OPHEIM v. VOLKSWAGEN AKTIENGESELLSCHAFT

UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF NEW JERSEY

MATTHEW OPHEIM, et al.,

Plaintiffs,

v.

Civ. No. 20-02483 (KM) (ESK)

VOLKSWAGEN

AKTIENGESELLSCHAFT; OPINION

VOLKSWAGEN GROUP OF AMERICA,

INC.; AUDI AKTIENGESELLSCHAFT;

and AUDI OF AMERICA, INC.,

Defendants.

KEVIN MCNULTY, U.S.D.J.:

Plaintiffs in this putative class action purchased Volkswagen or Audi

vehicles with an allegedly defective yet concealed engine part, i.e., a timing

chain. Plaintiffs sued Volkswagen Aktiengesellschaft (“VW AG”), Volkswagen

Group of America, Inc. (“VW America”), Audi Aktiengesellschaft (“Audi AG”),

and Audi of America, Inc. (“Audi America”). Plaintiffs, who hail from fourteen

states, assert contract, tort, and statutory claims under their respective states’

laws, as well as federal claims under the Magnuson-Moss Warranty Act

(“MMWA”), 15 U.S.C. § 2301 et seq. Audi AG moves to dismiss the complaint

for lack of personal jurisdiction, see Fed. R. Civ. P. 12(b)(2). (DE 48.)1 VM

1 Certain citations to the record are abbreviated as follows:

DE = docket entry

Am. Compl. = Amended Complaint (DE 29)

VW Mot. = VW America’s Brief in Support of its Motion to Dismiss (DE 45-1)

Opp. to VW Mot. = Plaintiffs’ Opposition to VW America’s Motion to Dismiss (DE

54)

Opp. to Audi Mot. = Plaintiffs’ Opposition to Audi AG’s Motion to Dismiss (DE

53)

America moves to dismiss for failure to state a claim, see Fed. R. Civ. P.

12(b)(6), and, as to the MMWA claims, for lack of subject-matter jurisdiction,

see Fed. R. Civ. P. 12(b)(1). (DE 45.) Audi AG joins in VM America’s motion to

dismiss.

For the following reasons, Audi AG’s motion (DE 48) is DENIED without

prejudice to renewal following jurisdictional discovery. VW America’s motion,

joined by Audi AG, is GRANTED IN PART and DENIED IN PART. In sum, the

MMWA claims, fraud claims based on affirmative misrepresentations, implied

warranty claims under Illinois and Oregon law, and negligent

misrepresentation claims under Georgia and Oregon law are dismissed. VW

America’s motion to dismiss is otherwise denied.

I. BACKGROUND

This case is about an allegedly defective engine part in certain Audi and

Volkswagen models.2 (Am. Compl. ¶¶ 1–2.) Specifically, this case concerns a

timing chain system, which contains multiple components. (Id. ¶ 62.) To

simplify, a typical car engine requires that fuel and air mix and combust, while

releasing waste products from combustion. (Id. ¶ 54.) To that end, a timing

chain system controls the opening and closing of an engine’s intake valves (for

introducing fuel and air) and exhaust valves (for releasing byproducts). (Id.

¶ 55.) Plaintiffs allege that the timing chain system at issue malfunctions and

can cause the engine to lose power. (Id. ¶ 6.)

Despite knowledge of the defect, Defendants never disclosed it. (Id. ¶ 7.)

Further, a timing chain system should usually last for 120,000 miles, and the

maintenance schedules that came with the cars did not state that the timing

chain system would need replacing early. (Id. ¶¶ 7, 10.) The New Vehicle

Limited Warranty (“NVLW”) provided with the vehicles promised repairs or

Palmer Decl. = Declaration of Neal Palmer (DE 49)

Importer Agmt. = Sample Importer Agreement (DE 53-2)

2 The Amended Complaint approaches 2,000 paragraphs, so I offer only a

summary of allegations pertinent to the current motions.

replacement only for four/five years or 50,000/60,000 miles (depending on the

exact model). (Id. ¶ 11.) Although the timing chain system was of course

present in the vehicles when Plaintiffs purchased them and the warranty

began, its defects often did not manifest themselves until later. (Id. ¶ 12.)

Defendants knew that the defect would emerge later, but concealed the defect

so that they would not have to repair it under the NVLWs. (Id.) This had the

effect of shifting the repair costs to consumers. (Id.)

Plaintiffs purchased these vehicles from dealerships, some of them new

and some used. (See id. ¶ 1.) They sued Defendants for fraud, negligent

misrepresentation, breach of express and implied warranties, violation of the

MMWA, unjust enrichment, and violations of consumer fraud and unfair and

deceptive trade practices statutes. (Id. ¶ 16.) Because Plaintiffs live in different

states, they allege their claims under their respective states’ laws (except for

the federal MMWA claim). They seek to represent a nationwide class of

purchasers, as well as sub-classes of purchasers in each state. They invoke

jurisdiction for their state-law claims under the Class Action Fairness Act of

2005 (“CAFA”), Pub. L. No. 109-2, 119 Stat. 4 (codified in pertinent part at 28

U.S.C. §§ 1332(d), 1441, 1446). (Am. Compl. ¶¶ 19, 189.)

For defendants, Plaintiffs named (1) VW AG, the manufacturer of

Volkswagen vehicles, which is based in Germany; (2) VW America, VW AG’s

American subsidiary; (3) Audi AG, the manufacturer of Audi vehicles, which is

based in Germany; and (4) Audi America, Audi AG’s American counterpart. (Id.

¶¶ 43–48.) These entities are all within the same corporate family. (Id.)

Although the cars are manufactured in Germany, VW America, which is

incorporated in New Jersey and based in Virginia, acts as VW AG and Audi

AG’s distributor in the United States. (Id.)

For example, Audi AG has importer agreements with VW America,

pursuant to which Audi AG manufactures cars to serve the American market,

and VW America serves as Audi AG’s “importer, distributor, and marketer” in

the United States by creating and contracting with a network of dealerships to

sell Audi cars to consumers. (Importer Agmt. at 4.) Audi AG and VW America’s

relationship is expressly “based upon mutual understanding, cooperation,

trust, and confidence.” To that end, the Agreement obligates Audi AG to, e.g.,

(1) consult with VW America to develop a “sales network” in the U.S. (id.

§ 10(a)); (2) consult with VW America about agreements with dealerships (id.

§ 10(b)); (3) work with VW America “to plan and effectively utilize [Audi AG’s]

production capacity,” (id. § 11(a)); (4) deliver products to VW America based on

specific purchase orders (id. § 11(e)); (5) establish guidelines for VW America’s

marketing and public relations efforts (id. § 15(a)); and (6) receive reports from

VW America regarding business in the American region (id. § 21(b)). Audi

America is an operating unit of VW America; it is not a subsidiary of Audi AG

and has no independent existence. (Palmer Decl. 10–11.)

Audi AG moves to dismiss for lack of personal jurisdiction, and VW

America moves to dismiss for failure to state a claim, in which Audi AG joins in

the alternative. Given that Audi America has no independent existence, VW

America moves on its behalf. VW AG had not been served when the motions

were filed. (VW Mot. at 1 n.1)

II. STANDARDS OF REVIEW

A. Personal Jurisdiction

On a Rule 12(b)(2) motion, the plaintiff bears the burden of establishing

sufficient facts to show that jurisdiction exists. Marten v. Godwin, 499 F.3d

290, 295–96 (3d Cir. 2007). Initially, a court must accept the plaintiff’s

allegations as true and construe disputed facts in favor of the plaintiff. Pinker

v. Roche Holdings, Ltd., 292 F.3d 361, 368 (3d Cir. 2002). Where factual

allegations are disputed, however, “the plaintiff must sustain its burden of

proof in establishing jurisdictional facts through sworn affidavits or other

competent evidence.” Patterson v. FBI, 893 F.2d 595, 603–04 (3d Cir. 1990)

(citation omitted). If the district court does not hold an evidentiary hearing, “the

plaintiff need only establish a prima facie case of personal jurisdiction.”

O’Connor v. Sandy Lane Hotel Co., 496 F.3d 312, 316 (3d Cir. 2007).

B. Failure to State a Claim

Federal Rule of Civil Procedure 8(a) does not require that a pleading

contain detailed factual allegations but “more than labels and conclusions.”

Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). The allegations must raise

a claimant’s right to relief above a speculative level, so that a claim is “plausible

on its face.” Id. at 570. That standard is met when “factual content [] allows the

court to draw the reasonable inference that the defendant is liable for the

misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Rule 12(b)(6)

provides for the dismissal of a complaint if it fails to state a claim. The

defendant bears the burden to show that no claim has been stated. Davis v.

Wells Fargo, 824 F.3d 333, 349 (3d Cir. 2016). I accept facts in the complaint

as true and draw reasonable inferences in the plaintiff’s favor. Morrow v.

Balaski, 719 F.3d 160, 165 (3d Cir. 2013) (en banc).

III. DISCUSSION

I take up Audi AG’s personal jurisdiction motion first. See Lightfoot v.

Cendant Mortg. Corp., 137 S. Ct. 553, 562 (2017) (“A court must

have . . . power over the parties before it (personal jurisdiction) before [the

court] can resolve a case.”). Concluding that I cannot dismiss Audi AG, I turn

to the Rule 12(b)(6) motion.

A. Personal Jurisdiction over Audi AG

Audi AG moves to dismiss all claims against it for lack of personal

jurisdiction. A federal court may exercise personal jurisdiction over a defendant

to the extent authorized by state law. Fed. R. Civ. P. 4(k)(1)(A). New Jersey

provides for jurisdiction coextensive with constitutional due process. Miller

Yacht Sales, Inc. v. Smith, 384 F.3d 93, 96 (3d Cir. 2004) (citing N.J. Ct. R. 4:4-

4). Due process allows for general or specific jurisdiction. Danziger & De Llano,

LLP v. Morgan Verkamp LLC, 948 F.3d 124, 129 (3d Cir. 2020). Plaintiffs do not

argue that the Court has general jurisdiction (see Opp. to Audi Mot. at 5–7), so

I focus on specific jurisdiction.3

A court has specific jurisdiction when the defendant has contacts with

the forum, and a plaintiff’s claims “arise out of or relate to” those contacts.

Ford Motor Co. v. Mont. Eighth Jud. Dist. Ct., 141 S. Ct. 1017, 1025 (2021)

(citation omitted). To apply that principle, the Third Circuit uses a three-part

test, requiring the plaintiff to show that (1) the defendant purposefully availed

itself of the forum, (2) the claims arise out of or relate to at least one of the

defendant’s activities, and (3) exercising personal jurisdiction comports with

fair play and substantial justice. O’Connor, 496 F.3d at 317. I discuss each

prong in turn.

Purposeful Availment

To start, the plaintiff must show that the defendant took “some act by

which [it] purposefully avails itself of the privilege of conducting activities

within the forum State.” Ford, 141 S. Ct. at 1024 (citation omitted). “[W]hat is

necessary is a deliberate targeting of the forum.” O’Connor, 496 F.3d at 317.

“[R]andom, isolated, or fortuitous” contacts with the forum will not do. Ford,

141 S. Ct. at 1024 (citation omitted).

To show purposeful availment, Plaintiffs point to, among other things,

the sample Importer Agreement between Audi AG and VW America. (Opp. to

Audi Mot. at 7–12.) The obligations in that Agreement make it plausible that

discovery will reveal facts showing that Audi AG deliberately targets New Jersey

consumers. When allegations and evidence “suggest with reasonable

particularity the possible existence of the requisite contacts between [Audi AG]

and the forum state, [Plaintiffs’] right to conduct jurisdictional discovery should

3 In any event, the Court lacks general jurisdiction over Audi AG. A court may

exercise general jurisdiction over a corporation when the corporation has “continuous

and systematic contacts with the forum state” such that it is “essentially at home”

there. Chavez v. Dole Food Co., 836 F.3d 205, 223 (3d Cir. 2016) (en banc) (quotation

marks and citation omitted). A corporation is “at home” at least where it is

incorporated or has its principal place of business. Id. (citation omitted). Audi AG is

organized under German law and headquartered in Germany. (Am. Compl. ¶ 45.)

be sustained.” Toys “R” Us, Inc. v. Step Two, S.A., 318 F.3d 446, 456 (3d Cir.

2003) (cleaned up). The Importer Agreement reveals that Audi AG does not

simply ship a lump number of cars to VW America to then distribute in the

United States independently. Rather, the Agreement evinces a collaborative

relationship in which Audi AG is attuned to the needs and realties of the

American market.

Moreover, some of the obligations suggest that Audi AG works with

specific sub-markets in mind. For example, Audi AG must consult with VW

America about developing a sales network and dealership agreements. It is

plausible, then, that Audi AG at least knows which states it is serving. Indeed,

VW America and “Audi” maintain a “regional” office in New Jersey. (Am. Compl.

¶ 20 (citing Volkswagen Group of America Locations, Volkswagen Group of

America, https://www.volkswagengroupofamerica.com/locations).)

Further, Audi AG delivers products to VW America based on specific

orders, and one can infer that those orders may specify dealerships or sub-

markets. This means that, although VW America serves as a middleman, Audi

AG effectively ships its products to specific markets within the US. Accordingly,

Audi AG is not some arms-length supplier.

Given the Importer Agreement, I cannot say that Audi AG’s contacts with

the New Jersey market are “random, isolated, or fortuitous.” Ford, 141 S. Ct. at

1024 (citation omitted). Instead, it is plausible that Audi AG worked with VW

America to supply the American market, and that work could at times be

forum-specific, such as by sending cars earmarked for certain regions. True,

the Third Circuit has held that efforts to reach the American market writ large

do not show purposeful availment as to the specific forum. Shuker v. Smith &

Nephew, PLC, 885 F.3d 760, 779 (3d Cir. 2018); D’Jamoos ex rel. Estate of

Weingeroff v. Pilatus Aircraft Ltd., 566 F.3d 94, 104 (3d Cir. 2009). But, while

the Importer Agreement may not be enough on its own to establish jurisdiction,

it still indicates that forum-specific facts could exist. That is sufficient to deny

the motion to dismiss in favor of discovery. Toys “R” Us, 318 F.3d at 456.

Regardless, Plaintiffs have another theory of purposeful availment

available to them: VW America is incorporated in New Jersey, so by doing

business with a New Jersey-incorporated company, Audi AG purposefully

directed its activities at New Jersey. This argument resembles one I recently

addressed in Rickman v. BMW of North America LLC, Civ. No. 18-4363, 2021

WL 1904740 (D.N.J. May 11, 2021). The defendants there were a German car

manufacturer (BMW AG) and its American distributor (BMW NA),

headquartered in New Jersey. Id. at *1–2. The plaintiffs sued both, alleging that

they falsely marketed vehicles as ones producing “low emissions.” Id. I held

that jurisdictional discovery was warranted, reasoning that because “BMW AG

serves the American market through BMW NA,” then “significant coordination

between the two is plausible.” Id. at *5.

The Audi AG-VW America relationship is similar to the BMW AG-BMW

NA relationship—with one key difference: The New Jersey connection in

Rickman was that BMW NA was headquartered there, while the New Jersey

connection here is that VW America is incorporated in New Jersey. VW

America’s headquarters, however, are in Virginia.

Is this a distinction with a difference? On one hand, it is easier to see

deliberate targeting of the forum when the theory of personal jurisdiction is

that a foreign defendant worked closely with a defendant headquartered in the

forum. One can readily infer that communications were sent into the forum

and that the foreign defendant knew it was doing business with a forum-based

entity. The physical presence of the co-defendant in the forum means that

efforts to contact or work with that defendant are more tied to the forum. The

same is not necessarily true when a defendant is merely incorporated in the

state. Can a foreign defendant then be said to have targeted a forum by

transacting with a co-defendant incorporated in that forum?

Principles of corporate law and personal jurisdiction suggest yes. The

Supreme Court’s go-to commentary on general jurisdiction explains:

The law treats corporations like legal persons, and the place of

incorporation and the principal place of business are both

analogous to domicile . . . . [T]he corporation . . . cannot ever be

absent from the state of incorporation . . . [E]ven if a corporation

neither does business nor maintains an office in the incorporating

state, the incorporation process itself provides notice of the

potential for judicial jurisdiction.

Brilmayer, et al., A General Look at General Jurisdiction, 66 Tex. L. Rev. 721,

733–34 (1988) (cited favorably by, e.g., Goodyear Dunlop Tires Operations, S.A.

v. Brown, 564 U.S. 915, 924 (2011)). Accordingly, the theory of personal

jurisdiction here becomes straightforward and plausible. The minimal facts

provided thus far suggest that Audi AG has an ongoing, substantial

relationship with VW America as its gateway into the American market. The

law views VW America as a New Jersey “person,” so by regularly transacting

with VW America, Audi AG deliberately targeted New Jersey. Cf. Meridian

Consulting I Corp. v. Eurotec Canada Ltd., Civ. No. 19-22197, 2021 WL 689132,

at *4–7 (D.N.J. Feb. 22, 2021) (Canadian company’s substantial business with

New Jersey company could subject it to personal jurisdiction in New Jersey).

Plaintiffs have at least made out a prima facie showing for purposeful

availment on this theory as well.

“Arise out of or relate to”

Even if the defendant has sufficient contacts with a forum, the plaintiffs’

claims must “arise out of or relate to” those contacts. Ford, 141 S. Ct. at 1025

(citation omitted). This used to mean, in the Third Circuit’s view, that a causal

connection existed between the contacts and the claims. I have concluded that

that causation requirement does not survive the Supreme Court’s holding in

Ford. Rickman, 2021 WL 1904740, at *8. (I do not repeat that discussion here.)

Freed from a strict causation requirement, Plaintiffs lean heavily on Ford

as factually analogous. There, Ford did not prevail on its argument that

plaintiffs had to show that “the company had designed, manufactured,

or . . . sold in the State the particular vehicle involved in the accident.” 141 S.

Ct. at 1023. The Court, however, looked not to the particular vehicle, but to

facts showing that Ford extensively served the market in Minnesota and

Montana. Id. at 1028. Accordingly, the Supreme Court held that Ford’s

contacts in the forums (promoting and selling cars there) were sufficiently

related to the claims (arising from an accident involving a Ford car in the

forum). Id.

This case is sufficiently analogous. The Importer Agreement at least

shows how Audi AG, in conjunction with VW America, serves the American

market, and it is plausible that those efforts entail forum-specific contacts,

including those directed at New Jersey. Next, the New Jersey plaintiffs

purchased their cars here and experience the “injury” here, i.e., owning/using

a defective car. The “relate to” prong is thus satisfied because Audi AG “serves

a market for a product in the forum State and the product malfunctions there.”

Ford, 141 S. Ct. at 1027. “Or said another way, if [Audi AG’s] business

deliberately extended into [New Jersey] (among other States), then [New

Jersey’s] courts could hold [it] accountable for a car’s [malfunctioning] there—

even though the vehicle had been designed and made overseas . . . .” Id.

There is a harder question as to whether I have jurisdiction over the

claims asserted by non-New Jersey residents. They did not purchase their cars

in New Jersey, and they have not experienced any injury in New Jersey.

Nonetheless, Plaintiffs’ alternative theory of jurisdiction suffices for the non-

New Jersey plaintiffs. Pursuant to the Importer Agreement, Audi AG retained

some control over what vehicles were shipped to the United States and how

they were marketed and distributed. There is, then, plausibly some

coordination between Audi AG and VW America. The claims here are that

defects were not disclosed by the written materials accompanying the cars or

defendants’ advertisements. (E.g., Am. Compl. ¶¶ 81–83.) It is plausible, given

the obligations in the Importer Agreement, that Audi AG directed or

collaborated with VW America regarding how the models would be sold and

promoted. The non-New Jersey plaintiffs’ claims would have stemmed from

decisions made within that relationship, which necessarily touched New Jersey

because VW America is a New Jersey corporation. Thus, there is a plausible

connection between the non-New Jersey plaintiffs’ claims and New Jersey. See

Rickman, 2021 WL 1904740, at *9–10 (discovery was warranted to develop how

German manufacturer interacted with American distributor to promote vehicles

in the US when plaintiffs claimed those promotions were misleading); Ponzio v.

Mercedes-Benz USA, LLC, 447 F. Supp. 3d 194, 217 (D.N.J. 2020) (when

marketing decisions were made in New Jersey, the court could exercise

jurisdiction over non-New Jersey plaintiffs’ claims).

Fair Play and Substantial Justice

I conclude that jurisdictional discovery is warranted to develop facts

regarding minimum contacts. There are uncommon cases, however, in which

“other considerations would render jurisdiction unreasonable.” Carteret Sav.

Bank, FA v. Shushan, 954 F.2d 141, 150 (3d Cir. 1992) (citation omitted). So I

briefly address whether considerations of fair play and substantial justice

would defeat jurisdiction and thus obviate the need for jurisdictional discovery.

They do not.

In this connection I consider (1) Audi AG’s burden, (2) New Jersey’s

interest, (3) Plaintiffs’ interest, (4) efficiency, and (5) other forums’ interests. Id.

Although Audi AG is a foreign company, it extensively targets the American

market and has a substantial relationship to a New Jersey company. So it

cannot complain of a severe burden. See Rickman, 2021 WL 1904740, at *7; In

re Platinum & Palladium Antitrust Litig., 449 F. Supp. 3d 290, 327 (S.D.N.Y.

2020). New Jersey has an interest in giving its residents a forum to vindicate

their legal interests for injuries occurring here. Plaintiffs have an interest in

litigating here because some of them are New Jersey residents. As to the fourth

and fifth factors, the alternative to litigating here would seem to be a separate

suit against Audi AG in Germany, and that is plainly inefficient for the

remaining parties. Audi AG has made no argument that Germany has a

stronger interest.

Thus, there is no “compelling case” for dismissal that would moot the

need for jurisdictional discovery. See Carteret, 954 F.2d at 150.

* * *

All said, this is not a case in which the Court can resolve its jurisdiction

over a key defendant based on allegations and preliminary facts. Better, I

think, to understand the relationship more fully between Audi AG and VW

America before proposing to dismiss Audi AG from this case. Audi AG’s motion

to dismiss for lack of personal jurisdiction will be denied without prejudice to

renewal following jurisdictional discovery, under the supervision of the

Magistrate Judge assigned to the case.

B. Rule 12(b)(6)

I address VW America’s arguments for dismissal as to each type of claim

(e.g., implied warranty, fraud, etc.). Before I do so, I deal with three clean-up

matters.

First, VW America mostly relies on general principles that cut across

different states’ laws. Unless otherwise noted, VW America does not argue that

any particular point of law differs state-to-state. As a result, I discuss VW

America’s arguments for dismissal mostly in terms of New Jersey law or

general principles.

Second, Plaintiffs, in their Opposition brief, state that they withdraw

three of their state-law claims.4 (Opp. at 2 n.5.) Having heard no opposition, I

treat the statement in the brief as a voluntary dismissal and grant leave to

dismiss those claims. See Fed. R. Civ. P. 41(a).

Third, VW America asks that all claims be dismissed on “group pleading”

grounds, because the factual allegations of the Amended Complaint do not

adequately distinguish among defendants. (VW Mot. at 6–7.) But, as the

discussion on personal jurisdiction indicates, the entities here are intertwined,

and more discovery is needed to determine the precise role of each. In such

circumstances, there is no need to dismiss the complaint. In re Volkswagen

4 These claims are for negligent misrepresentation under Georgia law (Count 27),

negligent misrepresentation under Oregon law (Count 80), and implied warranty under

Oregon law (Count 81).

Timing Chain Prod. Liab. Litig., Civ. No. 16-2765, 2017 WL 1902160, at *9

(D.N.J. May 8, 2017).

I turn to the main arguments.

Implied Warranty

VW America offers four reasons to dismiss the implied warranty claims:

(a) they are barred by the statute of limitations, (b) they are barred by the

NVLWs, (c) they do not allege that the cars fell below merchantability

standards, and (d) Plaintiffs fail to satisfy some states’ privity requirements.

(VW Mot. at 7–18.) With one minor exception, these reasons do not justify

dismissal.

a. Statute of Limitations

VW America moves to dismiss the implied warranty claims as untimely.

(VW Mot. at 7–11.) A court may dismiss a claim as untimely “only when the

statute of limitations defense is apparent on the face of the complaint.”

Wisniewski v. Fisher, 857 F.3d 152, 158 (3d Cir. 2017). Plaintiffs do not contest

that their claims fall outside of the applicable limitation periods. Instead, they

argue that the statute of limitations be tolled based on fraudulent concealment

of the defect. (Opp. to VW at 10–11.) That doctrine tolls a claim when the

defendant concealed facts necessary for a plaintiff to discover he had a claim.

Timing Chain, 2017 WL 1902160, at *14; see O’Keeffe v. Snyder, 416 A.2d 862,

872 (N.J. 1980); Lopez v. Swyer, 300 A.2d 563, 567 n.2 (N.J. 1973). VW

America offers two reasons why the doctrine does not apply here, but neither is

persuasive.

First, VW America argues that two plaintiffs, who purchased used

vehicles, did not purchase their vehicles within the limitations period, which

began when the original owner purchased the vehicle. (VW Mot. at 9–11.) For

this argument, they rely on an affidavit from a VW America employee attesting

to VW America’s “vehicle records” and state department of motor vehicle forms.

(Id.) Neither is appropriate to consider now, on a Rule 12(b)(6) motion. The

affidavit is plainly improper. Schmidt v. Skolas, 770 F.3d 241, 249 (3d Cir.

2014). As for the DMV forms, while a court may take judicial notice of some

public records, id., the forms are bare, and Plaintiffs may be able to argue for

different inferences to be taken therefrom, so to draw conclusive facts from

them is premature, see S. Cross Overseas Agencies, Inc. v. Wah Kwong

Shipping Grp., Ltd., 181 F.3d 410, 427 n.7 (3d Cir. 1999) (distinguishing

between taking notice of existence of documents versus the facts or arguments

asserted therein).

Next, VW America argues that the Amended Complaint fails to allege that

VW America took affirmative steps to conceal the defect, as required for the

doctrine to apply. (VW Mot. at 10–11.) But “a plaintiff is not required to plead,

in a complaint, facts sufficient to overcome an affirmative defense” like the

statute of limitations. Stephens v. Clash, 796 F.3d 281, 288 (3d Cir. 2015)

(citation omitted). Here, “the allegations [do] not rule out the possibility that the

statute of limitations should have been tolled.” Wiesniewski, 857 F.3d at 158.

The facts regarding VW America’s affirmative actions will need to be developed

in discovery.

b. NVLW

VW America next argues that Plaintiffs did not experience any problems

with the timing chain system during the implied warranty period, as limited by

the NVLW. (VW Mot. at 12–14.) Plaintiffs respond that the Court should not

enforce that limitation at this time because the Amended Complaint alleges

that the NVLW is unconscionable. (Opp. to VW Mot. at 12–14.)

A plaintiff may avoid the durational limits of a warranty if allegations

indicate that the warranty is unconscionable. Timing Chain, 2017 WL 1902160,

at *11; see also DeFrank v. Samsung Elecs. Am., Inc., Civ. No. 19-21401, 2020

WL 6269277, at *17 (D.N.J. Oct. 26, 2020). Plaintiffs must plead

(1) substantive unconscionability, i.e., the contract “involving an exchange of

obligations so one-sided as to shock the court’s conscience,” and (2) procedural

unconscionability, i.e., “an inequality of bargaining power.” DeFrank, 2020 WL

6269277, at *18 (citations omitted). Plaintiffs adequately allege both here.

Courts have held that a warranty is substantively unconscionable when a car

manufacturer knew “that class engines would fail after the end of the warranty

period but before the vehicle’s expected useful life.” Gelis v. Bayerische Motoren

Werke Aktiengesellschaft, Civ. No. 17-7386, 2018 WL 6804506, at *18 (D.N.J.

Oct. 30, 2018). Plaintiffs allege just that. (Am. Compl. ¶¶ 123, 132–33, 136.)

Courts have held that a warranty is procedurally unconscionable when the

manufacturer knew of the defect and concealed it while the consumer had no

means to negotiate the warranty. DeFrank, 2020 WL 6269277, at *18

(collecting cases).5 The same is alleged here. Because Plaintiffs plausibly allege

that the NVLW is unconscionable, its durational limit cannot be invoked to bar

their implied warranty claims at the motion to dismiss stage. Whether the

NVLWs are truly unconscionable, as claimed, must await development in

discovery.

c. Merchantability

VW America argues that the implied warranty claims fail because the

implied warranty of merchantability provides only for a minimum level of

quality, and the fact that Plaintiffs drove their cars for years problem-free show

that the cars met the requisite level of quality. (VW Mot. at 14–16.) “In order for

the implied warranty of merchantability to be breached, the product at issue

must have been defective or not fit for the general purpose for which it was

manufactured and sold.” Argabright v. Rheem Mfg. Co., 258 F. Supp. 3d 470,

484 (D.N.J. 2017) (citations omitted). As applied to cars, this means that the

car must “provide safe, reliable transportation.” Nelson v. Nissan N. Am., Inc.,

894 F. Supp. 2d 558, 567 (D.N.J. 2012) (citations omitted); see also In re FCA

US LLC Monostable Elec. Gearshift Litig., 334 F.R.D. 96, 112 (E.D. Mich. 2019)

(collecting cases across jurisdictions). Plaintiffs allege that the defect presents a

5 The only binding case VW America relies on is Werwinski v. Ford Motor Co., 286

F.3d 661, 673 (3d Cir. 2002), where the Third Circuit noted that car purchasers do not

necessarily lack bargaining power, because they have freedom to purchase other cars

with different warranties or purchase an extended warranty. But Werwinski does not

require rejection of Plaintiffs’ unconscionability theory at this early stage because its

discussion did not arise in the context of unconscionability. See id. (discussing

whether the economic loss doctrine should apply when a plaintiff sues a car

manufacturer in tort).

safety risk because it can cause the engine to lose power and thus the ability to

accelerate, maintain speed, or brake. (Am. Compl. ¶ 6.) Plaintiffs have thus

satisfied the Rule 12(b)(6) standard because they provide factual allegations

sketching out how the defect renders the vehicle unsafe. See Nelson, 894 F.

Supp. 2d at 567 (allegations of transmission failure are sufficient to state a

claim).

d. Privity

VW America argues that claims under California, Florida, Georgia,

Illinois, New York, North Carolina, Ohio, and Washington law must be

dismissed because those states require vertical privity. (VW Mot. at 16–18.)

Vertical privity means that Plaintiffs must have purchased the product directly

from the manufacturer, not a dealership. Clemens v. DaimlerChrysler Corp.,

534 F.3d 1017, 1023 (9th Cir. 2008) (California law). Plaintiffs acknowledge the

privity requirement but argue that most states recognize that a third-party

beneficiary of the contract between the manufacturer and dealership, i.e., the

consumer, can still bring a claim. (Opp. to VW Mot. at 17.) Along the same

lines, some states recognize that a dealership may act as an agent of the

manufacturer such that the plaintiff’s purchase from the dealership creates a

“direct nexus” to the manufacturer. Wilson v. Volkswagen Grp. of Am., Inc., Civ.

17-23033, 2018 WL 9850223, at *4 (S.D. Fla. Nov. 30, 2018) (citations

omitted). While not all these states have precedent clearly endorsing such

exceptions to the privity requirement, a persuasive consensus of courts has

emerged to recognize the exceptions.6 Moreover, it is basic contract law that

third parties may, in certain circumstances, enforce a contract. See

Restatement (Second) of Contracts § 302 (Am. Law Inst. 1979). Accordingly,

6 Wilson, 2018 WL 9850223, at *4 (Florida); Amin v. Mercedes-Benz USA, LLC,

349 F. Supp. 3d 1338, 1356 (N.D. Ga. 2018) (Georgia); In re MyFord Touch Consumer

Litig., 46 F. Supp. 3d 936, 983–85 (N.D. Cal. 2014) (California and North Carolina);

Hodgson, Russ, Andrews, Woods & Goodyear, LLP v. Isolatek Int'l Corp., 300 A.D.2d

1051, 1052 (N.Y. App. Div. 2002) (New York); Bobb Forest Prods., Inc. v. Morbark Indus.

Inc., 783 N.E.2d 560, 576 (Ohio Ct. App. 2002) (Ohio); Touchet Valley Grain Growers,

Inc. v. Opp & Seibold Gen. Constr., Inc., 831 P.2d 724, 730 (Wash. 1992) (Washington).

Plaintiffs plausibly are in privity with the manufacturers here because either

they, as end-users, are the beneficiaries of the manufacturers’ contracts with

dealerships, or the dealerships can be said to act as agents for the

manufacturer.7 Again, this defense, whatever its merits, is unsuitable for

adjudication on a Rule 12(b)(6) motion.

The exception, however, is Illinois. The Illinois Supreme Court has

strictly enforced the privity requirement and refused to create exceptions.

Manley v. Hain Celestial Grp., Inc., 417 F. Supp. 3d 1114, 1124 (N.D. Ill. 2019)

(collecting cases). In other words, the Illinois privity requirement, being

categorical as a matter of law, may furnish a basis for a Rule 12(b)(6)

dismissal.8 See Quitno v. Gen. Motors, LLC, No. 18-cv-7598, 2020 WL 777273,

at *5 (N.D. Ill. Feb. 18, 2020). Accordingly, Count 36 will be dismissed.

* * *

For the reasons above, the motion to dismiss the implied warranty claims

will be denied except as to Count 36, which will be dismissed.

Express Warranty

VW America makes four arguments why the express warranty claims

should be dismissed: (1) they are time-barred as to some Plaintiffs, (2) defects

did not manifest during the warranty period, (3) the NVLWs do not cover the

defects alleged, and (4) some Plaintiffs have not alleged that the NVLW was the

basis for their bargain.

7 VW America argues that certain Plaintiffs did not purchase their cars from

authorized dealerships, so they are too far removed to be third party beneficiaries. (VW

Mot. at 18.) But those are facts outside the Amended Complaint. VW America also

argues that Plaintiffs must allege more facts to show a third-party beneficiary or

agency relationship. But one can infer the manufacturers must have agreements with

dealerships, and no additional details are needed at this time. See Martinez v. UPMC

Susquehanna, 986 F.3d 261, 266 (3d Cir. 2021) (a plaintiff need not plead a prima

facie case, i.e., every element of a claim, but only “enough facts to raise a reasonable

expectation that discovery will reveal evidence of each necessary element”).

8 The cases Plaintiffs point to (Opp. to VW Mot. at 18 n.25) arose under the

MMWA and reached a different result under Illinois law. Rothe v. Maloney Cadillac,

Inc., 518 N.E.2d 1028, 1029–30 (Ill. 1988).

a. Statute of Limitations

VW America argues that claims under California, Colorado,

Massachusetts, New York, North Carolina, and Ohio law are time-barred

because, under those states’ law, the limitations period for claims arising from

NVLW-type warranties runs from the date of delivery—regardless of when the

defect is discovered. (VW Mot. at 19–20.) See, e.g., Trans-Spec Truck Serv. v.

Caterpillar Inc., 524 F.3d 315, 323–24 (1st Cir. 2008). But VW America

overlooks that, despite this strict accrual rule, tolling may still be available

under the separate fraudulent concealment doctrine. E.g., New Eng. Power Co.

v. Riley Stoker Corp., 477 N.E.2d 1054, 1059 (Mass. Ct. App. 1985); Allen v.

Andersen Windows, Inc., 913 F. Supp. 2d 490, 509–10 (S.D. Ohio 2012).

Indeed, VW America cites no authority for the proposition that tolling is

unavailable for the express warranty claims, so any such argument is forfeited.

Because Plaintiffs have a viable fraudulent concealment theory, I cannot

dismiss the express warranty claims on the pleadings. (See Section III.B.1.a,

supra.)

b. Warranty Period

VW America argues that an express warranty claim must fail if, as here,

the defect did not become apparent during the warranty period. (VW Mot. at

20–25.) But, as I explained, Plaintiffs put forward enough allegations to raise

an inference that the NVLW is unconscionable, so the fact that the engines did

not fail during the warranty period is not fatal at this stage. (See Section

III.B.1.b, supra.) See also Timing Chain, 2017 WL 1902160, at *11.

c. NVLW Coverage

VW America argues that the express warranty claims fail because the

NVLWs do not cover the design defects which form the basis of Plaintiffs’

claims. (VW Mot. at 25–27.) Rather, the NVLWs “cover[] any repair or

replacement to correct a defect in manufacturer’s material and workmanship.”

(NVLW at 7; see also Am. Compl. ¶ 11.)

The Third Circuit interpreted near-identical warranty language in Coba v.

Ford Motor Co., 932 F.3d 114 (3d Cir. 2019), as amended (July 26, 2019). The

Court held that the terms “material and workmanship” do not encompass

design defects. Id. at 121. Based on the ordinary meaning of the terms, “defects

in ‘workmanship’ and ‘materials’ are flaws pertaining to the construction or

manufacture of a product, while defects in ‘design’ are shortcomings that arise

in the plans for a product’s creation.” Id. In other words, “a ‘design’ defect is a

flaw inherent in the product’s intended operation and construction.” Id.

Applying that understanding, the Court held that claims arising from a car

manufacturer’s use of certain fuel-tank coatings were not covered by the

warranty because “[t]he fundamental nature of the defect relates to the overall

plan of construction and operation of the fuel tanks” and all fuel-tanks suffered

from the problem. Id. at 123 (quotation marks and citation omitted).

Whether Coba requires dismissal of the claims here is a close call. On

one hand, the thrust of Plaintiffs’ claims is aimed at the design of the timing

chain system. The Amended Complaint goes into detail about how the timing

chain system fails and which components may be the culprit. (Am. Compl.

¶¶ 61–78.) Further, problems with the timing chain affect a large swath of cars.

(Id. ¶ 111.) These allegations suggest a design defect claim because Plaintiffs

take issue with how the timing chain operates and do not strongly suggest that

anything in the manufacturing process is to blame. See Coba, 932 F.3d at 123.

Coba affirmed my own decision rejecting a design defect claim on just

these grounds, but that decision was in the context of a motion for summary

judgment. Coba v. Ford Motor Co., Civ. No. 12-1622, 2016 WL 5746361, at *8

(D.N.J. Sept. 30, 2016). At the motion to dismiss stage, the preference in this

District has been to let Plaintiffs develop facts in discovery to flesh out the

precise source of the problem and their theory of the case. In re Subaru Battery

Drain Prods. Liab. Litig., Civ. No. 20-3095, 2021 WL 1207791, at *12 (D.N.J.

Mar. 31, 2021); Timing Chain, 2017 WL 1902160, at *12; Alin v. Am. Honda

Motor Co., Civ. No. 08-4825, 2010 WL 1372308, at *6 (D.N.J. Mar. 21, 2010).

That is, the Amended Complaint identifies ways in which the timing chain

system does not work. But the Amended Complaint does not pinpoint whether

that malfunction is only a consequence of design choices or, as perhaps

discovery would reveal, a consequence of some problem in the manufacturing

process. For example, the Amended Complaint alleges that one part, the

ratchet pawl, fails. (Am. Compl. ¶ 67.) But the Amended Complaint does not

say whether the ratchet pawl fails because of how it is designed or how it is

manufactured. Because it may be the latter, more facts are necessary, and

dismissal is inappropriate. Timing Chain, 2017 WL 1902160, at *12.

VW America responds that the Amended Complaint does not adequately

allege that the timing chain system’s flaw stems from the manufacturing

process. (VW Mot. at 27.) True, some courts have required “more specific

allegations to the effect that . . . failures could have been caused by a flaw

in . . . [the] manufacturing process.” Garcia v. Chrysler Grp., LLC, 127 F. Supp.

3d 212, 227 (S.D.N.Y. 2015). But principles of Rule 12(b)(6) counsel that the

better course is to deny the motion to dismiss. On a Rule 12(b)(6) motion, a

court must keep in mind the nature of the plaintiff’s claim and asymmetries in

access to relevant information. See Garrett v. Wexford Health, 938 F.3d 69, 92–

93 (3d Cir. 2019). We cannot expect car owners to know the precise source of

problems with their cars, i.e., whether a manufacturer purposefully designed a

car to function in a certain way or whether something in the manufacturing

process affected functionality. Those facts are in the hands of Defendants, so

the lack of specific allegations along those lines should not be fatal.

Moreover, whether the timing chain system’s defect is one of design or

manufacturing is not just a factual, but a legal conclusion. A plaintiff is not

bound by the legal theories in a complaint, and they can change with

discovery. See Johnson v. City of Shelby, 574 U.S. 10, 11 (2014) (per curiam)

(“Federal pleading rules . . . do not countenance dismissal of a complaint for

imperfect statement of the legal theory supporting the claim asserted.”); Alin,

2010 WL 1372308, at *4–5 (complaint did not require dismissal because the

court need not adopt, at the pleading stage, any particular characterization of

the claim). Accordingly, it is plausible (though by no means certain) that

discovery will reveal the manufacturing process to be the source of the timing

chain system, Plaintiffs do not exclusively press a design defect theory which

would not be covered by the NVLW. Timing Chain, 2017 WL 1902160, at *12.

d. Basis of the Bargain

VW America argues that a plaintiff must allege that an express warranty

was “part of the basis of the bargain” of his/her purchase, yet Plaintiffs who

purchased used cars fail to allege that they purchased their cars while the

NVLW was in effect. (VW Mot. at 27.) Under New York and Illinois law, which

apply to the relevant claims, an express warranty requires “an affirmation of

fact or promise” that “becomes part of the basis of the bargain between the

parties.” Reid v. Unilever U.S., Inc., 964 F. Supp. 2d 893, 905 (N.D. Ill. 2013);

accord Kraft v. Staten Island Boat Sales, Inc., 715 F. Supp. 2d 464, 473

(S.D.N.Y. 2010). Plaintiffs expected that if, pursuant to the NVLW, VW America

discovered a defect during the warranty period—and VW America allegedly

did—then VW America would repair the defect. VW America, however, did not

perform such repairs, and now Plaintiffs have defective vehicles. Under this

theory, Plaintiffs thus relied on the NVLW having been complied with, even if it

expired prior to their purchase. VW America points to no New York or Illinois

case foreclosing that theory.

* * *

For the reasons above, the motion to dismiss the express warranty

claims will be denied.

MMWA

VW America moves to dismiss the MMWA claim on the ground that the

statute does not allow claims by fewer than 100 named plaintiffs. (VW Mot. at

28–29.) The MMWA is a federal statute that provides a federal cause of action

for consumers to assert breach of warranty claims, by incorporation of state

law. DeFrank, 2020 WL 6269277, at *17 (citing 15 U.S.C. § 2310(d)(1)). The

statute allows a consumer to bring a claim “(A) in any court of competent

jurisdiction in any State or the District of Columbia; or (B) in an appropriate

district court of the United States, subject to paragraph (3).” § 2310(d)(1).

Paragraph 3, in turn, provides that “[n]o claim shall be cognizable” if, among

other things, “the action is brought as a class action, and the number of named

plaintiffs is less than one hundred.” § 2310(d)(3)(C).

VW America contends that Plaintiffs’ claim flunks the paragraph 3

requirement because there are fewer than 100 named plaintiffs here. Plaintiffs

respond that CAFA provides a basis for jurisdiction that is an “alternative” to

the MMWA and does not require 100 named plaintiffs. (Opp. to VW Mot. at 25.)

CAFA grants federal courts jurisdiction over class actions when (1) the parties

are minimally diverse, (2) the class consists of at least 100 members, and

(3) the amount in controversy exceeds $5 million. Judon v. Travelers Prop. Cas.

Co. of Am., 773 F.3d 495, 500 (3d Cir. 2014) (citing 28 U.S.C. § 1332(d)(2),

(5)(B), (6)). The issue presented, then, is whether this Court has jurisdiction

over Plaintiffs’ MMWA claim in light of the 100-named-plaintiffs requirement,

considering its interplay with CAFA. See Samuel-Bassett v. KIA Motors Am.,

Inc., 357 F.3d 392, 402 (3d Cir. 2004) (characterizing the MMWA’s 100-named-

plaintiffs requirement as jurisdictional).

The Third Circuit has not addressed this issue. Until recently, no other

Court of Appeals had either, at least precedentially. In that silence, a

consensus emerged in this District that CAFA provided a way around the

MMWA’s 100-named-plaintiff requirement. E.g., McCalley v. Samsung Elecs.

Am., Inc., Civ. No. 07-2141, 2008 WL 878402, at *4–5 (D.N.J. Mar. 31, 2008)

(Greenaway, J.); McGee v. Cont’l Tire N. Am., Inc., Civ. No. 06-6234, 2007 WL

2462624, at *4 (D.N.J. Aug. 27, 2007). Things changed last year when the

Ninth Circuit became the first Court of Appeals to precedentially hold that

CAFA does not provide an alternative basis for jurisdiction in MMWA class

actions with fewer than 100 named plaintiffs. Floyd v. Am. Honda Motor Co.,

966 F.3d 1027, 1035 (9th Cir. 2020). Following Floyd, the consensus in this

District eroded. Every court to address Floyd has followed it. Subaru Battery,

2021 WL 1207791, at *20; Powell v. Subaru of Am., Inc., 502 F. Supp. 3d 856,

885 (D.N.J. 2020). Faced with no binding authority and a shifting landscape of

non-binding authority, I analyze the statute myself, guided by the courts that

have done so before me.

I begin with the plain language of the MMWA. BP P.L.C. v. Mayor & City

Council of Baltimore, 141 S. Ct. 1532, 1537 (2021). Plaintiffs do not dispute

that, because this is an MMWA action brought in a “district court of the United

States,” it is “subject to paragraph (3),” which requires that this action, “as a

class action,” have more than 100 “named plaintiffs.” § 2310(d)(1)(B), (3)(C).

Although Plaintiffs do not raise the argument, plaintiffs in other cases have

tried to skirt paragraph 3’s requirements by arguing that their case is one

brought “in any court of competent jurisdiction in any State” under subsection

(A), such that paragraph 3 does not apply. E.g., Chapman v. Gen. Motors, LLC, -

-- F. Supp. 3d ----, ----, No. 19-CV-12333, 2021 WL 1286612, at *24–25 (E.D.

Mich. Mar. 31, 2021) (“‘[A]ny court of competent jurisdiction,’ is broad—there is

no indication that it is restricted to only state courts, or conversely that federal

courts are excluded.” (quoting § 2310(d)(1)(A))). That argument is unpersuasive

because it renders the subsection referring to federal courts superfluous.

Courts avoid interpreting statutes in ways that render language or parts of the

statutory scheme superfluous. Aristy-Rosa v. Att’y Gen. U.S., 994 F.3d 112,

166 n.4 (3d Cir. 2021); City of Chicago v. Fulton, 141 S. Ct. 585, 591 (2021).

Interpreting “court of competent jurisdiction” to include federal courts would do

just that; if “any” court is covered, then subsection (B), referring to “district

court[s] of the United States” is unnecessary. Moreover, pulling federal courts

into subsection (A) would nullify the limits on federal jurisdiction which

Congress sought to impose via paragraph 3. I hold that this is not a case under

subsection (A), so the 100-named-plaintiffs requirement is in play. E.g., Powell,

502 F. Supp. 3d at 885.

The question becomes whether CAFA provides an escape hatch from that

requirement. In other words, did CAFA, the later-enacted statute, impliedly

repeal or modify the MMWA’s requirements? Implied repeals are generally

disfavored. Me. Cmty. Health Options v. United States, 140 S. Ct. 1308, 1323

(2020). Rather, “[w]hen confronted with two Acts of Congress allegedly touching

on the same topic, this Court . . . strive[s] ‘to give effect to both.’” Epic Sys.

Corp. v. Lewis, 138 S. Ct. 1612, 1624 (2018) (quoting Morton v. Mancari, 417

U.S. 535, 551 (1974)).

There is a way to harmonize the two statutes: CAFA does not modify the

MMWA’s requirements because CAFA applies to suits brought under diversity

jurisdiction, which MMWA suits are not. The MMWA creates a federal cause of

action, so federal courts hearing MMWA claims are exercising their federal-

question jurisdiction. See Mims v. Arrow Fin. Servs., LLC, 565 U.S. 368, 377,

380 (2012) (when a statute creates a federal cause of action, the statute

furnishes federal-question jurisdiction, even if it also provides that claims can

be brought in state court). In contrast, CAFA modifies jurisdictional

requirements in diversity-jurisdiction cases so that more class actions based

only on state law can be brought in federal court. Miss. ex rel. Hood v. AU

Optronics Corp., 571 U.S. 161, 165 (2014); see also S. Rep. No. 109-14, at 10

(2005). Because an MMWA claim creates a federal-question case, CAFA does

not apply to that claim. Indeed, there is nothing in CAFA’s legislative history

indicating that Congress sought to modify class-action requirements for class

actions pressing federal claims. Floyd, 966 F.3d at 1066. In short, CAFA and

MMWA cases have distinct requirements. Plaintiffs do not satisfy the MMWA

requirements, so their MMWA claims must be dismissed.

The motion to dismiss the MMWA claims (Counts 8, 15, 22, 30, 37, 43,

49, 56, 62, 69, 76, 83, 89, and 96) will be granted.

Fraud

Plaintiffs bring fraud claims, under either common law or a state statute,

depending on how the particular state recognizes fraud claims. VW America

identifies flaws underlying all or most fraud claims as well as flaws specific

under individual states’ laws.

a. Cross-Cutting Arguments

VW America identifies grounds for dismissal applicable to all fraud

claims, arguing that Plaintiffs’ allegations of (i) affirmative representations,

(ii) omissions, (iii) pre-sale knowledge, and (iv) grounds for equitable relief are

insufficient.

i. Affirmative Misrepresentations

VW America argues that Plaintiffs’ fraud claims based on affirmative

representations fail because the statements are not actionable, and Plaintiffs

do not plead causation or reliance. (VW Mot. at 30–35.) Fraud-based claims are

subject to a heightened pleading standard. Fed. R. Civ. P. 9(b); In re Suprema

Specialties, Inc. Secs. Litig., 438 F.3d 256, 272 (3d Cir. 2006). Plaintiffs must

plead “the who, what, when, where, and how of the events at issue.” U.S. ex rel.

Bookwalter v. UPMC, 946 F.3d 162, 176 (3d Cir. 2019) (citation omitted). Many

of Plaintiffs’ allegations do not meet this standard because they simply allege

that “Defendants” made “misrepresentations.” (E.g., Am. Compl. ¶¶ 129–30.)

See Frederico v. Home Depot, 507 F.3d 188, 201 (3d Cir. 2007) (Rule 9(b)

“requires, at a minimum, that the plaintiff identify the speaker of allegedly

fraudulent statements” (citation omitted)). Plaintiffs’ more particular allegations

that “Defendants” promoted the “high quality,” “reliability,” “superior

performance,” and “safety” of their vehicles (e.g., Am. Compl. ¶¶ 142, 457) fare

no better because they “constitute merely vague and ill-defined opinions or

puffery” and “are not assurances of fact and thus do not constitute

misrepresentations” for purposes of a fraud claim. Argabright, 201 F. Supp. 3d

at 608 (quotation marks and citation omitted); see also, e.g., Tatum v. Chrysler

Grp. LLC, Civ. No. 10-4269, 2011 WL 1253847, at *4 (D.N.J. Mar. 28, 2011)

(car manufacturer’s advertising claims that vehicles were “reliable” and

“durable” were not affirmative misrepresentations).

That leaves Plaintiffs with only a few particularized allegations of

affirmative misrepresentations. These remaining allegations stem from alleged

misrepresentations in the maintenance schedules and warranty booklets that

came with the cars. For example, the maintenance schedules and warranty

booklets allegedly stated that the timing chain needed replacing every 120,000–

130,000 miles. (Am. Compl. ¶ 10, Ex. C at 4.) The maintenance schedules and

warranty booklets thus did not accurately represent that, as Defendants knew,

the timing chain would fail far earlier in a vehicle’s lifetime. (Id. ¶ 15.) Similarly,

some maintenance schedules listed parts that would need to be replaced but

never listed the timing chain. (Id., Ex. C.)

Assuming that these qualify as affirmative misrepresentations, under

New Jersey law Plaintiffs must plead that they suffered a loss “as a result of”

the misrepresentations in the materials. Dugan v. TGI Fridays, Inc., 171 A.3d

620, 637 (N.J. 2017). Other states require more: Plaintiffs must have justifiably

relied on the misrepresentations to make the purchase. E.g., Yocca v.

Pittsburgh Steelers Sports, Inc., 854 A.2d 425, 438–49 (Pa. 2004). Still further,

Plaintiffs’ allegations of causation and reliance must satisfy Rule 9(b).

They do not. Plaintiffs merely plead in fact-free fashion that they “relied”

on “misrepresentations” “at the time of purchase.” (Am. Compl. ¶ 129.) Those

are legal conclusions not entitled to credit. Dewey v. Volkswagen AG, 558 F.

Supp. 2d 505, 526–27 (D.N.J. 2008). There are no factual allegations, then,

sketching out the relationship between the misrepresentations and Plaintiffs’

losses. For example, Plaintiffs do not allege “at what point—if ever—each

Plaintiff was exposed to one or more of the statements.” Id. Plaintiffs must

“inject precision or some measure of substantiation into” their fraud claims,

Frederico, 507 F.3d at 200, and that requires facts to show how individual

plaintiffs considered the maintenance schedules and warranty booklets. E.g.,

Dewey, 558 F. Supp. 2d at 527; Luppino v. Mercedes-Benz USA, LLC, Civ. No.

09-5582, 2010 WL 3258259, at *6 (D.N.J. Aug. 16, 2010). Because they do not,

fraud claims relying on affirmative misrepresentations will be dismissed.

ii. Omissions

VW America moves to dismiss claims based on a failure to disclose the

timing chain defect because Plaintiffs do not allege that, prior to their

purchase, they were exposed to “any advertisements, statements or literature

from Defendants that should have contained the allegedly omitted disclosure.”

(VW Mot. at 36.) As a result, Plaintiffs cannot show causation or reliance.

VW America misapprehends the standard:

[P]laintiffs need not identify specific samples of representations on

which they relied which did not contain the allegedly omitted

information, a standard which technically might encompass every

statement of the defendants. Rather, a plaintiff typically need only

allege that the defendant failed to disclose material information,

and that omission induced the plaintiff to enter into a transaction.

DeFrank, 2020 WL 6269277, at *7 (cleaned up). Plaintiffs have done just that.

(E.g., Am. Compl. ¶ 39.) As a result, their fraud-by-omission claims are

adequately alleged. See Dewey, 558 F. Supp. 2d at 527–28 (omissions claims

survived while affirmative misrepresentation claims did not because the

standards differed).

iii. Pre-Sale Knowledge

VW America asserts that all Plaintiffs’ fraud claims require allegations

that Defendants had knowledge of the alleged defect at the time of sale. (VW

Mot. at 40–41.) VW America acknowledges that Plaintiffs have included

allegations attempting to speak to pre-sale knowledge, but VW America says

that they are inadequate. (Id. at 41–49.)

VW America is correct that fraud claims usually require knowledge, but

allegations of knowledge are only subject to a plausibility—not particularity—

standard. DeFrank, 2020 WL 6269277, at *12; see also Fed. R. Civ. P. 9(b)

(“[K]nowledge[] and other conditions of a person’s mind may be alleged

generally.”). VW America also overlooks that, in assessing pre-sale knowledge

under this standard, courts consider “the totality of allegations . . . collectively”

and do not, as VW America’s brief does, attack each allegation one-by-one.

Ponzio, 447 F. Supp. 3d at 227.

Under the correct standard, Plaintiffs’ allegations suffice. The Amended

Complaint marshals multiple sources to permit an inference of knowledge:

(1) service bulletins over the past decade describing timing chain issues,

(2) consumer complaints made to regulators and dealerships, and (3) a

redesign of the chain. (Am. Compl. ¶¶ 68, 89–119.) VW America quibbles with

details about these sources, going through each individually in an attempt to

show it does not speak directly to every plaintiff’s model or purchase. (VW Mot.

at 41–49.) But courts assess such allegations at a higher level, asking whether,

together, they can establish a general knowledge. Ponzio, 447 F. Supp. 3d at

228. Plaintiffs’ allegations allow an inference that Defendants knew the timing

chain, at least generally, was a problem. That is all they need for now.

iv. Equitable Relief

VW America argues that Plaintiffs cannot seek equitable relief for their

fraud or consumer-protection claims without pleading that there is no

adequate remedy at law. (VW Mot. at 38–40.) But, as a general matter, courts

only dismiss claims not remedies at this early stage. Wright-Phillips v. United

Airlines, Inc., Civ. No. 20-14609, 2021 WL 1221111, at *20 (D.N.J. Apr. 1,

2021); In re Riddell Concussion Reduction Litig., 121 F. Supp. 3d 402, 424–25

(D.N.J. 2015). We still need to decide, e.g., liability before the viability of

injunctive relief comes into play. Riddell, 121 F. Supp. 3d at 424–25. I will not

dismiss Plaintiffs’ prayers for relief at this time.

b. State-Specific Arguments

VW America next makes arguments specific to individual states’

requirements for a fraud claim.

i. Fraudulent Concealment under Florida, Georgia, Illinois,

Massachusetts, New Jersey, New York, and Ohio Law

For fraudulent concealment claims under Florida, Georgia, Illinois,

Massachusetts, New Jersey, New York, and Ohio law, VW America argues that

those states either do not impose a duty to disclose on remote manufacturers

or distributors, or Plaintiffs do not allege facts establishing a duty to disclose.

(VW Mot. at 50–52.) Under all those states’ laws, however, a plaintiff pleads a

fraudulent concealment claim when (1) the defendant allegedly knew of a safety

defect and failed to disclose it, or (2) the defendant made a partial, misleading

disclosure. Timing Chain, 2017 WL 1902160, at *19–20 (collecting cases).

Plaintiffs have alleged as much, so their allegations suffice for these states’

duty-to-disclose elements. (See Sections III.B.1.c, III.B.4.a.i, supra.) See

Majdipour v. Jaguar Land Rover N. Am., LLC, Civ. No. 12-07849, 2013 WL

5574626, at *17–18 (D.N.J. Oct. 9, 2013).

ii. Missing Necessary Elements under Massachusetts,

Michigan, New Jersey, North Carolina, and Ohio Law

For certain states, VW America argues that Plaintiffs fail to plead

additional, necessary elements specific to those states.

Under Massachusetts law, VW America argues that there must be a

closer relationship between the parties than that here, where the dealerships

intervene between manufacturer and purchaser. (VW Mot. at 55.) The

Massachusetts courts have not defined how closely involved the plaintiff and

defendant must have been. They have said that “[p]rivity is not required,” but

the relationship must be more than “minor,” “insignificant,” or “trivial.”

Reisman v. KPMG Peat Marwick LLP, 787 N.E.2d 1060, 1078 (Mass. Ct. App.

2003) (citation omitted). As explained, the precise relationship between the

manufacturing Defendants here and the dealerships is not yet clear. Plaintiffs

do not and cannot know what materials or direction Defendants provided to the

dealerships. So dismissal in advance of discovery is premature. See In re Gen.

Motors LLC Ignition Switch Litig., 257 F. Supp. 3d 372, 417–18 (S.D.N.Y. 2017)

(allowing Massachusetts claim to proceed even when plaintiffs purchased cars

from dealerships).

Under Michigan law, VW America argues that “conduct specifically

authorized under laws administered by a regulatory board or officer” is exempt

from liability. (VW Mot. at 53–54 (quoting Mich. Comp. Laws § 445.904(1)).) But

VW America has not pointed to any laws that “specifically” “authorized” its

conduct, i.e., using a specific timing chain system and failing to disclose its

known flaws. Yet VW America bears the burden of showing this exemption’s

applicability, and Michigan courts scrutinize the relied-upon statute vis-à-vis

the conduct to ensure that defendants cannot escape liability simply by

claiming that they are subject to a regulatory agency. See In re Gen. Motors Air

Conditioning Mktg. & Sales Pracs. Litig., 406 F. Supp. 3d 618, 642 (E.D. Mich.

2019); Liss v. Lewiston-Richards, Inc., 732 N.W.2d 514, 520–21 (Mich. 2007).

Absent a more specific argument, VW America’s invocation of the exemption

fails.

Under New Jersey law, VW America argues that Plaintiffs have not

pleaded an “ascertainable loss” because the allegedly defective component

outperformed its warranty period. (VW Mot. at 55–56.) True, “[t]here are federal

cases in New Jersey which have limited [New Jersey Consumer Fraud Act or

“NJCFA”] claims to defects which occur within the warranty period.” DeFrank,

2020 WL 6269277, at *10. But courts have still agreed that safety hazards, like

those alleged here, can give rise to a NJCFA claim “regardless of the duration of

the warranty.” Id. at *11. In addition, in cases where, as here, plaintiffs allege

that defendants concealed a defect and limited the warranty accordingly, the

plaintiffs have adequately pleaded a NJCFA claim. Maniscalco v. Bro. Int’l Corp.

(USA), 627 F. Supp. 2d 494, 501–02 (D.N.J. 2009). Also significant is that those

cases dismissing NJCFA claims have done so by concluding that plaintiffs

suffered no damages. Id. at *10. Here, Plaintiffs allege a diminution in value

and costs of replacements, damages sufficient to satisfy the requirement of an

ascertainable loss. Mickens v. Ford Motor Co., 900 F. Supp. 2d 427, 446 (D.N.J.

2012). I reject VW America’s argument.

Under North Carolina law, VW America argues that Plaintiffs must plead

“egregious or aggravating circumstances.” (VW Mot. at 52–53 (quoting Ellis v.

La.-Pac. Corp., 699 F.3d 778, 787 (4th Cir. 2012)).) “Egregious or aggravating

circumstances,” however, signifies only that the claim cannot be based on a

mere breach of contract. Ellis, 699 F.3d at 787 (citing Becker v. Graber

Builders, Inc., 561 S.E.2d 905, 910–11 (N.C. Ct. App. 2002)). “Aggravating

circumstances include conduct of the breaching party that is deceptive.” Id.

(quoting Becker, 561 S.E.2d at 911). Plaintiffs have alleged deceptive practices

in that Defendants failed to disclose a defect within their knowledge. Ferro v.

Volvo Penta of the Ams., LLC, 731 F. App’x 208, 210 (4th Cir. 2018) (per

curiam).

Under Ohio law, VW America argues that an alleged defect that manifests

after the warranty period cannot support a claim. (VW Mot. at 55.) The only

case VW America cites for this proposition, Eisert v. Kantner, No. 2-10-13, 2010

WL 3836205, at *6–7 (Ohio Ct. App. Oct. 4, 2010), is inapposite because it does

not involve allegations, like those here, that defendants concealed a defect and

limited the warranty accordingly. Nor did Eisert “confront the issue of safety

concerns and is therefore not persuasive on this point.” In re Porsche Cars N.

Am., Inc., 880 F. Supp. 2d 801, 871 (S.D. Ohio 2012). Given the allegations

present here that were not addressed in Eisert, I decline to conclude that Eisert

compels dismissal of Plaintiffs’ Ohio claims.

iii. Availability of Class-Wide Relief under Colorado, Georgia,

and Ohio Law

Under Colorado and Georgia law, VW America argues that Plaintiffs

cannot seek monetary relief on a class-wide basis. (VW Mot. at 56–57 (citing

Colo. Rev. Stat. § 6-1-113; Ga. Code Ann. § 10-1-399).) Under Ohio law, VW

America argues that Plaintiffs can only maintain a class action if they satisfy

certain pre-suit requirements, which they have not. (Id. at 57–59 (citing Ohio

Rev. Code § 1345.09(B)).) These arguments involve a complicated issue:

whether a state law’s prohibitions or limitations on proceeding as a class action

applies in federal court, where Federal Rule of Civil Procedure 23 governs class

actions. Compare Lisk v. Lumber One Wood Preserving, LLC, 792 F.3d 1331,

1337 (11th Cir. 2015) (analyzing the Supreme Court’s fractured decision in

Shady Grove Orthopedic Associates, P.A. v. Allstate Insurance Co., 559 U.S. 393

(2010), to hold that Rule 23 displaces a state’s contrary bar), with In re Lipitor

Antitrust Litig., 336 F. Supp. 3d 395, 416–17 (D.N.J. 2018) (disagreeing with

Lisk’s analysis of Shady Grove and holding). VW America’s opening brief does

not even mention Shady Grove. This is a thorny issue requiring more

development. That development will occur in connection with class

certification. Even if Plaintiffs cannot maintain their Colorado, Georgia, Ohio

claims as a class, they will likely revert to maintaining them individually. It is

thus unnecessary to decide this issue now, so I decline to dismiss the

Colorado, Georgia, and Ohio claims. Timing Chain, 2017 WL 1902160, at *24.

iv. Applicability of the Economic Loss Rule under

Pennsylvania and Florida Law

Under Pennsylvania and Florida law, VW America argues that the

economic loss rule bars claims for common-law fraudulent concealment that

assert only economic harm. (VW Mot. at 59–60.) More recent authority suggests

that the rule only applies to negligence claims under Pennsylvania law. Earl v.

NVR, Inc., 900 F.3d 310, 313 (3d Cir. 2021); Knight v. Springfield Hyundai, 81

A.3d 940, 951–52 & n.9 (Pa. Super. Ct. 2013). Regardless, the rule does not

apply when fraud is extrinsic to the contract or fraud induced the plaintiff to

enter a contract. Timing Chain, 2017 WL 1902160, at *17. By alleging that

Defendants fraudulently concealed the defect, Plaintiffs’ allegations cross the

hazy line into fraud-in-the-inducement claims. Id.

v. Timeliness of Claims under California, Florida, Ohio, and

Oregon Law

VW America argues that fraud claims under California, Florida, Ohio,

and Oregon law are all untimely. But those claims’ timeliness turns on when

precisely the defect was discovered and the nature of Defendants’ alleged

fraudulent concealment. See Aryeh v. Canon Bus. Sols., Inc., 292 P.3d 871, 882

(Cal. 2013); Keegan v. Am. Honda Motor Co., 284 F.R.D. 504, 543 (C.D. Cal.

2012); Farmers Ins. Exch. v. First Choice Chiro. & Rehab., 2014 WL 3591558, at

*12 (D. Or. July 18, 2014); Ponzio, 447 F. Supp. 3d at 251. It is thus premature

to dismiss claims as untimely. (Section III.B.1.a, supra.)

* * *

For the foregoing reasons, VW America’s motion to dismiss the fraud

claims is granted to the extent those claims rely on affirmative

misrepresentations, but the motion is otherwise denied.

Negligent Misrepresentation

VW America puts forward several grounds to dismiss certain negligent

misrepresentation claims.

First, VW America argues that, under Illinois, Florida, and California law,

claims for negligent misrepresentation are barred by the economic loss rule.

(VW Mot. at 61.) But “those states allow claims to proceed when the tort claim

is based on conduct that is either independent of a contract or where there is a

risk of personal injury.” Timing Chain, 2017 WL 1902160, at *21 (collecting

cases). Plaintiffs have alleged as much here.

Second, VW America argues that, under Colorado, North Carolina, Ohio,

and California law, a negligent misrepresentation claim cannot be based on an

omission. (VW Mot. at 62.) However, Plaintiffs plead that Defendants

misrepresented the need to repair the timing chain in the maintenance

schedules and warranty booklets. (Section III.B.4.a.i, supra.) Defendants do not

raise reliance or causation problems that would prevent Plaintiffs from relying

on these misrepresentations for a negligent misrepresentation claim.

Third, VW America argues that, under New Jersey and Washington law,

there is no duty to disclose that can form the basis of a negligent

misrepresentation claim unless disclosure is necessary to make a previous

statement true or the parties share a special relationship. (VW Mot. at 64.)

Plaintiffs allege that defendants made misrepresentations in maintenance

schedules and warranty booklets but did not amend them despite their

knowledge of the defect. Thus, Plaintiffs’ allegations satisfy the rule VW

America puts forward.

Fourth, VW America argues that, under Massachusetts law, Plaintiffs

have not adequately pleaded reliance. (VW Mot. at 64.) But to the extent

Plaintiffs’ claims negligent misrepresentation claims rely on omissions, they

adequately plead reliance. (See Section III.B.4.a.ii, supra.) In any event,

Massachusetts law leaves reliance, once pled, to the jury. First Marblehead

Corp. v. House, 473 F.3d 1, 11 (1st Cir. 2006) (citing Nota Constr. Corp. v.

Keyes Assocs., 694 N.E.2d 401, 405 (Mass. Ct. App. 1998)).

Finally, VW America argues that, under California law, the negligent

misrepresentation claim is untimely. (VW Mot. at 65.) Again, timeliness

depends on the time of discovery, Cal. Code Civ. P. § 338(d), which cannot be

decided now. (Section III.B.1.a, supra.)

VW America’s motion to dismiss the negligent misrepresentation claims

will be denied.

Unjust Enrichment

VW America puts forward several reasons to dismiss the unjust

enrichment claims.

First, VW America argues that Plaintiffs cannot pursue unjust

enrichment claims, which are equitable, without showing that they lack an

adequate legal remedy. (VW Mot. at 65–66.) Similarly, VW America argues that

Plaintiffs cannot pursue unjust enrichment claims when they have an express

contract. (Id. at 68–69.) But Plaintiffs may plead unjust enrichment claims in

the alternative to their claims at law. Gap Props., LLC v. Cairo, Civ. No. 19-

20117, 2020 WL 7183509, at *4 (D.N.J. Sept. 17, 2020) (citations omitted); see

also Timing Chain, 2017 WL 1902160, at *22.

Second, VW America argues that some of the unjust enrichment claims

are untimely. (VW Mot. at 67–68.) Again, deciding timeliness is premature.

(Section III.B.1.a, supra.)

Third, VW America argues that some states do not recognize unjust

enrichment claims by purchasers from third-party entities because those

purchasers did not confer a direct benefit upon the manufacturer-defendant.

(VW Mot. at 67–68.) Similarly, VW America argues that New Jersey requires a

direct relationship between the parties. (Id. at 70.) But the precise nature of the

benefit here and relationships underlying it requires factual development. See

In re K-Dur Antitrust Litig., 338 F. Supp. 2d 517, 544 (D.N.J. 2004) (“The critical

inquiry is whether the plaintiff’s detriment and the defendant’s benefit are

related to, and flow from, the challenged conduct.”). That is, the nature of the

dealerships and manufacturers’ relationship is not yet clear. In any event,

“Defendant benefited, at Plaintiffs’ expense, when they sold Plaintiffs a vehicle

that would not operate properly until the end its purported usual lifespan.”

Timing Chain, 2017 WL 1902160, at *22.

Finally, VW America argues that the unjust enrichment claims fail

because they are predicated on the fraud conduct, which VW America views as

inadequately alleged. (VW Mot. at 69.) I disagree and find some fraud

allegations plausible, so this argument fails. (Section III.B.4.a.ii, supra.)

For those reasons, the motion to dismiss the unjust enrichment claims

will be denied.

IV. CONCLUSION

For the reasons set forth above, Audi AG’s motion to dismiss for lack of

personal jurisdiction is denied without prejudice to renewal following

jurisdictional discovery. VW America’s motion to dismiss is granted as to the

MMWA claims, fraud claims based on affirmative misrepresentations, implied

warranty claims under Illinois and Oregon law, and negligent

misrepresentation claims under Georgia and Oregon law. The motion is

otherwise denied.

A separate order will issue.

Dated: June 25, 2021

/s/ Kevin McNulty

___________________________________

Hon. Kevin McNulty

United States District Judge