Judge Holly J. Fujie, Case Number: 24STCV02084, Date: 2024-12-02 Tentative Ruling

This case arises from Plaintiff’s purchase of a 2023 Hyundai Ioniq 6 (“Vehicle”) warranted by Defendant. Based on alleged defects in the Vehicle, Plaintiff sued Defendant and filed a complaint on January 26, 2024, under the Song-Beverly Act for breach of express and implied warranties regarding the Vehicle.

On July 15, 2024, Defendant filed a motion to compel arbitration, which was subsequently withdrawn without prejudice on July 24, 2024. Thereafter, on September 19, 2024, Defendant filed the present Amended Motion to Compel Arbitration and Stay Action (the “Motion”). Plaintiff filed an opposition to the Motion on November 15, 2024, and Defendant filed a reply on November 21, 2024.

Plaintiff’s request for judicial notice is GRANTED pursuant to Evidence Code Sections 452(d) and 453.

“California law reflects a strong public policy in favor of arbitration as a relatively quick and inexpensive method for resolving disputes. To further that policy, section 1281.2 requires a trial court to enforce a written arbitration agreement unless one of three limited exceptions applies. 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.” (Acquire II, Ltd. v. Colton Real Estate Group (2013) 213 Cal.App.4th 959, 967; Code Civ. Proc., § 1281.2.) Similarly, “under the FAA, the strong federal policy favoring arbitration agreements requires courts to resolve any doubts concerning arbitrability in favor of arbitration.” (Valencia v. Smyth (2010) 185 Cal.App.4th 153, 176 (internal quotations omitted).)

In deciding a petition to compel arbitration, trial courts must decide first whether an enforceable arbitration agreement exists between the parties, and then determine the second gateway issue whether the claims are covered within the scope of the agreement. (Omar v. Ralphs Grocery Co. (2004) 118 Cal.App.4th 955, 961.) The opposing party has the burden to establish any defense to enforcement. (Gatton v. T-Mobile USA, Inc. (2007) 152 Cal.App.4th 571, 579 [“The petitioner, T–Mobile here, bears the burden of proving the existence of a valid arbitration agreement and the opposing party, plaintiffs here, bears the burden of proving any fact necessary to its defense.”].)

Procedurally, a petition to compel arbitration or stay proceedings must state verbatim the provisions providing for arbitration, or must have a copy of them attached. (Cal. R. Ct., rule 3.1330.)

“With respect to the moving party’s burden to provide evidence of the existence of an agreement to arbitrate, it is generally sufficient for that party to present a copy of the contract to the court.” (Baker v. Italian Maple Holdings, LLC (2017) 13 Cal.App.5th 1152, 1160.)

Here, Defendant seeks to compel arbitration based on the Arbitration Agreement found in the Owner’s Handbook & Warranty Information (“Handbook”) for the Vehicle. (Declaration of Jordan A. Willette [“Willette Decl.”], ¶ 2 and Ex. B.) Additionally, Defendant submits evidence that on June 28, 2023, Plaintiff enrolled his Vehicle in Defendant’s Bluelink services, during which enrollment customers must agree to the then-effective Bluelink Connected Services Agreement (“CSA”), the terms and conditions of which also include a binding arbitration provision (Declaration of Vijay Rao [“Rao Decl.”] Decl., ¶ 7 and Ex. 1).

If you purchased or leased your Hyundai vehicle in the State of California, you and we, Hyundai Motor America, 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, advertising for the vehicle, use of your vehicle, the performance of the vehicle, and service relating to the vehicle, the vehicle warranty, representations in the warranty, or duties contemplated under the warranty, including without limitation claims relate to false or misleading advertising, unfair competition, breach of contract or warranty, the failure to conform a vehicle to warranty, failure to repurchase or replace your vehicle, or claims for a refund or partial refund of your vehicle’s purchase price (excluding personal injury claims), but excluding claims brought under the Magnuson-Moss Warranty Act, shall be resolved by binding arbitration at either your or our election…

This agreement to arbitrate is intended to be broadly interpreted and to make all disputes and claims between us (including our affiliated companies) relating to or arising out of your vehicle purchase, use or performance of your vehicle, or the vehicle warranty subject to arbitration to the maximum extent permitted by law. The arbitrator (and not a court) shall decide all issues of interpretation, scope, and

IF YOU PURCHASED OR LEASED YOUR VEHICLE IN CALIFORNIA, YOUR WARRANTY IS MADE SUBJECT TO THE TERMS OF THIS BINDING ARBITRATION PROVISION. BY USING THE VEHICLE, OR REQUESTING OR ACCEPTANCE BENEFITS UNDER THIS WARRANTY, INCLUDING HAVING ANY REPAIRS PERFORMED UNDER WARRANTY, YOU AGREE TO BE BOUND BY THESE TERMS. IF YOU DO NOT AGREE WITH THESE TERMS, PLEASE CONTACT US AT OPT-OUT@HMAUSA.COM WITHIN THIRTY (30) DAYS OF YOUR PURCHASE OR LEASE TO OPT-OUT OF THIS ARBITRATION PROVISION.

A defendant’s motion to compel arbitration of a plaintiff’s claims must be granted if both sides mutually agreed to the arbitration of the claims (Pinnacle Museum Tower Ass’n v. Pinnacle Market Development (US) LLC (2012) 55 Cal 4^th 223, 226), the claims are covered by the agreement, (Omar v. Ralph’s Grocery Co. (2004) 118 Cal. App. 4^th 955, 961), and enforcement of the agreement would not be unconscionable. (OTO, LLC v. Kho (2019) 8 Cal. 5^th 111, 125.)

In the Court’s view, Plaintiff assented to the arbitration provision in the Handbook, the provision covers his claims against Defendant, and enforcement of the provision would not be unconscionable.[1]

Plaintiff manifested his assent to the arbitration provision in the Handbook through her reliance on it in suing Defendant. Specifically, his claim against Defendant for breach of express warranty in violation of the Song-Beverly Act is based on the warranty set forth in the Handbook. Plaintiff has thereby accepted the benefits of the contractual warranty in the Handbook. Having accepted the benefits by suing to enforce the warranty, Plaintiff is barred from arguing that he did not agree to the arbitration provision contained alongside the warranty in the Handbook. (Boucher v. Alliance Title Co. (2005) 127 Cal. App. 4^th 262, 269.) To be sure, Plaintiff did not sign or initial any portion of the Handbook, including the arbitration provision therein. A party need not sign an agreement, however, to be bound by it. “[A] party may accept a contract by conduct, as well as by words.” (Calvary SPV 1 LLC v. Watkins (2019) 36 Cal. App. 5^th 1070, 1081.) That is what Plaintiff has done here by suing to enforce the warranty in the Handbook that contained the arbitration provision. Indeed, Plaintiff cannot claim benefits of the warranty while simultaneously attempting to avoid its purported burdens (i.e., arbitration).

Plaintiff’s claims are plainly covered by the arbitration provision. As indicated above, the provision applies to “any claims or disputes” between Plaintiff and Defendant “related to or arising out of” Plaintiff’s use of the Vehicle, the warranty, and representations in the warranty. The provision broadly encompasses both the claim for breach of the express warranty and the claim for breach of the implied warranty.

As the party opposing arbitration, Plaintiff bears the burden of demonstrating that the arbitration provision is unenforceable.

“‘In determining waiver, a court can consider ‘(1) whether the party’s actions are inconsistent with the right to arbitrate; (2) whether “the litigation machinery has been substantially invoked” and the parties “were well into preparation of a lawsuit” before the party notified the opposing party of an intent to arbitrate; (3) whether a party either requested arbitration enforcement close to the trial date or delayed for a long period before seeking a stay; (4) whether a defendant seeking arbitration filed a counterclaim without asking for a stay of the proceedings; (5) “whether important intervening steps [e.g., taking advantage of judicial discovery procedures not available in arbitration] had taken place”; and (6) whether the delay “affected, misled, or prejudiced” the opposing party.’” (St. Agnes Med. Ctr. v. PacifiCare of California, 31 Cal. 4th 1187, 1196 citing Sobremonte v. Superior Court (1998) 61 Cal.App.4th 980, 992.)

The party opposing arbitration bears the burden of showing waiver. This burden is described as a “heavy burden of proof”, and any doubts regarding a waiver allegation should be resolved in favor of arbitration. (Quach v. California Com. Club, Inc. (2024) 16 Cal. 5th 562, 574 [“in ruling on waiver questions, California courts have, for decades, been applying a framework grounded in a ‘strong policy favoring arbitration’ over litigation, under which they hold parties seeking to establish waiver to a ‘heavy burden of proof,’ requiring a showing of prejudice beyond the loss of time and expenses normally associated with litigating a dispute and resolving any doubts ‘in favor of arbitration.’”].)

Here, the Court notes that Defendant has signified its intent to arbitrate early on through its Case Management Statement filed by Defendant back on May 20, 2024, indicating that “Defendant contends this matter is subject to binding arbitration and reserves the right to file a motion to compel arbitration and stay action.” Further, the Court finds, based on Defendant’s counsel’s declaration, that Defendant has not engaged in any significant litigation of this matter. The only affirmative action Defendant has taken in this case was to file an Answer and this Motion and serve limited written discovery asking Plaintiff to produce the subject vehicle documents. (Willette Decl., ¶ 5-6.) Defendant has not engaged in any other form of discovery, such as taking depositions or conducting vehicle inspections. (Id., ¶ 6.)

The Court thus finds that Defendant has not waived its right to enforce arbitration.

Plaintiff also raises the argument that the agreement to arbitrate is procedurally and substantively unconscionable.

Regardless of the claim asserted, arbitration agreements are only enforceable if they are not unconscionable. (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 113; Baxter v. Genworth N. Am. Corp., (2017) 16 Cal.App.5th 713, 721.) “Both procedural and substantive unconscionability must be present for a court to refuse to enforce a contract, although they need not be present in the same degree.” (Baxter, supra, 16 Cal.App.5th at 721 (citing Baltazar v. Forever 21, Inc. (2016) 62 Cal.4th 1237, 1243.) Procedural unconscionability focuses on (1) “oppression” resulting from unequal bargaining power that adheres the weaker party to nonnegotiable terms and (2) “surprise” involving “the extent to which the supposedly agreed-upon terms are hidden in a prolix printed form drafted by the party seeking to enforce them.” (Flores v. Transamerica HomeFirst, Inc., (2001) 93 Cal.App.4th 846, 853.) Substantive unconscionability “focuses on overly harsh or one-sided results [that lack substantial justification].” (Baxter, supra, 16 Cal.App.5th at 724; Armendariz, supra, 24 Cal.4th at 117-18.)

Plaintiff argues that the Arbitration Agreement is procedurally unconscionable because it was presented on a “take-it-or-leave-it” basis without the option of negotiation. Plaintiff asserts that he was not given a reasonable opportunity or time to review the terms of the arbitration provision. The Court is not persuaded by Plaintiff’s assertion.

Existing case law holds that a mandatory arbitration agreement only establishes a small degree of procedural unconscionability. (Armendariz, supra, 24 Cal.4th at 113 (“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.”); Serpa v. California Surety Investigations, Inc. (2013) 215 Cal.App.4th 695, 704 (“It is well settled that adhesion contracts in the employment context, that is, those contracts offered to employees on a take-it-or-leave-it basis, typically contain some aspects of procedural unconscionability.)

Here, the Arbitration Clause is presented to Plaintiff not in the context of employment, but as a customer whose decision to lease the vehicle was entirely willful. Plaintiff was not forced to purchase the subject vehicle. The risk of coercion in this context is minimal, and Plaintiff has not presented evidence to suggest otherwise. Moreover, as noted above, the provision also has a procedure for purchasers to opt-out of the arbitration provision, which Plaintiff did not exercise. Plaintiff’s opposition does not establish any other basis for finding the arbitration agreement procedurally unconscionable.

Plaintiff contends that the arbitration is substantively unconscionable due to its overbroad scope, unlimited duration and lack of mutuality.

Foremost, the Court finds that the provision between Plaintiff and Defendant is mutual as it binds both parties to arbitrate any claim or dispute between the parties relating to the Vehicle purchase, and that both parties waive the rights to trial in court before a judge or jury on all claims covered by the provision. Thus here, the agreement is mutual, and Plaintiff’s argument does not establish substantive unconscionability.

The Court also notes that the scope of the provision is explicitly limited to “claims arising out of your vehicle purchase, advertising for the vehicle, use of your vehicle, the performance of the vehicle, and service relating to the vehicle, the vehicle warranty, representations in the warranty, or duties contemplated under the warranty;” as such, this provision does not contribute to substantive unconscionability.

Additionally, the provision expressly covers claims arising from the purchase of the Vehicle. Thus, notwithstanding the provision that it covers claims even after the expiration of the warranty, the agreement will last only until the statute of limitations on Plaintiff’s potential claims related to the Vehicle’s purchase has lapsed, and is not infinite in duration as Plaintiff suggests.

Thus, the Court finds that Plaintiff failed to meet his burden of establishing that the arbitration provision is unconscionable.

The Motion is GRANTED. Plaintiff’s claims are stayed pending completion of arbitration. The Court sets a Non-Appearance Case Review re Status of Arbitration for June 2, 2025 at 9:30 am, and the parties are ordered to submit a joint statement regarding the status of arbitration at least seven court days before that Case Review date. The Final Status Conference scheduled for May 6, 2025, and the Jury Trial set for May 19, 2025, are advanced to this date and vacated.

Parties who intend to submit on this tentative must send an email to the Court at SMC_DEPT56@lacourt.org as directed by the instructions provided on the court website at www.lacourt.org. If the department does not receive an email and there are no appearances at the hearing, the motion will be placed off calendar.

Hon. Holly J. Fujie

Judge of the Superior Court

[1] Defendant’s Motion is also based on arbitration provision in the CSA. Because the Court is granting Defendant’s Motion based on the arbitration provision in the Handbook, the Court need not address whether Defendant can compel arbitration based on the CSA.