Epperson v. General Motors, LLC et al, No. 3:2023cv01554 - Document 17 (S.D. Cal. 2023)
Court Description: ORDER Granting 7 Motion to Dismiss in Part and Granting Request for Judicial Notice [7-2] Plaintiff may file an amended complaint on or before January 10, 2024.. Signed by Judge Thomas J. Whelan on 12/13/2023. (exs)
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Epperson v. General Motors, LLC et al Doc. 17 1 2 3 4 5 6 7 UNITED STATES DISTRICT COURT 8 SOUTHERN DISTRICT OF CALIFORNIA 9 10 JAMES EPPERSON Case No.: 3:23-cv-01554-W-AHG Plaintiff, 11 12 v. 13 GENERAL MOTORS, LLC, a limited liability company Defendant. 14 ORDER GRANTING MOTION TO DISMISS [DOC. 7] IN PART AND GRANTING REQUEST FOR JUDICIAL NOTICE [DOC. 7-2] 15 16 17 Pending before the Court is Defendant General Motors, LLC’s (“Defendant”) 18 motion to dismiss ([Doc. 7], “Motion”) the fourth and fifth causes of action in Plaintiff’s 19 complaint. ([Doc. 1-2], “Complaint”.) The Motion also asks the Court to take judicial 20 notice of certain EPA mileage range estimates. ([Doc. 7-2], “RJN”.) Plaintiff James 21 Epperson (“Plaintiff”) opposes the Motion. ([Doc. 8], “Opposition” 1.) Defendant has 22 replied. ([Doc 12], “Reply”.) 23 The Court decides the matter on the papers submitted and without oral argument. 24 See Civ. R. 7.1(d)(1). For the following reasons, the Court GRANTS IN PART the 25 Motion. The Court also GRANTS the Request for Judicial Notice. 26 27 1 28 Because Plaintiff’s Opposition does not contain page numbers, all page citations in this Order are to the ECF page number. 1 3:23-cv-01554-W-AHG Dockets.Justia.com 1 2 I. RELEVANT BACKGROUND 3 This case arises from Plaintiff’s purchase 2 of a 2020 Chevrolet Bolt (the 4 “Vehicle”) from one of Defendant’s “authorized dealer[s]” for an unspecified amount 5 “[o]n or about January 16, 2021.” (Complaint at ¶ 7-9.) According to Plaintiff, the 6 vehicle was covered by: (1) an express warranty, under which Defendant promised that 7 the Vehicle “would be free from defects in materials, nonconformities, or workmanship 8 during the applicable warranty period and to the extent the [Vehicle] had defects, 9 [Defendant] would repair the defects”; as well as (2) an implied warranty that the 10 “[Vehicle] would be of the same quality as similar vehicles . . . [and] would be fit for the 11 ordinary purposes for which similar vehicles are used.” (Id. ¶¶ 10, 11.) The Complaint 12 alleges however that during the warranty period, the Vehicle “exhibited defects” and that 13 when Plaintiff notified Defendant of such “defects” and “attempted to invoke the 14 applicable warranties,” Defendant “represented to PLAINTIFF that they could and would 15 make the [Vehicle] conform to the applicable warranties . . . .” (Id. ¶¶ 13-14.) 16 Specifically, Plaintiff alleges that Defendant “issued a recall notice for the [Vehicle]” 17 warning Plaintiff not to charge the Vehicle’s battery above “90%”; not to let the battery’s 18 mileage “fall below seventy (70) miles remaining”; and not to “park[] [the Vehicle] 19 indoors overnight” because the Vehicle’s battery “may ignite.” (Id. at ¶ 18.) Yet, 20 Plaintiff alleges that Defendant has since failed to “make the [Vehicle] conform to the 21 applicable warranties.” (Id. at 15.) 22 23 On July 21, 2023, Plaintiff filed a lawsuit against Defendant in the San Diego Superior Court, entitled James Epperson v. General Motors LLC, et al., No.37-2023- 24 25 26 27 28 2 The Complaint alleges that Plaintiff “purchased” the Vehicle. Complaint at ¶ 4. Similarly, the Notice of Removal refers to the agreement the parties entered into as a “Purchase Contract.” Notice of Removal at ¶ 17. The Court notes however that Defendant has indicated in other filings in this case that Plaintiff may have actually leased the Vehicle instead. (See Opposition to Motion for Remand [Doc. 15] at 9:8-13.) However, this Order is concerned only with the allegations in the Complaint. 2 3:23-cv-01554-W-AHG 1 00031140-CU-BC-CT. The Complaint asserts three causes of action under the Song- 2 Beverly Consumer Warranty Act (Cal. Civ. Code § 1790, et seq); one cause of action 3 alleging fraud; and another alleging violations of the California Business & Professions 4 Code § 17200 (“UCL”). (Complaint at ¶¶ 35-120.) 5 On or about August 23, 2023, Defendant removed the case to this Court based on 6 diversity jurisdiction. (Notice of Removal.) Defendant now moves to dismiss the 7 Complaint’s fourth and fifth causes of action—for fraud (both affirmative 8 misrepresentation and fraudulent concealment) and violation of the UCL—arguing: (1) 9 they fail to meet Rule 9(b)’s particularity requirement; (2) advertising EPA range mileage 10 estimates cannot constitute fraud; (3) the fraudulent concealment claims are barred by the 11 economic loss rule; and (4) Defendant had no duty to disclose the alleged Vehicle 12 “defects” to Plaintiff because the parties had no transactional relationship (i.e., Plaintiff 13 purchased the Vehicle from a dealership, not Defendant). (See Motion at 8:2-8.) In turn, 14 Plaintiff’s Opposition argues that he is only required to allege facts “specific enough to 15 give defendants notice of the particular misconduct so they can defend against it” and that 16 a transactional relationship did exist between Plaintiff and Defendant (i.e., that Defendant 17 did owe a duty to disclose certain information to Plaintiff). (Opposition at 3:21-5:7.) 18 Beyond that, Plaintiff asks for leave to amend if the Court grants the Motion. (Id. at 5:9- 19 6:9.) 20 21 22 II. LEGAL STANDARD Federal Rule of Civil Procedure 12(b)(6) allows a defendant to file a motion 23 to dismiss for failing “to state a claim upon which relief can be granted.” FED. R. 24 CIV. P. 12(b)(6). A motion to dismiss under Rule 12(b)(6) tests the complaint’s 25 sufficiency. See N. Star Int’l v. Ariz. Corp. Comm’n., 720 F.2d 578, 581 (9th Cir. 26 1983). A complaint may be dismissed as a matter of law either for lack of a 27 cognizable legal theory or for insufficient facts under a cognizable theory. 28 Robertson v. Dean Witter Reynolds, Inc., 749 F.2d 530, 534 (9th Cir. 1984). 3 3:23-cv-01554-W-AHG 1 Additionally, in evaluating the motion, the Court must assume the truth of all 2 factual allegations and must “construe them in light most favorable to the 3 nonmoving party.” Gompper v. VISX, Inc., 298 F.3d 893, 895 (9th Cir. 2002). 4 To survive a motion to dismiss, a complaint must contain “a short and plain 5 statement of the claim showing that the pleader is entitled to relief.” FED. R. CIV. 6 P. 8(a)(2). The Supreme Court has interpreted this rule to mean that “[f]actual 7 allegations must be enough to raise a right to relief above the speculative level.” 8 Bell Atl. Corp. v. Twombly, 550 U.S. 554, 555 (2007). The allegations in the 9 complaint must “contain sufficient factual matter, accepted as true, to ‘state a claim 10 to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) 11 (quoting Twombly, 550 U.S. at 570). While well-pled allegations in the complaint 12 are assumed true, a court is not required to accept legal conclusions couched as 13 facts, unwarranted deductions, or unreasonable inferences. Papasan v. Allain, 478 14 U.S. 265, 286 (1986); Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th 15 Cir. 2001). 16 When a complaint alleges fraud, it must also “state with particularity the 17 circumstances constituting fraud or mistake.” FED. R. CIV. P. 9(b) (“Rule 9(b)”). 18 This means that—when it comes to affirmative misrepresentations—the complaint 19 must allege the “who, what, when, where, and how of the misconduct charged” and 20 explain “what is false or misleading about a statement, and why it is false.” Ebeid 21 ex rel. U.S. v. Lungwitz, 616 F.3d 993, 998 (9th Cir. 2010). The same is true for 22 UCL causes of action, to the extent that they allege fraud or facts that necessarily 23 constitute fraud. Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1105 (9th Cir. 24 2003). Although, “[m]alice, intent, knowledge, and other conditions of a person’s 25 mind may be alleged generally.” FED. R. CIV. P. 9(b). But, these allegations of 26 malice, intent, knowledge, and mental state still cannot be conclusory or 27 speculative as they remain subject to Federal Rule of Civil Procedure 8 (“Rule 8”). 28 4 3:23-cv-01554-W-AHG 1 When it comes to claims of fraudulent concealment, courts typically do not 2 require the same level of specificity as they do for affirmative misrepresentation. 3 Baggett v. Hewlett-Packard Co., 582 F. Supp. 2d 1261, 1267-68 (C.D. Cal. 2007) 4 (emphasis added) (citations omitted) (“[I]t is clear that a plaintiff in a fraudulent 5 concealment suit will ‘not be able to specify the time, place, and specific content of 6 an omission as precisely as would a plaintiff in a false representation claim.’ 7 Because such a plaintiff is alleging a failure to act instead of an affirmative act, the 8 plaintiff cannot point out the specific moment when the defendant failed to act. 9 So, a fraud by omission or fraud by concealment claim ‘can succeed without the 10 same level of specificity required by a normal fraud claim.’ . . . . [Plaintiff has 11 satisfied its pleading requirement by] alleging that ‘Plaintiff and the Class were 12 unaware of the above facts and would not have acted as they did if they had 13 known.’”); Falk v. Gen. Motors Corp., 496 F. Supp. 2d 1088, 1098–99 (N.D. Cal. 14 2007) (“Clearly, a plaintiff in a fraud by omission suit will not be able to specify 15 the time, place, and specific content of an omission as precisely as would a 16 plaintiff in a false representation claim. . . . [A] fraud by omission claim can 17 succeed without the same level of specificity required by a normal fraud claim. . . . 18 Plaintiffs adequately state a claim of fraud by omission. They allege that GM was 19 bound by a duty to disclose material facts about its speedometers from 2003 to 20 2007. GM failed to disclose this information, and plaintiffs reasonably claim that 21 they suffered damages after justifiably relying on GM's failure to disclose any 22 defects with the speedometers.”). 23 Lastly, under FED. R. EVID. 2001(b)(2), courts may take judicial notice of 24 facts that “can be accurately and readily determined from sources whose accuracy 25 cannot reasonably be questioned.” The records and reports of administrative 26 bodies, such as the EPA, “are proper subjects of judicial notice, as long as their 27 authenticity or accuracy is not disputed.” AECOM Energy & Constr., Inc. v. 28 Ripley, 2019 WL 2610953, at *3 (C.D. Cal. Apr. 24, 2019); see Welk v. Beam 5 3:23-cv-01554-W-AHG 1 Suntory Imp. Co., 124 F. Supp. 3d 1039, 1041 (S.D. Cal. 2015) (citing Mack v. 2 South Bay Beer Distribs., Inc., 798 F.2d 1279, 1282 (9th Cir.1986) (overruled on 3 other grounds)). 4 5 III. DISCUSSION 6 A. 7 Defendant asks the Court to take judicial notice of the EPA’s range mileage Request for Judicial Notice 8 estimates for the 2020, 2021, and 2022 Chevrolet Bolt (259 miles). (RJN.) Indeed, 9 Plaintiff has attached a screen capture of and URL to the U.S. Department of Energy’s 10 website, www.fueleconomy.gov, that shows that the EPA’s range mileage estimates for 11 the 2020, 2021, and 2022 Chevrolet Bolt is 259 miles. ([Doc. 7-1], Strotz Declaration at 12 ¶ 4; Ex. A to Strotz Declaration.) Plaintiff’s Opposition does not contest or even address 13 the RJN. Seeing as Plaintiff does not dispute the authenticity or accuracy of the EPA’s 14 range mileage estimates for the 2020 Chevrolet Bolt as listed on www.fueleconomy.gov, 15 the Court grants the RJN and takes judicial notice that the EPA’s range mileage estimate 16 for the 2020 Chevrolet Bolt is 259 miles. See, e.g., AECOM Energy & Constr., Inc., 17 2019 WL 2610953, at *3 (C.D. Cal. Apr. 24, 2019) (taking judicial notice of PDF from 18 EPA’s website); Jarose v. Cnty. of Humboldt, 2020 WL 999791, at *4 (N.D. Cal. Mar. 2, 19 2020) (taking judicial notice of information publicly available on the EPA’s website). 20 21 22 23 24 25 26 27 B. Motion to Dismiss 1. Rule 9(b)’s Particularity Requirement a) Affirmative Misrepresentation (Fourth Cause of Action) Defendant moves to dismiss the Complaint’s fourth cause of action—to the extent that it alleges affirmative misrepresentation—on the grounds that the Complaint fails to plead fraud with particularity, as required by Rule 9(b). (Motion 28 6 3:23-cv-01554-W-AHG 1 at 12:13-13:20.) The elements of affirmative misrepresentation in California are: 2 (1) misrepresentation; (2) knowledge of falsity; (3) intend to induce reliance on the 3 misrepresentation; (4) justifiable reliance; and (5) damages. See California Civil 4 Jury Instructions (“CACI”), 1900. As outlined above, when it comes to claims of 5 affirmative misrepresentation, the Complaint must indeed allege fraud with 6 particularity, including the “who,” “what,” “when,” and “where” of the 7 misrepresentation. Plaintiff does not contest this, nor offers any real arguments 8 disputing Defendant’s assertion that the Complaint fails to allege affirmative 9 misrepresentation with particularity. (See Opposition at 3:21-4:24.) 10 Indeed, Plaintiff would be hard pressed to do so. While he may have alleged 11 “what” the misrepresentation was—e.g., “[Defendant] willfully, falsely, and 12 knowingly marketed the [Vehicle] as having the range capability to reach 259- 13 miles on a full charge. . . . [T]he [Vehicle] could not achieve its expected range and 14 safety due to the overheating battery”—the Complaint does not allege “who” made 15 this representation to Plaintiff, “when” exactly it was made, and “where” the 16 representation was made. (See Complaint ¶¶ 69, 75.) Instead, the Complaint 17 makes generic references to Defendant’s “every advertisement and consumer 18 communication” without ever actually identifying a single, specific “false” 19 advertisement. (Id. at ¶ 74.) 20 Meanwhile, Plaintiff is permitted to plead Defendant’s knowledge of the 21 “defect” and intent to have Plaintiff rely on the “misrepresentation” “generally.” 22 See FED. R. CIV. P. 9(b). Indeed, the Complaint does allege Defendant intended 23 Plaintiff to rely on its “misrepresentations” as the obvious intent of an automaker’s 24 advertisement is to induce members of the public to purchase its vehicles. (See 25 Complaint at ¶ 23 [“[Defendant] undertook a marketing strategy that advertises a 26 competitive mileage capacity (at [sic] or about 259 miles electric range on a full 27 charge to convey that consumers . . . are receiving and [sic] electric vehicle that is 28 able to maintain battery life for long distances.”].) 7 3:23-cv-01554-W-AHG 1 However, the Complaint’s allegations regarding knowledge of falsity (i.e., 2 that Defendant knew of the “defects” at the time of the Vehicle’s sale) are entirely 3 conclusory and do not even meet the standard of Rule 8. (See Complaint at ¶ 71 4 [“[Defendant] knew the representations were false . . . .”].) While the Complaint 5 does allege that Defendant “issued a recall notice” for the Vehicle “stating that its 6 battery may ignite when nearing a full charge” and “warn[ing] Plaintiff that the 7 Vehicle’s charge should not exceed 90% . . .[nor] fall below seventy (70) miles 8 remaining . . . [nor] be parked indoors overnight”; this recall was issued to Plaintiff 9 after he had already purchased the Vehicle—and thus does not plausibly support 10 Plaintiff’s conclusory allegation that Defendant was aware of the “defect” at the 11 time of sale. (Complaint at ¶ 18; see id. at ¶ 85.) 12 Accordingly, the Complaint’s affirmative misrepresentation claim must be 13 dismissed for failing to meet Rule 9(b)’s particularity requirement. Similarly, the 14 affirmative misrepresentation claim must also be dismissed because it fails to 15 allege any facts regarding Defendant’s knowledge of falsity. 16 17 18 b) Fraudulent Concealment (Fourth Cause of Action) Next, Defendant moves to dismiss the Complaint’s fourth cause of action— 19 to the extent that it alleges fraudulent concealment—also on the grounds that it 20 fails to meet Rule 9(b)’s heightened pleading standard. (Motion at 11:24-12:12.) 21 However, as discussed above, claims of fraudulent concealment are not required to 22 be pled with the same level of specificity as those of affirmative misrepresentation. 23 Yet, Plaintiff is still required to allege facts regarding each element of fraudulent 24 concealment (i.e. (1) concealment of material fact; (2) duty to disclose the fact; (3) 25 intent to defraud; (4) that Plaintiff would have acted differently had he known the 26 concealed fact; and (5) damages). See CACI 1901. 27 28 Here, the fourth cause of action does allege that Defendant concealed a material fact, that Plaintiff would have acted differently had he known the 8 3:23-cv-01554-W-AHG 1 concealed fact, and that Plaintiff has been damaged. (Complaint at ¶¶ 75 2 [“Defendant concealed and suppressed the fact that the vehicle could not achieve 3 its expected range and safety due to the overheating battery. Instead, Plaintiff 4 would only be able to charge the vehicle to 90% and use the vehicle only if the use 5 did not exceed 70 miles remaining”]; 81 [“[H]ad [Plaintiff] known the truth, they 6 would not have purchased the vehicle or would have paid significantly less”].) 7 Similarly, the Complaint alleges (at least facially) that Defendant had a duty to 8 disclose the omitted material facts.3 (Complaint at ¶ 78 [“Defendant had a duty to 9 disclose that the battery in the vehicle is unsafe at the point of purchase because (1) 10 Defendant had exclusive knowledge of the material, suppressed fact; (2) Defendant 11 took affirmative actions to conceal the material facts; and (3) Defendant made 12 partial representations about the mileage range, battery safety, and performance of 13 the vehicle that were misleading . . . .”].) 14 Turning to whether the Complaint sufficiently alleges intent to defraud, 15 Defendant cites Tenzer v. Superscope, Inc. for the proposition that that “something 16 more than non-performance is required to prove the defendant’s intent not to 17 perform his promise.” 39 Cal. 3d at 30. However, Tenzer went on to qualify that: 18 “[t]o be sure, fraudulent intent must often be established by circumstantial 19 evidence. Prosser, for example, cites cases in which fraudulent intent has been 20 inferred from such circumstances as defendant's insolvency, his hasty repudiation 21 of the promise, his failure even to attempt performance, or his continued 22 assurances after it was clear he would not perform.” Id. (citations omitted). Here, 23 Plaintiff facially alleged intent to defraud. (Complaint at ¶¶ 75-76, 79 [“Defendant 24 concealed and suppressed the fact that the [Vehicle] could not achieve its expected 25 range and safety . . . . Knowledge and information regarding the vehicle's defects 26 27 3 28 As to whether these allegations actually amount to Defendant owing Plaintiff a duty to disclose the claimed “defects”, see infra Section III(B)(4). 9 3:23-cv-01554-W-AHG 1 were in the exclusive and superior possession of Defendant . . . . Defendant 2 intended for Plaintiff to rely on these representations, as evidenced by Defendant's 3 advertising which stresses the ‘259-mi’ range of each vehicle.”].) That being said, 4 at no point does the Plaintiff actually allege any facts supporting these conclusory 5 assertions. Indeed, the only factual allegation the Complaint makes regarding 6 Defendant’s knowledge of the “defects” is: “[i]n 2021, [Defendant] issued a recall 7 notice for the [Vehicle] . . . . [Defendant] warned Plaintiff that the [Vehicle’s] 8 charge should not exceed 90% . . . .” (Complaint ¶ 18.) This allegation that 9 Defendant issued a recall notice after Plaintiff acquired the Vehicle plainly does 10 not support Plaintiff’s conclusion that Defendant intended to defraud him. (See 11 also id. at ¶ 85.) 12 Accordingly, the fourth cause of action’s fraudulent concealment claim fails 13 because the Complaint fails to allege sufficient facts showing that Defendant’s 14 fraudulent intent. 15 16 c) UCL Claims (Fifth Cause of Action) Next, Defendant argues that the fifth cause of action (UCL claim) fails 17 because it does not meet Rule 9(b)’s particularity requirement. (Motion at 10:27- 18 28.) However, not all UCL claims are subject to Rule 9(b). Vess v. Ciba-Geigy 19 Corp. USA, 317 F.3d at 1103-04. Since fraud is not an essential element of a UCL 20 claim, Rule 9(b)’s heightened pleading requirement applies only to allegations that 21 sound in fraud. Id. (emphasis added) (stating that “[plaintiff] asserts that alleged 22 actions by [defendants] . . . state claims under . . . CAL. BUS. & PROF. CODE §§ 23 17200 and 17500. Fraud is not an essential element of a claim under these statutes. 24 . . . [W]here fraud is not an essential element of a claim, only allegations 25 (‘averments’) of fraudulent conduct must satisfy the heightened pleading 26 requirement of Rule 9(b)” and that while the complaint may not explicitly use the 27 word “fraud,” allegations of “the circumstances constituting fraud” count as 28 allegations/averments of fraud triggering Rule 9(b).) 10 3:23-cv-01554-W-AHG 1 Under the UCL, a business practice is deemed “unfair competition” (and is 2 thus prohibited) if it constitutes either: (1) an unlawful business practice; (2) an 3 unfair business practice; or (3) a fraudulent business practice. CAL. BUS. & PROF. 4 CODE § 17200. Here, Plaintiff alleges Defendant has engaged in all three. 5 (Complaint at ¶¶ 87-120.) 6 Unlawful Business Practices Prong: The Complaint alleges that Defendant 7 has engaged in “unlawful” business practices by violating CAL. BUS. & PROF. 8 CODE § 17500 (“Section 17500”). (Complaint at ¶ 110.) Section 17500 in turn 9 makes it unlawful to publicly make or disseminate—with the intent to dispose of 10 property or to induce the public to enter into any obligation relating thereto—any 11 statement which the speaker knows or reasonably should know to be “untrue or 12 misleading.” CAL. BUS. & PROF. CODE § 17500. While Plaintiff does not use the 13 words “fraud” or “fraudulent” in alleging Defendant’s conduct violated Section 14 17500, a closer reading of the Complaint reveals that many of Plaintiff’s key 15 allegations regarding the “unlawful” prong of the UCL constitute what are 16 essentially averments of fraud. To wit, Plaintiff alleges: “Defendant’s use of the 17 defective battery, as alleged herein, is false, deceptive, misleading, and 18 unreasonable . . . . Defendant knew or should have known of its unlawful conduct. . 19 . . [T]he misrepresentations by Defendant detailed above constitute an unlawful 20 business practice . . . .” (Complaint at ¶¶ 111-13 [emphasis added].) These 21 allegations amount to “the circumstances constituting fraud” (specifically, 22 affirmative misrepresentation) and thus must be plead with specificity. As 23 explained above regarding Plaintiff’s claims of affirmative misrepresentation, 24 Plaintiff has failed to allege the “who,” “when,” and “where” of the 25 “misrepresentations” and failed to plead any facts regarding Defendant’s 26 knowledge of the supposed defects at the time of the Vehicle’s Sale and 27 Defendant’s intent for Plaintiff to rely on the “misrepresentations.” Accordingly, 28 these allegations of “unlawful” business practices must be stricken from Plaintiff’s 11 3:23-cv-01554-W-AHG 1 UCL claim. Without these allegations of fraudulent intent, Defendant’s knowledge 2 of the defects, or specific facts surrounding the “misrepresentations,” the 3 “unlawful” claim fails. 4 Fraudulent Business Practices Prong: The Complaint also claims that 5 Defendant violated the UCL by engaging in “fraudulent” business practices. 6 (Complaint at ¶¶ 101-09.) Obviously, satisfying the UCL’s “fraudulent” prong 7 requires allegations amounting to “the circumstances constituting fraud.” (See id. 8 at ¶¶ 104-105 [“Defendant’s use of a defective battery . . . is false, deceptive, 9 misleading, . . . and constitutes fraudulent conduct. Defendant knew or should have 10 known of their fraudulent conduct.”].) Under the “fraudulent” prong, Plaintiff 11 alleges both (a) affirmative misrepresentation—“Defendant’s conduct of 12 advertising a battery range of 259 miles is fraudulent and likely to deceive 13 members of the public” (Id. at ¶ 103)—and (b) fraudulent concealment— 14 “Defendant’s conduct of using a defective mattery at the point of sale without 15 notifying prospective consumers . . . is likely to deceive members of the public. 16 Defendant knew or should have known of their fraudulent conduct” (Id. at ¶¶ 104- 17 05). To the extent the “fraudulent” prong alleges affirmative misrepresentation, it 18 fails for the same reasons Plaintiff's common law affirmative misrepresentation 19 claim fail. (See supra Section III(B)(1)(a).) Similarly, while the “fraudulent” 20 prong’s concealment theory may not be subject to the same specificity requirement 21 as its affirmative misrepresenting theory, it fails to even meet Rule 8’s 22 requirements regarding fraudulent intent. (See supra Section III(B)(1)(b).) 23 Unfair Business Practices Prong: The Complaint asserts that Defendant 24 violated the UCL by engaging in “unfair” business practices. (Complaint at ¶ 87.) 25 California courts have used a variety of different tests to determine what 26 constitutes an “unfair” business practice under the UCL. See Doe v. CVS 27 Pharmacy, Inc., 982 F.3d 1204, 1214 (9th Cir. 2020). The Ninth Circuit has 28 acknowledged that at least three of the tests can be used to determine what an 12 3:23-cv-01554-W-AHG 1 “unfair” business practice is. Id. at 1215-16. As such, an “unfair” business 2 practice is one where either: (1) the challenged conduct is “tethered to [violation 3 of] any underlying constitutional, statutory or regulatory provision, or that it 4 threatens an incipient violation of an antitrust law, or violates the policy or spirit of 5 an antitrust law” (the “Tethering Test”); (2) the challenged conduct is “immoral, 6 unethical, oppressive, unscrupulous, or substantially injurious to consumers” (the 7 “Immoral Test”); or (3) the challenged conduct’s “impact on the victim outweighs 8 ‘the reasons, justifications and motives of the alleged wrongdoer’” (the “Balancing 9 Test”). Id. While some California Courts of Appeal have adopted a fourth test 10 borrowed from § 45(a) of the Federal Trade Commission Act (the “FTC Test”) 11 (e.g., Camacho v. Auto. Club of S. California, 142 Cal. App. 4th 1394, 1403 12 (2006)) other California Courts of Appeal and the Ninth Circuit have explicitly 13 rejected the applicability of the FTC Test to consumer cases like this. Lozano v. 14 AT & T Wireless Servs., Inc., 504 F.3d 718, 736 (9th Cir. 2007) (“[W]e do not 15 agree that the FTC test is appropriate in this circumstance. Though the California 16 Supreme Court did reference FTC's section 5 as a source of ‘guidance,’ that 17 discussion clearly revolves around anti-competitive conduct, rather than anti- 18 consumer conduct.”); Backus v. Gen. Mills, Inc., 122 F. Supp. 3d 909, 929 (N.D. 19 Cal. 2015) (“the Ninth Circuit [in Lozano] has rejected the use of the FTC test in 20 the consumer context”). Confusingly, in Lozano (2007), the Ninth Circuit also 21 went on to “reject[] the balancing approach [Balancing Test]” (504 F.3d at 736) 22 before later (in 2020) expressly endorsing its use without discussion of Lozano 23 (CVS Pharmacy, Inc., 982 F.3d at 1215). Adding to the confusion, since Lozano, 24 the Ninth Circuit has also seemingly accepted the validity of the FTC Test in a 25 consumer case at least twice—although both times in unpublished opinions 26 without discussion of Lozano. See Allen v. Hylands, Inc., 773 F. App'x 870, 874 27 (9th Cir. 2019) (“The UCL's unfair prong can apply to business practices that . . . 28 cause unforeseeable injuries to consumers that are not outweighed by 13 3:23-cv-01554-W-AHG 1 countervailing benefits”); Allen v. Hyland's, Inc., 2022 WL 1500795, at *2 (9th 2 Cir. May 12, 2022). Given that it is the most recently published Ninth Circuit 3 opinion on the matter, the Court will follow the holding of Doe v. CVS Pharmacy 4 and holds that an “unfair” business practice prong may be proven by either the 5 Tethering, Immoral, or Balancing Tests. 6 Here, the Complaint expressly asserts its “unfair” UCL claim under the FTC 7 Test the Ninth Circuit has rejected. (Complaint at ¶ 87 [“a challenged activity is 8 ‘unfair’ when ‘any injury it causes outweighs any benefits provided to consumers 9 and the injury is one that the consumers themselves could not reasonably avoid.’ 10 Camacho v. Auto Club of Southern California, 142 Cal. App. 4th 1394, 1403 11 (2006)”].) However, Plaintiff’s allegations that Defendant’s use of the “defective 12 battery in the vehicle ha[d] no utility and financially harms purchasers” by causing 13 them to “overpay[] for the [Vehicle] and receive[] a quality of vehicle less than 14 what they expected” would also seem to state an “unfair” UCL claim under both 15 the Immoral and Balancing tests. (See Complaint at ¶¶ 91, 94.) These allegations 16 do not involve the “circumstances constituting fraud,” fail to trigger Rule 9(b)’s 17 heightened pleading requirement, and thus state valid UCL claim under the 18 “unfair” prong. 19 20 21 22 2. EPA Mileage Range Estimates (Fourth and Fifth Causes of Action) Next, Defendant argues that the fourth and fifth causes of action must be 23 dismissed because, according to Defendant, its marketing of the EPA’s range 24 mileage estimates for the Vehicle cannot constitute misrepresentation. (Motion at 25 14:23-15:12.) Plaintiff does not address this argument in its Opposition. 26 Defendant cites Gray v. Toyota Motor Sales, U.S.A., Inc. for the proposition 27 that “‘as a matter of law, there is nothing false or misleading’ about a car 28 manufacturer’s advertising that identifies the EPA fuel economy estimates for the 14 3:23-cv-01554-W-AHG 1 car.” 554 Fed. Appx. 608, 609 (9th Cir. 2014) (quoting Paduano v. Am. Honda 2 Motor Co., 169 Cal. App. 4th 1453, 1470 (2009)). Indeed, in Gray, the plaintiff 3 sued Toyota under theories of both common law fraudulent concealment and the 4 UCL for advertising the subject vehicle as having a fuel economy estimate (the 5 same number as the EPA’s fuel economy estimate for the subject vehicle) that was 6 allegedly different than Toyoya’s own internal fuel economy estimates for that 7 vehicle. Id. In Gray, the Ninth Circuit upheld the district court's dismissal of the 8 claims with prejudice, stating “California law does not recognize a cause of action 9 for publicizing EPA fuel economy estimates and omitting further explanation,” and 10 that Toyota had no duty to “disclose certain information known to it which 11 conflicted with the EPA estimates.” Id. However, a close reading of Gray also 12 makes clear that this holding applied only to the UCL and fraudulent concealment 13 claims—not to claims of affirmative misrepresentation. Id. (emphasis added) 14 (“[Plaintiff] is unable to establish that Toyota violated its duty under California 15 law. [Plaintiff] does not allege that this case is governed by an existing warranty or 16 that any affirmative misrepresentations were made by Toyota.”). This is because 17 the basis for the ruling was that under California law “a manufacturer’s duty to 18 consumers is limited to warranty, unless a safety issue is present or there has been 19 some affirmative misrepresentation.” Id. 20 Here, unlike in Gray, the Complaint does allege that Defendant made 21 affirmative misrepresentations to Plaintiff about the Vehicle’s range mileage 22 estimates. (Complaint at ¶ 69 [“[Defendant] willfully, falsely, and knowingly 23 marketed the subject vehicle as having a range capacity to reach 259-miles on a 24 full charge.”) Of course, as discussed above, these allegations of affirmative 25 misrepresentation fail because they were not plead with the required particularity. 26 However, if Plaintiff properly plead affirmative misrepresentation against 27 Defendant, Gray would not bar relief. Furthermore, when it comes to the 28 Complaint’s fraudulent misrepresentation and UCL claims, Plaintiff alleges 15 3:23-cv-01554-W-AHG 1 misrepresentations beyond the range mileage issue. (E.g., Complaint at ¶¶ 27 2 [“[Defendant] issued a recall notice, stating that the vehicle may ignite when 3 nearing a full charge . . . . [And that] the vehicle should not be parked indoors 4 overnight due to the risk of fire.”]; 29 [“Plaintiff expected to use the vehicle 5 without the fear of the vehicle igniting and causing serious bodily harm.”].) 6 Accordingly, Plaintiff’s fraudulent concealment claim (fourth cause of 7 action) and the fifth cause of action must be dismissed to the extent that they rely 8 on Defendant’s representations that the Vehicle’s estimated range mileage was 259 9 miles (i.e., the EPA’s estimate range mileage for the Vehicle). However, to the 10 extent the fraudulent concealment claim and the fifth cause of action rely on other 11 “misrepresentations” about the vehicle (e.g., safety, battery fires), they do not 12 violate the rule in Gray. Similarly, if Plaintiff can sufficiently allege affirmative 13 misrepresentation by Defendant regarding the Vehicle’s estimated range mileage, 14 that claim will not be subject to the rule in Gray. 15 16 17 3. Economic Loss Rule (Fourth Cause of Action) Next, Defendant argues that Plaintiff’s fourth cause of action, to the extent 18 that it alleges fraudulent concealment, fails as a matter of law because of the 19 economic loss rule. (Motion at 15:27-16:18.) Plaintiff fails to contest this in its 20 Opposition. 21 Under California law, “where a purchaser’s expectations in a sale are 22 frustrated because the product he bought is not working properly, his remedy is 23 said to be in contract alone, for he has suffered only ‘economic’ losses.” Robinson 24 Helicopter Co., Inc. v. Dana Corp., 34 Cal. 4th 979, 988 (2004). For this reason, 25 federal courts sitting in diversity jurisdiction often dismiss fraudulent concealment 26 claims brought against vehicle manufacturers. E.g., In re Ford Motor Co. DPS6 27 Powershift Transmission Prod. Liab. Litig., 483 F. Supp. 3d 838, 850 n.5 (C.D. 28 Cal. 2020) (collecting cases dismissing fraudulent concealment claims over vehicle 16 3:23-cv-01554-W-AHG 1 defects under the economic loss rule). Here, Plaintiff’s fraudulent concealment 2 claims in the fourth cause of action indeed allege only economic injury. 3 (Complaint at ¶ 81 [“had [Plaintiff] known the truth, they would not have 4 purchased the vehicle or would have paid significantly less for the vehicle.”].) 5 Absent allegations of any other, non-economic injury, Plaintiff’s claim for 6 fraudulent concealment in the fourth cause of action necessarily fails as a matter of 7 law. 8 9 10 4. Direct Economic Relationship (Fourth Cause of Action) Defendant argues that the fourth cause of action’s fraudulent concealment 11 claim also fails because there was no direct economic relationship between 12 Plaintiff and Defendant—and thus Defendant never had a duty to disclose the 13 alleged battery “defects” to Plaintiff. (Motion at 16:22-18:8.) Plaintiff responds 14 by arguing he bought the Vehicle from one of Defendant’s authorized dealerships, 15 and that a car manufacturer’s authorized dealer is the manufacturer’s agent. 16 (Opposition at 4:26-5:7.) 17 As an initial matter, parties generally do not have an affirmative duty to 18 disclose information. Indeed, the first element of a fraudulent concealment claims 19 is that the defendant had a duty to disclose the information. CACI 1901. As the 20 California Supreme Court has made clear, absent a fiduciary duty (which is not 21 alleged here), a duty to disclose arises only in three circumstances: (1) the 22 defendant had exclusive knowledge of the material fact; (2) the defendant actively 23 concealed the material fact; or (3) the defendant made partial representations while 24 also suppressing the material fact. Bigler-Engler v. Breg, Inc., 7 Cal. App. 5th 25 276, 311 (2017); see CACI 1901. For its part, Plaintiff alleges that: “Defendant 26 had a duty to disclose that the battery in the vehicle is unsafe . . . because (1) 27 Defendant had exclusive knowledge of the material, suppressed facts; (2) 28 17 3:23-cv-01554-W-AHG 1 Defendant took affirmative actions to conceal the material facts; and (3) Defendant 2 made partial representations about the mileage range . . . .” (Complaint at ¶ 78.) 3 However, these three circumstances all “presuppose[] the existence of some 4 other relationship between the plaintiff and defendant in which a duty to disclose 5 can arise. A duty to disclose facts arises only when the parties are in a relationship 6 that gives rise to the duty, such as ‘seller and buyer, employer and prospective 7 employee, doctor and patient, or parties entering into any kind of contractual 8 arrangement.’” Bigler-Engler, 7 Cal. App. 5th at 311 (citations omitted). Thus, 9 there must be a “transaction” between the plaintiff and defendant and “[s]uch a 10 transaction must necessarily arise from direct dealings between the plaintiff and 11 defendant; it cannot arise between the defendant and the public at large.” Id. at 12 311-12 (emphasis added). This is a problem for Plaintiff as he alleges that he 13 acquired the vehicle from “an authorized dealer of [Defendant],” not directly from 14 Defendant. (Complaint at ¶ 9.) As such, there would not appear to be a direct 15 transaction between the Plaintiff and Defendant. 16 Plaintiff attempts to clear this hurdle by arguing that the “authorized dealer” 17 was Defendant’s “agent”. Id. However, the Complaint does not actually allege 18 any facts that support this conclusory assertion. Indeed, a number of courts have 19 held that automobile dealerships, even manufacturer “authorized” ones, are not 20 necessarily agents of automobile manufacturers. Keegan v. Am. Honda Motor Co., 21 838 F. Supp. 2d 929, 953 (C.D. Cal. 2012) (“Plaintiffs cites paragraph 15 and 121, 22 which state that ‘Honda’s dealers’ ‘are its agents’ . . . . This allegation is essentially 23 a legal conclusion framed as a factual allegation.”); Williams v. Yamaha Motor 24 Corp., U.S.A., 2015 WL 13626022, at *6 (C.D. Cal. Jan. 7, 2015) (“[t]he 25 relationship between automobile manufacturers and their dealers has been 26 examined by a host of courts throughout the country, all of which have agreed that 27 dealers are not ‘agents’ of manufacturers.”); Friedman v. Mercedes Benz USA 28 LLC, 2013 WL 8336127, at *6 (C.D. Cal. June 12, 2013) (“Plaintiff alleges that 18 3:23-cv-01554-W-AHG 1 ‘[dealer], as an authorized Mercedes dealership, served as Mercedes’ agent and 2 representative’ . . . . Plaintiffs have alleged no facts that . . . [dealer] in any respect 3 serves as MBUSA’s agent.”). 4 Here, just like in Keegan, Williams, and Friedman, Plaintiff does not 5 actually allege facts establishing an agency relationship between Defendant and the 6 dealership Plaintiff purchased the Vehicle from. Instead, the Complaint simply 7 makes the conclusory assertion that “[Plaintiff] acquired the [Vehicle] . . . from an 8 authorized dealer and agent of [Defendant] . . . [a] retail merchant[] authorized by 9 [Defendant] to do business in the State of California on behalf of [Defendant].” 10 (Complaint at ¶ 9.) While the Court is unwilling to go so far as to say a dealer can 11 never be the agent of an automobile manufacturer, the Complaint here does not 12 allege facts sufficient to establish an agency relationship between Defendant and 13 its dealers. See, e.g., Pereda v. Atos Jiu Jitsu LLC, 85 Cal. App. 5th 759, 768 14 (2022) (citations omitted) (“Actual agency is based on consent, and turns on 15 whether the principal has the right to control the agent's conduct. Ostensible 16 agency is based on appearances, and turns on whether the ‘the principal 17 intentionally, or by want of ordinary care, causes a third person to believe another 18 to be his agent even though the third person is not actually an agent.’”). 19 Plaintiff cites one recent California case in its Opposition, Dhital v. Nissan 20 North America, Inc., which found that plaintiffs’ allegation that “Nissan's 21 authorized dealerships are its agents for purposes of the sale of Nissan vehicles to 22 consumers” sufficiently pled an agency relationship between Nissan and Nissan 23 dealerships. 84 Cal. App. 5th 828, 844 (2022). However, Dhital is of no avail to 24 Plaintiff for several reasons. First, Dhital is currently pending before the 25 California Supreme Court, and thus has “no binding or precedential effect, and 26 may be cited for potentially persuasive value only.” Cal. R. Ct. 8.1115(e)(1). 27 Second, a ruling by a California state court on its own pleading standards has no 28 bearing on the pleading standards required in federal court. E.g., Miller v. Sawant, 19 3:23-cv-01554-W-AHG 1 18 F.4th 328, 337 (9th Cir. 2021) (“Pleading in federal court is governed by 2 Federal Rules of Civil Procedure, not state pleading requirements.”). Finally, the 3 Court finds the reasoning Dhital unpersuasive, as it fails to discuss Bigler-Engler; 4 any of the numerous cases holding automobile dealerships to not be agents of 5 manufacturers; or engage in a substantive analysis regarding what factual 6 allegations are required to successfully plead an agency relationship. 7 Accordingly, the fourth cause of action’s fraudulent concealment claim also 8 fails as a matter of law because it does not allege facts sufficient to establish that 9 the dealership Plaintiff acquired the Vehicle from was an agent of Defendant—to 10 wit, Plaintiff has not sufficiently alleged Defendant owed him a duty to disclose 11 the Vehicle’s alleged “defects.” 12 13 C. 14 In summation, this Order holds that: 15 Leave to Amend • The fourth cause of action’s affirmative misrepresentation claim must 16 be dismissed because it fails to meet Rule 9(b)’s particularity 17 requirement and fails to allege sufficient facts regarding Defendant’s 18 knowledge of falsity. 19 • The fourth cause of action’s fraudulent concealment claim must be 20 dismissed because: (a) it violates the economic loss rule; (b) fails to 21 allege facts supporting Defendant’s fraudulent intent; and (c) does not 22 sufficiently allege that Defendant had a duty to disclose the Vehicle’s 23 supposed “defects” to Plaintiff. Additionally, as currently pled, the 24 fourth cause of action fails to state a valid fraudulent concealment 25 cause of action—to the extent it alleges Defendant concealed that the 26 Vehicle could not achieve its advertised 259 mileage range estimate 27 (as determined by the EPA)—because California law is clear that an 28 20 3:23-cv-01554-W-AHG 1 automobile manufacturer advertising the EPA’s mileage range 2 estimates does not constitute fraudulent concealment. 3 • The fifth cause of action’s claim under the “unlawful” UCL prong 4 must be dismissed because, as currently plead, it relies on allegations 5 that amount to “the circumstances constituting fraud” that are not 6 plead with the requisite particularity. For the same reason, the fifth 7 cause of action’s “fraudulent” prong must also be dismissed to the 8 extent that it relies on an affirmative misrepresentation theory. To the 9 extent that the “fraudulent” prong relies on a theory of fraudulent 10 concealment, it must be dismissed because it fails to allege facts 11 regarding Defendant’s fraudulent intent. Additionally, the fifth cause 12 of action must also be dismissed—to the extent that it complains 13 Defendant advertised the Vehicle’s EPA mileage range estimate of 14 259 miles—because “California law does not recognize a [UCL] 15 cause of action for publicizing EPA fuel economy estimates and 16 omitting further explanation.” However, the fifth cause of action’s 17 “unfair” UCL claim remains. 18 19 Plaintiff asks the Court for leave to amend the Complaint if it grants the 20 Motion. (Opposition at 5:9-6:9.) Federal Rule of Civil Procedure 15(a)(2) states 21 that courts “should freely give leave [to amend] when justice so requires.” 22 Furthermore, Ninth Circuit precedent is clear that leave to amend “should be grated 23 with ‘extreme liberty’” and only be denied when “it is clear . . . that the complaint 24 could not be saved by any amendment.” Moss v. U.S. Secret Serv., 572 F.3d 962, 25 972 (9th Cir. 2009). While it may prove exceedingly difficult, the Court is not 26 convinced that it would be impossible for Plaintiff to plead valid affirmative 27 misrepresentation, fraudulent concealment, and “Unlawful”/“Fraudulent” UCL 28 claims against Defendant here. Considering this circuit’s extremely liberal policies 21 3:23-cv-01554-W-AHG 1 towards amending complaints, the Court gives Plaintiff leave to file an amended 2 complaint. However, any amended complaint must strictly comply with this 3 Order. When amending, Plaintiff should bear in mind that the factual allegations 4 in his amended complaint must be “consistent with” and may “not contradict the 5 allegations in original complaint.” United States v. Corinthian Colleges, 655 F.3d 6 984, 995 (9th Cir. 2011). 7 8 9 IV. CONCLUSION & ORDER For the foregoing reasons, the Court takes Judicial Notice of EPA mileage range 10 estimates Defendant requested [Doc. 7-2] and GRANTS IN PART the Motion to 11 Dismiss the Complaint’s Fourth and Fifth causes of action [Doc. 7]. The Court 12 GRANTS Plaintiff leave to file an amended complaint. Plaintiff may file an amended 13 complaint on or before January 10, 2024. 14 15 IT IS SO ORDERED. Dated: December 13, 2023 16 17 18 19 20 21 22 23 24 25 26 27 28 22 3:23-cv-01554-W-AHG
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