U.S. Sixth Circuit Panel’s Rejection of GM’s Article III Standing and Predominance Challenges to Class Certification is Now Set for Rehearing En Banc in Multi-State Defective Transmission Case | Fishman Haygood LLP

An August 2024 decision by a panel of the U.S. Sixth Circuit in Speerly v. General Motors¹, which underscores key developments in the law governing class certification, Article III standing, and the treatment of manifest defects in consumer claims, is set for rehearing by the entire bench. The case centers around the claims of purchasers from twenty-six states alleging defects in General Motors’s (“GM”) 8L45 and 8L90 transmissions, claiming issues such as “shuddering” and poor shift quality that remained even if and when they brought the car in to be repaired. Earlier this summer, and despite GM’s objections, the Sixth Circuit affirmed the District Court’s class certification of state-wide subclasses, offering an interesting case study in legal thresholds for predominance, causation, and economic loss.

The case will now be argued en banc in March 2025. Read on for analysis of the Sixth Circuit’s original decision and what it will mean if the panel’s decision stands.

Article III Standing

The Circuit Court faced the question of whether all class members must actually experience an alleged defect in order to establish Article III injury-in-fact for a proposed class. Generally, for a party to establish Article III standing, they must allege a genuine stake in the outcome of the case due to personal or imminent suffering of: (1) a concrete and particularized injury; (2) that is traceable to the allegedly unlawful actions of the opposing party; and (3) that is redressable by a favorable judicial decision.²

GM argued that the District Court’s decision to grant class certification was incongruous with precedent because according to the Supreme Court’s 2021 ruling in TransUnion LLC v. Ramirez (“TransUnion”), “[t]he purchase of a vehicle with alleged defects posing a potential future risk of a problem is not a concrete injury-in-fact for every purchaser.” The Sixth Circuit concluded that, “Unlike the TransUnion plaintiffs, all of the named putative class members have bought certain GM-manufactured cars that contain either an 8L45 or 8L90 transmission within the relevant timeframe, have experienced one or both of the issues with the 8L transmission in their car, and claim that they would not have bought their vehicle if they had known about these issues.”

The Court also ruled that diminished value suffices to establish standing for Article III purposes and concluded that “alleging overpaying for a defective product sufficiently provides the Plaintiffs with Article III standing.”

Manifest Defects and Class Certification

GM cited “a number of primarily unpublished cases” to bolster its claim that at least twelve of the class states have manifest defect rules that should preclude courts from including them in the class certification. The manifested defect rule generally states that consumers cannot bring product defect claims if they have not experienced a defective condition. The Sixth Circuit pointed out that all the named Plaintiffs “purchased cars from GM and alleged that they have actually experienced a shudder, shift quality issue, or both.” A number of the cases cited by GM “involve no-injury classes that were largely unable to demonstrate a present economic loss or were otherwise ineligible to bring a claim, independent of the manifest defect issue.” Furthermore, the Circuit Court agreed with the District Court’s conclusion that the issue of manifest defect “did not need to be determined at the class certification stage” and was more appropriate for a Rule 56 motion for summary judgment.

Individual Issues and Legal Variations

As detailed below, the Sixth Circuit rejected numerous arguments that individual issues predominated over common issues and therefore precluded certification.

Defect Differences

On concerns raised by the defense regarding defect differences, the Circuit Court determined that the District Court carefully evaluated whether the alleged shudder and shift quality issues were attributable to a single defect or two distinct defects in the 8L transmission systems. The District Court concluded that “ample evidence in the record… would permit a reasonable jury to conclude that the shudder and shift quality issues were caused by a universal design flaw in the class vehicle transmissions.” At this point in the proceedings, the Sixth Circuit found that the District Court had not abused its discretion in treating the two defects as part of a unified claim, concluding that if subsequent proceedings reveal the opposite, “the District Court can divide the class into two subclasses.”

Differences in Perception

The Court also addressed GM’s argument that subjective differences among class members, such as variations in vehicle make, model, year, and individual perceptions of the defects, precluded class certification. GM contended that whether a class member noticed, reported, or was concerned about the alleged shudder and shift quality issues depended on subjective experiences. However, the Court rejected this reasoning, emphasizing that the plaintiffs’ claims focused on alleged defects in the 8L45 and 8L90 transmissions, not on the specific differences brought by GM.

The Circuit Court clarified that the “relevant question in resolving this issue is whether the alleged defect would have impacted an objective consumer’s decision to purchase the product.” It further stated that “exactly how, and to what extent, each of the individual Plaintiffs experienced a shudder or shift quality issue is irrelevant to the inquiry that the district court identified as central to the class action.” This standard ensured that the focus remained on the defect’s influence on consumer purchasing decisions rather than individual subjective experiences, supporting the District Court’s decision to uphold the class certification.

Express Warranty

GM argued that express warranty claims in seventeen of the twenty-six states included in the class do not permit GM to be held liable on an express warranty claim if a class member did not seek or give GM an opportunity to repair their vehicle. The Sixth Circuit held the District Court’s conclusion that there was no predominance problem at the class certification stage. Specifically due to the District Court’s finding that the evidence showed that the problems with the 8L design cannot be fixed, or avoided for good, absent service actions that GM deemed too costly to deploy.

Reliance and/or Causation

GM also argued that variations in state laws under which Plaintiffs brought claims, would “lead to individualized issues regarding each of the relevant statutes that will predominate over common questions.” The District Court rejected, in a State-by-State analysis, the argument that classes or sub-classes could not be certified in twenty-one of the relevant states, based on a purported requirement to individually demonstrate causation or reliance for each member of the class or sub-class. The Sixth Circuit affirmed the District Court’s decision, noting that “should, in the course of further proceedings, individualized issues predominate over the common questions of law and fact that the district court identified, it may cull the class as required.”

Merchantability

The District Court originally ruled that merchantability was an entirely objective inquiry across all certified states. GM claimed that this was in error since certain states “reject individual implied warranty claims where a vehicle has been driven extensively without issue or with issues that do not render the vehicle inoperable.” However, the Sixth Circuit referred to the District Court’s review of each jurisdiction’s definition of “merchantability” of an automobile. It was consistently found that merchantability of a vehicle “requires a showing that the vehicle operates in a ‘safe condition’ or provides ‘safe transportation’.”

Further, under Tyson Foods³, the Supreme Court stated that predominance inquiries hinge on “whether the issue is susceptible to generalized, class-wide proof.” The Sixth Circuit found that regardless of the outcome, the question of whether the defects in the 8L transmissions impacted consumer safety or the vehicle’s intended use was a class-wide issue.

The Court also pointed out that the defense cites an “unpublished decision for the premise that Minnesota has rejected individual implied warranty claims when a vehicle has been driven without issue” and simultaneously “does not explain why the safe-and-reliable transportation standard for merchantability would not be sufficiently addressed by a class-wide inquiry into the safety of the 8L transmissions.”

State Class Action Bars

GM claimed that four states—Alabama, Arkansas, Louisiana, and Tennessee—have a “substantive” law in place that prohibits private class actions within the same statutory provision creating a private right of action for individual consumers. The Circuit Court rejects this argument, finding that under Shady Grove⁴, the Federal Rules of Civil Procedure, specifically Rule 23⁵, are controlling with respect to procedural issues in the Federal Court.

Former v. Current Owners

The defense also claimed that some vehicle owners had mitigated their losses by selling their cars, effectively transferring any alleged economic injury to subsequent buyers. The District Court had previously considered and accepted a Diminished Value Model that showed “those who resold could have done better had GM not sold a defective product.” The Sixth Circuit Court emphasized that whether certain plaintiffs ultimately recouped their losses “is a merits question” that does not preclude class certification at this stage. Additionally, it reiterated that the District Court “has the power to amend the class definition at any time before judgment” to address any concerns related to damages or class composition, further supporting the validity of the District Court’s class certification.

Arbitration

Finally, GM contended that certification was precluded because an unidentified but substantial minority of absent class members may be subject to arbitration agreements. The District Court, however, found that by “GM’s] engaging in this litigation and seeking dispositive rulings from the Court on the plaintiffs’ claims,” GM had waived any arbitration rights it may have. The Circuit Court held this decision, further noting that GM’s claim that certifying the class impedes on its right to arbitration is inconsistent with the company’s “myriad filings, which were thoroughly enmeshed with the merits of the case.”

Conclusion

The Sixth Circuit’s treatment of GM’s challenges regarding Article III standing, manifest injury, and the predominance of common questions provides a welcome receptiveness to the use of Rule 23 to address widespread economic and technological effects, and the evolution of class certification standards in complex, multi-state actions. In pursuing collective remedies, demonstrating manifestation of defects is not necessary for each buyer when there is adequate evidence of economic injury, such as overpayment and diminished value. Additionally, the Court’s opinion emphasizes that individual issues do not need to be resolved during the class certification stage. GM’s challenges were met with multiple reminders from the Court that class certification is not to be treated as “a dress rehearsal for the trial on the merits.”⁶ Rather, as this opinion from the Sixth Circuit showcases, the flexibility of our federal procedural law can and in many cases should be employed to fairly and efficiently address widespread economic harm.

Of course, this is only if the decision stands.

¹ Speerly v. General Motors, LLC, 115 F.4th 680 (6th Cir. 2024), decision vacated, rehearing en banc granted, 2024 WL 5162574 (6^th Cir. Dec. 19, 2024).

² ArtIII.S2.C1.6.4.1 Overview of Lujan Test

³ Tyson Foods, Inc. v. Bouaphakeo, 577 U.S. 442 (2016)

⁴ Shady Grove Orthopedic Associates, P.A. v. Allstate Insurance Co., 559 U.S. 393, 421–25 (2010)(Stevens, J., concurring).

⁵ Fed. R. Civ. P. 23

⁶ In re Whirlpool, 722 F.3d 838, 851–52 (6^th Cir. 2013) (quoting Messner v. Northshore Univ. HealthSystem, 669 F.3d 802, 811 (7th Cir. 2012))