Judge: Kimberly Knill, Case: 30-2022-01287423-CU-CO-CJC, Date: 2023-08-11 Tentative Ruling

Defendants’ Motion to Compel Binding Arbitration

Defendants Toyota Motor Sales, U.S.A., Inc. (“TMS”) and Oremor of Tustin, Inc. dba Tustin Toyota (“Tustin Toyota”) move to compel binding arbitration. The motion is GRANTED as to Tustin Toyota and DENIED as to TMS.

Plaintiff entered into a Retail Installment Sale Contract – Simple Finance Charge (With Arbitration Provision) (“RISC”) on 4/16/2021, with Tustin Toyota for the purchase of a 2021 Toyota Mirai. (Myers Decl., ¶ 3, Ex. A.) Defendant TMS is not a signatory to the RISC.

Tustin Toyota

Tustin Toyota is a signatory to the RISC.

The RISC covers “[a]ny claim or dispute, whether in contract, tort, statute or otherwise . . . between you and us   . . . which arises out of or relates to your credit application, purchase or condition of this vehicle, this contract or any resulting transaction or relationship . . . .” 

Plaintiff’s claims arise out of the condition of the subject vehicle and are thus covered by the RISC. The motion to compel arbitration as to Tustin Toyota is GRANTED.

TMS

TMS is not a signatory to the RISC but moves to compel arbitration under the doctrines of equitable estoppel and third-party beneficiary.

There is a split in appellate authority as to whether an arbitration clause in a RISC such as the one in the instant case, can be enforced by a non-signatory car manufacturer under the doctrines of third-party beneficiary and equitable estoppel. (Cf. Felisilda v. FCA US LLC (2020) 53 Cal.App.5th 486 (Felisilda); Ford Motor Warranty Cases (Ochoa) (2023) 89 Cal.App.5th 1324 (Ochoa), review pending; Montemayor v. Ford Motor Company (2023) 92 Cal.App.5th 958 (Montemayor).) In such a situation, the court exercising inferior jurisdiction can and must make a choice between the conflicting decisions. (Auto Equity Sales, Inc. v. Superior Ct. of Santa Clara Cnty. (1962) 57 Cal.2d 450, 456.)

Ochoa is currently pending review by the California Supreme Court and may be cited for its persuasive value. (Cal. Rules of Court, rule 8.1115(e)(1).)

Here, the Court elects to follow Ochoa and Montemayor. Plaintiffs base their causes of action against TMS on TMS’s statutory warranty obligations and not the sales contract with Tustin Toyota. Therefore, the doctrine of equitable estoppel does not apply to allow TMS, as a non-signatory to the RISC, to enforce the arbitration provision in the RISC.

Further, TMS is not a third-party beneficiary of the RISC between Plaintiff and Tustin Toyota and cannot enforce the arbitration provision in the RISC.

The motion to compel arbitration by TMS is DENIED.

The parties disagree as to how the Court should proceed given the split result.  (See Code Civ. Proc., § 1281.2 for 4 options.) Plaintiff requests the court refuse to enforce the arbitration agreement and join all parties in a single proceeding (option 1) or stay the arbitration as to Tustin Toyota and have the claims against TMS continue in the trial court (option 4).  Defendant requests the court order arbitration as to Tustin Toyota and stay the case as to TMS (option 3).

The Court believes option 3 is the best course.

The Court orders this action STAYED pending completion of the arbitration with Tustin Toyota.

A Status Conference re Arbitration is scheduled for 5/23/2024 at 1:30 PM.

Defendants to give notice.