Sixth Circuit Vacates Certification of a Sprawling Multistate Class of GM Vehicle Owners Alleging Transmission Defects

In Speerly v. GM, LLC , the Sixth Circuit en banc reversed a district court’s order certifying a class and multiple subclasses to assert various state law claims alleging defects in GM’s Hydra-Matic 8-Speed Transmission in vehicle models sold between 2015 and 2019 — in all, 26 state-wide subclasses with a total of 59 state-law claims on behalf of roughly 800,000 individual car buyers. The class had identified two problems with the transmission: (i) the transmission fluid absorbed moisture, changing its viscosity and causing gear shift slippage; and (ii) the transmission control module caused vehicles to lunge forward or “shudder.”

Before addressing the substantive elements of each cause of action, the court explained that the district court must “answer merits questions that bear on Rule 23’s demands.” The Rule 23 analysis “will inevitably address issues that overlap with the merits inquiry” because the “element-by-element, claim-by-claim inquiry” required for the commonality and predominance inquiry “implicates the merits of each claim.” Therefore, the Panel noted that the “district court, as a result, must not defer merits questions bearing on commonality and predominance until summary judgment.”

Regarding the commonality requirement, the Sixth Circuit explained that under Wal-Mart Stores, Inc. v. Dukes, a common question must resolve an issue that is “central” to the validity of each claim, and “an issue is not ‘central’ unless it affects at least one contested element in each cause of action.” Thus, “it flows from Wal-Mart that only an element-oriented analysis permits the court to identify which questions meaningfully move the lawsuit forward.”

As such, the court rejected the district court’s reasoning that commonality was satisfied because there were common questions about whether the transmissions had shift or shudder defects, whether GM knew of the defects, and whether the defects were material — “[a] court may not simply ask whether generalized questions yield a common answer.” “By hitching all 59 claims to a question about ‘defect’ in the abstract, the court overlooked how significant differences across each cause of action raise serious commonality concerns.” The court observed that “without an element-by-element commonality analysis, this court cannot effectively review which questions are truly central to which claims”:

A court might find that the element of breach in an express-warranty claim asks a common question: Does a problem exist in each transmission that GM promised to fix? But the element of breach in an implied-warranty claim asks a different question: Does a problem in each transmission amount to a defect that makes the car unfit for its ordinary purpose? The second question might not be common because some class members’ transmission problems might not seriously disrupt the safety and comfort of each class vehicle, especially for those customers who merely felt a “light punch” while upshifting while others felt a “lurch[].”

The same goes for knowledge. Is the right question whether GM knew that the transmissions had problems with harsh shifting in 2015, as relevant to a consumer-protection claim? That might lend itself to a common answer to the extent test drivers knew about it. Or is the relevant question that GM knew that it couldn’t fix buyer vehicles and kept selling them anyway, as relevant to an express-warranty claim? That might not lend itself to a common answer because GM repaired the shudder defect in 252,059 8L transmissions, most of which GM presumably covered with its free warranties.

Thus, by resolving the commonality question “at the level of generality of a ‘defect,’ the court did not measure the question’s impact on each cause of action.”

Regarding the predominance requirement, the court likewise emphasized that a “claim-by-claim comparison of the common and non-common questions” was necessary to determine which ones, if any, predominated. The circuit court noted that it was likely that one or more elements of each cause of action could not be proven with class-wide evidence, and further, particularly given the multiplicity of state laws relevant to the subclasses, district courts cannot ignore the variations in states’ laws and cannot defer rulings of law until summary judgment.

Finally, the Sixth Circuit rejected the district court’s conclusion that GM waived its arbitration defense as to the entire class when it waived arbitration as to the named plaintiffs.  “[W]aiver, or GM’s ‘voluntary relinquishment’ of the right to resolve the named plaintiffs’ claims by trial . . . does not speak for the unnamed class members.”

The lengthy en banc decision was followed by two concurring opinions and a dissenting opinion from one circuit judge, raising speculation that the Supreme Court may be asked to weigh in.