Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—S.D. Fla.: GM’s ambiguous warranty enabled the survival of breach of warranty claims for alleged design defect, (Jan 18, 2018)

By David Yucht, J.D.

General Motors’ express limited warranty was ambiguous enough to allow the survival of two consumers’ breach of warranty claim for failing to remedy an alleged design defect in the Corvette Z06, according to a federal district court in Florida.The consumers’ class action filing also made out a prima facie case under Florida’s Unfair & Deceptive Trade Practices Act. However, the economic loss rule barred the consumers’ fraudulent concealment claims, and unjust enrichment could not be pursued as an equitable remedy because there were adequate remedies at law (Vasquez v. General Motors, LLC, January 16, 2018, Gayles, D.).

Two consumers describing themselves as "track enthusiasts" purchased GM’s Corvette Z06 sports cars, which they alleged were marketed for use both on public roads and specialized closed race tracks. The consumers complained that the cars would overheat on race tracks and automatically decelerate, creating unsafe situations. The consumers alleged that GM refused to fix this alleged design defect under its warranty, which stated in pertinent part:

The warranty covers repairs to correct any vehicle defect, not slight noise, vibrations, or other normal characteristics of the vehicle due to materials or workmanship occurring during the warranty period. Needed repairs will be performed using new, remanufactured, or refurbished parts.

According to the consumers, GM knew of this defect but continued to market the cars for track driving. They alleged that GM had conducted extensive track testing of the vehicle, which would have revealed the alleged defect. Likewise, the consumers offered examples of online consumer complaints regarding the overheating issue and alleged that GM monitors the sites on which these complaints were lodged. They filed a putative class action against GM, claiming violations of the federal Magnuson-Moss Warranty Act and state law claims of unfair and deceptive trade practices, fraudulent concealment, breach of express warranty, and unjust enrichment. GM moved to dismiss for failure to state a claim.

Warranties. Finding sufficient ambiguity in the warranty language to make dismissal premature, the court refused to dismiss the consumers’ state and federal breach of warranty claims. The court noted that judges generally should not interpret contracts in resolving motions to dismiss unless the contract language is unambiguous. Here, GM argued that the limited warranty covered only "materials or workmanship," which it asserted referred only to manufacturing defects and not design defects. The consumers responded that because there was no comma preceding "due to materials or workmanship," the phrase modified the exclusions rather than the defects covered and, therefore, the warranty covered "any vehicle defect"—meaning both manufacturing and design defects. Because the contract was not completely unambiguous, it was not appropriate to dismiss the consumers’ contract based claims under both state law and the substantively identical federal Magnuson–Moss Warranty Act.

Economic loss rule/fraudulent concealment. The consumers’ fraudulent concealment claims were dismissed under the economic loss rule. The court noted that the parties agreed that any damages possibly suffered by the consumers were purely economic. However, Florida law barred fraudulent concealment claims involving products liability that seek only economic damages.

Florida Unfair & Deceptive Trade Practices Act. The consumers adequately pleaded a prima facie case under the Florida Unfair & Deceptive Trade Practices Act.Because this claim involved allegations of fraud, the complaint was required to conform to heightened notice standards. The court found that the consumers had alleged numerous specific representations, the precise marketing materials in which those representations were contained, and the manner in which the representations allegedly misled them and, thus, gave GM sufficient notice of the alleged misconduct.

Moreover, the consumers made out a prima facie showing of causation. GM argued that they had failed to claim that they actually saw the allegedly deceptive advertisements and that seeing them caused them to purchase their vehicles, but the court determined that the Florida statute did not require proof of subjective reliance.

Unjust enrichment. Finally, the court dismissed the consumers’ unjust enrichment claims. As an equitable claim, it could not be brought when a contract governed the dispute and when an adequate legal remedy existed.

The case is No. 17-22209-CIV-GAYLES.

Attorneys: Shelby R. Smith (Hagens Berman Sobol Shapiro LLP) for Michael Vazquez. April N. Ross (Crowell & Moring, LLP) for General Motors LLC.

Companies: General Motors LLC

Cases: StateUnfairTradePractices FloridaNews