Muehlbauer v. General Motors Corp.

Decision Date15 May 2006
Docket NumberNo. 05 C 2676.,05 C 2676.
CourtU.S. District Court — Northern District of Illinois
PartiesWayne MUEHLBAUER, Corey Bisson, Renee Fales and Charles Heath, individually and on behalf of all others similarly situated, Plaintiffs, v. GENERAL MOTORS CORPORATION, Defendant.

Page 847

431 F.Supp.2d 847
Wayne MUEHLBAUER, Corey Bisson, Renee Fales and Charles Heath, individually and on behalf of all others similarly situated, Plaintiffs,
No. 05 C 2676.
United States District Court, N.D. Illinois, Eastern Division.
May 15, 2006.

Page 848

Richard N. Kessler, Attorney at Law, Beatriz Maria Olivera, James Wilson Marks, Jasmine De La Torre, Harris, Kessler & Goldstein, Richard Joseph Doherty, Horwitz, Horwitz & Associates, Chicago, IL, for Plaintiffs.

James Andrew Langan, Brian Patrick Kavanaugh, Erik S. Newton, Kirkland & Ellis LLP, Chicago, IL, for Defendant.

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MORAN, Senior District Judge.

Plaintiffs bring this action individually and on behalf of similarly situated individuals, against defendant General Motors, and allege that defendant-designed components for braking systems of vehicles they purchased or leased were defective. They claim that defendant, having failed to disclose the defect, has been unjustly enriched, has breached implied warranties of merchantability, and has violated the consumer protection laws of California and Illinois. Defendant now moves to dismiss all counts, and also moves to strike the class allegations. For the following reasons the motion to dismiss is granted in part and denied in part, and the class allegations are stricken, but leave to amend is extended.


Plaintiffs allege that defendant defectively designed 1999 through 2002 model year C/K series GMT800 platform vehicles equipped with antilock brake systems (ABS) (class action cplt., ¶ 1(CAC)). Specifically, defendant's design permitted the wheel hub bearing assembly to corrode, which affected the ABS wheel speed sensors and contaminated what plaintiffs describe as the "air gap" (¶ 2). The altered air gap transmitted incorrect signals to the ABS sensor, which ultimately led to unwanted activation of the ABS at slow speeds, such as when one pulled into a parking space (¶¶ 24-27). Plaintiffs describe the alleged defect and relevant mechanical specifications with much greater detail, but for purposes of the motion to dismiss further recitation is unnecessary.

Consumers began complaining about ABS problems soon after defendant first sold the affected vehicles (¶ 28). Transport Canada, the Canadian governmental transportation agency, received and catalogued a number of complaints, which it forwarded to defendant as early as August 1999 (¶ 29). After receiving the complaints, Transport Canada launched an investigation and ultimately concluded that the corrosion caused a misalignment of the ABS sensor and led to unwanted ABS activation (¶¶ 31, 34). Investigators brought these findings to defendant's attention (¶ 32). According to Transport Canada investigators, GM apparently did not believe the misaligned sensor to be a significant issue (¶¶ 35, 36). Transport Canada's report concluded that any vehicle prone to corrosion and sensor misalignment was also subject to unwanted ABS activation (¶ 37). Nearly two years after its initial investigation, Transport Canada again communicated to defendant its concerns regarding the corrosion of the ABS, and furnished defendant with updated consumer complaints (¶¶ 46-48, 53-54).

After defendant initially rejected Transport Canada's suggestions for a product recall, it issued a Notice of Defect and, subsequently, a safety recall in January 2005 (¶¶ 64-65). This recall was limited to six Eastern Canadian provinces, and approximately 150,000 vehicles (¶ 66). A similar recall was not contemporaneously issued for vehicles in the United States. According to plaintiffs, defendant knew that the scope of the defect exceeded the vehicles subject to the Canadian recall (¶¶ 69-72).

Six months after the Canadian recall, and several days after this action was filed, the National Highway Traffic Safety Administration (NHTSA), began investigating allegations of unwanted ABS activation (¶¶ 77-78). On August 30, 2005, defendant issued a recall covering vehicles in 14 "salt belt" states, despite the fact that it had received complaints from consumers in 31 additional states (¶¶ 81, 84). As part of the recall, defendant instructed dealers to

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apply Zine-X, a rust inhibitor, to the wheel speed sensor mounting surface (¶ 92)

The four named plaintiffs are all citizens of different states. Wayne Muehlbauer is from Illinois; Corey Bisson is a citizen of Maine; Renee Fails is from California; and Charles Heath hails from Rhode Island. These plaintiffs all allege that they experienced unwanted ABS activation and increased stopping distances during low speed brake applications. Plaintiffs define the class as those "who purchased or leased, a 1999 through 2002 model year C/K series GMT 800 platform vehicle equipped with an ABS" in 14 states prior to August 30, 2005, and in 32 states and the District of Columbia at any time (¶ 96). Expressly excluded from the class are individuals who may have claims for personal injuries or consequential damages (id). The class is estimated to encompass "several hundreds thousand purchasers of the Vehicles at issue" (¶ 97).

In the first three counts plaintiffs present identical unjust enrichment claims, but on behalf of distinct groups of individuals in different states. Count I (¶¶ 103-111) is brought on behalf of consumers in 17 states, with Fales as the named plaintiff. Bisson and Heath are the named plaintiffs in Count II (¶¶ 112-121), which is brought on behalf of consumers in 21 states.1 Muehlbauer brings Count III (¶¶ 122-130) individually and on behalf of similarly situated residents of Illinois. In all three unjust enrichment counts plaintiffs allege that defendant knew of the defective design as early as 1999, but despite this knowledge did not disclose the defect until August 2005. Plaintiffs allege that defendant's retention of the sums they paid for the vehicles is unjust.

Bisson brings Count IV (¶¶ 131-38) individually and on behalf of similarly situated residents in 22 states, and purchasers of new vehicles in Texas. Under the relevant state statutes, Bisson alleges that the defective ABS made the vehicles unfit for their ordinary purposes of use.

Fales brings Count V individually and on behalf of residents of California, and alleges that defendant's non-disclosure of the design defect was an unfair or deceptive act in violation of the Consumers Legal Remedies Act, Cal.Civ.Code § 1750 et seq. Fales seeks to enjoin the manufacture and sale of defective vehicles. Count VI, brought by Muehlbauer individually and on behalf of Illinois residents, alleges that defendant violated the Consumer Fraud and Deceptive Business Practices Act, 815 ILCS 505/1, et seq. (ICFA). In both counts plaintiffs allege that they would not have purchased the vehicles had defendant disclosed the defects. Muehlbauer adds that defendant intended that he rely on the non-disclosure of the design defect.

Defendant moves to dismiss all counts, and begins by raising three grounds for dismissing those presenting unjust enrichment claims. According to defendant, those claims are flawed because plaintiffs do not allege any direct dealings with defendant, that no benefit was retained after the recalls, and because no unjust enrichment claim can be maintained in light of written limited warranties. Defendant seeks to dismiss Count IV on the grounds that plaintiffs have not alleged, and cannot allege, that they furnished notice to defendant of the claimed breach of implied warranty of merchantability, and because the alleged defects do not render the vehicles unmerchantable. Counts V and VI must be dismissed, defendant argues, because plaintiffs do not identify any specific misrepresentation

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that led to their damages. Defendant also contends that neither Count V nor Count VI satisfies the heightened pleading standards applicable to fraud-based claims. Defendant further argues that Count VI fails to state an ICFA claim due to plaintiffs' failure to allege any affirmative misrepresentations, omissions with a concomitant duty to disclose, or that defendant's allegedly wrongful conduct caused any actual damages.

Defendant also attacks plaintiffs' class allegations, arguing that they must be stricken on several grounds. Namely, the allegations include individuals who lack standing and have not suffered any injuries, and the alleged class is unmanageable.


Under Federal Rule of Civil Procedure 12(b)(6), a complaint may be dismissed if it fails "to state a claim upon which relief can be granted." Dismissal is improper if' there is any set of facts consistent with the allegations that support the claim for relief. Lekas v. Briley, 405 F.3d 602, 606 (7th Cir.2005); Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 81 L.Ed.2d 59 (1984). A motion to dismiss tests the sufficiency of the complaint, not the merits of the action. Triad Assocs. v. Chicago Hous. Auth., 892 F.2d 583, 586 (7th Cir.1989). All well-pleaded allegations are accepted as true, and all reasonable inferences are drawn in plaintiff's favor. McCullah v. Gadert, 344 F.3d 655, 657 (7th Cir.2003); Travel All Over the World, Inc. v. Kingdom of Saudi Arabia, 73 F.3d 1423, 1428 (7th Cir.1996). To survive defendant's motions, plaintiffs need not show that they will ultimately prevail, but only that they are entitled to offer evidence in support of their claims. Cole v. U.S. Capital, Inc., 389 F.3d 719, 724 (7th Cir.2004). Rule 8(a)(2) only requires that plaintiffs provide short and plain statements with no more than the bare minimum facts necessary to put defendant on notice of their claims. Brown v. Budz, 398 F.3d 904, 908-909 (7th Cir.2005). However, when fraud is alleged, it must be done with particularity and plead the who, what, when, where, and how of the alleged fraud. Uni*Quality, Inc. v. Infotronx, Inc., 974 F.2d 918, 923 (7th Cir.1992).

Counts I-Ill — Unjust Enrichment

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