Monteville Sloan, Jr. v. General Motors LLC

Filing 62

ORDER by Judge Edward M. Chen Granting 47 Defendant's Motion to Dismiss. (emcsec, COURT STAFF) (Filed on 8/1/2017)

Download PDF
1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 Plaintiffs, 8 9 10 ORDER GRANTING DEFENDANT’S MOTION TO DISMISS v. Docket No. 47 GENERAL MOTORS LLC, Defendant. 12 For the Northern District of California United States District Court 11 Case No. 16-cv-07244-EMC MONTEVILLE SLOAN, et al., 13 14 15 I. INTRODUCTION Plaintiffs have filed a class action against Defendant General Motors LLC (“GM”) 16 asserting that GM‟s Generation IV Vortec 5300 Engine used in GM‟s 2010-2013 vehicles is 17 defective and that GM knew the engine was defective at the time it sold the vehicles to Plaintiffs 18 but failed to disclose the alleged defect to consumers. Based on those allegations, Plaintiffs assert 19 claims under various state consumer protection and fraud statutes, including California‟s 20 Consumer Legal Remedies Act (“CLRA”) and Unfair Competition Law (“UCL”). Having 21 considered the parties‟ briefs and accompanying submissions, as well as the oral argument of 22 counsel, the Court hereby GRANTS GM‟s motion to dismiss with leave to amend. 23 24 II. FACTUAL AND PROCEDURAL BACKGROUND As a preliminary matter, the Court provides below a chart, which lists the name of each 25 named Plaintiff, the state where Plaintiff purchased his or her car, the state of Plaintiff‟s residence, 26 the car that was purchased and the date of purchase. 27 28 1 2 3 4 5 6 7 8 9 10 12 For the Northern District of California United States District Court 11 13 14 15 16 17 18 19 20 21 22 23 24 25 26 Name Raul Siqueiros Joseph Brannan Larry Goodwin Ted Edgecomb Marc Perkins Donald Ludington Thomas Shorter Derick Bradford Gabriel Del Valle Kevin Hanneken Gail B. Lannom Bradley K. Zierke Dan Madson James Faulkner Joseph Olivier Scott Smith Ross Dahl Drew Peterson Michael Ware Steve Kitchen John Neubauer Barbara Molina Steven Ehrke Bill Mauch Thomas Gulling Ronald Jones Mike Warpinski John Graziano Monteville Sloan Joshua Byrge Rudy Sanchez Christopher Thacker Randy Clausen James Robertson Jonas Bednarek State of Purchase California Alabama Arkansas Colorado Delaware Florida Florida Georgia Idaho Illinois Indiana Iowa Kansas Kentucky Louisiana Massachusetts Minnesota Minnesota Mississippi Missouri Nebraska New Mexico North Carolina North Dakota Ohio Ohio Oklahoma Pennsylvania South Carolina Tennessee Texas Virginia Car Date of Purchase 2011 Chevrolet Silverado 2010 GMC Yukon 2011 Chevrolet Silverado 2011 Chevrolet Silverado 2011 Chevrolet Avalanche 2010 Chevrolet Tahoe 2011 Chevrolet Silverado 2010 Chevrolet Silverado 2013 Chevrolet Avalanche 2011 GMC Sierra 1500 2012 Chevrolet Tahoe 2012 Chevrolet Avalanche 2013 Chevrolet Silverado 2011 GMC Sierra 2013 GMC Sierra 2011 GMC Yukon 2010 Chevrolet Silverado 2013 Chevrolet Silverado 2013 Chevrolet Silverado 2013 Chevrolet Silverado 2011 Chevrolet Silverado 2012 Chevrolet Avalanche 2013 Chevrolet Silverado 2011 Chevrolet Silverado 2013 Chevrolet Silverado 2013 Chevrolet Silverado 2012 Chevrolet Express 2012 Chevrolet Silverado 2013 Chevrolet Silverado 2012 Chevrolet Silverado 2013 Chevrolet Silverado 2010 Chevrolet Silverado N/A 2011 2010 2011 2011 2012 N/A 2014 2/2016 2011 01/2015 2011 12/2013 2015 N/A 2012 2010 12/2012 2016 07/2013 2012 N/A 2/2016 2013 N/A N/A 2014 12/2011 08/2014 2016 07/2013 06/2014 Washington West Virginia Wisconsin 2012 Chevrolet Suburban 2010 GMC Sierra 2010 Chevrolet Suburban 2013 2010 2010 27 28 Each Plaintiff purchased one of the following vehicles, which all have a Generation IV 2 1 Vortec 5300 Engine (the “Class Vehicles”): 2010-2013 Chevrolet Avalanche; 2010-2012 2 Chevrolet Colorado; 2010-2013 Chevrolet Express 1500; 2010-2013 Chevrolet Silverado 1500; 3 2010-2013 Chevrolet Suburban; 2010-2013 Chevrolet Tahoe; 2010-2013 GMC Canyon; 2010- 4 2013 GMC Savana 1500; 2010-2013 GMC Sierra 1500; 2010-2013 GMC Yukon; and 2010-2013 5 GMC Yukon XL. 6 In their complaint, Plaintiffs allege that the Generation IV Vortec 5300 Engine consumes reasonable oil consumption. This excessive oil consumption results in low oil levels, insufficient 9 lubricity levels, and corresponding internal engine component damage.” FAC ¶ 5. The alleged 10 cause of this excessive consumption is defective low-tension oil control rings that GM installed 11 within those engines (the “Low-Tension Oil Rings”). FAC ¶ 7. The Low-Tension Oil Rings were 12 For the Northern District of California an “abnormally and improperly high quantity of oil that far exceeds industry standards for 8 United States District Court 7 originally designed to reduce friction between the oil rings and cylinder walls in order to improve 13 fuel economy, horsepower and torque. FAC ¶ 7. However, this oil ring design “improperly 14 allows engine oil to travel past the pistons and enter the engine‟s combustion chambers, where it is 15 either consumed in the combustion process, or it hardens and accumulates therein” (the “Low- 16 Tension Oil Ring Defect”). FAC ¶ 7. 17 Plaintiffs allege that the “Low-Tension Oil Ring Defect in the Class Vehicles results in 18 excessive oil consumption, leading to increased friction and, thus, engine damage. That means 19 that each Class Vehicle has suffered and will continue to suffer, internal component wear.” FAC ¶ 20 143. Potential consequences include overheating, the engine catching on fire, and the engine 21 shutting down unexpectedly. FAC ¶¶ 148-150. To prevent damage from critically low oil levels, 22 GM implemented an Oil Life Monitoring System but Plaintiffs allege the system fails to advise 23 drivers of insufficient oil levels in their vehicles. FAC ¶¶ 9, 141-142. However, none of the 24 Plaintiffs allege that their vehicles actually experienced any excessive oil consumption. Further, 25 not a single Plaintiff alleges that his or her vehicle experienced any damage due to excessive oil 26 consumption from the Low-Tension Oil Rings. 27 28 Plaintiffs also allege that GM knew about the excessive oil consumption problem caused by the Low-Tension Oil Ring Defect in the Generation IV Vortec 5300 Engines. FAC ¶ 13. First, 3 1 Plaintiffs allege GM knew of the defect because GM abandoned the Low-Tension Oil Ring design 2 in its redesign of the Generation V Vortex 5300 Engines, which began as early as May 2011. 3 FAC ¶ 152. Second, Plaintiffs allege many consumers complained about excessive oil 4 consumption, referencing 68 complaints made on carcomplaints.com and explicitly citing thirteen 5 complaints made to such online forums and the National Highway Traffic Safety Administration 6 (“NHTSA”). FAC ¶¶ 159-165. Third, Plaintiffs allege GM knew of the defect because GM 7 issued one Technical Service Bulletin (“TSB”) addressing the oil loss in vehicles with Generation 8 IV Vortec 5300 engines. The TSB stated oil loss “could be caused by two conditions: (a) oil 9 pulled through the Positive Crankcase Ventilation (PCV) system; or (b) oil spray that is crankcase.” FAC ¶ 157. GM suggested fixes for these issues but stated that if those fixes did not 12 For the Northern District of California discharged from the Advanced Fuel Management (AFM) system‟s pressure relief valve within the 11 United States District Court 10 work, “[i]t may be necessary to replace all of the piston assemblies (pistons and rings) with new 13 parts.” TSB No. 10-06-01-008G: Engine Oil Consumption on Aluminum Block/Iron Block 14 Engines with Active Fuel Management. 15 Despite this alleged knowledge, GM has never disclosed the Low-Tension Oil Ring Defect 16 to consumers and “has allowed drivers of the Class Vehicles to continue driving those vehicles, 17 despite knowing that they are consuming oil at an abnormally high rate.” FAC ¶ 13. Therefore 18 Plaintiffs seek relief from their injury, which they identify as the fact that “they paid more for their 19 Class Vehicles than they would have paid had they known about the defect that GM failed to 20 disclose, or they would not have purchased or leased their Class Vehicles at all.” FAC ¶ 14. 21 Moreover Plaintiffs allege GM “trumpeted the performance of the Generation IV Vortec 5300 22 Engines and continuously proclaimed that the class vehicles were dependable and of the highest 23 quality, concealing and omitting the low-tension oil ring defect.” FAC ¶ 166. Specifically 24 Plaintiffs allege GM advertised the performance benefits of the Class Vehicles. FAC ¶¶ 168-187. 25 GM told consumers that the class Vehicles were “dependable, long-lasting and of the highest 26 quality”, leading consumers to “believe that the Class Vehicles would be free from defects that 27 result in excessive oil loss and engine damage.” FAC ¶¶ 167. Plaintiffs seek relief under the 28 following statutes: (1) Magnuson-Moss Warranty Act; (2) 32 state consumer protection and fraud4 1 based statutes such as the California Consumer Legal Remedies Act (“CLRA”) and California 2 Unfair Competition Law (“UCL”); and (3) 32 breach of implied and express warranty state 3 statutes. Plaintiffs first filed a class action complaint for declaratory and injunctive relief on 4 5 December 19, 2016. Docket No. 2 (“Complaint”). On February 27, 2017 Plaintiffs filed a First 6 Amended Complaint. Docket No. 29 (“FAC”). On April 10, 2017, GM filed the instant motion to 7 dismiss the First Amended Complaint, arguing that Plaintiffs lack constitutional standing, have 8 failed to adequately plead consumer protection and fraud claims, breach of express and implied 9 warranty claims, and unjust enrichment, and that Plaintiffs‟ claims are barred by applicable to the Motion to Dismiss on May 25, 2017. Docket No. 57 (“Opp.”). Then, on June 15, 2017 GM 12 For the Northern District of California statutes of limitation. Docket No. 47 (“GM Motion”). In response, Plaintiffs filed an Opposition 11 United States District Court 10 filed a Reply to Plaintiff‟s Opposition. Docket No. 58 (“GM Reply”). III. 13 14 15 A. DISCUSSION Legal Standard GM moves for dismissal for lack of subject matter jurisdiction pursuant to Federal Rule of 16 Civil Procedure 12(b)(1). Standing is “a threshold matter” that is necessary to establish subject 17 matter jurisdiction. Bates v. United Parcel Serv., Inc., 511 F.3d 974, 985 (9th Cir. 2007). In order 18 to establish standing, the Plaintiffs must show (1) an injury in fact; (2) a “causal connection 19 between the injury and the conduct complained of;” and (3) redressability of the injury. See Lujan 20 v. Defenders of Wildlife, 504 U.S. 555, 560–61 (1992). “At the pleading stage, general factual 21 allegations of injury resulting from the defendant's conduct may suffice.” Id. at 561. 22 GM has also moved for dismissal pursuant to Federal Rule of Civil Procedure 12(b)(6). 23 Under Rule 12(b)(6), a party may move to dismiss based on the failure to state a claim upon which 24 relief may be granted. A motion to dismiss based on Rule 12(b)(6) challenges the legal 25 sufficiency of the claims alleged. See Parks Sch. of Bus. v. Symington, 51 F.3d 1480, 1484 (9th 26 Cir. 1995). In considering such a motion, a court must take all allegations of material fact as true 27 and construe them in the light most favorable to the nonmoving party, although “conclusory 28 allegations of law and unwarranted inferences are insufficient to avoid a Rule 12(b)(6) dismissal.” 5 1 Cousins v. Lockyer, 568 F.3d 1063, 1067 (9th Cir. 2009). While “a complaint need not contain 2 detailed factual allegations…it must plead „enough facts to state a claim to relief that is plausible 3 on its face.‟” Id. “A claim has facial plausibility when the plaintiff pleads factual content that 4 allows the court to draw the reasonable inference that the defendant is liable for the misconduct 5 alleged.” Ashcroft v. Iqbal, 556 U.S. 662 (2009); see also Bell Atl. Corp. v. Twombly, 550 U.S. at 6 556. “The plausibility standard is not akin to a „probability requirement,‟ but it asks for more than 7 sheer possibility that a defendant acted unlawfully.” Iqbal, 556 U.S. at 678. Federal Rule of Civil Procedure 9(b), which requires that a plaintiff alleging fraud “must state with 10 particularity the circumstances constituting fraud.” Fed. R. Civ. P. 9(b); see Kearns v. Ford Motor 11 Co., 567 F.3d 1120, 1124 (9th Cir. 2009). To satisfy the heightened standard under Rule 9(b), the 12 For the Northern District of California Claims sounding in fraud or mistake are subject to the heightened pleading requirements of 9 United States District Court 8 allegations must be “specific enough to give defendants notice of the particular misconduct which 13 is alleged to constitute the fraud charged so that they can defend against the charge and not just 14 deny that they have done anything wrong.” Semegen v. Weidner, 780 F.2d 727, 731 (9th Cir. 15 1985). 16 B. 17 Standing GM argues that Plaintiffs have not pleaded a concrete or certainly impending injury 18 sufficient for Article III standing. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992). In 19 contrast, Plaintiffs allege that, “each Plaintiff suffered an injury in fact when they purchased 20 vehicles containing the Low-Tension Oil Ring Defect because Plaintiffs would not have purchased 21 these vehicles, or they would have paid less, had they known of the defect.” Opp. at 5. 22 The Ninth Circuit has held that overpayment itself is “injury in fact” under Article III. In 23 Mazza v. Am. Honda Motor Co., 666 F.3d 581, 595 (9th Cir.2012), the Ninth Circuit found Article 24 III standing in a fraudulent omission case when “plaintiffs contend that class members paid more 25 for [a product] than they otherwise would have paid, or bought it when they otherwise would not 26 have done so”. The facts in Mazza are similar to those in the present case. The plaintiffs in Mazza 27 alleged that they would not have purchased Honda‟s vehicle with a faulty anti-collision braking 28 system but for Honda‟s failure to disclose that the system does not warn drivers in time and does 6 1 not work in bad weather. 666 F.3d 581, 587–88 (9th Cir. 2012). Like GM here, Honda argued 2 individuals in a class who have no “injury in fact” have no Article III standing, but the Ninth 3 Circuit held that overpayment due to Honda‟s deceptive claims constituted an “injury in fact”. Id. 4 at 595. Similarly, in this case Plaintiffs‟ claims of overpayment for a defective product due to 5 GM‟s fraudulent omissions constitute an injury in fact. GM relies on Birdsong v. Apple, Inc., 590 F.3d 955, 958 (9th Cir. 2009), where the Ninth 6 7 Circuit found that overpayment for iPods was not an injury in fact. In Birdsong, however, the 8 Ninth Circuit emphasized that the Plaintiffs were only at risk of any injury if they used the iPods 9 in an unsafe manner; the products were not inherently defective. By contrast, in this case and that they would not have paid the same amount had they known of the defect. Mazza is 12 For the Northern District of California Plaintiffs allege that all engines incorporating the Low-Tension Oil Rings are inherently defective, 11 United States District Court 10 therefore the applicable authority, and the Court concludes that Plaintiffs have sufficiently alleged 13 an “injury in fact.” The Court therefore denies GM‟s motion to dismiss for lack of subject matter 14 jurisdiction. 15 C. Consumer Protection and Fraud Claims 16 The core component of Plaintiffs‟ consumer protection and fraud claims is that GM had a 17 duty to disclose the alleged Low-Tension Oil Ring Defect and failed to do so. FAC ¶¶ 229-1765. 18 Though Plaintiffs bring claims under the consumer protection laws of 32 states, the parties focus 19 their arguments on the UCL and CLRA.1 California Plaintiff Siqueiros alleged GM violated the 20 UCL, by “knowingly selling Class Vehicles that include defective engines with Low-Tension Oil 21 Rings that cause excessive oil consumption and omitting mention of this defect to consumers.” 22 23 24 25 26 27 28 1 The UCL prohibits any “unlawful, unfair or fraudulent business act or practice.” Cal. Bus. & Prof. Code § 17200. “Practices are „unlawful‟ when they violate other laws: §17200 “borrows” violations of other laws, treating them as unlawful practices that are independently actionable under the UCL.” Swearingen v. Late July Snacks LLC, 2017 WL 1806483, at *3 (N.D. Cal. May 5, 2017) (citing Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone, Co., 20 Cal. 4th 163, 179 (1999)). “Practices are „unfair‟ when grounded in „some legislatively declared policy or proof of some actual or threatened effect on competition.‟” Id. Practices are “fraudulent” when “members of the public are likely to be deceived”. Poldolsky v. First Healthcare Corp., 50 Cal. App. 4th 632, 647-48, as modified (Nov. 5, 1996), as modified (Nov. 20, 1996). The CLRA prohibits “unfair methods of competition and unfair or deceptive acts or practices.” Cal. Civ. Code § 1770. 7 1 FAC ¶¶ 291-299. Plaintiff Siqueiros also alleged GM violated the CLRA by engaging in unfair or 2 deceptive acts when, in the course of its business, GM failed to disclose material information. 3 FAC ¶¶ 232-233. Plaintiffs from other states assert similar arguments of failure to disclose under 4 corresponding state consumer protection and fraud statutes. GM argues it did not have a duty to 5 disclose and so all Plaintiffs‟ consumer protection and fraud claims should be dismissed. 6 Under California law, a defendant has a duty to disclose in four circumstances: “(1) when 7 the defendant is in a fiduciary relationship with the plaintiff; (2) when the defendant had exclusive 8 knowledge of material facts not known to the plaintiff; (3) when the defendant actively conceals a 9 material fact from the plaintiff; and (4) when the defendant makes partial representations but also suppresses some material fact.” Falk v. Gen. Motors Corp., 496 F. Supp. 2d 1088, 1094 (N.D. 11 Cal. 2007) (quoting LiMandri v. Judkins, 52 Cal. App. 4th 326, 337 (1997)). 12 For the Northern District of California United States District Court 10 As the California test suggests, a fraudulent omission claim requires proof that a defendant 13 was aware of the defect at the time of sale to establish defendant had a duty to disclose. See 14 Wilson v. Hewlett-Packard Co., 668 F.3d 1136, 1145 (9th Cir. 2012) (finding the CLRA and UCL 15 requires plaintiffs sufficiently allege defendant was aware of defect at the time of sale). As 16 common sense would indicate, moreover, this is true not only under California law but also, as it 17 appears, under the laws of the other states in which Plaintiffs have brought claims, as well as the 18 common law of torts generally. See, e.g., In re MI Windows & Doors, Inc. Prod. Liab. Litig., 914 19 F. Supp. 2d 744, 753–54 (D.S.C. 2012) (explaining that under South Carolina law, “[a] duty to 20 disclose arises in two situations: (1) a contracting party who has superior knowledge, or 21 knowledge that is not within the reasonable reach of the other party, has a legal duty to disclose 22 information material to the bargain; and (2) parties in a fiduciary relationship must disclose 23 material information to one another”); OMI Holdings, Inc. v. Howell, 918 P.2d 1274, 1299 (Kan. 24 1996) (“A party has a duty to disclose material facts if the party knows that the other is about to 25 enter into the transaction under mistake as to such facts, and that the other, because of the 26 relationship between them . . . would reasonably expect disclosure of such facts.”); Mason v. 27 Chrysler Corp., 653 So. 2d 951, 954 (Ala. 1995); see generally Restatement (Second) of Torts § 28 551 (1977) (“One party to a business transaction is under a duty to exercise reasonable care to 8 1 disclose to the other before the transaction is consummated . . . (e) facts basic to the transaction, if 2 he knows that the other is about to enter into it under a mistake as to them, and that the other, 3 because of the relationship between them, the customs of the trade or other objective 4 circumstances, would reasonably expect a disclosure of those facts.”); Am. L. Prod. Liab. 3d § 5 25:11. Although both Plaintiffs and Defendant agree on this legal standard, they disagree about 6 whether GM had a duty to disclose. A party‟s duty to disclose arises only where the fact in question is material. Id. Plaintiffs 9 and GM disagree about the standard for determining whether a fact is material. GM argues that a 10 material fact must implicate a safety concern, in absence of an affirmative misrepresentation. GM 11 Motion at 13. On the other hand, Plaintiffs argue a material fact does not have to implicate a 12 For the Northern District of California 1. 8 United States District Court 7 safety concern, but rather is any fact that a reasonable consumer would find important at the time 13 of purchase. Opp. at 10. GM is correct. In Wilson v. Hewlett-Packard, 668 F.3d 1136, 1141-42 14 (9th Cir. 2012) the Ninth Circuit explicitly held that under California law, a “manufacturer's duty 15 to consumers is limited to its warranty obligations absent either an affirmative misrepresentation 16 or a safety issue.” Id. at 1143-1144. 17 Materiality Plaintiffs point out that the California Court of Appeals itself has very recently clarified 18 that requiring a safety concern for a fact to be material is a “misreading of California law.” Norcia 19 v. Samsung Telecomms. Am., 2015 WL 4967247 at *6 (N.D. Cal. Aug. 20, 2015) (citing Rutledge 20 v. Hewlett-Packard Co., 238 Cal. App. 4th 1164, 1174-75 (2015)). Nevertheless, the Ninth 21 Circuit has continued to follow the holding of Wilson even after Rutledge, holding that an omitted 22 fact is not material where it does not implicate a safety concern. See Williams v. Yamaha Motor 23 Co., 851 F.3d 1015, 1025 (9th Cir. 2017) (finding a duty to disclose arises only if there are safety 24 issues, absent an affirmative misrepresentation). This Court is not free to depart from the Ninth 25 Circuit‟s holdings, even in the face of contrary state authority where that state authority predates 26 the Ninth Circuit ruling. See Mohamed v. Uber Techs., Inc., 848 F.3d 1201, 1211 (9th Cir. 2016). 27 Thus, in order to establish GM‟s duty to disclose, Plaintiffs are required to show that it omitted a 28 fact that is relevant to a safety concern. However, since Wilson and Williams apply only to 9 1 California law, the Court will treat GM‟s motion to dismiss on this ground as limited to the 2 California claims. 3 Plaintiffs‟ allegations fail to state a safety concern sufficient to trigger GM‟s duty to 4 disclose. Plaintiffs argue there is a safety concern because each Class Vehicle has a Generation IV 5 Vortec 5300 Engine, which includes Low-Tension Oil Rings that cause excessive oil 6 consumption. Additionally, Plaintiffs allege GM‟s Oil Life Monitoring System fails to advise 7 drivers of insufficient oil levels in their vehicles, exacerbating the safety concern. FAC ¶¶ 141- 8 142. As a result, Plaintiffs allege that each Class Vehicle is inherently defective. FAC ¶¶ 143- 9 147. But as GM points out, not a single plaintiff alleges that his or her vehicle actually his or her vehicle experienced any damage due to excessive oil consumption from the Low- 12 For the Northern District of California experienced excessive oil consumption. GM Reply at 1. In fact, not a single plaintiff alleges that 11 United States District Court 10 Tension Oil Rings. Further, GM clarifies that the Oil Life Monitoring System does not measure 13 the levels of oil but rather the quality of oil. Instead, there is a separate oil pressure indicator that 14 warns drivers of low oil levels, a fact that both GM and CA Plaintiffs agreed to during oral 15 argument. Because drivers will thus admittedly have warning before any engine damage, there is 16 no risk of sudden or surprising failure, which might give rise to a serious safety concern.2 Thus, 17 GM argues that CA Plaintiffs have not alleged a safety concern because they “do not allege a 18 single instance of a fire breaking out, or an engine suddenly shutting down”. GM Motion at 14. Plaintiffs rely on Asghari v. Volkswagen Group of Am., Inc., 42 F. Supp. 3d 1306, 1330 19 20 (C.D. Cal. 2013), where the court found plaintiffs‟ allegation that the engine‟s excessive oil 21 consumption can cause engine failure constituted a safety concern that could have been material to 22 a reasonable consumer. There, the plaintiffs had not alleged engine failure, yet the court still 23 found the risk to be a safety concern due to consumer complaints describing specific instances of 24 engine failure due to low oil levels. Id. at 1339. But, unlike in this case, the Asghari plaintiffs 25 actually alleged excessive oil consumption. More importantly, a number of consumers had 26 2 27 28 In this sense, there is no more of a safety concern than where, e.g., a car gets less gas mileage than advertised; while the more rapid consumption of gas might lead to a driver running out of fuel on a freeway or other dangerous location, the driver has a fuel gauge to warn him or her of low fuel. 10 1 complained of sudden loss of power while driving the allegedly defective cars; no similar 2 complaints have been made with respect to the GM cars in this case; nor have Plaintiffs 3 established a risk of sudden failure. This case is thus distinguishable from Asghari.3 Because no facts in this case suggest that the risk of excess oil consumption causes a safety 4 5 risk, where Plaintiffs admit that there is a functioning oil level gauge that will give advance 6 warning of low levels, the Court concludes that Plaintiffs have failed to allege that GM omitted 7 disclosure of a material fact under California law. The Court therefore DISMISSES the 8 California claims (for lack of material fact) with leave to amend. The Court does not, at this time, 9 address the law of other states on the question of materiality since the parties have not briefed the 10 issue outside of California law. 2. 12 For the Northern District of California United States District Court 11 Knowledge Plaintiffs allege GM had knowledge of the alleged Low-Tension Oil Ring Defect at the 13 time of sale for three reasons: (1) GM abandoned the Low-Tension Rings in its redesign of the 14 next generation engine; (2) there were 81 consumer complaints to the NHTSA and 15 carcomplaints.com regarding excessive oil consumption; and (3) GM issued one Technical Service 16 Bulletin (“TSB”) discussing the problem of excessive oil consumption. FAC ¶¶ 151-158. First, Plaintiffs argue that GM had knowledge of the defect because GM abandoned its 17 18 low-tension ring experiment in its redesign of Generation V Vortex 5300 Engines, which began as 19 early as May 2011, when GM was still selling Generation IV Vortec 5300 Engines. FAC ¶ 152. 20 Plaintiffs allege GM redesigned the Generation V Vortex 5300 Engines with the intent to “remedy 21 the excessive oil consumption problem plaguing the Class Vehicles. As part of that 2014 model 22 year overhaul, GM abandoned its Low-Tension Oil Ring debacle and returned to using standard 23 tension oil rings – while, at the same time, reintroducing an oil level sensor.” FAC ¶ 11. 24 According to Plaintiffs, this demonstrates that GM knew of the alleged defect in the low-tension 25 oil rings. 26 27 28 3 Similarly, in Cholakyan v. Mercedes–Benz USA, LLC, 796 F. Supp. 2d 1220, 1238 (C.D.Cal. 2011) and In re MyFord Touch Consumer Litig., 46 F. Supp. 3d 936, 957 (N.D. Cal. 2014), the plaintiffs had actually experienced malfunctions that themselves gave rise to a serious safety risk. 11 1 In Falco v. Nissan North Am., Inc., 2013 WL 5575075 at *6 (C.D. Cal Oct. 10, 2013) the 2 court found Nissan had prior knowledge of a defect because Nissan “replaced the chain guide of 3 the timing Chain Tensioning System with a redesigned version of the part that does not suffer 4 from the defect.” However, in this case, unlike in Falco, GM redesigned the entire engine, not 5 only the allegedly defective component. The fact that GM chose not to use the low-tension oil 6 rings in the context of its redesign of the full engine is of little or no probative value as to whether 7 it knew the rings were defective; it could have chosen not use the rings for independent design or 8 engineering reasons. Thus, the mere fact that GM used different oil rings when redesigning its 9 engines does not show its prior knowledge of the defect.4 NHTSA and consumer forums about excessive oil consumption and consequential engine damage. 12 For the Northern District of California Second, Plaintiffs allege GM had knowledge due to the 81 consumer complaints to 11 United States District Court 10 FAC ¶¶ 153-154. However, Plaintiffs concede that none of the complaints explicitly states that 13 the cause of the excessive oil consumption was the Low-Tension Oil Ring Defect. FAC ¶ 164. 14 Even if the complaints notified GM about the general excessive oil consumption problems, these 15 complaints would not establish that GM knew that the Low-Tension Oil Rings caused the 16 excessive consumption. Additionally, a majority of the complaints were posted in 2014 or later, 17 “long after the marking and sale of new model year 2010 through 2013 vehicles had ended.” GM 18 Reply at 8. These complaints therefore do not establish GM‟s knowledge of the alleged oil-ring 19 defect. Furthermore, the Ninth Circuit has held that consumer complaints suffice to establish 20 21 knowledge only where there were an unusual number of complaints, such that the manufacturer 22 would be on notice of a specific problem. In Williams v. Yamaha Motor Co., 851 F.3d 1015, 1026 23 (9th Cir. 2017), the Ninth Circuit found plaintiffs adequately pleaded the defendants‟ knowledge 24 where complaints regarding the outboard motor corrosion “were so frequent that individual 25 4 26 27 28 GM makes a further argument that the Federal Rules of Evidence 407 bars evidence of a redesign to show a defect or knowledge of defect: “When measures are taken that would have made an earlier injury or harm less likely to occur, evidence of the subsequent measures is not admissible to prove…a defect in a product or its design.” Because the Court concludes that the redesign evidence is not sufficient to show knowledge, it does not reach the question whether such evidence would be admissible under Rule 407. 12 1 Customer Relations supervisors personally handled as many as 40 or 50 different consumer 2 complaints, or more, regarding the issue, which was an unusually high number of complaints for 3 Yamaha to receive regarding corrosion this soon in the life of the engines.” Id. (internal quotation 4 marks omitted). By contrast, in Wilson v. Hewlett-Packard Co., 668 F.3d 1136, 1148 (9th Cir. 5 2012), the Ninth Circuit found plaintiffs‟ 14 complaints, 12 of which were undated, did not 6 support an inference that HP was aware of the defect at the time of sale. In this case, Plaintiffs do 7 not allege that the 81 complaints posted over the course of seven years was an unusually high 8 number of complaints. Thus, the complaints do not show GM‟s knowledge of the alleged defect. 9 Finally, Plaintiffs argue that GM had knowledge of the defect because of one TSB stated oil loss could be caused by two conditions, neither of which were the Low-Tension Oil 12 For the Northern District of California addressing the oil loss in vehicles with Generation IV Vortec 5300 engines. The TSB explicitly 11 United States District Court 10 Rings. FAC ¶ 157. Plaintiffs, argue, however, that the TSB recommends replacing the piston and 13 ring assemblies, indicating that GM knew about the Low-Tension Oil Ring Defect. Docket No. 48 14 (Oxford Decl.) Ex. 19. The TSB, however, does not indicate that the piston assemblies must be 15 replaced. Rather that replacement is specified as an occasional repair if other remedies fail, and 16 even then it does not mention replacement with a different ring configuration. The TSB does not 17 suggest that GM knew that all of the engines were inherently defective; indeed, the Low-Tension 18 Oil Rings are not even mentioned. 19 Plaintiffs point to two cases in which courts held that TSBs established the manufacturer‟s 20 knowledge, but the TSBs in those cases explicitly addressed the claimed defect. See Falco v. 21 Nissan North Am., Inc., 2013 WL 5575075 at *6 (C.D. Cal Oct. 10, 2013); Mui Ho v. Toyota 22 Motor Corp., 931 F. Supp. 2d 987, 999 (N.D. Cal. 2013). By contrast, in Grodzitsky v. Am. 23 Honda Motor Co., Inc., 2013 WL 690822 at *2 (C.D. Cal. Feb. 19, 2013), the court found 24 plaintiffs had not adequately alleged knowledge because the three TSBs only discussed general 25 problems with windows and did not explicitly mention the alleged window regulator defect. As in 26 Grodzitsky, the TSB Plaintiffs here rely on addresses the general problem of excessive oil 27 consumption, and does not mention the alleged specific defect. It therefore cannot establish GM‟s 28 knowledge of the defect. 13 1 Because Plaintiffs have not adequately alleged that GM knew of the alleged Low-Tension 2 Oil Ring defect, Plaintiffs have failed to allege that GM engaged in any fraudulent omission. The 3 Court therefore grants GM‟s motion to dismiss Plaintiffs‟ consumer claims for failure to state a 4 claim under California and all other states‟ laws asserted herein. As noted above, all states have a 5 knowledge requirement. The dismissal is with leave to amend. 6 D. Pre-Suit Notice GM asserts that three Plaintiffs are barred from this suit by failure to serve pre-suit notice. 7 8 Plaintiffs Bradford, Smith and Robertson allege claims under Massachusetts, Georgia and West 9 Virginia laws, which GM argues require pre-suit notice by the individual plaintiffs. GM Reply at In fact, Massachusetts, Georgia and West Virginia consumer protection statutes that GM cites do 12 For the Northern District of California 12. However, GM does not cite to any case law or statutory language supporting this argument. 11 United States District Court 10 not appear to require pre-suit notice by individual plaintiffs. Mass. Gen. Laws Ch. 93A, § 9(3); 13 Ga. Stat. § 10-1-399(b); W. Va. Code § 46A-6-106(c). As a result, Plaintiffs Bradford, Smith, and 14 Robertson have satisfied their pre-suit notice requirements through a notice letter with a return 15 receipt dated October 28, 2016. FAC ¶¶ 527, 899, 1676. 16 E. 17 Express Warranty Plaintiffs assert claims for breach of express warranty under the federal Magnuson Moss 18 Act, as well as under various state statutes. The Magnuson Moss Act does not include any 19 substantive warranty requirements; it merely provides a federal remedy for breach of warranties 20 under state law. Thus, Magnuson Moss claims “stand or fall with [plaintiffs‟] express and implied 21 warranty claims under state law.” Clemens v. DaimlerChrysler Corp., 534 F.3d 1017, 1022 (9th 22 Cir. 2008). 23 GM argues that these claims fail for two reasons. First, as Plaintiffs allege, the GM 24 warranty covers “repairs to correct any vehicle defect . . . related to materials or workmanship 25 occurring during the warranty period.” FAC ¶ 220. But Plaintiffs allege a design defect, namely 26 that GM‟s decision to include low-tension oil rings in the Generation IV Vortec 5300 engines 27 renders them susceptible to excessive oil consumption. GM argues that this sort of design defect 28 is not covered under the plain terms of the warranty. Several courts applying California law have 14 1 reached a similar result. See, e.g., Sharma v. BMW of N. Am., LLC, No. C-13-2274 MMC, 2014 2 U.S. Dist. LEXIS 84406, at *11 (N.D. Cal. June 19, 2014) (“Under California law, a warranty that 3 provides protection against „defects in materials or workmanship‟ does not cover design 4 defects.”); Tae Hee Lee v. Toyota Motor Sales, U.S.A., Inc., 992 F. Supp. 2d 962, 978 (C.D. Cal. 5 2014) (same); Daugherty v. Am. Honda Motor Co., 144 Cal. App. 4th 824, 830 (2006) (same). Plaintiffs point to two district court decisions holding that a warranty‟s reference to 6 Trek Bicycle Corp., 1992 WL 28884, at *2 (S.D.N.Y. Feb. 11, 1992) (“[T]he warranty‟s reference 9 to „workmanship‟ could refer to bicycle designs as well as to implementation of those designs in 10 the manufacturing process.”); In re Saturn L-Series Timing Chain Prods. Liab. Litig., 2008 WL 11 4866604, at *15 (D. Neb. Nov. 7, 2008)). The Saturn case, however, considered this issue in the 12 For the Northern District of California “workmanship” could be construed to include design defects, see Opp. at 21 (citing Koulajian v. 8 United States District Court 7 context of an unjust enrichment claim, not an express warranty claim. It therefore applied 13 different legal standards than those relevant here. Koulajian was decided under Indiana law, but 14 the Eighth Circuit has since held that under Indiana law, a warranty covering defects in materials 15 and workmanship does not cover design defects. Bruce Martin Constr., Inc. v. CTB, Inc., 735 16 F.3d 750, 753-54 (8th Cir. 2013). Thus, neither of Plaintiffs‟ authorities is persuasive. GM is 17 correct, on the other hand, that the overwhelming weight of state law authority holds that design 18 defects are not covered under similar warranties.5 Plaintiffs cite no case holding any state law of 19 warranties is to the contrary. Furthermore, that view appears consistent with the ordinary meaning 20 of the term “materials and workmanship.” Plaintiffs do not allege that that there was a flaw in 21 materials or workmanship in the specific low tension oil rings in their cars, but rather that it was 22 GM‟s design decision to include such rings in all cars with the same engine that led to their injury. 23 The Court agrees that that allegations do not appear to fall within the terms of the warranty. 24 Second, even assuming the express warranty did apply, GM argues that the warranty 25 26 27 28 5 See, e.g., Coba v. Ford Motor Co., 2016 U.S. Dist. LEXIS 136283, *25- 27 (D.N.J. Sept. 20, 2016); Voelker v. Porsche Cars N. Am., Inc., 353 F.3d 516 (7th Cir. 2003); Troup v. Toyota Motor Corp., 545 Fed. Appx. 668 (9th Cir. 2013); Robinson v. Kia Motors, Am., Inc., 2015 WL 5334739, *12 (D.N.J. Sept. 11, 2015); Schechner v. Whirlpool Corp., 2017 U.S. Dist. LEXIS 20282, *18-19 (E.D. Mich. Feb. 14, 2017). 15 1 claims fail because Plaintiffs do not allege that they presented their vehicles to dealers for repair 2 during the warranty period, as required under the terms of the warranty. Plaintiffs argue that they 3 were not required to comply with this requirement because it would have been “futile” to do so. 4 Opp. at 22-24. Plaintiffs base this contention on a handful of online consumer complaints cited in 5 the FAC in which customers reported that they were told that the level of oil consumption they 6 were experiencing was normal. FAC ¶¶ 159-163. This Court rejected a similar argument in In re MyFord Touch Consumer Litig., 46 F. 7 8 Supp. 3d 936, 970–71 (N.D. Cal. 2014). While explaining that “futility may, in theory, be a basis 9 for an excuse,” the Court noted that the plaintiffs in that case “cited no cases establishing a futility same is true here. More importantly, even assuming that the futility argument was possible, the 12 For the Northern District of California exception to the presentation required by the express terms of the express warranty.” Id. The 11 United States District Court 10 Court held in that case that there were “insufficient allegations in the complaint to make futility 13 plausible.” There, the Court found that 39 consumer complaints did “not meet the requisite 14 plausibility standard of Iqbal and Twombly.” The record is even thinner here, as of the 13 15 consumer complaints Plaintiffs cite in their FAC, only three stated that the dealer had informed 16 them that the level of oil consumption was normal. In short, the fact that three individuals, out of 17 the thousands who own similar vehicles, were told that it was not necessary to repair their cars 18 cannot plausibly establish that it would have been futile for Plaintiffs to attempt to repair their cars 19 per the terms of their warranties. The court therefore GRANTS GM‟s motion to dismiss 20 Plaintiffs‟ express warranty claims with leave to amend. 21 F. Implied Warranty 22 Plaintiffs also assert claims based on GM‟s alleged breach of the implied warranty of 23 merchantability. The implied warranty of merchantability provides that “„a warranty that the 24 goods shall be merchantable is implied in a contract for their sale if the seller is a merchant with 25 respect to goods of that kind‟ and that „[g]oods to be merchantable must be at least such as ... are 26 fit for the ordinary purposes for which such goods are used.‟” UCC § 2–314. Courts have held 27 that “a breach of the implied warranty of merchantability means the product did not possess even 28 the most basic degree of fitness for ordinary use.” Mocek v. Alfa Leisure, Inc., 114 Cal. App. 4th 16 1 402, 406 (2003). Under that standard, GM argues, Plaintiffs‟ claims must fail, because the 2 ordinary purpose of a car is to provide transportation, and no Plaintiff alleges that he or she was 3 forced to stop driving his or her vehicle, or that any excessive oil consumption interfered with the 4 safe operation of the vehicles. Indeed, as noted above, none of the Plaintiffs alleges that they 5 experienced excessive oil consumption at all. Plaintiffs, on the other hand, argue that they have 6 alleged an engine defect which can lead to engine damage and safety concerns. That defect 7 therefore necessarily interferes with the ordinary operation of the car. In MyFord Touch, this Court addressed similar claims and found that dismissal under Rule 8 9 12(b)(6) was not warranted, because “it is a question of fact for the jury as to whether the provide safe, reliable transportation.” 46 F. Supp. 3d at 980. However, in MyFord Touch, this 12 For the Northern District of California problems with MFT posed enough of a safety risk that the cars at issue could not be said to 11 United States District Court 10 Court concluded that Plaintiffs had adequately alleged a safety risk for the purpose of stating a 13 claim under the UCL and CLRA. For the reasons discussed above, in this case the Court comes to 14 the opposite conclusion. Here, no Plaintiff has alleged that he experienced any engine problems, 15 or even any excessive oil consumption. Most of the complaints cited in the FAC similarly do not 16 claim any serious engine problems beyond the fact of the excessive oil consumption itself, 17 although one claimed that he experienced the engine “misfir[ing] and run[ning] rough.” FAC ¶ 18 159. Furthermore, Plaintiffs concede that all of the cars at issue have a functioning oil level gauge 19 that can provide advance warning when oil levels are low. There is thus no credible risk of sudden 20 engine failure because of the excess oil consumption. Plaintiffs‟ allegations in this case are not 21 sufficient to create a fact question for the jury whether the cars at issue “could not be said to 22 provide safe, reliable transportation.” MyFord Touch, 46 F. Supp. 3d at 980. The Court therefore 23 GRANTS GM‟s motion to dismiss Plaintiffs‟ implied warranty claims with leave to amend. 24 G. 25 Unjust Enrichment Finally, Plaintiffs assert common law claims for unjust enrichment. GM argues that these 26 claims fail for a number of reasons. First, GM makes a cursory argument that there is no 27 standalone cause of action for unjust enrichment. But GM itself appears to acknowledge that this 28 is foreclose by the Ninth Circuit‟s decision in Astiana v. Hein Celestial Grp., 783 F.3d 753, 762 17 1 (9th Cir. 2015), under which the court may construe an unjust enrichment claim as a quasi- 2 contract claim for restitutionary relief. Second, GM argues that such a claim cannot be brought 3 where there is an express contract governing the purchases at issue. But as Plaintiffs argue, under 4 FRCP 8(d), a party is permitted to assert inconsistent alternative claims for relief. Moreover, in 5 Astiana the Ninth Circuit held that “even if a cause of action [for unjust enrichment] is duplicative 6 of or superfluous to other claims, this is not grounds for dismissal. Id. Relying on that holding, 7 this Court previously denied a motion to dismiss unjust enrichment claims where the plaintiffs had 8 also pled claims based on the warranty contracts that existed between the parties. In re Safeway 9 Tuna Cases, No. 15-CV-05078-EMC, 2016 WL 3743364, at *2 (N.D. Cal. July 13, 2016). 10 However, the unjust enrichment claims all depend on the allegation that GM wrongfully obtained a benefit by concealing the low-tension oil ring defect. As explained above, the 12 For the Northern District of California United States District Court 11 allegations regarding GM‟s knowledge and concealment of the defect are not sufficient to rise to 13 the level of plausibility. The Court therefore GRANTS GM‟s motion to dismiss the unjust 14 enrichment claims. IV. 15 16 CONCLUSION For the foregoing reasons, the Court GRANTS GM‟s motion to dismiss in its entirety. 17 The Court grants Plaintiffs leave to file a Second Amended Complaint within thirty (30) days of 18 the filing of this order. 19 This order disposes of Docket No. 47. 20 21 IT IS SO ORDERED. 22 23 24 25 Dated: August 1, 2017 ______________________________________ EDWARD M. CHEN United States District Judge 26 27 28 18

Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.


Why Is My Information Online?