Judge: Christian R. Gullon, Case: 24PSCV01352, Date: 2024-12-04 Tentative Ruling

Case Number: 24PSCV01352    Hearing Date: December 4, 2024    Dept: O

Tentative Ruling

DEFENDANT’S MOTION TO COMPEL BINDING ARBITRATION is GRANTED. A proposed order has been filed.

Background

This is a lemon law case.

On April 26, 2024, Plaintiff Veer Management Company Inc. filed suit against Defendants HYUNDAI MOTOR AMERICA, INC., a California Corporation (“Hyundai” or “HMA” or “Defendant”); CARDINALE AUTOMOTIVE GROUP-ARIZONA, INC., an Arizona Corporation dba CARDINALWAY HYUNDAI OF EL MONTE for various SBA violations arising from Plaintiff’s 2022 purchase of a new 2022 Hyundai Sonata, which suffers from defects and nonconformities including, but not limited to, engine, brake, and battery defects.

On June 4, 2024, Defendants Hyundai and Cardinale filed an answer.

On July 29, Hyundai filed the instant motion.

On October 4, 2024, Plaintiff filed its opposition.

On November 25, 2024, Defendant filed its reply.

Discussion

Defendant seeks to compel arbitration based upon an arbitration provision found in Plaintiff’s Owner’s Handbook & Warranty Information (“Warranty”). In the alternative, binding arbitration must be compelled under the Bluelink Connected Services Agreement (“CSA”). (Motion p. 1.)

For purposes of this motion, the court need only focus on the Warranty.[1]

Starting on page 11 of the Warranty, the page indicates in large and bold font that the proceeding information pertains to “Hyundai Warranty Information.” (Ameripour Decl., Ex. 3, p. 16 of 33 of PDF.) On pages 12-14 of Plaintiff’s Warranty is a section titled “BINDING ARBITRATION FOR CALIFORNIA VEHICLES ONLY”.  (Ameripour Decl., Ex. 3, p. 17 of 33 of PDF.)[2] The binding arbitration provision of the Warranty provides:

PLEASE READ THIS SECTION IN ITS ENTIRETY AS IT AFFECTS YOUR RIGHTS THIS SECTION DOES NOT PRECLUDE YOU FROM FIRST PURSUING ALTERNATIVE DISPUTE RESOLUTION THROUGH BBB AUTO LINE AS DESCRIBED IN THE “ALTERNATIVE DISPUTE RESOLUTION” PROVISION IN SECTION 3 OF THIS HANDBOOK.  If you purchased or leased your Hyundai vehicle in the State of California, you and we, Hyundai Motor America, each agree that any claim or disputes between us (including between you and any of our affiliated companies) related to or arising out of your vehicle purchase, advertising for the vehicle, use of your vehicle, the performance of the vehicle, any service relating to the vehicle, the vehicle warranty, representations in the warranty, or the duties contemplated under the warranty, including without limitation claims related to false or misleading advertising, unfair competition, breach of contract or warranty, the failure to conform a vehicle to warranty, failure to repurchase or replace your vehicle, or claims for a refund or partial refund of your vehicle's purchase price (excluding personal injury claims), but excluding claims brought under the Magnuson-Moss Warranty Act, shall be resolved by binding arbitration at either your or our election, even if the claim is initially filed in a court of law.

Given Plaintiff have purchased his vehicle in California, is bringing this action pursuant to this Warranty, and has alleged that repairs have been performed under the Warranty, the arbitration provision applies. Put differently, there would be no claims under Song-Beverly or warranty but for the existence of the Warranty provided to Plaintiffs by HMA. (Motion p. 13:1-3.)

In opposition, Plaintiff essentially argues that Defendant’s motion fails to present any evidence that the warranty booklet, let alone the arbitration terms, was presented to Plaintiffs prior to or at the time of lease. Nor does the Motion proffer any evidence that Plaintiffs ever read the arbitration provision, or that Plaintiffs consented to it.

The arguments, however, fails.

First, 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.) Even assuming some explicit notice about the warranty booklet, equitable estoppel applies to a written agreement containing an arbitration clause when a party must rely on the terms of the written agreement in asserting its claims as Plaintiff is very clearly doing here.  “A litigant may not assert claims based on a contract while simultaneously arguing that an arbitration clause in that contract is ineffective.” (Stiner v. Brookdale Senior Living, Inc., 810 F. App'x 531, 534 (9th Cir. 2020);[3]SM Tuscany, LLC v. Superior Court, 193 Cal. App. 4th 1222, 1239- 40 (2011).) As the District Court recently explained in Mendoza v. Hyundai Motor Am. (C.D. Cal. Dec. 15, 2022) 2022 U.S. Dist. LEXIS 226972, a plaintiff “cannot selectively ignore the Warranty’s arbitration provision while knowingly exploiting the Warranty’s benefits.”

Second, to the extent that Plaintiff argues the SBA’s anti-waiver provision precludes arbitration because it would deprive Plaintiff of its fundamental right to an action under Civ. Code § 1794 (Opp. p. 11), that argument contradicts precedent allowing for arbitration. (See Reply p. 8, citing to Sanchez, supra; Felisilda v. FCA US LLC (2020) 53 Cal.App.5th 486.)

Third, to the extent that Plaintiff argues that Defendant has waived arbitration by actively litigation the case (Opp. p. 12), Plaintiff’s authority requiring a showing of prejudice to the plaintiff is no longer applicable law. Prior to the United States Supreme Court ruling that prejudice does not need to be shown in an arbitration agreement to establish waiver in Morgan v. Sundance, Inc. (2022) 596 U.S. 411 (Morgan), California courts followed the federally established rule requiring such a showing. Because the U.S. Supreme Court has rejected this requirement, the California Supreme Court follows suit in Quach v. California Commerce Club, Inc. (2024) 16 Cal.5th 562 by overruling the additional requirement of finding prejudice in FAA-based arbitration contracts. Notwithstanding, the court docket does not reflect Defendant’s intention of waiving arbitration by merely producing document production on October 4, 2024 per the court’s order.  

Fourth, to the extent that Plaintiff argues that arbitration should be compelled as it would lead to conflicting outcomes, not necessarily.[4] Defendant argues for an entire stay pursuant to 9 U.S.C. § 3, as well as Code of Civil Procedure § 1281.4, which provides that “[i]f a court of competent jurisdiction, whether in this State or not, has ordered arbitration of a controversy which is an issue involved in an action or proceeding pending before a court of this State, the court in which such action or proceeding is pending shall, upon motion of a party to such action or proceeding, stay the action or proceeding until an arbitration is had in accordance with the order to arbitrate….” In opposition, Plaintiff relies upon CCP sections 1281.2 subdivision (c),[5] which provides, in relevant part, that a court need not compel arbitration if:

A party to the arbitration agreement is also a party to a pending court action or special proceeding with a third party, arising out of the same transaction or series of related transactions and there is a possibility of conflicting rulings on a common issue of law or fact.

Simply put, under section 1281.2 the court may, in its discretion, refuse to compel arbitration or may stay arbitration where “there is a possibility of conflicting rulings on a common issue of law or fact.” (Henry v. Alcove Investment, Inc. (1991) 233 Cal.App.3d 94, 100.)[6] But Henry is distinguishable and rather suports a finding to compel arbitration and stay the proceedings. In Henry, the plaintiff was an elderly man with certain ailments. The complaint alleged that certain defendants working with mortgage loan brokers defraud the plaintiff out of thousands of dollars through phony home improvement transactions by obtaining or forging the plaintiff’s signature on various blank contracts and loan documents then filling in these documents to reflect much higher amounts than the plaintiff agreed to pay for the home improvements. (Id. at p. 97.) Based on those facts, the appellate court affirmed the trial court’s ruling of staying arbitration. In doing so, the court reasoned that there was an “obvious” possibility of conflicting rulings on a common issue of fact or law because the arbitrator could find the individual who approached the plaintiff or other individual defendants did not defraud the plaintiff while at trial the trier of fact could find there was fraud committed by the one defendant or other defendants. (Id. at p. 101.) Here, the facts are not as complicated (i.e., the “nature of the controversy”, see CV Starr, infa fn. 7) nor entails such a “connection” between the individual defendants and the entity defendant. (Id. at p. 102.)[7] While there may be conflicting rulings (Opp. p. 14:16-18), such a possibility is not a ground for denying or staying arbitration under the FAA. (Id. at p. 100.) Therefore, the court determines arbitration is appropriate under these facts.

Fifth, to the extent that Plaintiff cites to Norcia v. Samsung Telecommunications America, LLC (9th Cir. 2017) 845 F.3d 1279, Norcia does not apply because Norcia did not bring any claims for breach of warranty. (Id. at p.1283.)

All in all, as it is disingenuous to allow Plaintiff to rely on the Warranty received the time of sale as a basis for this action but then avoid the binding arbitration provision in the Warranty by claiming there is no agreement to arbitrate thereunder, there is a valid arbitration agreement via application of equitable estoppel principle. (See also Opp. p. 13:9-11 [“It is clear the claims against Defendant (Song Beverly causes of action (causes of action 1-4) arise out of the same transaction as those against Hyunda [sic] of El Monte.”], further evidencing warranty claims against Hyundai arise from the purchase of the vehicle.)

Conclusion

Based on the foregoing, the motion is granted.