Judge: Maurice A. Leiter, Case: 24STCV26172, Date: 2025-03-10 Tentative Ruling

Case Number: 24STCV26172    Hearing Date: March 10, 2025    Dept: 54

Hearing Date: March 10, 2025

Department 54, Judge Maurice A. Leiter

Motion to Compel Arbitration

Moving Party: Defendant Hyundai Motor America

Responding Party: Plaintiffs Tarek Khuzam and Merla Khuzam

T/R:     DEFENDANT’S MOTION TO COMPEL ARBITRATION IS DENIED.

DEFENDANT TO NOTICE.  

If the parties wish to submit on the tentative, please email the courtroom at SMCdept54@lacourt.org with notice to opposing counsel (or self-represented party) before 8:00 am on the day of the hearing.

The Court considers the moving papers, opposition, and reply.

BACKGROUND

This is a lemon law action arising out of Plaintiffs’ purchase of a 2021 Hyundai Palisade manufactured and distributed by Defendant Hyundai Motor America.

ANALYSIS

“On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party thereto refuses to arbitrate a controversy, the court shall order the petitioner and the respondent to arbitrate the controversy if it determines that an agreement to arbitrate the controversy exists….”  (CCP § 1281.2.)  The right to compel arbitration exists unless the court finds that the right has been waived by a party’s conduct, other grounds exist for revocation of the agreement, or where a pending court action arising out of the same transaction creates the possibility of conflicting rulings on a common issue of law or fact.   (CCP § 1281.2(a)-(c).)  “The party seeking arbitration bears the burden of proving the existence of an arbitration agreement, and the party opposing arbitration bears the burden of proving any defense, such as unconscionability.”  (Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 236.)

A. Existence of Arbitration Agreement

Defendant moves to compel arbitration based on the arbitration provision in the Owner’s Handbook & Warranty Information, and on the arbitration provision in the Connected Services Agreement executed by Plaintiffs when they signed up for Hyundai’s Bluelink services. The warranty provides, “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), 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.” (Decl. Ameripour, Exh. 3.)

The CSA provides, “Hyundai and you agree to arbitrate any and all disputes and claims between us arising out of or relating to this Agreement, Connected Services, Connected Services Systems, Service Plans, your 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, except any disputes or claims which under governing law are not subject to arbitration, to the maximum extent permitted by applicable law.” (Decl. Rao, Exh. 2.)

In opposition, Plaintiffs assert that the arbitration provision in the warranty is not a contract and therefore not an agreement to arbitrate. Plaintiffs represent that the manual and warranty were not provided to them before purchase, and they never signed any arbitration agreement. Plaintiffs also argue that the CSA does not apply here because their claims do not arise from the CSA.

In reply, Defendant argues that the express warranty is itself a contract. Defendant reasons that under the doctrine of equitable estoppel Plaintiffs cannot both sue for breach of the warranty “contract” and deny that they have assented to the warranty “contract’s” terms.

The Court finds that Defendant has failed to show a mutual agreement to arbitrate the claims at issue in this action. Plaintiffs did not execute an arbitration agreement when purchasing the vehicle, and Defendant presents no evidence showing that Plaintiffs were presented with or aware of the arbitration provision at the time of purchase.

Neither party provides California authority that addresses whether an arbitration provision in a warranty is enforceable under contract principles. Plaintiffs present one federal case, Norcia v. Samsung Telecommunications Am., LLC, 845 F.3d 1279, 1284 (9th Cir. 2017), in which the Ninth Circuit found that the arbitration provision in a warranty booklet concerning the sale of a cell phone did not constitute a binding, contractual arbitration agreement. The Court, after extensive discussion of California common law contract formation principles and warranty law, found that the warranties lacked the requisite express acceptance of an offer to create a contract. The Court also noted that warranties place obligations only on the seller as the maker of the warranty. They do not place obligations on the buyer.

Defendant asserts that Norcia does not apply here because the plaintiffs in Norcia did not sue for breach of warranty; they sued for violations of the CLRA and UCL. Norcia speculates in a footnote that the plaintiffs may have been required to arbitrate breach of warranty claims had they brought them, but Norcia does not hold that a warranty is itself a mutually binding contract or that contractual equitable estoppel principles apply to warranties.

The Court also finds that the claims at issue in this action do not arise from the CSA.

Defendant has failed to establish the existence of an agreement to arbitrate. Defendant’s motion to compel arbitration is DENIED.