Judge Lynette Gridiron Winston, Case Number: 24PSCV03098, Date: 2025-01-27 Tentative Ruling

Judge: Lynette Gridiron Winston, Case: 24PSCV03098, Date: 2025-01-27 Tentative Ruling

The Court DENIES Defendant’s motion to compel arbitration. Defendant is ordered to file an answer or responsive pleading within 10 days of the Court’s order.

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

This is a lemon law case. On September 18, 2024, plaintiff Weston Morales (Plaintiff) filed this action against defendant Hyundai Motor America (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 November 5, 2024, Defendant moved to compel arbitration. On January 15, 2025, Plaintiff opposed the motion. On January 17, 2024, Defendant replied.

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 purporting to bear the opposing party’s signature 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.)

Plaintiff filed his opposition on January 15, 2025, which was untimely. (Code Civ. Proc., § 1005, subd. (b).) Nevertheless, the Court exercises its discretion to still consider the opposition, but admonishes Plaintiff to comply with the requirements of the Code of Civil Procedure going forward. (See Cal. Rules of Court, rule 3.1300, subd. (d); Juarez v. Wash Depot Holdings, Inc. (2018) 24 Cal.App.5th 1197, 1202.)

Defendant’s reply papers are more than 10 pages long, which is improper. (Cal. Rules of Court, rule 3.1113, subd. (d).) The Court will still consider Defendant’s reply, but admonishes Defendant to comply with the requirements of the California Rules of Court going forward.

Defendant also submitted new evidence on reply. Generally, new evidence is not permitted on reply unless it fills in gaps in the evidence created by the opposing party’s opposition and is not raising new substantive issues for the first time; otherwise, a further hearing would be required to permit the opposing party to respond. (Jay v. Mahaffey (2013) 218 Cal.App.4th 1522, 1537-1538.) None of the new evidence submitted on reply fills in any gaps of Plaintiff’s arguments. Accordingly, the Court declines to consider such evidence.

The Court SUSTAINS Plaintiff’s Objection Numbers 1 and 2 for lack of foundation.

The Court GRANTS the parties’ requests for judicial notice. (Evid. Code § 452, subds. (a)-(d).) However, the Court takes judicial notice of those 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.)

“[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 Warranty Handbook (defined below) does not provide any language indicating that the enforcement of its arbitration terms is governed by the FAA. (Ameripour Decl., Ex. 3.)[1] But, the CSA (as defined below) does provide that the FAA governs the enforcement of its arbitration terms. (Rao Decl., Ex. 2, p. 34 of pdf.) Accordingly, the CAA governs the motion to compel arbitration as it pertains to the Warranty Handbook, and the FAA governs the motion as it pertains to the CSA. (Victrola 89, LLC v. Jaman Properties 8 LLC, supra, 46 Cal.App.5th at p. 345.)

Defendant moves to compel arbitration based on language in its Owner’s Handbook & Warranty Information (the Warranty Handbook). (Ameripour Decl., Ex. 3.) Having quoted the arbitration language from the Warranty Handbook in the moving papers and having attached a copy to the motion, Defendant has met its initial burden. (Motion, 4:5-6:5; Gamboa v. Ne. Cmty. Clinic (2021) 72 Cal.App.5th 158, 167 (Gamboa); Condee v. Longwood Mgmt. Corp. (2001) 88 Cal.App.4th 215, 218.) The burden now shifts to Plaintiff. (Gamboa, supra, 72 Cal.App.5th at p. 167.)

Plaintiff objected to the Warranty Handbook on the grounds that it lacks foundation and is hearsay, and the Court sustained the objections for lack of foundation. Plaintiff also challenged the validity of the Warranty Handbook stating that he never received notice of the arbitration provision in the Warranty Handbook or that he was required to opt out of it within 30 days of the purchase. (Morales Decl., ¶ 5.) Plaintiff also states that he never signed any post-sale arbitration agreement. (Morales Decl., ¶ 6.) Plaintiff has therefore adequately challenged the validity of the Warranty Handbook and its arbitration provisions. The burden now shifts back to Defendant to prove by a preponderance of the evidence that the Warranty Handbook and its arbitration provisions are valid. (See Gamboa, supra, 72 Cal.App.5th at p. 171.)

Nowhere in Defendant’s reply does Defendant provide facts to establish a foundation for the admission of the Warranty Handbook or any other evidence to prove its validity. (See generally, Reply.) The declaration of Ali Ameripour submitted in support of the motion does not provide facts demonstrating personal knowledge regarding the Warranty Handbook or whether Plaintiff signed or accepted the arbitration provision in the Warranty Handbook. (See Ameripour Decl., ¶ 3, Ex. 3; Gamboa, supra, 72 Cal.App.5th at p. 169 [objection to declaration for lack of foundation and authentication on motion to compel arbitration affirmed on appeal where declarant did not provide foundational facts].) Defendant provided no other evidence to show that the Warranty Handbook is admissible and valid.

Moreover, the fact that motions to compel arbitration do not necessarily require authentication of the arbitration agreement with the moving papers does not mean Defendant may avoid the foundation requirement altogether; rather, foundations must be established once the opposing party challenges the validity of the arbitration agreement, the latter of which Plaintiff has done here. (See Gamboa, supra, 72 Cal.App.5th at pp. 167-168.)

Furthermore, even if the Warranty Handbook was admissible, it would not be sufficient to demonstrate the existence of an arbitration agreement between the parties. Defendant did not present any evidence demonstrating that Plaintiff signed or accepted the arbitration agreements contained in the Warranty Handbook before or at the time of purchasing the subject vehicle. (See generally, Ameripour Decl., Rao Decl.) Defendant did not present any evidence that Plaintiff even received the terms of the arbitration agreements in the Warranty Handbook before purchasing the subject vehicle. (See generally, Ameripour Decl., Rao Decl.)

Accordingly, the Court declines to consider the parties’ other arguments relating to the Warranty Handbook, and DENIES the motion to compel binding arbitration based on the Warranty Handbook.

Defendant also moves to compel arbitration based on language in the Connected Services Agreement (CSA). (Rao Decl., Ex. 2.) Having provided a copy of the CSA containing the arbitration language, Defendant has met its initial burden. (Zamudio v. Aerotek, Inc. (E.D. Cal. 2024) 733 F.Supp.3d 931, 938 [citing Espejo].) The burden now shifts to Plaintiff. (See Ibid.)

Plaintiff does not dispute the existence of the CSA, but instead contends that the clear language of the CSA applies only to claims related to the connected services that are the subject of the agreement, not to Plaintiff’s statutory warranty claims. Plaintiff contends that under no reasonable circumstances would consumers expect that the arbitration provision in the CSA covered claims that did not arise out of or relate to the connected services subject matter. Plaintiff contends this interpretation does not make sense given the other language regarding service plans, visitors, customers, etc., and that such terms would become surplusage if this arbitration language covered any and all claims between the parties. Plaintiff contends the language in the arbitration provision of the CSA does not support any argument that the parties reasonably intended such arbitration language to govern disputes over warranty defects. Plaintiff also contends the CSA arbitration clause is limited to disputes raised with Defendant’s service departments, and Plaintiff did not raise any such concerns with those departments.

In reply, Defendant contends Plaintiff accepted the terms of the CSA, and that its broad language covers all disputes between the parties, including vehicle warranty claims.

The Court agrees with Plaintiff. The arbitration language of the CSA does not support Defendant’s interpretation. “The contract must be construed as a whole and the intention of the parties must be ascertained from the consideration of the entire contract, not some isolated portion. [Citations.]” (Cnty. of Marin v. Assessment Appeals Bd. (1976) 64 Cal.App.3d 319, 325.) The purpose of the CSA concerns Defendant’s Blue Link services. (Rao Decl., Exs. 1-2.) No reasonable consumer would think that they are agreeing to arbitrate all disputes regarding vehicle defects merely by signing up for a subscription service that provides services such as “Remote Service Activation,” “Stolen Vehicle Recovery,” “Enhanced Roadside Assistance,” “Digital Key 2.0,” “Verizon Hotspot,” etc. (Rao Decl., Ex. 2, p. 7 of pdf.) None of that has anything to do with engine, electrical, or transmission defects, which are the substance of Plaintiff’s claims here. (Compl., ¶ 10.)

Moreover, Plaintiff correctly contends that Defendant’s interpretation of the arbitration provision of the CSA would render the majority of its words mere surplusage, which is improper. “’We must give significance to every word of a contract, when possible, and avoid an interpretation that renders a word surplusage.’ [Citation.]” (Advanced Network, Inc. v. Peerless Ins. Co. (2010) 190 Cal.App.4th 1054, 1063.) The arbitration provision of the CSA lists many Blue Link related services that it covers, such as “Connected Services, Connected Services Systems, Service Plans, the Vehicle, use of the sites, or products, services, or programs you purchase, enroll in or seek product/service support for, whether you are a Visitor or Customer, via the sites or through mobile application…” (Rao Decl., p. 34 of pdf.) Just because some broader language follows in the same paragraph does not mean it covers every dispute under the sun between the parties. If the language were as broad as Defendant is trying to make it, then the language quoted above and most of the other language in the arbitration provision of the CSA would be mere surplusage.

The Court declines to consider the parties’ remaining arguments. Based on the foregoing, the Court DENIES the motion.

The Court DENIES Defendant’s motion to compel arbitration. Defendant is ordered to file an answer or responsive pleading within 10 days of the Court’s order.

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

[1] The Court’s reference to the Warranty Handbook as attached to the declaration of Ali Ameripour here is only for purposes of determining whether the FAA or CAA governs this motion to compel arbitration. As noted above, the Court sustained Plaintiff’s objection to these warranties for lack of foundation and authentication, and the Court’s ruling remains the same in that regard.