New Jersey Supreme Court Holds That Individualized Proof of Damages Is Required Absent a Basis for Presumption of Class-Wide Damages Capable of Reliable Mathematical Calculation

In Little v. Kia Motors America, Inc., a litigation spanning nearly two decades, the New Jersey Supreme Court held that, although aggregate proof of damages can be appropriate in some settings, individualized proof of damages based on the actual costs incurred by the class members was required in the case before it. Class members had to show they incurred “actual costs” as a result of an alleged defect in order to recover damages.

In 2001, plaintiff filed a putative class action asserting breach of warranty and other claims on her behalf and on behalf of other New Jersey owners and lessees of certain Kia models. Plaintiff alleged that the vehicles had a defective brake system which rendered the vehicles’ front brakes susceptible to premature wear. After a four-week trial, the jury returned a verdict in favor of plaintiff and the class on the class-wide warranty claim, awarding zero damages for alleged diminution-in-value but $750 per class member on the out-of-pocket loss theory, which had been premised on an expert’s estimate of the amount of money an average owner would pay for brake repairs over the vehicles’ lives as a result of the alleged defect.

On defendant’s motion for a new trial and to decertify for purposes of repair damages, the trial court decertified the class “‘as to the quantum of damages each individual owner suffered,’ with the class members left to their individual proofs” limited to “the monetary amount of damages incurred, if any,” to be “handled on a claim-form basis.” After the Appellate Division reversed and remanded, plaintiff appealed from final judgment.

The central question for the New Jersey Supreme Court was “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.” The Court explained that “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.”

Thus, the Court adopted the Appellate Division’s reasoning in Muise v. GPU, Inc., where the appellate court cautioned that although individualized proofs were not always required, “a court should depart from that general rule only ‘where class-wide damages can be calculated by a reliable mathematical formula.’ … 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.” Further, “[e]ven if the plaintiff can show that all class members have sustained damage, … aggregate proof of damages must be based on a reliable mathematical formula in order to be admissible.”

Applying these principles, the Supreme Court reinstated the final judgment entered by the trial court, finding the record was clear that 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 brake defect” and the “expansive” class definition resulted in an undetermined number of class members who would gain a windfall from the jury’s award. Further, plaintiff did not present a reliable mathematical formula by which the jury could quantify the loss since the expert’s opinions were “untethered” to the actual experience of the class.

Lastly, the Court held that the trial court correctly decertified the class for purposes of damages and properly adopted the findings of the Special Master appointed to adjudicate all claims individually. Based on the information received at trial and the jury’s rejection of plaintiff’s diminution-in-value expert proofs, common questions no longer predominated over individualized inquiries as to the class members’ damages.

Little v. Kia brings New Jersey class-wide damages jurisprudence closer in line with the approach taken by many federal courts under Federal Rule of Civil Procedure 23, rejecting formulas for class-wide damages without proof, or proper legal presumption, that all class members have been harmed.

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