Judge Michael P. Linfield, Case 22STCV08853 2022-08-18 Tentative Ruling

Judge: Michael P. Linfield, Case: 22STCV08853, Date: 2022-08-18 Tentative Ruling

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SUBJECT: Motion of Defendant Ford Motor Company to Compel Arbitration and Stay Action

Moving Party: Defendants Ford Motor Company and South Bay Ford (collectively “Defendants”)

Resp. Party: Plaintiffs Wendy M. Najera Morales and Oscar Najera Rabadan (“Plaintiffs”)

Defendants Ford Motor Company and South Bay Ford’s Motion to Compel Arbitration and Stay Action is DENIED.

The Court is denying the motion for the legal reasons set forth below. However, the Court cannot struthiously ignore the policy implications that would inure should our Courts grant Defendants’ motion. Since there are arbitration provisions in virtually every lease agreement, upholding Defendants’ motion to compel arbitration would prevent any Lemon Law case from being heard in our State’s courts. Upholding such a motion would eviscerate these consumer protection statutes passed by our Legislature.

On March 11, 2022, Plaintiffs Wendy M. Najera Morales, and Oscar Najera Rabadan filed a complaint against Defendants Ford Motor Company and South Bay Ford alleging the following causes of action:

On July 12, 2022, Defendants moved the Court for an order to compel arbitration of this action and to stay proceedings during arbitration.

On August 5, 2022, Plaintiffs opposed Defendant’s motion to compel arbitration.

On August 5, 2022, Plaintiffs Wendy M. Najera Morales, and Oscar Najera Rabadan requested that the Court take judicial notice of the following items:

1. Pestarino v. Ford Motor Company (“FMC”) (N.D. Cal., June 15, 2020, 19-cv-07890-BLF): 2020 WL 3187370.

2. Pestarino v. FMC (N.D. Cal., June 15, 2020, 19-cv-07890-BLF): Retail Installment Sales Contract (“RISC”), Dkt 14-3.

3. In Re: Ford Motor Co. DPS6 Powershift Transmission Products Liability Litigation (C.D. Cal., July 2, 2020, No. 2:18-ml-02814-AB-PVC): 2020 WL 3637631.

4. In Re: Ford Motor Co. DPS6 Powershift Transmission Products Liability Litigation (C.D. Cal., July 2, 2020, No. 2:18-ml-02814-AB-PVC): Lease Agreement, Dkt 747-4.

5. Herrera v. FMC, et al. (San Diego Superior Court Case No. 37-2017-00049387-CUBC-CTL): Order Denying Motion to Compel Arbitration dated April 13, 2018.

6. Herrera v. FMC, et al. (San Diego Superior Court, Case No. 37-2017-00049387-CUBC-CTL): Motion to Compel Arbitration, with RISC attached to counsel’s declaration.

7. Rodriguez v. FMC, et al. (Los Angeles Superior Court, Case No. BC718266): Order Denying Motion to Compel Arbitration dated November 15, 2018.

8. Rodriguez v. FMC, et al. (Los Angeles Superior Court, Case No. BC718266): Declaration of Mike Gilligan in support of Motion to Compel Arbitration, with Lease.

9. Garay v. FMC, et al. (Los Angeles Superior Court, Case No. BC687595): Order Denying Motion to Compel Arbitration dated May 22, 2018.

10. Garay v. FMC, et al. (Los Angeles Superior Court, Case No. BC687595): Motion to Compel Arbitration, with RISC attached to counsel’s declaration.

11. Holmes v. FMC, et al. (Los Angeles Superior Court, Case No. BC687552): Order Denying Motion to Compel Arbitration dated March 22, 2018.

12. Holmes v. FMC, et al. (Los Angeles Superior Court, Case No. BC687552): Motion to Compel Arbitration, with RISC attached to counsel’s declaration.

13. Hernandez v. FMC, et al. (Los Angeles Superior Court, Case No. 19STCV26639): Order Denying Motion to Compel Arbitration dated January 15, 2020.

14. Hernandez v. FMC, et al. (Los Angeles Superior Court, Case No. 19STCV26639): Declaration of Richard J. May in support of Motion to Compel Arbitration, with Lease.

15. Nava Rodriguez v. FMC, et al. (Los Angeles Superior Court, Case No. 19STCV31234): Order Denying Motion to Compel Arbitration dated February 7, 2020.

16. Hernandez v. FMC, et al. (Los Angeles Superior Court, Case No. 19STCV26639): Declaration of Charles F. Harlow in support of Motion to Compel Arbitration, with RISC.

17. In re Toyota Motor Corp. Hybrid Brake Mktg., Sales, Practices & Prod. Liab. Litig., No. 10ml2172 CJC (RNB) (C.D. Cal. Oct. 10, 2011, a.k.a., Ninth Circuit Court of Appeals Decision in Kramer v. Toyota Motor Corp. (9th Cir. 2013) 705 F.3d 1122), Docket No. 133-2 – 133-5: Declaration of Michael L. Mallow in support of Motion to Compel Arbitration, with RISCs.

18. Ngo v. BMW of America, LLC, et al. (C.D. Cal.) 2:20-cv-06197, Docket No. 11-2: Declaration of Jim Cyr in Support of BMW of North America, LLC’s Motion to Compel Arbitration, with RISC.

19. McCormack, et al. Ford Motor Company, et al. (Orange County Superior Court, Case No. 30-2021-01236168-CU-BC-CTL): Declaration of David Polyakov in Support of Motion to Compel Arbitration, with RISC.

20. McCormack, et al. Ford Motor Company, et al. (Orange County Superior Court, Case No. 30-2021-01236168-CU-BC-CTL): Order Denying Motion dated July 27, 2022.

21. Ibarra v. Ford Motor Company, et al. (Alameda County Superior Court, Case Nos. RG21101287): Declaration of Trina M. Clayton in Support of Motion to Compel Arbitration, with RISC.

22. Ibarra v. Ford Motor Company, et al. (Alameda County Superior Court, Case No. RG21101287): Order Denying Motion dared December 2, 2021.

The Court DENIES all of Plaintiffs’ requests for judicial notice. “A written trial court ruling in another case has no precedential value.” (Budrow v. Dave & Buster’s of California (2009) 171 Cal.App.4th 875, 885; Bolanos v. Superior Court (2008) 169 Cal.App.4th 744, 761; In re Molz (2005) 127 Cal.App.4th 836, 845; Santa Ana Medical Hospital Center v. Belshé (1997) 56 Cal.App.4th 819, 831.) “[F]ederal decisional authority is neither binding nor controlling in matters involving state law.” (Howard Contracting, Inc. v. G.A. MacDonald Construction Co. (1998) 71 Cal.App.4th 38; Nagel v. Twin Laboratories, Inc. (2003) 109 Cal.App.4th 39, 55.)

On August 5, 2022, Plaintiffs objected to three passages in the Declaration of Jeck Dizon. The Court rules as follows on these evidentiary objections.

Objection		OVERRULED
1		OVERRULED
2		OVERRULED
3		OVERRULED

The Court also finds these objections to be frivolous. For instance, Plaintiff objects, on the grounds of “lack of personal knowledge,” to Jeck Dizon’s statement that “I am an attorney duly admitted to practice in all of the courts of the State of California and I am an associate with Lewis Brisbois. . . .” (Plaintiff’s Evidentiary Objections to Declaration of Jeck Dizon, Objection No. 1, p. 2:2-13; cf., Nazir v. United Airlines, Inc. (2009) 178 Cal.App.4th 243, 257, fn. 6 [“We sometimes ‘hear’ that a common practice in cases staffed by multiple levels of lawyers is to assign the most junior lawyer to ‘do the objections,’ which was apparently done here. Perhaps a wiser practice would be to have the most experienced lawyer, presumably with a better understanding of the law of evidence, deal with the objections.”)

California law incorporates many of the basic policy objectives contained in the Federal Arbitration Act, including a presumption in favor of arbitrability. (Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 971-972.) The petitioner bears the burden of proving the existence of a valid arbitration agreement by the preponderance of the evidence, the party opposing the petition then bears the burden of proving by a preponderance of the evidence any fact necessary to demonstrate that there should be no enforcement of the agreement, and the trial court sits as a trier of fact to reach a final determination on the issue. (Rosenthal v. Great Western Financial Securities Corp. (1996) 14 Cal.4th 394, 413.) The Court is empowered by Code of Civil Procedure section 1281.2 to compel parties to arbitrate disputes pursuant to an agreement to do so.

“The court shall order the petitioner and the respondent to arbitrate the controversy if it determines that an agreement to arbitrate the controversy exists, unless it determines that:

(c) A party to the arbitration agreement is also a party to a pending court action or special proceeding with a third party, arising out of the same transaction or series of related transactions and there is a possibility of conflicting rulings on a common issue of law or fact. For purposes of this section, a pending court action or special proceeding includes an action or proceeding initiated by the party refusing to arbitrate after the petition to compel arbitration has been filed, but on or before the date of the hearing on the petition. This subdivision shall not be applicable to an agreement to arbitrate disputes as to the professional negligence of a health care provider made pursuant to Section 1295.” (Code Civ. Proc., § 1281.2.)

The party petitioning to compel arbitration under written arbitration agreement bears the burden of proving the existence of a valid arbitration agreement by a preponderance of the evidence, and party opposing petition must meet the same evidentiary burden to prove any facts necessary to its defense. The trial court acts as the trier of fact, weighing all the affidavits, declarations, and other documentary evidence. (Code Civ. Proc., § 1281.2; Provencio v. WMA Securities, Inc., 125 Cal.App.4th 1028, 1031.)

The operative language of the Arbitration Provision in question states the following:

“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 H1is 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 claim or dispute is to be arbitrated by a single arbitrator on an individual basis and not as a class action. You expressly waive any right you may have to arbitrate a class action. You may choose the American Arbitration Association, 1633 Broadway, 10th Floor, New York, New York 10019 (www.adr.org), or any other organization to conduct the arbitration subject to our approval. You may get a copy oi the rules of an arbitration organization by contacting the organization or visiting its website.” (Dizon Decl., ¶ 2, Ex. 1, p. AMF00043.)

Signatories to this Arbitration Provision include Plaintiffs and seller Airport Marina Ford. (Id.) Defendants Ford Motor Company and South Bay Ford are not signatories to the Arbitration Provision. (Id.)

Defendants argue that (1) the Arbitration Provision is valid and enforceable by its terms, (2) the Arbitration Provision’s broad scope includes Plaintiffs’ claims, (3) the Arbitrator should decide whether arbitration is appropriate in this action, (4) Defendants may enforce the Arbitration Provision through equitable estoppel, and (5) Defendants can enforce the Arbitration Provision as third-party beneficiaries to the Arbitration Provision. (Motion, MPA, p. 11:19—19-27.) Because Defendants are nonsignatories to the Arbitration Provision, the Court will address their equitable estoppel and third-party beneficiary claims to determine whether Defendants may enforce the Arbitration Provision against Plaintiffs.

1. Nonsignatory Enforcement of Arbitration Agreements through Equitable Estoppel

As a general rule, only a party to an arbitration agreement is bound by or may enforce the agreement. (Thomas v. Westlake (2012) 204 Cal.App.4th 605, 613; CCP § 1281.2.) Nonsignatories of arbitration agreements may be bound by the agreement under ordinary contract and agency principles, including 1) incorporation by reference; 2) assumption; 3) agency; 4) veil-piercing/alter ego; and 5) estoppel. (Comer v. Micor, Inc. (9th Cir. 2006) 436 F.3d 1098, 1101.) Nonsignatories may also enforce arbitration agreements as third-party beneficiaries. (Id.) “In the arbitration context, the doctrine [of estoppel] recognizes that a party may be estopped from asserting that the lack of his signature on a written contract precludes enforcement of the contract's arbitration clause when he has consistently maintained that other provisions of the same contract should be enforced to benefit him. To allow [a plaintiff] to claim the benefit of the contract and simultaneously avoid its burdens would both disregard equity and contravene the purposes underlying enactment of the Arbitration Act.” (Washington Mut. Finance Group, LLC v. Bailey (5th Cir. 2004) 364 F.3d 260, 268; see also International Paper Co. v. Schwabedissen Maschinen & Anlagen GMBH (4th Cir. 2000) 206 F.3d 411, 418.) “Equitable estoppel precludes a party from claiming the benefits of a contract while simultaneously attempting to avoid the burdens that contract imposes.” (Kramer v. Toyota Motor Corp. (9th Cir. 2013) 705 F.3d 1122, 1128, see also Comer, 436 F.3d at 1101.)

“Where a nonsignatory seeks to enforce an arbitration clause, the doctrine of equitable estoppel applies in two circumstances: (1) when a signatory must rely on the terms of the written agreement in asserting its claims against the nonsignatory or the claims are intimately founded in and intertwined with the underlying contract, and (2) when the signatory alleges substantially interdependent and concerted misconduct by the nonsignatory and another signatory and the allegations of interdependent misconduct [are] founded in or intimately connected with the obligations of the underlying agreement.” (Kramer, 705 F.3d at 1128–1129 (cleaned up).)

Under the doctrine of 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. 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. Where the equitable estoppel doctrine applies, the nonsignatory has a right to enforce the arbitration agreement. 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. In any case applying equitable estoppel to compel arbitration despite the lack of an agreement to arbitrate, a nonsignatory may compel arbitration only when the claims against the nonsignatory are founded in and inextricably bound up with the obligations imposed by the agreement containing the arbitration clause. In determining whether the plaintiffs’ claim is founded on or intimately connected with the sales contract, we examine the facts of the operative complaint.” (Felisilda v. FCA US LLC (2020) 53 Cal.App.5th 486, 495–496 [cleaned up].)

Defendants argue that they may compel Plaintiffs to arbitrate their claims through equitable estoppel under Felisilda. (Motion, MPA, p. 16:11—17:14.) The Court finds that the facts of Felisilda are distinguishable from the facts of this current action. The plaintiffs in that case sued both the manufacturer, FCA US LLC, and the dealership, Elk Grove Dodge, and alleged that FCA US LLC had breached express warranty accompanying the sale of the vehicle. Here, on the other hand, Plaintiffs brought this action only against the manufacturer, Ford Motor Company, and the repair company, South Bay Ford. Plaintiffs did not include seller Airport Marina Ford, the selling dealership and party to the Arbitration Provision, as a named party in this action. Further, the Arbitration Provision expressly defines claims as those “between you and us or our employees, agents, successors or assigns.” (Dizon Decl., ¶ 2, Ex. 1, p. AMF00043.) Neither the selling dealership nor one of its “employees, agents, successors, or assigns” is named in this action or seeks to enforce the arbitration provision. Further, while the Complaint alleges that a warranty was issued in connection with the vehicle Plaintiff purchased, the Complaint specifically references the manufacturer’s warranty, not a warranty derived from or included within the Retail Installment Sale Contract (“RISC”). (See Complaint, ¶¶ 10, 11.)

Further, the Court notes that the basis of equitable estoppel – which was relied upon by the Felisilda court as the basis of its opinion – is not present here. As Felisilda stated, “ ‘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.’ ” (Felisilda at p. 496, quoting Jensen v. U-Haul Co. of California (2017) 18 Cal.App.5th 295, 306, quoting NORCAL Mutual Ins. Co. v. Newton (2000) 84 Cal.App.4th 64, 84.) But in the case before us, Plaintiffs are not trying to use the arbitration clause to their advantage against one defendant (or in one forum) but trying to avoid arbitration against other defendants (or avoid arbitration in another forum). Colloquially, they do not try to eat their cake and have it too. Hence there is no policy reason to hold that Plaintiffs are equitably estopped from preventing Defendants from arbitrating.

To invoke third-party beneficiary doctrine, the Court must “determine not only (1) whether the third party would in fact benefit from the contract, but also (2) whether a motivating purpose of the contracting parties was to provide a benefit to the third party, and (3) whether permitting a third party to bring its own breach of contract action against a contracting party is consistent with the objectives of the contract and the reasonable expectations of the contracting parties. All three elements must be satisfied to permit the third-party action to go forward.” (Goonewardene v. ADP, LLC (2019) 6 Cal.5th 817, 829–830.)

The Court finds no evidence in the Arbitration Provision or Retail Installment Sale Contract that a motivating purpose of the contracting parties was to provide a benefit to the third party. Rather, the RISC explicitly identifies the Plaintiffs as the Buyer, and Airport Marina Ford as the Seller-Creditor, and maintains focus on those two parties alone. (Dizon Decl., ¶ 2, Ex. 1, pp. AMF00038, AMF00043.) Even if the Arbitration Provision’s reference to “third parties who do not sign the RISC” were considered a reference to possible third-party beneficiaries, this would not serve as evidence to suggest that Defendants were the third parties in mind for the contracting parties upon signing. (Dizon Decl., ¶ 2, Ex. 1, p. AMF00043.)

The Court finds that Defendants may not enforce the Arbitration Provision of the Retail Installment Service Contract upon Plaintiffs through equitable estoppel or third-party beneficiary doctrine. As a result, Defendants’ initial three enforceability claims (that (1) the Arbitration Provision is valid and enforceable by its terms, (2) the Arbitration Provision’s broad scope includes Plaintiffs’ claims, and (3) the Arbitrator should decide whether arbitration is appropriate in this action) all fail, because they all require interpretation of the Arbitration Provision as a contract that bind Plaintiffs to enforcement by nonsignatories.

Defendants Ford Motor Company and South Bay Ford’s Motion to Compel Arbitration and Stay Action is DENIED.