Judge Lee W. Tsao, Case Number: 23NWCV00895, Date: 2024-08-13 Tentative Ruling

Judge: Lee W. Tsao, Case: 23NWCV00895, Date: 2024-08-13 Tentative Ruling

Case Number: 23NWCV00895 Hearing Date: August 13, 2024 Dept: C

Myra Sagastume vs Nissan North America, Inc.

Case No.: 23NWCV00895

Hearing Date: August 13, 2024 @ 09:30 a.m.

Tentative Ruling

Defendant Nissan North America, Inc.’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.

Background

On July 31, 2022, Plaintiff Myra Sagastume (“Plaintiff”) entered into a Retail Installment Sales Contract (“RISC”) to finance the purchase of a 2022 Nissan Rogue from Cerritos Nissan.

Plaintiff contends that the vehicle was defective and attempts to repair the vehicle failed to cure the defects. Plaintiff sued Defendant Nissan North America, Inc. (“Defendant”) alleging violations of the Song-Beverly Act.

Defendant now seeks 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.

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 cannot compel arbitration because Plaintiffs’ 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, Plaintiffs’ 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.)

Plaintiffs’ claims do not arise directly out of the RISC, even if Defendant’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. Defendant further argues that the claims necessarily arise from the RISC

because Plaintiffs could not have obtained the vehicle and the accompanying manufacturer warranties but for signing the RISC. However, Plaintiffs could have purchased a new vehicle through some other source of funding such as cash or an outside loan. Thus, like Ford, Plaintiffs’ claims arise from Defendant’s statutory obligation and not from the sale contract. Therefore, Defendant may not compel arbitration because Plaintiffs’ claims are not intimately found in or

intertwined with the RISC.

Accordingly, Defendant’s motion to compel arbitration and stay proceedings is DENIED.