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Laroe v. FCA U.S. LLC

United States District Court, D. Kansas

March 29, 2019

RONALD AND MELODY LAROE, individually, and on behalf of those similarly situated, Plaintiffs,
FCA US, LLC f/k/a CHRYSLER GROUP, LLC, et al., Defendants.


          Daniel D. Crabtree United States District Judge.

         This matter comes before the court on defendants FCA US, LLC (“FCA US, ” f/k/a/ Chrysler Group), and ZF North America, Inc.'s (“ZF NA”) Motions to Dismiss (Docs. 100 & 102). Plaintiffs Ronald and Melody LaRoe, individually, and on behalf of those similarly situated, have filed their Fourth Amended Complaint (Doc. 95) in this case. This filing-like its predecessors-alleges that defendants acted in concert to defraud owners of some 320, 000 vehicles manufactured by FCA US. Specifically, plaintiffs allege that defendants' scheme involved defective wire harnesses placed in some-but not all-FCA US-manufactured vehicles. The Fourth Amended Complaint substantially reduces the claims that plaintiffs assert. It merely claims that defendants violated the Racketeering Influenced and Corrupt Organizations Act (“RICO”). As they argued in previous Motions to Dismiss (Docs. 42 & 62), defendants contend that plaintiffs do not have standing to assert their claim. See Doc. 101 at 19-21; Doc. 103 at 16- 18.

         For reasons explained below, the court again concludes that plaintiffs lack standing to bring the RICO claim asserted in their Fourth Amended Complaint. But, exercising its discretion, the court grants plaintiffs leave-one last time-to amend their Fourth Amended Complaint if they choose to do so.

         I. Background

         This section briefly summarizes the procedural history culminating in plaintiffs' Fourth Amended Complaint. Then, it outlines the Fourth Amended Complaint's alleged facts pertinent to the court's analysis of plaintiffs' standing to assert their RICO claim.

         A. Procedural History

         Plaintiffs filed their Second Amended Complaint (Doc. 41) after the court granted their unopposed Motion seeking leave to file their amended complaint. See Docs. 39 & 40. FCA U.S. and ZF NA both filed Motions to Dismiss (Docs. 42 & 62), arguing in part that plaintiffs lacked standing to bring their claims and moving to dismiss the claims, in part, under Federal Rule of Civil Procedure 12(b)(1).

         The court agreed with defendants. The Second Amended Complaint hadn't asserted that plaintiffs had sustained any damages arising from the malady that the allegedly defective wire harness could cause-i.e., an unexpected shift in gear that “could” cause a collision. See Doc. 41 at 9 (internal quotations omitted). Also, the Second Amended Complaint didn't allege any problems with plaintiffs' car that were “‘fairly trace[able]'” to actions by defendants. Doc. 85 at 14 (quoting Clapper v. Amnesty Int'l USA, 568 U.S. 398, 408 (2013)). The court also rejected plaintiffs' argument that their injury included the diminished value of their vehicle. See Id. at 16 (citing Tae Hee Lee v. Toyota Motor Sales, U.S.A., Inc., 992 F.Supp.2d 962, 972-73 (C.D. Cal. 2014). Tae Hee Lee held that “claims of ‘diminished value' and ‘overpayment' [are] only allowed to proceed for those plaintiffs who had pled ‘something more,' [e.g., ] having stopped using vehicles for fear of personal safety or having sold or traded-in vehicles at a loss due to depressed resale values following recalls and publicized alleged incidents”). And the court found Tae Hee Lee's reasoning persuasive.

         But the court also granted plaintiffs leave to file another amended complaint. Plaintiffs responded with a mechanical error of their own, filing the wrong version of an amended complaint. See Doc. 94 (explaining that plaintiffs had filed the wrong document as their Third Amended Complaint (Doc. 88)). So, the court granted plaintiffs additional time to file a Fourth Amended Complaint-and it is that fourth generation Complaint that is before the court now.

         B. Fourth Amended Complaint

         The Fourth Amended Complaint makes allegations quite similar to those included in the Second Amended Complaint. But, it changes the theory of liability: plaintiffs assert only a RICO violation, and they allege economic losses as their only injury.

         When it considers defendants' motions to dismiss, the court accepts, of course, facts asserted by the Fourth Amended Complaint (Doc. 95) as true and views them in the light most favorable to plaintiffs. Burnett v. Mortg. Elec. Registration Sys., Inc., 706 F.3d 1231, 1235 (10th Cir. 2013) (citing Smith v. United States, 561 F.3d 1090, 1098 (10th Cir. 2009)).

         1. Allegations about all affected vehicles

         During model years 2014 to 2016, the Fourth Amended Complaint alleges, FCA U.S. manufactured at least 320, 000 cars and SUVs with defective sensor wire harnesses (collectively, “affected vehicles”). The wire harness at issue is a component inside the nine-speed transmission. This wire harness transmits electrical currents, which ultimately control which gear the automatic transmission selects, and when it selects that gear. The Fourth Amended Complaint alleges that the wire harnesses are defective because they were manufactured with insufficient wiring crimps, which hold a group of wires in the harnesses together snugly and thus maintain conductivity and connectivity. A wiring crimp defect, plaintiffs allege, can cause electrical resistance to become too great; if that happens, a vehicle's transmission can shift into neutral suddenly during normal operation.

         The Fourth Amended Complaint also alleges that ZF NA knew the root cause of the defect by July 10, 2014. FCA U.S. knew about the defect “well before” July 2016. Doc. 95 at 5. And, the Fourth Amended Complaint alleges, FCA U.S. knew about the defect “likely significantly earlier” than it informed the National Highway Traffic Safety Administration (“NHTSA”) of the problem. Id. In July 2016, FCA U.S. submitted a Safety Recall Report to NHTSA under 49 C.F.R. Part 573. Id. at 11, 11 n.14. In this report, FCA U.S. informed NHTSA that “‘[s]ome . . . vehicles may have insufficient crimps in the transmission wire harness that may cause an unexpected shift to neutral resulting in a sudden loss of motive power.'” Id. at 11 (quoting FCA US's Initial 49 C.F.R. Part 573 Report to NHTSA, submitted on July 12, 2016) (ellipsis in original). (For simplicity, this Order calls this report to NHTSA the “Part 573 Report.”) The report from FCA U.S. also explained, “‘[T]he remedy program for this recall is under development.'” Id. at 13 (quoting Part 573 Report). FCA U.S. included a draft Recall Notice with the Safety Recall Report.

         Eventually, FCA U.S. sent the Recall Notice to owners of the affected vehicles. This notice described the wire harness problem in this fashion:

The transaxle wire harness on your vehicle may have been built with insufficient wire terminal crimp(s). This may cause an intermittent high electrical resistance in the transaxle wire harness circuit(s). A high resistance circuit(s) in this wiring harness will cause the on-board diagnostic system to set a Diagnostic Trouble Code (DTC). When the DTC is set, the system defaults the transaxle to neutral and the customer experiences a loss of motive power. Motive power can usually be regained upon a restart. The loss of motive power could cause a crash without warning.

Id. at 11 (quoting Interim Recall Notice for Safety Recall S55/NHTSA 16V-529 [hereinafter “Interim Recall Notice”]) (internal quotation marks omitted). FCA US's Recall Notice also explained that:

FCA [US] intends to repair your vehicle free of charge (parts and labor). However, the parts required to provide a permanent remedy for this condition are currently not available. FCA [US] is making every effort to obtain these parts as quickly as possible. FCA [US] will contact you again by mail, with a follow-up recall notice, when the remedy parts are available.

Id. at 13 (quoting Interim Recall Notice) (emphasis in original) (internal quotation marks omitted).

         Plaintiffs assert that FCA U.S. never intended to provide a “permanent remedy” for the defective wire harnesses in all 320, 000 vehicles, and knew that it had no such intention when it issued its Recall Notice. Instead, plaintiffs allege, defendants chose to perform a software update that failed to cure the defect or its manifestations. In turn, FCA U.S. amended its Part 573 Safety Recall Report on October 6, 2016, to include the following language: “‘FCA U.S. will reprogram the Powertrain Control Module (“PCM”) and the Transmission Control Module (“TCM”). In addition, if the vehicle has an active or stored fault code, the transaxle range sensor wire harness will be replaced.'” Id. at 63 (quoting Part 573 Report, as amended Oct. 6, 2016). Consistent with this amended report, FCA U.S. instructed its dealers to do the following: “‘Due to the low expected failure rate, do not order a transaxle range sensor wire harness until you verify the specified DTC's. A parts ordering restriction has been assigned to help manage harness part availability.'” Id. at 14 (quoting FCA US's Dealer Service Instructions for Safety Recall S55/NHTSA 16V-529, 3 ...

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