Judge: Deirdre Hill, Case: 22TRCV01439, Date: 2023-03-24 Tentative Ruling

Case Number: 22TRCV01439    Hearing Date: March 24, 2023    Dept: M

Hearing Date:                         March 24, 2023

Moving Parties:                      Defendant American Honda Motor Company

Responding Party:                  Plaintiff Ibeth Meza

Motion to Compel Arbitration and Stay the Action

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

RULING

            The motion is DENIED.

BACKGROUND

On December 8, 2022, plaintiff Ibeth Jennifer Meza 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. (“Honda”) requests an order compelling binding arbitration and to stay the proceedings.

Request for Judicial Notice

            As to defendant’s Request for Judicial Notice as to the complaint and the answer in this action and as to the Notice of Entry of Dismissal and Proof of Service in the matter of Dina C. Felisilda, et al. v. FCA US LLC, et al. (Case No. 34-2015-00183668), the request is GRANTED.  See Evidence Code §452(d).

            As to plaintiff’s Request for Judicial Notice as to order in case no. 22TRCV00758, the request is DENIED.  The court grants plaintiff’s request for judicial notice of Ngo v. BMW of North America, LLC (9th Cir. 2022) 23 F.4th 942.

Evidentiary Objections

As to plaintiff’s objections to the declaration of defense counsel Kellen Nelson, the court SUSTAINS Nos. 1-3 for lack of foundation, personal knowledge, and authentication.  As to plaintiff’s objections to defendant’s request for judicial notice, the court OVERRULES Nos. 4-5.

            Existence of an Enforceable Agreement

“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 Nelson’s declaration that an arbitration agreement exists.  As noted above, the court sustains plaintiff’s objection to the exhibit.  Thus, the court finds that there is no competent or admissible evidence of the existence of an agreement to arbitrate executed by plaintiff.

In any event, as to whether Honda can enforce the arbitration agreement in the RISC, both parties agree that Honda was not a signatory.  Rather, Honda argues that it can enforce the arbitration agreement under the theory of equitable estoppel “because Plaintiff’s claims arise out of, and are intertwined with, the obligations of the Sales Contract,” citing to Felisilda v. FCA US LLC (2020) 53 Cal. App. 5^th 486, 497-99.  Honda 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, Honda contends, plaintiff’s claims relate directly to the condition of the vehicle, just as the Felisilda’s claim against FCA related to the condition of their vehicle.  Honda also contends that the sales contract establishes plaintiff’s standing under the Song-Beverly Act and that plaintiff seeks the purchase price as a remedy and restitution, which necessarily requires presentation of the sales contract.

Honda 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 Honda based on the arbitration provision’s broad language.

In opposition, besides arguing that there is no admissible evidence of an arbitration agreement, plaintiff argues that equitable estoppel does not apply and that Felisilda is distinguishable.  Plaintiff asserts that unlike Felisilda, plaintiff does not allege her warranties derived from the purchase agreement.  Rather, plaintiff alleges that Honda warranted the vehicle and that plaintiff’s claims specifically arise from that warranty.  Plaintiff does not seek to enforce the terms of the purchase agreement.  Moreover, in Felisilda, the plaintiffs sued both a signatory dealer and a manufacturer, and it was the dealer that moved to compel arbitration.  Further, plaintiff contends, “breach of warranty [claims against manufacturer] arise independently of a contract of sale between the parties.”  Greenman v. Yuba Power Products, Inc. (2013) 59 Cal. 2d 57, 60-61.  Plaintiff also makes the point that if she “had been gifted the lemon vehicle in this case, Honda still would be responsible for the warranty obligations to her in the warranty manual.”  Plaintiff further asserts that the RISC expressly provides that “[t]his provision does not affect any warranties covering the vehicle that the vehicle manufacturer may provide.”  Plaintiff contends that presented with a nearly identical warranty disclaimer, the court in Jurosky v. BMW of North America, LLC (S.D. Cal. 2020) 441 F. Supp. 3d 963, 970, found that the contract “demonstrates an intent to distinguish and distance the dealership’s purchase agreement from any warranty that [manufacturer] ‘may’ provide.”  Plaintiff also cites to Kramer v. Toyota Motor Corp. (9^th Cir. 2013) 705 F.3d 1122, 1124 (“[t]he terms of the arbitration clauses [in RISCs] are expressly limited to Plaintiff and the Dealerships”) and 1131 (the plaintiff’s warranty claims arose “independently from the Purchase Agreements, rather than intimately relying on them”).  Plaintiff also argues that defendant’s argument that plaintiff’s express and implied warranty claims are intertwined with the finance agreement has been considered and rejected by the 9^th Circuit, citing to Ngo v. BMW of North America, LLC (9^th Cir. 2022) 23 F.4^th 942, 949-50.

Moreover, plaintiff argues, Honda is not entitled to compel arbitration as a third-party beneficiary because the sales contract does not confer any benefit on Honda, and Honda’s claim that the express warranty manual only protects plaintiff because of the sales contract is false.

The court rules as follows:

The court finds that there is no competent or admissible evidence of the existence of an agreement to arbitration.  On this ground, the motion is DENIED.

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).

As to the ruling in Felisilda, in the absence of any other state court binding precedent, the court is bound unless it determines that precedent to be distinguishable.  See Auto Equity Sales, Inc. v. Superior Court of Santa Clara County (1962) 57 Cal. 2d 450, 455 (“[A]ll tribunals exercising inferior jurisdiction are required to follow decisions of courts exercising superior jurisdiction.”).  The Felisilda court stated, “[i]n any case applying equitable estoppel to compel arbitration despite the lack of an agreement to arbitrate, a nonsignatory may compel arbitration only when the claims against the nonsignatory are founded in and inextricably bound up with the obligations imposed by the agreement containing the arbitration clause.”  Felisilda, 53 Cal. App. 5^th at 498.  In that case, the Felisildas brought a Song-Beverly cause of action against a local automobile dealership and the manufacturer, where the manufacturer was not a signatory to the agreement.  The dealership moved to compel arbitration and the trial court granted the motion and ordered all the parties, including the manufacturer to arbitration.  The plaintiffs dismissed the dealership and the arbitration proceeded between the plaintiffs and the manufacturer.  The plaintiffs appealed and the appellate court affirmed the trial court order, finding that by signing the sales contract, “the Felisildas expressly agreed to arbitrate claims arising out of the condition of the vehicle—even against third party nonsignatories to the sales contract—[and] they are estopped from refusing to arbitrate their claim against [the manufacturer].”  Id. at 497.  The Felisilda court specifically noted that the Felisildas agreed to arbitrate “[a]ny claim or dispute, whether in contract, tort, statue or otherwise . . . between you and us or our employees, agents, successors or assigns, which arises out of or relates to . . . [the] condition of this vehicle.”  Id. at 490.  The court determined that 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.”  Id. at 497. 

Here, if the court were to consider the existence of the RISC, the court recognizes that the language is identical regarding any claim or dispute which arises out of the condition of the vehicle.  The Song-Beverly Act causes of action are statutory claims arising out of or relating to the condition of the vehicle, i.e., the subject vehicle has suffered from nonconformities to warranty to, including, but not limited to electrical defects, gauge cluster defects, instrument cluster defects, speedometer defects, tachometer defects, transmission defects, and engine defects.  Complaint, ¶10.  In this regard, plaintiff would be equitably estopped from denying that the arbitration provision applies to her claims against non-signatory Honda because such claims are “intimately founded in and intertwined” with the RISC.

The court notes though that the federal cases, including Ngo v. BMW of N. Am., LLC (9^th Cir. 2022) 23 F.4^th 942 (under California law, express and implied warranties from a non-signatory manufacturer are not part of the purchase agreement and instead arise independently of the sales contract) and Kramer, are persuasive authority albeit not binding.  In Kramer v. Toyota Motor Corp. (9^th Cir. 2013) 705 F.3d 1122, 1132, “In order for Toyota’s equitable estoppel argument to succeed, Plaintiffs’ claims themselves must intimately rely on the existence of the Purchase Agreements, not merely reference them.  Toyota is correct that Plaintiffs’ claims presume a transaction involving a purchase of a Class Vehicle.  The claims do not, however, rely upon the existence of a Purchase Agreement.  For illustration, a consumer who purchased a vehicle with cash instead of credit would still state a claim for such relief could be granted, absent a Purchase Agreement.”  But, as stated above, the court is bound to follow Felisilda, regardless of the reasoned criticism of Felisilda by federal courts.  And, as the arbitration language is identical, and plaintiff’s claims are “intertwined,” the court cannot find that Felisilda is distinguishable.

As to whether Honda 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.  Honda has not shown that the sales contract meets any of the elements.

The motion is DENIED.

Plaintiff is ordered to give notice of the ruling.