Judge: Randy Rhodes, Case: 22CHCV00534, Date: 2023-02-03 Tentative Ruling
Case Number: 22CHCV00534 Hearing Date: February 3, 2023 Dept: F51
Dept. F-51
Date: 2/3/23
Case #22CHCV00534
MOTION TO COMPEL ARBITRATION
Motion filed on 9/12/22.
MOVING PARTY: Defendant FCA US LLC (“Moving
Defendant”)
RESPONDING PARTY: Plaintiffs Julia Reniger and Peter
Reniger (collectively, “Plaintiffs”)
NOTICE: ok
RELIEF REQUESTED: An order: (1) compelling Plaintiffs
to submit their claims to arbitration; and (2) staying this action pending the
outcome of the arbitration.
TENTATIVE RULING: The motion is granted.
BACKGROUND
Plaintiffs bring this action under
the Song-Beverly Consumer Warranty Act (Civil Code § 1790 et seq.) for a vehicle they purchased on or
around 3/20/14, for which Moving Defendant provided the manufacturing warranty.
Plaintiffs allege that certain vehicle defects manifested during the warranty
period “including but not limited to, the electrical system; the engine; the
transmission.” (Compl. ¶
15.)
On 7/18/22, Plaintiffs filed their
complaint against defendants FCA US LLC and Ryder Chrysler Dodge Jeep Ram, alleging
the following causes of action: (1) Violation of Civil Code section 1793.2(d);
(2) Violation of Civil Code section 1793.2(b); (3) Violation of Civil Code
section 1793.2(a)(3); (4) Breach of Implied Warranty of Merchantability; and
(5) Negligent Repair.
On 9/9/22, Moving Defendant filed its answer.
On 9/12/22, Moving Defendant filed
the instant motion to compel arbitration. On 1/23/23, Plaintiffs filed their
opposition. On 1/27/23, Moving Defendant filed its reply.
ANALYSIS
Under both the Federal Arbitration
Act and California law, arbitration agreements are valid, irrevocable, and
enforceable, except on such grounds that exist at law or equity for voiding a
contract. (Winter v. Window Fashions Professions, Inc. (2008) 166
Cal.App.4th 943, 947.)
The party moving to compel
arbitration must establish the existence of a written arbitration agreement
between the parties. (Code of Civ. Proc. § 1281.2.) This is usually done by
presenting a copy of the signed, written agreement to the court. “A petition to
compel arbitration or to stay proceedings pursuant to Code of Civil Procedure
sections 1281.2 and 1281.4 must state, in addition to other required
allegations, the provisions of the written agreement and the paragraph that
provides for arbitration. The provisions must be stated verbatim or a copy must
be physically or electronically attached to the petition and incorporated by
reference.” (Cal. Rules of Court, rule 3.1330.)
The moving party must also
establish the other party’s refusal to arbitrate the controversy. (Code of Civ.
Proc. § 1281.2.) The filing of a lawsuit against the moving party for a
controversy clearly within the scope of the arbitration agreement affirmatively
establishes the other party’s refusal to arbitrate the controversy. (Hyundai
Amco America, Inc. v. S3H, Inc. (2014) 232 Cal.App.4th 572, 577.)
Here, the issue presented is
whether Moving Defendant, as the manufacturer of the subject vehicle, may
invoke the arbitration provision in a contract of sale entered into between
Plaintiff and the dealership, a nonparty to the instant action.
Standing
The contract of sale itself
provides the terms for the financing of the purchase, and includes the referenced
arbitration clause. Section 3 of the clause provides in part: “Any claim or
dispute, whether in contract, tort, statute or otherwise … which arises out of
or relates to your … purchase or condition of this vehicle or any resulting
transaction or relationship (including any such relationship with third parties
who do not sign the contract) … shall … be resolved by neutral arbitration.”
(Ex. B to Declaration of Eric Tsai.)
While the express warranty language
is not part of the agreement, it is undisputed in the complaint that Plaintiffs
seek relief against Moving Defendant for warranty claims. At a minimum, every
vehicle sale comes with an implied warranty of merchantability barring a
disclaimer. (Civ. Code § 1792.) Here, the contract of sale does include such a
disclaimer, but specifically carves out the applicability of such a disclaimer
to warranties provided by the manufacturer. (Ex. B to Tsai Decl.) Thus, even if
just for the breach of implied warranty, the court finds a nexus between the
contractual language and the instant action.
Equitable Estoppel
The agreement itself is only
executed by Plaintiffs and nonparty Glenn E. Thomas Company. Arbitration
agreements may only be generally compelled by parties to the agreement. (Code
of Civ. Proc. § 1281.2.) However, the doctrine of equitable estoppel allows for
a non-signatory party to compel arbitration “‘when the causes of action against
the nonsignatory are “intimately founded in and intertwined” with the
underlying contract obligations.’” (Felisilda v. FCA US LLC¿(2020) 53
Cal.App.5th 486, 495–496; JSM Tuscany, LLC v. Superior Court¿(2011) 193
Cal.App.4th 1222, 1237; Goldman¿v. KPMG, LLP¿(2009) 173 Cal.App.4th 209,
217–218; Crowley Maritime Corp. v. Boston Old Colony Ins. Co.¿(2008) 158
Cal.App.4th 1061, 1070 [Under equitable estoppel, a party cannot avoid
participation in arbitration, where the party received “a¿direct¿benefit
under¿the contract containing an arbitration clause…”]; Boucher¿v. Alliance
Title Co, Inc.¿(2005) 127 Cal.App.4th 262, 271).)
Plaintiffs, in opposition, seek to
distinguish the number of cases enforcing an arbitration clause by a third
party based on based on the lack of any established third party beneficiary. (Ngo
v. BMW of North America, LLC¿(9th Cir. 2022) 23 F.4th 942.) “A third party
beneficiary is someone who may enforce a contract because the contract is made
expressly for his benefit.” (Jensen v. U-Haul Co. of California¿(2017)
18 Cal.App.5th 295, 301.) The Ngo case involved BMW of North America
seeking to compel arbitration over a dispute regarding the financing agreement,
and the Ninth Circuit found BMW of North America lacked any basis to compel
arbitration as a third party beneficiary, due to the failure to establish any
third party beneficiary status. (Ngo, 23 F.4th at 948.)
Unlike Ngo, the subject
action involves both an equitable estoppel basis to compel as well as a claim
against the warranties provided by the manufacture of the vehicle itself—Moving
Defendant FCA US LLC. The Ngo court itself in fact distinguished claims
between a credit financing agreement and warranty claims in finding the
distinction between the claims. (Id. at 948–950.) Again, the complaint
itself seeks relief under express and implied warranties offered and required
by the manufacturer of the vehicle. No other parties are alleged as responsible
for adherence to the warranty. The claims against Moving Defendant are
therefore clearly “intertwined” with the terms of the contract regarding claims
under the contract, statute and/or tort.
Plaintiffs are equitably estopped
from both seeking to enforce the warranties owed by the manufacturer, while
denying the existence of contractual rights connected via the contract of sale
thereby allowing acquisition of the vehicle and conveyance of warranty rights.
The Court therefore rejects the extensive arguments under Ngo on grounds
that equitable estoppel compels arbitration of the warranty claims.
Third-Party Exception
Code of Civil Procedure section
1281.2, subdivision (c) provides an exception to a party’s right to arbitration
when “a party to the arbitration agreement is also a party to a pending court
action or special proceeding with a third party, arising out of the same
transaction or series of related transactions and there is a possibility of
conflicting rulings on a common issue of law or fact.” However, “because the
Federal Arbitration Act … contains no provision analogous to section 1281.2,
subdivision (c), that subdivision cannot be applied to deny the enforcement of
arbitration clauses governed by the FAA.” (Gloster v. Sonic Automotive, Inc.
(2014) 226 Cal.App.4th 438, 446.)
Plaintiffs argue that their fifth
cause of action for Negligent Repair is alleged as against non-moving defendant
Rydell Chrysler Dodge Jeep Ram, arising out of the same series of related
transactions as alleged against Moving Defendant, and thereby invokes the
statutory exception provided under Code of Civil Procedure section 1281.2,
subdivision (c). However, as Moving Defendant observes, the arbitration
agreement explicitly states that “an arbitration under this Arbitration
Provision shall be governed by the Federal Arbitration Act (9 U.S.C. § 1 et seq.) and not by
any state law concerning arbitration,” and the California statutory exception
is therefore inapplicable to deny enforcement of the instant agreement. (Def.’s
Reply, 10:19–21; Ex. B to Tsai Decl.)
The action is therefore ordered to
arbitration in compliance with the terms of the agreement. The parties are to
select an arbitration organization, which may include the American Arbitration
Association, or any other. Selection of the arbitrator shall proceed under the
selected organization rules. If the parties cannot agree on an organization,
the court orders the parties to submit a list of one to two organizations from
each party, where the court will select the organization. If the selected
organization itself lacks a method for selecting an arbitrator, the court will
again accept one to two arbitrators from each party within the organization and
select from the list. The parties have 30 days from the date of this order to
begin the selection process.
Stay of Proceedings
California Code of Civil Procedure
section 1281.4 states that the court shall stay the action or proceeding if the
court has ordered arbitration. (Code Civ. Proc. § 1281.4.) Here, as the Court
grants Moving Defendants’ motion to compel arbitration, the case is therefore
stayed pending completion of arbitration. The court will set an OSC re: Status
of Arbitration and Stay at the time of the hearing.
CONCLUSION
The motion is granted.