Consumer Rights At Risk: Hyundai and Kia Seek to Enforce Individual Arbitration Against California Customers

Last Updated on August 24, 2022

In what is being seen as a push to restrict customer rights, Hyundai and Kia are seeking to force individual arbitration against California vehicle owners who have filed complaints against the automaker.

Simply put, California Hyundai/Kia vehicle owners who have a dispute with the automaker, will be forced into private arbitration. Stripping away the right to join a class action lawsuit, and weakening consumers rights. It’s a dangerous precedent that could have far-reaching consequences.

This move comes despite the fact that both automakers were already fined by the National Highway Traffic Safety Administration for failing to abide by customer safety laws.

The Fine Print

Hyundai’s decision to include mandatory arbitration clauses in their warranty agreements is an interesting one. These terms, which are buried deep in the owners manual, force California customers out of the federal court system.

Instead, forcing individual customers to resolve complaints in the private arbitration system.

While beneficial to the automaker, customers will be without some protections afforded by court cases. In fact, this could result in much less compensation for damages if they’ve been wrongfully injured or had to pay out-of-pocket for car repairs.

Additionally, many experts argue that private arbitration discourages consumers from even raising a complaint. They say that it makes people less likely to speak up when they have a problem, because they know they’ll just be sent to private arbitration.

It then raises the question, how many California Hyundai/Kia vehicle owners were even aware of this arbitration provision when making their vehicle purchase? Would it have changed their decision to purchase the vehicle?

Legal Experts Warn, Private Arbitration Seeks to Limit Consumers Rights

While private arbitration may sound like a good idea, it actually limits your rights as a consumer. If you’re up against a large corporation, you’re at a disadvantage in terms of resources and bargaining power.

Legal experts warn that private arbitration is not only bad for consumer, but also for the justice system. They argue that it’s simply a way for corporations to avoid accountability and escape liability.

Additionally, consumer advocates are concerned that this latest action will make it more difficult for customers to seek justice if they experience problems with their vehicles.

A Dangerous Precedent That Gives All The Power to the Corporations

This news is troubling for a number of reasons. First, it seems that Hyundai and Kia are trying to avoid taking responsibility for their actions by attempting to avoid class action lawsuits and making each customer bring an individual lawsuit.

Second, by requiring arbitration, the automaker can essentially choose the arbitrator, meaning that owners may not get a fair hearing.

Finally, this could set a dangerous precedent for other companies who might seek to force customers into individual arbitration instead of dealing with complaints head-on through a class action.

Cho, et al. v. Hyundai Motor Company

The law firm representing the plaintiffs in the case, Sauder Schelkopf say that it appears that Hyundai and Kia are attempting to avoid taking responsibility for the defective cars.

Below is the official statement from the law firm handling the Cho, et al. v. Hyundai Motor Company case.

On March 23, 2022, the law firms of Sauder Schelkopf LLC and Walsh PLLC filed a class action lawsuit captioned Cho, et al. v. Hyundai Motor Company, LTD, No. 8:22-cv-00448 (C.D. Cal.) against Hyundai and Kia on behalf of owners and lessees with vehicles that are prone to excessive engine oil consumption, oil sludge and engine failure. The lawsuit alleges that certain Hyundai and Kia vehicles are experiencing oil consumption that results in ticking noises and possible failure of the engine’s internal components. When consumers present their vehicles to Hyundai and Kia for repair, they are informed that engine oil consumption is considered normal and are denied warranty coverage for the necessary repairs. As a result, current and former owners and lessees may be forced to pay for replacement engines and repairs out-of-pocket.

On June 28, 2022, Hyundai filed a motion to compel individual arbitration, where it argues that a Plaintiff, who purchased a 2022 vehicle, has claims that “do not belong in this Court because he is bound by an arbitration provision mandating individual arbitration.” Hyundai’s motion also does not even contend that the Plaintiff ever saw the arbitration clause at issue. If granted, a motion to compel individual arbitration sends the individual plaintiffs’ claims to private and binding arbitration. Arbitrations cannot be conducted on a class-wide basis, which means that Hyundai will only be held liable as to an individual plaintiff’s claims, instead of having to answer for a pervasive safety defect that plagues millions of its vehicles. In effect, the arbitration clause allows Hyundai to avoid liability almost entirely. Manufacturers, like Hyundai, bury these arbitration clauses in hundreds of pages of post-sale paperwork.

In 2013, The New York Times published an article whereby Hyundai agreed to drop the enforcement of the arbitration provision which brought attention to Hyundai’s arbitration policies. As a result, Hyundai eliminated binding arbitration policies from 2015 to 2019. Hyundai now attempts to reintroduce its arbitration clause in model year 2022 vehicles.

–Sauder Schelkopf

Millions of consumers, including those in Cho. v. Hyundai Motor Company, LTD, may never have their day in court over the oil consumption defect, or any other defect with their vehicles because of Hyundai’s attempt to enforce individual arbitration.

Final Thoughts

If you’re a Californian Hyundai or Kia owner, be aware that your right to join forces with other customers in a class action lawsuit has been taken away. The next time you have a dispute with the automaker, you’ll be forced into individual arbitration. A process that is often beneficial to the company, but can be damaging to consumers.

It’s important to know these things before you buy, and we hope our readers will share this article so that others may be informed as well.

Californian Hyundai and Kia owners, would you have bought your car if you knew about the individual arbitration clause? Let us know in the comments below.

We will continue to follow this story and provide updates as they become available.

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