Judge: Shirley K. Watkins, Case: 22VECV02268, Date: 2023-04-20 Tentative Ruling
Case Number: 22VECV02268 Hearing Date: April 20, 2023 Dept: T
22VECV02268 JUSTIN B POOLE vs HYUNDAI MOTOR AMERICA
[TENTATIVE]
ORDER: Defendant Hyundai Motor America’s
Motion to Compel Arbitration and Stay Proceedings is DENIED.
Plaintiff Justin B. Poole’s Request
for Judicial Notice submitted with his Supplemental Brief is GRANTED.
Defendant Hyundai
Motor America (Defendant) moved to compel arbitration and stay the proceedings as
to Plaintiff Justin Poole’s (Plaintiff) First
Amended Complaint (FAC.) This matter was
continued by the Court for the parties to submit supplemental briefing on the
recently released Second District Court of Appeal’s case, Martha Ochoa v. Ford Motor Company [And four other
cases.] (Apr. 4, 2023, B312261) __ Cal.Rptr.3d __ [2023 WL 2768484] (Ford Motor
Warranty Cases or FMWC.) Both parties submitted their supplemental
briefs.
Discussion
Defendant
argued that the Court should follow the reasoning of Felisilda v. FCA USA
LLC (2020) 53 Cal.App.5th 486 (Felisilda) over FMWC. Decisions of every division of the District
Courts of Appeal are binding upon all the superior courts of this state. (Auto Equity Sales, Inc. v. Superior Court
(1962) 57 Cal.2d 450, 455; see also Cuccia v. Superior Court (2007) 153
Cal.App.4th 347, 353-354.) Where there
is more than one appellate court decision and those decisions are in conflict,
the court exercising inferior jurisdiction can and must make a choice between
the conflicting decisions. (Sears v. Morrison (1999) 76 Cal.App.4th 577,
587.) A superior court ordinarily will
follow an appellate opinion emanating from its own district even though it is
not bound to do so, while superior courts in other appellate districts may pick
and choose between conflicting lines of authority. (McCallum v. McCallum
(1987) 190 Cal.App.3d 308, 315, fn. 4.) Despite
Defendant’s argument that the reasoning of the opinion in FMWC is
distinguishable and the Felisilda opinion is the correct opinion, the
Court exercises its discretion to follow the reasoning in FMWC.
The instant arbitration agreement in
the Retail Installment Sales Contract (RISC) entered between Plaintiff and
non-party Keyes Hyundai of Van Nuys is the exact same arbitration agreement
reviewed in FMWC. The Court
agrees with FMWC that equitable estoppel is inapplicable because
Plaintiff’s claims for violations of the Song-Beverly Consumer Warranty Act
(Act) and breaches of express and implied warranties are not founded upon or
intertwined with the RISC. Because
Plaintiff’s claims are not founded upon or intertwined with the RISC,
Defendant’s equitable estoppel argument is unpersuasive.
The Court further agrees with FMWC
that Defendant is not an intended third-party beneficiary to the RISC or
the RISC’s arbitration agreement. As
opined by FMWC, Defendant must show that they are an intended
third-party beneficiary by applying a “three-part test.” (Goonewardene v. ADP, LLC (2019) 6
Cal.5th 817, 830 (Goonewardene.)) Defendant argued in their Reply that the Goonewardene
test is inapplicable to an action grounded on violations of the Act but
this is in direct contradiction to the FMWC opinion opining that the Goonewardene
test must be applied. (Martha
Ochoa v. Ford Motor Company [And four other cases.] (Apr. 4, 2023, B312261)
__ Cal.Rptr.3d __ [2023 WL 2768484] *6-8.) The Court finds that Defendant did not
prove-up the three-part test to show that Defendant is a third-party
beneficiary to the RISC.
Even if Defendant had argued the
three-part test, the Court finds that the arbitration agreement in the RISC did
not directly benefit Defendant because Defendant is not the purchaser, dealer,
or dealer’s employees, agents, successors, or assigns. The Court finds that there was no motivating
purpose in the RISC to benefit Defendant.
The intent of the parties was to buy, sell, and finance the
vehicle. Lastly, to allow Defendant to
enforce the arbitration agreement as a third-party beneficiary is inconsistent
with the reasonable expectation of Plaintiff and the dealership since the right
to arbitrate was limited to buyer and seller (i.e., Plaintiff and
Dealership.) The Court finds that the
opinion of the FMWC opinion to be directly on point with the third-party
beneficiary issue that could be presented in the instant action.
Defendant’s
motion to compel arbitration based upon the third-party beneficiary contention
is unpersuasive.
Defendant also cited to an
arbitration agreement in the 2022 Owner’s Handbook & Warranty Information
Booklet (Booklet.) Defendant argued that
Plaintiff should be equitably estopped from denying the arbitration agreement
since he took advantage of the warranty’s substantive terms (i.e., submitting
the vehicle to an authorized repair facility.)
The moving party has the initial burden to show the existence of an
arbitration agreement by a preponderance of the evidence. (Pinnacle Museum Tower Association v.
Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 234-236; Segal
v. Silberstein (2007) 156 Cal.App.4th 627, 633; Giuliano v. Inland
Empire Personnel, Inc. (2007) 149 Cal.App.4th 1276, 1284.)
The Booklet’s arbitration agreement provides
in part:
BINDING ARBITRATION FOR CALIFORNIA
VEHICLES ONLY
PLEASE READ THIS SECTION IN ITS ENTIRETY AS IT AFFECTS
YOUR
RIGHTS
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), but
excluding claims brought under the Magnuson-Moss
Warranty Act, 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, or the
American Arbitration Association (AAA) under its
Consumer Arbitration Rules.
We will pay all fees for any arbitration except for
the initial filing fee of $250
for JAMS or $200 for AAA. The arbitration will be held
in the city or county of
your residence. To learn more about arbitration,
including the applicable
rules and how to commence arbitration, please contact:
***
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.
(Yao Decl., ¶ 4, Exh. B, Booklet p. 12-14,
emphasis in original.)
Defendant argued that Plaintiff
alleged that he received the Booklet (FAC par. 9.) However, the allegation in the FAC is not
verified and not admissible. Further,
Plaintiff’s allegation makes no reference to the Booklet or the Booklet’s warranty
or even receipt of the same. Because
Plaintiff made no reference to the Booklet and the FAC is not verified,
Defendant did not meet its burden to show the existence of an arbitration
agreement. Further, the only evidence
submitted to show Plaintiff’s receipt of the Booklet is Attorney Yao’s
declaration. (Yao Decl. par. 4.) Attorney Yao lacks any personal knowledge as
to the events occurring when the vehicle was purchased at the dealership. There are insufficient facts to show that Plaintiff
had knowledge of the arbitration agreement located in the Booklet which results
in a lack of showing Plaintiff’s consent by way of conduct (i.e., “accepting
benefits under this warranty, including having any repairs performed under
warranty.”) Without admissible evidence
to show entry into the arbitration agreement in the Booklet, Defendant failed
to meet its initial burden under the preponderance of evidence standard.
Civil Code section 1670.5, subdivision (a), codifies unconscionability as a
reason for refusing a contract’s enforcement.
It states: “If the court as a
matter of law finds the contract or any clause of the contract to have been
unconscionable at the time it was made the court may refuse to enforce the
contract, or it may enforce the remainder of the contract without the
unconscionable clause, or it may so limit the application of any unconscionable
clause as to avoid any unconscionable result.”
(§ 1670.5, subd. (a).)
There is no evidence that Plaintiff
knew about the arbitration agreement in the Booklet. There is no evidence he saw it. There is no evidence he agreed to it. There is no evidence that anyone told him
about it before he purchased the care.
The court agrees that the Warranty
Booklet’s arbitration clause is unconscionable. “The general principles of
unconscionability are well established.
A contract is unconscionable if one of the parties lacked a meaningful
choice in deciding whether to agree and the contract contains terms that are
unreasonably favorable to the other party.
[Citation.] Under this standard, the
unconscionability doctrine ‘“has both a procedural and a substantive
element.”’ [Citation.] ‘The procedural element addresses the
circumstances of contract negotiation and formation, focusing on oppression or
surprise due to unequal bargaining power.
[Citations.] Substantive
unconscionability pertains to the fairness of an agreement’s actual terms and
to assessments of whether they are overly harsh or one-sided.’” (OTO, L.L.C. v. Kho (2019)
8 Cal.5th 111, 125 (Kho).) It
is procedurally unconscionable because of the failure of manufacturer to make
known there is an arbitration provision in the Warranty Booklet. It is not subject to negotiation. There was no bargaining process. The plaintiff did not and could not freely
consent to the terms of the provision. There
is no evidence that plaintiff agreed to the provision. The provision is unfair because it was kept
secret from the plaintiff before he bought the car. He was never told before buying the car that
any manufacturer's warranty would be conditional and that he would give up his
right to a jury trial in order to access the warranty provisions. There is unequal power because plaintiff
never had an opportunity to discuss the warranty provisions and arbitration
provision with the manufacturer before purchasing the car from the dealer. Here, the plaintiff, would, under the
defendant's argument, be forced to accept the arbitration agreement in order to
access the warranty benefit but it is not reasonable to believe that people
would buy a new car from a dealer without manufacturer's warranties. That is not a reflection of the real world. It is also an unfair surprise to the
plaintiff as the provision purportedly is in a booklet which may or may not
have been given to plaintiff by the dealer, and who would have no idea that it
was buried in the booklet as per Ochoa, as the manufacturer was not a
party to the sales agreement.
Furthermore, there is also
substantive unconscionability. The
actual terms of the arbitration are also unfair. The purchaser is given only 30 days from
purchase to opt out of the agreement, regardless of whether the purchaser has
experienced any warranty related problems in those 30 days. This imposes a
severe restricted time limit to opt out, assuming if the provision is actually
seen within 30 days. This is patently
unfair. The defendant states without any
authority or evidence that if plaintiff wanted a car with different warranty
terms "Plaintiff could have easily found one." This presumes, however, that he even knew
about the terms before he purchased the car.
There is no evidence that is the case here, or ever.
Moreover, the grounds are also
especially onerous because regardless of whether plaintiff were to seek any
warranty work, the Booklet provision purportedly become immediate effective
when plaintiff "uses" the vehicle.
Finally, although there is mention
about how to locate the arbitration provisions on the JAMS website, moving
party has not established whether these procedures are easily found, nor is
there any evidence whether the arbitration provision meets JAMS' requirements
for arbitration, and whether the Booklet's provisions include all of the rights
allowed under the JAMS' provisions or whether they restrict any of the rights
set forth in the JAMS' provisions.
Because Defendant failed to meet its
initial burden to show Plaintiff’s entry into the Booklet’s arbitration
agreement, and because the court finds the Warranty Booklet arbitration
agreement unconscionable, this is further grounds to deny arbitration.
The Motion to Compel Arbitration and
Stay is DENIED.
IT IS SO ORDERED, CLERK TO GIVE
NOTICE.