Judge: Salvatore Sirna, Case: 23PSCV03773, Date: 2024-09-19 Tentative Ruling
Case Number: 23PSCV03773 Hearing Date: September 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. A hearing on the present motion is set for September 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 lemon law 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 with 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 remaining language 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.
Last, 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 applies only 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.
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.
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.
Accordingly, the court GRANTS Hyundai’s motion.
CONCLUSION
The matter is STAYED pending completion of binding arbitration.