General Publications August 1, 2014

"Automotive Recalls, Mootness and Class Actions," Law360, August 1, 2014.

Extracted from Law 360

Recalls and class actions go hand in hand. Often the filing of a class action follows an announced recall by a matter of days. The paradox here is apparent: the very purpose of a recall is to remedy a potential problem with the vehicle or product and yet the offer of a remedy may form the basis of a class action. To the extent the harm alleged in the lawsuit is remedied by the recall itself, shouldn’t the recall moot those claims?

Two years ago, the Tenth Circuit reached that result by applying the doctrine of prudential mootness in Winzler v. Toyota Motor Sales U.S.A. Inc.[1] While the Winzler case received a great deal of attention, it remained to be seen whether its reasoning would be broadly applied to moot claims in other class actions. Only a few cases have addressed this issue in the two years since Winzler was decided, but these cases suggest that mootness may be a viable strategy for dismissing claims where there has been a recall. And, even where this defense is not successful at the motion to dismiss stage, it may pave the way for defeating class certification.

The plaintiff in Winzler alleged that a defect in the engine control modules (“ECMs”) of certain Corolla vehicles made them “prone to stall without warning,” and sought “an order requiring Toyota to notify all relevant owners of the defect and then to create and coordinate an equitable fund to pay for repairs.”[2] The district court dismissed the complaint for failure to state a claim, and while that decision was being appealed, Toyota announced a nationwide recall of 2005-2008 Corolla and Corolla Matrix vehicles pursuant to the National Traffic and Motor Vehicle Safety Act. Although “promises of reform or remedy aren’t often sufficient to render a case moot as a constitutional matter,” the Tenth Circuit nonetheless dismissed all claims under the doctrine of prudential mootness.[3] A case is prudentially moot “if events so overtake a lawsuit that the anticipated benefits of a remedial decree no longer justify the trouble of deciding the case on the merits, [and] equity … demand[s] not decision but dismissal.”[4] The plaintiff was receiving precisely the injunctive relief she had requested. “Perhaps the lawyers would benefit if this would-be class action labored on through certification, summary judgment, and beyond. But it’s hard to see how anyone else would.”[5]

Notably, the plaintiff in Winzler did not request monetary damages. As a result, it was unclear whether plaintiffs in other cases would be able to avoid this result merely by seeking damages in addition to injunctive relief, particularly in light of prior cases declining to dismiss suits as moot where plaintiffs challenged the adequacy of the recall or alleged monetary damages.[6] Two recent cases, however, suggest an increased willingness by courts to apply mootness doctrines in recall cases.

The first of these cases is Cheng v. BMW of North America LLC filed in the Central District of California.[7] There, plaintiff alleged that certain BMW 7-Series sedans suffered from a “roll away defect” that could cause the vehicle to independently shift from park to neutral. The complaint was filed “just days after BMW announced a recall,” but the recall remedy did not become available until several months after the filing of the lawsuit.[8] The court applied Winzler and found that the plaintiff’s claims were prudentially moot.[9]

In so holding, the court rejected a number of specific arguments raised by the plaintiff. First, although the recall did not cover all of the putative class members’ vehicles, the court reasoned that, precertification, it need only consider the named plaintiff’s claims and his claims were encompassed by the recall.[10] Second, although the plaintiff argued that he sought damages in addition to injunctive relief, the complaint contained an allegation that he was not seeking monetary damages at this time (inadvertently, according to the plaintiff) and, “as a practical matter, it is unclear how Plaintiff can demonstrate injury in light of BMW’s offer to completely repair the roll away defect.”[11] The plaintiff later moved for reconsideration, arguing that he was seeking monetary damages and also arguing that the recall was insufficient to remedy the defect even in those vehicles covered by the recall. The court, however, declined to revisit its ruling.

Another recent case out of the Eastern District of Michigan similarly held that the plaintiffs’ claims were mooted by a recall. In Hadley v. Chrysler Group LLC, the plaintiffs brought suit to expedite the repair of allegedly defective airbag modules in certain Jeep Liberty, Jeep Grand Cherokee and Dodge Viper vehicles.[12] The complaint was filed eight months after Chrysler notified affected vehicle owners of the airbag module defect, but, as of the date the complaint was filed, Chrysler had not yet obtained the remedial parts needed to repair the impacted vehicles.[13] Chrysler subsequently obtained and tested the necessary parts and commenced the repair of recalled vehicles.[14] The Eastern District of Michigan held that the recall mooted the plaintiffs’ claims, divesting them of Article III standing.[15]

Like the court in Cheng, the Hadley court went to great efforts to reject the arguments asserted by the plaintiffs. First, although the plaintiffs were seeking monetary damages resulting from Chrysler’s delay in implementing the recall, the court found that the plaintiffs had not alleged sufficient facts to support these claimed damages.[16] Second, although Chrysler had not yet repaired many of the putative class vehicles, since a class had not yet been certified, the court only needed to consider the named plaintiffs’ claims and the recall remedy was available for their vehicles. This mooted their claims for injunctive and declaratory relief.[17] Finally, the court rejected the plaintiffs’ arguments that the recall did not cure the defect since they had not alleged that in their complaint.[18]

Taken together, Cheng and Hadley may demonstrate an increasing willingness by courts to invoke mootness doctrines in recall cases. But both cases may have met with different results had the plaintiffs more skillfully alleged their damages or the claimed inadequacy of the recall measures. Yet, even if plaintiffs are able to defeat similar mootness challenges through the use of detailed pleadings and clever damages theories, this does not mean that mootness arguments are not worth making. These arguments highlight the problems inherent in certifying a class of persons already entitled to a recall remedy.

Numerous courts have refused to certify a class where a recall or refund program has been offered. For example, in Daigle v. Ford Motor Co., after the plaintiffs filed their motion for class certification, Ford notified NHTSA that it would recall certain Freestars and Montereys to address malfunctions in the vehicles’ torque converters.[19] In denying class certification, the U.S. District Court for the District of Minnesota relied in part on the recall, finding that it “provides most of the putative class the relief it seeks. Under these circumstances, a class action does not appear to be a superior method to adjudicate the putative class claims.”[20] The Daigle court joined many others that have similarly held that class certification is not the superior method for resolving class members’ claims where a recall or refund program is offered.[21] Other courts, however, have rejected reliance on the superiority prong, reasoning that it is concerned with “whether a single suit would handle the dispute better than multiple suits[ and a] recall campaign is not a form of ‘adjudication[.]’”[22] However, a recall may yet prevent class certification on adequacy grounds: “A representative who proposes that high transaction costs (notice and attorneys’ fees) be incurred at the class members’ expense to obtain a refund that already is on offer is not adequately protecting the class members’ interests.”[23] Recalls may also raise typicality and predominance obstacles to certification.[24]

Moreover, in a number of recent cases, courts that rejected mootness arguments at the pleadings stage, later refused to certify a class due in large part to the recall offered to class members. For example, in Martin v. Ford, a case involving a recall of certain Windstar vehicles to correct a rear axle defect, the Eastern District of Pennsylvania rejected defendant’s mootness arguments in its motion to dismiss where not all class members were covered by the recall, plaintiff challenged the adequacy of the recall relief provided, and plaintiff sought monetary damages.[25] The court, however, later denied class certification in large part due to Ford’s recall. Specifically, the court declined to certify a damages class under Rule 23(b)(3) because class litigation was not superior to the recall already being offered and also refused to certify a Rule 23(b)(2) injunctive relief class on the grounds that the putative class representative was not typical or adequate because he had refused the recall remedy.[26] Other courts have also been more receptive to mootness arguments at the class certification stage.[27]

It seems inevitable that manufacturers will continue to be subjected to class actions following product recalls. But if recent case law is any indicator, manufacturers may be able to seek dismissal of these suits on mootness grounds, particularly where a plaintiff primarily seeks injunctive relief and does not challenge the adequacy of the recall remedy offered. And even if a mootness argument is unsuccessful at the pleadings stage, it begins the process of showing the court that many, if not all, class members will be made whole by the recall, laying the groundwork for defeating class certification on the basis of superiority, adequacy, typicality and/or predominance.

[1] 681 F.3d 1208 (10th Cir. 2012).

[2] Id. at 1209.

[3] Id. at 1210.

[4] Id.

[5] Id. at 1211.

[6] See, e.g., Martin v. Ford, 765 F. Supp. 2d 673 (E.D. Penn. 2011) (rejecting mootness argument where not all class members covered by the recall, plaintiff challenged the adequacy of the recall provided, and plaintiff sought monetary damages). But see Jovine v. Abbott Labs., Inc., 795 F. Supp. 2d 1331 (S.D. Fla. 2011) (dismissing FDUTPA claim because plaintiff could not plausibly allege damages in light of the recall given FDUTPA’s limitation on recovery to actual damages); Tosh-Surryhne v. Abbot Labs., Inc., No. civ-s-10-2603, 2011 WL 4500880 (E.D. Cal. Sept. 27, 2011) (holding that claims mooted where plaintiff sought only restitution).

[7] No. cv-12-09262, 2013 WL 3940815 (C.D. Cal. July 26, 2013).

[8] Id. at *4.

[9] Id. at *2-4.

[10] Id. at *4.

[11] Id.

[12] No. 13-cv-13665, 2014 WL 988962, at *1 (E.D. Mich. March 13, 2014).

[13] Id.

[14] Id. at *2.

[15] Id. at *4-7.

[16] Id. at *5.

[17] Id. at *5 & n.7.

[18] Id. at *6.

[19] No. 09-cv-3214, 2012 WL 3113854, at *1 (D. Minn. July 31, 2012).

[20] Id. at *5 (citations omitted).

[21] See, e.g., Waller v. Hewlett-Packard Co., 295 F.R.D. 472, 488-90 (S.D. Cal. 2013); Martin v. Ford Motor Co., 292 F.R.D. 252, 282-84 (E.D. Penn. 2013); Pagan v. Abbott Labs., Inc., 287 F.R.D. 139, 151 (E.D.N.Y. 2012); Webb v. Carter’s Inc., 272 F.R.D. 489, 504-505 (C.D. Cal. 2011); In re Conagra Peanut Butter Prods. Liab. Litig., 251 F.R.D. 689, 699-701 (N.D. Ga. 2008); In re Phenylpropanolamine (PPA) Prods. Liab. Litig., 214 F.R.D. 614, 622-23 (W.D. Wash. 2003); Chin v. Chrysler Corp., 182 F.R.D. 448, 463 (D.N.J. 1998).

[22] In re Aqua Dots Prods. Liab. Litig., 654 F.3d 748, 751-52 (7th Cir. 2011); see also Forcellati v. Hyland’s, Inc., No. cv-12-1983, 2014 WL 1410264, at *12 (C.D. Cal. April 9, 2014); In re Hannaford Bros. Co. Customer Data Sec. Breach Litig., 293 F.R.D. 21, 34-35 (D. Maine 2013).

[23] Aqua Dots, 654 F.3d at752; see also Waller, 295 F.R.D. at 488; Martin, 292 F.R.D. at 285. But see Hannaford Bros., 293 F.R.D. at 29-30.

[24] See, e.g., Waller, 295 F.R.D. at 488-90.

[25] Martin, 765 F. Supp. 2d at 681-82.

[26] Martin, 292 F.R.D. at 282-85.

[27] For example, in a case involving contaminated baby formula, the Eastern District of New York initially rejected mootness arguments at the motion to dismiss stage because consumer protection statutes might entitle plaintiff to recover more damages than provided under the recall program, Leonard v. Abbott Labs., Inc., No. 10-cv-4676, 2012 WL 764199, at *25-28 (E.D.N.Y. March 5, 2012), but later held that Rule 23’s superiority requirement was not met because of the recall program. Pagan, 287 F.R.D. at 151. Similarly, in a case alleging defects in the braking systems of certain Toyota vehicles that were recalled, on defendant’s motion to dismiss, the Central District of California rejected the argument that the recall mooted plaintiffs’ CLRA and UCL claims since plaintiffs had alleged that the recall did not cure the alleged defect, In re Toyota Motor Corp. Hybrid Brake Mktg., Sales, Pracs. and Prods. Liab. Litig., 890 F. Supp. 2d 1210, (C.D. Cal. 2011), but the court later denied class certification on predominance grounds where most of the putative class representatives and the majority of the class members they sought to represent had suffered no actual injury since they experienced no problems with their vehicles after the recall fix was implemented. In re Toyota Motor Corp. Hybrid Brake Mktg., Sales, Pracs. and Prods. Liab. Litig., 288 F.R.D. 445, 449-50 (C.D. Cal. 2013).

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