Judge Michael E. Whitaker, Case Number: 24SMCV01623, Date: 2024-08-14 Tentative Ruling

Judge: Michael E. Whitaker, Case: 24SMCV01623, Date: 2024-08-14 Tentative Ruling

On April 5, 2024, Plaintiff Issa Diab (“Plaintiff”) filed the Complaint against Defendant Lucid Group UA, Inc. (“Defendant”), alleging violations of the Song-Beverly Consumer Warranty Act.

Defendant moves to compel Plaintiff’s claims to arbitration and to stay the proceedings in this action. Plaintiff opposes the motion and Defendant replies.

“[T]he advantages of arbitration include a presumptively less costly, more expeditious manner of resolving disputes. It follows a party to a valid arbitration agreement has a contractual right to have its dispute with another party to the contract resolved quickly and inexpensively.” (Henry v. Alcove Investment, Inc. (1991) 233 Cal.App.3d 94, 99–100 [cleaned up].) Thus, “on petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party to the agreement refuses to arbitrate that 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.” (Code Civ. Proc., § 1281.2; see also

EFund Capital Partners v. Pless (2007) 150 Cal.App.4th 1311, 1320 [the language in section 1281.2 compelling arbitration is mandatory].) 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. (Code Civ. Proc., § 1281.2, subds. (a)-(c).)

“On a petition to compel arbitration, the trial court must first determine whether an agreement to arbitrate the controversy exists. 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 party seeking arbitration can meet its initial burden by attaching to the petition a copy of the arbitration agreement purporting to bear the respondent's signature.” (Bannister v. Marinidence Opco, LLC (2021) 64 Cal.App.5th 541, 543-544 [cleaned up].) The party seeking to compel arbitration must also “plead and prove a prior demand for arbitration and a refusal to arbitrate under the agreement.” (Mansouri v. Superior Court (2010) 181 Cal.App.4th 633, 640-641.)

And while the moving party on a motion to compel arbitration “bears the burden of proving the existence of a valid arbitration agreement by a preponderance of the evidence, [a] party opposing the petition bears the burden of proving by a preponderance of the evidence any fact necessary to its defense. The trial court sits as the trier of fact, weighing all the affidavits, declarations, and other documentary evidence, and any oral testimony the court may receive at its discretion, to reach a final determination.” (Ruiz v. Moss Bros. Auto Group, Inc. (2014) 232 Cal.App.4th 836, 842 [cleaned up]; see also Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 236 [“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”].)

Defendant contends Plaintiff entered into a written purchase agreement with Defendant for the purchase of the subject vehicle, which contained an arbitration provision that “any dispute or claim between you or us relating in any way to this Agreement will be resolved by binding arbitration, rather than in court.” (Ex. A to Hupman Decl.) The Agreement also provides:

Opt-Out: You may opt-out of the Arbitration Agreement, within 60 days from the date you accept this Agreement, by sending an email to Optout@LucidMotors.com from the email associated with your order with “Arbitration Opt-Out” in the subject line and indicating your request to opt-out of the arbitration provision in the body of the email.

(Ibid.) The agreement was signed effective March 9, 2023. (Ibid.) Thus, Plaintiff’s deadline to opt out of the arbitration provision was 60 days later, or May 8, 2023. Defendant has no record of Plaintiff opting out of the arbitration provision. (Hupman Decl. ¶ 4.) Plaintiff filed the instant lawsuit on April 5, 2024.

Plaintiff does not deny signing the purchase agreement on March 9, 2023, or that the purchase agreement contains an arbitration provision that applies to the claims at issue in this lawsuit, from which Plaintiff did not timely opt out. Rather, Plaintiff argues the arbitration provision is unconscionable.

As an initial matter, the parties have delegated the threshold issue of arbitrability to the arbitrator. Under the Federal Arbitration Act (“FAA”), parties may delegate the initial question of arbitrability to the arbitrator, so long as the delegation is “clear and unmistakable” and the delegation clause itself is not unenforceable due to fraud, duress, unconscionability, etc. (See Rent-A-Center, West, Inc. v. Jackson (2010) 561 U.S. 63, 69.) Here, the arbitration clause provides:

Claims arising out of or relating to the validity, application, scope, enforceability, or interpretation of this provision (the “Arbitration Agreement”) shall also be decided by an arbitrator and will be governed by the Federal Arbitration Act, 9 U.S.C § 1 et seq. (“FAA”).

Therefore, the clause contains a clear and unmistakable delegation clause, delegating the initial question of arbitrability to the arbitrator.

Neither the arbitration provision generally nor the delegation clause specifically contained therein are unconscionable.

“Unconscionability is ultimately a question of law for the court.” (Flores v. Transamerica Homefirst, Inc. (2001) 93 Cal.App.4th 846, 851.) “However, numerous factual issues may bear on that question.” (Gutierrez v. Autowest, Inc. (2003) 114 Cal.App.4th 77, 89.) As such, Plaintiff must show two elements to establish the unconscionability defense: (1) procedural unconscionability, which focuses on the manner in which the contract was negotiated, and (2) substantive unconscionability, which concerns whether the contract’s terms are unreasonably one-sided. (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 113-115 (hereafter Armendariz).)

“The prevailing view is that procedural and substantive unconscionability must both be present in order for a court to exercise its discretion to refuse to enforce a contract or clause under the doctrine of unconscionability. But they need not be present in the same degree. 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. In other words, the more substantively oppressive the contract term, the less evidence of procedural unconscionability is required to come to the conclusion that the term is unenforceable, and vice versa.” (Armendariz, supra, 24 Cal.4th at p. 114 [cleaned up].)

Procedural unconscionability examines the “oppression that arises from unequal bargaining power and the surprise to the weaker party that results from hidden terms or the lack of informed choice.” (Ajamian v. CantorCO2e, L.P. (2012) 203 Cal.App.4th 771, 795.) Preprinted forms buried within a volume of documents offered on a “take or leave it basis” evidence a high degree of procedural unconscionability. (See Dougherty v. Roseville Heritage Partners (2020) 47 Cal.App.5th 93, 102-104.) Most consumer contracts are adhesive and therefore present some procedural unconscionability. (Sanchez v. Valencia Holding Co., LLC (2015) 61 Cal.4th 899, 915.) “[A] finding of procedural unconscionability does not mean that a contract will not be enforced, but rather that courts will scrutinize the substantive terms of the contract to ensure they are not manifestly unfair or one-sided.” (Ibid.)

Plaintiff argues that the “arbitration clause is a procedurally unconscionable contract of adhesion” wherein “Plaintiff had no bargaining power and no ability to negotiate” and consumers like Plaintiff “cannot purchase a Lucid vehicle without signing the contract that contains the arbitration provision.”

The court disagrees. Although consumers must sign the purchase agreement that contains the arbitration provision (and delegation clause) in order to purchase a vehicle from Defendant, pursuant to the plain language of that arbitration clause itself, Plaintiff had the right and ability to opt out of the arbitration agreement within 60 days of signing the purchase agreement by simply emailing an opt-out request to Defendant. As such, Plaintiff’s arguments that the arbitration agreement was a contract of adhesion and that Plaintiff had no bargaining power ring hollow.

Therefore, the Court finds that neither the arbitration agreement nor the delegation clause contained therein to be procedurally unconscionable.[1]

As such, Defendant has met its burden to compel arbitration, and the Court specifically finds that the Arbitration Agreement between Plaintiff and Defendant is valid and enforceable. Therefore, the Court grants Defendant’s petition to compel arbitration. Further, the Court stays the proceedings in this action pending resolution of the arbitration.

Further, in light of the Court’s ruling on the motion to compel arbitration, the Court vacates the Case Management Conference, and sets a Status Conference re Arbitration on March 18, 2025 at 8:30 A.M. in Department 207. The parties shall file a Joint Report on the status of the arbitration no later than 5 court days before the Status Conference.

Defendant shall provide notice of the Court’s ruling and file the notice with a proof of service forthwith.

[1] Because the Court finds no procedural unconscionability, and a contract must be both procedurally and substantively unconscionable to be deemed unenforceable, the Court does not analyze substantive unconscionability.

DEPARTMENT	207
HEARING DATE	August 14, 2024
CASE NUMBER	24SMCV01623
MOTION	Petition to Compel Arbitration
MOVING PARTY	Defendant Lucid Group USA, Inc.
OPPOSING PARTY	Plaintiff Issa Diab