Judge: Daniel S. Murphy, Case: 22STCV09144, Date: 2022-09-21 Tentative Ruling

Case Number: 22STCV09144    Hearing Date: September 21, 2022    Dept: 32

Background

Plaintiff Maria Cisneros (Plaintiff) commenced this lemon law action against Defendant Ford Motor Company (Ford) on March 15, 2022.  The Complaint asserts causes of action for (1) breach of implied warranty under Song-Beverly, (2) breach of express warranty under Song-Beverly, and (3) fraudulent concealment.  The causes of action arise from Plaintiff’s purchase of a 2020 Ford Explorer (Vehicle).  

Objections

Plaintiff’s objections are overruled,

Discussion

Defendant Ford moves to compel Plaintiff to submit this action to binding arbitration. 

Ford presents a copy of the Vehicle’s Retail Installment Sale Contract (Sale Contract) entered into by Plaintiff and Galpin Motors.  (Ihara Decl. Ex. 1.)  The Sale Contract contains an arbitration clause which states in pertinent part:

Any claim or dispute, whether in contract, tort, statute or otherwise (including the interpretation and scope of this Arbitration Provision, and the arbitrability of the claim or dispute), between you [i.e., Plaintiff] and us [i.e. Galpin Motors] or our employees, agents, successors or assigns, which arises out of or relates to your credit application, purchase or condition of this vehicle, this contract or any resulting transaction or relationship (including any such relationship with third parties who do not sign this contract) shall, at your or our election, be resolved by neutral, binding arbitration and not by a court action.

(Ihara Decl. Ex. 1.)

Plaintiff’s causes of action fall within the broad scope of this arbitration clause because the causes of action relate to the purchase and condition of the Vehicle.  (See Vianna v. Doctors’ Management Co. (1994) 27 Cal.App.4th 1186, 1189 (noting that “arbitration agreements should be liberally interpreted, and arbitration should be ordered unless the agreement clearly does not apply to the dispute in question”).)

The disposition of this motion turns on whether Ford, a nonsignatory to the Sales Contract, may compel Plaintiff to arbitrate his claims pursuant to this arbitration clause. 

Ford argues that this question of arbitrability must be decided by the arbitrator because the Sales Contract contains a delegation clause.  However, it is well-established that a delegation of arbitrability “must be clear and unmistakable.”   (Aanderud v. Superior Court (2017) 13 Cal.App.5th 880, 892.)  As applied here, this means “clear and unmistakable evidence that [Plaintiff] agreed to arbitrate arbitrability with nonsignatories.”  (Kramer v. Toyota Motor Corp. (9th Cir. 2013) 705 F.3d 1122, 1127 (examining arbitrability issue in motion to compel arbitration brought by a manufacturer in a lemon law case).)  The arbitration clause at issue does not evidence Plaintiff’s intent to arbitrate arbitrability with Ford.  Instead, the arbitration clause evidences Plaintiff’s intent to arbitrate arbitrability with Galpin Motors and Galpin Motors’ “employees, agents, successors, or assigns.”  Ford does not fall into any of these groups.  As such, the arbitration clause does not delegate arbitrability to the arbitrator.

Ford contends that two nonsignatory theories support its motion: (1) third party beneficiary and (2) equitable estoppel.  Because the Court concludes that the equitable estoppel doctrine applies, the Court need not address the merits of Ford’s third party beneficiary theory.

Under the doctrine of equitable estoppel, “a nonsignatory defendant may invoke an arbitration clause to compel a signatory plaintiff to arbitrate its claims when the causes of action against the nonsignatory are ‘intimately founded in and intertwined’ with the underlying contract obligations.”  (JSM Tuscany, LLC v. Superior Court (2011) 193 Cal.App.4th 1222, 1237.)  The doctrine applies in either of two circumstances: (1) when the signatory must rely on the terms of the written agreement containing the arbitration clause in asserting its claims against the nonsignatory or (2) when the signatory alleges “substantially interdependent and concerted misconduct” by the nonsignatory and a signatory and the alleged misconduct is “founded in or intimately connected with the obligations of the underlying agreement.”  (Goldman v. KPMG, LLP (2009) 173 Cal.App.4th 209, 218-19.)  At bottom, “the linchpin for equitable estoppel is equity  — fairness.”  (Id. at 220.)

In Felisilda v. FCA US LLC (2020) 53 Cal.App.5th 486, the California Court of Appeal examined a nearly identical arbitration clause which stated in pertinent part: “[A]ny claim or dispute, whether in contract, tort, statute or otherwise … between you and us … which arises out of or relates to … [the] condition of this vehicle, this contract or any resulting transaction (including any such relationship with third parties who do not sign this contract) shall … be resolved by neutral, binding arbitration and not by a court action.”  The appellate court found that the equitable estoppel doctrine applied: “The [buyers’] claim against [the manufacture] directly relates to the condition of the vehicle that they allege to have violated warranties they received as a consequence of the sales contract.  Because the [buyers] expressly agreed to arbitrate claims arising out of the condition of the vehicle — even against third party nonsignatories to the sales contract — they are estopped from refusing to arbitrate their claim against [the manufacturer]. Consequently, the trial court properly ordered the [buyers] to arbitrate their claim against [the manufacturer].  (Felisilda v. FCA US LLC (2020) 53 Cal.App.5th 486, 496-97.)

Ford contends that the equitable estoppel doctrine applies because Plaintiff’s claims are inextricably intertwined with the Sales Contract.  The Court agrees. 

This arbitration agreement is not materially different from the one examined in Felisilda.  In this case, like the buyers’ claims in Felisilda, Plaintiff’s claims against Ford “directly relate[] to the condition of the vehicle that [allegedly] violated warranties [Plaintiff] received as a consequence of the sales contract.”  Because Plaintiff “expressly agreed to arbitrate claims arising out of the condition of the vehicle — even against third party nonsignatories to the sales contract — [Plaintiff is] estopped from refusing to arbitrate [his] claim against [Ford].”  As such, the Court must reach the same result here.

Moreover, before Felisilda was decided, the Court reached this same conclusion about the equitable estoppel theory in prior motions to compel arbitration brought in lemon law cases. 

To wit, California law reveals a strong interrelationship between warranties and underlying purchase agreements.  “A warranty is a contractual term concerning some aspect of the sale, such as title to the goods, or their quality or quantity.”  (Jones v. ConocoPhillips Co. (2011) 198 Cal.App.4th 1187, 1200 (emphasis added).)  “A warranty is as much one of the elements of sale and as much a part of the contract of sale as any other portion of the contract and is not a mere collateral undertaking.”  (A. A. Baxter Corp. v. Colt Industries, Inc. (1970) 10 Cal.App.3d 144, 153.)  To this point, in reviewing the Song-Beverly Act’s legislative history, the California Supreme Court has noted that “the Legislature apparently conceived of an express warranty as being part of the purchase of a consumer product.”  (Gavaldon v. DaimlerChrysler Corp. (2004) 32 Cal.4th 1246, 1258; see also Felisilda, supra, 53 Cal.App.5th at 496 (“[T]he sales contract was the source of the warranties at the heart of this case.”).) 

In view of this legal backdrop, the equitable estoppel doctrine applies in lemon law cases like this because the buyer relies upon the underlying purchase agreement to (1) establish standing, (2) invoke implied warranties, and (3) obtain remedies. 

Standing: Standing to bring Song-Beverly Act claims is limited to a “buyer of consumer goods” (Civ. Code § 1794(a)), which the Song-Beverly Act defines as “any individual who buys consumer goods from a person engaged in the business of manufacturing, distributing, or selling consumer goods at retail.”  (Civ. Code § 1791(b).)  Without this purchase agreement, Plaintiff cannot meet this standing requirement or, indeed, the standing requirement for any warranty claim.  (Jones, supra, 198 Cal.App.4th at 1201 (“As a general rule, a cause of action for breach of implied [or express] warranty requires privity of contract; ‘there is no privity between the original seller and a subsequent purchaser who is in no way a party to the original sale.’ ”).)

Implied Warranties: The implied warranty of merchantability attaches to “every sale of consumer goods that are sold at retail in this state,” unless properly disclaimed.  (Civ. Code § 1792.)  Without the Sales Contract, Plaintiff would have no implied warranties to invoke.

Remedies:  According to the Complaint, Plaintiff seeks to “reimbursement for the costs of financing, and owning the Vehicle” and “rescission of the purchase agreement of the Vehicle.”  (Compl. ¶ 34.)  These remedies require examination and presentation of the Sales Contract.

Because the Sales Agreement underlies Plaintiff’s causes of action, the equitable estoppel doctrine must apply.

Plaintiff’s reliance on federal court authorities reaching a contrary conclusion is unavailing.  These federal court authorities are (1) nonbinding, (2) were (in part) disregarded by the Felisilda court, and (3) fail to persuasively disentangle a warranty from an underlying purchase agreement for purposes of an equitable estoppel analysis.

Plaintiff argues that Felisilda is distinguishable because the buyers in that case brought claims against both the dealership and manufacturer whereas here claims are brought exclusively against the manufacturer.  This is a distinction without a meaningful difference.  The reasoning in Felisilda for upholding the equitable estoppel finding was that the buyers’ claims related to the condition of the subject vehicle and the buyers expressly agreed to arbitrate their claims arising out of the condition of the subject vehicle, including those against third party nonsignatories to the sales contract.  This same finding has been made here. 

In sum, the equitable estoppel doctrine applies and enables Ford to compel Plaintiff to arbitrate his claims against Ford.

Conclusion

Ford’s motion to compel arbitration is granted.