The United States Court of Appeals for the Eighth Circuit published two opinions last month in companion class actions alleging defects with off-road vehicles. With its decisions, the court held that purchaser plaintiffs must allege more than an increased risk of experiencing a defect-related injury in the future. Rather, plaintiffs must allege that a defect has manifested itself in the products they purchased. The Eighth Circuit also upheld a district court’s exercise of discretion in declining to certify classes based on the need for class-member specific inquiries and other practical case manageability concerns.
No Manifest Defect Means No Standing for Purchasers
First, the court addressed the Article III standing of purchaser plaintiffs alleging a product defect with its decision In re Polaris Marketing, Sales Practices, and Products Liability Litigation, No. 20-2518, 2021 WL 3612758 (8th Cir. Aug. 16, 2021). The plaintiffs alleged that a design defect in their ATVs leads to overheating that can potentially degrade component parts and create fire risks. Seven plaintiffs claimed that their vehicles had actually caught fire, while seven others alleged only that their vehicles were susceptible to fires in the future. The district court dismissed the claims of the “no-fire” plaintiffs for failure to allege an injury in fact sufficient to generate standing under Article III.
The no-fire plaintiffs argued on appeal that they had sustained concrete economic damages because they would not have purchased their vehicles (or would have paid significantly less for them) had the alleged defect been disclosed. According to the plaintiffs, their injuries occurred at the moment of purchase, regardless of whether their ATVs ever caught fire, because they had overpaid and been deprived of the benefit of their bargain as a result of the alleged design defect.
The court rejected these arguments and affirmed the dismissal of the no-fire plaintiffs’ claims. It highlighted the distinction between allegations concerning “a risk that a product will develop a defect in the future” and complaints where a plaintiff alleges “that their product actually exhibited the alleged defect.” Because the no-fire plaintiffs alleged only that excessive heat in their ATVs could cause microscopic degradation leading to fires, but not that their ATVs had actually caught fire or exhibited any other “manifest-but-invisible degradation,” the Eighth Circuit concluded that they had “alleged nothing more than the existence of a defect in a product line or ownership of a product that is at risk for manifesting a defect” and “failed to allege an injury sufficient to confer standing.”
In short, the Eighth Circuit’s opinion in Polaris appears to establish a bright-line rule requiring plaintiffs to allege some concrete manifestation of the alleged defect in the product that they purchased in order to establish their Article III standing.
Manageability Concerns May Preclude Class Certification
Just days later, the Eighth Circuit considered Fed. R. Civ. P. 23(b)(3)’s class certification standards in Johannessohn v. Polaris Industries, Inc., No. 20-2347, 2021 WL 3700153 (8th Cir. Aug. 20, 2021). The Johannessohn case also involved allegations of a failure to disclose a defect that makes ATVs susceptible to overheating. Purchaser plaintiffs from six states sought to certify a nationwide class pursuing claims for violations of Minnesota’s consumer protection laws or, alternatively, state-specific classes pursuing claims under the laws of the named plaintiffs’ respective home states.
The district court denied the plaintiffs’ class certification motion in its entirety, citing three deficiencies: (1) individualized inquiries predominated over questions of law or fact common to putative class members; (2) class action litigation was not superior to individualized methods of adjudication; and (3) the putative classes were defined in such a fashion as to include uninjured persons as class members. The Eighth Circuit affirmed, with two of the three judges on the panel voting to uphold each of the district court’s rationales.
With respect to Rule 23(b)(3)’s predominance requirement, the Eighth Circuit noted that the plaintiffs’ Minnesota consumer protection claims (and some of their other state-law claims) depended on proving fraud and the plaintiffs’ reliance. The court stressed the defendant’s right to present evidence challenging each plaintiff’s reliance on the allegedly fraudulent omissions and concluded that such individualized inquiries would “make for multiple mini-trials within the class action.” As a result, the Eighth Circuit held that the district court did not abuse its discretion by denying the motion for class certification as to the plaintiffs’ fraud-based claims on predominance grounds.
Where the plaintiffs’ claims did not depend on proving fraud and reliance, the Eighth Circuit agreed with the district court’s ruling that the plaintiffs had also failed to satisfy Rule 23(b)(3)’s superiority requirement. The Eighth Circuit highlighted a number of concerns with allowing the plaintiffs’ proposed state-specific classes to proceed, such as the jury’s need to apply “the laws of four different states to forty-three different vehicle configurations,” the prospect of evaluating different engines, changing exhaust standards, and various remediation efforts, and the existence of complicated damages issues concerning price premiums allegedly paid by different subsets of the proposed class. According to the Eighth Circuit, the “monumental manageability concerns” presented by the plaintiffs’ claims and proposed classes supported the district court’s conclusion that class litigation was not superior to individualized adjudication.
Finally, the court observed that the plaintiffs failed to “define their class to make sure all proposed members have standing” because the proposed classes included all purchasers of the ATV models in question, rather than only those whose ATVs manifested the alleged heat defect. Building off the same analysis presented in the Polaris decision discussed above, the Eighth Circuit explained that the risk of injury was “inconsequential” because the plaintiffs needed to “show a manifest defect.” The court ruled that “purchasers without manifest defects should not be able to piggyback on the injury caused to those with manifest defects.” It expressly rejected the plaintiffs’ theory of economic injury through overpayments and deprivation of their benefit of the bargain as “in direct conflict with the manifest defect rule” established by circuit precedent. Because the plaintiffs’ proposed classes included persons without standing, the court affirmed the district courts’ refusal to grant class certification.
Judge Kelly wrote a short concurring opinion. Although agreeing that the district court did not abuse its discretion with respect to its predominance and superiority analyses, she wrote separately to clarify her view that the standing of absent class members was not an obstacle to class certification. More specifically, Judge Kelly objected to treating proof of absent class members’ injuries as a matter of Article III standing, rather than a merits issue for trial. Because the named plaintiffs had plead concrete injuries from the alleged defect and alleged that all of the ATVs suffered from the same defect, Judge Kelly took the position that they had “defined the proposed class in such a way that anyone within it would have standing.”
These two recent decisions by the Eighth Circuit highlight the continued scrutiny paid by federal courts to the threshold issue of Article III standing of plaintiffs in consumer protection class actions. Particularly notable is the Eighth Circuit’s focus on the challenges presented by issues concerning the standing of absent class members. Although not expressly raised by the Eighth Circuit’s opinions, the Supreme Court’s decision this summer in TransUnion LLC v. Ramirez (as previously covered on this blog) may have played a role in the decisions, given the high court’s directive that federal courts scrutinize named plaintiffs’ ability to prove the standing of individual class members.
Additionally, the Johannesohn decision provides an example of how defendants may utilize the case management challenges associated with large consumer class actions in opposing class certification. In proposed class actions involving multiple products, long time periods, different subsets of plaintiffs, or application of various state laws, practical issues related to the presentation of evidence, jury instructions, or confusion of issues may make it difficult for plaintiffs to demonstrate that Rule 23(b)(3)’s predominance, commonality, superiority, or adequacy requirements are satisfied. It is therefore key for defendants facing a proposed class action to consult with experienced outside counsel to develop a comprehensive class certification opposition strategy from the outset of the case.