Judge Upinder S. Kalra, Case Number: 22STCV25418, Date: 2023-06-22 Tentative Ruling

CASE NAME: Aaliyah Finely v. LAD-N, LLC, a California Limited Liability Company, et al.

On August 5, 2022, Plaintiff Aaliyah Finley (“Plaintiff”) filed a complaint against Defendants LAD-N, LLC dba Lithia Nissan of Downtown LA and Nissan North America, Inc. (“Defendants.”) The complaint alleged two causes of action: (1) Violation of Song-Beverly Act – Breach of Express Warranty and (2) Negligent Repair. The complaint alleges that Plaintiff purchased the Subject Vehicle and entered a warranty contract with Defendant Nissan. During the warranty period, the Subject Vehicle experienced various defects and nonconformities. Plaintiff further alleges that Defendnats failed to sufficiently repair the Subject Vehicle when it was brought into be serviced. Additionally, Plaintiff alleges that Defendant Nissan did not replace the Subject Vehicle or make restitution as required under Song-Beverly.

On April 4, 2023, Defendants filed a Motion to Compel Arbitration. Plaintiff’s Opposition was filed on June 8, 2023. Defendants’ Reply was filed on June 14, 2023.

Motion to Compel Arbitration – Under California law, the trial court has authority to compel arbitration pursuant to Code Civ. Proc. §1281.2 where a written agreement for such arbitration exists and one of the parties refuses to arbitrate. Specifically, the statute provides that, “[o]n 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 arbitrate the controversy exists.” The statute further sets forth four grounds upon which the trial court may refuse to compel arbitration: (a) the right to compel arbitration was waived, (b) recission of the agreement, (c) there is a pending action or special proceeding with a third party, arising out of the same transaction; and (d) petitioner is a state or federally chartered depository institution.

“[T]he petitioner bears the burden of proving the existence of a valid arbitration agreement by the preponderance of the evidence . . . .” Giuliano v. Inland Empire Personnel, Inc. (2007) 149 Cal.App.4th 1276, 1284. “In determining whether an arbitration agreement applies to a specific dispute, the court may examine only the agreement itself and the complaint filed by the party refusing arbitration [citation]. The court should attempt to give effect to the parties' intentions, in light of the usual and ordinary meaning of the contractual language and the circumstances under which the agreement was made.” Weeks v. Crow (1980) 113 Cal.App.3d 350, 353. “To determine whether a contractual arbitration clause requires arbitration of a particular controversy, the controversy is first identified and the issue is whether that controversy is within the scope of the contractual arbitration clause.” Titolo v. Cano (2007) 157 Cal.App.4th 310, 316. “Doubts as to whether an arbitration clause applies to a particular dispute are to be resolved in favor of sending the parties to arbitration. The court should order them to arbitrate unless it is clear that the arbitration clause cannot be interpreted to cover the dispute.” California Correctional Peace Officers Ass'n v. State (2006) 142 Cal.App.4th 198, 205.

“[A] party opposing the petition bears the burden of proving by a preponderance of the evidence any fact necessary to its defense. [Citation.] In these summary proceedings, the trial court sits as a trier of fact, weighing all the affidavits, declarations, and other documentary evidence, as well as oral testimony received at the court's discretion, to reach a final determination.” Giuliano v. Inland Empire Personnel, Inc. (2007) 149 Cal.App.4th 1276, 1284.

Defendant requests the Court to take judicial notice of the following documents:

1. Complaint for Damages, filed in Los Angeles County Superior Court by Plaintiff Aaliyah Cruz on August 5, 2022, in the matter of Brenda Santa Cruz. v. Nissan North America, Inc. (Case No. 22STCV25418).

2. Notice of Entry of Dismissal and Proof of Service, filed in Sacramento Superior Court by Plaintiffs Dina C. Felisilda and Pastor O. Felisilda on February 11, 2016, in the matter of Dina C. Felisida, et al, v. FCA US LLC, et al. (34-2015-00183668).

3. Answer to Complaint for Damages, filed in Los Angeles County Superior Court by Defendant Nissan North America, Inc. on September 8, 2022, in the matter of Aaliyah Finley v. Nissan North America, Inc. (Case No. 22STCV25418).

The Court notes that this request has various errors. For example, Exhibit A is the complaint in this matter. However, on the RJN document, the description of Exhibit A states that the complaint is for “Aaliyah Cruz,” and “in the matter of Brenda Santa Cruz.”

The Court may take judicial notice of the existence of the records, but not the truth of matters asserted in such records. (Sosinsky v. Grant (1992) 6 Cal.App.4th 1548, 1565). As a result, although the court may take judicial notice that the documents exists, the Court may not take judicial notice of the truth of the facts in the documents.

Additionally, Evidence Code only allows the Court to take judicial notice of certain types of documents. The court may take judicial notice of “official acts of the legislative, executive, and judicial departments of the United States and of any state of the United States,” “[r]ecords of (1) any court of this state or (2) any court of record of the United States or of any state of the United States,” and “[f]acts and propositions that are not reasonably subject to dispute and are capable of immediate and accurate determination by resort to sources of reasonably indisputable accuracy.” (Evid. Code § 452, subds. (c), (d), and (h).) The Evidence Code does not allow the Court to take judicial notice of discovery responses or partOs of cases, such as depositions.

The request for judicial notice is GRANTED, as the documents are court documents under Evid. Code § 452(d).

1. Ex. C – Plaintiff objects on the following grounds: hearsay, authentication, foundation; lacks personal knowledge, and speculative and prejudicial.

As the moving party, Defendant bears the initial burden of establishing the existence of a valid arbitration agreement. Id. Upon establishing the existence of such an agreement, the burden shifts to the Plaintiff to prove that there are valid grounds for contesting arbitration by a preponderance of the evidence. Id.

In determining the enforceability of an arbitration agreement, the court considers “two ‘gateway issues’ of arbitrability: (1) whether there was an agreement to arbitrate between the parties, and (2) whether the agreement covered the dispute at issue.” (Omar v. Ralphs Grocery Co. (2004) 118 Cal.App.4th 955, 961 (Omar).)

“Arbitration is a product of contract. Parties are not required to arbitrate their disagreements unless they have agreed to do so. [Citation.] A contract to arbitrate will not be inferred absent a ‘clear agreement.’ [Citation.] When determining whether a valid contract to arbitrate exists, we apply ordinary state law principles that govern contract formation. [Citation.] In California, a ‘clear agreement’ to arbitrate may be either express or implied in fact. [Citation.]” (Davis v. Nordstrom, Inc. (9th Cir. 2014) 755 F.3d 1089, 1092-1093 (Davis).)

In support of its motion, Defendants submit a copy of the Retail Installment Sale Contract, attached to the Declaration of Kaitlin E. Preston as Exhibit C.

The Court of Appeal in Ruiz discussed authentication concerning arbitration agreements. “The trial court in Condee denied the petition to compel arbitration because the petitioner did not authenticate the opposing party's signature on the proffered arbitration agreement. (Condee, supra, 88 Cal.App.4th at p. 218, 105 Cal.Rptr.2d 597.) Significantly, however, the opposing party did not challenge the authenticity of its signature on the agreement. (Ibid.) Thus, the appellate court in Condee held it was error to deny the petition because the petitioner was not required to “follow the normal procedures of document authentication” in petitioning for arbitration. (Ibid.) The court observed that section 1281.2 did not require the petitioner to introduce the arbitration agreement into evidence, and also pointed out that, “[a] plain reading of the statute indicates that as a preliminary matter the court is only required to make a finding of the agreement's existence, not an evidentiary determination of its validity.” (Condee, supra, at p. 219, 105 Cal.Rptr.2d 597, italics added.)

“Properly understood, Condee holds that a petitioner is not required to authenticate an opposing party's signature on an arbitration agreement as a preliminary matter in moving for arbitration or in the event the authenticity of the signature is not challenged. (Condee, supra, 88 Cal.App.4th at pp. 218–219, 105 Cal.Rptr.2d 597; Toal v. Tardif (2009) 178 Cal.App.4th 1208, 1219, fn. 8, [101 Cal.Rptr.3d 97] [noting that “[t]o the extent Condee conflicts with Rosenthal, our Supreme Court's decision is controlling”].) Though Ruiz did not deny that the electronic signature on the 2011 agreement was his, he claimed he did not recall signing the 2011 agreement and would not have signed it had it been presented to him. In the face of Ruiz's failure to recall signing the 2011 agreement, Moss Bros. had the burden of proving by a preponderance of the evidence that the electronic signature was authentic (Evid. Code, § 1401), that is, it was what Moss Bros. claimed it was: “the act of” Ruiz (Civ. Code, § 1633.9, subd. (a)). Moss Bros. did not meet this evidentiary burden.

Plaintiff argues that Defendant have failed to meet their burden of demonstrating an arbitration agreement exists. No evidence was presented to indicate an agreement with Plaintiff and Defendants. The Declaration of Counsel provides the incorrect Plaintiff’s name, as well as the vehicle year, make, and model.

While the Declaration does not include the correct information about Plaintiff, Exhibit C does pertain to this Plaintiff. As such, the Court will analyze the merits of the argument.

As stated above, in determining the enforceability of an arbitration agreement, the court considers “two ‘gateway issues’ of arbitrability: (1) whether there was an agreement to arbitrate between the parties, and (2) whether the agreement covered the dispute at issue.” (Omar v. Ralphs Grocery Co. (2004) 118 Cal.App.4th 955, 961 (Omar).)

Defendant initially argued that it could compel Plaintiff to arbitration under two different theories: equitable estoppel and third-party beneficiary. Since the Defendant’s initial motion, the Second District Court of Appeal issued Ochoa v. Ford Motor Company (2023) 89 Cal.App.4th 1324; 316 Cal.Rptr.3d 611 (Ochoa), expressly disagreeing with Felisilda v. FCA US LLC (2020) 53 Cal.App.5th 486 (Felisilda). In reply, Defendant argues that this Court should follow Felisilda because stare decisis allows a trial court to follow either Felisilda or Ochoa, Felisilda is better reasoned that Ochoa, and Felisilda remains directly applicable.

Relying upon Felisilda, Defendant argues that under the theory of equitable estoppel, this matter can be compelled to arbitration because Plaintiff’s claims were intimately intertwined with the obligations of the sales contract. Plaintiff argues that Felisilda is no longer applicable and should instead follow the recent decision in Ochoa because the warranty claims are not intertwined with the sales contract.

The Court will begin by discussing Felisilda. The Felisildas brought a Song-Beverly cause of action against a local automobile dealership, Elk Grove Dodge Chrysler Jeep (“Elk Grove”), and the manufacturer, FCA US LLC (“FCA”). (Felisilda, supra., 53 Cal.App.5th at p. 489.) The Felisildas and the local dealer were parties to an installment sales contract that contained an arbitration clause. (Ibid.) FCA was not a signatory to the agreement. (Ibid.) Elk Grove moved to compel arbitration. (Ibid.) The lower court granted the motion and ordered all the parties, including FCA to arbitration, whereupon the Felisildas dismissed Elk Grove. (Ibid.) After the arbitrator found for FCA and the trial court confirmed the award, the Felisildas appealed the judgment of the court. (Ibid.) Among the contentions on appeal was whether the trial court had authority to “order the Felisildas to arbitrate their claim against FCA because FCA was a nonsignatory to the sales contract.” (Ibid.) The Felisilda panel affirmed the trial court’s order. The Court found that by signing the sales contract, “the Felisildas expressly agreed to arbitrate claims arising out of the condition of the vehicle—even against third party nonsignatories to the sales contract—[and] they are estopped from refusing to arbitrate their claim against FCA.” (Id. at p. 497.) The holding in Felisilda was grounded on the express provisions of the sales contract and the Felisildas’ causes of action. First, upon examining the terms of the sale contract, the Court noted that the Felisildas agreed to arbitrate “[a]ny claim or dispute, whether in contract, tort, statute or otherwise…between you and us or our employees, agents, successors or assigns, which arises out of or relates to … [the] condition of this vehicle.” (Id. at p. 490.) Second, after reviewing the Felisildas’ complaint where they alleged violations of warranties they received because of the purchase contract, the Court of Appeal found the Felisildas’ claim “directly relates to the condition of the vehicle.” (Id. at p. 497.)

In Ochoa, each plaintiff purchased a Ford Vehicle from a Ford authorized dealer and signed a Retail Instalment Sale Contract (“sale contract”). (Ochoa, supra, 316 Cal.Rptr.3d at p. 616.) The sales contract, which contained an arbitration clause, was between plaintiffs and the selling dealership but not the manufacturer, Ford. (Ibid.) Nonetheless, nonsignatory Ford sought to enforce the agreement under the doctrines of equitable estoppel and third party beneficiary. (Id. at p. 617.) The trial court denied Ford’s motion. (Ibid.) The Ochoa panel affirmed the trial court’s ruling and distinguished Felisilda. First, Ochoa disagreed with Felisilda’s conclusion that the warranty claims were intertwined with the sales contract. (Id. at p. 619.) Ochoa reasoned that upon examining the express language of the contract, it was clear that sales contract related to the sale and financing of the vehicle only and not the vehicle’s condition. (Id. at p. 620.) The Ochoa panel noted that the sales contract made no promises regarding the quality of the vehicle, the manner in which repairs would occur and explicitly disclaimed any warranty on the part of the dealer. (Ibid.) Second, Ochoa rejected Felisilda’s finding that the sales contract was the source of the warranties. (Id. at pp. 619-620.) Ochoa set forth the long history of California cases that have consistently held that warranties sourced from outside of the sales contract are not part the retail sales contract. (Id. at p. 621.) [1] Third, the Ochoa panel found that the language in the arbitration agreement referencing “third parties” was misconstrued by Felisilda. [2] Ochoa explained that the sales contract allowed for the buyer to purchase insurance, theft protection and extended warranties from third parties and those transactions, specifically set forth in the sales contract, could also be financed through the sales contract. (Id. at p. 620.) Ochoa reasoned that, read in context, the language referencing third parties authorized to enforce the arbitration clause, was limited to the third party actors who engaged in transactions of the type delineated in the sales contract. (Ibid.) Ochoa concluded that the manufacturer was not one of the contemplated third parties nor were the warranties purchased or financed through the sales contract.

Here, the Court finds that equitable estoppel does not allow Defendant to compel arbitration based on Ochoa. Where appellate decisions are in conflict, the court exercising inferior jurisdiction can and must make a choice between the conflicting decisions. (Auto Equity Sales, Inc. v. Superior Court of Santa Clara County (1962) 57 Cal.2d 450, 456.) The Court finds the reasoning of Ochoa to be more compelling than the analysis of Felisilda. The Court agrees with Ochoa’s conclusion that “manufacturer vehicle warranties that accompany the sale of motor vehicles without regard to the terms of the sale contract between the purchaser and the dealer are independent of the sale contract.” (Ochoa, supra, 306 Cal.Rptr.3d at pp. 619–620.) Accordingly, the Court finds that the claims raised by Plaintiff do not concern the retail installment sale contract or its arbitration provision. (Dec. Preston, Exhibit C.) Rather, Plaintiff’s claims are based on violation of the Song-Beverly Act and negligent repair, which do not relate at all to the Sales Contract. In sum, the Court finds that Plaintiff’s Song-Beverly claims are not “intertwined with” the sales contract, and therefore, the sales contract was not the source of the vehicle’s warranties.

Defendant argues that it can force arbitration as third-party beneficiaries. Specifically, the Sales Contract states that any claim that relates to “any resulting transaction or relationship (including any such relationship with third parties who do not sign this contract.” (Motion 17: 12-16.) Thus, because Defendant Nissan provides vehicles to car dealership, Nissan directly benefits from the sale of vehicles. Plaintiff argues that the agreement is not benefit Nissan, the purpose of the agreement is not to “confer a benefit on Defendants,” and allowing Defendants to compel arbitration based on third-party beneficiary would be inconsistent with the purpose of the contract. (Opp. 14: 10-27.)

A contract that is made expressly for the benefit of a third person, “may be enforced by him at any time before the parties thereto rescind it." (Civ. Code, § 1559). Persons who are “only incidentally or remotely benefited by it" are excluded. (Lake Almanor Associates L.P. v. Huffman-Broadway Group, Inc. (2009) 178 Cal.App.4th 1194, 1199.) To establish that it is an intended, third-party beneficiary of the contract, Defendant must show "(1) whether the third party would in fact benefit from the contract, but also (2) whether a motivating purpose of the contracting parties was to provide a benefit to the third party, (“and not simply acknowledge that a benefit to the third party may follow from the contract”), and (3) whether permitting a third party to bring its own breach of contract action against a contracting party is consistent with the objectives of the contract and the reasonable expectations of the contracting parties. All three elements must be satisfied to permit the third-party action to go forward." (Goonewardene v. ADP, LLC (2019) 6 Cal.5th 817, 830 (Goonewardene).)

The Court finds that Defendant fails in its burden to establish all three of the Goonewardene elements. Defendant again relies on part of the provision that identifies the scope of arbitrable matters that includes claims arising from any resulting relationship with third parties. However, the mere mention of third parties in the provision governing scope does not establish that the Sales Contract’s motivating purpose or intent was to benefit Defendant. (Ochoa, supra, 306 Cal.Rptr.3d at p. 621.) As discussed above, the “motivating purpose” of the Sales Contract was to finance the vehicle by, the “Seller-Creditor.” The only purpose of that contract is to ensure that Plaintiff receives her vehicle for the price that the Seller-Creditor is selling it at.

As stated previously, the dealer expressly disclaimed any warranties, and as California law provides, manufacturer warranties are separate from the sales contract. Accordingly, Defendant has not established that it can invoke the arbitration provision as a third-party beneficiary.[3]

Motion to Compel Arbitration is DENIED. Because the Motion to Compel Arbitration is is DENIED, the Motion to Stay the Proceedings is also DENIED.

Motion to Compel Arbitration is DENIED. Request for a Stay of the Proceedings is DENIED.

[1] Greenman v. Yuba Power Products, Inc. (1963) 59 Cal.2d 57 and Corporation of Presiding Bishop of Church of Jesus Christ of Latter Day Saints v. Cavanaugh (1963) 217 Cal.App.2d 492, 514.

[2]The Felisilda language is as follows:” Any claim or dispute, whether in contract, tort, statute or otherwise ..., between you and us or our employees, agents, successors or assigns, which arises out of or relates to ... purchase or condition of this vehicle, the cont[r]act 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 ....’” (Ford Motor Warranty Cases (2023) 89 Cal.App.5th 1324 [306 Cal.Rptr.3d 611, 620, 89 Cal.App.5th 1324], review filed (May 12, 2023).)

[3]Accordingly, the Court need not address Plaintiff’s waiver argument.