Hamm v. Mercedes-Benz USA, LLC

• Court: District Court, N.D. California
• Decided: June 23, 2023
• Docket: 5:16-cv-03370
• Status: Unknown

Opinion

1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 SAN JOSE DIVISION 7 8 TERRY HAMM, et al., Case No. 5:16-cv-03370-EJD

9 Plaintiffs, ORDER DENYING MOTION FOR PARTIAL RECONSIDERATION 10 v.

11 MERCEDES-BENZ USA, LLC, Re: ECF No. 156 Defendant. 12

13 Before the Court is Plaintiff Terry Hamm’s motion for partial reconsideration of the 14 Court’s order denying his motion for class certification, ECF No. 124 (“Class Certification Order” 15 or “CC Order”). Hamm argues that the Court erred in determining that he is not typical of the 16 class and that individual questions of reliance predominate common questions for his California 17 Consumers Legal Remedies Act (“CLRA”) claim. See ECF No. 156 (“Mot.”). Upon review of 18 the parties’ reconsideration briefing, the Class Certification Order, and the parties’ class 19 certification briefing and evidence, the Court DENIES the motion for partial reconsideration. The 20 Court also clarifies for the parties that this denial, and the Court’s denial of class certification in its 21 Class Certification Order, are without prejudice to Hamm’s ability to renew his motion for class 22 certification if he can remedy the deficiencies that the Court has identified. 23 I. BACKGROUND 24 The Court recounted the full factual background of this case in its Class Certification 25 Order, CC Order at 2–3, and therefore only summarizes Hamm’s claims and allegations here. In 26 short, Hamm alleges omissions against Defendant Mercedes-Benz USA, LLC (“MBUSA”). 27 Specifically, he alleges that MBUSA equipped certain of the vehicles it manufactured with a 1 defective automatic transmission—the 722.9 7G-Tronic transmission—and that MBUSA knew of 2 the defect but failed to disclose it in violation of the CLRA and the California Unfair Competition 3 Law (“UCL”). Second Am. Compl. (“SAC”) ¶¶ 1, 30–42, ECF No. 34. 4 On April 2, 2021, the Court denied Hamm’s motion for class certification. See CC Order. 5 In so ruling, the Court found that Hamm had met his burden to show numerosity, commonality, 6 and adequacy under Federal Rule of Civil Procedure 23(a). Id. at 5–9. It also found that, under 7 Federal Rule of Civil Procedure 23(b)(3), individual questions did not predominate for purposes of 8 proving a common defect, MBUSA’s knowledge of the alleged defect, and for calculation of 9 damages. Id. at 14–20. However, the Court narrowed Hamm’s proposed class definitions on 10 ascertainability grounds, id. at 9–13, and concluded that a class could not be certified because 11 Hamm was not typical and individual questions respecting reliance predominated over common 12 questions. Id. at 7–8, 20–23. And because Hamm failed to satisfy predominance under Rule 13 23(b)(3), the Court did not reach the issue of superiority. See generally id. 14 Subsequently, Hamm moved for leave to file a motion for partial reconsideration of the 15 Class Certification Order with regard to his UCL claim. ECF No. 125. The Court granted leave, 16 and Hamm filed his motion for partial reconsideration. ECF Nos. 128, 129. While this motion for 17 reconsideration was pending, MBUSA moved for judgment on the pleadings as to Hamm’s UCL 18 claim. ECF No. 130. The Court granted MBUSA’s motion, dismissing Hamm’s UCL claim 19 because Hamm sought equitable relief via his UCL claim despite having an adequate remedy at 20 law. ECF No. 148. As a result, Hamm’s motion for partial reconsideration on his UCL claim was 21 mooted. Id. 22 Following this decision, Hamm once more moved for leave to file a motion for partial 23 reconsideration of the Court’s denial of class certification, this time with regard to his CLRA 24 claim. ECF No. 154. The Court again granted leave, and Hamm’s second motion for partial 25 reconsideration is now before the Court. ECF Nos. 155, 156. 26 II. LEGAL STANDARD 27 Motions for reconsideration of interlocutory orders are governed by Civil Local Rule 7-9. 1 Barker v. Insight Glob., LLC, Case No. 16-cv-07186-BLF, 2019 WL 176260, at *2 (N.D. Cal. Jan. 2 11, 2019). Local Rule 7-9 provides three grounds for reconsideration: “(1) a material difference 3 in fact or law exists from that which was presented to the court, which, in the exercise of 4 reasonable diligence, the moving party did not know at the time of the order for which 5 reconsideration is sought; (2) the emergence of new material facts or a change of law occurring 6 after the time of such order; or (3) a manifest failure by the court to consider material facts or 7 dispositive legal arguments.” Id. (citing Civil L.R. 7-9(b)). 8 III. DISCUSSION 9 A. Typicality 10 Federal Rule of Civil Procedure 23(a)(3) requires a representative party to demonstrate that 11 her “claims or defenses . . . are typical of the claims or defenses of the class” before a court may 12 grant certification. Fed. R. Civ. P. 23(a)(3). To satisfy typicality, the class representative’s claims 13 and defenses need only be “reasonably coextensive” with those of absent class members and “need 14 not be substantially identical.” Just Film, Inc. v. Buono, 847 F.3d 1108, 1116 (9th Cir. 2017) 15 (quoting Parsons v. Ryan, 754 F.3d 657, 685 (9th Cir. 2014)). Nonetheless, certifying a class is 16 not appropriate when “there is a danger that absent class members will suffer [because] their 17 representative is preoccupied with defenses unique to it.” Hanon v. Dataproducts Corp., 976 F.2d 18 497, 508 (9th Cir. 1992) (citation omitted). 19 At issue in this motion for reconsideration is the Court’s conclusion that Hamm is atypical 20 because he is subject to the unique defense of non-reliance. CC Order at 7–8. To prove his CLRA 21 claim, Hamm must demonstrate actual reliance on MBUSA’s alleged omission. Daniel v. Ford 22 Motor Co., 806 F.3d 1217, 1225 (9th Cir. 2015). That is, he must show “that, had the omitted 23 information been disclosed, [he] would have been aware of it and behaved differently.” Id. 24 (quoting Mirkin v. Wasserman, 5 Cal. 4th 1082, 1093 (1993)). One way Hamm could establish 25 reliance is to prove that the alleged omission is material, thereby creating a presumption of 26 reliance. Id. However, like most presumptions, the presumption of reliance is rebuttable. 27 Lambert v. Nutraceutical Corp., No. CV 13-05942-AB (Ex), 2020 WL 12012559, at *8 (C.D. Cal. 1 Jan. 8, 2020). 2 In its Class Certification Order, the Court found that Hamm was subject to a non-reliance 3 defense because he never interacted with MBUSA or reviewed any materials from MBUSA. CC 4 Order at 8. Thus, “Hamm’s awareness of any potential disclosure by MBUSA of the alleged 5 defect may differ from the class members he seeks to represent.” Id. Hamm makes two 6 arguments for why the Court’s analysis was erroneous. First, he argues that “the defense of non- 7 reliance is not a basis for denial of class certification.” Mot. at 8 (quoting Hanon, 976 F.2d at 8 509). Second, he contends that the Court failed to properly consider the fact that he claims 9 MBUSA is liable for a wholesale omission. Id. at 8–9. From his perspective, this means that none 10 of MBUSA’s statements contained disclosures, making the question of his exposure to those 11 statements immaterial. Id. Neither argument is availing. 12 The Court begins with Hamm’s argument that a non-reliance defense does not defeat 13 typicality. Although the language he quoted from Hanon can be read to support his argument, in 14 context, it is clear the Hanon court did not go so far. Hanon relied on three citations to support its 15 statement that “non-reliance is not a basis for denial of class certification.” 976 F.2d at 509. Each 16 explained that courts should not resolve the merits of claims on a certification motion, not that 17 reliance falls outside the scope of a typicality analysis. For example, the footnote cited from 18 Blackie v. Barrack, 524 F.2d 891, 901 n.17 (9th Cir. 1975), provided that “the court may not put 19 the plaintiff to preliminary proof of his claim.” Likewise, In re Pizza Time Theatre Securities 20 Litigation, 112 F.R.D. 15, 22 (N.D. Cal. 1986), stood for the proposition that “the merits of the 21 case [] cannot be considered in a certification motion,” and Eisen v. Carlisle & Jacquelin, 417 22 U.S. 156, 177–78 (1974), stood for the proposition that “a motion for class certification is not the 23 appropriate point at which to resolve the merits of a plaintiff’s claim.” Hanon, 976 F.2d at 509. 24 Indeed, Hanon itself involved a reliance challenge to typicality and held the class representative to 25 be atypical on that basis. Id. at 508–09 (observing that the class representative’s “reliance on the 26 integrity of the market would be subject to serious dispute as a result of his extensive experience 27 in prior securities litigation, his relationship with his lawyers, his practice of buying a minimal 1 number shares of stock in various companies, and his uneconomical purchase of only ten shares of 2 stock in Dataproducts”). As such, Hanon says no more than that courts may not decide the merits 3 of a case at the class certification stage, and it was therefore appropriate for the Court to assess 4 reliance when analyzing typicality. 5 Hamm’s next argument about the omission-based nature of his CLRA claim is no more 6 convincing. He relies principally on Doyle v. Chrysler Group LLC, No. SACV 13-00620 JVS 7 (ANx), 2014 WL 3361770 (C.D. Cal. July 3, 2014), to argue that “[u]nlike a case of a 8 misrepresentation, a wholesale omission CLRA case does not raise a reliance-based typicality 9 bar.” Mot. at 9.1 Even though Doyle lends support to that position, holding that the “argument 10 that [plaintiff] failed to read any materials about the [allegedly defective part] does not negate 11 reliance,” the Court declines to follow its reasoning. 2014 WL 3361770, at *5. That is because 12 Doyle is at odds with current Ninth Circuit precedent. In Daniel, the Ninth Circuit held that the 13 reliance requirement of Mirkin—i.e., the requirement for a plaintiff to show that, had the omitted 14 information been disclosed, she would have been aware of it and behaved differently—applies to 15 CLRA claims. 806 F.3d at 1225. Doyle, to the contrary, concluded that Mirkin does not apply to 16 CLRA claims. Doyle, 2014 WL 3361770, at *6. So, Doyle assumed that the only way to rebut the 17 presumption of reliance was to either challenge the plaintiff’s allegations of defect or allegations 18 of omission; it did not consider whether Mirkin allows a defendant to challenge the presumption 19 by showing that a plaintiff would not have been aware of any disclosure. Id. While this approach 20 is understandable insofar as Daniel was decided after Doyle, the result is that Doyle is inconsistent 21 with current precedent. 22 Applying Mirkin to the facts of this case, the Court finds that reconsideration is not 23 warranted. Even assuming that MBUSA’s alleged omission is material and that the presumption 24 of reliance applies, MBUSA has put forward sufficient evidence rebutting that presumption to 25 1 Hamm’s other two cited authorities are inapposite because they do not deal with the question of 26 whether specific evidence can be used to rebut the presumption of reliance as to a particular plaintiff. See Alger v. FCA US LLC, 334 F.R.D. 415, 427 (E.D. Cal. 2020) (predominance 27 analysis); Banh v. Am. Honda Motor Co., Inc., No. 2:19-CV-05984-RGK-AS, 2020 WL 4390371, 1 demonstrate that non-reliance is a substantial defense against Hamm. In particular, it has offered 2 evidence that Hamm purchased his class vehicle from a Toyota dealership rather than a Mercedes- 3 Benz dealership, and that prior to purchase he did not view any MBUSA brochures or 4 advertisements, the MBUSA website, the owner’s manual, or the warranty booklet. Decl. of Eric 5 J. Knapp, Ex. 2 (“Hamm Dep.”), at 32:5–33:5, 58:23–59:24, 63:19–64:12, 66:19–67:10, ECF No. 6 100-3. Put another way, evidence shows that, before purchasing his vehicle, Hamm neither 7 interacted with any MBUSA representative nor accessed any materials from MBUSA. In the 8 absence of any contact with MBUSA’s statements or representatives, it can hardly be said that 9 “had the omitted information been disclosed [Hamm] would have been aware of it.” Mirkin, 5 10 Cal. 4th at 1093. Although Hamm may be able to argue that he could have learned of disclosures 11 through a third-party source rather than directly from MBUSA or its representatives, MBUSA has 12 nonetheless presented enough evidence rebutting the presumption of reliance that Hamm will 13 likely be “preoccupied with [non-reliance] defenses unique to [him].” Hanon, 976 F.2d at 508. 14 To be clear, the Court does not hold that Mirkin imposes any affirmative duty to 15 investigate on CLRA plaintiffs. It finds only that, in these particular circumstances where the 16 plaintiff did not have any exposure to the defendant’s representatives or statements, there is a 17 substantial enough question of reliance that the plaintiff is not typical of the class. Accordingly, 18 the Court DENIES Hamm’s motion for reconsideration.2 19 B. Predominance 20 Because the Court has found that Hamm is atypical, it need not address Hamm’s argument 21 that the Class Certification Order erred in its analysis of reliance for predominance purposes. 22 However, in the interest of judicial efficiency, the Court makes three brief observations to guide 23 the parties in the event that Hamm renews his motion for class certification. 24

25 2 Hamm argues that, in the hearing for his first motion for partial reconsideration on his UCL claim, the Court admitted that it erred in its analysis of reliance. Mot. at 4. However, the Court’s 26 statements were directed only to Hamm’s UCL claim, not his CLRA claim. And although the Court later asked Hamm whether he could have moved for reconsideration on the Court’s analysis 27 of his CLRA claim, such a spontaneous question, made without the benefit of briefing, is not a 1 First, although MBUSA argues that putative class members could have seen disclosures 2 present in owner’s manuals prior to purchase, and that there must therefore be individualized 3 inquiries into whether class members did so, it has provided no evidence that class members did so 4 in any significant numbers. Without such evidence, it is difficult for the Court to conclude that 5 individual questions would predominate—if a negligible number of class members viewed the 6 owner’s manual, there would be little need to ask individualized questions about exposure to the 7 owner’s manual. See Williams v. Apple, Inc., 338 F.R.D. 629, 648 (N.D. Cal. 2021) (“The Ninth 8 Circuit held that unless defendant had presented evidence that an affirmative defense would 9 require non-speculative individualized inquiries, the district court lacked discretion to deny class 10 certification based on that affirmative defense.”) (cleaned up) (citing True Health Chiropractic, 11 Inc. v. McKesson Corp., 896 F.3d 923, 932 (9th Cir. 2018)); see also Daniel, 806 F.3d at 1226 n.6 12 (“It would have been unlikely for Plaintiffs to review warranty, maintenance, and owner’s 13 booklets that came with the new vehicles prior to purchase. Consequently, those materials cannot 14 be considered in determining whether Plaintiffs would have been aware of a disclosure.”). 15 Second, even assuming that there were a substantial enough number of class members who 16 read the owner’s manuals to warrant asking individual questions on the issue, the owner’s manuals 17 likely did not contain a relevant disclosure. The purported disclosures that MBUSA relies on to 18 challenge reliance each discuss the presence of a “limp mode”:

19 If vehicle acceleration worsens or the transmission no longer shifts, the transmission is most likely operating in limp home (emergency 20 operation) mode. In this mode only second gear and reverse gear can be activated. 21 22 E.g. Expert Rep. of Kevin Lane Keller ¶ 21, ECF No. 100-10. However, this description of limp 23 mode does not disclose any defect in the transmission of Mercedes-Benz vehicles, even though 24 Hamm’s theory of liability is that MBUSA omitted information about such defect. SAC ¶ 1. 25 MBUSA points out that the Court previously held that the disclosures need not be about the 26 alleged defect, only that they reveal “limitations exist.” Opp’n to Mot. at 14, ECF No. 157. In so 27 holding, the Court relied on Mazza v. American Honda Motor Co., 666 F.3d 581 (9th Cir. 2012), 1 overruled on other grounds by Olean Wholesale Grocery Coop., Inc. v. Bumble Bee Foods LLC, 2 31 F.4th 651 (9th Cir. 2022), and Philips v. Ford Motor Co., No. 14-cv-02989-LHK, 2016 WL 3 7428810 (N.D. Cal. Dec. 22, 2016). CC Order at 22–23. 4 On further review, the Court is doubtful that Mazza is applicable in this circumstance. The 5 Mazza plaintiffs’ theory was that the defendant car manufacturer omitted information about the 6 limitations of the braking systems installed in certain cars. 666 F.3d at 585. In that context, a 7 disclosure that “limitations exist” would be a disclosure of the very fact that was allegedly 8 omitted. Here, though, it was a transmission defect that was allegedly omitted, not inherent 9 limitations in the functions of the transmission. And the Court does not read Mazza to say that the 10 disclosure of functional limitations is equivalent to the disclosure of a defect. See Mazza, 666 11 F.3d at 595–96. For this reason, the Court is also reluctant to follow Philips, which relied on 12 Mazza’s “limitations” language and therefore conflated Mazza’s omission of limitations theory 13 with an omission of defect theory. 2016 WL 7428810, at *1, 16 (noting that plaintiffs alleged 14 omission of a defect but nevertheless applying Mazza). 15 Finally, it is not obvious to the Court that it is appropriate to group individuals who 16 purchased their vehicles from MBUSA or an authorized dealership with those individuals who 17 purchased from unaffiliated dealerships or other third parties. While the presumption of reliance 18 may be proper as to those who purchased from MBUSA because they would clearly have been 19 exposed to MBUSA’s statements, it is less clear that the presumption of reliance is appropriate as 20 to those who purchased used vehicles from third parties, as Hamm’s situation illustrates. 21 IV. CONCLUSION 22 For the reasons stated above, the Court DENIES Hamm’s motion for reconsideration. If 23 there was any confusion on the matter, the Court clarifies that its denial of class certification is 24 without prejudice, and Hamm may renew his motion for class certification after addressing the 25 deficiencies identified in this Order and the Class Certification Order. If Hamm renews his 26 motion, the parties are advised that they should not reiterate arguments on the elements of class 27 certification or other issues on which the Court already found in favor of Hamm, unless there has 1 been an intervening change in law or further factual developments relevant to those elements or 2 || issues. 3 The parties shall meet and confer regarding the schedule for this case and present the Court 4 || with a proposed schedule within ten (10) days of this Order. 5 IT IS SO ORDERED. 6 Dated: June 23, 2023 7 8 EDWARD J. DAVILA 9 United States District Judge 10 11 12

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Z 18 19 20 21 22 23 24 25 26 27 28 Case No.: 5:16-cv-O3370-EID