Varela v. Fca US

IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE

MELISSA VARELA,
Plaintiff/Appellant,

v.

FCA US LLC, et al.,
Defendants/Appellees.

No. 1 CA-CV 19-0209
FILED 5-5-2020

Appeal from the Superior Court in Maricopa County
No. CV2015-008635
The Honorable Connie Contes, Judge

REVERSED IN PART; AFFIRMED IN PART; REMANDED

COUNSEL

Shumway Law, PLLC, Phoenix
By G. Lynn Shumway, Christopher J. Zachar, Brent Ghelfi
Counsel for Plaintiff/Appellant

Bowman and Brooke, LLP, Phoenix
By Paul G. Cereghini, Travis M. Wheeler
Counsel for Defendants/Appellees
 VARELA v. FCA US, et al.
Opinion of the Court

OPINION

Judge Diane M. Johnsen delivered the opinion of the Court, in which Presiding
Judge Samuel A. Thumma and Judge Randall M. Howe joined.1

J O H N S E N, Judge:

¶1 Melissa Varela sued three automotive corporations (together
"Chrysler") after a 2014 Jeep Grand Cherokee rear-ended her car at high speed,
injuring her and killing her four-year-old daughter in the back seat. The Jeep was
not equipped with automated collision-avoidance technology. Alleging negligence
and product liability (defective design), Varela claimed the Jeep would not have
collided with her car, or would not have collided with as much force, if it had been
equipped with that technology.

¶2 The superior court granted Chrysler's motion to dismiss based on a
doctrine called implied obstacle preemption. On appeal, Chrysler argues this
court's recent decision in Dashi v. Nissan North America, Inc., 247 Ariz. 56 (App.
2019), rev. denied (Ariz. Jan. 7, 2020), compels us to affirm. The facts and the nature
of the allegations here, however, are different. We conclude Varela's claims are not
preempted, reverse the dismissal and remand for further proceedings.2

1 Judge Johnsen was a sitting member of this court when the matter was
assigned to this panel of the court. She retired effective February 29, 2020. In
accordance with the authority granted by Article 6, Section 3, of the Arizona
Constitution and pursuant to A.R.S. § 12-145 (2020), the Chief Justice of the Arizona
Supreme Court has designated Judge Johnsen as a judge pro tempore in the Court of
Appeals, Division One, for the purpose of participating in the resolution of cases
assigned to this panel during her term in office.

2 Our jurisdiction over Varela's timely appeal arises from Article 6, Section 9,
of the Arizona Constitution, and Arizona Revised Statutes sections 12-120.21(A)(1)
(2020) and -2101(A)(1) (2020).

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Opinion of the Court

DISCUSSION

A. Implied Obstacle Preemption.

1. Introduction.

¶3 Automakers now design, install and regularly sell cars that use
technology to sense when a crash is likely ("forward collision warning") and to
automatically apply the brakes to avoid or minimize the effects of a crash ("crash
imminent braking"). See Federal Motor Vehicle Safety Standards; Automatic
Emergency Braking, 82 Fed. Reg. 8391, 8392 (Jan. 25, 2017). The National Highway
Traffic Safety Administration ("NHTSA") refers to these systems, together with
"dynamic brake support," as "automatic emergency braking" ("AEB") technologies.
See id. Chrysler offered its 2014 Jeep Grand Cherokee vehicle with five trim levels.
AEB technologies were standard on the two most expensive models, optional on
two other models, and not available at all on the least expensive model. The driver
who collided with Varela's car drove one of the middle models but had not bought
the option package that included AEB.

¶4 Chrysler argues Varela's tort claims are barred by implied obstacle
preemption as a result of a "deliberate decision" by NHTSA in 2017 to decline to
undertake a rulemaking process to mandate AEB technologies in new cars. As
Chrysler argues, "NHTSA's refusal to set formal standards amounts to an
authoritative decision to preserve manufacturer choice in whether and how to
install AEB technologies."

2. Legal principles.

¶5 This court reviews de novo the "issues of law relating to alleged federal
preemption of state law claims." Conklin v. Medtronic, Inc., 245 Ariz. 501, 504, ¶ 7
(2018). Chrysler bears the burden of establishing its preemption defense. See id. at
¶ 8. As relevant, obstacle preemption occurs when a state common-law claim
"stands as an obstacle to the accomplishment and execution of the full purposes
and objectives" of a federal law or regulation. Williamson v. Mazda Motor of Am.,
Inc., 562 U.S. 323, 330 (2011) (citation omitted). Chrysler's argument here is not that
Congress enacted a statute or a federal agency promulgated a rule that bars Varela's
claims. Instead, Chrysler argues the claims are barred by NHTSA's decision not to
regulate AEB technology, a subcategory of preemption called "implied obstacle
preemption." Dashi, 247 Ariz. at 57, ¶ 1.

¶6 Implied obstacle preemption cases are rare; Chrysler relies primarily
on Geier v. American Honda Motor Co., 529 U.S. 861 (2000). At issue in that case was
a 1984 federal safety standard requiring automakers "to equip some but not all of
their 1987 vehicles with passive restraints" for occupants of passenger cars. Id. at

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Opinion of the Court

864-65. The driver of a 1987 Honda Accord and her parents sued the manufacturer,
alleging her car was negligently and defectively designed without a driver's side
airbag. Id. at 865. In addressing preemption, the Court first noted that under a
"saving clause" in the National Traffic and Motor Vehicle Safety Act of 1966 ("Safety
Act"), 15 U.S.C. § 1397(k) (1988) (recodified as amended at 49 U.S.C. § 30103(e)
(2018)), "compliance with" a federal safety standard "does not exempt any person
from any liability under common law." Geier, 529 U.S. at 867-68.3 That provision
allows common-law claims "that seek to establish greater safety than the minimum
safety achieved by a federal regulation intended to provide a floor." Id. at 870. But
the saving clause is of no help to a plaintiff making a claim that "actually conflicts"
with a federal safety standard. Id. at 874.

¶7 The 1984 safety standard in Geier was premised on the reality that
although "buckled up seatbelts are a vital ingredient of automobile safety," data
showed that most front-seat passengers were not buckling up. Id. at 877. "[P]assive
restraint[s]" that would replace or complement seatbelts could remedy the
problem, but they had their own issues. See id. at 877-78. The public did not
particularly like "nondetachable automatic belts," and airbags posed "special risks
to safety," particularly for child passengers. Id. at 877. There also were expense
concerns. Id. at 878. For these reasons, the United States Department of
Transportation specifically rejected a proposal to require airbags in all cars.
Instead, the Department set "a performance requirement for passive restraint
devices [that allowed] manufacturers to choose among different passive restraint
mechanisms . . . to satisfy that requirement." Id. at 878-79. By mandating that
automakers install "a mix" of passive-restraint devices gradually, over time, the
Department intended to allow time for manufacturers to develop "alternative,
cheaper, and safer" passive-restraint devices. Id. at 879. Significantly, the Court
noted, the United States Solicitor General had filed an amicus brief reporting the
Department's view that the 1984 safety standard "embodies the Secretary's policy
judgment that safety would best be promoted if manufacturers installed alternative
protection systems in their fleets rather than one particular system in every car." Id.
at 881.

¶8 Turning to the plaintiffs' defective-design claim, the Geier Court
reasoned that "by its terms [the claim] would have required manufacturers of all
similar cars to install airbags rather than other passive restraint systems, such as
automatic belts or passive interiors." Id. The Court continued:

It thereby would have presented an obstacle to the variety and mix of
devices that the federal regulation sought. It would have required all

3 Absent material revision after the relevant date, we cite the current version
of a statute or rule.

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manufacturers to have installed airbags in [a geographic subset] of
their 1987 new car fleet, even though [the standard] at that time
required only that 10% of a manufacturer's nationwide fleet be
equipped with any passive restraint device at all. It thereby also
would have stood as an obstacle to the gradual passive restraint
phase-in that the federal regulation deliberately imposed. . . .
Because the rule of law for which [the plaintiffs] contend would have
stood "as an obstacle to the accomplishment and execution of" the
important means-related federal objectives that we have just
discussed, it is pre-empted.

Id. at 881-82 (quoting Hines v. Davidowitz, 312 U.S. 52, 67 (1941)).

¶9 The Supreme Court came to the opposite conclusion 11 years later,
when it next addressed this variety of obstacle preemption in the context of
highway safety. At issue in Williamson v. Mazda Motor of Am., Inc., 562 U.S. 323
(2011), was a later version of the same safety standard in Geier that, by 1989,
required automakers to install lap-and-shoulder belts in the rear seats of passenger
cars next to the vehicle's doors or frames, but allowed simple lap belts in the rear
inner seats. Id. at 326. The plaintiffs alleged a relative died in a traffic accident
because the rear aisle seat of the minivan in which she was riding was equipped
only with a lap belt, not a lap-and-shoulder belt. Id.

¶10 The Williamson Court acknowledged that, like the safety measure in
Geier, the 1989 measure explicitly gave automakers a choice about which form of
restraints to install. Id. at 332-33. But, in contrast to the earlier standard, when the
Department of Transportation issued the 1989 standard, it was not concerned about
building consumer acceptance or about the safety of lap-and-shoulder belts, so it
had no interest in ensuring a mix of different restraint devices. Id. at 333. The
record revealed that the primary reason for the Department's failure to require lap-
and-shoulder belts in all rear inner seats in 1989 was that it thought such a
requirement might not be cost-effective. Id. at 335. That judgment, the Court held,
could not impliedly preempt a common-law claim:

[T]hat fact – the fact that [the Department] made a negative judgment
about cost-effectiveness – cannot by itself show that [the Department]
sought to forbid common-law tort suits in which a judge or jury might
reach a different conclusion. . . . [T]o infer from the mere existence of
such a cost-effectiveness judgment that the federal agency intends to
bar States from imposing stricter standards would treat all such
federal standards as if they were maximum standards, eliminating the
possibility that the federal agency seeks only to set forth a minimum
standard potentially supplemented through state tort law. We cannot

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reconcile this consequence with a statutory saving clause that foresees
the likelihood of a continued meaningful role for state tort law.

Id. at 335. At the same time, the Solicitor General informed the Court that, in
contrast to the agency's view in Geier, the Department of Transportation did not
believe the 1989 safety measure preempted the claim at issue. Id. ("[T]he agency's
own views should make a difference." (quoting Geier, 529 U.S. at 883)).

3. Varela's claims and NHTSA's decision to forego AEB rulemaking.

¶11 The safety standards at issue in Geier and Williamson both required
installation of some passive restraints but allowed automakers to choose which
specific device to install. Williamson, 562 U.S. at 326; Geier, 529 U.S. at 878-79. By
contrast, at issue here is NHTSA's decision in 2017 not to require automakers to
install any AEB technologies. In Sprietsma v. Mercury Marine, 537 U.S. 51 (2002), the
Supreme Court unanimously held that a federal agency's decision to refrain from
mandating a national standard does not, without more, impliedly preempt a state
common-law tort action.

¶12 The plaintiff Sprietsma alleged an outboard motor was defectively
designed because it lacked propeller guards. Id. at 54-55. Like Chrysler in this case,
the manufacturer argued that a decision by the relevant federal agency (the Coast
Guard) not to adopt a regulation requiring propeller guards impliedly preempted
the claim. The Court rejected that contention: "It is quite wrong to view that
decision as the functional equivalent of a regulation prohibiting all States and their
political subdivisions from adopting such a regulation." Id. at 65.

¶13 As in Geier and Williamson, the Court in Sprietsma examined the basis
for the federal entity's decision. See id. at 66. Among the reasons the Coast Guard
cited for declining to mandate propeller guards was that the data did not support
such a regulation, there were questions about whether "a universally acceptable
propeller guard" would be feasible, and it would be expensive to retrofit boats with
propeller guards. Id. Nothing in this explanation, the Court concluded, "would be
inconsistent with a tort verdict premised on a jury's finding that some type of
propeller guard should have been installed on this particular . . . type of motor." Id.
at 67. To the contrary, as the Court noted, the Solicitor General informed the Court
that the Coast Guard did not view its decision as impliedly preempting a common-
law claim based on the absence of a propeller guard. Id. at 68.

¶14 Turning to the claims at issue here, by 2017, NHTSA, as authorized
by the Department of Transportation, had been studying AEB technologies for at
least ten years. Automatic Emergency Braking, 82 Fed. Reg. at 8392; 49 C.F.R. §
1.95(a). In 2011, NHTSA added "forward collision warning" to its New Car
Assessment Program ("NCAP"), a program by which it evaluates new cars'

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performance on various safety tests and reports the results to the public. Id.; see
generally Consumer Information; New Car Assessment Program, 73 Fed. Reg.
40,016 (July 11, 2008). In 2015, NHTSA added to NCAP two additional AEB
technologies, "crash imminent braking" and "dynamic brake support." Automatic
Emergency Braking, 82 Fed. Reg. at 8392. That same year, NHTSA announced a
commitment by ten automakers to voluntarily install AEB in their new cars, and
followed that in 2016 by announcing a commitment by 20 automakers,
"representing more than 99 percent of light motor vehicle sales in the United
States," to voluntarily install AEB in substantially all their light motor vehicles by
2022. Id. at 8392-93.

¶15 A consumer group petitioned NHTSA "to initiate a rulemaking to
issue a safety standard requiring that light vehicles be equipped" with AEB
technologies. Id. NHTSA's denial of the petition was no rejection of AEB. To the
contrary, the agency's written decision endorsed AEB as a powerful means of
improving roadway safety but asserted that, given the huge strides automakers
already had made in developing and installing AEB technologies, it did not need
to issue a formal rule to further promote AEB. Id. at 8393-94. NHTSA observed
that its decision to incorporate AEB performance standards in NCAP, along with
the responses of private ratings services to the agency's publication of safety ratings
issued to AEB devices in new vehicles, had caused automakers voluntarily "to
increase their installation of AEB technologies and to improve their performance."
Id. at 8394. Indeed, NHTSA observed that a formal rulemaking process might cause
a delay of three years or more before AEB technologies would be standard in new
cars. Id. That being the case, and given its limited resources, the agency concluded
it should devote its rulemaking energies to other initiatives, including even more
advanced motor-vehicle technologies. Id. at 8393-94.4

¶16 As NHTSA's decision noted, Chrysler is one of many manufacturers
that voluntarily agreed to install AEB technologies in their new cars. Id. at 8393,
n.2. Having developed and tested AEB for its Jeep Grand Cherokee, the company
submitted its 2014 model for NHTSA's new-car review through NCAP. The agency
found the AEB that Chrysler offered with its 2014 Jeep had been "either verified by
NHTSA or reported by the vehicle manufacturer[] as meeting" the agency's
performance criteria, and NHTSA's website reported the favorable result under a

4 We note that NHTSA recently commenced a rulemaking aimed at adapting
existing vehicle safety standards to driverless cars. See "Occupant Protection for
Automated Driving Systems," Docket No. NHTSA-2020-0014, issued March 16,
2020. In announcing that rulemaking, NHTSA expressly stated that it did not
intend its proposal to impliedly preempt a state-law tort claim premised on a higher
safety standard. Id. at 75.

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heading titled "Recommended Safety Technologies." 2014 Jeep Grand Cherokee: SUV
4WD, Nat'l Highway Traffic Safety Admin.,
https://www.nhtsa.gov/vehicle/2014/JEEP/GRAND%252520CHEROKEE/SUV
/4WD (last visited Feb. 27, 2020).

¶17 Varela alleges that, having designed and installed AEB as a standard
feature on its highest-end 2014 Grand Cherokees, Chrysler negligently and
defectively designed its other 2014 Grand Cherokee models by offering AEB
technologies, if at all, only as an option for which buyers would have to pay extra.
As Varela puts it, Chrysler should not have "option[ed] safety" by declining to make
its AEB standard on all trim packages of the 2014 Grand Cherokee. The specifics
of Varela's claims – particularly when juxtaposed against NHTSA's explanation for
declining to undertake AEB rulemaking – control our analysis of whether the
agency's denial of the petition in 2017 deserves preemptive effect, as in Geier and
Dashi, or is more akin to the agency actions in Sprietsma or Williamson, which did
not preempt common-law claims.

¶18 It is not disputed that Chrysler designed an AEB system that met
NHTSA's NCAP performance criteria but installed that system as standard in only
two of the five models of its 2014 Jeep Grand Cherokee. Unlike the plaintiff in Geier,
Varela does not challenge the automaker's choice to install one safety device over
another in the face of an agency action mandating a mix of devices. That is, she
does not allege the 2014 Grand Cherokee that hit her car was defective because it
came with an AEB design that was inferior to another AEB design. Nor, given the
NCAP approval of the AEB that Chrysler installed in some of its 2014 Grand
Cherokees, will the finder of fact in this case be asked to set a performance standard
for AEB technologies, an issue the claim in Dashi might have presented. Varela's
only contention is that, having won NHTSA's effective approval for its AEB design
during the NCAP process, Chrysler should have installed that design as a standard
feature on all models of its 2014 Grand Cherokees and that its failure to do so was
negligent and a design defect.

¶19 Given NHTSA's public confirmation that Chrysler's AEB satisfied
the agency's performance criteria in 2014, we cannot conclude that NHTSA's
decision to eschew a formal AEB rulemaking impliedly preempts Varela's
contention that Chrysler should have installed that same technology on the Jeep at
issue here. This is particularly true because NHTSA's refusal to commence an AEB
rulemaking in 2017 was premised primarily on the agency's conclusion that
automakers were moving forward so quickly with AEB that it did not need to issue
a formal rule to compel them to do so. Automatic Emergency Braking, 82 Fed. Reg.
at 8394-95. And, unlike in Geier, we have nothing in our record from NHTSA
informing us that when it decided against undertaking an AEB rulemaking in 2017,
it intended to preempt tort claims based on the absence of AEB. To the contrary,

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NHTSA's explanation for its decision recounts its long history of encouraging
automakers to develop AEB technologies; its decision to refrain from issuing a rule
was not driven by uncertainty about whether automakers should install AEB, or
about what design of AEB to install, but instead by the agency's apparent delight
at automakers' embrace of AEB technologies of all designs. See id.

¶20 As Williamson put it, a tort claim that would restrict a choice left open
by agency action is impliedly preempted only when "that choice is a significant
regulatory objective." 562 U.S. at 332. Nothing in NHTSA's 2017 decision even
hints of a "regulatory objective" by the agency to delay automakers' installation of
AEB technologies that have met its performance standards.5

¶21 Chrysler argues that allowing Varela's claims and others like it would
stymie automakers' "freedom to continue to innovate and increase consumer
safety." It contends that when a manufacturer introduces such technology on a
limited basis, it can use its resulting experience to "discover any unintended
consequences" while it further refines the technology. Nothing in our record or in
NHTSA's written decision, however, shows that NHTSA intended to foreclose
liability under circumstances such as this. Nor do we accept Chrysler's contention
that allowing Varela's claims would effectively punish it for developing and
installing AEB technology or reward hypothetical other "manufacturers for offering
no AEB technologies on their vehicles." The voluntary industry commitments that
NHTSA trumpeted in deciding to forego rulemaking demonstrate that automakers
face enormous competitive pressures to develop and install technologies that will
win the agency's recommendation in the NCAP process and the marketplace.

¶22 For these reasons, we conclude that NHTSA's refusal to undertake an
AEB rulemaking in 2017 does not impliedly preempt Varela's common-law claims.
This result is fully consistent with "a congressional determination that occasional
nonuniformity is a small price to pay for a system in which juries not only create,
but also enforce, safety standards, while simultaneously providing necessary
compensation to victims." Geier, 529 U.S. at 871.

5 Under Arizona Rule of Evidence 201, this court takes judicial notice of a 2017
Department of Transportation report to Congress vigorously endorsing
automakers' voluntary commitment to install AEB technologies "in virtually all
passenger vehicles by 2022." U.S. Dep't of Transp., The U.S. Department of
Transportation's Status of Actions Addressing the Safety Issue Areas on the NTSB's Most
Wanted List 7 (2017). The Department continued, "The historic voluntar[y]
commitment ensures that this lifesaving technology is incorporated into vehicles
faster than through traditional regulatory channels, and not just as a high-end
luxury option." Id.

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B. Protective Order Precluding Deposition.

¶23 Varela also appeals from the superior court's order granting Chrysler
a protective order pursuant to Arizona Rule of Civil Procedure 26(b)(1) precluding
a deposition of Mark Chernoby, Chrysler's chief technical compliance officer.

¶24 Pursuant to Rule 30(b)(6), Varela had served a deposition notice on
the company seeking testimony on 92 topics, and Chrysler produced three
company representatives with management roles in overseeing the Grand
Cherokee, who testified about the design, development, testing, functionality and
rollout of Chrysler's AEB systems in that vehicle. Varela also deposed two
additional Chrysler employees who testified in their individual capacities about the
company's AEB systems.

¶25 Varela then sought to depose Chernoby, who at the time reported
directly to Chrysler's chief executive officer. Varela asserted she wanted to depose
Chernoby about decisions the company made in rolling out AEB technologies
through its fleet generally and about a quotation attributed to him in a 2014
company press release.6

¶26 In moving for a protective order, Chrysler protested that Chernoby
had no "genuinely relevant knowledge" that Varela could not obtain from other
witnesses or other means of discovery. According to an affidavit Chernoby
submitted with the motion, he was Vice President Engineering & Product
Committee Coordinator, referring to the committee that had accepted the
recommendation of a "cross-functional team" about what trim levels of the 2014
Grand Cherokee "would receive [AEB] as either standard or optional equipment."
Chernoby averred that he had no recollection of any discussion about AEB during
a key meeting in April 2011 at which the 2014 Jeeps were discussed. Further, he
stated that two of the witnesses Chrysler produced in response to the Rule 30(b)(6)
deposition notice were members of that cross-functional team, and, after reviewing
their testimony, he stated that he had no knowledge or information concerning the
AEB roll-out that "is any way superior or more detailed" than those witnesses.

¶27 In response to the motion, Varela argued that the company had yet to
allow her to depose any witness about Chrysler's "overall corporate policies and
strategies with respect to" AEB, "including an overall corporate strategy for
introduction of the feature." Chrysler countered that, by noticing Chernoby's

6 The statement attributed to Chernoby in the press release was, "Chrysler
Group takes seriously its commitment to providing innovative and intuitive driver-
assistance features to the mainstream market segments."

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deposition, Varela effectively sought to dictate whom the company would produce
as a Rule 30(b)(6) witness about company-wide strategy and policy issues.

¶28 After full briefing and oral argument, the superior court granted the
motion to preclude the Chernoby deposition but ruled that Chrysler would need to
produce a Rule 30(b)(6) witness knowledgeable about overall corporate strategy
issues with respect to AEB.

¶29 The court did not abuse its discretion. See Brown v. Superior Court, 137
Ariz. 327, 331-32 (1983). Varela did not dispute Chrysler's assertions that Chernoby
lacked knowledge about why Chrysler as a corporation decided to introduce AEB
across its range of vehicles in the manner it did. And in granting the protective
order, the court made clear that it would enforce a Rule 30(b)(6) deposition on that
topic. See Ariz. R. Civ. P. 30(b)(6) (Upon service of a deposition notice that
"describe[s] with reasonable particularity the matters for examination, . . . [t]he
named entity must then designate one or more officers, directors, managing agents,
or other persons who consent to testify on its behalf.").

CONCLUSION

¶30 For the reasons stated, we reverse the judgment in favor of Chrysler,
affirm the protective order and remand for further proceedings. Varela is entitled
to her costs on appeal, contingent on compliance with Arizona Rule of Civil
Appellate Procedure 21.

AMY M. WOOD • Clerk of the Court
FILED: AA

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