benefit of the bargain damages can be measured by cost of repair in car class action

Nguyen v. Nissan North America, Inc., 932 F.3d 811 (9th Cir.
Nguyen bought a new 2012 Nissan 370Z with an allegedly
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” asserting consumer
protection and warranty claims. The court noted evidence supporting the idea of
a general defect of which Nissan was aware since 2007 or so, such as a project
engineer’s internal email: “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.” Nguyen’s son
experienced a scary instance of this when the clutch stopped working on the
highway, though fortunately he was able to move to the shoulder without physical
The district court denied class certification based on what
it saw as inadequacies in Nguyen’s damages model based on the cost of repairing
the clutch to fix the problem.  The
district court reasoned that the benefit of the bargain would only equal the
cost of replacing the defective clutch if consumers would’ve deemed the
defective part valueless, which was implausible because even Nguyen drove the
vehicle for nearly 27,000 miles before replacing the part.
The court of appeals reversed, finding that a
benefit-of-the-bargain model as measured by the average cost of replacing the
allegedly defective clutch system was appropriate to satisfy Rule 23(b)(3)’s
predominance requirement. The Supreme Court has emphasized that “at the
class-certification stage (as at trial), any model supporting a ‘plaintiff’s
damages case must be consistent with its liability case.’ ”
Damages under the CLRA, the Song-Beverly Act (California’s
warranty law), and the Magnuson-Moss Act could all be measured using a benefit
of the bargain theory.  And that was
consistent with Nguyen’s liability theory. “Plaintiff’s legal theory is not
based on the performance of the allegedly defective clutch system, but instead
the system itself, which he claims is defective. Had Plaintiff alleged that
performance problems constituted the defect and caused his and the class
members’ injuries, then the benefit of the bargain would not be the appropriate
measure of damages because, as the district court noted, class members might
have received varying levels of value based on if and when they experienced a
sticky clutch problem.”  But under Nguyen’s
theory, the defect exists whether or not the symptoms have manifested.  Further, he alleged, “a reasonable person
would have considered [the fact of the alleged defect] to be important in
deciding whether to purchase or lease Class Vehicles,” and thus that Plaintiff
and class members “would not have purchased or leased Class Vehicles equipped
with transmissions, or would have paid less for them.” Thus, “under both causes
of action, the sale of the vehicle with the known defect is the
liability-triggering event, not when the [defect] manifests.” It’s at that
point that a consumer paid more than she would’ve paid had she known the truth.
“[T]he focus is on the difference between what was paid and what a reasonable
consumer would have paid at the time of purchase without the fraudulent or
omitted information.”  Thus, it was
incorrect to say that repair costs wouldn’t measure the harm unless consumers
would’ve deemed the defective part valueless. 
Cases from other circuits have also found similar questions “amenable
to classwide resolution,” explaining that “a manufacturer’s misrepresentation
may allow it to command a price premium and to overcharge customers
systematically. Even if an individual class member subjectively valued the
vehicle equally with or without the accurate [information], she could have
suffered a loss in negotiating leverage if a vehicle with perfect safety ratings
is worth more on the open market.” 
Technically, I can see why the cost-to-fix might not completely match up
with the price drop in the overall negotiated price—though that’s how it works
in buying a house, buying a car might be different—but the court noted that
cost-to-fix “is a proxy for [his] overpayment of the vehicle at the point of
sale.”  In reality, probably many people would’ve
gone with a different car instead of one with a clutch so potentially nonfunctional it needed to be replaced, but since we can’t rewind that transaction the
cost-to-fix seems like a decent proxy for what they would’ve demanded to take this car
Anyway, Nguyen was seeking to vindicate “the right to take a
product free from defect. The defect did not cause the plaintiffs’ injury; the
defect was the injury.”  Damages for
actual faulty performance would indeed require an individualized analysis that
might defeat predominance. The faulty design, however, didn’t pose that problem
for class treatment. Reversed and remanded.

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