Woo v. American Honda Motor Co., Inc.

Opinion

1 2 5 6 TONY WOO, et al., Case No. 19-cv-07042-MMC

7 Plaintiffs, ORDER DENYING DEFENDANT'S 8 v. MOTION TO COMPEL ARBITRATION AND STAY CLAIMS OF PLAINTIFFS INC., 10 Defendant.

11 12 Before the Court is defendant American Honda Motor Co., Inc.'s ("Honda") "Motion 13 to Compel Arbitration and Stay Claims of Plaintiffs Woo and Schwert," filed February 16, 14 2021. Plaintiffs Tony Woo ("Woo"), Douglas P. Schwert ("Schwert"), and Daniel Rifkin 15 ("Rifkin") have filed opposition, to which Honda has replied. Having read and considered 16 the papers filed in support of and in opposition to the motion, the Court rules as follows.1 18 In the operative complaint, the Second Amended Complaint ("SAC"), plaintiffs 19 allege that Rifkin, on or about April 6, 2017, purchased a new Honda CR-V EX vehicle 20 from a Honda dealership in Denver, Colorado (see SAC ¶ 102), that Schwert, on or about 21 December 30, 2017, purchased a new 2018 Honda CR-V Touring vehicle from a Honda 22 dealership in Chattanooga, Tennessee (see SAC ¶ 125), and that Woo, on or about 23 January 12, 2019, purchased a new 2018 Honda CR-V EX vehicle from a Honda 24 dealership in Chico, California (see SAC ¶ 77). 25 Plaintiffs allege that each plaintiff's vehicle has a "Display Screen" allowing him to 26 "access and operate" his vehicle's "safety, information, communication, and 27 1 entertainment features." (See SAC ¶ 3.) According to plaintiffs, their respective Display 2 Screens are "defective" in that they "dim and go dark, freeze, or shine at full brightness, 3 causing driver distraction and rendering the [vehicles'] information center inoperable." 4 (See SAC ¶ 2.) Plaintiffs also allege Honda "failed to disclose or actively concealed" the 5 "defects." (See SAC ¶ 62.) Plaintiffs further allege that each of them, after experiencing 6 the above-referenced "defects," took his vehicle to one or more Honda dealerships, 7 which, in each instance, was unable to fix the "defect" (see SAC ¶¶ 81-89, 92-95, 106- 8 115, 129-37, 142-45), and, in addition, that each contacted Honda, which did not provide 9 any information as to how the "defect" could be fixed (see SAC ¶¶ 90-91, 116-17, 138). 10 Based on the above allegations, all plaintiffs assert, as the First Cause of Action, a 11 federal claim under the Magnuson-Moss Warranty Act. In addition, Woo asserts, as the 12 Second through Sixth Causes of Action, five claims under California law, Rifkin asserts, 13 as the Seventh and Eighth Causes of Action, two claims under Colorado law, and 14 Schwert asserts, as the Ninth and Tenth Causes of Action, two claims under Tennessee 15 law. Each of the ten Causes of Act is based on one or more of the following three 16 theories: (1) Honda, by not repairing the alleged defect, breached the express terms of 17 its "New Vehicle Limited Warranty," which warranty, plaintiffs assert, requires Honda to 18 "repair original components found to be defective in material or workmanship under 19 normal use and maintenance" (see SAC ¶¶ 168, 183, 247, 267; see also ¶ SAC 163); 20 (2) Honda breached the implied warranty of merchantability, as the alleged defect makes 21 drivers "less safe by detracting their attention and poses enough of a safety risk that [the] 22 [v]ehicles cannot be said to provide safe and reliable transportation" (see SAC ¶¶ 195, 23 262, 282; see also SAC ¶ 163); and (3) Honda engaged in deceptive and unfair business 24 practices, specifically, its having "actively concealed" the "defect" (see SAC ¶¶ 220, 225). 26 By the instant motion, Honda argues that the claims asserted on behalf of Woo 27 and Schwert only are, under the Federal Arbitration Act ("FAA"), subject to arbitration. 1 The FAA provides as follows:

2 If any suit or proceeding be brought in any of the courts of the United States upon any issue referable to arbitration under an agreement in writing for 3 such arbitration, the court in which such suit is pending, upon being satisfied that the issue involved in such suit or proceeding is referable to 4 arbitration under such an agreement, shall on application of one of the parties stay the trial of the action until such arbitration has been had in 5 accordance with the terms of the agreement, providing the applicant for the stay is not in default in proceeding with such arbitration. 6 See 9 U.S.C. § 3. 7 Under the FAA, a district court's role is to determine "if a valid arbitration 8 agreement exists," and, "if so, whether the agreement encompasses the dispute at 9 issue." See Davis v. Nordstrom, Inc., 755 F.3d 1089, 1092 (9th Cir. 2014). 10 A. Woo 11 With respect to Woo, Honda relies on an "Arbitration Provision" included in a 12 "Retail Installment Sale Contract" ("Sale Contract") between Woo and Ed Wittmeier Ford 13 Inc. ("Wittmeier Ford"), the dealership from which Woo purchased his Honda vehicle. 14 The Arbitration Provision, in relevant part, reads as follows: 15 Any claim or dispute, whether in contract, tort, statute or otherwise 16 (including the interpretation and scope of this Arbitration Provision and the arbitrability of the claim or dispute), between you and us or our employees, 17 agents, successors or assigns, which arises out of or relates to your credit application, purchase or condition of this vehicle, this contract or any 18 resulting transaction or relationship (including any such relationship with third parties who do not sign this contract), shall, at your or our election, be 19 resolved by neutral binding arbitration and not by a court action. 20 (See Kiser Decl. Ex. A at 4.) The Sale Contract defines "you" to be the "Buyer," who is 21 identified as Woo, and defines "us" to be the "Seller," which is identified as Wittmeier 22 Ford. (See id. Ex. A at 1.) 23 Honda, a nonsignatory to the Sale Contract, first argues that, pursuant to the 24 terms of the Arbitration Provision, the issue of whether Woo's claims against Honda are 25 subject to arbitration must be resolved by an arbitrator rather than a district court. As set 26 forth below, the Court is not persuaded. 27 Parties to an arbitration agreement "may delegate threshold arbitrability questions 1 evidence.” See Henry Schein, Inc. v. Archer & White Sales, Inc., 139 S. Ct. 524, 530 2 (2019) (internal quotation and citation omitted). Here, although, as set forth above, the 3 Arbitration Provision includes a clause providing that any dispute as to "the arbitrability of 4 the claim" shall be resolved by an arbitrator (see Kiser Decl. Ex. A at 4), the Arbitration 5 Provision, as also set forth above, limits its terms to claims or disputes between Woo and 6 Wittmeier Ford or said dealership's "employees, agents, successors or assigns” (see id.), 7 none of which Honda purports to be. Consequently, the Arbitration Provision lacks the 8 requisite "clear and unmistakable evidence" that Woo agreed to delegate to an arbitrator 9 the threshold question of whether his claims against Honda fall within the Arbitration 10 Provision. See Kramer v. Toyota Motor Corp., 705 F.3d 1122, 1127 (9th Cir. 2013) 11 (holding, where “terms of the arbitration clauses [were] expressly limited to Plaintiffs and 12 the Dealerships,” arbitration agreements did "not contain clear and unmistakable 13 evidence that Plaintiffs and Toyota agreed to arbitrate arbitrability"); Jurosky v. BMW of 14 North America, LLC, 441 F. Supp. 3d 963, 967-68 (S.D. Cal. 2020) (finding, where 15 arbitration clause covered claims between plaintiff and dealer or “employees, agents, 16 successors or assigns” of dealer, “the issue of whether the . . . dispute [was] arbitrable 17 given BMW’s status as a nonsignatory” was not for arbitrator to decide). 18 Next, Honda argues that, assuming the question of arbitrability is for the Court to 19 decide, Honda is entitled to enforce the Arbitration Provision on the basis of equitable 20 estoppel. As set forth below, the Court again is not persuaded. 21 Under California law, a plaintiff is "equitably estopped from avoiding arbitration of 22 his causes of action" against a "nonsignatory defendant" where his claims against the 23 nonsignatory "are intimately founded in and intertwined with the underlying contractual 24 obligations." See Boucher v. Alliance Title Co., 127 Cal. App. 4th 262, 272-73 (2005).2 25 As plaintiffs note, a number of district courts, in considering cases in which a 26 2 "[S]tate contract law" determines whether a nonsignatory to an arbitration 27 agreement can enforce the agreement. See Kramer, 705 F.3d at 1128. The parties 1 plaintiff and dealership enter into a purchase agreement containing language essentially 2 indistinguishable from the language in the Arbitration Provision, have found the plaintiff 3 was not equitably estopped from avoiding arbitration of his claims against a nonsignatory 4 manufacturer. In particular, those courts concluded, where the plaintiff asserted against 5 the manufacturer claims alleging defects in an automobile, such claims were not founded 6 in and intertwined with the purchase agreement, given that the claims made no reference 7 to a failure to comply with any obligation set forth in the purchase agreement. See, e.g., 8 Jurosky, 441 F. Supp. 3d at 969-75 (holding nonsignatory manufacturer could not enforce 9 arbitration provision in purchase agreement, where plaintiff alleged "no duty, obligation, 10 term, or condition imposed by the purchase agreement that [manufacturer] breached"); 11 Schulz v. BMW of N. Am., LLC, 472 F. Supp. 3d 632, 639-40 (N.D. Cal. 2020) (rejecting 12 manufacturer’s argument it could enforce arbitration provision where "purchase 13 agreement [did] not impose any warranty obligations on either the dealership or [the 14 manufacturer]"); Pestarino v. Ford Motor Co., No. 19-CV-07890-BLF, 2020 WL 3187370, 15 at *3-4 (N.D. Cal. June 15, 2020) (finding "lemon law claims" against manufacturer not 16 "intertwined" with plaintiff's contract with dealership, as such claims "do not rely on the 17 terms of the sale contract"). Here, similar to the circumstances presented in the above- 18 cited cases, Woo does not base any claim on a duty or obligation set forth in the Sale 19 Contract, and the Court likewise finds Honda is not entitled to enforce the Arbitration 20 Provision against Woo.3 21

22 3 To the extent Honda relies on Felisilda v. FCA US LLC, 53 Cal. App. 5th 486 (2020), in which a state appellate court considered an arbitration agreement containing 23 the same language regarding "third parties" as does the Arbitration Provision here, and, based thereon, found the plaintiffs therein equitably estopped from avoiding arbitration of 24 their claims against a nonsignatory manufacturer, see id. at 497, the Court again is not persuaded. The signatories there, as here, only agreed to arbitrate claims against "us," 25 which, in turn, is defined as the dealership and its "employees, agents, successors or assigns” (see Kiser Decl. Ex. A at 4), none of which Honda purports to be. 26 Consequently, the Court, having considered the holding in Felisilda, declines to follow it. See, e.g., Messih v. Mercedes-Benz USA, LLC, 2021 WL 2588977, at *11 (N.D. Cal. 27 June 24, 2021) (noting Felisilda "brushed over the restrictive 'you and us' language at the 1 Accordingly, to the extent Honda seeks an order compelling Woo to arbitrate his 2 claims against Honda, the motion will be denied. 3 B. Schwert 4 With respect to Schwert, Honda relies on an "Arbitration Agreement" attached to a 5 sales contract titled "Buyer's Order," by which Schwertz purchased a Honda vehicle from 6 Economy Honda Superstore ("Economy Honda"). (See Kiser Decl. Ex. B.) 7 The Arbitration Agreement provides that "[u]pon request of a Party, any and all 8 Claim(s) shall be decided in binding arbitration." (See id. Ex. B at 2.) "Claim(s)" are 9 defined as follows:

10 'Claim(s)' includes any and all disputes, claims or controversies between the Parties relating to the Vehicle, or arising out of or relating to: (a) the 11 application for and the terms of and enforceability of the sale, lease, or financing of the Vehicle, (b) the purchase or terms of any warranty, service 12 agreement, maintenance plan, paint/ undercarriage/interior protection product, anti-theft etching product and warranty, GAP protection, deficiency 13 waiver addendum, or any other product or insurance, (c) any claims of breach of contract, negligence, misrepresentation, conversion, fraud, or 14 unfair and deceptive trade practices, (d) any claim of a violation of any state or federal statute or regulation, or (e) the Vehicle's condition, warranty, 15 workmanship, servicing, maintenance, or repair. 16 (See id.) The Arbitration Agreement defines "Parties" as "you and us," and, in turn, 17 defines "you" to mean "the customer(s) who sign(s) below" and "us" to mean "the Dealer 18 signing below, and . . . the Dealer's employees, agents, and parent and affiliated 19 companies (including, but not limited to Cornerstone Acceptance Corporation) and their 20 employees and agents." (See id.) Schwert signed the Arbitration Agreement as 21 "Customer" and a representative of Economy Honda signed as "Dealer." (See id. Ex. C.) 22 Honda first argues the issue of whether Schwert's claims against Honda are 23 subject to arbitration must be resolved by an arbitrator. In support thereof, Honda relies 24 on a provision of the Arbitration Agreement stating "issues regarding whether a matter is 25 arbitrable shall be made by the arbitrator." (See id. Ex. B at 2.) For the reasons stated 26 above with respect to Woo's claims, the Court is not persuaded. 27 Next, Honda argues, it is entitled to enforce the Arbitration Provision on the basis 1 Under Tennessee law,4 "when the signatory attempts to derive a nonsignatory's 2 legal duties from the agreement containing the arbitration provision, the signatory should 3 be estopped from denying the arbitration provision." See Blue Water Bay at Center Hill, 4 LLC v. Hasty, 2017 WL 5665410, at *13 (November 27, 2017 Tenn. Ct. App.) Here, 5 however, Schwert does not base any claim on a duty arising from the sales agreement. 6 Although Honda argues Schwert received a "direct benefit" from Honda when he 7 entered into the sales agreement with Economy Honda (see Def.'s Mot. at 12:6-7, 13:9- 8 10), specifically, "Honda's 3-year/36,000-mile New Vehicle Limited Warranty" that 9 "accompanied" the sale (see SAC ¶ 67), the existence of a "but-for" factual relationship 10 between the plaintiff's claims and the purchase agreement is, under Tennessee law, 11 insufficient to support equitable estoppel; rather, the plaintiff's claim must "legally turn on 12 duties set forth in" that agreement. See Blue Water Bay, 2017 WL 5665410, at *15. 13 Here, as set forth above, Schwert's claims are not based on the sales agreement; 14 indeed, the sales agreement expressly "disclaims" such warranty. (See Riser Decl. Ex. B 15 at 1 (providing "[t]he only express warranties, if any, applying to the motor vehicle 16 described [in Buyer's Order] are those offered by the manufacturer"; further providing 17 "[t]he selling dealer makes no express warranties on the motor vehicle" and "expressly 18 disclaims all warranties, either express or implied")); see also Kramer, 705 F.3d at 1131 19 (holding, under California law, where purchase agreements "expressly differentiate dealer 20 warranties from manufacturer warranties," claims relying on beach of manufacturer's 21 warranty "arise independently from the Purchase Agreements, rather than intimately 22 relying on them").5 23 Accordingly, to the extent Honda seeks an order compelling arbitration of 24 Schwert's claims, the motion will be denied. 25 4 The parties agree Tennessee law governs enforceability of the Arbitration 26 Agreement. 27 5 The parties point to no Tennessee authority suggesting Tennessee law is to the 2 For the reasons stated above, Honda's motion to compel arbitration is hereby 3 || DENIED. 5 6 || Dated: July 7, 2021 . INE M. CHESNEY 7 United States District Judge 8 9 10 11 12

13 ©

17 18 19 20 21 22 23 24 25 26 27 28