FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
KIM NGO, No. 20-56027
Plaintiff-Appellant,
D.C. No.
v. 2:20-cv-06197-
MWF-GJS
BMW OF NORTH AMERICA, LLC;
BMW AKTIENGESELLSCHAFT; DOES,
1 THROUGH 10, INCLUSIVE, OPINION
Defendants-Appellees.
Appeal from the United States District Court
for the Central District of California
Michael W. Fitzgerald, District Judge, Presiding
Argued and Submitted November 16, 2021
Pasadena, California
Filed January 12, 2022
Before: Kim McLane Wardlaw, Barrington D. Parker, *
and Andrew D. Hurwitz, Circuit Judges.
Opinion by Judge Parker
*
The Honorable Barrington D. Parker, United States Circuit Judge
for the Second Circuit, sitting by designation.
2 NGO V. BMW OF NORTH AMERICA
SUMMARY **
Arbitration
The panel reversed the district court's order compelling
arbitration in an action brought by Kim Ngo, a purchaser of
a BMW, alleging breach of warranty.
Because the dealership financed Ngo’s purchase, they
entered into a purchase agreement, which contained an
arbitration clause. As a result of alleged defects with the car,
Ngo sued BMW of North America, LLC (“BMW”), the
manufacturer, which was not a signatory to the purchase
agreement. BMW moved to compel arbitration. The district
court granted the motion to compel arbitration, finding
BMW to be a third-party beneficiary.
The panel applied California law to determine whether a
non-signatory to an agreement containing an arbitration
clause may compel arbitration. Under California law, a non-
signatory is a third-party beneficiary only to a contract made
expressly for its benefit.
The panel applied the three-part test in Goonewardene v.
ADP, LLC, 6 Cal. 5th 817, 830 (2019). First, a third party
must in fact benefit from the contract. Here any benefit that
BMW might receive from the clause was peripheral and
indirect because it was predicated on the decisions of others
to arbitrate. Second, the contracting parties must have had a
“motivating purpose” of providing a benefit to the third
party. The panel held that BMW failed to demonstrate the
**
This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.
NGO V. BMW OF NORTH AMERICA 3
requisite “motivating purpose” where the vehicle purchase
agreement in question was drafted with the primary purpose
of securing benefits for the contracting parties themselves,
and third parties were not the purposeful beneficiaries of
such an undertaking. Third, permitting the third party to
enforce the contract must be consistent with the “objectives
of the contract” and the “reasonable expectations of the
contracting parties.” The panel held that nothing in the
contract here evinced any intention that the arbitration clause
should apply to BMW. BMW’s relative proximity to the
contract confirmed that the parties easily could have
indicated that the contract was intended to benefit BMW –
but they did not do so.
The panel rejected BMW’s contention that equitable
estoppel allowed it to compel arbitration. California permits
non-signatories to invoke arbitration agreements under the
doctrine of equitable estoppel under two circumstances. The
second basis for equitable estoppel did not apply because
Ngo did not allege any “concerted misconduct” between the
other signatory (the dealership) and either of the parties. The
first basis requires that Ngo either rely on the terms of the
purchase agreement or make claims that were intimately
founded in and intertwined with it. The panel held that
BMW was mistaken that, under the Song-Beverley and the
Magnuson-Moss Warranty Acts, Ngo’s claims were
inextricably intertwined with terms of the purchase
agreement. The panel rejected BMW’s argument that
equitable estoppel was broadened by the recent decision in
Felisilda v. FCA US LLC, 53 Cal. App. 5th 486 (2020). The
panel therefore declined to affirm on the ground of equitable
estoppel.
4 NGO V. BMW OF NORTH AMERICA
COUNSEL
Jennifer D. Bennett (argued), Gupta Wessler PLLC, San
Francisco, California; Matthew W.H. Wessler, Gupta
Wesler PLLC, Cambridge, Massachusetts.; Payam Shahian,
Strategic Legal Practices, Los Angeles, California; for
Plaintiff-Appellant.
Thomas M. Peterson, Morgan Lewis & Bockius LLP, San
Francisco, California; Karyn L. Ihara, Morgan Lewis &
Bockius LLP, Los Angeles, California; for Defendants-
Appellees.
OPINION
PARKER, Circuit Judge:
In 2012, Kim Ngo bought a new BMW 535i sedan from
Peter Pan Motors, Inc, a car dealership. Because the
dealership financed Ngo’s purchase, they entered into a
purchase agreement which contained an arbitration clause.
As a result of alleged defects with the car, Ngo sued BMW
of North America, LLC (“BMW”), the manufacturer, which
was not a signatory to the purchase agreement. The question
presented to us is whether BMW may compel arbitration
under the purchase agreement between Ngo and the
dealership. We conclude that it cannot, and we reverse the
district court’s order compelling arbitration.
I.
The purchase agreement listed Ngo as the “Buyer,” the
dealership as the “Creditor-Seller,” and BMW Bank of
North America (the financing company to which the
NGO V. BMW OF NORTH AMERICA 5
purchase agreement referred) as the “Assignee.” The
arbitration clause provided:
Either you or we may choose to have any
dispute between us decided by arbitration and
not in court or by jury trial . . . . Any claim or
dispute, whether in contract, tort, statute, or
otherwise (including the interpretation and
scope of 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 or 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
....
The purchase agreement also stated that it had no effect on
any “warranties covering the vehicle that the vehicle
manufacturer may provide.”
Ngo had a variety of issues with her car. Allegedly, the
engine shook violently on start-up, the back-up camera was
defective, the spark plugs were faulty, the sunroof was
broken, the brake rotors were warped, and the radiator hose
leaked. Although Ngo took her car to authorized BMW
facilities for a series of repairs, the problems persisted.
BMW expressly warrants its vehicles “against defects in
materials or workmanship.” BMW’s warranty offers
purchasers the option of non-binding mediation through the
Better Business Bureau, but it also makes clear that
6 NGO V. BMW OF NORTH AMERICA
dissatisfied consumers may sue in court. Under California’s
Song-Beverly Consumer Warranty Act (“Song-Beverly
Act”), a manufacturer that is unable to repair a new vehicle
to conform to its warranty must promptly replace or
repurchase the vehicle. Cal. Civ. Code § 1793.2(d)(2). The
federal Magnuson-Moss Warranty Act (“Magnuson-Moss
Act”) imposes similar requirements. See 15 U.S.C.
§ 2304(a)(4). When BMW refused to replace or repurchase
the car, Ngo brought the present action, alleging violations
of the Song-Beverly and the Magnuson-Moss Acts.
Ngo’s complaint named only BMW as a defendant. Her
first, second, third, and fourth claims assert breaches of an
express warranty. Her fifth claim alleges breach of the
implied warranty of merchantability. Her sixth claim, based
on the Magnuson-Moss Act, will “stand or fall with [the]
express and implied warranty claims under state law.”
Clemens v. DaimlerChrysler Corp., 534 F.3d 1017, 1022
(9th Cir. 2008).
BMW moved to compel arbitration, invoking the
arbitration clause in the purchase agreement between Ngo
and the dealership, arguing that it was a third-party
beneficiary of the arbitration clause. Alternatively, BMW
invoked equitable estoppel, arguing that Ngo’s claims were
“intimately founded in and intertwined with” the purchase
agreement.
The district court granted the motion to compel
arbitration, finding BMW to be a third-party beneficiary, but
not addressing equitable estoppel. The court held that BMW
was a third-party beneficiary because:
First, the arbitration provision here
specifically calls for the arbitration of any
claim dealing with the “purchase or condition
NGO V. BMW OF NORTH AMERICA 7
of the vehicle” including a claim involving
“third parties who do not sign this contract.”
***
Second, if there is any doubt as to whether
this “third party” clause should be read to
include BMW NA, BMW Bank, a subsidiary
of BMW NA, is an assignee of the arbitration
provision and the Purchase Agreement. In
other words, BMW NA is not some random
third party, but is affiliated with the assignee
of the agreement itself.
***
Third, BMW NA was responsible for the
warranty on the Vehicle, and the “vehicle
manufacturer” (which is BMW NA) is
explicitly mentioned in the Purchase
Agreement.
The court then dismissed the complaint and Ngo appealed.
II.
State law determines whether a non-signatory to an
agreement containing an arbitration clause may compel
arbitration. Arthur Andersen LLP v. Carlisle, 556 U.S. 624,
631–32 (2009). Under California law, a non-signatory is a
third-party beneficiary only to a contract “made expressly
for [its] benefit.” Cal. Civ. Code § 1559. BMW was
obligated to prove that “express provisions of the contract,”
considered in light of the “relevant circumstances,” show
that (1) “the third party would in fact benefit from the
8 NGO V. BMW OF NORTH AMERICA
contract;” (2) “a motivating purpose of the contracting
parties was to provide a benefit to the third party;” and
(3) permitting the third party to enforce the contract “is
consistent with the objectives of the contract and the
reasonable expectations of the contracting parties.”
Goonewardene v. ADP, LLC, 6 Cal. 5th 817, 830 (Cal.
2019). BMW fails this test.
First, a third party must “in fact benefit from the
contract.” Id. But a third party that “only incidentally or
remotely benefit[s]” from a contract does not meet this
standard. Lucas v. Hamm, 56 Cal. 2d 583, 590 (1961); see
also Levy v. Only Cremations for Pets, Inc., 271 Cal. Rptr.
3d 250, 257–58 (Cal. Ct. App. 2020). Here, the arbitration
clause expressly states that only three parties—Ngo, the
dealership, and the assignee—may compel arbitration. The
contract defines “you” as Ngo and “we” as the dealership
and its assignee. The clause specifies that “[e]ither you or we
may choose to have any dispute between us decided by
arbitration and not in court or by jury trial.” (emphasis
added). The clause also states that “[a]ny 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 or
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 . . .” (emphasis added).
The district court found, and BMW argues on appeal,
relying on Hajibekyan v. BMW of North America, LLC,
839 F. App’x 187 (9th Cir. 2021), that when an agreement
provides that it covers claims involving particular parties,
that agreement has been made expressly for the benefit of
NGO V. BMW OF NORTH AMERICA 9
those parties. The memorandum disposition in Hajibekyan,
however, is not binding precedent and, in any event, does not
help BMW. There, the arbitration clause defined arbitrable
disputes as those between “me and you or your employees,
officers, directors, affiliates, successors, or assigns,” and
defined “you” and “your” to include the assignee of the
contract. Id. at 188 (emphasis added). BMW was an affiliate
of the assignee in Hajibekyan. Id. Here, arbitrable disputes
do not include those involving BMW Bank of North
America’s assignees and affiliates, only those involving the
dealership’s assignees.
That BMW could, at some point down the line, receive
some benefit if the arbitration clause were read to extend to
the manufacturer is of no moment: incidental or secondary
benefit is not sufficient. See Lucas, 56 Cal. 2d at 590. The
clause is pellucid that only three parties may compel
arbitration, none of which is BMW. Language limiting the
right to compel arbitration to a specific buyer and a specific
dealership (and its assignees) means that extraneous third
parties may not compel arbitration. See Kramer v. Toyota
Motor Corp., 705 F.3d 1122, 1128 (9th Cir. 2013) (finding
similar language to evince the buyer’s intent to arbitrate with
the expressly named parties and no one else); see also Safley
v. BMW of N. Am., LLC, No. 20-cv-00366-BAS-MDD, 2021
WL 409722, at *5–6 (S.D. Cal. Feb. 5, 2021); Qi Ling Guan
v. BMW of N. Am., LLC, No. 20-cv-05025-MMC, 2021 WL
148202, at *2 (N.D. Cal. Jan. 15, 2021); Manuwal v. BMW
of N. Am., LLC, No. CV 20-2331 DSF, 484 F. Supp. 3d 862,
868 (C.D. Cal. 2020). Any benefit that BMW might receive
from the clause is peripheral and indirect because it is
predicated on the decisions of others to arbitrate. BMW
therefore fails to meet the first prong of the Goonewardene
test.
10 NGO V. BMW OF NORTH AMERICA
Second, the contracting parties must have had a
“motivating purpose” of providing a benefit to the third
party. Goonewardene, 6 Cal. 5th at 830. The phrase
“motivating purpose” was intended to “clarify that the
contracting parties must have a motivating purpose to benefit
the third party, and not simply knowledge that a benefit to
the third party may follow from the contract.” Id. BMW has
failed to demonstrate this requisite “motivating purpose.”
Our cases illustrate why this is so. In Lucas, persons to
be named in a will were third-party beneficiaries to a
contract between a will’s draftsman and a testator. See
56 Cal. 2d at 590. In Northstar Financial Advisors, Inc. v.
Schwab Investments, shareholders in a mutual fund were
third-party beneficiaries to a contract between a trust and an
investment advisor for the management of that mutual fund.
779 F.3d 1036, 1064 (9th Cir. 2015) (noting that the purpose
of the contract was “to manage and operate the Fund in
accordance with the fundamental investment objectives that
the shareholders had adopted”). And in Spinks v. Equity
Residential Briarwood Apartments, an employee was the
third-party beneficiary to a contract to provide housing for
that employee between an employer and a landlord. 171 Cal.
App. 4th 1004, 1031 (Cal. Ct. App. 2009).
Unlike agreements to draft wills or to manage trusts or
mutual funds—arrangements inherently formed with third
parties in mind—the vehicle purchase agreement in question
was drafted with the primary purpose of securing benefits
for the contracting parties themselves. In such an agreement,
the purchaser seeks to buy a car, and the dealership and
assignees seek to profit by selling and financing the car.
Third parties are not purposeful beneficiaries of such an
undertaking.
NGO V. BMW OF NORTH AMERICA 11
The text of the arbitration clause supports this
conclusion. It provides that claims and disputes “which
arise[] out of or relate[] to your credit application, purchase
or condition of this Vehicle, this contract or any resulting
transaction or 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.” (emphasis added). Though the language allows
for arbitration of certain claims concerning third parties, it
still gives only Ngo, the dealership, and the assignee the
power to compel arbitration. Nothing in the clause or, for
that matter, in the purchase agreement reflects any intention
to benefit BMW by allowing it to take advantage of the
arbitration provision.
Third, permitting the third party to enforce the contract
must be consistent with the “objectives of the contract” and
the “reasonable expectations of the contracting parties.”
Goonewardene, 6 Cal. 5th at 830. To make this
determination, we focus on “the language of the contract and
all of the relevant circumstances under which the contract
was entered into” to determine if “third party enforcement
will effectuate the contracting parties’ performance
objectives, namely those objectives of the enterprise
embodied in the contract, read in light of surrounding
circumstances.” Id. at 830–31 (cleaned up).
Nothing in the contract here evinces any intention that
the arbitration clause should apply to BMW. The arbitration
clause’s enforcement provisions are limited to the
dealership, the assignee, and Ngo. The compelling inference
from this arrangement is that the parties knew how to give
enforcement powers to non-signatories when they wished to
do so but gave none to BMW. Indeed, the fact that the
purchase agreement provides that it “does not affect any
12 NGO V. BMW OF NORTH AMERICA
warranties covering the vehicle that the vehicle
manufacturer may provide,” is a potent indication that the
parties knew how to deal with claims against the
manufacturer.
Although the arbitration clause may have extended to
claims regarding the purchase of the vehicle, it does not
follow that additional parties can enforce the arbitration
clause. In so concluding, the district court “confuse[d] the
nature of the claims covered by the arbitration clause with
the question of who can compel arbitration.” White v.
Sunoco, Inc., 870 F.3d 257, 267 (3d Cir. 2017).
Nor is our conclusion disturbed by the fact that BMW
was neither a stranger to the transaction nor “some random
third party,” as the district court put it. To the contrary,
BMW’s relative proximity to the contract confirms that the
parties easily could have indicated that the contract was
intended to benefit BMW—but did not do so. See Murphy v.
Directv, Inc., 724 F.3d at 1218, 1234 (9th Cir. 2013) (noting
that a signatory that named an entity other than the one
seeking arbitration as a third-party beneficiary “clearly knew
how to provide for a third-party beneficiary if it wished to
do so”).
III.
We also reject BMW’s contention that equitable estoppel
allows it to compel arbitration. California law permits non-
signatories to invoke arbitration agreements under the
doctrine of equitable estoppel only in limited circumstances.
Henson v. United States Dist. of N. Cal., 869 F.3d 1052,
1060 (9th Cir. 2017). The two circumstances are:
(1) when a signatory must rely on the terms of
the written agreement in asserting its claims
NGO V. BMW OF NORTH AMERICA 13
against the nonsignatory or the claims are
intimately founded in and intertwined with
the underlying contract, and
(2) when the signatory alleges substantially
interdependent and concerted misconduct by
the nonsignatory and another signatory and
the allegations of interdependent misconduct
are founded in or intimately connected with
the obligations of the underlying agreement.
Kramer, 705 F.3d at 1128–29 (cleaned up). Equitable
estoppel thus prevents a plaintiff from having it “both ways”
by seeking to hold a non-signatory liable for obligations
“imposed by [an] agreement,” while at the same time
“repudiating the arbitration clause of that very agreement.”
Goldman v. KPMG LLP, 173 Cal. App. 4th 209, 220, 231
(Cal. Ct. App. 2009).
Ngo did not allege any “concerted misconduct” between
the other signatory (the dealership) and either of the parties,
so the second basis for equitable estoppel does not apply.
Kramer, 705 F.3d at 1128. That leaves only the first basis,
which requires that Ngo either “rely on the terms of” the
purchase agreement or make claims that are “intimately
founded in and intertwined with” it. Id.
BMW argues that the “inextricably bound up” test is
satisfied for three reasons. First, “the express and implied
warranties provided by BMW NA are the additional terms
of the purchase agreement that contains the arbitration
proviso.” Second, BMW argues that Ngo’s claims “depend
on, arise out of, and are inextricably intertwined with the
purchase agreement.” Third, BMW suggests that “the
purchase agreement furnishes plaintiff’s standing to sue so
14 NGO V. BMW OF NORTH AMERICA
the arbitration clause is critical to her rights.” We are not
persuaded.
As an initial matter, under California law, warranties
from a manufacturer that is not a party to a sales contract are
“not part of [the] contract of sale.” Corp. of Presiding Bishop
of Church of Jesus Christ of Latter-Day Saints v.
Cavanaugh, 217 Cal. App. 2d 492, 514 (Cal. Ct. App. 1963);
see also Greenman v. Yuba Power Prods., Inc., 59 Cal. 2d
57, 63–64 (Cal. 1963). Instead, the express and implied
warranties arise “independently of a contract of sale.”
Greenman, 59 Cal. 2d at 60–61; Cavanaugh, 217 Cal. App.
2d at 514; see also Frost v. LG Elecs Mobilecomm USA, Inc.
No. D062920, 2013 WL 5409906, at *6 (Cal. Ct. App. Sept.
27, 2013) (a manufacturer’s warranties are “independent of
the purchase agreement”). Moreover, the purchase
agreement expressly states that it does not disturb any
warranties provided by BMW.
BMW is mistaken that, under the Song-Beverley and the
Magnuson-Moss Warranty Acts, Ngo’s claims are
inextricably intertwined with terms of the purchase
agreement. To be sure, Ngo must show that she owned a
BMW, but ownership does not entail an intention to enforce
any obligations of the purchase agreement on BMW. BMW
was not a party to the agreement and its obligations to Ngo
arose independently of her agreement with the dealership.
BMW argues that if Ngo had not signed the purchase
agreement with the dealership, she would not have been able
to purchase her car; if she had not purchased her car, BMW
would have issued no warranties; and if BMW had issued no
warranties, Ngo could not bring statutory claims. But this
“attenuated chain of reasoning” has been rejected by
California courts. Nemore v. Renovate Am., Inc.
No. B294459, 2019 WL 6167410, at *6 (Cal. Ct. App.
NGO V. BMW OF NORTH AMERICA 15
Nov. 20, 2019). And we rejected similar arguments in
Kramer. See 705 F.3d at 1131. Like Ngo’s purchase
agreement, the contracts in Kramer “expressly
differentiate[d] dealer warranties from manufacturer
warranties” and disclaimed any effect on the manufacturer’s
warranties. Id. We held that warranty claims against the
manufacturer “arise[] independently from the Purchase
Agreements, rather than intimately relying on them.” Id.
Lastly, BMW’s standing argument fails. It is the retail
sale—the fact that Ngo bought a BMW—not the purchase
agreement, that gives a plaintiff standing to bring claims
under the Song-Beverly Act. See Islas v. Ford Motor Co.,
No. EDCV 18-2221-GW(SPx), 2019 WL 10855294, at *5
(C.D. Cal. July 29, 2019) (the Act’s definition of the buyers
covered “does not contain any reference to a contract or any
contract-based rights” at all). The contract with the
dealership only “proves . . . the existence” of the retail sale.
Murphy, 724 F.3d at 1231. Because Ngo’s standing to bring
these claims against BMW does not derive from the
purchase agreement, BMW cannot establish that Ngo’s
claims are “inextricably tied up” with the purchase
agreement. For these reasons BMW fails to meet the Kramer
standard.
BMW alternatively argues that it need not meet the
Kramer standard because equitable estoppel under
California law was broadened by a recent decision: Felisilda
v. FCA US LLC, 53 Cal. App. 5th 486 (2020). We disagree.
The plaintiffs in Felisilda purchased a used 2011 Dodge
Grand Caravan from the Elk Grove Dodge dealership and
signed a purchase agreement containing an arbitration
provision that was virtually identical to the one Ngo signed.
See id. After discovering “serious defects” with the car, the
Felisildas sued both the dealership and the manufacturer. Id.
16 NGO V. BMW OF NORTH AMERICA
at 491. The dealership moved to compel arbitration. Id. at
489. After the manufacturer filed a notice of non-opposition,
the trial court compelled arbitration. Id. at 491. The
Felisildas then dismissed the dealership and the district court
ordered it to arbitrate with the manufacturer alone. Id. at 499.
The California Court of Appeal affirmed. Id.
It makes a critical difference that the Felisildas, unlike
Ngo, sued the dealership in addition to the manufacturer. In
Felisilda, it was the dealership—a signatory to the purchase
agreement—that moved to compel arbitration rather than the
non-signatory manufacturer. See id. at 489 (“Relying on the
retail installment sales contract . . . signed by the Felisildas,
Elk Grove Dodge moved to compel arbitration.”).
Furthermore, the Felisildas dismissed the dealership only
after the court granted the motion to compel arbitration.
Accordingly, Felisilda does not address the situation we are
confronted with here, where the non-signatory manufacturer
attempted to compel arbitration on its own. We therefore
decline to affirm on the ground of equitable estoppel.
IV.
For these reasons, we REVERSE and REMAND for
proceedings consistent with this opinion.