Gibson v. Toyota Motor Sales USA Inc
4:17-cv-00577
D.S.C.Sep 26, 2017Background
- Plaintiff Jill Gibson alleges joint ownership of a 2009 Toyota Camry and claims Toyota refused to honor a December 2014 warranty enhancement extending dashboard coverage to May 31, 2017 (plaintiff alleges sticky, degrading dashboard).
- The Vehicle was originally leased (July 2008) and later purchased by Wanda Jeffers (July 2012); plaintiff acquired an ownership interest before suit.
- The original manufacturer’s express warranty (transferrable to subsequent owners) contains a Dispute Settlement Program/arbitration clause; the December 2014 warranty enhancement incorporated the original warranty terms.
- The bill of sale for the used vehicle disclaimed seller warranties and sold the car “as is,” but did not disclaim manufacturer warranties or future enhancements.
- Plaintiff filed suit (breach of express warranty, breach of implied warranty, Magnuson-Moss Act, UCC delivery remedies). Toyota moved to compel arbitration or, alternatively, to dismiss for lack of jurisdiction or failure to state a claim. The court denied the motion.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether plaintiff is bound by an arbitration clause arising from earlier lease | Gibson: warranty transferred to subsequent owners; arbitration in manufacturer warranty is subject to conditions that were not met or were impossible | Toyota: arbitration clause in the lease or lease-related documents covers the dispute and should bind subsequent owners | Court: Lease arbitration clause does not bind post-lease purchasers; manufacturer warranty transfers to subsequent owners and is the relevant arbitration source |
| Whether the warranty enhancement is enforceable/modification requires consideration | Gibson: UCC §2-209 (as adopted in SC) allows modification without new consideration; enhancement valid and incorporated original warranty terms | Toyota: enhancement lacked consideration and is unenforceable; original warranty had expired so enhancement did not modify it | Court: Enhancement is a valid modification under UCC principles and plausibly incorporated original terms; defendant's contrary authorities inapposite |
| Whether plaintiff exhausted the Dispute Settlement Program prerequisite to suit | Gibson: cannot meaningfully use the program for the enhancement because Toyota’s chosen administrator does not provide services for the enhancement (impossible condition); Toyota waived enforcement | Toyota: Plaintiff failed to use the Dispute Settlement Program as required before filing suit | Court: Accepting plaintiff’s allegations as true, the requirement was impossible or breached and arbitration enforcement is not proper here |
| Whether dismissal is required on jurisdictional/mootness or Rule 12(b)(6) grounds | Gibson: alleges ongoing denial of repair and an actual breach of the enhancement | Toyota: offered relief before suit and contends claims are moot or insufficiently pleaded | Court: Jurisdiction/mootness challenge premature (factual dispute); complaint states plausible claims under warranty enhancement — motion to dismiss denied |
Key Cases Cited
- Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1 (establishes strong federal policy favoring arbitration)
- Adkins v. Labor Ready, Inc., 303 F.3d 496 (4th Cir.) (standard for compelling arbitration)
- Am. Gen. Life & Accident Ins. Co. v. Wood, 429 F.3d 83 (4th Cir.) (elements to compel arbitration)
- First Options of Chi., Inc. v. Kaplan, 514 U.S. 938 (arbitrability is a state-law contract-formation question)
- Hooters of Am., Inc. v. Phillips, 173 F.3d 933 (4th Cir.) (limits on enforceability where process is one-sided)
- Green Tree Fin. Corp.-Ala. v. Randolph, 531 U.S. 79 (FAA burden on party resisting arbitration)
- Choice Hotels Int'l, Inc. v. BSR Tropicana Resort, Inc., 252 F.3d 707 (4th Cir.) (dismissal vs. stay when claims are arbitrable)
- Aggarao v. MOL Ship Mgmt. Co., 675 F.3d 355 (4th Cir.) (procedural guidance on motions to compel/arbitrate)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (pleading standard: plausibility)
- Ashcroft v. Iqbal, 556 U.S. 662 (clarifies plausibility and permissible inferences)
- Jones v. United States, 96 U.S. 24 (impossible condition precedent doctrine)