Judge: Armen Tamzarian, Case: 24STCV08692, Date: 2024-10-23 Tentative Ruling

Case Number: 24STCV08692    Hearing Date: October 23, 2024    Dept: 52

Defendant Tesla, Inc.’s Motion to Compel Arbitration and Stay Proceedings; (2) Defendant Tesla Insurance Services, Inc.’s Demurrer

(1) Defendant Tesla, Inc.’s Motion to Compel Arbitration

Defendant Tesla, Inc. (formerly known as Tesla Motors, Inc.) moves to compel arbitration of this action against it by plaintiffs Vladimir Semenov and Elko Oksana.  Tesla, Inc. further moves to stay the action under Code of Civil Procedure 1281.4.    

Existence of Agreement

            Plaintiffs dispute the authenticity of their signatures.  The party moving to compel arbitration must establish the existence of a written arbitration agreement between the parties.  (CCP § 1281.2.)  It can meet the “initial burden to show an agreement to arbitrate by attaching a copy of the arbitration agreement purportedly bearing the opposing party’s signature.”  (Espejo v. Southern California Permanente Medical Group (2016) 246 Cal.App.4th 1047, 1060 (Espejo).)  After the opposing party “challenge[s] the validity of that signature,” the moving party must “establish by a preponderance of the evidence that the signature was authentic.”  (Ibid.)

            Tesla, Inc. meets its initial burden by attaching a copy of a retail installment sales contract.  (Kim Decl., Ex. 2.)  On the bottom right of the first page, it provides: “Agreement to Arbitrate: By signing below, you agree that, pursuant to the Arbitration Provision on page 7 of this contract, you or we may elect to resolve any dispute by neutral, binding arbitration and not by a court action.  See the Arbitration Provision for additional information concerning the agreement to arbitrate.”  (Id., p. 1.)  Underneath, both plaintiffs’ names are electronically written in cursive font.  (Ibid.) 

Plaintiffs do not adequately dispute their electronic signatures.  Challenging a signature’s authenticity generally requires a declaration by the plaintiff stating he or she did not sign the agreement or does not recall signing it.  (Espejo, supra, 246 Cal.App.4th at p. 1054; Ruiz v. Moss Bros. Auto Group, Inc. (2014) 232 Cal.App.4th 836, 846.)

Plaintiff Oksana states, “The documents of the sales agreement I was shown, does not have my signature but instead has a computer generated signature, but anyone can generate a signature.  I do not recall authorizing arbitration but I would never agree to give up my rights for a dispute to be heard by the court.”  (Oksana Decl., ¶ 5.)  Plaintiff Semenov states, “I do see my name in a computer generated form, but that is not my signature.  That signature is not verified and I refute that signature to be used as evidence against me.”  (Semenov Decl., ¶ 5.) 

The electronic signatures on the arbitration agreement are computer generated, but that does not mean they are invalid.  “ ‘[A]n electronic signature has the same legal effect as a handwritten signature.’ ”  (Espejo, supra, 246 Cal.App.4th at p. 1061.)  “[A]n electronic signature is attributable to a person if it is the act of the person.”  (Fabian v. Renovate America, Inc. (2019) 42 Cal.App.5th 1062, 1067 (Fabian).)  Plaintiffs do not state those computer-generated signatures did not result from their actions.  Oksana states she does not recall authorizing arbitration specifically but does not deny executing the retail installment sales contract that includes the arbitration agreement.  (Kim Decl., Ex. 2.)  Similarly, Semenov makes a conclusory statement that it “is not [his] signature,” but does not state he did not electronically execute the contract.

Assuming plaintiffs adequately challenged the signatures, Tesla, Inc. meets its burden of showing the signatures are authentic.  “ ‘[T]he burden of authenticating an electronic signature is not great.’ ”  (Fabian, supra, 42 Cal.App.5th at p. 1067.)  “The party seeking authentication may carry its burden ‘in any manner,’ including by presenting evidence of the contents of the contract in question and the circumstances surrounding the contract’s execution.”  (Id. at p. 1068.)  The moving party can meet its ultimate burden of the preponderance of the evidence by showing the “security precautions regarding transmission and use of an applicant’s unique username and password, as well as the steps an applicant would have to take to place his or her name on the signature line.”  (Espejo, supra, 246 Cal.App.4th at p. 1062.)

Tesla, Inc. presents two declarations by Raymond Kim, a manager of “business resolution” at the company.  (Kim Decl., ¶ 2.)  He testifies, “I am familiar with the process by which Tesla vehicles are ordered and purchased, and the related document creation and record-keeping processes and procedures in place.”  (Ibid.)  Kim located a copy of plaintiffs’ retail installment sales contract by searching Tesla’s electronic records.  (Id., ¶¶ 3, 6-8.) 

In his supplemental declaration, Kim explains the security precautions used to verify that only the buyers can electronically execute the contract: “The individual who is listed as ‘Buyer’ on the RISC must access on the Tesla app his or her Tesla account that he or she set up with a unique email address and password.  The account owner must then access the ‘Documents’ function of the app and click through a process titled ‘Review Agreements’ in which the terms of the RISC are displayed, including the Arbitration Provision I highlight in my previous Declaration.  The buyer must indicate his or her agreement to and acceptance of the provisions reflected in the RISC, and upon completing this review and acceptance process, electronic signatures in the name of the Buyer are affixed to the Retention Copy of the digitally executed contract.”  (Supp. Kim Decl., ¶ 4.)  “When there is a Co-Buyer involved in the purchase of a Tesla vehicle, the review and acceptance process I describe above is identical, except the Co-Buyer receives an email rather than an app notification, and accesses his or her Tesla account – with its own unique email address and password – on the Tesla website rather than on the app.”  (Id., ¶ 5.)  The contract “is a Retention Copy created by the process I describe above, executed by a Buyer whose Tesla account was created in the name of Oksana Elko and by a Co-Buyer whose Tesla account was created in the name of Vladimir Semenov.”  (Id., ¶ 6.) 

This testimony meets Tesla, Inc.’s burden of showing that plaintiffs’ acts caused the computer-generated signatures to be placed on the contract, including for the arbitration provision.

Unconscionability

            Plaintiffs argue the agreement is unconscionable.  “Both procedural and substantive unconscionability must be shown for the defense to be established, but ‘they need not be present in the same degree.’ ”  (OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111, 125 (OTO).)  “The burden of proving unconscionability rests upon the party asserting it.”  (Id. at p. 126.)  Plaintiffs do not meet their burden of proving unconscionability.

A. Procedural Unconscionability

Plaintiffs show a low degree of procedural unconscionability.  “ ‘The procedural element addresses the circumstances of contract negotiation and formation, focusing on oppression or surprise due to unequal bargaining power.’ ”  (OTO, 8 Cal.5th at p. 125.)  The “analysis ‘begins with an inquiry into whether the contract is one of adhesion.’  [Citation.]  An adhesive contract is standardized, generally on a preprinted form, and offered by the party with superior bargaining power ‘on a take-it-or-leave-it basis.’ ”  (Id. at p. 126.)  For an adhesive contract, the court must consider “whether circumstances of the contract’s formation created such oppression or surprise that closer scrutiny of its overall fairness is required.”  (Ibid.)  “ ‘ “ ‘Oppression occurs where a contract involves lack of negotiation and meaningful choice, surprise where the allegedly unconscionable provision is hidden within a prolix printed form.’ ” ’ ”  (Id. at p. 126.)   

Plaintiffs show the contract was adhesive.  “By itself, however, adhesion establishes only a ‘low’ degree of procedural unconscionability.”  (Davis v. Kozak (2020) 53 Cal.App.5th 897, 906 (Davis).)  Plaintiffs show no other basis for procedural unconscionability.

Plaintiffs argue, “The documents embrace[] all the characteristics of being signed under duress and fear of not obtaining the Tesla, insufficient time to review the documents to purchase the vehicle, devoid of any bargaining power lest the Plaintiffs be denied the Tesla Vehicle.”  (Opp., p. 3.)  Plaintiffs show no duress.  That defense generally requires “(a) Unlawful confinement of the person of the party, or of the spouse of such party, or of an ancestor, descendant, or adopted child of such party or spouse.  (b) Unlawful detention of the property of any such person.  (c) Confinement of such person, lawful in form, but fraudulently obtained, or fraudulently made unjustly harassing or oppressive.”  (Civ. Code, § 1569.)  Economic duress requires “a wrongful act which is sufficiently coercive to cause a reasonably prudent person faced with no reasonable alternative to succumb to the perpetrator's pressure.”  (Rich & Whillock, Inc. v. Ashton Development, Inc. (1984) 157 Cal.App.3d 1154, 1158.)  Plaintiffs present no such evidence.  Fear of not getting the car they want is not duress.  And plaintiffs present no evidence they had insufficient time to review the contract. 

Plaintiffs also argue they did not understand the agreement because they speak Russian.  (Opp., p. 2.)  That is not a defense to enforcement of a contract.  “ ‘[O]ne who accepts or signs an instrument, which on its face is a contract, is deemed to assent to all its terms, and cannot escape liability on the ground that he has not read it.  If he cannot read, he should have it read or explained to him.’ ”  (Randas v. YMCA of Metropolitan Los Angeles (1993) 17 Cal.App.4th 158, 163.)  “Generally, a party may not avoid enforcement of an arbitration provision because the party has limited proficiency in the English language.  If a party does not speak or understand English sufficiently to comprehend a contract in English, it is incumbent upon the party to have it read or explained to him or her.”  (Caballero v. Premier Care Simi Valley LLC (2021) 69 Cal.App.5th 512, 518–519.) 

Even if failing to understand the agreement were a valid defense, plaintiffs do not meet their burden of showing that.  Both plaintiffs state they “speak and write Russian.”  (Oksana Decl., ¶ 1; Semenov Decl., ¶ 1.)  They never state they do not speak or read English.  (See Evid. Code § 412 [“If weaker and less satisfactory evidence is offered when it was within the power of the party to produce stronger and more satisfactory evidence, the evidence offered should be viewed with distrust”].) 

Finally, plaintiffs argue the agreement is procedurally unconscionable because it does not “specifically reference what exact rights are generally more limited than a lawsuit,” such as the limits on discovery.  (Opp., p. 4.)  Plaintiffs provide no authority that specifically doing so is required.  Limiting discovery is part of substantive, not procedural, unconscionability. 

B. Substantive Unconscionability

Plaintiffs show no substantive unconscionability.  “Substantive unconscionability examines the fairness of a contract’s terms.”  (OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111, 129.)  “ ‘[T]he unconscionability doctrine is concerned not with “a simple old-fashioned bad bargain” [citation], but with terms that are “unreasonably favorable to the more powerful party.” ’ ”  (Id. at p. 130.)

Plaintiffs do not show that the agreement unfairly limits discovery.  Courts have held that agreements that expressly limit discovery—rather than failing to expressly permit discovery—can be substantively unconscionable.  (Fitz v. NCR Corp. (2004) 118 Cal.App.4th 702, 720; Kinney v. United HealthCare Services, Inc. (1999) 70 Cal.App.4th 1322, 1326.)  Rather than limiting discovery, the parties’ agreement is silent on the topic.  (Kim Decl., Ex. 2, p. 7.)

Plaintiffs also fail to show that any limit on discovery would be unfair in this case.  Generally, it is “not sufficient simply to claim that the discovery limitations [are] unconscionable in the abstract.”  (Baxter v. Genworth North America Corp. (2017) 16 Cal.App.5th 713, 729.)  Instead, it is “necessary to make a factual showing that the discovery limitations would as a practical matter thwart the [plaintiffs’] ability to prove his or her particular claims.”  (Ibid.)  Plaintiffs make only a conclusory argument that the agreement limits discovery in the abstract. 

Plaintiffs contend the agreement is “substantively unconscionable in that it requires the employee to relinquish his or her relevant administrative and judicial rights under federal and state statutes.”  (Opp, p. 4, fn. 5.)  Plaintiffs were not defendant’s employees.  This is a products liability case.  Plaintiffs also argue the agreement is “buried at the end of the” contract.  (Opp., p. 5.)  That is irrelevant to substantive unconscionability, which is about the fairness of the contract’s terms.

Plaintiffs further argue the agreement is substantively unconscionable because the signatures are not authentic.  (Opp., p. 7.)  Again, that is irrelevant to substantive unconscionability.  And as discussed above, Tesla, Inc. adequately authenticated plaintiffs’ signatures. 

Waiver

            Finally, plaintiffs contend defendant “waived” any right to arbitrate “by not getting a proper verification” of their signatures.  (Opp., p. 6.)  Whether defendant adequately authenticated the signatures is irrelevant to waiver.  Waiver occurs “when the party seeking to enforce a known contractual right has intentionally relinquished or abandoned that right.”  (Quach v. California Commerce Club, Inc. (2024) 16 Cal.5th 562, 569.)  Submitting insufficient evidence while attempting to enforce the right to arbitrate cannot constitute waiver.  Moreover, Tesla, Inc. did present sufficient evidence that the signatures are authentic.

Disposition

            Defendant Tesla, Inc.’s motion to compel arbitration and stay proceedings is granted.  Plaintiffs Vladimir Semenov and Elko Oksana are ordered to arbitrate this action against defendant Tesla, Inc.  The court hereby stays the entire action pending resolution of the arbitration proceeding. 

(2) Defendant Tesla Insurance Services, Inc.’s Demurrer

Defendant Tesla Insurance Services, Inc. demurs to all causes of action by plaintiffs Vladimir Semenov and Elko Oksana.  Above, the court ordered a stay of this entire action.  The court will therefore vacate the hearing on this demurrer.

The hearing on defendant Tesla Insurance Services, Inc.’s demurrer is vacated.