Judge Thomas D. Long, Case 22STCV17803 2023-04-06 Tentative Ruling

On May 31, 2022, Plaintiff Matthew Morgan filed this action against Defendants Ford Motor Company (“FMC”) and Vista Ford dba Vista Ford Lincoln (“Vista Ford”) (collectively, “Defendants”), arising from Plaintiff’s purchase of an allegedly defective vehicle from a non-party dealership.

On January 13, 2023, Defendants filed a motion to compel arbitration and stay the action pending completion of arbitration.

Plaintiff’s request for judicial notice of a Ninth Circuit case and a California Court of Appeal case is granted. (Evid. Code, § 451, subd. (a) [court shall take judicial notice of the law of this state and of the United States].)

When seeking to compel arbitration of a plaintiff’s claims, the defendant must allege the existence of an agreement to arbitrate. (Condee v. Longwood Management Corp. (2001) 88 Cal.App.4th 215, 219.) The burden then shifts to the plaintiff to prove the falsity of the agreement. (Ibid.) After the Court determines that an agreement to arbitrate exists, it then considers objections to its enforceability. (Ibid.) The Court must grant a petition to compel arbitration unless the defendant has waived the right to compel arbitration or if there are grounds to revoke the arbitration agreement. (Ibid.; Code Civ. Proc., § 1281.2.)

The parties do not dispute the existence of an arbitration agreement between Plaintiff and the non-party dealership, and Defendants provided the full sales contract containing the arbitration provision. (Keithly Decl., Ex. B [“Arbitration Agreement”].) The front of the contract states in a box: “Agreement to Arbitrate. By signing below, you agree that, pursuant to the Arbitration Provision on the reverse side of this contract, you or we may elect to resolve any dispute by neutral, binding arbitration and not by a court action. See the Arbitration Provision for additional information concerning the agreement to arbitrate.” Plaintiff signed immediately under this language. Plaintiff also signed under a notice that states: “YOU AGREE TO THE TERMS OF THIS CONTRACT. YOU CONFIRM THAT BEFORE YOU SIGNED THIS CONTRACT, WE GAVE IT TO YOU, AND YOU WERE FREE TO TAKE IT AND REVIEW IT. YOU ACKNOWLEDGE THAT YOU HAVE READ ALL PAGES OF THIS CONTRACT, INCLUDING THE ARBITRATION PROVISION ON THE REVERSE SIDE, BEFORE SIGNING BELOW. YOU CONFIRM THAT YOU RECEIVED A COMPLETELY FILLED-IN COPY WHEN YOU SIGNED IT.” Plaintiff signed below as Buyer.

The back of the contract contains the Arbitration Agreement, which provides, “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.”

Plaintiff argues that FMC, who did not sign the sales contract, cannot compel arbitration based on the contract because the FAA and federal law, particularly Ngo v. BMW of North America, LLC (9th Cir. 2022) 23 F.4th 942 (Ngo), apply. (See Opposition at pp. 1, 8-9.) Plaintiff also argues that only he or the dealership can compel arbitration, and equitable estoppel does not apply. (Id. at pp. 3-7, 10-15.)

Generally, only a party to an arbitration agreement may enforce the agreement, but the doctrine of equitable estoppel is an exception that allows a non-signatory to enforce an agreement. (Felisilda v. FCA US LLC (2020) 53 Cal.App.5th 486, 495 (Felisilda).) Under the doctrine of equitable estoppel, “a nonsignatory defendant may invoke an arbitration clause to compel a signatory plaintiff to arbitrate its claims 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.) The doctrine applies in either of two circumstances: (1) when the signatory must rely on the terms of the written agreement containing the arbitration clause in asserting its claims against the nonsignatory; or (2) when the signatory alleges “substantially interdependent and concerted misconduct” by the nonsignatory and a signatory and the alleged misconduct is “founded in or intimately connected with the obligations of the underlying agreement.” (Goldman v. KPMG, LLP (2009) 173 Cal.App.4th 209, 218-219.)

The court in Felisilda examined an identical arbitration clause contained in a dealer’s sales contract: “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 . . . 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. . . .” (Felisilda, supra, 53 Cal.App.5th at p. 490.) The court concluded that the equitable estoppel doctrine applied: “Because the [buyers] expressly agreed to arbitrate claims arising out of the condition of the vehicle – even against third party nonsignatories to the sales contract – they are estopped from refusing to arbitrate their claim against [the manufacturer]. Consequently, the trial court properly ordered the [buyers] to arbitrate their claim against FCA.” (Id. at p. 497.)

Plaintiff alleges that he received various warranties in connection with the purchase. (E.g., Complaint ¶¶ 10-11.) The court in Felisilda held that a similar allegation established that “the sales contract was the source of the warranties at the heart of this case.” (Felisilda, supra, 53 Cal.App.5th at p. 496.) As in Felisilda, Plaintiff’s claims against the manufacturer “directly relate[] to the condition of the vehicle that they allege to have violated warranties they received as a consequence of the sales contract.” (Id. at p. 497.)

Plaintiff argues that Felisilda is distinguishable because the plaintiffs there brought claims against both the dealership and the manufacturer, the dealership moved to compel arbitration, and the manufacturer filed a notice of non-opposition. (Opposition at pp. 5-6.) But in Felisilda, the claims against the dealership were eventually dismissed, leaving only the claims against the manufacturer before the plaintiffs’ appeal. (See Felisilda, supra, 53 Cal.App.5th at p. 489.) The Court of Appeal also expressly framed the issue as “whether a nonsignatory to the agreement has a right to compel arbitration under that agreement.” (Felisilda, supra, 53 Cal.App.5th at p. 495.)

The reasoning and holding of Felisilda lead to the conclusion that equitable estoppel doctrine permits Defendant to compel arbitration of Plaintiff’s claims against it.

Plaintiff argues because the Arbitration Agreement states that “[i]f federal law provides that a claim or dispute is not subject to binding arbitration, this Arbitration Provision shall not apply to such claim or dispute,” Ngo is therefore binding on this Court. (Opposition at pp. 1, 8-9.) However, “[s]tate law determines whether a non-signatory to an agreement containing an arbitration clause may compel arbitration.” (Ngo, supra, 23 F.4th at p. 946, citing Arthur Andersen LLP v. Carlisle (2009) 556 U.S. 624, 631-632.) Accordingly, this Court follows the binding state authority of Felisilda, not Ngo’s federal interpretation of equitable estoppel under state law. Additionally, the Arbitration Agreement states that “the arbitrability of the claim or dispute” shall be resolved by arbitration. This is a clear and unmistakable delegation of arbitrability to the arbitrator. (See Aanderud v. Superior Court (2017) 13 Cal.App.5th 880, 892.)

Plaintiff also argues that the reference to the FAA requires that the Arbitration Agreement be interpreted according to federal law, citing Davis v. Shiekh Shoes, LLC (2022) 84 Cal.App.5th 956 (Davis). (Opposition at p. 9.) However, Davis involved the issue of waiver, not whether the movant could compel arbitration. (Davis, supra, 84 Cal.App.5th at p. 963 [“Courts have recognized that where the FAA applies, whether a party has waived a right to arbitrate is a matter of federal, not state, law. . . . Accordingly, federal law supplies the law on waiver in this case.”].)

Plaintiff argues that the sales contract explicitly distinguishes between the seller’s warranty obligations and the manufacturer’s warranties. (Opposition at pp. 13-14.) However, the same quoted language also states, “This provision does not affect any warranties covering the vehicle that the vehicle manufacturer may provide.”

Plaintiff does not argue that the Arbitration Agreement is unconscionable. Because Plaintiff did not show grounds for rescission of the Arbitration Agreement, the motion is granted as to FMC. (See Code Civ. Proc., § 1281.2.)

Plaintiff’s sole cause of action against Vista Ford is for negligent repair. Defendants argue that this cause of action falls within the scope of the Arbitration Agreement because the warranty contract allowed Plaintiff to deliver the vehicle for service repairs at Vista Ford. (Motion at p. 3; Reply at p. 7.) However, this cause of action is based on Vista Ford’s independent duty of care, not the warranties or purchase contract. The fifth cause of action alleges only that Vista Ford did not properly store, prepare, and repair the vehicle “in accordance with industry standards.” This is not an allegation related to the condition of the vehicle pursuant to the warranties or purchase contract.

Plaintiff argues that because Vista Ford cannot compel arbitration, the Court should deny the motion in full under Code of Civil Procedure section 1281.2, subdivision (c). (Opposition at p. 15.) The claim against Vista Ford does not arise out of the same transaction and does not create the possibility of conflicting rulings on common issues.

The motion to compel arbitration is GRANTED as to FMC. The case against FMC is STAYED pending the completion of arbitration. A Status Conference re: Arbitration is scheduled for October 6, 2023 at 8:30 a.m. in Department 48 at Stanley Mosk Courthouse. Five court days before, the parties are to file a joint report regarding the status of arbitration, including the name of the retained arbitrator.

The motion to compel arbitration is DENIED as to Vista Ford. The case against Vista Ford is not stayed.

Parties who intend to submit on this tentative must send an email to the Court at SMCDEPT48@lacourt.org indicating intention to submit. Parties intending to appear are encouraged to appear remotely and should be prepared to comply with Dept. 48’s new requirement that those attending court in person wear a surgical or N95 or KN95 mask.

Hon. Thomas D. Long

Judge of the Superior Court