Catalano v. BMW of N. Am., LLC

• Citation: 167 F.Supp.3d 540
• Decision Date: 01 March 2016
• Docket Number: 15-cv-4889 (KBF)
• Parties: George Catalano, on behalf of himself and all others similarly situated, Plaintiff, v. BMW of North America, LLC, a New Jersey limited liability company; Bayerische Motoren Werke Aktiengesellschaft, a corporation organized under the laws of the Federal Republic of Germany; and BMW Manufacturing Co., LLC, a Delaware limited liability company, Defendants.
• Court: U.S. District Court — Southern District of New York

167 F.Supp.3d 540

George Catalano, on behalf of himself and all others similarly situated, Plaintiff,

v.BMW of North America, LLC, a New Jersey limited liability company; Bayerische Motoren Werke Aktiengesellschaft, a corporation organized under the laws of the Federal Republic of Germany; and BMW Manufacturing Co., LLC, a Delaware limited liability company, Defendants.

15-cv-4889 (KBF)

United States District Court, S.D. New York.

Signed March 1, 2016

Ian James Barlow, William Alter Kershaw, Kershaw Cook & Talley PC, Sacramento, CA, Amy Elisabeth Keller, Edward Anthony Wallace, Wexler Wallace LLP, Chicago, IL, Joseph Ralph Santoli, Ridgewood, NJ, for Plaintiff.

Christopher James Dalton, Rosemary Joan Bruno, Buchanan Ingersoll & Rooney P.C., Newark, NJ, Lauren Adornetto Woods, Buchanan Ingersoll & Rooney PC, Princeton, NJ, for Defendants.

OPINION & ORDER

KATHERINE B. FORREST

, District Judge

Plaintiff George Catalano (“Catalano”) commenced this action in June 2015, on behalf of himself and all others similarly situated, alleging that defendants BMW of North America, LLC (“BMW NA”), Bayerische Motoren Werke Aktiengesellschaft (“BMW AG”), and BMW Manufacturing Company, LLC (“BMW MC”) (collectively, “BMW”) fraudulently concealed and failed to address alleged safety defects present in certain BMW motor vehicle models. The allegedly defective vehicle models include all BMW-designed X5 series vehicles from 2000 to 2008, X3 series vehicles from 2004 to 2010, and 5 series vehicles from 2004 to 2010 (the “Class Vehicles”). Catalano alleges that the Class Vehicles are defective because electronic components are located in trunk and cargo areas that make them prone to damage and failure due to water exposure, a problem compounded by the fact that sunroof drainage tubes are prone to clogging and rupturing, which causes leakage into trunk areas. Based on the existence of the alleged defects and BMW's concealment of and failure to disclose them, Catalano's First Amended Complaint (“FAC”) alleges eight claims under New York law for breach of an express warranty, the implied warranties of merchantability and fitness for a particular purpose, and contract/common law warranty, fraudulent concealment, and violation of N.Y. GBL § 349

; the FAC seeks compensatory and punitive damages and injunctive and declaratory relief.

Pending before the Court is BMW's motion to dismiss, stay, or transfer this action under the first-filed rule, on the ground that a substantially similar suit, Sharma v. BMW of North America, LLC, Civil Action No. 3:13–cv–02274–MMC (N.D.Cal.), was instituted earlier in time in the United States District Court for the Northern District of California. BMW's motion, in the alternative, seeks dismissal of this action for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6)

; in that section of its motion, BMW asserts one or more particular grounds for dismissal of each of Catalano's various claims. (ECF No. 56.)

For the reasons set forth below, BMW's motion is GRANTED IN PART AND DENIED IN PART. The Court concludes that the first-filed rule does not apply under the circumstances presented here; for different reasons, the Court dismisses all claims against BMW MC, and also dismisses all claims—except for the N.Y. GBL § 349

claim—against the remaining two defendants, BMW NA and BMW AG. BMW MC is dismissed from this action because Catalano lacks Article III standing to pursue claims against it. Catalano's express warranty and contract/common law warranty claims are dismissed because the FAC plausibly alleges only a design defect, which is not covered by the warranty, the only written contract that the FAC alleges. Catalano's implied warranty claims are dismissed primarily because the FAC fails to allege privity with defendants and the claims are barred by the applicable statute of limitations. Catalano's fraudulent concealment claim is dismissed because the FAC fails to allege a strong inference of fraudulent intent as required under Rule 9(b); as explained below, however, the Court will allow Catalano an opportunity to replead solely this claim against BMW NA and BMW AG. Finally, Catalano's claim for injunctive relief is dismissed because an injunction is a remedy, not a separate cause of action, and his claim for declaratory relief is dismissed because it is duplicative of his legal claims.

I. BACKGROUND

A. Factual Background¹

1. Parties

Plaintiff George Catalano is a citizen of Connecticut who purchased a preowned 2007 BMW 530xi wagon, which is described as a “sport wagon”, in New York in 2010. (First Am. Compl. (“FAC”) ¶ 13, ECF No. 40.) The FAC does not indicate from whom Catalano purchased his vehicle. Catalano's vehicle came with a Certified Pre-Owned Warranty, the terms of which are detailed below. (FAC ¶ 13.) Catalano seeks to certify a class of plaintiffs that includes “[a]ll persons who purchased or leased any BMW X5 series vehicles, X3 series vehicles, and 5 series vehicles in New York.” (FAC ¶ 78.)²

BMW AG is a German corporation that designs and manufactures motor vehicles, parts, and other products for export and sale throughout the world, including throughout the United States and the State of New York. (FAC ¶¶ 27, 29.) BMW NA is a Delaware limited liability company authorized to conduct business in New York; it is an indirect wholly-owned subsidiary of BMW AG. (FAC ¶¶ 26-27.) During the period relevant to the FAC, BMW NA was engaged in the business of “marketing, importing, distributing, warranting, and selling automobiles and other motor vehicles and motor vehicle components throughout the United States,” including Class Vehicles in New York. (FAC ¶ 30.) BMW MC is a Delaware limited liability company with its principal place of business in South Carolina; it is also a wholly-owned subsidiary of BMW AG. (FAC ¶ 28.) BMW MC was the sole global producer of BMW X3 and X5 model vehicles sold in the State of New York. (FAC ¶ 31.) Catalano alleges that his vehicle was designed and manufactured by BMW AG and was sold, distributed, advertised, marketed and warranted by BMW NA. (FAC ¶ 13.)

2. The Alleged Defects

The FAC alleges that all of the Class Vehicles “contain serious design, manufacturing, or material defects that significantly impact the safety and value of [the] vehicles.” (FAC ¶ 1.) In particular, the FAC alleges that the Class Vehicles were “designed or manufactured so that certain vital electrical components are often located in the lowest part of the vehicles and are made with or housed in materials that fail to prevent water or moisture intrusion,” creating the potential for the vehicles to “lose power while in operation, experience an electrical malfunction, and/or fail to start” and making them prone to water damage through the “normal and ordinary use” of the vehicles. (FAC ¶ 1; see also FAC ¶¶ 34-35.) Catalano further alleges that the Class Vehicles were “designed or manufactured so that drainage tubes used to drain water away from the vehicles' sunroofs are located in close proximity to the vital electrical equipment often located in the lowest point of the Class Vehicles” and that the sunroof drains are prone to become clogged with dirt, debris, leaves, and other naturally-occurring materials with no warning to owners. (FAC ¶ 2; see also FAC ¶ 34-35.) Once clogged, the drainage tubes come loose or leak into the trunks of the Class Vehicles, saturating the trunks and causing vital electronic components to short and shut down. (FAC ¶ 2.) Catalano alleges that consumers have described these defects as causing an “electronics swimming pool” and “puddl[ing]” in the spare tire compartment. (FAC ¶ 51.)

In addition to broadly describing how the alleged defects affect all of the Class Vehicles, the FAC also describes Catalano's own experience with and damages caused by the defects. The FAC alleges that, in June 2012, approximately two years after Catalano's purchase, his vehicle experienced an electrical failure while he was driving with his wife—the car shut down completely while he was driving on a four-lane divided highway. (FAC ¶ 17.) No personal injuries resulted from this incident. (See FAC ¶ 17.) Catalano brought his vehicle to a BMW dealership, where he was informed that it was still covered by BMW NA's Certified Pre-Owned Warranty. (FAC ¶ 18.) The dealership found that nearly two inches of standing water had accumulated near electrical components in the trunk underneath the vehicle's spare tire compartment. (FAC ¶ 19.) The dealership made certain repairs to replace the corroded electronics and drain water from around the electronic modules and discovered that water had infiltrated the trunk as a result of clogged sunroof drain tubes. (FAC ¶ 20.) BMW NA refused to cover the repairs under Catalano's Certified Pre- Owned Warranty; as a result, Catalano incurred nearly $2,000 in repair costs. (FAC ¶ 21.) Catalano alleges that the dealership made no attempts to move the electronics from the lowest portion of the trunk compartment or make the compartment or the electronic components contained therein watertight. (FAC ¶ 22.) He alleges that the defects in his vehicle persist. (FAC ¶ 22.)

3. Allegations Relating to BMW's Knowledge of Defects

Catalano alleges that defendants knew or should have known of the Class Vehicles' defects based on several sources of information. First, he alleges that BMW was aware or should have been aware of numerous complaints filed with the National Highway Traffic Safety Administration (“NHTSA”) as early as 2008 that detailed damage caused by the placement of vulnerable electronics in the bottom of cargo areas. (FAC ¶¶ 3, 52.) Second, Catalano alleges that Class Vehicle owners made complaints describing these defects on various forums dedicated to car safety. (FAC ¶ 53.) Third, Catalano alleges that BMW was made aware of the defects by virtue of repair invoices, warranty claims and repair orders from BMW dealerships. (FAC ¶ 61.)

Catalano further alleges that defenda...