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Hyundai pushed the Ninth Circuit on Wednesday to resurrect its effort to force arbitration in a lawsuit alleging dangerous defects in its Palisade SUVs, arguing a district court ruling rejecting the arbitration clause showed “disdain for arbitration” and misapplied the law. The appeal, framed as a battle over consumer fairness and corporate overreach, unfolded with the energy of a courtroom drama.

Hyundai Says Judge Ignored Clear Delegation Clause

Representing Hyundai Motor America Inc., attorney Theodore Boutrous of Gibson Dunn & Crutcher LLP insisted that the lower court improperly brushed aside an arbitration agreement embedded in the contract for Hyundai’s complimentary Bluelink connected-services app.

Boutrous maintained that the agreement clearly delegates questions of arbitrability to the arbitrator.

“The case should be compelled to arbitration,” he told the appellate panel, calling the district judge’s order “dripping with disdain for arbitration.”

But the district court had ruled the provision unconscionable, finding the delegation clause unclear and noting that class-action issues were expressly reserved for the court.

Panel Probes Scope and Reach of Bluelink Contract

U.S. Circuit Judge Morgan Christen pressed Boutrous, pointing out that the arbitration clause wasn’t included in the car-purchase agreement but tucked inside a separate Bluelink contract that “purports to cover everything and replace everything.”

Boutrous conceded the clause’s broad sweep, arguing that such scope questions are for an arbitrator to decide.

He said the arbitration agreement covers all claims touching the Bluelink system and “other causes of action related to the vehicle,” including the tow-hitch defect at the center of the suit.

Judge Christen countered that the Bluelink terms shrink the statute of limitations from four years to one and “waive remedies otherwise available under California law.”

“The agreement seems to me to be quite extraordinary,” she remarked.

Boutrous argued there was no coercion: buyers were not required to enroll in Bluelink, and many purchased vehicles without signing up.

Plaintiffs Say Arbitration Clause ‘Entraps’ Consumers

Representing the SUV owners, Stephen Taylor of Lemberg Law LLC said the Bluelink contract has “nothing to do” with the lawsuit’s core claim — that faulty tow-wiring harnesses in 2020–2022 Palisade models can short-circuit and ignite.

Taylor argued that no reasonable consumer would expect that a free connected-services feature would secretly force them into arbitration for all vehicle-related disputes.

The district judge, he said, correctly recognized the “surprise and entanglement” of requiring arbitration through a complimentary service agreement that “captures all their rights and Hyundai’s obligations.”

When Judge Danielle J. Forrest asked whether unconscionable terms could simply be severed, Taylor replied that the clause contains a “laundry list” of problematic provisions.

Tow-Hitch Fire Claims Drive Underlying Litigation

The underlying Hyundai Disdain For Arbitration lawsuit, filed in June 2023, was brought by owners alleging that defective wiring in the tow-hitch harness can cause fires. Hyundai issued a recall in August 2022, but many drivers say they still await repairs and have turned to independent mechanics.

The Ninth Circuit panel included Judges Danielle J. Forrest, Morgan Christen, and Milan Smith.

Counsel

• For the drivers: Sergei Lemberg and Stephen Taylor, Lemberg Law LLC

• For Hyundai: Theodore J. Boutrous Jr., Gibson Dunn & Crutcher LLP; William A. Delgado, Shilpa A. Coorg, Richard Z. Lee, and Destiny R. Lopez, DTO Law