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holding that, even though "[u]nder New York law, a party cannot be successful on both a breach of contract claim and a claim for unjust enrichment," that " [p]laintiffs' alternative claims for breach of contract and for unjust enrichment can and should survive to discovery, and . . . will not be dismissed for having been pleaded in the alternative"
Summary of this case from Brian Trematore Plumbing & Heating, Inc. v. Walsh Constr. Grp.Opinion
10 CV 7493 (VB)
12-16-2011
WILLIAM SZYMCZAK, STEFAN SCHUELE, KIM DREHER, MARIO LOPEZ, MELANIE RIVERA, KATRINA BOYD, ANGELA GREATHOUSE, CORNELIUS JACKSON, DAVID SIMONS, LOLITA DILLARD, and ANNE STEWART, individually and on behalf of others similarly situated, Plaintiffs, v. NISSAN NORTH AMERICA, INC., and NISSAN MOTOR CO., LTD., Defendants.
MEMORANDUM DECISION :
Plaintiffs have commenced this action, on behalf of themselves and a putative class of similarly situated individuals, asserting claims related to their respective purchases of vehicles manufactured, sold, and warrantied by defendants Nissan North America, Inc. ("NNA") and Nissan Motor Co., Ltd. ("NMC"). Pending before the Court are NNA's motion to dismiss pursuant to Rule 12(b)(6) (Doc. #7) and NMC's motion to dismiss for lack of personal jurisdiction. (Doc. #11). For the reasons that follow, the Court GRANTS NNA's motion as to the following claims:
• Claims for breach of express warranty except as to plaintiffs' allegation that the warranty period was unconscionable;
• Claims for breach of implied warranty of merchantability;
• Claims under Section 349 of the New York General Business Law as to plaintiffs Schuele, Dreher, Rivera, Stewart, Boyd, Simons, and Dillard;
• Claims under Section 350 of the New York General Business Law;
• Claims under Tennessee Consumer Protection Act as to all plaintiffs except plaintiff Boyd;Concerning NMC's motion, the Court will permit plaintiffs to conduct limited discovery before presenting an opposition to the Court.
• Claims under the New Jersey Consumer Fraud Act;
• Claims under the Pennsylvania Unfair Trade Practices and Consumer Protection Law;
• Claims for fraud without prejudice;
• Claims for unjust enrichment as to plaintiffs Simons and Schuele.
BACKGROUND
For purposes of ruling on a motion to dismiss under Rule 12(b)(6), the Court accepts all factual allegations of the amended complaint as true and does not consider evidence outside the complaint. In light of the Court's decision not to resolve NMC's motion at this juncture, the Court will not address NMC's evidence in support of its motion.
I. Parties
Defendant NNA manufactures, sells, and warranties automobiles under several brand names, including Nissan Pathfinder, Nissan Xterra, Nissan Frontier, and Infiniti FX. These automobiles are sold throughout the United States. According to the complaint, defendant NMC is a Japanese corporation engaged in the business of automobile design, manufacture, and distribution. Plaintiffs allege NNA and NMC communicate concerning virtually all aspects of the Nissan and Infiniti vehicles which NNA distributes within the United States. They further allege the design, modification, installations, and decisions regarding the radiators and transmission for the automobiles at issue in this action were performed exclusively by NNA and/or NMC. Defendants developed the owner's manuals, warranty booklets, and information included in maintenance recommendations.
A. Plaintiff William Szymczak
Plaintiff Szymczak is a citizen of New York. In January 2006, he purchased a "new 2005 Nissan Pathfinder," which was designed, manufactured, and sold by defendants. After being driven approximately 52,000 miles, the vehicle was brought to a Nissan dealership because of problems with the cooling system. The automobile was again brought to Nissan when it had been driven approximately 60,000 miles and again at 65,825 miles. At this last time, the dealership told Szymczak he needed to replace the radiator. At no time did Nissan inform Szymczak that 2005 Pathfinders had been experiencing coolant system and radiator problems.
Szymczak alleges the 2005 Pathfinder had a defective radiator which leaked coolant into the transmission system, thus destroying the transmission. Plaintiff was informed by Nissan that the repairs to his vehicle caused by the leaking radiator would not be covered under either the 3 year/36,000 mile warranty or the 5 year/60,000 mile Powertrain coverage. Szymczak replaced the radiator and transmission in March 2010 at a cost of approximately $5,500.
B. Plaintiff Stefan Schuele
Plaintiff Schuele is a citizen of New Jersey. He alleges he purchased a new 2005 Nissan Pathfinder on "January 22, 2010." When Schuele's vehicle had approximately 70,000 miles on it, Schuele noticed that it was rumbling at 42 miles per hour. He brought the car to Fischer Transmissions, where he was told the car was experiencing a common problem. Schuele was charged approximately $4,600 for repairs associated with the failure of the radiator and/or transmission, which, according to plaintiffs, was due to defects in material and workmanship.
C. Plaintiff Kim Dreher
Plaintiff Dreher is a citizen of Pennsylvania. In April 2005, she purchased a new 2005 Nissan Pathfinder. Before she drove her vehicle 92,000 miles, she noticed it was not running smoothly. She brought the vehicle to Transplant Transmission, where she was told the car was experiencing a common radiator problem. At approximately 92,000 miles, Dreher replaced the radiator and transmission and was charged approximately $5,000.
D. Plaintiff Mario Lopez
Plaintiff Lopez is a citizen of the state of New York. In 2004, he purchased a 2005 Nissan Pathfinder. When his vehicle had been driven approximately 86,000 miles, the check engine light went on. Soon thereafter, he brought his vehicle to an automobile repair shop, where he was told that his car was experiencing a common problem related to the failure of the radiator and/or transmission. Lopez was also told the repairs would not be covered under any warranty. Lopez had the repair work performed by a transmission shop at a cost of $4,914.
E. Plaintiff Melanie Rivera
Plaintiff Rivera is a citizen of the state of New Jersey. She purchased a new 2005 Nissan Pathfinder in August 2005. When her car had been driven 89,871 miles, she noticed a rattling noise. She brought the vehicle to a Nissan dealer for an oil change and to have the noise checked. She then brought her car to another Nissan servicer, where she was told she was experiencing a leak of coolant from the radiator into the transmission, a common problem. She was charged approximately $1,100 for repairs.
F. Plaintiff Angela Greathouse
Plaintiff Greathouse is a citizen of New York who purchased a new 2006 Nissan Pathfinder in February 2006. Her vehicle had been driven approximately 89,000 miles, when, while driving on a highway at approximately 55-60 miles per hour, her vehicle suddenly slowed to 40 miles per hour. After she exited the highway, her vehicle "struggled" to move. She brought her car to an automobile service center where she was informed it was leaking coolant from the radiator into the transmission. Greathouse was charged approximately $5,000 for the repairs and was told the repairs would not be covered by the warranty.
G. Plaintiff Cornelius Jackson
Plaintiff Jackson is a citizen of New York. On January 13, 2009, he purchased a used 2005 Nissan Pathfinder from defendants. When the vehicle had been driven 80,650 miles, the check engine light turned on. Jackson brought his vehicle to a transmission repair shop, where he was told the car was leaking coolant from the radiator into the transmission. Jackson was charged $4,205.19 for the repairs and was told the repairs would not be covered under the warranty.
H. Plaintiff Anne Stewart
Plaintiff Stewart is a citizen of Connecticut. In 2008, she purchased a used 2005 Nissan Pathfinder from defendants.
In early 2009, when her vehicle had been driven 60,000 miles, Stewart began to notice that her transmission would not shift properly. On July 29, 2009, Stewart brought her vehicle to a Nissan servicer, where she was told the transmission fluid had "worn out" and she had "residue deposits" requiring her transmission system to be flushed and new fluid put in. Stewart paid $285 to have this work completed. Despite the repair, the transmission continued to shift improperly.
In June 2010, Stewart contacted NNA to inquire whether there were any recalls on the radiator or fuel gauge sensor on her Pathfinder. NNA told her that it was aware of no systemic issues or recalls. Stewart again contacted NNA in September 2010 and was told there was not a radiator recall.
In early November 2010, Stewart received a warranty extension notice from NNA regarding a fuel sensor level gauge on her vehicle. On November 11, she brought her vehicle to the Nissan servicer to have the fuel gauge sensor repaired pursuant to the warranty. She was informed at that time that her vehicle was affected by the radiator defect, for which the warranty had been extended. She was further informed that neither repair would be covered under the warranty because her vehicle had 80,870 miles and was beyond the mileage limitation of the extended warranty.
On November 12, Stewart contacted NNA and was told NNA would not cover the repairs. NNA's decision was based in part of the fact that Stewart had not been a "loyal customer" because she had not had regular maintenance performed at the dealership.
On November 16, Stewart had the repairs done at a cost of $1,439.80. She contacted NNA on November 19 to ask if they would cover the repair costs under the warranty. She was once again denied and advised she could contact the Better Business Bureau if she did not agree with NNA's decision.
I. Plaintiff Katrina Boyd
Plaintiff Boyd is a citizen of Tennessee. On June 16, 2009, she purchased a used 2005 Nissan Pathfinder. When her vehicle had approximately 75,000 miles on it, she had her radiator replaced because the coolant was mixing with transmission fluid. She only had to pay $100 of the $1,000 cost because she had purchased an extended warranty which covered most of the cost of replacing the radiator.
When her vehicle had 81,000 miles on it, Boyd had the vehicle's transmission flushed at a cost of $400, which was not covered by an extended warranty. When her vehicle had 91,000 miles, a sensor for the transmission had to be replaced at a cost of approximately $200.
Boyd alleges her transmission is not running properly. She further alleges she fears it will have to be replaced soon and the vehicle is not safe for her or her family. She has made several demands to her Nissan dealer for reimbursement of her out-of-pocket costs which have been refused.
J. Plaintiff David Simons
Plaintiff Simons is a citizen of Florida. He purchased a 2005 Pathfinder in August 2008. After reaching 80,000 miles, the vehicle began to exhibit transmission problems. When the automobile reached 82,000 miles, plaintiff took it to a transmission specialist in Sarasota, Florida. Plaintiff was told he might only need to flush the transmission. The transmission was flushed, and the vehicle worked for one week before starting to develop problems again, which prevented the vehicle from being driven. Plaintiff had the vehicle towed back to the transmission specialist who told plaintiff he had fluid leaking from the radiator into the transmission and he would need to replace the transmission and radiator.
In December 2010, plaintiff had the radiator and transmission replaced at a cost of $4,280.
K. Plaintiff Lolia Dillard
Plaintiff Dillard is a citizen of Georgia. She owns a 2005 Infiniti FX-35, purchased in May 25, 2010. Before it had been driven 90,000 miles, the vehicle began making a hard rubbing noise, and the transmission began to slip. On October 22, 2010, plaintiff brought the car to a Nissan dealership and was told her radiator coolant was mixing with transmission fluid. She paid the dealership $111 "to look at her car." On October 25, Nissan quoted her a price of over $6,000 to replace her radiator and transmission, which would not be reimbursed. She was then instructed to take her car to an Infiniti dealership, which she did on October 26.
At the Infiniti dealership, she was charged $125 to "look at her car." On November 4, 2010, she was informed Infiniti would not reimburse her for any repairs or replacement for her vehicle. Plaintiff brought her vehicle to an automobile repair shop where she had her radiator, transmission, and "valve body" of her transmission replaced at a cost of $3,900. The automobile had 89,934 miles on it at the time.
L. Other Unnamed Class Members
Plaintiffs propose a nationwide class of owners and lessees of Nissan Pathfinder, Nissan Xterra, Nissan Frontier, and Infiniti FX vehicles, model years 2005 through 2010. Alternatively, plaintiffs propose sub-classes of owners and lessees based on the respective states in which they reside, for the states of New York, New Jersey, Florida, Tennessee, Pennsylvania, Georgia, and Connecticut.
II. Radiator Defect
An automobile's radiator cools the engine and drivetrain components. Coolant is used to cool down the engine. The coolant is heated as it flows through the engine and is fed into the header of the radiator via the inlet and then cools down as it circulates through the tubes to the opposite header. Cold coolant then exits back into the engine via the outlet, and the cycle repeats. As it circulates through the tubes, the coolant transfers its heat to the tubes, which then transfer the heat to the fins that are lodged between each row of tubes. The fins then radiate the heat transferred by the tubes to the surrounding air.
Transmission fluid also circulates through the radiator, which houses an internal transmission cooler. According to plaintiffs, this also serves to cool the transmission.
Named plaintiffs allege their vehicles, as well as the other classmembers' vehicles, contain the same radiator defect which allows engine coolant to mix with and contaminate the transmission fluid, causing damage to the vehicle, including the transmission, valve body, radiator, and their respective component parts. One way to detect this contamination is to remove the radiator cap and examine the radiator fluid. If the fluid appears milky, there has been contamination. A damaged transmission or valve body can result in a dangerous condition. For example, a vehicle may be unable to shift out of a low gear.
Defendants' New Vehicle Limited Warranty provided for repair or replacement of any damage caused by defects in material or workmanship for 3 years/36,000 miles, whichever occurred first. Defendants' Powertrain Warranty provided for repair or replacement of damage to the powertrain or any of its components caused by defects in material or workmanship for 5 years/60,000 miles, whichever occurred first.
Plaintiffs allege defendants have been aware of the radiator defect for "some time" and failed to notify plaintiffs about it during the warranty period and failed to repair the defect free of charge. According to plaintiffs, radiators and transmissions are designed to function for periods and mileages in excess of those provided for by defendants' warranties. Plaintiffs further contend consumers legitimately expect the transmission not to fail until the vehicle had driven more miles than the warranties provided for.
According to the amended complaint, many plaintiffs and members of the proposed plaintiff class and sub-classes sustained damage to their transmissions as a result of the radiator defect while the vehicle was still covered by the Powertrain Warranty, and yet their warranty claims were denied. Plaintiffs assert defendants' failure to cover the damage to their vehicle is unconscionable.
Plaintiffs allege defendants had knowledge of the radiator defect as a result of pre-release testing data; early consumer complaints; replacement part sales data; data from dealerships; and from information from their dealers who are, allegedly, their agents for vehicle repairs. Plaintiffs claim they could not have discovered the latent radiator defect through any reasonable inspection. Instead, plaintiffs relied upon defendants' representations and warranties concerning the quality and durability of the vehicles. Plaintiffs further assert defendants failed to adequately research, design, test, and manufacture the radiator and transmissions before warranting, advertising, promoting, marketing, and selling them as suitable and safe for use in the intended manner. Plaintiffs contend that had they known of the defect, they would have taken steps to avoid the danger, would have paid less for their vehicles, or would not have bought them in the first place.
III. Complaints by Other Class Members
Included in plaintiffs' amended complaint are citations to various internet fora discussing the problems found in their cars. Plaintiffs also include quotations from complaints made to the National Highway Traffic Safety Administration regarding the radiator defect.
IV. Defendants' Alleged Response to Plaintiff's Initial Complaint
This action was commenced with the filing of a complaint on September 30, 2010. On January 14, 2011, plaintiffs filed an amended complaint. In their amended complaint, plaintiffs assert that in response to the initial complaint, defendants extended the New Vehicle Limited Warranty coverage for the "radiator assembly" from 3 years/36,000 miles to 8 years/80,000 miles. Plaintiffs contend this extension is deficient because (1) it does not cover any damage to the transmission not considered part of the "radiator assembly"; (2) defendants failed to institute an appropriate notice campaign to ensure owners and lessees of the vehicles are advised of the extension; (3) the duration of the warranty is insufficient; and (4) the warranty extension does not apply retroactively. Defendants deny any connection between the filing of the initial complaint and the extension of the warranty period.
V. Warranties
The 2005 New Vehicle Limited Warranty states:
Although the Court cannot generally review documents outside the pleadings on a Rule 12(b)(6) motion, because the warranty is integral to the amended complaint and was relied upon by plaintiffs, the Court may review it. See Subaru Distribs. Corp. v. Subaru of Am., Inc., 425 F.3d 119, 122 (2d Cir. 2005) ("[On a motion to dismiss], the court may consider any . . . documents upon which the complaint relies and which are integral to the complaint.").
WHO IS THE WARRANTOR
Nissan warrants all parts of your 2005 Nissan vehicle supplied by Nissan, except for those listed elsewhere under the caption "WHAT IS NOT COVERED."
* * *
FOR HOW LONG AND WHAT IS COVERED
BASIC COVERAGE
• The basic coverage period is 36 months or 36,000 miles, whichever comes first.
• This warranty covers any repairs needed to correct defects in materials or workmanship of all parts and components of each new Nissan vehicle supplied by Nissan except for the exclusions or items listed under the caption "WHAT IS NOT COVERED" or as indicated below.
* * *
OBTAINING WARRANTY SERVICE
¦ You must take the vehicle to an authorized Nissan dealer in the United States or Canada during regular business hours at your expense in order to obtain warranty service. The names and addresses of authorized Nissan dealers are listed in telephone directories.
* * *
LIMITATION OF WARRANTIES AND OTHER WARRANTY TERMS AND STATE LAW RIGHTS EXTRA EXPENSES - LIMITATIONS OF DAMAGES . . .The terms of the warranty that apply to the model year 2006 vehicles and to plaintiff Dillard's Infiniti are similar in all materials respects to the 2005 New Vehicle Limited Warranty.
ANY IMPLIED WARRANTY OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE SHALL BE LIMITED TO THE DURATION OF THIS WRITTEN WARRANTY.
VI. Causes of Action
Plaintiffs assert the following causes of action: (1) violation of New York General Business Law §§ 349 and 350; (2) violation of the New Jersey Consumer Fraud Act on behalf of the New Jersey sub-class of plaintiffs; (3) violation of the Pennsylvania Unfair Trade Practices and Consumer Protection Law on behalf of the Pennsylvania sub-class; (4) violations of the Tennessee Consumer Protection Act on behalf of the nationwide class or, alternatively, the Tennessee sub-class; (5) violations of the Connecticut Unfair Trade Practices Act on behalf of the Connecticut sub-class; (6) violations of the Florida Deceptive and Unfair Trade Practices Act on behalf of the Florida sub-class; (7) violations of the Georgia Fair Business Practices Act on behalf of the Georgia sub-class; (8) breach of the express warranty; (9) breach of the implied warranty of merchantability; (10) common law fraud; (11) unjust enrichment; and (12) breach of contract. Plaintiffs seek damages and injunctive relief in the form of a declaration that the damage sustained by plaintiffs is covered by their respective warranties.
DISCUSSION
The function of a motion to dismiss is "merely to assess the legal feasibility of the complaint, not to assay the weight of the evidence which might be offered in support thereof." Ryder Energy Distrib. v. Merrill Lynch Commodities, Inc., 748 F.2d 774, 779 (2d Cir. 1984). When deciding a motion to dismiss, the Court must accept all well-pleaded allegations as true and draw all reasonable inferences in favor of the pleader. Hishon v. King, 467 U.S. 69, 73 (1984). The claims must contain the grounds upon which the claim rests through factual allegations sufficient "to raise a right to relief above the speculative level." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). A pleader is obliged to amplify a claim with some factual allegations to allow the court to draw the reasonable inference that the co-defendant is liable for the alleged conduct. Ashcroft v. Iqbal, 556 U.S. ___, 129 S. Ct. 1937 (2009).
To determine which allegations it may consider, the Court first identifies conclusory pleadings that are not entitled to the assumption of truth. Ashcroft v. Iqbal, 129 S. Ct. at 1949-50 ("Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.") (citing Bell Atl. Corp. v. Twombly, 550 U.S. at 555).
Once it has identified well-pleaded factual allegations, the Court should "assume their veracity and then determine whether they plausibly give rise to an entitlement to relief." Ashcroft v. Iqbal, 129 S. Ct. at 1950. The Supreme Court has defined plausibility as follows:
A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. The plausibility standard is not akin to a "probability requirement," but it asks for more than a sheer possibility that a defendant has acted unlawfully. Where a complaint pleads facts that are "merely consistent with" a defendant's liability, it "stops short of the line between possibility and plausibility of 'entitlement to relief.' "Id. at 1949 (quoting Bell Atl. Corp. v. Twombly, 550 U.S. at 556-57). Dismissal is not appropriate when the relevant facts are solely within the possession and control of the defendants, and the plaintiffs' allegations are made "upon information and belief." Arista Records LLC v. Doe, 604 F.3d 110, 120 (2d Cir. 2010).
Defendants move for dismissal on the ground that plaintiffs have failed to state a claim for breach of express warranty, breach of implied warranties, common law fraud, unjust enrichment, and breach of contract. Defendants also contend that plaintiffs cannot assert the claims in the complaint based on the various state consumer protection statutes. The Court will address these arguments seriatim.
I. Breach of Express Warranty
Count VIII of the amended complaint alleges defendants violated the express warranty by failing to "correct defects in materials or workmanship" as stated in the vehicles' applicable express warranty. Plaintiffs' claim really asserts two separate breach of express warranty claims. The first is a traditional breach of an express warranty claim. The second is a claim that defendants breached the express warranty because the durational limits contained in the warranty were unconscionably limited.
A. Traditional Claim
Defendants argue dismissal of this count is appropriate because the radiator defect did not manifest itself until after the express warranty had expired. Plaintiffs respond by claiming (1) the defect manifested itself in other unnamed claim members' vehicles before the expiration of the warranty coverage; (2) the defect manifested itself and was covered by the Powertrain Coverage; and (3) defendants knew about the defect prior to the expiration of the warranty period.
The Court of Appeals has clearly spoken on the viability of a claim for breach of an express warranty where a latent defect does not become apparent until after the expiration of the warranty period. In Abraham v. Volkswagen of America, 795 F.2d 238, 250 (2d Cir. 1986), the Court of Appeals noted that the "general rule is that an express warranty does not cover repairs made after the applicable time or mileage periods have elapsed." The Court further explained:
[V]irtually all product failures discovered in automobiles after expiration of the warranty can be attributed to a "latent defect" that existed at the time of sale or during the term of the warranty. All parts will wear out sooner or later and thus have a limited effective life. Manufacturers always have knowledge regarding the effective life of particular parts and the likelihood of their failing within a particular period of time. Such knowledge is easily demonstrated by the fact that manufacturers must predict rates of failure of particular parts in order to price warranties and thus can always be said to "know" that many parts will fail after the warranty period has expired. A rule that would make failure of a part actionable based on such "knowledge" would render meaningless time/mileage limitations in warranty coverage.Id.; see also Meserole v. Sony Corp. of Am., Inc., 2009 U.S. Dist. LEXIS 42772 (S.D.N.Y. May 18, 2009) (dismissing claim of breach of express warranty despite allegations that warrantor knew of defects at time of sale).
Abraham stands for the broad proposition that there can be no claim for breach of an express warranty where a latent defect manifests itself after the expiration of the warranty period. Plaintiffs do not allege that the radiator defect became apparent in their respective vehicles during the lifetime of the warranty nor do they allege that any repairs were made during the lifetime of the warranty. See Canal Electric Co. v. Westinghouse Electric Co., 973 F.2d 988, 993 (1st Cir. 1992) ("[C]ase law almost uniformly holds that time-limited warranties do not protect buyers against hidden defects - defects that may exist before, but typically are not discovered until after, the expiration of the warranty period."). Plaintiffs' straightforward breach of express warranty claim, therefore, must be dismissed. This conclusion is applicable even if unnamed members of the putative class experienced radiator problems prior to the expiration of the warranty. See Lewis v. Casey, 518 U.S. 343, 357 (1996) ("[E]ven named plaintiffs who represent a class must allege and show that they personally have been injured, not that injury has been suffered by other, unidentified members of the class to which they belong and which they purport to represent.").
B. Claim of Unconscionability
In the alternative, plaintiffs argue the warranty period is unconscionable and unenforceable because defendants knew the defect would manifest itself after the expiration of such period. The allegations relevant to a determination of unconscionability are not contained within Count VIII (¶¶ 158-166). Rather, they are alleged within Count IX (¶¶ 167-175). Specifically, ¶ 174 contains the following language which mirrors language from the complaint at issue in In re Samsung DLP TV Class Action Litig., 2009 U.S. Dist. LEXIS 100065 (D.N.J. Oct. 27, 2009):
The allegations quoted in Samsung DLP stated:
The time limits contained in Samsung's extended written limited warranties were also unconscionable and grossly inadequate to protect the plaintiffs and the members of the Class. Among other things, plaintiffs and the members of the Class had no meaningful choice in determining those time limitations; the terms of the limited warranties unreasonably favored Samsung over members of the Class; a gross disparity in bargaining power existed as between Samsung and Class members; and Samsung knew or should have known that the Televisions were defective at the time of sale and would fail well before their useful lives, thereby rendering the time limitations insufficient, inadequate, and unconscionable.
The time limits contained in Defendants' warranty period were also unconscionable and inadequate to protect Plaintiffs and the Plaintiff Class. Among other things, Plaintiffs and the Plaintiff Class had no meaningful choice in determining these time limitations, the terms of which unreasonably favored Defendants. A gross disparity in bargaining power existed between Nissan and the Plaintiff Class, and
Nissan knew or should have known that the Class Vehicles were defective at the time of sale and that the radiator and transmission would fail well before their useful lives.Amended Complaint, ¶ 174. Count VIII, on the other hand, states the language of Section 2-302 of the New York Uniform Commercial Code which addresses unconscionable contracts, but does not contain any factual allegations relevant to a determination of whether the time limit in the warranty was unconscionable.
In support of plaintiffs' argument that the warranty period was unconscionable, plaintiffs rely on the Fourth Circuit Court of Appeals's decision in Carlson v. General Motors Corp., 883 F.2d 287 (4th Cir. 1989). In Carlson, the Court of Appeals held that where (1) there was unequal bargaining power between the buyer and seller, (2) the seller knew of an inherent defect in its product, and (3) the buyer has no ability to detect any defect, a durational limitation on the warranty is unconscionable and therefore unenforceable. Id., at 296. This argument was not addressed in Abraham, and several courts have found Carlson survives despite Abraham. See, e.g., Meserole v. Sony Corp. of Am., Inc., 2009 U.S. Dist. LEXIS 42772, at *23-24; McCalley v. Samsung, 2008 U.S. Dist. LEXIS 28076, *19-20 n.4 (D.N.J. 2008).
Much of the recent jurisprudence on this issue comes from the District of New Jersey, where courts have permitted claims for breach of an express warranty on the theory that a manufacturer's failure to notify a consumer that a product will fail means a durationally-limited warranty is unconscionable. See, e.g., Alban v. BMW of N. Am., LLC, 2010 U.S. Dist. LEXIS 94038 (D.N.J. Sept. 8, 2010) ("Alban I") (granting motion to dismiss with leave to replead); Henderson v. Volvo Cars of N. Am., LLC, 2010 U.S. Dist. LEXIS 73624, at *26-27 & n.6 (D.N.J. July 21, 2010) (stating the issue of unconscionability was better resolved on summary judgment); In re Samsung DLP Television Class Action Litig., 2009 U.S. Dist. LEXIS 100065, at *14-16; Payne v. Fujifilm U.S.A., Inc., 2007 U.S. Dist. LEXIS 94765, *11-12 (D.N.J. Dec. 28, 2007); see also Bussian v. DaimlerChrysler Corp., 411 F. Supp. 2d 614, 622-23, 2005 U.S. Dist. LEXIS 39791, at *20-21 (M.D.N.C. 2005), adopted by, 2006 U.S. Dist. LEXIS 3634 (M.D.N.C. Jan. 24, 2006). Nonetheless, even when permitting a claim to proceed as a matter of law, courts have found the factual allegations insufficient under Iqbal to support a claim of unconscionableness. See Alban v. BMW of N. Am., LLC, 2011 U.S. Dist. LEXIS 26754 (D.N.J. 2011) ("Alban II") (addressing amended complaint; rejecting plaintiff's allegations in support of his claim of unconscionability pursuant to Iqbal); see also Meserole v. Sony Corp. of Am., Inc., 2009 U.S. Dist. LEXIS 42772, at *23-24. A review of the relevant case law reveals that courts permit the Carlson theory to proceed, provided there are sufficient allegations to meet the Iqbal standard.
The Court agrees with the court's sentiments expressed in Henderson v. Volvo Cars of N. Am., LLC. There, the court stated:
[A] manufacturer's mere knowledge that a part will ultimately fail, after the expiration of a warranty period, is insufficient to provide a basis for a breach of express warranty claim. Moreover, such knowledge does not alone make the time/mileage limitation unconscionable. Here, however, Plaintiffs' allege additional claims in support of their unconscionability claims. Whether Plaintiffs can demonstrate that the express warranty was unconscionable remains to be seen, however, this Court will not dismiss Plaintiffs' breach of express warranty claims at this early stage.Henderson, 2010 U.S. Dist. LEXIS 73624, at *26 (relying on Dewey v. Volkswagen AG, 558 F. Supp. 2d 505 (D.N.J. 2008)). The Henderson Court thus found that plaintiffs' allegations were sufficient to support a claim that the express warranty was unenforceable because it was unconscionable.
Plaintiffs have alleged that (1) defendants were aware of the radiator defect, (2) defendants sold the vehicles with knowledge of the defect and of the fact that the defect would not manifest itself until after the expiration of the express warranty, and (3) they would have negotiated better terms in the purchase of their vehicles and the warranties had they been aware of the radiator defect. Amended Complaint ¶¶ 68-70, 72. As quoted above, they also allege they had no meaningful choice about the time limits contained in the warranty, there was a disparity between the parties' bargaining power, and NNA knew or should have known of the propensity of the radiator to fail. Amended Complaint ¶ 174. These allegations are sufficient to state a claim that the express warranty is unenforceable because the durational limitation is unconscionable. See, e.g., Martin v. Ford Motor Co., 765 F. Supp. 2d 673, 683 n.6 (E.D. Pa. 2011); In re Samsung DLP TV Class Action Litig., 2009 U.S. Dist. LEXIS 100065, at *16. Whether plaintiffs can actually prove such a claim is better left for after the completion of discovery.
II. Breach of Implied Warranty of Merchantability
Defendants next move to dismiss plaintiffs' breach of implied warranty of merchantability alleged in Count IX of the amended complaint because plaintiffs' vehicles were fit at the time of purchase for the ordinary purpose for which they were to be used. In their response to NNA's motion, plaintiffs contend the vehicles' failure before they had been driven 100,000 miles undermines an argument that the automobiles were fit for their ordinary purpose.
Under New York law, a breach of implied warranty claim requires allegations of the following three elements: "(1) that the product was defectively designed or manufactured; (2) that the defect existed when the manufacturer delivered it to the purchaser or user; and (3) that the defect is the proximate cause of the accident." Silivanch v. Celebrity Cruises, Inc., 171 F. Supp. 2d 241, 259 (S.D.N.Y. 2001). In other words, the implied warranty is breached where the product in question is not fit for the ordinary purpose for which it is to be used. See Denny v. Ford Motor Co., 87 N.Y.2d 248, 258 (1995) (citing N.Y. U.C.C. § 2-314(2)(c)). Such a warranty does not guarantee that the product will fill a buyer's every expectation; rather, it only "provides for a minimal level of quality." Id., at 258 n.4 (citing Skelton v. General Motors Corp., 500 F. Supp. 1181, 1191 (N.D. Ill. 1980), rev'd on other grounds, 660 F.2d 311 (7th Cir. 1981)).
This raises the issue of what is the ordinary purpose for which an automobile is to be used. In their response to NNA's motion, plaintiffs assert a purchaser of an automobile reasonably expects her vehicle to last more than 100,000 miles. Courts reject any such view and have consistently held that an automobile that was driven for years without problems was merchantable and fit for its ordinary use at the time of sale. See, e.g., Alin v. Am. Honda Motor Co., 2010 U.S. Dist. LEXIS 32584, at *34-35 (D.N.J. Mar. 31, 2010); Sheris v. Nissan North America, Inc., 2008 U.S. Dist. LEXIS 43664, at *16 (D.N.J. June 2, 2008) (citing cases); American Suzuki Motor Corp. v. Superior Court, 44 Cal. Rptr. 2d 526, 529 (Cal. App. 2d Dist. 1995).
The allegations of the amended complaint demonstrate plaintiffs have driven their respective vehicles without incident for several years before any radiator problem manifested itself. Plaintiffs' argument in their papers that a reasonable consumer expects an automobile to last beyond 100,000 miles is deficient because (1) it is not alleged in the amended complaint, (2) its relevance is belied the holding in Denny v. Ford Motor Co., cited by plaintiffs, that a product need not meet a "buyer's every expectation" but only meet a minimal level of quality, and (3) plaintiffs assert it without any factual support that would entitle it to deference under Iqbal. The Court also observes that the limits of Abraham v. Volkswagen of America, 795 F.2d 238, applies also to claims of a breach of the implied warranty of merchantability. In re Philips/Magnavox TV Litig., 2010 U.S. Dist. LEXIS 91343, at *13-14 (D.N.J. Sept. 1, 2010); see also Duquesne Light Co. v. Westinghouse Elec. Corp., 66 F.3d 604, 616 (3d Cir. 1995). Plaintiffs' claim for breach of the implied warranty of merchantability is therefore dismissed.
The only plaintiff who alleged a problem early in his ownership of the automobile was plaintiff Szymczak who alleged problems with the vent and cooling system. Plaintiffs do not allege this defect was connected in any way with the radiator, and it cannot serve as a basis for a claim that the automobile was not fit for its ordinary purpose.
Even if plaintiffs had sufficiently pleaded a claim for breach of the implied warranty of merchantability, most of their claims would nonetheless be barred by the applicable statute of limitations. The statute of limitations in New York for a claim for such breach is four years from the delivery of the good. Woods v. Maytag Co., 2010 U.S. Dist. LEXIS 116595, at *5 (E.D.N.Y. 2010); Fernandez v. Cent-Mine Equip. Co., 670 F. Supp. 2d 178, 189 (E.D.N.Y. 2009); N.Y. U.C.C. § 2-725. This rule applies even when the defect is discovered later; that is, there is no "discovery rule." Orlando v. Novurania of Am., Inc., 162 F. Supp. 2d 220, 223 (S.D.N.Y. 2001).
This action was commenced on September 30, 2010. Plaintiffs Szymczak, Lopez, and Greathouse allege they purchased their respective automobiles in January 2006, 2004, and February 2006. Their claims are therefore barred for this additional reason.
III. Plaintiffs' State Law Consumer Protection Claims
Counts I through VII of the amended complaint assert claims based on various state consumer protection statutes. NNA challenges these claims on several grounds. First, it argues the respective statutes cannot apply to out-of-state transactions. That is, the New York consumer protection statute, for example, cannot apply to the purchase of a vehicle in New Jersey. Second, NNA contends plaintiffs failed sufficiently to plead a misrepresentation, an element required under each statute. Third, NNA asserts plaintiffs failed to plead an actionable failure to disclose that was misleading. Finally, NNA points out that because Pennsylvania subscribes to the economic loss rule, any claim under Pennsylvania law is limited to a breach of contract claim.
A. Application of New York Law to Out-of-State Transactions
The first issue is easily resolved. The amended complaint states a claim for a violation of New York General Business Law §§ 349 and 350 on behalf of the nationwide class or, alternatively, the New York sub-class. The Tennessee claim is similarly directed. The claims under the New Jersey, Pennsylvania, Connecticut, Florida, and Georgia consumer protection statutes are asserted only on behalf of the sub-classes based in the respective states.
In a multi-state consumer class action, based on choice-of-law considerations, courts have applied the law of the buyer's domicile. See In re Rezulin Prods. Liab. Litig., 210 F.R.D. 61, 71 (S.D.N.Y. 2002); In re Bridgestone/Firestone Tires Prods. Liab. Litig., 288 F.3d 1012, 1016-1017 (7th Cir. 2002). States have no interest in applying their consumer protection statutes to buyers who live out of state and whose purchases occur out of state. This issue, however, is usually resolved at the Rule 23 class certification stage, not on a motion to dismiss. See, e.g., Rezulin Prods. Liab. Litig., 210 F.R.D. 61; Bridgestone/Firestone Tires Prods. Liab. Litig., 288 F.3d 1012. Courts, nonetheless, can address this claim in response to a Rule 12(b)(6) motion. See, e.g., Cooper v. Samsung Elecs. Am., Inc., 374 Fed. Appx. 250, 255 (3d Cir. 2010).
At this stage, the Court can dismiss plaintiffs' New York law claims as to those plaintiffs who did not purchase their automobiles in New York because the relevant statutes do not apply to transactions occurring outside the state. Section 349 of the New York General Business Law provides: "Deceptive acts or practices in the conduct of any business, trade or commerce or in the furnishing of any service in this state are hereby declared unlawful." N.Y. Gen. Bus. Law § 349(a). Section 350 proscribes "False advertising in the conduct of any business, trade or commerce or in the furnishing of any service in this state . . . ." N.Y. Gen. Bus. Law § 350. Addressing Section 349(a), the New York Court of Appeals has stated:
The reference in section 349(a) to deceptive practices in "the conduct of any business, trade or commerce or in the furnishing of any service in this state" unambiguously evinces a legislative intent to address commercial misconduct occurring within New York. Indeed, an examination of the text of General Business Law § 349 leads us to conclude that "in this state" can only modify "the conduct of any business, trade or commerce or the furnishing of any service." Thus, to qualify as a prohibited act under the statute, the deception of a consumer must occur in New York.Goshen v. Mut. Life Ins. Co., 98 N.Y.2d 314, 324-325 (2002) (emphasis in original); Thomas v. JPMorgan Chase & Co., 2011 U.S. Dist. LEXIS 83504, at *40 (S.D.N.Y. July 29, 2011) ("[T]he legislative history of the statute makes clear that it was intended to protect consumers in the state of New York."); see also Gotlin v. Lederman, 616 F. Supp. 2d 376, 392 (E.D.N.Y. 2009) ("§§ 349 and 350 only prohibit consumer deception or false advertising that occurs in New York state.").
As to plaintiffs Schuele, Dreher, Rivera, Stewart, and Boyd, these plaintiffs do not live in New York, and the Court will not presume any conduct by defendants that occurred within New York. See Weaver v. Chrysler Corp., 172 F.R.D. 96, 100 (S.D.N.Y. 1997) (dismissing Section 349 claim where plaintiff failed to allege any conduct by defendant within New York). The parties seem to agree that the standards that apply to Section 349 claims also apply to the various state consumer protection laws of the respective plaintiff's home states. Therefore, while the Court dismisses these plaintiffs' Section 349 claims, it does not dismiss the claims based on the laws of plaintiffs' respective home states.
Plaintiffs' claims under the New York General Business Law are dismissed as to those plaintiffs who do not reside in New York or did not purchase their vehicles in New York.
B. Application of Tennessee Law to Transactions Occurring Outside Tennessee
As to the Tennessee claim, NNA argues that this Court, as a New York court, should not adjudicate a dispute brought by out-of-state citizens for transactions occurring out-of-state subject to foreign law. That is, choice-of-law principles preclude this Court from applying Tennessee's law to citizens of other states where there are insufficient connections between Tennessee, the parties, and the underlying facts. The Court concurs and dismisses all of the plaintiffs' Tennessee-based claims, with the exception of plaintiff Boyd's claim.
As numerous courts have observed, in any action based in tort, the law of the defendant's home state should not govern those claims that have no other nexus to that state. See, e.g., In re Rezulin Prods. Liab. Litig., 210 F.R.D. 61, 70-71 (S.D.N.Y. 2002); In re Bridgestone/Firestone Tires Prods. Liab. Litig., 288 F.3d 1012 (7th Cir. 2002); Spence v. Glock, GES.m.b.H., 227 F.3d 308, 313 (5th Cir. 2000). Plaintiffs assert a class-wide cause of action based on Tennessee law presumably because NNA's principal place of business is in that state. That fact, however, is not relevant to the law that should apply to plaintiffs' claims that have no other connection to Tennessee. See Nat'l Western Life Ins. Co. v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 89 Fed. Appx. 287, 288 (2d Cir. 2004) ("Under New York conflict of law principles, fraud claims are governed by the state in which the injury is deemed to have occurred, which is usually where the plaintiff is located . . . ."); In re Rezulin Prods. Liab. Litig., 210 F.R.D. at 70-71 (rejecting application of law of defendants' home state in products liability action); see also In re Bridgestone/Firestone Tires Prods. Liab. Litig., 288 F.3d 1012 ("State consumer-protection laws vary considerably, and courts must respect these differences rather than apply one state's law to sales in other states with different rules."); Spence, 227 F.3d at 314 (noting law of state of purchase is more appropriate law to apply than defendant's home state).
In addition, except as to plaintiff Boyd, there are no allegations in the complaint of any actions occurring in Tennessee. Therefore, the case upon which plaintiffs rely, In re Mercedes-Benz Tele Aid Contract Litig., 257 F.R.D. 46 (D.N.J. 2009), is clearly distinguishable. There, the court applied New Jersey law to a consumer action in part because defendant's tortious misrepresentations occurred in New Jersey. See Maniscalco v. Brother Int'l Corp., 2011 U.S. Dist. LEXIS 67772, at *34-35 (D.N.J. June 24, 2011) (distinguishing In re Mercedes-Benz Tele Aid Contract Litig., 257 F.R.D. 46); see also Meserole v. Sony Corp. of Am., Inc., 2009 U.S. Dist. LEXIS 42772, at *17-18 n.6 (applying California law where plaintiffs alleged business decisions were made in California). Similarly, plaintiffs' reliance on Carlenstolpe v. Merck & Co., 638 F. Supp. 901, 910 (S.D.N.Y. 1986), is unavailing.
As to those plaintiffs who purchased their vehicles outside Tennessee, the law of those respective states will apply to their claims.
C. Allegations of Misrepresentations
NNA next moves to dismiss plaintiffs' claims under the various state consumer protection statutes because, it argues, the amended complaint fails to allege a sufficient misrepresentation or omission made by defendants. It argues, without citation, that New York's consumer protection statutes are typical of the consumer protection statutes at issue in this case.
To state a claim under the New York statutes, plaintiffs must allege "(1) that the act, practice or advertisement was consumer-oriented; (2) that the act, practice or advertisement was misleading in a material respect, and (3) that the plaintiff was injured as a result of the deceptive practice, act or advertisement." Pelman v. McDonald's Corp., 237 F. Supp. 2d 512, 525 (S.D.N.Y. 2003). An act is actionable only "if it is likely to mislead a reasonable consumer." Marcus v. AT&T Corp., 138 F.3d 46, 64 (2d Cir. 1998). Further, a plaintiff must allege an actual injury, though the injury need not be limited to pecuniary harms. Stutman v. Chemical Bank, 95 N.Y.2d 24, 29 (2000). There is no requirement under Section 349 that plaintiffs show reliance or scienter, Blue Cross & Blue Shield of N.J., Inc. v. Philip Morris, Inc., 178 F. Supp. 2d 198, 231 (E.D.N.Y. 2001), while a plaintiff under Section 350 must demonstrate reliance. See Small v. Lorillard Tobacco Co., Inc., 679 N.Y.S.2d 593, 599 (App. Div. 1998), aff'd, 94 N.Y.2d 43 (1999). NNA does not dispute that the actions at issue in the complaint were consumer-oriented and, if done, resulted in an injury. Regardless, plaintiffs have adequately pleaded the alleged misrepresentations were consumer-oriented and plaintiffs were injured as a result of those misrepresentations. See Ackerman v. Coca-Cola Co., 2010 U.S. Dist. LEXIS 73156 (E.D.N.Y. July 21, 2010) ("Injury is adequately alleged under GBL §§ 349 or 350 by a claim that a plaintiff paid a premium for a product based on defendants' inaccurate representations.").
Plaintiffs do not identify any false or misleading advertisement or plead any reliance on any such advertisement. See Small v. Lorillard Tobacco Co., Inc., 679 N.Y.S.2d at 599. Therefore, their claim under Section 350 is dismissed.
Plaintiff Schuele, Jackson and Stewart allege their vehicles were sold by defendants, while Boyd, Simons, and Dillard do not plead such allegations. The Court assumes, as it must for purposes of this ruling, that Schuele, Jackson and Stewart purchased their vehicles from NNA, but does not make the assumption for Boyd, Simons, and Dillard. Because there are no specific allegations that there were misleading misrepresentations made to Boyd, Simons, or Dillard concerning their purchases, their claims are dismissed under Section 349. Although privity between a buyer and seller is not required for a Section 349 claim, see In re Tertiary Butyl Ether Prods. Liab. Litig., 175 F. Supp. 2d 593, 630-31 (S.D.N.Y. 2001) ("Indeed, there is no requirement of privity, and the victims of indirect injuries are permitted to sue under [Section 349]."), the buyers must still allege receipt of or exposure to the misleading practice or act. Were the Court to read the allegations contained within paragraphs 91 through 95 of the amended complaint as applying to plaintiffs Boyd, Simons, and Dillard, the Court would still have to conclude that the allegations lack in specificity and contradict the other allegations as they relate to the sellers of these automobiles so as to render the allegations implausible.
The Section 349 claims on behalf of Boyd, Simons, and Dillard were also dismissed because they do not allege they reside in New York. In addition, the Section 349 claims on behalf of Schuele and Stewart were similarly dismissed. --------
NNA also argues that the allegations of the amended complaint are vague and fail to meet the pleading requirements under Iqbal. Although plaintiffs asserting a claim under Section 349 do not need to meet the requirements of Federal Rule of Civil Procedure 9(b), the factual allegations must nonetheless plead sufficient and specific facts to support a claim. Pelman ex rel. Pelman v. McDonald's Corp., 396 F.3d 508, 511 (2d Cir. 2005). In support of their Section 349 claim, plaintiffs rely principally upon three paragraphs of the amended complaint. Specifically, they allege:
Plaintiff Szymczak and/or his wife were informed by Nissan on the visit, described above, that the repairs to his Pathfinder caused by the leaking radiator would cost several thousands of dollars and that it would not be covered under either the 3 year/36,000 mile warranty or the 5 year/60,000 Powertrain Coverage. As a result, Plaintiff Szymczak had to bear the entire expense to have both the radiator and transmission replaced. Plaintiff Szymczak had the repairs made at a cost of approximately $5,500 in or about March 2010. (Amended
Complaint ¶ 20).These allegations, when read in light of the entire amended complaint, are sufficient to sustain a claim for a violation of Section 349 as to plaintiffs Szymczak, Lopez, Greathouse, and Jackson. Paragraph 93(a) appropriately alleges that defendants knew of the defect and told plaintiffs of the defect, and that the radiator systems were in fact defective. This case is therefore distinguishable from the cases cited by NNA. See Woods v. Maytag Co., 2010 U.S. Dist. LEXIS 116595, at *44-45 (E.D.N.Y. 2010) (dismissing Section 349 claim when plaintiff's bare allegations that defendant "knew" of the product's defect were insufficient); Horowitz v. Stryker Corp., 613 F. Supp. 2d 271, 287-88 (E.D.N.Y. 2009) (dismissing claims where the allegations were purely conclusory and lacking in any specificity). Here, plaintiffs' allegations include sufficient detail and a plausible narrative for how defendants knew of the radiator defect. At this stage, the Court can only assume the narrative is true. Therefore, the Court will not dismiss the Section 349 claims as to plaintiffs Szymczak, Lopez, Greathouse, and Jackson - all of whom live in New York - but will leave those plaintiffs to their proof.
In direct response to plaintiffs' original complaint filed on September 30, 2010, defendants instituted an extension of the New Vehicle Limited Warranty coverage for the "radiator assembly" from its original duration of 3 years/36,000 miles to 8 years/80,000 miles. However, this warranty extension is deficient for several reasons. First and foremost, Class Members are being advised that the warranty extension only relates to the "radiator assembly" and therefore any damage to the transmission or components not considered part of the "radiator assembly" are not covered. (Amended Complaint ¶ 80) (footnote omitted).
Defendants actively and knowingly misrepresented to Plaintiffs and the Class Members at the time of purchase or lease that the Class Vehicles, including the radiator and transmission system design of said Vehicles, did not contain a material defect, were in good working order, not defective and merchantable . . . . (Amended Complaint ¶ 93(a).
D. Allegations of a Failure to Disclose
1. Under New York Law
Plaintiffs Szymczak, Lopez, Greathouse, and Jackson can also maintain a cause of action under Section 349 for defendants' failure to disclose a defect when such failure was likely to mislead a reasonable consumer. See Oswego Laborers' Local 214 Pension Fund v. Marine Midland Bank, N.A., 85 N.Y.2d 20, 26 (1995). An omission-based claim is actionable under Section 349 when "the business alone possesses material information that is relevant to the consumer and fails to provide this information." Id., 85 N.Y.2d at 26. Plaintiffs' allegations meet this standard, and their claim under Section 349 based on a failure to disclose is not dismissed.
2. Under New Jersey Law
"To state a cause of action under the [New Jersey] Consumer Fraud Act, a plaintiff must allege: (1) an unlawful practice by the defendant; (2) an ascertainable loss by plaintiff; and (3) a causal nexus between the first two elements - defendant's allegedly unlawful behavior and the plaintiff's ascertainable loss." Parker v. Howmedica Osteonics Corp., 2008 U.S. Dist. LEXIS 2570, at *6 (D.N.J. Jan 14. 2008). Under New Jersey law, "[w]hen there is no fiduciary duty or special relationship between parties, there is no affirmative duty to disclose." Harvey v. Nissan North America, Inc., 2005 WL 1252341 (N.J. Super. App. Div. Apr. 29, 2005); Green v. General Motors Corp., 2003 WL 21730592 (N.J. Super. App. Div. July 10, 2003) (concluding there was an insufficient relationship between plaintiffs-purchasers and defendant-manufacturer when the automobile dealers had not taken any action to induce plaintiffs' reliance upon dealers).
In addition, there can be no claim under the Consumer Fraud Act for "the failure of a manufacturer or seller to advise a purchaser that a part of a vehicle may break down or require repair after the expiration of the warranty period . . . ." Perkins v. DaimlerChrysler Corp., 890 A.2d 997, 1004 (N.J. Super. Ct. App. Div. 2006). Although the Perkins statement was made in dicta, it has been relied upon by numerous courts. See, e.g., Glauberzon v. Pella Corp., 2011 U.S. Dist. LEXIS 38138, at *29 n.5 (D.N.J. Apr. 5, 2011); Nobile v. Ford Motor Co., 2011 U.S. Dist. LEXIS 26766, at *15-17 (D.N.J. Mar. 14, 2011). Perkins did, however, provide an exception where the defect implicated safety considerations. Perkins, 890 A.2d at 1004. In such a situation, the manufacturer or seller has a duty to inform the purchaser of the possibility that the vehicle may break down. Even then, however, courts have ruled that a claim could not lie once the warranty period has expired. Nobile, 2011 U.S. Dist. LEXIS 26766, at *16-17; see also Noble v. Porsche Cars N. Am., Inc., 2010 U.S. Dist. LEXIS 14454 (D.N.J. 2010) (applying Perkins even in light of safety concerns); Duffy v. Samsung Elecs. Am., Inc., 2007 U.S. Dist. LEXIS 14792 (D.N.J. 2007) (declining to extend Perkins because doing so would essentially extend the express warranty beyond what the parties had agreed to); but see Doll v. Ford Motor Co., 2011 U.S. Dist. LEXIS 95427 (D. Md. Aug. 25, 2011) (upholding the Perkins safety exception and declining to dismiss a New Jersey Consumer Fraud Act claim New Jersey).
Plaintiffs rely on the decision in Maniscalco v. Brother Int'l Corp. (USA), 627 F. Supp. 2d 494, 497 (D.N.J. 2009), which is distinguishable. There, the district court declined to dismiss a Consumer Fraud Act claim where the plaintiff had alleged that the defendant had purposefully limited the warranty period to ninety days on defective printer heads so as to preclude any warranty claims by uninformed consumers to whom the printers were marketed. There are no plausible allegations here that the warranty period was unreasonably short. See Noble v. Porsche Cars N. Am., Inc., 2010 U.S. Dist. LEXIS 14454, at *17 n.4 (distinguishing Maniscalco because defect in plaintiff's vehicle did not manifest itself for four years after the initial warranty period).
Because plaintiffs' claim alleges that defendants failed to provide notice of a latent defect and the warranty period has expired, it is not cognizable under the New Jersey Consumer Fraud Act and is dismissed.
3. Under Pennsylvania Law
NNA moves to dismiss plaintiff Dreher's claim because, it argues, it is barred by the economic loss rule. Plaintiffs did not respond to this argument.
Under Pennsylvania law, where a consumer purchases a product with a defect, but the consumer suffers only damage to the product by the defect, her damages are limited to contract damages, and tort claims are barred by the economic loss rule. See Werwinski v. Ford Motor Co., 286 F.3d 661, 670 (3d Cir. 2002). The economic loss rule "prohibits plaintiffs from recovering in tort economic losses to which their entitlement flows only from a contract." Duquesne Light Co. v. Westinghouse Elec. Corp., 66 F.3d at 618; see also Werwinski, 286 F.3d at 671 ("[T]he need for a remedy in tort is reduced when the only injury is to the product itself and the product has not met the customer's expectations, or, in other words, that the customer has received 'insufficient product value.'"). It "applies to bar tort claims for purely economic loss even where plaintiff alleges an intentional tort such as fraud, if the misrepresentation relates to the quality of the good sold." Martin v. Ford Motor Co., 765 F. Supp. 2d 673, 684 (E.D. Pa. 2011). The rule preempts claims under the Pennsylvania Unfair Trade Practices and Consumer Protection Law ("PUTPCPL"). See Spruce St. Props., Ltd. v. Noblesse, 2011 U.S. Dist. LEXIS 105835, at *33-34 (W.D. Pa. Sept. 19, 2011).
Because the only injury alleged by Dreher relates to the damage to her vehicle, the economic loss doctrine bars her claim under PUTPCPL. It is hereby dismissed.
4. Claims Under Other State Consumer Protections Law
NNA moves to dismiss all statutory claims but does not address the elements of the consumer protection laws of Tennessee, Connecticut, Florida, or Georgia. Therefore, the Court will not dismiss these claims, except to limit each claim to the plaintiff or plaintiffs who allege they purchased a vehicle in such state.
To summarize, the Court dismisses plaintiffs' claims under (1) Section 349 of the New York General Business Law as to all plaintiffs except Szymczak, Lopez, Greathouse, and Jackson; (2) Section 350 of the New York General Business Law as to all plaintiffs; (3) New Jersey Consumer Fraud Act as to all plaintiffs; and (4) PUTPCPL as to all plaintiffs.
IV. Plaintiffs' Fraud Claims
A claim for fraud under New York law requires a showing of "(1) a misrepresentation or material omission of fact which was false and known to be false by defendant, (2) made for the purpose of inducing the other party to rely upon it, (3) justifiable reliance of the other party on the misrepresentation or material omission, and (4) injury." Lama Holding Co. v. Smith Barney, Inc., 88 N.Y.2d 413, 421 (1996). In addition, when a plaintiff alleges fraud in the complaint, Federal Rule of Civil Procedure 9(b) contains an additional requirement: "In all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity." See Eternity Global Master Fund Ltd. v. Morgan Guar. Trust Co. of N.Y., 375 F.3d 168, 187 (2d Cir. 2004). "[T]o comply with Rule 9(b), the complaint must: (1) specify the statements that the plaintiff contends were fraudulent, (2) identify the speaker, (3) state where and when the statements were made, and (4) explain why the statements were fraudulent." Lerner v. Fleet Bank, N.A., 459 F.3d 273, 290 (2d Cir. 2006). Plaintiffs must "allege facts that give rise to a strong inference of fraudulent intent." Acito v. IMCERA Group, Inc., 47 F.3d 47, 52 (2d Cir. 1995). "The requisite 'strong inference' of fraud may be established either (a) by alleging facts to show that defendants had both motive and opportunity to commit fraud, or (b) by alleging facts that constitute strong circumstantial evidence of conscious misbehavior or recklessness." Shields v. Citytrust Bancorp, Inc., 25 F.3d 1124, 1128 (2d Cir. 1994). If plaintiff cannot plead specific facts because they are unknowable to them before discovery, they may plead such facts upon "information and belief" provided they specify why defendants are aware of the facts. DiVittorio v. Equidyne Extractive Indus., 822 F.2d 1242, 1248 (2d Cir. 1987)
The complaint fails to identify any speaker of any fraudulent comments or state where and when the statements were made. The complaint does not state that any plaintiff heard any statement upon which they justifiably relied. See Weaver v. Chrysler Corp., 172 F.R.D. at 101. While the Court will accept plaintiffs' allegations as to why the alleged-statements regarding the quality of the vehicles and the radiators were fraudulent, the Court will nonetheless require plaintiffs to meet the demands of Rule 9(b) as best they can and identify the speakers of any statements and when the statements were made. Plaintiffs' claims of common law fraud based on misrepresentations are therefore dismissed without prejudice.
Where a fraud claim is based on an omission, "the Complaint must still allege what the omissions were, the person responsible for failing to disclose, the context of the omission and the manner in which it misled Plaintiff, and what Defendant obtained through the fraud." Weaver v. Chrysler Corp., 172 F.R.D. at 101. As to those claims based on material omissions, the Court finds the amended complaint to be sufficient. Although the allegations are sparse, because plaintiffs' allegations rely on information that is more likely in the possession of defendants than plaintiffs, the Court will permit these fraud by omission claims to proceed. See Dewey v. Volkswagen AG, 558 F. Supp. 2d at 527 (permitting fraudulent omission claims to proceed where allegations were based on facts not within plaintiff's control); Henderson v. Volvo Cars of N. Am., LLC, 2010 U.S. Dist. LEXIS 73624, at *16 (permitting claims to proceed despite certain aspects of the complaint being "sparse").
Plaintiffs cite to several opinions in the District of New Jersey in which the courts permitted fraud claims to proceed despite statements without identified speakers. Two of these cases, however, are clearly distinguishable, and the third does not support plaintiffs' argument. For example in Dewey v. Volkswagen AG, 558 F. Supp. 2d at 525-526, the court permitted plaintiff's fraud claim to proceed because he had pleaded intent generally, which is permissible under Rule 9(b). The court further found that plaintiff's allegations of reliance were sufficient in light of the totality of the allegations. The problem with plaintiffs' allegations here is not related to reliance generally or to intent, but rather the unidentified speakers and settings of the statements. Therefore, Dewey does not apply.
Similarly, in Alin v. Am. Honda Motor Co., 2010 U.S. Dist. LEXIS 32584, at *25-29, the court found plaintiff's allegations were sufficient to put defendant on notice of the nature of the claims asserted against it. The court provided a litany of allegations from the complaint that supported plaintiff's claims. Here, plaintiffs' claims are much more conclusory and provide only a summary of defendants' alleged conduct. Therefore, they are not sufficient as the allegations in Alin were.
Finally, in Henderson v. Volvo Cars of N. Am., LLC, 2010 U.S. Dist. LEXIS 73624, at *11-15, the court found plaintiff's allegations regarding fraud through misrepresentations to be "summary in nature" and lacking sufficient specificity under Rule 9(b). On the other hand, the court permitted plaintiff's claims of fraud through material omissions to proceed. This case clearly does not support plaintiffs' argument regarding a material misrepresentation.
V. Claim for Unjust Enrichment
A claim for unjust enrichment alleges that defendant has received money or a benefit at the expense of plaintiffs. Unjust enrichment under New York law requires plaintiffs to plead "(1) that the defendant was enriched; (2) that the enrichment was at the plaintiff[s'] expense; and (3) that the circumstances are such that in equity and good conscience the defendant should return the money or property to the plaintiff." Golden Pac. Bancorp v. FDIC, 273 F.3d 509, 519 (2d Cir. 2001).
Under New York law, a party cannot be successful on both a breach of contract claim and a claim for unjust enrichment. See IDT Corp. v. Morgan Stanley Dean Witter & Co., 12 N.Y.3d 132, 142 (2009) ("Where the parties executed a valid and enforceable written contract governing a particular subject matter, recovery on a theory of unjust enrichment for events arising out of that subject matter is ordinarily precluded."). Plaintiffs' alternative claims for breach of contract and for unjust enrichment can and should survive to discovery, and pursuant to Rule 8(d)(2), will not be dismissed for having been pleaded in the alternative. See Nat'l City Commer. Capital Co., LLC v. Global Golf, Inc., 2009 U.S. Dist. LEXIS 42780, at *3-4 (E.D.N.Y. May 20, 2009) (citing cases). Plaintiffs, however, cannot ultimately succeed on both claims.
NNA contends that plaintiffs received the benefit of their bargains in the purchase of their automobiles because they were not promised vehicles that would run forever without needing repairs. In support of its argument, NNA relies on Weiner v. Snapple Bev. Corp., 2010 U.S. Dist. LEXIS 79647, at *34-35 (S.D.N.Y. Aug. 3, 2010), in which the court dismissed a claim for unjust enrichment because plaintiffs could not show they paid a premium for the products based on defendant's misrepresentations about the quality of its beverages. Here, the costs incurred by plaintiffs, with the exception of Boyd, are known and fixed. Therefore, there is an amount known that represents the premium paid by plaintiffs for a faulty radiator. These claims may proceed.
NNA next argues that Georgia law does not recognize a claim for unjust enrichment. The court in Sheet Metal Workers Local 441 Health & Welfare Plan v. GlaxoSmithKline, PLC, 737 F. Supp. 2d 380 (E.D. Pa. 2010) dismissed a claim for unjust enrichment under Georgia law where it was the sole claim asserted under Georgia law; that is, plaintiffs did not bring claims sounding in tort or for breach of contract under Georgia law. Finding that Georgia law did not recognize stand-alone claims for unjust enrichment, the court dismissed the claim. Georgia courts do, however, recognize an independent cause of action for unjust enrichment in the products liability context. See, e.g., In re Conagra Peanut Butter Prods. Liab. Litig., 2008 U.S. Dist. LEXIS 40753, *36-41 (N.D. Ga. May 21, 2008). Plaintiffs here have asserted a breach of contract claim and tort claims, which will be evaluated under Georgia law. Therefore, the Court will not dismiss the unjust enrichment claim based on Georgia law. If, later, the Court dismisses plaintiffs' other Georgia-based claims, it will dismiss the unjust enrichment claim under Georgia law as well.
Finally, NNA challenges plaintiffs' unjust enrichment claims under New Jersey and Florida law, arguing that plaintiffs do not allege that they entered into direct transactions with Nissan. Under both New Jersey and Florida law, a claim for unjust enrichment requires a direct relationship between the parties. See, e.g., Henderson v. Volvo Cars of N. Am., LLC, 2010 U.S. Dist. LEXIS 73624, at *32-33 ("An unjust enrichment claim also requires a 'direct relationship' between the parties or a mistake on the part of the party conferring the benefit."); American Safety Ins. Serv., Inc. v. Griggs, 959 So. 2d 322, 331 (Fla. Dist. Ct. App. 2007) ("The plaintiffs must show they directly conferred a benefit on the defendants."). The one Florida plaintiff is Simons, and he does not allege that he purchased his vehicle from defendants. Therefore, his unjust enrichment claim is dismissed. Plaintiffs Schuele and Rivera allege they purchased their automobiles in New Jersey from defendants. The allegations regarding Schuele's purchase are implausible because he alleges he purchased a new 2005 Nissan Pathfinder in January 2010 in New Jersey. The Court trusts this year to be a mistake, but will not assume so in ruling on the motion. Therefore, his claim is dismissed without prejudice. Rivera's claim, on the other hand, is adequately pleaded and will survive. Of course, Rivera will have to prove that she indeed purchased her vehicles from NNA.
VI. Breach of Contract Claim
Plaintiffs' breach of contract claim alleges plaintiffs and NNA entered into various sale contracts and warranty agreements, which NNA violated. NNA moves to dismiss this claim on the ground that NNA does not actually sell any vehicles to consumers, but rather to independently owned and operated dealerships. Therefore, with the exception of the warranty agreements, there are no contracts between plaintiffs and NNA. Second, NNA asserts this claim is duplicative of the breach of warranty claims.
While the Court need not defer to erroneous conclusions of law, it will not challenge well-pleaded allegations of fact which are plausible on their face. The amended complaint alleges a contractual relationship between plaintiffs and defendants, and the Court accepts these allegations. In addition, the amended complaint alleges additional contracts between the parties besides the warranty agreements. In light of these allegations, the Court does not dismiss plaintiffs' breach of contract claim. The Court will address these arguments, if raised, on a motion for summary judgment where factual submissions are appropriate.
VII. NMC's Motion to Dismiss
NMC has filed a motion to dismiss for lack of personal jurisdiction. In support of its motion, it has provided evidence in the form of an affidavit by Yuichi Nakada, a senior manager in NMC's legal department. Plaintiffs rely upon the allegations of the complaint in opposing NMC's motion. They also assert that they are entitled to jurisdictional discovery on the issue of NMC's personal jurisdiction.
On the basis of the papers currently before it, the Court would conclude that NMC lacks sufficient contacts to New York to warrant being haled into a New York court. Nonetheless, plaintiffs are entitled to limited discovery to enable themselves to present a meaningful opposition to NMC's motion. Therefore, the Court will provide plaintiffs until January 31, 2012, to conduct discovery on NMC regarding NMC's contacts in the United States and in New York. By no later than February 7, 2012, plaintiffs are instructed to submit a status letter informing the Court how they plan to proceed regarding NMC's motion. If the Court does not receive such letter, it will grant NMC's motion on its merits.
If plaintiffs are going to file a substantive objection to NMC's motion, such opposition shall be filed no later than February 21, 2012. NMC's reply is due February 28, 2012.
CONCLUSION
For the foregoing reasons, the Court GRANTS defendant NNA's motion to dismiss (Doc. #7) as follows:
• Claims for breach of express warranty except as to plaintiffs' allegation that the warranty period was unconscionable;Plaintiffs are granted leave to file an amended complaint on or before December 30, 2011, to address any claims that were dismissed without prejudice.
• Claims for breach of implied warranty of merchantability;
• Claims under Section 349 of the New York General Business Law as to plaintiffs Schuele, Dreher, Rivera, Stewart, Boyd, Simons, and Dillard;
• Claims under Section 350 of the New York General Business Law;
• Claims under Tennessee Consumer Protection Act as to all plaintiffs except plaintiff Boyd;
• Claims under the New Jersey Consumer Fraud Act;
• Claims under the Pennsylvania Unfair Trade Practices and Consumer Protection Law;
• Claims for fraud without prejudice;
• Claims for unjust enrichment as to plaintiffs Simons and Schuele.
The Clerk is instructed to terminate NNA's motion (Doc. #7). Dated: December 16, 2011
White Plains, New York
SO ORDERED:
/s/_________
Vincent L. Briccetti
United States District Judge.
In re Samsung DLP TV Class Action Litig., 2009 U.S. Dist. LEXIS 100065, at *15-16.