Opheim v. Volkswagen Aktiengesellschaft

MATTHEW OPHEIM, et al., Plaintiffs, v. VOLKSWAGEN AKTIENGESELLSCHAFT;VOLKSWAGEN GROUP OF AMERICA,INC.; AUDI AKTIENGESELLSCHAFT;and AUDI OF AMERICA, INC., Defendants.

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

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY

June 25, 2021

OPINION

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

Plaintiffs in this putative class action purchased Volkswagen or Audi vehicles with an allegedly defective yet concealed engine part, i.e., a timing chain. Plaintiffs sued Volkswagen Aktiengesellschaft ("VW AG"), Volkswagen Group of America, Inc. ("VW America"), Audi Aktiengesellschaft ("Audi AG"), and Audi of America, Inc. ("Audi America"). Plaintiffs, who hail from fourteen states, assert contract, tort, and statutory claims under their respective states' laws, as well as federal claims under the Magnuson-Moss Warranty Act ("MMWA"), 15 U.S.C. § 2301 et seq. Audi AG moves to dismiss the complaint for lack of personal jurisdiction, see Fed. R. Civ. P. 12(b)(2). (DE 48.)¹ VMAmerica moves to dismiss for failure to state a claim, see Fed. R. Civ. P. 12(b)(6), and, as to the MMWA claims, for lack of subject-matter jurisdiction, see Fed. R. Civ. P. 12(b)(1). (DE 45.) Audi AG joins in VM America's motion to dismiss.

For the following reasons, Audi AG's motion (DE 48) is DENIED without prejudice to renewal following jurisdictional discovery. VW America's motion, joined by Audi AG, is GRANTED IN PART and DENIED IN PART. In sum, the MMWA claims, fraud claims based on affirmative misrepresentations, implied warranty claims under Illinois and Oregon law, and negligent misrepresentation claims under Georgia and Oregon law are dismissed. VW America's motion to dismiss is otherwise denied.

I. BACKGROUND

This case is about an allegedly defective engine part in certain Audi and Volkswagen models.² (Am. Compl. ¶¶ 1-2.) Specifically, this case concerns a timing chain system, which contains multiple components. (Id. ¶ 62.) To simplify, a typical car engine requires that fuel and air mix and combust, while releasing waste products from combustion. (Id. ¶ 54.) To that end, a timing chain system controls the opening and closing of an engine's intake valves (for introducing fuel and air) and exhaust valves (for releasing byproducts). (Id. ¶ 55.) Plaintiffs allege that the timing chain system at issue malfunctions and can cause the engine to lose power. (Id. ¶ 6.)

Despite knowledge of the defect, Defendants never disclosed it. (Id. ¶ 7.) Further, a timing chain system should usually last for 120,000 miles, and the maintenance schedules that came with the cars did not state that the timing chain system would need replacing early. (Id. ¶¶ 7, 10.) The New Vehicle Limited Warranty ("NVLW") provided with the vehicles promised repairs orreplacement only for four/five years or 50,000/60,000 miles (depending on the exact model). (Id. ¶ 11.) Although the timing chain system was of course present in the vehicles when Plaintiffs purchased them and the warranty began, its defects often did not manifest themselves until later. (Id. ¶ 12.) Defendants knew that the defect would emerge later, but concealed the defect so that they would not have to repair it under the NVLWs. (Id.) This had the effect of shifting the repair costs to consumers. (Id.)

Plaintiffs purchased these vehicles from dealerships, some of them new and some used. (See id. ¶ 1.) They sued Defendants for fraud, negligent misrepresentation, breach of express and implied warranties, violation of the MMWA, unjust enrichment, and violations of consumer fraud and unfair and deceptive trade practices statutes. (Id. ¶ 16.) Because Plaintiffs live in different states, they allege their claims under their respective states' laws (except for the federal MMWA claim). They seek to represent a nationwide class of purchasers, as well as sub-classes of purchasers in each state. They invoke jurisdiction for their state-law claims under the Class Action Fairness Act of 2005 ("CAFA"), Pub. L. No. 109-2, 119 Stat. 4 (codified in pertinent part at 28 U.S.C. §§ 1332(d), 1441, 1446). (Am. Compl. ¶¶ 19, 189.)

For defendants, Plaintiffs named (1) VW AG, the manufacturer of Volkswagen vehicles, which is based in Germany; (2) VW America, VW AG's American subsidiary; (3) Audi AG, the manufacturer of Audi vehicles, which is based in Germany; and (4) Audi America, Audi AG's American counterpart. (Id. ¶¶ 43-48.) These entities are all within the same corporate family. (Id.) Although the cars are manufactured in Germany, VW America, which is incorporated in New Jersey and based in Virginia, acts as VW AG and Audi AG's distributor in the United States. (Id.)

For example, Audi AG has importer agreements with VW America, pursuant to which Audi AG manufactures cars to serve the American market, and VW America serves as Audi AG's "importer, distributor, and marketer" in the United States by creating and contracting with a network of dealerships tosell Audi cars to consumers. (Importer Agmt. at 4.) Audi AG and VW America's relationship is expressly "based upon mutual understanding, cooperation, trust, and confidence." To that end, the Agreement obligates Audi AG to, e.g., (1) consult with VW America to develop a "sales network" in the U.S. (id. § 10(a)); (2) consult with VW America about agreements with dealerships (id. § 10(b)); (3) work with VW America "to plan and effectively utilize [Audi AG's] production capacity," (id. § 11(a)); (4) deliver products to VW America based on specific purchase orders (id. § 11(e)); (5) establish guidelines for VW America's marketing and public relations efforts (id. § 15(a)); and (6) receive reports from VW America regarding business in the American region (id. § 21(b)). Audi America is an operating unit of VW America; it is not a subsidiary of Audi AG and has no independent existence. (Palmer Decl. 10-11.)

Audi AG moves to dismiss for lack of personal jurisdiction, and VW America moves to dismiss for failure to state a claim, in which Audi AG joins in the alternative. Given that Audi America has no independent existence, VW America moves on its behalf. VW AG had not been served when the motions were filed. (VW Mot. at 1 n.1)

II. STANDARDS OF REVIEW

A. Personal Jurisdiction

On a Rule 12(b)(2) motion, the plaintiff bears the burden of establishing sufficient facts to show that jurisdiction exists. Marten v. Godwin, 499 F.3d 290, 295-96 (3d Cir. 2007). Initially, a court must accept the plaintiff's allegations as true and construe disputed facts in favor of the plaintiff. Pinker v. Roche Holdings, Ltd., 292 F.3d 361, 368 (3d Cir. 2002). Where factual allegations are disputed, however, "the plaintiff must sustain its burden of proof in establishing jurisdictional facts through sworn affidavits or other competent evidence." Patterson v. FBI, 893 F.2d 595, 603-04 (3d Cir. 1990) (citation omitted). If the district court does not hold an evidentiary hearing, "the plaintiff need only establish a prima facie case of personal jurisdiction." O'Connor v. Sandy Lane Hotel Co., 496 F.3d 312, 316 (3d Cir. 2007).

B. Failure to State a Claim

Federal Rule of Civil Procedure 8(a) does not require that a pleading contain detailed factual allegations but "more than labels and conclusions." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). The allegations must raise a claimant's right to relief above a speculative level, so that a claim is "plausible on its face." Id. at 570. That standard is met when "factual content [] allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Rule 12(b)(6) provides for the dismissal of a complaint if it fails to state a claim. The defendant bears the burden to show that no claim has been stated. Davis v. Wells Fargo, 824 F.3d 333, 349 (3d Cir. 2016). I accept facts in the complaint as true and draw reasonable inferences in the plaintiff's favor. Morrow v. Balaski, 719 F.3d 160, 165 (3d Cir. 2013) (en banc).

III. DISCUSSION

I take up Audi AG's personal jurisdiction motion first. See Lightfoot v. Cendant Mortg. Corp., 137 S. Ct. 553, 562 (2017) ("A court must have . . . power over the parties before it (personal jurisdiction) before [the court] can resolve a case."). Concluding that I cannot dismiss Audi AG, I turn to the Rule 12(b)(6) motion.

A. Personal Jurisdiction over Audi AG

Audi AG moves to dismiss all claims against it for lack of personal jurisdiction. A federal court may exercise personal jurisdiction over a defendant to the extent authorized by state law. Fed. R. Civ. P. 4(k)(1)(A). New Jersey provides for jurisdiction coextensive with constitutional due process. Miller Yacht Sales, Inc. v. Smith, 384 F.3d 93, 96 (3d Cir. 2004) (citing N.J. Ct. R. 4:4-4). Due process allows for general or specific jurisdiction. Danziger & De Llano, LLP v. Morgan Verkamp LLC, 948 F.3d 124, 129 (3d Cir. 2020). Plaintiffs do notargue that the Court has general jurisdiction (see Opp. to Audi Mot. at 5-7), so I focus on specific jurisdiction.³

A court has specific jurisdiction when the defendant has contacts with the forum, and a plaintiff's claims "arise out of or relate to" those contacts. Ford Motor Co. v. Mont. Eighth Jud. Dist. Ct., 141 S. Ct. 1017, 1025 (2021) (citation omitted). To apply that principle, the Third Circuit uses a three-part test, requiring the plaintiff to show that (1) the defendant purposefully availed itself of the forum, (2) the claims arise out of or relate to at least one of the defendant's activities, and (3) exercising personal jurisdiction comports with fair play and substantial justice. O'Connor, 496 F.3d at 317. I discuss each prong in turn.

1. Purposeful Availment

To start, the plaintiff must show that the defendant took "some act by which [it] purposefully avails itself of the privilege of conducting activities within the forum State." Ford, 141 S. Ct. at 1024 (citation omitted). "[W]hat is necessary is a deliberate targeting of the forum." O'Connor, 496...