Third Circuit Court of Appeals Vacates Class Certification in Marcus v BMW of North America

August 2012

Herrick's class action defense team scored an important victory on August 7, 2012 when the Third Circuit Court of Appeals vacated a New Jersey District Court decision certifying a class in a products liability case involving our client, Bridgestone. The Third Circuit in Marcus v BMW of North America, LLC., et al., reviewed a New Jersey District Court's certification of a limited New Jersey sub-class of plaintiffs who claimed to have been harmed by their purchase or lease of certain BMW's equipped with Bridgestone run flat tires. Plaintiff claimed that the Bridgestone tires at issue were defective, in that they are allegedly susceptible to failure, are costly to replace, and cannot be repaired, and that selling or leasing a BMW equipped with such tires without fully disclosing all possible disadvantages of the tires violated the New Jersey Consumer Fraud Act (the "CFA"). The complaint asserted common law claims which included breach of warranty, breach of contract and breach of the warranty of good faith and fair dealing (arising under the Magnuson-Moss Act and state law) and sought damages for diminution in value of the cars under the CFA.

The Court of Appeals ruled that common law claims, where the product at issue can fail for a myriad of reasons unrelated to defect - in this case, tires - could not be tried as a class action due to the inability to establish causation by common proof, but rather would require individual inquiries to determine the cause of failure in each case. Such claims would therefore fail to meet the predominance requirement of Rule 23(b)(3). As for the CFA claims, the Court held that the District Court abused its discretion in finding a presumption of causation without making key factual findings to support it and remanded the case to the District Court opining that those claims could proceed only if Plaintiff is able to establish by a preponderance of the evidence that the alleged defects were either (i) not knowable to most of the class members before they made their decisions to purchase or lease, or (ii) even if knowable, that a significant number of class members learning of the defects would have changed their purchasing or leasing decisions.

Besides these important rulings, the Third Circuit found that the District Court failed to adequately define a clear and readily discernable class or the claims, issues and defenses to be given class treatment. Additionally the Appeals Court held that the District Court abused its discretion in finding that the numerosity requirement had been met. On remand, the Third Circuit instructed that, in order to further pursue class treatment of his claims, Plaintiff must identify with specificity the number of members who would qualify for class treatment, or advise the court as to how such specific information could be collected, whether through defendants records or some other reasonably reliable method.

In determining whether the commonality and typicality requirements have been met, the Court instructed that the District Court must not only consider the Defendants' behavior but must consider the Plaintiff's conduct as well with the object of determining whether Plaintiff's common law and consumer fraud claims are subject to any unique defenses not applicable to the class as a whole.

This decision is likely to have a far reaching impact on District Court's certification of class actions as the 55 page opinion exhaustively analyzes the process the lower court must follow with respect to each of the Rule 23(b)(3) requirements.