Judge: Daniel S. Murphy, Case: 24STCV13054, Date: 2024-10-21 Tentative Ruling

Case Number: 24STCV13054    Hearing Date: October 21, 2024    Dept: 32

BACKGROUND

            On May 23, 2024, Plaintiff Walter Salazar filed this action against Defendant Hyundai Motor America, asserting causes of action for breach of warranty under the Song-Beverly Act.

            On July 1, 2024, Defendant filed the instant motion to compel arbitration. Plaintiff filed his opposition on October 8 2024. Defendant filed its reply on October 14, 2024.

LEGAL STANDARD

The Federal Arbitration Act (FAA) states that “[a] written provision in any . . . contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction . . . shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” (9 U.S.C. § 2.) The term “involving commerce” is interpreted to mean simply “affecting commerce” to give the FAA the broadest reach possible, and does not require a transaction that is actually “within the flow of interstate commerce.” (See Allied-Bruce Terminix Co. v. Dobson (1995) 513 U.S. 265, 273-74; Citizens Bank v. Alafabco, Inc. (2003) 539 U.S. 52, 56.) Moreover, parties may agree to apply the FAA notwithstanding any effect on interstate commerce. (Victrola 89, LLC v. Jaman Properties 8 LLC (2020) 46 Cal.App.5th 337, 355.)

“On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party to the agreement refuses to arbitrate that controversy, the court shall order the petitioner and the respondent to arbitrate the controversy if it determines that an agreement to arbitrate the controversy exists….” (Code Civ. Proc, § 1281.2.) “The party seeking arbitration bears the burden of proving the existence of an arbitration agreement, and the party opposing arbitration bears the burden of proving any defense, such as unconscionability.” (Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 236.)

DISCUSSION

I. The Arbitration Provisions at Issue

            Defendant first relies on an arbitration provision in the vehicle owner’s manual, which states the following:

“If you purchased or leased your Hyundai vehicle in the State of California, you and we 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, use of your vehicle, the vehicle warranty . . . shall be resolved by binding arbitration.

. . .

IF YOU PURCHASED OR LEASED YOUR VEHICLE IN CALIFORNIA, YOUR WARRANTY IS MADE SUBJECT TO THE TERMS OF THIS BINDING ARBITRATION PROVISION. BY ACCEPTING BENEFITS UNDER THIS WARRANTY, INCLUDING HAVING ANY REPAIRS PERFORMED UNDER WARRANTY, YOU AGREE TO BE BOUND BY THESE TERMS.”

(Ameripour Decl., Ex. 3, § 4.)

Alternatively, Defendant relies on a Bluelink Connected Services Agreement (CSA) that Plaintiff signed in May 2021 when enrolling his vehicle in Hyundai’s Bluelink service. (Rao Decl. ¶¶ 4-6, Ex. 1, 2.) The CSA contains an arbitration provision stating the following:

“Hyundai and you agree to arbitrate any and all disputes and claims between us arising out of or relating to this Agreement, Connected Services, Connected Services Systems, Service Plans, your Vehicle, use of the sites, or products, services, or programs you purchase . . . This agreement to arbitrate is intended to be broadly interpreted and to make all disputes and claims between us subject to arbitration to the fullest extent permitted by law.

. . .

The agreement to arbitrate otherwise includes, but is not limited to: claims based in contract, tort, warranty, statute, fraud, misrepresentation or any other legal theory; claims that arose before this or any prior Agreement.”

(Rao Decl., Ex. 2, § 15(C), emphasis added.)

            Both arbitration provisions facially cover the claims currently being asserted in Plaintiff’s complaint.

II. Authentication

Plaintiff argues that the warranty cannot be authenticated by counsel’s declaration and that Defendant has no evidence Plaintiff signed the CSA. However, “[f]or purposes of a petition to compel arbitration, it is not necessary to follow the normal procedures of document authentication.” (Condee v. Longwood Management Corp. (2001) 88 Cal.App.4th 215, 218.) “The statute does not require the petitioner to introduce the agreement into evidence. A plain reading of the statute indicates that as a preliminary matter the court is only required to make a finding of the agreement's existence, not an evidentiary determination of its validity.” (Id. at p. 219.)

Plaintiff does not dispute the existence of the warranty or the CSA, or their respective terms, including the arbitration provisions. Plaintiff presents no evidence with his opposition and therefore fails to challenge the existence of the agreements or his awareness of them. In fact, as discussed further below, Plaintiff concedes the existence of the warranty because his claims depend on it. Thus, the Court finds that an arbitration agreement exists.

III. Equitable Estoppel

“[T]he ‘fundamental point’ of using equitable estoppel to compel arbitration is to prevent a party from taking advantage of a contract's substantive terms while avoiding those terms requiring arbitration.” (Ford Motor Warranty Cases (2023) 89 Cal.App.5th 1324, 1336.)

That is precisely what Plaintiff attempts to do here. Plaintiff bases his complaint on the express warranty provided by Defendant (Compl. ¶ 12) while seeking to avoid the arbitration provision within the same warranty. Plaintiff does not dispute that the warranty upon which he sues contains an arbitration agreement. Plaintiff is estopped from disclaiming the existence of the warranty and its terms.

IV. Mutual Assent

Plaintiff argues that the warranty and CSA are not contracts because there is no indication that Plaintiff was informed of them, read them, or signed them. However, Plaintiff has no evidence that he was unaware of the agreements or did not consent to them. Plaintiff does not dispute that he registered for Bluelink in May 2021 and had to sign the CSA as a result. Furthermore, as discussed above, Plaintiff is estopped from disclaiming the existence of the warranty.

As to signatures, “the writing memorializing an arbitration agreement need not be signed by both parties in order to be upheld as a binding arbitration agreement.” (Serafin v. Balco Properties Ltd., LLC (2015) 235 Cal.App.4th 165, 176.) “[I]t is not the presence or absence of a signature which is dispositive; it is the presence or absence of evidence of an agreement to arbitrate which matters.” (Banner Entertainment, Inc. v. Superior Court (1998) 62 Cal.App.4th 348, 361.) As discussed above, Defendant has established the existence of an arbitration agreement, which Plaintiff has not challenged.  

V. Unconscionability

Unconscionability has both a procedural and a substantive element. (Aron v. U-Haul Co. of California (2006) 143 Cal.App.4th 796, 808.) Both elements must be present for a court to invalidate a contract or clause. (Ibid.) However, the two elements need not be present in the same degree; courts use a sliding scale approach in assessing the two elements. (Carbajal v. CWPSC, Inc. (2016) 245 Cal.App.4th 227, 242.)

a. Procedural Unconscionability

Procedural unconscionability “focuses on two factors: ‘oppression’ and ‘surprise.’ ‘Oppression’ arises from an inequality of bargaining power which results in no real negotiation and ‘an absence of meaningful choice.’ ‘Surprise’ involves the extent to which the supposedly agreed-upon terms of the bargain are hidden in the prolix printed form drafted by the party seeking to enforce the disputed terms.” (Zullo v. Superior Court (2011) 197 Cal.App.4th 477, 484, internal citations omitted.)

            Plaintiff argues that the agreements are procedurally unconscionable because they were presented as take-it-or-leave-it with no negotiation. However, the warranty contains an opt-out provision, and the Bluelink service was optional. Moreover, Plaintiff did not have to purchase the subject vehicle. The arbitration provision in the respective agreements is clearly labeled and not buried or unintelligible. Thus, the Court finds no procedural unconscionability.

b. Substantive Unconscionability

Substantive unconscionability focuses on the actual terms of the agreement and evaluates whether they create overly harsh or one-sided results as to shock the conscience. (Suh v. Superior Court (2010) 181 Cal.App.4th 1504, 1515.)

            Plaintiff argues that the arbitration provision improperly impedes his rights under the Song-Beverly Act. However, arbitration merely addresses the forum in which disputes are resolved. It does not waive any statutory rights. Plaintiff cites cases disapproving of requiring consumers to litigate Song-Beverly claims in out-of-state forums because that would impede their statutory rights. (Opp. 11:11-17.) The arbitration here does no such thing. The arbitration would take place in California, waiving no rights under the Song-Beverly Act. Thus, the Court finds no substantive unconscionability.

            In sum, the Court finds that Defendant has established the existence of an arbitration agreement and that Plaintiff has not presented evidence rebutting that showing. Additionally, Plaintiff is equitably estopped from disclaiming the arbitration provision in the warranty. Lastly, Plaintiff has failed to show that either contract is unconscionable. Thus, arbitration is warranted.

CONCLUSION

            Defendant’s motion to compel arbitration is GRANTED. The case is stayed in its entirety pending the outcome of arbitration.