Zwerling v. Ford Motor Company et al, No. 5:2019cv03622 - Document 97 (N.D. Cal. 2022)

Court Description: Order Granting 42 Motion to Dismiss under FRCP 12(c). Amended Complaint due by 4/4/2022. Signed by Judge Edward J. Davila on 3/14/2022. (ejdlc1, COURT STAFF) (Filed on 3/14/2022)

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Zwerling v. Ford Motor Company et al Doc. 97 Case 5:19-cv-03622-EJD Document 97 Filed 03/14/22 Page 1 of 18 1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 SAN JOSE DIVISION 7 PHILIP ZWERLING, 8 Plaintiff, 9 v. 10 FORD MOTOR COMPANY, et al., United States District Court Northern District of California 11 Case No. 5:19-cv-03622-EJD ORDER GRANTING MOTION FOR JUDGMENT ON THE PLEADINGS Re: Dkt. No. 42 Defendants. 12 13 Plaintiff Philip Zwerling asserts claims against Defendants Ford Motor Company (“Ford”) 14 15 and Does 1-10 for (1) fraud by omission, and (2) violation of the Magnuson-Moss Warranty Act, 16 15 U.S.C. § 2301 et seq. Dkt. No. 39. Before the Court is Ford’s motion for judgment on the 17 pleadings pursuant to Federal Rule of Civil Procedure 12(c). Not. of Mot. and Mot. to Dismiss 18 Plf.’s First Am. Compl. under Fed. R. Civ. P. 12(c) by Def. Ford Motor Co. (“Mot.”), Dkt. No. 42. 19 The Court finds the motion appropriate for decision without oral argument pursuant to Civil Local 20 Rule 7-1(b). Having considered the parties’ written submissions, the Court GRANTS the motion 21 with leave to amend. 22 I. BACKGROUND 23 A. 24 Defendant Ford is a manufacturer of motor vehicles organized under the laws of Delaware. Factual Background 25 First Am. Compl. (“FAC”) ¶ 4. Zwerling is a current California resident and former Texas 26 resident. Id. ¶ 2; Dkt. Nos. 43-1, 43-2, 43-3, 43-4, 43-5 (listing home address for Zwerling in 27 Texas). On October 26, 2013, Zwerling purchased a new 2013 Ford F-350 Super Duty SRW truck 28 Case No.: 5:19-cv-03622-EJD ORDER GRANTING MOT. FOR J. ON THE PLEADINGS 1 Dockets.Justia.com United States District Court Northern District of California Case 5:19-cv-03622-EJD Document 97 Filed 03/14/22 Page 2 of 18 1 from a Texas Ford dealer for a total cash price of $48,949.08. FAC ¶ 6; Dkt. Nos. 43-1, 43-2. In 2 connection with the purchase, Zwerling obtained an express New Vehicle Limited Warranty (“the 3 Warranty”). FAC, Ex. A at 5–15. The Warranty provides that Ford “dealers will, without charge, 4 repair, replace, or adjust all parts on Zwerling’s truck that malfunction or fail during normal use 5 during the applicable coverage period due to a manufacturing defect in factory-suppled materials 6 or factory workmanship.” Id., Ex. A at 9. The bumper-to-bumper coverage lasts for three years or 7 36,000 miles, whichever occurs first. Id., Ex. A at 8. The Warranty further provides an extended 8 coverage period of five years or 60,000 miles, whichever occurs first, for the powertrain or engine 9 components. Id., Ex. A at 10. The Warranty also provides an extended coverage period of five 10 years or 100,000 miles, whichever occurs first, for the truck’s direct injection diesel engine and 11 certain components. Id., Ex. A at 11–12. The Warranty specifically notes “all questions regarding 12 [its] enforceability and interpretation are governed by the law of the state in which you purchased 13 your Ford vehicle.” Id., Ex. A at 7. 14 On November 1, 2013—six days after purchase—with 369 miles on the odometer, 15 Zwerling presented the truck to an authorized Ford repair facility because the check engine light 16 came on. Id. ¶ 9; Dkt. No. 43-3. The repair technician found the diesel exhaust fluid (“DEF”) line 17 was damaged and replaced it. FAC ¶ 9; Dkt. No. 43-3. 18 On January 10, 2014—approximately two and a half months after purchase—with 2,876 19 miles on the odometer, Zwerling presented the truck to an authorized Ford repair facility because 20 the check engine light came on. FAC ¶ 10; Dkt. No. 43-4. The repair technician replaced the 21 exhaust gas temperature sensor and pigtail. FAC ¶ 10; Dkt. No. 43-4. 22 On April 17, 2015, with 8,428 miles on the odometer, Zwerling presented the truck to an 23 authorized Ford repair facility for general maintenance and to address Recall 14E03 to reprogram 24 the powertrain control module. FAC ¶ 11; Dkt. No. 43-5. 25 On April 24, 2018, with approximately 26,085 miles on the odometer, Zwerling presented 26 the truck to an authorized Ford repair facility because the check engine light came on. The repair 27 technician “concluded the issue was related to the exhaust emissions system and fluid was added.” 28 Case No.: 5:19-cv-03622-EJD ORDER GRANTING MOT. FOR J. ON THE PLEADINGS 2 Case 5:19-cv-03622-EJD Document 97 Filed 03/14/22 Page 3 of 18 1 United States District Court Northern District of California 2 FAC ¶ 12. On October 23, 2018, with approximately 30,656 miles on the odometer, Zwerling 3 presented the truck to a third-party dealer complaining of a leak under the vehicle. Id. ¶ 13. The 4 repair technician observed a coolant leak and replaced the water pump, charging Zwerling 5 $1,203.83. Id. 6 Three days later, on October 26, 2018—exactly five years from the day of purchase— 7 Zwerling had the truck towed to an authorized Ford repair facility in California. Id. ¶ 14. He 8 complained that he had been driving when he heard a noise and the truck lost power. Id. The 9 wrench light came on, and the engine lost power and then died. Id. The repair technician 10 discovered, among other things, that the “exhaust system is completely plugged/restricted.” Id. 11 The technician replaced the diesel particulate filter, the selective catalytic converter, CAC tube, 12 diesel filter assembly, exhaust gas temperature sensor, and gaskets. Id. 13 Ten days later, on November 5, 2018, Zwerling presented the truck to an authorized Ford 14 repair facility because the check engine light came on. Id. ¶ 15. The repair technician removed 15 and inspected the DEF tank and replaced the reductant sender. Id. 16 Sometime in January 2019, Zwerling contacted Ford, asserting that the truck was a lemon 17 and requesting that Ford take it back in compliance with lemon law obligations. Id. ¶ 16. Ford 18 did not do so. Id. Zwerling believes that his truck suffers from “one or more defects that can 19 result in, among other problems, loss of power and/or stalling” (“the Engine Defect”). Id. ¶ 20. 20 B. 21 On May 6, 2019, Zwerling filed this action in the Superior Court for the County of Santa Procedural Background 22 Clara, asserting violations of California’s Song-Beverly Warranty Act (“SBWA”), fraud by 23 omission, and negligent repair against Ford and Keller Ford Lincoln, a Ford dealership and 24 servicer. Dkt. No. 1-2. On June 21, 2019, Ford removed the action to federal court. Dkt. No. 1. 25 On May 18, 2021, Zwerling filed the operative First Amended Complaint (“FAC”) pursuant to the 26 parties’ stipulation. Dkt. No. 39. The FAC dropped Keller Ford Lincoln and the SBWA claims. 27 See id. It also added a claim for violation of Magnuson-Moss Warranty Act (“MMWA”) through 28 Case No.: 5:19-cv-03622-EJD ORDER GRANTING MOT. FOR J. ON THE PLEADINGS 3 United States District Court Northern District of California Case 5:19-cv-03622-EJD Document 97 Filed 03/14/22 Page 4 of 18 1 breach of express and implied warranties, for which Zwerling seeks remedies permitted under the 2 SBWA. Id. ¶ 61, Prayer ¶¶ c, h. On August 27, 2021, Ford filed the motion for judgment on the 3 pleadings now before the Court. Dkt. No. 42. 4 II. LEGAL STANDARD 5 A. 6 “After the pleadings are closed—but early enough not to delay trial—a party may move for Rule 12(c) 7 judgment on the pleadings.” Fed. R. Civ. P. 12(c). “Judgment on the pleadings is properly 8 granted when, accepting all factual allegations in the complaint as true, there is no issue of 9 material fact in dispute, and the moving party is entitled to judgment as a matter of law.” Chavez 10 v. United States, 683 F.3d 1102, 1108 (9th Cir. 2012) (brackets and internal quotation marks 11 omitted). Like a motion to dismiss under Rule 12(b)(6), a motion under Rule 12(c) challenges the 12 legal sufficiency of the claims asserted in the complaint. See id. Indeed, a Rule 12(c) motion is 13 “functionally identical” to a Rule 12(b)(6) motion, and courts apply the “same standard.” Dworkin 14 v. Hustler Magazine, Inc., 867 F.2d 1188, 1192 (9th Cir. 1989) (explaining that the “principal 15 difference” between Rule 12(b)(6) and Rule 12(c) “is the timing of filing”); see also U.S. ex rel. 16 Cafasso v. Gen. Dynamics C4 Sys., 637 F.3d 1047, 1054 n.4 (9th Cir. 2011). 17 In considering the motion, the Court assumes the complaint’s allegations truth and draws 18 all reasonable inferences in the non-movant’s favor. Wolfe v. Strankman, 392 F.3d 358, 362 (9th 19 Cir. 2004). Like a motion under Rule 12(b)(6), in addition to considering the allegations of the 20 complaint, the Court may also consider materials subject to judicial notice. Heliotrope Gen., Inc. 21 v. Ford Motor Co., 189 F.3d 971, 981 (9th Cir. 1999). A Rule 12(c) motion for judgment on the 22 pleadings may thus be granted if, after assessing both the complaint and matters subject to judicial 23 notice, it appears “beyond doubt that the [non-moving party] cannot prove any facts that would 24 support his claim for relief.” R.J. Corman Derailment Servs., LLC v. Int’l Union of Operating 25 Eng’rs, Local 150, AFL-CIO, 335 F.3d 643, 647 (7th Cir. 2003). Dismissal under Rule 12(c) is 26 proper if the complaint shows on its face that it is time-barred by the applicable statute of 27 limitations. Hunt v. Cty. of Shasta, 225 Cal. App. 3d 432, 440 (1990); see also Yetter v. Ford 28 Case No.: 5:19-cv-03622-EJD ORDER GRANTING MOT. FOR J. ON THE PLEADINGS 4 Case 5:19-cv-03622-EJD Document 97 Filed 03/14/22 Page 5 of 18 1 United States District Court Northern District of California 2 Motor Company, 428 F. Supp. 3d 210, 231 (N.D. Cal. 2019). Although Rule 12(c) makes no mention of leave to amend, “courts have discretion both to 3 grant a Rule 12(c) motion with leave to amend . . . and to simply grant dismissal of the action 4 instead of entry of judgment.” Mitchell v. Corelogic, Inc., No. SA 17-CV-2274-DOC (DFMx), 5 2019 WL 7172978, at *4 (C.D. Cal. Nov. 20, 2019) (citing Carmen v. S.F. Unified Sch. Dist., 982 6 F. Supp. 1396, 1401 (N.D. Cal. 1997) and Moran v. Peralta Cmty. College Dist., 825 F. Supp. 7 891, 893 (N.D. Cal. 1993)); see also Harris v. Cnty. of Orange, 682 F.3d 1126, 1131, 1134-35 8 (9th Cir. 2012) (affirming district court’s dismissal under Rule 12(c) but reversing for failure to 9 grant leave to amend). Under Rule 15(a) of the Federal Rules of Civil Procedure, leave to amend 10 “shall be freely given when justice so requires,” bearing in mind “the underlying purpose of Rule 11 15 to facilitate decisions on the merits, rather than on the pleadings or technicalities.” Lopez v. 12 Smith, 203 F.3d 1122, 1127 (9th Cir. 2000) (en banc) (alterations and internal quotation marks 13 omitted). When granting judgment on the pleadings, “a district court should grant leave to amend 14 even if no request to amend the pleading was made, unless it determines that the pleading could 15 not possibly be cured by the allegation of other facts.” Id. at 1130 (internal quotation marks 16 omitted). 17 B. 18 Consumer protection claims that sound in fraud are subject to the heightened pleading Rule 9(b) 19 requirements of Federal Rule of Civil Procedure 9(b). See Vess v. Ciba-Geigy Corp. USA, 317 20 F.3d 1097, 1102 (9th Cir. 2003); San Miguel v. HP Inc., 317 F. Supp. 3d 1075, 1084 (N.D. Cal. 21 2018). Rule 9(b) requires that “a party must state with particularity the circumstances constituting 22 fraud.” Fed. R. Civ. P. 9(b). The circumstances constituting the fraud must be “specific enough to 23 give defendants notice of the particular misconduct which is alleged to constitute the fraud 24 charged so that they can defend against the charge and not just deny that they have done anything 25 wrong.” Semegen v. Weidner, 780 F.2d 727, 731 (9th Cir. 1985). Therefore, a party alleging 26 fraud must set forth “the who, what, when, where, and how” of the misconduct. Vess, 317 F.3d at 27 1106 (quoting Cooper v. Pickett, 137 F.3d 616, 627 (9th Cir. 1997)). “[I]n a case where fraud is 28 Case No.: 5:19-cv-03622-EJD ORDER GRANTING MOT. FOR J. ON THE PLEADINGS 5 Case 5:19-cv-03622-EJD Document 97 Filed 03/14/22 Page 6 of 18 1 not an essential element of a claim, only allegations . . . of fraudulent conduct must satisfy the 2 heightened pleading requirements of Rule 9(b)” while “[a]llegations of non-fraudulent conduct 3 need satisfy only the ordinary notice pleading standards of Rule 8(a).” Id. at 1104–05. With respect to Plaintiffs’ omissions-based fraud claims, “the pleading standard is lowered 4 5 on account of the reduced ability in an omission suit ‘to specify the time, place, and specific 6 content, relative to a claim involving affirmative misrepresentations.’” Barrett v. Apple Inc., No. 7 5:20-cv-04812-EJD, 2021 WL 827235, at *7 (N.D. Cal. Mar. 4, 2021) (quoting In re Apple & AT 8 & TM Antitrust Litig., 596 F. Supp. 2d 1288, 1310 (N.D. Cal. 2008)); see also Falk v. Gen. Motors 9 Corp., 496 F. Supp. 2d 1088, 1099 (N.D. Cal. 2007). United States District Court Northern District of California 10 III. DISCUSSION 11 A. 12 “Because motions for judgment on the pleadings are ‘functionally identical’ to Rule Requests for Judicial Notice 13 12(b)(6) motions, when ruling on either type of motion ‘courts must consider the complaint in its 14 entirety, as well as other sources . . ., in particular, documents incorporated into the complaint by 15 reference, and matters of which a court may take judicial notice.’” Webb v. Trader Joe’s Co., 999 16 F.3d 1196 (9th Cir. 2021) (citing Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322 17 (2007); Cafasso, 637 F.3d at 1054 n.4) (internal quotation marks and citations omitted). A court 18 generally may not consider any material beyond the pleadings when ruling on a Rule 12(b)(6) 19 motion. If matters outside the pleadings are considered, “the motion must be treated as one for 20 summary judgment under Rule 56.” Fed. R. Civ. P. 12(d). However, documents appended to the 21 complaint, incorporated by reference in the complaint, or which properly are the subject of judicial 22 notice may be considered along with the complaint when deciding a Rule 12(b)(6) motion. Khoja 23 v. Orexigen Therapeutics, 899 F.3d 988, 998 (9th Cir. 2018); see also Hal Roach Studios, Inc. v. 24 Richard Feiner & Co., Inc., 896 F.2d 1542, 1555 n.19 (9th Cir. 1990). Likewise, a court may 25 consider matters that are “capable of accurate and ready determination by resort to sources whose 26 accuracy cannot reasonably be questioned.” Roca v. Wells Fargo Bank, N.A., No. 15-cv-02147- 27 KAW, 2016 WL 368153, at *3 (N.D. Cal. Feb. 1, 2016) (quoting Fed. R. Evid. 201(b)). 28 Case No.: 5:19-cv-03622-EJD ORDER GRANTING MOT. FOR J. ON THE PLEADINGS 6 Case 5:19-cv-03622-EJD Document 97 Filed 03/14/22 Page 7 of 18 1 2 contract and purchase order for Zwerling’s truck; (2) receipts for repairs on November 1, 2013, 3 January 10, 2014, and April 17, 2015; (3) Zwerling’s original complaint in this action; and (4) the 4 plaintiff’s opposition to defendant FCA US LLC’s motion for judgment on the pleadings in 5 Scherer v. FCA US LLC et al., No. 3:20-cv-02009-AJB-BLM, Dkt. No. 23 (S.D. Cal. Mar. 31, 6 2021). Dkt. Nos. 43, 65. Zwerling requests that the Court take judicial notice of the Southern 7 District of California’s October 4, 2021 order denying FCA US LLC’s motion for judgment on the 8 pleadings in Scherer. Dkt. No. 63. Neither party opposes the other’s request for judicial notice. 9 United States District Court Northern District of California Ford requests that the Court take judicial notice of the following documents: (1) the sales The Court GRANTS Ford’s request for judicial notice as to the sales contract and purchase 10 order and the receipts for repairs as documents incorporated by reference in the complaint. FAC 11 ¶¶ 6, 9-11; Khoja, 899 F.3d at 998. The Court DENIES AS MOOT Ford’s request for judicial 12 notice as to the original complaint because that document is already part of the record in this 13 action. See Dkt. No. 1-2. The Court further DENIES the parties’ requests for judicial notice as to 14 the Scherer documents because they are not necessary to the Court’s resolution of Ford’s motion. 15 B. 16 As a threshold matter, the parties dispute which state’s law applies to Zwerling’s claims: Applicable State Law 17 Ford contends that Texas law applies based on the Warranty’s choice of law provision and 18 California choice of law jurisprudence favoring “the place of the wrong.” Mot. at 1, 6–7, 11. 19 Zwerling argues that Ford has conceded application of California law by failing to engage in the 20 necessary three-step governmental interest test. Plf.’s Opp’n to Def.’s Mot. for J. on the Pleadings 21 (“Opp’n”), Dkt. No. 62 at 3–5. The Court considers both arguments in turn, beginning with the 22 governmental interest test. 23 1. Governmental interest test 24 A federal court’s selection of the proper choice-of-law rules turns on the type of subject- 25 matter jurisdiction that the court is exercising. Patton v. Cox, 276 F.3d 493, 495 (9th Cir. 2002) 26 (“When a federal court sits in diversity, it must look to the forum state’s choice of law rules to 27 determine the controlling substantive law.”); Chan v. Soc’y Expeditions, Inc., 123 F.3d 1287, 1297 28 Case No.: 5:19-cv-03622-EJD ORDER GRANTING MOT. FOR J. ON THE PLEADINGS 7 Case 5:19-cv-03622-EJD Document 97 Filed 03/14/22 Page 8 of 18 1 (9th Cir. 1997) (“Federal common law applies to choice-of-law determinations in cases based on 2 federal question jurisdiction . . . .”); Paracor Fin., Inc. v. Gen. Elec. Capital Corp., 96 F.3d 1151, 3 1164 (9th Cir. 1996) (“In a federal question action where the federal court is exercising 4 supplemental jurisdiction over state claims, the federal court applies the choice-of-law rules of the 5 forum state . . . .”). The Court assumes for the sake of argument that diversity jurisdiction1 applies here and United States District Court Northern District of California 6 7 thus looks to California’s choice of law rules.2 Patton, 276 F.3d at 495. “By default, California 8 courts apply California law unless a party litigant timely invokes the law of a foreign state, in 9 which case it is the foreign law proponent who must shoulder the burden of demonstrating that 10 foreign law, rather than California law, should apply to class claims.” In re Hyundai & Kia Fuel 11 Econ. Litig., 926 F.3d 539, 561 (9th Cir. 2019) (en banc) (internal quotation marks and citations 12 omitted). To meet its burden, Ford must satisfy California’s three-step governmental interest test 13 used to resolve choice of law issues: 14 First, the court determines whether the relevant law of each of the potentially affected jurisdictions with regard to the particular issue in question is the same or different. Second, if there is a difference, the court examines each jurisdiction’s interest in the application of its own law under the circumstances of the particular case to determine whether a true conflict exists. Third, if the court finds that there is a true conflict, it carefully evaluates and compares the nature and strength of the interest of each jurisdiction in the 15 16 17 18 19 20 21 22 23 24 25 26 27 28 1 The FAC is devoid of any allegations directly addressing subject matter jurisdiction. The Court infers that the amount in controversy pled likely exceeds $75,000 because Zwerling seeks actual and punitive damages (presumably including the cash cost of the truck), as well as attorneys’ fees and civil penalties under the SBWA. See Laky v. Ford Motor Co., No. 5:19-cv-05546-EJD, 2021 WL 252694 (N.D. Cal. Jan. 26, 2021); Pestarino v. Ford Motor Co., No. 19-cv-07890-BLF, 2020 WL 1904590, at *3 (N.D. Cal. Apr. 17, 2020); see also Dkt. No. 1 (Ford’s notice of removal). 2 Zwerling’s MMWA claim also suggests federal question jurisdiction, in which case federal common law would apply. Chan, 123 F.3d at 1297. Federal common law follows the approach of the Restatement (Second) of Conflicts of Laws, in which case Texas law would apply. Id. (citing Restatement (Second) of Conflicts of Laws § 187(3) & cmt. h (1988)); see infra Section III.B.2 (discussing California law’s application of the Restatement of Conflicts of Law § 187(2) where warranty contains an express choice of law provision). To the extent the Court could exercise supplemental jurisdiction over the fraud by omission claim, California choice-of-law rules would apply, and the Court would proceed with the governmental interest test. Paracor, 96 F.3d at 1164). Case No.: 5:19-cv-03622-EJD ORDER GRANTING MOT. FOR J. ON THE PLEADINGS 8 Case 5:19-cv-03622-EJD Document 97 Filed 03/14/22 Page 9 of 18 2 application of its own law to determine which state’s interest would be more impaired if its policy were subordinated to the policy of the other state, and then ultimately applies the law of the state whose interest would be the more impaired if its law were not applied. 3 Senne v. Kansas City Royals Baseball Corp., 934 F.3d 918, 928 (9th Cir. 2019) (quoting Kearney 4 v. Salomon Smith Barney, Inc., 39 Cal. 4th 95 (2006)). “Only if both [jurisdictions] have a 5 legitimate but conflicting interest in applying its own law will the court be confronted with a ‘true 6 conflict’ case.” Love v. Associated Newspapers, Ltd., 611 F.3d 601, 610 (9th Cir. 2010). 1 United States District Court Northern District of California 7 Zwerling argues that Ford has not timely invoked Texas law because its motion does not 8 expressly recite the governmental interest test. Opp’n at 3–5. He relies solely on a decision from 9 the Southern District of California, Scherer v. FCA US LLC, for the proposition that failure to 10 engage in the governmental interest test results in a concession that California law applies. Id. 11 (citing ---F. Supp. 3d. ----, 2021 WL 4621692 (S.D. Cal. 2021)). To the extent Scherer even 12 stands for such a proposition, that case is not binding, and moreover, it is distinguishable. The 13 Scherer court based its ruling on the fact that the defendant only argued that Virginia law should 14 apply based on the defendant’s belief that the plaintiffs were Virginia residents at the time of 15 purchase. 2021 WL 4621692, at *8–9. Here, there is undisputed evidence before the Court that 16 Zwerling purchased and sought repairs for his truck in Texas while living in Texas. See Dkt. Nos. 17 43-1, 43-2, 43-3, 43-4, 43-5. Additionally, it does not appear that the Scherer warranty included a 18 choice of law provision such as the one here. At any rate, Ford’s papers reference California 19 choice of law cases and address the differences between Texas and California law and the states’ 20 competing interests in adjudicating this action. See Mot. at 6–10, 13–14, 17–20; Reply of Def. 21 Ford Motor Co. in Supp. of Mot. to Dismiss (“Reply”), Dkt. No. 64, at 2–4. Ford has therefore 22 addressed the governmental interest test in substance, if not in form. 23 The Court proceeds with the governmental interest analysis. At immediate issue for the 24 purposes of this motion are the states’ respective statutes of limitation. At the first step, the Court 25 notes that the Texas statute of limitation for a fraud by omission claim is four years, whereas 26 California’s statute of limitation is three years. Compare Stevens v. Ford Motor Co., No. 2:18- 27 CV-456, 2020 WL 12573279, at *8 n.5 (S.D. Tex. Nov. 2, 2020) (“The statutes of limitations for 28 Case No.: 5:19-cv-03622-EJD ORDER GRANTING MOT. FOR J. ON THE PLEADINGS 9 United States District Court Northern District of California Case 5:19-cv-03622-EJD Document 97 Filed 03/14/22 Page 10 of 18 1 fraud-by-omission, breach of implied warranty of merchantability, and Magnuson-Moss Warranty 2 Act are four years.”) (citing Tex. Civ. Prac. & Rem. Code § 16.004(a)(4); Tex. Bus. & Com. Code 3 § 2.725(a)) with Cal. Civ. Proc. Code § 338(d) (three-year statute of limitations for an action for 4 relief on the ground of fraud or mistake). This is a significant difference. 5 At the second step, the Court must examine “each jurisdiction’s interest in the application 6 of its own law under the circumstances of the particular case to determine whether a true conflict 7 exists.” Kearney, 39 Cal. 4th at 107. Where a case concerns a California resident defendant, 8 California is the only interested state. Rustico v. Intuitive Surgical, Inc., 424 F. Supp. 3d 720, 728 9 (N.D. Cal. 2019) (citing Ashland Chem. Co. v. Provence, 129 Cal. App. 3d 790, 794 (1982)), 10 aff’d, 993 F.3d 1085 (9th Cir. 2021); see also Nelson v. Int’l Paint Co., 716 F.2d 640, 644 (9th 11 Cir. 1983) (holding that “[o]nly California has an interest in having its statute of limitations 12 applied” in a case with a California forum where the only defendant is a California resident). 13 However, where, as here, the California resident is the plaintiff and not the defendant, California’s 14 interest in applying its own statute of limitations is weaker. Ledesma v. Jack Stewart Produce, 15 Inc., 816 F.2d 482, 485 (9th Cir. 1987). The alleged injury—the sale of a purportedly defective 16 truck—occurred in Texas, and Texas has a strong interest in having its statute of limitations apply 17 to cases involving foreign corporations’ vehicle sales to Texas residents. See Mazza v. Am. Honda 18 Motor Co., 666 F.3d 581, 591–92 (9th Cir. 2012) (stating that “each state has a strong interest in 19 applying its own consumer protection laws to” automobile sales within their borders); McCann v. 20 Foster Wheeler LLC, 48 Cal. 4th 68, 97–98 (2010) (“California choice-of-law cases nonetheless 21 continue to recognize that a jurisdiction ordinarily has the ‘the predominant interest’ in regulating 22 conduct that occurs within its borders . . . and in being able to assure individuals and commercial 23 entities operating within its territory that applicable limitations on liability set forth in the 24 jurisdiction’s law will be available to those individuals and businesses in the event they are faced 25 with litigation in the future.”). Thus, a “true conflict” exists. 26 At the third step, the Court concludes that Texas’s interest would be more impaired if the 27 Court were to apply California law. Under California law, “[s]tatutes of limitation are designed to 28 Case No.: 5:19-cv-03622-EJD ORDER GRANTING MOT. FOR J. ON THE PLEADINGS 10 United States District Court Northern District of California Case 5:19-cv-03622-EJD Document 97 Filed 03/14/22 Page 11 of 18 1 protect the enacting state’s residents and courts from the burdens associated with the prosecution 2 of stale cases in which memories have faded and evidence has been lost.” Rustico, 424 F. Supp. 3 3d at 728 (internal quotation marks omitted). But “although California has an interest in 4 protecting its courts from stale claims, that interest is at least equally balanced by its interest in 5 allowing its residents to recover for injuries sustained in a state that would recognize their claim as 6 timely.” Ledesma, 816 F.2d at 485. “California has little interest in applying its statute of 7 limitations when no California defendant is involved and when California plaintiffs seek to 8 recover for injuries that occurred in a state in which the claim was not time-barred.” Id. at 486. In 9 contrast, Texas’s legitimate government policy would be impaired by a failure to allow a cause of 10 action through which it could regulate vehicle sales to its residents. Mazza, 666 F.3d at 593 11 (“[E]ach foreign state has an interest in applying its law to transactions within its borders, and that 12 if California law were applied . . ., foreign states would be impaired in their ability to calibrate 13 liability to foster commerce.”). Accordingly, the Court finds that the governmental interest test favors application of Texas 14 15 law. 16 17 18 19 2. Warranty choice of law provision The Court next considers Ford’s argument concerning the Warranty’s choice of law provision. “When an agreement contains a choice of law provision, California courts apply the 20 parties’ choice of law unless the analytical approach articulated in § 187(2) of the Restatement 21 (Second) of Conflict of Laws . . . dictates a different result.” Bridge Fund Capital Corp. v. 22 Fastbucks Franchise Corp., 622 F.3d 996, 1002 (9th Cir. 2010) (internal quotation marks and 23 citation omitted). “Under the Restatement approach, the court must first determine ‘whether the 24 chosen state has a substantial relationship to the parties or their transaction, . . . or whether there is 25 any other reasonable basis for the parties’ choice of law.’” Id. (quoting Nedlloyd Lines B.V. v. 26 Superior Court, 3 Cal. 4th 459, 466 (1992)). If either of those tests is met, “the court must next 27 determine whether the chosen state’s law is contrary to a fundamental policy of California.” Id. 28 Case No.: 5:19-cv-03622-EJD ORDER GRANTING MOT. FOR J. ON THE PLEADINGS 11 Case 5:19-cv-03622-EJD Document 97 Filed 03/14/22 Page 12 of 18 1 (internal quotation marks and citation omitted). If such a conflict exists, the court must determine 2 “whether California has a materially greater interest than the chosen state in the determination of 3 the particular issue.” Id. (internal quotation marks and citation omitted). “If California possesses 4 the materially greater interest, the court applies California law despite the choice of law clause.” 5 Id. at 1003. United States District Court Northern District of California 6 The party seeking to enforce the choice of law provision has the burden of demonstrating 7 that the chosen state has a substantial relationship to the parties or their transaction, or that a 8 reasonable basis otherwise exists for the choice of law. See Wash. Mut. Bank, FA v. Superior 9 Court, 24 Cal. 4th 906, 917 (2001). If the proponent of the choice of law provision satisfies either 10 test, the provision “generally will be enforced unless the other side can establish both that the 11 chosen law is contrary to a fundamental policy of California and that California has a materially 12 greater interest in the determination of the particular issue.” Id. 13 Zwerling suggests that the Warranty’s choice of law provision does not apply to him 14 because he “never consented to the specific provision that was not disclosed to [him] until after he 15 purchased his vehicle.” Opp’n at 3 n.3. Other California district courts have rejected similar 16 arguments in cases concerning warranties. See, e.g., Rojas v. Bosch Solar Energy Corp., 443 F. 17 Supp. 3d 1060, 1073 (N.D. Cal. 2020); Han v. Samsung Telecomms. Am., LLC, No. CV 13-3823- 18 GW AJWX, 2013 WL 7158044, at *3–5 (C.D. Cal. Dec. 16, 2013). In particular, the Rojas court 19 refused to permit plaintiffs to escape the choice of law provision in the very same warranty they 20 sought to enforce. Rojas, 443 F. Supp. 3d at 1073. That court stated that it 21 22 23 24 25 perceives no basis for Plaintiffs’ assertion that they are not bound by the Limited Warranty’s choice of law provision. Plaintiffs have cited no case supporting their position that they can take the parts of the Limited Warranty they like, leave behind the parts they dislike, and thereby enforce a warranty that [the Defendant] never offered to anyone. The Court concludes that to the extent Plaintiffs are entitled to enforce the Limited Warranty, they are bound by the choice of law provision contained therein. Id. This reasoning applies to compel the same result here. 26 27 28 Zwerling relies on Dorman v. Int’l Harvester Co., 46 Cal. App. 3d 11, 19–20 (1975) for Case No.: 5:19-cv-03622-EJD ORDER GRANTING MOT. FOR J. ON THE PLEADINGS 12 Case 5:19-cv-03622-EJD Document 97 Filed 03/14/22 Page 13 of 18 1 the proposition that the Warranty’s choice of law provision is “irrelevant” because he did not 2 consent to it before purchase. Dorman concerned a disclaimer of implied warranties in a sales 3 contract, which is not at issue here. Zwerling provides no authority applying Dorman to a non- 4 disclaimed limited express warranty such as the one before the Court. Zwerling further argues that 5 he “was only aware of the terms of the express warranty when he purchased the Vehicle, and more 6 importantly, such limitations do not apply to statutory causes of action,” Opp’n 3 n.3, but he again 7 offers no authority in support of that assertion. For the reasons described above with respect to the governmental interest test, the Court 8 United States District Court Northern District of California 9 finds that Ford has adequately demonstrated that Texas has a substantial relationship to the 10 parties’ transaction, and that a reasonable basis otherwise exists for applying Texas law. See 11 supra Section III.B.1. Zwerling does not argue—and thus has not established—that applying 12 Texas law is contrary to a fundamental policy of California or that California has a materially 13 greater interest in the determination of his claims. Wash. Mut., 24 Cal. 4th at 917. Accordingly, under either the governmental interest test or the Restatement approach, 14 15 Texas law should apply to Zwerling’s claims. 16 C. 17 Ford contends that both of Zwerling’s claims are time barred and that no form of tolling Statute of Limitations 18 applies. Mot. at 9–10, 13–20; Reply at 10–15. As discussed above, the statute of limitations for 19 fraud by omission under Texas law is four years from the date the action accrues, and a claim for 20 breach of warranty under the MMWA is likewise four years when a tender of delivery is made.3 21 Tex. Civ. Prac. & Rem. Code § 16.004(a)(4); Tex. Bus. & Com. Code § 2.725(a)-(b) (“A cause of 22 23 24 25 26 27 28 Texas Business & Commerce Code § 2.725(b) provides that “[a] breach of warranty occurs when tender of delivery is made, except that where a warranty explicitly extends to future performance of the goods and discovery of the breach must await the time of such performance the cause of action accrues when the breach is or should have been discovered.” However, the Texas Supreme Court has instructed courts to construe this future performance exception “narrowly, with the emphasis on the term ‘explicitly.’” Safeway Stores, Inc. v. Certainteed Corp., 710 S.W.2d 544, 548 (Tex. 1986). Because the Warranty does not reference a specific future date, the future performance exception does not apply here. Id. (“For an express warranty to meet the exception, it must make specific reference to a specific date.”). 3 Case No.: 5:19-cv-03622-EJD ORDER GRANTING MOT. FOR J. ON THE PLEADINGS 13 Case 5:19-cv-03622-EJD Document 97 Filed 03/14/22 Page 14 of 18 1 action accrues when the breach occurs, regardless of the aggrieved party’s lack of knowledge of 2 the breach. A breach of warranty occurs when tender of delivery is made . . . .”); Stevens, 2020 3 WL 12573279, at *8 n.5; see also Click v. Gen. Motors LLC, No. 2:18-CV-455, 2020 WL 4 3118577, at *13 (S.D. Tex. Mar. 27, 2020). Zwerling’s claims accrued at the earliest on October 5 26, 2013, when he purchased his allegedly defective truck. Based on that accrual date, he was 6 required to file suit by October 26, 2017; however, he did not file his initial complaint until May 6, 7 2019. Dkt. No. 1-2. Unless the Court finds some form of tolling applies, Zwerling’s claims are 8 time barred. Zwerling argues that the equitable estoppel and delayed discovery doctrines apply to toll United States District Court Northern District of California 9 10 his claims.4 Opp’n at 18–23. Despite alleging application of the repair rule or class action 11 tolling5, FAC ¶ 49, Zwerling does not invoke them in his opposition, and the Court therefore does 12 not consider those theories. 13 1. Equitable estoppel/fraudulent concealment Zwerling’s opposition cites the doctrine of equitable estoppel, but it appears that doctrine 14 15 he actually seeks to apply is that of fraudulent concealment. See Opp’n at 18–19; B. Mahler 16 Interests, L.P. v. DMAC Constr., Inc., 503 S.W.3d 43, 54 n.4 (Tex. App. 2016) (“Because 17 fraudulent concealment is based on the doctrine of equitable estoppel, and because [Plaintiff’s] 18 equitable estoppel and fraudulent concealment defenses are based on the same alleged conduct by 19 [Defendant], we consider them together.”). Fraudulent concealment tolls the limitations period 20 until the plaintiff discovers the fraud or could have discovered it with reasonable diligence. 21 22 23 24 25 26 27 28 4 Zwerling asserts these arguments based on California law, but as described above, the Court applies Texas law to his claims. See supra Section III.B. 5 The Court observes that there is a pending class action in the Southern District of Texas concerning an alleged defect in Ford vehicles containing a 6.7L Power Stroke diesel engine and its fuel system for model years 2011 to the present. Compare Stevens v. Ford Motor Co., No. 2:18CV-456, 2020 WL 12573279, at *4 (S.D. Tex. Nov. 2, 2020) with FAC ¶¶ 6-7, 20 (describing Zwerling’s purchase of a 2013 Ford F-350 Super Duty SRW truck with a 6.7L diesel engine). However, “Texas does not toll its limitations for a federal class action.” Mize v. BMW of N. Am., No. 2:19-CV-7-Z-BR, 2021 WL 6502099, at *8 (N.D. Tex. Oct. 1, 2021), adopted by 2021 WL 5979469 (N.D. Tex. Dec. 17, 2021). Case No.: 5:19-cv-03622-EJD ORDER GRANTING MOT. FOR J. ON THE PLEADINGS 14 Case 5:19-cv-03622-EJD Document 97 Filed 03/14/22 Page 15 of 18 1 Adams v. Nissan N. Am., 395 F. Supp. 3d 838, 847 (S.D. Tex. 2018). The elements of fraudulent 2 concealment are: (1) actual knowledge of the wrong, (2) a duty to disclose the wrong, and (3) a 3 fixed purpose to conceal the wrong. Id. A plaintiff must also plead facts that he failed, despite 4 due diligence, to discover the facts giving rise to the cause of action. Id. Some Texas courts have 5 required an additional element of the plaintiff’s reasonable reliance on the deception. Id. (citing 6 cases). United States District Court Northern District of California 7 The Court finds that Zwerling has not adequately pled a duty to disclose the wrong. 8 Generally, no duty to disclose exists in an arms-length transaction between a manufacturer and 9 customer, particularly where a plaintiff did not purchase directly from the manufacturer. Id. at 10 850; Click, 2020 WL 3118577, at *7. Zwerling does not plead that he purchased his truck directly 11 from Ford. See FAC ¶ 6 (“Plaintiff purchased the Vehicle from a person or entity engaged in the 12 business of manufacturing, distributing, or selling consumer goods at retail.”). 13 Furthermore, “[u]nder Texas law, a duty to disclose in the context of fraudulent 14 concealment arises only in limited circumstances where there is a fiduciary or confidential 15 relationship.” Adams, 395 F. Supp. 3d at 849–50; see also In re Gen. Motors LLC Ignition Switch 16 Litig., 257 F. Supp. 3d 372, 453 (S.D.N.Y. 2017) (applying Texas law). Some Texas courts have 17 held that an affirmative duty to disclose may arise in four circumstances described in the 18 Restatement (Second) of Torts § 551: (1) where there is a fiduciary or confidential relationship 19 between the parties; (2) where a person voluntarily discloses information, the whole truth must be 20 disclosed; (3) when a person makes a representation and new information makes that earlier 21 misrepresentation misleading or untrue; and (4) when a person makes a partial disclosure and 22 conveys a false impression. In re Enron Corp. Sec., Deriv. & “ERISA” Litig., 540 F. Supp. 2d 23 759, 771 (S.D. Tex. 2007) (citations omitted); see also Trustees of Nw. Laundry & Dry Cleaners 24 Health & Welfare Tr. Fund v. Burzynski, 27 F.3d 153, 157 (5th Cir. 1994). However, the Texas 25 Supreme Court and Fifth Circuit have expressly avoided adopting this list of circumstances from 26 section 551 of the Restatement of Torts. Click, 2020 WL 3118577, at *8; Bradford v. Vento, 48 27 S.W.3d 749, 755–56 (Tex. 2001) (“We have never adopted section 551.”); see also In re Gen. 28 Case No.: 5:19-cv-03622-EJD ORDER GRANTING MOT. FOR J. ON THE PLEADINGS 15 Case 5:19-cv-03622-EJD Document 97 Filed 03/14/22 Page 16 of 18 1 Motors, 257 F. Supp. 3d at 453 (fraudulent concealment claim cannot proceed absent fiduciary or 2 confidential relationship in view of Texas Supreme Court’s ruling in Bradford). Zwerling does 3 not point to any allegations that would suggest that a fiduciary or confidential relationship 4 between him and Ford. Nor does his opposition cite any factual allegations in the FAC that 5 demonstrate a duty to disclose in the other circumstances described in the Restatement of Torts. 6 Accordingly, the Court finds that fraudulent concealment does not apply here to toll the 7 8 United States District Court Northern District of California 9 statute of limitations for either of Zwerling’s claims. 2. Discovery rule Under Texas law, the discovery rule applies to fraud claims but not to breach of warranty 10 claims. Geraghty & Miller, Inc. v. Conoco Inc., 234 F.3d 917, 931 (5th Cir. 2000) (citing 11 Martinez v. Humble Sand & Gravel, Inc., 940 S.W.2d 139, 147 (Tex. App. 1996), aff’d sub nom. 12 Childs v. Haussecker, 974 S.W.2d 31 (Tex. 1998)), abrogated on other grounds as recognized by 13 Vine Street LLC v. Borg Warner Corp., 776 F.3d 312, 317 (5th Cir. 2015); see also Safeway 14 Stores, 710 S.W.2d at 547, 549 (implied warranties do not extend into the future, so the discovery 15 rule does not apply); Click, 2020 WL 3118577, at *14. The discovery rule therefore cannot apply 16 to Zwerling’s MMWA claim. 17 As to the fraud by omission claim, “in order for the Texas discovery rule to apply, the 18 injury must be (1) ‘inherently undiscoverable’ and (2) ‘objectively verifiable.’” Brandan v. 19 Howmedica Osteonics Corp., 439 F. App’x 317, 321 (5th Cir. 2011) (quoting Barker v. Eckman, 20 213 S.W.3d 306, 312 (Tex. 2006)); see also Click, 2020 WL 3118577, at *14. “‘Inherently 21 undiscoverable’ requires that the existence of the injury is not ordinarily discoverable, despite the 22 plaintiff’s due diligence.” Steel v. Rhone Poulenc, Inc., 962 S.W.2d 613, 618 (Tex. App. 1997), 23 aff’d, 997 S.W.2d 217 (Tex. 1999). “Facts upon which liability are asserted are ‘objectively 24 verifiable’ when the plaintiff demonstrates direct, physical evidence.” Id. 25 Although Zwerling’s description of exactly what the Engine Defect consists of would 26 benefit from more fulsome pleading, FAC ¶¶ 20, 22-23 (describing defect solely in terms of its 27 effects), the Court finds that a defect within a vehicle’s engine would not be easily discoverable by 28 Case No.: 5:19-cv-03622-EJD ORDER GRANTING MOT. FOR J. ON THE PLEADINGS 16 United States District Court Northern District of California Case 5:19-cv-03622-EJD Document 97 Filed 03/14/22 Page 17 of 18 1 an ordinary consumer. See, e.g., Click, 2020 WL 3118577, at *14 (incompatibility of fuel pump 2 with U.S. diesel fuel was a defect no ordinary consumer could easily discover); Stevens, 2020 WL 3 12573279, at *10 (same). Zwerling pleads that he was not aware of the Engine Defect at the time 4 of sale and that he could not have known about the defect until he had made a reasonable number 5 of attempts to repair it. FAC ¶¶ 37, 39. Additionally, Zwerling alleges that he had to take his 6 truck in for repairs seven times between the time of purchase and the filing of his original 7 complaint. Id. ¶¶ 8-15. The parts that required replacement were those that concerned or were 8 related to the engine. Id. These allegations provide sufficient physical evidence that the truck had 9 some persistent engine-related defect. The fact that Zwerling’s first repair occurred a mere six 10 days after purchase, the second repair approximately two and half months after purchase, and the 11 final three repairs within less than three weeks of each other certainly suggests some kind of 12 continuing problem or defect. 13 Accordingly, the Court finds that the discovery rule applies to toll Zwerling’s fraud by 14 omission claim to October or November 2018, when the last three repairs took place over a period 15 of less than two weeks and included numerous part replacements. Id. ¶¶ 13-15. 16 D. 17 Ford argues that Zwerling has failed to state a claim for both fraud by omission and under Failure to State a Claim 18 the MMWA. Because the Court has determined that Zwerling’s MMWA claim is time barred, the 19 Court addresses only the fraud by omission claim. 20 Under Texas law, the elements of fraud by nondisclosure are: (1) the defendant failed to 21 disclose facts to the plaintiff; (2) the defendant had a duty to disclose those facts; (3) the facts were 22 material; (4) the defendant knew the plaintiff was ignorant of the facts and the plaintiff did not 23 have an equal opportunity to discover the facts; (5) the defendant was deliberately silent when it 24 had a duty to speak; (6) by failing to disclose the facts, the defendant intended to induce the 25 plaintiff to take some action or refrain from acting; (7) the plaintiff relied on the defendant’s 26 nondisclosure; and (8) the plaintiff was injured as a result of acting without that knowledge. 27 Parker v. Spotify USA, Inc., --- F. Supp. 3d ----, 2021 WL 6750851, at *10–11 (W.D. Tex. 2021). 28 Case No.: 5:19-cv-03622-EJD ORDER GRANTING MOT. FOR J. ON THE PLEADINGS 17 Case 5:19-cv-03622-EJD Document 97 Filed 03/14/22 Page 18 of 18 1 “Fraud by omission or non-disclosure is simply a subcategory of fraud because the omission or 2 non-disclosure may be as misleading as a positive misrepresentation of fact when a party has a 3 duty to disclose.” Id. (internal quotation marks omitted). As discussed above, Zwerling does not plead facts from which the Court may infer that 4 5 Ford had a duty to disclose the alleged Engine Defect. See supra Section III.C.2. Accordingly, 6 the Court finds that he has failed to state a claim for fraud by omission under the lower Rule 7 12(b)(6) standard, and the Court thus need not address whether he has satisfied Rule 9(b)’s 8 standard for pleading particularity. 9 IV. United States District Court Northern District of California 10 CONCLUSION For the foregoing reasons, the Court GRANTS IN PART and DENIES IN PART the 11 parties’ requests for judicial notice, and GRANTS Ford’s motion for judgment on the pleadings 12 with leave to amend to address the deficiencies described above. Zwerling shall file his amended 13 complaint by April 4, 2022. 14 15 IT IS SO ORDERED. Dated: March 14, 2022 16 17 18 EDWARD J. DAVILA United States District Judge 19 20 21 22 23 24 25 26 27 28 Case No.: 5:19-cv-03622-EJD ORDER GRANTING MOT. FOR J. ON THE PLEADINGS 18

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