Estate of Pilgrim v. General Motors LLC

596 F.Supp.3d 808

ESTATE OF William D. PILGRIM, et al., Plaintiffs,

v.GENERAL MOTORS LLC, Defendant.

2:20-CV-10562-TGB-DRG

United States District Court, E.D. Michigan, Southern Division.

Signed March 31, 2022

Andre Emilio Jardini, Knapp, Petersen & Clarke, Glendale, CA, Kenneth R. Chadwell, David M. Honigman, Mantese Honigman P.C., Troy, MI, for Plaintiffs.

April N. Ross, Kathleen T. Sooy, Corwell & Moring LLP, Washington, DC, Krista L. Lenart, Dykema Gossett, Ann Arbor, MI, Michael P. Cooney, Dykema Gossett, Detroit, MI, Nina Gavrilovic, Dykema Gossett, Bloomfield Hills, MI, for Defendant.

ORDER GRANTING IN PART AND DENYING IN PART MOTION TO DISMISS

TERRENCE G. BERG, United States District Judge

This is a large putative class action: forty-four Named Plaintiffs seek to sue General Motors ("GM") over an alleged defect in the LS7 engine that they say affected Corvette 427s (model year 2013) and Z06s (model years 2006-2013), in some cases causing catastrophic injury to drivers. There are 63 counts in the 309-page Amended Complaint, which includes federal law claims as well as state law claims for fraudulent concealment, consumer protection, and warranty breach under the laws of 22 states. ECF No. 15-1. For the reasons that follow, Defendant's Motion to Dismiss (ECF No. 21) is GRANTED IN PART and DENIED IN PART .

A summary of the counts that survive and those that do not is included in the Table of Claims that follows the Order.

Table of Contents

I. BACKGROUND...814

A. Alleged defects of the class vehicles...814

B. Procedural history and bankruptcy order...816

C. Structure of claims in the Amended Complaint and Motion to Dismiss...816

II. STANDARD OF REVIEW...817

III. ANALYSIS...818

A. Standing...818

B. Deficiencies in Implied Warranty of Merchantability (IMW) claims...819

1. Plaintiffs who bought Old GM vehicles...819

2. Sufficiency of allegations regarding merchantability...819

3. Song-Beverly Consumer Warranty Act claim...820

4. MMWA claim...820

C. Deficiencies in common law fraud claims...821

1. Sufficiency of 9(b) allegations...821

2. Failure to allege a duty to disclose...822

D. Viability of claims due to the economic loss doctrine...827

1. Negligence claims barred by economic loss doctrine...828

2. Fraud claims barred by economic loss doctrine...829

E. Consumer protection claims...831

1. Sufficiency of consumer protection claim allegations...831

2. California claim (Count 8) barred by law...831

3. Maryland Plaintiff does not allege the required "cognizable injury" (Count 24)...831

4. Oklahoma Plaintiff's claim (Count 42) is time-barred...832

5. Georgia Plaintiffs lack standing (Count 15)...832

CONCLUSION...832

I. BACKGROUND

A. Alleged defects of the class vehicles

Plaintiffs in this case all bought one of two different Corvette models (427, model year 2013, or Z06, model years 2006-2013) with an LS7 engine. ¶ 1, ECF No. 15-1, PageID.617. They allege that defects in the "design, manufacture, and assembly of these subject engines" make the engines susceptible to frequent mechanical failure due to "valve guide wear," leading to dangerous conditions where oil leaks under the vehicle, fouling the back tires and in some cases causing engine parts to explode. ¶¶ 4-5. Even if an individual does not suffer a catastrophic failure event, he or she can incur heavy repair costs to get the valve guides back in spec or to replace the engine altogether. ¶ 25.

As Plaintiffs’ Amended Complaint includes only a barebones explanation as to what "valve guide wear" is, some elaboration is necessary. Most combustion engines have some sort of valve system that regulates gas flow into the engine. The valves themselves have thin tubes, or stems, with a round disk at the end known as the valve plug or head. The valve closes when the valve plug makes contact with the valve seat, creating a seal. The valve guide is a cylinder that holds the valve stem andallows it to travel up and down as needed to seal and unseal. "Valve guide wear," the condition that Plaintiffs claim occurs in these engines, happens when the inner walls of the valve guide cylinder wear down, creating too much space ("clearance") between the valve stem and the sides of the guide. This can prevent the valve from seating properly in the valve seat, and can also pull excess oil into the engine or the exhaust system, leading to damage or malfunction. The clearance between the valve stem and the sides of the valve guide must therefore be maintained at an acceptable measurement to maintain engine and vehicle integrity. See generally Valve Guide Repair Options, Engine Builder Magazine , https://perma.cc/UX4A-7YA8.

Plaintiffs allege that GM has known about a defect with LS7 engines that leads to valve guide wear since this engine was first developed, and that GM's own engineers have posted on public forums about the subject. They further allege that GM has concealed from consumers the extent of knowledge they have about this alleged defect, instead characterizing any problems consumers experience as related to a manufacturing defect that only affects a small number of cars. ¶¶ 9-10, 23. Plaintiffs say that public forum posts by GM engineers "falsely assert[ ] that the problems arose from a single supplier and were limited to a short period of time from July 2008 to March 2009." ¶¶ 12-15; see C6 Z06 Question for Tadge Juechter, Corvette Forum, https://www.corvetteforum.com/forums/ask-tadge/3609003-answered-c6-z06-question-for-tadge-juechter.html.

At some point during the life of these engines, GM developed a "valve wiggle test" for dealerships or technicians to use to determine whether valves guides in LS7 engines were out of spec. ¶ 21. Plaintiffs allege that this test "lead to more repairs and investigations than [GM] wished to perform," causing GM to stop using it. ¶ 22. GM has never issued a recall for these engines. Plaintiffs also allege that, in an effort to "tamp down the furor" of public opinion regarding these vehicles, GM engaged a third-party review author to write a review of this engine indicating that the defect was "rare" and only confined to certain model years. ¶ 17; see Hib Halverson, "Ruthless Pursuit of Power: Lucky Seven Edition: The Mystique of the 7-Liter, 7000-RPM, LS7," Corvette Action Center (Updated November 2014), https://perma.cc/D3ZL-ZKJF.

B. Procedural history and bankruptcy order

The claims in this case were originally brought in 2015 in the United States District Court for the Central District of California, where all non-California plaintiffs were dismissed for lack of personal jurisdiction. Pilgrim v. Gen. Motors Co. , 408 F. Supp. 3d 1160, 1169 (C.D. Cal. 2019).¹ The dismissed plaintiffs have re-filed here. This case also implicates a series of orders and appeals stemming from GM's bankruptcy proceedings. A Sale Order issued on July 10, 2009 demarcated what liabilities the post-bankruptcy "New GM" entity would and would not take on from the pre-bankruptcy "Old GM." Since then, courts have been left to interpret this document whenever cases like this are filed against GM, and have particularly focused on a provision of the Sale Order that indicates Old GM was selling its assets to new GM "free and clear of all liens, claims, encumbrances, and other interests of any kind or nature whatsoever, including rights or claims based on any successor or transferee liability."²

Old GM filed for bankruptcy protection in June 2009; vehicles manufactured in Model Year 2010 and later were manufactured by New GM. This timeline is relevant in this case because the class vehicle definition encompasses model years from 2006-2013, and therefore includes cars that were manufactured both before and after the bankruptcy. In light of rulings in other courts interpreting the Sale Order, Plaintiffs here have stipulated that any warranty and negligence claims will be brought only on behalf of Class Members who purchased or leased class vehicles manufactured by New GM (on or after July 10, 2009). ECF No. 21, PageID.1056. Other claims, such as (1) warranty claims against New GM for vehicles manufactured by New GM, and (2) non-warranty claims based on New GM's conduct, are allowed.

C. Structure of claims in the Amended Complaint and Motion to Dismiss

Plaintiffs allege the following broad categories of claims under federal law and the laws of 22 states:

• Magnuson-Moss Warranty Act ("MMWA"), 15 U.S.C. § 2301

• Negligence

• Fraudulent concealment

• Implied warranty of merchantability ("IWM") (state-specific statutes)

• Consumer protection (state-specific statutes)

There are 63 counts: one for the MMWA, one for negligence on behalf of all the state sub-classes, and the rest proceeding in alphabetical order by state, naming the applicable consumer protection and IWM statutes for each state. Every state has a fraudulent concealment claim for a total of 22 counts; every state has at least one consumer protection claim, Georgia has two, and California has two for a total of 24 consumer protection counts; 14 states have IWM claims; there is also a standalone negligence claim for failure to recall under California law.

GM seeks to dismiss the Amended Complaint in full, and challenges Plaintiffs’ claims under various theories as allowed according to Rules 12(b)(1) and 12(b)(6). In particular, GM challenges:

A. Standing for the MMWA and negligence claims (under Rule 12(b)(1)); and

B. Deficiencies in the IWM claims,

C. Deficiencies in common law fraud claims,

D. Viability of claims due to the economic loss doctrine, and

E. Consumer protection claims, all under Rule 12(b)(6).

Within each of these broad categories, GM makes numerous arguments as to why claims should be dismissed. Some challenges can be resolved the same way for all claims, while others have state-specific considerations and outcomes. Additionally, some claims could theoretically be dismissed under more than one theory. To promote clarity, the Court will independently address all theories that GM has put forward, even if the resulting analysis shows that certain...