Ngoc Huynh v. Hyundai Motor America

After reviewing the language of this vehicle warranty and the circumstances of its alleged execution, the court concludes the motion should be denied. Defendant’s request for judicial notice of the complaint in this matter is granted. (Evid. Code, § 452, subd. (d).)

2022 OWNERS HANDBOOK & WARRANTY INFORMATION

The vehicle warranty upon which Huynh brings this action is one of a series of warranties contained in a 48-page document titled “2022 Owner’s Handbook and Warranty Information” (Owners Handbook).

The arbitration provision appears on pages 12-14 of the Owner’s Handbook. It states, in relevant part, that the parties “each agree that any claim or disputes between us (including between you and any of our affiliated companies) related or arising out of your vehicle purchase, advertising for the vehicle, use of your vehicle, the performance of the vehicle, and any service relating to the vehicle, the vehicle warranty, representations in the warranty, or the duties contemplated under the warranty . . . shall be resolved by binding arbitration at either your or our election even if the claim is initially filed in a court of law . . . .” (Declaration of Ali Ameripour, Ex. 1 at Ex. A, p. 12.)

Toward the end of the provision, it states: “This agreement evidences a transaction involving interstate commerce and shall be governed by the Federal Arbitration Act, 9 U.S.C. § 1-16.” (Id. at p. 14.)

The Owner’s Handbook is not signed and there is no evidence that Huynh was made aware of the text of the warranties in this document or the arbitration provision contained therein before she purchased the Subject Vehicle from the dealer.

Under the Federal Arbitration Act (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 as issue.” (Chiron Corp. v. Ortho Diagnostic Systems, Inc. (9th Cir. 2000) 207 F.3d 1126, 1130.)

To determine “whether a valid contract to arbitrate exists,” courts apply “ordinary state law principles that govern contract formation.” (Davis v. Nordstrom, Inc. (9th Cir. 2014) 755 F.3d 1089, 1093, citations omitted; see also Ingle v. Circuit City Stores, Inc. (9th Cir. 2003) 328 F.3d 1165, 1170.)

No Mutual Assent

There is no indication that Huynh signed the Owner’s Handbook or knew of its provisions at the time of sale. Hyundai fails to demonstrate mutual assent.

Under certain circumstances, including those involving an unsigned employee handbook, a contract may be void if “a party, before making the agreement, lacks reasonable opportunity to learn its terms.” (Esparza v. Sand & Sea, Inc. (2016) 2 Cal.App.5th 781, 790 [addressing arbitration provision contained in an employee handbook], citing Rosenthal v. Great Western Financial Securities 20 Corp. (1996) 14 Cal.4th 394, 421.)

As noted in Norcia v. Samsung Telecommunications America, LLC (9th Cir. 2017) 845 F.3d 1279 (Norcia), another case involving an unsigned brochure (entitled “Product Safety & Warranty Information”): “Even if there is an applicable exception to the general rule that silence does not constitute acceptance, courts have rejected the argument that an offeree’s silence constitutes consent to a contract when the offeree reasonably did not know that an offer had been made.” (Norcia, 845 F.3d at p. 1285 [applying “basic principles of California contract law”].)

No Equitable Estoppel

Hyundai argues that notwithstanding Huynh’s lack of assent and lack of knowledge regarding the arbitration provisions, she is equitably estopped from challenging these provisions in the vehicle warranty because she has affirmatively asserted the warranty by seeking repairs from Hyundai and bringing this Song-Beverly Action.

A nonsignatory to a contract is generally “ ‘estopped from avoiding arbitration if [he] knowingly seeks the benefits of the contract containing the arbitration clause.’ [Citation.] Equitable estoppel, thus, ‘precludes a party from claiming the benefits of a contract while simultaneously attempting to avoid the burdens that contract imposes.’” (Philadelphia Indemnity Insurance Co. v. SMG Holdings, Inc. (2019) 44 Cal.App.5th 834, 841 [citations omitted].)

But warranties like that found in the Owner’s Handbook are “governed by a different set of rules” in California: “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. [Citations.] Language in a written warranty agreement is ‘contractual’ in the sense that it creates binding, legal obligations on the seller [citation], but a warranty does not impose binding obligations on the buyer.

Rather, warranty law ‘focuses on the seller’s behavior and obligation—his or her affirmations, promises, and descriptions of the goods—all of which help define what the seller in essence agreed to sell.’ [Citations.] A buyer may have to fulfill certain statutory conditions to obtain the benefit of a warranty. See, e.g., Cal. Civ. Code[,] § 1793.02(c) (stating that ‘[i]f the buyer returns the [assistive device for an individual with a disability] within the period specified in the written warranty,’ the seller must adjust or replace the device (emphasis added)).

But a warranty generally does not impose any independent obligation on the buyer outside of the context of enforcing the seller’s promises.” (Norcia, supra, 845 F.3d at p. 1288.)

Norcia was not an equitable estoppel case, because the plaintiff there did not attempt to enforce the warranty. But its reasoning is nonetheless persuasive. A warranty is an atypical contract. It is essentially one-sided, even though it is offered only after a buyer has agreed to pay for something pursuant to a sales contract. And it imposes obligations on a seller (or, in this case, on a manufacturer who passes the car into the stream of commerce through an authorized dealer who is the actual “seller”), but no independent, free-standing obligations on a buyer. It is unreasonable to expect a car buyer to know or anticipate that the buyer is necessarily agreeing to arbitrate all claims against that manufacturer merely by receiving a preprinted warranty in an owner’s handbook.

The proposition that a manufacturer can compel arbitration in virtually every Song- Beverly case simply by inserting language into an owner’s handbook—without ever calling the buyer’s attention to that language—runs counter to the reasoning of Ford Motor Warranty Cases (2025) 17 Cal.5th 1122. In that case, the Supreme Court concluded that a manufacturer 21 could not enforce an arbitration provision in a sales contract to which its authorized dealer and a car buyer both affirmatively assented (but to which the manufacturer itself was not a party). (Id. at p. 1126.)

Allowing a car manufacturer to perform an end-run around that decision simply by inserting an undisclosed and unsigned arbitration provision into an owner’s handbook containing warranty terms would be an inequitable result. (UFCW & Employers Benefit Trust v. Sutter Health (2015) 241 Cal.App.4th 909, 929 [“ ‘The linchpin for equitable estoppel is . . . fairness.’ ”].)

In contrast to other reported California decisions in which the equitable estoppel has been applied, the present case “does not present the unfairness that equitable estoppel is designed to avoid.” (Id. at p. 931.)

Conclusion

The petition to compel arbitration is DENIED.

The court will prepare the order.

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