Calif. Judge Denies Ford Motion to Compel 3G Modem Claims to Arbitration

U.S. District Judge Michael Anello for Southern California in San Diego denied Ford’s motion to compel the 3G telematics claims of four class-action plaintiffs to arbitration (see 2304170047), said his signed order Tuesday (docket 3:22-cv-01716).

The plaintiffs allege the 3G modems on Ford vehicles they bought or leased were rendered inoperable, as were the roadside assistance features -- accessible through the FordPass and Lincoln Way mobile apps -- that depended on those modems, after AT&T’s 3G phaseout in 2022. They allege Ford knew as early as 2019 that AT&T’s phaseout of the 3G network was inevitable and yet continued to manufacture vehicles with 3G modems.

Ford moved to compel their claims to arbitration based on the sales contracts or lease agreements the four plaintiffs signed, plus the “connected services” agreements three of the plaintiffs signed to operate the FordPass and Lincoln Way apps. The plaintiffs argued that Ford can’t enforce those agreements, or that they don’t provide for mandatory arbitration.

It’s undisputed Ford wasn’t a signatory to the sales contracts and thus not a signatory to their arbitration provisions, said Anello’s order. Ford nevertheless argued that under California law, it may enforce these agreements based on the plaintiffs’ agency allegations, the order said.

But the court found it’s not clear on the record that any “agency relationship” between Ford and its dealers “is sufficiently connected” to the plaintiffs’ claims, “which challenge the decision by Ford to install 3G modems” in its vehicles, “despite allegedly knowing the technology would soon be rendered obsolete,” said Anello’s order. Ford hasn’t demonstrated it may enforce the arbitration provisions in the sale contracts against two of the plaintiffs “based upon a theory of agency,” the order said.

Similarly, the plaintiffs’ claims aren’t “sufficiently connected” to the lease agreements two of the plaintiffs signed, said the order. Ford also maintains that allowing it to enforce the arbitration provisions in the lease agreements “is consistent with the objectives of the contract and reasonable expectations of the contracting parties,” it said.

But the court “is not persuaded,” said Anello’s order. Even assuming the claims subject to arbitration include the plaintiffs’ claims against Ford, the lease agreements “plainly state that only four parties are permitted to invoke the arbitration provision, and Ford is not one of them,” it said.

Ford also contends three of the plaintiffs must be compelled to arbitrate their claims based on the terms of their FordPass and Lincoln Way mobile app agreements, said the order. The plaintiffs don’t dispute that they’re bound by mobile app agreements or that they otherwise didn’t have notice of the agreements or their terms, it said. They rather argue that the terms merely provide for optional arbitration, it said.

There’s no “genuine issue of material fact” about the existence of the mobile app agreements and their arbitration provisions, said the order. But Ford hasn’t demonstrated that those agreements contain a mutual understanding “to submit the dispute between the parties here to arbitration as a matter of law,” it said.

The provisions in those agreements also don’t “contain any language suggesting that arbitration is mandatory or otherwise providing that arbitration is in lieu of pursuing claims in court,” said the judge’s order. The provisions “also fail to identify any applicable arbitration procedures or rules,” it said. The agreements, for example, contain no delegation clause, no invocation of the American Arbitration Association rules, and “no clear and unmistakable indication” the issue of the arbitrability of the plaintiffs’ claims is “arbitrable,” it said.

Ford doesn’t argue or otherwise brief “the scope of the asserted agreements to arbitrate,” said the judge’s order: “Surely, Ford knows how to draft a mandatory and binding arbitration clause, and this is not it.” The court is “utterly unable to discern the intention of the parties” with respect to the arbitration provisions in the mobile app agreements. As a result, those provisions “must be construed against Ford,” said the order.

Though the court must address the “gateway issues” in resolving a motion to compel arbitration, it’s Ford’s burden to demonstrate that questions of law “should be resolved in its favor,” said the judge’s order. The court finds Ford hasn’t “met its burden of showing that there is a mandatory arbitration agreement that encompasses the dispute here," it said.