In a dramatic turn of events, a car dealership's attempt to compel arbitration in a dispute over an allegedly defective vehicle has been thwarted by the Illinois Appellate Court. McGrath Nissan, Inc., which filed the complaint in Cook County on June 12, 2023, against Fumi Suematsu, now faces significant legal hurdles as the court ruled that it waived its right to arbitration.
The case began when McGrath Nissan sold a certified pre-owned 2020 Nissan Kicks to Suematsu on May 13, 2022. The vehicle had logged 38,422 miles and was sold for $23,268.37. According to the sales contract, any disputes arising from the purchase were to be resolved through arbitration. However, on June 12, 2023, McGrath Nissan initiated legal action against Suematsu for failing to pay an outstanding balance of $5,000 on the vehicle.
Suematsu countered with claims that the vehicle was defective and that McGrath Nissan had committed multiple misrepresentations and statutory violations. Among her allegations were that McGrath's sales representative falsely claimed the car had never been in an accident and that a subsequent CarFax report revealed otherwise. She also cited numerous defects in the vehicle that should have disqualified it from being certified pre-owned.
On October 30, 2023, McGrath Nissan moved to dismiss Suematsu’s counterclaim in favor of arbitration based on their original agreement. However, the trial court denied this motion on February 2, 2024. The court found that by initiating legal proceedings against Suematsu first, McGrath Nissan had materially breached their own arbitration agreement and thus waived their right to demand arbitration.
Justice Coghlan delivered the judgment of the appellate court affirming this decision. The ruling emphasized that by choosing litigation initially, McGrath Nissan acted inconsistently with its own arbitration clause. This action demonstrated an abandonment of their right to arbitrate according to established legal precedents.
Suematsu’s counterclaim included serious accusations: breach of warranty due to undisclosed defects and fraud related to misrepresented accident history and statutory warranty disclosures under Illinois law (815 ILCS 505/2L). She sought compensatory damages for these breaches along with punitive damages for consumer fraud and common law fraud.
McGrath Nissan argued that Suematsu’s counterclaim drastically altered the nature of litigation unexpectedly and justified reverting back to arbitration. However, both courts found this argument unconvincing since her claims were directly related to issues foreseeable at the time McGrath chose litigation over arbitration.
Ultimately upholding principles of waiver and material breach in contract law—whereby a party cannot benefit from terms they themselves have violated—the appellate court's decision underscores critical lessons about consistency in legal strategy when bound by contractual agreements like arbitration clauses.
Representing McGrath Nissan is attorney [Attorney Name], while Fumi Suematsu is represented by [Attorney Name]. Presiding over this case is Judge Martin S. Agran under Case ID No. 1-24-0461.