Judge: David A. Rosen, Case: 22GDCV00671, Date: 2023-03-17 Tentative Ruling

Case Number: 22GDCV00671    Hearing Date: March 17, 2023    Dept: E

Hearing Date: 03/17/2023 – 8:30am
Case No: 22GDCV00671
Trial Date: Unset
Case Name: LILIA DE NIZ v. FORD MOTOR COMPANY

TENTATIVE RULING ON MOTION TO COMPEL ARBITRATION

Moving Party: Defendant, Ford Motor Company

Responding Party: Plaintiff, Lilia De Niz

Moving Papers: Motion; Proposed Order

Opposing Papers: Opposition; Request for Judicial Notice; Declaration of Camran Pakbaz

Reply Papers: Reply

Proof of Service Timely Filed (CRC Rule 3.1300):Ok
16/21 Court Days Lapsed (CCP 1005(b)): Ok
Proper Address:Ok

CCP §1290.4
“A copy of the petition and a written notice of the time and place of the hearing thereof and any other papers upon which the petition is based shall be served in the manner provided in the arbitration agreement for the service of such petition and notice.” (CCP §1290.4(a).) “If the arbitration agreement does not provide the manner in which such service shall be made and the person on whom service is to be made has previously appeared in the proceeding or has previously been served in accordance with subdivision (b) of this section, service shall be made in the manner provided in Chapter 5 (commencing with Section 1010) of Title 14 of Part 2 of this code.” (CCP §1290.4(c).)

Here, Plaintiff has already appeared as indicated by the fact that Plaintiff filed the action. Defendant appears to have served this notice and the accompanying papers of this motion by e-mail, and Opposition has made no objections to how the instant motion has been served.

RELIEF REQUESTED
Defendant, Ford Motor Company, moves for an order compelling arbitration of this action, and staying any further proceedings during the pendency of that arbitration.

 

Specifically, Ford moves to compel the claims of Plaintiff LILIA DE NIZ (“Plaintiff”) into arbitration via the Retail Installment Sale Contract (“RISC”), which Plaintiff entered into when she purchased her vehicle. Ford can compel this action into arbitration for four primary reasons:

(1) The RISC contains a valid and enforceable arbitration provision.

(2) The RISC contains language that delegates the issue of arbitrability to an arbitrator.

(3) Ford may enforce the arbitration provision in the RISC pursuant to the doctrine of equitable estoppel. As the California Court of Appeal recently held in Felisilda v. FCA US LLC (2020) 53 Cal.App.5th 486, 496-499, review denied (Nov. 24, 2020), equitable estoppel prevents Plaintiff from avoiding her obligations to arbitrate when, as here, her claims are intimately founded in and intertwined with the RISCs and the purchase and condition of their vehicles. Plaintiff’s claims are all based on alleged defects with the electrical, suspension, structural, and transmission system and Ford’s alleged failure or inability to repair it under the warranty. Every single claim in the Complaint arises out of and is inextricably intertwined with Plaintiff’s vehicle purchase by way of the RISC.

(4) As a third party beneficiary, Ford may enforce the arbitration provision in the RISC because the provision expressly encompasses claims arising out of relationships with third parties who do not sign the RISC, and Ford bears a close relationship with the signatories.

 

Ford brings this motion pursuant to Code of Civil Procedure section 1281, et seq., the Federal Arbitration Act, 9 U.S.C. § 2, and other applicable statutes and laws on the grounds that Plaintiffs are bound by a valid, written agreement to arbitrate the subject matter of the Complaint. Code Civ. Proc. § 1281.2. Ford further moves to stay this proceeding during the pendency of the arbitration pursuant to Code of Civil Procedure section 1281.4 which expressly provides that further proceedings “shall” be stayed “until an arbitration is had.”

 

BACKGROUND
On 10/07/2022, Plaintiff filed a Complaint against Defendant, Ford Motor Company alleging three causes of action: (1) Violation of Song-Beverly Act – Breach of Express Warranty, (2) Violation of Song-Beverly Act – Breach of Implied Warranty, and (3) Violation of the Song-Beverly Act Section 1793.2.

Plaintiff alleges that on January 29, 2019, Plaintiff purchased a 2019 Ford Escape, that Ford Motor Company warranted the subject vehicle and agreed to preserve or maintain the utility or performance of Plaintiff’s vehicle or to provide compensation if there was a failure in such utility or performance, and that the subject vehicle was delivered to Plaintiff with serious defects and nonconformities to warranty.

The instant motion pertains to whether or not Defendant (Ford Motor Company) a nonsignatory to the “Retail Installment Sale Contract – Simple Finance Charge (With Arbitration Provision” (RISC), can compel arbitration of this action under the RISC when it was not a party to the RISC because the only listed parties to the RISC were Buyer (Lilia) and Seller-Creditor (Sunrise Ford).

LEGAL STANDARD – MOTION TO COMPEL ARBITRATION
CCP §1281.2, governing orders to arbitrate controversies, provides in pertinent part:

On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party to the agreement refuses to arbitrate that controversy, the court shall order the petitioner and the respondent to arbitrate the controversy if it determines that an agreement to arbitrate the controversy exists, unless it determines that:

(a)   The right to compel arbitration has been waived by the petitioner; or

(b)   Grounds exist for recission of the agreement.

 

(CCP §1281.2(a)-(b).

 

Under the Federal Arbitration Act, arbitration agreements “shall be valid, irrevocable and enforceable, save upon such grounds that exist at law or in equity for the revocation of a contract.”  (9 U.S.C. section 2.)

 

There is a strong public policy in favor of arbitration of disputes and any doubts concerning the scope of arbitrable disputes should be resolved in favor of arbitration. (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 9 (“courts will ‘indulge every intendment to give effect to such proceedings.’”) (quotation omitted)). (See also AT&T Mobility, LLC v. Concepcion (2011) 563 U.S. 333, 339.) 

 

ANALYSIS
In purchasing the subject vehicle, Plaintiff executed a “Retail Installment Sale Contract – Simple Finance Charge (With Arbitration Provision)” (RISC) with the Seller-Creditor, Sunrise Ford. The RISC contains an arbitration provision that provides in relevant part:

 

1. EITHER YOU OR WE MAY CHOOSE TO HAVE ANY DISPUTE BETWEEN US DECIDED BY ARBITRATION AND NOT IN COURT OR BY JURY TRIAL…

 

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 and us 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.

 

(Def. Mot. Ex. 2.)

 

On the first page of the RISC, “You” is defined as the Buyer and Co-Buyer, if any, and “we” or “us” is defined as Seller-Creditor.

The Defendant first argues: (1) The arbitration provision in Plaintiff’s RISC is valid and enforceable by its terms, (2) The arbitration provision encompasses Plaintiff’s claims, and (3) The Arbitrator should decide the arbitrability of this dispute.

Here, the Court finds Defendant’s arguments of no importance because these arguments assume the existence of an arbitration agreement between the parties. Here, Defendant has not shown the existence of an arbitration agreement between the parties. The RISC, which contains the arbitration provision, was between Plaintiff and Sunrise Ford. Ford Motor Company was not a party to the RISC.

Equitable Estoppel
Equitable estoppel associated with a nonsignatory compelling arbitration arises as follows:

 

To summarize, under both federal and California decisional authority, 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. By relying on contract terms in a claim against a nonsignatory defendant, even if not exclusively, a plaintiff may be equitably estopped from repudiating the arbitration clause contained in that agreement. The focus is on the nature of the claims asserted by the plaintiff against the nonsignatory defendant. That the claims are cast in tort rather than contract does not avoid the arbitration clause. Moreover, the federal decisional authority is not limited, as plaintiff suggests, to cases in which a contract with a subsidiary corporation is relied upon to compel arbitration with a parent entity. The fundamental point is that a party may not make use of a contract containing an arbitration clause and then attempt to avoid the duty to arbitrate by defining the forum in which the dispute will be resolved.

 

(Boucher v. Alliance Title Co., Inc. (2005) 127 Cal.App.4th 262, 271-272 [internal citations omitted].)

 

Defendant argues it can compel arbitration because Plaintiffs’ claims arise out of, and are intertwined with, the obligations of the RISC. Defendant relies on the case of Felisilda v. FCA US LLC (2020) 53 Cal.App.5th 486 (Felisilda) to support its argument.

 

In Felisilda, the Third District Court of Appeal upheld an order compelling the plaintiffs to arbitration with the manufacturer of the alleged lemon vehicle even though it was not a signatory to the contract. The Felisilda court stated:

 

In signing the sales contract, the Felisildas agreed that “[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 ... shall ... be resolved by neutral, binding arbitration and not by a court action.” (Italics added.) Here, the Felisildas’ claim against FCA relates directly to the condition of the vehicle.

 

In their complaint, the Felisildas alleged that “express warranties accompanied the sale of the vehicle to [them] by which FCA ... undertook to preserve or maintain the utility or performance of [their] vehicle or provide compensation if there was a failure in such utility or performance.” Thus, the sales contract was the source of the warranties at the heart of **648 this case. The Felisildas noted they “delivered the vehicle to an authorized FCA ... repair facility for repair of the nonconformities.” However, “FCA ... has failed to *497 either promptly replace the new motor vehicle or promptly make restitution in accordance with the Song-Beverly Consumer Warranty Act.”

 

The Felisildas’ claim against FCA 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 Felisildas 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 FCA. Consequently, the trial court properly ordered the Felisildas to arbitrate their claim against FCA.

 

(Felisilda v. FCA US LLC (3d dist.-2020) 53 Cal.App.5th 486, 496-496.)

 

Intimately Founded In and Intertwined

Defendant argues that Plaintiff’s warranty claims directly relate to the purchase and condition of their vehicle because Plaintiff alleges that “Subject Vehicle was sold to Plaintiff with express warranties that the Subject Vehicle would be free from all defects in material and workmanship . . . .” (Def. Mot. p. 12.)

 

Further, Defendant argues that the Plaintiffs’ claims are inextricably intertwined with the RISC because it furnishes them with standing under the Song-Beverly Act. In moving papers, Defendant states, “ “To possess standing to bring a Song-Beverly Act claim, a consumer must buy or lease ‘a new motor vehicle from a person (including an entity) engaged in the business of manufacturing, distributing, selling, or leasing new motor vehicles at retail.” (Dagher v. Ford Motor Co. (2015) 238 Cal.App.4th 905, 926.)” (Def. Mot. p. 13.)

 

As to the standing argument, the Court finds Defendant’s argument unavailing because the Defendant’s own quote states nothing about how the standing arises from the contract with the Seller-Dealer as the Defendant implies.

 

Plaintiff argues the claims are not intimately founded in and intertwined with the RISC that he entered with Sunrise Ford. Plaintiff notes how the Complaint doesn’t even reference the RISC. Defendant explains how he is not trying to enforce any of the terms of the RISC against Defendant, but the Complaint is instead limited to his warranty claims that he is seeking to enforce under the statutory obligations of the Song-Beverly Act.

 

As stated in Ngo, “Lastly, BMW’s standing argument fails. It is the retail sale – the fact that Ngo bought a BMW – not the purchase agreement, that gives a plaintiff standing to bring claims under the Song-Beverly Act…Because Ngo’s standing to bring these claims against BMW does not derive from the purchase agreement, BMW cannot establish that Ngo’s claims are “inextricably tied up” with the purchase agreement.” (Ngo v. BMW of North America, LLC (9th Cir. 2022) 23 F.4th 942, 950.) Further, “As an initial matter, under California law, warranties from a manufacturer that is not a party to a sales contract are ‘not part of [the] contract of sale.” (Ngo v. BMW of North America, LLC (9th Cir. 2022) 23 F.4th 942, 949 citing Corp. of Presiding Bishop of Church of Jesus Christ of Latter-Day Saints v. Cavanaugh (1963) 217 Cal.App.2d 492, 514.)

 

Therefore, here, Plaintiff’s Complaint is not based on the RISC, as the Complaint does not reference the RISC as its basis for its action.

 

Defendant further argues that Plaintiff’s claims against Ford are inextricably intertwined with the RISC because the express and implied warranties are additional terms of the RISC that impose obligations on Ford, and Plaintiff alleges a violation of those obligations.

 

The Court finds this argument unavailing. As stated in Ngo, “Like Ngo's purchase agreement, the contracts in Kramer [cite] “expressly differentiate[d] dealer warranties from manufacturer warranties” and disclaimed any effect on the manufacturer's warranties. Id. We held that warranty claims against the manufacturer “arise[ ] independently from the Purchase Agreements, rather than intimately relying on them.” Id.” (Ngo v. BMW of North America, LLC (9th Cir. 2022) 23 F.4th 942, 950.)

 

Additionally, Paragraph 4 of the RISC states:

 

WARRANTIES SELLER DISCLAIMS

If you do not get a written warranty, and the Seller does not enter into a service contract within 90 days from the date of this contract, the Seller makes no warranties, express or implied, on the vehicle, and there will be no implied warranties of merchantability or of fitness for a particular purpose.

 

This provision does not affect any warranties covering the vehicle that the vehicle manufacturer may provide. If the Seller has sold you a certified used vehicle, the warranty of merchantability is not disclaimed.

 

(Ex. B. Def. Mot.)

 

Paragraph 4 provides further support for the argument that the warranties of the dealer and manufacturer are separate.

 

Third-Party Beneficiary

 

Defendant also seeks to compel arbitration on the theory that it is a third-party beneficiary.

 

The California Supreme Court has set forth the following test for determining if a party may be recognized as a third-party beneficiary:

 

Instead, a review of this court's third party beneficiary decisions reveals that our court has carefully examined the express provisions of the contract at issue, as well as all of the relevant circumstances under which the contract was agreed to, in order to determine not only (1) whether the third party would in fact benefit from the contract, but also (2) whether a motivating purpose of the contracting parties was to provide a benefit to the third party, and (3) whether permitting a third party to bring its own breach of contract action against a contracting party is consistent with the objectives of the contract and the reasonable expectations of the contracting parties. All three elements must be satisfied to permit the third party action to go forward.

 

(Goonewardene v. ADP, LLC (2019) 6 Cal.5th 817, 829-830.)

 

Defendant argues its third-party beneficiary argument succeeds on the following grounds:

Here, Ford can compel arbitration as a third party beneficiary for two main reasons: (1) the broad language of the arbitration provision and (2) the close relationship between Ford and Puente Hills Ford. The broad language of the arbitration provision demonstrates the first Goonewardene element – that Ford would in fact benefit from the arbitration provision – because it would enable Ford to compel Plaintiff’s claims into arbitration. Additionally, the arbitration provision’s sweeping scope demonstrates the second Goonewardene element – that a motivating purpose of the parties to the arbitration provision was to provide a benefit to Ford because it specifically refers to “third parties who do not sign” the RISC.

 

The close relationship between Ford and Sunrise Ford (the Ford-authorized dealership that both sold and serviced the Subject Vehicle) demonstrates the third Goonewardene element – that allowing Ford to compel arbitration as a third party beneficiary is consistent with the RISC’s objectives and the reasonable expectations of the signatories. Although Ford and Sunrise Ford are independent business entities, they enjoy a symbiotic business relationship; Ford distributes the vehicles that Sunrise Ford sells. In return, Sunrise Ford performs service and maintenance on Ford’s vehicles pursuant to Ford’s written warranty. Due to the closely intertwined relationship between Ford and Sunrise Ford (a signatory to the RISC), the Court should find that allowing Ford to compel arbitration is consistent with the objectives of the RISC and the reasonable expectations of Plaintiff and Sunrise Ford. Ford is not a distant stranger to the RISC, but the manufacturer, distributor, and warrantor of the vehicle that Plaintiff purchased via the RISC.

 

(Def. Mot. p.14-15.)

 

Here, the Court does not find Defendant’s argument convincing. “All three elements must be satisfied to permit the third party action to go forward.” (Goonewardene v. ADP, LLC (2019) 6 Cal.5th 817, 830.) The Court will only address the second element, because if one of the elements is not satisfied, then Defendant cannot move forward under this theory.

 

As stated in Ngo when addressing the second element:

 

Unlike agreements to draft wills or to manage trusts or mutual funds—arrangements inherently formed with third parties in mind—the vehicle purchase agreement in question was drafted with the primary purpose of securing benefits for the contracting parties themselves. In such an agreement, the purchaser seeks to buy a car, and the dealership and assignees seek to profit by selling and financing the car. Third parties are not purposeful beneficiaries of such an undertaking.

 

The text of the arbitration clause supports this conclusion. It provides that claims and disputes “which arise[ ] out of or relate[ ] 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.” (emphasis added). Though the language allows for arbitration of certain claims concerning third parties, it still gives only Ngo, the dealership, and the assignee the power to compel arbitration. Nothing in the clause or, for that matter, in the purchase agreement reflects any intention to benefit BMW by allowing it to take advantage of the arbitration provision.

 

(Ngo v. BMW of North America, LLC (9th Cir. 2022) 23 F.4th 942, 947-948.)

 

Here, as previously mentioned, the Arbitration Agreement in relevant part states:

 

1. EITHER YOU OR WE MAY CHOOSE TO HAVE ANY DISPUTE BETWEEN US DECIDED BY ARBITRATION AND NOT IN COURT OR BY JURY TRIAL…

 

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 and us 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.

 

(Def. Mot. Ex. B, [Emph added.].)

 

This language does not indicate a motivating purpose of the contracting parties was to provide a benefit to the third party. The language explicitly states that “you” or “we” [plaintiff or dealer] and “your” or “our” can elect to arbitrate.

 

In Reply, Defendant argues that Felisilda is a California Court of Appeals case and is binding on this Court, whereas the federal district court decisions are not.

 

The Court notes that Defendant’s argument that Felisilda is controlling and binding and that the Court should not apply the federal law of Ngo, is unavailing. However, Plaintiff successfully distinguished Felisilda from the instant facts. Therefore, even to the degree that the case could be persuasive authority, Felisilda is not on point to the facts of the case at bar. Further, while the Ngo cases is not binding on this Court, the Court still found the Ngo opinion, and Plaintiff’s arguments more convincing than Defendant’s arguments.

 

Defendant heavily relies on Felisilda to compel arbitration by the Defendant, a nonsignatory, because Felisilda had a similar arbitration provision and Felisilda compelled arbitration of a nonsignatory to the sales contract. While Defendant is correct to note that here the causes of action against Defendant do concern the condition of the subject vehicle, Plaintiff accurately distinguished Felisilda because in Felisilda the plaintiffs sued a dealership and the manufacturer. Here, Plaintiff only sued the manufacturer. Further, in Felisilda, the motion to compel arbitration was brought by the seller-dealer/signer of the arbitration agreement with the motion seeking to include the manufacturer. (Felisilda, supra, 53 Cal.App.5th at 498.) Here, moving Defendant was not named the seller-dealer in the RISC. Further here, Seller-Dealer is not even a named party in the action.

 

TENTATIVE RULING
Defendant’s motion to compel arbitration and stay proceedings is DENIED.

REQUEST FOR JUDICIAL NOTICE
Plaintiff in Opposition requested judicial notice of:

1.      The Ninth’s Circuit, February 12, 2022, Opinion, in Ngo v. BMW of North America, LLC et al., (9th Cir. 2022) 23 F.4th 942. attached as Exhibit 1 hereto.

Plaintiff requests judicial notice under evidence code 452 and 453.

Under Evidence Code §452:  

Judicial notice may be taken of the following matters to the extent that they are not embraced within Section 451:

(a) The decisional, constitutional, and statutory law of any state of the United States and the resolutions and private acts of the Congress of the United States and of the Legislature of this state.

(b) Regulations and legislative enactments issued by or under the authority of the United States or any public entity in the United States.

(c) Official acts of the legislative, executive, and judicial departments of the United States and of any state of the United States.

(d) Records of (1) any court of this state or (2) any court of record of the United States or of any state of the United States.

(e) Rules of court of (1) any court of this state or (2) any court of record of the United States or of any state of the United States.

(f) The law of an organization of nations and of foreign nations and public entities in foreign nations.

(g) Facts and propositions that are of such common knowledge within the territorial jurisdiction of the court that they cannot reasonably be the subject of dispute.

(h) Facts and propositions that are not reasonably subject to dispute and are capable of immediate and accurate determination by resort to sources of reasonably indisputable accuracy.

 

(Ibid..)

 

Under Evidence Code 453:

 

The trial court shall take judicial notice of any matter specified in Section 452 if a party requests it and:

(a) Gives each adverse party sufficient notice of the request, through the pleadings or otherwise, to enable such adverse party to prepare to meet the request; and

(b) Furnishes the court with sufficient information to enable it to take judicial notice of the matter.

 

(Ibid.)

 

The RJN is Granted.  CA Evid. Code, sections 452, 453.