Motion to Dismiss Denied in Proposed Federal Class Action on Alleged Fraud by OnStar and Four Automakers


Lubin Austermuehle is pleased to announce that we are part of a large auto dealer fraud class action lawsuit that recently survived a dismissal motion in the Eastern District of Michigan. In Re: OnStar Contract Litigation is a proposed class action consolidating lawsuits from around the nation against OnStar Corporation and four automakers that include the company’s technology in their new vehicles.

Along with other attorneys, our auto dealer fraud lawyers represent consumers who purchased vehicles with a version of OnStar that relies on analog cellular phone technology. The FCC voted in 2002 to phase out that technology and replace it with digital by Feb. 18, 2008. The “sunset period” was intended to allow companies time to phase out products based on analog technology and replace them with digital products. Nonetheless, our consolidated suit alleges, OnStar and the car manufacturers continued to sell analog OnStar to consumers allegedly without notifying them of the phase-out. When allegedly it did belatedly inform analog customers that their product would no longer work, it offered them a chance to pay for an upgrade to digital technology.

The case was consolidated in the U.S. District Court for the Eastern District of Michigan. On Feb. 19, 2009, the court considered the defendants’ motions to dismiss. In its opinion and order, the court started by rejecting the defendants’ request for a choice-of-law determination, saying it is inappropriate to make a choice this early. Thus, it declined to consider motions related to choice of law. However, it did order limited discovery on the choice of law to allow the court to determine class certification.

The court then turned to challenges to the complaint itself. First, it dismissed claims under the Michigan Consumer Protection Act on the grounds that no named plaintiffs live or purchased their vehicles in Michigan. Next, it considered claims based on consumer protection statutes in all states where plaintiffs reside. Defendants challenged some of these as untimely, since the statute of limitations had run; plaintiffs countered that the statute should be tolled due to fraudulent concealment and a discovery rule should be applied. More importantly, the plaintiffs alleged that this should be decided after discovery, in a summary judgment motion. The court agreed and declined to dismiss those claims.

OnStar separated from other defendants to move to dismiss on the grounds that state consumer protection laws require more particular allegations of fraud than had been stated by the plaintiffs. The court rejected this argument, noting that the Sixth Circuit has rejected a strict reading of the fair notice requirement. The complaint itself should be sufficient to allow defendants to file an answer. It also rejected the argument that OnStar is not an appropriate defendant because the plaintiffs didn’t show that there was a true joint venture between them and the auto manufacturer defendants. There is no heightened standard for this, the court noted, and it is not appropriate to resolve at the pleadings stage.

The court next considered arguments for dismissal involving individual plaintiffs and their individual states’ consumer protection laws. With one exception, the court rejected all of the defendants’ arguments. In most cases, it found the caselaw cited insufficient. Nor did providing a pamphlet about OnStar sufficiently defeat the claim that OnStar failed to disclose the analog phase-out, as Subaru argued, the court said. However, the court did grant a dismissal as to two plaintiffs in the state of New York, because the applicable statute there bars plaintiffs from seeking exemplary or minimum damages in a class action.

Likewise, the court granted the motion to dismiss on the plaintiffs’ breach of express warranty claim. Express warranties come with time or mileage limitations, the court noted, and many of the plaintiffs have already exceeded those limitations. The defendants cited several cases in support of its position, and the court found plaintiffs’ arguments that there were other express warranties unconvincing. Thus, where vehicles have fulfilled the term of their express warranties before the scheduled analog phase-out on Feb. 18, 2008, the court said this claim must fail.

Finally, the court declined to rule on motions to dismiss claims based on breach of implied warranty and thus the federal Magnusson-Moss Warranty Act, because they require a choice of law that it found inappropriate at this stage. Thus, the dismissal motions were granted in part and denied in part and set for limited discovery.

Lubin Austermuehle is proud to be a part of this auto-fraud class action lawsuit. Our firm regularly handles consumer fraud and consumer protection individual and class-action litigation, including lawsuits over defective products, “lemon” cars, trucks and RVs, deceptive advertising, billing fraud and debt collector abuses. Based in Chicago and Oak Brook, Illinois, near Wheaton, we defend consumers’ rights throughout the Midwest and the United States. If you’re ready to fight back against unfair and deceptive business practices, we offer free, confidential consultations. To set one up, you can contact us online or call toll-free at 630-333-0333.

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