In re Takata Airbag Products Liability Litigation

Citations: 193 F. Supp. 3d 1324; 2016 U.S. Dist. LEXIS 78662; 2016 WL 3388713Docket: MDL No. 2599; Master File No. 15-2599-MD-MORENO 14-24009-CV-MORENO

Court: District Court, S.D. Florida; June 14, 2016; Federal District Court

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Mazda Motor of America, Inc. filed a Motion to Dismiss against allegations in a multidistrict litigation concerning economic loss and personal injury related to Takata airbags. The Court, presided over by Judge Federico A. Moreno, reviewed Mazda's Motion, the Plaintiffs’ Omnibus Response, and Mazda’s Reply, as well as arguments presented during an oral hearing on October 23, 2015. The litigation consolidates claims from consumers of vehicles equipped with Takata airbags containing ammonium nitrate, involving multiple automotive manufacturers, including Mazda.

The Complaint alleges 11 specific counts against Mazda, which include violations of the Magnuson-Moss Warranty Act, fraudulent concealment, breach of the implied warranty of merchantability under the Song-Beverly Consumer Warranty Act, unjust enrichment, violations of California's unfair competition law, California’s Consumer Legal Remedies Act, California’s false advertising law, negligent failure to recall, and two counts related to Florida and Alabama state laws regarding deceptive trade practices and implied warranty breaches. The claims stem from purchases made by three Named Plaintiffs: Justin Birdsall (Pennsylvania), Crystal Pardue (Alabama), and Mickey Vukadinovic (Florida), with their cases having been filed directly into the MDL or transferred from other jurisdictions.

A pleading must contain a short and plain statement demonstrating the pleader's entitlement to relief, as per Federal Rule of Civil Procedure 8(a)(2). To avoid dismissal, a complaint must present sufficient factual content to establish a plausible claim, relying on Ashcroft v. Iqbal and Bell Atlantic Corp. v. Twombly, which emphasize that detailed factual allegations are not mandatory, but mere labels or a formulaic recitation of elements are insufficient. When claims involve fraud, Federal Rule 9(b) requires particularity regarding circumstances of the fraud, while mental states like malice or intent can be stated generally. This specificity protects defendants from vague allegations.

In the analysis section, the plaintiffs claim Mazda violated three California laws: Unfair Competition Law, Consumer Legal Remedies Act, and False Advertising Law. Mazda contends these claims should be governed by the laws of the states where the vehicles were purchased rather than California law, and the Court concurs. Although plaintiffs argue that the choice of law issue is premature, the Court finds it can be resolved without additional factual development. Generally, a federal court applies the forum state's choice of law rules, but in the case of multidistrict litigation under 28 U.S.C. § 1407, the transferee court must apply the choice of law that would have been applied had the case not been transferred. This necessitates an independent choice of law determination for all states involved. The use of a consolidated complaint does not alter this framework unless the parties agree, and such complaints serve as procedural tools rather than altering substantive rights.

Plaintiffs argue that the filing of a consolidated complaint permits the Court to disregard the choice of law rules of the transferor courts in favor of Florida’s rules. However, Gelboim v. Bank of Am. Corp. does not specifically address choice of law issues; it focused on the appealability of a dismissal within a multidistrict litigation (MDL) context. The Supreme Court held that cases within an MDL retain their separate identities, making a dismissal of one case appealable under § 1291. The Court noted that Section 1407 pertains to individual actions rather than a collective multidistrict "action." Furthermore, while parties may file a "master complaint" that can merge actions for administrative purposes during MDL pretrial proceedings, no true merger occurs if the master complaint serves merely as a summary of claims without legal effect. The unclear aspects of the Court's footnote 3 do not justify ignoring the transferor courts' conflict of law rules. Cases unresolved in the MDL must return to their original courts, and applying Florida’s rules universally would disturb the substantive rights of parties as determined by the transferor courts. Thus, the Court concludes that it must adhere to the choice of law rules of the transferor courts rather than solely applying Florida’s rules.

Florida’s choice of law rules govern Birdsall’s claims as they were filed in the Southern District of Florida, while Alabama’s rules apply to Pardue’s claims due to her transfer from the Northern District of Alabama, and Pennsylvania’s rules apply to Vukadinovic’s claims following his transfer from the Eastern District of Pennsylvania. Florida utilizes the "most significant relationship" test for tort actions, assessing four primary contacts: (1) location of the injury, (2) location of the conduct causing the injury, (3) parties' domicile and business locations, and (4) the center of the parties' relationship. The injury location is typically the most critical factor unless special circumstances dictate otherwise.

Pennsylvania employs a "flexible rule" that merges the significant contacts analysis with a governmental interest analysis, allowing the jurisdiction most interested in the issue to dictate the applicable law. This approach assesses the underlying policies and interests relevant to the case. Alabama adheres to the lex loci delicti rule, which mandates that the law of the place where the tort occurred governs the case.

A key aspect of conflict of law analysis is determining whether an actual conflict exists. A false conflict arises when state laws are substantially similar, allowing the court to apply the law of each state without further conflict analysis. Conversely, a true conflict occurs when multiple states have a legitimate interest in the facts of the case, and their laws differ, potentially leading to different outcomes.

There exists a conflict of law regarding the applicability of California law to the claims at hand, as California recognizes causes of action not acknowledged by Florida, Pennsylvania, and Alabama. The Court determines that, according to the choice of law rules of these states, California law should not apply since none of the Named Plaintiffs reside in California or purchased their vehicles there, nor did they encounter any deceptive advertisements in California. The only connection to California is Mazda's headquarters, which does not outweigh the interests of the other states where the vehicles were purchased and where the alleged harm occurred.

Specifically, Pennsylvania law applies to Birdsall's claims due to his vehicle purchase in Pennsylvania. Vukadinovic's claims are governed by Florida law since he bought his vehicle in Florida and resides there. Pardue's claims fall under Alabama law, as the harm occurred in Alabama where she purchased her vehicle. Consequently, the Court grants Mazda’s Motion to dismiss the claims based solely on California law, resulting in the dismissal of Counts 28, 29, and 30. However, Count 26, concerning the violation of California’s Lemon Law, is pleaded in the alternative under the laws of the states where the plaintiffs reside. The Court denies the Motion regarding Count 26 since the plaintiffs have provided an alternative basis for their claim.

Mazda contends that all damage claims should be dismissed due to the plaintiffs' failure to allege manifestation of a defect. Mazda argues that the plaintiffs’ vehicles have not shown any such defects, aligning with the legal precedent that requires manifestation for a defect. In response, the plaintiffs assert that the airbags have been defective from installation, citing inherent dangers associated with the propellant used by Takata, which has resulted in fatalities and injuries linked to the Inflator Defect.

At the motion to dismiss stage, the Court acknowledges Plaintiffs' claims regarding the instability of ammonium nitrate used as a propellant in Takata airbags, asserting that this instability raises concerns about the effectiveness of the airbags in protecting occupants. Plaintiffs contend that the unpredictability of the airbags' performance could create a more hazardous situation than having no airbags. The Court notes that, for the purpose of this motion, it accepts Plaintiffs' allegations of a uniform defect as true.

Mazda asserts that Plaintiffs have not sufficiently demonstrated its knowledge of the inflator defect at the time of sale, arguing that the claims relying on constructive knowledge should be dismissed. Plaintiffs rely on two theories: (1) Mazda "knew or should have known" about the defect due to the volatile nature of ammonium nitrate, and (2) Mazda had a duty to investigate its vehicles following a recall by Honda in 2008. The Court finds that Plaintiffs have adequately alleged Mazda's knowledge of the defect to meet the pleading requirements of Rule 9(b). 

Specifically, Plaintiffs allege that Mazda was aware of the use of volatile ammonium nitrate in the inflators and that the manufacturer reviewed the designs with Takata prior to approving the airbags. Furthermore, Plaintiffs cite Takata's expressed concerns over ammonium nitrate in patent documents from 1995 and 1999, and note that ammonium nitrate is known to be an industrial explosive. Consequently, the Court concludes that Plaintiffs have plausibly established that Mazda knew or should have known about the inflator defect, deferring further investigation into Mazda's knowledge and duty to a later stage in the proceedings.

Count 25 addresses a claim for fraudulent concealment against Mazda by three Named Plaintiffs, specifically Pardue. Mazda seeks dismissal of this claim, arguing four key points: (1) the Plaintiffs have not sufficiently alleged Mazda's knowledge of a defect; (2) they fail to meet Rule 9(b)'s heightened pleading requirements, lacking specific statements made by Mazda to Pardue; (3) they do not specify what Mazda gained from Pardue's vehicle purchase; and (4) Mazda had no duty to disclose information regarding Takata airbags to Pardue, a used car buyer. The Court counters that Plaintiffs have indeed adequately alleged Mazda's knowledge and have provided sufficient detail regarding the fraudulent concealment claim. The Court affirms that Plaintiffs have articulated the necessary elements of their omission claim, which does not rely on a specific statement but rather on a failure to disclose critical information regarding a dangerous defect. 

Under Alabama law, the elements of fraudulent concealment require: (1) a duty to disclose; (2) concealment of material facts; (3) inducement of the plaintiff's action; and (4) injury to the plaintiff. Mazda's primary contention relates to the duty to disclose, referencing arguments made by Subaru of America, asserting that no duty existed since Pardue purchased her vehicle from a third party. However, a duty may arise from "special circumstances," assessed through six factors, including the relationship between parties and their relative knowledge. Additionally, if a defendant has no duty to speak but chooses to do so, they must provide complete and truthful information, without concealing material facts.

Plaintiffs allege that Mazda failed to disclose the Inflator Defect, making incomplete representations about the safety and reliability of its vehicles. Specifically, they claim that Mazda marketed its cars in 2004 and 2005 as having "inspiring performance" and "reassuring safety features," which contradicted the undisclosed defect. At this motion to dismiss stage, the Court finds that Plaintiffs have sufficiently alleged Mazda’s duty to disclose these material facts. However, if Mazda lacked knowledge of the defect at the time of the statements, it would not have had such a duty, a determination appropriate for later stages of the case.

Regarding Vukadinovic’s claim for Fraudulent Concealment under Florida Law, Mazda argues for dismissal based on four points: (1) the economic loss rule bars recovery, (2) insufficient allegations of Mazda's knowledge of the defect, (3) failure to meet Rule 9(b)'s heightened pleading standard, and (4) lack of a duty to disclose information about Takata airbags. The Court finds that Plaintiffs have adequately pleaded knowledge and met the heightened pleading standard, but ultimately concludes that the economic loss rule bars Vukadinovic’s claim. This rule prohibits tort actions when the damages are solely economic losses, as defined by Florida law, and serves to delineate the boundary between contract and tort law, particularly in the context of products liability.

Florida's Supreme Court has restricted the economic loss rule's application primarily to products liability cases while noting exceptions for fraudulent inducement and negligent misrepresentation, which are not applicable in the products liability context. The court examined whether these exceptions might allow claims based on fraud when the allegations overlap with warranty claims, specifically concerning product performance. It concluded, aligning with other rulings, that such fraud claims do not survive in products liability scenarios where the fraud allegations mirror breach of warranty claims. Courts have ruled that allowing these claims could undermine the economic loss rule, which aims to prevent manipulation by purchasers asserting fraud claims for defective products that do not cause additional damage. Consequently, claims of fraudulent concealment related to warranty breaches are barred under this rule. The court granted Mazda's motion to dismiss Vukadinovic's fraudulent concealment claim, and while Birdsall's claim faced similar dismissal arguments, it was determined that the economic loss rule also barred Birdsall's claim despite adequately pleading the necessary knowledge under Rule 9(b).

Pennsylvania's Supreme Court has not definitively ruled on whether the economic loss rule prevents claims for fraudulent misrepresentation, as highlighted in *David Pflumm Paving, Excavating, Inc. v. Found. Servs. Co.* The court established that while the economic loss rule barred negligence claims, fraudulent misrepresentation claims failed for other reasons. The Third Circuit, however, anticipates that the Pennsylvania Supreme Court would apply the economic loss rule to intentional fraud claims related to the quality of goods sold, as seen in *Werwinski v. Ford Motor Co.* There exists a division among Pennsylvania's lower courts on whether exceptions to the economic loss rule apply for intentional torts, with some courts supporting the Third Circuit's stance, particularly regarding the Unfair Trade Practices Act and Consumer Protection Law. Ultimately, the court aligns with the Third Circuit's reasoning, asserting that the economic loss rule would bar claims of intentional fraud linked to the quality of goods, while acknowledging that the United States Supreme Court has upheld the economic loss doctrine, stating manufacturers have no duty to prevent products from injuring themselves.

The Court emphasized that an expansion of products liability remedies could lead to an overwhelming overlap with tort remedies, suggesting that tort claims are less necessary when the injury is solely to the product itself and does not involve unmet customer expectations or insufficient product value. It stated that express and implied warranties are designed to protect product value and quality, providing appropriate remedies for purchasers by ensuring they receive the benefits of their contracts. In REM Coal Co. v. Clark Equip. Co., Pennsylvania’s Supreme Court adopted this reasoning, questioning the validity of tort claims when a product defect causes no personal injury or damage to other property. The court asserted that contract theories, particularly breach of warranty, are well-suited for addressing economic losses stemming from a purchaser’s dissatisfaction with a product. It highlighted that the economic loss rule focuses on the actual harm claimed rather than the nature of the defect. Consequently, the court ruled that this rule precluded claims for strict products liability and negligence, as recognizing such claims would blur the lines between tort and contractual theories. The Court also noted that applying the economic loss rule to fraudulent concealment claims would undermine its purpose if these claims were allowed when the only alleged harm pertains to the product. The Third Circuit's analysis in Werwinski supported this stance, reinforcing the application of the "gist of the action doctrine" in fraud cases to prevent claims that merely replicate breach of contract actions. The eToll case further clarified that there is no categorical exception for fraud in this context, emphasizing that the distinction lies in whether the fraud pertains to the performance of contractual duties.

Allegations of fraud related to a contract claim are considered collateral unless the fraud is the primary issue. In this case, plaintiffs assert that Mazda fraudulently concealed information about an Inflator Defect, leading to economic harm tied solely to the product's quality and safety. The court determined that the economic loss doctrine precludes Birdsall's fraudulent concealment claim since it overlaps with breach of warranty claims. Additionally, Count 31, alleging negligent failure to recall, is dismissed for all three Named Plaintiffs because the economic loss rules of Alabama, Florida, and Pennsylvania bar negligence claims seeking only economic damages. These states' laws stipulate that negligence claims cannot arise when a defective product merely causes damage to itself. The plaintiffs did not contest the application of these laws but argued instead for California's recognition of the claim, which the court found irrelevant. Thus, Count 31 is dismissed for all named plaintiffs based on these legal principles. Lastly, Mazda has moved to dismiss Count 27 concerning unjust enrichment as asserted by the plaintiffs.

Pardue's claim for unjust enrichment under Alabama law is dismissed because she purchased her defective Mazda vehicle from an independent used car dealership, not directly from Mazda, meaning Mazda did not possess any of her money. Under Alabama law, a plaintiff must demonstrate that the defendant holds money that rightfully belongs to them, which requires direct possession by the defendant, as established in *Atl. Nat’l Trust, LLC v. McNamee*. Similarly, Birdsall's unjust enrichment claim under Pennsylvania law is also dismissed for the same reason; he bought his vehicle from a used car dealer with no affiliation to Mazda, failing to show that he conferred any benefit upon Mazda. Pennsylvania law requires proof that a plaintiff conferred a benefit to the defendant for an unjust enrichment claim to succeed. In both cases, the respective courts found no reasonable inferences that Mazda held money belonging to either plaintiff or received any benefit from them. Vukadinovic's unjust enrichment claim under Florida law is noted as distinct since he purchased a new Mazda, but details of his claims and Mazda's arguments for dismissal are not provided in this excerpt.

The Court examines two key arguments regarding the unjust enrichment claim. First, regarding the statute of limitations, Mazda contends that the claim is barred since it expired in early 2009. Plaintiffs counter by invoking Florida's four-year statute of limitations and asserting that fraudulent concealment and equitable estoppel should toll the limitations period. The Court agrees, noting that Plaintiffs have sufficiently alleged facts supporting fraudulent concealment, which, if proven, could prevent the statute from running. The Court finds that the allegations, including a statement from a Mazda dealership downplaying a warning light, could indicate an attempt to conceal the defect.

Second, Mazda argues that unjust enrichment is unavailable due to the existence of an express warranty covering the same issues. Plaintiffs counter that unjust enrichment can proceed unless there is a valid express contract. The Court acknowledges the existence of the warranty but notes that its enforceability has not been established. Thus, although Mazda has identified a contract, the Court allows the unjust enrichment claim to proceed, as Plaintiffs have raised questions about the warranty's validity and enforceability.

The court dismissed the unjust enrichment claim due to the plaintiffs' failure to contest an existing express contract governing the dispute and their inability to demonstrate the absence of an adequate legal remedy. However, the plaintiffs argued that the warranties were unconscionable and thus unenforceable, and they adequately claimed the lack of an adequate remedy at law. As a result, the court denied Mazda's motion to dismiss Vukadinovic's unjust enrichment claim.

Regarding Count 49, concerning the Alabama Deceptive Trade Practices Act (ADTPA), Mazda sought dismissal on three grounds: failure to demonstrate the defect's manifestation, lack of sufficient allegations regarding Mazda's knowledge of deceptive conduct, and non-compliance with the pre-suit notice requirement. The court rejected the first two arguments based on earlier findings. Although the court noted that the pre-suit notice requirement applies, it found the plaintiffs had sufficiently alleged that notice was served per Alabama law, specifically citing their counsel's actions to notify Mazda of the alleged violations. The plaintiffs were deemed to have met the notice provision, leading the court to deny Mazda's motion to dismiss the ADTPA claim.

In Count 47, related to the Florida Deceptive Trade Practices Act, Mazda also moved to dismiss, presenting two arguments, but the excerpt does not provide details on the court's ruling regarding this count.

Plaintiffs failed to prove the manifestation of the alleged defect and their claim is also barred by Florida’s four-year statute of limitations for FDUTPA claims. However, the Court acknowledges that plaintiffs sufficiently alleged manifestation of the Inflator Defect and considers Mazda's argument regarding the statute of limitations. Mazda contends that the statute of limitations expired in early 2009 and that the discovery doctrine does not apply to toll FDUTPA claims. Plaintiffs counter that the claim could still survive due to equitable tolling based on Mazda’s alleged fraudulent concealment. The Court agrees, adopting its prior reasoning that fraudulent concealment tolls the statute of limitations for Vukadinovic’s unjust enrichment claim, and thus denies Mazda’s motion to dismiss Vukadinovic’s FDUTPA claim (Count 47).

Regarding Count 48, which pertains to the breach of Florida’s implied warranty of merchantability, plaintiffs have chosen not to pursue this claim, leading the Court to grant Mazda’s motion to dismiss Count 48. As for Count 3, concerning the Magnuson Moss Warranty Act (MMWA), the Court notes that the plaintiffs did not respond to Mazda's arguments for dismissal, including the lack of privity between Vukadinovic and Mazda. Consequently, the Court dismisses Count 3 due to this lack of privity, confirming that Florida law requires privity to sustain a breach of implied warranty claim.

In conclusion, the Court grants in part and denies in part Mazda’s motion. Counts 25 and 27 are dismissed concerning specific plaintiffs while Counts 28, 29, 30, 31, 48, and Count 3 (as asserted by Vukadinovic) are also dismissed. The ruling does not affect any claims for injunctive relief, which will be addressed in a future order. Additional violations of California law alleged by the plaintiffs are not discussed in this order.

Plaintiffs assert alternative legal grounds only if California law is found inapplicable, with the three counts in this section strictly based on California law. The Supreme Court's ruling in Van Dusen establishes that a transferee district court must apply the same state substantive law, including choice of law rules, as the original state court would in matters of state law, emphasizing federalism principles. Venue changes under § 1404 are likened to mere changes in courtrooms, a principle also applicable to cases consolidated under § 1407. The plaintiffs involved reside in different states where they purchased their vehicles, and they claim that a defect renders the airbag a "useless piece of fabric" or dangerous. Mazda’s arguments for dismissing Count 31 are acknowledged, but the court finds the economic loss rule in the relevant states sufficient to bar the negligence claim, making further consideration of Mazda's arguments unnecessary. Additionally, while Mazda notes that Vukadinovic does not contest the contract's validity, the allegations of unconscionability challenge the contract's enforceability, a point Mazda fails to address.