Judge: Frank M. Tavelman, Case: 22BBCV00949, Date: 2023-03-03 Tentative Ruling

Case Number: 22BBCV00949    Hearing Date: March 3, 2023    Dept: A

LOS ANGELES SUPERIOR COURT

NORTH CENTRAL DISTRICT - BURBANK

DEPARTMENT A

MOTIONS TO COMPEL ARBITRATION & STAY MATTER

ALLEGATIONS: 

On November 8, 2022, Dionisio Alcala (“Plaintiff”) filed suit against Ford Motor Company (“Ford”) for claims arising out of the purchase of a 2019 Ford F-150 from Sunrise Ford (“Dealer”). The Complaint contains three causes of action: (1) violation of Song-Beverly Act-breach of express warranty, (2) violation of Song-Beverly Act - breach of implied warranty, and (3) violation of the Song- Beverly Act section 1793.2(b).

HISTORY: 

Plaintiff filed to dismiss the Dealer from this suit on February 17, 2023. The Court received Ford’s Motion to Compel Arbitration and Motion for Stay on January 5, 2023. Plaintiff’s opposition filed on February 17, 2023. Ford’s reply was filed February 24, 2023.

REQUEST FOR JUDICIAL NOTICE:

Plaintiff requests that judicial notice be taken of the decisions in Davis v. Shiekh Shoes, LLC (2022) 84 Cal.App.5th 956 and Ngo v. BMW of N. Am., LLC (9th Cir. Jan. 12, 2022) 23 F.4th 942. The Court will do so to the extent applicable.

RELIEF REQUESTED: 

Ford seeks to compel Plaintiff to submit to binding arbitration, and stay the proceedings pending the conclusion of such arbitration.

ANALYSIS: 

Compel Arbitration 

I.           LEGAL STANDARD 

C.C.P. § 1281.2 states: “[o]n 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 arbitrate the controversy exists.”

A party seeking to compel arbitration has the initial burden to prove, by a preponderance of the evidence, the existence of a valid and enforceable arbitration agreement. (Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 972.) If the moving party has met its initial burden, then the burden shifts to respondents to prove the falsity or unenforceability of the arbitration agreement. (Ibid.) 

“In determining whether an arbitration agreement applies to a specific dispute, the court may examine only the agreement itself and the complaint filed by the party refusing arbitration [citation]. The court should attempt to give effect to the parties' intentions, in light of the usual and ordinary meaning of the contractual language and the circumstances under which the agreement was made.”¿¿(Weeks v. Crow¿(1980) 113 Cal.App.3d 350, 353.)¿

II.         MERITS 

Existence of an Agreement to Arbitrate  ¿ 

Despite not being a signatory to the arbitration agreement, Ford nevertheless proved the existence of an arbitration agreement with Plaintiff.  Plaintiff signed a Retail Installment Sale Contract (“Sales Contract”) with Dealer containing an arbitration clause (“Arbitration Agreement”). (Keithly Decl., Exh. A.).  Specifically, the Sales Contract provides that the term “you” refers to the Buyer and that “we” and “us” refer to the Seller-Creditor.  The Sales Contract defines the Buyer as Plaintiff and the Seller-Creditor as Dealer. (Keithly Decl., Exh. A.)  The Arbitration Agreement provides as follows:

EITHER [Plaintiff] OR [Dealer] MAY CHOOSE TO HAVE ANY DISPUTE BETWEEN [Plaintiff and Dealer] DECIDED BY ARBITRATION AND NOT IN COURT OR BY JURY TRIAL…

Any claim or dispute, whether in contract or 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 your… purchase or 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 [Plaintiff’s] or [Dealer’s] election be resolved by neutral, binding arbitration and not by a court action…

…Any arbitration under this Arbitration Clause shall be governed by the Federal Arbitration Act (9 U.S.C. § 1 et. seq.) [(“FAA”)] and not by any state law concerning arbitration.

(Keithly Decl., Exh. A. (Emphasis added).)

In addition, in a signature box on the first page of the Sales Contract, Plaintiff signed below the following: “By signing below you agree that, pursuant to the Arbitration Provision on pg. 5 of this contract, you or we may elect to resolve any dispute by neutral, binding arbitration and not by a court action.”  (Keithly Decl., Exh. A.)

Plaintiff does not deny signing the Sales Contract containing the Arbitration Agreement.  (See Opposition.)  Rather, Plaintiff argues Ford is not entitled to enforce the arbitration agreement against Plaintiff. 

Under both California and federal case law, “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.) “Where the equitable estoppel doctrine applies, the nonsignatory has a right to enforce the arbitration agreement.” (Id., at p. 496.)

In Felisilda, the plaintiffs purchased a vehicle and signed a sales contract, which provided in pertinent part, "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 … 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." (Id. at 490)

The Felisilda plaintiffs sued the manufacturer and the dealership; the dealership moved to compel all parties to arbitration based on the sales agreement. The plaintiffs argued they could not be compelled to arbitrate their claims against non-signatory manufacturer. The Court of Appeal rejected this argument, finding that the manufacturer could compel arbitration under equitable estoppel, which allows a non-signatory to enforce an arbitration agreement when "the causes of action against the non-signatory are 'intimately founded in and intertwined' with the underlying contract obligations." (Id. at 495; quoting JSM Tuscany, LLC v. Superior Court (2011) 193 Cal.App.4th 1222, 1236-1237.) Citing the arbitration provisions above, the Court explained, "[t]he Felisildas' claim against [the manufacturer] directly relates to the condition of the vehicle that they allege to have violated warranties they received as a consequence of the sales contract. Because 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 [the manufacturer]." (Id. at 497.)

The arbitration agreement executed by Plaintiff is not materially different from the one in Felisilda. Felisilda found equitable estoppel because the buyers' claims related to the condition of the subject vehicle. The buyers expressly agreed to arbitrate their claims arising out of the condition of the subject vehicle, including those against third party non-signatories to the sales contract. That reasoning is present here.

The Court finds Ford  has established the existence of a valid arbitration agreement between Plaintiff and Dealer, which is enforceable by Ford, notwithstanding the fact Dealer has been dismissed as a defendant in the instant action and, as such, has not moved to compel arbitration.

Plaintiff argues that Felisilda is factually inapposite to the case at hand. Plaintiff argues that in Felisilda it was the dealership, and not the non-signatory manufacturer that was seeking to compel arbitration. Plaintiff does not explain how this distinction has any bearing on the Felisilda court’s finding that a third party can enforce a sales contract when the language of that contract specifically contemplates enforcement by non-signatories. The ruling of Felisilda focuses not on whether the dealership can compel arbitration, but whether the claims against a nonsignatory can be subject to arbitration. It cannot be that Plaintiffs can avoid the ruling in Felisilda by dismissing their claims against the dealership. Plaintiff’s dismissal of the dealership as a defendant has no bearing on the fact that the Sales Agreement exists, that the action arises from the sale of a vehicle under that Sales Agreement, and that the Sales Agreement contains language averring to third parties.

Plaintiff’s opposition is largely based on federal case law which does not bind this Court. The Court notes that “the decisions of federal district and circuit courts, although entitled to great weight, are not binding on state courts even as to issues of federal law.” (Alan v. Superior Court (2003) 111 Cal.App.4th 217, 229.)

Plaintiff argues that Federal Law, not Felisilda, should determine arbitrability in this instance because of the contract’s choice of law provision. To this end, Plaintiff cites to a California Court of Appeal ruling in Davis v. Shiekh Shoes, LLC (2022) 84 Cal.App.5th 956. The Court finds the decision in Davis is inapposite to this case. Davis concerned an instance in which an employer was confirmed to have waived its right to compel arbitration by virtue of failure to assert that right in its responsive pleadings.

Plaintiff argues that Davis stands for the idea that “when an arbitration agreement invokes federal law, the agreement will be interpreted according to federal law, even if California law dictates a different outcome.” (Oppo. pg. 2.) The Court finds this to be a misstatement of the holding in Davis. The Davis court stated that “Courts have recognized that where the FAA applies, whether a party has waived a right to arbitrate is a matter of federal, not state, law.” (Davis supra at 964.) The holding of Davis speaks specifically to the legal issue of waiver, not the interpretation of the entirety of whether a claim is arbitrable. Plaintiff does not point to any language in Davis which supports their extremely broad reading of the case

Plaintiff also greatly relies on Ngo v. BMW of North America, LLC (9th Cir. 2022) 23 F.4th 942. The Ngo case involved BMW of North America seeking to compel arbitration over a dispute regarding the financing agreement, and found BMW of North America (“BMW”) lacked any basis to compel arbitration as a third party beneficiary, due to the failure to establish any third party beneficiary status. (Ngo, supra, at p. 948.) The district court in Ngo did not rule on the equitable estoppel argument, rather focusing on whether BMW was the third-party beneficiary

The Ngo court refused to follow the logic of Felisilda, stating “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.” (Id. at 950.) “Furthermore, the Felisildas dismissed the dealership only after the court granted the motion to compel arbitration. Accordingly, Felisilda does not address the situation we are confronted with here, where the non-signatory manufacturer attempted to compel arbitration on its own.” (Id.)

Even if Ngo was convincing precedent on this Court, which it is not, the Court finds that the above statement is not sufficient to distinguish Felisilda from this case. Ngo drew its distinction from the complete lack of dealership involvement, the dealership was never even named as a party. Here, Plaintiff did name the dealership as a party and only filed for dismissal after Ford brought its motion to compel arbitration.

Plaintiffs’ reliance on the Ninth Circuit case Kramer v. Toyota Motor Corp.¿(9th¿Cir. 2013) 705 F.3d 1122 and subsequent cases is similarly misplaced.¿Plaintiffs contend that, like the Kramer plaintiffs,¿they do not depend¿upon the existence of the Sales Contract in asserting warranty claims against Ford, and therefore, their claims should not be subject to the equitable doctrine. (Kramer, supra, 705 F.3d 1122). However, the retail sales contracts in Kramer did not contain any language that could be construed as extending the scope of arbitration to third parties. By contrast, the arbitration provision in this case provides for arbitration of disputes that include third parties so long as the dispute pertains to the condition of the vehicle. The language of the arbitration provision here is nearly identical to the language at issue in Felisilda, where the Court of Appeal held that plaintiff’s agreement to a sales contract containing such language constituted express consent to arbitrate their claims regarding vehicle condition even against third parties. Just like Felisilda, Plaintiffs allege claims arising out of the condition of the Vehicle and are estopped from refusing to arbitrate their claims against Ford.

Based on the foregoing, Ford proved the existence of a valid Arbitration Agreement between Dealer and Plaintiff that is enforceable by Ford.  Plaintiff has met its initial burden; the burden shifts to Plaintiff to prove the falsity or unenforceability of the arbitration agreement.  Plaintiff has not bet this burden

III.        CONCLUSION 

The Court finds that an enforceable arbitration agreement exists as between Plaintiffs and Ford. As such, the motion to compel arbitration is GRANTED in its entirety.

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Arbitration Stay 

I.           LEGAL STANDARD 

Once arbitration has been compelled, in whole or in part, a stay of proceedings is mandatory if the issues in the arbitration and the pending action overlap. (C.C.P. § 1281.4 (if a court “has ordered arbitration of a controversy which is an issue involved in an action or proceeding pending before a court of this State, the court in which such action or proceeding is pending shall, upon motion of a party to such action or proceeding, stay the action or proceeding until an arbitration is had in accordance with the order to arbitrate or until such earlier time as the court specifies.”)) 

“The purpose of the statutory stay [under section 1281.4] is to protect the jurisdiction of the arbitrator by preserving the status quo until arbitration is resolved. In the absence of a stay, the continuation of the proceedings in the trial court disrupts the arbitration proceedings and can render them ineffective.” (Federal Ins. Co. v. Superior Court (1998) 60 Cal.App.4th 1370, 1374-1375 (citations omitted).) 

II.         MERITS 

As the Court grants the motion to compel arbitration in its entirety, the Court also grants the motion to stay the proceedings pending arbitration. 

III.        CONCLUSION 

The Court grants the instant motion. 

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RULING: 

In the event the parties submit on this tentative ruling, or a party requests a signed order or the court in its discretion elects to sign a formal order, the following form will be either electronically signed or signed in hard copy and entered into the court’s records. 

ORDER 

Defendant Ford Motor Company’s Motion to Compel Arbitration and Motion for Stay came on regularly for hearing on March 3, 2023 with appearances/submissions as noted in the minute order for said hearing, and the court, being fully advised in the premises, did then and there rule as follows: 

THE MOTION TO COMPEL ARBITRATION IS GRANTED. 

THE MOTION FOR STAY IS GRANTED. 

UNLESS ALL PARTIES WAIVE NOTICE, FORD MOTOR COMPANY  IS TO GIVE NOTICE.

IT IS SO ORDERED. 

DATE:  March 3, 2023                             _______________________________ 

                                                                         F.M. TAVELMAN, Judge 

Superior Court of California 

County of Los Angeles