Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—W.D. Okla.: Ford unable to stall deceptive trade practices claims over alleged defective diesel engine, (Aug 14, 2015)

By Michael Menzhuber, J.D., LL.M.

A consumer alleged sufficient facts under the Oklahoma Consumer Protection Act (OCPA) to pursue claims against auto maker Ford Motor Company regarding alleged design and manufacturing defects in a certain model of diesel engine, the federal district court in Oklahoma City has ruled. However, the tort claims against Ford were dismissed because they were barred by the economic loss doctrine (McAlister v. Ford Motor Company, August 13, 2015, DeGiusti, T.).

Background. Consumer Jack McAlister brought a class action against auto manufacturer Ford Motor Company, which alleged in part that Ford violated the OCPA and committed common law torts of manufacturer’s product liability and negligence in the design and manufacturer of a certain model of diesel engine. Specifically, McAlister alleged that Ford’s 6.7L Power Stroke diesel engine had defect designs that allowed water intrusion into the fuel system resulting in rust and damage to fuel system components. Ford moved for dismissal.

Oklahoma Consumer Protection Act (OCPA). McAlister alleged that Ford violated the OCPA by engaging in: (1) deceptive trade practices; (2) practices that were contrary to public policy; and (3) practices that were substantially injurious to consumers. Ford contended that McAlister’s complaint failed to specify how it allegedly violated the OCPA.

The court determined that McAlister’s allegations were minimally sufficient to avoid dismissal. His deceptive trade practices claim was supported by his allegations that Ford knew of the defective engine system, failed to disclose that information to purchasers, and omitted the defective component from the “bumper-to-bumper” warranty. He also alleged claim that Ford’s practices were contrary to public policy since Ford designed, manufactured, and sold defective vehicles and failed to eliminate the risk to consumers by repairing vehicles. Further, Ford engaged in practices that were substantially injurious to consumers by failing to recall the vehicles or inform purchasers of the defective design before preventable damage to the vehicle’s engines occurred.

Economic Loss Doctrine. Ford argued that the economic loss doctrine bars recovery in tort and, therefore, McAlister’s manufacturer’s product liability and negligence claims should be dismissed. Under the economic loss doctrine, recovery in tort is not permitted for damages categorized as “consequential harm flowing from” injury to the product itself. According to Ford, McAlister’s alleged injuries fell squarely within the category of “purely economic loss” because they were limited to the cost of vehicle repair, loss of use of the vehicle, and lower value of the vehicle and the warranty.

McAlister argued that his tort claims should be allowed to proceed because he alleged damages that went beyond injury to the vehicle. Specifically, he contended that he was: (1) exposed to an unreasonable risk of harm; and (2) had been placed in an untenable situation in which he were unable to obtain prompt repair, leading to the stress and mental/emotional distress of being stuck with unsafe vehicles.

The court agreed with Ford that McAlister’s allegations of damage to the vehicle, loss of use, and costly repairs were properly characterized as economic injury to the allegedly defective product and consequential harms from that injury. It determined that McAlister failed to allege personal injury damages because: (1) he failed to allege any physical injury to himself, or to a third party, resulting from Ford’s conduct, which is a requirement for recovery of mental or emotional distress damages under Oklahoma law; and (2) he expressly excluded “any persons who have suffered personal injuries as a result of the facts/defects alleged” from the putative class.

The case is No. CIV-14-1351-D.

Attorneys: Blake Sonne (Sonne Law Firm, PLC) for Jack McAlister. Andrew L. Richardson (McAfee & Taft) for Ford Motor Co.

Companies: Ford Motor Co.

Cases: StateUnfairTradePractices ConsumerProtection OklahomaNews