Raymo v. FCA US LLC

• Decision Date: 30 July 2020
• Docket Number: 2:17-cv-12168
• Citation: 475 F.Supp.3d 680
• Parties: Jeremy RAYMO, et al., Plaintiffs, v. FCA US LLC and Cummins Inc., Defendants.
• Court: U.S. District Court — Eastern District of Michigan

475 F.Supp.3d 680

Jeremy RAYMO, et al., Plaintiffs,

v.FCA US LLC and Cummins Inc., Defendants.

2:17-cv-12168

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

Signed July 30, 2020

Caroline F. Bartlett, Carella, Byrne, Cecchi, Olstein, Brody and Agnello, James E. Cecchi, Carella Byrne, Roseland, NJ, E. Powell Miller, Sharon S. Almonrode, William Kalas, The Miller Law Firm, P.C., Rochester, MI, Jennifer R. Scullion, Seeger Weiss LLP, New York, NY, Jerrod C. Patterson, Hagens Berman Sobol Shapiro, Steve W. Berman, Hagens Berman Sobol Shapiro LLP, Seattle, WA, Scott A. George, Seeger Weiss LLP, Philadelphia, PA, for Plaintiffs Jeremy Raymo, Forrest Poulson, Gary Gaster, Brendon Goldstein, Manuel Pena.

Caroline F. Bartlett, Carella, Byrne, Cecchi, Olstein, Brody and Agnello, Roseland, NJ, Dennis A. Lienhardt, Sharon S. Almonrode, William Kalas, The Miller Law Firm, P.C., Rochester, MI, Jennifer R. Scullion, Seeger Weiss LLP, New York, NY, Scott A. George, Seeger Weiss LLP, Philadelphia, PA, Steve W. Berman, Hagens Berman Sobol Shapiro LLP, Seattle, WA, for Plaintiffs Clarence Johnson, James Blount, Stephen Zimmerer, Darin Ginther, Justin Sylva, Jeremy Batey, Chris Wendel, Luke Wyatt, John Reyes, Matt Baffunno, Jason Gindele, Dennis Kogler, Ian Hacker.

Brittany J. Mouzourakis, James P. Feeney, Dykema Gossett, Bloomfield Hills, MI, Robert J. Giuffra, Jr., William B. Monahan, Sullivan & Cromwell LLP, New York, NY, for Defendant FCA US LLC.

Jeffrey Soble, Jonathan W. Garlough, Lauren M. Loew, Foley & Lardner LLP, Chicago, IL, Leah R. Imbrogno, Foley & Lardner LLP, Detroit, MI, Michael D. Leffel, Foley & Lardner LLP, Madison, WI, for Defendant Cummins Inc.

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTIONS TO DISMISS

TERRENCE G. BERG, UNITED STATES DISTRICT JUDGE

Plaintiffs seek to bring a nationwide class action alleging defects in the emissions aftertreatment systems of model year 2013–2017 Dodge 2500 and 3500 Ram trucks with Cummins 6.7-liter diesel engines (the "trucks" or "class vehicles"). Defendant FCA US LLC ("FCA") manufactured the trucks while Defendant Cummins, Inc. ("Cummins") manufactured the engines. According to Plaintiffs, Defendants misleadingly advertised the trucks as both fuel-efficient and emissions regulation-compliant while knowing that two separate defects in the aftertreatment system would actually cause the trucks to be less efficient and to exceed applicable emissions standards. In a 438-page Amended Complaint supplemented by 56 exhibits, Plaintiffs assert claims under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1962(c) – (d), the Magnuson-Moss Warranty Act ("MMWA"), 15 U.S.C. § 2301, as well as claims under the laws of 18 different states for breach of contract, unjust enrichment, fraudulent misrepresentation, fraudulent omission, and violation of consumer-protection statutes. Pending before the Court are motions to dismiss filed by FCA, ECF No. 35, and by Cummins, ECF No. 34. The Court will grant in part and deny in part the motions to dismiss.

BACKGROUND

Plaintiffs allege that Defendants manufactured, marketed, and sold the trucks with defects in their aftertreatment system. Aftertreatment systems, when functioning properly, cause the engine to produce exhaust within applicable emissions limits. ECF No. 34, PageID.5173 (Cummins Mot. to Dismiss Br.). These systems represent an auto-industry response to the increasing push for clean-diesel emissions and new regulations for diesel trucks issued by the Environmental Protection Agency ("EPA") and are commonly installed in medium and heavy-duty diesel trucks. See ECF No. 17, PageID.2479 (Am. Compl.). The primary components of an aftertreatment system are the Selective Catalytic Reduction system ("SCR"), and the Diesel Particulate Filter ("DPF"). The SCR helps capture and reduce NOx into less harmful substances, such as nitrogen and oxygen, essentially cleaning the exhaust before trucks emit it into the environment.¹ ECF No. 17, PageID.2484, ECF No. 34, PageID.5173. The DPF traps and removes particulate emissions. ECF No. 17, PageID.2484.

The crux of this case is the allegation that FCA and Cummins deceived consumers by marketing the trucks as high-performing, low-emission, reliable vehicles with good fuel economy, ECF No. 17, PageID.2490, when defects in their aftertreatment system actually caused the trucks to emit NOx in excess of EPA emissions standards and to fall below promised fuel-economy performance. ECF No. 17, PageID.2480. By concealing the existence of these defects, Plaintiffs claim FCA and Cummins deprived consumers of the benefit of their bargain, causing them to pay more for the trucks than they would have had they known about the defects. Plaintiffs further allege that the trucks’ defects caused them to "pay more at the pump," because of reduced mileage efficiency, and to pay more for necessary replacement parts. ECF No. 17, PageID.2490–91.

According to Plaintiffs, the class vehicles contained two defects, which they call the "washcoat defect" and the "flash defect." The "washcoat defect" refers to a problem with the sealant (or washcoat) used for the SCR's interior lining. Plaintiffs claim that the type of washcoat used rendered the SCR ineffective in reducing the trucks’ NOx emissions. The "flash defect" refers to a problem of soot build-up in the DPF that Defendants were allegedly fixing by "flashing" or reprogramming the trucks’ Electronic Control Modules to divert more fuel into the exhaust system in order to burn away the excess soot, thereby allegedly reducing fuel mileage at the expense of consumers. ECF No. 17, PageID.2480–90.

As to the "washcoat" defect, ordinarily the SCR's interior lining or "washcoat" facilitates the conversion of NOx emissions produced by diesel engines into nitrogen gas, water, and carbon dioxide. ECF No. 17, PageID.2480. But according to Plaintiffs, the class vehicles’ defective washcoat "almost immediately" caused the vehicles to exceed emissions standards. ECF No. 17, PageID.2480. Because of this defect, Plaintiffs assert, the trucks exceeded applicable emissions limits by 50%. ECF No. 17, PageID.2484. If left untreated, Plaintiffs claim the washcoat defect can cause the trucks’ emissions systems to shut down and, eventually, to reduce the engines’ maximum speed to only five miles per hour. ECF No. 17, PageID.2484–85. They refer to this as "limp mode." Id. At least some of the Plaintiffs claim their trucks were forced into "limp mode" as a result of the washcoat defect, creating safety risks and out-of-pocket expenses. Id.

As to the injury caused by the washcoat defect, mainly Plaintiffs contend they were injured at the point of sale because they paid more for the trucks than they would have had they known about the defect, which allegedly caused the trucks to pollute at higher levels than Plaintiffs expected based on Defendants’ representations and "to frequently enter into ‘limp mode.’ " ECF No. 17, PageID.2487–88.

According to the Amended Complaint, FCA and Cummins became aware of the washcoat defect "as early as September 2014" yet took no immediate steps to remedy it. ECF No. 17, PageID.2485. Instead, Plaintiffs assert, Defendants continued to misleadingly market the trucks as EPA-compliant and equipped with "the lowest emitting diesel engine ever produced." ECF No. 17, PageID.2481 (quoting ECF No. 17-2, Ram Owner's Manual, Ram Truck Diesel Supplement (2013)). FCA acknowledges it began receiving an increasing number of emissions-related warranty claims pertaining to model-year 2013–2015 trucks around this time. See ECF No. 35, PageID.5628 (FCA Mot. to Dismiss Br.); ECF No. 34, PageID.5173.

In response, Cummins conducted emissions testing on a number of affected trucks. That testing, which Cummins reported to the EPA on March 5, 2015, showed that for trucks exhibiting the emissions issue "the average NOx emissions were 0.1 g/mile over the 0.2 g/mile NOx standard." ECF No. 36-1, PageID.5675 (EPA Emissions Defect Inf. Report). The defect appeared present in at least 896 trucks of those 188,271 potentially affected (though Cummins did not test each potentially affected truck). ECF No. 36-1, PageID.5677–79. Cummins's report further explained that the washcoat issue "may cause some MY2013-2015 RAM 2500/3500 vehicles to experience degradation with the selective catalyst reduction (SCR) system." ECF No. 36-1, PageID.5675. After receiving Cummins's report, the Environmental Protection Agency ("EPA") and California Air Resources Board ("CARB") requested that Cummins, because it held the class vehicles’ Certificates of Compliance ("COCs") and Executive Orders ("EOs"), submit a voluntary recall plan addressing the emissions issue.² ECF No. 17, PageID.2562. FCA and Cummins then sued one another over who should bear the financial and logistical costs of the recall. That case ultimately settled. ECF No. 34, PageID.5157.

The process of rolling out the voluntary recall began in November 2016, according to Cummins, but appears not to have been announced by the EPA until July 2018. ECF No. 34, PageID.5157, 5174; ECF No. 36-2, PageID.5685 (Jul. 31, 2018 EPA Press Release). Cummins and FCA worked together to recall thousands of model year 2013–2015 trucks so that FCA dealers could replace the trucks’ SCR catalysts—free of charge to consumers—with a newer version containing an updated washcoat, thus resolving the defect. ECF No. 35, PageID.5630; ECF No. 36-5, PageID.5695–96 (Cummins Influenced Recall Plan). This newer washcoat was already being used in model year 2016 and later trucks. An EPA administrator lauded the recall as "a great example of how government and industry work together to protect health and environment." He continued, "[t]his is the way it's supposed to work." ECF No. 36-2, PageID.5685.

The "flash defect" is the second defect at issue in this lawsuit. Plaintiffs allege that the DPF in the trucks’ aftertreatment system routinely becomes clogged...