Judge Deirdre Hill, Case 22TRCV00531 2023-04-13 Tentative Ruling

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The court considered the moving, opposition, and reply papers and the notice of new authority.

On June 29, 2022, plaintiff Jelani Richardson filed a complaint against Nissan North America, Inc. for violations of Song-Beverly Act, fraudulent inducement-intentional misrepresentation, and fraudulent inducement-concealment and against Downey Import Cars, Inc. for negligent repair with respect to a 2020 Nissan Sentra.

Under CCP § 1281, a “written agreement to submit to arbitration an existing controversy or a controversy thereafter arising is valid, enforceable and revocable, save upon such grounds as exist for the revocation of any contract.”

Under CCP § 1281.2, “On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party thereto refuses to arbitrate such 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: . . . (c) A party to the arbitration agreement is also a party to a pending court action . . . with a third party, arising out of the same transaction or series of related transactions and there is a possibility of conflicting rulings on a common issue of law or fact. . . . (d) . . . . If the court determines that a party to the arbitration is also a party to litigation in a pending court action . . . with a third party as set forth under subdivision (c) herein, the court (1) may refuse to enforce the arbitration agreement . . . ; (2) may order intervention or joinder as to all or only certain issues; (3) may order arbitration among the parties who have agreed to arbitration and stay the pending court action . . . pending the outcome of arbitration proceeding; or (4) may stay arbitration pending the outcome of the court action or special proceeding.”

Defendant Nissan North America, Inc. requests an order compelling binding arbitration and to stay the proceedings.

“As stated in Cione v. Foresters Equity Services, Inc. (1997) 58 Cal. App. 4th 625, 634 ‘The right to arbitration depends upon contract; a petition to compel arbitration is simply a suit in equity seeking specific performance of that contract. There is no public policy favoring arbitration of disputes that the parties have not agreed to arbitrate.’” Lopez v. Charles Schwab & Co., Inc. (2004) 118 Cal. App. 4th 1224, 1229.

Defendant relies on a copy of a Retail Installment Sales Contract (“RISC”) attached to defense counsel Scott Sharp’s declaration that an arbitration agreement exists. He states that it is a true and correct copy of the contract produced by plaintiff in response to a single discovery request.

As to whether Nissan can enforce the arbitration agreement in the RISC, both parties agree that Nissan was not a signatory. Rather, Nissan argues that it can enforce the arbitration agreement because the RISC contains a valid and enforceable arbitration provision; under the theory of equitable estoppel; and as a third-party beneficiary.

As to equitable estoppel, defendant argues that plaintiff’s claims are intimately founded in and intertwined with the sales contract and the purchase and condition of plaintiff’s vehicle, citing to Felisilda v. FCA US LLC (2020) 53 Cal. App. 5^th 486. Nissan asserts that the sales contract contains a broad provision to arbitrate “[a]ny claim or dispute, whether in contract, tort, statute or otherwise . . . between you and us or our employees, agents, successor, or assigns, which arise out of or relates to . . . condition of this vehicle . . . 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 court action.” Thus, Nissan contends, plaintiff’s claims relate directly to the condition of the vehicle, just as the Felisildas’ claim against FCA related to the condition of their vehicle.

Nissan also argues that it may enforce the arbitration agreement as a third-party beneficiary because the sales contract and the arbitration provision are intended to benefit it based on the arbitration provision’s broad language (“including any such relationship with third parties who do not sign this contract”) and that that plaintiff’s purchase of the car, memorialized by the RISC, created a resulting warranty relationship between Nissan and plaintiff.

In opposition, plaintiff argues that Nissan is not entitled to enforce the arbitration clause and that equitable estoppel does not apply as plaintiff’s claims do not rely in any way on the terms of the RISC. Plaintiff asserts that they would have exactly the same claims if their dealership had not financed their car purchase and there was no financing contract at all. Plaintiff contends that while the Song-Beverly Act recognizes that warranties may accompany “a sale,” it does not state that a manufacturer’s warranty is a term of a sales contract. Also, plaintiff argues, the dealership’s contract does not impose any obligations on Nissan relating to the condition of the car. Plaintiff asserts that although the arbitration clause states that disputes about the condition of plaintiff’s car are arbitrable, it explicitly limits who can compel arbitration of those disputes to plaintiff and their car dealership. Moreover, plaintiff argues, the court is not bound by the Felisilda case as it did not consider whether a manufacturer may enforce a car dealership’s arbitration clause. Further, plaintiff argues, Nissan is not a third-party beneficiary of the dealership’s arbitration agreement.

In reply, defendant reiterates its arguments that the arbitration provision in the RISC is enforceable, and the arbitration provision’s broad language encompasses plaintiff’s claims because they relate to the vehicle’s condition, its purchase, the warranties Nissan issued, and the resulting relationship with Nissan. Defendant further reiterates its argument that it can compel arbitration as a non-signatory to the RISC under equitable estoppel because plaintiff’s claims are “inextricably intertwined” with the RISC. Defendant also argues that because the California Court of Appeal is split on the issue, the trial court is “free to follow either Felisilda or Ochoa” and that “the reasoning in Felisilda is thorough and sound.”

As addressed in the reply and in plaintiff’s notice of new authority, on April 4, 2023, the Court of Appeal, Second District, issued a ruling in Ochoa v. Ford Motor Company, which was certified for publication, and addresses the same issues and arbitration provision that are relevant to the herein motion.

Although the court finds the existence of an agreement to arbitrate contained in the Retail Installment Sales Contract between plaintiff and non-party dealership, the court finds that Nissan cannot enforce it as a non-signatory under any theory

As to 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: (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, 218-219. The first situation exists “‘when the signatory to a written agreement containing an arbitration clause “must rely on the terms of the written agreement in asserting [its] claims” against the nonsignatory.’” Id. at 218 (citation omitted).

The court follows the recent 2^nd District court of appeal case, Ford Motor Warranty Cases, Ochoa v. Ford Motor Company (April 4, 2023) 2023 WL 2768484, which addresses whether a non-signatory manufacturer can invoke the arbitration provision (which is identical to the herein provision) in a sales contract and declines to follow the holding in Felisilda. The appellate court rejected the manufacturer’s positions as to equitable estoppel, third-party beneficiary, and agency theories, stating: “We agree with the trial court that FMC could not compel arbitration based on plaintiffs’ agreements with the dealers that sold them the vehicles. Equitable estoppel does not apply because, contrary to FMC’s arguments, plaintiffs’ claims against it in no way rely on the agreements. FMC was not a third party of those agreements as there is no basis to conclude the plaintiffs and their dealers entered into them with the intention of benefitting FMC. And FMC is not entitled to enforce the agreements as an undisclosed principal because there is no nexus between plaintiffs’ claims, any alleged agency between FMC and the dealers, and the agreements.”

As to whether Nissan is a third-party beneficiary, the court finds that it is not. “A third-party beneficiary may enforce a contract made for its benefit.” CCP §1559. “[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. 5^th 817, 830. Nissan has not shown that the sales contract or the arbitration provision meets any of the elements.