A federal appeals court says owners and lessees of BMWs fitted with allegedly defective Bridgestone tires can’t sue as a class under the New Jersey Consumer Fraud Act.
In Marcus v. BMW of North America, 11-1192/1193, decided Tuesday, the court found that the judge below improperly certified a subclass by applying a presumption of causation to find that common issues of fact would predominate in satisfaction of Rule 23(b)(3).
If “the truth behind alleged defects is knowable and if evidence suggests that class members did not react to information about the product they bought or leased in a sufficiently similar manner such that common issues of fact would predominate, then certification is improper,” wrote Third Circuit Judge Thomas Ambro for the panel.
Lead plaintiff Jeffrey Marcus, a New York resident, sued in 2008, claiming his BMW, leased in New Jersey, was fitted with Bridgestone “run-flat” tires that needed replacement four times during his three-year lease.
Run-flat tires have self-supporting sidewalls that allow them to run for up to 150 miles after a puncture, even with complete pressure loss. Marcus claimed the tires’ stiffness made them more susceptible to damage during contact with common road hazards, but later asserted that their “low profile” — or stoutness relative to height — was the true design flaw.
Marcus claimed, under common-law principles and the CFA, that BMW and Bridgestone were aware of the defects but concealed that knowledge. The companies failed to inform customers that the tires are difficult or impossible to repair; that the tires are more expensive than conventional counterparts; and that BMW vehicles, by design, accommodate only the run-flat tires, so he may not opt to fit his vehicle with less-expensive radial tires, he contended.
In November 2010, U.S. District Judge Katharine Hayden in Newark declined to certify a national class but ordered certification for all current and former owners and lessees of 2006 through 2009 BMWs sold or leased in the state and equipped with Bridgestone run-flat tires that went flat.
Reversing, the panel said Hayden applied a presumption of causation without accounting for what the purchasers and lessees expected, which “depends on what information, if any, about the alleged defects was available during the class period and whether that class member knew about it.”
“If class members could have known of the alleged defects and the evidence shows that they do not react to information about the cars and tires they purchased or leased in a sufficiently uniform manner, then individual questions related to causation will predominate” rather than common questions, wrote Ambro, joined by Michael Chagares and Ruggero Aldisert.
The panel cited two New Jersey Supreme Court rulings — International Union of Operating Engineers Local No. 68 Welfare Fund v. Merck & Co., 929 A.2d 1076 (N.J. 2007), and Lee v. Carter-Reed Co., LLC, 4 A.3d 561 (N.J. 2010) — in which the court held that plaintiffs with knowledge of alleged fraud cannot succeed under the CFA.
Those rulings “convince us that, before applying a ‘presumption of causation’ to an NJCFA claim, a court must consider not only the defendants’ course of conduct, but also that of the plaintiffs.”
The panel added that Hayden abused her discretion in finding common proof of proximate causation as to Marcus’ common-law claims — breach of implied warranty of merchantability, contract, and the implied covenant of good faith and fair dealing — because she ignored “an undisputed, fundamental point: any tire can ‘go flat’ for reasons completely unrelated to their defects.”
Moving forward with the subclass would require an individualized inquiry as to why each member’s tire went flat, Ambro said. Marcus’ “own experience illustrates the problem” because two of his four damaged tires were punctured by sharp objects in the road that would have damaged beyond repair any kind of tire, run-flat or not.
Hayden’s finding on numerosity “crossed the line separating inference and speculation” because she used evidence of national-class numerosity to assume numerosity of the subclass, Ambro wrote.
Ascertainability of the class, too, is in question because it will be nearly impossible to figure which vehicles were sold or leased with the Bridgestone run-flats — as opposed to a different tire — and which of those needed replacement, the panel said.
Ambro also noted that on remand, the class should be better defined because it could include, as currently worded, vehicles obtained in places other than a BMW dealership, and used vehicles bought out of state that were originally bought in New Jersey.
Hugh Whiting of Jones Day in Cleveland argued for Bridgestone; Christopher Dalton of Buchanan Ingersoll & Rooney in Newark, for BMW; and Karin Fisch of Abbey, Spanier, Rodd & Abrams in New York, for Marcus. None returned a call.