SILVESTRE NAVARRETE vs FORD MOTOR COMPANY et al

Defendant moves to compel arbitration of this action pursuant to the Retail Installment Sales Contract (“RISC”). Defendant argues the Arbitration Provision in the RISC is governed by the Federal Arbitration Act (“FAA”) and California Arbitration Act (“CAA”). Defendant maintains it has not waived its right to arbitrate and no other grounds exist for revocation of the agreement. Having reviewed the language of the Arbitration Provision and the circumstances of its execution, the Court concludes that the motion should be granted.

LEGAL STANDARD

Defendant maintains that the FAA governs the Arbitration Provision based on the language itself and because the agreement affects interstate commerce. (Mtn. to Compel Arbitration at p 6:19-22.) The Arbitration Provision states “[a]ny arbitration under this Arbitration Provision shall be governed by the Federal Arbitration Act (9 U.S.C. §§ 1 et seq.) and not by any state law concerning arbitration.” (Declaration of Trina Clayton [“Clayton Decl.”], Ex. A.) Under the FAA, the court’s role is limited to determining “(1) whether a valid agreement to arbitrate exists, and if it does (2) whether the agreement encompasses the dispute at issue.” (Chiron Corp. v.

Ortho Diagnostic Systems, Inc. (9th Cir. 2000) 207 F.3d 1126, 1130.) To determine “whether a valid contract to arbitrate exists,” courts apply “ordinary state law principles that govern contract formation.” (Davis v. Nordstrom, Inc. (9th Cir. 2014) 755 F.3d 1089, 1093 [citations omitted]; see also Ingle v. Circuit City Stores, Inc. (9th Cir. 2003) 328 F.3d 1165, 1170.)

Alternatively, the CAA governs the Arbitration Provision. Code of Civil Procedure section 1281.2 provides:

On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party to the agreement refuses to arbitrate such controversy, the court shall order the petitioner and respondent to 12

arbitrate the controversy if it determines that an agreement to arbitrate the controversy exists, unless it determines that: [¶] The right to compel arbitration has been waived by the petitioner; or [¶] (b) Grounds exist for rescission of the agreement . . . . In determining the threshold question of whether an arbitration agreement exists between the parties, the court employs a three-step burden shifting analysis. (Iyere v. Wise Auto Group (2023) 87 Cal.App.5th 747, 755 (Iyere); see also Espejo v.

Southern California Permanente Medical Group (2016) 246 Cal.App.4th 1047, 1060.) The party seeking to compel arbitration bears the initial burden of showing an agreement to arbitrate. If that burden is met, the burden shifts to the opposing party to show a factual dispute regarding the agreement’s existence. If the opposing party does so, then the burden shifts back to the proponent of arbitration to show the existence of a valid agreement by a preponderance of the evidence. (Iyere, supra, 87 Cal.App.5th at p. 755.)

ANALYSIS

There is a Valid Agreement to Arbitrate

A valid agreement to arbitrate exists between the parties. The Arbitration Provision in the RISC provides in relevant part:

Any claim or dispute, whether in contract, tort, statute or otherwise (including the interpretation and scope of this Arbitration Provision, any allegation of waiver of rights under 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 of 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. (Clayton Decl., Ex A.)

Plaintiffs do not dispute that they signed the RISC on April 11, 2020. (Reply at p. 3:20-24.) In addition, Plaintiffs signed and acknowledged notice of the Arbitration Provision as follows: “Agreement to Arbitrate. By signing below, you agree that pursuant to the Arbitration Provision on page 5 of this contract, you or we may elect to resolve any dispute by neutral, binding arbitration and not by a court action. See the Arbitration Provision for additional information concerning the agreement to arbitrate.” (Ibid.)

The RISC further drew the Arbitration Provision to Plaintiffs’ attention through the following disclaimer: “. . . YOU ACKNOWLEDGE THAT YOU HAVE READ ALL PAGES OF THIS CONTRACT, INCLUDNG THE ARBITRATION PROVISION ON PAGE 5, BEFORE SIGNING BELOW.” (Ibid.) Plaintiffs’ signature on these sections of the RISC evinces the fact that he assented to the Arbitration Provision. (See Mendoza v. Trans Valley Transport (2022) 75 Cal.App.5th 748, 777 [“A party’s acceptance of an agreement to arbitrate may be express, as where a party signs the agreement.”].)

Plaintiff argues Defendant has failed to properly authenticate the RISC, and thus fails to meet its burden of proving the existence of a valid agreement to arbitrate. “The moving party ‘can meet its initial burden by attaching to the [motion or] petition a copy of the arbitration agreement purporting to bear the [opposing party’s] signature.’” (Gamboa v. Northeast Community Clinic (2021) 72 Cal.App.5th 158, 165.) Here, Defendant has attached a copy of the RISC signed by Plaintiff as Exhibit A to the Declaration of Trina Clayton.

To the extent Plaintiff argues Ms. Clayton lacks personal knowledge of the RISC’s execution, “the custodian of record need not have been present or employed when the document was created or signed to authenticate a document in a company’s files.” (Iyere v. Wise Auto Group (2023) 87 Cal.App.5th 747, 758-759.) Additionally, “[f]or purposes of a petition to compel arbitration, it is not necessary to follow the normal procedures of authentication.” (Gamboa, supra, 72 Cal.App.5th at pp. 165-166.) Therefore, Plaintiff has not successfully challenged the authenticity of the agreement, and Defendant has shown a valid agreement to arbitrate.

The Scope of the Arbitration Agreement Covers Plaintiff’s Claims

The scope of the agreement is covered by Plaintiff’s claims. Here, the Arbitration Provision applies to “any claim or dispute, whether in contract, tort, statute, or otherwise . . which arises out of or relates to your . . . purchase or condition of this vehicle, this contract or any resulting transaction or relationship . . . .” (Clayton Decl., Ex. A.) Plaintiffs’ sole cause of action against Defendant is for negligent repair, which inherently relates to the condition of the vehicle.

Plaintiff relies on the Ford Motor Warranty Cases (2025) 17 Cal.5th 1122 (Ochoa) to argue “warranty performance is not arbitrable through the form Sales Contract proffered by Defendant.” (Opposition at p. 2:8-10.) The plaintiff there brought an action against the manufacturer and not the dealership. The manufacturer had moved to compel arbitration based on the RISC as a non-party. The Court reasoned:

First we note that the provision begins and ends with references to the contract signatories. It describes disputes between “you and us,” and clarifies that “us” includes the dealers’ employees, agents, successors, or assigns. There is no claim here that Ford is an employee, agent, successor, or assign of any of the dealers. By its terms, the arbitration clause controls disputes (between “you and us”) that arise out of the credit application, purchase, or condition of the vehicle, “this contract,” or any “resulting transaction or relationship with third parties.” Here, the suit is between plaintiffs and Ford. It is based on allegations of Ford’s improper inducement, concealment, and fraud rather than disagreements with the dealers. The complaints alleged no contractual relationship between plaintiffs and Ford, certainly not such a relationship resulting from the sales contract.

The “third party” language in the arbitration clause means that if a buyer sues a dealer based on the condition of the vehicle, the dealer can elect to arbitrate that claim. (Id. at p. 1130 [emphasis in original].) With respect to the claims for breach of warranty arising under the Song-Beverly Act, the Court concluded, “[a]s plaintiffs’ claims are not intimately founded in or intertwined with the sales contracts, plaintiffs should not be estopped from pursuing their remedies against Ford in court.” (Id. at p. 1126.)

Its ultimate disposition was to preclude Ford from compelling to arbitrate the plaintiffs’ claims because the language of the arbitration clauses did not support an agreement to arbitrate with third parties. (Id. at p. 1138.) In addition, the Court held “plaintiffs’ claims flow not from the contracts but from separate statutory requirements and conventional fraud theories. They are not intimately found in and intertwined with the contractual terms.” (Ibid.)

Conversely, here, although Plaintiff has sued both the manufacturer and the dealer, only the dealer, Heritage Ford, has moved to compel arbitration. The RISC is an agreement Plaintiff entered into with Heritage Ford. As the dealer and a party to the agreement, Defendant may move to compel arbitration of Plaintiffs’ claims. However, to the extent Defendant argues the RISC creates a warranty, that is unsupported by the agreement itself. The RISC purports to disclaim warranties on the part of the seller but does not frustrate any warranties that the vehicle manufacturer may provide.

Plaintiff does not sue Defendant for the breach of any warranty, but instead for negligent repair. As Defendant notes, “this cause of action makes no reference to ‘warranties,’ ‘warranty repair,’ or any sort of ‘warranty repair relationship.’” (Reply at p. 5:18-19.) Rather, the allegations are that Defendant “breached its duty to Plaintiffs to use ordinary care and skill by failing to properly store, prepare, and repair the Subject Vehicle in accordance with industry standards.” (Complaint at ¶ 61.)

These allegations relate to the condition of the vehicle and the resulting transaction between Plaintiff and Defendant. (Reply at p. 5:24-26.) The language of the Arbitration Provision, supra, is broad and includes claims that arise from the contract but are not limited to it. (Clayton Decl., Ex. A.) The negligent repair claim, is therefore, covered by the Arbitration Provision. The California Supreme Court and subsequent authorities have not addressed whether a signatory dealership may move to compel arbitration pursuant to the RISC for tort claims like negligent repair.

Indeed, “the sole issue to be decided by Ochoa was whether a non-signatory to the sales contract/arbitration provision, such as a vehicle manufacturer, could compel arbitration of warranty claims based on equitable estoppel or as a third party beneficiary.” (Reply at p. 6:9- 11.) As a signatory to the RISC, and given the scope of the Arbitration Provision, the Court concludes that Defendant may move to compel arbitration of this claim. The Ford Motor Warranty Cases are therefore distinguishable and not applicable under these facts.

The Court next considers whether Defendant has waived its right to arbitration and whether any other grounds for revocation exist.

Defendant Has Not Waived its Right to Arbitrate

The California Supreme Court has identified various factors that are “relevant and properly considered in assessing waiver claims.” (St. Agnes Medical Center v. Pacific Care of California (2003) 31 Cal.4th 1187, 1195-1196.) Those factors are:

(1) whether the party’s actions are inconsistent with the right to arbitrate; (2) whether ‘the litigation machinery has been substantially invoked’ and the parties ‘were well into preparation of a lawsuit’ before the party notified the opposing party of an intent to arbitrate; (3) whether a party either requested arbitration enforcement close to the trial date or delayed for a long period before seeking a stay; (4) whether a defendant seeking arbitration filed a counterclaim without asking for a stay of the proceedings; (5) whether important intervening steps [e.g. taking advantage of judicial discovery procedures not available in arbitration] had taken place; and (6) whether the delay affected, misled, or prejudiced the opposing party. (Sobremonte v.

Superior Court (1998) 61 Cal.App.4th 980, 992 [internal citations and quotations omitted; St. Agnes, supra, 31 Cal.4th at p. 1196.) The prejudice requirement under the sixth factor has been abrogated by the California Supreme Court. (Quach v. California Commerce Club, Inc. (2024) 16 Cal.5th 562 (Quach).) The sixth factor regarding prejudice was based on federal cases that “applied an arbitration-specific rule that required a showing of prejudice to establish waiver.” (Quach, supra, 16 Cal.5th at p. 569.) “To establish waiver, there is no requirement that the party opposing enforcement of the contractual right demonstrate prejudice or otherwise show harm from the waiving party’s conduct.” (Id. at p. 585.)

The multifactor test is not “a mechanical process in which each factor is assessed and the side with the greater number of favorable factors prevails,” nor is the list of factors exclusive: rather, the factors reflect the principles that should guide courts in determining whether a party has waived its right to demand arbitration. (Zamora v. Lehman (2010) 186 Cal.App.4th 1, 15 [internal quotation marks and citation omitted].) “The waiver inquiry is exclusively focused on the waiving party’s conduct; neither the effect of that conduct on the party seeking to avoid enforcement nor that party’s subjective evaluation of the waiving party’s intent is relevant.” (Quach, supra, 16 Cal.5th at p. 585.)

Plaintiff does not assert that Defendant has waived its right to arbitration. (Reply at p. 1:9-10.) Nevertheless, the facts here do not demonstrate that Defendant has waived its right to arbitration. Defendant has only filed an Answer in this action. (Clayton Decl. at ¶ 4.) Defendant’s Answer includes the affirmative defense of an agreement to arbitrate. (Id., Ex. C.) Defendant has not propounded or responded to any discovery in this matter. (Id. at ¶¶ 5, 6.) Thus, Defendant has not engaged in litigation-related conduct. No trial date has been set in these proceedings. (Id. at ¶ 7.) Accordingly, no waiver has occurred, and Defendant may move to arbitrate these claims.

There are No Other Grounds for Revocation

As an initial matter, Plaintiffs do not assert any claims for fraud against Defendant Heritage Ford. The cause of action for fraudulent inducement is only asserted against Defendant Ford Motor Company. Instead, at issue is whether the Arbitration Provision is unconscionable.

The party challenging a contractual arbitration provision bears the burden of proving that it is both procedurally and substantively unconscionable. (OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111, 126 (OTO).) This may be done on a sliding scale, where the more substantively oppressive the contract term, the less evidence of procedural unconscionability is required, and vice versa. (Id. at pp. 125-126.) Nevertheless, both must be shown. Procedural unconscionability focuses on oppression or surprise to the “weaker” party based on unequal bargaining power, whereas substantive unconscionability focuses on the terms of the agreement and whether they are overly harsh or one-sided. (OTO, supra, 8 Cal.5th at pp. 125- 129.)

Here the Arbitration Provision has a low degree of unconscionability. Although Plaintiff was given notice of the arbitration provision prior to signing, the agreement was offered on a take-it-or-leave it basis and is found on a dense pre-printed form. (Opposition at p. 5:1-15.) (OTO, supra, 8 Cal.5th at p. 126 [“An adhesive contract is standardized, generally on a preprinted form, and offered by the party with the superior bargaining power on a take-itor-leave it basis.”].) However, the Arbitration Provision itself is on a separate page in bold and capitalized font. (Clayton Decl., Ex.

A.) (See cf. Higgins v. Superior Court (2006) 140 Cal.App.4th 1238, 1250-1251 [noting that procedural unconscionability has been found where the presence of an arbitration provision has not been distinguished through bold lettering, larger font, or capitalization].) As for substantive unconscionability, the Arbitration Provision provides arbitration is subject to the rules of the American Arbitration Association (“AAA”). (Clayton Decl. Ex A.) The parties must agree on an arbitrator to ensure neutrality. (Ibid.)

In addition, the Arbitration Provision provides that Defendant is to “pay the arbitration filing and administration fees up to a maximum of $5,000, and each party shall be responsible for its own attorneys’ fees, unless awarded by the arbitrator under applicable law.” (Ibid.)

Plaintiff relies on Cook v. University of Southern California (2024) 102 Cal.App.5th 312 (Cook) to argue that the Arbitration Provision is substantively unconscionable. (Opposition at pp. 5:17-6:24.) In Cook, the Second District Court of Appeal upheld the trial court’s denial of a motion to compel arbitration because of the (1) broad scope of the agreement, (2) the infinite duration, and (3) the lack of mutuality in the claims that were covered by the agreement. (Cook, supra, 102 Cal.App.5th at p. 321.) With respect to the broad scope, the agreement required the arbitration of “all claims” whether or not arising out of the employment relationship between the parties. (Ibid.) The court noted that employment contracts can provide a “margin of safety” to the party with the superior bargaining power as

long as there is a legitimate commercial need for doing so that is explained in the contract itself. (Cook, supra, 102 Cal.App.5th at p. 324.) The agreement there did not explain the justification and the court held that the trial court did not err in holding that the broad scope was substantively unconscionable. (Id. at pp. 324-325.) As for the infinite duration, the agreement purported to survive indefinitely following the employee’s termination unless modified by a written document signed by the president of the university. (Cook, supra, 102 Cal.App.5th at p. 325.)

The court held that this amounted to an express term of duration and did not establish that the agreement was terminable at will. (Ibid.) The court upheld the trial court’s finding of substantive unconscionability on the grounds that plaintiff could be ordered to arbitrate any injuries she suffered related to USC or its related entities for the rest of her life. (Cook, supra, 102 Cal.App.5th at pp. 318, 325.) Finally, the court found that the agreement lacked mutuality because the plaintiff was required to arbitrate any claims she had with USC’s related entities, but the related entities were not required to arbitrate their claims with her. (Id. at pp. 326-327.)

The court noted, “[t]he plain language of the arbitration agreement thus provides a significant benefit to USC’s related entities without any reciprocal benefit to Cook.” (Id. at p. 328.) Here, the Arbitration Provision is narrower than the one found in Cook and applies to claims “arising out of or relates to your credit application, purchase or condition of this vehicle, this contract, or any resulting transaction or relationship . . . .” (Clayton Decl., Ex. A.) Thus, the applicable claims are limited to the purchase and condition of the Subject Vehicle. (Reply at p. 8:22-23.)

The arbitration provision in Cook included claims arising outside the employment relationship. The Arbitration Provision here is not so broad as to include matters beyond the scope of the Subject Vehicle.

As for the agreement’s infinite duration, the Arbitration Provision provides that it “shall survive any termination, payoff or transfer of this contract.” (Clayton Decl., Ex. A.) Plaintiff argues “[b]y binding consumers to arbitration even after the warranty expires or they no longer own the vehicle, the Heritage agreement imposes an unreasonable and perpetual obligation on the consumer.” (Opposition at p. 6:20-22.) The Court does not agree that this clause of the Arbitration Provision is for an infinite duration in the same manner expressed by the arbitration clause in Cook.

Rather, it expresses an intent to bind subsequent holders of the contract to arbitration for the same limited scope of repairs performed on the Subject Vehicle. Therefore, it is again narrow in this regard and not substantively unconscionable. Given the low degree of procedural unconscionability and absence of substantive unconscionability, the Court concludes that the Arbitration Provision is enforceable. Accordingly, the Court GRANTS the Motion to Compel Arbitration.

This Action is Stayed in its Entirety A stay of these proceedings is proper pursuant to Code of Civil Procedure § 1281.4 and 9 U.S.C. § 3. Defendant requests a stay of the entire action. Ford Motor Company does not oppose. As Defendant notes, Plaintiff has sued two entities, Ford Motor Company and Heritage

Ford for different causes of action. Defendant argues “[p]roceeding against both defendants in separate forums carries an extremely high risk of rendering inconsistent rulings and rendering arbitration as to Heritage Ford ineffective.” (Reply at p. 10:6-7.) Plaintiffs have not offered any arguments opposing a stay to the entire action. Given the risk of inconsistent rulings presented by proceeding in two different forums, the Court STAYS this action in its entirety pending the outcome of arbitration.

CONCLUSION

The Motion to Compel Arbitration is GRANTED. This action is STAYED in is entirety pending the outcome of arbitration.

The matter shall be set for a Status Hearing re: Arbitration on January 29, 2027, at 11:00 a.m. in Department 13.

Moving party shall prepare and submit the final order, accompanied by the necessary Form EFS-020, within 10 days of the date of the hearing.

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