The Ninth Circuit ruled this week that a class of car owners could pursue their court claims against the manufacturer, Toyota, for product defects and false advertising, despite the existence of an arbitration agreement in each of the owners’ purchase agreements with the car dealerships.  The court held that Toyota had not proven either of the types of equitable estoppel that would allow it, as a non-signatory to the purchase agreements, to enforce the agreements’ arbitration clause.   Kramer v. Toyota Motor Corp., __ F.3d __, 2013 WL 357792 (9th Cir. Jan. 30, 2013).  (How could I resist posting about an arbitration case with “Kramer’ in the caption?!)

The plaintiffs’ claims related to defects in the antilock brake systems of 2010 models of the Toyota Prius and Lexus HS 250h.  Plaintiffs asserted multiple claims against Toyota, including violation of California laws prohibiting unfair competition and false advertising, breach of the implied warranty of merchantability, and breach of contract.  After “vigorously litigating the action” for almost two years, Toyota moved to compel arbitration a few months after SCOTUS issued Concepcion.  Toyota pointed to language in the purchase agreements allowing arbitration, delegating scope issues to the arbitrator, and waiving any right to arbitrate as a class.  The district court denied the motion to compel arbitration.

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