Corder v. Ford Motor Company
Filing
236
MEMORANDUM OPINION by Judge Charles R. Simpson, III on 4/23/2012; re 220 MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM re 2nd Amended Complaint filed by Ford Motor Company ; a separate order will issue in accordance with this opinion.cc:counsel (TLB)
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF KENTUCKY
AT LOUISVILLE
KENNETH E. CORDER, SR., on Behalf
of Himself and All Others Similarly Situated
v.
PLAINTIFFS
CIVIL ACTION NO. 3:05-CV-00016
FORD MOTOR COMPANY
DEFENDANT
MEMORANDUM OPINION
This matter is before the court on defendant Ford Motor Company’s motion to dismiss
plaintiff Kenneth E. Corder’s second amended complaint for failure to state a claim (DN 220). For
the reasons herein, that motion will be denied.
BACKGROUND
Briefly stated, the basic factual allegations made by Corder in this case are as follows: In
model year 2003 Ford F-Series Super Duty Trucks, Ford installed a particular 6.0L Power Stroke
Diesel engine that was widely-reported to have had issues. Beginning around July of 2003, Ford
began making model year 2004 Super Duty Trucks, in which it installed that same type of
engine. However, around October of 2003, Ford began installing an improved 6.0L Power Stroke
Diesel engine, the “Job 1.5” engine. In May 2004, Corder purchased a 2004 Ford F-Series Super
Duty Truck. He alleged that he thereafter discovered that the 6.0L Power Stroke Diesel engine in
his truck was the pre-Job 1.5 engine that had the widely-reported problems. Corder brought
claims on behalf of himself and others similarly situated against Ford for damages under the
Kentucky Consumer Protection Act (“KCPA”), KRS § 367.010 et seq., restitution, and other
equitable and declaratory relief. Corder alleged that the sale of the 2004 truck with the pre-Job
1.5 engine was a deceptive practice. He also brought a claim against Ford for unjust enrichment.
After initial discovery, Ford moved for summary judgment. This court granted the
motion, finding that Ford’s actions were not unfair, false, misleading, or deceptive. This court
also held that Corder failed to show that he had suffered “ascertainable loss of money or
property” within the meaning of the KCPA. Finally, this court dismissed Corder’s claim for
unjust enrichment.
In a July 9, 2008 decision, the Sixth Circuit reversed this court’s grant of summary
judgment on the KCPA claim. Corder v. Ford Motor Co., 285 F. App’x 226 (6th Cir. 2008). The
Sixth Circuit held that there was sufficient evidence to raise a genuine issue of material fact
regarding whether Ford’s sale of a 2004 model Super Duty truck with a pre-Job 1.5 engine
installed was an “unfair, false, misleading or deceptive” act. Id. at 228-229. The Sixth Circuit
also found that Corder had produced sufficient evidence from which a jury could find that he
suffered an “ascertainable loss of money or property” within the meaning of the KCPA. Id. at
229-230. However, the Sixth Circuit upheld the dismissal of Corder’s unjust enrichment claim.
Id. at 230.
Corder then filed a motion in this court to certify this action as a nationwide class action.
This court denied that motion. Particularly pertinent here, this court found that the KCPA should
not be applied to a nationwide class of purchasers of the Ford trucks at issue; rather, choice of
law principles would mandate application of the laws of the states in which the putative class
members had purchased their vehicles. Further, those state laws varied in ways that would make
it nearly impossible to apply in a single action. Specifically, this court pointed to the fact that
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some states’ laws required proof of reliance, while others’ laws did not. Additionally, because
applying the law of a jurisdiction that required proof of reliance would entail an individualized
inquiry into the state of mind of each consumer, it would be an overwhelming challenge to have
a trial where the individual reliance of each of those numerous consumers must be proved.
Corder then filed a second amended complaint, alleging a single claim of violation of the
KCPA. In that complaint, he proposed a class of only Kentucky residents who purchased the
2004 model Ford truck with the pre-Job 1.5 engine. Ford has now moved, pursuant to Rule
12(b)(6) of the Federal Rules of Civil Procedure, to dismiss the second amended complaint for
failure to state a claim.
ANALYSIS
Upon a motion to dismiss for failure to state a claim, a court “must construe the
complaint in the light most favorable to plaintiff” and “accept all well-pled factual allegations as
true.” League of United Latin Am. Citizens v. Bredesen, 500 F.3d 523, 527 (6th Cir. 2007). To
survive a motion to dismiss, the “complaint must contain either direct or inferential allegations
respecting all material elements” of the offense. In re Travel Agent Comm’n Antitrust Litig., 583
F.3d 896, 902 (6th Cir. 2009) (internal question marks ommitted). The complaint’s “factual
allegations must be enough to raise a right to relief above the speculative level” and must “state a
claim to relief that is plausible on its face.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555,
570 (2007).
The parties’ dispute here centers around a purely legal issue of Kentucky law: whether
reliance is an element of a claim for damages under the KCPA.1 Ford argues that Corder was
1
In its opinion denying Corder’s motion to certify a nationwide class, this court identified
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required to, but did not, allege that he relied upon Ford’s allegedly deceptive act. Corder
responds that reliance is not an element of a claim for damages under the KCPA. Instead, a
plaintiff need only show that the defendant’s alleged misrepresentation was material, which
supplies the causal nexus between the allegedly deceptive act and the claimed loss. Corder also
argues that the Sixth Circuit opinion reversing this court’s grant of summary judgment has
already resolved the issue of whether Corder adequately alleged a KCPA violation.
KRS § 367.170 proclaims, “Unfair, false, misleading, or deceptive acts or practices in the
conduct of any trade or commerce are hereby declared unlawful.” Under the KCPA,
Any person who purchases or leases goods or services primarily for personal,
family, or household purposes and thereby suffers any ascertainable loss of
money or property, real or personal, as a result of the use or employment by
another person of a method, act or practice declared unlawful by KRS 367.170,
may bring an action . . . to recover actual damages. The court may, in its
discretion, award actual damages and may provide such equitable relief as it
deems necessary or proper.
KRS § 367.220(1).
At the time the parties filed their papers pertaining to the motion to dismiss, no Kentucky
case explicitly considered whether that provision required a plaintiff to prove his or her reliance
on the defendant’s allegedly unlawful practice to obtain damages. However, less than three
months ago, the Kentucky Court of Appeals rendered a decision in Merck & Co., Inc. v. Ratliff,
1
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Kentucky as a state that does not require a showing of reliance. In support of that statement, this
court cited to Telcom Directories, Inc. v. Com. ex rel. Cowan, 833 S.W.2d 848, 850 (Ky. Ct. App.
1991). However, as Ford persuasively points out, that was an action brought by the Attorney General
to enjoin enforcement of an unlawful practice, not an action for damages brought by a private party.
Those two types of actions are governed by different statutes: KRS § 367.190 applies to actions by
the Attorney General for an injunction, while KRS § 367.220 applies to damages actions brought
by private parties. Thus, the holding in Telcom that the Attorney General need not prove reliance
by individual consumers is irrelevant to the separate question of whether a private party must prove
reliance. Nevertheless, as explained in the main text, this court concludes that Corder was not
required to specifically plead reliance to survive Ford’s motion to dismiss.
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2012 WL 413522 (Ky. Ct. App. Feb. 10, 2012). In that case, the plaintiff, a private party,
brought an action against Merck alleging that Merck had concealed the dangerous side effects of
Vioxx. Ratliff, 2012 WL 413522, at *1. The plaintiff sought to represent himself and a class of
other similarly situated Kentucky residents in claims for violations of the KCPA, fraudulent
concealment and/or misrepresentation, negligent and/or grossly negligent misrepresentation, and
unjust enrichment. Id. at *2. The trial court certified the action as a class action. Id. On appeal
from the certification order, the Court of Appeals found that the fraudulent and negligent
misrepresentation claims posed “particular problems for class certification” because those claims
each contained the element of reliance, which would require individualized proof. Id. at 5-7.
However, in addressing the KCPA claim, the court noted that there were “fewer obstacles to a
class claim.” Id. at 5. In so stating, the Court of Appeals examined a Missouri court decision in a
similar Vioxx case, Plubell v. Merck & Co., Inc., 289 S.W.3d 707, 714 (Mo. Ct. App. 2009).
Ratliff, 2012 WL 413522, at *5. The Court of Appeals noted that the Missouri consumer
protection statute was “nearly identical” to Kentucky’s. Id. Under the Missouri court’s
interpretation of the statute, the plaintiff did not have to prove “causation” with respect to each
individual’s decision to purchase Vioxx, but only that a loss resulted from Merck’s allegedly
unlawful practice. Id. Further, the Missouri court opined that the requisite loss could “be shown
through a ‘benefit-of-the-bargain’ theory that the product or service received . . . was not worth
what the customer paid for it.” Id.
Based on the Kentucky Court of Appeals’ contrasting discussion of the fraud claims and
the KCPA claim, it is clear that the Court of Appeals was of the opinion that the KCPA did not
require proof of reliance. We note that the Kentucky Supreme Court has not yet determined
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whether to grant discretionary review of the Court of Appeals’ decision. Nevertheless, in light of
the fact that the Court of Appeals’ opinion is the expressed view of a Kentucky appellate court
on this issue of Kentucky law, we will pay heed to that opinion and decline to dismiss Corder’s
complaint on the basis that he did not allege that he relied on Ford’s allegedly deceptive practice.
Other considerations also support the conclusion that Corder’s complaint should not be
dismissed for failing to plead reliance. First, the plain language of the statute does not mention
reliance. Had the Kentucky Legislature intended to include an element of reliance for a damages
claim under the KCPA, it easily could have done so. The Legislature’s failure to use the word
reliance in the KCPA statute is all the more telling in light of the fact that it has long been
established that Kentucky common-law fraud claims require the plaintiff to prove the element of
reliance. See, e.g., Cresent Grocery Co. v. Vick, 240 S.W. 388, 389 (Ky. 1922).
Instead, by its very terms, the KCPA requires only that the plaintiff prove that he or she
suffered an “ascertainable loss” that was the “result” of the allegedly deceitful practice of the
defendant. Loss causation is different from reliance. See Flegles, Inc. v. TruServ Corp., 289
S.W.3d 544, 552-553 (Ky. 2009) (a plaintiff must prove loss causation in addition to reliance in
a common-law fraud claim); Merck & Co., Inc. v. Ratliff, 2012 WL 413522, at *5 (“Under this
interpretation, causation need not be shown with respect to each individual class member’s
decision to purchase Vioxx, but merely that a loss resulted from the practice.”). Thus, the plain
meaning of the KCPA damages provision requires only a showing of a causal nexus between the
plaintiff’s loss and the defendant’s allegedly deceitful practice, not a strict showing that the
plaintiff relied on the defendant’s allegedly deceitful practice.
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Moreover, Kentucky courts interpreting the KCPA have noted that the act “is designed to
provide broad protection to consumers victimized by unlawful and deceptive trade practices.”
Craig & Bishop, Inc. v. Piles, 247 S.W.3d 897, 903 (Ky. 2008); see Stevens v. Motorists Mut.
Ins. Co., 759 S.W.2d 819, 821 (Ky. 1988) (“Our examination and analysis of the various cases
indicates clearly that the Kentucky legislature created a statute which has the broadest
application in order to give Kentucky consumers the broadest possible protection for allegedly
illegal acts.”). Consistent with that interpretation of the KCPA’s purpose, this court finds that
Kentucky courts would be unlikely to impute the common-law fraud element of reliance into the
statute where the statute does not use that word.
Additionally, this court’s review of Kentucky cases examining KCPA damages claims
reveals no language suggesting a reliance element. See, e.g., Smith v. Gen. Motors Corp., 979
S.W.2d 127, 130-11 (Ky. 1998); Craig & Bishop, Inc. v. Piles, 247 S.W.3d 897, 904-905 (Ky.
2008). While certainly not dispositive of the issue, the fact that Kentucky courts have never
stated that there is a reliance element is a good indication that there is not one.
The Sixth Circuit’s prior opinion in this case further supports the conclusion that it would
be improvident for this court to now dismiss Corder’s KCPA claim for failure to state a claim.
Of course, the Sixth Circuit was not specifically confronted with the issue of whether Corder had
to prove reliance to establish his right to damages under the KCPA. However, the Sixth Circuit
did determine that Corder had presented sufficient evidence from which a jury could find that he
suffered an “ascertainable loss of money or property.” Corder, 285 F. App’x at 229-230. Implicit
in that finding is a conclusion that the evidence presented by Corder was sufficient for a jury to
find the requisite causal connection between Ford’s allegedly deceptive practice and Corder’s
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ascertainable loss. In other words, it is clear from the Sixth Circuit opinion that it believed that
Corder had produced sufficient evidence to send his KCPA claim to a jury, and this court is thus
of the belief that he should not have his amended complaint asserting that very same claim
dismissed for failure to state a claim.
In light of the foregoing, this court will deny Ford’s motion to dismiss Corder’s
complaint. Because reliance is not an element of the KCPA, Corder was not required to plead it
in order to state a claim.
CONCLUSION
Ford’s motion to dismiss Corder’s second amended complaint will be denied. A separate
order will issue in accordance with this opinion.
April 23, 2012
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