Melnykov vs. Hyundai Motor America

The Handbook sets forth an arbitration agreement at pages 12-14, broadly requiring binding arbitration (for California vehicles) of any and all claims between plaintiff and Hyundai related to or arising out of the vehicle purchase, use or performance of the vehicle, or the vehicle warranty—with the exception of personal injury claims, Magnuson-Moss Warranty Act claims, and claims falling within the jurisdiction of the small claims court—through the American Arbitration Association (AAA) under its Consumer Arbitration Rules. (Ameripour Dec, Ex. 3 [Handbook, pp. 12-14].) There is no signature or signature line to indicate assent. Instead, the arbitration agreement states that plaintiff’s mere use of the vehicle indicates his assent. (Id.) Specifically, the last paragraph of the arbitration agreement reads:

IF YOU PURCHASED OR LEASED YOUR VEHICLE IN CALIFORNIA, YOUR WARRANTY IS MADE SUBJECT TO THE TERMS OF THIS BINDING ARBITRATION PROVISION. BY USING THE VEHICLE, OR REQUESTING OR 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 Dec., Ex. 3 [Handbook, p. 14].)

The arbitration agreement also states that it “shall be governed by the Federal Arbitration Act, 9 U.S.C. §§ 1-16.” (See Ameripour Dec. at Ex. 3 [Handbook, p. 14].) As such, both the procedural and substantive provisions of the FAA apply. (See Victrola 89, LLC v. Jaman Properties 8 LLC (2020) 46 Cal.App.5th 337, 345-346 [where arbitration agreement states its enforcement is “governed by the [FAA],” both the procedural and substantive provisions of FAA apply].)

Under the FAA, the court must compel arbitration of claims covered by an enforceable arbitration agreement. (9 U.S.C. § 3.) The party seeking to compel arbitration has the burden of proving the existence of an agreement to arbitrate by a preponderance of the evidence. (Johnson v. Walmart Inc. (9th Cir. 2023) 57 F.4th 677, 681 (Johnson).)

Importantly, “ ‘while doubts concerning the scope of an arbitration clause should be resolved in favor of arbitration, the presumption does not apply to disputes concerning whether an agreement to arbitrate has been made.’ [Citations.]” (Johnson, supra, 57 F.4th at pp. 680-681.) “ ‘[A]rbitration is strictly a matter of consent ... and thus is a way to resolve those disputes—but only those disputes—that the parties have agreed to submit to arbitration.’ [Citation.]” (Id. at p. 681; accord, Coinbase, Inc. v. Suski (2024) 602 U.S. 143, 148.) “As ‘arbitration is a matter of contract[,] ... a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit.’ [Citations.]” (Johnson, at p. 681.)

To determine whether the parties have agreed to arbitrate a dispute, federal courts apply state-law principles of contract formation. (Berman v. Freedom Financial Network, LLC (9th Cir. 2022) 30 F.4th 849, 855.)

To form a contract under California law, there must be mutual assent. (Herzog v. Superior Court (2024) 101 Cal.App.5th 1280, 1293-1294 (Herzog); Long v. Provide Commerce, Inc. (2016) 245 Cal.App.4th 855, 862 (Long).) “ ‘ “[M]utual manifestation of assent, whether by written or spoken word or by conduct, is the touchstone of contract.” ’ [Citation.]” (Long, at p. 862.)

“ ‘Mutual assent is determined under an objective standard applied to the outward manifestations or expressions of the parties, i.e., the reasonable meaning of their words and acts, and not their unexpressed intentions or understandings. The parties’ outward manifestations must show that the parties all agreed ‘upon the same thing in the same sense.’ If there is no evidence establishing a manifestation of assent to the ‘same thing’ by both parties, then there is no mutual consent to contract and no contract formation.” (Herzog, at pp. 1293-1294.)

The recent authorities discussing the formation of a contract in the online context are relevant here because the subject arbitration agreement in the handbook does not require a signature to manifest assent, but rather, states that the vehicle owner manifests consent to the agreement merely by using the vehicle, much like many website arbitration agreements. (See Ameripour Dec. at Ex. 3 [Handbook, p. 14].)

To be sure, signing an arbitration agreement is one manner of manifesting consent (see Binder v. Aetna Life Ins. Co. (1999) 75 Cal.App.4th 832, 850), but it is not the only manner. “ ‘[I]t is not the presence or absence of a signature which is dispositive; it is the presence or absence of evidence of an agreement to arbitrate which matters.’ [Citation.] Evidence confirming the existence of an agreement to arbitrate, despite an unsigned agreement, can be based, for example, on ‘conduct from which one could imply either ratification or implied acceptance of such a provision.’ ” (Serafin v.

Balco Properties Ltd., LLC (2015) 235 Cal.App.4th 165, 176.) For example, “[w]hen an employee continues his or her employment after notification that an agreement to arbitration is a condition of continued employment, that employee has impliedly consented to the arbitration agreement.” (Diaz v. Sohnen Enterprises (2019) 34 Cal.App.5th 126, 130.)

Assent, however, requires notice. (B.D. v. Blizzard Entertainment, Inc. (2022) 76 Cal.App.5th 931, 944 (Blizzard); Stover v. Experian Holdings, Inc. (9th Cir. 2020) 978 F.3d 1082, 1086 [“notice—actual, inquiry, or constructive—is the touchstone for assent to a contract”]; see Herzog, supra, 101 Cal.App.5th at pp. 1293-1294; Weeks v. Interactive Life Forms, LLC (2024) 100 Cal.App.5th 1077, 1089.) “[I]n the absence of actual notice, a manifestation of assent may be inferred from the consumer’s actions ... but any such action must indicate the parties’ assent to the same thing, which occurs only when the [provider] puts the consumer on constructive notice of the contractual terms.” (Sellers v. JustAnswer LLC (2021) 73 Cal.App.5th 444, 461 (Sellers); accord, Herzog, at p. 1294.)

“[W]hether the terms appear on a physical piece of paper or a computer screen, ‘California law is clear—“an offeree, regardless of apparent manifestation of his consent, is not bound by inconspicuous contractual provisions of which he was unaware, contained in a document whose contractual nature is not obvious.” ’ [Citation.]” (Sellers, supra, 73 Cal.App.5th at p. 461; accord, Herzog, supra, 101 Cal.App.5th at pp. 1293-1294; Long, supra, 245 Cal.App.4th at p. 862.)

Here, nothing shows Hyundai put Plaintiff on notice of the arbitration agreement within the approximately 46-page “Owner’s Handbook and Warranty Information” booklet prior to plaintiff’s purchase of the vehicle, and nothing from its cover suggests it contains an arbitration agreement to which plaintiff’s assent will be deemed merely by driving the vehicle off the lot. (See Ameripour Dec. at Ex. 3.) The fact that the arbitration agreement appears in the “owner’s handbook” indicates plaintiff would have had no reason to discover it until sometime after he had already become the “owner” of the vehicle and unwittingly assented to the agreement by driving it; and nothing suggests plaintiff would have had reason to reference the “warranty information” booklet within the first 30 days of ownership, such that he should have discovered the arbitration agreement in time to opt out.

Without any such notice, there can be no assent. (B.D. v. Blizzard Entertainment, Inc., supra, 76 Cal.App.5th at p. 944; Stover v. Experian Holdings, Inc., supra, 978 F.3d at p. 1086 [“notice— actual, inquiry, or constructive—is the touchstone for assent to a contract”]; Herzog, supra, 101 Cal.App.5th at pp. 1293-1294; Weeks v. Interactive Life Forms, LLC, supra,100 Cal.App.5th at p. 1089.)

Defendant has therefore failed to demonstrate plaintiff’s assent to the arbitration agreement.

Defendant contends plaintiff is nevertheless equitably estopped from denying the existence of the arbitration agreement because he relies on the warranty in the handbook as a basis for his claims. In the arbitration context, “[w]hen a plaintiff brings a claim which relies on contract terms against a defendant, the plaintiff may be equitably estopped from repudiating the arbitration clause contained in that agreement.” (JSM Tuscany, LLC v. Superior Court (2011) 193 Cal.App.4th 1222, 1239.) “The rule applies to prevent parties from trifling with their contractual obligations.” (Turtle Ridge Media Group, Inc. v. Pacific Bell Directory (2006) 140 Cal.App.4th 828, 833.)

The problem with defendant’s reliance on equitable estoppel is twofold. First, it conflates a “warranty” with a “contract,” both of which are legal terms of art, and not necessarily the same.

Equitable estoppel requires the existence of a “contract.” (See, e.g., Soltero v. Precise Distribution, Inc. (2024) 102 Cal.App.5th 887, 893 [sine qua non of equitable estoppel is plaintiff’s actual dependence on the underlying contract].) A contract is an agreement that requires mutual assent and consideration. (Civ. Code, § 1550 [contract elements; mutual assent and consideration are “essential to the existence of a contract”]; Aton Center, Inc. v. United Healthcare Ins. Co. (2023) 93 Cal.App.5th 1214, 1231 [“ ‘the vital elements of a cause of action based on contract are mutual assent (usually accomplished through the medium of an offer and acceptance) and consideration’ ”].)

An express warranty is an assurance of a product’s utility and performance that accompanies its purchase and, unlike a “contract,” does not require mutual assent. (See Civ. Code, § 1791.2, subd. (a) [“‘Express warranty’ means: (1) A written statement arising out of a sale to the consumer of a consumer good pursuant to which the manufacturer, distributor, or retailer undertakes to preserve or maintain the utility or performance of the consumer good or provide compensation if there is a failure in utility or performance; or (2) In the event of any sample or model, that the whole of the goods conforms to such sample or model.”]; Ford Motor Warranty Cases (2025) 17 Cal.5th 1122, 1134 [“Express warranties may arise from sources outside a ... contract, including statements in a manufacturer’s brochure...”]; see also Gavaldon v.

DaimlerChrysler Corp. (2004) 32 Cal.4th 1246, 1258-1259 [holding service contracts and express warranties are mutually exclusive, explaining “an express warranty” is “part of the purchase of a consumer product, and a representation of the fitness of that product,” whereas the purchase of a service contract is distinct from the purchase of the product itself].)

Defendant assumes the warranty in the handbook constitutes a “contract” in the traditional sense, as opposed to just an assurance of the vehicle’s utility and performance accompanying its purchase. The mere fact that defendant provided an express warranty guaranteeing the performance of the vehicle does not necessarily mean the parties executed a “contract” by which they “mutually” agreed to certain obligations—particularly those independent from and unrelated to the fitness of the product—that plaintiff is now attempting to disclaim, which is the situation that equitable estoppel is meant to address. (See Ford Motor Warranty Cases, supra, 317 Cal.5th at p. 1136 [with equitable estoppel, “the essential concern is whether plaintiffs are trying to enforce contractual terms beneficial to them while avoiding their own contractual agreement to arbitrate”].)

Having failed to show to the warranty constitutes a “contract” to which plaintiff has mutually agreed in the first place, defendant has failed to show he should be equitably estopped from avoiding the arbitration agreement therein. (See Goldman v. KPMG, LLP (2009) 173 Cal.App.4th 209, 220 [“ ‘[t]he linchpin for equitable estoppel is equity—fairness’ ”].)

Further, even if Defendant had established that the warranty was a “contract,” which it has not, equitable estoppel does not apply because plaintiff’s claims do not rely on the substantive terms of the subject warranty; they rely on obligations outside the warranty imposed by statute or common law. “[U]nless a party to an arbitration agreement has used the substantive terms of that agreement as the foundation for his claims..., there is no reason in equity why he should be forced to arbitrate his claims....” (Ford Motor Warranty Cases, supra, 17 Cal.5th at p. 1137.) “It is not enough that the complaint ... includes claims that ‘ “presum[e] the existence of” ’ such an agreement. [Citation.]

Instead, the causes of action ... must be ‘ “intimately founded in and intertwined” with the underlying contract obligations.’ [Citation.] Indeed, there must be ‘actual reliance on the terms of the agreement’ [citation], and the causes of action must premise liability on ‘duties imposed by the agreement” itself [citation].” (Ballesteros v. Ford Motor Co. (2025) 109 Cal.App.5th 1196, 1207-1208.)

Plaintiff has alleged three causes of action in this case against Defendant for (1) violation of the Song-Beverly Act – breach of express warranty, 2) violation of the Song-Beverly Act – breach of implied warranty, 3) violation of Business and Professions Code § 17200. The first two claims allege various violations of the Song- Beverly Act, which imposes certain statutory obligations on manufacturers who make express warranties. The third cause of action alleges Defendant committed unfair, unlawful, and fraudulent conduct in violation of California’s Unfair Competition Law.

“Manufacturers may ... make express warranties, which trigger various statutory provisions covering notice and repair or replacement of nonconforming goods. (See Civ. Code, § 1793 et seq.)” (Ford Motor Warranty Cases, supra, 17 Cal.5th at pp. 1133- 1134.) These obligations are not terms of the warranties themselves but “are imposed by statute.” (Ibid.) Plaintiff’s first cause of action is based on defendant’s violations of these statutory obligations—i.e., the failure to promptly provide restitution—rather than a term of the warranty itself. (Civ.

Code, § 1793.2, subds. (a)(3), (b), (d); see Complaint, ¶¶ 9-21.) The second cause of action arises from a breach of the implied warranty of merchantability, which “arises by operation of law.” (Ford Motor Warranty Cases, at p. 1134; see Complaint, ¶¶ 23-30.) None of these claims “premise liability on ‘duties imposed by the agreement’ itself....” (Ballesteros v. Ford Motor Co., supra, 109 Cal.App.5th at pp. 1207-1208.) Therefore, even if the warranty was a “contract” in the traditional sense (which again, Defendant has not shown), equitable estoppel does not apply because plaintiff’s claims do not rely on the substantive terms of the warranty itself.

Accordingly, the motion is denied to the extent it is based on the arbitration agreement in the Owner’s Handbook.

The Connected Services Agreement (CSA)

Defendant also seeks to compel arbitration pursuant to the CSA, which it contends is broad enough to cover plaintiff’s claims in this action.

Defendant has met its burden of demonstrating the existence of the arbitration agreement in the CSA but has failed to show its scope covers plaintiff’s Song-Beverly claims.

First, with respect to the existence of the arbitration agreement in the CSA—as noted above, state contract law governs the rights of parties to enforce an arbitration agreement. To resolve this inquiry, the court applies a three-step burden shifting process. (See Iyere v. Wise Auto Group (2023) 87 Cal.App.5th 747, 755 (Iyere); Gamboa v. Northeast Community Clinic (2021) 72 Cal.App.5th 158, 165 (Gamboa); see also Garcia v. Stoneledge Furniture LLC (2024) 102 Cal.App.5th 41, 51 [applying three-step burden shifting process, noting “[e]ven when an agreement provides that it is governed by the FAA, courts must first apply state law principles in determining whether the parties entered into an agreement to arbitrate”].)

On the first step, “the moving party bears the burden of producing ‘prima facie evidence of a written agreement to arbitrate the controversy.’ [Citation.]” (Gamboa, supra, 72 Cal.App.5th at p. 165.) To meet this burden, the moving party can “ ‘attach[] to the [motion or] petition a copy of the arbitration agreement purporting to bear the [opposing party’s] signature.’ [Citation.] Alternatively, the moving party can meet its burden by setting forth the agreement’s provisions in the motion. [Citations.]” (Ibid.; accord, Iyere, supra, 87 Cal.App.5th at p. 755.)

At this step, the movant need not follow the normal procedures of document authentication. (Iyere, at p. 755; Gamboa, at p. 165.) On the second step, “[i]f the movant bears its initial burden, the burden shifts to the party opposing arbitration to identify a factual dispute as to the agreement’s existence” through admissible evidence. (Iyere, at p. 755; Gamboa, at p. 165.) On the third step, “[i]f the opposing party meets its burden of producing evidence, ... the moving party must establish with admissible evidence a valid arbitration agreement between the parties.” (Gamboa, at p. 165; Iyere, at p. 755.)

Defendant has met its initial burden of producing “prima facie evidence” of the existence of the CSA by setting forth the agreement’s provisions. (See Rao Dec. ¶¶ 2-6, Ex. 2; see also Iyere, supra, 87 Cal.App.5th at p. 755; Gamboa, supra, 72 Cal.App.5th at p. 165.) Plaintiff has not presented any evidence disputing the existence of the CSA. As such, the burden-shifting process stops here, and defendant need not produce any further evidence to authenticate the document. (See Ramirez v. Golden Queen Mining Co., LLC (2024) 102 Cal.App.5th 821, 837.)

As for the scope of this arbitration provision—the CSA governs plaintiff’s “Connected Services,” i.e., certain wireless/GPS, stolen vehicle, and roadside assistance services, and plaintiff’s “Service Plan” for the same. (Rao Dec. at Ex. 2.)

The arbitration provision in the CSA is extremely broad and reads, in relevant part:

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. However, any dispute you or we may have relating to copyrights or other intellectual property shall not be governed by this agreement to arbitrate. For the avoidance of doubt, this means that any claims you or we may have relating to intellectual property rights against the other, including injunctive and other relief sought, may be brought in a court of competent jurisdiction.

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 (including, but not limited to, claims relating to advertising); claims that are currently the subject of purported class action litigation in which you are not a member of a certified class; claims relating to the Vehicle for which you seek product or service support via the sites; claims arising out of or relating to the Telephone Consumer Protection Act; claims relating to your data privacy or information security; and claims that may arise after the termination of this Agreement.

For purposes of this arbitration provision, references to “Hyundai,” “you,” and “us” shall include our respective parent entities, subsidiaries, affiliates, agents, employees, predecessors in interest, successors and assigns, websites of the foregoing, as well as all authorized or unauthorized users or beneficiaries of services, products or information provided or made available under this or prior Agreements between us relating to or arising from any aspect of your use of the Connected Services, Connected Service Systems, Service Plans, the Vehicle or access of the sites. Notwithstanding the foregoing, either party may bring an individual action in small claims court. You agree that, by entering into this Agreement, you and Hyundai are each waiving the right to a trial by jury or to participate in a class or representative action to the maximum extent permitted by law. ...

(Rao Dec. at Ex. 2.)

Although this arbitration provision purports to cover any and all disputes between the parties regarding “the Vehicle,” the scope of an arbitration clause “ ‘turns on whether the ... claims are “rooted” in the contractual relationship between the parties....’ ” (Ahern v. Asset Management Consultants, Inc. (2022) 74 Cal.App.5th 675, 692.) To be arbitrable, the subject claims must have their “roots” in the relationship between the parties that was created by the contract containing the arbitration provision. (Id. at pp. 692-693.) “[E]ven under a very broad arbitration provision, such as ‘any controversy or claim arising out of or relating to this agreement,’ ” the subject claims must “ ‘ “have their roots in the relationship between the parties which was created by the contract” ’ before they can be deemed to fall within the scope of the arbitration provision.” (Rice v.

Downs (2016) 248 Cal.App.4th 175, 188.)

Here, the CSA governs the provision of “Connected Services,” the wireless/remote technology/roadside assistance services received as part of plaintiff’s enrollment in a “Connected Services” subscription. (Rao Dec. at Ex. 2.) The complaint in this case alleges the vehicle contained defects and nonconformities to warranty. (See Complaint.) The “Connected Services” are not at issue in this case and plaintiff’s claims do not arise out of the relationship created by the CSA. As such, the arbitration agreement in the CSA does not encompass plaintiff’s claims. (Ahern v. Asset Management Consultants, Inc.,74 Cal.App.5th at p. 692; Rice v. Downs, supra, 248 Cal.App.4th at p. 188.)

Accordingly, the motion is denied.

Plaintiff shall give notice of this ruling.