NATURE OF PROCEEDINGS: Hearing on Defendant’s Motion to Compel Arbitration

 

Defendant’s Motion to Compel Arbitration is granted.

                                                                                                                                       

BACKGROUND

Plaintiff Mathew Noto filed this lemon law action against Tesla, Inc. (Defendant), alleging violations of the Song-Beverly Consumer Protection Act.

 

Defendant filed a Motion to Compel Arbitration. Plaintiff filed an Opposition.

 

LEGAL STANDARD

“On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party to the agreement refuses to arbitrate that controversy, the court shall order the petitioner and the respondent to arbitrate the controversy if it determines that an agreement to arbitrate the controversy exists….” Code Civ. Proc. § 1281.2. “The party seeking arbitration bears the burden of proving the existence of an arbitration agreement, and the party opposing arbitration bears the burden of proving any defense, such as unconscionability.” Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 236.

“‘In determining whether an arbitration agreement applies to a specific dispute, the court may examine only the agreement itself and the complaint filed by the party refusing arbitration ….’” Rice v. Downs (2016) 248 Cal.App.4th 175, 185 (Rice) (quoting Weeks v. Crow (1980) 113 Cal.App.3d 350, 353). “The ordinary rules of contract interpretation apply to arbitration agreements.” Ibid.

“‘The fundamental goal of contractual interpretation is to give effect to the mutual intention of the parties.’ ‘Such intent is to be inferred, if possible, solely from the written provisions of the  contract.” ‘If contractual language is clear and explicit, it governs.’ ‘“The ‘clear and explicit’ meaning of these provisions, interpreted in their ‘ordinary and popular sense,’ unless ‘used by the parties in a technical sense or a special meaning is given to them by usage’ controls judicial interpretation.”‘” State of California v. Continental Ins. Co. (2012) 55 Cal.4th 186, 195 (citations omitted). “‘The whole of a contract is to be taken together, so as to give effect to every part, if reasonably practicable, each clause helping to interpret the other. ‘“A court must view the language in light of the instrument as a whole and not use a ‘disjointed, single-paragraph, strict construction approach.’”‘ An interpretation that leaves part of a contract as surplusage is to be avoided.” Rice, supra, 248 Cal.App.4th 175, 186.

 

ANALYSIS

Defendant moves to compel Plaintiff’s claims to arbitration in accordance with their arbitration agreement.

I. Valid Arbitration Agreement

Defendant provides the following evidence in support of the motion. Plaintiff ordered a  2017 Tesla Model from Defendant on November 3, 2020. Kim Decl., ¶ 3. In placing that order, Plaintiff executed the Order Agreement, thereby agreeing to be bound by its terms and conditions, which included an agreement to arbitrate. Id., Ex. 1. Plaintiff does not dispute that he signed the Order Agreement, or that it contains a binding arbitration provision. Opp. at p. 3: 4-5, 23-25. Plaintiff instead argues the agreement contains an unenforceable limitation of liability.

II. Limitation of Liability

Plaintiff argues that the limitation of liability improperly waives his rights under the Song-Beverly Act because it limits his remedies to the reimbursement of the order payment. Opp. at pp. 5:25-6:4 (“California Civil Code § 1790.1 states that “[a]ny waiver by the buyer of consumer goods of the provisions of this chapter, except as expressly provided in this chapter, shall be deemed contrary to public policy and shall be unenforceable and void.”)

The “Limitation of Liability” provision states, “We are not liable for any incidental, special or consequential damages arising out of this Agreement. Your sole and exclusive remedy under this Agreement will be limited to reimbursement of your Order Fee, Order Deposit, and Transportation Fee.” Kim Decl., Ex. 1 at p. 11.

By its plain language, the liability limitation clause only applies to “damages arising out of this Agreement.” In contrast, the terms of the “Agreement to Arbitrate” provision apply to “any dispute arising out of or relating to any aspect of the relationship between you and Tesla…. This includes claims arising before this Agreement, such as claims related to statements about our products.” Viewing these adjacent provisions together, it seems clear the parties intended to limit liability only to a narrow range of issues, i.e., incidental, special, or consequential damages arising out of the agreement, while arbitrating a much broader range of claims, i.e., any claim arising out of or relating to any aspect of Plaintiff’s relationship with Tesla. Cf. Rice, supra 248 Cal.App.4th at p.188 (Contrasting an arbitration agreement’s narrowly worded arbitration clause with the preceding expansively worded jurisdiction clause). While the former category necessarily falls into the latter, more inclusive category, the agreement does not limit Defendant’s liability to the full range of arbitrable issues.

Plaintiff reads the limitation of liability provision as extending to the purchase of the vehicle and his rights under the Song-Beverly Act. Opp. at p. 5:13-15. Alternatively, Defendant advocates a narrow reading of the provision, that is limited to the act of ordering the vehicle, as distinguished from purchasing it. Reply at p. 21. Reading the agreement as a whole, the Court concludes that Defendant’s interpretation is persuasive. The disclaimer of “incidental, special, or consequential damages,” implies that Plaintiff is not disclaiming his general or direct damages. Thus, the following sentence must be read as confirming that general damages for breach of the Order Agreement consist of the “Order Fee, Order Deposit, and Transportation Fee.” Those would have been Plaintiff’s general damages if Defendant had failed to deliver the vehicle. As Defendant persuasively argues, in that scenario, the limitation of liability means Defendant would not be liable for expenses Plaintiff incurred renting another vehicle while waiting. Reply at p. 2:23-27.

The Court also notes that Defendant’s interpretation creates a symmetry between Defendant’s liability for breach of the Order Agreement being limited to “Order Fee, Order Deposit, and Transportation Fee,” and the liquidated damages provision, permitting Defendant to retain those same funds if Plaintiff canceled his order. Kim Decl., Ex. 1 at p. 9. Thus, either party’s failure to complete the purchase would result in the forfeiture of those funds to the other.

Therefore, the language cited by Plaintiff limiting Defendant’s liability for damages arising out of “this Agreement,” does not apply to its liability under the Song-Beverly Act. The Court agrees with Defendant’s argument that Plaintiff’s claims in this case are limited to its alleged violations of the Song-Beverly Act. Because the Limitation of Liability provision has no applicability in this case and does not violate the Song-Beverly Act, the Court need not address Plaintiff’s arguments regarding severability. Accordingly, Defendant’s motion to compel arbitration is granted.

 

 

CONCLUSION

Defendant’s motion to compel arbitration is granted.