United States District Court, S.D. Florida, Miami Division
ORDER GRANTING IN PART AND DENYING IN PART DEFEND
ANTS' MOTIONS TO DISMISS
FEDERICO A. MORENO, UNITED STATES DISTRICT JUDGE.
class action lawsuit is about whether certain Toyota entities
defrauded consumers and engaged in unfair trade practices by
concealing a defect in the Heating, Ventilation, and Air
Conditioning Systems installed in 2012-2017 Toyota Camrys and
Camry Hybrids. The Plaintiffs claim the Toyota entities'
conduct constitutes common law fraud or fraudulent
concealment, and violates the Racketeering Influenced and
Corrupt Organizations Act, the Magnuson-Moss Warranty Act,
Florida's Deceptive and Unfair Trade Practices Act, and
the Tennessee Consumer Protection Act. The Plaintiffs also
claim the Defendants have breached the implied warranty of
reasons below, the Defendants' Motions to Dismiss (D.E.
26, 27) are GRANTED IN PART AND DENIED IN PART. Specifically,
the Motions are GRANTED as to Counts III, IV, V, and VI, and
thus these Counts are DISMISSED, and the Motions are DENIED
as to Counts I, II, VII, and VIII.
Plaintiffs allege the Defendants marketed, sold, and leased
millions of 2012-2017 Toyota Camrys and Camry Hybrids
throughout the United States despite knowing the vehicles had
a defective Heating, Ventilation, and Air Conditioning
System. According to the Plaintiffs, the Heating,
Ventilation, and Air Conditioning Systems were defective
because they failed to properly remove all humidity and
water; and consequently, emitted foul, noxious, and toxic
odors into the vehicle passenger compartment, which exposed
passengers to serious health and safety hazards, such as mold
and other contaminants.
August 2014, Plaintiff Javier Cardenas purchased a new 2014
Toyota Camry from' Kendall Toyota near Miami, Florida,
while he was a Florida resident. In March 2017, Plaintiff
Kurt Kirton purchased a used 2015 Toyota Camry from a Wyatt
Johnson Toyota dealership in Clarkesville, Tennessee. Both
Plaintiffs allege they were unaware their vehicles had a
Defective Heating, Ventilation, and Air Conditioning System
at the time of purchase, and that had they known about the
Defect, they would not have purchased their vehicles.
Complaint alleges the Defendants possessed exclusive and
superior knowledge about the Defect based upon: (1) consumer
complaints filed with the National Highway Traffic Safety
Administration and with Toyota Motor Sales's network of
exclusive dealers; (2) testing performed by Toyota
Engineering and Manufacturing in response to consumer
complaints; (3) Technical Service Bulletins issued by Toyota
to its network of distributors and dealers; and (4) repair
orders, aggregate warranty data, and parts data compiled by
and received from those dealers. Despite having this
information, the Complaint alleges the Defendants failed to
disclose, and actively concealed the Defect and its health
and safety hazards from the Plaintiffs and putative class
result, the Plaintiffs filed an 8-count Class Action
Complaint seeking economic loss damages and alleging that the
Defendants' nondisclosure and active concealment of the
Defect violates federal and state law. The Toyota Defendants
and Southeast Toyota filed separate motions to dismiss. This
Order resolves both motions.
pleading that states a claim for relief must contain ... a
short and plain statement of the claim showing that the
pleader is entitled to relief." Fed.R.Civ.P. 8(a)(2). To
survive a motion to dismiss, a "complaint must contain
sufficient factual matter, accepted as true, to 'state a
claim to relief that is plausible on its face.'"
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting
Bell Ail. Corp. v. Twombly, 550 U.S. 544, 570
claim has facial plausibility when the plaintiff pleads
factual content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct
alleged." Id. (citing Twombly, 550
U.S. at 556). "While legal conclusions can provide the
framework of a complaint, they must be supported by factual
allegations." Id. at 679. Detailed factual
allegations are not required, but a complaint must offer more
than "labels and conclusions" or "a formulaic
recitation of the elements of the cause of action."
Twombly, 550 U.S. at 555 (citation omitted). The
factual allegations must be enough to "raise a right to
relief above the speculative level." Id.
cause of action sounds in fraud, the allegations in a
complaint must satisfy Federal Rule of Civil Procedure 9(b).
Under Rule 9(b), "a party must state with particularity
the circumstances constituting fraud or mistake";
although "conditions of a person's mind," such
as malice, intent, and knowledge may be alleged generally.
Fed.R.Civ.P. 9(b). To comply with Rule 9(b), a plaintiff must
allege: "(1) the precise statements, documents, or
misrepresentations made; (2) the time, place, and person
responsible for the statement; (3) the content and manner in
which these statements misled the Plaintiffs; and (4) what
the defendants gained by the alleged fraud." Brooks
v. Blue Cross & Blue Shield of Fla., Inc., 116 F.3d
1364, 1380-81 (11th Cir. 1997) (per curiam) (citation
omitted). In other words, a plaintiff is required to plead
the "who, what, when, where, and how" pertaining to
the underlying fraud. Garfield v. NDC Health Corp.,
466 F.3d 1255, 1262 (11th Cir. 2006) (citation omitted). At
bottom, the purpose of particularity pleading is to alert
defendants to their precise misconduct and protect them
against baseless charges of fraudulent behavior. See
Durham v. Bus. Mgmt. Assocs., 847 F.2d 1505, 1511
(11th Cir. 1988) (citation omitted).
at the motion to dismiss stage, the Court must view the
allegations in the complaint in the light most favorable to
the plaintiffs and accept well-pleaded facts as true. See
St. Joseph's Hosp., Inc. v. Hosp. Corp. of Am.,
795 F.2d 948, 954 (11th Cir. 1986).
RACKETEERING INFLUENCED AND CORRUPT ORGANIZATIONS
Racketeering (Count I)
Count I, the Plaintiffs assert a federal RICO claim under 18
U.S.C. Section 1962(c) against the Toyota Defendants. To
state a plausible Section 1962(c) claim, a plaintiff must
allege that defendants: (1) engaged in conduct (2) of an
enterprise (3) through a pattern (4) of racketeering
activity. Williams v. Mohawk Indus., Inc., 465 F.3d
1277, 1282 (11th Cir. 2006), abrogated on other grounds by
Ray v. Spirit Airlines, Inc., 836 F.3d 1340, 1349
(11th Cir. 2016).
case, the Plaintiffs' racketeering claim is predicated on
mail and wire fraud. Thus, the allegations in the Complaint
must comply not only with the plausibility criteria
articulated in Twombly and Iqbal, but also
with Rule 9(b)'s heightened pleading standard. Am.
Dental Ass'n v. Cigna Corp., 605 F.3d 1283, 1291
(11th Cir. 2010) (quoting Ambrosia Coal & Constr. Co.
v. Pages Morales, 482 F.3d 1309, 1316 (11th Cir. 2007)).
Notwithstanding, because particularity pleading under Rule
9(b) is limited to "the circumstances constituting
fraud," the non-fraud elements of a RICO claim can be
alleged under Rule 8(a) standards. See D. Penguin Bros.
v. City Nat. Bank, 587 Fed.Appx. 663, 666 (2d Cir.
2014); Audette-Weaver v. J.G. Wentworth, S.S.C,
L.P., No. 8:07-cv-2056-T-26MAP, 2008 WL 11336685, at *6
(M.D. Fla. Feb. 26, 2008).
activity is defined as any act indictable under any of the
statutory provisions listed in 18 U.S.C. Section 1961(1),
which includes mail and wire fraud in violation of 18 U.S.C.
Sections 1341 and 1343. See Kemp v. Am. Tel. & Tel.
Co., 393 F.3d 1354, 1359 (11th Cir. 2004). A
"pattern of racketeering activity" requires the
commission of at least two such acts within a ten-year
period. See 18 U.S.C. § 1961(5); Rajput v.
City Trading, LLC, 476 Fed.Appx. 177, 180 (11th Cir.
2012) (per curiam).
Plaintiffs' racketeering claim is predicated on mail and
wire fraud, and thus they must allege: (1) intentional
participation in a scheme to defraud; and (2) the use of the
interstate mails or wires in furtherance of that scheme.
United States v. Maxwell, 579 F.3d 1282, 1299 (11th
Cir. 2009) (citing United States v. Hasson, 333 F.3d
1264, 1270 and n.7 (11th Cir. 2003); United States v.
Ellington, 348 F.3d 984, 990 (11th Cir. 2003)). A
"scheme to defraud" requires proof of a material
misrepresentation, or the omission or concealment of a
material fact calculated to deceive another out of money or
property. Id. (citing United States v.
Svete, 556 F.3d 1157, 1161, 1169 (11th Cir. 2009)
case, the Court finds that the Plaintiffs adequately allege
mail and wire fraud against the Toyota Defendants. The
Complaint sets forth numerous allegations establishing the
Toyota Defendants' exclusive and superior knowledge of
the Defect. By way of examples, the Complaint alleges the
Toyota Defendants were aware of the Defect based upon
numerous complaints filed with the National Highway Traffic
Safety Administration by consumers complaining about foul,
moldy odors coming from the Heating, Ventilation, and Air
Conditioning System in their vehicle. (See D.E. 1 at
¶¶ 65-67.) The Complaint also alleges the Toyota
Defendants used their knowledge of the Defect to share
Technical Service Bulletins with its network of distributors
in 1997, 2009, 2011, 2013, and 2015. See Id. at
¶¶ 68-74, 125b-c, e, j, l.
to the Complaint, a 1997 Technical Service Bulletin described
the Heating, Ventilation, and Air Conditioning System Defect
as a "musty odor ... emitted from the air conditioning
system of some vehicles which are usually operated in areas
with high temperature and humidity." Id. at
¶¶ 69, 125b. This Technical Service Bulletin noted
that the odor could result from "[b]lockage of the
evaporator housing drain pipe, resulting in the build up of
condensate" or "[m]icrobial growth in the
evaporator, arising from dampness in the evaporator housing
where the cooling air flow is dehumidified."
Id. at ¶ 69.
the Complaint alleges that in 2009 and 2011, new Technical
Service Bulletins were issued, stating that a "newly
designed evaporator sub-assembly [had] been made available to
decrease the potential for HVAC odor" and that this
repair was "covered under the Toyota Comprehensive
Warranty ... in effect for 36 months or 36, 000 miles,
whichever occurs first." Id. at ¶¶
70-71, 125c, e. The 2009 Bulletin also stated that certain
"Camry, Camry HV, and Prius models may exhibit an
intermittent HVAC system odor." Id. at
¶¶ 70, 125c.
Complaint further alleges that a 2013 Bulletin explained the
odors as "naturally occurring from the HVAC system
and/or related environmental factors" and then informed
dealers there was "no way to eliminate these
odors." Id. at ¶¶72, 125j. That
Bulletin further provided procedures to "minimize"
the odors, but noted the procedures would "NOT eliminate
the odors experienced, but [were] provided to help reduce the
intensity of [the] odors." Id. The Complaint
also alleges that a 2015 Bulletin revised the 2013 Bulletin
to include 2007-2015 Camry and Camry Hybrid vehicles.
Id. at ¶¶ 73, 1251. Finally, the Complaint
alleges that despite this exclusive and superior knowledge of
the Defect, members of the Toyota RICO enterprise
"encouraged Plaintiffs and Class members to pay for
remedies that would fail to completely repair the HVAC System
Defect, to increase Defendants' and other members of the
Toyota RICO Enterprises' profits." Id. at
Complaint juxtaposes the consumer complaints filed with the
National Highway Traffic Safety Administration and the
Technical Service Bulletins, with numerous internal
communications supporting the reasonable inference that the
Toyota Defendants took actions to mislead consumers, or
conceal from them, the existence and/or full nature of the
Heating, Ventilation, and Air Conditioning System Defect in
order to avoid liability and to maintain revenue. Several
allegations stand out to the Court. First, the Complaint
alleges that on September 19, 2012, a communication was
transmitted via wire by a Toyota Motor Sales Product Engineer
between Toyota's offices in California and Texas, which
summarized communications with Southeast Toyota as follows:
AC has been one of the top issues for [Southeast Toyota] for
the last few years .... [Southeast Toyota] stopped
attempting to repair vehicles with AC odor, because of the
severity of the Lemon Law in the state of Florida.
[Southeast Toyota] started to tell customers the
condition was normal.
Id. at ¶¶ 77, 125g (emphasis added).
Relatedly, the Complaint alleges that on January 23, 2013,
Toyota transmitted a communication via wire to its offices in
Australia and Japan, explaining that Toyota and its dealers
were "hesitant" to attempt repairing the Heating,
Ventilation, and Air Conditioning Systems, because the odors
would come back, and it would subject Toyota to Lemon Law
liability. Id. at¶ 125h.
the Complaint alleges that on July 25, 2013, Toyota's
office in Kansas transmitted a communication via wire to
Southeast Toyota in Florida, which provided standardized
language to give complaining customers; specifically, that
the odor was not a defect, but rather, "an industrywide
condition." Id. at ¶ 125i. That
communication also advised that customers should be
encouraged to "contact [their] local Toyota dealership
for a thorough evaluation of the condition."
the Complaint alleges that on September 9, 2015, a Toyota
Pricing Manager emailed the National Product Planning
Manager, stating that he agreed with Southeast Toyota, and
[I]f this is a known issue with a [Technical Service
Bulletin] for how to repair, why are we asking to charge
customers. ... it does seem challenging to explain why to get
what a customer should expect as a standard condition for the
air conditioner (no odor) we charge more?
Id. at ¶ 81; ¶ 125m (noting the same
communication described the Defect as an engineering problem
affecting "a basic requirement of the system").
the Complaint alleges that the while the Toyota Defendants
knew about and wrestled with the Heating, Ventilation, and
Air Conditioning System Defect internally, but did not
publicly disclose it, they continued to tout the Canary's
"legendary quality" (2011), described the interior
as "a space that is rewarding and enhances the driver
experience" (2013), and marketed Camrys as providing
"maximum comfort" "ready for your next road
trip," and as "[c]ommitted to safety" (2016).
See Id. at ¶¶ 125d, 125k, 125n. The
Complaint also avers that the Toyota Defendants marketed the
2017 Camry as offering "the best combination of
roominess, comfort, quality safety and performance" and
that it upheld "its well-earned reputation for
comfort," which came with "[p]eace of [m]ind
[w]arranty [protection." Id. at ¶ 125o.
Finally, despite its knowledge of the Defect and continued
marketing of Camry vehicles, the Complaint alleges that
"[b]y concealing the scope and nature of the HVAC System
Defect contained in millions of vehicles, the Toyota
Defendants also maintained and boosted consumer confidence in
the Toyota brand" and "avoid[ed] the costs and bad
publicity associated with a recall or lemon law suit."
Id. at ¶¶ 120, 125f.
all these allegations as true, as the Court must at the
dismissal stage, the Court finds the Complaint sufficiently
alleges a scheme to defraud based on "material
misrepresentations" or the "omission or
concealment" of material facts from the Plaintiffs and
the putative class members. Cf. Stockinger v. Toyota
Motor Sales U.S.A., Inc., No. LACV 17-00035-VAP (KLSx),
2017 WL 10574372, at *15-19 (CD. Cal. July 7, 2017) (denying
motion to dismiss common law fraud claims under similar, if
not lesser, allegations); Salas v. Toyota Motor Sales,