Judge: Stephen P. Pfahler, Case: 23CHCV00342, Date: 2023-09-11 Tentative Ruling
Case Number: 23CHCV00342 Hearing Date: September 11, 2023 Dept: F49
Dept.
F-49
Date:
9-11-23
Case
#23CHCV00342
ARBITRATION
MOVING
PARTY: Defendant, Nissan North America
RESPONDING
PARTY: Plaintiff, Esteban Munoz
RELIEF
REQUESTED
Motion
to Compel Arbitration and Stay Action
SUMMARY
OF ACTION
On
November 14, 2021, plaintiff Esteban Munoz purchased a 2018 Nissan Altima
vehicle, which included a “bumper to bumper” and powertrain express warranty
with vehicle manufacturer defendant Nissan North America. Plaintiff alleges the
vehicle suffers from defects in transmission, engine, and electrical systems.
On
February 6, 2023, Plaintiff filed a complaint for Violation of Song-Beverly Act
– Breach of Express Warranty, Violation of Song-Beverly Act – Breach of Implied
Warranty, and Violation of Song-Beverly Act – Section 1793.2. Nissan North
America answered on March 15, 2023.
RULING: Denied.
Request
for Judicial Notice: Denied.
Plaintiff
may cite to the case law in the opposition.
Evidentiary
Objections: Overruled.
Defendant
Nissan North America, Inc. (Nissan) moves to compel arbitration pursuant to the
terms of the retail installment contract executed at the time of the
acquisition of the vehicle. Nissan seeks 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. Nissan in its role as
manufacturer, concedes it was not a signatory party to the agreement, but
insists it can enforce the agreement as the party responsible for the warranty
provisions under both the terms of the contract and equitable estoppel.
Plaintiff
in opposition challenges enforcement of the
arbitration agreement via the financing agreement. Plaintiff also denies any
third party beneficiary relationship between the dealership and manufacturer or
basis of estoppel.
Nissan in reply reiterates the enforceability of the
arbitration provision based on reliance on prior authority allowing arbitration.
Nissan maintains the case previously relied upon compelling arbitration
constitutes a better reasoned decision. Nissan also seeks to characterize the
warranty as part of the sales contract.
“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 court finds
the declaration of counsel for defendants sufficiently establishes competence
in knowledge, and the rightful possession of the sales agreement containing the
subject arbitration clause applicable to the subject action. [Eleonora
Antonyan, Ex. A.] The court
considers the argument regarding the lack of Nissan as a signatory party to the
agreement, thereby barring enforcement of the contract. The retail installment
contract itself provides for the terms of the financing, and includes the
referenced arbitration clause.
The agreement itself is only executed by Plaintiff and Nissan
of Mission Hills. 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 (Felisilda); 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 the lack of any established third party beneficiary and/or lack
of applicability of estoppel doctrine. Prior to recent cases within the Second
Appellate District, auto manufacturers moved to compel on grounds of estoppel
and/or third party beneficiary status. (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 an equitable estoppel basis to
compel via a claim against the warranty(ies) provided by the manufacture of the
vehicle itself—moving defendant Nissan. The Ngo
court further differentiated claims between a credit financing agreement and
warranty claims. (Id. at pp.
948-950.) The court therefore distinguishes Ngo in that the complaint
arises from the express and implied warranties offered and required by the
manufacturer of the vehicle, rather than terms regarding the financed purchase
of the vehicle. Plaintiffs names no other defendants as responsible for
adherence to the warranty (e.g. Nissan of Mission Hills).
Nissan’s argument, particularly in
reply reasonably relies on a finding that the warranty claims provided in the
contract are “intertwined” with the terms of the contract regarding claims
under contract, statute and/or tort, and therefore subject to arbitration
pursuant to the standard, incorporated clause. (Felisilda, supra, 53 Cal.App.5th
at pp. 495-497.) Nissan presents significant argument regarding the intertwined
nature of warranties regardless of the sales contract transaction basis for
acquisition of the vehicle. (Dagher v. Ford Motor Co. (2015) 238 Cal.App.4th 905, 926; Rodriguez v. FCA US, LLC
(2022) 77 Cal.App.5th 209, 222-223.)
Nevertheless, a leading case
decided in the Second Appellate District 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
Company (Cal. Ct. App., June 26, 2023, No.
B320477) 2023 WL 4181909, at *8–10. 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 of Placer County (Cal.
Ct. App., Aug. 16, 2023, No. C096773) 2023 WL 5270559, at *3-4.)
The argument of Nissan depends on
a finding of privity of contract among the parties and therefore a basis of
standing for enforcement of the warranties. 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 contract principles sufficiently dissociates
any findings of an inextricably intertwined contractual relationship on grounds
of estoppel between Plaintiff and Nissan. The motion otherwise lacks any
argument or evidence establishing a third party beneficiary relationship. [See
Declaration of Camran Pakbaz, Ex. 1.] 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 court otherwise
declines to consider the legally supported foundation to the Ford Motor
Warranty cases argued in the reply, and instead defers to the case precedent, especially
pending California Supreme Court review.
The motion is therefore denied.
Case Management Conference set for November 20, 2023. The
case is now at issue.
Defendants to provide notice.