TENTATIVE ORDER

Defendant Tesla, Inc.’s Motion to Compel Binding Arbitration is CONTINUED to TBD at hearing. On or before TBD at hearing, Defendant Tesla, Inc. shall provide a supplemental brief of no more than five (5) pages in length limited to the issue of whether a party can move to compel arbitration under a contract it has assigned to another party. Plaintiff Jonathan R. Shadi shall provide a responsive brief of no more than five (5) pages on or before TBD at hearing, again limited to this issue only. No further briefing will be considered.

Defendant Tesla, Inc. to give notice.

REASONING

Request for Judicial Notice

Defendant Tesla, Inc. (“Defendant”) requests judicial notice of Plaintiff Jonathan R. Shadi (“Plaintiff”)’s complaint in this action. Defendant’s request is GRANTED pursuant to Evidence Code section 452, subdivision (a).

Analysis

Defendant moves to compel Plaintiff to submit to arbitration on the ground that Plaintiff entered into a Motor Vehicle Order Agreement and Retail Installment Sales Contract, wherein Plaintiff agreed to arbitrate all claims relating to the condition of the 2020 Tesla Model X vehicle at issue in this action. Defendant argues that both agreements include a valid arbitration provision, and both agreements provide a basis for compelling arbitration here. Plaintiff opposes the motion on the ground that Plaintiff signed a superseding contract, and all rights were assigned to JPMorgan Bank, N.A., such that Defendant lacks standing to compel arbitration under the agreements.

“[I]n considering a . . . petition to compel arbitration, a trial court must make the preliminary determinations whether there is an agreement to arbitrate and whether the petitioner is a party to that agreement (or can otherwise enforce the agreement).” (M & M Foods, Inc. v. Pac. Am. Fish Co. (2011) 196 Cal.App.4th 554, 559; see also Giuliano v. Inland Empire Personnel, Inc. (2007) 149 Cal.App.4th 1276, 1284 [“petitioner bears the burden of proving the existence of a valid arbitration agreement by the preponderance of the evidence”].) In deciding a petition to compel arbitration, trial courts must first decide whether an enforceable arbitration agreement exists between the parties, and then determine whether plaintiff’s claims are covered by the agreement. (Omar v. Ralphs Grocery Co. (2004) 118 Cal.App.4th 955, 961.) The burden then shifts to the opposing party to prove, by a preponderance of evidence, a defense to enforcement of the agreement. (Rosenthal v. Great Western Financial Securities Corp. (1996) 14 Cal.4th 394, 413.)

Code of Civil Procedure section 1281 states, “A written agreement to submit to arbitration an existing controversy or a controversy thereafter arising is valid, enforceable and irrevocable, save upon such grounds as exist for the revocation of any contract.” Code of Civil Procedure section 1281.2 provides, in relevant part:

On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party thereto refuses to arbitrate such controversy, the court shall order the petitioner and the respondent to arbitrate the controversy if it determines that an agreement to arbitrate the controversy exists, unless it determines that:

(a) The right to compel arbitration has been waived by the petitioner; or

(b) Grounds exist for the revocation of the agreement.

(c) A party to the arbitration is also a party to a pending court action or special proceeding with a third party . . . .

“The right to arbitration depends upon contract; a petition to compel arbitration is simply a suit in equity seeking specific performance of that contract.” (Engineers & Architects Association v. Community Development Department (1994) 30 Cal.App.4th 644, 653.) General principles of contract law determine whether the parties have entered a binding agreement to arbitrate. (Chan v. Drexel Burnham Lambert, Inc. (1986) 178 Cal.App.3d 632, 640-641 [“The existence of a valid agreement to arbitrate involves general contract principles”].)

On October 27, 2019, Plaintiff placed an order to purchase the subject vehicle through Defendant’s website, which required Plaintiff to accept the terms and conditions of the Order Agreement. (Mot., Kim Decl. ¶¶ 3-4, Ex. 1.) The Order Agreement appeared in bold font and was displayed as a hyperlink, and if Plaintiff clicked on the hyperlink, a new window would have opened, revealing the agreement described in the hyperlink. (Mot., Kim Decl. ¶ 4.) The Order Agreement is a four-page document with terms and conditions, and on page 3 there is a provision stating as follows:

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.

(Mot., Kim Decl. ¶ 3, Ex. 1, hyperlinks omitted.) A customer may opt out by sending a letter to Defendant, but Plaintiff did not do so. (Mot., Kim Decl. ¶ 7.) 

On December 22, 2019, Plaintiff took delivery of the vehicle from Defendant, which required him to execute a Sale Contract. (Mot., Kim Decl. ¶ 3, 8, Ex. 2.) The last page of the Sale Contract, signed by Plaintiff, includes a notice of “ARBITRATION PROVISION [¶] PLEASE REVIEW – IMPORTANT – AFFECTS YOUR LEGAL RIGHTS” in bold, capitalized letters, describing the arbitration process as follows:

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.

(Mot., Kim Decl. ¶ 3, Ex. 2.) The Sale Contract identifies “you” as the buyer, Plaintiff, and “we” and “us” as the seller-creditor, Defendant. (Ibid.) As shown on the last page, the Sale Contract was then assigned by Defendant to JPMorgan Chase Bank, N.A. (Ibid.)

The Order Agreement is a version of a clickwrap agreement, an agreement in which an internet user accepts terms and conditions by clicking an “I agree” or “I accept” button, with a link to the agreement readily available, as was the case here. (Sellers v. JustAnswer LLC (2021) 73 Cal.App.5th 444, 463.) Such agreements are generally considered enforceable. (Id. at p. 470.) Plaintiff argues this agreement is not enforceable because it is not binding, and it has consideration of only $100 as an “Order Fee.” The Court finds that this agreement is not enforceable here, as Plaintiff’s claims do not clearly fall within the purview of the arbitration agreement within the Order Agreement. The provision states that it applies to “any dispute” between Plaintiff and Defendant. (Mot., Kim Decl. ¶ 3, Ex. 1.) However, the Order Agreement related only to an agreement to purchase the vehicle. Plaintiff could not have agreed to arbitrate any dispute that would ever occur between him and Defendant. Rather, he agreed to arbitrate disputes relating to his order for a Tesla vehicle. The fact that there was a second, separate Sale Contract makes clear that the sale of the vehicle was not complete simply by paying a $100 order fee and ordering a vehicle. “An arbitration agreement is tied to the underlying contract containing it, and applies only where a dispute has its real source in the contract. . . . No authority permits sending a matter to arbitration simply because the same parties agreed to arbitrate a different matter.” (Moritz v. Universal City Studios LLC (2020) 54 Cal.App.5th 238, 246.) It follows that Plaintiff’s claims do not arise out of the Order Agreement; they arise out of Sale Contract, which is when Plaintiff actually took ownership of the vehicle. Thus, the Court must consider whether the Sale Contract serves as a proper basis for arbitration.

It is undisputed that the Sale Contract was assigned to JPMorgan Chase Bank, N.A. In its reply, Defendant argues that its rights under the Sale Contract were not assigned, as it merely assigned its “interest” in the contract, not its rights. However, Defendant fails to provide any legal authority compelling such a conclusion, i.e., the Court lacks persuasive authority to support a finding that a party can assign a contract in the way Defendant did here but still move to compel arbitration. Defendant has provided only a short paragraph of argument in this respect, and the Court requires more authority and argument from both parties as to this issue. Accordingly, Defendant Tesla, Inc.’s Motion to Compel Binding Arbitration is CONTINUED TBD at hearing. On or before TBD at hearing, Defendant Tesla, Inc. shall provide a supplemental brief of no more than five (5) pages in length limited to the issue of whether a party can move to compel arbitration under a contract it has assigned to another party. Plaintiff Jonathan R. Shadi shall provide a responsive brief of no more than five (5) pages on or before TBD at hearing, again limited to this issue only. No further briefing will be considered.