Judge Christopher K. Lui, Case Number: 23STCV04681, Date: 2024-02-06 Tentative Ruling

Judge: Christopher K. Lui, Case: 23STCV04681, Date: 2024-02-06 Tentative Ruling

Case Number: 23STCV04681 Hearing Date: February 6, 2024 Dept: 76

Pursuant to California Rule of Court 3.1308(a)(1), the Court does not desire oral argument on the motion addressed herein. Counsel must contact the staff in Department 76 to inform the Court whether they wish to submit on the tentative, or to argue the matter. As required by Rule 3.1308(a), any party seeking oral argument must notify ALL OTHER PARTIES and the staff of Department 76 of their intent to appear and argue.

Notice to Department 76 may be sent by email to smcdept76@lacourt.org or telephonically at 213-830-0776.

Per Rule of Court 3.1308, if notice of intention to appear is not given, the Court may adopt the tentative ruling as the final ruling.

Plaintiffs allege that a Tesla salesperson misrepresented that the 2023 Tesla Model Y would be equipped with parking sensors, but it was in fact, not.

Defendant Tesla, Inc. moves to compel arbitration and to stay this action.

TENTATIVE RULING

Defendant Tesla, Inc.’s motion to compel arbitration and stay this action is GRANTED. Per Defendant’s stipulation, Defendant is to pay the filing fee attributable to the initiation of arbitration.

The Court sets a status conference re: initiation of arbitration for June 7, 2024 at 8:30 a.m.

ANALYSIS

Motion To Compel Arbitration and Stay Action

Request For Judicial Notice

Defendant’s request that the Court take judicial notice of the First Amended Complaint filed in this action is GRANTED per Evid. Code, § 452(d)(court records).

Discussion

Defendant Tesla, Inc. moves to compel arbitration and to stay this action.

Existence of Agreement To Arbitrate

Under California law, arbitration agreements are valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract. (Blake v. Ecker (2001) 93 Cal.App.4th 728, 741 overruled on other grounds by Le Francois v. Goel (2005) 35 Cal.4^th 1094.) A party petitioning to compel arbitration has the burden of establishing the existence of a valid agreement to arbitrate and the party opposing the petition has the burden of proving, by a preponderance of the evidence, any fact necessary to its defense. (Banner Entertainment, Inc. v. Superior Court (1998) 62 Cal.App.4th 348, 356-57.)

Plaintiffs argue that Defendant’s motion does not accurately reference the Order Agreement. However, the Court quotes below the exact language found in the Agreement attached to Plaintiffs’ Complaint, which they admit to having signed and which governs this dispute.

Plaintiffs attach the subject Order Agreement for the purchase of the 2023 Tesla Model Y as Exhibit A, thereby admitting that they agreed to its terms. The Arbitration Agreement is contained at Page 3 therein:

Agreement to Arbitrate. Please carefully read this provision, which applies to any dispute between you and Tesla, Inc. and its a¿liates, (together “Tesla”).

If you have a concern or dispute, please send a written notice describing it and your desired resolution to resolutions@tesla.com.

If not resolved within 60 days, you agree that any dispute arising out of or relating to any aspect of the relationship between you and Tesla will not be decided by a judge or jury but instead by a single arbitrator in an arbitration administered by the American Arbitration Association (AAA) under its Consumer Arbitration Rules. This includes claims arising before this Agreement, such as claims related to statements about our products. You further agree that any disputes related to the arbitrability of your claims will be decided by the court rather than an arbitrator, notwithstanding AAA rules to the contrary.

To initiate the arbitration, you will pay the filing fee directly to AAA and we will pay all subsequent AAA fees for the arbitration, except you are responsible for your own attorney, expert, and other witness fees and costs unless otherwise provided by law. If you prevail on any claim, we will reimburse you your filing fee. The arbitration will be held in the city or county of your residence. To learn more about the Rules and how to begin an arbitration, you may call any AAA o¿ce or go to www.adr.org.

The arbitrator may only resolve disputes between you and Tesla, and may not consolidate claims without the consent of all parties. The arbitrator cannot hear class or representative claims or requests for relief on behalf of others purchasing or leasing Tesla vehicles. In other words, you and Tesla may bring claims against the other only in your or its individual capacity and not as a plaintiff or class member in any class or representative action. If a court or arbitrator decides that any part of this agreement to arbitrate cannot be enforced as to a particular claim for relief or remedy, then that claim or remedy (and only that claim or remedy) must be brought in court and any other claims must be arbitrated.

If you prefer, you may instead take an individual dispute to small claims court.

You may opt out of arbitration within 30 days after signing this Agreement by sending a letter to: Tesla, Inc.; P.O. Box 15430; Fremont, CA 94539-7970, stating your name, Order Number or Vehicle Identification Number, and intent to opt out of the arbitration provision. If you do not opt out, this agreement to arbitrate overrides any different arbitration agreement between us, including any arbitration agreement in a lease or ¿nance contract.

(Bold emphasis and underlining added.)

The claims for negligent misrepresentation and violation of CLRA, Bus. & Prof. Code § 17200 and 17500 relate to the representations made by a Tesla sales representative, and thus come within the scope of arbitrable claims, i.e., an aspect of the relationship between Plaintiffs and Tesla. Indeed, the arbitration clause specifically provides that it “includes claims arising before this Agreement, such as claims related to statements about our products.”

The Court first addresses Plaintiffs’ argument that they opted-out of the arbitration agreement. Attached to Exhibit A of the Opposition a copy of Certified mail dated January 19, 2023, of a letter dated January 19, 2023, which is a pre-litigation letter sent on LEMONLAWGURU.COM letterhead. There is a request to opt out set forth on Page 2. However, as argued by Defendant in the opposition, the Order Agreement was electronically accepted on December 6, 2022, giving Plaintiffs until January 5, 2023 to opt out. The January 19, 2023 attempt to opt out was untimely. Further, there is no indication that the letter was mailed to the address specified in the Arbitration Agreement. As such, Plaintiffs’ attempt to opt out of the arbitration clause is ineffective.

The Court next addresses Plaintiffs’ argument that, because they are alleging that the contract was obtained by fraud in the inducement, their claims are not subject to arbitration because the contract, including the arbitration clause, is voidable.

Fraud in the inducement is a subset of the tort of fraud. It “occurs when ‘ “the promisor knows what he is signing but his consent is induced by fraud, [*295] mutual assent is present and a contract is formed, which, by reason of the fraud, is voidable.” ’ ” (Citations omitted .)

(Hinesley v. Oakshade Town Center (2005) 135 Cal.App.4th 289, 294-95.)

Because Plaintiffs only assert fraud in the inducement as to the entire contract, this does not render the arbitration clause unenforceable:

As we explained, the central rationale of Prima Paint was that an arbitration clause is separable from other portions of a contract, such that fraud in the inducement relating to other contractual terms does not render an arbitration clause unenforceable, even when such fraud might justify rescission of the contract as a whole. (Citation omitted.) “By entering into the arbitration agreement, the parties established their intent that disputes coming within the agreement’s scope be determined by an arbitrator rather than a court; this contractual intent must be respected even with regard to claims of fraud in the inducement of the contract generally.” (Citation omitted.) In light of Prima Paint and its progeny, we disapprove Bertero v. Superior Court, supra, 216 Cal. App. 2d 213, to the extent it holds that a party’s assertion of the invalidity of an entire contract categorically waives that party’s right to arbitrate pursuant to a provision in that contract.

(St. Agnes Medical Center v. PacifiCare of California (2003) 31 Cal. 4th 1187, 1199.)

Finally, Plaintiffs argue that, pursuant to the McGill rule, this matter cannot be subject to arbitration because Plaintiffs seek injunctions for the benefit of the general public.

In McGill, supra, 2 Cal.5th 945, a credit card account holder filed a class action against the issuing bank alleging claims under the CLRA, UCL, and the false advertising law (Bus. & Prof. Code, § 17500 et seq.) for deceptive practices in offering a “‘credit protector’” insurance plan. The complaint sought money damages, restitution, and an injunction prohibiting the bank “from continuing to engage in its allegedly illegal and deceptive practices.” (McGill, at p. 953.) The Supreme Court noted such “public injunctive relief, i.e., injunctive relief that has the primary purpose and effect of prohibiting unlawful acts that threaten future injury to the general public,” is among “the statutory remedies available for a violation of” the CLRA, the UCL, and the false advertising law. (McGill, at p. 951.)

The bank in McGill petitioned to compel the account holder to arbitrate her claims on an individual basis based on an arbitration clause in the customer account agreement. The arbitration clause required arbitration of “‘All Claims … ,’” and stated, “‘Claims and remedies sought as part of a class action, private attorney general or other representative action are subject to arbitration on an individual (non-class, non-representative) basis, and the arbitrator may award relief only on an individual (non-class, non-representative) basis.’ … ‘The arbitrator will not award relief for or against anyone who is not a party. If you or we require arbitration of a Claim, neither you, we, nor any other person may pursue the Claim in arbitration as a class action, private attorney general action or other representative action, nor may such Claim be pursued on your or our behalf in any litigation in any court.’” (McGill, supra, 2 Cal.5th at p. 952, italics added.)

The Supreme Court identified the issue in McGill as “whether the arbitration provision is valid and enforceable insofar as it purports to waive McGill's right to seek public injunctive relief in any forum.” (McGill, supra, 2 Cal.5th at p. 956.) The high court concluded the arbitration clause had such a sweeping preclusive effect across all fora because the clause barred McGill from pursuing “‘Claims and remedies’” on a class or representative basis in both arbitration and “‘in any litigation in any court.’” (Id. at p. 952.) Having identified the issue, the court ruled the arbitration provision was “invalid and unenforceable under California law” precisely because “it purports to waive McGill's statutory right to seek [public injunctive] relief.” (Id. at p. 961.)

(Mejia v. DACM Inc. (2020) 54 Cal.App.5th 691, 598.)

Here, the subject arbitration clause would require that claims for a public injunction be litigated in courts, and thus does not purport to waive Plaintiffs’ right to seek public injunctive relief in any forum:

(Arbitration Agreement, Page 3 [bold emphasis and underlining added.)

As such, the McGill rule does not invalidate the subject arbitration agreement.

Moreover, the Prayer for Relief in the 1AC does not even seek injunctive relief which may be considered a public injunction. (See 1AC, Page 12.) As such, there is nothing for this Court to even sever from the arbitration.

Because Plaintiffs have not demonstrated that the arbitration agreement is unconscionable, Plaintiffs have not shown that it should not be enforced.

As such, the motion to compel arbitration and stay this action is GRANTED. Per Defendant’s stipulation, Defendant is to pay the filing fee attributable to the initiation of arbitration.

The Court sets a status conference re: initiation of arbitration for June 7, 2024 at 8:30 a.m.