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Mercedes Owner Cannot Sue Company after Not Properly Opting Out of Class-Action Lawsuit

A vehicle owner who did not follow a federal court’s required procedure for opting out of a class-action lawsuit is barred from personally suing Mercedes-Benz over a faulty balance-shaft gear, the Ohio Supreme Court ruled today.

A Supreme Court majority rejected Pattiann McAdams’ claim that she did not need to follow the federal court’s process for opting out of a 2015 proposed settlement regarding faulty balance-shaft gears in various Mercedes-Benz vehicles because she had filed and maintained her own lawsuit against the automaker.

Writing for the Court majority, Justice Patrick F. Fischer stated the federal court only allowed those who qualified to be part of the class action to opt out if they “validly and timely excluded themselves.” McAdams did not take the proper steps to exclude herself, Justice Fischer wrote, and her use of an “informal” process to opt out would “demean the class-action process.”

The Court’s decision reversed the Tenth District Court of Appeals.

Chief Justice Maureen O’Connor and Justices Sharon L. Kennedy, R. Patrick DeWine, and Melody J. Stewart joined the opinion as did Eighth District Court of Appeals Judge Michelle J. Sheehan, sitting for Justice Judith L. French, who did not participate in the case.

Justice Michael P. Donnelly concurred in judgment only.

Vehicle Repairs Prompt Lawsuit
McAdams bought a used 2006 Mercedes SUV with the company’s M272 engine from a New York Mercedes-Benz dealership in 2008. While living in the Columbus area, she took her vehicle to Mercedes-Benz of Easton complaining of mechanical problems. The Easton dealership told her that the balance-shaft gear needed to be replaced. Crown Eurocars, another Mercedes-Benz dealership, completed the repair, and later determined the transmission conductor plate needed to be replaced.

Prior to McAdams seeking repairs of her SUV, a federal class-action lawsuit was filed against Mercedes-Benz in 2012 on behalf of a proposed class of vehicle owners, including those with the 2006 Mercedes-Benz vehicles with M272 engines. The suit alleged the defective balance-shaft gears caused engine malfunctions resulting in costly repairs.

In February 2015, McAdams filed a lawsuit in Franklin County against Mercedes-Benz USA, the Easton dealership, and the New York dealership that sold her the car.

Class Action Settles and McAdams Maintains Lawsuit
In April 2015, a federal court issued a notice of a proposed settlement and certification of a nationwide class. McAdams’ vehicle fell within the certified class. The federal court’s order required those who wanted to be excluded from the class action to submit a written request to KCC Class Action Services. The notice warned that anyone who fell within the class definition and did not submit a request for exclusion by the required deadline would be bound by “all proceedings, orders, and judgments” regarding the settlement. In August 2015, the federal court approved the settlement and concluded all class members had been given a fair opportunity to opt out.

A year after the judgment, Mercedes Benz USA and the Easton dealership deposed McAdams as part of her state lawsuit and learned that she was aware of the Seifi class action and she had spoken with the attorney representing the vehicle owners.  McAdams said she was asked to join the class and knew the case had settled. She explained that joining the class was not in her best interest because of the additional issue with the transmission conductor plate.

Automaker Seeks to Block Lawsuit
Two months later, Mercedes and the Easton dealership sought summary judgment based on res judicata, because McAdams did not opt out of the Seifi settlement and the  issues regarding her balance-shaft gear had been addressed though the class-action settlement. McAdams maintained she effectively opted out of the settlement by filing and maintaining her own lawsuit.

The trial court sided with Mercedes-Benz and the Easton dealership, granting them summary judgment, and dismissed the New York dealership from the case.

McAdams appealed to the Tenth District Court of Appeals in Columbus, which reversed the trial court, finding that McAdams’ actions -- maintaining her lawsuit and speaking to class counsel -- were a reasonable expression of her intent to opt out of the class action.

Mercedes-Benz USA, but not the Easton dealership, appealed to the Supreme Court, which agreed to hear the case.

Court Examines Terms of Settlement
Justice Fischer explained the Court had to determine if McAdams’ claims were barred by res judicata. Under res judicata, if a court that is empowered to decide a case issues a final judgment on the merits, then that ruling prevents any subsequent legal actions on the same issues between the same parties. A judicially ordered settlement, such as the one in the Seifi case, is a final judgment and res judicata will apply, he wrote.

The majority opinion found that by the time the Tenth District considered McAdams’ appeal, the federal court already had determined that McAdams was a member of the class. The federal court had determined several issues regarding the composition of the class and expressly identified the people who had successfully opted out of the settlement. McAdams was not among those the federal court excluded.  The Court found the appeals court was barred from considering McAdams’ claim because the issue already had been settled by the federal court.

The Court noted that the Tenth District’s error affected the judgment against the Easton dealership, but since the dealership did not appeal, the portions of the Tenth District decision pertaining to the dealership stands.

2018-1667. McAdams v. Mercedes-Benz, USA LLC, Slip Opinion No. 2020-Ohio-3702.

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