A Multidistrict Litigation started by a TikTok trend of individuals breaking into cars recently settled for an estimated $200 million. The Plaintiffs alleged that the Defendants—Hyundai and Kia—knowingly sold defective vehicles that were vulnerable to theft while also asserting that Defendants prioritized profits over safety. The vehicles at issue included 2011-2022 Kia vehicles and 2015-2022 Hyundai vehicles that were equipped with traditional “insert-and-turn” steel key ignition systems. Plaintiffs argued that vehicles lacking immobilizer technology were particularly susceptible to theft. According to Plaintiffs, without an immobilizer, anyone with a USB cable could steal the vehicle. Plaintiffs’ lawsuit encompassed various claims, including consumer fraud, unjust enrichment, and deceptive trade practices.

Background

On December 13, 2022, the Multidistrict Litigation, which included nearly 60 consumer lawsuits, was assigned to U.S. District Judge James V. Selna in Santa Ana, California. The Panel on Multidistrict Litigation’s decision to centralize these actions in the Central District of California was based on the convenience of the parties and witnesses and to promote the just and efficient conduct of the litigation. Additionally, Defendants Kia America Inc. and Hyundai Motor America are based in California, with other defendants also within the State.

Defendants’ Arguments for Dismissal

On Monday, May 1, 2023, Defendants Kia America, Inc., Hyundai Motor America, Kia Corporation, and Hyundai Motor Company (collectively “Defendants”) filed a Motion to Dismiss Consolidated Amended Consumer Class Action Complaint.

In their motion, Defendants’ presented several arguments challenging the validity of the claims made by the Plaintiffs including: (1) Plaintiffs cannot apply California law to consumers who did not purchase or lease their vehicles in California; (2) Plaintiffs cannot hold Defendants accountable for the actions of unrelated third-party criminals; (3) Plaintiffs’ misrepresentation claims fail because they did not review or rely on the challenged representations, which are non-actionable puffery and not false or misleading; (4) Plaintiffs’ omission/concealment claims lack specificity, fail to establish Defendants’ awareness of alleged defects, and do not demonstrate a duty to disclose or intent; (5) Plaintiffs’ breach of implied warranty claim is invalid because they do not allege that their vehicles are not fit for their ordinary purpose of providing safe and reliable transportation, and they lack privity with Defendants; (6) Plaintiffs’ unjust enrichment claims are unsupported and not recognized in some states; (7) Plaintiffs’ claims under California’s Unfair Competition Law lack plausibility regarding unlawful or unfair practices; and (8) Plaintiffs have not shown a lack of adequate legal remedy to seek equitable relief.

At least some of the arguments presented by the Defendants are likely to be meritorious.  In re Toyota Motor Corp. Unintended Acceleration Marketing, Sales Practices, and Products Liability supports the first defense in that parties should not be allowed to determine which state’s substantive law should apply by strategically selecting the forum in which to file suit.  785 F.Supp. 2d 925, 928-929 (C.D. Cal. 2011).  The validity of second, third, fourth, fifth, and sixth defenses then hinges on the state law under which they are brought, and said state law is not uniform. 

With respect to the claims under California’s Unfair Competition Law (the “UCL”), Defendants’ argument regarding the implausibility of Plaintiffs’ claims of unlawful or unfair practices may also be successful.  While the UCL creates an independent action when a business practice violates some other civil or criminal law, be it municipal, state, or federal, the party alleging a claim under the UCL must still state a cause of action under the borrowed law.  Altman v. PNC Mortg., 850 F.Supp. 2d 1057, 1076 (E.D. Cal. 2012).  Defendants’ argue that Plaintiffs cannot establish a UCL claim for two reasons.  First, Plaintiffs failed to plausibly allege that the vehicles at issue did not comply with state or federal law.  Second, that the lack of an immobilizer does not establish a UCL claim because immobilizers are not required to be installed in any vehicle by any law, and their decision to purchase a vehicle without an immobilizer was the Plaintiffs’ economic choice rather than the Defendants’ legal violation.

Settlement

Though Defendants’ motion to dismiss lays out their legal defenses, no decision will be made on those legal defenses after a settlement valued at an estimated $200 million ended the consolidated consumer claims in California. This settlement includes up to $145 million available for cash payments to customers with out-of-pocket losses, including up to $6,125 for total loss of vehicles, up to $3,375 for damage to vehicle and personal property, and other payments for insurance-related expenses, car rental, taxi, rideshare or public transit costs not otherwise covered by insurance.

Conclusion

This legal battle sheds light on important consumer rights issues and the potential need for enhanced vehicle security measures. The impact of this case could have far-reaching implications for the automotive industry, consumer rights litigation, and prospective settlements in that arena.

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