Mealey's (June 14, 2016, 9:20 AM EDT) -- BIRMINGHAM, Ala. — An Alabama federal judge on June 9 dismissed an auto services center franchisor from a putative class action alleging defects in aftermarket automotive oil filters for lack of personal jurisdiction (Justin Lee v. Hyundai Motor American Inc., et al., No. 2:16-cv-00159, N.D. Ala., Southern Div.; 2016 U.S. District LEXIS 75184).
(Opinion available. Document #98-160712-001Z.)
U.S. Judge R. David Proctor of the Northern District of Alabama, Southern Division, granted the motion to dismiss filed by Precision Tune Auto Care.
On Jan. 28, Jason Lee filed a complaint on behalf of himself and two proposed Alabama and nationwide putative classes, alleging that Hyundai Motor America Inc. (HMA) and Precision sold defective aftermarket oil filters to owners of Hyundai Elantras and refused to provide refunds and honor warranties related to engine failure allegedly related to the claimed defects.
Proposed Classes
The proposed classes are all purchasers, owners or lessees of 2011 or later model Hyundai Elantras and every person who purchased an aftermarket oil filter and oil change services from Precision for Elantra models from 2011 to the date of filing.
HMA’s principal place of business is in California. Precision’s principal place of business is in Virginia. Lee is an Alabama resident.
HMA manufactured the Elantra models in its Montgomery, Ala., plant starting in 2011. All Elantra models 2011 and later have a “nearly identical” engine and undergo “substantially the same” manufacturing process. Lee bought his Elantra from a dealer in Birmingham on April 14, 2015. The Elantra’s oil filter was allegedly taxed under pressure because of engine part and other defects.
HMA “never prohibited” Lee from using aftermarket oil filters and services from third-party auto service companies, he said. On Sept. 17, 2015, Precision serviced Lee’s Elantra. Lee claims that after Precision serviced his car, it stalled and spewed oil from the engine, the oil filter failed completely and then the engine partially failed.
Concern Expressed
According to Lee, Precision’s service technician explained that he was aware of the filter and engine defect and “expressed a concern” about the effectiveness of aftermarket filters on HMA-manufactured engines. The technician blamed HMA, Lee said. Precision then sold Lee another “useless” oil filter and service, but that soon failed and caused the engine to completely fail, he alleges. HMA later blamed Precision for the problems, Lee says.
Both HMA and Precision have denied warranty service under warranty agreements they issued, Lee claims. Also, Lee referenced three National Highway Traffic Safety Administration complaints — from Virginia, Maine and New Jersey — as a basis for the class claims.
Lee asserts causes of action against HMA under the Alabama Deceptive Trade Practices Act (ADTPA), breach of warranty and the Alabama Vehicle Lemon Law Act. He has also sued Precision for violations of ADTPA and breach of warranty. Lee seeks damages and an injunction, among other things.
Precision moved to dismiss. In its brief in support of the motion, it attached the declaration of Robert R. Falconi, the president of Precision, and the Precision Tune Auto Care franchise agreement between Precision Franchising LLC as franchisor and The Cherry Group Inc. as franchisee.
Separate Entity
Precision contended that it is not the franchisor of the local business that allegedly serviced Lee’s automobile and that it is a separate entity from the franchisor — Precision Franchising. It argued that the national warranty program is drafted by Precision Franchising, not Precision, and that this court does not have personal jurisdiction over it.
On March 28, Lee filed a first amended motion to stay Precision’s motion to dismiss with leave to conduct limited discovery. He argued that Precision’s motion should be converted to one for summary judgment due to the attachment of documents to that motion. He said he needed to conduct additional discovery on the number of contacts with Precision’s local franchisees and the degree of control over the franchisees, the role and legal relationship between the defendants and himself and the nature of Precision’s national warranty. Precision opposed the motion, saying that basic fact-finding should occur before the filing of a lawsuit.
Judge Proctor said Lee is not entitled to limited jurisdictional discovery because he has already received information from Precision and there is no indication that the facts Lee seeks to discover would affect the judge’s jurisdictional analysis.
Jurisdiction
Granting Precision’s motion to dismiss, the judge agreed that his court does not have personal jurisdiction over Precision.
“Here, Precision is not incorporated in Alabama and does not have its principal place of business here,” Judge Proctor wrote. “And, even if Precision made sizeable sales in Alabama, that would not be enough to render it subject to general, all-purpose jurisdiction.”
Lee was represented by Lee W. Loder of Loder PC in Birmingham. HMA was represented by James W. Clayton and Michael L. Kidney of Hogan Lovells in Washington, D.C., and Harlan Irby Prater IV, Robert Jackson Sewell and Wesley B. Gilchrist of Lightfoot Franklin & White in Birmingham. Precision was represented by Lindsay P. Hembree and Steve R. Burford of Simpson McMahan Glick & Burford in Birmingham.
(Additional documents available. Complaint. Document #98-160712-002C. Precision motion to dismiss. Document #98-160712-003M. Lee motion to stay. Document #98-160712-004M. Precision brief. Document #98-160712-005B.)...