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Caterpillar's attempt to dump a class action lawsuit over the quality of its engine parts backfired when a federal judge ruled the heavy-equipment maker not only failed to support its arguments, but also waived its right to raise those arguments again later.
Caterpillar moved to dismiss a class action complaint that is still in its pleading stage. The complaint, brought by three companies that bought or leased machinery equipped with Caterpillar C-18 industrial diesel engines, alleges a material defect in the engines causes them to overheat and malfunction.
U.S. District Judge Joan B. Gottschall found Caterpillar’s assertions about the plaintiffs’ choice of law were superficial at best, leaving her to apply “the well-settled rule that failure to develop a legal argument in an opening brief results in the argument’s waiver.”
Shannon McNulty
| Clifford Law Offices
“Because Caterpillar’s choice of law allegations cannot be reached, the court assumes for purposes of the present motion that, as the first amended complaint alleges, Illinois law governs,” Gottschall wrote. “Since Caterpillar does not cite or analyze Illinois law in support of its … motion, its arguments for dismissing the named plaintiffs’ claims have been waived.”
The lawsuit was brought by Quality Organic Products of Selma; Morning Star Farms Inc.; and Northwest Recycling LLC, on behalf of a national class of companies who bought or leased certain C-18 and C-32 engines made by Caterpillar. According to the complaint, for several years in the early 2010s, Caterpillar used steel cylinder liners in these engines, instead of the more typical cast iron. The steel liners had a tendency to crack under the stress of the engine’s operation, according to the plaintiffs, allowing oil and coolant to mix and causing the engine to fail.
All three of the plaintiffs experienced the same type of engine failure in machinery with C-18 engines in 2017 or 2018.
The plaintiffs proposed two nationwide classes: one for issuing or denying declaratory and injunctive relief and one for damages. The plaintiffs suggested Illinois law would govern the claims of all class members but offered to certify state-specific subclasses if a choice of law analysis found that to be unworkable.
Caterpillar did not dispute the three plaintiffs’ standing to press individual claims, but argued they are not fit to represent an entire class of buyers and lessors. C-18 and C-32 engines are used in many different applications and cannot be easily lumped together, the company said.
“Simply put, a C-18 engine in a Rotochopper grinder is not a ‘substantially similar’ product to a C-32 engine in a fishing boat, or even a C-18 engine in a generator or a hydraulic pump,” Caterpillar wrote in its motion to dismiss. “This is all the more true because plaintiffs’ claims focus on cylinder liners that will perform differently based on engine design, rod length, engine speed, conditions, and climate.”
Gottschall rejected the relevance of this argument, citing extensive precedent that class certification issues cannot be resolved before questions of standing.
“The parties agree that the named plaintiffs have individual standing, and the court concurs,” Gottschall wrote in her opinion, filed March 1. “The court rejects Caterpillar’s efforts to inject class certification issues into the standing inquiry, particularly while class certification discovery is ongoing.”
Caterpillar argued the class action allegations are defective on their face because they could not survive scrutiny under Supreme Court rules using Illinois law. The plaintiffs retorted those court rules and choice of law analyses are premature when class certification discovery has yet to be completed.
“The certification issues [Caterpillar] raises are enmeshed in factual and legal issues that would benefit from full exploration after certification discovery is complete,” Gottschall agreed. “The parties have not had an opportunity to develop the legal and factual record needed to resolve the important choice of law questions raised in this case.”
The plaintiffs are represented in the action by attorneys Shannon M. McNulty and Robert Clifford, of the Clifford Law Offices, of Chicago; Kenneth S. Byrd, Jason L. Lichtman, Sean A. Petterson and Catherine P. Humphreville, with the firm of Lieff Cabraser Heimann & Bernstein, of Nashville and New York; Enrique G. Serna and Daniel E. Serna, of Serna & Associates, of San Antonio, Texas; and Jon Powell and Mickey Johnson, of The Powell Law Firm, also of San Antonio.
Caterpillar is represented by attorneys Susan E. Groh, Diane P. Flannery and Andrew F. Gann Jr., of McGuireWoods LLP, of Chicago.