MORANO v. BMW OF NORTH AMERICA, LLC
Filing
32
MEMORANDUM OPINION. Signed by Judge Kevin McNulty on 2/28/13. (DD, )
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
JOHN J. MORANO, individually, and on
behalf of all others similarly situated,
Civ. No. 2: 12-CV-00606
(KM)(MAH)
Plaintiff,
MEMORANDUM OPINION
V.
BMW OF NORTH AMERICA, LLC,
Defendant.
KEVIN MCNULTY, U.S.D.J.:
The plaintiff, John J. Morano (“Morano”), brings this putative class
action against defendant, BMW of North America, LLC (“BMWNA”), for
violations of the Florida Deceptive and Unfair Trade Practices Act (“FDUTPA”),
breach of contract, breach of warranty, and punitive damages. The dispute
arose when the battery in Morano’s new BMW automobile would not hold a
charge and his BMW dealer refused to replace it. Plaintiff alleges that BMWNA
failed to clearly disclose the basis for excluding the battery problem from its
Ultimate Service Program (the “Maintenance Program”) and New Passenger
Vehicle Limited Warranty (the “Warranty”). Plaintiff seeks to represent a class
of “all persons or entities residing in the state of Florida who purchased or
leased a BMW automobile within the four (4) year period preceding the date on
which the Complaint is filed.”
BMWNA has moved to dismiss Morano’s claims, arguing that he failed to
plead his FDUTPA claim with the particularity required by FED. R. CIV. P. 9(b);
that his breach of contract and breach of warranty claims fail for lack of privity;
that the battery problem resulted from the manner in which Morano operated
the vehicle; and that the punitive damages claim is unsupported by factual
allegations. BMWNA also argues that the class action allegations are
unsustainable because individual issues of causation predominate over any
common issues of law or fact.
1
--
Pleading deficiencies aside, BMWNA’s central legal argument is that it is
not in privity with customers and therefore cannot be liable under applicable
Florida law for breach of warranty or breach of contract. This comes as a
surprise to the Court, as it doubtless would to consumers. BMWNA’s warranty
states that it runs to “the first retail purchaser.” But BMWNA makes no direct
sales or leases to customers; it sells and leases cars only through its dealers. If
the Warranty and Maintenance Program apply only to BMWNA’s direct
customers, then they apply to nobody. If this privily argument were correct,
then BMWNA’s aggressively marketed Warranty and Maintenance Program
would be unenforceable, not to say illusory. I am fairly certain, however, that
when Florida BMW owners bring their cars to the dealer for warranty servicing,
they are not told to go away because they lack privily. At any rate, I do not
agree that the Supreme Court of Florida would interpret that State’s law to
require -privity -4 these—circumstanees.mere-germane issue-is whether-the
Warranty and Maintenance Program cover, or should have covered, the claimed
defect. That, of course, is a separate issue, and a genuine one.
I have reviewed the parties’ submissions, and I heard oral argument on
December 16, 2012. For the reasons set forth below, the Court is persuaded
that the Complaint adequately sets forth claims for relief on Mr. Morano’s part,
and that a decision on class certification would be premature. Defendant’s
motion to dismiss will therefore be DENIED.
I.
BACKGROUND
On or about September 17, 2009, John Morano, a citizen of Florida,
leased a BMW 650i CV from the Paul Miller BMW dealership, which is located
in Wayne, New Jersey. (Compl. ¶J 1, 18-19.) Plaintiff leased his vehicle from a
New Jersey dealership because his local BMW dealership, BMW of Fort Myers,
referred him there. (Id. ¶ 20.) Defendant BMWNA is a Delaware Limited
Liability Company with its principal place of business in Woodcliff Lake, New
Jersey. (Id. ¶ 2.) BMWNA is the North American importer, distributor,
marketer, and warrantor of BMW brand vehicles. (Memorandum of Law in
Support of Motion to Dismiss (“Def. Mem.”), ECF No. 10-1, at 4 n.3.) BMWNA
does not sell or lease vehicles directly to consumers; it does so solely through
dealerships, which also serve as repair centers. (Id.)
This Court has diversity jurisdiction pursuant to 28 U.S.C. § 1332, the
diversity statute, as amended and supplemented by the Class Action Fairness
Act of 2005. The claims of the individual members of the proposed class exceed
the sum or value of $5,000,000, exclusive of interests and costs, and at least
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one member of the proposed class (i.e., Mr. Morano himself) is a citizen of a
different state (Florida) from BMWNA (New Jersey and Delaware). See 28 U.s.c.
§ 1332(d)(2) (“minimal diversity” requirement of the class Action Fairness Act);
28 U.S.C. § 1332(d)(10) (for class action purposes, “an unincorporated
association shall be deemed to be a citizen of the State where it has its
principal place of business and the State under whose laws it is organized”).
A. BMWNA’s “Ultimate Service” Maintenance Program
New BMW vehicles come with a 4 year! 50,000 mile Ultimate Service “no
maintenance” program. The model year 2009 BMW 6 Series Service and
Warranty Information manual describes the Maintenance Program, in part, as
follows:
TheBMWntenancPrm.beneiesignedtoheipreduc th
cost of ownership. This program has been devised with the following
objectives: to maximize vehicle safety, reliability, and resale value by
minimizing breakdowns resulting from wear, and minimizing cost and
inconvenience by computing maintenance intervals based upon the
specific manner in which each individual vehicle is driven. 2009 1, 3, 5,
and 6 Series vehicles purchased’ from any authorized BMW center in the
United States or Puerto Rico are covered by The BMW Maintenance
Program for 48 months or 50,000 miles.
(Dalton Deci., ECF No. 10-5, Ex. A., pp. 1-2.) Exclusions from coverage under
the Maintenance Program include the following: damage which results from
negligence, improper operation of the vehicle, wear and tear or deterioration
due to driving habits or conditions, improper repair, environmental influences,
flood, accident, or fire damage. (Id. at p. 2.)
Typically, when a court relies on matters outside of the pleadings, it
must convert the motion to dismiss into a motion for summary judgment
pursuant to Rule 56 of the Federal Rules of Civil Procedure. That procedure is
designed to provide all parties with a reasonable opportunity to present and
respond to all materials pertinent to the motion. See FED. R. Civ. P. 12(d);
Pension Ben. Guar. Corp. v. White Consol. Industries, Inc., 998 F.2d 1192, 1196
(3d Cir. 1993). A court may, however, consider extraneous documents that are
referred to in the complaint or documents on which the claims in the complaint
were based without converting the motion to dismiss into one for summary
BMWNA disclaims reliance on any distinction between leases and purchases for
these purposes.
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judgment. In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1426 (3d Cir.
1997); Pension Benefit, 998 F.2d at 1196. That is permitted because, when a
complaint refers to or relies on the document, “the plaintiff obviously is on
notice of the contents of the document, and the need for a chance to refute
evidence is greatly diminished.” Pension Benefit, 998 F.2d 1192 at 1196—97.
Therefore, I will rely on the Maintenance Program and Warranty which are
the very foundation of the Complaint
and will not convert the motion to
dismiss into one for summary judgment.
—
—
B. BMWNA’s New Passenger Vehicle Limited Warranty
New BMW vehicles also come with a 4 year/50,000 mile New Passenger
Vehicle Limited Warranty. The warranty for the 2009 BMW 6 Series explicitly
names BMWNA as the “warrantor.” (Dalton Deci., Ex. A., p. 33) BMWNA
‘warrants 2009 U;S
BMWNAoT sod
through the BMWNA European Delivery Program against defects in materials
or workmanship to the first retail purchaser, and each subsequent purchaser.”
(Id.) The Warranty provides that “upon discovery of a defect in material or
workmanship” the vehicle must be brought to the workshop of an authorized
BMW center. “The BMW center will, without charge for parts of labor, either
repair or replace the defective part(s) using new or authorized remanufactured
parts.” (Id.)
As is common, this Warranty contains exclusions. Excluded from
coverage are, among other things, damage “which results from negligence,
improper operation of the vehicle, improper repair, lack of or improper
maintenance [and] . . . [1]ailure to maintain the vehicle properly in accordance
with the instructions in the Owner’s Manual or the Service section of this
Statement, that results in the failure of any part of the vehicle . . . .“ (Id.)
Regarding batteries in particular, the Service and Warranty Information
Manual (which contains the Maintenance Program and the Warranty) provides:
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Battery Care
If your car is driven only for short distances of less than 10 miles over a
prolonged period of time, without an occasional drive at highway speeds,
the engines [sic] charging system will not maintain the battery.
Insufficient use of the vehicle could result in short term starting
problems and in the long term could damage the battery.
(Dalton Deci., Ex. A., p. 18.) In short, the Warranty, like the Maintenance
Program, excludes from coverage losses caused by the owner’s failure to use or
maintain the car properly.
C. Morano’s Experience
The Plaintiff, Mr. Morano, states that he saw BMW’s advertisements
touting the Maintenance Program and Warranty and visited his local BMW
center in Fort Myers, Florida. (Compi. ¶J 1, 17-20.) That Fort Myers dealer gave
Mr. Morano a brochure explaining BMW’s comprehensive “no-cost ownership”
program. (Id. at ¶ 17.) The Fort Myers dealership did not enter into a lease with
Morano, but arranged for him to lease a new BMW 650i convertible through a
BMW dealership in New Jersey. (Id. at ¶f 18-19.)
Very soon after Morano acquired the car, the battery failed to hold a
charge. (Id. at ¶ 21.) Morano alleges that he operated and maintained his
vehicle properly and that the battery problems occurred through no fault of his
own. When he took the vehicle to the Fort Myers dealer in January 2011, the
service technicians noted the following on his invoice:
cked faults, more than 20 faults, almost all from low battery voltage,
cleared and reset all systems, recked only battery exhaustive discharge
will not clear, as/per serv. Writer, charge battery reset today/ok. after
charging most of the day, recked battery, only 400 cca in a 85Occa
battery, test with midtronics shows replace battery, advised serve.
writer/ok.
(Labrie Deci., ECF No. 10-2, ¶ 2, Ex. A. [spelling and abbreviations as in
original]) The car’s onboard diagnostic system provided the technicians with
information about the car’s battery and charge status, as well as its driving
history. (Labrie Decl. ¶ 3.) In the preceding 32 days, Plaintiff’s vehicle had been
driven 65 times for a total of 388 miles an average of about 6 miles per trip.
(Id.) The system reported the following trip breakdown:
—
5
<3 miles:
3
—
12.5 miles:
12.5
62 miles:
—
22 trips
33 trips
10 trips
(Id.)
This information, says BMWNA, establishes that the battery died because
Morano failed to follow the Service and Warranty Information Manual’s
requirements. (Def. Mem. at 5.) In particular, “Plaintiff’s battery ‘died’ because
his vehicle was used predominately for very short trips, not because of any
alleged defect
85% of trips in the prior thirty-two days were about 12.5
miles or less.” Id. It was allegedly on that basis that BMW of Fort Myers refused
to replace the battery. Morano then purchased a new battery at his own
expense.
.
II.
.
.
LEGAL STANDARD
Federal Rule of Civil Procedure 12(b)(6) provides for the dismissal of a
complaint, in whole or in part, if it fails to state a claim upon which relief can
be granted. The moving party bears the burden of showing that no claim has
been stated. Hedges v. United States, 404 F.3d 744, 750 (3d Cir. 2005). In
deciding a motion to dismiss under Rule 12(b)(6), a court must take all
allegations in the complaint as true and view them in the light most favorable
to the plaintiff. See Warth v. Seldin, 422 U.S. 490, 501 (1975); Trump Hotels &
Casino Resorts, Inc. v. Mirage Resorts Inc., 140 F.3d 478, 483 (3d Cir. 1998);
see also Phillips v. County of Allegheny, 515 F.3d 224, 231 (3d Cir. 2008)
(“reasonable inferences” principle not undermined by later Supreme Court
Twombly case, infra).
Federal Rule of Procedure 8(a) does not require that a complaint contain
detailed factual allegations. Nevertheless, “a plaintiff’s obligation to provide the
‘grounds’ of his ‘entitlement to relief’ requires more than labels and
conclusions, and a formulaic recitation of the elements of a cause of action will
not do.” Bell Ati. Corp. V. Twombly, 550 U.S. 544, 555 (2007). Thus, the factual
allegations must be sufficient to raise a plaintiff’s right to relief above a
speculative level, such that it is “plausible on its face.” See id. at 570; see also
Umland v. PLANCO Fin. Serv., Inc., 542 F.3d 59, 64 (3d Cir. 2008). A claim has
“facial plausibility when the plaintiff pleads factual content that allows the
court to draw the reasonable inference that the defendant is liable for the
misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing
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Twombly, 550 U.S. at 556). While “[tihe plausibility standard is not akin to a
it asks for more than a sheer possibility.” Iqbal,
‘probability requirement’
556 U.S. at 678 (2009).
.
.
.
A complaint that alleges fraud is subject to the heightened pleading
requirements of Rule 9(b), Fed. R. Civ. P. Such a complaint must “state with
particularity the circumstances constituting fraud or mistake,” although
“[m]alice, intent, knowledge, and other conditions of a person’s mind may be
alleged generally.” FED. R. Civ. P. 9(b). At a minimum, Rule 9(b) requires “that
plaintiffs support their allegations of [1 fraud with all of the essential factual
background that would accompany ‘the first paragraph of any newspaper story’
that is, the ‘who, what, when, where and how’ of the events at issue.” In re
Suprema Specialties, Inc. Sec. Litig., 438 F.3d 256, 276-77 (3d Cir. 2006)
(quotiigIn re BurUngton Coat FactorM Sec. Litg., 114 F.3d 1410, 1422 (3d Cir.
1997)). Rule 9(b)’s particularity requirement ensures that defendants accused
of fraud are placed on notice of the precise misconduct that is alleged. Seville
Indus. Mach. Corp. v. Southmost Mach. Corp., 742 F.2d 786, 791 (3d Cir. 1984).
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III.
DISCUSSION
The Complaint asserts five causes of action: violations of FDUTPA (Count
I); breach of contract (Count II); breach of implied covenant of good faith and
fair dealing (Count III); breach of express warranty (Count IV); and punitive
damages (Count V).2 BMWNA has moved to dismiss all of them. For the
reasons set forth below, that motion to dismiss is DENIED in its entirety.
The parties agree that Florida law applies to these warranty and contract
claims. That stipulation appears to be well founded. This court applies the conflicts
law of New Jersey, the state in which it sits. See Klaxon v. Stentor Mfg. Co., 313 U.S.
487 (1941). New Jersey follows the “most significant relationship” test of the
Restatement (Second) of Conflict of Laws. P. V. v. Camp Jaycee, 197 N.J. 132, 142-43,
962 A.2d 453, 459-60 (2008). For contractual causes of action, significant factors
include the place of contracting; the place of negotiation; the place of performance; the
location of the contract’s subject matter; the domicile or location of the parties.
Restatement (Second) § 188. This Florida resident purchased the car from a New
Jersey dealer, but did so as a convenience, at the instigation of his local Florida
dealer. He maintained and drove the car in Florida, and attempted to have the alleged
defect repaired by the Florida dealer. Performance of the warranty and/or contract
occurred in Florida. Solely as to the warranty, UCC 1-105 (in effect in both Florida and
New Jersey), provides that local law “applies to transactions bearing an appropriate
relation to this State.” See also Aldon Industries, Inc. v. Don Myers & Assoc.s., Inc., 517
2
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A. Violation of FDUTPA (Count I)
Initially, the Court must consider whether to analyze Plaintiff’s FDUTPA
claim under the ordinary pleading requirements of Fed. R. Civ. P. 8(a) or the
heightened requirement of Rule 9(b) that fraud claims be pleaded with
particularity.
Is a FDUTPA claim a fraud claim? Not necessarily. To prevail on a
FDUTPA claim, a plaintiff must establish “a deceptive act or unfair practice,” as
well as causation and damages. See Galstaldi V. Sunvest Cmtys. USA, LLC, 637
F. Supp. 2d 1045, 1056 (S.D. Fla, 2009) (quoting Rollins, Inc. v. Butland, 951
So. 2d 860, 869 (Fla. 2d Dist. Ct. App. 2006)). “A deceptive act or unfair
practice” encompasses a range of activities far broader than common law fraud.
Thus it is well established that “the plaintiff need not prove the elements of
fraud to sustain an action under the [FDUTPA] statute.” State of Fla. Office of
2005). It follows, then, that “[t]he requirements of Rule 9(b) do not apply”
merely because a claim is brought under FDUTPA. Guerrero v. Target Corp., 12cv-21115, 2012 WL 3812324 (S.D. Fla. Sept. 4, 2012) (quoting Galstaldi, 637
F. Supp. 2d at 1056); see also Tenet, 420 F. Supp. 2d at 1310 (heightened
pleading requirements of Rule 9(b) do not apply to FDUTPA claim where “claim
is not premised on allegations of fraud”); Hackett Associates v. GE Capital
Information Technical Solutions, 744 F. Supp. 2d 1305 (S.D. Fla. 2010).
Nevertheless, where FDUTPA claims do happen to sound in fraud, federal
courts will apply the heightened pleading standard of Rule 9(b). See Blair v.
Wachovia Mortg. Corp., 1 1-cv-566-OC-37, 2012 WL 868878 (M.D. Fla. Mar. 14,
2012) (noting that “federal district courts have split as to whether FDUTPA
claims are subject to Rule 9(b)” but holding that “where the gravamen of the
claim sounds in fraud, as here, the heightened pleading standard of Rule 9(b)
would apply”); D.H.G. Props., L.L.C. v. Ginn Cos., 09-cv-735-J-34JRK, 2010 WL
5584464, at *5 n.9 (M.D. Fla. Sept. 28, 2010) (“The Court need not determine
the extent to which FDUTPA claims in other contexts may or may not be
subject to the heightened pleading requirements of Rule 9(b); it suffices to
recognize that the allegations of misrepresentation comprising Plaintiff’s
FDUTPA claim in this action are grounded in fraud, and thus, required to be
plead [sic] with particularity.”); Llado—Carreno v. Guidant Corp., 09-cv-20971,
2011 WL 705403, at *5 (S.D. Fla. Feb. 22, 2011) (finding Rule 9(b) does apply);
see also Stires V. Carnival Corp., 243 F. Supp. 2d 1313, 1322 (M.D. Fla. 2002)
(“Most courts construing claims alleging violations of the Federal Deceptive
Trade Practices Act or its state counterparts have required the heightened
F.2d 188, 19091(5th Cir. 1975) (where purchaser of defective carpet was in Florida,
carpet was installed in Florida, and economic injury occurred there, the “appropriate
relation” test permitted application of Florida law to warranty claim).
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pleading standard requirements of Rule 9(b).”) I agree that, at least as to a
fraud-based FDUTPA claim, the heightened pleading standard of Rule 9(b)
should apply.
Applying the Rule 9(b) standard, I find that Count I adequately pleads
the elements of a FDUTPA claim. The Complaint alleges that BMWNA packaged
a Maintenance Program and Warranty that it promoted as providing zero-cost
maintenance to purchasers. (Compl. ¶f 9-16.) Morano further alleges that
BMWNA leased him a luxury vehicle whose battery would not retain a charge
under normal operation. (Id. ¶ 16.) Morano points to specific marketing and
advertising materials and specific language in the Maintenance Program and
Warranty that would lead reasonable consumers to believe that they were
covered in the event that their cars’ batteries died under normal operating
conditions. Morano maintains that BMWNA unfairly and deceptively relied on
vague exclusions in the Maintenance Program and Warranty to deny the “no
economic loss as a result. These allegations meet the standards of Rule 9(b)
and, afortiori, would satisfy Rule 8(a), Fed. R. Civ. P.
Accordingly, BMWNA’s motion to dismiss Count I is DENIED.
B. Breach of Warranty (Count IV)
In Count IV, Plaintiff alleges breach of express warranty. To state a claim
for breach of express warranty under Florida’s Uniform Commercial Code, a
complaint must allege: (1) the sale of goods; (2) the express warranty; (3)
4
breach of the warranty; (4) notice to the seller; and (5) the injuries sustained
by the buyer as a result of the breach of the express warranty. Dunham-Bush,
Inc. v. Thermo-Air Serv., Inc., 351 So. 2d 351, 352 (Fla. Dist. Ct. App. 1997).
The Complaint alleges that Morano performed all of his obligations under his
lease contracts with BMWNA and its authorized dealerships, but that BMWNA
wrongfully refused to honor the warranty with respect to the car battery.
BMWNA’s position on privity, if accepted, would also tend to solidify the
conclusion that Morano has validly stated a fraud-based FDUTPA claim. (See
discussion at Section III.B.2, below.)
In its Reply Brief on this motion, BMWNA argues for the first time that the
Complaint fails to allege that Morano notffied BMWNA of the purported breach of
warranty. (Reply Br. at 13.) In its opening brief, however, BWNA argued that “BMWNA
behaved wholly in accordance with the Maintenance Program and Limited Warranty
it refused to cover a loss caused by the owner’s conduct.” (Def. Mem. at 7.) It is
difficult to see how BMWNA could decline coverage of a claim of which it had no
notice. It is also difficult to see how bringing the car to a BMW dealer for warranty
repairs would not support a plausible inference of proper notice.
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9
BMWNA moves to dismiss this claim, arguing that (1) BMW of Fort Myers
properly refused to replace the battery because the failure was caused by
Morano’s own conduct; and (2) Morano’s breach of warranty claim is barred
because he is not in privity with BMWNA.
1. Loss caused by Morano’s driving patterns
BMWNA relies on technicians’ notes and diagnostic data to conclude that
the battery failed because Morano failed to follow the Service and Warranty
Information Manual’s requirements. (Def. Mem. at 5.) Specifically, says
BMWNA, “[p]laintiff’s battery ‘died’ because his vehicle was used predominately
85% of trips in the
for very short trips, not because of any alleged defect
prior thirty-two days were about 12.5 miles or less.” Thus Mr. Morano’s
conduct, not any defect covered by the warranty, caused the battery problem.
.
.
.
This is not the stuff of a motion to dismiss, which requires that the court
accept the allegations of the complaint as true and construe them in plaintiff’s
favor. See p. 6, supra. BMWNA’s contentions consist of contestable factual
matters that rest on sources extrinsic to the Complaint. Even taking the service
records at face value, the Court could not conclude at this early stage that
Morano’s driving behavior fell short of what was required. The owner’s manual
warns that the battery may drain if the car is driven “only for short distances of
less than 10 miles over a prolonged period of time.” BMWNA asserts that 85%
(not all) of the trips were for 12.5 miles (not 10 miles) or less, for 32 days
(which may or may not be defined as a “prolonged period of time”). The
diagnostic data suggests that as many as 66% of the trips could have been
longer than 10 miles. See pp. 4-6, supra.
2. Lack of privity
BMWNA’s alternative argument is nothing if not audacious. BMWNA
concedes that it is the warrantor. But BMWNA operates only through dealers,
and does not sell or lease cars directly to any consumer. Therefore, no
consumer is in privity with BMWNA. If privity is required, this Warranty (at least
in Florida) is enforceable by nobody. It is perhaps fortunate for BMWNA that
5
this Court rejects its privity argument as a matter of law.
The legal premise of BMWA’s argument is that Florida law requires
privity in order for a plaintiff to maintain a cause of action for economic
damages resulting from a breach of express warranty. In this diversity case, I
“Fortunate” because the consequence might have been a finding that BMWNA
has propounded an apparently generous but actually meaningless warranty.
10
am required to predict how the state’s highest court would decide that issue of
law. The best guide, of course, would be a decision on point by the Florida
Supreme Court. Hunt v. U.S. Tobacco Co., 538 F.3d 217, 220-2 1 (3d Cir. 2008).
But “in the absence of guidance from the state’s highest court, [I]
must look to decisions of state intermediate appellate courts, of
federal courts interpreting that state’s law, and of other state
supreme courts that have addressed the issue,” as well as to
“analogous decisions, considered dicta, scholarly works, and any
other reliable data tending convincingly to show how the highest
court in the state would determine the issue at hand.”
Norfolk Southern Ry. Co. V. Basell USA Inc., 512 F.3d 86, 92 (3d Cir. 2008)
(quoting Koppers Co., Inc. v. Aetna Cas. & Sur. Co., 98 F.3d 1440, 1445 (3d Cir.
Young LLP- 494F-3d- 41-8--424 3cI-Gii.
2007); West v. AT&T Co., 311 U.S. 223, 237 (1940).
Traditionally, privity and liability on a warranty were coextensive. Such
privity limitations were logical in an era when manufacturers and ultimate
buyers negotiated face-to-face over products that were relatively simple to
understand and easy to inspect for quality. See Dean W. Russell, Enforcing
Manufacturers’ Warranty Exclusions Against Non-Privity Commercial Purchasers:
The Need for Uniform Guidelines, 20 GA. L. REV. 461 (1986). But as
manufacturers moved away from direct sales and increasingly sold their
products through authorized dealers or retailers, courts found creative
exceptions to strict privily requirements to avoid unjust results in particular
cases. See Cornelius W. Gillam, Products Liability in a Nutshell, 37 ORE. L. REV.
119, 153-155 (1958). As such exceptions proliferated, courts and legislatures
moved closer to acknowledging that the traditional privily rule had become
outdated. See Christopher C. Little, Suing Upstream: Commercial Reality and
Recovery for Economic Loss in Breach of Warranty Actions by Non-Privity
Consumers, 42 WAKE FOREST L. REv. 831, 843 (2007). That trend in the law
amounts to a recognition of the realities of a mass consumer economy. Most
consumers now make their purchases “from a retail seller who is nothing more
than an economic conduit for the manufacturer’s product.” Patricia F. Fonseca
& John R. Fonseca, Williston on Sales § 22:10 (5th ed. 2006). Florida, like
other jurisdictions, has recognized this trend. As early as 1976, the Florida
Supreme Court acknowledged that “warranty law in Florida has become filled
with inconsistencies and misapplications in the judiciary’s attempt to provide
justice to the injured consumer.” West v. Caterpillar Tractor Co., 336 So. 2d 80,
92 (Fla. 1976).
11
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In 1967, in an implied warranty case, the Florida Supreme Court decided
to “become aligned with those courts holding that an action may be brought
against a manufacturer notwithstanding want of privity.” Manheim v. Ford
Motor Co., 201 So. 2d 440, 441 (Fla. 1967). There, the plaintiff had purchased a
defective 1964 Lincoln Continental convertible from a dealership. The
complaint alleged that the dealership “warranted and represented” the car to be
well constructed, without defective parts, and suitable for use as a motor
vehicle. Id. at 440. The plaintiff also alleged that he relied upon various
television and print advertisements by the manufacturer, Ford Motor Company.
fri. at 441. Ford Motor Company did not (like BMWNA) offer a manufacturer’s
warranty, and Ford’s agreement with its dealership expressly disclaimed any
implied warranty of merchantability or fitness. Id. Nevertheless, the Florida
Supreme Court held that neither the absence of privily between the
manuacuread purchase r- the disclairner f warranty. etween t
manufacturer and dealership precluded an implied warranty claim by the
purchaser against the manufacturer. Id.
Manheim was an implied warranty case, and subsequent cases have
noted that it occurred in a specialized legal and factual setting. See, e.g., Mesa
v. BMW of N. Am., LLC, 904 So. 2d 450, 458 (Fla. Dist. Ct. App. 2005) (stating
well settled law in Florida that “a plaintiff cannot recover economic losses for
breach of implied warranty in the absence of privity”)(emphasis added); Powers
v. Lazy Days RV Center, Inc., No.8:05-cv-1542T17EAJ, 2006 WL 373011 (M.D.
Fla., Feb. 16, 2006) (noting that the sale in Manheim occurred before Florida’s
adoption of the UCC and limiting its scope to the effect of a disclaimer in a
contract between a manufacturer and its dealer). Nevertheless, Manheim’s
rejection of a strict privily requirement in an action between a buyer and a car
manufacturer remains instructive.
As to express warranty claims, Florida law regarding privily remains
“murky.” See John W. Reis, The Magic of Privity in Express Product Warranty
Claims: A Plaintiff’s Perspective, 79 FLA. B.J. 50, 50 (2005). At least two federal
court cases have lumped together implied and express warranty claims, stating
that that “[u]nder Florida law, the plaintiff must be in privily of contract to
recover under theories of breach of express or implied warranties.” Fields v.
Mylan Pharmaceuticals, Inc., 751 F. Supp. 2d 1257, 1259 (N.D. Fla. 2009);
T.W.M. v. American Medical Sys., 886 F. Supp. 842, 844 (N.D. Fla. 1995)
(same). They do so, however, without significant analysis.
Thickening the murk is the fact that the development of the law in
express warranty cases has been stunted and superseded by the Magnuson
12
Moss Warranty Act, 15 U.S.C. § 2301 et seq. (“MMWA”), enacted in 1975. The
MMWA, which subsumes many (if not all) express warranty claims, loosens
vertical privily requirements. See 13 Williston on contracts § 37:39 (4th ed.)
(“The [MMWA] enhances a consumer’s position by allowing recovery under a
warranty without regard to the existence of privily of contract between the
consumer and the warrantor.”) Thus some cases, without extensive analysis,
have dismissed implied warranty claims against a manufacturer for lack of
privily while allowing express warranty claims under the MMWA to go forward.
Mesa, 904 So. 2d at 458; Rentas v. DaimlerChrysler Corp., 936 So. 2d 747 (Fla.
Dist. Ct. App. 2006); David v. Am. Suzuki Motor Corp., 629 F. Supp. 2d 1309,
1321-22 (S.D. Fla. 2009).
Mesa, Reritas, and David, although MMWA cases, are factually parallel to
this one. Each involves a consumer’s express warranty claim against a car
manufacturer. In each, the vehicle manufacturer was held accountable for the
promises made in its express warranty. Given the persuasive rationale behind
those cases, the lack of analysis in the other cited lower court decisions, and
Florida’s apparent willingness to relax strict privily requirements in a proper
case, I do not believe that the Florida Supreme Court would adopt a literalist
position here. I predict that the Florida Supreme Court, confronted by the
question, would hold that vertical privily is not required under these
circumstances, and would bring the common law of express warranties more in
line with the MMWA.
This is not the classic privily case of a sale from A to B, followed by a sale
from B to C, who is a stranger to A. Rather, BMWNA and the dealer function as
an integrated, two-part seller (or lessor). BMWNA makes all of its consumer
sales or leases through its authorized dealers. Each sale is accompanied by a
standard express warranty, developed by BMWNA, identifying BMWNA as the
warrantor. Meanwhile, the dealer handles the mechanics of the sale or lease to
the retail customer. Servicing under the Warranty or Maintenance Program
occurs at the authorized service center (i.e., the dealer). The Warranty explicitly
states it runs to the first retail purchaser and subsequent purchasers; surely
BMWNA had the realities of its distribution chain in mind when it drafted this
language. It is simply unconscionable to say that this Warranty, which
accompanies each new car, is unenforceable against the warrantor. It defies
logic to say that BMWNA’s warranty flows to the first retail purchaser, but that
there is no such person.
13
BMWNA cannot meaningfully dispute that it advertises its Maintenance
Program and Warranty to attract retail consumers. Through dealerships in
Florida, New Jersey, and throughout the country, BMWNA sells and leases its
vehicles. Simultaneously BMWNA warrants that the vehicles it manufactures
will be free from defects and that covered maintenance will be performed gratis.
Buyers such as Mr. Morano reasonably rely upon such warranties. Presumably
BMWNA receives an economic benefit in return for the warranties it extends to
buyers.
being shuffled between
also suggests that BMWNA treats
Florida and New Jersey dealerships
dealerships as fungible instruments. Discovery in this case could reveal
relevant information about the level of control BMWNA exerts over dealership
practices: specifically, information regarding BMWNA’s role in how authorized
dealerships offer manufacturer’s warranties to buyers such as Morno
Plaintiff’s experience in purchasing his car
—
—
--
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In short, whatever the outer limits of Florida’s privity doctrine may be, I
predict that the Florida Supreme Court would not find this warranty
unenforceable for lack of privity. Accordingly, BMWNA’s motion to dismiss
Count IV is DENIED.
C. Breach of Contract: The Maintenance Program (Counts II & III)
In Count JJ,7 Morano alleges that BMWNA “through its agents, authorized
dealers and affiliates” entered into a written Maintenance Program contract
with Plaintiff. (Compl. ¶ 46.) Thereafter, Morano asserts, BMWNA failed to
perform its obligations, in breach of the Maintenance Program contract. To
state a claim for breach of contract under Florida law, Plaintiff must allege: (1)
a valid contract, (2) a material breach, and (3) damages. Meriri Hunter Codman,
Inc. v. Wackenhut Corrs. Corp., 941 So. 2d 396, 398 (Fla. Dist. Ct. App. 2006).
BMWNA asserts that elements (1) and (2) are lacking; because Morano obtained
The allegations of the Complaint also suggest that a course of dealing may shed
light on the meaning of the Warranty. Discovery may well reveal that, even in Florida,
BMW dealers routinely honor the Warranty and perform covered repairs for retail
customers. That would be inexplicable if, as BMWNA claims in litigation, the Warranty
does not run to those retail customers.
Under Florida law, breach of the implied covenant of good faith and fair dealing
is not an independent cause of action, but attaches to the performance of a specific
6
contractual obligation. Centurion Air Cargo, Inc. v. United Parcel Seru. Co., 420 F.3d
1146, 1151 (11th Cir. 2005). A claim for breach of the implied covenant of good faith
and fair dealing cannot be maintained under Florida law in the absence of a breach of
an express term of a contract. Id. (citations omitted). I therefore will not independently
discuss Count III, which is inextricably tied to Plaintiff’s breach of contract claim.
14
his car through a dealer, there is no contractual privity between BMWNA and
Morano, and therefore no breach.
In short, BMWNA here makes the same lack-of-privity argument that it
made in response to the warranty claim. As discussed above, the Court is not
convinced that a strict adherence to the doctrine of privity is required where a
manufacturer markets a car and a suite of premium vehicle maintenance
services, and then sells those goods and services exclusively through
authorized dealers. Further, in its motion papers, BMWNA asserts that, under
the terms of the Maintenance Program and Limited Warranty, it rightfully
“refused to cover a loss caused by the owner’s conduct.” (Def. Mem. at 7.) If
BMWNA is the entity that made the decision whether to cover certain losses
conveying that decision through the local dealer it stands to reason that the
at least that the two acted together. As
stated in the preceding section, the allegations are sufficient to suggest that
discovery may reveal a relevant course of dealing or relevant information about
the level of control BMWNA exerts over dealership practices. For the reasons
stated in section III.B, supra, BMWNA’s motion to dismiss Counts II and III is
—
—
DENIED.
D. Punitive Damages (Count V)
In Count V, Plaintiff alleges that BMWNA committed the acts and
omissions alleged in the Complaint with a wanton and willful disregard for
Plaintiff’s rights. Florida law permits a claim for punitive damages where the
defendant is found to have engaged in “intentional misconduct” or “gross
negligence.” Fla. Stat. § 768.72(2). The Florida statute provides that
“intentional misconduct” means “that the defendant had actual knowledge of
the wrongfulness of the conduct and the high probability that injury or damage
to the claimant would result and, despite that knowledge, intentionally
pursued that course of conduct, resulting in injury or damage.” Fla. Stat. §
768.72(2)(a).
BMWNA asserts that the punitive damages claim should be dismissed
because it does not contain facts sufficient to support its conclusory allegations
of intentional misconduct. Plaintiff alleges that BMWNA knowingly
manufactured a vehicle with a battery that would not hold a charge, and
enticed customers with Maintenance Programs and Warranties that appear to,
but do not, cover such defects. It is true that the allegations as to BMWNA’s
knowledge are somewhat sketchy, and of course any entitlement to punitive
damages must ultimately be proven, not merely alleged. But the allegations are
15
sufficient to raise Morano’s right to relief above a speculative level. Therefore,
BMWNA’s motion to dismiss Count V is DENIED.
E. Class Allegations
Plaintiff seeks to pursue claims on behalf of “all natural persons or
entities residing in the state of Florida who purchased or leased a BMW
automobile within the [four (4)] year period preceding the date on which this
Complaint is filed.” (Compl. ¶ 28.) According to Plaintiff, the members of the
class are so numerous that joinder of all members is impracticable as the class
may consist of thousands of individuals who purchased BMW vehicles during
the relevant time period. (Id. at ¶ 29.) Plaintiff also alleges that there are
common questions of law and fact (id. at ¶ 30), that his claims are typical of
the claims of members of the class (id. at ¶ 31), and that he will fairly and
adqutly
BMWNA responds that Plaintiff’s class allegations are facially
unsustainable under FED. R. Civ. P. 23 and must be dismissed. Specifically,
BMWNA argues that individual issues of causation predominate over any
common issues of law or fact. It is true that class allegations may sometimes
be so facially deficient that a court can dismiss them on a Rule 12(b)(6) motion.
See General Tele. Co. v. Falcon, 457 U.S. 147, 160 (1982)(”[S]ometimes the
issues are plain enough from the pleadings to determine whether the interests
of the absent parties are fairly encompassed within the named plaintiff’s claim.
amended
.“); FED. R. Civ. P. 23(d)(4)(courts can order “that the pleadings be
to eliminate therefrom allegations as to representation of absent persons, and
that the action proceed accordingly.”); Clark v. McDonald’s Corp., 213 F.R.D.
198, 205 n. 3 (D.N.J. 2003). However, dismissal of class allegations is only
appropriate in “rare cases where the complaint itself demonstrates that the
requirements for maintaining a class action cannot be met.” Myers v. Medquist,
Inc., 05-cv-4608, 2006 WL 3751210, at *4 (D.N.J. Dec. 20, 2006) (quoting
Strzakowlski v. General Motors Corp., 04-cv-4740, 2005 U.S. Dist. LEXIS
18111, *26 (D.N.J. Aug. 16, 2005)).
for
This is not that rare case. BMWNA makes cogent arguments
example, that individual driving histories may be dispositive, and that therefore
individual claims may predominate over those that can be adjudicated en
masse. At this early stage, however, I cannot assume or conclude that such
arguments have a sufficient basis in fact. I will deny BMWNA’s motion to
dismiss Plaintiff’s class allegations.
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16
Class certification is to be decided “at an early practicable time,” Fed. R.
Civ. P. 23(c)(1)(A) i.e., as early as possible, but not earlier. At this early stage,
I cannot be confident that a grant or denial of class certification would be well
founded. Plaintiff has pleaded sufficient facts to go forward. The Court will
address the certification issues in due course, on a motion for class
certification made under Rule 23(c) after the parties have had the opportunity
to conduct necessary discovery.
—
F. CONCLUSION
For the foregoing reasons, BMWNA’s motion to dismiss the Complaint is
DENIED. An appropriate order will be filed with this opinion.
EVIN MCNULTY, U.S.D.J.
Dated: February 28, 2013
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