Neil Yeschin v. Hyundai Motor America

MOTION FOR RECONSIDERATION

 

MOVING PARTY: Plaintiff Neil Yeschin

RESPONDING PARTY(S): Defendant Hyundai Motor America

STATEMENT OF MATERIAL FACTS AND/OR PROCEEDINGS:

Plaintiff Neil Yeschin brings this action against Defendant Hyundai Motor America for alleged violations of the Song-Beverly Act and fraud by omission.

On August 4, 2021, this court granted Defendant’s motion to compel arbitration and stayed the case pending arbitration. (See 08/04/2021 Minute Order.)

Plaintiff now moves for reconsideration of the court’s order compelling the parties to binding arbitration.  Defendant opposed the motion.  

TENTATIVE RULING:

Plaintiff’s Motion for Reconsideration is DENIED.

Defendant to give notice, unless waived.

DISCUSSION:

Motion for Reconsideration

I. Judicial Notice

Pursuant to Plaintiff’s request, the court takes judicial notice of Plaintiff’s Exhibits A through D.

II. Analysis

Plaintiff seeks reconsideration of the court’s prior order granting Defendant’s motion to compel arbitration.

Plaintiff makes this motion under Code of Civil Procedure section 1008, subdivision (c), “and the Court’s inherent Constitutional authority” to reconsider its prior orders. (See Notice). CCP § 1008(c) provides: “If a court at any time determines that there has been a change of law that warrants it to reconsider a prior order it entered, it may do so on its own motion and enter a different order.” 

 

In this court’s August 04, 2021, Ruling on Defendant’s motion to compel arbitration, Judge Rice ruled that Defendant Hyundai could invoke the arbitration agreement on an equitable estoppel theory established in Felisilda v. FCA US LLC (2020) 53 Cal. App. 5th 486. The court also concluded Defendant had not waived the right to arbitrate.

A. Timeliness of Motion

As an initial matter, Defendant contends Plaintiff’s motion is untimely. Under Code of Civil Procedure section 1008(a), “any party affected by” an order may move for reconsideration “within 10 days after service upon the party of written notice of entry of the order.” However, under subdivision (c) of section 1008, “[i]f a court at any time determines that there has been a change of law that warrants it to reconsider a prior order it entered, it may do so on its own motion and enter a different order.” (Emphasis added). Accordingly, subdivision (c) contains no time limit.

Plaintiff purports to move under section 1008(c). However, as noted, that section only permits the court to reconsider a motion on its own motion. Thus, Plaintiff is actually moving under subdivision (a). Defendant is therefore correct that the motion is untimely. 

Be that as it may, because this court can reconsider its own motions “at any time” under subdivision (c), the court will consider the motion here.

B. There Has Been No “Change in Law”

In this motion, Plaintiff first seeks reconsideration of the order compelling arbitration based on the recent Court of Appeal decision in Ochoa v. Ford, which Plaintiff argues “explicitly rejected the application of equitable estoppel as under Felisilda.” (Mtn. 4: 16-17.)

“As a general rule, only a party to an arbitration agreement may enforce the agreement. [Citation.] However, there are several exceptions that allow a nonsignatory to invoke an agreement to arbitrate. [Citation.] The doctrine of equitable estoppel is one of the exceptions. (Ibid.)”  (Felisilda, supra, 53 Cal. App. 5th at 495.) Under equitable estoppel, “as applied in ‘both federal and California decisional authority, a nonsignatory defendant may invoke an arbitration clause 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.’ [Citations.] ‘By relying 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.’ [Citation.] (Id.)

In Felisilda, the plaintiffs sued a car manufacturer and car dealer for violations of Song-Beverly.  The dealer moved to compel arbitration of the claims based on an arbitration provision.  (Id.)  The trial court ordered arbitration of the claims against both the dealer and manufacturer.  The plaintiffs then dismissed the dealer, and arbitrated their claims with the manufacturer.  (Id.)  After the trial court confirmed the arbitrator’s decision, the plaintiffs appealed, arguing that the trial court could not order plaintiffs to arbitrate the claim with the manufacturer because it was a nonsignatory to the sales contract.  (Id.)

The Court of Appeal rejected this argument.  The Court explained that the express warranties allegedly breached by the manufacturer arose from the sales contract.  (Id. at 496-97).  “Because the [plaintiffs] expressly agreed to arbitrate claims arising out of the condition of the vehicle – even against third party nonsignatories to the sales contract – they are estopped from refusing to arbitrate their claim against [the manufacturer].”  (Id. at 497).

More recently, the Court of Appeal addressed the same issues in Ford Motor Warranty Cases, No. B312261, 2023 WL 2768484 (Cal. Ct. App. Apr. 4, 2023) (“Ochoa”), a case certified for publication. In relevant part, the Ochoa Court converged from Felisilda’s position that “the sales contract was the source” of the warranties at issue. (Felisilda, supra, 53 Cal.App.5th at p. 496.) 

Instead, the Ochoa court concluded that “manufacturer vehicle warranties that accompany the sale of motor vehicles without regard to the terms of the sale contract between the purchaser and the dealer are independent of the sale contract.” (Ochoa, supra, 2023 WL 2768484 at *4 [emphasis added].) Thus, the court found equitable estoppel to be inapplicable because the plaintiffs’ claims “in no way rel[ied] on the sale contracts.” (Id.) Therefore, the Plaintiffs were not attempting “to prevent a party from taking advantage of a contract's substantive terms while avoiding those terms requiring arbitration,” which is the “’fundamental point’ of using equitable estoppel to compel arbitration.” (Id.)

Felisilda and Ochoa are directly in conflict.  Indeed, Ochoa did not purport to distinguish Felisilda.  Rather, the Court stated flatly that it “disagree[s] with Felisilda’s analysis.” (Ochoa, supra, 2023 WL 2768484 at *4.) The Ochoa Court also noted it was not bound by Felisilda because there is no “horizontal stare decisis” in California. (Id. at fn. 1.) 

However, this conflict does not render Felisilda invalid. “[W]here there is more than one appellate court decision, and such appellate decisions are in conflict…. the court exercising inferior jurisdiction can and must make a choice between the conflicting decisions.” (See Auto Equity Sales, Inc. v. Superior Ct. of Santa Clara Cnty. (1962) 57 Cal. 2d 450, 456.)  [FN 1]  Thus, fatal to Plaintiff’s motion is that there has been no “change in law”—only a split between two separate Court of Appeal decisions. [FN 2]

For purposes of this motion, and consistent with this court’s prior ruling, this court adopts the ruling and rationale of Felisilda. A close reading of Felisilda does not indicate that the California Court of Appeal considered it material whether the plaintiff named the dealership in the suit, or whether the dealer (but not the manufacturer) was the party seeking to compel arbitration.  Indeed, the Felisilda court flatly stated it was dealing with the case where a “nonsignatory may compel arbitration.”  (Felisilda, 53 Cal.App.5th at 496 [emphasis added]).  Rather, the court focused on the fact that the arbitration provision expressly extended to third parties, as it also does here.  (Id. at 498).  There is nothing in the decision that implies it would have come out differently had the manufacturer alone been the one who compelled arbitration.  [FN 3]

The bottom line is that this Court frankly believes that any court’s finding that the manufacturer of a car “was not intended to be a third-party beneficiary” of the sales contract is hair splitting at best – delusionary at its worse.  Consumers do not generally purchase or lease their new cars directly from the manufacturer.  They do so through the authorized dealers of the manufacturer.  The manufacturer is rarely directly involved in that transaction.  Common sense dictates that the manufacturer was clearly intended to benefit from any arbitration agreement between a purchaser/lessee and the authorized dealer of the manufacturer. [FN 4]   

As Judge Rice concluded in his previous order, Plaintiff’s causes of action “arise out of the purchase of the vehicle…,” which was “precisely the situation in Felisilda.” (08/04/2021 Ruling, p. 4.) Therefore, the arbitration provision was enforceable—and under current law and Auto Equity Sales, remains enforceable—by the nonsignatory manufacturer. (Id.) 

Accordingly, Plaintiff’s argument fails.

C. Even Assuming the Waiver Analysis has Changed, the Court Considered Factors Aside from Prejudice to Plaintiff

Second, Plaintiff seeks reconsideration on the grounds that prejudice is no longer a factor that may be considered in the waiver analysis.

When considering if waiver occurred in the context of arbitration, both state and federal courts consider “(1) whether the party's actions are inconsistent with the right to arbitrate; (2) whether ‘the litigation machinery has been substantially invoked’ and the parties ‘were well into preparation of a lawsuit’ before the party notified the opposing party of an intent to arbitrate; (3) whether a party either requested arbitration enforcement close to the trial date or delayed for a long period before seeking a stay; (4) whether a defendant seeking arbitration filed a counterclaim without asking for a stay of the proceedings; [and] (5) ‘whether important intervening steps [e.g., taking advantage of judicial discovery procedures not available in arbitration] had taken place…”  [Citations]. (Iskanian, 59 Cal. 4th at 375). 

Notably, under recent authority from the Supreme Court of the United States, the element of prejudice is “no longer required to demonstrate a waiver of one's right to arbitration, and the waiver inquiry should instead focus on the actions of the holder of that right.” (Davis v. Shiekh Shoes, LLC (2022) 84 Cal.App.5th 956, 795 [citing Morgan v. Sundance, 142 S.Ct. 1708 (2022)].) Whether prejudice remains a factor under California law is presently under review by the state Supreme Court. (See Quach v. California Com. Club, Case no. S275121.) 

This Court’s prior ruling did not address whether the FAA applied to the Arbitration Agreement, and the parties do not do so here. Even assuming that there has been a change in governing law such that it is inappropriate to consider prejudice, the court’s initial ruling stated grounds for granting the motion for reasons aside from the finding of no prejudice. 

The court noted that “there is no single determinative test of waiver.” (08/04/2021 Ruling [citing Guess?, Inc. v. Superior Court (2000) 79 Cal.App.4th 553, 557.) This court went on to note “there [was] no indication that Defendant here knew of and sat on the Arbitration Provision;” that Defendant referenced the existence of an arbitration agreement in its Answer; and ultimately “found no bad faith [by Defendant] in this case.” (08/04/2021 Ruling.) In other words, prejudice to Plaintiff was just one of multiple factors the court considered in finding no waiver of the right to arbitrate. This argument also fails.

Accordingly, Plaintiff’s motion for reconsideration is DENIED.

Moving party to give notice.

IT IS SO ORDERED.

DATE: August 23, 2023 ___________________________________