Mercedes Loses Sanctions Bid In Chrome Defect Suit

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Law360, New York (January 06, 2014, 1:38 PM ET) - A California judge on Thursday refused a bid by Mercedes-Benz USA LLC for sanctions in a putative class action alleging injury risks from chrome-plated interior trim pieces, chastising the carmaker for taking quotes from opposing counsel out of context to cast the suit as frivolous.

U.S. District Judge Dolly M. Gee said Mercedes-Benz had failed to show that plaintiff Ani Avedisian's first amended complaint was objectively baseless or was launched without a reasonable or competent prefiling inquiry, and therefore had no basis for demanding Rule 11 sanctions.

In the February 2012 suit, Avedisian accused the company - the U.S. distributor for Daimler AG - of selling cars over a six-year period with trim pieces that can flake, crack and peel and create sharp edges that can lacerate passengers' hands.

Judge Gee said that Mercedes-Benz was mistaken in arguing that Avedisian's counsel needed to investigate all interior chrome components in all Mercedes vehicles from the proposed class period before filing the first amended complaint, dismissing as irrelevant the carmaker's claim that under general industry practice such parts are manufactured by various vendors using different processes.

"That is not required for a prefiling investigation to be objectively reasonable under Rule 11," the judge said. "Here, counsel's prefiling investigation was objectively reasonable under the circumstances, and thus the [first amended complaint] was not frivolous at the time of filing."

According to the complaint, Mercedes-Benz knew for several years that the chrome defect had begun manifesting in cars made as early as 2006 but has neither remedied the problem nor advised consumers after the vehicles were purchased or leased by class members.

Consumers were allegedly unable to discover the alleged defect until long after their initial purchase because of Mercedes-Benz's active concealment, which Avedisian argues should toll the applicable statutes of limitations for the suit's claims under the California Consumer Legal Remedies Act and unfair competition law, and for fraud and breach of express and implied warranties.

Avedisian lodged a first amended complaint in April, and in November the carmaker filed its motion for sanctions after the plaintiff's legal team purportedly admitted in a declaration that they had no evidentiary basis for claiming that the defect affected all chrome-plated interior parts in all models years between 2006 and 2011.

As evidence, the motion pointed to comments by Avedisian's counsel during a meet and confer session suggesting that Mercedes-Benz "help" narrow the complaint's allegations, which it said indicated that the plaintiff was refusing to correct or withdraw claims that had been proven untenable by post-filing discovery and investigation.

The judge rejected this claim, saying that the comments instead suggest that the plaintiff is willing to amend the proposed class to drop any shaky contentions.

Moreover, deposition testimony indicating that a 2009 model year car did not contain chrome trim pieces and that an expert had not seen certain Mercedes models within the class period suffer from the alleged defects might be relevant to a motion for class certification or summary judgment but "does not support Mercedes' motion for sanctions," according to the order.

The judge also panned the carmaker's claim that the suit was filed for the "improper purpose" of fishing for evidence and leveraging litigation costs into a settlement, ruling that since the suit brought nonfrivolous, substantive claims, it was not brought for an improper purpose as a matter of law.

Counsel for Mercedes-Benz did not immediately respond to a request for comment Monday.

The plaintiff is represented by Stephen M. Harris of Knapp Peterson & Clarke and by Robert L. Starr and Adam Morris Rose of the Law Office of Robert L. Starr.

Mercedes-Benz is represented by Troy M. Yoshino, Matthew J. Kemner and Eric J. Knapp of Carroll Burdick & McDonough LLP.

The case is Ani Avedisian v. Mercedes-Benz USA LLC et al., case number 2:12-cv-00936, in the U.S. District Court for the Central District of California.

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