"defeat devices" in trucks plausibly deceptive because they rendered vehicles unlawful to drive

Biederman v. FCA US LLC, --- F.Supp.3d ----, 2025 WL 458831, No. 23-cv-06640-JSC (N.D. Cal. Feb. 11, 2025)

This is a putative class action over alleged “defeat devices” in diesel engines installed in RAM 2500 and 3500 pick-up trucks. Plaintiffs alleged that defendants’ representations about the trucks’ performance and compliance with regulatory standards were false and misleading since the vehicles could only perform as advertised while emitting pollutants beyond established limits. In addition, defendants’ emissions recall, issued to make the trucks legally compliant, allegedly reduced vehicle performance beyond defendants’ representations.

Plaintiffs alleged RICO claims, which failed because they were RICO claims, as well as California statutory and common-law claims, including fraud and breach of express and implied warranty. Some of the non-RICO claims survived.

First, plaintiffs couldn’t bring fraudulent concealment claims on behalf of a nationwide class, as to which they lacked standing.

Preemption: Are claims of compliance with regulatory standards preempted?

The Clean Air Act includes an express preemption provision:

No State or any political subdivision thereof shall adopt or attempt to enforce any standard relating to the control of emissions from new motor vehicles or new motor vehicle engines subject to this part. No State shall require certification, inspection, or any other approval relating to the control of emissions from any new motor vehicle or new motor vehicle engine as condition precedent to the initial retail sale, titling (if any), or registration of such motor vehicle, motor vehicle engine, or equipment.

But defendants didn’t explain how this would expressly preempt consumer protection claims, and there was a presumption against preemption for those. Plaintiffs’ state-law misrepresentation claims mostly didn’t “exist solely by virtue of” defendants’ disclosure requirements to the EPA. The court asked “whether Plaintiffs’ allegations could plausibly state a misrepresentation claim absent EPA regulation.” Plaintiffs alleged misrepresentations about: 1) “a clean-burning DEF system that made it so it would emit less pollutants than earlier models and/or equivalent gasoline-powered trucks;” 2) “good fuel economy;” 3) “low cost of ownership;” and 4) “strong towing and hauling capabilities.” Defendants also allegedly didn’t disclose the existence of “defeat devices” in the trucks, which could only perform as advertised while emitting pollutants beyond the legal limit, consumer expectations, and a comparable gasoline-powered vehicle. These “claims require proof of both more and less than what is required to enforce the federal standards.” No proof of an actual violation of EPA emissions standards was required, nor that the device would qualify as a “defeat device” as defined by federal regulation. Instead, defendants could be liable if they “installed and concealed software in the cars that reasonable consumers would have wanted to know about.” “Mere reference to regulatory standards, such as EPA emissions levels, does not alone infringe on the regulatory scheme.”

However, the court did find preempted claims relating to ads that the trucks complied with EPA and California Air Resources Board regulations. If the alleged false statement is that the trucks “complied with emissions law and regulations,” then plaintiffs could not prove their case absent a finding that defendants violated EPA regulations. (I gotta wonder whether this type of analysis should survive Loper Bright—I guess it’s an EPA regulation and not a statute, but if we exclude this, then do defendants get to argue that there’s no material difference to consumers between just claiming compliance with federal law versus also making the nonpreempted claims, thus insulating their other claims from liability as well? This decision seems to conflict with cases holding that a clear misrepresentation of FDA approval is actionable, but maybe the argument just below answers that.)

It didn’t matter that the EPA determined that defendant Cummins committed fraud, so a jury wouldn’t be second-guessing the agency’s determinations. Cummins denied the allegations despite entering into a consent order. And a fact finder could find that defendants did comply with EPA regulations, which would throw the agency’s allegations into doubt.

Both deceptive statements and deceptive omissions were plausibly alleged; as to the latter, plaintiffs pled that defendants had exclusive knowledge of material facts not known to the plaintiffs; materiality was alleged via allegations that plaintiffs would not have purchased the trucks or would have paid less had they known about the defeat devices. “Additionally, the EPA’s regulatory scheme and the Clean Air Act’s prohibition on defeat devices further suggest the presence of such devices in vehicles is material to consumers.” Even if plaintiffs also needed to allege that the omitted fact “affects the central functionality” of the product, which was not clearly required by California law, they’d done so, given that it’s illegal in California to “operate or leave standing upon a highway a motor vehicle that is required to be equipped with a motor vehicle pollution control device ... unless ... [the device] is correctly installed and in operating condition.” So this was a driveability issue.

Express warranty claims under the California Commercial Code failed because plaintiffs didn’t show that the defect persisted past multiple attempts to fix it. Implied warranty of merchantability claims failed for want of vertical privity; plaintiffs weren’t third-party beneficiaries to the contract between defendant FCA and the dealerships selling the trucks. But California’s Song-Beverly Act does not require vertical privity between the parties as an element of an implied warranty claim, and plaintiffs plausibly alleged that the trucks were unmerchantable because they could not be legally driven.