Chrysler Pacifica Fire Recall Products Liability Litigation
Filing
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OPINION AND ORDER Denying 46 MOTION to Compel Arbitration. Signed by District Judge David M. Lawson. (SPin)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
IN RE: CHRYSLER PACIFICA FIRE RECALL
PRODUCTS LIABILITY LITIGATION
MDL No. 3040
Case Number 22-3040
Honorable David M. Lawson
Magistrate Judge Elizabeth S. Stafford
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OPINION AND ORDER DENYING
MOTION TO COMPEL ARBITRATION
The plaintiffs in this multidistrict litigation allege that defendant FCA US LLC
manufactured and sold them Chrysler Pacifica Plug-in Hybrid minivans that are defective because
they have been known to combust spontaneously. The defendant has identified 18 plaintiffs named
in the Consolidated Master Complaint (CMC) who signed sales agreements with their respective
dealerships that contain various forms of arbitration clauses. Those clauses state, in essence, that
either party to the sales contract, and their respective agents, may elect to have disputes related to
the purchase or condition of the vehicles resolved by binding arbitration. FCA now moves to
compel arbitration by those plaintiffs who signed agreements containing the arbitration clauses.
However, FCA has challenged the viability of the CMC in a detailed motion to dismiss and
otherwise pursued the litigation in this Court under the pretrial orders. Its litigation conduct is
plainly inconsistent with any reliance on the arbitration agreements. Sixth Circuit precedent deems
conduct of that sort to constitute a waiver of the right to arbitrate. The motion to compel
arbitration, therefore, will be denied.
I.
The factual background of the case is discussed extensively in the Court’s opinion granting
in part and denying in part the defendant’s motion to dismiss, ECF No. 67.
The plaintiffs bring claims of deceptive practices and warranty breaches against defendant
FCA, which is the manufacturer of the Chrysler Pacifica Plug-in Hybrid minivan. The plaintiffs
say that, either due to defects in their design or problems during the manufacturing process, the
large battery plant incorporated into the powertrain of the vehicles has a tendency spontaneously
to enter a “thermal runaway” state resulting in combustion or explosion of the vehicle. The
spontaneous ignition of the batteries, the plaintiffs say, may occur unpredictably at any time, even
when the vehicles are parked and the ignition is off. Due to the risk of spontaneous fires, the
plaintiffs say that they are unable to drive or leave the vehicles unattended with peace of mind,
and they are forced to seek parking locations far removed from structures or other vehicles due to
the risk of damage to any nearby property if the vehicles suddenly burst into flames. The plaintiffs
acknowledge that FCA conducted a voluntary recall of the class vehicles based on the fire risk, but
they allege that the measures implemented by the recall are insufficient to cure the problem,
because the recall remedy consists merely of a software patch intended to “monitor” the battery
system for conditions that may lead to thermal runaway, and no repair or replacement of the battery
pack is offered unless Chrysler deems it “necessary” after an inspection. It appears that the
defendant did not determine that replacement was a necessary measure for any of the plaintiffs’
vehicles (or, apparently, for almost all of the other thousands of class vehicles currently in service).
In the 1,450-paragraph CMC, which spans more than 430 pages, including attached
exhibits, the plaintiffs pleaded 81 causes of action sounding in breaches of express and implied
warranties and violations of various state laws governing consumer sales, deceptive marketing,
and unfair trade practices.
This multidistrict litigation was initiated on August 3, 2022 by an order of the Judicial
Panel on Multidistrict Litigation (JPML) transferring to this Court for pretrial proceedings four
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civil actions pending in various districts for consolidation with three cases filed in this district.
Subsequent orders by the JPML transferred more cases raising the same claims, which altogether
comprise 11 putative class actions with 69 named plaintiffs who have pleaded, cumulatively, more
than 81 counts under the laws of 31 states. On October 17, 2022, the Court consolidated the related
cases and established initial deadlines for filing and challenging consolidated pleadings. The
plaintiff’s CMC was filed on November 3, 2022. On December 19, 2022, the defendant filed its
motion under Federal Rule of Civil Procedure 12(b)(6) challenging the viability of all of the claims
pleaded in the CMC. Five months later, on May 1, 2023, the defendant filed its motion to compel
arbitration.
The Court has established a timeline for discovery and motion practice relating to class
certification and the merits of the claims. The plaintiffs are due to file their motion for class
certification by April 10, 2024, all discovery must be completed by August 14, 2024, and
dispositive motions are due by September 11, 2024.
II.
FCA argues that all of the identified plaintiffs signed retail sales contracts with their
authorized dealers that included arbitration clauses, and the arbitration agreements reserve for the
arbitrator all questions involving the scope of the clauses and whether the plaintiffs’ claims are
subject to arbitration. It also insists that the arbitrator must decide whether FCA, as a non-party to
the contract, may invoke the arbitration clause, a question that it believes would be decided in its
favor, because the agreements to arbitrate cover “any dispute” arising from the sale of the subject
vehicles.
The plaintiffs disagree, insisting that the contract language does not manifest a clear and
unequivocal intent to submit questions about the arbitrability of the dispute to the arbitrator, the
arbitration clauses expressly limit arbitration to disputes arising between the purchaser and dealer
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concerning the transaction, and the terms do not embrace warranty claims against the non-party
manufacturer of the vehicles.
These issues, although certainly important, must take a back seat to the question whether
the defendant’s invocation of the right to arbitrate was untimely, and therefore whether it waived
or forfeited its privilege to seek resolution in a non-judicial forum.
Arbitration clauses of the type found in the dealership agreements are contractual
provisions which “courts must ‘rigorously enforce’” “according to their terms.” In re StockX
Customer Data Sec. Breach Litig., 19 F.4th 873, 878 (6th Cir. 2021) (quoting Am. Express Co. v.
Italian Colors Rest., 570 U.S. 228, 233 (2013)). The parties may designate the issues that they
will submit to the arbitrator. Lamps Plus, Inc. v. Varela, 587 U.S. ---, 139 S. Ct. 1407, 1416 (2019).
And those issues may include “‘gateway’ questions of ‘arbitrability,’ such as whether the parties
have agreed to arbitrate or whether their agreement covers a particular controversy.” Henry
Schein, Inc. v. Archer & White Sales, Inc., --- U.S. ---, 139 S. Ct. 524, 529 (2019). To include
those gateway questions, the parties must specify them in the agreement “by ‘clear and
unmistakable evidence.’” In re StockX, 19 F.4th at 878 (quoting Henry Schein, 139 S. Ct. at 530).
“Such a choice is typically evidenced in a so-called ‘delegation’ clause or provision.” Ibid.
It is true that there is a strong federal policy reflected in the Federal Arbitration Act that
favors arbitration, but that derives from the sanctity of contracts that is recognized generally in the
jurisprudence. The “Supreme Court has clarified[] that [the] policy ‘is to make arbitration
agreements as enforceable as other contracts, but not more so.’” Total Quality Logistics, LLC v.
Traffic Tech, Inc., No. 22-3148, 2023 WL 1777387, at *2 (6th Cir. Feb. 6, 2023) (quoting Morgan
v. Sundance, 596 U.S. 411, 418 (2022); Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S.
395, 404 n.12 (1967)).
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As with other contractual rights, the right to arbitrate may be waived. United States ex rel.
Dorsa v. Miraca Life Scis., Inc., 33 F.4th 352, 357 (6th Cir. 2022) (citing Am. Locomotive Co. v.
Gyro Process Co., 185 F.2d 316, 318 (6th Cir. 1950)). Courts do not “lightly infer that a party has
waived its right to arbitration.” Ibid. (quoting Johnson Assocs. Corp. v. HL Operating Corp., 680
F.3d 713, 717 (6th Cir. 2012)). But the Sixth Circuit has not hesitated to find a waiver when the
party seeking to compel arbitration has “tak[en] actions that are completely inconsistent with any
reliance on an arbitration agreement” or has “delay[ed] its assertion to such an extent that the
opposing party incurs actual prejudice.” Ibid. (quotations marks omitted). Dorsa’s rule was
abrogated in part by the Supreme Court’s recent ruling in Morgan, where the Court explained that
“the usual federal rule of waiver does not include a prejudice requirement,” and consequently held
“that prejudice is not a condition of finding that a party, by litigating too long, waived its right to
stay litigation or compel arbitration under the FAA.” Morgan, 596 U.S. at 419.
The Sixth Circuit has held that the filing of a motion to dismiss challenging the merits of
claims plainly is inconsistent with a defendant’s reliance on an arbitration agreement. However,
“‘[n]ot every motion to dismiss is inconsistent with the right to arbitration.’” Solo v. United Parcel
Serv. Co., 947 F.3d 968, 975 (6th Cir. 2020) (quoting Hooper v. Advance Am., Cash Advance Ctrs.
of Mo., Inc., 589 F.3d 917, 922 (8th Cir. 2009)). “For example, the Eighth Circuit has held that a
motion to dismiss raising ‘jurisdictional and quasi-jurisdictional grounds’ but seeking ‘no action
with respect to the merits of the case’ is not inconsistent with later seeking arbitration.” Ibid.
(quoting Dumont v. Sask. Gov’t Ins., 258 F.3d 880, 886-87 (8th Cir. 2001)). “Similarly, where a
complaint asserts a mix of arbitrable and nonarbitrable claims, ‘the portions of the motion [to
dismiss] addressed to nonarbitrable claims do not constitute a waiver.’” Ibid. (quoting Sweater
Bee by Banff, Ltd. v. Manhattan Indus., 754 F.2d 457, 463 (2d Cir. 1985)). “On the other hand, a
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motion to dismiss that seeks ‘a decision on the merits’ and ‘an immediate and total victory in the
parties’ dispute’ is entirely inconsistent with later requesting that those same merits questions be
resolved in arbitration.” Ibid. (quoting Hooper, 589 F.3d at 922). “A party may not use a motion
to dismiss ‘to see how the case [is] going in federal district court,’ while holding arbitration in
reserve for ‘a second chance in another forum.’” Ibid. (quoting Cabinetree of Wis., Inc. v.
Kraftmaid Cabinetry, Inc., 50 F.3d 388, 391 (7th Cir. 1995); Hurley, 610 F.3d at 339).
This case falls squarely within the rubric established by Dorsa, as modified by Morgan,
and as applied in Solo and similar decisions in other circuits. FCA’s immediate response to the
CMC was a motion to dismiss that challenged every cause of action in the consolidated amended
complaint, asserting dozens of legal arguments frontally attacking the merits of the plaintiffs’
entire case, and seeking from the Court “a decision on the merits” and “an immediate and total
victory in the parties’ dispute.” That approach to the litigation is “entirely inconsistent with later
requesting that those same merits questions be resolved in arbitration.” Solo, 947 F.3d at 975.
This is not a case where a narrowly focused preliminary motion to dismiss engaging merely
jurisdictional or procedural grounds was presented, not touching on merits issues. Under Morgan,
the Court need not find that the plaintiffs were prejudiced, only that the defendant relinquished the
right to arbitrate by acting inconsistently with that right in the litigation. It has done so here, by
seeking (and now having obtained) a comprehensive dispositive ruling from the Court (in which
it prevailed in part).
As Morgan held, waiver may be found where, as here, the defendant’s initial approach to
the litigation focuses on the merits and not forum choice, and where the demand for arbitration is
not presented until months later. Morgan, 596 U.S. at 414-15. At oral argument, the defendant
explained that it did not file the motion to compel arbitration until it was eight months into the case
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because only then did it learn that some of its dealers used paperwork that contained arbitration
clauses. But it taxes credulity to posit that FCA was not aware of the standard sales documents its
dealers were using. And even if that were accurate, it does not change the reality that FCA sought
“an immediate and total victory” from this Court by pursuing its motion to dismiss all claims in
the CMC. See Solo, 947 F.3d at 975 (“UPS’s motion to dismiss was thoroughly enmeshed in the
merits. It sought dismissal of all claims on the basis that Solo and BleachTech misinterpreted
contractual language. By asking the court to decide the meaning of the key contractual language,
UPS sought ‘immediate and total victory’” (quoting Hooper, 589 F.3d at 922)).
As the Sixth Circuit held in Dorsa (notwithstanding is partial abrogation), waiver may be
found even where the issue of arbitration is raised explicitly, but the defendant takes inconsistent
positions with respect to questions of arbitrability. In Dorsa, the court of appeals held that there
was a waiver where the defendant initially sought a ruling from the district court on the question
of arbitrability, and, when the ruling was not in its favor, then filed a second motion to compel
arbitration in which it argued that the question of arbitrability was for an arbitrator and not the
district court to decide. The Sixth Circuit concluded that by seeking a decision from the court on
the question of arbitrability the defendant had waived its right to submit that question to an
arbitrator. Dorsa, 33 F.4th at 357 (“Miraca may not first ask the district court to determine
arbitrability and then later argue that the court cannot decide [the question] after receiving an
unfavorable ruling.”).
The Sixth Circuit confronted a similar situation in Solo and readily concluded that by
litigating the merits of the claims and filing a motion to dismiss the complaint on the merits, the
defendant had waived its right to arbitrate. Defendant UPS had filed a motion to dismiss attacking
the merits of the claims, which was granted by the district court, but the decision was reversed on
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appeal. After remand, UPS moved to compel arbitration and limit discovery. The court rejected
UPS’s attempt to rely on the arbitration agreement, reasoning that “[b]y waiting to attempt to
enforce its arbitration rights until after the appellate court entered an unfavorable decision on its
merits arguments, UPS’s actions were inconsistent with reliance on an arbitration agreement.”
Solo, 947 F.3d at 975. UPS asserted that it had reserved the right to compel arbitration by so
stating in its motion to dismiss. The court rejected that argument as well. “A party cannot keep
its right to demand arbitration in reserve indefinitely while it pursues a decision on the merits
before the district court.” Id. at 976.
Other courts also have held that a party waives the right to arbitrate by seeking a decision
on the merits of claim from a district court. E.g., Gunn v. NPC Int’l, Inc., 625 F. App’x 261, 265
(6th Cir. 2015) (“[I]t was only after NPC obtained unfavorable rulings on its initial dispositive
motions that it moved to dismiss or compel arbitration. This is a factor weighing in favor of finding
waiver, for it suggests that NPC’s delay, instead of being attributable to an innocent or otherwise
excusable purpose, was deliberately motivated by some perceived tactical advantage.”); accord
Armstrong v. Michaels Stores, Inc., 59 F.4th 1011, 1015-16 (9th Cir. 2023) (“Obviously, seeking
a decision on the merits of a key issue in a case indicates an intentional and strategic decision to
take advantage of the judicial forum. For good reason, we have held that a defendant waived the
right to arbitrate after litigating in federal court for two years and then filing a motion to dismiss
on the merits. Likewise, a party that litigated in federal court for over a year, filed a motion to
dismiss on a key merits issue, and received an adverse ruling before moving to compel arbitration
was found to have waived the right to arbitration.”); Hill v. Xerox Bus. Servs., LLC, 59 F.4th 457,
473 (9th Cir. 2023) (“[T]ere can be little doubt that XBS acted inconsistently with its right to
compel arbitration under the 2002 DRP. As the detailed factual and procedural history of this case
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reveals — and as explored further below — XBS exerted a significant amount of energy
challenging the merits of the legal theory underlying the claims that Hill raised personally and on
behalf of the class members, including the 2002 DRP signatories.”); White v. Samsung Elecs. Am.,
Inc., 61 F.4th 334, 340 (3d Cir. 2023) (“Although motions to dismiss will not always evince an
intent to litigate instead of arbitrate, Samsung clearly sought to have this case dismissed by a court
on the merits. Only after it was apparent that further litigation would be required, and it could not
get the case fully dismissed before discovery, did Samsung attempt to arbitrate the remaining
claim.”); Gramercy Distressed Opportunity Fund II L.P. v. Piazza, No. 22-8050, 2023 WL
6296948, at *2 (10th Cir. May 10, 2023) (“[A] party can waive the right to pursue arbitration by
simultaneously pursuing merits relief in the courts. After all, one seeking arbitration is contending
that judicial review is inappropriate. To pursue adjudication on the merits by the court is contrary
to the purported desire to have the claims resolved by an arbitrator in the first instance.”). Similarly
here, FCA sought and received, at least in part, a decision on the merits of the plaintiffs’ several
claims. Seeking arbitration now amounts to asking for “a second chance in another forum.” Solo,
947 F.3d at 975.
When a defendant has acted promptly at the outset of the litigation to compel arbitration
before engaging in substantive litigation, this Court readily has granted such motions. E.g., Harper
v. Gen. Motors, LLC, No. 21-12907, 2023 WL 2586298, at *1 (E.D. Mich. Mar. 21, 2023). But
that is not the tack that the defendant took in this case. Here, the defendant waited too long to
broach the topic of arbitration, and consequently it waived its right to the alternative forum by first
seeking dispositive relief in this Court and then, months later, attempting to invoke its arbitration
right.
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III.
The defendant waived or forfeited its right to compel arbitration by waiting to file its
motion seeking to compel a transfer of the cases of the 18 plaintiffs to a nonjudicial forum until
after it actively had engaged with the merits of the case and filed a motion to dismiss challenging
all of the pleaded claims on the merits. That conduct plainly was inconsistent with reliance on the
arbitration agreements.
Accordingly, it is ORDERED that the motion to compel arbitration (ECF No. 46) is
DENIED.
s/David M. Lawson
DAVID M. LAWSON
United States District Judge
Dated: February 5, 2024
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