This consolidated appeal involves two class actions brought by Hyundai Palisade owners against Hyundai Motor America regarding defective tow-hitch wiring harnesses in 2020 through 2022 model-year vehicles. Hyundai moved to compel arbitration based on the terms and conditions of its Connected Services Agreement, known as the Bluelink contract. Plaintiffs had accepted these terms via a clickwrap agreement to access Connected Services features. The district court denied Hyundai's motions, and Hyundai appealed, arguing that the arbitration clause covered all disputes related to the vehicle, including product defects. The Ninth Circuit reviewed the denial de novo to determine if a valid arbitration agreement existed and whether it encompassed the specific dispute at hand.
The court addressed two primary issues. First, regarding the delegation clause, the court found that the agreement did not clearly and unmistakably delegate threshold questions of arbitrability to the arbitrator. The clause stated that 'All issues are for the arbitrator to decide,' but immediately followed with a provision reserving class proceedings for the court. The court held this language was sufficiently ambiguous to prevent clear delegation, especially in a class action context where the distinction between court and arbitrator authority is critical. Second, on the merits of the scope of arbitration, the court rejected Hyundai's argument that the term 'Vehicle' in the agreement covered all vehicle-related disputes. The court noted that 'Vehicle' was defined in the context of the Connected Services Agreement and used inconsistently throughout the document. Applying the absurdity canon, the court reasoned that a reasonable consumer subscribing to a service for Connected Services would not expect to arbitrate every possible dispute regarding their automobile, such as a mechanical defect in a tow hitch unrelated to the telematics system. The court concluded that interpreting 'Vehicle' to mean the entire automobile in this context would lead to absurd results, as it would force consumers to arbitrate claims entirely unrelated to the service they agreed to.
The decision affirms the lower court's denial of arbitration, allowing the class actions regarding defective tow-hitch wiring harnesses to proceed in court. It establishes that clickwrap agreements for connected vehicle services may not broadly cover product defects unrelated to the service itself, particularly where the contract language is ambiguous or leads to absurd results. The cases are remanded for further proceedings consistent with this determination. The ruling leaves open the question of how courts will interpret similar 'Vehicle' definitions in other connected service agreements.