Judge: Salvatore Sirna, Case: 23PSCV03733, Date: 2024-11-19 Tentative Ruling

The Court may change tentative rulings at any time. Therefore, counsel are advised to check this website periodically to determine whether any changes or updates have been made to the tentative ruling. Counsel may submit on a tentative ruling by calling the clerk in Department G at (909) 802-1104 prior to 8:30 a.m. the morning of the hearing.

Case Number: 23PSCV03733    Hearing Date: November 19, 2024    Dept: G

Defendant Hyundai Motor America’s Motion to Compel Binding Arbitration

Respondent: Plaintiff Donald Rayo

TENTATIVE RULING

Defendant Hyundai Motor America’s Motion to Compel Binding Arbitration is GRANTED.

The matter is STAYED pending completion of binding arbitration.

BACKGROUND

This is a Song-Beverly action. In December 2021, Plaintiff Donald Rayo allegedly entered into a warranty contract with Defendant Hyundai Motor America (Hyundai) by purchasing a 2022 Hyundai Santa Fe. Subsequently, Rayo alleges the vehicle presented with serious defects in its structural, suspension, engine, electrical and emissions systems.

On December 4, 2023, Rayo filed a complaint against Hyundai; Bay Area AG Inc., doing business as CardinaleWay Hyundai of Glendora (CardinaleWay); and Does 1-10, alleging the following causes of action: (1) breach of express warranty; (2) breach of implied warranty; (3) violation of Song-Beverly Act section 1793.2, subdivision (b); and (4) negligent repair.

On June 25, 2024, Hyundai filed the present motion. On September 12, 2024, the court continued the hearing on the present motion for additional briefing.

A hearing on the present motion is set for November 19, 2024, along with an informal discovery conference. A post-mediation status conference/trial setting conference is also set for January 14, 2025.

REQUESTS FOR JUDICIAL NOTICE

Hyundai requests the court take judicial notice of the Complaint filed in the present action. Rayo requests the court take judicial notice of federal regulations and congressional records. The court GRANTS their requests pursuant to Evidence Code section 452, subdivisions (c) and (d).

EVIDENTIARY OBJECTIONS

Rayo’s evidentiary objections are OVERRULED.

ANALYSIS

Hyundai moves to compel arbitration of Rayo’s Song-Beverly claims. For the following reasons, the court GRANTS Hyundai’s motion.

Legal Standard

“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.” (Code Civ. Proc., § 1281.) The court must grant a petition to compel arbitration unless it finds no written agreement to arbitrate exists, the right to compel arbitration has been waived, grounds exist for revocation of the agreement, or litigation is pending that may render the arbitration unnecessary or create conflicting rulings on common issues. (Code Civ. Proc., § 1281.2.) A petition to compel arbitration functions as a motion. (Code Civ. Proc., § 1290.2.)

In a motion or petition to compel arbitration, “the moving party bears the burden of producing ‘prima facie evidence of a written agreement to arbitrate the controversy.’” (Gamboa v. Northeast Community Clinic (2021) 72 Cal.App.5th 158, 165 (Gamboa).) Once the court finds an arbitration agreement exists, the party opposing arbitration bears the burden of establishing a defense to enforcement by preponderance of the evidence. (Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 413.) In interpreting an arbitration agreement, courts apply the same principles used to interpret contractual provisions with the fundamental goal of giving effect to the parties’ mutual intentions and applying contractual language if clear and explicit. (Valencia v. Smyth (2010) 185 Cal.App.4th 153, 177.) Because public policy strongly favors arbitration, “any doubts regarding the arbitrability of a dispute are resolved in favor of arbitration.” (Coast Plaza Doctors Hosp. v. Blue Cross of California (2000) 83 Cal.App.4th 677, 686.)

The Federal Arbitration Act (FAA) applies to contracts that involve interstate commerce (9 U.S.C. §§ 1, 2), but since arbitration is a matter of contract, the FAA also applies if stated in the agreement. (See Victrola 89, LLC v. Jaman Properties 8 LLC (2020) 46 Cal.App.5th 337, 355.) Pursuant to the FAA, the court’s role “is limited to determining (1) whether a valid agreement to arbitrate exists and, if it does, (2) whether the agreement encompasses the dispute at issue.” (Philadelphia Indemnity Ins. Co. v. SMG Holdings, Inc. (2019) 44 Cal.App.5th 834, 840, quoting U.S. ex rel. Welch v. My Left Foot Children’s Therapy, LLC (9th Cir. 2017) 871 F.3d 791, 796.)

Discussion

In this case, Hyundai argues Rayo’s action is subject to two different arbitration provisions, including a provision in the subject vehicle’s 2022 Owner’s Handbook and Warranty Information (Owner’s Handbook) and a provision in the Connected Services Agreement Terms and Conditions (Bluelink Agreement) for Hyundai’s Bluelink services. Because the court finds the arbitration provision in the Bluelink Agreement applies to the present action, the court need not determine the effect of the arbitration provision in the Owner’s Handbook.

When Rayo enrolled in Hyundai’s Bluelink services, Hyundai argues Rayo agreed to the Bluelink Agreement which included an arbitration provision. (Rao Decl., ¶ 4-6.) The provision provided in relevant part as follows:

“Hyundai and you agree to arbitrate any and all disputes and claims between us arising out of or relating to this Agreement, Connected Services, Connected Services Systems, Service Plans, your Vehicle, use of the sites, or products, services, or programs you purchase, enroll in or seek product/service support for, whether you are a Visitor or Customer, via the sites or through mobile application, except any disputes or claims which under governing law are not subject to arbitration, to the maximum extent permitted by applicable law. This agreement to arbitrate is intended to be broadly interpreted and to make all disputes and claims between us subject to arbitration to the fullest extent permitted by law. . . . The agreement to arbitrate otherwise includes, but is not limited to: claims based in contract, tort, warranty, statute, fraud, misrepresentation or any other legal theory; claims that arose before this or any prior Agreement . . . .” (Rao Decl., Ex. 2, § 15(C)(a).)

In opposition, Rayo argues the clear language of the Bluelink Agreement indicates the arbitration provision only applies to claims related to Bluelink and does not apply to statutory warranty claims. (Opp., p. 12:15-22.) Rayo, however, fails to provide the court any examples of such purportedly clear language. While Rayo points to the language stating, “Hyundai and you agree to arbitrate any and all disputes and claims between us arising out of or relating to this Agreement,” Rayo’s quotation omits the rest of the sentence which also includes claims arising out of or relating to service plans or Rayo’s vehicle. (Rao Decl., Ex. 2, § 15(C)(a).) Rayo also points to language in the Bluelink Agreement that disclaims warranties. (Rao Decl., Ex. 2, § 11.) But the fact that the Bluelink Agreement disclaims warranties supports the broad interpretation of the arbitration provision as it also applies to warranty claims.

Next, Rayo points to the preamble of the arbitration provision which states as follows:

“MOST CUSTOMER CONCERNS CAN BE RESOLVED QUICKLY AND TO THE CUSTOMER'S SATISFACTION BY CONTACTING HYUNDAI’S CUSTOMER SERVICE DEPARTMENT AT CONSUMERAFFAIRS@HMAUSA.COM OR CALLING 800-633-5151 AND THE GENESIS CUSTOMER SERVICE DEPARTMENT AT CUSTOMERCARE@GENESISMOTORSUSA.COM OR CALLING 844-340-9741. IN THE UNLIKELY EVENT THAT THE APPROPRIATE CUSTOMER SERVICE DEPARTMENT IS UNABLE TO RESOLVE YOUR CONCERNS, WE EACH AGREE TO RESOLVE THOSE DISPUTES THROUGH BINDING ARBITRATION OR SMALL CLAIMS COURT INSTEAD OF IN COURTS OF GENERAL JURISDICTION TO THE FULLEST EXTENT PERMITTED BY LAW, AND SUBJECT TO THE TERMS OF THIS AGREEMENT.” (Rao Decl., Ex. 2, § 15(C).)

Rayo argues this language suggests the arbitration provision is limited to disputes over connected services that cannot be resolved by Hyundai’s customer service department. (Opp., p. 13:13-27.) But, nowhere in this clause does it state the arbitration provision only applies to concerns related to connected services issues.  The court notes that “concerns” can also apply to a myriad of issues related to Rayo’s vehicle.  Moreover, Rayo’s argued interpretation would conflict with the arbitration provision’s explicit application to claims arising from Rayo’s vehicle and based on warranties or statutes. Further, the arbitration provision states it applies to “claims that arose before this or any prior Agreement.” (Rao Decl., Ex. 2, § 15(C)(a).)

Based on the broad applicability of these provisions, the court finds this arbitration provision is applicable to Rayo’s present action.

Last, Rayo argues Hyundai fails to establish that Rayo actually assented to the Bluelink Agreement. (Suppl. Opp., p. 5:17-6:15.) To establish prima facie evidence of an arbitration agreement, however, the party moving for arbitration need only provide a copy of the arbitration provision that purports to be signed by the parties or set forth the agreement’s terms in the motion. (Gamboa, supra, 72 Cal.App.5th at p. 165.) The moving party is not required “to follow the normal procedures of document authentication.” (Ibid, quoting Condee v. Longwood Management Corp. (2001) 88 Cal.App.4th 215, 218.) The opposing party “bears the burden of producing evidence to challenge the authenticity of the agreement” and can do so with statements under oath. (Ibid.) If the opposing party meets their burden, the moving party must then establish a valid arbitration with admissible evidence by preponderance of the evidence. (Ibid.)

Here, Rayo fails to present sufficient evidence that establishes Rayo did not sign or agree to the Bluelink Agreement. While Rayo states Rayo does not remember agreeing to the Bluelink Agreement (Rayo Decl., ¶ 4-5), Rayo does not deny receiving access to Bluelink services which would have only been accessible if Rayo electronically signed the Bluelink Agreement. (Rao Decl., ¶ 6.)

Unconscionability

In opposition to the arbitration provision’s enforcement, Rayo argues the arbitration provision is unconscionable. Pursuant to both federal and state law, arbitration agreements are valid and enforceable, unless they are revocable for reasons under state law that would render any contract revocable” including “fraud, duress, and unconscionability.” (Tiri v. Lucky Chances, Inc. (2014) 226 Cal.App.4th 231, 239.) “‘[U]nconscionability has both a procedural and a substantive element,’ the former focusing on ‘oppression’ or ‘surprise’ due to unequal bargaining power, the latter on ‘overly harsh’ or ‘one-sided’ results.” (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 114, quoting A & M Produce Co. v. FMC Corp. (1982) 135 Cal.App.3d 473, 486-487.) While both elements must be present to prevent enforcement, courts evaluate them as a sliding scale in 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.” (Ibid.)

Procedural Unconscionability

As to procedural unconscionability, Rayo argues the arbitration provision is procedurally unconscionable because it constitutes a contract of adhesion. (Opp., p. 14:24-15:19.) A contract of adhesion is “a standardized contract, which, imposed and drafted by the party of superior bargaining strength, relegates to the subscribing party only the opportunity to adhere to the contract or reject it.” (Neal v. State Farm Ins. Companies (1961) 188 Cal.App.2d 690, 694.) When “there is no other indication of oppression or surprise, ‘the degree of procedural unconscionability of an adhesion agreement is low, and the agreement will be enforceable unless the degree of substantive unconscionability is high.’” (Serpa v. California Surety Investigations, Inc. (2013) 215 Cal.App.4th 695, 704, quoting Ajamian v. CantorCO2e (2012) 203 Cal.App.4th 771, 796.) 

Here, while the arbitration provision in the Bluelink agreement appears to be a contract of adhesion, Rayo fails to point to any evidence of oppression or surprise. Thus, the court finds the degree of procedural unconscionability is low.

In supplemental briefing, Rayo also argues the arbitration provision is procedurally unconscionable because it fails to provide a copy of the arbitration rules referenced. (Suppl. Opp., p. 8:4-13.) The failure to provide a copy of the applicable arbitration rules “adds a bit to the procedural unconscionability” of the arbitration provision. (Zullo v. Superior Court (2011) 197 Cal.App.4th 477, 485.) But the extent of that unconscionability often depends on the arbitration rules themselves. (See id., at p. 485-486.) For example, the court found oppression and surprise existed when the arbitration rules included provisions limiting plaintiff’s damages and remedies. (Harper v. Ultimo (2003) 113 Cal.App.4th 1402, 1406-1407.)

Here, the arbitration provision states, “arbitration will be governed by the Consumer Arbitration Rules (the ‘AAA Rules’) of the American Arbitration Association (‘AAA’), as modified by this Agreement, and will be administered by the AAA.” (Rao Decl., Ex. 2, § 15(C)(c).) While the arbitration provision does not include a copy of the AAA Rules, it provides the website address where the rules can be found and also includes contact information for obtaining the rules. (Rao Decl., Ex. 2, § 15(C)(c).) However, Rayo fails to direct the court to any such oppressive provisions in the AAA Rules. Thus, while the arbitration provision is procedurally unconscionable to the extent it fails to provide a copy of the AAA Rules, the court finds the degree of procedural unconscionability remains low.

Substantive Unconscionability

As to substantive unconscionability, Rayo raises general objections to arbitration while failing to point to a specific provision that rises to a high degree of substantive unconscionability. (Opp., 15:21-16:18.) While Rayo argues arbitration deprives Rayo of the right to a jury trial and violates the Magnuson-Moss Warranty Act, Rayo fails to direct the court to a single California case that has invalidated arbitration provisions on this ground.

Rayo also claims arbitration will limit Rayo’s ability to conduct discovery. Because arbitration is meant to be streamlined, “discovery limitations are an integral and permissible part of the arbitration process.” (Dotson v. Amgen, Inc. (2010) 181 Cal.App.4th 975, 983, citing Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 105-106 (Armendariz).) At a minimum, parties “are at least entitled to discovery sufficient to adequately arbitrate their statutory claim, including access to essential documents and witnesses, as determined by the arbitrator(s) . . . .” (Armendariz, supra, 24 Cal.4th at p. 106.) While Rayo argues the arbitration rules at issue do not provide for depositions and involve “repeat players,” Rayo fails to provide any authority that establishes these issues create a high degree of substantive unconscionability. Thus, the court finds Rayo has failed to demonstrate the subject arbitration provision is substantively unconscionable.

Last, Rayo argues the Song-Beverly Act prohibits the deprivation of Rayo’s right to bring the present action in court. (Opp., p. 16:21-18:12.)  Again, however, Rayo fails to direct the court to a single citation to California authority that holds arbitration of Song-Beverly cases is prohibited by California law.

In supplemental briefing, Rayo makes seven additional arguments on the issue of substantive unconscionability. First, Rayo argues the arbitration provision is one-sided and harsh because it applies to warranty claims that can only be brought by the plaintiff. (Suppl. Opp., p. 9:17-11:4.) The arbitration provision, however, does not only require arbitration of warranty claims. It broadly requires arbitration of “all disputes and claims between us arising out of or relating to this Agreement, Connected Services, Connected Services Systems, Service Plans, your Vehicle, use of the sites, or products, services, or programs you purchase, enroll in or seek product/service support for, whether you are a Visitor or Customer, via the sites or through mobile application, except any disputes or claims which under governing law are not subject to arbitration, to the maximum extent permitted by applicable law.” (Rao Decl., Ex. 2, § 15(C)(a).) Because this arbitration provision also covers any claims that Hyundai may have against Rayo, the court finds the arbitration provision is not one-sided and harsh.

Second, Rayo contends the arbitration provision is one-sided and harsh because it requires the enforceability of the arbitration provision to be determined by the arbitrator. (Suppl. Opp., p. 11:7-12:1.) But such arguments have already been rejected by the court in Malone v. Superior Court (2014) 226 Cal.App.4th 1551, 1570-1571, which Rayo failed to address.

Third, Rayo maintains the arbitration provision contains a one-sided notice provision and illegal confidentiality clause. (Suppl. Opp., p. 12:4-23.) The notice provision states, “A party who intends to seek arbitration must first send to the other, by certified mail, a written Notice of Dispute (‘Notice’).” (Rao Decl., Ex. 2, § 15(C)(b).) Because the notice provision applies to whichever party initiates arbitration, the court finds the provision is not one-sided. And while the notice provision includes instructions for providing notice to Hyundai, Rayo fails to demonstrate how these requirements are unfairly one-sided given the issues that may arise from giving notice to a corporate entity as opposed to an individual. Nor does Rayo point to any authority holding how specific notice requirements for a corporate entity render the entire arbitration provision unenforceable. To the extent Rayo maintains the confidentiality requirement in the arbitration provision violates statutory law, California jurisprudence, and public policy, Rayo fails to provide any authority in support of this claim. Rayo’s sole citation to NBC Subsidiary (KNBC-TV), Inc. v. Superior Court (1999) 20 Cal.4th 1178, 1181, which does not provide guidance to this court since that case addressed public access to court proceedings, not arbitration proceedings.

Fourth, Rayo argues the arbitration provision illegally permits Hyundai to recover attorney fees. (Suppl. Opp., p. 12:27-14:10.) The court finds Rayo’s argument on this point, however, is based on a strained interpretation of the arbitration provision. Specifically, the arbitration provision states that “IN ARBITRATION, BOTH YOU AND HYUNDAI WILL BE ENTITLED TO RECOVER ATTORNEYS´ FEES FROM THE OTHER PARTY TO THE SAME EXTENT AS YOU WOULD BE IN COURT.” (Rao Decl., Ex. 2, § 15(C).) Because the clause ends with “as you would be in court” as opposed to “as you or Hyundai would be in court,” Rayo argues this provision allows Hyundai to obtain attorney fees as if they were the plaintiff. But equally plausible is the fact that “you” in the second half of the sentence refers to either of the two parties mentioned in the first half. While Rayo would obviously prefer the interpretation that could render the arbitration provision void, the rules of contractual interpretation demand the opposite. (Rodriguez v. Barnett (1959) 52 Cal.2d 154, 160 [“If a contract is capable of two constructions courts are bound to give such an interpretation as will make it lawful, operative, definite, reasonable, and capable of being carried into effect, if that can be done without violating the intention of the parties.”].) Because this clause can be interpreted as merely allowing attorney fees to the same extent as in court proceedings, the court finds that Rayo’s argument fails.

Fifth, Rayo repeats the argument that the arbitration provision is unconscionable because it deprives Rayo of the right to a jury trial or to bring a class action. (Suppl. Opp., p. 14:12-15:7.) But while Rayo now provides citations to authorities, they are inapposite. In Lange v. Monster Energy Company (2020) 46 Cal.App.5th 436, the court held a clause in arbitration provision that waived a party’s right to a jury trial if the action was resolved by the court was unconscionable and distinguished it from the inherent waiver of the right to a jury trial in arbitration agreements. (Id., at p. 452.) The present arbitration provision does not include the same provision that Lange found unconscionable. In fact, the arbitration provision explicitly states the waiver of the right to a jury trial is “to the maximum extent permitted by law” which would necessarily bar its applicability to court proceedings. (Rao Decl., Ex. 2, § 15(C)(a).) Rayo also relies on Szetela v. Discover Bank (2002) 97 Cal.App.4th 1094, for the rule that waiver of class actions is substantively unconscionable. But, Rayo failed to mention that the U.S. Supreme Court has subsequently held this rule to be preempted by the FAA. (See, Marceno v. DirecTV LLC (2015) 233 Cal.App.4th 1409, 1420-1421, citing AT&T Mobility LLC v. Concepcion (2011) 563 U.S. 333, 347, 352.)

Sixth, Rayo contends the arbitration provision substantially reduces Rayo’s time to bring the present action. (Suppl. Opp., p. 15:9-25.) Specifically, Rayo points to language stating, “YOU ARE NOT ALLOWED TO BRING ANY CLAIM AGAINST HYUNDAI (OR ANY OTHER THIRD PARTY BENEFICIARY) MORE THAN ONE YEAR AFTER THE CLAIM ARISES.” (Rao Decl., Ex. 2, § 15(B).) But Rayo omits a key phrase preceding this one that states “EXCEPT WHERE PROHIBITED BY LAW.” Thus, this provision does not apply.

Seventh and last, Rayo maintains the arbitration provision is unconscionable because it requires Rayo to post arbitration fees. (Suppl. Opp., p. 15:28-16:9.) In support of this claim, Rayo cites Gutierrez v. Autowest, Inc. (2003) 114 Cal.App.4th 77 (Gutierrez). But there, the court held it was unconscionable to “impos[e] arbitral forum fees that are prohibitively high.” (Id., at p. 90.) Here, Rayo fails to point to any evidence establishing how a $200 arbitration initiation fee is prohibitively high. Furthermore, while the Gutierrez court noted the possibility that the plaintiff could recover the fees at a later date was insufficient (Id., at p. 90), the present arbitration requires Hyundai to promptly reimburse payment of Rayo’s filing fees. (Rao Decl., Ex. 2, § 15(C)(c).) Thus, Rayo failed to demonstrate any significant level of substantive unconscionable and cannot establish the present arbitration provision is unconscionable. 

Accordingly, the court GRANTS Hyundai’s motion.

CONCLUSION

Based on the foregoing, Hyundai’s motion to compel arbitration of Rayo’s lemon law action is GRANTED.

The matter is STAYED pending completion of binding arbitration.