Nguyen v. Nissan North America, Inc., 072619 FED9, 18-16344

Docket Nº:18-16344
Opinion Judge:M. SMITH, CIRCUIT JUDGE
Party Name:Huu Nguyen, individually, and on behalf of a class of similarly situated individuals, Plaintiff-Appellant, v. Nissan North America, Inc., a California Corporation, Defendant-Appellee.
Attorney:Ryan Wu (argued) and John E. Stobart, Capstone Law APC, Los Angeles, California, for Plaintiff-Appellant. Alan J. Lazarus (argued) and Matthew J. Adler, Drinker Biddle & Reath LLP, San Francisco, California; Zoë K. Wilhelm and Adam J. Thurston, Drinker Biddle & Reath LLP, Los Angeles, California;...
Judge Panel:Before: MARY M. SCHROEDER and MILAN D. SMITH, JR., Circuit Judges, and DOUGLAS L. RAYES, District Judge.
Case Date:July 26, 2019
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit
 
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Huu Nguyen, individually, and on behalf of a class of similarly situated individuals, Plaintiff-Appellant,

v.

Nissan North America, Inc., a California Corporation, Defendant-Appellee.

No. 18-16344

United States Court of Appeals, Ninth Circuit

July 26, 2019

Argued and Submitted June 11, 2019 San Francisco, California

Appeal from the United States District Court for the Northern District of California Lucy H. Koh, District Judge, Presiding D.C. No. 5:16-cv-05591-LHK

Ryan Wu (argued) and John E. Stobart, Capstone Law APC, Los Angeles, California, for Plaintiff-Appellant.

Alan J. Lazarus (argued) and Matthew J. Adler, Drinker Biddle & Reath LLP, San Francisco, California; Zoë K. Wilhelm and Adam J. Thurston, Drinker Biddle & Reath LLP, Los Angeles, California; Sherman Vance Wittie and E. Paul Cauley Jr., Drinker Biddle & Reath LLP, Dallas, Texas; for Defendant-Appellee.

Kathy A. Wisniewski and Stephen A. D'Aunoy, Thompson Coburn LLP, St. Louis, Missouri, for Amicus Curiae FCA U.S. LLC.

Philip S. Goldberg, Shook Hardy & Bacon LLP, Washington, D.C.; Andrew J. Trask, Shook Hardy & Bacon LLP, San Francisco, California; for Amici Curiae Alliance of Automobile Manufacturers and Association of Global Automakers.

Ashley C. Parrish, Jesse Snyder, and Jacqueline Glassman, King & Spalding LLP, Washington, D.C.; Jonathan D. Urick and Steven P. Lehotsky, U.S. Chamber of Litigation Center, Washington, D.C.; Leland P. Frost and Peter C. Tolsdorf, Manufacturers' Center for Legal Action, Washington, D.C.; for Amici Curiae Chamber of Commerce of the United States and National Association of Manufacturers.

Before: MARY M. SCHROEDER and MILAN D. SMITH, JR., Circuit Judges, and DOUGLAS L. RAYES, [*] District Judge.

SUMMARY

[**]

Class Certification

The panel reversed the district court's denial of class certification in an action against Nissan North America pursuant to state and federal warranty laws arising from an allegedly faulty hydraulic clutch system in plaintiff's 2012 Nissan vehicle.

The district court denied plaintiff's motion for class certification on the ground that he failed to satisfy the predominance requirement of Federal Rule of Civil Procedure 23(b)(3) due to what the district court viewed as an inappropriate measure of damages.

The panel held that plaintiff's proposed damages model based on the benefit of the bargain is cognizable under California's Consumers Legal Remedies Act, the Song-Beverly Consumer Warranty Act, and the Magnuson-Moss Warranty Act. The panel held that plaintiff sufficiently demonstrated a nexus between his legal theory-that Nissan violated California law by selling vehicles with a defective clutch system that was not reflected in the sale price-and his damages model-the average cost of repair. The panel determined that plaintiff did not seek damages for the faulty performance of the clutch system, which as the district court concluded, would require an individualized analysis that might defeat predominance. Instead, plaintiff's theory was that the allegedly defective clutch was itself the injury, regardless of whether the faulty clutch caused performance issues. The panel concluded that the district court abused its discretion when it denied class certification based on a misconception of plaintiff's legal theory.

OPINION

M. SMITH, CIRCUIT JUDGE

When Plaintiff Huu Nguyen purchased a new 2012 Nissan 370Z as a college graduation present for his son, he was unaware of what he alleges was a potentially catastrophic design defect hidden in the vehicle's hydraulic clutch system. After the clutch purportedly malfunctioned- and Plaintiff spent more than $700 replacing it-he filed a putative class action against Defendant Nissan North America, Inc. (Nissan), asserting causes of action under state and federal warranty laws.

The district court denied Plaintiff's motion for class certification, concluding that he failed to satisfy the predominance requirement of Federal Rule of Civil Procedure 23(b)(3) due to what it viewed as an inappropriate measure of damages. Because we conclude that, following Comcast Corp. v. Behrend, 569 U.S. 27 (2013), Plaintiff's proposed damages model is consistent with his theory of liability, we reverse the district court's denial of class certification and remand.

FACTUAL AND PROCEDURAL BACKGROUND

I. Factual Background

A. Alleged Defect

This case involves an allegedly faulty hydraulic clutch system in various vehicles manufactured by Nissan (the Class Vehicles).1

The typical components of a hydraulic clutch system include a fluid reservoir, a clutch master cylinder (CMC), and a clutch slave cylinder (CSC), which is sometimes referred to as the release bearing.2 As explained by Plaintiff's expert, Michael Stapleford, P.E., the clutch system is a dry friction system that uses brake fluid in a discrete reservoir to transfer heat from the clutch components through the base of the CSC to the attached transmission front cover and the surrounding atmosphere. Such a system routinely generates heat ranging from 200 to 300 degrees Celsius, with hard use resulting in temperatures as high as 400 degrees Celsius.

Plaintiff alleges that, in reconfiguring the Class Vehicles' factory-installed clutch system in 2007, Nissan failed to properly account for heat transfer and produced a defective aluminum/plastic composite CSC that causes the system to overheat. Consequently, the clutch fluid boils and generates air that causes failure of the clutch pedal, such that it sticks to the floor and prevents a driver from shifting gears. A "sticky" clutch can make it difficult to control a vehicle's speed, presenting both safety and performance issues.

B. Nissan's Response

A consumer complaint submitted as evidence by Plaintiff indicates that the Class Vehicles began to malfunction as early as June 2007, while Nissan's own records identified the issue starting in October of that year. An internal Nissan report suggested that "abnormal high-temperature [during] continued use of partial clutch engagement might be the cause." Emails exchanged between Nissan employees in 2012 further discussed the sticky clutch problem and its potential causes, and in July 2012, a Nissan project engineer wrote, This issue is great enough that it warrants a serious look by R&D as to how we can improve the feel, and function of the clutch system. . . . Customers are universally dissatisfied with the feel and performance of the system even when it is performing as designed. . . . Combine that with the frequent claims of clutch pedal sticking to floor and you've taken a dissatisfaction item and made it into a breakdown item. I think a wholesale approach to a whole new hydraulic system, including a new pedal, is warranted.

Plaintiff claims that "[d]espite its investigations and testing, or even the change to a higher quality hydraulic fluid in the Class Vehicles, Nissan never informed consumers that the clutch system in the Class Vehicles had an inherent defect that made it prone to heat-related problems." In his complaint, Plaintiff asserted that if he and the other putative class members "knew about these defects at the time of sale or lease, [they] would not have purchased or leased the Class Vehicles or would have paid less for them."

C. Plaintiff's 2012 Nissan 370Z

Plaintiff purchased a new 2012 Nissan 370Z from an authorized Nissan dealer in Santa Clara County, California, as a college graduation present for his son, Michael. In March 2014, Michael was driving the 370Z on the freeway when the clutch pedal lost pressure and did not return to its depressed position; Michael had to pull over to the shoulder of the freeway and slow down until the clutch allowed him to shift into second gear. The Nissan dealership replaced the CSC at no charge because the vehicle was still under warranty. When a similar situation developed two years later, however, the 370Z was no longer under warranty, and so Plaintiff had the CSC replaced by an auto repair shop for $721.75.

II. Procedural History

Plaintiff's first amended complaint alleged five causes of action against Nissan: (1) violations of California's Consumers Legal Remedies Act (CLRA); (2) violations of California's Unfair Competition Law (UCL); (3) breach of implied warranty pursuant to the Song-Beverly Consumer Warranty Act (Song-Beverly Act); (4) breach of implied warranty pursuant to the Magnuson-Moss Warranty Act (Magnuson-Moss Act); and (5) unjust enrichment. The district...

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