Mazzocchi v. General Motors LLC et al
Filing
187
OPINION AND ORDER [Regarding New GM's Partial Motion To Dismiss the Third Amended Consolidated Class Action Complaint] re: (2356 in 1:14-md-02543-JMF) MOTION to Dismiss Claims of Certain Plaintiffs in the Third Amended Consolidated Comp laint filed by General Motors LLC: In short, many of the claims of the named Plaintiffs in this motion survive, but a large swath of the claims in the TACC - those brought under RICO, those brought on behalf of Plaintiffs whose cars we re not allegedly defective when sold, and those brought on behalf of Plaintiffs whose cars are too dissimilar from the named Plaintiffs' cars - are foreclosed. (For convenience, a chart indicating whether New GM's motion is granted or de nied with respect to each state law claim is attached as Exhibit A.) Additionally, the Court rejects Plaintiffs' broadest theory of damages - the brand devaluation theory as unprecedented and unsound. Thus, to the extent that Plaintiffs a re entitled to relief at all, they are entitled - at most - to benefit-of-the-bargain defect damages, out-of-pocket damages, and the like. Although this ruling addresses only some of the claims in the TACC, it will undoubtedly inform the parties wi th respect to the viability of other claims and, more generally, bear upon the further progress of the MDL. The July 13, 2016 ruling from the Second Circuit, which held that purchasers of Old GM cars with ignition switch defects can bring claims f or Old GM's wrongdoing against New GM has, in all likelihood, also substantially redefined the scope of the claims that may proceed. The parties should be prepared to discuss the implications of this Court's ruling and the Second Circuit 's ruling at the July 28, 2016 status conference - including but not limited to implications for the next phase of discovery. (See Docket Nos. 1569, 2156). Additionally, within thirty days from the date of this Opinion and Order, Plaintiffs s hall submit their proposed amendments to the TACC. (See Docket No. 2323). The Clerk of Court is directed to terminate Docket No. 2356. (Signed by Judge Jesse M. Furman on 7/15/2016) ***As per chambers, Filed In All Member Cases: 1:14-md-02543-JMF et al.(tn)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
-----------------------------------------------------------------------------x
IN RE:
GENERAL MOTORS LLC IGNITION SWITCH LITIGATION
This Document Relates To All Actions
-----------------------------------------------------------------------------x
07/15/2016
14-MD-2543 (JMF)
14-MC-2543 (JMF)
OPINION AND ORDER
JESSE M. FURMAN, United States District Judge:
[Regarding New GM’s Partial Motion To Dismiss the
Third Amended Consolidated Class Action Complaint]
INTRODUCTION ...........................................................................................................................3
BACKGROUND .............................................................................................................................6
PROCEDURAL HISTORY...........................................................................................................10
LEGAL STANDARDS .................................................................................................................13
DISCUSSION ................................................................................................................................14
A.
Plaintiffs’ Theories of Injury .................................................................................15
B.
Federal Claims .......................................................................................................24
1.
RICO ..........................................................................................................25
a.
b.
2.
C.
RICO Enterprise.............................................................................27
RICO Injury ...................................................................................36
The Magnuson-Moss Warranty Act...........................................................42
State Claims ...........................................................................................................42
1.
California ...................................................................................................43
a.
b.
CLRA .............................................................................................51
c.
Fraudulent Concealment ................................................................53
d.
Unjust Enrichment .........................................................................55
e.
SBA ................................................................................................56
f.
2.
UCL................................................................................................44
Negligent Failure To Recall ...........................................................57
District of Columbia ..................................................................................59
a.
b.
Fraudulent Concealment ................................................................61
c.
3.
DCCPPA ........................................................................................59
Unjust Enrichment .........................................................................61
Florida ........................................................................................................62
a.
FDUTPA ........................................................................................63
b.
Fraudulent Concealment ................................................................67
c.
Unjust Enrichment .........................................................................69
4.
Louisiana ....................................................................................................70
5.
Maryland ....................................................................................................72
a.
b.
Fraudulent Concealment ................................................................76
c.
Breach of Warranty ........................................................................77
d.
Unjust Enrichment .........................................................................77
e.
6.
MCPA ............................................................................................73
Negligence .....................................................................................78
Missouri .....................................................................................................78
a.
b.
Fraudulent Concealment ................................................................82
c.
Breach of Warranty ........................................................................84
d.
7.
MMPA ...........................................................................................79
Unjust Enrichment .........................................................................85
Oklahoma ...................................................................................................86
a.
b.
Breach of Warranty ........................................................................90
c.
Fraudulent Concealment ................................................................91
d.
8.
OCPA .............................................................................................87
Unjust Enrichment .........................................................................93
Virginia ......................................................................................................94
a.
VCPA and Fraudulent Concealment ..............................................94
b.
Unjust Enrichment .........................................................................97
D. Class Standing and Prudential Mootness .....................................................................97
CONCLUSION ............................................................................................................................101
2
INTRODUCTION
All defect-free cars are alike; each defective car is defective in its own way. This
multidistrict litigation (“MDL”), familiarity with which is assumed, arose from the recall in
February 2014 by General Motors LLC (“New GM”) of General Motors (“GM”) vehicles that
had been manufactured with a defective ignition switch — a switch that could too easily move
from the “run” position to the “accessory” and “off” positions, causing moving stalls and
disabling critical safety systems (such as the airbag). Following that recall, New GM recalled
millions of other vehicles, some for ignition switch-related defects and some for other defects.
Thousands of MDL Plaintiffs have filed claims alleging that they or their loved ones were
injured or killed as a result of accidents caused by one or the other of these defects. Those cases
are proceeding on one track, with “bellwether” trials in individual cases having commenced
earlier this year. On a separate track, Plaintiffs pursue claims for “economic losses.”
Specifically, Plaintiffs pursue recovery on behalf of a broad putative class of GM car owners and
lessors, arguing that they and others have been harmed by a drop in their cars’ value due to the
revelations of GM’s years-long cover-up of the ignition switch and other potentially fatal defects.
Their operative complaint — the Third Amended Consolidated Complaint or “TACC” — runs to
over a thousand pages and 4500 paragraphs, and includes claims under federal and state law
brought by named Plaintiffs in all fifty states and the District of Columbia.
On February 24, 2016, New GM moved, pursuant to Rule 12(b)(6) of the Federal Rules
of Civil Procedure, to partially dismiss the TACC. New GM’s motion was limited, not because
it conceded that the TACC’s other claims were valid, but because the scope of Plaintiffs’ claims
was likely to be affected by several appeals from rulings of the United States Bankruptcy Court
3
for the Southern District of New York to the United States Court of Appeals for the Second
Circuit — appeals that were decided just days ago. See In re Motors Liquidation Co., No. 152844-bk(L) (2d Cir. July 13, 2016).1 Prompted by the Court, the parties agreed that New GM’s
initial motion would focus on the claims of Plaintiffs from eight jurisdictions who purchased or
leased New GM cars (and who were outside the scope of the Second Circuit appeal). This
Opinion and Order is similarly limited to those claims. Thus, while it is a significant step in the
MDL, much remains to be done — including, presumably, more Rule 12(b)(6) motion practice.
By their own admission, Plaintiffs pursue an unprecedented theory of damages, one that
turns not on whether the vehicles at issue were sold with known, latent defects (many of the class
members’ cars were concededly not defective when sold), but rather on the alleged reduction in
resale value of the vehicles due to damage to New GM’s reputation and brand. For the reasons
discussed below, the Court finds that that novel theory of damages is unsound in light of
persuasive precedent interpreting consumer protection law and general principles of tort
recovery. Put simply, the law does not treat as cognizable a consumer’s interest in the
continuing good reputation of a manufacturer that sells him or her a defect-free product that
performs as warranted. That holding significantly curtails the scope of Plaintiffs’ potential
recovery under the TACC. So too does the Court’s finding, discussed below, that Plaintiffs —
1
The Second Circuit affirmed the Bankruptcy Court to the extent it held that the July 2009
Sale Order pursuant to which New GM acquired certain assets and liabilities from General
Motors Corporation (“Old GM”) does not apply to so-called “independent claims” brought
against New GM; it reversed the Bankruptcy Court’s rulings that the Sale Order barred claims
brought by pre-closing accident and economic loss ignition switch plaintiffs and purchasers of
used Old GM cars; and vacated the Bankruptcy Court’s rulings that the Sale Order barred claims
by purchasers of non-ignition switch Old GM vehicles and that the doctrine of equitable
mootness precluded claims against the General Motors Liquidation Trust (or “GUC Trust”). See
In re Motors Liquidation Co., slip op. at 74.
4
regardless of whether their cars were sold with a defect — fail to plead a viable claim under the
Racketeer Influenced and Corrupt Organizations (“RICO”) Act, 18 U.S.C. § 1961, et seq., both
because they fail to allege the existence of an “enterprise” within the meaning of RICO and
because RICO does not recognize the injury alleged by most of the Plaintiffs in the TACC.
Finally, recovery is further limited by the Court’s conclusion below that named Plaintiffs may
bring class claims only on behalf of plaintiffs whose cars were sold with sufficiently similar
defects (for example, the same type of ignition switch defect).
That said, the Court concludes that New GM goes too far in contending that the claims of
Plaintiffs who purchased or leased allegedly defective cars should largely be treated alike.
Plaintiffs’ state law claims (brought in addition to the federal RICO claim and federal warranty
claims) sound in consumer fraud, common law fraudulent concealment, unjust enrichment,
breach of warranty, and negligence. New GM’s arguments against them are generally of three
varieties: (1) that state law does not allow Plaintiffs to bring claims because their cars did not
manifest the alleged defects; (2) that New GM (which did not manufacture the defective ignition
switches) had no duty to disclose the alleged defects; and (3) that Plaintiffs have no viable unjust
enrichment claims because their cars were purchased used or with express warranties. The first
two arguments depend on the particulars of each jurisdiction’s law. Accordingly, while it entails
a significant amount of repetition, this Opinion and Order analyzes each claim in conjunction
with precedent from the relevant jurisdiction. New GM relies heavily on some opinions
rejecting claims such as those pressed here, but many jurisdictions do in fact recognize claims
brought by purchasers of products that were allegedly sold with known defects — regardless of
how the product later performed — and so a number of the individual Plaintiffs’ consumer
5
protection, fraud, and warranty claims survive. By contrast, the unjust enrichment claims must
largely be dismissed.
In short, as discussed in detail below, New GM’s motion to dismiss is GRANTED in part
and DENIED in part. More specifically, it is granted with respect to Plaintiffs’ RICO claim and
claims brought by any Plaintiff whose car was not allegedly defective when sold. New GM’s
motion to dismiss is also GRANTED with respect to some of Plaintiffs’ state law claims, but
DENIED with respect to others. Finally, the named Plaintiffs who survive cannot bring claims
on behalf of putative class members whose defects are not sufficiently similar to theirs. After
setting out the relevant background, the Court will address Plaintiffs’ theories of injury and then
turn to Plaintiffs’ claims, beginning with their claims under federal law.
BACKGROUND
The following facts — which are taken from the TACC, documents it incorporates, and
matters of which the Court may take judicial notice — are construed in the light most favorable
to Plaintiffs. See, e.g., Kleinman v. Elan Corp., 706 F.3d 145, 152 (2d Cir. 2013); LaFaro v.
N.Y. Cardiothoracic Grp., PLLC, 570 F.3d 471, 475 (2d Cir. 2009); Aurecchione v. Schoolman
Transp. Sys., Inc., 426 F.3d 635, 638 (2d Cir. 2005). On July 11, 2009, New GM emerged from
the bankruptcy of Old GM as the operative General Motors business entity and the largest car
manufacturer in the world. (See Third Am. Consolidated Compl. (Docket No. 1915) (“TACC”)
¶¶ 168, 993, 996). New GM portrayed the new company as one devoted to safety, innovation,
and vehicle quality. (See id. ¶¶ 171-188). For example, in the company’s 2010 Annual Report,
it touted that “[t]he new General Motors has one clear vision: to design, build and sell the
world’s best vehicles. Our new business model revolves around this vision, focusing on fewer
brands, compelling vehicle design, innovative technology, improved manufacturing productivity
6
and streamlined, more efficient inventory processes.” (Id. ¶ 176). And advertisements
proclaimed: “The New GM. Something to Believe In,” while asserting that “[a]dvanced safety
and security features will confirm GM’s role as an innovation leader.” (Id. ¶ 196).
Under the surface, however, things were not so rosy. Prior to the bankruptcy, Old GM
engineers learned of a problem with the ignition switch in certain car models. (See id. ¶¶ 284296). Specifically, the affected cars had an ignition switch that could inadvertently move from
the “run” to the “accessory” or “off” position during driving, causing a car to lose power and the
functionality of several critical safety features, including power brakes and airbags (although
engineers did not appreciate the relationship between the ignition switch and airbag
nondeployment until later). (Id. ¶¶ 258-260). Old GM issued a “Technical Service Bulletin”
(that is, a notice to dealers about issues in GM vehicles (see id. ¶ 582)) to its dealers (but not the
public) on February 28, 2005, advising them that there was a “potential for the driver to
inadvertently turn off the ignition due to low key ignition cylinder torque/effort” and that the
problem could be exacerbated if the driver was short or had a large key chain. (Id. ¶ 298). The
bulletin advised dealers to find out if customers were likely to be affected and to tell customers
to remove excess items from their key chains. (Id. ¶ 298). Old GM issued another Technical
Service Bulletin related to the issue in December 2005. (See id. ¶ 306).
During the same period, Old GM began receiving reports of fatal crashes involving cars
that had been in the “accessory” or “off” position or cars with airbags that did not deploy as
expected. (See id. ¶¶ 305, 307-309, 314, 317-327). Those reports continued after the
bankruptcy. (See id. ¶¶ 339-344). Despite opening investigations into such incidents, New GM
did not issue a recall of potentially affected vehicles, an approach that was consistent with New
GM’s emphasis on avoiding recalls. (See id. ¶¶ 336-337, 343, 345-348). Most of the claims
7
arising out of the accidents were resolved through settlements, although one claim — relating to
the death on March 10, 2010, of Brooke Melton — did proceed to litigation. (See id. ¶¶ 339,
342, 352). In addition to the reports of severe crashes, New GM received many customer
complaints related to ignition switch problems. (See id. ¶¶ 353, 375-379). In a Statement of
Facts (“SOF”) to which New GM later stipulated as a part of a Deferred Prosecution Agreement
(“DPA”) with the United States Attorney’s Office for the Southern District of New York, New
GM admitted that it knew of the ignition switch defect and its relationship to airbag
nondeployment by Spring 2012. (See id. ¶ 1057).
New GM ultimately recalled 2.1 million vehicles due to the ignition switch defect in
February and March 2014 (the “Delta Ignition Switch Vehicles”); in June and July 2014, New
GM recalled an additional eleven million vehicles for similar ignition switch defects. (See id.
¶¶ 257, 380-384, 388-391).2 The recalls sparked public outcry and a congressional investigation,
and led New GM to conduct its own internal investigation led by Anton R. Valukas, the
chairperson of Jenner & Block LLP. (See id. ¶¶ 384-385). Valukas and his team reviewed a vast
number of documents and interviewed hundreds of people, including over 200 New GM
employees and former employees. See In re Gen. Motors LLC Ignition Switch Litig., 80 F. Supp.
3d 521, 524 (S.D.N.Y. 2015). The result was a written report (the “Valukas Report”) that New
GM submitted to Congress, the Department of Justice, and the National Highway Traffic Safety
Administration (“NHTSA”), among others. See id. at 524-25. The Valukas Report concluded,
inter alia, that New GM had fostered a culture of cost-cutting and reluctance to take
2
The degree of similarity between these vehicles and the Delta Ignition Switch Vehicles is
a point of dispute.
8
responsibility for safety that delayed the discovery of, and response to, the ignition switch defect.
(See TACC ¶¶ 556-564, 571-597). New GM also set up a claims resolution facility run by
Kenneth Feinberg to resolve the claims of those who alleged personal injuries or wrongful deaths
as a result of the ignition switch defects. (See id. ¶ 386). All told, at least 124 deaths and
hundreds of injuries have been attributed to the ignition switch defects. (See id. ¶¶ 20, 261).
New GM continued to recall vehicles for ignition-switch-related and other defects. (See
id. ¶¶ 505-507, 616). Overall, between 2014 and 2015, New GM issued more than eighty-four
recalls relating to more than seventy defects and affecting over twenty-seven million GM cars.
(See id. ¶ 616). On May 16, 2014, New GM entered into a Consent Agreement with NHTSA,
admitting that it had violated the National Traffic and Motor Vehicle Safety Act (the “Safety
Act”), 49 U.S.C. §§ 30101, et seq. by failing to timely disclose the ignition switch defect and
issue recalls. (See TACC ¶ 23). As a result, New GM paid a $35 million fine, the maximum
provided for under the statute. New GM also entered into the DPA on September 16, 2015,
pursuant to which it consented to the filing of an Information charging it with a scheme to
conceal a deadly defect from a federal regulator and committing wire fraud, in violation of Title
18, United States Code, Sections 1001 and 1343. (See id. ¶¶ 1055-1057). The DPA also
required New GM to stipulate to the truth of certain facts, memorialized in the SOF, regarding
the history of the ignition switch defect and GM’s conduct surrounding it; to forfeit $900 million
dollars, representing proceeds from the conduct charged in the Information; to cooperate with
various government agencies and investigations; and to submit to the oversight of an
independent monitor tasked with reviewing and assessing New GM’s policies and procedures for
identifying product defects, issuing recalls, and generally ensuring vehicle safety. See Compl.,
United States v. $900,000,000 in U.S. Currency, No. 15-CV-7342 (S.D.N.Y. Sept. 17, 2015),
9
Docket No. 1, Ex. A (DPA); see also id., Ex. C (SOF). New GM explicitly agreed not to “make
any statement, in litigation or otherwise, contradicting the Statement of Facts or its
representations in” the DPA. (DPA ¶ 13).
PROCEDURAL HISTORY
On June 12, 2014, the Judicial Panel on Multidistrict Litigation (the “JPML”) issued an
order transferring fifteen actions to this Court for “coordinated or consolidated pretrial
proceedings” pursuant to Title 28, United States Code, Section 1407. (Docket No. 1). All
actions pending before the JPML at the time of its initial Order asserted economic loss claims
against New GM based on the ignition switch defect. Since then, the JPML has expanded the
scope of actions transferred to this MDL to encompass personal injury and wrongful death
claims (see Transfer Order (Docket No. 505) 1 n.1), as well as economic loss claims based on
both ignition switch defects and other alleged defects, on the theory that “there will be discovery
that is common to the MDL and to” such actions (Transfer Order (Docket No. 519) 1). To date,
the JPML has issued eighty-six transfer orders; the total number of cases in the MDL, including
cases directly filed in this Court, is approximately three hundred, brought by several thousand
plaintiffs. New cases continue to be transferred to, or filed in, the MDL every week.
On August 7, 2014, the Court issued Order No. 7, directing Lead Counsel to “review all
existing complaints . . . and file a consolidated or master complaint with claims on behalf of the
class or classes [of economic loss Plaintiffs], as appropriate.” (Docket No. 215, at 2-3).3 The
3
In Order No. 7, the Court expressed its view that consolidated or master complaints
would be helpful only with respect to economic loss claims and complaints, and would not be
“necessary or prudent with respect to personal injury and wrongful death claims” given, among
other things, the likelihood of case-specific factual and legal issues. (Docket No. 215, at 2).
10
Court explained that “having a consolidated or master complaint sooner rather than later would
streamline and clarify the claims and help eliminate those that are duplicative, obsolete, or
unreflective of developing facts or current law.” (Id. at 3). In addition, the Court reasoned that
having a consolidated or master complaint would not only facilitate litigation in this Court, but
would also help in the management and adjudication of parallel litigation proceeding in the
Bankruptcy Court. (Id.). Lead Counsel filed two Consolidated Complaints on October 14, 2014,
the first of which was limited to claims involving cars purchased or leased before July 11, 2009,
the date on which New GM purchased the assets of Old GM, and the second of which was
limited to post-July 11, 2009 claims. (Docket Nos. 345, 347).
The Consolidated Complaints did not name as plaintiffs every single plaintiff who had
filed an economic loss claim in the MDL. Instead, each Complaint named only a subset of the
economic loss plaintiffs in the MDL as proposed class representatives. The Complaints also
included language providing that the Complaints did not waive or dismiss claims not included in
the pleadings that were asserted by other plaintiffs, unless and until class certification came into
the picture. (See Docket No. 345, at 1; Docket No. 347, at 2). New GM took issue with this
language, and a series of orders and conferences addressed the appropriate balance between the
need for one or two master complaints to organize and streamline the litigation and the rights of
individual plaintiffs not named in the Consolidated Complaints. See generally In re Gen. Motors
LLC Ignition Switch Litig., No. 14-MD-2543 (JMF), 2015 WL 3619584, at *3-6 (S.D.N.Y. June
10, 2015). The result was Order No. 50 (Docket No. 875), entered on April 24, 2015. Order No.
50 makes clear that the Consolidated Complaints superseded individual economic loss
complaints, but provides a mechanism whereby individual plaintiffs have an opportunity to be
heard before their individual claims are dismissed without prejudice and makes clear that
11
individual plaintiffs retain rights to recover or pursue their claims depending on the outcome of
class certification. (See Docket No. 875 ¶¶ 3, 6). See generally In re Gen. Motors, 2015 WL
3619584, at *10. As particularly relevant here, Order No. 50 clarifies that the Consolidated
Complaints did supersede individual complaints for purposes of pretrial proceedings, including
motion practice.
Pursuant to Order No. 50, Plaintiffs submitted a single Amended Consolidated Complaint
on June 12, 2015, which incorporated developments from the first phase of discovery and certain
of the Bankruptcy Court’s rulings (rulings that were largely reversed or vacated by the Second
Circuit in its recent decision). (See Docket No. 875 ¶ 4; Docket No. 1038). Plaintiffs filed their
Second Amended Consolidated Complaint on July 9, 2015, and the TACC on December 17,
2015. (Docket Nos. 1139, 1915). Plaintiffs allege in the TACC that they were injured by New
GM’s disclosure of the many defects and related recalls based on a diminution in the value of
their GM-brand cars. (See TACC ¶¶ 1006-1017). Plaintiffs are defined as “[a]ll persons in the
United States who purchased or leased an Affected Vehicle prior to July 3, 2014 and who (i) still
own or lease an Affected Vehicle, and/or (ii) sold an Affected Vehicle on or after February 14,
2014, and/or (iii) purchased or leased an Affected Vehicle that was declared a total loss after an
accident on or after February 14, 2014.” (Id. ¶ 1027).4 The “Affected Vehicles” are defined as
“(A) all New GM vehicles sold or leased on or after July 11, 2009; (B) all New GM vehicles and
Old GM vehicles sold or leased as a ‘Certified Pre-Owned’ vehicle on or after July 11, 2009; and
4
The Court is not certain of the significance the dates in the proposed class definition.
February 14, 2014, is around the time New GM began recalling cars for the Delta ignition switch
defect, and July 3, 2014, is the date New GM recalled another 5.9 million vehicles for ignition
switch defects. (See TACC ¶¶ 380-384, 454).
12
(C) all vehicles subject to the Delta Ignition Switch recall in February and March of 2014 (the
‘Delta Ignition Switch Vehicles’).” (Id.). This “Nationwide Class” is further split into fifty-one
subclasses for each state and the District of Columbia, and two ignition switch subclasses — the
“Post-Sale Ignition Switch Defect Subclass” and the “Delta Ignition Switch Statewide Subclass”
— defined based on ownership of certain vehicles. (See id. ¶¶ 1036-1040).5
Plaintiffs bring a variety of federal and state law claims. Because of the appeals of the
Bankruptcy Court’s rulings to the Second Circuit, the recent resolution of which affects claims
brought on behalf of the purchasers of Old GM vehicles, the Court limited the current motion to
certain purchasers or lessors of New GM cars. (See Docket No. 2156). More specifically, by
agreement between the parties, the motion is limited to the claims of named Plaintiffs who reside
in California, the District of Columbia, Florida, Louisiana, Maryland, Missouri, Oklahoma, and
Virginia. (See id. at 1; Def. General Motors LLC’s Mem. Supp. Mot. To Dismiss (Docket No.
2357) (“New GM’s Mem.”) 5-6).
LEGAL STANDARDS
In evaluating a motion to dismiss, a court must accept all facts set forth in the complaint
as true and draw all reasonable inferences in the plaintiff’s favor. See, e.g., Burch v. Pioneer
Credit Recovery, Inc., 551 F.3d 122, 124 (2d Cir. 2008) (per curiam). A claim will survive a
“Post-Sale” refers to the covered vehicles sold or leased on or after July 11, 2009, when
Old GM’s sale of assets to New GM became effective. (See TACC ¶¶ 424, 1032). The parties
only specify in passing which Plaintiffs in this motion are members of the Post-Sale Ignition
Switch Defect Subclass, which is relevant to whether a plaintiff brings certain state law claims,
such as claims for breach of warranty or negligence. (See Pls.’ Mem. 21). The Court has
attempted to identify the Subclass members by cross-referencing the vehicles owned by each
Plaintiff with the list of car models comprising the Subclass provided in the TACC. (See TACC
¶¶ 1033, 1038).
5
13
Rule 12(b)(6) motion, however, only if the plaintiff alleges facts sufficient “to state a claim to
relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). A
claim is facially plausible “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 Twombly, 550 U.S. at 556). A plaintiff must show “more
than a sheer possibility that a defendant has acted unlawfully,” id., and cannot rely on mere
“labels and conclusions” to support a claim, Twombly, 550 U.S. at 555. If the plaintiff’s
pleadings “have not nudged [his or her] claims across the line from conceivable to plausible,
[the] complaint must be dismissed.” Id. at 570. Finally, to the extent that a plaintiff alleges
fraud, Rule 9(b) requires a plaintiff to plead claims “with particularity,” specifying “the
circumstances constituting fraud.” Fed. R. Civ. P. 9(b). In particular, “the complaint must:
(1) specify the statements that the plaintiff contends were fraudulent, (2) identify the speaker, (3)
state where and when the statements were made, and (4) explain why the statements were
fraudulent.” Lerner v. Fleet Bank, N.A., 459 F.3d 273, 290 (2d Cir. 2006) (internal quotation
marks omitted). Failure to satisfy the Rule 9(b) standard, if applicable, is grounds for dismissal.
See, e.g., id. at 293; Slayton v. Am. Express Co., 604 F.3d 758, 766 (2d Cir. 2010).
DISCUSSION
Plaintiffs bring claims under both federal and state law.6 Under the former, Plaintiffs
allege claims under the Racketeer Influenced and Corrupt Organizations (“RICO”) Act, 18
U.S.C. § 1961, et seq., on behalf of the Nationwide Class and claims under the Magnuson-Moss
6
The TACC includes third-party beneficiary claims brought on behalf of members of the
Delta Ignition Switch Subclass, but the parties agree that such claims are limited to purchasers of
Old GM vehicles and thus outside the scope of this motion. (See Pls.’ Mem. 1 n.1).
14
Warranty Act (“MMWA”), 15 U.S.C. § 2310, et seq., on behalf of the nationwide Post-Sale
Ignition Switch Defect Subclass. Under the latter, Plaintiffs bring claims on behalf of fifty-one
subclasses comprised of purchasers or lessors of New GM vehicles — one for each of the fifty
states and the District of Columbia. (As noted, however, this Opinion addresses only eight of
those jurisdictional subclasses.) The state law claims sound in consumer fraud, common law
fraud, implied warranty, unjust enrichment and, for some jurisdictions, negligence.
The Court will begin with the federal claims, then turn to the state law claims, and end
with discussion of two broader New GM arguments — namely, that Plaintiffs lack standing to
assert claims on behalf of the proposed class and that Plaintiffs’ claims are prudentially moot.
Before turning to Plaintiffs’ federal claims, however, the Court addresses Plaintiffs’ theories of
injury, as that discussion has a significant bearing on the rest of the Court’s analysis.
A.
Plaintiffs’ Theories of Injury
The TACC’s named Plaintiffs include residents of all fifty states and the District of
Columbia, purchasers of Old GM and New GM vehicles, as well as consumers who still hold
their GM-brand cars and consumers who have sold them. Additionally, and significantly, the
putative class Plaintiffs seek to represent includes purchasers or lessors of cars with dozens of
different alleged defects, not to mention consumers who purchased or leased GM cars that are
not alleged to have been sold with any defect or been subjected to any recall. (See TACC ¶ 51
(including Plaintiff Anna Andrews, whose car did not contain any alleged defect); id. ¶¶ 10271029 (defining the Nationwide Class to include all New GM vehicles sold or leased on or after
July 11, 2009)). Plaintiffs argue that these consumers are united by a common theory of injury,
what can be described as the “brand devaluation” theory: They thought they were buying cars
made by “a brand that had a reputation for producing safe and reliable cars,” that brand turned
15
out not to be what consumers thought it was (because of the company’s emphasis on cost-cutting
and disregard for safety), and when the revelations about defects and corporate culture became
public the brand was tarnished, resulting in lower resale values across the board for the brand’s
products. (June 17, 2016 Oral Argument Tr. (“Tr.”) 69). That theory of damages can be
contrasted with another theory underlying the TACC, which can be described as the “benefit-ofthe-bargain defect theory.” The gravamen of the benefit-of-the-bargain defect theory is that
Plaintiffs who purchased defective cars were injured when they purchased for x dollars a New
GM car that contained a latent defect; had they known about the defect, they would have paid
fewer than x dollars for the car (or not bought the car at all), because a car with a safety defect is
worth less than a car without a safety defect.
At times, Plaintiffs appear to argue that the two theories are one and the same — that the
“latent defect” in the brand devaluation theory was GM’s “true” corporate culture, which was
focused on cost-cutting and unconcerned with safety and which was concealed by New GM’s
misrepresentations about its brand and culture. (See Tr. 68-71). Relatedly, Plaintiffs’ claims
appear in some instances to rest at least in part on the benefit-of-the-bargain defect theory. (See,
e.g., TACC ¶ 57 (Plaintiff David Padilla “believes the value of his vehicle was diminished as a
result of the defects”); id. ¶ 66 (“Had [Plaintiff Pajja Jackson] known about the safety defects
and risks posed by his car . . . he would not have purchased this car.”); id. ¶ 67 (Plaintiff Joni
Ferden-Precht “would not have purchased this vehicle had she known about the safety defects in
her vehicle”); Pls.’ Opp’n Gen. Motors LLC’s Mot. To Dismiss (Docket No. 2761) (“Pls.’
Mem.”) 16 (“Plaintiffs claim that, as a result of New GM’s conduct, they have suffered
economic loss because they overpaid for their vehicles . . . .”) (emphasis added); see also Tr. 6869 (“The injury here was at the point of sale, everyone was told that they had a car that was safe
16
and reliable, and they didn’t have a car that was safe or reliable, or they thought they were
buying a brand that had a reputation for producing safe and reliable cars.” (emphasis added)). At
other times, however, Plaintiffs appear to distinguish the two theories and to largely disavow the
benefit-of-the-bargain defect theory. (See, e.g., Pls.’ Mem. 17 (“New GM relies on cases in
which plaintiffs claimed that the product they purchased was defective, and sought to recover
‘benefit of the bargain’ damages based on the difference between the purchase price and what
the product would have been worth had the defect been known. But that claim is not the primary
claim at issue on this motion. . . . Plaintiffs allege that they did not receive the benefit of the
bargain, and that the value of their vehicles diminished, because of New GM’s concealment of a
host of brand-wide defects and that New GM valued cost-cutting over safety.” (citations and
emphases omitted)); see also Tr. 69-70 (“[O]ur theory of the case is when you bought your car in
2007 or 2009, the brand was not what we thought it was. . . . You got a car made by a company
that wasn’t capable of making safe and reliable cars, whether or not you had a defect or no
defect.” (emphasis added))).
In the Court’s view, however, there is an important distinction between the two theories
of damages. The brand devaluation theory assumes that when a consumer purchases a car, the
purchase comes not only with a promise — shared by the benefit-of-the-bargain defect theory —
that the car does not contain any safety defects, but also with the promise that the manufacturer
of the car has, and will maintain, a particular reputation for making safe and reliable cars
separate and apart from the car purchased by the consumer at issue. Measuring damages for a
breach of the former promise is hard enough given how many variables (such as age, mileage,
technical features, consumer preference, and even paint color) affect the value and price of cars;
measuring damages for a breach of the latter promise is an even more fraught exercise, since the
17
value of a “brand” can be affected by many forces and can fluctuate and change swiftly. And
there is, most obviously, a fundamental distinction between the two theories when it comes to the
scope of the affected, and proposed, class: Whereas any purchaser of any GM vehicle could sue
and recover under the brand devaluation theory, only a purchaser of a GM vehicle sold with a
latent defect (and, as discussed below, perhaps only a purchaser of a GM vehicle sold with a
latent defect that later manifests itself) could proceed under the benefit-of-the-bargain defect
theory. In other words, to accept the brand devaluation theory is to accept that every time a
manufacturer sells a product, it vouches not just for the value and functionality of that product,
but also the product’s resale value and the brand’s continuing good name. In its most expansive
formulation, there would be no expiration on this guarantee.
As Plaintiffs concede, no court has ever recognized such a broad theory of damages. (See
Tr. 71-72). Cf. Carlson v. Gen. Motors Corp., 883 F.2d 287, 297 (4th Cir. 1989) (noting that the
theory of “plaintiffs who alleged damages based solely on the ‘diminished resale value’” of their
cars was “a novel one,” and the plaintiffs “cite no case in which a court has specifically held that
the implied warranty of merchantability protects against unanticipated losses in resale value”).
Instead, courts have consistently limited consumer protection claims to those consumers who
have themselves purchased a product that is alleged to be defective. See, e.g., Carlson, 883 F.3d
at 298 (holding that plaintiffs who alleged only a diminution in value and no defect could not
proceed with their claims, but plaintiffs who had alleged that their products were defective could
go forward); In re Sony Gaming Networks & Customer Data Sec. Breach Litig., 996 F. Supp. 2d
942, 987-88 (S.D. Cal. 2014) (holding that consumers who purchased gaming services with
allegedly insufficient security protections stated cognizable injuries under California consumer
protection statutes); Donohue v. Apple, Inc., 871 F. Supp. 2d 913, 927 (N.D. Cal. 2012) (holding
18
that a purchaser of one allegedly defective iPhone model could not bring claims related to other
allegedly defective iPhone models); In re Bisphenol-A (BPA) Polycarbonate Plastic Prods. Liab.
Litig., 687 F. Supp. 2d 897, 912 (W.D. Mo. 2009) (holding that plaintiffs who purchased baby
products containing an allegedly harmful chemical pleaded a claim for benefit of the bargain
damages); Lloyd v. Gen. Motors Corp., 916 A.2d 257, 281 (Md. 2007) (holding that plaintiffs
who had alleged that they purchased cars with defective seatbacks were entitled to benefit of the
bargain damages).
Notably, the closest Plaintiffs come to identifying a case that supports their position is In
re Toyota Motor Corp., 790 F. Supp. 2d 1152 (C.D. Cal. 2011) (“Toyota II”), where the Court
made the observation that “‘labels’ and ‘brands’ have independent economic value.” Toyota II,
790 F. Supp. 2d at 1166 n. 11. That is certainly true, see, e.g., Moseley v. V Secret Catalogue,
Inc., 537 U.S. 418, 432 (2003) (noting that a famous brand’s “mark is unquestionably valuable”),
yet it does not follow that a consumer can recover if he or she buys a defect-free and functional
product that performs as expected, but the company’s actions somehow affect the value of the
company’s brand. Moreover, the Toyota Court’s unremarkable observation — relegated to a
footnote — was irrelevant to the Court’s holding that the plaintiffs there had adequately pleaded
an injury. That is, the Toyota plaintiffs had not only alleged that they were injured by a general
devaluation in the Toyota brand (although there is no doubt that the Toyota brand took a hit from
the negative publicity surrounding its recalls in that case). Instead, as the Court explained it,
“[b]ecause every lead Plaintiff alleges a safety defect, and defective cars are not worth as much
as defect-free cars, Plaintiffs plausibly establish an economic loss.” Toyota II, 790 F. Supp. 2d at
19
1165. In other words, the Toyota Court recognized the plaintiffs to have a claim under a benefitof-the-bargain defect theory.7
Plaintiffs suggest that this case is unprecedented and merits an expansion of the
traditional limits on damages in consumer protection cases. (See Tr. 68, 72). But that suggestion
is overblown. The number of defects, the extent of New GM’s concealment of those defects, and
the scope of the recalls involved in this case may well exceed the allegations in any prior
consumer protection case. But the difference is one of degree rather than of kind. Indeed, one
need not look beyond the world of automobiles to find many cases in which alleged defects and
the concealment thereof did damage to a manufacturer’s reputation for quality and/or safety — at
least temporarily. Consider, for example, the Ford Pinto, the Ford/Firestone rollover problems,
Toyota unintended acceleration, Takata airbags, and Volkswagen diesel emissions. See
generally James Derek Sapienza, 10 of History’s Most Infamous Automotive Scandals, AUTOS
CHEAT SHEET (July 3, 2016), http://www.cheatsheet.com/automobiles/10-of-historys-most-
In a supplemental letter, Plaintiffs also rely on language in the Second Circuit’s July 13,
2016 opinion, where the Court observed that “[t]he business of cars is unique, dependent largely
on the goodwill of consumers.” (See July 13, 2016, Ltr. (Docket No. 3114) 1 (quoting In re
Motors Liquidation Co., slip op. at 60)). But the language upon which Plaintiffs rely does little
more than recognize the unremarkable fact that the GM brand has value (and that New GM’s
interest in preserving its brand might have led the company to assume liability for claims arising
from the ignition switch defect had they been disclosed during Old GM’s bankruptcy). The
language cannot be read to recognize the novel brand devaluation theory of damages. If
anything, language elsewhere in the Second Circuit’s opinion suggests that the Court understood
Plaintiffs’ economic loss claims to sound in the benefit-of-the-bargain defect theory. See In re
Motors Liquidation Co., slip op. at 41 (“The economic losses claimed by these individuals were
‘contingent’ claims. That is, the ignition switch defect was there, but was not yet so patent that
an individual could, as a practical matter, bring a case in court. The contingency standing in the
way was Old GM telling plaintiffs that the ignition switch defect existed. In other words, Old
GM’s creation of the ignition switch defect fairly gave rise to these claims, even if the claimants
did not yet know.” (citation omitted)).
7
20
infamous-automotive-scandals.html/?a=viewall. That is, there are many cases (some of which
are admittedly still pending) in which courts could have recognized the brand devaluation theory.
The silence is therefore telling. Additionally, even if Plaintiffs were right that this case were
unprecedented, recognizing the brand devaluation theory would open the door to a vast array of
claims by consumers of otherwise merchantable products seeking damages any time the
manufacturer of those products was beset by scandal or was revealed to have manufactured any
defective product.8 If such a sea change in consumer protection policy and law is warranted, it
should emerge from the legislative, not the judicial, realm.
That conclusion is bolstered by several other tort law doctrines and policies. First, to the
extent that consumer protection law is concerned with deterring manufacturers’ practices that
might harm consumers, see, e.g., Miller v. Long-Airdox Co., 914 F.2d 976, 979 (7th Cir. 1990)
(“When a state formulates its tort law, it must (at least implicitly) balance several different
policies including deterring wrongdoers, compensating injured parties, spreading the risk of loss
from certain activities, and trying to accomplish these goals without overly discouraging
productive activity.”); Hughes v. Abell, 867 F. Supp. 2d 76, 88-89 (D.D.C. 2012) (noting that
among the purposes of D.C.’s consumer protection law are deterring unfair business conduct and
8
In fact, taking the brand devaluation theory to its logical conclusion, it is not clear why it
would even be limited to instances in which a company manufactured a defective product, as the
value of a brand can suffer from all sorts of actions. Assume, for example, that Apple were to
launch several new products that were viewed as busts and that its reputation suffered as a result,
causing Apple products to be viewed as less “cool” and their resale value to decline. If a
consumer could recover for brand devaluation, anyone owning an Apple product could
conceivably bring a claim against Apple on the ground that its actions — producing “less cool”
products — reduced the value of his or her product, even though the product was exactly as
advertised at the point of sale. To state the point is to make clear what the consequences of
recognizing the brand devaluation theory would be.
21
“promot[ing] fair business practices in the community at large”); Blue Cross & Blue Shield of
N.J, Inc. v. Philip Morris, Inc., 133 F. Supp. 2d 162, 177 (E.D.N.Y. 2001) (noting that “one of
the primary goals of tort law [is] effective and administratively efficient deterrence and
compensation”), recognizing a brand devaluation theory may well over-deter. That is,
manufacturers whose brand names suffer because of defective products or fraudulent practices
will face lawsuits brought by consumers who are directly injured. Separate and apart from that,
such manufacturers will also take a hit in the market (likely triggering shareholder suits as well).
These effects will often be significant (as they have been for New GM here), and thus the costs
of allowing an even greater group of plaintiffs to recover are likely to exceed any marginal gain.
Additionally, where there is a limited pool from which potential plaintiffs can recover (which
will be true in most cases, although it has not been suggested here), awarding damages to the
larger set of brand devaluation plaintiffs would almost certainly diminish the resources available
to plaintiffs who have been more directly injured by the manufacturer’s products. Cf. BCS Servs.
Inc. v. Heartwood 88, LLC, 637 F.3d 750, 755 (7th Cir. 2011) (noting, with respect to a
discussion of proximate cause in tort, that “[t]he more plaintiffs there are clamoring for relief, the
less in damages each one may be able to recover”).
Rejection of the brand devaluation theory is also consistent with the well-established
proposition that a plaintiff cannot base a fraudulent misrepresentation claim on mere puffery.
That is, courts have repeatedly held that general statements about a brand’s quality, or a
product’s safety, are too vague or lacking in factual content to be actionable. See, e.g.,
Zaccagnino v. Nissan N. Am., Inc., No. 14-CV-3690 (LLS), 2015 WL 3929620, at *4 (S.D.N.Y.
June 17, 2015) (“[P]romoting a car as generally safe and reliable is too general a representation
to be proven true or false.”); In re Sony Grand Wega KDF-E A10/A20 Series Rear Projection
22
HDTV Television Litig., 758 F. Supp. 2d 1077, 1089 (S.D. Cal. 2010) (holding that statements
that products “were of ‘high’ or ‘superior’ quality” were not actionable); Davis v. Allstate Ins.
Co., No. CIV.A. 07-4572, 2009 WL 122761, at *6 (E.D. La. Jan. 15, 2009) (holding “’You’re in
good hands with Allstate’” to be inactionable puffery). If a fatal flaw in the brand devaluation
theory is that consumers lack an enforceable interest in a brand’s good name, the puffery
doctrine is the other side of the same coin — holding that generic quality statements about a
brand or a product do not create an enforceable promise if the consumer turns out to have been
misled.9
In short, the Court declines Plaintiffs’ invitation to recognize the expansive brand
devaluation theory of damages. At the same time, New GM goes too far when it argues that the
benefit-of-the-bargain defect theory fails across the board or always requires a plaintiff to prove
manifestation of the alleged defect. (See Tr. 85, 121; New GM’s Mem. 8-13; Def. Gen. Motors
LLC’s Reply Supp. Mot. To Dismiss (Docket No. 2828) (“New GM’s Reply”) 3-9). The Court
is bound to apply the states’ law to Plaintiffs’ state-law claims. See, e.g., In re
Bridgestone/Firestone, Inc., 288 F.3d 1012, 1016-17 (7th Cir. 2002) (“Bridgestone/Firestone II”)
(holding that the law of individual states applied to consumers’ economic loss claims for
allegedly defective tires); Szymczak v. Nissan N. Am., Inc., No. 10-CV-7493 (VB), 2011 WL
9
In observing that there is an analytical similarity between rejection of the brand
devaluation theory and the puffery doctrine, the Court intimates no view on whether the
misrepresentations alleged in this case qualify as inactionable puffery — a subject upon which
the parties spill considerable ink. (See New GM’s Mem. 48-49, 52-53; Pls.’ Mem. 47-49; New
GM’s Reply 27-28). The Court need not and does not decide the issue because none of the
Plaintiffs involved in this motion has a claim whose viability would turn on a finding that an
affirmative statement was actionable. As discussed below, Plaintiffs here either succeed in
pressing fraud claims on a theory of concealment or omission or their claims fail for other,
unrelated reasons.
23
7095432, at *12 (S.D.N.Y. Dec. 16, 2011) (“In a multi-state consumer class action, based on
choice of law considerations, courts have applied the law of the buyer’s domicile.”). And as
discussed in more detail below, different jurisdictions have reached different conclusions with
respect to whether a plaintiff can proceed under a benefit-of-the-bargain defect theory and
whether doing so depends on a showing that the plaintiff experienced the defect when using the
product. Additionally, New GM is wrong in arguing that the benefit-of-the-bargain defect theory
must fail because New GM did not warrant that its cars would have a particular resale value in
the future. (See New GM’s Reply 2). The benefit-of-the-bargain defect theory does not
compensate a plaintiff for a decrease in resale value — the brand devaluation theory does. The
benefit-of-the-bargain defect theory compensates a plaintiff for the fact that he or she overpaid,
at the time of sale, for a defective vehicle. That form of injury has been recognized by many
jurisdictions. Accordingly, while the Court rejects Plaintiffs’ reliance on the brand devaluation
theory at the outset, the viability of the benefit-of-the-bargain defect theory must be analyzed
with respect to each Plaintiff’s claims under the relevant jurisdiction’s law.
B.
Federal Claims
The Court turns, then, to Plaintiffs’ claims, beginning with their claims under federal law.
As both sides agree (see Tr. 88, 95), to the extent there are differences in federal law among the
Circuits, the Court is bound by Second Circuit law. See In re Korean Air Lines Disaster of Sept.
1, 1983, 829 F.2d 1171, 1176 (D.C. Cir. 1987) (R.B. Ginsburg, J.) (holding that the Circuit
precedent of the transferee court, not the transferor court, is applicable to questions of federal
law in cases transferred pursuant to 28 U.S.C. § 1407), aff’d sub nom. Chan v. Korean Air Lines,
Ltd., 490 U.S. 122 (1989); see also In re Pan Am. Corp., 950 F.2d 839, 847 (2d Cir. 1991)
(agreeing with In re Korean Air Lines); In re MTBE Prods. Liab. Litig., No. 00-MD-1358 (SAS),
24
2005 WL 106936, at *5 (S.D.N.Y. Jan. 18, 2005) (concluding that Lexecon Inc. v. Milberg Weiss
Bershad Hynes & Lerach, 523 U.S. 26 (1998), undercuts the reasoning but does not alter the
conclusion of In re Korean Air Lines). Applying that law, the Court concludes that Plaintiffs’
RICO claim fails for two reasons: because Plaintiffs do not plead the existence of an enterprise
with a common purpose independent from New GM’s ordinary business activities and because
even the benefit-of-the-bargain defect theory of injury is not cognizable under RICO. The Court
defers discussion of Plaintiffs’ MMWA claims because, although brought pursuant to federal
law, those claims incorporate and turn on state law.
1.
RICO
Plaintiffs’ first federal claim, brought on behalf of the Nationwide Class, is for violation
of the RICO Act. (TACC ¶¶ 1051-1141). To prevail on a civil RICO claim, for which treble
damages would be available, a plaintiff “must show (1) a substantive RICO violation under [18
U.S.C.] § 1962; (2) injury to the plaintiff’s business or property, and (3) that such injury was by
reason of the substantive RICO violation.” In re U.S. Foodservice Inc. Pricing Litig., 729 F.3d
108, 117 (2d Cir. 2013) (internal quotation marks omitted). To satisfy the first prong where, as
here, the plaintiff brings a claim under Title 18, United States Code, Section 1962(c), “a plaintiff
must show that the defendant conducted, or participated in the conduct, of a RICO enterprise’s
affairs through a pattern of racketeering activity,” Crawford v. Franklin Credit Mgmt. Corp., 758
F.3d 473, 487 (2d Cir. 2014), with a “pattern of racketeering activity” defined as at least two
predicate acts of racketeering within ten years, 18 U.S.C. § 1961(5).
As defined in RICO, “racketeering activity” encompasses various substantive criminal
offenses, including mail fraud in violation of Title 18, United States Code, Section 1341, and
wire fraud in violation of Title 18, United States Code, Section 1343. See id. § 1961(1).
25
“[B]ecause the mere assertion of a RICO claim has an almost inevitable stigmatizing effect on
those named as defendants and because the allure of treble damages, attorney’s fees, and federal
jurisdiction presents a powerful incentive for plaintiffs to attempt to fit garden variety fraud
claims within the standard of civil RICO, courts have noted that they have an obligation to
scrutinize civil RICO claims early in the litigation to separate the rare complaint that actually
states a claim for civil RICO from that more obviously alleging common law fraud.” Holmes v.
Parade Place, LLC, No. 12-CV-6299 (GBD) (DF), 2013 WL 5405541, at *14 (S.D.N.Y. Sept.
26, 2013) (alterations and internal quotation marks omitted); see also Patrizzi v. Bourne in Time,
Inc., No. 11-CV-2386 (PAE), 2012 WL 4833344, at *3 (S.D.N.Y. Oct. 11, 2012). In fact,
because “virtually every ordinary fraud is carried out in some form by means of mail or wire
communication . . . RICO claims premised on mail or wire fraud” — like those here — “must be
particularly scrutinized because of the relative ease with which a plaintiff may mold a RICO
pattern from allegations that, upon closer scrutiny, do not support it.” Gross v. Waywell, 628 F.
Supp. 2d 475, 493 (S.D.N.Y. 2009) (internal quotation marks omitted).
In this case, Plaintiffs allege the existence of a RICO associated-in-fact enterprise (the
“Enterprise”) consisting of at least New GM, its outside counsel King and Spalding LLP
(“K&S”), and its claims administrator ESIS, Inc. (“ESIS”). (See TACC ¶ 1062). The alleged
purpose of the Enterprise was to conceal the existence of the ignition switch defect and other
defects from regulators and the public and, more generally, to misrepresent the safety of GM
vehicles. (See id. ¶¶ 1058, 1063, 1073). Plaintiffs contend that K&S and ESIS participated in
the scheme by knowingly or unknowingly collaborating with New GM to “fraudulently conceal
information about the defects,” and benefited from that purpose by “secur[ing] ongoing business
and income from New GM as a result of achieving settlements for New GM that avoided public
26
disclosure of the Delta Ignition Switch Defect.” (Id. ¶¶ 1063, 1070). Plaintiffs allege that, in
furtherance of this scheme, each member of the Enterprise committed mail and wire fraud,
specifically by transmitting communications that fraudulently concealed the existence of the
defects in GM cars. (See id. ¶ 1073). In particular, Plaintiffs allege that the Enterprise knew that
the ignition switch defect was responsible for a number of fatal car crashes and entered into
settlements with the parties in order to avoid disclosing the defect. (See id. ¶¶ 1074-1101). They
further allege that New GM and K&S fraudulently concealed the defect during litigation
surrounding the Melton crash. (See id. ¶¶ 1101-1121). The RICO Enterprise allegedly caused
damage to Plaintiffs in several ways: (1) by causing them to pay more than they otherwise would
have for New GM cars; (2) by causing them to continue to drive vehicles they otherwise would
not; (3) by causing their vehicles to diminish in value; and (4) by causing some Plaintiffs to incur
expenses “in connection with their efforts to implement the 2014 recall.” (Id. ¶ 1139).
New GM argues that Plaintiff’s RICO claim fails for a number of reasons (see New
GM’s Mem. 26-42), but the Court will address only two here: the failure to allege the existence
of an “enterprise” and, at least for most Plaintiffs, the failure to allege a cognizable injury.
a.
RICO Enterprise
RICO liability is predicated on the existence of an “enterprise.” It is well-established that
“[t]he enterprise must be separate from the pattern of racketeering activity, and distinct from the
person conducting the affairs of the enterprise.” First Capital Asset Mgmt., Inc. v. Satinwood,
Inc., 385 F.3d 159, 173 (2d Cir. 2004) (citations omitted). That is, “liability depends on showing
that the defendants conducted or participated in the conduct of the ‘enterprise’s affairs,’ not just
their own affairs.” Reves v. Ernst & Young, 507 U.S. 170, 185 (1993). A corporation carrying
out its own activities (even fraudulent ones) only through its agents and employees does not
27
constitute an enterprise. See, e.g., Fitzgerald v. Chrysler Corp., 116 F.3d 225, 226 (7th Cir.
1997) (noting that in order to prevent RICO from “encompass[ing] every fraud case against a
corporation,” courts have held “that an employer and its employees cannot constitute a RICO
enterprise”); Riverwoods Chappaqua Corp. v. Marine Midland Bank, N.A., 30 F.3d 339, 344 (2d
Cir. 1994) (“[T]he person and the enterprise referred to must be distinct . . . . [B]y alleging a
RICO enterprise that consists merely of a corporate defendant associated with its own employees
or agents carrying on the regular affairs of the defendant, the distinctness requirement may not be
circumvented.”). Moreover, individuals or entities whose activities sometimes intersect do not
form an enterprise. Instead, the existence of an enterprise depends on a showing “of an ongoing
organization, formal or informal”; “evidence that the various associates function as a continuing
unit”; and “a common purpose of engaging in a course of conduct.” Boyle v. United States, 556
U.S. 938, 944-45 (2009) (internal quotation marks omitted).
Judge Posner’s decision in Fitzgerald is instructive. In that case, the plaintiffs alleged
that Chrysler had engaged in warranty fraud through a RICO enterprise “consisting of
subsidiaries of the Chrysler Corporation . . . plus Chrysler’s dealers, plus trusts controlled by
Chrysler” — all “affiliates and agents [that] participate[d] directly or indirectly in the retail sale
of Chrysler automobiles.” 116 F.3d at 226. Cautioning that, “[r]ead literally, RICO would
encompass every fraud case against a corporation, provided only that a pattern of fraud and some
use of the mails or of telecommunications to further the fraud were shown,” the Court observed
that courts — including the Second Circuit — had held “that an employer and its employees
cannot constitute a RICO enterprise.” Id. (citing, inter alia, Discon, Inc. v. NYNEX Corp., 93
F.3d 1055, 1063 (2d Cir. 1996), and Riverwoods Chappaqua Corp., 30 F.3d at 343-44). Judge
28
Posner concluded that the result should be no different merely because a corporation “does
business through agents, as virtually every manufacturer does.” Id. at 227. As he explained:
If Chrysler were even larger than it is and as a result had no agents, but only
employees (it might own all its dealerships), it could not be made liable for
warranty fraud under RICO. What possible difference, from the standpoint of
preventing the type of abuse for which RICO was designed, can it make that
Chrysler sells its products to the consumer through franchised dealers rather than
through dealerships that it owns, or finances the purchases of its motor vehicles
through trusts, or sells abroad through subsidiaries? We have never heard it
suggested that RICO was intended to encourage vertical integration, yet that is the
only effect that we can imagine flowing from [holding that Chrysler, its
subsidiaries, its trusts, and its dealers could constitute a RICO enterprise].
Id. The Court did not rule out the possibility of a manufacturer “us[ing] its dealers or other
agents or affiliates in such a way as to bring about the sort of abuse at which RICO is aimed, in
which event it might be possible to characterize the assemblage as a RICO enterprise.” Id. at
228. But, the Court concluded, “where a large, reputable manufacturer deals with its dealers and
other agents in the ordinary way, so that their role in the manufacturer’s illegal acts is entirely
incidental, differing not at all from what it would be if these agents were the employees of a
totally integrated enterprise, the manufacturer plus its dealers and other agents . . . do not
constitute an enterprise within the meaning of the statute.” Id.; see also, e.g., In re Toyota Motor
Corp. Unintended Acceleration Mktg., Sales Practices, & Prods. Liab. Litig., 826 F. Supp. 2d
1180, 1202-03 (C.D. Cal. 2011) (dismissing RICO claims because the “Plaintiffs merely allege
that the Defendants are associated in a manner directly related to their own primary business
activities, which is insufficient to state a claim . . . . Indeed, the [operative complaint] alleges no
more than that Defendants’ primary business activity — the design, manufacture, and sale or
lease of Toyota vehicles — was conducted fraudulently.”).
29
Significantly, Judge Posner’s conclusions are consistent with Second Circuit law, which
holds that a corporation acting in concert and in the ordinary course of business with its agents
and employees is not a RICO enterprise, whether or not the agents are external or internal to the
corporation. See, e.g., Cruz v. FXDirectDealer, LLC, 720 F.3d 115, 121 (2d Cir. 2013) (holding
that the defendant corporation, its chief operating officer, and its corporate counsel could not
form an enterprise because the complaint merely alleged that the COO and counsel carried out
“the regular affairs of [the defendant], such as day-to-day financial operations, including the
implementation and supervision of deceptive trading practices” (internal quotation marks
omitted)); Discon, Inc. v. NYNEX Corp., 93 F.3d 1055, 1064 (2d Cir. 1996) (holding that legally
separate entities that nonetheless act within the scope of a single corporate structure cannot form
a RICO enterprise, because “[i]t would be inconsistent for a RICO person, acting within the
scope of its authority, to be subject to liability simply because it is separately incorporated,
whereas otherwise it would not be held liable”), vacated on other grounds, 525 U.S. 128 (1998);
Daigneault v. Eaton Corp., Civ. No. 3-06-cv-1690 (JCH), 2008 WL 2604929, at *3 (D. Conn.
June 16, 2008) (holding that the plaintiff had failed to plead a RICO enterprise consisting of the
defendant’s employees and its legal defense team because “all of the employees and attorneys
alleged to constitute the RICO enterprise were acting as employees or agents of [the defendant]
when they allegedly committed mail or wire fraud”); Kaczmarek v. Int’l Bus. Machs. Corp., 30
F. Supp. 2d 626, 630 (S.D.N.Y. 1998) (“To the extent plaintiffs allege that the enterprise also
included third party manufacturers, dealers, and resellers, plaintiffs have failed to distinguish this
association of entities from the typical and ordinary participants who act separately for the
purpose of distributing any product.”); R.C.M. Executive Gallery Corp. v. Rols Capital Co., No.
93-CV-8571 (JGK), 1997 WL 27059, at *8 (S.D.N. Jan. 23, 1997) (rejecting the plaintiffs’
30
argument that the defendant partnership and its outside counsel formed an enterprise because the
allegations showed only that the attorney represented the partnership with respect to its interests
in the ordinary course of business).
Applying that law here, Plaintiffs’ RICO claim fails because they do not allege a
common purpose or organized conduct separate and apart from New GM’s ordinary affairs. In
the TACC, Plaintiffs allege that New GM, K&S, and ESIS formed an enterprise united by the
“common purpose” of “knowingly or unknowingly facilitating New GM’s scheme” to conceal
the ignition switch defect and maintain a profitable business. (See TACC ¶¶ 1070, 1073). In
more recent submissions, however, Plaintiffs appear to have withdrawn or abandoned the
“unknowing” facilitation theory. (See Pls.’ June 24, 2016 Ltr. (Docket No. 3051) (“Pls.’ Supp.
Ltr.”) 6 (“Plaintiffs do not agree that K&S and ESIS (or others) were unaware or that they did
not share a purpose with New GM: the TACC alleges the opposite.” (citing TACC ¶¶ 10581070)). In any event, to proceed on that theory Plaintiffs would have to plead and prove that
New GM, K&S, and ESIS “were sufficiently organized and devoted to the alleged illicit
purposes that the resulting whole functioned as a continuing unit” and that their “common
purpose was dictated” by a “person” — here, New GM — “who controlled the corporate . . .
entities’ activities and manipulated them to the desired illicit ends.” United States v. Cianci, 378
F.3d 71, 83 (1st Cir. 2004); see, e.g., Cruz, 720 F.3d at 121 (noting that entities who were
generally unaware of the defendant’s allegedly deceptive practices could not be plausibly alleged
to share a common purpose and therefore be part of a RICO enterprise); see also, e.g., Conte v.
Newsday, Inc., 703 F. Supp. 2d 126, 134-35 (E.D.N.Y. 2010) (dismissing a RICO claim where
the plaintiff alleged that the defendant, “its employees, and various independent contractors
engaged in a series of independent frauds that somehow benefited” the defendant, without
31
providing evidence “that the various defendants were associated with one another for a common
purpose”); Structural Maint. & Contracting Co. v. Jayce Enters., Inc., No. 09-CV-8087 (BSJ)
(MHD), 2010 WL 4159517, at *9 (S.D.N.Y. Oct. 12, 2010) (“Here, the amended complaint
repeatedly alleges that Defendants acted for their ‘own benefit.’ As a result, Plaintiffs fail to
allege that Defendants acted ‘for a common purpose.’” (citation omitted)). Plaintiffs make no
such allegations.
To the extent Plaintiffs allege that New GM, K&S, and ESIS shared a common purpose
because K&S and ESIS “knowingly facilitated” New GM’s scheme, their allegations also fall
short. Notably, Plaintiffs made a nearly identical argument earlier in the litigation when they
moved to compel production of documents from K&S on the basis of the crime-fraud exception
to the attorney-client privilege. (See Docket No. 1136). Specifically, Plaintiffs asserted, as they
do in the TACC, that K&S worked with New GM to settle cases involving the ignition switch
defect in order to prevent the defect from coming to light. (Compare Pls.’ Mem Supp. Mot. To
Compel Produc. Docs. New GM & King & Spalding LLC Based Crime-Fraud Exception
(Docket No. 1136), with TACC ¶¶ 1079, 1090, 1109-1118). The Court denied Plaintiffs’
motion, holding that there was no evidence of any intent on the part of K&S to perpetuate a
scheme to conceal the ignition switch defect. See In re Gen. Motors LLC, 14-MD-2543 (JMF),
2015 WL 7574460 (S.D.N.Y. Nov. 25, 2015). With respect to the settlement of cases, the Court
concluded that the communications between K&S and New GM “appear to be nothing more than
good-faith attorney evaluations of whether to settle individual cases in light of the risks of
adverse verdicts and large damage awards against New GM.” Id. at *6. Similarly, with respect
to alleged litigation misconduct in the Melton case, Plaintiffs “ultimately fail[ed] to point to
critical evidence of intent.” Id. at *8. As the Court concluded, Plaintiffs’ allegations consist of
32
“the stuff that ordinary (albeit perhaps overly aggressive) litigation is made of, which can and
should be addressed by sanctions in the same case, not the stuff that crimes and frauds are made
of.” Id. at *8-9.
Significantly, as Lead Counsel conceded at oral argument (see Tr. 101-102), the Court
may consider the documents presented in connection with the crime-fraud motion here, as
Plaintiffs relied on them in drafting the TACC. See, e.g., Chambers v. Time Warner, Inc., 282
F.3d 147, 153 (2d Cir. 2002). In light of that, the Court’s denial of the crime-fraud motion
compels the conclusion that Plaintiffs do not (and cannot) plausibly allege that K&S and ESIS
“knowingly facilitated” New GM’s scheme in a way that could satisfy the enterprise requirement
for purposes of RICO. (Admittedly, ESIS was not implicated in the crime-fraud motion. But the
TACC’s allegations with respect to ESIS’s knowledge and intent are even more threadbare than
the allegations with respect to the knowledge and intent of K&S.) On the settlement point, the
Court’s admonition in the crime-fraud context that “there is an important distinction between
effect and intent” applies with equal force here. In re Gen. Motors LLC, 2015 WL 7574460, at
*6. That is, although the settlements facilitated by K&S and ESIS may have enabled New GM
to continue its concealment of the ignition switch defect, there is no factual basis to infer that
K&S and ESIS knowingly acted with that purpose — as opposed to the purpose of carrying out
their respective professional obligations to a client — in mind. And with respect to Melton,
Plaintiffs’ allegations that K&S “hid” documents and “lied” during the Melton litigation are once
again both conclusory and contradicted by Plaintiffs’ own allegations that K&S was told that the
airbag nondeployment investigation was not relevant to the Melton crash, because there was no
allegation that her airbags should have deployed. (See TACC ¶¶ 1116-1118).
33
At oral argument, Plaintiffs contended that a shared lawful purpose could suffice to create
a RICO enterprise. (See Tr. 102-103). That may or may not be true as a general matter.
Compare, e.g., Cruz, 720 F.3d at 120 (“[F]or an association of individuals to constitute an
enterprise, the individuals must share a common purpose to engage in a particular fraudulent
course of conduct and work together to achieve such purposes.” (internal quotation marks
omitted)), with Cianci, 378 F.3d at 88 n.9 (noting that while “one might often expect [an
association-in-fact enterprise’s] purpose to be of a criminal nature . . . it is not required that each
participant have a separate mens rea so long as each can reasonably be said to share in the
common purpose”). But even if true, then the only “common purpose” plausibly alleged here is
the processing and settlement of New GM claims in the ordinary course of business. And as
discussed above, “where a large, reputable manufacturer deals with its . . . agents in the ordinary
way, so that their role in the manufacturer’s illegal acts is entirely incidental, differing not at all
from what it would be if these agents were the employees of a totally integrated enterprise, the
manufacturer plus its . . . agents . . . do not constitute an enterprise within the meaning of the
statute.” Fitzgerald, 116 F.3d at 228; see also Cruz, 720 F.3d at 121 (“We have long since
rejected the idea that a RICO enterprise may consist ‘merely of a corporate defendant associated
with its own employees or agents carrying on the regular affairs of the defendant . . . .”
(quoting Riverwoods Chappaqua Corp., 30 F.3d at 344)).
Contrary to Plaintiffs’ contentions (Pls.’ Mem. 33; Pls.’ Supp. Ltr. 5-6), Living Designs,
Inc. v. E.I. Dupont de Nemours & Co., 431 F.3d 353 (9th Cir. 2005), and Mayfield v. Asta
Funding, 95 F. Supp. 3d 685 (S.D.N.Y. 2015) — which involved enterprises comprised, in part,
of companies and their outside lawyers — do not call for a different result. For one thing, the
two cases are distinguishable on their facts. In Living Designs, for example, the attorneys had
34
allegedly helped their client, DuPont, cover up and falsify relevant information, and courts had
already found that the attorneys had acted improperly. See 431 F.3d at 358. (See New GM’s
June 24, 2016 Ltr. (Docket No. 3048) (“New GM’s Supp. Ltr.”) 5-6). Here, by contrast, there is
no allegation that New GM’s settlements were fraudulently obtained, and the Court has already
ruled that K&S did not act fraudulently with respect to the Melton litigation, the only case in
which Plaintiffs allege specific wrongdoing. See In re Gen. Motors LLC, 2015 WL 7574460, at
*8-9; cf. Morin v. Trupin, 711 F. Supp. 97, 105 (S.D.N.Y. 1989) (“[A]lthough attorneys are not
immune from liability simply because they represent a client, legitimate acts of attorneys on
behalf of clients cannot form the basis of a RICO claim.” (citations omitted)). Similarly, in
Mayfield, the law firm defendants were involved in obtaining fraudulent default judgments and
prepared fraudulent affidavits and pleadings; the lawyer defendants shared in the fraudulent
common purpose of the enterprise, and were not merely engaged in aiding their clients through
litigation in the ordinary course. See 95 F. Supp. 3d at 697-98.
To be sure, there is language in Living Design that could be read broadly to suggest that a
corporation and its outside counsel are always sufficiently distinct to establish a RICO enterprise.
For example, in holding that the enterprise formed by the defendant company and its outside
lawyers was “separate and distinct” from the company, the Ninth Circuit reasoned that “law
firms are required to conform to ethical rules and thus are not merely at the beck and call of their
clients. . . . Indeed, the rules of professional conduct require law firms to be distinct entities and
to maintain their professional independence. In addition, even in the context of the attorneyclient relationship, attorneys retain control over important functions; for example, in litigation,
the attorney retains control over tactical and strategic decisions.” 431 F.3d at 361-62 (citation
omitted). “Thus,” the Court concluded, “the litigation ‘enterprise’ necessarily must be distinct
35
from the client retaining legal assistance.” Id. Read that broadly, however, the Ninth Circuit’s
decision conflicts with Second Circuit precedent holding that attorneys and their clients are not
necessarily distinct for RICO enterprise purposes. See, e.g., Cruz, 720 F.3d at 121 (holding that
the defendant’s corporate counsel was merely carrying out ordinary business activities and
therefore not distinct); Discon, 93 F.3d at 1064 (noting that if “‘attorneys, accountants and other
agents’” were acting within the scope of their authority and on behalf of the corporation, they
would not create an enterprise (emphasis added)); Daigneault, 2008 WL 2604929, at *3 (holding
that the distinctiveness requirement was not met because the attorneys were acting as employees
or agents); R.C.M., 1997 WL 27059, at *8 (same).10
In short, because K&S and ESIS acted in concert with New GM to carry out its business,
and had no common purpose beyond helping New GM carry on its ordinary affairs, Plaintiffs do
not meet the pleading requirements for a RICO enterprise.
b.
RICO Injury
The lack of an “enterprise” is sufficient reason in itself to dismiss Plaintiff’s RICO claim,
but the claim largely fails for an additional reason as well. By its terms, “RICO compensates
only for injury to ‘business or property.’” McLaughlin v. Am. Tobacco Co., 522 F.3d 215, 228
(2d Cir. 2008) (quoting 18 U.S.C. § 1964(c)). In light of that limitation, the Second Circuit held
in McLaughlin that “loss of value” or “benefit of the bargain” damages “are generally
unavailable in RICO suits” and “plainly” unavailable where (similar to the case here) a RICO
Indeed, taken to its logical conclusion, the Ninth Circuit’s reasoning would apply equally
to in-house attorneys — even though they are indisputably employees of a corporation and thus
generally could not form an enterprise with it — since they are subject to the same rules of
professional responsibility as outside lawyers.
10
36
claim “sound[s] in fraud in the inducement.” Id. at 228-29. There, the plaintiffs alleged that
they had been deceived by the defendant tobacco companies into purchasing “light” cigarettes,
believing them to be healthier than full-flavored cigarettes. Id. at 220. As a result of the alleged
fraud, the plaintiffs purchased light cigarettes “in greater quantity than they otherwise would
have and at an artificially high price, resulting in plaintiffs’ overpayment for cigarettes.” Id.
One of the plaintiffs’ theories of injury “purport[ed] to measure the difference between the price
plaintiffs paid for light cigarettes as represented by defendants and the (presumably lower) price
they would have paid (but for defendants’ misrepresentation) had they known the truth.” Id. at
228. The Second Circuit rejected that theory on the ground that “the loss of value model is
designed to award plaintiffs damages based on the benefit of their bargain[, and s]uch damages
are generally unavailable in RICO suits.” Id. at 228. The Court understood this to follow
directly from the “business or property” requirement, because it had not been shown that “a
party’s ‘expectation’ can constitute ‘business or property.’” Id. RICO, as the Court interpreted
it, “‘requires proof of concrete financial loss, and not mere injury to a valuable intangible
property interest.’” Id. (quoting Oscar v. Univ. Students Coop. Ass’n, 965 F.2d 783, 785 (9th
Cir. 1992) (en banc)).11
That conclusion is consistent with courts that have found speculative, expectation-based,
benefit-of-the-bargain damages to be incompatible with RICO. See, e.g., In re Taxable Mun.
As Plaintiffs here note (see Pls.’ Mem. 28), the McLaughlin Court faulted the plaintiffs’
loss of value theory of damages on the ground that, “even if benefit of the bargain damages could
be awarded, there is no reasonable means of calculating them in this case.” 522 F.3d at 229. But
the difficulty in calculating damages — a consideration that may or may apply here — was
merely an additional reason to reject the plaintiffs’ argument above and beyond the Court’s
conclusion that expectation damages are not cognizable for purposes of RICO. See id. at 228-29.
11
37
Bond Sec. Litig., 51 F.3d 518, 522-23 (5th Cir. 1995) (holding that the plaintiff’s alleged injury
that he lost the opportunity to obtain a lower-interest loan was too speculative for purposes of
RICO); Roberts v. The Scott Fetzer Co., No. 4:07-CV-80 (CDL), 2010 WL 3937312, at *10
(M.D. Ga. Sept. 30, 2010) (“Moreover, the intangible, expectancy-type, benefit of the bargain
damages that Plaintiff seeks are not what are contemplated as being recoverable as RICO
damages.”); Impress Commc’ns v. Unumprovident Corp., 335 F. Supp. 2d 1053, 1065 (C.D. Cal.
2003); In re Bridgestone/Firestone, Inc. Tires Prods. Liab. Litig., 155 F. Supp. 2d 1069, 1091
(S.D. Ind. 2001) (rejecting the plaintiffs’ diminution-in-value theory because, “[a]s numerous
appellate and district courts have held . . . RICO affords a monetary remedy only to plaintiffs
who have actually realized the diminished value or experienced product failure, and not to those
who allege a risk (or even a probability) of such loss”). Judge Barker’s opinion in In re
Bridgestone/Firestone is particularly salient. There, one class of plaintiffs alleged that they had
been injured because they had bought defective tires that they either would not have bought or
would have paid less for, had they known about the safety defects. 335 F. Supp. 2d at 1090.
Another class alleged that its members had been harmed by purchasing cars whose value
decreased when the concealed tire defects came to light. Id. Noting that “[f]ederal courts have
consistently and repeatedly held that to satisfy the injury requirement of section 1964, a plaintiff
must prove an actual, concrete monetary loss,” Judge Barker rejected both classes’ RICO claims
because they had alleged only “financial loss . . . grounded in the possibility of future events.”
Id. at 1090-91.
Where courts have recognized expectation damages under RICO, it has been where an
agreement between the parties provided for a certain performance guarantee that the defendant
had no intention of keeping. See, e.g., In re U.S. Foodservice Inc. Pricing Litig., 729 F.3d 108,
38
122-23 (2d Cir. 2013) (holding that plaintiffs who had entered into contracts that purportedly
entitled them to pricing discounts but were in fact fraudulently overcharged by the defendants
had stated RICO injury in the form of the overpayment); In re Merrill Lynch Ltd. P’ships Litig.,
154 F.3d 56, 59 (2d Cir. 1998) (holding that plaintiffs who had invested in a real estate
partnership with guaranteed yields which the defendants knew could not be achieved had stated a
RICO injury for the amount of return that they had been guaranteed); Roberts, 2010 WL
3937312, at *8 (recognizing a viable theory of RICO damages only for each specific good which
was sold as new, turned out to be used, and was shown to have been worth less as a result).
Plaintiffs contend that their situation is like the ones in Merrill Lynch and U.S. Foodservice,
because “New GM never gave [Plaintiffs] what it promised” — namely, a car made by a
manufacturer that would continue to enjoy a good reputation — and RICO functions to “restore
Plaintiffs to the same position they would have been in but for the illegal conduct.” (Pls.’ Mem.
27-28) (internal quotation marks omitted). The contracts in Merrill Lynch and U.S. Foodservice,
however, contained explicit promises, whereas here the continuing resale value of GM-brand
vehicles is at best implied. Plaintiffs also attempt to distinguish McLaughlin by arguing that a
secondary market exists for cars, unlike cigarettes, similarly implying that a certain resale value
is implicit in the ownership of a car. (See Pls.’ Mem. 28; Tr. 96-97). But, as discussed above, no
court has recognized brand devaluation (on which the implied-resale theory turns) as a
cognizable injury, and the Court declines to do so here. Indeed, there is even less basis to
recognize that form of injury in the RICO context, where conceptions of injury have been more
cabined than in the consumer protection realm.
At oral argument, Plaintiffs suggested that improvements in the ability to calculate
damages and expert testimony militate in their favor, relying on Judge Posner’s opinions in BCS
39
Services, Inc. v. Heartwood 88, LLC, 637 F.3d 750 (7th Cir. 2011), and BCS Services, Inc. v. BG
Investments, Inc., 728 F.3d 633 (7th Cir. 2013). (See Tr. 98-101). There, the plaintiffs were
businesses that had participated in tax lien auctions through a county organization, the rules of
which permitted only one agent of a potential buyer or group of buyers to attend each auction.
BG Invs., 728 F.3d at 637. The logistics of the auction meant that a buyer with multiple agents
who could raise their arms and indicate bids would have a greater chance of winning a desired
lien. Id. The plaintiffs proved that the defendants had fraudulently packed the auction rooms
with multiple agents and were able to show a high statistical probability that they had won fewer
liens than they otherwise would have won absent the fraud. Heartwood 88, 637 F.3d at 759-60.
On those facts, the Seventh Circuit held that the plaintiffs had proved injury to their
“business” within the meaning of RICO — namely, that the fraud had deprived them of a
business opportunity to which they were otherwise entitled. See BG Invs., 728 F.3d at 638
(concluding that, while the plaintiffs might not have a “property” interest in the tax liens, they
had a “business” interest in “the profit they would have made had the fraud not prevented” it);
Heartwood 88, 637 F.3d at 756-57 (“The defendants stole a business opportunity from the
plaintiffs by flooding the auction room with raised hands that shouldn’t have been there.”); cf.
Living Designs, 431 F. 3d at 364 (holding that the plaintiffs’ allegation that they had suffered
financial losses, namely “that they settled their claims for a smaller percentage of their alleged
damages than they could have,” would not itself be sufficient to confer RICO standing, but that
their additional allegation that the fraudulent inducement harmed their property and business
interests in their businesses by accepting the lower settlements did suffice to show RICO injury).
Additionally, the Court relied on the principle that, where plaintiffs can prove injury, but the
“defendants’ misconduct prevent[s] the plaintiffs from calculating damages accurately, . . .
40
damages can be estimated by methods that would be deemed impermissibly speculative in other
contexts.” BG Invs., 728 F.3d at 639-40. That principle has no application here. Thus, for
purposes of this case, Judge Posner’s opinions can, at most, be read to stand for the proposition
that a RICO plaintiff can pursue a claim based on statistical harm to “business” expectations. As
applied here, that proposition might provide support for a RICO claim against New GM by
dealers in GM-branded vehicles who expected to be able to sell their stock at a certain price and
received lower prices when New GM’s concealment was revealed. (See Tr. 100 (counsel for
Plaintiffs noting that the BCS Services plaintiffs “were injured in their business . . . because of
that loss of opportunity”). It does not, however, support holding — in the face of McLaughlin —
that consumers could bring a RICO claim for harm to “property” based on the benefit-of-thebargain defect theory pressed here.12
In short, although New GM itself may well have committed fraud — as described below
and as New GM itself more or less conceded in entering the DPA and agreeing to the SOF — not
every fraud can form the basis of a RICO claim. Here, because Plaintiffs fail to allege a RICO
enterprise and largely fail to allege injury to “business or property” within the meaning of RICO,
New GM’s motion to dismiss Plaintiffs’ RICO claim is GRANTED.13
12
Strictly speaking, some Plaintiffs may well allege cognizable injuries. Out-of-pocket
losses are plainly recoverable under RICO, see, e.g., McLaughlin, 523 F.3d at 227-28, and the
TACC alleges that some Plaintiffs incurred out-of-pocket losses as a result of the ignition switch
recalls (for example, by paying for repairs or obtaining alternative transportation while their cars
were in the shop) and that some Plaintiffs sold or traded their cars for a lower-than-expected
resale value. (See Pls.’ Mem. 28; TACC ¶¶ 54, 56, 72, 91, 92). None of the Plaintiffs included
in this motion, however, alleges those kinds of injury. Moreover, the failure to allege an
enterprise is fatal to all Plaintiffs’ RICO claims, even those that allege cognizable losses.
In supplemental briefing, Plaintiffs brought to the Court’s attention an opinion in the
Takata Airbag MDL denying a motion to dismiss RICO claims very similar to the one pressed
here. (See Pls.’ June 28, 2016 Ltr. (Docket No. 3054) 3 n.3 (citing In re Takata Airbag Prods.
13
41
2.
The Magnuson-Moss Warranty Act
Plaintiffs’ second federal claim, brought on behalf of certain members of the Post-Sale
Ignition Switch Defect Subclass, is for violation of the MMWA, 15 U.S.C. § 2310, et seq. (See
TACC ¶¶ 1142-1158). The MMWA provides a remedy for “a consumer who is damaged by the
failure of a warrantor to comply with any obligation under a written [or implied] warranty.”
Wilbur v. Toyota Motor Sales, U.S.A., Inc., 86 F.3d 23, 26 (2d Cir. 1996) (internal quotation
marks and alterations omitted); see 15 U.S.C. § 2310(d)(1). The MMWA, however, does not
create an independent basis for liability. Instead, liability under the federal law turns on
questions of state warranty law. See, e.g., Birdsong v. Apple, Inc., 590 F.3d 955, 958 n.2 (9th
Cir. 2009); Carlson, 883 F.2d at 291; Walsh v. Ford Motor Co., 807 F.2d 1000, 1012 (D.C. Cir.
1986); Diaz v. Paragon Motors of Woodside, Inc., 424 F. Supp. 2d 519, 540 (E.D.N.Y. 2006).
Accordingly, Plaintiffs who have viable state law warranty claims, as discussed below, also have
viable claims under the MMWA; if a Plaintiff’s state law warranty claim is dismissed, so is his
or her MMWA claim.
C.
State Claims
The Court turns, then, to Plaintiffs’ state claims, which sound in consumer fraud,
common law fraud, warranty law, unjust enrichment, and negligence. As noted, Plaintiffs bring
Liab. Litig., No. 15-MD-2599 (FAM), 2015 WL 9987659 (S.D. Fla. Dec. 2, 2015)). The Takata
Court held that the Takata plaintiffs had adequately alleged an associated-in-fact enterprise
consisting of Takata, other vehicle manufacturers, and dealerships and that the plaintiffs had
adequately alleged injury by pleading that “they overpaid for vehicles based on misinformation
regarding vehicle safety; they overpaid for airbags within the vehicles; and the vehicles they
purchased diminished in value after the public learned about the airbag defect.” 2015 WL
9987659, at *1-2. This Court respectfully disagrees with the Takata Court’s conclusion, which
does not appear to rely on or cite any of the precedent discussed above (and is, to put it mildly, in
tension with much of it).
42
claims under the laws of all fifty states and the District of Columbia, but this motion deals with
claims under the laws of only eight jurisdictions: California, the District of Columbia, Florida,
Louisiana, Maryland, Missouri, Oklahoma, and Virginia. In their briefs, the parties largely
addressed these claims together on an issue-by-issue basis. By contrast — and despite the
repetition it entails — the Court will separately address each claim with respect to each
jurisdiction, as subtle differences in state law can dictate different results for plaintiffs in
different jurisdictions. By and large, however, Plaintiffs’ consumer fraud, common law fraud,
and implied warranty claims survive, but their unjust enrichment and negligence claims fail.
1.
California
The California Plaintiffs for purposes of this motion are Anna Andrews, Marc and
Madeline Koppelman, David Padilla, and Randall Pina. (See New GM’s Mem. 6). Andrews
owns a 2010 Buick LaCrosse, which she purchased used on August 25, 2011, and which was not
subject to any recall. (See TACC ¶ 51; New GM’s Mem. 6). The Koppelmans own a 2010
Chevrolet HHR, which they purchased Certified Pre-Owned in 2012 and which was subject to
the ignition switch, ignition cylinder, and power steering recalls. (See TACC ¶ 55; New GM’s
Mem. 6). Padilla owned a 2010 Chevrolet Cobalt, which he purchased new in April 2010 and
sold in spring 2014, and which was subject to the ignition switch, ignition cylinder, and power
steering loss recalls. (See TACC ¶ 57; New GM’s Mem. 6). Pina owns a 2011 Chevrolet HHR,
which he purchased new on or about April 25, 2011, and which was subject to the ignition
switch and ignition cylinder recalls. (See TACC ¶ 58; New GM’s Mem. 6). Andrews’ car has
never exhibited any defect. (See TACC ¶ 51). The Koppelmans’ car suffered a loss of power on
the road in June 2012; following the 2014 recall, the car was repaired. (See id. ¶ 55). Padilla’s
car shut off once while he was driving; before he sold it, the car’s ignition switch was replaced
43
pursuant to the 2014 recall. (See id. ¶ 57). Pina does not allege that his car manifested any
defect; he had his ignition parts replaced pursuant to the 2014 recall. (See id. ¶ 58). The
California Plaintiffs bring claims under the California Unfair Competition Law (“UCL”), Cal.
Bus. & Prof. Code § 17200, et seq. (TACC ¶¶ 1445-1467); the Consumers Legal Remedies Act
(“CLRA”), Cal. Civ. Code § 1750, et seq. (TACC ¶¶ 1418-1444); for fraudulent concealment
(id. ¶¶ 1468-1481); and for unjust enrichment (id. ¶¶ 1516-1525). The California Plaintiffs who
are also members of the Post-Sale Ignition Switch Defect Subclass (that is, everyone other than
Andrews — together, the “California Ignition Plaintiffs”) also bring a claim for violation of the
Song-Beverly Consumer Warranty Act (“SBA”), Cal. Civ. Code §§ 1791.1, 1792 (TACC
¶¶ 1482-1496), and for negligent failure to recall (id. ¶¶ 1497-1505). The Court will address
each of those claims in turn.
a.
UCL
California’s UCL proscribes “unlawful, unfair or fraudulent business acts or practices and
unfair, deceptive, untrue or misleading advertising.” Berger v. Home Depot USA, Inc., 741 F.3d
1061, 1068 (9th Cir. 2014) (internal quotation marks omitted); see Cal. Bus. & Prof. Code §
17200. “A plaintiff may pursue a UCL claim under any or all of three theories: the
‘unlawfulness,’ ‘fraudulent,’ or ‘unfairness’ prongs.” In re Toyota Motor Corp. Unintended
Acceleration Mktg., Sales Practices, & Prods. Liab. Litig., 754 F. Supp. 2d 1145, 1175 (C.D.
Cal. 2010) (“Toyota I”). The “unlawful” prong “borrows violations of other laws and treats them
as actionable.” Toyota I, 754 F. Supp. 2d at 1175 (internal quotation marks omitted). The
“fraudulent” prong looks to whether a business practice “is one that is likely to deceive the
public and may be based on representations that are untrue.” Id. at 1175. As for the “unfair”
prong, courts have yet to reach a consensus on what the statutory term means, but have variously
44
considered whether the defendant’s activities create “some actual or threatened impact on
competition” or whether “the impact of the challenged practice on its alleged victim [outweighs]
the reasons, justifications, and motives of the alleged wrongdoer.” Taragan v. Nissan N. Am.,
Inc., No. 09-CV-3660 (SBA), 2013 WL 3157918, at *8 (N.D. Cal. June 20, 2013). Here, the
California Plaintiffs contend that New GM is liable under all three prongs. (See TACC ¶¶ 14481450).
To prevail on a UCL claim, a plaintiff must plead and prove that the defendant engaged
in a business practice proscribed under one of the statute’s three prongs and that the plaintiff was
injured “as a result of” the business practice. See, e.g., Berger, 741 F.3d at 1068; Pirozzi v.
Apple, Inc., 966 F. Supp. 2d 909, 920 (N.D. Cal. 2013); Toyota I, 754 F. Supp. 2d at 1168.
Further, UCL allegations that sound in fraud must meet the heightened pleading requirements of
Rule 9(b). See, e.g., Kearns v. Ford Motor Co., 567 F.3d 1120, 1125 (9th Cir. 2009). In
Kwikset Corp. v. Super. Ct., 246 P.3d 877 (Cal. 2011), the California Supreme Court considered
the requirements for standing under the UCL in light of an amendment that required a plaintiff to
have “lost money or property” to bring a claim. The plaintiffs in the case had purchased locks
that were sold with a “Made in U.S.A.” label, but in fact had been manufactured abroad; the
plaintiffs alleged that they had suffered injury because they had been induced to purchase
products they did not want and would not have bought but for the misrepresentation. See
Kwikset, 246 P.3d at 883. The Kwikset Court held: “To satisfy the narrower standing
requirements imposed by [the amended UCL], a party must now (1) establish a loss or
deprivation of money or property sufficient to qualify as injury in fact, i.e., economic injury, and
(2) show that that economic injury was the result of, i.e., caused by, the unfair business practice
or false advertising that is the gravamen of the claim.” Id. at 885. Interpreting what could
45
constitute economic injury, the Court described the following as two representative, nonexclusive options: “A plaintiff may (1) surrender in a transaction more, or acquire in a
transaction less, than he or she otherwise would have; [or] (2) have a present or future property
interest diminished.” Id. at 885-86.
Applying those standards, the Kwikset Court held that the plaintiffs had stated a viable
injury under the UCL because “[a] consumer who relies on a product label and challenges a
misrepresentation contained therein can satisfy the standing requirement of section 17204 by
alleging, as plaintiffs have here, that he or she would not have bought the product but for the
misrepresentation.” Id. at 890. The economic harm came from the fact that “the consumer ha[d]
purchased a product that he or she paid more for than he or she otherwise might have been
willing to pay . . . whether or not a court might objectively view the products as functionally
equivalent.” Id. at 890; see also, e.g., McMahon v. Take-Two Interactive Software, Inc., No. 1455296, 2016 WL 684963, at *1 (9th Cir. Feb. 19, 2016) (citing Kwikset to find that the plaintiffs
had standing under the UCL because they alleged they would not have paid a “premium price” if
the defendants had not misrepresented the online availability of a video game); Johnson v. WalMart Stores, Inc., 544 F. App’x 696, 697 (9th Cir. 2013) (reversing the district court’s holding
that the plaintiff had not alleged sufficient injury where the plaintiff asserted that she had “paid
more than she otherwise would have if Wal-Mart had not engaged in the alleged
misrepresentation” (citing Kwikset) (internal quotation marks omitted)). Courts have since
extended Kwikset’s holding to cases of fraudulent concealment or omission, in addition to
affirmative misrepresentation. See, e.g., In re Sony Gaming Networks, 996 F. Supp. 2d at 988;
Donohue v. Apple, Inc., 871 F. Supp. 2d 913, 921 (N.D. Cal. 2012).
46
Here, each of the California Plaintiffs alleges that he or she would not have purchased his
or her New GM vehicle, or would have paid less than he or she did, had he or she known about
New GM’s corporate culture and the undisclosed defects in GM vehicles. (See TACC ¶¶ 51, 55,
57, 58). This alleged injury is directly in line with Kwikset. Furthermore, contrary to New GM’s
argument (see New GM’s Mem. 9-10), nothing in Kwikset suggests that a product must actually
manifest a defect to give rise to a claim. Instead, the Kwikset Court indicated that what matters is
whether, given a consumer’s subjective expectations, a product is what it was advertised to be —
even if there is no objective difference between the product as advertised and the product as
manufactured. See 246 P.3d at 890 (“For each consumer who relies on the truth and accuracy of
a label and is deceived by misrepresentations into making a purchase, the economic harm . . . —
the loss of real dollars from a consumer’s pocket — is the same whether or not a court might
objectively view the products as functionally equivalent.”). Further, the post-Kwikset cases to
which New GM cites do not address Kwikset or standing under the UCL, much less hold that a
manifested defect is required to bring a claim under the UCL. (See New GM’s Reply 9-10). See
Czuchaj v. Conair Corp., No. 13-CV-1901 (RBB), 2016 WL 1240391, at *3 (S.D. Cal. Mar. 30,
2016) (noting that the defendant argued that California requires a manifested defect for a breach
of implied warranty claim, but not addressing the issue); Galitski v. Samsung Telecomm. Am.,
LLC, No. 12-CV-472-D, 2015 WL 5319802, at *10 (N.D. Tex. Sept. 11, 2015) (noting that, for a
breach of implied warranty claim under California law, a manifestation of a defect does not
necessarily mean that a product is not merchantable); see also id. at *13-15 (denying class
certification for UCL and CLRA claims because the plaintiffs would have to present
individualized proof to show that each phone was defective when sold). Accordingly, the
California Plaintiffs each allege sufficient injury to bring a claim under the UCL. That leaves the
47
questions of whether New GM engaged in a prohibited practice and, if so, whether that practice
caused each Plaintiff’s injury.
The answer to those questions is plainly yes for the California Ignition Plaintiffs.
California law provides that a duty to disclose arises “(1) when the defendant is in a fiduciary
relationship with the plaintiff; (2) when the defendant ha[s] exclusive knowledge of material
facts not known to the plaintiff; (3) when the defendant actively conceals a material fact from the
plaintiff; or (4) when the defendant makes partial representations but also suppresses some
material fact.” Donohue, 871 F. Supp. 2d at 925; see Herron v. Best Buy Co., 924 F. Supp. 2d
1161, 1174 (E.D. Cal. 2013). A fact is material “‘if a reasonable man would attach importance
to its existence or nonexistence in determining his choice of action.’” Herron, 924 F. Supp. 2d at
1174 (quoting Kwikset, 246 P.3d at 877); see also Wilson v. Hewlett-Packard Co., 668 F.3d
1136, 1141 (9th Cir. 2012) (noting that California courts have generally found that a
manufacturer’s UCL duty to disclose extends only to safety issues). Here, the TACC includes a
litany of allegations suggesting that New GM may have known, via knowledge imputed from
Old GM employees and documents, about the ignition defects by at least spring 2010, when the
first California Plaintiff purchased his car. (See, e.g., TACC ¶¶ 298-339).14 For example: In
14
The question of whether and under what circumstances knowledge of Old GM employees
can be imputed to New GM has been the focus of prior litigation, before both this Court and the
Bankruptcy Court. See, e.g., In re Gen. Motors LLC Ignition Switch Litig., 14-MD-2543 (JMF),
2015 WL 9582714, at *2 (S.D.N.Y. Dec. 30, 2015); In re Motors Liquidation Co., 541 B.R. 104
(Bankr. S.D.N.Y. 2015). The Bankruptcy Court ruled that, as a matter of bankruptcy law, Old
GM personnel’s knowledge or knowledge of information contained in Old GM files could be
imputed to New GM only to the extent that it could be shown, as a matter of non-bankruptcy
law, that New GM actually had that knowledge (for example, through an Old GM employee who
later became an employee of New GM). See In re Motors Liquidation Co., 541 B.R. at 108.
Plaintiffs make clear in the TACC that they include allegations with respect to Old GM’s
knowledge only to the extent that it can be imputed to New GM, and highlight the significant
number of Old GM employees who went to work for New GM after the bankruptcy. (See TACC
48
February 2005 Old GM notified dealers, but not the public, about the ignition switch’s ability to
inadvertently rotate (id. ¶ 298); there were multiple “reports of power failure and/or engine
shutdown in Delta Ignition Switch Vehicles” that resulted in inquiries in 2005 by Old GM,
including one reported by an Old GM engineer (id. ¶¶ 302-304); Old GM was notified of media
reports investigating fatal crashes involving the ignition switch defect in 2006 and 2007 (id. ¶¶
315-316); Old GM was repeatedly notified by one of its engineers who experienced a stall while
driving a 2006 Chevrolet Impala in August 2005 (id. ¶ 424); Old GM and New GM received
notice of fatal incidents where the car was in the accessory or off position (including instances
where the frontal airbags should have deployed, but did not) from 2007 to 2010 (id. ¶¶ 317-329);
and New GM received customer complaints specifically identifying vehicle stalls and other
ignition issues between 2009 and 2014 (id. ¶¶ 375-379, 428-443, 490-500). And the concealed
defect unquestionably implicated a safety issue and would have affected a reasonable person’s
decision to purchase a car — making the omission material. Taken together, these allegations
are sufficient to satisfy the heightened pleading requirements of Rule 9(b) and to state a claim
under the UCL. See In re Sony Gaming Networks, 996 F. Supp. 2d at 988 (finding that a plaintiff
had alleged injury and causation under the UCL by alleging “that Sony omitted material
information regarding the security of [its products] and that this information should have been
disclosed to consumers and the time consumers purchased their [products]”).15
¶¶ 265-271). New GM does not challenge the inclusion of these allegations here to the extent
they bear on New GM, and drawing all inferences in Plaintiffs’ favor, it is plausible that much of
the knowledge attributed to Old GM employees and documents came over to New GM.
15
To be clear, the California Ignition Plaintiffs purchased car models that were not
manufactured with the faulty ignition switch, but which could have been repaired at some point
using the faulty ignition switch. (See New GM’s Mem. 3 n.3). Accordingly, if they are
ultimately to succeed on their claims with respect to the ignition switch, they will have to show
49
Andrews, whose car was not subject to any recall and who does not claim to have
experienced any defect, presents a different question. (See TACC ¶ 51). New GM would not
have had a duty to disclose to Andrews that other New GM cars were potentially defective. See
Donohue, 871 F. Supp. 2d at 927 (dismissing the plaintiff’s claim with respect to his iPhone
because the only alleged omissions were made regarding a different model). And she does not
have a claim under the benefit-of-the-bargain defect theory, as she does not allege that her car
was defective when sold. She proceeds, therefore, only under the brand devaluation theory,
which the Court has already rejected. Notably, that theory fails even under Kwikset’s expansive
conception of injury. The Kwikset Court acknowledged that “labels matter,” but it also grounded
its holding on the fact that accurate representations about geographic origin are material and
something to which consumers are legally entitled. See Kwikset, 246 P.3d at 890 (noting that the
California legislature had enacted legislation prohibiting deceptive representations of geographic
origin). By contrast, the continuing good reputation of a manufacturer is not an element of a
consumer purchase to which a consumer is entitled. Nor did New GM represent that its
reputation for safety and quality would remain unchanged. Andrews therefore does not state a
claim under the UCL, because she does not allege injury within the meaning of the statute. New
GM’s motion to dismiss the California Plaintiffs’ UCL claim is accordingly GRANTED with
respect to Andrews, but DENIED with respect to the Koppelmans, Padilla, and Pina.
that their cars in fact contained that defect. New GM does not raise this challenge here and, in
any event, drawing all reasonable inferences in favor of Plaintiffs, the Court can plausibly infer
that their cars may have contained the ignition switch defect.
50
b.
CLRA
The CLRA prohibits “unfair methods of competition and unfair or deceptive acts or
practices undertaken by any person in a transaction intended to result or which results in the sale
or lease of goods or services to any consumer.” Cal Civ. Code § 1770(a). The California
Plaintiffs contend that New GM violated the CLRA by, among other things, (1) representing that
its vehicles “have characteristics, uses, benefits, and qualities which they do not”; and
(2) representing that its vehicles “are of a particular standard, quality, and grade when they are
not.” (TACC ¶ 1422). See Cal. Civ. Code § 1770(a)(5), (7). They rely largely on allegations
that New GM actively concealed and failed to disclose safety defects in GM cars. (See TACC
¶¶ 1427-1428, 1433-1434). Concealment or a failure to disclose are actionable under the CLRA,
as under the UCL, “(1) when the defendant is in a fiduciary relationship with the plaintiff; (2)
when the defendant had exclusive knowledge of material facts not known to the plaintiff; (3)
when the defendant actively conceals a material fact from the plaintiff; and (4) when the
defendant makes partial representations but also suppresses some material fact.” Falk v. Gen.
Motors Corp., 496 F. Supp. 2d 1088, 1095 (N.D. Cal. 2007); see Toyota I, 754 F. Supp. 2d at
1172-73. California courts have held that in order for an undisclosed fact to count as “material,”
it must go to the safety of a product. See In re Sony Grand Wega KDF-E A10/A20 Series Rear
Projection HDTV Television Litig., 758 F. Supp. 2d 1077, 1095 (S.D. Cal. 2010); Toyota I, 754
F. Supp. 2d at 1173-74. CLRA claims that sound in fraud, as the claims do here, are subject to
the heightened pleading requirements of Rule 9(b). See, e.g., Kearns, 567 F.3d at 1126.
As for injury, although the Kwikset ruling addressed only the UCL and relied on language
specific to the UCL, courts have since read Kwikset to apply equally to injury under the CLRA.
See Hinojos v. Kohl’s Corp., 718 F.3d 1098, 1107-1108 (9th Cir. 2013); Musgrave v. ICC/Marie
51
Callender’s Gourmet Prods. Div., No. 14-CV-2006 (JST), 2015 WL 510919, at *9 (N.D. Cal.
Feb. 5, 2015). This Court agrees. Notably, the language of the CLRA is even broader than that
of the UCL: It provides a remedy to “[a]ny consumer who suffers any damage as a result” of an
unfair trade practice, Cal. Civ. Code § 1780(a) (emphasis added), whereas the UCL applies only
to “a person who has suffered injury in fact and has lost money or property as a result of the
unfair competition,” Cal. Bus. & Prof. Code § 17204 (emphasis added). On its own terms,
therefore, the statute would appear to reach at least as broadly as the UCL reaches. Cf. Kwikset,
246 P.3d at 886-87 (observing that the UCL’s “economic injury requirement is qualitatively
more restrictive than” the requirement of “injury in fact” required to establish Article III
standing, “embracing as it does fewer kinds of injuries”). That conclusion is particularly
appropriate in light of the CLRA’s exhortation that the statute “shall be liberally construed and
applied to promote its underlying purposes.” Cal. Civ. Code § 1760.
It follows that the California Ignition Plaintiffs sufficiently allege injury for purposes of
the CLRA, as they state that they purchased products that they otherwise would not have, or paid
more than they otherwise would have paid, due to New GM’s failure to disclose the ignition
defects in their cars. Additionally, they plausibly allege that New GM had a duty to disclose
those defects, either because New GM had exclusive knowledge of material facts or because
New GM actively concealed material facts. For example, the TACC alleges that Old GM and
New GM had notice of dozens of ignition-switch related accidents long before the spring of
2012, when New GM concededly knew of the defect. And a defect that can cause a car to
suddenly switch off plainly implicates safety, and thus constitutes a “material” fact that would
cause a consumer to behave differently if she knew of it. See Falk, 496 F. Supp. 2d at 1095; see
also Toyota I, 754 F. Supp. 2d at 1173 (“The Court is convinced that a safety consideration as
52
fundamental as whether a car is able to stop when the brakes are applied is material to
consumers.”). The California Ignition Plaintiffs accordingly state a claim under the CLRA. See
Toyota I, 754 F. Supp. 2d at 1174 (holding that the plaintiffs had stated a claim under the CLRA
when they alleged that Toyota had exclusive knowledge about the sudden acceleration defect and
did not disclose that defect to consumers). By contrast, Andrews’s CLRA claim must be
rejected; although the CLRA’s injury language is broader than that of the UCL, Plaintiffs do not
cite, and the Court is not aware of, any authority extending its reach to claims under a brand
devaluation theory. Thus, New GM’s motion to dismiss the CLRA claim is GRANTED with
respect to Andrews, but DENIED with respect to Padilla, Pina, and the Koppelmans.
c.
Fraudulent Concealment
In addition to their consumer fraud claims, the California Plaintiffs bring a common law
fraudulent concealment claim. (See TACC ¶¶ 1468-1481). Under California law, a plaintiff
bringing a claim for fraudulent concealment must allege: “(1) a misrepresentation (false
representation, concealment, or nondisclosure); (2) knowledge of falsity (or scienter); (3) intent
to defraud, i.e., to induce reliance; (4) justifiable reliance; and (5) resulting damage.” Toyota I,
754 F. Supp. 2d at 1189 (internal quotation marks omitted). For concealment to be actionable,
the defendant must have had a duty to disclose, which arises under the same circumstances as in
the UCL and CLRA contexts — namely, (1) if the defendant is in a fiduciary relationship with
the plaintiff; (2) if the defendant had exclusive knowledge of material facts not known to the
plaintiff; (3) if the defendant actively conceals a material fact from the plaintiff; or (4) if the
defendant makes partial representations but suppresses some material fact. See id. at 1190.
Given the Court’s analysis and conclusions with respect to the California Plaintiffs’ claims of
fraudulent concealment under the UCL and CLRA, it is plain that Andrews’s fraud claims must
53
be dismissed. It is equally plain that the California Ignition Plaintiffs plausibly allege a duty to
disclose and satisfy at least the first four elements of a fraud claim. Among other things, they
plausibly allege that New GM knew — in part through knowledge acquired from Old GM — of
dozens of accidents involving the ignition switch defects by the time they purchased their cars.
(See TACC ¶¶ 298-339).
Whether the California Ignition Plaintiffs plausibly allege damages for purposes of their
common law fraud claims, however, requires closer examination. The UCL and CLRA are
consumer-protection statutes, which by their terms extend broadly and have been interpreted by
courts to reach “benefit of the bargain” or “diminution in value” damages such as those alleged
here. By contrast, California law provides that “[o]ne defrauded in the purchase, sale or
exchange of property is entitled to recover the difference between the actual value of that with
which the defrauded person parted and the actual value of that which he received, together with
any additional damage arising from the particular transaction.” Cal. Civ. Code § 3343(a); see
Toyota I, 754 F. Supp. 2d at 1193. In other words, “[i]n fraud cases involving the ‘purchase, sale
or exchange of property,’ the Legislature has expressly provided that the ‘out of pocket’ rather
than the ‘benefit of the bargain’ measure of damages should apply” and, thus, “a defrauded party
is ordinarily limited to recovering his ‘out of pocket’ loss.” Strebel v. Brenlar Invs., Inc., 135
Cal. App. 4th 740, 747 (Cal. Ct. App. 2006) (internal quotation marks omitted)). That said, the
California Supreme Court has held that that limitation applies only to the calculation of damages,
not the ability to plead an injury. See Kwikset, 246 P.3d at 893-94 (“In the context of a common
law deceit action, the [Section 3343] rule’s only purpose is to provide the measure of damages; it
limits neither standing nor the availability of equitable remedies.”). Accordingly, New GM’s
54
motion to dismiss the California Plaintiffs’ fraudulent concealment claims is GRANTED with
respect to Andrews, and DENIED with respect to the California Ignition Plaintiffs.
d.
Unjust Enrichment
Next, the California Plaintiffs bring claims for unjust enrichment. (See TACC ¶¶ 15161525). New GM argues that California does not recognize unjust enrichment as a cause of
action. (See New GM’s Mem. 46). Although there is precedent supporting that assertion, at
least some courts have held that “[w]hen a plaintiff alleges unjust enrichment, a court may
construe the cause of action as a quasi-contract claim seeking restitution.” Astiana v. Hain
Celestial Grp., Inc., 783 F.3d 753, 762 (9th Cir. 2015) (internal quotation marks omitted); see
Berger 741 F.3d at 1070 (recognizing unjust enrichment as a cause of action). A plaintiff may
not recover for unjust enrichment or restitution, however, when there is a valid, express contract
between the parties, and the majority approach appears to be that such claims can be pleaded in
the alternative only if the plaintiff also alleges that the contract may have been invalid or
procured by fraud. Compare, e.g., Parino v. BidRack, Inc., 838 F. Supp. 2d 900, 908 (N.D. Cal.
2011) (denying a motion to dismiss an unjust enrichment claim because the plaintiff “properly
alleged a claim for fraud in the procuring of the alleged contract”), with Progeny Ventures, Inc.
v. W. Union Fin. Servs., Inc., 752 F. Supp. 2d 1127, 1135 (C.D. Cal. 2010) (dismissing an unjust
enrichment claim in light of an enforceable express contract between the parties), and Boon
Rawd Trading Int’l Co. v. Paleewong Trading Co., 688 F. Supp. 2d 940, 956 (N.D. Cal. 2010)
(dismissing an unjust enrichment claim because the plaintiff did not “either allege that the
parties’ rights were not squarely set out in a binding agreement, or allege that any express
contract was procured by fraud or was ineffective for some reason”). Here, Padilla and Pina both
allege that their cars were covered by warranties at the time of purchase. (See TACC ¶¶ 57-58).
55
By contrast, the TACC is silent with respect to whether Andrews and the Koppelmans were
parties to express warranties (although it is hard to imagine they were not). New GM’s motion
to dismiss the California unjust enrichment claim is accordingly GRANTED with respect to
Padilla and Pina, and DENIED with respect to Andrews and the Koppelmans.16
e.
SBA
The TACC’s last two claims under California law are brought solely on behalf of the
California Ignition Plaintiffs (that is, all California Plaintiffs other than Andrews). First, they
bring a claim for breach of the implied warranty of merchantability under the SBA. The SBA
provides that “every sale of consumer goods that are sold at retail in this state shall be
accompanied by the manufacturer’s and the retail seller’s implied warranty that the goods are
merchantable.” Cal. Civ. Code § 1792. ”Merchantable” goods are defined, in turn, as those that:
“(1) [p]ass without objection in the trade under the contract description; (2) [a]re fit for the
ordinary purposes for which such goods are used; (3) [a]re adequately contained, packaged, and
labeled; and (4) [c]onform to the promises or affirmations of fact made on the container or
label.” Cal. Civ. Code § 1791.1(a). Significantly, the relevant inquiry focuses on whether the
product was defective at the time it was sold. See Cholakyan v. Mercedes-Benz USA, LLC, 796
F. Supp. 2d 1220, 1243 (C.D. Cal. 2011) (“[T]he implied warranty of merchantability may be
breached by a latent defect undiscoverable at the time of sale, so in the case of a latent defect, a
product is rendered unmerchantable, and the warranty of merchantability is breached, by the
Andrews’s unjust enrichment claim may fail for other reasons — namely, failure to show
that New GM “unjustly” retained any benefit, because New GM did not act improperly with
respect to Andrews and her car. New GM does not press this argument, however, and the Court
declines to dismiss the claim sua sponte on that ground. (See New GM’s Mem., Ex. 1, at 1).
16
56
existence of the unseen defect, not by its subsequent discovery.” (emphasis added) (internal
quotation marks omitted)); Ehrlich v. BMW of N. Am., LLC, 801 F. Supp. 2d 908, 924 (C.D. Cal.
2010) (similar). Further, the SBA applies only to sales “of consumer goods that are sold at retail
in [California].” Cal. Civ. Code § 1792.
At the outset, the Koppelmans’ claim under the SBA must be dismissed because, as
alleged in the TACC (see TACC ¶ 55), they bought their car in Maryland, not in California. See
In re Sony Grand Wega, 758 F. Supp. 2d at 1097. By contrast, Padilla and Pina both state claims
under the SBA. They allege that their cars were sold with, among other things, the ignitionswitch defect. (See TACC ¶¶ 57-58). That defect resulted in a risk that their cars could suddenly
stall while driving, and “[v]ehicles subject to engine failure cannot be said to be merchantable.”
Cholakyan, 796 F. Supp. 2d at 1244. To be sure, the parties do not cite, and the Court has not
found, any precedent addressing whether the Kwikset theory of damages applies to claims under
the SBA. But the fact that Padilla’s and Pina’s vehicles were defective at the time of sale
suggests that California law permits their warranty claims to proceed. Cf. Toyota I, 754 F. Supp.
2d at 1186 (rejecting the argument that breach of warranty claims require a manifest defect).
New GM’s motion to dismiss the California Plaintiffs’ claims under the SBA and the MMWA
(which, as discussed above, depends on state warranty law) is therefore GRANTED with respect
to the Koppelmans, and DENIED with respect to Padilla and Pina.
f.
Negligent Failure To Recall
Finally, the California Ignition Plaintiffs bring claims for negligent failure to recall. (See
TACC ¶¶ 1497-1505). The Court agrees with New GM that those claims are barred by
California’s economic loss rule. (See New GM’s Mem. 55-56). That rule precludes a plaintiff
from recovering in negligence for a product defect that causes only economic loss, which
57
“consists of damages for inadequate value, costs of repair and replacement of the defective
product or consequent loss of profits — without any claim of personal injury or damages to other
property.” Sharma v. BMW of N. Am., LLC, No. 13-CV-2274 (MMC), 2014 WL 2795512, at *6
(N.D. Cal. June 19, 2014) (quoting Robinson Helicopter Corp. v. Dana Corp., 34 Cal. 4th 979,
988 (2005)). Such is the case here: The California Plaintiffs allege no personal injury or damage
to property other than the alleged economic impact on their cars. (See TACC ¶¶ 55, 57, 58).
Plaintiffs argue that the economic loss rule does not apply because damage was caused to
“property” — namely, their cars — “other than the product itself” — namely, the ignition
switches in their cars — and because of a special “relationship between the parties created here
by” the Safety Act. (Pls.’ Mem. 59). But if a plaintiff could do an end run around the economic
loss rule by drawing a distinction between property and its component parts the rule would be
rendered almost meaningless. Additionally, drawing a distinction between the ignition switch
and the overall car is unpersuasive in light of the fact that the contractual relationship between a
consumer and New GM is created with respect to the whole car, not each component part. Cf.
NuCal Foods v. Quality Egg LLC, 918 F. Supp. 2d 1023, 1028-29 (E.D. Cal. 2013) (holding that
the economic loss rule did not bar a negligence claim against a supplier of contaminated eggs
when the supplier’s eggs caused damage to other eggs held by the plaintiff). Finally, New GM
did not have a relationship with the California Ignition Plaintiffs, as distinct from its relationship
with all purchasers of its cars, that would give rise to an exception to the economic loss rule. See
Platte Anchor Bolt, Inc. v. IHI, Inc., 352 F. Supp. 2d 1048, 1054 (N.D. Cal. 2004) (noting that
the special-relationship exception requires the manufacturer’s specific knowledge of sales to a
particular party); Greystone Homes, Inc. v. Midtec, Inc., 86 Cal. Rptr. 3d 196, 222-24 (4th Dist.
58
2008) (same). Accordingly, New GM’s motion is GRANTED with respect to the California
Ignition Plaintiffs’ claim for negligent failure to recall.
2.
District of Columbia
The sole D.C. Plaintiff for purposes of this motion is Pajja Jackson, who took title to his
grandmother’s 2011 Buick Regal, which had been purchased new on August 23, 2010. (See
New GM’s Mem. 6; TACC ¶ 66). Jackson’s Buick was subject to the seat-bolt and front turn
signal recalls. (See New GM’s Mem. 6). Jackson experienced brake locking while driving the
car on multiple occasions, and the car’s battery also exploded, after which the battery was
repaired. (See TACC ¶ 66). Jackson is not a member of the Post-Sale Ignition Switch Defect
Subclass. (See id. ¶ 1033). Jackson brings claims under the D.C. Consumer Protection
Procedures Act (“DCCPPA”), D.C. Code § 28-3901, et seq. (TACC ¶¶ 1713-1737); for fraud by
concealment (id. ¶¶ 1738-51); and for unjust enrichment (id. ¶¶ 1769-1778). The Court will
address each claim in turn.
a.
DCCPPA
The DCCPPA prohibits “misleading or deceiving a consumer by representing that goods
or services have a sponsorship, approval, [or] certification that they do not have; representing
that goods or services are of a particular standard or quality if in fact they are of another; and
misrepresenting a material fact which has a tendency to mislead.” Search v. Uber Techs., Inc.,
128 F. Supp. 3d 222, 236 (D.D.C. 2015) (internal quotation marks omitted); see D.C. Code § 283904(a)-(e). To recover under the DCCPPA, a plaintiff must show (1) the existence of a material
fact that (2) the defendant failed to state, (3) that such omission had a tendency to mislead, (4)
that the plaintiff relied on the misrepresentation, and (5) that the plaintiff suffered damages as a
result. See, e.g., Simon v. Hofgard, — F. Supp. 3d —, 2016 WL 1226269, at *5 (D.D.C. Mar.
59
28, 2016) (internal quotation marks and alterations omitted); see also D.C. Code § 28-3904;
Search, 128 F. Supp. 3d at 236. Here, Jackson contends that New GM violated the DCCPPA by,
among other things, concealing a host of safety defects, making incomplete representations about
the safety of GM cars, and hiding the fact that the company valued cost-cutting over safety. (See
TACC ¶¶ 1721, 1723-1726, 1729, 1731).
Jackson’s DCCPPA claim fails as a matter of law for several reasons. First, the
DCCPPA only “establishes an enforceable right to truthful information . . . about consumer
goods and services that are or would be purchased, leased, or received in the District of
Columbia.” D.C. Code § 28-3901(c). Jackson’s car, however, was not purchased, leased, or
received in the District of Columbia; it was purchased in Mississippi, and there is no allegation
that it was otherwise “received” in D.C. (See TACC ¶ 66). Second, Jackson does not allege that
he or his grandmother, who purchased the car, relied on any representation by New GM. (See
TACC ¶ 66). See, e.g., Search, 128 F. Supp. 3d at 236 (noting that a plaintiff must have relied
on a misrepresentation to bring a claim under the DCCPPA); Chen v. Bell-Smith, 768 F. Supp. 2d
121, 141-42 (D.D.C. 2011) (dismissing a claim under the DCCPPA because the plaintiffs had not
alleged that the defendants had made a specific misrepresentation on which the plaintiffs had
relied). And third, Jackson does not allege that New GM made any misrepresentations or
omitted material facts with respect to the 2011 Buick Regal. The only alleged defects in the
2011 Buick Regal are the seat-bolt and front turn signal. (See New GM’s Mem. 6).17 But
Plaintiffs allege that New GM knew about the seat-bolt defect no earlier than July 10, 2013, long
17
Although Jackson alleges that his battery exploded, he does not allege that that was due
to a defect in the car or one about which New GM should have known. (See TACC ¶ 66).
60
after the 2011 Buick Regal was purchased. (See TACC ¶¶ 714-717). Similarly, New GM did
not know about the defect in the front turn signal until September 6, 2012, at the earliest. (See
id. ¶¶ 873-876). For all of these reasons, New GM’s motion is GRANTED with respect to the
D.C. Plaintiff’s DCCPPA claim.
b.
Fraudulent Concealment
For some of the same reasons, Jackson’s fraudulent concealment claim must be
dismissed. To state a claim for fraudulent concealment under D.C. law, a plaintiff must show
“(1) a duty on behalf of the defendant to disclose to the plaintiff a material fact; (2) the failure to
disclose the fact; (3) an intention to defraud or deceive the plaintiff; (4) action taken by the
plaintiff in justifiable reliance on the concealment; and (5) damages as a result of the defendant’s
concealment.” Howard Univ. v. Watkins, 857 F. Supp. 2d 67, 75 (D.D.C. 2012); see Sundberg v.
TTR Realty, LLC, 109 A.3d 1123, 1131 (D.C. 2015) (“[M]ere silence does not constitute fraud
unless there is a duty to speak.” (internal quotation marks omitted)). Further, a fraudulent
concealment claim must, pursuant to Rule 9(b), be pleaded with particularity. See Firestone v.
Firestone, 76 F.3d 1205, 1211 (D.C. Cir. 1996); Howard Univ., 857 F. Supp. 2d at 75. For the
reasons stated above with respect to the DCCPPA — namely, Jackson’s failure to allege reliance,
misrepresentation, or knowing failure to disclose a material fact, let alone with the particularity
required by Rule 9(b) — Jackson fails to state a claim for fraudulent concealment. New GM’s
motion to dismiss the D.C. Plaintiff’s fraud claim is accordingly GRANTED.
c.
Unjust Enrichment
Finally, Jackson brings a claim for unjust enrichment. (See TACC ¶¶ 1769-1778). New
GM argues that this claim must fail because the 2011 Buick Regal was covered by an express
warranty. (See New GM’s Mem. 42-43; TACC ¶ 66). D.C. law is clear that an element of an
61
unjust enrichment claim is the absence of an express contract. See, e.g., Albrecht v. Comm. on
Emp. Benefits of Fed. Reserve Emp. Benefits Sys., 357 F.3d 62, 69 (D.C. Cir. 2004); Harrington
v. Trotman, 983 A.2d 342, 346-47 (D.C. 2009) (collecting cases); Schiff v. Am. Ass’n of Retired
Persons, 697 A.2d 1193, 1194 n.2 (D.C. 1997). And although some courts applying D.C. law
have permitted unjust enrichment claims to be pleaded in the alternative, the majority approach
is not to permit alternative pleading where, as here, there is no contention that the contract is
invalid. See, e.g., Jacobson v. Hofgard, — F. Supp. 3d —, 2016 WL 837923, at *15 (D.D.C.
2016); United States v. First Choice Armor & Equip., Inc., 808 F. Supp. 2d 68, 77-78 (D.D.C.
2011); Plesha v. Ferguson, 725 F. Supp. 2d 106, 112 (D.D.C. 2010). (Cf. Pls.’ Mem. 39-40
(arguing that Plaintiffs may plead in the alternative under Rule 8)). Accordingly, New GM’s
motion to dismiss the D.C. Plaintiff’s unjust enrichment claim is GRANTED.
3.
Florida
There is only one Florida Plaintiff named in the TACC: Joni Ferden-Precht. (See TACC
¶ 67; New GM’s Mem. 6). Ferden-Precht purchased a new 2011 Chevrolet Traverse on May 27,
2011; the Traverse was subject to the wiring harness and seat belt connector defects. (See TACC
¶ 67; New GM’s Mem. 6). Neither defect manifested itself in the car, but Ferden-Precht did
experience an airbag service light that illuminated intermittently. (See TACC ¶ 67). FerdenPrecht is not a member of the Post-Sale Ignition Switch Defect Subclass. (See id. ¶ 1033). She
brings claims under the Florida Unfair and Deceptive Trade Practices Act (“FDUTPA”), Fla.
Stat. § 501.201, et seq. (TACC ¶¶ 1779-1802); for fraud by concealment (id. ¶¶ 1803-1816); and
for unjust enrichment (id. ¶¶ 1827-1836). The Court will address each in turn.
62
a.
FDUTPA
The elements of a claim under the FDUTPA are “(1) a deceptive act or unfair practice;
(2) causation; and (3) actual damages.” Carriuolo v. Gen. Motors Corp., — F.3d —, 2016 WL
2870025, at *3 (11th Cir. 2016); see Blair v. Wachovia Mortg. Corp., No. 11-CV-566 (TBS),
2012 WL 868878, at *3 (M.D. Fla. Mar. 14, 2012); Kia Motors Am. Corp. v. Butler, 985 So.2d
1133, 1140 (Fla. Dist. Ct. App. 2008). “A deceptive act or unfair practice may be found when
there is a representation, omission, or practice that is likely to mislead the consumer acting
reasonably in the circumstances, to the consumer’s detriment.” Blair, 2012 WL 868876, at *3
(internal quotation marks omitted); see Carriuolo, 2016 WL 2870025, at *3. As Ferden-Precht’s
FDUTPA claim sounds in fraud (see TACC ¶¶ 1784, 1794-1795), she must meet the heightened
pleading standards of Rule 9(b). See, e.g., Blair, 2012 WL 868878, at *3 (“While federal district
courts have split as to whether FDUTPA claims are subject to Rule 9(b), this Court concludes
that where the gravamen of the claim sounds in fraud, as here, the heightened pleading standard
of Rule 9(b) would apply.” (internal citations omitted)).
Whether Ferden-Precht sufficiently alleges an unfair or deceptive practice with respect to
her purchase of the 2011 Chevrolet Traverse is a close call. She does not allege any specific
misrepresentations New GM made about the car, other than general statements regarding quality
and safety that, as noted above, see supra at pages 22-23, are generally held to constitute
inactionable puffery. See, e.g., Zaccagnino v. Nissan N. Am., Inc., No. 14-CV-3690 (LLS), 2015
WL 3929620, at *4 (S.D.N.Y. June 17, 2015) (“[P]romoting a car as generally safe and reliable
is too general a representation to be proven true or false.”); In re Sony Grand Wega, 758 F. Supp.
2d at 1089 (holding that statements that products “were of ‘high’ or ‘superior’ quality” were not
actionable. Nor does she allege that New GM knew about the seat belt connector defect at the
63
time she purchased her car in 2011. (See TACC ¶¶ 694-701). She does, however, allege that
New GM may have known about the wiring harness defect, at least as present in other vehicle
models, as early as November 2009. (See id. ¶¶ 645-648). Although that barely alleges
knowledge of a potential defect that was not disclosed to consumers, the Court finds that it is just
enough to cross the Rule 9(b) line.
The parties focus more on the question of whether Ferden-Precht alleges a plausible
theory of injury under FDUTPA and whether she can pursue a FDUTPA claim without a
manifested defect. (See New GM’s Mem., Ex. 1, at 2; Pls.’ May 18, 2016 Ltr. (“Pls.’ Fla. Ltr.”)
(Docket No. 2871); New GM’s May 23, 2016 Ltr. (“New GM’s Fla. Ltr.”) (Docket No. 2885)).
Significantly, about two months ago, the Eleventh Circuit decided Carriuolo v. General Motors,
in which it affirmed the certification of a class of plaintiffs who alleged damages under FDUTPA
based on a benefit-of-the-bargain defect theory. See 2016 WL 2870025, at *9. The plaintiffs
there brought claims for safety ratings stickers on GM cars, which said that the cars had been
given five-star safety ratings in three categories — when, in fact, the cars had not been rated.
Notably, the Eleventh Circuit stated that, under FDUTPA, the plaintiffs’ “damages should reflect
the difference between the market value of a 2014 Cadillac CTS with perfect safety ratings for
three standardized categories and the market value of a 2014 Cadillac CTS with no safety
ratings.” 2016 WL 2870025, at *5. That is because, the Court explained, “FDUTPA damages
are measured according to the difference in the market value of the product or service in the
condition in which it was delivered and its market value in the condition in which it should have
been delivered according to the contract of the parties.” Id. The Court also rejected the
argument that differences in whether class members saw and relied upon the deceptive stickers
had a bearing on the merits of their claims, noting that “the FDUTPA ‘benefit of the bargain’
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model provides a standardized class-wide damages figure because the plaintiff’s out-of-pocket
payment is immaterial.” Id. Put simply, the FDUTPA injury inquiry — as interpreted by the
Carriuolo Court — focuses on what the defendant did, not what harm the individual plaintiff
suffered. That is directly in line with the benefit-of-the-bargain defect theory.
New GM argues that the Carriuolo Court’s holding does not govern here — relying on
Kia, in which the Florida District Court of Appeals held that plaintiffs must present evidence of a
manifest defect, and on cases holding that individualized damages must be shown for FDUTPA
claims. (See New GM’s Fla Ltr. 1-2). Admittedly, there is some tension — if not conflict — in
the cases interpreting Florida law, but the Court concludes that Plaintiffs (and the Carriuolo
Court) have the better of the argument. In the first place, Kia is not as persuasive as New GM
contends. The Kia Court stated that Florida “firmly aligned [itself] with” the jurisdictions
holding that defect manifestation is required in Ortiz v. Ford Motor Co., 909 So.2d 479 (Fla.
Dist. Ct. App. 2005). See Kia, 985 So.2d at 1139. But Ortiz did not clearly so hold. Instead, the
Court there simply found that that the differences in brake models would make it difficult to
prove a defect for all models on a class-wide basis; it also found that class treatment was not a
superior method of adjudication because the plaintiff had “failed to present proof demonstrating
the manageability of the putative class which is based on an economic recovery of a product that
is merely failure-prone.” 909 So.2d at 481. That does not amount to holding that manifestation
of a defect is required for an individual FDUTPA claim.
In the second place, the other authority upon which New GM relies is no more
convincing. (See New GM’s Fla. Ltr. 2). Brisson v. Ford Motor Co., 349 F. App’x 433 (11th
Cir. 2009) (per curiam), addressed a breach of warranty claim, not a FDUTPA claim, and
Breakstone v. Caterpillar, Inc., No. 09-CV-23324, 2010 WL 2164440, at *6 (S.D. Fla. May 26,
65
2010), held only that “it is inappropriate to certify a class containing both individuals [whose
product has] ‘manifested a deficiency’ and those whose product has ‘performed satisfactorily’”
because the plaintiffs with no manifest injury would have only speculative damages (citing Kia).
Plaintiffs here emphasize that they can show the relevant market data that would allow a factfinder to measure the difference between a defective car and a defect-free car. (See Tr. 97). If
so, then damages can be calculated on both an individualized and a class-wide level. See
Carriuolo, 2016 WL 2870025, at *5. (See New GM’s Fla. Ltr. 2). Finally, some deference is
due the Eleventh Circuit’s interpretation of the state law of a state within its jurisdiction, given
its familiarity with Florida law. See Casey v. Merck & Co., 653 F.3d 95, 100 (2d Cir. 2011)
(“Where . . . a question of state law has not been conclusively resolved by [a state’s courts], our
general practice is to look next to the law of the circuit in which the state is located . . . .”);
Factors Etc., Inc. v. Pro Arts, Inc., 652 F.2d 278, 283 (2d Cir. 1981) (holding that where a “court
of appeals has essayed its own prediction of the course of state law on a question of first
impression within that state, the federal courts of other circuits should defer to that holding,
perhaps always, and at least in all situations except the rare instance when it can be said with
conviction that the pertinent court of appeals has disregarded clear signals emanating from the
state’s highest court pointing toward a different rule”). In light of the foregoing, New GM’s
motion to dismiss Ferden-Precht’s FDUTPA claim is DENIED.18
New GM submitted a supplemental letter calling to the Court’s attention a recent opinion
on a motion to dismiss in the Takata Airbag MDL. (See New GM’s June 24, 2016 Ltr. (Docket
No. 3049); see also Pls.’ June 28, 2016 Ltr. (Docket No. 3054) (responding to New GM’s
letter)). See In re Takata Airbag Prods. Liab. Litig., — F. Supp. 3d — , 2016 WL 3388713 (S.D.
Fla. 2016). The Takata Court held that Florida law did not require the named plaintiffs to have
pleaded that their airbags manifested the alleged defect, limiting its analysis to the motion to
dismiss stage and “taking as true Plaintiffs’ allegations of a uniform defect.” In re Takata, 2016
18
66
b.
Fraudulent Concealment
In addition to her consumer fraud claim, Ferden-Precht brings a common law fraudulent
concealment claim. New GM argues that that claim is barred by Florida’s economic loss rule.
(See New GM’s Mem. 54-55; New GM’s Reply 30). The Court agrees.
The economic loss rule applies in products liability cases to preclude “recovery of
economic damages in tort where there is no property damage or personal injury.” Tiara Condo.
Ass’n, Inc. v. Marsh & McLennan Cos., 110 So.3d 399, 404 (Fla. 2013); see Fla. Power & Light
Co. v. Westinghouse Elec. Corp., 510 So.2d 899, 902 (Fla. 1987); Burns v. Winnebago Indus.,
Inc., No. 13-CV-1427, 2013 WL 4437246, at *2-3 (M.D. Fla. Aug. 16, 2013); Aprigliano v. Am.
Honda Motor Co., 979 F. Supp. 2d 1331, 1337 (S.D. Fla. 2013). “Economic loss” is defined to
include “damages for inadequate value, costs of repair and replacement of the defective product,
or consequent loss of profits — without any claim of personal injury or damage to other
property” and “the diminution in the value of the product because it is inferior in quality and
does not work for the general purposes for which it was manufactured and sold.” Tiara, 110
So.3d at 401 (internal quotation marks omitted). In Tiara, the Florida Supreme Court held that
“the economic loss rule is limited to products liability cases.” Id. at 400. The Court also noted,
and reaffirmed the viability of, exceptions to the rule, including fraudulent inducement, negligent
misrepresentation, and “free-standing statutory causes of action.” Id. at 406.
Plaintiffs do not dispute that Ferden-Precht is seeking only economic loss damages.
Instead, they contend that the economic loss rule also includes an exception for fraudulent
WL 3388713, at *5. The Takata opinion thus supports the Court’s conclusion, and New GM’s
renewed arguments to the contrary are unpersuasive.
67
concealment, and thus does not bar Ferden-Precht’s claim. (See Pls.’ Mem. 57-58). That
argument, however, elides the distinction between fraudulent inducement — which is by
definition independent of a contract claim — and fraudulent concealment, which may well
overlap with the subject matter of the contract and any contract claim. The exceptions to the
economic loss rule are defined as those that are “based on torts independent of the contractual
breach even though there exists a breach of contract action.” Tiara, 110 So.3d at 402 (internal
quotation marks omitted). When transferred into the products liability realm, that principle
suggests that tort claims that overlap with the subject matter of a breach of warranty claim are
barred by the economic loss rule because they do not arise independently from the sale of the
product itself. See Aprigliano, 979 F. Supp. 2d at 1337-38 (dismissing a claim for negligent
misrepresentation because it was “dependent on the same fundamental allegations contained in
the breach of warranty claim — specifically, that Honda breached the terms of its Warranties by
providing Plaintiffs with defective motorcycles and failing to repair or replace those
motorcycles”); Burns, 2013 WL 4437246, at *3 (agreeing with the defendants’ argument that the
economic loss rule applied to the plaintiff’s claims because the plaintiff sought “relief due to the
inferior quality of the RV, which did not meet his expectations due to the corrosion”); see also In
re Atlas Roofing Corp. Chalet Shingle Prods. Liab. Litig., No. 13-MD-2495 (TWT), 2015 WL
3796456, at *3 (N.D. Ga. June 18, 2015) (applying Florida law and dismissing a fraud claim that
alleged the defendant had sold a product with a known defect).
The opinion in In re MyFord Touch Consumer Litigation, 46 F. Supp. 3d 936 (N.D. Cal.
2014), upon which Plaintiffs rely, also conflates fraudulent inducement and fraudulent
concealment, and does not explain why Tiara’s reasoning is consistent with permitting a fraud
claim for economic loss to proceed when it is based only on a concealed product defect. See 46
68
F. Supp. 3d at 965-66 (applying Florida law). The other case Plaintiffs rely on, Miller v.
Samsung Electronics America Inc., No. 14-CV-4076, 2015 WL 3965608 (D.N.J. June 29, 2015),
is similarly unpersuasive because it involved a defendant that had “specifically marketed,
advertised and represented to consumers” that its product contained a feature that it did not
contain, and the Court expressly distinguished cases involving the fraudulent concealment of
product defects (where the economic loss rule would apply). 2015 WL 3965608, at *1, 10
(internal quotation marks omitted). Here, the only viable basis for Ferden-Precht’s fraud claim is
that New GM failed to disclose a known defect in her car at the time of purchase. That claim
falls squarely within the domain of products liability, and is therefore barred by Florida’s
economic loss rule. New GM’s motion to dismiss the Florida Plaintiff’s fraudulent concealment
claim is thus GRANTED.
c.
Unjust Enrichment
Finally, New GM argues that Ferden-Precht’s unjust enrichment claim should be
dismissed because her car was covered by an express warranty when it was purchased. (See
New GM’s Mem. 42-43; TACC ¶ 67). The weight of authority among courts interpreting
Florida law is that the absence of an express contract governing the parties’ relationship is an
element of unjust enrichment and that unjust enrichment may be pursued in the face of an
express contract only when the validity of the contract is called into question. See, e.g., Wilson
v. EverBank, N.A., 77 F. Supp. 3d 1202, 1220 (S.D. Fla. 2015) (“Plaintiffs cannot maintain their
unjust enrichment claim under the facts they allege here because their mortgage contracts, the
authenticity of which Plaintiffs cannot contest, do in fact govern the subject of Plaintiffs’
dispute.”); Martorella v. Deutsche Bank Nat’l Trust Co., 931 F. Supp. 2d 1218, 1227 (S.D. Fla.
2013) (“[U]njust enrichment may only be pleaded in the alternative where one of the parties
69
asserts that the contract governing the dispute is invalid.” (collecting cases)); Manicini Enters.,
Inc. v. Am. Express Co., 236 F.R.D. 695, 699 (S.D. Fla. 2006) (“[T]he Court finds that Plaintiff
should be permitted to plead alternative equitable claims for relief as the existence of express
contracts between the Parties has yet to be proven.”). There is no allegation or suggestion that
Ferden-Precht’s warranty is somehow invalid. New GM’s motion to dismiss the Florida
Plaintiff’s unjust enrichment claim is therefore GRANTED.
4.
Louisiana
The Louisiana Plaintiffs for purposes of this motion are Nathaniel and Frances Ann
Fagans. (See New GM’s Mem. 6). The Faganses own a 2013 Cadillac SRX, which they
purchased on June 19, 2013, and previously owned a 2012 Cadillac CTS, which they purchased
on July 2, 2012. (See TACC ¶ 87). The Cadillac CTS was subject to the unintended ignition key
rotation recall, and the Cadillac SRX was subject to the acceleration-lag and rear suspension nut
recalls. (See New GM’s Mem. 6). The Cadillac CTS stalled while driving in the spring of 2013;
the Cadillac SRX has not manifested a defect. (See TACC ¶ 87). The Louisiana Plaintiffs are
not members of the Post-Sale Ignition Switch Defect Subclass. (See id. ¶ 1038).19 They bring
claims under the Louisiana Unfair Trade Practices and Consumer Protection Law (“LUTPA”),
La. Rev. Stat. § 51:1401, et seq. (TACC ¶¶ 2352-2375); for fraud by concealment (id. ¶¶ 23762389); and unjust enrichment (id. ¶¶ 2408-2417).
19
Plaintiffs suggest in their brief that the Faganses are members of the Post-Sale Ignition
Switch Defect Subclass. (See Pls.’ Mem. 21). Their cars are not included in the list of Post-Sale
Ignition Switch Defect vehicles in the TACC, however. (See TACC ¶ 1038). In any event, even
if they were members of the Post-Sale Ignition Switch Defect Subclass and thus brought a breach
of warranty claim, it too would be barred by the LPLA.
70
New GM argues that all of the Louisiana Plaintiffs’ claims are barred by the Louisiana
Products Liability Act (“LPLA”). (See New GM’s Mem. 46-47, 51, 56; id., Ex. 1, at 3). The
Court agrees. The LPLA “established the exclusive theories of liability for manufacturers for
damages caused by their products.” La. Rev. Stat. § 9:2800.52; see, e.g., Demahy v. Schwarz
Pharma, Inc., 702 F.3d 177, 183 (5th Cir. 2012); Stahl v. Novartis Pharm. Corp., 283 F.3d 254,
261 (5th Cir. 2002); In re Gen. Motors LLC Ignition Switch Litig., 14-MD-2543 (JMF), 2016
WL 874778, at *4 (S.D.N.Y. Mar. 3, 2016); Payne v. Gardner, 56 So.3d 229, 231 (La. 2011);
see also Grenier v. Med. Eng’g Corp., 243 F.3d 200, 203-04 (5th Cir. 2001) (noting that the
LPLA’s only theories of liability are defective design, defective construction, failure to warn,
and breach of warranty). “Based on [that] unequivocal statutory language, courts routinely
dismiss claims against manufacturers that do not arise under the LPLA.” Cantu v. C.B. Fleet
Holding Co., No. 06-CV-2168, 2007 WL 689566, at *3 (W.D. La. Mar. 1, 2007) (collecting
cases dismissing negligence, fraud, and warranty claims on the basis of the LPLA).
Prudently, Plaintiffs do not argue that New GM is not the manufacturer of the vehicles at
issue here, and therefore not subject to the LPLA. Cf. In re Gen. Motors, 2016 WL 874778, at
*4 (holding that because Old GM, not New GM, had manufactured the plaintiff’s car in that
case, the LPLA’s exclusivity provision did not apply). Instead, they contend that because they
“do not sue for damages caused by their particular vehicles, and do not sue for losses arising
from a deficiency in or loss of use of their vehicles,” the damage they assert does not fall under
the LPLA and its exclusivity provision. (See Pls.’ Mem. 52-53 (internal quotation marks
omitted)). The LPLA is unequivocal, though, in defining damage as “all damage caused by a
product,” La. Rev. Stat. Ann. § 2800.53(5), and stating that a plaintiff “may not recover from a
manufacturer for damage caused by a product on the basis of any theory of liability not set forth”
71
in the LPLA, La. Rev. Stat. Ann. § 2800.52. Whatever Plaintiffs’ theory of damages, their injury
is tied to vehicles manufactured by New GM. And the only case they cite in support of their
position holds that where a contract “provided for certain engineer, repair, and training services”
— in addition to the products that were found to be defective — the plaintiff could pursue a nonLPLA claim for those services that were not provided. Hollybrook Cottonseed Processing, LLC
v. Carver, Inc., No. 09-CV-0750, 2010 WL 892869, at *7 (W.D. La. Mar. 11, 2010) (emphasis
added). The Louisiana Plaintiffs do not seek damages for services promised but not provided to
them, but rather damages due to the fact that they “would not have purchased [their] vehicles, or
they would have paid less for them, had they known about the defects . . . and New GM’s true
corporate culture.” (TACC ¶ 87). Those damages are directly tied to products manufactured by
New GM and, thus, the only method of recovery under Louisiana law is through the LPLA.
Accordingly, New GM’s motion to dismiss the Louisiana Plaintiffs’ LUTPA, fraud, and unjust
enrichment claims is GRANTED.
5.
Maryland
The Maryland Plaintiff for purposes of this motion is Harry Albert. (See TACC ¶ 90;
New GM’s Mem. 6). Albert purchased a new 2012 Chevrolet Camaro in October 2012; he
traded this car in for a used 2013 Chevrolet Impala in July 2014. The 2012 Chevrolet Camaro
was subject to the key fob ignition bump, driver-side airbag shorting bar, and seat bolt recalls;
the 2013 Chevrolet Impala was subject to the ignition key slot recall. (See New GM’s Mem. 6).
Albert experienced stalls while driving the 2012 Chevrolet Camaro at least three times. (See
TACC ¶ 90). He has not experienced a manifested defect with the 2013 Chevrolet Impala. (See
id.). Albert is a member of the Post-Sale Ignition Switch Defect Subclass. (See id. ¶ 1033). He
brings claims under the Maryland Consumer Protection Act (“MCPA”), Md. Code Com. Law
72
§ 13-101, et seq. (TACC ¶¶ 2483-2505); for fraud by concealment (id. ¶ 2506-2519); for a
breach of the implied warranty of merchantability, Md. Code Com. Law § 2-314 and the
Magnuson-Moss Warranty Act (TACC ¶¶ 2520-2526; 1142-1158); for unjust enrichment (id. ¶¶
2537-2546); and for negligence (id. ¶¶ 1159-1167). The Court will address each in turn.
a.
MCPA
The MCPA prohibits unfair and deceptive trade practices. Md. Code Com. Law § 13303. A plaintiff bringing a claim under the MCPA must allege (1) an unfair or deceptive practice
or misrepresentation; (2) reliance; and (3) that the practice or misrepresentation caused the
plaintiff injury. See Farasat v. Wells Fargo Bank, N.A., 913 F. Supp. 2d 197, 205 (D. Md.
2012); Stewart v. Bierman, 859 F. Supp. 2d 754, 768 (D. Md. 2012); Lloyd v. Gen. Motors
Corp., 916 A.2d 257, 275 (Md. 2007). The MCPA prohibits not only active misrepresentations,
but also the failure to disclose, or omission of, a material fact. See Md. Code Com. Law § 13301(3), (9); Bank of Am., N.A. v. Jill P. Mitchell Living Tr., 822 F. Supp. 2d 505, 534 (D. Md.
2011); Green v. H&R Block, Inc., 735 A.2d 1039, 1059 (Md. 1999). An omission is material “if
a significant number of unsophisticated consumers would find [the] information important in
determining a course of action,” Green, 735 A.2d at 1059, and a consumer can be said to have
“relied” on an omission “where it is substantially likely that the consumer would not have made
the choice in question had the commercial entity disclosed the omitted information,” Jill P.
Mitchell Living Tr., 822 F. Supp. 2d at 535.
Here, Albert plausibly alleges that New GM engaged in an unfair or deceptive trade
practice, at least with respect to the ignition-related defects in both of his cars. The TACC
alleges that New GM may well have known of the defects by 2009 or 2010, and New GM itself
has admitted that it knew of the ignition switch defect by the spring of 2012 — before Albert
73
bought his car. That is, the TACC plausibly alleges that New GM concealed the fact of the
ignition-related defects, a fact that could certainly be found to be “material,” as consumers would
likely not have purchased cars if they had known that the cars could suddenly stall and lose
power. See id. at 535; Green, 735 A.2d at 1059; see also Lloyd , 916 A.2d at 284 (holding that
the plaintiffs had pleaded misrepresentation or omission under the MCPA by alleging that the
defendants continued to manufacture cars while knowing that the cars were defective). Thus, the
only question at this stage of the proceedings is whether the benefit-of-the-bargain defect theory
of injury is cognizable under the MCPA.
The Court concludes that it is. In Lloyd, the Maryland Court of Appeals held that
consumers who had purchased cars with defective seats had suffered an “actual injury or loss” as
required for a claim under the MCPA because they “allege[d] that, as a result of the
[manufacturers’] misrepresentation or omission, they suffered a loss, measured by the amount it
will cost them to repair the defective seatbacks.” Id. at 281. Notably, the Court held that that
was the case even though the plaintiffs had alleged neither physical injury to person or property,
nor actual product malfunction. See id. at 275. Further, in reaching its conclusion, the Lloyd
Court distinguished between two earlier cases. See id. at 281. In one, the Court had held that a
plaintiff stated a claim by alleging that he had incurred moving expenses and an increase in rent
when forced to leave an unlicensed, uninhabitable apartment. See id. at 278-79 (discussing Golt
v. Phillips, 517 A.2d 328 (Md. 1986)). In the other, the Court had held that a similar claim failed
because the plaintiffs had not alleged that the apartment, although unlicensed, was uninhabitable
and had not alleged either any incurred costs or that they had not received the full benefit of their
bargain. See id. at 280-81 (discussing Citaramanis v. Hallowell, 613 A.2d 964 (Md. 1992)).
The critical question, the Lloyd Court explained, was whether a consumer had “suffered an
74
identifiable loss, measured by the amount the consumer spent or lost as a result of his or her
reliance on the seller’s misrepresentation.” Lloyd, 916 A.2d at 277. That is consistent with the
benefit-of-the-bargain defect theory, which measures the difference in value between the
defective car the consumer received and the defect-free car the consumer thought she was getting
(and for which she paid).
New GM argues that Lloyd does not apply to Albert’s claim, because the Lloyd holding
was limited to cases in which the loss alleged is the cost of repairing a defect. (See New GM’s
Mem. 14; New GM’s Reply 12). Although there is some language in the Lloyd Court’s opinion
that supports that reading, the Court disagrees. Lloyd’s expansive discussion of injury (both in
the context of the MCPA and the other causes of action, as discussed below) suggests that it is
not limited to cases alleging repair costs. If anything, the Lloyd plaintiffs appear to have used the
quantum of repair costs as the best proxy for fulfilling the benefit of their bargain, and making up
the difference between the defect-free car they thought they were purchasing and the one they
actually received. See Lloyd, 916 A.2d at 264-65. In particular, in distinguishing Citaramanis,
the Court of Appeals emphasized that the plaintiffs in that case had “articulated nothing they had
lost as a result of the alleged misrepresentation.” Id. at 281 (emphasis added). Here, by contrast,
Albert alleges a loss: that he purchased cars that he would otherwise not have had he known
about the undisclosed defects and that he suffered an economic loss from the difference in value
between a defective car and a defect-free car. (See TACC ¶ 90). In the Court’s view, that meets
the injury requirement of the MCPA. Accordingly, Albert states a claim under the MCPA, and
New GM’s motion to dismiss that claim is DENIED.
75
b.
Fraudulent Concealment
The elements of a claim for fraudulent concealment under Maryland law are: “(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, 916 A.2d at 274 (internal quotation marks
omitted); see Core Commc’ns, Inc. v. Verizon Md. LLC, 744 F.3d 310, 324 (4th Cir. 2014).
Maryland does not require a fiduciary relationship between the parties to impose a duty to
disclose, but where no such relationship exists, a plaintiff must plead that the defendant engaged
in “‘suppression of the truth with the intent to deceive.’” Rhee v. Highland Dev. Corp., 958 A.2d
385, 390 (Md. Ct. Special App. 2008) (quoting United States v. Colton, 231 F.3d 890, 899 (4th
Cir. 2000)). The Lloyd Court held that when plaintiffs allege a defect that creates a serious risk
of bodily harm or death, they can assert “a claim for economic loss resulting from fraudulent
concealment.” 916 A.2d at 275. For the reasons discussed above, the Court finds that Albert
sufficiently pleads his claim for fraudulent concealment. Specifically, the TACC alleges that
New GM knew of the defects by the time Albert purchased his car and continued to sell cars
without disclosing the defect — even arguably taking active steps to conceal the defect from
regulators and consumers. (See, e.g., TACC ¶ 619 (alleging that New GM instructed its
employees to avoid using terms that could notify NHTSA or the public as to the existence of a
safety issue)). See Lloyd, 916 A.2d at 284. Additionally, the ignition-related defects create a
serious risk of bodily harm or death, and New GM does not attempt to argue otherwise. Finally,
Albert alleges damages — namely, that he received less for his 2012 Chevrolet Camaro than he
would have had it not been defective and that he would not have purchased either the Camaro or
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his 2013 Chevrolet Impala if he had known about the defects. New GM’s motion to dismiss
Albert’s fraud claim is thus DENIED.
c.
Breach of Warranty
New GM argues that Albert’s implied warranty claims (under Maryland law and the
MMWA) fail because he does not allege a cognizable injury and because his 2013 Chevy Impala
did not manifest a defect. (See New GM’s Mem., Ex. 1, at 3). Once again, Lloyd calls for a
different conclusion. The Lloyd Court held that plaintiffs
are not required to plead that they have suffered a physical bodily injury in order
to prove a breach of warranty. Nor must a plaintiff prove that the product actually
malfunctioned. To the contrary, a plaintiff need only plead that the automobiles
were sold with a defect and that the defect rendered the goods unfit for ordinary
and safe use. In other words, the injury arises, ipso facto, from the breach,
creating a “gap” of sorts between what the consumer bargained for and what the
consumer actually received . . . . The objective determination of the cost of that
injury will always, at the very least, be the measure of difference between value of
the goods if the petitioner had received them as warranted and the value of the
goods as received with the defect.
916 A.2d at 290-91. That language squarely rebuts New GM’s contentions. Because Albert
pleads that both cars were sold with at least one defect and that the defects rendered the goods
unfit for ordinary and safe use (because of the possibility of a moving stall), he states a breach of
implied warranty claim under state (and, by extension, federal) law. Accordingly, New GM’s
motion to dismiss is DENIED with respect to Albert’s warranty claims.
d.
Unjust Enrichment
Next, New GM argues that Albert’s unjust enrichment claim should be dismissed because
it is precluded by an express warranty (in the case of the 2012 Chevrolet Camaro) and because
no direct benefit was conferred on New GM (in the case of the 2013 Chevrolet Impala, because it
was purchased used). (See New GM’s Mem. 46; New GM’s Mem., Ex. 1, at 3). As with the
77
cars purchased by Andrews and the Koppelmans, it is hard to imagine that the 2012 Camaro was
sold without an express warranty. The TACC, however, is silent on the question, so that is not a
basis to dismiss Albert’s unjust enrichment claim at this time. Further, with respect to the used
2013 Chevrolet Impala, the Court is unwilling to rule, as a matter of law, that purchasing a used
New GM car confers no benefit whatsoever on New GM. New GM could benefit from the sale
of used cars through, for example, increased brand loyalty and publicity or the purchase of
replacement parts. Accordingly, New GM’s motion to dismiss Albert’s unjust enrichment claim
is DENIED.
e.
Negligence
Finally, Albert brings a negligence claim, alleging that New GM negligently designed,
manufactured, and failed to warn. (TACC ¶¶ 1159-1167). New GM argues that this claim
should be dismissed because Albert does not allege a cognizable defect or theory of damages.
(See New GM’s Mem., Ex. 1, at 3). Lloyd squarely holds, however, that a negligence claim
premised on an expansive theory of economic loss may proceed if the plaintiff “allege[s] facts
that demonstrate that the product at issue creates a dangerous condition, one that gives rise to a
clear danger of death or personal injury.” 916 A.2d at 266 (emphasis omitted). As discussed
above, Albert does so here, and so New GM’s motion to dismiss his negligence claim is
DENIED.
6.
Missouri
The Missouri Plaintiffs for the purposes of this motion are Cynthia Hawkins, Ronald
Robinson, and Michelle Washington. (See New GM’s Mem. 6; TACC ¶¶ 105-107). Hawkins
purchased a used 2010 Chevrolet Cobalt on July 23, 2013; the Cobalt was subject to the ignition
switch defect recall, but did not manifest a defect before it was repaired in August 2014. (See
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TACC ¶ 105; New GM’s Mem. 6).20 Robinson purchased a used 2010 Chevrolet Impala in June
2010; the Impala was subject to the ignition key slot recall, but did not manifest a defect before
its parts were replaced in the summer of 2015. (See TACC ¶ 106; New GM’s Mem. 6).
Washington purchased a new 2014 Chevrolet Impala on May 9, 2014; the Impala was subject to
a host of recalls, but did not manifest a defect. (See TACC ¶ 107; New GM’s Mem. 6). All
three Missouri Plaintiffs are members of the Post-Sale Ignition Switch Defect Subclass. (See
TACC ¶ 1033). They bring claims for violation of the Missouri Merchandising Practices Act
(“MMPA”), Mo. Rev. Stat. § 407.010, et seq. (TACC ¶¶ 2827-2851); for fraud by concealment
(TACC ¶¶ 2852-2865); for breach of the implied warranty of merchantability, Mo. Rev. Stat. §
400.2-314 (TACC ¶¶ 2866-2872); for violation of the MMWA (TACC ¶¶ 1142-1158); and for
unjust enrichment (id. ¶¶ 2883-2892). The Court begins with the claims under the MMPA.
a.
MMPA
To pursue a claim under the MMPA, a plaintiff must show: (1) purchase of personal
merchandise; (2) an ascertainable loss of money or property; and (3) that the loss is a result of an
unfair or fraudulent business practice. See Owen v. Gen. Motors Corp., 533 F.3d 913, 922 (8th
Cir. 2008); Hope v. Nissan N. Am., Inc., 353 S.W.3d 68, 82 (Mo. Ct. App. 2011). Omission of a
material fact constitutes a prohibited business practice; where, as here, a plaintiff alleges such an
omission, he or she must show that the defendant knew or reasonably should have known the
material fact, and failed to disclose it to consumers. See Hope, 353 S.W.3d at 84.
Hawkins’s car, like those of the California Ignition Plaintiffs, would not have been
manufactured with the ignition switch defect, but could have been repaired at a later date using a
defective switch. See supra note 15.
20
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New GM implicitly concedes that Plaintiffs plead actionable omissions for the ignition
switch and key rotation defects. (See New GM’s Mem. 49-50). New GM argues, though, that
the Missouri Plaintiffs’ MMPA claims fail because none of their cars manifested a defect. (See
New GM’s Mem., Ex. 1, at 3-4; New GM’s Reply 10-11; see also June 24, 2016 Ltr. (Docket
No. 3048) (“New GM’s Supp. Ltr.”) 1-3). There is substantial case law applying Missouri law
consistent with that argument. See, e.g., In re Avandia Mktg. Sales Practices & Prods. Liab.
Litig., No. 15-2145, 2016 WL 559216, at *3 (3d Cir. Feb. 12, 2016) (holding that the plaintiff
had pleaded “no ascertainable loss” when she used a prescription drug and suffered no physical
injuries); Owen, 533 F.3d at 922-23 (“Where, as here, the alleged unfair practice is the failure to
disclose a product defect, there must be a showing that the [plaintiffs’] vehicle in fact suffered
that defect, or evidence from which the defect reasonably could be inferred.”); Briehl v. Gen.
Motors Corp., 172 F.3d 623, 628 (8th Cir. 1999) (“Since the Plaintiffs have failed to allege any
manifest defect and their vehicles performed in a satisfactory manner, the District Court was
correct when it dismissed the Plaintiffs’ Original Complaint.”); Mikhlin v. Johnson & Johnson,
No. 14-CV-881 (RLW), 2014 WL 6084004, at *3 (E.D. Mo. Nov. 13, 2014) (rejecting the
plaintiffs’ benefit of the bargain theory of damages where they had not suffered injury).
Confusing matters, however, many other cases have recognized MMPA claims even
without a manifested defect, often on a “diminution-in-value” or “benefit-of-the-bargain” theory
of the sort pressed here. See, e.g., Kelly v. Cape Cod Potato Chip Co., 81 F. Supp. 3d 754, 75859 (W.D. Mo. 2015) (“[U]nder the benefit of the bargain rule as applied to MMPA claims,
Plaintiff need only allege that the actual value of the product as purchased was less than the
value of the product as represented to state a claim for an ascertainable loss.”); Polk v. KV
Pharm. Co., No. 09-CV-0588 (SNLJ), 2011 WL 6257466, at *5 (E.D. Mo. Dec. 15, 2011)
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(“Missouri courts apply the ‘benefit of the bargain’ rule when determining if a plaintiff has
suffered an ascertainable loss under the MMPA.”); In re Celexa & Lexapro Mktg. & Sales
Practices Litig., 751 F. Supp. 2d 277, 295 (D. Mass. 2010) (“Injury under the Missouri CPA is
sufficiently pled where the class members allege that the actual value of the item they purchased
was less than the value of the item as it was represented to be at the time it was purchased.”); In
re Bisphenol-A (BPA) Polycarbonate Plastic Prods. Liab. Litig., 687 F. Supp. 2d 897, 912 (W.D.
Mo. 2009) (holding that MMPA claims based on product misrepresentations “d[id] not depend
on proving the products are defective”); Hope, 353 S.W.3d at 79 (affirming class certification
where the class consisted of “owners of the FX Vehicles on the theory that each owner would
have been or would be damaged by the ‘stigma’ and ‘diminished resale value’ . . . regardless of
the manifestation of the defect”); Plubell v. Merck & Co., 289 S.W.3d 707, 715 (Mo. Ct. App.
2009) (affirming certification of a class whose members “alleged an ascertainable loss under the
benefit-of-the-bargain rule, which compares the actual value of the item to the value of the item
if it had been as represented at the time of the transaction” which “is part of our standard
instructions for damages in misrepresentation cases”).
Although the question is a close one, the Court concludes that the balance of authority
weighs slightly in favor of Plaintiffs’ view that Missouri law recognizes the benefit-of-thebargain defect theory and does not require “manifestation” of a defect to bring a claim such as
the one here. Among other things, many of the cases appearing to require a plaintiff to show a
manifest defect seem to be driven by skepticism that the products at issue were even defective at
all. In Briehl, for example, the Court noted that “[t]he Plaintiffs do not allege that the [brake
system] is incapable of stopping the vehicles or that [the brake system] has violated any national
safety standards.” 172 F.3d at 626. Additionally, the plaintiffs there had failed to calculate any
81
damages due to lost resale value — causing the Court to label their damages theory too
speculative. Id. at 629. Similarly, in Mikhlin, the Court noted that the plaintiffs had not pleaded
any “quantifiable damages” or “ascertainable loss,” but had argued merely that they would not
have purchased Johnson’s Baby Powder had they known of studies showing an increased risk of
ovarian cancer associated with its use. 2014 WL 6084004, at *3; see also Owens, 533 F.3d at
923 (holding that the plaintiffs could not proceed on their proposed defect theory because there
could have been any number of reasons for the windshield wiper failure, there was no evidence
that their car had contained the alleged defect, and the plaintiffs’ own expert had testified that
23% of cars whose windshield wipers failed as theirs did “failed for no ascertainable cause”).
Notably, the BPA Court distinguished Briehl on precisely these grounds, stating that whereas in
Briehl there had been “only a potential that a person’s brakes would be misused” in the case
before it, “there is not merely a potential for BPA being in the products — there is no doubt that
BPA was present.” 687 F. Supp. 2d at 911. As in BPA, the TACC alleges that the defects here
were present in the Missouri Plaintiffs’ cars at the time of sale — they just did not cause any
problems while the plaintiffs were driving the cars. (See TACC ¶¶ 105-107). Additionally,
unlike in Briehl and Mikhlin, the TACC presents detailed calculations for the diminished resale
value of Plaintiffs’ vehicles. (See id. ¶¶ 1013-1016). New GM’s motion to dismiss Plaintiffs’
MMPA claims is thus DENIED.
b.
Fraudulent Concealment
Under Missouri law, “[t]o recover for fraudulent concealment, plaintiffs must prove that
defendants had a duty to disclose the concealed information.” In re Gen. Motors Corp. AntiLock Brake Prods. Liab. Litig., 966 F. Supp. 1525, 1535 (E.D. Mo. 1997) (collecting cases).
Such a duty can arise from a confidential or fiduciary relationship, privity of contract, or “when
82
one party has superior knowledge of information not within the fair and reasonable reach of the
other party.” Id. (internal quotation marks omitted); accord U.S. ex rel. Bussen Quarries, Inc. v.
Thomas, 938 F.2d 831, 833-34 (8th Cir. 1991). In Independent Business Forms, Inc. v. A-M
Graphics, Inc., 127 F.3d 698 (8th Cir. 1997), the Eighth Circuit called a situation where the
defendant had sold the plaintiff printing presses that the former knew were defective a “classic
case” of the scenario “where one of the parties has superior knowledge which is not within the
fair and reasonable reach of the other.” Id. at 702. Similarly, the Supreme Court of Missouri
held that a bank had a duty to disclose an EPA investigation that implicated a parcel of land sold
to the plaintiff at a foreclosure sale, and could be held liable for fraudulent concealment for
failing to disclose it. See Hess v. Chase Manhattan Bank, USA, N.A., 220 S.W.3d 758, 765-67
(Mo. 2007); see also id. at 765 (“[A] jury is empowered to find that the buyer has a right to rely
on the seller to disclose where the undisclosed material information would not be discoverable
through ordinary diligence.”). By contrast, in In re Gen. Motors Corp. Anti-Lock Brake Prods.
Liab. Litig., the court dismissed the plaintiffs’ fraudulent concealment claim because they had
failed to allege that General Motors did anything to conceal the alleged defect or that the
plaintiffs lacked an opportunity to discover the facts. See 966 F. Supp. at 1535.
The allegations here are closer to those in Independent Business Forms and Hess. As
noted, Plaintiffs allege that New GM knew of the ignition-related defects by late 2009 or early
2010 and (at least arguably) took steps to conceal those defects — for example, instructing
employees to avoid using words that might call attention to the existence of a safety issue. (See
TACC ¶ 619). There is no argument that these facts are not material or that Plaintiffs would
have been able to discover them through reasonable diligence. And given that the MMPA and
common law claims both sound in fraudulent concealment, Missouri law presumably recognizes
83
Plaintiff’s benefit-of-the-bargain defect theory of damages as valid for the common law theory of
fraud as well. See, e.g., Pollard v. Remington Arms Co., No. 13-CV-0086 (ODS), 2013 WL
3039797, at *3-5 (W.D. Mo. June 17, 2013) (discussing the elements of MMPA and common
law fraud claims together). Accordingly, New GM’s motion to dismiss the Missouri Plaintiffs’
fraudulent concealment claim is DENIED.
c.
Breach of Warranty
A plaintiff bringing a breach of implied warranty claim in Missouri must show “(1) that a
merchant sold goods, (2) which were not ‘merchantable’ at the time of sale, (3) injury and
damages to the plaintiff or his property (4) which were caused proximately or in fact by the
defective nature of the goods, and (5) notice to the seller of the injury.” Hope, 353 S.W.3d at 90.
Notably, the Missouri Court of Appeals in Hope, which had affirmed the district court’s class
certification for an MMPA claim, reversed the certification on the warranty claim, holding that
“a majority of the putative class members here have no breach of implied warranty claim”
because their cars had never exhibited the alleged defect. Id. at 91. The court noted that if the
cars never manifested a defect, they were “fit for their ordinary purpose, merchantable, and no
cause of action for breach of implied warranty can arise, as there must be some showing of
damage.” Id. at 91. In so holding, the Court of Appeals relied on O’Neil and Briehl, the Eighth
Circuit cases upon which New GM relies here. (See New GM’s Mem. 8-11).21 That suggests
Plaintiffs argue that Hope’s holding is no longer good law in light of In re Zurn Pex
Plumbing Prods. Liab. Litig., 644 F.3d 604 (8th Cir. 2011). (See Pls.’ Mem. 25 n.15; Pls.’ June
24, 2016 Ltr. (Docket No. 3051) 3). That opinion gives some support to Plaintiffs’ argument, as
the Eighth Circuit concluded that a plaintiff who had a product that contained a defect, but which
had not yet exhibited damage from a defect, could bring a warranty claim consistent with its
prior case law. See In re Zurn Pex Plumbing Prods. Liab. Litig., 644 F.3d at 616-17. But the
Court there was interpreting Minnesota, not Missouri, warranty law. See id. at 617.
21
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that, while manifestation of a defect may not be required to state a claim under the MMPA,
manifestation is required to plead a viable breach of warranty claim under Missouri law. See,
e.g., Williams v. United Tech. Corp., 2015 WL 7738370, at *6-7 (W.D. Mo. Nov. 30, 2015)
(dismissing a breach of implied warranty claim, even when the product had exhibited occasional
defects, because the product’s performance overall “satisfies a minimum level of quality such
that Defendants did not breach the implied warranty of merchantability”); Johnsen v. Honeywell
Int’l, Inc., No. 14-CV-594 (RLW), 2015 WL 631361, at *6 (E.D. Mo. Feb. 12, 2015)
(distinguishing Hope because “the individual plaintiff here has alleged an actual manifestation of
the defect” and therefore stated a viable breach of implied warranty claim). It follows that New
GM’s motion to dismiss the Missouri Plaintiffs’ breach of warranty claims must be and is
GRANTED.
d.
Unjust Enrichment
Finally, with respect to the Missouri Plaintiffs’ unjust enrichment claims, New GM
argues, first, that Robinson’s and Hawkins’s claims fail, because they purchased used vehicles
and therefore did not confer a direct benefit on New GM and, second, that Washington’s claim
fails because her vehicle came with an express warranty. (See New GM’s Mem. 42-46).22 The
Court finds that Robinson’s and Hawkins’s claims may proceed, both because it may be proved
at a later stage that purchasing a used New GM car conferred a sufficient benefit on New GM
22
New GM also contends that the unjust enrichment claims must be dismissed because the
Missouri Plaintiffs have adequate remedies at law. (See New GM’s Mem. 43-44). Missouri
courts have held, however, that “[w]hen a court has concurrent jurisdiction to hear both legal and
equitable claims, it may invoke equitable principles, despite the existence of an adequate remedy
at law.” Webcon Grp., Inc. v. S.M. Properties, L.P., 1 S.W.3d 538, 542-43 (Mo. Ct. App. 199)
(internal quotation marks omitted) (collecting cases).
85
and because “courts have allowed unjust enrichment claims to go forward under Missouri law
even without a showing that the plaintiff directly conferred a benefit upon the defendants.” In re
TFT-LCD (Flat Panel) Antitrust Litig., No. 07-MD-1827 (SI), 2011 WL 4345446, at *4 (N.D.
Cal. Sept. 15, 2011). The Court agrees, however, that Washington’s claim must be dismissed
because she alleges the existence of an express warranty (see TACC ¶ 107), and her unjust
enrichment claims arise out of the same allegations. See, e.g., Patterson Oil Co. v. Verifone,
Inc., No. 15-CV-4089, 2015 WL 6149594, at *9 (W.D. Mo. Oct. 19, 2015) (“T]he unjust
enrichment claim arises out of the express warranty contract and must be dismissed.”); Budach v.
NIBCO, Inc., No. 14-CV-4324, 2015 WL 3853298, at *8-9 (W.D. Mo. June 22, 2015) (rejecting
the plaintiff’s argument that unjust enrichment may be pleaded in the alternative and dismiss the
unjust enrichment claim on the basis of an express warranty). New GM’s motion to dismiss the
Missouri Plaintiffs’ unjust enrichment claim is therefore GRANTED with respect to Washington,
and DENIED with respect to Robinson and Hawkins.
7.
Oklahoma
The Oklahoma Plaintiffs for purposes of this motion are Jennifer Reeder and Bruce and
Denise Wright. (See New GM’s Mem. 6; TACC ¶¶ 137-140). Reeder purchased a used 2012
Chevrolet Impala on August 30, 2013, which was subject to the unintended ignition key rotation
recall and which exhibited a stuck ignition key while Reeder was driving the car in 2014. (See
TACC ¶ 137; New GM’s Mem. 6). Reeder also purchased a used 2010 Chevrolet Cobalt on
February 5, 2014; that car was subject to the ignition switch recall, among others, and stalled
while Reeder’s son was driving the car, resulting in a severe accident. (See TACC ¶ 138; New
GM’s Mem. 6). The Wrights purchased a new 2011 Chevrolet Camaro on March 18, 2011,
which was subject to the ignition switch recall but did not manifest a defect. (See TACC ¶ 140;
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New GM’s Mem. 6). Reeder and the Wrights are members of the Post-Sale Ignition Switch
Defect Subclass. (See TACC ¶ 1033). The Oklahoma Plaintiffs bring claims under the
Oklahoma Consumer Protection Act (“OCPA”), Okla. Stat. tit. 15 § 751, et seq. (TACC ¶¶ 35503576); for breach of the implied warranty of merchantability, 12A Okla. Stat. Ann. § 2-314
(TACC ¶¶ 3591-3597); for violation of the MMWA (TACC ¶¶ 1142-1158); for fraud by
concealment (id. ¶¶ 3577-3590); and for unjust enrichment (id. ¶¶ 3608-3617).
a.
OCPA
To state a claim under the OCPA, “a plaintiff must show (1) that the defendant engaged
in an ‘unlawful practice’ as that term is defined in section 753 of the Act; (2) that the challenged
practice occurred in the course of the defendant’s business; (3) that the plaintiff, as a consumer,
suffered an injury in fact; and (4) that the challenged practice caused the plaintiff’s injury.”
Dinwiddie v. Suzuki Motor of Am., Inc., 111 F. Supp. 3d 1202, 1215 (W.D. Okla. 2015) (citing
Patterson v. Beall, 19 P.3d 839, 846 (Okla. 2000)) (internal quotation marks omitted).
“Unlawful practices” include “[m]ak[ing] a false representation, knowingly or with reason to
know, as to the characteristics, ingredients, uses, benefits, alterations, or quantities of the subject
of a consumer transaction,” “[r]epresent[ing], knowingly or with reason to know, that the subject
of a consumer transaction is of a particular standard, style or model, if it is of another,” and
making “a misrepresentation, omission or other practice that has deceived or could reasonably be
expected to deceive or mislead a person to the detriment of that person.” Okla. Stat. Ann. tit. 15
§§ 752(13), 753(5), (7). Here, the Oklahoma Plaintiffs sufficiently allege that New GM knew
about, but did not disclose, at least some of the defects in their cars before they were purchased.
More specifically, the TACC alleges — and New GM itself has admitted — that New GM knew
about the ignition switch defect well before Reeder bought her 2010 Chevrolet Cobalt on
87
February 5, 2014 (the car was not recalled until March 28, 2014) (see TACC ¶¶ 384, 1057(3));
that New GM knew about the unintended ignition key rotation before Reeder purchased her 2012
Chevrolet Impala in August 2013 (see id. ¶¶ 422-424, 428-436); and that New GM knew about
the key fob ignition bump defect in the 2011 Chevrolet Camaro before the Wrights purchased
their car on March 18, 2011 (see id. ¶¶ 392-400).
Once again, however, the parties strenuously dispute whether the law requires the
manifestation of a defect to bring an OCPA claim and whether the OCPA recognizes a benefitof-the-bargain defect theory. (See New GM’s Mem., Ex. 1, at 4; Pls.’ Mem. 25; New GM’s
Reply 11-12).23 The Court finds that, although Oklahoma law is not crystal clear on the issue,
courts interpreting the OCPA have read it more strictly than consumer protection statutes in other
states, and require either a manifested defect or damages beyond a failure to receive the benefit
of a bargain, if not both. See, e.g., Harrison v. Leviton Mfg. Co., No. 05-CV-0491 (EFHM),
2006 WL 2990524, at *5 (N.D. Okla. Oct. 19, 2006) (holding that the plaintiff’s allegations that
he would have to replace the defendant’s allegedly defective products installed in his home did
not state an injury under the OCPA because it was “not the type of actual or threatened distinct
injury required to bring a claim under the OCPA, as plaintiff must allege actual damages to
qualify as an aggrieved consumer under the act” (internal quotation marks omitted); In re Gen.
Motors Corp., No. 04-MD-1600, 2005 WL 1924335, at *2 (W.D. Okla. Aug. 8, 2005) (noting
that to prevail on his claim under the OCPA, the plaintiff would have to allege that the alleged
defect manifested itself, and distinguishing a case where the plaintiff sought “to recover for a
Plaintiffs rely in part on Cuesta v. Ford Motor Co., 209 P.3d 278 (Okla. 2009). (See Pls.’
Mem. 25). But Cuesta has limited value as it involved Michigan law and only addressed a
breach of warranty claim. See Cuesta, 209 P.3d at 285.
23
88
potentially life-threatening defect” and therefore could not recover (internal quotation marks
omitted)); Tibbetts v. Sight ‘n Sound Appliance Ctrs., Inc., 77 P.3d 1042, 1051 (Okla. 2003)
(noting that the OCPA “requires the consumer to show something more than a violation of the
Act; instead for a viable private claim under the OCPA the consumer must show actual damages
as a necessary element of a claim”); Walls v. Am. Tobacco Co., 11 P.3d 626, 629 (Okla. 2000)
(rejecting the plaintiffs’ argument that “being an aggrieved consumer merely requires proof that
a plaintiff was the consumer in an unlawful transaction” because “damages are a necessary
element of a claim”). In Walls, for example, the Oklahoma Supreme Court concluded that “a
person may not bring an action as an aggrieved consumer under [the OCPA] solely as a result of
his or her payment of the purchase price” for a product sold in violation of the OCPA —
suggesting that Oklahoma does not recognize the benefit-of-the-bargain defect theory for OCPA
claims. 11 P.3d at 630. Plaintiffs do not cite, and the Court is not aware of, any authority
interpreting the OCPA that is to the contrary.
In light of the foregoing, the OCPA claim of the Wrights — whose car never manifested
a defect, and who allege damage only from a diminution in the value of their car — must be and
is dismissed. (See TACC ¶ 140). Reeder, on the other hand, alleges that both of her cars
manifested the ignition-related defects. (See id. ¶¶ 137-138). To be fair, the only manifested
defect that she alleges with respect to the 2012 Chevrolet Impala is that her key got temporarily
stuck in the ignition (she was able to remove it the next day). (See id.¶ 137). It may turn out that
that incident is unconnected to the unintended ignition key rotation defect; but, at this stage of
the proceedings, drawing all inferences in Reeder’s favor (as the Court must), the Court cannot
say as a matter of law that the incident does not qualify as the manifestation of the alleged defect.
Furthermore, Reeder alleges more than just a diminution in the value of her cars as a result of the
89
defects. For example, she contends that defects caused her to spend money as a result of the
Cobalt’s crash; that she has had to use up her extended warranty on the Impala as a result of the
crash; and that she received less in her insurance settlement because of the recalls’ effects on her
vehicle. (See id.¶ 138). Taken together, those allegations state a cognizable injury under the
OCPA, so New GM’s motion to dismiss Reeder’s OCPA claim is DENIED.
b.
Breach of Warranty
Courts interpreting Oklahoma warranty law have held that a manifested defect is also
required for a breach of warranty claim. See, e.g., Dinwiddie, 111 F. Supp. 3d at 1209 (noting
that a warranty claim typically requires manifestation of a defect during the warranty period);
Harrison, 2006 WL 2990524, at *6 (dismissing breach of warranty claims because the plaintiff
had not alleged that the products had manifested a defect); see also O’Neil v. Simplicity, Inc., 553
F. Supp. 2d 1110, 1115 (D. Minn. 2008) (relying in part on Harrison to hold that manifestation
of a defect is required for a warranty claim). In Hess, the court noted that Oklahoma (and
Michigan) had “not yet answered” the question of “whether a breach of warranty action can be
brought by a plaintiff for an allegedly defective product that has a ‘potential’ for damage, but
which has not yet ‘manifested’ damage.” 221 P.3d 132, 139. The Court went on to hold that —
at least for purposes of class certification — a plaintiff had to show either that a defect had
manifested itself or that such manifestation was “likely.” 221 P.3d at 139-40.
This case, of course, is at the motion-to-dismiss stage, and the balance of authority
suggests that Oklahoma warranty law requires a manifested defect for an individual breach of
warranty claim. In any event, while the Wrights’ car may have been defective at some point, that
defect never manifested and (at least for their purposes) never will as they have since disposed of
the car. (See TACC ¶ 140). Reeder’s cars, on the other hand, did manifest defects, and so her
90
warranty claims are not precluded on that ground. New GM argues that the claim should
alternatively be dismissed for failure to plead a cognizable theory of damages. (See New GM’s
Mem., Ex. 1, at 4). Oklahoma law suggests, however, that benefit-of-the bargain damages are
cognizable. See, e.g., Harrison, 2006 WL 2990524, at *6 (“A consumer may bring a claim for
breach of warranty against the retailer and the manufacturer to recover the benefit of the
bargain.” (citing Waggoner v. Town & Country Mobile Homes, Inc., 808 P.2d 649, 652 (Okla.
1990)); Cuesta, 209 P.3d at 286 (while discussing class certification under Oklahoma law, noting
different kinds of economic damages such as “replacement costs, diminution in value, or the cost
of a loaner vehicle”). New GM’s motion to dismiss the Oklahoma breach of warranty claims is
therefore GRANTED with respect to the Wrights, and DENIED with respect to Reeder.
c.
Fraudulent Concealment
By contrast, for common law fraud, Oklahoma does not appear to require that a plaintiff
show either a manifested defect or some injury beyond a diminution in value or benefit of the
bargain theory. In Tibbetts, the Oklahoma Supreme Court indicated that that requirement for
purposes of the OCPA derived from the “aggrieved consumer” language in the statute. 77 P.3d
at 1051. In LeFlore v. Reflections of Tulsa, Inc., 708 P.2d 1068 (Okla. 1985), on the other hand,
the Court stated that “Oklahoma, by decisional law, has adopted a form of the benefit of the
bargain measure in fraud actions, allowing the plaintiff to recover the difference between the
actual value received and the value the defrauded party would have had if it had been as
represented.” Id. at 1077 (collecting cases); see also Parks v. AT&T Mobility, LLC, No. 09-CV212, 2012 WL 4382194, at *9 (W.D. Okla. Sept. 25, 2012). The plaintiff in LeFlore had entered
a beauty contest that promised an all-expenses paid Caribbean cruise, but it turned out
transportation was not provided to the point of embarkation; LeFlore sought to recover the total
91
cost of the cruise plus the transportation to which she would have been entitled pursuant to the
terms of the contest advertisement (despite the fact that it appears she did not go on the trip).
708 P.2d at 1075. The Supreme Court reversed the lower court’s holding that LeFlore had not
pleaded damages on the ground that she had failed to receive the fully paid trip that had been
fraudulently promised. Id. at 1077; see also Bowman v. Presley, 212 P.3d 1210, 1219 (Okla.
2009) (reversing a grant of summary judgment that had held the buyers of a home represented as
larger than it was had not suffered any detriment, because a jury could find that the buyers would
be entitled to the value of the home as represented). Similarly, the Oklahoma Plaintiffs here
allege that they did not receive the benefit of their bargain because they were sold defective cars.
New GM also argues that the Oklahoma Plaintiffs’ fraudulent concealment claims fail
because Oklahoma does not impose a duty to disclose unless “the parties have a fiduciary,
confidential, or some other special relationship.” (New GM’s Mem. 53-54). But courts
interpreting Oklahoma law have recognized that,
[e]ven absent a fiduciary relationship, the relation of the parties, the nature of the
subject matter of the contract or the peculiar circumstances of each particular case
may be such as to impose a legal or equitable duty to disclose all material facts.
For example, the duty to disclose may arise from partial disclosure, the speaker
being under a duty to say nothing or to tell the whole truth.
Myklatun v. Flotek Indus., Inc., 734 F.3d 1230, 1234 (10th Cir. 2013) (applying Oklahoma law)
(internal quotation marks and citation omitted); see also Croslin v. Enerlex, Inc., 308 P.3d 1041,
1046 (Okla. 2013) (“Constructive fraud 1) may be based on a negligent misrepresentation or an
innocent misrepresentation where there is an underlying right to be correctly informed of the
facts, 2) may be based on the silence by one who has a duty to speak, or 3) may be invoked to
prevent harm or to extend protection to recognized public interests.”); Silk v. Phillips Petroleum
Co., 760 P.2d 174, 179 (Okla. 1988) (“If on account of peculiar circumstances there is a positive
92
duty on the part of one of the parties to a contract to speak, and he remains silent to his benefit
and to the detriment of the other party, the failure to speak constitutes fraud.”). In Croslin, for
example, the Oklahoma Supreme Court found that the defendant had a duty to disclose $10,000
of mineral proceeds that had accrued on a mineral interest being deeded away from the plaintiff
to the defendant. 308 P.3d at 1051. The language in the mineral deed assigning any royalties
that might accrue imposed a duty on the defendant to disclose related, material facts of which it
had particular knowledge. Id. Applying those standards, a car manufacturer’s failure to disclose
a potentially deadly safety defect of which it was aware — as New GM is alleged to have done
here — would seem to qualify as a “peculiar circumstance” triggering a duty to disclose.
Myklatun, 734 F.3d at 1234. (See Pls.’ Mem. 57). Accordingly, New GM’s motion to dismiss
the Oklahoma Plaintiffs’ fraudulent concealment claim is DENIED.
d.
Unjust Enrichment
Finally, the Wrights and Reeder each plead the existence of an express warranty covering
their cars. (See TACC ¶¶ 137-138, 140). Courts are split on whether to permit alternative
pleading of unjust enrichment claims under Oklahoma law when an express contract exists or
there is an adequate remedy at law. Compare Morrison v. Stonebridge Life Ins. Co., No. 11-CV1204, 2015 WL 137261, at *7 (W.D. Okla. Jan. 9, 2015) (rejecting the plaintiff’s argument that
she could plead alternative theories of recovery and collecting cases), with Briggs v. FreeportMcMoran Copper & Gold, Inc., No. 13-CV-1157, 2015 WL 1461884, at *6 (W.D. Okla. Mar.
30, 2015) (“[T]he Court finds that, at this stage of the litigation, plaintiffs have the right to plead
alternative theories of recovery and, therefore, plaintiffs’ unjust enrichment claim should not be
dismissed.”). Consistent with the many other jurisdictions that prohibit the alternative pleading
93
of contract and unjust enrichment claims, the Court GRANTS New GM’s motion to dismiss the
Oklahoma Plaintiffs’ unjust enrichment claims.
8.
Virginia
The final jurisdiction at issue in this motion is Virginia. The sole Virginia Plaintiff for
purposes of this motion is Ashlee Hall-Abbott. (See TACC ¶ 157; New GM’s Mem. 6). HallAbbott purchased a new 2014 Chevrolet Silverado in March 2014; since then, the car has been
the subject of a host of recalls. (See TACC ¶ 157; New GM’s Mem. 6). Hall-Abbott is not a
member of the Post-Sale Ignition Switch Defect Subclass. She brings claims under the Virginia
Consumer Protection Act (“VCPA”), Va. Code Ann. § 59.1-196, et seq. (TACC ¶¶ 4193-4216);
for fraud by concealment (id. ¶¶ 4217-4230); and for unjust enrichment (id. ¶¶ 4247-4256).24
a.
VCPA and Fraudulent Concealment
To bring a claim under the VCPA, a plaintiff must show that the defendant engaged in a
prohibited practice under the act (namely, using a “deception, fraud, false pretense, false
promise, or misrepresentation in connection with a consumer transaction”) and that the plaintiff
suffered a loss as a result of the prohibited practice. Bay Point Condo. Ass’n, Inc. v. RML Corp.,
52 Va. Cir. 432, 2000 WL 33268342, at *10 (Va. Cir. Ct. 2000); see Padin v. Oyster Point
Dodge, 397 F. Supp. 2d 712, 722 (E.D. Va. 2005); Owens v. DRS Auto. Fantomworks, Inc., 764
S.E.2d 256, 260-61 (Va. 2014). A party may also plead constructive fraud, where the
misrepresentation of a material fact is made innocently or negligently but results in damage to
the party who relies on it. See Cohn v. Knowledge Connections, Inc., 585 S.E.2d 578, 582 (Va.
24
The parties did not discuss Virginia law on consumer and common law fraud in their
initial briefing on this motion, but submitted supplemental letters on the issue at the Court’s
request. (See New GM’s Supp. Ltr. 3-5; Pls.’ Supp. Ltr. 3-5).
94
2003). Similarly, for a common law fraud claim, a plaintiff must plead “(1) a false
representation, (2) of a material fact, (3) made intentionally and knowingly, (4) with intent to
mislead, (5) reliance thereon by the party misled, and (6) resulting damage to the party misled.”
Owens, 764 S.E. 2d at 260. A plaintiff may plead fraud by concealment, but that generally
requires a duty to disclose. See Bank of Montreal v. Signet Bank, 193 F.3d 818, 829 (4th Cir.
1999); Norris v. Mitchell, 495 S.E.2d 809, 812-813 (Va. 1998). “A duty may arise (1) if the fact
is material and the one concealing has superior knowledge and knows the other is acting upon
the assumption that the fact does not exist; or (2) if one party takes actions which divert the other
party from making prudent investigations (e.g., by making a partial disclosure).” Bank of
Montreal, 193 F.3d at 829 (citations omitted).
New GM argues that Hall-Abbott lacks viable fraud claims because Virginia law would
not impose a duty to disclose on a remote manufacturer such as New GM. (See New GM’s
Supp. Ltr. 4-5). The Court disagrees. The case upon which New GM primarily relies, McCabe
v. Daimler AG, No. 12-CV-2494 (MHC), 2015 WL 10091635 (N.D. Ga. Aug. 20, 2015)
(applying Virginia law), was decided at the summary judgment stage based on the fact that no
evidence was presented suggesting that the plaintiff had had any communication or interaction
with the remote seller. 2015 WL 10091635, at *16; see Murray v. Royal Constr. Co., 61 Va. Cir.
643, 2002 WL 32238304, at *2 (Va. Cir. Ct. 2002) (finding there was no duty to disclose
because there were no allegations of any communication between the parties or any information
the defendant may have misrepresented or concealed); see also, e.g., Alexander v. Se. Wholesale
Corp., 978 F. Supp. 2d 615, 623 (E.D. Va. 2013) (“In Virginia, a claim of fraud does not require
direct contact or privity between the defendant and the plaintiff. A complaint must merely allege
that the defendant knew or had reason to know that the plaintiff would rely on the
95
misrepresentation.” (citation omitted)). Following discovery in this case, Hall-Abbott may well
be able to show a sufficient relationship between her and New GM — for example, through
marketing materials or the warranty that accompanied her vehicle. The Court does note,
however, that Hall-Abbott purchased her car in March 2014, after the first round of New GM’s
recalls; thus, at least to some extent, she may have been on notice of defects in the car at the time
of purchase. (See TACC ¶ 517). Plaintiffs sufficiently allege, however, that New GM knew
about at least some of the defects in the 2014 Chevrolet Silverado at the time of Hall-Abbot’s
purchase, but delayed in issuing recalls for that vehicle. For example, the TACC alleges that
New GM knew about problems in the transmission oil cooler line as early as September 2013,
but did not issue a recall until March 31, 2014. (See TACC ¶¶ 813-827). Given that that defect
could constitute a “material fact” that New GM concealed from Hall-Abbott and that New GM
was plainly in a position of superior knowledge with respect to that fact, the Court concludes that
Hall-Abbott adequately pleads that New GM had a duty to disclose that it violated.
New GM also contends that Virginia law requires the manifestation of a defect and does
not recognize the benefit-of-the-bargain defect theory. (See New GM’s Supp. Ltr. 3-4). But
New GM does not cite, and the Court has not found, any Virginia authority that imposes a
manifest defect requirement or rejects benefit-of-the-bargain recovery for fraud claims. (See
New GM’s Supp. Ltr. 4). Cf. Polk v. Crown Auto, Inc., 228 F.3d 541, 543 (4th Cir. 2000)
(affirming the dismissal of a VCPA claim based on an excessive fee for late payments when the
plaintiff never made a late payment and thus was not subjected to the fee); Alston v. Crown Auto,
Inc., 224 F.3d 332, 336 (4th Cir. 2000) (affirming the dismissal of a similar claim where the
plaintiff did pay the excessive fee, but was reimbursed for the full amount she paid above the
permissible limit). Instead, a few opinions suggest that benefit-of-the-bargain damages are
96
available under Virginia law. See Buie v. Sys. Automation Corp., 918 F.2d 955 (Table), 1990
WL 180126, at *11 (4th Cir. 1990) (citing with approval the Maryland Court of Appeals’
flexible approach to determining when benefit-of-the-bargain damages should be available for
fraud claims); Celeste v. Bayliss, No. 4460, 1986 WL 401809, at *4 (Va. Cir. Ct. July 23, 1986)
(noting that the benefit-of-the-bargain theory is one theory of recovery available for fraud
claims). In the absence of persuasive authority to the contrary, New GM’s motion to dismiss the
Virginia Plaintiff’s VCPA and fraudulent concealment claims is DENIED.
b.
Unjust Enrichment
Hall-Abbott purchased her 2014 Chevrolet Silverado with an express warranty (see
TACC ¶ 157), and makes no argument that the warranty was invalid. It follows that she may not
pursue a claim for unjust enrichment. See Myers v. Lee, No. 1:10-CV-131 (AJT) (JFA), 2010
WL 2757115, at *6 (E.D. Va. July 12, 2010) (dismissing an unjust enrichment claim where there
was no allegation that the express contract was invalid); Centex Constr. v. Acstar Ins. Co., 448 F.
Supp. 2d 697, 707 (E.D. Va. 2006) (“Virginia law provides no relief under a quantum meruit
theory where a valid, express contract exists between the parties.”); McDonald’s Corp. v.
Turner-James, No. 05-CV-804, 2005 WL 7873649, at *3 (E.D. Va. Nov. 29, 2005) (“[U]njust
enrichment claims arise only where there is no express contract.” (internal quotation marks
omitted). Accordingly, New GM’s motion to dismiss Hall-Abbbott’s unjust enrichment claim is
GRANTED.
D. Class Standing and Prudential Mootness
New GM’s remaining arguments are (1) that Plaintiffs lack standing to pursue claims
pertaining to vehicles that they themselves do or did not own and (2) that the recalls render
Plaintiffs’ claims prudentially moot. (See New GM’s Mem. 16-26; New GM’s Reply 12-16).
97
As should be clear from the foregoing discussion, the Court does not find that the recalls moot
Plaintiffs’ claims. New GM argues that the recalls provide Plaintiffs with full relief, but
Plaintiffs are seeking benefit-of-the-bargain damages even for cars that have been fully repaired
— cars that they allege were and are worth less than cars sold without the undisclosed defects.
Such claims are cognizable under at least some jurisdictions’ laws, as discussed above, despite
the Court’s rejection of Plaintiffs’ broader brand devaluation theory of damages. (Cf. Tr. 112-13
(arguing that brand devaluation claims could not be mooted by the recalls)). Furthermore, the
cases upon which New GM relies involved plaintiffs seeking declaratory and injunctive relief for
existing defects through a court-ordered recall. (See New GM’s Mem. 16-19; New GM’s Reply
12-14). See Hadley v. Chrysler Grp., LLC, 624 F. App’x 374, 379 (6th Cir. 2015) (“Because
New Chrysler has already acknowledged the defect . . . and repaired the plaintiffs’ vehicle, their
claims for a declaratory judgment and injunctive relief are moot.”); Winzler v. Toyota Motor
Sales U.S.A., Inc., 681 F.3d 1208, 1210-11 (10th Cir. 2012) (dismissing claims which sought an
order notifying consumers of a defect and creation of a fund for repairs because, once a recall
was implemented via NHTSA, “Congress and the Executive have committed to ensure [the
plaintiff] precisely the relief she seeks”); Cheng v. BMW of N. Am., LLC, No. 12-CV-9262
(GAF) (SHX), 2013 WL 3940815, at *4 (C.D. Cal. July 26, 2013) (dismissing claims as
prudentially moot because the defendant’s subsequent recall provided the plaintiff the injunctive
relief sought, and the plaintiff specifically disavowed any request for monetary damages). Here,
Plaintiffs seek to recover damages from New GM for fraud — not to obtain declaratory and
injunctive relief for existing defects. And finally, Plaintiffs allege that some of the ignition
recalls have not been fully effective, leaving at least some Plaintiffs with defective cars and
indisputably live claims. (See TACC ¶¶ 1150, 1494, 2524). Because the recalls, even those
98
sufficient to remedy the defects, do not compensate Plaintiffs fully for the damages sought here,
the Court declines to exercise its discretion to dismiss the remaining claims as prudentially moot.
By contrast, with respect to standing, the Court agrees with New GM that Plaintiffs lack
class standing to bring claims on behalf of consumers who purchased or leased different New
GM vehicles.25 The Second Circuit has held that, “in a putative class action, a plaintiff has class
standing if he plausibly alleges (1) that he personally has suffered some actual injury as a result
of the putatively illegal conduct of the defendant, and (2) that such conduct implicates the same
set of concerns as the conduct alleged to have caused injury to the other members of the putative
class by the same defendants.” Ret. Bd. of the Policemen’s Annuity & Ben. Fund of the City of
Chi. v. Bank of N.Y. Mellon, 775 F.3d 154, 161 (2d Cir. 2014) (internal quotation marks
omitted); see DiMuro v. Clinique Labs., LLC, 572 F. App’x 27, 29 (2d Cir. 2014) (summary
order); NECA-IBEW Health & Welfare Fund v. Goldman Sachs & Co., 693 F.3d 145, 162 (2d
Cir. 2012). In NECA, for example, the Second Circuit held that the plaintiffs had class standing
to bring claims on behalf of purchasers of some trust certificates that they themselves did not
own because they were backed by the same originators; the Court distinguished those from
certificates backed by other originators, however, noting that “to the extent the representations in
the Offering Documents were misleading with respect to one Certificate, they were not
necessarily misleading with respect to others.” 693 F.3d at 163-64. In Retirement Board, the
Court rejected the plaintiffs’ assertions of class standing because the “alleged misconduct must
be proved loan-by-loan and trust-by-trust. For example, whether Countrywide breached its
25
Both sides agreed at oral argument that it would be appropriate for the Court to consider
the issue of class standing at this stage. (See Tr. 106, 112).
99
obligations under the governing agreements (thus triggering BNYM’s duty to act) requires
examining its conduct with respect to each trust.” 775 F.3d at 162. The Retirement Board Court
specifically rejected the plaintiffs’ argument that BNYM’s general policy of inaction gave the
named plaintiffs sufficient standing, because the plaintiffs would still have had to show which
trusts actually should have triggered action on BNYM’s part. Id. Finally, in DiMuro, the Court
held that the plaintiffs could only assert claims with respect to the allegedly misadvertised
products that they themselves had purchased and used (and not other similar products), because
“[e]ntirely unique evidence will . . . be required to prove that the 35-some advertising statements
for each of the seven different . . . products are false and misleading.” 572 F. App’x at 29.
So too here. As the analysis with respect to each plaintiff’s claims makes clear, the
viability of the claims in the TACC turns primarily on individualized factors — what car was
purchased, when it was purchased, what kind of defect (or defects) it had, and what New GM
may have known about such defects at a given time. Plaintiffs argue that because they allege a
diminution in value of their vehicles, the “claims are thus typical of all New GM vehicle
purchasers, and they can serve as named Plaintiffs for the Nationwide RICO Class as well as
their respective state-wide classes.” (Pls.’ Mem. 26). As Plaintiffs conceded at oral argument,
however, rejection of the brand devaluation theory of damage means that Plaintiffs do not have a
common basis for their claims across all defects and vehicle models. (See Tr. 111). As
discussed above, the Court does reject that theory, so if a plaintiff does have a viable claim, it is
based on a fraudulent omission or concealment of a particular defect. That, in turn, depends on
individualized facts about that particular plaintiff’s vehicle type. New GM’s warranty or
statements about a vehicle’s safety may have been “misleading with respect to one [car] . . . [but]
not necessarily misleading with respect to others,” depending on what New GM knew and when.
100
NECA, 693 F.3d at 163. Claims may therefore have to proceed individually or in subclasses of
cars affected by a common defect. For example, the Court is inclined to agree with Plaintiffs
that a Delta Ignition Switch plaintiff has standing to bring claims on behalf of other Delta
Ignition Switch car purchasers, and owners of cars with the other ignition-related defects could
likely proceed on behalf of each other (perhaps with subclasses for cars bought before or after a
certain date, when it is established when New GM knew of a particular defect). (See Tr. 11112). By contrast, Plaintiffs alleging other defects — defects that have not been shown to have
any connection with each other — would not have claims susceptible to the same kind of
common proof (as Plaintiffs implicitly conceded in their argument with respect to the ignition
defects). Accordingly, the named Plaintiffs may assert claims only on behalf of owners of the
same car models that they themselves purchased (or leased) or models with sufficiently similar
defects, if applicable; the Court defers delineation of the specifics of the permissible class claims
until the class-certification stage.26 But New GM’s motion to dismiss is GRANTED with respect
to any putative class members whose vehicles do not fall within those parameters.
CONCLUSION
In short, many of the claims of the named Plaintiffs in this motion survive, but a large
swath of the claims in the TACC — those brought under RICO, those brought on behalf of
Plaintiffs whose cars were not allegedly defective when sold, and those brought on behalf of
Plaintiffs whose cars are too dissimilar from the named Plaintiffs’ cars — are foreclosed. (For
convenience, a chart indicating whether New GM’s motion is granted or denied with respect to
By New GM’s count, there are forty-four recalls referenced in the TACC concerning
vehicles that are not owned by any named plaintiff. (See New GM’s Mem. 2).
26
101
each state law claim is attached as Exhibit A.) Additionally, the Court rejects Plaintiffs’ broadest
theory of damages — the brand devaluation theory — as unprecedented and unsound. Thus, to
the extent that Plaintiffs are entitled to relief at all, they are entitled — at most — to benefit-ofthe-bargain defect damages, out-of-pocket damages, and the like.
Although this ruling addresses only some of the claims in the TACC, it will undoubtedly
inform the parties with respect to the viability of other claims and, more generally, bear upon the
further progress of the MDL. The July 13, 2016 ruling from the Second Circuit, which held that
purchasers of Old GM cars with ignition switch defects can bring claims for Old GM’s
wrongdoing against New GM has, in all likelihood, also substantially redefined the scope of the
claims that may proceed. The parties should be prepared to discuss the implications of this
Court’s ruling and the Second Circuit’s ruling at the July 28, 2016 status conference — including
but not limited to implications for the next phase of discovery. (See Docket Nos. 1569, 2156).
Additionally, within thirty days from the date of this Opinion and Order, Plaintiffs shall submit
their proposed amendments to the TACC. (See Docket No. 2323).
The Clerk of Court is directed to terminate Docket No. 2356.
SO ORDERED.
Dated: July 15, 2016
New York, New York
102
EXHIBIT A
CHART OF RULINGS ON NEW GM’S MOTION TO DISMISS STATE LAW CLAIMS
Consumer
Protection
Anna
Andrews
(CA)
Marc &
Madeline
Koppelman
(CA)
David Padilla
(CA)
Randall Pina
(CA)
Pajja Jackson
(DC)
Joni FerdenPrecht (FL)
Nathaniel &
Frances Ann
Fagans (LA)
Harry Albert
(MD)
Ronald
Robinson
(MO)
Michelle
Washington
(MO)
Cynthia
Hawkins
(MO)
Bruce &
Denise
Wright (OK)
Jennifer
Reeder (OK)
Ashlee HallAbbott (VA)
Fraudulent
Concealment
Warranty
Unjust
Enrichment
Negligence
GRANTED
GRANTED
N/A
DENIED
N/A
DENIED
DENIED
GRANTED
DENIED
GRANTED
DENIED
DENIED
DENIED
GRANTED
GRANTED
DENIED
DENIED
DENIED
GRANTED
GRANTED
GRANTED
GRANTED
N/A
GRANTED
N/A
DENIED
GRANTED
N/A
GRANTED
N/A
GRANTED
GRANTED
N/A
GRANTED
N/A
DENIED
DENIED
DENIED
DENIED
DENIED
DENIED
DENIED
GRANTED
DENIED
N/A
DENIED
DENIED
GRANTED
GRANTED
N/A
DENIED
DENIED
GRANTED
DENIED
N/A
GRANTED
DENIED
GRANTED
GRANTED
N/A
DENIED
DENIED
DENIED
GRANTED
N/A
DENIED
DENIED
N/A
GRANTED
N/A
103
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