584 F.Supp.3d 60
E.D.N.C.2022Background
- Plaintiffs Chad Sasso and Challenge Printing allege a 2016 Tesla Model S purchased for company use developed a recurring yellow-band defect on its 17-inch Innolux touchscreen; Tesla replaced the screen once under warranty but later said a permanent fix would cost $2,500.
- Sasso ordered the car on behalf of Challenge Printing; the purchase agreement was in Sasso’s name, ownership/title is not clearly alleged, and Sasso paid some ancillary costs (software upgrades, accessories, charging station installation).
- Plaintiffs contend Tesla never provided a hard copy of the New Vehicle Limited Warranty at delivery, that Tesla changed the online warranty versions over time, and that those changes diminished warranty rights.
- Plaintiffs pleaded state and federal claims: breach of implied and express warranty, Magnuson-Moss Warranty Act (MMWA), North Carolina Unfair and Deceptive Trade Practices Act (UDTPA), declaratory relief, breach of covenant of good faith and fair dealing, and sought damages, injunctive and punitive relief.
- Tesla removed to federal court and moved to dismiss under Rule 12(b)(1) (standing/jurisdiction) and Rule 12(b)(6) (failure to state a claim). The court granted dismissal without prejudice: Sasso was dismissed for lack of standing; Challenge Printing’s declaratory-judgment claim was dismissed as moot; all remaining claims were dismissed for failure to state plausible claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing of Sasso | Sasso paid costs and used the car for company business and thus suffered injury from the touchscreen defect and diminished warranty value | Sasso lacks an injury in fact because he does not allege ownership/title to the car; any lost vehicle/warranty value injured owner (Challenge Printing) | Sasso lacks standing; dismissed without prejudice under Rule 12(b)(1) |
| Declaratory-judgment claim (Challenge Printing) | Seeks declaration of warranty rights and that Tesla’s warranty scheme is unlawful | Tesla argues federal-case-or-controversy lacking because the warranty expired before suit, so claim is moot | Declaratory-judgment claim dismissed for lack of subject-matter jurisdiction (moot) |
| Breach of implied warranty of merchantability | The touchscreen defect affects safety, usability, and thus merchantability | The vehicle remains fit for ordinary purpose (transportation); the defect is cosmetic and does not render the car unsafe or inoperable | Claim dismissed under Rule 12(b)(6) for failure to plausibly allege the car was unfit for ordinary use |
| Breach of express warranty / MMWA (derivative and standalone) | Tesla failed to provide warranty pre-sale and later changed warranty versions, diminishing consumer rights and breaching express promises | Plaintiffs fail to plead the defect existed at the time of sale, fail to allege pre-sale request or reliance, and derivative MMWA claims rise or fall with state warranty claims | Express-warranty claims dismissed for failure to plausibly allege defect at sale or proximate causation; derivative MMWA dismissed; standalone MMWA dismissed for failure to allege actual, cognizable damages |
| NC UDTPA (misrepresentations and warranty-scheme) | Tesla misrepresented warranty terms, withheld correct warranty, and made unilateral harmful changes | Misrepresentation allegations lack particularity (Rule 9(b)); alleged warranty changes do not plausibly cause a concrete injury tied to the touchscreen problem | Misrepresentation-based UDTPA allegations dismissed under Rule 9(b); scheme-based UDTPA allegations dismissed for failure to plead particularized injury |
| Breach of covenant of good faith & punitive damages | Tesla acted unfairly in administering warranty and modifying terms | The implied-covenant claim cannot succeed separate from an underlying contract/warranty breach; punitive damages depend on viable underlying claims | Claim for breach of covenant and punitive damages dismissed because underlying contract/warranty claims fail |
Key Cases Cited
- Lujan v. Defenders of Wildlife, 504 U.S. 555 (standing requires injury in fact, traceability, and redressability)
- Spokeo, Inc. v. Robins, 578 U.S. 330 (injury-in-fact must be concrete and particularized)
- Steel Co. v. Citizens for a Better Env't, 523 U.S. 83 (court must decide subject-matter jurisdiction before merits)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (plausibility pleading standard at Rule 12(b)(6))
- Ashcroft v. Iqbal, 556 U.S. 662 (courts need not accept legal conclusions; pleadings must plausibly state claims)
- Dewitt v. Everready Battery Co., 355 N.C. 672 (elements of breach of implied warranty under North Carolina law)
- Walker v. Fleetwood Homes of N.C., Inc., 362 N.C. 63 (elements and standards for NC unfair and deceptive trade practices claim)
- Carlson v. General Motors Corp., 883 F.2d 287 (vehicle is generally merchantable where it provides safe, reliable transportation)