Pomerantz Strategic Consumer Practice Targets The Auto Industry

ATTORNEYS: BY JORDAN L. LURIE AND ARI Y. BASSER
POMERANTZ MONITOR NOVEMBER/DECEMBER 2019

Pomerantz is proud to introduce its Strategic Consumer Litigation Practice, headed by Jordan Lurie, a partner in the Firm’s Los Angeles office. This practice group represents consumers in actions that recover monetary and injunctive relief on behalf of class members while also advocating for important consumer rights.

Forget the engine and the shiny rims. Connected vehicles have become the next big thing for the automotive industry.

Nothing is driving the acquisition of car data faster than, well, driving. While connecting cars to computers is not new, what has changed is the volume and precision of the data and the information that is being extracted and connected to the Internet. The average modern-day car can contain 100 million lines of code (more than a space shuttle). Connected vehicles can monitor, collect and transmit information about their external and internal environment. The types of data generated by modern vehicles include sensitive categories such as location, biometric and behavioral information. Car makers have transformed the automobile from a machine that helps us travel to a sophisticated smartphone on wheels.

Bundling and selling data from connected cars will be a massive new revenue stream for auto manufacturers on the order of billions of dollars a year. Car manufacturers also are profiting from car data by building partnerships with third party service suppliers and exchanging data with them. If a pizzeria that a driver frequents is provided with data about the driver’s location as she’s driving by, the driver will get an offer to get a discount on a pizza if she picks it up right then and there, hot and ready to go. This is possible because of the vehicle data the car manufacturer has provided, and companies such as pizzerias are willing to pay car manufacturers for that data. According to a study by McKinsey & Company, by 2020 – just around the corner – automakers will be able to make more money selling vehicle data than by selling the cars themselves, and by 2030, the market for in-vehicle connectivity worldwide is expected to reach $750 billion.

In their desire to monetize vehicle data, car makers have turned on a powerful spigot of precious personal information without adequate disclosures and without offering to compensate drivers for use of their own car data. Consumers deserve, and are legally entitled, to know what data their car is collecting and transmitting and who has access to this information, and to have the opportunity to opt-in to data collection and the ability to participate in the commercialization of their own data. Car manufacturers are not entitled to use it for free and without full and adequate disclosures at the point of sale.

To address these wrongs on behalf of drivers and consumers, Pomerantz has instituted a series of actions against major car manufacturers, including General Motors and Jaguar Land Rover, to compel defendants to establish a framework for compensating drivers for defendants’ use of their car data and/or to compensate current and future car owners for the use of their car data (for example, by offering buyers financial incentives for the collection and use of vehicle data, lower monthly lease payments or discounted pricing or rebates, direct free features or services, or by otherwise subsidizing the cost of the car).

Pomerantz also seeks to require all car companies to provide prospective owners with written vehicle data and disclosure policies at the time of sale or lease and to obtain adequate consent or authorization to use or take information or data from owners’ car computer systems prior to purchase. At a minimum, there should be an easy-to-read facts sheet that provides for, among other things, opt-in consent to data collection and use; it should be possible for vehicle owners to access their data at any time in a usable format, delete their data at any time, revise the parameters of their data sharing at any time, and turn off their data at any time; and any data collected should not be monetized or utilized without the vehicle owners’ express consent. Absent any express agreement by vehicle purchasers, car companies should limit data collection to information reasonably necessary to operate the vehicle and maintain vehicle safety (including enabling real time emergency calls, immediate information that facilitates rescue services and road hazard warnings).  

Vehicle Emissions Warranty Fraud Drives New Wave of Litigation

Owning a vehicle is one of the largest expenditures of households in the United States, second only to housing. According to the American Automobile Association, an average repair bill is between $500 and $600, which an estimated 64 million American drivers (33% of vehicle owners) would not be able to pay without going into debt. To offset the soaring price of vehicle ownership and maintenance, most new vehicles come with a factory written warranty which is a promise, made by a manufacturer, to stand behind its product and to fix certain defects or malfunctions up to a certain time period or mileage milestone (whichever comes first). The manufacturer’s warranty covers all major components of a vehicle and is intended to pay for any covered repairs or part replacements during the warranty period. For decades, car manufacturers have been selling vehicles that are subject to unique state regulations regarding emissions standards. California’s stringent emissions rules require automakers to provide longer warranties and cover more items in order to identify malfunctioning emission control components and encourage repair to ensure emission control systems continue to function as designed and emissions remain low. Under California law (and similar regulations in other states), vehicle manufacturers are required to identify all “high-priced warranted parts” in Partial Zero Emissions Vehicles (“PZEVs”) and hybrid vehicles, which are entitled to warranty protection for 7 years or 70,000 miles under California’s High-Cost Emissions-Related Parts Warranty. California emissions warranty laws supersede and extend any manufacturer’s warranty offered at the point of sale. A “high-priced warranted part” is a warranted part which is a component that “affects any regulated emission from a motor vehicle or engine which is subject to California emission standards,” or that causes a vehicle’s on-board diagnostic malfunction indicator light to illuminate. Automotive companies determine whether the “individual replacement cost” of a warranted part exceeds the applicable cost limit by taking into account the model year of the new vehicle at issue and the annual average nationwide urban consumer price index published by the United States Bureau of Labor Statistics (“CPI”). The relevant time period for this determination is the time of certification. The “replacement cost” of an individual component is equal to “the retail cost to a vehicle owner” and includes “the cost of the part, labor, and standard diagnosis.” For each new vehicle, the manufacturer has the duty to identify, with supporting background information, each of the emissions related and high-priced parts that are entitled to extended warranty coverage as a high-price emissions part. Pomerantz has uncovered the fact that car manufacturers unilaterally identify some, but not all, of the “high-priced” warranted parts that should properly be covered under the emissions warranty for 7 years and 70,000 miles in order to minimize the manufacturers’ warranty exposure. By not comprehensively identifying, in their warranty booklets and in information provided to dealerships, all of the parts that should be included as “high-priced” warranted parts, car manufacturers are able to limit the warranty coverage for those parts to only 3 years and 50,000 miles. As a result, consumers are forced to pay out of pocket for these repairs which, by operation of law, should be paid for by the manufacturers. To date, Pomerantz has initiated actions in state and federal courts against BMW, Jaguar Land Rover North America, Kia, and Hyundai, to recover reimbursement of all costs wrongfully incurred by vehicle owners for repairs that should have been covered under California’s high-cost emissions warranty law, and to obtain orders compelling these manufacturers to accurately and comprehensively identify all parts and labor that should be covered under California’s high-cost emissions warranty. These actions will allocate repair costs appropriately between manufacturers and vehicle owners and promote California’s interest in curbing emissions.