Mercedes-Benz Class Action Defense Cases–In re Mercedes-Benz: New Jersey Federal Court Grants Class Action Treatment To Class Action Claims For Unjust Enrichment And Consumer Fraud Based On Analog-Based Tele Aid Sales

May 13, 2009 | By: Michael J. Hassen

Nationwide Class Action Complaint Alleging Unjust Enrichment and Violations of New Jersey’s Consumer Fraud Act Claims Warranted Class Action Treatment because Sale by Mercedes of Analog-Based Tele Aid Systems Involved Common Issues that Predominated over Individual Issues and because Balance of Rule 23’s Requirements for Class Action Certification had been Satisfied New Jersey Federal Court Holds

Ten separate class action lawsuits were filed in six different states against Mercedes-Benz and other defendants arising from vehicles equipped with the “Tele Aid” emergency response system; Mercedes-Benz moved the Judicial Panel on Multidistrict Litigation to consolidate the class action complaints for pretrial purposes, pursuant to 28 U.S.C. § 1407. In re Mercedes-Benz Tele Aid Contract Litig., ___ F.Supp.2d ___ (D.N.J. April 27, 2009) [Slip Opn., at 5]. The Judicial Panel granted the motion, and the various class actions were transferred to New Jersey, id., at 5-6. (The district court observed that the amount in controversy exceeds $5,000,000 and that minimal diversity exists; accordingly, the court had jurisdiction under the Class Action Fairness Act (CAFA). Id., at 2.) Once the class actions were centralized, the district court appointed interim class counsel and directed counsel to file a consolidated amended class action complaint, id., at 6. The putative nationwide class action complaint alleged causes of action for common law unjust enrichment and violations of the New Jersey Consumer Fraud Act “premised on the contention that Mercedes made statements or omissions of material facts that it knew or should have known were false or misleading when promoting vehicles purchased by Plaintiffs that were equipped with ‘Tele Aid,’ an emergency response system which links subscribers to road-side assistance operators by using a combination of global positioning and cellular technology.” Id., at 2-3. At bottom, the class action claims are premised on the theory that Mercedes knew “that the analog network on which the Tele Aid systems contained in their vehicles depended would cease to function in 2008, but continued to market Tele Aid without disclosing that fact.” Id., at 6. Plaintiffs’ attorneys moved the district court to certify the litigation as a class action; defense attorneys argued against class action treatment. Id., at 1. The district court determined that class action treatment was warranted and therefore granted plaintiffs’ class action certification motion.

The district court explained that plaintiffs’ task at the class action certification stage was to demonstrate that the claims in the class action complaint were susceptible to common proof at trial rather than relying on evidence that is individual to the putative class members. In re Mercedes-Benz, at 4. Plaintiffs’ motion for class action treatment was supported in part by three expert reports; the experts supported plaintiffs’ claim that Mercedes failed to adequately inform customers that analog service would terminate at the end of 2007, even though “discontinuation of analog service in early 2008 was a regulatory certainty at the time the FCC finalized its rule on August 8, 2002.” Id., at 3. “Mercedes began including Tele Aid systems in most of its vehicles in 2000,” id., and “touted its ability to provide subscribers with emergency road-side assistance, remotely unlock doors, and track stolen vehicles,” id., at 7. Certain of these vehicles relied solely on analog signals over wireless telephone networks; the company subsequently sold vehicles that were capable of using both analog and digital signals. Id. We do not discuss the facts in greater detail here, see id., at 7-12. The basis of plaintiffs’ class action certification motion was that “this case is particularly well-suited to class treatment because (1) their claims ‘arise from a single course of conduct that affect[ed] large numbers of consumers,’ and (2) the costs to each class member of pursuing his or her suit would exceed any potential recovery.” Id., at 13. Defense attorneys opposed class action treatment because (1) a nationwide class should not be certified as the claims of each named plaintiff are governed by the laws of their respective home states, which differ in material ways, and (2) common questions of fact do not predominate. Id., at 13-14.

After discussing the general rules governing class action certification under Rule 23, see In re Mercedes-Benz, at 14-16, and after determining that New Jersey governed plaintiffs’ class claims, see id., at 16-46, the federal court turned to its analysis of the elements of Rule 23(a). The district court readily found that Rule 23(a)(1)’s numerosity requirement was plainly satisfied given that the size of the class likely contained hundreds of thousands of customers. Id., at 47-48. (Further, Mercedes “effectively conceded” that numerosity had been met, id., at 48 n.12.) The court concluded further that the commonality test of Rule 23(a)(2) had been met. All that is required is that the named plaintiffs “share at least one question of fact or law with the grievances of the prospective class,” a test that “is easily met,” id., at 48 (citations omitted); the federal court found that “the vast majority of the factual and legal questions that will be addressed at trial are common to all members of the proposed class,” id., at 49. Similarly, Rule 23(a)(3)’s typicality requirement was “clearly satisfied” because the class action alleged that all putative class members “suffered the same harm” – viz., the “impending obsolescence” of analog-only Tele Aid systems. Id., at 50. And finally, the district court had no difficulty in finding that Rule 23(a)(4)’s adequacy of representation requirement had been met. See id., at 50-51.

The federal court then turned to whether class action treatment was warranted under Rule 23(b)(3), that is, whether a class action was the superior means of resolving the dispute and whether common questions of law or fact predominate over individual issues. In re Mercedes-Benz, at 51 et seq. With respect to the predominance prong, the federal court found that, with respect to both the unjust enrichment and consumer fraud claims, “virtually all of the legal and factual issues which will be adjudicated at trial are common to the class.” Id., at 52. (We do not here discuss the court’s analysis in detail. See id., at 52-58.) And finally, the district court found that class action treatment would be “the most efficient method for adjudicating Plaintiffs’ claims,” particularly because “[i]ndividual class members have little to no interest in controlling the prosecution of separate actions,” id., at 58, and because a trial would not be unmanageable, id., at 59. Accordingly, the court granted plaintiffs’ motion and certified a nationwide class action, defining the class at page 59 as: “All persons or entities in the United States who purchased or leased a Mercedes-Benz vehicle equipped with an analog-only Tele Aid system after August 8, 2002, and (1) subscribed to Tele Aid service until being informed that such service would be discontinued at the end of 2007, or (2) purchased an upgrade to digital equipment.”

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