Judge: Mark A. Young, Case: 23SMCV02155, Date: 2023-11-30 Tentative Ruling
Case Number: 23SMCV02155 Hearing Date: November 30, 2023 Dept: M
CASE NAME: Dooman, et
al., v. Tesla Inc.
CASE NO.: 23SMCV02155
MOTION: Petition/Motion
to Compel Arbitration
HEARING DATE: 11/30/2023
Legal
Standard
Under California and federal law,
public policy favors arbitration as an efficient and less expensive means of
resolving private disputes. (Moncharsh
v. Heily & Blase (1992)
3 Cal.4th 1, 8-9; AT&T Mobility
LLC v. Concepcion (2011) 563 U.S. 333, 339.) Accordingly, whether an
agreement is governed by the California Arbitration Act (“CAA”) or the Federal
Arbitration Act (“FAA”), courts resolve doubts about an arbitration agreement’s
scope in favor of arbitration. (Moncharsh, supra, 3 Cal.4th at 9;
Comedy Club, Inc. v. Improv West
Assocs. (9th Cir. 2009) 553 F.3d 1277, 1284; see also Engalla v. Permanente Med. Grp., Inc.
(1997) 15 Cal.4th 951, 971-972 [“California law incorporates many of the basic
policy objectives contained in the Federal Arbitration Act, including a
presumption in favor of arbitrability [citation] and a requirement that an
arbitration agreement must be enforced on the basis of state law standards that
apply to contracts in general”].) “[U]nder both the FAA and California law,
‘arbitration agreements are valid, irrevocable, and enforceable, save upon such
grounds as exist at law or in equity for the revocation of any contract.’ ” (Higgins v. Superior Crout (2006) 140 Cal.App.4th 1238, 1247.)
“Code of
Civil Procedure section 1281.2 requires a trial court to grant a petition to
compel arbitration if the court determines that an agreement to arbitrate the
controversy exists.” (Avery v.
Integrated Healthcare Holdings, Inc. (2013) 218 Cal.App.4th 50, 59,
quotations omitted.) Accordingly, “when presented with a petition to compel
arbitration, the court’s first task is to determine whether the parties have in
fact agreed to arbitrate the dispute.” (Ibid.) A petition to compel arbitration is in essence a suit in equity
to compel specific performance of a contract. (Id. at 71.) As with any other specific performance claim, “a
party seeking to enforce an arbitration agreement must show the agreement’s
terms are sufficiently definite to enable the court to know what it is to
enforce.” (Ibid. [internal citations omitted].) “Only
the valid and binding agreement of the parties, including all material terms
well-defined and clearly expressed, may be ordered specifically performed.” (Ibid.) An arbitration agreement “must be so interpreted as to give
effect to the mutual intention of the parties as it existed at the time of
contracting, so far as the same is ascertainable and lawful.” (Civ. Code, §
1636.) The language of the contract governs its interpretation if it is clear
and explicit. (Civ. Code, § 1368.) If uncertainty exists, “the language of a
contract should be interpreted most strongly against the party who caused the
uncertainty to exist.” (Civ. Code, § 1654.)
The party
seeking to compel arbitration bears the burden of proving the existence of a
valid arbitration agreement by the preponderance of the evidence. (Engalla v. Permanente Medical Group, Inc.
(1997) 15 Cal.4th 951, 972.) It would then be plaintiff’s burden, in opposing
the motion, to prove by a preponderance of the evidence any fact necessary to her
opposition. (See Ibid.) “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.” (Ibid.)
Defendant
Tesla, Inc. moves to compel Plaintiffs Koroush Dooman and Elena Semenova’s
claims to arbitration in accordance with their arbitration agreement with
Tesla, and to stay this action pending the outcome of arbitration.
Valid Arbitration Agreement
As with any contract, mutual assent
or consent is necessary for the formation of a valid arbitration agreement.
(Civ. Code, §§ 1550, 1565.) “Consent is not mutual, unless the parties all
agree upon the same thing in the same sense.” (Civ. Code, § 1580.) The moving
party bears the initial burden of showing the existence of an agreement to
arbitrate by a preponderance of the evidence. (Mitri v. Arnel Mgmt. Co. (2007) 157 Cal.App.4th 1164, 1169
[“Because the existence of the agreement is a statutory prerequisite to
granting the petition, the petitioner bears the burden of proving its existence
by a preponderance of the evidence.”].)
Defendant points to two agreements
relating to the Vehicle, both of which contain binding arbitration provisions:
(1) the Order Agreement, the terms of which Plaintiffs agreed to when they
placed their order for the Vehicle (Kim Decl., Ex. 1), and (2) the Lease, which
Plaintiffs signed just prior to delivery (Kim Decl., Ex. 2). The terms of both
agreements require arbitration to resolve any “dispute arising out of or
relating to any aspect of the relationship between you and Tesla… [including]
claims arising before this Agreement, such as claims related to statements
about our products.” (Id.) Plaintiffs do not dispute that they signed the Order
and Lease Agreements, which contain broad Arbitration clauses applying to the
claims at hand. Thus, Defendant meets its burden to show that Plaintiffs signed
the Arbitration agreements. Therefore, Plaintiffs have the burden to show a
defense to these agreements.
Unconscionability
Plaintiff argues that the agreement
is unconscionable. The doctrine of unconscionability refers to “an absence of
meaningful choice on the part of one of the parties together with contract
terms which are unreasonably favorable to the other party.” (Sonic-Calabasas
A, Inc. v. Moreno (2013) 57 Cal.4th 1109, 1133.) It consists of
procedural and substantive components, “the former focusing on oppression or
surprise due to unequal bargaining power, the latter on overly harsh or
one-sided results.” (Ibid.) Although both components of
unconscionability must be present to invalidate an arbitration agreement, they
need not be present in the same degree. (Armendariz v. Found Health Psychcare Servs., Inc. (2000) 24
Cal.4th 83, 114.) “Essentially a sliding scale is invoked 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.
[Citations.] In other words, the more substantively unconscionable the
contract term, the less evidence of procedural unconscionability is required to
come to the conclusion that the term is unenforceable, and vice versa.” (Ibid.) “The party resisting arbitration bears the burden of proving
unconscionability.” (Pinnacle
Museum Tower Assn. v. Pinnacle Market Dev. (US), LLC (2012) 55
Cal.4th 223, 247.)
As to procedural unconscionability,
Plaintiffs note that the sales contract was a pre-printed consumer sales
contract presented in a "take it or leave it" fashion, and thus they
had no meaningful opportunity to negotiate any of the terms. Notably, this
agreement is not an employment agreement, thus the adhesive nature of the
contract provides little to no procedural unconscionability. (See Baltazar v.
Forever 21 Inc. (2016) 62 Cal.4th 1237, 1246; [Courts do not recognize
that “adhesive” arbitration agreements in the employment context establish a
high degree of procedural unconscionability absent “surprise or other sharp
practices”]; see also Nguyen v. Applied Medical Resources Corp. (2016)
4 Cal.App.5th 232, 248; [the fact that an arbitration agreement is presented as
a “take-it-or-leave-it” contract of adhesion in the employment context, alone
only establishes a modest degree of procedural unconscionability].) However,
the record shows that this is not the case. The terms of the Agreements allow a
customer to opt out of arbitration agreement by sending a letter within 30 days
stating that intention. (Kim Decl. ¶ 7.) Plaintiffs did not do so. (Id.)
Plaintiffs also assert that the
agreement is procedurally unconscionable because Tesla failed to provide a copy
of the relevant arbitration rules or even advise which rules would be chosen. Plaintiff does
not demonstrate that a failure to attach arbitration rules, by
itself, creates procedural unconscionability. Courts have found that failure to
attach arbitration rules to an arbitration agreement requires courts to
scrutinize the substantive unconscionability of terms that were “artfully
hidden” but does not otherwise add to the procedural unconscionability of the
agreement. (E.g., Baltazar, supra, 62 Cal.4th at 1246; Nguyen,
supra, 4 Cal.App.5th at 248-249; see also A & M Produce Co. v. FMC
Corp., (1982) 135 Cal. App. 3d 473, 483 [limitation on consequential
damages in may be unconscionable].) Plaintiff does not point to any such terms,
artfully hidden or otherwise.
As to substantive
unconscionability, an agreement is substantively unconscionable if it
imposes terms that are “overly harsh,” “unduly oppressive,” “unreasonably
favorable,” or “so one-sided as to ‘shock the conscience.’ ” (Sanchez
v. Valencia Holding Co., LLC (2015)
61 Cal.4th 899, 910-911.) “All of these formulations point to the central idea
that unconscionability doctrine is concerned not with ‘a simple old-fashioned
bad bargain’ [citation], but with terms that are ‘unreasonably favorable to the
more powerful party.’ [Citation.]” (Id. at 911.) “These include ‘terms that
impair the integrity of the bargaining process or otherwise contravene the
public interest or public policy; terms (usually of an adhesion or boilerplate
nature) that attempt to alter in an impermissible manner fundamental duties
otherwise imposed by the law, fine-print terms, or provisions that seek to
negate the reasonable expectations of the nondrafting party, or unreasonably
and unexpectedly harsh terms having to do with price or other central aspects
of the transaction.’ ” (Ibid.)
Plaintiffs
argue that the clause disallowing Plaintiffs’ choice of arbitrator is
unconscionable. Plaintiffs proffer no citable California authority demonstrating
that the election of an arbitration agency such as AAA would be unconscionable.
(See Milliner v. Bock Evans Fin. Couns., Ltd., (N.D. Cal. 2015) 114 F.
Supp. 3d 871, 880 [process for selecting the arbitrator was substantively
unconscionable because Defendant had significantly unequal power in the
selection the arbitrator, where Defendant would provide a list of three
arbitrators from which Plaintiffs could choose].) Accordingly, the Court does
not conclude that this adds to any substantive unconscionability.
In summary,
there is little to no procedural unconscionability, and no substantial
unconscionability. Therefore, the Agreements are not unconscionable.
Conclusion
Defendant meets its burden to
demonstrate the existence of an arbitration agreement between the parties that
covers Plaintiffs’ claims. Plaintiffs, in turn, fail to demonstrate that the
agreement is unconscionable. Defendant’s motion is therefore GRANTED and the
Court orders Plaintiff’s claims to arbitration, as discussed above. The entire
action is STAYED pending the completion of the arbitration. (CCP § 1281.4.)