Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—N.D. Cal.: Ford unable to steer clear of consumers’ claims over defective power steering systems, (Jul 9, 2015)

By Linda O’Brien, J.D., LL.M.

A group of consumers alleged sufficient facts to pursue fraudulent omission claims against an automobile manufacturer in relation to an alleged defective power steering system in certain models of vehicles that the consumers purchased or leased, the federal district court in San Jose, California has decided (Philips v. Ford Motor Company, July 7, 2015, Koh, L.).

Ford Motor Company manufactures the Ford Fusion and Ford Focus, certain models which are equipped with an electronic power assisted steering (EPAS) system. William Philips, Jaime Goodman, Allison Colburn, and Ian Colburn, who purchased or leased certain Ford Fusion or Focus vehicles, brought a putative class action suit against Ford, alleging that the vehicles were equipped with a defective EPAS system. Asserting fraudulent concealment and violations of California’s Unfair Competition Law (UCL) and Consumer Legal Remedies Act (CLRA), the consumers claimed that the defect caused drivers to experience significantly increased steering effort and increased risk of losing control of their vehicles when the EPAS system failed. Ford moved for dismissal.

Statute of limitations. The court determined that the plaintiffs’ UCL, CLRA, and fraudulent concealment claims were not time-barred. The UCL contains a four-year statute of limitations and the CLRA’s limitations period is three years. The action was brought in 2014 and the limitations period began to run when the plaintiffs purchased their vehicles. In their complaint, however, the plaintiffs invoked the discovery rule, doctrine of fraudulent concealment, and equitable estoppel to toll the limitations periods for their claims.

According to the court, the plaintiffs were not charged under the discovery rule with a duty to reasonably investigate until the alleged steering defect manifested in their vehicles. Only when the defect manifested in their vehicles in 2013 and 2014 were the plaintiffs charged with a duty to investigate and presumptive knowledge of the defect, and the statute of limitations began to run.

Fraudulent omission claims. The plaintiffs adequately alleged the omission of a fact that Ford was obligated to disclose, according to the court. The plaintiffs’ evidence of a company technical service bulletin, consumer complaints, and a National Highway Traffic Safety Administration regarding the Ford Explorer were sufficient to plausibly show that Ford had knowledge of the EPAS system defect at the time the plaintiffs purchased their vehicles. Also, the plaintiffs’ allegations that the EPAS system failure at high or low speeds causes increased risk of (1) loss of control of the vehicle, (2) collisions, and (3) grave bodily harm constituted a material safety hazard was plausible and therefore Ford had a duty to disclose the EPAS system defect. Furthermore, the plaintiffs’ claims met the pleading standard of Federal Rule of Civil Procedure Rule 9(b) by identifying “who” (Ford), “what” (failing to disclose a known defect), “when” (the time of sale), and “where” (the various channels of distribution) with sufficient particularity.

Injunctive relief. However, the plaintiffs UCL and CLRA claims for equitable relief were dismissed due to the availability of an adequate remedy at law. They had an adequate remedy at law in the form of their claim for fraudulent concealment to redress their alleged injuries, the court determined.

The case is No. 5:14-cv-02989-LHK.

Attorneys: Adam J. Levitt (Grant & Eisenhofer PA) for William Philips. Amir M. Nassihi (Shook, Hardy & Bacon LLP) for Ford Motor Co.

Companies: Ford Motor Company

Cases: StateUnfairTradePractices CaliforniaNews