MARK H. COHEN, United States District Judge.
This case comes before the Court on Defendants' Motion for Summary Judgment [Doc. 110] ("Defs.' Mot."). For the reasons that follow, Defendants' Motion for Summary Judgment is
This is a putative class action brought by residents of Georgia, Texas, and Virginia based on alleged defects in the fuel systems of 2003-09 model years of W211 E-Class Mercedes-Benz vehicles. Defendant Daimler AG, a German corporation, manufactured the vehicles. Defendant Mercedes-Benz USA ("MBUSA"), a New Jersey limited liability company and a subsidiary of Daimler AG, distributed the vehicles within the United States.
The vehicles in question are alleged to have defects related to the fuel system, making them prone to leak gasoline vapor into the cabins and leak liquid gasoline outside of the vehicle, as well as causing liquid gasoline to be absorbed into the interior seats. Am. Compl. ¶¶ 2-3.
Plaintiff Ronan McCabe ("McCabe") is a resident of Georgia who purchased a 2006 Mercedes-Benz E55 AMG on January 24, 2012, from an individual seller named Kale Strickland for $30,000. Defs.' SUMF ¶ 62; Dep. of Ronan McCabe taken October 24, 2013 [Doc. 114] ("McCabe Dep.") at 17, 20. When McCabe purchased the car, it was six years old, had two prior owners, and had been driven approximately 53,000 miles. Defs.' SUMF ¶¶ 63, 67; McCabe Dep. at 19, 22, 41. There is no evidence that McCabe had any direct communication with Daimler AG or MBUSA before purchasing the car. Defs.' SUMF ¶¶ 65, 70; McCabe Dep. at 32-33, 35-36.
Strickland provided McCabe with the vehicle's maintenance records prior to the sale, which revealed that the vehicle had a history of prior gas-smell issues, had some related repair work done at the behest of a prior owner, and was the subject of MBUSA's 2008 voluntary recall campaign related to specific components of the fuel system of 2003-06 E-Class vehicles. Defs.' SUMF ¶¶ 72-74; McCabe Dep. at 39-45, Exs. 1-2 [Doc. 110-4]. There is no evidence to indicate that McCabe reviewed any of the records provided to him by Strickland. Defs.' SUMF ¶¶ 175; McCabe Dep. at 39. McCabe testified that had he reviewed the records provided by Strickland, although he was not sure, he probably would not have bought the car. McCabe Dep. at 40, 45. Although he did not review the records, McCabe took the car to Centennial Motors, a Mercedes-Benz dealer, for an inspection prior to purchasing the vehicle. Id. at 35-38. Based on minor issues identified during this inspection, McCabe negotiated a lower purchase price of the vehicle. Id.
The day after he purchased the vehicle, McCabe filled up the car with gasoline and, shortly thereafter, noticed an extremely strong smell of gasoline on the outside of the car and on the next day in
Plaintiff Randa Herring ("Herring") is a resident of Georgia who purchased a 2006 Mercedes-Benz E500 on April 9, 2009, from a Mercedes-Benz dealer, Mercedes-Benz of South Atlanta. Defs.' SUMF ¶ 82; Dep. of Randa M. Herring taken October 29, 2013 [Doc. 113] ("Herring Dep.") at 16. At the time of purchase, Herring's vehicle had 41,000 miles. Defs.' SUMF ¶ 84; Herring Dep. at 17. Although there is no evidence that Herring had any direct communication with Daimler AG or MBUSA prior to purchasing the car, Herring did communicate with representatives of Mercedes-Benz of South Atlanta regarding the purchase of her vehicle from the dealership. Defs.' SUMF ¶ 83; Pl. Randa Herring's Resp. to Def. Mercedes-Benz USA's First Set of Interrogs. No. 6, attached as Ex. AA to Defs.' Mot. At the time she purchased her vehicle, Herring also purchased a certified pre-owned warranty which provided coverage until the earlier of December 20, 2010, or 100,000 miles. Defs.' SUMF ¶ 85; Herring Dep., Ex. 1, attached as Ex. U to Defs.' Mot.
Herring first noticed a "very strong" odor of gas in her car in the summer of 2012. Defs.' SUMF ¶ 98; Herring Dep. at 15, 87. At the time, she had eclipsed both the mileage (108,000) and date restrictions on the certified pre-owned warranty. See Herring Dep. at 63. On or about July 1, 2012 (within days of smelling the "very strong" odor), she took her car to a Mercedes-Benz service center, where service technicians determined that the fuel leak was coming from the gas tank, told her she would need a new gas tank, and quoted her a price of $2,896.64 for the repairs. Defs.' SUMF ¶ 102; Herring Dep. at 26-29. Rather than electing to have the repairs done, Herring decided to trade in her vehicle on August 1, 2012. Defs.' SUMF ¶ 106-07; Herring Dep., Exs. 1, 3, attached as Exs. U and Y to Defs.' Mot.
On July 7, 2011, Plaintiff Jon Dustin Stone ("Stone"), a resident of Texas, purchased a 2007 Mercedes-Benz E63 AMG with 31,340 miles from an individual seller named Satig Der Ohanessian for $37,000. Defs.' SUMF ¶¶ 1-2; Dep. of Jon Dustin Stone taken November 15, 2013 [Doc. 115] ("Stone Dep.") at 12, 37-38; Pl. Jon Dustin Stone's Resp. to Def. Mercedes-Benz USA's First Set of Interrogs. No. 13, attached as Ex. II to Defs.' Mot. Prior to purchasing the car, in order to learn about
On September 30, 2011, over two months after he purchased his vehicle, Stone purchased an aftermarket warranty from NAC, a company unaffiliated with Daimler AG or MBUSA. Defs.' SUMF ¶ 7; Stone Dep. at 43; NAC Vehicle Service Agreement Application, Ex. 5 to the Stone Dep., attached as Ex. I to Defs.' Mot. (indicating the Stone's vehicle's odometer read 36,700 miles as of September 30, 2011). Stone bought the warranty not because of an awareness of the fuel system issues, but to cover any issue that may occur with regard to this used car. Defs.' SUMF ¶ 13; Stone Dep. at 64-65.
Stone testified that he may have begun experiencing gas odor issues as early as November 2011, the date he first took his car to a dealership, Mercedes-Benz of Plano and Park Place, for servicing. Stone Dep. at 59. At that time, Stone asked the Park Place dealer if they would pay for repairs related to the fuel system, and they informed him he would have to pay for it out of pocket. Id. at 63. Stone's second visit to the Mercedes-Benz of Plano and Park Place dealer was on January 18, 2012, when Stone took his car in specifically complaining of a fuel odor and fuel leak. Id. at 62-63. The Park Place dealer replaced the left side fuel-sending unit and installed a seal on the right side sending unit. Defs.' SUMF ¶ 110; Stone Dep. at 63. Stone returned two days later on January 20, 2012, with the same issues, and the Park Place dealer found the new sending unit was still leaking and replaced it, as well as the seal on the left side sending unit. Defs.' SUMF ¶ 10; Stone Dep. at 63. Still experiencing the same issues, Stone returned a third time on February 3, 2012, and the Park Place dealer replaced the entire fuel tank. Id.; Stone Dep. at 64. The cost of these repairs, including the deductibles, was covered by Stone's after-market warranty. Defs.' SUMF ¶ 12; Stone Dep. at 64. Despite these repairs, Stone testified that he continued to experience a fuel odor in the cabin of his vehicle every time he got in the car until some point in the latter part of 2012. Defs.' SUMF ¶ 111; Stone Dep. at 71-72, 80-81. Stone did not, however, take the vehicle back to be serviced related to the fuel odor issue before he sold it on January 11, 2013. Stone Dep. at 72-114.
Plaintiff Minh Vo ("Vo"), a resident of Virginia, purchased a 2006 Mercedes-Benz E500 in November 2008, from the American Service Center, a Mercedes-Benz dealership in Arlington, Virginia, for approximately $34,000. Defs.' SUMF ¶ 109. Dep. of Minh Vo taken November 8, 2013 [Doc. 116] ("Vo Dep.") at 21, 25. Apart from communicating with representatives of the Mercedes-Benz dealership regarding the purchase of his vehicle, there is no evidence that Vo had any direct communication with Daimler AG or MBUSA prior to purchasing the car. Defs.' SUMF 110; Vo Dep. at 29-30. At the time of purchase, Vo's E500 showed 27,355 miles on the odometer, and the car came with a certified preowned warranty. Defs.' SUMF ¶ 111; Vo Dep. at 17. Vo also purchased an extended warranty from the dealership. Defs.' SUMF ¶ 112; Vo Dep. at 17.
Vo first noticed a gasoline smell with regard to his E500 in May or June of 2012.
Vo bought a used 2005 E55 AMG with 55,670 miles on December 23, 2010, from Infiniti of Tyson's Corner, Virginia. Defs.' SUMF ¶¶ 125-26. Vo also purchased an after-market warranty from a company unaffiliated with Defendants. Defs.' SUMF ¶ 127; Vo Dep. at 96. Prior to Vo's ownership, the E55 AMG had parts related to the fuel system replaced under MBUSA's 2008 recall campaign. Vo Dep. at 133-35. Vo claims he first smelled gas inside the E55 AMG within the first several months after buying it. Defs.' SUMF ¶ 130; Vo Dep. at 99. In March 2011, Vo took the E55 AMG to American Service Center, a Mercedes-Benz dealership, to correct the fuel-smell issue and paid $945.28 for repairs related to the fuel system. Defs.' SUMF ¶¶ 131-32; Vo Dep. at 99-102. Vo testified that the gas smell in the E55 AMG resurfaced in 2013, but he had not taken the car in for repairs as of November 8, 2013. Defs.' SUMF ¶ 135; Vo Dep. 123-26.
On January 23, 2012, the National Highway Traffic Safety Administration ("NHTSA") opened an investigation ("2012 Investigation") into gasoline leaks on the fuel tanks and related components of certain Mercedes-Benz vehicles. Second Am. Compl. [Doc. 59] ("Am. Compl.") ¶ 24. The 2012 Investigation ultimately included all 2003 to 2008 Mercedes-Benz E-Class (W211) vehicles. Id.; Letter from NHTSA to Mercedes-Benz USA, LLC ("MBUSA") date stamped February 14, 2012 [Doc.1-4] ("Notice of 2012 Investigation"). As the 2012 Investigation encompassed all Mercedes-Benz E-Class (W211) vehicles from 2003 to 2008, all of Plaintiffs' vehicles in this case were included in the investigation: McCabe (2006 E55 AMG); Herring (2006 E500); Stone (2007 E63 AMG); and Vo (2006 E500 and 2005 E55 AMG). Am. Compl. ¶¶ 38, 45, 53, 67-68. The 2012 investigation examined the following components of the subject vehicles: "fuel pump assembly, the devices that seal the pump to the fuel tank, the hoses that connect to the fuel pump, and the fuel tank." See Notice of 2012 Investigation.
NHTSA's letter announcing the 2012 Investigation into the fuel tanks and related components also mentions a 2008 Voluntary Emissions Recall Campaign #2008-020001 ("2008 Recall") related to all 2003-06 E-Class and 2006 CLS Class vehicles. Am. Compl. ¶ 26; Notice of 2012 Investigation; Notice of Voluntary Emissions Recall Campaign #2008-020001 dated March 2008 [Doc. 1-5] ("Notice of 2008 Recall"). The 2008 Recall involved a more narrow subset of vehicles and model years than were at issue in the 2012 Investigation. Id. Moreover, the 2008 Recall was limited to one vehicle component, the fuel filter modules. See Notice of 2008 Recall. The Notice of 2008 Recall indicated that small cracks could develop in the fuel filter modules of the affected vehicles causing a fuel smell. Id.
On September 4, 2014, MBUSA sent a letter to NHTSA announcing its intention
Id.
On December 19, 2014, NHTSA closed the 2012 Investigation. NHTSA Office of Defects Investigation Closing Resume dated December 19, 2014 [Doc. 158-6]. The NHTSA investigation concluded that there were three identified leak sources unrelated to the issue with the filter modules identified in the 2008 Recall (1) "the On-Board Diagnostic fuel tank pressure sensor (located on top of the fuel filter/sender)," (2) "the outlet of the centrally mounted fuel tank fuel filling limiter valve," and (3) "the top of the fuel pump." Id. NHTSA noted that these areas of leakage are all located at the top of the fuel tank in unpressurized parts of the fuel system, and that "[w]hen the tank is full, fuel can slowly weep/seep from microcracks in these components and may collect in cavities on top of the filter/sender, pump, or tank." Id. NHTSA investigated complaints indicating that fuel entered the inside of vehicles under the rear seat bench, but concluded that there was no "plausible way for this to occur." Id. NHTSA noted MBUSA's warranty extension related to the fuel tank components of the E-Class vehicles and concluded "[the NHTSA Office of Defects investigation] is closing this investigation based on the manufacturer's extend [sic] warranty of the affected fuel system components and in consideration that the nature of the leaks does not appear to present an unreasonable risk to motor vehicle safety." Id.
On July 18, 2012, three Plaintiffs (McCabe, Stone, and Vo) from three states (Georgia, Texas, and Virginia) filed their original complaint. Class Action Compl. [Doc. 1]. On August 28, 2012, five additional Plaintiffs joined and filed their first amended complaint [Doc. 13], which included the following thirteen counts from the eight plaintiffs (McCabe, Herring, Stone, Deuel, Vo, Mattadeen, Cunningham, and Mediana) hailing from six different states (Georgia, Texas, Virginia, Florida, Illinois, and California):
Defendants filed motions to dismiss Plaintiffs' claims [Docs. 16 & 31] on September 24, 2012, and November 7, 2012, respectively. In response to the motions to dismiss, Plaintiffs withdrew their claim under Florida Deceptive and Unfair Trade Practices Act (Count 8), claims under the Texas Deceptive Trade Practices Act (Count 6), and Plaintiffs Herring and Mediana withdrew their unjust enrichment claims. Pls.' Resp. in Opp'n to MBUSA's Mot. to Dismiss [Doc. 21] at 22, n. 13, 34, n.15. The Court entered an Order on June 7, 2013 [Doc. 46] ("June 7 Order"), granting in part and denying in part the motions to dismiss as follows:
Defendants argued, inter alia, that Plaintiffs' express warranty claims failed because Plaintiffs did not present their cars within the relevant warranty periods. Plaintiffs conceded this point, but argued that the time and mileage limitations in the new vehicle limited warranties were unconscionable because Defendants knew or should have known that the fuel systems were defective. The Court found that Defendants' mere knowledge that a part will fail, or even that it is defective at the time of sale, is alone not sufficient to render the time and mileage limitations unconscionable as a matter of law. See June 7 Order at 12-20. The Court quoted at length from a Second Circuit case:
Abraham v. Volkswagen of Am., Inc., 795 F.2d 238, 250 (2d Cir.1986). This Court found that Plaintiffs did not allege any facts that would otherwise render the time and mileage limitations unconscionable as a matter of law. Consequently, the Court dismissed the claims for breach of express warranty (Count 3) of Plaintiffs Vo, Herring, Mattadeen, Cunningham, and Mediana. June 7 Order at 18.
Defendants argued that Plaintiffs' claims for implied warranty of merchantability failed, among other reasons, because Plaintiffs failed to present their vehicles within the warranty periods. As with the express warranty claims, Plaintiffs argued that the time and mileage limitations in the new vehicle limited warranties were unconscionable because Defendants knew or should have known the fuel systems were defective. The Court agreed with Defendants and found that Plaintiffs did not allege sufficient facts to show that the time and mileage limitations in the new vehicle limited warranties were unconscionable. Accordingly, the Court dismissed the claims for breach of implied warranty of merchantability (Count 4) of Plaintiffs Vo, Herring, Mattadeen, Cunningham, and Mediana. June 7 Order at 22.
The Court noted that the Magnuson-Moss Act did not provide a private cause of action and dismissed the Magnuson-Moss Act claims (Counts 1 and 2) of Plaintiffs Vo, Herring, Mattadeen, Cunningham, and Mediana because these same Plaintiffs failed to state claims for breach of warranty based on state law. June 7 Order at 29.
The Court dismissed the claims for the breach of the implied covenant of good faith and fair dealing of Plaintiffs Vo, Herring, Mattadeen, Cunningham, and Mediana because, inter alia, the state laws of Georgia, Florida, Virginia and California hold that this claim is valid only in relation to the performance of a contractual obligation, and Plaintiffs failed to identify any provision in their new vehicle limited warranties that imposed a duty upon Defendants to deliver vehicles free from any defects. June 7 Order at 32. The Court dismissed the implied covenant of good faith and fair dealing claim of Plaintiff Cunningham because Illinois does not recognize this as an independent cause of action outside the context of cases involving an insurer's obligation to settle with and insurer. June 7 Order at 30. Accordingly, the Court dismissed the claims for breach of the implied covenant of good faith and fair dealing (Count 5) of Plaintiffs Vo, Herring, Mattadeen, Cunningham, and Mediana. June 7 Order at 30-33.
The Court denied the Defendants' motions to dismiss with regard to the Virginia Consumer Protection Act, finding that Plaintiff Vo pled the common law elements of fraud with sufficient particularity and that he adequately pled a claim for relief under three of the subsections of the Virginia Consumer Protection Act. June 7 Order at 52.
The Court found that Plaintiff Cunningham's claims under the Illinois Uniform Deceptive Trade Practices Act and the Illinois Consumer Fraud And Deceptive Business Practices Act failed as a matter of law because they were time-barred, and she failed to allege that Defendants knew of any alleged defects before she bought her vehicle in 2003. June 7 Order at 53-55. Accordingly, the Court dismissed Plaintiff Cunningham's claims (Counts 9 and 10) pursuant to those acts. Id.
The Court denied Defendants' motions to dismiss Plaintiff Mediana's claim pursuant to the California Unfair Competition Law, finding that she sufficiently alleged that she was deceived by Defendants' failure to disclose the alleged defect in the vehicle she purchased, and she would not have purchased the vehicle otherwise. June 7 Order at 55-56.
Plaintiffs McCabe, Vo, and Deuel based their unjust enrichment claims on the theory that Defendants were obligated to cover the cost of the repairs of their vehicles under the Motor Vehicle Safety Act ("MVSA") and that Defendants were unjustly enriched when Defendants failed to pay for the repairs and instead made Plaintiffs pay. The Court found that, although they were not couched as such, these claims were essentially claims to enforce the MVSA and, recognizing that there is no private right of action under the MVSA, the Court dismissed these claims. June 7 Order at 33-36.
Defendants moved to dismiss Plaintiffs' claims for fraudulent concealment on two grounds: (1) Plaintiffs failed to plead fraud with particularity as required by Federal Rule of Civil Procedure 9(b), and (2) Plaintiffs failed to plausibly allege that Defendants had a duty to disclose the alleged defect to Plaintiffs. The Court rejected Defendants' first argument, finding that Plaintiffs pled the circumstances of the alleged fraud with sufficient particularity. June 7 Order at 37-39.
The Court then turned to the duty question, which is of particular relevance to the present Motion for Summary Judgment. The Court recognized that the failure to disclose a material fact will support a cause of action for fraud in each of the six states represented by Plaintiffs only if Defendants had a duty to disclose the alleged defect to Plaintiffs. The parties did not dispute that there was no fiduciary or confidential relationship that would give rise to Defendants' duty to disclose information about the alleged defects to Plaintiffs, but Plaintiffs argued that special circumstances existed with regard to each Plaintiffs' fraudulent concealment claims that gave rise to a duty to disclose outside the context of a fiduciary or confidential relationship. The Court then proceeded to analyze the motions to dismiss the fraudulent concealment claims under the respective state laws.
The Court recognized that a duty to communicate a material fact may arise "from the particular circumstances of the case" outside of the context of a fiduciary or confidential relationship. June 7 Order at 40-41 (citing O.C.G.A. § 23-2-53). In the context of Defendants' motions to dismiss (accepting all of Plaintiffs' well-pled
The present order considers below whether the facts and circumstances that have been elicited in discovery present a situation in which Defendants' duty to communicate information regarding the alleged defect arose as a matter of law at the time McCabe and Herring purchased their vehicles.
Similarly, the Court's prior ruling recognized that "the particular circumstances" of some cases give rise to a duty to disclose a material fact outside the context of a fiduciary or confidential relationship. Id. at 43. The Court went on to find that, accepting all of Plaintiffs' well-pled allegations as true and construing them in a light most favorable to Plaintiffs in the context of the motions to dismiss, Plaintiffs plausibly alleged each of the elements of fraudulent concealment under Texas law. Id. at 42-45.
The question for this Court in considering Defendants' Motion for Summary Judgment is whether the evidence of "particular circumstances" elicited in discovery is legally and factually sufficient to give rise to a duty to disclose on the part of Defendants under Texas law.
The Court found that Plaintiffs had pled sufficient plausible facts to overcome Defendants' motions to dismiss. Id. at 45-46. The question presently before this Court and discussed below is whether the evidence, viewed in a light most favorable to Plaintiffs, demonstrates that Defendants owed Plaintiffs a duty to disclose information regarding the alleged defects as a matter of Virginia law.
The Court found that Plaintiff Mattadeen alleged that he bought his vehicle in 2004, four years before Plaintiffs allege that Defendants were aware of the alleged defect in 2008. As such, the Court dismissed Plaintiffs' claims of fraudulent concealment under Florida law. Id. at 46-47.
Similarly, Plaintiff Cunningham alleged she bought her vehicle in 2003, five years before Plaintiffs allege that Defendants were aware of the alleged defect in 2008. As such, the Court dismissed Plaintiff Cunningham's claims of fraudulent concealment under Illinois law. Id. at 48-49.
Because Plaintiff Mediana plausibly alleged Defendants failure to disclose the alleged defect at the time she purchased her vehicle in October 2008 as well as all of the elements of fraud under California law, the Court denied Defendants' motion to dismiss Mediana's fraud claim. Id. at 49-51.
In sum, after the June 7 Order, the only claims that remained were (1) the fraudulent concealment claims of Plaintiffs McCabe, Herring, Stone, Deuel, Vo, and Mediana, (2) Plaintiff Vo's claim for a violation of the Virginia Consumer Protection Act, and (3) Plaintiff Mediana's claim under California Unfair Competition Law.
Summary judgment is appropriate when "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). A party seeking summary judgment has the burden of informing the district court of the basis for its motion, and identifying those portions of the record which it believes demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). "Credibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions," and cannot be made by the district court in considering whether to grant summary judgment. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); see also Graham v. State Farm Mut. Ins. Co., 193 F.3d 1274, 1282 (11th Cir.1999).
If a movant meets its burden, the party opposing summary judgment must present evidence that shows there is a genuine issue of material fact or that the movant is not entitled to judgment as a matter of law. Celotex, 477 U.S. at 324, 106 S.Ct. 2548. In determining whether a genuine issue of material fact exists to defeat a motion for summary judgment, the evidence is viewed in the light most favorable to the party opposing summary judgment, "and all justifiable inferences are to be drawn" in favor of that opposing party. Anderson, 477 U.S. at 255, 106 S.Ct. 2505; see also Herzog v. Castle Rock Entm't, 193 F.3d 1241, 1246 (11th Cir. 1999). A fact is "material" only if it can affect the outcome of the lawsuit under the governing legal principles. Anderson, 477 U.S. at 248, 106 S.Ct. 2505. A factual dispute is "genuine" if the evidence would permit a reasonable jury to return a verdict for the nonmoving party. Id.
"If the record presents factual issues, the court must not decide them; it must deny the motion and proceed to trial." Herzog, 193 F.3d at 1246. But, "[w]here the record taken as a whole could not lead a rational trier of fact to find for the non-moving party," summary judgment for the moving party is proper. Matsushita, 475 U.S. at 587, 106 S.Ct. 1348.
Plaintiffs' Amended Complaint includes a claim for common-law fraudulent concealment under the laws of the respective states of Georgia (McCabe and Herring), Texas (Stone), and Virginia (Vo), as well as a claim for the violation of the Virginia Consumer Protection Act (Vo).
Defendants contend that they are entitled to judgment as a matter of law on all of these claims because, inter alia, Plaintiffs have failed to present facts that would give rise to a duty on the part of Defendants to disclose any alleged defect to Plaintiffs. Defendants also argue that none of the Plaintiffs' alleged harm was proximately caused by any failure on their part to inform Plaintiffs about any alleged
Defendants argue that they are entitled to judgment as a matter of law as to the Georgia Plaintiffs' sole remaining claim for fraudulent concealment. Defendants argue that: (1) there was no duty to disclose any information regarding any alleged defect to either McCabe or Herring before they purchased their vehicles; (2) the alleged failure to disclose any information regarding any alleged defect was not the proximate cause of any harm suffered by either McCabe or Herring; (3) neither McCabe nor Herring justifiably relied on any failure on the part of Defendants to inform them about any alleged defect in their vehicles; (4) there is no evidence that Defendants intended to deceive McCabe; (5) Herring's fraudulent concealment claim fails as matter of law because it is essentially an improper "duty to recall" claim; and (6) there is no evidence of a design defect to support Herring's fraudulent concealment claim.
Under Georgia law, the tort of fraud has five elements: (1) a false representation or omission of a material fact; (2) scienter; (3) intention to induce the party claiming fraud to act or refrain from acting; (4) justifiable reliance; and (5) damages as the proximate result of defendant's action. Botes v. Weintraub, No. 1:08-CV-01341-CAM, 2010 WL 966864, at *4 (N.D.Ga. Mar. 12, 2010) (citing Parrish v. Jackson W. Jones P.C., 278 Ga.App. 645, 629 S.E.2d 468 (2006)). However, in a fraudulent concealment action, there must first exist a duty to communicate the omitted or concealed material fact to the defrauded party. GE Life & Annuity Assurance Co. v. Barbour, 191 F.Supp.2d 1375, 1383 (M.D.Ga.2002) ("An obligation to disclose must exist before a party may be held liable for fraud based upon the concealment of material facts.") (citing Williams v. Dresser Indus., 120 F.3d 1163, 1167 (11th Cir.1997)). This duty to communicate "may arise from the confidential relations of the parties or from the particular circumstances of the case." O.C.G.A. § 23-2-53.
Both Georgia Plaintiffs purchased their vehicles in used condition but under different circumstances: McCabe purchased his automobile from a third party unaffiliated with Defendants but Herring purchased her automobile from a Mercedes-Benz dealership. Defendants contend that they had no duty to disclose to either Plaintiff the alleged defect concerning the gasoline leak in the fuel tank. Plaintiffs respond that the duty to disclose arises from the particular circumstances of this case and assert that the Court, in its Order denying in part Defendants' motion to dismiss, already upheld this theory based upon the Georgia Court of Appeals' decision in Rivers v. BMW of N. Am., Inc., 214 Ga.App. 880, 883-84, 449 S.E.2d 337 (1994). Pls.' Opp'n to Defs.' Mot. for Summ. J. [Doc. 146] ("Pls.' Opp'n") at 22-23, 30 (citing June 7 Order at 40-41). Defendants, on the other hand, contend that the Court's earlier ruling on the motion to dismiss has no impact upon the consideration of their motion for summary judgment, where the existence of a duty to disclose must be measured by the specific facts of the case. Defs.' Reply Br. in Supp. of Omnibus Mot. for Summ. J. [Doc. 159] at 4-5.
In Rivers, the defendants made affirmative representations that the vehicle sold to plaintiff was a brand new vehicle. Id. at 880-81, 449 S.E.2d 337. When the vehicle arrived in the United States, its exterior paint and finish had been damaged by
The Georgia Court of Appeals reversed, finding (1) that it was error for the trial court to conclude that the "disclaimer in this sales contract was sufficient disclosure of the acid rain damage actually sustained and actually repaired, as a matter of law," and (2) "[i]t cannot be said that due diligence in buying an automobile would require a prospective purchaser to make such an inspection as possibly would have disclosed this latent damage." Id. at 883-84, 449 S.E.2d 337. Whether or not there was a duty on the part of the defendant manufacturer in Rivers to affirmatively disclose any defects was not an issue in that case.
The actual statement of the law from the Rivers case was as follows: "Concealment of material facts may amount to fraud when direct inquiry is made, and the truth evaded, or where the concealment is of intrinsic qualities of the article which the other party by the exercise of ordinary prudence and caution could not discover." Id. at 883-84, 449 S.E.2d 337. (internal quotation omitted). The Rivers court went on to hold that the plaintiff could not have been expected to discover the acid rain damage after it had been painted over, especially after the plaintiff inquired about the finish and the defendant denied that it was repainted. Id. at 884, 449 S.E.2d 337. As such, the Rivers court did not establish that there was a duty to disclose outside a confidential relationship based on the "particular circumstances of [that] case." See O.C.G.A. § 23-2-53. The Rivers court never considered the duty issue nor mentioned O.C.G.A. § 23-2-53.
Plaintiffs have failed to cite to a single case in which a court has applied Georgia law to find a duty to disclose outside of a confidential or special relationship in facts similar to this case, where there is no evidence that Defendants had direct knowledge of Plaintiffs' purchases of the vehicles in question and had no apparent relationship with Plaintiffs. See O.C.G.A. § 23-2-53. The cases in which courts have invoked the "particular circumstances" language of O.C.G.A. § 23-2-53 to find a duty to disclose outside of the confidential relationship context have involved at least some relationship between the parties. See Mitchell v. Ford Motor Credit Co., 68 F.Supp.2d 1315, 1320 (N.D.Ga.1998) ("Those cases where Georgia courts have found particular circumstances giving rise to a duty to disclose involve dependent relationships sufficient
The cases finding a duty to disclose under the "particular circumstances" prong of O.C.G.A. § 23-2-53 involved some sort of a relationship between the parties and there is no evidence of that before this Court. Although Herring bought her vehicle from a Mercedes-Benz dealer and McCabe took his vehicle to a Mercedes-Benz dealer for an inspection prior to purchasing the vehicle, there is no evidence (nor even an allegation) that either dealer were agents of Defendants. In order to find some relationship between Defendants and these Plaintiffs, the Court would have to assume some element of agency between Defendants and the Mercedes-Benz dealerships with whom Herring and McCabe interacted, and there is simply no evidence in the record to support this. See Lauria v. Ford Motor Co., 169 Ga.App. 203, 205, 312 S.E.2d 190 (1983) (finding that the agreement between the automobile manufacturer and dealer defined presence or absence of an agency relationship, and that there was not otherwise any evidence showing a de facto principal/agent relationship); GM Corp. v. Jenkins, 114 Ga.App. 873, 877-78, 152 S.E.2d 796 (1966) (reversing the trial court's denial of the defendant manufacturer's general demurrer to the tort action when there was no evidence of the contract forming the agency relationship between the automobile manufacturer and dealership: "it is obvious that the determination of whether the relationship between the manufacturer and dealer is that of principal and agent or that of independent contractors must be determined from the written instrument, and it would be useless to make a determination based on the incomplete allegations of the petition where the instrument, when before the court, might demand a contrary conclusion.").
Plaintiffs have not cited, nor has this Court found, one case in Georgia where a claim for fraudulent concealment similar to the one brought by Plaintiffs was sustained when the vehicle was used and purchased subsequent to the expiration of the warranty period. Given the absence of any legal precedent supporting Plaintiffs' contention, the Court is unable to conclude that under Georgia law "the particular circumstances" of this case warrant the imposition of a duty to disclose where there was no evidence of any relationship between Defendants and the Georgia Plaintiffs. Consequently, because the facts in this case establish as a matter of law that Defendants owed no duty to disclose to McCabe or Herring the alleged defect upon their purchases of their used vehicles, Plaintiffs' fraudulent concealment claims fail as a matter of law and Defendants are entitled to summary judgment on Count 3 as applied to Herring and McCabe.
Under Texas law, the elements of common law fraud are as follows:
Tex. Integrated Conveyor Sys. v. Innovative Conveyor Concepts, 300 S.W.3d 348, 366 (Tex.App.2009). "Fraud by nondisclosure is a subcategory of fraud." Id.
To prevail on a claim of fraud by nondisclosure under Texas law, a plaintiff must show that:
Horizon Shipbuilding, Inc. v. BLyn II Holding, LLC, 324 S.W.3d 840, 850 (Tex. App.2010); see also In re Enron Corp. Sec., Derivative & "ERISA" Litig., No. H-01-3624, 2010 WL 9077875, at *38 (S.D.Tex. Jan. 19, 2010) (quoting Bradford v. Vento, 48 S.W.3d 749, 754-55 (Tex. 2001)).
"As an essential element of a claim of fraud based on nondisclosure, the defendant must have a duty to disclose." Id., 2010 WL 9077875, at *38; see also Bradford, 48 S.W.3d at 755 ("As a general rule, a failure to disclose information does not constitute fraud unless there is a duty to disclose the information."). "Thus, silence may be equivalent to a false representation only when the particular circumstances impose a duty on the party to speak and he deliberately remains silent." Bradford, 48 S.W.3d at 755. "Whether such a duty exists is entirely a question of law." Hoggett v. Brown, 971 S.W.2d 472, 487 (Tex.App.1997) (citation and quotation omitted).
Id. 971 S.W.2d at 487; see also In re Enron Corp., 2010 WL 9077875, at *38.
There is no evidence before this Court that any of the four circumstances exist that would give rise to a duty to disclose on behalf of Defendants to Stone. First, there was no fiduciary relationship between Stone and Defendants because the vehicle was purchased from a private seller unaffiliated with Defendants. Second, there is no evidence of any disclosure of information or the making of a representation by Defendants directly to Stone
Plaintiffs cite Hidden Values, Inc. v. Wade, No. 3:11-CV-1917-L, 2012 WL 1836087, at *9 (N.D.Tex. May 18, 2012), for the proposition that "under Texas law, a duty to disclose can exist absent a fiduciary relationship when a party does not have an equal opportunity to discover material information withheld." Pls.' Opp'n at 24, n.13. Hidden Values discusses an "unresolved confusion" as to whether a general duty of disclosure in Texas is limited to a confidential or fiduciary relationship. 2012 WL 1836087, at *8 (citing United Teacher Assocs. Ins. Co. v. Union Labor Life Ins. Co., 414 F.3d 558, 566 (5th Cir.2005)). The district court in Hidden Values agreed with two Southern District of Texas decisions that interpreted the Supreme Court of Texas' decision in Bradford v. Vento, as "not foreclos[ing] the existence of a duty to disclose absent a confidential or fiduciary relationship" when a party does not have an equal opportunity to discover withheld information. Id. at *9. Regardless of the "confusion" in some of the Texas decisions, this Court finds that neither Bradford nor Hidden Values supports a determination that a duty to disclose existed in this case. Both Hidden Values and Bradford involved arm's length business transactions between the parties in which affirmative representations were made but other material information was not disclosed. On the other hand, there was no arms length transaction between Stone and Defendants — Stone purchased his car from a third-party seller.
As a matter of law, because Defendants had no duty to disclose the alleged defect to Stone, Defendants are entitled to judgment as a matter of law on Stone's Fraudulent Concealment claim (Count 3).
In Virginia, "[a] plaintiff asserting a claim of actual fraud must demonstrate (1) a false representation by the defendant, (2) of a material fact, (3) made intentionally and knowingly, (4) with intent to mislead, (5) reliance by the misled party, and (6) resulting injury to the party misled." Carlucci v. Han, 907 F.Supp.2d 709, 740 (E.D.Va.2012); see also Winn v. Aleda Constr. Co., 227 Va. 304, 308, 315 S.E.2d 193 (1984). Further, "a concealment or omission of a material fact may also give rise to a claim of actual fraud." Carlucci, 907 F.Supp.2d at 740. "Fraud by concealment requires actual intent to conceal a fact and reckless non-disclosure is not actionable." White v. Potocska, 589 F.Supp.2d 631, 642 (E.D.Va.2008) (citation omitted). "Although silence does not constitute fraud in the absence of a duty to disclose, a duty to disclose may arise where concealment of a material fact by one who knows that the other party is acting upon the assumption that the fact does not exist constitutes actionable fraud." Carlucci, 907 F.Supp.2d at 740 (citation and quotation omitted); see also Bank of Montreal v. Signet Bank, 193 F.3d 818, 829 (4th Cir.1999) ("[T]he failure to disclose information is generally not actionable as fraudulent concealment in the absence of some duty to disclose.") (citing Norris v. Mitchell, 255 Va. 235, 240, 495 S.E.2d 809 (1998)).
Bank of Montreal, 193 F.3d at 829 (internal citations omitted) (holding that there was sufficient evidence for a jury to find that the defendant had a duty to disclose information to the plaintiff related to the underlying transaction between the two parties).
Plaintiffs cite five cases in support of their position that Defendants' failure to disclose the alleged defect to Plaintiffs defeats Defendants' Motion for Summary Judgment under Virginia law: Hirschberg v. G.W. Motors, Inc., 34 Va. Cir. 55, 60 (1994); Norris v. Mitchell, 255 Va. 235, 495 S.E.2d 809 (1998); Van Deusen v. Snead, 247 Va. 324, 328, 441 S.E.2d 207 (1994); Spence v. Griffin, 236 Va. 21, 372 S.E.2d 595 (1988); Alexander v. Se. Wholesale Corp., 978 F.Supp.2d 615 (E.D.Va.2013). See Pls.' Opp'n at 22-30, 34-38. As is explained below, the Court finds that none of the cases cited by Plaintiffs establish that Virginia law imposes a duty on a remote seller, such as Defendants in this case, to disclose information to Plaintiffs under the facts of this case.
Hirschberg involved a case in which a car dealer sold a car to the plaintiff and represented to the plaintiff at the time of sale that it was a "new car" when, in fact, it had been vandalized and repaired by the defendant prior to the sale. Hirschberg, 34 Va. Cir. at 56. The defendant dealership moved for summary judgment, arguing that in Virginia, fraud was actionable only if it was an intentional, express verbalization
Norris involved the sale of a house wherein the plaintiffs alleged that the defendants committed fraud by failing to disclose information in a work permit related to repair work the defendant seller performed on the house at the request of the plaintiff buyers prior to the sale. Norris, 255 Va. at 237-38, 495 S.E.2d 809. The information would have revealed that the septic system would only tolerate a limited use of the wastewater system in the house. Id. The Supreme Court of Virginia acknowledged that "
Van Deusen is another case involving the sale of a home where the litigants were the buyers and sellers of property in question. Van Deusen, 247 Va. at 326, 441 S.E.2d 207. In that case, a prior inspection of the residence at issue revealed some foundation settlement and other issues that the sellers attempted to disguise and hide from the plaintiff purchasers. Id. at 327, 441 S.E.2d 207. The Virginia Supreme Court confirmed that "
Spence v. Griffin is the last in the line of cases relied upon by Plaintiffs wherein a Virginia court recognized the tort of fraud by concealment. As with the previous three, this case involved litigants who were parties to the underlying transaction. In Spence, the plaintiff alleged that the defendants fraudulently induced her into conveying land to them in a manner that was
Id. at 29, 372 S.E.2d 595. As with the other cases relied upon by Plaintiffs, this fraud by concealment claim found a duty to disclose where the litigants had an underlying contractual relationship.
Alexander v. Se. Wholesale Corp., 978 F.Supp.2d 615 (E.D.Va.2013), is the lone case cited by Plaintiffs in which a theory of fraud was applied to a remote seller who was not in privity of contract with the plaintiff. In that case, defendant Adams sold a vehicle to another defendant, Southeastern Wholesale Corp. ("Southeastern") and, as a part of that initial transaction, Adams certified the odometer reading (29,580 miles) as being correct to the best of his knowledge. Id. at 616. Southeastern subsequently sold the vehicle to plaintiff, who discovered almost two years later that the odometer reading was inaccurate when he tried to re-sell the vehicle. Id. Among other claims, plaintiff brought a fraud claim against Adams. Id. at 618. Adams moved to dismiss the fraud claim arguing that there was no allegation of an affirmative misrepresentation from Adams directly to plaintiff to support his claim for fraud. Id. at 622-23. The court denied the motion, holding that "[i]n Virginia, a claim of fraud does not require direct contact or privity between the defendant and the plaintiff. A complaint must merely allege that the defendant knew or had reason to know that the plaintiff would rely on the misrepresentation." Id. at 623 (citing Mortarino v. Consultant Engineering Servs., 251 Va. 289, 295-96, 467 S.E.2d 778 (1996)). The Alexander court then cited two other federal district court cases and a Virginia circuit court case that applied this same rule, first articulated in Mortarino, to cases with similar fact patterns where remote sellers of vehicles made affirmative misrepresentations to buyers who ultimately sold the vehicles to the plaintiffs. Id.; see also Branin v. TMC Enters., LLC, 832 F.Supp.2d 646 (W.D.Va.2011) (denying a motion to dismiss a fraud claim where the remote seller affirmatively misrepresented the mileage with the knowledge that the misrepresentation would be repeated to induce a future purchaser into believing the car had less mileage than it actually did); Eubank v. Ford Motor Credit Co., 54 Va. Cir. 170 (2000) (permitting the plaintiff to amend the pleadings to make allegations consistent with other cases in which Virginia courts recognized fraud based on affirmative misrepresentations of remote sellers of vehicles); Harris v. Universal Ford, Inc., No. 3:00-cv-693, 2001 U.S. Dist. LEXIS 8913, at *3-4 (E.D.Va. Feb. 5, 2001) (recommending that the district court deny the remote vehicle seller's motion to dismiss where the lawsuit contained allegations that the remote seller affirmatively provided incomplete documentation of damage and subsequent repairs done to the vehicle and representing that it was otherwise in "excellent, cherry condition."). The Alexander court stated that in cases where a plaintiff is asserting a fraud claim against a remote seller, it was sufficient to state a claim under Virginia law if the
The obvious difference between the case at bar and the line of remote seller cases relied upon by Plaintiffs is that there is no evidence of any affirmative misrepresentation on the part of Defendants in this case. Plaintiffs' fraud claim in this case is based on an omission. As detailed above, a fraud by omission claim carries with it a concomitant showing that the defendant owed the plaintiff a duty to disclose the information, the omission of which forms the basis of the fraud claim. Plaintiffs have presented no law to support the proposition that a defendant has a duty to disclose allegedly omitted information where the remote seller has no contractual relationship with the plaintiff and did not make any affirmative misrepresentation. See Norris, 255 Va. at 241, 495 S.E.2d 809 (affirming the trial court's dismissal of a fraud by omission case where there was no duty on the part of the defendants to provide the information the plaintiffs complained was omitted).
This case is more analogous to Samuels v. Fredericksburg Motorcars, 44 Va. Cir. 98, 99-100 (1997), where the plaintiff brought a fraud by omission claim against a remote seller of the vehicle he owned alleging that the previous owner knew that the vehicle had been wrecked and "should have been branded as salvage, ..., and that [the remote seller] fraudulently repaired the car and sold it to [a subsequent purchaser], a car dealer, without branding it as a salvage vehicle." The court rejected the plaintiff's fraud by omission theory against the remote seller. The Samuels court reasoned that even if the remote seller failed to comply with the Virginia statutes related to salvage vehicles, the remote seller defendant's conduct in attempting to repair the car and failing to properly label it as salvage "does not give every subsequent purchaser of the car a private fraud action against him." Id. at 100. The court reasoned that the remote seller defendant did not have an obligation (duty) to disclose any information:
Id. For the same reason, this Court concludes that under Virginia law, there was no duty for Defendants to disclose any alleged defects to Plaintiff Vo, and holds that Defendants are entitled to judgment as a matter of law on Plaintiffs' Fraudulent Concealment claim (Count 3).
Plaintiff Vo also brings a claim under the Virginia Consumer Protection Act ("VCPA"), Va.Code Ann. § 59.1-200, based on Defendants' failure to disclose the alleged defect. Defendants argue that Plaintiff Vo's VCPA claim fails for the same reasons his fraud claim failed.
Under the theory of liability pursued by Plaintiff Vo (fraudulent omission) in his VCPA claim, he has to prove the same elements of common-law fraud by omission. Koschene v. Hutchinson, 73 Va. Cir. 103 (2007) ("Common law standards of what constitutes a misrepresentation of fact govern such an inquiry.") (citing Lambert v. Downtown Garage, Inc., 262 Va. 707, 711, 553 S.E.2d 714 (2001)). As detailed above, a fraud by omission claim is not actionable absent a duty to disclose. Bank of Montreal, 193 F.3d at 829. Without a duty to disclose, Plaintiff Vo's VCPA claim fails as a matter of law.
For the foregoing reasons, it is hereby
