Judge: Mark A. Young, Case: 24SMCV03799, Date: 2025-02-24 Tentative Ruling
Case Number: 24SMCV03799 Hearing Date: February 24, 2025 Dept: M
CASE NAME: Grode, v. Hyundai Motor
America
CASE NO.: 24SMCV03799
MOTION: Petition/Motion to Compel
Arbitration
HEARING DATE: 2/24/2025
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. (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.)
EVIDENTIARY
ISSUES
Plaintiff’s objections are OVEERRULED.
ANALYSIS
Defendant Hyundai Motor America moves for an order
compelling Plaintiff Gabrielle Grode’s claims to arbitration in accordance with
her arbitration agreement and staying this action pending the outcome of
arbitration.
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.”].)
The instant lemon law case arises from Plaintiffs’ lease of
a 2020 Hyudai Kona and its accompanying express and implied warranties.
(Compl., ¶¶ 4-5.) Accompanying the sale of the Vehicle to Plaintiff was the Owner’s Handbook & Warranty Information which includes an agreement to arbitrate. In section 4,
entitled “HYUNDAI WARRANTY INFORMATION.” The Handbook provides:
BINDING ARBITRATION FOR CALIFORNIA VEHICLES ONLY
PLEASE READ THIS
SECTION IN ITS ENTIRETY AS IT AFFECTS YOUR RIGHTS
If you purchased or
leased your Hyundai vehicle in the State of California, you and we each agree
that any claim or disputes between us (including between you and any of our
affiliated companies) related to or arising out of your vehicle purchase, use
of your vehicle, the vehicle warranty, representations in the warranty, or the
duties contemplated under the warranty, including without limitation claims
related to the failure to conform a vehicle to warranty, failure to repurchase
or replace your vehicle, or claims for a refund or partial refund of your
vehicle's purchase price (excluding personal injury claims), shall be resolved
by binding arbitration at either your or our election, even if the claim is
initially filed in a court of law. If either you or we elect to resolve our
dispute via arbitration (as opposed to in a court of law), such binding
arbitration shall be administered by and through JAMS Mediation, Arbitration
and ADR Services (JAMS) under its Streamlined Arbitration Rules &
Procedures.
We will pay all JAMS
fees for any arbitration except for the initial filing fee of $250. The
arbitration will be held in the city or county of your residence. To learn more
about arbitration, including how to commence arbitration, you may call any JAMS
office or go to www.jamsadr.org:
This agreement to
arbitrate is intended to be broadly interpreted and to make all disputes and
claims between us (including our affiliated companies) relating to or arising
out of your vehicle purchase, use of your vehicle, or the vehicle warranty
subject to arbitration to the maximum extent permitted by law.
In any arbitration,
the arbitrator shall be bound by the terms of this agreement and shall follow
the applicable law. The arbitrator shall not have the power to commit manifest
errors of law, and any award rendered by the arbitrator that employs a manifest
error of law may be vacated or corrected by a court of competent jurisdiction
for such error. The arbitrator may only resolve disputes between you and us 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 Hyundai Motor America vehicles as permitted by
law. In other words, you and we may bring claims against the other only in your
or our individual capacity, and not as a plaintiff or class member in any class
or representative action to the maximum extent permitted by law. If a court or
arbitrator decides that any part of this agreement to arbitrate cannot be
enforced as to a particular claim for relief, then that claim (and only that
claim ) must be brought in court and must be stayed pending arbitration of the
arbitrable claims. If arbitration is elected by either party, the parties
collectively agree that they waive their right to a jury trial. In no events
shall class arbitration be permitted.
…This agreement evidences a
transaction involving interstate commerce and shall be governed by the [FAA]…
IF YOU
PURCHASED OR LEASED YOUR VEHICLE IN CALIFORNIA, YOUR WARRANTY IS MADE SUBJECT
TO THE TERMS OF THIS BINDING ARBITRATION PROVISION. BY USING THE VEHICLE, OR
REQUESTING OR ACCEPTING BENEFITS UNDER THIS WARRANTY, INCLUDING HAVING ANY
REPAIRS PERFORMED UNDER WARRANTY, YOU AGREE TO BE BOUND BY THESE TERMS. IF YOU
DO NOT AGREE WITH THESE TERMS, PLEASE CONTACT US AT OPT-OUT@GMA.COM WITHIN
THIRTY (30) DAYS OF YOUR PURCHASE OR LEASE TO OPT-OUT OF THIS ARBITRATION
PROVISION.
(Ameripour
Decl., Ex. 2, pp. 13-14.)
Defendants demonstrate that Plaintiff agreed to the above
arbitration terms. Plaintiffs allege that they leased the 2020 Genesis with
accompanying express warranties. (Compl., ¶¶ 4-5.) Each cause of action is related to or arises out of the purchase and use of the 2020 Genesis,
and the accompanying warranty. (Compl., ¶¶ 6, 15, 20, 26, 30, 38.) Plaintiff
does not present any evidence contradicting that
the applicable warranty contained the arbitration terms noted above. The
undisputed evidence thus suggests that Plaintiffs agreed to the warranty,
including its arbitration terms. Plaintiff cannot now deny the existence of the
arbitration agreement found within the express warranties which form the basis
of their action. Indeed, Plaintiffs would be judicially or equitably estopped
from doing so. “[A] party may be estopped from asserting that the lack of his
signature on a written contract precludes enforcement of the contract's
arbitration clause when he has consistently maintained that other provisions of
the same contract should be enforced to benefit him” as “a nonsignatory is
estopped from refusing to comply with an arbitration clause ‘when it receives a
‘direct benefit’ from a contract containing an arbitration clause.” (Boucher
v. Alliance Title Co., Inc. (2005) 127 Cal.App.4th 262, 269.) Plaintiffs
admittedly purchased the Vehicle with the cited express warranties and brought
this action pursuant to thereto. Plaintiffs alleged repairs were performed
under the express warranty, but Defendant were unable to conform the vehicle to
the warranty. Plaintiffs’ claims are thus inextricably intertwined with the
express warranty. Therefore, Plaintiff entered into the arbitration agreement
within the Handbook, which covers Plaintiff’s vehicle warranty claims.
Further, the provisions of the FAA control. The arbitration provision
states that the transaction involves interstate commerce and shall be governed
by the FAA. Automotive sales would generally involve interstate commerce, since
“cars are themselves instrumentalities of interstate
commerce.” (United States v. Oliver (9th Cir. 1995) 60 F.3d 547, 550.)
The FAA preempts the application of Civ. Code section 1790.1.
Unconscionability
Plaintiff asserts the Handbook’s arbitration 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.)
Plaintiffs shows a modest degree of procedural unconscionability. There is no evidence that Plaintiff ever
actually saw or acknowledged the arbitration agreement. The
binding arbitration clause is found in the Handbook, an approximately 46-page
document. The Table of Contents provides two potentially relevant sections:
Section 3 (CONSUMER INFORMATION) and section 4 (GENESIS WARRANTY
INFORMATION), as both apparently contain alternative dispute resolution
processes. The table notes such processes at pages 9, 10, and 13. The left half
of page 13 regards non-binding dispute resolutions. Starting on the right half
of page 13, though page 14, the Handbook provides the above noted arbitration
terms. Included are bolded terms informing readers of the “BINDING
ARBIRTATION”, a request to “READ THIS SECTION IN ITS ENTIRETY”, and
a final warning that “IF YOU PURCHASED OR LEASED YOUR VEHICLE IN CALIFORNIA,
YOUR WARRANTY IS MADE SUBJECT TO THE TERMS OF THIS BINDING ARBITRATION
PROVISION. BY USING THE VEHICLE, OR REQUESTING OR ACCEPTING BENEFITS UNDER THIS
WARRANTY, INCLUDING HAVING ANY REPAIRS PERFORMED UNDER WARRANTY, YOU AGREE TO
BE BOUND BY THESE TERMS.” While these conspicuous terms are present, the
terms are buried the middle of a Handbook which, in all likelihood, a consumer
may not expect an arbitration agreement to be found. An average consumer would
find this surprising. Further, the arbitration terms could be confused with the
other, nonbinding alternative dispute resolution processes detailed immediately
preceding the binding arbitration terms. Thus, the Court finds a modest degree
of surprise.
The
Court disagrees that the arbitration agreement is a contract of adhesion. The
terms provided the ability to take the warranty but not the arbitration. By its
own terms, the arbitration agreement provides 30 days to opt-out. While potentially
inconspicuous, the arbitration terms were certainly not presented on a
“take-it-or-leave-it” basis. Accordingly, at most, there is a small degree of
procedural unconscionability caused by the inconspicuous nature of the terms. The
Court would require at least a moderate showing of unconscionability in the arbitration
terms.
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.)
Plaintiff
identifies no terms that are substantively unconscionable. Plaintiffs only
contend that the arbitration terms necessarily require a waiver of their right
to jury trial, that discovery is inherently limited at arbitration, and that
the arbitrators may be biased in favor of Defendant, Hyundai would be a “repeat
player” at JAMS. (Opp. at 11.) However, the cited consequences are not unduly
oppressive, unreasonable or one-sided in context. Plaintiffs do not cite any
non-reciprocal terms or unreasonable restraints on discovery. The Court is not
persuaded by Plaintiffs’ speculation of JAMS’s bias in favor of Hyundai.
Therefore, the Court finds no substantive unconscionability. As such, the
arbitration agreement is not unconscionable.
Conclusion
Defendant meets its burden to demonstrate the existence of
an arbitration agreement between the parties that covers Plaintiff’s claims.
Plaintiff, in turn, fails 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.)
The Court sets a status conference re arbitration for November 6, 2025, at 8:30
a.m.