Judge: Michael Shultz, Case: 23CMCV01544, Date: 2024-05-16 Tentative Ruling
Case Number: 23CMCV01544 Hearing Date: May 16, 2024 Dept: A
23CMCV01544
Al Coronado v. American Honda Motor Co., Inc.
[TENTATIVE] ORDER
DENYING DEFENDANT’S MOTION TO COMPEL ARBITRATION AND STAY ACTION
I.
BACKGROUND
The
complaint alleges that American Honda Motor Co., (“Honda” or “Defendant”)
issued a warranty to Plaintiff in connection with the purchase of a 2023 Honda
Passport. The vehicle developed defects and nonconformities, which Defendant
could not repair. Defendant allegedly failed to comply with its obligations
under the Song-Beverly Consumer Warranty Act (“the Act”).
II.
ARGUMENTS
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”), which includes a provision requiring arbitration to resolve
disputes concerning the purchase or condition of the vehicle. Honda argues it
can compel arbitration, although not a signatory to the Sales Contract, based
on the express provisions requiring it. Principles of equitable estoppel also
apply to require Plaintiff to arbitrate disputes arising from the purchase or
condition of the vehicle.
Plaintiff argues that Defendant is not entitled to enforce an
arbitration provision between Plaintiff and the dealer. None of the theories
asserted by Defendant permits Defendant to compel arbitration. The Court should
not follow Felisilda v. FCA US, LLC (2020) 53 Cal.App.5th 486
(“Felisilda”).
Honda did not file a reply brief by May 9, 2024, which is five
court days before the hearing. (Code Civ. Proc., § 1005(b).)
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.)
Honda 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."].) Accordingly, Plaintiff’s objection to defense counsel’s
declaration, which includes the Sales Contract at issue is OVERRULED. (Catherine Y. Song decl., Ex. A.)
IV. DISCUSSION
A.
Honda is not a
signatory to the Sales Contract with the power to elect arbitration of
Plaintiff’s claims.
Contrary
to Defendant’s contention, Plaintiff’s claims are not preempted by the Federal
Arbitration Act (“FAA”). Courts apply state law to determine who is bound by an
arbitration agreement and who may enforce it. (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, who is not a party to this action. (Song decl., Ex.
A.) Honda, the manufacturer of the vehicle who allegedly issues the written
warranty, is not a party to the contract. (Id.) The
Sales Contract defines “We” or “Us” as the “Seller-Creditor.” (Id. .pdf p. 4.) It provides that any claim or dispute “between you and us”
shall at “your or our election” be resolved by binding arbitration, for
disputes arising out of or relating to the buyer’s “credit application,
purchase, or condition of the vehicle, this contract or any resulting transaction
or relationship (including any such relationship with third parties who do not
sign this contract … .” (Id. Ex. A, .pdf p. 8, ¶ 4.)
Honda conflates the provision governing
who can elect arbitration (“You” and “Us”) and the provision governing the scope
of arbitrable issues (disputes arising out of or relating to the contract or
any “resulting transaction or relationship with third parties.”) (Id.) 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.)
Ford
Warranty did not follow Felisilda’s interpretation of the sales contract. Felisilda construed the contract language to mean that buyer
consented to arbitrate claims with third-party, non-signatories, however, Ford Motor disagreed. (Ford
Motor at 1334 [“Rather, we read it as a further delineation of
the subject matter of claims the purchasers and dealers agreed to
arbitrate.” (Ford
Motor, at 1334–1335.)
The California Supreme Court granted
review of Ford Warranty precluding the courts 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
(Cal. 2023) 310 Cal.Rptr.3d 440.) Accordingly,
the Court exercises its discretion to follow the appellate court opinion in the
Ford Warranty cases.
Numerous
appellate court decisions have since rejected Felisilda’s
approach and interpretation of the identical arbitration provision and chose to
follow Ford Warranty. (Montemayor
v. Ford Motor Co. (2023) 92
Cal.App.5th 958, 971 [“… we
disagree with Felisilda that the language in the arbitration provision
referencing ‘third parties who do not sign this contract’ provides a basis for
nonsignatory manufacturers to compel arbitration of claims brought by vehicle
purchasers”]; 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."]; Davis
v. Nissan North America, Inc.
(2024) 100 Cal.App.5th 825, 837 [“We
agree with the holdings of these recent cases and adopt their reasoning as our
own.”].) The weight of authority falls in Plaintiffs’ favor.
Defendant’s reliance on Sanchez
v. Valencia Holding Co., LLC (2015)
61 Cal.4th 899 is misplaced. (Mot.
7:18-21.) The issue in Sanchez was whether the arbitration clause was
procedurally or substantively unconscionable, and therefore, unenforceable. (Sanchez
at 909.) Plaintiff’s argument is that Honda, as a third
party non-signatory, does not have the power to elect arbitration based on an
agreement between Plaintiff and the dealer.
B. Defendant has not demonstrated that Plaintiff is equitably estopped
from repudiating the arbitration clause in the Sales Contract.
A
recognized exception permitting non signatories 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 Plaintiff’s alleged 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.) Honda
contends that Plaintiff’s claims arise from the purchase and condition of the
vehicle and are dependent on the Sales Contract without which there would be no
warranty. (Mot. 11:12-22.) However, Plaintiff’s claims are founded on the
manufacturer’s warranty contract, not the Sales Contract with the dealer,
precluding application of equitable estoppel.
The Sales Contract obligated Plaintiff to
pay the dealer/creditor for the purchase price of the vehicle according to the
stated terms and conditions. (Song decl., Ex. A, .pdf p.4.) The complaint does not assert any claim
founded upon Plaintiff’s payment obligations to the dealer/creditor. Rather, Plaintiff’s
claims are based on Honda’s statutory obligations to reimburse consumers or
replace the vehicles when unable to repair in accordance with its warranty
(which Plaintiff alleges was issued by the manufacturer, not the dealer).
Therefore, the Sales Contract is not “closely intertwined” with Plaintiff’s
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. (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 of the vehicle
including for warranties of merchantability or of fitness. (Song decl., Ex. A, .p.
4, ¶4.)
In Montemayor,
supra, Division Seven of
the Second Appellate District affirmed the trial court’s order denial of 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. (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.].)
V. CONCLUSION
Based on the
foregoing, Honda’s motion to compel arbitration is DENIED.