Hamm v. Mercedes-Benz USA, LLC

Background

Terry Hamm owns a used 2006 Mercedes-Benz CLK350 equipped with an allegedly defective automatic 722.9 7G-Tronic transmission. Hamm alleged that the defect could cause a vehicle to enter “limp mode,” preventing shifting or acceleration, and that Mercedes-Benz USA, LLC (MBUSA) knew about the defect but did not disclose it. He asserted claims under California’s Consumer Legal Remedies Act (CLRA) and Unfair Competition Law (UCL).

Hamm sought certification of a class consisting of California owners and lessees of Mercedes-Benz vehicles with 722.9 transmissions. He proposed an alternative, narrower class limited to vehicles with the VGS1 version of that transmission. The court modified both proposed definitions to exclude people who had received free repairs or replacement transmissions from MBUSA or its agents, while retaining the proposed exclusions for MBUSA personnel, judicial officers and their staff and immediate families, people claiming personal injuries, and entities other than natural persons.

Class Certification

Federal Rule of Civil Procedure 23 requires a proposed class to satisfy requirements including numerosity, commonality, typicality, adequate representation, and ascertainability. For a damages class under Rule 23(b)(3), common legal or factual questions must predominate over individual questions, and a class action must be superior to other methods of resolving the dispute.

The court found numerosity satisfied because Hamm asserted that thousands or tens of thousands of potentially affected vehicles were sold in California. It also found commonality satisfied because the alleged defect, MBUSA’s knowledge, MBUSA’s duty to disclose, and the materiality of the alleged nondisclosure could present common questions. The court found Hamm and his counsel adequate to represent the proposed class.

The court concluded, however, that typicality and predominance were not satisfied because of individualized questions about reliance. Under the CLRA, a plaintiff must show that the plaintiff would have been aware of a disclosure and would have acted differently if the disclosure had been made. MBUSA argued that its owners’ manuals disclosed symptoms comparable to the alleged defect, including worsening acceleration and failure to shift. The court reasoned that determining which class members saw or had the opportunity to read those warnings, and how that information affected them, would require extensive individual inquiries. It therefore held that reliance varied from consumer to consumer and defeated predominance under Rule 23(b)(3). The court denied Hamm’s motion for class certification.

The court rejected MBUSA’s arguments that Hamm lacked a common method for proving the alleged defect, MBUSA’s knowledge, or damages. It found that Okcuoglu proposed comparing MBUSA’s repair-kit parts with original transmission parts, and that Sharp proposed using a hedonic regression model to estimate the effect of the alleged transmission defect on vehicle value. The court stated that these issues could be challenged through evidence and cross-examination rather than by denying class certification or excluding the experts.

Expert Motions

MBUSA moved under Federal Rule of Evidence 702 and Daubert v. Merrell Dow Pharmaceuticals, Inc. to strike the expert reports of Murat Okcuoglu and D.C. Sharp. Rule 702 permits qualified experts to offer relevant and reliable specialized testimony. Daubert requires courts to examine the reliability of the principles and methods underlying expert testimony.

As to Okcuoglu, the court found his proposed comparison of repair-kit components with unrepaired transmission parts to be a sufficient methodology for investigating a common defect. The court held that he did not need to complete the analysis or identify the defect’s precise cause at the class-certification stage. It denied MBUSA’s motion to strike his report.

As to Sharp, the court found that hedonic regression was a valid scientific method for estimating damages. It treated MBUSA’s challenges to Sharp’s data, sample size, vehicle attributes, and pricing information as issues affecting the weight of his analysis rather than its admissibility. The court also found that the model fit Hamm’s theory that all 722.9 transmissions were defective, regardless of their particular version or components. It denied MBUSA’s motion to strike Sharp’s report.

Because the court denied class certification, it deemed moot Hamm’s motion to strike MBUSA’s expert report and testimony from Kevin Lane Keller.

Disposition

The court denied Hamm’s motion for class certification; denied MBUSA’s motions to strike the expert reports of D.C. Sharp and Murat Okcuoglu; and deemed moot Hamm’s motion to strike Kevin Lane Keller’s expert report and testimony. This order addressed class certification and expert evidence, not whether Hamm ultimately would prevail on the underlying CLRA or UCL claims.