Judge: Mark A. Young, Case: 24SMCV03972, Date: 2025-02-20 Tentative Ruling

Case Number: 24SMCV03972    Hearing Date: February 20, 2025    Dept: M

CASE NAME:             Eschenbrenner, et al., v. Genesis Motor America LLC, et al. 

CASE NO.:                   24SMCV03972

MOTION:                     Petition/Motion to Compel Arbitration 

HEARING DATE:   2/20/2025

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. (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.) 

EVIDENTIARY ISSUES 

Plaintiff’s objections to the Rao and Ameripour declarations are OVERRULED.

ANALYSIS 

Defendant Genesis Motor America moves to compel Plaintiffs Michael Eschenbrenner and Edward Yonek’s claims to 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.”].) 

The instant lemon law case arises from Plaintiffs’ lease of a 2023 Genesis G90 and its accompanying express and implied warranties. (Compl., ¶ 8.) Defendant cites two arbitration agreements which may cover Plaintiffs’ claims: a) the Owner’s Handbook & Warranty Information and b) the Genesis Connected Services Agreement. In section 4, titled “GENESIS WARRANTY INFORMATION”, the Handbook provides several alternative dispute resolution processes. At pages 12-14, in a subsection titled “BINDING ARBITRATION FOR CALIFORNIA VEHICLES ONLY”, the Handbook provides the following arbitration terms:

“PLEASE READ THIS SECTION IN ITS ENTIRETY AS IT AFFECTS YOUR RIGHTS…

If you purchased or leased your Genesis vehicle in the State of California, you and we, Genesis Motor America, 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, advertising for the vehicle, use of your vehicle, the performance of the vehicle, any service relating to the vehicle, the vehicle warranty, representations in the warranty, or the duties contemplated under the warranty, including without limitation claims related to false or misleading advertising, unfair competition, breach of contract or warranty, 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), but excluding claims brought under the Magnuson-Moss Warranty Act, 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 the American Arbitration Association (AAA) under its Consumer Arbitration Rules.

[…]

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, or performance of your vehicle, or the vehicle warranty subject to arbitration to the maximum extent permitted by law. The arbitrator (and not a court) shall decide all issues of interpretation, scope, and application of this agreement… If arbitration is elected by either party, the parties collectively agree that they waive their right to a jury trial.

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.”

Defendants demonstrate that Plaintiffs have agreed to the above arbitration terms. Plaintiffs allege that they leased the 2023 Genesis with accompanying express warranties. (¶¶ 8, 17.) There is no dispute that the warranty contained the arbitration terms noted above. The undisputed evidence thus suggests that Plaintiffs agreed to the warranty, including its arbitration terms. Plaintiffs 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 leased the Vehicle and brought this action pursuant to the accompanying express warranty. Plaintiffs alleged repairs were performed under the express warranty, but Defendant were unable to conform the vehicle to the warranty. Plaintiffs’ claims are inextricably intertwined with the express warranty. Plaintiffs cannot deny their agreement to the arbitration provisions after relying on the express warranties which contain the arbitration terms.

Therefore, Plaintiffs entered into the arbitration agreement within GMA’s Handbook which covers Plaintiffs’ vehicle warranty claims.  The Court would note, however, that the Rao declaration fails to properly authenticate Plaintiff’s electronic signature.  The declaration does not demonstrate Plaintiffs’ assent to any click-wrap agreement. Furthermore, Defendant provides no information whether Plaintiffs agreed to the Genesis Connected Services Agreement or how Rao was able to authenticate Plaintiffs’ electronic signatures, if any. Thus, Defendant does not meet its burden to show that Plaintiffs agreed to the Genesis Connected Services Agreement’s arbitration clause. In light of the above conclusions, that issue is not fatal to this motion. 

Unconscionability 

Plaintiffs assert 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 demonstrates a modest degree of procedural unconscionability. GMA has presented no evidence that Plaintiffs have ever seen or acknowledged the arbitration agreement. As noted, the binding arbitration clause is found in the Handbook, an approximately 52-page document. The Table of Contents provides two relevant sections: Section 3 (CONSUMER INFORMATION) and section 4 (GENESIS WARRANTY INFORMATION) as both apparently contain alternative dispute resolution processes. The table notes subsections at pages 9 and 12 entitled “ALTERNATIVE DISPUTE RESOLUTION”. The table also notes at page 12 “BINDING ARBITRATION FOR CALIFORNIA VEHICLES ONLY”. Starting at the middle of page 12 and ending at page 14, the Handbook provides the above noted arbitration terms. Included are bolded and underlined sections 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 52-page Handbook which, in all likelihood, a consumer may not expect an arbitration agreement to be found. At a glance, the arbitration terms could be easily confused with the other alternative dispute resolution processes detailed immediately preceding the binding arbitration terms. Thus, the Court finds a modest degree of surprise.

Plaintiffs argue that the arbitration agreement is a contract of adhesion because there was no ability to negotiate the inconspicuous language, and no specific acknowledgement of the purported clause at the time of contracting. However, the arbitration agreement is not adhesive, as there was an ability to negotiate the arbitration agreement. By its own terms, the arbitration agreement provides 30 days to opt-out. While inconspicuous, the arbitration terms were certainly not presented on a “take-it-or-leave-it” basis. Accordingly, at most, there is a modest degree of procedural unconscionability caused by the hidden 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 GMA, as GMA would be a “repeat player” at AAA. (Oppenheim Decl., ¶9.) However, the cited terms are not unduly oppressive, unreasonable or one-sided. Plaintiffs do not cite any non-reciprocal terms or unreasonable restraints on discovery. The Court is not persuaded by Plaintiffs’ speculation of AAA’s bias towards GMA. Therefore, the Court finds little to 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 Plaintiffs’ claims. Plaintiffs, 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.)