Monteville Sloan, Jr. v. General Motors LLC

Filing 354

ORDER by Judge Edward M. Chen Granting in Part and Denying in Part 325 347 Defendant's Motions for Decertification. (emcsec, COURT STAFF) (Filed on 9/7/2021)

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Case 3:16-cv-07244-EMC Document 354 Filed 09/07/21 Page 1 of 13 1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 RAUL SIQUEIROS, et al., Plaintiffs, 8 9 10 United States District Court Northern District of California 11 Case No. 16-cv-07244-EMC v. GENERAL MOTORS LLC, Defendant. ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT’S MOTIONS FOR DECERTIFICATION Docket Nos. 325, 347 12 13 14 Plaintiffs allege that Defendant General Motors (“GM”) knowingly manufactured and sold 15 a car engine with an inherent defect that caused excessive oil consumption and engine damage. 16 The alleged defect affected 2011 to 2014 model-year GM vehicles. Plaintiffs assert claims under 17 various state consumer-protection and fraud statutes on behalf of a nationwide class as well as 18 various statewide classes. Plaintiffs filed their class action complaint on December 19, 2016. See 19 Docket No. 2 (“Compl.”). They have since amended their pleadings several times; the operative 20 complaint is the seventh amended complaint. See Docket No. 286 (“7AC”). 21 Before the Court are Defendant’s motions (1) motion to decertify all classes for lack of 22 Article III standing under Transunion LLC v. Ramirez, 141 S. Ct. 2190 (2021), Docket No. 347 23 (“Transunion Decertification Mot.”); and (2) motion to decertify the North Carolina and Texas 24 classes, Docket No. 325 (“NC and TX Decertification Mot.”). 25 For the following reasons, the Court (1) DENIES the motion to decertify for lack of 26 Article III standing, (2) DENIES the motion to decertify the North Carolina class, and (2) 27 GRANTS the motion to decertify the Texas class. 28 Case 3:16-cv-07244-EMC Document 354 Filed 09/07/21 Page 2 of 13 I. 1 2 A. BACKGROUND Factual Background Plaintiffs allege that GM’s Gen IV Vortec 5300 LC9 engine suffers from an “inherent” oil- 3 4 consumption defect. 7AC ¶ 7. The “primary cause” of the alleged defect is the piston rings 5 installed by GM. Id. ¶ 8. These piston rings “do not maintain sufficient tension to keep oil in the 6 crankcase,” and the oil migration that occurs as a result allows oil to “burn[] or accumulate[] as 7 carbon buildup on the combustion chamber’s surfaces.” Id. ¶¶ 8–9. Plaintiffs allege that the oil- 8 consumption defect causes safety problems in three ways: (1) oil consumption can lead to a lack 9 of adequate lubrication in the engine and dropping oil pressure levels in vehicles, see id. ¶ 19; (2) the presence of excess oil in the combustion chamber can cause spark plug fouling, which can 11 United States District Court Northern District of California 10 cause engine problems, see id.; and (3) when drivers experience these problems while driving, 12 they may be forced to pull over and stop alongside a road or highway (or they may be stranded in 13 such a location with an inoperable vehicle), which places them in danger, see id. ¶¶ 14, 120–21. 14 Initially, Plaintiffs sought to include all four Gen IV engine designs (the LC9, the LMG, 15 the LH9, and the LMF) in the class definition, but in the reply in support of Plaintiffs’ motion for 16 class certification, Plaintiffs limited the proposed class definition to vehicles with LC9 engines 17 with Active Fuel Management (AFM). See Docket No. 207 (“Reply in Supp. of First Class Cert. 18 Mot.”) at 7. The LC9 engine was installed in the 2010–2014 Chevrolet Avalanche; 2010–2014 19 Chevrolet Silverado; 2010–2014 Chevrolet Suburban; 2010–2014 Chevrolet Tahoe; 2010–2014 20 GMC Sierra; 2010–2014 GMC Yukon; and the 2010–2014 GMC Yukon XL (the “Class 21 Vehicles”). 7AC ¶ 2; see also Reply in Supp of First Class Cert. Mot. at 7. 22 B. 23 Current Procedural Posture This order will not provide the lengthy procedural background of this case because it is 24 unnecessary to decide the instant motions. Instead, it will provide a brief summary of the 25 individual and class claims that remain live for trial. 26 1. 27 On April 23, 2020, as to individual claims in the four bellwether states (California, New 28 Individual Claims Jersey, Ohio, North Carolina, and Texas), the Court granted summary judgment to Defendant on 2 Case 3:16-cv-07244-EMC Document 354 Filed 09/07/21 Page 3 of 13 1 2 3 4 5 6 7 all but the following: California (1) Count 2 – Violations of the Consumer Legal Remedies Act, Cal. Civ. Code § 1761; (2) Count 4 – Violations of the implied warranty under the SongBeverly Consumer Warranty Act, Cal. Civ. Code § 1790; (3) Count 7 – Violations of the Unfair Competition Law, Cal. Bus. & Prof. Code § 17200; 8 North Carolina (4) Count 88 – Violations of the Unfair and Deceptive Trade Practices Act, N.C. Gen. Stat. Ann. § 75-1.1; 9 (5) Count 90 – Breach of implied warranty of merchantability; (6) Count 91 – Fraudulent omission; 11 United States District Court Northern District of California 10 12 Texas (7) Count 123 - Deceptive Trade Practices-Consumer Protection Act, Tex. Bus. & C. Code § 17.01; and 13 (8) Count 125 – Breach of implied warranty of merchantability. 14 See Sloan v. Gen. Motors LLC (“Sloan III”), No. 16-CV-07244-EMC, 2020 WL 1955643, at *52– 15 *53 (N.D. Cal. Apr. 23, 2020). 16 On May 25, 2021, as to a second batch of states (Arkansas, California, Idaho, 17 Massachusetts, Pennsylvania, and Tennessee), the Court granted summary judgment to Defendant 18 on all but the following individual claims: 19 20 Idaho (9) Count 13 – Violation of Idaho Consumer Protection Act, Idaho Code Ann. § 48-601; 21 (10) Count 16 – Fraudulent omission; 22 Massachusetts (11) Count 18 – Breach of the Massachusetts Regulation of Business Practices and Consumer Protection Act, Mass. Gen. Laws ch. 93A, § 9(3); 23 24 25 26 27 (12) Count 20 – Breach of implied warranty of merchantability; (13) Count 21 – Fraudulent omission; Pennsylvania (14) Count 30 – Breach of implied warrant of merchantability; 28 3 Case 3:16-cv-07244-EMC Document 354 Filed 09/07/21 Page 4 of 13 Tennessee (15) Count 33 – Breach of Tennessee Consumer Protection Act, Tenn. Code Ann. § 47-18-101; and 1 2 (16) Count 36 – Fraudulent omission. 3 4 See Siqueiros v. Gen. Motors LLC (“Siqueiros I”), No. 16-CV-07244-EMC, 2021 WL 2115400, at 5 *26 (N.D. Cal. May 25, 2021). The Court also dismissed the Magnuson Moss Warranty Act (MMWA) claims under 6 7 Count 1 of the individual named plaintiffs1 in every state except: • California; 9 • North Carolina; 10 • Texas; 11 United States District Court Northern District of California 8 • Massachusetts; and 12 • Pennsylvania.2 13 See id.; Sloan III, 2020 WL 1955643, at *53. 14 Accordingly, the parties will proceed to try sixteen (16) individual claims. 15 2. 16 Of the individual claims that survived summary judgment, the Court certified the following 17 Class Claims for class-wide adjudication: 18 California (1) Count 4 – Violations of the implied warranty under the SongBeverly Consumer Warranty Act, Cal. Civ. Code § 1790; 19 20 Idaho (2) Count 13 – Violation of Idaho Consumer Protection Act, Idaho Code Ann. § 48-601. 21 22 North Carolina (3) Count 90 – Breach of implied warranty of merchantability; and 23 Texas (4) Count 125 – Breach of implied warranty of merchantability. 24 25 26 27 28 In a previous order, the Court dismissed with prejudice Plaintiffs’ MMWA class allegations. See Docket No. 278. 1 2 Because MMWA claims rise or fall with the state implied warranty claims, they will not be counted separately for purposes of trial. 4 Case 3:16-cv-07244-EMC Document 354 Filed 09/07/21 Page 5 of 13 1 2 3 4 See Siqueiros I, 2021 WL 2115400, at *27; Sloan III, 2020 WL 1955643, at *53. Accordingly, the parties anticipate trying four (4) claims on behalf of subclasses in four separate states. On June 15 and July 15, 2021, Defendant filed the pending motions to decertify the North 5 Carolina and Texas classes, and to decertify all classes for lack of Article III standing under 6 Transunion, respectively. NC and TX Decertification Mot.; Transunion Decertification Mot. 7 II. LEGAL STANDARD “Even after a certification order is entered, the judge remains free to modify it in the light 9 of subsequent developments in the litigation.” Gen. Tel. Co. of Sw. v. Falcon, 457 U.S. 147, 160, 10 (1982). “A district court may decertify a class at any time.” Rodriguez v. West Publ’g Corp., 563 11 United States District Court Northern District of California 8 F.3d 948, 966 (9th Cir. 2009). A motion for class decertification is subject to the same standard as 12 a motion for class certification under Federal Rule of Civil Procedure 23. Accordingly, before 13 certifying a class, the Court “must conduct a ‘rigorous analysis’ to determine whether the party 14 seeking certification has met the prerequisites of Rule 23.” Mazza v. Am. Honda Motor Co., Inc., 15 666 F.3d 581, 588 (9th Cir. 2012) (quoting Zinser v. Accufix Rsch. Inst., Inc., 253 F.3d 1180, 16 1186, amended 273 F.3d 1255 (9th Cir. 2001)). The Supreme Court has made it clear that Rule 23 17 “does not set forth a mere pleading standard.” Comcast Corp. v. Behrend, 569 U.S. 27, 33 (2013) 18 (quoting Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 349 (2011)). Rather, the party seeking 19 certification must “affirmatively demonstrate” her compliance with the requirements of both Rules 20 23(a)—numerosity, commonality, typicality, and adequacy—and 23(b)—predominance and 21 superiority. See Wal-Mart Stores, 564 U.S. at 349. 22 The underlying merits of the case, while somewhat relevant, should not overly cloud the 23 Court’s decertification analysis—the only question is whether the requirements of Rule 23 24 continue to be met. See Comcast, 569 U.S. at 33–34. The fact that certain elements of proof may 25 favor the defendant on the merits does not negate class certification; the issue is whether the proof 26 is amenable to class treatment. Moreover, “[n]either the possibility that a plaintiff will be unable 27 to prove [her] allegations, nor the possibility that the later course of the suit might unforeseeably 28 prove the original decision to certify the class wrong, is a basis for [decertifying] a class which 5 Case 3:16-cv-07244-EMC Document 354 Filed 09/07/21 Page 6 of 13 1 apparently satisfies the Rule.” Blackie v. Barrack, 524 F.2d 891, 901 (9th Cir. 1975). Ultimately, 2 whether to decertify a class is within the discretion of the Court. See Levya v. Medline Indus. Inc., 3 716 F.3d 510, 513 (9th Cir. 2013). 4 III. TRANSUNION DECERTIFICATION MOTION 5 This Court has twice held in this action that “each of the putative class members who 6 purchased a Class Vehicle has standing to receive damages because the alleged defect caused them 7 to overpay for their vehicles.” Siqueiros I, 2021 WL 2115400, at *19; see also Sloan v. Gen. 8 Motors LLC (“Sloan I”), No. 16-CV-07244-EMC, 2017 WL 3283998, at *4 (N.D. Cal. Aug. 1, 9 2017) (“Plaintiffs’ claims of overpayment for a defective product due to GM’s fraudulent omissions constitute an injury in fact. . . [t]he Court therefore denies GM’s motion to dismiss for 11 United States District Court Northern District of California 10 lack of subject matter jurisdiction.”). This holding was compelled by controlling Ninth Circuit 12 decisions establishing that overpaying for a defective product constitutes a sufficiently tangible 13 and concrete injury-in-fact under Article III. See Mazza, 666 F.3d at 595 (“Plaintiffs contend that 14 class members paid more for the CMBS than they otherwise would have paid, or bought it when 15 they otherwise would not have done so . . . . To the extent that class members were relieved of 16 their money by Honda’s deceptive conduct—as Plaintiffs allege—they have suffered an ‘injury in 17 fact.’” (quoting Stearns v. Ticketmaster Corp., 655 F.3d 1013, 1021 (9th Cir. 2011)); Maya v. 18 Centex Corp., 658 F.3d 1060, 1069 (9th Cir. 2011) (“Plaintiffs claim that, as a result of 19 defendants’ actions, they paid more for their homes than the homes were worth at the time of 20 sale. . . . This is a quintessential injury-in-fact.”). 21 Defendant urges the Court to reconsider this holding—which is now the controlling law of 22 the case—in light of the Supreme Court’s recent decision in Transunion, 141 S. Ct. at 2190. Far 23 from overturning Mazza, Maya, or this Court’s prior decisions, Transunion actually confirms that 24 Plaintiffs here suffered a concrete injury by overpaying for their vehicles. Transunion held that 25 putative class members who were incorrectly listed as terrorists on their Transunion credit reports 26 did not suffer a sufficiently concrete injury under Article III unless those reports were 27 disseminated to a third party. Id. at 2201, 2209–11. In other words, “[t]he mere presence of an 28 inaccuracy in an internal credit file, if it is not disclosed to a third party, causes no concrete harm.” 6 Case 3:16-cv-07244-EMC Document 354 Filed 09/07/21 Page 7 of 13 1 Id. at 2210. In so holding, the Supreme Court contrasted the speculative injury at issue in 2 Transunion with monetary injuries like Plaintiffs’ overpayment for their vehicles at issue here: 3 4 5 [C]ertain harms readily qualify as concrete injuries under Article III. The most obvious are traditional tangible harms, such as physical harms and monetary harms. If a defendant has caused physical or monetary injury to the plaintiff, the plaintiff has suffered a concrete injury in fact under Article III. 6 Id. at 2204 (emphasis added). In Transunion, there simply was no provable injury. The plaintiff 7 did not claim they overpaid for a defective product; nor could they identify any concrete injury of 8 the erroneous reports had not been dismissed. This Court’s conclusion that Plaintiffs have Article 9 III standing because they overpaid for their vehicles is thus entirely consistent with the longstanding rule, reaffirmed in Transunion, that monetary injuries are sufficiently tangible and 11 United States District Court Northern District of California 10 concrete under Article III. 12 Defendant also contends “the overwhelming majority of class members in each state” have 13 suffered no concrete injury because they “have not experienced the effects of the alleged oil- 14 consumption defect,” just like the majority of the plaintiffs in Transunion never had their credit 15 reports disseminated to a third party. Transunion Decertification Mot. at 5. This analogy does not 16 work, however, because the concrete injury here is the reduction in the Class Vehicle’s monetary 17 value, not the effects of the oil-consumption defect. Id. The addition of a terrorist designation did 18 not have diminished the monetary value of the credit reports in Transunion because those credit 19 reports—unlike the Class Vehicles here—were free. 20 Courts in this circuit, including the Ninth Circuit, have repeatedly held that putative class 21 members have Article III standing when plaintiffs allege that they overpaid for a defective 22 product, even if the defect at issue does not manifest itself in every putative class member’s 23 product. See e.g., Nguyen v. Nissan N. Am., Inc., 932 F.3d 811, 819 (9th Cir. 2019) (“Plaintiff's 24 theory of liability—that Nissan’s manufacture and concealment of a defective clutch system 25 injured class members at the time of sale—is consistent with his proposed recovery based on the 26 benefit of the bargain. We conclude that the district court abused its discretion when it denied 27 class certification.”); Aberin v. Am. Honda Motor Co., Inc., No. 16-CV-04384-JST, 2021 WL 28 1320773, at *6 (N.D. Cal. Mar. 23, 2021) (“Overpayment injury is sufficient to establish Article 7 Case 3:16-cv-07244-EMC Document 354 Filed 09/07/21 Page 8 of 13 1 III standing. . . . Contrary to Honda’s contention, Plaintiffs need not show that the alleged defect 2 manifested before they can bring a claim.” (citations omitted)); In re Gen. Motors LLC CP4 Fuel 3 Pump Litig., 393 F. Supp. 3d 871, 884 (N.D. Cal. 2019) (“[A]llegations of overpayment based on 4 a defendant’s failure to disclose a product’s limitations are clearly sufficient to satisfy Article III’s 5 injury-in-fact requirement.” (quoting In re Chrysler-Dodge-Jeep Ecodiesel Mktg., Sales Pracs., & 6 Prod. Liab. Litig. (“FCA”), 295 F. Supp. 3d 927, 948–49 (N.D. Cal. 2018))). 7 Here too, “Plaintiffs allege that the defective piston rings—which are allegedly present in every Class Vehicle—diminish the value of the Class Vehicles, regardless of whether they 9 actually cause excessive oil consumption.” Siqueiros I, 2021 WL 2115400, at *19 (citing FAC ¶¶ 10 117, 218, 240, 243, 244, 258, 259, 300, 351, 398, 488, 542, 592). In fact, Plaintiffs presented thus 11 United States District Court Northern District of California 8 far uncontroverted expert evidence that the oil-consumption defect caused excessive piston ring 12 wear in all the Class Vehicles, even if many putative class members have not felt its effects. See 13 Docket No. 305 (“Barnett Decl.”) at Ex. 3 (Expert Report of Dr. Werner J.A. Dahm) ⁋⁋ 54–58, 64, 14 110, 228; id. at Ex. 30 (Am. Expert Report of Jeffrey K. Ball) at 11, 20. 15 Finally, Defendant unsuccessfully attempts to characterize Plaintiffs’ injury here as the fear 16 of “future harm” from the oil-consumption defect. In Transunion, the class members who did not 17 have their credit reports disseminated to third parties “asserted [a] risk of future harm,” whereby 18 the terrorist designation in their credit reports “exposed them to a material risk that the information 19 would be disseminated in the future to third parties and thereby cause them harm.” 141 S. Ct. at 20 2210. The Supreme Court rejected that argument because “[i]t is difficult to see how a risk of 21 future harm could supply the basis for a plaintiff’s standing when the plaintiff did not even know 22 there was a risk of future harm.” Id. at 2212 (emphases added). Again, that reasoning does not 23 apply here because Plaintiffs’ injury is not the future “effects of the oil-consumption defect,” but 24 the fact that they overpaid for the defective Class Vehicles in the past. Plaintiffs need not suffer 25 the “effects of the oil-consumption defect”—much like the class members in Transunion who did 26 have their credit reports disseminated did not need to suffer the effects of that dissemination—to 27 have Article III standing. TransUnion, 141 S. Ct. at 2209 (“[T]he 1,853 class members whose 28 reports were disseminated to third parties suffered a concrete injury in fact under Article III.”). 8 Case 3:16-cv-07244-EMC Document 354 Filed 09/07/21 Page 9 of 13 Therefore, Plaintiffs who purchased defective vehicles suffered a past concrete injury 1 2 under Article III when they overpaid for those vehicles, regardless of whether they feel the effects 3 of the oil-consumption defect in the future. Accordingly, the Court DENIES Defendant’s motion 4 to decertify the classes for lack of Article III standing under Transunion. IV. 5 MOTION TO DECERTIFY NORTH CAROLINA AND TEXAS CLASSES In Sloan III, the Court certified for class-wide adjudication Plaintiffs’ claims for breach of 6 7 the implied warranty of merchantability in Texas and North Carolina because “there is evidence 8 upon which a reasonable jury could rely to conclude that the alleged oil-Consumption defect 9 constitutes a safety defect.” 2020 WL 1955643, at *46. In Siqueiros I, by contrast, the Court concluded that Plaintiffs’ “implied warranty claim [in Pennsylvania] is not suitable for class-wide 11 United States District Court Northern District of California 10 adjudication because an individualized inquiry is required to establish whether the oil- 12 consumption defect manifested in each of the individual Pennsylvania class member’s 13 vehicles, i.e. caused them personal injury or property damage.” 2021 WL 2115400, at *22. Defendant argues that this Court should decertify the implied warranty claims in North 14 15 Carolina and Texas because the laws of those states, like the law of Pennsylvania, adhere to the 16 manifest defect rule which requires each putative class member to demonstrate that the oil- 17 consumption defect actually manifested in their vehicles, i.e., caused excessive oil consumption or 18 engine wear in a manner which caused personal injury or property damage. NC and TX 19 Decertification Mot. at 6–7. This order will separately address the merits of this argument for 20 each of these states. 21 A. 22 North Carolina Under North Carolina law, “a warranty that the goods shall be merchantable is implied in a 23 contract for their sale if the seller is a merchant with respect to goods of that kind.” N.C. Gen. 24 Stat. § 25-2-314(1). To qualify as “merchantable,” goods must meet various requirements. Id. § 25 25-2-314(2)(a)-(f). Those requirements include fitness for “the ordinary purposes for which such 26 goods are used,” which is at issue here. Id. § 25-2-314(2)(c). 27 28 To state a claim for a breach of the implied warranty of merchantability, a plaintiff must plausibly plead: “(1) that the goods in question were subject to an implied warranty of 9 Case 3:16-cv-07244-EMC Document 354 Filed 09/07/21 Page 10 of 13 1 merchantability; (2) that the goods were defective at the time of the sale and as such did not 2 comply with the warranty; (3) that the resulting injury was due to the defective nature of the 3 goods; and (4) that damages were suffered.” Williams v. O’Charley’s, Inc., 728 S.E.2d 19, 21 4 (N.C. Ct. App. 2012); DeWitt v. Eveready Battery Co., 565 S.E.2d 140, 147 (N.C. 2002) (same 5 elements). “The burden is upon the purchaser to establish a breach by the seller of the warranty of 6 merchantability by showing that a defect existed at the time of the sale.” Morrison v. Sears, 7 Roebuck & Co., 354 S. E. 2d 495, 497 (N.C. 1987). Neither the North Carlina Supreme Court nor 8 the intermediate appellate courts of that state have held that the manifest defect rule applies to 9 implied warranty claims. The North Carolina courts have not held that the “injury” and 10 United States District Court Northern District of California 11 “damages” required to have been suffered need be a manifest personal injury or property damage. Defendant cites only Bussian v. DaimlerChrysler Corp. for the proposition that North 12 Carolina law requires a defect to manifest for a plaintiff to have a cognizable implied warranty 13 claim. 411 F. Supp. 2d 614 (M.D.N.C. 2006). The plaintiff in Bussian discovered that the ball 14 joints in his vehicle “had worn out prematurely and that failing to replace them would constitute a 15 safety hazard” when he took his Dodge Durango to a mechanic for a routine inspection. Id. at 16 618. As a result, he paid the mechanic $700 to replace the ball joints. Id. The federal court in the 17 Middle District of North Carolina concluded that the plaintiff “fail[ed] to make a legally sufficient 18 allegation that his Durango was not merchantable” because he “ma[de] no allegation that the 19 allegedly defective ball joints caused him to suffer mechanical problems, lose control of his 20 vehicle, or have an accident.” Id at 623. In other words, “[the p]laintiff’s complaint ma[de] out no 21 allegations that his Durango was not fit for the purposes for which it was intended, i.e., to provide 22 safe and reliable transportation.” Id. 23 Bussian, while supporting Defendant’s position, is not a persuasive source of law. It is a 24 decision by a federal court that did not rely on North Carolina law. Bussian did not cite any North 25 Carolina legal authority requiring each putative class member to establish that a product defect 26 caused them mechanical problems or personal injury in order to bring an implied warranty claim 27 under North Carolina law. Nor has Defendant cited to any other applicable authority, state or 28 otherwise, for this proposition. 10 Case 3:16-cv-07244-EMC Document 354 Filed 09/07/21 Page 11 of 13 Accordingly, the Court DENIES Defendant’s motion to decertify the North Carolina 1 2 Class. 3 B. 4 Texas “Under Texas law, products sold or leased by a merchant carry an implied warranty of 5 merchantability that the goods are ‘fit for the ordinary purpose for which such goods are used.’” 6 Click v. Gen. Motors LLC, No. 2:18-CV-455, 2020 WL 3118577, at *11 (S.D. Tex. Mar. 27, 7 2020) (quoting Tex. Bus. & Com. Code § 2.314(b)(3)). To establish a breach of the implied 8 warranty of merchantability, a plaintiff must show that the product (1) contained a defect that 9 renders it unfit for its ordinary purpose, (2) the defect existed when it left the manufacturer’s possession, and (3) the defect caused the plaintiff to suffer injury. Gen. Motors Corp. v. Garza, 11 United States District Court Northern District of California 10 179 S.W.3d 76, 81 (Tex. App. 2005). The Texas Supreme Court has not addressed whether the 12 manifest defect rule bars class certification of implied warranty claims in Texas, but the Court of 13 Appeals have held that it does. 14 For example, the plaintiffs in Garza alleged that their Chevy Malibus “ha[d] a brake 15 system defect that will, at some point during the life of the vehicle, cause the vehicle to pulsate 16 when the brakes are applied.” 179 S.W.3d at 78 (emphasis added). They also argued—as do 17 Plaintiffs here—“that individual questions about the Class members’ experiences are irrelevant 18 because the damages arose at the moment of purchase.” Id. at 83. The Texas Court of Appeals 19 rejected this argument and held that “[f]or purchasers who never experienced a problem during the 20 time they owned the car, they got what they paid for—a vehicle that provided transportation with a 21 brake system that safely stopped the car.” Id. at 83. Certification of the implied warranty claim 22 was therefore inappropriate because “questions regarding causation outweigh the common issues” 23 given that “even if a jury found that the brakes on all Malibus will pulsate at some time, the expert 24 testimony establishes that it is impossible to predict when the pulsation will occur during the life 25 of the vehicle.” Id. at 81. In other words, “the trial court’s class definition and trial plan [did] not 26 allow GM to challenge the claims of those individuals who either never experienced pulsation or 27 knew of the brake problem but did not care enough to bring it back for repair within a reasonably 28 short period of time.” Id. at 83. Under Garza, class-wide adjudication of the Texas Plaintiffs’ 11 Case 3:16-cv-07244-EMC Document 354 Filed 09/07/21 Page 12 of 13 1 implied warranty claims is inappropriate because a jury would have to make individual 2 determinations as to whether each putative class member experienced excessive oil consumption 3 or engine damage. Importantly, Garza requires a manifestation of the defect to bring an implied 4 warranty claim. 5 Similarly, in Everett v. TK-Taito, LLC the plaintiffs alleged that, “by virtue of a defective 6 design,” the seatbelt buckles in their vehicles “were susceptible to partial engagement, leaving the 7 seat belt essentially unrestrained.” Everett v. TK-Taito, L.L.C., 178 S.W.3d 844, 849 (Tex. App. 8 2005). As in the instant case, the Everetts “alleged economic injury damages, arguing that 9 purchasers of vehicles fitted with the [] buckles did not receive the benefit of the bargain that they made in the purchase of their vehicles and will suffer $500 per vehicle cost-of-replacement 11 United States District Court Northern District of California 10 damages.” Id. at 849–50. In the context of standing under Texas law, the Everett court explained 12 that “to cause redressable injuries in the breach of the implied warranty of merchantability context, 13 a ‘defect’ must either have manifested during the product’s normal use or such manifestation must 14 be inevitable when the defective feature of the product is used.” Id. at 855. Under that rule, the 15 Everetts did not have standing because “[a]lthough the Everetts’ vehicles [were] over a decade 16 old, the defect that they allege [] caused them economic injuries ha[d] not manifested itself, nor 17 [did] the Everetts claim that it [would] inevitably manifest itself.” Id. (emphasis added). The 18 Everett court—like the Garza court—rejected the benefit of the bargain theory of liability under 19 Texas’s implied warranty law. 20 In sum, Plaintiffs do not cite a single case where a Texas state court held that the economic 21 harm of purchasing an allegedly defective vehicle was sufficient to recover for a breach of the 22 implied warranty of merchantability under Texas law. To the contrary, Garza and Everett 23 conclusively held that the manifest-defect rule in Texas requires the defect to “manifest” in a way 24 that disrupts the operation of the vehicle such that it renders the vehicle unfit for its ordinary 25 purpose of moving people safely from one place to another. Here, because the oil-consumption 26 defect did not disrupt the operation of all the Texas class members’ vehicles, class certification is 27 inappropriate. 28 Accordingly, the Court GRANTS Defendant’s motion to decertify the Texas class. 12 Case 3:16-cv-07244-EMC Document 354 Filed 09/07/21 Page 13 of 13 V. 1 2 CONCLUSION The Court (1) DENIES the motion to decertify for lack of Article III standing, (2) 3 DENIES the motion to decertify the North Carolina class, and (2) GRANTS the motion to 4 decertify the Texas class. 5 This order disposes of Docket Nos. 325 and 347. 6 7 IT IS SO ORDERED. 8 9 Dated: September 7, 2021 10 United States District Court Northern District of California 11 12 ______________________________________ EDWARD M. CHEN United States District Judge 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 13

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