Doll v. Ford Motor Company
Filing
44
MEMORANDUM OPINION. Signed by Judge Alexander Williams, Jr on 8/25/2011. (rss, Deputy Clerk)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
SOUTHERN DIVISION
ERIC GREGORY DOLL, et al., On Behalf
Of Themselves And All Others Similarly
Situated,
Plaintiffs,
v.
FORD MOTOR COMPANY,
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* Civil Action No. 8:10-cv-01505-AW
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Defendant.
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MEMORANDUM OPINION
Plaintiffs Eric Gregory Doll, Donald L. Abraham, David Garcia, Stephen Mixon,
Matthew Pollack, Michael Regensburger, Patrick and Shirley Ziehr (collectively “Plaintiffs”), on
behalf of themselves and all other persons and entities similarly situated (the “Class(es)”), bring
this class action against Ford Motor Company (“Defendant” or “Ford”). Pending before the
Court is Defendant’s Motion to Dismiss (Doc. No. 23). The parties have fully briefed the
motions, and the Court finds that no hearing is necessary. See Local Rule 105.6 (D. Md. 2010).
For the reasons articulated herein, the Court will GRANT-in-PART and DENY-in-PART
Defendant’s Motion to Dismiss.
I.
FACTUAL AND PROCEDURAL BACKGROUND
Plaintiffs bring this suit against Defendant for the benefit and protection of all individuals
who purchased or leased 2004 and 2005 Ford Freestar and Mercury Monterey vehicles
(“vehicles”). (See Am. Compl. ¶ 1). The Classes are all persons or entities who purchased or
leased the vehicles in the states of Florida, Illinois, Maine, Maryland, New York, Pennsylvania,
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or South Carolina. See id. ¶ 46. Plaintiffs assert nine separate causes of action: (i) breach of
implied warranty under the Magnuson-Moss Act, 15 U.S.C. §§ 2301, 2301(7), 2310, asserted on
behalf of the Illinois, Maine, Maryland, New York, Pennsylvania, and South Carolina Classes;
(ii) breach of implied warranty asserted on behalf of the Illinois, Maine, Maryland, New York,
Pennsylvania, and South Carolina Classes; (iii) violations of the Florida Deceptive and Unfair
Trade Practices Act (“FDUTPA”), FL. STAT. ANN. 501.201, asserted on behalf of Plaintiff
Garcia and the Florida Class; (iv) violations of the Illinois Consumer Fraud and Deceptive
Practices Act (“CFDPA”), 815 ILSC 505/1, et seq., asserted on behalf of Plaintiff Abraham and
the Illinois Class; (v) violations of the Maine Unfair Trade Practices Act (“MUTPA”), 5 ME.
REV. STAT. ANN. § 205-A, et seq., asserted on behalf of Plaintiff Pollack and the Maine Class;
(vi) violations of the Maryland Consumer Protection Act (“MCPA”), MD. CODE ANN.,
COMMERCIAL LAW, § 13-101, et seq., asserted on behalf of Plaintiff Doll and the Maryland
Class; (vii) violations of the New York Deceptive Trade Practices Act (“NYDTPA”), N.Y. GEN.
BUS. LAW §349, et seq., asserted on behalf of Plaintiff the Ziehrs and the New York Class; (viii)
violations of the Pennsylvania Unfair Trade Practices and Consumer Protection Law
(“UTPCPL”), 73 PA. CONS. STAT. ANN. §§ 201-1, et seq., asserted on behalf of Plaintiff
Rogensburger and the Pennsylvania Class; (ix) and unjust enrichment asserted on behalf of all
Plaintiffs and Classes. See id. ¶ 5, 19, 22, 24, 26, 28, 30, 33-34, 36.
Plaintiffs allege that the Ford vehicles were equipped with defective torque converters
that suddenly and without warning prevented the vehicles from accelerating or maintaining their
speed. Id. ¶ 2. Consequently, Plaintiffs contend that the defect renders the vehicles entirely
inoperative or barely maneuverable, thereby posing a safety hazard for drivers and passengers of
the vehicles. Id. ¶ 19. Moreover, Plaintiffs claim that the defective torque convertors do not
2
conform to reasonable consumer expectations as these components have a markedly reduced
useful life when compared to similar vehicles with similar torque convertors and transmissions.
Id. ¶ 25. Due to this alleged defect, Plaintiffs were forced to replace the torque converter,
transmission, and/or related parts at a cost of approximately $1,000 to $3,000. Id.
Plaintiffs further claim that Ford both concealed and failed to disclose essential
information concerning the vehicles’ defective torque converter. Id. ¶ 3. Plaintiffs assert that
Ford knew the torque converter was defective and knew that it would fail before the
component’s expected life. See id. ¶ 3-4. Nevertheless, Plaintiffs claim that Ford consciously
concealed facts concerning the component’s performance history and propensity for premature
failure throughout the distribution, marketing, sales, customer service and advertisement of the
vehicles. See id. Plaintiffs argue that Ford had exclusive knowledge of the defect from access to
relevant data, as well as supplemental knowledge from numerous complaints made to Ford by its
customers, internet websites, and various other public forums. See id. ¶ 26. In particular,
Plaintiffs cite an article by The New York Times, which reported that the National Highway
Traffic Safety Administration (“NHTSA”) initiated a preliminary investigation of the vehicles to
evaluate complaints of transmission failure. Id. ¶ 20. When this investigation began, NHTSA had
received 178 complaints of this defect. Id. On November 10, 2009, NHTSA moved to the
Engineering Analysis phase of its investigation. Id. This phase represents the second and final
step of an NHTSA investigation and is triggered when data from the first phase indicates that
further investigation of a potential safety defect is required. Id. By this time, NHTSA had
received 227 complaints involving loss of power, 124 of which were attributed to “torque
converter shaft splines stripping, causing a sudden loss of power to the drivetrain.” Id.
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Moreover, Plaintiffs assert that before NHTSA’s July 2009 preliminary investigation,
Ford was aware of customer complaints regarding the torque convertor and resulting
transmission failure. Id. ¶ 21. By 2006, Plaintiffs assert that thousands of owners had complained
directly to Ford or through Ford’s authorized dealers, as well as through such internet sites as
http://www.edmunds.com. Id. ¶ 21-22.
As a direct consequence of Ford’s conduct, Plaintiffs claim to have suffered injuries,
damages and/or ascertainable loss. Id. ¶ 28. Plaintiffs assert that they would have paid less for
the vehicles or not have purchased the vehicles if Ford had disclosed the material information
regarding the defective torque convertor and resulting transmission failure. See id. ¶¶ 29, 31.
Additionally, Plaintiffs claim to have paid unreasonably high sums of money to repair and
replace the vehicles’ torque converter, transmission and related parts. Id. ¶ 29. Finally, Plaintiffs
allege injury because the defective torque convertor effectively prohibited the Plaintiffs’ safe
enjoyment of the vehicles. Id. ¶ 30.
In response to the Plaintiffs’ Amended Complaint, Defendant moves to dismiss each
cause of action pursuant to Fed. R. Civ. P. 12(b)(6). In support of their motion to dismiss,
Defendant claims that the implied warranty claims of Plaintiffs Abraham, Doll, Pollack,
Regensburger, and the Ziehrs are barred by the statute of limitations. (See Doc. No. 23-1, at 6-9).
Alternatively, the Defendant asserts that the implied warranty claims of Plaintiffs Abraham and
the Ziehrs should be dismissed because they lack privity with Ford, and the implied warranty
claims of Plaintiffs Abraham, Doll, Mixon, and Regensburger should be dismissed because they
failed to give the required notice. Id. at 11-13. Additionally, Defendant argues that the implied
warranty claims of all Plaintiffs should be dismissed because they have not adequately alleged
that their vehicles are unmerchantable. Id. at 15-19. Finally, Defendant alleges that Plaintiffs’
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Magnuson-Moss implied warranty claims fail for the same reasons as their state law claims fail.
Id. at 19-20.
With respect to the Plaintiffs’ consumer fraud claims, Defendant claims that the Plaintiffs
have failed to allege a misrepresentation claim with the particularity required by Rule 9(b). Id. at
20. Specifically, the Defendant argues that the Court should dismiss each Plaintiff’s consumer
fraud claim because: Mr. Garcia’s claim under the Florida Unfair Trade Practices Act does not
allege causation with particularity; Mr. Doll’s claim under the Maryland Consumer Protection
Act does not allege that Ford knew the relevant facts at the time of sale; Mr. Pollack’s claim
under the Maine Unfair Trade Practices Act (MUTPA) should be dismissed to the extent that the
MUTPA is based on providing warranties to consumers who buy new vehicles from dealerships;
the Ziehrs’ New York Consumer Fraud claims should be dismissed because the Plaintiff has not
showed their reliance on an omission; and, Mr. Regensburger’s Pennsylvania consumer fraud
claim is barred by the economic loss doctrine and a failure to allege reliance. See id. at 20-32.
Finally, Defendant argues that all of the consumer fraud claims should be dismissed because
Ford disclosed the potential for defects, and any other disclosure would have been either useless
or affirmatively misleading. See id.
In response to the Plaintiffs’ unjust enrichment claims, the Defendant asserts that the
claims of Plaintiffs Abraham, Doll, Pollack, and the Ziehrs should be dismissed because the
subject matter of the claim is covered by an express contract between the parties. Id. at 32-34.
Additionally, the claims of Plaintiffs Garcia, Mixon, and Regensburger should be dismissed
because they did not plausibly allege that they provided a benefit to Ford when they purchased
their used vehicles. Id. at 34-35.
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II.
STANDARD OF REVIEW
The purpose of a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6)
is to test the sufficiency of the plaintiff’s complaint. See Edwards v. City of Goldsboro, 178 F.3d
231, 243 (4th Cir. 1999). Generally, a complaint need only satisfy the “simplified pleading
standard” of Rule 8(a), Swierkiewicz v. Sorema N.A., 534 U.S. 506, 513 (2002), which requires a
“short and plain statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ.
P. 8(a)(2). Nevertheless, the Supreme Court has directed courts that “Rule 8 still requires a
‘showing,’” of “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp.
v. Twombly, 550 U.S. 544, 556 n.3 (2007). In its determination, the Court must consider all wellpled allegations in a complaint as true, Albright v. Oliver, 510 U.S. 266, 268 (1994), and must
construe all factual allegations in the light most favorable to the plaintiff. See Harrison v.
Westinghouse Savannah River Co., 176 F.3d 776, 783 (4th Cir. 1999). The Court need not,
however, accept unsupported legal allegations, Revene v. Charles County Comm’rs, 882 F.2d
870, 873 (4th Cir. 1989), legal conclusions couched as factual allegations, Papasan v. Allain, 478
U.S. 265, 286 (1986), or conclusory factual allegations devoid of any reference to actual events,
United Black Firefighters v. Hirst, 604 F.2d 844, 847 (4th Cir. 1979). In sum, “factual
allegations must be enough to raise a right to relief above the speculative level, on the
assumption that all the allegations in the complaint are true (even if doubtful in fact).” Twombly,
550 U.S. at 555 (citations omitted).
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III.
ANALYSIS
a. Plaintiffs’ Implied Warranty Claims
i. Statute of Limitations
Defendant avers that Plaintiffs Abraham, Doll, Pollack, Regensburger, and the Ziehrs are
barred from claiming breach of implied warranty by the applicable statutes of limitations. (See
Doc. No. 23-1, at 6-9). In their response, Plaintiffs do not deny that their claims are barred, but
rather, they assert that the statute of limitations should be tolled. (See Doc. No. 32, at 7). This
Court finds that the plaintiffs have adequately alleged that the applicable statutes of limitations
was tolled when Ford fraudulently concealed the torque converter defect, and thus these
plaintiffs’ implied warranty claims are not time barred and should not be dismissed at this point.
Under Maryland law, the statute of limitations governing warranty claims is tolled if “a
cause of action is kept from a party by the fraud of an adverse party.” MD. CODE ANN., CTS. &
JUD. PROC. § 5-203. Under Rule 9(b) of the Federal Rules of Civil Procedure, the party alleging
fraudulent concealment for the purpose of tolling the statute of limitations must plead the
circumstances with particularity. See Kwintkiewicz v. Bentley Motors, Inc., No. WMN–10–3212,
2011 WL 1336576 (D. Md. Apr. 7, 2011). Specifically, Rule 9(b) requires the party alleging
fraud to “state with particularity the circumstances constituting fraud or mistake,” yet “[m]alice,
intent, knowledge, and other conditions of a person’s mind may be alleged generally.” FED. R.
CIV. P. 9(b). The essential elements of fraudulent concealment include: (1) the defendant owed a
duty to the plaintiff to disclose a material fact; (2) the defendant failed to disclose that fact; (3)
the defendant intended to defraud or deceive the plaintiff; (4) the plaintiff took action in
justifiable reliance on the concealment; and (5) the plaintiff suffered damages as a result of the
defendant’s concealment. Lloyd v. General Motors Corp., 916 A.2d 257, 274 (Md. 2007). As a
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result, the party alleging fraudulent concealment must plead with particularity each of these five
elements.
Defendant argues that because there is no confidential or fiduciary relationship between
these Plaintiffs and Ford, a duty to disclose does not exist, and thus there is no fraudulent
concealment to toll the statute of limitations. (See Doc. No. 23-1, at 11). A duty to disclose can
certainly arise when a fiduciary or confidential relationship exists between the parties or when
one party makes a partial and fragmentary statement of fact. See Hill v. Brush Engineered
Materials, Inc., 383 F. Supp. 2d 814, 820 (D. Md. 2005). Nevertheless, a duty to disclose can
also arise under a federal statute. Langford v. Rite Aid of Alabama, Inc. 231 F.3d 1308, 1313
(“In exploring the question of whether a duty to disclose exists in a particular situation, federal
courts must go beyond common law and conduct an inquiry into relevant federal sources of
authority.”) In this case, the unambiguous language of the Motor Vehicle Safety Act, 49 U.S.C.
§ 30101-30170 (“Safety Act”), places a duty on vehicle manufacturers to report vehicle or
equipment defects. (See 49 U.S.C. § 30118(c)). In particular, the Safety Act states that a
manufacturer of a motor vehicle has a duty to notify the NHTSA and vehicle owners when it
“learns [that] the vehicle or equipment contains a defect and decides in good faith that the defect
is related to motor vehicle safety.” Id. Motor vehicle safety is defined as the “performance of a
motor vehicle or motor vehicle equipment in a way that protects the public against unreasonable
risk of accidents occurring because of the design, construction, or performance of a motor
vehicle, and against unreasonable risk of death or injury in an accident . . . .” Id. § 30102(8).
Taking the factual allegations in Plaintiffs’ Amended Complaint as true, Plaintiffs have
alleged sufficient facts to demonstrate that Ford was under a duty pursuant to the Safety Act to
disclose the torque converter defects. Plaintiffs state that through customer complaints filed
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directly with Ford, Ford’s authorized dealerships, NHTSA, internet websites, and other public
venues, Ford had knowledge of the defects but did not disclose them to the Plaintiffs or the
Classes. (See Doc. No. 20, at ¶¶ 4, 21, 23, 27). Moreover, Plaintiffs allege that the sudden loss of
power to the vehicle poses a safety hazard for drivers and passengers of the vehicles, as well as
for other vehicles traveling on public highways and streets. See id. ¶ 19. Therefore, Plaintiffs
have pled sufficient facts to show that the defective torque converter presents a risk of accidents,
deaths and/or injuries, which directly relates to motor vehicle safety as defined by the Safety Act.
Finally, all reasonable inferences can be made that Ford not only knew of the defect, but also that
Ford actively concealed its internal determination that the defect relates to motor vehicle safety.1
Consequently, Plaintiffs have adequately pled facts to show that Ford owed a duty to the
Plaintiffs.
While not directly challenged by Defendant, the remaining four elements of fraudulent
concealment have been sufficiently pled by the Plaintiffs, thereby tolling the statute of
limitations. First, Plaintiffs adequately argue that had Ford disclosed the vehicles’ defect, the
Plaintiffs would have acted differently. (See Am. Compl. ¶ 31). Second, Plaintiffs have alleged a
set of facts that support the notion that Ford actively intended to conceal facts regarding this
defect. See id. ¶ 4. Specifically, Plaintiffs claim that Ford had exclusive knowledge of the defect
from both internal and external sources but purposely concealed this information from the
Plaintiffs and Class members. See id. ¶¶ 4, 26. Finally, Plaintiffs allege sufficient facts that they
justifiably relied on Ford’s concealment and therefore suffered damages. See id. ¶¶ 28-31.
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Defendant argues that Plaintiffs have not adequately alleged that Ford determined that the defect relates to motor
vehicle safety as required under the Safety Act. (See Doc. No. 37, at 4). Nevertheless, Plaintiffs are arguing that the
statue of limitations should be tolled because Ford fraudulently concealed a defect within the Vehicles’ torque
convertor. (See Doc. No. 32, at 8). Inherent within this argument is that Ford concealed all facts surrounding the
defect, including Ford’s internal determination of whether the defect related to motor vehicle safety. In light of this
fact, this Court believes that all reasonable inferences can be drawn to conclude that Ford concealed its
determination that the defect related to motor vehicle safety.
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As an alternative reason to dismiss Plaintiffs’ tolling allegations, Defendant argues that
Plaintiffs have not pled fraudulent concealment with the sufficient particularity required under
Rule 9(b). (See Doc. No. 23-1, at 10). Defendant contends that nowhere in the Amended
Complaint have the Plaintiffs identified any misrepresentations, conversations or facts showing
active concealment by Ford that would satisfy the pleading requirements for fraud. See id. at 10.
Nonetheless, in fraudulent concealment cases where the concealment involves omissions of
material fact, Rule 9(b)’s particularity requirements are relaxed. See Shaw v. Brown &
Williamson Tobacco Corp., 973 F. Supp. 539, 552 (D. Md. 1997); see also Hill, 383 F. Supp. 2d
at 822-23 (distinguishing between cases of fraudulent concealment based on omissions where a
relaxed Rule 9(b) standard is used, and cases where fraud is predicated on a partial statement of
fact which presumably can be stated with particularity by Plaintiff, thereby evoking the normal
9(b) standard). The rationale supporting this conclusion is that omissions cannot be described in
terms of the time, place, and contents of the misrepresentation as required by other types of
fraudulent concealment. See id.
Under this lower standard, Plaintiffs have alleged with sufficient particularity the
circumstances constituting fraudulent concealment. Specifically, Plaintiffs declare that
Defendant was aware of a defect in the torque convertor, and that it learned of the problem as
early as 2004. (See Am. Compl. ¶ 21). Additionally, Plaintiffs allege that Ford became aware of
the defect through the NHTSA’s investigation, customer complaints, and through such websites
as http://www.edmunds.com. See id. ¶¶ 20, 21, 26. Plaintiffs assert that Ford consciously
concealed this information from the Plaintiffs and the Classes throughout the design,
manufacture and advertisement of the vehicles. See id. ¶¶ 4, 27. Finally, Plaintiffs claim they
would have taken different actions had they known about the defective torque convertor. See id.
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¶¶ 25, 29, 31. These allegations state with the required particularity when and how the Defendant
became aware of the defect, and describe the information consciously concealed by Ford. The
Plaintiffs have pled particular facts that support the circumstances surrounding their fraudulent
concealment allegation. Consequently, the statue of limitations is tolled, and Defendant’s motion
to dismiss the implied warranty claims of Plaintiffs Abraham, Doll, Pollack, Regensburger, and
the Ziehrs’ based on the fact that these claims are time-barred is DENIED.
ii. Privity
As an additional basis for asserting that the plaintiffs’ implied warranty claims should be
denied, Defendant avers that the implied warranty claims of Plaintiffs Abraham and the Ziehrs
should be dismissed because they lack privity with Ford. (Doc. No. 23-1, at 11-13). Plaintiffs
counter by arguing that under both Illinois and New York case law, privity requirements are
satisfied when the vehicle is purchased through an agent of the manufacturer, e.g., an authorized
Ford dealer. (See Doc. No. 32, at 12-13). Each plaintiff will be analyzed in turn.
1. Illinois
This Court holds that Plaintiff Abraham was not in privity with Ford, and thus this
Plaintiff’s breach of implied warranty claim should be dismissed. Under section 2-314(c)(2) of
the Uniform Commercial Code, a seller breaches the implied warranty of merchantability if its
product is not fit for the ordinary purposes for which such goods are used. See 810 ILL. COMP.
STAT. ANN. 5/2-314(2)(c) (West 2004). Under Illinois law, privity of contract is a prerequisite to
recover economic damages for a breach of implied warranty. See Rothe v. Maloney Cadillac,
Inc., 518 N.E.2d 1028, 1029-30 (Ill. 1988). Specifically, the implied warranties under UCC
article II allow a vehicle purchaser to initiate a cause of action solely against the immediate
seller—not the manufacturer. See id. at 1029. Consequently, since Abraham purchased a used
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2005 Ford Freestar from a Ford dealership and not directly from Ford, privity of contract does
not exist between Abraham and Ford. (See Am. Compl. ¶ 6). Plaintiffs do not deny this
contention. Rather, they argue that Abraham was in privity with Ford because the Illinois dealer
from which he purchased his vehicle was an agent of Ford. (See Doc. No. 32, at 14). The test for
agency is whether the principle is capable of controlling the agent’s method of accomplishing a
task, as well as the agent’s ability to subject the principle to liability. See Williams v. Ford Motor
Co., 990 F. Supp. 551, 554 (N.D. Ill. 1997) (citing Wargel v. First Nat’l Bank, 460 N.E.2d 331
(Ill. App. Ct. 1984)). Furthermore, agency may exist through actual or apparent authority. Id.
Apparent agency exists if: (1) the principal consented to or knowingly acquiesced to the agent’s
exercise of authority, (2) the third person reasonably concluded that the party was an agent of the
principal, and (3) the third person justifiably relied on the agent’s apparent authority to his or her
detriment. Id. Determining whether an agency relationship has been established is a question of
fact that should not usually be decided at the pleading stage; however, it is insufficient to merely
provide a general statement that the agency relationship exists. See Connick v. Suzuki Motor Co.,
675 N.E.2d 584, 592 (Ill. 1996) (“A complaint relying on agency must plead facts which, if
proved, could establish the existence of an agency relationship. It is insufficient to merely plead
the legal conclusion of agency.”).
In the Amended Complaint, Plaintiffs have not pled any facts to show that an agency
relationship existed between Ford and the dealer. Plaintiffs merely state that the Illinois
dealership from which Abraham bought his car is an authorized Ford dealership. (Am. Compl. ¶
6). This sole fact fails to demonstrate the existence of an agency relationship. Moreover, the case
relied on by the Plaintiffs to support their notion that an agency relationship existed fails to
persuade the Court. See Semitekol v. Monaco Coach Corp., 582 F. Supp. 2d 1009 (N.D. Ill.
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2008). Unlike in the present case, the plaintiffs in Semitekol cited several facts that were relevant
in demonstrating an agency relationship.2 See id. at 1025. In fact, the court in Semitekol
distinguished its holding from other court decisions that rejected agency arguments based on the
plaintiff’s ability to allege several factors in support of this connection. See id. In stark contrast
to Semitekol, the Plaintiffs have failed to allege any facts which could support an agency
relationship. Consequently, Plaintiff Abraham was not in privity with Ford, and Defendant’s
motion to dismiss the implied warranty claims of this Plaintiff is GRANTED.
2. New York
This Court holds that the Ziehrs Plaintiffs (representing the New York Class) should not
be dismissed because the privity requirement under the New York Uniform Commercial Code
(“NY UCC”) is eliminated in situations where the product’s defect is dangerous. Section 2-314
of the NY UCC states that “a warranty that the goods shall be merchantable is implied in a
contract for their sale if the seller is a merchant with respect to goods of that kind . . . .” N.Y.
U.C.C. LAW § 2-314. In order to be merchantable, products must be fit for the ordinary purposes
for which the products are expected to be used. See id. Moreover, section 2-318 provides that a
seller’s warranty, whether express or implied, extends to any person if it is reasonable to expect
that the person will use the goods. Id. § 2-318. Consequently, a purchaser of a vehicle may assert
a breach of implied warranty claim against a seller if the car is not fit for its ordinary purposes.
See Castro v. QVC Network, Inc., 139 F.3d 114, 118 n.7 (2d Cir.1998).
2
Specifically, the plaintiffs in Semitekol alleged that BMS was (and was held out to be) Monaco's “authorized
Beaver Monterey dealership”, that Monaco advertises BMS on its website in its “Dealer Finder” function, that BMS
distributed Monaco's warranties and owners' manuals to the public, that Monaco advised the plaintiffs that they
could contact BMS with any problems or customer service concerns, that BMS was to install certain items requested
by the plaintiffs on the motor-home, and that the plaintiffs were given the option of picking up the motor-home at
either the dealership or Monaco's factory. Semitekol, 582 F. Supp. 2d at 1025.
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In regard to asserting a claim against a manufacturer, New York has consistently held
that absent privity of contract, a purchaser cannot recover for mere economic loss under a theory
of breach of implied warranty. Westchester Cnty. v. Gen. Motors Corp., 555 F. Supp. 290, 294
(S.D.N.Y. 1983); see also Rosen v. Hyundai Group, 829 F. Supp. 41, 49-50 (E.D.N.Y. 1993)
(recognizing that only sellers are liable for breach of warranty under the NY UCC).
Nevertheless, New York recognizes an exception to this rule when the product’s defect is a
“thing of danger.” Hubbard v. Gen. Motors Corp., No. 95 Civ. 4362, 1996 WL 274018, at *5
(S.D.N.Y. May 22, 1996); see also Wade v. Tiffin Motorhomes, Inc., 686 F. Supp. 2d 174, 19091 (S.D.N.Y. 2009). In particular, where a defect in a product makes its use a likely source of
danger to several or many people, the manufacturer, as well as the vendor, is liable for breach of
implied warranties. See Hubbard, 1996 WL 274018, at *5.
In this instance, Plaintiffs have pled sufficient facts to support a finding that the vehicles
are dangerous, thereby triggering the privity of contract exception. Plaintiffs assert that the
vehicles suddenly, without warning, lose the ability to maintain speed or accelerate. (See Am.
Compl. ¶ 19). Plaintiffs further claim that the torque convertor defect poses a significant safety
hazard for drivers and passengers of the vehicles, as well as other travelers on the highway. See
id. ¶¶ 2-3. Finally, Plaintiffs provide a detailed description of the NHTSA’s investigation
regarding a potential safety defect within these vehicles. See id. ¶¶ 19-20. Taken together,
Plaintiffs have demonstrated that the defective torque converter within the vehicles is a “thing of
danger.”
Defendant responds by arguing that it is erroneous to rely on the Hubbard decision
because it was based on Goldberg v. Kollsman Instrument Corp., 191 N.E.2d 81 (N.Y. 1963),
which involved a personal injury and not economic loss. (See Doc. No. 23-1, at 12). This same
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argument was raised by the defendant in Hubbard but was rejected by that court. The court
stated:
[t]here is no reason to find that the Goldberg holding is limited to such a
circumstance [as personal injury cases]. Although the plaintiff in Goldberg was
the administratrix of the estate of a passenger killed in an airplane crash, the Court
of Appeals stated that it was answering the broad question: does a manufacturer’s
implied warranty of fitness of his product for its contemplated use run in favor of
all its intended users, despite lack of privity of contract?
Hubbard, 1996 WL 274018, at *7 n.6 (internal quotations omitted). Consequently, this court sees
no reason to limit the holding of Hubbard to cases involving personal injury. Finally, Defendant
urges the Court to disregard Hubbard and its line of cases because New York state courts have
not followed this Hubbard exception. (Doc. No. 37, at 9). Nevertheless, this Court finds the
district court’s reasoning to be persuasive and notes that the Hubbard line of decisions has not
been overruled by any New York state case. Consequently, for the above reasons, this Court
holds that Plaintiffs the Ziehrs have triggered the “thing of danger” exception to the privity of
contract requirement, and thus Defendant’s motion to dismiss the implied warranty claims of this
Plaintiff is DENIED.
iii. Required Notice
Defendant argues that the Court should dismiss the breach of implied warranty claims of
Plaintiffs Doll, Mixon, and Regensburger because they did not provide notice to Ford or to their
immediate sellers of the vehicles prior to bringing this lawsuit. (See Doc. No. 23-1, at 13-15).3
Plaintiffs contend that they have adequately pled this requirement by stating in their Amended
Complaint: “Plaintiffs and the Class members have provided sufficient and timely notice to Ford
3
Defendant includes Plaintiff Abraham in this defense; however, the Court will not address this Plaintiff as
Abraham’s breach of implied warranty claim has already been dismissed.
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regarding the problems they experienced.” (Doc. No. 32, at 16). Each Plaintiff will be analyzed
in turn.
1. Maryland
The Uniform Commercial Code adopted in Maryland requires a buyer to give notice to
the seller for a breach of implied warranty. MD. CODE ANN., COM. LAW § 2-607(3)(a).
Furthermore, a notification to a seller within a reasonable time is a “prerequisite” for claiming a
breach of implied warranty. See Lynx, Inc. v. Ordnance Prods., 327 A.2d 502, 513 (Md. 1974).
In particular, the comment to section 2-607 states that the notification must sufficiently
demonstrate to the seller that the transaction has issues and must be watched. See § 2-607, cmt.
4. The Maryland Court of Appeals has interpreted this provision to require the buyer to inform
the seller of the breach, the particular goods that have been impaired, and set forth the nature of
the nonconformity. See Lynx, Inc., 327 A.2d at 513. In sum, if a plaintiff wishes to claim a
breach of implied warranty against a manufacturer, the plaintiff must notify their immediate
seller of the breach. See Lloyd v. General Motors Corp., 575 F. Supp. 2d 714 (D. Md. 2008).
In this instance, Plaintiff Doll has failed to inform the seller of the torque convertor
problem, and thus Doll’s implied warranty claim must be dismissed. Plaintiffs contend that Doll
satisfied the notification requirement by having his car towed to the dealership for repairs and
paying for the repair of the torque converter. (See Am. Compl. ¶ 33). Nevertheless, this
completely fails to meet the notice requirements as articulated by the Maryland Court of
Appeals. The Plaintiffs have failed to allege that Plaintiff Doll informed the seller that there was
a breach, let alone the particular component that was impaired and the nature of the
nonconformity. Absent such information, neither the dealership nor Ford would have known that
the Plaintiff was claiming a breach of implied warranty, and the entire purpose of the notice
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requirement would be lost.4 Consequently, the Defendant’s motion to dismiss Plaintiff Doll’s
breach of implied warranty claim is GRANTED.
2. South Carolina
Plaintiff Mixon’s breach of implied warranty claim is dismissed for the same reason as
Plaintiff Doll. Under the Uniform Commercial Code adopted by South Carolina, a buyer must
notify their immediate seller of breach or be barred from any remedy. See S.C. CODE ANN. § 362-607(3)(a). In Southeastern Steel Co. v. W.A. Hunt Const. Co., 390 S.E.2d 475 (S.C. Ct. App.
1990), the court identified two prevailing standards that are used by courts to determine what
constitutes adequate notice—a lenient or strict standard. See id. at 477-78. The court, in holding
that the plaintiff had failed to provide adequate notice, did not choose a specific standard to
follow. Instead, the court in Southeastern Steel based its ruling on the fact that the plaintiff had
failed to meet the required notice under the lenient standard. See id. at 479. Likewise, when
applying the lenient standard, this Court finds that Plaintiff Mixon has failed to provide adequate
notice to the immediate seller of its vehicle.
Cases applying the lenient standard typically rely on Comment 4 of section 2-607, which
states that the buyer merely needs to inform the seller that “the transaction is still troublesome
and must be watched.” See id. cmt. 4. In this case, Plaintiffs have not pled any facts to show that
Mixon provided notice to the Chevy dealership from which he purchased his vehicle. (See Doc.
No. 32, at 19-20). Rather, Plaintiffs point to paragraph 64 of the Amended Complaint as
evidence of the required notice. See id. Nevertheless, this paragraph merely concludes that all
Plaintiffs gave sufficient and timely notice to Ford. Id. This paragraph fails to provide any facts
4
One of the primary reasons for the notification requirement is that it provides the seller and the manufacturer an
opportunity to correct their original performance and avoid costly litigation. See Lynx, Inc. v. Ordnance Prods., 327
A.2d 502, 513 (Md. 1974).
17
that would suggest that the Plaintiffs had informed their immediate sellers of the defective torque
convertor. (See Am. Compl. ¶ 64). Therefore, even under the lenient standard, Mixon did not
provide adequate notice. Consequently, Defendant’s motion to dismiss the implied warranty
claims of this Plaintiff is GRANTED.
3. Pennsylvania
Similar to Maryland and South Carolina, the Uniform Commercial Code adopted by
Pennsylvania requires the buyer to provide notice of the breach to the seller or be barred from
any remedy. See 13 PA. STAT. ANN. § 2607(c)(1). The Plaintiff Regensburger (representing the
Pennsylvania Class) relies on a New Jersey district court’s interpretation of Pennsylvania law to
argue that the filing of a complaint is sufficient notice. (See Doc. No. 32, at 20). Nevertheless,
this Court finds that Plaintiff Regensburger’s breach of implied warranty claim should be
dismissed.
In In re Ford Motor Co. E-350 Van Prods. Liability Litigation, 2010 WL 2813788
(D.N.J. July 9, 2010), the court held that the filing and service of a complaint constitutes
sufficient notice under section 2-607. See id. at *39-40. As a result, Plaintiffs argue that
Regensburger gave sufficient notice under Pennsylvania law by filing the original Complaint in
this suit. Defendant counters by pointing to a Pennsylvania district court case that discredits this
idea. In AFSCME v. Ortho-McNeil-Jassen Pharms., Inc., 2010 WL 891150 (E.D. Pa. Mar. 11,
2010), the court stated that plaintiffs need, at a minimum, to allege that they notified the
defendants in some manner or be barred from recovery. See id. at 7. Additionally, the court held
that notification requires an affirmative act. See id. at 6. This court finds that the holding in
AFSCME is more consistent with the purpose of the notice requirement, which include: (1) to
enable the seller to make efforts to cure the breach in order to minimize the buyer’s damages and
18
the seller’s liability; (2) to afford the seller a reasonable opportunity to learn the facts so that the
seller may adequately prepare for negotiation; and (3) to provide a seller with a terminal point in
time for liability. See Horne v. Novartis Pharms. Corp., 541 F. Supp. 2d 768, 786 (W.D.N.C.
2008). Therefore, this Court holds that the filing of a complaint is insufficient notification. See
AFSCME, 2010 WL 891150, at *39-40; see also Martin v. Ford Motor Co., 765 F. Supp. 2d 673,
682 (E.D. Pa. 2011) (“The Court agrees with Defendant that the filing of the Complaint is
insufficient ‘notification’ under the UCC.”).
Here, Plaintiff Regensburger has failed to satisfy the notification requirement for
claiming a breach of implied warranty. In pleading notification, Plaintiffs cannot merely rely on
a statement that they provided notice; rather, Plaintiffs must allege facts that show the particular
plaintiff has taken affirmative steps to put the seller on notice. See Martin, 765 F. Supp. 2d at
683 (“In making these allegations, Plaintiff has done more than allege Defendant had ‘notice’ of
the defect. Plaintiff is alleging that class members took the affirmative step of ‘notifying’
Defendant of the breach by complaining about this very issue to Defendant. . . . Consequently,
Plaintiff has satisfied the ‘notification’ requirement . . . .”). As a result, Defendant’s motion to
dismiss Plaintiff Regensburger claim of breach of implied warranty is GRANTED.
iv. Unmerchantable Vehicles
Defendant avers that the implied warranty claims of all Plaintiffs should be dismissed
because the vehicles are merchantable. (See Doc. No. 23-1, at 15-16).5 Defendant argues that the
mere fact a defect manifests itself after the warranty expires does not breach the implied
warranty of merchantability. See id. In fact, the Defendant warns that the potential for
5
Plaintiffs Abraham, Doll, Mixon, Pollack, Regensburger, and the Ziehrs, representing the Illinois, Maine,
Maryland, New York, Pennsylvania, and South Carolina classes, brought breach of implied warranty claims against
the Defendant. (Am. Compl. ¶ 55). Nevertheless, this Court has dismissed Plaintiffs Mixon, Doll, Regensburger, and
Abraham’s implied warranty claims. Consequently, the Court will only analyze Plaintiffs Pollack and the Ziehrs’
claims for merchantability.
19
mechanical failure exists in all complex products and such failure should not mark the product as
unmerchantable, or else, every manufacturer would automatically breach the implied warranty
by selling their vehicles. See id. Nevertheless, this Court finds that Plaintiffs Pollack and the
Ziehrs have pled sufficient facts to demonstrate the unmerchantable quality of their vehicles.
Under both Maine and New York law, goods are merchantable if they “are fit for the
ordinary purposes for which such goods are used.” See N.Y. U.C.C. LAW § 2-314; S.C. CODE
ANN. § 36-2-314. To determine the ordinary purpose, courts look to the customary expectations
and use of the particular good. See Canning v. Broan-Nutone, 480 F. Supp. 2d 392, 412 (D. Me.
2007); Diaz v. Paragon Motors of Woodside, Inc., 424 F. Supp. 2d 519, 540-41 (E.D.N.Y. 2006).
Since cars are designed to provide transportation, their ordinary purposes are to transport the
purchaser along any highway in a safe manner. See Diaz, 424 F. Supp. 2d at 541; see also
Canning, 480 F. Supp. 2d at 412 (“The next step in the analysis is whether the [product] was
unfit for that purpose. Specifically, Plaintiffs must show that the [the product] ‘because of
defects either did not work properly or [was] unexpectedly harmful.’”); Carlson v. General
Motors Corp., 883 F. 2d 287, 297 (4th Cir. 1989) (“Since cars are designed to provide
transportation, the implied warranty of merchantability is simply a guarantee that they will
operate in a safe condition and substantially free of defects. Thus, where a car can provide safe,
reliable transportation, it is generally considered merchantable.”).
In this instance, the Amended Complaint contains numerous allegations that, accepted as
true, state an implied warranty of merchantability claim. In particular, Plaintiffs have alleged that
“the defective torque converter and transmission have a useful life less than that of a
conventional torque converter and transmission.” (See Am. Compl. ¶ 25). Due to the defective
torque converter and transmission, the vehicles suddenly lose the ability to accelerate or maintain
20
speed, causing them to be unsafe and unreliable for transportation purposes. See id. ¶¶ 19, 25.
Furthermore, Plaintiffs cite to a NHTSA investigation that was initiated due to “a potential safety
defect” of the vehicles’ transmission. See id. ¶ 20. Plaintiffs also allege that “the vehicles’ torque
converter and transmission are unreliable and do not perform in accordance with the reasonable
expectations of Plaintiffs and Class members.” See id. ¶ 25. Finally, Plaintiffs assert that they
“would not have purchased, or would have paid substantially less for, their [v]ehicles had they
been informed that the torque converter is defective and has (along with the transmission) a
markedly reduced useful life.” Id. The Court finds that the Plaintiffs have alleged sufficient facts
to demonstrate that the defective torque converter and resulting transmission failure hinder the
Plaintiffs ability to enjoy safe and reliable transportation, thereby making the vehicles
unmerchantable. See e.g., Cholakyan v. Mercedes-Benz USA, 2011 WL 2682975, at *20 (C.D.
Ca. June 30, 2011) (“Vehicles subject to engine failure cannot be said to be merchantable.”).
Defendant counters by arguing that consumers’ reasonable expectations should not be
extended to include components within a vehicle that has traveled over 98,000 miles. (See Doc.
No. 37, at 12). Nevertheless, the benefit of discovery can illuminate the issue of whether a
conventional torque converter and 4-speed transmission that come equipped in comparable
vehicles routinely fail after being driven approximately 98,000 miles. Consequently, Defendant’s
motion to dismiss Plaintiffs Pollack and the Ziehrs’ claims of breach of implied warranty is
DENIED, as they as adequately pled that the vehicles they purchased were unmerchantable.
b. Magnuson-Moss Implied Warranty Claims
The Magnuson-Moss Warranty Act (“Act”), 15 U.S.C. § 2301, et seq., provides a method
for consumers to sue a warrantor for violations of a written or implied warranty. See Schimmer v.
Jaguar Cars, Inc., 384 F.3d 402, 405 (7th Cir. 2004). While the Act proscribes minimum federal
21
requirements for “full” warranties, see 15 U.S.C. § 2304(e), it generally “calls for the application
of state written and implied warranty law, not the creation of additional federal law.” See
Monticello v. Winnebago Industries, Inc., 369 F. Supp. 2d 1350, 1356 (N.D. Ga. 2005). The
Magnuson-Moss Warranty Act supplements, rather than supplants state law. See id.
Consequently, the Court adopts the same analysis for the Plaintiffs’ breach of implied warranty
claims under the Magnuson-Moss Warranty Act as it employed in the previous section of this
Memorandum Opinion analyzing Plaintiffs’ implied warranty claims. Accordingly, Defendant’s
Motion to Dismiss is GRANTED as to Plaintiffs Abraham, Doll, Mixon, and Regensburger on
their Breach of Implied Warranty claims under the Magnuson-Moss Warranty Act, but DENIED
as to Plaintiffs Pollack and Ziehrs.
c. Consumer Protection Claims
Plaintiffs Abraham, Doll, Garcia, Pollack, Regensburger, and the Ziehrs bring statutory
consumer protection claims under the laws of Illinois, Maryland, Florida, Maine, Pennsylvania,
and New York. Defendant offers various reasons why all of the Plaintiffs’ consumer protection
claims should be dismissed. (Doc. No. 23-1, at 20-31).
First, Defendant avers that all of the Plaintiffs’ claims should be dismissed because
Plaintiffs have failed to allege any misrepresentation by Ford with the required particularity
required by Rule 9(b). See id. at 20. Plaintiffs counter by stating that their claims are based upon
omissions—not misrepresentations. Therefore, they need not plead these omissions with
particularity. (See Doc. No. 32, at 23). The Court finds that Plaintiffs have pled their consumer
protection claims with the required specificity, especially under the lower standard employed by
courts for claims based on omission. See Hill, 383 F. Supp. 2d at 822-23. Plaintiffs allege that
Ford concealed, suppressed, and omitted material facts regarding the inherent defect within the
22
torque converter system. (See Am. Compl. ¶¶ 93, 99, 110, 113, 128, 138, 150). Plaintiffs further
allege that Ford knew the vehicles were defective and intended for the Plaintiffs to rely on its
concealment of these material facts, thereby misleading its customers. See id. Finally, Plaintiffs
claim that they would have paid significantly less or not have bought the vehicles had they been
aware of these omissions. See id. In short, Plaintiffs have pled facts that, if true, would violate
the individual states’ consumer protection acts.6
Next, Defendant contends that the consumer protection claims of all Plaintiffs should be
dismissed because Ford disclosed the potential for defects in its express warranty. (See Doc. No.
23-1, at 27). Defendant seeks dismissal by arguing that a warranty is an express
acknowledgement of potential defects in the vehicles. Consequently, Ford did not mislead their
customers since it already disclosed this information. See id. In the Defendant’s view, permitting
consumer protection claims in situations where the product outperforms the warranty period
would require car manufacturers to disclose all defects that might occur during the vehicles’
lifetime. See id. at 27-28. Indeed, many courts have been wary of consumer protection claims in
similar situations. Courts warn that allowing consumer protection claims where the product has
outlasted the warranty would compel manufacturers and sellers to extend their warranties for the
entire life of the vehicles. See In re Philips, No. 09-3072, 2010 WL 3522787, at *6-7 (D.N.J.
Sept. 1, 2010); see also Perkins v. DaimlerChryslter Corp., 890 A.2d 997 (N.J. Super. Ct. App.
Div. 2006).
Nevertheless, a warranty defense is generally unavailable where there are allegations of
intentional concealment of a defect or where a defendant has an obligation to disclose the defect.
6
The purpose underlying the requirement of Rule 9(b)’s heightened pleading standard is to provide a defendant fair
notice of the substance of a plaintiff’s claim so that the defendant can prepare a responsive pleading. See In re
OnStar Contract Litig., 600 F. Supp. 2d 861, 868 (E.D. Mich. 2009). This Court is satisfied that the Plaintiffs have
provided enough detail for the Defendant to file an answer with respect to the plaintiffs’ consumer protection act
claims.
23
See Maniscalco v. Brother Int’l Corp., 627 F. Supp. 2d 494, 501-02 (D.N.J. 2009); In re OnStar
Contract Litig., 600 F. Supp. 2d 861, 869-71 (E.D. Mich. 2009). A duty to disclose can arise
where there is a safety concern, a fiduciary relationship, or where a defendant’s omission goes
against a previous representation. See In re Philips, 2010 WL 3522787, at *6-7; In re OnStar
Contract Litig., 600 F. Supp. 2d at 869-71 (“[W]hen safety issues are presented, courts have
sustained claims and distinguished those cases.”). In the present case, Plaintiffs allege that the
sudden loss of power to the vehicles poses a safety hazard for drivers and passengers of the
vehicles, as well as for other travelers on the highways and streets. See id. ¶ 19. Plaintiffs have
pled sufficient facts to show that the defective torque converter presents a risk of accidents and
injuries, which directly relates to motor vehicle safety.
Defendant relies on Perkins in arguing that the consumer protection claims should be
dismissed. In short, Perkins stands for the proposition that merely alleging that the warranty is
shorter than the industry standard useful life of the product does not state a claim under the
Consumer Fraud Act. See Perkins, 890 A.2d 997 at 1004-5. Nevertheless, having thoroughly
reviewed the Amended Complaint and the defendant’s arguments in support of dismissing the
plaintiffs’ consumer protection claims, the Court finds that this case is substantively different
from Perkins. In Perkins, the allegedly substandard car part never actually failed. See Perkins,
890 A.2d 997 at 999. Furthermore, the plaintiffs in Perkins did not argue that the defendant knew
of a defect, which would cause the product to fail before its expected useful life. See id. In this
instance, Plaintiffs have alleged that the torque converter failed in each of their vehicles and that
Ford knew of the defect. (See Am. Compl. ¶¶ 26, 27, 32-39). Additionally, unlike in Perkins, the
present case deals with Ford’s expectations of its own product. In fact, Plaintiffs have alleged
that Ford knew of the defect prior to selling the vehicles, Ford issued a warranty that did not
24
cover the defective torque converters during the time period Defendant knew they would fail,
and Ford consciously concealed this information during the advertisement of the vehicles. See id.
¶¶ 4, 23, 25-27. Finally, plaintiffs have alleged that the defect in question is related to the safety
of the vehicle. The Court notes the Perkins’ Court declined to address cases (such as the instant
case) in which safety concerns may be implicated by the failure of the product in question,
making Perkins’ holding inapposite to the case at bar. See Perkins, 890 A.2d 997, 1004 (noting,
“Notwithstanding the prematurity of any determination about ascertainable loss in the present
matter, we nevertheless affirm the dismissal of the complaint because we agree in principle with
the trial judge’s determination that—absent those circumstances in which safety concerns might
be implicated, as to which we offer no view—the failure of a manufacturer or seller to advise a
purchaser that a part of a vehicle may breakdown or require repair after the expiration of the
warranty period cannot constitute a violation of the CFA. Our determination is driven by the fact
that in this case, it was not alleged that the deterioration or failure of such part represented a
danger to others.” Taken as a whole, plaintiffs’ allegations are sufficient to constitute an
unlawful act under the consumer protection acts of Illinois, Maryland, Florida, Maine,
Pennsylvania, and New York.7 See Maniscalco, 627 F. Supp. 2d at 501-02. Therefore, Plaintiffs
have sufficiently pled that Defendant was under a duty to disclose the torque converter defect,
thereby warranting that the Court DENY their motion to dismiss the plaintiffs’ consumer
protection claims, notwithstanding the defendant’s express warranty arguments.
The Court has reviewed the remaining arguments by the defendant for dismissing
Plaintiffs’ consumer protection act claims. The Court will address each plaintiff in turn.
7
Although these states have different substantive requirements, collectively they are intended to prohibit
unconscionable or immoral commercial practices, as well as fraud and deception through misrepresentations and
omissions of material facts. See In re Philips, No. 09-3072, 2010 WL 3522787, at *6-7 (D.N.J. Sept. 1, 2010).
25
i. Plaintiff Garcia’s Claim Under The Florida Unfair Trade Practices Act
Defendant contends that Plaintiff Garcia’s consumer protection act claim should be
dismissed because he has failed to adequately allege causation. (See Doc. No. 23-1, at 21). The
FDUTPA is designed to “[t]o protect the consuming public and legitimate business enterprises
from those who engage in unfair methods of competition, or unconscionable, deceptive, or unfair
acts or practices in the conduct of any trade or commerce.” FL. STAT. ANN. 501.202(2).
Although not specifically identified by the statute, there are three elements that are required to
establish a claim pursuant to the FDUTPA: 1) a deceptive act or unfair practice; 2) causation;
and 3) actual damages. See KC Leisure, Inc. v. Haber, 972 So. 2d 1069, 1073 (Fla. Dist. Ct. App.
2008). In order to make a claim under the FDUPTA, the plaintiffs must demonstrate that the
unfair or deceptive acts by the defendant are the cause of their injuries. See General Motors
Acceptance Corp. v. Laesser, 718 So. 2d 276, 277 (Fla. Dist. Ct. App. 1998).
This Court finds that Plaintiff Garcia has adequately pled a cause of action under the
FDUPTA, especially in light of the law’s liberal interpretation.8 Specifically, the Amended
Complaint alleges that Ford knew of the torque converter defect, as well as the resulting
transmission failure. (See Am. Compl. ¶ 21). Furthermore, it is alleged that Ford actively
concealed its knowledge of the defect from Plaintiffs and Class members, causing the Plaintiffs
significant financial harm. See id. ¶ 26. Finally, the Amended Complaint alleges that had the
Plaintiffs known of the defect, they would have paid significantly less for the vehicle or would
not have purchased the vehicle at all. See id. ¶¶ 28-31. The Plaintiffs have pled sufficient facts to
show that as a result of Defendant’s omissions, Plaintiffs were harmed. Therefore, Plaintiff
8
The Florida Legislature intended chapter 501 to be construed liberally. See Cummings v. Warren Henry Motors,
Inc., 648 So. 2d 1230, 1233 (Fla. Dist. Ct. App. 1995).
26
Garcia has adequately alleged causation, and the Defendant’s motion to dismiss this Plaintiff is
DENIED.
ii. Plaintiff Doll’s Claim Under The Maryland Consumer Protection Act
Defendant argues that absent a claim that Ford had actual knowledge of the defective
torque convertor, Ford cannot be held liable for failing to disclose these facts. (See Doc. No. 231, at 22). Defendant points to the language of the Amended Complaint, which states that “Ford
knew or should have known” of the defect “at the time of marketing, sale and distribution” of
Mr. Doll’s vehicle. (See Am. Compl. ¶ 27). Nonetheless, under Maryland law, the manufacturer
must merely know or have reason to know of the defect. See Hayes v. Hambruch, 64 F.3d 657
(4th Cir. 1995). Plaintiffs have alleged that “Ford had access to relevant data regarding the
useful life of the Vehicles’ torque converter and transmission and, further, had knowledge as a
result of the numerous complaints made by consumers about their Vehicles’ torque converter
and/or transmission failures to Ford, NHTSA, internet websites and other public fora.” (Am.
Compl. ¶26). Consequently, this Court finds that, at a minimum, Plaintiffs have adequately pled
that Ford had reason to know of the defect. Defendant’s motion to dismiss Plaintiff Doll’s
consumer protection claim is DENIED.
iii. Plaintiff Pollack’s Claim Under The Maine Unfair Trade Practices Act
Defendant avers that Plaintiff Pollack’s unfair trade practices claim should be dismissed
because voluntarily providing a limited warranty is not an unfair or deceptive act according to
the MUTPA. (See Doc. No. 23-1, at 22).
The MUTPA provides protection for consumers against unfair and deceptive trade
practices. 5 ME. REV. STAT. ANN. § 205-14. Specifically, it declares unlawful “unfair methods of
competition and unfair or deceptive acts or practices in the conduct of any trade or commerce.” §
27
207. Nevertheless, the MUTPA does not provide a clear definition of what constitutes an
“unfair” or “deceptive” act. Nevertheless, to justify a finding of unfairness, Maine courts have
held that the act or practice: (1) must cause, or be likely to cause, substantial injury to
consumers; (2) that is not reasonably avoidable by consumers; and (3) that is not outweighed by
any countervailing benefits to consumers. See State v. Weinschenk, 868 A.2d 200, 206 (Me.
2005). Defendant argues that Ford’s express warranty, even with its limitations, provided
Plaintiff Pollack with additional remedies beyond whatever remedies would have been available
under the law. (See Doc. No. 23-1, at 23). As a result, Defendant claims that Plaintiffs have
failed to allege that Ford acted in violation of the MUTPA. See id. at 24.
The Defendant’s argument is unavailing for two reasons. First, Plaintiffs are not
contending that Ford violated the MUTPA by providing an express warranty. Rather, Plaintiffs
allege that Ford violated the MUTPA by limiting its warranties when it knew or should have
known that the vehicles were defective. (See Am. Compl. ¶ 110). Second, the Court finds that the
Plaintiffs have alleged adequate facts to make a claim under the MUTPA. Plaintiffs allege that
Ford violated the MUTPA by inserting an unconscionable provision into a contract when it
should have known the vehicles were defective. Plaintiffs also allege that Ford fraudulently
concealed the existence of the defect in the vehicles. See ¶¶ 110-111. Furthermore, Plaintiffs
allege that the Defendant violated the MUTPA by selling vehicles that required prohibitively
high repair costs. See ¶ 112. Finally, Plaintiffs contend that the omissions by Ford were likely to
deceive reasonable consumers, and Plaintiffs would not have bought the vehicles had Ford
disclosed this information. See ¶¶ 115, 118. Moreover, Defendant has not provided any facts to
suggest that the benefit of a defective torque converter outweighs the harm experienced by the
28
Plaintiffs. These allegations are clearly sufficient to plead a violation of the MUTPA, and thus
Defendant’s motion to dismiss Pollack’s MUTPA claim is DENIED.
iv. Plaintiffs The Ziehrs’ Claim Under The New York Deceptive Trade
Practices Act
Section 349 of the New York General Business Law makes unlawful “deceptive acts or
practices in the conduct of any business, trade or commerce or in the furnishing of any service in
this state.” N.Y. GEN. BUS. LAW § 349. To state a claim for deceptive practices under this
section, a plaintiff must show: (1) that the act, practice, or advertisement was consumer-oriented;
(2) that the act, practice, or advertisement was misleading in a material respect; and (3) that the
plaintiff was injured as a result of the deceptive act, practice, or advertisement. See Pelman ex
rel. Pelman v. McDonald’s Corp., 396 F. Supp. 2d 439, 443-44 (S.D.N.Y. 2005) (citations
omitted). The standard for whether an act or practice is misleading is objective, requiring a
showing that a reasonable consumer would have been misled by the defendant’s conduct. See id.
Omissions, as well as acts, may form the basis of a deceptive practices claim.9 See Oswego
Laborers’ Local 214 Pension Fund v. Marine Midland Bank, 647 N.E.2d 741, 745 (N.Y. 1995).
Plaintiffs have adequately pled a claim under the New York Deceptive Trade Practices
Act. In the Amended Complaint, Plaintiffs contend that Ford misled consumers by withholding
material information regarding the defective torque converter, and, as a result, consumers were
harmed by high repair and replacement costs. (See Am. Compl. ¶¶ 3, 4). This Court finds that
Ford’s alleged omissions are consumer orientated, materially misleading, and are the source of
9
Defendant argues in their motion to dismiss that an omission can give rise to claim under section 349, but only in a
situation where the omission renders other statements made by a defendant misleading. (See Doc. No. 23-1, at 24).
Defendant cites Henry v. Rehab Plus, Inc., 404 F. Supp. 2d 435, 445 (E.D.N.Y. 2005) to support this proposition.
The court in Henry relies on Fogarazzo v. Lehman Bros., Inc., 341 F. Supp. 2d 274 (S.D.N.Y. 2005) in stating “[a]n
omission becomes a misrepresentation only in a situation in which it renders other statements made by a defendant
misleading.” However, in Fogarazzo, the court was analyzing securities fraud law and not consumer fraud statutes.
Consequently, this Court is not persuaded by the Defendant’s argument.
29
the Plaintiff’s injuries. Consequently, Defendant’s motion to dismiss the Ziehrs’ consumer
protection claims is DENIED.
v. Plaintiff Regensburger’s Claim Under The Pennsylvania Unfair Trade
Practices And Consumer Protection Law (UTPCPL)
Finally, Defendant argues that Mr. Regensburger’s consumer fraud claims are barred by
the economic loss doctrine. The Third Circuit Court of Appeals predicted that the Pennsylvania
Supreme Court would apply the economic loss doctrine to fraud-based claims under the
UTPCPL in Werwinski v. Ford Motor Co., 286 F.3d 661, 668 (3d Cir. 2002). This Court follows
the Third Circuit’s reasoning and finds that the economic loss doctrine bars Regenburger’s
consumer fraud claim under the UTPCPL.
The economic loss doctrine provides that “no cause of action can be maintained in tort
for negligence or strict liability where the only injury was economic loss—that is, loss that is
neither physical injury nor damage to tangible property.” 2–J Corp. v. Tice, 126 F.3d 539, 541
(3d Cir.1997) (internal quotations omitted). The doctrine initially developed in the products
liability context to prevent tort recovery where the only injury was to the product itself. See East
River S.S. Corp. v. Transamerica Delaval, Inc., 476 U.S. 858, 106 S.Ct. 2295, 90 L.Ed.2d 865
(1986) (adopting the doctrine in an admiralty products liability case). Within the Third Circuit, it
has since been applied in the context of service contracts, see, e.g., Palco Linings, Inc. v. Pavex,
Inc., 755 F. Supp. 1269, 1272 (M.D. Pa.1990), negligent misrepresentation claims, see, e.g.,
Duquesne Light Co. v. Westinghouse Elec. Corp., 66 F.3d 604, 620 (3d Cir.1995), and fraud
claims under the UTPCPL, see, e.g., Werwinski, 286 F.3d at 681. In Werwinski, eight plaintiffs
brought claims under the UTPCPL, alleging that certain vehicles contained a defect in their
transmissions. See Werwinski, 286 F.3d at 664. The appellants asserted that the defect caused
transmission failures; including, sudden acceleration, delayed forward or reverse engagement,
30
sudden shifts into reverse, and a total loss of acceleration or forward movement. See id.
Moreover, Plaintiffs claimed that Ford actively concealed the defect from their consumers. See
id.
While Pennsylvania’s Supreme Court had yet to address the issue, the court in Werwinski
extended the economic loss doctrine to allegations of fraudulent concealment under the
UTPCPL. See id. at 678-81. In doing so, the court relied on two decisions from other states. See
Huron Tool & Eng’g Co. v. Precision Consulting Servs., Inc., 532 N.W.2d 541, 545 (Mich. Ct.
App. 1995); Rich Prod. Corp. v. Kemutec, Inc., 66 F. Supp. 2d 937, 977–80 (E.D. Wis.
1999).These courts held that under the economic loss doctrine, fraud-based claims are only
actionable if the fraud is extraneous to the alleged breach of contract. See id. The court in
Werwinski reasoned that because the fraudulent concealment claims relate to the “quality or
character of the goods sold,” the claims clearly are “intertwined” with, and not “extraneous” to,
their breach of warranty claims. See Werwinski, 286 F.3d at 678-81 (citation omitted). As a
result, the court held that the economic loss doctrine barred the claim. See id. While this Court
recognizes the considerable debate over the validity of the Third Circuit’s decision, the Court
cannot ignore this pronouncement of Pennsylvania law. See Sarsfield v. Citimortgage, Inc., 707
F. Supp. 2d 546, 556 (M.D. Pa. 2010); O’Keefe v. Mercedes-Benz USA, 214 F.R.D. 226 (E.D.
Pa. 2003).
In this instance, Plaintiffs have only alleged economic losses resulting from Ford’s
fraudulent omissions. Consequently, the economic loss doctrine bars Plaintiff Regensburger’s
consumer fraud claim under the UTPCPL, and Defendant’s motion to dismiss this Plaintiff is
GRANTED.
d. Unjust Enrichment
31
In the alternative, Plaintiffs assert a claim for unjust enrichment. (Am. Compl. ¶ 155).
Defendant counters by arguing that Plaintiffs Abraham, Doll, Pollack, and the Ziehrs’ unjust
enrichment claims should be dismissed because the claim is covered by an express contract
between the parties. Since Plaintiffs received the unused portion of the original limited warranty
when they bought their vehicles, Defendant argues that this express contract governs, thereby
excluding Plaintiffs’ unjust enrichment claims. (See Doc. No. 23-1, at 32). Plaintiffs do not
directly address this argument by the Defendant; rather, they assert their right to plead in the
alternative under Fed. R. Civ. P. 8(a)(3). In support of this contention, Plaintiffs cite Hoang v.
Georgetown Contractors, Inc, No. 08:10-CV-2117-AW, 2010 WL 4485729, at *3 (D. Md. Nov.
9, 2010), for the proposition that a plaintiff may plead both breach of contract and unjust
enrichment theories. Nevertheless, the court in Hoang stated, “a plaintiff is not barred from
pleading these theories in the alternative where the existence of a contract concerning the subject
matter is in dispute.” See id. (internal quotations omitted). In this instance, Plaintiffs have not
disputed Defendant’s contention that an express contract governs the subject matter of the claim.
Consequently, without a dispute concerning the existence of a contract, Plaintiffs are barred from
alleging both theories in their Amended Complaint.
Maryland recognizes an exception to this rule in situations where there is evidence of
fraud or bad faith. See Janusz v. Gilliam, 947 A.2d 560, 567 (Md. 2008). This Court has already
established that Plaintiffs have adequately pled fraudulent concealment. Therefore, Plaintiff
Doll’s unjust enrichment claim is sustained. Defendant’s motion to dismiss Plaintiffs Abraham,
Pollack, and the Ziehrs is GRANTED, but Defendant’s motion to dismiss Plaintiff Doll’s unjust
enrichment claim is DENIED.
32
Defendant also argues that Plaintiffs Garcia, Mixon, and Regensburger’s unjust
enrichment claims should be dismissed because they have not adequately alleged that a benefit
was provided to Ford when they purchased their vehicles. (Doc. No. 23-1, at 34). In order to
allege unjust enrichment in Florida, South Carolina, and Pennsylvania, the plaintiff must confer a
benefit upon the defendant. See e.g., Rollins, Inc. v. Butland, 951 So. 2d 860, 876 (Fla. Dist. Ct.
App. 2006). Ford points out that these three Plaintiffs have not provided any evidence that
suggests Ford received a benefit when they bought their vehicles. Indeed, the Amended
Complaint is completely devoid of any factual allegations that suggest how Ford was benefited
from Mr. Garcia’s purchase of a used car at DriveTime Kissimmee Dealership, Mr. Mixon’s
purchase of a used car from a Chevrolet dealership, or Mr. Regensburger’s purchase of a used
car from a Chrysler dealership. (Am. Compl. ¶¶ 8, 9, 11). Moreover, courts in these states have
strongly suggested that automobile dealerships are generally not agents of automobile
manufacturers in the selling of vehicles, and that the inquiry is a fact-specific one that must be
supported by sufficient evidence in the record. See e.g., Zeno v. Ford Motor Co., 480 F. Supp. 2d
825 (W.D. Pa. 2007). Consequently, Defendant’s Motion to Dismiss Plaintiffs Garcia, Mixon,
and Regensburger’s unjust enrichment claims is GRANTED.
CONCLUSION
For the reasons stated above, the Court GRANTS-IN-PART and DENIES-IN-PART
Defendant Ford Motor Company’s Motion to Dismiss. In summary, Defendant’s Motion to
Dismiss is GRANTED as to Plaintiff Abraham , Doll, Mixon, Regensburger on their
Magnuson-Moss Warranty Act claims and Breach of Implied Warranty claims (Counts I and II),
with these claims remaining as to Plaintiffs Pollack and the Ziehrs.10 Defendant’s Motion to
10
The Court DENIES Defendant’s Motion to Dismiss Plaintiffs Pollack and Ziehrs’ Implied Warranty claims and
Magnuson-Moss Warranty Act claims.
33
Dismiss is GRANTED as to Plaintiff Regenburger’s consumer fraud claim under the UTPCPL
(Count VIII), but Plaintiffs’ consumer protection claims remain as to the remaining plaintiffs.11
Defendant’s Motion to Dismiss is GRANTED as to Plaintiffs Abrahams, Pollack, the Ziehrs,
Garcia, Mixon, and Regenburger’s unjust enrichment claims, but the unjust enrichment claims
remain as to Plaintiff Doll (Count IX).12 The Court will proceed to issue a Scheduling Order in
this case. Defendant is directed to answer or otherwise respond.
August 25, 2011
Date
/s/
Alexander Williams, Jr.
United States District Judge
11
The Court DENIES Defendant’s Motion to Dismiss Plaintiffs Doll, Garcia, Pollack, and Ziehrs’ consumer
protection claims.
12
The Court DENIES Defendant’s Motion to Dismiss Plaintiff Doll’s Unjust Enrichment Claim.
34
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