Opinion ID: 868479
Heading Depth: 3
Heading Rank: 1

Heading: Factual Allegations in the Gotthelf Action

Text: The allegations in the Complaint center around an alleged defect in the Toyota Prius’s optional, factory-installed, high-intensity discharge (“HID”) headlamp system, which caused the HID headlamp bulbs to stop working without warning (“Unexpected Extinguishment”). This is the same defect that was at issue in the Collado-Fixler action. Appellants claim that the Unexpected Extinguishment was unreasonably dangerous because one or both headlamps could extinguish while driving. On May 6, 2009, the National Highway Transportation Safety Association (“NHTSA”) notified Toyota that it had opened an investigation into HID headlamp failures in the 2006 and 2007 model year Toyota Prius, based on 338 reports it had received of such failures. Appellants include in their Complaint several of the customer reports filed with the NHTSA, the earliest of which is dated July 1, 2007. Appellants also allege that the NHTSA investigation uncovered approximately 2,200 consumer complaints regarding failed HID headlamps, some filed with the NHTSA and some with Toyota, and that additionally, as of September 2009, Toyota had received about 27,600 3 Appellants originally included owners of 2010 Toyota Priuses in their Complaint. The District Court determined that the 2010 Toyota Prius did not come equipped with HID headlights, and Appellants did not object to the District Court’s exclusion of 2010 vehicle owners from the putative class. 3 warranty claims on the issue. The NHTSA investigation found that in most cases of Unexpected Extinguishment, one bulb would extinguish at a time, and that toggling the headlamp switch on and off would temporarily restore lighting, thereby making it feasible to get the vehicle to a repair facility. In August 2009, the NHTSA closed its investigation, concluding that “a safety defect trend [had] not been identified at [that] time.” (App. 566, 803.) In December 2009, Toyota initiated a Customer Support Program, offering to fully reimburse owners of 2006-2009 Priuses who had replaced the headlight electronic control unit (“ECU”), and to partially reimburse customers who had replaced one or more of the HID headlamp bulbs. It sent the Customer Support letter to customers on December 28, 2009. In the letter, Toyota stated that the HID headlamp failure occurred toward the end of the HID bulb’s useful life, and explained that replacing the HID bulbs was “sufficient to curtail the intermittent operation.” (App. 263.) The letter also gave customers several suggestions on how to extend the life of the HID bulbs. Customers wishing to participate in the Support Program were required to submit claims no later than March 31, 2010. Gotthelf purchased a new Toyota Prius on April 28, 2006, and Guedalia leased a new Toyota Prius on August 30, 2006. Each paid more for the optional HID headlamp system. The HID headlamps were covered under Toyota’s 36-month or 36,000-mile warranty. One of Gotthelf’s HID headlamps first experienced Unexpected Extinguishment in October 2009, after his Prius had been driven 49,907 miles and was no longer under 4 warranty. When Gotthelf replaced the driver’s side HID headlamp bulb, the Toyota representative informed Gotthelf that Toyota was aware of the problem with the HID headlamps. In November 2009, the passenger side headlamp began to experience Unexpected Extinguishment, but as of the filing of the Complaint, Gotthelf had not replaced it. Unexpected Extinguishment first occurred in Guedalia’s passenger side HID headlamp in July 2009, after his Prius had been driven 59,021 miles and was no longer under warranty. In August 2009, Guedalia replaced one HID headlamp bulb, and in February 2010, he replaced the other. Both Gotthelf and Guedalia received Toyota’s December 28, 2009 Customer Support letter. In the Complaint, Appellants argue that Toyota had knowledge of the HID headlamp defect and concealed the defect from its customers. Appellants allege that Toyota marketed the more expensive HID headlamps as superior to standard halogen bulbs, claiming that the HID headlamps provide better visibility, use less power, and last longer than halogen bulbs. They claim that Toyota had knowledge of the defect in the HID headlamps as early as 2005 and failed to inform customers of the alleged latent defect. Appellants provide no factual support for this assertion, and the earliest customer complaint they include in their Complaint is dated July 1, 2007. They also claim that Toyota has concealed the defect and that the December 28, 2009 Customer Support letter was misleading, in that it failed to acknowledge any latent product defect and only partially reimbursed some customers. Appellants bring claims under New Jersey law for 5 violations of the New Jersey Consumer Fraud Act (“NJCFA”), N.J. Stat. Ann. § 56:81 et seq., common law fraud, breach of express warranty, and breach of the implied covenant of good faith and fair dealing. B. Procedural History of the Collado-Fixler and Gotthelf Actions When Appellants filed their Complaint, the Collado-Fixler action, which sought to represent the same nationwide class, was already pending in the Central District of California, and the parties were already engaged in settlement discussions. On September 17, 2010, Appellants filed a motion with the Judicial Panel on Multidistrict Litigation (“JPML”), seeking to have all the “Unexpected Extinguishment” cases, including Collado-Fixler, transferred to the District of New Jersey for consolidated and coordinated pretrial proceedings. The Panel denied the motion on November 30, 2010, because the Panel found that “the parties in the Central District of California actions are on the cusp of a settlement,” and “[t]here are more suitable mechanisms in place by which class members can object to or opt out of a class settlement.” (App. 668.) Appellants also filed a motion with the California District Court to intervene in the Collado-Fixler action, which was denied. On December 30, 2010, the parties in the Collado-Fixler action reached a formal settlement agreement (the “Settlement Agreement”), which purported to settle all claims related to the HID headlamps for owners of model years 2006-2009 Toyota Priuses. On January 10, 2011, the California District Court approved the Collado-Fixler plaintiffs’ 6 motion for certification of a settlement class under Fed. R. Civ. P. 23(b)(3).4 The court ordered that the class be given notice of the pendency of the action and the terms of the proposed settlement. Class members were given the opportunity to opt out of the Settlement Agreement and to file objections. Gotthelf opted out of the class settlement. Guedalia did not opt out, but filed an objection to the Settlement Agreement, claiming that the settlement was premature and insufficient to address the class members’ claims. The California District Court held a fairness hearing on October 17, 2011, and approved the Settlement Agreement, finding it “fair, adequate, and reasonable” under Fed. R. Civ. P 23(e). (App. 421-23.) The District Court considered the arguments raised by the objectors (including Guedalia), and found that they raised “no significant concerns that would preclude approval of the settlement.” (App. 423.) Guedalia received and cashed a check from the settlement, and did not file an appeal of Settlement Agreement in the Ninth Circuit.5 Following final approval of the Settlement Agreement, Toyota moved to dismiss the claims in the Gotthelf action. The District Court granted the motion on May 3, 2012, dismissing Guedalia’s and the putative class’s claims on res judicata grounds, and 4 In its Order approving a settlement class, the California District Court also considered, as is required, the factors set forth in Fed. R. Civ. P. 23(a). See Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 621 (1997). 5 In July 2011, an appeal of the Collado-Fixler action was filed in the Ninth Circuit, but only with respect to the California District Court’s award of attorney’s fees. 7 dismissing Gotthelf’s claims for failure to state a claim.6 Appellants filed a timely notice of appeal.