Judge: Salvatore Sirna, Case: 24PSCV02085, Date: 2025-01-13 Tentative Ruling

Case Number: 24PSCV02085    Hearing Date: January 13, 2025    Dept: G

Defendant Hyundai Motor America’s Motion to Compel Binding Arbitration

Respondent: Plaintiff Isidoro Gaona Rodriguez

TENTATIVE RULING

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

BACKGROUND

This is a Song-Beverly action. In May 2020, Plaintiff Isidoro Gaona Rodriguez allegedly entered into a warranty contract with Defendant Hyundai Motor America (Hyundai) by purchasing a 2020 Hyundai Elantra. Subsequently, Gaona Rodriguez alleges the subject vehicle presented with serious defects in its transmission, suspension, electrical, emission, engine and steering systems.

On June 27, 2024, Gaona Rodriguez filed a complaint against Hyundai; Puente Hills Hyundai, LLC, doing business as Puente Hills Hyundai; and Does 1-10, alleging the following causes of action: (1) breach of express warranty pursuant to the Song-Beverly Act; (2) breach of implied warranty pursuant to the Song-Beverly Act; (3) violation of Song-Beverly Act section 1793.2, subdivision (b); and (4) negligent repair.

On September 3, 2024, Hyundai filed the present motion. A hearing on the present motion is set for January 13, 2025, along with a case management conference.

REQUESTS FOR JUDICIAL NOTICE

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

Gaona Rodriguez’s evidentiary objections are OVERRULED.

ANALYSIS

Hyundai moves to compel arbitration of Gaona Rodriguez’s Song-Beverly claims. For the following reasons, the court DENIES 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 Gaona Rodriguez’s action is subject to an arbitration provision in the subject vehicle’s Owner’s Handbook and Warranty Information (Owner’s Handbook). (Motion, p. 3:24-5:12.) The provision provided in relevant part as follows:

“If you purchased or leased your Hyundai vehicle in the State of California, you and we each agree that any claim or disputes between us (including between you and any of our affiliated companies) related to or arising out of your vehicle purchase, use of your vehicle, the vehicle warranty, representations in the warranty, or the duties contemplated under the warranty, including without limitation claims related to the failure to conform a vehicle to warranty, failure to repurchase or replace your vehicle, or claims for a refund or partial refund of your vehicle's purchase price (excluding personal injury claims), shall be resolved by binding arbitration at either your or our election, even if the claim is initially filed in a court of law. If either you or we elect to resolve our dispute via arbitration (as opposed to in a court of law), such binding arbitration shall be administered by and through JAMS Mediation, Arbitration and ADR Services (JAMS) under its Streamlined Arbitration Rules & Procedures. . . . This agreement evidences a transaction involving interstate commerce and shall be governed by the Federal Arbitration Act, 9 U.S.C. §§ 1-16. Judgment upon any award in arbitration may be entered in any court having jurisdiction. IF YOU PURCHASED OR LEASED YOUR VEHICLE IN CALIFORNIA, YOUR WARRANTY IS MADE SUBJECT TO THE TERMS OF THIS BINDING ARBITRATION PROVISION. BY ACCEPTING BENEFITS UNDER THIS WARRANTY, INCLUDING HAVING ANY REPAIRS PERFORMED UNDER WARRANTY, YOU AGREE TO BE BOUND BY THESE TERMS. IF YOU DO NOT AGREE WITH THESE TERMS, PLEASE CONTACT US AT OPT OUT@HMAUSA.COM WITHIN THIRTY (30) DAYS OF YOUR PURCHASE OR LEASE TO OPT-OUT OF THIS ARBITRATION PROVISION.” (Ameripour Decl., Ex. 2, p. 13-14.)

In opposition, Gaona Rodriguez first argues Hyundai fails to establish adequate foundation for the existence of the arbitration provision in the Owner’s Handbook. (Opp., p. 5:22-6:28.) But 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 with admissible evidence by preponderance of the evidence. (Ibid.)

Here, Gaona Rodriguez fails to present sufficient evidence that challenged the authenticity of the Owner’s Handbook at issue. While Gaona Rodriguez provided a declaration that denies receiving any notice of the arbitration provision at issue, Gaona Rodriguez does not deny receiving the Owner’s Handbook. (Gaona Rodriguez Decl., ¶ 4-7.) Thus, this argument fails.

Gaona Rodriguez next argues the arbitration provision is unenforceable because the provision (1) violates the Magnuson-Moss Warranty Act (MMWA), (2) violates state provisions, and (3) is unconscionable. These arguments are addressed below.

MMWA

The MMWA “permits a ‘consumer’ to bring an action for damages and other relief when a warrantor breaches its obligations under a warranty or under the act.” (Atkinson v. Elk Corporation of Texas (2006) 142 Cal.App.4th 212, 222, citing 15 U.S.C. § 2310, subd. (d).) It “also permits warrantors to establish ‘informal dispute settlement procedures’ for breach of written warranty claims, and to require consumers to resort to such procedures before bringing a civil action.” (Walton v. Rose Mobile Homes LLC (5th Cir. 2002) 298 F.3d 470, 474 (Walton), citing 15 U.S.C. § 2310, subd. (a).) In interpreting the term “informal dispute settlement procedures,” the Federal Trade Commission (FTC) has issued regulations that prohibit written warranties from requiring binding arbitration. (Id., at p. 474-475, citing 16 C.F.R. § 703.5, subd. (j).)

Gaona Rodriguez argues the FTC’s interpretation should control here. (Opp., p. 8:4-10:6.) But two federal circuit court rulings provide persuasive, though not binding, authority on the arbitrability of warranty claims issues. The Fifth and Eleventh Circuits have held that written warranty claims arising under the MMWA may be subject to valid binding arbitration agreements. (Walton, supra, 298 F.3d at p. 478-479 [holding the MMWA does not preclude binding arbitration of warranty claims pursuant to a valid arbitration agreement and finding it improper to use FTC regulations to determine congressional intent]; Davis v. Southern Energy Homes, Inc. (11th Cir. 2002) 305 F.3d 1268, 1274–1280 (Davis) [holding “written warranty claims arising under the MMWA may be subject to valid binding arbitration agreements.”].)

Here, the MMWA does not preclude arbitration of this case. First, Gaona Rodriguez’s Complaint does not allege causes of action pursuant to the MMWA but rather alleges violations pursuant to California’s Song-Beverly Act. Second, the subject arbitration provision included an opt-out clause that allowed Gaona Rodriguez the option of rejecting the arbitration provision. (Ameripour Decl., Ex. 2, p. 14.) Third and last, Gaona Rodriguez failed to provide the court with any binding or controlling legal authority. Considering the strong federal policy of favoring arbitration of disputes where, as here, a written arbitration agreement exists, and a lack of authority disfavoring the arbitration of warranty claims, the court finds Gaona Rodriguez failed to establish that the MMWA applies or precludes arbitration here.

State Law Provisions

Gaona Rodriguez next contends California law prohibits a manufacturer from relying on an arbitration clause that is surreptitiously inserted into a warranty manual. (Opp., p. 10:8-12:6.) In support of this contention, Gaona Rodriguez cites Norcia v. Samsung Telecommunications America, LLC (9th Cir. 2017) 845 F.3d 1279 (Norcia). There, the Ninth Circuit held an arbitration provision in a warranty brochure was unenforceable as the consumer’s silence in failing to opt-out of the provision did not constitute assent pursuant to California contract law. (Id., at p. 1290.)

It has long been the rule in California that silence or failure to act is generally insufficient to convey acceptance of an offer. (See Leslie v. Brown Bros. Incorporation (1929) 208 Cal. 606, 621; Golden Eagle Ins. Co. v. Foremost Ins. Co. (1993) 20 Cal.App.4th 1372, 1385 (Golden Eagle).) Notwithstanding this general rule, “[a]cceptance of an offer may be inferred from inaction in the face of a duty to act, [Citations], and from retention of the benefit offered [Citations].” (Golden Eagle, supra, 20 Cal.App.4th at p. 1386.) In Norcia, the Ninth Circuit applied these rules in noting there was no evidence the consumer expressly assented to the arbitration provision contained in the warranty brochure. (Norcia, supra, 845 F.3d at p. 1285-1285.) The court also noted the consumer did not “sign the brochure or otherwise act in a manner that would show ‘his intent to use his silence, or failure to opt out, as a means of accepting the arbitration agreement.’” (Ibid., quoting Gentry v. Superior Court (2007) 42 Cal.4th 443, 468, overruled on other grounds in Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, 366.)

Here, there is also no evidence of Gaona Rodriguez signing the arbitration provision at issue or even acknowledging receipt of the Owner’s Handbook in which the arbitration provision was included. In reply, while Hyundai fails to explicitly address Norcia, Hyundai does appear to address the issue by contending mutual assent exists. Specifically, Hyundai contends Gaona Rodriguez assented to the terms of the arbitration provision by accepting the benefits of Hyundai’s warranty. (Reply, p. 2:17-3:4.) Hyundai also contends Gaona Rodriguez is estopped from asserting a lack of assent as Gaona Rodriguez is trying to enforce the other provisions of the warranty agreement. (Reply, p. 3:5-4:13.)

These contentions fail, however, as they do not appreciate “the difference between California warranty law and contract law, which are governed by different sets of rules.” (Id., at p. 1288.) “A seller is bound by any express warranties given to the buyer, including statements in written warranty agreements, advertisements, oral representations, or presentations of samples or models.” (Ibid.) Although written warranties are “‘contractual’ in the sense that it creates binding, legal obligations on the seller, [Citation], . . . a warranty does not impose binding obligations on the buyer.” (Ibid.) And the fact that a consumer must satisfy certain conditions before enforcing a warranty “is not equivalent to a freestanding obligation that limits a buyer’s rights outside of the scope of warranty itself.” (Ibid.)

In this case, because Gaona Rodriguez was not required to accept Hyundai’s warranties to make them binding, there was no “acceptance of a benefit” that can serve as Gaona Rodriguez’s assent to the terms of the arbitration provision. Furthermore, as in Norcia, the benefits of Hyundai’s warranty applied regardless of whether Gaona Rodriguez opted out of the arbitration provision. (Id., at p. 1286.) Thus, the court  finds the enforceability of the arbitration provision fails for lack of assent.

Accordingly, the court DENIES Hyundai’s motion.

CONCLUSION

Based on the foregoing, Hyundai’s motion to compel arbitration of Gaona Rodriguez’s Song-Beverly action is DENIED.