Judge Robert S. Draper, Case 22STCV20173 2023-05-05 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.)

GDCJ 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.)

GDCJ contends that GDCJ may compel arbitration as a non-party to the Sales Contract under the doctrine of equitable estoppel, or as a third-party beneficiary. GDCJ 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.)

GDCJ contends that Plaintiffs’ negligent repair claim arises from the condition of the Subject Vehicle, and notes that the Arbitration Agreement mandates arbitration of any claim that “relates to the condition of this vehicle.” (Opposition at p. 5.) GDCJ argues that the “language of the Arbitration Agreement provides that Plaintiffs agree to allow all claims arising from the condition of the vehicle to be arbitrated.” (Opposition at p. 5.)

However, as this Court noted when denying FCA’s Motion to Compel Arbitration, the Court finds the Ochoa Court’s limited interpretation of the Arbitration Agreement more persuasive than the Felisilda Court’s.

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. (Ochoa at p. 5.)

Here, as did the manufacturer defendant in Ochoa, GDCJ contends that the above language allows any third party against whom Plaintiffs state a claim to compel arbitration when that claim relates to the condition of the Subject Vehicle. However, the Ochoa Court found, and this Court agrees, that the language allows either the Dealership or Plaintiffs to compel arbitration against one another when the claims against one another relate to third party transactions financed through the RISC regarding the condition of the Subject Vehicle. Accordingly, GDCJ may not compel arbitration as a third-party beneficiary.

Next, GDCJ argues that as GDCJ’s alleged duty to repair the Subject Vehicle stems from FCA’s warranty with Plaintiffs, and as that warranty is intertwined with the Sales Contract, GDCJ’s duty to repair the Subject Vehicle is founded in the Sales Contract.

[Defendant’s] argument that plaintiffs’ manufacturer warranty claims are founded in the sale contracts because California law treats all warranty claims as contract claims is not supported by California law. California law does not treat manufacturer warranties imposed outside the four corners of a retail sale contract as part of the sale contract. In Greenman v. Yuba Power Products, Inc. (1963) 59 Cal.2d 57 (Greenman), our Supreme Court distinguished between, on the one hand, warranty obligations flowing from the seller to the buyer by contract, and, on the other hand, manufacturer warranties “that arise[ ] independently of a contract of sale between the parties.” (Id. at p. 60, italics added; see also Corporation of Presiding Bishop of Church of Jesus Christ of Latter Day Saints v. Cavanaugh (1963) 217 Cal.App.2d 492, 514 (Cavanaugh) [manufacturer's express warranty “was not part of a contract of sale between the manufacturer and the plaintiff” (italics added)].) (Ochoa at p. 5.)

As California law does not support GDCJ’s claim that the instant warranty claims are part of the sales contract, GDCJ’s argument that its duty to repair the Subject Vehicle is founded in the Sales Contract is unavailing.

As GDCJ is not a third-party beneficiary to the Arbitration Agreement, and as its duty to repair the Subject Vehicle is not founded in the Sales Contract, GDCJ may not compel arbitration as a non-party to the Sales Contract.