Dart Transit Company v. Paccar, Inc.

Background

Dart Transit Company sued Paccar, Inc., Paccar Engine Company, Kenworth Truck Company, and Peterbilt Motors Company. It asserted claims for breach of express warranty, breach of implied warranty, and violations of the Minnesota Prevention of Consumer Fraud Act.

Paccar manufactured MX-13 diesel engines for Kenworth and Peterbilt trucks, and Paccar Engine Company manufactured the engines. Dart Transit alleged that defendants represented that the engines were reliable, durable, efficient, environmentally friendly, and capable of lasting 1,000,000 miles. Dart Transit also alleged that defendants promised to stand behind the engines and that the vehicles would retain their value.

Beginning in 2017, Dart Transit’s affiliate, Highway Sales, Inc., purchased 498 vehicles from Paccar covering the 2018, 2019, and 2020 model years. Dart Transit then leased the vehicles and used them in its commercial-truck fleet. The vehicles had MX-13 engines and were covered by basic and extended warranties. The extended warranty provided repair or replacement for defects in materials or workmanship and disclaimed other remedies, including incidental and consequential damages. It also disclaimed implied warranties of merchantability and fitness for a particular purpose.

Dart Transit alleged defects involving chassis wiring harnesses, camshafts, and excessive fretting in the engines. It alleged that defendants knew about the problems, performed repeated repairs that did not correct them, and failed to disclose the defects. Dart Transit claimed losses including repair expenses, downtime, lost revenue, driver-turnover costs, and reduced resale value.

Rule 12(b)(6) Standard

The defendants moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which permits dismissal for failure to state a legally sufficient claim. At this stage, the court accepts the complaint’s factual allegations as true and asks whether they plausibly support relief. Fraud-based allegations must also satisfy Rule 9(b), which requires the circumstances of the alleged fraud to be stated with particularity.

Claims Against Paccar Engine Company, Kenworth, and Peterbilt

The court granted the motion to dismiss Kenworth and Peterbilt because the complaint and the parties’ filings established that they were unincorporated divisions of Paccar, Inc. The court also dismissed Paccar Engine Company because the complaint alleged only that it was Paccar’s subsidiary and manufactured the engines. The complaint did not allege that Paccar Engine Company provided a warranty or made representations that could support the asserted claims. The court therefore dismissed Paccar Engine Company, Kenworth Truck Company, and Peterbilt Motors Company and all claims against them.

Express Warranty

The court denied dismissal of Dart Transit’s express-warranty claims. It found that the complaint gave sufficient notice by identifying three categories of alleged defects affecting some substantial number of the 498 vehicles: fretting, wiring-harness failures, and camshaft failures. Although the complaint also referred to design defects, it expressly alleged that the defects involved materials or workmanship covered by the warranty. The court therefore accepted those allegations at the pleading stage.

The court also rejected the defendants’ argument that Dart Transit failed to provide pre-suit notice. Under Minnesota law, a buyer must notify the seller of a warranty breach before filing suit, but the notice need not use legal terms or identify a specific warranty. The court found that the allegations about repeated repairs and repeated failures supported an inference that Paccar knew the transactions remained troublesome and had opportunities to correct the problems.

The court did, however, dismiss Dart Transit’s claim for consequential damages under the express warranty. The warranty excluded incidental and consequential damages, including lost income or profits, vehicle downtime, and business costs or losses. The court concluded that Dart Transit was a sophisticated commercial trucking company and that the complaint did not plausibly allege that the exclusion was unconscionable—that is, so unfair that it could not reasonably be enforced. The court stated that the alleged repair-or-replacement remedy could have failed of its essential purpose, but that circumstance did not invalidate the consequential-damages exclusion for this commercial transaction absent a plausible showing of unconscionability.

Implied Warranty

The court granted dismissal of the implied-warranty claims. Minnesota law permits a manufacturer to disclaim implied warranties of merchantability and fitness for a particular purpose when the disclaimer is clear, conspicuous, and mentions those warranties. The court found that Paccar’s written disclaimer met those requirements. It rejected Dart Transit’s arguments that alleged undisclosed defects or the alleged failure of the limited remedy made the disclaimer unenforceable, relying on its conclusion that the complaint did not adequately allege unconscionability. The court did not address the defendants’ alternative statute-of-limitations argument.

Minnesota Prevention of Consumer Fraud Act

The court dismissed Dart Transit’s claim under the Minnesota Prevention of Consumer Fraud Act. It concluded that Dart Transit was a merchant rather than an ordinary consumer under Minnesota law because it operated a commercial-truck fleet, had been a Paccar customer for decades, and had purchased hundreds of commercial trucks. The court held that Dart Transit therefore could not pursue a claim against Paccar under the Act. Because it dismissed the claim on that ground, the court did not decide whether the complaint satisfied Rule 9(b) or adequately alleged a public benefit.

Disposition

Judge Katherine Menendez ordered that the defendants’ motion to dismiss was granted in part and denied in part. The court denied dismissal of the breach-of-express-warranty claims. It dismissed Paccar Engine Company, Kenworth Truck Company, and Peterbilt Motors Company and all claims against them, and dismissed Dart Transit’s claims for consequential damages, breach of implied warranty, and violations of the Minnesota Consumer Fraud Act. The opinion does not state that these dismissals were with or without prejudice.