In re Onstar Contract Litigation

• Decision Date: 19 February 2009
• Docket Number: Case No. 2:07-MDL-01867.
• Parties: In Re: ONSTAR CONTRACT LITIGATION.
• Court: U.S. District Court — Eastern District of Michigan

600 F.Supp.2d 861

In Re: ONSTAR CONTRACT LITIGATION.

Case No. 2:07-MDL-01867.

United States District Court, E.D. Michigan, Southern Division.

February 19, 2009.

OPINION & ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTIONS TO DISMISS

SEAN F. COX, District Judge.

Buyers and lessees of automobiles equipped with OnStar telematics brought prospective class action complaints against four automobile manufacturers and OnStar Corporation, asserting consumer protection act and warranty claims. The actions were consolidated for pretrial proceedings by the Judicial Panel on Multidistrict Litigation. After the complaints were combined in a Master Amended Complaint, Defendants filed the instant Motions to Dismiss. The parties have fully briefed the issues and oral argument was heard on December 18, 2008. For the reasons that follow, the Court shall: 1) grant the motions in part, 2) deny them in part, and 3) decline to rule on those challenges that require a conflicts of law determination because a conflicts of law determination would be premature at this stage of the litigation.

BACKGROUND

Plaintiffs filed their "Master Amended Class Action Complaint" (hereinafter "the MAC") on February 25, 2008, asserting claims against the following five defendants: 1) General Motors Corporation ("GM"); 2) Volkswagen Group of America ("VW"); 3) American Honda Motor Company ("Honda"); 4) Subaru of America ("Subaru"); and 5) OnStar Corporation ("OnStar"). For ease of reference, the MAC refers to Defendants GM, VW, Honda and Subaru, collectively, as the "Manufacturer Defendants." The MAC contains the following five counts: "Violations of the Michigan Consumer Protection Act" (Count I), asserted against all five Defendants (MAC at 43); "Violation of All States' Consumer Protection Acts" (Count II), asserted against all five Defendants (MAC at 45); "Breach of Express Warranty" (Count III), asserted against the Manufacturer Defendants (MAC at 52); "Breach of Implied Warranties" (Count IV), asserted against the Manufacturer Defendants (MAC at 53); and "Violation of The Magnuson-Moss Warranty Act" (Count V), asserted against the Manufacturer Defendants (MAC at 54). Thus, all five counts are asserted against GM, VW, Honda and Subaru while only Counts I and II (i.e., consumer protection act claims) are asserted against OnStar.

The following are some of the most pertinent allegations contained in the MAC, to provide a brief overview of the Plaintiffs' theories and alleged damages. Plaintiffs bring this purported nationwide class action against Defendants "due to the failure of analog OnStar equipment in their vehicles and the resulting termination of OnStar service." (MAC at ¶ 1).

Plaintiffs allege that "OnStar is a unique in-vehicle telecommunication safety system that provides automatic crash notification to emergency responders, stolen vehicle location, remote door unlock and remote diagnostics in the event of problems with airbags, anti-lock brakes or other systems. According to OnStar:

[OnStar provides] critical communications links among members of the public, emergency medical service providers and emergency dispatch providers; public safety, fire service and law enforcement officials, and hospital emergency and trauma care facilities.

* * *

The life-savings benefits of OnStar are intended not only for initial vehicle purchasers but also for subsequent owners over the life of the vehicle.

(MAC ¶ 2). "OnStar equipment and service for Manufacturer Defendants' vehicles is unique and is not available from other sources or as an after-market product." (MAC at ¶ 49).

"In 2002 Defendants' OnStar equipment relied on analog cellular signals to function." (MAC at ¶ 4). "In August 2002, the Federal Communications Commission ("FCC") ruled that cellular telephone companies need not continue to carry analog cellular signals. The FCC allowed for a `sunset' period to allow companies whose products were reliant upon analog signals to transition to digital equipment." (MAC at ¶ 3). Defendants' respective statements made to the FCC are alleged in paragraphs 60 through 74 of the MAC.

"All of the Defendants knew by August 2002 that their analog-based OnStar equipment would stop working on February 18, 2008. Despite the knowledge that their equipment would stop working in 2008, Defendants continued to sell analog equipment to customers without notifying those customers that the equipment would cease to function. Defendants intentionally concealed from consumers the material fact that their equipment would stop working on February 18, 2008." (MAC at ¶ 5). "After selling consumers equipment they knew would stop working, Defendants belatedly began warning consumers that their equipment was going to stop working by February 2008. Defendants required those customers whose equipment could be upgraded to a digital signal to pay for such upgrades to keep their OnStar equipment working." (MAC at ¶ 6)

"Because of Defendants' intentional concealment of the material fact that the equipment they sold to consumers would stop working in 2008, hundreds of thousands of consumers across the county either have equipment that is now useless or have paid to purchase new digital equipment." (MAC at ¶ 7). "As a result of the Defendants' actions, Plaintiffs and thousands of other owners and lessees of OnStar equipped vehicles have lost the benefits of this safety system and are exposed to an increased risk of serious personal injury and harm, or were forced to pay for upgrades to keep their systems functioning. Plaintiffs seek damages for themselves and all others similarly situated." (MAC at ¶ 8).

The damages alleged by a particular plaintiff depend on the type of OnStar hardware that was installed in that plaintiff's vehicle. "At various times, OnStar capable vehicles were equipped with three types of wireless cellular equipment: a) Analog-Only; b) Analog/Digital-Ready; and c) Dual-Mode (Analog/Digital)." (MAC at ¶ 53). "Vehicles with analog-only equipment were manufactured to operate only on analog wireless networks. The Defendant Manufacturers are not offering their customers any opportunity to upgrade analog-only equipment to operate on digital networks. Analog-only telematics ceased working on or about December 31, 2007." (MAC at ¶ 54). Vehicles with analog-digital-ready equipment can be converted to operate on digital networks, and the Defendant Manufacturers are charging those customers a $15.00 fee to upgrade their equipment and requiring them to enter into a service agreement for additional years. (MAC at ¶¶ 55 and 109).¹

Standard of Decision:

The Supreme Court has recently clarified the pleading standard necessary to survive a Rule 12(b)(6) motion. Bassett v. National Collegiate Athletic Assoc., 528 F.3d 426, 430 (6th Cir.2008) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). Factual allegations contained in a complaint must "raise a right to relief above the speculative level." Id. "Twombly does not `require heightened fact pleading of specifics, but only enough facts to state a claim to relief that is plausible on its face.'" Id. In reviewing a motion to dismiss, the court must construe the complaint in the light most favorable to the plaintiff, accept its allegations as true, and draw all reasonable inferences in favor of the plaintiff.

ANALYSIS

A. A Choice of Law Determination:

As a preliminary matter, Defendants request that, in order to rule on the pending motions, the Court engage in a choice-of-law analysis to determine the law that is to be applied to Plaintiffs' claims. Plaintiffs respond that a choice-of-law analysis would be premature and take the position that the Court need not engage in such an analysis before ruling on the pending motions.

It is well established that a district court sitting in diversity normally applies the substantive law, including the choice-of-law rules, of the forum state in which it sits. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941).

In this MDL proceeding, however, this Court is presiding over several diversity actions that have been transferred to this district, pursuant to 28 U.S.C. § 1407(a), for the purpose of conducting consolidated pre-trial proceedings. Although some of the actions were originally filed in Michigan, actions from other states, including California, New Jersey, Illinois, Louisiana, South Carolina, Ohio, and Pennsylvania, were transferred to this district by the MDL Panel.

"Where a transferee court presides over several diversity actions consolidated under the multidistrict rules, the choice of law rules of each jurisdiction in which the transferred actions were originally filed must be applied." In re Air Disaster at Ramstein Air Base, Germany, 81 F.3d 570 (5th Cir.1996) (citing Van Dusen v. Barrack, 376 U.S. 612, 84 S.Ct. 805, 11 L.Ed.2d 945 (1964)); see also Multidistrict Lit. Man. § 9:18 (2008) ("In diversity cases, the court will apply the law of the transferor forum, by application of its choice-of-law rules."). This means that, in order to engage in a choice-of-law analysis in this case, this Court would need to consider and apply the choice of law rules of numerous states.

In the pending motions, the parties have raised the issue and made limited arguments in support of their respective positions. The Court concludes, however, that the limited arguments made are not sufficient to enable this Court to engage in a meaningful conflicts of law analysis at this time. Moreover, due to the nature of their position on the issue, Plaintiffs assert that they need some limited discovery before they can fully brief the conflicts issue. Thus, the Court concludes that a choice-of-law analysis would be premature at this juncture.

Accordingly, the Court will proceed to analyze only those grounds for relief that do not require a conflicts of law analysis before they can be addressed.

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