Clenney v. FCA US LLC

Background

Michael and Norma Clenney alleged that they purchased a 2013 Dodge Challenger from FCA in February 2014 and experienced numerous technical problems. They first brought the vehicle to a repair facility in June 2014, when it had 2,800 miles. The complaint described eight additional repair visits between June 2014 and October 2019. The alleged problems involved the transmission, engine, and electrical system, including the vehicle’s Totally Integrated Power Module, or TIPM. The complaint alleged that the TIPM defect could cause the vehicle not to start or to stall, sometimes while traveling at high speeds.

The Clenneys asserted multiple causes of action, including claims under California’s Song-Beverly Act for breach of the implied warranty of merchantability, a claim under the federal Magnuson-Moss Warranty Act, and a fraudulent-concealment claim. The opinion also refers more generally to a fraudulent-inducement claim.

FCA’s Motion

FCA asked the court to dismiss the implied-warranty and Magnuson-Moss claims as barred by the statute of limitations. A statute of limitations is a deadline for bringing a claim. FCA argued that the deadline began when the implied warranty expired one year after the purchase, on February 15, 2015.

FCA also asked the court to dismiss the fraudulent-concealment claim under California’s economic-loss rule. That rule generally limits a purchaser seeking only financial losses from disappointed contractual expectations to contract remedies, unless the purchaser can show harm or a duty independent of the contract.

Warranty and Magnuson-Moss Claims

The court explained that the timeliness of these claims was an affirmative defense, not an element that the Clenneys had to prove in their complaint. At the motion-to-dismiss stage, the court could dismiss the claims on timeliness grounds only if the complaint itself made clear that the claims were time-barred.

The Clenneys alleged that they did not know, and had no reason to suspect, that FCA had breached the implied warranty until October 2019. They alleged that after a repair visit that month, the vehicle continued to show defects, the Clenneys requested a buyback or restitution, and FCA refused. The court said these allegations meant FCA could not establish a statute-of-limitations defense at this stage.

The court rejected FCA’s argument that the limitations period necessarily began when the implied warranty expired. Citing California law, the court stated that the limitations period for an implied-warranty claim runs from discovery of the breach, rather than automatically from the date of sale or warranty expiration. The court noted that discovery might later show that the Clenneys knew, after one or more earlier repair attempts, that FCA would not or could not fix the problems. But without evidence about what the Clenneys knew and when FCA communicated that it was unwilling to fix the vehicle, the court would not dismiss these claims as untimely.

Fraudulent Concealment and the Economic-Loss Rule

The court stated that California’s economic-loss rule bars recovery for losses limited to the product itself in many circumstances, but recognized that California law contains an exception for an independent tort. In an earlier California Supreme Court decision, the court had held that affirmative intentional misrepresentations could support a fraud claim independent of a contract. The California Supreme Court had not definitively decided whether the same exception applies to fraudulent concealment based on an omission.

Because the California Supreme Court had not resolved that question, Judge Chhabria predicted how that court would likely decide it. He considered California Supreme Court decisions, decisions from other states, and legal scholarship. He concluded that those sources suggested California’s economic-loss rule would not bar a fraudulent-concealment claim when the alleged fraud induced the plaintiff to enter the contract.

The court reasoned that fraudulent concealment and affirmative misrepresentation are both forms of fraud and that the key question is whether the alleged conduct constitutes an independent tort, rather than which form of fraud was used. The Clenneys alleged that FCA concealed material TIPM defects and that they relied on FCA’s silence when deciding whether to purchase or lease a vehicle equipped with a TIPM. The court therefore concluded that the economic-loss rule did not bar the claim at this stage.

FCA separately argued that the complaint did not plausibly allege that FCA had knowledge of the defect that was sufficiently exclusive. The court rejected that argument, explaining that the defect only needed to be difficult—not impossible—for an ordinary purchaser to discover. The court found it plausible that FCA knew substantially more about the defective TIPM than an ordinary car buyer. The court also noted that some information might have been publicly available without making the defect widely known to customers.

Disposition

Judge Vince Chhabria denied FCA’s motion to dismiss. The opinion did not state that the motion was denied with or without prejudice.