Judge Richard Y. Lee, Case 30-2022-01256998 2022-10-27 Tentative Ruling

Judge: Richard Y. Lee, Case: 30-2022-01256998, Date: 2022-10-27 Tentative Ruling

Defendants FCA US, LLC (“FCA”) and JA Moss, Inc. d/b/a Moss Bros. Chrysler Dodge Jeep Ram (“Moss Bros.”) (collectively, “Defendants”) move to compel Plaintiff Carmelo Markray and Peggy Markray (“Plaintiffs”) to arbitrate the claims raised in this action and for an order staying this action pending the resolution of arbitration. Defendants contend that they are entitled to enforce an arbitration provision between Plaintiff Peggy Markray and the third-party car dealership, Cerritos Dodge, as third-party beneficiaries and under the doctrine of equitable estoppel.

Request for Judicial Notice

Plaintiffs request judicial notice of the February 12, 2022 Ninth Circuit Opinion in the matter of Ngo v. BMW of North America, LLC (9th Cir. 2022) 23 F.4th 942, as well as several federal and state court orders in other matters concerning motions to compel arbitration.

The Request for Judicial Notice is GRANTED. (Evid. Code, §§ 451(a), 452(a).)

Authority

A party to an arbitration agreement may seek a court order compelling the parties to arbitrate a dispute covered by the agreement. (Code Civ. Proc., § 1281.2.) “The trial court may resolve motions to compel arbitration in summary proceedings, in which ‘[t]he petitioner bears the burden of proving the existence of a valid arbitration agreement by the preponderance of the evidence, and a party opposing the petition bears the burden of proving by a preponderance of the evidence any fact necessary to its defense. [Citation.] In these summary proceedings, the trial court sits as a trier of fact, weighing all the affidavits, declarations, and other documentary evidence, as well as oral testimony received at the court’s discretion, to reach a final determination.’” (Lane v. Francis Capital Management LLC (2014) 224 Cal.App.4th 676, 683.)

Arbitration Provision

The arbitration provision in the Retail Installment Sale Contract (“RISC”) between Plaintiff Peggy Markray and Cerritos Dodge states, in pertinent part:

“ARBITRATION PROVISION PLEASE REVIEW – IMPORTANT – AFFECTS YOUR LEGAL RIGHTS

1. EITHER YOU OR WE MAY CHOOSE TO HAVE ANY DISPUTE BETWEEN US DECIDED BY ARBITRATION AND NOT IN COURT OR BY JURY TRIAL. …

“Any claim or dispute whether in contract, tort, statute or otherwise (including the interpretation and scope of this Arbitration Provision, and the arbitrability of the claim or dispute), between you and us and our employees, agents, successors or assigns, which arises out of or relates to your credit application, purchase or condition of this vehicle, this contract or any resulting transaction or relationship (including any such relationship with third parties who do not sign this contract) shall, at your or our election, be resolved by neutral, binding arbitration and not by a court action. If federal law provides that a claim or dispute is not subject to binding arbitration, this Arbitration Provision shall not apply to such claim or dispute. … The arbitrator shall apply governing substantive law and the applicable statute of limitations. … Any 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.” (Declaration of Ali Azemoon, Ex. A.)

Merits

The parties dispute whether Defendants may move to compel arbitration under the RISC under the equitable estoppel doctrine, citing to Felisilda v. FCA US LLC (2020) 53 Cal.App.5th 486 (Felisilda) and Ngo v. BMW of N. Am., LLC (9th Cir. 2022) 23 F.4th 942 (Ngo).

In Felisilda, the court held that a non-signatory manufacturer has standing to compel arbitration under the doctrine of equitable estoppel. The Felisilda plaintiffs encountered problems with a used vehicle they had purchased and sued the dealership and manufacturer for violations of the Song-Beverly Act. (Id., at p. 489.) The dealer moved to compel arbitration based on the sales contract and the manufacturer, FCA, filed a notice of non-opposition. (Ibid.) The trial court granted the motion and ordered arbitration of the entire action. (Ibid.) The plaintiffs then dismissed the dealer, the matter went to arbitration, and the arbitrator found in favor of FCA. (Ibid.) On appeal, the plaintiffs argued that the trial court erred in including their claims against FCA in the arbitration because FCA was a non-signatory to the sales contract. (Ibid.)

Plaintiffs contend Felisilda is inapplicable here because unlike in Felisilda, where the dealership moved to compel arbitration, here, the dealership is not a defendant and only the manufacturer and a non-signatory dealership are moving to compel arbitration. Plaintiffs argue that Ngo is more apt.

In Ngo, the purchaser of a sedan experienced a variety of issues with the vehicle and sued only the manufacturer, not the dealership from whom the vehicle was purchased. (23 F.4th at p. 945.) The manufacturer moved to compel arbitration based on the purchase agreement between the plaintiff and the dealership. (Ibid.) The district court granted the motion and the Ninth Circuit reversed. The Ninth Circuit found Felisilda to be distinguishable because in Felisilda, it was the dealership, not the manufacturer, that moved to compel arbitration. (Id., at p. 950.) The Ngo court stated that the “critical difference” was that the Felisildas sued the dealership in addition to the manufacturer. (Ibid.) “Furthermore, the Felisildas dismissed the dealership only after the court granted the motion to compel arbitration. Accordingly, Felisilda does not address the situation we are confronted with here, where the non-signatory manufacturer attempted to compel arbitration on its own.” (Ibid.)

Felisilda is binding upon this Court, whereas Ngo and the other federal court cases cited by Plaintiff are not. (Alan v. Superior Court (2003) 111 Cal.App.4th 217, 229 [“the decisions of federal district and circuit courts, although entitled to great weight, are not binding on state courts”].) Thus, under Felisilda, the Court agrees equitable estoppel applies as to FCA and FCA may enforce the arbitration provision in the RISC.

However, Defendants fail to cite to any legal authority holding that a non-signatory such as Moss Bros., the dealership that allegedly failed to repair the subject vehicle, may compel arbitration under the RISC. Under the traditional rules for equitable estoppel, Moss Bros. must show that the claims against it are “intimately founded in and intertwined with the underlying contract obligations.” (Felisilda, supra, 53 Cal.App.5th at pp. 495-496, citations omitted.) “ ‘The fundamental point’ is that a party is ‘not entitled to make use of [a contract containing an arbitration clause] as long as it worked to her advantage, then attempt to avoid its application in defining the forum in which her dispute ... should be resolved.’ ” (Jensen v. U-Haul Co. of California (2017) 18 Cal.App.5th 295, 306, quoting NORCAL Mutual Ins. Co. v. Newton (2000) 84 Cal.App.4th 64, 84.)

Plaintiffs allege that Moss Bros. negligently failed to repair the subject vehicle in a breach of its duty to use ordinary care and skill in accordance with industry standards. (Compl., ¶ 79.) These allegations are not intimately founded in or intertwined with the RISC between Plaintiff Peggy Markray and Cerritos Dodge. Rather, the alleged duty owed to Plaintiffs by Moss Bros. arises out of a transaction between them that is entirely independent of the RISC. Thus, Moss Bros. is not entitled to enforce the RISC’s Arbitration Provision under the doctrine of equitable estoppel.

Defendants have also failed to carry their burden to show that Moss Bros. was a third-party beneficiary under the RISC. They again cite no authority holding that a non-signatory such as Moss Bros. may be properly considered a third-party beneficiary of the contract. Thus, the Court finds that Moss Bros. is also not entitled to compel arbitration under Arbitration Provision as a third-party beneficiary and DENIES the Motion to Compel Arbitration by Moss Bros.

Under Code of Civil Procedure section 1281.2(c), when a party to an arbitration agreement is also a party to a pending court action 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, the Court may deny a motion to compel arbitration of the controversy. (See also Los Angeles Unified School Dist. V. Safety Nat’l Casualty Corp. (2017) 13 Cal.App.5th 471, 482.)

Here, Plaintiffs’ claims against Moss Bros. arise out of the same transaction or series of transactions as their Song-Beverly Act claims against FCA. Plaintiffs allege that both FCA and Moss Bros. failed to adequately repair the subject vehicle. (Compl., ¶¶ 55, 60, 79.) In light of this overlap, there is a possibility of conflicting rulings as to exactly what defects the vehicle suffered from, if any, and whether either Defendant failed to adequately repair any defects.

Accordingly, the Court GRANTS the motion as to FCA and issues an order staying the litigation as to Moss Bros.

Under Code Civ. Proc. section 1281.2(d)(3): “If the court determines that a party to the arbitration is also a party to litigation in a pending court action or special proceeding with a third party as set forth under subdivision (c), the court (3) may order arbitration among the parties who have agreed to arbitration and stay the pending court action or special proceeding pending the outcome of the arbitration proceeding.

The Court vacates all future hearing dates and sets an ADR review hearing and Order to Show Cause whether the stay in the litigation pending against Moss Bros. should be lifted for June 22, 2023 at 1:30 p.m.

Defendants to give notice.