On March 31, the District of New Jersey dismissed a putative automotive class action against Hyundai Motor America and Hyundai Motor Company, finding that the named plaintiff failed to plead that Hyundai had knowledge of an alleged powertrain defect or that Hyundai was required to disclose the alleged defect.

• Plaintiff Jan Schechter, a New Jersey resident, sued Hyundai on behalf of a putative nationwide class of consumers who had purchased or leased 2017–2018 Hyundai Santa Fe vehicles. Schechter alleged that the vehicles’ defective powertrain resulted in delayed acceleration, loss of power, and rough shifting, and that Hyundai knew about these problems based on online consumer complaints posted on the NHTSA website, which Hyundai purportedly monitored.
  • He also alleged knowledge based on two technical service bulletins (“TSBs”) about the transmission control unit; a previous class action filed in California federal court that purportedly involved a similar defect; and certain pre-production testing and analysis data.
• Schechter brought claims for violations of the New Jersey Consumer Fraud Act (“NJCFA”), negligent misrepresentation under New Jersey law, and violations of California’s Consumers Legal Remedies Act (“CLRA”) and Unfair Competition Law (“UCL”). Schechter sought to represent a putative nationwide class and New Jersey and California sub-classes.
• The court first applied New Jersey’s “most significant relationship” test to hold that Schechter, as a New Jersey resident who purchased his vehicle in New Jersey, could not assert claims under California law on behalf of a nationwide class.
  • That Hyundai Motor America was located in California and may have made some of the misrepresentations there was not enough to overcome New Jersey’s relationship with the claims. As a result, the court dismissed the California claims.
• Turning to the NJCFA claim, the court found that Schechter did not adequately plead that Hyundai knew of the alleged powertrain defect.
  • The court found that a prior class action involving vehicles from 2010–2012 did not permit a finding of knowledge, since the earlier class vehicles allegedly suffered from a different defect (losing power or stalling). In any event, there was no allegation that a defect in 2010–2012 vehicles would still be present in 2017–2018 models.
  • The 25 online complaints to NHTSA were not enough to plead knowledge because roughly half were published after Schechter filed his lawsuit, and therefore could not show that Hyundai was aware of the defect at the time of sale. The other complaints involved different vehicles than Schechter’s vehicle or did not specify the model.
  • The two technical service bulletins were also insufficient to show knowledge because one TSB involved a different vehicle model than Schechter’s. Although the other did involve Schechter’s model, Schechter merely alleged that the TSB related to a “powertrain defect,” which was not specific enough to satisfy the heightened pleading standard for an NJCFA claim.
  • Schechter did sufficiently allege an ascertainable loss because he identified comparable vehicle models that he could have leased at a lower cost. As a result, the court granted him leave to replead his NJCFA claim.
• The court also dismissed Schechter’s negligent misrepresentation claim because he did not allege a duty to disclose the purported defect. Namely, the court found that Schechter had not pleaded the existence of a “special relationship” between himself and Hyundai that was sufficient to trigger a duty to disclose because he had leased the vehicle in a routine, arms-length transaction with an authorized dealership.
• The court’s ruling that Schechter’s collective allegations failed to plead knowledge is significant because named plaintiffs in automotive class actions typically plead knowledge based on similar grounds, such as TSBs and online consumer complaints. The court’s ruling may help defendants defeat similar allegations at the pleading stage.

Read the order of dismissal here.