Josep Vargas vs. Hyundai Motor America

Line 9 Case Name: Josep Vargas v. Hyundai Motor America Case No.: 25CV478684 In this Song-Beverly Consumer Warranty Act case, defendant Hyundai Motor America (“Hyundai”) moves to compel arbitration based on two agreements with plaintiff Josep Vargas (“Vargas”): (1) the vehicle warranty asserted by Vargas in the complaint, and (2) a “Bluelink Connected Services Agreement” (“CSA”). After reviewing the language of these agreements and the circumstances of their alleged execution, the court concludes the motion should be granted.

1. The Vehicle Warranty

The vehicle warranty upon which Vargas brings this action is one of a series of warranties contained in a 48-page document entitled “2023 Owner’s Handbook and Warranty Information” (“Owners Handbook”). The arbitration provision appears on pages 12-14 of the Owner’s Handbook and 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. 3 at p. 12.)

It goes on for another page and a half, toward the end of which 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 Vargas was made aware of the text of the warranties in this document or the arbitration provisions contained therein before he purchased his 2023 Hyundai Ioniq 5 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.) a. Mutual Assent

Here, there is no indication that Vargas signed the Owner’s Handbook or knew of its provisions at the time of sale. Therefore, there was no mutual assent supporting a valid agreement. Under certain circumstances, including those involving an unsigned 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 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”].)

The court finds that there is no evidence of assent by Vargas to the arbitration provisions here. b. Equitable Estoppel

Hyundai argues that notwithstanding Vargas’ lack of assent and lack of knowledge regarding the arbitration provisions, he is now barred by equitable estoppel from challenging these provisions in the vehicle warranty because he has affirmatively asserted the warranty by seeking repairs from Hyundai and by bringing this Song-Beverly action. Under an equitable estoppel theory, “a nonsignatory ‘is 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].) Applying these basic estoppel principles to the present case, Vargas cannot invoke the benefits of the vehicle warranty while evading or repudiating his obligations under the arbitration provision contained in that same warranty. However, the Court still finds it difficult to accept the equitable estoppel argument under the circumstances presented.

First, unlike most agreements, the agreement at issue here is a warranty, which, as noted in Norcia, supra, is “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 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, 845 F.3d at p. 1288.) The court recognizes that Norcia was not an equitable estoppel case, as the plaintiff there did not attempt to enforce the warranty; nevertheless, the basic concepts set forth above still hold. A warranty is an atypical contract because 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): 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.

Thus, it is particularly unreasonable to expect a car buyer to know or anticipate—certainly at the time of purchase, but

possibly even significantly thereafter, when alleged defects first arise—that in receiving a preprinted “5 year or 60,000 mile” warranty on pages 12-22 of a 48 page Owner’s Handbook from a car manufacturer that he or she is necessarily agreeing to arbitrate all claims against that manufacturer. Indeed, the notion 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 the fact that it has done so—seems to run directly counter to the significant line of cases in our courts that hold that a manufacturer cannot invoke an express arbitration provision in a sales contract to which its authorized dealer and a car buyer have both affirmatively assented (but to which the manufacturer itself is not a party), based on a thirdparty beneficiary or equitable estoppel theory. (See, e.g., The Ford Motor Warranty Cases (2023) 89 Cal.App.5th 1324 (Ochoa); Montemayor v.

Ford Motor Co. (2023) 92 Cal.App.5th 958; Kielar v. Superior Court (2023) 94 Cal.App.5th 614; Yeh v. Superior Court (2023) 95 Cal.App.5th 264; Davis v. Nissan North America, Inc. (2024) 100 Cal.App.5th 825; Rivera v. Superior Court (2024) 105 Cal.App.5th 288.) Allowing a car manufacturer to perform an end run around these decisions simply by inserting an undisclosed and unsigned arbitration “agreement” into an owner’s handbook containing warranty terms strikes the court as singularly unfair and unreasonable. “‘The linchpin for equitable estoppel is . . . fairness.’ [Citation.] ‘The doctrine thus prevents a party from playing fast and loose with its commitment to arbitrate, honoring it when advantageous and circumventing it to gain undue advantage.’ [Citation.]” (UFCW & Employers Benefit Trust v.

Sutter Health (2015) 241 Cal.App.4th 909, 929.) In contrast to other reported California decisions in which the doctrine has been applied, the court finds that the present case “does not present the unfairness that equitable estoppel is designed to avoid.” (Id. at p. 931.) By trying to invoke his rights under the vehicle warranty, Vargas is not playing “fast and loose with [his] commitment to arbitrate” or trying to gain an undue advantage, as the evidence indicates he was completely unaware of this purported commitment until it came time to seek the warranty protections he understood (perhaps somewhat vaguely) to come with his car.

The court therefore declines to apply equitable estoppel here. In doing so, it recognizes that its analysis may be incorrect, as there are contrary decisions in federal courts applying equitable estoppel under California law in similar or even identical circumstances. (E.g., Dardashty v. Hyundai Motor America (C.D. Cal. 2024) 745 F.Supp.3d 986.) For the reasons set forth above, the court respectfully disagrees with these federal court cases, which are persuasive authority but not binding authority on matters of California law. In short, notwithstanding the strong public policy favoring enforcement of agreements to arbitrate disputes, under both California law and the FAA, the court finds that the motion should be denied as to the arbitration provisions contained in the vehicle warranty.

2. The Bluelink CSA

As for the Bluelink Connected Services Agreement, the court notes that in contrast to the vehicle warranty, Hyundai does contend that Vargas “signed” the agreement, including its arbitration provision, when he electronically clicked a box on his computer acknowledging that he had “read and agree[d] to the Blue Link Terms & Conditions.” (Declaration of Vijay Rao [“Rao Decl.”] at ¶ 6.) The arbitration provision in the CSA is broad: (a) 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 . . . The agreement to arbitrate otherwise includes, but is not limited to: Claims based on 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) . . . (Rao Decl., Ex. 2 at ¶ 14 [emphasis added by Hyundai].)

Hyundai does not clearly explain what “Bluelink Connected Services” are, but it appears from a review of the CSA that these services are related to remote and wireless services for the car (e.g. through a smartphone app), including such features as “Remote Service Activation,”

“SOS/CAN” (i.e. emergency calls and location data), “Digital Key 2.0,” “Verizon Hotspot,” and “Over the Air software updates.” (Rao Decl., Ex. 2 at p. 1.) Based on the court’s review of the complaint, the nature of Vargas’ complained defects is unclear. It is unclear whether the nature of his claims concern mechanical defects relating to the engine or brakes or whether they relate to the above enumerated services falling under “connected services.” As stated, the agreement to arbitrate is to be interpreted broadly and encompasses claims based on warranty and statute, including the Song-Beverly Act. “As our Supreme Court has concluded: ‘Any doubts or ambiguities as to the scope of the arbitration clause itself should be resolved in favor of arbitration.’” (Victrola 89, LLC v.

Jaman Properties 8 LLC (2020) 46 Cal.App.5th 337, 351-352 [quoting Cronus Investments, Inc. v. Concierge Services (2005) 35 Cal.4th 376, 386; see also Western Bagel Co., Inc. v. Superior Court (2021) 66 Cal.App.5th 649 [the FAA also requires that any ambiguities regarding a fundamental attribute of arbitration be resolved in favor of arbitration].) Since it is unclear whether the scope of Plaintiff’s claims fall within the arbitration provision pertaining to the services described under the CSA, the court is to resolve such ambiguities in favor of arbitration.

Unlike the Owner’s Handbook, Plaintiff has assented to the terms of the CSA. “While Internet commerce has exposed courts to many new situations, it has not fundamentally changed the requirement that ‘ “[m]utual manifestation of assent, whether by written or spoken word or by conduct, is the touchstone of contract.”’ (Nguyen v. Barnes & Noble Inc. (2016) 245 Cal.App.4th 855, 862 (Nguyen). Courts have distinguished between “two flavors” of Internet contracts: “ ‘ “clickwrap” (or “click-through”) agreements, in which website users are required to click on an “I agree” box after being presented with a list of terms and conditions of use; and “browsewrap” agreements, where a website’s terms and conditions of use are generally posted on the website via a hyperlink at the bottom of the screen.’” (Long v.

Provide Commerce, Inc. (2016) 245 Cal.App.4th 855, 862 [quoting Nguyen, supra, 763 F.3d at pp. 1175-1176].) “Some internet contracts are a blend of the two, and have been called a ‘hybrid design,’ ‘modified clickwrap’, or ‘sign-in wrap’ agreement. ‘Sign-in-wrap’ agreements are those in which a user signs up to use an internet product or service, and the signup screen states that acceptance of a

separate agreement is required before the user can access the service.” (Colgate v. Juul Labs, Inc. (N.D. Cal. 2019) 402 F.Supp.3d 728, 763.) Here, in order to activate the Bluelink services, Vargas was required to agree to the CSA. “To enroll, Plaintiff would have had to click the box to acknowledge that they ‘read and agree[d] to the Blue Link Terms & Conditions’ and then click the “Complete” button.” The phrase Terms & Conditions included a hyperlink to the then-effective CSA.” (Rao Decl. at ¶ 6.)

Plaintiff had to click the box to activate Bluelink services and was in effect required to assent to the CSA. This process denotes a standard clickwrap agreement, which is generally enforceable. (See Disney Enters. v. Redbox Automated Retail, LLC (C.D. Cal. 2018) 336 F.Supp. 3d 1146, 1153; In re Facebook Biometric Info. Privacy Litig. (N.D. Cal. 2016) 185 F.Supp. 3d 115, 165.) In fact, courts have consistently enforced modified clickwrap agreements less conspicuous than those at issue here. (See Lee v.

Ticketmaster L.L.C. (9th Cir. 2008) 817 F.App’x 393, 394-395; Dohrmann v. Inuit, Inc. (9th Cir. 2020) 823 F.App’x 482, 484.) While ambiguity is one basis to compel arbitration, Vargas has also failed to oppose this motion. The failure to timely file an opposition is a basis for the court to grant the motion, as the court may construe such non-opposition as a concession that the motion is meritorious. (See D. I. Chadbourne, Inc. v. Super. Ct. (1964) 60 Cal.2d 723, 728, fn.4; see also Cal. Rule of Court 8.54, subd. (c) [appellate rule stating that "[a] failure to oppose a motion may be deemed a consent to the granting of the motion”].)

For these reasons, the Court GRANTS the motion to compel arbitration pursuant to the CSA and STAYS this action pending the outcome of arbitration. (Code Civ. Proc. § 1281.4; 9 U.S.C. § 3.)

3.

Conclusion

The Court GRANTS the motion to compel arbitration. The Court further GRANTS Hyundai’s Request for Judicial Notice pursuant to Evidence Code section 452, subdivision (d). This action is STAYED pending the outcome of arbitration.

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