Toyota Can’t Stop Prius Class Action to Compel Arbitration

2010 Prius

Toyota Motors must face a class action by Prius owners and has no power to compel arbitration of their claims of serious braking problems in 2010 models, a federal appeals court said Wednesday

Toyota were not signers to purchase agreements between consumers and the Prius dealerships, thus Toyota had no authority to compel arbitration, according to the 9th U.S. Circuit Court of Appeals.

The dealerships are not parties in the current class action.

Buyers in California, Texas and Maryland of Toyota Prius vehicles brought a class action alleging defects in the anti-lock brake system caused longer braking times and reduced the ability to stop. The case applies to cars purchased between June 2009 and February 2010.

The National Highway Traffic Safety Administration conducted a formal investigation in 2010 and found the Prius hybrid cars experienced momentary loss of braking capability. Toyota voluntarily recalled the autos to update the ABS software.

Plaintiffs filed suits that were consolidated into a class action. Plaintiffs argue Toyota violated consumer law, unfair competition, false advertising and breach of contract protections.

Toyota fought aggressively against the case in federal court for a year. But the company switched to pushing its arbitration claim after the U.S. Supreme Court decided that certain arbitration agreements could compel waiver of class action, in AT&T Mobility v. Concepcion in 2011.

The trial judge said Toyota had waived its right to compel arbitration at that point, because it had already gone to federal court.

The 9th Circuit said it didn’t even need to reach that question because Toyota simply didn’t have the power to compel arbitration because consumers made their agreements with dealers and not the automaker.

The opinion was written by visiting Judge Gordon J. Quist of the Western District of Michigan and joined by Judges Andrew Kleinfeld and Margaret McKeown.

Case: Kramer v. Toyota Motor Corp., No. 12-55050


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