California: Nissan Cannot Compel Arbitration

In the case of Damien T. Davis, et. al. v. Nissan North America, et. al., the Fourth District Court of Appeals of California recently held that Nissan North America, Inc. could not compel arbitration under the doctrine of equitable estoppel in a lawsuit brought by the purchasers of a new vehicle as a nonsignatory of the sales contract. The court affirmed that a vehicle manufacturer’s duty relating to its warranty is independent to the sales contract.    

Plaintiffs had purchased a new Nissan Altima from a Nissan dealership in Riverside, California and signed a sales contract with the dealership. Following multiple visits to an authorized Nissan repair facility, Plaintiffs were told on the fourth visit that the transmission was defective and needed to be replaced.  

Plaintiffs sued Nissan North America, Inc., the vehicle manufacturer; and Nissan of San Bernardino, an authorized repair facility, for violations of the Song-Beverly Consumer Warranty Act, including breach of express warranty and negligent repair. The Nissan defendants moved to compel arbitration arguing even though they were not parties to the sales contract, they could compel arbitration under the doctrine of equitable estoppel because plaintiffs’ claims were based on warranties they received as part of the sale.  

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The trial court denied the motion, relying on the Ninth Circuit’s 2022 decision in Ngo v. BMW of North America, LLC (9th Cir. 2022) 23 F. 4th 942, which stated the vehicle manufacturer’s duty relating to the warranty is independent to the sales contract. Notably, the trial court in the underlying action acknowledged that the sales contract between Plaintiffs and the Nissan dealership disclaimed any seller warranties but clarified the disclaimer did not affect any warranties the manufacturer may provide.  

The court of appeals explained that application of equitable estoppel would be appropriate where the claims that plaintiffs asserted against the nonsignatory depended upon, or were founded in and inextricably intertwined with the underlying contractual obligations of the agreement containing the arbitration clause. But equitable estoppel did not apply in this case because plaintiffs were not relying on the sales contract to impose liability on Nissan and rather alleged violations of manufacturer warranties under the Song-Beverly Act and a related tort claim.  

The case of Davis v. Nissan North America is among several recent decisions to disagree with the ruling of Felisilda et. al. v. FCA US LLC (2020) 53 Cal. App. 5th 486 which held that plaintiff-buyers were estopped from refusing to arbitrate claims against a vehicle manufacturer and were not prejudiced by the alleged lack of notice that a manufacturer could compel arbitration. The California Supreme Court has granted review to resolve the conflict between Felisilda and four published California Court of Appeal decisions rejecting the holding of Felisilda.