Judge: Joel L. Lofton, Case: 23AHCV00455, Date: 2023-10-26 Tentative Ruling

Case Number: 23AHCV00455    Hearing Date: October 26, 2023    Dept: X

   Tentative Ruling

Judge Joel L. Lofton, Department X

HEARING DATE:      October 26, 2023                                            TRIAL DATE: No date set.

CASE:                         AGUSTIN LOPEZ, an individual, v. AMERICAN HONDA MOTOR CO., INC. a California Corporation, and DOES 1 through 10, inclusive.  

CASE NO.:                 23AHCV00455

MOTION TO COMPEL ARBITRATION

MOVING PARTY:               Defendant American Honda Motor Co., Inc.

RESPONDING PARTY:      Plaintiff Agustin Lopez

SERVICE:                              Filed July 28, 2023

OPPOSITION:                       Filed October 13, 2023

REPLY:                                   Filed October 19, 2023

RELIEF REQUESTED

             Defendant American Honda Motor Co., Inc. (“Defendant”) moves for an order compelling Plaintiff Agustin Lopez (“Plaintiff”) to submit this case to binding arbitration.

BACKGROUND

             This case arises out of Plaintiff’s lemon law claim for the purchase of a 2019 Acura MDX, Vehicle Identification Number 5J8YD3H54KL003110 (“Subject Vehicle”). Plaintiff allegedly purchased the Subject Vehicle on July 18, 2022. Plaintiff filed this complaint on March 2, 2023.

TENTATIVE RULING

            Defendant’s motion to compel arbitration is DENIED.

LEGAL STANDARD

“California and federal law both favor enforcement of valid arbitration agreements.” (Aanderud v. Superior Court (2017) 13 Cal.App.5th 880, 889.) “A party who files a motion to compel arbitration ‘bears the burden of proving the existence of a valid arbitration agreement by the preponderance of the evidence, and a party opposing the petition bears the burden of proving by a preponderance of the evidence any fact necessary to its defense.’’ (Cisnero Alverez v. Altamed Health Services Corporation (2021) 60 Cal.App.5th 572, 580.)

DISCUSSION

            Arbitration Provision

            Defendant moves for an order compelling Plaintiff to submit this claim to binding arbitration based on the provision contained in the purchase agreement.

            The arbitration agreement at issue here provides, in 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 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 court action.” (Miner Decl. ¶ 9, Exhibit 1 at p. 16.)

            As a preliminary matter, Defendant argues that the warranty for the Subject Vehicle is part of the purchase agreement as a matter of law. However, “California law does not treat manufacturer warranties imposed outside the four corners of a retail sale contract as part of the sale contract.” (Ford Motor Warranty Cases (2023) 89 Cal.App.5th 1324, 1335 “Ochoa”.) The court recognizes that this issue is pending before the California Supreme Court. (Ford Motor Warranty Cases (2023) 532 P.3d 270.) California courts, with review of this issue pending, have chosen to agree with the reasoning stated in Ochoa. (See Kielar v. Superior Court (2023) 94 Cal.App.5th 614, 620.) This court agrees with Ochoa.

            Equitable Estoppel

            Defendant argues that equitable estoppel should apply to allow it to enforce the contract as a nonsignatory.

            “As a general rule, only a party to an arbitration agreement may enforce the agreement.” (Felisilda v. FCA US LLC (2020) 53 Cal.App.5th 486, 495 (“Felisilda”.) However, “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.) “By relying on contract terms in a claim against a nonsignatory defendant, even if not exclusively, a plaintiff may be equitably estopped from repudiating the arbitration clause contained in that agreement.” (Boucher v. Alliance Title Co., Inc (2005) 127 Cal.App.4th 262, 272.)

            Defendant argues that this court should follow the reasoning in Felisilda and that equitable estoppel applies because it is an assignee of the dealership. Although Defendant claims it was assigned the purchase agreement, it fails to demonstrate that is the case. Defendant’s attached declaration does not provide it was assigned the purchase agreement nor does the evidence cited in the motion at page two line nine demonstrate assignment. Further, even if Defendant were to demonstrate it was an assignee of the dealership, its argument that equitable estoppel applies fails.

            In Felisilda, supra, 53 Cal.App.5th at p. 490, the Court’s analysis of whether the plaintiff’s claims were intertwined with the sales agreement began with an evaluation of the language of the arbitration clause at issue. The arbitration clause in Felisilda encompassed “[a]ny claim or dispute . . . 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 . . ..” (Id. at p. 490.) The Court held that because the plaintiffs “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 defendant].” (Id. at p. 497.)

            However, another California Court of Appeals, in Ochoa, supra, 89 Cal.App.5th 1324 disagreed with the reasoning and conclusion in Felsilda. The Court in Ochoa concluded that the plaintiffs’ warranty claims were not based on their sales contract. (Id. at p. 1334.) As previously stated, the Court in Ochoa specifically ruled that “California law does not treat manufacturer warranties imposed outside the four corners of a retail sale contract as part of the sale contract.” (Id. at p. 1335.) Additionally, the Court also stated that the language of the arbitration provision did not provide that the plaintiffs had consent to arbitrate claims with third party nonsignatories. (Id. at p. 1334.) Rather, the court interpreted the language as listing the subject matter of claims the plaintiffs agreed to arbitrate with the dealers. (Id. at p. 1335.)

Defendant argues that the sales contract with the arbitration provision directly supply the basis for Plaintiff’s warranty claims. The Court in Ochoa rejected a similar argument. The Court stated: “[O]ur 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.’ ” (Ochoa, supra, 89 Cal.App.5th at p. 1336.) The Court held that “independent manufacturer warranties are not part of, but are independent from, retail sale contracts.” (Ibid.)

            Here, the court opts to follow the decision in Ochoa and holds that Plaintiff’s warranty claims are not intimately founded in and intertwined with the sales contract.

            Third Part Beneficiary

            Defendant also argues that it may enforce the arbitration provision as third-party beneficiaries.

Civil Code section 1559 provides: “A contract, made expressly for the benefit of a third person, may be enforced by him at any time before the parties thereto rescind it.” The California Supreme Court in Goonewardene v. ADP, LLC (2019) 6 Cal.5th 817, 830 stated that the following elements must be present for a third-party to move forward with a claim: “(1) whether the third party would in fact benefit from the contract, but also (2) whether a motivating purpose of the contracting parties was to provide a benefit to the third party, and (3) whether permitting a third party to bring its own breach of contract action against a contracting party is consistent with the objectives of the contract and the reasonable expectations of the contracting parties.”

However, “ ‘the “mere fact that a contract results in benefits to a third party does not render that party a ‘third party beneficiary.’ ” ’ [Citation.] Nor does knowledge that the third party may benefit from the contract suffice.” (Ochoa, supra, 89 Cal.App.5th at p., 1336.) 

            Defendant argues that it is a third-party beneficiary because the provision contemplates types of disputes such as the one that gives rise to the current case. Even if true, Defendant’s argument fails to address the other requirements to enforce the arbitration provision as a third-party beneficiary. Defendant’s arguments that it is a third-party beneficiary are unavailing.

CONCLUSION

            Defendant’s motion to compel arbitration is DENIED.

            Moving Party to give notice.

Dated:   October 26, 2023                                           ___________________________________

                                                                                    Joel L. Lofton

                                                                                    Judge of the Superior Court

Parties who intend to submit on this tentative must send an email to the court indicating their

intention to submit.  alhdeptx@lacourt.org