Unpublished Disposition, 872 F.2d 429 (9th Cir. 1989)

MEMORANDUM^* 

Albert Morjig seeks tort damages for economic losses on behalf of himself and a class composed of California residents who bought Mercedes Benz automobiles of 1972 or later model year. The complaint alleges that the automobiles had metallic paint that deteriorated prematurely as a result of a defect in the paint or the way it was applied. The district court granted the defendants' motion for judgment on the pleadings for failure to state a claim. The district court denied Morjig's motion to amend his complaint to include claims based on California's statutory warranties of implied merchantability. We affirm.

We review de novo a dismissal by judgment on the pleadings for failure to state a claim, taking as true all allegations of fact by the nonmoving party, and affirming only if the defendant is entitled to judgment as a matter of law and it is clear no relief could be granted under any set of facts that could be proven consistent with the allegations in the complaint. McGlinchy v. Shell Chemical Co., 845 F.2d 802, 810 (9th Cir. 1988).

The district court was correct in dismissing Morjig's complaint for failure to state a claim. California does not allow tort recovery in products liability cases where damage due to a defective product consists solely of economic losses, rather than personal injury or property damage. Sacramento Regional Transit Dist. v. Flxible, 158 Cal. App. 3d 289, 294, 298-99, 204 Cal. Rptr. 736, 738, 742 (1984) (citing Seely v. White Motor Co., 63 Cal. 2d 9, 18-19, 403 P.2d 145, 151-52, 45 Cal. Rptr. 17, 23-24 (1963)). Morjig's complaint sought tort damages for costs of repair and diminution in value. Such damages, absent allegations of personal injury or physical property damage, constitute economic damages for which tort recovery is not allowed. Flxible, 158 Cal. App. 3d at 294, 204 Cal. Rptr. at 739.

There is no merit to Morjig's argument that a defective undercoating caused further damage to the paint and therefore the plaintiffs sustained physical damage to property, rather than economic loss. Tort recovery may be had if the damaged property consists of the defective product itself when the plaintiff shows "(1) a defect and (2) further damage to plaintiff's property caused by the defect. When the defect and the damage are one and the same, the defect may not be considered to have caused physical injury." Flxible, 158 Cal. App. 3d at 294, 204 Cal. Rptr. at 738. See International Knights of Wine, Inc. v. Nave Pierson Winery, Inc., 110 Cal. App. 3d 1001, 168 Cal. Rptr. 301 (1980) (tort recovery was possible when a complaint alleged that defective bottle caps rendered wine unsaleable); Gherna v. Ford Motor Co., 246 Cal. App. 2d 639, 55 Cal. Rptr. 94 (1966) (the court allowed tort recovery for the cost of repairing a truck when a defect in the engine caused a fire that substantially damaged the truck). Because paint and undercoating are virtually the same part of a product, Knights and Gherna do not apply.

Morjig's argument that plaintiffs are entitled to tort recovery because they are consumers is foreclosed by Osborne v. Subaru of America, Inc., 198 Cal. App. 3d 646, 658, 243 Cal. Rptr. 815, 821 (1988), which holds that Seely prevents recovery of economic losses in a consumer class action products liability case. Accordingly, the district court did not err in dismissing the complaint for failure to state a claim.

The district court denied Morjig's motion for leave to amend his complaint to include claims for breach of implied warranty of merchantability based on the Song-Beverly Consumer Warranty Act, California Civil Code Sec. 1790, and California Commercial Code Sec. 2314. We review denial of leave to amend after a responsive pleading has been filed for abuse of discretion. DCD Programs, Ltd. v. Leighton, 833 F.2d 183, 187 (9th Cir. 1987). If the trial court makes specific findings on the factors supporting the denial of leave to amend, they must be upheld on appeal unless clearly erroneous. Id.

In 1978, the state court dismissed with prejudice as time-barred the statutory implied merchantability claims in Morjig's first amended complaint. Morjig moved in the district court for leave to file a third amended complaint to reallege a claim of breach of California's statutory implied warranty of merchantability. The district court denied leave to amend on the grounds that Morjig had not shown why the state court's dismissal on statute of limitations grounds was in error, that Morjig intentionally delayed reasserting the implied warranty claims for almost nine years, and that the defendants were prejudiced by the delay. Morjig does not respond in his brief to any of the grounds upon which the district court's dismissal was based. Under these circumstances, we have no basis for reversing the district court's denial of leave to amend.

AFFIRMED.