The Sixth Circuit recently affirmed a trial court’s decision to dismiss a proposed multi-state class action alleging that a car maker sold vehicles with cracked dashboards.  James Smith et al. v. General Motors LLC, No. 19-1614, 2021 WL 631475 (6th Cir. 2/18/21).  According to Plaintiffs, that defect produces dashboard cracking that could cause severe injuries because malfunctioning airbags could turn the plastic dashboards into deadly projectiles during a crash. But no class member, or any other customer, experienced that dangerous, hypothetical, scenario. At worst, Plaintiffs suffered only cosmetic damage and a potential reduced resale value from owning cars with cracked dashboards. Even still, Plaintiffs contend that defendant knew about the defect and its dangers and should be liable for that scary implication.

The case turned on what, exactly, Plaintiffs must plead to survive a motion to dismiss. They asserted that routine testing, customer complaints, and increased warranty claims alerted defendant to the defective dashboards. But that is not enough, said the panel, to move forward, absent some more specifics about how and when defendant supposedly (1) learned about the defect and its hazards, and (2) concealed the allegedly dangerous defect from consumers when selling cars. The general rule is that Plaintiffs must show that a defendant had sufficient knowledge of the harmful defect to render its sales fraudulent. And Plaintiffs simply did not allege particular facts showing that the defendant fraudulently unloaded such dangerous vehicles onto an unwitting public.

The court said this is much like Sir Arthur Conan Doyle’s Sherlock Holmes and his case of the dog that did not bark: the dispute centers on what a court can properly infer from shrapnel that did not spray. And, absent more detailed pleading, there was not enough showing that defendant learned about, and ignored, the allegedly dangerous defect.  You have to love the reference to the famous private detective character known for his proficiency with observation, deduction, and logic. He first appeared in 1887 in A Study in Scarlet, and was featured eventually in 4 novels and 56 short stories by Doyle. Since then, the famous resident of 221B Baker Street in London has been in more than 26,000 stage shows, films, television shows, and other books — making him the most portrayed literary human character in film and television history. As long as the character has been around, new adaptations still find wonderful perspectives or contexts for the consulting detective (e.g.,  Benedict Cumberbatch in Sherlock).  Loyal readers know we are always keen for a Philadelphia connection: In August of 1889, the managing editor of Lippincott’s Monthly Magazine in Philadelphia, came to London to organize a British edition of his magazine. He invited Conan Doyle for dinner in London at the elegant Langham Hotel which was to be mentioned later in a number of Holmesian adventures, and this led to commissioning Doyle to write The Sign of the Four, published in England and the US in February of 1890. 

Plaintiffs alleged that when the defendant changed the dashboard from a multi-piece design to a single-piece design, this change made the dashboard prone to cracking in two places. Fixing dashboard cracks can cost up to $1,800. they alleged. They emphasized that the design change allegedly created a safety hazard— a crack near the steering column that could lead to shrapnel spray during a crash. Plaintiffs’ complaint contained no allegation that any of them have been hurt by the allegedly defective dashboards. It only speculated that “[t]he [dashboard] cracks can interfere with the planned deployment of the passenger side airbag, thus creating a safety risk.” Plaintiffs confirmed that they did not have evidence showing that the dashboard’s alleged safety defect ever caused an injury to anyone driving or riding in an affected car.

Of particular interest to our readers is the analysis of the claim under Rule 9(b). To satisfy Rule 9(b), “the plaintiff must allege (1) ‘the time, place, and content of the alleged misrepresentation,’ (2) ‘the fraudulent scheme,’ (3) the defendant’s fraudulent intent, and (4) the resulting injury.” Wall v. Mich. Rental, 852 F.3d 492, 496 (6th Cir. 2017). Although the Plaintiffs pled that a defect existed, Plaintiffs did not meet their burden of showing defendant’s knowledge about the alleged safety risk. For example, their complaint did not explain how Plaintiffs determined a cracked dashboard posed a safety risk—a fact that would have helped show how either party would have gained knowledge about the risk, not whether that risk existed.

Rule 9(b) imposes a heightened pleading requirement for claims alleging fraud. That means that parties bringing a fraudulent concealment claim “must specify ‘the who, what, when, where, and how’ of the alleged omission.” Republic Bank & Tr. Co. v. Bear Stearns & Co., 683 F.3d 239, 256 (6th Cir. 2012). And they must do so with particularity. Fed. R. Civ. P. 9(b). In the context of this case, that meant that Plaintiffs needed to “state with particularity” factual allegations supporting the assertion that defendant knew about the safety implications of the dashboard defect. But Plaintiffs’ allegations merely identify the dashboard defect and say the manufacturer could have theoretically known about the flaw. And that’s not enough.

Plaintiffs argued that their allegations about testing, customer complaints made to the NHTSA and car dealers, and increased warranty claims involving the vehicles support their assertion that defendant knew about the alleged safety defect. But taken as a whole with inferences made in Plaintiffs’ favor, these factual allegations did not rise above mere speculation and recitation of legal claims. And so they were not enough to withstand a 12(b)(6) motion to dismiss.  Plaintiffs didn’t plead the results of the testing; Indeed, Plaintiffs admitted below that they never presented any “allegation that specifically says” that pre-production testing alerted GM to the defect. The customer complaints largely related to cars driven for many years and many miles.  All of the named Plaintiffs complained about defects in vehicles driven between 23,000 and 156,000 miles over multiple years. And the warranty claims did not show knowledge of any safety risks associated with the crack. So even if the warranty claim alleged spike supported that defendant knew about increased dashboard repairs, that does not mean the warranty claims led them to know about the hazardous airbag deployment that allegedly would accompany the cracked dashboard. In short, Plaintiffs offered no facts showing why the warranty claims informed of the safety hazard rather than a mere cosmetic issue.

The court made one more logical point about the latency period for the alleged defect: it seems odd to say the manufacturer knew, at the time of sale, about a dashboard crack that developed only after a vehicle traveled many thousands of miles over many years. Rephrased, Plaintiffs’ argument implies that defendant knew about the safety ramifications of that defect when it sold the cars even though the defect took that much time to manifest. “That makes little sense.”

As an important aside, we also see here the common error in multi-state and national class actions: plaintiffs’ assumption that one law governs all the claims.  While this means that all claims would rise or fall on a single substantive law principle, the reality is that one law almost ever governs every class member’s claims. But Plaintiffs presented their case without providing citations to support this underlying assumption. And that is troubling, said the court, because it highlights that Plaintiffs have failed to specify which jurisdiction’s laws, federal or otherwise, govern their suit. And that failure implicates Erie and the Rules of Decision Act.  Product liability cases often turn on specific state law requirements. See, e.g., In re Darvocet, Darvon & Propoxyphene Prods. Liab. Litig., 756 F.3d 917, 938 (6th Cir. 2014) (performing a “state-by-state Erie analysis” for a misrepresentation-based product liability claim). And parties usually specify which jurisdictions cover their diversity dispute, and then this court applies the “substantive law of the states” by either (1) following a ruling from the state supreme court, (2) following the applicable state statute, or (3) predicting how the state supreme court would rule “by looking to all available data, including decisions of the states’ appellate courts.” In re Darvocet,  756 F.3d at 937. And Plaintiffs’ assumption that general tort principles govern each claim also toed a dangerous line with the Rules of Decision Act and the Erie doctrine, said the panel. By asserting that a generalized framework governs, they ventured close to asking us to apply the general common law or federal common law, see Swift v. Tyson, 41 U.S. 1, 1 (1842), overruled by Erie R.R. Co. v. Tompkins, 304 U.S. 64 (1938), rather than “[t]he laws of the several states,” Rules of Decision Act, 28 U.S.C. 1652. Under the Erie doctrine, parties typically cannot escape the general rule that “[i]n diversity cases we apply the choice-of-law rules and substantive law of the forum state.” CenTra, Inc. v. Estrin, 538 F.3d 402, 409 (6th Cir. 2008).