Nobel Prize-winning economist, Brattle Principal, and University of Southern California Professor Daniel McFadden provided multiple expert reports and testimony in two recent consumer class action suits involving motor vehicle manufacturers. In both cases, Professor McFadden and his Brattle team – which included Principals Dr. Lisa Cameron and Dr. Armando Levy, and Associate Dr. Pablo Robles – supported a Kirkland & Ellis team led by Richard C. Godfrey, Wendy L. Bloom, and Andrew B. Bloomer in obtaining successful outcomes for its clients, GM and Polaris.
Favorable outcome for GM in consumer class action
In the GM matter, Brattle assisted the Kirkland & Ellis team in securing a settlement that was less than 1% of plaintiffs’ original $17 billion damages claim. The plaintiffs alleged that the company had failed to provide earlier notice of recalls related to GM ignitions, side airbags, and power steering systems, thus causing consumers to overpay for new cars incorporating these components. In his testimony, Professor McFadden explained that, although the plaintiffs’ experts purported to estimate the amount of this overpayment, their survey-based approach could only account for demand-side considerations, at best. Because the approach taken by the plaintiffs’ experts failed to take supply-side considerations into account, the resulting overpayment calculation was economically unsound.
Although some courts had previously accepted this economically unsound method for calculating overpayments, Judge Jesse M. Furman (SDNY) concluded that the method did not meet the requirements of the plaintiffs’ “benefit of the bargain” damages theory. In particular, Judge Furman found that the method failed to establish the price of vehicles that would have prevailed in the absence of the alleged misrepresentation, because it did not take the supply-side into account. His conclusions were consistent with the opinions expressed by Professor McFadden in support of GM’s successful summary judgment motion.
Class certification denied in Polaris consumer class action
Brattle also assisted the Kirkland & Ellis team in obtaining a victory at the class certification stage on behalf of Polaris, a US manufacturer of motorcycles, snowmobiles, and all-terrain vehicles (ATVs). In this case, the plaintiffs alleged that Polaris had failed to disclose information on alleged exhaust heat issues in thousands of its ATVs, causing consumers to overpay for these ATV models.
The plaintiffs’ experts claimed to have taken into account both supply and demand when establishing the amount of the alleged overpayment. However, Professor McFadden’s testimony explained that both the survey-based analysis of demand and the equilibrium model used to determine the amount of the alleged overcharge were unreliable. Judge Nancy E. Brasel (D.Minn.) denied certification of the class, ruling that the plaintiffs’ expert-driven overcharge theory was insufficient to meet class certification requirements since it failed to “supplant required showings of causation, injury and damages.”