Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—E.D.N.Y.: Nissan unable to avoid consumer claims of failure to disclose defect vehicle part, (Sep 29, 2015)

By Linda O’Brien, J.D., LL.M.

In a putative class action by consumers against an automobile manufacturer over the installation of allegedly defective vehicle parts, the consumers’ claims that the manufacturer failed to disclose information about the latent defect were sufficient to survive a motion to dismiss, the federal district court in Brooklyn, New York has ruled. However, the consumers’ allegations based on misrepresentations by the manufacturer were dismissed (Chiarelli v. Nissan North America, Inc., September 25, 2015, Garaufis, N.).

Nissan Motor Co. designs, manufactures, sells, and warrants automobiles and other vehicles under several brand names. All of its vehicles contain a timing chain tensioning system, which is an integral component of the combustion engine responsible for ensuring that the engine’s valves open and close in a precise, synchronized manner. Vincent Chiarelli purchased a used 2006 Nissan Frontier in March 2009. Chiarelli took his vehicle to a Nissan dealership for repair in February 2014, which identified an issue with the timing chain tensioning system. The repair of over $1,000 was not covered by any manufacturer warranty, including Chiarelli’s extended warranty.

Chiarelli and a group of consumers brought a putative class action against Nissan, asserting, in part, claims under the New York General Business Law (GBL), New Jersey Consumer Fraud Act (NJCFA), Florida Deceptive and Unfair Trade Practices Act (FDUTPA), and Maryland Consumer Protection Act (MCPA). The plaintiffs alleged that Nissan installed defective timing chain systems in various models of Nissan vehicles, causing the plaintiffs to pay for repairs after the expiration of their applicable Nissan warranties. The plaintiffs also alleged that Nissan was aware of the defect —issuing technical service bulletins to its dealerships beginning in 2007—and failed to notify consumers of the defect during the warranty period. Nissan moved for dismissal for failure to state a claim.

Omissions. The court found that the plaintiffs adequately alleged an omissions-based theory under the GBL, FDUTPA, and MCPA. The plaintiffs contended that Nissan failed to disclose information about the latent defect in the timing chain tensioning system, which only Nissan possessed and was relevant to consumers. Nissan’s argument that the plaintiffs failed to allege that Nissan owed them a legal duty to disclose the defect was rejected. The court noted that whether there was a legal duty was not the operative focus under the GBL.

Nissan’s argument that the terms of the express warranty set consumer expectations and therefore there was no claim that Nissan’s omissions were a practice likely to mislead a reasonable consumer under the circumstances was also rejected. The court noted that, although the plaintiff may not prove at trial that a reasonable consumer faced with a limited express warranty would be misled by a manufacturer’s failure to disclose that certain vehicle parts were likely to fail outside the warranty period, Nissan’s motion to dismiss was premature at the pleading stage and ignored the plaintiffs’ articulated theory that Nissan knew of the latent defect and failed to disclose it.

However, the court found that dismissal of the NJCFA claim was warranted. The NJCFA requires an ascertainable loss, and the plaintiffs could not claim such loss where the allegedly defective part outperformed its warranty period.

Misrepresentations. Additionally, the claims based on misrepresentations were inadequately alleged as a matter of law under the GBL, FDUTPA, and MCPA. According to the court, the plaintiffs’ allegations—that Nissan knowingly misrepresented to plaintiffs at the time of purchase or lease that the vehicles did not contain material defect, were in good working order, and were not defective—were conclusory. Such general statements without more detail and a plausible narrative were insufficient to show that Nissan knew of the latent defect.

The case is No. 14-CV-4327.

Attorneys: Gary S. Graifman (Kantrowitz Goldhamer & Graifman) for Vincent Chiarelli. David M. Covey (Sedgwick LLP) for Nissan North America, Inc.

Companies: Nissan North America, Inc.; Nissan Motor Co., Ltd.

Cases: StateUnfairTradePractices ConsumerProtection NewYorkNews