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Amato v. Subaru of America, Inc.

United States District Court, D. New Jersey

December 5, 2019

AMATO, ET AL Plaintiffs,
v.
SUBARU OF AMERICA, INC., ET AL Defendants.

          OPINION

          HON. JOSEPH H. RODRIGUEZ, UNITED STATES DISTRICT JUDGE

         This matter is before the Court on Defendants' Motion to Dismiss pursuant to Fed. R. Civ. Pro. 12(b)(6). Having considered the parties' submissions, the Court decides this matter without oral argument pursuant to Federal Rule of Civil Procedure 78(b). For the reasons stated below, the Court grants in part and denies in part Defendants' Motion to Dismiss.

         I. Background

         This case concerns alleged engine defects in Subaru's 2009 through and including 2018 model year Impreza WRX and WRX STi (“class vehicles” or “class vehicle”). Four named Plaintiffs, Joseph Amato, James Moore, Chris Lall, and George Sandoval (collectively “Plaintiffs”), bring this action against Defendants Subaru of America, Inc. (“SoA”) and Subaru Corporation (“SRB”), (collectively “Subaru” or “Defendants”), individually and on behalf of all others similarly situated.

         SRB is a Japanese corporation and manufacturer of Subaru vehicles. According to Plaintiffs, it manufactured and tested the class engine and engine management system, and “drafted and published the Owner's Manual and Warranty & Maintenance Booklet materials that accompanied class vehicles and/or were published on the Internet.” Compl. ¶ 18. “SoA manufactures, imports, distributes and/or sells Subaru motor vehicles including all class vehicles and also acts as the authorized representatives of Subaru in the United States. SoA operates its national marketing, warranty, consumer relations and engineering offices from its New Jersey facility.” Id. at ¶ 19. It also drafted and published the Owner's Manual and Warranty & Maintenance Booklet.” Id. at ¶ 21. Plaintiffs now claim that the engines used in the class vehicles, including engine codes EJ255, EJ257, and FA20 (“class engines”), are “predisposed to premature engine failure.” Id. at ¶ 1-3.

         According to the facts alleged in Plaintiffs' Complaint: “Class vehicles are defective with respect to improperly designed and manufactured pistons and an engine management system and PCV (positive crankcase ventilation) system that subjects class engines to premature catastrophic engine piston ringlands failure (the ‘Piston Ringlands Defect')” Id. at ¶ 4. This alleged defect “often” causes engine failure “at less than 50% of [the engines] reasonably expected useful life.” Id. at ¶ 10.[1] Plaintiffs claim that the class engine failure causes power loss, stalling, and “sudden and catastrophic engine self-destruction as overheated internal parts seize.” Id. at ¶ 8. Therefore, Plaintiffs assert that the Piston Ringlands Defect causes serious safety issues for drivers of the class vehicle. Id. at ¶ 9. Plaintiffs contend that the predecessor engines had similar issues, and instead of redesigning the engine, Defendants attempted to make certain modifications to the engine system.

         Plaintiffs filed a class action Complaint with this Court against Defendants alleging class wide claims for Breach of Express Warranty of Merchantability (Count I), Breach of Implied Warranty of Merchantability (Count II), Violation of Magnuson-Moss Warranty Act 15 U.S.C. § 2310(D)(1(A) (Count III), Negligent Misrepresentation (Count VIII), and Injunctive and Declaratory Relief (Count IX); and state law claims for certain subclasses under the New Jersey Consumer Fraud Act N.J. Stat. Ann. §§ 56:8-2 (Count IV), the Indiana Deceptive Consumer Sales Act, Ind. Code §§ 24-5-0.5-1 (Count V), New York General Business Law § 349 Deceptive Acts and Practices (Count VI), and Arizona Consumer Fraud Act, A.R.S. §§ 44-1521 (Count VII).

         Plaintiffs claim that Defendants' had actual knowledge of the alleged defect, which they concealed from consumers. Specifically, that “defendants fraudulently, intentionally, negligently and/or recklessly concealed . . . the Piston Ringland Defect in class engines even though the defendants knew or should have known of design, materials and manufacturing defects in class vehicles.” Id. at ¶ 47. They claim that “prior to manufacturing and then distributing a new part, defendants perform substantial field inspections, testing and quality review of vehicles in service to determine the root cause and diagnosis of a problem.” Id. at ¶ 38. In addition, Plaintiffs claim Defendants would have obtained knowledge of defect through (1) field information and customer feedback on warranty claims that SoA monitors, (2) inspections of class engines during replacement pursuant to warranty claims, (3) sales and distribution of engines to dealerships and repair facilities, (4) internet communications and other consumer forums, (5) information concerning revisions made to subsequent engine specifications and materials, and (6) communications with class vehicle owners. Id. at ¶¶ 39-40.

         The class vehicles were subject to a warranty contained within the Owner's Manual and Warranty & Maintenance Booklet materials. According to the Complaint, these materials “do not contain any maintenance or service information for class engine pistons or piston ringlands that are defective.” Id. at ¶¶ 10, 53. Plaintiffs' claims that they timely notified the defendants of breach of warranties Id. at ¶ 55. The putative class contacted SoA directly and/or through an authorized dealership and were notified that SoA would not replace engines incorporated in class engines or reimburse replacement costs “because their vehicles were outside of the express warranty period.” Id. at ¶¶ 56-57. Now Plaintiffs' plead that Defendants failed to cure the class vehicle defect, despite alleged knowledge of the defect, and have breached the terms of its express warranty. Id. at ¶ 58.

         The named class representative Plaintiffs' claims arise out of the following alleged facts:

         Plaintiff Amato was a resident of New Jersey at the time he leased his “new 2016 Impreza WRX STi from an authorized Pennsylvania Subaru dealer in November 2015.” At 65, 000 miles, Amato's class vehicle required replacement of the engine due to the Piston Ringland Defect. Amato spent more than $6, 500 replacing the class engine together with other incidental expenses. Id. at ¶ 14.

         Plaintiff Moore currently resides in Indiana. He “purchased a certified pre-owned 2013 WRX from an authorized Subaru dealer in Indiana in November of 2015.” At 66, 000 miles, Moore's class vehicle required replacement of the engine. Moore spent more than $7, 500.00 repairing the class engine together with other incidental expenses. Id. at ¶ 15.

         Plaintiff Lall currently resides in New York. He “purchased a new 2016 Subaru WRX from Curry Subaru, an authorized Subaru dealer in New York in or about May of 2016.” Id. at ¶ 16. At approximately 32, 000 miles, Bay Ridge Subaru worked on the clutch of his vehicle “and returned the vehicle to Lall without indicating any issue with the engine piston ringlands.” Id. “Upon information and belief, ” Bay ridge Subaru completed “a tear down and diagnostic of the vehicle” but did not address or advise about the Piston Ringland's Defect. At approximately 33, 000 miles, within 1, 000 miles of receiving the vehicle back from Bay Ridge Subaru, “the vehicle suffered a catastrophic engine ringlands failure.” Id. Thereafter, Lall “demanded” that SoA repair his vehicle's engine under warranty. According to the Complaint, SoA refused. Lall was required to pay for his engine repair and lost use of his vehicle in excess of 2 months. Id.

         Plaintiff Sandoval is a resident of Arizona. He “purchased a new 2018 WRX STi from Auto Nation Subaru of Scottsdale, Arizona, an authorized Subaru dealer in Scottsdale, Arizona in 2018 for approximately $41, 000.” Id. at ¶ 17. The engine in Sandoval's class vehicle “has not experienced ringlands failure.” Sandoval claims “he has suffered diminution of value as a result of class engine ringlands failure becoming public knowledge.” Id. He claims that prospective purchaser(s) have told him “that because Subaru has publicized the fact that the pistons and piston ringlands required strengthening, an issue which Subaru revealed was fixed in the 2019 version of the WRX STi vehicle, that such purchaser(s) would not want to purchase the earlier class vehicles which did not incorporate engines with the strengthened pistons and ringlands.” Id.

         Presently, Defendants move to dismiss all claims alleged in Plaintiffs' Complaint. [Dkt. No. 10]. The Motion to Dismiss has been fully briefed and is ripe for decision.

         II. Standard of Review

         Federal Rule of Civil Procedure 12(b)(6) allows a party to move for dismissal of a claim based on “failure to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). A complaint should be dismissed pursuant to Rule 12(b)(6) if the alleged facts, taken as true, fail to state a claim. Fed.R.Civ.P. 12(b)(6). When deciding a motion to dismiss pursuant to Rule 12(b)(6), ordinarily only the allegations in the complaint, matters of public record, orders, and exhibits attached to the complaint, are taken into consideration. See Chester County Intermediate Unit v. Pa. Blue Shield, 896 F.2d 808, 812 (3d Cir. 1990). It is not necessary for the plaintiff to plead evidence. Bogosian v. Gulf Oil Corp., 561 F.2d 434, 446 (3d Cir. 1977). The question before the Court is not whether the plaintiff will ultimately prevail. Watson v. Abington Twp., 478 F.3d 144, 150 (2007). Instead, the Court simply asks whether the plaintiff has articulated “enough facts 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 has facial plausibility 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). “Where there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief.” Iqbal, 556 U.S. at 679.

         The Court need not accept “‘unsupported conclusions and unwarranted inferences, '” Baraka v. McGreevey, 481 F.3d 187, 195 (3d Cir. 2007) (citation omitted), however, and “[l]egal conclusions made in the guise of factual allegations . . . are given no presumption of truthfulness.” Wyeth v. Ranbaxy Labs., Ltd., 448 F.Supp.2d 607, 609 (D.N.J. 2006) (citing Papasan v. Allain, 478 U.S. 265, 286 (1986)); see also Kanter v. Barella, 489 F.3d 170, 177 (3d Cir. 2007) (quoting Evancho v. Fisher, 423 F.3d 347, 351 (3d Cir. 2005) (“[A] court need not credit either ‘bald assertions' or ‘legal conclusions' in a complaint when deciding a motion to dismiss.”)). Accord Iqbal, 556 U.S. at 678-80 (finding that pleadings that are no more than conclusions are not entitled to the assumption of truth). Further, although “detailed factual allegations” are not necessary, “a plaintiff's obligation to provide the ‘grounds' of his ‘entitlement to relief' requires more than labels and conclusions, and a formulaic recitation of a cause of action's elements will not do.” Twombly, 550 U.S. at 555 (internal citations omitted). See also Iqbal, 556 U.S. at 678 (“Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.”).

         Thus, a motion to dismiss should be granted unless the plaintiff's factual allegations are “enough to raise a right to relief above the speculative level on the assumption that all of the complaint's allegations are true (even if doubtful in fact).” Twombly, 550 U.S. at 556. “[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged-but it has not ‘shown'-‘that the pleader is entitled to relief.'” Iqbal, 556 U.S. at 679.

         III. Discussion

         At the outset, Defendants object to the application of New Jersey law to nonresident Plaintiffs' claims for breach of warranties and negligent misrepresentation. In response, Plaintiffs contend that any conflict of laws analysis at the motion to dismiss stage would be premature. But “courts in this Circuit have sometimes determined that the choice of law analysis in a putative class action can be done at the motion to dismiss stage.” Snyder v. Farnam Companies, Inc., 792 F.Supp.2d 712, 718 (D.N.J. 2011) (collecting cases). If the Court were to conduct a choice of law analysis, it must apply the choice of law rules of the forum state, here, New Jersey. Barbey v. Unisys Corp., 256 Fed.Appx. 532, 533 (3rd Cir. 2007). Under New Jersey rules, the “choice of law analysis must be undertaken on an issue-by-issue basis.” Harper v. LG Elecs. USA, Inc., 595 F.Supp.2d 486, 490 (D.N.J. 2009) (citing Rowev . Hoffman-La Roche, Inc., 917 A.2d 767, 771 (N.J.2007)). Therefore, the Court will analyze each claim separately to determine whether an analysis is proper, and if so, determine which state's law should be applied at that time.

         A. Count I: Breach of Express Warranty

         Plaintiffs' claims for breach of express warranty are premised on the warranties Defendant SoA issued to the class vehicles, including the basic warranty and Powertrain Limited Warranty (“the Limited Warranty”). Compl. ¶ 118. The basic warranty covered class vehicles for “3 years or 36, 000 miles, whichever comes first.” The Limited Warranty promised “any repairs needed to correct defects in material or workmanship for 5 years or 60, 000 miles, whichever comes first.” Id. This Limited Warranty particularly covered the class vehicle's engine, and “engine block and all internal parts.” Id.; see [Dkt No. 10-2].

         The relevant limited warranty materials state:

THESE WARRANTIES ARE LIMTED IN DURATION TO THE TIME PERIOD OF THE WRITTEN WARANTIES. THESE WARRANTIES ARE IN LIEU OF ALL OTHER OBLIGATIONS, LIBILITIES, OR WARANTIES, WHETHER EXPRESS OR IMPLIED. ANY IMPLIED WARRNATIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE END AT THE SAME TIME COVERAGE ON THE PARTCULAR COMPONENT ENDS.

[Dkt No. 10-2]. As to Plaintiffs' claims under Count I of the Complaint, the Court need not address or engage in any choice of law analysis. Defendants allege that a conflict of law exists because New Jersey does not require privity or reliance to establish an express warranty claim, while the requirements under New York, Indiana, and Arizona law, include privity. Defendants, however, do not argue that Plaintiffs claim for breach of express warranty fails for lack of privity or reliance alike. Second, for the reasons stated below, the Court finds that Plaintiffs' breach of express warranty claim fails prior to the need for an analysis under any specific state law. In fact, Defendants do not argue that a conflict of laws between states exists on the pertinent issue this Court will dismiss Count I pursuant to. Therefore, the potential conflict is inapposite to the Court's analysis of Plaintiffs' claim.

         Defendants argue that Plaintiffs' breach of express warranty claims against SoA fail and therefore, Count I should be dismissed because (1) the Limited Warranty does not cover the alleged design defect and (2) none of the Plaintiffs have pleaded “legitimate breach of express warranty claims.” Def. Brf. at 13-21. Defendants first argument that Count I should be dismissed against SoA claims that the Limited Warranty that Plaintiffs rely on does not cover the alleged defect, because according to Defendants, Plaintiffs are alleging a design defect. The Limited warranty at issue covers only defects in “material or workmanship.” Defendant argues that “material or workmanship” pertains to manufacturing defects and does not subsume design defects. The Court agrees that the language of the Limited Warranty does not cover design defects.

         The Third Circuit has held that the plain and ordinary meaning of the term “defect[s] in . . . materials or workmanship, ” unambiguously excludes “design defects.” Coba v. Ford Motor Co., 932 F.3d 114, 121 (3d Cir. 2019) (citations omitted). Prior to the Third Circuits ruling, a number of courts within this district, and the relevant jurisdictions, held the same. See Cali v. Chrysler Grp. LLC, No. 10 CIV. 7606, 2011 WL 383952, at *2 (S.D.N.Y. Jan. 18, 2011), aff'd, 426 Fed.Appx. 38 (2d Cir. 2011) (“The terms ‘material,' ‘workmanship,' or ‘factory preparation,' . . . refer to the mechanical process of implementing [a] design.”); Nelson v. Nissan N. Am., Inc., No. CIV. 11-5712, 2014 WL 7331922, at *3 (D.N.J. Dec. 19, 2014) (choosing “to join the vast weight of authority [by] holding that a workmanship and materials warranty cannot encompass a design defect claim.”); Pegg v. Nexus RVs LLC, No. 3:16-CV-783, 2019 WL 2772444, at *8 (N.D. Ind. July 2, 2019) (same); Troup v. Toyota Motor Corp., 545 Fed.Appx. 668, 668-69 (9th Cir. 2013) (same).

         The Court must then decide if the Piston Ringland Defect, as pled, is a design defect or one of material and workmanship. In Coba, the court explained the difference between those types of defects as follows:

[D]efects in “workmanship” and “materials” are flaws pertaining to the construction or manufacture of a product, while defects in “design” are shortcomings that arise in the plans for a product's creation. More specifically, a “materials” defect is a failing in the quality of the actual substances used to make a product; a “workmanship” defect is a deficiency in the execution of a product's assembly or construction; and a “design” defect is a flaw inherent in the product's intended operation and construction . . .

Coba, 932 F.3d at 121.

         Here, Plaintiffs contend that they have sufficiently pled facts that the class vehicle defect, is covered under warranty as a materials and workmanship defect. The Complaint alleges that “[c]lass vehicles are defective with respect to improperly designed and manufactured pistons and an engine management system and PCV (positive crankcase ventilation) system.” Compl. ¶ 4. Plaintiffs also argue that their Complaint supports a claim for a manufacturing defect by claiming “the class engine pistons should have been manufactured differently by using forged pistons.” Pl. Opp. at 16; see Compl. ¶ 5. Further allegations contained in the Complaint claim that class engines were failing due to “materials, workmanship, manufacture, or design defect.” Compl. ¶ 44.

         Defendants argue that, in effect, Plaintiffs are “deliberately refusing” to identify the type of defect the Piston Ringland engine defect is, which Defendants insist is one of design. Def Brf. at 15. Defendants indicate that Plaintiffs' pleading discusses the modifications to the ECM programming and PCV system, both of which are issues of design and would constitute design defects. Additionally, Defendants stress that Plaintiffs criticize Defendants' material selections as causes for the engine defect, and such choices are design decisions. See Compl. ¶¶ 5-7.

         At this stage, the Court is “required to accept as true all of the allegations in the complaint and all reasonable inferences that can be drawn therefrom.” Morse v. Lower Merion Sch. Dist., 132 F.3d 902, 906 (3d Cir. 1997). Prior to discovery, some courts have decided that “the distinction between defect in design and defect in materials or workmanship is a matter of semantics, and [when] sufficient facts are alleged to assert both, the defendant's characterization of the nature of the claim pre-discovery should not control whether the complaint survives.” Alin v. Am. Honda Motor Co., No. CIV A 08-4825, 2010 WL 1372308, at *6 (D.N.J. Mar. 31, 2010). In this case, Plaintiffs Complaint concludes that the Piston Ringland Defect is one of design and manufacture. However, even taking Plaintiffs' allegations as true, their Complaint fails to sufficiently plead facts supporting a manufacturing defect or defect in “materials or workmanship.”

         Plaintiffs' specifically claim that the class engine's internal defect resulted from performance modifications. According to the Complaint, previous versions of the engine, “[t]he 2.0 liter and 2.5 liter high output class engine[, ] share substantially similar piston ringland construction but are manufactured differently. The earlier 2.0 liter STi engine had more durable forged pistons while class EJ and FA engines use more brittle cast pistons.” Compl. ¶ 5 (emphasis added). Plaintiffs make clear that what caused the cast engine piston's alleged durability issue, was the material used in the casting. Therefore, as pled, the alleged defect in the class vehicles resulted from the type of material used to case the engine pistons, which utilized a less expensive manufacturing process. These issues present problems in design, consistent with Plaintiffs' allegation that the engines lacked internal modifications to meet their performance modifications. Id. at ¶ 6.; see Coba, 932 F.3d at 123 (finding that a fuel tank defect, as alleged by plaintiff, was a design defect, noting that the problem was defendant's “plan to use [certain] coatings . . . in constructing its fuel tanks”). There are no facts alleged to suggest that the Piston Ringlands were defective because the engine departed from its intended design. Instead, as Defendants point out, Plaintiffs criticize the materials and type of process chosen to manufacture the alleged defective parts of the class vehicle. Such criticism fails to allege a problem in the process of constructing the engine, rather it alleges a flaw in the overall intended construction (a design decision).[2] See Id. at 121.

         Finally, Plaintiffs' opposition does not address its allegations regarding an inadequate PCV or engine management system. In fact, Plaintiffs' Complaint does not provide any factual assertions as to why the engine management system contributed to the engine failures and alleges only that the defendants “experimented with different PCV system configurations.” Therefore, at this time, the Court finds that Plaintiffs fail to state a claim for breach of express warranty, thus the Court will dismiss Count I.[3]

         B. COUNT II: Breach of Implied Warranty ...


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