Judge Calls Discovery Cost Concerns 'Overblown' in Subaru Infotainment Class Suit

Joel Schneider (Photo: Carmen Natale/ALM)

A Camden federal judge on Tuesday denied Subaru of America’s motion to stay full discovery in a putative, nationwide class action pitting the automaker against plaintiffs alleging the company sold and leased cars with a defective infotainment system.

U.S. Magistrate Judge Joel Schneider of the District of New Jersey issued a memorandum opinion and order that allows for limited discovery to proceed while Subaru awaits a ruling on its motion to dismiss the case that it filed last Feb. 28. The judge also said Subaru’s cost concerns over allowing discovery—even limited discovery—while it awaited the motion to dismiss decision were “overblown.”

"Defendants’ concern about 'extremely expensive' discovery is overblown," Schneider said. "As is always the case, the Court expects to closely manage discovery to assure that plaintiffs’ efforts are proportional. Further, contrary to defendants’ argument, a discovery stay will not simplify the issues for trial. In fact, the opposite is true.

“The Court’s resolution is fair to all parties,” Schneider wrote. “On the one hand, plaintiffs can immediately proceed to obtain plainly relevant and important core discovery. On the other hand, the 'floodgates' of discovery will not open until defendants’ motion is decided and

the issues to be litigated are joined.

“For the reasons to be discussed, defendants’ request is denied with the proviso that only limited and focused discovery on core issues will be permitted,” Schneider wrote.

In Chad Udeen and Mary Jane Jeffery v. Subaru of America Inc., the plaintiffs allege that a Starlink infotainment system defect in certain Subaru vehicles created a safety hazard. Subaru and other defendants have denied all liability allegations but acknowledged that, even if they prevailed in their motion to dismiss the case, warranty claims among California plaintiffs would still stand.

Schneider, referencing Gerald Chalames Corp. v. OKI Data Americas, Inc., a District of New Jersey decision from 2007, said “ the mere filing of a motion to dismiss does not stay discovery.” He listed four factors upon which to determine whether a stay should be entered, used in Jackson v. Trump Entertainment Resorts Inc., a District of New Jersey decision from 2015. The four were: whether a stay would unduly prejudice or present a clear tactical disadvantage to the nonmoving party; whether denial of the stay would create a clear case of hardship or inequity for the moving party; whether a stay would simplify the issues and the trial of the case; and whether discovery is complete and/or a trial date has been set.

“After examining all relevant evidence, the Court finds the relevant factors weigh in plaintiffs’ favor and, therefore, the Court will deny defendants’ request to stay all discovery,” Schneider wrote. “The Court agrees that plaintiffs will be prejudiced if all discovery is stayed while waiting for defendants’ motion to be decided."

He said the plaintiffs have the right to move forward with their complaint and that furthering the delay increases the chance that relevant evidence could get lost, memories fade or witnesses could became unavailable before the case goes to trial.

“The Court does not expect the Court-ordered discovery to be unduly time consuming or expensive,” Schneider said in also rejecting the “undue hardship” argument by the defendants to halt discovery. “The Court agrees with plaintiffs that, 'moving this litigation forward despite the pending motion to dismiss would ensure that the parties are able to timely and effectively resolve the claims and defenses presented in this case.'

“The discovery will serve to educate plaintiffs concerning the most important individuals and issues in the case. In the long run the Court expects defendants to benefit from this staging so that the parties do not chase discovery 'down a rabbit hole.'"

The ruling drew varying responses from the attorneys involved.

“We’re pleased with the court’s ruling,” said Kevin P. Roddy of Wilentz, Goldman & Spitzer of Woodbridge, one of the attorneys for the plaintiffs, in a phone interview on Wednesday. “We are looking forward to pushing through with discovery."

But Neal D. Waters of Walters Ballard Spahr's Cherry Hill office, for Subaru, had a different take on the opinion and said his side got what it originally wanted, too.

“The Magistrate judge’s decision lines up with what Subaru proposed,” he said on Wednesday. “Although the request for a stay for all discovery was denied, the court decision is otherwise consistent with the discovery that Subaru proposed to produce.”

Benjamin F. Johns of Chimicles Schwartz Kriner & Donaldson-Smith of Haverford, Pennsylvania, co-counsel for the plaintiffs, said “the discovery tract and motion to dismiss tract were running parallel.” He said his team had set Monday, March 18, as their self-imposed deadline to respond to Subaru’s motion to dismiss plaintiffs' complaint.

“We’ve already served Subaru with some discovery requests,” Johns said. “We are still evaluating this week’s opinion and may likely be preparing additional ones in response to this ruling. We are very pleased. We think it’s a comprehensive opinion. It raises some very important issues on behalf of people who own relatively new automobiles who are dealing with the problems described in our complaint.”

Subaru Corp. is a Japanese corporation. Subaru of America sold a record 680,000 vehicles last year, an increase of 5 percent over 2017, according to the company's year-end financial statements. It marked the 10th consecutive year of record sales and 11th consecutive year of sales increases. Among its brands are the Crosstrek, Ascent and Forester SUV models.

Subaru of America was founded in 1968 in Bala Cynwyd, Pennsylvania, and the following year saw a move to Pennsauken, New Jersey. The company's headquarters were located in Cherry Hill from 1986 until 2018 before moving to the Camden waterfront last year after the city offered a highly attractive incentive package—a $118 million tax break.

“We had other opportunities. We could have gone other places, and we chose this city because it fits in with what we’re trying to do as a company,” said Tom Doll, president of Subaru of America on opening day of its new home on April 27, 2018. “Our job is not just to take. We want to be able to give back.”