Judge: Lee W. Tsao, Case: 23NWCV02576, Date: 2024-07-10 Tentative Ruling
Case Number: 23NWCV02576 Hearing Date: July 10, 2024 Dept: C
MANCILLA
v. HYUNDAI MOTOR AMERICA
CASE
NO.: 23NWCV02576
HEARING:
7/10/24
#3
TENTATIVE ORDER
Defendant Hyundai Motor
America’s motion to compel arbitration is GRANTED.
Moving Party to give NOTICE.
This
is a Song-Beverly action. Defendant Hyundai Motor America moves to compel
arbitration of the parties’ dispute about alleged violations of the
Song-Beverly Act.
Requests
for Judicial Notice
Plaintiff
requests judicial notice of the following: (1) Martha Ochoa v. Ford Motor
Company (2023) 89 Cal.App.5th 1324; (2) Mark Kielar v. Super. Ct.
(2023) 94 Cal.App.5th 614; (3) Ngo v. BMW of North America, LLC, et al.
(9th Cir. 2002) 23 F.4th 942.
The
Court grants judicial notice under Evidence Code section 451, subdivision (a).
Compel
Arbitration
Defendant
moves to compel arbitration on the grounds of equitable estoppel. Defendant
argues that because Plaintiff agreed to be bound by a Retail Installment Sale
Contract (“RISC”) requiring him to resolve any disputes concerning the purchase
or condition of the vehicle by binding arbitration, he must arbitrate his
dispute with Defendant. Defendant also moves to arbitrate based on the
arbitration provision as part of Plaintiff’s warranty.
Retail Installment Sales Contract
A nonsignatory
manufacturer can compel arbitration under equitable estoppel “when the causes of
action against the nonsignatory are ‘intimately founded in and intertwined’
with the underlying contract obligations.” (Felisilda v. FCA US LLC
(Felisilda) (2020) 53 Cal.App.5th 486, 495.) The causes of actions
are intimately founded in and intertwined even if they do not exclusively rely
on the contract terms. “ ‘The fundamental point’ is that a party is ‘not
entitled to
make use of [a contract
containing an arbitration clause] as long as it worked to [his or] her advantage,
then attempt to avoid its application in defining the forum in which [his or]
her dispute . . . should be resolved.’” (Id. at 496.)
The court in Felisilda,
supra, 53 Cal.App.5th 486, 496-497, held that the manufacturer could compel
arbitration because the condition of the vehicle was within the subject matter
of the claims made arbitrable under the sale contract, the sale contract was
the source of the manufacturer’s warranties under which plaintiffs were suing,
and plaintiffs had expressly agreed to arbitrate claims arising out of the
condition of the vehicle, even against third party nonsignatories.
The court in Ford
Motor Warranty Cases (2023) 89 Cal.App.5th 1324, disagreed with Felisilda
that arbitration could be compelled under an identical arbitration provision.
This Court can now choose to either continue to follow Felisilda or
instead adopt Ford’s reasoning. (Sarti v. Salt Creek Ltd. (2008) 167
Cal.App.4th 1187, 1193.)
The Ford court
disagreed with Felisilda on the grounds that the fact “[t]hat the Felisilda
plaintiffs and the dealers agreed in their sale contract to arbitrate disputes
between them about the condition of the vehicle does not equitably estop the
plaintiffs from asserting [the manufacturer] has no right to demand
arbitration. Equitable estoppel would apply if the plaintiffs had sued [the
manufacturer] based on
the terms of the sale contract yet denied [the manufacturer] could enforce the
arbitration clause in that contract.” (Ford, supra, 89 Cal.App.5th 1324,
1334.) The Ford court held that the plaintiffs’ claims did not arise in the
sale contracts and instead on the statutory obligations under the Song-Beverly
Consumer Warranty Act, breach of implied warranty of merchantability, and
fraudulent inducement. “Not one of the plaintiffs sued on any
express contractual
language in the sale contract.” (Ford, supra, 89 Cal.App.5th 1324,
1335.)
Specifically, the
contract contained provisions that disclaimed any warranty by the Dealers, “while
acknowledging no effect on ‘any warranties covering the vehicle that the
vehicle manufacturer may provide.’” (Ibid.) Further, the California
Supreme Court distinguished between warranties from the seller arising out of
contract and warranties from the manufacturer arising “independently of a
contract of sale between the parties.” (Greenman v. Yuba Power
Products, Inc. (1963) 59 Cal.2d 57,
60.) Thus, plaintiffs’ claims were not “intimately founded in and intertwined”
with the sale contracts because the sale contracts do not intend to cover the manufacturer’s
warranties. (Ford, supra, 89 Cal.App.5th 1324, 1336.) Therefore,
equitable estoppel does not apply to compel plaintiff to arbitrate his claims
because plaintiff was not making use of the terms of the sale contracts. (Ibid.)
This Court chooses to follow Ford’s
reasoning.
Defendant cannot compel
arbitration because Plaintiff’s claims arise from Defendant’s statutory obligation
and are not based on any express contractual language. Equitable estoppel is applicable
where one party relies on a contract, which includes an arbitration provision,
in asserting its claims against a third party but attempts to avoid its
application to determining the forum in pursuing its claims. (Felisilda,
supra, 53 Cal.App.5th 486, 496.) Here, like in Ford, Plaintiff’s
claims “are based on [Defendant’s] statutory obligations to reimburse consumers
or replace their vehicles when unable to repair in accordance with its
warranty,” not based “on any express contractual language in the sale
contracts.” (Ford, supra, 89 Cal.App.5th 1324, 1335.) Plaintiff’s claims
do not arise directly out of the RISC, even if Defendant’s warranties accompanied
the sale of the subject vehicle. “The sale contracts include no warranty, nor
any assurance regarding the quality of the vehicle sold, nor any promise of
repairs or other remedies in the event problems arise. To the contrary, the
sale contracts disclaim any warranty on the part of the dealers, while
acknowledging no effect on ‘any warranties covering the vehicle that the vehicle
manufacturer may provide.’ In short, the substantive terms of the sale
contracts relate to sale and financing and nothing more.” (Ibid.)
Similarly, here the RISC includes no warranty, any assurance regarding the
quality of the vehicle, no promise to make repairs, and disclaims any manufacturer
warranty. Thus, like Ford, Plaintiff’s claims arise from Defendant’s statutory
obligation and not from the sale contract. Therefore, Defendant may not compel
arbitration because Plaintiffs’ claims are not intimately found in or intertwined
with the RISC.
Warranty
Plaintiff
argues that the arbitration clause in the warranty is procedurally and
substantively unconscionable.
A showing of unconscionability
requires procedural and substantive unconscionability. Procedural
unconscionability asks whether there is oppression from unequal bargaining
power or surprise from buried terms. (Armendariz v. Foundation Health
(2000) 24 Cal.4th 83, 114.) Substantive unconscionability asks whether
there are overly harsh, one-sided terms. (Id.) Both are required
to be proven to find unconscionability. However, there is a sliding scale; if
an agreement is particularly substantively unconscionable, the petitioner need
not show a large amount of procedural unconscionability, and vice versa. (Id.)
“The party resisting arbitration bears the burden of proving
unconscionability.” (Pinnacle Museum Tower Assn. v. Pinnacle Market
Development (US), LLC (2012) 55 Cal.4th 223, 236.)
Procedural Unconscionability
Plaintiff bears the burden of proving, by a preponderance of the
evidence, any fact necessary to show the Agreement was invalid. (See Banner Entertainment, Inc. v. Super. Ct.¿(1998) 62 Cal.App.4th 348, 356-357.)
Plaintiff argues that the arbitration agreement was not disclosed to
Plaintiff, it was buried in the warranty booklet, and he never signed the
agreement. But these circumstances, alone, do not constitute procedural
unconscionability. (See Dougherty v. Roseville Heritage Partners (2020) 47
Cal.App.5th 93, 103.) Unlike the plaintiff in Dougherty, the plaintiff had
options and could have purchased the vehicle elsewhere.
Substantive Unconscionability
Plaintiff makes no arguments about substantive
unconscionability.
Hence, the motion to compel arbitration is
GRANTED.