I. Introduction
The Plaintiffs, eight owners of cars manufactured by the Defendants who seek to represent others similarly situated, bring claims against the Defendants, Nissan North America, Inc. and Nissan Motor Company, based upon an alleged defective component in the cars. Their claims include counts for breach of contract; breach of the implied covenant of good faith and fair dealing; breach of an express warranty; breach of an implied warranty of merchantability; unjust enrichment; violations of the consumer protection statutes of Oregon, Colorado, Texas, Massachusetts, and North Carolina; and a violation of the Magnuson-Moss Warranty Act,
II. Factual Allegations
The Court accepts all non-conclusory facts alleged in the complaint, D. 1, as true, Ocasio-Hernandez v. Fortuño-Burset,
The Defendants manufacture and sell or lease cars. Certain models of these cars, identified as the "Class Vehicles," contain a defective Timing Chain Tensioning System ("TCTS"). ¶¶ 1, 2. As alleged, the defect in the TCTS causes the engine of the car to become damaged, necessitating expensive repairs, and potentially also posing a safety risk to the occupants of the car. ¶¶ 4, 59, 62, 101. The Defendants allegedly knew and should have known, at the time of sale or lease of the Class Vehicles, that the TCTS was defective. ¶¶ 5, 61, 71. However, instead of disclosing the defect in the TCTS, the Plaintiffs contend that the Defendants
The Defendants offer two warranty products on the Class Vehicles: first, the "Basic Warranty," which covered repairs during the first 36,000 miles or 36 months (whichever occurs first), and second, the "Powertrain Warranty," which covered repairs during the first 60,000 miles or 60 months (whichever occurs first). ¶ 6. The warranty covers repairs for defects in "materials and/or workmanship." ¶ 127. The Plaintiffs allege that the Defendants intentionally set these warranty limits so that the warranty coverage would expire before the defect in the TCTS would manifest itself. ¶ 64.
The named Plaintiffs all purchased or leased Class Vehicles manufactured by the Defendants from various dealerships. ¶¶ 14, 19, 24, 29, 34, 40, 45. Plaintiff Sarah Duncan is a citizen of Massachusetts who purchased a 2007 Nissan Maxima in Massachusetts in 2010. 114. In 2016, when her vehicle had approximately 127,000 miles, she was informed by a technician at a Nissan dealership that the TCTS needed to be replaced at a cost of approximately $1,500. ¶¶ 17-18. She was also informed that Nissan would not cover the cost of the repair. ¶ 18.
Plaintiff Richard Silver is a citizen of Massachusetts who purchased a 2007 Nissan Maxima in Massachusetts in 2007. ¶ 19. In 2014, when his vehicle had approximately 74,024 miles, he was informed by a technician at a Nissan dealership that the TCTS needed to be replaced, and that Nissan would not cover the cost of the repair. ¶¶ 22-23. He spent $1,641.45 replacing the TCTS. ¶ 23.
Plaintiffs Anthony and Judy Weissenburger are citizens of Oregon who purchased a 2004 Nissan Maxima in Oregon in 2004. ¶ 24. In 2011, when their vehicle had approximately 39,666 miles, they were informed by a technician at a Nissan dealership that the TCTS needed to be replaced and that Nissan would not cover the cost of the repair. ¶¶ 27-28. They spent approximately $1,400 replacing the TCTS. ¶ 28.
Plaintiff Kevin Fry is a citizen of Colorado who purchased a 2009 Nissan Frontier in Colorado on or about April 18, 2009. ¶ 29. On or about June 15, 2015, when his vehicle had approximately 58,100 miles, he was informed by a technician at a Nissan
Plaintiff Shaun Cooney is a citizen of Colorado who purchased a 2007 Nissan Xterra in 2016 in Colorado. ¶ 34. Later in 2016, when his vehicle had approximately 78,000 miles, he was informed by a technician at a Nissan dealership that the TCTS needed to be replaced and that Nissan would not cover the cost of the repair. ¶¶ 38-39. He spent approximately $928.01 replacing the TCTS. ¶ 39.
Plaintiff Clifton Stewart is a citizen of Texas who purchased a 2006 Nissan Frontier in 2006 in Texas. ¶ 40. In 2016, when his vehicle had approximately 87,333 miles, he was informed by a technician at a Nissan dealership that the TCTS needed to be replaced and that Nissan would not cover the cost of the repair. ¶¶ 43-44. He spent approximately $1,625.77 replacing the TCTS. ¶ 44.
Plaintiff Michelle Lim Stewart is a citizen of North Carolina who purchased a 2007 Nissan Pathfinder in North Carolina. ¶ 45. In 2015, when her vehicle had approximately 51,000 miles, she was informed by a technician at a car repair shop that the TCTS needed to be replaced. ¶¶ 48-49. She paid approximately $1,910 replacing the TCTS. ¶ 49.
III. Procedural History
On October 21, 2016, the Plaintiffs filed their complaint, D.1. The Defendants moved to dismiss, D. 14. This Court heard argument on the motion to dismiss and took the motion under advisement. D. 38.
IV. Discussion
A. Standard of Review
On a motion to dismiss based upon Rule 12(b)(6), the Court will dismiss a complaint that fails to allege adequate facts "to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly,
B. Choice of Law
"A federal court sitting in diversity," as this Court does here, "applies state substantive law." Levin v. Dalva Bros., Inc.,
C. Breach of Express Warranty (Count VI)
In the complaint, the Plaintiffs allege that they entered into either the Basic Warranty or Powertrain Warranty with the Defendants and that the Defendants breached that warranty by failing to cover the cost of repairing the defective TCTSs. ¶¶ 170, 171.
The Defendants first contend that the complaint fails to state a claim for relief because the warranty only covers "repairs needed to correct defects in the materials or workmanship," D. 15-1 at 8; D. 15-2 at 10; D. 15-3 at 8; D. 15-4 at 8,
In response, the Plaintiffs contend that the Defendants mischaracterize the allegations in the complaint. D. 20 at 25. The complaint alleges that the "Defendants failed to adequately ensure proper materials selection, research, design, testing and/or manufacture of the [TCTS]." ¶ 82. Thus, even under the Defendants' interpretation of the phrase "material or workmanship," the complaint pleads facts sufficient to state a claim for breach of the express warranty because a failure in the "manufacture" of the TCTS does refer to a departure of the product from its intended design.
The Defendants next contend that none of the Plaintiffs' repairs were made during the period of warranty coverage and thus that the Defendants were not obligated to reimburse Plaintiffs for those repairs under the terms of the warranty. D. 15 at 21-22. The Plaintiffs counter by arguing that the TCTS malfunctioned during the warranty period and thus that the repairs were covered under the terms of the warranty. D. 20 at 18-19. Moreover, the Plaintiffs contend that the warranty limits are not enforceable because the warranty limits were unconscionable, due to the Defendants' concealment of the defect from the Plaintiffs.
i. The Terms of the Warranty
The terms of the warranty do not support the Plaintiffs' position. The text of the warranty agreement, for each relevant model year, provides:
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.... The Powertrain coverage period is 60 months or 60,000 miles, whichever comes first. This warranty covers any repairs needed to correct defects in materials or workmanship."
D. 15-1 at 8; D. 15-2 at 10; D. 15-3 at 8; D. 15-4 at 8. As the Defendants point out, the warranty agreement is thus an agreement to provide repairs within certain time and mileage restrictions; not to remedy problems that become manifest within certain time and mileage restrictions, as the Plaintiffs contend. As the First Circuit observed, citing law from multiple jurisdictions, "case 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." Canal Elec. Co. v. Westinghouse Elec. Co.,
ii. Unconscionability of the Warranty Limits
The Plaintiffs contend that, because of the gross disparity in bargaining power between them and the Defendants, the lack of meaningful choice on the part of the Plaintiffs in determining those time limits, and the Defendants' knowledge and active concealment of the defect, the warranty limits are unconscionable. D. 20 at 19.
Although the substantive laws of five different states are at issue, all five have
The comment to that provision in the U.C.C. indicates that the "basic test is whether, in the light of the general commercial background and the commercial needs of the particular trade or case, the clauses involved are so one-sided as to be unconscionable under the circumstances existing at the time of the making of the contract," and that the "principle is one of the prevention of oppression and unfair surprise ... and not of disturbance of allocation of risks because of superior bargaining power."
Courts in the five states have interpreted the unconscionability provision of the UCC in similar ways. In North Carolina, "[t]o find unconscionability there must be an absence of meaningful choice on part of one of the parties [procedural unconscionability] together with contract terms which are unreasonably favorable to the other [substantive unconscionability]." Rite Color Chem. Co. v. Velvet Textile Co., Inc.,
In support of their claim that the warranty limits are unconscionable under the laws of all five states, the Plaintiffs point to Carlson v. Gen. Motors Corp.,
The Defendants point to cases declining to find a durational limit on a warranty to be unconscionable, even where the purchaser alleges that the manufacturer was aware that the defect would manifest after the end of the warranty. Santos v. SANYO Mfg. Corp., No. 12-cv-11452-RGS,
D. Implied Warranty of Merchantability (Count VII)
The complaint also alleges a count of a breach of the implied warranty of merchantability. The Defendants contend that such a claim is barred by the statute of limitations. In Colorado, the statute of limitations is three years.
The Plaintiffs do not contest either the length of the various statutes of limitations or the time at which the action accrued. They instead contend that the statute of limitations has been tolled by the Defendants' "fraudulent concealment" of the defect from the Plaintiffs, D. 20 at 29-31, namely: the Defendants' continued sale of the Class Vehicles notwithstanding their knowledge of the defect; the Defendants' redesign of the vehicles to fix the defect; the Defendants' giving goodwill adjustments to certain consumers for repairs necessitated by the defect; the Defendants' issuing of TSBs regarding the defect; the Defendants' issuance of a 2009 press release stating that the Class Vehicles feature a "silent timing chain"; and the Defendants' issuing of other statements regarding the positive attributes of the Class Vehicles. D. 20 at 30-31.
The five states offer similar formulations of the fraudulent concealment standard. As the Oregon Supreme Court explained, "one who wrongfully conceals material facts and thereby prevents discovery ... of the fact that a cause of
The Defendants contend, and the Plaintiffs do not contest, that fraudulent concealment necessarily involves an act of concealment by the defendant (at least in the absence of a duty to disclose). See Geo. Knight & Co., Inc., v. Watson Wyatt & Co.,
The Plaintiffs do not contend that the Defendants were under any duty to disclose, but rather contend that the Defendants engaged in active concealment of the deficiency in the TCTS. However, most of the actions by the Defendants, even as alleged to constitute active concealment, simply refer to the non-disclosure of the TCTS defect. Continuing to sell the Class Vehicles notwithstanding knowledge of the defect, changing the TCTS design in subsequent models, giving goodwill adjustments to certain consumers for repairs necessitated by the defect, and issuing TSBs regarding the defect all do not involve an action that would make it harder for the Plaintiffs to discover the nature of the defect.
The two remaining actions identified by the Plaintiffs similarly do not rise to the level of active concealment. The Defendants' "representations and warranties regarding the quality, durability, and other material characteristics of their vehicles," ¶ 83, and the Defendants' 2009 press release by the Defendants describing the Class Vehicles as having a "silent timing chain," ¶ 91, extend beyond a mere nondisclosure. However, the Plaintiffs do not allege any facts to support the inference that these two statements were either intended to conceal the discovery of the accrual of the cause of action, or that these statements actually concealed the discovery of the accrual of the cause of action.
The Plaintiffs' reliance upon Falco v. Nissan N. Am., Inc., 13-cv-00686,
E. Violation of the Magnuson-Moss Warranty Act (Count X)
The complaint pleads one count of a violation of the Magnuson-Moss Warranty Act. That statute provides, in relevant part, that "a consumer who is damaged by the failure of a supplier ... to comply with any obligation ... under a written warranty, implied warranty, or service contract, may bring suit for damages."
F. Breach of Contract (Count IX)
In the complaint, the Plaintiffs allege that they entered into "contracts and warranty agreements" with the Defendants, and that the Defendants breached these agreements by providing Plaintiffs with cars that had defective TCTSs. ¶¶ 196, 198. The Defendants, in their motion to dismiss, contend that the Plaintiffs fail to identify any contract that was breached, beyond the express warranty. D. 15 at 42. The Plaintiffs contend that the express warranty itself constitutes a contract that the Defendants breached. D. 20 at 40-41. The Defendants respond that, to the extent that the express warranty is the contract at issue, the count for breach of contract should be dismissed as redundant with the breach of express warranty claim. D. 22 at 26.
At the pleading stage, however, mere redundancy between two separate counts is not a sufficient reason to dismiss a count of the complaint. See In re RCK Modular Home Sys., Inc.,
G. Unjust Enrichment (Count VIII)
The complaint pleads a count of unjust enrichment, on the theory that the Defendants' misrepresentations regarding the TCTS defect render it unjust for the Defendants to keep the benefit of not paying for the repairs that the Plaintiffs paid for to the TCTS. ¶¶ 187-194. The Defendants contend that, because the Defendants' responsibility for covering repairs was governed by the warranty agreement, the warranty agreement displaces any common law claim for unjust enrichment. See Fortune Prod. Co. v. Conoco, Inc.,
H. Violation of the Oregon Unlawful Trade Practices Act (Count I)
The complaint alleges that the Defendants violated the Oregon Unlawful Trade Practices Act. The Defendants contend, in their motion to dismiss, that the claim under the Oregon Unlawful Trade Practices Act is barred by the statute of limitations, because the statute of limitations for that claim runs for one year after the discovery of the practice. D. 15 at 32. The Plaintiffs' response to this argument is to refer back to their equitable tolling argument. D. 20 at 36. But, for the same reasons that the equitable tolling argument failed with respect to the count for breach of the implied warranty of merchantability, that argument fails here as well.
I. Violation of the Colorado Consumer Protection Act (Count II)
The complaint alleges that the Defendants violated the Colorado Consumer Protection Act. The Defendants contend that the complaint fails plead facts sufficient to state a claim for relief under that Act because the complaint only alleges that the Defendants engaged in a failure to disclose material information, but does not describe the information that the Defendants failed to disclose with sufficient particularity. D. 15 at 33-34 (citing cases). Since Plaintiffs make no particular response to this specific argument, D. 20 at 32-33, the Court dismisses this claim for relief under the Colorado Consumer Protection Act.
J. Violation of the Texas Deceptive Trade Practices Consumer Protection Act (Count III)
The complaint alleges that the Defendants violated the Texas Deceptive Trade
The Plaintiffs respond that the Defendants' intent to induce the Plaintiffs to purchase the vehicles in failing to disclose the defect in the TCTS can be reasonably inferred from the facts pled in the complaint, specifically the allegation that the Defendants failed to disclose information that it knew concerning the TCTS. D. 20 at 37-38. They further contend that an intent to induce can be inferred from circumstantial evidence. See Siddiqui v. Fancy Bites, LLC,
However, such bare allegations here, however, do not support an inference the Defendants did so with the intent to induce the Plaintiffs to purchase the Class Vehicles. D. 22 at 14-15. Thus, the complaint fails to plead facts sufficient to state a claim for relief under the Texas Deceptive Trade Practices Consumer Protection Act.
K. Violation of the Massachusetts Consumer Protection Act, Chapter 93A (Count IV)
The Defendants contend that the complaint fails to plead facts sufficient to state a claim for relief under Chapter 93A, because this statute requires that the Plaintiffs show that the allegedly defective product "fails to conform to a legally binding standard." D. 15 at 36-37 (citing Iannacchino v. Ford Motor Co.,
The record is not sufficiently developed at this stage to dismiss this count of the complaint. In Iannacchino, the court's reasoning is that because the relevant federal agency, the National Highway Traffic Safety Administration ("NHTSA"), sets safety standards and enforces them,
The complaint establishes that NHTSA has a process for reviewing complaints from consumers, investigating the complaints where warranted, and issuing a recall where justified. See ¶ 94. The complaint does not make clear whether NHTSA would be capable of compensating the Plaintiffs for the expenses they incurred in repairing the TCTS defect. Thus, based on the pleadings in the complaint alone, the injury alleged by the Plaintiffs is not sufficiently similar to the injury alleged in Iannacchino to render the allegations insufficient to state a claim for relief under Chapter 93A.
L. Violation of the North Carolina Unfair and Deceptive Trade Practices Act
The complaint alleges that the Defendants violated the North Carolina Unfair and Deceptive Trade Practices Act ("UDTPA"), codified at
North Carolina has adopted the economic loss rule, which prohibits recovery for economic loss in tort. Instead, such claims are governed by contract law-in this case, the UCC. The courts have construed the term "economic losses" to include damages to the product itself. The rationale for the economic loss rule is that the sale of goods is accomplished by contract and the parties are free to include, or exclude, provisions as to the parties' respective rights and remedies, should the product prove to be defective. To give a party a remedy in tort, where the defect in the product damages the actual product, would permit the party to ignore and avoid the rights and remedies granted or imposed by the parties' contract. Where a defective product causes damage to property other than the product itself, losses attributable to the defective product are recoverable in tort rather than contract.
Other courts have applied North Carolina's economic loss doctrine to prevent recovery under UDTPA for claims arising out of the defect of a certain product alleging damage only to the product itself. See Bussian,
The Plaintiffs respond that the economic loss doctrine does not bar their claims because, in their complaint, they plead that the Defendants made specific misrepresentations regarding the TCTS system. D. 20 at 35 n. 16. But the cases they cite do not support their contention that the economic loss doctrine articulated in Moore does not apply to situations involving misrepresentations by the manufacturer. In Pearce v. Am. Def. Life Ins. Co.,
M. Declaratory Relief
The complaint pleads for a declaratory judgment "declaring that the remedial work necessary to correct the defect [TCTS] and its resulting damage alleged herein with respect to the vehicles' [TCTS] are rightfully covered warranty claims." ¶ 216. The Defendants contend that the Plaintiffs have not asserted a legally cognizable injury sufficient to give them standing to bring the declaratory judgment claim, because the express warranty did not cover the defect in the TCTS. D. 15 at 44-45. See Lujan v. Defs. of Wildlife,
V. Conclusion
For the foregoing reasons, the Defendants' motion to dismiss, D. 14, is ALLOWED with respect to Count I (Oregon Unlawful Trade Practices Act), Count II (Colorado Consumer Protection Act), Count III (Texas Deceptive Trade Practices Consumer Protection Act), Count V (North Carolina Unfair and Deceptive Trade Practices Act), Count VII (Breach of Implied Warranty of Merchantability), and DENIED with respect to the remaining counts.
So Ordered.
Notes
All paragraph references are to the complaint, D. 1, unless otherwise stated.
Although the warranty agreements were not attached to the complaint, they were attached to the Defendants' motion to dismiss and the Plaintiffs do not challenge the authenticity of those warranty agreements. Accordingly, the Court may properly consider them in adjudicating the motion to dismiss. Beddall v. State St. Bank and Tr. Co.,
The Defendants also contend that the claim for breach of express warranty under Oregon law is barred by the statute of limitations. D. 15 at 26. The Plaintiffs respond that the statute of limitations was tolled by a nationwide class action lawsuit that was later narrowed to exclude the Oregon plaintiffs. D. 20 at 23-24. The Defendants make no response to this argument in their reply brief, D. 22, so the Court declines to dismiss the Oregon claim on statute of limitations grounds.
The Plaintiffs cite, as supplemental authority, Hays v. Nissan North Am., 17-cv-00353,