Credit: Shutterstock

In a class action suit almost two decades long over a faulty brake system in a long-discontinued Kia vehicle, the Supreme Court reinstated a trial court's decision that plaintiffs who lacked proof of actual costs incurred for repairs couldn't recover damages.

In Little v. Kia Motors America, the court said "aggregate proofs"—versus actual costs—weren't enough. Justice Anne Patterson said the plaintiffs fell short on their burden of proof, lacking evidence of what they actually spent on repairs for the faulty brake system, and the appellate court ruling left them open to receiving an undeserved "windfall."

"In short, plaintiff's class included an undetermined number of members who stood to gain a windfall by virtue of the jury's award of $750 per class member for brake repairs," wrote Patterson Thursday. "Accordingly, we reverse the Appellate Division's judgment and reinstate the final judgment entered by the trial court."

Chief Justice Stuart Rabner and Justices Jaynee LaVecchia, Barry Albin, Faustino Fernandez-Vina, and Walter Timpone joined. Justice Lee Solomon did not participate.

In 2006 a jury determined that Kia Motors had breached its express and implied warranties and that the class of plaintiffs sustained damages. The jury found that the class members had suffered no damages relating to diminution in value, but that each class member had sustained $750 in damages for repair expenses "as a result of the defendant's breach of warranty."

A court-appointed special master, the first of two in the protracted case, conducted a claims process and recommended to the trial court that it award damages of $46,197.03 for the cost of repairs. The trial court accepted that recommendation, and on Sept. 10, 2015, a final judgment was entered in that amount, payable to the 150 claimants who had proved out-of-pocket costs for 21 compensable brake repairs; $200,000 in legal fees, $19,112 in prejudgment interest, $481,850 in costs, and an incentive award of $5,000 to the lead plaintiff, Regina Little, who had demonstrated no out-of-pocket expenses for compensable brake repairs.

Three years later, the Appellate Division reversed the trial court and reinstated the jury's award for out-of-pocket repair costs based on aggregate proofs, and remanded for an award of attorney fees.

"Although aggregate proof of damages can be appropriate in some settings, the Court considers such proof improper as presented in this case," wrote Patterson in the 47-page opinion.

"We concur with the trial court that it erred when it allowed plaintiff to prove class-members' out-of-pocket costs for brake repairs based on an estimate untethered to the experience of plaintiff's class," Patterson said.

In other words, if plaintiffs lacked receipts "or actual data" of repairs to their Kia, they were out of luck and would not recover damages.

Justice Anne Patterson. Photo by Carmen Natale

"We hold that the trial court properly ordered individualized proof of damages based on the actual costs incurred by the class members," wrote Patterson.

Patterson said the trial court got it right on many levels. It conducted a careful assessment of the common and individual questions, rightly concluded that the class' damage claims could not be resolved in a common proceeding, and found no single factual pattern on the limited question of damages that remained.

"The trial court's determination was firmly grounded in the trial evidence, which demonstrated the disparate experiences of individual class members," Patterson said. "The trial court's decertification order was a correct application of the predominance standard and a proper exercise of the court's discretion in the management of this case."

Michael D. Donovan of the Donovan Litigation Group in Malvern, Pennsylvania, represented the plaintiffs.

"It's a disappointing decision for New Jersey consumers," Donovan said in a phone call. "The court did not deal with the fact that all 8,400 people bought a defective car that could not be repaired to a nondefective condition.

"Yet the court held—contrary to the Appellate Division—that only people who had receipts for out-of-pocket costs could recover," said Donovan. "Even though those same people, 10 years after the fact, are still stuck with a clearly defective car."

Roberto A. Rivera-Soto, a former Supreme Court justice now with Ballard Spahr in Cherry Hill, represented Kia Motors. Rivera-Soto issued this statement: "We are pleased with the Court's opinion validating Kia's warranty program, and reinstating the trial court's holding that very few Kia customers suffered any out-of-pocket loss due to the coverage provided by Kia Motors America.  We look forward to concluding the matter."

The case was argued before the justices on Oct. 8, 2019.

Plaintiff Little asserted claims on her behalf and that of 8,400 other New Jersey owners and lessees of 1997, 1998, 1999, and 2000 Kia Sephia vehicles sold by South Korean automaker Kia Motors America Inc.

Little first filed suit in June 2001, asserting breach of warranty and statutory claims regarding the car's defective brake system.

In 2006, the class represented by Little was defined as "[a]ll residents of the State of New Jersey who purchased or leased a model year 1995-2000 Kia Sephia within the six year period preceding the filing of the Complaint."

During a four-week jury trial, Little asserted two theories: that the brakes "hastened" the vehicles' depreciation in value, and that the class members incurred out-of-pocket costs for repairs.

The claim for repair costs was based not on individualized proof, but on an estimate by Little's expert, Raymond Scott King. King, under cross-examination, admitted he had no actual data on what claimants actually spent on relevant repairs, but estimated that an average Kia Sephia owner would pay $1,250 for brake repairs over the vehicle's life because of the alleged brake defect, the court said.

The jury in 2008 determined the class members had suffered no damages due to diminution in value but that each class member had sustained $750 in damages for repair expenses, meaning an award of roughly $6.3 million.

Kia moved for a new trial postverdict and for an order to decertify the class on the issue of damages.

The trial court left the jury's liability verdict undisturbed but granted in part the defendant's motion for a new trial on damages.

The trial court then granted the defendant's motion to decertify the class as to the quantum of damages each individual owner suffered.

The trial court said it reached that conclusion after admitting it had erred when it submitted the question of out-of-pocket repair costs to the jury and instructed the jury to consider plaintiff's second damages theory based on classwide proofs instead of requiring individualized proof of damages for the class members' brake repairs.

A motion to recertify the class was granted, and the jury's finding of no diminution in value was reversed, in 2011, but the Appellate Division overturned that ruling the next year, holding that the trial court should have ordered a new trial on both theories of damages, which it found were not "fairly separable from each another."

A special master appointed on remand in 2013 found that only a fraction of the plaintiffs had proved damages. The special master recommended damages of about $46,000, rather than $750 per class member.

The case again returned to the Appellate Division, which in 2018 issued a decision that reached back to 2008 and reversed the granting of judgment notwithstanding the verdict.

The Supreme Court granted Kia's petition for certification, "limited to the issue of damages," in late 2018.

On Thursday, the court reversed the Appellate Division, and reinstated the trial court's 2015 final judgment awarding $46,000.

"A class action does not dispense with traditional burdens of proof in the name of efficiency; to the contrary, it leaves the parties' legal rights and duties intact and the rules of decision unchanged," Patterson wrote.

"Before admitting aggregate proof of damages in a class action, a court must undertake a careful inquiry to ensure that the proposed evidence does not deprive the defendant of a meaningful opportunity to contest the plaintiff's claims."

Patterson cited Muise v. GPU, an Appellate Division decision in 2004, which set forth principles regarding aggregate proofs of damages. Under Muise, Patterson wrote, in order to decide whether to permit classwide proof of damages, "a court must carefully consider (1) the underlying cause of action for which the class seeks recovery; (2) the measure of damages that the law allows if there is a finding of liability for that claim; and (3) the methodology by which the plaintiff seeks to prove damages on an aggregate basis."

This case tests factor No. 3 in particular, the court held.

"If the plaintiff cannot establish a basis for a presumption that all members of the class have sustained damage, aggregate proof of damages raises the specter that an individual with no viable claim will recover a windfall," said Patterson. "In such settings, the court should require individualized proof of damage."

Patterson said "aggregate proof of damages must be based on a reliable mathematical formula in order to be admissible."

Plaintiff expert King presented none, said Patterson.

"Like Muise, this case is not a setting in which class members' claims for damages could fairly be premised on aggregate proofs," Patterson said.

Patterson said the trial court properly recognized that Little could pursue damages based on class members' out-of-pocket damages for costs of repair as a remedy for breach of warranty, separate from her diminution-in-value claim.

But Little "presented no basis for a presumption—much less for a conclusion—that all members of the class suffered damages for out-of-pocket brake repairs necessitated by the Kia Sephia's brake defect," Patterson said.

The size of the putative class, comprised of both owners and lessees, was also problematic, said Patterson, given the breadth of the repairs, length of ownership, and other variables.

Finally, the court said the report and recommendations by the second special master, assigned to handle posttrial proceedings, was conducted with "precision and care" and supported by credible evidence.