MARGARET M. MORROW, District Judge.
On May 1, 2012, Ali Asghari filed this action on his own behalf and on behalf of a nationwide class of similarly situated individuals, against Volkswagen Group of America, Inc. ("VW Group"), Volkswagen AG, and Audi AG (collectively, "defendants").
VW Group moved to dismiss the first amended complaint on March 1, 2013.
Plaintiffs are California citizens who leased or purchased allegedly defective
Plaintiffs allege that prior to 2007, defendants knew of the following design and/or manufacturing defects in the class vehicles: (1) that the engine is unable to utilize engine oil properly; and (2) that the engine improperly burns off and consumes "abnormally high amounts of oil" (collectively "the oil consumption defect").
Plaintiffs contend that the rate of oil consumption can be as high as one quart every 500 miles.
Plaintiffs allege that the oil consumption defect was not reasonably foreseeable to the named plaintiffs or to class members,
Plaintiffs plead the following claims against all defendants on their own behalf and on behalf of the nationwide class and California sub-class: (1) violation of California's Consumer Legal Remedies Act ("CLRA"), California Civil Code § 1750 et
A Rule 12(b)(6) motion tests the legal sufficiency of the claims asserted in a complaint. A Rule 12(b)(6) dismissal is proper only where there is either a "lack of a cognizable legal theory" or "the absence of sufficient facts alleged under a cognizable legal theory." Balistreri v. Pacifica Police Department, 901 F.2d 696, 699 (9th Cir.1988). In deciding a Rule 12(b)(6) motion, the court generally looks only to the face of the complaint and documents attached thereto. Van Buskirk v. Cable News Network, Inc., 284 F.3d 977, 980 (9th Cir.2002); Hal Roach Studios, Inc. v. Richard Feiner & Co., Inc., 896 F.2d 1542, 1555 n. 19 (9th Cir.1990).
The court must accept all factual allegations pleaded in the complaint as true, and construe them and draw all reasonable inferences from them in favor of the non-moving party. Cahill v. Liberty Mutual Insurance Co., 80 F.3d 336, 337-38 (9th Cir.1996); Mier v. Owens, 57 F.3d 747, 750 (9th Cir.1995). It need not, however, accept as true unreasonable inferences or legal conclusions cast in the form of factual allegations. See Ashcroft v. Iqbal, 556 U.S. 662, 681, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) ("[B]are assertions . . . amount[ing] to nothing more than a `formulaic recitation of the elements' of a constitutional discrimination claim" are not entitled to an assumption of truth, quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)); see also Moss v. U.S. Secret Service, 572 F.3d 962, 969 (9th Cir.2009) ("Such allegations are not to be discounted because they are `unrealistic or nonsensical,' but rather because they do nothing more than state a legal conclusion — even if that conclusion is cast in the form of a factual allegation").
To survive a motion to dismiss, plaintiff's complaint must "contain sufficient factual matter, accepted as true, to `state a claim to relief that is plausible on its face.' . . . A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678, 129 S.Ct. 1937. See also id. ("The plausibility standard is not akin to a `probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully. . . . Where a complaint pleads facts that are `merely consistent with' a defendant's liability, it `stops short of the line between possibility and plausibility of "entitlement to relief,"'" quoting Twombly, 550 U.S. at 557, 127 S.Ct. 1955); Twombly, 550 U.S. at 545, 127 S.Ct. 1955 ("While a complaint attacked by a Rule
The CLRA makes illegal various "unfair methods of competition and unfair or deceptive acts or practices undertaken by any person in a transaction intended to result or which results in the sale or lease of goods or services to any consumer." CAL. CIV.CODE § 1770(a). Conduct that is "likely to mislead a reasonable consumer" violates the CLRA. Colgan v. Leatherman Tool Group, Inc., 135 Cal.App.4th 663, 680, 38 Cal.Rptr.3d 36 (2006) (quoting Nagel v. Twin Laboratories, Inc., 109 Cal.App.4th 39, 54, 134 Cal.Rptr.2d 420 (2003)). A "reasonable consumer" is an "ordinary consumer acting reasonably under the circumstances," who "is not versed in the art of inspecting and judging a product, [or] in the process of its preparation or manufacture. . . ." Id. (citing 1A CALLMANN ON UNFAIR COMPETITION, TRADEMARKS AND MONOPOLIES § 5:17 (4th ed.2004)).
Section 1770(a)(5) prohibits "[r]epresenting that goods or services have . . . characteristics, ingredients, uses, benefits, or quantities which they do not have . . . ." In addition, § 1770(a)(7) prohibits "[r]epresenting that goods or services are of a particular standard, quality, or grade . . . if they are of another." These sections of the CLRA encompass deceptive omissions as well as deceptive representations. Mui Ho v. Toyota Motor Corp., 931 F.Supp.2d 987, 995-96 (N.D.Cal.2013) (citing Daugherty v. American Honda Motor Company Inc., 144 Cal.App.4th 824, 835, 51 Cal.Rptr.3d 118 (2006)). The CLRA is to be "liberally construed and applied to promote its underlying purposes, which are to protect consumers against unfair and deceptive business practices and to provide efficient and economical procedures to secure such protection." Colgan, 135 Cal. App.4th at 680, 38 Cal.Rptr.3d 36.
Under the UCL, any person or entity that has engaged, is engaging, or threatens to engage "in unfair competition may be enjoined in any court of competent jurisdiction." CAL. BUS. & PROF.CODE §§ 17201, 17203. "Unfair competition" includes "any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising." Id., § 17200. The California Supreme Court has construed the term broadly. See Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co., 20 Cal.4th 163, 180, 83 Cal.Rptr.2d 548, 973 P.2d 527 (1999) ("[Section 17200] defines `unfair competition' to include any unlawful, unfair or fraudulent business act or practice. . . . Its coverage is sweeping, embracing anything that can properly be called a business practice and that at the same time is forbidden by law. . . . By proscribing any unlawful business practice, section 17200 borrows violations of other laws and treats
In their moving papers, defendants argued that Asghari could not assert claims under the CLRA or the UCL, on behalf of himself or the class, because he purchased his vehicle in New York.
Plaintiffs countered that Asghari had stated viable CLRA and UCL claims despite the fact that he did not lease his vehicle in California.
In Mazza, the Ninth Circuit considered a case in which plaintiffs successfully sought certification of a nationwide class whose members resided in 44 jurisdictions. Id. at 587 n. 1. The court examined the consumer protection laws of those jurisdictions and concluded that there were material differences between the California laws under which plaintiffs sued and the laws of the other states in which class members resided. See id. at 591 (describing differences between California's consumer protection laws and the laws of the other states). The court also noted that states have "an interest in applying [their] law to transactions within [their] borders," and that application of California law to
The principle articulated in Mazza "applies generally and is instructive even when addressing a motion to dismiss." Frezza v. Google Inc., No. 5:12-cv-00237-RMW, 2013 WL 1736788, *6 (N.D.Cal. Apr. 22, 2013). Applying Mazza, other courts have held that non-California residents injured by transactions that occurred outside California are precluded from asserting claims under California's consumer protection laws. See id.; Granfield v. NVIDIA Corp., No. C 11-05403 JW, 2012 WL 2847575, *3 (N.D.Cal. July 11, 2012) (dismissing CLRA and UCL claims asserted by a Massachusetts resident who purchased her computer in that state as barred by Mazza); Horvath v. LG Elecs. Mobilecomm U.S.A., No. 3:11-CV-01576-H-RBB, 2012 WL 2861160, *3-4 (S.D.Cal. Feb. 13, 2012) (same).
Mazza did not, however, create a "general rule that `where an out-of-state plaintiff claims to have been deceived or harmed as a result of misrepresentations or omissions received outside of California, that plaintiff's consumer protection claims must be brought under that plaintiff's own state laws.'" Forcellati v. Hyland's, Inc., 876 F.Supp.2d 1155, 1161 (C.D.Cal.2012); Allen v. Hylands, Inc., No. CV 12-01150 DMG, 2012 WL 1656750, *2 (C.D.Cal. May 2, 2012). Rather, "Mazza merely precludes application of California law to class members from states whose consumer protection laws differ materially from California's." Allen, 2012 WL 1656750 at *2; see also Frezza v. Google Inc., No. 5:12-cv-00237-RMW, 2013 WL 1736788, *6-7 (N.D.Cal. Apr. 22, 2013) ("Applying the Mazza principles and California's choice-of-law analysis to the facts of this case, it is readily apparent that plaintiffs' UCL claims are precluded. . . . [M]aterial differences. . . exist between the two states' consumer protection laws"); see also Washington Mutual Bank, FA v. Superior Court, 24 Cal.4th 906, 919-20, 103 Cal.Rptr.2d 320, 15 P.3d 1071 (2001) ("Under the first step of the governmental interest approach, the foreign law proponent must identify the applicable rule of law in each potentially concerned state and must show it materially differs from the law of California. The fact that two or more states are involved does not in itself indicate there is a conflict of laws problem").
In their motion, defendants did not argue that the CLRA and the UCL differed materially from equivalent New York consumer protection laws. They thus gave the court no basis to conclude that Asghari could not assert claims under California law. See Allen, 2012 WL 1656750 at *2 ("Defendants do not argue that Florida or Georgia have materially different consumer protection laws than California. Accordingly, there is no basis at this time for the Court to conclude that it would be inappropriate to apply California law to Plaintiffs' claims"); see also Keegan v. American Honda Motor Co., Inc., 284 F.R.D. 504, 539 (C.D.Cal.2012) ("[D]efendants bear the burden of showing that foreign law, rather than California law, should apply"); Bruno v. Quten Research Inst., LLC, 280 F.R.D. 524, 540 (C.D.Cal. 2011) ("Defendant has the burden. . . . to convince this Court of `material' differences in the law, as shown `on the facts of this case.' . . . Because Defendants have not identified any specific state's law or articulated any argument, beyond citation to other cases, to indicate there is a conflict,
Courts have, however, recognized that there are material differences between California and New York consumer protection laws. See Mazza, 666 F.3d at 591 ("California also requires named class plaintiffs to demonstrate reliance, while some other states' consumer protection statutes do not," citing Stutman v. Chem. Bank, 95 N.Y.2d 24, 709 N.Y.S.2d 892, 731 N.E.2d 608 (2000)); Keegan, 284 F.R.D. at 544-45 ("If the court were to certify a single UCL/CLRA class to which California law—including the statutes of limitations for UCL and CLRA claims—applies, [it] would undoubtedly include New York and Florida plaintiffs whose claims are time-barred under their own states' laws. This would expand defendants' liability beyond the liability they would face if Florida and New York plaintiffs sued under the laws of those states"). The parties' briefs, however, did not highlight whether there were actual variations in the state laws at issue in this litigation. Compare Mazza, 666 F.3d at 591 ("In its briefing, Honda exhaustively detailed the ways in which California law differs from the laws of the 43 other jurisdictions in which class members reside"). The court therefore deferred ruling on defendants' motion to dismiss Asghari's California claims and directed the parties to submit supplemental briefing as to whether there are material differences between the consumer protection and express and implied warranty laws of New York and California, so that the court could determine whether substantive variations between the two states' laws weighed against the extraterritorial application of California law to Asghari's claims. Defendants filed a supplemental brief on August 8, 2013.
A plaintiff seeking damages under the CLRA must provide notice to the defendant under California Civil Code § 1782(a). The statute states that at least thirty days prior to commencing an action for damages under the CLRA, the consumer must (1) notify the person alleged to have committed the violations, and (2) demand that the person "correct, repair, replace, or otherwise rectify the goods or services" in question. CAL. CIV.CODE § 1782(a). The notice must "be in writing and . . . be sent by certified or registered mail, return receipt requested," to the place where the transaction occurred or to the person's principal place of business in California. Id.
When a named plaintiff provides written notice to a defendant not only on his own behalf but on behalf of similarly situated consumers, the named plaintiff's notice suffices to satisfy § 1782 for all class members. In re Toyota Motor Corp.
Plaintiffs allege in their first amended complaint that "through . . . Asghari, [they] have provided all Defendants with notice of their alleged violations of the CLRA pursuant to California Civil Code § 1782(a)."
As noted, however, Asghari has since withdrawn his CLRA claim. Consequently, the other named plaintiffs and class members cannot rely on Asghari's CLRA letter. Accordingly, the court dismisses plaintiffs' CLRA claims with leave to amend to include allegations concerning
The limitations period for CLRA claims is three years. CAL. CIV. CODE § 1783. Defendants argue that the limitations period
Under the CLRA, the limitations period begins to run on the date the improper consumer practice was committed. CAL. CIV.CODE § 1783 ("Any action brought under the specific provisions of [the CLRA] shall be commenced not more than three years from the date of the commission of such method, act, or practice" (emphasis added)). In this context, that would be the date plaintiffs purchased or leased their vehicles. See Keegan, 284 F.R.D. at 544 ("Absent application of the delayed discovery rule, the statute of limitations would have begun to run on the date the car was purchased or leased"); see also Falk v. Gen. Motors Corp., 496 F.Supp.2d 1088, 1100 (N.D.Cal.2007) (implying that statute of limitations on CLRA claim would begin to run on the date that plaintiffs purchased their allegedly defective vehicles, if the discovery rule did not apply). Cf. Ries v. Arizona Beverages USA LLC, 287 F.R.D. 523, 534 (N.D.Cal.2012) (stating that the limitations period on a CLRA claim began to run when a consumer purchased allegedly mislabeled ice tea).
Defendants acknowledge that Calver allegedly purchased her vehicle used from a third party in 2011, less than three years before Asghari filed the original complaint in this action.
Even if the court were to assume that the statute of limitations on Calver's claims began to run when the individual who sold it to her first purchased the car from an Audi dealer, however, the complaint does not allege that that purchase occurred more than three years before Asghari filed this action. Defendants assert it can be inferred that Calver's vehicle was purchased from an authorized Audi dealer in 2008 because "Calver's vehicle has an in service date of March 26, 2008."
The complaint does allege that Lamia and Prasobratana's purchased their vehicles more than three years before Asghari commenced this action. "Plaintiffs contend, however, that their CLRA claims are not time-barred because the limitations period was tolled by the delayed discovery rule."
Plaintiffs assert that the delayed discovery rule applies because they could not have discovered the bases for their claims until defendants conducted oil consumption tests on the vehicles; Prasobratana never received the results of this test of his vehicle, while Lamia received the results only after the original complaint was filed.
Plaintiffs do not allege that defendants are liable under the CLRA simply because their vehicles required additional oil between regular oil changes, however. Nor do they allege claims based on rapid oil consumption that occurred on one occasion and necessitated the addition of oil prior to a regularly anticipated oil change. Plaintiffs allege, rather, that their vehicles have a defect that causes the engines to utilize engine oil improperly, burning it at an abnormally high rate, and leading to oil changes or the addition of oil on an unreasonably frequent basis.
The complaint pleads that Lamia took his vehicle to an authorized Audi repair facility in July 2012, complaining that he frequently had to add supplemental oil between oil changes.
The complaint alleges no facts, however, concerning the time and manner of Prasobratana's discovery that the engine was consuming oil at an accelerated rate. Although plaintiffs allege that Prasobratana added supplemental oil to his vehicle between oil changes, they do not plead facts as to how or when he learned that additional oil was needed because of the purported oil consumption defect. Nor does the complaint allege any facts from which it could be inferred that Prasobratana acted diligently in attempting to discover the defect. On the basis of the present complaint, therefore, Prasobratana is not entitled to invoke the discovery rule to show that his CLRA claim is timely. Prasobratana purchased his vehicle in 2008, more than three years before plaintiffs filed their complaint. The court concludes, therefore, that Prasobratana's CLRA claim is time-barred.
The Ninth Circuit has held that UCL claims "are subject to a four-year statute of limitations which beg[i]n[s] to run on the date the cause of action accrue[s], not on the date of discovery." Karl Storz Endoscopy-America, Inc. v. Surgical Tech., Inc., 285 F.3d 848, 857 (9th Cir.2002) (citing CAL. BUS. & PROF.CODE § 17208). Unlike CLRA claims, UCL claims do not benefit from the discovery rule. See Keegan, 284 F.R.D. at 543-44
Defendants argue that Calver's and Prasobratana's UCL claims must be dismissed as time-barred, because their vehicles were purchased from defendants in 2008, more than four years before Asghari filed this action in May 2012.
By contrast, the facts alleged in the complaint do not show that Calver's claim accrued more than four years before this action was filed. Calver allegedly purchased her vehicle from a third party in 2011. For the reasons stated in the court's discussion of the timeliness of Calver's CLRA claim, the complaint pleads no facts indicating that the third-party seller purchased the vehicle from defendants more than four years before plaintiffs commenced this action. Consequently, the court cannot conclude that Calver's UCL claim is time-barred. See Von Saher, 592 F.3d at 969 ("A claim may be dismissed under Rule 12(b)(6) on the ground that it is barred by the applicable statute of limitations only when `the running of the statute is apparent on the face of the complaint.' ... `A complaint cannot be dismissed unless it appears beyond doubt that the plaintiff can prove no set of facts that would establish the timeliness of the claim,'" citing Huynh v. Chase Manhattan Bank, 465 F.3d 992, 997 (9th Cir. 2006); Supermail Cargo, Inc. v. United States, 68 F.3d 1204, 1206 (9th Cir.1995)). Consequently, the court denies defendants' motion to dismiss Calver's UCL claim.
Defendants next argue that Calver cannot claim restitution under the UCL.
Individuals' remedies under the UCL are restricted to injunctive relief and restitution. A plaintiff may recover lost money in the form of restitution under the UCL, but not damages. See Korea Supply v. Lockheed Martin Corp., 29 Cal.4th 1134, 1152, 1144, 131 Cal.Rptr.2d 29, 63 P.3d 937 (2003) (holding that "disgorgement of profits allegedly obtained by means of an unfair business practice" is not "an authorized remedy under the UCL where the profits are neither money taken from a plaintiff nor funds in which the plaintiff has an ownership interest"). To show that she is entitled to restitution, a plaintiff must demonstrate that the defendant is in possession of money or property taken from her. See Groupion, LLC v. Groupon, Inc., 859 F.Supp.2d 1067, 1083 (N.D.Cal.2012) (holding that restitution was unavailable because plaintiff "ha[d] not submitted any evidence or ... argument, to show that [defendant] obtained money from [plaintiff] or that [plaintiff] otherwise ha[d] any ownership interest of any of [defendant's] profits," citing Colgan v. Leatherman Tool Group, Inc., 135 Cal.App.4th 663, 699, 38 Cal.Rptr.3d 36 (2006) (a plaintiff can seek money or property as restitution only when the "money or property identified as belonging in good conscience to the plaintiff [can] clearly be traced to particular funds or property in the defendant's possession")); Hill v. Opus Corp., 464 B.R. 361, 394 (C.D.Cal.2011) (restitution is not available where the money claimed by plaintiff cannot be "traced to any particular funds in [defendants'] possession"); EchoStar Satellite Corp. v. NDS Group PLC, No. SA CV03-0950 DOC, 2008 WL 4596644, *9 (C.D.Cal. Oct. 15, 2008) ("Restitution under the UCL is only available where the sum at issue can clearly be traced to particular funds or property in the defendant's possession. ... As the Court previously recognized, NDS never directly took anything from EchoStar..... Simply put, it is plain that EchoStar is seeking to dress up its unsuccessful damages claim as one for restitution under the UCL. However, such relief is not available" (internal quotation marks and citations omitted)); see also Bank of the West v. Superior Court, 2 Cal.4th 1254, 1268, 10 Cal.Rptr.2d 538, 833 P.2d 545 (1992) (with restitution, "defendant is asked to return something he wrongfully received; he is not asked to compensate the plaintiff for injury suffered as a result of his conduct").
Plaintiffs have not alleged facts indicating that defendants obtained Calver's money or property nor that defendants are in possession of funds rightfully belonging to her. Rather, the complaint alleges that Calver bought her vehicle from a third party. The complaint thus fails to plead facts showing that Calver has a plausible claim to restitution under the
The parties agree that plaintiffs' UCL and CLRA claims "sound in fraud" because they are based on defendants' allegedly fraudulent omission and/or concealment of material information concerning the engine defect. Such claims are subject to the heightened pleading requirements of Rule 9(b) of the Federal Rules of Civil Procedure. Kearns v. Ford Motor Co., 567 F.3d 1120, 1124 (9th Cir.2009); In re Toyota Motor Corp., 754 F.Supp.2d at 1170 n. 17. Generally, a plaintiff must plead the "time, place, and specific content" of allegedly fraudulent conduct to satisfy Rule 9(b). See Swartz v. KPMG LLP, 476 F.3d 756, 764 (9th Cir.2007); Cirulli v. Hyundai Motor Co., No. SACV 08-0854 AG (MLGx), 2009 WL 5788762, *4 (C.D.Cal. June 12, 2009) ("Generally, a plaintiff must plead `with particularity' the time and place of the fraud, the statements made and by whom made, an explanation of why or how such statements were false or misleading when made, and the role of each defendant in the alleged fraud," citing In re GlenFed, Inc. Sec. Litig., 42 F.3d 1541, 1547-49 (9th Cir.1994) (en banc); Lancaster Cmty. Hosp. v. Antelope Valley Hosp. Dist., 940 F.2d 397, 405 (9th Cir. 1991)). When a claim rests on allegations of fraudulent omission, however, the Rule 9(b) standard is somewhat relaxed because "a plaintiff cannot plead either the specific time of [an] omission or the place, as he is not alleging an act, but a failure to act." Id. (citing Washington v. Baenziger, 673 F.Supp. 1478, 1482 (N.D.Cal.1987)).
Nonetheless, a plaintiff alleging fraudulent omission or concealment must still plead the claim with particularity. See Bias v. Wells Fargo & Co., 942 F.Supp.2d 915, 935 (N.D.Cal.2013) ("Although Plaintiffs' allegations do allege a fraud based in part on omissions, a plaintiff must still plead such claim with particularity," citing Kearns, 567 F.3d at 1126 ("Because the Supreme Court of California has held that nondisclosure is a claim for misrepresentation in a cause of action for fraud, it (as any other fraud claim) must be pleaded with particularity under Rule 9(b)"); Marolda v. Symantec Corp., 672 F.Supp.2d 992, 1002 (N.D.Cal.2009) ("The Ninth Circuit has recently clarified that claims of nondisclosure and omission, as varieties of misrepresentations, are subject to the pleading standards of Rule 9(b)")); see also Eisen v. Porsche Cars North America, Inc., No. CV 11-9405 CAS, 2012 WL 841019, *3 (C.D.Cal. Feb. 22, 2012) ("Although claims based on an alleged fraudulent omission or concealment can succeed without the same level of specificity required by a normal fraud claim ... the contention that ... nondisclosure claims need not be pleaded with particularity is unavailing" (internal quotation marks and citations omitted)). Specifically, a plaintiff must "set forth an explanation as to why [the] omission complained of was false and misleading" to state a claim under Rule 9(b). Bias, 942 F.Supp.2d at 932 (citing In re GlenFed, Inc. Sec. Litig., 42 F.3d at 1548). "[T]o plead the circumstances of omission with specificity, plaintiff must describe the content of the omission and where the omitted information should or could have been revealed, as well as provide representative samples of advertisements, offers, or other representations that plaintiff relied on to make her purchase and that failed to include the allegedly omitted information." Eisen,
Defendants argue that plaintiffs have failed adequately to plead a fraudulent omission that satisfies Rule 9(b).
Plaintiffs assert that their claims are sufficient under Rule 9(b).
The court concludes that plaintiffs have adequately alleged their fraudulent omission/concealment claims with the particularity required by Rule 9(b). Plaintiffs plead "what" was omitted and/or concealed (an engine defect that causes the engine to consume excessive oil and creates a risk of engine failure);
Defendants assert that omissions are actionable under the CLRA and the UCL only when the omission is either contrary to a representation made by defendant or where a duty to disclose exists.
"Under California law, there are four circumstances in which an obligation to disclose may arise: (1) when the defendant is in a fiduciary relationship with the plaintiff; (2) when the defendant had exclusive knowledge of material facts not known to the plaintiff; (3) when the defendant actively conceals a material fact from the plaintiff; and (4) when the defendant makes partial representations but also suppresses some material facts." Smith v. Ford Motor Co., 749 F.Supp.2d 980, 987 (N.D.Cal.2010) (citing LiMandri v. Judkins, 52 Cal.App.4th 326, 337, 60 Cal.Rptr.2d 539 (1997)); see also Cirulli, 2009 WL 5788762 at *3 ("In Falk, the Northern District of California found that concealment or a failure to disclose can constitute actionable fraud under the CLRA in four situations: (1) when the defendant is in a fiduciary relationship with the plaintiff; (2) when the defendant had exclusive knowledge of material facts not known to the plaintiff; (3) when the defendant actively conceals a material fact from the plaintiff; and (4) when the defendant makes partial representations but
"[I]n order for non-disclosed information to be material, a plaintiff must show that `had the omitted information been disclosed, one would have been aware of it and behaved differently.'" Oestreicher, 544 F.Supp.2d at 971 (quoting Falk, 496 F.Supp.2d at 1095, in turn quoting Mirkin v. Wasserman, 5 Cal.4th 1082, 1093, 23 Cal.Rptr.2d 101, 858 P.2d 568 (1993)). As noted, "[m]ateriality ... is judged by the effect on a `reasonable consumer.'" Id. (citing Consumer Advocates v. Echostar Satellite Corp., 113 Cal.App.4th 1351, 1360, 8 Cal.Rptr.3d 22 (2003)).
Plaintiffs base their UCL and CLRA claims on defendants' allegedly knowing and intentional failure to disclose the engine defect to them and other putative class members. They contend defendants had a duty to disclose because they knew material facts concerning the defect that they actively concealed. Under California law, and as recently described by the Ninth Circuit, "`[a] manufacturer's duty to consumers is limited to its warranty obligations absent either an affirmative misrepresentation or a safety issue.'" Id. at 987-88 (citing Oestreicher, 322 Fed. Appx. at 493 (affirming the dismissal of CLRA, UCL and fraudulent concealment claims because plaintiff failed to allege that defendant had "affirmatively misrepresented its products" or that the alleged defect "posed a threat to his own safety or the safety of others"")); O'Shea v. Epson America, Inc., No. CV 09-8063 PSG (CWx), 2011 WL 3299936, *8 (C.D.Cal. July 29, 2011) ("[T]he weight of authority suggests that a "manufacturer's duty to consumers is limited to its warranty obligations absent either an affirmative misrepresentation or a safety issue," quoting Oestreicher, 322 Fed.Appx. at 493). See also Smith, 749 F.Supp.2d at 987 ("The California Court of Appeal has held that a manufacturer cannot be found liable under the CLRA for failure to disclose a defect that manifests itself after expiration of the warranty period unless such omission (1) is `contrary to a representation actually made by the defendant' or (2) pertains to a `fact the defendant was obligated to disclose,'" quoting Daugherty, 144 Cal.App.4th at 835-36, 51 Cal.Rptr.3d 118).
Plaintiffs allege that the engine's inability to utilize oil properly can cause engine failure to occur at any time, under any driving condition, and at any speed, creating a serious risk of injury.
To have standing to bring a claim under the UCL, a plaintiff must show that she "has suffered injury in fact and has lost money or property as a result of" defendant's violation of the statute. Pom Wonderful LLC v. Coca-Cola Co., 679 F.3d 1170, 1179 (9th Cir.2012). A plaintiff need only allege that she suffered a concrete financial loss to demonstrate actual injury-in-fact. Cholakyan, 796 F.Supp.2d at 1230; see also Steele v. Hospital Corp. of America, 36 F.3d 69, 71 (9th Cir.1994) (allegations of a "concrete financial loss" suffice to confer standing); Sanchez v. Wal-Mart Stores, Inc., No. 2:06-CV-2573 JAM KJM, 2008 WL 3272101, *3 (E.D.Cal. Aug. 6, 2008) ("To have standing under the UCL Sanchez need only demonstrate that she spent or lost money due to an unfair business practice. Direct victims of an unfair business practice may obtain an order of restitution to recover money lost from an unfair practice as well as injunctive relief. Through this action, Sanchez seeks an order of restitution to recover money lost from having to replace an allegedly defective stroller that she purchased from Wal-Mart due to an unfair business practice. ... This is minimally sufficient to confer standing to assert a claim for relief under the UCL").
Defendants argue that plaintiffs fail to allege injury-in-fact resulting from their allegedly fraudulent concealment of the oil consumption defect.
New York General Business Law ("GBL") § 349 creates a private cause of action for any person injured by "deceptive acts or practices in the conduct of any business, trade or commerce or in the furnishing of any service" in the state of New York. N.Y. GEN. BUS. LAW § 349. To state a claim under § 349, a plaintiff must allege: (1) the act or practice was consumer-oriented; (2) the act or practice was misleading in a material respect; and (3) the plaintiff was injured as a result. Spagnola v. Chubb Corp., 574 F.3d 64, 74 (2d Cir.2009); Bosch v. LaMattina, 901 F.Supp.2d 394, 406 (E.D.N.Y.2012). To be consumer-oriented, the conduct must have a "broad impact on consumers at large."
Defendants argue that Asghari's GBL § 349 claim must be dismissed because he fails to allege any fraudulent omission or concealment.
Defendants also contend that Asghari has not adequately alleged that he was injured by their alleged failure to disclose the oil consumption defect.
In Small, the New York Court of Appeals held that plaintiffs had not adequately alleged a cognizable injury under the GBL, where they asserted that defendants' failure to disclose facts relating to the addictive properties of nicotine prevented them from making free and informed choices as consumers. Id. Plaintiffs alleged that had they known that nicotine was addictive, they never would have purchased cigarettes. Plaintiffs did not, however, allege that the cost of cigarettes was affected by the alleged misrepresentations, nor did they seek recovery for injury to their health as a result of their addiction. The court rejected plaintiffs' assertion that a "consumers who buy a product that they would not have purchased, absent a manufacturer's deceptive commercial practices, have suffered an injury under General Business Law § 349" absent a "manifestation of either pecuniary or `actual' harm." Id.
Small does not require dismissal of Asghari's GBL claim because he has alleged actual, pecuniary harm. As noted in the court's discussion of plaintiffs' standing to assert UCL claims, the complaint alleges that Asghari suffered concrete financial injuries in the form of out-of-pocket expenses for frequent additions of oil to his vehicle.
In addition to state consumer protection claims, plaintiffs plead various breach of warranty claims. They asserts claims for breach of express warranty under the California U.C.C. and the New York U.C.C.; breach of warranty under the Magnuson Moss Warranty Act, 15 U.S.C. § 2301 et seq.; and breach of implied warranty under the Song-Beverly Consumer Warranty Act. The court addresses each of these claims in turn.
California Commercial Code § 2313, which defines express warranty, applies to "transactions in goods." See CAL. COM. CODE § 2102; see also CAL. CIV.CODE § 1791.2(a)(1) (defining an "express warranty" as "[a] written statement arising out of a sale to the consumer of a consumer good pursuant to which the manufacturer, distributor, or retailer undertakes to preserve or maintain the utility or performance of the consumer good or to provide compensation if there is a failure in utility or performance"); BLACK'S LAW DICTIONARY at 1582 (7th ed.1999) (defining "express warranty" as "[a] warranty created by the overt words or actions of the seller"); 3 B.E. WITKIN, SUMMARY OF CALIFORNIA LAW, §§ 55-56 (9th ed.1990); Richard A. Lord, WILLISTON ON CONTRACTS 4TH § 52.45 (4th ed.2004) ("Under the [Uniform Commercial] Code, an express warranty is usually associated with a contract for the sale of goods, but may be found in connection with other transactions involving goods. ... There is a division of opinion whether the express warranty concepts in the Code are also applicable or may be extended to service agreements").
An express warranty is a term of the parties' contract. See A.A. Baxter Corp. v. Colt Industries, Inc., 10 Cal.App.3d 144, 153, 88 Cal.Rptr. 842 (1970) ("A warranty is as much one of the elements of sale and as much a part of the contract of sale as any other portion of the contract and is not a mere collateral undertaking. ... [T]o constitute an express warranty, the statement must be a part of the contract"); Richard A. Lord, WILLISTON ON CONTRACTS 4TH § 52.45 (4th ed.2004) (stating that an express warranty is "a term of the parties' contract"); see Paularena v. Superior Court of San Diego County, 231 Cal.App.2d 906, 915, 42 Cal.Rptr. 366 (1965) ("The damages which each set of plaintiffs seek[s] through their [breach of warranty] cause[ ] of action are dependent upon their affirmance of the existence of a contract").
To prevail on a breach of express warranty claim, a plaintiff must prove that the seller "(1) made an affirmation of fact or promise or provided a description of its goods; (2) the promise or description formed part of the basis of the bargain; (3) the express warranty was breached; and (4) the breach caused injury to the plaintiff." Rodarte v. Philip Morris, Inc., No. 03-0353FMC, 2003 WL 23341208, *7 (C.D.Cal. June 23, 2003). A description of the goods at issue can create an express warranty so long as it was part of the basis
Defendants posit several reasons why plaintiffs' breach of express warranty under the California Commercial Code § 2313 should be dismissed: (1) that plaintiffs fail adequately to plead facts showing that they relied on the warranty in acquiring their vehicles; (2) that plaintiffs fail to allege that the warranty contained any representation regarding the vehicle's oil consumption that (a) could give rise to breach of warranty claim and (b) was relied on by any plaintiff; (3) that the disclosures in the Owner's Manual, specifying the need for the addition of oil between oil changes, precludes a breach of express warranty claim; (4) that the express warranty covers only "repair or replacement to correct a defect in [the] manufacturer's material and workmanship"; and (5) that plaintiffs have not incurred any out-of-pocket expenses for repairs to their vehicles.
Plaintiffs contend their California breach of express warranty claim is sufficiently pled.
See also id. at *5 (stating that "reliance (or some other substitute for privity) is required for an express warranty claim against a non-selling manufacturer of a product"). When there is no privity of contract, California law requires a showing that a plaintiff relied on an alleged warranty. Keegan, 284 F.R.D. at 546.
Here, none of the plaintiffs purchased his or her vehicle directly from the manufacturer. Therefore, none was in privity with defendants. See Clemens v. DaimlerChrysler Corp., 534 F.3d 1017, 1023 (9th Cir.2008) ("A buyer and seller
The complaint does not allege that any plaintiff relied on the express warranty in deciding to purchase his or her vehicle. Consequently, the court concludes that plaintiffs have failed to state a claim for breach of express warranty under California law. See Coleman, 2011 WL 3813173 at *4; Sanders v. Apple Inc., 672 F.Supp.2d 978, 988 (N.D.Cal.2009) (dismissing an express warranty claim, where the only named plaintiff with standing to sue failed to allege reasonable reliance); Stearns v. Select Comfort Retail Corp., No. 08-2746 JF, 2008 WL 4542967, *5 (N.D.Cal. Oct. 1, 2008) ("Stearns' claim for breach of express warranty fails because she does not allege reasonable reliance under the second element on the terms of the warranty"); Moncada v. Allstate Ins. Co., 471 F.Supp.2d 987, 997 (N.D.Cal.2006) (dismissing a breach of express warranty claim where plaintiffs did not allege reliance on express warranties); see also In re Hydroxycut Marketing and Sales Practices Litig., 801 F.Supp.2d 993, 1013 (S.D.Cal.2011) ("Because the FAC fails to allege facts showing that ... the Retailer Defendants ... made ... representations regarding the Products that Plaintiffs relied on in purchasing the Products, the Court dismisses the ... express warranty claim ... as to the Retailer Defendants"); Kearney v. Hyundai Motor Am., No. SACV09-1298-JST, 2010 WL 8251077, *9 (C.D.Cal. Dec. 17, 2010) ("Plaintiffs fail to allege that these specific statements were the express warranties that they relied on in purchasing their vehicles. ... To the extent that Plaintiffs base their express warranty claim on paragraph 130 of the Second Amended Complaint, the claim is dismissed"). Consequently, plaintiffs' California Commercial Code § 2313 claim must be dismissed.
Section 2-313 of the New York's U.C.C. governs express warranties. Under this section,
An express warranty is thus "an affirmation of fact or promise made by the seller to the buyer which relates to the goods and becomes part of the basis of the bargain." Horowitz v. Stryker Corp., 613 F.Supp.2d 271, 286 (E.D.N.Y.2009). To demonstrate that an express warranty has been given under New York law, a plaintiff "must prove that the statement falls within the definition of a warranty, that she relied on it, and that it became part of the basis for the bargain." Kraft v. Staten Island Boat Sales, Inc., 715 F.Supp.2d 464, 473 (S.D.N.Y.2010); Tompkins v. R.J. Reynolds Tobacco Co., 92 F.Supp.2d 70, 92 (N.D.N.Y.2000) ("[A]n action for breach of express warranty requires both the existence of an express promise or representation and reliance on that promise or representation. Plaintiff must also show that the `representation became part of the `basis of the bargain'").
Defendants argue that Asghari's breach of express warranty claim under the New York U.C.C. fails for the same reasons their breach of express warranty under California Commercial Code § 2313 fails.
The Song-Beverly Consumer Warranty Act ("Song-Beverly Act") was enacted to regulate warranties and strengthen consumer remedies for breaches of warranty. National R.V., Inc. v. Foreman, 34 Cal.App.4th 1072, 1077, 40 Cal.Rptr.2d 672 (1995). The act is intended to protect purchasers of "consumer goods," defined as "any new product or part thereof that is used, bought, or leased for use primarily for personal, family, or household purposes, except for clothing and consumables." CAL. CIV.CODE § 1791(a). Unless specific disclaimer methods are followed, an implied warranty of merchantability accompanies every retail sale of consumer goods in the state. CAL. CIV.CODE § 1792; see also Music Acceptance Corp. v. Lofing, 32 Cal.App.4th 610, 619, 39 Cal.Rptr.2d 159 (1995).
As defined in the Song-Beverly Act, an implied warranty of merchantability guarantees that "consumer goods meet
Defendants argue that Asghari cannot assert a claim under the Song-Beverly Act because he purchased his vehicle in New York.
Defendants argue that the Song-Beverly claims of Calver and Prasobratana are time-barred.
Like UCL claims, Song-Beverly Act claims are subject to a four-year statute of limitations. Horne v. Harley-Davidson, Inc., 660 F.Supp.2d 1152, 1157 (C.D.Cal. 2009) (citing Krieger v. Nick Alexander Imports, Inc., 234 Cal.App.3d 205, 215, 285 Cal.Rptr. 717 (1991) (citing CAL. COM.CODE § 2725)). The court concludes that Prasobratana's Song-Beverly Act claim is untimely for the reasons stated in the court's discussion of the timeliness of his CLRA and UCL claims. The court will not dismiss Calver's claim as untimely, however, for the same reasons it declines to dismiss her CLRA and UCL claims on limitations grounds.
Defendants argue that plaintiffs do not properly plead a breach of an implied warranty of merchantability.
A plaintiff claiming breach of an implied warranty of merchantability must show that the product "did not possess even the most basic degree of fitness for ordinary use." Mocek v. Alfa Leisure, Inc., 114 Cal.App.4th 402, 406, 7 Cal.Rptr.3d 546 (2003) (citing CAL. COMM.CODE § 2314(2)); see also Pisano v. American Leasing, 146 Cal.App.3d 194, 198, 194 Cal.Rptr.3d 546 (1983) ("Crucial to the inquiry is whether the product conformed to the standard performance of like products used in the trade"). The implied warranty of merchantability set forth in § 1791.1(a) requires only that a vehicle be reasonably suited for ordinary use, however. Stated differently, it need not be perfect in every detail so long as it "provides for a minimum level of quality." American Suzuki, 37 Cal.App.4th at 1296, 44 Cal.Rptr.2d 526 (quoting Skelton v. General Motors Corp., 500 F.Supp. 1181, 1191 (N.D.Ill.), rev'd. on other grounds, 660 F.2d 311 (7th Cir. 1981)). The basic inquiry, therefore, is whether the vehicle was fit for driving. See Carlson v. General Motors Corp., 883 F.2d 287, 297 (4th Cir.1989) ("Since cars are designed to provide transportation, the implied warranty of merchantability is simply a guarantee that they will operate in a safe condition and substantially free of defects. Thus, where a car can provide safe, reliable transportation, it is generally considered merchantable"), cert. denied, 495 U.S. 904, 110 S.Ct. 1923, 109 L.Ed.2d 287 (1990); Skelton, 500 F.Supp. at 1191 ("Automobiles are designed for driving, and therefore the question in this case is whether the GM vehicles at issue were fit for that purpose"); American Suzuki, 37 Cal.App.4th at 1296, 44 Cal.Rptr.2d 526 ("Courts in other jurisdictions have held that in the case of automobiles, the implied warranty of merchantability can be breached only if the vehicle manifests a defect that is so basic it renders the vehicle unfit for its ordinary purpose of providing transportation").
Whether a car provides a "minimum level of quality" is not determined by the manner in which it is operating at the time of sale. A vehicle that operates for some time after purchase may still be deemed "unfit for ordinary purposes" if its components are so defective
The complaint contains various allegations that, accepted as true, state a implied warranty of merchantability claim. Specifically, as noted, the complaint alleges that the engine is unable to properly utilize the engine oil, resulting in consumption of "abnormally high amounts of oil."
Another complaint states: "Since I bought my Audi, I have had to put oil in it many times ... I have also had an issue with the car seeming to lose power. ... This is very startling when it happens."
The Magnuson-Moss Warranty Act ("MMWA") permits a "consumer" to sue
As used in the MMWA, the term implied warranty "means an implied warranty arising under State law ... in connection with the sale by a supplier of a consumer product." 15 U.S.C. § 2301(7); Barabino v. Dan Gamel, Inc., No. 2:04-cv-2359-MCE-PA, 2006 WL 2083257, *4 (E.D.Cal. July 25, 2006) ("[W]hile the Plaintiff's MMWA claim constitutes a separate federal cause of action for breach of an implied warranty, courts must look to the relevant state law to determine the meaning and creation of any implied warranty"); see also Stearns v. Select Comfort Retail Corp., No. 08-2746 JF, 2009 WL 1635931, *9 (N.D.Cal. June 5, 2009) (the MMWA "does not expand the rights under [state law warranty] claims, and dismissal of the state law claims requires the same disposition with respect to an associated MMWA claim"); Kanter v. Warner-Lambert Co., 99 Cal.App.4th 780, 798, 122 Cal.Rptr.2d 72 (2002) ("State law applies in breach of warranty actions as to both implied and written warranty claims under Magnuson-Moss, except as expressly stated by that act").
Defendants argue that plaintiffs' MMWA breach of warranty claim should be dismissed because it is "entirely derived from state law."
For the reasons stated, the court grants defendants' motions to dismiss Asghari's California claims; Prasobratana's CLRA, UCL, and Song-Beverly Act claims; Calver's claim for restitution under the UCL; plaintiffs' claims for breach of express warranty under both California and New York
