Judge: Michael E. Whitaker, Case: 24SMCV04792, Date: 2025-05-05 Tentative Ruling

Case Number: 24SMCV04792    Hearing Date: May 5, 2025    Dept: 207

TENTATIVE RULING

MOTION

This case arises from allegations that manufacturer Defendant Tesla, Inc. (“Defendant” or “Tesla”) sold to Plaintiffs Illusionarium, Inc. and Spencer Howard Medof (“Plaintiffs”) an allegedly defective 2023 Tesla Model Y Long Range vehicle and failed to repair the defects or replace the vehicle, in violation of the Song-Beverly Act. 

On October 2, 2024, Plaintiff filed suit against Defendants, alleging three causes of action under the Song-Beverly Act for (1) breach of express warranty; (2) breach of implied warranty; and (3) breach of section 1793.2(b).

Defendant now moves to compel arbitration and stay this action pending the completion of arbitration proceedings.  Plaintiffs oppose the motion and Defendant replies.

REQUEST FOR JUDICIAL NOTICE

            Defendant requests judicial notice of Plaintiffs’ Complaint in this matter, filed on October 2, 2024. 

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 of the Complaint filed in this matter as a court record, but not the truth of the allegations contained therein.

EVIDENTIARY OBJECTIONS

            The Court rules as follows with respect to Plaintiff’s Objections to the Kim Declaration:

1. Overruled
2. Overruled
3. Overruled
4. Overruled

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

Defendants advance the Motor Vehicle Order Agreement Plaintiffs would have agreed to while placing their order online on or about April 19, 2022 and the Retail Installment Sale Contract for the purchase of the subject vehicle on credit, which Plaintiff signed upon delivery of the vehicle, on or about November 19, 2022.  (Kim Decl. ¶ 3 and Exs. 1-2.) 

The Order Agreement provides:

Agreement to Arbitrate. Please carefully read this provision, which applies to any dispute between you and Tesla, Inc. and its affiliates, (together “Tesla”).

If you have a concern or dispute, please send a written notice describing it and your desired resolution to resolutions@tesla.com.

If not resolved within 60 days, you agree that any dispute arising out of or relating to any aspect of the relationship between you and Tesla will not be decided by a judge or jury but instead by a single arbitrator in an arbitration administered by the American Arbitration Association (AAA) under its Consumer Arbitration Rules. This includes claims arising before this Agreement, such as claims related to statements about our products.

We will pay all AAA fees for any arbitration, which will be held in the city or county of your residence. To learn more about the Rules and how to begin an arbitration, you may call any AAA office or go to www.adr.org.

The arbitrator may only resolve disputes between you and Tesla, 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 Tesla vehicles. In other words, you and Tesla may bring claims against the other only in your or its individual capacity and not as a plaintiff or class member in any class or representative action. If a court or arbitrator decides that any part of this agreement to arbitrate cannot be enforced as to a particular claim for relief or remedy, then that claim or remedy (and only that claim or remedy) must be brought in court and any other claims must be arbitrated.

If you prefer, you may instead take an individual dispute to small claims court.

You may opt out of arbitration within 30 days after signing this Agreement by sending a letter to: Tesla, Inc.; P.O. Box 15430; Fremont, CA 94539-7970, stating your name, Vehicle Identification Number, and intent to opt out of the arbitration provision. If you do not opt out, this agreement to arbitrate overrides any different arbitration agreement between us, including any arbitration agreement in a lease or finance contract.

(Ex. 1 to Kim Decl.)  The bottom of page 1 of The Installment Sale Contract provides:

Agreement to Arbitrate: By signing below, you agree that, pursuant to the Arbitration Provision on page 5 of this contract, you or we may elect to resolve any dispute by neutral, binding arbitration and not by a court action. See the Arbitration Provision for additional information concerning the agreement to arbitrate.

(Ex. 2 to Kim Decl.)  This arbitration agreement statement is electronically signed by “Spencer Howard Medof” on behalf of “Illusionarium Inc” and in his individual capacity as a Co-Buyer.  (Ibid.)  Page 5 of the Installment Sale Contract provides:

ARBITRATION PROVISION

PLEASE REVIEW - IMPORTANT - AFFECTS YOUR LEGAL RIGHTS

1.     EITHER YOU OR WE MAY CHOOSE TO HAVE ANY DISPUTE BETWEEN YOU AND US DECIDED BY ARBITRATION AND NOT IN COURT OR BY JURY TRIAL.

2.     IF A DISPUTE IS ARBITRATED, YOU WILL GIVE UP YOUR RIGHT TO PARTICIPATE AS A CLASS REPRESENTATIVE OR CLASS MEMBER ON ANY CLASS CLAIM YOU MAY HAVE AGAINST US INCLUDING ANY RIGHT TO CLASS ARBITRATION OR ANY CONSOLIDATION OF INDIVIDUAL ARBITRATIONS.

3.     DISCOVERY AND RIGHTS TO APPEAL IN ARBITRATION ARE GENERALLY MORE LIMITED THAN IN A LAWSUIT, AND OTHER RIGHTS THAT YOU AND WE WOULD HAVE IN COURT MAY NOT BE AVAILABLE IN ARBITRATION.

Any claim or dispute, whether in contract, tort, statute or otherwise (including the interpretation and scope of this Arbitration Provision, any allegation of waiver of rights under this Arbitration Provision, and the arbitrability of the claim or dispute), between you and us or our employees, agents, successors or assigns, which arises out of or relates to your credit application, purchase or condition of this Vehicle, this contract or any resulting transaction or relationship (including any such relationship with third parties who do not sign this contract) shall, at your or our election, be resolved by neutral, binding arbitration and not by a court action. If federal law provides that a claim or dispute is not subject to binding arbitration, this Arbitration Provision shall not apply to such claim or dispute. Any claim or dispute is to be arbitrated by a single arbitrator only on an individual basis and not as a plaintiff in a collective or representative action, or a class representative or member of a class on any class claim. The arbitrator may not preside over a consolidated, representative, class, collective, injunctive, or private attorney general action. You expressly waive any right you may have to arbitrate a consolidated, representative, class, collective, injunctive, or private attorney general action. You or we may choose the American Arbitration Association (www.adr.org) or National Arbitration and Mediation (www.namadr.com) as the arbitration organization to conduct the arbitration. If you and we agree, you or we may choose a different arbitration organization. You may get a copy of the rules of an arbitration organization by contacting the organization or visiting its website.

Arbitrators shall be attorneys or retired judges and shall be selected pursuant to the applicable rules. The arbitrator shall apply governing substantive law and the applicable statute of limitations. The arbitration hearing shall be conducted in the federal district in which you reside unless the Seller-Creditor is a party to the claim or dispute, in which case the hearing will be held in the federal district where this transaction was originated. We will pay the filing, administration, service, or case management fee and the arbitrator or hearing fee up to a maximum of $5,000, unless the law or the rules of the chosen arbitration organization require us to pay more. You and we will pay the filing, administration, service, or case management fee and the arbitrator or hearing fee over $5,000 in accordance with the rules and procedures of the chosen arbitration organization. The amount we pay may be reimbursed in whole or in part by decision of the arbitrator if the arbitrator finds that any of your claims is frivolous under applicable law. Each party shall be responsible for its own attorney, expert and other fees, unless awarded by the arbitrator under applicable law. If the chosen arbitration organization's rules conflict with this Arbitration Provision, then the provisions of this Arbitration Provision shall control. Any arbitration under this Arbitration Provision shall be governed by the Federal Arbitration Act (9 U.S.C. §§ 1 et seq.) and not by any state law concerning arbitration. Any award by the arbitrator shall be in writing and will be final and binding on all parties, subject to any limited right to appeal under the Federal Arbitration Act.

You and we retain the right to seek remedies in small claims court for disputes or claims within that court's jurisdiction, unless such action is transferred, removed or appealed to a different court. Neither you nor we waive the right to arbitrate any related or unrelated claims by filing any action in small claims court, or by using self-help remedies, such as repossession, or by filing an action to recover the vehicle, to recover a deficiency balance, or for individual or statutory public injunctive relief. Any court having jurisdiction may enter judgment on the arbitrator's award. This Arbitration Provision shall survive any termination, payoff or transfer of this contract. If any part of this Arbitration Provision, other than waivers of class rights, is deemed or found to be unenforceable for any reason, the remainder shall remain enforceable. You agree that you expressly waive any right you may have for a claim or dispute to be resolved on a class basis in court or in arbitration. If a court or arbitrator finds that this class arbitration waiver is unenforceable for any reason with respect to a claim or dispute in which class allegations have been made, the rest of this Arbitration Provision shall also be unenforceable

(Ex. 2 to Kim Decl.)

            Thus, Tesla has produced two agreements to arbitrate “any claim or dispute” arising out of or relating to Plaintiffs’ “relationship with Tesla” (Exs. 1 & 2) and “purchase or condition of this Vehicle” (Ex. 2.)

            In opposition, Plaintiffs argue (1) Tesla has not provided sufficient evidence that Plaintiff affirmatively agreed to the Order Agreement, which has no signature line on its face; (2) the arbitration provision in the Order Agreement is conditional upon Plaintiffs sending Tesla written notice and the issue going unresolved for 60 days, which Tesla also does not establish; (3) Plaintiffs’ warranty claims are not within the scope of the Order Agreement’s arbitration clause.

            With regard to the Installment Contract, Plaintiffs also argue (1) Plaintiffs’ warranty claims are not within the scope of the Installment Contract’s arbitration clause because Tesla’s statutory warranty obligations do not arise from the Installment Contract; and (2) compelling arbitration would be tantamount to allowing Tesla to improperly contract out of its statutory Song-Beverly civil penalty liability because the AAA does not permit any discovery at all other than whatever discovery is allowed at the “whim” of the arbitrator, and without discovery, Plaintiffs cannot prove up their claims.

            In support of Plaintiffs’ arguments vis-à-vis the Installment Contract, Plaintiffs cite to Ford Motor Warranty Cases (2023) 89 Cal.App.5th 1324 as standing for the proposition that a car dealer may not compel arbitration of Song-Beverly claims based on an arbitration provision in a sales contract.  To the contrary, Ford held that the manufacturer could not compel arbitration based upon an arbitration provision contained within the sales contract between Plaintiff and the dealer (to which the manufacturer was not a party or third-party beneficiary) that did not contain any warranty provision, and in fact expressly disclaimed any warranties. 

            Indeed, the cases upon which Plaintiffs rely as “affirming” Ford are in accord with this interpretation.  For example, Motemayor v. Ford Motor Company (2023) 92 Cal.App.5th 958, 967 cites Ford as standing for the proposition that “one must be a party to an arbitration agreement to be bound by it or invoke it.”  Similarly, Kielar v. Superior Court of Placer County (2023) 94 Cal.App.5th 614, 617 cites to Ford as disagreeing with Felisilda v. FCA US LLC (2020) 53 Cal.App.5th 486, which held that a nonsignatory manufacturer could enforce the arbitration provision in the sales contract between the purchaser and the local dealership.  And Yeh v. Superior Court of Contra Costa County (2023) 95 Cal.App.5th 264, 269-270 merely cites to Ford for the proposition that a trial court’s decision to compel arbitration is reviewed de novo, immediately before citing to Jones v. Jacobson (2011) 195 Cal.App.4th 1, 15 as standing for the proposition that a “party seeking to compel arbitration […] has the burden to prove it is a party to the arbitration agreement covering the dispute.”

            By contrast, here, because Plaintiffs purchased the vehicle online directly from the manufacturer, the agreements in question are between Plaintiffs and Tesla directly.  Moreover, Tesla’s warranty obligations under Song-Beverly arise out of that direct relationship between Plaintiffs and Tesla wherein Plaintiffs purchased the subject vehicle directly from Tesla.  Therefore, Plaintiffs’ Song-Beverly claims are within the scope of the arbitration provision contained in the Installment Contract.

            Regarding Plaintiffs’ third argument that compelling arbitration is tantamount to enabling Tesla to improperly escape its statutory liability, the Court disagrees.  Plaintiffs may bring their Song-Beverly Act claims in arbitration the same as they would be able to in court, including claims for civil penalties.  California has a public policy in favor of arbitration because it enables parties to resolve their disputes in a streamlined and more cost-effective manner, which includes more limited discovery procedures.  That arbitration proceedings may limit discovery is not itself tantamount to contracting around statutory liability.

            Because the Court determines that the parties entered into a valid and binding arbitration agreement by way of the Installment Contract which covers the instant dispute, the Court does not address the parties’ arguments regarding the Order Agreement.  The Court also does not consider the Reply Declarations of Ali Ameripour or Raymond Kim because reply evidence generally violates due process, as it deprives the opposing party of a fair opportunity to respond.  (San Diego Watercrafts, Inc. v. Wells Fargo Bank, N.A. (2002) 102 Cal.App.4th 308, 316 [“due process requires a party be fully advised of the issues to be addressed and be given adequate notice of what facts it must rebut in order to prevail”]; see also Wall Street Network Ltd. v. New York Times Co. (2008) 164 Cal.App.4th 1171.) 

CONCLUSION

            Therefore, having found that Plaintiffs entered into a valid, binding, and enforceable arbitration agreement that covers the instant dispute, the Court grants Defendant’s motion and compels this action to arbitration. 

            Further, the Court stays proceedings in this matter, pending the resolution of the arbitration proceedings, and vacates the Case Management Conference as moot.

            Further, the Court sets a Status Conference regarding the Arbitration on March 16, 2026 at 8:30 A. M. in Department 207.  The parties shall file a Joint Status Report no later than 5 court days before the scheduled conference. 

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

DATED:  May 5, 2025                                                           ___________________________

                                                                                          Michael E. Whitaker

                                                                                          Judge of the Superior Court