Lassen v. Nissan North America, Inc.

Citations: 211 F. Supp. 3d 1267; 2016 WL 5868101Docket: Case No. CV 15-06491-AB (MRWx), Case No. CV 15-09200-AB (MRWx), Case No. CV 15-09204-AB (MRWx), Case No. ED CV 15-02434-AB (MRWx), Case No. SA CV 15-01988-AB (MRWx)

Court: District Court, C.D. California; September 30, 2016; Federal District Court

SummaryOriginalCytator Case TreatmentBackward CitatorAnalysis

EnglishEspañolSimplified EnglishEspañol Fácil

The Order grants motions to dismiss five related consumer fraud class action lawsuits against six Automakers regarding vehicles with keyless fob ignition systems that lack an auto-off feature, which Plaintiffs allege is a design defect that should have been disclosed prior to sale, constituting fraud. Originally filed in August 2015 against eighteen Automakers, the case was narrowed down as Plaintiffs voluntarily dismissed all but Nissan. Ultimately, five cases remain, each asserting claims for common law and statutory consumer fraud and unjust enrichment under California law, with varying additional claims under laws of other states. The motions for dismissal raised several issues including preemption, primary jurisdiction, lack of standing, and failure to state a claim. The Court decided to address preemption, primary jurisdiction, and standing collectively, as the factual allegations and legal theories across the cases are materially identical. The ruling consolidates the dismissal of all six motions into a single order for efficiency.

Keyless fobs enable drivers to start vehicles without traditional keys by transmitting an electronic signal, allowing ignition via a start/stop button when the fob is inside the car. However, if a driver exits the vehicle and removes the fob without pressing the button, the engine continues to run, potentially leading to carbon monoxide buildup in enclosed spaces, which poses serious health risks. Plaintiffs allege that drivers are unaware that the keyless fob does not turn off the engine, resulting in instances of carbon monoxide poisoning, including fourteen fatalities. They argue that vehicles equipped with keyless fobs should have an auto-off feature to mitigate this danger, claiming its absence constitutes a design defect. 

In the Nissan case, six plaintiffs, including Lassen, allege they were not informed in pre-sale marketing materials about the lack of an auto-off feature, leading to inadvertent running of their vehicles. Lassen, who purchased a 2007 Nissan Murano, asserts that she would have reconsidered her purchase or paid less had she been aware of the defect. All plaintiffs share similar claims regarding the lack of disclosure, concerns over safety, and financial harm from overpaying for the defective vehicles. Importantly, none of the plaintiffs experienced physical injuries, and the classes involved exclude those who have suffered personal injuries. Their claims focus on the design defect of the lack of auto-off functionality rather than traditional product liability issues.

Plaintiffs allege consumer fraud against automakers for failing to disclose a defect—specifically, the absence of an Auto-Off feature—in their vehicles, which allegedly influenced purchasing decisions. They seek declaratory and injunctive relief, including a determination of the vehicles' defects, notifications to all affected consumers, mandatory repairs, and prevention of future sales of defective vehicles without the Auto-Off feature. The claims encompass five California causes of action: violation of the Consumer Legal Remedies Act (CLRA), Unfair Competition Law (UCL), common law fraud and deceit, False Advertising Law (FAL), and unjust enrichment. 

The CLRA prohibits misleading acts or practices in consumer transactions, while the UCL addresses any unlawful or unfair business practices. California Civil Code sections 1709 and 1710 define deceit, including the failure to disclose known defects. The FAL makes it unlawful to make false or misleading statements about products or services. Plaintiffs assert the automakers were unjustly enriched by their transactions involving defective vehicles.

All claims are based on the premise that the vehicles are defective due to the missing Auto-Off feature, which the automakers had a duty to disclose. Plaintiffs argue they would not have purchased or would have paid less for the vehicles had they known about the defect. The automakers seek to dismiss the claims, asserting federal preemption, primary jurisdiction, lack of standing, and deficiencies in the pleadings under federal rules. The court will evaluate these arguments while outlining the relevant legal standards.

Plaintiffs' claims are not preempted by federal law, as the Automakers' arguments for preemption under the Supremacy Clause and the National Highway Transportation Safety Act (Safety Act) lack merit. Implied preemption can be either field or conflict preemption. Field preemption requires extensive federal regulation, indicating that states cannot supplement, which is not the case here. The Automakers also fail to establish conflict preemption, as there is no actual conflict between state law and the proposed rule from the National Highway Traffic Safety Administration (NHTSA), which has not yet been adopted. Consequently, motions to dismiss based on preemption are denied.

Regarding the recall remedy sought by Plaintiffs, the Automakers argue that such relief is preempted by the Safety Act because the NHTSA holds exclusive authority over recalls. This argument is unfounded, as the cited code sections do not indicate exclusivity of NHTSA's authority. Additionally, courts have consistently rejected the argument that state remedies frustrate the objectives of the Safety Act. The presumption against preemption applies here since motor vehicle safety is a traditional state regulatory field, placing the burden on the Automakers to demonstrate Congress's clear intent to preempt state law. They have not done so, as distinctions between different remedies are irrelevant in implied preemption analysis; the Safety Act does not indicate a Congressional intent to differentiate among remedies. Thus, if an injunction for repairs would interfere with the federal scheme, so would a damages award for failure to make those repairs.

A recall remedy is treated equivalently to a damages remedy, and the Automakers have failed to demonstrate that a court-ordered recall would undermine Congress's intent behind the Safety Act, which is primarily focused on reducing traffic accidents and related injuries. The Act's language emphasizes safety as the primary goal over uniformity in regulation. Therefore, any concern for regulatory uniformity does not outweigh Congress's commitment to vehicle safety, which allows for state laws to impose stricter safety standards. Consequently, the Safety Act does not preempt state law recalls, leading to the denial of the Automakers' motions to dismiss or strike on these grounds.

Additionally, the Automakers' claim that the doctrine of primary jurisdiction bars the Plaintiffs' claims is rejected. The Plaintiffs’ claims are based on state law, not on the Safety Act or its regulations, and do not necessitate any special administrative expertise for resolution. Thus, the primary jurisdiction doctrine is inapplicable, and these motions are also denied.

Finally, the Automakers challenge the Plaintiffs' standing under Article III, arguing they have not demonstrated an injury in fact due to a lack of harm from the alleged defect. The claims exclude those who suffered physical injuries from leaving vehicles running, meaning standing must rely on other forms of harm. The Automakers assert that since Plaintiffs received what they paid for, they lack the necessary standing to pursue these claims.

Plaintiffs claim standing based on several allegations: experiencing a defect in their vehicles, concerns about the lack of Auto-Off functionality, awareness of others suffering carbon monoxide poisoning, and a belief that they would not have purchased or would have paid less for their vehicles had they known about the defect. However, the court finds that the first two allegations do not constitute concrete injuries necessary for standing, as mere concern over a potential future harm does not meet the threshold for injury when plaintiffs explicitly limit their claims to economic damages. The court notes that plaintiffs have only left their vehicles running a few times without suffering any physical injury, rendering their concern speculative.

Moreover, allegations regarding others' carbon monoxide poisoning do not establish a specific injury to the plaintiffs, as standing cannot be derived from the experiences of non-parties. Although injuries to others might influence market perception and potentially affect vehicle resale values, plaintiffs fail to demonstrate that their vehicle's value decreased due to the lack of Auto-Off functionality. They also acknowledge that the alleged defect has not garnered significant media attention, further undermining any claim of diminished resale value.

While overpayment and loss in value can be valid injuries for standing, plaintiffs must provide sufficient factual allegations to support these claims. The court emphasizes that their allegations do not constitute a products liability action, as plaintiffs have not experienced physical injury, which is a prerequisite for such claims. Instead, the plaintiffs attempt to frame their claims within consumer fraud, arguing that they were misled into purchasing defective vehicles, which led to economic damages. However, without demonstrating actual injury beyond economic loss, they cannot establish the required standing to pursue their claims.

Plaintiffs are pursuing damages for an alleged defect in their vehicles that did not cause any actual injury, which undermines a products liability claim. The claim primarily concerns 'pure economic loss,' better suited to contract law under the Uniform Commercial Code rather than products liability law. Courts have historically dismissed similar cases for lack of standing, where no actual injury was demonstrated. Plaintiffs assert they overpaid for their vehicles but fail to establish a concrete injury, drawing parallels to the Birdsong case, where alleged defects in iPods were deemed insufficient as they were based on hypothetical risks. The court emphasized that merely suggesting safer design changes does not equate to a cognizable defect or tangible injury. In the Taragan case, claims regarding a keyless fob system were similarly dismissed because no plaintiffs experienced the alleged defect’s consequences, which were considered theoretical. The court noted that risks associated with the vehicles' design depend on the operator's actions, underscoring the lack of evidence for actual harm. Consequently, the Automakers' motion to dismiss based on lack of standing was granted, as Plaintiffs only presented conjectural and hypothetical injuries without any substantiated claims of defect.

Actual injury from carbon monoxide poisoning is deemed theoretical since no plaintiff has experienced such an injury. The risk arises not from vehicle malfunctions but from human error, specifically drivers failing to use the start/stop button to turn off the engine. Plaintiffs have not adequately pled a design defect necessary for consumer fraud claims. Counsel acknowledged that the viability of their claims hinges on alleging a legitimate defect, which they have not done, as the keyless fob systems function as intended. Plaintiffs' claims of economic damages, framed as "benefit of the bargain," do not establish standing since the alleged safety benefit was not part of the original bargain. No precedent exists for supporting consumer fraud claims based on a product that operates correctly, as all cited cases involve actual malfunctions. Examples include issues with unintended acceleration, malfunctioning airbags, non-operational window regulators, and failures in infotainment systems or engine functions.

In Falk v. General Motors Corp., the court examined claims related to vehicle defects, particularly concerning speedometer malfunctions and design defects in Electric Power Steering systems. Plaintiffs contended that they overpaid for vehicles due to the lack of expected safety features, specifically the absence of Auto-Off in keyless fob systems. However, the court found that the Plaintiffs did not demonstrate standing for their consumer fraud claims, as they acknowledged using the keyless systems correctly and failed to allege any malfunction of those systems. Furthermore, the court noted that existing state laws do not impose a broad duty to disclose defects unless specific circumstances apply, such as a fiduciary relationship or exclusive knowledge of material facts. The court referenced the Judkins factors, which outline conditions under which a duty to disclose exists. It concluded that the Plaintiffs' claims did not assert a legally plausible design defect, as the vehicles did not malfunction, and any prolonged operation was attributed to the Plaintiffs' inadvertent actions. The Plaintiffs lacked a legal theory that would support their allegations of defectiveness.

During oral arguments, the Court inquired how the functioning keyless fob system was deemed defective due to the absence of an Auto-Off feature. There was skepticism expressed regarding the applicability of products liability design defect standards to the distinct area of consumer fraud claims. Plaintiffs' counsel argued that California's design defect legal standard, which includes the "consumer expectations test" and the "risk-benefit test," should apply. Under these tests, a product is considered defective if it does not perform safely as expected by ordinary consumers or if the risks of its design outweigh its benefits. Additionally, manufacturers are expected to foresee and mitigate potential misuse of their products.

The Restatement of Torts similarly defines a design defect as one where the foreseeable risks could have been reduced through reasonable alternative designs. Plaintiffs contended that keyless fob systems without Auto-Off increase the risk of carbon monoxide poisoning due to inadvertent vehicle shut-off failures, thus qualifying as defectively designed under products liability standards. However, the Court noted that the plaintiffs relied heavily on injuries to others to support their claims, which may only be relevant in products liability contexts, not in consumer fraud cases. The plaintiffs did not adequately address the novelty of applying products liability standards to consumer fraud claims, particularly since the product in question functioned as intended. The Court highlighted that the purposes of products liability and consumer fraud laws differ significantly, which complicates the transferability of legal standards between the two.

Products liability law and consumer fraud law serve distinct purposes that affect their applicability and requirements. The primary aim of products liability law is to incentivize manufacturers to ensure product safety by providing remedies for harm caused by unreasonably dangerous products. This law shifts the burden of injury costs from consumers to manufacturers, even holding manufacturers liable for defects without their knowledge, although it limits liability to personal injury and property damage, excluding mere economic loss.

In contrast, consumer fraud law focuses on preventing sellers from deceiving consumers regarding products and services. It only requires the disclosure of defects that raise safety concerns when such defects are deemed material to prevent consumer deception. Thus, consumer safety is secondary to the law's goal of eliminating deception. Claims based on undisclosed safety defects start to blur the line between consumer fraud and safety concerns, which are not the primary focus of consumer fraud law.

Additionally, products liability law imposes liability regardless of the manufacturer's knowledge of the defect, while consumer fraud law necessitates that the seller possesses knowledge of the alleged defect to establish a claim. This fundamental difference highlights the divergent focuses of the two legal frameworks.

The Court expresses concern about applying products liability design defect standards to consumer fraud claims. Under products liability law, all parties in the distribution chain can be held liable for defects, regardless of their knowledge of those defects, and the determination of defectiveness is made retrospectively by a factfinder using open-ended tests, such as the risk/benefit analysis. This contrasts with consumer fraud claims, which require proof that the manufacturer knew about the defect and concealed it to induce purchase. Knowledge of a defect and its nondisclosure are essential elements of such claims, particularly when safety concerns are present. 

While products may function as intended, their design can still be deemed defective through retrospective methods, which do not align with the requirements for consumer fraud claims that necessitate prior knowledge of the defect. The Court concludes that using products liability standards in consumer fraud cases could create negative incentives for sellers, compelling them to disclose potential alternative designs, which diverges from the primary aim of consumer fraud law to prevent deception rather than ensuring absolute safety.

Allowing claims based solely on economic loss due to failure to disclose product hazards would blur the lines between consumer fraud and products liability claims. Under California law, a plaintiff must demonstrate injury from a defective product to sustain a products liability action; economic losses alone do not suffice for recovery. The standards for design defects in products liability do not easily apply to consumer fraud. For consumer fraud cases, the duty to disclose cannot be aligned with the retrospective nature of design defect assessments in products liability, particularly when a product functions as intended. Legal precedents indicate that claims of fraud cannot arise from non-disclosure of safety features in properly functioning products, as all cited cases involved malfunctioning items. Moreover, the plaintiffs have not provided a coherent legal theory that reconciles the functioning of their vehicles with their claims of defect. Their assertion that the absence of an Auto-Off feature indicates a design defect under products liability standards is inadequate for their consumer fraud claims. Consequently, the court concludes that the products liability design defect jurisprudence is not applicable to the distinct consumer fraud claims presented.

Plaintiffs lack standing to pursue their consumer fraud claims against the Automakers, leading to the granting of the motions to dismiss. This decision is definitive for all claims, rendering any further discussion of the Automakers’ additional arguments unnecessary. The Court notes that this is Plaintiffs’ second attempt to plead these claims, and although Plaintiffs’ counsel requested leave to amend to provide additional facts regarding alleged design defects in the keyless fob systems, the existing pleadings already present sufficient facts. However, these facts do not align with the legal standards required for consumer fraud claims. Consequently, the Court denies the request to amend and dismisses the actions without leave to amend.

The motions to dismiss are recorded under specific docket numbers. While two cases also included claims under Connecticut law, those claims were voluntarily dismissed. The inconsistency regarding whether a vehicle was purchased or leased is deemed immaterial to the motion's outcome. The Court finds that the arguments concerning preemption, primary jurisdiction, and standing do not vary among the claims, and both parties refer to California claims as representative of all claims. The Court also confirms that Plaintiffs’ standing is contingent upon alleging a cognizable defect. Although the Safety Act includes a preemption clause, no Automaker invoked this preemption, possibly due to the absence of a relevant motor vehicle safety standard; thus, the Court will not address this aspect.

The Court has determined to interpret the motion as one for dismissal of Plaintiffs' claims for injunctive relief resembling a recall. It clarified that its earlier ruling, which found the recall remedy not preempted, does not imply that it is an appropriate remedy for this case. Automakers requested judicial notice of the Owners’ Manuals, arguing that they contain disclosures that negate standing and weaken Plaintiffs' claims. Plaintiffs countered that the Manuals are not subject to judicial notice and are irrelevant since required disclosures should have been made prior to sale, not afterward. The Court concluded it need not address these matters, as Plaintiffs lack standing regardless of the Manuals. At oral argument, Plaintiffs' counsel stated that their standing is based on overpayment for the vehicles rather than a decrease in value. The Court acknowledged that standing under California's Unfair Competition Law (UCL) aligns with Article III standing, and thus Plaintiffs lack standing under both. Plaintiffs view California's disclosure duties as representative of those in other states but did not assert that other states impose stricter requirements; therefore, the Court presumes that if no duty exists under California law, no such duty exists under the laws of the other states involved.