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Mross v. General Motors Co. LLC

United States District Court, E.D. Wisconsin

August 25, 2016

GREG MROSS, et al., individuals on behalf of others similarly situated, Plaintiffs,
v.
GENERAL MOTORS COMPANY, LLC, Defendant.

          DECISION AND ORDER

          LYNN ADELMAN District Judge.

         The plaintiffs in this case are nineteen individuals who purchased vehicles manufactured by General Motors Company, LLC (“GM”), after July 2009. The vehicles are “GMT900 truck platform series vehicles, ” which include the Chevrolet Silverado Series, GMC Sierra series, Chevrolet Tahoe series, GMC Yukon series, Cadillac Escalade series, Chevrolet Suburban series, and Chevrolet Avalanche series. Compl. ¶ 1.[1] The plaintiffs allege that these vehicles contain a manufacturing or design defect that will cause “a large discernable crack” to form in the vehicle's dashboard panel “[a]t some point during the life” of the vehicle. Id. ¶¶ 2, 70-71. The complaint alleges that the cracks most commonly occur in two areas of the dashboard: at the steering column cowling and the passenger airbag area. Id. ¶ 3. The complaint alleges that the cost of repairing a dashboard that has cracked in this fashion ranges from $100 to $2, 000. Id. ¶ 72. The complaint further alleges that the cracking problem poses a safety risk. Specifically, the complaint alleges that “[t]he cracking around the airbag is particularly troubling as it could interfere with the deployment of [the] passenger airbag, ” that “[t]he dash is more likely to splinter in unplanned and potentially dangerous directions during [airbag] deployment, ” and that “the dashboard portion is more susceptible to shattering, which creates the potential for bodily harm from shrapnel during impact.” Id. ¶ 4.

         The plaintiffs do not allege that anyone has been injured by a cracked GM dashboard, and they are not seeking damages for personal injuries. Rather, they bring class-action claims for economic losses under various fraud and breach-of-warranty theories. These theories arise under the laws of each of the eleven states in which the plaintiffs purchased their vehicles, [2] under Michigan law (where no plaintiff purchased a vehicle but where GM has its headquarters), and under the federal Magnuson-Moss Warranty Act. The fraud claims allege that GM had a duty to disclose to all purchasers of its vehicles that the dashboards were likely to crack, but failed to do so. The breach-of-warranty and Magnuson-Moss claims allege that GM's actions concerning the cracked dashboards resulted in breaches of the implied warranty of merchantability. Federal subject matter jurisdiction is present under the Class Action Fairness Act of 2005 (“CAFA”), 28 U.S.C. § 1332(d), because at least one class member is of diverse citizenship from GM, [3] there are more than 100 class members nationwide, and the alleged aggregate amount in controversy exceeds $5, 000, 000.00, exclusive of interest and costs. Compl. ¶ 2.

         GM has moved to dismiss the complaint for failure to state a claim upon which relief can be granted. See Fed. R. Civ. P. 12(b)(6). To survive a Rule 12(b)(6) motion, a plaintiff must “state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). “A claim has facial plausibility when the plaintiff pleads factual content that 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). The complaint must, at a minimum, “give the defendant fair notice of what the claim is and the grounds upon which it rests.” Twombly, 550 U.S. at 555. In construing plaintiff's complaint, I assume all factual allegations to be true but disregard allegations that are conclusory. Iqbal, 556 U.S. at 678.

         I begin by assessing the plaintiffs' fraud-related claims. The plaintiffs bring a number of counts for common-law fraud-specifically, for “fraud by concealment”- under the laws of twelve states.[4] They also bring claims under various state statutes regulating deceptive trade practices and related matters.[5] None of these claims depend on the allegation that GM made any statements that were false.[6] Rather, the claims allege that GM failed to disclose the cracked-dashboard defect to potential purchasers.

         The parties have not pointed to any significant differences in the laws of the states at issue regarding a manufacturer's failure to disclose a product defect, and my own research indicates that there are none. The Restatement (Second) of Torts §§ 550 and 551 appear to accurately summarize the law.[7] There are two theories of liability that could apply to this case. The first, recognized in § 550 of the Restatement, is fraudulent concealment. Under that theory, “[o]ne party to a transaction who by concealment or other action intentionally prevents the other from acquiring material information is subject to the same liability to the other, for pecuniary loss[, ] as though he had stated the nonexistence of the matter that the other was thus prevented from discovering.” Restatement (Second) of Torts § 550 (Am. Law Inst. 1977). This rule generally applies in two situations. The first occurs when the defendant actively conceals a defect or problem in an item offered for sale to another. Id. cmt. a. So, for example, a seller of a home cannot cover up signs of termites by installing wallboard to hide the damage. See 3 Dan B. Dobbs et al., The Law of Torts § 682 (2d ed. 2011). The second situation occurs “when the defendant successfully prevents the plaintiff from making an investigation that he would otherwise have made, and which, if made, would have disclosed the facts; or when the defendant frustrates an investigation.” Restatement (Second) of Torts § 550 cmt. b.

         The second theory of liability that could apply to this case is liability for nondisclosure, as described in § 551 of the Restatement. Under this theory, a defendant may be liable for nondisclosure of a material fact even if the defendant did not actively conceal that fact. In other words, under this theory, a defendant's “mere silence” may result in liability. See Wells Fargo Bank v. Arizona Laborers, Teamsters and Cement Masons Pension Trust, 38 P.3d 12, 35 (Ariz. 2002) (“[T]he common law clearly distinguishes between concealment and nondisclosure. The former is characterized by deceptive acts or contrivances intended to hide information, mislead, avoid suspicion, or prevent further inquiry into a material matter. The latter is characterized by mere silence.”). However, for the defendant's mere silence to result in liability, the defendant must have been under a duty to disclose the fact. See Restatement (Second) of Torts § 551(1). The Restatement lists five categories of facts that a “party to a business transaction” must disclose:

(a) matters known to him that the other is entitled to know because of a fiduciary or other similar relation of trust and confidence between them; and
(b) matters known to him that he knows to be necessary to prevent his partial or ambiguous statement of the facts from being misleading; and
(c) subsequently acquired information that he knows will make untrue or misleading a previous representation that when made was true or believed to be so; and
(d) the falsity of a representation not made with the expectation that it would be acted upon, if he subsequently learns that the other is about to act in reliance upon it in a transaction with him; and
(e) facts basic to the transaction, if he knows that the other is about to enter into it under a mistake as to them, and that the other, because of the relationship between them, the customs of the trade or other objective circumstances, would reasonably expect a disclosure of those facts.

Id. § 551(2). In the present case, only subsection (2)(e) is applicable. That is, GM would have had a duty to disclose the propensity of the dashboards to crack only if that fact was “basic to the transaction” and the circumstances were such that the plaintiffs would reasonably expect GM to disclose it.[8]

         In the present case, although the plaintiffs generally allege that GM engaged in fraudulent concealment, this case is really one involving nondisclosure under § 551 rather than concealment under § 550. The plaintiffs have not alleged any specific facts giving rise to a reasonable inference that GM engaged in fraudulent concealment, i.e., that it intentionally prevented the plaintiffs from discovering the propensity of the dashboards to crack. The plaintiffs generally allege that “GM concealed and suppressed material facts concerning” the cracked-dashboard defect and related matters. See, e.g. Compl. ¶¶ 86-88. But this is the type of conclusory allegation that, under Twombly and Iqbal, I do not have to accept as true. See Iqbal, 556 U.S. at 679. And the complaint does not allege any specific facts that would amount to active concealment. That is, the complaint does not allege that GM did anything equivalent to a seller's hiding signs of termites with wallboard, or that it discouraged potential buyers from proceeding with investigations that likely would have revealed the defect. Rather, what the complaint alleges is that GM simply did not disclose the cracked-dashboard defect to potential buyers. This is therefore not a case ...


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