Bowes et al v. PACCAR Inc et al, No. 2:2019cv01794 - Document 45 (W.D. Wash. 2020)
Court Description: ORDER granting in part and denying in part Defendants' 25 Motion to Dismiss If Plaintiffs choose to file an amended complaint, they must plead additional allegations that cure the deficiencies identified in this order. The amended complaint must be filed within 30 days of the issuance of this order. Signed by U.S. District Judge John C Coughenour.(TH)
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Bowes et al v. PACCAR Inc et al Doc. 45 THE HONORABLE JOHN C. COUGHENOUR 1 2 3 4 5 6 UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON AT SEATTLE 7 8 9 JAMES BOWES et al., 10 Plaintiffs, ORDER v. 11 12 CASE NO. C19-1794-JCC PACCAR, INC. et al., 13 Defendants. 14 15 This matter comes before the Court on Defendants’ motion to dismiss pursuant to Federal 16 Rule of Civil Procedure 12(b)(6) (Dkt. No. 25). Having thoroughly considered the parties’ 17 briefing and the relevant record, the Court finds oral argument unnecessary and hereby GRANTS 18 in part and DENIES in part the motion for the reasons explained herein. 19 I. BACKGROUND 20 A. The Parties 21 Plaintiff James Bowes is a citizen and resident of Illinois. (Dkt. No. 1 at 7.) Plaintiff 22 Brian Hipsher is a citizen and resident of Florida. (Id.) Plaintiffs S&L Cartage, Inc., International 23 Logistics Group, Inc., and M&S Freight Systems, Inc. are Illinois corporations with principal 24 places of business in Illinois. (Id.) Plaintiff Western Provisions, Inc. is a South Dakota 25 corporation with its principal place of business in South Dakota. (Id.) 26 Defendant PACCAR, Inc. (“PACCAR”) is a Delaware corporation with its principal ORDER C19-1794-JCC PAGE - 1 Dockets.Justia.com 1 place of business in Washington. (Id.) Defendant PACCAR Engine Company (“PEC”), a 2 subsidiary of PACCAR, is a Mississippi corporation with its principal place of business in 3 Washington. (Id.) Defendants Kenworth Truck Company (“Kenworth”) and Peterbilt Motors 4 Company (“Peterbilt”) are divisions or subsidiaries of Defendant PACCAR, with their principal 5 places of business in Washington. (Id. at 8.) 6 B. The Engines 7 Defendants manufacture and sell heavy-duty commercial vehicles. (Id.) Beginning in 8 2010, Defendants began to manufacture PACCAR MX-13 diesel engines (“Engines”). (Id. at 4, 9 8.) The Engines incorporate an aftertreatment system (“ATS”) that Defendants have previously 10 included in other vehicles. (Id.) The ATS contains a diesel particulate filter (“DPF”) system and 11 a selective catalytic reduction (“SCR”) system, which control the Engines’ emission of nitrogen 12 oxides and particulate matter. (Id. at 8–9.) In order to meet the Environmental Protection 13 Agency’s (“EPA”) 2010 Heavy-Duty On Highway Emissions Standard (“2010 Standard”), 14 Defendants designed, manufactured, sold for profit, and warranted Engines with an Emissions 15 Aftertreatment System (“EAS”) emissions control unit. (Id. 4, 8.) The EAS includes an exhaust 16 gas recirculation (“EGR”) component that assists in altering the temperature and composition of 17 the exhaust. (Id.) 18 In a 2010 annual report, Defendants reported that the Engines were certified by the EPA 19 and the California Air Resources Board. (Id. at 10.) Defendants stated that the Engines were 20 durable, high-performing, and efficient. (Id.) In a 2014 annual report, Defendants reported that 21 their Mississippi factory had produced a record number of Engines and that over 75,000 Engines 22 had been installed since 2010. (Id.) Defendants’ marketing material has stated “that the Engine 23 has a B10 design life of 1,000,000 miles” and that the Engines’ reliability and durability have 24 been rigorously tested. (Id. at 10–11.) 25 C. Alleged Engine Defect 26 Plaintiffs allege that a defect in the Engines causes vehicles containing the Engines ORDER C19-1794-JCC PAGE - 2 1 (“Vehicles”) to not function reliably, even following repeated warranty repairs and replacements. 2 (Id. at 11.) The EAS and related systems continuously monitor Vehicles and, upon detection of a 3 malfunction, trigger a malfunction indicator and produce a fault code that is stored in the Engine 4 Control Module (“ECM”). (Id.) Engines are designed to attempt to address malfunctions 5 themselves; if a malfunction cannot be adequately addressed, an indicator light informs the 6 Vehicle’s operator of the malfunction. (Id.) The operator is instructed to take the affected 7 Vehicle to an authorized facility for malfunction identification and repair. (Id. at 12.) Defendants 8 require that repair work on Engines be performed at Defendants’ authorized dealers, who use the 9 fault codes to identify issues while performing the repairs. (Id. at 11–12.) If the operator fails to 10 do so, the Vehicle’s on-board diagnostic (“OBD”) system “will increase operator ‘inducements’ 11 including power derates or shutdown as required to protect the Engine and ATS.” (Id. at 12.) 12 Plaintiffs allege that they and members of the purported class “have repeatedly experienced 13 emissions related performance and reliability problems,” including that “the Vehicles regularly 14 experience numerous fault codes which require servicing.” (Id.) 15 D. Defendants’ Knowledge 16 Plaintiffs allege that, prior to selling the Engines, Defendants knew or should have known 17 that the EAS and related systems were not sufficiently robust to meet Defendants’ 18 representations about the systems’ reliability and durability, that the Engines and EAS were 19 experiencing failures, and that frequent repairs would be required. (Id. at 13.) After selling the 20 Vehicles, Defendants were able to track data regarding the Engines’ operating states via the 21 OBDs and to detect emissions-related issues as warranty claims were reported. (Id.) In response, 22 Defendants issued technical service bulletins and warranty campaigns relating to the EAS, 23 authorized minor adjustments, and/or replaced failed components with components that were 24 similarly prone to failure. (Id. at 13–14.) While Defendants knew or should have known about 25 the defects, they did not notify Plaintiffs or members of the purported class. (Id.) 26 // ORDER C19-1794-JCC PAGE - 3 1 E. Engine Warranty 2 Defendants provide to every user of an Engine a base warranty covering the applicable 3 Engine in the Vehicle’s operations manual, which lasts for 24 months, 250,000 miles, or 6,250 4 hours. (Id. at 14; Dkt. No. 1-2.) The base warranty defines “Warrantable Failures” as defects in 5 material and factory workmanship; if a warrantable failure occurs, Defendants will provide the 6 parts, components, or labor required to repair resultant damage to the affected Engine. (Dkt. No. 7 1 at 14.) The base warranty extends to the first purchaser of a Vehicle and limits the damages 8 that may be recovered. (See Dkt. No. 1-2 at 2, 4–5.) The base warranty disclaims any express or 9 implied warranties not included in the base warranty. (Id. at 4–6.) The base warranty disclaims 10 11 all incidental and consequential damages. (Id. at 6.) Defendants performed numerous warranty repairs on the Vehicles pursuant to the base 12 warranty and have “never rejected repairing an emission-related defect because it was not one of 13 ‘material or workmanship.’” (Dkt. No. 1 at 15.) But the repeated warranty work did not cure the 14 failures, as the Vehicles “repeatedly experienced emissions related malfunction detections, check 15 engine lights requiring taking the Vehicles out of service, power deratings and Engine 16 shutdowns.” (Id.) Plaintiffs assert that “[t]hese failures render the Vehicles unreliable and unsafe 17 for transportation because the Vehicles do not and cannot work properly or run reliably or 18 effectively.” (Id.) 19 F. Plaintiffs’ and the Class’s Experience 20 Plaintiff Bowes purchased a Vehicle in June 2015, Plaintiff Hipsher purchased Vehicles 21 in December 2011 and July 2012, Plaintiffs S&L Cartage, International Logistics Group, and 22 M&S Freight Systems purchased Vehicles from 2010 to 2013, and Plaintiff Western Provisions 23 purchased Vehicles from 2010 to 2012. (Id. at 18–19.) Plaintiffs’ Vehicles have repeatedly 24 broken down or suffered shutdowns, which have required Plaintiffs to deliver the Vehicles to 25 Defendants’ authorized dealers for warranty repair work. (Id. at 19.) Even after warranty repair 26 work was performed, Plaintiffs’ Vehicles continued to exhibit illuminated warning lights; ORDER C19-1794-JCC PAGE - 4 1 Engines derated or shut down; and Plaintiffs experienced problems with sensors, injectors, and 2 dosers along with other system failures. (Id.) Plaintiffs assert that because of the Vehicles’ issues 3 they have suffered out-of-pocket damages and damages arising from the diminished values of the 4 Vehicles both at the time of sale and now that the market is aware of the alleged defects. (Id. at 5 18–19.) Plaintiffs state that they would have either not purchased the Vehicles or would have 6 paid less for the Vehicles but for Defendants’ omissions and misrepresentations related to the 7 Vehicles. (Id. at 19.) 8 On November 5, 2019, Plaintiffs filed a class action lawsuit on behalf of themselves and 9 others similarly situated. (See generally id.) Plaintiffs purport to bring the action on behalf of a 10 nationwide class which excludes New Jersey, Georgia, and Texas for violations of Washington 11 law. (See id. at 23.) In the alternative, Plaintiffs purport to bring the action on behalf of a Florida 12 class, an Illinois class, an Ohio class, and a South Dakota class. (Id. at 23–24.) Plaintiffs allege 13 on behalf of the nationwide class that Defendants violated the Washington Consumer Protection 14 Act, Wash. Rev. Code § 19.86.010 et seq., and breached an express warranty in violation of 15 Wash. Rev. Code § 62A.2-313. (Id. at 26–29.) In the alternative, Plaintiffs allege on behalf of the 16 Florida class that Defendants breached an express warranty in violation of Fla. Stat. § 672.313, 17 breached an implied warranty in violation of Fla. Stat. § 672.314, breached a contract or 18 common law warranty in violation of Florida law, and violated the Florida Deceptive and Unfair 19 Trade Practices Act, Fla. Stat. § 501.201 et seq. (Id. at 29–35.) In the alternative, Plaintiffs allege 20 on behalf of the Illinois class that Defendants breached an express warranty in violation of 810 21 Ill. Comp. Stat. 5/2-313, breached an implied warranty in violation of 810 Ill. Comp. Stats. 5/2– 22 314 and 5/2A-212, and violated the Illinois Consumer Fraud and Uniform Deceptive Trade 23 Practices Act. 815 Ill. Comp. Stat. 505/2. (Id. at 35–41.) In the alternative, Plaintiffs allege on 24 behalf of the Ohio class that Defendants breached an express warranty in violation of Ohio Rev. 25 Code § 1302.26, breached an implied warranty in violation of Ohio Rev. Code § 1302.27, and 26 were negligent in designing, engineering, and manufacturing the Engines under Ohio law. (Id. at ORDER C19-1794-JCC PAGE - 5 1 41–46.) In the alternative, Plaintiffs allege on behalf of the South Dakota class that Defendants 2 breached an express warranty in violation of S.D. Codified Laws § 57A-2-313, breached an 3 implied warranty in violation of S.D. Codified Laws § 57A-2-314, and violated the South Dakota 4 Deceptive Trade Practices Act, S.D. Codified Laws § 37-24-6. (Id. at 46–51.) 5 Defendants move to dismiss Plaintiffs’ complaint pursuant to Federal Rule of Civil 6 Procedure 12(b)(6). (Dkt. No. 25.) 7 II. DISCUSSION 8 A. Legal Standard 9 The court may dismiss a complaint that “fails to state a claim upon which relief can be 10 granted.” Fed. R. Civ. P. 12(b)(6). To survive a motion to dismiss, a complaint must contain 11 sufficient factual matter, accepted as true, to state a claim for relief that is plausible on its face. 12 Ashcroft v. Iqbal, 556 U.S. 662, 677–78 (2009). A claim has facial plausibility when the plaintiff 13 pleads factual content that allows the court to draw the reasonable inference that the defendant is 14 liable for the misconduct alleged. Id. at 678. 15 A plaintiff must provide grounds for his or her entitlement to relief that amount to more 16 than labels and conclusions or a formulaic recitation of the elements of a cause of action. Bell 17 Atl. Corp. v. Twombly, 550 U.S. 544, 545 (2007). “[T]he pleading standard Rule 8 announces 18 does not require ‘detailed factual allegations,’ but it demands more than an unadorned, the- 19 defendant-unlawfully-harmed-me accusation.” Iqbal, 556 U.S. at 678. 20 “In alleging fraud[,] . . . a party must state with particularity the circumstances 21 constituting fraud . . . . Malice, intent, knowledge, and other conditions of a person’s mind may 22 be alleged generally.” Fed. R. Civ. P. 9(b); see Iqbal, 556 U.S. at 686. Under the Rule 9(b) 23 pleading standard, “[a]verments of fraud must be accompanied by ‘the who, what, when, where, 24 and how’ of the misconduct charged.” Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th 25 Cir. 2003) (quoting Cooper v. Pickett, 137 F.3d 616, 627 (9th Cir. 1997)). Even if the elements 26 of a claim do not include fraud, an allegation of a “unified course of fraudulent conduct” requires ORDER C19-1794-JCC PAGE - 6 1 that “the pleading of that claim as a whole must satisfy the particularity requirement of Rule 2 9(b).” Id. at 1103–04. “The Rule 9(b) standard is relaxed in fraudulent omission cases,” as the 3 plaintiff may not be able to specify the time, place, and specific content of an omission as 4 precisely as a plaintiff claiming false representation. Carideo v. Dell, Inc., 706 F. Supp. 2d 1122, 5 1132 (W.D. Wash. 2010). 6 B. Statutes of Limitations 7 Defendants move to dismiss several of Plaintiffs’ claims as untimely under the applicable 8 statutes of limitation. (See Dkt. No. 25 at 17–24.) A motion to dismiss based on the running of 9 the statute of limitations will not be granted “unless it appears beyond doubt that the plaintiff can 10 prove no set of facts that would establish the timeliness of the claim.” Supermail Cargo, Inc. v. 11 United States, 68 F.3d 1204, 1207 (9th Cir. 1995). 12 13 1. Breach of Express Warranty Claims “An action for breach of any contract for sale must be commenced within four years after 14 the cause of action has accrued. By the original agreement the parties may reduce the period of 15 limitation to not less than one year but may not extend it.” Wash. Rev. Code § 62A.2-725(1); see 16 81 Ill. Comp. Stat. 5/2-725(1) (setting four-year statute of limitations on action for breach of 17 contract of sale); S.D. Codified Laws § 57A-2-725(1) (“An action for breach of any contract for 18 sale must be commenced within four years after the cause of action has accrued.”); Fla. Stat. 19 § 95.11(2)(b) (setting five-year statute of limitations for action on written instrument). Generally, 20 a cause of action for breach of an express warranty accrues when the breach occurs, regardless of 21 when the plaintiff learns of the injury or when resulting damages have occurred. See Wash. Rev. 22 Code § 62A.2-725(2); 81 Ill. Comp. Stat. 5/2-725(2); S.D. Codified Laws § 57A-2-725(2); but 23 see Lion Life, LLC v. Regions Bank, 2013 WL 2367823, slip op. at 1 (S.D. Fla. 2013) (“In 24 Florida, under a breach of contract suit, the cause of action accrues and the statute of limitations 25 begins to run when the last element giving rise to the cause of action takes place.”). Thus, under 26 Washington, Illinois, and South Dakota law, a breach of warranty occurs upon delivery unless ORDER C19-1794-JCC PAGE - 7 1 the warranty “explicitly extends to future performance” and “discovery of the breach must await 2 the time of such performance,” in which case “the cause of action accrues when the breach is or 3 should have been discovered.” Wash. Rev. Code § 62A.2-725(2); 81 Ill. Comp. Stat. 5/2-725(2); 4 S.D. Codified Laws § 57A-2-725(2). 5 The breach of express warranty statutes of Washington, Illinois, and South Dakota 6 explicitly recognize that they do “not alter the law on tolling of the statute of limitations.” Wash. 7 Rev. Code § 62A.2-725(4); 81 Ill. Comp. Stat. 5/2-725(4); S.D. Codified Laws § 57A-2-725(4). 8 A court may equitably toll the applicable statute of limitations “when justice requires,” as when 9 there is “bad faith, deception, or false assurances by the defendant and the exercise of diligence 10 by the plaintiff.” Millay v. Cam, 955 P.2d 791, 797 (Wash. 1998); accord Ralda-Sanden v. 11 Sanden, 989 N.E.2d 1143, 1147 (Ill. Ct. App. 2013); Pitt-Hart v. Sanford USD Med. Ctr., 878 12 N.W.2d 406, 416 (S.D. 2016). 13 Under Florida law, “[i]f the warranty expires before a plaintiff discovers the breach, then 14 the statute begins to run on the expiration date.” Kaplan v. Volvo Penta of the Americas, LLC, 15 2014 WL 6908423, slip op. at 2–3 (S.D. Fla. 2014). The Florida Supreme Court has recognized 16 that Fla. Stat. § 90.501 significantly limits the application of equitable tolling under Florida state 17 law. See Major League Baseball v. Morsani, 790 So. 2d 1071, 1074–75 (Fla. 2001); see also 18 Kelley v. Metro. Life Ins. Co., 2013 WL 5797367, slip op. at 3 (S.D. Fla. 2013) (finding breach 19 of contract claim was time-barred under five-year statute of limitation and rejecting argument 20 that Fla. Stat. § 95.051 tolled statute of limitations). But the Florida Supreme Court has also 21 noted that the doctrine of equitable estoppel “presupposes a legal shortcoming in a party’s case 22 that is directly attributable to the opposing party’s misconduct” and “bars the wrongdoer from 23 asserting that shortcoming and profiting from his or her own misconduct.” Morsani, 790 So. 2d 24 at 1076–77. 25 Here, the express warranty at issue spanned for 24 months, 250,000 miles, or 6,250 hours 26 ORDER C19-1794-JCC PAGE - 8 1 from the date of purchase. (See Dkt. No. 1-2 at 2.) 1 Plaintiffs filed their complaint in this action 2 on November 5, 2019. (See Dkt. No. 1.) Defendants argue that Plaintiffs’ claims for breach of 3 the express warranty are therefore untimely under each applicable statute of limitations, citing 4 the purchase dates alleged in Plaintiffs’ complaint. (Dkt. No. 25 at 18–20.) 5 Plaintiffs’ complaint alleges that Defendants were aware of the Engines’ defect before 6 selling Engines and that Defendants possessed exclusive knowledge of or access to material facts 7 that Plaintiffs could not have known or discovered with reasonable diligence. (See Dkt. No. 1 at 8 13–14.) Plaintiffs further allege that when they brought Vehicles in for warranty repair work, 9 Defendants represented that the Vehicles’ issues were warrantable and that the resultant repairs 10 corrected the issues. (Id. at 18, 20–21.) Plaintiffs also assert that Defendants knowingly and 11 actively misrepresented the nature of the Engines’ defect and the efficacy of the warranty repair 12 work performed. (Id. at 20.) And Plaintiffs explicitly plead that the equitable doctrines of tolling 13 and estoppel apply to their claims. (See id. at 20–23.) Thus, the complaint sets forth factual 14 allegations which demonstrate that Plaintiffs may be able to establish that the applicable statutes 15 of limitations may be subject to equitable tolling or equitable estoppel. See Supermail Cargo, 68 16 F.3d at 1207. Accordingly, Defendants’ motion to dismiss is DENIED on this ground. 2 17 1 18 19 20 21 22 23 24 25 26 In ruling on a motion to dismiss, the court may consider only the pleadings or documents attached to or incorporated by reference in the pleadings. See United States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003); Rubio v. U.S. Bank N.A., 2014 WL 1318631, slip op. at 5 (N.D. Cal. 2014). Plaintiffs have attached the base warranty to their complaint and reference it throughout their complaint. (See generally Dkt. Nos. 1, 1-2.) Defendants have attached four limited warranty agreements to their motion to dismiss, two of which were signed by Plaintiff Hipsher and two of which were signed by Plaintiff Western Provisions. (See Dkt. No. 25-1 at 3, 6, 9, 12.) Defendants argue that these limited warranties, which provide that Plaintiffs had 12 months in which to bring a lawsuit after a claim accrued, were incorporated by reference in Plaintiffs’ complaint. (See Dkt. No. 25 at 13–14 & 13 n.6) (citing Dkt. No. 1 at 14). But the cited portion of Plaintiffs’ complaint references the base warranty attached thereto, and the base warranty does not appear in any of the limited warranties offered by Defendants. (Compare Dkt. No. 1-2 with Dkt. No. 25-1 at 2–13.) Therefore, the Court will not consider the limited warranties in ruling on Defendants’ motion to dismiss. 2 Because the Court finds that Plaintiff’s complaint establishes a reasonable inference that the statutes of limitations applicable to Plaintiffs’ breach of warranty claims may be subject to ORDER C19-1794-JCC PAGE - 9 1 2. Breach of Implied Warranty Claims 2 Under Ohio, Illinois, and South Dakota law, claims for breach of implied warranty are 3 subject to a four-year statute of limitations. See Ohio Rev. Code § 1302.98(A); 810 Ill. Comp. 4 Stat. § 5/2-725(2); S.D. Codified Laws § 57A-2-725(1). Florida law assigns a five-year statute of 5 limitations to such claims. See Fla. Stat. § 95.11(2)(b). Generally, a cause of action accrues upon 6 delivery, regardless of the aggrieved party’s knowledge; but if the warranty at issue explicitly 7 extends to the future performance of the goods, a cause of action accrues when the breach is or 8 should have been discovered. See Ohio Rev. Code § 1302.98(B); Val Decker Packing Co. v. 9 Corn Prod. Sales Co., 411 F.2d 850, 851 (6th Cir. 1969); 81 Ill. Comp. Stat. 5/2-725(2); 10 Progressive N. Ins. Co. of Illinois v. Ford Motor Co., 259 F. Supp. 3d 887, 890 (S.D. Ill. 2017); 11 S.D. Codified Laws § 57A-2-725(2); City of Lennox v. Mitek Indus., Inc., 519 N.W.2d 330, 332– 12 33 (S.D. 1994); AB CTC v. Morejon, 324 So. 2d 625, 628 (Fla. 1975). All four statutes of 13 limitations applicable to claims for breach of implied warranty may be tolled or the defendant 14 may be estopped from asserting a statute of limitations defense if the defendant prevented the 15 plaintiff from discovering the facts underlying their cause of action. See Northern Frozen Foods, 16 Inc. v. Farro, 138 N.E.3d 1223, 1229–30 (Ohio Ct. App. 2019) (collecting cases); Clifton v. I- 17 Flow Corp., 2011 WL 5077615, slip op. at 3 (N.D. Ill. 2011) (citing 735 Ill. Comp. Stat. 5/13- 18 215 and collecting cases); Jandreau v. Sheesley Plumbing & Heating Co., Inc., 324 N.W.2d 266, 19 272 (S.D. 1982) (collecting cases); Morsani, 790 So. 2d at 1076–77. 20 Here, Defendants assert that Plaintiffs’ various claims for breach of implied warranty are 21 time-barred because the applicable statutes of limitations began to run on the date each Plaintiff 22 purchased the Vehicles at issue. (See Dkt. No. 25 at 23.) But, as discussed above, Plaintiffs’ 23 complaint explicitly pleads the doctrines of equitable estoppel and equitable tolling, alleges that 24 25 26 equitable tolling or estoppel, it declines to reach the parties’ arguments regarding the reasonableness or unconscionability of the limitation period in the limited warranties or the application of the discovery rule to Plaintiffs’ claims. (See Dkt. Nos. 39 at 18–23, 40 at 6–10.) ORDER C19-1794-JCC PAGE - 10 1 Defendants possessed exclusive knowledge of or access to material facts that Plaintiffs could not 2 have known or discovered with reasonable diligence, and alleges that Defendants knowingly and 3 actively misrepresented the nature of the Engines’ defect and the efficacy of warranty repair 4 work. See supra Section II.B.1.; (Dkt. No. 1 at 13–14, 18, 20–23). Thus, Plaintiffs’ complaint 5 sets forth factual allegations which may establish that the applicable statutes of limitations may 6 not bar Plaintiffs’ claims for breach of implied warranty. See Supermail Cargo, 68 F.3d at 1207. 7 Accordingly, Defendants’ motion to dismiss is DENIED on this ground. 8 3. Consumer Fraud Claims 9 Washington, Illinois, South Dakota, and Florida prohibit unfair or deceptive acts or 10 practices in the conduct of trade or commerce. See Wash. Rev. Code § 19.86.020; 815 Ill. Comp. 11 Stat. 505/2; S.D. Codified Laws § 37-24-6; Fla. Stat. § 501.202(2). The relevant statutes 12 generally define “trade” and “commerce” as the sale of assets or services as well as related 13 advertising and distribution. See Wash. Rev. Code § 19.86.010(2); 815 Ill. Comp. Stat. 505/1(f); 14 S.D. Codified Laws § 37-24-1(13); Fla. Stat. § 501.203(8). Washington, South Dakota, and 15 Florida set four-year statutes of limitations to claims of consumer fraud while Illinois sets a 16 three-year statute of limitations, all of which begin to run after a cause of action accrues. See 17 Wash. Rev. Code. § 19.86.120; S.D. Codified Laws § 37-24-33; Fla. Stat. § 95.11(3)(f); Ill. 18 Comp. Stat. § 505/10a(e). In Washington, Illinois, and South Dakota, a consumer fraud cause of 19 action accrues when the aggrieved party discovers the facts constituting the unlawful conduct. 20 See Reeves v. Teuscher, 881 F.2d 1495, 1501 (9th Cir. 1989); Leonel & Noel Corp. v. Cerveceria 21 Centro Americana, S.A., 758 F. Supp. 2d 596, 604 (N.D. Ill. 2010); S.D. Codified Laws § 37-24- 22 33. Florida courts have held that Fla. Stat. § 95.11(3)’s silence on the applicability of the delayed 23 discovery rule means that the doctrine does not apply to causes of action for unfair and deceptive 24 trade practices. See Yusuf Mohamad Excavation, Inc. v. Ringhaver Equip., Co., 793 So. 2d 1127, 25 1127–29 (Fla. Dist. Ct. App. 2001). But the Florida Supreme Court has stated that “the statute of 26 limitations may be tolled when it can be shown that fraud has been perpetrated on the injured ORDER C19-1794-JCC PAGE - 11 1 party sufficient to place him in ignorance of his right to a cause of action or to prevent him from 2 discovering his injury.” Nardone v. Reynolds, 333 So.2d 25, 39 (Fla. 1976); see Hearndon v. 3 Graham, 767 So.2d 1179, 1184–85 (Fla. 2000) (clarifying difference in accrual of an action and 4 tolling of statute of limitations under Florida law). 5 Here, Defendants argue that Plaintiffs’ consumer fraud claims are untimely under the 6 applicable statutes of limitations because the statutes began to run upon Plaintiffs’ purchase of 7 their Vehicles. (See Dkt. No. 25 at 20–22.) It is true that each of Plaintiffs’ consumer fraud 8 claims allege that Defendants failed to reveal material facts and information about the Engines at 9 the time Plaintiffs bought their Vehicles. (See Dkt. No. 1 at 26–27, 34–35, 40–41, 50–51.) But 10 Plaintiffs also allege that Defendants were aware of the defect in the Engines prior to selling 11 them and possessed exclusive knowledge of or access to material facts that were not known or 12 reasonably discoverable by Plaintiffs. (Id. at 13–14.) And Plaintiffs state that Defendants 13 continued to prevent them from discovering the alleged defect when Vehicles were brought in 14 for warranty repairs. (Id. at 18, 20–21.) Thus, Plaintiffs have asserted that Defendants knowingly 15 and actively misrepresented the nature of the Engines’ alleged defect well beyond the time 16 Plaintiffs purchased the Vehicles. Such allegations establish a plausible claim that Plaintiffs were 17 precluded from discovering the facts underlying their consumer fraud claims and that Plaintiffs’ 18 claims did not begin to accrue until after their purchase of the Vehicles at issue. See Supermail 19 Cargo, 68 F.3d at 1207; Reeves, 881 F.2d at 1501; Leonel & Noel Corp., 758 F. Supp. 2d at 604; 20 S.D. Codified Laws § 37-24-33; Nardone, 333 So.2d at 39. Accordingly, Defendants’ motion to 21 dismiss is DENIED on this ground. 22 23 4. Breach of Implied Warranty in Tort under Ohio Law Defendants assert that Plaintiffs’ implied warranty in tort claim arising under Ohio law is 24 untimely. (See Dkt. No. 25 at 24–25.) Defendants argue that Plaintiffs’ cause of action accrued 25 soon after Plaintiff Bowes purchased the Vehicle at issue but would have needed to “accrue no 26 later than November 5, 2017” to be timely. (Id.) ORDER C19-1794-JCC PAGE - 12 1 Under Ohio law, “[i]mplied warranty in tort is a common-law cause of action that 2 imposes liability upon a manufacturer or seller for breach of an implied representation that a 3 product is of good and merchantable quality, fit and safe for its ordinary intended use.” White v. 4 DePuy, Inc., 718 N.E.2d 450, 454 (Ohio Ct. App. 1998) (internal quotations omitted). Implied 5 warranty in tort claims are subject to a two-year statute of limitations. See U.S. Fid. & Guar. Co. 6 v. Truck & Concrete Equip. Co., 257 N.E.2d 380, 384–85 (Ohio 1970) (citing Ohio Rev. Code 7 § 2305.10). Generally, “[f]or implied warranty in tort claims based on defective products . . . the 8 loss occurs at the point at which the alleged defect manifests, rather than the point at which the 9 sale is made.” In re Porsche Cars N. Am., Inc., 880 F. Supp. 2d 801, 866 (S.D. Ohio 2012). And 10 under Ohio law, a “statute of limitations may be tolled where there is some conduct of the 11 adverse party, such as a misrepresentation, which excludes suspicion and prevents inquiry.” 12 Bryant v. Doe, 552 N.E.2d 671, 675 (Ohio Ct. App. 1988). 13 As discussed above, Plaintiffs’ complaint explicitly pleads the doctrines of equitable 14 estoppel and equitable tolling, alleges that Defendants possessed exclusive knowledge of or 15 access to material facts that Plaintiffs could not have known or discovered with reasonable 16 diligence, and alleges that Defendants knowingly and actively misrepresented the nature of the 17 Engines’ defect and the efficacy of warranty repair work. See supra Section II.B.1.; (Dkt. No. 1 18 at 13–14, 18, 20–23). Thus, Plaintiffs’ complaint sets forth factual allegations which may 19 establish that the statute of limitations applicable to Plaintiff Bowes’s claim for breach of implied 20 warranty in tort under Ohio law may be tolled. See Supermail Cargo, 68 F.3d at 1207. 21 Accordingly, Defendants’ motion to dismiss is DENIED on this ground. 22 C. Implied Warranty Claims 23 Defendants assert that PACCAR disclaimed all implied warranties and therefore 24 Plaintiffs’ claims for breach of implied warranty must be dismissed. (See Dkt. No. 25 at 22.) 25 Defendants’ argument is premised on language contained in the limited warranties attached to 26 their motion to dismiss. (See id.) (citing Dkt. No. 25-1). As discussed above, the limited ORDER C19-1794-JCC PAGE - 13 1 warranties attached to Defendants’ motion to dismiss are not properly before the Court and thus 2 the Court will not consider them in ruling on Defendants’ motion to dismiss. See supra II.B.1. 3 n.1. Accordingly, Defendants’ motion to dismiss is DENIED on this ground. 4 D. Plaintiff Bowes’s Warranty Claims 5 Defendants argue that Plaintiff Bowes’s claims for breach of warranty must be dismissed 6 because the allegations in Plaintiffs’ complaint do not establish a plausible claim that he was the 7 first purchaser of the Vehicle at issue. (See Dkt. No. 25 at 23–24.) The base warranty states that 8 “[t]he PACCAR MX-13 Engine is warranted directly to the first purchaser or first lessee by 9 PACCAR.” (Dkt. No. 1-2 at 2.) Plaintiffs’ complaint alleges that “[o]n or about June, 2015, 10 Bowes purchased a 2012 Kenworth/Peterbilt Vehicle.” (Dkt. No. 1 at 18.) The complaint does 11 not contain allegations establishing that Plaintiff Bowes was not the first purchaser of the 12 Vehicle, despite the difference in the date of purchase and the model date of the Vehicle. (See id. 13 at 7, 18.) And unlike in S.L. Anderson & Sons, Inc. v. PACCAR Inc., C18-0742-JCC (W.D. 14 Wash. 2018), Plaintiffs do not concede that Plaintiff Bowes is not the first purchaser of the 15 Vehicle at issue. Compare id., Dkt. No. 51 at 15 with (Dkt. No. 39 at 26). Therefore, the 16 allegations in Plaintiffs’ complaint establish a plausible claim that Plaintiff Bowes was the first 17 purchaser of his Vehicle, and Defendants’ motion to dismiss is DENIED on this ground. 18 E. 19 20 Ohio State Law Claims 1. Purchase of Vehicle in Ohio Defendants assert that Plaintiffs have failed to establish a plausible claim that a Vehicle at 21 issue in this litigation was purchased in Ohio and therefore “there is not even an arguable basis 22 for Ohio law to apply, and Plaintiffs’ claims under Ohio law should be dismissed.” (Dkt. No. 25 23 at 24.) But Plaintiffs’ complaint states that “Plaintiff Bowes is a citizen and resident of Illinois, 24 having purchased most if not all of his subject vehicles in the State of Ohio,” that “[o]n or about 25 June, 2015, Bowes purchased a 2012 Kenworth/Peterbilt Vehicle,” and that the alleged defect 26 existed at the time of sale. (Dkt. No. 1 at 7, 18.) Plaintiffs’ complaint does not allege that ORDER C19-1794-JCC PAGE - 14 1 Plaintiff Bowes purchased other Vehicles relevant to this litigation. Therefore, when read 2 together, the allegations in Plaintiffs’ complaint plainly contradict Defendants’ assertion that 3 “there is no allegation that the specific vehicle at issue was purchased” in Ohio. (See Dkt. No. 25 4 at 24.) Accordingly, Defendants’ motion to dismiss is DENIED on this ground. 5 6 2. Viability of Common Law Tort Claims Defendants argue that Plaintiffs’ claims for breach of implied warranty in tort and for 7 negligent design, manufacturing, and engineering under Ohio common law are not cognizable 8 because Plaintiff Bowes purchased his Vehicle for commercial use and Plaintiffs seek purely 9 economic damages. (Dkt. No. 25 at 25–26.) 10 A federal court applying a state’s law must apply the law as it believes the state’s 11 supreme court would. See Gravquick A/S v. Trimble Navigation Int’l Ltd., 323 F.3d 1219, 1222 12 (9th Cir. 2003). If there is no controlling state supreme court decision, the court “must predict 13 how the [state supreme court] would decide the issue, using intermediate appellate court 14 decisions, statutes, and decisions from other jurisdictions as interpretive aids.” Id. 15 Under Ohio law, “commercial buyers cannot recover in tort for economic loss.” Trgo v. 16 Chrysler Corp., 34 F. Supp. 2d 581, 594 (N.D. Ohio 1998) (citing Midwest Ford, Inc. v. C.T. 17 Taylor Co., 694 N.E.2d 114, 116–19 (Ohio Ct. App. 1997)); see Apostolos Group, Inc. v. BASF 18 Constr. Chems., LLC, 2011 WL 1847723, slip op. at 3–6 (Ohio Ct. App. 2011). The Ohio 19 Supreme Court has not ruled on the issue of “whether, absent privity of contract, a plaintiff can 20 recover purely economic losses under tort theories” but has strongly implied that it would depart 21 from its prior decisions holding that such plaintiffs could do so. See Chemtrol Adhesives, Inc. v. 22 Am. Mfrs. Mut. Ins. Co., 537 N.E.2d 624, 635 n.7 (Ohio 1989). 23 Following the Ohio Supreme Court’s statement in Chemtrol Adhesives, Inc. v. Am. Mfrs. 24 Mut. Ins. Co., 537 N.E.2d 624 (Ohio 1989), Ohio courts of appeal reached divergent conclusions 25 as to whether a commercial party plaintiff not in privity can recover purely economic losses in 26 tort. See Midwest Ford, Inc. v. C.T. Taylor Co., 694 N.E.2d 114, 117 (Ohio Ct. App. 1997) (“The ORDER C19-1794-JCC PAGE - 15 1 issue before this court is whether [a claim for breach of an implied warranty in tort] should be 2 available to commercial buyers of products who claim purely economic loss from product 3 suppliers with whom they are not in privity. In answering in the negative, we leave Ohio product 4 liability law as we found it.”); Ohio Dep’t of Adm. Serv. v. Robert P. Madison Int’l, Inc., 741 5 N.E.2d 551, 555–58 (Ohio Ct. App. 2000) (finding that “a consumer, commercial or not, can 6 maintain a claim for breach of implied warranty/strict liability [in tort] against a manufacturer, 7 not in privity, for purely economic loss.”). Subsequently, the Sixth Circuit reviewed Ohio 8 caselaw and concluded that under Ohio law “commercial parties lacking privity, as opposed to 9 non-commercial parties, would be foreclosed from recovering economic losses.” HDM 10 Flugservice GmbH v. Parker Hannifin Corp., 332 F.3d 1025, 1028–30 (6th Cir. 2003) 11 (collecting cases); see Nat’l Interstate Ins. Co. v. Motor Coach Indus., Inc., 2012 WL 264577, 12 slip op. at 3 (N.D. Ohio 2012) (collecting cases) (“Ohio Department of Administrative Services 13 apparently has never been followed and directly contradicts other Ohio cases which refuse to 14 extend tort-based causes of action to commercial buyers not in privity who are seeking to recover 15 economic losses.” . . . “The Sixth Circuit has specifically rejected the holding on Ohio 16 Department of Administrative Services.”); but see Roxy Home Improvement, LLC v. Mercedes- 17 Benz USA, LLC, 2018 WL 1705800, slip op. at 4 (N.D. Ohio 2018) (citing Chemtrol, 537 N.E.2d 18 at 635; Ohio Dep’t of Adm. Serv., 741 N.E.2d at 558; HDM Flugservice GmbH, 332 F.3d at 19 1029; Caterpillar Fin. Servs. Corp. v. Harold Tatman & Son’s Ents., Inc., 50 N.E.3d 955, 966 20 (Ohio Ct. App. 2015)) (noting that “Ohio courts have held that a commercial or non-commercial 21 consumer may maintain tort claims against a manufacturer, not in privity, for purely economic 22 loss” before finding that “[a]s commercial consumers in privity with MBUSA, plaintiffs cannot 23 maintain tort claims against manufacturer MBUSA for purely economic loss.”). 24 Here, Plaintiffs allege that Defendant “PACCAR is an international manufacturer of 25 heavy-duty commercial vehicles,” that the Engines were designed to comply with the “EPA 2010 26 Emission Standard applicable to heavy-duty, on-highway diesel engines,” and that Engines’ ORDER C19-1794-JCC PAGE - 16 1 alleged defect “renders the Vehicles unreliable transportation and unsuitable for ordinary 2 commercial use.” (Dkt. No. 1 at 8, 11.) Plaintiffs acknowledge that “Plaintiff Bowes, as a third- 3 party beneficiary of contracts between Defendants and their dealers . . . lacks . . . privity with 4 PACCAR . . . .” (Dkt. No. 39 at 28) (citing Dkt. No. 1 at 45). And Plaintiffs bring Ohio common 5 law tort claims for breach of implied warranty in tort and negligent design, engineering, and 6 manufacturing to recover economic damages. (Dkt. No. 1 at 44–46.) 7 The complaint’s allegations demonstrate that Plaintiff Bowes purchased the Vehicle at 8 issue as a commercial party, was not in privity with Defendants when he did so, and now seeks 9 to recover economic damages under tort theories of liability. (See Dkt. No. 1 at 8, 11, 44–46, 51– 10 52.) Given the Ohio Supreme Court’s implied rejection of this method of recovery, the Sixth 11 Circuit’s analysis of relevant Ohio caselaw, and the weight of Ohio courts of appeals’ decisions 12 on this issue, the Court finds that the Ohio Supreme Court would conclude that Plaintiff Bowes’s 13 status as a commercial party not in privity with Defendants precludes him from recovering 14 purely economic damages under tort theories of recovery. See Gravquick A/S, 323 F.3d at 1222; 15 Chemtrol Adhesives, 537 N.E.2d at 635 n.7; HDM Flugservice GmbH, 332 F.3d at 1028–30; 16 Midwest Ford, 694 N.E.2d at 117; Nat’l Interstate Ins. Co., 2012 WL 264577, slip op. at 3. 17 Accordingly, Defendants’ motion to dismiss is GRANTED as to Plaintiffs’ claims for breach of 18 implied warranty in tort and negligent design, engineering, or manufacturing arising under Ohio 19 law. 20 III. 21 CONCLUSION For the foregoing reasons, Defendants’ motion to dismiss (Dkt. No. 25) is GRANTED in 22 part and DENIED in part. Plaintiff Bowes’s claims for breach of implied warranty in tort and 23 negligent design, engineering, or manufacturing arising under Ohio law are DISMISSED without 24 prejudice and with leave to amend. If Plaintiffs choose to file an amended complaint, they must 25 plead additional allegations that cure the deficiencies identified in this order. The amended 26 complaint must be filed within 30 days of the issuance of this order. If filed, the amended ORDER C19-1794-JCC PAGE - 17 1 2 complaint shall only include additional allegations regarding the dismissed claims. DATED this 11th day of June 2020. 5 A 6 John C. Coughenour UNITED STATES DISTRICT JUDGE 3 4 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 ORDER C19-1794-JCC PAGE - 18
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