The Eleventh Circuit reversed and remanded class certification of most claims brought by a group of consumers who alleged their Ford Mustang Shelby GT350s were not “track ready” as advertised. The court’s decision in Tershakovec v. Ford Motor Company, No. 22-10575, — F.4th —, 2023 WL 4377585 (11th Cir. July 7, 2023), focused on the reliance element of the consumers’ claims, concluding that whether a damages class may be certified under Rule 23(b)(3) will depend on the state-law standard for proving reliance, including whether the state law applies a presumption of reliance.

The plaintiffs were individuals, residing in a number of different states, who had purchased Ford Mustang Shelby GT350s that has been advertised as “track ready.” As it turns out, the plaintiffs claimed, their cars were not track ready and would overheat and decelerate on long track runs. They further alleged that this was a problem that existed for two particular trim packages that did not come with the “cooler” necessary to prevent overheating.

The consumers filed a putative class action bring various state-law claims based on common-law fraud theories as well as state consumer-protection statutes. They sought certification of a Rule 23(b)(3) damages class, which the district court granted as to almost all of the claims. As to the varying state laws that would apply to the consumers’ claims, the district court certified multiple state subclasses within the single class.

The Eleventh Circuit granted Ford’s application for discretionary appeal and reversed certification as to most of the claims, concluding that the district court did not properly analyze the predominance requirement for 23(b)(3) certification. Specifically, the district court did not appropriately consider the varying standards for reliance under the respective state laws, and what evidence would be needed to prove each claim.

In considering predominance, the court first must identify the plaintiffs’ claims and the elements of those claims to determine whether the existence of those elements could be shown through common evidence. In other words, the court must “predict how the parties will prove” common and individual questions at trial.

For state-law fraud claims, the common elements are a misrepresentation or omission, materiality, reliance, causation, and injury. Because the parties focused on the reliance element—and how that element must be proven—the Eleventh Circuit did as well.

The district court’s error was leaning too heavily on the notion that reliance can be presumed. This was an overgeneralization, because any presumption depends on the applicable state law. Although the district court acknowledged that the presumption did not exist in every state, it went no further in its analysis.

The Eleventh Circuit then analyzed the relevant state laws and how they differ as to whether proof of reliance is necessary at all and, if so, how it can be established.

First, however, the court considered and rejected the plaintiffs’ argument that presumption is always presumed because their claims involve material omissions, not misrepresentations. This argument relied on the Supreme Court’s decision in Affiliated Ute Citizens of Utah v. United States, 406 U.S. 128, 153 (1972), which held that, in the circumstances of the Rule 10b-5 securities case before it, which involved primarily a failure to disclose—i.e., an omission as opposed to a misrepresentation—proof of reliance may be presumed. The Eleventh Circuit found Ute inapplicable, because this case dealt with alleged false statements in marketing and advertising, not omissions from them.

Turning then to state-law standards for reliance, the court divided the claims for class certification had been granted into three groups:

  1. Claims requiring no proof of reliance at all (here, consumer-protection statutes in Florida, Missouri, New York, and Washington);
  2. Claims requiring proof of reliance and do not apply any presumption (here, claims under the common law of New York, Tennessee, and Washington, as well as under the Texas consumer-protection statute); and
  3. Claims that require reliance but for which reliance may sometimes be presumed (here, California statutory and common-law claims).

The predominance question as to the first two groups was straightforward. For group one—no proof of reliance required—common questions would predominate, and the class was properly certified. For group two—reliance is required and not presumed—individual questions would predominate, and the class should not have been certified. For group three, the answer would require a deeper analysis of whether reliance could be presumed, and so these claims were remanded to the district court.

The court also considered the plaintiffs’ warranty claims. As to claims for violation of the federal Magnum-Moss Warranty Act, because this statute merely supplements state law, the certification question would follow the answer under the relevant state law. As to the state-law implied-warranty claims, these claims would be remanded for further consideration by the district court.

Finally, the court briefly considered Ford’s argument that 23(b)(3)’s superiority requirement was not met because the class action would be unmanageable. The district court had found the case would be manageable, rejecting Ford’s argument that jurors would lose track of the various state laws and the proof required for each. The Eleventh Circuit agreed with Ford but instructed the district court to reevaluate this question now that the class claims would be narrower. The court also warned the district court that it would need to articulate a more clear plan for managing this issue.

Judge Tjoflat concurred in part, explaining, in a lengthy opinion, the reasons why he would deny certification as to all of the claims. He summarized his opinion as follows:

My reasoning derives from lifting the hood and examining the various parts of the law before this Court on appeal. At first glance, the six claims with which I disagree with the Majority look ready to drive off the lot, but in fact, they are lemons. Here is the User’s Manual for this opinion as we engage in a multi-point diagnostic. This opinion (1) begins by surveying the consumer protection scheme provided by the Federal Trade Commission Act (the “FTC Act”); (2) compares and contrasts that scheme to the mechanisms established by Florida, New York, Missouri, Washington, and California’s respective consumer protection statutes; (3) identifies the inherent causal mechanism required for misrepresentation causes of action; (4) outlines four constitutional defects—First Amendment, due process, Article III standing, and separation of powers—inherent in allowing certification of claims under these statutes; and (5) explains why none of the cases cited by the Majority ought to bind or persuade this Court.