Judge Christian R. Gullon, Case Number: 23PSCV02869, Date: 2024-03-13 Tentative Ruling

Judge: Christian R. Gullon, Case: 23PSCV02869, Date: 2024-03-13 Tentative Ruling

Defendant Hyundai Motor America’s (“Defendant”) MOTION TO COMPEL BINDING ARBITRATION is DENIED for lack of mutual assent.

On September 18, 2023, Plaintiff SARA PINEDA filed suit against Defendant for (1) Violation of the Song-Beverly Act – Breach of Express Warranty.

Defendant brings forth the motion pursuant to California Code of Civil Procedure section 1281 et seq. (Motion p. 1.)

A petition to compel arbitration must allege both (1) a “written agreement to arbitrate” the controversy, and (2) that a party to that agreement “refuses to arbitrate” the controversy. (Code Civ. Proc., § 1281.2.) Once this is done, the burden shifts to the opposing party to demonstrate the falsity of the purported agreement. (Condee v. Longwood Management Corp. (2001) 88 Cal.App.4th 215, 218–219.) In ruling on a motion to compel arbitration, the court must first determine whether the parties actually agreed to arbitrate the dispute, and general principles of California contract law help guide the court in making this determination. (Mendez v. Mid-Wilshire Health Care Center (2013) 220 Cal.App.4th 534, 541.) A petition to compel arbitration is a suit in equity to compel specific performance of a contract. (Frog Creek Partners, LLC. v. Vance Brown, Inc. (2012) 206 Cal.App.4th 515, 532.)

The issue presented is whether an arbitration provision found in the Owner’s Handbook & Warranty Information (“Handbook”) located in the glovebox of the vehicle should be enforced.[1]

As clearly established by Defendant’s citations, the rules governing contract law guide motions to compel arbitration. (See e.g., Motion p. 3, quoting AT&T Mobility LLC v. Concepcion (2011) 563 U.S. 333, 339, emphasis added [“fundamental principle that arbitration is a matter of contract.”]; see Motion p. 5:23-26, quoting (9 U.S.C. § 2) [The FAA applies to an arbitration agreement that is “in a contract.”]; Motion 6:5-6 [“The parties contractually agreed that the FAA would govern this agreement…”]; Motion p. 7:6-7, quoting Turtle Ridge Media Group, Inc. v. Pacific Bell Directory (2006) 140 Cal.App.4th 828, 832, emphasis added [“States are obligated ‘to treat arbitration agreements the same as other types of contracts….’”]; Motion p. 7:16-18, quoting Comedy Club, Inc. v. Improv W. Assocs., 553 F.3d 1277, 1284 (9th Cir. 2009) (internal quotation marks omitted) [“[W]here the contract contains an arbitration clause, there is a presumption of arbitrability.”]; Motion p. 9:22-25, quoting Felisilda v. FCA US LLC (2020) 53 Cal.App.5th 486, 496, emphasis added [“‘The fundamental point is that “a party is not entitled to make use of [a contract containing an arbitration clause] as long as it worked to [his or] her advantage, then attempt to avoid its application in defining the forum in which [his or] her dispute ... should be resolved.’”]; Motion p. 10:15-18, citing Metalclad Corp. v. Ventana Environmental Organizational Partnership (2003) 109 Cal.App.4th 1705, 1714, emphasis added [“Plaintiff’s Claims are necessarily inherently inseparable from the “underlying contract obligations”].)

Turning to contract principles, in a bilateral contract, the promisor and promisee exchange promises, whereby the promises represent binding legal obligations. (Larwin-Southern California, Inc. v. JGB Investment Co. (1979) 101 Cal.App.3d 626, 637.) This requirement of binding legal obligations is generally referred to as the doctrine of mutuality of obligation. As articulated by the California Supreme Court in Mattei v. Hopper (1958) 51 Cal.2d 119, “the contract to bind either party, both must have assumed some legal obligations . . . Or, if one of the promises leaves a party free to perform or to withdraw from the agreement at his own unrestricted pleasure, the promise is deemed illusory, and it provides no consideration.” (Id. at p. 122.) “If there is no evidence establishing a manifestation of assent to the ‘same thing’ by both parties, then there is no mutual consent to contract and no contract formation.” (Opp. p. 2, quoting Bowers v. Raymond J. Lucia Companies, Inc. (2012) 206 Cal.App.4th 724, 733.) Effectively, to assent to the terms of the agreement, a party must be aware of the contractual provisions she is assenting to. (See Opp. p. 2, Windsor Mills, Inc. v. Collins & Aikman Corp. (1972) 25 Cal.App.3d 987, 993 [“Hence, an offeree, regardless of apparent manifestation of his consent, is not bound by inconspicuous contractual provisions of which he was unaware, contained in a document whose contractual nature is not obvious.”], emphasis added.)

Here, the Handbook is not a contract because, (i) it sets forth no exchange of promises; (ii) does not identify the parties; (iii) does not bear signatures; and (iv) does not set forth the good/vehicle at issue, amongst other requirements. To the extent there is mutual assent, that is likely found within the sales contract entered into on December 28, 2021, wherein Plaintiff bought a 2020 Hyundai Elantra for a total price of approximately $36,495.68 from Patriot Hyundai of El Monte, which Defendant has not provided as an exhibit.

In addition to relying upon contract principles to argue that the arbitration provision found in the Handbook doesn’t apply, Plaintiff relies upon Norcia v. Samsung Telecommunications Am. LLC, 845 F.3d 1279 (9th Cir. 2017).

In Norcia, the plaintiff purchased a Samsung phone that came with a receipt which provided the order location, the plaintiff’s mobile number, the product identification number, and the contract end date. (Id. at p. 1282.) The receipt also stated that the plaintiff is agreeing to the Customer Agreement, but the “Customer Agreement did not reference Samsung or any other party. Norcia signed the Customer Agreement, and Verizon Wireless emailed him a copy.” (Ibid.) After signing the Customer Agreement and after the employee helped the employee transfer his contacts, the plaintiff took the box and contents home to unpack the remainder. The box contained a brochure, one section dedicated the express warranty that contained an arbitration provision. (Ibid.) After filing a class complaint alleging misrepresentation about storage capacity, etc., Samsung moved to compel arbitration. (Id. at pp. 1282-1283.) In affirming the trial court’s ruling to deny the motion, the Ninth Circuit reasoned “There is no dispute that [plaintiff] did not expressly assent to any agreement in the brochure. Nor did [plaintiff] sign the brochure or otherwise act in a manner that would show ‘his intent to use his silence, or failure to opt out, as a means of accepting the arbitration agreement.” (Id. at pp. 1285-1286.)

Similarly, here, the sales contract can be analogized to the receipt and the brochure within the box to the Handbook within the car. Neither employee—where the Samsung employee or the Hyundai salesperson—informed the purchaser (whether Norcia or Pineda) that the warranty is found within a separate writing. Accordingly, Defendant has not met its burden to establish that Plaintiff intended to assent to the Handbook terms.[2]

Thus, echoing the court in Norcia, Plaintiff was not informed about the Handbook upon signing the sales contract, Plaintiff did not receive the Handbook upon signing the sales contract, Plaintiff did not sign the Handbook, nor did Plaintiff otherwise act in a manner that would show her “intent to use [her] silence, or failure to opt out, as a means of accepting arbitration.” (Ibid.)

To the extent that Defendant argues that Norcia is inapposite because there the plaintiff there did not bring a warranty claim, the argument’s applicability is unclear. While the Norcia court did note that the “Norcia's complaint involves a non-warranty dispute. Thus, our analysis is governed by contract law—not warranty law,” (Id. at p. 1284), it is unclear as to how the two—contract law and warranty law—impart different rules. After all, as set out in CACI jury instruction 3201 and Civil Code Section 1793.2(d)(2), actions brought under the SBA for alleged breaches of an express warranties require a defendant's giving an express (written) warranty covering the vehicle and a defect (or defects) in the vehicle. In turn, express warranties are contractual nature. (See American Suzuki Motor Corp. v. Superior Court (1995) 37 Cal.App.4th 1291, 1295.) And as a lease is a contract, then that means that Plaintiffs’ cause of action breach of express warranties directly derives from the contract, which consequently requires contract interpretation to determine its applicability, validity, and scope.

To the extent that Defendant avers Plaintiff is estopped because her claims fundamentally rest on the warranty (Civil Code section 1589), the court disagrees that the exception applies. (Plaintiff’s opposition does not address estoppel.) As Plaintiff relies upon Norcia, the court turns to a section of the opinion that addresses estoppel:

An offeree's silence may also be treated as consent to a contract when the party retains the benefit offered. See Golden Eagle, 20 Cal.App.4th at 1386, 25 Cal.Rptr.2d 242; see also Cal. Civ. Code § 1589 (“A voluntary acceptance of the benefit of a transaction is equivalent to a consent to all the obligations arising from it, so far as the facts are known, or ought to be known, to the person accepting.”). In Golden Eagle, a couple received a renewal certificate from their insurance company, and retained the benefit of the renewed insurance policy without paying the premium. 20 Cal.App.4th at 1386, 25 Cal.Rptr.2d 242. The court held that in light of the existing relationship between the couple and the insurance company, the couple's retention of the renewal certification was “sufficient evidence of acceptance of the renewal policy” under California law. (Id. at p. 1285, emphasis added.)

In Golden Eagle, supra, the undisputed facts more specifically were that the insured “received a written notification from the [insurance company], informing them they were being ‘provid[ed] continuous insurance coverage.’ A bill for a deposit toward the premium for the renewal policy was enclosed. [The insured] understood from these documents the policy had been renewed and he was being billed for the new period of coverage. …. We also note [the insurance company’s] offer did not come from “out of the blue.” There was an existing relationship between [the insurance company] and the [the insured]. The [insured] knew the mobile home park was insured by [the insurance company].” (Golden Eagle, 20 Cal.App.4th at p. 1386, emphasis added and underline added.) Accordingly, based on (1) the written notification, (2) an understanding of the written document(s), and (3) the parties’ existing relationship, the appellate court determined that the totality of the facts was sufficient evidence of acceptance of the renewal policy. (Id. at p. 1387.)

Here, however, the arbitration agreement came “out of the blue.” There is no indication that Plaintiff knew of or understand that she would be bound to an arbitration agreement. To treat her silence, without the requisite showings above, would require this court to rewrite the principles that have long governed contracts jurisprudence, which this court will not and cannot do.

[1] For clarity, the initial burden, and Defendant’s burden, is to establish that a valid contract governs. (See Rosenthal v. Great W. Fin. Sec. Corp., 14 Cal.4th 394, 413, 58 Cal.Rptr.2d 875, 926 P.2d 1061 (1996) [The burden of proving the existence of an agreement to arbitrate by a preponderance of the evidence rests on the moving party].)

[2] Plaintiff also argues she cannot read Spanish and negotiated the sale of the vehicle in Spanish. However, the court is uncertain as to the persuasiveness of this argument as Plaintiff is not contended that the sales contract (which she presumably signed) was in English. To take her argument would then mean the sales contract itself is likely unenforceable. (Plus, there is no analysis as to unconscionability.)