Kobe Falco v. Nissan North America Inc et al, No. 2:2013cv00686 - Document 51 (C.D. Cal. 2013)
Court Description: ORDER DENYING IN PART AND GRANTING IN PART DEFENDANTS MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM 29 by Judge Dean D. Pregerson: For the reasons set forth herein, the court DENIES Defendant NNAs motion to dismiss Plaintiffs First Amended Complai nt for failure to state a claim under Rule 12(b)(6) as to Plaintiffs (1) CLRA,(2) Implied Warranty, (3) UCL,(4) WCPA, and (5) Fraud claims. The court GRANTS NNAs motion to dismiss as to Plaintiffs Unjust Enrichment claim. (lc). Modified on 10/10/2013. (lc).
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Kobe Falco v. Nissan North America Inc et al Doc. 51 1 2 O 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 CENTRAL DISTRICT OF CALIFORNIA 10 11 12 KOBE FALCO, individually, and on behalf of a class similarly situated individuals, 13 Plaintiff, 14 v. 15 16 NISSAN NORTH AMERICA INC., NISSAN MOTOR CO.LTD, a Japanese Company, 17 Defendants. 18 ___________________________ ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) Case No. CV 13-00686 DDP (MANx) ORDER DENYING IN PART AND GRANTING IN PART DEFENDANT’S MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM [Dkt. No. 29-1] 19 20 Before the court is Defendant Nissan North America’s (NNA) 21 motion to dismiss Plaintiff Kobe Falco, Joel Seguin, Alfredo 22 Padilla, and Roberto Galvan's First Amended Class Action Complaint 23 under Rules 12(b)(6) and 9(b),(DKT No. 29-1, “MTD”), as well as 24 Plaintiffs' Opposition, (DKT No. 41, “Opp.”), and Defendant’s Reply 25 (DKT. No 46, “Reply”). 26 and heard oral argument, the court now adopts the following order. 27 /// 28 /// Having reviewed the parties' submissions Dockets.Justia.com 1 I. Background 2 Named Plaintiffs Falco, Seguin, Padilla, and Galvan are 3 purchasers, respectively, of 2005 Nissan Pathfinder, a 2007 Nissan 4 Quest, 2006 Nissan Pathfinder, and 2005 Pathfinder vehicles. (FAC 5 ¶¶ 55, 61, 70, 77.) Plaintiffs allege that their vehicles had a 6 defectively designed Timing Chain Tensioning System (TCTS). They 7 bring this putative class action on behalf of themselves and other 8 purchasers or lessees of the vehicles noted above and other Nissan 9 vehicle lines which they allege share the TCTS defect.1 (Id. ¶¶ 2, 10 11 5, 28.) The TCTS is a component of an internal combustion engine. It 12 is responsible for connecting the engine’s camshaft to the 13 crankshaft, which in turn control the opening and closing of the 14 engine’s valves. (Id. ¶ 29.) The TCTS ensures that the valves open 15 and close in a precise, synchronized manner that is necessary for 16 the engine to function. (Id.) According to Plaintiffs, a TCTS 17 malfunction can cause vehicle pistons and valves to smash into one 18 another, causing an inability to accelerate, maintain speed, and 19 idle smoothly, and potentially catastrophic engine failure. (Id. ¶¶ 20 31, 33.) 21 Plaintiffs allege the TCTSs installed in the Subject Vehicles 22 are prone to failure before consumers reasonably expect any failure 23 to occur,(id. ¶ 5.), and that the defect presents a safety concern 24 for drivers and occupants of the vehicles. (Id. ¶¶ 10, 53.) 25 1 26 27 28 The lines of vehicles alleged to include the defect include: 2004-2008 Nissan Maxima, 2004-2009 Nissan Quest , 2004-2006 Nissan Altima(with the VQ35 engine), 2005-2007 Nissan Pathfinder, 20042007 Nissan Xterra, and 2005-2007 Nissan Frontier(with the VQ49 engine). These vehicles are referred to herein as the Subject Vehicles. (FAC ¶ 2.) 2 1 Plaintiffs allege that after their vehicles’ TCTSs broke down they 2 were confronted with significant repair costs, ranging from $510.60 3 in the case of Falco to $2,788.00 in the case of Seguin. (Id. ¶¶ 4, 4 59, 68). Plaintiffs allege that they would not have bought the 5 vehicles had they known of the TCTS defect. (Id. ¶ 12) 6 Plaintiffs allege that NNA has been aware of the defect since 7 2004, as a result of information exclusively within its possession, 8 including data from pre-production testing, pre-production design 9 failure mode and analysis, production design failure mode and 10 analysis, and early consumer complaints, as well as aggregate data 11 from retailers.2 (Id. ¶ 37.) Plaintiffs allege that despite this 12 knowledge, NNA continued to install the defective component, while 13 concealing its knowledge so that the warranty period would expire 14 before owners became aware of the problem. (Id. ¶ 8.) 15 In support of these contentions, Plaintiffs allege that NNA 16 redesigned one of the defective TCTS components in 2006 or 2007, 17 correcting the defect, but without informing consumers. (Id. ¶¶ 39- 18 43.) Plaintiffs further point to a series of three Technical 19 Service Bulletins issued by Nissan North America, beginning July 20 17, 2007, instructing technicians to replace TCTS component parts 21 in the case of whining or buzzing noises. (Id. ¶¶ 44-49.) 22 Additionally, Plaintiffs point to complaints by drivers to the 23 National Highway Traffic Administration, which Plaintiffs allege 24 NNA monitors regularly, between 2006 and 2010. (Id. ¶¶ 50, 52.) 25 26 27 28 2 Plaintiffs refer throughout their complaint to “Nissan,” by which they appear to refer collectively to both Nissan North America (NNA) and its Japanese parent company Nissan Motor Co., Ltd (NML). For the purposes of this motion, the court construes Plaintiffs’ references to “Nissan” to refer to NNA. 3 1 In the case of each Plaintiff, the repairs were undertaken 2 outside of the vehicle’s five-year, 60,000-mile (which ever comes 3 first) Powertrain warranty. (Id. ¶¶ 57, 65, 74, 82 57, 58.) 4 Plaintiffs allege that they heard “whining,” “buzzing,” and 5 “ticking” sounds during the warranty period which were symptomatic 6 of the TCTS defect, and that they would have demanded that NNA 7 repair the vehicles during the warranty period had they been made 8 aware of the nature and extent of the problem. (Id. ¶¶ 57, 64, 73, 9 80.) 10 Based on the facts described above, Plaintiffs asserted six 11 causes of action against NNA: (1) violation of California's 12 Consumer Legal Remedies Act (“CLRA”), Cal. Civ. Code §§ 1750 et 13 seq; 2) breach of implied warranty pursuant to California’s 14 Song–Beverly Consumer Warranty Act, Cal. Civ. Code §§ 1792 and 15 1791.1 et seq.; 3) violation of California's Unfair Competition Law 16 (“UCL”), Cal. Bus. & Prof. Code §§ 17200 et seq.;(4) violation of 17 Washington’s Consumer Protection Act (“WCPA”), RCW 19.86 et seq;(5) 18 Fraud, and (6) Unjust Enrichment. 19 20 II Legal Standard 21 A. Motions to Dismiss 22 A complaint will survive a motion to dismiss when it contains 23 “sufficient factual matter, accepted as true, to state a claim to 24 relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 25 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 26 570 (2007)). When considering a Rule 12(b)(6) motion, a court must 27 “accept as true all allegations of material fact and must construe 28 those facts in the light most favorable to the plaintiff.” Resnick 4 1 v. Hayes, 213 F.3d 443, 447 (9th Cir.2000). Although a complaint 2 need not include “detailed factual allegations,” it must offer 3 “more than an unadorned, the-defendant-unlawfully-harmed-me 4 accusation.” Iqbal, 556 U.S. at 678. Conclusory allegations or 5 allegations that are no more than a statement of a legal conclusion 6 “are not entitled to the assumption of truth.” Id. at 679. In other 7 words, a pleading that merely offers “labels and conclusions,” a 8 “formulaic recitation of the elements,” or “naked assertions” will 9 not be sufficient to state a claim upon which relief can be 10 granted. Id. at 678 (citations and internal quotation marks 11 omitted). 12 “When there are well-pleaded factual allegations, a court 13 should assume their veracity and then determine whether they 14 plausibly give rise to an entitlement of relief.” Id. at 679. 15 Plaintiffs must allege “plausible grounds to infer” that their 16 claims rise “above the speculative level.” Twombly, 550 U.S. at 17 555. “Determining whether a complaint states a plausible claim for 18 relief” is a “context-specific task that requires the reviewing 19 court to draw on its judicial experience and common sense.” Iqbal, 20 556 U.S. at 679. 21 B. Rule 9(b) 22 Claims sounding in fraud are subject to the heightened 23 pleading requirements of Federal Rule of Civil Procedure 9(b), 24 which requires that a plaintiff alleging fraud “must state with 25 particularity the circumstances constituting fraud.” See Kearns v. 26 Ford Motor Co., 567 F.3d 1120, 1124 (9th Cir.2009). “To satisfy 27 Rule 9(b), a pleading must identify the who, what, when, where, and 28 how of the misconduct charged, as well as what is false or 5 1 misleading about [the purportedly fraudulent] statement, and why it 2 is false.” Cafasso, United States ex rel v. Gen. Dynamics C4 Sys., 3 Inc., 637 F.3d 1047, 1055 (9th Cir.2011) (internal quotation marks 4 and citations omitted). 5 6 III. Analysis 7 A. California Consumers Legal Remedies Act (CLRA) 8 9 Plaintiffs’ first claim is made under the CLRA. The CLRA prohibits “unfair methods of competition and unfair or deceptive 10 acts or practices.” Cal. Civ. Code § 1770. Plaintiffs rely on § 11 1770(a)(5), which prohibits “[r]epresenting that goods or services 12 have sponsorship, approval, characteristics, ingredients, uses, 13 benefits, or quantities which they do not have”, and § 1770(a)(7), 14 which prohibits “[r]epresenting that goods or services are of a 15 particular standard, quality, or grade, or that goods are of a 16 particular style or model, if they are of another.”3 17 Although a plaintiff may bring a claim under these sections of 18 the CLRA for both representations and fraudulent omissions, a 19 fraudulent omissions claim is only actionable if the omission is 20 “contrary to a representation actually made by the defendant” or 21 “of a fact the defendant was obliged to disclose.” 22 Am. Honda Motor Co., Inc., 144 Cal. App. 4th 824, 835 (2006). 23 “In the CLRA context, a fact is deemed ‘material,’ and obligates an 24 exclusively knowledgeable defendant to disclose it, if a Daugherty v. 25 3 26 27 28 Plaintiffs also allege in general terms that Defendants have violated § 1770(a)(9), which prohibits “[a]dvertising goods or services with intent not to sell them as advertised.” See FAC ¶ 105. However, because Plaintiffs do not allege specific facts to support this contention or otherwise explain its inclusion, the court dismisses this aspect of Plaintiffs’ claim. 6 1 ‘reasonable [consumer]’ would deem it important in determining how 2 to act in the transaction at issue.” Collins v. eMachines, Inc., 3 202 Cal.App.4th 249,255 (2011). 4 Nondisclosure or concealment of a material fact may be 5 actionable, among other circumstances, when (1) the defendant had 6 exclusive knowledge of material facts not known to the plaintiff, 7 and (2) the defendant actively conceals a material fact from the 8 plaintiff. LiMandri v. Judkins, 52 Cal.App.4th 326, 336–37 9 (Cal.Ct.App.1997). Plaintiffs assert that NNA is liable on both 10 grounds, each of which NNA challenges in the instant motion. The 11 court addresses each theory of liability in turn. 12 1. Exclusive Knowledge of Material Facts 13 The court first analyzes Plaintiffs’ assertion that NNA 14 violated its duty to Plaintiffs to disclose material facts 15 exclusively within its possession. 16 I. Materiality of the Alleged Timing Chain Tensioning System 17 Problem 18 The initial issue is whether the alleged defect was 19 “material.” 20 CLRA suit because the purported defect did not arise until after 21 the expiration of the vehicles’ warranty period. (Opp. at 6.) NNA 22 argues that the warranty “define[s] consumer expectations of 23 product life and establish[es] the parameters of a fact’s 24 ‘materiality’ for purposes of a fraudulent non-disclosure claim.” 25 (Reply at 5.) 26 NNA contends that it is immune from liability in a NNA is correct that a warranty generally defines a consumer’s 27 expectations of a product’s performance under California law. See 28 Daugherty, 144 Cal.App.4th at 830–32. However, California courts 7 1 have carved out an exception to this rule that is relevant to the 2 current case: A manufacturer’s duty to consumers is not limited to 3 its warranty obligations where the nondisclosure involves an 4 “unreasonable safety risk.” Wilson v. Hewlett–Packard Co., 668 F.3d 5 1136, 1141 (9th Cir. 2012). See also Daugherty, 144 Cal.App.4th at 6 832-38; Smith v. Ford Motor Co., 749 F. Supp. 2d 980, 987 (N.D. 7 Cal. 2010) aff'd, 462 F. App'x 660 (9th Cir. 2011)(citing 8 Daugherty, 144 Cal.App.4th at 836) (“[W]here, as here, a 9 plaintiff's claim is predicated on a manufacturer's failure to 10 inform its customers of a product's likelihood of failing outside 11 the warranty period, the risk posed by such asserted defect cannot 12 be ‘merely’ the cost of the product's repair; rather, for the 13 omission to be material, the failure must pose ‘safety concerns.’”) 14 On its face, Plaintiffs’ complaint focuses squarely on safety, 15 alleging, for example: 16 [T]he fact that the Timing Chain Tensioning System is prone to 17 sudden premature failure is material to consumers because it 18 presents a serious safety issue and places driver and 19 passengers at risk of harm. 20 System is an integral component of the Subject Nissan 21 Vehicles’ engines. 22 fails, it can cause a variety of problems for the Subject 23 Nissan Vehicles, including the inability [to] accelerate and 24 maintain speed, as well as catastrophic engine failure, among 25 other issues. 26 in motion, occupants of the vehicles are exposed to rear end 27 collisions and other accidents caused by the driver’s 28 inability to maintain an appropriate speed on the road. The Timing Chain Tensioning When the Timing Chain Tensioning System When any of these occur while the vehicles are 8 1 (FAC ¶ 10.) 2 NNA argues that Plaintiffs have not “alleg[ed] with 3 particularity a defect and a causal connection to the alleged 4 unreasonable safety hazard” and that “Plaintiffs provide no 5 supporting detail indicating how the alleged timing belt defect 6 constitutes a safety hazard.” (MTD at 12; Reply at 7.) However, the 7 court finds to the contrary that the First Amended Complaint 8 describes in sufficient detail, through both text and figures, that 9 the alleged failure of the Timing Chain Tensioning System can cause 10 the vehicle’s pistons and valves to smash into one another, leading 11 to an inability to accelerate or maintain speed, as well as 12 catastrophic engine failure. See FAC ¶¶ 10, 29-31, 34, 39-43. 13 NNA relies heavily on Wilson here, but this reliance is 14 misplaced. In Wilson, the court found a logical inconsistency in 15 the plaintiffs’ allegation that a defect cutting off power to a 16 laptop could cause the laptop to ignite. 668 F.3d at 1144. By 17 contrast, the nexus between the alleged Timing Chain Tensioning 18 System and the danger posed by engine failure is natural and 19 direct. See In re Saturn L-Series Timing Chain Products Liab. 20 Litig., MDL 1920, 2008 WL 4866604 at *8 (D. Neb. Nov. 7, 2008) 21 (holding, in the case of an alleged defective steel timing chain, 22 that “the potential for an engine to stop operating in the middle 23 of an intersection, or on an interstate at speeds upwards of 65 24 miles per hour, constitutes enough of a safety risk that the 25 Defendants in this case had a duty to disclose the safety defect to 26 any potential consumer”). 27 NNA also argues that the claim must be rejected because 28 Plaintiffs have failed to allege that they or other members of the 9 1 putative class have experienced a mechanical failure resulting in 2 an unreasonable risk to personal safety. 3 of the assertion that Plaintiffs must allege such harm to 4 themselves or other class members, NNA relies on Tietsworth v. 5 Sears, Roebuck & Co., 2009 WL 3320486 (N.D. Cal. Oct. 13 2009). 6 There, plaintiffs alleged that a defect in a washing machine’s 7 control board could lead to the machine spinning out of control, 8 posing a safety risk. Id. at *5. Addressing the issue as a question 9 of standing, the court held that the plaintiffs lacked standing to (MTD at 14.) In support 10 pursue a claim because they failed to allege that they or other 11 putative class members had experienced the alleged malfunction 12 involving the machine spinning out of control. Id. 13 However, other courts that have considered the issue have 14 expressly disagreed with Tietsworth’s rationale. As Judge Fogel 15 explained in Ehrlich v. BMW of North America, LLC: 16 The Court is not persuaded by Tietsworth or BMW's arguments 17 that Plaintiff must plead that consumers have been injured by 18 the alleged unreasonable safety risk. Tietsworth approached 19 the safety defect issue in terms of actual injury to the named 20 plaintiffs, finding that they “lacked standing” to pursue 21 their claims based on merely posited injuries. Here, Plaintiff 22 has alleged that he was injured by the defective windshields 23 by having to replace the cracked windshield in his MINIs 24 twice.... The alleged unreasonable risk of safety created by 25 compromised windshields during rollover accidents is relevant 26 to the materiality of BMW's omissions, and Plaintiff has 27 alleged a plausible unreasonable safety risk that would have 28 been material to the reasonable consumer. 10 1 801 F.Supp. 2d 908, 918 (C.D. Cal 2010) (internal citations 2 omitted). See also Cholakyan v. Mercedes-Benz USA, LLC, 796 3 F.Supp.2d 1220, 1236–37 (C.D. Cal 2011) (rejecting defendant's 4 argument that “the purported safety defects are speculative in 5 nature, because there is no allegation that [plaintiff] or any 6 other class member ever experienced such a defect”); In re Toyota 7 Motor Corp., 754 F.Supp.2d 1145, 1160 (C.D. 2010)(“The Court agrees 8 with Plaintiffs that experiencing [a sudden unintended 9 acceleration] defect is not required for standing. Standing merely 10 requires a redressable injury that is fairly traceable to 11 Defendants' conduct”); In re Porsche, 880 F. Supp 2d 827-28 (S.D. 12 Ohio, 2012) (applying rule of Ehrlich and Cholakyan); Keegan v. Am. 13 Honda Motor Co., Inc., 838 F. Supp. 2d 929, 943 (C.D. Cal. 2012) 14 (same). 15 The court agrees with and will apply the rule of Ehrlich, 16 Cholakyan, In re Porsche, and Keegan. There is little question the 17 plaintiffs have alleged a sufficient injury-in-fact to establish 18 standing: Each has alleged that he has been injured by the alleged 19 defect by having to pay for the repair of his vehicle. As with the 20 allegedly defective windshields in Ehrlich, the safety risk posed 21 by the allegedly defective TCTS is not relevant to standing but 22 rather goes to the materiality of NNA’s alleged omissions. The 23 court finds that Plaintiffs have alleged a plausible unreasonable 24 safety risk that a reasonable consumer would have found material. 25 ii. Defendant’s Knowledge of Alleged Defect 26 In order for a defendant’s duty to disclose an alleged defect 27 to be actionable, the defendant must have been aware of the defect 28 at the time of sale to the plaintiff. See Wilson, 668 F.3d at 1145. 11 1 NNA argues that Plaintiffs have not alleged sufficient facts to 2 show that NNA was aware of the alleged defect at the time of sale. 3 In particular, NNA argues that Plaintiffs’ allegations are 4 conclusory and do not include facts that pre-date the sale of 5 vehicles and thereby permit an inference of Defendant’s knowledge 6 at the time of sale. (MTD at 15.) 7 In alleging NNA’s exclusive knowledge, Plaintiffs assert that: 8 [S]ince as early as 2004, Nissan acquired its exclusive 9 knowledge of the Timing Tensioning System defect through 10 sources not available to Plaintiffs and members of the Class 11 including, but not limited to, pre-production testing, pre- 12 production design failure mode and analysis data, production 13 design failure mode and analysis data, early consumer 14 complaints made exclusively to Nissan’s network of dealers and 15 directly to Nissan, aggregate warranty data compiled from 16 Nissan’s network of dealers, testing conducted by Nissan in 17 response to consumer complaints, and repair order and parts 18 data received by Nissan from Nissan’s network of dealers. 19 20 FAC ¶ 37. NNA argues that dismissal is required under Wilson, 668 F.3d 21 at 1145-48 (9th Cir. 2012) because Plaintiffs’ allegations are 22 impermissibly conclusory. In Wilson, the Ninth Circuit found that 23 the plaintiffs’ allegation that Hewlett-Packard was aware of an 24 alleged computer defect at the time of sale because it had “access 25 to the aggregate information and data regarding the risk of 26 overheating” was “speculative and [did] not suggest how any tests 27 or information could have alerted HP to the defect.” Id. at 1146-47 28 (internal citations and quotation marks omitted). NNA also points 12 1 to Grodzitsky v. Am. Honda Motor, 2013 WL 690822 at *6 (C.D. Cal. 2 Feb 19, 2013), where the court found similarly generalized 3 allegations of “pre-release testing data” and “aggregate data from 4 Honda dealers” to inadequately plead that the manufacturer was 5 aware of the defect at the time of sale to the plaintiffs. 6 However, in the present case, unlike in Wilson and Grodzitsky, 7 Plaintiffs have alleged particular facts which make Plaintiffs’ 8 allegations more than merely speculative or conclusory. 9 noted above, Plaintiffs allege that on or around July 17, 2007, NNA First, as 10 issued the first of several Technical Service Bulletins to its 11 dealerships instructing technicians to replace components of the 12 Timing Chain Tensioning System in the vehicles covered by the 13 complaint. (FAC ¶¶ 44-47.) Second, Plaintiffs allege that in or 14 around 2006 or 2007, NNA replaced the chain guide of the Timing 15 Chain Tensioning System with a redesigned version of the part that 16 does not suffer from the defect. (FAC ¶¶ 41-42.) These facts, if 17 true, permit plausible inferences that NNA was aware of the defect 18 at the time they sold the vehicles in 2005 and 2006 and that NNA 19 acquired this knowledge through the sorts of internal data 20 Plaintiffs allege. 21 Indeed, the facts of this case are much closer to those of 22 Mui Ho v. Toyota Motor Corp., 2013 WL 1087846 (N.D. Cal. Mar. 14, 23 2013), where the court found pleadings regarding the defendant’s 24 exclusive knowledge at the time of sale adequate, than they are to 25 those of Wilson or Grodzitsky. In Ho, similar to the present case, 26 the plaintiffs alleged that Toyota acquired their knowledge of a 27 defective headlamp through “pre-release testing data,” “aggregate 28 data from Toyota dealers,” “early consumer complaints,” and “other 13 1 internal sources of aggregate information.” (Ho Second Amended 2 Complaint, 3:12-cv 02672-SC, Dkt. No. 56 at ¶ 48.) And like the 3 present case, defendants allegedly provided their dealers with a 4 technical service informational bulletin acknowledging the 5 headlight defect and noting the availability of replacement parts. 6 (Ho SAC ¶ 9.) Although the bulletin appears to have been issued 7 after some or most of the plaintiffs purchased their cars, (Ho SAC 8 ¶¶ 9, 20, 30, 35), the court found that the plaintiffs had alleged 9 sufficient facts to support their claim that the defendants knew of 10 the defect at the time of sale. 2013 WL 1087846 at *8. This court 11 reaches the same conclusion in the current case. 12 NNA correctly points out that most of the alleged complaints 13 to NHTSA occurred post-sale, including those explicitly raising 14 safety concerns.(MTD at 17; FAC 50-54.) Were post-sale customer 15 complaints the only basis for NNA’s alleged knowledge at the time 16 of sale, as it appears was the case in Grodzitsky, 2013 WL 690822 17 at * 6-7, NNA would have a stronger case. But for the reasons 18 explained above, there are other adequate bases to permit an 19 inference that NNA was aware of the alleged defect at the time of 20 sale. These allegations create a reasonable likelihood that 21 discovery will produce evidence that NNA was aware of the alleged 22 defect at the time it sold the vehicles to Plaintiffs. 23 2. Active Concealment 24 The court now turns to Plaintiffs’ second theory under the 25 CLRA. An discussed above, an actionable claim may arise “when the 26 defendant actively conceals a material fact from the plaintiff.” 27 LiMandri, 52 Cal. App. 4th at 337. 28 required: (1) the defendant must have concealed or suppressed a 14 The following five elements are 1 material fact; (2) the defendant must have been under a duty to 2 disclose the fact to the plaintiff; (3) the defendant must have 3 intentionally concealed or suppressed the fact with the intent to 4 defraud the plaintiff; (4) the plaintiff must have been unaware of 5 the fact and would not have acted as he did if he had known of the 6 concealed or suppressed fact; and (5) as a result of the 7 concealment or suppression of the fact, the plaintiff must have 8 sustained damage. Lovejoy v. AT & T Corp., 119 Cal.App.4th 151, 157 9 (Cal.Ct.App. 2004). 10 With respect to the first and second elements, Plaintiffs have 11 adequately pled that the alleged TCTS defect was material because 12 it was safety-related and that the defendant therefore had an 13 obligation to disclose it. 14 See infra Section III(A)(1). With respect to the third element, Plaintiffs allege that NNA 15 actively concealed its knowledge of the TCTS defect, among other 16 actions, by issuing TSBs advising repair facilities and dealerships 17 that it was necessary to replace certain elements of the TCTS, but 18 not informing customers about the TSBs (id. ¶¶ 7, 8, 44-48); 19 failing to disclose that it redesigned the TCTS as a result of its 20 internal knowledge of the system’s defect (FAC ¶¶ 29-43); giving 21 goodwill adjustments to reduce the costs of repairs for some 22 customers who complained, but failing to do some for other 23 customers who did not complain (id. ¶ 7); and when attempting to 24 address the alleged defect, using a temporary fix (id. ¶ 8). 25 These allegations sufficiently allege active concealment that 26 would create a duty to disclose. See, e.g., Falk v. Gen. Motors 27 Corp., 496 F. Supp. 2d 1088, 1097 (N.D. Cal. 2007) (finding that 28 plaintiffs sufficiently pled active concealment by alleging that 15 1 manufacturer did not notify consumers of defect in light of 2 complaints and replaced defective parts with other defective parts 3 in order to conceal defects); Marsikian v. Mercedes Benz USA, LLC, 4 2009 WL 8379784 at *14 (C.D. Cal. May 4, 2009)(finding sufficient 5 to state a claim for active concealment allegations that internal 6 service bulletins, “goodwill” adjustments given to the most vocal 7 owners, and temporary fixes concealed the defect from the general 8 customer base); Ehrlich v. BMW of N. Am., LLC, 801 F. Supp. 2d 908, 9 919 (C.D. Cal. 2010) (finding sufficient to state a claim for 10 active concealment allegations that defendant withheld information 11 about alleged defect that it had learned through internal sources 12 and customer complaints, replaced defective windshields only for 13 the most vocal customers without disclosing the replacement program 14 to all consumers, and concealed the program by calling the 15 replacements “goodwill” adjustments). 16 To the extent that NNA challenges these allegations, it argues 17 that the July 17, 2007 TSB disclosed the TCTS issue to consumers. 18 (Reply at 5.) NNA points out that the text of the TSB is directed 19 to the consuming public (referring, for example, to “your 20 vehicle.”) (Reply at 5.) Plaintiffs counter by asserting that the 21 TSB can only be accessed online if one pays a “Viewing 22 Subscription” and that its intended viewers are dealers, not 23 customers. (See Reply at 15, fn 11.) This dispute of fact is not 24 appropriately addressed at the stage of a motion to dismiss under 25 Rule 12(b)(6). 26 With respect to the fourth and fifth elements, NNA asserts 27 that Plaintiffs have failed to plead actionable reliance. (MTD at 28 18.) NNA asserts that each Plaintiff’s claim that he would not have 16 1 purchased the vehicle or paid less had he known of the alleged 2 defect is conclusory. Id. at 18-19. However, under California law, 3 reliance, on a classwide basis, may be established by materiality, 4 a rule that applies in “failure to disclose” cases. See, e.g., 5 Stearns v. Ticketmaster Corp., 655 F.3d 1013, 122 (9th Circuit) 6 (citing McAdams v. Monier, Inc., 182 Cal.App.4th 174, 184 (2010) 7 (holding that because of defendant's failure to disclose 8 information “which would have been material to any reasonable 9 person who purchased” the product, a presumption of reliance was 10 justified)). 11 the alleged TCTS defect was material. See, infra, Section 12 (III)(A)(1)(I). 13 As discussed above, Plaintiffs adequately plead that NNA further argues that Plaintiffs’ reasonable expectations 14 were satisfied because the vehicles allegedly did not fail during 15 the life of the warranty. (MTD at 18.) 16 unavailing. 17 warranty does not define customers’ expectations where, as here, 18 the alleged defect is safety-related. In such cases, the non- 19 disclosure of the defect may give rise to a fraudulent 20 nondisclosure claim even if the defect arises and the claim is made 21 outside of the warranty period. This argument is For the reasons discussed above, see Section III(A), a 22 23 24 B. Breach of Implied Warranty under the Song-Beverly Warranty Act The Song–Beverly Consumer Warranty Act creates “an implied 25 warranty of merchantability,” whereby the seller guarantees that 26 consumer goods meet each of the following conditions: (1) pass 27 without objection in the trade under the contract description; (2) 28 are fit for the ordinary purposes for which such goods are used; 17 1 (3) are adequately contained, packaged, and labeled; and (4) 2 conform to the promises or affirmations of fact made on the 3 container or label. Cal. Civ. Code § 1791.1 4 warranty, “the implied warranty of merchantability arises by 5 operation of law” and “provides for a minimum level of quality.” 6 (Am. Suzuki Motor Corp v. Superior Court, 37 Cal.App.4th at 1291, 7 1295–1296 (1995) (internal quotation marks and citation omitted). 8 Plaintiffs assert that the alleged TCTS defect renders the Class 9 Vehicles unfit for their particular purpose of providing safe and 10 Unlike an express reliable transportation. (FAC ¶¶ 137-143.) 11 NNA moves to dismiss on two grounds. First, NNA argues that 12 Plaintiffs have failed to allege that the vehicles are unfit for 13 their ordinary purpose, which, relying on Am. Suzuki,37 Cal. App. 14 4th 1295-96, it argues is simply to provide transportation. (MTD at 15 24.) NNA argues that the fact that the vehicles outlasted their 16 warranty demonstrate that the vehicles “must have, by definition, 17 been fit for [their] ordinary purpose[].” (Id.) NNA quotes a 18 passage purportedly from Am. Suzuki which would strongly support 19 its position (“[W]here an express time-limited warranty is issued 20 by a manufacturer, latent defects discovered after the term of the 21 warranty are not actionable as an implied warranty claim.”) (MTD at 22 24). However, the court does not find this passage in the cited 23 case. 24 Moreover, the proposition that a vehicle is merchantable 25 solely because it provides transportation was rejected in Isip v. 26 Mercedes-Benz USA, LLC, 155 Cal. App. 4th 19, 27 (2007) (“We reject 27 the notion that merely because a vehicle provides transportation 28 from point A to point B, it necessarily does not violate the 18 1 implied warranty of merchantability. A vehicle that smells, 2 lurches, clanks, and emits smoke over an extended period of time is 3 not fit for its intended purpose.”) Plaintiffs assert that the 4 alleged defect violates the implied warranty of merchantability on 5 the ground that “a vehicle that whines, buzzes, fails to accelerate 6 and maintain speed, experience engine failure, and ultimately 7 requires engine repairs” is unmerchantable. (Opp at 24.) While 8 Plaintiffs’ allegations may not reach the level of those in Mexia, 9 the court finds that, taken as true, they are enough to survive a 10 11 motion to dismiss. NNA’s second argument is that Plaintiffs’ claims are time- 12 barred. (MTD at 24.) California Civil Code section 1791.1 provides 13 that “[t]he duration of the implied warranty of merchantability ... 14 shall be coextensive in duration with an express warranty which 15 accompanies the consumer goods, provided the duration of the 16 express warranty is reasonable; but in no event shall such implied 17 warranty have a duration of less than 60 days nor more than one 18 year following the sale of new consumer goods to a retail buyer.” 19 Commercial Code section 2725 states in relevant part: “(1) An 20 action for breach of any contract for sale must be commenced within 21 four years after the cause of action has accrued.... (2) A cause of 22 action accrues when the breach occurs, regardless of the aggrieved 23 party's lack of knowledge of the breach. A breach of warranty 24 occurs when tender of delivery is made, except that where a 25 warranty explicitly extends to future performance of the goods and 26 discovery of the breach must await the time of such performance the 27 cause of action accrues when the breach is or should have been 28 discovered.” A cause of action under the Song–Beverly Act accrues 19 1 from the date the product is delivered, if the defect–-albeit 2 undiscovered-- existed at that time. Mexia, 174 Cal. App. 4th at 3 1305. 4 NNA asserts that the above rules mean that an implied warranty 5 brought more than five years from the date of delivery is time- 6 barred: Since the implied warranty lasts only one year, NNA argues, 7 a claim must be brought within four years of the expiration of the 8 one-year period, or five years from the date of sale. 9 argument, fails, however because under California law, NNA’s five- This 10 year warranty had the effect of tolling the statute of limitations. 11 Indeed, a court in this district recently considered and rejected 12 precisely NNA’s argument in Ehrlich v. BMW of N. Am., LLC, 801 F. 13 Supp. 2d 908, 924-25 (C.D. Cal. 2010) (“BMW's argument fails 14 because it ignores the existence of the 4–year/50,000–mile express 15 warranty, which is a warranty that ‘explicitly extends to future 16 performance of the goods.’ That warranty tolled the statute of 17 limitations until Plaintiff reasonably knew that his MINI would not 18 perform as it should, which did not occur until his windshield 19 cracked and BMW would not replace it.’) (citing 20 Alexander Imports, Inc., 234 Cal.App.3d 205, 215–17 (Ct.App.1991)). 21 Following the holding in Erlich, Plaintiffs’ claims are not time- 22 barred because NNA’s five-year warranty tolled the running of the 23 implied warranty’s statute of limitations. Krieger v. Nick 24 25 26 C. California Unfair Competition Law (UCL) California’s Unlawful Competition Act prohibits “unlawful,” 27 “unfair,” or “fraudulent” business practices. Cal. Bus. & Prof. 28 Code § 17200. Plaintiffs assert that NNA’s business practices are 20 1 unlawful, unfair, and fraudulent. (FAC ¶¶ 18-27.) 2 For a claim based upon unlawful business practices under the 3 UCL, the UCL “borrows violations of other laws and treats them as 4 unlawful practices that the unfair competition law makes 5 independently actionable.” Cel-Tech Comms., Inc. v. Los Angeles 6 Cellular Tel. Co., 20 Cal4th 163, 180 (1999). 7 that NNA’s conduct violates the unlawful prong on the grounds that 8 it violates the CLRA and the Song-Beverly Warranty Act. (See FAC ¶ 9 118.) NNA asserts that it has violated neither law. Plaintiffs assert However, 10 because the court finds that Plaintiffs’ pleadings under the CLRA 11 and the Song-Beverly Warranty Act are sufficient to survive NNA’s 12 motion to dismiss, see, infra, Sections III(A) and III(B), the 13 court finds that Plaintiffs’ pleadings as to the UCL’s unlawful 14 prong are likewise sufficient. 15 Having determined that Plaintiffs have adequately pled a UCL 16 violation under the “unlawful” prong, it need not address whether 17 Plaintiffs’ claims are adequately pled under the “unfair” and 18 “fraudulent” prongs. 19 20 21 D. Washington Consumer Protection Act (WCPA) Under the WCPA, a plaintiff must prove that the defendant's 22 act or practice (1) is unfair or deceptive; (2) occurs in the 23 conduct of trade or commerce; (3) affects the public interest; (4) 24 causes injury to the plaintiff's business or property; and (5) 25 causes the injury suffered. Hangman Ridge Training Stables, Inc. v. 26 Safeco Title Ins. Co., 105 Wash.2d 778, 719 P.2d 531, 535 (1986). 27 Washington courts have determined that the knowing omission of a 28 material fact is a “deceptive” practice. See Testo v. Russ Dunmire 21 1 Oldsmobile, Inc., 16 Wash. App. 39, 51, 554 P.2d 349, 358 (1976)(“A 2 buyer and seller do not deal from equal bargaining positions when 3 the latter has within his knowledge a material fact which, if 4 communicated to the buyer, will render the goods unacceptable or, 5 at least, substantially less desirable. Failure to reveal a fact 6 which the seller is in good faith bound to disclose may generally 7 be classified as an unfair or deceptive act due to its inherent 8 capacity to deceive and, in some cases, will even rise to the level 9 of fraud.”); Carideo v. Dell, Inc., 706 F. Supp. 2d 1122, 1133 10 (W.D. Wash. 2010) (citing Testo). 11 failure to disclose the TCTS to Plaintiffs was a material omission 12 that constituted a deceptive practice in the course of trade or 13 business of public interest that resulted in damages to Plaintiffs. 14 (FAC ¶¶ 132-136.) 15 Plaintiffs allege that NNA’s NNA challenges Plaintiffs’ WCPA claim on the same grounds as 16 it challenges Plaintiffs’ CLRA claim. (MTD at 22-23.) 17 asserts that the alleged failure to disclose was not “material” 18 because it relates solely to the post-warranty performance of the 19 vehicles. (Id. at 23) However, Plaintiffs identify no Washington 20 case law to support this proposition. Moreover, a U.S. district 21 court has recently suggested that Washington courts would allow 22 “failure to disclose” actions for defects that arise post-warranty, 23 including even non-safety defects. See Carideo v. Dell, Inc., 706 24 F. Supp. 2d 1122, 1134 (W.D. Wash. 2010) (rejecting argument that 25 defendant’s “duty to its consumers was limited to its warranty 26 obligations absent either an affirmative misrepresentation or a 27 safety issue” because Washington courts have not embraced this 28 principle, as articulated by California courts in Dougherty and its 22 First, it 1 2 progeny). NNA further challenges the WCPA claim on the grounds that 3 Plaintiffs have failed to allege NNA’s knowledge at the time of 4 sale. (MTD at 23, citing Robinson v Avis Rent a Car System, Inc, 22 5 P.3d 818, 824 (Wash. App. 2001)). 6 section III(A)(1)(ii), the court found that Plaintiffs have 7 sufficiently pled NNA’s knowledge at the time of sale to survive a 8 motion to dismiss under Rule 12(B)(6). However, as discussed supra in 9 10 11 E. Fraud Plaintiffs appear to assert a claim of fraudulent concealment 12 (failure to disclose). 13 intentionally concealed or suppressed a material fact, (2) the 14 defendant had a duty to disclose that fact, (3) acted with the 15 intent to defraud the plaintiff, (4) the plaintiff was unaware of 16 the fact, and (5) as a result of the concealment, plaintiffs were 17 damaged. See Roddenberry v. Roddenberry, 44 Cal.App.4th 634, 666 18 (1996). 19 A plaintiff must how that (1) the defendant All but one of NNA’s challenges as to Plaintiffs’ allegations 20 of fraudulent concealment are addressed at length in Section 21 III(A). A final objection is that Plaintiffs have failed to plead 22 fraudulent concealment with the specificity required by 9(b). 23 Rule 9(b) requires that “[i]n alleging fraud or mistake, a 24 party must state with particularity the circumstances constituting 25 fraud or mistake. Malice, intent, knowledge, and other conditions 26 of a person's mind may be alleged generally.” As a general rule, 27 “[a]verments of fraud must be accompanied by the ‘who, what, when, 28 where, and how’ of the misconduct charged.” 23 Cooper v. Picket, 137 1 F.3d 616,627 (9th Cir. 1997). 2 fraud by omission or fraud by concealment claim “can succeed 3 without the same level of specificity required by a normal fraud 4 claim.” Baggett v. Hewlett-Packard, Co., 582 F. Supp. 2d 1261, 1267 5 (C.D. Cal. 2007) (internal citations omitted). “[A] plaintiff in a 6 fraudulent concealment suit will ‘not be able to specify the time, 7 place, and specific content of an omission as precisely as would a 8 plaintiff in a false representation claim.’” Id. (internal 9 citations omitted). Ultimately, the question before the court is 10 whether the plaintiff “identifies the circumstances constituting 11 fraud so that a defendant can prepare an adequate answer from the 12 allegations.” See Moore v. Kayport Package Exp., Inc., 885 F.2d 13 531, 540 (9th Cir. 1989). 14 that Plaintiffs’ allegations that NNA concealed from consumers its 15 knowledge of the TCTS problem during the period 2004 through 2007 16 are sufficiently specific to go beyond the level of merely 17 conclusory or speculative and are sufficient to enable NNA to 18 produce an adequate response. However, as Plaintiffs point out, a In the present case, the court finds 19 20 21 F. Unjust Enrichment Finally, NNA challenges Plaintiffs’ claim of unjust enrichment 22 on the grounds that unjust enrichment is not an independent cause 23 of action. (MTD at 25.) The court agrees. “California does not 24 recognize a standalone cause of action for unjust enrichment.” 25 Robinson v. HSBC Bank USA, 732 F.Supp.2d 976 (N.D.Cal.2010). 26 “Unjust enrichment is not a cause of action, however, or even a 27 remedy, but rather, a general principle, underlying various legal 28 24 1 doctrines and remedies.” McBride v. Boughton, 123 Cal.App.4th 379, 2 387, 20 Cal.Rptr.3d 115 (2004) (internal citations omitted). 3 4 5 IV. Conclusion For the reasons set forth herein, the court DENIES Defendant 6 NNA’s motion to dismiss Plaintiffs’ First Amended Complaint for 7 failure to state a claim under Rule 12(b)(6) as to Plaintiffs’ (1) 8 CLRA,(2) Implied Warranty, (3) UCL,(4) WCPA, and (5) Fraud claims. 9 The court GRANTS NNA’s motion to dismiss as to Plaintiffs’ Unjust 10 Enrichment claim. 11 12 13 IT IS SO ORDERED. 14 15 16 Dated: October 10, 2013 DEAN D. PREGERSON United States District Judge 17 18 19 20 21 22 23 24 25 26 27 28 25
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