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DaimlerChrysler Class Action Defense Case- Chin v. DaimlerChrysler: New Jersey Federal Court Holds California Law Applies And Class Action Materially Influenced Automobile Recall Decision Justifying Award Of Attorney Fees

Class Action Against Car Manufacturer was a Catalyst Behind Recall Program thus Entitling Plaintiffs to Attorney Fee Award as “Prevailing Party” under California law New Jersey Federal Court Holds

In March 1994, following consumer complaints, the National Highway Traffic Safety Administration (NHTSA) opened an investigation into whether the Bendix 10 ABS had a safety-related defect warranting a recall. In October 1995 plaintiffs filed a putative class action against DaimlerChrysler for, inter alia, violations of the Magnuson-Moss Warranty Act, 15 U.S.C. § 2301, alleging that Chrysler vehicles equipped with Bendix 10 ABS were defective. And in April 1996, Chrysler voluntarily recalled vehicles equipped with Bendix 10 ABS, thereby ending the NHTSA’s investigation. Chin v. DaimlerChrysler Corp., 461 F.Supp.2d 279, 281 (D. N.J. 2006). But in March 1996, plaintiffs had amended their class action complaint to allege that Chrysler vehicles equipped with Bendix 9 ABS also were defective, as the product was “largely interchangeable [with the Bendix 10] and suffer[ed] from virtually identical defects.” Id. The NHTSA informed Chrysler in September 1996 that it would begin investigating customer complaints involving the Bendix 9 ABS, and soon thereafter the company voluntarily recalled vehicles equipped with Bendix 9 thereby ending the NHTSA investigation. Id.

Defense attorneys moved to dismiss the amended class action complaint, but the district court denied the motion in March 1997 and the following month Chrysler publicly announced its recall of vehicles with Bendix 9 ABS. Chin, at 281. However, defense attorneys successfully defeated plaintiffs’ effort to certify the lawsuit as a class action: in September 1998, the district court denied plaintiffs motion for class certification on the ground that plaintiffs had failed to demonstrate that common questions of law would predominate over individual issues, as required by Rule 23(b)(3), because the court would be required to apply the laws of 52 jurisdictions if a nationwide class were certified. Id., at 281-82. As the district court observed, “[f]or nearly all intents and purposes, Plaintiffs’ class-action came to an end” with the denial of the motion to certify a class action. Id., at 281.

Even though plaintiffs failed in seeking class certification, they moved for attorney fees under the “catalyst theory” arguing that Chrysler only agreed to “voluntarily” recall its Bendix 9 ABS vehicles because of their class action complaint. Olson, at 282. As the district court summarized, plaintiffs argued that “their suit achieved the relief they sought despite not receiving a formal judgment in their favor,” id. In analyzing the motion, the district court explained that “New Jersey choice-of-law rules dictate that it is necessary to apply the substantive law of each Plaintiff’s home state” and that 25 plaintiffs are citizens of California, so the court applied California law in determining whether to award attorney fees to the California plaintiffs. Id., at 283. Under California Code of Civil Procedure § 1021.5, a “successful party” is entitled to recover attorney fees for prosecuting an action for “the enforcement of an important right affecting the public interest.” Id., at 284. And after a thorough analysis, the district court concluded that plaintiffs’ action was the “catalyst” that resulted in the recall of both the Bendix 9 ABS vehicles and the Bendix 10 ABS vehicles. Id., at 284-98. Accordingly, plaintiffs were entitled to an award of attorney fees. Id., at 298.

NOTE: The district court noted that in Buckhannon Bd. & Care Home, Inc. v. West Virginia Dep’t of Health and Human Res., 532 U.S. 598, 610 (2001), the United States Supreme Court held that “the ‘catalyst theory’ is not a permissible basis for the award of attorney’s fees under the [Fair Housing Amendments Act of 1988] and the [Americans With Disabilities Act of 1990].” However, the California Supreme Court subsequently held that the catalyst theory is permissible in determining whether to award fees under California Code of Civil Procedure § 1021.5. Olson, at 282-83 (citing Tipton-Whittingham v. City of Los Angeles, 34 Cal.4th 604, 608 (Cal. 2004) and Graham v. DaimlerChrysler Corp., 34 Cal.4th 553, 560-61 (2004)).

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