Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—D.N.J.: Mitsubishi stalled in attempt to dismiss claims arising from operational truck failures, (Jul 31, 2015)

By Michael Menzhuber, J.D., LL.M.

Mitsubishi’s motion to dismiss consumer fraud and breach of warranty claims, arising from alleged operational truck failures caused by its BlueTec® technology engine that had been installed, was granted in part and denied in part by the federal district court in Trenton, New Jersey. The court granted Mitsubishi’s motion to dismiss the claims for breach of implied warranty of merchantability and declaratory relief but denied its’ motion to dismiss the claims for violations of Florida’s Deceptive and Unfair Trade Practices Act (FDUTPA), breach of express warranty, and breach of the implied covenant of good faith and fair dealing. The court also denied Mitsubishi’s motion to strike the class allegations as premature (Q+Food LLC v. Mitsubishi Fuso Truck of America, Inc., July 30, 2015, Shipp, M.).

Background. Q+Food LLC (QF) purchased a FE125 truck (truck) that was manufactured by Mitsubishi Fuso Truck of America, Inc. (Mitsubishi) and that was equipped with Mitsubishi’s BlueTec® engine (engine). The engine used an electronic control unit (ECU) software that was programmed to provide certain responses in the event of a problem with the engine’s operating condition: (1) warning; (2) de-rate; or (3) shutdown. The warranty package included a five-year warranty that covered the BlueTec® emission control system.

QF alleged that, on 13 different occasions, it had to bring the truck in for service at an authorized dealership and that the truck was out-of-service for at least 250 days of the 790 days in which it owned the truck. Following QF’s repeated notices and complaints regarding the condition of the truck, it received an email from Mitsubishi’s product support manager stating that Mitsubishi would provide it with no further assistance.

QF filed a putative class action, alleging: (1) violations of the New Jersey’s Consumer Fraud Act (NJCFA) or the FDUPTA; (2) breach of express warranty; (3) breach of implied warranty of merchantability; (4) breach of implied covenant of good faith and fair dealing; and (5) declaratory relief.

Choice of law. In order to determine the state law applicable to each claim, the court applied New Jersey’s “most significant relationship” test which has two parts: (1) whether an actual conflict of law exists and, if so, (2) which state has the most significant relationship to the claim. With respect to the violations of NJCFA and FDUPTA claim, the court determined there was a conflict between the statutes because the NJCFA provided for treble damages and FDUPTA did not. Concerning the breach of express warranty claims, the court found a difference in the notice requirements for each state. There was also an actual conflict of law with respect to the breach of the implied warranty of merchantability because the Florida had a privity requirement and New Jersey did not.

The court determined that Florida had the “most significant relationship” because: (1) the sale of the truck took place in Florida; (2) the maintenance work on the truck took place in Florida; and (3) QF was a Florida company wholly-owned by two Florida residents. By contrast, the only tie to New Jersey was Mitsubishi’s headquartered presence in the state.

Florida’s Deceptive and Unfair Trade Practices Act. Mitsubishi argued that QF’s FDUPTA claim should be dismissed because: (1) it was not plead with particularity; (2) the press release constituted puffery; (3) QF did not allege seeing the press release; and (4) QF did not allege actual damages. The court disagreed. It determined that: (1) QF adequately alleged a deceptive or unfair practice with sufficient particularity; (2) the statements alleged in QF’s complaint went beyond what normally constitutes puffery and made specific representations; (3) no actual reliance by QF was required under Florida law; and (4) there was support, under Florida law, that the FDUTPA contemplates compensation for the diminished value of a vehicle.

Breach of express warranty. Mitsubishi argued that QF’s breach of warranty claim should be dismissed because QF failed to provide pre-suit notice and Mitsubishi complied with the terms of the warranty. The court disagreed. It determined that QF’s allegations that it repeatedly brought the truck to an authorized dealer for service, and the fact that it received an email from Mitsubishi’s product support manager in response to its notices and complaints, was sufficient to establish pre-suit notice. The court further determined that the statement in the email that Mitsubishi would provide no further assistance to QF was sufficient to establish that the terms of the warranty were not complied with.

Breach of the implied warranty of merchantability. Mitsubishi argued that QF’s breach of the implied warranty of merchantability claim should be dismissed because there was no privity between the parties and Mitsubishi disclaimed such a warranty. The court agreed that there was no privity between QF and Mitsubishi and, consequently, granted Mitsubishi’s motion to dismiss.

Breach of the implied covenant of good faith and fair dealing. Mitsubishi argued that QF’s breach of implied covenant of good faith and fair dealing claim should be dismissed because QF could not state a claim for breach of warranty. Mitsubishi also argued that the claim should be dismissed because an implied covenant of good faith and fair dealing could not be asserted to override the terms of the express warranty to obligate it to provide a defect-free truck. The court disagreed because: (1) it did not dismiss QF’s breach of warranty claim; and (2) QF’s allegation of breach of implied covenant of good faith and fair dealing was not based solely on the truck’s defects but, also because Mitsubishi “knew or should have known” its warranty was unconscionable and it failed to provide proper parts and service for the engine.

Declaratory judgment. The court dismissed QF’s declaratory judgment because it was duplicative of the relief sought in the other counts of QF’s complaint.

Class allegations. Mitsubishi moved to strike the class allegations in QFs complaint on that basis that the proposed nationwide class was overbroad and individualized fact issues destroyed predominance. The court determined that, given the early state of the proceedings, the motion to strike the class allegations was premature.

The case is No. 14-6046 (MAS) (DEA).

Attorneys: James C. Shah (Shepherd, Finkelman, Miller & Shah, LLP) for Q+Food LLC. Michael P. Daly (Drinker, Biddle & Reath, LLP) for Mitsubishi Fuso Truck of America, Inc.

Companies: Q+Food LLC; Mitsubishi Fuso Truck of America, Inc.

Cases: StateUnfairTradePractices FloridaNews NewJerseyNews