United States District Court Eastern District of Michigan Southern Division
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Case 4:16-cv-14024-TGB-RSW ECF No. 60, PageID.<pageID> Filed 03/29/18 Page 1 of 31 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION JAMES BLEDSOE, et al., on be- half of themselves and all others similarly situated, Plaintiffs, v. Case No. 4:16-cv-14024 Hon. Terrence G. Berg FCA US LLC, a Delaware corpo- ration, and CUMMINS INC., an Indiana corporation, Defendants. OPINION AND ORDER GRANTING DEFENDANTS’ MOTIONS TO DISMISS WITHOUT PREJUDICE (Dkts. 26, 27) I. Introduction Plaintiffs in this proposed putative class action allege that Defend- ant FCA’s 2007-2012 Dodge Ram 2500 and 3500 diesel trucks (the “Trucks” or “Affected Vehicles”), equipped with 6.7-liter Turbo Diesel en- gines manufactured by Defendant Cummins Inc., emit nitrogen oxides (“NOx”) at levels in excess of federal and state emissions standards. The Complaint alleges violations of the Racketeer Influenced and Corrupt Or- ganizations Act (“RICO Act”), the Magnuson Moss Warranty Act (“MMWA”), as well as claims asserted under the respective laws of 49 states and the District of Columbia. Plaintiffs allege that Defendants Case 4:16-cv-14024-TGB-RSW ECF No. 60, PageID.<pageID> Filed 03/29/18 Page 2 of 31 marketed the Trucks as containing “clean diesel engines,” while they dis- charged emissions at levels greater than what a reasonable customer would expect based on the alleged representations. Defendants have moved for dismissal of Plaintiffs’ Complaint, which Plaintiffs oppose. Plaintiffs seek to bring claims on behalf of themselves and a nation- wide class of all persons or entities in the United States who, as of No- vember 1, 2016, owned or leased the following Trucks: 1. 2007-2010 Dodge Ram 2500 and 3500 with Cummins diesel (2WD, 4WD) 2. 2011-2012 Dodge Ram 2500 and 3500 with Cummins diesel (non-SCR systems, 2WD, 4WD). Plaintiffs also seek to establish sub-classes representing owners and/or lessees of the Trucks in every state and the District of Columbia, alleging deceptive advertising, breach of contract, and fraudulent con- cealment claims under the laws of those respective states. Pending before the Court are Defendants’ motions to dismiss plain- tiffs’ Consolidated and Amended Class Action Complaint (“Amended Complaint” or “Complaint”) pursuant, in part, to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). For the reasons outlined below, Defend- ants’ motions are GRANTED WITHOUT PREJUDICE. II. Background The United States Environmental Protection Agency (“EPA”) prom- ulgates emissions standards and regulations for manufacturers of diesel engines. Plaintiffs’ Complaint maintains that diesel engines, unlike their 2 Case 4:16-cv-14024-TGB-RSW ECF No. 60, PageID.<pageID> Filed 03/29/18 Page 3 of 31 gasoline counterparts, generate power by compressing a mist of liquid fuel and air to very high temperatures and pressures, causing the mix- ture to spontaneously combust. See Dkt. 22, Pg. ID 1540. One by-product of this diesel combustion process is the creation of oxides of nitrogen (“NOx”), which include a variety of nitrogen and oxygen chemical com- pounds that only form at high temperatures. Id. NOx emissions have been the target of EPA regulation, for the pollutant and harmful nature of nitrogen oxides is well documented.1 In January 2001, the EPA issued the “2010 NOx standard,” requir- ing NOx emissions from heavy-duty diesel engines be reduced by 95 per cent—to .20 grams of NOx per horsepower-hour—by no later than 2010. See 66 Fed.Reg. 5,002 (Jan. 18, 2001). The EPA exercised authority pur- suant to Section 202 of the Clean Air Act (“CAA”) in enacting this new standard. As one court explained, “[b]y delaying the effective date until 2010, [the] EPA gave [the] industry nine years to innovate the necessary new technologies.” Mack Trucks, Inc. v. E.P.A., 682 F.3d 87, 89 (D.C. Cir. 2012). The named Plaintiffs in this case are 15 alleged purchasers or les- sees of model year 2007-2012 Dodge Ram 2500 and 3500 heavy-duty trucks equipped with Defendant Cummins’ 6.7-liter turbo diesel engines. Defendant Fiat Chrysler Automobiles LLC (“FCA”) is a motor vehicle 1 Plaintiffs’ Complaint alleges that NOx is a toxic pollutant that contributes to ni- trogen dioxide, particulate matter in the air and certain health problems. See Dkt. 22, Pg. ID 1541 at ¶ 54. 3 Case 4:16-cv-14024-TGB-RSW ECF No. 60, PageID.<pageID> Filed 03/29/18 Page 4 of 31 manufacturer and a licensed distributor of new, previously untitled Chrysler, Dodge, Jeep, and Ram brand motor vehicles. Dkt. 22, Pg. ID 1537. Plaintiffs allege that FCA sells and leases the vehicles it manufac- tures, including the Trucks at issue in this case, through FCA franchise dealerships. Dkt. 22, Pg. ID 1538. Defendant Cummins Inc. is a Fortune 500 company that designs, manufactures, and distributes engines, filtra- tion, and power generation products. Dkt. 22, Pg. IDs 1538-39. Cummins Inc. manufactured the diesel engines for the Trucks at issue in this case. The Complaint alleges that each Plaintiff is similarly situated. Each purchased or leased a 2007-2012 model year Dodge Ram 2500 or 3500. These trucks were allegedly: [E]quipped with an emissions system that turned off or limited its emissions reduction system during normal driving conditions and emitted pollutants such as NOx at many multiples of emissions emit- ted from gasoline-powered vehicles, at many times the level a reason- able consumer would expect from a “clean Diesel,” and at many multi- ples of that allowed by federal law. See, e.g., Dkt. 22, Pg. ID 1510 at ¶ 27. Throughout their Complaint, Plain- tiffs allege that Defendants installed “defeat devices” in the Trucks, which resulted in significantly increased emissions when tested during normal driving as compared to when tested in laboratory settings.2 2 See, e.g., Dkt. 22, Pg. ID 1598 at ¶¶ 181-183; 1607 at ¶ 216; 1610 at ¶ 227; and 1611 at ¶ 228-29. The Complaint does not explicitly define “defeat device.” However, Plaintiffs do reference defeat devices in the Complaint that were identified by the EPA in a similar case. See Dkt. 22, Pg. ID 1503 at ¶ 8. The Court therefore inter- prets the Complaint’s use of the term “defeat device” to refer to a device “that cause[s] the vehicle to perform effectively when being tested for compliance, and 4 Case 4:16-cv-14024-TGB-RSW ECF No. 60, PageID.<pageID> Filed 03/29/18 Page 5 of 31 According to the Complaint, Plaintiffs tested one 2012 Dodge Ram 2500, the results of which allegedly show that the vehicle emitted emis- sions at amounts greater than those permitted by federal and state reg- ulations, higher than its “gasoline engine counterpart,” higher than what a reasonable consumer would expect, and higher than levels set for vehi- cles to obtain certificates of compliance. Dkt. 22, Pg. ID 1505. In addition to the emissions test, Plaintiffs support their allegations by pointing to the existence of a purported “worldwide emissions scandal,” unrelated regulatory enforcement actions directed at other vehicles manufactured by FCA, and prior regulatory enforcement taken against Cummins for problems with other engines. Plaintiffs contend that these facts give rise to a plausible inference that FCA and Cummins engaged in the alleged “Emissions Fraud Enterprise,” where they created, marketed, and sold to consumers Trucks with defective emissions systems or with defeat de- vices installed in them. According to Plaintiffs, this defeat device allow the vehicles to perform in such a way to “pass” emissions testing when tested, but allow the Trucks to operate differently (emitting emissions as a much higher level) during actual on-road performance. The consolidated amended Complaint includes two claims brought on behalf of a proposed nationwide class of claimants. The first alleges that the Defendants violated the RICO Act. Dkt 22, Pg. IDs 1586-1601. then reduce[s] the effectiveness of the emissions control system during normal oper- ation and use.” See id. 5 Case 4:16-cv-14024-TGB-RSW ECF No. 60, PageID.<pageID> Filed 03/29/18 Page 6 of 31 The second alleges that the Defendants violated the Magnuson Moss Warranty Act. Dkt. 22, Pg. IDs 1601-04. The Complaint contains addi- tional state law claims arising under the fraudulent concealment and consumer protection laws of 49 states and the District of Columbia. See generally Dkt. 22. Defendants have separately moved for dismissal pursuant to Fed- eral Rules of Civil Procedure 8(a), 9(b), 12(b)(1) and 12(b)(6). Dkts. 26, 27. III. Standard of Review To survive a motion to dismiss, a complaint “must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). A claim is plausi- ble on its face if the “plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the mis- conduct alleged.” Bell Atlantic Corp. v. Twombly 550 U.S. 544, 556 (2007). Plausibility is not the same as probability, but rather “asks for more than a sheer possibility that a defendant has acted unlawfully.” Id. While plaintiffs are not required to provide “detailed factual allegations,” Rule 8 of the Federal Rules of Civil Procedure demands “more than an una- dorned, the-defendant-unlawfully-harmed-me accusation.” Iqbal, 556 U.S. at 678 (citing Twombly, 550 U.S. at 555). The first step in assessing the validity of a 12(b)(6) motion to dis- miss is to identify any conclusory allegations contained in the complaint. 6 Case 4:16-cv-14024-TGB-RSW ECF No.