Judge Thomas Falls, Case 22PSCV00991 2023-04-12 Tentative Ruling

RE: STEVE SAYEGH, et al. vs FORD MOTOR COMPANY, A DELAWARE CORPORATION (22PSCV00991)

MOTION OF DEFENDANT FORD MOTOR COMPANY TO COMPEL ARBITRATION AND STAY ACTION is GRANTED. The case is stayed. The parties are expected to discuss the matter of the expired lease during the hearing.

On September 2, 2022, Plaintiffs STEVE SAYEGH and MARISSA MARTINEZ (collectively, “Plaintiffs”) filed suit against Defendant Ford Motor Company (“Defendant”) for 1. Breach of lmplied Warranty of Merchantability under The Song-Beverly Act (“SBA”) 2. Breach of Express Warranty under The Song-Beverly Act and 3. Fraudulent Concealment.

Defendant moves for arbitration because the sales contract Plaintiff signed contained an arbitration provision. The Lease provides the following arbitration provision:

Arbitration is a method of resolving any claim, dispute, or controversy (collectively, a “Claim”) without filing a lawsuit in court. Either you or Lessor/Finance Company/Holder (“us” or “we”) (each, a “Party”) may choose at any time, including after a lawsuit is filed, to have any Claim related to this contact decided by arbitration. . . . Claims include but are not limited to the following: 1) Claims in contract, tort, regulatory or otherwise; 2) Claims regarding the interpretation, scope, or validity of this provision, or arbitrability of any issue except for class certification; 3) Claims between you and us, our employees, agents, successor, assigns, subsidiaries, or affiliates; 4) Claims arising out of or relating to your application for credit, this contract, or any resulting transaction or relationship, including that with the dealer, or any such relationship with third parties who do not sign this contract. This contract is subject to the Federal Arbitration Act.[1]

The court finds that there is a valid agreement signed by Plaintiffs and that the arbitration agreement (via doctrine of equitable estoppel) extends to nonsignatories. (See Felisilda v. FCA US LLC (2020) 53 Cal.App.4th 486). After all, the crux of the Complaint pertains to “defects, malfunctions, misadjustments, and/or nonconformities existent with the Vehicle” and that Defendant failed to conform the vehicle to the applicable warranties that came with his purchase of the vehicle. Plus, having examined the facts of the complaint wherein Plaintiffs’ claims against Defendant directly relate to the condition of the vehicle, the court determines that Plaintiffs’ claims is founded on and intimately connected with the sales contract/lease.

To the extent that Plaintiffs aver that Felisilda “was incorrectly decided” (Opp. p. 1), the court is unpersuaded.

First, there is no binding authority overturning Felisilda. Second, as noted by Defendant, in Felisilda, the plaintiffs dismissed the dealership, leaving arbitration between the manufacturer and the plaintiffs, which was the judgment on appeal. Additionally, regardless of if in Felisilda both the dealership and the manufacturer were initially parties to the action, the appellate court expressly based its finding on the language in the sales contract and the nature of the plaintiff’s claim against the manufacturer to conclude that the entire matter be submitted to arbitration. (Id. at p. 496.) Hence, the whole purpose of invoking the equitable estoppel doctrine is premised upon the absence of the signatory, meaning that the absence of the dealer is a distinction without a meaningful difference.[2]

Therefore, as Felisilda has directly spoken on an issue of state law, reliance on a federal court’s view of state law is improper. (Id. at p. 497 [federal district authorities “are not binding on state courts, even as to issues of federal law.”].)[3]

To the extent that Plaintiffs aver that the arbitration provision is procedurally unconscionable because it “strips Plaintiffs of statutorily guaranteed rights available to Plaintiffs under The Song-Beverly Act,” the court is again unpersuaded.

If that were the case, then the Legislature, in the creation of the SBA, could have precluded enforcement of arbitration agreements altogether.

Therefore, absent authority that precludes arbitration in lemon law cases, the court determines that the arbitration provision is fair.

To the extent that Plaintiffs aver the lease is improperly authenticated through its counsel, the court is unpersuaded.

First, as noted by Defendant Plaintiffs object to the admissibility of the Lease even though Plaintiffs themselves provide the same Lease as an attachment to Plaintiffs’ Complaint. Second, as noted by Defendant, as a preliminary requirement, the court is “only required to make a finding of the agreement’s existence, not an evidentiary determination of its validity.” (Condee v. Longwood Mgmt Corp. (2001) 88 Cal.App.4th 215, 218–19.) As the court in Condee explained, “[t]he provisions must be stated verbatim or a copy must be physically or electronically attached to the petition and incorporated by reference. For this step, it is not necessary to follow the normal procedures of document authentication.” (Id.) Once the party seeking to compel arbitration alleges the agreement’s existence, the burden then shifts to the plaintiff to prove the falsity of the purported agreement.” (Condee, supra, 88 Cal.App.4th at p. 219; emphasis added.) Here, however, Plaintiff does not contend that the lease is invalid. For example, Plaintiffs have “not testified under oath or declare under penalty of perjury that the party never saw or does not remember seeing the agreement, or that the party never signed or does not remember signing the agreement.” (Id.) Rather, Plaintiffs rely upon the lease to assert their actions against Defendant.

Therefore, for purposes of this motion—which requires the moving party to produce prima facie evidence of a written agreement to arbitrate the controversy—Defense Counsel has sufficiently authenticated the lease agreement.

Lastly, to the extent that Plaintiffs aver that Defendant attempts to “enforce an arbitration provision in an expired lease agreement, the term of which expressly ran from May 27, 2017 through May 27, 2020,” (Opp. pp. 3-4), the court actually finds this argument not merely unpersuasive but perhaps fatal to Plaintiffs’ entire action.[4]

Plaintiffs, without citation to authority, state that the lease terminated upon the end of the lease term, there was no renewal of the lease or arbitration provision, and there is/was no agreement that the arbitration provision survives the end of the term of the lease such that the arbitration provision. However, Plaintiffs’ claims for (1) breach of implied warranty and (2) breach of express warranty are brought under the SBA, an Act which is premised upon warranties found in a contract. Specifically, the implied warranty of merchantability cause of action alleges that Defendant breached the implied warranty that was “accompanied by the Defendant’s implied warranty” and that “pursuant to the Song-Beverly Act” Defendant violated the obligations under the SBA. (Complaint ¶¶87, 92) (emphasis added). As for the express warranty cause of action, the complaint alleges that “Defendants, and each of them, failed to service or repair the Vehicle to match the written warranty . . . thereby breaching Defendants' obligations under the Song-Beverly Act. (Complaint ¶¶100, 101) (emphasis added).

Regarding actions brought under the SBA for alleged breaches of an express warranties, the plaintiff's prima facie elements, as set out in CACI jury instruction 3201 and Civil Code Section 1793.2(d)(2), require a defendant's giving an express (written) warranty covering the vehicle and a defect (or defects) in the vehicle. In turn, express warranties are contractual nature. (See American Suzuki Motor Corp. v. Superior Court (1995) 37 Cal.App.4th 1291, 1295.) And as a lease is a contract, then that means that Plaintiffs’ second cause of action breach of express warranties directly derives from the Lease. But, if as Plaintiffs claim that the lease is expired (i.e., no contract), then there can be no claim for a breach of express warranty, a cause of action which requires a contract (i.e., a lease).

The same reasoning applies to a breach of implied warranty of merchantability. As defined in the SBA, “an implied warranty of merchantability guarantees that ‘consumer goods meet each of the following: [¶] (1) Pass without objection in the trade under the contract description. [¶] (2) Are fit for the ordinary purposes for which such goods are used. [¶] (3) Are adequately contained, packaged, and labeled. [¶] (4) Conform to the promises or affirmations of fact made on the container or label.” (Isip v. Mercedes-Benz, LLC (2007) 155 Cal.App.4th 19, 26) (emphasis added). “Thus, there exists in every contract for the sale of goods by a merchant a warranty that the goods shall be merchantable.” (Id) (emphasis added). Accordingly, again, even the implied warranty cause of action is premised upon a contract, but Plaintiffs aver there is no enforceable contract/lease.

As for the fraud cause of action, that too is predicated upon the lease/contract because, as explained above, the contract/lease begets the warranties. (Complaint ¶112 [Defendant “deceived Plaintiffs by promising that the Vehicle would conform to the applicable warranties”]) (emphasis added).

Therefore, without an enforceable contract/lease, it appears there can be no action against Defendant. Though not dispositive for the instant motion, the court requests the parties to be prepared to discuss the issue of the expired lease (supported by legal authority) during the hearing.

Based on the foregoing, the court compels arbitration and stays all proceedings.

[1] Under the Federal Arbitration Act (“FAA”), a party moving to compel arbitration must show: “(1) the existence of a valid, written agreement to arbitrate; and, if it exists, (2) that the agreement to arbitrate encompasses the dispute at issue.” (Ashbey v. Archstone Prop. Mgmt., Inc. (9th Cir. 2015) 785 F.3d 1320, 1323.)

[2] (See also id [“By relying on contract terms in a claim against a nonsignatory defendant, even if not exclusively, a plaintiff may be equitably estopped from repudiating the arbitration clause contained in that agreement.”].)

[3] Plaintiffs heavily rely on Kramer v. Toyota Motor Corp. (9th Cir. 2013) 705 F.3d 1122. However, that case is inapposite for three reasons: (i) Kramer is a federal case (thus not binding); (ii) Felisilda (decided in 2020) rejected the applicability of Kramer and (iii) the arbitration provision in Kramer did not mention “third parties” whereas both the arbitration provision in Felisilda and the instant case referenced “third parties.”

[4] Defendant very briefly discusses the issue, but the court finds it warrants elaboration.