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Ahead of the Curve Auto Supplier
BlogsPublications | February 10, 2017
5 minute read
Ahead of the Curve Auto Supplier

Three Insights into How Justice Gorsuch Might Affect the Automotive Industry

Judge Neil Gorsuch of the U.S. Court of Appeals for the 10th Circuit appears to be headed toward confirmation as the next Justice of the United States Supreme Court. If confirmed, how might his decisions in that role affect the American automotive industry? Although every case depends on its own facts, three of his Tenth Circuit decisions provide some clues.

Meshwerks v Toyota Motor Sales USA, Inc. (2008)

Judge Gorsuch wrote this opinion dismissing a copyright infringement suit brought against Toyota and its advertisers. When Toyota and its advertisers decided to start using digital (rather than photographic) images of cars in their ads, they hired Meshwerks, a Utah-based contractor, to create wire-frame digital scans of the vehicles. The marketing team could then colorize, animate and tweak these images however they needed to. When the defendants altered the images to reflect adjustments to the car body designs, however, Meshwerks sued, arguing that it owned the copyright in the digital models it created.

The court, however, determined that Meshwerks couldn’t own a copyright, because the digital models were not copyrightable in the first place. Copyright law only protects original expression–that is, something that its author came up with rather than copied. The fundamental flaw in plaintiff’s argument here was focusing on the skill it took to operate the 3D scanning machines and Maya modeling software but ignoring the fact that, at the end of the day, all they were doing was reproducing the exact dimensions of something that already existed. They created new digital files, but those files contained nothing conceptually new. Judge Gorsuch called them “completely unadorned digital replicas of Toyota vehicles in a two-dimensional space.”

As automotive companies broaden their technological offerings, it’s encouraging to see evidence that, if confirmed, Judge Gorsuch will closely examine the issues such new technologies raise.

Winzler v. Toyota Motor Sales USA, Inc. (2012)

As luck would have it, Judge Gorsuch wrote another opinion involving the same automotive defendant six years later. This case involved a plaintiff proposing a nationwide class of 2006 Toyota Corolla and Toyota Corolla Matrix owners and lessees. She alleged that the cars harbored defective "Engine Control Modules" ("ECMs"), making them prone to stall without warning, and sought a nationwide recall as a remedy.

Soon after the lawsuit was filed, however, Toyota announced a recall of the vehicles at issue, overseen by the National Highway Transportation Safety Administration ("NHTSA"). Although this did not technically render the plaintiff’s lawsuit moot, Judge Gorsuch relied on the equitable doctrine of “prudential mootness” to dismiss the lawsuit anyway. “Things might be different if we thought Ms. Winzler would be left without complete relief,” he wrote. But Toyota’s act of declaring the defect to NHTSA and announcing a recall set into motion the statutorily mandated and administratively overseen national recall process.

The plaintiff protested that NHTSA might not conduct the recall process as robustly as she would like. Judge Gorsuch acknowledged this possibility, but it did not change his deference to NHTSA’s expertise.  He expressed considerable reluctance to “assume that NHTSA ... is likely to abdicate its duty” or “fall down on the job.” Rather, he opted to respect NHTSA’s “latitude ... when it comes to selecting what they believe to be the most appropriate path to their stated remedial objective.”

These statements suggest a high level of respect and deference that a Justice Gorsuch would afford to NHTSA and other executive branch regulatory bodies in future automotive disputes.

Carolina Casualty Insurance Co. v. Yeates (2009)

Judge Gorsuch joined, but did not author, this en banc decision of the 10th Circuit’s full 12-member bench. Nevertheless, the ruling is an acknowledgement that he appreciates the importance of automotive regulations being applied uniformly nationwide.

Federal regulations (specifically, 49 C.F.R. § 387.301(a)) require interstate trucking companies to maintain insurance or another form of surety "conditioned to pay any final judgment recovered against such motor carrier for bodily injuries to or the death of any person resulting from the negligent operation, maintenance or use of motor vehicles.” To satisfy this insurance requirement, most interstate trucking companies obtain a specific endorsement to one or more of their insurance policies—the MCS-90 endorsement—which guarantees payment of minimum amounts, as set forth in the regulations, to an injured member of the public.

Before this decision, a 20-year old Tenth Circuit precedent held that the MCS-90 endorsement amended contrary language in the underlying insurance policy, which would otherwise have limited the insurance carrier's liability to excess coverage. That holding had been interpreted to mean that an MCS-90 endorsement modifies the underlying insurance policy in a variety of ways, including (1) allowing recovery from a policy that otherwise does not provide liability coverage, and (2) allowing primary liability recovery from a policy that provides only excess coverage.

Since that decision, however, nearly every other federal appellate court to consider the issue decided it the other way, holding that the MCS-90 endorsement is a surety obligation and does not modify the language of an underlying insurance policy. Judge Gorsuch and his colleagues recognized that their contrary rule—which interpreted federal law for the states in their jurisdiction—had become “an idiosyncratic, minority position that frustrates the regulatory purpose behind the MCS-90 endorsement and impedes the uniform regulation of interstate trucking.” Because precedential decisions may only be overruled by the full en banc court, the judges unanimously accepted this appeal in order to reverse their prior decision and bring their court in line with what had become the national norm.

By signing on to this opinion, Judge Gorsuch demonstrated a willingness to re-evaluate and an appreciation of the fact that uniform rules reduce regulatory burdens on automotive companies.

Although automotive disputes will continue to raise new questions in various areas of law, these three opinions offer reason for optimism that a Justice Gorsuch will approach each situation with precision, a respect for the existing system of automotive regulation and desire to maintain nationwide uniformity in the rules that automotive companies must follow.