Judge: Mark A. Young, Case: 22SMCV02413, Date: 2023-05-24 Tentative Ruling
Case Number: 22SMCV02413 Hearing Date: May 24, 2023 Dept: M
CASE NAME: Beer, et al.,
v. FCA US LLC, et al.
CASE NO.: 22SMCV02413
MOTION: Petition/Motion
to Compel Arbitration
HEARING DATE: 5/24/2023
SUMMARY OF RULING
Defendant Santa
Monica Chrysler Jeep Dodge Ram’s motion to compel arbitration is
Legal
Standard
Under California and federal law,
public policy favors arbitration as an efficient and less expensive means of
resolving private disputes. (Moncharsh
v. Heily & Blase (1992)
3 Cal.4th 1, 8-9; AT&T Mobility
LLC v. Concepcion (2011) 563 U.S. 333, 339.) Accordingly, whether an
agreement is governed by the California Arbitration Act (“CAA”) or the Federal
Arbitration Act (“FAA”), courts resolve doubts about an arbitration agreement’s
scope in favor of arbitration. (Moncharsh, supra, 3 Cal.4th at 9;
Comedy Club, Inc. v. Improv West
Assocs. (9th Cir. 2009) 553 F.3d 1277, 1284; see also Engalla v. Permanente Med. Grp., Inc.
(1997) 15 Cal.4th 951, 971-972 [“California law incorporates many of the basic
policy objectives contained in the Federal Arbitration Act, including a
presumption in favor of arbitrability [citation] and a requirement that an
arbitration agreement must be enforced on the basis of state law standards that
apply to contracts in general”].) “[U]nder both the FAA and California law,
‘arbitration agreements are valid, irrevocable, and enforceable, save upon such
grounds as exist at law or in equity for the revocation of any contract.’ ” (Higgins v. Superior Crout (2006) 140 Cal.App.4th 1238, 1247.)
“Code of
Civil Procedure section 1281.2 requires a trial court to grant a petition to
compel arbitration if the court determines that an agreement to arbitrate the
controversy exists.” (Avery v.
Integrated Healthcare Holdings, Inc. (2013) 218 Cal.App.4th 50, 59,
quotations omitted.) Accordingly, “when presented with a petition to compel
arbitration, the court’s first task is to determine whether the parties have in
fact agreed to arbitrate the dispute.” (Ibid.) A petition to compel arbitration is in essence a suit in equity
to compel specific performance of a contract. (Id. at 71.) As with any other specific performance claim, “a
party seeking to enforce an arbitration agreement must show the agreement’s
terms are sufficiently definite to enable the court to know what it is to
enforce.” (Ibid. [internal citations omitted].) “Only
the valid and binding agreement of the parties, including all material terms
well-defined and clearly expressed, may be ordered specifically performed.” (Ibid.) An arbitration agreement “must be so interpreted as to give
effect to the mutual intention of the parties as it existed at the time of
contracting, so far as the same is ascertainable and lawful.” (Civ. Code, §
1636.) The language of the contract governs its interpretation if it is clear
and explicit. (Civ. Code, § 1368.) If uncertainty exists, “the language of a
contract should be interpreted most strongly against the party who caused the
uncertainty to exist.” (Civ. Code, § 1654.)
The party
seeking to compel arbitration bears the burden of proving the existence of a
valid arbitration agreement by the preponderance of the evidence. (Engalla v. Permanente Medical Group, Inc.
(1997) 15 Cal.4th 951, 972.) It would then be plaintiff’s burden, in opposing
the motion, to prove by a preponderance of the evidence any fact necessary to her
opposition. (See Ibid.) “In these
summary proceedings, the trial court sits as a trier of fact, weighing all the
affidavits, declarations, and other documentary evidence, as well as oral
testimony received at the court’s discretion, to reach a final determination.” (Ibid.)
Analysis
Defendant Santa
Monica Chrysler Jeep Dodge Ram (“SMCJDR”) asserts that the instant claims are
required to go to arbitration because Plaintiff signed an arbitration agreement
covering their claims.
As with any contract, mutual assent
or consent is necessary for the formation of a valid arbitration agreement.
(Civ. Code, §§ 1550, 1565.) “Consent is not mutual, unless the parties all agree
upon the same thing in the same sense.” (Civ. Code, § 1580.) The moving party
bears the initial burden of showing the existence of an agreement to arbitrate
by a preponderance of the evidence. (Mitri
v. Arnel Mgmt. Co. (2007) 157 Cal.App.4th 1164, 1169 [“Because the
existence of the agreement is a statutory prerequisite to granting the
petition, the petitioner bears the burden of proving its existence by a
preponderance of the evidence.”].)
It is undisputed that Plaintiffs
signed an agreement for the sale of the vehicle, which contained an arbitration
provision. On March 20, 2019, Plaintiffs purchased a 2019 Chrysler Pacifica
(“Vehicle”) from third party Orange Coast Chrysler Jeep Dodge. (Gruzman Decl., ¶2 and Exh. A.) This purchase
was memorialized in the Sales Contract. (Id.) The Sales Contract explicitly
included an arbitration clause and an agreement to arbitrate. (Id.) Specifically,
Plaintiffs signed in a separate box entitled: “Agreement to Arbitrate.” (Id.)
The text in this box states: “By signing below, you agree that, pursuant to the
Arbitration Provision on the reverse side of this contract, you or we may elect
to resolve any dispute by neutral, binding arbitration and not by a court
action.” (Id.) Among other terms, the arbitration provision states:
YOU AGREE TO THE TERMS OF THIS
CONTRACT. YOU CONFIRM THAT BEFORE YOU SIGNED THIS CONTRACT, WE GAVE IT TO YOU,
AND YOU WERE FREE TO TAKE IT AND REVIEW IT. YOU ACKNOWLEDGE THAT YOU HAVE READ
BOTH SIDES OF THIS CONTRACT, INCLUDING THE ARBITRATION PROVISION ON THE REVERSE
SIDE, BEFORE SIGNING BELOW. YOU CONFIRM THAT YOU RECEIVED A COMPLETELY
FILLED-IN COPY WHEN YOU SIGNED IT.
(Id.)
SMCJDR argues that the instant
claims arise from the above cited sale agreement. Plaintiffs brought the
instant Song-Beverly action against the manufacturer of the Vehicle, FCA, and SNCJDR.
As to SMCJDR, Plaintiffs allege a single cause of
action Negligent Repair. (Compl., ¶¶ 90-94.) Plaintiffs allege that they delivered
the Vehicle to SMCJDR for substantial repair on at least one occasion. (Id., ¶
91.) SMCJDR “breached its duty to Plaintiffs to use ordinary care and skill by
failing to properly store, prepare and repair the Subject Vehicle in accordance
with industry standards.” (Id. ¶ 93.)
SMCJDR admits it is not a direct
party to the agreement. Instead, it relies on a theory of equitable estoppel to
enforce the arbitration agreement against Plaintiffs. “As a general rule, only
a party to an arbitration agreement may enforce the agreement. [Citation.]
However, there are several exceptions that allow a nonsignatory to invoke an
agreement to arbitrate. [Citation.] The doctrine of equitable estoppel is one
of the exceptions. (Ibid.)” (Felisilda v. FCA US LLC, (2020) 53 Cal.
App. 5th 486, 495.) Under 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.’ [Citations.] ‘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.’ [Citation.] (Id.)
In Felisilda, the plaintiffs
sued a car manufacturer and car dealer for violations of the Song-Beverly Act.
The dealer moved to compel arbitration of the claims based on an arbitration
provision in the sales contract between dealer and plaintiff. (Id. at
489.) The trial court ordered arbitration of the claims against both the dealer
and manufacturer. After the trial court confirmed the arbitrator’s decision,
the plaintiffs appealed, arguing that the trial court could not order
plaintiffs to arbitrate the claim with the manufacturer because it was a
nonsignatory to the sales contract. (Id.) The Court of Appeal rejected
this argument, finding that the express warranties allegedly breached by the
manufacturer arose from the sales contract. (Id. at 496-97.) “Because the [plaintiffs] expressly agreed to
arbitrate claims arising out of the condition of the vehicle – even against
third party nonsignatories to the sales contract – they are estopped from
refusing to arbitrate their claim against [the manufacturer].” (Id. at
497.)
However,
recently, the Second District of the Court of Appeal addressed this issue in the
published decision of Ford Motor Warranty Cases, (Cal. Ct. App. Apr. 4,
2023) 89 Cal.App.5th 1324 (“Ochoa”). In relevant part, Ochoa expressly
diverged from Felisilda’s analysis that “the sales contract was the source”
of the warranties at issue. (Felisilda, supra, 53 Cal.App.5th at 496.)
Instead, Ochoa concluded that “manufacturer vehicle warranties that
accompany the sale of motor vehicles without regard to the terms of the sale
contract between the purchaser and the dealer are independent of the sale
contract.” (Ochoa, supra, at 619, emphasis added.) Thus, the court found
equitable estoppel to be inapplicable because the plaintiffs’ claims “in no way
rel[ied] on the sale contracts.” (Id. at 621) Therefore, the Plaintiffs
were not attempting “to prevent a party from taking advantage of a contract's
substantive terms while avoiding those terms requiring arbitration,” which is
the “’fundamental point’ of using equitable estoppel to compel arbitration.” (Id.)
Ochoa also disagreed with Felisilda’s holding that a
manufacturer could compel arbitration as a third-party beneficiary of the sales
contract, agreeing with federal authority that “the sale contracts reflect no
intention to benefit a vehicle manufacturer.” (Id. at 622, citing
Ngo v. BMW of North America (9th Cir. 2022) 23 F.4th 942 (Ngo).)
While not binding on this court, Ngo
is both instructive and persuasive. (Haynes v. EMC Mortgage Corp. (2012) 205 Cal. App.
4th 329, 334 (“federal decisions on state law can be persuasive authority”).) In Ngo, the plaintiff sued BMW, who
manufactured the car, but did not include the dealer. The arbitration provision
was nearly identical to the one in Felisilda. The manufacturer attempted
to compel arbitration based on the provision. The 9th Circuit rejected this
attempt, finding equitable estoppel theory inapplicable to the manufacturer. The
court explained:
It makes a critical difference that
the Felisildas, unlike Ngo, sued the dealership in addition to the
manufacturer. In Felisilda, it was the dealership—a signatory to the purchase
agreement—that moved to compel arbitration rather than the non-signatory
manufacturer. [Citation]…Furthermore, 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.
(Ngo 23 F.4th at 950.) Notably, Ochoa did not find this
distinction to be critical. Ngo also held that the manufacturer was not
a third-party beneficiary of the agreement. (Id. at 946.)
Thus, there is a split of authority
on this point of law. “[W]here there is more than one appellate court decision,
and such appellate decisions are in conflict…. the court exercising inferior
jurisdiction can and must make a choice between the conflicting decisions.” (Auto
Equity Sales, Inc. v. Superior Ct. of Santa Clara Cnty. (1962) 57 Cal. 2d
450, 456.) The Court thus has the discretion to follow Ochoa or Felisilda.
Here, SMCJDR fails to demonstrate either
that it has a valid arbitration agreement with Plaintiffs or some other theory
for enforcement of the agreement applies. SMCJDR contends that the Court should
follow Felisilda as controlling the outcome but recognizes that the
Court has the discretion to follow Ochoa. The Court will follow Ochoa
for several reasons. First, this Court resides in the Second District. The
Court would therefore favor Ochoa’s guidance on this matter. Second, even
if the Court were to apply Felisilda, SMCJDR has not demonstrated that
Plaintiffs’ negligent repair claim is “rooted” in the Sales Contract containing
the arbitration clause. The relationship between SMCJDR and the agreement is even
more attenuated than that of a manufacturer and the dealer. SMCJDR is apparently a third-party repair
facility that performed repairs through their own, independent agreement with
Plaintiffs. Plaintiffs are not seeking to enforce any term of the Sales
Contract against SMCJDR. Because the negligent repair cause of action is not
intimately founded in and intertwined with the Sales Contract, SMCJDR’s motion
is without merit. Third, federal authority supports this conclusion. Defendants
repeatedly assert that federal law would compel arbitration here. Yet, relevant
federal authority would not allow third parties to enforce the arbitration
provision on a third-party beneficiary or equitable estoppel theory. Finally, Ngo
and Ochoa are the better reasoned cases which more precisely examine the
contract terms and long-standing warranty law. (See Ochoa, supra, at
621-622.)
Accordingly, SMCJDR’s motion is
DENIED.