Judge: Lee W. Tsao, Case: 22NWCV00629, Date: 2023-07-11 Tentative Ruling
Case Number: 22NWCV00629 Hearing Date: July 11, 2023 Dept: C
RAMIREZ DE DELGADO v. H
GREG AUTO BUENA PARK LLC, et al.
CASE NO.: 22NWCV00629
HEARING: 7/11/23
#6
TENTATIVE RULING
Defendants Nissan North
America, Inc. and H Greg Auto Buena Park, LLC’s motion to compel arbitration
and stay of proceedings is DENIED.
Opposing Party to give
NOTICE.
Defendants
Nissan North America, Inc. (“Nissan”) and H Greg Auto Buena Park, LLC (“H
Greg”) move for an order compelling arbitration and staying proceedings
pursuant to CCP § 1281 et seq.
Complaint
On
April 12, 2019, Plaintiff MARIA RAMIREZ DE DELGADO leased a new 2019 Nissan
Altima, VIN: 1N4BL4BV8KN324292.
(Complaint, ¶ 8.) Plaintiff alleges
that the vehicle had a Continuously Variable Transmission (“CVT”) defect, and attempts
to repair the vehicle failed to cure the defects. (Id., ¶¶ 11, 77.) Based thereon, the Complaint asserts causes
of action for:
1.
Violation of the Song-Beverly Act – Breach of
Express Warranty (v. Nissan)
2.
Fraudulent Inducement – Intentional
Misrepresentation (v. Nissan)
3.
Fraudulent Concealment – Intentional
Misrepresentation (v. Nissan)
4.
Negligent Repair (v. H Greg)
Arbitration
Agreement
Parties
may be compelled to arbitrate a dispute upon the court finding that: (1) there
was a valid agreement to arbitrate between the parties; and (2) said agreement
covers the controversy or controversies in the parties’ dispute.¿(Omar v.
Ralphs Grocery Co. (2004)¿118 Cal.App.4th 955, 961.) A party moving to compel arbitration has the
burden of establishing the existence of a valid agreement to arbitrate and the
party opposing the petition has the burden of proving, by a preponderance of
the evidence, any fact necessary to its defense. (Banner Entertainment, Inc.
v. Superior Court¿(1998) 62 Cal.App.4th 348, 356-357.)
Here,
Plaintiff signed a Lease Agreement that contained an arbitration clause to arbitrate
“[a]ny 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 Lease agreement or any
resulting transaction or relationship (including any such relationship with
third parties who did not sign the Lease).” (Salas Decl., Ex. 5.)
Further, Plaintiff does not dispute that there is a valid arbitration agreement
between Plaintiff and nonparty Downey Nissan.
Thus, Defendant has met its burden of proving that there is a valid
arbitration agreement by attaching the claimed Arbitration Agreement.
Equitable
Estoppel
A
nonsignatory manufacturer can compel arbitration under equitable estoppel “when
the causes of action against the nonsignatory are ‘intimately founded in and
intertwined’ with the underlying contract obligations.” (Felisilda v. FCA US
LLC (Felisilda) (2020) 53 Cal.App.5th 486, 495.) The causes of actions are intimately founded
in and intertwined even if they do not exclusively rely on the contract terms.
“ ‘The fundamental point’ is that a party is ‘not entitled to make use of [a
contract containing an arbitration clause] as long as it worked to [his or] her
advantage, then attempt to avoid its application in defining the forum in which
[his or] her dispute . . . should be resolved.’ “ (Id. at 496.)
The
court in Felisilda, supra, 53 Cal.App.5th 486, 496-497, held that the
manufacturer could compel arbitration because the condition of the vehicle was
within the subject matter of the claims made arbitrable under the sale
contract, the sale contract was the source of the manufacturer’s warranties
under which plaintiffs were suing, and plaintiffs had expressly agreed to
arbitrate claims arising out of the condition of the vehicle, even against
third party nonsignatories. The court in
Ford Motor Warranty Cases (Ford) (2023) 89 Cal.App.5th 1324, disagreed with
Felisilda that arbitration could be compelled under an identical
arbitration provision. This Court can now choose to either continue to follow
Felisilda or instead adopt Ford’s reasoning. (Sarti v. Salt Creek Ltd.
(2008) 167 Cal.App.4th 1187, 1193 [“All trial courts are bound by all published
decisions of the Court of Appeal . . . Unlike at least some federal
intermediate appellate courts, though, there is no horizontal stare decisis in
the California Court of Appeal.”].)
The
Ford court disagreed with Felisilda on the grounds that the fact
“[t]hat the Felisilda plaintiffs and the Dealers agreed in their sale
contract to arbitrate
disputes
between them about the condition of the vehicle does not equitably estop the
plaintiffs from asserting [the manufacturer] has no right to demand
arbitration. Equitable estoppel would apply if the plaintiffs had sued [the
manufacturer] based on the terms of the sale contract yet denied [the
manufacturer] could enforce the arbitration clause in that contract.” (Ford,
supra, 89 Cal.App.5th 1324, 1334.) The Ford court held that the
plaintiffs’ claims did not arise in the sale contracts and instead on the
statutory obligations under the Song-Beverly Consumer Warranty Act, breach of
implied warranty of merchantability, and fraudulent inducement. “Not one of the
plaintiffs sued on any express contractual language in the sale contract.” (Ford,
supra, 89 Cal.App.5th 1324, 1335.) Specifically, the contract contained
provisions that disclaimed any warranty by the Dealers, “while acknowledging no
effect on ‘any warranties covering the vehicle that the vehicle manufacturer
may provide.’ ” (Ibid.) Further, the California Supreme Court distinguished
between warranties from the seller arising out of contract and warranties from
the manufacturer arising “independently of a contract of sale between the
parties.” (Greenman v. Yuba Power Products, Inc. (Greenman) (1963) 59
Cal.2d 57, 60.) Thus, plaintiffs’ claims were not “intimately founded in and
intertwined” with the sale contracts because the sale contracts do not intend
to cover the manufacturer’s warranties. (Ford, supra, 89 Cal.App.5th
1324.) Therefore, equitable estoppel does not apply to compel plaintiffs to
arbitrate their claims because plaintiffs were not making use of the terms of the
sale contracts. (Ibid.)
Like
in Ford, Defendants fail to cite any authority to support its contention
that manufacturer’s warranties are founded in the lease contract.
Defendant
may not compel arbitration because Plaintiff’s claims arise from Defendant’s
statutory obligation and are not based on any express contractual language.
Equitable estoppel is applicable where one party relies on a contract, which
includes an arbitration provision, in asserting its claims against a third
party but attempts to avoid its application to determining the forum in
pursuing its claims. (Felisilda, supra, 53 Cal.App.5th 486, 496.) Here,
like in Ford, Plaintiff’s claims “are based on [Defendant’s] statutory
obligations to reimburse consumers or replace their vehicles when unable to
repair in accordance with its warranty,” not based “on any express contractual
language in the sale contracts.” (Id. at 620.) Plaintiff’s claims do not arise
directly out of the lease, even if Defendant’s warranties accompanied the lease
of the subject vehicle. “The sale contracts include no warranty, nor any
assurance regarding the quality of the vehicle sold,
nor
any promise of repairs or other remedies in the event problems arise. To the
contrary, the sale contracts disclaim any warranty on the part of the dealers,
while acknowledging no effect on ‘any warranties covering the vehicle that the
vehicle manufacturer may provide.’ In short, the substantive terms of the sale
contracts relate to sale and financing and nothing more.” (Ibid.) Similarly,
here the lease includes no warranty, any assurance regarding the quality of the
vehicle, no promise to make repairs, and disclaims any manufacturer warranty.
Thus, like Ford, Plaintiff’s claims arise from Defendant’s statutory
obligation and not from the sales contract. Therefore, Defendant may not compel
arbitration because Plaintiffs’ claims are not intimately found in or
intertwined with the lease.
Third
Party Beneficiary
Defendant
argues that it may enforce the Arbitration Agreement because it contemplates
enforcement by and against nonsignatory third parties.
“A
third party beneficiary is someone who may enforce a contract because the
contract is made expressly for his benefit.” (Jensen v. U-Haul Co. of
California (2017) 18 Cal.App.5th 295, 301; see also Civ. Code, § 1559 [“[a]
contract, made expressly for the benefit of a third person, may be enforced by
him ....”].) A person “only incidentally or remotely benefited” from a contract
is not a third party beneficiary. (Lucas v. Hamm (1961) 56 Cal.2d 583,
590.) Thus, “the ‘mere fact that a contract results in benefits to a third
party does not render that party a “third party beneficiary.” ’ ” (Jensen,
supra, 18 Cal.App.5th 295, 302.) Nor does knowledge that the third party may
benefit from the contract suffice. (Goonewardene v. ADP, LLC (2019) 6
Cal.5th 817, 830.) Rather, the parties to the contract must have intended the
third party to benefit. (Hess v. Ford Motor Co. (2002) 27 Cal.4th 516,
524.)
To
show the contracting parties intended to benefit it, a third party must show
that, under the express terms of the contract at issue and any other relevant
circumstances under which the contract was made, (1) “the third party would in
fact benefit from the contract”; (2) “a motivating purpose of the contracting
parties was to provide a benefit to the third party”; and (3) permitting the
third party to enforce the contract “is consistent with the objectives of the
contract and the reasonable expectations of the contracting parties.” (Goonewardene,
supra, 6 Cal.5th 817, 830.)
Defendant
is not a third-party beneficiary as contemplated by the lease because there is
no motivating purpose between Plaintiff and the Dealership to provide benefit
for Defendant. The Ford court held that the same language, “[a]ny claim
or dispute, . . . which arises out of or relates to your . . . 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)” did not intend to include the manufacturer. “Purchasers .
. . 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 contracts.
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.” (Ford, supra, 89
Cal.App.5th 1324, 1335.) Similarly, here, the contract evidences no intent to
include Defendant and statutory manufacturer warranties claims, rather, there
is only evidence that it intends to include any purchases from third parties
which were financed under the contract, such as optional service contract,
vehicle insurance, and state fees. Thus, the lease does not reveal a motivating
purpose to include Defendant as a third-party beneficiary. Therefore, Defendant
cannot enforce the Arbitration Agreement as a third-party beneficiary.
Accordingly,
Defendants’ motion to compel arbitration and stay proceedings is DENIED.