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Can a Product-Liability Class that Is Full of Uninjured Members Be Certified?

Posted in Class Certification, Predominance, Superiority

The answer is a resounding “no,” says Judge Cormac Carney of the Central District of California in a recent significant decision in litigation over the third generation Toyota Prius and 2010 Lexus HS250h vehicles (In re Toyota Motor Corp. Hybrid Brake Mktg., Sales Practices & Prods. Liab. Litig. (pdf), No. SAML 10-2172-CJC (C.D. Cal. Jan. 9, 2013).

Judge Carney is presiding over a multidistrict litigation (consolidating five class actions) against Toyota, in which the plaintiffs allege that a defect in the Prius’s anti-lock brake system (“ABS”) causes increased stopping time and distance when a driver hits the brakes.

The court identified a variety of flaws with the proposed class action, but “most problematic” was the fact that a “substantial majority” of the class members had “never suffered an actual injury that was caused by a manifest defect in the ABS.” In part, that was because Toyota established that it had recalled the vehicles in response to customer concerns and installed updated software that effectively resolved the brake feel issue. Thus, the court concluded that the class could not be certified.

Notably, as part of its denial of class certification, the court also rejected plaintiffs’ argument that they suffered an injury because they would not have paid the same purchase price for their vehicles if they had known of the ABS issue. Some courts have accepted a similar “premium price” or “benefit of the bargain” theory. But Judge Carney observed that “merely offering a creative damages theory does not establish the actual injury that is required to prevail on [plaintiffs’] product liability claims.” The court explained that as a result of the recall and software fix, the majority of the class members “received exactly what they paid for”—a vehicle with brakes that operated without incident—and incurred no financial loss whether through resale or repair costs.

In its decision, the court explained that, although a small proportion of the proposed class may allege actual injury (in the court’s view) because of an ABS issue prior to the recall, determining which of many possible factors caused any such harm “would require highly individualized, fact-intensive inquiries” not suitable for a class action. Judge Carney rejected the notion that “a class of thousands” should be certified where only a “few suffered an actual injury that resulted from a manifest defect in the ABS.” Such a class action, he concluded, would not be “a superior, fair, and efficient method for resolving the parties’ controversy.”

This decision is a significant one—particularly so in light of the court’s rejection of plaintiffs’ premium-price theory. It provides a welcome counterpoint to a decision by the Sixth Circuit (in a case against Whirlpool) and a decision by the Seventh Circuit (in a case against Sears) appearing to accept a similar theory—which, if it gains broader currency—could threaten to usher in a new wave of product-defect and warranty class actions premised on oddball alleged defects that few purchasers experience. Like Judge Carney in Toyota—and the Eleventh Circuit in Walewski, which we recently reported—courts should recognize that purchasers of products that perform as intended have gotten precisely what they paid for and therefore have no claim against the manufacturer or retailer. Enrolling those satisfied purchasers in vast litigation classes can only impose unwarranted costs on manufacturers and retailers and ultimately drive up prices paid by consumers.