Judge William A. Crowfoot, Case Number: 22AHCV00463, Date: 2023-05-19 Tentative Ruling

Judge: William A. Crowfoot, Case: 22AHCV00463, Date: 2023-05-19 Tentative Ruling

On March 3, 2023, defendant Nissan North America, Inc (“Defendant”) filed this motion for an order compelling plaintiff Blanca Dominguez (“Plaintiff”) to arbitrate her claims for violations of the Song-Beverly Consumer Warranty Act (“SBA”), fraud, and negligent repair. Defendant argues that a valid arbitration agreement exists in the Retail Installment Sale Contract (“RISC”) that Plaintiff entered into when she purchased her vehicle and that Defendant may enforce the arbitration agreement based on the doctrine of equitable estoppel and as a third-party beneficiary.

On May 1, 2023, Plaintiff filed an opposition brief, supporting declaration, and evidentiary objections. Plaintiff argues that Defendant is not entitled to enforce the arbitration agreement in the RISC because the doctrine of equitable estoppel does not apply and Defendant is not a third-party beneficiary of the RISC. Plaintiff also argues that Defendant has waived any right to arbitration and that the arbitration provision is unconscionable.

On May 12, 2023, Defendant filed a reply brief and supplemental declaration. On reply, Defendant concedes that it is not a third-party beneficiary, but maintains the right to enforce the arbitration provision based on equitable estoppel. (Reply, p. 6.)

Plaintiff objects to the copy of the RISC attached to defense counsel’s declaration on the grounds that it is hearsay, lacks foundation/authentication, and is speculative and prejudicial. The objections are OVERRULED. In moving to compel arbitration, Defendant need only allege the existence of an agreement to arbitrate. (Condee v. Longwood Management Corp. (2001) 88 Cal.App.4th 215, 219.)

When seeking to compel arbitration of a plaintiff’s claims, the defendant must allege the existence of an agreement to arbitrate. (Condee, supra, 88 Cal.App.4th at p. 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.)

Defendant argues that the RISC has an arbitration provision. Plaintiff does not dispute that she entered into an RISC with an arbitration provision but argues that Defendant cannot enforce the arbitration provision. Based on the Second District of the Court of Appeal’s recent ruling in Ford Motor Warranty Cases (2023) 89 Cal.App.5th 1324 (Ochoa), this Court agrees with Plaintiff.

The RISC identifies Plaintiff as the buyer (“Buyer”) and refers to Plaintiff as “You” while identifying non-party Nissan of Alhambra as “Seller-Creditor” and referring to it as “we” or “us.” (Salinas Decl., Ex. B, p. 1.) A box in the lower right-hand corner of the RISC states:

Agreement to Arbitrate: By signing below, you agree that, pursuant to the Arbitration Provision on 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.

1. EITHER YOU OR WE MAY CHOOSE TO HAVE ANY DISPUTE BETWEEN US DECIDED BY ARBITRATION AND NOT IN COURT OR BY JURY TRIAL.

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. If 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.”

Defendant primarily relies on Felisilda v. FCA US LLC (2020) 53 Cal.App.5th 486, 496-499 (Felisilda) to argue that the doctrine of equitable estoppel applies. In Felisilda, the court of appeal concluded that the doctrine of equitable estoppel allowed the manufacturer to compel arbitration based on the arbitration agreement within the plaintiff-customer’s sales contract with the dealer. The Felisilda court stated:

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 [the manufacturer].” (Felisilda, supra, 53 CallApp.5th at p. 497.)

However, in Ochoa, the court of appeal held that the plaintiff’s claims here are “based on Defendant’s statutory obligations to reimburse consumers or replace their vehicles when unable to repair in accordance with its warranty, not on any express contractual language in the sale contracts” and concluded that the warranty was “not founded in or intimately connected with the obligations of the [RISC].” (Ochoa, supra, 89 Cal.App.5th at p. 1335.)

The Ochoa court also disagreed with the Felisilda court’s interpretation of the sale contract as broadly calling for arbitration of claims against third party nonsignatories. (Ochoa, supra, 89 Cal.App.5th at pp. 1333-1335.) Instead, Ochoa clearly distinguishes between (1) the parties to the claims or disputes (here, “you and us or our employees, agents, successors or assigns”), and (2) the subject matters of the claims or disputes (e.g., arising out of or relating to “. . . this contract and any resulting transaction or relationship (including any such relationship with third parties who do not sign this contract”). (See id. at pp. 1134-1135.) Thus, based on the language of the arbitration provision before this Court and Ochoa’s clear interpretation thereof, there is no agreement requiring Plaintiff to arbitrate a claim or dispute between herself and a non-signatory third-party such as Defendant.

Defendant argues that Felisilda is the “better-reasoned decision” because Ochoa is based on “brief out-of-context statements in 1963 opinions by the California Supreme Court in Greenman v. Yuba Power Products (1963) 59 Cal.2d 57 (Greenman) and by the Court of Appeal in Corporation of Presiding Bishop of Church of Jesus Christ of Latter Day Saints v. Cavanaugh (1963) 217 Cal.App.2d 492, 514 (Cavanaugh). (Reply, p. 11.) Defendant contends that Greenman and Cavanaugh are inapposite because the warranty at issue in Greenman “was not one governed by the law of contract, but one governed ‘by the law of strict liability in tort’, and Cavanaugh involved an express warranty arising out of the sale by the manufacturer to the installer of a heating system rather than to the plaintiff who contracted for the installation. (Reply, 13:6-23.) Additionally, Defendant argues that several cases published after the SBA was enacted in 1970 “consistently make clear that warranties are part of sales contracts.” (Reply pp. 9-11.)

After reviewing the cases cited in Defendant’s reply, the Court concludes that even if they are more recent, they are not more persuasive than Greenman or Cavanaugh. Furthermore, there is no horizontal stare decisis in the California Court of Appeal and this Court can choose to either continue to follow Felisilda or instead adopt Ochoa’s reasoning. (Sarti v. Salt Creek Ltd. (2008) 167 Cal.App.4th 1187, 1193.) This Court chooses to adopt Ochoa based on the Ochoa court’s detailed examination of an identical arbitration provision. Also, “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. This dilemma will endure until the Supreme Court resolves the conflict, or the Legislature clears up the uncertainty by legislation.” (McCallum v. McCallum (1987) 190 Cal.3d 309, 315, n. 4.) Ochoa was decided by the Court of Appeal of California, Second Appellate District and Felisilda was decided by the Court of Appeal of California, Third Appellate District. This court belongs to the Second Appellate District. Therefore, for practical reasons, as well as the substantive reasons articulated above, this Court decides to follow Ochoa instead of Felisilda and concludes that the doctrine of equitable estoppel does not permit Defendant to compel arbitration.

William A. Crowfoot

Judge of the Superior Court

Parties who intend to submit on this tentative must send an email to the Court at ALHDEPT3@lacourt.org indicating intention to submit on the tentative as directed by the instructions provided on the court website at www.lacourt.org. Please be advised that if you submit on the tentative and elect not to appear at the hearing, the opposing party may nevertheless appear at the hearing and argue the matter. Unless you receive a submission from all other parties in the matter, you should assume that others might appear at the hearing to argue. If the Court does not receive emails from the parties indicating submission on this tentative ruling and there are no appearances at the hearing, the Court may, at its discretion, adopt the tentative as the final order or place the motion off calendar.