Judge Stephen P. Pfahler, Case Number: 21CHCV00917, Date: 2023-12-11 Tentative Ruling

Judge: Stephen P. Pfahler, Case: 21CHCV00917, Date: 2023-12-11 Tentative Ruling

Case Number: 21CHCV00917 Hearing Date: December 11, 2023 Dept: F49

Dept. F-49

Date: 12-12-23

Case #21CHCV00917

RECONSIDERATION

MOVING PARTY: Defendant, Hyundai Motor America

RESPONDING PARTY: Plaintiff, Thomas Miller

RELIEF REQUESTED

Motion for Reconsideration of the Order Compelling Arbitration and the Stay of the Action

SUMMARY OF ACTION

On November 29, 2017, Plaintiff Thomas Miller “acquired” a new 2018 Hyundai Elantra vehicle from an unspecified “licensed California dealer of automobiles.” Plaintiff alleges the vehicle was covered by warranties for five years/60,000 miles and 10 year/100,000 miles. On an unspecified date, the vehicle began experiencing unspecified problems.

On December 2, 2021, Plaintiff filed a complaint for Breach of Implied Warranty of Merchantability, and Breach of Express Warranty. Hyundai Motor America answered the complaint on January 5, 2022.

On August 1, 2022, the court granted Defendant’s motion to compel arbitration.

RULING: Granted.

Plaintiff Thomas Miller moves for reconsideration of the August 1, 2022, order compelling arbitration pursuant to the vehicle purchase agreement with vehicle manufacturer, defendant Hyundai Motors America. The motion comes more than one year after the order compelling arbitration on grounds of the change in underlying case law regarding vehicle manufacturer arbitration. Defendant in opposition contend the motion is both untimely and improperly filed months after the change in law and on the eve of the scheduled arbitration. Both parties argue the merits of whether the case still remains subject to arbitration under the recent change to the law on the subject matter. Plaintiff in reply challenges the opposition as failing to respond to the authority supporting reconsideration, and cites to the cases disagreeing with relied upon case law in support of compelling arbitration.

“When an application for an order has been made to a judge, or to a court, and refused in whole or in part, or granted, or granted conditionally, or on terms, any party affected by the order may, within 10 days after service upon the party of written notice of entry of the order and based upon new or different facts, circumstances, or law, make application to the same judge or court that made the order, to reconsider the matter and modify, amend, or revoke the prior order. The party making the application shall state by affidavit what application was made before, when and to what judge, what order or decisions were made, and what new or different facts, circumstances, or law are claimed to be shown.” (Code Civ. Proc., § 1008, subd. (a).)

“A motion for reconsideration may only be brought if the party moving for reconsideration can offer ‘new or different facts, circumstances, or law which it could not, with reasonable diligence, have discovered and produced at the time of the prior motion. (Citations.) A motion for reconsideration will be denied absent a strong showing of diligence.” (Forrest v. State Of California Dept. Of Corporations (2007) 150 Cal.App.4th 183, 202 disapproved of and overruled on unrelated grounds in Shalant v. Girardi (2011) 51 Cal.4th 1164, 1172 (footnote 3); New York Times Co. v. Superior Court (2005) 135 Cal.App.4th 206, 212–213; Baldwin v. Home Sav. of America. (1997) 59 Cal.App.4th 1192, 1199; Garcia v. Hejmadi (1997) 58 Cal.App.4th 674, 690.) Disagreement with a ruling is not a new fact that will support the granting of a motion for reconsideration. (Gilberd v. AC Transit (1995) 32 Cal.App.4th 1494, 1500.) A court acts in excess of jurisdiction when it grants a motion to reconsider that is not based upon “new or different facts, circumstances or law.” (Id., at p. 1499.) Motions for reconsideration are restricted to circumstances where a party offers the Court some fact or circumstance not previously considered, and some valid reason for not offering it earlier. (Ibid.)

A court acts in excess of jurisdiction when it grants a motion to reconsider that is not based upon “new or different facts, circumstances or law.” (Gilberd v. AC Transit (1995) 32 Cal.App.4th 1494, 1499.) Motions for reconsideration are restricted to circumstances where a party offers the Court some fact or circumstance not previously considered, and some valid reason for not offering it earlier. (Id.)

The motion itself was filed on September 28, 2023—nearly 14 months after August 1, 2022, order granting the motion. The case law relied upon by Plaintiff in support of the motion published on April 4, 2023, yet Plaintiff still waited almost six months to even file the subject motion, without any explanation for the delayed timing. The motion is therefore untimely and without justification.

Notwithstanding the shortcomings of the motion, the court elects to consider the circumstances given the change in law impacting the many lemon law cases through the district. “If 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.” (Code Civ. Proc. § 1008, subd. (c).) While the court acknowledges the delays, the court also notes the lack of any arbitration occurring in the interim, thereby mitigating any potential basis of prejudice as a result of the subject sua sponte reconsideration of the arbitration order.

Defendant Hyundai Motor America (Hyundai) moved to compel arbitration pursuant to the terms of the retail installment contract executed at the time of the acquisition of the vehicle. Hyundai sought arbitration on grounds that the claims arise from alleged defects with the vehicle. The “condition” of the vehicle is a term within the contract requiring arbitration. Hyundai conceded it was not a signatory party to the agreement, but insisted it could enforce the agreement as the party responsible for the warranty provisions under both the terms of the contract and case authority. Defendant challenged any arguments for waiver, and contended the clause in no way violates the unconscionable standards. Plaintiff in opposition presented three main arguments: waiver, lack of a signatory party to the contract, and lack of admissible evidence even establishing the existence of the arbitration clause. Defendant in reply denied any waiver, and reiterated the basis of authority for a non-signatory beneficiary right to enforce an arbitration agreement.

Recent case law prompts new consideration of the standard for arbitration. The court therefore reconsiders the underlying arguments relative to the impacts of the changes to the law regarding warranty contracts.

“A written agreement to submit to arbitration an existing controversy or a controversy thereafter arising is valid, enforceable and irrevocable, save upon such grounds as exist for the revocation of any contract.” (Code Civ. Proc., § 1281.) “On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party thereto refuses to arbitrate such controversy, the court shall order the petitioner and the respondent to arbitrate the controversy if it determines that an agreement to arbitrate the controversy exists, unless it determines that: (a) The right to compel arbitration has been waived by the petitioner; or (b) Grounds exist for the revocation of the agreement.” (Code Civ. Proc., § 1281.2.)

The law creates a general presumption in favor of arbitration. In a motion to compel arbitration, the moving party must prove by a preponderance of evidence the existence of the arbitration agreement and that the dispute is covered by the agreement. The burden then shifts to the resisting party to prove by a preponderance of evidence a ground for denial (e.g., fraud, unconscionability, etc.). (Rosenthal v. Great Western Fin'l Securities Corp. (1996) 14 Cal.4th 394, 413-414; Hotels Nevada v. L.A. Pacific Ctr., Inc. (2006) 144 Cal.App.4th 754, 758.) Any challenges to the formation of the arbitration agreement should be considered before any order sending the parties to arbitration. The trier of fact weighs all evidence, including affidavits, declarations, documents, and, if applicable, oral testimony to determine whether the action goes to arbitration. (Hotels Nevada v. L.A. Pacific Ctr., Inc., supra, 144 Cal.App.4th at p. 758.)

The retail installment contract itself provides for the terms of the financing, 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 the your…purchase or condition of this vehicle…shall…be resolved by neutral arbitration.” While the express warranty language is not part of the agreement, it is undisputed in the complaint that Plaintiff seeks relief against Defendant for warranty claims. At a minimum, every vehicle sale comes with an implied warranty of merchantability barring a disclaimer. (Civ. Code, § 1792.) Thus, even if just for the breach of implied warranty, the court finds a nexus between the contractual language and the instant complaint.

The agreement itself is only executed by R & A Alexander Investments. Arbitration agreements may only be generally compelled by parties to the agreement. 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.’” (JSM Tuscany, LLC v. Superior Court (2011) 193 Cal.App.4th 1222, 1237; Felisilda v. FCA US LLC (2020) 53 Cal.App.5th 486, 495-496; 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).)

Plaintiff in opposition seeks 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 (“Ngo.”) “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 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, supra, at p. 948.)

Unlike Ngo, the subject action involves both an equitable estoppel basis to compel as well as a claim against the warrany(ies) provided by the manufacture of the vehicle itself—moving defendant Hyundai Motor America. 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 pp. 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 Hyundai are therefore clearly “intertwined” with the terms of the contract regarding claims under contract, statute and/or tort. Plaintiff is equitably estopped from both seeking to enforce the warranties owed by the manufacturer, while denying the existence of contractual rights connected via the financing agreement 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.

A leading case decided in the Second Appellate District, however, distinguishes the contractual basis of warranty claims. (Ford Motor Warranty Cases (Ochoa) (2023) 89 Cal.App.5th 1324.) The Ford Motor Warranty Cases specifically confronted the exact situation regarding a third party non-signatory manufacturer seeking to compel arbitration(s) via (a) sales contract(s) of the various purchasing parties for 2015-2016 manufacturing dated vehicles. The court categorically distinguished Felisilda whereby non-signatory manufacturers could compel arbitration on grounds of equitable estoppel. The holding, at least in part, relies on a finding that the warranty obligations, and therefore claims against the manufacturer arise independently from the sales contract. (Id. at p. 1324, 133-1334.)

The court also found that Ford Motor Company was precluded from making an argument as a third party beneficiary, due to the failure to establish any showing within the express terms of the contract. (Id. at pp. 1334-1335) Another recent case in the Second Appellate District on the subject affirms the holding of the Ford Warranty case. (Montemayor v. Ford Motor Co. (2023) 92 Cal.App.5th 958, 971-974.) The Third Appellate District recently granted a writ of mandate reversing an order compelling arbitration citing the Second District opinions in support. (Kielar v. Superior Court (2023) 94 Cal.App.5th 614, 619-621.)

To the extent the argument of Hyundai depends on a finding of privity of contract among the parties and therefore a basis of standing for enforcement of the warranties, the court considers the new standard. As addressed in the plain language of the Song-Beverly Act statute, along with other California law, purchasers gain vested warranties with the purchase of new and certain used automobiles. The Ford Motor Warranty Cases specifically found the arbitration clause within the finance contracts constitutes a separate and independent consideration from said legally vested warranties imposed outside the purchase contract context. (Ford Motor Warranty Cases, supra, 89 Cal.App.5th at pp. 1334-1335.) The Ford Motor Warranty Cases court specifically decoupled inherently owed warranties from contractual principles governing arbitration. In separating the governing spheres, the court specifically found warranties shall not be governed by sales contracts. (Id. at pp. 1335-1336.) The court also specifically held that said contracts lack evidence in support of any independent argument for a third party beneficiary relationship. (Id. at pp. 1336-1337.)

The California Supreme Court granted review of the Ford Motor Warranty Cases. “Grant of review by the Supreme Court of a decision by the Court of Appeal does not affect the appellate court's certification of the opinion for full or partial publication under rule 8.1105(b) or rule 8.1110, but any such Court of Appeal opinion, whether officially published in hard copy or electronically, must be accompanied by a prominent notation advising that review by the Supreme Court has been granted. [¶] (2) The Supreme Court may order that an opinion certified for publication is not to be published or that an opinion not certified is to be published. The Supreme Court may also order depublication of part of an opinion at any time after granting review.” (Cal. Rules of Court, rule 8.1105(e)(1)(B), (e)(2).) “Pending review and filing of the Supreme Court's opinion, unless otherwise ordered by the Supreme Court under (3), a published opinion of a Court of Appeal in the matter has no binding or precedential effect, and may be cited for potentially persuasive value only. Any citation to the Court of Appeal opinion must also note the grant of review and any subsequent action by the Supreme Court.” (Cal. Rules of Court, 8.1115(e)(1).) The court agrees that the Montemayor case will also likely be included under any review of the California Supreme Court and therefore considers both under the discretionary standard.

Notwithstanding the California Supreme Court review, the court still considers the cases persuasive impacts. “As a practical matter, a superior court ordinarily will follow an appellate opinion emanating from its own district even though it is not bound to do so. Superior courts in other appellate districts may pick and choose between conflicting lines of authority.” (McCallum v. McCallum (1987) 190 Cal.App.3d 308, 315 (footnote 4).)

The court finds the reasoning of Ford Motor Warranty Cases regarding the legal separation of warranty obligations from sales contract arbitration clause contract principles sufficiently dissociates any findings of an inextricably intertwined contractual relationship on grounds of estoppel between Plaintiff and Hyundai. The motion otherwise lacks any argument or evidence establishing a third party beneficiary relationship. For both court policy reasons, and factual agreement with the Ford Motor Warranty Cases and Montemayor, the court continues to adhere to the subject authority pending California Supreme Court review.

The motion for reconsideration is therefore Granted. The court orders the case removed from arbitration, and restores the action to the civil active list.

Plaintiff to give notice.