Judge: Michael Shultz, Case: 23CMCV00541, Date: 2023-10-03 Tentative Ruling
Case Number: 23CMCV00541 Hearing Date: October 3, 2023 Dept: A
23CMCV00541 Francisco
Villareal v. American Honda Motor Co, Gardena Honda
[TENTATIVE] ORDER
I.
BACKGROUND
The complaint filed on April 19, 2023, alleges that Plaintiff
bought a 2020 Honda Pilot made by Defendant, American Honda Motor Co., Inc.
(Honda) on May 17, 2020. The vehicle developed defects that Defendant could not
repair. Plaintiff alleges violations under the Song-Beverly Consumer Warranty
Act (the “SBA”).
Defendant Honda requests an order compelling this matter
to binding arbitration pursuant to the Federal Arbitration Act (FAA) as
required by the Retail Installment Sales Contract (Sales Contract) that Plaintiffs
signed at the time of purchase. The Sales Contract required arbitration of all
claims arising out of the purchase or condition of the vehicle. Although Honda
is not a signatory to the Sales Contract, it has standing to enforce the
arbitration provision based on theories of equitable estoppel and as a
third-party beneficiary of the contract between Plaintiff and the dealer.
Plaintiff argues that Defendant cannot compel arbitration
pursuant to an agreement to which it is not a party. The agreement limits the
parties who can elect arbitration. Defendant
lacks standing under either theory asserted.
eCourt does not reflect that Defendant filed a reply
brief by September 26, 2023 (five Court days before the hearing
The Court can 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).
III.
DISCUSSION
A.
Judicial Notice.
The Court grants Defendant’s request for judicial notice of Plaintiff’s
complaint and Plaintiff’s request for judicial notice of the following
opinions: Martha OCHOA, et al., Plaintiffs and Respondents,
v. FORD MOTOR COMPANY, Defendant and Appellant., 2022 WL 982389 and Ngo
v. BMW of North America, LLC (9th
Cir. 2022) 23 F.4th 942. (Evid. Code, § 452 (a) and (d).)
B. Plaintiff’s objections.
Plaintiff’s
objections to the declaration of Ali Ameripour are overruled. Plaintiff argues that the
Sales Contract is inadmissible hearsay and lacks foundation and authentication.
However, Honda’s burden in moving to compel arbitration is to show the existence of an agreement, not its validity.
(Espejo v. Southern California Permanente
Medical Group (2016) 246
Cal.App.4th 1047, 1058 ["as a
preliminary matter the [trial] court is only required to make a finding of the
agreement's existence, not an evidentiary determination of its validity.”]). To
meet its burden, the moving party need only attach a copy of the agreement to
the petition and incorporate it by reference. (Id. at 1058; Cal. Rules of Court, rule 3.1330 [“The provisions must be stated verbatim or a copy
must be physically or electronically attached to the petition and incorporated
by reference."]).
All remaining
objections are OVERRULED.
C. Honda is not a signatory to the Sales Contract with the power to elect
arbitration of Plaintiff’s claims.
While the arbitration provision states
that arbitration is governed by the Federal Arbitration Act (“FAA”), courts
apply state law to determine who is bound and who may enforce an arbitration
agreement. (Thomas
v. Westlake (2012) 204
Cal.App.4th 605, 614, fn. 7);
(Rosenthal v. Great Western Fin.
Securities Corp. (1996) 14
Cal.4th 394, 410 ["Because
the California procedure for deciding motions to compel [arbitration] serves to
further, rather than defeat, full and uniform effectuation of the federal law's
objectives, the California law, rather than section 4 of the USAA, is to be followed
in California courts."]). 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). Section 3 of the FAA requires the Court to stay the action if it
involves issues referable to arbitration. (9 U.S.C.A. § 3).
The Sales Contract at issue is between Plaintiff and Carson
Honda. (Decl. of Ali Ameripour, Ex. 2.) Honda is not a party to the contract. (Id.)
The Sales Contract defines “We” or “Us” as the
“Seller-Creditor” and states that any claim or dispute “between you and us”
shall at “your or our election” be resolved by binding arbitration, even for
disputes arising from the condition of the vehicle including claims resulting
from relationships with third parties who do not sign the contract. (Ameripour
Decl., Ex. 2, .pdf p. 18.)
D. Honda has not established that it may enforce the
contract as a third-party beneficiary.
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.) An exception to that rule is where a contract is
made expressly for the benefit of a third person. (Civ. Code, § 1559). Persons who are “only incidentally or remotely benefited by it"
are excluded. (Lake
Almanor Associates L.P. v. Huffman-Broadway Group, Inc. (2009) 178 Cal.App.4th 1194, 1199).
To establish that it is an intended, third-party beneficiary of
the contract, Defendant must show "(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 not
simply acknowledge that a benefit to the third party may follow from the
contract”), 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, 830).
Honda contends that the arbitration agreement intends to
benefit third parties such as Honda, relying on the scope of the provision that
refers to claims arising out of or relating to Plaintiff’s purchase or
condition of this vehicle or “any resulting transaction or relationship
(including any such relationship with third parties who do not sign this
contract.” (Ameripour Decl., Ex. 2, page 5.) Honda conflates the provision governing
who can elect arbitration (“You” and “Us”) and the provision governing the scope
of arbitrable issues (disputes with third parties including nonsignatories that
relates to Plaintiff’s purchase of the vehicle).”
In Ford
Motor Warranty Cases (2023) 89
Cal.App.5th 1324, 1335 (“Ford
Warranty”) the court held that the manufacturer did not have the power to
elect arbitration as it was not a signatory and because the sales contract with
the dealer was not the source of the manufacturer warranties at issue in the
case. Plaintiff did not agree to
arbitrate claims with the manufacturer, and the sales contract “could not be
construed to bind the purchaser to arbitrate with the universe of unnamed third
parties.” (Ford
Warranty at 1335.)
The mere mention of third parties in the provision governing
scope does not establish that the Sales Contract’s motivating purpose or intent
was to benefit Honda. The “motivating purpose” of the Sales Contract was to
finance the vehicle through Carson Honda, the “Seller-Creditor.” (Ameripour
decl., Ex. 2, .pdf p. 14, first paragraph [“By signing this contract, you
choose to buy the vehicle on credit under the agreements on all pages of this
contract” in the financed amount and based on finance charges shown on the
included schedules.]).
While the California Supreme Court granted review of Ford Warranty, the Supreme Court stated that the case "may
be cited, not only for its persuasive value, but also for the limited purpose
of establishing the existence of a conflict in authority that would in turn
allow trial courts to exercise discretion under Auto Equity Sales, Inc. v.
Superior Court (1962) 57 Cal.2d 450, 456, 20 Cal.Rptr. 321, 369 P.2d 937, to
choose between sides of any such conflict." (Ford
Motor Warranty Cases (Cal. 2023) 310
Cal.Rptr.3d 440.) The Court
exercises its discretion to follow the opinion of the appellate court in the Ford
Warranty cases.
In Montemayor
v. Ford Motor Co. (2023) 92
Cal.App.5th 958, Division Seven
of the Second Appellate District affirmed the trial court’s order denying
Defendant’s motion to compel arbitration as Ford was not a party to the sales
contract and could not enforce the arbitration provision under the principles
of equitable estoppel or as a third-party beneficiary of the contract. (Montemayor
at 971 [agreeing with the Ford Warranty cases that the language referencing “third parties
who do not sign this contract” refers to the subject matter of arbitrable
claims, not who may enforce the arbitration provision.])
Two additional appellate court decisions chose to follow Ford Warranty and Montemayor. (Kielar
v. Superior Court of Placer County
(2023) 94 Cal.App.5th 614 ["We
join those recent decisions that have disagreed with Felisilda and
conclude the court erred in ordering arbitration."]; Jaquelyn
Yeh v. Superior Court of Contra Costa County (Cal. Ct. App., Sept. 6, 2023, No. A166537) 2023 WL 5741703, at *4 ["As we explain, we agree with the
conclusions reached by Ford Warranty, Montemayor, and Kielar and
hold that MBUSA cannot compel arbitration with petitioners."].)
Lastly, Honda’s contention that the arbitration provision must
be enforced given the California Supreme Court’s opinion in Sanchez
v. Valencia Holding Co., LLC (2015)
61 Cal.4th 899, is without
merit. Sanchez determined that an arbitration provision in a sales
contract was not unconscionable. Plaintiff’s opposition is not based on grounds
the agreement is unconscionable.
E. Plaintiff’s claims are founded on the manufacturer’s warranty contract,
not the sales contract with the dealer, precluding application of equitable
estoppel.
Another exception to the
general rule that nonsignatories cannot enforce an arbitration provision 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.)
In applying equitable estoppel, the Court
examines Plaintiff’s claims to determine if they are “intertwined” with the Plaintiff’s
obligations imposed by the Sales Contract. (Goldman
v. KPMG, LLP (2009) 173
Cal.App.4th 209, 218.) Defendant
contends that Plaintiff relies on the existence of the Sales Contract as there
would be no claim without it. (Mot., 10:14-119.) However, as Plaintiff observes, Plaintiff could
assert claims under the SBA whether Plaintiff had paid in cash or financed the
purchase. (Opp. 10:14-20; Fuentes v. TMCSF, Inc. (2018) 26 Cal.App.5th 541, 553 [where Plaintiff was not relying on the security agreement to
establish statutory claims because “[e]ven if he had paid cash for the
motorcycle, his complaint would be identical.”].) Claims under the SBA do not
depend on how Plaintiff paid for the vehicle.
Defendant also contends that the
Plaintiff’s claims are founded upon the Sales Contract which required
arbitration of claims arising out of the condition of the vehicle. Defendant
concludes that Plaintiff is equitably estopped from repudiating the arbitration
provision, which is part of the same contract. As previously stated, the scope
of arbitrable issues applied to disputes between the parties who agreed to
binding arbitration, which did not include the manufacturer.
The Sales Contract obligated Plaintiffs to
pay the dealer/creditor for the purchase price of the vehicle according to the
stated terms and conditions. (Ameripour Decl., Ex. 2.) The complaint does not assert any claim
founded upon Plaintiff’s payment obligations to the dealer/creditor. Rather,
Plaintiff’s claims are based on Defendant’s statutory obligations to reimburse
consumers or replace the vehicles when unable to repair in accordance with its
warranty. Therefore, the sales contract is not “closely intertwined” with
Plaintiff’s Song-Beverly Consumer Warranty Act.
Ford
Warranty observed that warranties from
a non-party manufacturer are not part of the sales contract. (Ford
Warranty at 1335, citing Corporation
of Presiding Bishop of Church of Jesus Christ of Latter-Day Saints v. Cavanaugh (1963) 217 Cal.App.2d 492, 514 and Greenman
v. Yuba Power Products, Inc. (1963)
59 Cal.2d 57.) Here, the
dealer expressly disclaimed any warranties, express or implied on the vehicle
including for warranties of merchantability or of fitness. (Ameripour Decl., Ex.
2, .pdf p. 17, ¶ 4.). The Montemayor court adopted the same reasoning as
Ford Warranty. (Montemayor
at
972.)
Accordingly, Honda has not established
that equitable estoppel applies.
IV.
CONCLUSION
A moving party’s burden is to
establish that a valid arbitration agreement exists between the parties. (Molecular Analytical Systems v.
Ciphergen Biosystems, Inc. (2010)
186 Cal.App.4th 696, 705.) Defendant
has not met its initial burden. Accordingly, the motion is DENIED.