Flynn v. FCA US LLC

IN THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF ILLINOIS

BRIAN FLYNN, GEORGE BROWN, )

KELLY BROWN, MICHAEL KEITH, )

on behalf of themselves and all others )

similarly situated, )

) Case No. 15-cv-855-SMY

Plaintiff, )

)

vs. )

)

FCA US LLC and )

HARMAN INTERNATIONAL )

INDUSTRIES, INC., )

)

Defendants. )

MEMORANDUM AND ORDER

YANDLE, District Judge:

Background

Plaintiffs Brian Flynn, Michael Keith, and George and Kelly Brown bring this putative

class action against Defendants FCA US LLC (“FCA”) and Harman International Industries, Inc.

(“Harman”), asserting consumer fraud claims related to a design defect in the Uconnect system

manufactured by Harman and installed in some of FCA’s 2013-2015model vehicles (“the subject

vehicles”).

The Uconnect system allows integrated control over phone, navigation, and entertainment

functions in the subject vehicles and, according to Plaintiffs, is vulnerable to hackers seeking to

take remote control of the subject vehicles, as reported in a 2015 WIRED magazine article that

contributed to a subsequent voluntary recall by Chrysler. Aside from the hack described in the

WIRED article, which was conducted in a controlled environment, there has been no hack of the

Uconnect system; no hacker has remotely accessed the system, no hacker has seized control of a

vehicle’s operations,and no consumer has ever been injured.

Plaintiffs allege the subject vehicles continue to have vulnerabilities that could allow

hackers to access critical and non-critical systems in the vehicles. Specifically, they allege the

vehicles are defective in that: (1) the Uconnect system is exceedingly hackable; (2) the vehicles’

central computer system fails to prevent hackers from using access gained through the Uconnect

from remotely taking control of the vehicles; and (3) the Uconnect system and subject vehicles

lack the capability to quickly, automatically, safely, securely, and effectively download software

patches that are critical for protecting vehicles from the types of attacks described. They further

allege that but for Defendants’ misrepresentations about the defects, they would not have

purchased the vehicles or would have paid less for them. They contend the defects have

diminished the value of their vehicles and that upon resale, members of the class will receive less

for their vehicles than they would have had the vehicles been free from the alleged defects.

Procedural History

In February 2016, Defendants moved to dismiss Plaintiffs’ First Amended Complaint,

arguing that Plaintiffs lack standing to pursue their claims because they fail to allege the types of

standing injuries recognized as viable by the courts. Judge Michael Reagan, to whom this case

was previously assigned, denied Defendants’ motions, concluding Plaintiffs have alleged

sufficient facts to establish Article III standing (see Docs. 115, 236).

Defendants moved for reconsideration and renewed their standing challenge in January

2018, based on a decision from the Ninth Circuit Court of Appeals, upholding a district court’s

dismissal of a complaint for lack of standing in a lawsuit involving allegations nearly identical to

those made by Plaintiffs in this case. See, Cahen v. Toyota Motor Corp., 2017 WL 6525501 (9th

Cir. 2017) (Doc. 378). Judge Reagan denied reconsideration but certified the standing issue for

interlocutory appeal under 28 U.S.C. § 1292(b), acknowledging that his decision conflicted with

Cahen(and several other decisions) which arose on “allegations nearly identical to those made by

Plaintiffs in this case”(Doc. 385). The Seventh Circuit Court of Appeals denied the interlocutory

appeal without explanationin May 2018(Doc. 388).

Judge Reagan granted Plaintiffs’ Motion for Class Certification in July 2018 and certified

threeseparate statewide classes consisting of consumers from Illinois, Michigan and Missouri,the

home states of the named Plaintiffs – Flynn (Illinois), George and Kelly Brown (Missouri), and

Keith (Michigan) (Doc. 399). All three classes were certified against FCA; only the Michigan

class was certified against Harman. Each class was defined to include: “All persons who purchased

or leased vehicles in [the applicable state] on or before July 5, 2018, that were manufactured by

FCA and that are equipped with the Uconnect 8.4A or Uconnect 8.4AN systems that were subject

to the July 23, 2015 NHTSA Safety Recall campaign number 15V461.”

This case was reassigned to the undersigned judgein April 2019, following Judge Reagan’s

retirement. After the close of discovery, Defendants filed a Motion to Decertify the Classes (Doc.

550), Motions for Summary Judgment (Docs. 561, 586), a Motion to Dismiss for Lack of

Jurisdiction (Doc. 574), and a Motion to Stay Issuance of Class Notice Pending the Rulings on

Dispositive and Decertification Motions (Doc. 578), all of which are ripe for resolution. Because

the Court has an independent obligation at each stage of the proceedings to ensure that it has

subject matter jurisdiction over this litigation, the undersigned finds it appropriate to address

Defendant’sMotion to Dismiss for Lack of Jurisdictionbefore delving into the merits of thecase.

Standard of Review

When considering a Rule 12(b)(1) motion, theCourt accepts as true all well-pleaded factual

allegations and draws all reasonable inferences in favor of the plaintiff. Alicea-Hernandez v.

Catholic Bishop of Chi., 320 F.3d 698, 701 (7th Cir. 2003). However, if a defendant challenges

standing as a factual matter, the Court may look beyond the allegations in the complaint and view

whatever evidence has been submitted to determine whether subject matter jurisdiction exists.

Apex Digital, Inc. v. Sears, Roebuck & Co., 572 F.3d 440, 444 (7th Cir. 2009). The Court is free

to weigh the evidence and satisfy itself that it has power to hear the case. Id. There is “no

presumptive truthfulness attache[d] to plaintiff’s allegations, and the existence of disputed material

facts will not preclude the court from evaluating for itself the merits of jurisdictional claims.” Id.

The plaintiff bears the burden of establishing standing by a preponderance of the evidence. See

Reid v. Ill. State Bd. of Educ., 358 F.3d 511, 515 (7th Cir. 2004).

Discussion

As an initial matter, Plaintiffs argue that Defendant’s motion to dismiss should be denied

out of hand based on the law of the case doctrine. The law of the case is a discretionary doctrine,

not an inflexible dictate. See Chicago Joe’s Tea Room, LLC v. Village of Broadview, 894 F.3d

807, 818 (7th Cir. 2018) (collecting cases). “When good reasons for [re-examination] appear (such

as new evidence or controlling law, or clear error), the ‘law of the case’ doctrine must yield to

rational decision-making.” Id. quoting Peterson v. Lindner, 765 F.2d 698, 704 (7th Cir. 1985).

And, the Court is “significantly less constrained by the law of the case doctrine with respect to

jurisdictional questions.” Gilbertv.IllinoisStateBd.ofEduc., 591 F.3d 896, 903 (7th Cir. 2010),

quoting O’Sullivan v. City of Chicago, 396 F.3d 843, 849–50 (7th Cir. 2005). In this case, the

Court’s interests in ensuring subject matter exists, adhering to controlling law, and preventing clear

error warrant a reexamination of Defendants’ standing arguments.

Article III of the United States Constitution limits federal court jurisdiction to actual cases

and controversies. See Clapper v. Amnesty Int'l USA, 568 U.S. 398, 408 (2013). Article III

standingrequires: (1) that the plaintiff suffered an injury in fact–an invasion of a legally protected

interest which is concrete and particularized and actual or imminent – not conjectural or

hypothetical; (2) that there must be a causal connection between the injury and the conduct

complained of–the injury has to be fairly traceable to the challenged action of the defendant; and

(3) that it must be likely, as opposed to merely speculative, that the injury will be redressed by a

favorable decision. See Lujan v. Defs. of Wildlife, 504 U.S. 555, 574 (1992); Berger v. Nat'l

Collegiate Athletic Ass'n, 843 F.3d 285, 289 (7th Cir. 2016).

Plaintiffs claim that the fundamental designs of the internal communications architectures

in their vehicles and the Uconnect are “radically unsafe” to the point they are dangerously

vulnerable to cyberattacks that take control of the vehicles’ critical safety systems, including

steering, braking, acceleration, and ignition. They also claim Defendants misled class members to

believe they were buying or leasing safe vehicles but sold them vehicles riddled with critical safety

defectsinstead.They allege that overpayment injuries are clear, concrete, and were suffered at the

moment each class member purchased or leased the vehicle.

Plaintiffs rely heavily on In re Aqua Dots, 654 F.3d 748 (7th Cir. 2011) and Cole v. General

Motors Corporation, 484 F.3d 717 (5th Cir. 2007) for the proposition that overpayment or a drop

in value suffices as an injury for standing purposes. In Aqua Dots, the defendantsmanufactured a

children’s toy that contained beads made with chemicals which, if swallowed, caused serious

injury to children. A group of parents who purchased the toy but whose children were not injured,

filed a class action lawsuit seeking refunds of the entire purchase price. Id. at 750. After the

district court refused to certify a class, the parents filed an interlocutory appeal in the Seventh

Circuit Court of Appeals. Id. As a threshold matter, the Seventh Circuit considered whether the

parents hadstandingand concludedthat under a benefit-of-the-bargain theory,an economic injury

occurs when the purchaser acquires a worthless product, even if there is no indication that he was

physically harmed by the product – “they paid more for the toys than they would have, had they

knowntherisks thebeads posedtochildren.” Id at 751.

InCole, a class of plaintiffs sued General Motors allegingdefects with the defendant's side-

impact airbag system, which plaintiffs alleged the defendant promoted as an added safety feature.

Cole, 484 F.3d at 718. The alleged defect was such that it could have caused the vehicles’ side-

impact airbag systems to deploy unexpectedly and without a crash. Id.at 718–19. The plaintiffs’

airbags had never inadvertently deployed, but they alleged they suffered economic injury when

they purchased a defective vehicle. Id. The plaintiffs also claimed that they suffered economic

injury from the defendant’s unreasonable delay in replacing the defective airbags on the vehicles.

Id. Theysought recovery for actual economic harm, including overpayment, loss in value, or loss

of usefulness, arising from the loss of their benefit of the bargain. Id. The Fifth Circuit Court of

Appeals found that the plaintiffs had established a concrete injury-in-fact and had standing.

Significantly, the court concluded there was “no doubt”the airbags were defective and had caused

actual damage, based on instances when the airbags had deployed unexpectedly in other vehicles.

Id. Thus, the Fifth Circuit held the plaintiffs had sufficiently alleged an economic injury because

their vehicles were defective at the moment of purchase and because of the defendant's allegedly

unreasonable delay in offering service for the defect.

The first distinction between Plaintiffs’ allegations and theAqua Beadsand Coleplaintiffs

is that it is unclear whether the Uconnect system is defective at all. This case, in which it is unclear

whether the Uconnect system is defective at all, is factually distinguishable from Aqua Dots and

Cole,where it was undisputed that the products were defective; the products had caused injury and

it was reasonably foreseeable that an injury could occur. TheAqua Dotsplaintiffs purchased a toy

that had been proven could poison children and was,therefore, a worthless product that could not

be utilized; the Cole plaintiffs purchased vehicles lauded by the defendant as having an added

safety feature which, in fact, was demonstrably defective.

Here, Plaintiffs concede that only one hack of the 1.2 million subject vehicles with the

purported defects has occurred, and that one occurrence took place when two highly trained

researchers hacked a vehicle in a controlled setting (Doc. 575-1, p. 61; see also Docs. 93-96 at

Nos. 1-2, 4-5). Relatedly, Plaintiffs’ expert’s opinion, on which they rely in part to support

standing, is that the Uconnect system is “defective” because it should have “more”safety features

associated with it (Doc. 575-2, pp. 7, 45-46). More specifically, the Uconnect system could have

been made safer by adding secure gateways, trust anchors, andintrusion detection to the vehicles,

and by having six CAN bus segments instead of two. Id. at pp. 8, 52-53. But while in his opinion,

the defect is that the Uconnect has vulnerabilities, he also acknowledges that “vulnerabilities

happen” so the mere fact that a product has “a vulnerability” does not in itself, mean a product is

defective (Doc. 575-1at pp. 88-89).

Theoretically, any product can be made safer or better – there are no foolproof products.

The fact that the Uconnect has vulnerabilities and could have been made safer does not make it

defective when no vehicles have ever manifested the alleged defect. Plaintiffs' claims are thus

qualitatively different than those made by consumers who allege the purchase of a product that

was reduced in value at the point of sale because of an actual defect (Aqua Dots, Cole), resulting

in immediate, concrete, and particularized financial harm.1

Moreover, Courts faced with similar standing challenges have found that a future risk of

hacking is too speculative and that allegations of economic loss stemming from speculative risk

of future harm cannot establish standing. See Cahen v. Toyota Motor Corp., 147 F.Supp.3d 955

(N.D. Cal. 2015) aff’d by Cahen v. Toyota Motor Corp., 717 Fed.Appx. 720 (9th Cir. 2017); U.S.

Hotel and Resort Mgmt., Inc. 2014 WL 3748639 (D. Minn. July 30, 2014)(dismissing for lack of

standing claims as too speculative where plaintiffs alleged a risk of future injury due to publicity

surrounding certain hotel room locks’ susceptibility to unauthorized opening). Although the Ninth

Circuit's decision in Cahen is unpublished and non-precedential, the facts closely parallel those

here, and the undersigned finds the analysis persuasive.

In Cahen, the plaintiffs claimed the defendants equipped their vehicles with computer

technology that was susceptible to third-party hacking. But they did “not allege that any of their

vehicles have actually been hacked, or that they are aware of any vehicles that have been hacked.”

They raised the same overpayment theory of injury as Plaintiffs in this case, -- that “they would

not have purchased their [vehicles] or would not have paid as much as they did to purchase them”

1Plaintiffs cite additional cases for the proposition that economic injuries are a sufficient basis to establish

standing. Unlike the cited authority, here, Plaintiffs’ economic injury is speculative and not directly

ascertainable. See, eg., Gladstone Realtors v. Vill. of Bellwood, 441 U.S. 91 (1979) (finding village had

standing to challenge legality of defendants’ conduct under the Fair Housing Act of the Civil Rights Act of

1968 where village alleged that sales practices of real estate brokerage firms and employees had actually

begun to rob village of its racial balance and stability);Mayav.CentexCorp.,658 F.3d 1060 (9th Cir. 2011)

(homeowners had standing to sue developers for decreased value and desirability of their homes where they

alleged that the developers’ actions in marketing neighboring homes to unqualified buyers resulted in

foreclosures which reduced value of their houses, since foreclosures sold below market value and then

became new comparative sales values for the neighborhood; ChicagoFaucetShoppe,Inc.v.NestleWaters

N. Am. Inc., 24 F. Supp. 3d 750 (N.D. Ill. 2014) (plaintiffs had standing because they would not have

purchased defendant’s bottled water or paid a premium for it if they had known it was municipaltap water

instead of 100% natural spring water as marketed); Gustavson v. Wrigley Sales Company, 961 F.Supp.2d

1100 (N.D. Cal. 2013) (same).

had they known that the defendants were misrepresenting the security of the technology. Id. at

966 (alteration in original). The district court found that the plaintiffs failed to establish standing

because the“entire threat [alleged] rests on the speculative premise that a sophisticated third-party

cybercriminal may one daysuccessfully hack one of plaintiffs' vehicles.” Id. Thistheory offuture

injury was too speculative to satisfy the well-established requirement that threatened injury must

be “certainly impending,”and failed to identify a risk of harm that was “concrete and particularized

as to [the plaintiffs].” Id. at 967 (quoting Birdsong v. Apple, Inc., 590 F.3d 955, 960 (9th Cir.

2009)). The court went on to conclude that “[w]hen economic loss is predicated solely on how a

product functions, and the product has not malfunctioned, ... something more is required than

simply alleging an overpayment for a ‘defective’ product.” Id.at 970. The Ninth Circuit affirmed,

finding that the alleged defect was speculative and had never manifested. Cahen v. Toyota Motor

Corp., 717 Fed. Appx at 720.

The evidence proffered by Plaintiffs’ damage experts as proof of diminution in value

consists of a survey conducted by one expert where consumers were asked to make choices about

vehicle features, and application by another expert of the survey results in a calculation that deducts

that value from the sale price of each vehicle. As was true in Cahen, there has been no

demonstrable effect on the market for Plaintiffs’ vehicles based on, for example, documented

recalls, declining Kelley Bluebook values, or a risk so immediate that they were forced to replace

or discontinue using their vehicles, thus incurring out-of-pocket damages. Cahen,717 F. App'x at

723–24. Plaintiffs do not allege their Uconnect systems do not work; that they have experienced

any problems related to the Uconnect system;that they are unwilling to drive their vehicles because

of the defects in the Uconnect systems; or that they have sold or traded (or attempted to sell or

trade) their vehicles at a loss due to the alleged defects with the Uconnect system.

Simply stated, Plaintiffs do not have standing. The allegation that Defendants wrongfully

induced them to purchase their vehicles by concealing the alleged defect in the Uconnect and that

their vehicles are worth substantially less than they would be without the alleged defect is

conclusory and unsupported. “‘A ‘concrete’ injury must be ‘de facto;’ that is, it must actually

exist.” Black’s Law Dictionary 479 (9th ed. 2009); See also, Rivera v. Wyeth—Ayerst

Laboratories, 283 F.3d 315, 320-21 (Sth Cir. 2002) (“The plaintiffs apparently believe that if they

keep oscillating between tort and contract law claims, they can obscure the fact that they have

asserted no concrete injury. Such artful pleading, however, is not enough to create an injury in

fact.”); Lassen v. Nissan N. Am., Inc. 211 F.Supp. 3d 1267, 1281 (C.D. Cal. 2016) (collecting

cases). Ultimately, Plaintiffs have not suffered any injury in fact. They received what they

bargained for — vehicles equipped with infotainment services — and do not plausibly allege that

they were financially harmed by virtue of their vehicle purchases.

The undersigned does not arrive at its conclusion lightly, particularly given the lengthy

history of this litigation. That said, the Court cannot address the merits of Plaintiffs’ claims without

the constitutional authority to do so. Accordingly, Defendants’ Motion to Dismiss for Lack of

Jurisdiction is GRANTED and this case is DISMISSED with prejudice. The Clerk of Court is

DIRECTED to enter judgment accordingly.

IT IS SO ORDERED.

DATED: March 27, 2020

Now KL. Goll

STACI M. YANDLE

United States District Judge

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