Antitrust Law Daily Wrap Up, ANTITRUST—D.N.J.: BMW not liable for alleged monopoly over fuel injectors, (Aug 12, 2016)

By Jody Coultas, J.D.

A BMW purchaser failed to state antitrust and state unfair trade practices claims against BMW of North America, LLC (BMWNA) based on alleged defects in the vehicle’s fuel injectors and an alleged monopoly in the market for those fuel injectors, according to the federal district court in Newark, New Jersey (DiMartino v. BMW of North America, LLC, August 11, 2016, Martini, W.).

DiMartino purchased a BMW 5-series that contained an N54 engine. Due to a failure of two fuel injectors, DiMartino was required to bring his car in for an out-of-warranty repair and replace all six of the Index 10 fuel injectors with Index 11 models. All Index 10 models were recalled because of a systemic defect, and there was an alleged incompatibility between the Index 10 and Index 11 fuel injectors. BMWNA’s monopoly on the aftermarket sale of parts allegedly forced customers to pay for a full set of Index 11 fuel injectors. Index 11 fuel injectors’ incompatibility with the N54 engine’s onboard computer allegedly caused a subsequent failure, which required replacement of the computer.

On behalf of himself and similarly situated BMW purchasers, DiMartino filed claims for unjust enrichment, monopolization under Section 2 of the Sherman Antitrust Act, and violation of the Florida Deceptive and Unfair Trade Practices Act (FDUTPA). BMWNA moved to dismiss.

Statute of limitations. DiMartino’s reliance on the discovery rule was sufficient to avoid dismissal of the claims as time-barred, according to the court. The discovery rule delays the running of the statute of limitations "until the point where the complaining party knows or reasonably should know that he has been injured and that his injury has been caused by another party’s conduct." This is an issue of fact best left to a fact finder. DiMartino sufficiently alleged that the inherent incompatibility of the fuel injectors was not discoverable until the Index 10 fuel injectors failed and the vehicle was brought in for repairs. Also, DiMartino alleged that BMWNA was aware of the defects and incompatibility, but failed to inform consumers of the issue. Without even a purchase date provided, it is not possible for the court to determine when the claim began to accrue.

Antitrust standing. The court found that DiMartino lacked standing to assert the antitrust claims because he was not the direct purchaser of the fuel injectors. BMWNA argued that DiMartino and the class lacked standing because the fuel injectors were never sold directly to consumers, but rather to dealers and authorized service providers. Only a direct purchaser has standing to maintain a federal antitrust action. DiMartino framed the standing doctrine as requiring an "overcharge" on an individual product, while his claim was based on illegal tying by BMW only on consumers. However, the direct purchaser standing rule applies to illegal tying claims, and there is no case law that the direct-purchaser standing doctrine should be limited to an individual product overcharge.

DiMartino also argued that the dealers and services providers only stocked the fuel injectors, and that consumers were the direct purchasers. Even if the second-parties were merely pass through entities for the final sale to the consumer, this did not obviate the fact that the fuel injectors went through at least one economic step between BMWNA and consumers. Because the dealers and service providers were the direct purchasers, DiMartino did not have standing, according to the court.

DiMartino was not exempt from the direct-purchaser standing rule, according to the court. None of the limited exceptions recognized by the Supreme Court or the circuit courts were applicable. DiMartino argued that the court provide an exception based on the fact that the case would not run afoul of the policy rationales underlying the direct-purchaser standing doctrine. The policy concerns underlying the direct-purchaser standing rule included: (1) a risk of duplicative liability and inconsistent adjudications; (2) potential evidentiary complexities and uncertainties from ascertaining the portion of the overcharge passed to the indirect purchasers; and (3) the dilution of ultimate recovery available to direct purchasers. Even if the court were open to considering a new exception, DiMartino failed to demonstrate that the policy rationales motivating the direct-purchaser doctrine were not relevant here.

Injunctive relief standing. DiMartino also lacked standing to seek injunctive relief, according to the court. Indirect purchaser status did not bar him from seeking injunctive relief on his antitrust claim. However, DiMartino failed to show a reasonable likelihood of future injury. There was no evidence that DiMartino would buy a new BMW, and a new BMW would not include the alleged defects.

FDUTPA. BMWNA’s motion to dismiss the FDUTPA claim was granted without prejudice. The heightened pleading standard of Federal Rule of Civil Procedure 9(b) applied in this case as it was soundly based in fraud. DiMartino’s broad statements regarding BMWNA’s alleged concealment of an incompatibility as well as references to BMWNA’s deceptive acts were insufficient to meet the Rule 9(b) standard. DiMartino also failed to provide dates of purchase or when and to whom he brought it in for repairs, which led the court to conclude that he failed to provide the requisite "precision or some measure of substantiation" to survive a motion to dismiss.

The case is No. 15-8447 (WJM).

Attorneys: James E. Cecchi (Carella, Byrne, Cecchi, Olstein, Brody & Agnello, PC) for Joseph DiMartino. R. Brendan Fee (Morgan Lewis & Bockius LLP) for BMW of North America, LLC.

Companies: BMW of North America, LLC

Cases: Antitrust StateUnfairTradePractices NewJerseyNews