Judge: Melvin D. Sandvig, Case: 22CHCV00587, Date: 2023-01-23 Tentative Ruling
Case Number: 22CHCV00587 Hearing Date: January 23, 2023 Dept: F47
Dept. F47
Date: 1/23/23
Case #22CHCV00587
MOTION TO
COMPEL ARBITRATION
Motion filed on 11/3/22.
MOVING PARTY: Defendant AutoNation Chrysler Dodge Jeep
Ram Valencia
RESPONDING PARTY: Plaintiffs Edward
Luster and Virginia Luster
NOTICE: ok
RELIEF REQUESTED: An order compelling arbitration
and staying this action.
RULING: The motion is placed off calendar as moot.
On 11/3/22, Defendant AutoNation Chrysler Dodge Jeep Ram
Valencia (AutoNation) filed the instant motion seeking an order compelling arbitration
and staying this action. On 1/9/23,
Plaintiffs Edward Luster and Virginia Luster dismissed AutoNation from this
action without prejudice. (See
Dismissal filed 1/9/23). As such, the
instant motion is moot.
Dept. F47
Date: 1/23/23
Case #22CHCV00587
MOTION TO
COMPEL ARBITRATION
Motion filed on 11/2/22.
MOVING PARTY: Defendant FCA US LLC
RESPONDING PARTY: Plaintiffs Edward Luster and Virginia
Luster
NOTICE: ok
RELIEF REQUESTED: An order compelling arbitration
and staying this action.
RULING: The motion is granted.
SUMMARY OF FACTS & PROCEDURAL HISTORY
This action arises out of Plaintiffs Edward Luster and
Virginia Luster’s (Plaintiffs) purchase of a 2017 Dodge Ram 1500 vehicle (the Vehicle)
from former Defendant Auto Company XXIII, Inc. dba AutoNation Chrysler Dodge
Jeep Ram Valencia (AutoNation) pursuant to a “Retail Installment Sales Contract
– Simple Charge (With Arbitration Provision)” (the Contract/RISC). (Clayton Decl., Ex.A). The RISC was for the sale of a warranted
vehicle. Id. Plaintiffs contend that the Vehicle is
defective and Defendant FCA US LLC (FCA) been unable to service or repair the
Vehicle to conform to the applicable express warranties contained in the RISC
after a reasonable number of opportunities.
Plaintiffs further contend that despite the foregoing, FCA has failed to
promptly replace the Vehicle or make restitution as required under the
Song-Beverly Act. (Complaint ¶¶15, 17,
26).
As a result, on 8/1/22, Plaintiffs filed this action against
FCA and AutoNation for: (1) Violation of Civil Code 1793.2(d) (against FCA);
(2) Violation of Civil Code 1793.2(b) (against FCA); (3) Violation of Civil
Code 1793.2(a)(3) (against FCA); (4) Breach of the Implied Warranty of
Merchantability – Civil Code 1791.1, 1794, 1795.5 (against FCA); and (5)
Negligent Repair (against AutoNation).
Plaintiffs allege that all of their causes of action against FCA “arise out
of the warranty obligations of FCA US LLC in connection with a motor vehicle
for which FCA US LLC issued a written warranty.” (Complaint ¶14).
On 9/16/22, AutoNation and FCA filed separate Answers to
the Complaint. On 11/2/22, FCA filed the
instant motion seeking an order compelling arbitration and staying this
action. On 11/3/22, AutoNation filed its
own motion to compel arbitration and stay this action. On 1/9/23, Plaintiffs dismissed AutoNation
from this action without prejudice. (See
Dismissal filed 1/9/23). On 1/10/23,
Plaintiffs filed their opposition to FCA’s motion. On 1/13/23, FCA filed its reply to the
opposition.
ANALYSIS
Plaintiffs’ “objection” to paragraph 2 of the declaration
of Trina Clayton which authenticates the RISC for the purchase of the Vehicle
and is attached thereto as Exhibit A is overruled. (See Opposition, p.2:17-21). Plaintiffs have not submitted declarations
disputing that they signed the RISC.
The RISC contains an arbitration provision which provides,
in relevant part:
ARBITRATION
PROVISION
PLEASE
REVIEW – IMPORTANT- AFFECTS YOUR LEGAL RIGHTS
1. EITHER YOU OR WE MAY CHOOSE
TO HAVE ANY DISPUTE BETWEEN US DECIDED BY ARBITRATION AND NOT IN COURT OR BY
JURY TRIAL.
2. IF ANY DISPUTE IS ARBITRATED,
YOU WILL GIVE UP YOUR RIGHT TO PARTICIPATE AS A CLASS REPRESENTATIVE OR CLASS
MEMBER ON ANY CLASS CLAIM YOU MAY HAVE AGAINST USE INCLUDING ANY RIGHT TO CLASS
ARBITRATION OR ANY CONSOLIDATION OF INDIVIDUAL ARBITRATIONS.
3. DISCOVERY AND RIGHTS TO
APPEAL IN ARBITRATION ARE GENERALLY MORE LIMITED THAN IN A LAWSUIT, AND OTHER
RIGHTS THAT YOU AND WE WOULD HAVE IN COURT MAY NOT BE AVAILABLE IN ARBITRATION.
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.
If federal law provides that a claim or dispute is not subject to
binding arbitration, this Arbitration Provision shall not apply to such claim
or dispute.
…
…
This Arbitration Provision shall
survive any termination, payoff or transfer of this contract. If any part of
this Arbitration Provision, other than waivers of class action rights, is
deemed or found to be unenforceable for any reason, the remainder shall remain
enforceable. If a waiver of class action rights is deemed or found to be
unenforceable for any reason in a case in which class action allegations have
been made, the remainder of this Arbitration Provision shall be unenforceable.
(bold in original; italics added) (Clayton
Decl., Ex.A).
In determining whether to compel arbitration, the Court
must determine: (1) whether there is an agreement to arbitrate between the
parties; and (2) whether the agreement covers the dispute. Howsam (2002)
537 U.S. 79, 84. A party moving to
compel arbitration need only provide the Court with a copy of the Arbitration
Agreement. See Condee
(2001) 88 CA4th 215, 218-219; CRC 3.1300.
Here, FCA has provided a copy of the Arbitration Agreement to the Court
and, contrary to the “objection” of Plaintiffs, as noted above, Defendants have
sufficiently authenticated same for purposes of this motion.
Pursuant to both federal and California law, under the
doctrine of equitable estoppel, “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.” (internal quotation
marks omitted) JSM Tuscany, LLC
(2011) 193 CA4th 1222, 1237.
With regard to the purchase of a vehicle where the
plaintiff and the selling dealership entered a RISC, this very issue has
recently been decided by the Court of Appeal in Felisilda (2020) 53
CA5th 486 wherein the Court held:
“Under the doctrine of equitable
estoppel, as applied in both federal and California decisional authority, a
non-signatory defendant may invoke an arbitration clause to compel a signatory
plaintiff to arbitrate its claims when the causes of action against the non-signatory
are ‘intimately founded in and intertwined’ with
the underlying contract obligations [i.e., the purchase and condition of the
vehicle].” (internal citations omitted).
Felisilda, supra, at
495.
Because Plaintiffs expressly agreed to arbitrate claims
arising out of the condition of the Vehicle (which are all of Plaintiffs’
causes of action against FCA in this action), including against third party
non-signatories to the RISC, Plaintiffs are estopped from refusing to arbitrate
their claim against FCA. See Felisilda,
supra at 497. As explained by the
Court in Felisilda:
“‘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.’” (internal citations omitted)
Id. at 496.
All of Plaintiffs’ causes of action against FCA relate
“to the purchase [and] condition of the Vehicle;” therefore, they fall under
the Arbitration Provision in the RISC. (See
Complaint ¶¶14-15, 17, 26). The RISC is
the source of the warranties Plaintiffs’ rely on for their claims. As such, the warranties and their purported
breach are “intimately founded in and intertwined” with the RISC.
The Federal Arbitration Act (FAA) applies where: (1) the
contract evidences a transaction involving commerce; or (2) where the parties
expressly agree that the FAA governs arbitration agreement disputes under the
contract. Cronus Investments, Inc.
(2005) 35 C4th 376, 383-384; Rodriguez (2006) 136 CA4th 1110, 1122. Here, as noted above, the Arbitration
Provision in the RISC specifically states that “[a]ny arbitration under this
Arbitration Provision shall be governed by the Federal Arbitration Act
(9.U.S.C. § 1 et. seq.) and not by any state law concerning arbitration.” (Clayton Decl., Ex.A). Additionally, the transaction involved
commerce. California law also supports compelling this
matter to arbitration under the RISC as there is no evidence that FCA has
waived the right to arbitrate nor do grounds
exist to revoke the agreement to arbitrate.
See CCP 1281.2(a), (b); Jenks (2015) 243 CA4th 1, 9 (a
non-signatory may enforce an arbitration agreement under the doctrine of
equitable estoppel).
Plaintiffs’ argument that this action against FCA is not
subject to arbitration based on the sentence within the Arbitration Agreement
which states: “[i]f Federal Law provides that a claim or dispute is not subject
to binding arbitration, this Arbitration Provision shall not apply to such
claim or dispute” is without merit. Plaintiff
interprets the foregoing sentence to mean that if a federal case has ruled that
a manufacturer could not compel arbitration as a non-signatory (as was done in Ngo
(9th Cir. 2022) 23 F4th 942), then this action cannot be compelled
to arbitration. This Court disagrees
with Plaintiffs’ interpretation.
The provision relied on by Plaintiff applies to claims
(i.e., sexual harassment) that are forbidden by Federal Law from being
compelled to arbitration. No such
prohibition exists for the type of warranty claims made in this action. Further, as noted above, the subject
Arbitration Provision provides that “[a]ny arbitration under this Arbitration
Provision shall be governed by the Federal Arbitration Act (9 U.S.C. § 1 et. seq)
and not by any state law concerning arbitration.” (Clayton Decl., Ex.A). The foregoing provision means that after the
matter is compelled to arbitration, the arbitrator should apply the FAA to
govern the arbitration not that this Court must apply federal law to determine
whether the arbitration provision is enforceable.
The foregoing interpretation is supported by the decision
in Felisilda wherein the Court rejected the application of federal law
in interpreting the same arbitration provision that is at issue in this
case. See Felisilda, supra
at 497-498. It has further been held
that “just as [parties] may limit by contract the issues which they will
arbitrate [citation], so too may they specify by contract the rules under which
the arbitration will be conducted. [Citation.]”. Nixon (2021) 67 CA5th 934, 945. Parties may “expressly designate that any
arbitration proceeding [may] move forward under the FAA’s procedural provisions
rather than under state procedural law.”
Id. That is what the Arbitration Provision in the RISC in
this case has done. The Arbitration Provision
incorporates the Federal Arbitration Act’s procedural laws; however, it does
not mandate the substantive applicable law by which the enforceability of the
provision should be determined. Rather,
to determine whether the Arbitration Provision applies and mandates that the
claims against FCA are arbitrated, a California court must apply substantive
California law which as noted above requires that this matter against FCA be arbitrated.
Additionally, Plaintiffs’ reliance on Ngo, supra,
is misplaced. First, Ngo, a
federal case, is not binding on this Court whereas Felisilda, supra,
is binding. See Auto Equity
Sales, Inc. (1962) 57 C2d 450, 455 (“When deciding matters of California
law, the doctrine of Stare Decisis requires the Court of inferior jurisdiction
follow the published decisions of California courts of superior jurisdiction.”). Second, Ngo seemingly misinterprets
underlying California case law for its proposition that “under California law,
warranties from a manufacturer that is not a party to a sales contract ‘are not
part of [the] contract of sale.’” Ngo,
supra at 949. The California case
law relied on by Ngo is factually distinguishable as the cases involved
plaintiffs who were not parties to the sales contracts. See Corp. of Presiding Bishop of
Church of Jesus Christ of Latter-Day Saints v. Cavanaugh (Cavanagh)
(1963) 217 CA2d 492, 514; Greenman (1963) 59 C2d 57, 61.
As noted above, the warranties on which Plaintiffs’ base
their claims are an essential part of the benefits Plaintiffs received when
they decided to enter the RISC.
Additionally, the protections provided by the Song-Beverly Act only
apply to consumers who purchase vehicles directly from the retail seller within
the meaning of the Act. See Dagher
(2015) 238 CA4th 905, 926-927. Without
the RISC from an FCA-authorized dealer, Plaintiffs would have no standing to
seek relief under the Song-Beverly Act (on which all of their causes of action
against FCA are based). As such,
Plaintiffs’ claims are inextricably intertwined with the RISC and FCA may
enforce the Arbitration Provision under the doctrine of equitable
estoppel.
Contrary to Plaintiffs’ assertion, the warranty
disclaimer in the RISC does not preclude the arbitration of their claims. The same disclaimer language was included in
the arbitration provision addressed in Felisilda. Further, the warranty disclaimer reinforces
the fact that Plaintiffs’ claims are inextricably intertwined with the RISC. Under Song-Beverly Act, “every sale of
consumer goods that are sold at retail in this state shall be accompanied by
the manufacturer’s and the retail seller’s implied warranty that the goods are
merchantable,” which can be disclaimed “only when a consumer good is on an ‘as
is’ or ‘with all faults’ sale.” Hartnett 2009 WL 10672795 *1, 3 (citing Civil Code 1792,
1792.3). The fact that contracting
parties can disclaim implied warranties in the RISC reinforces the conclusion
that such warranties are necessary terms of the RISC. Consistent with this rule, the RISC contains
language that could potentially, while not automatically, disclaim certain
warranties. The RISC provides that there
would be no express or implied warranties only if the purchaser did “not get a
written warranty, and the [dealer] does not enter into a service contract
within 90 days from the date of this contract[.]” (Clayton Decl., Ex.A). Here, Plaintiffs concede that “the sale of
the Vehicle was accompanied by Defendant FCA’s implied warranty of
merchantability.” (Complaint ¶40). The sale of the Vehicle to Plaintiffs was not
“as-is.” Therefore, the warranty
disclaimer provision was never triggered.
The disclaimer provision actually reinforces the fact that the RISC
included the existence of the manufacturer’s warranty and shows that Plaintiffs’
claims against FCA are “intimately founded in and intertwined with” the
obligations imposed by the RISC. Hartnett,
supra (rejecting dealer-defendant’s argument that a substantively
identical warranty provision disclaimed any implied warranty by the dealer
because sale was not made “as-is”).
Plaintiffs’ argument that Jarboe (2020) 53 CA5th
539 creates a split of authority is also without merit. Based on distinguishable facts, the Court in Jarboe
ruled that the claims against non-signatories to the contract (affiliated
dealerships) could not be compelled to arbitration because it was not clear what
relationship the plaintiff had with the affiliated dealerships and whether the
relationship was integral to support the application for equitable
estoppel. See Jarboe, supra
at 554. Here, the relationship between
Plaintiffs and FCA is clear. Here,
Plaintiffs received a manufacturer’s warranty through the execution of the RISC
and they are now suing FCA based on such warranties. As such, Plaintiffs’ causes of action against
FCA in this action are clearly inextricably intertwined with the RISC. Therefore, Plaintiffs’ action can be compelled
to arbitration regardless of the fact that the dealership defendant has been
dismissed by Plaintiffs. See Jarboe,
supra at 554, 555; Felisilda, supra at 494-496.
CONCLUSION
Based on the foregoing, FCA’s request to compel
Plaintiffs to arbitrate this action is granted.
The action is stayed pending the resolution of the arbitration. See CCP 1281.4; 9 U.S.C. §3.