Judge: Lindsey E. Martinez, Case: 2021-01236168, Date: 2022-07-25 Tentative Ruling

No. 3: McCormack v. Ford Motor Company

Ruling:  Defendant’s motion to compel arbitration is denied. 

Defendant moves to compel Plaintiffs to arbitrate their claims, based upon the language in the Arbitration Provision of the Retail Installment Sale Contract – Simple Finance Charge (With Arbitration Provision) (Contract) Plaintiffs signed with nonparty Tuttle-Click Ford.  (Polyakov Dec., Ex. 1.)

Parties moving to compel arbitration “may meet their initial burden to show an agreement to arbitrate by attaching a copy of the arbitration agreement purportedly bearing the opposing party's signature.” (Espejo v. Southern California Permanente Medical Group (2016) 246 Cal.App.4th 1047, 1060.) If the opposing party challenges the validity of that signature, however, the moving party must “establish by a preponderance of the evidence that the signature was authentic.” (Ibid.)

Here, Plaintiffs challenge the authenticity of the RISC submitted by Defendant.  Defendant does not provide any admissible evidence that the signatures on the Contract were authentic.  Instead, Defendant only attempts to authenticate the Contract by attaching a copy of it to their counsel’s declaration.  The motion is also denied for the additional following reasons.

The Federal Arbitration Act (“FAA”), which includes both procedural and substantive provisions, governs agreements involving interstate commerce. There is no dispute that the FAA applies.

The Arbitration Provision covers any “claim or dispute … between you [Plaintiff] and us [the dealership] or our employees, agents, successors or assigns.” (Polyakov Dec., Ex. 1.)  Defendant is not included in the class of litigants who may compel arbitration. The Arbitration Provision provides: “Either you or we may choose to have any dispute between us decided by arbitration and not in a court or by jury trial.” (Id.) Defendant has not submitted any evidence that it falls under one of the categories of third parties identified in the arbitration provision’s claim coverage, namely the dealership’s “employees, agents, successors, or assigns.”

Defendant contends that it can compel arbitration under the doctrine of equitable estoppel.  “Under the doctrine of equitable estoppel, as applied in ‘both federal and California decisional authority, a nonsignatory defendant may invoke an arbitration clause to compel a signatory plaintiff to arbitrate its claims when the causes of action against the nonsignatory are intimately founded in and intertwined with the underlying contract obligations. By relying on contract terms in a claim against a nonsignatory defendant, even if not exclusively, a plaintiff may be equitably estopped from repudiating the arbitration clause contained in that agreement.” (Felisilda v. FCA US LLC (2020) 53 Cal.App.5th 486, 495–496 [citations omitted].)

Where the equitable estoppel doctrine applies, the nonsignatory has a right to enforce the arbitration agreement.” (JSM Tuscany, LLC v. Superior Court (2011) 193 Cal.App.4th at 1222, 1237, fn. 18.) “ ‘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.’ ” (Jensen v. U-Haul Co. of California (2017) 18 Cal.App.5th 295, 306, quoting NORCAL Mutual Ins. Co. v. Newton (2000) 84 Cal.App.4th 64, 84.) “In any case applying equitable estoppel to compel arbitration despite the lack of an agreement to arbitrate, a nonsignatory may compel arbitration only when the claims against the nonsignatory are founded in and inextricably bound up with the obligations imposed by the agreement containing the arbitration clause.” (Goldman v. KPMG, LLP (2009) 173 Cal.App.4th at 209, 219.)  In determining whether the plaintiffs’ claim is founded on or intimately connected with the sales contract, we examine the facts of the operative complaint. (Id. 229-230.)

Defendant contends that the claims asserted against it are premised on and arise out of the Contract and, thus, involve the same facts and vehicle.  Although Plaintiffs’ claims against Defendant assert a failure to conform to warranties, none of them reference the Contract. And even if Plaintiffs’ Complaint referenced the Contract, in order to be intertwined with the purchase agreement, Plaintiffs must allege a violation of a “duty, obligation, term or condition” imposed by the purchase agreement. (Goldman, 173 Cal.App.4th at 230-231.) The Complaint does not allege a duty, obligation, term, or condition imposed by the Contract that Defendant breached. Further, the Contract expressly differentiates Defendant’s warranty from the dealership’s warranties. (Polyakov Dec., Ex. 1.)   The Contract contains a provision in which the dealership disclaims all warrants and states “[t]his provision does not affect any warranties covering the vehicle that the vehicle manufacturer may provide.” (Id.) This differentiation indicates an intent to distinguish and distance the Contract from any warranty that Defendant may provide.

Defendant contends that the decision in Felisilda v. FCA US LLC (2020) 53 Cal. App.5th 486 compels arbitration here. Felisilda involved similar facts. The Felisildas purchased a used vehicle from a dealer, and, when the vehicle experienced significant mechanical problems, they sued both the dealer and the manufacturer. (Id. at 489.) The dealer moved to compel arbitration based upon an arbitration contract virtually identical to the subject Arbitration Provision, the manufacturer filed a notice of non-opposition, and the trial court compelled the Felisildas to arbitrate their claims against both the dealer and the manufacturer. The Court of Appeal upheld the decision compelling the Felisildas to arbitrate their claims against the manufacturer “because the Felisildas expressly agreed to arbitrate claims arising out of the condition of the vehicle—even against third party nonsignatories to the sales contract.” (Id. at 497.)

Felisilda is distinguishable. The Felisildas sued both the manufacturer and the dealer. Here, Plaintiffs have not sued the dealership.  The Arbitration Provision defines claims as those “between you and us or our employees, agents, successors or assigns.”  (Polyakov Dec., Ex. 1.)  Neither the dealership nor one of its “employees, agents, successors, or assigns” is currently named in this action or is seeking to enforce the arbitration provision. Plaintiffs are not seeking to invoke the duties and obligations of Defendant under the Contract while seeking to avoid arbitration. Accordingly, Defendant has not shown that it can compel arbitration based on equitable estoppel.

Defendant has also not shown that it is a third-party beneficiary of the Contract.  California law states that “[a] contract, made expressly for the benefit of a third person, may be enforced by him at any time before the parties thereto rescind it.” (Civ. Code., § 1559.) Defendant bears the burden of proving that it is a third-party beneficiary of the Contract. (See Garcia v. Truck Ins. Exch. (1984) 36 Cal.3d 426, 436.) 

The recent Ninth Circuit decision in Ngo v. BMW of North America, LLC (9th Cir. 2022) 23 F.4th 942 is persuasive.  That case involved a similar arbitration provision and similar arguments by the party moving to compel arbitration, and the Court ruled that the manufacturer was not a third-party beneficiary, rejecting the contention that equitable estoppel applied to compel arbitration.  (Ngo v. BMW of North America, LLC (9th Cir. 2022) 23 F.4th 942 (noting that “the Felisildas dismissed the dealership only after the court granted the motion to compel arbitration. Accordingly, Felisilda does not address the situation we are confronted with here, where the non-signatory manufacturer attempted to compel arbitration on its own. We therefore decline to affirm on the ground of equitable estoppel.”); Mesler v. Bragg Management Co. (1985) 39 Cal.3d 290, 299 (“[D]ecisions of federal courts interpreting California law are persuasive but not binding.”).)

Defendant’s and Plaintiffs’ requests for judicial notice are granted except as to the sales contract.  (Evi. Code § 452(d) and (h).)  The Contract is not subject to judicial notice.  Although not binding, unpublished and published federal district court cases are citable as persuasive authority (Aleman v. AirTouch Cellular (2012) 209 Cal.App.4th 556, 576, fn. 8; Goldman v. KPMG, LLP (2009) 173 Cal.App.4th 209, 219), and the court must take judicial notice of the decisional law of this state and of the United States (Evid. Code, § 451(a).).

Plaintiffs to give notice.