Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—C.D. Cal.: Yamaha sinks boaters’ consumer fraud claims, (Jan 12, 2015)

By Greg Hammond, J.D.

Consumers of Yamaha Motor Corporation, U.S.A.’s first-generation F-series four-stroke outboard motor failed to state valid consumer fraud claims against the motor maker under various state unfair competition and trade practices laws. In granting Yamaha’s motion to dismiss, the federal district court in Los Angeles found that the consumers did not allege any affirmative misrepresentation, actionable omission, or presale knowledge of any defect on the part of Yamaha (Kirsopp v. Yamaha Motor Co. Ltd., January 7, 2015, O’Connell, B.).

Background. As part of its business, Yamaha designs and manufactures outboard motors for recreational boats, including the first-generation F-Series four-stroke outboard motor. Consumers who purchased the first-generation outboard motor allege that the product was flawed, causing significant internal corrosion of the motor’s dry exhaust system. If left untreated, the consumers allege that the defect causes the motor to fail prematurely. Four consumers filed suit against Yamaha, alleging, in part, violations of California’s Unfair Competition law (UCL), the Connecticut Unfair Trade Practices Act (CUTPA), and the Maryland Consumer Protection Act (MCPA). The court previously dismissed these claims, finding that the consumers failed to allege an affirmative misrepresentation or an omission of material fact. After the consumers filed an amended complaint, Yamaha moved to dismiss for a second time.

Consumer fraud. The court dismissed the amended complaint, finding once again that the consumers failed to allege any affirmative misrepresentation or omission of material fact, and for the additional reason that the consumers failed to allege that Yamaha had presale knowledge of any defect.

The consumers first argued that they sufficiently alleged specific affirmative misrepresentations, including the following statements: “top reliability in marine engines” and “exceptional product life, unmatched reliability and durability.” The court, however, determined that even if the statements were deemed more than non-actionable puffery, the consumers failed to allege that any of them actually saw the statements prior to purchasing their motors. Absent any express allegation that they saw the purportedly misleading content, there could be no reliance, and the claims therefore failed under Federal Rule of Civil Procedure 8(a) and 9(b).

In support of their claims of fraudulent omission of material facts, the consumers asserted that Yamaha had a duty to disclose a defect that it knew could cause engine failure. Implicit in their argument, however, is the notion that engine failure constitutes an “unreasonable safety hazard.” The court concluded that the consumers failed to allege a sufficient causal nexus between the alleged defect and the safety hazard. Without a causal nexus, the court could not conclude that the alleged defect presented an unreasonable safety hazard giving rise to any duty to disclose.

Finally, the consumers argued that they adequately alleged presale knowledge of the purported defect for two reasons: (1) Yamaha knew and/or should have known about the defect because it had exclusive access to data and research conducted prior to and during the design and manufacture of the four stroke outboard motors; and (2) Yamaha must have learned of the defect prior to creating and selling a repair kit designed to replace corroded engine parts; fixing the defect for the next generation of motors; and updating the user manual to include a maintenance chart that recommends owners inspect or replace their exhaust guide and exhaust manifold every 1,000 hours or five years. The court found these allegations speculative and determined that it could not reasonably conclude that the consumers adequately alleged Yamaha’s presale knowledge of any defect.

The case number is CV 14-00496 BRO (VBKx).

Attorneys: Christopher M. Burke (Scott and Scott LLP) and Daniel L. Warshaw (Pearson, Simon & Warshaw, LLP) for Philip Kirsopp. James L. Zelenay, Jr. (Gibson, Dunn & Crutcher LLP) for Yamaha Motor Co., Ltd. Companies: Yamaha Motor Co., Ltd.

Cases: StateUnfairTradePractices CaliforniaNews