PAPPA vs FORD MOTOR COMPANY, et al.

A Stipulation and Appointment of Official Reporter Pro Tempore (CV/E-206) is required to be signed by each party, the private court reporter, and the Judge prior to the hearing, if not using a reporter from the Court’s Approved Official Reporter Pro Tempore list.

Once the form is signed it must be filed with the clerk. If a litigant has been granted a fee waiver and requests a court reporter, the party must submit a Request for Court Reporter by a Party with a Fee Waiver (CV/E-211) and it must be filed with the clerk at least 10 days prior to the hearing or at the time the proceeding is scheduled if less than 10 days away. Once approved, the clerk

24CV010240: PAPPA vs FORD MOTOR COMPANY, et al. 01/15/2025 Hearing on Motion to Compel Arbitration in Department 53

will forward the form to the Court Reporter’s Office and an official reporter will be provided.

TENATIVE RULING:

Defendants Ford Motor Company (“FMC”) and Future Ford of Sacramento’s (“Future Ford”) (collectively, “Defendants”) motion to compel arbitration and stay proceedings is ruled upon as follows.

The notice of motion does not provide notice of the Court’s tentative ruling system, as required by Local Rule 1.06. Moving counsel is directed to contact opposing counsel and advise them of Local Rule 1.06 and the Court’s tentative ruling procedure and the manner to request a hearing. If moving counsel is unable to contact opposing counsel prior to hearing, moving counsel is ordered to appear at the hearing.

The notice of motion includes the incorrect address for the Court. The correct address for Department 53 of the Sacramento Superior Court is 813 6th Street, Sacramento, California 95814.

Background

On May 23, 2024. Plaintiff Daniel Scott Pappa (“Plaintiff”) initiated the instant lemon law action related to the purchase of a certified pre-owned 2021 Ford Ranger, VIN 1FTER4EH3MLD46386 (“the Vehicle”). Plaintiff brings causes of action for violations of the Song-Beverly Act, negligence, and fraudulent inducement – concealment against Defendants. In pertinent part, Defendants allege that Plaintiff purchased the Vehicle through the Retail Installment Sale Contract (“RISC”), which contained arbitration clause. (Declaration of Taylor F. Sullivan (“Sullivan Decl.”) ¶5, Exh. 4.)

Defendants now move to compel arbitration pursuant to the RISC and stay the proceedings. Plaintiff opposes.

Judicial Notice

Defendants request judicial notice of the following exhibits: (1) Plaintiff’s complaint; (2) Defendant’s Answer; and (3) notice of entry of dismissal for Felisilda v. FCA US LLC (Case no. 15-183668). Defendants’ request is granted for the limited purposes appropriate for judicial notice. (See Evid. Code § 452, subds. (d); see also Johnson & Johnson v. Superior Court (2011) 192 Cal.App.4th 757, 768 [court may take judicial notice of the existence of court documents but not to the truth of the statements contained therein].)

Plaintiff requests judicial notice of the following exhibits: (A) Ford Motor Warranty Cases

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24CV010240: PAPPA vs FORD MOTOR COMPANY, et al. 01/15/2025 Hearing on Motion to Compel Arbitration in Department 53

(2023) 89 Cal.App.5th 1324; (b) Montemayor v. Ford Motor Company (2023) 92 Cal.App.5th 958; (C) Kielar v. Superior Court (2023) 94 Cal.App.5th 614; (D) the Third District Court of Appeal response to Petition for writ of mandate in Campos v. Superior Court (Case No. C098848); (E) the Third District Court of Appeals response to Petition for writ of mandate in Ortiz v. Superior Court (Case No. C099135); (F) Yeh v. Superior Court (2023) 95 Cal.App.5th 264; and (G) Davis v. Nissan North America, Inc. (2024) 100 Cal.App.5th 825. Plaintiff’s request is granted for the limited purposes appropriate for judicial notice. (See Evid. Code §452, subd. (d); see also Johnson & Johnson v. Superior Court (2011) 192 Cal.App.4th 757, 768 [court may take judicial notice of the existence of court documents but not to the truth of the statements contained therein].)

The Court notes that Plaintiff’s requests for judicial notice of published California cases is unnecessary and are of limited value. Under Evidence Code section 451, subdivision (a), “[t]he decisional . . . and public statutory law of this state” are matters of which the Court must take judicial notice. Thus, there is no need or purpose in filing a request seeking judicial notice of published California appellate decisions. While it does not appear that Plaintiff seeks judicial notice of findings of fact in appellate decisions, the Court notes that such is not a proper basis for judicial notice. (See Lockley v. Law Office of Cantrell, Green, Pekich, et al. (2001) 91 Cal.App.4th 875, 887; Gilmore v. Superior Court (1991) 230 Cal.App.3d 416.)

Legal Standard

California law, like federal law, favors enforcement of valid arbitration agreements. (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 97; accord, Aanderud v. Superior Court (2017) 13 Cal.App.5th 880, 889.) Under California law, a party to an arbitration agreement may seek a court order compelling the parties to arbitrate a dispute covered by the agreement. (Code Civ. Proc. § 1281.2.) A written agreement to submit a controversy to arbitration is valid, enforceable, and irrevocable consistent with standard contract principles. There is a strong public policy favoring the enforcement of arbitration agreements. (Code Civ. Proc. § 1281; Madden v. Kaiser Foundation Hospitals (1976) 17 Cal.3d 699, 706.)

The moving party “bears the burden of proving the existence of an arbitration agreement by a preponderance of the evidence, and the party opposing arbitration bears the burden of proving by a preponderance of the evidence any defense, such as unconscionability.” (Serafin v. Balco Properties Ltd., LLC (2015) 235 Cal.App.4th 165, 172-173, quoting Peng v. First Republic Bank (2013) 219 Cal.App.4th 1462, 1468; Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 972 [internal citations and quotation omitted].) General principles of contract law govern arbitration agreements. (Serafin, supra, 235 Cal.App.4th at 173.)

The Court must grant a petition to compel arbitration if it determines that the parties agreed to arbitrate the controversy, unless it determines that: (a) the petitioner waived the right to compel arbitration; (b) grounds exist to revoke the agreement; or, (c) a party to the arbitration agreement

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is also a party to a pending court action or special proceeding with a third party, arising out of the same transaction or series of related transactions and there may be conflicting rulings on a common issue of law or fact. (Code Civ. Proc., § 1281.2; Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 413.)

Discussion

Plaintiff has dismissed Future Ford from the instant action. Future Ford’s motion is therefore DROPPED from calendar as moot. The Court thus addresses the motion only as to FMC.

FMC is not a signatory to the agreement to arbitrate. (Sullivan Decl., Exh. 4.)

Nonsignatories generally may not compel contractual arbitration. (JSM Tuscany, LLC v. Superior Court (2011) 193 Cal.App.4th 1222, 1236-1237.) However, certain exceptions exist, and nonsignatories may enforce an arbitration provision if they can show some basis for extending the agreement to them under state contract law. (Westlye v. Look Sports, Inc. (1993) 17 Cal.App.4th 1715, 1728; Arthur Andersen LLP v. Carlisle (2009) 556 U.S. 624, 631.) Under California law, a nonsignatory may enforce an arbitration agreement pursuant to a third-party beneficiary theory. (See, e.g., Thornton v.

Career Training Center, Inc. (2005) 128 Cal.App.4th 116.) Nonsignatories may also enforce arbitration agreements through the doctrine of equitable estoppel. (See, e.g., Molecular Analytical Systems v. Ciphergen Biosystems, Inc. (2010 186 Cal.App.4th 696 [claims asserted against nonsignatory “intimately intertwined” with contract containing arbitration clause.])

“[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.” (Goldman v. KPMG, LLP (2009) 173 Cal.App.4th 209, 219 [emphasis in original.]) Whether the claims against the nonsignatory are “founded on or intimately connected with” the agreement containing the arbitration provision is determined by examining the operative complaint. (Felisilda v. FCA US LLC (2020) 53 Cal.App.5th 486, 496.) Whether a nonsignatory may enforce an arbitration agreement “is a question of state law.” (Ford Motor Warranty Cases, supra, 89 Cal.App.5th at 1332.)

FMC relies on the Third District Court of Appeal’s decision in Felisilda, supra, in support of its motion to compel. In that case, the plaintiffs brought lemon law claims against the vehicle manufacturer and its certified dealer. The trial court ordered the plaintiffs’ claims against both defendants to arbitration, even though the manufacturer was not a party to the sales contract that contained the arbitration provision at issue. In affirming the trial court, the Felisilda court concluded that the arbitration provision applied to claims against the manufacturer based on equitable estoppel because the plaintiffs’ claims against the manufacturer were based solely on the warranties contained in the sales contract. The court stated:

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

24CV010240: PAPPA vs FORD MOTOR COMPANY, et al. 01/15/2025 Hearing on Motion to Compel Arbitration in Department 53

The Felisildas’ claim against FCA directly relates to the condition of the vehicle that they allege to have violated warranties they received as a consequence of the sales contract. Because the Felisildas 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 FCA. Consequently, the trial court properly ordered the Felisildas to arbitrate their claims against FCA.

(Felisilda, supra, 53 Cal.App.5th at 497.)

In contrast to Felisilda is the Ford Motor Warranty Cases. The Ford Motor Warranty Cases involved several lemon law actions against only the manufacturer that were consolidated into one action. In affirming the trial court’s denial of the manufacturer’s motion to compel arbitration, the court expressly declined to follow Felisilda and concluded that equitable estoppel did not apply because the plaintiffs’ claims were not founded on the sale contract. Specifically, in its discussion of Felisilda, the Ford Motor Warranty court provided the following rationale:

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. (Felisilda, supra, 53 Cal.App.5th at 495-496.) That is not what the plaintiffs did in Felisilda.

(Ford Motor Warranty Cases, supra, 89 Cal.App.5th at 1334.)

The court also rejected the Felisilda court’s broad interpretation of language in the arbitration agreement related to claims against third parties, specifically the provision that permitted arbitration of any claim or dispute arising out of the “‘purchase or condition of this vehicle, the contract or any resulting transaction or relationship (including any such relationship with third parties who do not sign this contract) .’” (Ford Motor Warranty Cases, supra, 89 Cal.App.5th at 1334 [emphasis in Felisilda].)

This language was found in the arbitration agreements in both Felisilda and Ford Motor Warranty Cases, and is identical to the language in the Arbitration Provision in this case. Regarding this language, the Ford Motor Warranty court stated, “[w]e do not read this italicized language as consent by the purchaser to arbitrate claims with third party nonsignatories. Rather, we read it as a further delineation of the subject matter of claims the purchasers and dealers agreed to arbitrate.” (Id. at 1334-1335 [emphasis in original].)

In concluding that the plaintiff’s lemon law claims were not founded in the sales contract, the court noted that although many of the plaintiffs referred to the contract in their complaints and even occasionally attached it as an exhibit, “no plaintiffs alleged violations of the sale contracts’ express terms. Rather, plaintiffs’ claims are based on FMC’s statutory obligations to reimburse consumers or replace their vehicles when unable to repair in accordance with its warranty.

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Not one of the plaintiffs sued on any express contractual language in the sale contracts.” (Ford Motor Warranty Cases, supra, 89 Cal.App.5th at 1335.) The court also noted that the sales contract did not contain any warranties, finding that “the substantive terms of the sale contracts relate to sale and financing and nothing more.” (Ibid.) The court also rejected the manufacturer’s argument that California law treats all warranty claims as contract claims, citing to 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. Ultimately, the court concluded:

But, contrary to FMC’s assertion, it does not ‘naturally follow’ from any contractual character of manufacturer warranty claims that they inhere in a retail sale contract containing no warranty terms. Following Greenman, supra, 69 Cal.2d 57, and Cavanaugh, supra, 217 Cal.App.2d 492, independent manufacturer warranties are not part of, but are independent from, retail sale contracts.

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. (Felisilda, supra, 53 Cal.App.5th at p. 496.) Plaintiffs’ claims in no way rely on the sale contracts. Equitable estoppel does not apply.

(Ford Motor Warranty Cases, supra, 89 Cal.App.5th at 1336.)

The Ford Motor Warranty opinion was published on April 4, 2023. On July 19, 2023, the California Supreme Court granted review and noted that Ford Motor Warranty Cases “may be cited, not only for its persuasive value, but also for the limited purpose of establishing the existence of a conflict in authority that would in turn allow trial courts to exercise discretion under Auto Equity Sales, Inc. v. Superior Court (1962) 57 Cal.2d 450, 456 [20 Cal. Rptr. 321, 369 P.2d 937], to choose between sides of any such conflict.” (Ochoa v.

Ford Motor Co. (In re Ford Motor Warranty Cases) (July 19, 2023, S279969) 2023 Cal. LEXIS 4235.) Furthermore, the Third District Court of Appeal in Kielar v. Superior Court (2023) 94 Cal.App.5th 614 expressly renounced its own earlier decision in Felislda that equitable estoppel applies in this situation. The California Supreme Court has granted review of Kielar as well. (Id., review granted Oct. 25, 2023, S281937.)

Given the development of decisional law in California since Felisilda, this Court is persuaded at this time by Ford Motor Warranty Cases. The Court notes that this case is factually similar to Ford Motor Warranty Cases, including the lack of warranties in the RISC and the fact that the other signatory to the RISC is not a party in this action. In reply, Defendant appears to suggest that the dismissal of Future Ford from the instant action demonstrates bad faith. Plaintiff is entitled to dismiss a party from his complaint. In any event, Future Ford does not appear to be a signatory to the RISC such that dismissal would have any effect. (Sullivan Decl., Exh. 4 [identifying seller as “Suburban Motors, Inc.”].) Additionally, like the plaintiffs in Ford Motor

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24CV010240: PAPPA vs FORD MOTOR COMPANY, et al. 01/15/2025 Hearing on Motion to Compel Arbitration in Department 53

Warranty Cases, Plaintiff’s claims are not founded on the RISC, as Plaintiff does not allege any breach of the RISC terms. Instead, Plaintiff’s claims “are based on [Defendant]’s statutory obligations to reimburse consumers or replace their vehicles when unable to repair in accordance with its warranty.” (Ford Motor Warranty Cases, supra, 89 Cal.App.5th at 1335.) Indeed, Plaintiff has not “sued on any express contractual language” in the Lease. (Ibid.) (See generally, Compl.)

FMC does not address in its moving or reply papers the Ford Motor Warranty Cases. FMC does not have standing to enforce the Arbitration Provision as a nonsignatory under an equitable estoppel theory. Its motion to compel arbitration on this basis is DENIED.

To the extent that FMC contends that it is entitled to enforce the arbitration clause as an intended third-party beneficiary to the RISC, the Court finds this argument unpersuasive. Whether FMC is an expressly named or unnamed third-party beneficiary, it must nevertheless meet the requirements for establishing a third-party beneficiary claim. In making such a determination, the supreme court indicated that it a court must

carefully examine[] the express provisions of the contract at issue, as well as all of the relevant circumstances under which the contract was agreed to, in order to determine not only (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 (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.) The supreme court continued:

With regard to the second element, we note that our past cases have sometimes referred to this element of the third party beneficiary doctrine as a requirement that the “purpose” of the contract be to benefit the third party (see, e.g., Lucas v. Hamm, supra, 56 Cal.2d at pp. 589–590) and sometimes as a requirement that there be “an intent to benefit” the third party (see, e.g., id. at p. 591; Murphy v. Allstate Ins. Co., supra, 17 Cal.3d at p. 944; Garcia v. Truck Ins. Exchange, supra, 36 Cal.3d at p. 436).

Because of the ambiguous and potentially confusing nature of the term “intent” (see Eisenberg, supra, 92 Colum. L.Rev. at p. 1378), this opinion uses the term “motivating purpose” in its iteration of this element to clarify that the contracting parties must have a motivating purpose to benefit the third party, and not simply knowledge that a benefit to the third party may follow from the contract.

(Ibid.) Based on a review of the RISC, the Court finds that the motivating purpose behind the Lease is not to benefit FMC. Indeed, the motivating purpose of the RISC is the sale of the

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Vehicle to Plaintiff in exchange for payment. (Sullivan Decl., Exh. 4.)

Neither does the third element turn in FMC’s favor. It is unclear how FMC would be able to bring a breach of contract action against Plaintiff if Plaintiff violated any terms of the RISC. This is apparent from Plaintiff’s complaint, which brings causes of action for statutory violations unrelated to any provisions in the RISC against FMC. As such, FMC is not a third-party beneficiary of the RISC under the test articulated by the supreme court. Defendant’s motion to compel arbitration on this basis is also DENIED.

FMC also contends that the question of arbitrability is for the arbitrator to decide. This argument is premised on a showing of a valid arbitration agreement that can be enforced. As noted above, FMC is not a signatory to the arbitration provision and cannot enforce the arbitration agreement.

Disposition

Defendant FMC’s motion to compel arbitration and stay proceedings is DENIED, in its entirety. Defendant Future Ford’s motion to compel arbitration and stay proceedings is DROPPED as moot.

This minute order is effective immediately. No formal order or other notice is required. (Code Civ. Proc. § 1019.5; Cal. Rules of Court, rule 3.1312.)