Judge Randolph M. Hammock, Case Number: 21STCV33113, Date: 2023-09-25 Tentative Ruling

Plaintiff Erica Contreras (“Contreras”) purchased a 2021 Mercedes-Benz vehicle manufactured by Defendant Mercedes Benz USA, LLC (“MBUSA”), that allegedly contained defects and nonconformities. Plaintiff sued Defendant MBUSA for (1) violation of Song-Beverly Act – breach of express warranty, and (2) violation of Song-Beverly Act – breach of implied warranty.

However, this court suggests that the parties stipulate to stay the current arbitration proceedings, pending a decision by the California Supreme Court in Ford Motor Warranty Cases (2023) 89 Cal. App. 5th 1324 (Ochoa), which has been accepted for review. Absent a stipulation of the parties, all prior orders remain in full force and effect.

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). But this 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.

Plaintiff seeks reconsideration of the order compelling arbitration based on the recent Court of Appeal decision in Ochoa v. Ford. Plaintiff contends Ochoa represents a change in law justifying reconsideration. In opposition, Defendant disputes that any change of law occurred for purposes of section 1008. Defendant asserts that “Ochoa does not overturn the ruling in Felisilda,” but rather, only “create[s] a split in authority.” (Opp. 2: 12-13.) As will be explained, this court agrees.

In Felisilda, the plaintiffs sued a car manufacturer and car dealer for violations of Song-Beverly. (Felisilda v. FCA US LLC (2020) 53 Cal. App. 5th 486.) 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 (2023) 89 Cal. App. 5th 1324 (“Ochoa”). 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.) Separately, Ochoa also held that the manufacturer was not a third-party beneficiary of the arbitration provision. (Id. at 1340.)

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, 89 Cal. App. 5th at 1334.) 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.) 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 1]

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.

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 2]

Judge of the Superior Court

FN 1 - Interestingly enough, it does appear that the California Supreme Court will, in fact, be addressing (and hopefully – resolving) this current split in the court of appeals, since it has recently granted review of the Ochoa decision.

FN 2- On the other hand, it is certainly a fair point to also note that it would certainly be easier for the sales or lease contract to simply state that fact, since it is essentially written by the manufacturer and/or its authorized dealer.