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Nita Lemon Law Wins Court Ruling Denying Forced Arbitration in Breach of Warranty Lemon Law Case

Mercedes-Benz SUV

In recent posts, we have written about the Ford Motor cases which are winding their way through the California courts. These cases, currently being reviewed by the California Supreme Court, should hopefully answer the question of whether an auto manufacturer can compel arbitration of a Lemon Law claim between a car owner and the dealer who sold or leased the car, or whether car owners can instead have a jury trial and their day in court.

Lower courts have been split on the issue, which has put the matter in the hands of the Supreme Court to resolve. For instance, the Third District Appellate Court in Felisilda v. Ford Motor Company ruled that an auto manufacturer can compel arbitration. In contrast, the Second District Appellate Court ruled the opposite in cases like Ochoa v. Ford Motor Company and Montemayor v. Ford Motor Company. Unfortunately, the matter has been in the high court’s hands since July 2023 and they have yet to rule. Meanwhile, car owners and lessees with lemon vehicles continue to fight to get their cases heard in court.

At Nita Lemon Law, we have a case of our own in Orange County that has required us to litigate this very issue. We were pleased to have the court rule in our favor on the matter, keeping our case out of arbitration and in the hands of the court, where we hope to present our case to the jury if the matter cannot be satisfactorily resolved before trial. Learn more about our case below, and contact Nita Lemon Law for help with lemon law claims in Los Angeles or throughout California statewide.

Florentino Garibay v. Mercedes-Benz USA, LLC

Our client, Florentino Garibay, leased a new 2022 Mercedes-Benz GLC300W. The lease agreement included a four-year, 50,000-mile warranty from Mercedes-Benz USA, LLC (MBUSA), guaranteeing that the vehicle would be free from defects in material and workmanship during the warranty period. Unfortunately, our client soon started to experience a large number of serious problems with the vehicle, including fuel system leakage, oil leaks, exhaust fumes inside the car, slipping transmission and more.

When the problems with the vehicle could not be satisfactorily repaired, we filed a lawsuit in Orange County Superior Court. The complaint in the case of Florentino Garibay v. Mercedes-Benz USA, LLC was filed on June 13, 2023, seeking a jury trial and monetary damages under the law.

MBUSA quickly countered by filing a motion to stay the court proceedings and compel arbitration instead, pursuant to an arbitration clause in the lease agreement. That clause in the lease contract allowed either party to choose arbitration at their discretion; if either party were to choose arbitration, then the case would be submitted to arbitration rather than tried in court. The lease contract containing that provision, however, was between Garibay (the lessee) and Fletcher Jones Motor Cars, Inc. (the dealer). MBUSA was not a party to the contract and consequently was not a party that could assert rights under the arbitration clause.

We therefore opposed the motion, submitting a detailed brief in opposition to the defendant’s motion. The court considered the papers submitted by both parties and issued its ruling on September 8.

Our brief succinctly stated the issue for the court to resolve: “whether the nonsignatory Defendant MBUSA can compel arbitration based on the lease agreement between Plaintiff and non-party selling dealer.” (emphasis in original) In our brief, we argued that MBUSA did not have legal standing to invoke the arbitration clause. We also advanced the legal principle that a nonsignatory to an agreement can’t force a signatory into binding arbitration. We addressed the defendant’s other allegations by pointing out that the auto manufacturer is not an intended third-party beneficiary of the lease agreement between the lessee and the dealer, and that the arbitration clause violates public policy.

We made it clear that “There is no arbitration clause between Plaintiff and MBUSA.” No arbitration agreement exists between MBUSA and Plaintiff, so there is no basis for the court to grant MBUSA’s motion to compel arbitration, we explained.

To support our position, we cited the Ochoa decision decided by the California Court of Appeal decided on April 4, 2023. That case, as our brief pointed out, contained a nearly identical arbitration clause as the one at issue in our case. The appellate court in Ochoa held that the defendant in that case, Ford Motor Company, could not compel arbitration.

Court Rules Against Arbitration and in Favor of Our Client

In its Minute Order delivered September 8, 2023, the court denied MBUSA’s motion to compel arbitration. It is illustrative to quote directly from the judge’s ruling:

“Mercedes-Benz USA, LLC, finds itself on the losing end of a string of recent cases that hold that the manufacturer, a non-signatory to the dealer sales agreement, may not compel arbitration in a Lemon Law case. For some time, the only case in point was Felisilda v. FCA US, LLC (2020) 53 Cal.App.5th 486. That case held that the manufacturer could compel arbitration. Although this court routinely advised counsel that it thought Felisilda was poorly reasoned and wrongly decided, it believed it was compelled to follow it.

But since then, the tide has turned. Several intermediate courts of appeal have rejected the Felisilda analysis. (See Ford Motor Warranty Cases (2023) 89 Cal.App.5th 1324, Montemayor v. Ford Motor Co. (2023) 92 Cal.App.5th 959, Kielar v. Superior Court (Aug. 16, 2023, C096773) ___ Cal.App.5th ___, and Yeh v. Superior Court (Sept. 6, 2023, A166537) ___ Cal.App.5th ___.) The issue raised in all these cases is presently before the California Supreme Court. But this court finds the weight of authority compels the denial of the motion.”

The court noted that the lease agreement came from a Mercedes-Benz Financial Services USA LLC pre-printed form. Nevertheless, the lease agreement was between the dealer and the purchaser, not Mercedes-Benz. In fact, it was signed by the dealer’s Finance Manager, not Mercedes-Benz.

Language in the lease does allow an assignee to request arbitration, but the assignee of the lease is Daimler Trust, not Mercedes-Benz USA LLC. As Judge Salter ruled, “The court specifically rejects defendant’s claim that this language intends to include it within its terms. The court further finds that the defendant’s reliance on Felisilda… is far off the mark. Moreover, those case [sic] are unpersuasive.”

The defendant’s motion to compel arbitration was denied, and our case lives on to seek justice and fair compensation in a court of law, ruled on by a judge and jury of Mr. Garibay’s peers, as envisioned by our founding fathers when they included the right to a civil jury trial in the Bill of Rights.

Get Help With Your Lemon Law Claim From an Experienced California Lemon Law Attorney at Nita Lemon Law Firm

If you are experiencing problems with your motorcycle, car, or truck, I would like the opportunity to evaluate your lemon law claim at no charge to you and discuss your legal options. For a free, no-obligation consultation, please call me in Los Angeles at 213-232-5055 or toll-free throughout California at 877-921-5256. You can also submit a free case evaluation on my website at www.nitalemonlaw.com, or email me directly at nick@nitalemonlaw.com. No matter which way you contact me, I will personally evaluate your case and promptly respond to your inquiries. I look forward to hearing from you.

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