In re Myford Touch Consumer Litigation
2014 U.S. Dist. LEXIS 74235, 46 F. Supp. 3d 936, 2014 WL 2451291 (2014)
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Rule of Law:
A manufacturer has a duty to disclose known product defects that create a safety risk, and a generic warranty disclaimer that its products may not be defect-free does not absolve the manufacturer of liability for fraudulent concealment of a specific, known defect.
Facts:
- Ford Motor Company designed and sold vehicles with an integrated 'infotainment' system called MyFord Touch (MFT).
- Ford marketed the MFT system's safety, communication, and entertainment features and charged a premium of approximately $1,000 for it as a stand-alone option.
- Soon after its 2010 rollout, the MFT system exhibited serious problems, including freezing, crashing, and non-responsiveness, which could render features like the rearview camera and defroster inoperable.
- Plaintiffs alleged that the MFT malfunctions created safety risks by distracting drivers or disabling critical vehicle functions.
- Ford received numerous customer complaints and, beginning in April 2011, issued multiple Technical Service Bulletins (TSBs) and software updates to its dealers to address the MFT problems.
- A salesperson at a Mahopac Ford dealership informed Plaintiff Miller, who was aware of mixed reviews, that Ford had corrected any defects in the MFT system prior to his purchase.
Procedural Posture:
- Twenty-three individuals and one organization filed a class action lawsuit against Ford Motor Company in the U.S. District Court for the Northern District of California, a court of first instance.
- The complaint alleged numerous claims under federal and state laws, primarily centered on fraud and breach of warranty.
- Ford filed a motion to dismiss the majority of the claims pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim.
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Issue:
Does a vehicle manufacturer have a duty to disclose known defects in an optional infotainment system that pose a safety risk, and can an affirmative misrepresentation claim be based on a dealership salesperson's statement that known defects have been corrected?
Opinions:
Majority - Judge Edward M. Chen
Yes. A vehicle manufacturer has a duty to disclose known defects that pose a safety risk, and a claim for affirmative misrepresentation can proceed based on a salesperson's statements if an agency relationship is plausibly alleged. The court found that Plaintiffs plausibly alleged Ford's fraudulent concealment by failing to disclose known defects in the MFT system. A duty to disclose arose from safety concerns, as a malfunctioning MFT system could distract a driver or disable critical features like the rearview camera or defroster, creating a safety risk. The court rejected Ford's argument that a generic warranty disclaimer insulated it from liability, stating it would be 'odd' to allow a general disclaimer to shield a company that 'actually knew of a specific defect.' The court also found that Plaintiffs plausibly alleged Ford's knowledge of the defects at the time of sale, inferring it from the timeline of TSBs and software updates issued shortly after the product's launch. While most fraud claims based on affirmative misrepresentation were dismissed for lacking specificity, the claim of Plaintiff Miller was allowed to proceed. The dealership salesperson's statement that defects 'had been corrected' was a specific, affirmative representation. The court concluded that this statement could be imputed to Ford because Plaintiffs had sufficiently alleged an agency relationship between Ford and its authorized dealers, making dismissal at this stage inappropriate.
Analysis:
This decision reinforces that a manufacturer's duty to disclose known safety defects can create tort liability for fraudulent concealment that is not easily defeated by a motion to dismiss, even with a limited warranty in place. The court's analysis limits the effectiveness of the economic loss rule by finding that statutory duties and the duty to not fraudulently induce a contract exist independently of the contract itself. Significantly, the ruling on agency liability suggests that manufacturers may be held responsible for specific factual representations made by sales staff at authorized, independent dealerships, potentially expanding the scope of liability beyond official corporate advertising and written materials.
