In Ford Motor Warranty Cases, the Supreme Court today holds that a car manufacturer cannot rely on arbitration clauses in sales contracts between car dealers and the buyers of the manufacturer’s cars to require the buyer-plaintiffs to arbitrate lawsuits against the manufacturer alleging defective cars.
The court’s unanimous opinion by Justice Carol Corrigan says that, because the manufacturer — Ford Motor Company — was not a party to the buyer-dealer contracts, “Plaintiffs and Ford have not agreed to anything, much less to arbitrate any dispute between them.”
It’s not that a nonsignatory to a contract can never invoke an arbitration clause in the contract, however. “If plaintiffs have agreed to arbitrate claims arising out of a contract dispute,” the court states, “they may not pursue a lawsuit to vindicate contractual provisions beneficial to them yet avoid an agreement to arbitrate, either by couching their claims as actions unrelated to the contract or by suing a nonsignatory.” But the court concludes that each buyer’s action involves “a dispute flowing, not from the contract where the arbitration clause appears, but from obligations imposed by statute or conventional fraud duties” and that, because “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.”
The court affirms the published opinion of the Second District, Division Eight, Court of Appeal. It disapproves the Third District’s decision in Felisilda v. FCA US LLC (2020) 53 Cal.App.5th 486, with which Division Eight and other appellate courts had disagreed. Review and depublication were denied in Felisilda. (See: Disapprovals of review-denied opinions show the Supreme Court is not an error-correction court.)
