Faulk v. Sears Roebuck and Co

Filing 40

ORDER DENYING DEFENDANT'S MOTION TO DISMISS THE FIRST AMENDED COMPLAINT (SI, COURT STAFF) (Filed on 11/14/2011)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

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United States District Court
For the Northern District of California

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KEVIN FAULK, on behalf of himself and all
others similarly situated,

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ORDER DENYING DEFENDANT’S
MOTION TO DISMISS THE FIRST
AMENDED COMPLAINT

Plaintiff,

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No. C 11-2159 SI

v.
SEARS, ROEBUCK AND CO.,
Defendant.

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Defendant’s motion to dismiss the first amended complaint is scheduled for a hearing on
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November 18, 2011. Pursuant to Civil Local Rule 7-1(b), the Court determines that the matter is
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appropriate for resolution without oral argument, and VACATES the hearing. For the reasons set forth
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below, the Court DENIES the motion.
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BACKGROUND
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On May 2, 2011, plaintiff Kevin Faulk filed this putative class action against Sears, Roebuck
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and Company. The first amended complaint (“FAC”) alleges that Sears has violated federal and
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California law in its administration of the Limited Tire Warranty applicable to tires sold online and in
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Sears’ retail outlets and auto centers, and in its marketing and selling of the Road Hazard Plus extended
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service agreement applicable to those tires. Specifically, the FAC alleges that “Sears has a policy of
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denying responsibility under both its express warranty and Road Hazard Plus Agreement to any
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customer who cannot prove that he or she has had their tires rotated at specific intervals and has had a
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wheel alignment at least once per year. None of the written documents provided to the customers

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specifies that the customer must rotate their tires at specific intervals, perform a wheel alignment, or be

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able to prove either as a condition precedent to coverage under either the express warranty or the Road

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Hazard Plus service agreement.” FAC ¶ 12.
The FAC alleges that on or about April 23, 2009, Faulk purchased three Falken brand tires, and

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the Road Hazard Plus warranty for each of the three tires, from a Sears Auto store in San Jose,

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California. Id. ¶ 7. The tires were accompanied by a Limited Tire Warranty that covers tires that

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become “unserviceable due to a defect in materials or workmanship” during the warranty period. Id ¶

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8. The Road Hazard Plus warranty purchased by plaintiff covers, among other things, tires that become

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United States District Court
For the Northern District of California

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“unserviceable due to normal wear and tear, including Road Hazards, experienced under ordinary

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driving conditions.” Id. ¶ 9.

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The FAC alleges that on December 25, 2010, one of the tires that Faulk purchased from Sears

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blew out while Faulk was driving the vehicle in Oregon. Id. ¶ 14. On December 26, 2010, Faulk took

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the vehicle to a Sears Auto Center in Portland, Oregon, where he was informed that the three Falken

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tires he had purchased needed to be replaced due to wear. Id. The complaint alleges, “Named Plaintiff

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requested that Defendant honor both its Limited Tire Warranty and Road Hazard Plus Warranty but

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Defendant refused, informing Named Plaintiff that the warranties would be honored only if Named

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Plaintiff could demonstrate that a wheel alignment had been performed at least once a year and that the

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tires had been rotated at intervals of no more than every 6,000 miles since the dates of their purchase.

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No other reason was given for Sears’ refusal to honor the warranties.” Id. The FAC alleges that prior

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to December 26, 2010, Faulk “was unaware of Defendant’s policy of denying responsibility under both

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its express warranty and its Road Hazard Plus Agreement to any customer who cannot prove that he or

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she has had their tires rotated at specific intervals and has had a wheel alignment at least once a year.”

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Id. ¶ 15. According to the complaint, because plaintiff was “[s]tranded far from home and left with no

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other choice, Named Plaintiff purchased two new tires from the Sears Auto Center in Portland to replace

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two of the tires purchased in April 2009. Id. ¶ 16.

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On or about January 21, 2011, Faulk went to the Sears located on Tully Road in San Jose to have

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an alignment performed. Id. ¶ 17. The FAC alleges that Sears personnel refused to perform an
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alignment unless the final tire from the April 23, 2009 sale was also replaced. Id. “Sears again refused

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to provide warranty coverage for this tire, giving the same, and sole, reason as given by the Portland

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store: Sears would not give any warranty refund and/or credit unless the owner could show that the tires

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had been rotated every 6,000 miles and aligned at least once per year.” Id. The complaint alleges that

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Faulk “has sustained damages as a direct result of Sears’ failure to honor its warranty as written, and

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its failure to specify the terms of its warranty and Road Hazard Plus coverage.” Id. ¶ 18.

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The FAC alleges claims under the Song-Beverly Consumer Warranty Act, Cal. Civ. Code § 1790

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et seq., the Magnuson-Moss Warranty Act, 15 U.S.C. § 2302, California’s Consumers Legal Remedies

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Act, Cal. Civ. Code § 1750 et seq., and California’s Unfair Competition Law, Cal. Bus. & Prof. Code

United States District Court
For the Northern District of California

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§ 17200 et seq.

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LEGAL STANDARD

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Under Federal Rule of Civil Procedure 12(b)(6), a district court must dismiss a complaint if it

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fails to state a claim upon which relief can be granted. The question presented by a motion to dismiss

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is not whether the plaintiff will prevail in the action, but whether the plaintiff is entitled to offer

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evidence in support of the claim. See Scheuer v. Rhodes, 416 U.S. 232, 236 (1974), overruled on other

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grounds by Davis v. Scherer, 468 U.S. 183 (1984).

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In answering this question, the Court must assume that the plaintiff’s allegations are true and

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must draw all reasonable inferences in the plaintiff’s favor. See Usher v. City of Los Angeles, 828 F.2d

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556, 561 (9th Cir. 1987). However, the Court is not required to accept as true “allegations that are

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merely conclusory, unwarranted deductions of fact, or unreasonable inferences.” St. Clare v. Gilead

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Scis., Inc. (In re Gilead Scis. Sec. Litig.), 536 F.3d 1049, 1055 (9th Cir. 2008). To survive a Rule

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12(b)(6) motion to dismiss, the plaintiff must allege “enough facts to state a claim to relief that is

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plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 127 S. Ct. 1955, 1974 (2007). While

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courts do not require “heightened fact pleading of specifics,” a plaintiff must provide “more than labels

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and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Id. at 1965.

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Plaintiff must allege facts sufficient to “raise a right to relief above the speculative level.” Id.

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If the Court dismisses the complaint, it must then decide whether to grant leave to amend. The
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Ninth Circuit has “repeatedly held that a district court should grant leave to amend even if no request

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to amend the pleading was made, unless it determines that the pleading could not possibly be cured by

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the allegation of other facts.” Lopez v. Smith, 203 F.3d 1122, 1130 (9th Cir. 2000) (citations and internal

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quotation marks omitted).

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DISCUSSION
I.

Standing
Defendant contends that plaintiff has not alleged facts sufficient to show that he was actually

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injured, and thus that plaintiff lacks standing. According to defendant, plaintiff must allege facts

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United States District Court
For the Northern District of California

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showing that he was entitled to coverage under the Limited Tire Warranty and Road Hazard Plus

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Agreement, and that plaintiff has failed to do so. Defendant argues that plaintiff is required to allege

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“(1) that his tires were defective, (2) that his tires were within the treadlife required under the Limited

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Warranty and Road Hazard Plus, (3) that the purported excess wear to Faulk’s tires had an identified

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cause, (4) that Faulk’s alleged tire blow-out was caused by a road hazard, (5) that Faulk complied with

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the necessary maintenance requirements listed in the Limited Warranty, Road Hazard Plus or the Tire

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Care Recommendations, and (6) that the various exclusions of the Limited Warranty and Road Hazard

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Plus were inapplicable.” Reply at 3:7-15.

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In response, plaintiff argues that defendant has improperly recast this case as a “breach of

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warranty” case, when in fact plaintiff alleges that Sears violated the law by failing to provide the

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necessary terms and conditions of both the Limited Warranty and Road Hazard Plus Agreement at the

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point of sale, and by imposing extrinsic conditions upon purchasers who make a claim thereunder.

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The Court concludes that plaintiff has alleged that he was injured as a result of defendant’s

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violation of the relevant statutes. The complaint alleges that defendant violated federal and state law

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by failing to make the terms and conditions of the Limited Tire Warranty and the Road Hazard Plus

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Agreement, including its requirements for periodic rotation and alignment of tires, available to plaintiff

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at the time of sale. The complaint further alleges that plaintiff was injured by this violation because

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Sears refused to provide service under the Limited Tire Warranty and the Road Hazard Plus Agreement

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solely on the basis that plaintiff could not demonstrate compliance with the allegedly undisclosed terms
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and conditions. See FAC ¶ 14. Thus, plaintiff has alleged that his damages were proximately caused

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by defendant’s violation of the law.
McGarvey v. Penske Automotive Group, Inc., 639 F. Supp. 2d 450 (D.N.J. 2009), cited by

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defendant, does not hold otherwise. In McGarvey, the plaintiffs alleged that they purchased products

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with limited warranties, and that the terms of the limited warranties violated the anti-tying provision of

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the Magnuson-Moss Warranty Act (“MMWA”). None of the plaintiffs had attempted to use the

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warranties at issue, and thus the complaint did not allege that any of the plaintiffs were actually injured

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by the alleged violation of the MMWA. The court dismissed the plaintiffs’ claims, holding that “a

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plaintiff ‘is required to show that he has sustained actual damage, proximately caused by the defendant’s

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United States District Court
For the Northern District of California

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failure to comply . . . with the MMWA,’ in order to state an actionable MMWA claim.” Id. at 456

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(quoting Atchole v. Silver Spring Imports, Inc., 379 F. Supp. 2d 797, 802 (D. Md. 2005) (internal

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brackets and emphasis deleted)). The McGarvey court noted that a plaintiff could allege either a

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violation of the substantive provisions of the MMWA or a breach of warranty claim under the MMWA,

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but that a plaintiff must allege actual damage to bring either type of claim. Id. at 456 & n.6. Here,

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plaintiff alleges violations of the substantive provisions of the MMWA and other statutes, and that he

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was actually damaged by those violations.1

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II.

Failure to state a claim

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A.

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Defendant contends that plaintiff has failed to state a claim under the Song-Beverly Consumer

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Warranty Act and the MMWA because Sears fully set forth the terms and conditions of the Limited Tire

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Warranty and Road Hazard Plus at the time of plaintiff’s purchase. Defendant recognizes that plaintiff

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alleges that Sears violated the law by failing to specify as terms of the Limited Tire Warranty and Road

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Hazard Plus the requirements that wheel alignment be performed annually and that tire rotation occur

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on a 6,000 mile basis. However, defendant contends that these terms were disclosed by the following:

Song-Beverly and MMWA

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Defendant also asserts that the proposed class definition is “wildly overbroad” because it
includes consumers who were not damaged. Whether a class will be certified, and whether the class
definition is overbroad, are questions to be addressed in connection with a motion for class certification.
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(1) the Limited Tire Warranty states that coverage is excluded for, inter alia, “tire damage or wear

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caused by . . . [i]mproper maintenance” or “wheel misalignment,” FAC Ex. 2; (2) the Road Hazard Plus

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excludes coverage for, inter alia, the consumer’s “failure to ensure proper mounting, balancing, inflation

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and other preventative maintenance,” Id. Ex. 3; and (3) the Road Hazard Plus expressly obligates tire

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owners to, inter alia, “ensure that your tire and wheel assemblies are in balance . . . [and] that your

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vehicle is properly aligned in accordance with the vehicle manufacturer’s specifications.” Id.

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Defendant argues that the Limited Tire Warranty and Road Hazard Plus “expressly condition coverage

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on proper maintenance by the consumer, and it is both impossible as a practical matter and unnecessary

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under Song-Beverly for Sears to provide an exhaustive catalogue as to procedures constituting proper

United States District Court
For the Northern District of California

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tire maintenance.” Motion at 19:14-18.

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Plaintiff responds that both the Song-Beverly Act and the MMWA require full and conspicuous

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disclosure of the terms of warranties and service contracts, and that Song-Beverly additionally requires

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disclosure of a buyer’s obligations to perform preventative maintenance. Plaintiff contends that he has

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stated a claim under both statutes because the complaint alleges that none of the written documents

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provided to customers specifies that the customer must rotate their tires at specific intervals, perform

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wheel alignment, or be able to prove either as a condition precedent to coverage under either the Limited

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Tire Warranty or the Road Hazard Plus. See FAC ¶¶ 12, 37, and 41.

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The Court finds that plaintiff has stated a claim under both statutes, and that the question of

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whether defendant’s disclosures were sufficiently full and conspicuous is a factual matter that cannot

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be decided at this stage of the litigation. Defendant’s reliance on Testan v. Carlsen Motor Cars, Inc.,

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2002 WL 234737 (Cal. Ct. App. 2002), is both improper under Cal. Rule of Court 8.1115 because

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Testan is an unpublished decision, and also misplaced, as Testan was decided on summary judgment.

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See id. at *6 (affirming summary judgment in favor of defendants and finding that the warranty at issue

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“is not unfair nor is it likely to deceive consumers.”).

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B.

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California’s Consumer Legal Remedies Act (“CLRA”) prohibits various “unfair methods of

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competition and unfair or deceptive acts or practices undertaken by any person in a transaction intended

CLRA

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to result or which results in the sale or lease of goods or services to any consumer . . . .” Cal. Civ. Code

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§ 1770(a). Defendant contends that plaintiff’s CLRA claim is not pled with particularity as required by

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Rule 9(b), and also that the complaint does not allege facts showing any unfair or deceptive acts by

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Sears.
The Court disagrees and finds that plaintiff has stated a claim under the CLRA. Assuming

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arguendo that Rule 9(b) applies to plaintiff’s CLRA claim,2 the complaint alleges that Sears failed to

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provide all the terms and conditions at the point of sale. The complaint alleges the date and store at

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which that plaintiff purchased the tires, as well as the dates and stores at which plaintiff requested that

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Sears honor its warranties and Sears refused coverage unless plaintiff could demonstrate compliance

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United States District Court
For the Northern District of California

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with allegedly undisclosed requirements. “These allegations are specific enough to give defendants

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notice of the particular misconduct . . . so they can defend against the charge and not just deny that they

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have done anything wrong.” Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003)

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(internal citation and quotations omitted).

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C.

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The UCL prohibits “unlawful, unfair or deceptive business practices.” Cal. Bus. & Prof. Code

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§ 17200. Defendant contends that plaintiff’s UCL claim must be dismissed because it is not pled with

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particularity. However, plaintiff’s § 17200 claim is brought under the unlawful and unfair prongs, see

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FAC ¶¶ 45-46, and thus Rule 9(b) does not apply to this claim. See Marolda v. Symantec Corp., 672

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F. Supp. 2d 992, 1004 (N.D. Cal. 2009) (The first two allegations [under the UCL] do not involve fraud,

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and need only be pleaded under the requirements of Rule 8(a).”).

UCL

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Defendant also argues that plaintiff has failed to state a claim under the UCL because

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defendant’s actions were not unlawful or unfair. Defendant’s arguments in this regard are identical to

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those advanced against plaintiff’s other claims, and for the same reasons, the Court rejects them and

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finds that plaintiff has stated a claim under the UCL.

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The Ninth Circuit has held that fraud is not an element of a CLRA claim, and that Rule 9(b)
only applies to CLRA claims that are grounded in fraud. See Kearns v. Ford Motor Co., 567 F.3d 1120,
1125 (9th Cir. 2009).
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CONCLUSION
For the foregoing reasons, the Court DENIES defendant’s motion to dismiss the first amended
complaint. Docket Nos. 20 & 23.

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IT IS SO ORDERED.

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Dated: November 14, 2011
SUSAN ILLSTON
United States District Judge

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United States District Court
For the Northern District of California

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