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Coba v. Ford Motor Co.

United States District Court, D. New Jersey

August 4, 2017

GALO COBA and COBA LANDSCAPING AND CONSTRUCTION, INC., individually, and on behalf of other members of the general public similarly situated, Plaintiffs,
v.
FORD MOTOR COMPANY, Defendant.

          OPINION

          KEVIN MCNULTY, U.S.D.J.

         Plaintiffs Galo Coba and Coba Landscaping and Construction, Inc. ("Coba Landscaping")[1] bring this putative class action against Defendant Ford Motor Company ("Ford"). The Third Amended Class Action Complaint (the "Complaint") (ECF no. 91)[2] contains four counts arising out of Ford's alleged inability to cure a defective fuel tank installed in certain Ford F-Series Super Duty trucks and E-Series vans.

         Now before the Court is Ford's motion (ECF no. 130-1) for summary judgment. In a previous Opinion (ECF no. 149), I granted summary judgment to Ford on Counts 1, 2, and 4, which allege breach of express warranty, breach of the implied contractual covenant of good faith and fair dealing, and common law fraud. At that time, I also administratively terminated without prejudice the portion of Ford's summary judgment motion concerning Count 3, which alleges a violation of the New Jersey Consumer Fraud Act (the "NJCFA"), N.J. Stat. Ann. § 56:8-2, and I granted leave to submit supplemental briefing.

         The parties have submitted supplemental briefing and, for the reasons stated below, I will grant summary judgment to Ford on Count 3. This opinion assumes familiarity with my prior Summary Judgment Opinion, and should be read in conjunction with it.

         I. FACTS

         The facts, as set forth in my previous Summary Judgment Opinion, are incorporated here by reference. (See SJ Op. 2-13, 2016 WL 5746361 *l-*7.)

         II. DISCUSSION

         A. Summary Judgment Standard

         The familiar legal standards governing a motion for summary judgment are likewise incorporated by reference, and will not be repeated here. (See SJ Op. 13-14, 2016 WL 5746361 *7-*8.)

         B. Analysis

         1. Violation of the New Jersey Consumer Fraud Act

         a. Elements of a CFA Claim

         Coba's third cause of action arises under the New Jersey Consumer Fraud Act ("CFA"). In a diversity case, this court must interpret substantive state law in accordance with rulings of the state's highest court. Lacking such specific guidance, it must predict how the state court would resolve the issue. Hunt v. U.S. Tobacco Co., 538 F.3d 217, 220-21 (3d Cir. 2008); Norfolk Southern Ry. Co. v. Basell USA Inc., 512 F.3d 86, 91-92 (3d Cir. 2008); see generally Erie R. Co. v. Tompkins, 304 U.S. 64, 78 (1938).

         The New Jersey Legislature enacted the NJCFA in 1960 to address fraudulent practices in the market for consumer goods and to deter such conduct by merchants. Furst v. Einstein Moomjy, Inc., 182 N.J. 1, 11 (2004) (citing Cox v. Sears Roebuck & Co., 138 N.J. 2, 21 (1994)). As amended in 1971, the statute confers a private right of action for consumers who have suffered from unconscionable or fraudulent practices in the marketplace:

Any person who suffers any ascertainable loss of moneys or property, real or personal, as a result of the use or employment by another person of any method, act, or practice declared unlawful under this act of the act hereby amended and supplement may bring an action or assert a counterclaim therefor in any court of competent jurisdiction.

N.J. Stat. Ann. § 56:8-19. The NJCFA is to be liberally construed in favor of the consumer, see Cox, 138 N.J. at 14, and "applied broadly in order to accomplish its remedial purpose, " Gonzalez v. Wilshire Credit Corp., 207 N.J. 557, 576 (2011) (quoting Lemelledo v. Beneficial Mgmt. Corp., 150 N.J. 255, 264 (1997)); see also Gennari v. Weichert Co. Realtors, 148 N.J. 582, 604 (1997).

         "To state a prima facie case under the CFA, a plaintiff must demonstrate three elements: (1) unlawful conduct by the defendant; (2) an ascertainable loss by the plaintiff; and (3) a causal connection between the defendant's unlawful conduct and the plaintiffs ascertainable loss." Pay an v. GreenPoint Mortgage Funding, 681 F.Supp.2d 564, 572 (D.N.J. 2010) (citing Bosland v. Wamock Dodge, Inc., 197 N.J. 543, 557 (2009)); accord Gonzalez, 207 N.J. at 576.

         The first element of an NJCFA claim-unlawful conduct-is defined as: "[t]he act, use or employment by any person of any unconscionable commercial practice, deception, fraud, false pretense, false promise, misrepresentation, or the knowing, concealment, suppression, or omission, in connection with the sale or advertisement of any merchandise . . . ." N.J. Stat. Ann. § 56:8-2. From this statutory definition, courts have derived three broad categories of unlawful conduct: affirmative acts, knowing omissions, and regulatory violations. Federico v. Home Depot, 507 F.3d 188, 202 (3d Cir. 2007) (citing Cox, 138 N.J. at 17).

         Coba's allegations fall within the second category: knowing omissions. "When the alleged consumer fraud consists of an omission, the plaintiff must show that the defendant acted with knowledge, and intent is an essential element of the fraud." Cox, 138 N.J. at 18. An actionable omission thus occurs where the defendant "(1) knowingly concealed (2) a material fact (3) with the intention that the consumer rely upon the concealment." Arcand v. Brother Intern. Corp., 673 F.Supp.2d 282, 297 (D.N.J. 2009).

         b. Coba's New Jersey CFA Claim

         Coba alleges that Ford knowingly concealed the material fact that "the Class Vehicles suffered from a common defect resulting in fuel tank material clogging portions of the fuel system, thereby causing sudden loss of power to the engine, sudden loss of forward propulsion, and stalling while driving the Class Vehicles" by "purposefully fail[ing] to disclose this to Plaintiffs and Class Members during the purchase of the vehicle and, in fact, actively conceal[ing], suppress[ing] and omitt[ing] any mention of the Fuel Tank Defect." (3AC ¶ 153) Coba further alleges that "Ford purposefully and knowingly failed to disclose the Fuel Tank Defect in the Class Vehicles and replacement tanks in order to secure the sale of these vehicles or replacement tanks at a premium price and also to mislead owners during the express warranty period to avoid having to perform their contractual duties under the warranty." (3AC ¶ 160)

         Coba's omissions claim, as noted above, requires a showing that Ford knowingly concealed a material fact with the intention that the consumer rely on that omission. See Arcand, 673 F.Supp.2d at 297. Implicit is the requirement that the defendant be subject to an "underlying duty ... to disclose what he concealed to induce purchase." Id. "Obviously, there can be no [unlawful conduct], or reliance for that matter, if the defendant was under no obligation to disclose the information in the first place." Id. Whether a defendant was subject to a duly to disclose is a question of law that must be determined in light of the factual circumstances. Judge v. Blackfin Yacht Corp., 357 N.J.Super. 418, 426-27 (App. Div. 2003) (citing Carter Lincoln-Mercury, Inc., Leasing Div. v. EMAR Grp., Inc., 135 N.J. 182 (1994)).

         Ford contends that Coba has not raised a material factual dispute with regard to the unlawful conduct element of its omissions claim. Ford states that it violated no duty to disclose the alleged material facts relating to the fuel tank delamination at the time of Coba's purchases.

         There is well-developed case law, cited by both sides in the initial briefing on this motion, as to the nature and scope of a manufacturer's duty of disclosure with respect to a warranted defect. See, e.g., Mickens v. Ford Motor Co., No. 10-CV-5842 KM MAH, 2015 WL 5310755, at *8 (D.N.J. Sept. 10, 2015) (citing Tatum v. Chrysler Grp., LLC, 2011 WL 1253847, *5 (D.N.J. March 28, 2011)). Automobile manufacturers commonly warrant their cars against failures for a period of time. Thus freedom from, e.g., fuel tank failure for a fixed period of years becomes part of the bargained-for exchange; if such a failure occurs, it will be remedied at the manufacturer's expense. It is well known that automobiles do not always function flawlessly; that is the very reason for a warranty. Where the relevant defect was covered by a warranty, then, "it is not sufficient to allege that the defendant manufacturer knew that a part might fail [due to the defect] before the warranty expired but concealed that knowledge." Alban v. BMW of N. Am., LLC, 2010 WL 3636253, at *10 (D.N.J. Sept. 8, 2010) (emphasis in original) (citing Perkins v. DaimlerChrysler Corp., 383 N.J.Super. 99, 111-12, 890 A.2d 997 (App. Div. 2006)). Instead, B[t]o support a CFA cause of action for fraud in the context of a warranted defect, a plaintiff must show that the manufacturer was not in good faith insuring against a risk, but that it actually *knew with certainty that the product at issue or one of its components was going to fail." Mickens, 2015 WL 5310755, at *8 (citing Tatum, 2011 WL 1253847, *5 (emphasis in original)). "Only then will a concealed, but warranted-against, defect furnish the basis for a CFA claim." Id.

         Originally, both sides seemed to have briefed the NJCFA duty to disclose issue on the assumption that the fuel tank delamination was a warranted defect. As I noted in my earlier Summary Judgment Opinion, that was an understandable assumption, given Ford's "position that it could not reliably identify the nature of the problem but honored warranty claims in the interim" and Coba's "position that the defect was covered by the NVLW." (S.J. Op. at 22, 2016 WL 5746361 at *12). However, because I found that the allegations and proofs relate solely to an alleged design defect, not covered by the express warranty (and there is no implied warranty claim asserted), I granted the parties the opportunity to address the NJCFA duty-to-disclose issue in light of my disposition of the express warranty issue.

         The parties have submitted supplemental briefs on the issue of the duty to disclose in relation to a non-warranted defect. I now turn to that question.

         The parties agree that the NJCFA is applicable whether or not the allegedly omitted defect was covered by a warranty. Thus, the disputed question here is not whether the NJCFA protects the consumer from non-warranted defects, but rather what standard should govern the duty to disclose. Must plaintiffs demonstrate that a defendant knew that a product was certain to fail, as in the Alban line of cases? Or is the knowledge that a product may fail sufficient to trigger a duty to disclose a non-warranted defect?

         For its part, Coba argues that in the "absence of warranty coverage . . . courts do not insist that the defendant know that a defect would arise in 100% of the cases before finding an omissions claim actionable, with or without warranty." (PI. Supp. Br. 2-3) Coba further contends that if the Alban certainty standard is applied in the absence of a warranty, "defendants will be in the perverse position of being able to escape liability entirely under the NJCFA simply because they did not warrant a known defect that is prone to failure but does not fail at a 100% rate." (PI. Supp. Br. 3-4) Coba argues that "[t]he Court's finding that the fuel tank delamination defect is not covered by warranty can only aid Plaintiffs-not Ford. This is because the existence of a warranty is typically invoked as a defense to a claim that defendant violated the NJCFA." (PI. Supp. Br. 8)

         In contrast, Ford asks the Court to apply the certainty standard here, arguing that "Alban and its progeny are nearly indistinguishable from this case." (Def. Supp. Br. 4) This is so, says Ford, because "there is no conceptual distinction between a defect that is not covered by warranty because it falls outside the durational limitation (as in the Alban-line of cases) versus a defect that falls outside the scope of the warranty (as in this case)." "[B]oth what [the warranty] covers and for how long, " says Ford, "are 'part of the benefit of the bargain between the parties.'” (Id. at 4-5) (quoting Thiedemann v. Mercedes-Benz U.S.A., LLC,872 A.2d 783, 794 (N.J. ...


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