Hamm v. Mercedes-Benz USA, LLC

Background

Terry Hamm moved for partial reconsideration of the court’s earlier order denying his motion for class certification. Hamm alleged that Mercedes-Benz USA, LLC equipped certain vehicles with a defective 722.9 7G-Tronic automatic transmission, knew about the defect, and failed to disclose it in violation of the California Consumers Legal Remedies Act and California Unfair Competition Law.

In its earlier class-certification order, the court found that Hamm satisfied some requirements for class certification, including numerosity, commonality, and adequacy. The court also found that individual questions did not predominate for proving a common defect, Mercedes-Benz USA’s knowledge, or damages. But it narrowed the proposed class definitions on ascertainability grounds and denied certification because Hamm was not typical of the class and individual reliance questions predominated. The court did not reach superiority.

The court had previously dismissed Hamm’s Unfair Competition Law claim on Mercedes-Benz USA’s motion for judgment on the pleadings because Hamm sought equitable relief despite having an adequate remedy at law. His earlier reconsideration motion concerning that claim therefore became moot. The motion addressed in this order concerned reconsideration of the class-certification denial as to the Consumers Legal Remedies Act claim.

Legal Standard

The court applied Civil Local Rule 7-9, which permits reconsideration of an interlocutory order when there is a previously unknown material difference in fact or law, new material facts or a change in law, or a manifest failure to consider material facts or dispositive legal arguments.

For class certification, Federal Rule of Civil Procedure 23(a)(3) requires the representative plaintiff’s claims to be typical of the class’s claims. The court explained that a representative may be atypical when unique defenses could cause the representative to become preoccupied with issues that do not apply to absent class members.

Typicality and Reliance

The court held that Hamm’s alleged lack of reliance supported its finding that he was not typical of the proposed class. To prove his Consumers Legal Remedies Act claim, Hamm had to show actual reliance on Mercedes-Benz USA’s alleged omission—meaning that, if the information had been disclosed, he would have known about it and acted differently. A material omission may create a presumption of reliance, but that presumption can be rebutted.

The court rejected Hamm’s argument that a non-reliance defense cannot support denial of class certification. It read the cited precedent as prohibiting courts from deciding the merits of a claim during class certification, not as preventing courts from considering reliance when analyzing typicality. The court also rejected Hamm’s argument that a case based on a complete omission cannot create a reliance-based typicality problem, concluding that this position conflicted with controlling Ninth Circuit authority requiring reliance for the claim.

Even assuming that the alleged omission was material and that a presumption of reliance applied, the court found that Mercedes-Benz USA had offered enough evidence to rebut that presumption as to Hamm. The evidence showed that Hamm bought his vehicle from a Toyota dealership, did not view Mercedes-Benz brochures, advertisements, website materials, owner’s manuals, or warranty booklets before purchasing, and did not interact with a Mercedes-Benz representative. The court concluded that these circumstances created a substantial reliance defense unique to Hamm. It clarified that it was not imposing an affirmative duty on Consumers Legal Remedies Act plaintiffs to investigate.

Predominance

Because the court found that Hamm was not typical, it did not decide his argument that the earlier order incorrectly analyzed whether individual reliance questions predominated. The court nevertheless offered guidance if Hamm renewed his class-certification motion. It observed that Mercedes-Benz USA had not shown that a significant number of class members viewed owner’s manuals before purchase, and it questioned whether the cited “limp mode” language disclosed a transmission defect rather than merely describing functional limitations.

The court also questioned whether purchasers who bought vehicles from Mercedes-Benz USA or authorized dealerships should be grouped with purchasers who bought used vehicles from unaffiliated dealerships or other third parties. It stated that a presumption of reliance might be appropriate for purchasers exposed to Mercedes-Benz USA’s statements, but that its application was less clear for third-party purchasers.

Disposition

The court DENIED Hamm’s motion for partial reconsideration. It clarified that its denial of class certification was without prejudice, allowing Hamm to renew the class-certification motion after addressing the deficiencies identified in this order and the earlier class-certification order. The court also directed the parties to meet and confer about the case schedule and submit a proposed schedule within ten days.