Judge: Ronald F. Frank, Case: 23TRCV00914, Date: 2023-09-08 Tentative Ruling
Case Number: 23TRCV00914 Hearing Date: September 8, 2023 Dept: 8
Tentative Ruling¿
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HEARING DATE: September
8, 2023¿
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CASE NUMBER: 23TRCV00914
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CASE NAME: Ilaha Aliabas
Gizel Hajiyeva v. Tesla Motors, Inc., et al.
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MOVING PARTY: Defendant, Tesla, Inc.
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RESPONDING PARTY: Plaintiff,
Ilaha Aliabas Gizel Hajiyeva
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TRIAL DATE: Not
Set.
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MOTION:¿ (1) Motion to Compel Arbitration
Tentative Rulings: (1) Defendant’s
Motion to Compel Arbitration is GRANTED.
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I. BACKGROUND¿¿
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A. Factual¿¿
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On March 27, 2023, Plaintiff, Ilaha Aliabas Gizel Hajiyeva (“Plaintiff”) filed a Complaint
against Defendant, Tesla Motors, Inc., and DOES 1 through 10. The Complaint
alleges causes of action for: (1) Violation of Civil Code § 1793.2(d); (2)
Violation of Civil Code § 1793.2(b); (3) Violation of Civil Code section
1793.2(a)(3); (4) Breach of Express Written Warranty – Civil Code § 1791.2 (a),
Section 1794; and (5) Breach of the Implied Warranty of Merchantability – Civil
Code § 1791.1, Section 1794.
The Complaint is based on a
August 17, 2022 purchase by Plaintiff of a 2022 Tesla Model Y, manufactured
and/or distributed by Defendant, with corresponding Vehicle Identification
Number 7SAYGDEFXNF519653. Plaintiff notes that they purchased the
Vehicle from a person or entity in the business of manufacturing, distributing,
or selling consumer goods at retail (Complaint, ¶ 8.) Plaintiffs also note that
they received an express written warranty in which Defendant, Tesla undertook
to preserve or maintain the utility or performance of the Vehicle or to provide
compensation if there is a failure in utility or performance for a specified
period of time. (Complaint, ¶ 9.) Plaintiffs contend that the warranty
provided, in relevant part, that in the event a defect developed with the
Vehicle during the warranty period, Plaintiffs could deliver the Vehicle for
repair services to a repair shop and the Vehicle would be repaired. (Complaint,
¶ 9.)
After
Plaintiffs took possession of the Vehicle and during the warranty period, the
Vehicle is alleged to have contained or developed defects, that substantially
impair the use, safety, and/or value of the vehicle. (Complaint, ¶ 10.) During
the warranty period, Plaintiff notes the following components, systems of
features that created repair problems: (1) defective body system; (2) Defective
powertrain system; defective safety system; (3) defective safety system; (4) defective
electrical system; (5) defective breaking system; (6) defective noise system;
and and (7) any additional complaints made by Plaintiffs, whether or not they
are contained in the records or on any repair orders. (Complaint, ¶ 11.)
Plaintiffs
argue that the defects violate the express written warranties issued by
Defendant, as well as the implied warranty of merchantability. (Complaint, ¶
12.) Plaintiffs note that they provided Defendant sufficient opportunity to
service or repair the Vehicle, however, that Tesla was unable and/or failed to
service or repair the Vehicle within a reasonable number of attempts.
(Complaint, ¶¶ 13, 14 .)
Defendant,
Tesla Motors, Inc. (“Tesla”) filed a Motion to Compel Binding Arbitration as
its initial responsive pleading.
B. Procedural¿¿
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On May 3, 2023, Tesla filed a Motion to
Compel Binding Arbitration. On August 25, 2023, Plaintiff filed an opposition.
On August 31, 2023, Tesla filed a reply brief.
¿II. REQUEST FOR JUDICIAL
NOTICE
Tesla filed a request for this
Court to take judicial notice of the following document in support of their
Motion to Compel Arbitration:
1. Plaintiff
Ilaha Hajiyeva’s Complaint, filed on or about March 27, 2023, a true and
correct copy of which is attached to the Declaration of Ali Ameripour as
Exhibit “3.”
The Court grants Tesla’s request
and takes judicial notice of the above document.
III. ANALYSIS
A.
Legal Standard
¿ California Code
of Civil Procedure, Section 1281 provides that “[a] written agreement to
submit to arbitration an existing controversy or a controversy thereafter
arising is valid, enforceable, and irrevocable, save upon such grounds as exist
for the revocation of any contract.”¿ “California law, like federal law, favors
enforcement of valid arbitration agreements.”¿ (Armendariz v. Foundation
Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 97.)¿ “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” unless grounds exist not to compel
arbitration.¿ (Code Civ. Proc. § 1281.2.) The Song-Beverly Act
also favors arbitration of Lemon Law disputes with a series of “carrot and
stick” provisions that immunize a warrantors from a species of civil penalty if
they have a certified lemon arbitration program in place. The AAA arbitration provision in Tesla’s
contract is not the pre-litigation lemon arbitration program contemplated by
Song-Beverly, but rather is a litigation diversion provision contemplated by
the Federal Arbitration Act and by the California Arbitration Act. Tesla’s provisions do not indicate that
federal law controls, so this Tentative Ruling will rest on California law.
“There
is no public policy favoring arbitration of disputes which the parties have not
agreed to arbitrate.” (Engineers & Architects Assn. v. Community
Development Dept.¿(1994) 30 Cal.App.4th 644, 653.) Nevertheless, the strong
public policy promoting private arbitration of civil disputes gives rise to a
presumption in favor of arbitrability and compels the Court to construe
liberally the terms of the arbitration agreement. (Vianna v. Doctors’
Management Co.¿(1994) 27 Cal.App.4th 1186, 1189).¿ ¿¿
B.
Discussion
a. Existence of Arbitration Agreement
Here, the parties agree that there was a written
agreement, the Motor Vehicle Order Agreement (“Order Agreement”) and the Motor
Vehicle Retail Installment Sale Contract (“RISC”), that included arbitration
agreements. However, Plaintiff asserts in her opposition, that the Order
Agreement is superseded by the RISC; the motion to compel arbitration is an
adhesion contract and is unconscionable; argues this Court should strike the
provision requiring AAA as arbitrators to ensure a fair and unbiased
arbitration process; that her claims are independent from the order and
purchase agreements; and that the purchase agreements explicitly differentiate
the manufacturer’s warranties as separate from the agreements themselves.
Here, the Arbitration Agreement in 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
plaintiffs 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.
((Declaration of Raymond Kim (“Kim Decl.”),
Ex. 1 to page 3.)
Further, the Arbitration Agreement in the
RISC provides:
“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 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.”
(Declaration of Raymond Kim (“Kim Decl.”), Exhibit 2, Sales
Contract, p. 7.) Tesla notes that the
scope of the Arbitration Provision in the Order Agreement is even broader than
the RISC, as the Order agreement states that Plaintiffs unambiguously agree to
arbitrate disputes with Tesla “arising out of or relating to any aspect of the
relationship between us.” The Order Agreement also contains a 30-day opt-out
provision, enabling a Tesla purchaser or lessee to send a letter to Tesla
within 30 days expressing the customer’s desire to reject arbitration for
matters embraced by the Order Agreement arbitration provision. Tesla did not receive any opt-out letter from
Plaintiffs. (Kim Decl. ¶ 7.)
b. Applicability of Ochoa v. Ford Motor
Co.
Generally, only signatories to an
arbitration agreement may enforce it. (Rowe v. Exline (2007) 153
Cal.App.4th 1276, 1284.) However, there are several exceptions to the
nonsignatory enforcement rule. (Bouton v. USAA Cas. Ins. Co. (2008)
167 Cal.App.4th 412, 424.)
In their opposition brief, Plaintiffs rely in part on the recent
Second District nonsignatory exception case of Ochoa vs. Ford, also
cited as Ford Motor Warranty Cases (2023) 89 Cal.App.5th 1324. Plaintiffs’ reliance is misplaced. In Ochoa,
the Second converged from the First District in Felisilda v. FCA US LLC
(2020) 53 Cal.App.5th 486 as to the equitable estoppel exception to the general
rule that nonsignatory parties to an arbitration agreement cannot compel a
signatory party to arbitrate a suit filed in the court system. Regardless of the appellate district’s
analysis of the equitable estoppel exception, both Felisilda
and Ochoa discuss a manufacturer’s ability to enforce an arbitration
provision given to the buyer by the selling dealership as opposed to the
manufacturer’s own arbitration agreement.
This case is distinguishably different. Here, Tesla is not only the
manufacturer, but also sells its vehicles directly to the consumer. Tesla is one of the signatories to the
arbitration agreements at issue, and does not have third-party dealerships that
handle the ordering and selling of its vehicles. As such, Plaintiffs’ reliance
on the nonsignatory exception case of Ochoa is unavailing. Because Tesla
does not use third-party dealerships to order and sell their vehicles, and
because they directly contract and sell their vehicles to consumers, there is
no nonsignatory seeking to enforce a dealer’s arbitration agreement. Tesla is a signatory on the contract with
Plaintiff. No exception to a rule
regarding non-signatories is needed or even relevant here.
c.
Enforcement of Arbitration Clause
In its motion to
compel arbitration, Tesla asserts that Arbitration Agreements exist in their
RISC and the Order Agreement. Tesla has also presented evidence that Plaintiffs
failed to opt out of the Order Agreement’s arbitration provision, which Tesla
allows by way of a consumer sending a letter to Tesla stating that intention,
as well as choosing to sign the RISC prior to the delivery of their vehicle.
(Kim Decl., ¶ 7, Exhibit 1 – Order Agreement, p.3.) Plaintiff
also does not dispute having signed the agreement. (Opp., p. 5.) The Court
finds that Plaintiffs signed the arbitration agreements and that the two
proffered arbitration agreements exist. Further, the Court is not persuaded by
Plaintiff’s assertion that the Order Agreement and the RISC conflict.
The
Complaint alleges various statutory violations for alleged vehicle defects. The
Court notes that the Arbitration Agreement applies to, “[a]ny 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” Plaintiffs and Tesla. (Kim Decl., Exhibit 2, Sales Contract, p. 7.) The Court
finds that the claims in Plaintiffs’ Complaint are covered within the scope of
the arbitration agreements. The Court disagrees with Plaintiffs’ arguments that
at Plaintiffs’ claims do not arise out of the agreement, namely, because such
arguments rely on inapplicable case law. As such, this Court finds that on the
face of the agreement made between the parties, the Arbitration clause is
enforceable.
d. Unconscionability
Plaintiffs next argue that in their
opposition that the contract drafted by Tesla is one of adhesion and is
unconscionable and/or otherwise revocable.
Unconscionability is a valid
defense to a petition to compel arbitration. (Sonic-Calabasas A, Inc. v.
Moreno (2013) 57 Cal.4th 1109, 1143.) State law governs the
“unconscionability” defense. (Doctor’s Assocs., Inc. v. Casarotto (1996)
517 US 681, 687.) The core concern of the unconscionability doctrine is the
“absence of meaningful choice on the part of one of the parties together with
contract terms which are unreasonably favorable to the other party.” (Sonic-Calabasas,
supra, 57 Cal.4th at 1145.) The unconscionability doctrine ensures that
contracts—particularly contracts of adhesion—do not impose terms that have been
variously described as overly harsh, unduly oppressive, so one-sided as to
shock the conscience, or unfairly one-sided. (Id.) Here, Plaintiffs have not identified any
overly harsh or unduly oppressive provisions, other than depriving them of the
court system to resolve their dispute without any other option. The Court finds that such a deprivation,
without much more, is not overly harsh, unduly oppressive, nor shocking of the
conscience.
“The procedural element of unconscionability focuses on
whether the contract is one of adhesion. (Armendariz, supra, 24
Cal.4th at p. 113; Mercuro v. Superior Court, supra, 96
Cal.App.4th at p. 174.) Procedural unconscionability focuses on whether there
is “oppression” arising from an inequality of bargaining power or “surprise”
arising from buried terms in a complex printed form. (Armendariz, supra,
24 Cal.4th at p. 114; Mercuro v. Superior Court, supra, 96 Cal.App.4th
at p. 174.) The substantive element addresses the existence of overly harsh or
one-sided terms. (Little v. Auto Stiegler, Inc. (2003) 29 Cal.4th 1064,
1071 [130 Cal.Rptr.2d 892, 63 P.3d 979]; Armendariz, supra, 24
Cal.4th at p. 114.) An agreement to arbitrate is unenforceable only if both the
procedural and substantive elements are satisfied. (Armendariz, supra,
24 Cal.4th at p. 113; Mercuro v. Superior Court, supra, 96
Cal.App.4th at p. 174.) However, Armendariz held, “[T]he 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, at p. 114; see also Kinney
v. United HealthCare Services, Inc., supra, 70 Cal.App.4th at p. 1329.).” McManus
v. CIBC World Markets Corp. (2003) 109 Cal.App.4th 76, 87.)
i)
Procedural
Unconscionability
Plaintiffs
argue that the Order/Purchase Agreements are adhesive and therefore
procedurally unconscionable. Plaintiffs base their arguments on the fact that a
Purchase Agreement is a ‘take it or leave it’ contract that gives Plaintiffs no
opportunity to negotiate any of the preprinted terms in the lease or to
negotiate any other decision-maker besides a single AAA arbitrator. In
Plaintiffs’ unconscionability argument, they reference the case of Sanchez
v. Valencia Holding Co., LLC (2015) 61 Cal.4th 899. However, the facts of Sanchez
are not inherently analogous to the facts here. In Sanchez, the contract
at issue was printed on a single page which was the standard 8 ½ inches wide
but a scroll-like 26 inches long. The paper was covered in different provisions
which were printed on the front and the back, but only the front of the paper
had signature blocks. (Id. at 908.) The arbitration agreement was hiding
on the back at the bottom, as far away from notice as it could possibly be. (Ibid.)
The Sanchez Court found
procedural unconscionability there. (Id. at 913-915.) Here, although not specifically argued by
Plaintiffs, the adhesive nature of the arbitration agreements arguably flows in
part from the digital nature of the Order Agreement and RISC. A Tesla buyer must click on the hyperlink to
visualize the arbitration agreements, and if they did so on the screen would appear
several pieces of normal-size paper with normal printing and margins. The
arbitration clause is located squarely in the middle of the agreement (i.e.,
page 3 of 6). When there is no other indication of oppression other than the
adhesive aspect of an agreement, the degree of procedural unconscionability is
low. (Serpa v. California Surety Investigations, Inc. (2013) 215
Cal.App.4th 695, 704.)
As such,
this Court find that the procedural unconscionability is low.
ii)
Substantive
Unconscionability
Next, Plaintiffs argue that the
arbitration provisions require AAA with no alternative and therefore are
substantively unconscionable. An arbitration agreement is generally enforceable, if it (1)
provides for neutral arbitrators, (2) provides for more than minimal discovery,
(3) requires a written award, (4) provides for all of the types of relief that
would otherwise be available in court, and (5) does not require the parties to
pay unreasonable costs and fees as a condition of access to an arbitration
forum. (See Armendariz v. Foundation Health Psychcare Services, Inc.
(2000) 24 Cal.4th 83, 102.)
Plaintiffs
argue that by requiring Plaintiffs to submit any and all disputes solely
through AAA under its Consumer Arbitration Rules, Defendant improperly takes
advantage of Plaintiffs and impairs the integrity of the bargaining process.
For example, as noted by Plaintiff, under the AAA Rules, parties have
severely limited discovery, including a lack of any depositions. (See AAA
Rules, R-22.) Further, beyond a very ambiguous description of the exchange of
information (i.e., “specific documents and other information”), the AAA rules
state: “No other exchange of information beyond what is provided for in section
(a) above is contemplated under these rules, unless an arbitrator determines
further information exchange is needed to provide for a fundamentally fair
process.” What Plaintiffs fail to acknowledge is that
these discovery limitations apply equally to both sides. Tesla also will be deprived of the right to
take depositions but it will be required to exchange specific documents and, on
application to the arbitrator, both sides may be required to exchange other
information such as exchanging expert reports.
Lastly, Plaintiffs argue that although the
arbitration provision includes a link to www.adr.org, it provides no other
guidance regarding how to search for the rules, or any information
regarding ow the rules are applied, how
these rules differ from a civil forum, whether there are other rules, etc..
Based on this, Plaintiffs conclude that the provision is substantively
unconscionable. The Court disagrees.
Unlike other arbitration agreements with substantively problematic
provisions, the Tesla arbitration agreement does not require Plaintiff to
travel to another state to arbitrate, does not apply the law of any state
besides California, does not contain its own internal statute of limitations,
does not require Plaintiff to advance the costs of the arbitrator, and does not
contain a limitation of remedies provision preventing Plaintiffs from obtaining
a refund or a civil penalty or their attorneys fees if they prevail. Those types of provisions where present raise
the substantive unconscionability level above the Court’s threshold for finding
an arbitration agreement unenforceable.
While this Court has found an arbitration agreement in a Song-Beverly
case to be unconscionable, such findings have been on a much stronger showing
than Plaintiffs have made here.
In
its reply brief, Tesla notes that AAA’s Consumer Arbitration Rules
(“CAR”) do allow for the exchange of information between the parties, pursuant
to Rule 22 of the CAR. (Exhibit 1, Second Ameripour Decl.) As such, Tesla
argues that for a simple lemon law case such as this, AAA's Consumer
Arbitration Rules are more than sufficient, as there is nothing in the
Song-Beverly Act that guarantees certain discovery. Further, Tesla asserts that
there is nothing that states that the discovery that is conducted in an
arbitration has to be the same as that which is conducted when a case proceeds
in a California Superior Court.
This Court does not find a basis to
strike the provision requiring AAA as arbitrators.
IV. CONCLUSION¿¿
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For the foregoing reasons, Defendant’s Motion to Compel Arbitration is GRANTED.
Defendant is ordered to give
notice.¿¿¿¿
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