Judge: Joel L. Lofton, Case: 23BBCV00464, Date: 2023-09-06 Tentative Ruling

Case Number: 23BBCV00464    Hearing Date: September 6, 2023    Dept: X

   Tentative Ruling

Judge Joel L. Lofton, Department X

HEARING DATE:      September 6, 2023                                          TRIAL DATE: No date set.

CASE:                         SELVIN A. SALAZAR, an individual, and MIRTALA GAMIZ, an individual, v. AMERICAN HONDA MOTOR CO., INC., a California corporation, and DOES 1 through 10, inclusive.  

CASE NO.:                 23BBCV00464

MOTION TO COMPEL ARBITRATION

MOVING PARTY:               Defendant American Honda Motor Co., Inc. (“Defendant”)

RESPONDING PARTY:      Plaintiffs Selvin A. Salazar and Mirtala Gamiz

SERVICE:                              Filed April 6, 2023

OPPOSITION:                       Filed August 22, 2023

REPLY:                                   Filed August 30, 2023

RELIEF REQUESTED

            Defendant’s motion to compel arbitration is GRANTED.

            This case is ordered stayed pursuant to Code of Civil Procedure section 1281.4.

BACKGROUND

             This case arises out of Plaintiffs Selvin A. Salazar and Mirtala Gamiez’s (“Plaintiffs”) lemon law claim involving a 2020 Honda Pilot, Vehicle Identification Number 5FNYF5H50LB010242 (“Subject Vehicle”). Plaintiffs allege they leased the Subject Vehicle on December 2, 2019.  Plaintiffs filed this complaint on February 2, 2023, alleging three causes of action for (1) violation of Song-Beverly Act – breach of express warranty, (2) violation of Song-Beverly Act – breach of implied warranty, (3) violation of Song-Beverly Act section 1793.2.

TENTATIVE RULING

OBJECTIONS TO EVIDENCE

            Plaintiff’s objections are overruled.

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

            Motion to Compel Arbitration

            Defendant seeks an order compelling Plaintiffs to submit this claim to binding arbitration. Defendant argues that pursuant to the lease agreement under which Plaintiffs leased the Subject Vehicle, Plaintiffs must arbitrate its claims against it. The arbitration provision provides, in part: “By signing the Arbitration Consent, YOU elect to have disputes resolved by arbitration. YOU, HONDA, or any involved third party may pursue a Claim. ‘Claim’ means any dispute between YOU, HONDA, or any involved third party relating to your account this Lease, or our relationship, including any application, the Vehicle, its performance and any representations, omissions or warranties.” (Ameripour Decl. ¶ 2, Exhibit 1 at p. 6.)

            The Doctrine of Equitable Estoppel

            One issue presented is whether Defendant is able to enforce the arbitration agreement based on equitable estoppel.

            “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.)

            The issue, then, is whether Plaintiff’s claims are intimately founded in and intertwined with the retail installment sales contract.

            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 Ford Motor Warranty Cases (2023) 89 Cal.App.5th 1324 (“Ochoa”) 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.) The Court 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 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.)

Defendants argue 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: “California law does not treat manufacturer warranties imposed outside the four corners of a retail sale contract as part of the sale contract. . . . 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.’ ” (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. The court recognizes that the California Supreme Court granted the petition for review. (Ford Motor Warranty Cases (2023) 532 P.3d 270.) However, the court holds that Plaintiff’s warranty claims are not intimately founded in and intertwined with the sales contract.

            Third Party Beneficiaries

            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.) “For a nonsignatory to invoke an arbitration provision in an agreement based on a third party beneficiary theory, the nonsignatory beneficiary first must establish the agreement was applicable to the controversy.” (Jones v. Jacobson (2011) 195 Cal.App.4th 1, 22.)

            In Ngo v. BMW of North America, LLC (9th Cir. 2022) 23 F.4th 942, the Court analyzed whether the Goonewardene factors applied to allow a manufacturer to enforce the arbitration agreement. As to the first Goonewardene prong, the Court stated that “the arbitration clause expressly states that only three parties—Ngo, the dealership, and the assignee—may compel arbitration.” (Id. at p. 946.) Thus, the Court held that any benefit to the manufacturer was “peripheral and indirect because it is predicated on the decisions of others to arbitrate.”

            Here, the arbitration agreement provides that “YOU, HONDA, or any involved third party may pursue a Claim.” (Ameripour Decl. ¶ 2, Exhibit 1 at p. 6.) The arbitration provision expressly defines “HONDA” to include, in addition to other entities, “American Honda Motor Co. Inc.”. (Ibid.) Unlike in Ngo, the arbitration agreement here expressly provides Defendant with the benefit of pursuing a claim pursuant to the arbitration provision. In the same vein, the second Goonewardene prong is met because the parties agreed, pursuant to the language of the contract, that “HONDA” would include Defendant. In the current case, Defendant is more than an incidental beneficiary of the agreement but an expressly named party with the power to pursue a claim pursuant to the arbitration agreement.

            “[P]ermitting the third party to enforce the contract must be consistent with the ‘objectives of the contract’ and the ‘reasonable expectations of the contracting parties.’ ” (Ngo, supra, 23 F.4th at p. 948.) Here, the arbitration agreement provides Defendant with the ability to bring a claim under the arbitration agreement. Further, the agreement defines a claim as including “any dispute between YOU, HONDA, or any involved third party relation to your account, this lease, or our relationship, including any application, the Vehicle, its performance and any representations, omissions or warranties.” (Ameripour Decl. ¶ 2, Exhibit 1 at p. 6.) Once again, HONDA includes Defendant in the present case. Additionally, the arbitration provision specifically mentions that claims covered include the performance of the vehicle and any warranties. Thus, allowing Defendant to enforce the provision is consistent with the objectives of the contract.

            Defendant has demonstrated it is able to enforce the arbitration provision as a third-party beneficiary.

CONCLUSION

            Defendant’s motion to compel arbitration is GRANTED.

            This case is ordered stayed pursuant to Code of Civil Procedure section 1281.4.

            Case Management Conference is taken off calendar and the court sets a status hearing regarding arbitration on June 5, 2024 at 8:30 am.

            Moving Party to give notice.

Dated:   September 6, 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.  Parties intending to appear are strongly encouraged to appear remotely.  alhdeptx@lacourt.org