Judge: Lee W. Tsao, Case: 23NWCV01360, Date: 2023-12-28 Tentative Ruling
Case Number: 23NWCV01360 Hearing Date: February 14, 2024 Dept: C
gomez, et al. v.
american honda
CASE NO.: 23NWCV01360
HEARING: 2/14/24 @ 9:30 AM
#5
Defendant’s
motion to compel arbitration and stay proceedings is DENIED.
Plaintiff to give NOTICE.
Defendant American Honda Motor Co., Inc.
(Defendant) moves for an order compelling arbitration and staying proceedings.
On
July 31, 2022, Plaintiffs Ana Gomez and Victor Gomez (collectively Plaintiffs)
entered into a Retail Installment Sales Contract (RISC) to finance their
purchase of a 2018 Honda Civic from Honda World. Plaintiffs contend that the
vehicle was defective and attempts to repair the vehicle failed to cure the
defects. Plaintiff filed a Complaint against Defendants Nissan and Cerritos
Nissan 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.