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Gibson v. Toyota Motor Sales, U.S.A., Inc.

United States District Court, D. South Carolina, Florence Division

September 26, 2017

Jill L. Gibson, on behalf of herself and all others similarly situated, Plaintiff,
Toyota Motor Sales, U.S.A., Inc., Defendant,


          Richard Mark Gergel, United States District Court Judge.

         This matter is before the Court on Defendant's motion to compel arbitration or in the alternative to dismiss the complaint. For the reasons set forth below, the Court denies the motion.

         I. Background

         Plaintiff alleges she jointly owned a 2009 Toyota Camry (the "Vehicle") with her mother, Wanda Jeffers. (Dkt. No. 1 ¶¶ 3-4.) Ms. Jeffers originally leased the Vehicle on July 31, 2008 from Florence Toyota. (Dkt. No. 21 at 2.) The lease contains a binding arbitration clause and class action waiver. (Dkt. No. 7-3.) Defendant Toyota Motor Sales, Inc. provided the Vehicle a three-year express warranty, beginning from the Vehicle's "in service" date. (Dkt. No. 7-6 at 10.) The express warranty requires owners to use a "Dispute Settlement Program" administered by the National Center for Dispute Settlement before bringing any court action regarding warranty claims. (Id. at 7-8.) Ms. Jeffers later purchased the Vehicle in July 2012, and Plaintiff allegedly later acquired a joint ownership interest in the Vehicle.[1] The purchase agreement with the seller, "VT INC TSTEE WOLT" (VT Inc. as trustee for World Omni LT), provided for an "as is" sale in which the seller disclaimed any express or implied warranties. (Dkt. No. 7-5.)

         In December 2014, Toyota unilaterally extended express warranty coverage to May 31, 2017 for claims regarding dashboards degraded by prolonged exposure to sunlight, under what it called a "warranty enhancement." (Dkt. No. 14-1.). That extension is subject to the "terms, conditions, and limitations in" the original manufacturer's warranty. (Id.) But Plaintiff alleges the original warranty's arbitration provider, the National Center for Dispute Settlement, "does not render services associated with extended warranties provided by Defendants, including the Program." (Dkt. No. 1 ¶ 89.)

         Plaintiff alleges the dashboard of the Vehicle "is sticky with holes appearing in it" yet Toyota has refused to honor the warranty extension. (Id. ¶¶ 41-44.) Plaintiff filed the present action on March 2, 2017, asserting claims for breach of express warranty, breach of implied warranty of merchantability, violation of the Magnuson-Moss Warranty Act, and "failure to make delivery" under S.C. Code §§ 36-2-711 & 36-2-712. Defendant moves to compel arbitration, or, alternatively to dismiss for lack of subject-matter jurisdiction or for failure to state a claim.[2]

         II. Legal Standard

         A. Motion to compel arbitration

         The Federal Arbitration Act ("FAA") reflects a liberal policy toward arbitration. The Act provides that a written agreement to arbitrate in any contract involving interstate commerce or a maritime transaction "shall be valid, irrevocable and enforceable" unless there exists grounds for revocation in law or equity. 9 U.S.C. § 2; Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983). A litigant can compel arbitration under the FAA if the litigant can demonstrate: '"(1) the existence of a dispute between the parties; (2) a written agreement that includes an arbitration provision which purports to cover the dispute; (3) the relationship of the transaction, which is evidenced by the agreement, to interstate or foreign commerce; and (4) the failure, neglect or refusal of the [party] to arbitrate the dispute.'" Am. Gen. Life & Accident Ins. Co. v. Wood, 429 F.3d 83, 87 (4th Cir. 2005) (quoting Adkins v. Labor Ready, Inc., 303 F.3d 496, 500-01 (4th Cir. 2002)). District courts have "no choice but to grant a motion to compel arbitration where a valid arbitration agreement exists and the issues in a case fall within its purview." Adkins, 303 F.3d at 500.

         Whether the parties agreed to arbitrate a particular dispute is a question of state law governing contract formation. First Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 944 (1995). And where the parties did so agree, there are certainly limits on the enforceability of arbitration agreements, particularly where the dispute resolution process is "utterly lacking in the rudiments of even-handedness" or is so "one-sided that. . . [the] only possible purpose is to undermine the neutrality of the proceeding." Hooters of Am., Inc. v. Phillips, 173 F.3d 933, 935-38 (4th Cir. 1999). The party resisting arbitration bears the burden of showing that the issue is unsuitable for arbitration. Green Tree Fin. Corp.-Ala. v. Randolph, 531 U.S. 79, 91 (2000).

         The FAA requires a court to stay "any suit or proceeding" pending arbitration of "any issue referable to arbitration under an agreement in writing for such arbitration, and "[t]his stay-of-litigation provision is mandatory." Adkins, 303 F.3d at 500; see also 9 U.S.C. § 3; Hooters, 173 F.3d at 937. The Fourth Circuit has also held that if all of the claims asserted in a complaint are subject to arbitration, dismissal of the complaint is "an appropriate remedy." Choice Hotels Int'l, Inc. v. BSR Tropicana Resort, Inc., 252 F.3d 707, 709-10 (4th Cir. 2001). The Fourth Circuit has noted the inconsistency between its opinions on this issue. Aggarao v. MOL Ship Mgmt. Co., 675 F.3d 355, 376 n.18 (4th Cir. 2012) ("There may be some tension between our decision in Hooters-indicating that a stay is required when the arbitration agreement 'covers the matter in dispute'-and Choice Hotels-sanctioning dismissal 'when all of the issues presented ... are arbitrable.'"). It has also noted that the circuits are divided on this question, which it has not resolved for this Circuit. Id.

         A litigant wishing to compel arbitration without answering the complaint should move under Rule 12 of the Federal Rules of Civil Procedure. See Fed. R. Civ. P. 12(a). In this Circuit, litigants seeking to should move under Rule 12(b)(3) (improper venue). Aggarao, 675 F.3d at 365 n.9. When considering a motion under Rule 12(b)(3), the Court may consider evidence outside the pleadings, but the facts are viewed light most favorable to the plaintiff because a plaintiff need only make a prima facie showing of proper venue to survive a motion to dismiss. Id. at 365-66.

         B. Motion to dismiss under Rule 12(b)(1)

         A motion to dismiss for lack of subject-matter jurisdiction filed under Rule 12(b)(1) of the Federal Rules of Civil Procedure challenges the jurisdiction of a court to adjudicate the matter before it. Arbaugh v. Y& H Corp.,546 U.S. 500, 514 (2006). A challenge to subject-matter jurisdiction may contend either 1) that the complaint fails to allege facts sufficient to establish subject matter jurisdiction or 2) "that the jurisdictional allegations of the complaint [are] not true." Adams v. Bain,697 F.2d 1213, 1219 (4th Cir. 1982). Where the sufficiency of the jurisdictional allegations in the complaint is challenged facially, "the facts alleged in the complaint are taken as true, and the motion must be denied if the complaint alleges sufficient facts to invoke subject matter jurisdiction." Kerns v. United States,585 F.3d 187, 192 (2009). If, however the defendant contends "that the jurisdictional allegations of the complaint [are] not true, " the plaintiff bears the burden to prove facts establishing jurisdiction and the district court may "decide disputed issues of fact." Id. In that case, because the plaintiffs allegations are not presumed true, "the court should resolve the relevant factual disputes only after appropriate discovery." 24th Senatorial Dist. Republican Comm. v. Alcorn,820 F.3d 624, 629 (4th Cir. 2016). And where "the jurisdictional facts and the facts central to a tort ...

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