Judge: Donald F. Gaffney, Case: "Duran v. Nissan North America, Inc.", Date: 2023-07-12 Tentative Ruling

TENTATIVE RULING:

 

Petition to Compel Arbitration.

 

Defendants Nissan North America, Inc. and Downey Import Cars, Inc. dba Downey Nissan, seek to compel arbitration of the claims asserted by Plaintiff Maria Duran.  For the following reasons, the petition to compel arbitration is DENIED.

 

Defendants are not parties to the Contract at issue. Plaintiff entered into the Contract with only Stadium Nissan.   (Dizon Dec., Ex. B.)  Defendants contend they can compel arbitration pursuant to the doctrine of equitable estoppel as articulated in the Court of Appeal’s decision in Felisilda v. FCA US LLC (2020) 53 Cal.App.5th 486.

 

The Court follows the recent opinions issued in Ford Motor Warranty Cases (Ochoa) (2023) 89 Cal.App.5th 1324 and Montemayor v. Ford Motor Company (Cal. Ct. App., June 26, 2023, No. B320477) 2023 WL 4181909.

 

“Under the doctrine of equitable estoppel, ‘as applied in ‘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.” (Felisilda v. FCA US LLC (2020) 53 Cal.App.5th 486, 495).  “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.” (Id. at 496). “Where the equitable estoppel doctrine applies, the nonsignatory has a right to enforce the arbitration agreement.” (Id.). 

 

“’The fundamental point’ is that a party is ‘not entitled to make use of [a contract containing an arbitration clause] as long as it worked to [his or] her advantage, then attempt to avoid its application in defining the forum in which [his or] her dispute…should be resolved.’” (Felisilda v. FCA US LLC (2020) 53 Cal.App.5th 486, 495).  “In 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.” (Id.). “In determining whether the plaintiffs’ claim is founded on or intimately connected with the sales contract, we examine the facts of the operative complaint.” (Id.).

 

Similar to the agreement herein, the Plaintiffs in Felisilda 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.” (Id. at 496).  As the Plaintiffs in Felisilda alleged “express warranties accompanied the sale of the vehicle,” the court found the sales contract was the source of the warranties being disputed. (Id.).

 

Based on the above, the Court concluded “the Felisildas’ agreement to the sales contract constituted express consent to arbitrate their claims regarding vehicle condition even against third parties.” (Id. at 498).   Additionally, “[b]ecause 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.” (Id. at 497).

 

In moving to compel arbitration, Defendants assert equitable estoppel applies, as Plaintiff’s claims arise from Defendants’ “warranty obligations.”

 

Notably, however, the Court in Ford Motor Warranty Cases (Ochoa) (2023) 89 Cal.App.5th 1324 examined identical contractual language and expressly declined to follow Felisilda. (89 Cal.App.5th at 1333.) Initially, the Court “disagree[d] with Felisilda that ‘the sales contract was the source of [FCA’s] warranties at the heart of this case.” (Id. at 1335-1336.)  Instead, the Court explained that “manufacturer vehicle warranties that accompany the sale of motor vehicles without regard to the terms of the sale contract between the purchaser and the dealer are independent of the sale contract.” (Id.) 

 

Consequently, the Ochoa Court found that Plaintiff’s warranty claims were not “founded” in the sales contract.  “Rather, plaintiffs’ claims are based on FMC’s statutory obligations to reimburse consumers or replace their vehicles when unable to repair in accordance with its warranty.” (Id. at 1335.) “Not one of the plaintiffs sued on any express contractual language in the sale contracts.” (Id.)  “The sale contracts include no warranty, nor any assurance regarding the quality of the vehicle sold, nor any promise of repairs or other remedies in the event problems arise. To the contrary, the sale contracts disclaim any warranty on the part of the dealers, while acknowledging no effect on ‘any warranties covering the vehicle that the vehicle manufacturer may provide.’ In short, the substantive terms of the sale contracts relate to sale and financing and nothing more.” (Id.)

 

Similarly, the agreement herein disclaims any effect on manufacturer warranties stating: “If you do not get a written warranty…the Seller makes no warranties…This provision does not affect any warranties covering the vehicle that the vehicle manufacturer may provide.” (Dizon Dec., Ex. B.)   Additionally, similar to the circumstances in Ochoa, Plaintiff herein is not asserting any claims against Defendants based on the terms of the Retail Installment Sales Contract. (See Complaint, generally.)

 

As was the case in Ochoa and Felisilda, Defendants assert Plaintiff’s claims fall within the arbitration provision, given language referencing third parties and the condition of the vehicle; however, the Court in Ochoa “also disagree[d] with the Felisilda court’s interpretation of the sale contract as broadly calling for arbitration of claims ‘against third party nonsignatories.’” (Ford Motor Warranty Cases (Ochoa) 89 Cal.App.5th at 1334.)  Citing the identical language discussed in Felisilda and included herein, referring to “any such relationship with third parties who do not sign this lease,” the Ford Motor Warranty court explained: “We do not read this italicized language as consent by the purchaser to arbitrate claims with third party nonsignatories.  Rather, we read it as a further delineation of the subject matter of claims the purchasers and dealers agreed to arbitrate.  They agreed to arbitrate disputes ‘between’ themselves – ‘you and us’ – arising out of or relating to ‘relationship[s],’ including ‘relationship[s] with third parties who [did] not sign th[e] [sale] contract[s],’ resulting from the ‘purchase, or condition of th[e] vehicle, [or] th[e] [sale] contract.’” (Id. at 1334-1335.)  “It says nothing of binding the purchaser to arbitrate with the universe of unnamed third parties.” (Id.; see also Montemayor v. Ford Motor Company (Cal. Ct. App., June 26, 2023, No. B320477) 2023 WL 4181909, at *1 (“We conclude Ford cannot enforce the arbitration provision in the sales contract because the Montemayors’ claims against Ford are founded on Ford's express warranty for the vehicle, not any obligation imposed on Ford by the sales contract, and thus, the Montemayors’ claims are not inextricably intertwined with any obligations under the sales contract. Nor was the sales contract between the Montemayors and AutoNation intended to benefit Ford.”).)

 

Here, the “manufacturer vehicle warranties that accompany the sale of motor vehicles…are independent of the sale contract.” (Ford Motor Warranty Cases (Ochoa) 89 Cal.App.5th at 1334.])  The language which references third-parties refers to the kind of claims subject to arbitration and does not expand the parties to the agreement, consistent with the findings in Ochoa. (Id.)

 

Defendants have also not satisfied their burden of showing they are third party beneficiaries to the contract.  (Ngo v. BMW of North America, LLC (9th Cir. 2022) 23 F.4th 942; Montemayor v. Ford Motor Company (Cal. Ct. App., June 26, 2023, No. B320477) 2023 WL 4181909, at *10 (holding that Ford was not a third party beneficiary of a contract that is substantially identical to the one at issue in this case).)

 

The Court declines ruling on Defendants’ evidentiary objections because they are not material to the disposition of this motion. 

 

Plaintiff to give notice.