Case Number: BC687552 Hearing Date: March 22, 2018 Dept: 53

RICHARD HOLMES vs. FORD MOTOR COMPANY , et al.; BC687552, MARCH 22, 2018

[Tentative] Order RE: DEFENDANTS’ PETITION TO COMPEL ARBITRATION AND MOTION TO STAY ACTION

Defendants’ FORD MOTOR COMPANY and VISTA FORD INC. dba VISTA FORD LINCOLN’s Petition to Compel Arbitration and Motion to Stay Action is GRANTED IN PART AND DENIED IN PART.

BACKGROUND

Plaintiff Richard Holmes (“Holmes”) initiated this action on December 19, 2017, against Defendants Ford Motor Company (“Ford”) and Vista Ford Inc. dba Vista Ford Lincoln (“Vista Ford”) (jointly, “Defendants”). The operative First Amended Complaint (“FAC”) was filed on January 12, 2018 and asserts causes of action for violations of the Song-Beverly Act, fraudulent concealment, intentional misrepresentation, negligent misrepresentation, and violation of the Consumer Legal Remedies Act. Holmes alleges that the used 2012 Ford Focus (the “Subject Vehicle”) he purchased from Vista Ford (and manufactured by Ford) has a defective transmission.

Defendants now petition the Court to compel arbitration pursuant to an arbitration agreement contained in the Retail Installment Sales Contract (“RISC”) signed by Holmes when he purchased the Subject Vehicle. Defendants also move to stay this action pending resolution of the arbitration. Holmes opposes.

DISCUSSION

A. Existence of an Arbitration Agreement

In a motion to compel arbitration, the moving party must prove by a preponderance of evidence the existence of the arbitration agreement and that the dispute is covered by the agreement. The burden then shifts to the resisting party to prove by a preponderance of evidence a ground for denial (e.g., fraud, unconscionability, etc.). (Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 413-414; Hotels Nevada v. L.A. Pacific Ctr., Inc. (2006) 144 Cal.App.4th 754, 758.)

Here, there is no dispute that an arbitration agreement exists between Holmes and Vista Ford, as contained in the RISC. Holmes concedes as much and indicates that he chooses JAMS or ADR Services as the forum for arbitration. However, Holmes contends that no arbitration agreement exists as between him and Ford because Ford was not a signatory to the arbitration agreement.

Defendants assert that Holmes can be required to arbitrate his claims against Ford, though a non-signatory to the arbitration agreement, under the doctrine of equitable estoppel. Where a signatory alleges “substantially interdependent and concerted misconduct” by a non-signatory and a signatory, and the alleged misconduct is “founded in or intimately connected with the obligations of the underlying agreement” the claims against the non-signatory may be arbitrated along with the claims against the signatory. (Goldman v. KPMG LLP (2009) 173 Cal.App.4th 209, 218-219.) Defendants contend that Holmes’ alleged claims are based on interdependent and concerted conduct of Defendants. Holmes alleges in the FAC that Defendants were agents of each other and that they “actively concealed the existence and nature of the Transmission Defect from [Holmes] at the time of purchase, repair, and thereafter.” (FAC, ¶¶ 8, 26, 58.) The FAC further alleges that Vista Ford committed “wrongful acts” with the authorization or ratification from Ford pursuant to a company policy or scheme regarding the advertising and sale of Ford vehicles equipped with the defective transmission. (FAC, ¶ 175.) With regard to the fraud causes of action, the FAC alleges that Holmes relied on statements made by Vista Ford, as an agent of Ford, on the Subject Vehicle’s window sticker and other marketing material about the Subject Vehicle. (FAC, ¶¶ 71-72.) Defendants also contend that Holmes’ allegations of concerted misconduct are “intimately connected” with the obligations of the RISC. Holmes alleges that his agreement to purchase the Subject Vehicle was based on it having an automatic transmission and that “Ford and its authorized agents did not publicly or privately disclose to [Holmes] any information about the Transmission Defect.” (FAC, ¶¶ 71-72.) Holmes further alleges that the omissions were “material to [his] decision to purchase the Vehicle.” (FAC, ¶ 72.)

In opposition, Holmes contends that equitable estoppel does not apply to his case pursuant to Kramer v. Toyota Motor Corp. (9th Cir. 2013) 705 F.3d 1122, 1131. In Kramer, plaintiffs asserted breach of warranty claims against Toyota, the manufacturer of the vehicles at issue. Toyota attempted to compel arbitration pursuant to an arbitration agreement in the purchase agreements between the plaintiffs and the dealerships. (Id. at pp. 1124-1126.) Toyota argued equitable estoppel, specifically, that the plaintiffs’ claims were intertwined with the purchase agreements because the claims relied on the existence of the vehicle purchase transactions. (Id. at p. 1130.) The Ninth Circuit held that equitable estoppel did not apply because the plaintiffs’ claims did not rely on the existence of the purchase agreements, and the plaintiffs were not seeking to enforce or challenge the terms, duties, or obligations of the purchase agreements. (Id. at pp. 1132.) The Court finds that equitable estoppel does not apply here. Just as in Kramer, Holmes’ claims against Ford do not rely on the existence of the RISC, and Holmes is not seeking to enforce or challenge the terms, duties, or obligations of the RISC. Indeed, Defendants do not point to any term of the RISC that is being challenged by Holmes.

The Court is also unpersuaded by Defendants’ attempts to distinguish Kramer. Defendants argue that Kramer was a class action where the dealerships were not named defendants and that the plaintiffs alleged violations of consumer protection statutes. (Reply, p. 7: 15-18.) For one, Holmes has asserted a cause of action for violations of the Consumer Legal Remedies Act, so the Court does not see a ready distinction there. Furthermore, the fact that Vista Ford is a named defendant is only relevant to the collusion allegations; it has no effect on the fact that there is no intimate connection between the allegations of the FAC and the RISC.

Defendants cite to In re Apple iPhone 3G Products Liability Litigation (Apple) (N.D. Cal. 2012) 859 F.Supp.2d 1084 in support of their position, but the Court finds that it is inapposite. Primarily, the court in Apple found that the plaintiffs’ claims against the cellphone manufacturer (Apple) were intertwined with the wireless service contracts the plaintiffs entered into with the wireless service provider (ATTM) because the plaintiffs “only had access to the ATTM 3G network because they had signed contracts with Defendant ATTM which granted them access to that network.” (Id. at p. 1096.) That crucial link is missing here. The signing of the RISC did not grant Holmes “access” to the Subject Vehicle. In other words, Holmes could have purchased the Subject Vehicle regardless of signing the RISC. As the Ninth Circuit in Kramer stated, “a consumer who purchased a vehicle with cash instead of credit would still state a claim for which relief could be granted, absent a Purchase Agreement.” (Kramer, supra, 705 F.3d at p. 1132.) Therefore, the Court grants the petition to compel arbitration as to Vista Ford but denies the petition as to Ford.

B. Motion for Stay

Defendants move for a stay of the action pending resolution of arbitration between Holmes and Vista Ford pursuant to Code of Civil Procedure section 1281.4, which provides that a court shall stay an action or proceeding “upon motion of a party to such action or proceeding” in which “arbitration of a controversy which is an issue involved in [the] action or proceeding” has been ordered. (Code Civ. Proc., § 1281.4.) Accordingly, the court action against Ford will be stayed until the arbitration involving Ford Vista is completed.

Plaintiff contends that the Court should stay the arbitration against Ford Vista and proceed with the court action against Ford, citing Madden v. Kaiser Hospitals (1976) 17 Cal.3d 699, 714.

“Plaintiff contends that a stay of her action with respect to Kaiser will lead to piecemeal and protracted litigation because she has also named as defendants the two blood banks. We agree that plaintiff may properly join the blood banks as parties defendant ( Landau v. Salam (1971) 4 Cal.3d 901 [95 Cal.Rptr. 46, 484 P.2d 1390]), but that right does not empower her to avoid her duty to arbitrate any dispute with Kaiser. We point out that under these circumstances, the trial court is not required to stay all proceedings against the defendants who are not entitled to arbitration; the court may, in its discretion, sever the action as to the blood banks or limit any stay to those issues subject to arbitration. (See Code Civ. Proc., § 1281.4; Cook v. Superior Court (1966) 240 Cal.App.2d 880, 885 [50 Cal.Rptr. 81].)

The Court is willing to consider a proposal by Plaintiff that will allow both the action against Ford to proceed at the same time as the arbitration against Ford Vista where different, non-duplicative issues are involved. Until then, Ford’s motion to stay the Court action until completion of the arbitration is granted.

CONCLUSION

Based on the foregoing, Defendants’ petition to compel arbitration is GRANTED IN PART AND DENIED IN PART. Only those claims against Defendant Vista Ford, Inc. dba Vista Ford Lincoln are ordered to arbitration. This arbitration is stayed pending the completion of the action against Ford.

Holmes is ordered to provide notice of this ruling.

DATED: March 22, 2018

_____________________________

Howard L. Halm

Judge of the Superior Court