Judge Jill Feeney, Case Number: 21STCV13658, Date: 2023-12-06 Tentative Ruling

This is a lemon law action. The Complaint alleges as follows. On October 14, 2016, James Branscromb III (“Plaintiff”) purchased a 2015 Mercedes-Benz C300 (“subject vehicle”). The subject vehicle contained certain electrical and engine defects. Following a number of attempts, Mercedes-Benz USA, LLC (“Defendant”) was unable to repair the subject vehicle. Defendant failed to promptly replace the defective vehicle, or repurchase the vehicle from Plaintiff.

On April 9, 2021, Plaintiff filed the Complaint. Plaintiff’s Complaint alleges three (3) causes of action against Defendants Mercedes-Benz USA, LLC and House of Imports, Inc.: (1) Violation of Song-Beverly Act – Breach of Express Warranty; (2) Violation of Song-Beverly Act – Breach of Implied Warranty; and (3) Negligent Repair.

Plaintiffs move for reconsideration of the Court’s October 29, 2021 order granting Defendant’s motion to compel arbitration and stay action on the grounds that there is a change of law that warrants reconsideration.

(a) 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) 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.

A court acts in excess of jurisdiction when it grants a motion to reconsider that is not based upon “new or different facts, circumstances or law.” (Gilberd v. AC Transit (1995) 32 Cal.App.4th 1494, 1499.) Motions for reconsideration are restricted to circumstances where a party offers the Court some fact or circumstance not previously considered, and some valid reason for not offering it earlier. (Id.)

An appellate decision published during an action’s pendency may be a change of law under section 1008, subdivision (c), and requires a trial court to reconsider its earlier ruling if the decision materially changed the law. (Valdez v. Himmelfarb (2006) 144 Cal.App.4th 1261, 1276.) A change in the law is always an appropriate basis, up until final judgment is entered, for changing an interim order. (State of California v. Superior Court (Flynn) (2016) 4 Cal.App.5th 94, 101.)

A trial court may exercise its inherent jurisdiction to reconsider an interim ruling. (Le Francois v. Goel (2005) 35 Cal.4th 1094, 1096-1097.) The trial court is specifically authorized to exercise such inherent jurisdiction to reconsider orders compelling arbitration. (Malek v. Blue Cross of California (2004) 121 Cal.App.4th 44, 59–60.)

Although judges generally may not reconsider rulings made by another judge, a different judge may entertain the motion if the original judge who made the ruling is unavailable. (People v. Saez (2015) 237 Cal.App.4th 1177, 1185.)

Here, Plaintiffs move for reconsideration of the Court’s order compelling arbitration. The Court relied on Felisilda¿v. FCA US LLC¿(2020) 53 Cal.App.5th 486 to determine that Mercedes was a third-party beneficiary to the sale agreement between Plaintiff and Mercedes Benz of Encino (“MB Encino”). On April 4, 2023, the Second Appellate District of the California Court of Appeal reached a decision contrary to Felisilda in Ochoa v. Ford Motor Company (Ford Motor Warranty Cases) (2023) 89 Cal. App. 5th 1324, review granted July 19, 2023, S279969 (“Ochoa”). Another similar decision, Montemayor v. Ford Motor Company (2023) 92 Cal.App.5th 958 (“Montemayor”), was published after Ochoa. Plaintiff argues the new law found in Ochoa, which specifically addresses the reasoning in Felisilda, justifies reconsideration of the motion.

The motion is untimely under Code of Civil Procedure section 1008 subdivision (a) (“Section 1008”). Neither subdivision (a) nor subdivision (c) of Section 1008 give Plaintiff the authority to move for reconsideration more than ten days after the order where there is a change of law. (See Advanced Building Maintenance v. State Comp Ins. Fund (1996) 49 Cal.App.4th 1388, 1392 [finding the trial court’s denial of the motion for reconsideration correct where the motion was served more than 10 days after service of written notice of entry of the order].) Subdivision (a) limited the time in which a party may file a motion for reconsideration. Subdivision (c), on the other hand, gives the court authority to sua sponte reconsider a ruling where there is a change in law.

A court may consider a number of factors in determining whether to exercise its discretion, including the importance of the change of law, the timing of the motion, and the circumstances of the case. (Farmers Ins. Exchange v. Superior Court (2013) 218 Cal.App.4th 96, 107.)

Here, Mercedes argues that the parties have already completed all phases of arbitration and were on the verge of completing arbitration when the final evidentiary hearing was postponed pending the outcome of this motion. However, Plaintiff argues that arbitration is not yet complete because the parties have yet to take any depositions, including Defendant’s person most qualified, conduct a vehicle inspection, or serve any written discovery demands. It appears the parties have not completed arbitration. The Court finds that while the motion is untimely, the change in law warrants reconsideration of a prior order.

Mercedes argues that Ochoa is not a change of law because Ochoa did not overrule Felisilda and thus created a split of authority. Where appellate decisions are in conflict, the court exercising inferior jurisdiction can and must make a choice between the conflicting decisions. (Auto Equity Sales, Inc. v. Superior Court of Santa Clara County (1962) 57 Cal.2d 450, 456.) Here, as will be explained below, the Court finds that the more limited interpretation of the parties’ agreement in Ochoa more accurately reflects the parties’ intent.

“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 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.” (Id.)

In Felisilda, plaintiff purchased a vehicle from defendant dealership. After the car broke down during the warranty period, plaintiff brought a claim under the SBA against defendant dealership and defendant manufacturer. Relying on an arbitration provision in the sales contract that was identical to the instant Arbitration Agreement, defendant dealership moved to compel arbitration; defendant manufacturer filed a notice of non-opposition.

The trial court granted defendants’ motion to compel arbitration. Thereafter, plaintiff dismissed defendant dealership. After the arbitrator found in defendant manufacturer’s favor, plaintiff appealed.

On appeal, plaintiff argued that the trial court lacked jurisdiction to order plaintiffs to arbitrate their claim against defendant manufacturer because defendant manufacturer was a non-signatory to the sales contract.

The Felisilda Court affirmed, holding that defendant manufacturer could compel arbitration pursuant to the doctrine of equitable estoppel. The Court found that as plaintiff’s claim against defendant manufacturer related directly to the condition of the vehicle, and “[b]ecause [plaintiff] expressly agreed to arbitrate the claims arising out of the condition of the vehicle – even against third party nonsignatories to the sales contract – [plaintiff is] estopped from refusing to arbitrate their claim against [defendant manufacturer].” (Felisilda at p. 497.)

In Ochoa, the Second District of the Court of Appeal 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.)

Defendant manufacturer in Ochoa argued that arbitration could be compelled pursuant to a sales contract almost identical to the instant Contract under the doctrine of equitable estoppel, or as a third-party beneficiary.

In rejecting defendant manufacturer’s equitable estoppel argument, the Court held that as California law does not treat manufacturer warranties imposed outside the four corners of a retail sales contract as part of the sale contract, “Plaintiff’s claims in no way rely on the sale contracts. Equitable estoppel does not apply.” (Id. at p. 7.)

In rejecting defendant manufacturer’s third-party beneficiary theory, the Court held that “allowing [defendant manufacturer] to enforce the arbitration provision as a third party beneficiary would be inconsistent with the reasonable expectations of the contracting parties where they twice specifically vested the right of enforcement in the purchaser and the dealer only.” (Id. at p. 8.)

Mercedes points out that Plaintiff alleges in his Complaint that the subject sale was accompanied by an implied warranty that the vehicle was merchantable pursuant to Civ. Code, section 1792. Mercedes argues that this case is distinguishable from Ochoa because there is a link here between the sale of the vehicle and the manufacturer’s warranty. However, the allegations of Plaintiff’s Complaint have no bearing on whether Mercedes may enforce an arbitration agreement and whether Mercedes’ warranty is part of the sale contract. The terms of the arbitration agreement do not change merely because Plaintiff alleged a warranty accompanied the sale contract. Additionally, California law does not consider a manufacture warranty imposed outside the four corners of a retail sales contract as part of the sale contract. The Court must look to the language of the sale contract itself.

Mercedes also argues that the warranty must be considered part of the sale contract because protections under the Song-Beverly Act would not exist but for the sale contract. This argument fails because even if a warranty must arise from a sale contract for a vehicle to trigger protections under Song-Beverly Act, this has no bearing on whether a party may compel a matter to arbitration based on a warranty imposed outside a retail sales contract.

The Felisilda Court did not find that in California, a manufacturer’s warranty is inherently intertwined with the sales contract; instead, Felisilda based its decision on the language of the sales contract itself.

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. (Ochoa at p. 1335.)

Here, the Court finds the Ochoa’s limited interpretation of the quoted language more accurately depicts the parties’ intent when they entered into the Arbitration Agreement. Moreover, the Court will not reject the Court of Appeal’s analysis of manufacturer’s warranties in Ochoa in favor of Felisilda, a decision which did not analyze the inherent relation between manufacturer’s warranties and underlying sales contracts in any depth. Although Mercedes might find the Ochoa Court’s analysis erroneous, there is simply no analysis in Felisilda that is persuasive on the matter.

On December 6, 2023, the Court ordered the parties to submit supplemental briefing on how much has been paid for arbitration and by whom, what has occurred in the arbitration, what remains, and what are the appeal rights as to the issue of Ochoa.

Plaintiff’s counsel testifies that after this matter was ordered to arbitration, Plaintiff exchanged his documents in support of his claims but had not received Defendant’s document exchange. (Mukai Decl., ¶2.) The parties have not submitted opening briefs and the Final Status Conference was not held on September 26, 2023. (Id., ¶3.) The parties have not submitted exhibit lists or witness lists. (Id.) The parties have not met and conferred regarding foundation and authentication of exhibits. (Id., ¶5.)

Plaintiff also argues that although an order compelling arbitration may only be appealed after arbitration is complete, Plaintiff may petition for writ relief. (Ramos v. Superior Court (2018) 28 Cal.App.5th 1042, 1050.)

On the other hand, Defendant’s counsel testifies that the arbitrator determined there would be no written discovery in this case, only a mandatory exchange of documents and information which was completed on January 2023. (Aliviado Decl., ¶4.) The arbitrator also decided that there would be no depositions unless a party applied for permission to take a deposition. (Id., ¶5.) Plaintiff never applied to take a deposition. (Id., ¶6.) Although the parties could conduct a vehicle inspection, there was no vehicle to inspect because the vehicle was totaled before this matter was filed. (Id., ¶7.) The last proceeding in arbitration was a case management conference. (Id., ¶8.)

The parties’ supplemental briefing is conflicting. Although Plaintiff represents it never received Defendant’s document production, Defendant believes the exchange was completed in January 2023. Although Defendant represents that arbitration is nearly complete, the supplemental briefing shows that the last proceeding in the arbitration took place in December 2022 and nothing else has taken place since. Neither party addressed how much has been paid for arbitration and by whom.

Because there is no evidence that arbitration is nearly complete or that any party has already expended significant resources to complete arbitration, the Court will exercise its discretion to reconsider the motion to compel arbitration as described below.

Accordingly, the motion for reconsideration is denied as untimely. The court reconsiders the motion to compel arbitration under its own authority in light of Ochoa v Ford Motor Company (Ford Motor Warranty Cases) (2023) 306 Cal.Rprt.3d 611. (See Code Civ. Proc., section 1008, subd. (c).) Upon reconsidering the court ruling on Defendant’s motion to compel arbitration, the court denies the motion to compel arbitration. The matter is remanded to the superior court for all further proceedings.