Woo v. American Honda Motor Co., Inc.

Background

Tony Woo, Douglas P. Schwert, and Daniel Rifkin alleged that display screens in their Honda vehicles were defective because they dimmed, went dark, froze, or became excessively bright. They alleged that the problems distracted drivers and made the vehicles’ information centers unusable. They also alleged that Honda failed to disclose or actively concealed the defects and did not provide a fix after the plaintiffs contacted Honda and its dealerships.

All three plaintiffs asserted a federal claim under the Magnuson-Moss Warranty Act. They also asserted state-law claims based on alleged breaches of express and implied warranties and alleged deceptive or unfair business practices. Honda’s motion concerned only Woo’s and Schwert’s claims.

Woo’s Claims

Honda relied on an arbitration provision in the retail installment sale contract between Woo and the dealership that sold him his vehicle. The provision covered disputes between Woo and the dealership or the dealership’s employees, agents, successors, or assigns. Honda was not a signatory to that contract and did not claim to be one of those listed entities.

The court first rejected Honda’s argument that an arbitrator, rather than the court, should decide whether Woo’s claims were subject to arbitration. Although the provision referred to disputes about arbitrability, it did not clearly and unmistakably show that Woo agreed to let an arbitrator decide whether claims against Honda, a nonsignatory, fell within the provision.

The court also rejected Honda’s argument that it could enforce the provision through equitable estoppel. Equitable estoppel is a doctrine that can prevent a person from avoiding arbitration when the person’s claims against a nonsignatory are closely based on and connected to the contract containing the arbitration provision. The court found that Woo did not base his claims on any duty or obligation in the dealership’s sale contract. It therefore denied Honda’s request to compel Woo to arbitrate his claims.

Schwert’s Claims

Honda relied on an arbitration agreement attached to the sales contract under which Schwert purchased his vehicle from the dealership. That agreement broadly defined covered claims but limited the relevant “Parties” to the customer, the dealer, and the dealer’s employees, agents, parent, and affiliated companies. Honda was not identified as one of those entities.

For the same reasons discussed regarding Woo, the court rejected Honda’s argument that an arbitrator should decide whether Schwert’s claims were arbitrable. The court then applied Tennessee law, which the parties agreed governed the agreement’s enforceability. Under the rule cited by the court, equitable estoppel would apply when a signatory’s legal duties owed by a nonsignatory came from the agreement containing the arbitration provision.

The court found that Schwert’s claims did not arise from duties in the dealership sales agreement. The fact that Schwert’s purchase was factually connected to Honda’s warranty was not enough. The sales agreement expressly disclaimed warranties by the selling dealer and stated that any express warranties were offered by the manufacturer. The court therefore denied Honda’s request to compel Schwert to arbitrate his claims.

Disposition

The court denied Honda’s motion to compel arbitration and stay the claims of Woo and Schwert. The opinion does not decide whether Rifkin’s claims are subject to arbitration. Judge Maxine M. Chesney signed the order.