19CV351180
Jennifer Leggitt vs Ford Motor Company et al

1. Plaintiff does not dispute the validity of the arbitration agreement. Nor does Plaintiff argue that arbitration between she and Ken Grody Ford, the two signatories to the arbitration agreement, is somehow inappropriate. Therefore, at a minimum, Plaintiff presumptively must arbitrate her claims with Ken Grody Ford.

2. That leaves the question—hotly disputed by both sides—whether Plaintiff must arbitrate her claims against Ford under the arbitration agreement, even though Ford is not a signatory to the arbitration agreement.

Because Ford is not a signatory to the arbitration agreement, the Court, and not an arbitrator, must decide whether Ford can compel Plaintiff to arbitration. “The question of whether a nonsignatory is a party to an arbitration agreement is one for the trial court in the first instance.” (American Builder’s Assn. v. Au-Yang (1990) 226 Cal.App.3d 170, 179.) Stated a different way, signatories to an arbitration agreement can agree that questions of arbitrability should be committed to the arbitrator, but a nonsignatory has no such power. (See Benaroya v. Willis (2018) 23 Cal.App.5th 462, 469 (Benaroya).) Therefore, the Court will decide this issue.

Even keeping in mind the strong pro-arbitration stance of the Federal Arbitration Act and California Arbitration Act, “a party cannot be compelled to arbitrate a dispute that he or she has not agreed to resolve by arbitration. [Citations.]” (Benaroya, supra, 23 Cal.App.5th at p. 469, internal quotation marks omitted.) But there are certain “circumstances in which nonsignatories to an agreement containing an arbitration clause can be compelled to arbitrate under that agreement.” (Suh v. Superior Court (2010) 181 Cal.App.4th 1504, 1513 [listing six “theories by which a nonsignatory may be bound to arbitrate”].) The three theories upon which Ford is relying are agency, equitable estoppel, and third-party beneficiary. (Opening Brief, at pp. 7-10.)

Third-Party Beneficiary

An arbitration agreement can be enforced by a third-party beneficiary of the agreement, even if the beneficiary is not identified by name in the agreement, as long it was “made expressly for the benefit” of the third party. (Civ. Code, § 1559; Macaulay v. Norlander (1992) 12 Cal.App.4th 1, 7-8.)

The arbitration provision in the contract signed by Ken Grody Ford and Plaintiff (not Ford) at issue states:

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.

(May Decl., Ex. D, emphasis added.)

Plaintiff’s claims against Ford fall within the scope of this provision. Her express and implied warranty claims under the Song-Beverly Act relate to the “condition” of the Ford vehicle she purchased from Ken Grody Ford. And once Plaintiff purchased the car, there was a “resulting relationship” with Ford, a “third part[y] who [did] not sign the contract,” given Ford’s ongoing warranty obligations.

Plaintiff argues that Ford was not intended to be a beneficiary of the arbitration provision. But the above-quoted provision specifically included within the scope of arbitration “third parties who do not sign this contract.” What other third parties would there be except for the vehicle manufacturer? This is strong evidence that the parties intended, either expressly or impliedly, to include Ford as a third-party beneficiary. The Court believes that Ford is more than “incidentally benefitted” by the arbitration provision. (Cf. Gilbert v. Gilbert Fin. Corp. v. Steelform Contracting Co. (1978) 82 Cal.App.3d 65, 70 [to be a true third party beneficiary, the third party must be “more than incidentally benefitted by the contract”].)

Equitable Estoppel

A nonsignatory defendant can seek arbitration of a claim made by a signatory plaintiff if the claim is “based on the same facts and are inherently inseparable” from arbitrable claims against signatory defendants. (Metalclad Corp. v. Ventana Environmental Organizational Partnership (2003) 109 Cal.App.4th 1705, 1713-1714.) Whether a claim is arbitrable, of course, is based on the language of the arbitration agreement. Alternatively, a nonsignatory defendant can seek arbitration of a claim made by a signatory plaintiff if there is substantially interdependent misconduct by the nonsignatory and a signatory and “the allegations of interdependent misconduct [are] founded in or intimately connected with the obligations of the underlying agreement.” (Goldman v. KPMG LLP (2009) 173 Cal.App.4th 209, 219.)

Here, many of the underlying facts and key questions in the case (e.g., is the vehicle defective? Was it defective at the time it was sold to Plaintiff?) relate to Plaintiff’s claims against Ford and her claims against Ken Grody Ford. And both sets of claims relate to the sales contract between Ken Grody Ford and Plaintiff. Plaintiff even has one claim (breach of the implied warranty of merchantability) that is asserted against both Ken Grody Ford and Ford. This claim—at least against Ken Grody Ford—relies heavily on the sales agreement, as the sales agreement obligated Ken Grody Ford to deliver a merchantable vehicle.

These claims appear “inherently inseparable.” And the claims asserted against Ken Grody Ford arise in large part out of the sales agreement. Since, as discussed before, Plaintiff’s claims against Ken Grody Ford are arbitrable, Plaintiff’s “inextricably intertwined” claims against Ford also are arbitrable, under the equitable estoppel doctrine.

Plaintiff relies on the non-binding 9th Circuit case of Kramer v. Toyota Motor Corp. (9th Cir. 2013) 705 F.3d 1122 to avoid the use of equitable estoppel. But the arbitration agreement in that case was materially different. For instance, it did not apply to claims against third parties. More important, the Kramer court did not have a dealership who would be in arbitration—the only defendant was the auto manufacturer. Here, it is undisputed that Ken Grody Ford will be in arbitration with Plaintiff, so the only question is whether Ford will be “added on” to that arbitration. The Court finds Kramer distinguishable.

In conclusion, the Court has found that Ford—admittedly a nonsignatory to the arbitration agreement—can enforce arbitration of Plaintiff’s claims against it under third-party beneficiary and equitable estoppel theories. (Given those conclusions, the Court need not decide whether arbitration is appropriate under an agency theory.)

The Court accordingly GRANTS Ford’s motion to compel arbitration and STAYS this case pending the completion of that arbitration (which would include Ken Grody Ford). The Court sets a status conference for May 14, 2020 at 10 am.