Judge Berg said most of the consumers had standing to sue and established an economic injury at the point of sale to survive the companies’ dismissal bids. The truck buyers said that FCA and Cummins misled them about the trucks’ emissions rates, leading them to pay an $8,000 to $10,000 premium for trucks that couldn’t live up to their promised fuel-economy performance, Judge Berg explained.
By Linda Chiem
Law360 (July 30, 2020, 8:44 PM EDT) — A Michigan federal judge on Thursday slashed most of a proposed racketeering class action claiming Fiat Chrysler and engine manufacturer Cummins sold Dodge Ram trucks with defective diesel engines that triggered excess emissions, but gave the consumers another shot at bolstering their claims.
U.S. District Judge Terrence G. Berg largely granted motions to dismiss from FCA US LLC and Cummins Inc. in a Racketeer Influenced and Corrupt Organizations Act suit alleging they deceived consumers by marketing Dodge Ram 2500 and 3500 trucks with 6.7-liter Cummins diesel engines as high-performing, low-emission, reliable vehicles with good fuel economy, when they weren’t. However, most of the claims were dismissed without prejudice, so the consumers can still repurpose or flesh them out in another amended complaint.
Dodge Ram truck buyers and lessees from 18 states claimed that the Cummins-manufactured engines contained defects in their emissions “aftertreatment” systems that caused the trucks to emit pollutants beyond U.S. Environmental Protection Agency-approved levels. The affected vehicles were from model years 2013 to 2017, and they supposedly contained two defects. One was a degraded “washcoat,” or sealant, in the interior lining of the selective catalytic reduction system, and the other was a so-called “flash defect” that led to soot buildup from a clogged diesel particulate filter.
In his 63-page ruling Thursday, Judge Berg said most of the consumers had standing to sue and established an economic injury at the point of sale to survive the companies’ dismissal bids. The truck buyers said that FCA and Cummins misled them about the trucks’ emissions rates, leading them to pay an $8,000 to $10,000 premium for trucks that couldn’t live up to their promised fuel-economy performance, Judge Berg explained.
He also rejected the companies’ arguments that the consumers’ claims were preempted by the Clean Air Act because they were trying to enforce federal emissions standards.
“Proving noncompliance with federal emissions standards is by no means essential to their success,” Judge Berg said. “Because this is not an action seeking to enforce EPA emissions regulations, the court concludes plaintiffs’ claim[s] are not preempted by the CAA.”
Notably, though, Judge Berg said “it is clear this case is not an appropriate vehicle for a civil RICO action” because the consumers “have not adequately pled the existence of a common enterprise between FCA and Cummins, or the required state of mind for a RICO claim.”
“Plaintiffs’ RICO claims must be dismissed because they have not specifically pled a ‘common purpose’ uniting FCA and Cummins in the washcoat or flash enterprises,” Judge Berg said.
The suit’s Magnuson-Moss Warranty Act claim was also nixed. Judge Berg further parsed through the bevy of state-law claims in their enormous 438-page amended complaint, noting that the consumers “make little effort to support the validity of their fraudulent concealment, consumer protection, breach of contract, or unjust enrichment claims on a state-specific basis.”
Judge Berg slashed all of their state law breach of contract claims, unjust enrichment claims under the laws of California and Texas, all of their state law claims for fraudulent omission, and all of the claims they brought under the various state consumer protection statutes.
However, he kept alive the plaintiffs’ claims for unjust enrichment under Alabama, Colorado, Florida, Georgia, Idaho, Kentucky, Michigan, Mississippi, New Jersey, North Carolina, Ohio, Oklahoma, Pennsylvania, Utah, Virginia and Washington state law. Likewise, their state law claims against FCA and Cummins for affirmative misrepresentation all survive to the extent that they do not rest on alleged misrepresentations that Judge Berg identified as puffery or otherwise non-actionable, according to the opinion.
The decision comes more than a year after FCA and Cummins moved for dismissal, arguing that the two supposed defects were already fixed in a 2016 recall.
Cummins offered consumers a free “washcoat” upgrade in response to warranty claims that certain trucks experienced a degraded washcoat over time that resulted in excess nitrogen oxide emissions. It also issued a software “flash,” basically a software update, that FCA dealerships provided for free to fix a clogged particulate filter that was under warranty, according to court filings.
“The complaint contains no allegations whatsoever that FCA played any role in designing the components at issue,” FCA said in its June 2019 dismissal bid. “This court should not permit plaintiffs to transform the successful remediation of product issues into RICO and fraud claims, and, in any event, the complaint provides no basis for such claims against FCA.”
Cummins similarly argued in its motion to dismiss that the drivers’ claims are “improper” and “unnecessary” because the drivers have already been made whole by Cummins’ recall, which the EPA signed off on. In fact, the EPA praised the washcoat upgrade in particular as “a great example of how government and industry work together to protect health and the environment.”
“This is a product-defect case that has been resolved to the EPA’s full satisfaction,” Cummins said.
Consumers, led by plaintiff Jeremy Raymo, kicked off the litigation in July 2017, claiming that they didn’t get what they paid for in the trucks, which were burning through more fuel and releasing extra pollutants because of their defective engines.
The attorneys representing the drivers in this case have also steered high-profile RICO class actions accusing major automakers, including Fiat Chrysler and General Motors, of rigging certain vehicles with so-called defeat devices to fool regulators’ emissions tests.
Notably, one of their other cases alleging FCA and Cummins rigged Dodge Ram trucks to cheat emissions tests advanced after a Michigan federal judge ruled in March 2019 that the consumers sufficiently alleged economic harm and the existence of a defeat device.
Steve W. Berman of Hagens Berman Sobol Shapiro LLP, an attorney for the truck buyers, said Thursday that they’re “happy with the decision and ready to proceed.”
An FCA spokesman declined to comment. Press representatives for Cummins did not immediately respond to a request for comment Thursday.
The truck buyers are represented by Steve W. Berman and Jerrod C. Patterson of Hagens Berman Sobol Shapiro LLP, E. Powell Miller, Sharon S. Almonrode and Dennis A. Lienhardt of The Miller Law Firm PC, Christopher A. Seeger of Seeger Weiss LLP, James E. Cecchi of Carella Byrne Cecchi Olstein Brody & Agnello PC, and Eric J. Artrip of Mastando & Artrip.
FCA is represented by Robert J. Giuffra Jr. and William B. Monahan of Sullivan & Cromwell LLP, and James P. Feeney of Dykema Gossett PLLC.
Cummins is represented by Jonathan W. Garlough, Jeffrey A. Soble, Michael D. Leffel and Leah R. Imbrogno of Foley & Lardner LLP.
The case is Raymo et al., v. FCA US LLC et al., case number 2:17-cv-12168, in the U.S. District Court for the Eastern District of Michigan.