Judge Deirdre Hill, Case 22TRCV01127 2023-04-18 Tentative Ruling

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Moving Parties: (1) Defendant FCA US LLC, (2) defendant JRDTSP LLC d/b/a Scott Robinson Chrysler Dodge Jeep Ram

The court considered the moving, opposition, and reply papers and plaintiff’s notice of supplemental authority.

On November 2, 2022, plaintiff Jonah J. McKinley filed a complaint against FCA US, LLC for violations of statutory obligations under the Song-Beverly Consumer Warranty Act and Magnuson-Moss Warranty Act and against and Scott Robinson Chrysler Dodge Jeep Ram for negligent repair as to a 2020 Chrysler Pacifica Hybrid.

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.”

Defendants FCA US LLC and JRDTSP LLC d/b/a Scott Robinson Chrysler Dodge Jeep Ram (“Scott Robinson”) request 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.

Both defendants rely on a copy of a Retail Installment Sales Contract (“RISC”) attached to defense counsel Hailey Rogerson’s declaration that an arbitration agreement exists. She 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 defendants can enforce the arbitration agreement in the RISC, the parties agree that neither FCA nor Scott Robinson is a signatory. Rather, defendants argue that they have standing to enforce the arbitration agreement under the doctrine of equitable estoppel as held in Felisilda v. FCA US LLC (2020) 53 Cal. App. 5^th 486. Defendants argue that the arbitration provisions are the same (“which arises out of or relates to . . . condition of this vehicle”) and that plaintiff’s claims arise from the RISC and the condition of the vehicle.

In opposition, plaintiff argues that defendants are not entitled to enforce the arbitration provision because neither of them is a party to the RISC and no arbitration agreement exists to arbitrate this dispute. Plaintiff also argues that the choice-of-laws provision in the RISC states that federal law controls and that “federal law is crystal clear that these claims are not subject to binding arbitration,” citing to Ngo v. BMW (9^th Cir. 2022) 23 F.4^th 942 (“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.’ Instead, the express and implied warranties arise ‘independently of a contract of sale.’”) (citations omitted). As to Felisilda, plaintiff argues that there are critical distinctions between it and the herein case—the Felisilda court relied on the single joint claim against the signatory selling dealership and the manufacturer to define the dispute and it was the signatory dealership’s motion that was granted in that case. Moreover, plaintiff argues, plaintiff’s warranty and common law claims against FCA and Scott Robinson simply are not “intimately founded in and intertwined with” or rooted in the RISC. Also, plaintiff asserts, defendant Scott Robinson is in direct competition with the signatory dealership Premier CDJR of Buena Park and cannot avail itself of a competing dealership’s arbitration rights.

In reply, defendants reiterate their argument that they have standing to compel arbitration as a non-signatory third party because the arbitration provision language itself expressly contemplates third-party enforcement. Defendants argue that plaintiff’s reliance on Ngo is misplaced and not binding on the court. Defendants further argue that Felisilda is indistinguishable, and that the RISC is the source of the warranties “at the heart of this case.”

The court is aware that 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, the court finds that defendants 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 and better reasoned 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 Ochoa 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.”