Judge: H. Jay Ford, III, Case: 23SMCV05813, Date: 2024-04-16 Tentative Ruling

Case Number: 23SMCV05813    Hearing Date: April 16, 2024    Dept: O

  Case Name:  Navid v. Tesla Motors, Inc.

SUBJECT:                 MOTION TO COMPEL ARBITRATION

MOVING PARTY:   Defendant Tesla Motors, Inc.

RESP. PARTY:         Plaintiff Sam Navid

TENTATIVE RULING

            Defendant Tesla Motors, Inc.’s Motion to Compel Arbitration is GRANTED. Defendant proved the existence if a valid arbitration agreement. Plaintiff Sam Navid did not meet their burden to prove a defense to enforcement. The action is stayed pending resolution of arbitration pursuant to CCP §1281.4.

Defendant Tesla Motors, Inc.’s RJN is GRANTED.

Under both the Title 9 section 2 of the United States Code (known as the Federal Arbitration Act, hereinafter “FAA”) and the Title 9 of Part III of the California Code of Civil Procedure commencing at section 1281 (known as the California Arbitration Act, hereinafter “CAA”), arbitration agreements are valid, irrevocable, and enforceable, except on such grounds that exist at law or equity for voiding a contract.  (Winter v. Window Fashions Professions, Inc. (2008) 166 Cal.App.4th 943, 947.)

“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.” (Rice v. Downs (2016) 247 Cal.App.4th 1213, 1223, citing Coast Plaza Doctors Hospital v. Blue Cross of California (2000) 83 Cal.App.4th 677, 686-87.)   “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, unless it determines that: (a) The right to compel arbitration has been waived by the petitioner…”  (Code Civ. Proc., § 1281.2.)

“A party opposing the petition bears the burden of proving by a preponderance of evidence any fact necessary to its defense.” (Olvera v. El Pollo Loco, Inc. (2009) 173 Cal.App.4th 447, 453.) CCP §1281.2 only allows the Court to deny enforcement of an applicable arbitration agreement where the party resisting arbitration demonstrates (1) waiver; (2) grounds for rescission of the agreement; or (3) subsection (c) grounds involving third parties to the arbitration agreement and potential for inconsistent rulings of fact or law. (See Code Civ. Proc., § 1281.2.)

If the court determines that a party to the arbitration is also a party to litigation in a pending court action or special proceeding with a third party as set forth under subdivision (c), the court (1) may refuse to enforce the arbitration agreement and may order intervention or joinder of all parties in a single action or special proceeding; (2) may order intervention or joinder as to all or only certain issues; (3) may order arbitration among the parties who have agreed to arbitration and stay the pending court action or special proceeding pending the outcome of the arbitration proceeding; or (4) may stay arbitration pending the outcome of the court action or special proceeding.

(Code Civ. Proc., § 1281.2.)

I.      Arbitration Agreement

Defendant Tesla Motors, Inc. (“Tesla”) move to compel arbitration based on the “Agreement to Arbitrate” within the Order Agreement Plaintiff Sam Navid (“Navid”) agreed to when clicking a “Place Order button on Tesla’s website” on 5-22-22. (Kim Decl., ¶¶ 3–4, Ex. 1 (“Order Agreement”).)  Tesla declares the Navid would not have been able to place the order without clicking the Place Order Button, and that prior to placing the oreder Navid would see text advising NAvid that he is “agreeing to the Order Agreement’s terms and conditions.” (Kim Decl., ¶ 4.) The Agreement to Arbitrate states 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, 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, 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., ¶ 7, Ex. 1, p. 3)

            Tesla declares that once executed, Navid’s Order Agreement would become visible on Navid’s “mytesla.com account for as long as the customer owns the vehicle. (Kim Decl., ¶ 4.) Tesla declares that by the terms of the Agreement to Arbitrate within the order agreement customers have thirty days to opt out “by sending a letter to Tesla,” and Navid sent no such letter within the thirty-day grace period. (Kim Decl., ¶ 5.) Raymond Kim declares he is the manager of Business Resolution for Tesla, and is “familiar with the service and sales of Tesla vehicles, including the related creation and record-keeping procedures,” at the date of the transaction with Navid. (Kim Decl., ¶ 2.)

            The Court finds that Tesla has proven the existence of a valid arbitration agreement, agreed upon by Navid as part of an online Order Agreement on 5-22-22. The arbitration agreement includes the issues involved in this case because the arbitration agreement states “any dispute arising out of or relating to any aspect of the relationship between you and Tesla” will be “administered by the American Arbitration Association (“AAA”).” (Kim Decl., ¶ 7, Ex. 1, p. 3)

The burden now shifts to Navid to prove that the Court should deny enforcement by demonstrating grounds for a defense under CCP §1281.2.

II.   Unconscionability

            Navid argues the arbitration agreement is procedurally and substantively unconscionable, thus grounds for rescission of the agreement under CCP § 1281.2(b). (See Oppo., 6–9.)

            “The prevailing view is that procedural and substantive unconscionability must both be present in order for a court to exercise its discretion to refuse to enforce a contract or clause under the doctrine of unconscionability.  But they need not be present in the same degree. Essentially a sliding scale is invoked which disregards the regularity of the procedural process of the contract formation, that creates the terms, in proportion to the greater harshness or unreasonableness of the substantive terms themselves.  In other words, the more substantively oppressive the contract term, the less evidence of procedural unconscionability is required to come to the conclusion that the term is unenforceable, and vice versa.” (Baltazar v. Forever 21, Inc. (2016) 62 Cal.4th 1237, 1243–1244, quoting Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4^th 83, 114).

a.     Procedural Unconscionability

            “The procedural element addresses the circumstances of contract negotiation and formation, focusing on oppression or surprise due to unequal bargaining power.  Oppression occurs where a contract involves lack of negotiation and meaningful choice, surprise where the allegedly unconscionable provision is hidden within a prolix printed form.  When the contract is a contract of adhesion imposed and drafted by the party with superior bargaining power, the adhesive nature of the contract is evidence of some degree of procedural unconscionability. However, the fact that an agreement is adhesive is not, alone, sufficient to render it unconscionable.”  (Malone v. Superior Court (2014) 226 Cal.App.4th 1551, 1561.)

            “The term contract of adhesion signifies a standardized contract, which, imposed and drafted by the party of superior bargaining strength, relegates to the subscribing party only the opportunity to adhere to the contract or reject it.”  (Armendariz, supra, 24 Cal.4th at p. 113.)  Thus, a form agreement presented on a preprinted form and offered on a take-it-or-leave-it-basis would render it a contract of adhesion.  (Baltazar, supra, 62 Cal.4^th at p. 1245.)  Where a contract of adhesion is presented but there is no element of surprise or oppression, the Court must be “particularly attuned” to a claim of unconscionability, but the agreement is “not subject[ed] to the same degree of scrutiny as contracts of adhesion that involve surprise or other sharp practices.”  (Ibid.) 

            “The circumstances relevant to establishing oppression include, but are not limited to (1) the amount of time the party is given to consider the proposed contract; (2) the amount and type of pressure exerted on the party to sign the proposed contract; (3) the length of the proposed contract and the length and complexity of the challenged provision; (4) the education and experience of the party; and (5) whether the party's review of the proposed contract was aided by an attorney.”  (OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111, 126–127.)

            Navid argues the Agreement to Arbitrate is procedurally unconscionable as a contract of adhesion because like Gutierrez, the Order Agreement was presented to Navid on a “take it or leave it” basis with Navid “given no opportunity to negotiate any of the preprinted terms of the lease.” (Gutierrez v. Autowest, Inc. (2003) 114 Cal.App.4th 77, 89 [holding that such a one-sided and inflexible lease created an adhesion contract, and thus procedurally unconscionable].) Further, Navid argues that under Gentry, the 30-day opt out period within the arbitration agreement here does not preclude it from procedural unconscionability, and in fact Courts have found this to be a small degree of procedural unconscionability to at least allow for Courts to examine the substantive unconscionability element. (See Gentry v. Superior Court (2007) 42 Cal.4th 443, 470 [arbitration agreement had a degree of procedural unconscionability even though there was a 30-day opt out provision].)

            Tesla argues that under the Sanchez concurrence in part, there is no procedural unconscionability. Tesla argues the types of “unfair bargaining” claims made by Navid are similar to the situation in Sanchez, and are not enough to reach a great disparity in bargaining power. (Sanchez v. Valencia Holding Co., LLC (2015) 61 Cal.4th 899, 931, Chin, J. concurrence in part [“There is nothing in this buyer seller relationship from which we can infer a great disparity of bargaining power . . . . [A]lthough the contract was standardized, ‘no presumption is warranted that Plaintiff had no choice or power to negotiate as to the terms of their purchase agreement or that they could not obtain comparable or superior terms […]”].) The majority opinion in Sanchez found that the arbitration clause at issue contained some slight procedural unconscionability, and furthermore, Tesla did not address the 30-day opt out clause which created some procedural unconscionability in Gutierrez.

            Thus, the Court finds that the Agreement to Arbitrate contains slight procedural unconscionability within the 30-day opt out provision and lack of bargaining power, which is enough to move on to the substantive unconscionability analysis.

b.     Substantive Unconscionability

Substantive unconscionability focuses on the terms of the agreement and whether those terms are “so one sided as to “’shock the conscience.’” (Kinney v. United Healthcare Services, Inc. (1999) 70 Cal. App.4th 1329, 1330.)  “To reiterate, we assess unconscionability with a sliding scale approach. [Citation] In light of the high degree of procedural unconscionability, even a low degree of substantive unconscionability could render the arbitration agreement unconscionable.” (Carmona v. Lincoln Millennium Car Wash, Inc. (2014) 226 Cal.App.4th 74, 85.)

Navid argues the arbitration agreement is substantively unconscionable because arbitration Discovery under the American Arbitration Association (“AAA”) Rule 22 is inherently limited thus arbitration cannot meet the statutory requirements of a Song-Beverly Act case. (See Oppo, 7–12.) This argument is unsupported by precedence and unpersuasive. Navid does not cite to a single case in which it was found that binding arbitration conflicts with the right and remedies, specifically within Discovery, under the Song-Beverly Act. Navid cites to Davis to argue that the lack of discovery within arbitration at issue is substantively unconscionable but Davis involved an employment dispute and the arbitration clause there included actual limitations on discovery. (Davis v. Kozak (2020) 53 Cal.App.5th 897, 912–913 [“the arbitration agreement's default limitations on discovery are almost certainly inadequate to permit his fair pursuit of these claims.”].) Here, nothing in the arbitration clause limits discovery in the manner that occurred within Davis. In fact, AAA Rule 22 allows for an exchange of information between parties, and does not state any limitations other than to state “arbitration must remain a fast and economical process.” (Ameripour 2^nd Decl., ¶ 2, Ex. 1.) Nor does Navid does cite to any precedence stating what level of discovery is necessary for Song-Beverly Act case.

 Furthermore, Navid cites to Rheinhart which involves a motion for summary judgment in a Song-Beverly Act case, but does not include an arbitration issue, and thus is not persuasive in this instance. (See Rheinhart v. Nissan North America, Inc. (2023) 92 Cal.App.5th 1016, 1020-1021.)

Navid does not point out any section of the arbitration that is so one-sided as to shock the conscious, nor any precedence that is on point to deny this motion to compel arbitration. The Court finds that there is no substantive unconscionability and thus no unconscionability within the agreement to arbitrate.  

Tesla’s Motion to Compel Arbitration is GRANTED.

III.           Stay pending resolution of arbitration pursuant to CCP §1281.4 

            “If 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 or until such earlier time as the court specifies.” (Code Civ. Proc., § 1281.4.)

The action is stayed pending resolution of arbitration pursuant to CCP §1281.4.