Judge: Melvin D. Sandvig, Case: 22CHCV00639, Date: 2023-04-04 Tentative Ruling

Case Number: 22CHCV00639    Hearing Date: April 4, 2023    Dept: F47

Dept. F47

Date: 4/4/23

Case #22CHCV00639

 

MOTION TO COMPEL ARBITRATION

 

Motion filed on 1/10/23.

 

MOVING PARTY: Defendant FCA US LLC

RESPONDING PARTY: Plaintiffs Patricia Ang-Schmid and Eric Ang-Schmid

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 Patricia Ang-Schmid and Eric Ang-Schmid’s (Plaintiffs) purchase of a 2021 Chrysler Pacifica Hybrid vehicle (the Vehicle) from Petersen CDJR pursuant to a “Retail Installment Sales Contract – Simple Charge (With Arbitration Provision)” (the Contract/RISC).  (Gruzman Decl., Ex.A).  The RISC was for the sale of a warranted vehicle.  Id.; (Gruzman Decl., Ex.B – Complaint ¶¶9, 12).  Plaintiffs contend that the Vehicle is defective and Defendant FCA US LLC (FCA) has 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 also contend that FCA was aware of the defects and concealed and/or failed to disclose same.  (Complaint ¶¶19-21).  Plaintiffs contend that despite the foregoing, FCA has failed to promptly replace the Vehicle or make restitution as required under the Song-Beverly Act.  (Complaint ¶¶13, 14, 17, (second) ¶47 on p.10*). (*The paragraphs in the complaint are misnumbered as they go from 1-62 and then begin again at 46.)       

 

As a result, on 8/15/22, Plaintiffs filed this action against FCA and Defendant San Fernando Motor Company dba Rydell Chrysler Dodge Jeep Ram (Rydell) to whom Plaintiffs took the vehicle for repair.  As against FCA, Plaintiffs allege four causes of action under the Song-Beverly Act and a claim for fraudulent inducement - concealment.  (Gruzman Decl., Ex.B).   

 

On 1/10/23, FCA filed the instant motion seeking an order compelling arbitration and staying this action.  On 1/10/23, Rydell also filed a motion to compel arbitration and stay this action.  On 3/31/23, Plaintiffs filed a consolidated opposition to FCA’s and Rydell’s motions.  On 3/27/23, FCA filed its reply to the opposition. 

 

ANALYSIS 

 

The Court notes that the “consolidated” opposition only lists the 4/4/23 hearing date for FCA’s motion.  FCA’s reply lists a 4/5/23 hearing date when Rydell’s motion, not FCA’s motion, is scheduled for 4/5/23.  

The “consolidated” opposition exceeds the 15-page limit set forth in CRC 3.1113(d) without obtaining court approval as required.  See CRC 3.1113(e).  Plaintiffs contend that they filed the “consolidated” opposition “[i]n the interest of judicial economy and efficiency.”  (See Opposition, p.1, fn.).  FCA and Rydell filed two separate motions; therefore, they were each entitled to file a 15-page memorandum contrary to the implication by Plaintiffs that the defendants memorandums are somehow excessive because they total 27 pages when combined.  Id.  Despite Plaintiffs’ failure to obtain court approval before filing the oversized memorandum, the Court considered the entire opposition in ruling on the merits of the motion.  See CRC 3.1113(g); CRC 3.1300(d).   

 

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.

 

. . .

 

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.

 

…

 

Any 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.

 

…

 

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) (Gruzman Decl., Ex.A).

 

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 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 ¶12).  The RISC is the source of the warranties Plaintiffs’ rely on for their claims.  Contrary to Plaintiffs assertion, the Warranty Information attached to the Complaint as Exhibit A is not a contract between Plaintiffs and FCA which gives rise to their claims.  Neither party signed the documents which merely explains and details the warranties FCA provided at the time of the sale of the Vehicle under the RISC.  As such, the warranties and their purported breach are “intimately founded in and intertwined” with the RISC.

 

FCA also has standing to enforce the arbitration agreement as a third-party beneficiary.  Third-party beneficiaries may enforce arbitration agreements even if they are not named in the agreement if they establish that the agreement is applicable to the controversy that is the subject of the litigation.  Cohen (2019) 31 CA5th 840, 856; Jones (2011) 195 CA4th 1, 22;  Keller Construction Company, Inc. (1990) 220 CA3d 222, 229.  Here, the Arbitration Agreement provides that it is binding on “any resulting transaction or relationship (including any such relationship with third parties who do not sign this contract)… .”  (Gruzman Decl., Ex.A).  As such the RISC was intended to “include any third-party” who may benefit from or be obligated under it which includes FCA.  Plaintiffs rely on non-binding federal authority (Jurosky (S.D. Cal. 2020) 441 F.Supp.3d 963) which was rejected by the court in Felisilda to support their argument that FCA does not qualify as a third-party beneficiary.  See  Felisilda, supra at 498.    

 

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.”  (Gruzman 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).

 

FCA has met its burden of establishing by a preponderance of the evidence that an arbitration agreement exists which covers the dispute (i.e., the purchase and condition of the vehicle) raised in this action.  See Condee (2001) 88 CA4th 215, 218-219; (Gruzman Decl., Ex.A).  The gravamen of Plaintiffs’ complaint is that “Defendant FCA and its representatives in this state have been unable to service or repair the Vehicle to conform to the applicable express warranties after a reasonable number of opportunities.”  (Complaint (second) ¶47 on p.10).  As such, Plaintiffs are invoking agency principles to bring their claims against FCA.  Such an allegation alone is sufficient for FCA to invoke the benefit of the arbitration agreement, even as a non-signatory, and even apart from equitable estoppel principles.  See Thomas (2012) 204 CA4th 605, 614-615 (“. . . a plaintiff’s allegation of an agency relationship among defendants is sufficient to allow the alleged agents to invoke the benefit of an arbitration agreement executed by their principal even though the agents are not parties to the agreement. [Citations.]  Moreover, it would be unfair to defendants to allow [Plaintiff] . . . to invoke agency principles when it is to his advantage to do so, but to disavow those same principles when it is not. [Citations.]”

 

Plaintiffs’ argument that this action against FCA is not subject to arbitration based on the sentence within the Arbitration Provision 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.  Plaintiffs interpret 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.”  (Gruzman 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 most 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[.]”  (Gruzman Decl., Ex.A).  Here, Plaintiffs concede that “the sale of the Vehicle was accompanied by Defendant FCA’s implied warranty of merchantability.”  (Complaint (second) ¶61 on p.13).  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’ reliance on Jarboe (2020) 53 CA5th 539, an employment case, is misplaced.  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 inextricably intertwined with the RISC.  Therefore, Plaintiffs’ action can be compelled to arbitration regardless of the fact that Plaintiffs have not sued the dealership where Plaintiffs purchased the vehicle.  See Jarboe, supra at 554, 555; Felisilda, supra at 494-496. 

 

Plaintiffs’ argument that even if the Court finds FCA can compel arbitration, the motion must be denied under the third-party exception to arbitration contained in CCP 1281.2(c) is moot as the Court also finds that Plaintiffs’ claim against Rydell is subject to arbitration.  

 

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.  Plaintiffs’ request for a continuance because their counsel is aware of several California Court of Appeal cases pending on the issue presented by this motion is denied.  Plaintiffs present no authority for such a continuance and give no indication when decisions on the pending cases are expected.  If a change in the law occurs within the time period set forth in CCP 1008(a), Plaintiffs are free to seek reconsideration of the ruling on this motion.