220 F. Supp. 3d 1046
C.D. Cal.2016Background
- Plaintiffs Kathy Shaw and Hartwell Steele sued Nissan North America and Nissan Japan (with supplier BorgWarner described in the complaint) alleging their vehicles’ timing chain tensioning systems (TCTS) were defective, causing engine damage, safety risks, and economic loss. Plaintiffs bought Subject Nissan Vehicles that experienced TCTS failures.
- Plaintiffs allege Nissan and BorgWarner knew of the defect by 2003, shared testing results, issued technical service bulletins beginning in 2007, and made part redesigns in 2006–2007, but did not notify consumers.
- Plaintiffs sued under civil RICO, asserting Nissan and BorgWarner formed an “association‑in‑fact enterprise” whose common purpose was to conceal the TCTS defect and profit by selling defective vehicles, using mail and wire communications to further the scheme.
- Defendants moved to dismiss under Rule 12(b)(6) and Rule 9(b) (fraud pleading), arguing the complaint alleges ordinary business relationships and fails to plead an enterprise, common fraudulent purpose, or particularized predicate acts.
- The district court assumed facts pleaded as true but found the complaint alleged, at best, ordinary commercial conduct and insufficient facts to plausibly allege an enterprise or fraudulent common purpose; it dismissed the RICO and conspiracy claims without leave to amend.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether plaintiffs plausibly alleged an "enterprise" (association‑in‑fact) under §1962(c) | Nissan and BorgWarner shared a common purpose to design, sell, and conceal defective TCTS and thus formed an enterprise | Allegations describe ordinary supplier‑manufacturer interactions and parent‑subsidiary business activities, not an enterprise separate from defendants | Dismissed: plaintiffs failed to plausibly allege an enterprise; allegations reflect routine business conduct |
| Whether the complaint pleads a fraudulent common purpose (or sufficient facts to exclude innocent explanations) | Shared knowledge of defect, communications, TSBs, and part redesigns show coordinated concealment and fraudulent purpose | Communications and design decisions reflect independent, ordinary business judgments and remedial responsiveness, not a conspiracy to defraud | Dismissed: plaintiffs’ facts are consistent with innocent alternate explanations and lack allegations to render fraud plausible |
| Whether RICO predicate acts of mail/wire fraud were pleaded with particularity under Rule 9(b) | Predicate fraud occurred via coordinated mail/wire communications and TSBs used to conceal defect | Plaintiffs did not specify the who/what/when/where/how of each fraudulent communication or each defendant’s role | Dismissed (implicit): heightened pleading not satisfied because enterprise and fraud not plausibly pleaded |
| Whether a §1962(d) conspiracy claim can stand independently | Conspiracy alleged to further the RICO enterprise to conceal defect and injure consumers | Conspiracy cannot be alleged absent a plausible underlying §1962(c) violation or independent facts | Dismissed: conspiracy claim fails because substantive RICO claim fails and no independent factual basis alleged |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (pleading must state a plausible claim and not rely on conclusory allegations)
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (plausibility standard for complaints)
- Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479 (elements of a RICO claim defined)
- Boyle v. United States, 556 U.S. 938 (association‑in‑fact enterprise structural features)
- United States v. Turkette, 452 U.S. 576 (definition of enterprise under RICO)
- Cedric Kushner Promotions, Ltd. v. King, 533 U.S. 158 (enterprise must be distinct from the defendant)
- H.J., Inc. v. Northwestern Bell Tel. Co., 492 U.S. 229 (pattern requires related predicates and threat of continued criminal activity)
- United States v. Freeman, 6 F.3d 586 (discussion of RICO pattern flexibility)