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Flynn v. FCA U.S. LLC

United States District Court, S.D. Illinois

September 23, 2016

BRIAN FLYNN, GEORGE BROWN, KELLY BROWN, and MICHAEL KEITH, on behalf of themselves and all others similarly situated, Plaintiffs,
v.
FCA U.S. LLC, doing business as Chrysler Group LLC, and HARMON INTERNATIONAL INDUSTRIES, INC. Defendants.

          MEMORANDUM AND ORDE

          Michael J. Reagan United States District Court.

         In 2015, Brian Flynn, Michael Keith, and George and Kelly Brown-all owners or lessees of Chrysler vehicles-brought suit against Chrysler and Harmon International Industries, seeking to sue on their own behalf and on behalf of a number of other vehicle owners similar to them. Their suit concerns a design flaw in some of Chrysler's 2013-2015 vehicles that received public attention in a 2015 Wired magazine article. The vehicles in question are equipped with a uConnect system, manufactured by Harmon International, that allows integrated control over the phone, navigation, and entertainment functions throughout the vehicle. Per the plaintiffs, the uConnect system turns the affected vehicles into rolling deathtraps: the uConnect system has design vulnerabilities that allow hackers to take remote control of the vehicle's functions, including the vehicle's steering and brakes, to comical or disastrous effect. The Wired article contributed to a voluntary recall by Chrysler, depending on how one sees things, and despite the recall the plaintiffs maintain that the affected vehicles still have a number of vulnerabilities that would allow hackers to access the vehicles' critical and non-critical systems. Those ongoing vulnerabilities led the plaintiffs to file a class complaint in this Court, seeking monetary damages and injunctive relief.

         Flynn, Keith, and the Browns assert a number of claims linked to the uConnect system and the vehicles the system was installed in, each predicated on their home state's law. Chrysler and Harmon, say the plaintiffs, violated the Magnuson-Moss Act and the implied warranty of merchantability for the affected vehicles under Michigan, Illinois, and Missouri law by putting the vehicles into circulation with the design vulnerabilities; they committed fraud and violated the Michigan, Illinois, and Missouri consumer protection statues when they lied about the vehicles' safety or failed to fully disclose the uConnect vulnerabilities; they were negligent in designing and later fixing the affected vehicles' vulnerabilities; and they were unjustly enriched by virtue of their tortious or fraudulent conduct or their violations of the vehicles' implied warranties. As damages, the plaintiffs say that they overpaid for their vehicles because the vehicles were initially defective; that the ongoing vulnerabilities have diminished their vehicles' value; that the vulnerabilities have put the plaintiffs at risk of injury or death; and that the vulnerabilities have placed the plaintiffs in an ongoing state of fear or anxiety. Chrysler and Harmon have moved to dismiss all or part of the operative complaint on jurisdictional and pleading grounds, and those motions are now ripe for review.

         One note is in order concerning another motion Chrysler filed after Chrysler and Harmon moved to dismiss the operative complaint. The two named Missouri plaintiffs in this case, George and Kelly Brown, bought their Chrysler vehicle pursuant to a discount program, and because that discount program included an arbitration clause covering warranty claims against Chrysler, Chrysler has moved to stay this entire case so that the Browns' claims can be addressed before an arbitrator. Harmon supports the motion. By separate order today, the Court granted a limited stay as to the Browns' claims only, but denied a stay as to the other claims in this suit. Accordingly, this ruling will only address the motions to dismiss directed at Plaintiff Flynn's claims (under Illinois law) and Plaintiff Keith's claims (under Michigan law). Any arguments directed at the Browns' claims will be denied without prejudice in light of the stay; Chrysler and Harmon are free to make those arguments again once the stay is lifted.

         Chrysler and Harmon make a number of arguments in favor of full or partial dismissal of the Michigan and Illinois claims in this case, but it makes sense to start with their jurisdictional arguments, for if those succeed all or part of the case must end. The two complain the loudest about standing-they insist that the plaintiffs have not alleged the kinds of injuries recognized as viable by the courts, much less ones that are traceable to either entity's conduct. Their reference to “allegations” and the standard they cite in their motions suggests a facial challenge to standing, and for that kind of challenge the Court accepts as true all of the complaint's allegations and construes those allegations in the plaintiff's favor. Silha v. ACT, Inc., 807 F.3d 169, 173 (7th Cir. 2015). To have standing, a litigant must show that he has suffered a concrete and particularized injury that is fairy traceable to the challenged conduct and is likely to be redressed by a favorable court decision. Hollingsworth v. Perry, 133 S.Ct. 2652, 2661 (2013). The standing doctrine, grounded as it is in the Constitution's case or controversy requirement, serves a number of practical goals: it limits premature judicial interference with legislation, it prevents the courts from being overwhelmed with cases, and it ensures that the primary victims of wrongful conduct will not have their cases litigated in advance by persons who were only trivially harmed. Am. Bottom Conservancy v. United States Army Corps of Eng's, 650 F.3d 652, 656 (7th Cir. 2011).

         Flynn and Keith allege that they have been injured in a variety of ways. The first two injuries-that the uConnect vulnerabilities have exposed them to an increased risk of injury or death if their vehicles were hacked and that they suffer anxiety and fear because of that possibility-both have some standing problems in light of the Supreme Court's holding in Clapper v. Amnesty Int'l USA, 133 S.Ct. 1138, 1147 & n.5 (2013), that a risk of future injury and the fear of that injury doesn't create standing absent a “substantial” risk that the feared injury will come to bear. Taking the plaintiffs' allegations as true, there's not that kind of risk here. There's no allegation in the complaint that the plaintiffs' vehicles were hacked at all or that their vehicles were actually meddled with in a way that could cause real injury. There is the Wired article and its author, who was subject to a hack that put the author at some controlled risk for journalistic effect, and there were also reports from thirty people who reported possible hacking-related problems during the course of the voluntary recall. But the Wired scenario was done to a willing subject in a quasi-laboratory setting who suffered no injury whatsoever, and the vast majority of the recall reports concerned theft-related hacks, having nothing to do with any risk of injury or death. Only four owners in a universe of over a million reported anything close to a safety-related problem-three reported engine stalls and one reported a sudden unintended acceleration that may have been caused by hacking-and there's no allegation that those consumers were actually injured, severely or otherwise. Once more, the uConnect system has been subject to a recall, and even though Flynn and Keith insist that the recall didn't fix all of the vulnerabilities and offer some developed allegations on that front, the recall still reduces the chances even more that a real world hack will occur and that Flynn and Keith will be injured or killed by virtue of a takeover of their vehicles. At the end of the day, four unverified safety-related reports and one safety-related hack in a quasi-controlled setting concerning a purported defect that's been in existence since 2013 doesn't add up to a “substantial” risk of harm to the plaintiffs here. See, e.g., Koronthaly v. L'Oreal USA, Inc., 374 F. App'x 257, 259 (3d Cir. 2010) (subjective fear of injury insufficient to create standing when plaintiff had “suffered no adverse health effects” and there was no objective indication of a serious risk of harm); Simpson v. California Pizza Kitchen, Inc., 989 F.Supp.2d 1015, 1022 (S.D. Cal. 2013) (no standing where there was nothing to suggest that ingestion caused actual harm).

         Consider the chain of events that would need to occur for a serious injury to befall Flynn or Keith. Their automobiles would need to be hacked by a hacker proficient enough to access the vehicles by remote. The hack would need to occur despite the fact that the recall fixed some of the vulnerabilities referenced in the Wired article. The hacker would need to gain access to the critical systems of the vehicle, and then the hacker would need to hijack those systems in a way that would cause a wreck of the kind of magnitude that could injure or kill. The plaintiffs don't allege that this chain of events has ever happened to anyone, and the chain looks a lot like the kind deemed too attenuated and speculative to create standing in other cases. See Clapper, 133 S.Ct. 1138 at 1148-50; In re African-Am. Slave Descendants Litig., 471 F.3d 754, 760-61 (7th Cir. 2006). This isn't like a data breach case where cybercriminals who have stolen credit data will likely use that data in the future even if they haven't at the start of a suit, Remijas v. Neiman Marcus Grp., LLC, 794 F.3d 688, 694-95 (7th Cir. 2015); in this case there is no allegation that a real world hacker has ever hacked the uConnect system to cause injury, nor is there any suggestion that hackers with knowledge of these kinds of vulnerabilities take advantage of them to injure hapless drivers.

         So Flynn and Keith lack standing to press injuries based on a risk of injury or death and the fear of that injury. That doesn't mean that they lack standing across the board, though-standing is evaluated on an injury-by-injury basis, Davis v. Fed. Elec. Comm'n, 554 U.S. 724, 734 (2008), and Flynn and Keith have two other injuries they wish to press here. Those two injuries are mirror images of each other: they claim that they overpaid for their affected vehicles because the automobiles had defects at the time they were purchased, and they also insist that the defects have caused an appreciable drop in the value of their vehicles on the market. Chrysler and Harmon insist that any overpayment or diminution of value is speculative given that no consumer has actually been severely injured or killed by way of the defect, but safety-related defects aren't the only kinds of defects that could cause a drop in value, and there are enough allegations offered and materials cited by the plaintiffs to suggest a drop, at least at this point in the case. Market forces alone, pressed along by the 2015 Wired article exposing safety- and access-related vulnerabilities with the uConnect system, could lead to a reduction in the value of the vehicles, as could reports from some 27 odd consumers during the recall suggesting that their automobiles were remotely unlocked and then robbed by hackers. And overpayment or a drop in value suffices as an injury for standing purposes. E.g., In re Aqua Dots Prods. Liab. Litigation, 654 F.3d 748, 750-51 (7th Cir. 2011); Cole v. Gen. Motors Corp., 484 F.3d 717, 722-23 (5th Cir. 2007); In re Toyota Motor Corp. Unintended Acceleration Prods. Liab. Litig., 754 F.Supp.2d 1145, 1162 (C.D. Cal. 2010).

         Chrysler and Harmon brush off the overpayment and diminution cases on the grounds that they all involved situations where the harms from defects had materialized for some group of customers, even if they hadn't materialized for the actual plaintiffs in the case. That distinction might matter-it stands to reason that there likely wouldn't be much of a loss in value if the defective product wasn't defective at all-but the distinction doesn't hold up here. Aqua Dots, Cole, and Toyota Motor all involved products where other customers had problems with the product but the plaintiffs luckily ducked them, and there are allegations of similar problems experienced by other consumers here-Flynn and Keith allege that a journalist driving one of the affected vehicles was hacked in real time and his event narrated for the market to read in a national magazine a little over a year ago, and that the narration fed into a recall that involved at least thirty reports of purported hacking of the affected vehicles. Those events might not back up a substantial risk of death or injury to Keith and Flynn, but they do provide a foundation for a claim that the affected vehicles were overpriced when they were sold or that the affected vehicles lost value once knowledge of the defects reached the market. See Toyota Motor Corp., 754 F.Supp.2d at 1162-66 (noting that the risk of actual harm from the defect wasn't substantial, but that the “market effect” of the defect was “actual or imminent” and that the non-conclusory allegations of market value loss were sufficient to allege injury in fact).

         It's true that a recall occurred for the affected vehicles in this case, and it's also true that a number of courts have cast suspicious glances at claims of overpayment or diminished value when a recall purportedly fixed all of the problems prior to suit. E.g., Hadley v. Chrysler Group LLC, 624 F. App'x 374, 378 (6th Cir. 2015); In re Toyota Motor Corp. Hybrid Brake Marketing Sales Prac. & Prod. Liab. Litig., 915 F.Supp.2d 1151, 1159 (C.D. Cal. 2013). The key phrase is “all of the problems”-if a recall didn't remedy three vulnerabilities out of ten or one vulnerability out of twenty, then it's only logical that there might still be a loss in value on the market despite the manufacturer's efforts. See Sater v. Chrysler Group LLC, No. 14-00700, 2014 WL 11412674, at *4 (C.D. Cal. Oct. 7, 2014); In re Toyota Motor Corp., 790 F.Supp.2d 1152, 1162 (C.D. Cal. 2011).

         Keith and Flynn claim that kind of slip here, and their supporting allegations are far from conclusory-they point out that the Wired article documented a number of vulnerabilities with the uConnect system, they offer clear allegations as to what vulnerabilities the recall didn't fix, and the documents from the recall offer some doubt as to whether everything is fixed. If the plaintiffs can prove that the recall didn't fix all of the defects and that the ongoing vulnerabilities have reduced the market value of their vehicles, the initial overpayment and the subsequent reduced value would qualify as injuries in fact. Whether it's a small injury or whether the injury isn't legally viable given a doctrine like economic loss are separate questions-all that matters for standing at this phase is that the plaintiffs allege a fair probability of injury. E.g., MainStreet Org. of Realtors v. Calumet City, Ill., 505 F.3d 742, 744-45 (7th Cir. 2007); Am. Bottom, 650 F.3d at 658. Keith and Flynn have alleged such an injury here in spite of the recall, and that's enough. They've also alleged causation despite the defendants' argument to the contrary: if the defects in the uConnect system still allow hackers to access their vehicles despite the recall, then any lost value would be “fairly traceable” to the uConnect defects, regardless of whether hacking by third parties also contributed. Lewert v. P.F. Chang's China Bistro, Inc., 819 F.3d 963, 967-68 (7th Cir. 2016).

         Failing a wholesale jurisdictional dismissal on standing grounds, the defendants insist that Flynn and Keith lack standing to bring some of the state law claims raised in this suit. For instance, Flynn is a resident of Illinois, and the defendants argue that he lacks standing to bring claims under Missouri or Michigan law where he has no connection to those states. Likewise, Keith is a resident of Michigan, and the defendants maintain that he lacks standing to invoke the laws of Missouri or Illinois. This argument conflates the standing question with the merits of a claim. Standing exists if a litigant has been injured, the defendants caused that injury, and the injury can be redressed by a judicial decision-nothing more is required. Morrison v. YTB Int'l, Inc., 649 F.3d 533, 536 (7th Cir. 2011). The question of what state law is properly invoked by each plaintiff or putative plaintiff is a merits question or possibly a question linked to the propriety of class certification, and federal courts shouldn't conflate that issue with the standing point. E.g., Morrison, 649 F.3d at 536; Le v. Kohl's Dep't Stores, Inc., ___ F.Supp.3d ___, 2016 WL 498083, at *12-13 (E.D. Wis. Feb. 8, 2016); Cohan v. Medline Indus., Inc., No. 14-cv-1835, 2014 WL 4244314, at *2 (N.D. Ill. Aug. 27, 2014). Chrysler and Harmon's argument, premised entirely on standing, must be rejected.

         With the standing point resolved, Chrysler (but not Harmon) has two more jurisdictional arguments. The first concerns collateral attack: Chrysler says that Flynn and Keith can't take issue with the National Highway Traffic Safety Administration's ruling that there are no more problems with the uConnect system through this more conventional lawsuit, but must challenge that purported ruling through the Administrative Procedure Act. It's a tough pill for the Court to swallow that all plaintiffs are barred wholesale from bringing a typical products liability lawsuit for damages merely because a federal agency has coordinated a recall and made findings as a part of that process, and Chrysler doesn't make that pill any more palatable with a developed argument-it doesn't cite one case where a Court extended the collateral attack doctrine to a case like this. The Court needn't resolve the more difficult question of whether collateral attack applies in these circumstances, though, because the collateral attack point can be disposed of on more mundane grounds. To create a collateral attack problem, Chrysler would need to show that the defect issue was finally determined by the Administration, see Peterson v. Johnson, 714 F.3d 905, 911-12 (6th Cir. 2013); State Farm Mut. Auto. Ins. Co. v. Indus. Pharmacy Mgmt., LLC, No. 09- 00176, 2009 WL 2448474, at *4-5 (D. Haw. Aug. 11, 2009), and the tenor of the Administration's findings don't suggest that kind of finality or confidence. Far from issuing any kind of ultimate determination on the comprehensiveness of Chrysler's voluntary recall, the Administration said, in its recall findings, that it only “appear[ed]” that the defects were addressed, and elsewhere said that it was making no conclusive ruling on whether the defects were cured by way of Chrysler's voluntary recall. Without a more conclusive determination by the Administration as to a defect, there's nothing for the plaintiffs to attack collaterally through this suit.

         Chrysler's second jurisdictional argument concerns preemption. According to Chrysler, many of the declaratory requests in the complaint must be dismissed because they are poorly veiled attempts to institute a court-ordered recall and thus are preempted by the Motor Vehicle Safety Act, specifically the parts of the Act that set up procedures for the National Highway Traffic Safety Administration to use as a part of any recall. The touchstone of any preemption analysis is congressional intent, and that intent can be stated explicitly or implied by the federal statute's structure and purpose. Gade v. Nat'l Solid Wastes Mgmt. Ass'n, 505 U.S. 88, 98 (1992). There's nothing to suggest that the Safety Act explicitly preempts all state claims; to the contrary, the savings clause specifically preserves state law warranty obligations and other rights and remedies provided by state law. See 49 U.S.C. ยง 30103(d). That said, implied preemption can still limit a state claim or order despite the presence of a savings clause. If a part of a federal statute occupies a field so thoroughly that it leaves no room for the States to supplement it, or if state claims or ...


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