Judge: Deirdre Hill, Case: 22TRCV00758, Date: 2023-01-27 Tentative Ruling

Case Number: 22TRCV00758    Hearing Date: January 27, 2023    Dept: M

Hearing Date:                         January 27, 2023

Moving Parties:                      Defendant American Honda Motor Company

Responding Party:                  Plaintiff Adan Aparicio

Motion to Compel Arbitration and Stay the Action

            The court considered the moving, opposition, and reply papers.

RULING

            The motion is DENIED.

BACKGROUND

On August 30, 2022, plaintiffs Adan F Aparicio and Darline Aparicio filed a complaint against American Honda Motor Company for violations of statutory obligations under the Song-Beverly Consumer Warranty Act.

LEGAL AUTHORITY

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.” 

DISCUSSION

            Defendant American Honda Motor Company, Inc. (“AHM”) requests an order compelling binding arbitration and to stay the proceedings.

            Existence of an agreement to arbitrate

“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 asserts that on February 23, 2020, plaintiffs purchased a new 2020 Honda Pilot and executed a Retail Installment Sale Contract – Simple Finance Charge (With Arbitration Provision) (“RISC”), which contains an arbitration provision.

The arbitration provision states, in part:  “1.  Either you or we may choose to have any dispute between us decided by arbitration and not in a court or by jury trial . . . Any claim or dispute, whether in contract, tort, statute or otherwise . . . 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 his 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.”

Acknowledging that it was not a signatory to the RISC, defendant argues that it has standing to enforce the arbitration clause under the doctrine of a third-party beneficiary of the contract and under the doctrine of equitable estoppel.  Defendant asserts that the agreement specifically intended to benefit AHM, given that the claims against AHM arise out of or relate to the condition of the vehicle and the “resulting” warranty relationship that arose out of the execution of the RISC.  As to equitable estoppel, defendant contends that the complaint presumes the existence of the RISC and necessarily relies on its existence in order to maintain the causes of action under the Song-Beverly Act, citing to Felisilda v. FCA USA LLC (2020) 53 Cal. App. 5^th 486, 497.  Defendant also argues that plaintiffs’ claims fall squarely within the scope of the arbitration clause.

In opposition, plaintiffs argue that as a nonsignatory to the RISC, defendant does not have standing to invoke the arbitration provision and cannot use the RISC to compel arbitration and equitable estoppel does not apply.  Plaintiffs cite to Kramer v. Toyota Motor Corp. (9^th Cir. 2013) 705 F.3d 1122, 1124, where the court held that “[t]he terms of the arbitration clauses [in RISCs] are expressly limited to Plaintiff and the Dealerships.”  Further, plaintiffs argue, plaintiffs do not rely on the terms of the RISC in asserting their claims as they are not intertwined with the RISC because defendant’s warranties are separate from the RISC.  See Kramer, at 1131 (the plaintiffs’ warranty claims arose “independently from the Purchase Agreements, rather than intimately relying on them”).  Plaintiffs also argue that defendant’s reliance on Felisilda is misplaced because plaintiffs only brought an action against defendant (and not the dealership).  Moreover, plaintiffs assert, recent case law has rejected the Felisilda holding in Ngo v. BMW of North America LLC.

In reply, defendant argues that the language of the RISC includes defendant—it encompasses any dispute over the purchase or condition of the vehicle and “any resulting transaction or relationship (including any such relationship with third parties who do not sign the contract).  Defendant reiterates that Felisilda is applicable and that the appellate court examined an identical arbitration provision in an identical form retail installment sale contract in a similar “lemon law” matter and that equitable estoppel does apply.  Defendant also argues that Felisilda rejected the Kramer case, cited by plaintiffs, and that the Kramer case did not include language that included “any such relationship with third parties who do not sign this contract.”  Defendant also reiterates its argument that the RISC underlies plaintiffs’ causes of action and is the “source of the warranties” as plaintiffs allege that “[i]n connection with the purchase of the Vehicle Plaintiff received an express warranty.”  Defendant further argues that Ngo v. BMW of North America, cited by plaintiffs, is distinguishable and not binding.  Defendant asserts that in Ngo, the plaintiff had not made any reference to the link between the RISC and the warranties in the complaint.  Defendant also reiterates that it is an intended third party beneficiary of the RISC.

The court rules as follows:

“A third party beneficiary may enforce a contract made for its benefit.  CCP §1559.  However, ‘[a] putative third party’s rights under a contract are predicted upon the contracting parties’ intent to benefit’ it.  Ascertaining this intent is a question of ordinary contract interpretation.”  Hess v. Ford Motor Co. (2002) 27 Cal.4th 516, 524.   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 in Ngo v. BMW of N. Am., LLC (Jan. 12, 2022) 23 F.4^th 942 (9^th Cir.) distinguishes Felisilda.  In Felisilda, the plaintiffs purchased a used 2011 Dodge Grand Caravan from a dealership “and signed a purchase agreement containing an arbitration provision that was virtually identical to the one Ngo signed.  After discovering ‘serious defects’ with the car, the Felisildas sued both the dealership and the manufacturer.  The dealership moved to compel arbitration.  After the manufacturer filed a notice of non-opposition, the trial court compelled arbitration. The Felisildas then dismissed the dealership and the district court ordered it to arbitrate with the manufacturer alone.  The California Court of Appeal affirmed.  It makes a critical difference that the Felisildas, unlike Ngo, sued the dealership in addition to the manufacturer.  “In Felisilda, it was the dealership—a signatory to the purchase agreement—that moved to compel arbitration rather than the non-signatory manufacturer. . . . Accordingly, Felisilda does not address the situation we are confronted with here, where the non-signatory manufacturer attempted to compel arbitration on its own.  We therefore decline to affirm on the ground of equitable estoppel.”  Ngo, supra at 950.

Such is the case here where plaintiffs did not sue the dealership and the non-signatory defendant is attempting to compel arbitration on its own.

The motion is thus DENIED.

Plaintiffs are ordered to give notice of the ruling.