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Arthur Alban, Individually, and On Behalf of All Other Similarly Situated v. Bmw of North America

March 15, 2011

ARTHUR ALBAN, INDIVIDUALLY, AND ON BEHALF OF ALL OTHER SIMILARLY SITUATED PLAINTIFF,
v.
BMW OF NORTH AMERICA, LLC, DEFENDANT.



The opinion of the court was delivered by: Debevoise, Senior District Judge

NOT FOR PUBLICATION

OPINION

This matter arises out of the emission of a burnt crayon-like odor from Plaintiff Arthur Alban's BMW E46 Class vehicle. Mr. Alban filed a Complaint against Defendant BMW of North America, LLC ("BMW") alleging that it defectively designed and manufactured his vehicle, and asserting claims for (1) violations of the Magnuson-Moss Warranty Act ("MMWA"), 15 U.S.C. §§ 2301, et seq.; (2) breach of express warranty; (3) breach of implied covenant of good faith and fair dealing; (4) breach of implied warranty of merchantability; (5) consumer fraud under the New Jersey Consumer Fraud Act ("NJCFA"), N.J. Stat. Ann. §§ 56:8-1, et seq.; and (6) unjust enrichment.

BMW moved to dismiss Mr. Alban's claims, arguing that they were barred because the warranty on his vehicle had expired when they arose. Mr. Alban maintained that the expiration of his warranty should not bar his claims because BMW was obligated to either proactively inform its customers of that defect, or provide repairs pursuant to the warranty, regardless of when it was discovered, because the company knew of the defect at the time he purchased his vehicle. In the alternative, he argued that the time-limitation in his warranty was unconscionable and therefore unenforceable.

The Court found that Mr. Alban's claims were barred due to the expiration of the warranty. However, the Court granted him leave to amend his allegations of unconscionability as well as his consumer fraud claim under the NJCFA. The Court also dismissed Mr. Alban's unjust enrichment claim because (1) the warranty agreement had expired at the time he sought repairs, and (2) that claim was time-barred.

Mr. Alban then filed an Amended Complaint in an attempt to cure the deficiencies in his allegations of unconscionability and those in support of his consumer fraud claim. BMW now moves to dismiss the Amended Complaint, arguing that it fails to cure those deficiencies. In doing so, it argues that Mr. Alban's allegations are insufficient to show that the time-limitation in his warranty was unconscionable or to support a claim under the NJCFA, because they fail to indicate that BMW knew of the defect in his vehicle at the time of purchase. Mr. Alban, on the other hand, maintains that his allegations do, in fact, indicate BMW's knowledge and fraudulent concealment of that defect.

For the reasons set forth below. BMW's motion is granted. Mr. Alban's Amended Complaint fails to allege unconscionability because, as a matter of law, allegations regarding BMW's knowledge of a defect before the expiration of his warranty cannot serve as a basis for finding that the time-limitation in his warranty is unconscionable. In addition, Mr. Alban's allegations regarding the duration of his warranty, the lack of a meaningful choice in determining the duration, and disparate bargaining power are conclusory and therefore cannot support a similar finding of unconscionability. Similarly, Mr. Alban's allegations regarding BMW's knowledge of the defect before the expiration of his warranty amount to mere speculation that cannot support his consumer fraud claim under the NJCFA.

I. BACKGROUND

On August 15, 2003, Mr. Alban purchased a BMW E46 Class vehicle. At the time of purchase, he entered into a New Vehicle Limited Warranty (the "warranty agreement"), which covered "defects in materials or workmanship." (Def.'s Br. Supp. Mot. Dismiss, Decl. of Renate Kulnik, Ex. A at 30.)*fn1 The warranty agreement states that BMW would "repair or replace" any defective parts if, "upon discovery of a defect in material or workmanship," the customer brought his or her vehicle "to the workshop of any authorized BMW center, during normal business hours." (Id.)

In addition, like most motor vehicle warranties, the warranty agreement included a time and mileage limitations clause stating that the warranty period "begins on the date of the first retail sale" and expires after "48 months or 50,000 miles, whichever occurs first." (Id.) That clause was made applicable to all implied covenants or warranties by another section of the warranty agreement, which provides in conspicuous language that "THE DURATION OF ANY IMPLIED WARRANTIES, INCLUDING THE IMPLIED WARRANTY OF MERCHANTABILITY, IS LIMITED TO THE DURATION OF THE EXPRESS WARRANTIES HEREIN." (Id. at 31.)

During the summer of 2008, Mr. Alban's vehicle developed a strange odor that "smelled like a melted crayon." (Amend. Compl. ¶ 27.) The odor waned during the fall, but returned the following summer. Mr. Alban eventually tracked the source of the smell to the insulation surrounding the trunk of his car.

Upon this discovery, Mr. Alban telephoned the BMW dealership where he purchased his car. A representative at that dealership told him that she had not received any reports of a similar odor from other customers. He then conducted a series of electronic searches using the Internet, which revealed several postings from other BMW owners complaining about the same problem, many of which are excerpted in Mr. Alban's Amended Complaint. See (Amend. Compl. ¶ 8.)

These searches also yielded a Technical Service Bulletin ("TSB") issued by BMW in November 2007, which states that "[a]n unpleasant odor may be noticed in the trunk or in the areas around the rear parcel shelf" of some 2003 BMW E46 Class vehicles, and that "[t]he customer may refer to the odor as smelling similar to a solvent or wax crayon." (Amend. Compl., Ex. A.) The TSB further states the cause of this odor results from "excessive amounts of solvent being present in and around the rear parcel shelf insulation" and instructed BMW dealers and authorized service representatives that the problem could be repaired by "[r]eplac[ing] the rear parcel shelf insulation as well as any other trunk trim panels which may be giving off th[e] odor." (Id.) Finally, the TSB notes that this repair is "[c]overed under the terms of the BMW New Vehicle Limited Warranty." (Id.)

The November 2007 TSB was superseded by one issued in January 2009. The January 2009 TSB notes the same odor "smelling like wax crayons" affecting some E46 Class models, as well as certain E65 and E66 models. (Def.'s Br. Supp. Mot. Dismiss, Declaration of Christopher J. Dalton ("Dalton Decl."), Ex. K.) However, it diagnoses the odor as the result of "[d]egredation of the sound insulating mat located under the rear parcel shelf." (Id.) In addition, it states that "[s]uch degradation typically does not occur until the vehicle is more than a couple of years old." (Id.) Like the November 2007 TSB, relevant repairs are "[c]overed under the terms of the BMW New Vehicle Limited Warranty." (Id.)

After discovering the November 2007 TSB, Mr. Alban contacted his local BMW service center and asked that they replace the insulation in his vehicle's trunk. Citing the fact that his warranty agreement had expired on August 15, 2007, the service center refused. Mr. Alban then contacted BMW's national headquarters in Woodlake, NJ, which also refused his request. Eventually, he repaired the insulation himself, at an alleged expense of "over $150" and "countless hours" of his time. (Amend. Compl. ¶ 36.)

On October 21, 2009, Mr. Alban filed a Complaint, setting forth six causes of action against BMW for its refusal to replace the odiferous insulation in his car. The first two, which alleged violations of the MMWA and breach of express warranty, relied on identical allegations of wrongdoing. Specifically, they alleged that "BMW breached its [] warranty to Plaintiff" by (1) selling him a vehicle with defective sound insulation that was "substantially certain to fail within the use or life of the vehicle," (2) failing to notify him of that defect before the expiration of his warranty, and (3) refusing to repair the defective insulation after the warranty expired. (Compl. ¶¶ 54(a)-(c), 59(a)-(c).)

Mr. Alban's third claim asserted that BMW breached the covenant of good faith and fair dealing implied in the warranty agreement. To support that assertion, he alleged that BMW "knew or should have known that the contracts and/or warranties" to which the buyers of its vehicles agreed "were unconscionable," and "abus[ed] its discretion in the performance of th[ose] contracts by . . . intentionally subjecting [him] to a risk (the defect) [he] would not have contemplated at the time of purchase." (Compl. ¶ 64.) Mr. Alban also alleged that BMW "breached the implied covenants by not placing terms in the contracts and/or warranties th[at] conspicuously stated . . . that the sound insulation w[as] susceptible to emitting a[n] odor and . . . would need replacement." (Compl. ¶ 65.) In other words, Mr. Alban contended that BMW knew at the time he purchased his vehicle that the solvent used on the sound insulation would eventually break down and emit an odor, and BMW's failure to disclose this fact breached the covenant of good faith and fair dealing implied in the warranty agreement.

This contention also formed the basis for Plaintiff's fourth claim: that BMW committed consumer fraud under the NJCFA. He alleged that "BMW knowingly concealed, suppressed, or omitted the material fact that" his vehicle "suffers from a defect that results in emitting an unpleasant odor," when it should have disclosed that defect prior to sale. (Compl. ¶¶ 71, 72.) Central to this assertion was that "BMW knew or should have known at the time of manufacture and sale . . . that the insulation used in the trunk [of his vehicle] was defective." (Compl. ¶ 6.)

In his fifth claim, Mr. Alban maintained that BMW breached the implied warranty of merchantability that accompanied the sale of his vehicle. In doing so, he alleges that his car was "not fit for the ordinary purpose for which [it] w[as] sold because," over time, the odor emanating from the defective insulation contained in his ...


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