District Court (MI) Allows On-Star Litigation to Proceed under CLRA

In In re On-Star Contract Litigation, 2009 WL 415990 (E.D.Mich. 2009), Judge Cox allowed a claim to proceed as pleaded under the CLRA, denying an FRCP 12(b)(6) Motion.  The Plaintiffs allege that

In 2002 Defendants’ OnStar equipment relied on analog cellular signals to function.”(MAC at  4).“In August 2002, the Federal Communications Commission (“FCC”) ruled that cellular telephone companies need not continue to carry analog cellular signals. The FCC allowed for a ‘sunset’ period to allow com-panies whose products were reliant upon analog signals to transition to digital equipment.”(MAC at  3). Defendants’ respective statements made to the FCC are alleged in paragraphs 60 through 74 of the MAC.  ¶  “All of the Defendants knew by August 2002 that their analog-based OnStar equipment would stop working on February 18, 2008. Despite the knowledge that their equipment would stop working in 2008, Defendants continued to sell analog equipment to customers without notifying those customers that the equipment would cease to function. Defendants intentionally concealed from consumers the material fact that their equipment would stop working on Feb-ruary 18, 2008.”(MAC at  5).“After selling consumers equipment they knew would stop working, De-fendants belatedly began warning consumers that their equipment was going to stop working by Febru-ary 2008. Defendants required those customers whose equipment could be upgraded to a digital signal to pay for such upgrades to keep their OnStar equipment working.”(MAC at  6)  ¶  “Because of Defendants’ intentional concealment of the material fact that the equipment they sold to con-sumers would stop working in 2008, hundreds of thousands of consumers across the county either have equipment that is now useless or have paid to pur-chase new digital equipment.”(MAC at  7).“As a result of the Defendants’ actions, Plaintiffs and thou-sands of other owners and lessees of OnStar equipped vehicles have lost the benefits of this safety system and are exposed to an increased risk of serious personal injury and harm, or were forced to pay for up-grades to keep their systems functioning. Plaintiffs seek damages for themselves and all others similarly situated.”(MAC at  8).  ¶   The damages alleged by a particular plaintiff depend on the type of OnStar hardware that was installed in that plaintiff’s vehicle. “At various times, OnStar capable vehicles were equipped with three types of wireless cellular equipment: a) Analog-Only; b) Ana-log/Digital-Ready; and c) Dual-Mode (Analog/Digital).” (MAC at  53).“Vehicles with analog-only equipment were manufactured to operate only on analog wireless networks. The Defendant Manu-facturers are not offering their customers any oppor-tunity to upgrade analog-only equipment to operate on digital networks. Analog-only telematics ceased working on or about December 31, 2007 .”(MAC at  54). Vehicles with analog-digital-ready equipment can be converted to operate on digital networks, and the Defendant Manufacturers are charging those cus-tomers a $15.00 fee to upgrade their equipment and requiring them to enter into a service agreement for additional years. (MAC at  55 and 109)

Judge Cox denied the defendants’ Motion to Dismiss under FRCP 12(b)(6), explaining that the Plaintiff’s allegations, taken as true, fall outside the CLRA rules set forth in Daugherty v. American Honda Motor Co., 144 Cal.App.4th 824 (2006) (dismissing express warranty claim under CLRA because no representation was made); accord Bardin v. DaimlerChrylser Corp., 136 Cal.App.4th 1255, 1276 (2005), but within the rule of Falk v. General Motors Corp., 496 F.Supp.2d 1088 (N.D.Calf.2007) (CLRA claim allowed to proceed where unreasonable risk of safety hazard).

Plaintiffs do allege, in the MAC, that “OnStar is a unique in-vehicle telecommunication safety system that provides automatic crash notification to emergency responders … remote diagnostics in the event of problems with airbags, anti-lock brakes or other systems.”(MAC at  2). The MAC further alleges that “[a]s a result of Defendants’ actions, Plaintiffs and thousands of other owners and lessees of OnStar equipped vehicles have lost the benefits of this safety system and are exposed to an increased risk of serious personal injury and harm …” (MAC at  8). Thus, the Court concludes that Plaintiffs’ allegations concerning safety are sufficient, under Falk, to enable it to survive a motion to dismiss under Rule 12(b)(6).