Duncan v. Nissan N. Am., Inc. - 305 F. Supp. 3d 311 (D. Mass. 2018)

Rule:

The "basic test is whether, in the light of the general commercial background and the commercial needs of the particular trade or case, the clauses involved are so one-sided as to be unconscionable under the circumstances existing at the time of the making of the contract," and that the "principle is one of the prevention of oppression and unfair surprise . . . and not of disturbance of allocation of risks because of superior bargaining power."

Facts:

The Defendants manufacture and sell or lease cars. Certain models of these cars, identified as the "Class Vehicles," contain a defective Timing Chain Tensioning System ("TCTS"). As alleged, the defect in the TCTS causes the engine of the car to become damaged, necessitating expensive repairs, and potentially also posing a safety risk to the occupants of the car. The Defendants allegedly knew and should have known, at the time of sale or lease of the Class Vehicles, that the TCTS was defective. However, instead of disclosing the defect in the TCTS, the Plaintiffs contended that the Defendants concealed information regarding the defect in the TCTS from consumers, while disclosing information to dealerships via Technical Service Bulletins ("TSBs"), regular publications to dealerships that are authorized to perform repairs on the Defendants' cars. Plaintiffs alleged that they entered into either the Basic Warranty or Powertrain Warranty with the Defendants and that the Defendants breached that warranty by failing to cover the cost of repairing the defective TCTSs. The Plaintiffs contended that, because of the gross disparity in bargaining power between them and the Defendants, the lack of meaningful choice on the part of the Plaintiffs in determining those time limits, and the Defendants' knowledge and active concealment of the defect, the warranty limits are unconscionable. 

Issue:

Did the Plaintiffs sufficiently state a claim that the durational limits in the express warranty are unconscionable, at least for the purposes of defeating a motion to dismiss?

Answer:

Yes.

Conclusion:

Although there is persuasive authority on both sides, the Court was inclined to side with the Plaintiffs. The Plaintiffs have pled a lack of meaningful choice over the terms of the warranty, , a disparity of bargaining power, a purposeful limitation of the warranty period to exclude the defect, and a defect known at the time of sale to the manufacturer but concealed from the purchaser. Moreover, the defect known at the time of sale to the manufacturer was not necessarily the kind of defect that all manufacturers would necessarily know by testing different components for failure rates. Rather, the complaint draws a distinction between components must be routinely replaced in an automobile, and thus are designed to be relatively inexpensive to identify and replace, and components that are expected to last the lifetime of the car, and thus may be quite expensive to replace, and alleges that the defective TCTS was in the latter category. In light of the UCC's instruction to take into account the "general commercial background," and offer parties a "reasonable opportunity to present evidence as to [the clause's] commercial setting, purpose, and effect," UCC § 2-302, the Court found that the Plaintiffs have sufficiently stated a claim that the durational limits in the express warranty are unconscionable, at least for the purposes of defeating a motion to dismiss.