Dart Transit Co. v. Paccar, Inc., et al.

Background

Plaintiff Dart Transit Company operates a fleet of commercial trucks. Highway Sales, described in the opinion as a long-time affiliate of Dart Transit, purchased 498 trucks from Defendant PACCAR, Inc. beginning in 2017. Each truck was equipped with an MX-13 engine, and Dart Transit leased the trucks for use in its fleet. In connection with the purchase, PACCAR provided a Limited Warranty Agreement containing: (1) a one-year contractual limitations period; (2) a repair-or-replace exclusive remedy; and (3) a consequential-damages disclaimer.

Dart Transit filed the original complaint on August 19, 2024, alleging the MX-13 engines suffered from multiple defects rendering the vehicles frequently disabled and inoperable. PACCAR moved to dismiss. United States District Judge Katherine M. Menendez granted the motion to dismiss in part and denied it in part, dismissing Dart Transit's claim for damages disclaimed by the Limited Warranty Agreement and dismissing Dart's claim under the Minnesota Prevention of Consumer Fraud Act. A Pretrial Scheduling Order was entered April 22, 2025, setting a November 14, 2025 deadline to amend the pleadings.

On November 14, 2025, Dart Transit timely moved to amend the complaint to: (1) add Highway Sales as a plaintiff; and (2) revise one paragraph (Paragraph 60) to allege that the engine defects were not publicly known at the time of purchase and that current widespread knowledge of the defects has depressed vehicle resale values.

Legal Standard

Under Federal Rule of Civil Procedure 15(a)(2), courts should "freely give leave" to amend "when justice so requires." Leave may be denied where there is undue delay, bad faith, dilatory motive, repeated failure to cure deficiencies, undue prejudice to the opposing party, or futility. A proposed amendment is futile if it "could not withstand a motion to dismiss under Rule 12(b)(6)" — meaning it fails to plead sufficient factual matter, accepted as true, to state a plausible claim for relief.

Adding Highway Sales as a Plaintiff

Relation Back Under Rule 15(c)

PACCAR argued that any claims by Highway Sales are time-barred under the Limited Warranty Agreement's 12-month limitations period, since the action commenced more than 15 months before the proposed amendment. The court analyzed whether the proposed amendment "relates back" to the original complaint under Federal Rule of Civil Procedure 15(c) — a doctrine that treats an otherwise untimely pleading as if it had been filed on the date of the original, timely pleading.

Following the Eighth Circuit's approach in Plubell v. Merck & Co., Inc., 434 F.3d 1070 (8th Cir. 2006), the court applied the Rule 15(c)(3) test for adding a new plaintiff: an amendment relates back if (a) the defendant knew or should have known it would be called upon to defend against claims by the newly added plaintiff, and (b) the defendant would not be unfairly prejudiced.

The court found both conditions satisfied. PACCAR conceded that Highway Sales' proposed claims are "the same express warranty claim as Dart [Transit], based on the same trucks and the same factual predicate." Highway Sales was mentioned in both the original complaint and the Limited Warranty Agreement, and the factual basis for its claims was identical to Dart's. PACCAR therefore had adequate notice. As to prejudice, PACCAR did not argue it would suffer prejudice, and the court found none, since the claims and underlying facts are the same. The court held the Proposed Amended Complaint relates back to the original complaint, meaning Highway Sales' claims are not time-barred.

Whether the Amendment Is Nonetheless Futile: Direct vs. Consequential Damages

PACCAR separately argued that adding Highway Sales would be futile because the only damages it alleges are consequential damages already barred by the Limited Warranty Agreement under Judge Menendez's earlier ruling.

Under the Proposed Amended Complaint, Highway Sales bore a contractual obligation at the end of each lease to cover any "TRAC residual-value deficiency" — the shortfall if the sale proceeds from the trucks fell below a predetermined contractual amount. The complaint alleged that engine defects depressed resale values, increasing the deficiency Highway Sales had to pay.

Dart Transit argued these are direct damages — reflecting the difference between the value of goods promised and goods actually delivered. The court disagreed. Applying Minnesota's Uniform Commercial Code, Minn. Stat. § 336.2-715(2)(a)-(b), the court distinguished direct damages (which "arise out of the breach itself" and are measured by the difference in value of conforming versus non-conforming goods) from consequential damages (additional losses arising from general or particular requirements that the seller had reason to know at the time of contracting).

The court found guidance in Far East Aluminium Works Co. Ltd. v. Viracon, Inc., 27 F.4th 1361 (8th Cir. 2022), in which the Eighth Circuit, applying Minnesota law, held that costs beyond the replacement value of defective goods — specifically costs tied to the particular requirements of the parties' arrangement — were consequential damages. Applying that reasoning, the court concluded that the TRAC residual-value deficiency damages are consequential because they are "additional, foreseeable losses that arise out of the particular requirements of Highway Sales' leases for the vehicles."

Because Judge Menendez previously held that the consequential-damages disclaimer in the Limited Warranty Agreement is enforceable and not unconscionable, and because the Proposed Amended Complaint alleges no other damages Highway Sales suffered (such as repair costs covered by the warranty), Highway Sales would have no recoverable damages. The amendment adding Highway Sales as a plaintiff was therefore denied as futile.

Amendment to Paragraph 60

Dart Transit also sought to revise Paragraph 60 to allege that engine defects were not publicly known at the time of purchase, and that current widespread knowledge of the defects has negatively impacted vehicle values. PACCAR opposed, arguing the amendment is irrelevant to the surviving warranty claim and could complicate the record.

The court applied the standard amendment factors and found PACCAR failed to demonstrate any basis for denial: the motion was filed before the pleading-amendment deadline, allowing the revision would not revive any previously dismissed claims, and PACCAR identified no undue prejudice. The court granted the motion as to Paragraph 60.

Disposition

The court granted Dart Transit's Motion for Leave to Amend the Complaint (Dkt. 47) in part and denied it in part: the motion was granted as to the proposed revision to Paragraph 60 and denied as to the addition of Highway Sales as a plaintiff.