Judge: Melvin D. Sandvig, Case: 22CHCV00639, Date: 2023-04-05 Tentative Ruling
Case Number: 22CHCV00639 Hearing Date: April 5, 2023 Dept: F47
Dept. F47
Date: 4/5/23
Case #22CHCV00639
MOTION TO COMPEL ARBITRATION
Motion filed on 1/10/23.
MOVING PARTY: Defendant San Fernando Motor Company dba Rydell Chrysler Dodge Jeep Ram
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), through its representatives, 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. (Complaint (second) ¶47*). Plaintiffs also contend that FCA was aware of the defects and concealed and/or failed to disclose same. (Complaint ¶¶19-21). Plaintiffs took the Vehicle to Defendant San Fernando Motor Company dba Rydell Chrysler Dodge Jeep Ram (Rydell) for repair. (Complaint ¶75). 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 Rydell. As against Rydell, Plaintiffs allege one cause of action for negligent repair. (Gruzman Decl., Ex.B).
On 1/10/23, Rydell filed the instant motion seeking an order compelling arbitration and staying this action. On 1/10/23, FCA 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, Rydell 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.
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.
…
…
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.
Here, Plaintiffs expressly agreed to arbitrate claims arising out of the condition of the Vehicle, which includes the failure/negligent repair of the defects alleged in the Complaint, including against third party non-signatories to the RISC. Similarly, the Arbitration Agreement includes the right to arbitrate claims that arise directly from the RISC or claims that arise from “any resulting transaction or relationship.” (Gruzman Decl., Ex.A). The warranty created by the RISC requires Plaintiffs to take the Vehicle to an authorized repair facility (an FCA dealership, such as Rydell) for repairs, or the warranty is voided. Plaintiffs’ negligent repair claim against Rydell arises from a “resulting transaction” and/or “resulting relationship” with Rydell, an authorized FCA dealership, to repair the Vehicle under the terms of the warranty provided by the manufacturer, FCA. Therefore, Plaintiffs’ relationship with Rydell arises from and depends on the warranties created in the RISC. Further, Plaintiffs’ negligent repair claim is related to their claims against FCA as all of the allegations in those claims are incorporated into the negligent repair claim against Rydell. (Complaint ¶74). Based on the foregoing, Plaintiffs are estopped from refusing to arbitrate their claim against Rydell. 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.
Both federal and California law support arbitration of Plaintiffs’ claims. 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 Rydell 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). Rydell has met its burden of establishing by a preponderance of the evidence that an arbitration agreement exists which covers the dispute (i.e., the condition of the vehicle) raised in this action. See Condee (2001) 88 CA4th 215, 218-219; (Gruzman Decl., Ex.A).
Plaintiffs’ argument that this action 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 and repair 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 claim against Rydell is arbitrated, a California court must apply substantive California law which as noted above requires that this matter against Rydell 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. Plaintiffs’ relationship with Rydell arose out of negligent repairs which Plaintiffs’ claim Rydell made under those warranties. As such, the negligent repair claim is intertwined with the RISC and Plaintiffs’ claims against FCA.
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, FCA and Rydell is clear. Here, Plaintiffs received a manufacturer’s warranty through the execution of the RISC and they are now suing FCA and Rydell based on such warranties and negligent repairs made thereunder. As such, Plaintiffs’ causes of action against FCA and Rydell 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.
CONCLUSION
Based on the foregoing, Rydell’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.