United States: Massachusetts Federal Court Holds Complaint Alleging Defendant Breached Warranties By Selling Automobile Prone To Catching Fire Did Not State Claim For Unfair Trade Practices In Absence Of Allegations Defendant Knew Of Defect

In Utica Nat. Ins. Co. v. BMW of North America, LLC, 2014 U.S. Dist. LEXIS 131010 (D. Mass. Sep. 18, 2014), a car manufactured by defendant caught fire while parked overnight at a garage, damaging the garage, its equipment and other vehicles owned by the garage and its customers. It was determined that the fire originated in the automobile, and the garage's insurer paid its claim for fire damages. A few months later, defendant recalled certain automobile models, including the one that had caught fire, because an electronic circuit board was prone to overheating, potentially causing smoldering that could result in fires. The recall report disclosed that the model at issue had a total of two recalls, three investigations, nineteen complaints and twenty-nine service bulletins, but it did not identify the dates on which the complaints were received.

The garage's insurer, as its subrogee, sued defendant in Massachusetts superior court for negligence, breach of warranties, strict liability and violations of Mass. Gen. L. c. 93A (the Massachusetts unfair and deceptive practices statute) based on alleged defects in the car's design rendering it susceptible to fires. Defendant removed the case to the United States District Court for the District of Massachusetts on the basis of diversity of citizenship, and moved to dismiss the strict liability and c. 93A claims. Plaintiff did not oppose dismissal of the former claims, but disputed defendant's contention that a business plaintiff suing for unfair trade practices under § 11 of c. 93A needs to allege something more than a mere breach of warranty to state a plausible claim for recovery.

Rejecting plaintiff's argument, the court first noted that the Massachusetts Supreme Judicial Court has held that a breach of warranty is not per se actionable under § 11 of c. 93A, as distinguished from § 9 of the statute which provides a remedy for non-business plaintiffs such as consumers. Rather, a § 11 plaintiff must show defendant "acted in some significantly unfair or deceptive fashion"—in other words, plaintiff "must allege a breach of warranty 'plus,' where that 'plus' is conduct by [defendant] which, if true, would render the breach repugnant to the milieu of the commercial marketplace." Here, plaintiff's complaint alleged only that a breach of warranty defect caused damage and defendant later issued a recall to correct the defect, and the undated complaints noted in the recall report were insufficient to support an inference that defendant knew of the defect prior to the time of the fire. Absent such an inference, there was nothing in the complaint to support a claim under § 11. Moreover, plaintiff could not cure the complaint's deficiencies by making additional allegations in its brief opposing the motion to dismiss, especially where these were more akin to "rhetorical flourishes" than actual facts. The court hinted it might entertain a motion to amend the complaint if plaintiff were properly to allege certain additional facts—concerning earlier fires in the car model and other litigation involving defendant— that its counsel referred to at the motion hearing, but based on the existing record the court allowed defendant's motion.

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