Judge John J. Kralik, Case Number: 24NNCV04990, Date: 2025-05-09 Tentative Ruling

Plaintiff Ycheal Dov Levine (“Plaintiff”) alleges that on September 27, 2023, he leased a new 2023 Tesla Model Y vehicle, manufactured by Defendant Tesla Motors, Inc. (“Defendant”). Plaintiff alleges that Defendant issued an express written warranty. Plaintiff alleges that during the warranty period, Plaintiff began experiencing nonconformities with the vehicle, which substantially impaired the vehicle’s use, safety, and/or value. (Compl., ¶¶31-32.) Plaintiff alleges that despite multiple repair visits, Defendant was unable to conform the vehicle to the terms of the warranty.

The complaint, filed October 11, 2024, alleges causes of action for: (1) violation of lemon law; (2) violation of implied warranty of merchantability; (3) negligent repair; (4) misrepresentation; and (5) violation of Magnuson-Moss Warranty Federal Trade Commission Improvement Act.

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

With the reply papers, Defendant objected to Exhibit A of the declaration of Natan Davoodi, which was filed in support of the opposition papers. Exhibit A includes a “US Senate Letter.” (Davoodi Decl., ¶¶3-4.) Defendant objected on the grounds of lack of foundation and personal knowledge, hearsay, and relevance, as well as on the basis that there was no foundation to substantiate that the letter was what Plaintiff’s counsel purported it to be, Plaintiff’s counsel did not state where the letter was found, and the letter cannot be found on any legitimate or governmental website. The objection is sustained. The Court notes that this letter had no bearing on the Court’s ruling on the motion.

Defendant moves to compel arbitration against Plaintiff and stay the action pending the outcome of the arbitration.

Defendant provides a copy of the Lease Agreement, which includes an agreement to arbitrate. (Kim Decl., Ex. 1 [Lease Agreement].) The Lease Agreement was entered between Plaintiff and Tesla Motors Inc. (Lease Agreement, at p.1.) The Lease Agreement is 3 pages in length. It appears to be electronically signed by Plaintiff. (Id. at p.3.)

Defendant provides the declaration of Raymond Kim, Manager, Business Resolution at Defendant. He states that Plaintiff leased a 2023 Tesla Model Y on June 28, 2023 from Defendant pursuant to the Lease Agreement. (Kim Decl., ¶3, Ex. 1.) He states that the Lease Agreement is largely a pre-printed agreement that is filled out at the time of the transaction and would have been made at or near the time of the lease of the subject vehicle and then thereafter electronically stored. (Id., ¶¶4-7.) He states that under Defendant’s procedures, a signed, electronic copy of the Lease Agreement was put into Defendant’s electronic file after Plaintiff signed the Lease Agreement on June 28, 2023, and it available for viewing by customers on their mytesla.com account. (Id., ¶¶9-10.)

Page 3 of the Lease Agreement includes a box with the bolded term: “Agreement to Arbitrate” at section 33. It states:

33. 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 the AAA and we will pay all the 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 (such as injunctive or declaratory relief), then that claim or remedy (and only that claim or remedy) shall be severed and 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.

In opposition, Plaintiff argues that Defendant takes consumer’s information, uses it to self-populate an electronic Lease Agreement with terms that are not made known to the customer until after their signature is taken, and consumers are not given the VIN number until after the agreement is signed so that they cannot opt out. Plaintiff argues that Defendant acted affirmatively to prevent Plaintiff from knowing the terms of the Lease Agreement, did not disclose the arbitration agreement, and never let Plaintiff read the Lease Agreement or review its contents. (Plaintiff provides a link to a youtube.com video made by a third party as an example of the ordering process of Tesla vehicles online, which was posted in June 2023. The Court declines to consider this video as it is not Plaintiff’s personal experience/video documenting his entering into the Lease Agreement, he has not provided a declaration stating the process of entering the Lease Agreement, and the video was made by an unknown third party in June 2023 such that the process may have been different by the time Plaintiff leased the vehicle in September 2023.)

Although Plaintiff argues that the Lease Agreement was self-populated by Defendant, he does not provide any arguments or evidence showing that he did not agree to the Lease Agreement terms when providing his electronic signature. In fact, in the complaint, Plaintiff alleges that he entered into the Lease Agreement with Defendant and includes a copy of the Lease Agreement as an exhibit to the complaint. (FAC, ¶¶14, 17, Ex. A [Lease Agreement].) Plaintiff has not provided his own declaration stating that he lacked the ability to review the terms of the Lease Agreement prior to signing and assenting to its terms. He also has not provided a declaration stating that he was prevented from viewing the lease terms prior to leasing the vehicle, that he could not view the agreement on the mytesla.com website, that the agreement was not on the website prior to the 30-day opt-out period expired, or that the agreement on the website did not have the VIN number for his vehicle. In defense counsel Ali Ameripour’s declaration submitted with the reply brief, he provides a copy of Plaintiff’s July 21, 2023 repair order for the subject vehicle, which includes Plaintiff’s VIN number. (Ameripour Decl. re Reply, Ex. 1 [7/25/23 Invoice].) Defendant argues that the July 25, 2023 invoice was within the 30-day opt-out period (which expired on July 28, 2023, or 30 days from June 28, 2023), such that Plaintiff had leased the vehicle, was driving it, and had the VIN number before the opt-out period expired.

As such, the Court finds that there is an existence of the arbitration agreement within the Lease Agreement. The scope of the arbitration agreement is sufficiently broad enough to cover the claims in this action, as the arbitration agreement is intended to cover “any dispute arising out of or relating to any aspect of the relationship between you and Tesla,” which “includes claims arising before this Agreement, such as claims related to statements about our products.” Most of Plaintiff’s argument are regarding whether the arbitration agreement is unconscionable and void against public policy. The Court considers these arguments next.

First, Plaintiff argues that the arbitration agreement includes a fee-shifting term that would force Plaintiff to expend thousands of dollars to arbitrate this matter, citing Gutierrez v. Autowest, Inc. (2003) 114 Cal.App.4th 77. (Opp. at pp.12-13.) In Gutierrez, the Court of Appeal remanded the matter of a petition to compel arbitration to permit the trial court to reconsider the issue of severance of an unconscionable costs provision in an arbitration agreement (i.e., whether the provision that plaintiffs pay substantial administrative fees was drafted in bad faith and then the exercise of the trial court’s discretion to sever the provision).[1]

Here, the arbitration provision provides that Plaintiff will be reimbursed for the costs paid to commence the arbitration proceeding, Defendant will pay all subsequent arbitration fees, and any filing fees will be reimbursed to Plaintiff if Plaintiff is the prevailing party. There is no “fee-shifting” provision in the arbitration agreement as Defendant has agreed to pay for essentially all arbitration fees (except filing fees in the first instance until reimbursement). Further, Plaintiff argues that arbitration may cost over $10,000, but there is no evidence that Plaintiff would be subject to paying those fees (since Defendant expressly stated it would pay any subsequent fees post-filing) nor has Plaintiff shown he lacks the financial resources to do so in the event he did pay some fees. Thus, there are low-to-no indications of substantive unconscionability with respect to this argument.

Second, Plaintiff argues that the arbitration agreement was in a written form contract, which was not conspicuous enough. (Opp. at p. 14.) However, the arbitration agreement is provided in a box so that it is set apart from the other terms of the Lease Agreement. The fact that it is largely “pre-printed” and is part of a form contract is not, in itself, a ground to find that the terms are unconscionable.

Third, Plaintiff argues that Defendant’s “disclaimer/disclosure” is ineffective because Defendant never made such a disclaimer/disclosure prior to entering the Lease Agreement and actively concealed terms, and only gave the Lease Agreement after delivery, thereby depriving consumers of the opportunity to ask questions. (Opp. at pp.15-16.) Plaintiff also argues that the 30-day opt-out provision does not preclude procedural unconscionability. (Opp. at p.3.) The opt-out clause does not necessarily sway the analysis one way or the other. (Gentry v. Superior Court (2007) 42 Cal.4th 443, 466-467.) The arbitration agreement provides 30 days for Plaintiff to opt out of the arbitration agreement. Plaintiff argues that he did not have the VIN number at the time of signing the Lease Agreement. However, Plaintiff does not provide his declaration stating that he lacked the VIN number at the time of signing or that he received the VIN number after the 30-day period elapsed. As discussed above, Defendant provided evidence in the reply brief showing that Plaintiff has the VIN number by the time he went for his first repair on July 25, 2023, which was before the opt-out period of July 28, 2023. The opt-out provision gives Plaintiff the unilateral choice after signing the agreement (which can be viewed on his mytesla.com account) to opt out of the arbitration provision of the Lease Agreement. Further, there is no evidence that shows that Plaintiff felt pressure to not opt out of the arbitration—as stated above, he had 30 days after signing the Lease Agreement to do so. Although the opt out provision does not insulate the agreement from procedural unconscionability, there is no evidence that Plaintiff did not feel free to opt out, or that Plaintiff was unable to negotiate the terms of the agreement. Finally, there is no declaration from Plaintiff stating that he was unable to view the Lease Agreement from the website.

Plaintiff argues that the arbitration agreement is prohibited by anti-waiver provisions of the Consumer Protection Laws, including the Consumers Legal Remedies Act (Civ. Code, § 1750 et seq.), the Magnuson-Moss Warranty Act (15 U.S.C. §§ 2302(c), 2304), and the Song-Beverly Act (Civ. Code, § 1790.1).

Under the CLRA, “Any waiver by a consumer of the provisions of this title is contrary to public policy and shall be unenforceable and void.” (Civ. Code, § 1751.) Plaintiff cites to Civil Code, § 1780, which states that consumers “may” bring a court action under the CLRA. (The CLRA is codified in Civil Code, § 1750 et seq., while the Song-Beverly Act is codified in Civil Code, § 1790 et seq.) In the complaint, Plaintiff alleges that BBB Auto Line Program Rule 3 violates Civil Code, § 1751 regarding waivers and that any claim that Plaintiff has waived his remedies under the Lemon Laws is void under, among other statutes, Civil Code, § 1751. (Compl., ¶¶8, 29.) However, the complaint does not assert a cause of action under the CLRA. As such, references to the CLRA have no bearing on this action.

(c) Prohibition on conditions for written or implied warranty; waiver by Commission

No warrantor of a consumer product may condition his written or implied warranty of such product on the consumer's using, in connection with such product, any article or service (other than article or service provided without charge under the terms of the warranty) which is identified by brand, trade, or corporate name; except that the prohibition of this subsection may be waived by the Commission if--

(1) the warrantor satisfies the Commission that the warranted product will function properly only if the article or service so identified is used in connection with the warranted product, and

The performance of the duties under subsection (a) shall not be required of the warrantor if he can show that the defect, malfunction, or failure of any warranted consumer product to conform with a written warranty, was caused by damage (not resulting from defect or malfunction) while in the possession of the consumer, or unreasonable use (including failure to provide reasonable and necessary maintenance).

The Song-Beverly Act at Civil Code, § 1790.1 states: “Any waiver by the buyer of consumer goods of the provisions of this chapter, except as expressly provided in this chapter, shall be deemed contrary to public policy and shall be unenforceable and void.”

As pointed out by Defendant in the reply brief, the arbitration provision does not waive Plaintiff’s rights to bring her claims under the Song-Beverly Act and the Magnuson-Moss Warranty Act to their full extent, nor the remedies sought therein.

Thus, Plaintiff’s arguments that the arbitration agreement violates anti-waiver provisions will not be a ground to deny this motion.

Plaintiff also argues that the arbitration agreement should be deemed void because it waives the consumer’s unwaivable rights under the CLRA and Song-Beverly Act to recover attorney’s fees and costs. Plaintiff argues that the arbitration agreement: (1) gives the arbitrator discretion to award attorney’s fees, whereas the prevailing party in Song-Beverly Act and CLRA cases are entitled to mandatory fees (Civ. Code, §§ 1794(d), 1780(d)); (2) exposes the consumer to paying defense attorney’s fees at the arbitrator’s discretion whereas the CLRA requires a finding that Plaintiff’s prosecution of the case was not in good faith before such an award (Civ. Code, § 1780(d)); (3) limits Defendant’s liability for consumer arbitration fees to claim clearly exceeding $5,000 and private arbitrator costs can be costly; (4) has an illusory mutuality clause; and (5) Plaintiff’s complaint largely seeks injunctive relief to prevent Defendant from practicing trickery and deceit, which is not arbitrable. (Opp. at pp. 8-9.)

However, the arbitration agreement states: “To initiate the arbitration, you will pay the filing fee directly to the AAA and we will pay all the 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.” (Lease Agreement at p.3, § 33.) As such, the arbitration agreement takes into account statutory requirements for attorney’s fees under the code.

With respect to the CLRA arguments, as noted above, Plaintiff does not bring an action pursuant to the CLRA. Next, Plaintiff has not stated how the arbitration terms have an illusory mutuality clause. Finally, Plaintiff does not lose the right to seek injunctive relief as any claims that are not decided by the arbitrator are stayed and will be determined following the arbitration.

Defendant Tesla Motors, 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: Arbitration for November 13, 2025 at 8:30 a.m.

[1] The Court of Appeal stated:

When allocating arbitral costs at the time of the award, the arbitrator will know the magnitude of those costs, as well as the size of the award, the resources available to the consumer to pay costs and whether a class has been certified that can share the costs. These and other relevant facts may be taken into account in the allocation. The consumer will have the burden of showing the extent of his or her ability to pay. The allocation will then be subject to judicial review, on a petition to confirm, correct or vacate the award. (§ 1285 et seq.) Though this review may exceed the narrow scope envisioned by the California Arbitration Act (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 6, 11, 33, 10 Cal.Rptr.2d 183, 832 P.2d 899), expanded judicial review was contemplated by both the United States and California Supreme Courts to ensure that statutory claims can be vindicated in the arbitral forum.

(Gutierrez v. Autowest, Inc. (2003) 114 Cal.App.4th 77, 100.)

Superior Court of California

County of Los Angeles

Department B