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Parkinson v. Hyundai Motor America

December 12, 2008

MICHAEL PARKINSON, ET AL., PLAINTIFFS,
v.
HYUNDAI MOTOR AMERICA, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Alicemarie H. Stotler Chief U.S. District Judge

MEMORANDUM OPINION ON ORDER:

(1) GRANTING IN PART AND DENYING IN PART PLAINTIFFS' MOTION FOR CLASS CERTIFICATION; AND (2) DENYING PARTIES' MOTIONS TO STRIKE

I. PROCEDURAL BACKGROUND

On June 16, 2008, plaintiffs Michael Parkinson, Donn Schroeder, Michael K. Sano, Eric Matuschek, and Wesley Gorman (collectively, "plaintiffs") filed a Motion for Class Certification. On June 27, 2008, defendant Hyundai Motor America ("defendant") filed opposition and a Motion to Strike and Objections to Plaintiffs' Purported Statistical Data. On August 1, 2008, plaintiffs filed a Motion to Strike and Objections to Declaration of Jason R. Erb and Evidence Attached Thereto in Support of Defendant's Opposition to Motion for Class Certification. On August 6, 2008, plaintiffs filed a reply in further support of the Motion for Class Certification.

On September 17, 2008, the Court granted the parties leave to submit supplemental filings in support of their respective positions regarding class certification. Plaintiffs filed a supplemental reply on September 17, 2008, and defendant filed a supplemental opposition on September 29, 2008.

All of the above matters came on for hearing on October 20, 2008, at the conclusion of which the Court took the matters under submission. On November 6, 2008, the Court issued an Order and Minute Order granting in part and denying in part plaintiffs' Motion for Class Certification, noting that a memorandum opinion may follow. Defendant filed a Petition for Permission to Appeal with the Ninth Circuit on November 21, 2008. The Court granted in part and denied in part defendant's application for a stay pending appeal on November 24, 2008.*fn1

II. FACTUAL SUMMARY

Defendant is an American subsidiary of Hyundai Motor Company that distributes, markets, sells, and issues warranties for Hyundai passenger vehicles. (First Am. Consolidated Compl. ("FACC") ¶¶ 13-14.) In the first quarter of 2002, defendant introduced the 2003 Hyundai Tiburon. (FACC ¶ 17.) According to the owner's guide and handbook, the 2003 Hyundai Tiburon came equipped with the "Hyundai Advantage -- America's Best Warranty," which included: (1) a New Vehicle 60 Months/60,000 Miles Limited Warranty; (2) a New Vehicle 120 Months/100,000 Miles Limited Powertrain Warranty for original owners (60 months/60,000 miles for subsequent owners); and (3) a 12 months/12,000 miles warranty for "[n]ormal maintenance items" found to be "defective in material or workmanship under normal use and maintenance." (Decl. of Eric H. Gibbs ("Gibbs Decl."), Ex. 1 at 16, Ex. 2 at 16-17, 21, 38.) Defendant expressly excluded from coverage any "damage or failure" resulting from negligent maintenance, use of non-Genuine Hyundai Parts, misuse, abuse, accidents, modifications, or alterations. (Gibbs Decl., Ex. 2 at 18, 20.)

Plaintiffs are residents of various states, including California, who purchased a new or used manual-transmission 2003 Hyundai Tiburon GT ("Tiburon"). (Mot. Class Cert. 1.) After purchasing their Tiburons, plaintiffs each experienced problems shifting into and between gears. Each plaintiff then spent roughly $2,000 in replacement parts and repairs.

Michael Parkinson purchased a new Tiburon from an Ohio dealership in May 2003. (Decl. of Jason H. Anderson ("Anderson Decl."), Ex. S at 248.) At approximately 30,000 miles, Parkinson attempted to move his Tiburon from a parking spot but was unable to shift into reverse and had trouble transitioning into other gears. (Anderson Decl., Ex. R at 93:10-21.) Parkinson was able to drive the vehicle home, and, the next morning, drove to a local Hyundai dealership for inspection. (Anderson Decl., Ex. R at 93:14-18.) Later that day, the dealership called Parkinson to inform him that his "clutch had failed and that it would have to be replaced." (Anderson Decl., Ex. R at 105:11-21.) Although Parkinson assumed that the repair would be covered under warranty, the technician determined that the problem was a "failed" clutch disc, which was not covered. (See Anderson Decl., Ex. R at 107:22-23, 108:20-24.) Parkinson initially disputed the warranty coverage but, ultimately, paid for the repair. (Anderson Decl., Ex. R at 116:4-18, Ex. T at 249-50.)

Donn Schroeder purchased a new Tiburon from a Maryland dealership in March 2003. (Anderson Decl., Ex. B at 57.) At approximately 53,000 miles, he was unable to shift into reverse and took the Tiburon to the dealership for repairs. (Anderson Decl., Ex. A at 75:17-25.) The service technician informed Schroeder that the clutch was worn and needed replacing but the repair would not be covered under the vehicle's warranty. (Anderson Decl., Ex. A at 89:10-14, Ex. E at 106.) Schroeder "didn't question it" and agreed to pay for the repair. (Anderson Decl., Ex. A at 90:8-10.)

Michael K. Sano purchased a new Tiburon from a California dealership in February 2002. (Anderson Decl., Ex. G at 137-38.) At approximately 88,000 miles, during his drive to work, Sano "[c]ouldn't get [the clutch] out of gear." (Anderson Decl., Ex. F at 116:1.) Sano took his Tiburon to a dealership where a service technician test-drove the vehicle and wrote an invoice identifying the problem as a "bad" clutch. (Anderson Decl., Ex. F at 112:11-25.) The technician recommended "replacement of clutch ass[embl]y" at a quoted price of $1,895, but Sano declined. (Anderson Decl., Ex. H at 139.) Instead, Sano had a mechanic friend make the repairs. (Anderson Decl., Ex. F at 115:15-20, 118:5-7, 124:17-23.)

Eric Matuschek, a trained automobile mechanic and professional stuntman, purchased a new Tiburon from a California dealership in March 2003. (FACC ¶ 47; Anderson Decl., Ex. P at 27:1-16, 28:23-24, 29:2-12.) At approximately 30,000 miles, Matuschek noticed what he thought to be clutch-related problems while driving his Tiburon. (Anderson Decl., Ex. P at 110:4-18.) He drove the vehicle to his repair shop and began researching the symptoms on the Internet. (Anderson Decl., Ex. P at 114:5-22.) Matuschek then called a Hyundai dealership whose representative suggested that he bring the car in for inspection; however, Matuschek declined when the representative estimated that the repair would cost roughly $2,600. (Anderson Decl., Ex. P at 114:23-25, 115:1-5.) Instead, Matuschek performed the repair himself. (Anderson Decl., Ex. P at 123:5-25, 124:23-25, 128:15-17, 131:2-12.)

Wesley Gorman purchased a used Tiburon from a Florida Ford dealership in March 2005. (Def.'s Opp. 9; Anderson Decl., Ex. I at 146.) At the time of purchase, the vehicle had approximately 41,000 miles on it. (Anderson Decl., Ex. I at 146.) In May 2005, Gorman took his Tiburon to a Florida Hyundai dealership to report a "creeping noise" and vibration when shifting. (Anderson Decl., Ex. J at 70:19-25, 71:1-2.) The Hyundai dealership told Gorman that the clutch repair was not covered under warranty and suggested that he take the vehicle to the original place of purchase - the Ford dealership - for repairs. (Anderson Decl., Ex. J at 85:1-7, 88:5-10.) When the Ford dealership also refused to cover the costs of the clutch repair, Gorman purchased an aftermarket clutch and had a Honda specialty shop perform the repairs. (Anderson Decl., Ex. J at 85:4-21, Ex. M at 173.)

In March 2004, defendant released a Technical Service Bulletin stating problems with the Tiburon's flywheel and clutch assembly. (See FACC ¶¶ 30-31.) On March 22, 2006, Parkinson filed a putative class action against defendant in Orange County Superior Court. (Not. Removal, Ex. A.) Defendant filed a Notice of Removal to this Court on April 4, 2006. At roughly the same time, plaintiffs Gorman, Schroeder, and Sano were in the initial stages of litigating putative class actions against defendant in the Central District of California. (See Def.'s Mot. to Consolidate 2-3.) On August 7, 2006, the Court consolidated the cases and appointed interim class counsel.*fn2 Plaintiffs filed a First Amended Consolidated Complaint on September 7, 2006, alleging, inter alia, violation of the Consumers Legal Remedies Act, unfair business practices, breach of written warranty under the Magnuson-Moss Warranty Act, and breach of express warranty. Defendant, after unsuccessfully moving to dismiss the action, filed its answer on April 20, 2007.

Plaintiffs argue that the cause of the alleged problems in plaintiffs' vehicles is a defective "flywheel system." (FACC ¶ 29.) In all manual transmission vehicles, "the torque of the engine is connected to the transmission by the clutch assembly." (Decl. of Dirk Starksen ("Starksen Decl.") 3.) The Tiburon's clutch assembly consists of a dual mass flywheel, a clutch disc, and clutch cover assembly composed of a cover stamping, diaphragm spring, and pressure plate. (Decl. of Dylan Hughes, Ex. 4 at 5; Starksen Decl. 3.) The flywheel and clutch cover assembly are attached to the engine's driveshaft. (Starksen Decl. 3.) The clutch disc is "clamped" between the flywheel and clutch cover assembly. (Starksen Decl. 3.)

"The clutch assembly engages and disengages the engine from the transmission, enabling the driver to start, stop, idle, and shift gears." (Starksen Decl. 4.) When the driver presses his foot on the clutch pedal, the clutch disconnects the engine from the transmission. (Starksen Dec. 3.) When the driver releases the clutch pedal, the clutch becomes fully engaged and connects the engine to the transmission, thus enabling the automobile to drive.

"The principal function of the dual mass flywheel is to absorb minor engine vibrations before they are transmitted to the driveline where they may create gear rattle." (Starksen Decl. 3.) To accomplish this, the dual mass flywheel is divided into two sections: a "primary" section that connects to the crankshaft, and a secondary section attached to the primary section with springs to isolate and absorb engine vibrations.

According to plaintiffs, the Tiburon's dual mass flywheel system "suffers from excessive heat build-up under normal driving conditions," which, in turn, leads to premature flywheel system failure, "rendering the vehicle inoperable." (Pl.'s Supp. Reply 1; FACC ¶ 29.)

III. SUMMARY OF PARTIES' CONTENTIONS

On May 27, 2008, plaintiffs filed a motion for certification of a class consisting of:

All current and former owners or lessees of a manual-transmission 2003 Tiburon GT, produced on or before April 1, 2003, who paid for a replacement to the flywheel assembly, clutch disc assembly, clutch cover assembly, or clutch release bearing within the applicable warranty period. (Mot. Class Cert. 1.) Excluded from the class are defendant, Hyundai Motor Company; any affiliate, parent, or subsidiary of defendant or Hyundai Motor Company; any entity in which defendant or Hyundai Motor Company has a controlling interest; any officer, director, or employee of defendant or Hyundai Motor Company; anyone employed by counsel for plaintiffs; any judge to whom this case is assigned, as well as her immediate family or staff; any person who purchased a Tiburon for the purpose of resale; and those pursuing claims for personal injury. (Mot. Class Cert. 7.)

A. Plaintiffs' Motion for Class Certification

Plaintiffs each purchased a 2003 Hyundai Tiburon GT after defendant aggressively marketed the vehicle as being protected by "America's Best Warranty." However, plaintiffs, like thousands of others, have been wrongfully forced to bear the cost of repairing a defective flywheel system.

The Court should certify the class because each of the procedural requirements in Fed. R. Civ. P. 23 is satisfied, the class action device is well suited to this case, and a class action will afford a fair and efficient way of litigating the class claims.

1. Class Treatment is Appropriate Under Rule 23

a. Plaintiffs Satisfy Rule 23(a)

Under Fed. R. Civ. P. 23(a), the class must be so numerous that joinder of all members is impracticable (numerosity), there must be questions of law or fact common to the class (commonality), the claims or defenses of the representative parties must be typical of the claims or defenses of the class (typicality), and the representative parties must fairly and adequately protect the interests of the class (adequacy).

To satisfy the numerosity requirement, joinder of all parties must be "impracticable," but not necessarily impossible. Negrete v. Allianz Life Ins. Co. of N. Am., 238 F.R.D. 482, 487 (C.D. Cal. 2006). Plaintiffs need not identify with precision the number of class members and may instead rely on reasonable inferences. Westways World Travel, Inc. v. AMR Corp., 218 F.R.D. 223, 233-34 (C.D. Cal. 2003).

Plaintiffs' evidence shows that defendant sold 12,652 class vehicles, many of which required defective flywheel system repairs that defendant failed to cover under warranty. Also, defendant sold a large number of replacement flywheels and received numerous complaints from Tiburon owners dissatisfied with the lack of warranty coverage. These facts evidence a class whose individual members would be too large to join in one action.

To satisfy commonality, plaintiffs may show either shared legal issues with divergent facts, or a "common core of facts" with divergent legal remedies. Dukes v. Wal-Mart, Inc., 509 F.3d 1168, 1177 (9th Cir. 2007). Moreover, the inquiry is qualitative, not quantitative, and one significant issue may warrant certification.

Id.; Thomas v. Baca, 231 F.R.D. 397, 400 (C.D. Cal. 2005). In automobile defect cases, commonality is often found when the most significant question concerns the existence of a defect. See, e.g., Chamberlan v. Ford Motor Co., 223 F.R.D. 524, 526 (N.D. Cal. 2004).

Plaintiffs show commonality here because the central issue is whether the Tiburon flywheel system is defective. Plaintiffs' allegations present a number of other common legal and factual questions, including: (1) whether and to what extent defendant was obligated to repair or replace allegedly defective flywheel systems under the warranty; (2) whether the 12 months/12,000 miles warranty for the "clutch lining" applies to the entire clutch disc assembly, as well as the flywheel, clutch cover, and release bearing; (3) whether defendant knew or should have known the flywheel system allegedly was defective; (4) whether defendant had a duty to disclose the alleged flywheel system problems; (5) whether the allegedly undisclosed problems would be material to a reasonable consumer; (6) whether defendant engaged in conduct likely to deceive a reasonable consumer; and (7) whether the alleged failure to disclose or misrepresentations regarding warranty coverage violated the Consumers Legal Remedies Act ("CLRA") or Unfair Competition Law ("UCL").

A class representative's claims are typical if they are "reasonably coextensive" with those of the absent class members. Dukes, 509 F.3d at 1184. Plaintiffs' warranty claims are "reasonably coextensive" with those of the absent class members because plaintiffs and every other class member purchased a 2003 Tiburon with a manual transmission, experienced problems related to the defective flywheel system, and paid for the repair out-of-pocket, in violation of the warranty agreement. Likewise, plaintiffs' consumer protection claims are "reasonably coextensive" with those of absent class members because all claims arise from defendant's common scheme to misrepresent its warranty and withhold internal knowledge of common problems with the Tiburon's flywheel system.

To establish that they will fairly and adequately represent the interests of the class, plaintiffs must show that they do not have conflicting interests with the class and that they are represented by qualified, competent counsel. Id. at 1185. Plaintiffs' interests and those of the unrepresented class members are aligned because each suffered the same injury; there are no conflicts of interest. Further, plaintiffs are represented by qualified and competent counsel.

b. The Case is Maintainable as a Class Action Under Rule 23(b)(3)

In addition to satisfying the requirements of Rule 23(a), a party seeking certification must show that the class action fits within one of the categories described in Rule 23(b). Here, plaintiffs' action meets the predominance and superiority requirements of Rule 23(b)(3).

The predominance inquiry hinges on the cohesiveness of the class -- whether common legal and factual questions appear more significant than individual legal and factual questions. Hanlon v. Chrysler Corp., 150 F.3d 1011, 1022 (9th Cir. 1998). The legal and factual issues central to plaintiffs' claims are common to all class members. These include allegations that the Tiburon flywheel system was defective and, thus, that defendant breached its warranty agreements for failing to cover the cost of repair. Further, the scope of coverage under the warranty agreement is a question of contract construction common to all members of the class. Plaintiffs' UCL and CLRA claims also hinge on common questions of law and fact, including the existence of a known defect, whether defendant had a duty to disclose that defect, whether it failed to do so, whether those undisclosed facts would be material to a reasonable consumer, and whether defendant engaged in conduct likely to deceive a reasonable consumer or comprising a common scheme by applying the 12 months/12,000 miles "clutch lining" warranty limitation to the entire flywheel system.

Individual litigation of relatively small damages claims is both a burden on the judiciary and uneconomical for plaintiffs. Hanlon, 150 F.3d at 1023. Few, if any, of the potential class members in this action could afford individual litigation of their claims, given the disparity between possible recovery and litigation costs. Therefore, the class action method is superior.

c. A Nation-Wide Class is Appropriate

A court may certify a nation-wide class for alleged violations of state law. See Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 821, 105 S.Ct. 2965, 86 L.Ed. 2d 628 (1985). For certification to be proper, application of the state's laws to outof-state class members must comport with due process. Once plaintiffs make this showing, the burden shifts to the non-movant to show that the laws of another state apply. Wash. Mut. Bank, FA v. Superior Court, 24 Cal. 4th 906, 921, 103 Cal. Rptr. 2d 320 (2001).

i. Application of California Law Is Constitutional

To satisfy their burden, plaintiffs must show that California has a significant contact or aggregation of contacts to the claims of the class members to ensure that California law is not being applied arbitrarily. See Wershba v. Apple Computer, Inc., 91 Cal. App. 4th 224, 244, 110 Cal. Rptr. 2d 145 (2001); Clothesrigger, Inc. v. GTE Corp., 191 Cal. App. 3d 605, 612-13, 236 Cal. Rptr. 605 (1987). Here, defendant has a substantial presence in California, including in-state business practices that form the core of plaintiffs' allegations. Additionally, a significant number of class members reside in California.

Because plaintiffs have already identified significant contacts, the burden shifts to defendant to show that the laws of another state apply. This burden is "substantial" when defendant is located in California and the alleged misconduct occurred in or emanated from California. See In re Activision Sec. Litig., 621 F. Supp. 415, 430 (N.D. Cal. 1985). In California, a three-step "governmental interest" test is used to determine choice of law questions. Under the "governmental interest" test, the Court first determines whether the laws of each potentially concerned state are different from those of California. Kearney v. Salomon Smith Barney, Inc., 39 Cal. 4th 95, 107, 45 Cal. Rptr. 3d 730 (2006).

The Court then "examines each jurisdiction's interest in the application of its own law." Id. If the non-forum state laws differ from those of the forum state and the non-forum states have an interest in applying their laws in the action, the Court will select the law of the state whose interests would be most impaired.

Id. at 107-08.

Defendant cannot satisfy its burden because California's consumer protection statutes, upon which some of plaintiffs' claims are based, are largely homogeneous with those of the other fifty states and, if anything, afford greater protection to consumers. Even assuming a conflict existed, defendant cannot show that another state has a more substantial interest in having its laws apply to this action. California has a strong interest in policing wrongful conduct allegedly occurring within its borders, including when the victims of such conduct are out-of-state residents.

B. Defendant's Opposition

The motion for class certification should be denied because factual and legal issues unique to each plaintiff predominate every facet of the litigation. Several key background facts illustrate this point.

First, individual driver habits and the driving environment impact the lifespan of a clutch. Second, the purchase and service process is individualized and detached from defendant. For example, the Tiburon was designed and manufactured in Korea by Hyundai Motor Company, then shipped to one of the 794 independently-owned Hyundai dealerships throughout the country. Defendant only becomes involved in a warranty determination when a customer disputes a dealer's coverage decision or when a dealer requests assistance with a particularly difficult vehicle diagnosis.

Third, clutch-related diagnoses are complex and highly individualized. Often, the service technician must discuss the symptoms with the customer and road test the vehicle to observe the customer's driving habits. Like virtually all other automobile manufacturers, defendant does not provide coverage where there is evidence of lack of proper maintenance, abusive driving, a prior accident, or modifications to the vehicle.

Fourth, while the class vehicle was in production, there were over fifteen different component ...


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