Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—S.D. N.Y.: Claim that Nissan failed to disclose vehicle defect may proceed, (Jun 19, 2015)

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

A consumer’s claim that Nissan failed to disclose vehicle defects in violation of the New York deceptive practices law could go forward, according to the federal district court in New York City. The court determined that the consumer had standing to sue and had stated a claim for deceptive business practices. However, the court found that the consumer failed to state a claim for false advertising or breach of warranty (Zaccagnino v. Nissan North America, Inc., June 17, 2015, Stanton, L.).

Background. Nissan North America, Inc. manufactures and sells Nissan and Infinity vehicles. In February of 2013, it conducted a limited recall of Nissan vehicles to repair the vehicles’ occupant classification system (OCS). The limited recall did not fix the defect and consumer complaints and warranty claims continued through 2013.

In August 2013, Andrew Zaccagnino purchased a 2013 Nissan Altima from a Nissan dealership. The car was not subject to the limited February 2013 recall. In March 2014, Nissan expanded the recall to almost one million cars, including Zaccagnino’s newly purchased car. After having the vehicle checked by his mechanic, he took it to a Nissan dealership which performed the repair. After Zaccagnino later became aware of reports that the March 2014 recall did not adequately repair the OCS defect, he claimed that he had no confidence that the defect in his vehicle had been repaired.

Zaccagnino filed a complaint against Nissan alleging that it had engaged in deceptive business practices and false advertising by not disclosing that his car might be defective and continuing to advertise it as a safe, quality vehicle. He also claimed that Nissan breached the express and implied warranties by selling him a car with a defective OCS and failing to repair it. Nissan, in response, moved to dismiss Zaccagnino’s complaint for lack of standing and failure to state a claim.

Standing. The court determined that Zaccagnino had standing to sue because he alleged that: (1) he paid more for his car than he would have if Nissan had disclosed the OCS defect; and (2) Nissan failed to repair his car in accordance with the warranties, leaving him with a car diminished in value. Also, among other relief requested, he sought an award of damages to compensate him for those economic injuries.

Deceptive business practices. The court noted that, to state a claim for deceptive business practices under Section 349 of the New York General Business Law (NYGBL), the act or practice, in addition to being consumer-oriented, must be misleading in a material way and the plaintiff must have suffered an injury as a result of the deceptive act. The court determined that Zaccagnino’s allegation, that Nissan was aware but did not reveal to him when he purchased the car that the February 2013 recall had not solved the OCS defect and that the defect was present in many vehicles not subject to the recall, was sufficient to plead that those omissions were materially misleading. The court determined he sufficiently pled an injury because he alleged that he would have paid less for the car if Nissan had disclosed the OCS defect.

False advertising. One of the requirements for stating a false advertising claim under Section 350 of the NYGBL is that the plaintiff must have relied on the advertising. Zaccagnino alleged that he purchased the car in reliance on Nissan advertisements which had “safety and quality” as consistent themes. Nissan argued that general themes of “safety and quality” are not misleading, as a matter of law, because they are mere puffery. The court agreed and granted Nissan’s motion to dismiss the false advertising claim.

Breach of express warranty. Zaccagnino alleged that he had no confidence that his car was fixed and, as such, Nissan breached its express warranty by failing to repair his car. Nissan argued that the car was repaired and that the post-repair behavior detailed in the complaint described a properly functioning OCS. The court agreed with Nissan because the issue was not whether Zaccagnino had confidence in the repair but, rather, whether the repair was actually done.

Breach of implied warranty. The court noted that implied warranty of merchantability requires that goods “are fit for the ordinary purpose for which such goods are used.” The court dismissed Zaccagnino’s claim of breach of implied warranty because the complaint indicated that the recall corrected the OCS defect and that, following the recall repair, the car could transport Zaccagnino in a “reasonably safe manner.”

Magnuson-Moss Warranty Act (MMWA). The MMWA allows a consumer to sue a warrantor for breach of a written or implied warranty. Because the court had dismissed Zaccagnino’s express and implied warranty claims, it determined that his MMWA claim also had to be dismissed.

The case is No. 14 Civ. 3690 (LLS)

Attorneys: Gregory Mark Nespole (Wolf Haldenstein Adler Freeman & Herz LLP) for Andrew Zaccagnino. Alyssa Ramirez (Winston & Strawn LLP) for Nissan North America, Inc.

Companies: Nissan North America, Inc.

Cases: Advertising StateUnfairTradePractices NewYorkNews