Judge: Michael Shultz, Case: 22CMCV00287, Date: 2022-12-06 Tentative Ruling
Case Number: 22CMCV00287 Hearing Date: December 6, 2022 Dept: A
22CMCV00287
OLMOS V. AMERICAN HONDA MOTOR COMPANY, INC.
[TENTATIVE] ORDER
I.
BACKGROUND
The complaint filed on August 5,
2022, alleges that Plaintiff purchased a vehicle manufactured by Defendant on March
7, 2020. The vehicle developed electrical, audio, and other defects. Defendant
allegedly failed to comply with its obligations under the Song-Beverly Consumer
Warranty Act (“the SBA”). Plaintiff alleges claims for violations of the SBA.
II.
ARGUMENTS
A.
Defendant’s Motion filed October
4, 2022
Defendant requests an order to
compel Plaintiff to submit this matter to binding arbitration as required by
the Retail Installment Sales Contract (“the Sales Contract”) he signed. The broad
scope of the arbitration provision requires binding arbitration for any dispute
concerning the purchase or condition of the vehicle. Plaintiff acknowledged the
arbitration provision but filed this civil action.
Defendant argues that it is not signatory
to the Sales Contract, however, it is entitled to enforce the arbitration
provision under the doctrine of equitable estoppel. Plaintiff claims are based
on the alleged violations of warranties provided to him in the Sales contract. Therefore,
Plaintiff is equitably estopped to deny that the arbitration provision is
enforceable.
Defendant also argues that because
Plaintiff’s claims are inextricably intertwined with the Sales Contract, it
does not matter that Defendant is not a signatory. The Sales Contract establishes Plaintiff’s
standing to sue under the SBA.
Defendant argues it is a
third-party beneficiary of the Sales Contract and is entitled to enforce the arbitration
provision as expressly provided. Plaintiff agreed to arbitrate any claim
related to the Sales Contract including claims relating to the condition of the
vehicle or any resulting relationship including those with third parties. The action should be stayed pending the
completion of binding arbitration. The Federal Arbitration Act (“FAA”)
also requires compliance with the arbitration provision.
B.
Opposition filed November 21, 2022
Plaintiff argues that the motion
should be denied because Defendant did not sign the Sales Contract and has no
standing under any theory to compel Plaintiff to arbitrate his claims under the
SBA. Defendant relies on Felisilda v. FCA US LLC (2020) 53 Cal.App.5th 486 which is an “outlier” case and is not controlling authority since
the moving party Felisilda the dealership, who was a signatory to the
Sales Contract. Plaintiff here did not sue the dealership. The Felisilda
decision has been “roundly rejected” by several federal courts.
The arbitration provision clearly
limits the scope of disputes to those between Plaintiff and the dealership,
Carson Honda, or their employees and agents.
The reference to “third parties who do not sign the contract” describes
the types of arbitrable disputes between Plaintiff and the dealership. Plaintiff’s
claims against the manufacturer are not “inextricably intertwined” with
Plaintiff’s underlying contractual obligations. Plaintiff’s claims have nothing to do with the
Sales Contract signed with the dealership. Nor is Honda a third-party
beneficiary of the Sales Contract.
C.
Reply filed November 29, 2022
Plaintiff relies on solely on
non-binding federal authority. Felisilda provides that arbitration can
be compelled under equitable principles. The arbitration clause at issue here
is identical to that in Felisilda. Plaintiff’s own complaint contains
the same language considered by Felisilda to conclude that the
plaintiff’s claims there were inextricably intertwined with the obligations
under the Sales Contract. California has repeatedly held that a non-signatory
can enforce an arbitration agreement under principles of equitable estoppel. It
is inequitable for Plaintiff to take advantage of the sales contract to bring
warranty claims against the manufacturer while simultaneously disavowing the
arbitration provision.
III DISCUSSION
The court grants Defendant’s request for judicial
notice of the complaint, Defendant’s answer, and a notice of entry of dismissal
in Felisilda v. FCA US, LLC filed in Sacramento Superior Court. Evid. Code, §
452(d). The court may order the parties to arbitrate the matter on petition of
a party to an arbitration agreement. Code Civ. Proc., § 1281.2. The petitioner’s burden is to
establish that a valid arbitration agreement exists. The opposing party’s burden
is to establish a defense to enforcement based on a preponderance of
evidence. Molecular Analytical Systems v.
Ciphergen Biosystems, Inc. (2010) 186 Cal.App.4th 696, 705
The
Sales Contract at issue is made between Plaintiff and Carson Honda. Declaration
of Maks Shapiro. Ex. 1. Defendant is not a party to the contract. Id. The
Sales Contract states that “[a]ny arbitration under this Arbitration Provision
shall be governed by the Federal Arbitration Act and not by any state law
concerning arbitration.” Id., .pdf page 8. Even if the FAA governs, the
court applies state law as to who is bound and who may enforce an arbitration
agreement. Thomas v. Westlake (2012) 204 Cal.App.4th 605, 614, n.7.
Under
Section 2 of the FAA, written arbitration agreements are valid, irrevocable,
and enforceable “save upon such grounds as exist at law or in equity for the
revocation of a contract.” Arthur Andersen LLP v.
Carlisle (2009) 556 U.S. 624, 629–630; 9 U.S.C.A. § 2 (West).
Section 3 of the FAA requires the court
on application of one of the parties to stay the action if it involves issues
referable to arbitration. 9 U.S.C.A. § 3 (West).
Under
California law, the general rule is that “only a party to an arbitration
agreement is bound by or may enforce the agreement. (Code Civ. Proc., §
1281.2); …" Thomas v. Westlake (2012) 204
Cal.App.4th 605, 613. However,
there are exceptions to the general rule in which a non-signatory can invoke an
arbitration clause to compel a signatory plaintiff to arbitrate its claims. JSM Tuscany, LLC v. Superior
Court (2011) 193 Cal.App.4th 1222, 1237. One exception is the principle of equitable
estoppel which applies "when the causes of action against the nonsignatory
are ‘intimately founded in and intertwined’ with the underlying contract
obligations …” Under those circumstances , where a plaintiff relies “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[,]” Boucher v. Alliance Title Co.,
Inc. (2005) 127 Cal.App.4th 262, 272.
Equity
is the “lynchpin” for equitable estoppel, “and the point of applying it to
compel arbitration is to prevent a situation that ‘would fly in the face of
fairness.’ [Citation.] The purpose of the doctrine is to prevent a plaintiff
from, in effect, ... ‘relying on the contract when it works to [his] advantage
[by establishing the claim] and repudiating it when it works to [his]
disadvantage [by requiring arbitration].’ [Citation.] The plaintiff's
actual dependence on the underlying contract in making out the claim against
the nonsignatory defendant is therefore always the sine qua non of an
appropriate situation for applying equitable estoppel.’" Goldman v. KPMG, LLP (2009) 173
Cal.App.4th 209, 229 [italics
in original].
Thus,
in Felisilda v. FCA US LLC (2020) 53
Cal.App.5th 486 (petition
for review by the California Supreme Court denied November 24, 2020), the court
looked to the operative complaint to determine whether the plaintiff’s claims
were “founded on or intimately connected” with the sales contract. The contract
at issue in Felisilda contains the identical language as the Sales
Contract at issue here. Felisilda agreed that
“[a]ny
claim or dispute, whether in contract, tort, statute or otherwise ... between
you and us ... which arises out of or relates to ... [the] condition
of this vehicle ... shall ... be resolved by neutral, binding
arbitration and not by a court action.” Felisilda at 496 [italics in original].
The Sales Contract here states:
“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.” Shapiro declaration, Ex. 2, .pdf p. 8, fourth para.
As in Felisilda,
Plaintiff’s complaint arises from the condition of the vehicle. Complaint ¶ 12
[“During the warranty period, the Vehicle contained or developed defects,
including, but not limited to the following: a. Defective body system; b.
Defective audio system; c. Defective electrical system; and additional
complaints …”]. Plaintiff also alleges that “in connection with the purchase of
the Vehicle, Plaintiff received an express written warranty in which Defendant
undertook to preserve or maintain the utility or performance of the Vehicle.”
Complaint ¶ 10. Plaintiff alleges he presented the vehicle for repair to
Defendant and its representatives. Complaint ¶ 20. Therefore, the Sales
Contract here was the source of the express warranties at issue. Felisilda at 497, [“The Felisildas’ claim against FCA directly relates to the condition
of the vehicle that they allege to have violated warranties they received as a
consequence of the sales contract."].
Plaintiff
argues that Felisilda “had no cause to consider whether a nonsignatory
manufacturer as a sole defendant, could successfully compel arbitration.” Opp.
6:19-21. However, the foregoing language cited above directly addresses a
nonsignatory’s right to invoke an agreement to arbitrate under equitable
estoppel principles. Id. at 495. As Defendant points out in its reply, the
issue before the court was “the question of whether a nonsignatory to the
agreement has a right to compel arbitration under the agreement.” Felisilda
at 495.
To
distinguish Felisilda, Plaintiff relies chiefly on federal authority, primarily
Kramer v. Toyota Motor Corp. (9th
Cir. 2013) 705 F.3d 1122; Ngo v. BMW of North America,
LLC (9th Cir. 2022) 23 F.4th 942; and Lopez v. Mercedes-Benz USA, LLC among others. Federal opinion interpreting state law is not binding;
rather the court may rely upon federal court opinions "for their cogent
reasoning and persuasive value.” McCann v. Lucky Money, Inc. (2005)
129 Cal.App.4th 1382, 1396.
Felisilda also considered and rejected federal
authority cited in part by Plaintiff. Notably, Ngo disagreed with the
state court’s interpretation of the identical provisions of the Sales Contract
and concluded that equitable estoppel did not apply since the manufacturer’s
warranties arose “independently from the Purchase Agreements, rather than
intimately relying on them.” Ngo at 950. The Ninth Circuit criticized as an
“attenuated chain of reasoning” the manufacturer’s contention that its
warranties would not apply absent the purchase agreement.
Ngo at 949. However, given that Felisilda is
a California appellate court opinion that interprets identical language in both
the Sales Contract here at issue and Plaintiff’s allegations in concluding that
Plaintiff’s claims were “intertwined”, it is binding authority.
IV.
CONCLUSION
Based
on the foregoing, Defendant’s Motion to Compel Arbitration is GRANTED. The
action is stayed pursuant to 9 U.S.C. § 3 of the FAA. The court sets an Order
to Show Cause re: completion of arbitration for June 5, 2023, at 8:30 a.m. in
Department A of the Compton courthouse.