Plaintiffs from twenty-six states sought class certification GM for alleged defects in transmission systems, experiencing “shudder” and shift quality issues while driving, even when they brought their cars in to be repaired.  The District Court certified twenty-six State-wide sub-classes, and the U.S. Sixth Circuit affirmed.

With respect to Article III standing, the Court first addressed the question of whether all class members must actually experience an alleged defect in order to establish Article III injury-in-fact for a proposed class, and concluded that: “Unlike the TransUnion plaintiffs, all of the named putative class members have bought certain GM-manufactured cars that contain either an 8L45 or 8L90 transmission within the relevant timeframe, have experienced one or both of the issues with the 8L transmission in their car, and claim that they would not have bought their vehicle if they had known about these issues.”

With respect to the question of whether diminished value suffices to establish standing for Article III purposes, the Court concluded that “alleging overpaying for a defective product sufficiently provides the Plaintiffs with Article III standing.”

The Court then addressed the manifest defect requirements under substantive State law: “GM cites a number of primarily unpublished cases to support its claim that a manifest defect rule precludes subclasses from at least twelve states — Alabama, Arkansas, Delaware, Florida, Illinois, Maine, Minnesota, New Jersey, New York, Oklahoma, South Carolina, Texas, and Wisconsin — from being included in the class certification. However, the Plaintiffs in this case are distinguishable from the plaintiffs in that cited caselaw. In the present case, all of the named Plaintiffs have purchased cars from GM and alleged that they have actually experienced a shudder, shift quality issue, or both. By contrast, a number of the cases that GM cited in its briefs involve no-injury classes that were largely unable to demonstrate a present economic loss or were otherwise ineligible to bring a claim, independent of the manifest defect issue…. Further, the district court here concluded that the ‘manifest defect’ issue was more properly suited for a Rule 56 motion for summary judgment and did not need to be determined at the class certification stage, which is consistent with our class action precedent.”

Finally, the Court rejected numerous arguments that individual issues predominated over common issues, and therefore precluded certification:

(i) Defect Differences – “The district court inquired into and considered arguments about whether the shudder and shift quality issues were the result of one individual defect or two separate defects in the 8L transmissions. And in its order, the district court discussed the ample evidence in the record that would permit a reasonable jury to conclude that the shudder and shift quality issues were caused by a universal design flaw in the class vehicle transmissions…. If, later in the proceedings, it becomes apparent that the defects do not both stem from the 8L transmissions, or there are other issues that arise with considering the two defects in the same class action, the district court can divide the class into two subclasses. At this point in the proceedings, though, the district court did not abuse its discretion in considering the two defects stemming from the same transmissions and determining that they could be addressed in the same class action.”

(ii) Differences in Perception – “GM focuses on the fact that there are different makes, models, and years of cars included in the class definition, and that whether the class members notice, report, or care about either symptom that could be caused by the alleged ‘shudder’ and ‘shift quality’ defects rests on subjective perceptions and experiences. As to GM’s first point, the Plaintiffs’ claims, and the confines of the class that the district court certified, rest on alleged defects with the 8L45 and 8L90 transmissions, rather than on alleged issues with any particular make, model, and/or year of vehicle. As to GM’s second point, and as explained in detail in the district court’s grant of the class certification, the relevant question in resolving this issue is whether the alleged defect would have impacted an objective consumer’s decision to purchase the product. Exactly how, and to what extent, each of the individual Plaintiffs experienced a shudder or shift quality issue is irrelevant to the inquiry that the district court identified as central to the class action.”

(iii) Express Warranty – GM claims that seventeen of the twenty-six states included in the class definition do not permit GM to be held liable on an express warranty claim if a class member did not seek or give GM an opportunity to repair their vehicle. The District Court, however, concluded that the evidence showed that the problems with the 8L design cannot be fixed, or avoided for good, absent service actions that GM deemed too costly to deploy.

(iv) Reliance and/or Causation – The Court rejected, in a State-by-State analysis, the argument that classes or sub-classes could not be certified in twenty-one of the relevant States, based on a purported requirement to individually demonstrate causation or reliance for each member of the class or sub-class.

(v) Merchantability – GM argued that the District Court erred when it found that merchantability was an entirely objective inquiry across all of the certified states, because certain states reject individual implied warranty claims where a vehicle has been driven extensively without issue or with issues that do not render the vehicle inoperable. However, in Tyson Foods, the Supreme Court stated that predominance inquiries hinge on whether the issue is susceptible to generalized, class-wide proof. “The district court concluded that its review of the numerous jurisdictions hewed consistently to the view that ‘merchantability’ of an automobile requires a showing that the vehicle operates in a ‘safe condition’ or provides ‘safe transportation.’ Further, whether the errors posed by the 8L transmissions impacted the consumers’ safety or the vehicles’ intended use is a class-wide question, regardless of which way the decision maker eventually goes. GM cites an unpublished decision for the premise that Minnesota has rejected individual implied warranty claims when a vehicle has been driven without issue. However, GM does not explain why the safe-and-reliable transportation standard for merchantability would not be sufficiently addressed by a class-wide inquiry into the safety of the 8L transmissions.”

(vi) State Class Action Bars – GM claims that four states — Alabama, Arkansas, Louisiana, and Tennessee — have a “substantive” law in place that prohibits private class actions within the same statutory provision creating a private right of action for individual consumers.  Under Shady Grove, however, the Federal Rules of Civil Procedure are controlling with respect to procedural issues in Federal Court.

(vii) Former v. Current Owners – “GM contends that the district court overlooked the fact that some GM vehicle owners had been able to recoup their losses already, because they sold their cars and therefore passed any purported economic injury and damages to the next buyer. However, the district court accepted and considered a Diminished Value Model that showed those who resold could have done better had GM not sold a defective product. Further, we have stated that whether some Plaintiffs are unable to prove damages because they eventually recouped the withheld depreciation is a merits question, and the district court has the power to amend the class definition at any time before judgment.”

(viii) Arbitration – GM argued that certification was precluded because an unidentified but substantial minority of absent class members may be subject to arbitration agreements. The Court, however, found that GM had waived this argument by engaging in the litigation and seeking dispositive rulings from the Court on the plaintiffs’ claims.

 

Speerly v. General Motors, No.23-1940, 2024 WL 3964115 (6th Cir. Aug. 28, 2024).