Defects Manifesting Outside Warranty Can Still Be Material

In class actions alleging a failure to disclose a product defect, defendants often argue that consumers’ reasonable expectations should be defined by the product’s warranty. In other words, if a defect causes out-of-warranty failures only, the defect can’t possibly matter to consumers and defendants have no legal duty to disclose the defect in advance.

This argument drew considerable traction in California in recent years, often requiring plaintiffs to plead the defect posed a safety hazard in order to state a claim. See, e.g., Wilson v. Hewlett-Packard Co., 668 F.3d 1136, 1142-43 (9th Cir. 2012). That pendulum now appears to be swinging back in California, however, with courts recognizing a broader duty to disclose under California law. Rutledge v. Hewlett Packard, 238 Cal.App.4th 1164 (July 2015); see also Norcia v. Samsung Telecommunications Am., 2015 WL 4967247 (N.D. Cal. Aug. 20, 2015).

In Chiarelli v. Nissan N. Am., 2015 WL 5686507 (E.D.N.Y. Sept. 25, 2015), Judge Nicholas Garaufis recently had occasion to consider the argument in the context of New York, Florida, and Maryland law, and he rejected the argument nearly in full:

Nissan next argues that the terms of the express warranty set the consumer’s expectations as a matter of law, and therefore there can be no claim that Nissan’s omissions could be viewed as a practice likely to mislead a reasonable consumer acting reasonably under the circumstances. … Courts addressing omissions-based [New York General Business Law] claims against vehicle manufacturers, such as the one Plaintiffs assert here, have rejected this argument.  … The court agrees with these precedents; absent further guidance from the New York Court of Appeals, the general omissions framework contained in Oswego controls, and Quarterdeck does not stand for the broad proposition for which Nissan cites it.

Chiarelli, 2015 WL 5686507, at *12. The court went on to reach the same conclusion under both Florida and Maryland law based on the same reasoning.  Id., at *16-17.  The court reached the opposite conclusion under New Jersey law only, though even there it noted a split among the courts to have considered the issue in New Jersey.  Id. at 14-15.