Knotts v. Nissan North America, Inc.

Background

Michael Knotts alleged that he bought a new 2012 Nissan Versa from an authorized Nissan dealership in Minnesota in approximately October 2012. The vehicle had a continuously variable transmission, or CVT. Knotts alleged that the CVT was defective, could cause the vehicle to lose most or all ability to accelerate, and often failed during or shortly after Nissan’s warranty period. After acceleration problems, a repair shop replaced the transmission, and Knotts paid more than $3,300. Nissan allegedly refused to cover the repairs because they occurred outside the warranty period and were performed by a non-Nissan service provider.

Knotts filed a putative class action for current and former owners and lessees of certain Nissan Versas. He asserted Minnesota deceptive-trade-practices claims, a Minnesota false-advertising claim, breach of express and implied warranties, fraudulent misrepresentation, concealment and failure to disclose, and unjust enrichment in the alternative.

Nissan filed a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint adequately states a legally actionable claim. Nissan also filed a motion to strike or dismiss the proposed class allegations, relying on the Supreme Court’s decision in Bristol-Myers Squibb Co. v. Superior Court of California.

Motion to Dismiss

Express warranty. The court dismissed Count IV. Nissan’s warranty covered repairs needed to correct defects in materials or workmanship, including transmission defects, but required the owner to take the vehicle to an authorized Nissan dealer for warranty service. Knotts alleged that he took the vehicle to an unaffiliated repair shop and did not allege that he presented it to an authorized Nissan dealer and that the dealer refused to provide warranty service. The court held that Nissan could not have breached the warranty on those allegations and dismissed the express-warranty claim with prejudice because repleading would be futile.

Implied warranty. The court allowed the implied-warranty claim to proceed past the motion-to-dismiss stage. Although Nissan argued that the vehicle was merchantable because it operated for a substantial period and that the warranty’s time and mileage limits controlled, the court found that Knotts plausibly alleged that the transmission was defective in ordinary use. The court also found that Knotts had pleaded sufficient facts to plausibly allege that the warranty’s time and mileage limits were unconscionable, meaning potentially unfair because of the alleged defect and the parties’ unequal bargaining positions. The court granted Knotts an opportunity to obtain discovery on that issue.

Unjust enrichment. The court denied dismissal of Count VII. Knotts pleaded unjust enrichment as an alternative theory, which the rules permit before the existence and scope of an enforceable contract governing the dispute have been conclusively decided. The court also found that the alleged financial relationship between Nissan and its authorized dealer was not too indirect, at the pleading stage, to support the claim.

Fraud and related claims. The court dismissed Count VI, alleging fraudulent misrepresentation, concealment, and failure to disclose, without prejudice. Knotts adequately alleged some facts, including Nissan’s website statements about CVT performance, post-sale knowledge of complaints, reliance, and monetary loss. But he did not adequately allege that Nissan intended to induce reliance or that Nissan knew of the defect before the vehicles were marketed; his pre-production-testing allegations were conclusory. The court stated that an amended pleading could correct these deficiencies.

The court also dismissed Count III, the Minnesota False Statement in Advertising Act claim, without prejudice. Knotts identified Nissan’s website as an advertising source, but did not allege whether he viewed the website, when he viewed it, or whether he viewed it in Minnesota. He also did not allege that the statement occurred in Minnesota, as the statute requires. The court rejected Nissan’s argument that the website statements were merely non-actionable puffery, finding that statements about smoother performance, quicker acceleration, and better fuel economy were not so vague or general as to be puffery.

Minnesota Deceptive Trade Practices Act. The court denied dismissal of Count I. Because the statute provides injunctive relief for future harm, Knotts needed to allege a continuing risk of harm. The court found sufficient his allegations that Nissan continued to advertise the CVTs, that the safety risks were ongoing, and that he could not know whether the defect had been fixed or whether a replacement transmission would fail again.

Public benefit. The court also denied Nissan’s argument that the statutory consumer-protection claims failed for lack of a public benefit. Knotts alleged that Nissan’s online representations were ongoing, potentially affected the public broadly, threatened public safety, and warranted injunctive relief in addition to damages.

Motion to Strike Class Allegations

The court denied Nissan’s motion to strike or dismiss the proposed nationwide class allegations. Nissan argued that Bristol-Myers Squibb required the court to have specific personal jurisdiction over the claims of each unnamed class member who bought a vehicle outside Minnesota. The court held that Bristol-Myers Squibb, which concerned a mass-tort action rather than a federal class action, did not apply to unnamed members of a putative federal class at this stage. The court reasoned that a putative class action presents one suit brought by the named plaintiff, and that Rule 23’s class-certification requirements provide procedural safeguards that distinguish class actions from mass actions. The court did not hold that the proposed class was certified; it denied the motion to strike or dismiss the class allegations.

Disposition

Judge Susan Richard Nelson ordered that Nissan’s motion to dismiss be granted in part and denied in part. The express-warranty claim was dismissed with prejudice; the fraudulent-misrepresentation, concealment, failure-to-disclose, and Minnesota false-advertising claims were dismissed without prejudice; and the other challenged claims survived the motion to dismiss. The court separately ordered that Nissan’s motion to strike or dismiss the class allegations be denied.