Judge: Jon R. Takasugi, Case: 24STCV18386, Date: 2024-11-07 Tentative Ruling

Case Number: 24STCV18386    Hearing Date: November 7, 2024    Dept: 17

Superior Court of California

County of Los Angeles

DEPARTMENT 17

TENTATIVE RULING

            Defendant Tesla, Inc.’s motion to compel arbitration is GRANTED.

            This is a “Lemon Law” action arising from a purchase of an allegedly defective car. On July 24, 2024, Plaintiff Lester Mayorga (“Plaintiff”) filed a Complaint against Defendant Tesla, Inc. (“Defendant” or “Tesla”) alleging causes of action for: (1) violation of subdivision (d) of Civil Code section 1793.2; (2) violation of subdivision (b) of Civil Code section 1793.2; (3) violation of subdivision (a)(3) of Civil Code section 1793.2; (4) breach of express written warranty (Civ. Code § 1791.2(a); § 1794); (5) breach of implied warranty of merchantability (Civ. Code § 1791.1; § 1794).

            On August 28, 2024, Defendant filed the instant motion to compel the dispute into arbitration, and to stay judicial proceedings during the pendency of arbitration.

            The motion is unopposed.

Legal Standard

The Federal Arbitration Act (“FAA”) reflects a liberal federal policy favoring arbitration and the fundamental principle that arbitration is a matter of contract. (AT&T Mobility LLC v. Concepcion¿(2011) 563 U.S. 333, 339 (Concepcion).) The Supreme Court’s recent decision in Morgan v. Sundance emphasizes that this policy is not designed to place arbitration agreements on unequal footing as other contracts, but only to make arbitration agreements as enforceable as other kinds of legally-binding contracts. (Morgan v. Sundance, Inc., 596 U.S. 411, 419.)

Similarly, Under California¿law,¿public policy favors arbitration as an efficient and less expensive means of resolving private disputes.¿(Moncharsh¿v.¿Heily¿&¿Blase¿(1992) 3 Cal.4th 1, 8-9; Concepcion,¿supra, 563 U.S. at p. 339.) In interpreting the U.S. Supreme Court’s decision in Morgan, the California Supreme Court also held that “California policy, like federal policy, puts arbitration agreements on equal footing with other types of contracts.” (Quach v. California Commerce Club, Inc., 16 Cal.5th 562, 569.)¿“To further that policy, Code of Civil Procedure, 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 (Acquire II), citing Code of Civ. Proc., § 1281.2, subds. (a)-(c).) “[U]nder¿both the FAA and California law, ‘arbitration agreements are valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.’”¿(Higgins v. Sup. Ct.¿(2006) 140 Cal.App.4th 1238, 1247.)

Accordingly, whether an agreement is governed by the California Arbitration Act (“CAA”) or the¿FAA, courts resolve doubts regarding the scope of arbitrable issues in favor of arbitration.¿(Moncharsh,¿supra, 3 Cal.4th at p. 9;¿Comedy Club, Inc. v. Improv West Assocs.¿(9th Cir. 2009) 553¿F.3d¿1277, 1284; see also¿Engalla¿v. Permanente Med. Grp., Inc.¿(1997) 15 Cal.4th 951, 971-972 [“California law incorporates many of the basic policy objectives contained in the Federal Arbitration Act, including a presumption in favor of arbitrability [citation] and a requirement that an arbitration agreement must be enforced on the basis of state law standards that apply to contracts in general [citation]”].)¿

The petitioner bears the burden of proving the existence of a valid arbitration agreement by a preponderance of the evidence, and the opposing party bears the burden of proving any fact necessary to its defense by the same evidentiary standard.¿(Gatton v. T-Mobile USA, Inc.¿(2007) 152 Cal.App.4th 571, 579.)

Finally, “[i]f a court of competent jurisdiction, whether in this State or not, has ordered arbitration of a controversy which is an issue involved in an action or proceeding pending before a court of this State, the court in which such action or proceeding is pending shall, upon motion of a party to such action or proceeding, stay the action or proceeding until an arbitration is had in accordance with the order to arbitrate or until such earlier time as the court specifies.” (Code Civ. Proc., § 1281.4.) Similarly, under the FAA, the Court is required to stay the proceedings for a case that has been referred to arbitration, upon application of one of the parties, during the pendency of such arbitration. (9 U.S.C. § 3.)

Discussion

            Defendant moves to compel Plaintiff’s dispute to arbitration on the basis of two separate agreements Plaintiff signed as a condition of purchasing a 2021 Tesla Model 3 (the “Subject Vehicle”), which is the subject of Plaintiff’s claims against Defendant. Both of these agreements, Defendant contends, contain enforceable arbitration agreements that allow either party to compel a dispute concerning the purchase or condition of an automobile pursuant to such agreements to arbitration, if either party so elects. The Court is satisfied that Defendant has presented sufficient evidence of the existence of an enforceable arbitration agreement that covers Plaintiff’s claims.

Existence of an Agreement to Arbitrate

            In ruling on a motion to compel arbitration, the court must first determine whether the parties actually agreed to arbitrate the dispute, and general principles of California contract law help guide the court in making this determination. (Mendez v. Mid-Wilshire Health Care Center (2013) 220 Cal.App.4th 534, 541.) “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.)

            Defendant asserts that Plaintiff executed two separate enforceable pre-dispute arbitration agreements on November 15, 2020 during Plaintiff’s purchase of the Subject Vehicle. In support of this assertion, Defendant presents the declaration of Raymond Kim—a Business Resolution Manager at Tesla who is familiar with the service and sales of Tesla vehicles at the time of of the subject transaction involving Plaintiff. (Kim Decl., ¶ 2.)

Kim testified that “Plaintiff initially ordered a 2021 Tesla Model 3 with VIN 5YJ3E1EA7MF867778 (the ‘Subject Vehicle’) from Tesla on or about November 15, 2020” and that, by executing this purchase, “Plaintiff electronically accepted the terms and conditions of the Motor Vehicle Order Agreement (‘MVOA’) online, a true and correct copy of which is attached hereto as Exhibit ‘1’ that I obtained from the electronic document storatge kept in the ordinary course of business.” (Id., ¶ 3; Exh. 1.) Kim elaborated that Plaintiff placed his order “by clicking a button that read ‘Place Order’ or Tesla’s website. … Immediately below the ‘Place Order’ button would have appeared text in bold font advising Plaintiff that by clicking ‘Place Order’ he would be agreeing to the terms and conditions of the [Motor Vehicle Order Agreement]. The Motor Vehicle Order Agreement appeared in bold font and was displayed as a hyperlink.” (Id., ¶ 4.)

The Motor Vehicle Order Agreement contains an arbitration provision that reads as follows:

Agreeement to Arbitrate. Please carefully read this provision, which applies to any dispute between you and Tesla, Inc. […].

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 juge 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 satements 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 arbitreation agreement in a lease or finance contract.

(Kim Decl., ¶ 6; Exh. 1 (emphasis and formatting in original).)

            Although the Motor Vehicle Order Agreement allows the customer to opt out of the arbitration agreement by sending a written waiver letter to Tesla, Kim testified that Plaintiff failed to do so. (Kim Decl., ¶ 7.)

            Further, Kim testified that Plaintiff also entered an arbitration agreement when he “took delivery of the Subject Vehicle on or about December 25, 2020, at which time Plaintiff executed a Retail Installment Sale Contract (‘RISC’) for the purchase of the Subject Vehicle on credit, a true and correct copy of which is attached hereto as Exhibit ‘2’.” (Kim Decl., ¶ 3; Exh. 2.) This form sales contract “is largely pre-printed, with the only details that need to be filled in being the financial details of the transaction, Plaintiff’s identifying information, the vehicle identifying information, and the signatures of the Plaintiff. Included in the pre-printed portion of the RISC in an arbitration provision.” (Id., ¶ 8.) Plaintiff was provided time by Tesla to read this contract, including the arbitration provision, prior to signing it. (Id., ¶ 9.) Once Plaintiff did sign the contract at or near the time of sale, it was electronically saved to the electronic document storage system connected to the Subject Vehicle’s VIN number.

            The Retail Installment Sale Contract contains an arbitration provision that reads as follows:

ARBITRATION PROVISION

PLEASE REVIEW – IMPORTANT – AFFECTS YOUR LEGAL RIGHTS

1.      EITHER YOU OR WE MAY CHOOSE TO HAVE ANY DISPTUE BETWEEN US DECIDED BY ARBITRATION AND NOT IN COURTOR 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. […]

(Kim Decl., ¶ 12; Exh. 2.)

            The Motor Vehicle Order Agreement submitted by Defendant seems to contain Plaintiff’s personally identifying information—including his name, phone number, and email—and indicates that the Subject Vehicle was placed pursuant to such agreement on November 15, 2020. As indicated by Defendant’s declarant, Plaintiff would not have been able to place such vehicle purchase order without agreeing to the Motor Vehicle Order Agreement, which included the above described arbitration agreement. (Kim Decl., ¶ 4.) Further, the Retail Installment Sale Contract seems to bear Plaintiff’s signature, which is sufficient evidence to meet the initial burden to show the existence of an arbitration agreement. (See Espejo v. Southern Calfiornai Permanente Medical Group (2016) 246 Cal.App.4th 1047, 1060.)

            Noting that the Order Agreement expressly states that “this agreement to arbitrate overrides any different arbitration agreement between us, including any arbitration agreement in a lease or finance contract[,]” the Court find that Defendant has satisfied its burden of establishing that the Motor Vehicle Order Agreement contains an existing agreement to arbitrate between the parties.

Applicability of the Federal Arbitration Act

            “A party seeking to enforce an arbitration agreement has the burden of showing FAA preemption.” (Lane v. Francis Capital Mgmt. LLC (2014) 224 Cal.App.4th 676, 684.) California law provides that parties may expressly designate that any arbitration proceeding should move forward underthe FAA’s procedural provisions rather than under state procedural law. (Cronus Investments, Inc. v. Concierge Services (2005) 35 Cal.4th 376, 394.) Otherwise, the FAA provides for enforcement of arbitration provisions in any “‘contract evidencing a transaction involving commerce.’ (9 U.S.C. § 2.)” (Allied-Bruce Terminix Companies, Inc. v. Dobson (1995) 513 U.S. 265, 277.) Accordingly, “[t]he party asserting the FAA bears the burden to show it applies by presenting evidence establishing the contract with the arbitration provision has a substantial relationship to interstate commerce[.]” (Carbajal v. CWPSC, Inc. (2016) 245 Cal.App.4th 227, 234 (italics added).) Moreover, as noted above, the California contract law applies to the validity of the arbitration agreement. (Winter v. Window Fashions Professionals, Inc. (2008) 166 Cal.App.4th 943, 947.)

            Here, Defendant has satisfied the requirement to establish that the FAA applies by presenting sufficient evidence that the arbitration agreement was included in a contract involving interstate commerce. Both the Order Agreement and Sale Contract related to the sale of motor vehicles. Defendant points to Sanchez v. Valencia Holding Co., LLC (2015) 61 Cal.4th 899, where the California Supreme Court analyzed whether a similar arbitration agreement included in an automobile sales contract was unconscionable under the terms of the FAA. Defendant also cited to persuasive federal authority stating that even when used in intrastate commerce, “cars are themselves instrumentalities of commerce, which Congress may protect.” (United States v. Oliver (9th Cir. 1995) 60 F.3d 547, 551.) Accordingly, the FAA applies and will preempt California law if in conflict.

Scope of the Arbitration Clause

            Both arbitration provisions in the agreement Plaintiff agreed to as a virtue or ordering and purchasing the Subject Vehicle include broad scopes. According to the arbitration provision in the Order Agreement, Plaintiff agreed to arbitrate “any dispute between [Plaintiff] and Tesla, Inc.” (Kim Decl., ¶ 6; Exh. 1.) According to the Sale Contract, Plaintiff agreed to arbitrate “[a]ny claim or dispute, whether in contract, tort, statute or tohwerise … between [Plaintiff] and [Tesla] … which arises out of or relates to your credit application, purchase or conditions of this vehicle, this contract or any resulting transaction or relationship ….” (Kim Decl., ¶ 12; Exh. 2.)

            Here, Plaintiff brings five (5) different causes of action which each arise under the Song-Beverly Consumer Warranty Act (the “Song-Beverly Act”). As Defendant properly contends, each of Plaintiff’s claims, on their face, directly arise out of the relationship between Plaintiff as purchaser/consumer and Tesla as the manufacturer/warrantor. Accordingly, plaintiff’s claims are within the scope of the operative arbitration agreement contained within the Motor Vehicle Order Agreement.

Enforceability of Agreement

            “Once … [an existent arbitration agreement] is presented to the court, the burden shifts to the party opposing the motion to compel, who may present any challenges to the enforcement of the agreement and evidence in support of those challenges.” (Baker v. Italian Maple Holdings, LLC (2017) 13 Cal.App.5th 1152, 1160.)

As stated above, both under California and Federal law, courts are obligated to treat arbitration agreements as equally enforceable as any other contractual agreement. (Morgan v. Sundance, Inc., 596 U.S. 411, 419; Quach v. California Commerce Club, Inc., 16 Cal.5th 562, 569.) Accordingly, “under¿both the FAA and California law, ‘arbitration agreements are valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.’”¿(Higgins v. Sup. Ct., supra, 140 Cal.App.4th at p. 1247.)

Here, Plaintiff has not presented any defense to the enforcement of the arbitration agreement in this case. Accordingly, Plaintiff has not established any basis to deny enforcement of the arbitration agreement in the Motor Vehicle Order Agreement between Plaintiff and Defendant, which covers the claims in this matter.

Based on the foregoing, the Court GRANTS Defendant’s Motion to Compel Arbitration.

Stay of Proceedings

As stated above, “[i]f a court of competent jurisdiction, whether in this State or not, has ordered arbitration of a controversy which is an issue involved in an action or proceeding pending before a court of this State, the court in which such action or proceeding is pending shall, upon motion of a party to such action or proceeding, stay the action or proceeding until an arbitration is had in accordance with the order to arbitrate or until such earlier time as the court specifies.” (Code Civ. Proc., § 1281.4.) And similarly, under the FAA, a Court is required to stay the proceedings for a case that has been referred to arbitration, upon application of one of the parties, during the pendency of such arbitration. (9 U.S.C. § 3.)

Here, Defendant requests the Court to stay judicial proceedings during the pendency of the arbitration in this case. Based on the foregoing, the Court GRANTS Defendant’s request to stay judicial proceedings pending the competion of contractually mandated arbitration.

Conclusion

            In all, the Court GRANTS Defendant’s Motion to Compel Aribtration. And the Court GRANTS Defendant’s request to stay judicial proceedings pending the completion of the contractually mandated arbitration.

            Moving Party to give notice.

Dated: November     , 2024

   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. 

For more information, please contact the court clerk at (213) 633-0517.  Your understanding is appreciated.