Judge: Lynette Gridiron Winston, Case: 22PSCV00716, Date: 2023-10-09 Tentative Ruling
Case Number: 22PSCV00716 Hearing Date: October 9, 2023 Dept: 6
Enbozhia Boudoin v. Mercedes-Benz USA, LLC
Plaintiff’s Motion for Reconsideration of the Court’s Order Granting Defendant Mercedes-Benz USA, LLC’s Motion to Compel Arbitration
TENTATIVE RULING
The Court GRANTS the motion for reconsideration. On reconsideration, the Court DENIES Defendant’s motion to compel arbitration, and hereby VACATES its November 21, 2022 order regarding the same.
BACKGROUND
This is a lemon law action. On July 14, 2022, Plaintiff Enbozhia Boudoin (Plaintiff) filed this action against Defendant Mercedes-Benz USA, LLC (Defendant) and Does 1 through 10, alleging causes of action for violation of Song-Beverly Act – Breach of Express Warranty, violation of Song-Beverly Act – Breach of Implied Warranty, and violation of the Song-Beverly Act section 1793.2, subdivision (b).
On April 13, 2023, Plaintiff filed the instant motion for reconsideration. On August 7, 2023, Defendant opposed. On August 14, 2023, Plaintiff replied.
LEGAL STANDARD
“When an application for an order has been made to a judge, or to a court, and refused in whole or in part, or granted, or granted conditionally, or on terms, any party affected by the order may, within 10 days after service upon the party of written notice of entry of the order and based upon new or different facts, circumstances, or law, make application to the same judge or court that made the order, to reconsider the matter and modify, amend, or revoke the prior order. The party making the application shall state by affidavit what application was made before, when and to what judge, what order or decisions were made, and what new or different facts, circumstances, or law are claimed to be shown.” (Code Civ. Proc., § 1008, subd. (a).)
“If a court at any time determines that there has been a change of law that warrants it to reconsider a prior order it entered, it may do so on its own motion and enter a different order.” (Id., subd. (c).)
On November 21, 2022, the Court granted Defendant’s motion to compel arbitration. In that order, the Court relied on Felisilda v. FCA US LLC (2020) 53 Cal.App.5th 486, and determined that Plaintiff was equitably estopped from refusing to arbitrate her warrant disputes with Defendant by way of her agreement to arbitrate disputes with the dealer who sold the subject vehicle. (Order Tentative Ruling (11/21/2022).)
In Felisilda, the Court of Appeal held that a vehicle buyer who signed an arbitration provision as part of her vehicle sales contract with the dealer may be compelled to arbitrate her claim against an automobile manufacturer, even though the manufacturer was a nonsignatory to the sales contract containing the relevant arbitration provision. (Felisilda, supra, 53 Cal.App.5th at pp. 496-497). The Court of Appeal reasoned that where the buyer expressly agreed to arbitrate claims arising out of the condition of the vehicle, even against third party non-signatories to the sales contract, and where the buyer's claim against the manufacturer relates to the condition of the vehicle that allegedly violated the contract's warranty, the buyer is estopped from refusing to arbitrate. (Id.)
On April 4, 2023, approximately four months after the Court issued its November 21, 2022 order, the Second District of the California Court of Appeal reached a decision contrary to Felisilda in Ochoa v. Ford Motor Company (Ford Motor Warranty Cases) (2023) 89 Cal. App. 5th 1324.
In Ochoa, the Second District of the Court of Appeal expressly declined to follow Felisilda, finding that equitable estoppel should not apply to compel arbitration in such circumstances because "manufacturer vehicle warranties that accompany the sale of a motor vehicle without regard to the terms of the sale contract between the purchaser and the dealer are independent of the sale contract." (Ochoa, supra, 89 Cal.App.5th at p. 1334.) Ochoa held that because the plaintiffs alleged breaches of warranties in violation of the Song-Beverly Act, rather than violations of the sales contracts' express terms, the agreement to arbitrate contained in the sales contract did not estop the plaintiffs from refusing to arbitrate breach of warranty claims against the manufacturer, who was not a party to the sales contract. (Id. at p. 1335-1336 ("California law does not treat manufacturer warranties imposed outside the four corners of a retail sale contract as part of the sale contract").
In light of Ochoa, Plaintiff now moves for the Court's reconsideration of its order dated November 21, 2022, in which the Court granted Defendant’s motion to compel arbitration based on Felisilda. For the reasons set forth below, pursuant to its inherent authority, the Court GRANTS the motion for reconsideration, and on reconsideration, DENIES the motion to compel arbitration.
“Although section 1008 limits the circumstances in which a party may seek reconsideration, it ‘do[es] not limit the court's ability, on its own motion, to reconsider its prior interim orders so it may correct its own errors.’ (See Coastline JX Holdings LLC v. Bennett (2022) 80 Cal.App.5th 985, 1000-1001 quoting Le Francois v. Goel (2005) 35 Cal.4th 1094, 1107.) “[A] trial court has inherent power to reconsider an interim ruling on its own motion. [Citation.] This authority derives from the judiciary's fundamental, constitutionally mandated function to resolve specific controversies between parties.” (Coastline, supra, 80 Cal.App.5th at p. 1001 (citations omitted).)
Thus, "[i]f a court at any time determines that there has been a change of law that warrants it to reconsider a prior order it entered, it may do so on its own motion and enter a different order." (Code Civ. Proc., § 1008, subd. (c).) Additionally, and without a change of law, a trial court may exercise its inherent jurisdiction to reconsider an interim ruling. (Le Francois, supra, 35 Cal.4th at pp. 1096-1097.) The trial court is specifically authorized to exercise such inherent jurisdiction to reconsider orders compelling arbitration. (Malek v. Blue Cross of California (2004) 121 Cal.App.4th 44, 59-60.)
Here, the Court finds it has jurisdiction under either subdivision (c) of Code of Civil Procedure section 1008 or under the Court’s inherent authority to reconsider its prior interim rulings, which would include the Court’s November 21, 2022 order. (See Le Francois, supra, 35 Cal.4th at pp. 1096-1097.) “[I]t is immaterial what may have triggered a trial court's insight that its interim order might be erroneous: ‘We cannot prevent a party from communicating the view to a court that it should reconsider a prior ruling (although any such communication should never be ex parte). We agree that it should not matter whether the “judge has an unprovoked flash of understanding in the middle of the night” [citation] or acts in response to a party's suggestion. If a court believes one of its prior interim orders was erroneous, it should be able to correct that error no matter how it came to acquire that belief.’” (Coastline, supra, 80 Cal.App.5th at p. 1001 quoting Le Francois, supra, 35 Cal.4th at p. 1108.)
On reconsideration, the Court finds good cause to follow the holding in Ochoa, including because it is in harmony with federal authority on the same question. (See Ngo v. BMW of N. Am., LLC (9th Cir. 2022) 23 F.4th 942, 946.) Additionally, on June 26, 2023, the Second District of the Court of Appeal decided the case Montemayor v. Ford Motor Co. (2023) 92 Cal.App.5th 958, in which the Court of Appeal also rejected the holding in Felisilda that equitable estoppel applies to enable a non-signatory manufacturer to enforce an arbitration provision in a sales contract like the contract at issue in this case. The Court further notes that more opinions from the Court of Appeal have been issued since Ochoa and Montemayor, such as Kielar v. Superior Court (2023) 94 Cal.App.5th 614 and Jaclyn Yeh v. Superior Court of Contra Costa County (2023) 94 Cal.App.5th 264, both of which have rejected Felisilda and followed Ochoa.
Defendant does not contend that they are a party to the Sales Contract (as defined in the original motion to compel arbitration), but instead relies on the equitable estoppel theory from Felisilda.[1] The Sales Contract contains the following language, which is identical to the language at issue in Ochoa:
ARBITRATION PROVISION [¶] ... [¶]
1. 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 ... 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. . . .
The Second District in Ochoa found that this language was insufficient to support the manufacturer’s equitable estoppel argument, stating that the breach of warranty claims were not based on the sales contracts with the dealers but are completely independent from the terms of the sales contract. (Ochoa, supra, 89 Cal.App.5th at p. 1334.) The Court of Appeal held that this language in the arbitration clause referring to arbitration of claims “against third party non signatories” cannot mandate arbitration of the warranty claims. Rather, such language agreed to arbitrate claims against third parties whose service, etc., are financed under the sales contract. (Id.)
The Second District also found that the warranty claims are not founded in the sales contracts. The warranty claims arise out of statutory obligations to reimburse consumers or replace their vehicles when unable to repair in accordance with the warranty, or related claims. They do not arise out of any express contractual language in the sales contracts, which themselves do not include any warranties, or assurance regarding the vehicle’s performance, or any promise of repairs or remedies if contracts 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.” (Id. at p. 1335.) In short, “the substantive terms of the sale contracts relate to sale and financing and nothing more.” (Ibid.)
With respect to the issue of third-party beneficiaries, the Court notes that Defendant did not respond in its opposition to this issue as raised in the moving papers for Plaintiff’s motion for reconsideration. Nevertheless, just to be clear on this point as well, the Court of Appeal in Ochoa also rejected the third-party beneficiary argument.
Analyzing the Ninth Circuit Court of Appeal's recent decision in Ngo, supra, 23 F.4th 942, the Second District agreed that the sales contracts reflect no intention to benefit a vehicle manufacturer under Goonewardene – nothing in the sales contracts or their arbitration provision offers any direct “benefit” to the manufacturer, there was no indication that a benefit to the manufacturer was a motivating purpose of the contract, and allowing the manufacturer to enforce the arbitration would be inconsistent with the reasonable expectations of the contracting parties. (Ochoa, supra, 89 Cal.App.5th at pp. 1337-1338,)
Applying this reasoning, there is insufficient evidence to show whether a motivating purpose of the contracting parties was to provide a benefit to Defendant. Civil Code section 1559 requires that a contract benefiting a third party must be made expressly for the benefit of a third person before that third party can enforce it. (Civ. Code § 1559.) The Court finds no language in the Sales Contract indicating an express intent to benefit the Defendant, nor does the Court find that allowing Defendant to compel arbitration would be consistent with the reasonable expectations of the contracting parties.
Based on the foregoing, the Court DENIES Defendant’s motion to compel arbitration.
CONCLUSION
The Court GRANTS the motion for reconsideration. On reconsideration, the Court DENIES Defendant’s motion to compel arbitration, and hereby VACATES its November 21, 2022 order regarding the same.
Plaintiff is ordered to give notice of the Court’s ruling within five calendar days of this order.
[1] For the sake of brevity, the Court does not address the preliminary issues addressed in Defendant’s motion to compel arbitration, but focuses instead on the crux of the matter here which is the equitable estoppel theory.