Judge: Jon R. Takasugi, Case: 21STCV23551, Date: 2022-07-26 Tentative Ruling

Case Number: 21STCV23551    Hearing Date: July 26, 2022    Dept: 17

Superior Court of California

County of Los Angeles

DEPARTMENT 17

TENTATIVE RULING

Defendant’s motion to compel arbitration is GRANTED. This matter is ordered stayed pending the completion of arbitration proceedings.

            On 6/24//2021, Plaintiff Mansal Mansour (Plaintiff) filed suit against Hyundai Motor America (Defendant) alleging violations of the Song-Beverly Act.

            Now, Defendant moves to compel arbitration of Plaintiff’s Complaint.

Discussion

The party moving to compel arbitration “bears the burden of proving [the] existence [of an arbitration agreement] by a preponderance of the evidence.” (Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 413.) The moving party also bears the burden of demonstrating that the claims fall within the scope of the arbitration agreement. (Omar v. Ralphs Grocery Co. (2004) 118 Cal.App.4th 955, 961.)

A.    Existing Agreement

Defendant submitted evidence that on 6/21/2020, Plaintiff entered into a purchase contract (RISC) for a new 2020 Hyundai Ioniq. The Purchase Agreement reads “ARBITRATION PROVISION” and “PLEASE REVIEW – IMPORTANT- AFFECTS YOUR LEGAL RIGHTS”).” (Tahsildoost Decl., ¶5, Exh. 2.) 

The arbitration provision provides:

1.      EITHER YOU OR WE MAY CHOOSE TO HAVE ANY DISPUTE BETWEEN US DECIDED BY ARBITRATION AND NOT IN COURT OR BY JURY TRIAL.

2.      IF A DISPUTE IS ARBITRATED, YOU WILL GIVE UP YOUR RIGHT TO PARTICIPATE AS A CLASS REPRESENTATIVE OR CLASS MEMBER ON ANY CLASS CLAIM YOU MAY HAVE AGAINST US INCLUDING ANY RIGHT TO CLASS ARBITRATION OR ANY CONSOLIDATION OF INDIVIDUAL ARBITRATIONS.

3.      DISCOVERY AND RIGHTS TO APPEAL IN ARBITRATION ARE GENERALLY MORE LIMITED THAN IN A LAWSUIT, AND OTHER RIGHTS THAT YOU AND WE WOULD HAVE IN COURT MAY NOT BE AVAILABLE IN ARBITRATION.

Any claim or dispute, whether in contract, tort, statute or otherwise (including the interpretation and scope of this Arbitration Provision, and the arbitrability of the claim or dispute), between you and us or our employees, agents, successors or assigns, which arises out of or relates to your credit application, purchase or condition of this vehicle, this contract or any resulting transaction or relationship (including any such relationship with third parties who do not sign this contract) shall, at your or our election, be resolved by neutral, binding arbitration and not by a court action […] 

            (Ibid.)

In opposition, Plaintiff argues that Defendant has no standing as a non-signatory to invoke arbitration because there is no principal-agent relationship, no third-party beneficiary relationship, and because the doctrine of equitable estoppel does not apply. In particular, Plaintiff alleges that the agreement was purely between Plaintiff and the non-party selling dealership, and that his claims against Defendant in no way reference the underlying RISC.

Where a nonsignatory seeks to enforce an arbitration clause, the doctrine of equitable estoppel applies in two circumstances: (1) when a signatory must rely on the terms of the written agreement in asserting its claims against the nonsignatory or the claims are “intimately founded in and intertwined with” the underlying contract [citations], and (2) when the signatory alleges substantially interdependent and concerted misconduct by the nonsignatory and another signatory and “the allegations of interdependent misconduct [are] founded in or intimately connected with the obligations of the underlying agreement.” (Felisilda v. FCA US LLC (2020) 53 Cal.App.5th 486, 495.) 

For several reasons, the Court is persuaded that the doctrine of equitable estoppel applies here.

First, Plaintiff’s Complaint not only assumes the existence of the underlying vehicle sales contract, but necessarily relies on this contract’s existence in order to assert causes of action under the Song-Beverly Consumer Warranty Act. While Plaintiff may argue otherwise, Plaintiff received the Subject Vehicle and manufacturer warranties when he executed the RISC. If Plaintiff did not enter into the RISC, he would not have received the Subject Vehicle or the corresponding warranties and certifications from Defendant.  Defendant’s duty to comply with warranties arose only after Plaintiff purchased the vehicle.

Second, Plaintiff’s Song-Beverly claims all directly relate to the “condition” of the subject vehicle that Plaintiff alleges violated warranties received via the sales contract.  Specifically, Plaintiff’s Complaint alleges the Subject Vehicle contained warning light  defects (Complaint ¶ 11) and Defendant was unable to conform the Subject Vehicle to its express warranties and failed to disclose these defects (Complaint ¶¶ 11, 13.) As such, Plaintiff’s claim are intimately founded in and intertwined with the underlying contract and the condition of the vehicle bought subject to that contract.

In sum, all of Plaintiff’s claims center on the condition of the Subject Vehicle, and arise from the purchase of the Subject Vehicle. Given that Plaintiff’s claims are intertwined with the “purchase or condition” of the vehicle, and given that Plaintiff’s claim relies on the existence of the underlying sales contract, the doctrine of equitable estoppel applies. (Felisilda, supra, 53 Cal.App.5th at p. 495.) 

B.    Covered Claims

As set forth above, Plaintiff’s claims against Defendant arise out of the purchase and condition of the subject vehicle, and thus fall within the scope of the arbitration agreement. 

Given that Defendant has established by a preponderance of the evidence that an arbitration agreement exists, and that Plaintiff’s claims are covered by that agreement, the burden shifts to the Plaintiff to establish that the arbitration clause should not be enforced. (Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 236. (Pinnacle).)

II.               Plaintiff’s Burden 

The party opposing arbitration bears the burden of proving, by a preponderance of the evidence any defense, such as unconscionability or duress. (Pinnacle, supra, 55 Cal.4th at p. 236.)

“Unconscionability has both procedural and substantive elements. Although both must appear for a court to invalidate a contract or one of its individual terms, they need not be present in the same degree: ‘[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.’”  (Roman v. Superior Court (2009) 172 Cal.App.4th 1462, 1469. (Roman).) Where the degree of procedural unconscionability is low, “the agreement will be enforceable unless the degree of substantive unconscionability is high.” (Ajamian v. CantorCO2e (2012) 203 Cal.App.4th 771, 796 (Ajamian).)

      Plaintiff argues that the agreement is procedurally unconscionable because it is an adhesion contract, and substantively unconscionable because it strips Plaintiff of critical discovery rights.

Tellingly, as to his first contention, Plaintiff has not set forth any case law wherein a Court found the adhesive nature of a vehicle purchase agreement to be procedurally unconscionable. While Courts have found adhesion contracts to evince a “degree” of procedural unconscionability in the employment context, this is because “the arbitration agreement stands between the employee and necessary employment, and few employees are in a position to refuse a job because of an arbitration agreement.” (Little v. Auto Stiegler, Inc. (2003) 29 Cal.4th 1064, 1071.) By contrast, consumers do not face the same pressure to consent to an adhesive arbitration agreement when purchasing consumer goods. Because Plaintiff did not face the same economic pressure when purchasing a vehicle as an individual applying for a job would have, the Court declines to find any degree of procedural unconscionability.

      Because Plaintiff has failed to present any evidence of procedural unconscionability, he has failed to meet his burden.

Based on the foregoing, Defendant’s motion to compel arbitration is granted. This matter is ordered stayed pending the completion of arbitration proceedings.

It is so ordered.

Dated:  July    , 2022

   Hon. Jon R. Takasugi
   Judge of the Superior Court

Parties who intend to submit on this tentative must send an email to the court at smcdept17@lacourt.org by 4 p.m. the day prior as directed by the instructions provided on the court website at www.lacourt.org.  If a party submits on the tentative, the party’s email must include the case number and must identify the party submitting on the tentative.  If all parties to a motion submit, the court will adopt this tentative as the final order.  If the department does not receive an email indicating the parties are submitting on the tentative and there are no appearances at the hearing, the motion may be placed off calendar. 

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