Ferrari, et al v. Autobahn, Inc. et al, No. 4:2017cv00018 - Document 64 (N.D. Cal. 2017)
Court Description: ORDER GRANTING MOTION OF SMI TO DISMISS FOR LACK OF PERSONAL JURISDICTION; GRANTING IN PART AND DENYING IN PART MOTIONS TO DISMISS FIRST AMENDED COMPLAINT WITHOUT LEAVE TO AMEND by Judge Yvonne Gonzalez Rogers granting in part and denying in part 19 Motion to Dismiss; granting 22 Motion to Dismiss; granting in part and denying in part 26 Motion to Dismiss; granting in part and denying in part 27 Motion to Dismiss Amended Pleadings due by 8/8/2017. (fs, COURT STAFF) (Filed on 7/21/2017)
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Ferrari, et al v. Autobahn, Inc. et al Doc. 64 1 2 3 4 5 UNITED STATES DISTRICT COURT 6 NORTHERN DISTRICT OF CALIFORNIA 7 8 9 STEVE FERRARI, ET AL., Plaintiffs, 10 vs. United States District Court Northern District of California 11 12 MERCEDES BENZ USA, LLC, ET AL., Defendants. 13 CASE NO. 17-cv-00018-YGR ORDER GRANTING MOTION OF SMI TO DISMISS FOR LACK OF PERSONAL JURISDICTION; GRANTING IN PART AND DENYING IN PART MOTIONS TO DISMISS FIRST AMENDED COMPLAINT WITHOUT LEAVE TO AMEND Re: Dkt. Nos. 19, 22, 26, 27 14 Plaintiffs Steve Ferrari, Mike Keynejad, Patricia Rubin, Hooshang Jowza, Celso Frazao, 15 Renuka Narayan, Gertrud Frankrone, Ernest Salinas, Kalkhusan Sareen, Hossein Jalali, Ron 16 Wolfe, Sohrab Rahimzadeh, Fred Grant, Ester Grant, Vincent Leung, Ken Wong, Jessica 17 Langridge, Tony Nicolosi, Donald Lyang, Artur Semichev, John Diaz, Harold Fethe, and 18 Raymond Gapasin, bring this action against defendants Autobahn, Inc. dba Autobahn Motors 19 (“Autobahn”), Mercedes-Benz USA, LLC (“MBUSA”); Sonic Automotive, Inc. (“Sonic”); and 20 Speedway Motorsports, Inc. (“SMI”). Plaintiffs bring the action on behalf of a putative class and 21 allege claims for fraud; trespass to chattel; negligent misrepresentation; negligence; violation of 22 California’s False Advertising Law (“FAL”), Business & Professions Code section 17500; and 23 violation of California’s Unfair Competition Law (“UCL”), Business & Professions Code section 24 17200. 25 The action was filed in San Mateo Superior Court on December 20, 2016. MBUSA 26 removed the action to this Court under the Class Action Fairness Act, 28 U.S.C. section 1453 et 27 seq. Plaintiffs filed their First Amended Complaint on January 25, 2017, adding an additional 28 claim for relief for “CPO” [certified pre-owned vehicle] fraud. (Dkt. No. 14 [“FAC”].) Because Dockets.Justia.com 1 the claims in the FAC, aside from the CPO Fraud and trespass to chattel claim, were nearly 2 identical to those alleged a prior action dismissed by this Court, Ferrari, et al. v. Autobahn, Inc., et 3 al., Case No. 4:15-cv-04379-YGR, the instant action was related and reassigned to the 4 undersigned. Defendants have each filed a motion to dismiss on grounds of failure to state a plausible 5 6 claim against them. Defendant SMI also moves under Rule 12(b)(1) of the Federal Rules of Civil 7 Procedure on the grounds that the Court lacks personal jurisdiction over it. (Dkt. Nos. 19, 22, 26, 8 27.) 9 10 Having carefully considered the papers submitted1 and the pleadings in this action, the evidence properly admissible in the context of these motions2 and the matters judicially United States District Court Northern District of California 11 12 13 14 15 16 1 Defendant Autobahn’s motion (Dkt. No. 26) and reply (Dkt. No. 42) contain copious footnotes in what appears to be nine-point font or smaller, in violation of Civil Local Rule 34(c)(2) [requiring 12-point standard font in all text, including footnotes]. The Court has not considered the material in those footnotes. 2 17 18 19 20 21 22 23 24 25 26 27 28 In opposition to SMI’s motion, plaintiffs submitted the declaration of attorney Herman Frank (Dkt. No. 32), attaching a number of exhibits, including excerpts of depositions and discovery taken in other cases. The vast majority of the exhibits have nothing to do with SMI’s contacts with the jurisdiction. Exhibit G, which purports to explain counsel’s basis for naming SMI as a defendant, attaches a copy of a printouts from www.zmax.com, indicating SMI is copyright holder for the webpage, and that zMax is “party of the Speedway Motorsports family.” (Id. at ECF 125, 128.) Plaintiffs submitted the declaration of John Diaz, captioned as a declaration in opposition to MBUSA’s motion, but apparently addressed to SMI’s motion. (Dkt. No. 33.) The declaration and exhibits are directed at a variety of topics including distribution of zMax, properties purportedly owned by third party O. Bruton Smith, and a proposed stipulated order in an FTC enforcement action against SMI in the Middle District of North Carolina. (Id. at ECF 51 [discussing whether defendants’ actions would comply with the stipulated final order “if it is entered”].) The Court finds the Diaz declaration is inadmissible because it is: insufficient to lay a foundation or to authenticate the documents attached; replete with hearsay; and irrelevant to the question of SMI’s contacts with this jurisdiction. Plaintiffs also submitted declarations of Elliott Dan (Dkt. No. 36), Larry Dirksen (Dkt. No. 35), and Paul Grewal (Dkt. No. 34), all former employees of Autobahn. None of these declarations are addressed to the issue of SMI’s contacts with this jurisdiction. The extrinsic evidence therein is not properly offered in connection with the 12(b)(6) motions. The Court therefore has not considered them in connection with the motions herein. 2 1 noticeable3, the pleadings and orders in the prior civil action, and for the reasons set forth below, 2 the Court: (1) GRANTS the Motion of SMI to Dismiss on grounds of lack of personal jurisdiction; 3 (2) GRANTS IN PART AND DENIES IN PART, WITH LEAVE TO AMEND, the motions of MBUSA, 4 Autobahn and Sonic to dismiss under Rule 12(b)(6). 5 I. SMI’S MOTION TO DISMISS UNDER RULE 12(B)(1) Defendant SMI has moved to dismiss the claims against it for lack of personal jurisdiction 7 under Rule 12(b)(1). Federal courts ordinarily follow state law in determining the bounds of their 8 jurisdiction over persons, looking to the state’s long arm statute regarding service of summons. 9 See Fed. Rule Civ. Proc. 4(k)(1)(A) (service of process effective to establish personal jurisdiction 10 over defendant subject to jurisdiction in the state court where the district is located); Daimler AG 11 United States District Court Northern District of California 6 v. Bauman, 134 S. Ct. 746, 753 (2014) (same). California’s long-arm statute, in turn, permits 12 exercise of personal jurisdiction to the fullest extent permitted by federal due process. Id. For 13 purposes of federal due process, two types of personal jurisdiction exist: general jurisdiction 14 (sometimes called “all-purpose”) and specific jurisdiction (sometimes called “case-linked”). 15 Bristol-Myers Squibb Co. v. Superior Court of California, San Francisco Cty., 137 S. Ct. 1773, 16 1779–81 (2017). “A court with general jurisdiction may hear any claim against that defendant, 17 even if all the incidents underlying the claim occurred in a different State.” Id. A court with only 18 specific jurisdiction over a defendant is limited to hearing claims deriving from the facts that 19 establish jurisdiction in the forum. Id. 20 A corporation is subject to general jurisdiction only in the states where it is incorporated or 21 has its principal place of business. Daimler AG, 134 S.Ct. at 753, 761. Only in an exceptional 22 case will “a corporation's operations in a forum other than its formal place of incorporation or 23 principal place of business [ ] be so substantial and of such a nature as to render the corporation at 24 25 26 27 28 3 Defendant MBUSA seeks judicial notice of orders, transcripts, and complaints filed in the prior federal action and in the state court action, Maskay Inc. dba Eurotech v. Autobahn Motors, Inc. dba Autobahn Motorsports et al. in the Superior Court of California for the County of San Mateo, No. CIV52559. (Dkt. No. 20.) Defendant SMI seeks judicial notice of documents filed in the prior federal court action. (Dkt. No. 25.) The requests are GRANTED. The Court takes judicial notice of the existence of those documents, but not the truth of the matters stated therein. 3 1 home in that State.” Id. at 761, n.19; see also Martinez v. Aero Caribbean, 764 F.3d 1062, 1076 2 (9th Cir. 2014). 3 The Ninth Circuit applies a three-part test to determine whether a court has specific personal jurisdiction, taking into account whether: (1) the defendant has performed some act or 5 consummated some transaction within the forum or otherwise purposefully availed himself of the 6 privileges of conducting activities in the forum; (2) the claim arises out of or results from the 7 defendant’s forum-related activities; and (3) the exercise of jurisdiction is reasonable. Bancroft & 8 Masters, Inc. v. Augusta Nat. Inc., 223 F.3d 1082, 1086 (9th Cir. 2000). Plaintiffs bear the burden 9 on the first two factors. Boschetto v. Hansing, 539 F.3d 1011, 1016 (9th Cir. 2008); Sher v. 10 Johnson, 911 F.2d 1357, 1361 (9th Cir. 1990). Agency relationships may be relevant to the 11 United States District Court Northern District of California 4 existence of specific jurisdiction, and “a corporation can purposefully avail itself of a forum by 12 directing its agents or distributors to take action there.” Daimler AG, 134 S.Ct. at 759 n.13 (citing 13 Asahi, 480 U.S. at 112 (defendant’s act of “marketing [a] product through a distributor who has 14 agreed to serve as the sales agent in the forum State” may amount to purposeful availment)). 15 However, if “a parent and a subsidiary are separate and distinct corporate entities, the presence of 16 one . . . in a forum state may not be attributed to the other.” Holland Am. Line Inc. v. Wartsila N. 17 Am., Inc., 485 F.3d 450, 459 (9th Cir. 2007) (passive website and advertising presence in a state 18 does not establish personal jurisdiction). 19 Here, the evidence in the record does not support a finding of either general or specific 20 jurisdiction over SMI in this Court. SMI has its headquarters in North Carolina, and is 21 incorporated in Delaware. (Declaration of William R. Brooks, Dkt. No. 29 at ¶ 2.) SMI does not 22 have any offices or employees in California and does not regularly conduct business in California. 23 (Id. ¶ 3.) It is not registered to do business in California and has no agent for the service of 24 process in California. (Id. ¶ 4.) SMI does not make, manufacture, or sell any product in 25 California, including zMax, the oil-additive product that is at the center of many of plaintiffs’ 26 allegations in this action. (Id. at ¶¶ 8-9.) Rather, Oil-Chem Research Corporation (“Oil-Chem”), 27 a wholly owned subsidiary of SMI and a separate legal entity, manufactures and markets zMax. 28 4 1 (Id. at ¶¶ 9-10.) The legally separate subsidiary’s activities are irrelevant to the Court’s 2 jurisdiction over SMI. 3 Plaintiffs do not dispute these facts, but rather offer other facts which they contend 4 establish personal jurisdiction over SMI. They contend that SMI is “connected” with a California 5 company (MOC) that distributes zMAX; that bottles of zMAX include the statement 6 “recommended by” SMI; and SMI is listed as holder of the copyright on the zmax.com website. 7 None of these contacts is sufficient to find that SMI is subject to this Court’s jurisdiction. 8 Plaintiffs’ arguments—that zMax is sold in California and regularly used by defendants Autobahn 9 and Sonic in California—do not support specific jurisdiction in the face of evidence that SMI does not make or sell that product. Further, plaintiffs’ assertion that SMI’s CEO owned or owns 11 United States District Court Northern District of California 10 property in California likewise does not support general or specific jurisdiction here. 12 Consequently, the motion of SMI to be dismissed for lack of jurisdiction is GRANTED 13 WITHOUT LEAVE TO AMEND. The Court does not reach the additional pleading deficiencies 14 raised by SMI. 15 II. 16 17 18 19 20 21 22 23 24 25 26 27 28 MOTIONS OF DEFENDANTS MBUSA, AUTOBAHN, AND SONIC TO DISMISS UNDER RULE 12(B)(6) A. Fraud Claims (First, Third, Fourth, and Fifth Claims for Relief) Plaintiffs allege the following fraud-based claims for relief: (i) “CPO Fraud” or fraud by all defendants in the course of selling Certified Pre-Owned vehicles [First claim for relief]; (ii) false representations that genuine Mercedes Benz parts and accessories were used in repairs and service by Autobahn (third claim for relief); and (iii) false representations that genuine Mercedes Benz parts are superior to or longer-lasting than non-genuine parts (fourth claim for relief). Plaintiffs also allege a claim for negligent misrepresentation based upon the use of non-genuine parts (fifth claim for relief). “The elements of a cause of action for fraud in California are: (a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity; (c) intent to defraud; (d) justifiable reliance; and (e) resulting damage.” Kearns v. Ford Motor Co., 567 F.3d 1120, 1126 (9th Cir. 2009) (internal quotations and citations omitted). “The elements of negligent 5 1 misrepresentation are (1) the misrepresentation of a past or existing material fact, (2) without 2 reasonable ground for believing it to be true, (3) with intent to induce another’s reliance on the fact 3 misrepresented, (4) justifiable reliance on the misrepresentation, and (5) resulting damage.” 4 Apollo Capital Fund, LLC v. Roth Capital Partners, LLC, 158 Cal. App. 4th 226, 243 (2007). 5 Federal Rule of Civil Procedure 9(b) requires that “a party must state with particularity the 6 circumstances constituting fraud or mistake.” Fed. R. Civ. P. 9(b). “Malice, intent, knowledge, 7 and other conditions of a person’s mind may be alleged generally.” Id. While a federal court will 8 examine state law to determine whether the elements of fraud have been pleaded sufficiently to 9 state a cause of action, Rule 9(b)’s specificity requirements apply to the circumstances of the fraud. Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1103 (9th Cir. 2003). Thus, “[a]verments 11 United States District Court Northern District of California 10 of fraud must be accompanied by the who, what, when, where, and how of the misconduct 12 charged.” Id. at 1106 (internal quotations and citations omitted). 13 1. First Claim for Relief: Certified Pre-Owned (CPO) Vehicle Fraud 14 With respect to the CPO fraud claim, plaintiff Harold Fethe alleges that, in 2009, he 15 purchased a certified pre-owned Mercedes-Benz vehicle from Autobahn, with a warranty covering 16 the period up to September 23, 2011. (FAC ¶ 5.) He thereafter purchased an extended warranty, 17 offered by a third party, which expired in December 2016. (Id. ¶ 5.) Fethe alleges that he 18 obtained later obtained information indicating that, at some time prior to his purchase from 19 Autobahn, Autobahn had placed the zMax oil additive in the car. (Id.¶ 5.) Fethe alleges that he 20 attempted to obtain warranty repair of the damage done to his vehicle on account of the use of 21 zMax, but that his claim was denied in November 2016 on the grounds that damage caused by oil 22 additives was not covered. (Id.¶ 46.) Fethe alleges that, had he known about the use of zMax by 23 Autobahn, he would not have purchased the vehicle from Autobahn. (Id.¶¶ 87, 101, 104, 107.) 24 He alleges that he paid $2,000 to $3,000 more for the vehicle than one without a CPO designation, 25 and that the use of zMax placed his warranty “in jeopardy” since damage due to use of non- 26 genuine parts is not covered. (Id.¶¶ 87, 109.) Fethe seeks to represent a class of individuals who 27 purchased CPO vehicles from Autobahn “in which zMax was placed, during the period 2004 - 28 6 1 present, and/or purchased [a] pre-owned vehicle from any dealership owned by Sonic 2 Automotive.” (Id.¶ 6.) 3 Plaintiffs allege that MBUSA, through its CPO program standards, sets certain inspection 4 criteria, with factory-trained technicians reconditioning used vehicles using genuine Mercedes 5 Benz parts to insure the vehicles perform to MBUSA’s standards. Plaintiffs’ allegations reference 6 the MBUSA website, an MBUSA YouTube video regarding the CPO program, and an MBUSA 7 CPO program guide setting forth these provisions. (Id.¶¶ 74-78, 82-83.) Plaintiffs allege that 8 Autobahn, as an authorized dealership and agent of MBUSA, has intentionally used products not 9 approved by MBUSA in reconditioning vehicles for CPO certification, including an oil additive called zMax, and other non-genuine Mercedes-Benz parts. (Id.¶¶ 84, 89.) Plaintiffs further allege 11 United States District Court Northern District of California 10 that zMax is used in CPO cars conditioned by Autobahn at the direction of Sonic, Autobahn’s 12 parent company. (Id.¶ 92.) Plaintiffs contend that use of zMax is prohibited by MBUSA, citing 13 this statement allegedly appearing on an MBUSA website: 14 15 16 17 18 19 Up to now, Daimler AG has not approved any product that is allowed to be introduced or mixed into approve, read-formulated [sic] lubricants for engines, transmissions, or major assemblies in Mercedes-Benz vehicles as a special additive! The vehicle owner is solely responsible if special additives are used in lubricants! If damage occurs the legal warranty and guarantee claims may be limited. (Id.¶ 86, emphasis supplied.)4 As to Autobahn, plaintiffs contend they used non-genuine parts, contrary to the CPO 20 program rules, and failed to provide customers with certification inspection reports as required by 21 Vehicle Code section 11713.18. (Id.¶¶ 100, 102.) Plaintiffs assert that Autobahn deliberately 22 withheld information about use of zMax and misrepresented compliance with the CPO program. 23 (Id.¶ 103.) Plaintiffs argue that they reasonably and detrimentally relied on the misrepresentations 24 25 26 27 28 4 Plaintiffs include allegations regarding the use of zMax as part of their CPO Fraud claim and their non-OEM parts claim. (See FAC ¶ 38 [there are two classes of victims, customers of Autobahn Motors who received non-OEM parts including zMAX during the repair process, and those who received non-OEM parts during the process of purchasing a CPO automobile].) 7 1 by Autobahn and were harmed by paying higher prices for CPO-designated vehicles and 2 jeopardizing their warranties. (Id. ¶¶ 107, 108, 109.) 3 4 a. Autobahn & Sonic Autobahn first argues that the CPO fraud claim is time-barred. Autobahn contends Fethe 5 has alleged no basis for delayed accrual of the statute of limitations, such as that he could not have 6 discovered the use of zMax sooner had he acted with diligence. The Court agrees that, with 7 respect to the CPO Fraud claim, the FAC has not alleged when Fethe, the representative plaintiff 8 on this alleged class claim, discovered the use of zMax in his CPO vehicle. See Creditors 9 Collection Serv. v. Castaldi, 38 Cal. App. 4th 1039, 1044 (1995) (limitations period commences to run when the aggrieved party could have discovered the basis for the claim with an exercise of 11 United States District Court Northern District of California 10 reasonable diligence). 12 The allegations of the FAC are ambiguous as to when he learned, or should have learned 13 that zMax was used in his car and caused damage. While Fethe purchased the vehicle in 2009, he 14 alleges: (1) he obtained a VMI report sometime after that, the VMI report did not indicate use of 15 zMax (Id. ¶ 6); (2) some unspecified time later he learned that he needed “desludging” due to use 16 of zMax; and (3) he was denied a warranty repair in December 2016. The motion of Autobahn to 17 dismiss the CPO Fraud claim is GRANTED WITH LEAVE TO AMEND on statute of limitations 18 grounds. Plaintiffs are given leave to amend to allege a basis for delayed discovery. 19 In its scattershot motion, Autobahn has also seeks to dismiss the CPO Fraud (and other 20 fraud claims) on the grounds that the allegations do not meet the particularity requirements of Rule 21 9(b), are internally inconsistent, and fail to allege reliance, damages, or injury sufficiently. In 22 connection with the CPO Fraud claim, Fethe alleges that his vehicle was damaged by use of a non- 23 genuine/non-OEM product contrary to the CPO program requirements, that he paid more for the 24 vehicle than he otherwise would have paid without the false CPO certification, and that his 25 warranty did not cover the damage resulting from Autobahn’s conduct. These allegations are not 26 27 28 8 1 conclusory or implausible on their face. The Court concludes that the allegations of the CPO 2 Fraud claim are sufficiently particular,5 and state a plausible basis for consequent damages. As to Sonic, plaintiffs allege that it is liable for CPO fraud because it directed the use of 3 4 zMax in all cars, and thereby aided and abetted the conduct of Autobahn in falsely asserting 5 vehicles were CPO certified. (Id. ¶¶ 92, 112.) The allegations are sufficient to state the basis for 6 Sonic’s liability on this claim, to the extent plaintiffs can plead around the statute of limitations 7 bar. b. 8 9 MBUSA With respect to MBUSA, plaintiffs allege that since MBUSA chose to appoint Autobahn as its agent to implement the CPO program, it is charged with the knowledge of its agent. That is, 11 United States District Court Northern District of California 10 MBUSA is charged with knowledge that the products used in reconditioning the cars did not 12 comply with the CPO program’s requirements, and was responsible for terminating dealerships 13 that did not comply with those requirements. (FAC ¶¶ 93, 95.) Plaintiffs further contend that 14 MBUSA should have been aware of Autobahn’s practice because it should have received vehicle 15 history reports, which would show use of non-approved products. (Id. ¶¶ 95, 96.) MBUSA argues 16 that there is no allegation that any plaintiff relied on any MBUSA statement (such as a manual or 17 ad) other than the CPO certification itself, and that all the actions inconsistent with the CPO 18 program are alleged to have been taken by other defendants. 19 “[A] principal is liable to third parties ... for the frauds or other wrongful acts committed 20 by [its] agent in and as a part of the transaction of” the business of the agency. Daniels v. Select 21 Portfolio Servicing, Inc., 246 Cal. App. 4th 1150, 1172 (2016), review denied (July 27, 2016) 22 (quoting Grigsby v. Hagler, 25 Cal.App.2d 714, 715(1938).) Here, plaintiffs have alleged a 23 5 24 25 26 27 28 Autobahn incorrectly asserts that Rule 9(b) requires every element of a fraud claim, rather than just the circumstances of the fraud, to be pleaded with particularity. See Fed. R. Civ. P. 9(b) (“Malice, intent, knowledge, and other conditions of a person's mind may be alleged generally.”); Vess, 317 F.3d at 1103 (Rule 9(b) applies to allegations of the circumstances of the fraud); Midwest Commerce Banking Co. v. Elkhart City Ctr., 4 F.3d 521, 524 (7th Cir. 1993) (“All Rule 9(b) required, however, was that Elkhart set forth the date and content of the statements or omissions that it claimed to be fraudulent. Elkhart was not required to go further and allege the facts necessary to show that the alleged fraud was actionable.”) 9 1 plausible agency relationship between Autobahn and MBUSA as part of the CPO certification 2 program. The Court further finds no merit to MBUSA’s arguments that the fraud allegations are 3 implausible on their face, or that plaintiffs have not alleged reliance or causation sufficiently. 4 MBUSA’s motion to dismiss the CPO fraud claim on the grounds stated is DENIED. 5 2. 6 7 8 9 10 United States District Court Northern District of California 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 Third and Fifth Claims for Relief: Fraud and Negligent Misrepresentation Regarding Use of Non-Genuine/Non-OEM Parts In their third and fifth claims for relief, plaintiffs allege that defendant Autobahn published false statements on its website indicating that it used (or, at times, “only used”) genuine MercedesBenz parts in its services, and suggested in its repair manual that it always used genuine parts, in accordance with Mercedes-Benz manufacturer recommendations. (FAC ¶¶ 156-159.) Autobahn is also alleged to have represented falsely in printed booklets that zMax and “MOC” products are genuine Mercedes-Benz parts. (Id. ¶ 165.) Plaintiffs allege this conduct is misleading, violates the CPO guidelines, and violates California Vehicle Code section 11713.18 regarding certified pre-owned cars. Plaintiffs allege that they reasonably relied on that deceptive conduct in purchasing CPO vehicles and bringing vehicles to Autobahn for service. a. Autobahn & Sonic Autobahn’s argument for dismissal of these claims turns mainly on its contention that use of non-OEM parts, including zMax, did not render any of its alleged statements false. Whether Autobahn’s statements on its website (or printed booklets) were false or misleading constitutes a factual issue, not one that can be determined on the face of the pleadings. Likewise, the Court finds entirely unpersuasive Autobahn’s contention that the allegations of damage on account of overpaying for these non-genuine parts are contradicted by other allegations in the complaint regarding the false claims that genuine parts are superior. The allegation that genuine parts are “every bit as good” as the non-genuine parts does not undercut the allegation that plaintiffs were overcharged when they paid for genuine parts, but Autobahn instead used lower-priced non-genuine parts. Regardless of whether the parts actually perform the same, Autobahn’s alleged practice of using cheaper parts billed at higher rates would be deceptive. 28 10 1 As to the remainder of Autobahn’s arguments for dismissal—insufficiency of the 2 allegations, failure to allege damages, lack of plausibility—the Court finds, as stated above, that 3 Autobahn’s arguments do not support dismissal. The allegations are sufficient to the “who, what, 4 when, where, and how” of the misrepresentations, and plaintiffs allege reliance and damage 5 resulting therefrom. 6 Sonic is again alleged to be liable for aiding and abetting the alleged fraudulent conduct by 7 directing Autobahn to use the non-genuine parts in plaintiffs’ and other customers’ cars, and by 8 concealing from plaintiffs that zMax and other products alleged are prohibited by MBUSA and 9 not covered under the MBUSA warranty. (Id. ¶¶ 166, 167, 175, 182.) These allegations 10 United States District Court Northern District of California 11 12 13 14 sufficiently state the basis for this claim against Sonic. The motions of Autobahn and Sonic to dismiss the third and fifth claims for relief are DENIED. b. MBUSA MBUSA is alleged to be liable for the misrepresentations because it administers the CPO 15 program and Autobahn acts as its agent. (Id. ¶¶ 162, 163.) While MBUSA is plausibly alleged to 16 have an agency-principal relationship with Autobahn in connection with the CPO certification 17 program, no such plausible agency relationship is alleged with respect to the non-OEM parts 18 claim. There is no allegation indicating that Autobahn is acting as MBUSA’s agent when it 19 engaged in its regular automobile repair business. To the extent there is overlap between the non- 20 genuine/non-OEM parts fraud claim and the CPO claim, plaintiffs have alleged the basis for 21 MBUSA’s liability, based on an agency relationship with Autobahn in the CPO program only. 22 The Court reads the FAC as pleading separate, distinct fraud claims based on these two distinct 23 factual scenarios. Plaintiffs have alleged no false statement or deceptive conduct by MBUSA in 24 connection with the alleged OEM-parts fraud. Plaintiffs have not alleged an agency relationship 25 with respect to run-of-the-mill repairs by Autobahn that would support imputing Autobahn’s 26 knowledge and actions to MBUSA. Thus, the Court finds that MBUSA’s motion to dismiss the 27 third and fifth claims for relief is GRANTED on these grounds. 28 11 1 3. Fourth Claim for Relief: Longevity and Superiority Fraud 2 In their fourth claim for relief, plaintiffs allege that MBUSA, Autobahn, and Sonic falsely 3 stated that Mercedes Benz genuine parts have longer life than non-genuine parts. Plaintiffs allege 4 that these claims are made by MBUSA in advertising brochures mailed to customers and on 5 MBUSA’s website. (Id. ¶ 196.) Plaintiffs allege Autobahn uses the MBUSA-provided content in 6 its direct mailings and email advertising, which are authorized by its parent, Sonic. (Id. ¶ 196.) 7 MBUSA’s advertising states that genuine parts provide “measurable differences” and are alleged to have included statements that certain genuine Mercedes-Benz parts: “can last 45% 9 longer;” are “36% more effective;” “last at least 40,000 miles” as compared to others that “might 10 need to be replaced at 12,000 miles;” “can provide up to 800,000 more wiping cycles” than other 11 United States District Court Northern District of California 8 brands; or are otherwise superior to non-genuine parts. (Id. ¶ 197.) Plaintiffs allege these 12 statements are materially false because the parts are made by the same manufacturers as the non- 13 genuine parts, and the non-genuine parts perform as well in every way as the genuine parts. (Id. 14 ¶¶ 200, 201.) MBUSA is alleged to know the statements are false, are being made to consumers, 15 and are more than just inactionable puffery, because they include numerical designations 16 supporting the claims of superiority. 17 MBUSA contends that plaintiffs’ allegations as to the element of falsity are too 18 conclusory, and do not provide sufficient facts as to why the statements are false. MBUSA argues 19 the allegation that the same manufacturer makes the genuine and non-genuine parts does not 20 plausibly support a claim that the parts are made to the same standards, or that the superiority 21 statements made by MBUSA are false. MBUSA also argues that the advertising claims alleged 22 are merely non-actionable promotional statements, and do not promise specific longevity or other 23 quantified performance advantages over all competitor parts (or even specific competitor parts). 24 First, plaintiffs’ allegations sufficiently identify the statements they contend are false, who 25 made them, how and when. Second, the Court cannot determine, as a matter of pleading, that the 26 statements are so vague or subjective as to be non-actionable, given that they offer specific 27 numerical measures, even if the claims of superior longevity are slightly qualified by the words 28 “can” or “up to.” “Generalized, vague, and unspecified assertions constitute ‘mere puffery’ upon 12 1 which a reasonable consumer could not rely, and hence are not actionable.” Anunziato v. 2 eMachines, Inc., 402 F.Supp.2d 1133, 1139 (C.D.Cal.2005) (quoting Glen Holly Entertainment, 3 Inc. v. Tektronix Inc., 343 F.3d 1000, 1005 (9th Cir. 2003)). “While product superiority claims that 4 are vague or highly subjective often amount to non[-]actionable puffery . . . misdescriptions of 5 specific or absolute characteristics of a product are actionable.” Southland Sod Farms v. Stover 6 Seed Co., 108 F.3d 1134, 1145 (9th Cir.1997). By contrast, “[a] specific and measurable 7 advertisement claim of product superiority based on product testing is not puffery.” Id. Here, 8 MBUSA has couched the alleged misrepresentations in numerical terms. Whether the statements 9 constitute “mere puffery” cannot be determined on the pleadings. 10 MBUSA further moves to dismiss the longevity and superiority fraud claim on the grounds United States District Court Northern District of California 11 that plaintiffs have not alleged reliance by any plaintiff that resulted in injury. The allegations of 12 the fourth claim for relief are long on descriptions of the alleged falsity, but short on a statement of 13 any consequent injury caused by plaintiffs’ reliance on the statements. While plaintiffs allege that 14 they were charged a higher OEM price when they received non-OEM products, and that non-OEM 15 parts caused damage to their vehicles or their warranty coverage (FAC ¶¶ 203-208), they do not 16 allege that they viewed or relied on the advertising targeted here itself, or that such reliance caused 17 them any damage or injury. Consequently, MBUSA’s motion to dismiss the fourth claim for relief 18 is GRANTED WITH LEAVE TO AMEND to allow plaintiffs to allege, if possible, facts to establish 19 reasonable reliance and resulting injury. 20 Because the allegations against Autobahn and Sonic on this claim are that Autobahn 21 passed on these alleged longevity representations in its own advertising, at the direction of Sonic, 22 knowing that the statements were false. However, plaintiffs have not alleged reliance on them, the 23 motion to dismiss the claim against Autobahn and Sonic is likewise GRANTED WITH LEAVE TO 24 AMEND. 25 B. Negligence Claim (Sixth Claim for Relief) 26 Plaintiffs allege a sixth claim for relief based on negligence. The negligence claim 27 incorporates the fraud allegations and adds that defendants negligently concealed the true facts 28 about use of non-OEM products. As to Autobahn and Sonic, they are alleged to have breach their 13 1 duty by “negligently and wrongfully marketing, distributing, selling, and placing zMAX into 2 automobiles, knowing that in so doing, the manufacturer’s certified pre-owned warranties, or such 3 similar warranties issued by third parties, are thereby rendered void or voidable at the option of the 4 warrantor negligently placed zMax into vehicles knowing the CPO warranties or other warranties 5 would be rendered void or voidable on account of that conduct.” (Id. ¶ 223.) MBUSA is alleged 6 to be negligent because it knew, through VMI reports it received and the pendency of this 7 litigation, that Sonic and Autobahn were selling zMax in a manner that would render MBUSA or 8 other warranties void or voidable. Plaintiffs allege MBUSA had a duty to correct Sonic and 9 Autobahn’s conduct by virtue of their use of the Mercedes-Benz name to market zMax as if it 10 United States District Court Northern District of California 11 were approved by MBUSA. (Id. ¶¶ 224-27.) First, negligent concealment is not a cognizable claim for relief. See Pooshs v. Phillip 12 Morris USA, Inc., No. C 04-1221 PJH, 2013 WL 2252471, at *9 (N.D. Cal. May 22, 2013) (citing 13 California authorities holding that “[a]bsent a statutory authorization, or a special relationship 14 between the parties creating a duty to disclose, there is no liability for implied representations, or 15 for negligent nondisclosure or concealment”). 16 Second, plaintiffs fail to allege the elements of a negligence claim as to Autobahn, Sonic, 17 and MBUSA. “To prevail on their negligence claim, plaintiffs must show that [each defendant] 18 owed them a legal duty, that it breached the duty, and that the breach was a proximate or legal 19 cause of their injuries.” Merrill v. Navegar, Inc., 26 Cal. 4th 465, 476 (2001). Plaintiffs do not 20 allege the duty and breach elements for Autobahn and Sonic distinctly. Nor have plaintiffs alleged 21 a plausible basis for claiming MBUSA had a duty to exercise control over Autobahn’s and Sonic’s 22 conduct. 23 Based on the foregoing, as to Autobahn, Sonic, and MBUSA, the motion to dismiss the 24 sixth claim for relief is GRANTED WITH LEAVE TO AMEND to allege each of the elements of a 25 cognizable negligence claim against each defendant. 26 C. 27 Plaintiffs allege a claim for trespass to chattel against Autobahn and Sonic (not MBUSA). 28 Trespass to Chattel Claim (Second Claim for Relief) Plaintiffs allege that, by repeatedly using non-approved/non-genuine products in repairs and 14 1 service, they caused damage to plaintiffs’ automobiles because use of products such as zMax and 2 non-approved brake fluid damaged cars and put warranties (including warranties under the CPO 3 program) in jeopardy, as well as resulting in overcharges to plaintiffs for non-genuine parts. (Id. 4 ¶¶ 132, 134-39) Trespass to chattel is a tort theory under California law related to the concept of 5 conversion, the elements of which are: plaintiff’s possession of the property; defendant’s 6 intentional interference with the plaintiff’s use of the property; lack of plaintiff's consent; and 7 damages. Thrifty-Tel, Inc. v. Bezenek, 46 Cal. App. 4th 1559, 1566-67 (1996). Such a claim is 8 subject to a three-year statute of limitations. Cal. Code Civ. Proc. § 338(c) (“action for taking, 9 detaining, or injuring any goods or chattels”). 10 Autobahn contends this claim must be dismissed for having been filed outside the United States District Court Northern District of California 11 applicable statute of limitations, as well as for failure to allege a plausible claim or a concrete 12 injury. With respect to the statute of limitations argument, although plaintiffs include allegations 13 regarding the CPO warranty within this claim, the claim more generally alleges that Autobahn 14 placed non-genuine products in plaintiffs’ cars without their consent or knowledge, causing them 15 damage. Plaintiffs list a number of different kinds of parts they allege were placed in plaintiffs’ 16 vehicles repaired by Autobahn. The use of these parts is alleged to have continued to the present, 17 and is alleged to have been discovered by plaintiffs in mid-2015 at the earliest. (FAC ¶¶ 59-65.) 18 The Court finds these allegations sufficient to state a plausible basis for delayed accrual of the 19 statute of limitations such that the claim is timely. 20 Autobahn further argues that the claim should be dismissed for failure to allege a plausible 21 claim or a basis for injury in fact. The Court finds the allegations sufficient on both points. 22 Sonic is alleged to be liable on this claim for aiding and abetting the violation by its 23 direction to Autobahn to use zMax, knowing that zMax and other non-approved products would 24 harm the vehicles. (FAC ¶¶ 138, 143, 144, 148.) These allegations are sufficient to state a basis 25 for Sonic’s liability on this claim. 26 The motion of Autobahn and Sonic to dismiss the second claim for relief is DENIED. 27 // 28 // 15 1 D. UCL and FAL Claims (Seventh and Eighth Claims for Relief) 2 The FAL and UCL claims both incorporate and are derivative of plaintiffs’ fraud claims, 3 alleging that the fraudulent conduct constitutes false and misleading advertising. They seek 4 injunctive relief to prevent defendants from continuing to make false advertisements and to correct 5 past false statements. Because, as stated herein, the motions to dismiss some of the fraud-based 6 claims are granted with leave to amend as to MBUSA, Autobahn, and Sonic, the motions to 7 dismiss the UCL and FAL claims are likewise GRANTED WITH LEAVE TO AMEND to permit 8 plaintiffs’ to amend the allegations to conform to the other claims from which they derive. Autobahn also argues that, to the extent plaintiffs are seeking injunctive relief, they have 9 no standing because they can no longer be misled by the alleged false advertising statements. The 11 United States District Court Northern District of California 10 Court does not find this argument persuasive. To decide that plaintiffs who allege they learned a 12 defendant’s advertising statements are false do not have standing to bring a claim for false 13 advertising on behalf of other consumers would undermine the objectives of these California 14 consumer protection statutes. Moreover, when a consumer learns that one representation was 15 false, this does not eliminate the question about whether the defendant will make future, similar 16 misrepresentations to that consumer. See Ries v. Arizona Beverages USA LLC, 287 F.R.D. 523, 17 533 (N.D. Cal. 2012) (“were the Court to accept the suggestion that plaintiffs’ mere recognition of 18 the alleged deception operates to defeat standing for an injunction, then injunctive relief would 19 never be available in false advertising cases, a wholly unrealistic result.”); Lilly v. Jamba Juice 20 Co., No. 13-CV-02998-JST, 2015 WL 1248027, at *3 (N.D. Cal. Mar. 18, 2015) (collecting 21 cases). The motion to dismiss, to the extent made on those grounds, is DENIED. 22 III. 23 CONCLUSION Accordingly, the Motion to Dismiss SMI for lack of personal jurisdiction under Rule 24 12(b)(1) is GRANTED WITHOUT LEAVE TO AMEND. Defendant Speedway Motorsports, Inc. is 25 DISMISSED. 26 27 With respect to the Motions of MBUSA, Autobahn, and Sonic to Dismiss under Rule 12(b)(6), the Court ORDERS as follows— 28 16 1 1. 2 On the first claim for relief, the motion is DENIED on the grounds of failure to allege a 3 false or misleading statement attributable to MBUSA. On the third and fifth claims, the motion is GRANTED WITH LEAVE TO AMEND to allege 4 5 MBUSA’s motion is GRANTED IN PART AND DENIED IN PART: the basis for liability against MBUSA. On the fourth claim, the motion is GRANTED on the grounds that the claim does not 6 7 sufficiently allege reliance and injury. However, the plaintiffs have satisfactorily alleged the 8 nature of the misrepresentations and that they are actionable, such that the other grounds argued 9 are DENIED. On the sixth claim, the motion is GRANTED WITH LEAVE TO AMEND to permit plaintiffs 10 United States District Court Northern District of California 11 to allege the elements of cognizable negligence claim, including a basis for claiming MBUSA had 12 a duty to exercise control over Autobahn’s and Sonic’s conduct. On the derivative seventh and eighth claims, the motion is GRANTED WITH LEAVE TO 13 14 AMEND to allege the basis for MBUSA’s liability, consistent with the fraud-based claims against 15 it. 16 2. Autobahn’s and Sonic’s motions are GRANTED IN PART AND DENIED IN PART: 17 On the first claim for relief, the motion is GRANTED WITH LEAVE TO AMEND on statute of 18 limitations grounds only, as stated herein. The allegations otherwise are sufficient to state a claim 19 for fraud. 20 On the second, third, and fifth claims, the motion is DENIED. 21 On the fourth claim, the motion is GRANTED WITH LEAVE TO AMEND on the grounds that 22 23 plaintiffs have not sufficiently alleged reliance or injury. On the sixth claim, the motion is GRANTED WITH LEAVE TO AMEND to permit plaintiffs 24 to allege the elements of cognizable negligence claim, including the basis for claiming duty and 25 breach, as to Autobahn and Sonic. 26 27 On the derivative seventh and eighth claims, the motion is GRANTED WITH LEAVE TO AMEND to allege the basis for these defendants’ liability, consistent with the fraud-based claims 28 17 1 against them. However, the motion is DENIED on the additional grounds of lack of standing for 2 prospective relief, raised by Autobahn. 3 Plaintiffs shall file their amended complaint no later than August 8, 2017. Plaintiffs’ shall 4 lodge with the Court a redline document comparing the original to the amended complaint at the 5 time of its filing. 6 Defendants MBUSA, Autobahn, and Sonic shall file their responses 14 days thereafter. 7 Defendants are advised that they may not renew arguments rejected in this Order without a proper 8 basis for so doing. 9 10 United States District Court Northern District of California 11 IT IS SO ORDERED. This terminates Docket Nos. 19, 22, 26, and 27. Dated: July 21, 2017 YVONNE GONZALEZ ROGERS UNITED STATES DISTRICT COURT JUDGE 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 18
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