Judge Stephen P. Pfahler, Case Number: 24STCV01342, Date: 2024-06-12 Tentative Ruling

Judge: Stephen P. Pfahler, Case: 24STCV01342, Date: 2024-06-12 Tentative Ruling

Case Number: 24STCV01342 Hearing Date: June 12, 2024 Dept: 68

Dept. 68

Date: 6-12-24

Case: 24STCV01342

ARBITRATION

MOVING PARTY: Defendant, Mercedes-Benz USA, LLC

RESPONDING PARTY: Plaintiff, Sang Hyun Kim

RELIEF REQUESTED

Motion to Compel Arbitration and Stay Action

SUMMARY OF ACTION

Plaintiff purchased a new 2023 Mercedes-Benz vehicle on July 21, 2023. The vehicle suffers from defects, including the active brake light, camera view, and instrument cluster systems.

On January 18, 2024, Plaintiff filed a complaint for 1) Violation of Civil Code § 1793.2(d); 2) Violation of Civil Code § 1793.2(b); 3) Violation Of Civil Code § 1793.2(a)(3); 4) Breach of Express Written Warranty; and 5) Breach of the Implied Warranty Of Merchantability.

RULING: Denied.

Request for Judicial Notice: Granted.

The court takes judicial notice of the existence of the complaint, but cannot take judicial notice of the content for any truth of the matter asserted.

Defendant Mercedes-Benz USA, LLC (Mercedes-Benz) moves to compel arbitration pursuant to the terms of the lease executed at the time of the acquisition of the vehicle. Mercedes-Benz seeks arbitration on grounds that the claims arise from alleged defects with the vehicle. Mercedes-Benz 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 as a third party beneficiary and equitable estoppel. The court electronic filing system shows no opposition or reply on file at the time of the tentative ruling publication cutoff.

“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.)

Mercedes-Benz moves to compel under the Federal Arbitration Act (FAA), as provided in the contract. While the FAA governs the rules for conducting arbitration, barring citation to a case precluding California law, motions to compel arbitration are still governed by California law. (Adolph v. Uber Technologies, Inc. (2023) 14 Cal.5th 1104, 1119; Viking River Cruises, Inc. v. Moriana (2022) 142 S.Ct. 1906; Volt Information Sciences, Inc. v. Board of Trustees of Leland Stanford Junior University (1989) 489 U.S. 468, 477–479; Victrola 89, LLC v. Jaman Properties 8 LLC (2020) 46 Cal.App.5th 337, 346; see AT&T Mobility LLC v. Concepcion (2011) 563 U.S. 333, 341-346.)

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 defendant sufficiently establishes competence in knowledge, and the rightful possession of the lease agreement containing the subject arbitration clause applicable to the subject action. [Declaration of Ali Ameripour, Ex. 2.] The court finds the language of the agreement also clearly applies to the warranties on the vehicle.

While the motion remains unopposed, the court considers the situation regarding the lack of Mercedes-Benz as a signatory party to the agreement, thereby barring enforcement of the contract. The lease itself provides for the terms, and includes the referenced arbitration clause. The agreement was only between Plaintiff and non-party Keyes European. Mercedes-Benz is not a named party within the agreement. [Ameripour Decl., Ex. 2.]

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).)

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 on both equitable estoppel and third party beneficiary theories. (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 Mercedes-Benz may depend on a finding of privity of contract among the parties and therefore a basis of standing for enforcement of the warranties, the court also finds no basis of enforcement. 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, Montemayor, and Kielar. “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).)

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 Mercedes-Benz. The motion otherwise lacks sufficient argument or evidence establishing a third party beneficiary relationship, or authority of the Keyes European representative from executing the agreement on behalf of Mercedes-Benz. The court finds no distinction in the instant lease agreement from the agreement(s) considered in the Ford case. Thus, for both court policy reasons, and factual agreement with the Ford Motor Warranty Cases, Montemayor, and Kielar, the court continues to adhere to the subject authority pending California Supreme Court review.

The motion is therefore denied.

Trial scheduled for February 3, 2025.

Defendant to provide notice.