Judge: Lynette Gridiron Winston, Case: 24PSCV01133, Date: 2025-01-27 Tentative Ruling

Case Number: 24PSCV01133    Hearing Date: January 27, 2025    Dept: 6

CASE NAME:  Suzy Christian Chang v. Tesla, Inc. d/b/a Tesla Motors, Inc. 

Defendant Tesla, Inc.’s Motion to Compel Binding Arbitration 

TENTATIVE RULING 

The Court GRANTS Defendant’s motion to compel arbitration and hereby STAYS this action pending the completion of the arbitration. The Court will set a future status conference date at the hearing on this motion. 

             Defendant is ordered to give notice of the Court’s ruling within five calendar days of this order. 

BACKGROUND 

This is a lemon law case. On April 9, 2024, plaintiff Suzy Christian Chang (Plaintiff) filed this action against defendant Tesla, Inc. d/b/a Tesla Motors, Inc. (Defendant) and Does 1 through 10, alleging causes of action for violation of Song-Beverly Act – breach of express warranty, violation of Song-Beverly Act – breach of implied warranty, and violation of the Song-Beverly Act section 1793.2. 

On August 30, 2024, Defendant moved to compel arbitration. On January 9, 2024, Plaintiff opposed the motion. On January 17, 2025, Defendant replied. 

LEGAL STANDARD 

Parties may be compelled to arbitrate a dispute upon the court finding that: (1) there was a valid agreement to arbitrate between the parties; and (2) said agreement covers the controversy or controversies in the parties’ dispute.¿(Omar v. Ralphs Grocery Co. (2004)¿118 Cal.App.4th 955, 961.) A party moving to compel arbitration has the burden of establishing the existence of a valid agreement to arbitrate and the party opposing the petition has the burden of proving, by a preponderance of the evidence, any fact necessary to its defense. (Banner Entertainment, Inc. v. Superior Court¿(1998) 62 Cal.App.4th 348, 356-357.) A party seeking to compel arbitration meets their initial burden of establishing the existence of a valid arbitration agreement by attaching a copy to the motion or petition to compel arbitration. (Espejo v. Southern California Permanente Medical Group (2016) 246 Cal.App.4th 1047, 1060 (Espejo).) 

“California has a strong public policy in favor of arbitration and any doubts regarding the arbitrability of a dispute are resolved in favor of arbitration.” (Coast Plaza Doctors Hospital v. Blue Cross of California (2000) 83 Cal.App.4th 677, 686.) “This strong policy has resulted in the general rule that arbitration should be upheld unless it can be said with assurance that an arbitration clause is not susceptible to an interpretation covering the asserted dispute.” (Ibid. [internal quotations omitted].) This is in accord with the liberal federal policy favoring arbitration agreements under the Federal Arbitration Act (“FAA”), which governs all agreements to arbitrate in contracts involving interstate commerce. (9 U.S.C. § 2, et seq.; Higgins v. Superior Court (2006) 140 Cal.App.4th 1238, 1247.) 

REQUESTS FOR JUDICIAL NOTICE 

            The Court GRANTS Defendant’s request for judicial notice. (Evid. Code, § 452, subd. (d).) However, the Court takes judicial notice of the foregoing documents only as to “the existence, content and authenticity of public records and other specified documents”; it does not take judicial notice of the truth of the factual matters asserted in those documents. (Dominguez v. Bonta (2022) 87 Cal. App. 5th 389, 400.) 

DISCUSSION 

FAA v. CAA

“[T]he FAA's procedural provisions do not apply unless the contract contains a choice-of-law clause expressly incorporating them. [T]he question is not whether the parties adopted the CAA’s procedural provisions: The state's procedural statutes apply by default because Congress intended the comparable FAA sections to apply in federal court. The question, therefore, is whether the parties expressly incorporated the FAA’s procedural provisions into their agreements.” (Victrola 89, LLC v. Jaman Properties 8 LLC (2020) 46 Cal.App.5th 337, 345, internal citations omitted and italics in original.) “[P]revious cases have held that when an arbitration agreement provides that its ‘enforcement’ shall be governed by California law, the [CAA] governs a party's motion to compel arbitration. It follows that when an agreement provides that its ‘enforcement’ shall be governed by the FAA, the FAA governs a party's motion to compel arbitration.” (Id. at p. 346.) 

The Arbitration Agreement (defined below) does not indicate which law governs its enforcement. (See Kim Decl., Ex. 1.) Accordingly, the CAA governs this motion to compel arbitration. (Victrola 89, LLC v. Jaman Properties 8 LLC, supra, 46 Cal.App.5th at pp. 345-346.) 

Existence of Valid Arbitration Agreement and Covered Claims 

Defendant attached a copy of a Motor Vehicle Order Agreement, which contains an arbitration provision (the Arbitration Agreement). (Kim Decl., Ex. 1.) The Arbitration Agreement contains the following language: 

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. 

(Kim Decl., Ex. 1.) 

            By attaching a copy of the Arbitration Agreement to the motion, Defendant has met its initial burden. (Espejo, supra, 246 Cal.App.4th at p. 1060.) The burden now shifts to Plaintiff to challenge the existence of the Arbitration Agreement. 

            Plaintiff does not dispute the existence of the Arbitration Agreement, nor does Plaintiff dispute the scope of the Arbitration Agreement as covering Plaintiff’s claims. Plaintiff instead argues that the Arbitration Agreement is unenforceable on grounds of unconscionability. 

Unconscionability 

            “[P]rocedural and substantive unconscionability must both be present in order for a court to exercise its discretion to refuse to enforce a contract or clause under the doctrine of unconscionability.” (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 102.) The courts invoke a sliding scale which disregards the regularity of the procedural process of the contract formation, that creates the terms, in proportion to the greater harshness or unreasonableness of the substantive terms themselves, i.e., the more substantively oppressive the contract term, the less evidence of procedural unconscionability is required to conclude that the term is unenforceable, and vice versa. (Id. at p. 114.) Plaintiff bears the burden of proving that the provision at issue is both procedurally and substantively unconscionable.  

Procedural Unconscionability 

“Procedural unconscionability focuses on the elements of oppression and surprise. Oppression arises from an inequality of bargaining power which results in no real negotiation and an absence of meaningful choice … Surprise involves the extent to which the terms of the bargain are hidden in a ‘prolix printed form’ drafted by a party in a superior bargaining position.” (Roman v. Superior Court (2009) 172 Cal.App.4th 1462, 1469, internal citations and quotation marks omitted.) 

Plaintiff contends the Arbitration Agreement is procedurally unconscionable because the underlying contract was a pre-printed consumer sales contract presented to Plaintiff on a take-it-or-leave-it basis, i.e., an adhesion contract, and that Plaintiff had no meaningful opportunity to negotiate with Tesla regarding any of the terms, except to reject arbitration, such that Plaintiff had to accept the contract as a whole to purchase the subject vehicle. Plaintiff also contends that Defendant failed to provide Plaintiff with a copy of the relevant arbitration rules or even advise which rules would be chosen, but that they instead provide a link where the rules may be accessed online. 

In reply, Defendant contends the Arbitration Agreement is not unconscionable because Plaintiff failed to demonstrate both procedural and substantive unconscionability. Defendant contends there is an opt-out provision for the Arbitration Agreement. Defendant then contends that a dealer using a form contract is not automatically procedurally unconscionable. 

The Court finds that Plaintiff has not adequately demonstrated procedural unconscionability here, if at all. First, although not mentioned in Defendant’s reply papers, Plaintiff’s arguments regarding the contract being presented on a take-it-or-leave-it basis, lack of meaningful opportunity to negotiate, and failure to provide a copy of the relevant arbitration rules, are not supported by any evidence. (Opp., 5:3-23.) The declaration Plaintiff submitted does not mention anything to support these arguments. (See generally, Serrano Decl.) Additionally, even assuming for the sake of argument that the Arbitration Agreement is an adhesion contract, that by itself is not dispositive. (Peng v. First Republic Bank (2013) 219 Cal.App.4th 1462, 1470.) 

Second, Plaintiff cites the cases of Harper v. Ultimo (2003) 113 Cal.App.4th 1406 (Harper) and Trivedi v. Curvexo Technology Corp. (2010) 189 Cal.App.4th 387 (Trivedi)[1] in support of the argument that the failure to attach a copy of the arbitration rules constitutes procedural unconscionability. But, the California Supreme Court in Baltazar v. Forever 21, Inc. (2016) 62 Cal.4th 1237 (Baltazar) directly addressed these cases and this argument, and clarified that the failure to attach a copy of the arbitration rules is only an issue when the plaintiff is challenging the arbitration rules themselves. (Id. at p. 1246.) The California Supreme Court found that the defendant’s failure to attach a copy of the arbitration rules did not constitute procedural unconscionability because the plaintiff challenged only the arbitration agreement, not the arbitration rules. (Ibid.) Additionally, the other case Plaintiff cites in support of this contention, Salome Samaniego v. Empire Today LLC (2012) 205 Cal.App.4th 1138 (Salome), is a Court of Appeal decision decided before Baltazar and relies on Harper and Trivedi. (205 Cal.App.4th at p. 1146.) 

Thus, the Court finds Plaintiff has not adequately demonstrated procedural unconscionability. 

Substantive Unconscionability 

“Substantive unconscionability focuses on the actual terms of the agreement and evaluates whether they create ‘overly harsh’ or ‘‘one-sided’ results’ [Citations] that is, whether contractual provisions reallocate risks in an objectively unreasonable or unexpected manner.  [Citation] Substantive unconscionability ‘may take various forms,’ but typically is found in the employment context when the arbitration agreement is ‘one-sided’ in favor of the employer without sufficient justification, for example, when ‘the employee’s claims against the employer, but not the employer’s claims against the employee, are subject to arbitration.’ [Citations]” (Roman, supra, 172 Cal.App.4th at pp. 1469-1470.) 

            Plaintiff contends the Arbitration Agreement is substantively unconscionable because it allows for a choice of arbitration forum, but only for the party “electing” to arbitrate. Plaintiff contends the Arbitration Agreement gives Defendant the ability to choose whether to arbitrate, the forum of the arbitration, and the rules of the arbitration. Plaintiff then contends the arbitration-cost provisions of the Arbitration Agreement are substantively unconscionable because it requires the consumer to pay all costs above $5,000, which benefits more financially capable companies like Defendant and discourages buyers from seeking to enforce their legal rights. 

In reply, Defendant contends that the Arbitration Agreement is not substantively unconscionable because it is not so one-sided as to shock the conscience, as it covers all disputes between the parties and applies to both sides. Defendant contends that Plaintiff appears to just take issue with the arbitration in general rather than anything actually unconscionable. Defendant contends the Arbitration Agreement allows the parties to use the AAA, which uses a neutral arbitrator selection process, and that numerous California courts have enforced the provision with respect to arbitration through AAA. 

The Court finds Plaintiff has not adequately demonstrated substantive unconscionability here. First, although not mentioned in Defendant’s reply papers, the Court notes that the order agreement Plaintiff references is not the same order agreement upon which Defendant moved to compel arbitration. A quick comparison shows that these documents differ from each other. For example, in the bottom lefthand corner of each document, the version Defendant submitted shows it was copyrighted in 2021, while the version Plaintiff submitted was copyrighted in 2022. (Kim Decl., Ex. 1, pp. 8-10 of pdf; Serrano Decl., Ex. 1, pp. 6-9 of pdf.) Both documents also reflect different version numbers in the same location. (Kim Decl., Ex. 1, pp. 8-10 of pdf; Serrano Decl., Ex. 1, pp. 6-9 of pdf.) 

Plaintiff also submitted two documents entitled Motor Vehicle Purchase Agreement. One document reflects that Plaintiff accepted the order on September 6, 2021, while the other reflects a date of agreement on June 19, 2022. (Serrano Decl., Ex. 1, pp. 4-5 of pdf.) Defendant’s order agreement then reflects Plaintiff placing the order on December 6, 2021. (Kim Decl., Ex. 1, p. 7 of pdf.) The Court further notes that the arbitration language differs somewhat between the documents. (Kim Decl., Ex. 1, pp. 8-10 of pdf; Serrano Decl., Ex. 1, pp. 6-9 of pdf.) 

Given the discrepancies between the two documents, the Court relies on the  version Defendant submitted. Either way, neither agreement supports Plaintiff’s arguments. Neither the Arbitration Agreement submitted by Defendant nor the arbitration language in the order agreement submitted by Plaintiff say anything about the party electing arbitration being able to choose the arbitration organization or its applicable rules. (Opp., 6:9-11; Kim Decl., Ex. 1, p. 9 of pdf; Serrano Decl., Ex. 1, pp. 6-9 of pdf.) Moreover, neither document says anything about a $5,000.00 arbitration cost limit or that Plaintiff must bear such costs. (See generally, Kim Decl., Ex. 1; Serrano Decl., Ex. 1.) In fact, the Arbitration Agreement says that Defendant bears all the costs of arbitration. “We will pay all AAA fees for any arbitration…” (Kim Decl., Ex. 1, p. 9 of pdf.) Also, the order agreement Plaintiff submitted says the consumer must pay the filing fee directly to AAA and that Defendant will pay all subsequent AAA fees excluding attorney fees, experts, and other witness fees, and that Defendant will reimburse the filing fee to Plaintiff if Plaintiff prevails. (Serrano Decl., Ex. 1, ¶ 7 of pdf.) 

Accordingly, the Court finds Plaintiff has not adequately demonstrated substantive unconscionability here. 

Based on the foregoing, the Court GRANTS Defendant’s motion. 

CONCLUSION 

The Court GRANTS Defendant’s motion to compel arbitration and hereby STAYS this action pending the completion of the arbitration. The Court will set a future status conference date at the hearing on this motion. 

             Defendant is ordered to give notice of the Court’s ruling within five calendar days of this order.