Judge: Gary Y. Tanaka, Case: 22TRCV00667, Date: 2023-02-06 Tentative Ruling

Case Number: 22TRCV00667    Hearing Date: February 6, 2023    Dept: B

LOS ANGELES SUPERIOR COURT – SOUTHWEST DISTRICT

Honorable Gary Y. Tanaka                                                                                     Monday, February 6, 2023
Department B                                                                                                                            Calendar No. 9

PROCEEDINGS

Christian De Vaney Vaughan v. Tesla, Inc., et al.

22TRCV00667

1.      Tesla, Inc.’s Motion to Compel Arbitration

TENTATIVE RULING

Tesla, Inc.’s Motion to Compel Arbitration is denied without prejudice.

Background

            Plaintiff filed the Complaint on August 5, 2022. Plaintiff’s First Amended Complaint was filed on September 9, 2022. Plaintiff alleges the following facts. Plaintiffs allege that her 2022 Tesla Model Y, which was manufactured and distributed by Defendant, was advertised, represented, and leased to Plaintiff as a new vehicle with a clean repair history with no prior damage.  However, in fact, the vehicle was not new and not safe. The vehicle was previously damaged and had prior body damage and repairs of $8,677.40 that were not disclosed to Plaintiff. Plaintiff alleges the following causes of action: 1. Breach of Implied Warranty of Merchantability Under the Song-Beverly Warranty Act; 2. Breach of Express Warranty of Merchantability Under the Song-Beverly Warranty Act; 3. Violation of Consumer Legal Remedies Act (Civ. Code 1750 et seq.); 4. Violation of Unfair Competition Law, Business and Professions Code 17200 et seq.; 5. Concealment.

            Objections

            Plaintiff’s objections to the declaration of Raymond Kim: Objections 1 to 9 are overruled.

            Request for Judicial Notice

            Defendant’s request for judicial notice is granted.

            Motion to Compel Arbitration

            “California law reflects a strong public policy in favor of arbitration as a relatively quick and inexpensive method for resolving disputes.  [Citation.]  To further that policy, [Code of Civil Procedure] section 1281.2 requires a trial court to enforce a written arbitration agreement unless one of three limited exceptions applies.  [Citation.]  Those statutory exceptions arise where (1) a party waives the right to arbitration; (2) grounds exist for revoking the arbitration agreement; and (3) pending litigation with a third party creates the possibility of conflicting rulings on common factual or legal issues.  (§ 1281.2, subds. (a)–(c).)”  Acquire II, Ltd. v. Colton Real Estate Group (2013) 213 Cal.App.4th 959, 967.

            “The petitioner bears the burden of proving the existence of a valid arbitration agreement by the preponderance of the evidence, and a party opposing the petition bears the burden of proving by a preponderance of the evidence any fact necessary to its defense.  In these summary proceedings, the trial court sits as a trier of fact, weighing all the affidavits, declarations, and other documentary evidence, as well as oral testimony received at the court’s discretion, to reach a final determination.”  Giuliano v. Inland Empire Personnel, Inc. (2007) 149 Cal.App.4th 1276, 1284.

            “The party opposing arbitration has the burden of demonstrating that an arbitration clause cannot be interpreted to require arbitration of the dispute.  Nonetheless, this policy does not override ordinary principles of contract interpretation.  [T]he contractual terms themselves must be carefully examined before the parties to the contract can be ordered to arbitration:  Although [t]he law favors contracts for arbitration of disputes between parties, there is no policy compelling persons to accept arbitration of controversies which they have not agreed to arbitrate.”  Rice v. Downs (2016) 247 Cal.App.4th 1213, 1223 (internal citations and quotations omitted).

            In Rowe v. Exline (2007) 153 Cal.App.4th 1276, 1286, the Court of Appeal found that “a nonsignatory sued as an agent of a signatory may enforce an arbitration agreement.”  Id. at 1286.  In addition, “a nonsignatory who is the agent of a signatory can even be compelled to arbitrate claims against his will.”  Id. at 1285, citing Harris v. Superior Court (1986) 188 Cal.App.3d 475, 477–78.  Further, “in many cases, nonparties to arbitration agreements are allowed to enforce those agreements where there is sufficient identity of parties.”  Valley Casework, Inc. v. Comfort Construction, Inc. (1999) 76 Cal.App.4th 1013, 1021.  This includes nonparties as agents of a party as well as “a third party beneficiary of an arbitration agreement.”  Ibid. 

            Defendant moves for an order compelling arbitration of Plaintiff’s claims and for an order for stay pending completion of arbitration.  The motion is made pursuant to Code of Civil Procedure §1281 et seq. and the FAA, on the grounds Plaintiff is bound by an agreement to arbitrate the subject matter of the First Amended Complaint. Defendant argues that a valid arbitration agreement exists between the parties that requires arbitration of Plaintiff’s claims.  

            Code Civ. Proc., § 1281.2 states, in relevant part: “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[. . .]” “Generally, an arbitration agreement must be memorialized in writing. A party's acceptance of an agreement to arbitrate may be express, as where a party signs the agreement. A signed agreement is not necessary, however, and a party's acceptance may be implied in fact or be effectuated by delegated consent. An arbitration clause within a contract may be binding on a party even if the party never actually read the clause.” Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 236 (internal citations omitted).

            Defendant established the existence of a valid arbitration agreement between Plaintiff and Defendant. (Decl., Kim, ¶¶ 1-5, Exs. 1-2.)  Both the Order Agreement and Lease Agreement contained arbitration provisions.  Both agreements governed disputes between Tesla, Inc. and its affiliates.  (Id. at Exs. 1, 2.)  The relevant language in the arbitration provisions provide that the parties agree: “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.”  (Id., Ex. 1, Page 3; Ex. 2, Page 3.)  Plaintiff’s claims arise out of the relationship between Plaintiff and Tesla, Inc. and are encompassed within the broad scope of the arbitration clause.

            While Plaintiff objected to the declaration of Raymond Kim, in fact, Plaintiff does not deny the existence of the agreements attached to the declaration of Raymond Kim. Instead, Plaintiff simply elaborates on the details of the making of the agreements and provides arguments declaring that the agreements are procedurally unconscionable.  (Decl., Christina De Vaney Vaughan, ¶¶ 2-11.)  Plaintiff contends that Defendant’s evidence does not support the existence of an arbitration agreement.  Plaintiff states that Defendant’s evidence lacks foundation and personal knowledge. The Court finds that Defendant’s evidence is competent to demonstrate the existence of an arbitration agreement between the parties.  Defendant provided competent evidence to show that Plaintiff executed the arbitration agreement.  Defendant provided proper foundation for the existence of the agreement and the facts evidencing Plaintiff’s executing the agreement. Again, Plaintiff, herself, does not deny executing the subject agreements.  It is not an adequate defense to enforcement that Plaintiff failed to read and understand the agreement before signing the agreement. Caballero v. Premier Care Simi Valley LLC (2021) 69 Cal.App.5th 512, 519.  Thus, Plaintiff fails to show that no valid arbitration agreement exists between the parties.

            Therefore, the burden shifts to Plaintiff to show that the arbitration clause should not be enforced. Rice, supra, 247 Cal.App.4th at 1223.  Plaintiff has met her burden to show that the arbitration agreement should not be enforced.

            The Court notes that Defendant Tesla Motors, Inc.’s default was entered on December 21, 2022. Plaintiff argues that Tesla Motors, Inc. is a third party, which has defaulted in this action. Therefore, Plaintiff argues that the statutory exception set forth in Code Civ. Proc., § 1281.2(c) applies.  The statute states, in relevant part: “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.  For purposes of this section, a pending court action or special proceeding includes an action or proceeding initiated by the party refusing to arbitrate after the petition to compel arbitration has been filed, but on or before the date of the hearing on the petition.”

            By contrast, Defendant argues that Tesla Motors, Inc. and Tesla, Inc. are not separate entities, and, in fact, are the same entity.  This contention is attempted to be supported by two declarations provided by the moving party’s attorney who simply recites certain information found in publicly available documents from the California Secretary of State website.  (Declarations, Ali Ameripour, dated December 28, 2022, and dated January 30, 2023.)  It is not certain that Ali Ameripour has provided the necessary foundation to testify as to the legal entity status of these two corporations.  However, no formal objections to the declarations were submitted by Plaintiff.

            In any event, the status of these two entities leaves moving Defendant in a paradox, for purposes of this motion.  If the parties are two separate entities as argued by Plaintiff, the Court is fully within its right and discretion to deny the motion based on the risk of inconsistent rulings. Again, the Court notes that Tesla Motors, Inc. is in default. Thus, a serious risk of inconsistent rulings exists if the matter would proceed to arbitration between Tesla, Inc. and Plaintiff.  However, assuming arguendo that Tesla Inc. and Tesla Motors, Inc. are the exact same entity for all legal purposes, as argued by moving party, then, Tesla, Inc. has no standing to move to compel arbitration.  Because, under this argument, Tesla Motors, Inc. is the same entity as Tesla, Inc., and because Tesla Motors, Inc. is in default, Tesla, Inc. could not move to compel arbitration until and, if, Tesla Motors, Inc.’s entry of default is set aside.

            Therefore, for the foregoing reasons, Tesla, Inc.’s Motion to Compel Arbitration and to Stay Action is denied without prejudice.

            Plaintiff is ordered to give notice of this ruling.