may please the court counsel my name is jason on behalf of the appellant's i've reserved three minutes for rebuttal this is an appeal of the district court's dismissal of plaintiffs fraudulent concealment and consumer protection claims under rule twenty six dollars there's really only one primary issue at play in this appeal and that's whether a claim based on the failure to disclose a safety defect requires the plaintiffs to plead knowledge of not only the defect but also of the safety risk posed by the defendant the answer is no the defendants knowledge of the safety implications of a defect is not an element of the claim other than the district court not a single question turn on state all i mean i have to say i'm confused a little bit there's no discussion in either brief about relevant state law that i'm assuming this is the diversity it claims have been brought under all fifty states in this case so what so are we about you waiting this question of the knowledge of a safety of a safety risk under all of the laws california you know consumer protection statute and the california wall on fargo and concealment i mean the only reason i'm asking is because it does seem to me the states are a little bit different on this knowledge i both of you just agree i guess years it's basically the same requirement in every state well i don't think any state actually requires knowledge of the defend its knowledge of the safety implications the defect but every state does does have a law that states that a duty to disclose arises where the defendant has exclusive knowledge of material fact not known to the plaintiff so that's common across all the state's laws and that's really what we're dealing with here so we're dealing with  we're dealing with safety a safety risk because it's material yes the words if it's a cosmetic defect i don't have a duty to disclose it in any state in america if it's a defendant have to know that it's material i mean isn't that the same thing as saying they have to know that it's a safety risk in the context of this case no because materiality is viewed from the perspective of a reasonable consumer require that the plaintiff has to show that the defendant has knowledge of the safety risks posed by the fact is the same as requiring that the defect aside that the defendant has to have knowledge of the defects materiality that's what it is a materiality is never judge from the perspective of the defendant it's judged by the reasonable consumer and if there is any question as to whether this requirement was there i think we could just take a look at the williams vs yamaha case  the six circuit has never made that requirement and no other circuit court of appeals has but in williams vs yama the defendant there argued that while it may have known of the defect it did not know of an unreasonable safety hazard posed by the defe response the th circuit court of appeals held that the argument quote two separate prongs of the test for consumer fraud pre sale knowledge of a defect in the status of that defect is an unreasonable safety hazard but that's exactly what the district court did hear it alighted two of those prongs and in doing so if you just think about the practicality of what results from their district court essentially created a standard where g m submission would only be act plaintiffs could plead that g m had actually subjectively perceived a safety issue and opted not to disclose it but foxes don't guard the hen house for good reason it would just be a logical two condition play dysfunctional mission claim on self serving conclusion that a safety issue doesn't exist no court in the country besides the district court and them raw score upon which the district court relied action and the court there said that this prior class action would how would this prior class action make h p aware of the of the safety hazard but if you take a look at the opinion there is no actual analysis of defend its knowledge of the safety risk wilson actually sets forth clearly the four elements it's the existence of the defect the existence of the safety risk the causal connection between the defect and a safety risk and knowledge of the defect if we take a look at all the courts that have cited wilson they set forth those four elements not one of the cases that g m s cited to actually independently analyze agreement well there are certain aspects of the ross opinion the plaintiffs did ask the court to follow obviously players that not asked the court to file wholesale follow ross or else we'd simply be asking the court to dismiss our claims because they were dismissed in that case the aspect of them ross opinion th the district court to follow was the finding that there was an unreasonable safety hazard we also made clear that we did not believe knowledge of the safety risk was required now in ross the court also found that there wasn't even knowledge of the defect so there was there's two components there was a knowledge of the defect wasn't not there was no knowledge of the safety risk but we pointed out to the court is that the  that it could find that we plausibly alleged knowledge of the defect and still be consistent with ross because when you compare the allegations you can see everything that was missing in ross that we actually have in our complaint at bottom the one problem with knowledge and ross was there was no indication that g m ever had knowledge of the propensity of the dashboard to correct at any time there was no allegation of pre sale knowledge and here we have all that we have complaints that are dated that are on that it's a website that are on a chevrolet forum dot com where a g m representative was responding to those complaints that clearly show that there were complaints specifically about the defect that we have allege that occurred prior to every single purchase vehicle purchase here and that was really the main problem in ross it was for nothing that the court can infer that any case no i don't believe there's any bar by the economical loss doctrine because we're dealing with a fraudulent concealment we're dealing with an admission but that's the whole point is economic law supper says you can't bring a tort claim if you've got a contract quite right if you've got a warranty claim i mean that's the whole point of it when i guess that's that's why you're making the safety issue will be the issue of economic loss doctrine hasn't come up with any of the cases that we've cited  dealing with it comes up in a lot of the say a lot of these warranty cases doesn't it it didn't preclude airbag cases i mean you always see the see it right you can make a fraudulent concealment argument if you've got a if you're talking about is just a defect that's covered by a warranty and i don't see any of the cases that have decided in the briefs that any of the plaintiffs claims were precluded based on economic loss doctrine i'm not sure if that was even argued in the district court but that's just court where we are now is that you have given the warranty klein correct yes that's in order to bring this complying so i think the question is and one of the things that we're struggling with is whether there is a distinction between what sometimes is called concealment but more generally here is probably a failure of disclosure where there's a duty to disclose in in that that if they separate klein wrong consumer protection climbed because understand that there's this question with more there's the question with with hewlett packard many of the cases that you cite arise in the context of consumer protection and they are the ones that tend to say you have this that tend to ignore the question of whether the defendant understood or at pre hinted that there was a safety issue involved because the determination is materiality is there not a distinction that even if there laura croft along with failure to disclose in an individual klein that your consumer climbs could still go forward i don't think there's a there's a problem there really all these cases are just looking at whether incorrectly misinterpreted the wilson opinion and if you take a look at all that and then and then you have five years later williams comes out the th circuit case of william versus yama so if there's any question of whether wilson added this extra requirement williams makes that clear that there is no additional requirement when the court rejects the defense argument that knowledge of the safety risk is required we also have the bronco case that actually clearly sets out what the problem is if you had to require a defendant a plaintiff to plead to the defendant's knowledge of the safety issue and as the court states there it's really required the plaintiffs to plead materiality and they just can't be the case because materiality is viewed from the perspective consumer and the safety issue is merely the way that a plaintiff demonstrates materiality in a post warranty claim so it's the same type of  was no allegation that there was actually a fire right now why would that be analogous here to there's no allegation that there was ever actually been a safety issue well v the issue of injury doesn't go towards knowledge it goes towards whether a an unreasonable safety hazard has been played and the case law is clear that you either need an incidence of injury or you need to have a causal connection between the defect and the safety risk and in that case the court just couldn't see the connection between the risk of the defect and the risk of fire which is why the court looked towards is there any type of injury here but when you have the causal connection in injuries not required and in all the case law that we've cited both parties make that clear it's one or the other so when you have the causal connection which is satisfied where you explain the causal chain from the defect towards the ultimate safety hazard an injury is not required that's also why and it's a recall is not required that's why chain that's never happened well we don't know if it's never happened before we have not been able to obtain discovery yet so that's it's we don't have an allegation every form every complaint every everything you look at and there's never been a report of this actually happening  have got alleged that this is ever actually ultimate safety risk has never happened but that that's actually not required for the claim you know like materiality courts assess whether safety risk is there based on a consumer's perspective in an argument by the defendant that there is no safety risk is inappropriate at the motion to dismiss stage if you think about it if if it's inappropriate for a defendant to argue that there is no safety risk of the most dismissed agent good morning your honest counsel i'm james mcgrath for general motors may have pleased the court let me start with a response to your earlier question are on our general motors both in this case and in the m ross case premised its motion to dismiss on the fact that for all the calling law fraud claims and all the statutory fraud claims the defendant needed to state a plausible claim the g m how to do just disclose and the plaintiffs accepted that premise for purposes of the disposition in this case and the court below proceeded on that promise after the duty to disclose hinges on materiality and the case law isn't it correct to say they automatically material  correct but what the plaintiffs argue here your honor is that g m they can plausibly state a claim the g m committed fraud if they allege the g m failed to disclose that some dashboards might develop one or two cracks after prolonged use an operation after the warranty period had expired even if g m had no knowledge that a safety issue was involved the plaintiffs here have abandoned their warranty preacha warranty claims which the  posted that they could go forward on the implied warranty claim and any other theories or causes of action such as negligence that might not turn on a defendant's knowledge or intent and so those claims are out of the case and we're now we're now faced with fraud claims and the defendant says it's time you think that that the consumer protection declines rely on on fraudulent concealment also as opposed to failure to disclose that which is a duty to disclose party so all agreed below before the district court in their briefs that this is a failure to disclose case both for the common law and the consumer protections and that's the question what you failed to discl it is your honor but in order to have a duty to disclose you need to have you need to do something has to trigger that and the courts have said that needs to be material and for purposes of our cases the cases we've cited materiality means it has to be a defect so the question now is that so so we're on the same course ok good so the period to be material as being a safety deep that makes it a material issue so fraudulent concealment case in the sense that it's everybody agrees it's a failure to disclose and so the whole of the horrible case turns on whether there was a duty to disclose and what the plot terms on whether you have a material develop a cosmetic one that never manifested itself indicate any kind of safety issue or injury to anybody and reasonably concluded that there was no safety issue if they plead that it's a safety issue g m had to disclose it would that would open the floodgates to fraud claims now maybe it's a breach of warranty clammer maybe it's a negligence claim or maybe it's some other claim but here they're trying to this is an intentional tour they're trying to allege that g m plausibl decided the case on was the fact that there was nothing to indicate that g m knew that there was any safety issue and in fact everything pointed in the opposite direction you know this is a case where these vehicles we've got eight of the most popular g m s u v s and  s and pickups that were on the road for seven more years starting in two thousand and seven so we've got hundreds of thousands or millions of vehicles that have been in service for a decade and have traveled tanja hundreds of thousands of miles an obviously have been involved in accidents but despite all of that history and having these seasons plaintiff's lawyers searching high and low they haven't been able to identify anything that suggests this is there was between whether there he had pled thumb playing with whether they can prove something and where the motion to dismiss them when we are you want to but i think that what the district court said was even if i accept the fact that there was a safety  i need to determine whether g m knew that there was a safety issue both the district corp alone and am lost and they said all of these can textual facts and they took their lead from it paul twomey all these can textual facts and our common sense  experience tells us that where there's where there isn't the plaintiffs can see that the testing did not demonstrate a safety issue they conceded that before the district court none of the consumer complaints actually identify any safety related issue despite the fact that these vehicles have been in the news for over a dozen years we have no injury no injury i think there's been there's no dispute about that i think what we're struggling of all of us are struggling with i show is a safety that and never go on to say that there is also a requirement that you show subjective awareness on the part of the defendant let me let me address that your honor let me that head on because the plaintiffs are trying to you know denigrate a mirage now but in fact they embraced it wholeheartedly before the district court they noted in their brief for the district court that john general motors was relying on the two am last decisions and they say without qualification or county i had plenty to say also urged this court to follow and watch which actually supports the viability of twenty disclaims and on the following page they quote the section from memory loss where the district court said you have to show both you quote it is unclear however how this class action should have made hewlett packard where the defect a safety hazard that's the th circuit in the miller case which we cited in our brief and i wish  some cases that say you have to show that there is a safety defect and then there are some cases that say you have to show that there's a safety defect and you have to show subjective knowledge that the language  circuit said this is a quote it said quote it is unclear how this class action should have made h hewlett packard or we're that this defect posed a safety hazard so i think the th circuit there is saying the former know not only that there was a defect that there but that it posed a safety hazard and that was in the section of the opinion that was talking about whether there was knowledge of the defect yes yes your honor there was a separate section of the opinion that talked about the defect or whatever the safety issue but there was a separate section that knowledge of the fact and it was clear that it was the safety part was in that part of the opinion right there wrecked your honor and the blanco case which they rely on which is a a district a california case decided after wilson never discusses wells never never grapples with that language never falls to circuit court opinion but other than what  what is there other than wilson so there's the miller case from the district of michigan which is which was a case in which involved similar allegations against general motors brought by some of the same plaintiffs council in which the court there dismissed that's a common theme here suggest that the duty to disclose only gets triggered if you have something that's material or basic to the transaction in the cases are pretty clear that we've cited that that has to be a safety issue so maybe you could have is the restatement  clear that the defendant has the defendant has to know the materiality of the thing i mean it makes a logical sense to me because we're talking about fraud and you're defrauding somebody and it's odd to me that i would say i know there's a defect but i have no idea what the implications of it are it turns out by happenstance ten years later that it was a safety hazard and life threatening or whatever but if i that if it was just cosmetic blemishes it wouldn't trigger a duty to disclose that if that's all g m thought this was and that's what you know you know the evidence in the you know the allegations and the kid g m thought that wouldn't be enough but that you had to go the next step and find something that was so fundamental that transaction that that triggered the duty and i don't see how you can make that leap with though having the defendant know otherwise the defendant would defendants ligi an hour or other manufacturers would just have to disclose a whole host of things that they didn't think would never materialize into any you have with this you know i mean you would at time zero it would be you wouldn't have a duty to disclose it would only be time you know some five years later that it turned out to be a safety defect that retroactively at the time you had a duty to disclose right i mean that would be i and that's my reading of the point of what the plaintiffs are saying you had a duty to disclose a defect that turned out to be a safety defect right and you're saying no no no but i'm i am curious because i don't know that the restatement gives us that answer but maybe well i don't know if the restatement specifically says at least that the part that the m r scored in this court relied on that you know you have to have knowledge of both but it certainly says that in order to trigger a defendant disclose it has to rise to that level of material out ality and if this is if this is a knowledge or intent toward as fraud it is how can g m be deemed to have to make a disclosure when it doesn't have any  position that in a compliant the plaintiffs have to alleged specific subject give knowledge on the part of the defendant do you know i think then how would they have that i think that they have to present facts that make it reasonable to infer that general motors had knowledge which is exactly what the does this state of the district court help them to hear particularly in the court's decision on the motion to reconsider ration you can see that but and pretty testing procedures under stand the court did not except that i struggle with that a little bit because you know i would ask you about paragraph one hundred and three of the compliant regarding pre testing i understand that's not the subject of the allegation but isn't time appropriate allegation in this case it would say these point gives all purchased their cars two thousand and seven and lighter many courts have grappled without specific issue but all of the courts that have addressed that have said the pre testing along even coupled with consumer complaints is not enough wilson looked at that the best case looked at that the all those cases said pre testing alone plus consumer complaints is not enough and the stewart case specifically said it's not enough to say the defendant has all the information you need to have something more to plausibly allege that there fact knowledge if somebody on the forum had complained that their airbag had deployed improperly or something and their dashboard had been cracked or whatever would that be enough of the words if if it had happened i mean i think you're at a minimum that would have to be enough wouldn't it that that would that would certainly be moved from from possible towards plausible i mean the timing would be important if it was one out of a one million maybe not enough because it doesn't this is the diskos back to knowledge of the safety defect if there's no manifestation of this issue the safety issue then it can can't show your knowledge of the safety issue i take it that's one piece of it your honor but the courts the cases that the plaintiff has relied on have all pointed to something more something disha that the testing on the complaints were tied to a safety issue the issuance of a technical service bulletin d suggest that this was actually the case that the allegation something would have suggested that the defendant actually had knowledge other otherwise i mean give me how you would articulate rule that was really problematic are you saying that that's the rule or are you saying that the rule is you don't know that it is a safety defect without further information meaning ring defining the st half of bryant as opposed to all of them did not give requirement to please and i'm not i'm not asking for a subjective requirement but this is a really important issue and this is one that the court's going to speak to for the st time here and i think the standard should be have the plaintiffs plausibly allege that that it's reasonable to infer that the defendant knew that there was a material in this case a safety defect prior to the time that they purchased in this case their vehicles and i'd asked the court to follow those decisions which look at when they test it on a preproduction testing and consumer complaints have been enough and when they have it and i suggest to the court that the distinction is that there's there's something more i mean the defendants i mean the plaintiffs in this case when pressed by the district court conceded that there's no allegation that specifically says the text testing actually revealed a problem and so you can talk about testing all you want but if less and less you can allege based on something that there is actually revealed something you've alleged nothing more than testing took place in the courts have said that that's not complaint that says i'm afraid that if i crash this is there's going to be a problem there's nothing more and two hundred and forty complaints in a one million vehicles is is a percentage of a fraction of a percentage of the overall so  i'm not asking to understand exactly where the difficulty lies because we've got to balance not generating inappropriate and unfair class work and not on my own a defendant to hide  know that and we think that struggle before in our history you you could point back to these awful pentel cases do we have to wait until the people's cars are rear of the thank the defect period yes and i'm not saying it has to actually manifest and god forbid result in somebody being badly injured or killed but that's just one of the you know one of the factors that i identify here because there's nothing else that you can point to that says all of this shows that that the defendant it's reasonable to infer based on this that the defendant no and the other thing i just urge the court to recall is we're only talking about the fraud claims here the other causes of action that might not turn on knowledge or intent warranty or the like were banded and you know but those claims could give plaintiffs in certain situations relief where there wasn't specific the kind of specific knowledge we're talking i concede that there are certain consumer protections all that might give them the sun i'm sure under certain circumstances it's hard to make a blanket statement but here we're talking about a narrow set of claims where the defendant is is accused of defrauding but i think if we look at wilson there's one line that references knowledge of a safety issue there's actually no analysis of it found its knowledge of the safety issue not a single case that's been cited actually analyzes the issue of whether defendant has knowledge of the safety implications and i think we all ranko is actually directly on point the reason why it doesn't cite a wilson is because the williams case came out five years later they made clear that any interpretation of wilson that would suggest there's this extra element of knowledge is just simply incorrect in the bronco case this is a great quote no case cited by the parties is held that a manufacturer must also be aware the defect carried safety implications or is otherwise material while the fact of the c p implications may be a requisite element of the claim for one specific knowledge of a safe the implication is not and that's why the cases that g m cites to where knowledge was not sufficient it was because plaintiffs hadn't actually pled a safety issue like a case like garrick knowledge was actually adequately pled it's just plentiful only a legit defect that was normal wear and tear so at the end of the day when the courts are just struggling with why the rule would make sense why is it it's a fraud it's a fraud if it turns out to be a safety defect it's not a fraud if it doesn't turn out to be a safety factor it has nothing to do with what i knew at the time about safety it just turns on whether it happened to be a safety defect later that's a flaw i mean that's an intentional toward well if we take a look at materiality at the point where defendant defenders aware of a defect the defendant isn't going to eventually know whether that defect would be material or not to a consumer but if it has to make a decision is it going to disclose the defect or not disclose it risk that this would be deemed material to consumer it's the same thing we're just talking about materiality so just like in a normal case the defendant might not know whether something is material that doesn't matter because it is the plaintiffs burden to demonstrate that something is material the same way that it's a plant as a burden to demonstrate that there is a plausible safety risk and let's just remember this is a motion to dismiss or not a summary judgment or not a classification although the evidence may ultimately demonstrate that the defect doesn't create a safety risk it's pointless burger at this stage to allege the plausible prospect of a safety concern which is exactly what plaintiffs did and the district court recognised that by acknowledging that we played an unreadable safety hazard and just like materiality the conclusion of an unreasonable safety hazard is subject to proof but not now and not until the plaintiffs are able to obtain discovery to support their claims now just as far as the knowledge allegations if you take a look at where knowledge allegations of testing and customer complaints were insufficient we have all that information here in our complaint i pulled all those complaints you can see that there is just nothing close to the level of detail that we have here with testing it fails because the plate that doesn't identify the test that was conducted the point of doesn't suggest how that testing would have made the defendant aware of the defect here we have benefited the specific testing we identify that was conducted remember we have to take a look in the context of what's going on here g m change from a multi piece dashboard to a single piece dashboard because of that change they would have conducted tests specifically on that dashboard customer complaints fail what are you arguing that everything that you put it was enough to they knew that there was a defect or that they knew that there was a safety i mean it seems to me that question drives whether these allegations are going to be enough for the requirement is knowledge of the defect what we have and what we did argue to the district court is the extent it was going to required knowledge of a safety risk we've satisfied that as well and particularly because our customer complaints you have customers that are actually expressing legitimate fears about the safety implications of this defect and we can't forget that g m admitted journal manufacturers only obligated to report this an issue if they think it could implicate safety and the fact that they did it and it's a kind of shows the plausibility that there is a safety risk there i think if we take it by show that they are earning on the side of being cautious because they're worried about getting sued well if they're erring on the side of being cautious then that demonstrates right there that it is not just speculative it is possible it is plausible i haven't it's an admission that i think the court needs to look at very very carefully here and the difference with this case to compare to others we're not just we haven't just alleged that there's an issue we haven't just allege that customers are complaining we are alleging that customers complained of the specific defect that we feel it's with specificity and specifically raised legitimate safety concerns it's actually something that's absent in most cases where the knowledge element is still is still south satisfied and for that reason if you get nothing more than what the defendant says you're firing nothing when there's no injuries we had no have they all had it repaired so us some have some haven't the ones there are certain ones actually have had it repaired where it cracked again so this is a situation where the replacement doesn't fit even if the problem i assume they're all having it fixed right  to extent they're able to afford to have it fixed they are doing that there it is very expensive so it's something that certain plaintiffs are not able to do but i think it's very telling that for those that actually came out of pocket a few one thousand dollars to fix it they're also given a similar defective