Judge: Salvatore Sirna, Case: 24PSCV00688, Date: 2024-12-11 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: 24PSCV00688    Hearing Date: December 11, 2024    Dept: G

Defendant Hyundai Motor America’s Motion to Compel Binding Arbitration

Respondent: Plaintiff Nesrin M. Elshabasy

TENTATIVE RULING

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

BACKGROUND

This is a Song-Beverly action. In June 2022, Plaintiff Nesrin M. Elshabasy allegedly entered into a warranty contract with Defendant Hyundai Motor America (Hyundai) by purchasing a 2022 Hyundai Tucson. Subsequently, Elshabasy alleges the vehicle presented with serious defects in its structural, suspension, engine, electrical, and steering systems.

On March 7, 2024, Elshabasy filed a complaint against Hyundai; Riverside Metro Auto Group, LLC, doing business as Riverside Hyundai; 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 July 10, 2024, Hyundai filed the present motion. A hearing on the present motion is set for December 11, 2024.

REQUESTS FOR JUDICIAL NOTICE

Hyundai requests the court take judicial notice of the Complaint filed in the present action. Elshabasy 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

Elshabasy’s evidentiary objections are OVERRULED.

ANALYSIS

Hyundai moves to compel arbitration of Elshabasy’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 Elshabasy’s action is subject to two different arbitration provisions, including a provision in the subject vehicle’s “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 Elshabasy enrolled in Hyundai’s Bluelink services, Hyundai argues Elshabasy 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, the 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, § 14(C)(a).)

In opposition, Elshabasy first argues Hyundai fails to establish that Elshabasy actually assented to the Bluelink Agreement. (Opp., p. 12:10-28.) To establish prima facie evidence of an arbitration agreement, 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 provision with admissible evidence by preponderance of the evidence. (Ibid.)

Here, Elshabasy failed to present sufficient evidence that establishes Elshabasy did not sign or agree to the Bluelink Agreement. In fact, while Elshabasy provided a declaration that discusses the Owner’s Handbook, Elshabasy neglects any discussion of the Bluelink Agreement. Thus, the court finds Elshabasy failed to carry the burden of challenging the Bluelink Agreement’s authenticity.

Next, Elshabasy 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. 13:11-25.) But Elshabasy does not provide any examples of such purportedly clear language. While Elshabasy 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,” Elshabasy’s quotation omits the rest of the sentence which also includes claims arising out of or relating to service plans or Elshabasy’s vehicle. (Rao Decl., Ex. 2, § 14(C)(a).) Elshabasy also points to language in the Bluelink Agreement that disclaims warranties for “connected services.” (Rao Decl., Ex. 2, § 10.) But the fact that the Bluelink Agreement disclaims warranties for Bluelink supports the broad interpretation of the arbitration provision as it also applies to warranty claims.

Elshabasy next 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, § 14(C).)

Elshabasy argues this language suggests the arbitration provision is limited to disputes over Bluelink services that cannot be resolved by Hyundai’s customer service department. (Opp., p. 13:26-14:19.) The court notes, however, that nowhere in this clause does it state the arbitration provision only applies to concerns related to Bluelink issues.  Further, the court recognizes that concerns can also conceivably apply to any issue with Elshabasy’s vehicle. Moreover, Elshabasy’s argued interpretation would conflict with the arbitration provision’s explicit application to claims arising from Elshabasy’s vehicle and based on warranties or statutes. Furthermore, the arbitration provision states it applies to “claims that arose before this or any prior Agreement.” (Rao Decl., Ex. 2, § 14(C)(a).) Based on the broad applicability of these provisions, the court finds that this arbitration provision is applicable to Elshabasy’s present action.

UNCONSCIONABILITY

In opposition to the arbitration provision’s enforcement, Elshabasy 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, Elshabasy argues the arbitration provision is procedurally unconscionable because it constitutes a contract of adhesion. (Opp., p. 16:12-17.) 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, Elshabasy fails to point to any evidence of oppression or surprise. Thus, the court determines the degree of procedural unconscionability is low.

Substantive Unconscionability

As to substantive unconscionability, Elshabasy argues the arbitration provision is one-sided because it applies to warranty claims in favor of Hyundai. (Opp., p. 17:4-18:9.) But the arbitration provision 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, the 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, § 14(C)(a).) Since the arbitration provision also covers any claims that Hyundai may have against Elshabasy, the court finds that the provision is not one-sided and harsh.

Second, Elshabasy contends the arbitration provision is one-sided and harsh because it requires the enforceability of the arbitration provision to be determined by the arbitrator. (Opp., p. 18:10-19:1.) But such arguments have already been rejected by Malone v. Superior Court (2014) 226 Cal.App.4th 1551, 1570-1571, which Elshabasy fails to address.

Third, Elshabasy maintains the arbitration provision illegally permits Hyundai to recover attorney fees. (Opp., p. 19:3-20:1.) But Elshabasy’s argument 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, § 14(C).) Because the clause ends with “as you would be in court” as opposed to “as you or Hyundai would be in court,” Elshabasy maintains 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 Elshabasy would 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 this argument also fails.

Fourth and last, Elshabasy argues the arbitration provision substantially reduces Elshabasy’s time to bring the present action. (Opp., p. 20:3-15.) Specifically, Elshabasy 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, § 14(B).) Because the statute of limitations for an action pursuant to the Song-Beverly Act is four years, this is a substantial reduction of Elshabasy’s time to bring the present action. (Krieger v. Nick Alexander Imports, Inc. (1991) 234 Cal.App.3d 205, 213-215 [holding four-year statute of limitations applies to the Song-Beverly Act].) Courts have frequently held such reductions are one-sided and unconscionable. (See, e.g., Fisher v. MoneyGram Intern., Inc. (2021) 66 Cal.App.5th 1084, 1105; Dennison v. Rosland Capital LLC (2020) 47 Cal.App.5th 204, 212.) Furthermore, this provision is one-sided and oppressive at it appears to only apply to Elshabasy and not Hyundai.

But the analysis does not end here. “The final question is whether the unconscionable provisions warrant a refusal to enforce the entire arbitration agreement, or whether the offending provisions may be limited or severed to avoid an unfair result.” (Bakersfield College v. California Community College Athletic Assn. (2019) 41 Cal.App.5th 753, 769.) “In deciding whether to sever terms rather than to preclude enforcement of the provision altogether, the overarching inquiry is whether the interests of justice would be furthered by severance; the strong preference is to sever unless the agreement is “permeated” by unconscionability.” (Ajamian v. CantorCO2e, L.P. (2012) 203 Cal.App.4th 771, 802.) “An agreement to arbitrate is considered ‘permeated’ by unconscionability where it contains more than one unconscionable provision” or when “‘there is no single provision a court can strike or restrict in order to remove the unconscionable taint from the agreement.’” (Magno v. The College Network, Inc. (2016) 1 Cal.App.5th 277, 292, quoting Armendariz, supra, 24 Cal.4th at p. 124-125.)

Here, while the clause significantly limiting Elshabasy’s time to bring an arbitration claim is unconscionable, Elshabasy failed to establish the existence of any other unconscionable provisions. As such, the court determines that the arbitration provision is not otherwise permeated with unconscionability and the time-limitations clause can be severed from the arbitration provision in the Bluelink Agreement.  .

Accordingly, the court finds the arbitration provision enforceable and GRANTS Hyundai’s motion.

CONCLUSION

Based on the foregoing, Hyundai’s motion to compel arbitration of Elshabasy’s Song-Beverly action is GRANTED.