Judge: Michael Small, Case: 22STCV12023, Date: 2023-08-18 Tentative Ruling

Case Number: 22STCV12023    Hearing Date: August 18, 2023    Dept: 57

Plaintiff Xochitl Lozano Salazar sued Nissan North America, Inc (“NNA”) for breach of warranty obligations under the Song-Beverly Consumer Warranty Act (“Song-Beverly Act”) and for fraud in connection with Salazar’s purchase of a Nissan vehicle (“the Subject Vehicle”) from Fontana Nissan (“the Dealer”).  Salazar also sued another Nissan dealership, LAD-N, LLC dba Nissan of Downtown LA (“Downtown Nissan”) for negligent repair of the Subject Vehicle.

NNA has moved to compel arbitration of Salazar’s claims against NNA (“the Motion”).  NNA’s hook in the Motion is an arbitration clause in the Retail Installment Sales Contract (“RISC”) that Salazar entered into with the Dealer at the time of the purchase of the Subject Vehicle.  (Downtown Nissan is not seeking to compel arbitration of Salazar’s claim against it.)   Salazar opposes the Motion. 

NNA is not a party to the RISC.  NNA argued in the Motion that it can nevertheless enforce the arbitration clause in the RISC under California law based on the doctrine of equitable estoppel.[1] 

In advance of the July 7, 2023 hearing on the Motion, this Court issued a written tentative ruling denying the Motion.  In the tentative ruling, the Court observed that the doctrine of equitable estoppel authorizes “a nonsignatory defendant [to] invoke an arbitration clause [in a contract] 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.” (JSM Tuscany, LLC v. Superior Court (2011) 193 Cal.App.4th 1222, 1237, internal quotations omitted; Goldman v. KPMG, LLP (2009) 173 Cal.App.4th 209, 217-218.)   The Court further observed in the tentative ruling that there is a split in authority regarding the application of the doctrine of equitable estoppel to automobile manufacturers’ motions to compel arbitration of Song-Beverly Act claims based on arbitration agreements between the plaintiff and the dealership from which the plaintiff purchased the automobile that is the subject of the claims. 

On one side of the ledger is the decision of Division 8 of the Second District Court of Appeal in the Ford Motor Warranty Cases, known by the lead case, Ochoa v. Ford Motor Co. (2023) 89 Cal.App.5th 1324.  In Ochoa, the Court of Appeal held that the doctrine of equitable estoppel was inapplicable.  Central to that holding was the Court’s determination that Song-Beverly Act claims against a non-signatory automobile manufacturer are not intimately founded in and intertwined with the obligations in the contract containing the arbitration clause between the plaintiff and the dealer from which the plaintiff purchased the automobile at issue.  The holding and reasoning of Ochoa were followed by Division Seven of the Second District Court of Appeal in Montemayor v. Ford Motor Company (2023) 92 Cal.App.5th 958.  On the other side of the ledger is the decision of the Third District Court of Appeal in Felisilda v. FCA US LLC (2020) 53 Cal.App.5th 486.  The Court of Appeal there held that the defendant/automobile manufacturer could enforce the arbitration clause in the sales contract between the plaintiffs and the dealership by dint of the doctrine of equitable estoppel and thereby compel arbitration of the plaintiffs’ Song-Beverly Act claims against the manufacturer. 

Felisilda is in direct conflict with Ochoa (and Montemayor as well).  In the tentative ruling issue prior to the July 7, 2023 hearing, the Court stated that unless and until the California Supreme Court resolves that conflict, lower courts have discretion to accept the reasoning of one side of the ledger or the other.  (Auto Equity Sales, Inc. v. Superior Court (1962) 57 Cal.2d 450, 456 [the doctrine of stare decisis, which requires trial courts to follow decisions of appellate courts, “has no application where there is more than one appellate court decision, and such appellate decisions are in conflict. In such a situation, the [trial] court . . . can and must make a choice between the conflicting decisions.”].)   Salazar, naturally, urged this Court to follow Ochoa, not Felisilda.  It is vice versa for NNA.    The Court stated that in the tentative ruling and at the July 7, 2023 hearing itself that it had concluded that Ochoa was better reasoned than Felisilda and thus it would follow the former, not the latter. Based on that conclusion, the Court tentatively ruled at the July 7, 2023 hearing that the doctrine of equitable estoppel was unavailable to NNA, and that, accordingly, the Court was inclined to deny the Motion. 

The Court declined, however, to finalize the tentative ruling.  Instead, the Court continued the hearing on the Motion to today (August 18, 2023).  The Court took this approach because, at that time of the prior hearing on the Motion, a petition for review of the decision in Ochoa was pending at the Supreme Court.  The Court decided to wait to see if the Supreme Court granted review, and if review was granted, whether the Supreme Court would, pursuant to California Rule of Court 8.1115(e), issue any guidance to lower courts on the precedential force of Ochoa pending review.  Rule 8.1115(e)(1) provides that “[p]ending review and filing of the Supreme Court's opinion, unless otherwise ordered by the Supreme Court under [Rule 8.1115(e)(3)], a published opinion of a Court of Appeal in the matter has no binding or precedential effect, and may be cited for potentially persuasive value only.” 

On July 19, 2023, the Supreme Court granted review in Ochoa.  (Ford Motor Warranty Cases (2023) – Cal.5th, 310 Cal.Rptr.3d 440.   In so doing, the Supreme Court also guidance under Rule 8.1115(e)(3) that this Court was anticipating.  Specifically, the Supreme Court stated that “[p]ending review, [Ochoa] 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 . . . to choose between sides of any such conflict.”  (Ibid.)  In other words, notwithstanding the grant of review in Ochoa, the Court of Appeal decision in that case continues to have precedential force and this Court is able to follow that decision over the decision in Felisilda.   Because this Court remains persuaded that Ochoa is better reasoned than Felisilda, and because the Motion fails under Ochoa, the Motion is denied.  With the denial of the Motion, this case is no longer stayed.[2]