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Little v. Kia Motors America, Inc.

Superior Court of New Jersey, Appellate Division

July 18, 2018

REGINA LITTLE, on behalf of herself and all others similarly situated, Plaintiff-Appellant/ Cross-Respondent,
v.
KIA MOTORS AMERICA, INC., Defendant-Respondent/ Cross-Appellant.

          Argued May 16, 2018

          On appeal from Superior Court of New Jersey, Law Division, Union County, Docket No. L-0800-01.

          Michael D. Donovan (Donovan Axler, LLC) of the Pennsylvania bar, admitted pro hac vice, argued the cause for appellant/cross-respondent (Schnader Harrison Segal & Lewis, LLP, Francis and Mailman, PC, Feldman Shepherd Wohlgelernter Tanner Weinstock Dodig, LLP, and Michael D. Donovan, attorneys; Michael D. Donovan, Lisa J. Rodriguez, James A. Francis, Edward S. Goldis and Alan M. Feldman (Feldman Shepherd Wohlgelernter Tanner Weinstock Dodig, LLP) of the Pennsylvania bar, admitted pro hac vice, on the brief).

          Roberto A. Rivera-Soto argued the cause for respondent/cross-appellant (Ballard Spahr, LLP, attorneys; Roberto A. Rivera-Soto, Neal D. Walters, Michael R. Carroll and Michele C. Ventura, on the brief).

          Before Judges Koblitz, Manahan and Suter.

          OPINION

          KOBLITZ, J.A.D.

         In this class action against defendant Kia Motors America, Inc. (KMA), plaintiff class of 8455 Kia Sephia owners and lessees represented by Regina Little proved at a jury trial that the Sephia, model years 1997 through 2000, had a defective front brake system, which caused premature brake pad and rotor wear. Concluding that the defect amounted to a breach of express and implied warranties, and that all owners had suffered damage due to the defect, the jury awarded each member of the class $750 ($6.3 million total) in repair damages.

         Determining for the first time post-trial that repair damages could not be awarded on a class-wide basis because they were dependent upon individual factors, the trial court granted KMA's motion for judgment notwithstanding the verdict (JNOV) on the repair damages award, decertified the class for purposes of damages, and ordered a new trial on repair damages only, to proceed by way of claim forms. With the advantage of recent case law unavailable to the trial judge, we now reverse, reinstate the jury award and remand for determination of counsel fees.

         I.

         We recount only the facts and procedural history relevant to this appeal. We begin with the procedural history. On June 26, 2001, Little filed an amended class action complaint on behalf of herself and others similarly situated, against defendant, a California corporation with offices in New Jersey. The putative class alleged that the Sephia had a defective front brake system and asserted causes of action for: fraudulent business practices in violation of California law and the New Jersey Consumer Fraud Act (CFA), N.J.S.A. 56:8-1 to -210; breach of an express warranty; breach of the implied warranty of merchantability; and failure to comply with the federal Magnuson-Moss Warranty Improvement Act (MMWA), 15 U.S.C. §§ 2301 to 2312.

         In August 2003, the court granted class certification. Prior to trial, the trial judge heard a number of pretrial motions on the admissibility of evidence. Defendant moved unsuccessfully to exclude as net opinions the class expert testimony of Raymond King, on repair damages, and John Matthews, on diminution of value damages.

         After a month-long trial, in June 2008 the jury returned a verdict finding that defendant had breached the express and implied warranties as well as the MMWA, but that it had not violated the CFA. The jury found that the class had suffered damages and awarded each member repair damages. It awarded no damages for diminution in value.

         In a November 24, 2008 written decision, the trial judge granted defendant's motion for JNOV as to repair damages only, decertifying the class for purposes of damages only based on the finding that individual factors predominated, and ordered a new trial on repair damages to proceed by way of claim forms.

         In a January 2011 decision, another judge granted plaintiff's motion to recertify the class, explaining that individual damages issues did not require decertification. This judge appointed a special master. In an August 12, 2011 order, without having read the record and based on the special master's recommendation, the motion judge vacated the zero diminution in value jury award to allow the master to consider damages for all class members on any applicable theory of recovery.

         In a published decision dated April 2, 2012, we reversed the August 12, 2011 order because the motion judge had improperly vacated the jury's finding of no diminution in value damages without first canvassing the record to determine whether that aspect of the verdict resulted in a manifest denial of justice. Little v. KIA Motors Am., Inc., 425 N.J.Super. 82, 89-91 (App. Div. 2012). Further, the motion judge's decision was inconsistent with the law of the case doctrine, since the trial judge's decision on the limited new trial had controlled the proceedings for nearly three years. Id. at 93.

         On remand, the motion judge appointed a new special master to adjudicate the claims. In August 2013, she accepted the new special master's finding that only 150 claimants had proven their damages, and his recommendation of a total award of $46, 197. Little was not among the members for whom he recommended recovery.

         In January 2015, class counsel requested an award of $6, 055, 916 in attorney fees and $481, 850 in costs of suit, with pre- and post-judgment interest, pursuant to the MMWA. After reducing the class's attorney fee award based on the paucity of damages it recovered, on May 6, 2015, a new motion judge ordered defendant to pay: $200, 000 for the class's attorney fees, plus $19, 113 in prejudgment interest; $481, 850 in fees and costs of suit; and $5000 to Little as an incentive award.

         II.

         At trial, plaintiff demonstrated a defect in the Sephia's brakes. Defendant began selling the Sephia in New Jersey in 1997. Raymond King, plaintiff's expert in mechanical engineering and repair damages, explained that when a driver presses the brakes, hydraulic pressure forces brake fluid into a brake caliper, which causes the brake pads to squeeze against the rotors and decrease the spinning of the wheel. The pressure of the brake pads against the rotors causes friction, which produces heat. The hotter the brake system becomes, the faster the brake pads and rotors wear.

         Based on the documents from defendant that King had reviewed, as well as deposition testimony from defendant executives, King concluded that the Sephia's front brake system had a systemic design defect that did not allow for the proper dissipation of heat. This defect caused a premature wear of the brake pads, pulsating or grinding brakes, warped or prematurely worn rotors, and shaking or vibration (also called shudder or judder) when the driver applied the brakes. Repairs or replacement of the brake pads and rotors failed to correct the problem.

         To reach this conclusion, King reviewed a standardized industry report; Quality Assurance Field Product Reports and District Parts and Service Manager Reports, drafted by defendant's mechanics and managers throughout the United States; defendant's Technical Assistance Center Incident Reports; Technical Service Bulletins; and defendant's warranty brake claims data.

         The parties stipulated that from 1997 to 2000 a total of 8455 Sephias were sold in New Jersey. Defendant's warranty repair data showed that the total number of warranty repairs to front brake components on the Sephia in New Jersey was about 8400. Defendant sold 42, 713 model year 1997 Sephias in the United States. The warranty claim rate nationally for that model's brakes was 92%. King testified that he had never before seen a warranty claim rate that high. In his view, it "screamed" that there was a problem with the brake system. The following years the model had similarly high claim rates.

         In January 2 002, Kia Motors Corporation (Kia Motors), KMA's parent company based in South Korea, issued a technical services bulletin introducing newly designed brake pads and rotors, known as the "field fix." The updated pads were not compatible with the original rotors; thus, both had to be replaced as a set. This was an improvement, King said, but it failed to meet the 20, 000-mile standard. At most, the field fix brake pads lasted 14, 000 to 15, 000 miles.

         In addition to reviewing Kia Motors' documents, King inspected the cars belonging to Little and Samuel-Basset (the named plaintiff in a Pennsylvania class action against defendant, Samuel-Bassett v. Kia Motors Am., Inc., 34 A.3d 1 (Pa. 2011)). King found nothing remarkable about either car in general, or the brake system in particular, that would have caused premature brake pad and rotor wear, and nothing to suggest that driving habits had caused the premature brake wear.

         After surveying five Kia dealerships, King estimated that an owner would spend about $250 for a brake repair. Defendant's documents showed brake replacements when cars had as little as 2000 miles, and others at more than 10, 000 miles. On average, a Sephia would need a brake replacement every 10, 000 miles. In King's experience, and based on industry data he reviewed, cars typically lasted 100, 000 miles, or seven to eight years.

         Based on a life of 100, 000 miles, and the need for a brake repair every 10, 000 miles, King estimated an owner would incur ten brake repairs over the life of the car, doubling the normal repair expense due to the defective brake system. As a result, the owner would incur $1250 in additional repair expenses (five times $250) due to the defective brake system.

         On cross-examination, King conceded that the $1250 brake repair costs would not apply to someone who had brake replacements at 20, 000-mile-or-more intervals, or to someone who had each brake replacement paid under warranty. He also admitted that his damages model did not conform exactly to Little's experience.

         Little testified that in January or February 1999, she purchased a new Sephia for $13, 288. Her constant brake problems began within two weeks. She testified that for the three years she owned the car, a set of brakes lasted no more than six to seven months.

         Plaintiff read into the record a portion of the deposition testimony of several individuals, including defendant KMA's Director of Technical Operations, Timothy McCurdy, who testified that defendant had been aware of the brake issue based on the rate of repairs, and that it had taken steps to address it by relaying the complaints to Kia Motors.

         A "major cause" of these problems was improper dissipation of heat. While there was no set standard for the life of brakes, McCurdy said that consumers typically expected them to last 20, 000 miles. One study from Kia Motors reported that the 1999 Sephia had a brake pad life of 16, 000 miles. Defendant notified Kia Motors that 16, 000 miles was not acceptable, since brake pads should last at least 20, 000 miles.

         Defendant did not cover the brake pads under warranty, but it did cover defects in the brake system under the three-year or 36, 000 mile warranty. In model year 2002, Kia Motors replaced the Sephia with the Kia Spectra. The Spectra was "the same basic car," but with a different brake system. None of Kia Motors' vehicles, including the Spectra, had brake repair rates as high as the Sephia's.

         Kia Motors Deputy General Manager Young Sun Sohn's deposition testimony revealed that when Kia Motors developed the Sephia, the specification for the brake pads was that they achieve a life of 20, 000 kilometers, or just under 12, 500 miles.

         Lee Sawyer, defendant's Senior Vice President of Fixed Operations, testified at deposition that some Sephias had brakes that wore prematurely. Typically, brake pads lasted 20, 000 to 25, 000 miles before needing replacement. "Some of the Sephia owners were experiencing brake pad life in the [ten] to [twelve thousand] mile range."

         Defendant became aware of the Sephia brake problem within the first year of sales based on warranty claims and brake pad orders from the parts department. After the first year, defendant also noticed an increase in part orders for rotors, which usually last 50, 000 to 75, 000 miles.

         While defendant's policy was to exclude brakes from the warranty, some dealers covered brake pad replacements as warranty repairs or as goodwill repairs, both at no charge to the owner. Dealers did this because they knew that there were problems with the brakes.

         Sawyer said that McCurdy had an engineer investigate the brake issue and send a report to Kia Motors' headquarters. At some point, a South Korean engineer met with someone at KMA and said the brakes had to be redesigned with better quality material.

         Michelle Cameron, defendant's Manager for Consumer Affairs, testified that people who answered complaints through defendant's call center were trained to notify callers that brakes were not covered under the warranty.

         Plaintiff presented expert testimony from John Matthews, a professor at the University of Wisconsin School of Business, on diminution damages. In Matthews's opinion, Sephia owners paid about $2000 more for their Sephia ...


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