The Sixth Circuit handed down a recent decision, Smith v. General Motors, that, on its face, could be construed as having a wide-reaching impact on the pleading standard for certain product-liability and fraud claims.  But the panel was careful to disclose the larger, admittedly “odd” context of the case, making it difficult to discern just how far Smith’s holding might reach.

Smith involved allegedly defective dashboards in certain GM vehicles.  Plaintiffs alleged that these GM dashboards were prone to cracking and that, in theory, such cracking could “lead to an airbag malfunction or shrapnel spray during a crash,” though no plaintiff claimed to have actually been injured by the alleged defect.  (Slip Op. at 3–4.)

GM moved to dismiss plaintiffs’ complaint, relying in part on Mross v. General Motors Co., No. 15-C-0435, 2016 WL 4497300 (E.D. Wis. Aug. 25, 2016), a case involving the same dashboard defect, in which the district court concluded that a complaint must allege the defendant knew both “that the dashboards were likely to crack and that this defect posed the safety concerns alleged in the complaint.”  Importantly, the plaintiffs in Smith agreed with GM that Mross set forth the correct legal framework, and even “urged” the district court to follow it.  (Slip. Op. at 5.)

The district court accepted the parties’ invitation to follow Mross, and concluded—consistent with Mross’s requirement that a plaintiff plead not only that a defendant knew of the defect, but also knew of the safety risk posed by that defect—that plaintiffs’ claims had to be dismissed.

On appeal, plaintiffs regretted their reliance on Mross, but the panel (Suhrheinrich, Stranch, Nalbandian) held them to their bargain, finding that the invited-error doctrine precluded plaintiffs from arguing that the Mross standard didn’t govern their claims. (Slip Op. at 9.)  Indeed, it was the invited-error doctrine that convinced Judge Stranch to concur in the judgment, despite her concerns that a Mross­-type standard unfairly “saddl[es] Plaintiffs with an additional burden at the pleading stage.” (Slip Op. at 20–23, Stranch, J., concurring.)

There were also “messy choice-of-law issues” that the court was able to side-step without issuing an opinion on any state’s particular substantive law. Still, it is notable that the panel endorsed Mross’s reasoning, finding support for its holding in the Restatement (Second) of Torts. According to the panel, Mross’s holding that a defendant must know of the defect and its safety risk “flows logically from the text of the Restatement, which only requires disclosure of facts basic to a transaction if a person ‘knows that [another person] is about to enter [a transaction] under a mistake as to them.’” (Slip Op. at 12 (quoting Restatement (Second) of Torts § 551(2)(e)).  If plaintiffs’ alleged harm was the failure to disclose the safety risk, the panel questioned how GM could be liable for the failure to disclose that risk—the “fact basic to the transaction” that GM allegedly withheld—unless GM knew about it.

It is on this point that the concurrence sharply differs, and questions whether Mross’s holding is correct. In fact, Judge Stranch thought Mross an “outlier” and, contrary to the panel, argued that Mross did not “flo[w] logically from” the Restatement. (Slip Op. at 22.)

What, then, to make of Smith v. General Motors?  Perhaps most important is the panel’s detailed discussion of pleading standards, offering practitioners some concrete examples of (and potential analogies for) what does (or does not) meet Rule 12(b)(6) and Rule 9(b) requirements. (Slip Op. at 13–19.)  But in light of the invited-error basis of the court’s ruling, the concurrence maintains that the panel’s opinion does not amount to the Sixth Circuit adopting Mross’s rule.  (Slip Op. at 20, Stranch, J., concurring, (“The Seventh Circuit (the court to which the Mross plaintiffs could have appealed) has not clearly adopted Mross’s rule. Nor have we, either before this case or as a result of it.”).)  It thus remains to be seen what effect this “odd” case has on pleading standards for tort claims in the circuit.  (Slip Op. at 2.)