Regina Little v. Kia Motors America, Inc.(081691) (Union County and Statewide)

SYLLABUS
This syllabus is not part of the Court’s opinion. It has been prepared by the Office of the
Clerk for the convenience of the reader. It has been neither reviewed nor approved by the
Court. In the interest of brevity, portions of an opinion may not have been summarized.
Regina Little v. Kia Motors America, Inc. (A-24-18) (081691)
Argued October 8, 2019 – Decided June 25, 2020
PATTERSON, J., writing for the Court.
In this class action, plaintiff Regina Little asserted claims on her own behalf
and on behalf of other New Jersey owners and lessees of 1997, 1998, 1999, and 2000
Kia Sephia vehicles distributed by defendant Kia Motors America, Inc., alleging that
those vehicles had a defective brake system. The central question in this appeal is
whether the trial court properly permitted plaintiff’s theory of damages based on the
cost of brake repairs to be asserted classwide, supported only by aggregate proofs.
Plaintiff filed this action against defendant in June 2001, asserting breach of
warranty and statutory claims on her own behalf and on behalf of the putative class.
In 2006, the class represented by plaintiff was defined as “[a]ll residents of the State
of New Jersey who purchased or leased a model year 1995-2000 Kia Sephia within
the six year period preceding the filing of the Complaint,” subject to certain
enumerated exclusions. The matter was tried before a jury in a four-week trial.
Plaintiff asserted two distinct theories of damages. First, she alleged that the
defective brakes hastened each Kia Sephia’s depreciation, diminishing the vehicle’s
value, and that all class members had thus overpaid for their vehicles. Second,
plaintiff asserted that the class members incurred out-of-pocket costs due to the
brake defect because the cars required more frequent brake repairs than they would
have required absent the defect.
Plaintiff premised the latter claim not on individualized proof of class
members’ repair costs, but on an estimate by her expert, Raymond Scott King, that
an average Kia Sephia owner would pay $1250 for brake repairs over the vehicle’s
life as a result of the defect alleged. On cross-examination, King made a number of
concessions, including that he did not have any data on what Kia Sephia owners
actually paid for relevant repairs.
The jury determined that defendant had breached its express and implied
warranties and that the class had sustained damages. The jury found that the class
members had suffered $0 in damages due to diminution in value but that each class
1
member had sustained $750 in damages “[f]or repair expenses reasonably incurred
as a result of the defendant’s breach of warranty.”
In post-verdict proceedings, defendant moved for a new trial and for an order
decertifying the class on the issue of damages. The court left the jury’s liability
verdict undisturbed but granted in part defendant’s motion for a new trial, limited to
the issue of damages. The court concluded that it had erred when it submitted the
question of out-of-pocket repair costs to the jury and instructed the jury to consider
plaintiff’s second damages theory based on classwide proofs. Instead, the court
determined that it should have required individualized proof of damages for the class
members’ brake repairs. The trial court therefore granted defendant’s motion to
decertify the class as to the quantum of damages each individual owner suffered.
A court-appointed Special Master conducted a claims process, evaluated the
class members’ individual claims, and recommended to the trial court that it award
damages in the amount of $46,197.03 for the cost of repairs. The trial court
accepted that recommendation, and, in 2015, final judgment was entered in
plaintiff’s favor in that amount plus attorneys’ fees and costs.
The parties cross-appealed. The Appellate Division reversed the trial court’s
post-trial determinations, reinstated the jury’s award for out-of-pocket repair costs
based on plaintiff’s aggregate proofs, and remanded for an award of attorneys’ fees.
455 N.J. Super. 411, 416-36 (App. Div. 2018). The appellate court held that,
notwithstanding the jury’s rejection of plaintiff’s diminution-in-value theory, the
trial court should have ordered a new trial on both theories of damages, which it
found were not “fairly separable from each another.” See id. at 426.
The Court granted defendant’s petition for certification, “limited to the issue
of damages.” 236 N.J. 113 (2018).
HELD: Although aggregate proof of damages can be appropriate in some settings,
the Court considers such proof improper as presented in this case. The trial court
erred when it initially allowed plaintiff to prove class-members’ out-of-pocket costs
for brake repairs based on an estimate untethered to the experience of plaintiff’s
class. The trial court properly ordered individualized proof of damages on
plaintiff’s brake-repair claim based on the actual costs incurred by the class
members. Thus, the trial court’s grant of defendant’s motions for a new trial and for
partial decertification of the class were a proper exercise of its discretion.
1. A class action does not dispense with traditional burdens of proof in the name of
efficiency; to the contrary, it leaves the parties’ legal rights and duties intact and the
rules of decision unchanged. Before admitting aggregate proof of damages in a clas s
action, a court must undertake a careful inquiry to ensure that the proposed evidence
2
does not deprive the defendant of a meaningful opportunity to contest the plaintiff’s
claims. In Muise v. GPU, Inc., 371 N.J. Super. 13 (App. Div. 2004), the Appellate
Division undertook precisely such an inquiry and set forth principles regarding
aggregate proofs of damages, which the Court now adopts. (pp. 25-30)
2. To decide whether to permit classwide proof of damages, a court must carefully
consider (1) the underlying cause of action for which the class seeks recovery; (2)
the measure of damages that the law allows if there is a finding of liability for that
claim; and (3) the methodology by which the plaintiff seeks to prove damages on an
aggregate basis. If the plaintiff cannot establish a basis for a presumption that all
members of the class have sustained damage, aggregate proof of damages raises the
specter that an individual with no viable claim will recover a windfall. In such
settings, the court should require individualized proof of damage. Even if the
plaintiff can show that all class members have sustained damage, moreover,
aggregate proof of damages must be based on a reliable mathematical formula in
order to be admissible. (pp. 30-31)
3. The Court rejects any attempt to redefine the break-repair claim as an alternative
measure of the diminution-in-value claim that does not require individualized proof.
The Court reviews the actual claim that plaintiff presented and the court submitted
to the jury -- a claim for the class members’ out-of-pocket expenditures for brake
repairs, presented through the testimony of her expert. The trial court properly
recognized that plaintiff could pursue damages based on class members’ out-of-
pocket damages for costs of repair as a remedy for breach of warranty, distinct from
her diminution in value claim. The Court therefore applies the principles set forth in
Muise and other case law to the out-of-pocket repair cost claim that plaintiff
presented at trial. (pp. 31-34)
4. Plaintiff presented no basis for a presumption -- much less for a conclusion -- that
all members of the class suffered damages for out-of-pocket brake repairs
necessitated by the Kia Sephia’s brake defect. The uncertainty about class
members’ damages claims derived from the expansive definition of plaintiff’s class,
which included an undetermined number of members who stood to gain a windfall
by virtue of the jury’s award of $750 per class member for brake repairs. Even if
plaintiff could demonstrate that all members of the class sustained an out-of-pocket
loss, plaintiff’s expert had no basis to develop a reliable mathematical formula for
estimating the average out-of-pocket costs incurred by members of that class, and he
did not present such a formula. This case is not a setting in which class members’
claims for damages could fairly be premised on aggregate proofs. The trial court
properly granted defendant’s motion for a new trial limited to that aspect of
plaintiff’s damages claim. (pp. 34-39)
3
5. The trial court also properly reassessed the question of predominance under Rule
4:32-1(b)(3) in holding that for purposes of the new trial on class members’ out-of-
pocket costs, common questions no longer predominated over individualized
inquiries as to the class members’ damages. The trial court conducted a careful
assessment of the common and individual questions. It concluded that the class’s
damage claims could not be resolved in a common proceeding. The court found no
single factual pattern on the limited question of damages that remained. The trial
court’s determination was firmly grounded in the trial evidence, which demonstrated
the disparate experiences of individual class members. The trial court’s
decertification order was a correct application of the predominance standard and a
proper exercise of the court’s discretion in the management of this case. (pp. 39-43)
6. Finally, the Court reviews the adoption of the Report and Recommendations of
the Special Master by the judge assigned to handle post-trial proceedings. The
Court notes that an individualized claims process on damages may be an equitable
and practical method of resolving damages claims. The trial judge and post-trial
judge acted within their discretion when they authorized such a procedure in this
action. Moreover, the Special Master conducted the claims process with precision
and care. The Special Master reviewed each claim, made individualized
determinations, and thoughtfully considered and resolved the many objections made
by both parties. The Court finds that the claims process in this case was fair and
exemplary. The Special Master’s Report and Recommendations were supported by
substantial credible evidence in the record, and the court properly adopted the
Special Master’s findings. (pp. 43-47)
REVERSED. The final judgment entered by the trial court is REINSTATED.
CHIEF JUSTICE RABNER and JUSTICES LaVECCHIA, ALBIN, FERNANDEZ-
VINA, and TIMPONE join in JUSTICE PATTERSON’s opinion. JUSTICE
SOLOMON did not participate.
4
SUPREME COURT OF NEW JERSEY
A-24 September Term 2018
081691
Regina Little, on behalf of
herself and all others
similarly situated,
Plaintiff-Respondent,
v.
Kia Motors America, Inc.,
Defendant-Appellant.
On certification to the Superior Court,
Appellate Division, whose opinion is reported at
455 N.J. Super. 411 (App. Div. 2018).
Argued Decided
October 8, 2019 June 25, 2020
Roberto A. Rivera-Soto argued the cause for appellant
(Ballard Spahr and Patterson Belknap Webb & Tyler,
attorneys; Roberto A. Rivera-Soto, Neal D. Walters,
Casey G. Watkins, and Peter C. Harvey, of counsel and
on the briefs).
Michael D. Donovan (Donovan Litigation Group) of the
Pennsylvania bar, admitted pro hac vice, argued the cause
for respondent (Donovan Litigation Group; Schnader
Harrison Segal & Lewis; Feldman, Shepherd,
Wohlgelertner, Tanner, Weinstock & Dodig; and Francis
& Mailman, attorneys; Lisa J. Rodriguez, James A.
Francis, Michael D. Donovan, and Alan M. Feldman
(Feldman, Shepherd, Wohlgelertner, Tanner, Weinstock
& Dodig) of the Pennsylvania bar, admitted pro hac vice,
on the briefs).
1
JUSTICE PATTERSON delivered the opinion of the Court.
In this class action, plaintiff Regina Little asserted breach of warranty
and other claims on her own behalf and on behalf of other New Jersey owners
and lessees of 1997, 1998, 1999, and 2000 Kia Sephia vehicles distributed by
defendant Kia Motors America, Inc. Plaintiff alleged that Kia Sephias in those
model years had a defective brake system.
At trial, plaintiff presented two distinct claims for damages. First, she
alleged that the class members suffered damages because the defective brakes
hastened each Kia Sephia’s depreciation, diminishing the vehicle’s value, and
that all class members had thus overpaid for their vehicles. Second, plaintiff
asserted that the class members incurred out-of-pocket costs due to the brake
defect because the cars required more frequent brake repairs than they would
have required absent the defect. Plaintiff premised that second damages claim
not on individualized proof of class members’ repair costs, but on an expert’s
estimate of the amount of money an average Kia Sephia owner would pay for
brake repairs over the vehicle’s life as a result of the defect alleged.
The jury agreed with plaintiff that the Kia Sephia had a brake defect,
found that defendant had breached express and implied warranties, and
determined that the class had sustained damages because of the brake defect.
2
The jury decided that the class members suffered no damages due to their
vehicles’ diminution in value. It nevertheless awarded damages in the amount
of $750 per class member based on plaintiff’s claim for the cost of repairs.
After the jury verdict, the trial court determined that it should have
required individualized proof of damages for the class members’ brake repairs.
The court left the jury’s liability verdict undisturbed. However, it granted
defendant’s motion for a new trial pursuant to Rule 4:49-1, as to the amount of
out-of-pocket damages incurred by class members. The trial court decertified
the class as to that limited issue and ordered individualized assessments of out-
of-pocket expenses incurred by the class members. A court-appointed Special
Master conducted a claims process, evaluated the class members’ individual
claims and recommended to the trial court that it award damages in the amount
of $46,197.03 for the cost of repairs. The trial court accepted that
recommendation, and final judgment was entered in plaintiff’s favor in that
amount plus attorneys’ fees and costs.
The parties cross-appealed. The Appellate Division reversed the trial
court’s post-trial determinations, reinstated the jury’s award for out-of-pocket
repair costs based on plaintiff’s aggregate proofs, and remanded for an award
of attorneys’ fees. Little v. Kia Motors Am., Inc., 455 N.J. Super. 411, 416-36
(App. Div. 2018). We granted defendant’s petition for certification.
3
Although aggregate proof of damages can be appropriate in some
settings, we consider such proof improper as presented in this case. We
concur with the trial court that it erred when it allowed plaintiff to prove class-
members’ out-of-pocket costs for brake repairs based on an estimate
untethered to the experience of plaintiff’s class. We hold that the trial court
properly ordered individualized proof of damages based on the actual costs
incurred by the class members. We view the trial court’s grant of defendant’s
motions for a new trial and for partial decertification of the class as a proper
exercise of its discretion. The claims proceeding that followed, carefully
conducted by a Special Master whose Report and Recommendations were
adopted by the trial court, was equitable to all parties.
Accordingly, we reverse the Appellate Division’s judgment and reinstate
the final judgment entered by the trial court.
I.
We derive our summary of the facts from the trial record.
Defendant began selling the Kia Sephia in New Jersey in 1997. Between
1997 and 2000, Kia sold or leased approximately 8400 Kia Sephias in New
Jersey.
Relying in part on defendant’s internal documents, plaintiff alleged that,
because of design and manufacturing flaws, the Kia Sephia’s front brakes
4
prematurely wore out, and defendant’s efforts to redesign the brakes failed to
correct the defect. 1 Defendant conceded that there was an increased rate of
brake wear in model year 1997-2000 Sephias but maintained that it had
resolved the problem through successive improvements in its design.
Defendant’s purchase contract for 1997, 1998, and 2000 model year
Sephias included the following warranty language:
What is Covered
Kia Motors America, Inc. warrants that your new Kia
Vehicle is free from defects in material or
workmanship, subject to the following terms and
conditions. An Authorized Kia Dealer will make
necessary repairs, using new or remanufactured parts,
to correct any problem covered by this limited warranty
without charge to you.
* * *
Basic Warranty Coverage
Except as limited or excluded below, all components of
your new Kia Vehicle are covered 36 months or 36,000
miles, whichever comes first, from the earlier date of
either retail delivery or first use of the Kia Vehicle.
1
Although plaintiff alleged in her complaint that the brake defect in the Kia
Sephia affected the distance required to stop the car and caused a safety
hazard, the parties stipulated at trial that there was no such hazard and that the
Sephia’s brakes in the relevant model years satisfied Federal Motor Vehicle
Safety Standards for stopping distance. See generally 49 C.F.R. § 571.105.
5
The contract provided that the warranty excluded “[n]ormal
[d]eterioration,” defined to include “[n]ormal wear, tear or deterioration such
as discoloration, fading, deformation, etc.” Although defendant took the
position that brake pads were among the “wear items” excluded from its
warranty, some of its dealers in New Jersey and other states repaired
customers’ brakes at no charge, and defendant covered the dealers’ costs as
warranty repairs. The parties stipulated that there were 8404 repairs pursuant
to warranty on the front brake components to Kia Sephias owned by New
Jersey residents during the relevant period, and that those repairs were
conducted on cars bearing 4875 different vehicle identification numbers.
According to defendant, it conducted those warranty repairs whether or not the
car was still within the three-year, 36,000-mile warranty, and paid a total of
$1.4 million for those repairs.
In January 2002, defendant offered customers a “field fix” in which a
redesigned rotor would be installed in the brake system of the customer’s car.
The parties stipulated that 242 warranty repairs involving the “field fix” were
conducted in New Jersey. In addition, defendant offered the owners of model
year 1997-2000 Kia Sephias that had previously required two or more brake
repairs a coupon for a free brake repair using the “field fix” redesign. In New
6
Jersey, 650 Kia Sephia owners received a coupon for a repair pursuant to that
program.
Beginning with model year 2001, defendant included a redesigned brake
system in Kia Sephias sold in the United States.
II.
A.
Plaintiff filed this action against defendant in the Law Division on June
26, 2001. She alleged that on March 1, 1999, she purchased a 1999 Kia Sephia
from a New Jersey dealer for approximately $13,000. Plaintiff asserted that
the brakes in her vehicle constantly malfunctioned, requiring her to return her
car to Kia dealers for repairs on at least five occasions, and that defendant
failed to correct the problem. She asserted individual and class action claims
for violation of sections 17200 and 17500 of the California Business and
Professions Code; 2 violation of the New Jersey Consumer Fraud Act (CFA),
N.J.S.A. 56:8-1 to -224; breach of an express warranty and the implied
warranty of merchantability; and violation of the federal Magnuson-Moss
Warranty--Federal Trade Commission Improvement Act, 15 U.S.C. §§ 2301 to
2312 (Magnuson-Moss Act).
2
Plaintiff’s claims based on the California Business and Professions Code were
dismissed prior to trial.
7
Pursuant to Rule 4:32, plaintiff requested certification of a class “of all
persons who purchased and/or leased Kia Sephia automobiles within six years
preceding the filing of [the] action.” On her own behalf and on behalf of the
putative class, she sought compensatory damages, a declaratory judgment,
injunctive relief, attorneys’ fees, and other remedies.
After granting partial summary judgment dismissing plaintiff’s claims to
the extent they related to or purported to state a claim for a national class, the
judge handling pretrial matters in this case considered plaintiff’s motion to
certify a class of New Jersey owners and lessees of Kia Sephias. The judge
held that plaintiff had satisfied the requirements of Rule 4:32, granted
plaintiff’s motion for class certification, and appointed counsel for the class.3
Pursuant to an order dated February 9, 2004 and as required by Rule 4:32-2(b),
plaintiff’s counsel provided notice to the class in a form approved by the court.
As amended by a different judge’s order dated November 17, 2006, the
class represented by plaintiff was defined as follows:
3
With respect to the four requirements of Rule 4:32-1(a), the judge found (1)
that the class was so numerous that joinder of all members was impracticable;
(2) that there were questions of law or fact common to the class; (3) that
plaintiff’s claims were typical of the claims of the class; and (4) that plaintiff
would fairly and adequately protect the interests of the class. With respect to
the requirements of Rule 4:32-1(b), the judge found that common questions of
law and fact “predominate[d] over any questions affecting only individual
members, and that a class action [was] superior to other available methods for
the fair and efficient adjudication of the controversy.” R. 4:32-1(b)(3).
8
All residents of the State of New Jersey who purchased
or leased a model year 1995-2000 Kia Sephia within the
six year period preceding the filing of the Complaint,
excluding (i) all persons who are currently engaged in
or have been engaged in litigation and/or arbitration
with Defendant concerning defects in the Sephia model
automobiles; (ii) all persons who have executed valid
releases in connection with claims related to defects in
the Sephia model automobiles; (iii) all Judges, judicial
officers and members of their immediate families; and
(iv) all persons who have or may have claims for
personal injuries arising out of or in any way related to
alleged defects in the Sephia model automobiles, which
claims arose prior to entry of judgment and distribution
of the relief sought in the Complaint.
B.
1.
The matter was tried before a jury in a four-week trial.
Plaintiff asserted two distinct theories of damages, each of which, she
contended, constituted a basis for a jury’s award of damages for breach of
warranty and a finding of ascertainable loss under the CFA, without
individualized proof of each class member’s losses. She presented her first
theory of classwide damages through the testimony of John Matthews, Ph.D.,
whom the trial court qualified as an expert in quantitative analysis, statistics,
and valuation losses. Plaintiff presented her second theory of classwide
9
damages through the testimony of Raymond Scott King, whom the court
qualified as an automobile engineer with an expertise in braking systems. 4
Matthews compared the resale value of a Kia Sephia in the relevant
model years to the resale value of several competing vehicles that he selected
and assigned to a “cohort group.” Choosing a different time period for his
calculation for each of the four model years so as to maximize the rate of the
Sephia’s depreciation, Matthews opined that at the end of each model year’s
depreciation period, the Sephia was worth only forty percent of its original
value, and that it depreciated faster than all but one of the cars in his “cohort
group.”
On that basis, Matthews testified that each purchaser of a Kia Sephia --
even a purchaser such as plaintiff who did not sell or trade in her vehicle --
suffered a loss due to his or her vehicle’s depreciation as compared with the
“cohort group” of vehicles.5 Matthews also presented a second figure,
4
After conducting hearings pursuant to N.J.R.E. 104 in accordan ce with the
standard of N.J.R.E. 702 and Kemp v. State, 174 N.J. 412, 424 (2002), the trial
court rejected defendant’s challenges to the admission of both experts’
opinions.
5
According to Matthews, a new 1997 Kia Sephia was subject to excess
depreciation in the amount of $2191, a new 1998 Kia Sephia was subject to
excess depreciation in the amount of $1125, a new 1999 Kia Sephia was
subject to excess depreciation in the amount of $904, and a new 2000 Kia
Sephia was subject to excess depreciation in the amount of $640.
10
substantially higher than his depreciation figure, for each of the four model
years, and identified that amount as the average Kia Sephia purchaser’s
“overpayment” for his or her car. Matthews testified that in the absence of an
alternative explanation, the diminution of the Kia Sephias’ value was caused
by the brake defect.
Although most of King’s expert testimony focused on plaintiff’s
allegation that the Kia Sephia’s brakes were defective, he also testified in
support of plaintiff’s damages claim.
King estimated “the likely out-of-pocket expenses incurred by members
of the class” as a result of the brake defect. He premised his estimate on three
assumptions. First, he opined that it is reasonable for a car owner to expect his
or her vehicle to last 100,000 miles. Second, he stated a “normal” interval for
brake replacements is every 20,000 miles. Third, King estimated that the
average Kia Sephia required a brake replacement every 10,000 miles, twice the
“normal” frequency of every 20,000 miles. He based that estimate not on any
analysis of brake-repair data, but on several anecdotal reports of individual
brake repairs that identified the vehicle’s mileage at the time of the repair to be
relatively close to that figure.
On that basis, King calculated that each class member should expect to
pay for five “normal” brake replacements -- repairs not attributable to any
11
defect in his or her car -- during the expected 100,000-mile duration of his or
her ownership of that car. King concluded that during the ownership of the
average Kia Sephia, the vehicle accumulated the projected 100,000 miles and
the brakes would have to be repaired on ten occasions. According to King,
five of those brake repairs would be “normal” repairs that would be expected
in a vehicle without defects, and five would be “abnormal” brake repairs
attributable to the brake defect.
Based on telephone inquiries to five or six New Jersey Kia dealers, King
estimated the average cost of a brake repair in New Jersey to be $250.
Multiplying that amount by the estimated five “abnormal” brake repairs, he
concluded that an average class member’s out-of-pocket expenses for brake
repairs would be $1250.
King then extrapolated that calculation to the class as a whole. He
estimated that there were 42,000 “abnormal” brake repairs performed on the
Kia Sephias in the relevant model years. Deducting the 8404 brake repairs for
which defendant paid under its warranty program from that estimate, King
opined that the defect in the Sephia’s brakes required class members to pay for
a total of approximately 34,000 brake repairs. He contended that the class’s
aggregate out-of-pocket expenses could be calculated by multiplying 34,000
by $250.
12
On cross-examination, King conceded that if a given class member drove
a Kia Sephia 25,000 miles with no need for a brake repair, or incurred no out -
of-pocket costs because defendant paid for any necessary brake repairs under
warranty, his opinion would not apply to that class member. King
acknowledged that plaintiff did not retain her car until it reached 100,000
miles and that he was unaware of any brake repairs to plaintiff’s Kia Sephia
after it was driven 45,000 miles. King conceded that his estimates relied
exclusively on defendant’s warranty data and that he did not have any data on
what Kia Sephia owners actually paid for non-warranty repairs.6
2.
Before the trial judge, the parties disputed whether the evidence
presented by Matthews and King was sufficient to establish classwide damages
arising from defendant’s alleged breach of warranty. They also contested
whether Matthews and King had proven each class member’s ascertainable
6
In addition to presenting the expert testimony of Matthews and King,
plaintiff presented her own testimony regarding her experience with her Kia
Sephia, as well as the testimony of Kia employees regarding the brake defect
and Kia’s marketing practices. Kia presented the testimony of its Vice
President of Parts and Service regarding warranty repairs; three Kia Sephia
owners who had opted out of the class because they were satisfied with the
performance of their vehicles; an expert witness on “engineering, design and
warranty data,” who addressed whether the brakes were defective; and an
expert on “statistics, expert analysis, loss causation, and damage calculati on”
to counter the expert opinions of Matthews and King on classwide damages.
13
loss, an element of plaintiff’s CFA claim under Thiedemann v. Mercedes-Benz
USA, LLC, 183 N.J. 234, 247-48 (2005).
Arguing that neither Matthews nor King had established breach of
warranty damages or ascertainable loss for any class member, and citing due
process considerations, defendant moved for an involuntary dismissal pursuant
to Rule 4:37-2 at the close of plaintiff’s proofs and again at the close of the
evidence. The trial court denied both motions.
Reiterating purported deficiencies in plaintiff’s aggregate proofs,
defendant moved to decertify the class or, in the alternative, to recertify the
class on the question of liability only, leaving the question of damages for
individualized determinations. The trial court denied the motion.
In the jury charge conference, defendant requested that the court limit
the class to one theory of damages for breach of warranty. The trial court
declined that request. It ruled that a class member could sustain damages for
both the diminution of his or her vehicle’s value and out-of-pocket costs for
brake repairs, and that both damages theories should be submitted to the jury .
At the conclusion of the trial, the trial judge instructed the jury on
damages for breach of warranty, acknowledging the class’s two theories of
classwide damages:
In a breach of warranty case, the function of damages
is simply to make an injured party whole. In other
14
words, the innocent party must be given the benefit of
the bargain and placed in as good a position as they
would have been in as if the contract had been
performed.
It is for you to decide the appropriate amount of
damages in this case.
In a breach of warranty case, one measure of damages
is the difference at the time of delivery between the
value of the vehicle, as accepted and the value of the
vehicle as it would have been if it was -- as it was
warranted.
In other words, the measure of damages is the
difference in value between the vehicle as promised
minus the value of the vehicle as delivered in a
defective condition. Damages may also be measured
by the increased cost of maintenance and repair to
purchasers and lessees of the Sephia as a result of the
defects.
The two damages theories were addressed in separate questions on the
verdict form, which the trial court identified as a form used by plaintiff’s
counsel in other litigation and suggested by plaintiff.
3.
The jury returned a verdict in favor of plaintiff with respect to most of
her claims. It determined that defendant had breached its express and implied
warranties to the class members with respect to the vehicles purchased by the
15
class and had violated the Magnuson-Moss Act. It found, however, that
defendant had not violated the CFA.
The jury determined that the class had sustained damages. Asked to
state the amount of damages sustained by each class member “[f]or the
difference in value, if any, of the Sephia as warranted compared to the Sephia
as delivered,” the jury responded “$0.” Asked to state the amount of damages
sustained by each class member “[f]or repair expenses reasonably incurred as a
result of the defendant’s breach of warranty,” the jury responded “$750.”
C.
In post-verdict proceedings, defendant moved for judgment
notwithstanding the verdict pursuant to Rule 4:40-2, for a new trial pursuant to
Rule 4:49-1, and for an order decertifying the class on the issue of damages
pursuant to Rule 4:32-2.
With respect to breach of warranty damages, defendant argued that when
the class was certified several years earlier, the court assumed that plaintiff’s
theory of classwide damages would be the diminution-in-value theory
presented by Matthews. Defendant asserted that in light of the jury’s rejection
of that theory, and its award of damages solely based on class members’ out-
of-pocket expenses for brake repairs, damages could not be fairly calculated
absent individualized proofs.
16
Noting defendant’s concession that repair costs required by a defect can
be a proper measure of damages for breach of warranty, plaintiff responded
that the jury verdict on repair costs was properly premised on King’s estimate
of the average repair cost that a class member would be expected to incur.
Plaintiff did not challenge the jury’s verdict rejecting her diminution-of-
value damages claim in a motion for judgment notwithstanding the verdict, a
motion for a new trial, or any other post-trial application.
The trial court denied defendant’s motion for judgment notwithstanding
the verdict in its entirety and its motion for a new trial as to liability, finding
“ample support for the jury’s verdict in all respects but damages.” It granted
in part, however, defendant’s motion for a new trial, limited to the issue of
damages. The court concluded that it had erred when it submitted the question
of out-of-pocket repair costs to the jury and instructed the jury to consider
plaintiff’s second damages theory based on classwide proofs. It commented
that “[t]he 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.” The trial court limited the new trial to “the monetary
amount of damages incurred, if any,” to be “handled on a claim-form basis.”
Noting that in the initial class certification proceedings, plaintiff’s
counsel had recognized that “the fact of damages may be different for each
17
individual,” the trial court held that “it cannot be shown that all members of
the class suffered monetary damages on a class-wide model.” The court
reasoned that if it were to maintain class certification for purposes of repair
damages, it would “provide a windfall for those owners who did not actually
pay for brake repairs more often than every 20,000 miles.” The trial court
therefore granted defendant’s motion to decertify the class “as to the quantum
of damages each individual owner suffered,” with the class members left to
their individual proofs.
D.
Following the transfer of this matter from the trial judge to another
judge, plaintiff proposed a class notice plan and a claims-form process. At the
court’s direction, the notice to the class requested details about each class
member’s vehicle, the vehicle’s repair history, any warranty coverage of the
repair costs, and any accidents involving the vehicle during the warranty
period. The notice indicated that the claimant should provide documentation
of his or her claims, but also directed each class member to submit his or her
claim even if he or she could not provide documentation. The court appointed
a third-party administrator to process the claims. Also at the court’s direction,
defendant set up a website for the use of class members submitting claims.
18
In response to the notice, members of the class returned between 1110
and 1120 claim forms. Plaintiff’s counsel took the position that they could not
represent the individual claimants because their interests conflicted with those
of the class as a whole. The judge certified a new class, consisting of the
individual Kia Sephia owners and lessees who had submitted claim forms, and
plaintiff’s counsel represented that class.
The judge then appointed a Special Master to determine “which [claim]
forms state valid claims to be paid.” Shortly after his appointment, the Special
Master advised the court and counsel that he viewed his role to extend beyond
the recommended adjudication of the class members’ individual claims. He
stated that “the jury verdict finding no diminution in value cannot logically
survive,” that he considered himself “empowered to revisit this theory,” and
that the claimants should be permitted to pursue damages for breach of
warranty other than those based on out-of-pocket repair costs.
Over defendant’s objection, the judge adopted the Special Master’s
conclusions, thus overturning the jury verdict rejecting diminution-of-value
damages -- which had not been challenged by plaintiff -- and nullifying the
trial court’s post-judgment determinations.
The Appellate Division granted defendant’s motion for leave to file an
interlocutory appeal and reversed the judge’s order, noting that the court
19
handling the post-trial proceedings had not reviewed the trial transcript before
it overturned the jury verdict and overruled the trial judge’s rulings; that the
court had adjudicated issues not before it; and that the trial judge’s post-trial
rulings should have been viewed as the law of the case. Little v. Kia Motors
Am., Inc., 425 N.J. Super. 82, 89-93 (App. Div. 2012). The Appellate
Division remanded the matter for further proceedings consistent with its
opinion. Id. at 93.
On remand, the judge assigned to handle the post-trial proceedings
appointed a new Special Master. Analyzing each claim form that had
previously been submitted as well as other documents pertinent to some of the
claims, the second Special Master recommended that the court find that 150
claimants had proven that they incurred out-of-pocket expenses for
compensable brake repairs, and that it award damages in the amount of
$46,197.03. The judge adopted the second Special Master’s Report and
Recommendation.
The case was then transferred to another judge. Plaintiff’s counsel
requested $6,055,916 in attorneys’ fees and $481,850 in costs, prejudgment
interest, and post-judgment interest. On September 10, 2015, the court entered
final judgment against defendant in the amount of $46,197.03 in damages
payable to the 150 claimants who had proven out-of-pocket costs for
20
compensable brake repairs. The judgment also included $200,000 in legal
fees, $19,112 in prejudgment interest, $481,850 in costs, and an incentive
award of $5000 to plaintiff, who had demonstrated no out-of-pocket expenses
for compensable brake repairs.
E.
Plaintiff appealed the final judgment. She challenged several
determinations, including the trial court’s grant of a new trial on the issue of
damages and the individualized determinations that followed, and sought
reinstatement of the jury’s damages verdict. Defendant cross-appealed,
asserting, among other arguments, that the trial court should have decertified
the class for all purposes, granted its motion for a judgment notwithstanding
the verdict, and excluded King’s expert testimony.
The Appellate Division reversed the trial court’s judgment. Little, 455
N.J. Super. at 426-36.7 The Appellate Division perceived error in the trial
court’s grant of a new trial on only the damages theory based on out-of-pocket
expenses for brake repairs and held that, notwithstanding the jury’s rejection
7
The Appellate Division incorrectly characterized the trial court’s post -
verdict ruling to include the grant of a judgment notwithstanding the verdict on
the question of damages for brake repairs. Id. at 417. As the trial court’s
written decision makes clear, it did not grant a judgment notwithstanding the
verdict; instead, the court granted in part defendant’s motion for a new trial,
decertified the class for damages, and required “claims proceedings as to
damages.”
21
of plaintiff’s diminution-in-value theory, the trial court should have ordered a
new trial on both theories of damages. See id. at 426. The court viewed
plaintiff’s damages theories as not “fairly separable from each another” and
expressed concern that the trial court did not tell the jury “of any ramification s
if only repair damages were awarded.” Ibid.
The Appellate Division disagreed with the trial court’s conclusion that
cost-of-repair damages could not be assessed classwide. Id. at 428-36. It
viewed both of plaintiff’s experts to present reasonable theories of damages
and held that a claimant’s “small windfall . . . should not defeat recovery.” Id.
at 429. The Appellate Division distinguished this case from its decision in
Muise v. GPU, Inc., 371 N.J. Super. 13 (App. Div. 2004), on the ground that
King’s calculations more closely tracked actual data than the mathematical
model rejected in Muise, given King’s reliance on defendant’s brake-repair
data, the testimony of defendant’s executives, and defendant’s internal
documents. Id. at 431-32. The court held that a class may prove classwide
damages “based on a reliable mathematical formula.” Id. at 432.
The Appellate Division also relied on the Pennsylvania Supreme Court’s
decision in Samuel-Bassett v. Kia Motors America, Inc., 34 A.3d 1, 12 (Pa.
2011), in which plaintiff’s counsel in this matter represented a Pennsylvania
class of Kia Sephia purchasers and lessees. Ibid. The Appellate Division
22
viewed the Pennsylvania Supreme Court’s majority opinion that approved
King’s estimate of a class member’s out-of-pocket damages in Samuel-Bassett
to be a proper aggregate proof of classwide damages. Id. at 432-34 (discussing
Samuel-Bassett, 34 A.3d at 11-13, 35-37, 40).
On those grounds, the Appellate Division reversed the trial court’s
determination, reinstated the jury’s award of $750 per class member based on
aggregate proofs, and remanded for an award of attorneys’ fees to plaintiff. Id.
at 439. It rejected the arguments presented in defendant’s cross-appeal. Id. at
436-39.
We granted defendant’s petition for certification, “limited to the issue of
damages.” 236 N.J. 113 (2018). We invited supplemental briefs and indicated
that the parties should address “alternative methods by which damages may be
fairly and practicably determined in this action, taking into consideration the
number of claimants and the difficulties that some claimants may encounter in
documenting their expenditures to repair the brakes of the 1997-2000 model
year Kia Sephia vehicles” at issue in this case. Ibid.III.
A.
Defendant argues that, in the wake of the jury’s rejection of plaintiff’s
diminution-in-value theory of aggregate damages, the trial court properly
23
recognized that individualized proof of out-of-pocket expenditures for brake
repairs represented the only equitable method to assess class members’
damages. It asserts that plaintiff’s aggregate damages evidence, presented by
her expert, King, violated defendant’s due process rights and was improperly
approved by the Appellate Division. Defendant contends that plaintiff’s
characterization of her out-of-pocket damages theory for purposes of appeal
contravenes that theory as it was presented at trial. It argues that the claims-
form proceeding overseen by the second Special Master protected the class
members’ recovery of out-of-pocket damages and also preserved defendant’s
due process right to defend this action.
B.
Plaintiff asserts that every member of the class is entitled to a remedy
for the brake defect in all model year 1997-2000 Kia Sephias, a defect
recognized by the jury in its verdict. Plaintiff contends that an award of
damages for a claimant’s “out of pocket payment” is inadequate to compensate
that claimant’s loss because no single repair could cure the defect in the brake
system. She argues instead that the jury’s award of $750 per claimant,
supported by King’s “reliable mathematical formula,” should not be deemed to
represent only the jury’s calculation of repair costs. Plaintiff asserts that the
jury award also represented the amount necessary on the date the car was
24
delivered to “cure the unfixable defect” in each Kia Sephia. According to
plaintiff, the Appellate Division therefore properly declined to limit class
members’ damages to the actual repair costs that they incurred. Plaintiff
contends that the claims process overseen by the second Special Master
improperly premised an award on the “actual damages incurred,” when it
should have recognized that the defect could not be corrected by a brake
repair. Plaintiff asserts that the class members were entitled to recover more
than what they paid for such repairs.
IV.
A.
We first review the trial court’s grant of defendant’s motion for a new
trial pursuant to Rule 4:49-1 as to whether damages for brake repairs could be
calculated on a classwide basis.
In that inquiry, we “give considerable deference to a trial court’s
decision to order a new trial, as the trial court has gained a ‘feel of the case’
through the long days of the trial.” Lanzet v. Greenberg, 126 N.J. 168, 175
(1991); accord Conklin v. Hannoch Weisman, 145 N.J. 395, 407 (1996).
Applying the same standard that governs the trial court, we determine
“whether there was a miscarriage of justice under the law.” Hayes v.
Delamotte, 231 N.J. 373, 386 (2018) (quoting Risko v. Thompson Muller
25
Auto. Grp., Inc., 206 N.J. 506, 522 (2011)); accord R. 2:10-1 (“The trial
court’s ruling on such a motion shall not be reversed unless it clearly appears
that there was a miscarriage of justice under the law.”).
B.
When it granted a new trial on out-of-pocket repair damages, the trial
court ruled that it had erred when it authorized proof of the class’s repair costs
by means of an expert’s estimate without requiring an individualized inquiry.
We thus consider the standard that guides a court’s determination whether to
permit a class to prove its damages in aggregate form, or to require evidence
specific to each class member. 8
“A ‘class action is “an exception to the usual rule that litigation is
conducted by and on behalf of the individual named parties only.”’” Dugan v.
TGI Fridays, Inc., 231 N.J. 24, 46 (2017) (quoting Iliadis v. Wal-Mart Stores,
Inc., 191 N.J. 88, 103 (2007)). It “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
8
We do not concur with plaintiff that defendant waived its right to argue that
the aggregate proofs at issue violated its due process rights. Defendant raised
its due process argument before the trial court at pretrial hearings and at trial,
as well as on appeal.
26
situated litigants.” Ibid. (quoting Iliadis, 191 N.J. at 104). The class action
device “also helps to equalize adversaries, a purpose that is even more
compelling when the proposed class consists of people with small claims.”
Iliadis, 191 N.J. at 104.
A class action, however, does not dispense with traditional burdens of
proof in the name of efficiency; to the contrary, “it leaves the parties’ legal
rights and duties intact and the rules of decision unchanged.” Shady Grove
Orthopedic Assocs., P.A. v. Allstate Ins. Co., 559 U.S. 393, 408 (2010)
(plurality opinion). Just as due process principles mandate that a court permit
the plaintiff to prove her case subject to the court rules, the Rules of Evidence,
and other relevant law, “[d]ue process requires that there be an opportunity to
present every available defense” within the same constraints. Gonzalez v. Safe
& Sound Sec. Corp., 185 N.J. 100, 114 (2005) (quoting N.Y., Susquehanna &
W. R.R. Co. v. Vermeulen, 44 N.J. 491, 501 (1965)).
Notwithstanding the unique burdens that a class action imposes on
judicial resources, a court must recognize that the most expeditious method of
presenting a claim or defense may not ensure a fair trial. Accordingly, before
admitting aggregate proof of damages in a class action, a court must undertake
a careful inquiry to ensure that the proposed evidence does not deprive the
defendant of a meaningful opportunity to contest the plaintiff’s claims.
27
In its decision in Muise, the Appellate Division undertook precisely such
an inquiry. Muise arose from the claims of a class consisting of electrical
utility customers who experienced heat-related power outages. 371 N.J. Super.
at 18. The class sought to recover damages against the electrical utility whose
service was interrupted. Ibid. Although the class initially asserted claims
based on violations of the CFA, negligence, and several other common-law
claims, only the negligence claim remained when the trial court considered the
issue of aggregate proofs. Id. at 18-20.
As an alternative to proving the customer’s individual losses, the
plaintiffs retained two experts to present classwide proof of their claims. Id. at
23. The experts relied on surveys that they and others conducted in which
electrical customers in California and Canada were asked to state what their
expected costs would be if they experienced a power outage under certain
hypothetical circumstances. Id. at 24. In papers they had written on the use of
surveys to prove damages, the experts had cautioned that respondents in such
surveys had scant experience with service interruptions and that the resulting
estimates would be influenced by socioeconomic, demographic, and
geographic factors. Ibid. Nonetheless, in the Muise case, the experts invoked
those surveys to estimate $62 million in damages to the class. Ibid.28
In an opinion by Judge King, the Appellate Division affirmed the trial
court’s decision rejecting the survey evidence. Id. at 28-29, 46-52. The court
adopted the reasoning of the trial judge, who “did not find that individualized
proofs were always required,” but cautioned that a court should depart from
that general rule only “where class-wide damages can be calculated by a
reliable mathematical formula.” Id. at 28. “Even then,” the court observed, “a
statistical model estimating the total amount of damages should not be
substituted for actual proof unless it can be presumed that all members of the
class suffered damage.” Id. at 28-29. The Appellate Division determined that
although “it might be reasonable to presume that all class members, merely by
losing power, suffered some damage,” the plaintiffs had failed to offer a
reliable mathematical formula to quantify that damage. Id. at 52.
The Appellate Division’s holding in Muise is consistent with the
approach taken by many federal courts under Federal Rule of Civil Procedure
23, the federal analogue to Rule 4:32. See, e.g., Ridgeway v. Walmart Inc.,
946 F.3d 1066, 1086-87 (9th Cir. 2020) (holding that although the amount of
damages is invariably an individual question, class members may resort to
representative or statistical evidence to prove their claims when “the evidence
is reliable in proving or disproving the elements of the relevant cause of
action” (quoting Tyson Foods, Inc. v. Bouaphakeo, 577 U.S. ___, ___, 136 S.
29
Ct. 1036, 1046 (2016)); Day v. Celadon Trucking Servs., Inc., 827 F.3d 817,
835 (8th Cir. 2016) (ruling that a class may use representative evidence to
calculate damages so long as the evidence is reliable); Newton v. Merrill
Lynch, Pierce, Fenner & Smith, Inc., 259 F.3d 154, 187-89 (3d Cir. 2001)
(rejecting the plaintiff’s argument that he should be permitted to present a
formula for classwide proofs, given that the plaintiff had not establish ed that
all members of the class had suffered damages and had not presented a viable
formula as a substitute for individualized proofs).
We concur with the principles stated by the Appellate Division in Muise,
which we now adopt. To decide whether to permit classwide proof of
damages, a court must carefully consider (1) the underlying cause of action for
which the class seeks recovery; (2) the measure of damages that the law allows
if there is a finding of liability for that claim; and (3) the methodology by
which the plaintiff seeks to prove damages on an aggregate basis. If the
plaintiff cannot establish a basis for a presumption that all members of the
class have sustained damage, aggregate proof of damages raises the specter
that an individual with no viable claim will recover a windfall. In such
settings, the court should require individualized proof of damage. Muise, 371
N.J. Super. at 47-48; Newton, 259 F.3d at 187-89. Even if the plaintiff can
show that all class members have sustained damage, moreover, aggregate
30
proof of damages must be based on a reliable mathematical formula in order to
be admissible. Muise, 371 N.J. Super. at 47-48; Ridgeway, 946 F.3d at 1086-
87; Day, 827 F.3d at 835. We apply those principles in this case.
C.
1.
We briefly address plaintiff’s characterization on appeal of the claim for
out-of-pocket repair costs that she asserted at trial.
As plaintiff presented her out-of-pocket brake-repair claim to the jury, it
was premised on costs incurred by class members for brake repairs
necessitated by the brake defect. That claim was entirely separate from the
diminution-of-value damages that she also sought to recover. Indeed, plaintiff
prevailed in an application before the trial court regarding the jury charge; the
court charged the jury that plaintiff could recover for both the diminution in
value of the class members’ Kia Sephias and the “increased cost of
maintenance and repair” to purchasers and lessees “as a result of the defects.”
When the case went to the jury, plaintiff had the opportunity to achieve a
cumulative recovery on both theories.
On appeal, however, plaintiff attempts to redefine the claim she made
before the jury. She now describes that claim to be based not on the increased
costs incurred by individual class members to maintain and repair the vehicles,
31
as the jury was charged, but on the amount that would be necessary to replace
the defective vehicle with one that was defect-free. After the fact, plaintiff
portrays her out-of-pocket brake-repair claim as an alternative measure of the
diminution-in-value claim that the jury rejected. She argues that such a claim
is common to all class members, that it requires no individualized proof, and
that the Appellate Division properly viewed the two claims to be inseparable.
Plaintiff’s effort to recharacterize her damages claim, however, is belied by the
record of King’s testimony, the position she took in motion practice before the
trial court and at the charge conference, and the jury charge that she persuaded
the court to give.
Accordingly, we review the actual claim that plaintiff presented and the
court submitted to the jury -- a claim for the class members’ out-of-pocket
expenditures for brake repairs, presented through the testimony of her expert.
2.
As the trial court recognized, costs incurred by a given class member for
repairs and maintenance necessitated by the defect in the Kia Sephia was an
appropriate measure of damages for the breach of warranty claims asserted in
this case pursuant to N.J.S.A. 12A:2-313, N.J.S.A. 12A:2-314, and N.J.S.A.
12A:2-315.
32
Under the Uniform Commercial Code (UCC), a buyer who has accepted
goods and has given notification of breach pursuant to N.J.S.A. 12A:2-607(3)
“may recover as damages for any non-conformity of tender the loss resulting
in the ordinary course of events from the seller’s breach as determined in an y
manner which is reasonable.” N.J.S.A. 12A:2-714(1). The UCC recognizes
“the difference at the time and place of acceptance between the value of the
goods accepted and the value they would have had if they had been as
warranted” as the ordinary measure of damages, “unless special circumstances
show proximate damages of a different amount.” N.J.S.A. 12A:2-714(2).
In appropriate settings, however, the plaintiff’s repair costs can also
provide a reasonable measure of damages. See McDonald v. Mianecki, 79 N.J.
275, 282 n.1 (1979) (noting that although “diminution in value is a standard
measure of damages in breach of warranty cases,” in some circumstances “it
may be appropriate to utilize cost of repairs as the standard”); 525 Main St.
Corp. v. Eagle Roofing Co., 34 N.J. 251, 254-55 (1961) (holding that when
diminution of value damages are not easily calculated, “the cost of repairs, or
the cost of replacement if replacement is necessary to obtain the promised
performance, is the appropriate approach without reference to the [product’s]
value”); Perth Amboy Iron Works, Inc. v. Am. Home Assurance Co., 226 N.J.
Super. 200, 219 (App. Div. 1988) (holding that “diminution in value is the
33
standard measure of damages in breach of warranty cases. In a few cases,
however, the appropriate standard is the cost of repairs”). Accordingly, the
trial court properly recognized that plaintiff could pursue damages based on
class members’ out-of-pocket damages for costs of repair as a remedy for
breach of warranty, distinct from her diminution-in-value claim.
3.
The central question in this appeal is whether the trial court properly
permitted plaintiff’s brake-repair claim to be asserted classwide, supported
only by aggregate proofs. As did the trial court when it granted a new trial on
damages, we apply the principles set forth in Muise and other case law to the
out-of-pocket repair cost claim that plaintiff presented at trial.
As the record makes clear, plaintiff presented no basis for a presumption
-- much less for a conclusion -- that all members of the class suffered damages
for out-of-pocket brake repairs necessitated by the Kia Sephia’s brake defect.
Plaintiff did not contend that every member of her expansive class of 8400
owners and lessees incurred an out-of-pocket loss. Indeed, plaintiff’s expert,
King, candidly admitted that his estimate of average out-of-pocket costs would
not apply to class members whose experience with their vehicles matched
various scenarios posed to him at trial.
34
The uncertainty about class members’ damages claims derived from the
expansive definition of plaintiff’s class. As the class was proposed and as it
was certified, it was not limited to New Jersey owners and lessees of Kia
Sephias who incurred out-of-pocket expenses for repairs and maintenance
because of the brake defect. Instead, with narrow exceptions, the class
included “[a]ll residents of the State of New Jersey who purchased or leased” a
Kia Sephia in the relevant model years over the six years preceding the filing
of the complaint. Yet, any class member who did not experience problems
with the vehicle’s brakes -- as did three Kia Sephia owners who opted out of
the class and testified for defendant -- would incur no out-of-pocket costs.
Any class member whose Kia Sephia did not require brake repairs more
frequently than it would have absent the defect would incur no out-of-pocket
costs. And any class member whose brakes required extra repairs by virtue of
the brake defect, but whose repairs were paid for by Kia under warranty,
would incur no out-of-pocket costs.9 In short, plaintiff’s class included an
undetermined number of members who stood to gain a windfall by virtue of
the jury’s award of $750 per class member for brake repairs.
9
In Thiedemann, the Court rejected class action claims premised on alleged
breaches of the CFA, the implied warranty of merchantability under N.J.S.A.
12A:2-314, and the Magnuson-Moss Act because the vehicle defects at issue
were “addressed by warranty, at no cost to the consumer.” 183 N.J. at 238-39,
251.
35
Even if plaintiff could demonstrate that all members of the class
sustained an out-of-pocket loss, she did not present a reliable mathematical
formula by which the jury could fairly quantify that loss. See Muise, 371 N.J.
Super. at 28-29; Ridgeway, 946 F.3d at 1086-87; Day, 827 F.3d at 835;
Newton, 259 F.3d at 187-89.
The estimate provided by plaintiff’s expert, King, was based on three
premises: that an average brake repair cost $250 in New Jersey during the
relevant period; that the “life span” of an average Kia Sephia in the relevant
model years -- apparently defined as the time period in which the original
owner or lessee would retain the vehicle -- would be 100,000 miles; and that
because of the brake defect in the vehicles, an average Kia Sephia in the
relevant model years would require a brake repair every 10,000 miles, instead
of every 20,000 miles, which King considered the expected interval for a brake
repair.
The first of those premises was amply supported by King’s research. He
conducted an informal telephone survey of six or seven New Jersey Kia
dealers, inquired as to what each of them would charge for a brake repair, and
averaged the estimates provided.
The second and third bases for King’s testimony, however, rested on an
inadequate foundation. King’s estimate that Kia Sephias had an average “life
36
span” of 100,000 miles, during which the class member owner or lessee would
retain the vehicle, was supported only by general information as to the length
of time that consumers drive their cars and statistics on how many miles an
average car is driven per year, as well as a Kia document suggesting that the
Kia Sephia could be driven as much as 200,000 miles. That estimate was
unsupported by the slightest inquiry as to the length of time that the actual Kia
Sephia owners and lessees in the class retained their vehicles. It represented
nothing more than guesswork.
Most importantly, King’s assertion that the average Kia Sephia would
need a brake repair every 10,000 miles was untethered to the real-world
experience of the class. In support of his 10,000 miles figure, King cited
nothing more than a few anecdotal reports in defendant’s files from Kia Sephia
owners, most or all in other states, who complained of brake problems when
the mileage on their cars was in the general vicinity of that benchmark. King
also alluded to a study of what he conceded were the extreme driving
conditions faced by Los Angeles drivers. Moreover, King had no information
on the brake performance of the class members’ vehicles outside of the limited
and nonrepresentative sample that appeared in Kia’s documents on warranty
repairs; as he conceded, “[t]hat data just wasn’t available.” The information
37
gathered by King simply did not support an accurate estimate of the frequency
of brake repairs to the Kia Sephias owned by the class.
In short, plaintiff’s expert had no basis to develop a reliable
mathematical formula for estimating the average out-of-pocket costs incurred
by members of that class, and he did not present such a formula.10
D.
Like Muise, this case is not a setting in which class members’ claims for
damages could fairly be premised on aggregate proofs. The trial court
correctly determined that plaintiff’s claim for out-of-pocket brake-repair costs
required individualized determinations, and that its initial decision to submit
10
When it approved King’s estimate as a classwide model for out-of-pocket
damages in this case, the Appellate Division relied heavily on the
Pennsylvania Supreme Court’s decision in Samuel-Bassett v. Kia Motors
America, Inc., another class action involving the Kia Sephia in which King
testified for the plaintiff class. Little, 455 N.J. Super. at 432-34. In the
Appellate Division’s view, the Pennsylvania Supreme Court held that King’s
aggregate proof of out-of-pocket damages in the Pennsylvania class action was
reliable and properly admitted in that case. Ibid. Indeed, the Appellate
Division suggested that had the Pennsylvania Supreme Court decided Samuel-
Bassett before the trial court’s decision granting a new trial in this case, the
trial court would have denied that motion. Id. at 432-33. In fact, the
Pennsylvania Supreme Court held that defendant had waived its objection to
King’s damages model in the Pennsylvania case, and expressly declined to
reach the question of whether that model was a reliable basis for aggregate
proof. Samuel-Bassett, 34 A.3d at 41 & n.27 (“Given the limited nature of
[the defendant’s] preserved challenge, we need not, and therefore do not,
express a definitive view on . . . whether the methodology of Bassett’s expert
in estimating individual damages here was sound.”). The Appellate Division’s
reliance on Samuel-Bassett is thus misplaced.
38
the question of repair damages to the jury based solely on King’s classwide
proofs resulted in a “miscarriage of justice under the law.” See R. 2:10-1. The
court properly granted defendant’s motion for a new trial limited to that aspect
of plaintiff’s damages claim.
V.
A.
We next consider the trial court’s decertification of the class for
purposes of individualized assessments of class members’ claims for repair
damages.
The decertification of a class, in whole or in part, is one of the remedies
available to a trial court under Rule 4:32-2. As this Court has observed, “Rule
4:32 vests in the trial court substantial control over management of a class
action. A trial court can mold the class . . . and, in an appropriate case, can
even decertify a class.” In re Cadillac V8-6-4 Class Action, 93 N.J. 412, 437
(1983); see also Lee v. Carter-Reed Co., L.L.C., 203 N.J. 496, 530 (2010)
(“[A] trial court always will have options at its disposal, such as subdividing
the class, if necessary, or, in a worst case scenario, decertifying the class if
justice cannot be achieved through a class action.”); Iliadis, 191 N.J. at 119(noting the court’s authority to “alter or amend the certification of a class” and
39
citing In re Cadillac for the proposition that a court has the authority to
decertify a class).
We review the trial court’s decision decertifying the class for abuse of
discretion. See Dugan, 231 N.J. at 50 (applying abuse of discretion standard to
certification decision); In re Cadillac, 93 N.J. at 438-39 (same).
The governing standard for decertification, like the standard for class
certification, is prescribed by Rule 4:32-1(a). That Rule requires a party
seeking to certify a class to demonstrate that
(1) the class is so numerous that joinder of all members
is impracticable, (2) there are questions of law or fact
common to the class, (3) the claims or defenses of the
representative parties are typical of the claims or
defenses of the class, and (4) the representative parties
will fairly and adequately protect the interests of the
class.
[R. 4:32-1(a).]
Should the plaintiff satisfy those requirements, the court then applies
Rule 4:32-1(b), which provides in relevant part:
(b) Class Actions Maintainable. An action may be
maintained as a class action if the prerequisites of
paragraph (a) are satisfied, and in addition:
....
(3) the court finds that the questions of law or fact
common to the members of the class predominate
over any questions affecting only individual
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members, and that a class action is superior to
other available methods for the fair and efficient
adjudication of the controversy. The factors
pertinent to the findings include:
(A) the interest of members of the class in
individually controlling the prosecution or
defense of separate actions;
(B) the extent and nature of any litigation
concerning the controversy already
commenced by or against members of the
class;
(C) the desirability or undesirability in
concentrating the litigation of the claims in
the particular forum; and
(D) the difficulties likely to be encountered
in the management of a class action.
[R. 4:32-1(b).]
Under Rule 4:32-1(b)’s predominance standard, the court first
undertakes “a qualitative assessment of the common and individual questions
rather than a mere mathematical quantification of whether there are more of
one than the other.” Lee, 203 N.J. at 519-20 (citing Iliadis, 191 N.J. at 108).
Second, the court considers “whether the ‘benefit’ of resolving common and
presumably some individual questions through a class action outweighs doing
so through ‘individual actions.’” Id. at 520 (quoting Iliadis, 191 N.J. at 108).
“A third inquiry is whether a class action presents a ‘common nucleus of
41
operative facts.’” Ibid. (quoting Iliadis, 191 N.J. at 108). “[W]e heed our
prior observation that ‘the answer to the issue of predominance is found . . . in
a close analysis of the facts and law.’” Iliadis, 191 N.J. at 109 (omission in
original) (quoting In re Cadillac, 93 N.J. at 434).
B.
In its determination of post-trial motions, the trial court left undisturbed
its certification of the class for purposes of liability but reached the opposite
conclusion on the question of damages. Having explored the deficiencies in
plaintiff’s aggregate proofs on the cost of repair, deemed an individualized
inquiry to be the only fair way to determine class members’ out-of-pocket
losses, and ordered a new trial on damages, the trial court properly reassessed
the question of predominance under Rule 4:32-1(b)(3). Informed by the trial
evidence and the jury’s rejection of plaintiff’s diminution-in-value expert
proofs, the trial court held that for purposes of the new trial on class members’
out-of-pocket costs, common questions no longer predominated over
individualized inquiries as to the class members’ damages.
The trial court conducted a careful assessment of the common and
individual questions. It concluded that the class’s damage claims could not be
resolved in a common proceeding. The court found no single factual pattern
on the limited question of damages that remained. See Lee, 203 N.J. at 519-
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20; Iliadis, 191 N.J. at 108. The trial court’s determination was firmly
grounded in the trial evidence, which demonstrated the disparate experiences
of individual class members.
We view the trial court’s decertification order to be a correct application
of Rule 4:32-1(b)’s predominance standard and a proper exercise of the court’s
discretion in the management of this case.
VI.
Finally, we review the adoption of the Report and Recommendations of
the second Special Master by the judge assigned to handle post-trial
proceedings.
When we review a Special Master’s findings and conclusions, we use
our “ordinary standards of review, considering them in the same manner as we
would the findings and conclusions of a judge sitting as a finder of fact.” State
v. Chun, 194 N.J. 54, 93 (2008). We “accept[] the fact findings of a special
master to the extent they are supported by ‘substantial credible evidence in the
record.’” State v. Cassidy, 235 N.J. 482, 491 (2018) (quoting Chun, 194 N.J.
at 93).
With the consent of the parties, the Assignment Judge and the judge
assigned to handle post-trial proceedings jointly appointed the second Special
Master. The court assigned the Special Master to conduct a claims proceeding
43
based on claim forms that class members had submitted at an earlier stage of
the case, and to submit a Report and Recommendations with a proposed
determination of all disputed claims, subject to both parties’ right to object.
The Special Master undertook a series of steps to ensure that as many
class members as possible received full and fair consideration of their claims.
He established detailed procedures for the handling of discrete categories of
claims, such as claims in which the class member failed to sign the form,
claims in which the class member provided no information, and claims in
which the class member provided partial but incomplete information in support
of the claim. The Special Master declined to address claims in which the class
member did not sign the form or provided no information at all but allowed
class members who had submitted insufficient information on their claim
forms to present their claims before him. He made rulings on numerous issues
raised by the parties with respect to individual claims.
The Special Master established fair and workable criteria for a
claimant’s recovery of the costs that he or she spent on a brake repair . He
deemed a repair to be compensable if it was performed within the first three
years that the claimant owned the car or when the car had been driven fewer
than 36,000 miles, if the repair was conducted when the car had been driven
44
fewer than 20,000 miles since the most recent repair, and if defendant did not
pay for the repair.
In accordance with those criteria, the Special Master adjudicated 1201
claims. The parties then conferred with respect to the Special Master’s
determination and resolved all but ninety-three claims, which were referred to
the Special Master for resolution. Of those, the Special Master recommended
that the court deny twenty-two claims, award partial recovery to thirty-three
claimants, and award full recovery to the remaining claimants.
Both parties filed objections to the Special Master’s Report and
Recommendations. In a detailed written opinion, the judge handling post-trial
proceedings considered and rejected the parties’ objections. The judge found
the Special Master’s findings to be supported by substantial credible evidence
in the record and adopted those findings.
We agree with the post-trial judge’s determination. As plaintiff
recognized when she suggested a claims proceeding on damages to the trial
court during a hearing on class certification, such a proceeding may be an
equitable and practical method of resolving damages claims. See, e.g., In re
Nexium Antitrust Litig., 777 F.3d 9, 19 (1st Cir. 2015) (noting that an
individual claims process may be conducted at the liability and damages stage
of class action litigation); Kern v. Siemens Corp., 393 F.3d 120, 127 (2d Cir.
45
2004) (“[O]nce defendant’s liability is established, the court may be justified
in . . . requiring class members to file statements of their claims . . . .” (first
omission in original) (quoting 7B Wright, Miller & Kane, Federal Practice &
Procedure § 1787 at 217 (2d ed. 1986))); Kyriazi v. W. Elec. Co., 647 F.2d
388, 392 (3d Cir. 1981) (noting that “[t]he proof of claim procedure employed
by the district court was not novel” and that “[t]he consensus among courts
and commentators” recognized that the procedure can “serve as an essential
aid” in class actions). The trial judge and post-trial judge acted within their
discretion when they authorized such a procedure in this action.
Moreover, the second Special Master conducted the claims process with
precision and care. As the claim form made clear, a claimant’s failure to retain
documentation of his or her brake repairs did not bar his or her otherwise valid
claim. The Special Master reviewed each claim, referring to defendant’s
records pertaining to the claimant’s vehicle and other relevant documents. He
made individualized determinations as to the brake repairs conducted on each
vehicle, and any payments for those repairs under defendant’s warranty. The
Special Master thoughtfully considered and resolved the many objections made
by both parties.
This was, in short, a fair and exemplary claims process. We agree with
the judge who oversaw this case after trial that the Special Master’s Report and
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Recommendations were supported by substantial credible evidence in the
record. See Cassidy, 235 N.J. at 491. We hold that the court properly adopted
the Special Master’s findings.
VII.
The determination of the Appellate Division is reversed, and the final
judgment entered by the trial court on September 10, 2015 is reinstated.
CHIEF JUSTICE RABNER and JUSTICES LaVECCHIA, ALBIN,
FERNANDEZ-VINA, and TIMPONE join in JUSTICE PATTERSON’s opinion.
JUSTICE SOLOMON did not participate.
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