Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—D.N.J.: Defective Jeep Cherokee transmission allegations dismissed, (Sep 1, 2016)

By Edward L. Puzzo, J.D.

Purchasers of Jeep Cherokee vehicles were unable to maintain an action against the vehicle manufacturer under California’s Consumer Legal Remedies Act and Unfair Competition Law because they did not sufficiently plead facts showing that the manufacturer had knowledge of the alleged defective transmission prior to sale, the federal district court in Trenton, New Jersey, has ruled (Granillo v. FCA US LLC, August 29, 2016, Wolfson, F.).

Plaintiffs brought a putative class action against Fiat Chrysler Automobiles (FCA) based on allegedly defective automatic transmissions in FCA-manufactured vehicles. The action, brought on behalf of California purchasers and lessees of vehicles manufactured by FCA, brought claims under California’s Consumer Legal Remedies Act (CLRA) and Unfair Competition Law (UCL), among other claims.

The automatic transmissions on certain FCA vehicles—including 2014 and 2015 Jeep Cherokees, 2015 Jeep Renegades and 2015 Chrysler 200s—allegedly exhibited rough, delayed or sudden shifting of gears or failing to shift gears due to defective Transmission Control Modules and software. Plaintiffs allege that FCA was aware of the defective transmissions, issuing various technical service bulletins (TSBs) to dealers, but continued to sell the vehicles with the defective transmissions.

CLRA claim. The CLRA claim was based on an allegation that FCA had a duty to disclose the material fact of the transmission defect but failed to do so. FCA countered that the allegation was insufficiently specific for a fraud-based claim, because it failed to specify whether the defect was in the manufacture or design of the transmission. But the court stated that the material fact was not the cause the transmission defect but the vehicles’ rough and delayed shifting, regardless of cause.

FCA next alleged that its knowledge of the defect could not be alleged merely "on information and belief" and facts must be alleged that plausibly supported an inference that the pertinent information was particularly within their control. The court disagreed, finding that the knowledge of the defect was peculiarly within FCA’s control.

However, the court continued, the plaintiffs did not sufficiently allege facts indicating that FCA knew of the defects on the June 17, 2014, and October 4, 2014, dates that plaintiffs purchased their vehicles. Plaintiffs had merely pleaded that FCA was aware of software defects prior to the release of the 2014 Jeep Cherokee, but did not sufficiently plead facts showing that the software defects were not cured before the release of the vehicle and that they were related to the transmission defects. Plaintiffs also alleged that complaints of the transmission defects were available on third-party websites, but failed to plead facts indicating that FCA had knowledge of statements on these sites.

The court concluded that plaintiffs had not alleged facts sufficient to support an "on information and belief" inference that FCA had knowledge of the transmission defect prior to plaintiffs’ purchase of their vehicles. The court therefore dismissed the CLRA claim without prejudice. The UCL claim for fraudulent business practices was dismissed for the same reasons.

The case is No. 3:16-cv-00153-FLW-DEA.

Attorneys: Howard Gutman for Dolores Granillo. Kathleen N. Fennelly (Graham Curtin) for FCA US LLC.

Companies: FCA US LLC

Cases: StateUnfairTradePractices NewJerseyNews