Judge: Michael E. Whitaker, Case: 24SMCV04197, Date: 2025-03-05 Tentative Ruling

Case Number: 24SMCV04197    Hearing Date: March 5, 2025    Dept: 207

TENTATIVE RULING

MOTION

This case arises from allegations that Defendant Hyundai Motor America (“Hyundai”) sold Plaintiff Dwayne Graham (“Plaintiff”) a defective vehicle with a warranty but failed to repair, refund, or replace the vehicle, in violation of the Song-Beverly Act. 

On August 28, 2024, Plaintiff brought suit, alleging three causes of action for (1) Breach of Express Warranty; (2) Breach of Implied Warranty; and (3) Violation of Section 1793.2.

Defendant now moves to compel the matter to arbitration and to stay this action pending the completion of arbitration proceedings.  Plaintiff opposes the motion and Defendant replies.

EVIDENTIARY OBJECTIONS

            The Court rules as follows with respect to Plaintiff’s evidentiary objections:

1.               Overruled

2.               Overruled

3.               Overruled

4.               Overruled 

REQUESTS FOR JUDICIAL NOTICE

            Defendant’s Request for Judicial Notice

Defendant requests judicial notice of Plaintiff’s Complaint in this matter.

Judicial notice may be taken of records of any court in this state.  (Evid. Code, § 452, subd. (d)(1).)  Because the Complaint is part of the Court’s record for this case, the Court may take judicial notice of it.  (Ibid.)   However, “while courts are free to take judicial notice of the existence of each document in a court file, including the truth of results reached, they may not take judicial notice of the truth of hearsay statements in decisions and court files.  Courts may not take judicial notice of allegations in affidavits, declarations and probation reports in court records because such matters are reasonably subject to dispute and therefore require formal proof.”  (Lockley v. Law Office of Cantrell, Green, Pekich, Cruz & McCort (2001) 91 Cal.App.4th 875, 882 [cleaned up].) 

Accordingly, the Court takes judicial notice of the existence and filing of the Complaint in this matter as a court record, but not the truth of the allegations contained therein.

            Plaintiff’s Request for Judicial Notice

            Plaintiff requests the Court to take judicial notice of the following legislative history of the United States Congress:

1. 40 Fed.Reg. 60168 - 60211 (Dec. 31, 1975);

2. 64 Fed.Reg. 19700 - 19709 (Apr. 22, 1999);

3. H.R.Rep. No. 93–1107 (1974);

4. Subcommittee Staff Report, 120 Cong. Rec. 31,318 (1974); and

5. Final Action Concerning Review of Interpretations of Magnuson-Moss Warranty Act; Rule Governing Disclosure of Written Consumer Product Warranty Terms and Conditions; Rule Governing Pre-Sale Availability of Written Warranty Terms; Rule Governing Informal Dispute Settlement Procedures; and Guides for the Advertising of Warranties and Guarantees, 80 Fed.Reg. 42710-01 (July 20, 2015).

            Plaintiff also requests the Court to take judicial notice of the following sections of the Code of Federal Regulations:

·       16 C.F.R., Subchapter G, parts 700, 701, 702, and 703

Judicial notice may be taken of the following:

(a) The decisional, constitutional, and statutory law of any state of the United States and the resolutions and private acts of the Congress of the United States and of the Legislature of this state.

(b) Regulations and legislative enactments issued by or under the authority of the United States or any public entity in the United States.

(c) Official acts of the legislative, executive, and judicial departments of the United States and of any state of the United States.

(Evid. Code § 452, subds. (a)-(c).)

            Thus, the Court takes judicial notice of the legislative history as an act of Congress, pursuant to subdivisions (a) and (c), and the Court takes judicial notice of the cited sections of the Code of Federal Regulations as regulations issued by or under the authority of the United States pursuant to subdivision (b).

ANALYSIS

1.     MOTION TO COMPEL ARBITRATION – LEGAL STANDARDS

            “[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”].) 

2.     ENFORCEABLE ARBITRATION AGREEMENTS

Defendant advances the Warranty for the subject vehicle, which includes the following arbitration provision:

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 redeemed 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 you 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. 

Notwithstanding the above, you may file a lawsuit in small claims court for any claims that otherwise require binding arbitration.  This agreement evidences a transaction involving interstate commerce and shall be governed by the Federal Arbitration Act, 9 U.S.C. §§ 1-16.  Judgment upon any award in arbitration may be entered in any court having jurisdiction.

IF YOU PURCHASED OR LEASED YOUR VEHICLE IN CALIFORNIA, YOUR WARRANTY IS MADE SUBJECT TO THE TERMS OF THIS BINDING ARBITRATION PROVISION.  BY 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@HMAUSA.COM WITHIN THIRTY (30) DAYS OF YOUR PURCHASE OR LEASE TO OPT-OUT OF THIS ARBITRATION PROVISION.

(Ex. 3 to Ameripour Decl. at pp. 13-14.)

Defendant also advances a Bluelink Connected Services Agreement Plaintiff agreed to on or about January 15, 2020, in connection with enrolling in Hyundai’s Bluelink services, which includes the following arbitration provision:

(a) 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. This agreement to arbitrate is intended to be broadly interpreted and to make all disputes and claims between us subject to arbitration to the fullest extent permitted by law. However, any dispute you or we may have relating to copyrights or other intellectual property shall not be governed by this agreement to arbitrate. For the avoidance of doubt, this means that any claims you or we may have relating to intellectual property rights against the other, including injunctive and other relief sought, may be brought in a court of competent jurisdiction. The agreement to arbitrate otherwise includes, but is not limited to: claims based in contract, tort, warranty, statute, fraud, misrepresentation or any other legal theory; claims that arose before this or any prior Agreement (including, but not limited to, claims relating to advertising); claims that are currently the subject of purported class action litigation in which you are not a member of a certified class; claims relating to your vehicle for which you seek product or service support via the sites; claims arising out of or relating to the Telephone Consumer Protection Act; claims relating to your data privacy or information security; and claims that may arise after the termination of this Agreement.

[…]

 Notwithstanding the foregoing, either party may bring an individual action in small claims court. You agree that, by entering into this Agreement, you and Hyundai are each waiving the right to a trial by jury or to participate in a class or representative action to the maximum extent permitted by law. This Agreement evidences a transaction in interstate commerce, and thus the Federal Arbitration Act governs the interpretation and enforcement of this arbitration provision. This arbitration provision shall survive termination of this Agreement or your relationship with Hyundai for any reason.

(Rao Decl. ¶ 4 and Ex. 2 at ¶ 15.C [emphasis added].)

            Thus, Defendant has produced evidence that two arbitration agreements exist that encompass the current dispute.

            In opposition, Plaintiff argues (1) both provisions are unenforceable and (2) both provisions are unconscionable.

a.            ENFORCEABILITY OF HANDBOOK PROVISION

Plaintiff argues the handbook provision is unenforceable because (1) the Song-Beverly Act adopts the Magnuson-Moss Warranty Act’s preclusion of binding arbitration of warranty disputes and (2) Plaintiff did not assent to the terms of the handbook provision.

Binding Arbitration Provisions for Warranty Disputes

Section 1793.1, subdivision (a)(1) of the Song-Beverly Act provides, “Every manufacturer, distributor, or retailer making express warranties with respect to consumer goods shall fully set forth those warranties in simple and readily understood language, which shall clearly identify the party making the express warranties, and which shall conform to the federal standards for disclosure of warranty terms and conditions set forth in the federal Magnuson-Moss Warranty-Federal Trade Commission Improvement Act (15 U.S.C. Sec. 2301 et seq.), and in the regulations of the Federal Trade Commission adopted pursuant to the provisions of that act.”

The Magnuson-Moss Warranty Act grants the Federal Trade Commission (“FTC”) power to regulate alternative dispute resolution claims involving warranties.  (15 U.S.C., § 2310, subd. (a)(2).)  The FTC has held that alternative dispute resolution mechanisms are not legally binding “in any civil action arising out of a warranty obligation[.]” (16 CFR, § 703.5, subd. (j).)

As such, Plaintiff argues, the Court must show deference, under Chevron U.S.A. Inc. v. NRDC (1984) 467 U.S. 837 (overruled in Loper Bright Enterprises v. Raimondo (2024) 603 U.S.) (hereafter Chevron), to the FTC’s regulations on binding alternative dispute resolution provisions for warranty claims.

As a threshold matter, the Court is not convinced that Section 1793.1’s mandate that express warranties “shall conform to the federal standards for disclosure of warranty terms and conditions” (emphasis added) extends to the FTC’s regulations regarding binding arbitration provisions for Magnuson-Moss warranty claims.

Moreover, in reply, Defendant points out that Chevron was recently overturned.  Furthermore, even before Chevron was overturned, in Epic Systems Corp. v. Lewis (2018) 138 S.Ct. 1612, the U.S. Supreme Court held that Chevron deference is not appropriate with respect to an agency’s interpretation of the FAA if that agency does not administer the FAA.  (Id. at p. 1618.)  Because the FTC does not administer the FAA, Defendant argues this provision of Magnuson-Moss would not ever have been entitled to Chevron deference.

Defendant further points out that the Fifth Circuit Court of Appeals has held that Magnuson-Moss does not preclude binding arbitration agreements.  (Walton v. Rose Mobile Homes LLC (5th Cir. 2002) 298 F.3d 470, 478-479.)  The Eleventh Circuit has similarly held “written warranty claims arising under Magnuson-Moss Warranty Act may be subject to valid binding arbitration agreements.” (Davis v. Southern Energy Homes, Inc. (11th Cir. 2002) 305 F.3d 1268, 1274-1280.) 

Although the Ninth Circuit has not weighed in on the issue, California has a strong public policy in favor of alternative dispute resolution.  (See Brodke v. Alphatec Spine Inc. (2008) 160 Cal.App.4th 1569, 1577.)  As such, federal District Courts within the Ninth Circuit, including California, have followed the Fifth and Eleventh circuits in permitting binding arbitration agreements with respect to warranty claims.  (See, e.g., In re Apple Iphone 3G Prods., Liab. Litig. (N.D. Cal. 2012) 859 F.Supp.2d 1084, 1091.)

Moreover, California courts have upheld binding arbitration provisions for Song-Beverly claims.  (See Sanchez v. Valencia Holding Co., LLC (2015) 61 Cal.4th 899, 909-910 (hereafter Sanchez).)

Therefore, the Court does not find applicable California law precludes enforcing binding arbitration provisions for Song-Beverly warranty claims.

Assent

Plaintiff next argues that Defendant cannot rely on the arbitration provision and opt-out clause provided surreptitiously within a warranty manual to establish Plaintiff’s consent to the arbitration provision.  In support, Plaintiff replies on Norcia v. Samsung Telecommunications America, LLC (9th Cir. 2017) 845 F.3d 1279 (hereafter Norcia).  In Norcia, the Ninth Circuit, in applying California law, determined that the consumer was not bound by an arbitration clause containing an opt-out provision that was included within a warranty.  In so holding, the Ninth Circuit noted that while warranty law imposes obligations on the seller flowing from the seller’s promises and description of the goods, a warranty does not generally impose obligations on the buyer.

Similarly, in Knutson v. Sirius XM Radio Inc. (9th Cir. 2014) 771 F.3d 559 (hereafter Knutson), upon which Norcia relies, the Ninth Circuit held that a “Welcome Kit” sent in connection with a 90-day satellite radio trial subscription that required the consumer to affirmatively cancel the subscription to avoid being charged was not an enforceable contract.  (Id. at pp. 561-62.)

In reply, Defendant argues that Plaintiff may not seek to enforce the benefits of the warranty contract on the one hand while on the other hand simultaneously denying the existence of an enforceable agreement with respect to the arbitration provision.  In support, Defendant has provided several federal district court opinions upholding the exact arbitration provision at issue.

But the Court finds these cases distinguishable, as each of them involved a plaintiff who alleged the existence of a contract in the operative complaint.  By contrast, here, Plaintiff has not alleged that the warranty created a contract between the parties, nor does Plaintiff seek redress on the warranty under a breach of contract theory.  Rather, Plaintiff seeks to enforce Defendant’s promises under warranty law. 

The Court agrees with Plaintiff that the arbitration provision, which is buried on pages 13-14 of the handbook, and which purports to obtain Plaintiff’s assent by virtue of staying silent in the face of an opt-out provision, is akin to the arbitration agreements in Norcia and Knutson, for which the courts found there was no mutual assent.

Therefore, the Court finds Plaintiff was not sufficiently on notice of the arbitration provision to manifest any mutual assent to it by virtue of the opt-out provision.

b.           ENFORCEABILITY OF BLUELINK AGREEMENT

Plaintiff next argues the arbitration clause in the BlueLink Agreement is unenforceable because (1) the Rao declaration does not sufficiently establish that Plaintiff assented to it; and (2) the terms “vehicle” and “warranty” contained in the BlueLink agreement pertained to the connected services for which Plaintiff was signing up, not general warranty claims on the entire vehicle. 

As for Plaintiff’s first argument, the Rao declaration provides:

In my capacity as Director of Connected Ops & Owner Apps/Web, I administer business activities and processes relating to the Hyundai Bluelink services for Hyundai vehicles

[…]

3. Hyundai Bluelink services refers to a connected car system that includes various functions and features.

4. To enroll in Bluelink services, customers must agree to the then-effective Connected Services Agreement (“CSA”). Hyundai makes a copy of the CSA available to every customer who enrolls in the Bluelink services plan. The CSA is often called the “Terms and Conditions” or “Terms & Conditions.”

5. On January 15, 2020 Plaintiff enrolled their Vehicle in Bluelink services.

6. When new Bluelink services enrollees like Plaintiff activates Bluelink services, they agree to the then-effective CSA. An example screen capture that reflects the content and general layout that Plaintiffs would have seen when they activated Bluelink services on January 15, 2020 is attached as Exhibit 1. To enroll, Plaintiff would have had to click the box to acknowledge that they “read and agree[d] to the Blue Link Terms & Conditions” and then click the “Complete” button. The phrase Terms & Conditions included a hyperlink to the then-effective CSA. As presented to Plaintiff, the box acknowledging the Terms & Conditions would not have been “prepopulated” with a check mark. Plaintiffs would have had to click that box to acknowledge assent to the CSA. A customer cannot successfully activate Bluelink services unless they complete the step requiring them to click the box acknowledging they agree to the Bluelink Terms and Conditions. Attached hereto as Exhibit 2 is a true and correct copy of the CSA that was in effect at that time.

(Rao Decl. ¶¶ 1, 3-6.)

            Thus, the Rao declaration establishes from personal knowledge that Plaintiff enrolled in the Bluelink services, outlines the process Plaintiff would have gone through in enrolling in those services, and provides a copy of the terms to which Plaintiff expressly agreed at that time by checking the box indicating “I have read and agree to the Blue Link Terms & Conditions” that are linked.  (Ex. 1 to Rao Decl.)  This is sufficient to demonstrate that Plaintiff was adequately on notice of the BlueLink Terms and Conditions, including the arbitration agreement, and affirmatively agreed to them by checking the box and then clicking the “Complete” button.  (Ibid.)

            In opposition, Plaintiff provides the following declaration:

6. I never signed any post-sale “Arbitration Agreement,” including the instant one being submitted by Defendant, because this subsequent “Arbitration Agreement” does not require a consumer’s express consent, nor contains an actual signature-line.

(Graham Decl. ¶ 6.)

            But whether checking the box and clicking the “Complete” button constitutes express consent or an electronic signature is a legal question, not a factual one.  As such, Plaintiff’s declaration does not refute that Plaintiff affirmatively assented to the Bluelink Terms and Conditions, including the arbitration agreement contained therein.

            Scope of BlueLink Arbitration Agreement

            Plaintiff next argues that, although the language of the BlueLink Arbitration Agreement appears to be broad, encompassing all claims arising regarding the vehicle and Plaintiff’s vehicle warranty claims, in context, it is clear that the BlueLink Terms arbitration provision encompasses only claims related to BlueLink, any issues that BlueLink may pose for the vehicle, and any warranties arising with respect to the BlueLink system.  In support, Plaintiff points to the preamble before the arbitration agreement that indicates:

MOST CUSTOMER CONCERNS CAN BE RESOLVED QUICKLY AND TO THE CUSTOMER'S SATISFACTION BY CONTACTING HYUNDAI’S CUSTOMER SERVICE DEPARTMENT […] IN THE UNLIKELY EVENT THAT THE APPROPRIATE CUSTOMER SERVICE DEPARTMENT IS UNABLE TO RESOLVE YOUR CONCERNS, WE EACH AGREE TO RESOLVE THOSE DISPUTES THROUGH BINDING ARBITRATION OR SMALL CLAIMS COURT INSTEAD OF IN COURTS OF GENERAL JURISDICTION TO THE FULLEST EXTENT PERMITTED BY LAW, AND SUBJECT TO THE TERMS OF THIS AGREEMENT.

(Ex. B to Rao Decl. at ¶ 15.C. [emphasis added].)

            The Court disagrees.  The plain language of the arbitration agreement provides, “This agreement to arbitrate is intended to be broadly interpreted and to make all disputes and claims between us subject to arbitration to the fullest extent permitted by law.”  It further provides:

The agreement to arbitrate otherwise includes, but is not limited to: claims based in contract, tort, warranty, statute, fraud, misrepresentation or any other legal theory; claims that arose before this or any prior Agreement (including, but not limited to, claims relating to advertising); claims that are currently the subject of purported class action litigation in which you are not a member of a certified class; claims relating to your vehicle for which you seek product or service support via the sites; claims arising out of or relating to the Telephone Consumer Protection Act; claims relating to your data privacy or information security; and claims that may arise after the termination of this Agreement.

(Ex. B to Rao Decl. at ¶ 15.C. [emphasis added.])

            As such, the BlueLink arbitration agreement covers the instant dispute.

c.      UNCONSCIONABILITY

            “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, Respondent 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].) 

                                                              i.     PROCEDURAL UNCONSCIONABILITY

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 (hereafter, Dougherty).)  Most consumer contracts are adhesive and therefore present some procedural unconscionability. (Sanchez, supra, 61 Cal.4th at p. 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 agreement is procedurally unconscionable because it is a contract of adhesion offered to Plaintiff on a “take it or leave it” basis.

The Court agrees that the standard terms were presented to Plaintiff on a “take it or leave it” basis, and is thus, a contract of adhesion.  However, the level of oppression in a contract for the purchase of BlueLink services is not as great as an employment contract, for example.  (See e.g., Tiri v. Lucky Chances, Inc. (2014) 226 Cal.App.4th 231, 245.)  Moreover, “contracts of adhesion are generally enforceable according to their terms” except to the extent the terms do not fall within the reasonable expectations of the adhering party in a weaker bargaining position.  (Saterbak v. JPMorgan Chase Bank, N.A. (2016) 245 Cal.App.4th 808, 817.)

Here, the Court agrees that the broad scope of the arbitration provision, which encompasses all claims relating to the subject vehicle, may come as a surprise to a customer signing terms and conditions relating to complementary BlueLink services.

As such, the Court finds the contract to be moderately procedurally unconscionable.

                                                            ii.     SUBSTANTIVE UNCONSCIONABILITY

            Substantive unconscionability refers to agreement terms which are overly harsh, unduly oppressive, unreasonably unfavorable, or so one-sided as to shock the conscience – which, for practical purposes, all mean the same thing.  (Sanchez, supra, 61 Cal.4th at p. 915.)   With regard to demonstrating substantive unconscionability, an “old-fashioned bad bargain” or a contract term which “merely gives one side a greater benefit” is insufficient.  (Id. at pp. 911-912.)  The test for substantive unconscionability is whether the terms impair the integrity of the bargaining process or otherwise contravene public policy, or the terms “attempt to alter in an impermissible manner fundamental duties otherwise imposed by the law” or “negate the reasonable expectations of the nondrafting party.” (Sonic-Calabassas A, Inc. v. Moreno (2013) 57 Cal.4th 1109, 1145; see also Carbajal v. CWPSC, Inc. (2016) 245 Cal.App.4th 227, 247 [“outside the reasonable expectation of the nondrafting party or is unduly oppressive”]; Dougherty, supra, 47 Cal.App.5th at pp. 104-107 [arbitration agreement that curtailed plaintiffs’ ability to recover statutory remedies, such as punitive damages and attorney fees, and contained limitations on discovery that risked frustrating plaintiffs’ statutory elder abuse claims was substantively unconscionable].) 

            In the context of employment agreements, courts have found that when the claims covered by an arbitration agreement are realistically only brought by one of the parties to the agreement against the other, the provision is substantively unconscionable for being one sided. 

            While this may be so, the Court disagrees that cases interpreting the substantive unconscionability of employment agreements with respect to an arbitration provision covering vehicle warranty claims is apt.  Notably, employment agreements, by their nature, involve litigants who are under greater pressure to sign and agree to the terms of the agreement, to obtain employment and make a living.  By contrast, if a car customer is unhappy with a specific company’s arbitration terms, the customer has more flexibility to go to another dealer than someone who is wanting to find work. 

            Plaintiff also argues that the provision permitting Defendant to recover statutory attorneys’ fees is overly harsh because it contravenes California law.  Specifically, the Song-Beverly Act permits a prevailing buyer to recover their reasonable attorneys’ fees, but not a prevailing seller.  (Civ. Code. § 1794 subd. (d).) 

            However, the arbitration provision provides, “HOWEVER, IN ARBITRATION, BOTH YOU AND HYUNDAI WILL BE ENTITLED TO RECOVER ATTORNEYS’ FEES FROM THE OTHER PARTY TO THE SAME EXTENT AS YOU WOULD BE IN COURT.”

            The Court does not interpret this provision as expanding Hyundai’s right to recover attorneys’ fees to the same extent Plaintiff would be able to in court, in contravention of the controlling statute.  Rather, the Court interprets this provision in context as informing and warning Plaintiff that Hyundai’s attorneys’ fees are recoverable in arbitration to the same extent they would be recoverable in court.

            To the extent Hyundai intended by this provision to grant itself the ability to recover attorneys’ fees that would otherwise be unavailable, the Court finds the provision unenforceable and severable. 

            Either way, it does not create substantive unconscionability precluding Defendant from compelling arbitration.

            Therefore, the Court finds no substantive unconscionability.

CONCLUSION

            Therefore, having found that the parties entered into a binding and enforceable arbitration agreement, as contained within the BlueLink Terms and Conditions, to which Plaintiff affirmatively manifested assent by checking the box agreeing to the linked terms and clicking the button at the bottom, that the scope of the agreement covers Plaintiff’s claims, and that the agreement is not substantively unconscionable, the Court grants Defendant’s motion to compel arbitration.  Further, the Court stays these proceedings, pending the outcome of arbitration.

            Further, on the Court’s own motion, the Courts vacates the Case Management Conference set for March 5, 2025 and the Informal Discovery Conference set for March 25, 2025.  The Court sets a Status Conference re Arbitration on March 5, 2026 at 8:30 A.M. in Department 207.  The parties shall file a Joint Status Report regarding the Arbitration no later than 5 court days before the scheduled conference. 

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

DATED:  March 4, 2025                                                        ___________________________

                                                                                          Michael E. Whitaker

                                                                                          Judge of the Superior Court