1 2 3 4 5 6 7 8 9 UNITED STATES DISTRICT COURT 10 SOUTHERN DISTRICT OF CALIFORNIA 11 12 MICHAEL SCRIBER, et al., individually Case No. 22-cv-1716-MMA-AHG and on behalf all others similarly situated, 13 ORDER DENYING DEFENDANT Plaintiffs, 14 FORD MOTOR COMPANY’S v. MOTION TO COMPEL 15 ARBITRATION 16 FORD MOTOR COMPANY, Defendant. [Doc. No. 21] 17 18 19 20 21 Plaintiffs Michael Scriber, Stacy Powell, Doug Harrigan, and Susan Wisner 22 Phillips (collectively, “Plaintiffs”) bring this putative class action against Ford Motor 23 Company (“Defendant” or “Ford”). See Doc. No. 20 (“Second Amended Complaint” or 24 “SAC”). On June 29, 2023, Ford filed a motion to compel arbitration. See Doc. No. 21. 25 Plaintiffs filed an opposition, to which Ford replied. See Doc. Nos. 25, 26. The Court 26 found the matter suitable for determination on the papers and without oral argument 27 pursuant to Federal Rule of Civil Procedure 78(b) and Civil Local Rule 7.1.d.1. See Doc. 28 No. 23. For the reasons set forth below, the Court DENIES Ford’s motion. 1 I. BACKGROUND 2 Between 2016 and 2020, Plaintiffs purchased or leased new Ford1 vehicles (the 3 “Vehicles”): in August 2020, Scriber purchased a new 2020 Ford Fusion Energi, see SAC 4 ¶ 6; in December 2019, Powell leased a new 2019 Ford Fusion Energi, which she later 5 purchased in October 2020, see id. ¶ 11; in October 2020, Harrigan purchased a new 6 2020 Ford Fusion Energi, see id. ¶ 16; and in July 2016, Phillips leased a new 2016 7 Lincoln MKZ Hybrid Reserve, see Doc. No. 21-9; Doc. No. 25 at 9. The Vehicles were 8 covered by a 3 year/36,000-mile New Vehicle Limited Warranty. See SAC ¶¶ 6, 11, 16, 9 23. All of the Vehicles were equipped with a 3G modem, and Plaintiffs allege they were 10 not informed of this fact at the time of their purchase or lease. See id. ¶¶ 7, 12, 17, 24. 11 The 3G modem is an onboard wireless module that allows vehicle owners to 12 communicate with their vehicles using AT&T’s 3G network. See id. ¶¶ 27, 29. It 13 equipped the Vehicles with internet-capable features, such as roadside emergency safety, 14 see id. ¶ 2, and allowed Plaintiffs to remote start the Vehicles, check whether the 15 Vehicles were charging, schedule charging, id. ¶¶ 8, 13, 20, 25, check the Vehicles’ 16 location, monitor fuel level, and check basic system functions such as battery life, see id. 17 ¶ 25. These features were available through the MyFord Mobile App and MyLincoln 18 App. See id. ¶¶ 8, 13, 20, 25, 29. 19 Generally speaking, Plaintiffs allege that Ford’s 3G modem was rendered 20 inoperable after AT&T’s 3G phase out in 2022. See id. ¶ 2. Plaintiffs allege that Ford 21 knew AT&T’s phase out of the 3G network was inevitable as early as 2019 and yet 22 continued to manufacture the Vehicles with a 3G modem.2 See id. ¶ 31. 23 24
25 26 1 The parties agree that Ford manufactures Lincoln branded vehicles as well. See SAC ¶¶ 1–2, 5; see also Doc. No. 21-1 at 6 fn. 1. 27 2 In November 2021, Ford offered a limited time Customer Satisfaction Program, allowing owners to have the upgrade performed at no cost. See id. ¶ 33. The program expired in May 2022. See id. It 28 1 According to Plaintiffs, they were either informed the modem would stop working, 2 see id. ¶ 18, or learned on their own when their mobile app stopped working, see id. ¶¶ 8, 3 13, 20, or when their car developed issues, see id. ¶ 25. What ensued next varies. In July 4 2022, Scriber brought his Vehicle to the Service Center at El Cajon Ford. See id. ¶ 9. He 5 was informed that the upgrade to a 4G modem was not considered a repair and thus 6 would not be covered by his warranty. See id. It was estimated that the upgrade kit 7 would cost $458.69 and labor costs would total $558.48. See id. Also in July 2022, 8 Powell called Ford and was informed that a 4G modem upgrade would be necessary. See 9 id. ¶ 14. Ford informed her that she would need to purchase the upgrade kit for $500 but 10 that Ford would cover the labor costs. See id. In early 2021, Harrigan contacted Fairway 11 Ford about the phase out, during which time he was informed that his Vehicle would not 12 be affected. See id. ¶ 18. During an unrelated servicing a few months later, he was again 13 informed his Vehicle would not be affected. See id. ¶ 19. After his mobile app stopped 14 working, Harrigan emailed and called Ford and in the second half of 2022 and was told 15 that Ford would not cover any portion of the upgrade. See id. ¶¶ 21, 22. Phillips does not 16 plead what actions she took after learning that an upgrade was necessary. 17 Plaintiffs allege that to date they have not obtained an adequate repair or 18 replacement for the non-functional 3G modem. See id. ¶ 35. As a result, they bring the 19 following five causes of action on behalf of a class of consumers who purchased the 20 Vehicles: (1) breach of express warranty; (2) breach of the implied warranty of 21 merchantability; (3) violation of California’s Consumer Legal Remedies Act, Cal. Civ. 22 Code § 1750 et seq. (“CLRA”); (4) violation of California’s Unfair Competition Law, 23 Cal. Bus. & Prof. Code § 17200 et seq. (“UCL”); and (5) fraudulent omission. 24 II. LEGAL STANDARD 25 The Federal Arbitration Act (“FAA”) permits “[a] party aggrieved by the alleged 26 failure, neglect, or refusal of another to arbitrate under a written agreement for arbitration 27 [to] petition any United States District Court . . . for an order directing that . . . arbitration 28 proceed in the manner provided for in [the arbitration] agreement.” 9 U.S.C. § 4. Upon a 1 showing that a party has failed to comply with a valid arbitration agreement, the district 2 court must issue an order compelling arbitration. Id. The Supreme Court has stated that 3 the FAA espouses a general policy favoring arbitration agreements. AT & T Mobility v. 4 Concepcion, 563 U.S. 333, 339 (2011). Federal courts are required to rigorously enforce 5 an agreement to arbitrate. See id. Courts are also directed to resolve any “ambiguities as 6 to the scope of the arbitration clause itself . . . in favor of arbitration.” Volt Info. Scis., 7 Inc. v. Bd. of Trs. of Leland Stanford Jr. Univ., 489 U.S. 468, 476–77 (1989). 8 In determining whether to compel a party to arbitrate, the Court may not review the 9 merits of the dispute; rather, the Court’s role under the FAA is limited “to determining 10 (1) whether a valid agreement to arbitrate exists and, if it does, (2) whether the agreement 11 encompasses the dispute at issue.” Cox v. Ocean View Hotel Corp., 533 F.3d 1114, 1119 12 (9th Cir. 2008) (internal quotation marks and citation omitted). If the Court finds that the 13 answers to those questions are “yes,” the Court must compel arbitration. See Dean Witter 14 Reynolds, Inc. v. Byrd, 470 U.S. 213, 218 (1985). If there is a genuine dispute of material 15 fact as to any of these queries, a district court should apply a “standard similar to the 16 summary judgment standard of [Federal Rule of Civil Procedure 56].” Concat LP v. 17 Unilever, PLC, 350 F. Supp. 2d 796, 804 (N.D. Cal. 2004). 18 Agreements to arbitrate are “valid, irrevocable, and enforceable, save upon such 19 grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2. 20 Courts must apply ordinary state law principles in determining whether to invalidate an 21 agreement to arbitrate. Ferguson v. Countrywide Credit Indus., 298 F.3d 778, 782 (9th 22 Cir. 2002). As such, arbitration agreements may be invalidated by generally applicable 23 contract defenses, such as fraud, duress, or unconscionability. Concepcion, 563 U.S. at 24 339–41. 25 III. REQUEST FOR JUDICIAL NOTICE 26 As an initial matter, Ford has filed a request for judicial notice in connection with 27 its motion. See Doc. No. 21-10. Plaintiff has not responded to or otherwise opposed 28 Ford’s request. Pursuant to Federal Rule of Evidence 201, the Court may take judicial 1 notice of an adjudicative fact if it is “not subject to reasonable dispute.” Fed. R. Evid. 2 201(b). A fact is not subject to reasonable dispute if it is either (1) generally known 3 within the territorial jurisdiction of the trial court or (2) capable of accurate and ready 4 determination by resort to sources whose accuracy cannot reasonably be questioned. Id.; 5 see also Khoja v. Orexigen Therapeutics, Inc., 899 F.3d 988, 999 (9th Cir. 2018) (quoting 6 Fed. R. Evid. 201(b)). The Court “must take judicial notice if a party requests it and the 7 court is supplied with the necessary information.” Fed. R. Evid. 201(c)(2). Additionally, 8 “incorporation-by-reference is a judicially created doctrine that treats certain documents 9 as though they are part of the complaint itself.” Khoja, 899 F.3d at 1002. 10 Ford asks the Court to judicially notice three exhibits: (1) excerpted pages from 11 Ford Credit Auto Lease Two LLC, CAB East LLC, and CAB West LLC’s Form SF-3 12 Registration Statement filed with the U.S. Securities and Exchange Commission on June 13 8, 2022, see Doc. No. 21-11 (“RFJN Ex. A”); (2) a copy of the Retail Installment Sale 14 Contract entered into between Plaintiff Harrigan and Fairway Ford on October 15, 2020, 15 see Doc. No. 21-12 (“RFJN Ex. B”); and (3) a copy of the Retail Installment Sale 16 Contract entered into between Plaintiff Scriber and El Cajon Ford on August 30, 2020, 17 see Doc. No. 21-13 (“RFJN Ex. C”). 18 The Court finds that Exhibit A is a public record, available on a government 19 website, that is neither in dispute nor can reasonably be questioned. See Koja, 899 F.3d 20 at 999. Additionally, the Court finds that Plaintiff incorporates Exhibits B and C by 21 reference in the Second Amended Complaint. See, e.g., SAC ¶¶ 6, 16. Accordingly, the 22 Court GRANTS Ford’s request and takes judicial notice of Exhibits A, B, and C. 23 IV. DISCUSSION 24 Ford moves to compel arbitration based upon the following agreements: (1) Scriber 25 and Harrigan’s sale contracts; (2) Powell and Phillips’ lease agreements; and (3) Scriber, 26 Harrigan, and Phillips’ “Connected Services” agreements. Plaintiffs argue that Ford 27 cannot enforce these agreements, or that they do not provide for mandatory arbitration. 28 The Court addresses each in turn. 1 A. Sale Contracts 2 Plaintiffs Scriber and Harrigan entered into retail installment sale contracts with 3 their respective dealerships (the “Sale Contracts”). On August 30, 2020, Scriber entered 4 into a Retail Installment Sale Contract with El Cajon Ford. RFJN Ex. C. On October 15, 5 2020, Harrigan entered into a Retail Installment Sale Contract with Fairway Ford. RFJN 6 Ex. B. Both Sale Contracts are substantively identical, as are their arbitration provisions. 7 The arbitration provisions read, in relevant part: 8 9 ARBITRATION PROVISION PLEASE REVIEW – IMPORTANT – AFFECTS YOUR LEGAL 10 RIGHTS 11 1. EITHER YOU OR WE MAY CHOOSE TO HAVE ANY DISPUTE BETWEEN US DECIDED BY ARBITRATION AND NOT IN COURT 12 OR BY JURY TRIAL. 13 2. IF A DISPUTE IS ARBITRATED, YOU WILL GIVE UP YOUR RIGHT TO PARTICIPATE AS A CLASS REPRESENTATIVE OR 14 CLASS MEMBER ON ANY CLASS CLAIM YOU MAY HAVE 15 AGAINST US INCLUDING ANY RIGHT TO CLASS ARBITRATION OR ANY CONSOLIDATION OF INDIVIDUAL ARBITRATIONS. 16 3. DISCOVER AND RIGHTS TO APPEAL IN ARBITRATION ARE 17 GENERALLY MORE LIMITED THAN IN A LAWSUIT, AND OTHER RIGHTS THAT YOU AND WE WOULD HAVE IN COURT 18 MAY NOT BE AVAILABLE. 19 Any claim or dispute, whether in contract, tort, statute or otherwise (including 20 the interpretation and scope of this Arbitration Provision, and the arbitrability 21 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, 22 purchase or condition of this vehicle, this contract or any resulting transaction 23 or relationship (including any such relationship with third parties who did not sign this contract) shall, at your or our election, be resolved by neutral, binding 24 arbitration and not by court action. 25 26 RJFN Ex. B; see also RFJN Ex. C. 27 The Sale Contracts’ arbitration provisions also provide that they are governed by 28 the FAA. Id. 1 It is undisputed that Ford is not a signatory to these Sale Contracts and thus not a 2 signatory to these arbitration provisions: “You” refers to Scriber and Harrigan as the 3 Buyers and “We” or “Us” refers to the Seller-Creditors, El Cajon Ford and Fairway 4 Ford.3 Nonetheless, Ford urges that it may enforce these provisions. 5 “The United States Supreme Court has held that a litigant who is not a party to an 6 arbitration agreement may invoke arbitration under the FAA if the relevant state contract 7 law allows the litigant to enforce the agreement.” Kramer v. Toyota Motor Corp., 705 8 F.3d 1122, 1128 (9th Cir. 2013) (citing Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 9 632 (2009)). The parties agree that California law applies. See Doc. Nos. 21-1 at 17, 25 10 at 15; see also RFJN Ex. B (providing that Federal law and California law apply to the 11 contract); RFJN Ex. C (same). Ford argues that under California law, it may enforce 12 these agreements based upon Plaintiffs’ agency allegations and the doctrine of equitable 13 estoppel. 14 1. Agency Relationship 15 California permits a nonsignatory to compel a signatory to arbitration under a 16 theory of agency. To succeed on this theory, Ford must demonstrate that “there is a 17 connection between the claims alleged against the nonsignatory and its agency 18 relationship with a signatory.” Cohen v. TNP 2008 Participating Notes Program, LLC, 19 31 Cal. App. 5th 840, 863–64 (Cal. Ct. App. 2019). 20 The Court agrees that Plaintiffs unambiguously plead an agency relationship 21 between Defendant and the signatory-Dealers. For example, in support of their breach of 22 the implied warranty of merchantability claim, Plaintiffs allege that they “had sufficient 23 dealings with Defendant and its agents (dealers) to establish privity of contract between 24 themselves and Defendant. As alleged supra, Plaintiffs purchased their Class Vehicles 25 from Ford dealerships, agents of Ford.” SAC ¶ 70. Seemingly recognizing this, 26
27 3 The Court hereinafter refers to the dealerships—El Cajon Ford, Fairway Ford, Sunnyvale Ford, and 28 1 Plaintiffs do not argue that no agency relationship exists. Rather, Plaintiffs rely on 2 Glassburg v. Ford Motor Co., No. 2:21-cv-01333-ODW (MAAx), 2021 U.S. Dist. 3 LEXIS 211786, at *11 (C.D. Cal. Nov. 2, 2021), asserting that their claims have no 4 connection to the agency relationship. See Doc. No. 25 at 16–17. 5 The Court begins with the Second District Court of Appeal decision in In re Ford 6 Motor Warranty Cases, 89 Cal. App. 5th 1324 (Cal. Ct. App. 2023) (“In re FMWC”). In 7 In re FMWC, purchasers of Ford Focus and Fiesta model vehicles experienced problems 8 with the transmissions in their vehicles. 89 Cal. App. 5th at 1330. They ultimately sued 9 Ford, but not their dealerships, for claims including violations of the Song-Beverly 10 Consumer Warranty Act, Cal. Civ. Code § 1790 et seq., violations of the Magnuson- 11 Moss Warranty Act, 15 U.S.C. § 2301 et seq., breach of the implied warranty of 12 merchantability, and fraudulent inducement. Id. Applying the FAA, the trial court found 13 that Ford was not entitled to enforce the arbitration provision in the sale contracts as a 14 nonsignatory under California law. Id. at 1331. The Court of Appeal affirmed. Id. at 15 1343. 16 With respect to the agency allegations, the Court of Appeal noted that the 17 references to Ford’s agents were “ambiguous,” id. at 1341 (“[FMC] and its agent’s 18 omissions and/or misrepresentations”; “[FMC] and its agents intentionally concealed and 19 failed to disclose facts”; and that “[FMC] and its agents actively concealed the existence 20 and nature of the Transmission Defect”), notably in light of the fact that “[a] corporation 21 can act only through its agents,” id. (quoting Kelly v. General Telephone Co., 136 Cal. 22 App. 2d 278, 286 (Cal. Ct. App. 1982)). Here, as discussed above, the agency allegations 23 are not ambiguous. But it is not enough that there be an alleged agency relationship 24 between Ford and the Dealers. As the Court of Appeal explained, there must be a 25 connection between Plaintiffs’ claims, the agency relationship between Ford and the 26 Dealers, and the Sale Contracts between the Dealers and Plaintiffs. Id. 27 Plaintiffs’ claims, while pursuant to both statute and common law, stem from the 28 central premise that Ford knowingly sold and leased the Vehicles with a modem that was 1 inevitable for decommission and therefore would ultimately become inoperable. With 2 respect to their breach of express warranty claim, Plaintiffs plead that Plaintiffs and Ford 3 formed a contract “at the time they purchased their [ ] Vehicles” that included express 4 warranties, but that the Vehicles did not perform as promised. FAC ¶¶ 52, 54. As to 5 their breach of the implied warranty of merchantability claim, Plaintiffs allege that their 6 Vehicles, “when sold and at all times thereafter, were not in merchantable condition.” Id. 7 ¶ 63. Plaintiffs also contend that Ford violated the CLRA by omitting the modem defect, 8 “intend[ing] to result in, and result[ing] in, the sale or lease of the [ ] Vehicles.” Id. ¶ 74. 9 To that end, Plaintiffs also explicitly allege that Ford “violated the CLRA by selling and 10 leasing [the] Vehicles that it knew were equipped with defective modems.” Id. ¶ 75. 11 Turning to their UCL claim, Plaintiffs assert that Ford “knew when [the] Vehicles were 12 first sold and leased that they were equipped with a defective modem,” and allege that as 13 a result, they paid more than they should have. Id. ¶¶85, 89. Finally, in support of their 14 fraudulent omission claim, Plaintiffs allege that the information about the defective 15 modem were material to the decision of whether to purchase or lease the Vehicles or 16 deciding what price to pay. Id. ¶ 96. 17 Plaintiffs also, importantly, allege that the Dealers did not disclose the fact that the 18 Vehicles were equipped with the allegedly defective modem at the time of the purchases 19 and leases. Id. ¶¶ 7 (“The fact that the telematics system relied on a 3G modem was not 20 disclosed by Ford’s authorized dealership, on the vehicle’s window, or elsewhere at the 21 time Plaintiff Scriber purchased the vehicle.”), 12 (same), 17 (same), 24 (same). 22 On the other hand, as the In re FMWC court recognized, “[g]enerally, retailers are 23 not considered the agents of the manufacturers whose products they sell.” 89 Cal. App. 24 5th at 1324 (first quoting Murphy v. DirecTV, Inc., 724 F.3d 1218, 1232 (9th Cir. 2013); 25 and then citing Alvarez v. Felker Mfg. Co., 230 Cal. App. 2d 987, 1000 (Cal. Ct. App. 26 1964)). This is because under California law, “[a]gency requires that the principal 27 maintain control over the agent’s actions.” Murphy, 724 F.3d at 1232 (citing DeSuza v. 28 Andersack, 133 Cal. Rptr. 920, 924 (Cal. Ct. App. 1976)). Here, but for the agency 1 allegations pertaining to the Dealers’ authority to sell Ford vehicles, there are no 2 allegations, evidence, or argument that Ford actually controls the Dealers in such a way 3 that would provide for an agency relationship under California law. The Court also notes 4 the context within which these agency allegations exist: Plaintiffs expressly plead an 5 agency relationship in support of their breach of the implied warranty of merchantability 6 claim in an effort to demonstrate privity of contract, which they go on to explain is “not 7 required in this case because Plaintiffs . . . are intended third-party beneficiaries of 8 contracts between Defendant and its dealers.” FAC ¶ 70. 9 Also of note is that the New Vehicle Limited Warranty upon which Plaintiffs’ base 10 their breach of warranty claim seemingly provides for optional arbitration that is not final 11 and is nonbinding. See Doc. No. 25 at 10. Additionally, Plaintiffs do not press a claim 12 for breach of the Sale Contracts. 13 For these reasons, the Court agrees that Glassburg is instructive. As the Glassburg 14 court noted: 15 16 Here, fatal to Glassburg’s agency theory is the observation that, if there is any contract between Ford and the Dealer that establishes an agency relationship 17 between those two, that contract certainly is not the Contract under which 18 Glassburg purchased his Mustang. Glassburg s claims against Ford are not for any liability arising from the Contract—that much was made clear in Kramer. 19 Similarly, no party contends that Ford was acting in its capacity as the 20 Dealer’s agent when Ford breached the warranties, and indeed, such an argument would be absurd, because it would require a party to assert that a 21 manufacturer manufactures products as an agent of the manufacturer’s 22 distributor, when, if anything, the opposite is usually true. Thus, the purported agency relationship between Ford and the Dealer is insufficient to support 23 Glassburg’s nonsignatory theory. 24 25 Glassburg, 2021 U.S. Dist. LEXIS 211786, at *11. 26 In this case, although the Court finds that Plaintiffs unambiguously plead that the 27 Dealers are Ford’s agents, they do so in a perfunctory manner and the Court is not 28 sufficiently persuaded that the Dealers were acting as agents on Ford’s behalf when they 1 entered into the Sale Contracts with Plaintiffs Scriber and Harrigan. Further, it is not 2 clear on this record that any such agency relationship between Ford and the Dealers is 3 sufficiently connected to Plaintiffs’ claims, which challenge the decision by Ford to 4 install 3G modems in the Vehicles despite allegedly knowing the technology would soon 5 be rendered obsolete. Accordingly, the Court finds that Ford has not demonstrated it may 6 enforce the arbitration provisions in the Sale Contracts against Plaintiffs Scriber and 7 Harrigan based upon a theory of agency. 8 2. Equitable Estoppel 9 California law also permits nonsignatories to invoke arbitration agreements under 10 the doctrine of equitable estoppel, but only in limited circumstances. Henson v. United 11 States Dist. of N. Cal., 869 F.3d 1052, 1060 (9th Cir. 2017). Generally speaking, 12 “[e]quitable estoppel precludes a party from claiming the benefits of a contract while 13 simultaneously attempting to avoid the burdens that contract imposes.” Kramer, 705 14 F.3d at 1128 (quoting Comer v. Micor, Inc., 436 F.3d 1098, 1101 (9th Cir. 2006) (internal 15 quotation marks omitted)). 16 The two circumstances where a nonsignatory may enforce an arbitration agreement 17 under this doctrine are: “(1) when a signatory must rely on the terms of the written 18 agreement in asserting its claims against the nonsignatory or the claims are intimately 19 founded in and intertwined with the underlying contract, and (2) when the signatory 20 alleges substantially interdependent and concerted misconduct by the nonsignatory and 21 another signatory and the allegations of interdependent misconduct are founded in or 22 intimately connected with the obligations of the underlying agreement.” Ngo v. BMW of 23 N. Am., LLC, 23 F.4th 942, 948–49 (9th Cir. 2022) (quoting Kramer, 705 F.3d at 1128– 24 29 (cleaned up) (internal quotation marks omitted)). “Equitable estoppel thus prevents a 25 plaintiff from having it ‘both ways’ by seeking to hold a non-signatory liable for 26 obligations ‘imposed by [an] agreement,’ while at the same time ‘repudiating the 27 arbitration clause of that very agreement.’” Ngo, 23 F.4th at 949 (quoting Goldman v. 28 KPMG LLP, 173 Cal. App. 4th 209, 220 (Cal. Ct. App. 2009)). 1 Here, Ford argues that the first circumstance exists. According to Ford, “Plaintiffs 2 concede that Ford’s obligations forming the basis for their claims were part of the 3 contract they entered into with Ford when they purchased their vehicles.” Doc. No. 21-1 4 at 20. Ford also points to Plaintiffs’ theory of liability—that they paid more for the 5 Vehicles than they were worth—and Plaintiffs’ citation to California Civil Code § 1572 6 in their First Amended Complaint. Id. 7 “As an initial matter, under California law, warranties from a manufacturer that is 8 not a party to a sales contract are ‘not part of [the] contract of sale.’” Ngo, 23 F.4th at 9 949 (quoting Corp. of Presiding Bishop of Church of Jesus Christ of Latter-Day Saints v. 10 Cavanaugh, 217 Cal. App. 2d 492, 514 (Cal. Ct. App. 1963)). “Instead, the express and 11 implied warranties arise ‘independently of a contract of sale.’” Id. (quoting Greenman v. 12 Yuba Power Prods., Inc., 59 Cal. 2d 57, 60–61 (Cal. 1963)). Of course, it is relevant that 13 Plaintiffs purchased the Vehicles and therefore the fact that Plaintiffs Scriber and 14 Harrigan entered into the Sale Contracts is a plain and undisputed fact underlying this 15 case. However, what matters here is that Scriber and Harrigan own, or owned, these 16 Ford-manufactured Vehicles, not that Plaintiffs entered into these Sale Contracts. See 17 Ngo, 23 F.4th at 949 (“To be sure, Ngo must show that she owned a BMW, but 18 ownership does not entail an intention to enforce any obligations of the purchase 19 agreement on BMW. BMW was not a party to the agreement and its obligations to Ngo 20 arose independently of her agreement with the dealership.”). 21 Again, the Court finds Glassburg instructive. As that court explained: “Under 22 binding authority of Kramer, in the typical case, a consumer’s statutory and contractual 23 claims against a vehicle manufacturer based on the condition of the vehicle are not 24 dependent on a purchase contract the consumer may have signed when the consumer 25 purchased the vehicle from a dealer.” 2021 U.S. Dist. LEXIS 211786, at *7 (citing 26 Kramer, 705 F.3d at 1132). Similar to Glassburg, here Plaintiffs name only Ford as 27 Defendant, not the Dealers, and the Court is not persuaded that their claims are founded 28 in the Sale Contracts. 1 On this issue, the Court turns back to In re FMWC. The Second District Court of 2 Appeal cited to Greenman and Cavanaugh in concluding that “it does not naturally 3 follow from any contractual character of manufacturer warranty claims that they inhere in 4 a retail sale contract containing no warranty terms.” In re FMWC, 89 Cal. App. 5th at 5 1336. Similarly here, the Sale Contracts contain no warranties and Plaintiffs do not 6 allege that Ford breached any warranties that the Dealers covenanted in the Sale 7 Contracts. In fact, as was the case in In re FMWC, the Sale Contracts here include no 8 warranty or other promise regarding the quality of the Vehicles and expressly note that 9 the agreements “do[] not affect any warranties covering the vehicle that the vehicle 10 manufacturer may provide.” RFJN Exs. B, C. “In short, the substantive terms of the sale 11 contracts relate to sale and financing and nothing more.” In re FMWC, 89 Cal. App. 5th 12 at 1335. 13 The Court acknowledges that the California Supreme Court has granted the 14 petition for review in In re FMWC, identifying the specific issue as: “Do manufacturers’ 15 express or implied warranties that accompany a vehicle at the time of sale constitute 16 obligations arising from the sale contract, permitting manufacturers to enforce an 17 arbitration agreement in the contract pursuant to equitable estoppel?” Ochoa v. Ford 18 Motor Co. (In re Ford Motor Warranty Cases), 532 P.3d 270 (Cal. 2023). Nevertheless, 19 the Court of Appeal’s decision in In re FMWC is persuasive to the Court at this time, as 20 are the other cases that rely on the same underlying authorities and arrive at the same 21 outcome. Accordingly, the Court finds that the doctrine of equitable estoppel does not 22 permit Ford to compel arbitration. 23 For these reasons, the Court DENIES Ford’s motion to compel arbitration based 24 upon the Sale Contracts under a theory of agency or the doctrine of equitable estoppel. 25 B. Lease Agreements 26 Next, Ford asserts that Plaintiffs Powell and Phillips must be compelled to arbitrate 27 their claims based upon the arbitration provisions in their lease agreements (the “Lease 28 Agreements”). In July 2016, Phillips entered into a Lease Agreement with Ford Motor 1 Credit Company and CAB West LLC. See Doc. No. 21-9 (“Friedrichs Ex. B”). In 2 December 2019, Powell also entered into a Lease Agreement with Ford Motor Credit 3 Company and CAB West LLC. See Doc. No. 21-8 (“Friedrichs Ex. A”). Both Lease 4 Agreements provide that the contract is subject to the FAA and contain the following 5 arbitration provision: 6 7 ARBITRATION
8 Arbitration is a method of resolving any claim, dispute, or controversy 9 (collectively, a “Claim”) without filing a lawsuit in court. Either you or Lessor/Finance Company/Holder (“us” or “we”) (each, a “Party”) may choose 10 at any time, including after a lawsuit is filed, to have any Claim related to this 11 contract decided by arbitration. Neither party waives the right to arbitrate by first filing suit in a court of law. Claims include but are not limited to the 12 following: 1) Claims in contract, tort, regulatory or otherwise; 2) Claims 13 regarding the interpretation, scope, or validity of this provision, or arbitrability of any issue except for class certification; 3) Claims between you and us, our 14 employees, agents, successors, assigns, subsidiaries, or affiliates; 4) Claims 15 arising out of or relating to your application for credit, this contract, or any resulting transaction or relationship, including that with the dealer, or any such 16 relationship with third parties who do not sign this contract. 17 18 Friedrichs Ex. A; see also Friedrichs Ex. B. 19 It is undisputed that “you” refers to Plaintiffs Powell and Phillips, the Lessors are 20 the Dealers (Sunnyvale Ford in Phillips’ instance and Sunrise Ford in Powell’s instance), 21 the Finance Company is Ford Motor Credit Company, and the Holder is CAB West LLC. 22 Despite being a nonsignatory, Ford argues it may compel Powell and Phillips to arbitrate 23 their claims based upon equitable estoppel, agency, and third-party beneficiary theories. 24 1. Equitable Estoppel & Agency Allegations 25 Ford’s arguments with respect to the theory of agency and doctrine of equitable 26 estoppel are duplicative of those made in support of its motion to compel arbitration 27 under the Sale Contracts. See Doc. No. 21-1 at 22–23. As discussed above, Plaintiffs’ 28 claims are premised upon the allegedly improper decision to manufacture and sell the 1 Vehicles with soon-to-be obsolete technology. Plaintiffs’ claims are not sufficiently 2 connected to the Lease Agreements, which merely relate to the financing of the Vehicles. 3 Moreover, to the extent Plaintiffs plead that the Dealers were Ford’s agents, see FAC 4 ¶70, there is no evidence or argument that the Dealers acted on Ford’s behalf when 5 entering into these Lease Agreements. Finally, the express and implied warranties are 6 independent of the Lease Agreements. Accordingly, for the same reasons discussed 7 above, the Court DENIES Ford’s motion on this basis. 8 2. Third-Party Beneficiary 9 Ford also maintains that it may enforce the arbitration provisions in the Lease 10 Agreements as a third-party beneficiary. See Doc. No. 21-1 at 23–26. Under California 11 law, a nonsignatory may enforce a contract if the “agreement was ‘made expressly for 12 [its] benefit.’” Ronay Family Limited Partnership v. Tweed, 157 Cal. Rptr. 3d 680, 685– 13 86 (Cal. Ct. App. 2013) (quoting Cal. Civ. Code § 1559). In order to succeed under this 14 theory, Ford must prove that “express provisions of the contract,” considered in light of 15 the “relevant circumstances,” show that (1) “the third party would in fact benefit from the 16 contract;” (2) “a motivating purpose of the contracting parties was to provide a benefit to 17 the third party;” and (3) permitting the third party to enforce the contract “is consistent 18 with the objectives of the contract and the reasonable expectations of the contracting 19 parties.” Goonewardene v. ADP, LLC, 6 Cal. 5th 817, 830 (Cal. 2019). 20 Beginning with the first element, Ford points to Plaintiffs’ Second Amended 21 Complaint, wherein they allege they were harmed by Ford’s conduct and that Ford was 22 unjustly enriched. Doc. No. 21-1 at 24 (quoting SAC ¶ 84). Additionally, Ford 23 highlights that the “Claims” definition in the Lease Agreements’ arbitration provisions 24 includes “Claims between you and us, our employees, agents, successors, assigns, 25 subsidiaries, or affiliates . . . .” Id. (quoting Friedrichs Exs. A & B). To that end, Ford 26 offers evidence demonstrating that CAB West LLC is a wholly owned subsidiary of Ford 27 Motor Credit Company, RFJN Ex. A, and that Ford Motor Credit Company is a wholly 28 owned subsidiary of Ford, Friedrichs Decl. ¶ 7. 1 Second, Ford contends that the contracting parties’ intent to benefit Ford is 2 apparent from the language of the Lease Agreements, pointing back to the Claims 3 definition as encompassing Ford. Doc. No. 21-1 at 24. Third, Ford maintains that 4 allowing it to enforce the arbitration provisions in the Lease Agreements is consistent 5 with the objectives of the contract and reasonable expectations of the contracting parties. 6 Id. In support, Ford also notes that Plaintiffs’ pursuit of an action against only 7 nonsignatories is “a quite obvious, if not blatant, attempt to bypass the agreement’s 8 arbitration clause.” Id. (quoting Franklin v. Cmty. Reg’l Med. Ctr., 998 F.3d 867, 875 9 (9th Cir. 2021)). 10 The Court is not persuaded. Even assuming the claims subject to arbitration 11 include Plaintiffs’ claims against Ford, the Lease Agreements plainly state that only four 12 parties are permitted to invoke the arbitration provision, and Ford is not one of them. 13 Ford relies on Hajibekyan v. BMW of N. Am., Ltd. Liab. Co., 839 F. App’x 187 (9th Cir. 14 2021). But Hajibekyan is unpublished and therefore not binding. More importantly, the 15 facts in Hajibekyan are distinguishable. Unlike the arbitration provision in Hajibekyan, 16 the arbitration provisions in the Lease Agreements do not extend the right to compel 17 arbitration to the signatories’ affiliates. Instead, the Court finds that the case of Ngo is 18 both binding and on point. See Ngo, 23 F.4th at 946. Similar to Ngo, the only parties 19 permitted to compel arbitration here are Plaintiffs Powell and Phillips (as Lessees), the 20 Dealers (as Lessors), Ford Motor Credit Company (as Finance Company), and CAB West 21 LLC (as Holder). See id. As the Ninth Circuit in Ngo aptly explained: 22 That BMW could, at some point down the line, receive some benefit if the 23 arbitration clause were read to extend to the manufacturer is of no moment: 24 incidental or secondary benefit is not sufficient. The clause is pellucid that only three parties may compel arbitration, none of which is BMW. Language 25 limiting the right to compel arbitration to a specific buyer and a specific 26 dealership (and its assignees) means that extraneous third parties may not compel arbitration. Any benefit that BMW might receive from the clause is 27 peripheral and indirect because it is predicated on the decisions of others to 28 1 arbitrate. BMW therefore fails to meet the first prong of the Goonewardene test. 2
3 Id. at 947 (internal citations omitted). As such, Ford has not demonstrated that it would 4 benefit from the Lease Agreements. For this reason, Ford is not permitted to compel 5 Plaintiffs Powell and Phillips to arbitration. The Court also notes that based upon Ngo, 6 Ford has failed to satisfy all of the remaining elements as well. See id. at 948 (discussing 7 the second element: “Though the language allows for arbitration of certain claims 8 concerning third parties, it still gives only Ngo, the dealership, and the assignee the 9 power to compel arbitration. Nothing in the clause or, for that matter, in the purchase 10 agreement reflects any intention to benefit BMW by allowing it to take advantage of the 11 arbitration provision”). The Court appreciates the affiliation between CAB West LLC, 12 Ford Motor Credit Company, and Ford. But Ford’s “relative proximity to the contract 13 confirms that the parties easily could have indicated that the contract was intended to 14 benefit [Ford]—but did not do so.” Id. 15 Accordingly, the Court DENIES Ford’s motion to compel Plaintiffs Powell and 16 Phillips to arbitrate their claims on this basis. 17 C. Connected Services Agreements 18 Finally, Ford contends that Plaintiffs Scriber, Harrigan, and Phillips must be 19 compelled to arbitrate their claims based upon the terms of their mobile app agreements 20 (the “Connected Services Agreements”). As alleged in the Second Amended Complaint, 21 the 3G modem technology allows a vehicle owner to communicate with his vehicle using 22 the Ford and Lincoln mobile apps. See SAC ¶¶ 8, 13, 20, 25, 29. According to Ford, 23 FordPass and Lincoln Way are mobile apps administered by Ford, and vehicle owners 24 must create and maintain accounts in order to access and utilize the technology. Doc. 25 No. 21-2 (“Vedula Decl.”) ¶ 3. Ford maintains that Scriber, Harrigan, and Phillips 26 maintain such accounts, id. ¶ 5, and that account holders are required to agree to the 27 Connected Services Agreements’ terms and conditions to access and manage the 28 accounts, id. ¶ 3. 1 According to Ford’s records, Plaintiff Scriber has maintained a FordPass account 2 since August 31, 2020. Id. ¶ 5(a). Scriber agreed to the Connected Services Agreement’s 3 April 4, 2022 revised terms on June 30, 2022. Id.; see also Vedula Ex. A. Plaintiff 4 Harrigan has maintained a FordPass account since August 14, 2019. Id. ¶ 5(b). Harrigan 5 agreed to the Connected Services Agreement’s January 25, 2023 revised terms on March 6 25, 2023. Id.; see also Vedula Ex. B. Plaintiff Phillips has maintained a Lincoln Way 7 account since October 31, 2017. Id. ¶ 5(c). Phillips agreed to the Connected Services 8 Agreement’s January 25, 2023 revised terms on April 13, 2023. Id.; see also Vedula 9 Ex. C. Ford also offers the prompt presented to Plaintiffs Scriber, Harrigan, and Phillips, 10 demonstrating that all three were required to click “I Accept” when presented with the 11 revised terms in the Connected Services Agreements order to continue accessing their 12 accounts. Vedula Ex. D. 13 As relevant, the Connected Services Agreements, see Vedula Exs. A–C, are 14 identical. They provide that Michigan law governs the terms of these Agreements, and 15 provide the following with respect to arbitration: 16 17 21. Class or Collective Actions
18 For the purposes of this section: “Us” or “We” shall mean Ford Motor 19 Company, its Asignees, and their employees, directors, officers, agents, predecessors, succcessors, subsidiaries, and affiliates. “You” shall include 20 yourself, and/or your successors and beneficiaries. “Party” shall mean either 21 You or Us.
22 AGREEMENT TO ARBITRATE: Arbitration is a method of resolving any 23 claim, dispute, or controversy (collectively, a “Claim”) in front of one or more neutral individuals instead of filing a lawsuit in court and having a trial in 24 front of a judge or jury. 25 Each Party may bring Claims against the other only on an individual basis and 26 not as a plaintiff or class member in a class, collective, representative, public 27 injunctive relief, or private attorney general actions. The arbitrator may not preside over any consolidates, representative, class, collective or private 28 1 attorney general action involving You and Ford. The arbitrator may award relief only to the extent necessary to provide relief necessitated by the Claims. 2 The arbitrator cannot, without consent of all parties: 1) combine one claim 3 with another, 2) facilitate notification to others of potential claims, or 3) arbitrate any type of representative or multi-plaintiff proceeding. 4
5 If the bar to Claims or remedies for public injunctive relief or private attorney general action is held unenforceable, You and Ford agree any such Claims or 6 remedies shall be severed and stayed before a Court with applicable 7 jurisdiction pending final resolution of the arbitration on any remaining Claims or remedies subject to arbitration. 8
9 Vedula Ex. A; see also Vedula Exs. B & C. 10 To begin, neither party briefs the choice of law issue. Again, the Connected 11 Services Agreements provide that Michigan law governs. Curiously, both parties cite to 12 Michigan and California state court cases in support of their respective positions on this 13 issue. See Doc. No. 21-1 at 27; Doc. No. 25 at 31. In any event, California choice of law 14 principles, in accordance with the Second Restatement of Conflict of Laws, “strongly 15 favor enforcement of choice of law provisions, so long as those provisions are freely and 16 voluntarily agreed upon.” Hughes Elecs. Corp. v. Citibank Del., 15 Cal. Rptr. 3d 244, 17 248 (Cal. Ct. App. 2004) (citing Nedloyd Lines B.V. v. Superior Court, 11 Cal. Rptr. 2d 18 330, 333 (Cal. 1992)). Because Ford’s principal place of business is in Dearborn, 19 Michigan, which is located in Wayne County, the substantial relationship test is met. 20 Hughes Elecs., 15 Cal. Rptr. 3d at 249. Moreover, neither party argues, nor does the 21 Court find, that Michigan law governing contract formation and interpretation is contrary 22 to California public policy. Accordingly, the Court applies Michigan law to the threshold 23 questions of whether Plaintiffs agreed to resolve their claims through arbitration. 24 “The elements of a valid contract in Michigan are: ‘(1) parties competent to 25 contract, (2) a proper subject matter, (3) a legal consideration, (4) mutuality of 26 agreement, and (5) mutuality of obligation.’” Hergenreder v. Bickford Senior Living 27 Grp., LLC, 656 F.3d 411, 417 (6th Cir. 2011) (quoting Hess v. Cannon Twp., 696 28 N.W.2d 742, 748 (Mich. Ct. App. 2005) (internal quotation marks omitted)). Michigan 1 law seems to recognize clickwrap agreements as enforceable so long as the consumer 2 “had reasonable notice, actual or constructive, of the terms of the putative agreement” 3 and “manifest[ed] assent to those terms.” Lee v. Panera Bread Co., No. 1:22-cv-11958, 4 2023 U.S. Dist. LEXIS 49246, at *9 (E.D. Mich. Mar. 6, 2023) (applying Michigan law). 5 Here, Plaintiffs do not dispute that they are bound by the Connected Services 6 Agreements, or that they otherwise did not have notice of the Agreements or their terms. 7 Rather, Plaintiffs argue that that this provision merely provides for optional arbitration 8 and that “[n]othing in [the provision] dictates that arbitration is the only forum in which 9 Plaintiffs can bring their claims.” Doc. No. 25 at 31. 10 Michigan recognizes that “[t]he cardinal rule of contract interpretation is to 11 ascertain the parties’ intent.” People v. Swirles, 553 N.W.2d 357, 358 (Mich. Ct. App. 12 1996) (citing Rasheed v Chrysler Corp, 517 N.W.2d 19, 29 n.28 (Mich. 1994)); see also 13 Bazzi v. M S Int’l Inc, No. 2:21-CV-11788-TGB, 2022 U.S. Dist. LEXIS 50520, at *13– 14 14 (E.D. Mich. Mar. 21, 2022) (“A court’s primary obligation when interpreting a 15 contract is to determine the intent of the parties.”) (citing Bodnar v. St. John Providence, 16 Inc., 933 N.W.2d 363, 373 (Mich. Ct. App. 2019)). “The parties’ intent is discerned from 17 the contractual language as a whole according to ‘its plain and ordinary meaning.’” 18 Bazzi, 2022 U.S. Dist. LEXIS 50520, at *13–14 (citing Radenbaugh v. Farm Bureau 19 Gen. Ins. Co. of Mich., 610 N.W.2d 272, 275 (Mich. Ct. App. 2000)). Under Michigan 20 law, “[a]n arbitration agreement is a contract by which the parties forgo their rights to 21 proceed in civil court in lieu of submitting their dispute to a panel of arbitrators.” Galea 22 v. FCA US LLC, 917 N.W.2d 694, 698 (Mich. Ct. App. 2018) (internal citation and 23 quotation marks omitted). 24 Courts apply “a summary judgment-like standard and rule as a matter of law when 25 there are no genuine issues of material fact regarding the existence of an arbitration 26 agreement.” Slade v. Empire Today, LLC, No. 20-cv-2393 DMS (KSC), 2021 U.S. Dist. 27 LEXIS 127498, at *11 (S.D. Cal. July 7, 2021). Here, the Court finds that there is no 28 genuine issue of material fact as to the existence of the Connected Services Agreements 1 and the provisions contained therein. However, Ford has not demonstrated that these 2 Agreements contain an agreement to submit the dispute between the parties here to 3 arbitration as a matter of law. First, Ford has not properly briefed the issue under the 4 applicable state law: Michigan. Second, the provisions can only be described as a 5 hodgepodge of statements. See Vedula Exs. A–C. The section is entitled “Class or 6 Collective Actions.” After defining the parties, the Agreements proceed to define the 7 term “arbitration.” The remainder of this section merely purports to prohibit bringing 8 various types of claims and requests for relief in front of an arbitrator. Among other 9 things, these provisions do not contain any language suggesting that arbitration is 10 mandatory or otherwise providing that arbitration is in lieu of pursuing claims in court. 11 The provisions also fail to identify any applicable arbitration procedures or rules. The 12 Agreements contain no delegation clause, no invocation of the American Arbitration 13 (“AAA”) rules, see Brennan v. Opus Bank, 796 F.3d 1125, 1130 (9th Cir. 2015) (holding 14 that “incorporation of the AAA rules constitutes clear and unmistakable evidence that 15 contracting parties agreed to arbitrate arbitrability”), and no clear and unmistakable 16 indication that the issue of arbitrability of Plaintiffs’ claims is arbitrable, id. (providing 17 that while a court must determine the gateway issues, such “issues can be expressly 18 delegated to the arbitrator where the parties clearly and unmistakably provide otherwise”) 19 (internal quotation marks and citation omitted). To that end, Ford does not argue or 20 otherwise brief the scope of the asserted agreements to arbitrate. 21 Surely, Ford knows how to draft a mandatory and binding arbitration clause, and 22 this is not it. The Court is utterly unable to discern the intention of the parties with 23 respect to these provisions in the Connected Services Agreements. As a result, these 24 provisions must be construed against Ford. See Cole v. Auto Owners Ins. Co., 723 25 N.W.2d 922, 924 (Mich. Ct. App. 2006) (“[C]ontracts are construed against the drafter 26 only when there is a true ambiguity and the parties’ intent cannot be discerned through all 27 conventional means, including extrinsic evidence.”) (citing Klapp v. United Ins. Grp. 28 Agency, Inc., 663 N.W.2d 447, 454–55 (Mich. 2003)). 1 While the Court must address the gateway issues in resolving a motion to compel 2 || arbitration, it is Ford’s burden to demonstrate that these questions of law should be 3 resolved in its favor. The Court finds that Ford has not met its burden of showing that 4 there is a mandatory arbitration agreement that encompasses the dispute here under 5 Michigan law. Accordingly, the Court DENIES its motion to compel arbitration based 6 upon the Connected Services Agreements. 7 V. CONCLUSION 8 Based upon the foregoing, the Court DENIES Ford’s motion to compel arbitration. 9 IT IS SO ORDERED. 10 || Dated: November 7, 2023 11 “ Miku. DW Lhihls “£4 12 HON. MICHAEL M. ANELLO 13 United States District Judge 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28