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In re General Motors Air Conditioning Marketing and Sales Practices Litigation

United States District Court, E.D. Michigan, Southern Division

September 5, 2019

IN RE GENERAL MOTORS AIR CONDITIONING MARKETING AND SALES PRACTICES LITIGATION ALL CASES

          OPINION AND ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION TO DISMISS (ECF #35)

          MATTHEW F. LEITMAN, UNITED STATES DISTRICT JUDGE

         In this putative consolidated class action, seventeen plaintiffs from thirteen states bring a variety of claims against Defendant General Motors Company (“GM”) arising out of alleged defects in the air conditioning systems of their GM vehicles. GM has now moved to dismiss most of Plaintiffs' claims. (See Mot. to Dismiss, ECF #35.) For the reasons that follow, GM's motion is GRANTED IN PART and DENIED IN PART.

         I

         GM is one of the world's leading automakers. Plaintiffs are consumers who purchased various GM vehicles under the Chevrolet, GMC, and Cadillac brands (the “Class Vehicles”).[1] Plaintiffs claim that the air conditioning systems in the Class Vehicles are defective and that GM's efforts to repair the defects have failed. More specifically, Plaintiffs assert that the Class Vehicles “have a serious defect that causes the [air conditioning systems] to (a) crack and leak refrigerant; (b) lose pressure within the [air conditioning system]; and (c) fail to properly function to provide cooled air into the [v]ehicle's passenger cabin” (the “AC Defect”). (Am. Compl. at ¶3, ECF #24 at Pg. ID 1013.) According to Plaintiffs, the AC Defect “inhibits Plaintiffs['] … expected, comfortable, and safe use of their [v]ehicles, and requires [them] to go months without functioning [air conditioning] while waiting for replacement parts, and to pay for equally defective replacement parts that themselves are susceptible to failure.” (Id. at ¶10, Pg. ID 1015.) Plaintiffs further allege that the AC Defect “also creates a safety risk for Plaintiffs … because [the defect] subjects the occupants of the [v]ehicles to unsafely high temperatures and can lead to decreased visibility due to fogging of the windows and an inability to use the [air conditioning system] to de-fog the windows.” (Id. at ¶11, Pg. ID 1015.) Finally, Plaintiffs claim that GM “knew” of the AC Defect before Plaintiffs purchased or leased their vehicles but “failed to disclose and actively concealed the [defect] from [Plaintiffs] and the public.” (Id. at ¶12, Pg. ID 1015-16.)

         II

         Plaintiffs filed their First Amended Consolidated Master Class Action Complaint (the “First Amended Complaint”), the operative pleading in this action, on August 14, 2018. (See Am. Compl., ECF #24.) The named Plaintiffs are as follows:

• Rodney Martin, an Alabama resident who “purchased a new 2015 Chevrolet Silverado” from an “authorized GM dealer” in Alabama in 2015. (See Id. at ¶¶ 23-24, Pg. ID 1020);
• Kenneth Gay, an Arizona resident who “purchased a new 2014 Chevrolet Silverado” from an “authorized GM dealer” in Arizona in 2013. (See Id. at ¶¶ 32-33, Pg. ID 1022);
• Carl Williams, a California resident who “purchased a new [2014 Chevrolet Silverado]” in California in 2014. (See Id. at ¶43, Pg. ID 1024);
• Clarence Larry, a California resident who “purchased a new 2015 Chevrolet Tahoe” from “an authorized GM dealer” in California in 2015. (See Id. at ¶¶ 54-55, Pg. ID 1028);
• Erica Wolfe, a Florida resident who “purchased a certified pre-owned 2015 Chevrolet Tahoe … with an extended warranty” from “an authorized GM dealer” in Florida in 2016. (See Id. at ¶¶ 68-69, Pg. ID 1031);
• Andrew C. Hill, a Florida resident who “purchased a new 2014 Chevrolet Silverado” from “an authorized GM dealer” in Florida in 2014. (See Id. at ¶¶ 79-80, Pg. ID 1033);
• Richie Ainsworth, a Louisiana resident who “purchased a used 2014 Chevrolet Silverado” from “an authorized GM dealer” in Louisiana in 2015. (See Id. at ¶¶ 87-88, Pg. ID 1035);
• James Won, a New Jersey resident who purchased (1) “a new 2015 Chevrolet Suburban” from an “authorized GM dealer” in New York in 2014, (2) a “second Chevrolet Suburban” from an authorized GM dealer in New York in 2015, (3) “a third new 2015 Chevrolet Suburban” from an “authorized GM dealer” in New Jersey in 2016, and (4) a “a 2016 Cadillac Escalade” from an “authorized GM dealer” in New Jersey in 2016. (See Id. at ¶¶ 99-103, Pg. ID 1037-38.)
• Hayes Ellis, an Alabama resident who purchased a “new 2014 GMC Sierra” from an “authorized GM dealer” in Oklahoma in 2014. (See Id. at ¶¶ 119-20, Pg. ID 1041);
• Billy Frank, a Tennessee resident who purchased a new “2015 Chevrolet Suburban” in Tennessee in 2015. (See Id. at ¶¶ 129-30, Pg. ID 1043);
• John O'Brien, a Tennessee resident who purchased a new “2014 GMC Sierra” in Tennessee in 2013. (See Id. at ¶¶ 141-42, Pg. ID 1046);
• Marcus Bell, a Texas resident who purchased a “new 2014 GMC Sierra” from an “authorized GM dealer” in Texas in 2013. (See Id. at ¶¶ 152-53, Pg. ID 1049);
• Aaron and Jan Howard, Washington residents who purchased a “new 2014 Chevrolet Silverado” from an “authorized GM dealer” in Washington in 2013. (See Id. at ¶¶ 162-63, Pg. ID 1051);
• Leslie Griffin, a Georgia resident who purchased a “certified pre-owned 2015 Chevrolet Suburban” from an “authorized GM dealer” in Georgia in 2016. (See Id. at ¶¶ 175-76, Pg. ID 1053-54);
• Edilberto Gomez, a Florida resident who purchased a “new 2015 Chevrolet Silverado” from an “authorized GM dealer” in Florida in 2016. (See Id. at ¶¶ 185-86, Pg. ID 1056); and
• Corey Steketee, a Michigan resident who purchased a “new 2014 GMC Sierra” from an “authorized GM dealer” in Michigan in 2013. (See Id. at ¶¶ 195-96, Pg. ID 1058).

         These Plaintiffs bring claims for breach of the Class Vehicles' express and implied warranties, unjust enrichment, fraud, and violations of the consumer protection laws of various states. GM moved to dismiss Plaintiffs' claims on November 13, 2018. (See Mot. to Dismiss, ECF #35.) The Court held a hearing on the motion on June 25, 2019.

         III

         GM moves to dismiss Plaintiffs' claims pursuant to Federal Rule of Civil Procedure 12(b)(6). “To survive a motion to dismiss” under Rule 12(b)(6), “a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is facially plausible when a plaintiff pleads factual content that permits a court to reasonably infer that the defendant is liable for the alleged misconduct. See Id. When assessing the sufficiency of a plaintiffs claim, a district court must accept all of a complaint's factual allegations as true. See Ziegler v. IBP Hog Mkt, Inc., 249 F.3d 509, 512 (6th Cir. 2001). “Mere conclusions, ” however, “are not entitled to the assumption of truth. While legal conclusions can provide the complaint's framework, they must be supported by factual allegations.” Iqbal, 556 U.S. at 664. A plaintiff must therefore provide “more than labels and conclusions, ” or “a formulaic recitation of the elements of a cause of action” to survive a motion to dismiss. Twombly, 550 U.S. at 555. “Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Iqbal, 556 U.S. at 678.

         IV

         GM moves to dismiss nearly all of Plaintiffs' claims on several different grounds.[2] In the motion to dismiss, GM separates its arguments into four categories:

• “Plaintiffs' Express and Implied Warranty Claims Should be Dismissed.” (Mot. to Dismiss, ECF #35 at Pg. ID 1705-17);
• “Plaintiffs' Claim of Unjust Enrichment Should be Dismissed.” (Id. at Pg. ID 1717-20);
• “Plaintiffs' Fraudulent Concealment Claims Should be Dismissed” (Id. at Pg. ID 1720-28); and
• “Plaintiffs' Claims Under the Consumer Protection Statutes Should be Dismissed.” (Id. at Pg. ID 1728-42.)

         The Court will address each of these categories in turn below.

         A

         1

         In Counts 11, 12, 19, and 35 of the First Amended Complaint, Plaintiffs Carl Williams, Clarence Larry, Leslie Griffin, and James Won allege that GM breached the express “Limited Warranty” of the vehicles they purchased. (See Am. Compl., ECF #24 at Counts 11, 12, 19, and 35.) These “bumper-to-bumper” Limited Warranties provide that GM will pay for any necessary “repairs to correct any vehicle defect … related to materials or workmanship occurring during the warranty period.” (Limited Warranty, ECF #35-2 at Pg. ID 1755.[3]) The “warranty period” for these vehicles is “3 years or 36, 000 miles, whichever comes first.” (Id.; see also, e.g., Am. Compl. at ¶602, ECF #24 at Pg. ID 1194, describing the “new vehicle three-year and 36, 000-mile Limited Warranty”).

         Likewise, Plaintiffs Carl Williams, Clarence Larry, Erica Wolfe, Andrew C. Hill, Edilberto Gomez, Leslie Griffin, Richie Ainsworth, Corey Steketee, James Won, Hayes Ellis, and Marcus Bell claim GM breached their vehicles' implied warranties. (See Am. Compl., ECF #24 at Counts 13, 14, 18, 20, 25, 28, 31, 37, and 42.) Under the terms of the Limited Warranty, any implied warranties are limited in duration to the same period (three years or 36, 000 miles, whichever occurs first) that applies to the Limited Warranty: “[A]ny implied warranty of merchantability or fitness for a particular purpose applicable to this vehicle is limited in duration to the duration of this written warranty.” (Limited Warranty, ECF #35-2 at Pg. ID 1764; emphasis in original.)

         2

         GM argues that all Plaintiffs - with the exception of Plaintiff Carl Williams[4]- cannot state a viable breach of express or implied warranty claim because the air conditioning systems in their vehicles did not allegedly fail until after their warranties expired. (See Mot. to Dismiss, ECF #35 at Pg. ID 1706; see also Id. at Pg. ID 1714, discussing expiration of implied warranties.) The Court agrees.

         To maintain a claim for breach of an express or implied warranty, a plaintiff must, among other things, “seek warranty service within the [] period contained in the … [w]arranty.” In re Ford Motor Co. Speed Control Deactivation Switch Prods. Liab. Litig., 2007 WL 2421480, at *7 (E.D. Mich. Aug. 24, 2007) (noting that plaintiffs' breach of express and implied warranty claims “fail[ed]” because “[n]one of the named Plaintiffs allege[d] that they sought warranty service … within the three-year warranty period”); see also In re OnStar Contract Litig., 600 F.Supp.2d 861, 877-79 (E.D. Mich. 2009) (dismissing breach of express warranty claim where plaintiffs “fail[ed] to allege that they sought service for the OnStar equipment in their vehicle, or actually incurred any problems with same, within the durational limits specified in their respective express warranties”).[5]

         Here, no Plaintiff (other than Carl Williams) alleges that his or her air conditioning system failed and/or that he or she sought warranty coverage related to the air conditioning system during the durational limits covering the express and implied warranties. Indeed, the air conditioning systems in many of the named Plaintiffs' vehicles did not fail until tens of thousands of miles after they reached the 36, 000-mile durational limit under their warranties.[6] Because Plaintiffs' warranties expired before their air conditioning systems allegedly failed, they have failed to state viable breach of express or implied warranty claims.

         3

         Plaintiffs counter that their express and implied warranty claims are viable because “[a]ny time and mileage limits set forth in the [Limited] Warranty [are] unconscionable” and therefore unenforceable as a matter of law. (Resp. to Mot. to Dismiss, ECF #43 at Pg. ID 1907; see also Id. at Pg. ID 1917-18, discussing unconscionability of implied warranties.) The Court disagrees.

         “A plaintiff must allege both substantive and procedural unconscionability when claiming a breach of warranty based on the theory of unconscionability.” Rivera v. Ford Motor Co., 2017 WL 3485815, at *3 (E.D. Mich. Aug. 15, 2017). “A contract is substantively unconscionable if its provisions are so outrageously unfair as to shock the judicial conscious.” Id. at *4. In assessing procedural unconscionability, a court asks: “[W]hat is the relative bargaining power of the parties, their relative economic strength, the alternative sources of supply, in a word, what are their options?” Andersons, Inc. v. Horton Farms, Inc., 166 F.3d 308, 322 (6th Cir. 1998) (applying Michigan law); see also Smith v. Ford Motor Co., 749 F.Supp.2d 980, 993 (N.D. Cal. 2010) (applying California law and explaining that “[t]he procedural element of unconscionability focuses on two factors: oppression and surprise. Oppression arises from an inequality of bargaining power which results in no real negotiation and an absence of meaningful choice”).[7] “Unconscionability is ultimately a question of law for the court.” Id.

         Plaintiffs fail to plausibly allege procedural unconscionability. They contend that the durational limits in the express and implied warranties are procedurally unconscionable because “there was unequal bargaining power between GM and Plaintiffs … as Plaintiffs … had no other options for purchasing warranty coverage other than directly from GM.” (Resp. to Mot. to Dismiss, ECF #43 at Pg. ID 1908.) But as GM aptly points out, “the auto industry is one of the most competitive marketplaces that exists.” (Mot. to Dismiss, ECF #35 at Pg. ID 1709.) An individual seeking to purchase one of the Class Vehicles has many other options - sometimes within walking distance of his local GM dealership - if he is unhappy with the warranty that GM provides. For this reason, “the clear weight of authority” has rejected the argument that a vehicle “warranty [is] procedurally unconscionable because [consumers] had no meaningful choice in determining the time limits [of the warranty].” Majdipour v. Jaguar Land Rover N. Am., LLC, 2013 WL 5574626, at *20 (D.N.J. Oct. 9, 2013) (dismissing breach of express warranty claim and rejecting argument that warranty was procedurally unconscionable); see also Rivera, 2017 WL 3485815, at *4 (rejecting argument that durational limits in automobile warranty were unconscionable and noting that “such limitations are … routinely enforced by the courts”).[8]

         Plaintiffs respond that even if the automobile marketplace is competitive, the bargaining power here was especially unequal - and the warranty limitations were therefore procedurally unconscionable - because GM knowingly failed to disclose the AC Defect to Plaintiffs and the public. In support of that argument, Plaintiffs rely on In re Porsche Cars N. Am., Inc., 880 F.Supp.2d 801 (S.D. Ohio 2012). In In re Porsche, an automobile manufacturer moved to dismiss the plaintiffs' breach of warranty claims on the ground that the plaintiffs' claims were barred by the warranty's durational limits. The district court rejected that argument and held that “Plaintiffs ha[d] alleged sufficient facts to state a prima facie case [that the durational limits in the warranties were] unconscionab[le].” Id. at 822. The court concluded that “when a manufacturer is aware that its product is inherently defective and the buyer has no notice of or ability to detect the problem, there is perforce a substantial disparity in the parties' relative bargaining power.” Id. (emphasis in original; internal quotation marks omitted).

         The Court respectfully disagrees with and is not persuaded by In re Porsche. In re Porsche conflates a difference in knowledge with a difference in bargaining power. Bargaining power comes primarily from having viable alternatives in the marketplace, and a vehicle consumer with many options - like the Plaintiffs here - has real and substantial bargaining power even where a seller like GM knowingly fails to disclose a defect. That is why the “majority” of courts have ruled that a seller's “presale knowledge [of an alleged defect, ] … standing alone, is insufficient to establish procedural unconscionability.” Rivera, 2017 WL 3485815, at *4. The Court joins that majority. Plaintiffs have also failed to plausibly allege that the warranties' durational limits are substantively unconscionable. Plaintiffs insist that the limits are substantively unconscionable because “GM knew of the defect and did not disclose it.” (Mot. to Dismiss, ECF #43 at Pg. ID 1908.) But “[c]ourts have routinely rejected express warranty claims premised on [this] theory.” Chiarelli v. Nissan N. Am., Inc., 2015 WL 5686507, at *7 (E.D.N.Y. Sept. 25, 2015) (“The case law is clear [] that a defendant's knowledge of a latent defect does not render unconscionable a limitation contained in an express warranty.”).[9] As the United States Court of Appeals for the Second Circuit persuasively explained:

[V]irtually all product failures discovered in automobiles after expiration of the warranty can be attributed to a “latent defect” that existed at the time of sale or during the term of the warranty. All parts will wear out sooner or later and thus have a limited effective life. Manufacturers always have knowledge regarding the effective life of particular parts and the likelihood of their failing within a particular period of time. Such knowledge is easily demonstrated by the fact that manufacturers must predict rates of failure of particular parts in order to price warranties and thus can always be said to “know” that many parts will fail after the warranty period has expired. A rule that would make failure of a part actionable based on such “knowledge” would render meaningless time/mileage limitations in warranty coverage.

Abraham v. Volkswagen of Am., Inc., 795 F.2d 238, 250 (2d Cir. 1986).

         For all of the reasons explained above, the Court DISMISSES all of Plaintiffs' express and implied warranty claims (Counts 11, 12, 13, 14, 18, 19, 20, 25, 28, 31, 35, 37, and 42) except for the warranty claims of Carl Williams, the only Plaintiff who alleges that his air conditioning system failed during the term of his warranty.[10]

         B

         In Counts 11-14 of the First Amended Complaint, Plaintiff Carl Williams alleges that his air conditioning system failed during the term of his express and implied warranties and that GM breached those warranties when it failed to adequately repair the AC Defect. (See Am. Compl. at ¶¶ 42-53, ECF #24 at Pg. ID 1024-28; see also Id. at Counts 11-14.) GM moves to dismiss these claims on several grounds. (See Mot. to Dismiss, ECF #35 at Pg. ID 1710-13, 1716-17.) The Court will address each of these arguments separately.

         1

         GM first argues that the Court should dismiss Williams' breach of express warranty claims because Williams “does not plead facts sufficient to show that GM actually breached the Limited Warranty.” (Id. at Pg. ID 1710.) GM says that it “complied with the promises in the express warranty by paying for repairs made to [Williams'] vehicle” and that Williams' air conditioning system is currently working. Thus, GM insists that Williams cannot maintain claims for breach of the Limited Warranty. (Id.) The Court disagrees.

         Williams plausibly alleges that GM has not adequately repaired his vehicle and that his vehicle will therefore require additional repair work in the future. More specifically, Williams alleges that GM has addressed the AC Defect by installing “equally defective replacement parts [that] leaves the [air conditioning system] susceptible to repeated failure.” (Am. Compl. at ¶230, ECF #24 at Pg. ID 1067.) Williams further alleges that:

GM's proposed “fixes” for the AC System have proven inadequate. Because GM discontinued the refrigerant hose originally installed in Class Vehicles due to the hose's purported inability to withstand the pressures to which it is exposed, GM required Class members whose AC Systems failed to purchase a redesigned hose supposedly manufactured to specifications sufficient to avoid cracking during ordinary and intended use. GM also required its customers to install a line bracket to restrain the hose. These repairs were ineffective, however, because other AC System components, such as the condenser, also crack and spring leaks.

(Id. at ¶232, Pg. ID 1067-68.) Finally, Williams alleges that he did have his air conditioning system repaired once, that the repair did not work, and that he needed to have his vehicle serviced a second time. (See Id. at ¶¶ 49-50, Pg. ID 1026.) Taken together, at the motion to dismiss stage, Williams plausibly alleges that GM breached the express Limited Warranty by not sufficiently repairing his air conditioning system. The Court therefore DENIES GM's motion to dismiss Williams' breach of express warranty claims (Counts 11 and 12) on this ground.

         2

         GM next argues that the Court should dismiss Williams' breach of express warranty claims because Williams did not comply with the terms of his warranty. GM says that the Limited Warranty required Williams to provide GM with “written notice of the purported defect and an opportunity to repair [his] vehicle[] prior to filing suit, ” but Williams failed to provide that pre-suit notice. (Mot. to Dismiss, ECF #35 at Pg. ID 1711.) The Court disagrees.

         The provision of the Limited Warranty on which GM relies is titled “State Warranty Enforcement Laws.” (Limited Warranty, ECF #35-2 at Pg. ID 1789.) It states that:

Laws in many states permit owners to obtain a replacement vehicle or a refund of the purchase price under certain circumstances. The provisions of these laws vary from state to state. To the extent allowed by state law, GM requires that you first provide us with written notification of any service difficulty … so that we have an opportunity to make any needed repairs before you are eligible for the remedies provided by these laws.

(Id.; emphasis added.)

         The Court cannot conclude at this time, as a matter of law, that this provision applies to Williams' claims. The provision is included in a section of the Limited Warranty that appears to relate to claims under state “lemon laws.”[11] But Williams is neither bringing a “lemon law” claim nor seeking any “remedies provided by [state lemon laws].” Id. Moreover, Williams is not seeking a “replacement vehicle” or a “refund of his purchase price.” For these reasons, it is not clear that the notice provision GM relies upon is applicable here. The Court therefore DENIES GM's motion to dismiss Williams' express warranty claims (Counts 11 and 12).

         3

         Williams brings two implied warranty claims: one under California's Song-Beverly Consumer Warranty Act (see Am. Compl. at ¶¶ 519-32 (Count 13), ECF #24 at Pg. ID 1177-79) and one under California's commercial code (see Id. at ΒΆΒΆ ...


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