Flier v. FCA US LLC

Background

Richard and Patricia Flier purchased a new 2017 Chrysler Pacifica manufactured by FCA US LLC. They alleged that the vehicle developed operational problems, including stalling, loss of power, shifting and acceleration problems, and other issues. They attributed some or all of these problems to defects in the vehicle’s 9HP transmission and Power Control Module (PCM). They also alleged that FCA issued several recalls in 2018 involving the vehicle’s PCM and manual park release.

The Flier plaintiffs asserted claims under California’s Song-Beverly Consumer Warranty Act, the California Consumer Legal Remedies Act (CLRA), and for fraud by omission. They alleged that FCA failed to repair the vehicle as required by its warranties and knew about the alleged PCM defect before the sale but concealed it. FCA removed the case from state court based on diversity jurisdiction. The court had previously denied the plaintiffs’ motion to send the case back to state court.

Motion and Legal Standards

FCA moved for judgment on the pleadings under Federal Rule of Civil Procedure 12(c) on the fraud-by-omission, CLRA, and punitive-damages claims. A Rule 12(c) motion tests whether the pleadings contain enough factual matter to state a plausible claim. FCA argued that the fraud and CLRA allegations did not satisfy Federal Rule of Civil Procedure 9(b), which requires fraud to be pleaded with particularity, including the basic details of the alleged misconduct. FCA also argued that California’s economic-loss rule barred the fraud-by-omission claim because the alleged losses were economic losses involving the vehicle.

Fraud by Omission

The court held that the fraud-by-omission claim was subject to Rule 9(b)’s heightened pleading standard. The court nevertheless found the allegations sufficiently detailed. The complaint identified the alleged defective components—the 9HP transmission and PCM—described the resulting symptoms, alleged that the plaintiffs sought repairs from FCA more than once, and referred to FCA’s recalls involving the PCM.

The court also found sufficient allegations that FCA had superior or exclusive knowledge of the alleged defect and therefore had a duty to disclose it. The complaint alleged that FCA possessed pre-market and production data, reviewed consumer complaints, conducted testing, and had warranty-repair and recall information. The court further found that the allegations supported an inference that FCA intended to induce the plaintiffs’ reliance because they alleged that FCA concealed the defect while the plaintiffs relied on FCA’s marketing materials and interactions with sales representatives when purchasing the vehicle.

The court rejected FCA’s argument that the economic-loss rule barred the claim at the pleading stage. The court found persuasive decisions concluding that the rule does not bar fraudulent-omission claims. It noted, however, that the Ninth Circuit had asked the California Supreme Court to decide whether the economic-loss rule applies to fraudulent-omission claims. The court therefore denied FCA’s motion as to the fraud-by-omission claim without prejudice, allowing FCA to bring another motion on that issue if the California Supreme Court reaches a different conclusion.

CLRA and Punitive Damages

The court held that the CLRA claim also had to satisfy Rule 9(b) because the plaintiffs based it on an alleged course of fraudulent conduct. The court concluded that the allegations supporting FCA’s duty to disclose the PCM defect and the plaintiffs’ reliance were sufficiently detailed to support the CLRA claim.

Because the CLRA claim survived, the court also allowed the related punitive-damages claim to survive. The court denied FCA’s motion as to both the CLRA and punitive-damages claims.

Disposition

The court denied FCA’s motion for judgment on the pleadings, without prejudice. The court specified that FCA could renew the motion only as to the fraud-by-omission claim if the California Supreme Court later decides that the economic-loss rule applies to that type of claim.