Judge: Frank M. Tavelman, Case: 22BBCV01181, Date: 2023-05-19 Tentative Ruling

Case Number: 22BBCV01181    Hearing Date: May 19, 2023    Dept: A

MOTION FOR RECONSIDERATION

ALLEGATIONS: 

Henry Ramirez Morataya (“Morataya”) & Bryan Ramirez (“Ramirez”) (collectively “Plaintiffs”) filed suit against Toyota Motor Sales, U.S.A., Inc. (“TMS”), on December 12, 2022 for claims arising out of the purchase of a 2021 Toyota Supra from Toyota of North Hollywood (“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).

On February 2, 2023, this Court heard TMS’s motion to compel arbitration. The Court, relying on Felisilda v. FCA US LLC (2020) 53 Cal.App.5th 486, granted the motion to compel arbitration and stay the action.

Plaintiffs now move for reconsideration of the order compelling arbitration. Plaintiffs assert new law has been created in the Second District Court of Appeals ruling in Ochoa v. Ford Motor Company (2023) 89 Cal.App.5th 1324 (“Ochoa”).

HISTORY: 

On April 25, 2023, Plaintiffs filed their motion for reconsideration. On May 8, 2023, TMS filed its opposition. On May 11, 2023, Plaintiffs filed their reply.  

ANALYSIS: 

Compel Arbitration 

I.          LEGAL STANDARD 

Motion for Reconsideration

C.C.P. § 1008(a) provides “When an application for an order has been made to a judge, or to a court, and refused in whole or in part, or granted, or granted conditionally, or on terms, any party affected by the order may, within 10 days after service upon the party of written notice of entry of the order and based upon new or different facts, circumstances, or law, make application to the same judge or court that made the order, to reconsider the matter and modify, amend, or revoke the prior order. The party making the application shall state by affidavit what application was made before, when and to what judge, what order or decisions were made, and what new or different facts, circumstances, or law are claimed to be shown.”

C.C.P. § 1008(c) provides “If a court at any time determines that there has been a change of law that warrants it to reconsider a prior order it entered, it may do so on its own motion and enter a different order.”

Motion to Compel Arbitration

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 

Jurisdiction for Reconsideration

TMS argues Plaintiffs’ motion for reconsideration is untimely under C.C.P. § 1008(a), which imposes a strict 10-day time limit for filing such motions. TMS argues plaintiff cites to no authority supporting its arguments that their motion is timely. TMS cites to Le Francois v. Goel (2005) 35 Cal.4th 1094, which enumerates the rule in C.C.P § 1008(c) that a court may move for reconsideration upon findings of new law. TMS argues the Court should not reward Plaintiffs’ untimely motion by bringing a motion for reconsideration sua sponte.

The Court acknowledges that Plaintiffs’ motion is untimely under C.C.P. § 1008(a); however, that is due to no fault of the Plaintiff.   There was a recent contrary ruling on this issue which would permit the Court to deviate from its prior ruling. Auto Equity Sales, Inc., 57 Cal. 2d 450, 456 (If appellate court decisions conflict, then the lower court must choose between the conflicting decisions). As such, the Court, on its own motion, reconsiders its February 2, 2023 ruling. The Court finds the language of LeFrancois instructive. “We cannot prevent a party from communicating the view to a court that it should reconsider a prior ruling…We agree that it should not matter whether the judge has an unprovoked flash of understanding in the middle of the night or acts in response to a party's suggestion. If a court believes one of its prior interim orders was erroneous, it should be able to correct that error no matter how it came to acquire that belief.” (LeFrancois supra, 35 Cal.4th 1094 at 1108, citation and quotation marks omitted.) Here, Plaintiffs have brought to the Court’s attention a change in the rule of law which merits reconsideration of its previous ruling.

TMS also argues the Court lacks jurisdiction to reconsider the matter because Plaintiff’s did not challenge the jurisdiction of the arbitrator. TMS argues that because this Court entered a stay of arbitration, the case is now in limbo and the Court cannot reconsider its order to compel arbitration.

The Court disagrees. The Court did not divest itself of jurisdiction by sending this matter to arbitration. The Court is unaware of a statute that provides for such a divestiture of jurisdiction and the Court is unaware of any case expressly holding that there is such a divestiture of jurisdiction. In fact, case law has held court’s retain jurisdiction for reconsideration of orders compelling arbitration and can do so when the emergence of new law requires. See Malek v. Blue Cross of California (2004) 121 Cal.App.4th 44, at 60. Additionally, the progress of the arbitration has no bearing on jurisdiction for reconsideration. (Id.)

The Effect of Ochoa

“Where there is more than one appellate court decision, and such appellate decisions are in conflict the superior court can and must make a choice between the conflicting decisions” (Auto Equity Sales, Inc. v. Superior Court (1962) 57 Cal.2d 450, 456, citations and quotation marks omitted.) In practice, “…a superior court ordinarily will follow an appellate opinion emanating from its own district even though it is not bound to do so.” (McCallum v. McCallum (1987) 190 Cal.App.3d 308, 315.)

The rulings in Felisilda and Ochoa present conflicting opinions from the Fourth and Second Appellate districts respectively. The Court’s previous ruling compelling arbitration relied on Felisilda as the primary binding precedent at the time of decision. Now, Ochoa presents analysis which stands equal and opposite to that in Felisilda. Ultimately, the Court finds the reasoning in Ochoa to be more persuasive in deciding whether to compel arbitration.

The Arbitration Clauses

The relevant portions of the arbitration clause in Ochoa read as follows:

EITHER YOU OR WE MAY CHOOSE TO HAVE ANY DISPUTE BETWEEN US DECIDED BY ARBITRATION AND NOT IN COURT OR BY JURY TRIAL.”

“[A]ny claim or dispute, whether in contract, tort, statute or otherwise (including the interpretation and scope of this Arbitration Provision, and the arbitrability of the claims or dispute), between you and us or our employees, agents, successors or assigns, which arises out of or relates to your credit application, purchase, or condition of this vehicle, this contract or any resulting transaction or relationship (including any such relationship with third parties who did not sign this contract) shall, at your or our election, be resolved by neutral, binding arbitration and not by a court action.”

(Ochoa supra, 89 Cal.App.5th 1324, at 1330.) 

This clause is virtually identical the clause presented in the agreement here. The agreement here provides:

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…

(Shippen-Murray Decl. Exh. A pg. 7.)

The Court notes the arbitration clause in Felisilda is also virtually identical to the agreement here and the agreement in Ochoa.

Equitable Estoppel

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 supra, 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.)

The Court previously ruled along the lines of Felisilda as binding precedent. The Felisilda court found equitable estoppel applied because the plaintiff’s claims were intimately founded in and intertwined with the dealership contract. The Felisilda court explained, "[t]he 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. 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 FCA." (Id. at 497.)

The Ochoa court disagreed in Felisilda’s finding that the plaintiff’s claims were “founded in or intertwined with” the dealership sales contracts. The court “disagree[d] with Felisilda that ‘the sales contract was the source of [FCA’s] warranties at the heart of this case.’” (Ochoa supra, 89 Cal.App.5th 1324, at 1334.) Instead, the Ochoa court held plaintiff’s claims were “…based on FMC’s statutory obligations to reimburse consumers or replace their vehicles when unable to repair in accordance with its warranty,” and not “on any express contractual language in the sale contracts.” (Id. at 1335.) The Ochoa court further reasoned, “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.)   

The Court is of the same opinion as Ochoa that Plaintiffs’ claims are not “intimately founded in and intertwined” with the substantive terms of the dealership contract. Here, as in Ochoa, the dealership sales contract contains no aversion to a manufacturer warranty and in fact disclaims any warranty explicitly. (Shippen-Murray Decl. Exh. A pg. 4.) The Court further agrees Plaintiff’s claims are based on statutory obligations under Song-Beverly, rather than the contractual relationship between Plaintiffs and the dealership. No language in the contract serves as the source Plaintiffs’ claims against the dealer, absent extrapolation from the third-party non-signatory language. As will now be discussed, the Court feels this language is not intended to allow third parties to compel arbitration.

Third-Party Nonsignatories

The Court similarly agrees with Ochoa’s interpretation of the “third-party nonsignatory” language employed in the dealership contract.

At issue here is the contract language “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…”

The court in Felisilda read the above language to mean that third parties could compel arbitration in disputes relating to the purchased vehicle. (Felisilda supra, at 498.) The Ochoa court instead read the language as “a further delineation of the subject matter of claims the purchasers and dealers agreed to arbitrate.”  (Ochoa supra, 89 Cal.App.5th 1324, at 1335.) 

Ochoa clearly distinguishes between (1) the parties to the claims or disputes and (2) the subject matters of the claims or disputes. Here, the parties are defined as “…you and us or our employees, agents, successors or assigns”. The subject matter of the claim is “…any resulting transaction or relationship (including any such relationship with third parties who do not sign this contract.)”. If there was a dispute between Plaintiffs and the dealership that arose out of or related to a resulting transaction or relationship with a third party, then Plaintiffs and the dealership could arbitrate that dispute.  However, based on the arbitration provision’s language and Ochoa’s clear interpretation thereof, there is no agreement requiring Plaintiff to arbitrate a claim or dispute between himself and a non-signatory third-party. 

The Court finds Ochoa’s interpretation of the arbitration language to be the most logical. The language indicates the clause intends to allow arbitration of claims arising out of interaction with third party non-signatories by either Plaintiffs or the dealership. The clause simply does not contemplate manufacturers, or any third party for that matter, as having the right to compel arbitration under the terms of the agreement.

III.       CONCLUSION 

The Court finds the reasoning of Ochoa to be more persuasive than that of Felisilda. The Court finds the language of the arbitration agreement does not contemplate allowing TMS to compel arbitration of Plaintiffs’ claims. Further, the doctrine of equitable estoppel does not apply as Plaintiffs’ claims against TMS are not intimately founded in or intertwined with the dealership agreement. As such, the Court vacates its prior ruling compelling arbitration, and now DENIES the motion to compel arbitration.

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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 denies the motion to compel arbitration in its entirety on reconsideration, the motion to stay proceedings is moot.  

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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 

Henry Ramirez Morataya & Bryan Ramirez’s Motion for Reconsideration came on regularly for hearing on May 19, 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 COURT VACATES ITS PRIOR ORDER TO COMPEL ARBITRATION, AND THE MOTION TO COMPEL ARBITRATION IS DENIED.  

THE MOTION FOR STAY IS MOOT 

UNLESS ALL PARTIES WAIVE NOTICE, PLAINTIFFS ARE TO GIVE NOTICE.

IT IS SO ORDERED. 

DATE:  May 19, 2023                             _______________________________ 

                                                                        F.M. TAVELMAN, Judge 

    Superior Court of California 

     County of Los Angeles