Martell v. General Motors LLCMartell v. General Motors LLC
Case Information
IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF OREGON WILLIAM MARTELL , individually and on Case No. 3:20-cv-284-SI behalf of all others similarly situated,
OPINION AND ORDER Plaintiff,
v.
GENERAL MOTORS LLC ,
Defendant. John E. Tangren, Daniel R. Ferri, and Adam J. Levitt, D ICELLO L EVITT G UTZLER LLC , Ten North Dearborn Street, Eleventh Floor, Chicago, IL 60602; Kim D. Stephens, T OUSLEY B RAIN S TEPHENS PLLC , 1700 Seventh Avenue, Suite 2200, Seattle, WA 98101; and W. Daniel “Dee” Miles III, H. Clay Barnett III, and J. Mitch Williams, B EASLEY , A LLEN , C ROW , M ETHVIN , P ORTIS & M ILES PC , 272 Commerce Street, Montgomery, AL 36104. Of Attorneys for Plaintiff and the Proposed Class.
April N. Ross and Kathleen Taylor Sooy, C ROWELL & M ORING LLP , 1001 Pennsylvania Avenue NW, Washington, DC 20004; and Jennifer L. Campbell and Stephanie C. Holmberg, S CHWABE , W ILLIAMSON & W YATT PC , 1211 SW Fifth Avenue, Suite 1900, Portland, OR 97204.
Of Attorneys for Defendant.
Michael H. Simon, District Judge.
Plaintiff William Martell brings this putative class action against General Motors LLC (GM or Defendant), alleging breach of express warranty, violation of the Magnuson Moss Warranty Act (MMWA), fraudulent omission, violation of the Oregon Unlawful Trade Practice Act (UTPA), and unjust enrichment. Plaintiff asserts all claims on behalf of an Oregon statewide class, except the MMWA claim, which he brings on behalf of a nationwide class. Plaintiff seeks monetary, declaratory, and injunctive relief. GM moves to dismiss Plaintiff’s Complaint for failure to state a claim and to strike the class allegations. For the reasons below, GM’s motion to dismiss and to strike is GRANTED IN PART and DENIED IN PART.
STANDARDS
A. Motion to Dismiss
A motion to dismiss for failure to state a claim may be granted only when there is no
cognizable legal theory to support the claim or when the complaint lacks sufficient factual
allegations to state a facially plausible claim for relief.
Shroyer v. New Cingular Wireless Servs.,
Inc.
,
A complaint must contain sufficient factual allegations to “plausibly suggest an
entitlement to relief, such that it is not unfair to require the opposing party to be subjected to the
expense of discovery and continued litigation.”
Starr
,
B. Standing
The U.S. Constitution confers limited authority on the federal courts to hear only active
cases or controversies brought by persons who demonstrate standing.
See Spokeo, Inc. v. Robins
,
A plaintiff “must show standing with respect to each form of relief sought.”
Ellis v.
Costco Wholesale Corp.
,
When a plaintiff seeks prospective injunctive relief, threat of repeated future injury may
suffice to provide standing.
See Nordstrom v. Ryan
,
A plaintiff seeking prospective injunctive relief “must demonstrate ‘that he is realistically threatened by a repetition of [the violation].’” Armstrong v. Davis,275 F.3d 849 , 860–61 (9th Cir. 2001) (alteration in original) (quoting City of L.A. v. Lyons,461 U.S. 95 , 109 (1983)), abrogated on other grounds by Johnson v. California ,543 U.S. 499 , 504–05 (2005). A threat of repetition can be shown “at least two ways.” Id. at 861. “First, a plaintiff may show that the defendant had, at the time of the injury, a written policy, and that the injury ‘stems from’ that policy.” Id. “Second, the plaintiff may demonstrate that the harm is part of a ‘pattern of officially sanctioned . . . behavior, violative of the plaintiffs’ [federal] rights.’ ” Id. (alterations in original) (quoting LaDuke v.
Nelson,
BACKGROUND
In 2011, Plaintiff bought a 2011 Chevrolet Silverado equipped with a Generation IV 5.3 Liter V8 Vortec 5300 LC9 engine (Subject Engine) from a Chevrolet dealership in The Dalles, Oregon (Dealership). Plaintiff’s car was covered by GM’s standard five-year warranty. In 2015, Plaintiff noticed that his vehicle was consuming excessive engine oil. Plaintiff continued to have related engine problems, causing him to need repeated service from the Dealership. Throughout 2015 and 2016, the Dealership repeatedly told Plaintiff that his oil consumption level was normal.
In late 2016, Plaintiff’s counsel investigated a suspected Oil Consumption Defect. In
July 2017, Plaintiff’s Dealership conducted an oil consumption test on Plaintiff’s car. Upon
receiving the results of this test—confirming the vehicle was using excessive oil—Plaintiff
joined a class action lawsuit in the Northern District of California (the
Sloan
Action) on
August 31, 2017.
See Sloan v. General Motors LLC
, Case No. 3:16-cv-07244-EMC (N.D. Cal.).
Plaintiff was dismissed from the
Sloan
Action on February 11, 2020 because, after several
decisions applying the U.S. Supreme Court’s personal jurisdiction ruling in
Bristol-Myers Squibb
Co. v. Super. Ct. of Cal., S.F. Cnty.,
Plaintiff filed this lawsuit on February 19, 2020, alleging that the Subject Engine is defectively designed. Compl. (ECF 1). Plaintiff alleges that the primary cause of the Oil Consumption Defect is that the “piston rings that GM installed within the [Subject Engines] do not maintain sufficient tension to keep oil in the crankcase.” Compl. at ¶ 8. Plaintiff also alleges other problems, including issues with the Active Fuel Management System, the Positive Crankcase Ventilation (PCV) system, the Oil Life Monitoring System, and the oil pressure gauge indicator on the dashboard. He contends that GM knew of and intentionally concealed the Oil Consumption Defect and that GM has failed to compensate Plaintiff and the putative class members.
DISCUSSION
GM moves to dismiss all of Plaintiff’s claims under Rule 12(b)(6) of the Federal Rules of Civil Procedure. GM further argues that Plaintiff lacks standing to request injunctive relief and also moves to dismiss Plaintiff’s nationwide MMWA claim under Rule 12(b)(1). In the alternative, GM moves to strike Plaintiff’s class allegations.
A. Breach of Express Warranty
GM argues that Plaintiff’s express warranty claim fails because GM’s Five-Year Limited
Warranty applies only to manufacturing defects and Plaintiff alleges a design defect.
See, e.g.
,
Compl. at ¶ 3 (“the Class Vehicles were engineered to fail”) and ¶ 75 (“the design flaws caus[ed]
excessive oil consumption in the Class Vehicles”). Design defects are distinct from
manufacturing defects. A manufacturing defect occurs when a manufacturer constructs a single
product in a substandard manner, generally resulting in a deviation from the manufacturer’s
intended result or from other seemingly identical products.
See, e.g.
,
Taylor v. Bos. Sci.
Corp.
,
Plaintiff alleges in his Complaint that the text of the warranty provided: “The warranty covers repairs to correct any vehicle defect . . . related to materials or workmanship occurring during the warranty period.” (Ellipses in Plaintiff’s Complaint.) On the basis of this warranty text, as alleged, Plaintiff asserts that the warranty covers defects related to materials or workmanship and that such coverage should extend to the Oil Consumption Defect and to design defects generally. Defendant argues that the phrase “materials or workmanship” applies only to manufacturing defects, but not to design defects such as the Oil Consumption Defect.
Courts are not unanimous on whether an express warranty’s coverage of defects in “materials or workmanship” (or the phrase “materials and workmanship”) extends to design defects or is limited to manufacturing defects. Most decisions hold that this text in an express warranty is limited to manufacturing defects and does not cover design defects. [1]
A few courts, however, have concluded that warranty language providing coverage of
defects in manufacturing or workmanship covers design defects. In
Koulajian v. Trek Bicycle
Corp.
,
In the context of analyzing whether a plaintiff could proceed with an unjust enrichment claim, the district court in In re Saturn L-Series Timing Chain Prods. Liab. Litig. , 2008 WL 4866604 (D. Neb. Nov. 7, 2008), concluded that an express warranty with similar text encompassed a claim of design defect. Id. at *14-15. The court noted that “design is integrated into each step of the manufacturing process and affects both materials and workmanship.” Id. at *15. Thus, the court concluded, the plaintiff’s unjust enrichment claim was barred by the express warranty in that case.
Finding no persuasive and authoritative analysis suggesting that the phrase “materials or
workmanship” should be read to include design defects, and a large body of law holding
otherwise, the Court finds that the term “materials or workmanship” in the warranty at issue
applies only to manufacturing defects, not to design defects. Although the Court is persuaded
that “defects in materials or workmanship” refers only to manufacturing defects, how this phrase
is given meaning within the express warranty is a matter of contract interpretation.
See Oregon
Azaleas, Inc. v. W. Farm Serv., Inc.
,
The Court requested and received the full text of the express warranty, which reads as follows without the ellipses added by Plaintiff in his Complaint:
The warranty covers repairs to correct any vehicle defect, not slight noise, vibrations, or other normal characteristics of the vehicle related to materials or workmanship occurring during the warranty period.
ECF 31-2 at 9 (“Repairs Covered”) (emphasis added).
In support of Plaintiff’s assertion that the warranty covers design defects, Plaintiff cited
but did not discuss
Weiss v. General Motors LLC
,
B. Magnuson Moss Warranty Act
Plaintiff’s claim under the MMWA rests on his predicate state law claim.
See Clemens v.
DaimlerChrylser Corp.
,
The Court also notes that Plaintiff may not bring MMWA class allegations unless 100
named plaintiffs assemble.
See Floyd v. Am. Honda Motor Co
.,
C. Fraudulent Omission
GM argued in its briefing that Plaintiff’s fraudulent omission claim must be dismissed because it is preempted by Oregon’s product liability statute, Oregon Revised Statutes (ORS) §§ 30.900, et seq. Before oral argument, the Court provided specific case law and questions for the parties to address at oral argument on this issue. At oral argument, GM conceded that under Oregon law the products liability statute does not “preempt” other common law claims but merely “embraces” those claims such that the statutory framework applies to those theories of liability. [2] Thus, GM withdrew this argument.
GM argues, however, that Plaintiff’s allegations of fraud are inadequate because they do
not meet the heightened pleading standard of Rule 9(b) of the Federal Rules of Civil Procedure
for claims sounding in fraud, fail to demonstrate that GM had a duty to disclose the alleged
material omissions, fail to allege reliance, and fail to show GM’s knowledge. To satisfy
Rule 9(b), a plaintiff’s allegations must be “specific enough to give defendants notice of the
particular misconduct which is alleged to constitute the fraud charged so that they can defend
against the charge and not just deny that they have done anything wrong.”
Semegen v.
Weidner
,
Oregon law recognizes four theories of fraud: (1) affirmative misrepresentation;
(2) omission of a material fact when there is an independent duty to disclose; (3) omission of a
material fact needed to make a “half-truth” not misleading; and (4) actual or active concealment.
See Unigestion Holding, S.A. v. UPM Technology, Inc
.,
To allege an omission claim properly, a plaintiff must show a duty to disclose.
See
Benson Tower Condo. Owners Ass’n v. Victaulic Co.
,
Plaintiff appears at times, especially in his Response brief, to be alleging a half-truth. To allege a half-truth properly, a plaintiff must allege reliance upon the communication from which the information was omitted. The Court has discussed elsewhere the element of reliance for a half-truth claim:
In cases involving half-truths, the reliance element of a fraud claim is more complex. In Hynix Semiconductor Inc. v. Rambus Inc. , the Northern District of California addressed at summary judgment the issue of establishing reliance in the context of a half-truth under California's fraud law. [3]2007 WL 4209399 (Nov. 26, 2007). The court reasoned that “[o]rdinarily, one must prove that one read or heard a misrepresentation to have relied on it,” but “[o]n the other hand, an omission is never conveyed, making it impossible for one to hear or read it.” Id. at *7. The court further reasoned that “the half-truth calculated to deceive likely puts the one who hears it at ease,” but that it “is the omitted portion of the half-truth that would have led a person to behave differently.” Id. The court added that, given this dynamic, “to establish reliance in a case premised on ‘half-truths,’ a plaintiff must show that they heard the half-truth, but can be found to have relied on it if they would have behaved differently ‘had the omitted information been disclosed.’” Id.
The reasoning in the
Hynix
case is consistent with Oregon fraud
law.
Cf. Gregory
,
Plaintiff recites numerous advertisements, brochures, radio ads, and other public statements by Defendant in the Complaint that Plaintiff alleges were misleading half-truths. Plaintiff does not, however, allege that he saw or heard any of those statements. Plaintiff alleges in his fraudulent omission claim that he “justifiably acted or relied to [his] detriment upon GM’s omissions of fact concerning the . . . Oil Consumption”—in other words that he relied on the lack of knowledge of the material information about the defect. To establish reliance in a half-truth case, however, Plaintiff must show that he heard the half-truth, or that another person heard the half-truth and conveyed it to Plaintiff, who then relied upon it. See Benson Tower , 2014 WL 5285475, at *13 (noting that reliance can in some cases be derivative and that it can be “sufficient to show that the defendant made a representation to a third party with the intention that it be communicated to and acted upon by the plaintiff” (simplified)). Plaintiff alleges neither and thus fails adequately to plead reliance. Because Plaintiff has not plead reliance, his fraudulent omission claim cannot survive on a half-truth theory.
The remaining theory under which Plaintiff may pursue a fraudulent omission theory is
active or actual concealment. Plaintiff appears to bring such a theory with the allegations in the
Complaint at ¶¶ 135-136 and 79-80.
See also Sloan v. General Motors
,
Plaintiff’s Fraudulent Omission claim (Count 4) is dismissed without prejudice and with leave to replead. The Court declines, at this time, to address GM’s other arguments against Plaintiff’s fraud claim. The Court will consider those arguments if Plaintiff chooses to replead this claim. The Court notes, however, that under Rule 9(b) a defendant’s state of mind ( i.e. , knowledge and intent) may be “alleged generally.”
D. Oregon’s Unlawful Trade Practices Act
1. Statute of Limitations
Oregon’s UTPA provides that a suit “must be commenced within one year after the
discovery of the unlawful method, act or practice.” ORS § 646.638(6). Under the discovery rule,
a cause of action accrues, and thus a statute of limitations begins to run, “when the plaintiff
knows or in the exercise of reasonable care should have known facts which would make a
reasonable person aware of a substantial possibility” that the elements of their claim existed.
Gaston v. Parsons
,
Oregon law provides a two-step analysis for determining whether a plaintiff reasonably
should have known of the claims asserted.
Moradi v. ReconTrust Co., N.A.
,
GM contends that Plaintiff has exceeded the one-year statute of limitations. GM argues that Plaintiff was on inquiry notice when he began to notice problems with his vehicle in 2015 and brought it in for service. GM further argues that Plaintiff could have discovered GM’s allegedly unfair or deceptive conduct with reasonably diligent conduct. GM notes that Plaintiff did not file suit until he joined the Sloan Action on August 31, 2017, more than one year after the problems began with Plaintiff’s vehicle in 2015.
In his response brief, Plaintiff argues that the limitations period for this claim was tolled with the filing of the Sloan Action in the Northern District of California on December 19, 2016. Plaintiff also argues that the limitations period between his discovery of his vehicle’s oil related engine problems and the filing of his claim in the Sloan Action was tolled by GM’s fraudulent concealment. The Complaint alleges that neither Plaintiff nor the class could have discovered that their vehicles were defective during the limitations period, even with reasonable diligence. Plaintiff also alleges that he could not have known about the alleged Oil Consumption Defect until after Plaintiff’s counsel’s investigation in late 2016. Plaintiff further alleges that although he brought his vehicle in for numerous servicing visits, he was repeatedly told that his vehicle’s oil consumption was normal under GM standards and it was not until July 2017 that Plaintiff received an oil consumption test that confirmed his vehicle’s excessive oil consumption problem.
At this stage of the litigation, the Court does not find that the only conclusion that a reasonable jury could reach is that Plaintiff knew or should have known before August 31, 2016 about GM’s alleged conduct under the UTPA. Accordingly, Defendant’s motion to dismiss this claim as untimely is denied. Based on this ruling, the Court need not reach a decision on Plaintiff’s tolling argument.
2. Adequacy of Allegations
GM argues that Plaintiff must specifically allege deceptive advertising, reliance, and causation and that Plaintiff fails to allege that he personally encountered, relied on, or purchased his vehicle as a result of any specific GM advertisement. GM further argues that because Plaintiff’s UTPA claim sounds in fraud, it must meet Rule 9(b)’s requirements.
Rule 9(b) applies to case “grounded in fraud” even when fraud is not an element of the
claim
. Vess v. Ciba-Geigy Corp. USA,
GM further argues that Plaintiff did not plead reliance, a necessary element of a half-truth
theory.
See Pearson v. Philip Morris, Inc.
,
E. Unjust Enrichment
GM argues that the existence of an express warranty and of “adequate legal remedies” in Plaintiff’s consumer protection, fraudulent omission, and express warranty claims prevent consideration of Plaintiff’s unjust enrichment claim. These are the only arguments raised by GM related to Plaintiff’s unjust enrichment claim and thus the only arguments addressed by the Court with respect to this claim. Plaintiff responds that he is entitled to allege claims in the alternative, especially because it has not yet been determined that an enforceable and applicable contract exists or that a remedy at law is available to him in this case.
In Oregon, a party may plead alternative claims for breach of both an express contract
and a “quasi-contract.”
Kashmir Corp. v. Patterson
,
We have frequently held that a plaintiff may plead alternatively on an express contract and in quantum meruit, and that the plaintiff cannot be required to elect upon which theory plaintiff will rely.
* * *
In the present case, when the builder prepared his complaint, he could not be certain what the position of the defendant would be.
The builder probably knew that the owners would contend the builder had not satisfactorily completed his contract but the builder probably did not know whether the owners were going to contend the builder was not entitled to recover on the contract because he substantially failed to complete the contract. For this reason the builder had the right to allege a count based upon the express contract and one based upon quasi contract.
Kashmir,
Unjust enrichment is a “remedial device which the law has formulated to permit
recovery . . . from a party even though under the law of express contracts that party would not be
obligated to pay.”
Kashmir
,
GM cites
Harney v. Associated Materials, LLC
,
Nguyen
relies on the Court’s statement in
Harney
that when a valid, legally enforceable contract exists, unjust enrichment may not be pleaded in the alternative. The applicability of the
express warranty in
Nguyen
to the products at issue, however, was undisputed. Indeed, the
defendant in
Nguyen
had provided the plaintiff with a refund and replacement light bulbs under
the warranty.
See
Plaintiff emphasizes in his Response that “GM has not admitted the existence of a
contract between Plaintiff and GM governing the sale of his vehicle, and, in fact, has denied that
the express warranty covers the subject matter of this lawsuit.” GM is correct in its assertion that
there is no dispute that the warranty is a valid contract. Whether a contract
exists
, however, does
not end the inquiry. A contract that governs one aspect of the relationship between the parties,
but is unrelated to the dispute at issue, is not valid, or is not enforceable, does not preclude the
ability of a plaintiff to allege an unjust enrichment claim.
See Kashmir
,
The Court cannot yet determine whether there is a valid, applicable, enforceable contract
governing the subject of this lawsuit. Rather, the parties dispute how the terms of the warranty
should be interpreted, and whether as a result of that interpretation the warranty is an applicable
and enforceable contract that covers the subject matter of the unjust enrichment claim.
See
Munich v. Columbia Basin Helicopter, Inc.
,
GM also argues that Plaintiff cannot allege an unjust enrichment claim along with a non-
equitable claim. GM cites
Alsea Veneer, Inc. v. State
,
Defendants argue that plaintiffs should be limited to their remedies at law. We disagree. Equitable relief does not lie if there is an adequate remedy at law. Johnson v. Steen,281 Or. 361 , 575 P.2d 141 (1978). The remedy at law must be practical, efficient, and adequate, as full a remedy as that which can be obtained in equity. N.Y. Life Ins. Co. v. Yamasaki,159 Or. 123 ,78 P.2d 570 (1938). Equitable relief is appropriate here, because the remedy in damages is not an adequate remedy.
Id. at 36. As the full passage shows, equitable remedies are only foreclosed when the remedy at law is practical, efficient, and adequate—as full a remedy as that which can be obtained in equity. At this stage of the litigation, it is unknown whether the remedy at law meets this standard. Thus, Plaintiff is not barred from bringing his claim for unjust enrichment (Count 5) in the alternative to his express contract or other legal claims on the basis of the availability of an equitable remedy.
F. Standing to Request Injunctive Relief
GM argues that Plaintiff lacks standing to seek injunctive relief because Plaintiff has not alleged a risk of ongoing or continuing harm. The Court agrees. Plaintiff has not asserted that there is an inadequate remedy at law, a continuing and present adverse effect of GM’s alleged misconduct, a sufficient likelihood that Plaintiff will be wronged again in a similar way, or a serious risk of irreparable harm. Plaintiff alleges—and indeed suggests GM’s knowledge is evidenced by—the fact that GM redesigned the Subject Engine to solve the Oil Consumption Defect. Thus, the harm has been ameliorated and is not alleged to be at risk of recurring. Additionally, Plaintiff alleges that the harm that he and the class suffered is the full or partial lease or purchase price of their vehicles. This is monetary harm. Plaintiff also has not shown that monetary damages would be insufficient to compensate Plaintiff and the putative class members. Accordingly, the Court strikes Plaintiff’s demand for injunctive relief.
CONCLUSION
Defendant’s Motion to Dismiss and to Strike (ECF 12) is GRANTED IN PART and DENIED IN PART. Plaintiff’s claims other than his claim of unjust enrichment are dismissed without prejudice and with leave to replead. Plaintiff’s Nationwide Class allegations and request for injunctive relief are stricken. Plaintiff may file an Amended Complaint within 14 days of this Opinion and Order.
IT IS SO ORDERED .
DATED this 6th day of October, 2020.
/s/ Michael H. Simon Michael H. Simon United States District Judge
Notes
[1]
See, e.g., Bruce Martin Constr., Inc. v. CTB, Inc.
,
[2] Under Oregon law, “[a] product liability civil action ‘embraces all theories a plaintiff
can claim in an action based on a product defect,’ including, for example, negligence, strict
liability, breach of warranty, and fraudulent misrepresentation.”
Simonsen v. Ford Motor Co.
,
[3] For purposes of the pending motion, the Court assumes that California’s law of fraud is materially similar to Oregon’s fraud law.
[4] In Pearson , the Oregon Supreme Court analyzed causation and reliance in the context of a claim involving both misrepresentations and omissions that were material because of the affirmative representations. The Court noted that under the UTPA, a “plaintiff must suffer a loss of money or property that was caused by the unlawful trade practice. Whether, to prove the requisite causation, a plaintiff must show reliance on the alleged unlawful trade practice depends on the conduct involved and the loss allegedly caused by it.” Id. at 127 (emphasis in original).