LaRoe et al v. FCA US LLC
MEMORANDUM AND ORDER. It is ordered by the court that unless plaintiffs file a Fifth Amended Complaint within 14 days of the date of this Order, the court will grant renewed motions to dismiss filed by defendant FCA US, LLC, and defendant ZF N orth America, Inc. It is further ordered that defendant FCA US, LLC's Motion to Dismiss (Doc. 100 ) and defendant ZF North America, Inc.'s Motion to Dismiss (Doc. 102 ) are denied. Signed by District Judge Daniel D. Crabtree on 03/29/2019. (mig)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS
RONALD AND MELODY LAROE,
individually, and on behalf of those
Case No. 17-2487-DDC-JPO
FCA US, LLC
f/k/a CHRYSLER GROUP, LLC, et al.,
MEMORANDUM AND ORDER
This matter comes before the court on defendants FCA US, LLC (“FCA US,” f/k/a/
Chrysler Group), and ZF North America, Inc.’s (“ZF NA”) Motions to Dismiss (Docs. 100 &
102). Plaintiffs Ronald and Melody LaRoe, individually, and on behalf of those similarly
situated, have filed their Fourth Amended Complaint (Doc. 95) in this case. This filing—like its
predecessors—alleges that defendants acted in concert to defraud owners of some 320,000
vehicles manufactured by FCA US. Specifically, plaintiffs allege that defendants’ scheme
involved defective wire harnesses placed in some—but not all—FCA US-manufactured vehicles.
The Fourth Amended Complaint substantially reduces the claims that plaintiffs assert. It merely
claims that defendants violated the Racketeering Influenced and Corrupt Organizations Act
(“RICO”). As they argued in previous Motions to Dismiss (Docs. 42 & 62), defendants contend
that plaintiffs do not have standing to assert their claim. See Doc. 101 at 19–21; Doc. 103 at 16–
For reasons explained below, the court again concludes that plaintiffs lack standing to
bring the RICO claim asserted in their Fourth Amended Complaint. But, exercising its
discretion, the court grants plaintiffs leave—one last time—to amend their Fourth Amended
Complaint if they choose to do so.
This section briefly summarizes the procedural history culminating in plaintiffs’ Fourth
Amended Complaint. Then, it outlines the Fourth Amended Complaint’s alleged facts pertinent
to the court’s analysis of plaintiffs’ standing to assert their RICO claim.
A. Procedural History
Plaintiffs filed their Second Amended Complaint (Doc. 41) after the court granted their
unopposed Motion seeking leave to file their amended complaint. See Docs. 39 & 40. FCA US
and ZF NA both filed Motions to Dismiss (Docs. 42 & 62), arguing in part that plaintiffs lacked
standing to bring their claims and moving to dismiss the claims, in part, under Federal Rule of
Civil Procedure 12(b)(1).
The court agreed with defendants. The Second Amended Complaint hadn’t asserted that
plaintiffs had sustained any damages arising from the malady that the allegedly defective wire
harness could cause—i.e., an unexpected shift in gear that “could” cause a collision. See Doc. 41
at 9 (internal quotations omitted). Also, the Second Amended Complaint didn’t allege any
problems with plaintiffs’ car that were “‘fairly trace[able]’” to actions by defendants. Doc. 85 at
14 (quoting Clapper v. Amnesty Int’l USA, 568 U.S. 398, 408 (2013)). The court also rejected
plaintiffs’ argument that their injury included the diminished value of their vehicle. See id. at 16
(citing Tae Hee Lee v. Toyota Motor Sales, U.S.A., Inc., 992 F. Supp. 2d 962, 972–73 (C.D. Cal.
2014). Tae Hee Lee held that “claims of ‘diminished value’ and ‘overpayment’ [are] only
allowed to proceed for those plaintiffs who had pled ‘something more,’ [e.g.,] having stopped
using vehicles for fear of personal safety or having sold or traded-in vehicles at a loss due to
depressed resale values following recalls and publicized alleged incidents”). And the court
found Tae Hee Lee’s reasoning persuasive.
But the court also granted plaintiffs leave to file another amended complaint. Plaintiffs
responded with a mechanical error of their own, filing the wrong version of an amended
complaint. See Doc. 94 (explaining that plaintiffs had filed the wrong document as their Third
Amended Complaint (Doc. 88)). So, the court granted plaintiffs additional time to file a Fourth
Amended Complaint—and it is that fourth generation Complaint that is before the court now.
B. Fourth Amended Complaint
The Fourth Amended Complaint makes allegations quite similar to those included in the
Second Amended Complaint. But, it changes the theory of liability: plaintiffs assert only a
RICO violation, and they allege economic losses as their only injury.
When it considers defendants’ motions to dismiss, the court accepts, of course, facts
asserted by the Fourth Amended Complaint (Doc. 95) as true and views them in the light most
favorable to plaintiffs. Burnett v. Mortg. Elec. Registration Sys., Inc., 706 F.3d 1231, 1235 (10th
Cir. 2013) (citing Smith v. United States, 561 F.3d 1090, 1098 (10th Cir. 2009)).
1. Allegations about all affected vehicles
During model years 2014 to 2016, the Fourth Amended Complaint alleges, FCA US
manufactured at least 320,000 cars and SUVs with defective sensor wire harnesses (collectively,
“affected vehicles”). The wire harness at issue is a component inside the nine-speed
transmission. This wire harness transmits electrical currents, which ultimately control which
gear the automatic transmission selects, and when it selects that gear. The Fourth Amended
Complaint alleges that the wire harnesses are defective because they were manufactured with
insufficient wiring crimps, which hold a group of wires in the harnesses together snugly and thus
maintain conductivity and connectivity. A wiring crimp defect, plaintiffs allege, can cause
electrical resistance to become too great; if that happens, a vehicle’s transmission can shift into
neutral suddenly during normal operation.
The Fourth Amended Complaint also alleges that ZF NA knew the root cause of the
defect by July 10, 2014. FCA US knew about the defect “well before” July 2016. Doc. 95 at 5.
And, the Fourth Amended Complaint alleges, FCA US knew about the defect “likely
significantly earlier” than it informed the National Highway Traffic Safety Administration
(“NHTSA”) of the problem. Id. In July 2016, FCA US submitted a Safety Recall Report to
NHTSA under 49 C.F.R. Part 573. Id. at 11, 11 n.14. In this report, FCA US informed NHTSA
that “‘[s]ome . . . vehicles may have insufficient crimps in the transmission wire harness that
may cause an unexpected shift to neutral resulting in a sudden loss of motive power.’” Id. at 11
(quoting FCA US’s Initial 49 C.F.R. Part 573 Report to NHTSA, submitted on July 12, 2016)
(ellipsis in original). (For simplicity, this Order calls this report to NHTSA the “Part 573
Report.”) The report from FCA US also explained, “‘[T]he remedy program for this recall is
under development.’” Id. at 13 (quoting Part 573 Report). FCA US included a draft Recall
Notice with the Safety Recall Report.
Eventually, FCA US sent the Recall Notice to owners of the affected vehicles. This
notice described the wire harness problem in this fashion:
The transaxle wire harness on your vehicle may have been built with insufficient
wire terminal crimp(s). This may cause an intermittent high electrical resistance in
the transaxle wire harness circuit(s). A high resistance circuit(s) in this wiring
harness will cause the on-board diagnostic system to set a Diagnostic Trouble Code
(DTC). When the DTC is set, the system defaults the transaxle to neutral and the
customer experiences a loss of motive power. Motive power can usually be
regained upon a restart. The loss of motive power could cause a crash without
Id. at 11 (quoting Interim Recall Notice for Safety Recall S55/NHTSA 16V-529 [hereinafter
“Interim Recall Notice”]) (internal quotation marks omitted). FCA US’s Recall Notice also
FCA [US] intends to repair your vehicle free of charge (parts and labor). However,
the parts required to provide a permanent remedy for this condition are currently
not available. FCA [US] is making every effort to obtain these parts as quickly as
possible. FCA [US] will contact you again by mail, with a follow-up recall notice,
when the remedy parts are available.
Id. at 13 (quoting Interim Recall Notice) (emphasis in original) (internal quotation marks
Plaintiffs assert that FCA US never intended to provide a “permanent remedy” for the
defective wire harnesses in all 320,000 vehicles, and knew that it had no such intention when it
issued its Recall Notice. Instead, plaintiffs allege, defendants chose to perform a software update
that failed to cure the defect or its manifestations. In turn, FCA US amended its Part 573 Safety
Recall Report on October 6, 2016, to include the following language: “‘FCA US will reprogram
the Powertrain Control Module (“PCM”) and the Transmission Control Module (“TCM”). In
addition, if the vehicle has an active or stored fault code, the transaxle range sensor wire harness
will be replaced.’” Id. at 63 (quoting Part 573 Report, as amended Oct. 6, 2016). Consistent
with this amended report, FCA US instructed its dealers to do the following: “‘Due to the low
expected failure rate, do not order a transaxle range sensor wire harness until you verify the
specified DTC’s. A parts ordering restriction has been assigned to help manage harness part
availability.’” Id. at 14 (quoting FCA US’s Dealer Service Instructions for Safety Recall
S55/NHTSA 16V-529, 3 (revised Feb. 2017) [hereinafter “Dealer Service Instructions”]). The
Fourth Amended Complaint alleges that this “part availability” explanation was false, and that
defendants artificially imposed the restricted availability so that FCA US could avoid spending
money to provide replacement parts.
Plaintiffs allege that FCA US instructed its dealers—in lieu of replacing the defective
harnesses in all vehicles—to update the affected vehicles’ powertrain and transmission software
modules unless a DTC revealed that the vehicle had suffered a loss of motive power, as shown
by an active or stored fault code. FCA US estimated that only 5% of affected vehicles would
have a DTC showing that the vehicle had experienced such a loss of power. And, for those
vehicles with a DTC showing a loss of power, the dealer actually would replace the defective
wire harness. Later, FCA US sent another notice letter to owners of affected vehicles. This
notice letter mentioned that FCA US would use a software update as part of a recall, but it never
explained that the update would not include a physical repair to the defective wire harness.
In sum, the Fourth Amended Complaint alleges that the software update merely changed
the way the defect manifests itself. It did not, plaintiffs allege, fix the defect. Specifically, the
software update forces the car to shift unexpectedly into “‘fixed-gear limp mode.’” Id. at 15
(quoting Dealer Service Instructions at 2). The Fourth Amended Complaint also alleges that
FCA US never told NHTSA, dealers, or owners of the affected vehicle about this mode. Also,
FCA US never explained how vehicle owners could drive in fixed-gear limp mode. And FCA
US also did not explain which gear the vehicle would select for fixed-gear limp mode. For
example, FCA US did not explain whether the car always would select the same pre-determined
gear (of nine available forward speeds) or, instead, simply would select the last gear the
transmission had used before the fault occurred.
The Fourth Amended Complaint alleges that plaintiffs have consulted a purported expert
witness, Marthinus van Schoor.1 They allege that Mr. van Schoor’s qualifications and opinions
support their assertion that the affected vehicles remained defective after defendants’ software
update. In relevant part, Mr. van Schoor has opined that unexpected gear shifts caused by
defective wiring crimps could cause a collision. He also opined that the electrical resistance
caused by defective wiring crimps can increase over time. Finally, Mr. van Schoor opined that
FCA US’s software update—and the fixed-gear limp mode it triggers—“does not fix the safety
related aspect of [the] defect.” Id. at 24. In other words, the affected vehicles that received the
software update still could crash without warning because they could shift into fixed-gear limp
mode. Thus, Mr. van Schoor concluded, the only way to remedy the defect is to replace the
defective wire harness.
Defendants’ software update, plaintiffs allege, deceived consumers into believing that
defendants had provided a permanent remedy for their vehicles’ defect. And, because of their
suit and other public documents, plaintiffs assert, the value of all affected vehicles has decreased
by the amount required to permanently repair these vehicles—i.e., replace the defective wire
harness. Plaintiffs have calculated the replacement cost to be $550 per car.2
Other federal circuits and district courts have allowed plaintiffs to plead opinions from purported experts in their
complaints while reserving the ability to rule on evidentiary issues later on. See, e.g., Nursing Home Pension Fund,
Local 144 v. Oracle Corp., 380 F.3d 1226, 1233 (9th Cir. 2004) (“[P]ersonal sources of information relied upon in a
complaint should be ‘described in the complaint with sufficient particularity to support the probability that a person
in the position occupied by the source would possess the information alleged.’” (quoting Novak v. Kasaks, 216 F.3d
300, 314 (2d Cir. 2000)); In re Resonant Inc. Secs. Litig., No. 15-1970 SJO (VBKx), 2016 WL 6571267, at *5 (C.D.
Cal. July 11, 2016) (concluding that “expert testimony is not barred from being plead[ed] directly into a complaint”
and “assum[ing], under Federal Rule of Civil Procedure 12(b)(6), that the expert opinions referenced in the
[complaint were] true, without prejudice to addressing the admissibility of the expert testimony in a Daubert motion
filed before trial”). But while the court includes plaintiffs’ allegations about Mr. van Schoor’s opinions in its factual
summary, these allegations ultimately do not persuade the court that plaintiffs have alleged sufficient facts to
establish standing. See infra Part III.B.2.
Plaintiffs allege that the cost to replace the wire harness in the affected vehicles is about $550 per car. See Doc.
95 at 5 n.6. Plaintiffs come to that figure by alleging that: (1) the wire harness, part number CSVF551AA, or
CSFFS552AA, retails for about $80.00, and the replacement valve body O-Ring Kit part number CSVFS555AA
The Fourth Amended Complaint alleges that plaintiffs have suffered several types of
economic loss, including: (1) $550 in direct losses because plaintiffs will have to pay to replace
their vehicle’s wire harness or determine whether the wire harness is defective; (2) the
diminished value of their vehicle because of the defective wire harness; (3) reasonable
compensation for time, mileage, and transportation costs to replace the wire harness; and (4)
reasonable compensation for every earlier visit to a dealership because of the defective wire
harness, including time and costs to have the software update installed.
2. Allegations about plaintiffs’ Jeep Cherokee
Around August 9, 2014, plaintiffs purchased a brand-new 2014 Jeep Cherokee from a
full-service FCA US dealership. When plaintiffs purchased the Cherokee, it had about 52 miles
on the odometer. Plaintiffs were the first and—to date—only owners of this Cherokee. But, in
2015, plaintiffs began experiencing an increasing number of problems with their Cherokee.
“[A]round” December 2016, after receiving the recall notice from FCA US, plaintiffs scheduled
a service appointment at their dealership. Id. at 26. On December 5, 2016, plaintiffs understood
that the dealership had performed the recall work on their Cherokee. At the time, plaintiffs’
Cherokee had about 32,460 miles on its odometer. Plaintiffs allege that they incurred out-ofpocket costs, time, and gas money to travel to the dealership for the repairs.
After the dealership performed the recall work, it told plaintiffs that it had performed the
repairs as needed under Safety Recall S55/NHTSA 16V-529 and, in lay terms, had “fixed”
plaintiffs’ Cherokee. Sometime later—on a date not specified by the Fourth Amended
Complaint—plaintiffs’ Cherokee would not start. So, plaintiffs had it towed to a dealership in
retails for about $5.00; (2) three quarts of automatic transmission fluid part number 68218925AA retails for about
$30.00 per quart, or $90.00; and (3) the 2.7 to 3.0 hours of labor can cost about $375.00 (depending on local rates
charged by FCA US dealers where consumers live).
Kansas. Then, plaintiffs learned that the dealership they previously had visited in Lee’s Summit,
Missouri, had performed a software update. Also, they learned that the Lee’s Summit dealership
had not replaced the wire harness.
Plaintiffs allege that their Jeep Cherokee “carries the same defect” that the recall
documents described. Id. at 27. Specifically, they assert, their vehicle was manufactured with a
defective wire harness. Plaintiffs allege that, because defendants did not track the defective
vehicles, they don’t know which of the affected vehicles covered by the recall notice will
manifest issues caused by the defective wire harnesses. Defendants have provided no
explanation for their estimate that 5% of the affected vehicles will manifest issues caused by the
defect, plaintiffs allege. Because defendants sent the recall notice to all owners of affected
vehicles, plaintiffs assert that the “defect applies to 100%” of the affected vehicles. Id. at 20.
And, to rule out a defect, FCA US would have to identify, remove, and inspect the wire harness
in each affected vehicle.
Plaintiffs allege that they attempted to arrange for the part replacement in their vehicle, at
their own cost. They represent that they invited defendants’ “litigation representatives to attend
and participate in the process.” Id. at 29. But defendants refused, plaintiffs allege, so plaintiffs
“sought the assistance” of the court. Id. On June 5, 2018, Magistrate Judge James P. O’Hara
conducted a telephone status conference with the parties about plaintiffs’ inquiry. See Doc. 83.
During the conference, defendants expressed concerns about evidence spoliation. And neither
party provided the court with reliable evidence that replacing the allegedly defective part in
plaintiffs’ vehicle would pose no significant risk of spoliation. The court thus declined to enter
an order approving plaintiffs’ proposed course of action. Judge O’Hara notified plaintiffs that
neither the court nor defendants were preventing plaintiffs from replacing the part in their
Cherokee if they believed they could do so without evidence spoliation. But the court also
informed plaintiffs that they might have to defend a motion accusing them of evidence
Plaintiffs also allege that other consumers have experienced the transmission defect. By
June 30, 2016, FCA US had received 3,981 warranty complaints about the wiring harness defect.
Doc. 95 at 30. By August 2016, NHTSA had received 661 consumer complaints about the
transmissions in their Jeep Cherokees. Another 130 consumers had complained about the
Chrysler 200 model.
Defendants move to dismiss this lawsuit under Fed. R. Civ. P. 12(b)(1) for lack of subject
matter jurisdiction because, they assert, plaintiffs have no standing to bring their claim. Standing
to sue is elemental to subject matter jurisdiction, so the court must resolve this threshold question
before expressing any opinion about the substance of the case’s claims or defenses. See Rivera
v. IRS, 708 F. App’x 508, 513 (10th Cir. 2017) (“Under Article III of the Constitution, standing
is a prerequisite to subject matter jurisdiction that [courts] must address, sua sponte if necessary,
when the record reveals a colorable standing issue.” (citing United States v. Ramos, 695 F.3d
1035, 1046 (10th Cir. 2012))). “A court lacking jurisdiction cannot render judgment but must
dismiss the cause at any stage of the proceedings in which it becomes apparent that jurisdiction is
lacking.” Basso v. Utah Power & Light Co., 495 F.2d 906, 909 (10th Cir. 1974) (citation
omitted). Since federal courts are courts of limited jurisdiction, there is a presumption against
jurisdiction, and the party invoking federal jurisdiction bears the burden to prove it exists.
Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994).
Plaintiffs assert that they are trying to track the analysis applied in Safe Streets Alliance v.
Hickenlooper, 859 F.3d 865 (10th Cir. 2017). The Tenth Circuit began its standing analysis
there with the sufficiency of plaintiffs’ allegations to bring a RICO claim—and not with the
question whether plaintiffs’ allegations adequately established Article III standing. See Safe
Streets, 859 F.3d at 881, 885–91. Article III standing requires a plaintiff to show: (1) an “injury
in fact—an invasion of a legally protected interest which is (a) concrete and particularized, and
(b) actual or imminent, not conjectural or hypothetical”; (2) “a causal connection between the
injury and the conduct complained of—the injury has to be fairly . . . trace[able] to the
challenged action of the defendant, and not . . . th[e] result [of] the independent action of some
third party not before the court”; and (3) that it is “likely, as opposed to merely speculative, that
the injury will be redressed by a favorable decision.” Lujan v. Defs. of Wildlife, 504 U.S. 555,
560–61 (1992) (internal quotations and citations omitted).
The third element of the Article III standing test is not particularly difficult to allege, at
least not to survive a motion to dismiss. But RICO’s standing requirement effectively
encompasses the first two Article III standing requirements. See Safe Streets, 859 F.3d at 881;
18 U.S.C. § 1964(c). Namely, at the motion to dismiss stage, plaintiffs adequately must plead
that: (1) their business or property was injured; and (2) that the defendants’ violation caused
plaintiffs’ injury. Safe Streets, 859 F.3d at 881. The court thus applies the Tenth Circuit’s
reasoning in Safe Streets to determine whether plaintiffs have pleaded sufficient facts to establish
that they have both Article III standing and RICO standing.
Because plaintiffs have tailored their allegations to replicate those made by the Safe
Streets plaintiffs, the court first summarizes that case and the Circuit’s rationale for reversing the
district court’s order that dismissed the case.
A. Safe Streets
Safe Streets involved a suit by an organization who alleged a marijuana manufacturer—
licensed by the state of Colorado and Pueblo County, Colorado—had “injured . . . adjacent
property” owned by two members of the organization. 859 F.3d at 876–77, 879. Though the
landowners did not live on the adjacent land, they alleged that they “often visit[ed] the property
on weekends with their children to ride horses, hike, and visit with friends in the closely-knit
neighborhood.” Id. at 879 (internal quotations omitted).
Plaintiffs alleged two types of harm. First, “the publicly disclosed drug conspiracy itself
. . . injured the value of [their] property.” Id. (internal quotations omitted). Plaintiffs alleged that
“the large quantity of drugs at marijuana grows purportedly makes [plaintiffs] targets for theft,
and a prospective buyer of the . . . land would reasonably worry that the . . . marijuana grow
increases crime in the area.” Id. (internal quotations omitted). And second, the “operation has
repeatedly caused a distinctive and unpleasant marijuana smell to waft onto [plaintiffs’] . . .
property,” making it “less suitable for recreational and residential purposes[,] . . . interfer[ing]
with the [landowners’] use and enjoyment of their property, and diminish[ing] the property’s
value.” Id. at 879–80 (internal quotations omitted).
The Circuit’s analysis began by discussing whether plaintiffs had alleged a sufficient
injury to establish standing under RICO. “To maintain a cause of action under [RICO],” the
Circuit explained, “a plaintiff must plead and ultimately prove: (1) that the defendant violated
[18 U.S.C.] § 1962; (2) that the plaintiff’s business or property was injured; and (3) that the
defendant’s [RICO] violation is the cause of that injury.” Id. at 881. By “plausibly alleging a
reduction in land value,” the Circuit held, plaintiffs sufficiently had “plead[ed] a property injury
under RICO.” Id. at 887. In other words, plaintiffs had “aver[red] that today their land is worth
less than it was before, and that this diminution in value occurred because their new neighbors
began their endeavors.” Id. (second emphasis added). The Circuit held that RICO’s standing
principles did not require plaintiffs to plead that they had tried to sell their land, or even appraise
it. Instead, the Circuit drew a “common-sense pleading-stage inference that nuisances diminish
the value of land.” Id. The Circuit also concluded it was plausible that “because a crime
syndicate [was] publicly violating federal law adjacent to their property, that land [currently was]
less valuable.” Id. at 888.
The Circuit also discussed RICO’s causation requirement. Namely, the statute requires
RICO plaintiffs to plead plausible allegations that defendant’s RICO violation was both the “but
for cause” and the proximate cause of plaintiff’s injury. Id. at 889. The Circuit and the United
States Supreme Court have explained this causation requirement in the following way: “‘When a
court evaluates a RICO claim for proximate causation, the central question it must ask is whether
the alleged violation led directly to the plaintiff’s injuries.’” Id. (quoting Anza v. Ideal Steel
Supply Corp., 547 U.S. 451, 461 (2006)). In Safe Streets, “no complex, external facts [were] at
play, as the enterprise [was] the direct source of all of the alleged injuries to the [landowners’]
land.” Id. at 891. Or, to put it differently, the landowners’ injuries were “direct byproducts of
the location and manner” of the defendants’ alleged violations. Id.
The Circuit concluded that plaintiffs had alleged plausible injuries directly caused by
defendants’ purported RICO violation. It thus held that plaintiffs had standing to bring their
RICO claim and reversed the order dismissing plaintiffs’ complaint.
B. Plaintiffs’ Standing Here
FCA US argues that the Fourth Amended Complaint at issue here is different because it
merely speculates that plaintiffs’ vehicle may have a defective wire harness. Defendants note
that the Fourth Amended Complaint never actually alleges that plaintiffs’ vehicle contains a
defective harness. And, because plaintiffs have not pleaded that their vehicle has shown any
manifestations of the defect alleged by the pleading, FCA US asserts, they have failed to satisfy
Article III’s standing requirement of an injury-in-fact. See Doc. 101 at 20–21 (citing Clapper,
568 U.S. at 410–14). Plaintiffs’ allegation that they were deprived of $550 of their vehicle’s
value—defendants argue—is not “fairly traceable” to FCA US’s “purported fraud[,] . . . i.e.,
promising ‘parts’ to ‘permanently fix’ a wire harness years” after purchase. Doc. 112 at 8.
ZF NA’s contentions are similar. Like FCA US, defendant ZF NA contends that
plaintiffs’ allegations of diminished vehicle value are insufficient to establish standing. And
plaintiffs “would have incurred” expenses while taking their car to a dealership for repairs
“regardless of the supposed ‘sham recall,’” it asserts. Doc. 103 at 18. Finally, ZF NA contends,
plaintiffs’ allegation that their vehicle contains a defective part rests on: (1) a recall notice that
they and the owners of around 320,000 other affected vehicles received; and (2) the expert
opinion plaintiffs described in their allegations. But, ZF NA argues, plaintiffs don’t assert that
their purported expert ever evaluated plaintiffs’ vehicle. Doc. 113 at 9; see also Doc. 95 at 21–
Plaintiffs respond, first arguing that the “standing bar” adopted in Safe Streets “is
relatively low”—the Safe Streets plaintiffs “merely alleged amorphous, speculative damages to
their property value.” Doc. 110 at 41. Plaintiffs read Safe Streets to hold that they need not
“prove a property loss caused by the RICO violation,” or demonstrate any kind of a “‘concrete
financial loss’ [to establish] standing.” Id. at 42 (quoting Safe Streets, 859 F.3d at 888). All
320,000 affected vehicles that were recalled are defective, plaintiffs contend. And plaintiffs, as
vehicle owners who received the recall notice, sustained economic damages because “they did
not receive the ‘parts’ or ‘permanent remedy’ they were promised.” Id. at 43.
Finally, plaintiffs offer two cases where, they say, federal district courts in California and
Michigan recognized that damages analogous to the ones plaintiffs claim here sufficed to
establish standing. Specifically, plaintiffs assert that they—like the plaintiffs in the California
case—“‘have identified a particular, reasonably narrow range by which they allegedly overpaid
for the[ir] . . . [v]ehicle.’” Id. at 44 (quoting In re Chrysler-Dodge-Jeep Ecodiesel Mktg., Sales
Practices, & Prods. Liab. Litig., 295 F. Supp. 3d 927, 951 (N.D. Cal. 2018)). And the Michigan
court, plaintiffs contend, has held that plaintiffs don’t need to allege a defect when proceeding on
a mail fraud theory under RICO because “damages have already been inflicted equally to all
class members . . . at the moment the fraud was finalized.” Id. at 45 (citing In re Duramax
Diesel Litig., 298 F. Supp. 3d 1037, 1071–72 (E.D. Mich. 2018)).
Plaintiffs’ Fourth Amended Complaint attempts to follow the injury-in-fact and causation
allegations that the Tenth Circuit found sufficient to establish RICO standing in Safe Streets. But
the factual allegations in the Fourth Amended Complaint do not match the Safe Streets
allegations to the extent plaintiffs claim. The court’s analysis divides plaintiffs’ alleged damages
into two categories: (1) out-of-pocket expenses; and (2) economic losses. The next two
subsections discuss them.
1. Out-of-pocket expenses
Plaintiffs assert that their damages include: (1) “reasonable compensation for their time,
mileage, and transportation costs associated with having the physical repair properly performed
on their vehicles”; and (2) “reasonable compensation for every prior visit to a dealership
necessitated by the defects in the [w]ire [h]arness[,] . . . including the costs and time associated
with having the sham software recall performed.” Doc. 95 at 55. Relevant to the facts of their
actual experience with their Jeep Cherokee, plaintiffs assert that, “[b]eginning sometime in 2015,
[they] began having an increasing number of problems” in their Cherokee. Id. at 26. Then, after
receiving the recall notice, and sometime around December 2016, plaintiffs scheduled a service
appointment at their dealership in Lee’s Summit, Missouri, to have the recall repair performed on
their vehicle around December 2016. Plaintiffs allege that they incurred out-of-pocket expenses
to travel to the dealership and spent time and gas money doing so. At some unspecified time
later, plaintiffs allege that their vehicle wouldn’t start, so they had it towed to a different
dealership in Kansas.
While the Fourth Amended Complaint certainly alleges that plaintiffs have incurred outof-pocket costs, they have not pleaded that these expenses are “direct byproducts” of defendants’
alleged RICO violation—i.e., providing a software update instead of replacing the wire harness.
Plaintiffs’ allegations never connect the alleged RICO scheme to the damages they allege: they
don’t assert that the initial “number of problems” with their vehicle or its failure to start resulted
from the software update, or even from a defective wire harness. Id. In fact, the Fourth
Amended Complaint alleges that plaintiffs didn’t learn about the software update that their
vehicle received until they already had arrived at the second dealership they visited. See id. at
27. In short, plaintiffs have not drawn a direct line—as Safe Streets requires—between
defendants’ alleged RICO violation and their expenses. Instead, plaintiffs merely have alleged a
timeline that includes unidentified problems with their vehicle, i.e., it wouldn’t start. And
plaintiffs’ Fourth Amended Complaint never alleges that defective wire harnesses caused
problems with vehicles’ ability to start. These generalized allegations don’t satisfy the causation
requirement for RICO standing formulated by the Tenth Circuit.
The court thus concludes that plaintiffs have not alleged injuries in the form of out-ofpocket expenses that can be traced to defendants’ alleged RICO violations.
2. Economic losses
The second category of damages alleged by plaintiffs relies on economic losses. But
plaintiffs’ characterization of these losses varies slightly between one portion of the Fourth
Amended Complaint and another. First, plaintiffs assert that they directly have lost $550 as of
the day the Fourth Amended Complaint was filed, “either by [the] need to pay out of pocket to
have the wire harness in their vehicle removed to replace it [or] determine if the defect exists.”
Id. at 18. Also, plaintiffs allege the vehicle’s value has diminished because of uncertainty
whether their vehicle has a defective wire harness. But, several pages later, plaintiffs assert that
they have been “deprived of the value of their vehicle by being sold [a] defective vehicle . . .
[and] not having a real recall and a proper part replacement.” Id. at 55. They seek to recover
damages for the diminished value of their Jeep Cherokee because of the defective wire harness
and insufficient software update.
Plaintiffs argue that, to plead a RICO claim, Safe Streets doesn’t require them to allege
that their property has diminished in value. See Doc. 110 at 42; Safe Streets, 859 F.3d at 888
(holding that plaintiffs need not “cite statistics, appraisals, attempts to sell, or other concrete
evidence to quantify their concrete financial loss with actual facts” (internal quotations omitted)).
But the Safe Streets plaintiffs had alleged that odors from defendants’ neighboring property,
where marijuana grew, and defendants’ operation of an enterprise openly violating federal law
directly had caused their property’s value to decline. So, the Safe Streets plaintiffs did not
merely allege “amorphous, speculative damages to their property value.” See Doc. 110 at 41.
They asserted specific circumstances—i.e., odors and defendants’ openly criminal activity—to
make plausible allegations that their property’s value had declined.
Here, the Fourth Amended Complaint only alleges that plaintiffs’ vehicle has a defect
based on a recall notice they received. And, even if plaintiffs’ vehicle has the defect plaintiffs
assume it has, they fail to connect defendants’ alleged RICO violation—a “sham” software
update—and the diminished value of that vehicle. As discussed above, plaintiffs haven’t pleaded
facts showing that the problems they experienced with their vehicle are traceable to defendants’
“sham” software update. Plaintiffs also assert that public information about the recall and their
lawsuit has affected the value of their vehicle. But this relationship is more attenuated than the
relationship that the Safe Streets plaintiffs alleged—there, defendants were operating an open
criminal enterprise next door to plaintiffs’ property.
Plaintiffs haven’t pleaded facts in their Fourth Amended Complaint that replicate the
facts alleged in Safe Streets, i.e., factual allegations about odors actually having travelled onto
plaintiffs’ property and an open criminal enterprise diminishing their property’s value. The
Tenth Circuit did not require the Safe Streets plaintiffs to quantify or plead fact-specific
allegations about an actual amount of property losses. But those plaintiffs specifically alleged
that smells and activities on the neighboring property actually had affected plaintiffs’ use of their
land. Here, in an effort to follow Safe Streets, plaintiffs quantify their economic losses and argue
that they don’t need to prove their vehicle’s value declined to withstand a motion to dismiss. But
plaintiffs merely assert the conclusion that they are affected economically by defendants’ failure
to replace their defective wire harness. Plaintiffs never allege any facts demonstrating how they
are affected. Safe Streets—and its “narrow holdings”—explains that RICO’s civil remedy
standard is a “heavily fact-dependent” one. See 859 F.3d at 891. Here, plaintiffs only have
alleged, at best, a tenuous connection between defendants’ purported RICO violation and the
decreased value of their Jeep Cherokee. This tenuous connection falls short of the facts pleaded
in Safe Streets.
Finally, plaintiffs rely on In re Chrysler-Dodge-Jeep and In re Duramax as persuasive
authority that their alleged damages suffice to establish standing. But the allegations in those
cases differ from ones made here. Plaintiffs in those two cases alleged that they had overpaid for
their vehicles. But they didn’t just assert that their vehicles had diminished in value. See In re
Chrysler-Dodge-Jeep, 295 F. Supp. 3d at 949 (“Whether the value of the Class Vehicles has
dropped is not Plaintiffs’ focus. . . . Plaintiffs contend that they overpaid for the Class
Vehicles.”); In re Duramax, 298 F. Supp. 3d at 1052 (“Plaintiffs’ overpayment theory suffices to
provide standing to sue GM[.] . . . Accepting Plaintiffs’ allegations as true, they paid a premium
for a ‘clean diesel’ vehicle which actually polluted at levels dramatically higher than a
reasonable consumer would expect.”).
In contrast, here, plaintiffs do not advance the same “overpayment” damages claim.
They also don’t assert that they “would not have purchased” their vehicle, “or would have paid
less for it,” but for defendants’ actions. See In re Chrysler-Dodge-Jeep, 295 F. Supp. 3d at 945.
Instead, the Fourth Amended Complaint asserts that plaintiffs have been deprived of the value of
the vehicle, and they have incurred damages in the form of diminished value as of the date they
brought their claims. Unlike Chysler-Dodge-Jeep and Duramax, plaintiffs have not alleged that
they already have paid for a benefit to their vehicle—i.e., emissions reduction technology or
some other specific feature—that they never received.
Thus, plaintiffs have not alleged injuries in the form of out-of-pocket expenses that one
plausibly can trace to defendants’ alleged RICO violations. Also, plaintiffs only have pleaded a
tenuous connection between defendants’ purported RICO violation and the decreased value of
their Jeep Cherokee. And plaintiffs have not alleged that they overpaid for their Cherokee, or for
any specific feature. The court thus concludes that plaintiffs have not alleged sufficient
damages—both in the form of out-of-pocket expenses and economic losses—to satisfy the
standing requirement established by Safe Streets.
The Fourth Amended Complaint fails to plead facts plausibly alleging standing sufficient
to assert a RICO claim. Often, the court permits plaintiffs to amend inadequate allegations to
assert—if they rightfully can do so—a plausible claim for relief. But here, arguably, the
circumstances call for a different outcome. Plaintiffs already have had two chances to plead and
replead a plausible claim. Both times, they have responded with inadequate allegations. In some
respects, it appears that plaintiffs are prospecting for words that will substitute for the requisite
injury to their business or property, as RICO requires. But, the court also is aware that
defendants declined to participate in a procedure that could have revealed whether plaintiffs’
vehicle contains a defective harness. See Doc. 83.
Though it is a close call, the court, in its discretion, will grant plaintiffs leave to replead
their RICO claim. Plaintiffs must file a Fifth Amended Complaint within 14 days of this
Order’s date. If plaintiffs do not file a Fifth Amended Complaint, defendants FCA US and ZF
NA may renew their motions and adopt the memoranda supporting the current motions (Docs.
100 & 102), and the court would grant those motions. For now, however, the court denies FCA
US’s Motion to Dismiss (Doc. 100) and ZF NA’s Motion to Dismiss (Doc. 102).
IT IS THEREFORE ORDERED BY THE COURT THAT unless plaintiffs file a
Fifth Amended Complaint within 14 days of the date of this Order, the court will grant
renewed motions to dismiss filed by defendant FCA US, LLC, and defendant ZF North America,
IT IS FURTHER ORDERED THAT defendant FCA US, LLC’s Motion to Dismiss
(Doc. 100) and defendant ZF North America, Inc.’s Motion to Dismiss (Doc. 102) are denied.
IT IS SO ORDERED.
Dated this 29th day of March, 2019, at Kansas City, Kansas.
s/ Daniel D. Crabtree
Daniel D. Crabtree
United States District Judge
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