In re Myford Touch Consumer Litig., Case No. 13–cv–03072–EMC

• Decision Date: 14 February 2018
• Docket Number: Case No. 13–cv–03072–EMC
• Citation: 291 F.Supp.3d 936
• Parties: IN RE MYFORD TOUCH CONSUMER LITIGATION
• Court: U.S. District Court — Northern District of California

291 F.Supp.3d 936

IN RE MYFORD TOUCH CONSUMER LITIGATION

Case No. 13–cv–03072–EMC

United States District Court, N.D. California.

Signed February 14, 2018

EDWARD M. CHEN, United States District Judge

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION FOR SUMMARY JUDGMENT Docket No. 341

The crux of this case is that Ford's infotainment system known as MyFord Touch was allegedly defective. Plaintiffs seek to recover damages on behalf of the certified classes in the form of the diminution in value caused to their vehicles by the defect. Ford now moves for summary judgment on the classwide express and implied warranty claims as well as a number of individual fraud and consumer protection claims. For the reasons below, the Court GRANTS IN PART and DENIES IN PART Ford's motion.

I. FACTUAL AND PROCEDURAL BACKGROUND

The following claims have been certified for class treatment: Breach of Implied Warranty on behalf of California, Massachusetts, New Jersey, North Carolina, Ohio, and Virginia classes; Breach of Express Warranty on behalf of California and Washington classes; violation of the Massachusetts Consumer Protection Act on behalf of the Massachusetts class; negligence under Ohio law; and strict product liability under Colorado law. See Docket No. 279 at 41–43.¹ The classes are defined to include "all persons or entities who purchased or leased a Ford or a Lincoln vehicle in [the applicable state] from Ford Motor Company or through a Ford Motor Company dealership before August 9, 2013, which vehicle was equipped with a MyFord Touch or MyLincoln Touch in-car communication and entertainment system."Id. at 1.

Plaintiffs' various claims alleging fraud and fraudulent omission were not certified by the Court, nor were express warranty claims under the laws of Iowa, Massachusetts, New Jersey, New York, North Carolina, Ohio, and Virginia. Id. at 36–39, 43.

However, several of the non-class claims remain in the case on an individual basis.

The following chart summarizes the class claims certified by state.

State Claims Certified
                California         Breach of Implied Warranty
                                   Breach of Express Warranty
                                   Song-Beverly Act
                                   Unfair Competition Law
                Colorado           Strict Product Liability
                Massachusetts      Breach of Implied Warranty
                                   Massachusetts Consumer
                                   Protection Act
                New Jersey         Breach of Implied Warranty
                North Carolina     Breach of Implied Warranty
                Ohio               Breach of Implied Warranty
                                   Negligence
                Virginia           Breach of Implied Warranty
                Washington         Breach of Express Warranty
                

A. Summary of Factual Allegations

Plaintiffs and Class Members purchased vehicles from Ford that were equipped by MyFord Touch ("MFT"), an "infotainment" system. The gravamen of Plaintiffs' allegations is that the MFT system suffered from an underlying, systemic defect in its base software that caused numerous problems, many of which are described in more detail below. In general, these involved failure of navigation systems, failure of Bluetooth connectivity and hands-free systems, failure of the climate control system, frequent freezes and lock-ups, the failure of the back-up camera including images that froze in place, and so on. See TAC ¶ 7. When malfunctions occurred, certain vehicle features allegedly became inoperable because MFT was the only way to utilize them. Further, Plaintiffs allege that the malfunctions distract drivers and therefore cause unreasonable safety risks.

MFT is powered by an operating system known as Ford SYNC, which is also the name given to Ford's first generation MFT system. Vehicles with MFT cost more than those without it, though the precise cost is disputed. Plaintiffs allege that Ford has not yet fixed the problem with MFT, though Ford claims that one of its post-Class Period software updates in 2013 made MFT "first in class," and that other software updates issued during the Class Period improved MFT's functionality. Ford's vehicles were covered by a limited express warranty, whose relevant portions are quoted in the analysis below.

B. Summary of Expert Reports

Although not all of the expert reports are material to the instant motion, the Court summarizes each expert's proffered testimony below.

1. Plaintiffs' Expert Dr. Arnold

Dr. Arnold is an economist with advanced degrees in business and who has taught economics; he works at Compass Lexecon applying economic models to project damages calculations. Ford does not challenge Dr. Arnold's expertise, but contends his models in this case are not tied to implied and express warranty damages and provide no reliable justification for his assumption that the value of a defective MFT to consumers was $0.

Dr. Arnold used data produced by Ford to calculate the revenue Ford received for sales of the MFT system with and without a navigation feature. See Edwards Decl., Ex. 56. He calculates that consumers paid $625 for MFT without navigation and $1,364 for MFT with navigation. Dr. Arnold then treats the full cost paid as equivalent to the economic loss suffered by each plaintiff due to the defect; in other words, Dr. Arnold's damages calculation assumes that the MFT system was valueless. Plaintiffs argue that this assumption is supported by other evidence they intend to introduce at trial showing that none of the subsequent software upgrades released by Ford resolved the defects at issue, and thus failed to restore any value to the MFT system. Dr. Arnold's determination that the MFT system had zero value is premised on the notion that risk averse consumers would not purchase the MFT with known and severe defects, especially as many affect safety, thus rendering its value zero. However, that the value to some consumers is zero does not necessarily imply that the MFT had no market value generally. Dr. Arnold did not attempt to determine the percentage of consumers or Class Members who were in fact risk averse and for whom the MFT system therefore had zero value versus those who might attribute value to it. At best, he states that "most" consumers are risk averse, but he does not state that "all" are. Plaintiffs argue that the basis for his assumption is economic literature he relies upon; thus, the credibility of his assumption is a question of fact for the jury, which may discredit his testimony and make downward adjustments to his damages estimate. The parties disagree about whether Dr. Arnold's predicate assumptions are so unreliable or unsound as to require exclusion of his opinion entirely, or whether they may be presented to the jury to consider alongside other foundational evidence and the jury may be allowed to determine what weight, if any, to give to Dr. Arnold's opinion.

2. Plaintiffs' Expert Mr. Boedeker

Mr. Boedeker is an economist with advanced degrees in statistics and economics, and 25 years of experience applying economic, statistical, and financial models. Ford does not challenge Mr. Boedeker's qualifications but rather whether his damages model is tied to implied and express warranty damages, and whether his methodology is reliable.

Mr. Boedeker used a survey method called choice-based conjoint analysis to infer how consumers valued the MFT system in four scenarios where they were exposed to varying levels of information about the MFT defect, its safety implications, and Ford's knowledge of and failure to disclose information about the defect. See Edwards Decl., Ex. 57. The analysis shows that the more information consumers were provided about the defect, the less valuable the MFT system became to them. Thus, while consumers originally valued MFT at $1,850, that value dropped by $729 when they were told to "[i]magine that your salesperson tells you at the point of purchase that the MFT system has a glitch but that a fix for the glitches will be provided for free in the future when ready," id. ¶ 74; by $910 when they were presented with statements showing Ford's knowledge of the defect and its severity; and by $839–$1,290 when they learned that the defect also caused distractions raising safety concerns.

Ford argues that Mr. Boedeker's model is not suitable for calculating express or implied warranty damages because it does not estimate the cost of repair, it fails to account for the value of subsequent software upgrades, and because the survey questions introduce an element of fraud into respondents' valuations, an element irrelevant to breach of warranty claims. Ford also argues that Mr. Boedeker's methodology is unreliable because his calculation of the change in MFT's value focuses only on the demand side of the equation without considering the supply-side, because he does not account for used car sales data, and because certain aspects of his methodology have not been peer reviewed in economic literature.

3. Plaintiffs' Expert Dr. Rosenberg

Dr. Rosenberg provided a human factors analysis of the MyFord Touch system. See Berman Decl., Ex. 19. He analyzes MFT for its usability, safety, and stability. He performed driving studies that focused on measuring subjective and objective measures of driver distraction resulting from interactions with MFT. He concluded that there are issues with the design and implementation of MFT including requiring undue time and attention, excessive task demand, overly complicated mental models, and causing mistrust of the system, resulting in distraction to drivers and hence a safety hazard. He also observes that because of the frustrations with the MFT systems, drivers may fall back on performing tasks with other devices like smartphones that are not designed with the driving task in mind, therefore increasing the safety risks involved. Dr. Rosenberg evaluated up to version 3.7 of the MFT system, including software upgrades issued after the end of the class period in August 2013. Ford has not challenged Dr. Rosenberg.

4. Other Experts

The parties have retained other experts but they are not at...