In re: General Motors LLC Ignition Switch Litigation
Filing
277
OPINION AND ORDER [Regarding New GM's Partial Motion To Dismiss the Fourth Amended Consolidated Class Action Complaint] re: (3577 in 1:14-md-02543-JMF) MOTION to Dismiss Claims of Certain Plaintiffs in the Fourth Amended Consolidated Complaint, filed by General Motors LLC. For the reasons stated below, New GM's motion to dismiss is GRANTED in part and DENIED in part. More specifically, it is GRANTED with respect to Plaintiffs' repleaded "brand devaluation" claims, but DENIED with respect to Plaintiff's lost-time-to repair claims. Additionally, it is GRANTED with respect to Plaintiffs who purchased their vehicles prior to New GM's inception or disposed of their vehicles prior to the recall announcement. And finally, New GM's motion to dismiss Plaintiffs' claims in Alabama, Illinois, Massachusetts, Michigan, New York, Pennsylvania, Texas, and Wisconsin is GRANTED in part and DENIED in part, depending on, among other things, whether each state's law allows claims in the absence of a manifested defect, requires a special trust relationship between the parties for a duty to disclose to arise, and permits plaintiffs to plead both contract claims and unjust enrichment claims. Ultimately, for the reasons that follow, most of Plaintiffs' consumer fraud, fraudulent concealment, and breach of implied warranty claims survive, while the bulk of Plaintiffs' unjust enrichment claims must be and are dismissed. As the Court indicated in the last round of motion practice, although this ruling addresses only some of the claims in the operative complaint, it should inform the parties with respect to the viability of other claims and, more generally, bear upon the further progress of the MDL. Pursuant to Order No. 114 (Docket No. 3431), no later than three weeks from the date of this Opinion and Order, the parties shall meet and confer and advise the Court of their views with respect to whether and how the Court's rulings apply to the thirty-five jurisdictions that have not been the subject of full briefing (the Court's sincere hope being that it will not have to repeat this exercise with respect to each and every one of the remaining jurisdictions). Any submissions should address a briefing schedule and process if either side believes that briefing or motion practice is appropriate. Further, to the extent the parties find it helpful, they should confer and submit a chart (or proposed order) summarizing the rulings in this Opinion and Order with respect to the named Plaintiffs' claims, to be so ordered by the Court. In those submissions, Plaintiffs should also indicate to the Court whether they intend to amend the FACC (as to any of the claims that were dismissed with leave to amend) and, if so, provide an outline of the proposed amendments and a proposed schedule. The Clerk of Court is directed to terminate Docket No. 3577, and as further set forth in this order. (Signed by Judge Jesse M. Furman on 6/30/2017) (ras)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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IN RE:
GENERAL MOTORS LLC IGNITION SWITCH LITIGATION
This Document Relates To All Actions
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06/30/2017
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
Fourth Amended Consolidated Class Action Complaint]
INTRODUCTION ...........................................................................................................................1
BACKGROUND .............................................................................................................................3
LEGAL STANDARDS ...................................................................................................................5
DISCUSSION ..................................................................................................................................7
A.
Brand Devaluation Claims .......................................................................................7
B.
Damages for Lost Time .........................................................................................12
C.
The Relevant Time Period for New GM’s Economic Loss Liability ....................17
D.
State Law Claims ...................................................................................................23
1.
Alabama .....................................................................................................23
a.
b.
Fraudulent Concealment ................................................................28
c.
2.
The ADTPA ...................................................................................24
Unjust Enrichment .........................................................................32
Illinois ........................................................................................................33
a.
b.
Fraudulent Concealment ................................................................39
c.
3.
The ICFA .......................................................................................34
Unjust Enrichment .........................................................................42
Massachusetts ............................................................................................46
a.
b.
4.
The Massachusetts CPA ................................................................47
Unjust Enrichment .........................................................................49
Michigan ....................................................................................................51
a.
The MCPA .....................................................................................52
b.
c.
Breach of Implied Warranty ..........................................................62
d.
5.
Fraudulent Concealment ................................................................59
Unjust Enrichment .........................................................................63
New York ...................................................................................................66
a.
b.
Fraudulent Concealment ................................................................72
c.
6.
GBL Section 349............................................................................68
Unjust Enrichment .........................................................................75
Pennsylvania ..............................................................................................77
a.
b.
Manifestation .................................................................................80
c.
The UTPCPL .................................................................................87
d.
Fraudulent Concealment ................................................................90
e.
7.
Economic Loss Doctrine ................................................................79
Unjust Enrichment .........................................................................95
Texas ..........................................................................................................98
a.
b.
Fraudulent Concealment ..............................................................110
c.
8.
The Texas DPTA .........................................................................100
Unjust Enrichment .......................................................................113
Wisconsin.................................................................................................115
a.
The WDTPA ................................................................................116
b.
Fraudulent Concealment ..............................................................125
c.
Unjust Enrichment .......................................................................125
CONCLUSION ............................................................................................................................127
ii
INTRODUCTION
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. In this litigation, Plaintiffs seek recovery on behalf of a broad putative class of GM car
owners and lessors whose vehicles were subject to those recalls, arguing that they have been
harmed by, among other things, a drop in their vehicles’ value due to the ignition switch defect
and other defects. Their operative complaint — the Fourth Amended Consolidated Complaint or
“FACC” — runs to over a 1700 pages and 7500 paragraphs, and includes claims under state law
brought by named Plaintiffs in all fifty states and the District of Columbia.
In conjunction with the parties, the Court decided early on not to entertain a motion to
dismiss all of the Plaintiffs’ economic loss claims at once — given, among other things, the
number and scope of those claims; the possibility that the litigation would be materially affected
by parallel proceedings in (and arising out of) bankruptcy court; and the likelihood that the
parties could ultimately agree upon how the Court’s rulings as to some state law claims would
apply to others, saving the need for the parties to brief and the Court to decide the same issues in
fifty-one different jurisdictions. In an opinion filed almost exactly one year ago with respect to
the then-operative Third Amended Consolidated Complaint (“TACC”), the Court ruled on the
validity of, among other things, Plaintiffs’ claims in eight jurisdictions. Since that time,
Plaintiffs filed the FACC and New GM filed another partial motion to dismiss, pursuant to Rules
1
9(b) and 12(b)(6) of the Federal Rules of Civil Procedure, focusing — by agreement — on the
claims of Plaintiffs from eight jurisdictions that were not addressed in the Court’s last Opinion.
This Opinion and Order addresses those claims and a few issues that are not state-specific (that
is, that apply to all Plaintiffs’ claims) — namely, a revised version of Plaintiffs’ “brand
devaluation” theory of damages, which was pled in the TACC and dismissed in the Court’s last
Opinion; Plaintiffs’ claims for damages in the form of “lost time” spent having their vehicles
repaired; and the viability of economic loss claims brought by Plaintiffs who purchased their
vehicles before New GM came into existence on July 10, 2009, or who disposed of their vehicles
prior to GM’s announcement of the recalls in 2014. .
For the reasons stated below, New GM’s motion to dismiss is GRANTED in part and
DENIED in part. More specifically, it is GRANTED with respect to Plaintiffs’ repleaded “brand
devaluation” claims, but DENIED with respect to Plaintiff’s lost-time-to repair claims.
Additionally, it is GRANTED with respect to Plaintiffs who purchased their vehicles prior to
New GM’s inception or disposed of their vehicles prior to the recall announcement. And finally,
New GM’s motion to dismiss Plaintiffs’ claims in Alabama, Illinois, Massachusetts, Michigan,
New York, Pennsylvania, Texas, and Wisconsin is GRANTED in part and DENIED in part,
depending on, among other things, whether each state’s law allows claims in the absence of a
manifested defect, requires a special trust relationship between the parties for a duty to disclose
to arise, and permits plaintiffs to plead both contract claims and unjust enrichment claims.
Ultimately, for the reasons that follow, most of Plaintiffs’ consumer fraud, fraudulent
concealment, and breach of implied warranty claims survive, while the bulk of Plaintiffs’ unjust
enrichment claims must be and are dismissed.
2
BACKGROUND
The underlying facts giving rise to this MDL proceeding are set forth in this Court’s prior
opinions, familiarity with which is presumed. See, e.g., In re General Motors LLC Ignition
Switch Litig., 14-MD-2543 (JMF), 2016 WL 3920353 (S.D.N.Y. July 15, 2016). To the extent
relevant here, pursuant to a Sale Order entered on or about July 10, 2009, New GM emerged
from the bankruptcy of General Motors Corporation (“Old GM”) as the operative GM business
entity and the largest car manufacturer in the world. (Docket No. 3356 (“FACC”) ¶¶ 291, 336,
873). Prior to the bankruptcy, however, Old GM personnel learned of a defect with the ignition
switches in certain car models that allowed them to move from the “run” to the “off” or
“accessory” positions too easily. See In re Gen. Motors, 2016 WL 3920353, at *3. New GM
opened several investigations into incidents — including fatal crashes — involving the defective
ignition switch, but ultimately did not recall any vehicles until February 2014. See id. at *4.
Thereafter, 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. Id.
On June 12, 2014, the Judicial Panel on Multidistrict Litigation transferred to this Court
fifteen actions relating to the alleged ignition switch defect for “coordinated or consolidated
pretrial proceedings” pursuant to Title 28, United States Code, Section 1407. (Docket No. 1).
The MDL has since grown to hundreds of cases (comprised of several thousand individual
claims), with new cases transferred to, or filed directly with, the Court every month. Broadly
speaking, the Court and the parties have divided the cases into two categories: personal injury
and wrongful death claims, on the one hand, and economic loss claims, on the other. (See
Docket No. 215). With respect to the latter, at issue here, the Court ordered Plaintiffs to proceed
by submitting a “master” consolidated complaint that would supersede individual complaints, at
3
least for purposes of pretrial proceedings (including motion practice). See In re Gen. Motors,
2016 WL 3920353, at *5; In re General Motors LLC Ignition Switch Litig., No. 14-MD-2543
(JMF), 2015 WL 3619584, at *10 (S.D.N.Y. June 10, 2015).
Plaintiffs did so, and later amended the consolidated complaint twice. On February 24,
2016, New GM filed a partial motion to dismiss the then-operative TACC. (Docket No. 2356).
In an opinion entered on July 15, 2016, the Court granted New GM’s motion in part and denied it
in part. See In re Gen. Motors, 2016 WL 3920353. In particular, the Court dismissed Plaintiffs’
claims under the federal Racketeer Influenced and Corrupt Organization (“RICO”) Act, 18
U.S.C. § 1961, et seq., and rejected Plaintiff’s broadest theory of damages, which it called the
“brand devaluation theory.” See id. at *7-18. The Court characterized the “brand devaluation
theory” of damages as “unprecedented and unsound,” after finding that “persuasive precedent
interpreting consumer protection law and general principles of tort recovery” precluded it from
being a basis for recovery. Id. at *2, 42. The Court also considered Plaintiffs’ claims under the
laws of eight different states, upholding the majority of Plaintiffs’ consumer fraud, common law
fraud, and implied warranty claims while dismissing the bulk of their unjust enrichment and
negligence claims. See id. at *18-42.
On September 15, 2016, Plaintiffs filed the FACC at issue here. The FACC asserts
claims on behalf of a class of millions of Old GM and New GM vehicle owners whose vehicles
were affected by various alleged defects and recalls. (See FACC 2-4). The FACC defines the
plaintiff class as “[a]ll persons who bought or leased (i) a Delta Ignition Switch Vehicle on or
before February 14, 2014; (ii) a Low Torque Ignition Switch Vehicle prior to July 3, 2014; (iii) a
Knee-to-Key Camaro Defect Vehicle prior to July 3, 2014; (iv) a Side Airbag Defect Vehicle
prior to March 17, 2014; and/or (v) a Power Steering Defect Vehicle Prior to April 1, 2014.” (Id.
4
¶ 34; see also id. at 2-3; Docket No. 3578 (“GM Mem.”), at 2-7). It does not seek damages for
physical injury or property damage; nor does it allege that Plaintiffs were promised defect-free
vehicles. Instead, Plaintiffs allege that their vehicles diminished in value because of the recalls
and New GM’s alleged conduct. (FACC ¶¶ 32-33, 44, 1104). They also allege that “all
Plaintiffs incurred damages in at least the form of lost time required to repair their vehicles.”
(E.g., FACC ¶ 1145). Plaintiffs bring a variety of state law claims, sounding in consumer fraud,
common law fraud, implied warranty, and unjust enrichment. By agreement between the parties,
the instant motion is largely limited to claims of the named Plaintiffs who reside in eight states
not addressed in New GM’s motion to dismiss the TACC: Alabama, Illinois, Massachusetts,
Michigan, New York, Pennsylvania, Texas, and Wisconsin. (Docket No. 3431). 1
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
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
The FACC also includes successor liability claims brought on behalf of the Delta Ignition
Switch plaintiffs. (FACC ¶¶ 896-957). New GM has moved for summary judgment on those
claims. (See Docket Nos. 3427, 3519). The Court will address that motion in a separate opinion.
1
5
“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.
To the extent that a plaintiff alleges fraud, as Plaintiffs do here, Rule 9(b) requires a
plaintiff to plead claims “with particularity,” specifying “the circumstances constituting fraud.”
Fed. R. Civ. P. 9(b). Rule 9(b) “provides that a party alleging fraud ‘must state with particularity
the circumstances constituting fraud or mistake,” to ensure that the defendant has “fair notice of
a plaintiff’s claim and adequate information to frame a response.” United States v. Wells Fargo
Bank, 972 F. Supp. 2d 593, 615 (S.D.N.Y. 2013). Generally, to satisfy Rule 9(b), a 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). For fraud claims premised on concealment, a plaintiff must allege
“(1) what the omissions were; (2) the person responsible for the failure to disclose; (3) the
context of the omissions and the manner in which they misled the plaintiff; and (4) what the
defendant obtained through the fraud.” Schneider v. Pearson Educ., Inc., 12-CV-6392 (JPO),
2013 WL 1386968, at *4 (S.D.N.Y. Apr. 5, 2013). Notably, “where the alleged fraudulent
scheme involved numerous transactions that occurred over a long period of time, courts have
found it impractical to require the plaintiff to plead the specifics with respect to each and every
instance of fraudulent conduct.” Wells Fargo Bank, 972 F. Supp. 2d at 616 (internal quotation
marks omitted). Failure to satisfy the Rule 9(b) standard, if applicable, is grounds for dismissal.
See, e.g., Lerner, 459 F.3d at 293; Slayton v. Am. Express Co., 604 F.3d 758, 766 (2d Cir. 2010).
6
DISCUSSION
As noted, New GM’s present motion is largely limited to claims of the named Plaintiffs
from eight new states: Alabama, Illinois, Massachusetts, Michigan, New York, Pennsylvania,
Texas, and Wisconsin. As in the earlier opinion concerning New GM’s partial motion to dismiss
the TACC, the Court will address each state separately because there are differences, small and
large, in the relevant law from one state to the next. Before doing so, however, the Court will
address three broader (that is, non-state-specific) arguments made by New GM — namely, that
the Court should dismiss (1) Plaintiffs’ revised version of the “brand devaluation” theory;
(2) Plaintiffs’ claims for “lost time” (that is, time devoted to repairing vehicles as part of the
recalls); and (3) benefit-of-the-bargain claims brought on behalf of (a) Plaintiffs who purchased
their vehicles before July 2009, when New GM was created, and (b) Plaintiffs who disposed of
their vehicles before New GM announced its recalls in 2014. 2
A. Brand Devaluation Claims
As an initial matter, New GM moves to dismiss the FACC to the extent that it repleads
the brand devaluation claims that the Court dismissed in its prior Opinion. (Docket No. 3547
(“GM Supp. Br.”), at 1; see also Docket No. 3543; Nov. 10, 2016 Status Conf. Tr. 33-35). In its
prior Opinion, the Court dismissed that theory of damages “as unprecedented and unsound.” In
re Gen. Motors, 2016 WL 3920353, at *42. The Court reasoned that the theory was
unprecedented in both its breadth and scope in at least two respects. First, it was brought on
By separate Order entered on June 16, 2017, the Court dismissed the claims of thirteen
Plaintiffs for failure to comply with their discovery obligations. (See Docket No. 4093).
Accordingly, the Court need not and does not address the claims of Melissa Cave, Mary Ann
Cechini, Carolyn Coleman, Bruce Dunn, Mark Fellter, Karen Gooden, Wynonia Jackson, Pearl
Jemison, Shawn Markin, Eric Rhine, William Shimak, and Bryon and Tonya Skinner.
2
7
behalf of anyone who owned a GM brand car — without regard for whether a car had a defect.
See id. at *7. Second, if recognized, it would amount to an indefinite guarantee of both “the
product’s resale value and the brand’s continuing good name.” Id. The Court acknowledged
that “labels and brands have independent economic value,” yet stated that “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.” Id. at
*8. Indeed, the Court noted that doing so might well have perverse effects: It might over-deter
manufacturers and “diminish the resources available to plaintiffs who have been more directly
injured by the manufacturer’s products.” Id. at *9. “If such a sea change in consumer protection
policy and law [was] warranted,” the Court ultimately concluded, “it should emerge from the
legislative, not the judicial, realm.” Id.
Plaintiffs replead the brand devaluation theory in the FACC, but contend that they do so
in a “narrowed and revised” form that cures the defects identified by the Court in its last
Opinion. (FACC ¶ 1086; Docket No. 3438 (“Pls.’ Ltr.”), at 1). Specifically, Plaintiffs identify
two differences between the brand devaluation claims pleaded in the TACC and the brand
devaluation claims pleaded in the FACC. First, Plaintiffs amended their brand devaluation
claims to apply only to “Plaintiffs and putative class members who have (or had) defective cars.”
(Docket No. 3546 (“Pls.’ Supp. Br”), at 2). Second, “the FACC incorporates the work of a brand
expert and explains how the theory applies in this specific context to affected cars.” (Id. (citing
FACC ¶¶ 308-335). That is, “[t]he FACC makes allegations about how the repeated recalls had
a negative impact on the brands and models that were recalled, about the relationship of New
GM to its sub-brands, about New GM’s brand architecture, and it identifies some of the primary
variables that will inform the calculation of the spillover effect of the ignition switch recalls to
8
other recalled cars.” (Id. (citing FACC ¶¶ 332-335). New GM counters that these changes are
immaterial for either of two reasons: (1) because the Court dismissed the brand devaluation
claims in the TACC with prejudice; and (2) because, in any event, the claims, as amended, still
fall short. (GM Supp. Br. 2-8). The Court agrees with New GM on both scores.
First, New GM is correct that the Court dismissed Plaintiffs’ brand devaluation claims
with prejudice. In its motion to dismiss the TACC, New GM certainly asked that Plaintiffs’
brand devaluation claims be dismissed with prejudice. (Docket No. 2357, at 1-3). And while the
Court was silent on the issue in its Opinion, see 2016 WL 3920353 at *42, the law deems such
silence to mean dismissal with prejudice, see, e.g., Lerma v. Falks, 338 F. App’x 472, 474 (5th
Cir. 2009) (“The district court’s dismissal, though, will be construed as a dismissal with
prejudice because it was silent on the issue.”); Stern v. Gen. Elec. Co., 924 F.2d 472, 477 n.7 (2d
Cir. 1991) (“A district court’s dismissal under rule 12(b)(6) is, of course, with prejudice unless it
specifically orders dismissal without prejudice.”); Crawford v. W.V. Governor’s Office, 935 F.2d
1285 (4th Cir. 1991) (per curiam) (noting that final orders that were “silent” as to whether a
dismissal is with or without prejudice “indicat[e] dismissal with prejudice”). Notably, Plaintiffs
themselves come close to conceding as much. In a footnote in the FACC itself, for example,
they state that their brand devaluation “allegations remain in the Complaint to preserve these
claims for appeal.” (FACC 1 n.1 (emphasis added)). And in their memorandum of law in
opposition to New GM’s motion to dismiss (which Plaintiffs filed after they had briefed the
question of whether the Court’s earlier dismissal was with or without prejudice), they note that
9
the FACC includes “enhanced brand diminution allegations for appellate purposes.” (Docket
No. 3661 (“Pls.’ Opp’n”), at 4-5 (emphasis added)). 3
Plaintiffs concede that “12(b)(6) dismissals unrelated to pleading infirmities . . . are
generally with prejudice, even if silent as to the point.” (Pls.’ Ltr. 1-2). Nevertheless, they argue
that the Court “made clear that further amendments — without limitation — were authorized” in
the final paragraph of its earlier Opinion. (Id. at 2). That argument barely passes the laugh test.
The final paragraph of the Court’s earlier Opinion read in full:
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).
In re Gen. Motors, 2016 WL 3920353, at *42. Nowhere in that paragraph (or elsewhere in the
Opinion, for that matter) did the Court grant Plaintiffs carte blanche to re-plead the claims that
had been found deficient. To be sure, the Court did invite Plaintiffs to submit “proposed
amendments to the TACC” within thirty days, id., but that invitation — as the citation to Docket
No. 2323 made clear — was limited to Plaintiffs’ agreement “to make certain amendments to the
TACC” to comply with rulings of the Bankruptcy Court. (Docket No. 2323, at 2; see also
Additionally, although Plaintiffs also replead their RICO claim in the FACC (see FACC
¶¶ 998-1088), they conceded at the status conference held on October 13, 2016, that they did so
only for preservation purposes and agreed that there was no need for New GM to move for
dismissal of the claim again. (Oct. 13, 2016 Status Conf. Tr. 9-10; see also FACC 1 n.1).
Accordingly, Plaintiffs’ RICO claim is (or remains) dismissed.
3
10
Docket No. 2389 (adopting the parties’ proposal regarding the proposed amendments)).
Accordingly, to the extent the Court dismissed Plaintiffs’ claims — including their brand
devaluation claims — that dismissal was plainly with, not without, prejudice.
Second, and in any event, Plaintiffs’ revised brand devaluation claims still fail as a matter
of law. See, e.g., Williams v. Citigroup Inc., 659 F.3d 208, 214 (2d Cir. 2011) (noting that a
court need not grant leave to amend when “where the proposed amendment would be futile”
(internal quotation marks omitted)). The FACC’s new paragraphs about the importance of labels
and brands do little more than provide a factual basis for the proposition that “labels and brands
have independent economic value” — a proposition explicitly accepted by the Court in its earlier
Opinion. See In re Gen. Motors, 2016 WL 3920353, at *8. And while the revised claims are
brought on behalf of a narrower universe of Plaintiffs — namely, “Plaintiffs and putative class
members who have (or had) defective cars” (Pls.’ Supp. Br. 2) — that does not make them any
less “unprecedented and unsound.” In re Gen. Motors, 2016 WL 3920353, at *42. For one
thing, Plaintiffs provide no conceptual basis for narrowing the universe of plaintiffs who could
recover under their theory; that is, ipse dixit aside, they identify no limiting principle that would
justify applying the brand devaluation theory to only a subset of GM car owners generally, all of
whom the theory would view as having suffered harm. Additionally, whether the claims are
asserted on behalf of all GM car owners or some subset of that universe, the claims suffer from
the more fundamental problems identified in the Court’s earlier opinion — namely, that existing
law does not provide a guarantee of both “the product’s resale value and the brand’s continuing
good name.” Id. at *7.
As they did in their briefing in opposition to New GM’s motion to dismiss the TACC,
Plaintiffs rely primarily (if not exclusively) on In re Toyota Motor Corp., 790 F. Supp. 2d 1152
11
(C.D. Cal. 2011). (See Pls.’ Supp. Br. 5). But that decision does not support Plaintiffs’
argument, let alone bear the weight that Plaintiffs would put on it. Far from acknowledging the
brand devaluation theory, the Toyota Court merely recognized that the plaintiffs in that case had
established injury-in-fact as a result of their defective cars under the benefit-of-the-bargain
theory. See 790 F. Supp. 2d at 1165 (“Because 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.”); see also In re Gen. Motors, 2016 WL 3920353, at *8 (noting that the Toyota
Court recognized the plaintiffs to have a claim solely under the benefit-of-the-bargain defect
theory). More broadly, the portion of the Toyota opinion upon which Plaintiffs here rely
concerns the question of standing, not the viability of any particular damages theory. See In re
Toyota, 790 F. Supp. 2d at 1166 (finding injury-in-fact for a plaintiff that “plausibly established
an economic loss by alleging that he saw the trade-in value of his 2007 Toyota Sienna drop
according to various sources ‘once the recalls were made public’”). And as the Toyota Court
itself observed, “[a]n injury-in-fact differs from a ‘legal interest’; an injury-in-fact need not be
capable of sustaining a valid cause of action under applicable tort law.” Id. at 1160 (quoting
Denney v. Deutsche Bank AG, 443 F.3d 253, 264-65 (2d Cir. 2006). Thus, Toyota provides no
more support with respect to Plaintiffs’ amended brand devaluation claims than it did with
respect to their original claims, and those claims remain dismissed.
B. Damages for Lost Time
Next, New GM moves to dismiss Plaintiffs claims to the extent that they seek damages in
the form of “lost time” — that is, the time they spent getting repairs done on their defective
vehicles in connection with the recalls. (See GM Mem. 24-25; Docket No. 3734 (“GM Reply”),
at 13-14; see also, e.g., FACC ¶¶ 1145, 2794, 3790, 3918, 5182, 5958, 6573, 7298; Pls.’ Opp’n
12
28-29). New GM contends that time spent having a vehicle repaired for free as part of a recall
does not constitute a legally cognizable or compensable injury. (See GM Mem. 24-25; GM
Reply 13-14). Significantly, however, it frames that argument in categorical terms. That is, New
GM does not move to dismiss Plaintiffs’ claims under the law of any particular jurisdiction
(either the eight states that are the focus of this round of motion practice or otherwise); instead, it
argues that Plaintiffs’ theory of damages for lost time — a theory alleged for the first time in the
FACC — fails as a matter of law, without regard for the substantive law to be applied. In light
of that, the question for present purposes is whether any jurisdiction would recognize Plaintiffs’
theory of “lost time” damages. If so, then New GM’s motion can be denied, and the question of
whether any particular Plaintiff has a viable claim for “lost time” damages under his or her
jurisdiction’s law can be postponed to another day.
The Court concludes that some states do recognize “lost time” as a valid theory of
consequential damages. Consequential damages are generally “defined as damages which arise
from special circumstances that make them probable, although they would be unusual apart from
such circumstances.” Nat’l Investor Servs. Corp. v. Integrated Fund Servs., Inc., 85 F. App’x
779, 781 (2d Cir. 2004) (summary order) (internal quotation marks omitted). By contrast,
general damages are “the natural and probable consequence of the breach.” Id. While all states
permit the recovery of general damages in some form, states diverge with respect to the
availability of consequential damages and, in particular, whether lost time can be recovered as a
form of consequential damage. For example, courts in Illinois — one of the states at issue here
— have recognized “lost time” as a viable theory of damages. See, e.g., Fed. Ins. Co. v. J.K.
Mfg. Co., 933 F. Supp. 2d 1065, 1073 (N.D. Ill. 2013) (“Economic loss includes some incidental
and consequential losses as lost profits, rental expenses and lost time.” (emphasis added)
13
(quoting Reed v. Central Soya Co., 621 N.E.2d 1069, 1074 (Ind. 1993))); Dacor Corp. v. Sierra
Precision, 753 F. Supp. 731, 732-733 (N.D. Ill. 1991) (declining to dismiss the plaintiff’s request
for “incidental and consequential damages flowing from the recall of the defective products” as
duplicative of the request for “damages in an amount equal to the difference between the value”
of the product as sold versus the value of the product as warranted).
More broadly, as Plaintiffs note (Pls.’ Opp’n 28-29), most state courts construe their
consumer protection statutes to permit recovery beyond actual damages, including incidental and
consequential damages. See, e.g., Jersild v. Aker, 775 F. Supp. 1198, 1206 (E.D. Wis. 1991)
(discussing the Wisconsin Supreme Court’s acknowledgment that damage measures must be
flexible depending “on the nature of the bargain and the circumstances of each case,” such that
parties can be entitled to “indirect or consequential damages” if not duplicative of direct
damages); Stutman v. Chem. Bank, 731 N.E.2d 608, 612 (N.Y. 2000) (requiring a plaintiff to
prove only actual injury rather than “pecuniary harm” to recover under New York’s consumer
protection statute); Hauf v. Life Extension Found., 547 F. Supp. 2d 771, 780 (W.D. Mich. 2008)
(observing that the Michigan consumer protection statute is “remedial” and “must be liberally
construed to achieve its intended goals,” such that a plaintiff can recover for a broad array of
damages, even for injuries such as mental distress (quoting Forton v. Laszar, 609 N.W.2d 850,
853 (Mich. Ct. App. 2000))); Aspinall v. Philip Morris Cos., 813 N.E.2d 476, 492 (Mass. 2004)
(observing that defendants “confused issues of whether the plaintiffs will be able to prove actual
damages with whether they have been injured by the defendants’ allegedly unlawful conduct,”
which would entitled them to damages regardless under the Massachusetts consumer protection
statute). In light of these examples, New GM’s categorical challenge to Plaintiffs’ claims for
“lost time” damages falls short.
14
In fact, despite New GM’s claims to the contrary (GM Reply 13-14), some courts have
even recognized “lost time” as a basis for recovery in cases involving vehicle recalls. See, e.g.,
Frederick v. DaimlerChrysler Corp., No. 05-CV-2085 (JWL), 2005 WL 1319135, at *2 (D. Kan.
May 12, 2005) (remanding to state court a case in which the plaintiffs were seeking, inter alia,
“[c]ompensation for loss of time, loss of vehicle use, rental car expenses, inconvenience, and
consequential damages” incurred for having their Grand Cherokees serviced and repaired); In re
Myford Touch Consumer Litig., No. 13-CV-3072 (EMC), 2016 WL 7734558, at *15-17 (N.D.
Cal. Sept. 14, 2016) (declining to certify a class where the plaintiffs “presented no methodology
at all” relating to incidental and consequential damages, particularly because the plaintiffs did
not even tell the court whether “they [sought] to recover for the loss of time in taking their
vehicles to Ford to repair” and, if so, whether that would “include time driving their vehicles to
and from Ford for repair” and “[l]ost wages as a result”); Neale v. Volvo Cars of N. Am., LLC,
794 F.3d 353, 357 n.1 (3d Cir. 2015) (considering, for purposes of diversity jurisdiction, the
scope of damages pleaded by the plaintiffs “including but not limited to costly repairs, loss of
vehicle use, substantial loss in value and resale value of the vehicles, and other related
damages”); Ford Motor Co. v. Ocanas, 138 S.W.3d 447, 449-50 (Tex. App. 2004) (considering
the trial court’s certification of a class where the damages sought included, among other things,
“loss of use of the vehicle during the time of replacement”).
Hadley v. Chrysler Group LLC, 624 F. App’x 374 (6th Cir. 2015), upon which New GM
relies, does not call for a different conclusion. In Hadley, the plaintiffs alleged injuries “in the
form of the diminished value and loss of enjoyment of their vehicle, the cost of having their
airbag system diagnosed or repaired, and the expense incurred from having to obtain alternative
means of transportation.” Id. at 377. The Sixth Circuit dismissed the claims on standing
15
grounds because, in relevant part, the plaintiffs had failed to allege that they ever stopped using
their vehicle as a result of the defect or repairs. See id. at 378-79. Thus, the Hadley Court did
not reach the question of whether a party can recover damages for “lost time” (or, as framed in
that case, “lost use”), particularly when a plaintiff can “establish a casual connection” between
his or her injuries and the defendant’s misconduct. Id. at 378. On top of that, this Court
previously distinguished Hadley and the other cases relied on by New GM because the plaintiffs
in those cases were “seeking declaratory and injunctive relief for existing defects through a
court-ordered recall.” In re Gen. Motors, 2016 WL 3920353, at *40. By contrast, Plaintiffs here
“seek to recover damages from New GM for fraud — not to obtain declaratory and injunctive
relief for existing defects.” Id. Accordingly, the Court sees no reason why Plaintiffs (who
plainly have standing to sue) should not be entitled to consequential damages if they are able to
make out the necessary elements under the applicable state law.
None of this is to say that Plaintiffs in every jurisdiction will be able to recover for “lost
time”; there may well be states that do (or would) not recognize “lost time” as a valid theory of
damages. Additionally, with respect to jurisdictions that do recognize “lost time” as a valid
theory, Plaintiffs may face obstacles to certification of a class. Compare, e.g., In re Myford
Touch, 2016 WL 7734558, at *17 (“Absent a clear model, the Court might be tasked with
conducting individualized inquiries into how each class member was harmed, not just into the
extent of the harm. [The p]laintiffs have therefore failed to satisfy Rule 23(b)(3) with respect to
their requests for incidental and consequential damages.”), with Gunnells v. Healthplan Servs.,
Inc., 348 F.3d 417, 429-430 (4th Cir. 2003) (“Plaintiffs’ other damages claims — those relating
to injury to credit, time lost, and loss of enjoyment of life — may require individualized inquiry.
But even considering [p]laintiffs’ claims against [the defendant] as a whole, we cannot conclude
16
that the district court abused its discretion in finding that at this juncture common issues
predominate over the individual issues that may be involved in resolving these claims.”). But
those are questions for another day — either in connection with motions for class certification or
dispositive motions examining the laws of each applicable state. For present purposes, it suffices
to say that some states do recognize the “lost time” theory of damages alleged by Plaintiffs. It
follows that New GM’s motion to dismiss that theory on a categorical basis is denied.
C. The Relevant Time Period for New GM’s Economic Loss Liability
Before turning to New GM’s state-specific arguments, the Court addresses two final
issues that affect Plaintiffs in multiple jurisdictions (including jurisdictions beyond those
specifically addressed in New GM’s current motion). The first issue is whether Plaintiffs who
purchased their vehicles prior to July 10, 2009 — the date on which New GM purchased most of
the assets of Old GM as part of the bankruptcy proceedings — can pursue claims for economic
loss. 4 New GM contends that they may not, on the ground that any economic injury occurred at
the time of sale — prior to New GM’s existence — while Plaintiffs argue that New GM’s own
misconduct caused a decrease in the value of their vehicles, independent from any damages
caused by Old GM. (Pls.’ Opp’n 23-24). The second issue is whether Plaintiffs who disposed of
— that is, sold, traded in, or returned — their vehicles prior to New GM’s announcement of the
recalls beginning in 2014 can pursue such claims. New GM asserts these Plaintiffs could not
have realized any “diminished value” damages because they did not own any affected GM
vehicles at the time of the recall; Plaintiffs contend that New GM’s argument cannot be squared
As Plaintiffs note, this argument could be mooted, at least in part, if the Court were to
hold that Plaintiffs could pursue successor liability claims against New GM. (Pls.’ Opp’n 23).
As noted above, that issue is the subject of a separate motion to be addressed in due course. (See
Docket Nos. 3519, 3520, 3617, 3656).
4
17
with its own assertion that the relevant point in time for assessment of benefit-of-the-bargain
damages is the date of sale. (GM Mem. 22-24; Pls.’ Opp’n 24 n.17).
The Court agrees with New GM on both issues. As discussed at length in the Court’s
prior Order (and reaffirmed above in the discussion of the reframed brand devaluation claims),
Plaintiffs’ injuries here are limited to the “benefit-of-the-bargain defect theory.” See In re Gen.
Motors, 2016 WL 3920353, at *7-10. That theory holds “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.” Id. at *7. Most relevant here, the theory “does not compensate a plaintiff for a decrease
in resale value.” Id. at *10 (emphasis added). Instead, a plaintiff is compensated “for the fact
that he or she overpaid, at the time of the sale, for a defective vehicle.” Id. (emphasis added). It
follows that Plaintiffs who purchased cars from Old GM suffered an injury before New GM even
existed and cannot now recover from New GM for those injuries. Put differently, while New
GM’s alleged concealment of the ignition switch defect may have caused economic injury to
Plaintiffs who purchased their vehicles after New GM came into existence, it did not cause
economic injury to Plaintiffs who purchased their vehicles before; the latter Plaintiffs’ injury, if
any, was complete at the time of sale, and thus is not attributable to New GM’s conduct.
That conclusion is consistent with the decisions of courts confronting similar facts. In
Hadley, for example, the plaintiffs argued that they had been injured by the diminished value of
their vehicles due to New Chrysler’s delay in implementing repairs. See 624 F. App’x at 378.
The Hadley Court rejected that argument as follows: “New Chrysler did not manufacture the
plaintiffs’ vehicle. Old Chrysler did. The plaintiffs have not shown how they suffered
18
diminished-value injuries based on solely on New Chrysler’s delay in repairing the [defect].” Id.
Similarly, in In re Old Carco LLC, 492 B.R. 392 (Bankr. S.D.N.Y. 2013), the plaintiffs brought
claims against New Chrysler, as the purchaser of Carco LLC’s assets, even though the plaintiffs
owned vehicles that had been manufactured and sold by the then-bankrupt Carco. See id. at 39597. With respect to the claims of the plaintiffs who had purchased vehicles before New Chrysler
acquired Carco, the Bankruptcy Court concluded: “Each purchased a defective vehicle
manufactured by Old Carco that requires more servicing and is worth less money. New
Chrysler’s failure to warn them that they purchased a defective vehicle manufactured by Old
Carco did not proximately cause their economic injury . . . .” Id. at 405. The Bankruptcy Court
contrasted those plaintiffs’ situations with the situation of a plaintiff who suffered a personal
injury as a result of a defect that could have warned about at an earlier date. See id. In such a
case, the Court reasoned, the failure to warn would have “proximately cause[d]” a plaintiff’s
subsequent injuries. Id.; see also Holland v. FCA US LLC, 656 F. App’x 232, 240 (6th Cir.
2016) (“Even if FCA had warned the [p]laintiffs, nothing would have changed. The only injuries
the [p]laintiffs allege involve the costs of the repairs, but the [p]laintiffs would have needed these
repairs irrespective of any warning. The injuries were the result of the defect, not FCA’s failure
to warn. Thus, the [p]laintiffs have failed to sufficiently allege that FCA’s failure to warn caused
their injury to survive a motion for judgment on the pleadings.”).
Plaintiffs’ attempts to distinguish these cases are weak at best. With respect to In re Old
Carco, Plaintiffs make much of the fact that the purchasers in that case had knowledge of the
design defects, whereas the purchasers here did not. (See Pls.’ Opp’n 27). But that is a
distinction without a difference. That is, whether or not Plaintiffs who purchased their vehicles
prior to July 10, 2009, knew at the time of their purchase that a defect existed, they still
19
purchased their vehicles prior to the creation of New GM. Moreover, although Plaintiffs are
correct that the defendant-manufacturer had issued several recalls relating to the defect at issue in
that case (specifically, a fuel-spit back problem), the plaintiffs there were the owners of
particular models and years that had not previously been recalled. See In re Old Carco, 492 B.R.
at 395-96, 399. Plaintiffs seek to distinguish Hadley (and Holland), meanwhile, on the ground
that it did “not involve a massive fraudulent cover-up, but a voluntary recall.” (See Pls.’ Opp’n
27). But again, Plaintiffs do not explain why — even taking that difference as true — a cover-up
would render New GM liable for economic injuries to Plaintiffs who, by their own admission,
were harmed by “depriv[ations] of the benefits of their bargains.” (Id.). Those deprivations took
place at the time of sale, and no amount of arm-waving or finger-pointing can change the basic
fact that New GM did not exist at that time and thus could not have caused the harm.
Finally, Plaintiffs rely on state-law cases allowing recovery for “diminished value” (see
Pls.’ Opp’n 24-26), but those cases are immaterial. The Court does not take New GM to be
arguing that “diminished value” can never be a proper measure of damages. Several of the states
at issue here plainly permit recovery of that sort in some circumstances. See, e.g., Miller v.
William Chevrolet/Geo, Inc., 762 N.E.2d 1, 10 (Ill. App. Ct. 2001) (“Illinois courts have
generally allowed damages claims based on diminished value of a product regardless of whether
it has yet malfunctioned, provided the product contains a manifested defect or current condition
affecting value.”); Parkway Co. v. Woodruff, 901 S.W.2d 434, 441 (Tex. 1995) (“Diminution in
value does not duplicate the cost of repairs if the diminution is calculated based on a comparison
of the original value of the property and the value after repairs are made.” (emphasis omitted)).
But none of the cases cited by Plaintiffs addresses the real issues here: whether “diminished
value” damages occur at or after the time of sale and, relatedly, whether an entity that did not
20
exist when the product was sold can be held liable for such damages. See, e.g., Franklin Corp. v.
Prahler, 932 N.Y.S.2d 610, 616 (2011) (holding that a plaintiff should be able “to recover the
cost of [] diminution in value” where that diminution was caused “by the negligence of the
defendant” (emphasis added)). Thus, the Court relies on the reasoning in its prior Opinion and
the authority of Hadley, Holland, and In re Old Carco to conclude that the claims of all Plaintiffs
who bought their vehicles prior to entry of the Sale Order on must be dismissed. 5
This brings the Court to the final non-state-specific issue: New GM’s contention that
economic loss claims brought by Plaintiffs who sold, traded-in, or returned their vehicles prior to
the announcement of the recalls must also be dismissed. (GM Mem. 23-24). Plaintiffs’ respond
solely by saying “this argument flatly contradicts New GM’s argument that only the point of sale
is relevant.” (Pls.’ Opp’n 24 n.17). But the Court takes New GM to be arguing that, even under
Plaintiffs’ theory, those who disposed of their vehicles before the recall could not have realized
any “diminished value” because they did not own the defective vehicles when the recalls were
announced. If so, the Court agrees. Crucially, though, New GM’s point is limited to economic
loss damages. In all likelihood, a plaintiff who resold her car before the recall suffered no
economic loss damages, as the then-unknown defect could not have affected the resale price.
See, e,g., Avery v. State Farm Mut. Auto. Ins. Co., 835 N.E.2d 801, 859-60 (Ill. 2005) (finding no
Specifically, with respect to the named Plaintiffs at issue in this motion, New GM’s
motion to dismiss is GRANTED with respect to Alabama Plaintiff Gerald Smith and Marion
Smoke; Illinois Plaintiff Keith Nathan; Massachusetts Plaintiffs Colin Elliott and Susan Viens;
Michigan Plaintiffs Diana Cnossen, David Price, Jacqueline Smith, and Bryan Wallace; New
York Plaintiffs Sandra Levine, Michael Rooney, and William Ross; Pennsylvania Plaintiffs
Shawn Doucette, Shirley Gilbert, and George Mathis; Texas Plaintiffs Shenyesa Henry, Lisa
Simmons, and Malinda Stafford; and Wisconsin Plaintiff Les Rouse.
5
21
actual damages where the plaintiff sold his vehicle for fair market value prior to any public
knowledge that certain parts were of inferior quality).
That said, for reasons not discussed by the parties, it does not necessarily follow that the
claims of all such Plaintiffs must be dismissed in their entirety. In theory, a plaintiff who
purchased her car after the Sale Order, but sold it before the recall was announced, could still
plead and prove damages in the form of out-of-pocket expenses and lost time. For instance, Lisa
McClellan, who purchased her car on November 22, 2010, but returned the car to the dealership
prior to the announcement of the recalls, alleges that her car “shut off while she was driving at
least fifty or sixty times” in the year and a half that she owned it, requiring her to take it to “the
service repair shop often.” (FACC ¶ 275). McClellan further alleges that “[s]he suffered
economically because of the vehicle,” presumably because of the need for frequent repairs. (Id.).
By contrast, Greg Theobald — the only other Plaintiff who purchased a vehicle from New GM
but traded in the car prior to the recalls — does not allege paying for any defect-related repairs or
suggest that the defect, even if not announced, had any impact on the amount he received for the
car. Accordingly, New GM’s motion to dismiss is denied with respect to McClellan and granted
with respect to Theobald. Plaintiffs, however, are granted leave to amend to the FACC to allege
other damages incurred by Theobald, if any. 6
The other two Plaintiffs who sold, traded in, or returned their cars prior to the
announcement of the first recalls in February 2014 are Coleman and Viens. The claims of the
former were dismissed by the Court’s Order of June 16, 2016, see supra note 2, and the claims of
the latter fail because she purchased her car prior to the Sale Order, see supra note 5.
Accordingly, the Court need not address whether they allege any viable damages despite the date
on which they disposed of their cars. (See GM Mem. 23).
6
22
D. State Law 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
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: Alabama, Illinois, Massachusetts, Michigan,
New York, Pennsylvania, Texas, and Wisconsin. 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 address each claim with respect to each jurisdiction separately, as subtle
differences in state law can compel 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 claims fail.
1. Alabama
In light of the Court’s rulings above and the Order of June 16, 2017, the only remaining
Alabama Plaintiff for purposes of this motion is Valeria Glenn. Glenn owns a 2006 Pontiac
Solstice, which she purchased used on February 23, 2013, and which was subject to the Delta
Ignition Switch recall. (Id. ¶ 47). Glenn’s car experienced a shutdown event once while she was
driving, and her steering wheel also locked up. (Id.). Glenn had her car’s ignition switch
replaced in April 2014 pursuant to the recall. (Id.). She brings claims under the Alabama
Deceptive Trade Practices Act (“ADTPA”), Ala. Code § 8-19-1, et seq. (FACC ¶¶ 1123-1148);
for fraudulent concealment (id. ¶¶ 1149-1162); and for unjust enrichment (id. ¶¶ 1185- 1195).
The Court will address each of these claims in turn. 7
The Court notes that it need not and does not decide in the discussion below whether
Alabama law requires the manifestation of a defect to plead claims for consumer fraud, common
7
23
a. The ADTPA
Glenn’s first claim arises under the ADTPA (see FACC ¶¶ 1123-1148), which provides a
remedy for certain “unlawful trade practices.” Ala. Code § 8-19-5. Before addressing the
substance of Glenn’s claim under the statute, however, the Court must address a threshold issue
raised by New GM — namely, that the “savings clause” of the ADTPA precludes Glenn’s claim
outright. (See GM Mem. 45-46). That provision provides:
The civil remedies provided herein and the civil remedies available at common
law, by statute or otherwise, for fraud, misrepresentation, deceit, suppression of
material facts or fraudulent concealment are mutually exclusive. An election to
pursue the civil remedies prescribed in this chapter shall exclude and be a
surrender of all other rights and remedies available at common law, by statute or
otherwise. . . . An election to pursue any civil remedies available at common law
. . . arising out of any act, occurrence or transaction actionable under this chapter
shall exclude and be a surrender of all rights and remedies available under this
chapter.
Ala. Code § 8-19-15(a)-(b). In light of that language, Glenn wisely concedes that she “cannot
ultimately proceed under both the Alabama DTPA and the common law of fraud by
concealment.” (Pls.’ Opp’n 44). But New GM goes one step further and argues that, by
pleading a common law fraud claim, Glenn “procedurally waived” any claim under the ADTPA
and that the statutory claim should therefore be dismissed. (GM Mem. 46).
There is a split of authority on the question of whether a plaintiff can plead claims under
both the ADTPA and common law — that is, on whether a plaintiff must make her “election”
law fraudulent concealment, or unjust enrichment, as the claims of the one and only Alabama
Plaintiff who does not allege the manifestation of a defect — Gerald Smith (see GM Mem. 16;
Pls’ Opp’n 15) — were dismissed on other grounds. See supra note 5. Notably, the Court’s
analyses of the claims in the other seven jurisdictions implicated in New GM’s motion are
unaffected by the rulings above and the June 16, 2017 Order, as the remaining Plaintiffs in each
of those jurisdictions necessitate resolution of every issue raised in New GM’s motion to
dismiss.
24
under the savings clause at the pleading stage or may wait. Compare Holmes v. Behr Process
Corp., No. 15-CV-0454 (WMA), 2015 WL 7252662, at *2-3 (N.D. Ala. Nov. 17, 2015)
(dismissing the plaintiff’s ADPTA claim on the ground that she had “procedurally waived” it by
pleading common law fraud claims), with Barcal v. EMD Serono, Inc., No. 14-CV-1709 (MHH),
2016 WL 1086028, at *5 (N.D. Ala. Mar. 21, 2016) (denying a motion to dismiss an ADPTA
claim on the ground that while the “ADPTA’s savings clause would preclude [the plaintiff] from
ultimately obtaining relief under both the ADPTA and her common law claims,” she was
permitted to plead both), and Collins v. Davol, Inc., 56 F. Supp. 3d 1222, 1227 n.2 (N.D. Ala.
2014) (similar). In the Court’s view, the courts permitting both claims at the pleading stage have
the better of the argument. First, although the plain language of the savings clause requires a
plaintiff to elect one or the other remedy, it does not specify when in the proceedings the plaintiff
must do so. 8 Second, although the options are “mutually exclusive,” the provision explicitly
allows a plaintiff to elect either of the two kinds of remedy. See, e.g., Cheminova Am. Corp. v.
Corker, 779 So. 2d 1175, 1183 (Ala. 2000) (noting that “the Act specifically states that
consumers are not prohibited from seeking redress under the common law or under other statutes
for conduct that could be redressed under the Act”). Thus, it makes no more sense to say that a
Underscoring this point, the Alabama Supreme Court has considered without comment
(albeit, regarding other issues) cases in which common law and ADPTA claims were pleaded
together at the outset. See, e.g., Ex Parte Terminix Int’l Co. Ltd. P’ship, Inc., 14 So. 3d 849, 850
(Ala. 2009) (evaluating a motion for a protective order during discovery in a case where the
plaintiffs asserted, “among other things, claims of fraud, breach of warranty, negligence, breach
of contract, . . . and claims pursuant to the Alabama Deceptive Trade Practices Act”);
Birmingham News Co. v. Lynch, 797 So. 2d 440, 444 (Ala. 2001) (evaluating the trial court’s
denial of a motion to compel arbitration where the plaintiffs alleged, inter alia, “fraud in the
inducement” and “violations of the Deceptive Trade Practices Act”).
8
25
plaintiff who pleads both kinds of claims has “procedurally waived” her claim under the ADPTA
than to say that she has procedurally waived her claims under the common law.
Finally, Rule 8(d)(3) of the Federal Rules of Civil Procedure — which applies in this
forum — “allows parties to plead alternative, even inconsistent, theories.” Barcal, 2016 WL
1086028, at *5; see Fed. R. Civ. P. 8(d)(3) (“A party may state as many separate claims or
defenses as it has, regardless of consistency.”). Relying on Holmes, New GM contends that Rule
8(d)(3) does not apply because it would “improperly enlarge [Glenn’s] substantive rights,
violating the Rules Enabling Act” and the rule established in Erie R. Co. v. Tompkins, 304 U.S.
64 (1938) (GM Reply 22), but the Court is unpersuaded. Allowing Glenn to recover on her
ADPTA claim and her common law fraud claim would obviously enlarge her substantive rights
contrary to the language of the Act’s savings clause. But the right to plead alternative, or even
inconsistent, claims is not a matter of substance; it is a quintessential matter of procedure. In
short, while Glenn will — at some point — need to make an “election” to pursue either her
ADPTA claim or her common law fraud claims, the Court will not require her to do so now, let
alone dismiss either kind of claim on the dubious ground that it was “procedurally waived.”
Turning to the merits of Glenn’s ADTPA claim, to the extent relevant here, the statute
makes it unlawful to represent “that goods or services have . . . benefits[] or qualities that they do
not have,” Ala. Code § 8-19-5(5); to represent “that goods or services are of a particular
standard, quality, or grade,” id. § 8-19-5(7); or to engage “in any other unconscionable, false,
misleading, or deceptive act or practice in the conduct of trade or commerce,” id. § 8-19-5(27).
Alabama case law “interpreting the scope of the specific unlawful trade practices described in
[the Act]” is scant, but the “entire statutory scheme” makes clear that the Act’s provisions “are
designed to have limited application, and are intended to replace the common law and statutory
26
actions for fraud only in specifically designated situations.” Sam v. Beaird, 685 So. 2d 742, 744
(Ala. Civ. App. 1996). While the ADPTA does not “explicitly mak[e] the concealment or
omission of a material fact unlawful,” the Act’s “catch-all” provision makes it unlawful to
engage “in any other . . . deceptive act or practices.” Reid v. Unilever U.S., Inc., 964 F. Supp. 2d
893, 915-16 (N.D. Ill. 2013) (quoting Ala. Code. § 8-19-5(27)). Thus, a plaintiff may base an
ADPTA claim on an “alleged concealment, suppression, or omission.” Id. at 916. In doing so,
however, the plaintiff must show “some knowledge of false or deceptive conduct on the part of
the wrongdoer.” Beaird, 685 So. 2d at 744; see also, e.g., Lynn v. Fort McClellan Credit Union,
No. 11-CV-2904 (VEH), 2013 WL 5707372, at *7 (N.D. Ala. Oct. 21, 2013) (dismissing
ADPTA claim for failure to show “any intent by [the defendant] to deceive” the plaintiff).
Further, where, as here, an ADPTA claim sounds in fraud, the plaintiff must satisfy Rule 9(b).
Reid, 964 F. Supp. 2d at 916.
Glenn’s ADPTA claim is sufficient to satisfy the heightened pleading requirements of
Rule 9(b). Glenn’s car was subject to the Delta Ignition Switch recall (FACC ¶ 47), and New
GM tacitly concedes that the consumer protection claims of Delta Ignition Switch Plaintiffs in
every state (except Wisconsin, which the Court addresses below) are sufficiently pleaded to the
extent that they rest on alleged omissions as opposed to misrepresentations. (See GM Mem. 3538: Pls.’ Opp’n 35 n.28). Glenn’s claim easily survives on that basis alone, but it also passes the
Rule 9(b) test to the extent it rests on alleged misrepresentations. (See FACC ¶¶ 1135, 1137
(alleging affirmative misrepresentations)). 9 With respect to the Delta Ignition Switch defect in
New GM contends that Plaintiffs abandoned their misrepresentation claims under the law
of every jurisdiction at issue here other than Wisconsin by not responding to its arguments for
dismissal. (GM Reply 17-18). The Court disagrees, as Plaintiffs state as follows in their brief:
9
27
particular, Plaintiffs allege many misrepresentations made by New GM in nationwide
advertisements and reports about the safety and reliability of their vehicles; Plaintiffs also offer a
slew of evidence showing that New GM knew about (or should have known about) the Delta
Ignition Switch defect from the time of its inception. (See FACC ¶¶ 336-472). The Court
previously found allegations less robust than these to be “just enough to cross the Rule 9(b)
line,” even though the plaintiff had not alleged “any specific misrepresentations” that she relied
on prior to purchasing her vehicle. In re Gen. Motors, 2016 WL 3920353, at *26. Other courts
have done much the same. See, e.g., In re Takata Airbag Prod. Liab. Litig., No. 14-CV-24009
(FAM), 2016 WL 5844872, at *3 (S.D. Fla. June 20, 2016) (finding an ADPTA claim to be
sufficient under Rule 9(b) where the plaintiffs had alleged that Subaru misrepresented in its
brochures and on its website that its airbags were safe and reliable); Glenn v. Hyundai Motor
Am., No. SA 15-CV-2052 (DOC), 2016 WL 3621280, at *13 (C.D. Cal. June 24, 2016) (similar).
It follows that New GM’s motion to dismiss Glenn’s ADPTA claim must be and is denied.
b. Fraudulent Concealment
In addition to her consumer fraud claim, Glenn also brings claims for common law
fraudulent concealment (sometimes referred to as “suppression” under Alabama law). (See
Plaintiffs dispute New GM’s contention that their voluminous misrepresentation
allegations fail to satisfy Rule 9(b). See [FACC] ¶¶ 336-422 (detailing broad
sampling of false claims of safety and reliability). But, as New GM concedes,
omissions and concealments, by themselves, are actionable under the consumer
protection laws of each relevant jurisdiction apart from Wisconsin. Accordingly,
for the purposes of this Section, Plaintiffs discuss their consumer protection
claims based on misrepresentations claims only in the context of their claims
under the Wisconsin DTPA.
(Pls Opp’n 35 n.28 (emphasis omitted)). Thus, this is not a situation where “an inference may be
fairly drawn” that Plaintiffs have abandoned a whole host of claims. Jackson v. Fed. Exp., 766
F.3d 189, 196 (2d Cir. 2014).
28
FACC ¶¶ 1149-1162). To prevail, Glenn must show: “(1) a duty on the part of the defendant to
disclose facts; (2) concealment or nondisclosure of material facts by the defendant;
(3) inducement of the plaintiff to act; [and] (4) action by the plaintiff to his or her injury.”
Parsons & Whittemore Enters. Corp. v. Cello Energy, LLC, 613 F. Supp. 2d 1271, 1288 (S.D.
Ala. 2009) (quoting Freightliner, LLC v. Whatley Contract Carriers, LLC, 932 So. 2d 883, 891
(Ala. 2005)). Here, whether Glenn pleads a plausible claim of fraudulent concealment turns on
whether New GM owed her a duty. (See FACC ¶¶ 1155-1159). Under the statute, a duty to
disclose arises if there is a confidential relationship between the parties or where the “particular
circumstances” of the case mandate disclosure. Ala. Code 1975 § 6-5-102; see also Parsons,
613 F. Supp. 2d at 1288; Freightliner, 932 So. 2d at 891. Glenn does not allege, nor could she
allege, any confidential relationship or fiduciary duty on the part of New GM. Instead, the
viability of her claim turns on whether the particular circumstances here required disclosure.
Courts look to several factors in determining whether the particular circumstances of a
case required disclosure: “(1) the relationship of the parties; (2) the relative knowledge of the
parties; (3) the value of the particular fact; (4) the plaintiffs’ opportunity to ascertain the fact;
(5) the customs of the trade; and (6) other relevant circumstances.” Freightliner, 932 So. 2d at
891 (internal quotation marks omitted). Of particular relevance here, one of the “other relevant
circumstances” is whether a defendant has made any “affirmatively false statements.” In re
Takata Airbag Prod. Liab. Litig., 193 F. Supp. 3d 1324, 1337 (S.D. Fla. 2016) (internal
quotation marks omitted); see also Freightliner, 932 So. 2d. at 895 (holding that, where a
defendant does not have a duty to speak but chooses to speak “either voluntarily or in response to
inquiry, he is bound not only to state the truth but also not to suppress or conceal any facts within
29
his knowledge which will materially qualify those statements,” that is, “if he speaks at all, he
must make a full and fair disclosure” (internal quotation marks omitted)).
The decision in In re Takata is particularly illustrative here. The plaintiffs there sought to
recover economic losses from Mazda for having knowingly installed Takata-brand airbags filled
with ammonium nitrate — a propellant highly prone to instability and explosions — in several
models of Mazda cars. See 193 F. Supp. 3d at 1335. Mazda moved to dismiss the plaintiffs’
Alabama fraudulent concealment claim, arguing it had no duty to disclose because the cars had
been purchased from third parties. See id. at 1336-37. The In re Takata Court disagreed, finding
that Mazda had a duty to disclose the alleged defect arising out of the company’s decision to
“[make] incomplete representations about the safety and reliability of the Class Vehicles, while
purposefully withholding material facts from [p]laintiffs that contradicted these representations.”
Id. at 1337-38 (internal quotation marks omitted). The Court pointed in particular to information
in brochures and on Mazda’s website discussing its cars’ superior performance and safety
features. See id.
Glenn’s allegations are quite similar to the allegations made by the plaintiffs in In re
Takata. She plausibly alleges that New GM knew of ignition switch-related defects by late 2009
or early 2010 and (at least arguably) took steps to conceal those defects — for example, by
instructing New GM employees not to use terms that could alert the National Highway Traffic
Safety Administration (“NHTSA”) or the public to the existence of a safety issue. (FACC ¶¶ 42,
1024, 1156). 10 Further, these facts were plainly of “high value,” and there is no suggestion that
With respect to certain non-ignition switch defects, New GM contends that the FACC
fails to allege that it had knowledge of the defect prior to certain plaintiffs’ purchasing their
vehicles. (See GM Mem. 50 n.26). That argument does not apply to Glenn, the only remaining
Alabama Plaintiff, and thus is not addressed here.
10
30
Glenn had an opportunity to ascertain them on her own. (See id. ¶¶ 736-47, 752-54, 785, 1131).
Most relevant, Glenn alleges that New GM made repeated statements concerning the safety of its
vehicles and the company’s focus on safety standards. (See id. ¶¶ 336-424 (providing several
specific examples)). A defendant that has chosen speak voluntarily cannot “suppress or conceal
any facts within his knowledge which will materially qualify those stated.” Freightliner, 932 So.
2d at 895 (emphasis omitted).
In arguing otherwise, New GM points to Mason v. Chrysler Corp., 653 So. 2d 951 (Ala.
1995), in which the Alabama Supreme Court held that plaintiffs who purchased cars advertised
to be “smooth-riding,” which actually vibrated when driving at high speeds, could not make out
a claim for fraudulent suppression because their “contacts with Chrysler Corporation consisted
primarily of their viewing national advertisements before they purchased the vehicle and their
presenting the vehicle for repair.” Id. at 955; see also McGowan v. Chrysler Corp., 631 So. 2d
842, 847 (Ala. 1993) (finding the plaintiff “failed to present substantial evidence that [Chrysler]
had a duty to disclose to him the problems with the Fifth Avenue line of cars” for similar
reasons); DaimlerChrysler Corp. v. Morrow, 895 So. 2d 861, 866 (Ala. 2004) (affirming
dismissal on summary judgment where the plaintiff had alleged merely that Chrysler had a duty
to disclose “certain similar problems that had occurred in other Dodge Ram trucks like his,”
without more specific allegations). Notably, however, the cases upon which New GM relies
were all decided at the summary judgment stage rather than motion to dismiss stage, and none
involved specific evidence that the defendant “knowingly or actively concealed from [the
plaintiff] its knowledge of the” defects. McGowan, 631 So. 2d at 848. Accordingly, the Court
concludes that Glenn, like the plaintiffs in In re Takata, plausibly alleges that New GM had a
duty to disclose under the particular circumstances of this case. See In re Takata, 193 F. Supp.
31
3d at 1338 (“At the motion to dismiss stage, because Plaintiffs have alleged that Mazda made
these incomplete statements, the Court finds Plaintiffs have sufficiently alleged Mazda had a
duty to disclose additional facts about the safety of its vehicles.”). As that was the only disputed
element of her fraudulent concealment claim, New GM’s motion to dismiss that claim is denied.
c. Unjust Enrichment
Finally, Glenn brings an unjust enrichment claim. (See FACC ¶¶ 1185-1195). To prevail
on a claim for unjust enrichment under Alabama law, “the plaintiff must show that the defendant
holds money which, in equity and good conscience, belongs to the plaintiff or holds money
which was improperly paid to the defendant because of mistake or fraud.” Scrushy v. Tucker,
955 So.2d 988, 1011 (Ala. 2006) (internal quotation marks and emphases omitted). “A
defendant cannot be unjustly enriched if it does not have in its possession any money belonging
to the plaintiff.” RREF RB-AL SLDL, LLC v. Saxon Land Dev., 968 F. Supp. 2d 1133, 1141
(M.D. Ala. 2013). That requirement is fatal to Glenn’s claim, as she purchased her vehicle used
from Southtown Motors, a non-GM dealership. (FACC ¶ 47). Accordingly, the Court “cannot
reasonably infer from the facts alleged that [New GM] ever held any money belonging to
[Glenn].” In re Takata, 193 F. Supp. 3d at 1342. In any event, “unjust enrichment is an
equitable remedy which issues only where there is no adequate remedy at law.” Unilavor Trust,
SA v. Columbia Petroleum, LLC, 315 F.R.D. 374, 382 (S.D. Ala. 2016); see also N. Assur. Co. of
Am. v. Bayside Marine Const., Inc., No. 08-CV-222 (KD), 2009 WL 151023, at *4 (S.D. Ala.
2009) (“Alabama law makes clear that unjust enrichment is an equitable remedy only to be
invoked where there is no available remedy at law.”); Pearson’s Pharm., Inc. v. Express Scripts,
Inc., 505 F. Supp. 2d 1272, 1278 (M.D. Ala. 2007) (dismissing an unjust enrichment claim with
prejudice because a party had an adequate remedy at law for damages under a theory of breach
32
of contract). Here, Glenn has adequate remedies at law insofar as she purchased her car under
warranty (FACC ¶ 47), and brings claims for the same damages under the ADPTA and for
common law fraudulent concealment. Accordingly, New GM’s motion to dismiss Glenn’s
unjust enrichment claims must be granted.
2. Illinois
The remaining Illinois Plaintiffs for purposes of this motion are Susan Benner, Debra
Cole, Charlene Kapraun, Patrick Painter, and Cliff Redmon. Benner owned a 2007 Pontiac G5
that she bought as a certified pre-owned vehicle on August 22, 2011, which was subject to the
Delta Ignition Switch recall. (FACC ¶ 115). Cole owned a 2004 Chevrolet Impala, which she
purchased used in August 2009, and which was subject to the Low Torque Ignition Switch recall.
(Id. ¶ 117). Kapraun owns a 2008 Chevrolet Impala, which she bought used from a private seller
on May 27, 2011, and which was also subject to the Low Torque Ignition Switch recall. (Id.
¶ 119). Painter owns a 2010 Chevrolet Cobalt SS that he purchased new in April 2010, which
was subject to the Delta Ignition Switch and Power Steering recalls. (Id. ¶ 122). Finally,
Redmon owned a 2010 Chevrolet Camaro that he purchased new in the spring of 2010, which
was subject to the Knee-to-Key Ignition Switch recall. (Id. ¶ 123).
Benner’s car’s ignition switch was difficult to turn on and, since it was repaired as part of
the Delta Ignition Switch recall on August 6, 2014, the steering wheel of her car now vibrates —
an issue that has yet to be fixed by the dealership. (Id. ¶ 115). Cole’s car would sometimes not
start, despite turning the ignition key; she ultimately received a recall notice for the Low Torque
Ignition Switch recall in 2014. (Id.¶ 117). In April 2014, however, she sold the vehicle due to
ignition switch and other issues. (Id.). Kapraun’s vehicle never manifested any defect, although
it was subject to the Low Torque Ignition Switch recall, for which she received a recall notice on
33
July 6, 2015. (Id. ¶ 119). Painter’s power steering failed in April 2011, but he had his car
repaired under warranty. (Id.¶ 122). In October 2011, the ignition switch cylinder had to be
replaced because the car would not turn off and the key could not be removed from the ignition.
He did not learn about the recalls until 2014, however. (Id.). Finally, twice while Redmon was
backing out of his driveway, his car shut down. (Id.¶ 123). Although he never received a recall
notice, the dealership told him it needed to repair the ignition switch when he went in for an oil
change. After the repair, the car’s remote fob no longer worked properly. (Id.). In January
2015, Redmon traded in his car. (Id.). The Illinois Plaintiffs bring claims under the Illinois
Consumer Fraud and Deceptive Business Practices Act (“ICFA”), 815 ILCS 505/1 et seq. & 720
ILCS 295/1A (FACC ¶¶ 2772-2796); for fraudulent concealment (id. ¶¶ 2797-2810); and for
unjust enrichment (id. ¶¶ 2833-2843). The Court will address each of these claims in turn. 11
a. The ICFA
The ICFA “provides a remedy for ‘unfair methods of competition and unfair or deceptive
acts or practices’ in specific commercial transactions.” Greenberger v. GEICO Gen. Ins. Co.,
631 F.3d 392, 399 (7th Cir. 2011) (quoting 815 Ill. Comp. Stat 505/2). Specifically, the statute
prohibits “unfair methods of competition and unfair or deceptive acts or practices, including but
not limited to the use or employment of any deception, fraud, false pretense, false promise,
misrepresentation, or the concealment, suppression or omission of any material fact.” 815 Ill.
Comp. Stat. 505/2. To state a claim under the ICFA, a plaintiff must show: “(1) a deceptive act
or practice by defendant; (2) defendant’s intent that plaintiff rely on the deception; and (3) that
As was the case for Alabama, the Court need not and does not decide whether the law in
Illinois or Massachusetts (the next state) requires the manifestation of a defect for any of the
claims at issue. That is because New GM does not argue the issue with respect to those states.
11
34
the deception occurred in the course of conduct involving trade and commerce.” Connick v.
Suzuki Motor Co., 675 N.E.2d 584, 593 (1996); see also Reid, 964 F. Supp. 2d at 912. Where an
ICFA claim is based on concealment, a plaintiff must also “establish that the fact concealed was
known to the seller at the time of concealment.” Chevrolet/GEO, Inc., 762 N.E.2d at 14. By
contrast, “even innocent misrepresentations can support liability.” Id. Finally, claims sounding
in fraud under the ICFA are subject to the heightened pleading standards of Rule 9(b). See, e.g.,
Greenberger, 631 F.3d at 399.
With those standards in mind, the Court will address each of the remaining Illinois
Plaintiffs’ claims. First, Benner’s claim — based on the Delta Ignition Switch recall (FACC
¶ 115) — requires little discussion. New GM does not contest that Plaintiffs bringing claims
relating to the Delta Ignition Switch recall on a concealment theory satisfy Rule 9(b). And
Plaintiffs plainly allege a “deceptive act” (or, rather, acts) on the part of New GM that occurred
in the course of commerce and that led them (including Benner) to either purchase a vehicle that
they otherwise would not have or pay more for the vehicle. (See id. ¶¶ 2772-2796). Thus, for
the reasons discussed above with respect to Glenn’s claim, Benner’s ICFA claim survives, in
both its concealment and misrepresentation forms. See, e.g., Connick, 675 N.E.2d at 594-95
(upholding an ICFA claim where the plaintiffs alleged that Suzuki represented “that the Samurai
had special safety features to protect passengers in a rollover accident” when “this information
was false since the Samurai had improper side-door strength and roof-crush resistance” and
“Suzuki undoubtedly knew that many prospective purchasers would read the review”).
The next two Plaintiffs, Cole and Kapraun, purchased vehicles subject to Low Torque
Ignition Switch recalls. (See Pls.’ Opp’n 4; GM Mem., Ex. 2 (“Recall Chart”), at 2).
Specifically, Cole’s car was subject to the June 2014 recall for an Inadvertent Key Rotation
35
Defect (Recall Chart 2), and Kapraun’s car was subject to the July 2014 recall for a Slotted Key
Defect. (Id.). In simple terms, these defects both involved low torque ignition switches that
could inadvertently move out of the run position (due to road conditions or weighted key chains),
leading to a loss of power and loss of critical safety systems, including the airbags. (See FACC
¶¶ 562-655; GM Mem. 3-4, 5-6). As with the Delta Ignition Switch recall, New GM does not
contest that Plaintiffs bringing claims relating to the Low Torque Ignition Switch recalls on a
concealment theory generally satisfy Rule 9(b). Instead, New GM takes aim at Plaintiffs’ claims
to the extent that they rest on the concealment of a “defective process” through which New GM
built vehicles. (GM Mem. 39; see FACC ¶ 2777 (alleging the unlawful concealment of defects
as well as a “defective process” that included “cost-cutting, minimizing the importance of safety
issues, siloing, the depletion of resources devoted to recognizing and studying safety issues,
etc.”)). New GM claims that the FACC contains “no facts regarding a defective manufacturing
‘process’ aside from allegations relating to the Delta Ignition Switch vehicles.” (GM Mem. 39
(citation omitted)). Relatedly, it contends that the “allegation — that Delta Ignition Switch
defects harmed owners of all recalled vehicles — attempts to resurrect the ‘brand devaluation’
theory.” (Id. (citation omitted)).
If Plaintiffs were bringing free-floating “defective process” claims — that is, untethered
to actual defects in particular vehicles — the Court would be inclined to agree with New GM
that the claims would amount to little more than rebranded brand devaluation claims. But the
Court does not understand that to be what Plaintiffs allege. Instead, the “defective process”
allegations are more accurately viewed as an extension of, or gloss on, Plaintiffs’ concealment
claims as to particular defects. (See Pls.’ Opp’n 39-40). And contrary to New GM’s
contentions, the “defective process” allegations are not limited to Delta Ignition Switch vehicles.
36
Indeed, the FACC includes extensive allegations regarding New GM’s prioritization of costcutting over safety, contributing to a culture that allowed for all of the alleged defects to occur
and remain concealed. (See FACC ¶¶ 772-821). These allegations include references to
company-wide practices that were applied to both the Delta Ignition Switch and non-Delta
Ignition Switch defects. For example, when evaluating whether to re-mail special bulletins
regarding several known defects (including but not limited to the Delta Ignition Switch defect), a
New GM director expressed concern that doing so would “drive a lot of cost and [would] create
part issues.” (Id. ¶ 784). Additionally, New GM instructed employees company-wide to refrain
from using words such as “dangerous,” “defect,” and “safety-related” — instructions that
plausibly (perhaps, likely) led to the concealment of defects beyond the Delta Ignition Switch.
(See, e.g., id. ¶¶ 803-810). Finally, the FACC alleges that New GM was aware of the particular
defects affecting Cole’s and Kapraun’s cars from its inception (see id. ¶¶ 522-597), but — as
with the Delta Ignition Switch defect — failed to promptly address or recall those vehicles.
Taken together, then, the Court concludes that Cole and Kapraun (and the other non-Delta
Ignition Switch plaintiffs, including Redmon and Painter) sufficiently allege a “defective
process” at New GM that would have been material to a reasonable consumer and could have
contributed to concealment of all of the alleged defects, not just the Delta Ignition Switch.
Next, New GM argues that Redmon’s ICFA claim must be dismissed in its entirety
because he cannot show that New GM was aware of the Knee-to-Key Bump defect (also referred
to as the “Camaro Ignition Key Bump” defect) prior to his purchase of a Chevrolet Camaro. (See
GM Mem. 41; FACC ¶ 123). The Court agrees. Plaintiffs allege that NHTSA received
“numerous complaints of power failures in 2010-2014 Camaros,” starting “as early as January
2010, months after New GM’s formation.” (FACC ¶ 665; id. ¶¶ 669-783 (listing examples)).
37
The only specific examples Plaintiffs allege, however, are (1) an undated complaint involving a
model year 2010 car (see id. ¶ 666); (2) two complaints in May 2010 (see id. ¶¶ 667, 669); and
(3) complaints between October 2012 and May 2014. (See id. ¶ 670). The problem for Redmon
is that the FACC is conspicuously vague about the specific date on which he purchased his car,
describing it only as “in spring 2010” (id. ¶ 123) — a date that could be before or after the
complaints in May 2010 and is obviously before the complaints in October 2010 and later. Thus,
it is unclear whether any of the NHTSA complaints had been filed before Redmon’s car
purchase. As the NHTSA complaints are the sole basis upon which Plaintiffs allege New GM’s
knowledge of the Camaro Ignition Key Bump defect, it follows that Plaintiffs do not allege facts
giving rise to a “strong inference” of New GM’s “actual knowledge.” Lerner, 459 F.3d at 29093. Thus, Redmon’s ICFA claim is dismissed, albeit with leave to amend in the event that he
can cure the Rule 9(b) problem. See Official Publ’ns, Inc. v. Kable News Co., 884 F.2d 664, 669
(2d Cir. 1989) (“[W]here [a] complaint is deficient under Rule 9(b), leave to amend is usually
afforded.”).
Finally, New GM challenges Painter’s ICFA claim relating to the Power Steering defect
on a similar ground — namely, that New GM did not know about the defect when Painter
purchased his new 2010 Chevrolet Cobalt SS in April 2010. (GM Mem. 43-44; FACC ¶ 122).
With respect to that defect, Plaintiffs allege that New GM knew “[f]rom the date of its inception”
that “Old GM began receiving customer complaints regarding loss of power steering” in several
car models as early as 2003. (Id. ¶ 753). Moreover, in 2010, “New GM first recalled MY 20052010 Chevy Cobalts” for these power steering issues. (Id. ¶ 755). Significantly, however,
38
Plaintiffs do not allege when in 2010 this recall occurred. 12 If the recall occurred before Painter
purchased his car in April 2010, then his ICFA claim would necessarily fail because — at the
time of his alleged injury — he could not show that New GM was deceptively concealing the
defect or that his damages were “proximately caused” by any deception. Dubey v. Pub. Storage,
Inc., 918 N.E.2d 265, 277 (Ill. App. Ct. 2009). By contrast, if the recall occurred relatively soon
after Painter’s purchase, it would be reasonable to infer — on the basis of the complaints that
Old GM had received and the fact that there is inevitably a delay between discovery of a defect
and announcement of a recall relating to that defect, taken together — that New GM knew of the
alleged defect at the time of the purchase.
Accordingly, New GM’s motion to dismiss Painter’s ICFA claim is granted to the extent
that it pertains to the Power Steering defect. Notably, though, Painter’s car was also subject to
the Delta Ignition Switch recall (FACC ¶ 122) — as to which his claim survives for the reasons
stated above. In any event, assuming the 2010 power steering recall of 2010 Chevy Cobalts was
initiated after Painter purchased his car in April 2010, he is granted leave to amend his ICFA
claim with respect to the Power Steering defect. Additionally, for the reasons stated above, New
GM’s motion is also granted with leave to amend as to Redmon. With respect to the other
Illinois Plaintiffs’ ICFA claims, New GM’s motion is denied.
b. Fraudulent Concealment
The Illinois Plaintiffs also bring claims for common law fraudulent concealment. (See
FACC ¶¶ 2797-2810). To state a claim for fraudulent inducement under Illinois law, a plaintiff
Even more inexplicably, New GM does not indicate when the recall occurred in its
briefing, even though the Valukas Report (general familiarity with which is assumed) indicates
that it took place in March 2010, and it is plausible that the Court could have taken judicial
notice based on public documents or the like.
12
39
must “allege that the defendant concealed a material fact when he was under a duty to disclose
that fact to plaintiff.” Connick v. Suzuki Motor Co., 675 N.E.2d 584, 593 (Ill. 1996). In
Connick, the Illinois Supreme Court held that “[a] duty to disclose a material fact may arise out
of several situations.” Id. The Court then described two:
First, if plaintiff and defendant are in a fiduciary or confidential relationship, then
defendant is under a duty to disclose all material facts. Second, a duty to disclose
material facts may arise out of a situation where plaintiff places trust and
confidence in defendant, thereby placing defendant in a position of influence and
superiority over plaintiff. This position of superiority may arise by reason of
friendship, agency, or experience.
Applying that standard, the Connick Court affirmed dismissal of claims much like those here —
namely, claims for economic losses resulting from an alleged vehicle defect that had been
concealed by the manufacturer. See id. As the Court explained, because “the complaint merely
alleged that plaintiffs had purchased [their cars] from an authorized Suzuki dealer, and that
Suzuki manufactured and distributed [those cars],” the plaintiffs had not “sufficiently allege[d]
that they were in a confidential or fiduciary relationship with Suzuki, or that Suzuki was in a
position of superiority over them.” Id. at 593. “Without such allegations,” the Court concluded,
“plaintiffs’ complaint did not allege a duty to disclose material facts which could give rise to a
claim for common law fraudulent concealment.” Id.; see also Chevrolet/GEO, Inc., 762 N.E.2d
at 13-14 (affirming dismissal of a fraudulent concealment claim brought by a consumer against a
car dealer on the ground that, “[b]arring additional facts, the arms-length transaction that
occurred between [the consumer] and [car dealer] did not give rise to a confidential relationship
sufficient to impose a general duty of disclosure under the fairly rigorous principles of common
law”).
40
New GM argues that the Illinois Plaintiffs cannot meet the standard set forth in Connick.
(GM Mem. 52-53). That may well be true, but other courts have held that, under Illinois law,
there are “means of establishing a duty to speak” separate and apart from proving a “special or
fiduciary relationship” of the sort discussed in Connick. Allstate Ins. Co. v. Regions Bank, No.
14-CV-067 (WS), 2015 WL 4073184, at *12 (S.D. Ala. July 2, 2015). Specifically, even
without evidence of “direct contact,” a plaintiff may also “establish a duty to speak for
fraudulent concealment purposes in situations where (i) a defendant’s acts contribute to
plaintiff’s misapprehension of a material fact and defendant fails to correct it or (ii) the
defendant’s silence is accompanied by deceptive conduct.” Id.; accord Greene v. Mizuho Bank,
Ltd., 206 F. Supp. 3d 1362, 1375-77 (N.D. Ill. 2016); PXRE Reins Co. v. Lumbermens Mut. Cas.
Co., 342 F. Supp. 2d 752, 757 (N.D. Ill. 2004); see also, e.g., Miner v. Fashion Enters., 794
N.E.2d 902, 917 (Ill. App. Ct. 2003) (“Mere silence does not amount to fraud. However, silence
accompanied by deceptive conduct or suppression of a material fact can give rise to concealment
and the party which has concealed information is then under a duty to speak.”).
Additionally, although not cited by Plaintiffs, at least two courts have held in
circumstances similar to those presented here that a manufacturer of cars (or car parts) owed a
duty to consumers under Illinois law to disclose “safety defects.” In re Volkswagen Timing
Chain Prod. Liab. Litig., No. 16-CV-2765 (JLL), 2017 WL 1902160, at *20 (D.N.J. May 8,
2017) (“Plaintiffs here have specifically pled that the defect in the Timing Chain System created
safety concerns, and, despite [d]efendant’s knowledge of the defect and the safety concerns
associated with the same, [d]efendant chose not to disclose the defect to [p]laintiffs. Hence,
[d]efendant had a duty to disclose the defect under . . . Illinois . . . law . . . .” (citation omitted));
see also In re Takata Airbag Prod. Liab. Litig., No. 14-CV-24009, 2017 WL 2406711, at *5
41
(S.D. Fla. June 1, 2017) (“In many states, a fraudulent concealment claim requires that the
defendant have a duty to disclose facts. . . . [A] direct relationship is not required to create a duty
to disclose — other special circumstances can suffice. . . . [B]ecause [the p]laintiffs allege that
Takata made incomplete representations, the Court finds that [p]laintiffs sufficiently allege that
Takata had a duty to disclose additional facts about the safety of its airbags.”). Here, Plaintiffs
allege that New GM had a duty to disclose the defects “because it made many affirmative
representations about the safety, quality, and lack of defects in New GM vehicles . . . , which
were misleading, deceptive, and incomplete” absent disclosure of the whole truth. (FACC
¶ 2804). These allegations — along with the specific facts alleged in support of the claim
throughout the FACC — are sufficient at this stage to sustain the Illinois Plaintiffs’ claims for
fraudulent concealment. New GM’s motion with respect to these claims is thus denied.
c. Unjust Enrichment
Finally, the Illinois Plaintiffs bring claims for unjust enrichment against New GM.
(FACC ¶¶ 2833-2843). To prevail on a claim for unjust enrichment under Illinois law, a plaintiff
must “allege that the defendant has unjustly retained a benefit to the plaintiff’s detriment, and
that the defendant’s retention of the benefit violates the fundamental principles of justice, equity,
and good conscience.” Reid v. Unilever U.S., Inc., 964 F. Supp. 2d 983, 922 (N.D. Ill. 2013)
(quoting HPI Health Care Servs., Inc. v. Mt. Vernon Hosp., Inc., 545 N.E. 2d 672, 679 (Ill.
1989)). “Because unjust enrichment is based on an implied contract, where there is a specific
contract which governs the relationship of the parties, the doctrine of unjust enrichment has no
application.” People ex rel. Hartigan v. E&E Hauling, Inc., 607 N.E. 2d 165, 177 (Ill. 1992)
(internal quotation marks omitted); see also Reid, 964 F. Supp. 2d at 922 (“In general, the
remedy of unjust enrichment is not available when a specific contract governs the parties’
42
relationship.”); Shaw v. Hyatt Intern. Corp., 461 F.3d 899, 902 (7th Cir. 2006) (“[The plaintiff]
fails to present a claim for unjust enrichment, because that is unavailable where the claim rests
on the breach of an express contract.”). Here, all but one of the Illinois Plaintiffs (namely,
Kapraun) purchased their New GM vehicles under warranty — that is, with a specific contract
governing the relationship of the parties. But that does not end the Court’s inquiry.
Under Illinois law, “a party may plead claims in the alternative, i.e., she may plead a
claim for breach of contract as well as unjust enrichment,” Guinn v. Hoskins Chevrolet, 836
N.E.2d 681, 704 (Ill. App. 2005), as long as the plaintiff does “not include allegations of an
express contract which governs the relationship of the parties[] in the counts for unjust
enrichment,” The Sharrow Group v. Zausa Dev. Corp., No. 04-CV-6379 (JBM), 2004 WL
2806193, *3 (N.D. Ill. 2004) (collecting cases). The crucial question, then, is whether a
plaintiff’s unjust enrichment claim actually rests on a breach of an underlying contract. See, e,g.,
id. (dismissing the plaintiff’s unjust enrichment claim because throughout the complaint it was
alleged that “valid and enforceable agreements” governed the parties’ relationship and the
plaintiff had incorporated those allegations into its count for unjust enrichment); see also, e.g.,
Cooper v. Durham School Services, No. 03-CV2431 (JBM), 2003 WL 22232833, at *7 (N.D.Ill.
Sept. 22, 2003) (similar); Team Impressions, Inc. v. Chromas Technologies Canada, Inc., No.
02-CV-5325 (AJS), 2003 WL 355647, at *4 (N.D. Ill. February 18, 2003) (similar). 13
Significantly, the dispositive question is a substantive one — namely, what it takes, as a
matter of state law, to allege a plausible claim of unjust enrichment (or to negate an otherwise
valid claim thereof). That is, if allegations in the FACC (or the lack of allegations in the FACC)
render a particular claim implausible, the claim is subject to dismissal, even though a plaintiff is
entitled under Rule 8(d)(3) of the Federal Rules of Civil Procedure to “state as many separate
claims . . . as it has, regardless of consistency.” It is for that reason that Plaintiffs’ unjust
enrichment claims must be considered on a state-by-state basis — and that the Court’s
conclusions as to those claims varies somewhat by state. See, e.g., Schechner v. Whirlpool
13
43
In this case, the Illinois Plaintiffs do not base their unjust enrichment claims on the
breach of an existing contract. Nor do they incorporate any reference to a contract into that
count — indeed, none of the remaining Illinois Plaintiffs is even seeking to recover under a
theory of express or implied warranty. (See, e.g., FACC ¶ 2835 (“This claim is pleaded in the
alternative to any contract-based claims brought on behalf of Plaintiffs.”)). Thus, the case is
easily distinguished from other Illinois precedents in which the viability of the unjust enrichment
claim turned on an alleged contractual breach. See, e.g., Guinn, 836 N.E.2d at 705 (“Although
the contract is not specifically referenced in [plaintiff’s] unjust enrichment count, she
incorporates the allegations of each other count into the unjust enrichment count. Moreover, [the
plaintiff] attached to her complaint the retail installment contract.”); Thorogood v. Sears,
Roebuck & Co., No. 06-CV-1999, 2006 WL 3302640, at *5 (N.D. Ill. Nov 9, 2006) (dismissing
an unjust enrichment claim where the plaintiff had “incorporated by reference the allegations of a
contractual express warranty” and attached a report that “specifically mention[ed] that the dryer
was subject to a one-year contractual warranty”); Shaw v. Hyatt Int’l Corp., No. 05-CV-5022,
2005 WL 3088438, *3 (N.D. Ill. Nov. 15, 2005) (dismissing an unjust enrichment claim after
reaching “the inescapable conclusion that the present dispute [arose] out of an express contract”).
Accordingly, the Illinois Plaintiffs can proceed with their unjust enrichment claims, express
warranties notwithstanding. See Reid, 964 F. Supp. 2d at 924; Sirazi v. Gen. Mediterranean
Holding, SA, No. 12-CV-0653, 2013 WL 812271, at *9 (N.D. Ill. Mar. 5, 2013).
Corp., — F. Supp. 3d —, 2017 WL 588460, at *11 (E.D. Mich. Feb. 14, 2017) (“Here, state law
regarding the availability of an unjust enrichment claim is so intertwined with a substantive right
under state law that Rule 8’s alternative pleading provision may not be enforced. Therefore, the
Court may not allow Plaintiffs to plead unjust enrichment if the state court would prohibit the
same, despite the permissive nature of Rule 8.”).
44
New GM alternatively contends that Illinois law precludes unjust enrichment where a
plaintiff has an adequate remedy at law. (See GM Mem. 28). Although it is “well settled that a
party cannot seek equitable relief when he has an adequate legal remedy,” the precise nature of
unjust enrichment under Illinois law has “led to numerous confusing statements in case law
[implying] that it is equitable in nature,” though “it is essentially an action at law.” In re Sears,
Roebuck & Co. Tools Mktg. & Sales Practices Litig., No. 05-CV-2623, 2007 WL 3754823, at *3
(N.D. Ill. Dec. 18, 2006); see also In re Aqua Dots Prod. Liab. Litig., 270 F.R.D. 377, 386 (N.D.
Ill. 2010) (“[T]here is considerable confusion about the law of unjust enrichment, including the
no-adequate-remedy-at-law requirement in Illinois. While many intermediate courts in Illinois
routinely say that, because it is an equitable remedy, unjust enrichment is only available when
there is no adequate remedy at law, the Illinois Supreme Court has said that restitution, i.e.,
money damages under an unjust enrichment theory, is a legal remedy.” (internal quotation marks
and citation omitted)). “The correct Illinois rule appears to be a narrower one: unjust enrichment
is unavailable where a specific contract governs the relationship of the parties.” In re Aqua Dots,
270 F.R.D. at 386. Indeed, all of the cases New GM cites preclude unjust enrichment claims due
to the existence of an express contract. See Guinn, 836 N.E.2d at 704 (“[W]here there is a
specific contract that governs the relationship of the parties, the doctrine of unjust enrichment
has no application.” (internal quotation marks alteration omitted); Nesby v. Country Mut. Ins.
Co., 805 N.E.2d 241, 243 (Ill. App. Ct. 2004) (same). For the reasons discussed above, the
existence of an express contract does not pose an obstacle to the Illinois Plaintiffs’ pursuing their
unjust enrichment claims. See, e.g., Triumph Packaging Grp. v. Ward, No. 11-CV-7927, 2012
WL 5342316, at *7 (N.D. Ill. Oct. 29, 2012) (allowing the plaintiffs’ claims to proceed because
no specific contract existed); Scott v. GlaxoSmithKline Consumer Healthcare, L.P., No. 05-CV-
45
3004, 2006 WL 952032, at *4 (N.D. Ill. Apr. 12, 2006) (“GSK is incorrect in stating that this
unjust enrichment claim seeks equitable relief.”). Accordingly, New GM’s motion to dismiss the
Illinois Plaintiffs’ unjust enrichment claims is denied.
3. Massachusetts
The two remaining Massachusetts Plaintiffs for purposes of this motion are Debra
Companion and Richard Leger. Companion owns a 2010 Chevrolet Cobalt that she purchased
under warranty as a certified pre-owned vehicle from a Chevrolet dealer on December 31, 2011.
(FACC ¶ 154). Her car was subject to the Delta Ignition Switch and Power Steering recalls.
(Id.). Leger owned a 2007 Pontiac G5 that he purchased used under a ninety-day warranty from
a Hyundai dealership in 2013. (Id. ¶ 156). His car was subject to the Delta Ignition Switch
recall. (Id.). Companion’s car experienced one shutdown event while she was driving on the
highway, forcing her to pull over to restart the car. (Id. ¶ 154). She received an ignition switch
recall notice but not a power steering recall notice, and her car was repaired in the summer of
2014 pursuant to the recall. (Id.). Leger’s car began experiencing ignition switch issues in
November 2013, including several instances when it shut down while he was driving. (Id.
¶ 156). He also experienced loss of power to the power steering and locking of the steering
wheel. (Id.). After Leger learned about the recall in April 2014, he told the dealership that he
would not pay for the car until the issues were fixed; his car was ultimately repossessed. (Id.).
Companion and Leger bring claims against New GM under the Massachusetts Consumer
Protection Act (“Massachusetts CPA”), Mass. Gen. Laws ch. 93A, § 1 et seq. (FACC ¶¶ 37693793); for common law fraud by concealment (id. ¶¶ 3794-3807); for breach of the implied
warranty of merchantability, ALM GL. CH. 106, § 2-314 (id. ¶¶ 3808-3817); and for unjust
enrichment (id. ¶¶ 3840-3850). New GM moves to dismiss only two of these claims: the claim
46
under the Massachusetts CPA and the unjust enrichment claim. The Court will address each of
these claims in turn.
a. The Massachusetts CPA
The Massachusetts Plaintiffs’ claims under the Massachusetts CPA (otherwise known as
Chapter 93A) can be addressed briefly. The Act prohibits “unfair or deceptive acts or practices
in the conduct of any trade or commerce.” Mass. Gen. Laws ch. 93A § 2(a). To prevail on such
a claim, the plaintiff “must show that the defendant engaged in trade or business and committed
an unfair or deceptive act, causing economic injury to the plaintiff.” Brown v. Bank of Am., Nat.
Ass’n, 67 F. Supp. 3d 508, 514 (D. Mass. 2014); see also Mass. Eye & Ear Infirmary v. QLT
Phototherapeutics, Inc., 552 F.3d 47, 69 (1st Cir. 2009). “[I]t is neither necessary nor sufficient
that a particular act or practice violate common or statutory law” to make out a claim under the
statute. Id. Instead, conduct is “deceptive” when “it has the capacity to mislead consumers,
acting reasonably under the circumstances, to act differently from the way they otherwise would
have acted.” Aspinall v. Philip Morris Cos., 813 N.E.2d 476, 488 (2004). Massachusetts courts
have not set out a precise test for determining when conduct becomes “unfair or deceptive,” see
Kattar v. Demoulas, 739 N.E.2d 246, 257 (2000) (explaining that such definition would be
“impossible” because “there is no limit to human inventiveness in this field”), but rather look to
the following factors: “(1) whether the practice is within at least the penumbra of some commonlaw, statutory, or other established concept of unfairness; (2) whether it is immoral, unethical,
oppressive, or unscrupulous; and (3) whether it causes substantial injury to consumers.”
Hanrahran v. Specialized Loan Serv., LLC, 54 F. Supp. 3d 149, 154 (D. Mass. 2014). Finally, to
the extent a Chapter 93A claim is premised on fraudulent conduct, it must satisfy the heightened
pleading requirements of Rule 9(b). See Ouch v. Fed. Nat. Mortg. Ass’n, No. 11-CV-12090
47
(RWZ), 2013 WL 139765, at *2 (D. Mass. Jan. 10, 2013); cf. Crisp Human Capital Ltd. v.
Authoria Inc., 613 F. Supp. 2d 136, 139 (D. Mass. 2009) (“[T]o the extent it does not involve
fraud, a Chapter 93A claim is not subject to a heightened pleading requirement.”).
Applying those standards here, the Massachusetts Plaintiffs’ Chapter 93A claims survive
for the reasons stated above in the discussion of the Alabama and Illinois Plaintiffs’ consumer
fraud claims. That is, both Companion and Leger purchased vehicles that suffered from the
Delta Ignition Switch defect, and — as discussed above — Plaintiffs’ allegations, both as to
concealment and as to misrepresentation, satisfy Rule 9(b). (See FACC ¶¶ 154, 156).
Additionally, New GM does not dispute (and nor could it) that the Massachusetts Plaintiffs
sufficiently allege “deceptive” conduct to trigger Chapter 93A’s protections. Finally,
Companion and Leger also allege sufficient injury, as neither would have paid as much for, or
potentially purchased, their vehicles had they known of the defects. See, e.g., Brown, 67 F.
Supp. 3d at 514 (noting that a “Chapter 93A claimant must also sufficiently plead economic
injury,” i.e., “some kind of separate, identifiable harm arising from the violation itself”).
Accordingly, Companion’s and Leger’s claims survive. 14
Companion’s 2010 Chevy Cobalt also suffered from the Power Steering defect. (See
FACC ¶ 154). For reasons discussed above in connection with Painter’s consumer fraud claim,
there is a strong argument that Companion’s claim on that score fails as a matter of law. That is
because she did not purchase her car until December 2011 (id.), which is after New GM recalled
certain car models (including hers) pursuant to a 2010 electric power steering defect recall, thus
revealing the allegedly concealed facts. Strangely, though, New GM does not make the
argument with respect to Companion’s claim. Given the lack of a challenge from New GM, and
the possibility that subtle (but material) differences may exist among the different recalls, the
Court declines to dismiss Companion’s claim on this ground.
14
48
b. Unjust Enrichment
As noted, New GM also moves to dismiss the Massachusetts Plaintiffs’ unjust
enrichment claims. To prevail on this claim under Massachusetts law, a plaintiff must show:
“(1) a benefit conferred upon the defendant by the plaintiff; (2) an appreciation or knowledge by
the defendant of the benefit; and (3) acceptance or retention by the defendant of the benefit under
the circumstances would be inequitable without payment of its value.” Blake v. Professional
Coin Grading Serv., 898 F. Supp. 2d 365, 390 (D. Mass. 2012); see also Salamon v. Terra, 477
N.E.2d 1029, 1031 (Mass. 1985). Significantly, however, unjust enrichment “can only be used if
the court does not find that a valid contract was formed.” Wong v. Nieboer, No. 0233-CV-0207,
2006 WL 1172191, at *4 (Mass. App. Ct. Apr. 15, 2006) (per curiam); see also Platten v. HG
Bermuda Exempted Ltd., 437 F.3d 118, 130 (1st Cir. 2006) (“Massachusetts law does not allow
litigants to override an express contract by arguing unjust enrichment.”); Boswell v. Zephyr
Lines, Inc., 606 N.E. 2d 1336 (Mass. 1993) (holding that a claim for unjust enrichment
“presupposes that no valid contract covers the subject matter of a dispute”); Zarum v. Brass Mill
Mat. Corp., 134 N.E.2d 141, 143 (Mass. 1956) (“The law will not imply a contract where there is
an existing express contract covering the same subject matter.”). Thus, where a plaintiff
“concedes the existence of a valid express contract between the parties,” state substantive law
bars any claim of unjust enrichment. See, e.g., Okmyansky v. Herbalife Int’l of Am., Inc., 415
F.3d 154, 162 (1st Cir. 2005). 15
Plaintiffs point to one Massachusetts case allowing the pleading of alternative theories,
see Juergens v. Microgroup, Inc., No. 10-CV-237 (DJC), 2011 WL 1020856, at *2 (Mass. Super.
Ct. Jan. 28, 2011) (“The plaintiff is permitted to proceed under alternative theories of contract
and quasi-contract.”), but the weight of Massachusetts authority is to the contrary, see, e.g.,
Rottner v. AVG Techs. USA, Inc., 943 F. Supp. 2d 222, 231 n.13 (D. Mass. 2013) (“In light of the
viable contract claims at law, it is unnecessary for the court to consider his alternative equitable
15
49
Here, both Massachusetts Plaintiffs purchased their vehicles while under warranty (see
FACC ¶¶ 154, 156), which forecloses their unjust enrichment claims. Moreover, even if the
express warranties were no bar, a plaintiff is prohibited under Massachusetts law from bringing a
claim for unjust enrichment where an adequate remedy at law exists — regardless of the viability
of that theory or whether it sounds in contract, fraud, or tort. See, e.g., Scarpaci v. Lowe’s Home
Ctr., LLC, 212 F. Supp. 3d 246, 253 n.7 (D. Mass. 2016) (“The term ‘adequate remedy at law’
refers to the existence of a legal (as opposed to equitable) theory by which the plaintiff make
seek recovery; it does not, however, require the existence of a legal theory under which the
plaintiff is ultimately successful on obtaining recovery.”); Fernandes v. Havkin, 731 F. Supp. 2d
103, 114 (D. Mass. 2010) (“A claim of unjust enrichment, however, is not available to a party
with an adequate remedy at law. [The p]laintiff’s negligence and chapter 93A claims thus
preclude a claim for unjust enrichment. The disposition of those claims is irrelevant. Their mere
availability is a bar to a claim of unjust enrichment.” (internal quotation marks and citations
omitted)); Adrion v. Knight, No. 07-CV-11277 (RGS), 2009 WL 3152885, at *1 n.1 (D. Mass.
Sept. 28, 2009) (“[T]he availability of an adequate remedy at law (whether successful or not)
precludes an equitable claim of unjust enrichment.”); Santagate v. Tower, 833 N.E.2d 171, 176
(Mass. 2005) (“An equitable remedy for unjust enrichment is not available to a party with an
adequate remedy at law.”). On that basis too, the Massachusetts Plaintiffs’ unjust enrichment
claims fail. Accordingly, New GM’s motion to dismiss those claims is granted.
claim for unjust enrichment.”); Santos v. SANYO Mfg. Corp., No. 12-CV-11452 (RGS), 2013
WL 1868268, at *7 (D. Mass. May 3, 2013) (“Because Santos had a valid contract with SANYO,
he cannot maintain an equitable action for unjust enrichment.”).
50
4. Michigan
The remaining Michigan Plaintiffs for purposes of this motion are Sheree Anderson,
Carter Bishop, Marquetta Chestnut, Rafael Lanis, Sophia Marks, Brian Semrau, and Franklin
Wloch. Anderson owned a used 2008 Chevrolet HHR that she purchased under warranty from a
dealership on November 15, 2011, which was subject to the Delta Ignition Switch defect.
(FACC ¶ 158). Bishop owns a 2008 Chevrolet Impala that he purchased used and unwarranted
from a dealership on August 7, 2012, which was subject to the Low Torque Ignition Switch
recall. (Id. ¶ 159). Chestnut owns a 2005 Chevrolet Malibu that she purchased used and
unwarranted from a dealership on February 17, 2011, which was subject to the Low Torque
Ignition Switch and Power Steering recalls. (Id. ¶ 160). Lanis owns a 2006 Chevrolet Cobalt
that he purchased used and unwarranted at auction in July 2011, which was subject to the Delta
Ignition Switch recall. (Id. ¶ 162). Marks owns a 2009 Chevrolet Impala that she purchased
used from a dealership along with an extended warranty on July 28, 2009, and which was subject
to Low Torque Ignition Switch recall. (Id. ¶ 163). Semrau leased a new 2013 Cadillac CTS
from a Cadillac dealership on August 19, 2013, while the vehicle was under the manufacturer’s
warranty, and it was later subject to the Low Torque Ignition Switch recall. (Id. ¶ 165). Finally,
Wloch owns a 2011 Cadillac CTS that he purchased as a certified pre-owned vehicle from a
Cadillac dealership along with an extended warranty on April 22, 2014, and which was subject to
the Low Torque Ignition Switch recall. (Id. ¶ 169).
Anderson’s car experienced issues with the ignition switch, including locking up such
that she was unable to turn the key on several occasions. (FACC ¶ 158). Her car was repaired
pursuant to the recall on June 10, 2014, after a several month delay waiting for the parts. (Id.).
She finally sold the car for scrap on August 25, 2016, after additional mechanical issues rendered
51
it unusable. (See id.). Bishop’s vehicle never manifested any defect, although it was repaired in
June 2016 pursuant to the Low Torque Ignition Switch recall. (Id. ¶ 159). The power steering in
Chestnut’s car twice went out, once causing her to spin out on ice and almost collide with an
oncoming ambulance, and once forcing her to coast across a highway to an exit in order to restart
her car. (Id. ¶ 160). Lanis experienced his ignition switch shutting down approximately ten
times after he started his car and removed his hand from the key, as well as one time while he
was sitting idle at a traffic light. (Id. ¶ 162). On almost a daily basis, his key would stick in the
ignition switch. (Id.). Lanis’s car was repaired in April 2014 pursuant to the ignition switch
recall; afterwards, he twice tried to sell the vehicle but was unsuccessful. (See id.). Mark’s car
shut off once while she was driving after hitting a bump in the road, requiring her to pull over
and restart the car. (Id. ¶ 163). Her car was repaired in 2015 pursuant to the Low Torque
Ignition Switch recall. (Id.). Like Bishop’s car, Semrau’s leased car never manifested any
defect, although New GM sent him the parts to repair his ignition switch himself pursuant to the
Low Torque Ignition Switch recall. (Id. ¶ 165). Semrau returned the vehicle on August 16,
2016, at the end of his lease. (Id.).
Together, the Michigan Plaintiffs bring claims against New GM under the Michigan
Consumer Protection Act (“MCPA”), Mich. Comp. Laws § 445.903, et seq. (FACC ¶¶ 38963920); for common law fraud by concealment (id. ¶¶ 3921-3934); for breach of implied warranty
of merchantability, see Mich. Comp. Laws § 440.2314 (id. ¶¶ 3935-3944); and for unjust
enrichment (id. ¶¶ 3967-3977). The Court will address each of these claims in turn.
a. The MCPA
The MCPA “prohibits the use of unfair, unconscionable, or deceptive methods, acts, or
practices in the conduct of trade or commerce.” Zine v. Chrysler Corp., 600 N.W.2d 384, 392
52
(Mich. App. Ct. 1999); see also Mich. Comp. Laws § 445.903(1). To the extent relevant here,
the MCPA prohibits, inter alia, (1) representing that goods or services have characteristics that
they do not have; (2) representing that goods or services are of a particular standard if they are of
another; (3) making false or misleading statements of fact concerning the reasons for, existence
of, or amounts of price reductions; (4) failing to reveal a material fact, the omission of which
tends to mislead or deceive the consumer, and which fact could not reasonably be known by the
consumer; (5) making a representation of fact or statement of fact material to the transaction
such that a person reasonably believes the represented or suggested state of affairs to be other
than it actually is; and (6) failing to reveal facts that are material in light representations of fact
made in a positive manner. See Mich. Comp. Laws § 445.903(1). Michigan courts construe the
provisions of the MPCA “with reference to the common-law tort of fraud.” Mayhall v. A.H.
Pond Co., Inc., 341 N.W. 2d 268, 270 (Mich. 1983). For a misrepresented fact to be “material,”
therefore, it “need not relate to the sole or major reason for the transaction,” but it must be
“important to the transaction or affect[] the consumer’s decision to enter into the transaction.”
Zine, 600 N.W.2d at 398 (internal quotation marks omitted). With respect to omissions,
however, the inquiry “is not whether the omission is misleading to a reasonable consumer but
whether the consumer could reasonably be expected to discover the omission at issue.” Id.
Moreover, for those subsections of the MCPA, plaintiffs “must establish reliance” to make out a
viable claim. In re OnStar Contract Litig., 278 F.R.D. 352, 378 (E.D. Mich. 2011). Finally, to
the extent a plaintiff’s MCPA claim is premised on fraud (as opposed to breach of an express or
implied warranty), it must meet the heightened pleading standards of Rule 9(b). See In re
Packaged Ice Antitrust Litig., 779 F. Supp. 2d 642, 666 (E.D. Mich. 2011).
53
Applying those standards here, the Michigan Plaintiffs’ MCPA claims are sufficient to
survive New GM’s motion to dismiss. First, Plaintiffs allege “how [New GM] violated the
MCPA,” including “identify[ing] which MCPA sections” New GM purportedly violated.
Muneio v. Fed. Nat. Mortg. Assoc., 09-CV-12973 (AC), 2010 WL 5146328, at *4 (E.D. Mich.
Dec. 13, 2010). (See FACC ¶¶ 3921-3934). Second, the purported misrepresentations were
“material,” as Plaintiffs allege that their decisions to purchase GM cars were impacted by the
perception of safety. (See, e.g., id. ¶ 159 (considering “advertisements touting high safety ratings
from crash tests” when purchasing); id. ¶ 3907 (“New GM’s [deceptive acts] were likely to and
did in fact deceive reasonable consumers, including Plaintiffs, about the true safety and
reliability of their vehicles.”)). And with respect to New GM’s alleged omissions, Plaintiffs
sufficiently allege that the defects were not the sort that “consumer[s] could reasonably be
expected to discover.” Zine, 600 N.W.2d at 398. (See FACC ¶ 3911).
Finally, the Michigan Plaintiffs’ MCPA claims satisfy the requirements of Rule 9(b). To
the extent the Michigan Plaintiffs’ claims relate to the Delta Ignition Switch recall (Anderson
and Lanis) and the Low Torque Ignition Switch recalls (everyone other than Anderson and
Lanis), that is true for the reasons discussed above in connection with Alabama and Illinois.
That leaves only Chestnut’s claim concerning the Power Steering recall. (FACC ¶ 160). 16 With
respect to that claim, Plaintiffs allege, among other things, that New GM knew “[f]rom the date
As discussed above in connection with Illinois Plaintiff Painter, New GM recalled some
vehicles for electric power steering defects in 2010 — namely, model year 2005-2010 Chevrolet
Cobalts and model year 2007-2010 Pontiac G5s. (FACC ¶ 755). Complicating matters, New
GM issued another round of recalls for the Power Steering defect in 2014, including some of the
models that had been recalled in 2010 (namely, the model year 2010 Chevrolet Cobalt) and
additional models as well. (Id. ¶ 749). Unlike Painter, and potentially Companion, Chestnut’s
vehicle was not subject to the 2010 recall.
16
54
of its inception” that “Old GM began receiving customer complaints regarding loss of power
steering” as early as 2003. (Id. ¶ 753). In particular, with respect to 2005 Chevy Malibus
(Chestnut’s car), “New GM knew that, in response to a NHTSA Preliminary Investigation into
potential Power Steering Defect . . . [,] Old GM [had] extended warranty coverage . . . to replace
the steering column assembly” even though “[n]o recall was done.” (Id. ¶ 754). In June 2010,
moreover, New GM initiated a special coverage program for that model. (Id. ¶ 756). Taken
together, these allegations are sufficient to demonstrate that New GM knew about the Power
Steering defect at the time of Chestnut’s purchase in 2011.
That leaves one final issue to address: whether Bishop, Semrau, and Wloch can maintain
their MPCA claims given that their vehicles never manifested the defects at issue here. (FACC
¶¶ 159, 165, 169). 17 Both parties agree that Michigan courts have not yet resolved whether a
plaintiff can bring economic loss claims in the absence of a manifest defect. (See GM Mem. 18;
Pls.’ Opp’n 20). The Court is thus tasked with determining how “it believe[s] the [Michigan
Supreme Court] would rule if the issue were before it.” Leon’s Bakery, Inc. v. Grinnell Corp.,
990 F.2d 44, 47 (2d Cir. 1993). As far as this Court (and the parties) can tell, only one other
federal court has confronted this same task. See In re Bridgestone/Firestone, Inc. Tires Prod.
Liab. Litig., 155 F. Supp. 2d 1069, 1096-1099 (S.D. Ind. 2001), overruled on other grounds by In
re Bridgestone/Firestone, Inc., 288 F.3d 1012 (7th Cir. 2002). There, the Court concluded that
New GM also contends that Anderson’s car never manifested a defect. (GM Mem. 20
n.11). But Anderson is a Delta Ignition Switch Plaintiff (see FACC ¶ 158), and she alleges that,
at least several times, the ignition switch on her vehicle “lock[ed] up on her and she [was] unable
to turn the key.” (Id.). New GM argues that this is not a “manifestation of the defect for which
[she] is suing” (GM Reply 11 n.8), because she does not allege that her ignition switch “moved
out of the ‘run’ position” (GM Mem. 20 n.11). That may turn out to be the case, but since
Anderson alleges a defect in her ignition switch and that switch acted abnormally on at least
several occasions, the Court declines to dismiss her claims on that basis without discovery.
17
55
the Michigan Supreme Court would not require the manifestation of a defect because, unlike in
the realm of negligence (where a plaintiff must show injury), the MCPA requires a plaintiff to
plead only “loss.” See id. at 1097; see also Mich. Comp. Laws § 445.911(b)(2) (“A person who
suffers loss as a result of this a violation of this act may bring an action to recover actual
damages . . . .” (emphasis added)). As the Bridgestone/Firestone Court noted, other jurisdictions
with consumer protection statutes that require only a showing of loss have allowed claims to
proceed absent a manifested defect. See, e.g., Hinchliffe v. Am. Motors Corp., 440 A.2d 810,
819 (Conn. 1981) (allowing a plaintiff’s statutory fraud action to proceed — absent any defect —
because “[w]henever a consumer has received something other than what he bargained for, he
has suffered a loss of money or property”).
At least one Michigan appellate decision lends strong support to this position. See
Mayhall v. A.H. Pond. Co., Inc., 341 N.W.2d 268 (Mich. Ct. App. 1983) (per curiam). In
Mayhall, “the sole issue [was] whether the complaint alleged that plaintiff had suffered a ‘loss’
sufficient to withstand a motion for summary judgment” under the MCPA. See id. at 269. The
plaintiff there had purchased a ring in reliance on “the defendants’ knowing and false
representation, made in their advertisement, that the ring was perfect,” although the ring
ultimately did not prove to be so. See id. at 272. The Michigan Court of Appeals instructed that
the MCPA should be construed in accordance with common law fraud principles, and concluded
that, in a fraud action, “injury may consist in the plaintiff’s unfulfilled expectations.” Id. at 270.
Specifically, “the injury suffered by a victim of fraud” is that “the victim does not receive what
he expected to receive,” allowing him to “recover the difference between the actual value of the
property when the contract was made and the value it would have possessed if the representation
had been true.” Id. at 271. Consistent with that principle, other courts have repeatedly held that,
56
“[u]nder Michigan law, a fraud plaintiff is entitled to the benefit of the bargain — in other words,
what the purchaser would have gotten had the representations been true.” Thompson v. Paasche,
950 F.2d 306, 314 (6th Cir. 1991) (emphasis omitted); Hunter v. SMS, Inc., 843 F.2d 1391 (6th
Cir. 1988) (noting that “benefit of the bargain damages resulting from [] fraudulent
misrepresentations” are measured “by the difference between the actual value of the [item]
received by the plaintiff and the value the [item] would have possessed had the representations
been true”); Dow Chem. Co. v. Gen. Elec. Co., No. 04-CV-10275 (BC), 2005 WL 2372838, at *4
(E.D. Mich. Sept. 27, 2005) (“Under Michigan law, recovery for damages caused by a failed,
substandard, or defective product is limited . . . [to] the benefit of the bargain . . .” (internal
quotation marks omitted)). This Court has previously found similar — if not less — support
sufficient to conclude that a jurisdiction would allow a consumer fraud claim even without a
manifest defect. See In re Gen. Motors, 2016 WL 3920353, at *40 (holding that Virginia would
not require a manifest defect as “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”). Thus, the Court will not impose a manifest defect requirement on
the Michigan Plaintiffs here.
New GM’s arguments to the contrary fall flat. For one, New GM contends that
Bridgestone/Firestone is not persuasive authority because it was subsequently overruled by the
Seventh Circuit. That is true, but the Seventh Circuit overruled the district court decision on
other grounds (namely, choice of law). See Bridgestone/Firestone, 288 F.3d at 1018-20.
Admittedly, the Seventh Circuit expressed some skepticism that economic loss claims could be
maintained absent a manifested defect on the ground that “most states” had adopted the opposite
rule, but the Circuit expressly declined to decide the issue because it found that Indiana law,
57
rather than Michigan or Tennessee law, controlled. See id. at 1016-17 (noting also that plaintiffs
must have believed Michigan and Tennessee to be “in the favorable minority” of jurisdictions
with respect to the manifestation requirement). New GM also cites to several non-Michigan
cases prohibiting recovery absent a manifest defect (see GM Mem. 18-20), but those precedents
are less persuasive than Mayhall, a Michigan decision. Moreover, some of the other jurisdictions
have walked back their stance on the issue more recently. See, e.g., In re Zurn Pex Plumbing
Prod. Liab. Litig., 644 F.3d 604, 608 (8th Cir. 2011) (rejecting an argument by the defendants,
which rested on a case New GM cites, that the plaintiffs could not show a “current harm” based
on brass piping that “contained a defect upon installation” because that defect had not yet
“caused external damage”). Indeed, in its ruling on the TACC, this Court found that California,
Florida, Maryland, Missouri, and Virginia do not (or would not) have a manifest defect
requirement for their consumer protection laws. See In re Gen. Motors, 2016 WL 3920353, at
*20, *26-27, *31, *33-34, *39-40. 18
In the absence of persuasive authority to the contrary, the Court thus concludes that the
Michigan Plaintiffs “need only allege” that their vehicles are defective; “[t]hey are not required
to allege and prove . . . manifestation of [that] defect.” Bridgestone/Firestone, 155 F. Supp. 2d at
1100; cf In re Takata, 193 F. Supp. 3d at 1335 (“If Takata had installed grenades in its airbags
that may or may not explode on impact, a court would not require an explosion to demonstrate
manifestation of a defect. Plaintiffs have alleged essentially this scenario, explaining that
That said, the Seventh Circuit and New GM appear to be right that the “majority view is
that there is no legally cognizable injury in a product defect case, regardless of whether the claim
is for fraud, violation of consumer protection statutes, breach of warranty, or any other theory,
unless the alleged defect has manifested itself in the product used by the claimant.” 1
McLaughlin on Class Actions § 5:56 (13th ed.); see also id. § 5:56 n.15 (collecting cases).
18
58
occupants of vehicles equipped with the allegedly defective airbags cannot know whether their
airbags will expel metal shrapnel that may kill or maim them.” (footnote omitted)). Accordingly,
New GM’s motion to dismiss the Michigan Plaintiffs’ MCPA claims is denied.
b. Fraudulent Concealment
The Michigan Plaintiffs next bring a common law claim for fraudulent concealment (also
known in Michigan as “silent fraud”). (See FACC ¶¶ 3921-3934). “Silent fraud is essentially
the same [as traditional fraud] except that it is based on a defendant suppressing a material fact
that he or she was legally obligated to disclose, rather than making an affirmative
misrepresentation.” Barclae v. Zarb, 834 N.W.2d 100, 115 (Mich. Ct. App. 2013). To make out
a claim, “the plaintiff must show that the defendant suppressed the truth with the intent to
defraud the plaintiff and that the defendant had a legal or equitable duty of disclosure.” Id.
(emphasis added); see also MacDonald v. Thomas M. Cooley Law School, 724 F.3d 654, 665
(6th Cir. 2013) (“[T]o state a claim for the tort of silent fraud, a plaintiff must allege more than
non-disclosure; a plaintiff must establish that the defendant had a legal duty to make a
disclosure.” (internal quotation marks omitted)). A “legal or equitable duty” arises “most
commonly in a situation where inquiries are made by the plaintiff, to which the defendant makes
incomplete replies that are truthful in themselves but omit material information.” Hord v.
Envnmt’l Res. Inst. of Mich., 617 N.W.2d 543, 550-51 (Mich. 2000) (collecting cases). In fact,
Michigan courts effectively require proof of “statements by the vendor that were made in
response to a specific inquiry by the purchaser, which statements were in some way incomplete
or misleading.” M&D, Inc. v. W.B. McConkey, 585 N.W.2d 33, 39 (Mich. Ct. App. 1998)
(emphasis added) (collecting cases). That is, a plaintiff cannot prevail merely by showing “that
the seller knew there was a hidden defect and that the purchaser had no knowledge of it.” Id.
59
The Sixth Circuit’s decision in Cooley is instructive. In that case, graduates of the
Thomas M. Cooley Law School sued their alma mater alleging that the school’s annual
employment report and salary survey misrepresented the employment outcomes of its graduates
— thereby inducing them to attend the school despite what were, in reality, bleak employment
prospects upon graduation. See 724 F.3d at 657-60. The Sixth Circuit rejected the plaintiffs’
silent fraud claim because they “did not allege in their amended complaint that they ever asked
Cooley about the claims in its Employment Reports so as to create a duty for Cooley to disclose
the truth.” Id. at 666. “This failure to inquire,” the Court concluded, “dooms the silent-fraud
claim. Absent such an inquiry, Cooley had no duty to make any further disclosure concerning its
Employment Reports.” Id.; see, e.g., Hord, 617 N.W.2d at 550 (holding that the plaintiff could
not establish a silent fraud claim where “[t]here was no evidence that the plaintiff made any
inquiry about the financial condition of the company in general or requested updated financial
data in particular”); McConkey, 585 N.W.2d at 39-40 (dismissing a silent fraud claim in the
absence of proof that “the buyer expressed some particularized concern or made a direct inquiry
and the seller failed to fully disclose the material facts within the seller’s knowledge”); see also,
e.g., Innovation Ventures, LLC v. Ultimate One Distrib. Corp., No. 12-CV-5354 (KAM) (RLM),
2014 WL 1311979, at *11 (E.D.N.Y. Mar. 28, 2014) (“[U]nder Michigan law, partial disclosure
can amount to fraud only if the partial disclosure is in response to a specific inquiry made by the
injured party.” (emphasis added)); cf. Clement-Rowe v. Michigan Health Care Corp., 538
N.W.2d 20, 23-24 (upholding a silent fraud claim where the employer had “assert[ed] its
economic health to attract qualified employees” even though it knew that the company was
financially shaky and the employer “omit[ed] to disclose, when asked, known economic
instability” that later led to layoffs (emphasis added)).
60
These decisions are fatal to the Michigan Plaintiffs’ fraudulent concealment claims. The
Michigan Plaintiffs do not allege that they made any inquiries directly to New GM regarding the
safety of their vehicles or the existence of any potential defects. Such a “failure to inquire
“dooms the silent-fraud claim.” Cooley, 724 F.3d at 666. Contrary to Plaintiffs’ argument, it is
not enough that New GM made “many affirmative representations about the safety, quality, and
lack of defects in New GM vehicles, which were misleading, deceptive, and incomplete without
the disclosure of the defects.” (FACC ¶ 3928). “Absent” an actual “inquiry,” New GM “had no
duty to make any further disclosure concerning” the safety (or lack thereof) of GM cars. Cooley,
724 F.3d at 666. Notably, the two cases cited by Plaintiffs do not hold otherwise. (See Pl’s
Opp’n 54). In the first — United States Fidelity & Guar. Co. v. Black, 313 N.W. 2d 77 (Mich.
1981) — the Michigan Supreme Court held that, as a “general rule,” a party “to a business
transaction is under an obligation to exercise reasonable care to disclose to the other party . . .
any subsequently acquired information which he recognizes as rendering untrue, or misleading,
previous representations.” Id. at 89. But key to the Court’s holding was the fact that the parties
in the case had an ongoing relationship in which the appellants frequently discussed “their
concern over their potential liability” and “openly attempt[ed] to limit this liability,” with the
result that the appellees “knew that [the appellants] were very concerned” about the issue and so
“had a duty to clearly inform [them] of the new situation.” Id. at 88-89. And in Alfieri v.
Bertorelli, 813 N.W.2d 772 (Mich. Ct. App. 2012), the Michigan Court of Appeals found a duty
to disclose because the plaintiffs had “made direct inquiries of defendants about the condition of
the property” and the defendants were later advised that their “sales brochure contained
inaccurate and misleading information.” Id. at 776 (emphasis added). In short, these cases
underscore that a direct inquiry (or the functional equivalent) is a sine qua non of a fraudulent
61
concealment claim under Michigan law. As the Michigan Plaintiffs do not allege such inquiries,
New GM’s motion to dismiss their fraudulent concealment claims must be and is granted. 19
c. Breach of Implied Warranty
Next, New GM challenges the viability of implied warranty claims asserted by the
Michigan Plaintiffs whose vehicles did not manifest any defect — namely, Bishop, Semrau, and
Wloch. The Bridgestone/Firestone Court considered and rejected the same argument on the
ground that the Uniform Commercial Code (“UCC”), which has been adopted by Michigan,
“expressly provides” that a claim for the breach of an implied warranty “‘accrues when the
breach occurs” and that “there is no requirement that [p]laintiffs demonstrate any injury to their
person or property as a result of the breach, but only that they purchased an unmerchantable
product.” 155 F. Supp. 2d at 1099 (quoting UCC § 2-725(2)); see also, e.g., Koscielny v. Ford
Motor Co., No. 05-CV-527127 (NZ), 2006 WL 1726486, at *4 (Mich. Cir. Ct. June 21, 2006)
(“Breach of the warranty of merchantability means the vehicle was defective at the time when it
left the possession of the manufacturer or seller” (internal quotation marks and alteration
omitted)); Neibarger v. Universal Coops., Inc., 486 N.W.2d 612, 615 (Mich. 1992) (“Under
In any event, the Court is skeptical whether the representations made by New GM
regarding the safety of its vehicles would be actionable under Michigan law, even if the
Michigan Plaintiffs could prove that they made direct inquiries of New GM. See, e.g., Ram Int’l
Inc v. ADT Sec. Servs., Inc., No. 11-CV-10259, 2011 WL 5244936, at *6 (E.D. Mich. Nov. 3,
2011) (holding that promises of efficiency and reliability “cannot form the basis of a fraud
claim”), aff’d, 555 Fed App’x 493 (6th Cir. 2014); Van Tassel v. McDonald Corp., 407 N.W.2d
6, 8 (Mich. 1987) (“An action for fraud may not be predicated upon the expression of an opinion
or salesmen’s talk in promoting a sale, referred to as puffing.”); cf. First Presbyterian Church of
Ypsilanti v. H.A. Howell Pipe Organs, Inc., No. 07-13132, 2010 WL 419972, at *3-4 (E.D.
Mich. Feb. 1, 2010) (dismissing a fraudulent concealment claim where there was “no allegation
that [the plaintiff] specifically inquired into [the defendant’s] financial condition,” and holding
that the defendant’s statement that business had been “very good” did not give rise to a duty to
disclose as the plaintiff did not “seek specific clarification”).
19
62
Article 2 [of the UCC], a sale of goods is accompanied by the implied warranties of
merchantability and fitness . . . . Thus, under the code, the purchaser of defective goods may
recover for the benefit of the bargain (the difference between the value of the goods as delivered
and the value the goods would have had they complied with the warranty).” (footnotes omitted)).
The Court agrees with that logic and conclusion. Thus, New GM’s motion to dismiss must be
and is denied.
d. Unjust Enrichment
Finally, the Court turns to the Michigan Plaintiffs’ unjust enrichment claims. (See FACC
¶¶ 3967-3977). To state a claim for unjust enrichment under Michigan law, a plaintiff must
show “(1) receipt of a benefit by the defendant from the plaintiff and (2) an inequity resulting to
plaintiff because of the retention of the benefit by defendant.” Lipov v. Louisiana-Pac. Corp.,
No. 12-CV-439, 2013 WL 3805673, at *5 (W.D. Mich. July 22, 2013) (citing Dumas v. Auto
Club Ins. Ass’n, 473 N.W.2d 652, 663 (Mich. 1991)). “If this is established, the law will imply a
contract in order to prevent unjust enrichment. However, a contract will be implied only if there
is no express contract governing the same subject matter.” Belle Isle Grill Corp. v. City of
Detroit, 666 N.W.2d 271, 478 (Mich. Ct. App. 2003) (citation omitted); accord Kingsley Assocs.,
Inc. v. Moll PlastiCrafters, Inc., 65 F.3d 498, 506 (6th Cir. 1995); Romeo Inv. Ltd. v. Michigan
Consol. Gas Co., No. 260320, 2007 WL 1264008, at *7-8 (Mich. Ct. App. May 1, 2007).
Michigan courts have occasionally allowed plaintiffs to plead alternative claims for breach of
contract and equitable relief, but such cases have involved disputes regarding the validity of the
underlying contracts. See, e.g., Glaske v. Indep. Bank Corp., No. 323167, 2016 WL 298986, at
*10 (Mich. Ct. App. Jan. 21, 2016). Moreover, “[t]hese rules, allowing simultaneous and
alternative claims for breach of contract and unjust enrichment, no longer appear to be good law
63
when both claims are asserted against the same defendant, with whom the plaintiff has an
express contractual relationship.” Morris Pumps v. Centerline Piping, Inc., 729 N.W.2d 898,
906 (Mich. Ct. App. 2006). Under those circumstances, “Michigan courts now hold that the
existence of the express contract bars the [equitable] claim.” Id. Here, Michigan Plaintiffs
Marks, Semrau, and Wloch all purchased their vehicles while still under warranty (FACC
¶¶ 163, 165, 169), and Plaintiffs do not challenge the validity of those warranties. Their unjust
enrichment claims must be and are dismissed on that basis alone.
For an independent reason, however, all of the Michigan Plaintiffs’ unjust enrichment
claims are subject to dismissal. That is because Michigan courts “only employ the doctrine of
unjust enrichment in cases where the defendant directly receives a benefit from the plaintiff.”
Smith v. Glenmark Generics, Inc., USA, No. 315898, 2014 WL 4087968, at *1 (Mich. Ct. App.
Aug. 19, 2014); accord Belle Isle Grill Corp., 256 666 N.W.2d at 666; Storey Attends
Healthcare Prod., Inc., No. 15-CV-13577, 2016 WL 3125210, at *12 (E.D. Mich. June 3, 2016).
Applying that requirement, courts have consistently dismissed unjust enrichment claims under
Michigan law where the benefit to the defendant was conferred by a third party. See, e.g., Lipov,
2013 WL 3805673, at *6 (dismissing a claim where the defendant sold the product at issue
“through distributors and wholesalers to builders, subcontractors, and/or agents, who then
installed the [product] on [the p]laintiff’s residence,” holding that “these indirect transactions do
not state a claim that [p]laintiff conferred a direct benefit on [d]efendant”); W.C. Ducomb Co.,
Inc. v. Ann Arbor Mach. Co., 2012 WL 516089, at *3 (Mich. Ct. App. Feb. 16, 2012)
(“Assuming that retaining the money from Chrysler was a benefit, it is undisputed that those
funds came from Chrysler, not from plaintiff. Accordingly, plaintiff cannot establish the first
element of unjust enrichment.”); A & M Supply Co. v. Microsoft Corp., No. 274164, 2008 WL
64
540883, at *2 (Mich. Ct. App. Feb. 28, 2008) (concluding that “the unjust enrichment doctrine
does not apply under the facts alleged by plaintiff here” because the plaintiff could neither point
to “direct contact between Microsoft and the indirect purchasers” nor “show that Microsoft
received any direct payment or other benefit from those purchasers”).
Admittedly, Plaintiffs’ argument to the contrary finds some support in a handful of
federal cases. See, e.g. In re Auto. Parts Antitrust Litig., 50 F. Supp. 3d 836864-865 (E.D. Mich.
2014) (“Michigan law does not require a benefit to be conferred directly by plaintiff to a
defendant.”); accord Miller v. MSX-IBS Holding, Inc., No. 16-CV-10596, 2016 WL 4138238, at
*7 (E.D. Mich. Aug. 4, 2016); In re Static Random Access Memory (SRAM) Antitrust Litig., 580
F.Supp. 2d 896 (N.D. Cal. 2010); Sheet Metal Workers Local 441 Health & Welfare Plan v.
GlaxoSmithKline, PLC, 737 F. Supp. 2d 380, 438 (E.D. Pa. 2010). But those cases do not
withstand close scrutiny. All rely on the same three Michigan precedents — Kammer Asphalt
Paving Co., Inc. v. East China Tp. Schools, 504 N.W.2d 635, 640-41 (Mich. 1993); Morris
Pumps v. Centerline Piping, Inc., 729 N.W.2d 898, 904-05 (Mich. Ct. App. 2006); and In re
Cardizem CD Antitrust Litig., 105 F Supp. 2d 618, 670-71 (E.D. Mich. 2000) — and, as other
courts (including the Michigan Court of Appeals) have explained, those precedents do not bear
the weight that the outlier cases have put on them. See, e.g., Fenerjian v. Nonshim Co., Ltd., 72
F. Supp. 3d 1058, 1087-88 (N.D. Cal. 2014) (concluding that Kammer and Morris Pumps are
“less instructive because they involved situations where the parties’ contacts or transactions with
each other were direct” and that “Cardizem is not instructive because [it] did not cite any
Michigan state authority involving indirect purchasers or transactions”); see also, e.g., Smith,
2014 WL 4087968, at *1; W.C. Ducomb Co., 2012 WL 516089, at *4 (similar); A & M Supply
Co., 2008 WL 540883, at *2 (similar). At most, “Michigan courts have in some instances
65
allowed a plaintiff to recover for an indirect conferral of benefit where the plaintiff is a
subcontractor and the defendant is the party that hired the general contractor. This doctrine only
applies where the defendant and the plaintiff had some sort of direct interaction, however.”
Storey, 2016 WL 3125210, at *12. The doctrine does not apply to cases “involving consumer
plaintiffs and a remote manufacturer.” Id.; accord Schechner, 2017 WL 588460, at *10. This
case is indisputably of the consumer-remote manufacturer variety, as all of the Michigan
Plaintiffs purchased their vehicles from third parties rather than directly from New GM. That is
fatal to their unjust enrichment claims. Accordingly, New GM’s motion to dismiss the Michigan
Plaintiffs’ unjust enrichment claims is granted.
5. New York
The remaining New York Plaintiffs for purpose of this motion are Renate Glyttov, Nicole
Mason, Donna Quagliana, and Bedford Auto Sales, Inc. Glyttov owned a 2009 Chevrolet HHR
that she purchased as a certified pre-owned vehicle under warranty from a Chevrolet dealer on
March 28, 2012, which had a Delta Ignition Switch defect and was also subject to the Power
Steering recall. (FACC ¶ 213). Mason owns a 2010 Chevrolet Cobalt that she purchased new
with an extended warranty from a dealership on May 17, 2010, which was subject to the Delta
Ignition Switch and Power Steering recalls. (Id. ¶ 215). Quagliana owns a 2005 Chevrolet
Cobalt that she purchased used and unwarranted from a dealership in 2013, which was subject to
the Delta Ignition Switch recall. (Id. ¶ 216). Finally, Bedford Auto Sales, Inc. is a car
dealership with its principal place of business in Bedford, Ohio, which purchased two vehicles
from New York dealers — a 2010 Chevy Cobalt subject to the Delta Ignition Switch and Power
Steering recalls and a 2009 Chevrolet Cobalt subject to the Delta Ignition Switch recall,
66
purchased in December 2013 and January 2013 respectively — both of which it ultimately sold
at a loss. (See id. ¶ 212).
Glyttov’s car shut off spontaneously on several occasions, including while she was
driving on the highway; the car would also shut off when she was driving on bumpy roads or hit
a pothole. (Id. ¶ 213). Also, on several occasions, the key would not turn and would become
stuck in the ignition. (Id.). In May 2012, her ignition lock cylinder was replaced during a
routine oil change. (Id.). Two years later, on June 11, 2014, her ignition keys and switch were
replaced. (Id.). She received notification of the Power Steering recall in June 2014, but the
notice indicated the parts were not then available; her power steering was finally serviced on
December 10, 2014, and she ultimately traded in the car in 2015. (See id.). Mason’s car
spontaneously shut off on at least three occasions, including when her daughter was driving the
vehicle home from a test to get her driver’s license; twice the vehicle had to be towed because it
would not restart. (Id. ¶ 215). Her car’s ignition switch was replaced in June 2014 under the
recall, and she believes her power steering was serviced under the recall in or shortly after
November 2014. (Id.). Quigliana’s car turned off on two occasions while her daughter was
driving to school; she attempted to have the vehicle fixed without success until she was told
about the ignition switch recalls. (See id.). In 2015, after the ignition switch was repaired, the
car was totaled in an accident. (Id.). Finally, Bedford Auto Sales, Inc. does not allege that either
car it purchased manifested a defect. (Id. ¶ 212). After the recalls were announced, Bedford
sought to get the cars repaired, but it was consistently informed that the ignition switch
replacement parts were not available. (Id. ¶ 216). The dealership ultimately sold both cars at a
loss in February and April 2015.
67
Together, the New York Plaintiffs bring claims against New GM under New York’s
consumer protection law for deceptive acts and practices, N.Y. Gen. Bus. Law (“GBL”) §§ 349350 (FACC ¶¶ 5161-5183); for common law fraudulent concealment (id. ¶¶ 5184-5197); for
breach of implied warranty of merchantability, N.Y. U.C.C. § 2-314 (id. ¶¶ 5198-5207); for
violations of the False Advertising Act, N.Y. Gen. Bus. Law § 350 (id. ¶¶ 5208-5216); and for
unjust enrichment (id. ¶¶ 5239-5249). The Court will address each of these claims in turn.
a. GBL Section 349
New York consumer protection statute, General Business Law Section 349(a) (“Section
349”), prohibits “[d]eceptive acts or practices in the conduct of any business, trade or commerce
or in the furnishing of any service.” To prove a claim under Section 349(a), a plaintiff must
show, “first, that the challenged act or practice was consumer-oriented; second, that it was
misleading in a material way; and third, that the plaintiff suffered injury as a result of the
deceptive act.” Stutman v. Chem. Bank, 731 N.E.2d 608, 611 (N.Y. 2000). Conduct is
materially misleading if it is “likely to mislead a reasonable consumer acting reasonably under
the circumstances.” Oswego Laborers’ Local 214 Pension Fund v. Marine Midland Bank, N.A.,
647 N.E.2d 741, 745 (N.Y. 1995). Notably, however, “reliance is not an element of a [S]ection
349 claim.” Stutman, 731 N.E.2d at 612. Finally, as the parties’ briefing makes clear (compare
GM Mem. 34 n.17 with Pls.’ Opp’n 36 & n.30), federal courts are divided over whether claims
under Section 349 are subject to the heightened pleading standards of Rule 9(b). In a case that is
presumably binding on this Court, the Second Circuit held in Pelman ex rel. Pelman v.
McDonald’s Corp., 396 F.3d 508, 511-12 (2d Cir. 2005), that the more relaxed standards of Rule
8(a) apply because Section 349 extends “well beyond common-law fraud to cover a broad range
of deceptive practices.” But other courts have declined to follow Pelman when it comes to
68
Section 349 claims sounding in fraud. See, e.g., Keegan v. Am. Honda Motor Co., Inc., 838 F.
Supp. 2d 929, 957-58 (C.D. Cal. 2012).
The Court need not resolve the question of whether Rule 9(b) applies to the New York
Plaintiffs’ Section 349 claims because it would make no difference to the Court’s analysis or
conclusions. First, all of Bedford Auto’s Section 349 claims are subject to dismissal because
New York law requires a manifested defect for a plaintiff to recover on any claim and its
vehicles did not manifest any of the alleged defects. (See FACC ¶¶ 209-212). Unlike in
Michigan, there is no shortage in New York of case law on this point. Most relevant here is
Frank v. DaimlerChrysler Corp., 741 N.Y.S.2d 9 (N.Y. App. Div. 2002), in which a putative
class of plaintiffs brought claims for economic loss arising under Section 349 (as well common
law fraud and breach of implied warranty claims), alleging a defect in the front seat backrests of
certain vehicles that made the seats prone to collapse in the event of a rear-end collision. See id.
at 11-12. The Frank Court found the plaintiffs’ claims had been properly dismissed because
“plaintiffs must plead actual injuries or damages, resulting from defendants’ conduct, as an
essential element of each” of their causes of action.” Id. at 12. In reaching that conclusion, the
Court undertook an extensive review of existing case law in this District — which unanimously
provided that “[p]urchasers of an allegedly defective product have no legally recognizable claim
where the alleged defect has not manifested itself in the product they own.” Hubbard v. General
Motors Corp., No. 95-CV-4362, 1996 WL 274018, at *3 (S.D.N.Y. May 22, 1996); see also id.
(“[A] Suburban that performs satisfactorily and never exhibits the alleged braking system defect
is fit for the purposes intended and does not give rise to a breach of warranty claim or other.”); In
re Canon Cameras, 237 F.R.D. 357, 360 (S.D.N.Y. 2006) (“[P]roof of malfunction is a
prerequisite to any of plaintiffs’ claims [including under Section 349], and yet they do not
69
meaningfully contest that the class they seek to certify likely consists in overwhelming measure
of owners of cameras that did not malfunction at all.”); Weaver v. Chrysler Corp., 172 F.R.D. 96,
100 (S.D.N.Y. 1997) (“Where, as here, a product performs satisfactorily and never exhibits the
alleged defect, no cause of action lies.”).
The Frank Court also found support for its conclusion in precedents from other
jurisdictions that had adopted the manifest defect requirement. See Frank, 741 N.Y.S.2d at 1415; see also, e.g., Briehl v. Gen. Motors Corp., 172 F.3d 623, 628 (8th Cir. 1999) (dismissing
claims regarding allegedly defective brakes where the plaintiffs “[had] not alleged that their ABS
brakes [had] malfunctioned or failed” because, “[u]nder each of the theories” invoked by the
plaintiffs, “damages constitutes an essential element of the cause of action”); Yost v. Gen. Motors
Corp., 651 F. Supp. 656, 657 (D.N.J. 1986) (holding that a complaint alleging a design defect
that was likely to cause damage and create safety hazards was insufficient to state a cause of
action). Finally, the Court reasoned that “[p]ublic policy concerns” favored a manifest defect
requirement — in particular, that “it would be manifestly unfair to require a manufacturer to
become, in essence, an indemnifier for a loss that may never occur.” Frank, 741 N.Y.S.2d at 16.
Faced with a relative glut of adverse case law, the New York Plaintiffs insist that the Frank
Court would have come out the other way had the plaintiffs in the case alleged (as Bedford Auto
does here (see FACC ¶ 212)) that they had sold their cars at a financial loss because of the
defect. (See Pls.’ Opp’n 13-14). Some loose language in Frank aside, see 741 N.Y.S.2d at 17
(observing that the plaintiffs had not alleged injury in part because they did not allege that they
had “attempted to sell, or sold an automobile at a financial loss because of the defect”), however,
Plaintiffs conspicuously fail to cite any case departing from Frank on this ground. Moreover,
such a distinction would do little or nothing to alleviate the public policy concerns raised in
70
Frank. Plaintiffs try instead to rely on BMW Group LLC v. Castle Oil Corp., 29 N.Y.S.3d 253
(N.Y. App. Div. 2016), in which the court found allegations that the defendant delivered
“inferior, adulterated heating oil” rather than the higher-quality oil contracted for sufficient to
sustain a claim for breach of express warranty. See id. at 254. But the BMW Court itself
described “‘no injury’ latent defect” cases like Frank as inapposite because those cases involved
the production or sale of “a defective product” or the failure “to warn of the product’s danger,”
rather than a “basic contract law” claim that the defendant “fail[ed] to uphold its end of the[]
bargain and to deliver what was promised.” Id. at 256. BMW Group is thus less persuasive in
this context than the multitude of cases cited by New GM. Accordingly, New GM’s motion to
dismiss is granted with respect to Bedford Auto’s Section 349 claims. 20
By contrast, the Section 349 claims of the remaining New York Plaintiffs — all of whom
allege manifestation of their defects — largely survive New GM’s motion. First, New GM does
not (and obviously cannot) dispute that its challenged acts were consumer-oriented. Second,
given the seriousness of the alleged defects, New GM’s alleged misrepresentations (in the form
of consumer-directed advertisements and reports) and omissions can be described as “materially
Relying on Frank, New GM argues that Bedford Auto cannot make out any claims —
statutory or otherwise — absent a manifested defect. (See GM Mem. 12). The Court need not
address the argument with respect to unjust enrichment because (as discussed below), the New
York Plaintiffs’ claims must be dismissed for other reasons. With respect to Bedford Auto’s
claims for fraudulent concealment and breach of implied warranty, however, the Court agrees
with New GM. See, e.g., Weaver, 172 F.R.D. at 99 (“Plaintiff’s allegation of possible economic
loss fails to plead adequately the required damages element for fraud . . . and breach of
warranty.”); Feinstein v. Firestone Tire & Rubber Co., 535 F. Supp. 595, 603 (S.D.N.Y. 1982)
(“Tires which lived full, productive lives were, by demonstration and definition, ‘fit for the
ordinary purposes’ for which they were used; hence they were ‘merchantable’ under [the UCC],
and no cause of action for breach of an implied warranty can arise.”); Canon Cameras, 237
F.R.D. at 360 (dismissing claims under Section 349 because “satisfaction of [its] elements would
. . . require proof of malfunction”). Accordingly, Bedford Auto’s claims are dismissed in full.
20
71
misleading.” Third, the New York Plaintiffs all allege sufficient injury, as they assert that they
would not have purchased, or paid as much for, their vehicles had they known about the alleged
defects. Finally, to the extent the remaining New York Plaintiffs’ claims relate to the Delta
Ignition Switch recall (Glyttov, Mason, and Quagliana), they satisfy Rule 9(b) for the reasons
discussed above in connection with Alabama and Illinois. Mason’s vehicle — a 2010 Chevy
Cobalt that she purchased in May 2010 — was also subject to the Power Steering recall. (See
FACC ¶ 215). Notably, New GM contends that, like Illinois Plaintiff Painter, Mason’s car may
have been part of the 2010 power steering recall (defeating any claim of concealment), but
Mason has not alleged when in 2010 relative to her purchase that recall took place. Neither party
disputes, however, that Glyttov’s car — also subject to the Power Steering recall at issue here —
was not part of the earlier 2010 recall so that argument is not applicable to her claim. Glytovv
purchased her vehicle in March 2012 (id. ¶ 213); two years prior, in 2010, GM Canada had
issued a recall for power steering defects in that model, and NHTSA had begun investigating the
same issue with respect to New GM. (Id. ¶ 757). These allegations are sufficient to establish
that New GM had knowledge of the alleged defect prior to Glytovv’s purchase. Accordingly,
New GM’s motion to dismiss is granted solely as Bedford Auto’s and Mason’s claims (in the
latter case, only to the extent they are premised on the Power Steering recall), but Mason (like
Painter) is also granted leave to amend to allege when in 2010 the recall of her vehicle took
place.
b. Fraudulent Concealment
The Court turns next to the New York Plaintiffs’ common law fraudulent concealment
claims. (FACC ¶¶ 5184-5197). Notably, New GM’s sole argument for dismissal of those claims
is that they are barred by New York’s economic loss doctrine. (See GM Mem. 58-59; GM Reply
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29-30). That rule generally “restricts plaintiffs who have suffered ‘economic loss,’ but not
personal or property injury, to an action for the benefits of their bargain. If the damages suffered
are of the type remedial in contract, a plaintiff may not recover in tort.” EED Holdings v.
Palmer Johnson Acquisition Corp., 387 F. Supp. 2d 265, 277 (S.D.N.Y. 2004) (internal
quotation marks omitted) (citing, inter alia, Schiavone Constr. Co. v. Elgood Mayo Corp., 436
N.E.2d 1322, 1323 (N.Y. 1982)). The rule indisputably applies to claims sounding in negligence
or strict liability. See, e.g., Computech Intern., Inc., v. Compaq Computer Corp., No. 02-CV2628 (RWS), 2004 WL 1126320, at *10 (S.D.N.Y. May 21, 2004) (citing cases). Whether fraud
claims are barred, however, is a closer question. As this Court has observed before, most courts
in this Circuit have declined to apply the economic loss rule to intentional torts, citing the
absence of any New York authority to the contrary. See Weisblum v. Prophase Labs, Inc., 88 F.
Supp. 3d 283, 297-98 (S.D.N.Y. 2015); accord EED Holdings, 387 F. Supp. 2d at 278;
Computech Int’l, 2004 WL 1126320, at *10.
That approach is bolstered by the fact that New York courts have long “routinely
permitted” fraud claims for pure economic loss to proceed. EED Holdings, 387 F. Supp. 2d at
278; see, e.g., First Bank of Americas v. Motor Car Funding, Inc., 690 N.Y.S.2d 17, 21-22 (N.Y.
App. Div. 1999) (allowing fraud claims to advance despite alleging only economic damages with
no mention of the economic loss doctrine); Strasser v. Prudential Sec., Inc., 630 N.Y.S.2d 80,
81-82 (N.Y. App. Div. 1995) (affirming a jury verdict on a cause of action for fraud); Stevenson
Equipment, Inc. v. Chemig Construction Corp., 585 N.Y.S.2d 318, 319-20 (N.Y. App. Div.
1991) (upholding a jury verdict awarding the plaintiff economic recovery based on a claim of
fraudulent concealment); Deerfield Comm. Corp. v. Chesebrough-Ponds, Inc., 502 N.E.2d 1003,
1004 (N.Y. App. Div. 1986) (affirming a lower court’s denial of a motion to dismiss the
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plaintiff’s fraudulent concealment counterclaim where another counterclaim sounded in contract
and the only alleged damages were purely economic). It is also consistent with the approach
taken by many — if not most — other jurisdictions. See, e.g., Geneva Pharm. Tech. Corp. v.
Barr Labs., Inc., 201 F. Supp. 2d 236, 287 (S.D.N.Y. 2002) (New Jersey law); Orlando v.
Novurania of America, Inc., 162 F. Supp. 2d 220, 226 n.2 (S.D.N.Y. 2001) (Connecticut law).
Some courts in the Circuit, however, have applied the economic loss rule to fraud claims
under New York law. See, e.g., Kalimantano GmbH v. Motion in Time, Inc., 939 F. Supp. 2d
392, 416-17 (S.D.N.Y 2013); GMA Accessories, Inc v. ePartners Inc., No. 07-CV-8414 (LAK),
2008 WL 781188, at *1 (S.D.N.Y. Mar. 19, 2008). But those courts have relied solely on
Orlando, which, in turn, cited no authority for its conclusion, leading this Court and others to
find it unpersuasive. See Weisblum, 88 F. Supp. 2d at 298; EED Holdings, 387 F. Supp. 2d at
278. And while New GM invites the Court to revisit the issue on the basis of two New York
Appellate Division cases not cited by the defendants in Weisblum (see GM Mem. 58-59 & n.28
(citing Weiss v. Polymer Plastic Corp., 802 N.Y.S.2d 174 (N.Y. App. Div. 2005), and New York
Methodist Hospital v. Carrier Corporation, 892 N.Y.S.2d 110 (N.Y. App. Div. 2009)), the Court
declines the invitation. Assuming for the sake of argument that two intermediate appellate court
decisions clearly on point would warrant reconsideration, the two decisions are not quite as
clearly on point as New GM would have them. In Weiss, for example, the Court referenced only
“strict products liability and negligence” in its discussion of the economic loss rule and
addressed the plaintiffs’ fraud claim separately. See 802 N.Y.S.2d 175-76. And New York
Methodist involved claims for “negligent design and manufacture and breach of contract”; fraud
is mentioned, but only in the context of a “cross motion” by the plaintiff (which was denied
below) that sought “leave to replead so as to assert causes of action sounding in, among other
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things, fraud.” 892 N.Y.S.2d at 111. Notably, every subsequent decision citing these cases with
respect to the economic loss doctrine has done so for the uncontroversial (and, for present
purposes, irrelevant) proposition that the doctrine bars strict products liability and negligence
claims. See, e.g., 126 Newton St., LLC v. Allbrand Commercial Windows & Doors, Inc., 993
N.Y.S.2d 558, 560-61 (N.Y. App. Div. 2014) (citing both cases). New GM does not cite — and
this Court has not found — a single decision that relies on either case for the proposition that the
economic loss doctrine applies to intentional torts under New York law.
The Court thus adheres to the view that claims for intentional torts are not precluded by
New York’s economic loss doctrine. Accordingly, New GM’s motion to dismiss the New York
Plaintiffs’ fraudulent concealment claim on the ground that the doctrine does apply is denied
(except with respect to Bedford Auto, as discussed above).
c. Unjust Enrichment
Finally, the New York Plaintiffs bring claims of unjust enrichment. To prevail on an
unjust enrichment claim under New York law, a plaintiff must show that “(1) the defendant was
enriched, (2) at the expense of the plaintiff, and (3) it would be inequitable to permit the
defendant to retain that which is claimed by the plaintiff.” Koenig v. Boulder Brands, Inc., 995
F. Supp. 2d 274, 290 (S.D.N.Y. 2014) (alteration omitted). As this Court has repeatedly held,
however, “[i]t is one of the ‘well-settled principles of New York law’ that ‘the existence of a
valid and enforceable written contract governing a particular subject matter ordinarily precludes
recovery in quasi contract for events arising out of the same subject matter.’” Downey v. Adloox
Inc., — F. Supp. 3d —, No. 16-CV-1689 (JMF), 2017 WL 816141, at *7 (S.D.N.Y. Feb. 28,
2017) (quoting Superintendent of Ins. v. Ochs, 377 F.3d 209, 213 (2d Cir. 2004)); accord Grant
& Eisenhofer, P.A. v. Bernstein Liebhard LLP, No. 14-CV-9839 (JMF), 2015 WL 1809001, at
75
*5 (S.D.N.Y. Apr. 20, 2015). “Unjust enrichment may be pleaded in the alternative, but only
where there is ‘a bona fide dispute as to whether a relevant contract exists or covers the disputed
issue.’” Downey, 2017 WL 816141, at *7 (emphasis added) (quoting Marshall v. Hyundai
Motor Am., 51 F. Supp. 3d 451, 471 (S.D.N.Y. 2014)). 21 Here, two New York Plaintiffs —
Glyttov and Mason — purchased their cars subject to express warranties (see FACC ¶¶ 213,
215), and neither disputes the validity of those warranties. That dooms their claims.
In any event, all of the New York Plaintiffs’ unjust enrichment claims fail for a separate
reason: Because they have adequate remedies at law. The Second Circuit has repeatedly
reaffirmed that unjust enrichment under New York law “is an equitable claim that is unavailable
where an adequate remedy at law exists.” Fed. Treasury Enter. Sojuzplodoimport v. Spirits Int’l
N.V., 400 F. App’x 611, 613 (2d Cir. 2010) (summary order); accord Norris v. Grosvenor Mktg.,
803 F.3d 1281, 1287 (2d Cir. 1986); Samiento v. World Yacht Inc., 883 N.E.2d 990, 996 (N.Y.
2008). Once again, Plaintiffs’ only retort is that unjust enrichment may be pleaded in the
alternative at this stage of the litigation. (See Pls.’ Opp’n 31-32). But this Court has previously
rejected that argument in light of Corsello v. Verizon N.Y., Inc., 967 N.E.2d 1177 (N.Y. 2012), in
which the New York Court of Appeals held that “an unjust enrichment claim ‘is not available
where it simply duplicates, or replaces, a conventional contract or tort claim.” Weisblum, 88 F.
Supp. 2d at 297 (quoting Corsello, 968 N.E.2d at 740). Other courts in this Circuit agree: “[T]he
accusations surrounding the plaintiff’s unjust enrichment claim overlap with her fraud,
As Plaintiffs note (Pls.’ Opp’n 30), there is some authority for the proposition that a
plaintiff may plead contract claims and unjust enrichment claims under New York law in the
alternative pursuant to Rule 8. See, e.g., Barth Packaging, Inc. v. Excelsior Packaging Grp.,
Inc., No. 11-CV-2563 (VB), 2011 WL 3628858, at *1 (S.D.N.Y. Aug. 16, 2011). That is not,
however, the prevailing view or the view that this Court has taken. See, e.g., Marshall v.
Hyundai Motor Am., 51 F. Supp. 3d 451, 471 (S.D.N.Y. 2014) (collecting cases).
21
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fraudulent concealment, express warranty, and [Section] 349 claims, all of which may proceed.
She therefore may not bring an unjust enrichment claim as a catch-all cause of action where she
adequate pleads that the defendants committed the recognized tort of fraud and breached an
express warranty.” Mahoney v. Endo Health Sols., Inc., No. 15-CV-9841 (DLC), 2016 WL
3951185, at *11 (S.D.N.Y. July 20, 2016). In light of these precedents, and Plaintiffs’ failure to
point to any post-Corsello case law to the contrary, all of the New York Plaintiffs’ unjust
enrichment claims fail. Accordingly, New GM’s motion to dismiss on this count is granted.
6. Pennsylvania
The remaining Pennsylvania Plaintiffs for purposes of this action are Janice Bagley,
Raymond Berg, Paul Pollastro, and David Schumacher. Bagley owns a 2007 Chevrolet Cobalt
that she purchased used under a thirty-day warranty from a private seller in 2013, which was
subject to the Delta Ignition Switch recall. (FACC ¶ 243). Berg owns a 2012 Chevrolet
Traverse that he purchased used from a dealership in October 2013 along with an additional
warranty; the car was ultimately subject to the Side Airbag recall. (Id. ¶ 244). Pollastro owns a
2007 Chevrolet Cobalt that he purchased as a certified pre-owned vehicle under limited warranty
from a dealership on November 22, 2010, which was subject to the Delta Ignition Switch recall.
(Id. ¶ 248). And finally, Schumacher owns a 2008 Buick Enclave that he purchased used from a
dealership along with an extended warranty on May 30, 2014, which was subject to the Side
Airbag defect recall. (Id. ¶ 249).
Berg does not allege that his car ever manifested any defect; nor did he receive a recall
notice for the side airbag defect — although he has had the car serviced and other recall repairs.
(Id.¶ 244). Bagley’s car experienced two stalling events within the first month of ownership —
and a third event only a few weeks later. (Id.¶ 243). In February 2014, she was in an accident
77
after a deer ran in front of her car, but the airbags did not deploy. (Id.). Bagley had the ignition
switch replaced in June or July 2014, presumably pursuant to the recall. (See id.). In Pollastro’s
case, the key began to stick in the ignition switch shortly after his purchase of the car in the
summer of 2011; he took the vehicle to a dealership, which identified the issue as a problem with
the floor shifter. (Id. ¶ 248). He had the ignition switch replaced on July 24, 2014, after the
recall was announced, but the first replacement switch failed, requiring a two-day repair period.
(Id.). Additionally, Pollastro had to return to the dealership afterward because the new key did
not properly match the new ignition switch. (Id.). Finally, the power steering in Schumacher’s
car went out within the first day of ownership while he was turning through a major intersection,
nearly causing an accident. (Id. ¶ 249). He has also experienced other defects with the car,
including issues with the power hatch, but he does not allege that the side airbag defect has
manifested itself and he never had the car repaired. (See id.).
The Pennsylvania Plaintiffs bring claims against New GM under the Pennsylvania Unfair
Trade Practices and Consumer Protection Law (“UTPCPL”), 73 P.S. § 201-1 et seq. (FACC
¶¶ 5937-5959); for common law fraudulent concealment (id. ¶¶ 5960-5973); for breach of the
implied warranty of merchantability, 13 PA. Const. Stat. Ann. § 2314 (id. ¶¶ 5974-5983); and for
unjust enrichment (id. ¶¶ 6006-6016). The Court will address each of these claims in turn.
Before doing so, however, the Court briefly addresses two threshold issues raised by New GM:
whether Pennsylvania’s economic loss doctrine bars all of Plaintiffs’ UTPCPL and common law
claims and whether Berg’s and Schumacher’s claims are subject to dismissal because the defects
that they allege did not manifest in their vehicles. (See, e.g., GM Mem. 16-17, 47, 56-57).
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a. Economic Loss Doctrine
In Werwinski v. Ford Motor Co., 286 F.3d 661 (3d Cir. 2002), the Third Circuit held,
based on its prediction at the time of how the Pennsylvania Supreme Court would rule on the
issue, that the economic loss doctrine applies not only to claims of negligence, but also to claims
under the UTPCPL and to intentional torts. See id. at 674-82. As other courts have explained,
however, there are many reasons to doubt the soundness of Werwinski’s prediction, particularly
with the passage of time. See, e.g., Landau v. Viridian Energy PA LLC, 223 F. Supp. 3d 401,
411-415 (E.D. Pa. 2016); DeFebo v. Andersen Windows, Inc., 654 F. Supp. 2d 285, 293-94 (E.D.
Pa. 2009); O’Keefe v. Mercedes-Benz USA, LLC, 214 F.R.D. 266, 276 (E.D. Pa. 2003); Smith v.
Reinhart Ford, 68 Pa. D. & C. 4th 432, 437-38 (C.P. Lanc. 2002); Zwiercan v. General Motors
Corp., 58 D. & C. 4th 251, 266-70 (C. P. Phila. 2002). In fact, citing intervening decisions by
the lower Pennsylvania courts, several district courts within the Third Circuit itself have gone so
far as to decline to follow Werwinski. See, e.g., Landau, 2016 WL 6995038, at *6-10 (citing
cases). The Third Circuit’s decision, of course, is not even arguably binding on this Court. But
in any event, the Court concludes, substantially for the reasons provided by the Landau Court,
that the more recent cases have the better of the argument — at least with respect to claims under
the UTPCPL. See id. After all, the economic loss rule is a common law doctrine, while the
UTPCPL is “a statute in derogation of common law.” Id. (internal quotation marks omitted). A
“judicially created limitation cannot simply be engrafted onto a statute.” Id.
Whether the economic loss doctrine bars Plaintiffs’ fraudulent concealment claims is a
closer question, however, as the more recent case law has focused predominantly on the
UTPCPL. See, e.g., id.; see also DeFabo, 654 F. Supp. 2d at 293-94. Moreover, at least two
federal courts have followed Werwinski to dismiss fraudulent concealment claims in similar
79
cases. See In re Takata, 193 F. Supp. 3d at 1341-42; Martin v. Ford Motor Co., 765 F. Supp. 2d
673, 684 (E.D. Pa. 2011). But again, this Court is not bound by Werwinski (as the Martin Court
was). And there are good reasons to predict that, if confronted with the question, the
Pennsylvania Supreme Court would hold that the economic loss doctrine does not apply to
intentional torts. As the Court in O’Keefe noted, “before the Werwinski panel’s decision,
Pennsylvania’s Common Pleas Courts were apparently unanimous in refusing to apply the
economic loss doctrine even in common law intentional fraud claims.” 214 F.R.D. at 276 (citing
cases). And there are strong public policy reasons to “leav[e] the possibility of an intentional tort
suit hanging over the head of a party considering outright fraud.” Air Prods. Chems., Inc. v.
Eaton Metal Prods. Co., 256 F. Supp. 2d 329, 336 (E.D. Pa. 2003). That is, “the economic loss
doctrine is premised on the notion that parties to a contract may protect themselves from
negligence or defective products by negotiating the liability terms of the contract. . . . [I]n both
theory and practice, it is impracticable, if not impossible, for parties to negotiate terms regarding
what happens if one of them is intentionally deceiving the other.” Id.; see also O’Keefe, 214
F.R.D. at 278. Thus, the Court concludes that the economic loss doctrine does not call for
dismissal of the Pennsylvania Plaintiffs’ common law fraud claims either.
b. Manifestation
Next, the Court turns to the question of whether Pennsylvania law allows a plaintiff to
sue for economic loss in the absence of a manifested defect. 22 The Court begins with Plaintiffs’
New GM identifies Pennsylvania Plaintiffs Berg, Pollastro, and Schumacher as having
failed to allege a manifested defect. (See GM Mem. 17 & n.10). Pollastro, a proposed Delta
Ignition Switch Plaintiff, alleges that, on one occasion “[s]hortly after purchase, the key became
stuck in the ignition switch” — an incident that prompted him to take his vehicle to a dealership
for inspection. (FACC ¶ 248). New GM submits that these allegations are insufficient because
he did not allege that his vehicle ever shut off. (GM Mem. 17 n.10). As with Michigan Plaintiff
22
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claims under the UTPCPL. New GM’s argument that those claims are barred rests almost
exclusively on the holding of the Third Circuit in Argus v. Shiley, Inc., 989 F.2d 142 (3d Cir.
1993). There, the plaintiff brought claims for intentional infliction of emotional distress
(“IIED”), negligent infliction of emotional distress, and punitive damages against the
manufacturer of her heart valve, alleging that the valves were prone to malfunction — and,
crucially, that this knowledge caused her (and other recipients) “harm” in the form of “severe
mental anguish, anxiety, fear,” and the like. See id. at 143-44. In predicting how the Supreme
Court of Pennsylvania would rule, the Third Circuit concluded:
It seems to us that the Supreme Court of Pennsylvania would find no relief may
be granted on the allegations of the complaint here for two independent reasons,
either of which would bar this action. First, . . . Angus has not alleged that the
valve implanted in her is defective, a prerequisite to liability in a products
liability action. . . . Second, Angus has not suffered a compensable injury as the
direct impact from the manufacture, sale, and implanting of the valve was on her
emotional state and the allegations of this case will not support a recovery for
emotional injuries.
Id. at 147 (citations omitted). On its face, then, Argus is distinguishable from this case because
Plaintiffs here do allege that their vehicles were defective (even if the defect had not yet
manifested), and because Plaintiffs allege injuries outside of the emotional realm. Additionally,
much of the Argus Court’s reasoning was specific to IIED claims. See id. at 148 (“If the
Supreme Court of Pennsylvania recognized a cause of action for intentional infliction of
Anderson, the Court concludes that Pollastro’s allegations suffice for present purposes.
Schumacher — a proposed Side Airbag defect Plaintiff — alleges several defects with respect to
his car, including that his “power steering went out” while he was driving on the interstate.
(FACC ¶ 249). New GM argues that these defects are irrelevant because he fails to allege any
side-airbag related defect (GM Mem. 17 n.10), and Plaintiffs apparently concede the point. (See
Pls.’ Opp’n 17 (arguing that Schumacher has a “viable” claim “notwithstanding the absence of
malfunction”)). Neither party disputes that Berg’s vehicle has never manifested a defect.
81
emotional distress on the allegations of Argus’s complaint, it effectively would sanction a large,
if not vast, number of lawsuits by consumers who obtained properly functioning valves.”); see
also id. at 147 (“[B]ased on the cases involving the infliction of emotional distress, we are
convinced that the district court correctly found that no basis for relief was stated in Angus’s
complaint.”). But the elements necessary to prevail on an IIED claim differ materially from the
elements of a UTPCPL claim. Compare Hoy v. Angelone, 691 A.2d 476, 482, as aff’d 720 A.2d
745 (1998), with Hunt, 538 F.3d at 223. New GM is correct that other courts have cited Argus as
evidence that the Pennsylvania Supreme Court would require a manifest defect in the UTPCPL
context — but every one of those courts has done so in a string cite and without grappling with
the distinction between IIED and consumer fraud claims. See, e.g., Bridgestone/Firestone, 288
F.3d at 1017; Ziegelmann v. DaimlerChrysler Corp., 649 N.W.2d 556, 561 (N.D. 2002)
(parenthetical quoting Angus’s holding with respect to “a cause of action for [IIED]”);
Tietsworth v. Harley-Davidson, Inc., 677 N.W.2d 233, 240 (Wis. 2004) (same). The Court thus
agrees with Plaintiffs that Argus is neither controlling nor particularly helpful here.
That conclusion is reinforced by recent pronouncements from Pennsylvania courts about
the sorts of damages that amount to “ascertainable harm” under the UTPCPL. The statute itself
provides that “[a]ny person who purchases or leases goods or services . . . and thereby suffers
any ascertainable loss of money or property, real or personal . . . may bring a private action.” 73
Pa. Stat. Ann. § 201.92 (emphasis added); see also Weinberg v. Sun Co., Inc., 777 A.2d 442, 446
(Pa. 2001) (“The statute clearly requires, in a private action, that a plaintiff suffer an
ascertainable loss as a result of the defendant’s prohibited action.” (emphasis omitted)). And
while the “Pennsylvania Supreme Court has not definitively addressed what constitutes
ascertainable loss under the statute,” Kaymark v. Bank of Am., N.A., 783 F.3d 168, 180 (3d Cir.
82
2015), Pennsylvania courts have found that benefit-of-the-bargain damages can be sufficient,
see, e.g., Dibish v. Ameriprise Fin., Inc., 134 A.3d 1079, 1087-88, appeal denied, 141 A.3d 481
(Pa. 2016) (considering a UTPCPL claim and “conclud[ing] that the record did not support the
trial court’s determination that the plaintiffs had presented no evidence of an ascertainable loss”
where, “[a]t a minimum, the plaintiffs had lost the benefit of their bargain[] because the
insurance policy issued was more expensive than the policy promised them”).
Moreover, as Plaintiffs note, several lower Pennsylvania courts have found benefit-ofthe-bargain damages sufficient under the UTPCPL. For instance, in Zwiercan v. Gen. Motors
Corp., No. 3235, 2002 WL 1472335 (Pa. Com. Pl. May 22, 2002), the “crux” of the dispute
between the parties was “over the term ‘ascertainable loss,’ as it is used in the UTPCPL.” Id. at
*2. The Zweircan Court distinguished Angus as a case based on speculative, emotional damages;
by contrast, the plaintiff in Zweircan alleged that the seats of her vehicle were defective and
required repair — rendering “the fact that she had not suffered a manifestation of the defect in
her [v]ehicle of no import.” Id. at *3; see also Solarz v. DaimlerChrysler Corp., No. 2033, 2002
WL 452218, at *13 (Pa. Com. Pl. Mar. 13, 2002) (finding “the plaintiffs allege[d] ascertainable
loss to support a claim under [the UTPCPL]” where they alleged a “difference in value between
minivans with the park-brake interlock device and those without it”); Grant v. Bridgestone
Firestone Inc., 57 Pa. D. & C 4th 72 (Com. Pl. 2002) (concluding, based in part on the reasoning
of the district court in Bridgestone/Firestone, 155 F. Supp. 2d at 1096-99, that “[w]henever a
consumer has received something other than what he bargained for, he has suffered a loss of
money or property” (internal quotation marks omitted)). In light of these precedents, the Court
rejects New GM’s argument that Berg’s and Schumacher’s UTPCPL claims should be dismissed
because their vehicles never manifested any defects.
83
The Court reaches a different conclusion, however, with respect to Berg’s and
Schumacher’s common law claims. Notably, all the Pennsylvania cases cited by Plaintiffs
discuss only the UTPCPL and implied breach of warranty claims — two contexts in which
“harm” (or “injury”) is defined outside the common law. See Zweircan, 2002 WL 1472335, at
*1 (UTPCPL and warranty claims); Solarz, 2002 WL 452218, at *1 (UTPCPL, breach of
warranty, and breach of contract claims); Grant, 2002 WL 372941, at *1 (UTPCPL and warranty
claims). While the UTPCPL requires only “ascertainable loss,” a common law fraud claim
requires a showing of “injury” that was proximately caused by reliance on the defendant’s
fraudulent acts. See Presbyterian Med. Ctr. v. Budd, 832 A.2d 1066, 1072 (Pa. Super. Ct. 2003).
Plaintiffs do not cite, and the Court has not found, any Pennsylvania cases allowing fraud or
unjust enrichment claims to proceed in the absence of a manifest defect. In fact, the case law
suggests that a plaintiff may not even have standing to bring those claims in the absence of a
manifested defect. See, e.g., Holster v. Jeld-Wen, Inc., 10-CV-3966, 2011 WL 4528378, at *1
(E.D. Pa. Sept. 30, 2011) (dismissing claims for “common law fraud by omission, breach of
implied warranty of merchantability, and in the alternative, unjust enrichment” for lack of
standing where the proposed class was composed of consumers of a certain brand of windows
allegedly containing undisclosed inherent defects). Plaintiffs cite a single case that purportedly
supports their position in the common law context (Pls.’ Opp’n 18), but that case falls flat, both
because that court was reviewing an award of damages under the UTPCPL and because the
plaintiffs there alleged an already-suffered economic injury. See Boehm v. Riversource Life Ins.
Co., 117 A.3d 308, 320-30 (Pa. Sup. Ct. 2015). The Boehm Court analyzed “ascertainable loss”
under the UTPCPL, see id. at 328-30, but certainly did not endorse benefit-of-the-bargain
damages in the common law fraud context (as Plaintiffs contend (see Pls.’ Opp’n 18)), let alone
84
state that the loss of one’s benefit of the bargain suffices as an injury for purposes of the common
law. See Boehm, 117 A.3d at 325-30; see also Dibish, 134 A.3d at 1089 (analyzing
“ascertainable loss” under the UTPCPL while making no mention of common law fraud,
although the plaintiff had prevailed on both theories below).
In the absence of Pennsylvania case law to the contrary, the Court is persuaded by the
ample precedent holding that injury (and, relatedly, actual damages) for common law purposes
requires the manifestation of a defect. See, e,g., Tietsworth, 677 N.W.2d at 240 (“The amended
complaint alleges only that the motorcycles have diminished value . . . because [they] have
demonstrated a ‘propensity’ for premature engine failure and/or will fail as a result of the cam
bearing defect. This is insufficient to state a legally cognizable injury for purposes of a fraud
claim.”); Jarman v. United Indus. Corp., 98 F. Supp. 2d 757, 768 (S.D. Miss. 2000) (dismissing
claims for common law fraud and unjust enrichment, among others, because “unless there is
actually a failure in product performance, there is not basis at all for claiming that the plaintiff
has been damaged in any way” since “[m]ere suspicion of a lost bargain . . . will not support an
award of damages”); In re Air Bag Prod. Liab. Litig., 7 F. Supp. 2d 792, 805 (E.D. La. 1998)
(dismissing common law claims because the “plaintiffs [had] failed to advance any allegation of
manifest injury or defect, both central tenets of their tort and implied warranty claims”).
Accordingly, Berg and Schumacher’s common law claims — for fraudulent concealment and
unjust enrichment — are dismissed. (As discussed below, Schumacher’s unjust enrichment
claim is subject to dismissal on an additional basis).
Finally, the Court reaches the same conclusion with respect to Berg’s and Schumacher’s
claims for breach of the implied warranty of merchantability pursuant to Section 2314 of Title 13
85
of the Pennsylvania Commercial Statutes Code. (See FACC ¶¶ 5974-5983). 23 “The
Pennsylvania Commercial Code provides that an implied warranty of merchantability requires
that the product be ‘fit for the ordinary purposes for which goods are used.’” Petrucelli v.
Bohringer & Ratzinger, 46 F.3d 1298, 1309 (3d Cir. 1995) (citing Pa. Cons. Stat. Ann.
§ 2314(b)(3)). A claim for breach of implied warranty requires a plaintiff to make out four
elements: the existence of an implied warranty, a breach of that warranty, “a causal connection
between the defendant’s breach and the plaintiff’s injury,” and “the extent of loss proximately
caused by the defendant’s breach.” Byrd v. Essex Silverline Corp., No. 04-CV-4827, 2008 WL
81887, at *3 (E.D. Pa. Jan. 8, 2008); see also 13 Pa. Const. Stat. § 2314 cmt. 13. To make out
the last two elements, a plaintiff necessarily “must show that the productive was defective.” Id.;
see also Epler v. Jansport Subsidiary of VF Corp., No. 00-CV-154, 2001 WL 179862, at *7
(E.D. Pa. Feb. 22, 2001) (“In the absence of a defect, [the p]laintiff’s claim for breach of implied
warranty fails.”); Thomas v. Carter-Wallace, Inc., 27 Pa. D & C. 4th 146, 149 (C.P. 1994)
(observing that Pennsylvania law consistently holds that a merchant is “only liable for harm
caused by a defect in their product” and citing cases); Altronics of Bethlem, Inc. v. Repco, Inc.,
957 F.2d 1102, 1105 (3d Cir. 1992) (requiring a plaintiff to establish, inter alia, “that the product
malfunctioned”). But see Weiler v. SmithKline Beecham Corp., 53 Pa. D. & C. 4th (Pa. Ct.
Comm. Pl. 2001) (allowing implied warranty claims to proceed where the plaintiff repeatedly
alleged that certain drugs were “defective” and that she had suffered economic loss because
those drugs did not effectively treat her symptoms). Thus, even if the sale of a defective vehicle
New GM does not challenge the implied warranty claims of the other Pennsylvania
Plaintiffs.
23
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violates the implied warranty of merchantability, the real question, as the Zwiercan court
observed, is “whether a manifestation of the breaching defect is required for a claim to accrue.”
2002 WL 1472335, at *3. That court concluded it is, noting that “Pennsylvania is hardly alone in
requiring a manifestation of a defect before a breach of warranty claim can be permitted.” Id. at
*4 & n.7 (collecting cases); see also Solarz, 2002 WL 452218, at *5 (dismissing implied
warranty claims of plaintiffs who had not alleged any manifested defect); Grant, 2002 WL
372941, at *5 (same). In light of the foregoing precedent, the Court agrees that, under
Pennsylvania law, a manifested defect is required to make out a claim for implied warranty as
well. 24 Accordingly, Berg and Schumacher’s implied warranty claims must be dismissed.
c. The UTPCPL
The Court turns, then, to the substance of the Pennsylvania Plaintiffs’ claims under the
UTPCPL. (See FACC ¶¶ 5937-5959). That statute “makes it unlawful for individuals or
businesses to engage in unfair or deceptive acts or practices.” Baker v. Family Credit
Counseling Corp., 440 F. Supp. 2d 392, 411 (E.D. Pa. 2006). To the extent relevant here, it
prohibits, inter alia, representing that goods or services have characteristics, benefits, or qualities
that they do not have; representing that goods or services are of a particular standard, quality, or
grade if they are of another; advertising goods or services with the intent not to sell them as
advertised; and engaging in any other fraudulent or deceptive conduct that creates a likelihood of
The Court found one federal case, not cited by the parties, that reaches a different
conclusion from the precedent discussed above: In re Ford Motor Co. E-350 Van Prod. Liab.
Litig. (No. II), No. 03-CV-4558, 2010 WL 2813788, at *41-42 (D.N.J. July 9, 2010). There, the
court considered whether the Pennsylvania Supreme Court would permit implied warranty
claims for purely economic injury, absent a manifested defect. See id. The Court premised its
decision in large part on the lack of “caselaw from lower courts in Pennsylvania suggesting any
trend in that direction,” but — as the above discussion makes clear — that premise is
questionable.
24
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confusion or misunderstanding. See 73 P.S. § 201-2(4)(v), (vii), (ix), (xxi). (FACC ¶ 5941).
Complicating matters somewhat, “[w]hat a plaintiff must include in a complaint in order to
allege a violation of the UTPCPL depends on which section of the UTPCPL a defendant
allegedly violated.” Baker, 440 F. Supp. 2d at 412. Under the false advertising sections (such as
sections (v) and (vii)), for example, a plaintiff must allege “that the advertisement was false, that
it actually deceives or has a tendency to deceive a substantial segment of its audience, and that
the false advertising is likely to make a difference in the purchasing decision.” Id. (quoting
DiLucido v. Terminix Int’l, Inc., 676 A.2d 1237, 1240-41 (Pa. Super. Ct. 1996). “Puffery is not
actionable as false advertising.” Commonwealth v. Golden Gate Nat’l Senior Care LLC, 158
A.2d 203, 215 (Pa. Commw. Ct. 2017) (distinguishing between material representations and
puffery).
With respect to claims under the UTPCPL’s “catch-all” provision (section (xxi)),
however, Pennsylvania courts are split on whether a plaintiff must allege the elements of
common law fraud. See Seldon v. Home Loan Servs., Inc., 647 F. Supp. 2d 451, 468 (E.D. Pa.
2009) (collecting cases on both sides). A prior version of the provision prohibited only
“fraudulent” conduct, but the Pennsylvania legislature amended it in 1996 to add a prohibition on
“deceptive” conduct as well. See Walkup v. Santander Bank, N.A., 147 F. Supp. 3d 349, 360
(E.D. Pa. 2015). Neither the Pennsylvania Supreme Court nor the Third Circuit has addressed
the effect of this change. See id.; see also Kemezis v. Matthews, 394 F. App’x 956, 958-59 (3d
Cir. 2010) (summary order) (declining to resolve the issue). In the face of that vacuum, most
federal courts have predicted that “the Pennsylvania Supreme Court would follow the
intermediate appellate courts’ interpretation that . . . [p]laintiffs need not plead the elements of
common law fraud to state a claim under the catch-all provision of the UTPCPL.” Walkup, 147
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F. Supp. 3d at 361 (emphasis added); see also Seldon, 647 F. Supp. 2d at 469 (“[I]f a plaintiff
alleges deceptive conduct, a plaintiff need not allege the elements of common law fraud, but,
conversely, must do so if a plaintiff alleges fraudulent conduct.”). Accordingly, a plaintiff’s
allegations need only meet the heightened pleading standards of Rule 9(b) to the extent his or her
UTPCPL claim is premised on fraudulent conduct, as opposed to deceptive conduct. See, e.g.,
Christopher v. First Mut. Corp., No. 05-CV-1149, 2006 WL 166566, at *3 (E.D. Pa. Jan. 20,
2006); Seldon, 647 F. Supp. 2d at 469-70. Finally, to allege a violation under any provision of
the UTPCPL, “a plaintiff must show that he justifiably relied on the defendant’s wrongful
conduct or representation and that he suffered harm as a result.” Hunt v. United States Tobacco
Co., 538 F.3d 217, 223 (3d Cir. 2008) (internal quotation marks omitted).
As New GM tacitly concedes, Plaintiffs’ allegations concerning New GM’s advertising
and marketing are plainly sufficient to support the Pennsylvania Plaintiffs’ false advertisingbased UTPCPL claims under subsections (v), (vii), and (ix), as those claims are not subject to
any heightened pleading standard. (See FACC ¶¶ 336-472). Plaintiffs’ UTPCPL claims under
the “catch-all” provision present a closer question, however, if only because there is a colorable
argument that they sound in fraud and thus implicate Rule 9(b). Substantially for the reasons
discussed in connection with the other states above, however, the claims of the remaining
Pennsylvania Plaintiffs (Bagley and Pollastro) concerning the Delta Ignition Switch defect
satisfy the Rule’s heightened pleading standards. That leaves Berg and Schumacher, who
purchased vehicles affected by the Side Airbag defect (also referred to as the “Wiring Harness”
or “Side-Impact Airbag Wiring Harness” defect). (Id. ¶¶ 243, 249; Recall Chart 5-6). 25 New
The particulars of the Side Airbag Defect are not especially relevant here. Briefly
explained, corrosion or loose crimps in the side impact airbag wiring harness could lead to an
25
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GM challenges their claims on the ground that the FACC fails to allege that the company was
aware of the defect prior to their vehicle purchases. (See GM Mem. 40-41). But that is not the
case. First, the year before Berg purchased his 2012 Chevy Traverse, New GM had issued
Customer Service Bulletins about replacing the front seat-mounted side-impact airbag connectors
in that model after experiencing a high volume of warranty claims relating to that issue. (FACC
¶¶ 244, 743). Similarly, three years before Schumacher purchased his 2008 Buick Enclave, New
GM had issued a similar bulletin for that make and model. (See id. ¶¶ 249, 740-742). Thus, the
Pennsylvania Plaintiffs’ UTPCPL claims survive.
d. Fraudulent Concealment
Next, the Court turns to the claims for common law fraudulent concealment, also called
“non-disclosure” under Pennsylvania law, for the Pennsylvania Plaintiffs other than Berg and
Schumacher. (See FACC. ¶¶ 5960-5973). To make out a fraud claim, a plaintiff must show “(1)
a representation; (2) which is material to the transaction at hand; (3) made falsely, with
knowledge of its falsity or recklessness as to whether it is true or false; (4) with intent of
misleading another into relying on it; (5) justifiable reliance on the misrepresentation; and (6) the
resulting injury was proximately caused by the reliance.” Presbyterian Med. Ctr., 832 A.2d at
1072. “The tort of intentional non-disclosure has the same elements as intentional
misrepresentation, except in the case of intentional non-disclosure, the party intentionally
conceals a material fact rather than making an affirmative misrepresentation.” Bortz v. Noon,
729 A.2d 555, 561 (Pa. 1999). “Absent a duty to speak or disclose,” however, “the concealment
increase in resistance, which the airbag sensing system interpreted as a fault — causing a
“service air bag” message to display. (FACC ¶ 732). That increased resistance could, in turn,
result in the side airbags failing to deploy during a crash. (Id. ¶ 733).
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of certain facts cannot constitute fraud.” Protica, Inc. v. iSatori Tech., LLC, No. 11-CV-1105,
2012 WL 1071223, at *5 (E.D. Pa. Mar. 30, 2012). Like most jurisdictions, Pennsylvania
recognizes that “a duty to disclose exists because of a fiduciary or similar relationship of trust
and confidence between the parties.” Gibbs v. Ernst, 647 A.2d 882, 893 (Pa. 1994) (internal
quotation marks omitted). In general, such a relationship exists “whenever the relative positions
of the parties is such that the one has power and means to take advantage of, or exercise undue
influence over the other.” Matter of Estate of Evasew, 584 A.2d 910, 913 (Pa. 1990) (internal
quotation marks omitted); see also id. (listing examples of such relationships, including those
“between trustee and cestui que trust, guardian and ward, attorney and client, and principal and
agent”). Given the arm’s-length nature of the relationship between New GM and Plaintiffs, it is
pretty clear that Plaintiffs cannot make out a duty to disclose on that basis.
But the Pennsylvania Plaintiffs have another avenue available to them, as “Pennsylvania
law recognizes a difference between active concealment and mere silence in the context of
common law fraud.” Gnagey Gas & Oil Co., Inc. v. Pa. Underground Storage Tank Indem.
Fund, 82 A.3d 485, 501 (Pa. Commw. Ct. 2013); accord Am. Planned Cmtys., Inc., 28 F. Supp.
2d 964, 968 (E.D. Pa. 1998) (“Concealment alone may create a sufficient basis for finding that a
party engaged in fraud so long as the other elements of fraud are present.”). As the Gnagey Gas
Court concluded after an exhaustive analysis of the issue: “[A]t common law, no fiduciary
relationship, no statute, no other independent legal duty to disclose is necessary to make active
concealment actionable fraud — simple ‘good faith’ imposes an obligation not to purposefully
conceal material facts with intent to deceive.” 82 A.3d at 502; see also Boardakan Rest. LLC v.
Gordon Grp. Holdings, LLC, No. 11-CV-5676, 2015 WL 4597970, at *11 (E.D. Pa. July 31,
2015) (“[W]here a party is accused of purposefully concealing information material to a
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transaction, no confidential or fiduciary relationship between the parties need exist for liability to
be imposed. Pennsylvania has adopted the Restatement (Second) of Torts § 550, which imposes
liability for intentional concealment of material information regardless of a duty to disclose.”
(citing Youndt v. First Nat’l Bank of Port. Allegany, 868 A.2d 539, 549 (Pa. Super. Ct. 2005)). 26
This theory of fraudulent concealment “is characterized by deceptive acts or contrivances
intended to hide information, mislead, avoid suspicion, or prevent further inquiry into a material
matter.” Gnagey Gas, 82 A.3d at 500. In a similar vein, “a defendant’s incomplete disclosure
can result in misleading ‘half-truths,’ where a material fact is not disclosed to the plaintiff,”
permitting the plaintiff to recover under a theory of nondisclosure. Boardakan Rest. LLC v.
Gordon Grp. Holdings, LLC (“Boardakan II”), No. 11-CV-5676, 2016 WL 6213035, at *12
(E.D. Pa. Oct. 24, 2016); accord In re Unisys Corp. Retiree Med. Ben. ERISA Litig., No. 03-CV3924, 2006 WL 2822261, at *49-50 (E.D. Pa. Sept. 29, 2006).
Applying these principles, Pennsylvania courts have upheld active concealment claims in
many cases despite the lack of any fiduciary or special relationship. See, e.g., Gnagey Gas, 82
A.3d at 503-04 (upholding a claim for “active concealment” where the defendant knew about
eight underground storage tanks on a property that was sold and “active[ly] concealed their
existence”); Nat’l Bldg. Leasing, Inc. v. Byler, 381 A.2d 963, 966 (Pa. Super. Ct. 1977) (holding
that sellers fraudulently concealed material information when they demolished several buildings,
For reference, Section 550 of the Restatement (Second) of Torts, titled “Liability for
Fraudulent Concealment,” states: “One party to a transaction who by concealment or other action
intentionally prevents the other from acquiring material information is subject to the same
liability to the other, for pecuniary loss as though he had stated the nonexistence of the matter
that the other was thus prevented from discovering.” Pennsylvania has also adopted Section 551,
which imposes liability for fraudulent nondisclosure in those situations where there is an
affirmative duty to disclose, such as in a fiduciary or confidential relationship. See Duquesne
Light Co. v. Westinghouse Elec. Corp., 66 F.3d 604, 611-12 (3d Cir. 1995).
26
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deposited the debris in a large hole located on the property, filled the hole with soil, and told the
buyers that the debris had been removed from the property); Aetna, Inc. v. Health Diagnostic
Lab Inc.., No. 15-CV-1868, 2015 WL 9460072, at *5 (E.D. Pa. Dec. 28, 2015) (observing that
“Plaintiff would not need to prove an affirmative duty to disclose as Bluewave Defendants argue
because that only arises when a party cannot prove active concealment and must rely on a nondisclosure theory” and concluding that “Plaintiff has pleaded sufficient facts that it may be
entitled to relief under an active concealment theory” because it alleged that the defendants had
engaged in a fraudulent billing scheme that they hid from the plaintiff insurance provider).
New GM’s arguments to the contrary fall short. For one, the cases New GM cites were
all limited to the question of whether a fiduciary or confidential relationship existed, and did not
address the active-concealment doctrine. See, e.g., Jeter v. Brown & Williamson Tobacco Corp.,
113 Fed App’x 465, 469 (3d Cir. 2004); Brown v. Johnson & Johnson, 64 F. Supp. 3d 717, 725
(E.D. Pa. 2014); Slippery Rock Area Sch. Dist. v. Tremco, Inc., No. 15-CV-1020, 2016 WL
3198122, at *10-13 (W.D. Pa. June 9, 2016). New GM does cite one case, Arndt v. Johnson &
Johnson, 67 F. Supp. 3d 673 (E.D. Pa. 2014), in which the plaintiff alleged that the defendant
had covered up manufacturing defects in one of its drugs (which led to the death of the plaintiff’s
son). See id. at 678-70. But that allegation was made in service of the plaintiff’s argument that
the company’s fraudulent concealment tolled the statute of limitations — a fundamentally
different issue from the one presented here. Accordingly, the Court declined to consider several
acts allegedly committed by the defendant on the ground that they occurred prior to the
plaintiff’s son’s death, see id. at 679, and held that even if the plaintiff “had adequately alleged
affirmative acts of concealment,” he was ineligible for tolling because he did not undertake “any
93
investigation” before the statute of limitations period ended, see id. at 680. Ardnt and the other
cases cited by New GM are therefore not particularly apt guides in this context.
Here, Pennsylvania Plaintiffs expressly plead that New GM “concealed and suppressed
material facts concerning safety defects.” (FACC ¶ 5962). Together with the other allegations
in the FACC, discussed above, that is sufficient to plead a claim for active concealment under
Pennsylvania law. Still, to prevail on this claim, each of the Pennsylvania Plaintiffs must also
show that New GM “intended for the plaintiff to be induced to act,” “that the plaintiff justifiably
relied on the defendant’s misrepresentation,” and “that the plaintiff suffered damages as the
proximate result of that reliance.” Boardakan II, 2016 WL 6213035, at *13 (citing Sowell v.
Butcher & Singer, Inc., 926 F.2d 289, 296 (3d Cir. 1991). In other words, a plaintiff must show
that the defendant had “knowledge of the untrue character of his representation,” Ira G. Steffy &
Son, Inc. v. Citizens Bank of PA, 7 A.3d 278, 290 (Pa. Super. Ct. 2010), and that “the means of
obtaining the information in question were not equal,” Fort Washington Res., Inc. v. Tannen, 858
F. Supp. 455, 460 (E.D. Pa. 1994). The FACC satisfies those requirements, however, as
Plaintiffs allege, among other things, that “to conceal and suppress the defects,” New GM “went
so far as to instruct its employees not to use terms that could notify NHTSA or the public as to
the existence of a safety issue” (FACC ¶ 5964); that New GM did so “in whole or in part to
protect its profits and avoid recalls that would hurt the brand’s image and cost New GM money”
(id. ¶ 5968); that “New GM had superior knowledge and access to the facts regarding the
defects” that Plaintiffs could not have discovered on their own (id. ¶ 5967); and, in terms of
damages, that Plaintiffs would have “paid less for their vehicles or would not have purchased or
leased them at all” had they known of the defects. (Id. ¶ 5971). Accordingly, New GM’s motion
to dismiss the remaining Pennsylvania Plaintiffs’ fraudulent concealment claims is denied.
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e. Unjust Enrichment
Finally, the Pennsylvania Plaintiffs assert claims of unjust enrichment. (See FACC
¶¶ 6006-6016). To prevail on such a claim under Pennsylvania law, a plaintiff must show that
(1) the “plaintiff conferred a benefit on the defendant”; (2) “the defendant appreciated the
benefit”; and (3) “acceptance and retention by the defendant of the benefits, under the
circumstances, would make it inequitable for the defendant to retain the benefit without paying
for the value of the benefit.” Glob. Ground Support, LLC v. Glazer Enters., Inc., 581 F. Supp.
2d 669, 675 (E.D. Pa. 2008); see also Mitchell v. Moore, 729 A.2d 1200, 1203-04 (Pa. 1999). As
with many of the states discussed above, Pennsylvania holds that “where the subject matter of
the claim is governed by a contract, a plaintiff cannot pursue (and a court cannot grant relief)
based on unjust enrichment theory.” Andrichyn v. TD Bank, N.A., 93 F. Supp. 3d 375, 389 (E.D.
Pa. 2015) (collecting cases); accord Gurdkowski v. Foremost Ins. Co., 556 F. App’x 165, 169-70
(3d Cir. 2014). Courts applying Pennsylvania law are divided, however, on the question of
whether a plaintiff may plead contract claims and unjust enrichment claims together. Compare,
e.g., Fish Net, Inc. v. ProfitCenter Software, No. 09-CV-5466, 2011 WL 1235204, at *10 (E.D.
Pa. Mar. 31, 2011) (no alternative pleading), and Sheinman Provisions, Inc. v. Nat’l Deli, LLC,
No. 08-CV-453, 2008 WL 2758029, at *4 (E.D. Pa. July 15, 2008) (same), with Spuhler v. Mass.
Mut. Life Ins. Co., No. 14-MDA-911, 2015 WL 5970490, at *5 (Pa. Super. Ct. Oct. 1, 2015)
(allowing alternative pleading). But the weight of authority, particularly recent authority, seems
to hold that, as a matter of substantive state law, a plaintiff can assert an unjust enrichment claim
even where he or she asserts the existence of an express contract. See Lugo v. Farmers Pride,
Inc., 967 A.2d 963, 970 (Pa. Super. Ct. 2009); accord Bonomo v. Nova Fin. Holdings, Inc., No.
11-CV-4762, 2012 WL 2196305, at *13 (E.D. Pa. June 15, 2012); Kane v. Platinum Healthcare,
95
LLC, No. 10-CV-4390, 2011 WL 248494, at *6 (E.D. Pa. Jan. 25, 2011); Rollinson v. ClarkeDeMarco, No. 2004-2993, 2007 WL 4593471 (Pa. Comm. Pl. Jan. 22, 2007); DTK Ventures,
L.P. v Russo, No. 05-EQ-4059, 2006 WL 2988463 (Pa. Comm. Pl. Aug. 21, 2006). Accordingly,
the Court will not dismiss the remaining Pennsylvania Plaintiffs’ claims on that basis, even
though all of them purchased their vehicles pursuant to some form of warranty.
New GM’s last challenge to the Pennsylvania Plaintiffs’ unjust enrichment claims —
namely, that Pennsylvania law requires the conferral of a direct benefit to allow recovery under
this theory (see GM Mem. 32) — has more weight, at least with respect to some Plaintiffs.
Regrettably, the case law on point is once again somewhat muddled. Compare In re Takata, 193
F. Supp. 3d at 1343 (dismissing a claim on the ground that the plaintiff had purchased his car
from a third party), and Schmidt v. Ford Motor Co., 972 F. Supp. 2d 712, 722 (E.D. Pa. 2013)
(similar), with Incubadora Mexicana, SA de CV v. Zoetis, Inc., 310 F.R.D. 166, 176-77 (E.D. Pa.
2015) (“Plaintiffs need not have purchased the vaccine lots at issue directly from [d]efendants to
have conferred benefits on the defendant.” (internal quotation marks omitted)). Whether or not
proof of a direct benefit is required, however, Pennsylvania courts have regularly held that a
plaintiff “need not have dealt directly with each defendant in order to allege a claim of unjust
enrichment against them.” Baker v. Family Credit Counseling Corp., 440 F. Supp. 2d 392, 420
(E.D. Pa. 2006) (collecting cases); see also Com. ex rel. Pappert v. TAP Pharm. Prod., Inc., 885
A.2d 1127, 1137 (Pa. Commw. Ct. 2005) (“The [d]efendants assert that the Commonwealth has
failed to state a cause of action for unjust enrichment because they have not pleaded facts
showing that the Commonwealth conferred any direct benefit on the [d]efendants. . . . However,
. . . we can infer [that it did confer a benefit on the defendant] from the pleading.”).
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In re Ford Motor Co. E-350 Van Prods. Liab. Litig. (No. II), No. 03-CV-4558 (GEB),
2011 WL 601279, at *10 (D.N.J. Feb. 16, 2011), which involved unjust enrichment claims under
circumstances similar to those here, is particularly instructive. There, the Court concluded that,
under “Pennsylvania’s law of restitution, benefit refers to ‘any form of advantage,’ and the
plaintiff need not directly make payment to defendants in order to raise a claim for unjust
enrichment. Thus, although the direct benefits — i.e., payment for vehicle delivery — took
place upstream, the Court cannot say that [the plaintiffs] have conveyed no benefit on Ford.” Id.
at *6. The Court expressed skepticism that “purchase of a used vehicle — which the Court
presumes was acquired by the dealership from a downstream consumer — has any effect on the
manufacturer,” but found that the plaintiffs who purchased new vehicles had “indirectly
conferred a benefit upon Ford, because their new vehicle purchase factored into the calculus
whereby their dealership and Ford made orders for replacement vehicles.” Id.
Applying those principles here, and giving Plaintiffs the benefit of the doubt, the Court
concludes that Pollastro — who purchased his vehicle as a certified pre-owned car from a
Chevrolet (i.e., GM) dealer (see FACC ¶ 248) — may proceed with his claim. His purchase may
have “factored into the calculus whereby their dealership and [New GM] made orders for
replacement vehicles,” Ford Motor Co. E-350 Van Products Liab. Litig., 2011 WL 601279, at
*6, thereby conferring a benefit, albeit indirectly, on New GM. By contrast, there are no
allegations in the FACC from which the Court could infer that Bagley — who purchased her
vehicle from a private seller (or, for that matter, Schumacher who purchased his car from a nonGM dealership) — conferred a benefit, whether direct or indirect, on New GM. Accordingly,
Bagley’s unjust enrichment claim must be and are dismissed. (Schumacher’s claim was
previously dismissed failing to allege a manifested defect.)
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7. Texas
The remaining Texas Plaintiffs for purposes of this motion are Gareebah Al-ghamdi,
Dawn Bacon, Michael Graciano, Keisha Hunter, Tajah Liddy, Lisa McClellan, and Cindy
Wilson. Al-ghamdi owns a 2004 Chevrolet Impala that she purchased used and unwarranted at
an auto expo on September 7, 2009, which was subject to the Low Torque Ignition Switch recall.
(FACC ¶ 266). Bacon owns a 2006 Cadillac CTS that she purchased used and unwarranted from
a private seller in September 2012, which was subject to the Low Torque Ignition Switch recall.
(Id. ¶ 267). Graciano owns at 2007 Chevrolet Cobalt that he purchased used along with a
warranty from a dealership on October 17, 2011, which was subject to the Delta Ignition Switch
recall. (Id. ¶ 270). Hunter owned a 2006 Chevrolet Cobalt which she purchased used from a
dealership on March 22, 2013, which was subject to the Delta Ignition Switch defect. (Id.
¶ 272). Liddy owns a 2011 GMC Acadia that she purchased used along with an extended
warranty from a dealership on May 22, 2011, which was subject to the Side Airbag recall. (Id.
¶ 274). McClellan owned a 2005 Malibu Maxx that she purchased used under a ninety-day
warranty from a dealership on November 22, 2010, which was subject to the Low Torque
Ignition Switch and Power Steering recalls. (Id. ¶ 275). Finally, Wilson owns a 2008 Saturn
Aura XR that she purchased used along with an extended warranty from a dealership in 2012,
which was subject to the Power Steering recall. (Id. ¶ 279).
Hunter does not allege that her vehicle ever manifested any defect, but the vehicle was
repaired pursuant to the recall in early 2015. (Id. ¶ 272). After experiencing post-repair
mechanical problems, Hunter returned the car to the dealership, defaulting on her loan. (See id.).
Wilson similarly does not allege any issues with her car; she did not receive a recall notice for
the power steering issue, although she did have her car repaired pursuant to a recall notice
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regarding a defective wave plate in March 2015. (Id. ¶ 279). By contrast, Al-ghamdi’s car
experienced frequent shut downs while she was driving, including on the highway; initial
diagnostic testing failed to show why her vehicle was shutting off while in motion. (Id. ¶ 266).
She received a recall notice for the Low Torque ignition switch defect in 2015, but as of the
filing of the FACC had not yet had her vehicle repaired because the dealership did not have the
parts available. (See id.). Similarly, Bacon’s car has stopped without warning while driving on
the interstate at least eight times — nearly causing several serious accidents. (Id. ¶ 267). She
also experienced trouble with the ignition switch, requiring her to turn the ignition key may times
before her car will start. (Id.). She has yet to receive a recall notice for the ignition switch
defect, so her car remains unrepaired. (Id.). Although Bacon attempted to trade her car in
several times, the dealerships have declined to accept it because they cannot sell her model until
the ignition problem is fixed. (See id.). Graciano has also had recurring issues with his vehicle,
as it has experienced stalling and corresponding loss of power steering on numerous occasions.
(Id. ¶ 270). In March 2014, Graciano received a recall notice, although it took several months
before his family received a loaner vehicle while waiting for delivery of the parts necessary to
repair his car. (Id.). Liddy’s car experienced issues with the timing change sensor and an oil pan
leak (id. ¶ 274); she has also been told that her engine needs to be replaced. (Id.). Although
Liddy’s car was subject to the Side Airbag recall (as well as recalls for the hatchback motors and
seatbelts), she does not allege that she experienced any issues with the airbags or that her car has
been repaired pursuant to the recall. (Id.). McClellan had significant issues with her car, which
shut off while she was driving at least fifty to sixty times in the first year and a half that she
owned it. (Id. ¶ 275). Her car was repaired many times, but she does not remember receiving
99
any recall notices. (See id.). She eventually returned the car to the dealership due to its many
problems. (Id.).
The Texas Plaintiffs bring claims against New GM under the Texas Deceptive Trade
Practices Act (“Texas DPTA”), Tex. Bus. & Com. Code §§ 17.41 et seq. (FACC ¶¶ 6551-6581);
for common law fraudulent concealment (id. ¶¶ 6582-6595); for breach of the implied warranty
of merchantability, Tex. Bus. & Com. Code § 2.314 (id. ¶¶ 6596-6605); and for unjust
enrichment (id. ¶¶ 6628-6638). The Court will address each of these claims in turn.
a. The Texas DPTA
The Texas Plaintiffs first bring claims under the Texas DPTA. (See FACC ¶¶ 65516581). Before addressing the substance of those claims, however, the Court addresses a
threshold challenge raised by New GM — namely, that Texas law bars recovery for purely
economic losses under the Texas DPTA where the parties’ transaction is covered by a contract.
(GM Mem. 46). Generally speaking, New GM is correct that Texas law “precludes recovery in
tort for economic losses resulting from the failure of a party to perform under a contract.” Lamar
Homes, Inc. v. Mid-Continent Cas. Co., 242 S.W.3d 1, 12 (Tex. 2008). Whether, however, that
rule is a product of the “economic loss doctrine” (as New GM characterizes it) or application of
the “independent injury” requirement — pursuant to which a plaintiff cannot make out a cause of
action in tort without alleging conduct actionable outside of a governing contract, see Chapman
Custom Homes, Inc. v. Dallas Plumbing Co., 445 S.W.3d 716, 718 (Tex. 2014) — is not entirely
clear, as the line between the two doctrines is, to put it mildly, blurred. See Eastman Chem. Co.
v. Niro, 80 F. Supp. 2d 712, 716 n.2 (S.D. Tex. 2000); see also, e.g., Arlington Home, Inc. v.
Peak Envt’l Consultants, Inc., 361 S.W.3d 773, 779 (Tex. App. 2012) (noting “that there is not
one ‘economic loss rule,’ but several rules governing recovery of economic losses in various
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areas of the law”). Functionally, however, there is not much daylight between the two rules: To
determine whether an independent injury occurred, “as with the economic loss rule, the inquiry is
whether the alleged unconscionable conduct could have resulted in the absence of a contract
between the parties.” Shakeri v. ADT Sec. Servs., Inc., 816 F.3d 283, 295 (5th Cir. 2016)
(internal quotation marks omitted).
In light of that principle, courts applying Texas law have routinely dismissed tort-style
claims under the DPTA where the claims amounted to “nothing more than [] breach of contract
claim[s].” Dickey v. Club Corp. of Am., 12 S.W.3d 172, 178 (Tex. App. 2000); see, e.g.,
Shakeri, 816 F.3d at 295 (dismissing an unconscionable conduct claim under the DTPA because
it “ultimately rest[ed] on the allegation that [the defendant] falsely advertised that its alarm
system would be of high quality and would work, when the alarm system, in fact, did not work
as it was supposed to under the contract”). At the same time, Texas courts have repeatedly held
that “the fact that the heart of [a] dispute involves the interpretation of a contract does not
automatically preclude a DPTA claim.” Garza v. CTX Mortg. Co., LLC, 285 S.W.3d 919, 928
(Tex. App. 2009). As the Fifth Circuit recently observed:
While . . . a breach of contract does not itself constitute a DTPA violation, the
Texas Supreme Court has never held that underlying conduct that breaches an
agreement cannot violate the DTPA merely because it also breaches an existing
contractual obligation. Put differently, if a particular duty is defined both in a
contract and in a statutory provision, and a party violates the duty enumerated in
both sources, the economic loss rule does not apply.
McCaig v. Wells Fargo Bank (Texas), N.A., 788 F.3d 463, 475 (5th Cir. 2015). Thus, for
example, Texas courts have allowed DTPA claims by consumers where they are premised, not
on breach of the contract to provide goods or services per se, but rather on “advertis[ing] goods
or services with the intent not to sell them as advertised” or on failing to disclose material
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information “at the time of the transaction.” Conquest Drilling Fluids, Inc. v. Tri-Flo Int’l, Inc.,
137 S.W.3d 299, 309 (Tex. App. 2004); accord Tony Gullo Motors LLP v. Chapa, 212 S.W.3d
299, 304-05 (Tex. 2006); Balay v. Gamble, 2011 WL 2435929, at *5 (Tex. App. Ct. June 16,
2011). “A duty to not act illegally to procure a contract,” these courts have reasoned, “is
separate and independent from the duties established by the contract itself.” Conquest Drilling
Fluids, 137 S.W.3d at 310.
Relatedly, Texas court have permitted DPTA claims to proceed, notwithstanding
contracts governing the parties’ transactions, where plaintiffs have alleged “unconscionable
actions” on the part of defendants. See, e.g., SCS Builders, Inc. v. Searcy, 390 S.W.3d 534, 541
(Tex. App. 2012) (“Under the record in this case, we hold that the duty breached by [the
defendants]: to refrain from engaging in or using deceptive trade practices as set out in Section
17.50(a)(3) — unconscionable actions or courses of action — was one that . . . arose outside, and
existed independently of, the contract.”). Finally, Texas courts have observed that a party who
prevails on a statutory fraud claim is entitled to statutory damages — that is, to damages beyond
the subject matter of the contract. See id. at 541-42 (observing that the “nature of the remedy”
for a DTPA violation differs from the remedy in a contract action because Section 17.50(b)(1) of
the Act entitles the prevailing party to economic damages, attorney’s fees, costs, and potentially
other additional damages); cf. Formosa Plastics Corp. USA v. Presidio Eng’rs & Contractors,
Inc., 960 S.W.2d 41, 45 (Tex. 1998) (“When the only loss or damage is to the subject matter of
the contract, the plaintiff’s action is ordinarily on the contract.”); Breitling v. LNV Corp., 15-CV0703, 2015 WL 5896131, at *4 (N.D. Tex. Oct. 5, 2015) (“[A] party who succeeds in an action
under this section of the [another Texas statute] is entitled to statutory damages . . . . The
economic loss rule is thus inapplicable to a claim under [that statute].”).
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In light of the foregoing authorities, the Court concludes that the Texas Plaintiffs’ DPTA
claims are not barred by the economic loss doctrine (or its close cousin, the independent injury
requirement). It may well be that New GM’s conduct violated contracts with (at least some of)
the Texas Plaintiffs. But the gravamen of the Texas Plaintiffs’ DPTA claims is not that New GM
violated duties that arose under contracts. Instead, it is that New GM violated duties that arose
under the DPTA: not to misrepresent the quality and safety of is cars and not to conceal defects
prior to Plaintiffs’ purchases of their allegedly defective cars. (See FACC ¶¶ 6555, 6557). And
Texas law provides that “[a] statutory offender will not be shielded from liability simply by
showing its violation also violated a contract.” McCaig, 788 F.3d at 475. Thus, the real issue is
whether the Texas Plaintiffs state claims under the DPTA. To the extent they do, their claims
arise independent of contract and are not barred by the economic loss rule. To the extent they do
not — which was the case in the authorities upon which New GM relies, see, e.g., Crawford v.
Ace Sign, Inc., 917 S.W.2d 12, 14 (Tex. 1996) (finding no actionable misrepresentation under the
DTPA because the defendant’s statements were “nothing more than representations that the
defendants would fulfill their contractual duty to publish, and the breach of the duty sounds only
in contract”) — the economic loss rule would apply (but would also be superfluous). See, e.g.,
McCaig, 788 F.3d at 475 (noting the “inapt[ness]” of certain cases in which “Texas courts have
applied the economic loss rule to the DTPA” because, “in each of them, the Texas Supreme
Court concluded that there was no statutory violation to begin with” (citing cases)).
The remaining Texas Plaintiffs do state claims under the DPTA. To prove a violation of
the Act, a plaintiff must show that “(1) [he or she] is a consumer, (2) the defendant engaged in
false, misleading or deceptive acts, and (3) these acts constituted a producing cause of the
consumer’s damages.” Doe v. Boys Club of Greater Dallas, Inc., 907 S.W.2d 472, 478 (Tex.
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1995) (citing Tex. Bus. & Com. Code § 17.50(a)(1)). For DTPA claims that sound in fraud, a
plaintiff must also meet the heightened pleading standards of Rule 9(b). See, e.g., Omni USA,
Inc. v. Parker-Hannifan Corp., 798 F. Supp. 2d 831, 850-51 (S.D. Tex. 2011). In this case, the
Texas Plaintiffs (who plainly qualify as consumers under the law), allege that New GM engaged
in false, misleading or deceptive acts in several ways, but the Court need address only one: that
New GM undertook an “unconscionable action or course of action.” (FACC ¶ 6554). That
phrase is defined under the statute as “an act or practice which, to a consumer’s detriment, takes
advantage of the lack of knowledge, ability, experience, or capacity of the consumer to a grossly
unfair degree.” Tex. Bus. & Com Code § 17.45(5). When assessing the “unconscionability” of
an action, courts look to “what the consumer could have or would have done if he had known
about the information,” as well as the consumer’s relative “knowledge, ability, experience, or
capacity.” Peltier Enters., Inc. v. Hilton, 51 S.W.3d 616, 623 (Tex. App. Ct. 2000). Courts
“determine whether the consumer was taken advantage of to a grossly unfair degree by looking
at the entire transaction, not just whether a defendant actually intended to take advantage of the
consumer.” SCS Builders, 390 S.W.3d at 541. “To prove an unconscionable action or course of
action, a plaintiff must show that the defendant took advantage of his lack of knowledge and the
resulting unfairness was glaringly noticeable, flagrant, complete and unmitigated.” Washburn v.
Ford, No. 14-CV-0459, 2017 WL 2258253, at *5 (Tex. App. May 23, 2017); see also Parkway
Co. v. Woodruff, 901 S.W.2d 434, 441 (Tex. 1995) (“[U]nconscionability requires that the seller
take advantage of special skills and training at the time of the sale.”).
Applying those standards here, the Court concludes that the FACC sufficiently alleges
that New GM’s practice of promoting its vehicles as safe and reliable, despite its knowledge of
numerous alleged defects, “took advantage of [the plaintiffs’] lack of knowledge” such that “the
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resulting unfairness was glaringly noticeable, flagrant, complete and unmitigated.” Tex. Bus. &
Com Code § 17.45(5); see Washburn, 2017 WL 2258253, at *5. First, as noted, in evaluating
whether the defendant’s actions were unconscionable, courts look to “what the consumer could
have or would have done if he had known about the information.” Peltier Enters., 51 S.W.3d at
623. Here, the Texas Plaintiffs expressly allege that, had they known about the defects, they
would have altered their purchasing behavior. (See, e.g., FACC ¶¶ 266, 267). The FACC also
alleges that Plaintiffs lacked any sophisticated knowledge or experience in the realm of car
manufacturing and that New GM was uniquely positioned to take advantage of that disparity.
Cf. Peltier Enters., 51 S.W.3d at 624 (“A plaintiff with knowledge about indirect lending or with
years of experience in the car-selling business would not have been able to show that [the
defendant] did anything that was ‘unconscionable.’”). And finally, New GM’s purportedly
unconscionable actions were a “producing cause” of Plaintiffs’ injury, thus satisfying the third
prong of the DPTA analysis, because — but for the company’s deception — Plaintiffs allegedly
would not have purchased or paid as much for their vehicles. See, e.g., Mercedes-Benz of N.
Am., Inc v. Dickenson, 720 S.W.3d 844, 855 (Tex. App. Ct. 1986) (upholding a DTPA
unconscionability claim where Mercedes had failed to provide proper repair parts despite “the
repeated appearance of numerous defects in the car” because “it resulted in a gross disparity
between the value [the plaintiff] gave in consideration for the car and the value of the car he
received”). Accordingly, the Texas Plaintiffs provide sufficient allegations to sustain their
claims under the DTPA.
The Court has already addressed New GM’s general arguments to the contrary with
respect to the Delta Ignition Switch Plaintiffs (as to misrepresentations) and the non-Delta
Ignition Switch Plaintiffs (as to concealment of a defective process), and will not repeat those
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discussions here. New GM’s additional arguments focus on the FACC’s allegations concerning
the company’s knowledge of other defects alleged by the Texas Plaintiffs — specifically, the
Power Steering defect (Wilson and McClellan) and the Side Airbag defect (Liddy) — and the
relationship in time between any such knowledge and those Plaintiffs’ vehicle purchases. (See
GM Mem. 43-44; FACC ¶¶ 274-275, 279). With respect to the former, however, the FACC
plausibly alleges New GM’s knowledge prior to the relevant purchase dates (and, notably, New
GM does not argue otherwise). For example, New GM knew before McClellan purchased her
2005 Chevy Malibu Maxx in November 2010 that, in response to a preliminary investigation
concerning that particular car model, Old GM had extended warranty coverage to replace the
steering column assembly. (Id. ¶¶ 275, 754). Additionally, in June 2010, New GM itself
initiated a special coverage program for the 2005 Chevy Malibu Maxx. (Id. ¶ 756). Similarly,
two years before Wilson purchased her 2008 Saturn Aura XR, New GM had issued a service
bulletin regarding “special coverage to replace the power steering motor” for that very car. (Id.
¶ 756). The case for New GM’s knowledge of the Side Airbag defect prior to Liddy’s vehicle
purchase in May 2011 is a much closer call. But she alleges that, from its inception, New GM
knew about problems in the wiring harness and other components of the airbag wiring dating
back to 2008, in other vehicles and the 2009 model of the Saturn Aura XR, her vehicle. (FACC
¶¶ 734, 736-745). “Although that barely alleges knowledge of a potential defect that was not
disclosed” to Liddy herself, it is — as the Court previously found with respect to similar
allegations in the TACC — “just enough to cross the Rule 9(b) line.” In re Gen. Motors, 2016
WL 3920353, at *26 (upholding a claim concerning the wiring harness defect under Florida’s
consumer protection statute).
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In the alternative, New GM contends that the DPTA claims of Hunter, Liddy, and Wilson
must be dismissed because their vehicles never manifested the defects at issue. (See GM Mem.
10-12 & n.7). 27 New GM relies heavily on Everett v. TK-Taito, L.L.C., 178 S.W.3d 844 (Tex.
App. 2005), for this proposition. In Everett, the plaintiffs sued several manufacturers under the
DTPA (among other causes of action) for the production and sale of defective seatbelts that were
“susceptible to partial engagement, leaving the seat belt user essentially unrestrained”). Id. at
849. Plaintiffs alleged that their economic injury — namely, the “loss of the benefit of their
bargain” and “prospective cost of replacing the defective buckles” — constituted an “injury in
fact” for purposes standing, even though their seatbelts had never malfunctioned. See id. at 851.
The Texas Court disagreed, beginning its analysis by expressly “drawing a distinction between
manifested product defects and unmanifested product defects,” id. at 852, and concluding that
the plaintiffs had “not plead[ed] facts demonstrating the type of injury that is compensable under
the DPTA,” id. at 858. In particular, the Court found that, “[s]o far,” according to the pleadings,
the plaintiffs had “received the benefit of their bargain; they were promised and they received
seat belt buckles that latched and provided sufficient restraint.” Id. Moreover, they had not
“pleaded characteristics or benefits that the seat belts were represented to have but did not have,”
although “allegedly defective.” Id. The Everett Court did, however, place a temporal limitation
on its holding: “[a]t some point, potential loss-of-benefit-of-the-bargain injuries . . . from a defect
that has not manifested itself simply become too remote in time to constitute an ‘injury’ for
Liddy does allege that, “[i]n addition to the airbag recall and sensor issue, [her] vehicle
had problems with the timing change sensor and an oil pan leak” and that she “has been told that
the engine needs to be replaced.” (FACC ¶ 274). But she is a proposed Side Airbag defect
Plaintiff and does not allege that that defect manifested itself. Accordingly, Plaintiffs appear to
concede that a manifestation requirement would bar her claim. (See Pls.’ Opp’n 10).
27
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statutory standing purposes under the DPTA.” Id.; see also id. at 859 n.14 (“We do not hold that
a consumer may never possess standing to bring suit under the DTPA for benefit-of-the-bargain
damages based on an unmanifested product defect.”).
Arguably, then, Everett leaves open the possibility of standing for Plaintiffs here (or, at
least, some Plaintiffs depending on how long they have or had used their vehicles absent any
defect). See, e.g., Doyle v. Chrysler Grp., LLC, No. 13-CV-0620 (JVS), 2014 WL 1910628, at
*10 (C.D. Cal. Jan. 29, 2014) (declining to rely on Everett as, there, the “allegedly defective seat
belt had functioned as promised for over ten years” whereas the likelihood of manifestation in
the instant case was not so remote); DaimlerChrysler Corp. v. Inman, 252 S.W.3d 299, 301, 304
(Tex. 2008) (observing that “[a] person who buys a defective product can sue for economic
damages, but the law is not well developed on the degree to which the defect must actually
manifest itself before it is actionable,” and holding that the plaintiff class lacked standing as the
“fear of possible injury from an accidental release of a seatbelt [was] so remote” (footnote
omitted)). But the great weight of Texas authority suggests that manifestation is necessary, at
least in the context of frequently used products like cars, for a plaintiff to bring an action for
solely economic losses. See, e.g., Rosa v. Am. Water Heater Co., 177 F. Supp. 3d 1028, 1051,
1053 (S.D. Tex. 2016) (“A water heater, like a tire or car, has a limited usable life. . . . Given the
extensive body of case law indicating that Texas does not permit plaintiffs to recover unless they
have experienced some injury to a product with a limited useable life, the court is not persuaded
by [the p]laintiff’s arguments.”); Gen. Motors Corp. v. Garza, 179 S.W.3d 76, 83 (Tex. App.
2005) (“[T]he purchasers of Malibus could drive their cars with no problem until the pulsation
manifested, if it ever did. For purchasers who never experienced a problem during the time they
owned the car, they got what they paid for — a vehicle that provided transportation with a brake
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system that safely stopped the car.”); Martin v. Ford Motor Co., 914 F. Supp. 1449, 1455 (S.D.
Tex. 1996) (“Plaintiffs cannot succeed on any of their claims without demonstrating that they
have in fact been injury.” (collecting Texas cases)); Polaris Indus. v. McDonald, 119 S.W.3d
331, 338 (Tex. App. 2003) (finding no standing where the alleged design defect had not caused
an injury); see also Compaq Computer Corp. v. LaPray, 79 S.W.3d 779, 792 (Tex. App. 2002)
(“Tires and cars have a distinctly limited usable life. At the end of the product’s life, the product
and whatever defect it may have had pass away. If a defect does not manifest itself in that time
span, the buyer has gotten what he bargained for.”), rev’d on other grounds, 135 S.W.3d 657
(Tex. 2004). Federal courts applying Texas law have almost uniformly concluded the same.
See, e.g., In re Gen. Motors Type III Door Latch Litig., No. 98-CV-5836, 2001 WL 103434, at
*3 (N.D. Ill. Jan. 31, 2001) (“Courts interpreting Texas law have generally opposed the idea that
consumers should be able to recover damages for an allegedly defective product which has not
yet malfunctioned or caused injury,” and the two Texas courts that have “allowed uninjured
plaintiffs to proceed . . . have specifically distinguished cases in which owners of automobiles
sued for defects which never materialized.”); In re Air Bag Prods. Liab. Litig., 7 F. Supp. 2d at
806 (concluding that, under Texas law, the “plaintiffs’ failure to demonstrate or, even allege,
manifest injury or defect shatters an essential element of all their tort and implied warranty
claims”).
Faced with a veritable “wealth of contrary case law,” Plaintiffs’ inability to provide a
single Texas precedent reaching a different outcome in the context of cars is beyond telling. In
re Air Bag Prod. Liab. Litig.,7 F. Supp. 2d at 805. The cases that Plaintiffs do cite were
expressly distinguished by the Everett Court as “not controlling” because they all involved
manifested defects. 178 S.W.3d at 852 (listing cases). (See Pls.’ Opp’n 12 n.9 (listing the
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same)). Plaintiffs’ attempts to distinguish New GM’s cases are also unavailing: They claim the
cases did not involve alleged misrepresentations or product recalls, but none of those differences
undermines the central point of the cases — namely, that a manifest defect is a necessary
element of a DPTA claim. Accordingly, New GM’s motion to dismiss the remaining Texas
Plaintiffs’ DPTA claims is granted as to Hunter, Liddy, and Wilson, but otherwise denied. 28
b. Fraudulent Concealment
Next, the Texas Plaintiffs bring common law claims of fraudulent concealment. (See
FACC ¶¶ 6582-6595). To prevail on an action for fraud under Texas law, a plaintiff must prove
that “(1) a material representation was made, (2) the representation was false, (3) when the
speaker made the representation, he knew it was false or made it recklessly without knowledge
of the truth as a positive assertion, (4) the speaker made it with the intention that it should be
acted upon by the party, (5) the party acted in reliance upon it, and (6) the party thereby suffered
injury.” Solutioneers Consulting, Ltd. v. Gulf Greyhound Partners, Ltd., 237 S.W.3d 379, 385
(Tex. App. 2007); see also Formosa Plastics Corp. USA v. Presidio Eng’rs & Contractors, Inc.,
New GM contends that the lack of a manifest defect also defeats the implied warranty,
fraudulent concealment, and unjust enrichment claims of Hunter, Liddy, and Wilson. (GM
Mem. 12). As the above cited case law makes clear, under Texas law, implied warranty claims
are also foreclosed absent a manifest defect. See, e.g., Everett, 178 S.W.3d at 853-55 (“[F]or a
defect to cause redressable damages in a breach of the implied warranty of merchantability
action, it must cause the product not to function adequately in the performance of its ordinary
function for the plaintiff.”); Polaris Indus., 119 S.W.3d at 340-41 (dismissing breach of implied
warranty claim where jet ski could and did perform adequately such that the plaintiffs sought
only benefit-of-the-bargain damages); Garza, 179 S.W.3d at 81 (“A product that performs its
ordinary function adequately does not breach the implied warranty of merchantability merely
because it does not function as well as the buyer would like, or even as well as it could.”).
Accordingly, the implied warranty claims of Hunter, Liddy, and Wilson must be dismissed. As
to these Plaintiffs’ fraudulent concealment and unjust enrichment claims, the Court is inclined to
agree with New GM that they are also foreclosed, but it need not reach the issue because (for
reasons discussed below) those claims fail for different reasons.
28
110
960 S.W.2d 41, 47 (Tex. 1998). Fraud by omission or fraudulent concealment “is a subcategory
of fraud because an omission or non-disclosure may be as misleading as a positive
misrepresentation of fact when a party has a duty to disclose.” Solutioneers, 237 S.W.2d at 385.
Thus, to state a claim of fraudulent concealment under Texas law, a plaintiff must allege facts
from which a court can plausibly find that the defendant had a “duty to disclose.”
Texas precedent is, to put it mildly, a tad inconsistent with respect to what circumstances give
rise to a duty to disclose. On the one hand, courts have pronounced that such a duty “may arise
in four situations”:
(1) when there is a fiduciary relationship; (2) when one voluntarily discloses
information, the whole truth must be disclosed; (3) when one makes a
representation, new information must be disclosed when that new information
makes the earlier representation misleading or untrue; and (4) when one makes a
partial disclosure and conveys a false impression.
Vial v. Gas Sol., Ltd., 187 S.W.3d 220, 230 (Tex. App. 2006). On the other hand, some
(although not all) courts applying Texas law have held that a “confidential” or special trust
relationship is necessary for a duty to disclose to arise in any of these four situations. See, e.g.,
United Teacher Assocs. Ins. Co. v. Union Labor Life Ins. Co., 414 F.3d 558, 565 (5th Cir. 2005)
(“[N]o duty to disclose exists in Texas absent a fiduciary or confidential relationship.”
(collecting cases)); see also, e.g., Bradford v. Ventor, 48 S.W.3d 749, 755-56 (Tex. 2001)
(holding that, “[a]s a general rule, a failure to disclose information does not constitute fraud
unless there is a duty to disclose the information” and noting “we have never adopted section
551” of the Restatement (Second) of Torts, which recognizes a duty of disclosure in nonfiduciary interactions where, for example, disclosure is necessary to correct a misleading partial
statement). But see, e.g., Hurd v. BAC Home Loans Servicing, LP, 880 F. Supp. 2d 747, 763
(N.D. Tex. 2012) (“This district has held that even without a special relationship giving rise to a
111
duty of care, there is always a duty to correct one's own prior false or misleading statement.”);
Anderson, Greenwood & Co. v. Martin, 44 S.W.3d 200, 213 (Tex. App. 2001) (“The existence of
a confidential relationship is but one of the bases for imposing a duty to disclose.”). In light of
the Texas Supreme Court’s decision in Bradford and the Fifth Circuit’s pronouncement in
United Teacher Associations, the Court is inclined to agree with New GM that Plaintiffs’
fraudulent concealment claims cannot proceed absent fiduciary or confidential relationships.
That conclusion is bolstered by several cases involving circumstances analogous to those
here, in which courts have held that the connection between a plaintiff-purchaser and a
defendant-manufacturer is too attenuated to sustain a fraud claim under Texas law where the
plaintiff-purchaser had acquired her vehicle from a third party. In McCabe v. Daimler AG, 160
F. Supp. 3d 1337 (N.D. Ga. 2015), for instance, the district court found “no evidence of any
disclosure of information or the making of a representation by [the defendant car distributor]
directly to [the plaintiff] concerning the vehicle” before purchase. Id. at 1353-54. The Court
reasoned that, even if Bradford left open the possibility of a duty to disclose absent a confidential
or fiduciary relationship, the Texas Supreme Court decision still involved “arm’s length business
transactions between the parties in which affirmative representations were made but other
material information was not disclosed. On the other hand, there was no arms length transaction
between [the plaintiff] and [defendant distributor]” because the plaintiff “purchased his car from
a third-party seller.” Id. at 1354; see also Garcia v. Chrysler Grp. LLC, 127 F. Supp. 3d 212,
235 (S.D.N.Y. 2015) (dismissing Texas fraudulent concealment claims as Chrysler had no duty
to disclose under the circumstances); Nissan Motors Co. v. Armstrong, 145 S.W.3d 131, 149
(Tex. 2004) (holding that the trial court did not err in dismissing the plaintiff’s fraud claims
where she had “obtained her car from her parents six years after they bought it from Nissan” and
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“Nissan had no involvement or pecuniary interest in the transaction,” meaning Nissan had “no
duty to disclose” any defect). At a minimum, therefore, Texas law requires proof of a
transaction between the parties of some sort (even arm’s length) before a duty to disclose will
arise. Because none of the Texas Plaintiffs interacted with New GM directly, New GM’s motion
to dismiss their fraudulent concealment claims must be and is granted. 29
c. Unjust Enrichment
Finally, the Court turns to the Texas Plaintiffs’ unjust enrichment claims. (FACC
¶¶ 6628-6638). As other courts have observed, the precise characterization of unjust enrichment
under Texas law — whether it is “an independent cause of action” or a “quasi-contractual theory
of recovery” — is “not completely clear.” Perales v. Bank of America, N.A., No. 14-CV-1791,
2014 WL 3907793, at *3 (S.D. Tex. Aug. 11, 2014) (collecting cases on both sides); see also
Ford Motor Co. E-350 Van Products Liab. Litig., 2011 WL 601279, at *10 (“Texas courts have
provided limited guidance regarding the doctrine of unjust enrichment.”). Regardless, the
elements of unjust enrichment are well-defined: Recovery is allowed “when one person has
obtained a benefit from another by fraud, duress, or the taking of an undue advantage.”
Heldenfels Bros., Inc. v. City of Corpus Christi, 832 S.W2d 39, 41 (Tex. 1992). The remedy is a
narrow one, however, as the Texas Supreme Court has cautioned that it is not rendered proper
“merely because it might appear expedient or generally fair that some recompense be afforded
for an unfortunate loss . . . or because the benefits to the person sought to be charged amount to a
New GM also contends that the economic loss doctrine bars the Texas Plaintiffs’
fraudulent concealment claims. (See GM Mem. 57-58). In light of the Court’s conclusion that
the Texas Plaintiffs fail to state fraudulent concealment claims on other grounds, the Court need
not address New GM’s contention — or the question of whether the economic loss doctrine
applies differently with respect to the DPTA (as discussed above) and common law fraud claims.
29
113
windfall.” HECI Exploration Co. v. Neel, 982 S.W.2d 881, 891 (Tex. 1998) (internal quotation
marks omitted). As in most states, “when a valid, express contract covers the subject of the
parties’ dispute, there can be no recovery under a quasi-contract theory.” Fortune Prod. Co. v.
Conoco, Inc., 52 S.W.3d 671, 684 (Tex. 2000); accord Coghlan v. Wellcraft Marine Corp., 240
F.3d 449, 454 (5th Cir. 2001); Patterson v. Long Beach Mortg. Co., No. 07-CV-1602, 2009 WL
4884151, at *8 (N.D. Tex. Dec. 15, 2009). Significantly, however, “whether a plaintiff has a
meritorious claim for breach of contract does not govern whether that remedy precludes a claim
for unjust enrichment; rather, the mere existence of [a] potential contract claim bars the unjust
enrichment remedy.” Anderson v. CitiMortgage, Inc., No. 10-CV398, 2011 WL 1113494, at *6
(E.D. Tex. Mar. 24, 2011) (internal quotation marks omitted). Here, most of the remaining
Texas Plaintiffs — namely Graciano, Liddy, McClellan, and Wilson — purchased their vehicles
under warranty, and Plaintiffs do not dispute the validity of those contracts. Accordingly, these
Plaintiffs’ claims fail as a matter of law. See, e.g., In re Porsche Cars N. Am., Inc., 880 F. Supp.
2d 801, 879 (S.D. Ohio 2012) (“Texas Plaintiffs’ vehicles are subject to the terms of the
Warranties. The Warranties define PCNA’s obligation to reimburse consumers for the cost of
repairing and replacing parts that are defective in material. Allowing Texas Plaintiffs to recover
the damages that they seek from PCNA under a theory of unjust enrichment would improperly
expand the duration and scope of these Warranties.”).
In any event, the unjust enrichment claims of all the Texas Plaintiffs fall short because
they have an adequate remedy at law. Unjust enrichment is an equitable claim and, “[l]ike other
equitable claims, an adequate legal remedy may render equitable claims of unjust enrichment . . .
unavailable.” BMG Direct Mktg., Inc. v. Peake, 178 S.W.3d 763, 770 (Tex. 2005); accord Texas
Carpenters Health Ben. Fund v. Philip Morris, Inc., 21 F. Supp. 2d 664, 678 (E.D. Tex. 1998).
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In fact, even when Texas courts refer to unjust enrichment as a “claim,” they “do not . . .
characterize [it] as a separate cause of action from money had and received; they consider it to be
a general theory of recovery for an equitable action seeking restitution.” Hancock v. Chicago
Title Ins. Co., 635 F. Supp. 2d 539, 560 (N.D. Tex. 2009) (citation omitted), aff’d sub nom.
Benavides v. Chicago Title Ins. Co., 636 F.3d 699 (5th Cir. 2011); see also, e.g., Walker v. Cotter
Prop., Inc., 181 S.W.3d 895, 900 (Tex. App. 2006) (“Unjust enrichment is not an independent
cause of action but rather characterizes the result of a failure to make restitution of benefits either
wrongfully or passively received under circumstances which give rise to an implied or quasicontractual obligation to repay.”). To the extent the Texas Plaintiffs state an independent cause
of action for unjust enrichment, therefore, the claim is duplicative of their other claims and must
be dismissed. See, e.g., In re Clorox Consumer Litig., No. 12-CV-280, 2013 WL 3967334, at
*12 (N.D. Cal. July 31, 2013); Vigo v. Reed, No. 11-CV-2044, 2013 WL 786925, at *4 (N.D.
Tex. Mar. 4, 2013). Thus, New GM’s motion to dismiss the Texas Plaintiffs’ unjust enrichment
claims is granted in full.
8. Wisconsin
Last but not least, the remaining Wisconsin Plaintiffs for purposes of this motion are
Nancy Bellow, Dion Jones, Scott Schultz, and Christy Smith. Bellow owns a 2007 Chevrolet
Cobalt that she purchased used and not under warranty from a Buick dealership on March 31,
2012, which was subject to the Delta Ignition Switch defect recall. (FACC ¶ 286). Jones owns a
2007 Chevrolet Impala that he purchased from a private seller in May 2013, which was subject
to the Low Torque Ignition Switch recall. (Id. ¶ 287). Schultz owns a 2006 Saturn Ion that he
purchased used and not under warranty from a dealership in 2011, which was subject to the Delta
Ignition Switch defect and Power Steering recalls. (Id. ¶ 289). Finally, Smith owns a 2008
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Buick Enclave, which she purchased used along with an extended warranty from a car dealership
on December 20, 2012, which was subject to the Side Airbag recall. (Id. ¶ 290).
Bellow does not allege that her car ever experienced any issues, although she was fearful
of driving it after learning about the ignition switch recall. (Id. ¶ 286). Her car’s ignition switch
was repaired, as part of the recall, on September 18, 2014. (Id.). Jones alleges that he
experienced “a few problems” with the ignition switch of his car, finding it too unreliable to be
used to drive for hire with Uber. (See id. ¶ 287). Smith experienced an issue with the airbag
light in her car coming on almost immediately after she purchased it in December 2012; she
returned to the dealership, which replaced the airbag. (Id. ¶ 290). Schultz, however, experienced
several issues with his ignition switch. His car shut off approximately ten times while he was
driving it; during one incident, “he had to maneuver to avoid an oncoming vehicle and a ditch.”
(Id. ¶ 289). When the car would turn off, the power steering and brakes would also be disabled.
(See id.). Finally, his car also shut off while driving on gravel roads and railroad tracks; it is
possible that his knee hit the ignition switch on some of those occasions. (Id.). Smith did not
have his car repaired pursuant to the recall, because he traded it in around August 2014 after
experiencing so many problems and being unable to sell the vehicle privately. (See id.).
The Wisconsin Plaintiffs bring claims against New GM under the Wisconsin Deceptive
Trade Practices Act (“WDTPA”), Wis. Stat. § 100.18 (FACC ¶¶ 7277-7300); for common law
fraudulent concealment (id. ¶¶ 7301-7314); and for unjust enrichment (id. ¶¶ 7337-7347). The
Court will address each of these claims in turn.
a. The WDTPA
The Wisconsin Plaintiffs first bring claims under the WDTPA, which “generally prohibits
false, deceptive, or misleading representations or statements of fact in public advertisements or
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sales announcements.” Tietsworth, 677 N.W.2d at 244; see also Wis. Stat. § 100.18(1). To state
a claim under the statute, then, a plaintiff must prove three elements: “(1) the defendant made a
representation to ‘the public’ with the intent to induce an obligation, (2) the representation was
‘untrue, deceptive or misleading,’ and (3) the representation materially caused a pecuniary loss
to the plaintiff.” Spacesaver Corp. v. Marvel Grp., Inc., 621 F. Supp. 2d 659, 662 (W.D. Wis.
2009). Significantly, in contrast to the consumer protection laws of the other states at issue in
this motion, “[s]ilence — an omission to speak — is insufficient to support a claim” under the
WDTPA. Tietsworth, 677 N.W.2d at 245. That is because the Act “does not purport to impose a
duty to disclose, but, rather, prohibits only affirmative assertions, representations, or statements
of fact.” Id. Relatedly, mere “puffery” — defined as “the exaggerations reasonably to be
expected of a seller as to the degree of quality of his product, the truth or falsity of which cannot
be precisely determined,” State v. Am. TV & Appliance of Madison, Inc., 430 N.W.2d 709, 712
(Wis. 1998) — is also “legally insufficient” to support a DTPA claim. Tietsworth, 677 N.W.2d
at 245-46. Finally, “[b]ecause a claim under the DTPA sounds in fraud, it must be pleaded with
particularity” under Rule 9(b). Miller v. Vonage Am., Inc., No. 14-CV-379, 2015 WL 59361, at
*5 (E.D. Wis. Jan. 5, 2015).
Applying those standards here, the Wisconsin Plaintiffs’ WDTPA claims largely pass
muster. New GM does not dispute that the Wisconsin Plaintiffs are members of “the public”
within the meaning of the Act. See K & S Tool & Die Corp. v. Perfection Mach. Sales, Inc., 732
N.W.2d 792, 799 (Wis. 2007) (noting that the WDTPA does not define the phrase but
concluding a plaintiff ceases to be a member of “the public” only where there is “some particular
relationship between the parties,” such as a pre-existing contract). Nor does it contest that, if
there are actionable misrepresentations, they are alleged to have “materially caused a pecuniary
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loss” to the Wisconsin Plaintiffs. Spacesaver Corp., 621 F. Supp. 2d at 662. (See FACC ¶¶ 287,
289). Instead, New GM challenges their claims on the ground that the claims actually rest on the
concealment of defects — rather than any active misrepresentation — and thus fall outside the
scope of the WDTPA. (See GM Mem. 48-49; GM Reply 24). It is certainly true that the FACC
contains a host of concealment-related allegations, as discussed above. But that does not mean
that allegations of concealment are irrelevant to the analysis, let alone that Plaintiffs are
precluded from also bringing misrepresentation-based claims. See Murillo v. Kohl’s Corp., 197
F. Supp. 3d 1119, 1127 (E.D. Wis. 2016) (rejecting an argument that the plaintiffs could not
make out a WDTPA claims because their complaint, “at least in part, tie[d] Kohls’ liability to
certain price-related omissions,” noting that, “for every deceptive misstatement of fact, there will
often be corresponding omission of truth”); see also Christense v. TDS Metrocom LLC, 763
N.W.2d 248 n.4 (Wis. Ct. App. 2008) (Table) (“[A] nondisclosure of facts, combined with an
affirmative representation that is undermined by the non-disclosed facts, may result in liability
under [the WDTPA]. In such situations, the existence of the undisclosed facts may show that the
affirmative representation is untrue, deceptive, or misleading.”). And Plaintiffs certainly plead
their fair share of misrepresentations: for example, that New GM “intentionally and knowingly
misrepresented material facts” regarding the safety of its vehicles (FACC ¶ 7288), “made
material statements about the safety and reliability of” defective vehicles (id. ¶ 7290), and “made
incomplete representations about the safety and reliability” of those vehicles. (Id. ¶ 7291).
New GM’s alternative argument — that, to the extent Plaintiffs plead active
misrepresentations, those misrepresentations are not sufficient under the WDTPA (see GM
Mem. 48) — is a closer call, if only because the line between “puffery” and actionable
statements of fact can be difficult to draw. See, e.g., United Concrete & Const., Inc. v. Red-D-
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Mix Concrete, Inc., 836 N.W.2d 807, 817 (Wis. 2013) (distinguishing between an “abstract,
highly generalized pitch” and “a specific, factual statement”). As a general matter, however,
whether an assertion amounts to puffery or not turns on whether it is “a statement of fact which
can be proven false.” Am. TV, 430 N.W.2d at 712; see also United Concrete, 836 N.W.2d at 816
(“Exaggerations of this sort do not subject the speaker to liability under [the WDTPA] because
they convey only the seller’s opinion and are not capable of being substantiated or refuted.”
(internal quotation marks omitted)). And here, Plaintiffs identify a host of statements made by
New GM to the public that, when viewed in context, could be objectively measured. For
example, Plaintiffs point to advertisements by New GM discussing its vehicles’ “world class
engineering” and “advanced safety and security features,” not to mention the company’s “quality
processes in the plant that prevent any defects from getting out.” (FACC ¶¶ 365-424). New GM
also advertised to the public that it made “some of the safest vehicles on earth”; that “passenger
safety is a primary consideration throughout the engineering process”; that the company had an
“above-and-beyond commitment to provide continuous occupant protection before, during and
after a crash”; and that it employed “the world’s most sophisticated safety technology,” with
safety as the company’s “top priority.” (See id.).
To be sure, if “[v]iewed in isolation,” some of these statements — about making “some
of the safest vehicles on earth” and the like — “may indeed constitute ‘puffery.’” Murillo, 197
F. Supp. 3d at 1128. But when viewed in conjunction with other allegations in the FACC —
particularly those tending to show that New GM was aware of the various alleged defects at the
same time that it was touting, for example, its “quality processes . . . that prevent any defects
from getting out” (FACC ¶¶ 365-424) — many of these statements cross the line from mere
puffery to active misrepresentations. Compare United Concrete, 836 N.W.2d at 817 (dismissing
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statements that a “product is the ‘best’ or the like” as “not representing a fact at all, let alone
misrepresenting one”), with Radford v. J.J.B. Enters., Ltd., 472 N.W.2d 790, 794 (Wis. Ct. App.
1991) (finding “credible evidence” of a material misrepresentation where the defendants “spoke
to the condition of the boat as it existed” prior to the plaintiff’s purchase, claiming it had “a
sound hull” — when the boat leaked from the time the plaintiff purchased it). See generally In
re Toyota Motor Corp., No. 10-MDL-2151 (JVS), 2012 WL 12929769, at *17 (C.D. Cal. May 4,
2012) (“Advertising a car as safe and reliable when it actually has a safety-related defect that
may render it unable to stop is not within the tolerable range of commercial puffery” (internal
quotation marks omitted)).
Thus, the Court concludes that the Wisconsin Plaintiffs adequately allege at least some
misrepresentations that are actionable under the WDTPA, and their claims may not be dismissed
on this basis. With respect to specific non-Delta Ignition Switch Plaintiffs: Schultz is a proposed
Power Steering (and Delta Ignition Switch) Defect Plaintiff. (FACC ¶ 289). He purchased his
2006 Saturn Ion in 2011; the prior year, in June 2010, New GM approved a special coverage
plan for that vehicle model, extending warranty coverage to ten years or 100,000 miles and
instructing dealers to replace the power steering motors in the cars of customers who
complained. (See id. ¶ 756). Moreover, in December 2010, New GM Canada issued a recall of
2006 Saturn Ions (among other vehicles) — but New GM still did not recall those same models
in the United States. (See id. ¶ 757). These allegations are sufficient to demonstrate that New
GM had knowledge of the defect prior to Schultz’s purchase in 2011. Finally, Smith is a
Proposed Side Airbag Defect Plaintiff (id. ¶ 290). She purchased her 2008 Buick on December
20, 2012 (id.); since its inception, New GM knew that Old GM had issued a technical service
bulletin in November 2008 regarding the 2008 Buick’s issue with increased resistance in its
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airbag wiring (see id. at ¶ 740). New GM was also aware of a host of similar issues in other
models, including later Buick models — prompting New GM to circulate an internal bulletin
recommending that dealers replace the wiring connectors in, among other things, 2011 and 2012
Buick Enclaves. (Id. ¶ 743; see generally id. ¶¶ 731-747). Taken together, these allegations are
sufficient at this stage to allege that New GM had knowledge of the Side Airbag defect when
Smith purchased her car in 2012. Accordingly, New GM’s motion to dismiss all the Wisconsin
Plaintiffs’ WDTPA claims is denied.
Before moving on, the Court must briefly address two alternative arguments raised by
New GM for dismissing Wisconsin Plaintiff Bellow’s WDTPA claim. First, New GM asserts
that Bellow’s claims are barred by the WDTPA’s three-year statute of repose. See Wis. Stat.
§ 100.18(11)(b). (GM Mem. 49). That assertion, however, appears to be premised on an error.
New GM alleges that Bellow purchased her vehicle in 2007, more than three years before this
action was commence (an assertion that, inexplicably, Plaintiffs adopt). (GM Mem. 49; Pls.’
Opp’n 50). The FACC alleges, however, that Bellow purchased her vehicle in March 2012.
(FACC ¶ 286; Recall Chart 8). Second, New GM claims that Bellow cannot allege a cause of
action under the WDTPA (or otherwise) because her car never manifested any defect. (GM
Mem. 9-10). 30 In making this argument, New GM relies heavily on the Wisconsin Supreme
New GM makes the same argument with respect to Wisconsin Plaintiffs Jones and Smith.
(See GM Mem. 10 n.5; GM Reply 4 n.3). Jones is a proposed Low Torque Ignition Switch
Plaintiff who alleges that he “experienced a few problems with the ignition switch” of his car.
(FACC ¶ 287). Although somewhat threadbare, that allegation suffices for now to take Jones out
of the no-manifestation category. Smith is a proposed Side Airbag defect Plaintiff; she alleges
that the “airbag light came on” in her car “almost immediately after purchasing it.” (Id. ¶ 290).
That too suffices for now. The airbag light coming on is precisely how the defect would
manifest itself short of the airbags not deploying in an accident. (See Pls.’ Opp’n 8; FACC ¶ 732
(noting that increased resistance in the side airbag wiring harness “will illuminate the airbag
readiness light on the instrument cluster” and may, over time, “reach a level where the [airbags]
30
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Court’s analysis in Tietsworth. See 677 N.W.2d at 239-42. In Tietsworth, a class of plaintiffs
(namely, owners of certain Harley-Davidson motorcycles) brought claims for common law fraud
and WDTPA violations against the company alleging that “their motorcycles [were] diminished
in value because [a] defect create[d] a ‘propensity’ for premature engine failure.” Id. at 236.
Notably, none of these plaintiffs “alleged any personal injury or property damage caused by the
defective engines”; nor did they allege “that their motorcycle engines [had] actually failed or
malfunctioned in any way.” Id.
In a section titled “Common-Law Fraud Claim,” the Court observed that, “[i]n the
context of deciding when a claim accrues for purposes of the statute of limitations, we have
generally held that a tort claim is not capable of present enforcement (and therefore does not
accrue) unless the plaintiff has suffered actual damage.” Id. at 239 (emphasis added). Because
the injury alleged was “diminution in value only” — that is, “the plaintiffs allege[d] that their
motorcycles [were] worth less than they paid for them” — the Court concluded that the
plaintiffs’ allegations standing alone were “insufficient to state a legally cognizable injury for
purposes of a fraud claim.” Id. at 240 (noting that “[d]iminished value premised upon a mere
possibility of future product failure is too speculative and uncertain to support a fraud claim”).
Having resolved the plaintiffs’ common law fraud claims on that basis, the Court then analyzed
their WDTPA claims in a separate section titled “DTPA Claim.” Id. at 244. As the Court noted,
to prevail on a statutory fraud claim in Wisconsin, a plaintiff need only show that he or she
“suffer[ed] a pecuniary loss” to have alleged a legally cognizable injury. Id.; see also Wis. Stat.
will not deploy in a crash”)). And it would be perverse to require Smith to be involved in an
accident to prove that her car manifested the defect. See In re Takata, 193 F. Supp. 3d at 1335
(“If Takata had installed grenades in its airbags that may or may not explode on impact, a court
would not require an explosion to demonstrate manifestation of a defect.”).
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§ 100.18(11)(b) (“Any person suffering pecuniary loss because of a violation of this section
[may recover].”). The Court thus dismissed the plaintiffs’ WDTPA claims on a wholly separate
ground from their common law claims: that they were premised mainly on nondisclosure and
“the only affirmative assertions alleged in the [] complaint [were] mere puffery,” neither of
which are actionable under the WDTPA. See 677 N.W.2d at 245-46.
New GM argues that the Tietsworth Court intended its holding regarding the need for a
manifested defect in the common law fraud context to extend to statutory fraud claims. (See GM
Mem 9-10; GM Reply 3). But the Court is not convinced. The Wisconsin Supreme Court
explicitly distinguished between its two holdings, both structurally (by dividing the discussions
into two sections) and legally. See, e.g., 677 N.W.2d at 237 (summarizing that “diminished
value” is “insufficient to state damages in a tort claim for fraud” and, in the next paragraph, that
“plaintiffs have also failed to state a claim for deceptive trade practices” because those claims
were premised on “non-disclosure” and “classic advertising puffery” (emphasis added)). In
support of its argument, New GM points to a lengthy string cite in Tietsworth’s common law
fraud section that includes (without comment) two out-of-state decisions dismissing, for lack of a
manifested defect, “various statutory claims” and “deceptive trade practices” claims in addition
to common law claims. See id. at 240-41. But the Tietsworth Court itself characterized these
cases as “federal and state court decisions that have affirmed the dismissal of claims brought
under fraud, strict products liability, and other tort theories where the allegedly defective
product has not actually malfunctioned.” Id. at 240 (emphasis added). Had the Court believed
that manifestation of a defect was required to state a legally cognizable claim under the WDTPA,
it could have dismissed those claims on that same ground (and, presumably, in the same section
of its opinion). It did not.
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The Court’s conclusion that Tietsworth does not control here is bolstered by other
Wisconsin decisions. First, since Tietsworth, Wisconsin courts have dismissed common law
fraud claims absent a manifested defect, while allowing WDTPA claims to proceed. See, e.g.,
Martin v. LG Elecs. USA, Inc., No. 14-CV-83 (JDP), 2015 WL 1486517, at *8 (W.D. Wis. Mar.
31, 2015) (citing Tietsworth to foreclose a plaintiff’s common law fraud claims while allowing
his WDTPA claim to proceed because he alleged “that he suffered a pecuniary loss in the
diminution of the player’s value” (emphasis added)). Notably, New GM does not cite, and the
Court has not found, any case law applying Tietsworth’s manifestation holding to bar a WDTPA
claim. Second, Wisconsin courts have interpreted “pecuniary loss” in the WDTPA broadly “to
encompass any monetary loss,” including the loss of a plaintiff’s benefit of the bargain. Mueller
v. Harry Kaufmann Motorcars, Inc., 859 N.W.2d 451, 458-59 (Wis. App. Ct. 2014). In Mueller,
for instance, the Wisconsin Appellate Court reversed a trial court’s holding that “pecuniary loss”
included “only benefit-of-the-bargain damages” because it found that “nothing in the words of
the statute [] limits ‘pecuniary loss’ to benefit-of-the-bargain damages,” meaning a full refund of
the purchase price might also suffice for damages. See id.; see also K & S Tool, 732 N.W.2d at
803 (affirming a jury’s verdict that the plaintiff had suffered pecuniary loss where it had alleged
that it “would not have purchased” the product at all but for the seller’s misrepresentations
because it did not receive the product it bargained for). “In sum, based upon [the statute’s] plain
language and particularly the deterrent purpose of the statute,” the Wisconsin Appellate Court
has concluded “that a ‘pecuniary loss’ can include monetary remedies like the cost of repair or
diminution in value.” Mueller, 859 N.W.2d at 460 (emphasis added). In light of this authority,
diminished value (or benefit-of-the-bargain damages) can fulfill the WDTPA’s “pecuniary loss”
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requirement, whether or not a defect has manifested. Accordingly, New GM’s motion to dismiss
Bellow’s WDTPA claim is denied. 31
b. Fraudulent Concealment
Next, New GM challenges the Wisconsin Plaintiffs’ fraudulent concealment claims on
the ground that they are barred under Wisconsin law by the economic loss rule. (GM Mem. 55).
Plaintiffs concede this point. (See Pls.’ Opp’n 56; GM Reply 28 n.19). Accordingly, New GM’s
motion to dismiss the Wisconsin Plaintiffs’ fraudulent concealment claims is granted.
c. Unjust Enrichment
Finally, the Court turns to the Wisconsin Plaintiffs’ claims for unjust enrichment. To
state a claim for unjust enrichment under Wisconsin law, “a plaintiff must show that: (1) plaintiff
conferred a benefit on the defendant, (2) the defendant appreciated or knew of the benefit, and
(3) the defendant accepted or retained the benefit under circumstances making retention of the
benefit inequitable without payment.” Martin, 2015 WL 1486517, at *7; see also Puttkammer v.
Minth, 266 N.W.2d 361, 363 (1978) (same). New GM argues that the unjust enrichment claims
of all the Wisconsin Plaintiffs should be dismissed because they have adequate remedies at law.
(See GM Mem. 26-27, 29; GM Reply 14-16). But conspicuously, New GM’s sole authority in
support of that argument is a case from 1956 concerning an injunction, in which the Court stated
that “one who invokes the aid of equity must ordinarily” show “they were without an adequate
remedy at law.” Klump v. Cybulski, 81 N.W.2d 42, 46 (Wis. 1957). New GM’s failure to cite —
and the Court’s failure to find — a more recent authority on point, let alone a single authority
New GM also challenges Bellow’s unjust enrichment claim on manifestation grounds.
(GM Mem. 10). Because, as discussed below, the Wisconsin Plaintiffs cannot maintain their
unjust enrichment claims for other reasons, the Court need not resolve that issue.
31
125
with respect to unjust enrichment is telling, especially given the ample applicable precedent from
other jurisdictions. Accordingly, the Court declines to dismiss the Wisconsin Plaintiffs’ unjust
enrichment claims on this ground at this stage of the proceedings.
New GM’s second argument — which applies only to Smith — is that, as a matter of
Wisconsin law, a plaintiff may bring an unjust enrichment claim only in the absence of an
enforceable contract. (GM Mem. 26-27). As in other jurisdictions, there are authorities on both
sides of that issue. Compare, e.g., Diamond Ctr., Inc v. Leslie’s Jewelry Mfg. Corp., 562 F.
Supp. 2d 1009, 1016-17 (W.D. Wis. 2008) (allowing pleading in the alternative), with Harley
Marine Servs., Inc. v. Manitowoc Marine Grp., LLC, 759 F. Supp. 2d 1059, 1062-63 (E.D. Wis.
2010) (dismissing an unjust enrichment claim where the plaintiff also alleged breach of contract).
Nevertheless, the weight of authority supports New GM’s position, at least where the plaintiff
alleges the existence of a contract in her complaint (and there is no suggestion that the contract is
invalid). See, e.g., Carroll v. Stryker Corp., 658 F.3d 675, 682 (7th Cir. 2011) (“In Wisconsin,
the quasi-contractual theories of quantum meruit and unjust enrichment are legal causes of action
grounded in equitable principles and can be invoked only in the absence of an enforceable
contract.”). That is, where a plaintiff herself alleges the existence of a contract, “the plaintiff is
precluded from pleading in the alternative claims that are legally incompatible with the contract
claim. This is but an application of the rule that ‘[a] plaintiff pleads himself out of court when it
would be necessary to contradict the complaint in order to prevail on the merits . . . .’” Harley
Marine Servs., 759 F. Supp. 2d at 1063 (quoting Tamayo v. Blagojevich, 526 F.3d 1074, 1086
(7th Cir. 2008)). Here, Smith does not bring a contract claim per se, but she does allege the
existence of a contract. (FACC ¶ 290 (“She purchased an extended warranty for the car.”)). In
light of that allegation, her unjust enrichment claim is “is a dud on its face” and must be
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dismissed. Harley Marine Servs., 759 F. Supp. 2d at 1061. Accordingly, New GM’s motion to
dismiss Smith’s unjust enrichment claim under Wisconsin law is granted.
CONCLUSION
In sum, many claims asserted by the named Plaintiffs in this motion survive, but the
Court yet again rejects Plaintiffs’ novel theory of damages — the brand devaluation theory — as
impermissibly repleading claims previously dismissed with prejudice and, in any event, as
insufficient as a matter of law. The economic loss claims of a large swath of named Plaintiffs
are also foreclosed because those individuals either purchased their vehicles prior to New GM’s
creation on July 10, 2009 (meaning their time-of-sale economic injury cannot be attributed to
New GM) or disposed of their vehicles prior to New GM’s announcement of the recalls in 2014
(meaning they did not suffer economic damages from reselling or trading in vehicles not yet
known to be defective). To the extent that the named Plaintiffs who disposed of their vehicles
prior to the recall announcements can plead and prove out-of-pocket expenses or lost time
damages stemming from a defect (for instance, payment of defect-related repairs during
ownership), however, Plaintiffs are granted leave to amend. Relatedly, the Court rejects New
GM’s categorical challenge to Plaintiffs’ claims for “lost time” damages, as some states
recognize this as a valid theory of consequential damages.
Turning to the state law claims of the remaining Plaintiffs, the statutory consumer fraud
claims of most (and, in many states, all) Plaintiffs survive — although the claims of the New
York and Texas Plaintiffs whose vehicles never manifested a defect are dismissed. Further,
Illinois Plaintiff Painter and New York Plaintiff Mason are granted leave to amend to their
consumer fraud claims to the extent that the 2010 power steering recall was initiated after they
purchased their vehicles (which were subject to the 2014 Power Steering recall at issue here).
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Illinois Plaintiff Redmon is also granted leave to amend his consumer fraud claim to the extent
that he can allege that he purchased his car after the May 2010 NHSTA complaints regarding the
Knee-to-Key defect. Plaintiffs’ fraudulent concealment claims also survive in most states,
although they are barred under the laws of Michigan, Texas, and Wisconsin. Moreover, the
fraudulent concealment claims of the New York and Pennsylvania Plaintiffs whose vehicles
never manifested a defect are dismissed. Similarly, to the extent Plaintiffs brought implied
warranty claims (which the Alabama, Illinois, and Wisconsin Plaintiffs did not), those claims
generally survive, except again for those of the New York, Pennsylvania, and Texas Plaintiffs
whose cars never manifested any defect. Finally, the bulk of Plaintiffs’ unjust enrichment claims
are dismissed — except for the claims of the Illinois Plaintiffs, Pennsylvania Plaintiff Pollastro
(who purchased his car from a GM-brand dealership), and the Wisconsin Plaintiffs other than
Smith (whose car was purchased under warranty), which all survive.
As the Court indicated in the last round of motion practice, although this ruling addresses
only some of the claims in the operative complaint, it should inform the parties with respect to
the viability of other claims and, more generally, bear upon the further progress of the MDL.
Pursuant to Order No. 114 (Docket No. 3431), no later than three weeks from the date of this
Opinion and Order, the parties shall meet and confer and advise the Court of their views with
respect to whether and how the Court’s rulings apply to the thirty-five jurisdictions that have not
been the subject of full briefing (the Court’s sincere hope being that it will not have to repeat this
exercise with respect to each and every one of the remaining jurisdictions). Any submissions
should address a briefing schedule and process if either side believes that briefing or motion
practice is appropriate. Further, to the extent the parties find it helpful, they should confer and
submit a chart (or proposed order) summarizing the rulings in this Opinion and Order with
128
respect to the named Plaintiffs’ claims, to be so ordered by the Court. In those submissions,
Plaintiffs should also indicate to the Court whether they intend to amend the FACC (as to any of
the claims that were dismissed with leave to amend) and, if so, provide an outline of the
proposed amendments and a proposed schedule.
The Clerk of Court is directed to terminate Docket No. 3577.
SO ORDERED.
Dated: June 30, 2017
New York, New York
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