TENTATIVE ORDER

Defendant Lucid Group USA, Inc.’s Petition to Compel Arbitration and Stay Proceedings is GRANTED.

The proceedings are hereby STAYED pending the outcome of arbitration.

Defendant Lucid Group USA, Inc. to give notice.

REASONING

Request for Judicial Notice

Plaintiffs Syed Mohammad G. Hossain and Syed Hossain M.D., Inc. (“Plaintiffs”) request judicial notice of this Court’s ruling denying a motion to compel arbitration in Los Angeles Superior Court Case No. 24SMCV03931 (Cacciapaglia v. Tesla, Inc.). Plaintiffs’ request is GRANTED pursuant to Evidence Code section 452, subdivision (d).

Analysis

Defendant Lucid Group USA, Inc. (“Defendant”) moves to compel Plaintiffs to submit to arbitration on the ground that Plaintiffs entered into a Purchase Agreement, wherein they agreed to arbitrate all claims relating to the condition of the 2022 Lucid Air vehicle at issue in this action. Defendant argues that the contract includes a valid arbitration provision, Plaintiffs did not opt out of the arbitration provision, and Plaintiffs’ claims fall within the scope of the arbitration provision. Plaintiffs oppose the motion on the ground that the arbitration clause is unconscionable.

Here, Plaintiffs entered into a Purchase Agreement with an arbitration provision stating, in part, as follows:

11. Disputes, Arbitration, Waiver of Jury Demand

If either you or we have a dispute, the party raising the dispute will send a written notice of the dispute to the other, along with the requested resolution. You can send your request to us at disputes@lucidmotors.com. If a dispute is not resolved within 60 days, you and we agree that any dispute or claim between you and us or relating in any way to this Agreement will be resolved by binding arbitration, rather than in court, except that either you or we may assert claims in small claims court if the claims qualify. . . . Claims arising out of or relating to the validity, application, scope, enforceability, or interpretation of this provision (the “Arbitration Agreement”) shall also be decided by an arbitrator and will be governed by the Federal Arbitration Act, 9 U.S.C § 1 et seq. (“FAA”). . . .

We also both agree that you or we may bring suit in court to: 1) enjoin infringement or other misuse of intellectual property rights; 2) file bankruptcy; 3) enforce a security interest in the Vehicle by repossession; 4) take legal action in court enforce the arbitrator’s decision; or 5) request that a court review whether the arbitrator exceeded the authority granted by this Arbitration Agreement. . . .

Opt-Out: You may opt-out of the Arbitration Agreement, within 60 days from the date you accept this Agreement, by sending an email to Optout@LucidMotors.com from the email associated with your order with “Arbitration Opt-Out” in the subject line and indicating your request to optout of the arbitration provision in the body of the email.

(Mot., Hupman Decl. ¶ 3, Ex. A, at ¶ 11.) Plaintiffs do not dispute that they signed this agreement. Instead, Plaintiff argues that the arbitration agreement is unconscionable.

At the outset, Plaintiffs contend that unconscionability is an issue to be decided by the Court, while Defendant argues that the arbitrator decides issues of unconscionability. Again, the agreement expressly provided that “[c]laims arising out of or relating to the validity, application, scope, enforceability, or interpretation of this provision (the ‘Arbitration Agreement’) shall also be decided by an arbitrator.” (Mot., Hupman Decl. ¶ 3, Ex. A, at ¶ 11.) The question of who decides issues of arbitrability is described as follows:

Parties may agree to have an arbitrator decide not only the merits of a particular dispute but also gateway questions of arbitrability, such as whether the parties have agreed to arbitrate or whether their agreement covers a particular controversy. But courts should not assume that the parties agreed to arbitrate arbitrability unless there is clear and unmistakable evidence that they did so.

This is a heightened standard that pertains to the parties’ manifestation of intent, not the agreement’s validity. That is because the question of who would decide gateway questions like the unconscionability of an arbitration provision is not one that the parties would likely focus upon in contracting, and the default expectancy is that the court would decide the matter. Although parties are free to authorize arbitrators to resolve such questions, courts will not conclude that they have done so based on silence or ambiguity in their agreement, because doing so might too often force unwilling parties to arbitrate a matter they reasonably would have thought a judge, not an arbitrator, would decide. The “clear and unmistakable” test applies under both the FAA and California law.

Courts have held that there are two prerequisites for a delegation clause to be effective. First, the language of the clause must be clear and unmistakable. Second, the delegation must not be revocable under state contract defenses such as fraud, duress, or unconscionability.

(Mendoza v. Trans Valley Transport (2022) 75 Cal.App.5th 748, 772-773, quotation marks, brackets, citations omitted.)

The Court finds that the language of the Purchase Agreement makes clear that the parties intended to delegate all issues to the arbitrator, including issues of unconscionability, with the language that “[c]laims arising out of or relating to the validity, application, scope, enforceability, or interpretation of this provision (the ‘Arbitration Agreement’) shall also be decided by an arbitrator.” (Mot., Hupman Decl. ¶ 3, Ex. A, at ¶ 11.) The provision meets the first prerequisite for a delegation clause to be effective, i.e., the language of the clause is clear and unmistakable. The second requirement is that the delegation clause cannot “be revocable under state contract defenses such as fraud, duress, or unconscionability.” (Mendoza v. Trans Valley Transport, supra, 75 Cal.App.5th at p. 773.)

As to unconscionability, it is axiomatic that “a party opposing the petition [to compel arbitration] bears the burden of proving by a preponderance of the evidence any fact necessary to its defense. [] In these summary proceedings, the trial court sits as a trier of fact, weighing all the affidavits, declarations, and other documentary evidence, as well as oral testimony received at the court’s discretion, to reach a final determination.” (Giuliano v. Inland Empire Personnel, Inc., supra, 149 Cal.App.4th at p. 1284.) “Courts analyze the unconscionability standard in Civil Code section 1670.5 as invoking elements of procedural and substantive unconscionability.” (McManus v. CIBC World Markets Corp. (2003) 109 Cal.App.4th 76, 87 (McManus).) “The procedural element of unconscionability focuses on whether the contract is one of adhesion” and “whether there is oppression arising from an inequality of bargaining power or surprise arising from buried terms in a complex printed form.” (Ibid., quotation marks omitted.) “The substantive element addresses the existence of overly harsh or one-sided terms.” (Ibid.) “An agreement to arbitrate is unenforceable only if both the procedural and substantive elements are satisfied.” (Ibid.)

“Procedural unconscionability pertains to the making of the agreement; it focuses on the oppression that arises from unequal bargaining power and the surprise to the weaker party that results from hidden terms or the lack of informed choice.” (Ajamian v. CantorCO2e, L.P. (2012) 203 Cal.App.4th 771, 795.) An arbitration provision is substantively unconscionable where the provision “does not fall within the reasonable expectations of the weaker or ‘adhering’ party,” is “unduly oppressive,” or has “overly harsh or one-sided” terms. (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 113-114 (Armendariz); McManus, supra, 109 Cal.App.4th at p. 87.) “An arbitration agreement is lawful if it (1) provides for neutral arbitrators, (2) provides for more than minimal discovery, (3) requires a written award, (4) provides for all of the types of relief that would otherwise be available in court, and (5) does not require [the assenting party] to pay either unreasonable costs or any arbitrators fees or expenses as a condition of access to the arbitration forum.” (Armendariz, supra, 24 Cal.4th at p. 102, quotation marks omitted.)

Plaintiffs argue that the agreement is procedurally unconscionable because it was a preprinted consumer sales contract presented to Plaintiffs on a “take it or leave it” basis, such that Plaintiffs had no meaningful opportunity to negotiate the terms. This argument is not well taken. First, the agreement included an opt-out provision, but Plaintiffs provide no evidence that they attempted to opt out of the arbitration agreement. Second, presentation of an arbitration agreement on a “take it or leave it” basis, even in an employment context, does not automatically render the agreement procedurally unconscionable; Plaintiffs must also show that there was no opportunity for meaningful negotiation or that he was subjected to oppressive tactics that forced him to sign the agreement. (See Lagatree v. Luce, Forward, Hamilton & Scripps (1999) 74 Cal.App.4th 1105, 1127 [“a compulsory predispute arbitration agreement is not rendered unenforceable just because it is required as a condition of employment or offered on a ‘take it or leave it’ basis”].) Notably, Plaintiffs make no argument that they were not given the agreement to review and study before purchasing the vehicle, and there is no evidence that anyone exerted pressure on Plaintiffs. Further, the agreement is relatively short, in a normal sized typeface, with headings making clear that the agreement was one to arbitrate claims.

Plaintiffs also argue that the failure to provide a copy of the relevant arbitration rules or stating which rules would be chosen is improper. This is belied by the agreement, which states that “[u]nless otherwise agreed, the arbitration will be conducted by the American Arbitration Association (‘AAA’),” and “[t]he arbitration must be conducted in accordance with AAA’s Consumer Arbitration Rules, which are available at www.adr.org or by calling the AAA at 800-778-7879.” (Mot., Hupman Decl. ¶ 3, Ex. A, at ¶ 11.)

As to substantive unconscionability, Plaintiffs argue that the clause only allows for a choice of arbitration forum for the party electing to arbitrate. The agreement expressly provides that AAA is the forum “unless otherwise agreed” (Mot., Hupman Decl. ¶ 3, Ex. A, at ¶ 11), and there is no evidence that Plaintiffs asked to arbitrate in JAMS but that the request was rejected. Insofar as Plaintiffs argue that the agreement will result in a biased arbitration in favor of Defendant, the agreement expressly provides for the appointment of a neutral arbitrator. (Mot., Hupman Decl. ¶ 3, Ex. A, at ¶ 11.) Plaintiffs also argue that the agreement places a cost burden on the consumer, which improperly prevents a buyer from seeking to enforce his legal rights. There is no such provision in the agreement, and even if there were, Plaintiffs provide no evidence to support their argument that any costs would be prohibitive based on their ability or inability to pay.

For these reasons, Defendant Lucid Group USA, Inc.’s Petition to Compel Arbitration and Stay Proceedings is GRANTED. The proceedings are hereby STAYED pending the outcome of arbitration.