Judge: Walter P. Schwarm, Case: 30-2022-01298694, Date: 2023-07-18 Tentative Ruling
Motion No.1:
Defendant’s (FCA US LLC) Motion to Compel Arbitration and Stay Action (Motion), filed on 2-16 under ROA No. 19, is DENIED. The Notice for this Motion (Notice) was file don 2-16-23 under ROA No. 27.
Plaintiffs’ (Nolvia Romero and Anvenies Campos) Request for Judicial Notice, filed on 7-5-23 under ROA No. 49, is GRANTED pursuant to Evidence Code section 452, subdivision (a).
Code of Civil Procedure section 1281.2 states in part, “On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party to the agreement refuses to arbitrate that 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 rescission of the agreement. . . .”
Toal v. Tardif (2009) 178 Cal.App.4th 1208, 1219, provides, “In Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 58 Cal.Rptr.2d 875, 926 P.2d 1061 (Rosenthal), our Supreme Court set forth the procedure to be followed when a petitioner seeks to compel arbitration: ‘[W]hen a petition to compel arbitration is filed and accompanied by prima facie evidence of a written agreement to arbitrate the controversy, the court itself must determine whether the agreement exists and, if any defense to its enforcement is raised, whether it is enforceable. Because the existence of the agreement is a statutory prerequisite to granting the petition, the petitioner bears the burden of proving its existence by a preponderance of the evidence. If the party opposing the petition raises a defense to enforcement—either fraud in the execution voiding the agreement, or a statutory defense of waiver or revocation [citation]—that party bears the burden of producing evidence of, and proving by a preponderance of the evidence, any fact necessary to the defense.’ [Citation.]” (Footnote 8 omitted.) Espejo v. Southern California Permanente Medical Group (2016) 246 Cal.App.4th 1047, 1060 (Espejo), provides, “In context, the brief discussion of Condee by the court in Toal regarding a petitioner's ultimate burden has no bearing on the question before us—whether defendants may meet their initial burden to show an agreement to arbitrate by attaching a copy of the arbitration agreement purportedly bearing the opposing party's signature. We conclude they may, in compliance with the requirements of section 1281.2 and California Rules of Court, rule 3.1330.” (Italics in Espejo.)
Gamboa v. Northeast Community Clinic (2021) 72 Cal.App.5th 158, 165 (Gamboa), explains, “First, the moving party bears the burden of producing ‘prima facie evidence of a written agreement to arbitrate the controversy.’ [Citation.] The moving party ‘can meet its initial burden by attaching to the [motion or] petition a copy of the arbitration agreement purporting to bear the [opposing party's] signature.’ [Citation.] Alternatively, the moving party can meet its burden by setting forth the agreement's provisions in the motion. [Citations.] For this step, ‘it is not necessary to follow the normal procedures of document authentication.’ [Citation.] If the moving party meets its initial prima facie burden and the opposing party does not dispute the existence of the arbitration agreement, then nothing more is required for the moving party to meet its burden of persuasion. [¶] If the moving party meets its initial prima facie burden and the opposing party disputes the agreement, then in the second step, the opposing party bears the burden of producing evidence to challenge the authenticity of the agreement. [Citation.] The opposing party can do this in several ways. For example, the opposing party may testify 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. [Citations.] [¶] If the opposing party meets its burden of producing evidence, then in the third step, the moving party must establish with admissible evidence a valid arbitration agreement between the parties. The burden of proving the agreement by a preponderance of the evidence remains with the moving party. [Citation.]”
Equitable Estoppel:
Relying on equitable estoppel, the Motion states, “. . . Although not a signatory to the Sales Contract, the binding precedent of Felisilda v. FCA US LLC (2020) 53 Cal.App.5th 486, establishes that FCA has standing to enforce the Arbitration Agreement under the doctrine of equitable estoppel and as a third-party beneficiary.” (Motion; 1:18-22.) Plaintiffs’ Opposition to FCA US, LLC’s Motion to Compel Arbitration and Stay Action (Opposition), filed on 7-5-23 under ROA No. 47, states, “These recent Court of Appeals rulings clearly demonstrate that non-signatory manufacturers, like FCA US, LLC . . . cannot invoke the arbitration provision in sales contracts because Plaintiffs’ claims are not inextricably intertwined with any term or obligation of the Sales Contract, and FCA is not an intended beneficiary of the Sales Contract.” (Opposition; 1:26-2:3.)
Here, Defendant has met its initial burden of showing the existence of written arbitration agreement by attaching a copy of the arbitration agreement between Plaintiffs and Surf City Auto Group (Dealer) (Sandhu Decl., ¶ 2 and Exhibit A.) The arbitration agreement is contained in the Retail Installment Sale Contract (RISC) between Plaintiffs and Dealer. (Sandhu Decl., ¶ 2 and Exhibit A.)
Felisilda v. FCA US LLC (2020) 53 Cal.App.5th 486, 495 (Felisilda), states, “As a general rule, only a party to an arbitration agreement may enforce the agreement. [Citation.]” Westra v. Marcus & Millichap Real Estate Investment Brokerage Co., Inc. (2005) 129 Cal.App.4th 759, 763 (Westra), provides, “ ‘ “The strong public policy in favor of arbitration does not extend to those who are not parties to an arbitration agreement, and a party cannot be compelled to arbitrate a dispute that he has not agreed to resolve by arbitration. [Citation.]” ’ [Citations.]” Correia v. NB Baker Electric, Inc. (2019) 32 Cal.App.5th 602, 622 (Correia), explains, “Under state and federal law, an arbitration agreement applies only to the parties who agreed to its terms and a party cannot be compelled to arbitrate a dispute that it has not elected to submit to arbitration. [Citation.]” Jones v. Jacobson (2011) 195 Cal.App.4th 1, 15 (Jones), states, “We conclude that in such instances, the nonsignatory bears the burden to establish he or she is a party to the arbitration agreement/provision covering the dispute.” (Italics in Jones.) “As is now obvious, with limited exceptions only parties to an arbitration agreement can enforce it or be required to arbitrate. [Citation] . . . [¶] ‘. . . Even the strong public policy in favor or arbitration does not extend to those who are not parties to an arbitration agreement or who have not authorized anyone to act for them in executing such agreement.’ . . . [¶] ‘Exceptions in which an arbitration agreement may be enforced by or against nonsignatories include where a nonsignatory is a third party beneficiary of the agreement [citation] and when a nonsignatory and one of the parties to the agreement have a preexisting agency relationship that makes it equitable to impose the duty to arbitrate on either of them. [Citations.]’ [Citation.] (Id., at pp. 17-18.)
The RISC provides the following terms regarding arbitration: “1. EITHER YOU OR WE MAY CHOOSE TO HAVE ANY DISPUTE BETWEEN US DECIDED BY ARBITRATION AND NOT IN COURT OR BY JURY TRIAL. [¶] 2. IF A DISPUTE IS ARBITRATED, YOU WILL GIVE UP YOUR RIGHT TO PARTICIPATE AS A CLASS REPRESENTATIVE OR CLASS MEMBER ON ANY CLASS CLAIM YOU MAY HAVE AGAINST US INCLUDING ANY RIGHT TO CLASS ARBITRATION OR ANY CONSOLIDATION OF INDIVIDUAL ARBITRATIONS. [¶] 3. DISCOVERY AND RIGHTS TO APPEAL IN ARBITRATION ARE GENERALLY MORE LIMITED THAN IN A LAWSUIT, AND OTHER RIGHTS THAT YOU AND WE WOULD HAVE IN COURT MAY NOT BE AVAILABLE IN ARBITRATION.” (Sandhu Decl., ¶ 2 and Exhibit A.) The RISC further states, “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 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. . . .” (Sandhu Decl., ¶ 2 and Exhibit A.) The RISC specifically defines “You” as the “Buyer (and Co-Buyer, if any)” (Plaintiffs) and “we” or “us” as the “Seller” (Dealer). (Sandhu Decl., ¶ 2 and Exhibit A.) Defendant is not a signatory to the RISC. (Sandhu Decl., ¶ 2 and Exhibit A.)
In Felisilda, “. . . the Felisildas brought an action against Elk Grove Dodge and the manufacturer, FCA US LLC (FCA) for violation of the Song-Beverly Consumer Warranty Act (Song-Beverly Act) (Civ. Code, § 1790 et seq.). Relying on the retail installment sales contract (sales contract) signed by the Felisildas, Elk Grove Dodge moved to compel arbitration. FCA filed a notice of nonopposition to the motion to compel. The trial court ordered the Felisildas to arbitrate their claim against both Elk Grove Dodge and FCA. In response, the Felisildas dismissed Elk Grove Dodge. The matter was submitted to arbitration, and the arbitrator found in favor of FCA. The trial court confirmed the arbitrator's decision. From the resulting judgment, the Felisildas appeal.” (Id, at p. 489; Footnote 1 omitted.) “In October 2015, Elk Grove Dodge moved to compel arbitration of the Felisildas’ claim. In so moving, Elk Grove Dodge argued the entire matter should be ordered to arbitration – including FCA, even though FCA was not a signatory to the sales contract. FCA filed a ‘notice of non-opposition’ to Elk Grove Dodge. FCA did not advance any argument in support of arbitration.” (Felisilda, supra, 53 Cal.App.5th at p. 491.)
“As a general rule, only a party to an arbitration agreement may enforce the agreement. [Citation.] However, there are several exceptions that allow a nonsignatory to invoke an agreement to arbitrate. [Citation.] The doctrine of equitable estoppel is one of the exceptions. [Citation.] [¶] Under the doctrine of equitable estoppel, ‘as applied in “both federal and California decisional authority, 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.” (Boucher [v. Alliance Title Co, Inc. (2005) ] 127 Cal.App.4th [262,] 271 [25 Cal.Rptr.3d 440] [ (Boucher) ]; Goldman [v. KPMG, LLP (2009) ] 173 Cal.App.4th [209,] 217-218 [92 Cal.Rptr.3d 534] [ (Goldman) ].) “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.” (Boucher, supra, 127 Cal.App.4th at p. 272 [25 Cal.Rptr.3d 440]; Goldman, supra, 173 Cal.App.4th at p. 220 [92 Cal.Rptr.3d 534].)’ [Citation.] [¶] ‘Where the equitable estoppel doctrine applies, the nonsignatory has a right to enforce the arbitration agreement.’ [Citation.] ‘ “The fundamental point” is that a party is “not entitled to make use of [a contract containing an arbitration clause] as long as it worked to [his or] her advantage, then attempt to avoid its application in defining the forum in which [his or] her dispute . . . should be resolved.” ’ [Citations.] ‘In any case applying equitable estoppel to compel arbitration despite the lack of an agreement to arbitrate, a nonsignatory may compel arbitration only when the claims against the nonsignatory are founded in and inextricably bound up with the obligations imposed by the agreement containing the arbitration clause.’ [Citation. In determining whether the plaintiffs’ claim is founded on or intimately connected with the sales contract, we examine the facts of the operative complaint. [Citation.]” (Id., at pp. 495-496; Italics in Felisilda.)
Glassburg v. Ford Motor Co., (C.D. Cal. Nov. 2, 2021) 2021 WL 5086358,
at page 3 (Glassburg), states, “Ford
argues that Felisilda v. FCA US LLC, 53 Cal. App. 5th 486 (2020) compels a different result, but Ford is mistaken.
In Felisilda, the consumer had originally brought their
claim against both the dealer and the manufacturer. [Citation.] This
difference is key. The existence of a claim against the dealer makes Felisilda inapposite because the claim against
the dealer brought the Felisildas' claim within the scope of the arbitration
agreement, that is, within the class of claims described by the arbitration
agreement as arbitrable. [Citation.] (‘[T]he arbitration provision in this
case provides for arbitration of disputes that include third parties so
long as the dispute pertains to the condition of the vehicle.” (emphasis
added)). Because the Felisildas initially brought their claim against both
the dealer and the manufacturer, their dispute was one that “include[d] third
parties.’ [Citation.] The Court based its conclusion that equitable
estoppel applied primarily on the fact that the Felisildas' claim against the
manufacturer fell within the scope of the operative arbitration
clause. [Citation.]”
Ngo v. BMW of North America, LLC (9th Cir. 2022) 23 F.4th 942, 950 (Ngo), “BMW alternatively argues that it need not meet the Kramer standard because equitable estoppel under California law was broadened by a recent decision: Felisilda v. FCA US LLC, 53 Cal. App. 5th 486, 266 Cal.Rptr.3d 640 (2020). We disagree. [¶] The plaintiffs in Felisilda purchased a used 2011 Dodge Grand Caravan from the Elk Grove Dodge dealership and signed a purchase agreement containing an arbitration provision that was virtually identical to the one Ngo signed. [Citation.] After discovering ‘serious defects’ with the car, the Felisildas sued both the dealership and the manufacturer. [Citation.] The dealership moved to compel arbitration. [Citation.] After the manufacturer filed a notice of non-opposition, the trial court compelled arbitration. [Citation.] The Felisildas then dismissed the dealership and the district court ordered it to arbitrate with the manufacturer alone. [Citation.] The California Court of Appeal affirmed. [Citation.] [¶] It makes a critical difference that the Felisildas, unlike Ngo, sued the dealership in addition to the manufacturer. In Felisilda, it was the dealership—a signatory to the purchase agreement—that moved to compel arbitration rather than the non-signatory manufacturer. [Citation.] Furthermore, the Felisildas dismissed the dealership only after the court granted the motion to compel arbitration. Accordingly, Felisilda does not address the situation we are confronted with here, where the non-signatory manufacturer attempted to compel arbitration on its own. We therefore decline to affirm on the ground of equitable estoppel.” In Ngo, “Ngo’s complaint named only BMW as a defendant.” (Id., at p. 945.)
Alan v. Superior Court (2003) 111 Cal.App.4th 217, 229, provides, “And, of course, the decisions of federal district and circuit courts, although entitled to great weight, are not binding on state courts even as to issues of federal law. [Citation.]”
Ford Motor Warranty Cases v. Ford Motor Company (Ochoa) 89 Cal.App.5th 1324 (Ochoa) distinguished Felisilda. Ochoa states, “That the Felisilda plaintiffs and the dealer agreed in their sale contract to arbitrate disputes between them about the condition of the vehicle does not equitably estop the plaintiffs from asserting FCA has no right to demand arbitration. Equitable estoppel would apply if the plaintiffs had sued FCA based on the terms of the sale contract yet denied FCA could enforce the arbitration clause in that contract. [Citation.] That is not what the plaintiffs did in Felisilda. [¶] The plaintiffs’ breach of warranty claims against FCA in Felisilda were not based on their sale contracts with the dealers. We disagree with Felisilda that ‘the sales contract was the source of [FCA's] warranties at the heart of this case.’ [Citation.] As we discuss further below, 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.” (Id., at p. 1334. Ochoa further states, “Again, the ‘ “ ‘fundamental point’ ” ’ of using equitable estoppel to compel arbitration is to prevent a party from taking advantage of a contract's substantive terms while avoiding those terms requiring arbitration. [Citation.] Plaintiffs’ claims in no way rely on the sale contracts. Equitable estoppel does not apply.” (Id., at p. 1336.)
Defendant’s Reply to Plaintiffs’ Opposition to Its Motion to Compel Arbitration and Stay Action (Reply), filed on 7-11-23 under ROA No. 54, states, “As the Ochoa case has been appealed it may only be cited for persuasive and not precedential value.” (Reply; 1:14-15.) California Rules of Court, rule 8.1115(e)(1), states, “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.”
To the extent that Ochoa is in conflict with Felisilda, the court finds Ochoa’s reasoning more persuasive.
Similar to Ochoa, Plaintiffs base their causes of action on the Defendant’s vehicle warranties. The Complaint, filed on 12-22-22 under ROA No. 2, alleges causes of action for breach of express warranty pursuant to Civil Code section 1793.2, breach of the implied warranty of merchantability, and fraudulent inducement against Defendant. (See, the first, second, third, fourth, and fifth causes of action alleged in the Complaint.) The Complaint alleges the sixth cause of action against Dealer only. (Complaint.) Plaintiffs do not base their causes of action on the terms of the sales contract between Plaintiff—and Dealer. Therefore, the court finds that equitable estoppel does not apply to allow Defendant, as a non-signatory to the RISC, to enforce the arbitration provision in the RISC.
Third Party Beneficiary:
Ochoa provides, “To show the contracting parties intended to benefit it, a third party must show that, under the express terms of the contract at issue and any other relevant circumstances under which the contract was made, (1) ‘the third party would in fact benefit from the contract’; (2) ‘a motivating purpose of the contracting parties was to provide a benefit to the third party’; and (3) permitting the third party to enforce the contract ‘is consistent with the objectives of the contract and the reasonable expectations of the contracting parties.’ [Citation.]” (Id., at p. 1337.)
Ochoa explains, “We agree with Ngo that the sale contracts reflect no intention to benefit a vehicle manufacturer under Goonewardene. First, nothing in the sale contracts or their arbitration provision offers any direct ‘benefit’ to FMC [citation]. FMC's claim that it ‘would benefit from utilizing arbitration as an efficient means of dispute resolution’ (italics added) if treated as a third party beneficiary begs the question: does the provision directly benefit FMC? The answer is patently ‘no.’ Its direct benefits are expressly limited to those persons who might rely on it to avoid proceeding in court—the purchaser, the dealer, and the dealer's employees, agents, successors or assigns. FMC is none of these. [¶] Second, there is no indication that a benefit to FMC was the signatories’ ‘motivating purpose’ [citation] in contracting for the sale and purchase of a Ford vehicle. The manifest intent of the parties was to buy, sell and finance a car, and to allow either the purchaser or the dealer to compel arbitration of the specified categories of disputes between them, or between the purchaser and any of the dealer's ‘employees, agents, successors or assigns.’ [Citation.]” (Id., at pp. 1338-1339.) “Finally, allowing FMC to enforce the arbitration provision as a third party beneficiary would be inconsistent with the ‘reasonable expectations of the contracting parties’ [citation] where they twice specifically vested the right of enforcement in the purchaser and the dealer only.” (Id., at p. 1340.)
Under Ochoa, Defendant is not a third-party beneficiary of the RISC between Plaintiffs and Dealer.
Based on the above, the court DENIES Defendant’s (FCA US LLC) Motion to Compel Arbitration and Stay Action filed on 2-16 under ROA No. 19.
Motion No. 2:
Based on the Request for Dismissal filed on 7-5-23 under ROA No. 52, Defendant’s (Surf City Auto Group, Inc. dba Huntington Beach Chrysler Dodge Jeep Ram) Motion to Compel Arbitration and Stay Action (filed on 2-16-23 under ROA No. 21) is OFF CALENDAR.