ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTIONS FOR SUMMARY JUDGMENT AND PLAINTIFFS' MOTION TO CERTIFY CLASS
MICHAEL J. REAGAN, Chief District Judge.
INTRODUCTION
In 2015, Plaintiffs Brian Flynn, Michael Keith, and George and Kelly Brown filed this putative class action against Defendants FCA US LLC ("FCA") and Harman International Industries, Inc. ("Harman") alleging a number of claims related to design flaws in the Uconnect system, which was manufactured by Harman and installed in certain 2013-2015 Chrysler vehicles.
Before the Court are Defendants' motions for summary judgment and Plaintiffs' motion to certify class. Plaintiffs moved to certify several classes, including nationwide and state-based classes. (Doc. 266). FCA and Harman both responded to the motion (Docs. 318, 321), and Plaintiffs replied to both responses (Docs. 338, 339). The Court held a hearing on the motion on January 11, 2018, after which Defendants renewed a standing challenge made in the early stages of this litigation and sought permission for an interlocutory appeal (Docs. 344, 345, 378). The Seventh Circuit denied the petition for leave to file an interlocutory appeal on May 4, 2018. (Doc. 388). Defendants petitioned for rehearing, and their request was denied on June 29, 2018.
Before briefing was complete on the motion to certify class, Defendants filed seven motions for summary judgment. FCA filed four motions (Docs. 256, 257, 264, and 267) along with briefs in support thereof, and Harman filed three (Docs. 346, 348, and 350).
BACKGROUND
Plaintiffs bring suit against Harman and FCA on a number of implied warranty and fraud claims alleging that two Uconnect infotainment systems, the 8.4A and 8.4AN, which were manufactured by Harman and incorporated into certain vehicles (the "class vehicles") by FCA, were installed in such a way that the systems are unreasonably and unsafely vulnerable to hacking by third-parties. In essence, this case contemplates (1) whether the class vehicles are defective; (2) whether Defendants knew they were defective and, if so, when; and (3) whether they withheld or concealed information about the alleged defects from consumers. All the vehicles purchased or leased by the named plaintiffs were equipped with either a Uconnect 8.4A or 8.4AN.
Brian Flynn is an Illinois consumer who purchased a new 2014 Jeep Grand Cherokee from Federico Chrysler Dodge Jeep RAM in Wood River, Illinois. He seeks to certify a nationwide or, in the alternative, an Illinois-based Magnuson-Moss Warranty Act class on the theory that the cybersecurity defects in the class vehicles run afoul of the implied warranty of merchantability. To that end, he also seeks to certify an Illinois class on a common law implied warranty of merchantability claim.
In addition, Flynn brings common law fraudulent concealment and fraudulent omission claims on behalf of a nationwide or an Illinois class of consumers, alleging that FCA and Harman concealed and suppressed information about the severity of the cybersecurity defects in the class vehicles. In doing so, Flynn contends that FCA and Harman also engaged in deceptive or unfair business practices in connection with the sale of his vehicle in violation of the Illinois Consumer Fraud and Deceptive Business Practices Act (ICFA) when they concealed or omitted material facts about the cybersecurity of the class vehicles and made affirmative statements about the safety of the vehicles. Flynn also pursues an unjust enrichment claim on behalf of a nationwide or Illinois class against both FCA and Harman.
George and Kelly Brown are Missouri consumers who purchased, through a special pricing program, a 2014 Jeep Cherokee from Dave Sinclair Chrysler Jeep Dodge in Pacific, Missouri. The Browns were subject to arbitration on their warranty claims and opted not to pursue them. Instead, they join Flynn in bringing a fraudulent concealment and fraudulent omission claim and an unjust enrichment claim on behalf of a nationwide class. They also allege that FCA and Harman violated the Missouri Merchandising Practice Act, Missouri's unfair and deceptive practices act, and seek to bring an unjust enrichment claim on behalf of a Missouri class if a nationwide class is not certified.
Michael Keith is a Michigan consumer who leased a 2014 Dodge Ram 1500 and a 2014 Jeep Cherokee from Lakeshore Chrysler in Montague, Michigan. He also leased a 2015 Dodge Challenger from K&M Dodge in Grand Rapids, Michigan. He brings an MMWA implied warranty of merchantability claim on behalf of either a nationwide or a Michigan class against FCA and Harman. He joins Flynn and the Browns in the proposed nationwide class fraudulent concealment and fraudulent omission claim and the nationwide class unjust enrichment claim. Keith also alleges that Harman and FCA violated the Michigan Consumer Protection Act and were unjustly enriched by his leasing of defective vehicles.
Harman and FCA maintain that the class vehicles are safe and not defective. They maintain that the vehicles have never been hacked outside of a controlled environment and that hacking the class vehicles now, after a 2015 recall campaign, is a remote risk, too remote to support Plaintiffs' claims of any overpayment or diminution in value damages. As Defendants moved for summary judgment on the named plaintiffs' claims before a class was certified, the Court considers their motions before considering Plaintiffs' motion to certify class.
MOTIONS FOR SUMMARY JUDGMENT
A. Legal Standard
Federal Rule of Civil Procedure 56 governs motions for summary judgment. Summary judgment is appropriate if the movant shows that there is no genuine dispute as to any material fact and that the movant is entitled to judgment as a matter of law.
In assessing a summary judgment motion, the district court views the facts in the light most favorable to, and draws all reasonable inferences in favor of, the nonmoving party.
B. FCA's Motion for Summary Judgment on All Claims (Doc. 256)
FCA's first motion for summary judgment raises two issues: first, that Plaintiffs have no evidence of a defect and, second, that they have no evidence of damages. As to whether Plaintiffs have evidence of a defect in the class vehicles, the Court finds that there is a genuine issue of material fact. Plaintiffs present evidence of cybersecurity weaknesses, including various documents uncovered during discovery and the expert testimony of Marc Rogers. When considered in the light most favorable to Plaintiffs, this is sufficient to demonstrate a genuine dispute between the parties as to whether the class vehicles have defects. Similarly, the parties have a genuine dispute as to whether the alleged defects were remedied by FCA's voluntary recall or whether they require additional measures to protect the vehicles from an unreasonable risk of hacking.
As to evidence of damages, despite FCA's arguments to the contrary, the parties dispute whether the defects alleged by Plaintiffs have been repaired sufficiently. While FCA cites case law from district courts around the country that may suggest that overpayment damages are inappropriate where a defect has been fixed, here there is a dispute of material fact as to the effectiveness of Chrysler's software-related recall. Plaintiffs provide evidence that the design and installation of the Uconnect devices themselves, rather than the software operating the devices, is defective and that fixing the software may not have fixed the alleged defects. Accordingly, the Court finds that genuine disputes of material fact exist such that summary judgment cannot be granted as to all counts at this time.
C. Motions for Summary Judgment on Magnuson-Moss Warranty Act and Common Law Implied Warranty Claims (Docs. 257, 264, 346, 350)
Both FCA and Harman move for summary judgment on Flynn's and Keith's Magnuson-Moss Warranty Act (MMWA) claims, which they seek to bring against both Defendants on behalf of a nationwide class or, in the alternative, an Illinois and a Michigan class, respectively. The MMWA claims are based on alleged violations of the implied warranty of merchantability. Additionally, Flynn brings an Illinois common law implied warranty of merchantability claim against FCA.
Neither Keith nor Flynn provided Defendants with pre-suit notice or an opportunity to cure prior to filing suit, and Defendants argue that they are entitled to summary judgment due to the lack of pre-suit notice. In ruling on Defendants' motions to dismiss, the Court found that the MMWA does not require pre-suit notice or an opportunity to cure in a putative class action prior to class certification, but FCA and Harman ask the undersigned to reconsider that ruling. Pursuant to 15 U.S.C. § 2310(e), putative MMWA class actions may proceed to the extent necessary to establish the representative capacity of the named plaintiffs prior to providing a defendant with notice and an opportunity to cure.
Flynn's common law implied warranty claim brought under Illinois law is not saved by the notice provision in the MMWA. The only way his common law claim can survive is if an exception to the notice requirement exists. As the Court already ruled, an exception to the notice requirement exists in Illinois if a defendant already knew of the defect in an entire product line.
Defendants next argue that Flynn and Keith cannot pursue their MMWA claims and that the claims they seek to bring on behalf of a nationwide class must fail because their vehicles are merchantable. MMWA claims rise or fall based on the underlying state law.
Even though both Plaintiffs continued to drive their vehicles after learning of the hack detailed by WIRED, the Court cannot find as a matter of law that the vehicles were merchantable based on that evidence alone, as Defendants suggest. Plaintiffs provide evidence of cybersecurity defects sufficient to create a genuine issue of material fact as to merchantability and the presence of defects in the vehicles. Despite Defendants' characterization that the defect alleged by Plaintiffs requires that they be hacked before bringing suit, Plaintiffs provide evidence that suggests that the Uconnect integration in their vehicles is flawed such that the defect exists regardless of whether they, personally, have had their vehicles hacked. The crux of their case is that their vehicles had unreasonable cybersecurity defects at the time they were produced and sold to the public, even when compared to other vehicles and products that include computer systems that are inherently hackable. The defect is in the design and the installation of the devices, according to Plaintiffs' evidence, and there is a genuine issue of material fact as to whether the vehicles were defective at the time they were sold and whether they were, and are, merchantable.
FCA also argues that summary judgment on Flynn's claims must be granted because he purchased from a dealership, rather than directly from FCA. Illinois law requires privity for an implied warranty claim and FCA maintains that there is no evidence of privity here. Privity inquiries into the relationship between a purchaser, a seller, and a manufacturer are fact-intensive. In some circumstances, a manufacturer is in privity with a consumer who purchased through a remote seller, but in others privity cannot be established between a consumer and a manufacturer.
Harman raises additional arguments as to the nationwide MMWA claim in Count One. The Court has previously dismissed all of the MMWA claims against Harman, but Plaintiffs attempt to bring Harman back into the MMWA action by including them in a proposed nationwide MMWA claim in Count One.
For all these reasons, the Court
D. Motions for Summary Judgment on Brian Flynn's Common Law Fraud and Illinois Consumer Fraud Act Claims (Docs. 257, 346)
Flynn seeks to bring common law fraudulent concealment and fraudulent omission claims against FCA and Harman on behalf of a nationwide class (Count 2) or, in the alternative, an Illinois class (Count 7). He also alleges an Illinois Consumer Fraud and Deceptive Business Practices Act (ICFA) claim on behalf of an Illinois class.
The Court considers counts two and seven together, as the same law applies to both.
The problem for Flynn is that he points to no evidence and makes no developed argument beyond mere conjecture that demonstrates that an automobile manufacturer, or a component manufacturer for an automobile manufacturer, and a consumer who purchases from a dealership are engaged in a fiduciary or special trust relationship or that there was an intent to deceive by FCA or Harman such that a duty to speak arose. In the absence of any evidence or developed argument to support his claim, both Defendants are entitled to summary judgment on Flynn's common law fraudulent concealment and omission claims (Counts 2 and 7).
Turning to Flynn's statutory fraud claims, the Illinois Consumer Fraud Act (ICFA) prohibits the "misrepresentation or the concealment, suppression, or omission of any material fact" in the conduct of any trade or commerce.
Here, there is a genuine issue of material fact as to whether the information about the Uconnect design and installation that allegedly was withheld would have changed Flynn's decision to purchase his vehicle or whether it was the type of information that he would be expected to rely on in deciding to purchase a vehicle. Defendants gloss over Flynn's evidence that he did not fully understand the cybersecurity risks of the Uconnect device in his car by pointing to testimony that Flynn understands that computers can be hacked and that he purchased a car with a computer. That is insufficient to warrant summary judgment on the basis of materiality.
Defendants next argue that Flynn cannot demonstrate that he relied on the information at issue, but ICFA does not require proving reliance, only that a defendant intended that a consumer would rely on a deceptive or unfair practice.
Under ICFA, deceptive advertising cannot be the proximate cause of damages unless the advertisement actually deceives the plaintiff.
E. Motions for Summary Judgment on Brian Flynn's Unjust Enrichment Claims (Docs. 257, 346)
Where unjust enrichment claims are based on the same conduct underlying fraud claims, the claims rise or fall together.
F. Motions for Summary Judgment on Keith's Michigan Consumer Protection Act Claim (Docs. 264, 350)
Keith alleges that both Harman and FCA violated the Michigan Consumer Protection Act. According to Keith, Defendants both made affirmative misrepresentations and failed to disclose material facts in connection with the sale of the class vehicles. The Michigan Consumer Protection Act (MCPA) prohibits "[u]nfair, unconscionable, or deceptive methods, acts or practices in the conduct of trade or commerce."
Keith identifies no specific statements on which he relied in leasing his vehicles and cannot survive summary judgment on his MCPA claim to the extent that he pursues an affirmative representation theory. Seemingly, Keith is aware of this shortfall, as his responses to the summary judgment motions appear to ignore that there is an affirmative misrepresentation aspect to his MCPA claim. Accordingly, Defendants are entitled to summary judgment on count twelve to the extent that Keith attempts to premise his MCPA claim on affirmative misrepresentations by Defendants.
As to whether Defendants failed to reveal material facts, the elements Keith must establish are different. The MCPA proscribes "failing to reveal a material fact, the omission of which tends to mislead or deceive the consumer, and which fact could not reasonably be known by the consumer."
G. Motions for Summary Judgment on George and Kelly Brown's Missouri Merchandising Practices Act Claim (Docs. 267, 348)
To succeed on their Missouri Merchandising Practices Act (MMPA) claim, the Browns must establish that they bought merchandise from the defendants for personal, family, or household purposes and that they suffered an ascertainable loss of money or property as a result of an act declared unlawful by Mo. Rev. Stat. 407.020, which defines the term "unlawful practice" broadly as the "act, use or employment by any person of any deception, fraud, false pretense, false promise, misrepresentation, unfair practice, or the concealment, suppression, or omission of any material fact in connection with the sale or advertisement of any merchandise in trade or commerce . . . in or from the state of Missouri."
The Browns present sufficient evidence to survive summary judgment on the questions of causation and materiality. They have experts and witnesses prepared to testify about the design defects in the affected vehicles and to calculate financial loss in the form of overpayment. There is evidence suggesting that FCA knew of the defects at all relevant times and did not disclose them. The Browns testify that had they known that their vehicle was designed with the alleged cybersecurity defects, then they would not have paid as much as they did or perhaps would not have purchased it at all. Taken together, this amounts to questions of material fact as to whether information concealed by FCA constituted an unlawful practice that caused the Browns to suffer an ascertainable loss.
FCA attempts to add a requirement that the Browns show something beyond the typical bad faith or recklessness showings for omission claims under the MMPA, but the scienter requirement for claims alleging an omission of material fact relates to whether FCA knew, or upon reasonable inquiry would have known, the material facts it allegedly failed to disclose.
The Browns are in a different position as to their fraudulent omission claims against Harman. They offer no evidence that Harman knew, or upon reasonable inquiry would have known, that the installation of the Uconnect device in their vehicle led to cybersecurity defects. Harman's evidence shows that they manufactured the Uconnect device to FCA's specifications but that they had no role in the installation or fitting of the units in FCA's vehicles. The Browns offer no evidence to the contrary. Further there is no evidence or case law before the Court that suggests that Harman is a seller within the meaning of the MMPA. There is no evidence that Harman sold anything to the Browns. They produced components for a vehicle sold by FCA. Absent evidence that the Browns purchased something from Harman, as required by the plain language of the MMPA, the Browns' MMPA claims fail against Harman. Accordingly, FCA's motion for summary judgment (Doc. 267) is denied and Harman's motion for summary judgment (Doc. 348) is granted as to count nine.
H. Motions for Summary Judgment on Missouri and Michigan Unjust Enrichment Claims (Docs. 264, 267, 348, 350)
Both the Browns and Keith bring unjust enrichment claims under the laws of their home states. In order to sustain a claim for unjust enrichment under Michigan law, a plaintiff must prove (1) that the defendant received a benefit conferred by the plaintiff, and (2) that there was a resulting inequity to the plaintiff.
I. Remaining Nationwide Class Claims
As all Plaintiffs' unjust enrichment claims fail, Defendants' motions for summary judgment on Count Three, the nationwide unjust enrichment claim, are granted, as well. Similarly, the Browns' and Keith's common law fraudulent concealment claims were dismissed with prejudice due to the economic loss doctrine. (See Docs. 115, 236), and the Court has granted summary judgment as to Flynn's common law claims. Accordingly, the Court finds that none of the plaintiffs can pursue count two and grants Defendants' motions for summary judgment as to count two.
PLAINTIFFS' MOTION TO CERTIFY CLASS
Having fully considered Defendants' motions for summary judgment, the Court turns to Plaintiffs' motion to certify class. As a preliminary note, the question of class certification is moot as to the claims on which the Court has granted summary judgment because the named plaintiffs in this case are not proper class representatives as to their claims that lack merit.
A. Standard Governing Class Certification
District courts should exercise "caution in class certification generally."
The putative class representatives bear the burden of proving each disputed requirement by a preponderance of the evidence.
B. Rule 23(a) Requirements
a. Rule 23(a)(1): Numerosity
Rule 23(a) requires that a proposed class be "so numerous that joinder of all members is impracticable."
b. Rule 23(a)(2): Commonality
Rule 23(a)(2) requires that "questions of law or fact common to the class" must exist before a class may be certified.
For purposes of 23(a)(2), even a single common contention, the determination of which resolves an issue that is central to the validity of the claims, is sufficient.
c. Rule 23(a)(3): Typicality
A claim is typical if it "arises from the same event or practice or course of conduct that gives rise to the claims of other class members and . . . [the] claims are based on the same legal theory."
d. Rule 23(a)(4): Adequacy
The final requirement of Rule 23(a) is that the representative parties fairly and adequately protect the interests of the class.
Here, Defendants challenge the adequacy of class counsel, but the undersigned is not convinced by the record that counsel cannot adequately represent the interests of the proposed classes. Counsel has pursued their clients' interests vigorously, has litigated discovery issues thoroughly, and has devoted significant time and resources to this action. While this litigation has had contentious moments and the parties have an obvious distaste for each other's tactics, class counsel has demonstrated that they are competent to fairly and adequately represent the interests of a class without conflict.
Further, despite Defendants' many objections to the adequacy of the named plaintiffs, their arguments do not focus on the relevant inquiry — whether Plaintiffs' interests are antagonistic to those of the class members. Defendants suggest, without developed argument to support the contention, that the interests of a new purchaser are antagonistic to those of a used purchaser because only one person in a chain of ownership can recover overpayment damages. Defendants also argue that class representation is inadequate because Plaintiffs propose including purchasers and lessees in the same class. Plaintiffs' methods for damage calculations can accommodate measuring damages for different types of class members, and courts have certified classes involving claims of both purchasers and lessees of vehicles.
B. Rule 23(b)(3) Considerations
Plaintiffs' predominance argument in their opening brief is insufficient to satisfy the Court that they have satisfied their burden. Predominance is similar to typicality and commonality but is far more demanding, and Plaintiffs barely scratch the surface of what the Court must consider. They are saved from a ruling that they failed to establish predominance only by the time spent discussing relevant issues during the hearing on the motion to certify class.
As Plaintiffs seek certification under Rule 23(b)(3), they must show (1) that the questions of law or fact common to the members of the proposed class predominated over questions affecting only individual class members; and (2) that a class action is superior to other available methods of resolving the controversy.
a. Damages
The Court first considers whether "damages are susceptible of measurement across the entire class."
Damages are susceptible of class-wide measurement if there is a "single or common method that can be used to measure and quantify the damages of each class member.
Here, Plaintiffs offer two methods to measure damages on a class-wide basis. First, they offer that damages could be calculated by expert Myles Kitchen who would estimate a cost of repair for the class vehicles by estimating the cost to retrofit the vehicles with the needed cybersecurity upgrades. Considering that Plaintiffs' case is focused on whether class members overpaid for their vehicles, the undersigned is unconvinced that this is a method for calculating class-wide damages. Damages must fit a plaintiff's theory of liability and be sufficiently reliable.
Plaintiffs offer another method for measuring class-wide damages: a discrete choice analysis that could measure consumer opinions on the economic value of vehicle cybersecurity. This method is an enhanced form of conjoint analysis, a methodology often used to calculate damages in class actions and is sufficiently tied to Plaintiffs' theory of liability. The analysis attempts to measure the value of the class vehicles had consumers been aware of the allegedly withheld information about the lacking cybersecurity. With this method, Plaintiffs have met their burden of showing a proposed class-wide damage calculation that is consistent with their theory of liability.
b. Predominance
Predominance analysis begins with the elements of the underlying causes of action.
i. Proposed Nationwide Classes
Rule 23(b)(3) warns against certifying a nationwide class on the Magnuson-Moss Warrant Act claim. MMWA claims rely on underlying state law. The Court squarely rejects Plaintiffs' contention that Michigan law should be applied to an entire nationwide class regardless of where class members reside or where they purchased and used their vehicles. To certify a class potentially would require the Court to apply the law to every state, and there are wide variations between various state implied warranty claims, including, but not limited to, states that require privity and states that do not. To do so would be unwieldy and would require highly individualized inquiries.
Plaintiffs propose that, to overcome the differences in underlying state laws the Court could instead certify subclasses of class members living in states that require privity and class members living in states that do not. Even though that broadly covers an aspect of implied warranty claims that varies from state to state, there are more variations between state laws on the implied warranty of merchantability than just the question of privity. Merchantability, for example, can be defined differently at the state level with different nuances carved out, and the application of the state definition to a consumer's factual situation would determine, in part, whether a claim rises or falls. For this reason, courts commonly refuse to certify nationwide classes based on warranty, fraud, and products-liability suits based on questions of commonality, predominance and superiority, and this Court finds that doing so is necessary here.
ii. Proposed State Classes
As to the state classes, the Court finds that common questions predominate. For Plaintiffs' implied warranty claims, there appears to be no difference among class members with respect to proving merchantability and the defectiveness of the class vehicles. For the omission-based consumer protection claims, whether Defendants knew the vehicles were defective and engaged in unlawful practices poses a common question that predominates over individual questions that may arise. Further, these common questions are particularly appropriate for class-wide resolution. The proof needed to answer these questions is common to all class members, and it would be highly costly to litigate the same questions of liability on an individual basis. In Amchem, the Supreme Court commented that "[p]redominance is a test readily met in certain cases alleging consumer or securities fraud or violations of the antitrust laws."
c. Superiority
Under the superiority requirement of Rule 23(b)(2), a class action must be superior to other available methods for the fair and efficient adjudication of the controversy. "Class certification is usually considered a superior method of adjudicating claims involving standardized conduct, even if there are individual issues that exist among class members (for example, on questions such as damages), so long as those individual issues can be managed through bifurcated hearings."
Because common issues predominate and the named Plaintiffs are typical and adequate class representatives, as discussed above, the instant case meets this requirement. Despite individualized damage inquiries that may be required if the class prevails, this case will be manageable as a class action. Requiring each class member to bring a separate action would be a waste of time and money.
C. Class Definition
Having determined that the 23(a) and 23(b)(3) factors are satisfied as to counts four, five, nine, ten, and eleven, the final consideration before the Court is the definition of the proposed class. A class definition "must be definite enough that the class can be ascertained."
Defendants argue that, as proposed, the class definition is unmanageable because class members would be ever-shifting due to the failure to include time limitations, making the class amorphous. Plaintiffs' response is that the Court should exercise its power to modify the class definition rather than deny certification, and they propose the date of class certification as a cut-off date for class membership. A cut-off date is necessary to avoid manageability difficulties, as new class members could be created any time a class vehicle is purchased on the resale market. Class definition issues should be solved by refining the class rather than flatly denying certification.
CONCLUSION
Defendants' motions for summary judgment (Docs. 256, 257, 264, 267, 346, 348, 350) are
Further, for the above-stated reasons, the Court
The motion is
Counts Four and Five: an Illinois Class against FCA US, LLC defined as:
Count Nine: a Missouri Class against FCA US, LLC defined as:
Count Twelve: a Michigan Class against FCA US, LLC and Harman defined as:
The Court
In light of an anticipated appeal of this Order, the Court
Should no party file a timely notice of appeal, the parties shall confer regarding class notice and shall file a status report with their joint proposal or competing proposals by August 10, 2018.
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