Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—9th Cir.: Alleged Prius design defect was not a breach of express or implied warranty, (Nov 21, 2013)

By Linda O’Brien, J.D., LL.M.

The dismissal of two consumers’ class action, alleging that a design defect in their vehicle caused by the automobile manufacturer breached the express and implied warranty of merchantability in violation of the California Unfair Competition Law (UCL), was upheld by the U.S. Court of Appeals in San Francisco (Troup v. Toyota Motor Corp, November 20, 2013, Per Curiam).

Henry and Veronica Troup purchased a Prius, an automobile manufactured and sold by Toyota Motor Corporation and Toyota Motor Sales, U.S.A., Inc. (collectively “Toyota”). The Troups filed a class action against Toyota, claiming violations of California’s UCL for breach of an express warranty and breach of the implied warranty of merchantability. Specifically, the plaintiffs alleged that their Prius had a design defect resulting from the use of resin to construct the gas tank. The federal district court in Pasadena dismissed the plaintiffs’ class action for failure to state a claim.

The Ninth Circuit held that the alleged design defect did not fall within the scope of the vehicle’s express warranty against defects in materials or workmanship because defects in design are excluded from express warranties under state (California) law. Moreover, the Troups failed to allege any defect in materials or workmanship.

The Troups also failed to state a plausible claim for breach of implied warranty of merchantability. The plaintiffs did not claim that the vehicle was unfit for its intended use as the alleged defect did not compromise the vehicle’s safety, render it inoperable, or drastically reduce its mileage range. In contrast, the Troups claimed that the defect required them to refuel the vehicle more often.

The court also found that the plaintiffs lacked standing to assert the UCL claims, since they were Pennsylvania residents who purchased the Prius in their home state and the statute contained no provisions to regulate claims of nonresidents arising from conduct occurring entirely outside of California. Finally, the district court’s decision to dismiss the complaint with prejudice was not an abuse of discretion given that the Troups were afforded five opportunities to amend their complaint to set forth plausible claims for relief.

The case is No. 11-56637.

Attorneys: Steve Berman (Hagens Berman Sobol Shapiro LLP) for Henry Troup and Veronica Troup. Darlene Mi-Hyung Cho (Loeb & Loeb LLP) and William Harding Latham (Nelson Mullins Riley & Scarborough LLP) for Toyota Motor Corp. and Toyota Motor Sales U.S.A. Inc.

Companies: Toyota Motor Corp.; Toyota Motor Sales, U.S.A., Inc.

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