JONES v. BMW OF NORTH AMERICA, LLC

IN THE UNITED STATES DISTRICT COURT

FOR THE MIDDLE DISTRICT OF NORTH CAROLINA

LEONARD JONES, )

)

Plaintiff, )

)

v. ) 1:20-cv-00057

)

BMW OF NORTH AMERICA, LLC, )

)

Defendant. )

MEMORANDUM OPINION AND ORDER

THOMAS D. SCHROEDER, Chief District Judge.

Before the court is the motion of Defendant BMW of North

America, LCC (“BMW”) to dismiss Plaintiff Leonard Jones’s amended

complaint pursuant to Federal Rule of Civil Procedure 12(b)(6).

(Doc. 18.) Jones brings fraud and warranty-based claims against

BMW arising from allegedly defective N63 engines. For the reasons

set forth below, BMW’s motion to dismiss will be denied.

I. BACKGROUND

The amended complaint alleges the following facts, which the

court accepts as true and construes in the light more favorable to

Jones for purposes of the present motion:

On March 12, 2012, Jones purchased a certified pre-owned 2011

BMW 550i from BMW’s authorized dealer in Raleigh, NC. (Doc. 17

¶ 14.) Prior to purchase, Jones reviewed BMW’s New Vehicle Limited

Warranty and Certified Pre-Owned Limited Warranty. (Id. ¶ 28.)

Under both warranties, BMW promised to repair or replace components

found to be defective in material or workmanship during the term

of the warranty. (Id. ¶¶ 29, 30.)

Shortly after purchase, Jones discovered the vehicle consumed

an excessive amount of engine oil which required him to add oil

several times between BMW’s recommended oil change intervals. (Id.

¶ 16.) In 2012, Jones complained about the excessive oil

consumption to two separate BMW authorized dealers. (Id. ¶ 17.)

In response, dealership employees told Jones that the oil

consumption was normal and did not offer any repairs to resolve

the problem.1 (Id. ¶ 18.) On or around December 23, 2014, Jones

brought his vehicle to a third BMW authorized dealer who performed

a “Customer Care Package” on the vehicle. (Id. ¶ 21.) During

that visit, the authorized dealer reprogrammed the vehicle’s oil

1 In its reply brief, BMW argues for the first time that fraudulent

concealment tolling based on the BMW dealerships’ employees’ statements

would be inappropriate because Jones has not sufficiently alleged that

the BMW dealerships at issue were BMW’s agents. (Doc. 21 at 4–5, 7

n.7.) This argument fails. “Under North Carolina law, the existence

of an actual agency relationship depends on the degree of control

retained by the principal over the details of the work as it is being

performed.” Thomas v. Freeway Foods, Inc., 406 F. Supp. 2d 610, 617

(M.D.N.C. 2005) (internal quotation marks omitted). Jones’s amended

complaint includes sufficient factual allegations to suggest BMW

retained control over the BMW dealerships in relation to the execution

of warranty repairs. Specifically, Jones alleges that BMW “provides

training, materials, special tools, diagnostic software, and replacement

parts to its dealers, and demands that the warranty repairs be performed

in strict accordance with its repair guidelines, Technical Service

Bulletins, and other instructions. . . . In return, BMW pays its

authorized dealerships monetary compensation for such warranty repairs.”

(Doc. 17 ¶¶ 33–35.) Thus, on the face of the complaint, Jones has

plausibly alleged an agency relationship. See also Nyarko v. BMW of N.

Am., LLC, No. CV RDB-18-3618, 2020 WL 1491361, at *7–8 (D. Md. Mar. 27,

2020).

service interval by reducing it from the earlier of either 15,000

miles or two years to the earlier of either 10,000 miles or one

year. (Id. ¶ 22.)

Jones contends that the excessive oil consumption is the

result of a manufacturing defect afflicting BMW’s N63 engines.

(Id. ¶¶ 37, 38.) The N63 engine is a V8, twin-turbocharged engine

placed in certain BMW 5 Series, 6 Series, 7 Series, X5, and X6

vehicles from the 2009 through 2014 model years. (Id. ¶¶ 39, 40.)

The engine’s excessive consumption of engine oil is well known

among car enthusiasts and BMW owners. (Id. ¶ 42.)

Jones alleges that BMW tried to conceal the problem by issuing

a series of technical service bulletins (“TSBs”) discussing the

engine oil consumption of N63 engines but failing to acknowledge

that the engine was defective. (Id. ¶¶ 52–59.) In a TSB issued

in June 2013, BMW increased the engine oil consumption

specifications for N63 engines and directed service technicians to

double the amount of engine oil added during oil changes. (Id. ¶¶

54, 55.) Another TSB indicated that “[t]he additional engine oil

consumption of a turbocharged engine, as compared to a normally

aspirated engine, is normal and not a defect.” (Id. ¶ 56.) On

December 29, 2014, BMW launched an “N63 Customer Care Package”

which, among other things, instructed BMW technicians to offer

free replacements of various components within the N63 engine and

adjusted the recommended intervals between oil changes. (Id.

¶¶ 61, 62.)

On September 18, 2015, a class action lawsuit was filed in

the United States District Court for the District of New Jersey

which made allegations similar to those presented in this case.

See Bang v. BMW of N. Am., LLC, No. CV 15-6945, 2016 WL 7042071

(D.N.J. Dec. 1, 2016). This class action resulted in a settlement.

(Doc. 17 ¶ 92.) Jones opted out of the settlement and filed an

individual action in New Jersey District Court on December 3, 2018.

(Id.) On November 27, 2019, the New Jersey District Court severed

and dismissed without prejudice Jones’s claims with leave to re-

file as a separate action. (Id. ¶ 94); Sarwar v. BMW of N. Am.,

LLC, No. CV 18-16750, 2019 WL 7499157, at *3 (D.N.J. Nov. 27,

2019). That court further ordered that the statute of limitations

for any claims asserted in that case was deemed tolled during the

pendency of that action and for a period of thirty days from the

date of that order, ultimately extended to January 27, 2020. (Doc.

17 ¶ 95); Sarwar, 2019 WL 7499157, at *3.

Jones filed the present action on January 17, 2020 (Doc. 1)

and an amended complaint on April 21, 2020 (Doc. 17). In his

amended complaint, he brings five causes of action: breach of

warranty pursuant to the Magnuson-Moss Warranty Act (“MMWA”), 15

U.S.C. § 2301 et seq.; breach of an implied warranty of

merchantability pursuant to the MMWA and N.C. Gen. Stat. § 25-2-

314; breach of express warranties pursuant to N.C. Gen. Stat. § 25-

2-313; violation of the North Carolina Unfair and Deceptive Trade

Practices Act (“UDTPA”), N.C. Gen. Stat. § 75-1.1 et seq.; and

fraudulent concealment. (Doc. 17 ¶¶ 96–151.)

BMW now moves to dismiss these claims pursuant to Federal

Rule of Civil Procedure 12(b)(6). (Doc. 18.) Jones responded in

opposition (Doc. 20), and BMW replied (Doc. 21). The dismissal

motion is now fully briefed and ready for resolution.

II. ANALYSIS

BMW argues dismissal is appropriate on multiple grounds.

First, BMW alleges that all of Jones’ claims are barred by the

applicable statute of limitations and equitable tolling does not

apply. (Doc. 19 at 5–14.) Second, in relation to Jones’s express

warranty claim, BMW contends that Jones has not sufficiently

pleaded reliance. (Id. at 14, 15.) Lastly, in relation to Jones’s

UDTPA and fraudulent concealment claims, BMW argues that Jones has

not pleaded them with the requisite particularity and that those

claims are barred by the economic loss rule. (Id. at 15–21.) Each

of these arguments will be addressed in turn.

A. Statute of Limitations

BMW first seeks dismissal of Jones’s claims based on an

affirmative defense: the applicable statute of limitations. A

court may resolve a statute of limitations defense at the motion

to dismiss stage only if “all facts necessary to the affirmative

defense ‘clearly appear[ ] on the face of the complaint.’” Goodman

v. Praxair, Inc., 494 F.3d 458, 464 (4th Cir. 2007) (quoting

Fredericksburg & Potomac R.R. Co. v. Forst, 4 F.3d 244, 250 (4th

Cir. 1993)). The burden of establishing the affirmative defense

rests with the defendant. Id. Further, a plaintiff is not

required to allege sufficient facts to defeat a statute of

limitations defense in his complaint. See id.

A three-year limitations period applies to Jones’s claim for

common law fraudulent concealment, N.C. Gen. Stat. § 1-52(9)

(2020), and a four-year limitations period applies to his claim

under the UDTPA, N.C. Gen. Stat. § 75-16.2 (2020). For both of

these claims, the limitations period begins to run from the time

the fraud was or should have been discovered by the plaintiff with

the exercise of reasonable diligence. See Mt. Land Props. v.

Lovell, 46 F. Supp. 3d 609, 624 (W.D.N.C. 2014) (common law fraud);

Dreamstreet Invs. Inc. v. MidCountry Bank, 842 F.3d 825, 830 (4th

Cir. 2016) (UDTPA). Jones’s North Carolina warranty-based claims

are subject to a limitations period of four years after a cause

accrues. N.C. Gen. Stat. § 25-2-725 (2020). Under North Carolina

law, a cause for breach of warranty accrues at tender of delivery.2

2 Alternatively, as BMW points out, where goods are sold with a future

performance warranty, a cause will accrue on the date when the defect

should have been discovered. N.C. Gen. Stat. § 25-2-725(2). Neither

party argues that BMW’s warranties were future performance warranties.

(See Doc. 17; Doc. 19 at 7; Doc. 20.) See also Fairchild v. Kubota

Tractor Corp., No. 1:18CV69, 2018 WL 4038126, at *5 (W.D.N.C. Aug. 23,

2018) (analyzing similar language and concluding no future performance

warranty was created). As such, the accrual of future performance

warranties will not be addressed here.

Id. The MMWA does not contain a statute of limitations. When

faced with a federal statute without a specified limitations

period, federal courts apply the limitations period of an analogous

state law. N. Star Steel Co. v. Thomas, 515 U.S. 29, 33-34 (1995).

The MMWA supplements state law by supplying a federal cause of

action for warranty violations. Wolf v. Ford Motor Co., 829 F.2d

1277, 1278 (4th Cir. 1987). Accordingly, courts adjudicating MMWA

claims apply the limitations period applicable to state law breach

of warranty claims. See, e.g., Ferro v. Volvo Penta of the Ams.,

LLC, 731 F. App’x 208, 210 (4th Cir. 2018) (applying four-year

statute of limitations applicable under North Carolina law claims

for breach of warranty to MMWA claims). Therefore, the four-year

statute of limitations applicable to North Carolina breach of

warranty claims governs. Id.; N.C. Gen. Stat. § 25-2-725 (2020).

Jones’s claims for common law fraudulent concealment and

violation of the MMWA would have begun accruing only when the

defect should have been discovered through reasonable diligence.

On the face of Jones’s amended complaint, there is insufficient

information to determine that date. Although Jones reports that

he noticed excess oil consumption “not long after” purchasing the

vehicle and he has cited online forum posts from BMW enthusiasts

regarding the engine’s oil consumption dating back to 2011 (Doc.

17 ¶¶ 16, 48), these facts alone are not sufficient to determine

when the overall engine defect was discoverable. As it cannot be

determined when the limitations period began to run in relation to

these claims, BMW’s motion to dismiss them on this basis will be

denied.

Regarding Jones’s warranty-based claims, as Jones purchased

the subject vehicle in March 2012 and his warranty claims began

accruing upon tender of delivery, his warranty claims would have

elapsed in March 2016. (Doc. 19 at 8.) In response to this

argument, Jones’s amended complaint asserts five bases for tolling

the applicable statute of limitations: fraudulent concealment, the

discovery rule, equitable estoppel, equitable tolling,3 and class

action tolling. Because the first four tolling arguments can be

satisfied by a common premise, i.e., that BMW took steps to conceal

the oil consumption defect from Jones which then interfered with

his ability to learn that BMW had injured him, the court addresses

them together in its discussion of fraudulent concealment tolling,

as do the parties themselves. (See Doc. 19 at 10–12; Doc. 20 at

7–11.) See Supermarket of Marlinton v. Meadow Gold Dairies, 71

F.3d 119, 122 (4th Cir. 1995) (fraudulent concealment); Childers

Oil Co. v. Exxon Corp., 960 F.2d 1265, 1272 (4th Cir. 1992)

(discussing that the “discovery rule” tolls the limitations period

3 Plaintiff’s amended complaint and opposition both argue that the

statute of limitations should be tolled based on equitable estoppel.

(Doc. 17 ¶¶ 89–91; Doc. 20 at 7–11.) In his opposition, however, he

cites the standards for both equitable estoppel and equitable tolling.

(Doc. 20 at 8.) For the purposes of the present motion, the court will

construe Jones as alleging both grounds.

for a fraud claim until a plaintiff discovers or should have

discovered the falsity of defendant’s statements); English v.

Pabst Brewing Co., 828 F.2d 1047, 1049 (4th Cir. 1987) (explaining

“equitable tolling applies where the defendant has wrongfully

deceived or mislead the plaintiff” and “equitable estoppel applies

where . . . the defendant engages in intentional misconduct to

cause the plaintiff to miss the filing deadline”).

1. Fraudulent concealment tolling

The parties agree that the Fourth Circuit’s standard for

fraudulent concealment tolling applies to the present case. (See

Doc. 19 at 10, 11; Doc. 20 at 8–11; Doc. 21 at 4 n.4.) The court

accepts that standard for the purposes of the present motion.4 The

fraudulent concealment doctrine provides that “when the fraud has

been concealed or is of such a character as to conceal itself, and

the plaintiff is not negligent or guilty of laches, the limitations

period does not begin to run until the plaintiff discovers the

fraud.” Marlinton, 71 F.3d at 122 (internal quotation marks

omitted). The doctrine applies where (1) the party pleading the

4 Without deciding the issue, the court notes that as Jones’s claims are

subject to the North Carolina statutes of limitations, North Carolina

tolling laws may be the more appropriate law for decision. See Hemenway

v. Peabody Coal Co., 159 F.3d 255, 265 (7th Cir. 1998) (“When state law

supplies the period of limitations, it also supplies the tolling rules.”)

(citing § 1983 cases, Hardin v. Straub, 490 U.S. 53 (1989), and Chardon

v. Fumero Soto, 462 U.S. 650, (1983)). North Carolina courts do not

typically recognize fraudulent concealment as a mechanism for tolling

the statute of limitations but would consider this claim under equitable

estoppel. See Friedland v. Gales, 509 S.E.2d 793, 797 (N.C. Ct. App.

1998).

statute of limitations fraudulently concealed facts that are the

basis of the plaintiff’s claim, and (2) the plaintiff failed to

discover those facts within the statutory period, (3) despite the

exercise of due diligence. Id. “Generally, whether a plaintiff

exercised due diligence is a jury issue not amenable to resolution

on the pleadings.” Edmonson v. Eagle Nat’l Bank, 922 F.3d 535,

554 (4th Cir. 2019).

BMW argues that Jones failed to sufficiently plead fraudulent

concealment on multiple grounds. First, BMW argues that Jones has

not stated facts that indicate BMW engaged in any concealment such

that the limitations period should be tolled. The court disagrees.

In his amended complaint, Jones alleges that BMW failed to disclose

the defect to him and he was precluded from knowing the severity

of the defect because of BMW’s misrepresentations and concealment.

(Doc. 17 ¶¶ 77–84.) He alleges BMW issued TSBs outlining the

defect to all BMW automotive dealers, which suggests that BMW was

aware of the problem and consciously chose not to inform consumers.

(Id. ¶¶ 52–57.) Further, he alleges these TSBs were put in effect

to better conceal the engine’s defect and related excessive oil

consumption. (Id.) He also alleges that BMW launched an N63

Customer Care Package and reduced the recommended oil change

intervals in 2014 to further conceal the ongoing effects of the

manufacturing defect. (Id. ¶¶ 61–63.) Finally, Jones asserts

that BMW continued to represent to consumers that the oil

consumption was normal and not a defect, despite BMW’s knowledge

to the contrary. (Id. ¶¶ 57, 58.) When taken as true for purposes

of a motion to dismiss — as the court must — Jones’s allegations

state a plausible set of facts that would entitle him to tolling

of the statute of limitations. See also Nyarko v. BMW of N. Am.,

LLC, No. CV RDB-18-3618, 2020 WL 1491361, at *7–8 (D. Md. Mar. 27,

2020) (analyzing the same factual allegations and finding

plaintiffs sufficiently pleaded fraudulent concealment to survive

motion to dismiss); Loy v. BMW of N. Am., LLC, No. 4:19-CV-00184

JAR, 2020 WL 5095372, at *3 (E.D. Mo. Aug. 28, 2020) (same);

O'Connor v. BMW of N. Am., LLC, No. 18-CV-03190-CMA-STV, 2020 WL

1303285, at *4 (D. Colo. Mar. 19, 2020) (same); Harris v. BMW of

N. Am., LLC, No. 4:19-CV-00016, 2019 WL 4861379, at *5 (E.D. Tex.

Oct. 2, 2019) (same); Schneider v. BMW of N. Am., LLC, No. 18-CV-

12239-IT, 2019 WL 4771567, at *7 (D. Mass. Sept. 27, 2019) (same);

Carroll v. BMW of N. Am., LLC, No. 119CV000224JMSTAB, 2019 WL

4243153, at *8 (S.D. Ind. Sept. 6, 2019) (same).

Second, BMW argues that Jones did not exercise due diligence

as a matter of law because “it is clear there was both capacity

and opportunity to discover the mistake” within the statutory

period. (See Doc. 19 at 9; Doc. 21 at 2 n.2.) This argument is

unpersuasive. The precise time period during which Jones learned

of the N63 engine defect and the degree to which he exercised due

diligence involves issues of fact not suited for resolution at

this stage. At the very least, Jones’s amended complaint indicates

that he attempted to exercise due diligence by visiting two

separate BMW dealers in 2013 to identify the root of his vehicle’s

excessive oil consumption and both times he was informed that his

vehicle was operating normally. (See Doc. 17 ¶¶ 17, 18.) Although

Jones alleges that discussion of the N63 engine was a “hot topic”

in certain sectors of the internet as early as 2011 (id. ¶ 49),

the court cannot conclude at this early stage that Jones was

knowledgeable of, or even had access to, such discussions or other

information which would lead him to believe that his engine had a

defect. Accordingly, Jones has sufficiently alleged facts

supporting fraudulent concealment tolling at this stage.

2. Class action tolling

Under American Pipe & Construction Co. v. Utah, 414 U.S. 538,

554 (1974), “the commencement of a class action suspends the

applicable statute of limitations as to all asserted members of

the class who would have been parties had the suit been permitted

to continue as a class action.”5 Class action suits trigger the

5 Although North Carolina has adopted class action tolling under American

Pipe, see Scarvey v. First Fed. Sav. & Loan Ass'n of Charlotte, 552

S.E.2d 655, 661 (N.C. 2001), this case involves cross-jurisdictional

tolling, see Wade v. Danek Med., Inc., 182 F.3d 281, 287 (4th Cir. 1999)

(defining cross-jurisdictional tolling to be where courts toll the

limitations period of related state law claims during the pendency of a

class action in another court); Nyarko, 2020 WL 1491361, at *9 n.8

(arising from the Bang class action). North Carolina courts have not

decided whether to accept cross-jurisdictional tolling. In re Dairy

Farmers of Am., Inc. Cheese Antitrust Litig., No. 9 CV 3690, 2015 WL

3988488, at *31 (N.D. Ill. June 29, 2015). However, the court notes that

tolling of the limitations period because such suits properly give

defendants notice of the “essential information necessary to

determine both the subject matter and size of prospective

litigation” within the statutory limitations period. Id. at 554–

55. Such tolling ceases for an individual’s claims when the

individual putative class member opts out of the class. Womack v.

United Parcel Serv., Inc., 311 F. Supp. 2d 492, 497 (E.D.N.C.

2004).

Here, Jones relies on the Bang class action lawsuit to support

the tolling of the limitations period. However, BMW argues that

Jones’s claims should not be tolled based on that class action

because Jones’s claims are not “the same” as those raised in it.

(Doc. 19 at 13–14.) Specifically, BMW argues that Jones’s claims

are based on North Carolina law, which was not implicated in the

prior class action suit. (Id.) BMW cites Crown, Cork & Seal Co.

v. Parker in support of its contention, but this case does not

suggest that subsequent individual claims must be exactly the same

or that both cases must cite the exact same statutory provisions

few states have adopted cross-jurisdictional tolling and federal courts

have been wary to extend cross-jurisdictional tolling where states have

not decided the issue. See, e.g., Wade, 182 F.3d at 287–88 (Virginia);

Clemens v. DaimlerChrysler Corp., 534 F.3d 1017, 1025 (9th Cir. 2008)

(California); Chavez v. Occidental Chemical Corp., 933 F.3d 186 (2d Cir.

2019) (refusing to determine whether New York permits cross-

jurisdictional tolling and certifying the question to the New York State

Court of Appeals). For the purposes of the present motion, as neither

party has argued this issue, the court accepts the application of cross-

jurisdictional tolling.

for class action tolling to apply. See 462 U.S. 345 (1983).

Rather, courts look to whether the claims asserted in a prior class

action suit provide defendants with sufficient notice of the

substantive claims against them. See, e.g., Davis v. Bethlehem

Steel Corp., 769 F.2d 210, 212 (4th Cir. 1985) (finding that

tolling did not apply because the class suit “does not adequately

notify the defendants of the substantive claims against them, nor

of the generic identities of the potential plaintiffs”); Tosti v.

City of Los Angeles, 754 F.2d 1485, 1489 (9th Cir. 1985) (finding

that tolling applied to a different claim because the class suit

involved the same allegations and “[t]he City had ample notice of

the nature of Tosti’s discrimination claims”); Lindner Dividend

Fund, Inc. v. Ernst & Young, 880 F. Supp. 49, 54 (D. Mass. 1995)

(“While a subsequent individual suit need not necessarily be

identical in every respect to an earlier class action for the

limitations period to be tolled, . . . the class action suit must

give defendant ample notice of plaintiff's individual claim.”);

Child.’s Hosp. & Med. Ctr. Found. of Omaha v. Countrywide Fin.

Corp., No. CV-11-02056-MRP-MAN, 2011 WL 13220509, at *3 (C.D. Cal.

Aug. 22, 2011) (“Most courts to consider the issue have held that

claims need not be identical in order for American Pipe to apply.

The inquiry is whether the claims concern the same evidence,

memories, and witnesses as the subject matter of the original class

suit.”) (internal quotations marks and citations omitted). Other

courts have applied this standard to the multiple cases arising

out of the Bang class action and have allowed claims to go forward

despite not being brought under the same statutory provisions as

those in the prior class action suit. See Nyarko, 2020 WL 1491361,

at *9 n.8; Loy, 2020 WL 5095372, at *3; Schneider, 2019 WL 4771567,

at *7; Carroll, 2019 WL 4243153, at *8.

Jones opted out of the Bang class action settlement in August

2018. (Doc. 17 ¶ 92.) The claims he brings in the present action

arise from the same set of facts that underpinned the Bang class

action. Compare Bang, 2016 WL 7042071 at *1–3 with (Doc. 17 ¶¶

14–76). Further, all of the claims Jones brings under North

Carolina law mirror those brought in Bang under other states’ laws.

Compare Bang, 2016 WL 7042071 at *5–8 with (Doc. 17 ¶¶ 104–51).

Given the near-identical similarity between the facts and claims

at issue in the two cases, the court concludes that Jones has

plausibly claimed that his individual action qualifies for tolling

under American Pipe.

Because BMW has failed to carry its burden of demonstrating

on the face of the complaint that the limitations periods for

Jones’s warranty-based claims have expired, its motion to dismiss

the claims on these grounds will be denied.

B. Breach of Express Warranty Claim

Under North Carolina law, to state a claim for breach of an

express warranty, a plaintiff must show (1) there was an express

warranty of fact or a promise as to the product, (2) the plaintiff

relied on the warranty in deciding to purchase the product, and

(3) the defendant breached that warranty. Maxwell v. Remington

Arms Co., No 1:10CV918, 2014 WL 5808795, at *3 (M.D.N.C. Nov. 7,

2014) (citing Harbor Point Homeowners' Ass'n, Inc. ex rel. Bd. of

Dirs. v. DJF Enters., 697 S.E.2d 439, 447 (N.C. Ct. App. 2010)).

BMW argues that Jones has failed to sufficiently allege the

second required element, his reliance on the express warranty, and

that he instead alleges only “legal trigger words,” such that the

claim should be dismissed. (Doc. 19 at 15.) The court disagrees.

The allegations underpinning Jones’s claim of reliance are

sufficiently specific to survive a motion to dismiss. Compare

Remington, 2014 WL 5808795, at *4 (finding the plaintiff failed to

plead reliance where he alluded to the written limited warranty

but did not allege “the terms of that warranty, that he received

the warranty prior to purchase, or that he otherwise relied on the

warranty”), with Bussian v. DaimlerChrysler Corp., 411 F. Supp.

2d. 614, 621 (M.D.N.C. 2006) (finding reliance sufficiently

pleaded where plaintiff alleged that he “reasonably relied on

Defendants’ representations and warranties” and those

representations “became a basis of the bargain” between the

parties, specifying that “[a] higher level of specificity is not

required . . . at the pleadings stage”). Here, Jones has alleged

that he received both of the subject warranties prior to purchase;

that, among other things, the warranties represented that BMW would

repair the vehicle’s engine in the event of a defect; that he

relied on that representation; and that the representation was

material to his decision to purchase the vehicle. (Doc. 17 ¶¶ 28–

30.) These allegations are specific enough to demonstrate reliance

at the pleading stage. As such, BMW’s motion to dismiss Jones’s

breach of express warranty claim for failure to state a claim will

be denied.

C. Pleading with Requisite Particularity

BMW argues that Jones’s claims for fraudulent concealment and

violation of the UDTPA should be dismissed because he has not

pleaded the causes of action with the required particularity.

Fed. R. Civ. P. 9(b) creates a heightened pleading standard

for claims brought in federal court based on fraud or mistake,

including state law claims. Topshelf Mgmt., Inc. v. Campbell-

Ewald Co., 117 F. Supp. 3d 722, 725–26 (M.D.N.C. 2015). Under

this rule, parties alleging fraud “must state with particularity

the circumstances constituting fraud or mistake. Malice, intent,

knowledge, and other conditions of a person's mind may be alleged

generally.” Fed. R. Civ. P. 9(b). Parties must plead with

particularity “the time, place, and contents of the false

representations, as well as the identity of the person making the

misrepresentation and what he obtained thereby.” U.S. ex rel.

Wilson v. Kellogg Brown & Root, Inc., 525 F.3d 370, 379 (4th Cir.

2008) (citing Harrison v. Westinghouse Savannah River Co., 176

F.3d 776, 784 (4th Cir. 1999)). These requirements extend to

claims under the UDTPA when such claims are predicated on an

underlying fraud.6 Topshelf at 729.

The purposes of this heightened pleading standard are to give

a defendant sufficient notice of the claim to permit them to

formulate a defense; to protect against frivolous suits; to

eliminate suits where all the fraud facts are learned after

discovery; and to protect defendants from harm to their goodwill

and reputation. Humana, Inc. v. Ameritox, LLC, 267 F. Supp. 3d

669, 677 (M.D.N.C. 2017) (citing Harrison, 176 F.3d at 784).

Consequently, “[a] court should hesitate to dismiss a complaint

under Rule 9(b) if the court is satisfied (1) that the defendant

has been made aware of the particular circumstances for which [it]

will have to prepare a defense at trial, and (2) that plaintiff

has substantial prediscovery evidence of those facts.” Harrison,

176 F.3d at 784.

To state an actionable claim of fraud under North Carolina

law, the following essential elements must be shown: (1) a false

representation or concealment of a material fact, (2) that was

6 Jones’s claim under the UDTPA is based in the same nondisclosure upon

which he bases his fraudulent concealment claim. Thus, to the extent

Jones satisfies the pleading requirements for his fraudulent concealment

claim, the court will consider his claim under the UDTPA similarly

satisfied. (See Doc. 19 at 15–19 (making no arguments regarding

Plaintiff’s UDTPA claim separate from his fraudulent concealment

claim).)

reasonably calculated to deceive, (3) which was made with the

intent to deceive, (4) that did in fact deceive, and (5) resulted

in damage. Liner v. DiCresce, 905 F. Supp. 280, 288 (M.D.N.C.

1994) (citing Myers & Chapman, Inc. v. Thomas G. Evans, Inc., 374

S.E.2d 385 (N.C. 1988)). Further, when alleging fraudulent

concealment, plaintiffs must also allege that the defendant had a

duty to speak such that their silence was fraudulent. Griffin v.

Wheeler–Leonard & Co., 225 S.E.2d 557, 565 (N.C. 1976). For

parties negotiating at arm’s length, a duty to speak arises where

either (1) one party has taken affirmative steps to conceal

material facts from the other or (2) one party has knowledge of a

latent defect in the subject matter of the negotiations about which

the other party is both ignorant and unable to discover through

reasonable diligence. Breeden v. Richmond Cmty. Coll., 171 F.R.D.

189, 196 (M.D.N.C. 1997).

Here, BMW argues that Jones has failed to state a claim for

fraudulent concealment, first because Jones has not sufficiently

alleged that BMW had a duty to speak. (Doc. 19 at 17–18.) Jones,

however, has alleged facts that plausibly indicate BMW had a duty

to speak because BMW took affirmative steps to conceal material

facts regarding the defect in the N63 engine. Specifically,

Jones’s amended complaint indicates that, despite his vehicle’s

increased oil usage and BMW’s awareness of the defect, Jones was

told by multiple BMW dealerships that his engine was operating

normally. (Doc. 17 ¶¶ 17, 18, 52–58.) He alleges that BMW’s June

2013 TSB and the “N63 Customer Care Package” were both attempts to

conceal the severity of the defect from consumers and reduce

complaints. (Id. ¶¶ 54–55, 61–63.) If true, these actions

constitute affirmative acts taken to conceal a material fact — the

N63’s excessive oil consumption, indicative of an engine defect —

which would have imposed upon BMW a duty to speak.

Jones has also plausibly alleged BMW had a duty to speak

because it had knowledge of the N63 engine defect, about which

Jones was ignorant.7 (See id. ¶ 70.) He claims that BMW had

knowledge of the defect as early as 2008 based on sources not

publicly available, including pre-release testing data, durability

testing, early consumer complaints, testing conducted in response

to those complaints, aggregate data from BMW dealers, dealer repair

orders, and other internal sources. (Id. ¶ 69.) He also claims

he was ignorant of the engine defect, as demonstrated by his

decision to purchase the vehicle, the price paid for the vehicle,

and his repeated attempts to have the car repaired. (Id. at ¶¶ 17–

18, 76.) Although factual development through discovery may show

that Jones should have known about the alleged defect when he

purchased the subject vehicle based on, e.g., information that was

7 As discussed in Section A.1., supra, questions regarding the

discoverability of the defect and Jones’s due diligence are not

appropriate for resolution at the current stage.

publicly available at the time, that is not conclusively

established by the allegations in the amended complaint. The

allegations taken together plausibly suggest that BMW had a duty

to speak, such that its silence was fraudulent.

BMW further argues that Jones has failed to meet the pleading

requirements of Rule 9(b) because, relying on the standard

articulated in Harrison, 176 F.3d at 784, Jones has failed to

specifically allege the contents of the misrepresentations, the

time and place of the misrepresentations, the persons who made the

misrepresentations, and the fruit obtained thereby. (Doc. 19 at

18.) However, where a plaintiff alleges fraud by concealment — as

Jones does here — the level of particularity required is adjusted.

See Breeden, 171 F.R.D. at 196 (acknowledging that fraud by

concealment “is by its very nature, difficult to plead with

particularity”) (quoting Daher v. G.D. Searle & Co., 695 F. Supp.

436, 440 (D. Minn. 1988)). To comply with the enhanced pleading

requirements of Rule 9(b) for a claim of fraudulent concealment,

a plaintiff will usually be required to allege with reasonable

particularity: (1) the relationship or situation giving rise to

the duty to speak, (2) the event or events triggering the duty to

speak, and/or the general time period over which the relationship

arose and the fraudulent conduct occurred, (3) the general content

of the information that was withheld and the reason for its

materiality, (4) the identity of those under a duty who failed to

make such disclosures, (5) what the defendant gained by withholding

information, (6) why plaintiff's reliance on the omission was both

reasonable and detrimental, and (7) the damages proximately

flowing from such reliance. Id. at 195.

As the court has already addressed, Jones sufficiently

pleaded the situation and events giving rise to the duty to speak.

He has also specifically alleged the content of the information

withheld and its materiality. Although Jones has not identified

a specific natural person who failed to make the required

disclosures, this is not strictly necessary when alleging fraud

against a corporate defendant. See Smith v. Clark/Smoot/Russell,

796 F.3d 424, 432–33 (4th Cir. 2015) (rejecting Rule 9(b) challenge

to allegations involving false certification of pay records where

the plaintiff identified the perpetrators as the corporate

defendants and provided evidence of the fraud); United States ex

rel. Bledsoe v. Community Health Sys., Inc., 501 F.3d 493, 506

(6th Cir. 2007) (rejecting contention that, “in addition to

alleging specific false claims, the [plaintiff] must plead the

identity of the specific individual employees within the defendant

corporation who submitted false claims to the government,” and

“hold[ing] that while such information is relevant to the inquiry

of whether a relator has pled the circumstances constituting fraud

with particularity, it is not mandatory”). Here, Jones has made

sufficient allegations regarding BMW’s actions, and the actions of

its agents, such that the “who” requirement of Rule 9(b) is

satisfied. Further, Jones has sufficiently alleged reasonable

reliance (see Doc. 17 ¶ 143) and damages stemming from the

misrepresentation (id. ¶ 72 (explaining he incurred more frequent

maintenance visits, increased out-of-pocket spending on

replacement oil, and decreased resale value on his vehicle)).

Lastly, the amended complaint demonstrates that had Jones known of

the engine defect, he would not have purchased the subject vehicle,

illustrating the fruits obtained from the misrepresentation. (Id.

¶¶ 7, 76, 130, 148.) Taken together, and mindful of the Fourth

Circuit’s instruction in Harrison, 176 F.3d at 784 (“A court should

hesitate to dismiss a complaint under Rule 9(b) if the court is

satisfied (1) that the defendant has been made aware of the

particular circumstances for which [it] will have to prepare a

defense at trial, and (2) that plaintiff has substantial

prediscovery evidence of those facts.”), the court is satisfied

that Jones has pleaded fraudulent concealment and the fraud

underlying his UDTPA claim with sufficient particularity.

D. Economic Loss Rule

In North Carolina, the economic loss rule “generally bars

recovery in tort for damages arising out of a breach of contract.”

Rountree v. Chowan Cty., 796 S.E.2d 827, 830 (N.C. Ct. App. 2017).

“The rationale for the economic loss rule is that the sale of goods

is accomplished by contract and the parties are free to include,

or exclude, provisions as to the parties’ respective rights and

remedies, should the product prove to be defective.” Moore v.

Coachmen Indus., 499 S.E.2d 772, 780 (N.C. Ct. App. 1998). Thus,

a “tort action must be grounded on a violation of a duty imposed

by operation of law,” not a violation of a duty arising purely

from “the contractual relationship of the parties.” Rountree, 796

S.E.2d at 831 (internal quotation marks and citation omitted).

“Accordingly, North Carolina law requires courts to limit

plaintiffs’ tort claims to only those claims which are

‘identifiable’ and distinct from the primary breach of contract

claim.” Legacy Data Access, Inc. v. Cadrillion, LLC, 889 F.3d

158, 164 (4th Cir. 2018) (quoting Broussard v. Meineke Disc.

Muffler Shops, Inc., 155 F.3d 331, 347 (4th Cir. 1998)).

BMW argues that Jones’s claims for fraudulent concealment and

violations of the UDTPA are barred by the economic loss rule

because Jones has not alleged that BMW breached a duty separate

from those required of it under the relevant warranties.8 (Doc.

19 at 19–21.) The court disagrees.

8 BMW relies on Bussian v. DaimlerChrysler Corp. in support of this

argument. 411 F. Supp. 2d. 614 (M.D.N.C. 2006). However, Bussian

“limit[ed] its decision to cases . . . involving allegations of a

defective product where . . . the allegations of unfair trade practices

are intertwined with the breach of contract or warranty claims.” Id.

at 627. Here, Jones alleges unfair and deceptive trade practices at

least partially in relation to the inducement of the contract, separate

from his claims under the warranty. To that extent, Bussian is

inapplicable. This is consistent with the decisions of multiple courts

that have declined to extend the holding of Bussian in similar cases.

See, e.g., In re Caterpillar, Inc., C13 & C15 Engine Prod. Liab. Litig.,

“Under North Carolina law, a party to a contract owes the

other contracting party a separate and distinct duty not to provide

false information to induce the execution of the contract.”9

Schumacher Immobilien Und Beteiligungs AG v. Prova, Inc., No.

1:09cv00018, 2010 WL 3943754, at *2 (M.D.N.C. Oct. 7, 2010); see

also Ada Liss Grp. v. Sara Lee Corp., No. 06CV610, 2010 WL 3910433,

at *11 (M.D.N.C. Apr. 27, 2010) (finding that the defendant owed

the plaintiff “a duty not to provide deceptive or misleading

information” in connection with their distributorship agreement);

but see Wireless Commc’ns, Inc. v. Epicor Software Corp., Civil

No. 3:10CV556–DSC, 2011 WL 90238, at *5 (W.D.N.C. Jan. 11, 2011)

(distinguishing Ada Liss and Schumacher on the basis that the

No. 1:14-CV-3722 JBS-JS, 2015 WL 4591236, at *36 (D.N.J. July 29, 2015);

In re MyFord Touch Consumer Litig., 46 F. Supp. 3d 936, 966–67 (N.D.

Cal. 2014); see also Ellis v. Louisiana-Pac. Corp., 699 F.3d 778, 787

(4th Cir. 2012) (“North Carolina courts have never addressed whether

UDTPA claims are subject to the [economic loss rule].”); Coker v.

DaimlerChrysler Corp., 617 S.E.2d 306, 319 (N.C. Ct. App. 2005) (Hudson,

J., dissenting) (“[B]y enacting a remedy for economic losses suffered

by reason of an act deemed wrongful by the statute, the legislature has

effectively preempted the economic loss rule for those cases covered by

the act.”).

9 North Carolina law also imposes a duty not to defraud others.

Definitive Staffing Sols., Inc. v. Staffing Advantage, L.L.C., No. 7:18-

CV-187-FL, 2019 WL 3660878, at *6 (E.D.N.C. Aug. 6, 2019) (citing Forbis

v. Neal, 649 S.E.2d 382, 387 (N.C. 2007), and Ragsdale v. Kennedy, 209

S.E.2d 494, 500 (N.C. 1974)). This duty may be considered separate from

a breach of contract where “allegations of fraud and deceit are obvious

from the manner in which the breach is alleged.” See Oestreicher v. Am.

Nat. Stores, Inc., 225 S.E.2d 797, 808 (N.C. 1976); see also Definitive

Staffing, 2019 WL 3660878, at *6. The court does not read the pleadings

as presenting such a case and, as such, does not consider this as a

separate duty upon which Jones can rely to overcome the economic loss

rule.

plaintiffs in those cases “specifically pled facts that the

defendants never intended to perform the contracts or specifically

intended to deceive the plaintiffs,” whereas the plaintiff in

Wireless Commc’ns never “allege[d] that Epicor entered into the

Agreement with the intent not to perform”). As discussed above,

North Carolina imposes a duty to disclose on parties negotiating

at arm’s length where (1) one party has taken affirmative steps to

conceal material facts from the other or (2) one party has

knowledge of a latent defect in the subject matter of the

negotiations about which the other party is both ignorant and

unable to discover through reasonable diligence. Breeden, 171

F.R.D. at 196.

The extent to which Jones’s fraudulent concealment and UDTPA

claims are barred by the economic loss rule thus depends on whether

Jones has sufficiently alleged that BMW had a duty to disclose the

N63 engine defects prior to the sale of the vehicle and the

execution of the warranties. See also Definitive Staffing Sols.,

Inc. v. Staffing Advantage, L.L.C., No. 7:18-CV-187-FL, 2019 WL

3660878, at *6 (E.D.N.C. Aug. 6, 2019) (“While plaintiff’s breach

of contract claim looks to whether defendant performed under the

Agreement, plaintiff’s fraud and UDTPA claims focus on whether

defendants procured the Agreement under false pretenses or

deceptively performed under the Agreement to increase their income

without plaintiff’s knowledge or consent.”).

As discussed in Section A.1., supra, Jones alleges BMW had a

duty to disclose, such that its silence would constitute false

inducement of a contract, because (1) BMW took affirmative acts to

conceal the severity of the engine defect from him and (2) BMW had

knowledge of the engine defect, about which Jones was ignorant and

could not discover through reasonable diligence. In support of

the first rationale, Jones reports that BMW took affirmative acts

to conceal the defect by having service technicians report the

engine functioning as normal in 2012, instructing service

technicians to put double the recommended amount of oil in affected

vehicles starting in June 2013, and launching the Customer Care

Package and altering the recommended oil change intervals in

December 2014. However, each of these acts occurred after Jones

purchased the vehicle in March 2012. As these acts of concealment

occurred after Jones entered the warranty contract, they do not

support a claim that BMW was under a duty to disclose at the time

of contracting such that its silence constituted the false

inducement of the contract.

Alternatively, Jones argues that BMW was under a duty to

disclose because it knew about the engine defect while Jones was

ignorant and unable to discover it through reasonable diligence.

This rationale is plausible. As discussed in Section A.1., supra,

Jones has alleged that BMW had knowledge of the defect at the time

of contracting based on sources of information unavailable to

consumers. Jones has plausibly claimed his ignorance of the defect

based on his purchase of the vehicle, the price he paid for the

vehicle, and his repeated attempts to have the car repaired.

Although Jones must also ultimately show that he was unable to

discover the defect through his own reasonable diligence, this

issue is not well-suited for determination at the motion to dismiss

stage. Edmonson, 922 F.3d at 554 (“Generally, whether a plaintiff

exercised due diligence is a jury issue not amenable to resolution

on the pleadings.”) As such, the court is satisfied that Jones

has plausibly claimed that BMW violated a duty separate from those

owed to him by the warranties — specifically a duty not to provide

false information, or fraudulently remain silent, to induce the

execution of the contract — such that his fraud and UDTPA claims

survive a motion to dismiss.

III. CONCLUSION

For the reasons stated,

IT IS THEREFORE ORDERED that BMW’s motion to dismiss (Doc.

18) is DENIED.

/s/ Thomas D. Schroeder

United States District Judge

September 25, 2020