Judge: Stephen P. Pfahler, Case: 24STCV09471, Date: 2024-12-02 Tentative Ruling
Case Number: 24STCV09471 Hearing Date: December 2, 2024 Dept: 68
Dept.
68
Date:
12-2-24
Case:
24STCV09471
Trial
Date: Not Set
ARBITRATION
MOVING
PARTY: Defendant, Tesla Motors, Inc.
RESPONDING
PARTY: Plaintiff, Dong Chung
RELIEF
REQUESTED
Motion
to Compel Arbitration and Stay Action
SUMMARY
OF ACTION
On
November 11, 2022, Plaintiff Dong Chung either leased or purchased a 2023 Tesla
Model Y vehicle. The vehicle suffers from unspecified defects.
On
April 16, 2023, Plaintiff filed a complaint for Violations Violation of
Song-Beverly Act – Breach of Express Warranty, Violation Violation of
Song-Beverly Act – Breach of Implied Warranty.
RULING: Granted.
Request
for Judicial Notice: Granted.
The
court takes judicial notice of the existence of the complaint, but cannot take
judicial notice of the content for any truth of the matter asserted.
Defendant
Tesla Motors, Inc. (Tesla) moves to compel arbitration pursuant to the terms of
the lease executed at the time of the acquisition of the vehicle. Tesla seeks
arbitration on grounds that the claims arise from alleged defects with the
vehicle. Plaintiff in opposition
challenges the motion on grounds of unconscionability. Tesla in reply
denies any unconscionability in the agreement, and reiterates public policy in
favor of arbitration.
“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.) “On petition of a party to an arbitration
agreement alleging the existence of a written agreement to arbitrate a
controversy and that a party thereto refuses to arbitrate such controversy, the
court shall order the petitioner and the respondent to arbitrate the controversy
if it determines that an agreement to arbitrate the controversy exists, unless
it determines that: (a) The right to compel arbitration has been waived by the
petitioner; or (b) Grounds exist for the revocation of the agreement.” (Code
Civ. Proc., § 1281.2.)
Tesla moves to compel under the Federal Arbitration
Act (FAA), as provided in the contract. While the FAA governs the rules for conducting
arbitration, barring citation to a case precluding California law, motions to
compel arbitration are still governed by California law. (Adolph v. Uber
Technologies, Inc. (2023) 14 Cal.5th 1104, 1119; Viking River Cruises, Inc. v. Moriana (2022) 142
S.Ct. 1906; Volt Information Sciences, Inc.
v. Board of Trustees of Leland Stanford Junior University (1989)
489 U.S. 468, 477–479; Victrola 89, LLC v. Jaman Properties 8 LLC (2020)
46 Cal.App.5th 337, 346; see AT&T Mobility LLC v.
Concepcion (2011) 563 U.S. 333, 341-346.)
The law creates a general presumption in favor of
arbitration. In a motion to
compel arbitration, the moving party must prove by a preponderance of evidence
the existence of the arbitration agreement and that the dispute is covered by
the agreement. The burden then shifts to the resisting party to prove by a
preponderance of evidence a ground for denial (e.g., fraud, unconscionability,
etc.). (Rosenthal v. Great Western Fin'l Securities Corp. (1996) 14
Cal.4th 394, 413-414; Hotels Nevada v. L.A. Pacific Ctr., Inc. (2006)
144 Cal.App.4th 754, 758.)
Any challenges to the formation of the
arbitration agreement should be considered before any order sending the parties
to arbitration. The trier of fact weighs all
evidence, including affidavits, declarations, documents, and, if applicable,
oral testimony to determine whether the action goes to arbitration. (Hotels Nevada v. L.A. Pacific Ctr.,
Inc., supra, 144 Cal.App.4th at p. 758.)
The court finds
the declaration of the Business Resolution Manager for Tesla sufficiently establishes
competence in knowledge, the rightful possession of the “Motor Vehicle Order
Agreement,” which specifically includes the arbitration clause applicable to
the subject action. [Declaration of Raymond Kim, Ex. 1.] The presented copy of the
agreement itself lacks any indication of an electronic signature. Tesla
represents the acceptance of the order agreement itself is required in order receive
any vehicle. Tesla represents a purchaser has a 30-day window to cancel; the
record shows no cancellation. Plaintiff represents taking possession of the
vehicle in the complaint—a necessary precursor to filing the subject action. Plaintiff
in opposition otherwise presents no challenge to the formation of the agreement
itself. The court therefore finds a validly executed agreement.
The relevant portion of the arbitration clause states: “If
not resolved within 60 days, you agree that any dispute arising out of or
relating to any aspect of the relationship between you and Tesla will not be
decided by a judge or jury but instead by a single arbitrator in an arbitration
administered by the American Arbitration Association (AAA) under its Consumer
Arbitration Rules. This includes claims arising before this Agreement, such as
claims related to statements about our products. You further agree that any
disputes related to the arbitrability of your claims will be decided by the
court rather than an arbitrator, notwithstanding AAA rules to the contrary.” The
court finds the language of the agreement clearly applies to the warranties on
the vehicle. The court concludes the alleged claims constitute a dispute
subject to arbitration under the terms of the agreement. Tesla therefore shifts
the burden for establishing a basis of arbitration.
The court considers the defenses to arbitration. Plaintiff raises unconscionability
argument on grounds of adhesion presentation and unfavorable terms.
Unconscionability claims have both a “‘procedural’” and
“‘substantive’” element. (Stirlen v.
Supercuts, Inc. (1997) 51 Cal.App.4th 1519, 1531.) “‘Procedural unconscionability’” concerns the manner in
which the contract was negotiated and the circumstances of the parties at that
time. (Kinney
v. United HealthCare Services, Inc. (1999)
70 Cal.App.4th 1322, 1329.) “‘The procedural element focuses on two
factors: “oppression” and “surprise.”
“Oppression” arises from an inequality of bargaining power which results
in no real negotiation and an absence of meaningful choice. “Surprise” involves
the extent to which the supposedly agreed-upon terms of the bargain are hidden
in the prolix printed form drafted by the party seeking to enforce the disputed
terms.’” (Stirlen v. Supercuts, Inc.,
supra, 51 Cal.App.4th at p. 1532.) “Substantive unconscionability” involves
contracts leading to “‘“overly harsh”’” or “‘“one-sided”’” results.’” …
“[U]nconscionability turns … on an absence of ‘justification “for it…” [and
therefore] must be evaluated as of the time the contract was made.’” (Id. at p. 1532.)
“The adhesive nature of the [consumer] contract is
sufficient to establish some degree of procedural unconscionability. Yet ‘a
finding of procedural unconscionability does not mean that a contract will not
be enforced, but rather that courts will scrutinize the substantive terms of
the contract to ensure they are not manifestly unfair or one-sided.’” (Sanchez
v. Valencia Holding Co., LLC (2015) 61 Cal.4th 899, 915.) Plaintiff
specifically relies on a claim of adhesion based on a lack of awareness and
understanding of the arbitration agreement impacts themselves, limited
discovery provisions.
The court finds the
circumstances regarding the transaction, including the placement of the
arbitration clause itself, and circumstances in the execution of the agreement rendering
the lease as a “one sided” transaction insufficiently supports any basis
unconscionability to thwart the enforceability of the agreement on this basis.
(See Sanchez v. Valencia Holding Co., LLC, supra, 61
Cal.4th at p. 919-921.) Plaintiff
was given a 30-day window to cancel the purchase, which dissipates any alleged
pressure to accept the agreement without sufficient time to consider the
implications of the terms.
Even assuming a one sided
transaction and disassociating any temporal considerations, Plaintiff lacks any
substantive support establishing a material disadvantage from the terms
themselves. (Gutierrez v. Autowest, Inc. (2003) 114 Cal.App.4th 77,
89-90.) Plaintiff’s reliance on class action and employment case law
constitutes inapposite authority. (Davis v. Kozak (2020) 53
Cal.App.5th 897, 911; Gentry v. Superior Court (2007) 42 Cal.4th
443, 470; Armendariz v. Foundation Health Psych Care Services, Inc. (2000)
24 Cal.4th 83, 102-106.)
The discovery argument challenges American Arbitration Rule
22 (AAA), whereby authority to conduct discovery is vested with the arbitrator.
Plaintiff contends said discretion of the arbitrator presumptively constitutes
a material disadvantage.
The court finds no unconscionable
terms due to AAA Rule 22. Vested discretion with the arbitrator to manage
discovery precisely supports the policy behind arbitration—efficient, managed
adjudication of claims to manage costs. An accusation on a potential limit into
the fair prosecution of the defect claim constitutes improper speculation.
Plaintiff will presumably participate in the selection of the arbitrator, and may
always challenge the conduct of the arbitrator in a later hearing to confirm
the award if Plaintiff can factually and legally establish prejudice. The court
otherwise declines to find any hypothetical basis for prejudice against the
consumer simply based on a standard rule.
The court otherwise finds no
support for the void agreement presented in the last part of the opposition. (Rheinhart
v. Nissan North America, Inc. (2023) 92 Cal.App.5th 1016, 1033.)
The court therefore finds no bar
of the arbitration agreement on grounds of unconscionability.
Finally, although not raised by either
party, the court also notes that the subject action presents a different
scenario from multiple other arbitration agreements involving third party
dealerships. California courts reject a finding of a third party beneficiary
relationship between the seller and manufacturer and/or equitable estoppel
grounds. (Kielar v. Superior Court (2023) 94 Cal.App.5th 614, 619-621; Montemayor v. Ford Motor Co.
(2023) 92 Cal.App.5th 958, 971-974; Ford
Motor Warranty Cases (Ochoa) (2023) 89 Cal.App.5th 1324.) Because
Tesla is the identified manufacturer, seller and party responsible for warranty
repairs, the court specifically distinguishes any potential, later presented
positions on grounds of lack of a third party beneficiary or estoppel basis as
a form of defense.
The motion is therefore GRANTED.
“If a court of competent jurisdiction, whether in this State
or not, has ordered arbitration of a controversy which is an issue involved in
an action or proceeding pending before a court of this State, the court in
which such action or proceeding is pending shall, upon motion of a party to
such action or proceeding, stay the action or proceeding until an arbitration
is had in accordance with the order to arbitrate or until such earlier time as
the court specifies.” (Code Civ. Proc., § 1281.4.) The court orders the action
stayed.
The court will set an OSC re: Status of Arbitration and Stay
at the time of the hearing and concurrent with the Case Management Conference.
Tesla to provide notice.