The Class Action Fairness Act has had a noticeable effect on class action practice. One aspect of CAFA involves the need to assert jurisdictional minimums, as recently reaffirmed by the Eighth Circuit in Penrod v. K&N Eng’g, Inc., No. 20-1355, 2021 WL 4177761 (8th Cir. Sept. 15, 2021). The appeals court concluded that the plaintiffs failed to plausibly allege damages in excess of $5 million, as required for jurisdiction under the Class Action Fairness Act.
Plaintiffs are three individuals who purchased oil filters designed by defendant. They sought to represent a nationwide class of all purchasers of three styles of oil filters that they alleged share a common defect that can cause these oil filters to suddenly separate or fracture. According to plaintiffs, the defect made the oil filters susceptible to failure and increased the risk of catastrophic failure such that, had defendant disclosed the defect, purchasers would have found the risk unacceptable, and not purchased.
Plaintiffs asserted a number of different claims, including breach of warranty, fraud, negligence, and strict liability. Each claim was dependent upon CAFA as the source of federal jurisdiction. The district court found that plaintiffs’ reliance on CAFA was ineffectual because they failed to plausibly plead an aggregate amount in controversy exceeding $5 million. Plaintiffs appealed, arguing they plausibly pleaded an amount in controversy in excess of $5 million.
Under CAFA, federal courts have jurisdiction over class actions in which the amount in controversy plausibly exceeds $5 million in the aggregate. 28 U.S.C. § 1332(d)(6); see also Raskas v. Johnson & Johnson, 719 F.3d 884, 888 (8th Cir. 2013). The district court found that most of plaintiffs’ proposed class members did not have a filter failure and thus did suffer any cognizable injuries or damages, and that the remaining class members did not plausibly allege total damages in excess of $5 million. Plaintiffs contended the district court erred in its analysis because the proper measure of damages here was the monetary difference between what the proposed class members should have paid for the potentially defective oil filters, in light of the alleged design defect and increased risk of catastrophic failure, and what they actually paid for them.
The court concluded that plaintiffs’ contention was unavailing as contrary to the long-standing rule that no tort claim for economic damages lies when a product is merely at risk of failing. Briehl v. General Motors Corp., 172 F.3d 623 (8th Cir. 1999). Under 8th Circuit precedent, a cognizable tort claim arises when a defective product has actually malfunctioned or failed, not merely when a defect poses a risk or possibility of injury or damage.
According to its plain language, plaintiffs’ complaint alleged a defect in the oil filters makes them “susceptible” or at “risk” to fail. Oil filters being susceptible to fail, or at risk of failing, is not the same thing as having failed, or being sure to fail. Cf. In re Zurn Pex Plumbing Prod. Liab. Litig., 644 F.3d 604, 617 (8th Cir. 2011).
Here, the determinative issue was whether the plaintiffs had alleged an aggregate injury sufficient to confer jurisdiction. Plaintiffs tried to rely on various contract theories to argue that the uninjured class members did, in fact, have cognizable injuries. The plaintiffs, however, did not allege a claim for breach of contract in their complaint. They in essence tried to recast their product liability claim into a non-existent breach of contract claim. Plaintiffs also referred to an alleged economic injury that was suffered based on the difference in the price between the defective oil filter and a non-defective one. The court noted that unless/until the product fails or causes injury, the purchasers have received the benefit of their bargain. See
In Re: Polaris Marketing, Sales Practices and Products Liab, Litig., 2021 WL 3612758, at *3 (8th Cir. Aug. 16, 2021).
In this case, most of the oil filters at issue never failed. Plaintiffs could not simply “recast their product liability claim in the language of contract” to state a claim. Rivera v. Wyeth-Ayerst Lab’ys., 283 F.3d 315, 320 (5th Cir. 2002); see also Wallace v. ConAgra Foods, Inc., 747 F.3d 1025, 1030 (8th Cir. 2014). Excluding the “no-injury” proposed class members, and even accepting as plausible plaintiffs’ estimation of the oil filters at issue that actually were defective and failed, they simply could not meet the jurisdictional threshold for damages. Of the three named class members, only one sustained engine failure that cost $10,000. The filter failure on the other two motorcycles resulted simply in oil leaking onto their rear tires. The math just didn’t work for plaintiffs with so many non-defective, non-failing filters.