United States Court of Appeals Fifth Circuit F I L E D REVISED JULY 31, 2007 IN THE UNITED STATES COURT OF APPEALS April 10, 2007
FOR THE FIFTH CIRCUIT Charles R. Fulbruge III Clerk
No. 05-31070
BEVERLY COLE; ANITA S PERKINS; JEWELL P LOWE
Plaintiffs - Appellees
v.
GENERAL MOTORS CORP
Defendant - Appellant
Appeal from the United States District Court for the Western District of Louisiana, Lafayette
Before KING, GARZA, and OWEN, Circuit Judges.
KING, Circuit Judge:
Defendant-appellant General Motors Corporation appeals the
district court’s certification of a nationwide Rule 23(b)(3)
class of Cadillac DeVille owners who allege breach of express and
implied warranties. For the reasons that follow we REVERSE the
district court’s Ruling and REMAND for entry of an order denying
class certification.
I. FACTUAL AND PROCEDURAL BACKGROUND
General Motors Corporation (“GM”) manufactured and sold over
200,000 1998 and 1999 model year Cadillac DeVilles (“DeVilles”)
-1- in the United States. The DeVilles feature side-impact Air Bag
Systems and Side Impact Sensing Modules (“SISMs”), the latter of
which trigger inflation of the vehicle’s side impact air bags
under certain conditions. This class action centers on alleged
defects in the SISMs.
In September 2000, GM sent a voluntary recall notice to all
DeVille record owners and lessees explaining that GM
has decided that a defect which relates to motor vehicle safety exists and may manifest itself in your 1998 or 1999 model year Cadillac DeVille. [GM] ha[s] learned of a condition that can cause the side impact air bags in your car to deploy unexpectedly, without a crash, as you start your car or during normal driving.
GM indicated that it had received 306 reports of inadvertent
deployment out of approximately 224,000 affected vehicles. GM
further explained that it was working to obtain replacement SISMs
and that it would contact DeVille owners again when replacement
SISMs were available so that owners could take their DeVilles to
a dealership for the installation of two new SISMs. GM expected
those replacement SISMs to be available to a first group of
owners in April 2001. GM additionally provided safety
recommendations for the interim and a toll-free phone number for
customers who had questions.
Replacement of the SISMs was delayed because the
manufacturing line for the 1998 and 1999 SISMs had been
dismantled. GM did not have enough replacement parts to
-2- implement a general recall of all DeVilles until May 2001.
According to GM, it devised a two-part recall plan to overcome
this production problem. Using available components, GM produced
40,000 replacement SISMs by November 2000. GM referred to these
as “service build modules” and offered them to owners who called
the toll-free phone number and expressed particular concerns
about the recall. GM engaged a third-party vendor to manufacture
the remaining replacement systems, which were referred to as
“replacement build modules.”
Among the owners who received GM’s voluntary recall notice
were the named plaintiffs (and now class representatives) Beverly
Cole, Anita S. Perkins, and Jewell P. Lowe (collectively,
“plaintiffs”). Lowe is the mother of one of plaintiffs’ counsel,
Perkins is a paralegal for another of plaintiffs’ counsel, and
Cole is the paralegal’s cousin. Each purchased a 1998 or 1999
DeVille equipped with the SISMs at issue; however, the SISMs in
their vehicles were not among those that had deployed
inadvertently. Nevertheless, after receiving GM’s September 2000
letter, plaintiffs filed a class action suit against GM in
federal court in October 2000. In response, GM contacted
plaintiffs in November 2000 and offered to replace the SISMs in
their DeVilles immediately with replacements from GM’s stock of
service build modules. According to plaintiffs, they rejected
GM’s offer because GM did not extend the offer to all DeVille
owners and GM would not answer questions about the source of the
-3- parts, the number available, and whether the SISMs had been
properly tested. Plaintiffs later voluntarily dismissed this
first suit.
Plaintiffs filed the present class action suit in Louisiana
state court on December 18, 2000. GM removed the case on the
basis of diversity jurisdiction to the Western District of
Louisiana. On January 26, 2001, plaintiffs moved for class
certification pursuant to Rule 23(b)(3) of the Federal Rules of
Civil Procedure on behalf of “[a]ll persons and legal entities
who have acquired, whether by purchase, lease, donation or
otherwise . . . anywhere in the United States, 1998 or 1999
Cadillac Devilles equipped with side impact air bag systems and
side impact sensing modules.”1 Their motion for class
certification specifically excluded DeVille owners “who sustained
bodily injury or death as the result of the unexpected or
premature deployment of a side impact air bag.”
Briefing and discovery on class certification issues ensued.
Meanwhile, GM began a phased general recall of 1998 and 1999
DeVilles in May 2001 by sending recall letters to DeVille record
owners and lessees.2 Pursuant to this general recall, Lowe’s
1 Plaintiffs filed an Amended Motion for Class Certification on August 29, 2001. All references to plaintiffs’ “motion for class certification” are to the amended motion. 2 According to GM, letters were sent to the most recent DeVille purchasers first because the likelihood of inadvertent deployment decreased significantly over time.
-4- SISMs were replaced in September 2001, and Perkins’s and Coles’s
SISMs were replaced in October 2001. According to GM, it
completed mailing recall notices to all DeVille record owners and
lessees on December 28, 2001, and the majority of those owners
and lessees have had their SISMs replaced. Plaintiffs do not
dispute that GM’s recall is now complete.
In their First Amended and Restated Class Action Complaint
(“complaint”), plaintiffs allege that GM “promoted side impact
air bags, which included so-called [SISMs], as an added safety
feature” in its 1998 and 1999 DeVilles. Plaintiffs also allege
that GM “has . . . admitted that a defect exists in the 1998 and
the 1999 Cadillac Devilles which can cause the side impact air
bags to deploy unexpectedly, without a crash, when the car is
started or during normal driving.” Plaintiffs further assert
that GM “did not repair or replace the [SISMs] within a
reasonable time after the sale and/or lease of the subject
vehicles.” Based on these allegations, plaintiffs aver that GM
has failed to deliver to plaintiffs and the class members the thing purchased, has delivered a thing other than the thing purchased, has breached express and implied warranties of sale, has sold and delivered to plaintiffs and the class members a thing containing defects under the redhibition laws of the State of Louisiana and the comparable provisions of the Uniform Commercial Code, and/or has breached contracts with plaintiffs and the class members, and such conduct has damaged plaintiffs and the class members.
Plaintiffs seek recovery from GM for
-5- (1) return of the purchase or lease price, or, alternatively, for a reduction of the purchase or lease price, (i.e., the loss of the benefit of the bargain, or the difference between the value of the vehicle as delivered and the value it would have had if it had been delivered as warranted), and (2) for all other pecuniary and/or economic damages as permitted by the redhibition laws of the State of Louisiana and/or the comparable provisions of the Uniform Commercial Code, (3) punitive damages, if permitted, (4) interest at the legal rate from the date(s) of purchase, or alternatively, from the date of judicial demand, until paid, together with (5) reasonable attorney’s fees, and all costs.
Finally, both the complaint and the motion for class
certification assert that questions of law and fact common to the
class included:
(a) Whether GM breached its contractual or quasi contractual obligations to the class, including (without limitation), the warranty against vices and defects, the warranty of merchantability, and/or all express warranties and warranties implied by law;
(b) Whether the defective [SISMs] with which the 1998 and 1999 Cadillac Devilles are equipped diminish the usefulness or value of the vehicles;
(c) Whether the [SISMs] with which the 1998 and 1999 Cadillac Devilles are equipped are defective such that plaintiffs have been deprived of the difference in value between what they were promised and what they received;
(d) Whether the 1998 and 1999 Cadillac Devilles equipped with the aforementioned side impact airbag system are fit for their intended use; and
(e) Whether restitution or, alternatively,
-6- reduction, of the purchase and/or lease price, and other pecuniary and/or economic damages, under the redhibition laws of the State of Louisiana and/or the comparable provisions of the Uniform Commercial Code; punitive damages, if applicable; and/or attorney’s fees are available to plaintiffs and the class members.
For reasons that are not apparent, the district court
appointed a special master to review the motion for class
certification and other related documents.3 On September 27,
2002, the special master concluded that Rule 23's prerequisites
were satisfied and recommended certification of a Rule 23(b)(3)
class. GM objected to the special master’s recommendation in
October 2002, contending that plaintiffs lacked standing and that
plaintiffs failed to satisfy Rule 23's requirements of
predominance, superiority, adequacy, and typicality. Again for
reasons that are not apparent, the district court took nearly
three years to enter its Ruling. On August 4, 2005, the district
court accepted the special master’s recommendation, certified the
class,4 and named Cole, Perkins, and Lowe as class
3 The opinion of the special master indicates that the parties jointly moved to appoint a special master. No such motion appears in the record, and counsel stated at oral argument that the district court appointed the special master sua sponte. The parties were later ordered to enter into mediation with the special master serving as mediator. The district court ordered the parties to split equally the special master’s fees of $15,584.12. Neither party challenges these orders and therefore we express no opinion on the propriety of them. 4 The district court’s ruling defines the class as
-7- representatives.
GM now brings this interlocutory appeal under Rule 23(f),
asserting that the district court abused its discretion in
certifying a nationwide class of plaintiffs bringing claims under
the laws of fifty-one jurisdictions. GM asserts generally the
same arguments it made below.
II. STANDING
Before we reach the questions regarding the class
certification, we must resolve the standing question as a
threshold matter of jurisdiction. Rivera v. Wyeth-Ayerst Labs.,
283 F.3d 315, 319 (5th Cir. 2002). As a jurisdictional matter,
standing is a question of law that we review de novo. Bonds v.
Tandy, 457 F.3d 409, 411 (5th Cir. 2006). Facts expressly or
[a]ll persons and legal entities who have acquired, whether by purchase, lease, donation or otherwise (“Acquirers”), anywhere in the United States, 1998 or 1999 Cadillac DeVilles equipped with side impact air bag systems and side impact sensing modules (“Vehicle”). EXCLUDED from the class are all Acquirers who sustained bodily injury or death as a result of the unexpected or premature deployment of a side impact air bag; all persons who executed, before October 26, 2000, a release in favor of General Motors Corporation (“GM”), on account of an unexpected or premature deployment of a side impact air bag; commercial lessors and dealers; any Acquirer who acquired a Vehicle after the date of the voluntary recall; any Acquirer who acquired a Vehicle after the SISM/side impact air bag system had been repaired; counsel for GM; and counsel for plaintiffs and the class.
-8- impliedly found by the district court in the course of
determining jurisdiction are reviewed for clear error. Rivera,
283 F.3d at 319.
At an “irreducible constitutional minimum,” to have
standing, plaintiffs must establish three elements. Lujan v.
Defenders of Wildlife, 504 U.S. 555, 560 (1992). First,
plaintiffs must show that they have suffered “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.’” Id. (internal quotation marks
omitted) (quoting Whitmore v. Arkansas, 495 U.S. 149, 155
(1990)). Second, plaintiffs must establish “a causal connection
between the injury and the conduct complained of.” Id. Finally,
it must be likely that the injury “will be redressed by a
favorable decision.” Id. (quoting Simon v. E. Ky. Welfare
Rights Org., 426 U.S. 26, 38 (1976)).
GM argues that plaintiffs lack standing because the air bags
in their vehicles never deployed inadvertently, and therefore,
they cannot have suffered an injury in fact. They argue that
without actual deployment, plaintiffs’ injury is speculative
because plaintiffs can only claim that the SISMs in their
vehicles were potentially defective. Because plaintiffs’ air
bags never deployed inadvertently, GM contends that plaintiffs
advance the kind of “no-injury products liability” suit we
dismissed for lack of standing in Rivera, 283 F.3d at 320.
-9- In contrast, plaintiffs argue that even though they have not
suffered physical injury, they have suffered economic loss
satisfying the injury-in-fact requirement because the SISMs in
all DeVilles were defective at the moment of purchase.
Plaintiffs allege that they contracted to purchase DeVilles with
side impact air bags that would deploy only under certain
circumstances involving a side impact but that they received
DeVilles with air bags that could “deploy unexpectedly, without a
crash” as the car is started or during normal driving.
Plaintiffs further allege that GM promised to repair “any defect
related to materials or workmanship occurring during the Warranty
Period” within a “reasonable time,” but that after admitting the
defect, GM did not in fact repair or replace their SISMs within a
reasonable time. Plaintiffs claim that all DeVilles contained
defective SISMs at the moment of purchase and that therefore,
their injury was concrete at the moment they purchased their
DeVilles. They assert that their injury is that there is a
difference between what they contracted for and what they
actually received.
In Rivera, purchasers of a prescription drug sought recovery
of economic damages after learning that the manufacturer had
withdrawn the drug from the market because the drug had caused
liver damage to other patients. Rivera, 283 F.3d at 317. We
concluded that the Rivera plaintiffs lacked standing because they
described their claim as emanating from the drug manufacturer’s
-10- failure to warn and sale of a defective product, but the
plaintiffs did not claim that the drug had caused them any
physical or emotional injury. Id. at 319. Although the
plaintiffs quantified their injury in terms of economic damages,
we concluded that merely asking for economic damages failed to
establish an injury in fact because the plaintiffs never defined
the source of their economic injury. Id. The plaintiffs could
not assert benefit-of-the-bargain damages because they had no
contract with the manufacturer. Id. at 320. Due to these
factors, we determined that the injuries that the plaintiffs
alleged were suffered not by them, but rather, by the non-party
patients suffering liver damage. Id. at 319. And we referred to
the Rivera plaintiffs’ claim as a “no-injury products liability”
suit. Id. at 320.
Rivera is distinguishable from the instant case. In Rivera,
the plaintiffs sought damages for potential physical injuries;
because they never suffered actual physical injuries, they could
only allege injuries that were suffered by non-parties. The
Rivera plaintiffs did not assert economic harm emanating from
anything other than potential physical harm. Here, although
plaintiffs do not assert physical injuries (either their own or
those of other persons), they do assert their own actual economic
injuries. Plaintiffs allege that each plaintiff suffered
economic injury at the moment she purchased a DeVille because
each DeVille was defective. Plaintiffs further allege that each
-11- plaintiff suffered economic injury arising from GM’s unreasonable
delay in replacing their defective SISMs. Plaintiffs seek
recovery for their actual economic harm (e.g., overpayment, loss
in value, or loss of usefulness) emanating from the loss of their
benefit of the bargain. Notably in this case, plaintiffs may
bring claims under a contract theory based on the express and
implied warranties they allege. Whether recovery for such a
claim is permitted under governing law is a separate question; it
is sufficient for standing purposes that the plaintiffs seek
recovery for an economic harm that they allege they have
suffered. See Parker v. District of Columbia, No. 04-7041, slip
op. at 10 (D.C. Cir. March 9, 2007) (“The Supreme Court has made
clear that when considering whether a plaintiff has Article III
standing, a federal court must assume arguendo the merits of his
or her legal claim.” (citing Warth v. Seldin, 422 U.S. 490, 501-
02 (1975))). We therefore conclude that plaintiffs have
established a concrete injury in fact and have standing to pursue
this class action.
III. Class Certification
A. Background
Rule 23 of the Federal Rules of Civil Procedure requires
that several preliminary conditions be met before a proposed
class of plaintiffs may be certified. First, Rule 23(a) provides
-12- that certification is proper
only if (1) the class is so numerous that joinder of all members is impracticable, (2) there are questions of law or fact common to the class, (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class, and (4) the representative parties will fairly and adequately protect the interests of the class.
FED. R. CIV. P. 23(a). If Rule 23(a)’s prerequisites of
numerosity, commonality, typicality, and adequacy are met, then
the proposed class must additionally satisfy one of the three
provisions for certification under Rule 23(b). Plaintiffs here
sought certification of a Rule 23(b)(3) class, which requires
additional showings of predominance and superiority, i.e., that
“questions of law or fact common to the members of the class
predominate over any questions affecting only individual members,
and that a class action is superior to other available methods
for the fair and efficient adjudication of the controversy.”
FED. R. CIV. P. 23(b)(3).
B. Standard of Review
We review a district court’s decision to certify a class for
abuse of discretion. Spence v. Glock, 227 F.3d 308, 310-11 (5th
Cir. 2000); Castano v. Am. Tobacco Co., 85 F.3d 734, 740 (5th
Cir. 1996). Notwithstanding the district court’s broad
discretion to certify a class, it must do so within the bounds of
Rule 23. Spence, 227 F.3d at 310. The district court must
“rigorously analyze Rule 23's prerequisites before certifying a
-13- class.” Id. Failure to do so or the commission of a legal error
while doing so may be the basis of reversal. See, e.g., id. at
311 (concluding that because district court erred in its choice
of law analysis, it therefore abused its discretion); Castano, 84
F.3d at 740 (concluding that because district court erred in
predominance inquiry, it therefore abused its discretion).
Although “the strength of a plaintiff’s claim should not affect
the certification decision,” it is necessary for the district
court to go beyond the pleadings to determine whether the
requirements of Rule 23 have been met: “a court must understand
the claims, defenses, relevant facts, and applicable substantive
law in order to make a meaningful determination of the
certification issues.” Castano, 84 F.3d at 745. The court must
also consider “how a trial on the merits would be conducted” if
the class were certified. Id. at 740. The party seeking
certification has the burden of proof on Rule 23's prerequisites.
McManus v. Fleetwood Enters., Inc., 320 F.3d 545, 548 (5th Cir.
2003).
C. Analysis
GM argues that the district court abused its discretion in
concluding that plaintiffs satisfied the requirements of adequacy
and typicality under Rule 23(a) and predominance and superiority
under Rule 23(b)(3). Because we conclude that the district court
-14- abused its discretion in determining that the predominance
requirement was satisfied, we find it unnecessary to address all
of GM’s challenges.
To satisfy the predominance requirement, plaintiffs must
demonstrate that “questions of law or fact common to the members
of the class predominate over any questions affecting only
individual members.” FED. R. CIV. P. 23(b)(3). In a diversity
class action, as is the case here, inherent in the predominance
inquiry is a determination of which states’ substantive laws will
apply to the claims. This is because if multiple states’ laws
apply and those laws vary, the variations may impact whether
common issues of law and fact predominate among the class
members. The Rule 23(b)(3) certification inquiry must therefore
consider how “variations in state law affect predominance.”
Castano, 84 F.3d at 740.
Federal courts must apply the choice of law rules of the
forum state. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487,
496 (1941). Plaintiffs argued and the district court agreed that
under Louisiana’s choice of law rules, the laws governing
plaintiffs’ claims are “the laws of the state where the vehicle
is used by its owner or lessee and in where [sic] the contract of
repair is to be performed.” Thus, the laws of all fifty-one
jurisdictions (all fifty states plus the District of Columbia)
apply to this class action.
We have recognized that in a class action governed by the
-15- laws of multiple states, such as this one, “variations in state
law may swamp any common issues and defeat predominance.”
Castano, 84 F.3d at 741; accord Georgine v. Amchem Prods., Inc.,
83 F.3d 610, 627 (3d Cir. 1996) (holding that predominance was
defeated, in part, by the number of differing state legal
standards applicable to the controversy), aff’d, 521 U.S. 591,
624 (1997). The party seeking certification of a nationwide
class must therefore “provide an ‘extensive analysis’ of state
law variations to reveal whether these pose ‘insuperable
obstacles.’” Spence, 227 F.3d at 313 (quoting Walsh v. Ford
Motor Co., 807 F.2d 1000, 1017 (D.C. Cir. 1986)). And the
district court must then “consider how those variations affect
predominance.” Castano, 84 F.3d at 740. Failure to engage in an
analysis of state law variations is grounds for decertification.
See Castano, 84 F.3d at 741-44 (concluding that court abused its
discretion in certifying class where plaintiffs had failed to
properly address variations in state law such that conclusion of
predominance was based on speculation); Spence, 227 F.3d at 316
(concluding that court abused its discretion in certifying class
where plaintiffs had failed to carry their burden of providing an
extensive analysis of applicable law).
Plaintiffs assert that they have analyzed the applicable
laws of the fifty-one jurisdictions and they are “virtually the
same.” They conclude that predominance is unfettered in this
case because any variations in the substantive law applicable to
-16- this case are “not significant and would not affect the result.”
They further conclude that “neither complex jury instructions nor
multiple separate trials will be required to try the common
issues in this proceeding under the laws of the 51
jurisdictions.”
As support for their argument, plaintiffs provided the
district court with an extensive catalog of the statutory text of
the warranty and redhibition laws of the fifty-one jurisdictions
implicated in this suit; included in this catalog is the text of
the relevant provisions of the Louisiana Civil Code5 and the UCC
provisions of forty-nine states and the District of Columbia.6
Plaintiffs additionally provided an overview of textual
variations in the relevant UCC provisions as adopted by the fifty
jurisdictions. Finally, plaintiffs submitted a report from an
expert on contract law who opined, after analyzing some
variations, that “the few variations in the provisions of UCC
Article 2 relevant to this case are such that they do not affect
the result” and that Louisiana law “does not differ from Article
2 in a manner that would affect the result.”
GM, on the other hand, provided the district court with
5 Plaintiffs provide the statutory text, with commentary and case notes, for each of sections 2475, 2520, 2522, 2524, 2541, 2545, and 2548 of the Louisiana Civil Code. 6 Plaintiffs provide the statutory text, with commentary and case notes, for each of sections 313, 314, 316, and 714 of Article 2 of the UCC for each jurisdiction.
-17- extensive charts of authority concerning express and implied
warranty actions from the fifty-one jurisdictions showing, inter
alia, variations among the states in regard to reliance, notice
of breach, vertical privity, and presumptions of merchantability.
Despite GM’s showing, the district court concluded that applying
the laws of fifty-one jurisdictions would not make the class
unmanageable or cause individual issues to overcome common ones
because Louisiana law and the relevant UCC provisions adopted by
“virtually every other jurisdiction” provided similar protections
for express and implied warranties. The district court adopted
plaintiffs’ assertion that common issues predominated over
individual ones because all members of the class asserted the
same “benefit of the bargain” warranty claim based on the fact
that “they contracted for a vehicle that did not have a
potentially defective side airbag system, but instead received a
vehicle with a side airbag system that had the potential to
deploy inadvertently.”
We conclude that plaintiffs did not sufficiently demonstrate
the predominance requirement because they failed both to
undertake the required “extensive analysis” of variations in
state law concerning their claims and to consider how those
variations impact predominance. Cf. Spence, 227 F.3d at 313
(quoting Walsh, 807 F.2d at 1017). Plaintiffs’ assertion of
predominance relied primarily on the textual similarities of each
-18- jurisdiction’s applicable law and on the general availability of
legal protection in each jurisdiction for express and implied
warranties. Plaintiffs’ largely textual presentation of legal
authority oversimplified the required analysis and glossed over
the glaring substantive legal conflicts among the applicable laws
of each jurisdiction.
As we explain below, there are numerous variations in the
substantive laws of express and implied warranty among the fifty-
one jurisdictions that the plaintiffs failed to “extensively
analyze” for their impact on predominance. Although plaintiffs
assert that the laws of the fifty-one jurisdictions are
“virtually the same,” such that “no complex jury instructions” or
“multiple separate trials” would be necessary, we note that many
of the variations in state law raise the potential for the
application of multiple and diverse legal standards and a related
need for multiple jury instructions. For some issues, variations
in state law also multiply the individualized factual
determinations that the court would be required to undertake in
individualized hearings. Specifically, the laws of the
jurisdictions vary with regards to (1) whether plaintiffs must
demonstrate reliance, (2) whether plaintiffs must provide notice
of breach, (3) whether there must be privity of contract,
(4) whether plaintiffs may recover for unmanifested vehicle
defects, (5) whether merchantability may be presumed and
(6) whether warranty protections extend to used vehicles.
-19- Plaintiffs failed to articulate adequately how these variations
in state law would not preclude predominance in this case.
1. Reliance
To create an express warranty under UCC § 2-313, an
“affirmation of fact or promise” or a “description of the goods”
by the seller must be part of the “basis of the bargain.” UCC
§ 2-313. There is a clear split of authority among the
jurisdictions as to whether a buyer must show reliance on a
statement or representation for it to be considered part of the
“basis of the bargain.” See generally BARKLEY CLARK & CHRISTOPHER
SMITH, THE LAW OF PRODUCT WARRANTIES § 4:16 (2d ed. 2002) (identifying
three distinct approaches and collecting cases). Some
jurisdictions require a strict showing of reliance. See, e.g.,
Hendricks v. Callahan, 972 F.2d 190, 193 (8th Cir. 1992)
(applying Minnesota law); Overstreet v. Norden Labs., Inc., 669
F.2d 1286, 1289-91 (6th Cir. 1982) (applying Kentucky law); Speed
Fastners, Inc., v. Newsom, 382 F.2d 395, 397 (10th Cir. 1967)
(applying Oklahoma law); Hagenbuch v. Snap-On Tools Corp., 339 F.
Supp. 676, 680 (D.N.H. 1972) (applying New Hampshire law);
Coryell v. Lombard Lincoln-Mercury Merkur, Inc., 544 N.E.2d 1154,
1158 (Ill. App. Ct. 1989) (applying Illinois law). Other
jurisdictions have no reliance requirement. See, e.g., Winston
Indus., Inc. v. Stuyvesant Ins. Co., 317 So. 2d 493, 497 (Ala.
Civ. App. 1975) (applying Alabama law); Young & Cooper, Inc. v.
-20- Vestring, 521 P.2d 281, 291 (Kan. 1974) (applying Kansas law);
Villalon v. Vollmering, 676 S.W.2d 220, 222 & n.1 (Tex. App.
1984) (applying Texas law); Interco Inc. v. Randustrial Corp.,
533 S.W.2d 257, 261 (Mo. Ct. App. 1976) (applying Missouri law).
And still other jurisdictions have applied a rebuttable
presumption of reliance. See, e.g., Royal Bus. Machs., Inc. v.
Lorraine Corp., 633 F.2d 34, 44 (7th Cir. 1980) (applying Indiana
law); Sessa v. Riegle, 427 F.Supp. 760, 766 (E.D. Pa. 1977)
(applying Pennsylvania law), aff'd 568 F.2d 770 (3d Cir. 1978).
But plaintiffs ignored these differences. Although plaintiffs’
expert noted that some courts require reliance, instead of
analyzing the variations among the jurisdictions for their effect
on predominance, plaintiffs’ expert dismissed the variations,
contending that the promise of repair would always be relied upon
by a buyer because it “always accompanies the purchase or rental
of a new automobile.” Without any supporting legal authority,
plaintiffs’ expert opined: “Never was a presumption of reliance,
if reliance is necessary, more justified.” The district court
similarly concluded that it was reasonable to presume reliance on
the part of all purchasers in this case. In doing so, the court
distinguished law to the contrary from only one jurisdiction and
cited no authority to support the validity of this presumption
for the other jurisdictions.
Moreover, certain jurisdictions’ requirement that plaintiffs
show reliance as a condition for recovery greatly impacts the
-21- predominance inquiry: “the economies ordinarily associated with
the class action device” are defeated where plaintiffs are
required to bring forth individual proof of reliance. Patterson
v. Mobil Oil Co., 241 F.3d 417, 419 (5th Cir. 2001) (“Claims for
money damages where individual reliance is an element are poor
candidates for class treatment, at best.”). In this class of
more than 200,000 individuals, class members governed by the laws
of states requiring strict reliance would be required to bring
forth evidence of individualized reliance. This would require
the court to undertake an inquiry that would turn on facts
particular to each of those class members and raises the
potential that the trial would break down into multiple
individual hearings.
2. Notice of Breach
Section 2-607 of the UCC requires consumers wishing to bring
a breach of warranty claim to notify the seller of an alleged
breach “within a reasonable time.” U.C.C. § 2-607(3)(2).
Plaintiffs, however, did not address the UCC’s notice
requirement. In a fashion similar to its analysis of reliance,
the district court presumed, without analyzing the law of any
jurisdiction, that no jurisdiction would require that members of
the class give GM notice of the alleged breach because GM had
already acknowledged the problem.
We are not convinced, however, that all jurisdictions would
-22- adopt this presumption. We previously rejected the notion that
notice is useless where a breach is apparent to both parties,
observing that the notice required
is not of the facts, which the seller presumably knows quite as well as, if not better than, the buyer, but of buyer's claim that they constitute a breach. The purpose of the notice is to advise the seller that he must meet a claim for damages, as to which, rightly or wrongly, the law requires that he shall have early warning.
E. Air Lines, Inc. v. McDonnell Douglas Corp., 532 F.2d 957, 972
(5th Cir. 1976). State law varies on what constitutes reasonable
notice and to whom notice should be given, and other courts
considering the issue in the class certification context have
noted that these variations impact predominance. See, e.g.,
Compaq Computer v. Lapray, 135 S.W.3d 657, 673-75 (Tex. 2004)
(collecting cases and noting that variation in state law
regarding notice was among factors defeating predominance); Walsh
v. Ford Motor Co., 130 F.R.D. 260, 276 (D.D.C. 1990) (noting that
states vary in regard to the notice requirement). Given the
variations among the states regarding the notice requirement,
plaintiffs failed to adequately analyze the impact of these
variations on predominance.
3. Privity of Contract
Plaintiffs similarly failed to “extensively analyze” the
variations in the law of the fifty-one jurisdictions concerning
the requirement of privity of contract. There is a “sharp split
-23- of authority” as to whether a purchaser may recover economic loss
from a remote manufacturer when there is no privity of contract
between the parties. BARKLEY CLARK & CHRISTOPHER SMITH, THE LAW OF
PRODUCT WARRANTIES § 10:20 (2d ed. 2002) (“Many cases hold that [the
absence of] vertical privity is a bar to recovery of primary
economic loss against the remote manufacturer.”). The
requirement of privity is more strictly enforced in claims
involving implied warranties than those involving express
warranties. Id.
Plaintiffs’ expert briefly addressed the privity requirement
for express warranties in four states, concluding that any
variations among the jurisdictions were “minor” and opining that
regardless of variation, the privity requirement was inapplicable
to the facts of this case. Plaintiffs’ expert, however, entirely
failed to address the privity requirement for implied warranties.
The district court did not analyze the laws of any jurisdictions
regarding privity and instead “note[d] that there may be some
variations in the state laws with respect to this issue” but that
those differences “could be addressed through subclasses and the
normal course of individual trials that take place in large
litigations.” This is hardly the type of “extensive analysis” of
variations in law that is required prior to certification. Cf.
Castano, 84 F.3d at 742.
GM has provided its own catalog of state law variations
regarding privity, which indicates that a significant number of
-24- jurisdictions require vertical privity in an implied warranty
action for direct economic loss. See, e.g., Rhodes v. Gen.
Motors, 621 So. 2d 945, 947 (Ala. 1993); Rocky Mountain Fire &
Cas. Co. v. Biddulph Oldsmobile, 640 P.2d 851, 856 (Ariz. 1982);
Hauter v. Zogarts, 534 P.2d 377, 383 n.8 (Cal. 1975); Spolski
Gen. Contractor, Inc. v. Jett-Aire Corp. Aviation Mgmt. of Cent.
Fla., Inc., 637 So. 2d 968, 970 (Fla. Dist. Ct. App. 1994);
Bodymasters Sports Indus. v. Wimberley, 501 S.E.2d 556, 561 (Ga.
Ct. App. 1998); Puckett v. Oakfabco, Inc., 979 P.2d 1174, 1183
(Idaho 1999); Connick v. Suzuki Motor Co., Ltd., 656 N.E.2d 170,
180 (Ill. App. Ct. 1995), aff’d in part on other grounds, rev’d
in part on other grounds, 675 N.E.2d 584 (Ill. 1996). Other
jurisdictions, however, have eliminated the privity of contract
requirement and allow recovery of economic loss from remote
manufacturers. See, e.g., Morrow v. New Moon Homes, Inc., 548
P.2d 279, 289 (Alaska 1976); Nobility Homes of Tex., Inc. v.
Shivers, 557 S.W. 2d 77, 81 (Tex. 1977); Cova v. Harley Davidson
Motor Co., 182 N.W. 2d 800, 802 (Mich. Ct. App. 1970).
These state law variations are important, in part because
they would require separate jury instructions. Additionally, for
states that have a strict privity requirement for implied
warranty claims, each class member would be required to prove
individually that she purchased her DeVille from GM or its agent,
as opposed to an independent dealer or another individual.
-25- Therefore, the privity of contract inquiry would turn on facts
particular to each class member and thus would require
individualized hearings. Other courts have declined class
certification, at least in part because of variations in state
law regarding privity of contract. See, e.g., Chin v. Chrysler
Corp., 182 F.R.D. 448, 460 (D.N.J. 1998) (noting that plaintiffs
failed to show that state law differences regarding vertical
privity did not pose manageability problems); Walsh v. Ford Motor
Co., 130 F.R.D. at 272 (“Along with the various implied warranty
standards and other subsidiary issues . . . the numerous vertical
privity rules convince this Court that a predominance of common
issues are not present in this case.”).
4. Recovery for Unmanifested Vehicle Defects
Plaintiffs additionally failed to demonstrate predominance
because they did not address variations in state law regarding
recovery for an unmanifested product defect. The vast majority
of the members of this class never experienced any manifestation
of the alleged defect.7 But many jurisdictions do not permit the
recovery of economic loss in vehicle defect cases where the
vehicle has performed satisfactorily and has never manifested the
7 GM’s voluntary recall letter indicated that there were 306 reports of inadvertent deployment out of approximately 224,000 DeVilles. The class specifically excludes individuals who sustained bodily injury or death resulting from the inadvertent deployment of their air bags. It is conceivable that some individuals experienced inadvertent deployment but were not physically injured as a result. Therefore, they remain eligible for class membership.
-26- alleged defect. See, e.g., Briehl v. Gen. Motors Corp., 172 F.3d
623, 627-28 (8th Cir. 1999) (collecting cases and dismissing
claims brought under any theory for allegedly defective anti-lock
braking systems where plaintiffs’ brakes never malfunctioned or
failed).
Plaintiffs attempt to sidestep this glaring obstacle by
distinguishing their claim as one brought under a contract theory
(for breach of warranty) instead of products liability. This
maneuver does not escape the reality that some jurisdictions
require that the alleged defect manifest itself regardless of
whether the claim is brought under contract or tort. For
example, in Breihl, the plaintiffs alleged defective anti-lock
braking systems and sought recovery for overpayment of their
vehicles. The Eighth Circuit held that the plaintiffs had no
cognizable claims for breach of express and implied
warranties——or under any other theory——where the braking systems
had never malfunctioned or failed. 172 F.3d at 628 (citing to
decisions under New York, Texas, and South Carolina law).
Likewise, the Fourth Circuit, looking specifically at recovery of
diminished resale value, held that there is no recovery for
breach of implied warranties under South Carolina law where a
vehicle had never manifested the alleged defect. Carlson v. Gen.
Motors Corp., 883 F.2d 287, 297 (4th Cir. 1989). Other
jurisdictions have similarly held that actual manifestation of a
vehicle defect is a prerequisite to recovery under warranty
-27- theories. See In re Air Bag Prods. Liab. Lit., 7 F. Supp. 2d
792, 805 (E.D. La. 1998) (dismissing warranty claim based on
defective air bags brought under Texas law where plaintiffs never
alleged that the air bags functioned improperly); Weaver v.
Chrysler Corp., 172 F.R.D. 96, 100 (S.D.N.Y. 1997) (dismissing
warranty claim based on defective integrated child safety seats
brought under New York law where plaintiff had experienced no
problem with the child seat in his vehicle); Yost v. Gen. Motors
Corp., 651 F. Supp. 656, 658 (D.N.J. 1986) (dismissing claim for
breach of implied warranty of merchantability brought under New
Jersey law where plaintiff did not allege any actual mechanical
difficulties with his vehicle); Feinstein v. Firestone Tire &
Rubber Co., 535 F. Supp. 595, 603 (S.D.N.Y. 1982) (dismissing
warranty claims based on defective tires brought under New York
law where defect never manifested); Am. Suzuki Motor Corp. v.
Superior Court, 44 Cal. Rptr. 2d 526, 531 (Cal. Ct. App. 1995)
(dismissing warranty claim brought under California law where
defect never manifested).
Yet it is not clear that the actual manifestation of a
vehicle defect is a common prerequisite for recovery under
warranty law in all jurisdictions. See In re
Bridgestone/Firestone, Inc., 155 F. Supp. 2d 1069, 1099-1101
(S.D. Ind. 2001) (holding that manifestation of vehicle defect is
not required under Tennessee and Michigan law for recovery under
express and implied warranty theories), rev’d on other grounds,
-28- 288 F.3d 1012 (7th Cir. 2002); see also In re
Bridgestone/Firestone, Inc., 288 F.3d 1012, 1017 (7th Cir. 2002)
(contemplating that it is not clear whether bringing a defect-
based claim under contract law rather than tort avoids the
requirement that the product defect manifest itself but
commenting that “most states would not entertain” recovery under
a warranty theory where plaintiffs’ product had not failed).
Such variations, which are likely to preclude recovery for some
class members, further show that plaintiffs failed to carry their
burden of showing that common issues of law predominate.
5. Presumptions of Merchantability
Even among those jurisdictions that might allow recovery for
an unmanifested vehicle defect, there are variations in their
laws. In some jurisdictions, use of a vehicle for a certain
period of time without experiencing a defect gives rise to a
presumption that the vehicle is merchantable. See, e.g., Walsh,
130 F.R.D. at 273 (noting that prolonged use of a product raised
a presumption of merchantability in four states, which would
require an individualized inquiry into each state’s requirements
and each plaintiff’s circumstances). Plaintiffs failed to
address these presumptions, how they vary, and the potential
individualized legal questions they present.
6. Warranty Protections for Used Vehicles
Finally, jurisdictions vary in regard to whether an implied
warranty extends from a remote manufacturer to a purchaser of
-29- used goods. Compare Gen. Motors Corp. v. Halco Instruments,
Inc., 185 S.E.2d 619, 622 (Ga. Ct. App. 1971) (holding that
purchaser of used goods has no implied warranty claim against
manufacturer), with Int’l Petroleum Servs., Inc. v. S & N Well
Serv., Inc., 639 P.2d 29, 34 (Kan. 1982) (stating that the extent
of the implied warranty obligation in transactions involving used
goods depends on the circumstances of the transactions). The
class of plaintiffs here is composed of purchasers of both new
and used cars. Plaintiffs again failed to analyze the impact of
these variations in state law on the legal standards class
members would be held to, the jury instructions, and trial
management, (i.e., how the trial would be affected by the
possible need to conduct individualized inquiries into whether
class members bought used versus new cars).
IV. CONCLUSION
Plaintiffs have failed to adequately address, much less
“extensively analyze,” the variations in state law we discussed
above and the obstacles they present to predominance. The
district court was not in a position to determine that “questions
of law and fact common to the members of the class predominate”
in the vacuum created by plaintiffs’ omission. See Castano, 84
F.3d at 742-43 & n.15; Spence, 227 F.3d at 313. Given these
significant variations in state law and the multiple
individualized legal and factual questions they present, we
conclude that plaintiffs have failed to carry their burden in
-30- establishing predominance and that the district court abused its
discretion in certifying the class action.
Accordingly, the district court’s Ruling granting class
certification is REVERSED and the case is REMANDED for entry of
an order denying class certification. Costs shall be borne by
plaintiffs.
-31-