Judge Gail Killefer, Case Number: 22STCV15778, Date: 2023-05-25 Tentative Ruling

Judge: Gail Killefer, Case: 22STCV15778, Date: 2023-05-25 Tentative Ruling

Case Number: 22STCV15778 Hearing Date: May 25, 2023 Dept: 37

HEARING DATE: May 25, 2023

CASE NUMBER: 22STCV15778

CASE NAME: Ana Lopez v. Nissan North America, Inc.

MOVING PARTY: Defendant, Nissan North America, Inc. (“NNA”)

OPPOSING PARTY: Plaintiff, Ana Lopez

TRIAL DATE: Not set.

PROOF OF SERVICE: OK

MOTION: Defendant’s Motion to Compel Arbitration

OPPOSITION: March 10, 2023

REPLY: March 16, 2023

SUPPLEMENTAL REPLY: May 17, 2023

TENTATIVE: Defendant’s motion is granted. Plaintiff is ordered to arbitrate his claims against NNA. This action is stayed pending completion of arbitration or further order of the court. The court sets an order to show cause re status of the arbitration for May 28, 2024, at 8:30 a.m. in Department 37. NNA is to give notice.

Background

This is a lemon law action arising from the purchase by Ana Lopez (“Plaintiff”) of a 2018 Nissan Sentra on May 28, 2018 (the “Vehicle”). Plaintiff alleges that Defendant Nissan North America, Inc. (“NNA”), which manufactured the Vehicle, provided Plaintiff various warranties in connection with the Vehicle in which Defendants undertook to preserve or maintain the performance of the Vehicle and to repair the Vehicle in the event of any defects during the warranty period. Plaintiff alleges that the Vehicle developed numerous defects during the warranty period, including but not limited to defects related to the CVT transmission and engine. Further, Plaintiff alleges that the Defendant LAD Carson-N, LLC. (“Dealership Defendant”) also failed to repair defects to the Vehicle when it was presented to Defendants and their authorized representatives for repair.

Plaintiff’s Complaint alleges the following causes of action: (1) violation of the Song-Beverly Act—breach of express warranty, (2) fraudulent inducement—intentional misrepresentation, (3) fraudulent inducement—concealment, and (4) negligent repair.

Defendants now move to compel arbitration and for a stay of this action pending completion or arbitration. Plaintiff opposes the motion.

The hearing on this motion was continued, pending the decision in Ford Motor Warranty Cases (2023) 89 Cal.App.5th 1324 [306 Cal.Rptr.3d 611, 620, 89 Cal.App.5th 1324], review filed (May 12, 2023)(hereinafter “Ochoa”).

The motion now comes for hearing.

Evidentiary Objections

Objections to Declaration of Zachary Powell

Objection 1: sustained. Hearsay, Secondary evidence rule, irrelevant, and speculative.

Request for Judicial Notice

NNA requests judicial notice of the following in support of its motion:

1. Complaint filed by Plaintiff in this matter; (Exhibit 1)

2. Answer filed by NNA to Plaintiff’s Complaint in this matter; (Exhibit 2)

3. The Notice of Entry of Dismissal filed by Plaintiffs Dina C. Felisilda and Pastor O. Felisilda on February 11, 2016 in the matter Dina C. Felisilda, et al, v. FCA US LLC, et al., Sacramento Superior Court Case No. 34-2015-00183668. (Exhibit 3).

Defendant’s requests are granted. The existence and legal significance of this document are proper matters for judicial notice. (Evid. Code § 452(d), (h).) However, the court may not take judicial notice of the truth of the contents of the documents. (Herrera v. Deutsche Bank National Trust Co. (2011) 196 Cal.App.4th 1366, 1375.) Documents are only judicially noticeable to show their existence and what orders were made. The truth of the facts and findings within the documents are not judicially noticeable. (Lockley v. Law Office of Cantrell, Green, Pekich, Cruz & McCort (2001) 91 Cal.App.4th 875, 885.)

Discussion

I. Legal Standard

“California law reflects a strong public policy in favor of arbitration as a relatively quick and inexpensive method for resolving disputes. To further that policy, CCP § 1281.2 requires a trial court to enforce a written arbitration agreement unless one of three limited exceptions applies. Those statutory exceptions arise where (1) a party waives the right to arbitration; (2) grounds exist for revoking the arbitration agreement; and (3) pending litigation with a third party creates the possibility of conflicting rulings on common factual or legal issues.” (CCP § 1281.2; Acquire II, Ltd. v. Colton Real Estate Group (2013) 213 Cal.App.4th 959, 967.) Similarly, public policy under federal law favors arbitration and the fundamental principle that arbitration is a matter of contract and that courts must place arbitration agreements on an equal footing with other contracts and enforce them according to their terms. (AT&T Mobility LLC v. Concepcion (2011) 563 U.S. 333, 339.)

In deciding a motion or petition to compel arbitration, trial courts must first decide whether an enforceable arbitration agreement exists between the parties and then determine whether the claims are covered within the scope of the agreement. (Omar v. Ralphs Grocery Co. (2004) 118 Cal.App.4th 955, 961.) The opposing party has the burden to establish any defense to enforcement. (Gatton v. T-Mobile USA, Inc. (2007) 152 Cal.App.4th 571, 579 [“The petitioner ... bears the burden of proving the existence of a valid arbitration agreement and the opposing party, plaintiff here, bears the burden of proving any fact necessary to its defense.”].)

II. Existence of an Arbitration Agreement

A motion to compel arbitration or stay proceedings must state verbatim the provisions providing for arbitration or must have a copy of them attached. (Cal. Rules of Court, rule 3.1330.)

A party may demonstrate express acceptance of the arbitration agreement in order to be bound (e.g., Mago v. Shearson Lehman Hutton Inc. (9th Cir. 1992) 956 F.2d 932 [agreement to arbitrate included in job application]; Nghiem v. NEC Electronic, Inc. (9th Cir. 1994) 25 F.3d 1437 [agreement to arbitrate included in handbook executed by employee]; Lagatree v. Luce, Forward, Hamilton & Scripps (1999) 74 Cal. App. 4th 1105 [employer may terminate employee who refuses to sign agreement to arbitrate]) or implied-in-fact in fact acceptance (Asmus v. Pacific Bell (2000) 23 Cal. 4th 1, 11 [implied acceptance of changed rules regarding job security]; DiGiacinto v. Ameriko-Omserv Corp. (1997) 59 Cal. App. 4th 629, 635 [implied acceptance of changed compensation rules]). (Craig v. Brown & Root (2000) 84 Cal.App.4th 416, 420 (Craig).)

“A signed agreement is not necessary, however, and a party’s acceptance [of an agreement to arbitrate] may be implied in fact….” (Pinnacle Museum Tower Ass’n v. Pinnacle Market Dev. (US), LLC (2012) 55 Cal.4th 223, 23 (Pinnacle), 6.) “An arbitration clause within a contract may be binding on a party even if the party never actually read the clause.” (Ibid.)

NNA contends that Plaintiff must be ordered to arbitrate their claims because the Arbitration Agreement found in the Retail Installment Sales Contract (the “RISC”, “Sales Agreement” or “Agreement”) Plaintiff executed at the time they purchased the Vehicle requires it. (Motion, 8-14; Declaration of Rodrigo Salas (“Salas Decl.”), Exh. 4-5.) The Agreement provides in pertinent part as follows:

ARBITRATION PROVISION:

PLEASE REVIEW- IMPORTANT – AFFECTS YOUR LEGAL RIGHTS

1. EITHER YOU OR WE MAY CHOOSE TO HAVE ANY DISPUTE BETWEEN US DECIDED BY ARBITRATION OR BY JURY TRIAL.

2. IF A DISPUTE IS ARBITRATED, YOU WILL GIVE UP YOUR RIGHT TO PARTICIPATE AS A CLASS REPRESENTATIVE OR CLASS MEMBER ON ANY CLASS CLAIM YOU MAY HAVE AGAINST US INCLUDING ANY RIGHT TO CLASS ARBITRATION OR ANY CONSOLIDATION OF INDIVIDUAL ARBITRATIONS.

3. DISCOVERY AND RIGHTS TO APPEAL IN ARBITRATION ARE GENERALLY MORE LIMITED THAN IN A LAWSUIT, AND OTHER RIGHTS THAT YOU AND WE WOULD HAVE IN COURT MAY NOT BE AVAILABLE IN ARBITRATION.

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 arise out of or relate 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 do not sign this contract) shall, at your or our election, be resolved by neutral, binding arbitration and not by a court action. If federal law provides that a claim or dispute is not subject to binding arbitration, this Arbitration Provision shall not apply to any such claim or dispute. Any claim or dispute is to be arbitrated by a single arbitrator on an individual basis and not as a class action. You expressly waive any right you may have to arbitrate a class action. You may choose the American Arbitration Association…or any other organization to conduct arbitration subject to our approval. You may get a copy of the rules of an arbitration organization by contacting the organization or visiting its website.

Arbitrators shall be attorneys or retired judges and shall be selected pursuant to the applicable rules. The arbitrator shall apply substantive law and the applicable statute of limitations. The arbitration hearing shall be conducted in the federal district in which you reside unless the Seller-Creditor is a party to the claim or dispute, in which case the hearing will be held in the federal district where this contract was executed. We will pay your filing, administration, service or case management fee and your arbitrator or hearing fee all up to a maximum of $5000, unless the law or the rules of the chosen arbitration organization require us to pay more. The amount we pay may be reimbursed in whole or in part by decision of the arbitrator if the arbitrator finds that any of your claims is frivolous under applicable law. Each party shall be responsible or its own attorney, expert and other fees, unless awarded by the arbitrator under applicable law. ... Any arbitration under this Arbitration Provision shall be governed by the Federal Arbitration Act (9 U.S.C. § 1, et seq.) and not by any state law concerning arbitration. ...

You and we retain the right to seek remedies in small claims court for disputes or claims within the court’s jurisdiction, unless such action is transferred, removed or appealed to a different court. Neither you nor we waive the right to arbitrate by using self-help remedies, such as repossession, or by filing an action to recover to vehicle, to recover a deficiency balance, or for individual injunctive relief. Any court having jurisdiction may enter judgment on the arbitrator’s award. This Arbitration Provision shall survive any termination, payoff, or transfer of this contract. ...

(Salas Decl., Exh. 4-5.)(emphasis added)

Additionally, NNA contends that notwithstanding its status as a non-signatory to the Agreement, NNA may still compel arbitration because claims against it are related to the condition of the Vehicle, that the Agreement is valid under the FAA, and was valid as agreed to between the parties. (Motion, 9-14.) NNA alternatively contends that it has standing to compel arbitration because it is an intended third-party beneficiary of the Agreement, as NNA is the manufacturer of the Vehicle. (Motion, 14-15.) Defendant cites Felisilda v. FCA US LLC, (2020) 53 Cal.App. 5th 486 (“Felisilda”) for this argument.

Felisilda arose in connection with the sale of a used Dodge Grand Caravan that Plaintiffs purchased from a dealership and manufactured by defendant, FCA US, LLC. (“FCA”) (Id. at 489.) Plaintiffs brought an action against the dealership and FCA after the vehicle began exhibiting problems. (Id.) The dealership moved to compel arbitration relying on the retail installment sales contract signed by Plaintiffs, and the trial court ordered Plaintiffs to arbitrate against both the dealership and FCA. (Id.) FCA did not move to compel arbitration but instead filed a notice of non-opposition. (Id.) The Court of Appeal concluded that the trial court correctly determined that Plaintiff’s claims against FCA were encompassed by the arbitration agreement. (Id.) In reaching this conclusion, the Court of Appeal examined an identical arbitration clause which stated in pertinent part: “[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, this contract or any resulting transaction or relationship (including any such relationship with third parties who do not sign this contract) shall … be resolved by neutral, binding arbitration and not by a court action.” The appellate court found that the equitable estoppel doctrine applied: “The [buyers’] 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 [buyers] 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]. Consequently, the trial court properly ordered the [buyers] to arbitrate their claim against [the manufacturer]. (Id. at pp. 496-497.)

Moreover, before Felisilda was decided, the Court reached this same conclusion about the equitable estoppel theory in prior motions to compel arbitration brought in lemon law cases.

Under 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 in either of two circumstances: (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.) At bottom, “[t]he linchpin for equitable estoppel is equity—fairness.”” (Id. at p. 220.)

A review of longstanding precedent in California law reveals a strong interrelationship between warranties and underlying purchase agreements. “A warranty is a contractual term concerning some aspect of the sale, such as title to the goods, or their quality or quantity.” (Jones v. ConocoPhillips Co. (2011) 198 Cal.App.4th 1187, 1200 (emphasis added).) “A warranty is as much one of the elements of sale and as much a part of the contract of sale as any other portion of the contract and is not a mere collateral undertaking.” (A. A. Baxter Corp. v. Colt Industries, Inc. (1970) 10 Cal.App.3d 144, 153.) To this point, in reviewing the Song-Beverly Act’s legislative history, the California Supreme Court has noted that “the Legislature apparently conceived of an express warranty as being part of the purchase of a consumer product.” (Gavaldon v. DaimlerChrysler Corp. (2004) 32 Cal.4th 1246, 1258; see also Felisilda, supra, 53 Cal.App.5th at 496 (“[T]he sales contract was the source of the warranties at the heart of this case.”).)

The Gavaldon case specifically does significant analysis of the Song-Beverly Act, namely sections 1794.4 and 1794.41. In Gavaldon, the California Supreme Court includes the following findings:

“Section 1794.41, subdivision (a)(3), for example, provides: ‘The [service] contract is applicable only to items, costs, and time periods not covered by the express warranty. However, a service contract may run concurrently with or overlap an express warranty if (A) the contract covers items or costs not covered by the express warranty or (B) the contract provides relief to the purchaser not available under the express warranty, such as automatic replacement of a product where the express warranty only provides for repair.’

Section 1794.4, subdivision (a) provides that ‘Nothing in this chapter shall be construed to prevent the sale of a service contract to the buyer in addition to, or in lieu of, an express warranty if that contract fully and conspicuously discloses in simple and readily understood language the terms, conditions and exclusions of that contract....’ And section 1794, subdivision (a) provides: ‘Any buyer of consumer goods who is damaged by a failure to comply with any obligation under this chapter or under an implied or express warranty or service contract may bring an action for the recovery of damages and other legal and equitable relief.’

The above three statutes indicate that the Legislature not only conceived of service contracts as distinct from express warranties, but intended the two categories to be mutually exclusive. Section 1794.41, subdivision (a)(3), does not permit a service contract to cover the same items as an express warranty. Section 1794.4 specifies that service contracts are sold in addition to or in lieu of express warranties. And section 1794 refers to express warranties and service contracts in the alternative. If express warranties and service contracts were intended to overlap, then these sections would have been phrased differently, by modifying the term “express warranty” to at least leave open the possibility of overlap. ...

Without such a modifier to the term “express warranty,” it is difficult to escape the inference that the Legislature considered service contracts to be categorically distinct from express warranties.

The legislative history of the Song–Beverly Act supports this interpretation. ... At the same time, section 1795.5 was added to extend the Song–Beverly Act's application to used consumer goods sold with express warranties. ...(Stats.1971, ch. 523, § 17, p. 3008.)

In response to concerns about the prospective enactment of section 1795.5 from the Northern California Motorcar Dealers Association, Inc., Senator Song's staff assured the association that the proposed remedies with respect to express warranties on used vehicles would not apply to used vehicles with service contracts. That response is perhaps the clearest window we have into the Legislature's reason for distinguishing between a service contract and an express warranty. It stated: ‘You may be correct that the distinction between a warranty and a service contract is purely one of semantics, but such is often the most important kind. I believe the words ‘guarantee’ and ‘warranty’ possess a meaning that ‘service contract’ does not share. .... We think that an ‘as is' sale, with or without a service contract, will better inform the public as to what they are actually buying than a sale accompanied by the express warranties presently used in the used car trade.’ (Richard Thomsen, Admin. Asst. to Sen. Song, Letter to Wallace O'Connell, Apr. 16, 1971, p. 2.)

It is true that, functionally speaking, warranties and service contracts appear to have the same purpose—to guarantee the repair or replacement of certain products or parts of products for a specified period of time. But, as the above passage suggests, the Legislature apparently conceived of an express warranty as being part of the purchase of a consumer product, and a representation of the fitness of that product that has particular meaning for consumers. In contrast, it apparently thought of the purchase of a service contract as distinct from the purchase of the product, and not as a representation of fitness but only an agreement to provide repair services, a kind of insurance. Hence, one difference between express warranties and service contracts is that the latter is generally purchased “for an additional cost.’ (§ 1791, subd. (o).)” (Gavaldon, supra.)

In view of this legal backdrop, the equitable estoppel doctrine has been found to apply in lemon law cases like this because the buyer relies upon the underlying purchase agreement to (1) establish standing, (2) invoke implied warranties, and (3) obtain remedies.

Standing: Standing to bring Song-Beverly Act claims is limited to a “buyer of consumer goods” (Civ. Code § 1794(a)), which the Song-Beverly Act defines as “any individual who buys consumer goods from a person engaged in the business of manufacturing, distributing, or selling consumer goods at retail.” (Civ. Code § 1791(b).) Without this purchase agreement, Plaintiff cannot meet this standing requirement or, indeed, the standing requirement for any warranty claim. (Jones, supra, 198 Cal.App.4th at 1201 (“As a general rule, a cause of action for breach of implied [or express] warranty requires privity of contract; ‘there is no privity between the original seller and a subsequent purchaser who is in no way a party to the original sale.’ ”).)

Implied Warranties: The implied warranty of merchantability attaches to “every sale of consumer goods that are sold at retail in this state,” unless properly disclaimed. (Civ. Code § 1792.) Without the RISC, Plaintiff would have no implied warranties to invoke.

Remedies: According to the Complaint, Plaintiff seeks to “reimbursement” for the costs of financing, and owning the Vehicle and “rescission” of the purchase agreement of the Vehicle. (Complaint. ¶¶ 90, Prayer for Relief.) These remedies require examination and presentation of the RISC.

Because the Sales Agreement underlies Plaintiff’s causes of action, including a claim for an express breach of the Agreement, the equitable estoppel doctrine has been found to apply.

The court views the Ochoa decision as an appellate decision in opposition to the application of Felisilda. In Ochoa, the Second District of the Court of Appeal explicitly declined to follow Felisilda, holding 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.” (Ochoa at p. 4.)

Further, the Ochoa court concluded:

The Felisilda court relied on the following italicized language to conclude that third parties could enforce the arbitration provision: “ ‘Any claim or dispute, whether in contract, tort, statute or otherwise . . . , between you and us or our employees, agents, successors or assigns, which arises out of or relates to . . . purchase or condition of this vehicle, the 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 . . . .’ ” [citation].

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. . .

Purchasers, like plaintiff . . . can elect to buy insurance, theft protection, extended warranties and the like from third parties, and they can finance their transactions with those third parties under the sale contract. The “third party” language in the arbitration clause means that if a purchaser asserts a claim against the dealer . . . that relates to one of those third-party transactions, the dealer can elect to arbitrate that claim. It says nothing of binding the purchaser to arbitrate with the universe of unnamed third parties.

[Defendant’s] argument that plaintiffs’ manufacturer warranty claims are founded in the sale contracts because California law treats all warranty claims as contract claims is not supported by California law. California law does not treat manufacturer warranties imposed outside the four corners of a retail sale contract as part of the sale contract. In Greenman v. Yuba Power Products, Inc. (1963) 59 Cal.2d 57 (Greenman), our Supreme Court distinguished between, on the one hand, warranty obligations flowing from the seller to the buyer by contract, and, on the other hand, manufacturer warranties “that arise[ ] independently of a contract of sale between the parties.” (Id. at p. 60, italics added; see also Corporation of Presiding Bishop of Church of Jesus Christ of Latter Day Saints v. Cavanaugh (1963) 217 Cal.App.2d 492, 514 (Cavanaugh) [manufacturer's express warranty “was not part of a contract of sale between the manufacturer and the plaintiff” (italics added)].) (Ochoa at *620-626.)

Further, this court notes, sua sponte, that the Ochoa court found that the argument “California law treats all warranty claims as contract claims is not supported by California law.” (Ochoa, at *621.) Ochoa states the manufacturer had the burden of establishing that warranties were part of the sales contract, and has failed to do so. (Id.)

Also, this court further notes, sua sponte, that Ochoa court identifies that the manufacturer in lemon law motions to compel arbitration under the Song-Beverly Act fails to establish the correct Goonewardene factors, and that the Ngo court’s analysis establishes that manufacturers are likely not intended beneficiaries of sales between dealers and consumers. (Ochoa, 89 Cal.App.5th 1324 at *621-623; citing Goonewardene v. ADP, LLC (2019) 6 Cal.5th 817, 830.)

The court notes the Ochoa court’s decision to not follow Felisilda’s interpretation creates a split in binding authority upon this court. Where there is a split of authority, trial courts have discretion to choose between the decisions. (Auto Equity Sales, Inc. v. Sup. Ct. (1962) 57 Cal.2d 450, 456.)

Ochoa refused to follow the Felisilda interpretation, instead holding that the italicized portion of the RISC above is “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.”

(Ochoa at *620.)

As noted above, Ochoa also refused to follow Felisilda because the Ochoa court concluded that warranties were not founded within sales agreement, and are “imposed outside the four corners of a retail sale contract as part of the sale contract.” (Ochoa, at *621.) This court disagrees with this analysis, and elects to not follow the Ochoa ruling for the following reasons.

First, in finding that equitable estoppel did not support an interpretation reading manufacturer warranties to be part of the RISC, the Ochoa court relies on two decisions primarily: Corp. of Presiding Bishop of Church of Jesus Christ of Latter- Day Saints v. Cavanaugh (“Cavanagh”), 217 Cal.App.2d 492, 514 (1963) and Greenman v. Yuba Power Prod., Inc. (“Greenman”), 59 Cal.2d 57 (1963). This court does not find either cases to be instructive or binding in this motion.

Both Cavanagh and Greenman involved warranties made and transactions entered before the enactment of the UCC and the Song-Beverly Consumer Warranty Act in California, two statutes which form the entire foundation of Plaintiff’s claims here. Further, while the UCC itself forms a basis for warranties made in California, the Song-Beverly Act “was meant to supplement, not supersede, the provisions of the Commercial Code.” (Dagher v. Ford Motor Co. (2015) 238 Cal.App.4th 905, 928.) Thus, while Cavanagh and Greenman may be instructive in cases where warranties are made outside of a strict statutory scheme, because lemon law actions—and Plaintiff’s claims here particularly—arise solely out of the Act’s statutory regime, the two cases cannot provide this court sufficient guidance with regards to the Act’s interpretation.

Second, this court finds that while the Ochoa court at *621 decided that manufacturer warranties are not “part of the sale contract,” the Gavaldon court specifically read the legislative history of the Act to mean that warranties for new vehicles were “part of the purchase of a consumer product, and a representation of the fitness of that product.”

When read in concert with Civ. Code § 1792’s language that the implied warranty of merchantability attaches to “every sale of consumer goods that are sold at retail in this state,” it means both express and implied warranties should be read as part of the sales contract per binding authority and statute.

Further, if the Ochoa court’s determination that the warranties are separate from the purchase agreement, then every Plaintiff bringing forth Song-Beverly claims will lack standing to sue the manufacturer. “Without this purchase agreement, Plaintiff cannot meet this standing requirement or, indeed, the standing requirement for any warranty claim. (Jones v. ConocoPhillips Co. (2011) 198 Cal.App.4th 1187, 1201 (“As a general rule, a cause of action for breach of implied [or express] warranty requires privity of contract; ‘there is no privity between the original seller and a subsequent purchaser who is in no way a party to the original sale.’ ”).)”

Therefore, this court finds that, in order for the Act to maintain its regime over manufacturers and the warranties they make, manufacturers’ warranties must be read into sales agreements, like the RISC here, in order for Plaintiff to have privity in contract with the manufacturer, and thus, establish standing to bring such claims against a manufacturer.

Thus, the court finds Felisilda to be instructive, and under its own authority pursuant to Auto Equity Sales, Inc. v. Sup. Ct. (1962) 57 Cal.2d 450, elects to follow Felisilda’s analysis.

However, this court agrees with Ochoa’s analysis regarding the manufacturer’s position as an alleged third party beneficiary, and therefore disregards such an argument as it fails the Goonewardene factors.

In opposition, Plaintiff also argues that Felisilda is distinguishable because the buyers in that case brought claims against both the dealership and manufacturer whereas here the claims are brought solely against the manufacturer. This is a distinction without a meaningful difference. The reasoning in Felisilda for upholding the equitable estoppel finding was that the buyers’ claims related to the condition of the subject vehicle and the buyers expressly agreed to arbitrate their claims arising out of the condition of the subject vehicle, including those against third party nonsignatories to the sales contract. The same rationale is found here in these circumstances, with this Agreement. Further, the FAA does not “alter background principles of state contract law regarding the scope of agreements (including the question of who is bound by them).” (Arthur Andersen LLP v. Carlisle (2009) 556 U.S. 624, 630.)¿ As opposed to the California Court of Appeal ruling in Felisilda, Ngo is not binding on this court and provides persuasive authority only. (See¿Felisilda, supra, at 497.)¿ The Court does not find Ngo more persuasive than the binding authority in Felisilda. Because state law determines whether a nonsignatory party may compel arbitration, the court rejects Plaintiff’s argument that the choice-of-law provision in the arbitration agreement here precludes the applicability of Felisilda.

Additionally, Plaintiff also contends equitable estoppel does not apply, arguing there is no reliance on the RISC. (Opposition, 6-9; citing Jarboe v. Janless Auto Group (2020) 53 Cal.App.5th 539 (Jarboe).)

In Jarboe, Plaintiff, who was terminated from an automobile dealership, brought a wage and hour action individually and on behalf of a putative class against his former employer and affiliated dealerships. (Jarboe, supra, 53 Cal.App.5th at 543-544.) The trial court granted Defendants’ motion to compel arbitration as to 11 out of 12 causes of action against the employer and denied the motion as to the request for a stay and as to the other defendants. (Id.) The Court of Appeal found that the trial court correctly rejected Defendants’ arguments about standing to compel arbitration as third-party beneficiaries and under the theory of equitable estoppel. (Id. at 547.) According to the Court of Appeal, even if the other owners had standing to compel arbitration under the operative agreement, it is limited to the “context of their ownership” of the company named in the employment agreement also at issue. (Id. at 550.) Additionally, the Jarboe court concluded that it was correct to refuse to compel arbitration against the other defendants because there was no showing that plaintiff’s claims against these other defendants are “rooted” in his employment with his former employer or his agreement to arbitrate with his former employer. (Id. at 552-556.)

Plaintiff’s arguments of NNA’s waiver also fail. In reply, NNA explains Plaintiff’s reliance on Morgan v. Sundance, 142 S.Ct. 1709 (2022) is misplaced as NNA raised arbitration in its Case Management Conference statement, and is immaterial “because federal procedural rules are not at issue in this case.” (Reply, 1-3.)

The court agrees with NNA that Felisilda applies and gives NNA standing to move to compel arbitration in this action. Pursuant to Felisilda, NNA has standing to compel arbitration if Plaintiff’s claims relate to the condition of the vehicle and Plaintiff has agreed to arbitrate claims arising out of the condition of the vehicle. Further, the court concludes that Jarboe does not conflict with Felisilda. Instead, Jarboe held that arbitration could not be compelled against non-signatory companies because there was no showing that plaintiff’s claims arise out of his employment with his former employer or his agreement to arbitrate with his former employer. Thus, Felisilda and Jarboe stand for the same principles.

As discussed above, the Agreement provides in pertinent part that Plaintiff agrees to arbitrate claims “which arise out of or relate 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 do not sign this contract).” Thus, Plaintiff has agreed to arbitrate claims arising out of or relating to the “condition” of the Vehicle, or any resulting “relationship,” including any relationship with “third parties who do not sign the contract,” such as NNA.

For these reasons, the court finds that a valid agreement to arbitrate exists which applies to all of Plaintiff’s claims against NNA in this action. The court will now analyze the parties’ arguments regarding defenses to enforcement.

III. Defenses to Enforcement

A. Procedural & Substantive Unconscionability

Pursuant to Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 114 (Armendariz) both procedural and substantive unconscionability must be present in order for a court to exercise its discretion to refuse to enforce a valid arbitration agreement. Additionally, in Armendariz, the California Supreme Court recognized that it is more appropriate to sever and restrict illegal terms that are collateral to the main purpose of a contract than to find the entire contract invalid. (Armendariz, supra, 24 Cal.4th at 124 [“Courts are to look to the various purposes of the contract. If the central purpose of the contract is tainted with illegality, then the contract as a whole cannot be enforced. If the illegality is collateral to the main purpose of the contract, and the illegal provision can be extirpated from the contract by means of severance or restriction, then such severance and restriction are appropriate.”].)

Here, Plaintiff contends the Agreement is both substantively and procedurally unconscionable as it is a contract of adhesion, requires Plaintiff to pay arbitration fees, and mandates that each party is responsible for their own attorney, expert, and remaining fees. (Opp., 13-15.) In reply, NNA correctly contends that an adhesive contract on its own is not unconscionable. (Reply, 8; AT&T Mobility LLC v. Concepcion (2011) 563 U.S. 333, 346–47.) Further, NNA correctly contends that Plaintiff fails to highlight the relevant portion of the RISC where Defendant agrees to pay $5,000, or more, for the required arbitration and service fees. (Reply, 9.)

Because both substantive and procedural unconscionability are required before the court may refuse to enforce a valid arbitration agreement, and Plaintiff has failed to make a showing of either and both, NNA’s motion is granted.

Conclusion

NNA’s motion is granted. Plaintiff is ordered to arbitrate his claims against NNA. This action is stayed pending completion of arbitration or further order of the court. The court sets an order to show cause re status of the arbitration for May 28, 2024, at 8:30 a.m. in Department 37. NNA is to give notice.