Judge: Lee W. Tsao, Case: 23NWCV00512, Date: 2024-01-03 Tentative Ruling
Case Number: 23NWCV00512 Hearing Date: January 3, 2024 Dept: C
lopez v. nissan
CASE NO.: 23NWCV00512
HEARING: 1/3/24 @ 10:30 AM
#6
Defendant’s
motion to compel arbitration and stay proceedings is DENIED.
Plaintiff to give NOTICE.
Defendant Nissan North America, Inc.
(Defendant) moves for an order compelling arbitration and staying proceedings.
On
July 31, 2022, Plaintiff Jesse Lopez (Plaintiff) entered into a Retail
Installment Sales Contract (RISC) to finance her purchase of a 2022 Nissan
Pathfinder from Cerritos Nissan. Plaintiff contends that the vehicle was
defective and attempts to repair the vehicle failed to cure the defects. On February
16, 2023, Plaintiff filed a Complaint against Defendants Nissan and Cerritos
Nissan alleging:
1.
Breach
of Express Warranty
2.
Breach
of Implied Warranty
3.
Unfair
Business Practices
4.
Negligent
Repair
Defendant
Cerritos Nissan was dismissed without prejudice on December 19, 2023.
Defendant
now seek to compel arbitration under the RISC and its accompanying arbitration
agreement. The arbitration provision in the RISC states:
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 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 a court
action.
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.)
Defendants are not third-party beneficiaries as
contemplated by the RISC because there is no motivating purpose between
Plaintiff and the dealership to provide benefit for Defendants. 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
Motor Warranty Cases (Ford) (2023) 89 Cal.App.5th 1324, 1335.)
Similarly, here, the contract evidences no intent to include Nissan 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 contracts, vehicle insurance, and
state fees. Thus, the RISC does not reveal a motivating purpose to include Defendant
as a third-party beneficiary. Therefore, Defendant cannot enforce the
Arbitration Agreement as third-party beneficiaries.
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, supra, 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. (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, 1336.) 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.) This Court chooses to follow Fords reasoning.
Discussion
Defendant may not compel arbitration because
Plaintiff’s claims arise from Nissan’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.” (Ford, supra, 89 Cal.App.5th 1324, 1335.) Plaintiff’s claims
do not arise directly out of the RISC, even if Nissan’s warranties accompanied
the sale 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 RISC
includes no warranty, any assurance regarding the quality of the vehicle, no
promise to make repairs, and disclaims any manufacturer warranty. Nissan further
argues that the claims necessarily arise from the RISC because Plaintiff could
not have obtained the vehicle and the accompanying manufacturer warranties but
for signing the RISC. However, Plaintiff could have purchased a new vehicle
through some other source of funding such as cash or an outside loan. Thus,
like Ford, Plaintiff’s claims arise from Nissan’s statutory obligation
and not from the sale contract. Therefore, Defendant may not compel arbitration
because Plaintiff’s claims are not intimately found in or intertwined with the
RISC.
Accordingly, Defendant’s motion to compel arbitration and stay
proceedings is DENIED.