Judge: Frank M. Tavelman, Case: 24NNCV02224, Date: 2024-12-27 Tentative Ruling

Case Number: 24NNCV02224    Hearing Date: December 27, 2024    Dept: A

PETITION TO COMPEL ARBITRATION

NOTICE:

The Court is not requesting oral argument on this matter.  The Court is guided by California Rules of Court, Rule 3.1308(a)(1) whereby notice of intent to appear is requested.  Unless the Court directs argument in the Tentative Ruling, no argument is requested and any party seeking argument should notify all other parties and the court by 4:00 p.m. on the court day before the hearing of the party’s intention to appear and argue.  The tentative ruling will become the ruling of the court if no argument is received.  

Notice may be given either by email at BurDeptA@LACourt.org or by telephone at (818) 260-8412.

ALLEGATIONS: 

Serop Torosyan (Plaintiff) brings this action against Tesla, Inc. (Tesla) and Tesla Burbank alleging violation of certain provisions of Civil Code § 1791.2, commonly known as the Song Beverly Act. Plaintiff states causes of action for (1) Breach of Express Warranty (as against Tesla), (2) Breach of Implied Warranty (as against Tesla), (3) Violation Of Business And Professions Code §17200 (as against Tesla), and (4) Negligent Repair (as against Tesla Burbank).

Before the Court is a motion by Tesla to compel Plaintiff’s claims to arbitration. Plaintiff opposes the motion on grounds that the contract is unenforceable.

ANALYSIS: 

I.                    LEGAL STANDARD 

C.C.P. § 1281.2 states: “[o]n petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party thereto refuses to arbitrate such controversy, the court shall order the petitioner and the respondent to arbitrate the controversy if it determines that an agreement arbitrate the controversy exists.”

A party seeking to compel arbitration has the initial burden to prove, by a preponderance of the evidence, the existence of a valid and enforceable arbitration agreement. (Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 972.) If the moving party has met its initial burden, then the burden shifts to respondents to prove the falsity or unenforceability of the arbitration agreement. (Id.) 

II.                 MERITS

Judicial Notice

Tesla requests judicial notice be granted of the Complaint in this matter. As the Complaint in this matter is a record of the Court within the meaning of Evidence Code § 452, it is subject to judicial notice. Accordingly, Tesla’s request is GRANTED.

Motion to Compel

As evidence of a valid arbitration agreement between the parties, Tesla produces a lease agreement (the contract) between themselves and Plaintiff. (Kim Decl. Exh. 1.) Plaintiff appears to have signed the contract on March 17, 2022. (Kim Decl. Exh. 1.) Plaintiff does not dispute having signed the contract. The arbitration provision in the contract reads as follows:

Agreement to Arbitrate. Please carefully read this provision, which applies to any dispute between you and Tesla, Inc. and its affiliates (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. We will pay all AAA fees for any arbitration, which 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 office 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 (such as injunctive or declaratory relief), then that claim or remedy (and only that claim or remedy) shall be severed and 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, 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 finance contract.

(Kim Decl. Exh. 1.)

The Court must first determine whether the contract constitutes a valid arbitration agreement. “The existence of a valid agreement to arbitrate is determined by reference to state law principles regarding the formation, revocation and enforceability of contracts generally.” (Bolter v. Superior Court (2001) 87 Cal.App.4th 900, 906.) Here, the contract evidences the formation of an agreement to arbitrate. The contract was conspicuously presented to Plaintiff and required his signature as affirmative assent to its terms to proceed with the transaction. (Kim Decl.  Exh. 1, p. 3.)

The arbitration agreement must also relate to the action before the Court. “In determining whether an arbitration agreement applies to a specific dispute, the court may examine only the agreement itself and the complaint filed by the party refusing arbitration [citation]. The court should attempt to give effect to the parties' intentions, in light of the usual and ordinary meaning of the contractual language and the circumstances under which the agreement was made.” (Weeks v. Crow (1980) 113 Cal.App.3d 350, 353).

Here, the Court finds the arbitration clause in the contract clearly applies to Plaintiff’s claims under Song Beverly. The language that “any dispute arising out of or relating to any aspect of the relationship between you and Tesla” certainly covers claims arising from the allegedly defective Tesla vehicle provided to Plaintiff.

The Court finds Tesla has demonstrated the existence of a valid arbitration agreement between the parties. In opposition, Plaintiffs do not dispute that the arbitration agreement in the Lease is signed or authentic. As such, Tesla has upheld its initial burden and the burden shifts to Plaintiff to show falsity or unenforceability.

Procedural Unconscionability

When a contract is an adhesion contract, imposed and drafted by the party with superior bargaining power, the adhesive nature of the contract is evidence of some degree of procedural unconscionability. (Sanchez v Carmax Auto Superstores Cal., LLC (2014) 224 CA 4th 398, 403.) However, this fact alone is insufficient to make an agreement unconscionable. (Diaz v Sohnen Enters. (2019) 34 CA 5th 126, 132.) When there is no other indication of oppression or surprise, the degree of procedural unconscionability of an adhesion agreement is low, and it will be enforceable unless the degree of substantive unconscionability is high. (Ajamian v CantorCo2e, L.P. (2012) 203 CA 4th 771, 796.)

Plaintiffs argue that the Lease is an adhesive contract because it was offered on a "take it or leave it" basis without any meaningful opportunity to negotiate with Tesla regarding any of the terms. Plaintiff avers that he was “given an electronic contract” but was never advised to review it. (Torosyan Decl., p. 2.) Plaintiff further states he was rushed in signing the finance agreement and not given time to review the contract, instead being told to e-sign whatever was given to him. (Id.) The Court finds these arguments to be unpersuasive.

To begin, the adhesive nature of the contract appears to be lacking. The contract includes an opt-out provision which allows the Plaintiffs to opt out of the arbitration agreement within 30 days. (Kim Decl., Exh. 1.) Adhesion contracts are those in which the signing party is presented no functional choice as to arbitration, whereas here the contract clearly provided an option for Plaintiff to opt-out of the clause altogether.

Plaintiff’s argument that he was rushed into signing the contract is similarly unavailing. Plaintiff does not dispute that he was presented with the entire contract prior to signing, instead implying that he did not read it because he was being rushed. Courts have held that, “one who accepts or signs an instrument, which on its face is a contract, is deemed to assent to all its terms, and cannot escape liability on the ground that he has not read it.” (Randas v. YMCA of Metro. Los Angeles (1993) 17 Cal. App. 4th 158, 163.)

Plaintiff’s argument that the arbitration agreement is specifically hidden among walls of text so as to prevent his understanding is also unpersuasive. The contract here is three pages in length, accompanied by Plaintiff’s signature on the final page containing the arbitration clause. (Kim Decl. Exh. 1.) The arbitration clause is surrounded by a box and presented with the clear heading “33. Arbitration Agreement”. Given the short length of the contract and the lengths taken to highlight the arbitration provision, the Court does not view the provision as an act of subterfuge.

Finally, Plaintiff’s argument that Defendant did not provide a copy of the AAA rules with the proposed arbitration agreement is also unpersuasive. “The failure to provide a copy of the arbitration rules generally raises procedural unconscionability concerns only if there is a substantively unconscionable provision in the omitted rules." (Cisneros Alvarez v. Altamed Health Services Corporation (2021) 60 Cal.App.5th 572, 590.) Here, Plaintiff does not argue that any of the provisions of the AAA rules are unconscionable. Further, the contract specifically informs the consumer of two ways to obtain information about the Rules. The arbitration agreement states: "To learn more about the Rules and how to begin an arbitration, you may call any AAA office or go to www.adr.org." (Kim Decl., Ex. 1.)

In short, Plaintiff has failed to demonstrate any substantial degree of procedural unconscionability. Regardless, some degree of procedural unconscionability is present because Plaintiff was not involved in the drafting of the agreement. Accordingly, Plaintiff bears the burden to demonstrate a great deal of substantive unconscionability.

Substantive Unconscionability

Substantive unconscionability pertains to the fairness of an agreement’s actual terms and to an assessment of whether these terms are overly harsh or one-sided. (OTO, L.L.C. v. Kho supra at 129.) A term is not substantively unconscionable when it merely gives one party a greater benefit; instead, it must be so one-sided as to “shock the conscience.” (Pinnacle Museum Tower Ass'n v Pinnacle Mktg. Dev. (US), LLC (2012) 55 CA 4th 223, 246.)

Here, Plaintiff argues that terms of the arbitration clause serve to unduly benefit Tesla. Plaintiff reasons that although the arbitration clause applies to “any dispute” between the parties, it also carves out exceptions wherein Tesla is not forced to arbitrate matters involving repossession or small claims matters. Upon review, the Court is unable to locate the exception for repossession matters in the contract. To the extent that small claims court matters are exempted, this exemption appears to apply to Plaintiff. The contract states “If you prefer, you may instead take an individual dispute to small claims court.” (Kim Decl. Exh. 1.) Plaintiff does not explain how a provision which vests additional power in himself is indicative of unconscionability on behalf of Tesla.

Plaintiff’s argument that the contract is unconscionable because it permits further arbitration if an initial award includes injunctive relief is unpersuasive. First, there is no provision in the arbitration clause which provides for new arbitration where injunctive relief is granted. Instead, the contract provides that an award of injunctive relief may be determined “non-arbitrable” by the arbitrator and subject to litigation. Second, Plaintiff explicitly states that this nonexistent clause is in favor of the consumer, then immediately argues that this somehow results in an advantage for Tesla. (Opp. p. 10.)

Plaintiff next argues that arbitration would revoke his protection against Tesla’s recovering attorney’s fees on California Consumers Legal Remedies Act (CLRA) claims. The Court finds this argument unpersuasive. Plaintiff points to no authority for the position that his knowing waiver of his right to litigate his CLRA claims results in substantive unconscionability. That arbitration does not necessarily provide the same statutory safeguards for CLRA claims does not indicate an undue advantage for Tesla.

Lastly, Plaintiff’s arguments regarding class action matters are entirely irrelevant as this is not a class action matter.

In short, the Court finds no substantive unconscionability has been demonstrated. Accordingly, Plaintiff has failed to carry his burden in showing unenforceability and the motion to compel arbitration is GRANTED.

Stay

Once arbitration has been compelled, in whole or in part, a stay of proceedings is mandatory if the issues in the arbitration and the pending action overlap. (C.C.P. § 1281.4 [if a court “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 or until such earlier time as the court specifies.”]) 

“The purpose of the statutory stay [under section 1281.4] is to protect the jurisdiction of the arbitrator by preserving the status quo until arbitration is resolved. In the absence of a stay, the continuation of the proceedings in the trial court disrupts the arbitration proceedings and can render them ineffective.” (Federal Ins. Co. v. Superior Court (1998) 60 Cal.App.4th 1370, 1374-1375 (citations omitted).) 

Plaintiff argues that his Negligent Repair claim against Tesla Burbank is not arbitrable, thus the Court should exercise its discretion to deny arbitration of all claims in the interest of preventing conflicting rulings. The Court finds this argument unpersuasive, as any claim for negligent repair against Tesla Burbank does not necessarily relate back to the manufacturer.  Likewise, Plaintiff and Tesla Burbank can likewise agree to arbitrate the case or aspects of the case can be stayed pending the completion of any trial or arbitration should it be appropriate.  Plaintiff has not demonstrated the existence of Tesla Burbank as a proper Defendant in this action as Defendant Tesla Motors represents that no such entity exists, and Plaintiff does not refute this and service upon this entity has not occurred in the 195 days since filing of the case.  Likewise, Plaintiff would be able to verify the existence of this entity quickly with the California Secretary of State yet has not provided any declaration or other evidence concerning the entity’s existence.

Tesla represents in reply that no such entity exists, instead, “Defendant Tesla Motors, Inc. owns and operates each of its repair facilities.” (Reply. p. 7.) Plaintiff presents no substantive evidence that his cause of action for Negligent Repair is properly directed at Tesla Burbank rather than Tesla itself. As such, the Court declines to exercise its discretion under C.C.P. § 1281.4.  However, if subsequent discovery should be contrary to Tesla’s assertion and the Court’s ruling on this matter, then Plaintiff may petition the Court for reconsideration of that limited issue.

As the Court grants the motion to compel arbitration in its entirety, the Court also grants the motion to stay the proceedings pending arbitration. 

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RULING:

In the event the parties submit on this tentative ruling, or a party requests a signed order or the court in its discretion elects to sign a formal order, the following form will be either electronically signed or signed in hard copy and entered into the court’s records. 

ORDER 

Tesla Motors, Inc.’s Motion to Compel Arbitration came on regularly for hearing on December 20, 2024, with appearances/submissions as noted in the minute order for said hearing, and the court, being fully advised in the premises, did then and there rule as follows: 

THE MOTION TO COMPEL ARBITRATION IS GRANTED.

THE COURT SETS A STATUS CONFERENCE RE ARBITRATION FOR DECEMBER 18, 2025 AT 9:00 A.M.

TESLA TO GIVE NOTICE.  

IT IS SO ORDERED. 

DATE:  December 27, 2024                          _______________________________ 

                                                                        F.M. TAVELMAN, Judge