Judge: Joel L. Lofton, Case: 24GDCV00362, Date: 2024-08-28 Tentative Ruling
Case Number: 24GDCV00362 Hearing Date: August 28, 2024 Dept: X
Tentative Ruling
Judge Joel L. Lofton,
Department X
HEARING DATE: Aug 28,
2024
TRIAL
DATE: No date set.
CASE: MOHAMMED YASSIN
DALATI vs TESLA MOTORS, INC. d/b/a TESLA, INC.
CASE NO.: 24GDCV00362
MOTION
TO COMPEL ARBITRATION
MOVING PARTY: Defendant Tesla Motors, Inc.
RESPONDING PARTY: Plaintiff
Mohammed Yassin Dalati
SERVICE: Filed April 2, 2024
OPPOSITION: Filed August 15, 2024
REPLY: Filed August 21, 2024
RELIEF
REQUESTED
Defendant Tesla moves for an order
to compel arbitration and to stay this action based on an arbitration agreement
it alleges Plaintiff agreed to when he purchased the vehicle.
BACKGROUND
This case arises out of Plaintiff Dalati’s
lemon law claim for a 2023 Tesla Model Y he allegedly purchased (“Subject
Vehicle”). Plaintiff alleges that the Subject Vehicle suffered from various problems
and was accompanied by a 4-year and 8-year warranties, yet Defendant and its
representatives were unable to repair the Subject Vehicle.
Plaintiff filed this complaint on February
27, 2024, alleging three causes of action for (1) breach of express written
warranty (Song-Beverly), (2) breach of implied warranty (Song-Beverly), and (3)
violation of Civil Code section 1793.2, subdivision (b).
REQUEST FOR JUDICIAL NOTICE
Tesla’s request for judicial notice of
Plaintiff's complaint is granted. (Evid. Code §§ 452, 453.)
TENTATIVE RULING
Defendant Tesla, Inc.’s motion to compel arbitration is GRANTED.
The entire action is stayed pending arbitration.
LEGAL STANDARD
“A written
agreement to submit to arbitration an existing controversy or a controversy
thereafter arising is valid, enforceable and irrevocable, save upon such
grounds as exist for the revocation of any contract.” (Code Civ. Proc. § 1281.)
“California
and federal law both favor enforcement of valid arbitration agreements.” (Aanderud
v. Superior Court (2017) 13 Cal.App.5th 880, 889.) “A party who files
a motion to compel arbitration ‘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.’’ (Cisnero Alverez v. Altamed Health
Services Corporation (2021) 60 Cal.App.5th 572, 580.)
While
arbitration is favored in the law, "the policy favoring arbitration cannot
displace the necessity for a voluntary agreement
to arbitrate." (Victoria v.
Superior Court (1985) 40 Cal.3d 734, 739 [citation and internal quotations
omitted] [emphasis in original]; see Johnson
v. Walmart Inc. (9th Cir. 2023) 57 F.4th 677, 680-681 ["[W]hile doubts
concerning the scope of an arbitration clause should be resolved in favor of
arbitration, the presumption does not apply to disputes concerning whether an
agreement to arbitrate has been made"] [internal citation and quotations
omitted].) "[W]aiver of the right to jury trial is inherent in the
decision to resolve
disputes in a nonjudicial forum.
But absent a clear agreement to submit disputes to arbitration or some other
form of ADR, we cannot infer that the right to a jury trial has been
waived." (Badie v. Bank of America (1998)
67 Cal.App.4th 779, 804.)
DISCUSSION
The declaration Raymond Kim ("Kim") states he is a Manager,
Business Resolution at Tesla and has reviewed Tesla's files for the subject
vehicle, sets forth the following facts:
(1)
Plaintiff
placed an order for the Subject Vehicle on May 2, 2023 (Kim Decl. ¶ 3),
(2)
“In
placing that order, Plaintiff agreed to the terms of a Motor Vehicle Order
Agreement (“Order Agreement”), thereby agreeing to be bound by its terms and
conditions, which included an agreement to arbitrate.” (Kim Decl. ¶3.)
(3)
“Plaintiff
placed the order by clicking a Place Order button on Tesla’s website. Plaintiff
would not have been able to place the order without clicking this button on
Tesla’s website or authorizing someone to do so on Plaintiff’s behalf. Prior to
placing the order, Plaintiff would see text and be advised that Plaintiff are
agreeing to the Order Agreement’s terms and conditions. There would be a
hyperlink to the Order Agreement terms and conditions that the Plaintiff could
click on and view prior to proceeding with the order. If a customer clicks on
this hyperlink, a new window would open revealing the Order Agreement. Further,
once executed, the Order Agreement would become visible to the customer on the
customer’s mytesla.com account for as long as the customer owns the vehicle.
Once an Order Agreement is executed, as was done here, the Order Agreement is
automatically saved to the electronic document storage system containing all of
the documents related to the subject transaction. Given my knowledge and understanding
of Tesla's procedures, the Order Agreement only ends up in the electronic file
(as it did here) after a consumer has executed the Order Agreement.” (Kim Decl. ¶ 4.)
(4)
“While
the customer may opt out of the Agreement to Arbitrate by sending a letter to
Tesla stating that intention within thirty days of execution of the Order
Agreement, Plaintiff did not do so. Tesla maintains letters in which its
customers opted out of the Agreement to Arbitrate, but it did not receive any
such letter from Plaintiff.” (Kim Decl.
¶5.)
(5)
“Plaintiff
accepted the terms and conditions of the Order Agreement in this matter,
including the arbitration provision . . . . I know this to be true because the
Order Agreement would not end up in Tesla’s internal system where I retrieved
it from had she not executed the Order Agreement.” (Kim Decl. ¶ 8.)
The Order Agreement
is attached to the Kim Declaration as Exhibit 1. The Agreement to Arbitrate clause
is located on page 3 of the Order Agreement, and provides:
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. You further agree that any disputes related to
the arbitrability of your claims will be decided by the court rather than an
arbitrator, notwithstanding AAA rules to the contrary.
To initiate the arbitration, you will pay the filing fee directly to AAA
and we will pay all subsequent AAA fees for the arbitration, except you are
responsible for your own attorney, expert, and other witness fees and costs
unless otherwise provided by law. If you prevail on any claim, we will
reimburse you your filing fee. The arbitration 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, Order Number or 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, Exh. 1,
p. 3.)
There is an
Agreement to Arbitrate
In its motion, Tesla asserts that Arbitration Agreements exists in its
Order Agreement. Defendant points to the section of the Order Agreement that
contains a thirty day opt-out provision, enabling a Tesla purchaser to send a
letter to Tesla within thirty days expressing the customer’s desire to reject
arbitration for matters embraced by the Order Agreement arbitration provision.
The Kim Declaration indicates Tesla did not receive any out-out letter. (Kim Decl. ¶ 6 “Tesla maintains
letters in which its customers opted out of the Agreement to Arbitrate, but it
did not receive any such letter from Plaintiff.”)
The opposition does not appear to contest the existence of an arbitration
agreement and does not dispute having signed the agreement. Instead, Plaintiff
responds the arbitration agreement is unconscionable.
Unconscionability
Plaintiff argues that in their opposition that the contract
drafted by Tesla is one of adhesion and is unconscionable.
Unconscionability is a valid defense to a petition to
compel arbitration. (Sonic-Calabasas A, Inc. v.
Moreno (2013) 57 Cal.4th 1109, 1142.) State law governs the
“unconscionability” defense. (Doctor’s Assocs., Inc. v. Casarotto (1996)
517 US 681, 687.) The core concern of the unconscionability doctrine is the
“absence of meaningful choice on the part of one of the parties together with
contract terms which are unreasonably favorable to the other party.” (Sonic-Calabasas, supra, 57
Cal.4th at 1145.) The unconscionability doctrine ensures that
contracts—particularly contracts of adhesion—do not impose terms that have been
variously described as overly harsh, unduly oppressive, so one-sided as to
shock the conscience, or unfairly one-sided. (Ibid.)
Procedural Unconscionability
“The procedural element of unconscionability focuses on whether
the contract is one of adhesion. (Armendariz, supra, 24 Cal.4th
at p. 113; Mercuro v. Superior Court, supra, 96 Cal.App.4th at p.
174.) Procedural unconscionability focuses on whether there is “oppression”
arising from an inequality of bargaining power or “surprise” arising from
buried terms in a complex printed form. (Armendariz, supra, 24
Cal.4th at p. 114; Mercuro v. Superior Court, supra, 96 Cal.App.4th at
p. 174.) The substantive element addresses the existence of overly harsh or
one-sided terms. (Little v. Auto Stiegler, Inc. (2003) 29 Cal.4th 1064,
1071 [130 Cal.Rptr.2d 892, 63 P.3d 979]; Armendariz, supra, 24
Cal.4th at p. 114.) An agreement to arbitrate is unenforceable only if both the
procedural and substantive elements are satisfied. (Armendariz, supra,
24 Cal.4th at p. 113; Mercuro v. Superior Court, supra, 96
Cal.App.4th at p. 174.) However, Armendariz held, “[T]he 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.” (Armendariz, at p. 114; see also Kinney v. United HealthCare
Services, Inc., supra, 70 Cal.App.4th at p. 1329.).” McManus v. CIBC
World Markets Corp. (2003) 109 Cal.App.4th
76, 87.)
Here, Plaintiff has not identified any overly harsh or
unduly oppressive provisions, other than the Order Agreement being presented as
a “ ‘take it or leave it’ agreement (i.e., an adhesion contract.) Plaintiff had
no meaningful opportunity to negotiate with Tesla regarding any of the terms,
except to reject arbitration of the described sales-related claims depriving
them of the court system to resolve their dispute without any other option.”
(Motion, p. 4.) The opposition claims, “[i]f Plaintiff wanted the Model Y,
Plaintiff had to accept the contract as a whole.” (Motion, pp. 4-5.) This
argument lacks merit. The opposition does not contain any points or authorities
which support the contention that Plaintiff was required to accept the contract
as a whole in order to purchase the Model Y. Had Plaintiff followed the opt-out
procedures as instructed in the Agreement to Arbitrate, then Plaintiff still
could have purchased the Subject Vehicle. Had Plaintiff opted out of the
arbitration agreement, then a motion to compel arbitration by Tesla would
fail—but that is not the case here.
The opposition also asserts the agreement is procedurally
unconscionable because Tesla failed to provide a copy of the relevant
arbitration rules or even advise which rules would be chosen. Plaintiff does
not demonstrate that a failure to attach arbitration rules, by itself, creates
procedural unconscionability. Courts have found that failure to attach
arbitration rules to an arbitration agreement requires courts to scrutinize the
substantive unconscionability of terms that were “artfully hidden” but does not
otherwise add to the procedural unconscionability of the agreement. (See e.g.,
Baltazar v. Forever 21 Inc. (2016) 62 Cal.4th 1237, 1246; Nguyen v. Applied
Medical Resources Corp. (2016) 4 Cal.App.5th 232, 248-249; see also A
& M Produce Co. v. FMC Corp., (1982) 135 Cal. App. 3d 473, 483
[limitation on consequential damages in may be unconscionable].) Plaintiff does
not point to any such terms, artfully hidden or otherwise.
As such, this Court finds that the procedural
unconscionability is low.
Substantive Unconscionability
As
to substantive unconscionability, an agreement is substantively unconscionable
if it imposes terms that are “overly harsh,” “unduly oppressive,” “unreasonably
favorable,” or “so one-sided as to ‘shock the conscience.’ ” (Sanchez
v. Valencia Holding Co., LLC (2015) 61 Cal.4th 899, 910-911.) “All of
these formulations point to the central idea that unconscionability doctrine is
concerned not with ‘a simple old-fashioned bad bargain’ [citation], but with
terms that are ‘unreasonably favorable to the more powerful party.’
[Citation.]” (Id. at 911.) “These include ‘terms that impair the
integrity of the bargaining process or otherwise contravene the public interest
or public policy; terms (usually of an adhesion or boilerplate nature) that
attempt to alter in an impermissible manner fundamental duties otherwise
imposed by the law, fine-print terms, or provisions that seek to negate the
reasonable expectations of the nondrafting party, or unreasonably and
unexpectedly harsh terms having to do with price or other central aspects of
the transaction.’ ” (Ibid.)
An arbitration agreement is generally enforceable, if it
(1) provides for neutral arbitrators, (2) provides for more than minimal
discovery, (3) requires a written award, (4) provides for all of the types of
relief that would otherwise be available in court, and (5) does not require the
parties to pay unreasonable costs and fees as a condition of access to an
arbitration forum. (See Armendariz v. Foundation Health Psychcare Services,
Inc. (2000) 24 Cal.4th 83, 102.)
The opposition argues the arbitration clause is
substantively unconscionable because the clause allows for a choice of the
arbitration forum only for the party “electing” to arbitrate, leaving no room
for Plaintiff to select the arbitration organization or rules.
Plaintiff
argues that Defendant has elected the forum and rules for the arbitration,
citing to Chavarria v. Ralphs (9th Cir. 2013) 733 F.3d 916
(“Even if it were the case that Ralphs’ policy does not guarantee that Ralphs
will always be the party with the final selection, the selection process is not
one designed to produce a true neutral in any individual case.”). Part of
the issue in Chavarria was that the arbitration selection
provision would always produce an arbitrator proposed by Ralphs and that the
provision precluded institutional arbitration administrators like AAA or JAMS
which had established rules and procedures to select a neutral
arbitrator. Here, Defendant’s arbitration agreement does not preclude the
selection of neutral arbitrators at qualified institutions like AAA or
JAMS.
Further, the opposition argues the arbitration-cost
provisions would impose prohibitive costs on Plaintiff and this is
substantively unconscionable and violates minimum due process standards for
consumer arbitrations.
Plaintiff also argues that the arbitration cost provision
is substantively unconscionable and would impose prohibitive costs on Plaintiff
because the fees (1) to initiate an arbitration and (2) for Plaintiff’s
attorney, expert, and witness are Plaintiff’s responsibility. However, the
arbitration clause also states: “we [Defendant] will pay all subsequent AAA
fees for the arbitration . . . . If you prevail on any claim, we will reimburse
you your filing fee. The arbitration will be held in the city or county of your
residence.” (Kim Decl., Exh. 1, p. 3.) Thus, it is unclear to the Court how the
arbitration cost provision is substantively unconscionable.
Therefore,
because there exists a valid and enforceable agreement to arbitrate the claims
alleged in Plaintiff’s complaint and because there are no indications of
procedural or substantive unconscionability which render the arbitration
agreement as not unenforceable, the Court GRANTS the motion and orders the
parties to proceed to arbitration. In addition, the Court will order the action
stayed pending completion of the arbitration.
CONCLUSION
Defendant Tesla, Inc.’s motion to compel arbitration is GRANTED.
Case Management Conference scheduled on Oct 13, 2024, is vacated.
Status conference regarding Arbitration is scheduled for June 11,
2025 at 8:30am
Moving
party to give notice.
Dated: August 28,
2024 ___________________________________
Joel
L. Lofton
Judge
of the Superior Court
Parties who intend to submit on this tentative must send an email to the court
indicating their
intention to submit.
Parties intending to appear are strongly encouraged to appear remotely. alhdeptx@lacourt.org