Judge: Michael E. Whitaker, Case: 24SMCV05670, Date: 2025-03-18 Tentative Ruling

Case Number: 24SMCV05670    Hearing Date: March 18, 2025    Dept: 207

TENTATIVE RULING

MOTION

This case arises from allegations that manufacturer Defendant American Honda Motor Co., Inc. (“Honda”) and dealer Defendant Standard Motor LLC (“Standard”) leased to Plaintiff David Kostandian (“Plaintiff”) (together, “Defendants”) a defective vehicle with a warranty but failed to repair, refund, or replace the vehicle, in violation of the Song-Beverly and Magnuson-Moss Acts. 

On November 19, 2024, Plaintiff brought suit alleging nine causes of action for (1) fraud and deceit; (2) breach of written warranty (Magnuson-Moss); (3) breach of implied warranty (Magnuson-Moss); (4) breach of written warranty (Song-Beverly); (5) breach of implied warranty (Song-Beverly); (6) violation of Business & Professions Code §§ 17200, et seq.; (7) violation of Business & Professions Code § 17500, et seq.; (8) negligence; and (9) strict liability.

Defendants now moves to compel arbitration and to dismiss or stay this action pending the completion of arbitration proceedings.  Plaintiff opposes the motion and Defendants reply.

REQUEST FOR JUDICIAL NOTICE

            Defendants request the Court to take judicial notice of the following:

1. The certified copy of American Honda Finance Corporation’s Fictitious Business Name Statement for Acura Financial Services and Affidavit of Publication filed by American Honda Finance Corporation with San Diego County’s Office of the County Clerk/Recorder. A true and correct copy is attached hereto as Exhibit “D”.

2. American Honda Finance Corporation’s Form 10-Q filed and maintained with the United States’ Security and Exchange Commission for the period ending June 30, 2024. A true and correct copy is attached hereto as Exhibit “E”.

            Regarding Exhibit 1, courts can take judicial notice of recorded documents if authenticity is not reasonably disputed.  (Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal.App.4th 256, 264-265.)  “The official act of recordation and the common use of a notary public in the execution of such documents assure their reliability, and the maintenance of the documents in the recorder’s office makes their existence and text capable of ready confirmation, thereby placing such documents beyond reasonable dispute.”  (Ibid.)  Moreover, courts can take judicial notice not only of the existence and recordation of recorded documents but also matters that can be deduced from the documents, including the parties, dates, and legal consequences of recorded documents relating to real estate transactions.  (Ibid.) 

As for Exhibit 2, official notices, statements, and certificates made by a federal government agency (like the Security and Exchange Commission (“SEC”)) are properly the subject of judicial notice as documents reflecting official acts of a federal executive department, pursuant to Evidence Code section 452, subdivision (c).  (See generally Friends of Shingle Springs Interchange, Inc. v. County of El Dorado (2011) 200 Cal.App.4th 1470, 1483-1484.)  However, “materials prepared by private parties and merely on file with the state [or federal] agencies” may not be properly judicially noticed as an official act of a legislative, executive, or judicial department of the United States or any state of the United States.  (People v. Thacker (1985) 175 Cal.App.3d 594, 598.)

            Notwithstanding, judicial notice can be taken of SEC filings as “[f]acts and propositions that are not reasonably subject to dispute and are capable of immediate and accurate determination by resort to sources of reasonably indisputable accuracy” pursuant to Evidence Code section 452, subdivision (h).  In Apple Inc. v. Superior Court, the appellate court explained that judicial notice of the existence of Apple’s filing with the SEC was proper under subdivision (h), and while the truth of the composition of the board members listed at the time of that filing could be factually disputed, the opposing party had not disputed the accuracy of the statement, and therefore the Court took judicial notice both of the existence of the document and the truth of the board composition listed therein.  (Apple Inc. v. Superior Court (2017) 18 Cal.App.5th 222, 242.)

            Here, because Plaintiff has not opposed, objected to, or otherwise disputed the accuracy of the information contained in Request for Judicial Notice (“RJN”) Exhibits 1 or 2, the Court takes judicial notice of them.

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 Lease Agreement Plaintiff executed when he leased the vehicle and the Warranty Booklet Plaintiff received upon delivery of the vehicle, each of which contains an arbitration provision.

a.     Lease Agreement

The Lease Agreement provides:

Agreement to Arbitrate: By signing below, you agree that, pursuant to the Arbitration Provision, Provision, Item 26, on page 6 of this Lease, 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.

[Lessee’s signature]

[Lessee’s initials at the bottom of page 1]

[…]

26. ARBITRATION PROVISION

ARBITRATION PROVISION

PLEASE REVIEW - IMPORTANT- AFFECTS YOUR LEGAL RIGHTS

1. EITHER YOU OR WE MAY CHOOSE TO HAVE ANY DISPUTE BETWEEN 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, and the arbitrability of the claim or dispute), between you and us or our parents, subsidiaries, affiliates, employees, officers, agents, representatives, predecessors, successors or assigns, (individually and collectively "us" or "our") which arises out of or relates to your credit application, origination or servicing of this Lease, the manufacture, delivery, condition, or performance of this Vehicle, any representations, omissions, or warranties, or any resulting transaction or relationship (including any such relationship with third parties who do not sign this Lease) 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 on an individual basis and not as a class action. You expressly waive any right you may have to arbitrate a class action. You may choose the American Arbitration Association (www.adr.org), JAMS (www.jamsadr.com), National Arbitration and Mediation (www.namadr.com), or any other organization to conduct the arbitration subject to our approval. You may geta copy of the rules of an arbitration organization by contacting the organization or visiting its website.

[…]

Opt Out: If you would like to opt out of arbitration, you may send us a written notice of opt out. The notice of opt out must provide your name, a description of the leased vehicle, including vehicle Including vehicle identification number (VIN), and a statement that you want to opt out of the arbitration provision. The written notice must be postmarked within 30 days of the date of this Lease and sent to Acura Financial of Services, P.O. Box 165007, Irving, TX 75016.You agree that we may make changes to this Arbitration Provision it we notify you of the changes and give you another opportunity to opt out.

YOU CONFIRM THAT BEFORE YOU SIGNED THIS LEASE, WE GAVE IT TO YOU, AND YOU WERE FREE TO TAKE IT AND REVIEW IT. YOU ACKNOWLEDGE THAT YOU READ ALL PAGES OF THIS LEASE, INCLUDING THE ARBITRATION PROVISION ABOVE (ITEM 26), BEFORE SIGNING BELOW. YOU CONFIRM THAT YOU RECEIVED A COMPLETELY FILLED-IN COPY WHEN YOU SIGNED THIS LEASE.

[Lessee’s Signature]

(Ex. A to Fisher Decl.)

Defendants contend that “Acura Financial Services” is a fictitious business name registered to American Honda Financial Corporation (“AHFC”), which is a wholly-owned subsidiary of Defendant Honda.  (See RJN Ex. D, ¶ 1.)  The arbitration provision in the Lease Agreement expressly applies to claims and disputes arising between Plaintiff lessee and “us or our parents[.]”  Further, case law supports permitting a nonsignatory parent to compel or be compelled to arbitration proceedings under such circumstances as equity demands.  (See Cohen v. TNP 2008 Participating Notes Program, LLC (2019) 31 Cal.App.5th 840, 863-865.)  Thus, to the extent “Acura Financial Services” is a party to the Lease Agreement, its parent, Defendant Honda, may be permitted to compel Plaintiff to arbitration.

However, the Lease Agreement is actually between Acura of Los Angeles Westside as Lessor and Plaintiff as Lessee.  (Ex. A to Fisher Decl.)  The first page of the lease does, however, provide that “Lessor will assign this Lease and sell the Vehicle to Honda Lease Trust (Assignee”) and Acura Financial Services (“AFS”) helped arrange this Lease.”  (Ibid.)  The Lease Agreement further defines “We,” “us” and “our” as “the Lessor named above [Acura of Los Angeles Westside] and any assignee of this Lease.”  (Ibid.)

            Thus, the arbitration provision contained in the Lease, on its face, applies to disputes between Plaintiff and Acura of Los Angeles Westside (not a party to this lawsuit) as signatory and/or Honda Lease Trust (also not a party to this lawsuit) as assignee.  Although Acura Financial Services (“AFS”) is listed as having “helped arrange this Lease,” AFS is not listed as either a signatory or an assignee and therefore is not, as defined by the terms of the Lease, part of the “We” “us” or “our” to whom the arbitration provision in the Lease applies.

            Although the attorney declaration of Jordan R. Fisher characterizes the Lease Agreement as being entered into among Plaintiff, “Standard Motor, LLC, dba Acura of Los Angeles Westside, American Honda Finance Corporation, dba Acura Financial Services, and Honda Lease Trust” (Fisher Decl. ¶ 2), there is no evidence in the record that “Acura of Los Angeles Westside” is a dba for Defendant Standard Motor, LLC.  Moreover, the characterization that the Lease Agreement was entered into among these three Honda/Acura entities is demonstrably incorrect, as the Lease Agreement was, on its face, only signed by Plaintiff and Acura of Los Angeles Westside, although it does reference Honda Lease Trust by name as assignee.

            In briefing, Defendants also point to Civil Code section 2985.7, which defines “Lessor” as “a person who is engaged in the business of leasing, offering to lease or arranging the lease of a motor vehicle under a lease contract[.]”  But “We,” “us” and “our” is defined as “the Lessor named above” not any “Lessor” as that term is defined by law.  Acura of Los Angeles Westside is the only lessor named above.  AFS is listed below that phrase, next to “Honda Lease Trust” as assignee, with only the designation that AFS “helped to arrange this Lease.”  

            Therefore, Defendants have not presented sufficient evidence demonstrating that either Honda or Standard are parties to the Lease Agreement or its arbitration provision.

b.     Warranty Booklet

Pages 6-7 of the Warranty Booklet provide:

Agreement To Arbitrate

Please carefully read this provision, which applies to any dispute between you and American Honda Motor Co., Inc. and its parent entities, subsidiaries, affiliates, agents, authorized service and repair facilities, employees, predecessors in interest, successors and assigns (together “Acura,” “we,” or “us”). You and we agree that any dispute arising out of or relating to any aspect of the relationship between you and Acura will not be decided by a judge or jury but instead by a single arbitration administered by the American Arbitration Association (AAA) under its Consumer Arbitration Rules in effect on the date of delivery of your vehicle to you. This Agreement to Arbitrate includes all claims, whether based in contract, tort, statute, fraud, misrepresentation or any other legal theory; claims arising out of your warranty; claims arising before or after this Agreement, such as claims related to statements about our products; claims about the performance, design of our products, or manufacturing of our products; and claims that are currently the subject of purported class action litigation in which you are not a member of a certified class.

[…]

All issues are for the arbitrator to decide, including the scope and enforceability of this arbitration provision. Disputes concerning the validity, application, scope, enforceability, or interpretation of this Agreement will be exclusively decided by the arbitrator. The Agreement and associated proceedings, such as waiver, estoppel, breach, or default before, during, or after arbitration, will be governed by the Federal Arbitration Act, 9 U.S.C. § 1 et seq., and federal common law, not by any state laws or procedures regarding arbitration. The arbitrator at all times holds the exclusive authority to address challenges to this Agreement, including questions of waiver, estoppel, breach, default, or the validity or scope of any part of this Agreement.

[…]

You may opt out of arbitration within 30 days after the date of delivery of your vehicle to you by sending a letter to: Acura’s Office of the General Counsel, 1919 Torrance Blvd., Mail Stop CHI-4, Torrance, CA 90501, stating your name, Vehicle Identification Number, and intent to opt out of the arbitration provision. If you do not opt out, then this agreement to arbitrate is binding.

(Ex. C to Fisher Decl.)

            Plaintiff initialed and signed an acknowledgment of “Receipt of Warranty Information.”  (Ex. B to Fisher Decl.)

Courts generally view arbitration provisions within booklets that purport to bind a consumer if they remain silent during the opt-out period with a high degree of skepticism.  For example, in Norcia, the Ninth Circuit, 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.  (Norcia v. Samsung Telecommunications America, LLC (9th Cir. 2017) 845 F.3d 1279 (hereafter Norcia).)

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 did not form an enforceable contract.  (Id. at pp. 561-62.)

Here, the arbitration provision is on pages 6-7 of the warranty booklet, which purports to obtain Plaintiff’s asset by virtue of staying silent in the face of an opt-out provision, like the purported agreements in Norcia and Knutson, where the courts found there was no mutual assent. 

Nor does Plaintiff’s acknowledgment of having received “Warranty Information” suffice to put Plaintiff on sufficient notice that on page 6 of the “warranty information” is an agreement to bind Plaintiff to arbitration if Plaintiff neglects to affirmatively opt out of it within thirty days.  As the Ninth Circuit pointed out in Norcia, warranties do not generally impose obligations on the buyer.  Thus, Plaintiff’s acknowledgment of receiving “warranty information” is insufficient to construe Plaintiff’s silence as to an arbitration provision contained within that booklet as assent to its terms.

As such, the Court does not find that under the circumstances presented, Plaintiff mutually assented to the terms of the arbitration provision contained in the warranty booklet.

CONCLUSION

            Therefore, having found that Defendants failed to demonstrate Plaintiff entered into any binding and enforceable arbitration agreement, the Court denies Defendants’ motion to compel arbitration without prejudice. 

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

DATED:  March 18, 2025                                                      ___________________________

                                                                                          Michael E. Whitaker

                                                                                          Judge of the Superior Court