Judge Robert S. Draper, Case 22STCV20173 2023-04-28 Tentative Ruling

Plaintiffs Francisco Elias and Teresa Elias (“Plaintiffs”) purchased a 2015 Dodge Ram 1500 (the “Subject Vehicle”) manufactured by defendant FCA US, LLC (“FCA”). (Compl. ¶ 19.) Plaintiff entered into a warranty contract with FCA by which FCA undertook to preserve the utility and performance of the Subject Vehicle or provide compensation for FCA’s failure to do so. (Compl. ¶ 20.)

The court may take judicial notice of “official acts of the legislative, executive, and judicial departments of the United States and of any state of the United States,” “[r]ecords of (1) any court of this state or (2) any court of record of the United States or of any state of the United States,” and “[f]acts and propositions that are not reasonably subject to dispute and are capable of immediate and accurate determination by resort to sources of reasonably indisputable accuracy.” (Evid. Code § 452, subds. (c), (d), and (h).)

Evidence Code Section 452 provides that judicial notice may be taken for facts and propositions that are “not reasonably subject to dispute and are capable of immediate and accurate determination by resort to sources of reasonably indisputable accuracy.” (Cal. Evid. Code § 452(h).) Further, “a court may take judicial notice of [recorded documents and] the fact of a document's recordation, the date the document was recorded and executed, the parties to the transaction reflected in a recorded document, and the document's legally operative language, assuming there is no genuine dispute regarding the document's authenticity. From this, the court may deduce and rely upon the legal effect of the recorded document, when that effect is clear from its face.” (Scott v. JPMorgan Chase Bank, N.A. (2013) 214 Cal.App.4th 743, 745-755.)

Nissan moves to compel arbitration pursuant to an arbitration provision (“Arbitration Agreement”) in the Retail Installment Sales Contract (the “Sales Contract”) entered into between Plaintiffs and the dealership where Plaintiffs purchased the Subject Vehicle, non-party Shaver Automotive Group (the “Dealership”).

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 or 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. (Sandhu Decl., Exh A.)

FCA contends that FCA may compel arbitration as a non-party to the Sales Contract under the doctrine of equitable estoppel, or as a third-party beneficiary. FCA cites Felisilda v. FCA US LLC (2020) 53 Cal.App.5th 486 to support this contention.

In Felisilda, plaintiff purchased a vehicle from defendant dealership. After the car broke down during the warranty period, plaintiff brought a claim under the SBA against defendant dealership and defendant manufacturer. Relying on an arbitration provision in the sales contract that was identical to the instant Arbitration Agreement, defendant dealership moved to compel arbitration; defendant manufacturer filed a notice of non-opposition.

The trial court granted defendants’ motion to compel arbitration. Thereafter, plaintiff dismissed defendant dealership. After the arbitrator found in defendant manufacturer’s favor, plaintiff appealed.

On appeal, plaintiff argued that the trial court lacked jurisdiction to order plaintiffs to arbitrate their claim against defendant manufacturer because defendant manufacturer was a non-signatory to the sales contract.

The Felisilda Court affirmed, holding that defendant manufacturer could compel arbitration pursuant to the doctrine of equitable estoppel. The Court found that as plaintiff’s claim against defendant manufacturer related directly to the condition of the vehicle, and “[b]ecause [plaintiff] expressly agreed to arbitrate the claims arising out of the condition of the vehicle – even against third party nonsignatories to the sales contract – [plaintiff is] estopped from refusing to arbitrate their claim against [defendant manufacturer].” (Felisilda at p. 497.)

However, in the recently decided Ochoa, Martha et al. v. Ford Motor Company, No. B312261, April 4, 2023, the Second District of the Court of Appeal explicitly declined to follow Felisilda, holding 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 at p. 4.)

Defendant manufacturer in Ochoa argued that arbitration could be compelled pursuant to a sales contract identical to the instant Sales Contract under the doctrine of equitable estoppel, or as a third-party beneficiary.

In rejecting defendant manufacturer’s equitable estoppel argument, the Court held that as California law does not treat manufacturer warranties imposed outside the four corners of a retail sales contract as part of the sale contract, “Plaintiff’s claims in no way rely on the sale contracts. Equitable estoppel does not apply.” (Id. at p. 7.)

In rejecting defendant manufacturer’s third-party beneficiary theory, the Court held that “allowing [defendant manufacturer] to enforce the arbitration provision as a third party beneficiary would be inconsistent with the reasonable expectations of the contracting parties where they twice specifically vested the right of enforcement in the purchaser and the dealer only.” (Id. at p. 8.)

FCA notes that when there is a district split in the Court of Appeal, the Court is free to follow either ruling, regardless of the fact that this Court sits in the Second District Court of Appeal. (Auto Equity Sales, Inc. v. Superior Ct. of Santa Clara Cnty. (1962) 57 Cal.2d 450, 455.) While this is true, in practice “a superior court ordinarily will follow an appellate opinion emanating from its own district even though it is not bound to do so.” (McCallum v. McCallum (1987) 190 Cal.App.3d 308, 315.)

Second, FCA argues that the fact that the dealership was a named defendant in Felisilda, whereas the dealership was not a named defendant here and in Ochoa, is immaterial to the Court’s reasoning and should not be considered. While the Court agrees that neither the Felisilda nor the Ochoa Court extensively addressed this issue, the fact that the Ochoa Court considered a situation more factually similar to the one at bar is persuasive.

Finally, the Court notes that Ochoa was decided more recently, and therefore directly addresses the Felisilda ruling. The Court finds the Ochoa Court’s interpretation of the language of the arbitration agreement particularly instructive as compared to the Felisilda Court’s interpretation:

The Felisilda court relied on the following italicized language to conclude that third parties could enforce the arbitration provision: “ ‘Any claim or dispute, whether in contract, tort, statute or otherwise . . . , between you and us or our employees, agents, successors or assigns, which arises out of or relates to . . . purchase or condition of this vehicle, the 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 . . . .’ ” [citation].

We do not read this italicized language as consent by the purchaser to arbitrate claims with third party nonsignatories. Rather, we read it as a further delineation of the subject matter of claims the purchasers and dealers agreed to arbitrate. . .

Purchasers, like plaintiff . . . can elect to buy insurance, theft protection, extended warranties and the like from third parties, and they can finance their transactions with those third parties under the sale contract. The “third party” language in the arbitration clause means that if a purchaser asserts a claim against the dealer . . . that relates to one of those third-party transactions, the dealer can elect to arbitrate that claim. It says nothing of binding the purchaser to arbitrate with the universe of unnamed third parties.

The Court finds that the Ochoa Court’s limited interpretation of the arbitration agreement more accurately depicts the parties’ intent. Moreover, that the Court sits in the Second District, where Ochoa was decided, and that Ochoa was more factually similar to the case at bar, are persuasive in compelling this Court to follow the Ochoa ruling.

Accordingly, the Court finds that the Ochoa ruling is on-point, controlling, and mandates that this Court deny FCA’s attempt to compel arbitration pursuant to a contract that it was not a party to.

In their moving papers, FCA contends that GDCJ’s motion is distinguishable from the instant motion, and therefore must be considered separately. As no joinder was filed, and as Plaintiffs do not argue why the ruling in this matter should be applicable to GDCJ, this Order applies only to defendant FCA.

With that said, the Court believes the outcome of GDCJ’s motion will likely be the same and encourages the parties to consider withdrawing that motion. Otherwise, the Court will consider GDCJ’s motion as scheduled.