Ho v. Toyota Motor Sales, U.S.A., Inc.

Filing 37

Order by Hon. Samuel Conti granting in part and denying in part 27 Defendants' Motion Dismiss.(sclc2, COURT STAFF) (Filed on 3/14/2013)

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1 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE NORTHERN DISTRICT OF CALIFORNIA 8 United States District Court For the Northern District of California 9 10 11 12 MUI HO, SHELDA ANGLIN, and TED FLORY, individually, and on behalf of other members of the general public similarly situated, Plaintiffs, 13 v. 14 15 16 TOYOTA MOTOR CORPORATION and TOYOTA MOTOR SALES, U.S.A., INC., Defendants. 17 ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) Case No. 12-2672 SC ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION TO DISMISS 18 19 I. 20 INTRODUCTION Now before the Court is Defendants Toyota Motor Sales, U.S.A., 21 Inc. ("TMS") and Toyota Motor Corporation's (collectively 22 "Defendants") motion to dismiss Plaintiffs Mui Ho, Shelda Anglin, 23 and Ted Flory's ("Plaintiffs") First Amended Class Action 24 Complaint. 25 fully briefed, ECF Nos. 32 ("Opp'n"),1 34 ("Reply"), and suitable 26 1 27 28 ECF No. 27 ("MTD"); ECF No. 21 ("FAC"). The motion is The Court is concerned that Plaintiffs' excessively long footnotes are attempts to circumvent the Local Rules' page limits by pushing material that should properly be in the body of Plaintiffs' argument into the single-spaced footnote format. See, e.g., Opp'n at 10 nn.5-6.; Civ. L.R. 7-4(b). Plaintiffs are warned 1 for decision without oral argument, Civ. L.R. 7-1(b). For the 2 reasons explained below, the Court GRANTS in part and DENIES in 3 part Defendants' motion. 4 5 II. BACKGROUND 6 The named Plaintiffs are three purchasers of Defendants' Lexus 7 RX vehicles produced between the years of 2004 and 2009 (the "Class 8 Vehicles"). 9 their own behalf and that of all other purchasers or lessees of the FAC ¶ 1. They bring this putative class action on United States District Court For the Northern District of California 10 Class Vehicles. Id. ¶¶ 1, 80-89. Plaintiffs claim that the Class 11 Vehicles' headlamp assemblies are defective because they are prone 12 to condensation and moisture retention. 13 problems eventually cause the headlamps to become dangerously dim 14 or to fail completely, posing safety hazards and creating expense 15 for the Class Vehicles' owners. 16 harms based on these hazards and expenses. Id. ¶¶ 3-4. Id. ¶¶ 5-7. These Plaintiffs allege Id. ¶ 17-19. Plaintiffs claim that they had no way to discover the alleged 17 18 defects until the headlamps began to pose problems. See id. ¶¶ 48- 19 49. 20 Vehicles' headlamp problems as early as 2004, due to Defendants' 21 exclusive knowledge of and access to facts like "pre-release 22 testing data, early consumer complaints . . . , testing, and other 23 internal investigation conducted in response to those complaints." 24 Id. ¶¶ 48-49. 25 publicly disclosed any defects or issued a recall. 26 57-58. However, they claim that Defendants were aware of the Class Despite this alleged knowledge, Defendants never Id. ¶¶ 11-19, According to Plaintiffs, Defendants chose instead to 27 28 that use of these tactics in future filings could result in noncompliant portions of their papers being stricken. 2 consumers until the problem inevitably manifested again after the 3 Class Vehicles' express warranty periods. 4 further proof of Defendants' knowledge of the alleged defect and 5 failure to disclose it, Plaintiffs point to Defendants' issuance of 6 two technical service informational bulletins ("TSIB(s)") to their 7 dealers in 2007 and 2010. 8 headlamp defect. 9 provide new headlamps to replace the old ones, and the 2010 TSIB 10 United States District Court provide haphazard "temporary fixes" that provided stopgap relief to 2 For the Northern District of California 1 informed dealers that "improved headlamp housings" were available 11 to replace the old headlamps. 12 all of these repair parts were defective too. 13 Id. Id. Id. ¶¶ 11-19. As Both TSIBs addressed the alleged The 2007 TSIB stated that dealers could Id. ¶¶ 8-12. Plaintiffs allege that Id. Plaintiffs Ho and Flory bought used Class Vehicles in 2007 and 14 2011, respectively. Id. ¶¶ 20, 30. 15 Class Vehicle from an authorized dealer in 2006. 16 Plaintiff Ho complained about her passenger side headlamp's 17 moisture problems three times, in January 2008, January 2010, and 18 January 2012. 19 of Defendants' dealerships. 20 her warranty, but Plaintiff Ho paid $1,000 and $155.88, 21 respectively, for the latter two repairs. 22 Plaintiff Anglin complained about a similar problem in March 2008 23 and again in either December 2008 or January 2009. 24 On her first visit, Defendants' dealer verified her complaint but 25 refused to repair it, contending that such moisture issues were 26 normal and not repairable. 27 dealer again verified her problems and refused repair, stating that 28 water intrusion and oxidation were not covered under her warranty. Id. ¶¶ 20-28. Plaintiff Anglin bought a new Id. ¶ 35. Each time she had it replaced at one Id. Her 2008 repair was covered under Id. ¶ 32. 3 Id. ¶¶ 24, 28. Id. ¶¶ 32-33. On the second visit, the 1 Id. ¶ 33. Plaintiff Flory first complained about his headlamp in 2 January 2012, bringing it to a dealer per Defendants' instructions 3 in February 2012. 4 would repair the headlamp for $185. 5 the charges, choosing instead to attempt to remedy his headlamp's 6 moisture problems on his own. Id. ¶¶ 37-38. There he was told that Toyota Id. He refused the repair and Id. ¶ 38. asserted six causes of action against Defendants: (1) violation of 9 California's Consumer Legal Remedies Act ("CLRA"), Cal. Civ. Code 10 United States District Court Based on the facts described above, Plaintiffs initially 8 For the Northern District of California 7 §§ 1750 et seq.; (2) violation of California's Unfair Competition 11 Law ("UCL"), Cal. Bus & Prof. Code §§ 17200 et seq., pursuant to 12 California's Secret Warranty Law, Cal. Civ. Code §§ 1795.90 et 13 seq.; (3) violation of the UCL on grounds other than violation of 14 California's Secret Warranty Law; (4) fraud by omission; (5) breach 15 of implied warranty pursuant to the Song-Beverly Consumer Warranty 16 Act, Cal. Civ. Code §§ 1792 and 1791.1 et seq.; and (6) breach of 17 express warranty under California Commercial Code section 2313, 18 exclusively asserted against Defendant TMS. 19 brief, Plaintiffs withdrew their UCL claim based on the California 20 Secret Warranty Law. 21 dismiss asserts that Plaintiffs fail to state claims under any of 22 the remaining five causes of action. Opp'n at 24 n.23. In their opposition Defendants' motion to See MTD at 1-2. 23 24 III. LEGAL STANDARD 25 A. 26 Motions to Dismiss A motion to dismiss under Federal Rule of Civil Procedure 27 12(b)(6) "tests the legal sufficiency of a claim." 28 Block, 250 F.3d 729, 732 (9th Cir. 2001). 4 Navarro v. "Dismissal can be based 1 on the lack of a cognizable legal theory or the absence of 2 sufficient facts alleged under a cognizable legal theory." 3 Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 4 1988). 5 should assume their veracity and then determine whether they 6 plausibly give rise to an entitlement to relief." 7 Iqbal, 556 U.S. 662, 679 (2009). 8 must accept as true all of the allegations contained in a complaint 9 is inapplicable to legal conclusions. "When there are well-pleaded factual allegations, a court Ashcroft v. However, "the tenet that a court Threadbare recitals of the United States District Court For the Northern District of California 10 elements of a cause of action, supported by mere conclusory 11 statements, do not suffice." 12 Twombly, 550 U.S. 544, 555 (2007)). 13 generally "limited to the complaint, materials incorporated into 14 the complaint by reference, and matters of which the court may take 15 judicial notice." 16 540 F.3d 1049, 1061 (9th Cir. 2008) (citing Tellabs, Inc. v. Makor 17 Issues & Rights, Ltd., 551 U.S. 308, 322 (2007)). 18 19 B. Id. (citing Bell Atl. Corp. v. The court's review is Metzler Inv. GMBH v. Corinthian Colls., Inc., Rule 9(b) Claims sounding in fraud are subject to the heightened 20 pleading requirements of Federal Rule of Civil Procedure 9(b), 21 which requires that a plaintiff alleging fraud "must state with 22 particularity the circumstances constituting fraud." See Kearns v. 23 Ford Motor Co., 567 F. 3d 1120, 1124 (9th Cir. 2009). "To satisfy 24 Rule 9(b), a pleading must identify the who, what, when, where, and 25 how of the misconduct charged, as well as what is false or 26 misleading about [the purportedly fraudulent] statement, and why it 27 is false." 28 Inc., 637 F.3d 1047, 1055 (9th Cir. 2011) (internal quotation marks United States ex rel Cafasso v. Gen. Dynamics C4 Sys., 5 1 and citations omitted). 2 3 IV. DISCUSSION 4 A. Warranty Claims i. 5 Breach of Implied Warranty The Song–Beverly Consumer Warranty Act, Cal. Civ. Code § 6 7 1792 ("Song-Beverly"), provides that "every sale of consumer goods 8 that are sold at retail in [California] shall be accompanied by the 9 manufacturer's and the retail seller's implied warranty that the United States District Court For the Northern District of California 10 goods are merchantable." 11 or part thereof that is used, bought, or leased for use primarily 12 for personal, family, or household purposes, except for clothing 13 and consumables." 14 "Consumer goods" means "any new product Id. § 1791(a). Defendants argue that Plaintiffs' claims under Song-Beverly 15 fail as to Plaintiffs Ho and Flory, because they purchased used 16 Class Vehicles. 17 Plaintiff Anglin has a valid claim under this cause of action, 18 since they do not argue otherwise. 19 Plaintiffs respond as to Plaintiff Ho that Song-Beverly applies to 20 used goods notwithstanding section 1791 if an express warranty was 21 given during the used goods' sale. 22 an implied warranty claim under Song-Beverly, because there is no 23 dispute that she was given an express warranty when she bought her 24 used Class Vehicle, and because a defendant can be held to have 25 breached an implied warranty by selling a product with a latent 26 defect. 27 Rinker Boat Co., 174 Cal. App. 4th 1297, 1304-05 (Cal. Ct. App. 28 2009)). MTD at 5. Defendants apparently concede that See id.; Opp'n at 23 n.20. They claim that she may plead Opp'n at 23 (citing Cal. Civ. Code § 1795.5(c); Mexia v. Plaintiffs concede that they have no claim as to Plaintiff 6 1 Flory under Song-Beverly, because his express warranty had expired 2 by the time he purchased his Class Vehicle. 3 Id. at 24. The Court finds that Plaintiffs have not pled a breach of the duration of the implied warranty for used goods extends only up 6 to three months after purchase from a distributor or retail seller. 7 Plaintiffs did not plead exactly when or from whom Plaintiff Ho 8 purchased her Class Vehicle in 2007, and the Court cannot assume, 9 without facts, that Plaintiff Ho's purchase of her Class Vehicle 10 United States District Court implied warranty as to Plaintiff Ho. 5 For the Northern District of California 4 fell within Song-Beverly's time limits, or that she purchased her 11 Class Vehicle from a "distributor or retail seller" per Song- 12 Beverly. 13 Song-Beverly provides that As to Plaintiff Ho, Plaintiffs' claim for breach of implied 14 warranty is DISMISSED. 15 if they can plead that Plaintiff Ho purchased her Class Vehicle 16 from a dealer or retailer seller within the implied warranty period 17 provided by Song-Beverly. 18 Plaintiff Anglin. 19 20 ii. Plaintiffs have leave to amend this claim This claim is undisturbed as to Breach of Express Warranty Plaintiffs' claim for breach of express warranty is based on 21 California Commercial Code section 2313. 22 of express warranty claim, the plaintiff must prove: (1) the 23 seller's statements constitute an affirmation of fact or promise or 24 a description of the goods; (2) the statement was part of the basis 25 of the bargain; and (3) the warranty was breached." 26 Dentsply Int'l, Inc., 180 Cal. App. 4th 1213, 1227 (Cal. Ct. App. 27 2010) (internal quotation marks and citation omitted). 28 " To prevail on a breach Weinstat v. The Class Vehicles come equipped with a four-year, 50,000-mile 7 1 New Vehicle Limited Warranty ("NVLW"), which covers "repairs and 2 adjustments needed to correct defects in materials or workmanship 3 of any part supplied by [Defendants] . . . ." 4 Plaintiffs assert against Defendant TMS alone that, in responding 5 to the Class Vehicles' headlamp problems with temporary fixes and 6 defective parts, and in Plaintiff Anglin's case refusing to honor 7 the NVLW, TMS breached an express warranty. 8 FAC ¶¶ 96, 141-42). 9 standing to bring a claim under this cause of action, thereby FAC ¶ 142. Opp'n at 20-21 (citing Plaintiffs concede that Plaintiff Flory has no United States District Court For the Northern District of California 10 limiting their claim to Plaintiffs Ho and Anglin. 11 n.19. 12 affirmation of fact or a promise, or that it was part of the basis 13 of the bargain. 14 Plaintiffs have standing to bring claims for breach of express 15 warranty. The parties do not appear to contest that the NVLW is an They contest whether it was breached and whether See MTD at 5-10; Reply at 13-14. a. 16 See Opp'n at 23 Plaintiff Ho As to Plaintiff Ho, Plaintiffs claim that "[b]y replacing a 17 18 defective part with another defective part in [Plaintiff Ho's] 19 vehicle in January 2008 . . . [TMS] breached its NVLW because it 20 failed to 'correct [the] defect' under its warranty." 21 In so clarifying their allegations from the FAC, Plaintiffs 22 apparently concede that Plaintiff Ho's 2010 and 2012 repairs fall 23 outside the express warranty, since they do not dispute Defendants' 24 arguments that Plaintiff Ho's Class Vehicle had exceeded the NVLW's 25 mileage limitations by those points. 26 10. 27 28 Opp'n at 21. See Opp'n at 21-22; MTD at 8- The Court finds that Plaintiffs fail to plead a breach of express warranty as to Plaintiff Ho. 8 The NVLW covers "repairs and 1 adjustments needed to correct defects in materials or workmanship 2 of any part supplied by [Defendants]," and regardless of any 3 alleged defects in replacement parts, that is what Defendants 4 provided to Plaintiff Ho. 5 acting in conformance with it during Plaintiff Ho's 2008 repair. 6 Moreover, the fact that the problem arose again after the warranty 7 period, in 2010 and 2012, cannot be the basis of a breach of 8 express warranty claim. 9 Daugherty v. American Honda Motor Company Inc., 144 Cal. App. 4th United States District Court The California Court of Appeals in 15 824 (Cal. Ct. App. 2006), made that point of law very clear: Opening the door to [a theory of liability based on a product's failure outside the warranty period] would change the landscape of warranty and product liability law in California. Failure of a product to last forever would become a 'defect,' a manufacturer would no longer be able to issue limited warranties, and product defect litigation would become as widespread as manufacturing itself. 16 Id. at 829; see also Anunziato v. eMachines, Inc., 402 F. Supp. 2d 17 1133, 1135-36 (C.D. Cal. 2005) (applying that principle), Brothers 18 v. Hewlett-Packard Co., No. C 06-2254 RMW, 2006 U.S. Dist. LEXIS 19 82027 at *25 (N.D. Cal. Oct. 31, 2006) (same). 10 For the Northern District of California Defendant TMS did not breach the NVLW by 11 12 13 14 20 21 22 23 Accordingly, Plaintiffs' claim for breach of express warranty is therefore DISMISSED WITH PREJUDICE as to Plaintiff Ho. b. Plaintiff Anglin As to Plaintiff Anglin, Plaintiffs assert that Defendants 24 breached the NVLW when they refused to repair Plaintiff Anglin's 25 headlamps during the warranty period. 26 argue that Plaintiffs do not plead a claim as to Plaintiff Anglin 27 because she did not contact Toyota directly to seek assistance with 28 her warranty claim, as the NVLW directs. 9 FAC ¶¶ 32-33. MTD at 10. Defendants Rather, 1 Plaintiff Anglin only contacted a Toyota-licensed servicing dealer. 2 Id. 3 warranty as to Plaintiff Anglin, Plaintiffs must have first 4 notified Defendants of the problem. 5 Defendants claim that to bring a proper breach of express Id. In response, Plaintiffs rely primarily on two cases, Keegan v. 6 American Honda Motor Co., Inc., 838 F. Supp. 2d 929, 950-51 (C.D. 7 Cal. 2012), and In re Toyota Motor Corp. Unintended Acceleration 8 Marketing, Sales Practices, and Products Liab. Litig., 754 F. Supp. 9 2d 1145, 1173 (C.D. Cal. 2010). These cases in turn rely chiefly United States District Court For the Northern District of California 10 on Justice Traynor's opinion in Greenman v. Yuba Power Prods, Inc., 11 59 Cal. 2d 57 (Cal. 1963), which held that timely notice of a 12 breach of an express warranty is not required if the action is 13 against a manufacturer and is brought "by injured consumers against 14 manufacturers with whom they have not dealt." 15 rationale for that holding was that "[b]etween the immediate 16 parties to the sale [the notice requirement] is a sound commercial 17 rule, designed to protect the seller against unduly delayed claims 18 for damages. 19 remote seller, it becomes a booby-trap for the unwary." 20 Defendants respond that Greenman and its progeny do not apply in a 21 commercial setting, since the plaintiff in Greenman was physically 22 injured. 23 elaboration, that Keegan and Toyota stretched Greenman's holding 24 "to an illogical extreme." 25 Id. at 61. The As applied to personal injuries, and notice to a Reply at 14. Id. Defendants also argue, without any Id. In Keegan, the plaintiff bought a car from a dealership and 26 then sued the manufacturer instead of the dealership for breach of 27 express warranty, alleging that the car's tires prematurely wore 28 down and posed a safety risk. 838 F. Supp. 2d at 949-51. 10 The 1 defendants in Keegan argued that the plaintiff should have given 2 notice to the dealership first, thereby giving them an opportunity 3 to cure the defect, rather than suing the manufacturer immediately. 4 Id. at 950-51. 5 Greenman, holding that "under California law, a consumer need not 6 provide notice to a manufacturer before filing suit against them." 7 Id. Rejecting this argument, the Keegan court followed (citing Greenman, 59 Cal. 2d at 61). 8 In Toyota, the plaintiff bought a car from a dealership and 9 sued the manufacturer for breach of express warranty because the United States District Court For the Northern District of California 10 car would accelerate unexpectedly and uncontrollably. 11 2d at 1171-72, 1180. 12 The court held that the plaintiffs who bought their cars directly 13 from the manufacturer were subject to the notice requirement, but 14 that as to the plaintiffs who bought their cars from dealerships, 15 the notice requirement was "excused as to a manufacturer with which 16 the purchaser did not deal." 17 754 F. Supp. This posed an obvious safety hazard. Id. Id. at 1180. The Court sees no reason to conclude, as Defendants urge, that 18 the Keegan or Toyota courts stretched Greenman to an illogical 19 extreme. 20 law, that where a customer pleads injuries arising from a product 21 purchased from a dealer, the notice requirement as to the 22 manufacturer is waived. 23 The Court finds that Plaintiffs did not need to provide Defendants 24 with notice of Plaintiff Anglin's claims before bringing a breach 25 of express notice claim as to her. 26 this district and elsewhere, the Court finds that Greenman imposes 27 no physical injury requirement on plaintiffs who bring a breach of 28 express warranty claim against a manufacturer for a defective Rather, those courts held, consistent with California See, e.g., Greenman, 59 Cal. 2d at 61. 11 Further, like other courts in 1 product purchased from a dealer. 2 2d at 951; Toyota, 754 F. Supp. 2d at 1171-72; Greenman, 59 Cal. 2d 3 at 61. 4 See, e.g., Keegan, 838 F. Supp. The Court finds that Plaintiffs sufficiently pled a breach of 5 express warranty claim as to Plaintiff Anglin. 6 Defendants' motion is DENIED as to this claim. Plaintiffs' claims under the CLRA and UCL, like their fraud by 9 omission claim, sound in fraud because plaintiffs allege "a unified 10 United States District Court B. 8 For the Northern District of California 7 course of fraudulent conduct and rely entirely on that conduct" in 11 bringing these claims. 12 are therefore subject to the heightened pleading requirement of 13 Federal Rule of Civil Procedure 9(b). 14 specifically ruled that Rule 9(b)'s heightened pleading standards 15 apply to claims for violations of the CLRA and UCL."). i. 16 17 Fraud Claims Kearns, 567 F. 3d at 1124. These claims See id. ("[W]e have CLRA The CLRA prohibits "unfair methods of competition and unfair 18 or deceptive acts or practices." 19 Plaintiffs rely on sections 1770(a)(5) and 1770(a)(7) of the CLRA, 20 which respectively prohibit "[r]epresenting that goods or services 21 have sponsorship, approval, characteristics, ingredients, uses, 22 benefits, or quantities which they do not have" and "[r]epresenting 23 that goods or services are of a particular standard, quality, or 24 grade, or that goods are of a particular style or model, if they 25 are of another." 26 Cal. Civ. Code § 1770. These sections of the CLRA are held to encompass both 27 representations, per the explicit text of the statute, as well as 28 omissions. Daugherty, 144 Cal. App. 4th at 835. 12 To be actionable, the defendant, or an omission of a fact the defendant was obliged 3 to disclose." 4 potentially obligated to disclose it, if a "reasonable consumer 5 would deem it important in determining how to act in the 6 transaction at issue." 7 plaintiff's claim is predicated on a manufacturer's failure to 8 inform its customers of a product's likelihood of failing outside 9 the warranty period, the risk posed by such asserted defects cannot 10 United States District Court an omission must be "contrary to a representation actually made by 2 For the Northern District of California 1 be 'merely' the cost of the product's repair . . . rather, for the 11 omission to be material, the failure must pose 'safety concerns.'" 12 Smith v. Ford Motor Co., 749 F. Supp. 2d 980, 987 (N.D. Cal. 2010) 13 (citing Daugherty, 144 Cal. App. 4th at 835-38). 14 California law . . . [a] manufacturer's duty to consumers is 15 limited to its warranty obligations absent either an affirmative 16 misrepresentation or a safety issue." 17 v. Hewlett–Packard Co., 668 F.3d 1136, 1141 (9th Cir. 2012). Id. A fact is material, rendering a defendant Collins, 202 Cal. App. 4th at 255. When "a Therefore, "under Id. at 988; see also Wilson 18 Nondisclosure or concealment of a material fact that a 19 defendant was obliged to disclose can be actionable in four 20 situations: (1) when the defendant is in a fiduciary relationship 21 with the plaintiff; (2) when the defendant had exclusive knowledge 22 of material facts not known to the plaintiff; (3) when the 23 defendant actively conceals a material fact from the plaintiff; or 24 (4) when the defendant makes partial representations but also 25 suppresses some material fact. 26 4th 326, 336-37 (Cal. Ct. App. 1997). 27 recently cautioned, in the context of product defect claims, 28 "California courts have generally rejected a broad obligation to LiMandri v. Judkins, 52 Cal. App. 13 As the Ninth Circuit has 1 disclose." Wilson, 668 F.3d at 1142. Plaintiffs' CLRA claims are based on their allegations that 2 3 Defendants had a duty to disclose the alleged defect's safety and 4 cost ramifications but fraudulently refused to do so.2 5 94-104, Opp'n at 7-8.3 6 to disclose these facts is actionable because (1) Defendants had 7 exclusive knowledge of the material fact that the headlamps were 8 defective, or, alternatively, (2) Defendants actively concealed 9 that material fact. United States District Court For the Northern District of California 10 See FAC ¶¶ Plaintiffs allege that Defendants' failure See Opp'n at 15-16. Both theories require the existence of a material fact. a. 11 The Class Vehicles' Headlamp Problem Was Material 12 Plaintiffs allege that the Class Vehicles' headlamp problems 13 14 were inherently unsafe because the headlamps could shut off 15 randomly, posing a safety hazard when driving at night or in unsafe 16 conditions.4 17 purchased the Class Vehicles had they known of the headlamps' 18 2 19 20 21 22 Plaintiffs further allege that they would not have Plaintiffs argue in a footnote that Defendants waived their right to respond to Plaintiffs' arguments about safety by not anticipating Plaintiffs' reliance on such arguments and rebutting them in its MTD. See Opp'n at 9 n.3. This argument fails. Defendants raised the issue, however briefly, and cannot realistically be expected to predict and rebut every argument Plaintiffs might make in their opposition brief. 3 23 In clarifying this theory in their opposition brief, Plaintiffs apparently abandon the FAC's allegations that Defendants made explicit representations under the CLRA. See FAC ¶ 94. 24 4 25 26 27 28 Plaintiffs also argue for a separate duty to disclose the headlamp defect within the warranty period, based on material nonsafety reasons, but these arguments are not supported by the law, and the Court need not address them since it finds a duty to disclose for safety reasons. See Ford Motor, 749 F. Supp. 2d at 987 (stating that for an omission to be material, the failure to disclose must pose safety concerns) (citing Daugherty, 144 Cal. App. 4th at 835-38). 14 1 issues. FAC ¶ 17. Defendants argue that Daugherty and an earlier 2 case, Bardin v. DaimlerChrysler Corp., 136 Cal. App. 4th 1255, 3 1261-62 (Cal. Ct. App. 2006), require a plaintiff to have actually 4 been injured before an omission as to an alleged safety defect can 5 be held material and actionable. 6 Defendants are wrong. See Reply at 5-8. Daugherty stated, as Defendants quote, 7 that a duty to disclose may arise if a plaintiff alleges "physical 8 injury or . . . safety concerns posed by the defect." 9 144 Cal. App. 4th at 836 (emphasis added) (citing Bardin, 136 Cal. Daugherty, United States District Court For the Northern District of California 10 App. 4th at 1261-62). 11 Falk v. General Motors Corp., 496 F. Supp. 2d 1088 (N.D. Cal. 12 2007), which Defendants also cite, held that a fact can give rise 13 to a duty to disclose and an actionable omission if it implicates 14 safety concerns that a reasonable consumer would find material. 15 Falk, 496 F. Supp. 2d at 1096-97; Daugherty, 144 Cal. App. 4th at 16 836. 17 Defendants' concerns, Reply at 8, this uncontroversial holding does 18 not render the word "safety" in a plaintiff's pleadings a talisman 19 that forces a duty to disclose -- plaintiffs must still plead facts 20 showing a material safety defect. 21 product's failure to last forever is an actionable defect, since 22 such a failure is obviously distinct from a product's safety risks. 23 See id. 24 subsequent cases are unavailing. 25 Daugherty and cases following it, including This is a basic rule of California law. Contrary to Nor does it mean that a Defendants' attempts to restate the rule of Daugherty and Defendants also cite the appellate decision from Smith v. 26 Ford Motor Company, 462 Fed. App'x 660, 663 (9th Cir. 2011), aff'g 27 749 F. Supp. 2d 980 (N.D. Cal. 2010), to support their contention 28 that Plaintiffs' alleged "safety risk" was "inherently speculative 15 1 or implausible" and therefore cannot be the basis for a duty to 2 disclose. 3 court's finding that the plaintiffs did not plead a safety defect 4 because they did not adequately show how problems with a car's 5 ignition lock (i.e., a driver's inability to start or shut off the 6 car's engine) posed an unreasonable safety hazard. 7 In Ford Motor, the Ninth Circuit affirmed the district Id. In the instant matter, the Court finds that Plaintiffs 8 successfully showed that the alleged defect posed a genuine safety 9 risk because a headlamp flickering or going out at night or in United States District Court For the Northern District of California 10 inclement weather could put the car's driver in danger. 11 reasonable consumer would consider this risk material because of 12 the inherent risks of physical injury in the event of a headlamp- 13 related accident, or the costs associated with continually 14 repairing problematic headlamps. 15 sections of the California Vehicular Code requiring working 16 headlamps for safety purposes, providing further support for their 17 claim that defective or inoperative headlamps pose a public safety 18 hazard. 19 respond that the possibility of headlamp failure after years of use 20 is not actually an "unreasonable safety risk," and that the 21 accumulation of water in the Class Vehicles' headlamps is "readily 22 observable," Reply at 9, but these disputes raise questions of fact 23 that are inappropriate for a Rule 12(b)(6) motion to dismiss. 24 25 26 A Moreover, Plaintiffs point to See FAC ¶¶ 51 (citing Cal. Veh. Code § 24400). Defendants The Court finds that Plaintiffs have adequately alleged that Defendants had a duty to disclose the headlamp problems. b. Exclusive Knowledge of a Material Fact 27 An actionable omission can arise "when the defendant had 28 exclusive knowledge of material facts not known to the plaintiff." 16 1 Judkins, 52 Cal. App. 4th at 337. 2 adequately alleged that the Class Vehicles' headlamp problem is 3 material. 4 Defendants had a duty to disclose facts about the headlamp defect 5 because they had exclusive knowledge of those facts. 6 To support this allegation, Plaintiffs claim that Defendants had 7 non-public, internal data about the Class Vehicles' headlamp 8 problems, including "pre-release testing data, early consumer 9 complaints about the defect to Defendants' dealers who are their Section IV.B.i.a, supra. As discussed above, Plaintiffs Plaintiffs allege that Opp'n at 15. United States District Court For the Northern District of California 10 agents for vehicle repairs, dealership repair orders, testing 11 conducted in response to those complaints, and other internal 12 sources." 13 Id. Defendants claim that Plaintiffs' pleadings are conclusory and 14 that Plaintiffs merely parroted boilerplate allegations similar to 15 those in other class actions. 16 compelling responses. 17 conclusory facts to support their claim. 18 litigation, Plaintiffs have provided the Court with sufficient 19 detail to make a determination about Defendants' knowledge relative 20 to that of its customers. 21 See Reply at 10-11. These are not Plaintiffs sufficiently alleged enough nonAt this stage of The Court finds that Plaintiffs' allegations support their 22 claims that Defendants had exclusive knowledge of the headlamp 23 issue such that a failure to disclose it would be actionable. 24 25 c. Active Concealment of Material Facts "[W]hen the defendant actively conceals a material fact from 26 the plaintiff," a failure to disclose that fact can be actionable. 27 Judkins, 52 Cal. App. 4th at 337. 28 concealment, a plaintiff must plead the following five elements: 17 To state a claim for active 1 7 (1) the defendant must have concealed or suppressed a material fact, (2) the defendant must have been under a duty to disclose the fact to the plaintiff, (3) the defendant must have intentionally concealed or suppressed the fact with the intent to defraud the plaintiff, (4) the plaintiff must have been unaware of the fact and would not have acted as he did if he had known of the concealed or suppressed fact, and (5) as a result of the concealment or suppression of the fact, the plaintiff must have sustained damage. 8 Lovejoy v. AT&T Corp., 119 Cal. App. 4th 151, 157 (Cal. Ct. App. 9 2004). 2 3 4 5 6 These are essentially the same elements of a fraud by United States District Court For the Northern District of California 10 omission claim. 11 Pac. Bank., 207 Cal. App. 4th 859, 863 (Cal. Ct. App. 2012) 12 (providing fraud by omission elements). 13 Compare id. with SCC Acquisitions, Inc. v. Cent. Plaintiffs adequately pled that the Class Vehicles' headlamp 14 problem was material and that Defendants had a duty to disclose it. 15 See Section IV.B.i.a supra. 16 knowledge and intent to conceal by citing to multiple other 17 consumers' similar complaints, as well as Defendants' decisions to 18 repair Class Vehicles' headlamps only temporarily, or to replace 19 them with other defective parts. 20 17 (knowledge of the defect), 7, 17, 56, 58 (intent to conceal it). 21 Further, as to reliance, Plaintiffs allege that they would not have 22 purchased the Class Vehicles had they known of the headlamp issue. 23 See id. ¶¶ 17, 18, 61, 99, 116, 127. 24 facts showing adequate grounds for damages based on costs of repair 25 and being exposed to the risk of automobile accidents and moving 26 violations. 27 These facts support Plaintiffs' allegation that Defendants actively 28 concealed the truth of the Class Vehicles' headlamp problem from Plaintiffs allege the elements of See, e.g., id. ¶¶ 2, 7, 14, 16, Finally, Plaintiffs pled See, e.g., id. ¶¶ 6, 13, 17-19, 24, 26, 28, 38, 50. 18 1 2 the public. The Court finds that Plaintiffs allege sufficient facts to 3 support a claim under the CLRA. 4 Plaintiffs' CLRA claims is therefore DENIED. ii. 5 6 Defendants' motion to dismiss Fraud by Omission To plead fraud by omission under California law, a plaintiff 7 must show (1) the concealment or suppression of material fact, (2) 8 a duty to disclose the fact to the plaintiff, (3) intentional 9 concealment with intent to defraud, (4) justifiable reliance, and United States District Court For the Northern District of California 10 (5) resulting damages. SCC Acquisitions, 207 Cal. App. 4th at 863. 11 Claims for fraud must be pled at a heightened standard of 12 specificity per Federal Rule of Civil Procedure 9(b). 13 because a plaintiff bringing fraud by omission claims "will not be 14 able to specify the time, place, and specific content of an 15 omission as precisely as would a plaintiff in a false 16 representation claim," plaintiffs may plead fraud by omission by 17 alternative means. However, Falk, 496 F. Supp. 2d at 1098-99. 18 The elements for fraud by omission were addressed in a 19 different context above, in which the Court found that Plaintiffs 20 stated a claim for Defendants' active concealment of a material 21 safety defect. 22 same here, and the Court need not restate them. 23 that Plaintiffs have adequately pled a fraud by omission claim. 24 Defendants' motion to dismiss this claim is DENIED. 25 26 See supra Section IV.B.i.c. iii. The elements are the The Court finds Violations of the UCL California Business & Professions Code § 17200 prohibits acts 27 of "unfair competition," including any "unlawful, unfair or 28 fraudulent business act or practice." 19 "Because [section 17200] is 1 written in the disjunctive, it establishes three varieties of 2 unfair competition -- acts or practices which are unlawful, or 3 unfair, or fraudulent." 4 Cal. App. 4th 1544, 1554 (Cal. Ct. App. 2007). Berryman v. Merit Prop. Mgmt., Inc., 152 Plaintiffs allege that Defendants' knowledge and concealment 5 and unlawful, unfair, and fraudulent business practices" under the 8 UCL. 9 that they plead violations of each prong. 10 United States District Court of the Class Vehicles' headlamps' problems were "unfair competition 7 For the Northern District of California 6 a. 11 FAC ¶¶ 113-121. Plaintiffs clarify in their opposition brief Opp'n at 17-18. Unlawful Practices Plaintiffs can plead a UCL violation under the "unlawfulness" 12 prong by pleading that a business practice violated a predicate 13 federal, state, or local law. 14 Angeles Cellular Tel. Co., 20 Cal. 4th 163, 180 (Cal. 1999) (citing 15 State Farm Fire & Cas. Co. v. Superior Court, 45 Cal. App. 4th 16 1093, 1103 (Cal. Ct. App. 1996)). 17 claims are predicated on Defendants' alleged violations of the CLRA 18 and California's express and implied warranty statutes. 19 at 18. 20 Defendants' concealment violates the CLRA and California's express 21 warranty statute is sufficient to support Plaintiffs' claims under 22 the unlawful prong of the UCL. 23 24 See Cel–Tech Commc'ns, Inc. v. Los Plaintiffs state that their See Opp'n The Court finds that Plaintiffs' allegations showing that b. Unfair Business Practices To support their unfairness claim, Plaintiffs cite McKell v. 25 Washington Mutual, Inc., 142 Cal. App. 4th 1457, 1473 (Cal. Ct. 26 App. 2006), which held that "[a] business practice is unfair within 27 the meaning of the UCL if it violates established public policy or 28 if it is immoral, unethical, oppressive or unscrupulous and causes 20 approach, California courts balance the "impact of [the business 3 practice] on its alleged victim" against "the reasons, 4 justifications, and motives of the alleged wrongdoer." 5 Specifically regarding safety issues, this Court has stated that 6 "[f]ailing to provide safety information is a practice that 7 violates public policy." 8 C 08-04929 WHA, 2009 WL 733873, at *4 (N.D. Cal. Mar. 17, 2009). 9 Plaintiffs' opposition brief clarifies that "Defendants violated 10 United States District Court injury to consumers which outweighs its benefits."5 2 For the Northern District of California 1 the unfair prong by, among other things, actively concealing the 11 headlight defect and associated costs." Under this Id. Mourning v. SmithKline Beecham Corp., No. Opp'n at 18. As stated above, Plaintiffs allege sufficient facts to state a 12 13 CLRA claim premised on Defendants' failure to disclose a material 14 safety problem. 15 this failure to disclose violates public policy as well as the 16 CLRA. 17 adequately plead a violation of the unfairness prong of the UCL. See Section IV.B.i, supra. See Mourning, 2009 WL 733873, at *4. c. 18 The Court finds that Therefore Plaintiffs Fraudulent Business Practices 19 To state a claim under the UCL's "fraudulent" prong, 20 plaintiffs must plead that a defendant's allegedly fraudulent 21 business practice is one "in which members of the public are likely 22 5 23 24 25 26 27 28 California courts and the legislature have not specified which of several possible "unfairness" standards is the proper one. This Court recently found that the California Supreme Court would likely adopt the approach to unfairness provided in Camacho v. Automobile Club of Southern California, 142 Cal. App. 4th 1394, 1402 (Cal. Ct. App. 2006), which incorporated the three factors constituting unfairness under the Federal Trade Commission Act. Lyons v. Bank of America, N.A., No. 11–01232 CW, 2011 WL 3607608, at *10 (N.D. Cal. Aug. 15, 2011) (citing Camacho, 12 Cal. App. 4th at 1402). However, without guidance from a controlling source, the Court cannot say that Plaintiffs' legal grounds for this claim are improper, and Defendants have not argued that they are. 21 1 to be deceived." 2 Servs., Inc., 177 Cal. App. 4th 1235, 1254 (Cal. Ct. App. 2009)). 3 The Court finds that because Plaintiffs have sufficiently stated a 4 claim for fraud by omission and have pled a violation of the CLRA 5 based on a duty to disclose, Plaintiffs sufficiently plead a 6 violation of the UCL under the fraudulent prong. Plaintiffs have adequately pled violations of each prong of 7 8 Id. at *11 (citing Morgan v. AT&T Wireless the UCL. Defendants' motion to dismiss this claim is DENIED. 9 United States District Court For the Northern District of California 10 V. CONCLUSION 11 For the reasons explained above, Defendants Toyota Motor 12 Corporation and Toyota Motor Sales U.S.A., Inc.'s motion to dismiss 13 Plaintiffs Mui Ho, Shelda Anglin, and Ted Flory's First Amended 14 Class Action Complaint is GRANTED in part and DENIED in part. 15 Court orders as follows: The 16 Plaintiffs' claim for breach of implied warranty under the 17 Song-Beverly Act is DISMISSED with leave to amend as to 18 Plaintiff Ho. 19 Anglin. 20 Plaintiffs' claim for breach of express warranty as to 21 Plaintiff Ho is DISMISSED WITH PREJUDICE. 22 undisturbed as to Plaintiff Anglin. 23 Plaintiffs' fraud by omission claim is undisturbed. 24 Plaintiffs' CLRA claim is undisturbed. 25 Plaintiffs' UCL claim is undisturbed. This claim is undisturbed as to Plaintiff This claim is 26 Plaintiffs have leave to amend their claim for breach of implied 27 warranty under the Song–Beverly Consumer Warranty Act only if they 28 are able to plead that Plaintiff Ho purchased her Class Vehicle 22 1 from a dealer or retailer seller within the implied warranty period 2 provided by that statute. 3 this Order's signature date to file an amended complaint. 4 filings are subject to Rule 11, and since Plaintiffs have amended 5 their complaint once, they may not re-plead any additional facts or 6 causes of action without requesting leave from the Court. 7 Plaintiffs do not file an amended complaint, the deficient claim 8 may be dismissed with prejudice. Plaintiffs have thirty (30) days from All If 9 United States District Court For the Northern District of California 10 IT IS SO ORDERED. 11 12 14 Dated: March ___, 2013 13 UNITED STATES DISTRICT JUDGE 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 23

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