On Monday, a federal court in California tentatively allowed a potential class action claim against Hyundai’s American subsidiary to move forward past the motion to dismiss stage.  The case stems from factual assertions included in Hyundai’s advertising campaign for its Elantra sedan.  As part of the advertising campaign, Hyundai asserted that the Elantra got 40 miles per gallon on the highway.  However, according to the plaintiff, who is representing a putative class, the Elantra got far fewer miles per gallon during real world driving.  Based upon this purportedly false information, the plaintiff is pursuing statutory claims founded upon California’s unfair business practices, false advertising and consumer protection laws along with related common law causes of action. 

Hyundai moved to dismiss the complaint on the ground that the miles per gallon figure represented an EPA estimate that it was required to disclose pursuant to certain federal regulations.  This, according to Hyundai, established that the plaintiff’s claims were preempted by federal law.  The judge rejected this preemption argument at the motion to dismiss stage.  The judge reasoned that Hyundai’s advertisements neither indicated that the mileage figure was as EPA estimate nor included certain federally required discloses.  This was sufficient to avoid the preemption argument Hyundai raised. 

The case underscores the need for manufactures to be particularly careful and vigilant in confirming that the claims made in their advertising campaigns are factually accurate.  Additionally, the case highlights the quandaries some companies are placed in when it comes to compliance with federal and state regulations.  In short, a manufacturer not only must comply with all applicable federal or state regulations, but must also confirm the veracity of the claims made it its advertising campaigns. Manufacturers can be exposed to a class action lawsuit if their advertising campaigns contain potentially false or materially misleading information. 

For more information, please contact any member of Goldberg Segalla’s Global Insurance Services Practice Group.