Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—N.D. Cal.: Claims against Porsche based on wiring harness defect proceed, (Aug 26, 2016)

By Edward L. Puzzo, J.D.

The purchaser of a Porsche vehicle adequately pleaded a claim against the manufacturer under the California Consumer Legal Remedies Act by alleging that Porsche had knowledge of a wiring harness defect at the time of the sale, that they had a duty to disclose the defect, and that they had engaged in a transaction with the purchaser, the federal district court in San Jose, California has ruled (Butler v. Porsche Cars North America, Inc., August 25, 2016, Koh, L.).

Plaintiff Paul Butler, who purchased used a 2007 Porsche 911 vehicle—first sold in May 2007—from an authorized Porsche dealership in July 2015, alleged that vehicles of this type had a defective wiring harness that caused the battery to not fully charge, preventing the vehicle from starting. Based on this alleged defect, Butler brought a putative class action lawsuit against Porsche Cars North America under the California Consumer Legal Remedies Act (CLRA) on behalf of himself and other California owners of 2005-2008 Porsche 911/997 class vehicles.

Butler alleged that Porsche's failure to disclose the existence of the faulty wiring in this class of vehicles was a fraudulent omission under the CLRA. A valid claim for fraudulent omission, the court explained, requires the plaintiff to allege that the omitted fact was a fact the defendant was required to disclose and that the defendant was aware of the defect at the time of sale.

Duty to disclose. The parties agreed that the allegedly faulty wiring harness in the vehicle was not covered by any written or express warranty. Porsche argued that this meant that they had no duty to disclose the alleged defect, because under California law, a manufacturer has no duty to disclose that a vehicle component might require repair or replacement after the expiration of the vehicle's warranty. But Butler countered that an exception to the absence of duty to disclose existed when the defect involved a safety issue. Butler argued that this exception applied because if the wiring failed at night or during a rainstorm while the vehicle was being driven, the resultant loss of headlights or windshield wipers would present a serious safety hazard.

The court stated that, despite the fact that Butler did not personally suffer the electrical failure while driving, and only suffered a failure to start, he had plausibly alleged that the defect could present a safety hazard, which was all that was necessary to allege a duty to disclose the defect.

Knowledge of defect. Butler also argued that Porsche was aware of the wiring harness defect as of the date of the vehicle's first sale in May 2007. This knowledge could be inferred, Butler argued, by the fact that Porsche received complaints about the wiring before this vehicle was first sold, by Porsche's discontinuation of the wiring harness design after the 2007 model year, and because they issued a technical service bulletin (TSB) regarding the defective wiring in January 2008. The court found that these allegations of Porsche's awareness of the defect at the time of the first sale of the vehicle sufficient to plead a knowledge of the defect.

Transaction. Finally, Porsche argued that Butler had failed to plead that he had engaged in a transaction with it and was entitled to bring an action under the CLRA. The court conceded that the complaint did not specify exactly when or from whom Butler purchased the vehicle, but other allegations in the complaint allowed the inference that Butler had purchased the vehicle and had not received it as a gift. The purchase of the vehicle satisfied the CLRA transaction requirement, even if Butler did not purchase the vehicle directly from Porsche, stated the court. In the context of CLRA claims brought by car owners against car manufacturers in the district, the court explained, plaintiffs who purchased used vehicles, or who purchased vehicles from dealerships rather than directly from the manufacturer, had standing to bring CLRA claims against manufacturers, even though they never entered into transactions directly with the manufacturers.

The court ruled that Butler had sufficiently pleaded a duty to disclose by Porsche, Porsche's knowledge of the defect at the time of the vehicle sale, and a transaction between the parties. Therefore, Porsche's motion to dismiss for failure to state a claim was denied.

The case is No. 5:16-cv-02042-LHK.

Attorneys: Michael D. Braun (Braun Law Group, PC) for Paul B. Butler. Stephen Thaddeus Waimey (Lee, Hong, Degerman, Kang & Waimey) and Matthew A. Goldberg (DLA Piper LLP) for Porsche Cars North America, Inc.

Companies: Porsche Cars North America, Inc.

Cases: StateUnfairTradePractices CaliforniaNews