Defective Product Class Actions: California Versus Florida Posted on February 28, 2017 by Larry Bodine By William C. Ourand, Esq. • Newsome Melton, P.A. Reprinted from the Winter 2016 issue of The Trial Lawyer Magazine. California has long been a common battleground for class action disputes. And there are many good reasons for this; most notably, California has a robust body of consumer protection law that lends itself well to class action litigation. In recent years, however, Florida has emerged as an ever-growing presence in the class action world, particularly with respect to automotive defect class actions. This trend, in turn, has given rise to a burgeoning body of Florida consumer protection law that has unique advantages and disadvantages when compared with California law. This article will begin by discussing recent class action cases pursued in Florida, will then move into a comparative analysis of the consumer protection laws governing class action suits filed in California and Florida, and will conclude by offering suggestions as to how to proceed when presented with the option of pursuing a class action involving consumers from each state. Recent Florida Class Actions Because each state has its own unique set of consumer protection laws and judicial precedent, is typically impossible to certify a national consumer fraud class in a product defect case. Accordingly, consumer advocates must pick and choose their battles wisely, as smaller states may not have a sufficient number of aggrieved consumers to help level the playing field through the class action mechanism. With a growing population of just under 20,000,000 people, Florida is one of the most populous states in the nation. It is unsurprising, then, that Florida courts, particularly the U.S. District Court for the Southern District of Florida, have become an increasingly common battleground for class action litigation. Recent examples of major automotive consumer fraud class action cases filed in Florida include: Batista v. Nissan North America, Inc., which involves an alleged defect that causes the continuously variable transmissions (“CVTs”) in certain Nissan Pathfinders and Infiniti QX60s to violently shake, impairing those vehicles’ ability to accelerate. The case was filed in the Miami Division of the Southern District of Florida in December 2014 by our firm in partnership with two other firms. The Court recently entered preliminary approval for a nationwide settlement class of all current and former owners and lessees of 2013–2014 Nissan Pathfinders and 2014 Infiniti QX 60s. Batista v. Nissan North America, Inc., Case No.: 1:14-cv-24728, D.E. 151 (S.D. Fla. 2016). Sanchez-Knutson v. Ford Motor Co., which involves an alleged defect that causes carbon monoxide to seep into the occupant cabin of certain Ford Explorers. In October 2015, Judge Dimitreleous of the Southern District’s Fort Lauderdale Division certified a class of all consumers who purchased or leased 2011–2015 Ford Explorers in Florida. In doing so, the Court accepted, “for purposes of class certification,” the plaintiff’s proposed “conjoint” damages model, which is “an analytic survey method used to measure customer preferences for specific features of products.” Sanchez-Knutson v. Ford Motor Co., 310 F.R.D. 529, 539 (S.D. Fla. 2015). The case was set to begin trial in early August 2016, but the parties reached a settlement agreement, which has been presented to the Court for approval. The proposed settlement would cover everyone who purchased or leased a 2011–2015 Ford Explorer in the United States. Sanchez-Knutson v. Ford Motor Co., 0:14-cv-6134, D.E. 416 (S.D. Fla. 2016). Carriuolo v. General Motors Co., which involves an alleged misrepresentation as to the safety ratings for the 2014 Cadillac CTS. The Eleventh Circuit Court of Appeals recently affirmed the certification of a class of Florida consumers who purchased the vehicles, joining ranks with a growing number of circuits that have allowed for so-called “price premium” or “overcharge” classes even after the latest wave of SCOTUS decisions narrowly construing Rule 23. See Carriuolo v. GM Co., 823 F.3d 977 (11th Cir. 2016). This case is currently set for trial in early 2017. Carriuolo v. GM Co., Case No.: 0:14-cv-61429, D.E. 99 (S.D. Fla. 2016). Additionally, Judge Moreno of the Southern District of Florida is currently presiding over the massive Takata airbag multi-district litigation (“MDL”). The consolidation of the MDL in Florida’s Southern District serves as a powerful testament to the Southern District’s ability to oversee complex litigation. Additionally, given the egregious nature of the exploding airbag inflator defect, it appears likely that the MDL litigation will generate favorable Florida consumer protection precedent. The UCL And CLRA Versus FDUTPA The primary statutes driving consumer fraud claims in California are the Unfair Competition Law (“UCL”) and the Consumer Legal Remedies Act (“CLRA”). Florida’s corollary law is the Unfair and Deceptive Trade Practices Act (“FDUTPA”). Although there is a far greater body of law construing the UCL and CLRA, recent FDUTPA decisions have staked out the boundaries of what constitutes a cognizable and classable FDUTPA claim. This portion of the article will summarize several key distinctions between these two bodies of law. FDUTPA Is Not Limited to Safety Defects Most consumer fraud claims involving defective products revolve around an omissions theory—specifically, that the manufacturer failed to disclose a defect, and as a result, the consumer did not get what was paid for. For such a claim to be actionable under the UCL and CLRA, the plaintiff must show that the defendant was under a duty to disclose, which typically requires showing that the defect was “material.” The materiality inquiry, in turn, generally revolves around whether the defect poses a safety hazard. See Myers v. BMW of N. Am., LLC, 2016 U.S. Dist. LEXIS 140768 (N.D. Cal. Oct. 11, 2016); Lassen v. Nissan N. Am., Inc., 2016 U.S. Dist. LEXIS 139512 (C.D. Cal. Sep. 30, 2016). In contrast, courts applying FDUTPA have specifically rejected a “safety hazard” requirement in omissions cases. See Matthews v. Am. Honda Motor Co., 2012 U.S. Dist. LEXIS 90802 (S.D. Fla. June 6, 2012) (rejecting the defendant’s argument that the plaintiff’s FDUTPA claim should be dismissed because the defect at issue did not pose a safety hazard, and explaining that the “argument derives from case law interpreting California’s consumer fraud statute . . . and FDUTPA is not so limited”). Instead, the plaintiff in a FDUTPA case must simply show that the defect diminishes the product’s value such that the failure to disclose the defect would be likely to mislead a consumer acting reasonably at the time of purchase. Id. As a practical matter, this distinction means that cosmetic defects—like paint discoloration and delamination—can form the basis for a valid FDUTPA claim, even if they could not meet the safety hazard analysis that often drives UCL and CLRA cases. Id. FDUTPA Does Not Require Pre-Sale Awareness or Knowledge of the Defect To “properly allege an actionable omission” under the UCL and CLRA, the plaintiff must allege “that the defendant knew of the defect at the time a sale was made.” Myers v. BMW of N. Am., LLC, 2016 U.S. Dist. LEXIS 140768, at *9 (N.D. Cal. Oct. 11, 2016). To meet the pre-sale knowledge requirement, plaintiffs often rely upon a combination of consumer complaints posted online, data from the National Highway Traffic Safety Administration (“NHTSA”), and technical service bulletins addressing the issue. See Butler v. Porsche Cars N. Am., Inc., 2016 U.S. Dist. LEXIS 114239 (N.D. Cal. Aug. 25, 2016). Of course, manufacturers do not always issue timely bulletins, and defects are not always well documented in NHTSA databases. Unfortunately, it can be difficult for the plaintiff— without access to discovery—to find other evidence to substantiate the defendant’s awareness of the defect. See Grodzitsky v. Am. Honda Motor Co., No. 2:12-cv-1142-SVW-PLA, 2013 U.S. Dist. LEXIS 33387, at *18 (C.D. Cal. Feb. 19, 2013) (granting the defendant’s motion to dismiss, and reasoning that the plaintiff’s references to online complaints and “speculative” allegations about the defendant’s pre-sale testing and internal data were insufficient to establish pre-sale awareness of the defect). Conversely, “FDUTPA does not require [the defendant] to have subjective knowledge of alleged defects in order for [the plaintiff] to state a viable FDUTPA claim.” Gavron v. Weather Shield Mfg., 819 F. Supp. 2d 1297, 1302 (S.D. Fla. 2011). This is because Florida precedent makes it clear that, for purposes of FDUTPA, “a deceptive act occurs when there is a representation, omission, or practice that is likely to mislead the consumer acting reasonably in the circumstances, to the consumer’s detriment.” Id. (citations and quotations omitted). And as such, FDTUPA “focuses on whether an act is deceptive, not whether a defendant knew that the allegedly violative conduct was occurring.” Id. The CLRA Has a Discovery Rule; FDUTPA Does Not The UCL has a four-year statute of limitations, and the CLRA has a three-year statute of limitations. Cal. Bus. & Prof. Code § 17208; Cal. Civ. Code § 1783. California courts have extended the common-law discovery rule to both UCL and CLRA claims. See Philips v. Ford Motor Co., 2015 U.S. Dist. LEXIS 88937 (N.D. Cal. July 7, 2015). Under California’s common law discovery rule, a “claim accrues and the limitations period beings to run when a plaintiff has information of circumstances to put him on inquiry or if he has the opportunity to obtain knowledge from sources open to his supervision.” Id. (emphasis in original). FDUTPA has a four-year statute of limitations. Fla. Stat. § 95.11(3)(f). And unlike UCL and CLRA claims, “[a] FDUTPA claim accrues at the time of purchase or lease of a product, not upon discovery of an alleged defect.” Speier- Roche v. Volkswagen Grp. of Am., Inc., 2014 U.S. Dist. LEXIS 59991 (S.D. Fla. 2014) (“It is well-settled there is no ‘delayed discovery rule’ applicable to FDUTPA claims.”). However, a plaintiff may still be entitled to toll the statute of limitations if he or she can plead and prove fraudulent concealment. See Licul v. Volkswagen Group of Am., Inc., 2013 U.S. Dist. LEXIS 171627, at *7 (S.D. Fla. 2013). California Has a Catalyst Fee Statute; Florida Does Not California law provides that “a court may award attorneys’ fees to a successful party against one or more opposing parties in any action which has resulted in the enforcement of an important right affecting the public interest….” Cal. Code Civ. Proc. § 1021.5. This statute is a codification of the so- called “catalyst fee” theory, which is an “exception to the general rule that each party to a lawsuit bears its own attorney’s fees.” Macdonald v. Ford Motor Co., 142 F. Supp. 3d 884, 890 (N.D. Cal. 2015). This statute allows the plaintiff to recover attorney’s fees if it is shown that the defendant issued a recall or undertook some other action in response to a UCL or CLRA class action. Id. Moreover, the statute applies to actions filed in both federal and state courts. Id. Florida does not have a similar catalyst fee statute. Instead, FDUTPA simply contains a “prevailing party” attorney’s fee provision. Fla. Stat. § 501.2105(3). The courts have so far not expressly resolved the issue of whether a defendant must pay for the plaintiff’s attorney’s fees in a case where the defendant issues a recall to address a defect that is also the subject of pending FDUTPA class action litigation. In such circumstances, the defendant may argue that it should not be required to pay attorney’s fees on the grounds that the plaintiffs did not secure a final order on the merits. This argument would likely be premised on Supreme Court and other federal precedent construing prevailing party attorney’s fees provisions in various federal statutes. See Orlando Communs. LLC v. Cellco P’ship, 2015 U.S. Dist. LEXIS 103214 (M.D. Fla. July 22, 2015) (discussing Supreme Court precedent on whether and when a court may award “prevailing party” attorney’s fees). Given the difference in the nature and scope of the federal statutes addressed in that precedent, we believe that such arguments are incorrect, and would vehemently argue that fees should be awarded to ensure that the state law policy objectives underlying FDUTPA are achieved. However, this argument is more difficult to make than it would be in California due to the lack of a specific catalyst fee statute. It Is Harder for The Defendant to Obtain Attorney’s Fees Under California Law The UCL lacks any fee-shifting provision, and as such, a prevailing defendant must typically look to the CLRA if it wishes to seek attorney’s fees from the plaintiff. The CLRA, in turn, only permits the court to award “[r]easonable attorney’s fees … to a prevailing defendant upon a finding by the court that the plaintiff’s prosecution of the action was not in good faith.” Cal. Civ. Code § 1780(e). “Courts have uniformly constructed this language as requiring a subjective test.” Corbett v. Hayward Dodge, Inc., 119 Cal. App. 4th 915, 924 (2004). As explained by the courts, “good faith, or its absence, involves a factual inquiry into the plaintiff’s subjective state of mind.” Id. (emphasis in original). Accordingly, the defendant has the burden of establishing that the plaintiff acted in subjective bad faith in filing the lawsuit. Id. FDUTPA, on the other hand, simply states that “[t]he trial judge may award the prevailing party the sum of reasonable costs incurred in the action plus a reasonable legal fee for the hours actually spent on the case as sworn to in an affidavit.” Fla. Stat. § 501.2105(3). Under this provision, “[o]nce a trial court has determined that a party is a prevailing party under FDUTPA, it then has discretion to award attorney’s fees and costs after considering various equitable factors….” Chow v. Chak Yam Chau, 640 F. App’x 834, 838 (11th Cir. 2015). Those factors include, but are not limited to, a consideration of whether the claim was filed in bad faith, or alternatively, whether the claim was frivolous even in the absence of subjective bad faith. Id. While California has been the traditional forum for class action disputes, emerging precedent from Florida and the Eleventh Circuit has shown that FDUTPA can be a very powerful tool for consumer advocates. As set forth above, courts applying FDUTPA have embraced the conjoint damages analysis, and have certified cases involving “overcharge” theories. Additionally, a comparison of California and Florida law reveals that FDUTPA may be the better choice in cases where the defect does not have a clear safety implication, or where there is a lack of public documentation to establish the defendant’s pre-sale knowledge of the defect. On the other hand, the UCL and CLRA may be better tools to employ in cases involving older products, where there is a chance that the defendant may issue a recall during the pendency of litigation, or where there is a higher likelihood that the defendant may prevail and request attorney’s fees from your client.