Judge: Erick L. Larsh, Case: 2022-01246697, Date: 2023-01-04 Tentative Ruling

Defendant FCA US, LLC’s (hereinafter, defendant or FCA) motion to compel arbitration is DENIED.

FCA is not a signatory to the subject arbitration agreement in the retail installment sales contract (RISC) between plaintiff Andrew Mitchell (plaintiff) and nonparty seller-dealer San Leandro CDJR, and has failed to establish its standing to enforce it. (See Jones v. Jacobson (2011) 195 Cal.App.4th 1, 15 (Jones) [nonsignatory seeking to enforce an arbitration agreement bears the burden to establish standing to enforce the agreement]; see also Tsai Decl. at Ex. B [subject RISC].)

Defendant contends it is entitled to enforce the subject arbitration agreement under the doctrine of equitable estoppel, relying primarily on Felisilda v. FCA US LLC (2020) 53 Cal.App.5th 486 (Felisilda).

Where, as here, the Federal Arbitration Act (FAA, 9 U.S.C. § 1, et seq.) applies, state contract law determines whether a defendant may compel arbitration as a nonsignatory, including on an equitable estoppel theory. (See Arthur Andersen LLP v. Carlisle (2009) 129 S.Ct. 1896, 1902-1903 [pursuant to § 2 of FAA, state law governs the question of whether an arbitration agreement may be enforced by a nonparty to the agreement]; Victrola 89, LLC v. Jaman Properties 8 LLC (2020) 46 Cal.App.5th 337, 353, fn. 6 [“ ‘Even if the FAA applies, the question whether a contract containing an arbitration provision can be enforced by or against nonparties to the contract is governed by state law principles. [Citation.] In any event, for purposes of equitable estoppel, California and federal law are identical. [Citations.]’ [Citation.]”]; see also Tsai Decl. at Ex. B, p. 6 [“Any arbitration under this [a]rbitration [p]rovision shall be governed by the [FAA] (9 U.S.C. § 1 et seq.) and not by any state law concerning arbitration.”].)

In Felisilda, the court held the vehicle manufacturer was entitled to enforce a virtually identical arbitration agreement against the buyer-plaintiffs under an equitable estoppel theory, by finding in part that the arbitration agreement “expressly” extended to and encompassed claims “against third party nonsignatories to the sales contract,” based on the following provision: “Any claim or dispute, whether in contract, tort, statute or otherwise (including the interpretation and scope of this Arbitration Provision, and the arbitrability of the claim or dispute), between you and us or our employees, agents, successors or assigns, which arises out of or relates to ... [the] condition of this 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.” (Felisilda, supra, 53 Cal.App.5th at pp. 490, 496-498.)

Felisilda does not address the “between you and us” or “at your or our election” language in this provision, which specifically limits the scope of the arbitration agreement to claims between plaintiff (“you”) and the signatory seller-dealer (“us”), and specifically grants only the plaintiff and the dealer the right to compel arbitration. But to the extent Felisilda interprets this provision, which includes such language, as “expressly” encompassing and extending to claims “against” third parties (see Felisilda, supra, 53 Cal.App.5th at pp. 497, 498), it conflicts with other case law interpreting contract provisions containing similar “between you and us” language as meaning what it says—i.e., as being limited in scope to claims/other matters “between” the two signatories identified as “you” and “us” only. (See, e.g., Jarboe v. Hanlees Auto Group (2020) 53 Cal.App.5th 539, 549-550 [interpreting similar language in an arbitration agreement as encompassing disputes limited to those between the signatories as specified]; Fuentes v. TMCSF, Inc. (2018) 26 Cal.App.5th 541, 546-547, 549 [an arbitration provision that identifies the scope of the obligation to arbitrate as being limited to claims between the signatories, does not extend to claims between a signatory and a third party]; see also Jones, supra, 195 Cal.App.4th at p. 17 [rejecting application of arbitration provision to claims against nonsignatory defendants, noting “it would have been a simple matter” for signatory, who supplied the form arbitration agreement and was related to nonsignatories, “at the time of contracting to have broadened the arbitration agreement to include within its scope other [related] parties”]; Blickman Turkus, LP v. MF Downtown Sunnyvale, LLC (2008) 162 Cal.App.4th 858, 896 [attorney fee clause applying to litigation “ ‘between the parties hereto’ ” plainly limits fees to litigation between signatories].)

Given this conflicting authority, and because basic cannons of contract interpretation require the court to “give significance to every word of a contract, when possible, and avoid an interpretation that renders a word surplusage” (In re Tobacco Cases I (2010) 186 Cal.App.4th 42, 49; Carson v. Mercury Ins. Co. (2012) 210 Cal.App.4th 409, 420; Civ. Code, § 1641), the court finds that contrary to Felisilda, the subject arbitration agreement does not “expressly” encompass or extend to claims “against” the nonsignatory defendant manufacturer, either expressly or otherwise.

Further, Felisilda’s holding regarding the nonsignatory manufacturer’s right to compel arbitration is based on the doctrine of equitable estoppel. (See Felisilda, supra, 53 Cal.App.5th at pp. 496-499.) Equitable estoppel is not a new theory; the factors necessary for its application are well established in the law. Applying those factors to this case, it is clear that the doctrine does not apply here. “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, supra, 53 Cal.App.5th at pp. 495-496, citations omitted.)

“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.” (Goldman v. KPMG, LLP (2009) 173 Cal.App.4th at 209, 219, italics added.) The plaintiff’s actual dependence on the underlying contract in making out the claim against the nonsignatory is always the sine qua non of an appropriate situation for applying equitable estoppel. (Jensen v. U-Haul Co. of California (2017) 18 Cal.App.5th 295, 306.)

Here, plaintiff’s claims against defendant FCA do not depend on the existence of the RISC or any obligation or duty it imposes. Nothing in the complaint suggests plaintiff’s claims are based on any express or implied warranty in the RISC; and the material terms of the express written warranty alleged in the complaint appear nowhere in the RISC. Indeed, it is clear from the allegations of the complaint that plaintiff’s claims against FCA are independent of the RISC, and arise out of warranties directly between plaintiff and FCA and/or otherwise imposed by law, and the mere fact that plaintiff purchased the vehicle (as opposed to the method by which he acquired it, such as via the RISC). In other words, plaintiff would have had the same causes of action against FCA if plaintiff had simply come into the dealership, paid the full purchase price, and was handed title and the keys.

Defendant has therefore failed to establish that equitable estoppel applies here or that it is entitled to enforce the arbitration agreement as a nonsignatory under this exception.

Plaintiff’s request for judicial notice is GRANTED. (See Evid. Code, § 451, subd. (a).)

Defendant shall give notice.