The Unheard Tree: The Struggle Over Unmanifested Defects in Consumer Class Actions

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One of the most famous questions in philosophy is “if a tree fell in a forest and nobody was there to hear it, would it still make a sound?”  A similar question dominates the world of consumer class actions.  If a product contains a defect but the buyer never experiences the defect and the product performs satisfactorily for its useful life, does the buyer have a cause of action?  Manufacturers and sellers insist that the answer is “no.”  Causation of injury is an essential part of any cause of action and no claim can succeed unless the plaintiff proves that the alleged defect manifested itself to create personal or economic harm.  This view is strongly supported by the case authority and numerous cases have dismissed proposed class actions where the claimant never experienced the defect.

 

In many instances, however, the named plaintiff alleges that he or she has experienced the defect and can avoid dismissal or summary judgment.  In almost all such cases, most of the purchasers have not and will not experience the defect.  Defendants resist class certification, contending that the necessity of establishing loss causation for each class member means that the class cannot meet the requirement of Federal Rule of Civil Procedure 23(b)(3) that issues common to the class predominate over individual issues.  Unfortunately, some courts have rejected this argument and have certified class actions despite the causation issue.  These courts reason that the very fact of purchasing a product containing a defect in itself may give rise to “point-of-sale” damages that do not require the defect to manifest itself.  They reach this breathtaking conclusion without careful consideration of whether the substantive causes of action permit the recovery of point-of-sale damages.

 

An example of this trend is found in In re Whirlpool Corp. Front-Loading Washer Prods. Liab. Litig, 678 F.3d 409 (6th Cir. 2012), where the court approved the certification of a class action of purchasers of washing machines that were allegedly susceptible to offensive odors caused by mold.  In response to the defendant’s contention that the majority of purchasers would never experience a mold problem, the Sixth Circuit Court of Appeals replied that the “class members may be able to show that each class member was injured at the point of sale upon paying a premium price for the [washing machines], even if the washing machines purchased by some members have not developed the mold problem.”  The Sixth Circuit did not show, however, that any cause of action under Ohio law, which governed the case, allowed recovery of such point-of-sale damages.  Nor did the court address the copious authority requiring actual manifestation of the defect in order to state a cause of action.  Unfortunately, it appears that Whirlpool is gaining some jurisprudential traction.  The Seventh Circuit Court of Appeals recently approved the certification of a similar class action in Butler v. Sears, Roebuck and Co., 702 F.3d 359 (7th Cir. 2012).

 

A sounder approach to the issue was taken in In re Toyota Motor Corp Hybrid Brake Marketing, Sales Practices and Prod. Liab. Litig., 2013 WL 150205 (C.D. Cal. 2013).  The court rejected certification of a class action alleging that certain brake systems were defective, finding that the predominance requirement was not satisfied.  The district court noted that actual loss was a requirement of each of the causes of action alleged. A class member with a vehicle that had not experienced substandard performance had no valid claim.  Merely asserting that the defect diminished the value of the vehicle did not provide a basis for relief.

 

The rule requiring that the defect manifest itself makes good jurisprudential and policy sense.  Almost all consumer products have a limited useful life.  If the consumer uses the product without incident during that useful life, he or she has received the benefit of his or her bargain, even if the product contains some latent “defect.”  If persons who have sustained actual loss as a result of the defect are compensated and then persons who have had no actual loss are also contemplated, the seller in effect pays for far more damage than was actually caused, an economically inefficient result that can only result in higher costs to consumers in the long run.

 

By ignoring the manifestation requirement and speculating on point-of-sale damages theories that are not supported by the substantive law, cases like Whirlpool create a disconnect between substantive and procedural law.  They may even go so far as to effectively alter the substantive law in class actions cases in violation of the Rules Enabling Act.  The cases deserve close and critical scrutiny.