CLRA gives broad protections

• Hanson reports CLRA gives broad protections, courts say.

TRIAL BAR NEWS, CONSUMER ATTORNEYS OF SAN DIEGO, February 2006: New Guidance for Consumers Legal Remedies Act Claims: Chamberlan v. Ford Motor Co., 369 F.Supp.2d 1138 (N.D.Cal. 2005)

By: John W. Hanson, JD, LLM
Rosner, Law & Mansfield

Although the Consumers Legal Remedies Act (“CLRA”) has been on the books since 1970, there remain a surprising number of elements that have never been addressed (or only scantily addressed) in published decisions. That has significantly changed with Judge Claudia Wilken’s May 2005 decision in Chamberlan v. Ford Motor Company, 369 F.Supp.2d 1138 (N.D.Cal. 2005). Among the many issues decided in that case were (1) whether pure omissions are actionable under the CLRA, (2) whether a duty to disclose is a required element; (3) what is sufficient proof of causation, materiality and/or reliance, (4) whether the “discovery rule” applies to the three-year CLRA statute of limitations, and (5) what is “damage” for purposes of the CLRA. On every question, Judge Wilken decided in favor of the consumer plaintiff and a liberal interpretation of the CLRA. This, combined with the enactment of the Class Action Fairness Act of 2005, which surely means similar cases in the future will be brought in federal court, undoubtedly makes this case one of the more important consumer rights decisions of 2005.

The case involved allegedly defective intake manifolds installed in several models of Ford Motor Company automobiles over the course of several years. Chamberlan, 369 F.Supp.2d at 1141-42. The manifolds in question were composed of plastic, rather than the usual aluminum, and were alleged to wear out significantly earlier than the aluminum versions and well before the rest of the car. Id. at 1142-43. Plaintiff alleged that Ford knew that the plastic manifolds were defective prior to all of sales. Ford had, in fact, at one point offered a replacement manifold to certain fleet vehicle buyers, such as police departments and taxi services. Id. at 1142. Apparently no such offer was made to non-business consumers, however.

Chamberlan was brought (and eventually certified) as a class action on behalf of “consumers residing in California who currently own, or paid to repair or replace the plastic intake manifold” in any of the subject vehicles. See Chamberlan v. Ford Motor Co., 23 F.R.D. 524, 525 (N.D.Cal. 2004). The class covered a several year period from the sale of the first vehicle with a plastic intake manifold. The complaint asserted only CLRA and UCL claims for consumer fraud. No breach of warranty or tort claims were involved.

Ford moved for summary judgment on the CLRA cause of action generally and as to particular subsets of the class.¹ Plaintiffs prevailed on all counts, except as to a limited subset of class members who purchased the very earliest vehicles prior to the first complaints of the defect. Chamberlan, 369 F.Supp.2d at 1149, 1151.

The Court began its analysis by clarifying several important elements of the CLRA cause of action. First, the Court denied Ford’s claims that a CLRA cause of action must show the existence of a duty of reasonable care and an intentional breach of that duty. Id. at 1144. The issue of duty appears to have arisen from the fact that the class plaintiffs were buyers of used cars and, therefore, not in privity of contract with Ford. The Court in response clearly states that the duty of manufacturers runs to even subsequent sales of used products. Id. In so holding, the Court rejected a variety of court decisions that appeared to have applied common law fraud requirements to CLRA causes of action. Id.

The Court went on to find also that pure omissions were actionable under the CLRA. Id. at 1145. The CLRA uses the terms “misrepresenting” or “representing” several times, but never uses the term omission. See Cal.Civ.Code §1770. Nevertheless, the Court, in keeping with the required liberal construction of the CLRA, (see Cal.Civ.Code §1760), broadly construed misrepresentation to encompass pure omission. Id.

Of particular noteworthiness to the class-action practitioner is the Court’s next area of discussion – materiality. California law has long been clear that, in an omission/concealment case, causation as to each class member is commonly proven by the materiality of the omission. Massachusetts Mutual Life Ins. Co. v. Superior Court (2002) 97 Cal.App.4th 1282; Hunter v. McKenzie (1925) 197 Cal. 176. The Court reaffirmed that materiality is judged by a “reasonable consumer” standard. Chamberlan, 369 F.Supp.2d at 1145. The Court made several comments about how to establish what are the “reasonable consumer’s”expectations. First, the Court held that “anecdotal evidence” alone would be insufficient. Id. The testimony of several class members, therefore, was insufficient proof to withstand summary judgment regarding whether the reasonable consumer would have behaved differently had the defectiveness of the plastic manifolds been disclosed. Id. The Court, however, accepted the testimony of plaintiff’s expert auto mechanic that consumers do not expect such parts to fail during the normal life of their vehicles. Id. at 1145 n.3. This was sufficient in the Court’s opinion to place the matter before the jury despite Ford’s objection that a marketing specialist, rather than an auto mechanic, would be the only appropriate expert. Id. Neither did the Court require testimony that consumers actually shopped for vehicles on the basis of particular parts like manifolds. Common sense, the Court explained, leads to the conclusion that the unusually premature failure of such an important part would be material. Id. at 1145. This leads to the question, unanswered in Chamberlan, whether expert testimony is required at all, since common sense and objective proof of the costliness of the defect may be available.

The Court next considered Ford’s claim that class members whose manifolds have not yet failed have suffered no cognizable damage and thus were missing a required element. The CLRA’s explicit language allows a consumer “who suffers any damage” to bring a claim. Cal.Civ.Code §1780(a). Plaintiffs presented expert evidence that all or nearly all of the class members’ manifolds would fail before the end of the useful life of the vehicle. Chamberlan, 369 F.Supp.2d at 1148. The Court accepted this evidence as sufficient based primarily on the holding of Hicks v. Kaufman & Broad Corp. (2001) 89 Cal.App.4th 908, 923, where the Court of Appeal held in a breach of warranty case that a plaintiff need only show that the defect is substantially certain to manifest during the product’s useful life. Notably, the Court in Chamberlan explicitly disregarded the dicta in Hicks that such a standard would not apply to products such as cars, which it described as having a limited useful life.² Chamberlan, 369 F.Supp.2d at 1147. The essential point made by the Court is that consumers were not getting the benefit of the bargain where there it is substantially certain that the product will fail before expected, and that this is sufficient “damage” to support a consumer fraud claim.³

The last point of significance covered by the Court regards the statute of limitations. The Court squarely held that the “discovery rule” applied to CLRA claims, something never before definitively found in a published opinion. Chamberlan, 369 F.Supp.2d at 1148 (“[The CLRA] statute of limitations’ runs from the time a reasonable person would have discovered the basis for a claim.”)(citing Mass. Mutual, 97 Cal.App.4th at 1295.) The Court went on to state in particular reference to the facts of that case that “[t]he mere fact that a consumer’s manifold failed does not necessarily mean that the person should have discovered Defendant’s alleged non-disclosure at that time.” Id. In other words, it is not the manifestation of the defect, but the discovery of the fraud related to the defect that triggers the statute of limitations.

In conclusion, the Chamberlan case should be a welcome addition to the consumer plaintiff’s arsenal in both individual and group actions. Furthermore, it should also be noted that Judge Wilken published several other decisions in this case that are more than worthy of review by class action and consumer lawyers generally. These include decisions granting class certification, Chamberlan v. Ford Motor Co., 23 F.R.D. 524 (N.D.Cal 2004), and denying federal preemption, Chamberlan v. Ford Motor Co., 314 F.Supp.2d 953 (N.D.Cal. 2004). Furthermore, the Ninth Circuit Court of Appeals in Chamberlan v. Ford Motor Co., 402 F.3d 952 (9th Cir. 2005), also issued a decision, and perhaps its first decision, applying the criteria of Federal Rule of Civil Procedure 23(f) review. Happy New Year and Happy Research!