UNITED STATES DISTRICT COURT, SOUTHERN DISTRICT OF NEW YORK
March 30, 1982
Richard L. FEINSTEIN, et al., Plaintiffs,
The FIRESTONE TIRE AND RUBBER CO., Defendant; Irving KANTER, etc., Plaintiff, v. FIRESTONE TIRE AND RUBBER CO., Defendant; Mary JACKS and Eileen Miller, etc., Plaintiffs, v. FIRESTONE TIRE AND RUBBER CO., INC., Defendant
The opinion of the court was delivered by: HAIGHT
MEMORANDUM OPINION AND ORDER
Plaintiffs in the three captioned actions move for class certification under Rule 23, F.R.Civ.P. The defendant in each case is The Firestone Tire & Rubber Company ("Firestone"). The cases arise out of a series of failures of Firestone-manufactured steel belted radial tires, which in 1978 prompted reports by the National Highway Traffic Safety Administration ("NHTSA") and the Committee on Interstate and Foreign Commerce of the United States House of Representatives. In response to the NHTSA report, Firestone entered into a voluntary recall program of the tires in question. Alleged defects in Firestone tires have also spawned numerous specific actions for death, injury or damage; and, as in the three cases at bar, more far-reaching, putative class actions, based upon various theories of recovery.
Firestone contends that none of the captioned cases is appropriate for class certification under Rule 23, the pertinent provisions of which appear in the margin.
The three actions now pending in this Court may be summarized as follows:
1. The Feinstein Action. The Feinstein action was commenced in this Court in 1978. The named plaintiffs' amended complaint seeks to certify a class of persons and entities who:
"... (a) owned Firestone 500 steel belted radial tires ("Firestone 500's') manufactured by defendant, The Firestone Tire & Rubber Company ("Firestone') commencing with the date of the applicable statute of limitations and terminating with entry of judgment herein (the "Class Period'); and (b) owned Firestone TPC steel belted radial tires ("TPC's') commencing with the date of the applicable statute of limitations and terminating with entry of judgment herein."
Jurisdiction is asserted under the Magnuson-Moss Warranty Act, 15 U.S.C. § 2301 et seq.,
and under principles of state statutory and common law. Firestone asserts, and plaintiffs do not dispute, that such a class would cover approximately 43,000,000 tires and approximately 12,000,000 or more putative class members. During the course of preliminary hearings in the case, counsel for the Feinstein plaintiffs have narrowed the claims asserted on behalf of the class to claims for breach of an implied warranty of merchantability under the Uniform Commercial Code, §§ 2-314 and 2-714.
That is to say, the putative Feinstein class members assert no claims for death, injury or accident-related property damage resulting from their use of Firestone tires. The claims of this class are limited to claims for "economic damages" arising out of the cited sections of the UCC, and for punitive damages.
2. The Kanter Action. The Kanter action was originally filed in the Supreme Court of the State of New York, New York County. Firestone removed the action here. Kanter's complaint originally sought class certification under Article 9 of the NYCPLR; having been removed to this Court, he now invokes Rule 23. Kanter seeks certification as representative of a class consisting of individuals and entities "who are residents of the State of New York and purchased Radial 500's between December 1, 1975 and January 1, 1978," the class to include "persons who purchased such tires as original equipment on their automobiles or as replacement tires." Firestone asserts, and the plaintiff Kanter does not deny, that this class would include 574,000 tires and 160,000 putative class members. The theories of liability asserted in Kanter include, in addition to breach of the implied warranty of merchantability, strict liability in tort, negligence, reckless disregard, fraud and deceit. The complaint in Kanter prays for "the amount of actual damages sustained by plaintiff and each member of the class"; "a recall of all Radial 500 tires sold to residents of New York which are still in use"; and "the replacement on a fairly adjusted basis of all Radial 500 tires which are recalled with steel-belted radial tires which are safe and free of defects or the equivalent in dollars."
3. The Jacks Action. The Jacks action was originally commenced in the United States District Court for the Northern District of Ohio, Eastern Division. That court (William K. Thomas, District Judge) granted Firestone's motion under 28 U.S.C. § 1404(a) to transfer the case to this Court for consolidation with Feinstein. The named plaintiffs in Jacks, also invoking the Magnuson-Moss Warranty Act and Ohio law, seek to certify a class which:
"... consists of all purchasers of Firestone Steel belted radial automobile tires (hereinafter "Radial'), or their equivalent sold under another name, including persons who purchased said tires as original equipment on new cars or from third party vendors under private label."
Firestone alleges, and the Jacks plaintiffs do not dispute, that such a class would include approximately 47,000,000 tires and approximately 13,700,000 or more persons. The amended complaint asks that the conduct of Firestone be found violative of the Magnuson-Moss Warranty Act, and that its actions also be condemned as constituting "common law fraud," as well as in violation of Ohio law "and similar laws of other states." Plaintiffs in Jacks demand alternative compensation to all members of the class as follows:
"(i) To require a return of said tires and recover the original purchase price.
"(ii) To require a return of said tires and acceptance of a new non-defective tires.
"(iii) To require the payment of money damages for actual and consequential damages incurred.
"(iv) To require the payment of punitive damages in the amount of $ 10,000.00 for each purchaser of said tires."
The Jacks plaintiffs also request preliminary and permanent injunctive relief in respect of further sales of defective tires and disclosure of existing defects.
The appropriateness of these actions for class certification under Rule 23 are considered seriatim, and in the order summarized above.
Class Certification of the Feinstein Action
Before a class action may be maintained under Rule 23, the action must meet the prerequisites of Rule 23(a), and one set of the alternative requirements of Rule 23(b).
Of the four specified Rule 23(a) prerequisites, usually identified by the shorthand names "numerosity," "commonality," "typicality" and "adequacy," Firestone concedes only numerosity, and contests the others. In addition to these specific Rule 23(a) requirements, the courts have implied two others: (1) there must be an identifiable class, and (2) the class representatives must be members of that class. 7 Wright and Miller, Federal Practice and Procedure (1972), §§ 1760, 1761 at 579-592. Firestone challenges the presence of both factors. Finally, if the class is certifiable only under Rule 23(b)(3), it must appear (1) that questions of law or fact common to class members predominate over questions affecting only individual members, and (2) that a class action "is superior to other available methods for the fair and efficient adjudication of the controversy." Firestone contends that the Feinstein class is arguably certifiable only under Rule 23(b)(3), and that neither of these two additional requirements is shown. The burden of persuasion on all disputed issues falls on plaintiffs, as the proponents of class certification. Greeley v. KLM Royal Dutch Airlines, 85 F.R.D. 697 (S.D.N.Y.1980).
I hold that this case may be certified, if at all, only under Rule 23(b)(3).
That being so, one of the decisive issues is whether common questions of law or fact "predominate" over individual questions. Firestone vigorously attacks certification on that ground.
It is necessary to analyze the nature of the putative class's claims, and the proof that would be adduced in support of them. While recitation in the complaint of common questions of fact or law may satisfy bare pleading requirements, when a motion for certification is made the Court must look beyond the labels employed, and, on the basis of the record developed since filing, determine whether it is in fact confronted with a legitimate class action.
As noted supra, the Feinstein plaintiffs now limit their claims and that of the putative class to claims of economic damage arising out of breach of implied warranties under U.C.C. §§ 2-314 and 2-714. Section 2-314 establishes the basis of liability. Under its terms, "a warranty that the goods shall be merchantable is implied in a contract for their sale"; to be merchantable, the goods "must be at least such as ... (c) are fit for the ordinary purposes for which such goods are used." If the buyer proves a breach of implied warranty of merchantability, § 2-714 comes into play, and provides inter alia that "the measure of damages is the difference at the time and place of acceptance between the value of the goods accepted and the value they would have had if they had been as warranted ..." § 2-714(2). The Feinstein plaintiffs' substantive allegations of fault (amended complaint, paras. 155, 156) read as follows:
"155. In connection with manufacture and sales of the Firestone 500's and Firestone TPC's, Firestone warranted that the tires were of merchantable quality and were fit for the purpose intended, including their mounting upon an automobile for use by the plaintiffs and the Class.
"156. Firestone 500's and Firestone TPC's are not of merchantable quality and are not fit for the use intended. Upon information and belief, as a result of their defective conditions, the plaintiffs and the Class have suffered or will suffer blowouts, tread separation and chunking, steel belt separation, or shifting, bead distortion, sidewall blisters and cracks, and out of round conditions."
Damages are prayed for "in an amount to be determined at trial"; plaintiffs' briefs make it clear that they claim economic damages accruing at the time they purchased their tires, as measured generally by § 2-714(2).
Firestone offers credible evidence that during the years in question "the great majority" of types of tires in suit "remained failure free throughout the time they were used," meeting or exceeding the maximum express treadwear mileage guarantee of 40,000 miles.
Indeed, certain plaintiffs whose depositions have been taken acknowledge that their Firestone tires led full and uneventful lives. Plaintiffs do not dispute this evidence. I am, therefore, led to conclude that in respect of the considerable majority of Firestone tires covered by this litigation, the "rubber met the road" and continued to do so, without incident, during their predicted lives of service.
That raises the question of whether the owners of such tires have suffered any damages. Plaintiffs say they have. They claim that all Firestone tires contained common defects; and their damage theory is stated succinctly in their reply brief at 26: "... the Feinstein plaintiffs' claim is that the purchase of a defective tire, ipso facto, caused economic loss."
No persuasive authority is cited for that proposition, and I reject it. Tires which lived full, productive lives were, by demonstration and definition, "fit for the ordinary purposes" for which they were used; hence they were "merchantable" under U.C.C. § 2-314, and no cause of action for breach of an implied warranty can arise. This is quite basic; as comment 13 to § 2-314 observes:
"In an action based on breach of warranty, it is of course necessary to show not only the existence of the warranty but the fact that the warranty was broken and that the breach of the warranty was the proximate cause of the loss sustained."
Plaintiffs' cause of action based upon the Magnuson-Moss Act does not change this result. 15 U.S.C. § 2310(d)(1) extends the Act to a consumer "who is damaged by the failure" to comply, inter alia, with an implied warranty (emphasis added). Liability does not exist in a vacuum; there must be a showing of some damage, which then may lead to further issues of quantum. Judge McGarr, certifying a class action under Magnuson-Moss in In re General Motors Corporation Engine Interchange Litigation, MDL Docket No. 308 (N.D.Ill. Oct. 13, 1977), articulated that distinction at slip op. 7:
"The court is convinced that the issues of liability and the fact of damage can be tried separately from the issues involved in determination of individual damages. Therefore, the class is certified for the purpose of establishing liability only." (emphasis added).
In the case at bar, I hold that tire owners whose tires performed to their entire satisfaction cannot demonstrate, as a matter of law, the "fact of damage" necessary to state a claim under Magnuson-Moss.
The principle is further illustrated by Skelton v. General Motors Corp., 500 F. Supp. 1181, 1191-92 (N.D.Ill.1980), reversed on other grounds, 660 F.2d 311 (7th Cir. 1981). Plaintiffs, purchasers of automobiles manufactured by defendant General Motors, sought to bring a nationwide class action under Magnuson-Moss on behalf of all purchasers of GM automobiles manufactured from 1976 through 1979. Plaintiffs asserted that brochures, manuals, consumer advertising, and other publications warranted and represented that the cars contained "THM 350 (M38) transmissions," which "would meet a specified level of performance," but that GM had made an undisclosed substitution of an inferior THM 200 transmission. This was alleged to constitute, inter alia, the breach of an implied warranty under Magnuson-Moss. The district court, looking "to state law to determine the scope of implied warranties" under § 2301(7) of the Act, 500 F. Supp. at 1191, arrived (as do the present plaintiffs) at U.C.C. § 2-314. The court posed the question as follows:
"The implied warranty of merchantability does not impose a general requirement that goods precisely fulfill the expectations of the buyer. Instead, it provides for a minimum level of quality-that the goods "are fit for the ordinary purposes for which such goods are used.' U.C.C. § 2-314(2)(c). Automobiles are designed for driving, and therefore the question in this case is whether the GM vehicles at issue were fit for that purpose." Ibid.
After reviewing Illinois interpretations of the Code, the court in Skelton answered that question in the affirmative:
"The complaint here describes a less extreme situation. The plaintiffs allege that the substitution of THM 200 transmissions was "a material change' in the cars, and that these transmissions are "more expensive to maintain' and "less desirable to the purchasing public than THM 350 (M38) Transmissions.' Second Amended Complaint at 5. These statements fall short of alleging a breach of implied warranties, since they do not suggest that the cars were unfit for driving or below a minimally acceptable standard of quality." Id. at 1192.
The case at bar does not turn on the adequacy of plaintiffs' pleading, but rather upon the actual performance of Firestone's tires, as revealed by the record developed between filing the complaint and moving for certification. The majority of the tires sold to putative class members, by doing what they were supposed to do for as long as they were supposed to do it, clearly lived up to that "minimum level of quality" which is all U.C.C. § 2-314(2)(c) requires. Thus no claim for breach of an implied warranty is maintainable in respect of such tires. Plaintiffs' bald assertion that a "common" defect which never manifests itself "ipso facto caused economic loss" and breach of implied warranty is simply not the law.
Since it appears that the majority of the putative class members have no legally recognizable claim,
the action necessarily metastasizes into millions of individual claims. That metastasis is fatal to a showing of predominance of common questions. Those class members whose tires had performed as warranted would have to be identified and eliminated from the action. Myriad questions would confront the survivors, including the manner in which the alleged breach of warranty manifested itself, and other possible causes of the problem encountered.
This situation simply does not lend itself to class treatment.
I hold that view, even accepting arguendo plaintiffs' assertion that they can prove "common defects" in Firestone tires.
Within the context of a suit for breach of implied warranty a "defect" is of legal significance only if it renders a tire unfit for its ordinary purpose; and the undisputed evidence of actual performance is that the majority of the Firestone tires, whatever their imperfections may have been, did not have defects making them unfit for their intended use. I am quite prepared to judicially notice the facts of NHSTA and Congressional concern, if not the contents of their reports; and to infer from that concern that an unusual and worrying number of Firestone tires failed. But most did not. Neither the fact of governmental concern nor plaintiffs' allegations of "common defects" can transform this litigation, involving millions of purchasers of millions of tires, into an action where common questions of fact or law predominate.
Throughout their briefs plaintiffs rely upon In re General Motors Corporation Engineer Interchange Litigation, supra, and In re Agent Orange Product Liability Litigation, supra, where classes were certified. These cases are very different, and the differences serve to highlight the difficulties inherent in the present case.
The Engineer Interchange litigation arose out of General Motors' decision to put Chevrolet engines in its 1977 Oldsmobiles, and to install in certain 1977 Oldsmobiles transmissions originally designed for Chevettes. Oldsmobile purchasers were told nothing of these changes. The district court certified a nationwide class of individuals "who purchased 1977 Oldsmobile automobiles and who received Oldsmobile automobiles which, without their knowledge or consent, contained V-8 engines manufactured by the Chevrolet Motor Division of General Motors Corporation." The district court then approved a settlement of the class action, an approval which the Seventh Circuit reversed for reasons not pertinent here. 594 F.2d 1106 (7th Cir.), cert. denied, 444 U.S. 870, 100 S. Ct. 146, 62 L. Ed. 2d 95 (1979). The proposed settlement called for General Motors to provide to each class member $ 200 in cash, plus a 36-month or 36,000 mile extended warranty on the power train, the latter element in recognition of the claimed inadequacies of the substituted transmissions.
It is obvious that the Engine Interchange litigation bears no meaningful resemblance to the case at bar. In Engine Interchange, the manufacturer substituted inferior major parts, concealing that substitution from the Oldsmobile purchasers, who remained under the impression that they were purchasing, along with Oldsmobile bodies, Oldsmobile engines and transmissions. That subterfuge either inflicted a legal injury upon all Oldsmobile purchasers or none of them; the decisive questions of fact and law were common to all class members. Furthermore, it was at least arguable as a common question (but see Skelton, supra) that economic losses were suffered at the time of purchase by car buyers who paid for Oldsmobiles and received what were, in significant aspects, disguised Chevrolets.
Similarly, in the Agent Orange litigation, the herbicide to which the troops serving in Vietnam were exposed, was either offensive in the physical and legal senses or not; and the servicemen and their families either had legal remedies or not. Again, decisive common questions of law and fact predominated, as appears from Judge Pratt's analysis set out in the margin.
In the case at bar, the two decisive questions of fact-the existence vel non of "damage in fact," and causation-must be decided with respect to each individual Firestone purchaser and each tire. That is sufficient to preclude class certification.
In the light of this holding, I need not discuss at length the other objections to certification made by Firestone. But certain of them raise additional substantial questions. I will deal briefly with two of these: the lack of commonality of questions of law, and the adequacy of the Feinstein plaintiffs as representatives of the putative class.
As to questions of law, we have noted that the Magnuson-Moss Act, in respect of claims for breaches of implied warranty, looks to state law for the definition of what an "implied warranty" is. Plaintiffs say this causes no difficulty, since U.C.C. §§ 2-314 and 2-714 "are identical in 49 states and provide a uniform legal basis for its resolution." That is an over-simplification; even within the U.C.C. implied warranty umbrella, state law may differ in such significant areas as vertical privity
and the availability of punitive damages.
In the Engine Interchange litigation, Judge McGarr, while certifying a class under Magnuson-Moss, refused to certify a class in respect of implied warranty claims implicating the U.C.C., stating at slip op. 8: "Though the Commercial Code is uniform throughout forty-nine states, each jurisdiction has developed its own interpretation of the Code, thus leading to potentially conflicting legal authorities."
The extent to which the Feinstein plaintiffs are prepared to strain in order to achieve class certification is reflected by the suggestion, reply brief at 34, that this Court solve any choice of law problems "by selecting the law of the one state which has the most substantial interests with the issues before the court." What state might that be? Plaintiffs suggest Ohio, which in their view, as "the principal place of business of Firestone, has the most significant contacts with this action," reply brief at 34 fn.; Ohio also has the apparent advantage for plaintiffs of allowing punitive damages to be recovered in certain breach of warranty cases. Ibid. However, as Firestone correctly points out, this federal court sitting in New York is required, either under Magnuson-Moss jurisdiction or diversity jurisdiction, to look to New York choice-of-law rules. New York follows the "grouping of interests" or "center of gravity" approach in both contract and tort cases, Babcock v. Jackson, 12 N.Y.2d 473, 240 N.Y.S.2d 743, 191 N.E.2d 279 (1963); George v. Douglas Aircraft Co., 332 F.2d 73 (2d Cir.), cert. denied, 379 U.S. 904, 85 S. Ct. 193, 13 L. Ed. 2d 177 (1964). That requires identifying "the law of the state with the most substantial interest in the issue in question," Wheeler v. Standard Tool and Manufacturing Co., 359 F. Supp. 298, 301 (S.D.N.Y.1973), aff'd, 497 F.2d 897 (2d Cir. 1974). Plaintiffs do not persuade me that Ohio satisfies that requirement in a case involving a tire which was, say, manufactured in Pennsylvania, purchased in Massachusetts, and had its defects manifest themselves in New Jersey.
Secondly, a serious question of adequacy of representation arises when the class representatives profess themselves willing, as they do here, to assert on behalf of the class only such claims as arise from breach of an implied warranty. Plaintiffs' contemplation is that other claims, such as those for death, injury, accident-related property damage, or other consequential damage, may be pursued in other courts. It is fair to say that, during the course of preliminary hearings in this case, plaintiffs so tailored the class claims in an effort to improve the possibility of demonstrating commonality. But that improvement-essentially cosmetic, as the foregoing analysis demonstrates-was purchased at the price of presenting putative class members with significant risks of being told later that they had impermissibly split a single cause of action.
Plaintiffs suggest that this problem be dealt with by excluding from the class those tire owners "who have already asserted a claim against Firestone," and by providing in a judgment or settlement of this action that any recovery by a class member must be "conditioned upon his acknowledging in writing the possibility that he may be waiving other rights." Reply brief at 47-48. This is simply another example of the plaintiffs suggesting an awkward and inadequate solution to an inherently insoluble certification problem. But this putative class vessel is so overladen with problems of unfairness and unmanageability that it capsizes and sinks.
Class certification of the Feinstein action is denied.
Class Certifications of the Kanter and Jacks Actions
No extended discussion is required to demonstrate that neither the Kanter nor the Jacks action may receive class certification. The same obstacles confronting Feinstein apply to Kanter and Jacks; and those obstacles are compounded by the much broader relief sought on behalf of the putative members of these two classes. Thus the complaint in Kanter invokes strict tort liability and fraud theories, in addition to breach of implied warranty, and claims the total of "actual damages sustained" by each member of the class. The Jacks action adds to a Magnuson-Moss Act cause of action claims for fraud under the common law and under the laws of all the states of the union, and demands recovery for "actual and consequential damages incurred" by every class member. It is precisely this breadth of claim and invocation of differing laws which prompted Judge McGarr in the Engine Interchange litigation to deny class certification to all claims except for breach of an express warranty under Magnuson-Moss.
Judge Bryan of the Eastern District of Virginia reached the same conclusion in denying class certification in Farris v. Firestone Tire & Rubber Co., Inc., Civ. No. 78-711-A (E.D.Va. March 9, 1979).
While I recognize the general remedial purposes of Rule 23 and the class action provisions of the Magnuson-Moss Warranty Act, they can be relied upon by litigants, and administered by the courts, only in accordance with their terms and conditions, and in circumstances where the furtherance of justice is promoted, not hindered. In the cases at bar, those terms and conditions have not and cannot be met, and those circumstances are not present. To certify any of these actions as class actions would be to unleash a Frankenstein monster of unmanageability, weighted down with individual questions of fact and law which clearly predominate, to the potential disadvantage of the litigants, and to the certain prejudice of the orderly disposition of such enforceable legal claims as may arise from the public's ownership and use of Firestone tires.
The motions for class certification are denied.
It is So Ordered.