FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

JESSICA KRAMER,

Plaintiff,

and

ALEXSANDRA DEL REAL; MICHAEL

CHOI; MICHAEL SCHOLTEN,

Individually and on Behalf of All

Others Similarly Situated; LU LI,

Plaintiffs-Appellees,

v.

TOYOTA MOTOR CORPORATION, a

Japanese corporation / a foreign

corporation, DBA Toyota Motor

North America, Inc.; TOYOTA

MOTOR SALES, U.S.A., INC., a

California corporation / a foreign

corporation,

Defendants-Appellants.

No. 12-55050

D.C. No.

8:10-ml-02172-

CJC-RNB

OPINION

Appeal from the United States District Court

for the Central District of California

Cormac J. Carney, District Judge, Presiding
2 KRAMER V. TOYOTA MOTOR CORP.

 The Honorable Gordon J. Quist, United States District Court for the *

Western District of Michigan, sitting by designation.

 This summary constitutes no part of the opinion of the court. It has

**

been prepared by court staff for the convenience of the reader.

Argued and Submitted

October 11, 2012—Pasadena, California

Filed January 30, 2013

Before: Andrew J. Kleinfeld and M. Margaret McKeown,

Circuit Judges, and Gordon J. Quist, Senior District Judge.*

Opinion by Judge Quist

SUMMARY

**

Arbitration

The panel affirmed the district court’s order denying a

motion to compel arbitration.

The panel held that Toyota Motor Corporation and Toyota

Motor Sales, U.S.A., Inc. may not compel plaintiffs to

arbitrate their claims. The panel also held the district court

had the authority to decide whether Toyota, a nonsignatory to

several purchase agreements with arbitration provisions

between plaintiffs and various Toyota dealerships, may

compel arbitration. Finally, the panel could discern no reason

that the plaintiffs should be equitably estopped from avoiding

arbitration in this case.
KRAMER V. TOYOTA MOTOR CORP. 3

COUNSEL

Theodore J. Boutrous Jr.; William E. Thomson; Blaine H.

Evanson; Brandon J. Stoker, Gibson, Dunn & Crutcher LLP,

Los Angeles, California; Michael L. Mallow; Denise A.

Smith-Mars; Rachel A. Rappaport, Loeb & Loeb LLP, Los

Angeles, California, for Defendants-Appellants.

Vahn Alexander; Christopher B. Hayes, Faruqi & Faruqi,

LLP, Los Angeles, California; Marc L. Godino, Glancy

Binkow & Goldberg LLP, Los Angeles, California, for

Plaintiffs-Appellees.

OPINION

QUIST, District Judge:

Toyota Motor Corporation and Toyota Motor Sales,

U.S.A., Inc. (collectively “Toyota” or “Defendants”) seek

review of the district court’s denial of their motion to compel

arbitration. The district court held that Toyota, a

nonsignatory to several agreements with arbitration

provisions between Plaintiffs and various Toyota dealerships

(hereinafter “Dealerships”), could not compel Plaintiffs to

arbitrate with Toyota. The district court also found that

Toyota had waived any right to compel arbitration by

vigorously litigating this action in district court for nearly two

years.

We have jurisdiction pursuant to 9 U.S.C. § 16(a)(1)(C),

which provides for immediate interlocutory appeal of a

district court’s denial of a motion to compel arbitration.

Green Tree Fin. Corp.-Alabama v. Randolph, 531 U.S. 79, 86
4 KRAMER V. TOYOTA MOTOR CORP.

(2000). For the reasons set forth below, we affirm the district

court’s order denying Toyota’s motion to compel arbitration.

BACKGROUND

Plaintiffs are owners of Model Year 2010 Toyota Prius

vehicles who purchased their new vehicles between June

2009 and February 2010 from Toyota dealerships in

California, Texas, and Maryland. Plaintiffs bring this

putative class action on behalf of themselves and others

similarly situated who purchased or leased a Model Year

2010 Toyota Prius or Model Year 2010 Lexus HS 250h

(collectively “Class Vehicles”) in the United States.

Plaintiffs allege that they experienced defects in their antilock brake systems (ABS), resulting in increased stopping

distances. Plaintiffs further allege that Toyota had notice of

the defect as early as July 2009 but failed to disclose the

defect and continued to manufacture and sell vehicles with

defective ABS. Plaintiffs assert claims for violation of

California’s Consumers Legal Remedies Act, Cal. Civ. Code

§ 1750 et seq.; unfair competition, Cal. Bus. & Prof. Code

§ 17200 et seq.; false advertising, Cal. Bus. & Prof. Code

§ 17500 et seq.; breach of the implied warranty of

merchantability, Cal. Com. Code § 2314; and common law

breach of contract.

Plaintiffs purchased their vehicles on credit by entering

into either a “Retail Installment Sale Contract” or “Purchase

Agreement” with their respective dealerships. The

agreements (hereinafter “Purchase Agreement(s)”) set forth

the terms of the sales, including information regarding the

purchase price, financing, insurance, warranties disclaimed

by the dealer, warranties of buyer, and rescission rights. The

Purchase Agreements also contained similarly worded
KRAMER V. TOYOTA MOTOR CORP. 5

 Toyota did not move the district court to compel arbitration of Plaintiff 1

Jessica Kramer’s claim because Kramer did not sign an agreement with an

arbitration provision.

arbitration provisions. For example, the agreement entered 1

by Plaintiff Michael Scholten states,

1. EITHER YOU OR WE MAY CHOOSE

TO HAVE ANY DISPUTE BETWEEN YOU

AND US DECIDED BY ARBITRATION,

RATHER THAN IN COURT OR BY JURY

TRIAL.

2. IF A DISPUTE IS ARBITRATED, YOU

WILL GIVE UP YOUR RIGHT TO

PART IC I P A T E AS A CL ASS

REPRESENTATIVE OR CLASS MEMBER

ON ANY CLAIM YOU MAY HAVE

AGAINST US. YOU WILL GIVE UP ANY

RIGHT TO CLASS ARBITRATION AND

TO ANY CONSOLIDATION OF

INDIVIDUAL ARBITRATIONS.

. . .

If either you or we elect, any claims or

disputes arising out of this transaction, or

relating to it, will be determined by binding

arbitration and not by court action. This

includes all claims and disputes arising out of,

or relating to: the vehicle, your credit

application, this contract, the sale or financing

of the vehicle, and any collection activities.
6 KRAMER V. TOYOTA MOTOR CORP.

 See Press Release, Nat’l Highway Traffic Safety Admin., Department 2

of Transportation Addresses Toyota Safety Issues (Feb. 4, 2010),

http://www.nhtsa.gov/PR/DOT-22-10. Plaintiffs’ First Amended

Complaint alleges NHTSA announced its investigation on February 3,

2010.

. . .

This Arbitration Clause applies, regardless of

whether the claims or disputes arise in

contract, tort, statute or otherwise. It also

applies to any claim or dispute about the

interpretation and scope of this Arbitration

Clause. It also applies to any claim or dispute

about whether a claim or dispute should be

determined by arbitration.

Any claim or dispute is to be arbitrated by a

single arbitrator who will arbitrate only your

own claims and not the claims of a class of

persons. You expressly waive any right you

may have to arbitrate a class action.

Likewise, the arbitration clauses in the other Purchase

Agreements employ the language “you” and “we” or “buyer”

and “dealer” to identify who may elect arbitration. Toyota is

not a signatory to any of the Purchase Agreements.

PROCEDURAL HISTORY

On February 4, 2010, the National Highway Traffic

Safety Administration announced a formal investigation into

allegations that Model Year 2010 Toyota Prius hybrid

vehicles experienced momentary loss of braking capability.2
KRAMER V. TOYOTA MOTOR CORP. 7

On February 8, 2010, Toyota voluntarily recalled the Class

Vehicles to update the ABS software. Between February 8

and February 19, 2010, Plaintiffs filed separate class action

lawsuits in several federal district courts. On April 9, 2010,

the United States Judicial Panel on Multidistrict Litigation

(JPML) issued a Transfer Order in In re: Toyota Motor Corp.

Unintended Acceleration Marketing, Sales Practices and

Products Liability Litigation (MDL 2151), pursuant to which

the JPML transferred several actions to the Central District of

California. On July 28, 2010, the present actions were

consolidated by stipulation pursuant to 28 U.S.C. § 1407, and

on November 22, 2010, the district court approved a

negotiated protective order governing discovery.

On April 26, 2011, Plaintiffs filed the operative First

Amended Complaint. The following day, the United States

Supreme Court issued its decision in AT&T Mobility LLC v.

Concepcion, __ U.S. __, 131 S. Ct. 1740 (2011), which

abrogated Discover Bank v. Superior Court, 36 Cal. 4th 148

(2005), and held enforceable class action waivers in certain

arbitration agreements. Discover Bank had previously held

class action arbitration provisions unconscionable and

unenforceable in consumer contracts of adhesion under

certain circumstances. 36 Cal. 4th at 153.

On June 16, 2011, Toyota moved to dismiss Plaintiffs’

claims pursuant to Federal Rule of Civil Procedure 12(b)(6),

which the district court denied on September 12, 2011. The

following day, Toyota informed Plaintiffs’ counsel that

Toyota intended to move to compel arbitration. On

September 27, 2011, Toyota answered the First Amended

Complaint, asserting arbitration as one affirmative defense.

On October 10, 2011, Toyota moved to compel arbitration.

The district court denied Toyota’s motion on December 20,
8 KRAMER V. TOYOTA MOTOR CORP.

2011, finding Toyota had waived any right to arbitrate by

vigorously litigating the action, participating in discovery,

and negotiating protective orders for nearly two years. The

court also found that Toyota, as a nonsignatory to the

Purchase Agreements between Plaintiffs and Dealerships,

could not compel arbitration, and equitable estoppel did not

require arbitration.

DISCUSSION

I.

A.

Toyota first argues that the district court erred by deciding

whether Toyota had a right to compel arbitration, contending

that the Purchase Agreements commit that question to an

arbitrator.

We review de novo district court decisions about the

arbitrability of claims. Momot v. Mastro, 652 F.3d 982, 986

(9th Cir. 2011). With limited exceptions, the Federal

Arbitration Act (FAA) governs the enforceability of

arbitration agreements in contracts involving interstate

commerce. See 9 U.S.C. § 1 et seq. The FAA states that “[a]

written provision in any . . . contract evidencing a transaction

involving commerce to settle by arbitration a controversy

thereafter arising out of such contract . . . shall be valid,

irrevocable, and enforceable, save upon such grounds as exist

at law or in equity for the revocation of any contract.” Id.

§ 2. The FAA reflects both a “liberal federal policy favoring

arbitration,” Concepcion, __ U.S. __, 131 S. Ct. at 1745

(quoting Moses H. Cone Mem’l Hosp. v. Mercury Constr.

Corp., 460 U.S. 1, 24 (1983)), and the “fundamental principle
KRAMER V. TOYOTA MOTOR CORP. 9

that arbitration is a matter of contract,” id. (quoting Rent-ACenter, West, Inc. v. Jackson, __ U.S. __, 130 S. Ct. 2772,

2776 (2010)).

The scope of an arbitration agreement is governed by

federal substantive law. Tracer Research Corp. v. Nat’l

Envtl. Servs. Co., 42 F.3d 1292, 1294 (9th Cir. 1994). “[A]s

a matter of federal law, any doubts concerning the scope of

arbitrable issues should be resolved in favor of arbitration,

whether the problem at hand is the construction of the

contract language itself or an allegation of waiver, delay, or

a like defense to arbitrability.” Chiron Corp. v. Ortho

Diagnostic Sys., Inc., 207 F.3d 1126, 1131 (9th Cir. 2000)

(quoting Moses H. Cone, 460 U.S. at 24–25).

Nevertheless, “arbitration is a matter of contract and a

party cannot be required to submit to arbitration any dispute

which he has not agreed so to submit.” United Steelworkers

v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582 (1960).

“Because arbitration is fundamentally a matter of contract,

the central or primary purpose of the FAA is to ensure that

private agreements to arbitrate are enforced according to their

terms.” Momot, 652 F.3d at 986 (internal quotation marks and

citation omitted). Generally, the contractual right to compel

arbitration “may not be invoked by one who is not a party to

the agreement and does not otherwise possess the right to

compel arbitration.” Britton v. Co-op Banking Grp., 4 F.3d

742, 744 (9th Cir. 1993). Accordingly, “[t]he strong public

policy in favor of arbitration does not extend to those who are

not parties to an arbitration agreement.” Comedy Club, Inc.

v. Improv W. Assocs., 553 F.3d 1277, 1287 (9th Cir. 2009)

(citation omitted).
10 KRAMER V. TOYOTA MOTOR CORP.

B.

The first issue for review is whether the district court had

authority to decide whether Toyota, a nonsignatory to the

Purchase Agreements, can compel Plaintiffs to arbitrate. The

district court addressed the issue in a footnote,

While parties may agree to explicit provisions

enabling the arbitrator to decide issues of the

applicability and scope of an arbitration

agreement, these provisions are part of the

agreement and only apply to signatories.

Toyota cannot invoke the right to the benefits

of the Purchase Agreement because it was not

a party to the agreement; thus, the threshold

issue of whether Toyota, as a nonsignatory,

may compel Plaintiffs to submit to arbitration

under the Purchase Agreements must be

decided by this Court. Britton, 4 F.3d at 744;

Comedy Club, 553 F.3d at 1287. None of the

cases cited byToyota in support of its position

. . . counsels otherwise, as they are inapposite

to nonsignatories.

Toyota argues that because the Purchase Agreements

expressly provide that the arbitrator shall decide issues of

interpretation, scope, and applicability of the arbitration

provision, the arbitrator should decide the issue of whether a

nonsignatory may compel Plaintiffs to arbitrate.

“It is well settled in both commercial and labor cases that

whether parties have agreed to ‘submi[t] a particular dispute

to arbitration’ is typically an ‘“issue for judicial

determination.”’ Granite RockCo. v. Int’l Bhd. of Teamsters,
KRAMER V. TOYOTA MOTOR CORP. 11

__ U.S. __, 130 S. Ct. 2847, 2855 (2010) (citations omitted).

“It is similarly well settled that where the dispute at issue

concerns contract formation, the dispute is generally for

courts to decide.” Id. at 2855–56 (citations omitted). As

explained in First Options of Chicago, Inc. v. Kaplan,

“[c]ourts should not assume that the parties agreed to arbitrate

arbitrability unless there is ‘clea[r] and unmistakabl[e]’

evidence that they did so.” 514 U.S. 938, 944 (1995)

(quoting AT&T Techs., Inc. v. Commc’n Workers of Am.,

475 U.S. 643, 649 (1986)); see also Granite Rock, 130 S. Ct.

at 2856 n.5. “In this manner the law treats silence or

ambiguity about the question ‘who (primarily) should decide

arbitrability’ differently from the way it treats silence or

ambiguity about the question ‘whether a particular meritsrelated dispute is arbitrable because it is within the scope of

a valid arbitration agreement’—for in respect to this latter

question the law reverses the presumption.” First Options,

514 U.S. at 944–45 (citing Mitsubishi Motors Corp. v. Soler

Chrysler-Plymouth, Inc., 473 U.S. 614, 626 (1985))

(emphasis in original).

Here, the arbitration agreements do not contain clear and

unmistakable evidence that Plaintiffs and Toyota agreed to

arbitrate arbitrability. While Plaintiffs may have agreed to

arbitrate arbitrability in a dispute with the Dealerships, the

terms of the arbitration clauses are expressly limited to

Plaintiffs and the Dealerships. For example, Scholten’s

arbitration clause states that “[e]ither you or we may choose

to have any dispute between you and us decided by

arbitration.” The language of the contracts thus evidences

Plaintiffs’ intent to arbitrate arbitrability with the Dealerships

and no one else. The Dealerships are not a party to this
12 KRAMER V. TOYOTA MOTOR CORP.

 The scope of the arbitration provisions in the Purchase Agreements 3

does extend to assignees. The Scholten Purchase Agreement, for example,

encompasses disputes between “you” [Plaintiffs] and “anyone to whom

we [Dealerships] transfer this contract, whether or not they sign this

contract” or “our [Dealerships’] employees and agents.” Toyota does not,

however, contend that it is a transferee, employee, or agent of the

Dealerships.

action. See Momot, 652 F.3d at 987. Given the absence of 3

clear and unmistakable evidence that Plaintiffs agreed to

arbitrate arbitrability with nonsignatories, the district court

had the authority to decide whether the instant dispute is

arbitrable. See United Bhd. of Carpenters and Joiners of Am.

v. Desert Palace, Inc., 94 F.3d 1308, 1310 (9th Cir. 1996).

This court addressed a similar issue in Mundi v. Union

Security Life Insurance Co., 555 F.3d 1042 (9th Cir. 2009).

In Mundi, the arbitration provision defined a dispute as a

disagreement between the two contract signatories—Wells

Fargo and the borrower. Id. at 1045. The court found that the

nonsignatory-defendant could not compel arbitration because

the arbitration agreement, by its terms, did not apply to the

nonsignatory.

The arbitration agreement is premised on a

disagreement between Wells Fargo and the

borrower. In the absence of such a

disagreement, the arbitration provision does

not apply. Thus, any disagreement between

the borrower and a third party, such as [the

defendant], is simply not within the scope of

the arbitration agreement, even if it is related
KRAMER V. TOYOTA MOTOR CORP. 13

in some attenuated way to . . . the arbitration

provision.

Id.

As applied to this case, it makes no difference that

Plaintiffs and Toyota disagree over the arbitrability of the

arbitration agreement, as opposed to whether the entire

dispute may be arbitrated. “[T]he question ‘who has the

primary power to decide arbitrability’ turns upon what the

parties agreed about that matter.” First Options, 514 U.S. at

943 (emphasis in original). The parties to this litigation did

not agree to arbitrate arbitrability; Plaintiffs only agreed to

arbitrate arbitrability—or any other dispute—with the

Dealerships because the arbitration clause is limited to claims

between “you and us”—i.e. Plaintiffs and the Dealerships. In

the absence of a disagreement between Plaintiffs and the

Dealerships, the agreement to arbitrate arbitrability does not

apply. Therefore, a disagreement between Plaintiffs and

Toyota “is simply not within the scope of the arbitration

agreement.” Mundi, 555 F.3d at 1045.

II.

A.

Toyota also argues that it may compel arbitration even

though it is a nonsignatory to the Purchase Agreements

because Plaintiffs are equitably estopped from avoiding

arbitration.

“Equitable estoppel precludes a party from claiming the

benefits of a contract while simultaneously attempting to

avoid the burdens that contract imposes.” Comer v. Micor,
14 KRAMER V. TOYOTA MOTOR CORP.

 No party has asked us to apply any state law other than California. 4

Inc., 436 F.3d 1098, 1101 (9th Cir. 2006) (internal quotation

marks and citation omitted). In the arbitration context, this

principle has generated various lines of cases. See Mundi,

555 F.3d at 1046. This case involves “a nonsignatory seeking

to compel a signatory to arbitrate its claims against the

nonsignatory.” Id.

The United States Supreme Court has held that a litigant

who is not a party to an arbitration agreement may invoke

arbitration under the FAA if the relevant state contract law

allows the litigant to enforce the agreement. See Arthur

Andersen LLP v. Carlisle, 556 U.S. 624, 632 (2009). We

therefore look to California contract law to determine whether

Toyota, as a nonsignatory, can compel arbitration.4

Where a nonsignatory seeks to enforce an arbitration

clause, the doctrine of equitable estoppel applies in two

circumstances: (1) when a signatory must rely on the terms of

the written agreement in asserting its claims against the

nonsignatory or the claims are “intimately founded in and

intertwined with” the underlying contract, Goldman v. KPMG

LLP, 173 Cal. App. 4th 209, 221 (2009) (quoting Metalclad

Corp. v. Ventana Envtl. Org. P’ship, 109 Cal. App. 4th 1705,

1713 (2003)), 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.” Goldman, 173 Cal.

App. 4th at 219. Toyota argues that this case presents both

circumstances.
KRAMER V. TOYOTA MOTOR CORP. 15

1.

In Jones v. Jacobson, the California Court of Appeal

addressed the first possibility. 195 Cal. App. 4th 1, 20

(2011). When a signatory relies on the terms of a written

agreement,

[u]nder [the doctrine of equitable estoppel], a

nonsignatory defendant may invoke an

arbitration clause to compel a signatory

plaintiff to arbitrate its claims when the causes

of action against the nonsignatory are

intimately founded in and intertwined with the

underlying contract obligations. [. . .] This

requirement comports with, and indeed

derives from, the very purposes of the

doctrine: to prevent a party from using the

terms or obligations of an agreement as the

basis for his claims against a nonsignatory,

while at the same time refusing to arbitrate

with the nonsignatory under another clause of

the same agreement.

195 Cal. App. 4th 1, 20 (2011) (internal quotations omitted)

(emphasis added) (citing Boucher v. Alliance Title Co.,

127 Cal. App. 4th 262, 271–72 (2005); JSM Tuscany, LLC v.

Superior Court, 193 Cal. App. 4th 1222, 1237 (2011);

Goldman, 173 Cal. App. 4th at 221). “[E]quitable estoppel

applies only if the plaintiffs’ claims against the nonsignatory

are dependent upon, or inextricably bound up with, the

obligations imposed by the contract plaintiff has signed with

the signatory defendant.” Goldman, 173 Cal. App. 4th at

229–30. “[M]erely ‘mak[ing] reference to’ an agreement

with an arbitration clause is not enough. Equitable estoppel
16 KRAMER V. TOYOTA MOTOR CORP.

applies ‘when the signatory to a written agreement containing

an arbitration clause “must rely on the terms of the written

agreement in asserting [its] claims” against the

nonsignatory.’” Id. at 218 (quoting MS Dealer Serv. Corp. v.

Franklin, 177 F.3d 942, 947 (11th Cir. 1999)). To determine

whether the plaintiffs’ claims relied on the written agreement,

the Goldman court looked to whether the claims that the

nonsignatory sought to arbitrate were “‘intimately founded in

and intertwined with the underlying contract obligations.’”

Id. at 221 (quoting Metalclad, 109 Cal. App. 4th at 1713).

In Goldman, investors brought consolidated claims

against their accountants, attorneys, and investment advisors

for, among other things, breach of fiduciary duty and fraud

related to a fraudulent tax avoidance scheme. Id. at 213. As

one step in the scheme, the advisors assisted the investors in

forming limited liability companies with standard operating

agreements containing broad arbitration provisions. Id. The

accountants and attorneys, who were not parties to the

operating agreements, sought to compel arbitration, relying

on the doctrine of equitable estoppel. Id. at 216. The court

affirmed a lower court’s denial of the motion to compel

arbitration, finding that the claims were “unrelated to any of

the obligations in the operating agreements, which were

merely a procedural and collateral step in the creation of the

fraudulent tax shelters.” Id. at 218. The court observed that

the complaints did not “rely on or use any terms or

obligations of the operating agreements as a foundation for

their claims” and did not even mention the agreements. Id.

Thus, the court held the doctrine of equitable estoppel was

inapplicable. Id.

Similarly, in Mundi, the widow of an insured borrower

brought a claim against an insurer for refusing to pay a
KRAMER V. TOYOTA MOTOR CORP. 17

 We note some confusion as to whether Mundi, 555 F.3d 1042, remains 5

good law. See, e.g., In re Apple iPhone Antitrust Litig., 874 F. Supp. 2d

889, 895–98 (N.D. Cal. 2012). In Arthur Anderson, 556 U.S. 624, the

United States Supreme Court clarified that a litigant who is not party to an

arbitration agreement may invoke arbitration if the relevant state contract

law allows the litigant to enforce the agreement. Id. at 632. After careful

review, we conclude that Mundi remains good law. Although the court in

Mundi cited federal equitable estoppel cases, rather than looking directly

to applicable state law, the court applied the same substantive law on

equitable estoppel that a California court would have applied. Like the

California courts in Jones and Goldman, the Mundi court held that in order

for a nonsignatory to compel a signatory to arbitrate, the signatory’s

claims must be “intertwined with,” “arise out of,” or “relate directly to”

the contract providing for arbitration. 555 F.3d at 1047. As one court

noted, “the mere fact that the court in Mundi referred to other federal court

opinions in formulating its holding regarding equitable estoppel does not

mean that Mundi was stating ‘federal common law.’” In re Apple, 874 F.

Supp. 2d at 897.

benefit under a life insurance policy to a third-party lender

after the borrower’s death. 555 F.3d at 1044. Although the 5

insurance policy did not contain an arbitration provision, the

insurer sought to compel arbitration on the basis of equitable

estoppel because a loan agreement between the borrower and

the third-party lender—designated as the creditor-beneficiary

of the policy—contained an arbitration clause. Id. The court

held that the breach of insurance policy claim was not

“intertwined” with the loan agreement and the claim did not

“arise out of” or “relate directly to” the loan agreement. Id.

at 1047 (internal quotations and alterations omitted).

Toyota broadly asserts that Plaintiffs’ claims are

intertwined with the Purchase Agreements because they rely

upon the existence of Plaintiffs’ vehicle purchase

transactions. In addition, Toyota argues that Plaintiffs’

claims are intertwined in two specific ways: (1) Plaintiffs’
18 KRAMER V. TOYOTA MOTOR CORP.

prayer for relief seeks “revocation of acceptance,” and (2)

Plaintiffs rely on the “price term” of the Purchase

Agreements in support of their prayer for damages for

diminution of the purchase price. We take each of these

arguments in turn.

a. Vehicle Purchases

Toyota’s overarching argument is that Plaintiffs’ claims

are intertwined with the Purchase Agreements because

Plaintiffs’ claims rely on the existence of Plaintiffs’ vehicle

purchase transactions.

In Count I, Plaintiffs allege that Toyota violated

California consumer protection law. Plaintiffs allege the

violation arose from Toyota’s unfair or deceptive practices,

including failure to disclose and actively concealing the risk

of the loss of brake control. Plaintiffs also allege material

representations involving the characteristics, uses, benefits,

and qualities of Toyota vehicles. For purposes of this claim,

we discern no reliance by Plaintiffs on the Purchase

Agreements. Toyota’s arguments regarding Plaintiffs’

requested relief aside, Toyota does not specifically argue this

claim is intertwined with the Purchase Agreements.

In Count II, Plaintiffs allege Toyota violated California

unfair competition law by repeated fraudulent

misrepresentations and omissions regarding the safety of

Plaintiffs’ vehicles. This claim is not “intimately founded in”

the Purchase Agreements, Jones, 195 Cal. App. 4th at 20, nor

does it reference or rely upon the existence of the Purchase

Agreements, Goldman, 173 Cal. App. 4th at 221.
KRAMER V. TOYOTA MOTOR CORP. 19

In Count III, Plaintiffs allege violation of California false

advertising law. For example, Plaintiffs allege Toyota

disseminated false or misleading statements about vehicle

safety through Toyota’s advertising, marketing, and other

publications. Similarly, Count III is not intimately founded

in, nor does it reference or rely upon, the Purchase

Agreements.

In Count IV, Plaintiffs allege breach of the implied

warranty of merchantability because the brake defect

rendered the vehicles unfit for their ordinary purposes.

Toyota contends that the implied warranty arose by operation

of the Purchase Agreements and is therefore intertwined with

the Purchase Agreements. We disagree. The Purchase

Agreements expressly differentiate dealer warranties from

manufacturer warranties. For example, the Scholten Purchase

Agreement states, “[t]his provision does not affect any

warranties covering the vehicle that the manufacturer or

supplier may provide.” The Li Purchase Agreement further

reads, “[t]he Dealer is not a party to the manufacturer’s

warranty, in the case of a new motor vehicle or chassis, the

printed new manufacturer’s new vehicle warranty delivered

to Purchaser with such vehicle or chassis shall apply.” Thus,

Plaintiffs’ implied warranty claim against Toyota arises

independently from the Purchase Agreements, rather than

intimately relying on them.

Finally, in Count V, Plaintiffs plead breach of contract in

the alternative, “to the extent Toyota’s repair or adjustment

commitment is deemed not to be a warranty under

California’s Commercial Code.” Plaintiffs allege the breach

arises from Toyota’s failure to adequately repair Plaintiffs’

vehicles. Toyota argues Plaintiffs’ claim relies upon the

Purchase Agreement, including privity of contract between
20 KRAMER V. TOYOTA MOTOR CORP.

Plaintiffs and Toyota. However, Plaintiffs’ breach of contract

claim does not rely on the Purchase Agreement. Although

the claim “sounds in contract,” as Toyota emphasizes, the

claim relies on Plaintiffs’ status as third-party beneficiaries to

contracts between Toyota and the Dealerships—i.e. service

duties the Dealerships owe to Plaintiffs on behalf of

Toyota—not the Purchase Agreements. We agree with the

district court’s conclusion that, in portraying Plaintiffs’

breach of contract claim as a breach of the Purchase

Agreement, Toyota misrepresents Plaintiffs’ breach of

contract claim. Plaintiffs plead breach of contract in the

alternative to the implied warranty claim, and the claim arises

from the same actions underlying the warranty

claim—Toyota’s representations about its commitment to

repairs and safety—not any promise in the Purchase

Agreements. We thus find that Count V is not intertwined

with the Purchase Agreements.

b. Revocation of Acceptance

Toyota also contends that Plaintiffs’ claims are

intertwined because Plaintiffs seek “revocation of

acceptance” as one form of relief. Toyota reads this relief as

“revocation of acceptance of the Purchase Agreement,” as

opposed to revocation of acceptance of the sale itself.

Looking to California contract law, the correct analysis is

whether Plaintiffs would have a claim independent of the

existence of the Purchase Agreement (equitable estoppel

applies “when the signatory must rely on the terms of the

written agreement in asserting its claims against the

nonsignatory,” Goldman, 173 Cal. App. 4th at 222 (emphasis

added), or “when the causes of action against the

nonsignatory are intimately founded in and intertwined with
KRAMER V. TOYOTA MOTOR CORP. 21

the underlying contract obligations,” Jones, 195 Cal. App. 4th

at 20 (emphasis added)), not whether the court must look to

the Purchase Agreement to ascertain the requested relief. The

emphasis of the case law is unmistakably on the claim itself,

not the relief. Despite Toyota’s focus on Plaintiffs’ relief,

Toyota offers no cases to support Toyota’s proposed

application.

Here, Plaintiffs’ claims are premised on California

consumer law, unfair competition, false advertising, breach

of the implied warranty of merchantability, and breach of

contract. In order for Toyota’s equitable estoppel argument

to succeed, Plaintiffs’ claims themselves must intimately rely

on the existence of the Purchase Agreements, not merely

reference them. Toyota is correct that Plaintiffs’ claims

presume a transaction involving a purchase of a Class

Vehicle. The claims do not, however, rely upon the existence

of a Purchase Agreement. For illustration, a consumer who

purchased a vehicle with cash instead of credit would still

state a claim for which relief could be granted, absent a

Purchase Agreement. In this regard, the facts resemble the

facts of Goldman and Mundi, in which Plaintiffs’ claims

arose independently of the terms of the agreements containing

arbitration provisions. Moreover, we note that Plaintiffs’

First Amended Complaint never actually references the

Purchase Agreement, either in the prayer for relief or

otherwise.

c. Price Term

Toyota similarly argues that Plaintiffs rely on the “price

term” of the Purchase Agreements because Plaintiffs request

damages for diminution of value of their vehicles

(“restitution” or “restitutionary disgorgement”). Again, we
22 KRAMER V. TOYOTA MOTOR CORP.

disagree. Under California law, mere reference to a term of

the Purchase Agreements is not enough. See Goldman,

173 Cal. App. 4th at 218. Moreover, we note that Plaintiffs’

Complaint does not reference the Purchase Agreements or a

specific price term. For purposes of their prayer for relief,

Plaintiffs merely rely on the fact that they exchanged value

for their vehicles, and that, due to the alleged ABS defect, the

value of their vehicles has decreased.

We therefore find, as did the district court, that Toyota

erroneouslyequates Plaintiffs’ purchase of the Class Vehicles

and the existence of Purchase Agreements between Plaintiffs

and the Dealerships with interrelatedness between Plaintiffs’

claims and the obligations of the Purchase Agreements.

Plaintiffs do not seek to enforce or challenge the terms,

duties, or obligations of the Purchase Agreements. In fact,

according to Plaintiffs’ First Amended Complaint, the only

operative documents are Toyota’s marketing materials and

express written warranties, which provide the basis of the

false advertising claim.

2.

Toyota next argues that Plaintiffs must arbitrate their

claims because Plaintiffs allege collusion and interdependent

misconduct between Toyota and the Dealerships. The

doctrine of equitable estoppel applies where a signatory raises

allegations of substantially interdependent and concerted

misconduct by both a nonsignatory and a signatory.

Goldman, 173 Cal. App. 4th at 222 & n.7 (citing MS Dealer,
KRAMER V. TOYOTA MOTOR CORP. 23

We note that although MS Dealer, 177 F.3d 942, is a federal case and 6

Arthur Andersen instructs this court to apply California state law, the

California Court of Appeal in Goldman, 173 Cal. App. 4th 209, adopted

the MS Dealer equitable estoppel analysis as California state law.

 It is noteworthy that many California equitable estoppel cases omit any 7

mention of the concerted misconduct line of equitable estoppel cases,

suggesting the doctrine’s principal application is where plaintiffs’ claims

are intertwined with agreements containing arbitration provisions.

177 F.3d at 947). California state contract law does not 6

allow a nonsignatory to enforce an arbitration agreement

based upon a mere allegation of collusion or interdependent

misconduct between a signatory and nonsignatory.

In any case applying equitable estoppel to

compel arbitration despite the lack of an

agreement to arbitrate, a nonsignatory may

compel arbitration only when the claims

against the nonsignatory are founded in and

inextricably bound up with the obligations

imposed by the agreement containing the

arbitration clause. In other words, allegations

of substantially interdependent and concerted

misconduct by signatories and nonsignatories,

standing alone, are not enough: the allegations

of interdependent misconduct must be

founded in or intimately connected with the

obligations of the underlying agreement.

Goldman, 173 Cal. App. 4th at 219 (emphasis in original).7

Toyota argues, “[P]laintiffs claim that Toyota and the

signatory dealers ‘engaged in a pattern of denial and

concealment’ of the alleged defect that caused [P]laintiffs’
24 KRAMER V. TOYOTA MOTOR CORP.

injuries.” Plaintiffs deny that they allege collusion between

Toyota and the Dealerships.

We find unconvincing Toyota’s claim that a pattern of

denial or concealment by both Toyota and the dealers

amounts to allegations of collusion or interdependent

misconduct for purposes of equitable estoppel. As the district

court noted, the sparse portions of the First Amended

Complaint that Toyota cites to support its argument do not

amount to collusion. Moreover, even if Toyota were correct

that Plaintiffs allege a pattern of concealment between Toyota

and the dealerships, these allegations are not connected to the

Purchase Agreements. Rather, like the other allegations in

the First Amended Complaint, the allegations of collusion are

not “inextricably bound up with the obligations imposed by

the agreement containing the arbitration clause.” Goldman,

173 Cal. App. 4th at 219. Therefore, Plaintiffs’ allegations

alone cannot trigger equitable estoppel under California

contract law. See id.

B.

Regarding equity, we briefly note that this case is

distinguishable from other cases in which equitable estoppel

has been applied. California courts have explicitly noted that

parties should only be estopped if their “‘own conduct

renders assertion of those rights contrary to equity.’”

Goldman, 173 Cal. App. 4th at 221 (quoting Metalclad,

109 Cal. App. 4th at 1713). The “linchpin” for equitable

estoppel is fairness. Id. at 220. The facts of Metalclad, 109

Cal. App. 4th 1705, provide a useful contrast to this case.

Metalclad, a California company, entered into an oral

agreement with Ventana to sell Metalclad’s subsidiary,

Econsa. Id. at 1709. Metalclad followed up on the agreement
KRAMER V. TOYOTA MOTOR CORP. 25

by entering into a written agreement with Geologic, a

Ventana subsidiary, for the sale of Econsa. Id. The written

agreement included a broad arbitration clause. Id. at 1710.

Metalclad later brought claims including breach of contract

and fraud against Ventana and others. Id. When Metalclad

sought to avoid arbitration, Ventana argued that Metalclad

should be equitably estopped because Metalclad sought to

both enforce the agreement and repudiate the arbitration

provision. Id. at 1713. The court agreed, holding that the

claims were “intimately founded in and intertwined with” the

underlying contract, and it would be unfair to allow Metalclad

to avoid provisions in the same agreement it sought to

enforce. See id. at 1717. “Another maxim of jurisprudence is

relevant here . . . ‘He who takes the benefit must bear the

burden.’” Id. at 1718–19.

By contrast, in this case, Plaintiffs do not seek to

simultaneously invoke the duties and obligations of Toyota

under the Purchase Agreement, as it has none, while seeking

to avoid arbitration. Thus, the inequities that the doctrine of

equitable estoppel is designed to address are not present.

III.

Finally, Toyota argues that the district court erred in

finding that Toyota waived any right it may have had to

compel arbitration. Because we find that Toyota has no right

to compel arbitration in the present case, we need not

consider the issue of waiver.

CONCLUSION

We conclude that Toyota may not compel Plaintiffs to

arbitrate their claims. The district court had the authority to
26 KRAMER V. TOYOTA MOTOR CORP.

decide whether Toyota, a nonsignatory to the Purchase

Agreements, may compel arbitration. Further, we discern no

reason that the Plaintiffs should be equitably estopped from

avoiding arbitration in this case.

AFFIRMED.