Dali Chaia v. Genesis Motor America

Chaia’s evidentiary objections are overruled. The moving party can meet their burden of producing prima facie evidence of a written agreement to arbitrate by “attaching to the [motion or] petition a copy of the arbitration agreement purporting to bear the [opposing party’s] signature. Alternatively, the moving party can meet its burden by setting forth the agreement’s provisions in the motion.” (Gamboa v. Northeast Community Clinic (2021) 72 Cal.App.5th 158, 165-165 [internal citations and quotations omitted].)

While the Court separately addresses the lack of Chaia’s signature below, Genesis has nevertheless attached a copy of the warranty to its motion and has set forth the relevant provisions in its moving papers. While Ms. Richards may not be the custodian of records for the warranty booklet, “[f]or purposes of a petition to compel arbitration, it is not necessary to follow the normal procedures of authentication.” (Ibid.) In any event, Genesis also attaches the warranty to the Declaration of Karla Osorio who claims she has personal knowledge “acquired in the course and scope of my job responsibilities at GMA and through my review of pertinent documents maintained and relied on in the ordinary course of business by GMA and its affiliated entities.” “[T]he custodian of a document need not have been present or employed when the document was created or signed to authenticate a document in a company’s files.” (Iyere v.

Wise Auto Group (2023) 87 Cal.App.5th 747, 758-759.) The objections to the Declaration of Vijay Rao are overruled for the same reasons as his declaration is also based on personal knowledge acquired in the course of his job duties and by review of the documents maintained in the ordinary course of business.

1. 2022 OWNERS HANDBOOK & WARRANTY INFORMATION The vehicle warranty upon which Chaia 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 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 7

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 Karla Osorio Montalvan, Ex. A 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 Chaia was made aware of the text of the warranties in this document or the arbitration provision contained therein before she purchased his 2022 Genesis GV70 vehicle from the dealer.

Chaia also argues the Magnuson-Moss Warranty Act (“MMWA”) precludes binding arbitration of warranty disputes. The Ninth Circuit withdrew its opinion interpreting the MMWA to prohibit pre-dispute mandatory binding arbitration clauses in warranty agreements. (Kolev v. Euromotors West/The Auto Gallery (2012) 676 F.3d 867.) In the absence of binding authority, the Court looks to other jurisdictions for guidance. The Fifth Circuit Court of Appeals has found that the MMWA does not preclude binding arbitration. (See, e.g., Walton v.

Rose Mobile Homes LLC (5th Cir. 2002) 298 F.3d 470, 473-479.) The court noted that “binding arbitration is not normally considered to be an ‘informal dispute settlement procedure,’ and it therefore seems to fall outside the bounds of the MMWA and of the FTC’s power to prescribe regulations.” (Id. at p. 476.) The court concluded that the text, legislative history, and purpose of the MMWA do not show a congressional intent to bar arbitration of MMWA written warranty claims. (Id. at pp. 478-479.) The Eleventh Circuit Court of Appeals has likewise held that the MMWA allows for the enforcement of otherwise valid arbitration agreements. (Davis v.

Southern Energy Homes, Inc. (11th Cir. 2002) 305 F.3d 1268, 1271- 1272.) Similarly, California favors arbitration as a matter of public policy. (Code Civ. Proc. § 1280 et seq.) Thus, while arbitration may be precluded on other grounds, it is not precluded by the MMWA.

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 Chaia 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 8

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”].)

Recently, the Second District Court of Appeal in Kostandian v. American Honda Motor Co., Inc., 2026 Cal.App. LEXIS 3321, considered whether a valid agreement to arbitrate existed under a warranty booklet. The court there found in the affirmative because the lease agreement included a final inspection at delivery sheet that the respondent signed and initialed confirming his receipt of the owner’s manual and warranty information. (Id. at *16.) The facts here are distinguishable from Kostandian. There is no evidence that the warranty was presented in any manner to Chaia.

Additionally, Chaia did not sign any documents confirming receipt of the Owner’s Handbook. Thus, there is no evidence of assent by Chaia to the arbitration provisions here. In sum, unlike Kostandian, there are no facts supporting an outward manifestation of assent. “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.’” (Long v.

Provide Commerce, Inc. (2016) 245 Cal.App.4th 855, 862 [internal citations omitted].)

b. EQUITABLE ESTOPPEL

Genesis argues that notwithstanding Chaia’s lack of assent and lack of knowledge regarding the arbitration provisions, she is now barred by equitable estoppel from challenging these provisions in the vehicle warranty because she has affirmatively asserted the warranty by seeking repairs from Genesis 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

1 Appellant Honda Motor America also moved to compel arbitration pursuant to a lease agreement executed by its wholly owned subsidiary financing company that was named as a party therein. This case is also distinguishable because Genesis does not move to compel arbitration pursuant to the lease agreement, and the CSA is limited in scope to Bluelink services only as discussed below. 9

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 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.)

2. THE BLUELINK CSA

As for the Bluelink Connected Services Agreement, the Court notes that in contrast to the vehicle warranty, Genesis does contend that Chaia “signed” the agreement including its arbitration provision, when she electronically clicked a box on a dealer-owned device, such as a tablet, acknowledging that she had read and agreed to the Blue Link Terms & Conditions. (Declaration of Vijay Rao [“Rao Decl.”] at ¶¶ 18, 19, Ex. A.) 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: 10

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. B at ¶ 14.)

As explained in the Declaration of Vijay Rao, “Genesis Connected Services refers to an optional Connected Services system that includes various functions and features such as remote start with climate control, remote door lock and unlock, remote car finder, on-demand diagnostics and alerts, enhanced roadside assistance, and automatic emergency assistance.” (Rao Decl. at ¶ 5.) Based on the Court’s review of the complaint, it appears that none of these services are a part of the present Song-Beverly action.

Instead, Chaia has sued for “serious defects and nonconformities to warranty including, but not limited to electrical, structural, suspension, and transmission system defects.” (Complaint at ¶ 10.) Chaia also sues for tail lamp abnormalities, abnormal noise emitting from the rear area, and abnormal noise emitted upon depressing the brake and gas pedal. (Id. at ¶¶ 11-15.) Under no stretch of the imagination are these complained-of defects in the car a part of the “connected services” provided by the Bluelink technology.

As a result, the court finds that the arbitration provision in the CSA does not apply to the present action. Although the language of the CSA arbitration provision is exceedingly broad and contains the words “the Vehicle” and “warranty” in the above quoted language, the court concludes that reading this agreement governing “connected services” to be broad enough to govern any and all disputes relating to the vehicle as a whole would be illogical and unwarranted. It is not a reasonable interpretation of the CSA provision, when read as a whole, and the court rejects it.

The Court denies the motion to compel to the extent that it is based on the arbitration provision contained in the CSA. Since the vehicle warranty does not create an agreement to arbitrate and the scope of the CSA does not cover Chaia’s claims, the Court need not address the parties’ additional arguments regarding delegability, unconscionability, or the reimbursement of costs.

3. CONCLUSION

The motion to compel arbitration is DENIED.

Plaintiff shall prepare and submit the final order, accompanied by the necessary Form EFS-020, within 10 days of the date of the hearing.

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