Judge: John J. Kralik, Case: 23GDCV02012, Date: 2024-04-12 Tentative Ruling

Case Number: 23GDCV02012    Hearing Date: April 12, 2024    Dept: NCB

Superior Court of California

County of Los Angeles

North Central District

Department B

BACKGROUND

A.    Allegations

Plaintiff Sameh William (“Plaintiff”) alleges that Plaintiff purchased a 2019 Tesla Model 3 on September 16, 2019, for which manufacturer/distributor Defendant Tesla, Inc. d/b/a Tesla Motors, Inc. (“Defendant”) issued a written warranty.  Plaintiff alleges the warranty was not issued by the selling dealership.  Plaintiff alleges the subject vehicle was delivered with serious defects and nonconformities to the warranty and that it developed other serious defects and nonconformities to warranty including, but not limited to, electrical, structural, and engine system defects.  (Compl., ¶10.)  Plaintiff alleges that he first presented the subject vehicle for repairs in December 2019 and reported that the calculated amp hour capacity would display a smaller range than what was observed.  Plaintiff presented the vehicle in September 2021 with reports that the projected range would decrease to 210 volts, on August 5, 2022 with reports to tears to the left side of the steering wheel, on August 11, 2022 with reports that the air conditioner system emitted an unpleasant odor, and on August 25, 2022 with reports about an abnormally high consumption rate of the HV battery. 

The complaint, filed September 21, 2023, alleges causes of action for: (1) violation of Song-Beverly Act – breach of express warranty; (2) violation of Song-Beverly Act – breach of implied warranty; and (3) violation of Song-Beverly Act § 1793.2. 

B.     Motion on Calendar

On November 1, 2023, Defendant filed a motion to compel arbitration.

On March 29, 2024, Plaintiff filed an opposition brief.

On April 5, 2024, Defendant filed a reply brief.

REQUEST FOR JUDICIAL NOTICE

            With the moving papers, Defendant submitted a request for judicial notice of the complaint.  The request is granted.  (Evid. Code, § 452(d).) 

DISCUSSION

            Defendant moves to compel arbitration against Plaintiff. 

A.    Terms of the Arbitration Agreement

Defendant provides a copy of the Motor Vehicle Order Agreement, which includes an agreement to arbitrate.  (Kim Decl., Ex. 1 [Order Agreement].)  The Order Agreement was entered between Plaintiff and Tesla, Inc.  (Order Agreement, at p.2.)  The Order Agreement is only 4 pages in length.

            Defendant provides the declaration of Raymond Kim, Manager, Business Resolution at Defendant.  He states that when Plaintiff ordered the subject vehicle from Defendant on September 13, 2019, Plaintiff agreed to the terms of the Order Agreement, which included the arbitration agreement.   (Kim Decl., ¶3.)  Mr. Kim states that Plaintiff placed the order by clicking a Place Order button on Defendant’s website and that Plaintiff could not have placed an order without clicking the button or authorizing someone to do so on his behalf.  (Id., ¶4.)  Mr. Kim states that customers may opt out of the arbitration agreement within 30 days of execution of the Order Agreement but Plaintiff did not do so.  (Id., ¶5.) 

Page 3 of the Order Agreement includes a box with the bolded term: “Agreement to Arbitrate.”  It states:

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.

(Order Agreement at p.4.) 

            In the opposition brief, Plaintiff does not raise any arguments regarding the existence of the arbitration agreement, whether he signed the agreement, or the scope of the arbitration agreement.  Rather, he argues that the arbitration provision is unconscionable. 

            As the parties do not dispute the existence or scope of the arbitration agreement, the Court will discuss whether the terms of the arbitration agreement are unconscionable. 

B.     Unconscionability

            Plaintiff argues that the arbitration agreement is procedurally unconscionable because the Order Agreement was a pre-printed consumer sales contract that was presented to Plaintiff on a “take it or leave it” basis (contract of adhesion), such that Plaintiff had no meaningful opportunity to negotiate with Defendant about the terms.  However, the arbitration agreement expressly allowed Plaintiff 30 days after signing the arbitration agreement to opt out of the arbitration provision by sending a written letter to Defendant.  As such, this particular term was not a contract of adhesion.  Further, there is no evidence that the Order Agreement or the arbitration clause were non-negotiable or that Plaintiff made any attempt to negotiate such terms and was denied.  (See Bolanos v. Khalatian (1991) 231 Cal.App.3d 1586 [holding that arbitration agreement was enforceable because the plaintiff’s declaration did not say that she could not read or understand the agreement and because she did not offer any evidence that she was forced or tricked into signing the agreement].) Plaintiff has not provided a declaration that he attempted to ask questions about or negotiate the Order Agreement or the arbitration agreement and that he was denied such requests.

            Plaintiff also argues that the arbitration agreement did not include a copy of the relevant arbitration rules.  However, the arbitration agreement stated that the American Arbitration Association would be the chosen arbitrator and that rules may be found by calling the AAA office or going on the www.adr.org website.  The failure to attach or provide the AAA rules to the arbitration agreement is not, in itself, a sufficient ground to support a finding of procedural unconscionability.  For example, in Lane v. Francis Capital Management LLC (2014) 224 Cal.App.4th 676, 690, the Court of Appeal concluded: “[T]he failure to attach a copy of the AAA rules did not render the agreement procedurally unconscionable. There could be no surprise, as the arbitration rules referenced in the agreement were easily accessible to the parties—the AAA rules are available on the Internet.”

            Thus, there are no indications of procedural unconscionability. 

            Plaintiff argues that the arbitration agreement is substantively unconscionable because the clause allows for a choice of the arbitration forum only for the party “electing” to arbitrate.  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. 

            Plaintiff also argues that the arbitration cost provision is substantively unconscionable and would impose prohibitive costs on Plaintiff.  However, the arbitration agreement states: “We [Defendant] will pay all AAA fees for any arbitration, which will be held in the city or county of your residence.”  (Order Agreement at p.3.)  As such, it is unclear how the arbitration cost provision is unconscionable. 

            As there are no indications of procedural or substantive unconscionability, the motion to compel arbitration is granted. 

CONCLUSION AND ORDER

            Defendant Tesla, Inc.’s motion to compel arbitration is granted.  The action shall be stayed pending the outcome of the arbitration.  The Court sets a Status Conference re: Status of Arbitration for September 4, 2024 at 8:30 a.m.

Defendant shall give notice of this order. 

DATED:  April 12, 2024                                                        ___________________________

                                                                                          John J. Kralik

                                                                                          Judge of the Superior Court