Biederman v. FCA: Court Trims Claims in Diesel Defeat Device Suit

In Biederman v. FCA US LLC, the United States District Court for the Northern District of California issued a decision addressing motions to dismiss a class action brought by consumers who purchased or leased RAM 2500 and 3500 diesel pickup trucks. The lawsuit alleged that FCA US LLC and Cummins Inc. installed defeat devices in the trucks, enabling them to perform as advertised while emitting pollutants beyond legal limits. The plaintiffs claimed these representations violated various consumer protection and warranty laws.

Claims and Preemption Arguments

The plaintiffs asserted multiple causes of action, including common law fraud, violations of California consumer statutes (CLRA, FAL, UCL), breach of warranty, and unjust enrichment. They also brought a civil RICO claim against Cummins.

Defendants sought to dismiss all claims, including on the grounds of federal preemption under the Clean Air Act (CAA) and the Energy Policy and Conservation Act (EPCA). They argued that certain representations about emissions compliance could not support state-law claims because such claims intruded on federal regulatory authority.

The Court agreed in part, finding that claims based solely on the trucks' compliance with federal or California emissions standards were preempted. However, the Court held that misrepresentation claims grounded in consumer expectations and omissions about defeat devices could proceed.

RICO and Nationwide Fraud Claims Dismissed

The Court dismissed the civil RICO claim against Cummins, finding that plaintiffs lacked statutory standing under the indirect purchaser rule set forth in Illinois Brick Co. v. Illinois. Because plaintiffs did not purchase directly from Cummins, they could not pursue a RICO claim under existing precedent.

Additionally, the Court dismissed common law fraud claims brought on behalf of a nationwide class. It concluded the named plaintiffs, all based in California, lacked standing to assert fraud under other states' laws.

Misrepresentation and Omission Claims Allowed to Proceed

The Court found that plaintiffs sufficiently pled their claims under California consumer protection laws and common law fraud, including reliance and materiality. Plaintiffs alleged they viewed specific representations on FCA and Cummins websites and relied on those representations in deciding to purchase the trucks.

The Court rejected defendants' arguments that the statements amounted to puffery or lacked sufficient specificity. It concluded that allegations of defeat devices, emissions performance, and misleading recall disclosures were sufficient to state claims for fraud and consumer deception.

The Court also found plaintiffs plausibly alleged omissions, including that FCA and Cummins had exclusive knowledge of defeat devices and failed to disclose them despite a duty to do so. The omission affected the vehicles' central functionality, particularly in jurisdictions where operation of such vehicles would be unlawful.

Warranty Claims Mixed Ruling

The Court dismissed several express and implied warranty claims under the California Commercial Code due to a lack of privity and failure to allege multiple repair attempts. It held that under Clemens v. DaimlerChrysler, privity is required unless a plaintiff qualifies under a recognized exception, which was not met here.

However, the Court allowed implied warranty claims under California's Song-Beverly Act to proceed, as that statute does not require privity. The plaintiffs plausibly alleged that the vehicles were unfit for their ordinary purpose due to the defeat devices making them illegal to operate under California law.

Unjust Enrichment Claim Survives

The Court permitted the unjust enrichment claim to proceed. Although California does not recognize unjust enrichment as an independent cause of action, it can support restitution under a quasi-contract theory. Plaintiffs sufficiently alleged that FCA and Cummins benefited from sales of the vehicles and that they paid a premium based on misrepresentations.

Final Rulings and Next Steps

The Court granted the motion to dismiss in part, including the RICO claim and certain warranty claims, but allowed key misrepresentation, omission, and unjust enrichment claims to proceed. Plaintiffs were granted leave to amend dismissed claims, with the exception of the RICO claim, for which amendment was deemed futile.

Legal Guidance for Regulatory Compliance Disputes

Legal disputes involving federal preemption and misrepresentation claims can significantly impact businesses subject to complex regulatory schemes. Our team at Whitcomb, Selinsky, PC helps clients understand the scope of federal regulations, assess litigation risks, and navigate compliance and enforcement challenges with clarity and confidence.