Judge Michael T. Smyth, Case Number: 37-2023-00021389-CU-BC-CTL, Date: 2024-06-14 Tentative Ruling

Judge: Michael T. Smyth, Case: 37-2023-00021389-CU-BC-CTL, Date: 2024-06-14 Tentative Ruling

SUPERIOR COURT OF CALIFORNIA,

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HALL OF JUSTICE

TENTATIVE RULINGS - June 13, 2024

06/14/2024 09:00:00 AM C-67 COUNTY OF SAN DIEGO

JUDICIAL OFFICER:Michael T. Smyth

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Civil - Unlimited Breach of Contract/Warranty Motion Hearing (Civil) 37-2023-00021389-CU-BC-CTL SONG VS MERCEDES-BENZ USA LLC CAUSAL DOCUMENT/DATE FILED:

Defendant Mercedes-Benz USA, LLC's ('MBUSA') Motion to Compel Arbitration is DENIED.

Defendant's request for judicial notice is granted. (ROA 15.) Plaintiff does not dispute the existence of the Retail Installment Sale Contract with Mercedes-Benz of Escondido (i.e., the dealer). Rather, the central question is whether Defendant MBUSA is entitled to enforce the arbitration agreement in that contract despite not being a signatory.

It is undisputed that Defendant was not party to the arbitration agreement at issue. Defendant argues that this is of no consequence because in Felisilda v. FCA US LLC (2020) 53 Cal.App.5th 486 the court applied equitable estoppel to conclude the plaintiffs could be compelled to arbitrate their claims against FCA even though FCA was not a signatory to the relevant arbitration agreement. Equitable estoppel is a doctrine that may applied in the interest of fundamental fairness, to allow a non-signatory to enforce an arbitration agreement where the claims are 'founded in and intertwined with the underlying contractual obligations.' (JSM Tuscany, LLC v. Super. Ct. (2011) 193 Cal.App.4th 1222, 1237.) The Felisilda court found that the warranty claims in that case were sufficiently intertwined with the sales agreement that included an arbitration agreement such that the entire case could be compelled to arbitration. (Felisilda, supra, 53 Cal.App.5th at 496-498.) But Felisilda is distinguishable. There, it was the signatory dealer that moved to compel arbitration of the entire matter, including as to the nonsignatory manufacturer. (Id. at 490.) Here, it is the nonsignatory manufacturer that has moved for arbitration. Moreover, most California courts since Felisilda have declined to follow its holding and instead determined that when a lemon law plaintiff bases their claims solely on the terms of the manufacturer's warranties, the claims are based on those warranties and not intertwined with or 'founded in the sales contracts.' (Ford Motor Warranty Cases (2023) 89 Cal.App.5th 1324, 1335-1336; see also Davis v. Nissan North America, Inc. (2024) 100 Cal.App.5th 825, 837-838; Yeh v. Super. Ct. (2023) 95 Cal.App.5th 264, 295-296; Kielar v. Super. Ct. (2023) 94 Cal.App.5th 614, 620-621; Ngo v. BMW of North America, Inc. (9th Cir. 2022) 23 F.4th 942, 950.) Therefore, 'manufacturer vehicle warranties that accompany the sale of motor vehicles without regard to the terms of the sale contract between purchaser and the dealer are independent of the sales contract.' (Ford Motor Warranty Cases, supra, 89 Cal.App.5th at 1334 [emphasis added]; see also Yeh, supra, 95 Cal.App.5th at 295-296.) 'Not one of the plaintiffs sued on any express contractual language in the sales contract,' 'independent manufacturer warranties are not part of, but are independent from, retail sale contracts,' and 'Plaintiffs' claims in no way rely on the sale contracts.' (Ford Motor Warranty Cases, supra, 89 Cal.App.5th at 1336.) That the warranty accompanied the sale is irrelevant-the manufacturer's warranties are the target of Plaintiff's lawsuit, not the sales contract. This court adopts the reasoning of the opinions that have declined to follow Felisilda and finds that Defendant may not Calendar No.: Event ID: TENTATIVE RULINGS

3104110 1 CASE NUMBER: CASE TITLE: SONG VS MERCEDES-BENZ USA LLC 37-2023-00021389-CU-BC-CTL compel arbitration under an equitable estoppel theory.

Defendant is also unable to compel arbitration as a third-party beneficiary because it cannot satisfy the elements required by Goonewarden v. ADP, LLC (2019) 6 Cal.5th 817. For example, there is no evidence that the contracting parties had a 'motivating purpose' of providing a benefit to Defendant.

(See id. at 830 ['the contracting parties must have a motivating purpose to benefit the third party, and not simply knowledge that a benefit to the third party may follow from the contract.']; see also Ford Motor Warranty Cases, supra, 89 Cal.App.5th at 1338-1340 [discussing lack of intention to benefit vehicle manufacturer and lack of motivating purpose in vehicle sale contract].) Defendant argues that the cases which contradict Felisilda currently under review by the California Supreme Court are non-binding. But in granting review of the Ford Motor Warranty Cases, the Supreme Court stated that the opinion '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.' Thus, until the issue is decided there, this court will continue to follow the majority of California courts in denying Defendant's motion to compel arbitration. This coincides with the course taken by the majority of the courts of appeal. (E.g., Kielar, supra, 94 Cal.App.5th at 621 ['Whether a manufacturers' express or implied warranties that accompany a vehicle at the time of sale constitute obligations arising from the sale contract, permitting manufacturers to enforce an arbitration agreement in the contract pursuant to equitable estoppel is a question now pending before our Supreme Court. In the meantime, we agree with Montemayor and Ford Motor that they do not.'].) The motion is denied.

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