Judge: Christian R. Gullon, Case: 24PSCV01011, Date: 2024-08-07 Tentative Ruling

Case Number: 24PSCV01011    Hearing Date: August 7, 2024    Dept: O

Tentative Ruling

Defendant Hyundai Motor America’s (“Defendant”) MOTION TO COMPEL BINDING ARBITRATION is GRANTED.

Background

This is a lemon law case.

On April 2, 2024, Plaintiff Ben Su filed suit against Defendants HYUNDAI MOTOR AMERICA, a California Corporation (“Defendant”) and PUENTE HILLS HYUNDAI, LLC, a California Limited Liability Company d/b/a PUENTE HILLS HYUNDAI (“Dealership”) for:

On May 3, 2024, Defendant filed its answer.

On May 15, 2024, the Dealership filed its answer.

On June 18, 2024, Defendant filed the instant motion.

On July 25, 2024, Plaintiff filed his opposition.

Legal Standard

A petition to compel arbitration must allege both (1) a “written agreement to arbitrate” the controversy,[1] 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.) 

Discussion[2]

The issue presented is whether an arbitration provision found in the warranty booklet.

As clearly established by Defendant’s citations, the rules governing contract law guide motions to compel arbitration. (See e.g., Motion p. 7, 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. 7, quoting (9 U.S.C. § 2) [The FAA applies to an arbitration agreement that is “in a contract.”]; Motion 7:18-19 [“The parties contractually agreed that the FAA would govern this agreement…”]; see also 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….’”]; see also 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.”]; see also 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.’”]; see also 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 and underline added.)

Here, Plaintiff himself is stating there is an obvious contract by judicial admission. Indeed, the complaint is one based on violation of an express warranty based upon a contract that Plaintiff voluntarily and with knowledge entered.

-        “These causes of action arise out of the warranty obligations of HMA in connection with a motor vehicle for which HMA entered into a written warranty contract with Plaintiff(s).” (Complaint ¶5, emphasis and underline added)

-        “On September 15, 2022, Plaintiff purchased a 2022 Hyundai IONIQ 5, having VIN No.: KM8KRDAF6NU108630 ("the Subject Vehicle”). These causes of action arise out of warranty and repair obligations of HYUNDAI MOTOR AMERICA in connection with a vehicle that Plaintiff purchased and for which HYUNDAI MOTOR AMERICA issued a written warranty (Complaint ¶9, emphasis and underline added).

-        “DURING these pre-sale communications, I asked about the manufacturer’s warranty. Cardinaleway Hyundai of El Monte assured me that the Subject Vehicle was already warranted under HMA’s express warranty.” (Su Decl., ¶5, emphasis added.)[3]

For that reason—in that Plaintiff does not dispute actual notice of the warranty contract—the Plaintiff’s reliance on Norcia v. Samsung Telecommunications Am. LLC, 845 F.3d 1279 (9th Cir. 2017) is misplaced. There, the plaintiff learned of an express warranty that contained an arbitration provision after purchasing his phone and signing the customer agreement and taking the box and contents home.

To the extent that Plaintiff argues that there is not a valid contract because “Defendant categorically failed to set-forth any evidence showing an agreement to arbitrate exists between Plaintiff and Defendant” (Opp. p. 6:24-25), that argument fails for two reasons. 

First, because a provision within a contract is not read or understood by the nondrafting party does not justify a refusal to enforce it. (Gutierrez v. Autowest, Inc. (2003) 114 Cal.App.4th 77, 88.)

Second, California law recognizes that a drafting party “[is] under no obligation to highlight the arbitration clause of its contract, nor [is] it required to specifically call that clause to [the nondrafting party’s] attention.” (Sanchez v. Valencia Holding Co., LLC (2015) 61 Cal.4th at 899, 914.)

To the extent that Plaintiff may argue there is not a valid contract because he was not provided with the warranty booklet, his declaration inherently contends other. (See Su Decl., ¶6 [“I was never given notice ...that …a Warranty booklet that was presumably delivered to me….”, emphasis added.)

To the extent that Plaintiff argues the agreement is unconscionable, that too fails.

As for both procedural and substantive unconscionability, Plaintiff largely relies upon Dougherty v. Roseville Heritage Partners (2020) 47 Cal.App.5th 93.) But Dougherty is factually distinguishable. There, the arbitration clause was inconspicuously buried at page 70 of the contract, and it permitted the defendant to modify the agreement on 30 days’ notice, and if the resident did not agree, they would be required to move out, and it also precluded the signors from pursuing punitive damages or attorney’s fees under the Elder Abuse Act.

Here, the facts are distinguishable on two fronts. First, the arbitration provision here is fully conspicuous. Even if the booklet is 50 pages, the arbitration provision is set out in a separate section in the handbook, is identified in the Table of Contents, is clearly marked, not hidden, and not ambiguous. Thus, a purchaser reading through the Warranty Handbook to assess the scope of the warranties they were receiving at the time of purchase would as easily be able to find the arbitration provisions as the warranty for parts of their vehicle. Second, even as to arguments about substantive unconscionability, unlike the agreement in Doughtery, here, the agreement contains an explicit opt out provision, there is no restriction on recoverable damages, any limits on discovery will apply equally to HMA and Plaintiff, and HMA will pay for all arbitration costs except for the initial filing fee of $250.

Ultimately, should there be any doubts as to the enforceability of the arbitration agreement, any doubts “are to be resolved in favor of sending the parties to arbitration.” (United Transp. Union v. Southern Cal. Rapid Transit Dist. (1992) 7 Cal.App.4th 804, 808); see also Lamps Plus, Inc. v. Varela (2019) 587 U.S. __ [139 S.Ct. 1407, 1418] [“ambiguities about the scope of an arbitration agreement must be resolved in favor of arbitration.”]; Chiron Corp. v. Ortho Diagnostic Systems, Inc., 207 F.3d 1126, 1131 (9th Cir. 2000) [“little doubt that the dispute [was] subject to arbitration” where agreement covered “[a]ny dispute, controversy or claims”]; AT&T Technologies, Inc. v. Communications Workers of Amer., 475 U.S. 643, 650 (1986) [“only the most forceful evidence” can overcome contract enforcement.].)

Thus, absent meeting its burden to establish a defense by a preponderance of the evidence (Pinnacle Museum Towers Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 246-247), that leaves no doubts that the parties are to arbitrate the matter.

Conclusion

Based on the foregoing—as Plaintiff is suing upon a written contract that he, by judicial admission, assented to and that said warranty was provided by HMA (as the direct provider) and he has failed to meet her burden of establishing both procedural and substantive unconscionability—the motion is GRANTED.[4]