Milstead v. General Motors LLC

Background

James Milstead, Arthur Ray, and Richard Vargas sued General Motors LLC, General Motors Holdings LLC, and General Motors Company, which the opinion collectively calls “GM.” They brought the case for themselves and a proposed class of people and entities that purchased or leased GM trucks or sport utility vehicles in California from model years 1999 through 2018.

The alleged defect concerns the vehicles’ airbag control unit, also called the Sending and Diagnostic Module. According to the complaint, software in the module was programmed to close the time window for airbag deployment and seatbelt tightening before 100 milliseconds had elapsed. The plaintiffs alleged that GM knew about the defect and its safety risks but concealed it and did not recall or repair the vehicles.

The court had previously dismissed earlier versions of the complaint because the plaintiffs had not plausibly defined the defect. In the most recent earlier order, the court allowed the plaintiffs to amend most claims but dismissed Vargas’s express-warranty claim with prejudice. GM then moved to dismiss the Third Amended Complaint. GM did not separately challenge the court’s earlier conclusions about the adequacy of the unjust-enrichment and implied-warranty claims or the economic-loss rule.

Legal standard

The court applied Federal Rule of Civil Procedure 12(b)(6), which asks whether a complaint contains enough factual matter to state a plausible claim for relief. For claims based on fraud, Federal Rule of Civil Procedure 9(b) also requires the circumstances of the alleged fraud to be stated with particularity, including the basic details of who, what, when, where, and how.

The court also considered Article III standing. Standing requires an injury in fact, a connection between the injury and the defendant’s conduct, and a likelihood that a favorable court decision would remedy the injury.

Court’s analysis

Alleged defect. The court held that the amendments cured the earlier problem with the definition of the defect. The Third Amended Complaint consistently defined the defect as airbag-control-unit shutoff times below 100 milliseconds. The presence of different specific shutoff times—such as 16, 45, or 50 milliseconds—did not defeat uniformity because each was below the alleged 100-millisecond limit.

The complaint also referred to an accident involving a 2009 GM truck in which the airbags allegedly did not deploy during a fatal crash because of a programmed shutoff time below 100 milliseconds. The court found that this allegation, together with the other allegations, supported an inference that the alleged defect was present in the named plaintiffs’ 2010 and 2012 vehicles.

The court rejected GM’s argument that the plaintiffs had to show that GM vehicles experienced airbag nondeployment more often than vehicles made by other manufacturers. It also rejected GM’s argument that the absence of proof connecting the alleged defect to the cited airbag failure made the claims implausible. At the pleading stage, the court viewed the allegations and cited accident examples in the light most favorable to the plaintiffs. It concluded that the plaintiffs had adequately pleaded a well-defined and plausible defect and had provided enough detail to satisfy the heightened fraud-pleading requirement.

GM’s knowledge. The court rejected GM’s argument that the plaintiffs had not adequately alleged GM’s knowledge of the defect. It found that the complaint contained detailed allegations implying that GM knew of the danger and intentionally continued using premature shutoff times. The court also rejected GM’s renewed argument concerning the absence of a higher rate of airbag nondeployment in GM vehicles compared with other manufacturers.

Standing. GM argued that the plaintiffs lacked standing because they were alleging only that the vehicles could have been made safer, not that the vehicles failed to perform as designed. The court concluded that these arguments concerned whether the plaintiffs had stated actionable claims, rather than whether the court had jurisdiction to hear the case. The court declined to treat GM’s merits arguments as a jurisdictional challenge and again concluded that the alleged safety defect could support economic injury based on an overpayment theory.

Disposition

The court denied GM’s motion to dismiss the plaintiffs’ complaint. This order decided only whether the Third Amended Complaint could proceed past the dismissal stage; it did not decide whether GM is ultimately liable for the alleged defect or whether the plaintiffs will prevail.