Sixth Circuit revives state claims against GM over Duramax clean diesel engines

CINCINNATI (CN) — A split three-judge panel in the Sixth Circuit upheld the dismissal of a RICO claim against General Motors on Wednesday but reinstated state claims that the auto giant lied about its Duramax clean diesel truck engines.

The opinion stems from a lawsuit filed by a group of auto owners in 2017 against GM and Robert Bosch LLC. The plaintiffs claim GM used an “online defeat device” to fudge emissions to manipulate U.S. Environmental Protection Agency protocols.

According to the plaintiffs, GM used deceptive marketing to tout the engines' "whopping reduction" in carbon emissions despite knowing that once the defeat device was disabled in real-world driving scenarios, the pollution numbers would exceed federal limits.

Consumers were duped into paying nearly $600 more per truck for the sham "clean diesel" technology, according to experts' estimates in the suit.

U.S. District Judge Thomas Ludington, a George W. Bush appointee, determined the truck owners' state law claims were "inextricably intertwined" with violations of the Racketeer Influenced and Corrupt Organizations Act and dismissed the claims, prompting an appeal to the Sixth Circuit.

The appeals court, while tossing the RICO claim, cited the “indirect purchaser” rule as a basis for its decision. The rule, first announced in the 1977 U.S. Supreme Court case Illinois Brick v. State of Illinois, states that a buyer who is two or more steps removed from the RICO violator lacks standing to bring a lawsuit. That case also introduced the “bright-line” rule, which applies only to indirect-purchasers seeking passthrough overcharges.

“Even if plaintiffs are correct that these reasons for the indirect-purchaser rule do not apply in the current case, however, ‘the bright-line rule of Illinois Brick means that there is no reason to ask whether the rationales of Illinois Brick ‘apply with equal force’ in every individual case,’” U.S. Circuit Judge Karen Moore, a Bill Clinton appointee, wrote for the majority. “The bright-line rule applies, and we will ‘not engage in "an unwarranted and counterproductive exercise to litigate a series of exceptions."'"

But the majority reversed the Ludington’s dismissal of the plaintiffs’ state law claims, finding that the Clean Air Act did not pre-empt them.

“Without the CAA, plaintiffs could nonetheless bring a claim that GM fraudulently omitted relevant information about its emission system in its communications to consumers,” Moore wrote. “These theories of liability benchmark against other vehicles; these claims exist independently of federal regulation.”

U.S. Circuit Judge Rachel Bloomekatz, a Joe Biden appointee, joined Moore in the majority.

Plaintiff’s attorney Steve Berman of the Seattle firm Hagens, Berman, Sobol, and Shapiro LLP said in an emailed statement that he had mixed feelings about the Sixth Circuit’s decision.

“Obviously we’re very pleased that the state law claims are reversed,” Berman wrote. “On the other hand, on the RICO claim, I strongly disagree with Sixth Circuit. The intended victims of the scheme are the consumers.”

GM’s attorney Jay Lefkowitz of the New York firm Kirkland and Ellis did not respond to a request for comment by press time.

U.S. Circuit Judge Raymond Kethledge, a George W. Bush appointee, concurred in part and dissented in part, finding Ludington was correct in tossing the state claims.

“And the EPA concluded that the system was not a defeat device,” Kethledge wrote. “Moreover, as noted above, the benchmark for the named plaintiffs and their expert alike — as to whether these trucks’ emissions were ‘clean’ — was whether they complied with federal emissions standards. (Also, the idea that any purchaser of a full-size pickup would expect a diesel truck to have cleaner emissions than a gasoline one is implausible on its face.) Labels aside, in substance this case would relitigate the EPA’s regulatory judgment.”

Kethledge added, “Making complex technical judgments about vehicle emissions is precisely the kind of thing that expert agencies are good at — and lay jurors are not. We lose our legal bearings and misapply binding precedent in concluding otherwise here.”

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