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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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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MUI HO, SHELDA ANGLIN, and TED
FLORY, individually, and on
behalf of other members of the
general public similarly
situated,
Plaintiffs,
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v.
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TOYOTA MOTOR CORPORATION and
TOYOTA MOTOR SALES, U.S.A.,
INC.,
Defendants.
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Case No. 12-2672 SC
ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS'
MOTION TO DISMISS
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I.
20
INTRODUCTION
Now before the Court is Defendants Toyota Motor Sales, U.S.A.,
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Inc. ("TMS") and Toyota Motor Corporation's (collectively
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"Defendants") motion to dismiss Plaintiffs Mui Ho, Shelda Anglin,
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and Ted Flory's ("Plaintiffs") First Amended Class Action
24
Complaint.
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fully briefed, ECF Nos. 32 ("Opp'n"),1 34 ("Reply"), and suitable
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1
27
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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
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18
defects until the headlamps began to pose problems.
See id. ¶¶ 48-
19
49.
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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.
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Plaintiff Ho complained about her passenger side headlamp's
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moisture problems three times, in January 2008, January 2010, and
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January 2012.
19
of Defendants' dealerships.
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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
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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.
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would repair the headlamp for $185.
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the charges, choosing instead to attempt to remedy his headlamp's
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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
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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
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§§ 1750 et seq.; (2) violation of California's Unfair Competition
11
Law ("UCL"), Cal. Bus & Prof. Code §§ 17200 et seq., pursuant to
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California's Secret Warranty Law, Cal. Civ. Code §§ 1795.90 et
13
seq.; (3) violation of the UCL on grounds other than violation of
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California's Secret Warranty Law; (4) fraud by omission; (5) breach
15
of implied warranty pursuant to the Song-Beverly Consumer Warranty
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Act, Cal. Civ. Code §§ 1792 and 1791.1 et seq.; and (6) breach of
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express warranty under California Commercial Code section 2313,
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exclusively asserted against Defendant TMS.
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brief, Plaintiffs withdrew their UCL claim based on the California
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Secret Warranty Law.
21
dismiss asserts that Plaintiffs fail to state claims under any of
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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
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A.
Warranty Claims
i.
5
Breach of Implied Warranty
The Song–Beverly Consumer Warranty Act, Cal. Civ. Code §
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1792 ("Song-Beverly"), provides that "every sale of consumer goods
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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
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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
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and consumables."
14
"Consumer goods" means "any new product
Id. § 1791(a).
Defendants argue that Plaintiffs' claims under Song-Beverly
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fail as to Plaintiffs Ho and Flory, because they purchased used
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Class Vehicles.
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Plaintiff Anglin has a valid claim under this cause of action,
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since they do not argue otherwise.
19
Plaintiffs respond as to Plaintiff Ho that Song-Beverly applies to
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used goods notwithstanding section 1791 if an express warranty was
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given during the used goods' sale.
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an implied warranty claim under Song-Beverly, because there is no
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dispute that she was given an express warranty when she bought her
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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
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fell within Song-Beverly's time limits, or that she purchased her
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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
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warranty is DISMISSED.
15
if they can plead that Plaintiff Ho purchased her Class Vehicle
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from a dealer or retailer seller within the implied warranty period
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provided by Song-Beverly.
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Plaintiff Anglin.
19
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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
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California Commercial Code section 2313.
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of express warranty claim, the plaintiff must prove: (1) the
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seller's statements constitute an affirmation of fact or promise or
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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
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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.
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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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