Judge: Michael Small, Case: 23STCV30931, Date: 2024-09-17 Tentative Ruling

Case Number: 23STCV30931    Hearing Date: September 17, 2024    Dept: 57

Plaintiff Nicole Lazaran (“Lazaran”) leased a 2020 Hyundai Kona (“the Subject Vehicle”) from Glendale Hyundai (“the Dealership”).  The Subject Vehicle was manufactured and distributed by Defendant Hyundai Motor America  (“HMA”).  Based on alleged defects in the Subject Vehicle, Lazaran sued HMA under  the Song-Beverly Consumer Warranty Act (“the Song-Beverly Act”) for breach of the express and implied warranties regarding the Subject Vehicle that HMA furnished to Lazaran in connection with her lease of the Subject Vehicle. Pending before the Court is HMA’s motion to compel arbitration of Lazaran’s claims.  The Court is granting HMA’s motion.

HMA’s motion to compel arbitration is based, inter alia, on an arbitration provision in the Owner’s Handbook and Warranty Information (“the Handbook”) that was in the glove box of the Subject Vehicle when Lazaran leased it.  The Handbook sets forth an express warranty by HMA of the fitness of the Subject Vehicle. The arbitration provision in the Handbook comes thereafter.  It first states as follows:

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.

In a related vein, the arbitration provision in the Handbook elsewhere further states as follows, in all capital letters:

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 OPTOUT@HMAUSA.COM WITHIN THIRTY (30) DAYS OF YOUR PURCHASE OR LEASE TO OPT-OUT OF THIS ARBITRATION PROVISION.[1]

A defendant’s motion to compel arbitration of a plaintiff’s claims must be granted if both sides mutually agreed to the arbitration of the claims, (Pinnacle Museum Tower Ass’n v. Pinnacle Market Development (US) LLC (2012) 55 Cal.4th 223, 226), the claims are covered by the agreement, (Omar v. Ralphs Grocery Co. (2004) 118 Cal.App.4th 955, 961), and enforcement of ,the agreement would not be unconscionable. (OTO, LLC v. Kho (2019) 8 Cal.5th 111, 125 [“OTO”])   In the Court’s view, Lazaran assented to the arbitration provision in the Handbook, her claims against HMA are covered by the provision, and enforcement of the provision would not be unconscionable.

Lazaran manifested her assent to the arbitration provision in the Handbook through her reliance on it in suing HMA.  Specifically, her claim against HMA for breach of the express warranty in violation of the Song-Beverly Act is based on the warranty set forth in the Handbook.  Lazaran has thereby accepted the benefits to her of the contractual warranty in the Handbook.  Having accepted the benefits by suing to enforce the warranty, Lazaran is barred from arguing that she did not agree to the arbitration provision contained alongside the warranty in the Handbook.  (Boucher v. Alliance Title Co. (2005) 127 Cal.App.4th 262, 269.)  To be sure, Lazaran did not sign or initial any portion of the Handbook, including the arbitration provision therein.  But a party need not sign an agreement to be bound by it.  [“[A] party may accept a contract by conduct, as well as by words.”].).  (Calvary SPV I LLC v. Watkins (2019) 36 Cal. App.5th 1070, 1081,)  That is what Lazaran has done here by suing to enforce the warranty in the Handbook that is coupled with the arbitration provision.

Lazaran’s claims plainly are covered by the arbitration provision.  As indicated above, the provision applies to “any claim or disputes” between Lazaran and HMA “related to arising out of” Lazaran’s use of the Subject Vehicle, the warranty and representations in the warranty.  The provision broadly encompasses both the claim for breach of the express warranty and the claim for breach of the implied warranty.

As the party opposing arbitration, Lazaran bears the burden of demonstrating that the arbitration provision is unconscionable, which she contends it is.  (Szetela v. Discover Bank (2002) 97 Cal.App.4th 1094, 1099.)   Lazaran has failed to carry that burden. 

“Unconscionability has procedural and substantive aspects.”  (Abramson v. Juniper Networks, Inc.¿(2004) 115 Cal.App.4th 638, 655.) “Both procedural and substantive unconscionability must be present before a contract or term will be deemed unconscionable.”  (Serafin v. Balco Properties Ltd., LLC¿(2015) 235 Cal.App.4th 165, 178.)  Procedural unconscionability focuses on the circumstances surrounding the execution of the agreement and the relative bargaining power of the parties to the agreement; substantive unconscionability focuses on the fairness, or lack thereof, of the agreement’s terms.  (OTO, supra, 8 Cal.5th at p. 125.)   In analyzing unconscionability, courts apply a “sliding scale, which means that “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 v. Foundation Health Psychcare Services (2000) 24 Cal.4th 83, 114.)

Lazaran’s contention that the arbitration provision in the Handbook is procedurally unconscionable rests on the propositions that (a) the arbitration provision was not called to her attention when she leased the  Subject Vehicle and she was generally unaware of it until HMA moved to compel arbitration, and (b) she was in an unequal bargaining position compared to HMA.  Neither proposition carries the day for Lazaran.  Even if Lazaran did not know about the arbitration provision in the Handbook, she knew about the warranty in the Handbook because, as alleged in her complaint, she took the Subject Vehicle to an authorized HMA dealer for repairs based on the warranty.  As to comparative bargaining power, of course HMA is a large corporation and Lazaran is an individual consumer.  But that does not, in and of itself, render the arbitration provision procedurally unconscionable. And, in any event, as indicated above from the text of the agreement, the Handbook gave Lazaran the power to opt-out of the arbitration provision if she so chose.

 Even if the arbitration provision in the Handbook provision were procedurally unconscionable, Lazaran has failed to show how the provision also is substantively unconscionable.  She points only to the opt-out opportunity, labeling it illusory.  The Court disagrees with that characterization of the opt-out opportunity.

Because the Court is granting HMA’s motion to compel arbitration, proceedings in this Court are stayed pending the outcome of the arbitration.   The Court is setting a hearing on the status of the arbitration for September 17, 2024 at 8:30 a.m.