Judge: John J. Kralik, Case: 23GDCV00561, Date: 2023-12-15 Tentative Ruling
Case Number: 23GDCV00561 Hearing Date: December 15, 2023 Dept: NCB
North
Central District
|
pedro
manuel sochynsky, et al., Plaintiffs, v. american
honda motor co., inc., et al., Defendants. |
Case No.:
23GDCV00561 Hearing
Date: December 15, 2023 [TENTATIVE]
order RE: motion to compel arbitration |
BACKGROUND
A.
Allegations
Plaintiffs Pedro Manuel Sochynsky and
Laura Gutierrez de Flores (“Plaintiffs”) allege that on July 14, 2019, they purchased
a 2019 Honda Odyssey vehicle. Plaintiffs allege that Defendant American Honda
Motor Co., Inc. (“Honda”) warranted the vehicle and agreed to preserve or
maintain the utility or performance of the vehicle or provide compensation if
there was a failure in such utility or performance. Plaintiffs allege that the vehicle was
delivered with serious defects and nonconformities to warranty and developed
other serious defects and nonconformities to warranty including electrical,
structural, suspension, emission, and engine system defects. They allege that the defects and
nonconformities to warranty manifested themselves within the applicable express
warranty period, and that the nonconformities substantially impair the use, value
and/or safety of the vehicle.
Plaintiffs allege that they delivered
the vehicle to an authorized Honda repair facility for repair of the
nonconformities, but that it was unable to conform the vehicle to the applicable
express warranty after a reasonable number of repair attempts. Plaintiffs allege that notwithstanding their
entitlement to a replacement vehicle or restitution, Honda has failed to
promptly replace the vehicle or promptly make restitution in accordance with
the Song-Beverly Act.
Plaintiffs also allege that they
delivered the vehicle to Defendant New Century Honda in Glendale (“New
Century”) for repair on numerous occasions, and that New Century breached its
duty to Plaintiffs to use ordinary care and skill by failing to properly store,
prepare and repair the vehicle in accordance with industry standards,
proximately causing Plaintiffs damages.
The complaint, filed March 12, 2023,
alleges 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 the Song-Beverly Act Section 1793.2(b); and (4) negligent
repair. The 1st to 3rd
causes of action are alleged against Honda.
The 4th cause of action is alleged against New Century.
B.
Relevant Background
On April 21, 2023, Honda filed its first motion to compel arbitration,
which Plaintiffs opposed.
On August 11, 2023, Judge Ralph C. Hofer of Department D in the
Glendale Courthouse issued a tentative ruling denying the motion. However, upon review of its file, it realized
that there was a CCP § 170.6 challenge against Judge Hofer. The Court in Department D accepted the
peremptory challenge and the case was reassigned to this Department B in the Burbank
Courthouse.
C.
Motion on Calendar
On September 19, 2023, Honda filed a motion to
compel arbitration and to stay the action pending the outcome of the
arbitration.
The Court is not in receipt of an opposition brief.
REQUEST FOR JUDICIAL NOTICE
Honda requests judicial notice of: (1) Plaintiffs’ complaint filed on March
21, 2023. The request is granted. (Evid. Code, § 452(d).)
DISCUSSION
Honda moves to compel Plaintiffs to arbitrate their
claims based on the Retail Installment Sale Contract (“Sales Contract”).
1.
Terms of the Agreement to Arbitration
In support of the motion, Honda provides the
declaration of defense counsel Ali Ameripour, which attaches a copy of the Sales
Contract. (Ameripour Decl., ¶4, Ex. 2 [Sales
Contract].)
The Sales Contract is entered between Seller
Norm Reeves Honda Superstore WC and Buyer Pedro Manuel Sochynsky and Co-Buyer
Laura Gutierrez de Flores. The Sales
Contract includes a section entitled “ARBITRATION PROVISION,” which states in
relevant part:
1. Either you or we may choose to have any
dispute between us decided by arbitration and not in court or by jury trial.
…
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 any of our employees,
agents, successors or assigns, which arises out of or relates to a 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 such claim or dispute. …
(Sales
Contract at “Arbitration Provision.”) The
Arbitration Provision states the required qualifications of the arbitrator, the
applicable law, the payment of arbitration fees, and that the arbitration shall
be governed by the FAA. (Id.)
2.
Is there an enforceable agreement to arbitrate? Is Honda
the intended third-party beneficiary to the Lease?
The Sales Contract at issue was entered between Plaintiffs and Norm
Reeves Honda Superstore WC. While there appears
to be a valid agreement to arbitrate, the issue before the Court is whether Honda
can rely on the arbitration provision to compel arbitration.
Honda is not a signatory to the Sales Contract. Nevertheless, it argues that it has standing
to compel arbitration under the Sales Contract because it is a third-party
beneficiary and through the principle of equitable estoppel. Honda argues that it is entitled to invoke
the Arbitration Provision because it states that any claim or dispute arising
out of the contract, “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 be resolved by arbitration.
The Court finds the case Felisilda v. FCA US LLC (2020) 53
Cal.App.5th 486 to be instructive. In Felisilda,
plaintiffs purchased a vehicle from Elk Grove Auto Group, Inc. dba Elk Grove
Dodge Chrysler Jeep (“Elk Grove Dodge”), encountered problems with the vehicle,
and sued Elk Grove Dodge and manufacturer FCA US LLC (“FCA”) for violating the
Song-Beverly Act. (Felisilda,
supra, 53 Cal.App.5th at 489.) Elk Grove
Dodge moved to compel arbitration based on the agreement signed by plaintiffs,
and FCA filed a notice of non-opposition.
The trial court ordered arbitration and plaintiffs dismissed Elk Grove
Dodge. (Id.) The Court of Appeal affirmed the arbitration
between plaintiffs and FCA, finding that plaintiffs’ claim against FCA was
encompassed in the arbitration provision.
The arbitration provision stated that any claim or dispute between
plaintiffs and Elk Grove Dodge (its employees, agents, successors, or assigns)
“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)” shall be
subject to arbitration at a party’s election.
(Id. at 490.) The Court of
Appeal found that the agreement signed by plaintiffs included the arbitration
of matters directly related to the condition of the vehicle as the complaint
alleged claims for violation of express warranties, “the sales contract was the
source of the warranties at the hearing of this case,” and plaintiffs expressly
agreed to arbitrate claims arising out of the condition of the vehicle—even
against third party nonsignatories to the sales contract. (Id. at 496.) Thus, the Court of Appeal found that
arbitration was proper.
Thereafter, the Ford Motor Warranty
Cases, Ochoa v. Ford Motor Company (2023) 89 Cal.App.5th 1324 (“Ochoa”)
was decided. There, the Court of Appeal
held that Ford could not compel arbitration based on the plaintiffs’ agreements
with the dealers that sold them the vehicles.
(Ochoa, supra, 89 Cal.App.5th at 1329.) The Court held that equitable estoppel did
not apply because the plaintiffs’ claims were in no way related to the
agreements and Ford was not a third-party beneficiary of the agreements as
there was no basis to conclude that the plaintiffs and their dealers entered
into the agreements with the intent of benefitting Ford. (Id.)
The sales contracts at issue identified the parties as the buyer/“you”
and the selling dealer as “Creditor-Seller,” “we,” or “us,” and Ford was not a
party to nor named in the sales contract.
(Id.) Ford argued that
equitable estoppel applied because the plaintiffs’ claims were intimately
founded in and intertwined with the underlying obligations of the sales
contracts and the sales contracts between the plaintiffs and dealers gave plaintiffs
contractual rights they now sue on—warranty claims against the
manufacturer. (Id. at 1333.) The Court of Appeal disagreed and declined to
follow Felisilda because the fact that the plaintiffs and dealer agreed to
arbitrate disputes did not include Ford and the plaintiffs’ breach of warranty
claims against Ford were not based on their sales contracts as warranties
accompany the sale of vehicles without regard to the sales contract’s
terms. (Id. at 1334.) In addressing the contract language in Felisilda,
the Court of Appeal stated:
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. 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.”
…
The “third
party” language in the arbitration clause means that if a purchaser asserts a
claim against the dealer (or its employees, agents, successors or assigns) that
relates to one of these 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.
(Id.
at 1334-35.) The Court of Appeal further
found that equitable estoppel did not apply because the plaintiffs’ claims were
not founded in the sales contract, but were instead based on the manufacturer’s
warranties. (Id. at 1335.)
Finally,
most recently, the Court of Appeal decided Kielar v. Superior Court of
Placer County (2023) 94 Cal.App.5th 614.
In this action, Kielar challenged the superior court’s decision to grant
Hyundai Motor America’s motion to compel arbitration of his causes of action
for violation of the Song-Beverly Consumer Warranty Act. (Kielar, supra, 94 Cal.App.5th at 616.) The superior court had relied on Felisilda
and concluded that Hyundai, as a nonsignatory manufacturer, could enforce the
arbitration provision in the sales contract between Kielar and his local car
dealership under the doctrine of equitable estoppel. (Id.)
The Court of Appeal joined the recent decisions disagreeing with Felisilda
(Montemayor v. Ford Motor Co. (2023 92 Cal.App.5th 958 and Ochoa,
supra) and issued a preemptory writ of mandate compelling the superior court to
vacate its prior order and enter a new order denying Hyundai’s motion. (Id.)
In arriving at its decision, the Court of Appeal stated that Plaintiff’s
claims did not rely on any terms of the sales contract with the
dealership. (Id. at 430-431.) The Court of Appeal instead found:
Kielar's complaint alleges “Hyundai issued a written
warranty.” This warranty was not part of his sales contract with the
dealership. Indeed,
the sales contract acknowledges this separate warranty and disclaims any
implied warranties by the dealership: “If you do not get a written warranty,
and the Seller does not enter into a service contract within 90 days from the
date of this contract, the Seller makes no warranties, express or implied, on
the vehicle, and there will be no implied warranties of merchantability or of
fitness for a particular purpose. [¶] This provision does not affect any
warranties covering the vehicle that the vehicle manufacturer may provide.” [Footnote
omitted] In Ford Motor and Montemayor, Ford
Motor Company moved to compel arbitration of the same type of claims at issue
in this proceeding based on “the same form arbitration provision” in the
plaintiffs’ sales contract with dealerships. (Ford
Motor, supra, 89 Cal.App.5th at p. 1333, 306 Cal.Rptr.3d 611, rev.
granted; see also Montemayor, supra, 92 Cal.App.5th
at p. 968, 310 Cal.Rptr.3d 82.) These sales contracts also included the same
disclaimer regarding warranties. (Montemayor, supra,
at p. 962, 310 Cal.Rptr.3d 82; Ford Motor, supra,
at p. 1335, 306 Cal.Rptr.3d 611.) These authorities explained Felisilda’s statement that “the sales contract was the
source of the warranties” was flawed because “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.”
(Ford Motor, supra, at p. 1334, 306 Cal.Rptr.3d 611;
accord Montemayor, supra, at p. 969, 310 Cal.Rptr.3d 82; see
also Ngo v. BMW of North America, LLC (9th Cir. 2022) 23
F.4th 942, 949 [“the express and implied warranties arise ‘independently of a
contract of sale’ ”].) Whether a manufacturers’ express or implied warranties
that accompany a vehicle at the time of sale constitute obligations arising from
the sale contract, permitting manufacturers to enforce an arbitration agreement
in the contract pursuant to equitable estoppel is a question now pending before
our Supreme Court. In the meantime, we agree with Montemayor and Ford Motor that they do not.
Additionally, we agree with Montemayor and Ford
Motor that the parenthetical language in the arbitration provision
referring to nonsignatory third parties “was a ‘delineation of the subject
matter of claims the purchasers and dealers agreed to arbitrate’ ” and does
not bind the purchaser “ ‘to arbitrate with the universe of unnamed third
parties.’ ” (Montemayor, supra, 92 Cal.App.5th at p. 971, 310
Cal.Rptr.3d 82, quoting Ford Motor, supra,
89 Cal.App.5th at p. 1335, 306 Cal.Rptr.3d 611, rev. granted.)
(Kielar,
supra, 94 Cal.App.5th at 431.)
The Supreme Court has granted a review of the Ochoa
case, limiting its review to the issue: “Do manufacturers' express or implied
warranties that accompany a vehicle at the time of sale constitute obligations
arising from the sale contract, permitting manufacturers to enforce an
arbitration agreement in the contract pursuant to equitable estoppel?” (Ford Motor Warranty Cases
(Cal. 2023) 310 Cal.Rptr.3d 440.) The
Supreme Court further stated:
Pending
review, the opinion of the Court of Appeal, which is currently published at 89
Cal.App.5th 1324, 306 Cal.Rptr.3d 611, may be cited, not only for its
persuasive value, but also for the limited purpose of establishing the
existence of a conflict in authority that would in turn allow trial courts to
exercise discretion under Auto Equity Sales, Inc. v. Superior Court (1962) 57
Cal.2d 450, 456, 20 Cal.Rptr. 321, 369 P.2d 937, to choose between sides of any
such conflict. (See Standing Order Exercising Authority Under California Rules
of Court, Rule 8.1115(e)(3), Upon Grant of Review or Transfer of a Matter with
an Underlying Published Court of Appeal Opinion, Administrative Order
2021-04-21; Cal. Rules of Court, rule 8.1115(e)(3) and corresponding Comment,
par. 2.)
(Id.)
In view of the Supreme Court’s statement that it is
free to do so, the Court has reviewed the pertinent cases and finds that the reasoning in Felisilda to be more
persuasive than the successive holdings in Ochoa, Montemayor v. Ford Motor Company (2023)
92 Cal.App.5th 958, and Kielar. While
Ochoa and the later cases have become the trend in discussing motions to
compel arbitration in a Song-Beverly Act setting, the Supreme Court’s language
leaves this Court free while review of Ochoa is pending to follow
analysis in Felisilda if it finds it more persuasive. The Court finds that it is more persuasive
and will follow it here as Ochoa and the cases that follow it seem to
abandon any traditional concept of third-party beneficiary and equitable
estoppel.
As summarized above, in Felisilda,
the sales contract was the source of the warranties that made up the heart of
the case and the plaintiff had agreed to arbitrate all claims arising out of
the condition of the vehicle—even against non-signatories to the contract. Here, similarly, Plaintiffs signed the Sales
Contract and expressly agreed to arbitrate any claim or dispute arising out of the
Sales Contract or any resulting transaction or relationship arising out of the Sales
Contract, including disputes between Plaintiffs and the dealer, as well as “any such relationship with third
parties who do not sign this contract.” Even if not directly named in the agreement, Honda is obviously an
intended third-party beneficiary of the contract to arbitrate a vehicle
warranty claim. Indeed, it would be hard to imagine a clearer case of a
third-party beneficiary. The manufacturer made the vehicle, sold it to the
dealer and provided the warranty, which constitutes practically the entire
consideration of the contract. The law has long allowed the consumer to pursue
the manufacturer based on a contractual relationship with the seller despite
any of the notions of privity of contract that were once considered necessary. Any
reasonable consumer signing the arbitration agreement would understand that it
included claims that could be brought jointly against the dealer and
manufacturer. It is likely that Honda itself drafted and printed the warranty, purchase/lease
agreement and arbitration clause for use in the transaction. The manufacturer’s
brand, the manufacturer’s automobile, and the warranty that accompanied it,
together constitute the sine qua non of the transaction. The warranty is thus inextricably intertwined
with the sale contract of the dealer that contains the arbitration clause
(which will be discussed further below). These recent cases do not purport to
overrule all third-party beneficiary law, yet if Honda cannot be considered a
third-party beneficiary of this contract, then the doctrine has no further
application in California.
Thus, relying on Felisilda, the Court finds that Honda may
invoke the arbitration provision in the Lease agreement as the intended
third-party beneficiary.
3.
Equitable Estoppel
“[I]f a plaintiff relies on the terms of an agreement to
assert his or her claims against a nonsignatory defendant, the plaintiff may be
equitably estopped from repudiating the arbitration clause of that very
agreement. In other words, a signatory to an agreement with an
arbitration clause cannot ‘have it both ways'; the signatory ‘cannot, on the
one hand, seek to hold the non-signatory liable pursuant to duties imposed by
the agreement, which contains an arbitration provision, but, on the other hand,
deny arbitration's applicability because the defendant is a non-signatory.’” (Goldman v. KPMG, LLP (2009)
173 Cal.App.4th 209, 220.) “Under the
doctrine of equitable estoppel, as applied in both federal and California
decisional authority, 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 v. FCA US LLC (2020) 53 Cal.App.5th 486,
495.)
Honda argues that equitable estoppel applies such
that it can compel Plaintiffs to arbitrate their claims.
The complaint alleges that Honda provided express
warranties regarding defects and implied warranties of merchantability. (See Compl., ¶¶10, 18, 33, 49.) The complaint references the sales contract
only to allege that Plaintiffs seek to revoke the sales contract. (Id., ¶12.) An increasing number of Courts of Appeal have
argued that alleged breaches of the warranty received under the lease/sales
contract are in fact separate from the lease/sales contract. (See Ochoa, supra, 89
Cal.App.5th at 1334 [“[M]anufacturer 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.”].) This Court finds that sort of argument to be
difficult to repeat with conviction. Here, Plaintiffs’ right to assert warranty
claims against the manufacturer would not exist but for the agreement
containing the arbitration clause.
Plaintiffs attempt to skirt the issue (and
existence) of the Sales Contract by way of its artful pleading. However, as discussed above, the
relationships between the parties arose as a result of the existence of the Sales
Contract. The Sales Contract’s terms and
the manufacturer’s warranty that accompanied it are inextricably
intertwined. (See e.g., Mance v. Mercedes-Benz USA (N.D. Cal. 2012) 901
F.Supp.2d 1147, 1157 [“And, upon examination, Mercedes–Benz should be
allowed to compel Mr. Mance to arbitrate his claim because his claim ‘makes
reference to or presumes the existence of’ the underlying contract.
Mercedes–Benz's duty to comply with its warranty arose only when Mr. Mance
bought the car. Had he not signed the contract, he would not have received the
warranty from Mercedes-Benz. In other words, his claim for breach of warranty
is premised on, and arises out of, the contract.”].) As discussed above, Plaintiffs’ claims
against MBUSA based on the warranties are intimately founded in and intertwined
with the underlying Sales Contract.
Without the Sales Contract, Plaintiffs would not have been able to purchase
the vehicle or obtain the benefits under a manufacturer’s warranty.
Again, to find there was no equitable estoppel
here would mean that the entire doctrine was being abandoned with respect to
contract claims generally, not just disfavored arbitration contracts. By making
claims that Plaintiffs received under the Sales Contract, Plaintiffs are equitably
estopped from contesting the application of the arbitration agreement to such
claims. Thus, the Court finds that equitable estoppel also supports enforcement
of the arbitration provision.
For the reasons discussed above, the motion is granted.
CONCLUSION AND
ORDER
Defendant
American Honda Motor Co., Inc.’s motion to compel Plaintiffs to
arbitration and stay the action is granted. The Court orders the 1st to 3rd
causes of action alleged against Honda to be compelled to arbitration. The action will be stayed as to the 4th
cause of action for negligent repair that was alleged against Defendant New
Century Honda in Glendale only.
The Court sets a Status Conference re Status of
Arbitration for June 5, 2024 at 8:30 a.m.
Defendant shall
provide notice of this order.
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DATED: December 15, 2023 ___________________________
John
Kralik
Judge
of the Superior Court