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Duncan v. Nissan N. Am., Inc.

District Court, District of Columbia
305 F. Supp. 3d 311 (2018)
ELI5:

Rule of Law:

A time-and-mileage-limited express warranty may be deemed unconscionable and thus unenforceable at the pleading stage if a plaintiff plausibly alleges the manufacturer knew of a latent defect at the time of sale, concealed it from the consumer, and intentionally set the warranty limits to expire before the defect would likely manifest.


Facts:

  • Nissan North America, Inc. and Nissan Motor Company (Nissan) manufactured and sold vehicles containing a Timing Chain Tensioning System (TCTS).
  • The TCTS in certain models was defective due to an inferior plastic component, which could lead to engine damage.
  • Nissan allegedly knew about this defect at the time of sale but concealed this information from consumers, while informing its dealerships through Technical Service Bulletins.
  • The vehicles came with time-and-mileage-limited warranties, such as a 'Powertrain Warranty' for 60 months or 60,000 miles.
  • Plaintiffs, including Sarah Duncan and Richard Silver, purchased these Nissan vehicles.
  • The TCTS in each of the named plaintiffs' vehicles failed, causing them to seek repairs.
  • In each case, the failure occurred after the time and mileage limits of the express warranty had expired.
  • Nissan refused to cover the cost of the repairs for the plaintiffs, citing the expired warranties.

Procedural Posture:

  • Eight vehicle owners (Plaintiffs) filed a class action complaint against Nissan North America, Inc. and Nissan Motor Company (Defendants) in the United States District Court for the District of Massachusetts.
  • The complaint alleged multiple counts, including breach of express warranty, breach of implied warranty, and violations of several state consumer protection acts.
  • Defendants filed a Rule 12(b)(6) motion to dismiss all counts for failure to state a claim.
  • The district court heard oral argument on the motion to dismiss.

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Issue:

Does a time-and-mileage-limited express warranty become unconscionable and unenforceable if the manufacturer allegedly knew of a latent defect at the time of sale, concealed it from the consumer, and intentionally set the warranty limits to expire before the defect would likely manifest?


Opinions:

Majority - Denise J. Casper

Yes, a time-and-mileage-limited express warranty can be deemed unconscionable and unenforceable under these alleged circumstances. Although time-limited warranties typically do not cover hidden defects discovered after expiration, a claim for unconscionability may overcome this general rule. Under the Uniform Commercial Code (UCC), a contract clause can be found unconscionable if it involves both procedural unconscionability (e.g., lack of meaningful choice, unfair surprise) and substantive unconscionability (harsh, one-sided terms). Here, the Plaintiffs plausibly alleged procedural unconscionability through the disparity in bargaining power and lack of choice over warranty terms. They also alleged substantive unconscionability by claiming Nissan knew of a latent defect in a part expected to last the car's lifetime, concealed it, and purposefully set the warranty period to expire before the defect would manifest. These allegations are sufficient to state a claim that the warranty limits are unconscionable and survive a motion to dismiss.



Analysis:

This decision is significant for consumer protection litigation, as it affirms that manufacturers cannot necessarily hide behind a standard durational warranty if they knowingly sold a product with a concealed, latent defect. It reinforces the doctrine of unconscionability as a viable tool for consumers to challenge warranty limitations that appear fair on their face but are allegedly designed to be deceptive in practice. The ruling provides a clear framework for plaintiffs to survive a motion to dismiss on an express warranty claim by pleading specific facts about the manufacturer's knowledge and concealment. This precedent may encourage more litigation over latent defects that manifest shortly after a warranty expires, shifting legal scrutiny from the mere terms of the warranty to the manufacturer's conduct and knowledge at the time of sale.

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