This Court GRANTS Tesla’s request and takes judicial notice of the above.  

III. ANALYSIS 

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).

Here, the parties agree that there were two written agreements, the Retail Installment Sales Contract (“RISC”), and the Order Agreement, that included an arbitration agreements. However, Plaintiffs asserts that manufacturer warranties are not derived from purchase agreements pursuant to Ford Motor Warranty Cases, Montemayor, and Kielar. However, Plaintiffs’ substantive argument in their opposition claims that the arbitration agreement is a contract of adhesion. While the Court agrees, that is only part of the analysis.   

Here, the Order Agreement contained an arbitration agreement, which stated:  

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 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. […] 

(Kim Decl., Exhibit 2, page 5.)  

Further, Tesla points to the section of the Order Agreement that 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.  The Kim declaration in support of the motion indicates Tesla did not receive any opt-out letter from Plaintiffs. (Kim Decl., ¶ 7.)  

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.  Plaintiff’s 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, Plaintiff’s 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 to the contract with Plaintiff. No exception to a rule regarding non-signatories is needed or even relevant here.   

In its motion to compel arbitration, Tesla asserts that Arbitration Agreements exist in their RISC and 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. Plaintiff also does not dispute having signed the agreement. The Court finds that Plaintiffs signed the arbitration agreements and that the proffered arbitration agreement exists.  

The Complaint alleges various statutory violations for alleged vehicle defects. The Court further notes that the Arbitration Agreement applies to, “any dispute between you and Tesla, Inc. and its affiliates.” (Kim Decl., Exhibit 1, p. 4.) The Court finds that the claims in Plaintiffs’ Complaint are covered within the scope of the arbitration agreement. The Court disagrees with Plaintiffs’ arguments that Plaintiffs’ claims do not arise out of the agreement. As such, this Court finds that on the face of the agreement made between the parties, the Arbitration clause is enforceable.  

Plaintiff 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, Plaintiff has 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.) 

Procedural Unconscionability  

Plaintiffs argue that the Order Agreement is adhesive and therefore procedurally unconscionable. Plaintiffs base their arguments on the fact that the Order Agreement is a ‘take it or leave it’ contract that gave Plaintiffs no meaningful opportunity to negotiate or discuss any of the terms outlined in the Agreements. In Plaintiffs’ unconscionability argument, he reference the case of Gutierrez v. Autowest, Inc. (2003) 114 Cal.App.4th 77. In Gutierrez, a plaintiff entered into an automobile lease agreement with the defendant, an automobile dealer. The plaintiff subsequently sued the dealer over alleged fraud in the transaction, and the adhesive agreement contained an inconspicuous arbitration clause. (Id. at 83-84.) There, based on the AAA rules in effect at the time the defendant moved to compel arbitration, the Plaintiff would have had to pay $8,000 in administrative fees to initiate arbitration. . (Id. at 90-91.) The Gutierrez Court held that “where a consumer enters into an adhesive contract that mandates arbitration, it is unconscionable to condition that process on the consumer posting fees he or she cannot pay.” (Id. at 89-90.) 

Here, Plaintiffs attempt to draw an analogy to Gutierrez, by claiming that the take it or leave it contract was adhesive, and consequently procedurally unconscionable. However, the contract in Gutierrez was not found to be unconscionable because it was adhesive. In fact, the Gutierrez court noted that “simply because a provision within a contract of adhesion is not read or understood by the nondrafting party does not justify a refusal to enforce it.” (Id. at 88.) Instead, the Court reasoned that the unbargained-for term may only be denied enforcement if it is also substantively unreasonable. (Ibid.) Here, although not specifically argued by Plaintiff, the adhesive nature of the arbitration agreements arguably flows in part from the digital nature of the Agreement.  A Tesla buyer must click on the hyperlink to visualize the arbitration agreements, and if they did so on the screen would appear five pages of an easy-to-read document with prominently displayed agreement with distinctive border on page three (3) of the Order Agreement. 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 finds that the procedural unconscionability is low.   

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.) 

Plaintiff argues that by requiring her to submit any and all disputes solely through AAA under its Consumer Arbitration Rules, Defendant exploits the vulnerability of Plaintiff, and also undermines 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.