Counts et al v. General Motors, LLC

Filing 27

ORDER Denying 22 Motion for Clarification. Signed by District Judge Thomas L. Ludington. (Sian, M)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
NORTHERN DIVISION
JASON COUNTS, et al,
Plaintiff,

Case No. 16-cv-12541

v.

Honorable Thomas L. Ludington

GENERAL MOTORS, LLC,
Defendants.
_______________________________________/
ORDER DENYING MOTION FOR CLARIFICATION
On June 7, 2016, nine plaintiffs filed a 442-page complaint alleging deceptive
advertising, breach of contract, and fraudulent concealment claims under the laws of thirty states
against Defendant General Motors (“GM”). ECF No. 1. Fundamentally, Plaintiffs allege that GM
installed a “defeat device” in the 2014 Chevrolet Cruze Diesel which results in significantly
higher emissions when the vehicle is in use compared to when it is being tested in laboratory
conditions. Defendant filed a motion to dismiss several months later which made multiple
arguments, including that the claims were preempted because they depended on proof of
noncompliance with EPA regulations governing emissions and “defeat devices.” On February
14, 2017, the Court issued an opinion and order which granted in part Defendant’s motion to
dismiss, but rejected the GM’s argument that Plaintiffs’ claims were preempted. ECF No. 21. On
February 28, 2017, Defendant filed a motion seeking clarification, where they raised a new
argument: that Plaintiffs’ claims are preempted by EPA regulations to the extent they depend
upon proving that the Cruze contains a “defeat device” as that term is defined by the EPA. ECF
No. 22. For the reasons that follow, GM’s motion will be denied.
I.

The allegations in Plaintiffs’ complaint were summarized in the Court’s February 14,
2017, opinion and order. That summary is adopted in full. For clarity, the most relevant portions
will be repeated here.
The complaint alleges that each Plaintiff is similarly situated. All bought a
Chevrolet Cruze which was allegedly equipped with a “defeat device” that
resulted in significantly increased emissions when tested during normal driving as
compared to when tested in laboratory settings. Plaintiffs further allege that they
purchased the vehicle on the “reasonable, but mistaken, belief that [the] vehicle
was a ‘clean diesel’ as compared to gasoline vehicles, complied with United
States emissions standards, and would retain all of its operating characteristics
throughout its useful life, including high fuel economy.” See Compl. at ¶¶ 20, 23,
26, 27, 30, 33, 36, 39, 42. Further, Plaintiffs allege that they “selected and
ultimately purchased [their] vehicles[s], in part, because of the Clean Diesel
system, as represented through the advertisements and representations made by
GM.” Id. Finally, Plaintiffs allege that if GM had disclosed the true details of the
clean diesel system design or indicated that the 2014 Chevrolet Cruze actually
“emitted pollutants at a much higher level than gasoline vehicles do,” they “would
not have purchased the vehicle, or would have paid less for it.” Id.
...
All parties agree that GM received a certification of compliance with the relevant
regulations from the EPA prior to releasing the 2014 Chevrolet Cruze Diesel.
However, Plaintiffs allege that, despite that certification and GM’s “clean diesel”
advertising campaign, the 2014 Chevrolet Cruze Diesel was equipped with a
“defeat device” which triggered the Cruze Clean Turbo Diesel functions when the
vehicle was being tested, but deactivated the system when the vehicle was
actually in use. Id. at ¶¶ 73–75.
Specifically, Plaintiffs allege that multiple reports and tests indicate that GM
vehicles equipped with “clean diesel” systems “emit far more pollution on the
road than in lab tests.” Id. at ¶ 73.
Feb. 14, 2017, Op. & Order at 2, 4, ECF No. 21.
II.
GM’s motion seeks clarification of the opinion and order granting in part its motion to
dismiss. Pursuant to Federal Rule of Civil Procedure 60(a), “[t]he court may correct a clerical
mistake or a mistake arising from oversight or omission whenever one is found in a judgment,

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order, or other part of the record.” In response to motions for clarification, courts typically
discuss the scope and application of the order being clarified. GM asserts that there is ambiguity
regarding how portions of the February 14, 2017, order interact. To the extent there are material
ambiguities in the February 14, 2017, opinion and order, they will be addressed below.
III.
A.
In the February 14, 2017, Opinion and Order, the Court concluded that “to the extent
Plaintiffs are suing GM for manufacturing a vehicle that emits ‘more than a certain amount of
[NOx or particular emissions]’ in violation of EPA regulations or that is not equipped with a
properly functioning and federally required ‘emission-control technology,’ their claims are
preempted by the EPA.” Feb. 14, 2017, Op. & Order at 23. The Court went on to explain that
“Plaintiffs’ claims do not directly depend on proof of noncompliance with federal emissions
standards.”1 Id. at 25. In response to GM’s argument that allowing Plaintiffs’ to bring suit would
create “a ‘chaotic patchwork of state standards,’” the Court explained that “Plaintiffs are not
attempting to tighten emissions regulations or introduce separate state emissions regulation. . . .
Rather, Plaintiffs are attempting to hold GM responsible for what Plaintiffs allege are false
representations about certain technology in the Cruze.” Id. at 26 (quoting In re Caterpillar, Inc.,
C13 & C15 Engine Prod. Liab. Litig., No. 1:14-CV-3722 JBS-JS, 2015 WL 4591236 (D.N.J.
July 29, 2015)). The Court further explained: “An action by a state attorney general focused on
punishing vehicle manufacturers for purposely circumventing federal regulation is substantially

1

However, that is not to say that proof of noncompliance is irrelevant. As the Court indicated in the February 14,
2017, order, “[i]f Plaintiffs show that Cruze is noncompliant with EPA emissions regulations, that would
substantiate their claims of misrepresentations.” Id. at 26 n. 8. See also id. at 27 (“There can be no doubt that
proving noncompliance would bolster Plaintiffs’ claims, but Plaintiffs need not make that showing to prevail.”).

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different from a suit by private consumers who allege that a vehicle manufacturer misrepresented
the functionality and effectiveness of certain technology.” Id. at 26–27.
The Court then dismissed Plaintiffs’ breach of contract and fraudulent misrepresentation
claims for failure to state a claim. As mentioned in the February 24, 2017, order, GM’s briefing
has consistently been premised on a misapprehension of Plaintiffs’ (liberally construed) claims.
Plaintiffs’ “claims do not depend on and thus Plaintiffs need not allege facts indicating that the
Cruze violates EPA emissions standards.” Id. at 32. Rather, Plaintiffs must simply allege that
“GM fraudulently concealed or misrepresented that the functionality and effectiveness of the
Cruze’s ‘clean diesel’ system was substantially lower than a reasonable customer would expect.”
Id. Because the GM’s advertising campaign constituted nonactionable “puffery,” Plaintiffs’
fraudulent misrepresentation claims were dismissed. Id. at 36–39.
However, Plaintiffs’ fraudulent concealment claims were adequately alleged. The
briefing on those claims focused on whether GM had a duty to disclose the operation of the
“defeat device.” The Court concluded that, in at least some states, a duty to disclose arises when
the defendant has exclusive knowledge of a defect or actively conceals the defect. Rather than
specifically addressing the viability of fraudulent concealment claims under the law of specific
states, GM argued simply that Plaintiffs did not adequately allege that GM had exclusive
knowledge of the “defeat device” or actively concealed it. That argument was rejected:
If Plaintiffs’ allegations are true, GM installed a “defeat device” on the Cruze.
The only plausible purpose of such a device is to create the appearance of low
emissions without the reality of low emissions. If GM were not attempting to
deceive regarding the level of emissions produced by the Cruze, the alleged
“defeat device” would not exist. This is sufficient to constitute active
concealment.
Id. at 40–41.
B.
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GM’s professed confusion regarding the February 14, 2017, order is as follows:
To proceed on this sole surviving claim, plaintiffs would need to establish the
following elements:


“GM installed a ‘defeat device’ on the Cruze”;



“GM had a duty to disclose the existence of the ‘defeat device’” to
plaintiffs;



GM failed “to disclose the existence of the ‘defeat device’” to
plaintiffs; and



Plaintiffs relied on GM’s omission and suffered injury in the form
of overpayment for their vehicles.

. . . Both the Complaint and GM’s motion to dismiss note that (1) the CAA and
EPA’s implementing regulations are the sole basis for defining a “defeat device,”
and (2) the use of a “defeat device” is explicitly prohibited under both the CAA
and EPA regulations. Plaintiffs allege that GM failed to disclose that it installed
an illegal “defeat device” in the Cruze that resulted in non-compliance with EPA
emissions regulations. To establish this claim, plaintiffs necessarily will need to
prove that GM used a “defeat device” in violation of the CAA and the Cruze’s
resulting emissions violate federal standards.
Mot Clarification at 3–4, ECF No. 22 (internal citations omitted).
This argument is fundamentally premised on the same misapprehension exhibited
throughout GM’s motion to dismiss. GM contends that Plaintiffs’ surviving claims depend upon
proof that the Cruze contained a “defeat device” as defined by federal law and regulations. But
GM has not demonstrated, given the allocation of the standard of proof at the motion to dismiss
stage, that such a showing is a prerequisite for Plaintiffs obtaining relief under their fraudulent
concealment or consumer protection law claims. Perhaps GM’s perplexity stems from the fact
that, in the opinion and order, the Court consistently placed the term “defeat device” in scare
quotes. But that particular designation of the term was not meant to imply (much less establish)
that the EPA’s definition of such a device was being relied upon. Rather, the scare quotes were
meant to communicate that “defeat device” was a term of art, a stand-in for the idea of a hidden
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vehicle component that, through obfuscation, allows for “the appearance of low emissions
without the reality of low emissions.”2 Feb. 14, 2017, Op. & Order at 40.
The opinion and order did not, even by implication, state that Plaintiffs’ fraudulent
concealment claim was seeking recovery for GM’s concealment of a “defeat device” as defined
by federal law. Rather, as was explained, “Plaintiffs must allege with particularity facts showing
that GM fraudulently concealed or misrepresented that the functionality and effectiveness of the
Cruze’s ‘clean diesel’ system was substantially lower than a reasonable consumer would expect,
given the representations made in GM’s advertising campaign.” Feb. 14, 2017, Op. & Order at
32 (emphasis added). GM interprets that statement as referring only to Plaintiffs’ fraudulent
misrepresentation claims. Because the sentence did expressly reference GM’s advertising
campaign, that interpretation is not unreasonable. But, as made clear by the fact that both the
fraudulent misrepresentation and fraudulent concealment claims were mentioned, that reasonable
consumer standard applies to the fraudulent concealment claims as well.3 In general, proof of
fraudulent concealment simply requires showing that material facts were concealed in a way that
would mislead a reasonable consumer about the true condition of the property, thus causing
damage. There is no doubt that proof that the Cruze contains a “defeat device” as defined by
federal law would be exceedingly relevant to Plaintiffs’ claims. But (at least based on the
arguments GM has made to this point) Plaintiffs could prevail upon their fraudulent concealment
claim without proving GM’s noncompliance with EPA regulations.
GM makes much of the fact that Plaintiffs define “defeat device” in their Complaint by
referring to EPA regulations. See Compl. at ¶ 13. The Complaint does reference the federal
2

The term “defeat device” does suggest that the device’s purpose is to “defeat” something, presumably emissions
standards. But the fact that the term “defeat device” originated in the context of emissions regulations does not mean
that an equivalent device could not simultaneously cause redressable injury to private consumers.
3
Indeed, even though GM’s advertising campaign does not constitute actionable misrepresentations, it does provide
context for the question of whether GM made material omissions that would have misled a reasonable consumer.

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definition of “defeat device,” but a fair reading of the Complaint does not compel the conclusion
that Plaintiffs are predicating their claim for relief upon proof that the Cruze contains a “defeat
device” as that term is defined by federal law. Paragraph Thirteen of the Complaint, where the
federal definition is provided, reads as a technical explanation of the kind of component which
Plaintiffs allege has caused their injury. Plaintiffs allege throughout the remainder of the
complaint that GM intentionally concealed several material facts about the Cruze. See, e.g.,
Compl. at ¶¶ 20, 126. At the motion to dismiss stage, all reasonable inferences must be drawn in
Plaintiffs’ favor. GM interprets Plaintiffs’ complaint in a narrow fashion and argues that it is
preempted, but that approach is incompatible with the Rule 12(b)(6) pleading standard.
Success upon Plaintiffs’ fraudulent concealment claim would likely also provide the basis
for the EPA to conclude that GM has installed an illegal “defeat device” in the Cruze. But the
fact that success on a cause of action might also demonstrate regulatory noncompliance does not
mean that the cause of action is itself premised on proof of the regulatory noncompliance.
GM further argues that Plaintiffs’ claims would still be preempted even if Plaintiffs
claims are construed as only alleging that GM failed to disclose lawful emissions technology.
Def. Reply Br. at 3. GM asserts that such a claim would be preempted because “it would allow
individual states to set and enforce their own regulations governing vehicle emissions, separate
from those of the EPA, and thus would create the precise ‘chaotic patchwork of state standards’
that CAA § 209 was intended to avoid.” Id. at 3–4 (quoting Feb. 14, 2017, Op. & Order at 26.
That argument is without merit. If accepted, consumers would be unable to hold vehicle
manufacturers liable for any intentionally defective technology, if the technology also impacted
or concealed the vehicle’s emissions levels. Plaintiffs are attempting to hold GM responsible for
allegedly concealing the (non)functionality of certain technology within the Cruze, “not

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attempting to tighten emissions regulations or introduce separate state emissions regulations.”
Feb. 14, 2017, Op. & Order at 26. The case which GM cited in its motion to dismiss for the
proposition that permitting Plaintiffs’ claims to proceed would create a chaotic patchwork of
state standards, In re Office of Attorney Gen. of State of N.Y., involved an attempt by the New
York state attorney general to hold vehicle manufacturers liable for circumventing EPA
regulations. 269 A.D.2d 1, 10 (2000). But “[a]n action by a state attorney general focused on
punishing vehicle manufacturers for purposely circumventing federal regulation is substantially
different from a suit by private consumers who allege that a vehicle manufacturer misrepresented
the functionality and effectiveness of certain technology.” Feb. 14, 2017, Op. & Order at 26–27.
See also In re Caterpillar, Inc., C13 & C15 Engine Prod. Liab. Litig., No. 1:14-CV-3722 JBSJS, 2015 WL 4591236 at *11 (D.N.J. July 29, 2015) (“Plaintiffs’ claims which seek enforcement
of express and implied warranties for defects in the Engines’ emissions systems, as well as those
based on consumer fraud and negligent design, are hardly comparable to efforts by state and
local governments to adopt or enforce emissions standards or to require additional certifications
or inspections prior to sale.”).
For the reasons articulated above (which largely reiterate the analysis in the February 14,
2017, Opinion and Order), Plaintiffs’ fraudulent concealment claims are not preempted.
IV.
Accordingly, it is ORDERED that Defendant’s motion for clarification, ECF No. 22, is
DENIED.

Dated: April 20, 2017

s/Thomas L. Ludington
THOMAS L. LUDINGTON
United States District Judge

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PROOF OF SERVICE
The undersigned certifies that a copy of the foregoing order was served
upon each attorney or party of record herein by electronic means or first
class U.S. mail on April 20, 2017.
s/Michael A. Sian
MICHAEL A. SIAN, Case Manager

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