White v. Volkswagen Group of America, Inc
MEMORANDUM OPINION AND ORDER GRANTING 17 Motion to Dismiss filed by Volkswagen Group of America, Inc. All other pending motions are DENIED AS MOOT. Judgment will be entered separately. Signed by Honorable P. K. Holmes, III on February 25, 2013. (jas) Modified text on 2/25/2013 (jas).
IN THE UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF ARKANSAS
FORT SMITH DIVISION
SHIRLEY J. WHITE; JENNIFER LACHANCE;
ISABEL HODGSON; and JAMES VINES,
on behalf of themselves and all others similarly situated
Case No. 2:11-CV-02243
VOLKSWAGEN GROUP OF AMERICA, INC.
MEMORANDUM OPINION AND ORDER
Before the Court are Defendant Volkswagen Group of America, Inc.’s (“Volkswagen”)
Motion to Dismiss the First Amended Class Action Complaint (Doc. 17) and Brief in Support (Doc.
18); Plaintiffs’ Response in Opposition (Doc. 21); and Defendant’s Reply (Doc. 23). For the reasons
stated herein, Defendant’s Motion to Dismiss (Doc. 17) is GRANTED.
Separate Plaintiff Shirley White (“White”) of Arkansas filed a class action complaint (Doc.
1) on behalf of herself and all others similarly situated on December 14, 2011. Thereafter, on
February 17, 2012, Volkswagen filed its first motion to dismiss for failure to state a claim. White,
along with three new Plaintiffs, then filed an Amended Class Action Complaint (Doc. 12) on March
14, 2012.1 The new Plaintiffs who were added to the Amended Class Action Complaint were
Jennifer LaChance (“LaChance”) of California, Isabel Hodgson (“Hodgson”) of Louisiana, and
James Vines (“Vines”) of Florida. After the Amended Complaint was filed, Plaintiffs informed the
Contrary to Plaintiffs’ assertion, the Amended Complaint (Doc. 12) does not appear to have
been filed timely, pursuant to Fed. R. Civ. P. 15(a)(1)(B), as it was filed 26 days after service of
Defendant’s Motion to Dismiss. However, as Defendant did not object to the late filing, the Court
has construed Plaintiffs’ Amended Complaint as a request for leave to file, which the Court now
grants. This Memorandum Opinion and Order will address the merits of Defendant’s Motion to
Dismiss Plaintiffs’ Amended Complaint.
Court in writing that Vines “was inadvertently included” as a Plaintiff and that his claims should be
dismissed. (Doc. 21, p. 1). This left only the claims of White, LaChance, and Hodgson for the
Plaintiffs’ Amended Complaint alleges that New Beetle automobiles manufactured by
Defendant from model years 2003 - 2007 contain design and/or manufacturing defects that cause
“hard shifting,” or difficult and unpredictable shifting into gear during normal driving. Plaintiffs
contend that over time, this hard-shifting defect necessitates repair and/or replacement of the subject
vehicles’ transmission systems, at a cost of several thousand dollars per vehicle.
Plaintiffs further maintain that this transmission defect was present in each of their New
Beetles since the date of manufacture. They assert that Defendant was aware of the defect at the time
these vehicles were first sold, but failed to disclose the defect to Plaintiffs. Accordingly, Plaintiffs
argue that their vehicles’ transmission systems were damaged during the relevant warranty periods
offered by Defendant.
At the time that Plaintiffs’ New Beetles were originally manufactured and sold, there were
two warranties offered by Defendant that covered repair or replacement of Plaintiffs’ transmission
systems. The first warranty was the Limited New Vehicle Warranty, which generally covered the
cost of any repairs or defects for four years or 50,000 miles, whichever came first. The second
warranty was the Limited Powertrain Warranty, which covered particular defects, including
transmission defects, for five years or 60,000 miles, whichever came first. For all Plaintiffs, the
coverage period of the Limited Powertrain Warranty overlapped with and exceeded the coverage
period of the Limited New Vehicle Warranty.2
Because the Limited Powertrain Warranty is the most inclusive warranty for all Plaintiffs,
the Court will refer only to the Limited Powertrain Warranty (hereinafter “Warranty”) when
discussing warranty coverage for Plaintiffs’ vehicles.
On or about November of 2010, Defendant began mailing letters to owners and lessees of
New Beetles from model years 2003 - 2007, stating, “Volkswagen has received customer complaints
of affected vehicles that may experience a hard shift from first to second gear, and also from second
to third gear.” (Doc. 12-2). According to Plaintiffs, Defendant offered to extend the warranty
covering the valve body in the transmission system for seven years from the date of manufacture or
100,000 miles, whichever came first, because Defendant recognized and admitted that a transmission
defect existed. The extended valve body warranty offered by Defendant did not, however, cover
replacement of the entire transmission system in each affected vehicle, but rather was limited to “the
diagnosis and repair of the transmission valve body.”3 Id.
Plaintiffs allege that defects in their vehicles’ transmission valve bodies must have caused
damage to their entire transmission systems. All Plaintiffs contend that they were forced to replace
their transmission systems at great personal cost. They now bring various causes of action in this
matter, on their own behalf and on behalf of a nationwide class of others similarly situated, for
breach of express warranty and unjust enrichment. In addition, Plaintiff White of Arkansas asserts,
on behalf of herself and a class of Arkansas New Beetle owners and lessees, claims for breach of the
implied warranty of merchantability, strict liability for design defect, strict liability for defective
manufacture, negligence, and violations of the Arkansas Deceptive Trade Practices Act, Ark. Code
Ann. § 4-88-101, et seq. Plaintiff LaChance of California asserts, on behalf of herself and a class
of California New Beetle owners and lessees, a claim pursuant to the California Consumer Legal
Remedies Act, Cal. Civil Code § 1750, et seq., and a claim pursuant to California’s Unfair
This 2010 warranty extension for repair or replacement of the valve body did not cover
repair or replacement of the entire transmission system. Thus, the warranty extension did not
supersede the Warranty’s coverage.
Competition Law, Cal. Bus. & Prof. Code § 17200, et seq. Lastly, Plaintiff Hodgson of Louisiana
asserts, on behalf of herself and a class of Louisiana New Beetle owners and lessees, a claim for
redhibition pursuant to Louisiana law.
II. Legal Standard
In ruling on a motion to dismiss, the Court accepts as true all of the factual allegations
contained in a complaint and reviews the complaint to determine whether its allegations show that
the pleader is entitled to relief. Schaaf v. Residential Funding Corp., 517 F.3d 544, 549 (8th Cir.
2008). All reasonable inferences from the complaint must be drawn in favor of the non-moving
Crumpley-Patterson v. Trinity Lutheran Hosp., 388 F.3d 588, 590 (8th Cir. 2004).
Complaints should be liberally construed in the plaintiff’s favor and “should not be dismissed for
failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in
support of his claim which would entitle him to relief.” Rucci v. City of Pacific, 327 F.3d 651, 652
(8th Cir. 2003) (quoting Conley v. Gibson, 355 U.S. 41, 45-46 (1957)). Nevertheless, “a complaint
must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on
its face.” Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009). Pleadings that contain mere “labels and
conclusions” or “a formulaic recitation of the elements of the cause of action will not do.” Bell
Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2009). “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.” Iqbal, 129 S.Ct. at 1949.
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.” Warth v. Seldin, 422 U.S. 490, 502 (1975).
Accordingly, the Court will begin by analyzing whether the individual claims of Plaintiff White of
Arkansas, the first Plaintiff named in the Amended Complaint, are subject to dismissal.
A. Plaintiff White
White purchased a used 2003 New Beetle in August of 2009. According to the public
records of the Arkansas Department of Motor Vehicles, White is the third owner of her vehicle.
(Doc. 17-5). At the time White purchased the vehicle, the odometer registered 77,438 miles. The
five-year/60,000 mile Warranty covering the transmission system in her vehicle had expired by the
time White became the vehicle’s owner. She alleges in the Amended Complaint that she began to
experience hard-shifting problems when the car had been driven approximately 80,000 miles. White
took the vehicle to a factory-authorized Volkswagen dealership for repair and was told that nothing
was wrong with her car. The hard-shifting problem persisted. Two weeks later, she returned the car
to the dealership and was then told that the transmission system needed to be replaced. White had
the transmission system replaced at her own expense on or about July 23, 2010, at a cost of several
1. Count I: Breach of Express Warranty
It is undisputed that White became the owner of her vehicle in 2009, well after the fiveyear/60,000 mile Warranty period for her 2003 vehicle expired. The 2003 Warranty states:
The Limited Powertrain Warranty is automatically transferred without cost if the
ownership of the vehicle changes within the Warranty period.
(Doc. 17-2, p. 5).
Because the ownership of White’s vehicle was not transferred to White within the Warranty
period, White was not covered under the Warranty when she experienced transmission problems.
Her breach of warranty claim is therefore subject to dismissal on that basis.
White also fails to plead that she relied upon this clearly expired Warranty in purchasing her
used vehicle. According to Arkansas law, this failure to plead that she relied on the Warranty as the
basis of her bargain is fatal to her claim. See Ciba-Geigy Corp. v. Alter, 309 Ark. 426, 447 (1992)
(“When a buyer is not influenced by the [terms of an express warranty] in making his or her
purchase, the [warranty] is not a basis of the bargain.”); Brooks v. Remington Arms Co., Inc., 2010
WL 6971894 (W.D. Ark. Oct. 2010) (“[T]he Arkansas Supreme Court directly addressed this issue
and held that reliance is an essential element of an express warranty claim.”). Even if White had
affirmatively pled reliance, such a pleading would have been implausible, as by the plain terms of
the Warranty, White became the owner of her vehicle after the Warranty expired.
Lastly, the Court addresses White’s attempt to avoid the application of the Warranty’s time
and mileage limitations by arguing that they are procedurally and substantively unconscionable. Her
argument is that Defendant knew that a latent defect was present in the transmission systems of all
2003 - 2007 New Beetles at the time that these vehicles were advertised and sold to the public.
White further contends that “the process surrounding the warranty offering was unfair” due to
Defendant’s concealment of the transmission defect, and that Defendant “was plainly the party with
the superior bargaining power . . . to conceal this knowledge of the defect and thereby craft a
warranty that was designed to expire just before the defect was to render the transmission inoperable,
thereby relieving Volkswagen from any obligation to remedy the damage of its own making, and
instead leaving Plaintiffs to pay thousands of dollars to replace these defective transmissions.” (Doc.
21, p. 23).
White’s attempt to extend the coverage of her expired Warranty through an unconscionability
argument is unavailing. Her vague claim, unsupported by any factual allegation, that Defendant
must have had pre-sale knowledge of the defect and crafted its rather standard five-year/60,000 mile
Warranty so as to stymie future claims by purchasers fails to meet the pleading standards set forth
in Twombly. 550 U.S. at 555 (“Factual allegations must be enough to raise a right to relief above
the speculative level.”). Moreover, “[w]hether a contract is unconscionable must be determined in
light of the general commercial background, commercial needs in the trade or particular case, the
relative bargaining position of the parties, and other circumstances at the time the contract was
made.” Hunter v. Texas Instruments, Inc., 798 F.2d 299, 303 (1986). In determining whether a
contract is unconscionable, a court must review the totality of the circumstances surrounding the
negotiation and execution of the contract to ascertain whether gross inequality of bargaining power
existed between the parties. State ex rel. Bryant v. R&A Inv. Co., 336 Ark. 289, 296 (1999).
Here, the Court cannot begin to analyze the unconscionability of the Warranty with respect
to White because White was not a party to the original Warranty, nor was she ever covered by the
Warranty’s transfer provision. White has no standing to argue that she was injured due to the alleged
unconscionability of the Warranty, and furthermore, she is not in a position to hypothesize about the
circumstances surrounding the negotiation and execution of the original contract. She cannot speak
to the relative bargaining positions of the former owners of her vehicle, who, in fact, were in privity
of contract with Defendant. White’s bargaining power in relation to Defendant’s is therefore
immaterial, as White purchased her six-year-old vehicle knowing that the Warranty had already
Taking White’s unconscionability argument to its logical conclusion, it appears that she
would be in favor of allowing any New Beetle owner to make a transmission claim on the Warranty
at any time, regardless of the number of years of use or number of miles registered on the vehicle’s
odometer. Defendant, however, is not required to warrant its vehicles forever. As the Second
Circuit observed in the often-cited case of Abraham v. Volkswagen of Am., Inc.:
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.
795 F.2d 238, 250 (2d Cir. 1985).
Indeed, there is nothing facially unconscionable about a five-year/60,000 mile warranty in
the auto industry. Even warranties with more restrictive terms have been approved by many courts.
See, e.g., Nelson v. Nissan North Am., Inc., 2012 WL 3920626, *5 (D. N.J. Sept. 7, 2012) (“First,
there is nothing substantively unconscionable or unreasonable about a 5 year/60,000 mile
warranty.”); Gotthelf v. Toyota Motor Sales, U.S.A., Inc., 2012 WL 1574301 (D. N.J. May 3, 2012)
(three-year/36,000 mile warranty not unconscionable); Alban v. BMW of N. Am., LLC, 2011 WL
900114 (D. N.J. March 15, 2011) (four-year/50,000 mile warranty not unconscionable); Suddreth
v. Mercedes-Benz, LLC, 2011 WL 5240965 (D. N.J. Oct. 31, 2011) (same); Smith v. Ford Motor Co.,
462 Fed. Appx. 660, 663 (9th Cir. 2011) (three-year/36,000 mile warranty not unconscionable); In
re Toyota Motor Corp. Unintended Acceleration Mktg., Sales Practices, & Prods. Liab. Litig., 754
F. Supp. 2d 1145 (C.D. Cal 2010) (same); Evitts v. DaimlerChrysler Motors Corp., 834 N.E.2d 942
(Ill. App. Ct. 2005) (same); Moore v. Coachmen Indust., Inc., 499 S.E.2d 772 (N.C. Ct. App. 1998)
(twelve-month/15,000 mile warranty not unconscionable); Hornberger v. General Motors Corp., 929
F. Supp. 884 (E.D. Pa. 1996) (three-year/36,000 mile warranty not unconscionable).
As the Warranty in the case at bar meets industry standards and, in the Court’s view, was not
unconscionable, it is clear that White was not covered under the Warranty. Her express warranty
claim must therefore be dismissed.
2. Count II: Breach of Implied Warranty of Merchantability
Arkansas law permits a merchant to limit an implied warranty of merchantability. Ark. Code
Ann. §§ 4-2-314 and 4-2-316. Here, according to the plain terms of Defendant’s express Warranty,
the implied warranty of merchantability applicable to White’s vehicle “is limited in duration to the
period of this written warranty.” (Doc. 17-2, p. 5). As discussed above, the written Warranty expired
prior to the time White became the owner of her vehicle. Since the implied warranty’s duration is
equal to the written Warranty’s, the implied warranty also expired.
Even if the express language of the Warranty had not limited the term of the implied warranty
on White’s vehicle, Arkansas law imposes a four-year statute of limitations on all implied
warranties, beginning on the date of tender of delivery. Ark. Code Ann. § 4-2-725. The parties
agree that the tender of delivery of White’s car was made in 2003 to the car’s original owner. Under
any interpretation of law, therefore, no implied warranty of merchantability existed in 2009, when
White became the car’s new owner. The implied warranty of merchantability claim must be
3. Counts III - IV: Strict Liability for Design Defect and Defective Manufacture
In Arkansas, a supplier of a product is liable under a strict liability theory if (1) the product
was supplied in a defective condition which rendered it unreasonably dangerous, and (2) the
defective condition was the proximate cause of harm to person or property. Ark. Code Ann. 4-86102. Arkansas law accordingly requires a plaintiff to “prove that the product in question was in a
defective condition at the time it left the hands of the particular seller.” Campbell Soup Co. v. Gates,
319 Ark. 54, 59 (1994). Here, White alleges that her vehicle had a latent defect that caused the
transmission system to fail and require replacement prematurely.
The Arkansas Supreme Court has held that in order to demonstrate liability on the basis of
circumstantial evidence, the plaintiff “must negate the other possible causes of failure of the product
for which the defendant would not be responsible in order to raise a reasonable inference that the
dangerous condition existed while the product was still in the control of the defendant.” Id. “A
plaintiff is no longer required to prove negligence in a strict liability claim but still must prove the
product was defective so as to render it unreasonably dangerous, and that the defect was the cause
of the injury.” Higgins v. Gen. Motors Corp., 287 Ark. 390, 391 (1985).
The Amended Complaint states generally that “[d]uring the time that each of the Plaintiffs
possessed their respective vehicles, they adhered to the required vehicle maintenance work and
schedule.” (Doc. 12, para 10). However, the Amended Complaint does not include any information
about the actions taken by prior owners of Plaintiffs’ vehicles with respect to maintenance.4 White,
for example, is her vehicle’s third owner, and it appears she can only speculate as to how her vehicle
The only mention in the Amended Complaint regarding the prior ownership of Plaintiffs’
vehicles is the following: “None of Plaintiffs’ vehicles were involved in an accident during the times
of Plaintiffs’ ownership or, insofar as Plaintiffs have been able to determine, at any time prior to
that.” (Doc. 12, p. 6) (emphasis added).
was driven, maintained, repaired, or modified during the six years prior to the time she bought the
vehicle. She states no facts in the Amended Complaint which would lead the Court to conclude that
she can “prove that the product in question was in a defective condition at the time it left the hands
of the particular seller.” Campbell, 319 Ark. 59.
White does not attempt to trace the chain of custody and ownership of her vehicle back to
Defendant, which is significant because the fact that the transmission in her car failed after seven
years and nearly 80,000 miles, following ownership by two previous drivers, suggests any number
of plausible causes for the failure. Because White has failed to establish proximate causation, her
strict liability claims must be dismissed.
4. Count V: Negligence
To establish a claim for negligence under Arkansas law, a plaintiff must demonstrate that a
duty of care was owed, the defendant breached that duty of care, and the breach was the proximate
cause of the plaintiff’s injuries. Branscumb v. Freeman, 360 Ark. 171, 179 (2004). As explained
above with regard to White’s strict liability claims, as the third-hand owner of her used vehicle,
White is unable to show proximate causation of her injury, as she alleges no facts in the Amended
Complaint regarding the use, maintenance, or repair of her vehicle during the six years prior to her
purchase. She makes no statement as to other possible causes for the damage to her vehicle prior
to the time she became the vehicle’s owner, which was after the Warranty had expired. Accordingly,
without a valid showing of proximate causation, White’s negligence claim must also be dismissed.
5. Count VI: Violations of Arkansas Deceptive Trade Practices Act
When a person “suffers actual damage or injury as a result of an offense or violation” of the
Arkansas Deceptive Trade Practices Act (“ADTPA”), Ark. Code Ann. § 4-88-113(f), a cause of
action for liability may be brought for any “unconscionable, false, or deceptive act or practice in
business, commerce, or trade,” Ark. Code Ann § 4-88-107(a)(10). White contends that Defendant
violated the ADTPA when it knowingly advertised and sold White a vehicle that contained a latent
transmission defect that would require repair and/or replacement prior to the expiration of the
Warranty. White claims she reasonably relied upon certain representations, omissions, and
advertisements presented by Defendant in connection with the qualities, standards, characteristics,
and/or attributes of Defendant’s New Beetle automobile, and White now finds herself damaged due
to out-of-pocket repairs she was forced to make to her vehicle’s transmission system. (Doc. 12, p.
In particular, White contends that Defendant “made false representations as to the
characteristics and benefits of the subject vehicles,” “advertised the subject vehicles, touting the
warranties purportedly covering the subject vehicles, all the while with the intent not to sell them as
advertised,” and “engaged in representations and omissions in connection with the advertising,
marketing, and offering for sale of the subject vehicles . . . that are deceptive and unconscionable at
common law” in violation of Ark. Code Ann. § 4-88-107(a)(1), (a)(3), and (a)(10). Id.
Federal Rule of Civil Procedure 9(b) requires any plaintiff claiming fraud to plead with
particularity the circumstances constituting fraud. The Court observes, and the parties apparently
agree, that Rule 9(b)’s pleading standard applies with equal force to state consumer fraud statutes
as to common law fraud claims. In re General Motors Corp. Anti-Lock Brake Prods. Liab. Litig.,
966 F.Supp. 1525, 1536 (E.D. Mo. 1997), aff’d, Briehl v. GMC, 172 F.3d 623 (8th Cir. 1999); Pruitt
v. Southwestern Energy Co., 2013 WL 588998, at *5 (E.D. Ark. Feb. 13, 2013); Whatley v.
Reconstrust Co. NA, 2010 WL 4916372, at *6 (E.D. Ark. Nov. 23, 2010). This pleading standard
“demands a higher degree of notice than that required for other claims. The claim must identify who,
what, where, when, and how.” United States ex rel. Costner v. United States, 317 F.3d 883, 888 (8th
Cir. 2003). “Rule 9(b) is to be read in the context of the general principles of the Federal Rules, the
purpose of which is to simplify pleading.” Id. The reason why particularity in pleading is required
for fraud claims, such as those established under the ADTPA, is “to enable the defendant to respond
specifically and quickly to the potentially damaging allegations.” Id.
Beginning with White’s false representations and false advertising claims, the Court observes
that at no point in the Amended Complaint does White specify what false representations were
affirmatively made to her by Defendant, nor does she state that she relied on particular false
representations in making the decision to purchase her vehicle. These facts are fatal to White’s
White summarily maintains that Defendant should be held liable under the ADTPA for “any
advertising that depicts the subject vehicles in a manner that leads the consumer to believe that they
are of superior quality, design, or reliability,” presumably because White’s own vehicle required
repair after more than six years of use, three different owners, and approximately 80,000 miles of
driving. (Doc. 12, p. 28). White further contends, again, without reference to any particular
advertising, statement, or campaign conducted by Defendant, that Defendant set out “to assure the
public falsely that there was no cause for concern about the quality of manufacturing and assembly
of the Volkswagen New Beetle, even when Volkswagen of America knew that this was not true
because it was receiving numerous complaints about defects in the components of the same vehicles,
including their transmissions.” Id. White cites to a news article entitled “Defining the American
Car,” from July 26, 2003, in which Defendant purportedly responds to “public concern over the
quality of the New Beetle’s assembly” by reassuring consumers that assembly in Mexico yields
vehicles that are “comparable” to the vehicles built by Defendant in Germany. Id. at pp. 14-15.5
Taking White’s claims in turn, the Court finds that her complaints about Defendant’s general
advertising of the New Beetles’ superior quality, design, and reliability do not meet Rule 9(b)’s
requirements for pleading fraud with particularity. White appears to object to all positive advertising
and branding of the New Beetle by Defendant. Such objections are too generic to provide enough
information to allow Defendant to respond specifically and quickly to her allegations of fraud, and
they do not meet the pleading standards of Iqbal and Twombly. Furthermore, Defendant’s alleged
“campaign” to diffuse criticism about its decision to manufacture vehicles in Mexico, if anything,
must be construed as evidence of Defendant’s openness as to its manufacturing procedures, rather
than its concealment of such. According to the date of the article attached to the Amended
Complaint, Defendant confirmed to the public that it was building its New Beetles in Mexico more
than six years before White decided to purchase her vehicle. White may only claim a violation of
the ADTPA if she suffered economic injury “as a result” of her reliance on Defendant’s allegedly
false representations or advertisements. Ark. Code Ann. § 4-88-113(f).
Clearly, none of the
representations and advertisements she cites in the Amended Complaint may be construed as the
cause or causes of White’s particular injury.
Finally, although White claims that Defendant made advertisements touting the New Beetle’s
various warranties, White cannot plausibly claim that she relied on such advertisements in making
In the Court’s view, this article cited by Plaintiffs (Doc. 12-3) would tend to caution, rather
than encourage, the average consumer as to the quality of the 2003 New Beetle. The article, which
was published the same year White’s car was manufactured, essentially criticizes Defendant’s
decision to assemble some of its vehicles in Mexico, rather than Germany, and implies that assembly
in Mexico is undesirable. Far from concealing this fact, Defendant appears to have admitted it in
the text of the attached article.
her purchasing decision. This is because, as discussed above, it is unreasonable for White to have
relied on Defendant’s clearly expired Warranty in making her purchasing decision, and thus, any
advertisement touting the Warranty could not have led to White’s injury.
The only ADTPA claim remaining is White’s fraudulent omissions/fraudulent concealment
claim. Ark. Code Ann. § 4-88-107(10). The gist of this claim is that Defendant fraudulently
concealed from White and other consumers the latent defect in the New Beetles’ transmission
systems. Defendant correctly points out that the ADTPA has a statute of limitations period of five
years, which would appear to preclude White from making her ADTPA claim seven years after the
original date of manufacture of her vehicle. Ark. Code Ann § 4-88-115. However, White counters
in her Response to Defendant’s Motion to Dismiss that Defendant’s fraudulent concealment of the
transmission defect tolled the limitations period:
Here, the whole premise of the ADTPA claim is that Volkswagen engaged in a
furtive campaign to fraudulently conceal the latent defect plaguing the Tiptronic
transmissions. Under these circumstances, where White did not and could not have
earlier discovered Volkswagen’s fraudulent omission, the statute of limitations did
not begin to run when her vehicle was first sold, but rather only upon White’s
discovery of the violation . . .
(Doc. 21, p. 48).
White asserts that Defendants had knowledge of a transmission defect at the time of
manufacture and actively concealed this fact, and that White relied on Defendant’s
omission/concealment of the defect when making the decision to purchase her car. White provides
no details as to which individuals employed by Defendant concealed knowledge of the alleged
defect, when such concealment occurred, or how Defendant’s “campaign to fraudulently conceal”
was carried out. Id. As evidence of Defendant’s knowledge of the defect, White can only point to
Defendant’s 2010 offer to extend the warranty on the valve body, which does not demonstrate
Defendant’s knowledge of the defect in 2003, the date White’s vehicle was manufactured.
It is black letter law that “when a failure to speak is the equivalent of fraudulent concealment,
the law imposes a duty to speak rather than remain silent.” Badger Capital, LLC v. Chambers Bank
of North Arkansas, 650 F.3d 1125, 1130 (8th Cir. 2011) (internal quotations and citations omitted).
One owes the duty to disclose information only when there is an established relationship between
the parties, such as a contractual relationship or a fiduciary relationship. Id. (citing Berkeley Pump
Co. v. Reed-Joseph Land Co., 279 Ark. 384, 387 (1983)). “Arkansas courts appear to require the
existence of some type of relationship or contact between the parties before they conclude that
special circumstances exist.” Id. at 1131. Accordingly, even if White had made an adequate
showing that Defendant knew or should have known of a latent defect in the transmission system,
it is clear that there was no privity of contract at any time between Defendant and White, and no
confidential or fiduciary relationship exists or existed between them. Without any basis for imposing
on Defendant a duty to disclose any alleged defect to White, no fraudulent omissions or fraudulent
concealment occurred. All of White’s ADTPA claims must therefore be dismissed for the reasons
6. Count XI: Unjust Enrichment
“[A]n action based on unjust enrichment is maintainable where a person has received money
or its equivalent under such circumstances that, in equity and good conscience, he or she ought not
to retain.” El Paso Production Co. v. Blanchard, 371 Ark. 634, 646 (2007). “To find unjust
enrichment, a party must have received something of value . . .” Hatchell v. Wren, 363 Ark. 107,
117 (2005). White alleges that “[b]y purchasing a Volkswagen-branded automobile, Plaintiffs and
the class members conveyed monetary as well as intangible benefits on Defendant, and Defendant
appreciated and was enriched by those benefits.” (Doc. 12, p. 36). However, White admits that she
is the third-hand purchaser of her used New Beetle, and therefore, Defendant received no monetary
benefit from White’s purchase.
White also maintains that she was “forced to and did purchase replacement Volkswagen
transmission parts that were necessary as a result of the defect plaguing Plaintiff’s vehicle,” and that
the purchase of Volkswagen-brand replacement parts unjustly enriched Defendant. Id. This
allegation assumes that Defendant had some obligation to repair White’s transmission. However,
as discussed above, the Warranty covering the transmission had expired long before White’s
transmission failed, and Defendant had no contractual obligation to repair or replace the transmission
when it was out of warranty. Since Defendant did not owe White a new transmission, it follows that
White’s out-of-pocket purchase of a new transmission conferred no unjust benefit on Defendant.
White’s unjust enrichment claim, therefore, must be dismissed.
Now that the Court has determined that all of Arkansas Plaintiff White’s claims must be
dismissed pursuant to Fed. R. Civ. P. 12(b)(6), the question of the Court’s continuing jurisdiction
over the claims of the remaining Plaintiffs must be considered. The basis for the Court’s jurisdiction
in this matter is diversity of citizenship pursuant to 28 U.S.C. § 1332, as Plaintiffs are citizens of
Arkansas, California, and Louisiana, and Defendant is a citizen of Delaware, Virginia, and possibly
Michigan. White is without standing to pursue claims on behalf of any putative class members.
Warth, 422 U.S. at 502. Dismissing her from this action means that the Court is left with only the
common law and state law claims of the two out-of-state Plaintiffs, LaChance and Hodgson.
According to 28 U.S.C. § 1407(b), a civil action may be brought in (1) a judicial district in
which any defendant resides, (2) a judicial district in which a substantial part of the events or
omissions giving rise to the claim or claims occurred, or, if there is no district in which an action
may otherwise be brought, (3) any judicial district in which any defendant is subject to a court’s
personal jurisdiction. In this case, Defendant resides outside of Arkansas. None of the claims made
by the remaining Plaintiffs were occasioned by events that occurred in Arkansas. Therefore, it is
clear that the Western District of Arkansas is not the proper venue for the claims remaining in this
case. This action may otherwise be brought in California or Louisiana, where the remaining
Plaintiffs reside, and indeed, the courts in those states would be better equipped to adjudicate matters
arising under their respective states’ laws.
For the above reasons, IT IS HEREBY ORDERED THAT:
Plaintiff Vines’ claims are voluntarily dismissed; Plaintiff White’s claims are dismissed with
prejudice for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6); and the
remaining claims of Plaintiffs LaChance and Hodgson are dismissed without prejudice, due to lack
of proper venue, pursuant to 28 U.S.C. § 1406(a).
IT IS FURTHER ORDERED THAT Defendant’s Motion to Dismiss (Doc. 17) is
GRANTED, and this case is dismissed. Judgment will enter contemporaneously herewith.
All other pending motions are DENIED AS MOOT.
IT IS SO ORDERED this 25th day of February, 2013.
/s/P. K. Holmes, III
P.K. HOLMES, III
CHIEF U.S. DISTRICT JUDGE
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