REGINAL LITTLE VS. KIA MOTORS AMERICA, INC. (L-0800-01, UNION COUNTY AND STATEWIDE) ( 2018 )

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-0794-15T3
REGINA LITTLE, on behalf of
herself and all others
similarly situated,
APPROVED FOR PUBLICATION
Plaintiff-Appellant/ July 18, 2018
Cross-Respondent,
APPELLATE DIVISION
v.
KIA MOTORS AMERICA, INC.,
Defendant-Respondent/
Cross-Appellant.
_____________________________
Argued May 16, 2018 – Decided July 18, 2018
Before Judges Koblitz, Manahan and Suter.
On appeal from Superior Court of New Jersey,
Law Division, Union County, Docket No. L-0800-
01.
Michael D. Donovan (Donovan Axler, LLC) of the
Pennsylvania bar, admitted pro hac vice,
argued the cause for appellant/cross-
respondent (Schnader Harrison Segal & Lewis,
LLP, Francis and Mailman, PC, Feldman Shepherd
Wohlgelernter Tanner Weinstock Dodig, LLP, and
Michael D. Donovan, attorneys; Michael D.
Donovan, Lisa J. Rodriguez, James A. Francis,
Edward S. Goldis and Alan M. Feldman (Feldman
Shepherd Wohlgelernter Tanner Weinstock
Dodig, LLP) of the Pennsylvania bar, admitted
pro hac vice, on the brief).
Roberto A. Rivera-Soto argued the cause for
respondent/cross-appellant (Ballard Spahr,
LLP, attorneys; Roberto A. Rivera-Soto, Neal
D. Walters, Michael R. Carroll and Michele C.
Ventura, on the brief).
The opinion of the court was delivered by
KOBLITZ, J.A.D.
In this class action against defendant Kia Motors America,
Inc. (KMA), plaintiff class of 8455 Kia Sephia owners and lessees
represented by Regina Little proved at a jury trial that the
Sephia, model years 1997 through 2000, had a defective front brake
system, which caused premature brake pad and rotor wear.
Concluding that the defect amounted to a breach of express and
implied warranties, and that all owners had suffered damage due
to the defect, the jury awarded each member of the class $750
($6.3 million total) in repair damages.
Determining for the first time post-trial that repair damages
could not be awarded on a class-wide basis because they were
dependent upon individual factors, the trial court granted KMA's
motion for judgment notwithstanding the verdict (JNOV) on the
repair damages award, decertified the class for purposes of
damages, and ordered a new trial on repair damages only, to proceed
by way of claim forms. With the advantage of recent case law
unavailable to the trial judge, we now reverse, reinstate the jury
award and remand for determination of counsel fees.
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I.
We recount only the facts and procedural history relevant to
this appeal. We begin with the procedural history. On June 26,
2001, Little filed an amended class action complaint on behalf of
herself and others similarly situated, against defendant, a
California corporation with offices in New Jersey. The putative
class alleged that the Sephia had a defective front brake system
and asserted causes of action for: fraudulent business practices
in violation of California law and the New Jersey Consumer Fraud
Act (CFA), N.J.S.A. 56:8-1 to -210; breach of an express warranty;
breach of the implied warranty of merchantability; and failure to
comply with the federal Magnuson-Moss Warranty Improvement Act
(MMWA), 15 U.S.C. §§ 2301 to 2312.
In August 2003, the court granted class certification. Prior
to trial, the trial judge heard a number of pretrial motions on
the admissibility of evidence. Defendant moved unsuccessfully to
exclude as net opinions the class expert testimony of Raymond
King, on repair damages, and John Matthews, on diminution of value
damages.
After a month-long trial, in June 2008 the jury returned a
verdict finding that defendant had breached the express and implied
warranties as well as the MMWA, but that it had not violated the
CFA. The jury found that the class had suffered damages and
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awarded each member repair damages. It awarded no damages for
diminution in value.
In a November 24, 2008 written decision, the trial judge
granted defendant's motion for JNOV as to repair damages only,
decertifying the class for purposes of damages only based on the
finding that individual factors predominated, and ordered a new
trial on repair damages to proceed by way of claim forms.
In a January 2011 decision, another judge granted plaintiff's
motion to recertify the class, explaining that individual damages
issues did not require decertification. This judge appointed a
special master. In an August 12, 2011 order, without having read
the record and based on the special master's recommendation, the
motion judge vacated the zero diminution in value jury award to
allow the master to consider damages for all class members on any
applicable theory of recovery.
In a published decision dated April 2, 2012, we reversed the
August 12, 2011 order because the motion judge had improperly
vacated the jury's finding of no diminution in value damages
without first canvassing the record to determine whether that
aspect of the verdict resulted in a manifest denial of justice.
Little v. KIA Motors Am., Inc., 425 N.J. Super. 82, 89-91 (App.
Div. 2012). Further, the motion judge's decision was inconsistent
with the law of the case doctrine, since the trial judge's decision
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on the limited new trial had controlled the proceedings for nearly
three years. Id. at 93.
On remand, the motion judge appointed a new special master
to adjudicate the claims. In August 2013, she accepted the new
special master's finding that only 150 claimants had proven their
damages, and his recommendation of a total award of $46,197.
Little was not among the members for whom he recommended recovery.
In January 2015, class counsel requested an award of
$6,055,916 in attorney fees and $481,850 in costs of suit, with
pre- and post-judgment interest, pursuant to the MMWA. After
reducing the class's attorney fee award based on the paucity of
damages it recovered, on May 6, 2015, a new motion judge ordered
defendant to pay: $200,000 for the class's attorney fees, plus
$19,113 in prejudgment interest; $481,850 in fees and costs of
suit; and $5000 to Little as an incentive award.
II.
At trial, plaintiff demonstrated a defect in the Sephia's
brakes. Defendant began selling the Sephia in New Jersey in 1997.
Raymond King, plaintiff's expert in mechanical engineering and
repair damages, explained that when a driver presses the brakes,
hydraulic pressure forces brake fluid into a brake caliper, which
causes the brake pads to squeeze against the rotors and decrease
the spinning of the wheel. The pressure of the brake pads against
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the rotors causes friction, which produces heat. The hotter the
brake system becomes, the faster the brake pads and rotors wear.
Based on the documents from defendant that King had reviewed,
as well as deposition testimony from defendant executives, King
concluded that the Sephia's front brake system had a systemic
design defect that did not allow for the proper dissipation of
heat. This defect caused a premature wear of the brake pads,
pulsating or grinding brakes, warped or prematurely worn rotors,
and shaking or vibration (also called shudder or judder) when the
driver applied the brakes. Repairs or replacement of the brake
pads and rotors failed to correct the problem.
To reach this conclusion, King reviewed a standardized
industry report; Quality Assurance Field Product Reports and
District Parts and Service Manager Reports, drafted by defendant's
mechanics and managers throughout the United States; defendant's
Technical Assistance Center Incident Reports; Technical Service
Bulletins; and defendant's warranty brake claims data.
The parties stipulated that from 1997 to 2000 a total of 8455
Sephias were sold in New Jersey. Defendant's warranty repair data
showed that the total number of warranty repairs to front brake
components on the Sephia in New Jersey was about 8400. Defendant
sold 42,713 model year 1997 Sephias in the United States. The
warranty claim rate nationally for that model's brakes was 92%.
6 A-0794-15T3
King testified that he had never before seen a warranty claim rate
that high. In his view, it "screamed" that there was a problem
with the brake system. The following years the model had similarly
high claim rates.
In January 2002, Kia Motors Corporation (Kia Motors), KMA's
parent company based in South Korea, issued a technical services
bulletin introducing newly designed brake pads and rotors, known
as the "field fix." The updated pads were not compatible with the
original rotors; thus, both had to be replaced as a set. This was
an improvement, King said, but it failed to meet the 20,000-mile
standard. At most, the field fix brake pads lasted 14,000 to
15,000 miles.
In addition to reviewing Kia Motors' documents, King
inspected the cars belonging to Little and Samuel-Basset (the
named plaintiff in a Pennsylvania class action against defendant,
Samuel-Bassett v. Kia Motors Am., Inc., 34 A.3d 1 (Pa. 2011)).
King found nothing remarkable about either car in general, or the
brake system in particular, that would have caused premature brake
pad and rotor wear, and nothing to suggest that driving habits had
caused the premature brake wear.
After surveying five Kia dealerships, King estimated that an
owner would spend about $250 for a brake repair. Defendant's
documents showed brake replacements when cars had as little as
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2000 miles, and others at more than 10,000 miles. On average, a
Sephia would need a brake replacement every 10,000 miles. In
King's experience, and based on industry data he reviewed, cars
typically lasted 100,000 miles, or seven to eight years.
Based on a life of 100,000 miles, and the need for a brake
repair every 10,000 miles, King estimated an owner would incur ten
brake repairs over the life of the car, doubling the normal repair
expense due to the defective brake system. As a result, the owner
would incur $1250 in additional repair expenses (five times $250)
due to the defective brake system.
On cross-examination, King conceded that the $1250 brake
repair costs would not apply to someone who had brake replacements
at 20,000-mile-or-more intervals, or to someone who had each brake
replacement paid under warranty. He also admitted that his damages
model did not conform exactly to Little's experience.
Little testified that in January or February 1999, she
purchased a new Sephia for $13,288. Her constant brake problems
began within two weeks. She testified that for the three years
she owned the car, a set of brakes lasted no more than six to
seven months.
Plaintiff read into the record a portion of the deposition
testimony of several individuals, including defendant KMA's
Director of Technical Operations, Timothy McCurdy, who testified
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that defendant had been aware of the brake issue based on the rate
of repairs, and that it had taken steps to address it by relaying
the complaints to Kia Motors.
A "major cause" of these problems was improper dissipation
of heat. While there was no set standard for the life of brakes,
McCurdy said that consumers typically expected them to last 20,000
miles. One study from Kia Motors reported that the 1999 Sephia
had a brake pad life of 16,000 miles. Defendant notified Kia
Motors that 16,000 miles was not acceptable, since brake pads
should last at least 20,000 miles.
Defendant did not cover the brake pads under warranty, but
it did cover defects in the brake system under the three-year or
36,000 mile warranty. In model year 2002, Kia Motors replaced the
Sephia with the Kia Spectra. The Spectra was "the same basic
car," but with a different brake system. None of Kia Motors'
vehicles, including the Spectra, had brake repair rates as high
as the Sephia's.
Kia Motors Deputy General Manager Young Sun Sohn's deposition
testimony revealed that when Kia Motors developed the Sephia, the
specification for the brake pads was that they achieve a life of
20,000 kilometers, or just under 12,500 miles.
Lee Sawyer, defendant's Senior Vice President of Fixed
Operations, testified at deposition that some Sephias had brakes
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that wore prematurely. Typically, brake pads lasted 20,000 to
25,000 miles before needing replacement. "Some of the Sephia
owners were experiencing brake pad life in the [ten] to [twelve
thousand] mile range."
Defendant became aware of the Sephia brake problem within the
first year of sales based on warranty claims and brake pad orders
from the parts department. After the first year, defendant also
noticed an increase in part orders for rotors, which usually last
50,000 to 75,000 miles.
While defendant's policy was to exclude brakes from the
warranty, some dealers covered brake pad replacements as warranty
repairs or as goodwill repairs, both at no charge to the owner.
Dealers did this because they knew that there were problems with
the brakes.
Sawyer said that McCurdy had an engineer investigate the
brake issue and send a report to Kia Motors' headquarters. At
some point, a South Korean engineer met with someone at KMA and
said the brakes had to be redesigned with better quality material.
Michelle Cameron, defendant's Manager for Consumer Affairs,
testified that people who answered complaints through defendant's
call center were trained to notify callers that brakes were not
covered under the warranty.
10 A-0794-15T3
Plaintiff presented expert testimony from John Matthews, a
professor at the University of Wisconsin School of Business, on
diminution damages. In Matthews's opinion, Sephia owners paid
about $2000 more for their Sephia than the car was worth as a
result of the defective brake system.
Matthews computed the diminution in value based on Sephia's
value retention at the time of resale. The 1998 model's initial
sale price was $10,000, but it retained only forty percent of that
value, or $4000, while comparable cars retained fifty percent of
value, or $5000, at resale. Matthews concluded that double the
actual resale value, or $8000, was thus the true value of the
Sephia at the time of purchase.
Matthews testified that the diminution in value was a result
of the defective brake system. Not only were owners aware of the
problems, but defendant's dealers were also aware of the problems,
based on the Technical Service Bulletins that Kia Motors had
distributed. This knowledge drove down the price that people were
willing to pay for a used Sephia.
On cross-examination, Matthews said that the diminution in
value was not dependent on the number of brake repairs the car
had, but rather, on the market perception of a car with a faulty
brake system.
11 A-0794-15T3
III.
The defense did not deny the Sephia had brake problems.
Donald Pearce, defendant's Vice President of Parts and Service,
testified that a database recorded the following dates of brake
repairs to Little's car as warranty repairs: September 1999,
April 2000, and June 2000. He said defendant had difficulty
addressing the brake system complaints because the complaints
differed: some related to noise, others had to do with judder,
and some related to premature wear. Based on data he had seen,
Pearce said that $250 was a reasonable charge to replace brake
pads and rotors.
Larry Douglas Petersen, defendant's expert in auto
engineering and design and warranty data analysis, testified that
he was not aware of any industry standard or expectation for the
life of brake pads. He believed the rate at which brake pads wore
was dependent on environmental conditions, driving habits, type
and size of the car, and design and construction of the brake pads
and brake system.
Petersen did not believe that the problem with the Sephia
brake system was due to heat and the system's inability to
dissipate it. Instead, he opined that the problem was the result
of low-quality rotors provided by the vendor. He based this
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primarily on the warranty data he had seen, which suggested that
the problem related primarily to the rotors.
On cross-examination, Petersen said that McCurdy's goal was
that brake pads would last 20,000 miles. Petersen was not aware
of any test where the Sephia brake pads achieved that goal.
Petersen testified that defendant did not provide him, nor
did he request, information on brake repairs not covered under
warranty. He believed, however, the dealerships would have had
that information. With respect to recalls, Petersen believed auto
companies only issued them for safety concerns. He also testified
that if a car had a design defect, all owners would experience the
problem.
Bruce Strombom, defendant's expert in statistics, economic
analysis, loss causation, and damage calculation, disagreed with
Matthews's conclusion that the faulty brake system caused
excessive depreciation or diminution in value. Strombom's opinion
was that Matthews's overpayment formula failed to account for the
difference in purchase price and length of ownership, and the
comparison groups that he used resulted in an overstatement of
damages. Matthews also failed to account for other explanations
for the Sephia's increased rate of depreciation, such as decreased
purchase price, problems with the fuel pump and seatbelt, and low
quality-rating score. Thus, a major flaw in Matthews's analysis
13 A-0794-15T3
was that he failed to establish a link between depreciation and
the brakes.
Defendant also called as witnesses three Sephia owners who
had opted out of the class because they were all satisfied with
their cars and had experienced no problems with the brakes.
IV.
The jury returned a verdict finding that defendant had
breached its express warranty, the implied warranty of
merchantability, and the MMWA. In answering the question, "Did
the class sustain damages?" the jury answered "yes." The verdict
sheet then asked the jury to specify the amount of damages that
each class member had incurred for "the difference in value, if
any, of the Sephia as warranted compared to the Sephia as
delivered," and the amount for "repair expenses reasonably
incurred as a result of defendant's breach of warranty." The jury
answered zero for diminution in value, and $750 for repair
expenses.
In a November 2008 written decision, the trial judge found
the evidence supported the jury's finding of liability, but that
she had erred in submitting the question of repair damages to the
jury because those damages were dependent upon individual factors,
and thus, could not be awarded on a class-wide basis. She granted
defendant's motion for JNOV as to repair damages only, decertified
14 A-0794-15T3
the class for purposes of damages, and ordered a new trial on
repair damages to proceed by way of claim forms.
The trial judge cited Kyriazi v. Western Electric Co., 647
F.2d 388, 392 (3d Cir. 1981), in ordering the claim-form
proceeding. Kyriazi is a class action sex-discrimination
employment case, where the trial court found in the liability
phase of the litigation that the employer had a policy of
discrimination against women. Id. at 390. In the damages phase,
the court ordered the class members to submit claim forms to a
special master who would presume each claim valid and consider any
employer challenges at a hearing. Id. at 390-91. Here, after
significant motion practice over the exact parameters of the claim-
form process, the result was a hugely reduced total damages amount
of $46,197.
V.
Plaintiff contends that the trial judge erred in granting
defendant's motion for JNOV and vacating the $750 repair expenses
award for each class member. It argues that the award was (a)
consistent with the Uniform Commercial Code (UCC), N.J.S.A. 12A:2-
714, which allows for a reasonable estimate of damages in a breach
of warranty case; (b) consistent with breach of contract damages
in a class action; and (c) supported by the evidence.
15 A-0794-15T3
In considering a motion for JNOV, a trial court and a
reviewing court apply the same standard: "[I]f, accepting as true
all the evidence which supports the position of the party defending
against the motion and according [it] the benefit of all inferences
which can reasonably and legitimately be deduced therefrom,
reasonable minds could differ, the motion must be denied . . . ."
Boyle v. Ford Motor Co., 399 N.J. Super. 18, 40 (App. Div. 2008)
(quoting Verdicchio v. Ricca, 179 N.J. 1, 30 (2004)).
Pursuant to Rule 4:49-1(a), a trial court may grant a new
trial "as to all or part of the issues" decided at trial. "The
trial judge shall grant the motion if, having given due regard to
the opportunity of the jury to pass upon the credibility of the
witnesses, it clearly and convincingly appears that there was a
miscarriage of justice under the law." R. 4:49-1(a).
A jury verdict is entitled to considerable
deference and "should not be overthrown except
upon the basis of a carefully reasoned and
factually supported (and articulated)
determination, after canvassing the record and
weighing the evidence, that the continued
viability of the judgment would constitute a
manifest denial of justice." That is, a
motion for a new trial "should be granted only
where to do otherwise would result in a
miscarriage of justice shocking to the
conscience of the court." In fact, in Carey
v. Lovett, 132 N.J. 44, 66 (1993), we
expressly stated that a "trial court should
not disturb the amount of a verdict unless it
constitutes a manifest injustice . . . ."
16 A-0794-15T3
[Risko v. Thompson Muller Auto. Grp., Inc.,
206 N.J. 506, 521 (2011) (first quoting Baxter
v. Fairmont Food Co., 74 N.J. 588, 597-98
(1977); then quoting Kulbacki v. Sobchinsky,
38 N.J. 435, 456 (1962)).]
The trial judge vacated the $750 repair damages award on the
ground that only diminution in value applied to the class as a
whole. She believed she had erred in submitting repair damages
to the jury for consideration, explaining that those damages were
dependent on the actual expenses incurred by each class member.
The judge said:
The jury determined that [p]laintiff had not
proven a diminution in value of the Kia
automobiles. Such a finding would result in
damage throughout the class. The jury instead
determined that class members suffered losses
of $750 due to the defective brake system.
This court is convinced this finding was based
upon an erroneous submission by the court of
the jury question and accompanying
instructions. The damages suffered by each
class member are dependent on numerous
variables, such as brake life, frequency of
repair, driving habits and length of time the
car was owned. These damages cannot be
ascertained on a class wide basis, and the
court's decision to submit same to the jury
was error.
We note that where theories of damages may impact one another,
the court must order a new trial on damages as a whole and may not
order a new trial on only one theory of damages. Donovan v. Port
Auth. Trans-Hudson Corp., 309 N.J. Super. 340, 353 (App. Div.
1998) (ordering a new trial on damages as a whole where future
17 A-0794-15T3
wage loss could impact pain and suffering damages, even though the
jury's pain and suffering award was supported by the evidence and
law). Here, the judge instructed the jury it could award damages
based on a diminution of value or repair expenses, or both. The
judge did not tell the jury of any ramifications if only repair
damages were awarded. A court may not grant a new trial on a
discrete issue unless that issue is "fairly separable from the
other issues" in the case. Corridon v. City of Bayonne, 129 N.J.
Super. 393, 398 (App. Div. 1974). As explained to the jury, the
two types of damages were not fairly separable from each other.
On appeal, plaintiff contends the judge erred in finding that
repair damages could not be awarded on a class-wide basis. All
class members purchased a car with the same faulty brake system,
which, according to defendant's records, required a brake repair
about every 10,000 miles. As King testified, based on the average
life of a car (100,000 miles) and the undisputed cost of a brake
repair ($250), one could accurately estimate each class member's
average repair damages resulting from defective brakes.
Plaintiff contends that King's method of estimating damages
was consistent with the UCC standard for determining contract
damages, as that standard allows for the computation of damages
based on any reasonable method that places the plaintiff in the
position he or she would have been in had the defendant not
18 A-0794-15T3
breached the contract, or warranty, as in this case. See N.J.S.A.
12A:2-714.
Defendant argues that proof of a product defect does not
equate to proof of damages, and it disputes that New Jersey law
allows for the averaging of damages. It argues that the class
must prove damages for each individual class member and the
relatively few claims submitted during the claim-form process show
that King's estimate was incorrect and was nothing more than a net
opinion, unsupported by fact.
Because the jury found the claims for breach of express and
implied warranties were established, the UCC provides the starting
point for assessing damages. N.J.S.A. 12A:2-313 (express
warranties); N.J.S.A. 12A:2-314 (implied warranty of
merchantability); N.J.S.A. 12A:2-315 (implied warranty of fitness
for a particular purpose); N.J.S.A. 12A:2-714 (buyer's damages for
breach of accepted goods); N.J.S.A. 12A:2-719 (modification of
remedy).
The trial judge's interpretation of those statutes as applied
to this case are entitled to no deference, as they entail matters
of law. Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140
N.J. 366, 378 (1995) ("A trial court's interpretation of the law
and the legal consequences that flow from established facts are
not entitled to any special deference.").
19 A-0794-15T3
The jury in this case found no diminution in value damages.
In most breach of warranty cases, diminution in value, or the
difference between the goods as delivered and as warranted,
provides the proper measure of damages. Perth Amboy Iron Works,
Inc. v. Am. Home Assurance Co., 226 N.J. Super. 200, 219 (App.
Div. 1988). However, repair damages may be appropriate, depending
on the facts of the case. Ibid.; accord Furst v. Einstein Moomjy,
Inc., 182 N.J. 1, 13 (2004) (applying UCC principles to a consumer
fraud case and concluding that the cost of replacing a damaged
carpet was the appropriate measure of damages, as that method put
the buyer in the position he would have been in if he had received
a non-defective carpet). Diminished resale value or the cost of
a retrofit repair may also provide a reasonable measure of damages.
In re GMC Pick-Up Truck Fuel Tank Prods. Liab. Litig., 55 F.3d
768, 816-17 (3d Cir. 1995) (emphasizing, in a class action suit,
that section 2-714(1) of the UCC allows for damages "as determined
in any manner which is reasonable").
Our Supreme Court explained that breach of contract
compensatory damages are intended to put the injured party in the
position he or she would have been in had the goods been delivered
as promised. 525 Main St. Corp. v. Eagle Roofing Co., 34 N.J.
251, 254 (1961). "Although specific rules are formulated for
sundry situations, they are subordinate to this broad purpose";
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thus, "a given formula is improvidently invoked if it defeats a
common sense solution" to computing damages. Ibid.Breach of contract damages need not be established with exact
certainty:
[M]ere uncertainty as to the quantum of
damages is an insufficient basis on which to
deny the non-breaching party relief. Although
it complicates the precise calculation of
damages, our courts have long held that
"[p]roof of damages need not be done with
exactitude. . . . It is therefore sufficient
that the plaintiff prove damages with such
certainty as the nature of the case may
permit, laying a foundation which will enable
the trier of the facts to make a fair and
reasonable estimate."
[Totaro, Duffy, Cannova and Co., LLC v. Lane,
Middleton & Co., LLC, 191 N.J. 1, 14 (2007)
(quoting Lane v. Oil Delivery Inc., 216 N.J.
Super. 413, 420 (App. Div. 1987)).]
As explained in the Restatement (Second) of Contracts:
Alternative to Loss in Value of Performance § 348 (Am. Law Inst.
1981), a small windfall to the injured party based on an inability
to prove exact damages should not defeat recovery. Also, the
injured party need not prove that he or she actually spent the
money to repair the defect in order to recover for the breach.
Cox v. Sears Roebuck & Co., 138 N.J. 2, 22 (1994).
Those principles support the class's argument that breach of
contract damages are not limited to the actual out-of-pocket
expenses that each class member incurred, but rather, are proper
21 A-0794-15T3
if based on any reasonable method that places the class members
in the position they would have been in if KMA had provided a car
free of a defective brake system. King and Matthews provided two
ways the jury could reasonably compute damages. King's formula
estimated the additional repair expenses the class would incur as
a result of the defective brake system, while Matthews's formula
estimated the diminution in value between the Sephia as warranted
and the Sephia as delivered.
A net opinion is an expert opinion that is not supported by
facts and data. Polzo v. Cty. of Essex, 196 N.J. 569, 583 (2008)
(discussing the requirements of N.J.R.E. 703). King's opinion,
which is the only one that defendant claims on appeal is a net
opinion, was based on the average life of the car (100,000 miles),
the expected life of brake pads (20,000 miles), the average cost
of a brake repair ($250), and defendant's warranty repair data.
King's trial testimony provided examples of the claims, which
supported his conclusion that, on average, the Sephia needed a
brake repair every 10,000 miles.
Defendant did not dispute that the average life of a car was
100,000 miles, and it conceded the average cost of a brake repair
($250) and the expected life of brake pads (20,000 miles). While
it did not concede that the Sephia needed a brake repair every
10,000 miles, it provided no evidence to challenge that figure,
22 A-0794-15T3
other than the testimony of three class members who had opted out
of the class because they had experienced no brake problems with
their cars. The experience that those three owners had, out of
an 8455-person class, does not outweigh the voluminous evidence
that supported King's 10,000-mile brake-repair average.
It is worth noting that during the jury charge conference,
the trial judge considered the propriety of the class's two
theories of damages for a second time. In disagreeing with an
argument raised by defendant that the jury could award diminution
in value damages, or repair damages, but not both, the judge said
that the jury was free to determine damages in any reasonable
manner to make the aggrieved party whole. The jury could find
both that the class members overpaid for their cars, and that they
incurred additional repair expenses as a result of the faulty
brake system. Both theories of damages presented by the class
were proper considerations for the jury.
In ruling JNOV that class-wide damages could not be calculated
pursuant to King's model, the trial judge relied primarily on our
decision in Muise v. GPU, Inc., 371 N.J. Super. 13 (App. Div.
2004). In Muise, two groups of GPU customers filed suit against
GPU after experiencing power outages during a heat wave. Id. at
18-20. The plaintiffs sought damages for the loss of power based
on consumer fraud, negligence and breach of contract. Id. at 18.
23 A-0794-15T3
The trial court initially granted class certification to all New
Jersey customers of GPU, and about 2500 customers submitted claims
ranging in value from $1 to $150,000. Id. at 23.
Only the negligence claim survived summary judgment. Id. at
20. GPU moved to decertify the class, and the class moved for a
declaration of admissibility of their experts' survey-based method
of computing damages for the class. Ibid. The class-wide damages
model valued hypothetical power outages based on surveys of
electrical customers in California and Canada. Id. at 24. The
experts "adapted this data to New Jersey in order to 'estimate
customer damages resulting from GPU service interruptions from
July 4 to 10, 1999.'" Ibid. (quoting the experts' report).
The experts recognized that their survey model of damages was
limited, and admitted that their "results were predictions and
estimations based on survey scenarios" that reflected what some
class members had experienced. Ibid. The exact cost of power
loss was dependent upon socioeconomic, demographic and geographic
factors. Id. at 24-25.
The trial court concluded that the class-wide model of damages
was not reliable, as it was based on hypothetical estimates that
did not reflect actual damages in the case. Id. at 28. The trial
judge recognized that individualized proofs of damages were not
necessary so long as the class-wide damages model was based on a
24 A-0794-15T3
reliable mathematical formula. Id. at 47. This formula, however,
was hypothetical and unreliable. Ibid. Further, the class had
failed to prove actual damage, or harm as a proximate cause of
power loss; experiencing a break in power did not necessarily
result in actual harm. Ibid.We agreed. As the trial court had recognized, proof of
individual damages was the norm, and a court should depart from
that norm only if (a) there was proof, or at least a presumption,
that the class members sustained damage, and (b) there was a
reliable mathematical formula to compute the estimated or
aggregated damages. Ibid. (citing In re Prudential Ins. Co. of
Am. Sales Practices Litig., 962 F. Supp. 450, 517 (D.N.J. 1997),
aff'd in part, vacated in part on other grounds, 148 F.3d 283 (3d
Cir. 1998), where "[t]he court acknowledged that the possible
methods of proving the amount of damages included expert testimony
estimating aggregate damages sustained by the class, or a formula
to be applied to individual class members" so long as "sufficient
facts [are] introduced so that a court can arrive at an intelligent
estimate without speculation or conjecture").
While we agreed with the trial court that class certification
was not appropriate for all New Jersey customers, we concluded
that certification was appropriate for a more limited class,
namely, customers in Red Bank "whose outages directly resulted
25 A-0794-15T3
from the alleged negligence in delaying the replacement of the
transformers in the Red Bank substation." Id. at 64. We
recognized that individual damages issues might still exist with
respect to the limited class, but concluded that those damages
issues could be addressed through a number of techniques, including
claim forms, interrogatories, requests for admissions, and
"statistical interpretation of sampling data from the relevant
universe, established based on competent data." Ibid.
Here, King based his class-wide model for damages on: actual
brake repairs that Sephia owners had experienced, as evidenced by
defendant's warranty repair documents; studies that defendant
produced on the duration of brake pads and rotors in the Sephia;
reports on defendant's efforts to improve the duration of the
Sephia brake system; and testimony from defendant's executives on
the brake system. As the Muise decision makes clear, so long as
a plaintiff-class establishes proof of damage, or at least a pre-
trial presumption of damage, the class need not prove individual
damage, but may instead present class-wide average damages based
on a reliable mathematical formula.
The trial judge did not have the advantage of reviewing the
2011 Pennsylvania Supreme Court opinion, supporting the propriety
of the verdict in that sister-case. Samuel-Bassett, 34 A.3d at
11-13. King also testified as the plaintiff's expert in
26 A-0794-15T3
Pennsylvania. The Samuel-Bassett jury found that KMA had breached
its express and implied warranties, and awarded each of the 9400
Pennsylvania class members $600 (about $5.6 million for the class)
in repair damages. Id. at 13. After the trial court denied KMA's
motion for JNOV, it awarded the class $4,125,000 in counsel fees
and $267,513 in costs of suit. Ibid.
In finding that KMA's challenges lacked merit, the Samuel-
Bassett majority began by discussing the facts that established
class-wide liability. Id. at 35-36. The majority said that
deposition testimony from the same KMA executives who testified
or whose deposition testimony was presented in this case (McCurdy,
Sawyer, Pearce and Sohn), along with KMA's internal documents,
established that all Sephias had the same defective front brake
system that did not allow for proper dissipation of heat. Id. at
35-36. This resulted in premature brake pad wear and warping of
the rotors, which required excessive repairs. Id. at 36.
The majority found that the class had "adduced sufficient
evidence to prove" that each member suffered damages. Id. at 37.
Two of KMA's executives (Pearce and Cameron) had testified that
while KMA had paid for some repairs under warranty, a coupon
program and good will replacements, KMA's policy was to exclude
brake repairs from the warranty as wear-and-tear items. Ibid.
"As a result [Sephia] owners sustained out-of-pocket repair costs
27 A-0794-15T3
estimated by [King] at approximately $1005 over the life of their
Kia Sephia." Ibid.
King had "estimated that each vehicle underwent five extra
repairs in addition to wear-and-tear replacements of brake pads
and rotors." Ibid. The majority said:
This calculation, of course, does not account
for factors such as: whether class members
owned their vehicles over 100,000 miles,
whether each class member experienced exactly
five additional repairs, and whether any
additional repairs were covered under
warranty. Indeed, warranty data introduced
at trial reflected that KMA covered some of
the brake component replacements under good
will and brake coupon programs, which
suggested that a number of the estimated
repairs for the class did not in fact cause
class members out-of-pocket expenses.
[Ibid.]
The majority noted that KMA's defense had centered on
undermining the allegation of a defective system and questioning
whether the alleged defect had affected each owner in the class,
particularly since brake wear depended upon many variables. Id.
at 37.
The majority found unpersuasive the one dissenting judge's
criticism that the class's aggregate approach to damages "blur[ed]
the substantive requirements of the law of damages," which
generally required proof of individual damages. Id. at 40 (citing
Scottsdale Mem'l Health Sys., Inc. v. Maricopa Cty., 228 P.3d 117,
28 A-0794-15T3
133 (Ariz. Ct. App. 2010) (rejecting an argument that calculating
damages based on a statistical sample violated due process); In
re Pharm. Indus. Average Wholesale Price Litig., 582 F.3d 156,
197-99 (1st Cir. 2009) (holding: "Aggregate computation of class
monetary relief is lawful and proper. Courts have not required
absolute precision as to damages."); Hilao v. Estate of Marcos,
103 F.3d 767, 784-86 (9th Cir. 1996) (finding no due process
violation in a formula that aggregated damages based on a sample)).
The majority noted that the United States Supreme Court had
also rejected the notion that a jury may not estimate damages.
Ibid. (quoting Zenith Radio Corp. v. Hazeltine Research, Inc., 395
U.S. 100, 124 (1969), for the proposition that "[a]lthough the
factfinder is not entitled to base a judgment on speculation or
guesswork, the jury may make a just and reasonable estimate of the
damage based on relevant data, and render its verdict
accordingly"). Thus, the majority affirmed the trial court's
decision denying KMA's motion for JNOV. Ibid.Samuel-Bassett majority's decision is consistent with New
Jersey law on breach of contract damages in a class action. King's
testimony here provided a reasonable basis for an aggregation of
damages award, and the jury accepted that basis in computing
damages. It did not award the full amount of damages that King
had estimated ($1250), but instead decreased the amount by $500,
29 A-0794-15T3
or two brake repairs. That decision was also supported by the
record, which showed that defendant had provided some repairs
under warranty or goodwill, and it had increased the life of the
brake pads to 14,000 or 15,000 miles with the field fix. Thus,
the jury could reasonably have decreased King's estimate to reflect
those two factors.
The trial judge's concern that the jury award would provide
a windfall to class members who did not actually spend $750 in
additional repair costs was inconsistent with principles of
contract damages, and resulted in an unjust windfall to defendant,
which produced no evidence to defeat King's estimated damages.
The 2016 United States Supreme Court decision in Tyson Foods,
Inc. v. Bouaphakeo, 577 U.S. ___, 136 S. Ct. 1036 (2016), also
supports the conclusion that King's aggregate method of computing
damages was appropriate. The Tyson Foods decision primarily
addresses whether a class may prove liability for failure to
adequately compensate employees based on statistical data of
average uncompensated work time.
In Tyson Foods, a class of 3344 employees filed suit against
their employer, Tyson Foods, claiming that it had failed to pay
them for time spent changing into and out of a safety protective
suit needed for butchering. Id. at 1041-43. The class claimed
30 A-0794-15T3
entitlement to overtime pay pursuant to the Fair Labor Standards
Act, 29 U.S.C. § 207(a). Id. at 1042.
Because the employees sought overtime pay, each member had
to establish that he or she had worked more than forty hours per
week, inclusive of the time spent changing into and out of the
protective gear, in order to establish a claim. Id. at 1043. Due
to Tyson Foods' lack of records on the amount of time the employees
spent changing, the plaintiffs relied on what they called
"representative evidence" of the average time it took an employee
to don and doff the gear. Id. at 1043.
This evidence included employee testimony,
video recordings of donning and doffing at the
plant, and, most important, a study performed
by an industrial relations expert, Dr. Kenneth
Mericle. Mericle conducted 744 videotaped
observations and analyzed how long various
donning and doffing activities took. He then
averaged the time taken in the observations
to produce an estimate of 18 minutes a day for
the cut and retrim departments and 21.25
minutes for the kill department.
[Ibid.]
An employees' expert's testimony supported an aggregate award
of about $6.7 million in unpaid wages; however, the jury awarded
the class only $2.9 million. Ibid. Tyson Foods moved to set
aside the verdict claiming that the district court had erred in
certifying the class based on the variation in donning and doffing
time. Ibid.31 A-0794-15T3
On appeal to the Supreme Court, Tyson Foods first argued that
the trial court had erred in certifying the class "because the
primary method of proving injury assumed each employee [had] spent
the same time donning and doffing protective gear, even though
differences in composition of that gear may have meant that, in
fact, employees [had taken] different amounts of time to don and
doff." Id. at 1041. Tyson Foods claimed that the class's method
of averaging was an inherently unfair way to (1) avoid the
differences that made the group inappropriate for class
certification, and (2) relieve the employees of proving individual
damages. Id. at 1046. Tyson Foods requested the Court to announce
a broad rule prohibiting the type of representative evidence relied
upon by the class to establish liability. Ibid.In rejecting Tyson Foods' request for a broad rule excluding
representative evidence to establish liability, the Court said:
A categorical exclusion of that sort, however,
would make little sense. A representative or
statistical sample, like all evidence, is a
means to establish or defend against
liability. Its permissibility turns not on
the form a proceeding takes – be it a class
or individual action – but on the degree to
which the evidence is reliable in proving or
disproving the elements of the relevant cause
of action.
[Ibid.]
32 A-0794-15T3
Whether statistical evidence can establish liability in a class
action depends on the purpose of the evidence and the underlying
cause of action. Ibid.The Court underscored that the employees had used the
representative evidence to "fill an evidentiary gap created by the
employer's failure to keep adequate records." Id. at 1047. Once
the district court found the evidence admissible, "its
persuasiveness [was], in general, a matter for the jury." Id. at
1049.
Defendant here, like Tyson Foods, failed to present evidence
to rebut the class's formula for computing aggregate damages.
Defendant had access to documents that would have established the
actual rate of brake repairs by defendant's dealers. But the only
documents on repairs that they produced related to warranty
repairs. We see no reason to disturb the jury's considered
determination of class damages.
VI.
On cross-appeal, defendant contends that the court erred in
charging the jury on breach of the implied warranty of
merchantability. In charging the jury, the court must "set forth
in clearly understandable language the law that applies to the
issues in the case." Toto v. Ensuar, 196 N.J. 134, 144 (2008).
The charge serves as "a road map that explains the applicable
33 A-0794-15T3
legal principles, outlines the jury's function, and spells out
'how the jury should apply the legal principles charged to the
facts of the case.'" Ibid. (quoting Viscik v. Fowler Equip. Co.,
173 N.J. 1, 18 (2002)).
We review the charge as a whole to determine whether it
correctly sets forth the law as applied to the facts. Ibid. With
respect to the implied warranty of merchantability, the trial
judge charged the jury:
An implied warranty of merchantability is a
promise by the sellers that the goods, in this
case, Mrs. Little's and the class vehicles,
were fit for their ordinary purpose for which
automobiles are used.
The implied warranty of merchantability does
not require that the goods, in this case the
vehicles, be defect free, but the implied
warranty of merchantability, provides that []
K[M]A warrants the cars that are fit for their
ordinary purposes for which cars are used.
Thus, to prove a breach of implied warranty,
the [p]laintiff must show an implied promise
that the vehicles were fit for their ordinary
purpose for which a vehicle is used.
Two[,] that there was a defect that
substantially impaired the value or use of the
car.
Three, the defect caused a lost [sic] to the
purchaser.
And, four, damages with regard to the
instructions I will give you.
34 A-0794-15T3
Defendant contends the charge was erroneous because the
correct standard was not whether the Sephia was fit for the
ordinary purposes for which cars are used, but rather, whether the
cars provided safe and reliable transportation. Defendant
contends that it did not breach the implied warranty of
merchantability because Little conceded that her car provided safe
transportation, and she drove her car 75,000 miles prior to
surrendering it.
The charge was proper and consistent with N.J.S.A. 12A:2-
314(2)(c), which provides that goods are merchantable if they "are
fit for the ordinary purposes for which such goods are used." See
also Model Jury Charge (Civil), 4.22, "Breach of Implied Warranty
of Fitness for Particular Purpose Under UCC" (1984) (explaining
in the commentary that when the issue does not deal with fitness
for a particular purpose, the standard is one of fitness for the
ordinary purpose). The implied warranty standard was not limited
to whether the Sephia was safe and reliable, but rather, whether
it was fit for the ordinary purpose for which cars are used. A
driver would fairly assume that an ordinary car would have a brake
system that does not cause premature wear of brake pads and rotors.
The court correctly charged the jury on the implied warranty of
merchantability.
35 A-0794-15T3
VII.
The class was certified in 2003 based on Rule 4:32-1(a) and
(b)(3). Defendant contends that the court erred in denying its
many motions to decertify the class because Little's experience
was not typical of the class, individual issues predominated, and
the vast majority of the class members suffered no damages as
demonstrated by the claims form process. In order to certify a
class, the court must find that (1) the large number of members
makes joinder impractical, (2) the members raise common questions
of law or fact, (3) the representative's claims or defenses are
typical, and (4) the representative will fairly and adequately
protect the interests of the group. R. 4:32-1(a).
The court must also find that the group has satisfied at
least one of the three requirements set forth in Rule 4:32-1(b).
Rule 4:32-1(b)(3) requires a finding that common questions of law
or fact predominate, and that a class action is superior to other
methods of resolution.
Defendant first argues that the court erred in denying its
request for decertification because Little's experience was not
typical of the class. Defendant relies on (1) King's testimony
that Little's repairs did not fit exactly within the average
repairs his model computed, and (2) the testimony of the three
36 A-0794-15T3
Sephia owners who had opted out of the class because they had
experienced no problems with their cars.
This argument lacks merit because a class representative need
not establish her experience was exactly the same as every class
members' in order to establish her claims are typical of other
members' claims. Like the class members, Little purchased the
same type of car with the same defective brake system that required
repairs about every 10,000 miles. To require more similarity than
that would defeat the purpose of class actions.
As our Supreme Court said in Iliadis v. Wal-Mart Stores,
Inc., 191 N.J. 88, 104 (2007):
When making certification determinations,
"the best policy" is to interpret the class-
action rule "so as to promote the purposes
underlying the rule." 5 James W. Moore et
al., Moore's Federal Practice, § 23.03 (3d ed.
1997). Unitary adjudication through class
litigation furthers numerous practical
purposes, including judicial economy, cost-
effectiveness, convenience, consistent
treatment of class members, protection of
defendants from inconsistent obligations, and
allocation of litigation costs among numerous,
similarly-situated litigants.
The class action in New Jersey also helps to
equalize adversaries, a purpose that is even
more compelling when the proposed class
consists of people with small claims. In such
disputes, where the claims are, in isolation,
"too small . . . to warrant recourse to
litigation," the class-action device
equalizes the claimants' ability to zealously
advocate their positions. [In re Cadillac V8-
37 A-0794-15T3
6-4 Class Action, 93 N.J. 412, 435 (1983)]. .
. . In short, the class action's equalization
function opens the courthouse doors for those
who cannot enter alone.
Class certification furthered those purposes here where each class
members' damages were relatively small.
Finally, defendant contends that the court should have
decertified the class during the claim-form proceeding because
repairs were unique to each member and the majority of the class
members did not fit the claim-form criteria. This argument lacks
merit because the claim-form proceeding should not have occurred.
Further, failing to return a claim form does not prove that the
class member incurred no damage. The court correctly certified
the class. The cross-appeal is without merit.
We reverse the trial judge's grant of a JNOV and remand for
a determination of counsel fees consistent with this opinion. We
do not retain jurisdiction.
38 A-0794-15T3