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Court of Appeal:
Arbitration Proviso in Sales Contract Doesn’t Benefit Ford
Opinion From This District’s Div. Seven Repudiates Third District’s 2020 Decision
By a MetNews Staff Writer
The Court of Appeal for this district has affirmed an order denying a motion by Ford Motor Company to compel arbitration of an action against it under the state’s “lemon law,” holding that an arbitration provision in the sales agreement did not extend to the manufacturer because it was not a party to that agreement.
Monday’s opinion by Justice Gail Ruderman Feuer of Div. Seven, upholding an order by Los Angeles Superior Court Judge Mel Red Recana, repudiates a contrary decision in 2020 by the Third District Court of Appeal in Felisilda v. FCA US LLC. Another panel in this district, less than three months ago, also rejected the reasoning in Felisilda.
In the 2020 case as well as in the case decided Monday, the sales agreement recited:
“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...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.”
Third District’s Decision
In Felisilda, Dina and Pastor Felisilda sued FCA—formerly known as Chrysler Group LLC—and a dealership, alleging violations of the Song-Beverly Consumer Warranty Act, popularly known as the “lemon law”; the dealership moved to compel arbitration; FCA filed nonopposition to arbitration; the trial court ordered it.
Justice Andrea L. Hoch wrote:
“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 claim against FCA.”
She went on to say:
“We…reject the Felisildas’ contention that the rule requiring mutual consent to arbitrate is violated for lack of the Felisildas’ consent to arbitrate their claim against FCA. As explained above, the Felisildas’ agreement to the sales contract constituted express consent to arbitrate their claims regarding vehicle condition even against third parties. Their consent preceded the motion to compel filed in this case.”
Feuer’s Opinion
In the case before this district’s Div. Seven, Rosanna and Jesse Montemayor sued under the lemon law and other theories, and Ford moved to compel arbitration. In her opinion affirming Recana’s order, Feuer indicated her panel’s rejection of the Third District’s view, and said:
“We conclude Ford cannot enforce the arbitration provision in the sales contract because the Montemayors’ claims against Ford are founded on Ford’s express warranty for the vehicle, not any obligation imposed on Ford by the sales contract, and thus, the Montemayors’ claims are not inextricably intertwined with any obligations under the sales contract. Nor was the sales contract between the Montemayors and AutoNation intended to benefit Ford.”
Noting that this district’s Div. Eight, in Ford Motor Warranty Cases, declined to follow Felisilda, Feuer wrote:
“We too decline to follow Felisilda and adopt the reasoning in Ford Warranty.
No Intertwining
Feuer elaborated:
“To be sure, the Montemayors would not have sued Ford for the defective condition of the vehicle but for the sale of the vehicle by AutoNation pursuant to the sales contract. And Ford provided an express warranty to the Montemayors as a result of the sale. But that does not mean Ford’s obligation to provide a non-defective vehicle under its separate express warranty is in any way founded on an obligation imposed by the sales contract or is intertwined with those obligations.”
She went on to say:
“Further, we disagree with Felisilda that the language in the arbitration provision referencing ‘third parties who do not sign this contract’ provides a basis for nonsignatory manufacturers to compel arbitration of claims brought by vehicle purchasers….We agree with Ford Warranty…that this language refers to the subject matter of covered claims, not the scope of who may enforce the arbitration provision.”
The justice found no merit in Ford’s contention that it was a third party beneficiary of the agreement between the dealership and the Montemayors.
Grime’s Decision
Ford Motor Warranty Cases stemmed from five lawsuits filed in the Los Angeles Superior Court which were coordinated. Judge Amy Hogue denied the motion by Ford to compel arbitration, and Div. Eight affirmed on April 4 in an opinion by Justice Elizabeth A. Grimes.
Criticizing Felisilda, she said:
“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….
“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.’…[M]anufacturer 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.”
Feuer’s opinion came in Montemayor v. Ford Motor Company, 2023 S.O.S. 2143.
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