Judge: Michael Shultz, Case: 23CMCV01301, Date: 2024-01-23 Tentative Ruling
Case Number: 23CMCV01301 Hearing Date: January 23, 2024 Dept: A
23CMCV01301 Cynthia Jimenez, et al. v.
Nissan North America, Inc., et al.
[TENTATIVE] ORDER DENYING MOTION BY DEFENDANTS TO
COMPEL ARBITRATION AND STAY ACTION
I.
BACKGROUND
The
complaint alleges that Defendant, Nissan North America, Inc., (“Nissan”) issued
a warranty to Plaintiffs in connection with their purchase of a 2019 Nissan Rogue.
Plaintiff alleges that LAD Carson-N, LLC dba Carson Nissan, (“Dealership”) failed
to properly diagnose the issues and were negligent in repairing the vehicle. Plaintiffs
allege claims in violation of the Song-Beverly Consumer Warranty Act (“SBA”).
Both
Defendants filed this motion on December 7, 2023, however, on January 8, 2024,
Plaintiff dismissed the Dealership from the complaint, with prejudice, leaving
Nissan, the manufacturer, as the only defendant.
II.
ARGUMENTS
Nissan 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 FAA preempts state
law with respect to whether the Sales Contract was unconscionable. The Sales
Contract required arbitration of all claims arising out of the purchase or
condition of the vehicle. Although Nissan is not a signatory to the Sales
Contract, it has standing to enforce the arbitration provision based on equitable
estoppel.
Plaintiffs argue that Nissan cannot compel
arbitration pursuant to an agreement to which it is not a party. The Sales
Contract is unenforceable as it is unconscionable and violates Plaintiffs’
right to a jury trial. Equitable estoppel does not apply since Plaintiffs’
claims against Nissan are not founded on underlying contract obligations
between Plaintiffs and the Dealer.
In reply, Nissan argues that the opposition was untimely served.
Nissan received it one day before the reply was due. Therefore, the Court
should disregard it. Nissan contends that the facts of this case are identical to
Felisilda v. FCA US, LLC (2020) 53 Cal.App.5th 486, which the
Court should follow. Plaintiffs rely on non-binding federal cases. Ochoa v.
Ford Motor Cases, on which Plaintiffs also rely is not binding and has no
precedential effect since the California Supreme Court granted Ford’s petition
for review.
III. LEGAL
STANDARDS
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.)
Nissan
need only 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.”]). 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."].)
IV. DISCUSSION
A.
The
Court has considered the Plaintiffs’ opposition.
The opposition was served
on Nissan electronically on January 8, 2024, and timely filed on January 9,
2024, (nine court days before the hearing). (Code Civ. Proc., § 1005 subd.
(b).) While Nissan contends it did not receive the opposition until requested
from Plaintiffs, Nissan was able to file a reply brief, which the Court has
considered.
The Court has
discretion to consider late papers in favor of the strong policy favoring
disposition of the case on the merits. (Kapitanski
v. Von’s (1983) 146 Cal.App.3d 29, 32). [“Judges are well aware of the
unnecessary burdens placed on courts and counsel when strict compliance with
local procedural rules results in the expenditure of unnecessary time and money
for the preparation of later section 473 motions.”]. Nissan has not shown any
prejudice resulting from untimely receipt of the opposition.
B. Nissan is not a signatory to
the Sales Contract with the power to elect arbitration of Plaintiffs’ claims.
Contrary
to Nissan’s contention, Plaintiffs’ claims are not preempted 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
Plaintiffs and Carson Nissan, who has been dismissed. (Nissan’s RJN Ex. B.) Nissan,
the manufacturer, 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. (Nissan’s RJN, Ex. B, p. 46; p. 52, ¶4.)
C. Plaintiffs are not equitably estopped from repudiating
the arbitration clause in the Sales Contract.
A
recognized exception permitting nonsignatories to compel arbitration 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 Plaintiffs’ claims to determine if they are “intertwined” with the Plaintiffs’
obligations imposed by the Sales Contract. (Goldman
v. KPMG, LLP (2009) 173
Cal.App.4th 209, 218.) Nissan
contends that Plaintiffs’ complaint asserts that Defendants issued an implied
warranty of merchantability requiring Defendants to refund the price of the
vehicle to Plaintiffs. (Mot. 10:10-13.) However, Plaintiffs’ claims are founded
on the manufacturer’s warranty contract, not the Sales Contract with the Dealer,
precluding application of equitable estoppel.
Nissan’s reliance on Felisilda v. FCA US LLC (2020) 53 Cal.App.5th 486 is misplaced as it is procedurally distinguishable
from this action. In Felisilda, the appellate court acknowledged that the
manufacturer did not move to compel arbitration but only filed a notice of
non-opposition to the dealership’s motion to compel. (Felisilda at 498). The Court of Appeal determined that since the
dealership’s (signatory’s) motion to compel included the manufacturer as a
party to the arbitration, the trial court had the prerogative to compel
arbitration of the claim against the manufacturer since "[i]t is the
motion that determines the relief that may be granted by the trial court."
(Felisilda at 498). In other words, the dealer, as a signatory with
the power to elect arbitration, could also request arbitration of the
Plaintiffs’ claims against the manufacturer, although not a signatory, giving
the trial court the “prerogative” to compel all parties to arbitration.
While the Dealer and Nissan jointly moved
to compel arbitration, the Dealer/Signatory is no longer a party to the action.
Accordingly, based on the express contract provision, Nissan does not have the
power alone to elect arbitration of issues covered by its own warranty
based on the Sales Contract’s scope of arbitration that included “resulting
relationships with third parties.”
Recent cases have declined
to follow Felisilda’s conclusion that a nonsignatory could compel
arbitration between the buyer and dealer. Division Eight of the Second District
Court of Appeal concluded that the manufacturer/nonsignatory did not have the power
to elect arbitration since the sales contract was not the source of the
manufacturer warranties at issue in the case. (Ochoa
v. Ford Motor Company (2023)
89 Cal.App.5th 1324, 1335, (“Ford Warranty”), petn. for review granted July 19, 2023.) 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.” (Id.)
Nissan observes that the
California Supreme Court granted review of Ochoa v. Ford precluding
the Court from relying on it for precedential value. However, 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, to choose between sides of any such conflict." (Ford
Motor Warranty Cases 532
P.3d 270.) The Court
exercises its discretion to follow the opinion of the appellate court in the Ochoa v. Ford cases.
The Sales Contract obligated Plaintiffs to
pay the dealer/creditor for the purchase price of the vehicle according to the
stated terms and conditions. (Nissan’s RJN, Ex. B.) The complaint does not assert any claim
founded upon Plaintiffs’ payment obligations to the dealer/creditor. Rather, Plaintiffs’
claims are based on Nissan’s statutory obligations to reimburse consumers or
replace the vehicles when unable to repair in accordance with its warranty
(which Plaintiffs allege was issued by the manufacturer, not the Dealer).
Therefore, the Sales Contract is not “closely intertwined” with Plaintiffs’
claims under the Song-Beverly Consumer Warranty Act.
Ford
Warranty observed that
warranties from a non-party manufacturer are not part of the sales contract. (Ochoa
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 of the vehicle
including for warranties of merchantability or of fitness. (Nissan’s RJN, Ex.
B, p. 50, ¶ 4.).
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 the
manufacturer’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 sales 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 Ochoa and Montemayor. (Kielar
v. Superior Court (2023) 94
Cal.App.5th 614, 617 ["We
join those recent decisions that have disagreed with Felisilda and
conclude the court erred in ordering arbitration."]; Yeh
v. Superior Court of Contra Costa County
(2023) 95 Cal.App.5th 264, 272 ["As
we explain, we agree with the conclusions reached by Ford Warranty,
Montemayor, and Kielar and hold that [Mercedes-Benz USA] cannot
compel arbitration with petitioners."].) The weight of authority falls in
Plaintiffs’ favor.
V.
CONCLUSION
Based on the
foregoing, Nissan’s Motion is DENIED.