Tex. Hill Country Landscaping, Inc. v. Caterpillar, Inc.

522 F.Supp.3d 402

TEXAS HILL COUNTRY LANDSCAPING, INC., et al., Plaintiffs,

v.CATERPILLAR, INC., Defendant.

Case No.: 20-cv-0227

United States District Court, N.D. Illinois, Eastern Division.

Signed March 1, 2021

Daniel Eugenio Serna, Pro Hac Vice, Enrique Gerardo Serna, Pro Hac Vice, Serna & Associates PLLC, Jon Todd Powell, Pro Hac Vice, The Law Office of Jon Powell, San Antonio, TX, Robert A. Clifford, Shannon Marie McNulty, Clifford Law Offices, P.C., Chicago, IL, Catherine Peyton Humphreville, Pro Hac Vice, Jason Louis Lichtman, Sean Petterson, Lieff Cabraser Heimann & Bernstein, LLP, New York, NY, John Patterson Johnson, Pro Hac Vice, The Law Office of Jon Powell, San antonio, TX, Kenneth Sherman Byrd, Lieff Cabraser Heimann & Bernstein, Nashville, TN, for Plaintiffs Texas Hill Country Landscaping Inc., Northwest Recycling, LLC.

Daniel Eugenio Serna, Pro Hac Vice, Enrique Gerardo Serna, Pro Hac Vice, Serna & Associates PLLC, Jon Todd Powell, Pro Hac Vice, The Law Office of Jon Powell, San Antonio, TX, Robert A. Clifford, Shannon Marie McNulty, Clifford Law Offices, P.C., Chicago, IL, Catherine Peyton Humphreville, Pro Hac Vice, Sean Petterson, Lieff Cabraser Heimann & Bernstein, LLP, New York, NY, John Patterson Johnson, Pro Hac Vice, The Law Office of Jon Powell, San Antonio, TX, for Plaintiff Morning Star Farms.

Andrew Gann, Pro Hac Vice, Diane Pulley Flannery, Pro Hac Vice, McGuireWoods LLP, Richmond, VA, Susan E. Groh, McGuireWoods LLP, Chicago, IL, for Defendant.

MEMORANDUM OPINION AND ORDER

Joan B. Gottschall, United States District Judge

Plaintiffs Texas Hill Country Landscaping, Inc. d/b/a Quality Organic Products of Selma ("Quality Organic Products"); Morning Star Farms, Inc. ("Morning Star"); and Northwest Recycling, LLC ("Northwest Recycling") seek to represent a national class of purchasers and lessors of certain C-18 and C-32 engines manufactured and sold by defendant Caterpillar, Inc. ("Caterpillar"). See First Am. Class Action Compl. ("Am. Compl.") ¶¶ 107–09, ECF No. 8. Plaintiffs allege that these engines ("class engines") have a defective component called a cylinder liner. See Am. Compl. ¶¶ 1–3, 66–73. "When the [cylinder] Liner fails, oil and coolant mix, ultimately leading to engine failure. That failure requires expensive, time-consuming repairs in existing engines," according to plaintiffs’ first amended class action complaint ("first amended complaint"). Id. ¶ 2. The first amended complaint has six counts: a claim for declaratory and injunctive relief, breach of express and implied warranty (counts II and III), negligent misrepresentation, unjust enrichment, and negligence. Id. at 25–32.

Caterpillar moves to dismiss the first amended complaint for lack of standing and in part for failure to state a claim. ECF No. 40. Caterpillar also asks the court to strike the first amended complaint's class action allegations under Rule 12(f) of the Federal Rules of Civil Procedure. Id. Caterpillar's standing arguments and motion to strike both challenge plaintiffs’ ability to represent the proposed class. Finding these arguments to be premature given that an agreed period of class certification and merits discovery is ongoing, the court denies Caterpillar's motion.

I. Background

For purposes of deciding Caterpillar's motion to dismiss and motion to strike, the first amended complaint's well-pleaded facts must be accepted as true and viewed in the light most favorable to plaintiffs. See Taha v. Int'l Bhd. of Teamsters, Local 781 , 947 F.3d 464, 469 (7th Cir. 2020) (citing Yeftich v. Navistar, Inc. , 722 F.3d 911, 915 (7th Cir. 2013) ) (failure to state a claim); Jackson v. Payday Fin., LLC , 764 F.3d 765, 773 n.19 (7th Cir. 2014) (challenge to subject matter jurisdiction under Fed. R. Civ. P. 12(b)(1) ); AEL Fin., LLC v. Colarusso & Nozawa, Ltd. , 2010 WL 11712478, at *1 (N.D. Ill. Feb. 5, 2010) (citing Bobbitt v. Victorian House, Inc. , 532 F. Supp. 734, 737 (N.D. Ill. 1982) ) (motion to strike under Rule 12(f) ). The court summarizes the first amended complaint below in accordance with these standards.

A. The Alleged Defect

A cylinder liner is an engine component intended to protect the engine from wear. See Am. Compl. ¶¶ 56, 64. Because cylinder liners are replaceable parts, they are often used in commercial propulsion engines. Am. Compl. ¶ 55.

Ordinary engine operation exposes the cylinder liner to "extreme" heat and pressure. Am. Compl. ¶ 58. The cylinder liner must be capable of withstanding this heat and pressure and must allow the piston to travel with minimal friction. Am. Compl. ¶¶ 58, 62. The cylinder liner must also resist corrosion due to its direct physical contact with other engine parts (the bore). Am. Compl. ¶ 59. Manufacturers most commonly use cast iron for cylinder liners, but plaintiffs allege that during the class period Caterpillar used steel liners, leading to the alleged defect. Am. Compl. ¶¶ 60–61 (alleged upon information and belief). Caterpillar is alleged, on information and belief, to have used the same allegedly defective liners in all of its C-18 and C-32 engines manufactured in the early to mid-2010's until Caterpillar designed and deployed a replacement liner. Am. Compl. ¶ 73.

The allegedly defective liners had "an undue amount of ‘residual stresses’ that are locked during the heating process. These residual stresses are in the upper portions of the Liners ...." Am. Compl. ¶ 67. Residual stress can cause a cylinder's shape to change, and changes in shape can in turn lead to the liner cracking. Am. Compl. ¶ 68. If the liner cracks, oil and coolant can mix in the engine, causing the engine to overheat and to fail. See Am. Compl. ¶¶ 66, 70. "As a result of the Defect, Plaintiffs and Class members also experienced repeated instances of engine overheating, engine failure, oil in the radiator, and other issues with their Engines that led to excessive downtime ...." Am. Compl. ¶ 71.

B. The Named Plaintiffs’ Allegations

In December 2017, plaintiff Quality Organic Products, a Texas company providing agricultural products and services, bought a horizontal grinder for approximately $648,000. See Am. Compl. ¶¶ 6–7. The grinder came equipped with a Caterpillar C-18 engine. Am. Compl. ¶ 7. The engine began overheating approximately four months later, in March 2018, and oil was found in its radiator. Am. Compl. ¶ 9. A Caterpillar authorized dealer performed a repair that took two and a half weeks and included replacing the cylinder liner. Am. Compl. ¶¶ 10, 12. Four hours after the grinder returned to service, the "exact same problem occurred" and its engine again failed. Am. Compl. ¶ 12. The dealer told Quality Organic Products the engine's cylinder liner had cracked and would need to be replaced. Am. Compl. ¶ 13.

In January 2018, plaintiff Morning Star, a Kansas company, leased a hay grinder equipped with a Caterpillar C-18 engine. Am. Compl. ¶¶ 22, 23. Morning Star paid approximately $492,000 for the grinder. Am. Compl. ¶ 23. The hay grinder broke down "shortly after" Morning Star leased it because a cracked cylinder led to water and oil mixing in the engine. See Am. Compl. ¶¶ 24–26. The repair took 30–40 days. Am. Compl. ¶ 27.

In February 2018, plaintiff Northwest Recycling, a Maryland company, bought a "Rotochopper" equipped with a Caterpillar C-18 engine. Am. Compl. ¶¶ 35-36. Oil was detected in the engine's coolant within four months. See Am. Compl. ¶¶ 36-37. Documents associated with a June 2018 repair state that the number two cylinder liner had cracked. Am. Compl. ¶ 37. Subsequent repairs were performed in September, October, and November 2018, including a complete engine replacement. See Am. Compl. ¶¶ 39-41.

C. Class Action Allegations

In their first amended complaint, plaintiffs propose two nationwide classes comprised of all purchasers or lessors of Caterpillar engines equipped with the allegedly defective cylinder liners. One class would be for the purpose of issuing, or denying, declaratory and injunctive relief, and the other would be a nationwide damages class. See Am. Compl. ¶¶ 107(a), (b). Plaintiffs maintain that Illinois's substantive law would govern the claims of all class members. Am. Compl. ¶ 53 (choice of law allegations). But if the choice of law analysis ultimately points to the law of one or more other states, plaintiffs propose certifying state-specific subclasses. See Am. Compl. ¶ 107(c). As a further alternative to the damages class, plaintiffs would seek certification of one or more issues for class-wide resolution, such as whether the liners are defective. Am. Compl. ¶ 107(d).

D. Procedural Posture

Caterpillar attached the declarations of two of its employees, Gary Mueller and Jesse Quick, to its memorandum in support of its motion to dismiss.¹ ECF No. 42 Exs. A, B. The declarations describe in general terms some alleged differences between the design, manufacture, and applications of Caterpillar's C-18 and C-32 engines. See generally id. For instance, both aver that different Caterpillar divisions design and manufacture its C-18 and C-32 engines. Mueller Decl. ¶¶ 5-6; Quick Decl. ¶¶ 6–7. Caterpillar relies on these declarations solely to support its motion to dismiss for lack of standing. Response 2, ECF No. 46.

One day after defendants filed their pending motion to dismiss and to strike, the parties filed a joint motion asking the court to adopt their schedule for pretrial discovery. ECF No. 43. The motion was granted. ECF No. 44. The parties jointly sought and obtained a six-month extension of all discovery deadlines on February 25, 2021. See ECF No. 62. Under the revised schedule proposed by the parties and adopted by the court, fact discovery will be completed by October 1, 2021. Am. Scheduling Order 1, ECF No. 65. After expert discovery, motions for class certification are due March 16, 2022. Id.

II. Article III Standing

As the party invoking the court's jurisdiction, each plaintiff must demonstrate Article III standing by showing that it "has suffered a...