Lohman v. Daimler-Chrysler Corp.

• Decision Date: 15 March 2007
• Docket Number: No. 25,752.,25,752.
• Citation: 166 P.3d 1091,2007 NMCA 100
• Parties: M.D. LOHMAN, Individually and on behalf of all similarly situated persons, Plaintiff-Appellee, v. DAIMLER-CHRYSLER CORPORATION, and United States Testing Company, Defendants-Appellants.
• Court: Court of Appeals of New Mexico

166 P.3d 1091

2007 NMCA 100

M.D. LOHMAN, Individually and on behalf of all similarly situated persons, Plaintiff-Appellee, v. DAIMLER-CHRYSLER CORPORATION, and United States Testing Company, Defendants-Appellants.

No. 25,752.

Court of Appeals of New Mexico.

March 15, 2007.

Certiorari Denied, No. 30,334, May 2, 2007.

Certiorari Denied, No. 30,341, August 1, 2007.

Law Offices of James P. Lyle, P.C., James P. Lyle, Albuquerque, NM, for Appellee.

Wallace King Domike & Branson, PLLC, Terri S. Reiskin, Washington, D.C., Rodey, Dickason, Sloan, Akin & Robb, P.A., Edward Ricco, Jocelyn Drennan, Jeffrey M. Croasdell, Albuquerque, NM, for Appellant Daimler-Chrysler Corporation.

Dines & Gross, P.C., Gregory P. Williams, Jim Dines, Albuquerque, NM, for Appellant United States Testing Company, Inc.

OPINION

ORTIZ, Judge (sitting by designation of New Mexico Supreme Court).

{1} This is a putative class action relating to allegedly defective seat belt buckles. The first amended complaint alleged several causes of action, all of which were dismissed except a claim under the Unfair Practices Act (UPA). By their interlocutory' appeals. Defendants Daimler-Chrysler Corporation (DCC) and United States Testing Company (USTC) (collectively, Defendants) seek the dismissal of the remaining UPA claim. For the reasons that follow, we reject Defendant's various assertions of error and affirm.

BACKGROUND

{2} The products at issue in this case are seat belts that were widely utilized by vehicle manufacturers in the 1980s and 1990s, known as the TK-52 series. Plaintiff asserts that the TK-52 series buckles have a propensity to partially engage, such that the user may reasonably believe that the buckle is securely fastened when it is not. Federal Motor Vehicle Safety Standard number 209 (FMVSS 209) specifically requires testing and certification to prevent buckles which are subject to this sort of partial engagement from reaching the market. Plaintiff contends that Defendants were aware that the TK-52 series buckles did not comply with FMVSS 209. Plaintiff alleges that Defendants conspired to conceal this deficiency by adopting an internal policy purporting to exempt the buckles from partial engagement testing, by falsely certifying that the buckles comply with FMVSS 209, and by systematically denying that the buckles are defective. This is the alleged factual context out of which Plaintiff's claims arise.

{3} Defendants advance a two-pronged attack on the legal sufficiency of Plaintiff's first amended complaint. First, Defendants contend that Plaintiff has failed to allege a false or misleading representation, which is not preempted by federal law and which falls within the parameters of the UPA. Second, USTC asserts that Plaintiff has failed to allege damages or loss as required by the UPA.

STANDARD OF REVIEW

{4} A motion to dismiss tests the legal sufficiency of the complaint. Healthsource, Inc. v. X-Ray Assocs. of N.M., 2005-NMCA-097, ¶ 16, 138 N.M. 70, 116 P.3d 861. For purposes of Rule 1-012(B)(6) NMRA, we accept all well-pleaded facts as true and evaluate whether the claimant could prevail under any state of facts which might be proven in accordance with the allegations of the complaint. N.M. Life Ins. Guar. Ass'n v. Quinn & Co., 111 N.M. 750, 753, 809 P.2d 1278, 1281 (1991). A complaint should not be dismissed unless there is a total failure to allege some matter essential to the relief sought. Las Luminarias of the N.M. Council of the Blind v. Isengard, 92 N.M. 297, 300, 587 P.2d 444, 447 (Ct.App.1978).

DISCUSSION

I. False or Misleading Representation

{5} "The gravamen of an unfair trade practice is a misleading, false, or deceptive statement made knowingly in connection with the sale of goods or services." Diversey Corp. v. Chem-Source Corp., 1998-NMCA-112, ¶ 17, 125 N.M. 748, 965 P.2d 332. In order to state a claim under the UPA, a complaint must contain allegations to the effect that: (1) the defendant made an oral or written statement, a visual description or a representation of any kind that was either false or misleading; (2) the false or misleading representation was knowingly made in connection with the sale, lease, rental, or loan of goods or services in the regular course of the defendant's business; and (3) the representation was of the type that may, tends to, or does deceive or mislead any person. See generally NMSA 1978, § 57-12-2(D) (2003); Stevenson v. Louis Dreyfus Corp., 112 N.M. 97, 100, 811 P.2d 1308, 1311 (1991).

{6} In this case, Plaintiff has alleged that: (1) Defendants falsely and knowingly misrepresented the TK-52 series buckle to be safe, defect-free, and compliant with FMVSS 209; (2) these misrepresentations were made in order to enable DCC to sell vehicles within the United States; and (3) consumers have been deceived into purchasing vehicles equipped with TK-52 series buckles. Superficially, these allegations might appear to satisfy the three essential elements enumerated above. However, they provide no information about the manner in which the alleged misrepresentations were made. This is the subject of a series of separate allegations, which may usefully be classified as the fraudulent certification theory, the conspiratorial concealment theory, and the market presence theory. We address each in turn.

A. Fraudulent Certification Theory

{7} Plaintiff alleges that Defendants made false or misleading representations within the scope of the UPA by fraudulently certifying that the TK-52 series belts complied with applicable federal regulatory requirements. In this regard, Plaintiff notes that vehicle manufacturers are required to "self-certify that the vehicles comply with [FMVSS 209]." Plaintiff further asserts that

because the TK-52 series buckle could not pass the test and comply with [FMVSS 209,] . . . Defendants . . . adopted an internal standard [which] . . . automatically exempt[ed] [the TK-52 series buckle] from partial engagement testing. By utilizing this internal standard, [Defendants] . . . continued to certify all TK-52 series buckles as compliant with [FMVSS] 209, even though they are not.

{8} Defendants assert that the foregoing allegations cannot support Plaintiff's UPA claim. Four arguments have been advanced. First, Defendants assert that the fraudulent certification theory is barred by principles of federal preemption. Second, Defendants contend that the theory is premised on impermissibly indirect communications. Third, the connection with the sale of goods or services is attacked. Fourth and finally, USTC asserts that the fraudulent certification theory fails to describe any communication on its part which has a propensity to deceive.

1. Federal Preemption

{9} Defendants contend that Plaintiff's fraudulent certification theory is preempted by federal law on two grounds

a. Policing Federal Agencies

{10} First, Defendants contend that Plaintiff's fraudulent certification theory is not viable because it is premised on communications with a federal regulatory body that cannot form the basis for a private cause of action. This position finds nominal support in the case of Buckman Co. v. Plaintiffs' Legal Committee, 531 U.S. 341, 121 S.Ct. 1012, 148 L.Ed.2d 854 (2001). In Buckman, tort claims were advanced against a drug manufacturer based on the manufacturer's alleged misrepresentations to the FDA. Observing that "the relationship between a federal agency and the entity it regulates is inherently federal," id. at 347, 121 S.Ct. 1012, the United States Supreme Court held that private, state-law claims based a regulated entity's fraud upon a federal agency are preempted.

{11} Acknowledging Buckman, the New Mexico Supreme Court has observed that the states do not police fraud against federal agencies. See Palmer v. St. Joseph Healthcare P.S.O., Inc., 2003-NMCA-118, ¶ 56, 134 N.M. 405, 77 P.3d 560 ("[P]olicing fraud against federal agencies is hardly a field which the States have traditionally occupied." (internal quotation marks and citation omitted)). The Palmer court noted that in light of this principle, a private party cannot bring a state-law claim against a regulated entity, based upon the entity's alleged misrepresentation to a federal regulatory authority. Id.

{12} In reliance upon Buckman, Defendants contend that the portions of the first amended complaint which describe the certification process cannot provide a basis for Plaintiff's UPA claim because the alleged misrepresentations were essentially made to the National Highway Traffic Safety Administration (NHTSA), a federal regulatory agency, by Defendants as regulated entities. However, the first amended complaint does not indicate that Defendants misrepresented the qualities of the TK-52 series to NHTSA or to any other federal agency. The first amended complaint does not identify the audience at all. Contextually, however, it seems unlikely that Plaintiff's fraudulent certification theory is premised on communications between Defendants and NHTSA. The partial engagement testing and "self-certification" that are addressed in the first amended complaint originate with the National Traffic and Motor Vehicle Safety Act (the NTMVSA), 49 U.S.C. §§ 30101 to 30170 (2000), as further developed through applicable regulations. See 49 C.F.R. § 571.209 (2006) (FMVSS 209).

{13} The NTMVSA specifies that certifications, such as the self-certifications of compliance with FMVSS 209 at issue in this case, are to be addressed to dealers and distributors. See 49 U.S.C. § 30115(a). As a result, we cannot presume that Defendants' allegedly fraudulent certifications were directed at NHTSA. See generally Valdez v. State, 2002-NMSC-028, ¶ 4, 132 N.M. 667, 54 P.3d 71 (observing that a complaint must be construed in the light most favorable to the party opposing a motion to dismiss, with all doubts resolved in favor of the sufficiency of the complaint). We therefore conclude that Buckman is inapplicable.

b. Classic Federal...