Becerra et al v. General Motors LLC et al

Filing 41

ORDER: The Motion to Dismiss the Amended Complaint filed by Defendant (Dkt # 27 ) is granted in part and denied in part. Signed by Judge William Q. Hayes on 3/10/2017. (mdc)

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1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 ARMANDO J. BECERRA, et al, CASE NO. 15cv2365-WQH-JMA 11 ORDER 13 Plaintiffs, v. GENERAL MOTORS LLC AND DOES 1 through 100, 14 Defendant. 12 15 HAYES, Judge: 16 The matter before the Court is the Motion to Dismiss the Amended Complaint 17 filed by Defendant General Motors LLC (“Defendant”). (ECF No. 27). 18 I. Introduction 19 This case was initiated on October 19, 2015 when Plaintiffs Armando J. Becerra 20 and Guillermo Ruelas, on behalf of themselves and those similarly situated, filed a 21 Complaint. (ECF No. 1). On January 25, 2016, Defendant filed a motion to dismiss. 22 (ECF No. 15). On February 11, 2016 (ECF No. 17), and April 15, 2016 (ECF No. 22), 23 the Court issued orders granting Plaintiffs two extensions to file an amended complaint. 24 On April 29, 2016, Plaintiffs Armando J. Becerra, Guillermo Ruelas, Robert Stewart, 25 and Steve Wilson, on behalf of themselves and those similarly situated (“Plaintiffs”) 26 filed the Amended Complaint. (ECF No. 23). On May 9, 2016, the Court issued an 27 order denying Defendant’s motion to dismiss (ECF No. 15) as moot. (ECF No. 24). 28 On July 28, 2016, Defendant filed the Motion to Dismiss the Amended -1- 15cv2365-WQH-JMA 1 Complaint. (ECF No. 27). On August 8, 2016 (ECF No. 29) and October 26, 2016 2 (ECF No. 33), the Court issued orders granting Plaintiffs two extensions to file a 3 response to the Motion to Dismiss the Amended Complaint. On November 2, 2016, 4 Plaintiffs filed a response. (ECF No. 34). On December 15, 2016, the Court granted 5 Defendant an extension to file a reply. (ECF No. 36). On December 30, 2016, 6 Defendant filed a reply (ECF No. 37) and a Request for Judicial Notice (ECF No. 38). 7 II. Allegations of the Amended Complaint (ECF No. 23) 8 Plaintiffs allege that Defendant manufactured trucks that “were sold with 9 inadequate headlights which do not illuminate the road well enough for safe night 10 driving” and that “give[] drivers much less time to identify and react to other cars, 11 pedestrians, or obstacles.” (ECF No. 23 at ¶ 1). Plaintiffs allege that Defendant “has 12 long known about the problem but has not notified consumers.” Id. at ¶ 4. Plaintiffs 13 allege that the vehicles at issue are “2014-2015 model year GMC Sierra Vehicles that 14 were factory installed with a single filament bulb headlight system, including 15 2014-2015 model year GMC Sierra 1500, 2015 model year GMC Sierra 2500HD, and 16 2015 model year GMC Sierra 3500HD.” Id. at ¶ 18. The Amended Complaint lists six 17 individual Plaintiffs: Armando J. Becerra, who allegedly purchased his vehicle on or 18 about August 14, 2013 in Escondido, California; Guillermo Ruelas, who allegedly 19 purchased his vehicle in August 2013 in Bakersfield, California; Robert Stewart, who 20 allegedly purchased his vehicle in Silsbee, Texas in May 2013; and Steve Wilson, who 21 allegedly purchased his vehicle in Center, Texas in February 2014. Id. at ¶¶ 9-12. 22 Plaintiffs allege that “the headlights are inadequate for safe night driving” Id. at 23 ¶¶ 19-31. Plaintiffs allege that even when a driver switches to high beam headlights, 24 “the lights still fail to adequately and safely illuminate the road. At 60 mph, a driver 25 has 250 feet of visibility, or less than three seconds to react and come to a stop. 26 However, over 300 feet is typically needed to bring a vehicle to a stop from 60 miles 27 an hour, if reaction time is included.” Id. at ¶ 31. 28 Plaintiffs allege that “[t]he lack of effectiveness of the headlights is due to -2- 15cv2365-WQH-JMA 1 changes [Defendant] made in the bulbs, assembly, and operation of the headlights.” Id. 2 at ¶ 32. “In earlier models, [Defendant] used a reflector-style headlight with two 3 independent headlight systems, one for high beams and one for low beams, each with 4 its own bulb, a lens, a reflector, housing and a voltage source. For the vehicles at issue 5 in this case, GM changed to a projector-style headlight with a single bulb, a smaller 6 reflector, two lenses, a shutter to switch between high and low beams and a single 7 voltage source.” Id. at ¶¶ 33-34. Plaintiffs allege that Defendant’s “new configuration 8 is much less effective because the shutter causes dark bands in the low beam 9 configuration[.]” Id. at ¶ 35. 10 Plaintiffs allege that Defendant “has admitted in its Technical Service Bulletins 11 [that] the voltage is insufficient.” Id. Plaintiffs allege that as of March 7, 2016, the 12 database of the National Highway Traffic Safety Administration (“NHTSA”) contains 13 121 “detailed consumer complaints about the inadequate headlights of the Vehicles.” 14 Id. at ¶ 38. Plaintiffs allege the consumer complaints “detail the headlight performance 15 problems and difficulties concerning night time visibility when driving the Vehicles” 16 and “illustrate [Defendant’s] recalcitrance and refusal to acknowledge and correct these 17 issues even when directly confronted and in the face of numerous complaints.” Id. at 18 ¶ 74. Plaintiffs allege that Defendant “has redesigned [its] headlights to a different 19 system for the 2016 model year trucks[,]” and “[i]t appears that there are currently zero 20 NHTSA complaints concerning the 2016 GMC Sierras.” Id. at ¶ 41. 21 Plaintiffs allege that in March and June 2015, Defendant issued Technical Service 22 Bulletins to its dealerships stating that “Some customers may comment of poor 23 headlight performance when driving in very dark rural areas. While the headlights meet 24 all Federal Motor Vehicle Safety Standard requirements . . . customers may request 25 better headlight performance for these very dark rural areas.” Id. at ¶¶ 42-43. Plaintiffs 26 allege that according to one of the Bulletins, Defendant “increased the voltage by .4 27 Volts in the new bulbs, but that customers have not found the increase to provide 28 adequate illumination” and “Plaintiffs who have had the voltage upgrade still -3- 15cv2365-WQH-JMA 1 experience substandard illumination.” Id. at ¶¶ 48-49. Plaintiffs allege that 2 “[Defendant] and its dealerships were fully aware of the inadequacy of the headlights.” 3 Id. at ¶ 51. Plaintiffs allege that Defendant violated the Transportation Recall 4 Enhancement, Accountability, and Documentation (“TREAD”) Act and the relevant 5 Federal Safety Standard set by NHTSA. Id. at ¶¶ 52-57. 6 Plaintiffs “bring this action as a class action pursuant to Federal Rule of Civil 7 Procedure 23(a) and 23(b) on behalf of themselves and all others similarly situated as 8 members of the proposed class, defined as: All current or former purchasers and lessees 9 of one or more of the Vehicles who purchased or leased their Vehicles in the United 10 States (other than for purposes of resale or distribution).” Id. at ¶ 75. 11 Plaintiffs bring the following causes of action: (1) violations of the 12 Magnuson-Moss Warranty Act, 15 U.S.C. § 2301, et seq.; (2) violations of the 13 Consumers Legal Remedies Act Cal. Civ. Code § 1750, et seq. (“CLRA”); (3) violation 14 of Cal. Bus. & Prof. Code § 17200, et seq., Unfair Competition Law (“UCL”); (4) 15 breach of Song-Beverly Warranty Act (Express Warranty); (5) breach of Song-Beverly 16 Warranty Act (Implied Warranty); (6) Breach of Implied Warranty of Merchantability, 17 Tex. Bus. & Com. Code Ann. § 2.314; (7) Violation of Texas Deceptive Trade Practices 18 Act (“DTPA”), Tex. Bus. & Com. Code § 17.50; (8) “Unfair and Deceptive Acts and 19 Practices Under The Various State Laws In Which Class Members Reside[;]” (9) 20 Fraudulent Concealment; and (10) Unjust Enrichment. 21 Plaintiffs seek class certification and an order enjoining Defendant from 22 continuing the unfair business practices alleged in the Amended Complaint. Plaintiffs 23 seek an order from the Court requiring Defendant to institute a recall or otherwise repair 24 the vehicles at issue. Plaintiffs seek actual damages and an award of attorneys’ fees and 25 costs. 26 III. Motion to Dismiss 27 A. Request for Judicial Notice (ECF No. 38) 28 “As a general rule, a district court may not consider any material beyond the -4- 15cv2365-WQH-JMA 1 pleadings in ruling on a Rule 12(b)(6) motion.” Lee v. City of Los Angeles, 250 F.3d 2 668, 688 (9th Cir. 2001) (citation omitted). There are “two exceptions to the 3 requirement that consideration of extrinsic evidence converts a 12(b)(6) motion to a 4 summary judgment motion.” Id. First, Federal Rule of Evidence 201 provides that 5 “[t]he court may judicially notice a fact that is not subject to reasonable dispute because 6 it is generally known within the trial court’s territorial jurisdiction; or can be accurately 7 and readily determined from sources whose accuracy cannot reasonably be questioned.” 8 Fed. R. Evid. 201(b). Second, under the doctrine of incorporation by reference, courts 9 may “take into account documents whose contents are alleged in a complaint and whose 10 authenticity no party questions, but which are not physically attached to the [plaintiff’s] 11 pleading.” Knievel v. ESPN, 393 F.3d 1068, 1076 (9th Cir. 2005) (citation and 12 quotation marks omitted). 13 Plaintiffs request that the Court take judicial notice of a 2007 National Highway 14 Traffic Safety Administration Report to Congress, and a 2008 National Highway Traffic 15 Safety Administration Research Findings Report. (ECF No. 38). The Court grants 16 Defendant’s Request for Judicial Notice (ECF No. 38), and the Court takes judicial 17 notice of these documents – which are not subject to reasonable dispute over their 18 authenticity. See Fed. R. Evid. 201(b); Lee, 250 F.3d at 690; Knievel, 393 F.3d at 1076. 19 B. Standard of Review 20 Federal Rule of Civil Procedure 12(b)(6) provides for dismissal for “failure to 21 state a claim upon which relief can be granted[.]” Fed. R. Civ. P. 12(b)(6). Federal 22 Rule of Civil Procedure 8(a)(2) provides that “[a] pleading that states a claim for relief 23 must contain . . . a short and plain statement of the claim showing that the pleader is 24 entitled to relief[.]” Fed. R. Civ. P. 8(a)(2). “A district court’s dismissal for failure to 25 state a claim under Federal Rule of Civil Procedure 12(b)(6) is proper if there is a ‘lack 26 of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable 27 legal theory.’” Conservation Force v. Salazar, 646 F.3d 1240, 1242 (9th Cir. 2011) 28 (quoting Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir.1988)). -5- 15cv2365-WQH-JMA 1 “[A] plaintiff’s obligation to provide the ‘grounds’ of his ‘entitle[ment] to relief’ 2 requires more than labels and conclusions, and a formulaic recitation of a cause of 3 action’s elements will not do.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 4 (2007). “To survive a motion to dismiss, a complaint must contain sufficient factual 5 matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” 6 Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). “A 7 claim has facial plausibility when the plaintiff pleads factual content that allows the 8 court to draw the reasonable inference that the defendant is liable for the misconduct 9 alleged.” Id. (citation omitted). “[T]he tenet that a court must accept as true all of the 10 allegations contained in a complaint is inapplicable to legal conclusions.” Id. “When 11 there are well-pleaded factual allegations, a court should assume their veracity and then 12 determine whether they plausibly give rise to an entitlement to relief.” Id. at 679. “In 13 sum, for a complaint to survive a motion to dismiss, the non-conclusory ‘factual 14 content,’ and reasonable inferences from that content, must be plausibly suggestive of 15 a claim entitling the plaintiff to relief.” Moss v. U.S. Secret Service, 572 F.3d 962, 969 16 (9th Cir. 2009). 17 Additionally, claims sounding in fraud must comply with the heightened pleading 18 requirements of Federal Rule of Civil Procedure 9(b), which requires that “[i]n alleging 19 fraud or mistake, a party must state with particularity the circumstances constituting 20 fraud or mistake.” Fed. R. Civ. P. 9(b). “To comply with Rule 9(b), allegations of 21 fraud must be specific enough to give defendants notice of the particular misconduct 22 which is alleged to constitute the fraud charged so that they can defend against the 23 charge and not just deny that they have done anything wrong.” Bly-Magee v. 24 California, 236 F.3d 1014, 1019 (9th Cir. 2001) (citation omitted). Rule 9(b) “requires 25 more specificity including an account of the time, place, and specific content of the 26 false representations as well as the identities of the parties to the misrepresentations.” 27 Swartz v. KPMG LLP, 476 F.3d 756, 764 (9th Cir. 2007) (citation omitted). 28 C. Analysis -6- 15cv2365-WQH-JMA 1 2 1. Legally Cognizable Injury Defendant contends this action should be dismissed because Plaintiffs have not 3 alleged any injury or damages that would entitle them to relief. Defendant contends 4 that each of Plaintiffs’ claims require a showing of a cognizable injury. Defendant 5 contends that Plaintiffs fail to allege that the “headlights malfunction, fail to operate as 6 designed, or violate any applicable legal standard.” (ECF No. 27-1 at 16). Defendant 7 contends that a product defect claim requires a showing of an actual product 8 malfunction, or a manifested defect in the product. Defendant contends that Plaintiffs’ 9 “vague and general assertions of damages” are insufficient to state a claim for any of 10 their causes of action. Id. at 18. Defendant contends that Plaintiffs’ allegations 11 concerning risk of future harm prevent a finding that Plaintiffs have suffered a legally 12 cognizable injury. 13 Plaintiffs contend that they have suffered damages in the form of economic harm 14 and loss of usefulness of the vehicles, and exposure to an increased risk of automobile 15 accidents. Plaintiffs contend that the headlights are defective because they are too dim 16 for safe driving, and the alleged “defect manifests every time the headlights are turned 17 on.” (ECF No. 34 at 14). 18 Plaintiffs cannot maintain their causes of actions without alleging a legally 19 cognizable injury.1 The Court of Appeals has rejected a finding of cognizable injury 20 when “[t]he risk of injury the plaintiffs allege is not concrete and particularized as to 21 themselves.” Birdsong v. Apple, Inc., 590 F.3d 955, 960 (9th Cir. 2009). In Birdsong, 22 1 See 15 U.S.C. § 2310(d)(1) (Magnuson-Moss Warranty Act requires “a 23 consumer who is damaged by the failure of a supplier, warrantor, or service contractor to comply with any obligation under this chapter”); Cal. Civ. Code § 1780 (CLRA 24 requires showing of “any damage”); Cal. Bus. & Prof. Code § 17204 (UCL claim requires a showing of “injury in fact”); In re Hydrocycut Marketing and Sales Practices 25 Litig., No. 09MD2087–BTM (AJB), 2010 WL 2839480, at *2 (S.D. Cal. July 20, 2010) (Moskowitz, J.) (claim for express warranty requires that “the breach caused injury to 26 the plaintiff”); Isip v. Mercedes-Benz USA, LLC, 65 Cal. Rptr.3d 695, 698 (Cal. Ct. App. 2007) (damages required for a breach of the implied warranty of merchantability); 27 Tex. Bus. & Com. § 17.50(a) (DTPA requires showing of “economic damages or damages for mental anguish”); Davis v. HSBC Bank Nevada, N.A., 691 F.3d 1152, 1163 28 (9th Cir. 2012) (“a claim for fraudulent concealment requires that . . . the plaintiff must have sustained damage”) (citation omitted). -7- 15cv2365-WQH-JMA 1 the plaintiffs failed to plead a cognizable injury when they claimed they would suffer 2 hearing loss from using an iPod music player. Id. The Court of Appeals found that 3 “[a]t most, the plaintiffs plead a potential risk of hearing loss not to themselves, but to 4 other unidentified iPod users who might choose to use their iPods in an unsafe manner” 5 by raising the volume to a hazardous level. Id. In this case, Plaintiffs allege that when 6 they operate the vehicles, Plaintiffs have no choice but to utilize the allegedly dim 7 headlights; for example, Plaintiffs allege that “the lights still fail to adequately and 8 safely illuminate the road” even if a driver switches from low beams to high beams. 9 (ECF No. 23 at ¶ 31). 10 Defendant relies on Birdsong to contend that as a matter of law, a product defect 11 cause of action cannot be satisfied without a showing of a “actual product malfunction 12 or manifested defect.” (ECF No. 27-1 at 16) (citing Birdsong, 590 F.3d at 961). In 13 Birdsong, the Court of Appeals found that any injury to the plaintiffs was merely 14 “hypothetical” because the iPod devices “have the ‘capability’ of producing unsafe 15 levels of sound and that consumers ‘may’ listen to their iPods at unsafe levels combined 16 with an ‘ability’ to listen for long periods of time.” 590 F.3d at 961. In this case, 17 Plaintiffs allege that the vehicles provide unsafe lighting conditions whenever they are 18 engaged in a dark area. (ECF No. 23 at ¶ 1). While Plaintiffs “may” choose to use their 19 headlights at any time, the threat of injury in this case is not hypothetical because 20 California state law requires Plaintiffs to use headlights while driving in the dark. 21 Birdsong, 590 F.3d at 961; see Cal. Veh. Code § 24400(b) (“A motor vehicle . . . shall 22 be operated during darkness . . . with at least two lighted headlamps”). 23 Further, Plaintiffs have pled facts sufficient to support an inference that they did 24 not receive the benefit of their bargain with Defendant. See Tae Hee Lee v. Toyota 25 Motor Sales, U.S.A., Inc., 992 F. Supp.2d 962, 972 (C.D. Cal. 2014) (“There can be no 26 serious dispute that a purchaser of a product who receives the benefit of his bargain has 27 not suffered . . . injury-in-fact traceable to the defendant’s conduct.”). When Plaintiffs 28 sought to purchase a vehicle, “[s]afe and functional headlights were material” to that -8- 15cv2365-WQH-JMA 1 decision. (ECF No. 23 at ¶ 17). Plaintiffs allege that the brightness of the headlights 2 have “lead[] to difficulty spotting any pedestrians, animals, signage, and road shoulder 3 lines.” Id. at ¶ 20. Plaintiffs allege that after several individual Plaintiffs experienced 4 driving in the evening with the headlights, these drivers purchased new bulbs and 5 sought to trade in their vehicles. Id. at ¶¶ 9-11. Plaintiffs also allege that the headlights 6 remained too dim even after switching to high beam headlights; this factual allegation 7 further supports Plaintiffs’ injury claim. (ECF No. 23 at ¶ 31). See Tae Hee Lee, 992 8 F. Supp.2d at 972 (declining to find injury because despite alleged defect, car brakes 9 would still “automatically slow the vehicle in the event of an unavoidable collision”). 10 Plaintiffs have pled facts sufficient to support an inference that they suffered a 11 legally cognizable injury in being prevented from properly observing signage and 12 pedestrians while driving the vehicles in dark or rural areas. See Tae Hee Lee, 992 F. 13 Supp.2d at 972 (finding the plaintiffs failed to allege economic injury “because they 14 have not had any negative experience with” allegedly defective anti-lock brakes, and 15 the brakes worked properly “in the event of an unavoidable collision”); In re Toyota 16 Motor Corp. Hybrid Brake Mktg., 915 F. Supp.2d 1151, 1159 (C.D. Cal. 2013) (finding 17 the plaintiff’s “benefit-of-the-bargain argument” failed because the plaintiff “had no 18 problem with the braking performance of his vehicle” and drove “without incident.”). 19 The Court concludes that Plaintiffs have alleged facts sufficient to support the 20 conclusion that they suffered a legally cognizable injury. 21 2. Fraud 22 Defendant contends that Plaintiffs’ fraud-based claims must be dismissed because 23 Plaintiffs have failed to satisfy the heightened pleading standard of Federal Rule of 24 Civil Procedure 9(b). Defendant contends that Plaintiffs do not allege facts 25 demonstrating that Defendant “concealed anything, whether intentionally or not.” (ECF 26 No. 27-1 at 21). Defendant contends that it could not have hidden a defect because 27 “headlamp brightness is something that is readily observable to potential customers 28 before they make their purchase, particularly customers who might view headlamp -9- 15cv2365-WQH-JMA 1 brightness as material to their buying decision.” (ECF No. 37 at 11). 2 Plaintiffs contend that Defendant had exclusive knowledge of the defect because 3 exclusivity can be established if a party “had ‘superior’ knowledge of the defect.” (ECF 4 No. 34 at 21) (citation omitted). Plaintiffs contend that they “may not have noticed any 5 problems with the headlights until they attempted to drive in the dark.” Id. Plaintiffs 6 contend that Defendant concealed the defect because it was aware of the defect and took 7 “ineffective measures” to address it. Id. at 22. 8 Federal Rule of Civil Procedure 9(b) states that “[i]n alleging fraud or mistake, 9 a party must state with particularity the circumstances constituting fraud or mistake.” 10 Fed. R. Civ. P. 9(b). “It is established law, in this circuit and elsewhere, that Rule 11 9(b)’s particularity requirement applies to state-law causes of action.” Vess v. Ciba12 Geigy Corp. USA, 317 F.3d 1097, 1103 (9th Cir. 2003). “Averments of fraud must be 13 accompanied by ‘the who, what, when, where, and how’ of the misconduct charged.” 14 Tomek v. Apple Inc., 636 Fed. Appx. 712, 713 (9th Cir. 2016) (quoting Vess, 317 F.3d 15 at 1106). 16 Plaintiffs’ claims under the CLRA, UCL, and DTPA, in addition to their 17 fraudulent misrepresentation claims, sound in fraud because Plaintiffs have alleged “a 18 unified course of fraudulent conduct and rely entirely on that course of conduct” in 19 bringing each of these claims. Kearns v. Ford Motor Co., 567 F.3d 1120, 1125 (9th 20 Cir. 2009); see also Vess, 317 F.3d at 1103-04 (finding that when a plaintiff “allege[s] 21 a unified course of fraudulent conduct and rel[ies] entirely on that course of conduct as 22 the basis of a claim . . . the claim is said to . . . ‘sound in fraud,’ and the pleading of that 23 claim as a whole must satisfy the particularity requirement of Rule 9(b).”). “A 24 fraud-based omission claim under the UCL and CLRA ‘must be contrary to a 25 representation actually made by the defendant, or an omission of fact the defendant was 26 obliged to disclose.’” Huntzinger v. Aqua Lung America, Inc., Case No. 15cv1146 27 WQH (KSC), 2015 WL 8664284, at *8 (S.D. Cal. Dec. 10, 2015) (Hayes, J.) (quoting 28 In re Sony Gaming Networks, 996 F. Supp.2d 942, 991 (S.D. Cal. 2014) (Battaglia, J.)). - 10 - 15cv2365-WQH-JMA 1 “A duty to disclose may arise: (1) when the defendant is in a fiduciary relationship with 2 the plaintiff; (2) when the defendant had exclusive knowledge of material facts not 3 known to the plaintiff; (3) when the defendant actively conceals a material fact from the 4 plaintiff; or (4) when the defendant makes partial representations but also suppresses 5 some material fact.” In re Sony Gaming Networks, 996 F. Supp.2d at 991. 6 “[I]n a case where fraud is not an essential element of a claim, only allegations 7 . . . of fraudulent conduct must satisfy the heightened pleading requirements of Rule 8 9(b).” Vess, 317 F.3d at 1105. “While fraud is not a necessary element of a claim 9 under the CLRA and UCL, a plaintiff may nonetheless allege that the defendant 10 engaged in fraudulent conduct” and “[i]n that event, the claim is said to be ‘grounded 11 in fraud’ or to ‘sound in fraud,’ and the pleading . . . as a whole must satisfy the 12 particularity requirement of Rule 9(b).” Kearns, 567 F.3d at 1125. “Because the 13 Supreme Court of California has held that nondisclosure is a claim for 14 misrepresentation in a cause of action for fraud, it (as any other fraud claim) must be 15 pleaded with particularity under Rule 9(b).” Id. at 1127. 16 Plaintiffs allege that “Defendant deals in automobiles and holds itself out as 17 having knowledge and skill in the design and manufacture of automobiles.” (ECF No. 18 23 at ¶ 16). Plaintiffs allege the headlights are unsafe for nighttime driving. Id. at ¶ 1. 19 Plaintiffs allege that “Defendant knew about the inherent headlight system defect in the 20 Vehicles at all relevant times.” Id. at ¶ 216. Plaintiffs allege that Defendant’s 21 knowledge was based on customer complaints, customer efforts to seek repairs from 22 Defendant, and Defendant’s issuance of several Bulletins concerning the headlights. 23 Id. at ¶¶ 42-43, 74. 24 Defendant allegedly issued two technical service Bulletins to its dealerships in 25 March and June 2015 concerning headlight brightness. (ECF No. 23 at ¶ 42). Plaintiffs 26 allege these Bulletins state that “[s]ome customers may comment of poor headlight 27 performance when driving in very dark rural areas.” Id. at ¶ 43. While these Bulletins 28 were issued after the named Plaintiffs purchased the allegedly-defective vehicles, the - 11 - 15cv2365-WQH-JMA 1 Court finds that Plaintiffs have alleged sufficient facts to support a plausible inference 2 that Defendant had knowledge of the defect at the time of the sales. See also Mui Ho 3 v. Toyota Motor Corp., 931 F. Supp.2d 987, 998 (N.D. Cal. 2013) (finding exclusive 4 knowledge satisfied by allegations of “early consumer complaints about the defect to 5 Defendants’ dealers who are their agents for vehicle repairs”); Falco v. Nissan N. 6 America Inc., No. CV 13–00686 DDP (MANx), 2013 WL 5575065, at *6 (C.D. Cal. 7 Oct. 10, 2013) (allegations of service Bulletins issued by the defendant in 2007 “permit 8 plausible inferences that [the defendant] was aware of the defect at the time they sold 9 the vehicles in 2005 and 2006”); 10 Further, Plaintiffs have alleged that within a reasonable time after purchasing the 11 vehicles, Plaintiffs discovered and complained about the performance of the headlights. 12 In Gray v. Toyota Motor Sales, U.S.A., the court declined to find that the defendant 13 manufacturer had exclusive knowledge of a defect relating to the miles-per-gallon rate 14 of certain vehicles. No. CV 08–1690 PSG (JCx), 2012 WL 313703, at *9 (C.D. Cal. 15 Jan. 23, 2012). The court found that the vehicles’ “real-world [miles-per-gallon] can 16 be readily and immediately observed by a layman” and the defendant’s “knowledge of 17 its real world fuel performance ceased to be ‘exclusive’” when “the first [vehicle] was 18 driven off the lot[.]” Id. Unlike in Gray, Plaintiffs in this case did not discover the 19 alleged defect until driving in dark – and oftentimes rural – areas. (ECF No. 23 at ¶¶ 20 1, 12, 43). The Court permits the plausible inference that “headlamp brightness is” not 21 “something that is readily observable to potential customers before they make their 22 purchase[.]” (ECF No. 37 at 11). The Court concludes that Plaintiffs have pled 23 sufficient facts to put Defendant on notice of their claims under the requirements of 24 Rule 9(b). See Huntzinger, 2015 WL 8664284 at *8 (finding the plaintiff pled 25 sufficient factual allegations to satisfy Rule 9(b) and “to support an inference that the 26 Defendant knew of the defects”). Defendant’s motion to dismiss Plaintiffs’ fraud-based 27 claims on the ground that Plaintiffs have failed to comply with Rule 9(b) is denied. 28 3. Safe Harbor Doctrine - 12 - 15cv2365-WQH-JMA 1 Defendant contends that Plaintiffs cannot maintain CLRA and UCL claims 2 because they fall into California’s safe harbor doctrine – which prevents general unfair 3 competition claims. Defendant contends that “[f]ederal and state regulations govern the 4 design, placement and output of vehicle headlights[,]” and Plaintiffs have not alleged 5 any violation of these standards. (ECF No. 27-1 at 26). Defendant contends that “[a] 6 practice is not actionable under either the UCL or the CLRA if it is authorized by 7 specific legislation.” Id. Plaintiffs contend that the federal and state regulations 8 Defendant relies on for its safe harbor argument allow remedies under other statutes – 9 including the CLRA and UCL. 10 “When specific legislation provides a ‘safe harbor,’ plaintiffs may not use the 11 general unfair competition law to assault that harbor.” Cel-Tech Comms., Inc. v. Los 12 Angeles Cellular Tel. Co., 973 P.2d 527, 541 (Cal. 1999); cf. Merrell Dow Pharms. Inc. 13 v. Thompson, 478 U.S. 804, 817 (1986) (“a complaint alleging a violation of a federal 14 statute as an element of a state cause of action, when Congress has determined that there 15 should be no private, federal cause of action for the violation,” cannot serve as the basis 16 for federal question jurisdiction). The Supreme Court of California has stated that the 17 scope of the UCL “is not unlimited” because “[s]pecific legislation may limit the 18 judiciary’s power to declare conduct unfair.” Cel-Tech, 973 P.2d at 541. “When 19 specific legislation provides a ‘safe harbor,’ plaintiffs may not use the general unfair 20 competition law to assault that harbor.” Id. An action under the CLRA can be limited 21 by a safe harbor as well. See Bourgi v. West Covina Motors, Inc., 83 Cal. Rptr.3d 758, 22 766 (Cal. Ct. App. 2008) (finding “the provisions of the CLRA must be read together 23 with the safe harbor provision” of a California statute); Alvarez v. Chevron Corp., 2009 24 WL 5552497, No. CV 09–3343–GHK (Cwx), at *6 (C.D. Cal. Sept. 30, 2009) (“As 25 with the UCL, specific legislation on point may create a ‘safe harbor’ defense to the 26 more general prohibitions of the CLRA.”). The safe harbor doctrine will prevent CLRA 27 or UCL claims if separate legislation “actually ‘bar[s]’ the action or clearly permit[s] 28 the conduct.” Cel-Tech, 973 P.2d at 541. - 13 - 15cv2365-WQH-JMA 1 Defendant identifies one federal and one state regulation that regulate the 2 adequacy of motor vehicle headlights. (ECF No. 27-1 at 26); see 49 C.F.R. § 571.108 3 (2016); Cal. Veh. Code § 26101. However, Defendant does not identify any regulation 4 or statute that prevents Plaintiffs from pursuing CLRA or UCL claims in federal court, 5 or that otherwise operate to “‘bar’ th[is] action[.]” Cel-Tech, 973 P.2d at 541. Further, 6 one federal statute that Plaintiffs allege Defendant violated contains another provision 7 that states that “[a] remedy under [the statute] is in addition to other rights and remedies 8 under other laws of the United States or a State.” 49 U.S.C. § 30103(d); ECF No. 23 9 at ¶ 52. Defendant’s motion to dismiss Plaintiffs’ CLRA and UCL claims based on 10 California’s safe harbor doctrine is denied. 11 4. CLRA 12 Defendant contends that Plaintiffs’ CLRA claim fails because Plaintiffs do not 13 identify a specific statement that was likely to mislead a reasonable consumer. 14 Defendant contends that Plaintiffs’ only allegation of a misleading statement “is 15 [Plaintiffs’] vague allegation” concerning Defendant’s promotional materials. (ECF 16 No. 27-1 at 24). Defendant contends that Plaintiffs do not dispute the accuracy of any 17 specific statement made by Defendant. Plaintiffs contend their allegation that 18 Defendant violated the TREAD Act by failing to disclose the alleged defect “gives rise 19 to a CLRA claim.” (ECF No. 34 at 26). Plaintiffs contend that Defendant’s alleged 20 TREAD Act violation supports a CLRA claim “regardless of any affirmative 21 misrepresentation[.]” Id. 22 The CLRA applies to every transaction that results in the sale of goods to a 23 consumer, and the statute prohibits various unfair or deceptive acts. Cal. Civ. Code § 24 1770(a). The statute prohibits, in relevant part, “[r]epresenting that goods . . . have 25 sponsorship, approval, characteristics, ingredients, uses, benefits, or quantities that they 26 do not have . . . are of a particular standard, quality, or grade,” and “[a]dvertising goods 27 or services with intent not to sell them as advertised.” Cal. Civ. Code §§ 1770(a)(5); 28 (a)(7); (a)(9). The CLRA imposes liability on a party that omits a material fact to a - 14 - 15cv2365-WQH-JMA 1 consumer, defined as a fact that “a reasonable consumer would deem . . . important” and 2 “would certainly attach importance to the disclosure of[.]” Collins v. eMachines, Inc., 3 134 Cal. Rptr.3d 588, 593-94 (Cal. Ct. App. 2011) (citation omitted). Under the statute, 4 omission of a material fact is actionable “when the defendant had exclusive knowledge 5 of material facts not known to the plaintiff[.]” LiMandri v. Judkins, 60 Cal. Rptr.2d 6 539, 543 (Cal. Ct. App. 1997). To pursue a fraudulent omission claim under the CLRA, 7 “California federal courts have held that, under the CLRA, plaintiffs must sufficiently 8 allege that a defendant was aware of a defect at the time of sale to survive a motion to 9 dismiss.” Wilson v. Hewlett-Packard Co., 668 F.3d 1136, 1145 (9th Cir. 2012). 10 A duty to disclose a material fact may arise out of factual allegations of “any 11 safety concerns posed by the defect.” Daugherty v. American Honda Motor Co., Inc., 12 51 Cal. Rptr.3d 118, 127 (Cal. Ct. App. 2006). The risk of a safety issue arising from 13 a defect, without an allegation of physical injury, may constitute a material fact. See 14 Mui Ho, 931 F. Supp.2d at 997 (holding it is “a basic rule of California law” that “a fact 15 can give rise to a duty to disclose and an actionable omission if it implicates safety 16 concerns that a reasonable consumer would find material.”); Falk v. General Motors 17 Corp., 496 F. Supp.2d 1088, 1096 (N.D. Cal. 2007) (finding allegedly-defective 18 speedometer is “material to the reasonable consumer, driver and passenger” because it 19 may “lead to traveling at unsafe speeds”). The Court finds that Plaintiffs have pled 20 facts sufficient to support the conclusion that the alleged defect in the headlights 21 concerned a safety risk that Plaintiffs would find material in purchasing a motor vehicle. 22 Plaintiffs allege that Defendant “and its dealerships were fully aware of the 23 inadequacy of the headlights.” (ECF No. 23 at ¶ 51). Plaintiffs allege Defendant was 24 aware of these concerns based upon customer complaints and Bulletins issued by 25 Defendant in March and June 2015, and these concerns “warrant . . . notification to the 26 government and consumers” under the TREAD Act. Id. at ¶¶ 38-50, 53. The Court 27 concludes that Plaintiffs’ allegation of customer complaints over the headlights is 28 sufficient to support a plausible inference that Defendant had knowledge of the defect - 15 - 15cv2365-WQH-JMA 1 at the time of the sales. See supra section III.C.2. 2 Further, Plaintiffs allege that under federal law, the “headlight safety concerns” 3 raised by Plaintiffs “warrant[ed] . . . notification to the government and consumers” 4 pursuant to the TREAD Act. (ECF No. 23 at ¶ 51-53). The TREAD Act was enacted 5 by Congress in 2000, and, in relevant part, requires that a motor vehicle manufacturer 6 must notify the Secretary of Transportation upon learning of a defect that relates to 7 motor vehicle safety. 49 U.S.C. § 30118(c); Suzuki Motor Corp. v. Consumers Union 8 of U.S., Inc., 330 F.3d 1110, 1120 (9th Cir. 2003) (Kozinski, C.J., dissenting from 9 denial of rehearing en banc). The Court finds that Plaintiffs have alleged sufficient 10 facts to establish a CLRA violation based upon the allegation that Defendant had a duty 11 to notify the Secretary of Transportation, pursuant to the TREAD Act, upon receiving 12 numerous complaints about the headlights. 49 U.S.C. § 30118(c)(1-2). See also In re 13 Toyota Motor Corp., 790 F. Supp.2d 1152, 1172-73 (C.D. Cal. 2011) (finding that an 14 alleged TREAD Act violation was a sufficient basis for a “a CLRA claim based on 15 fraudulent omissions.”). Defendant’s motion to dismiss Plaintiffs’ CLRA claim is 16 denied. 17 5. UCL 18 Defendant contends that Plaintiffs have failed to identify fraudulent, unfair, or 19 unlawful conduct. Defendant contends that Plaintiffs have failed to identify an unfair 20 business practice because the “vehicles’ headlights operated exactly as described, and 21 the effectiveness of the headlights was easily discernable to any prospective buyer.” 22 (ECF No. 27-1 at 25). Defendant contends that Plaintiffs have failed to identify 23 unlawful conduct because Plaintiffs have failed to adequately plead a CLRA violation. 24 Plaintiffs contend that Defendant’s conduct was fraudulent because Defendant 25 failed to disclose to customers that its headlights were unsuitable for safe night driving. 26 Plaintiffs contend that Defendant’s conduct was “‘unfair’ because it violates the policies 27 underlying the federal headlight regulations and safety reporting requirements, 28 including the TREAD Act.” (ECF No. 34 at 27). Plaintiffs contend that Defendant’s - 16 - 15cv2365-WQH-JMA 1 conduct was unlawful because Plaintiffs have sufficiently pled violations of the CLRA, 2 a federal motor vehicle safety standard, and breaches of express and implied warranty. 3 The UCL defines “unfair competition” as “any unlawful, unfair or fraudulent 4 business act or practice and unfair, deceptive, untrue or misleading advertising[.]” Cal. 5 Bus. & Prof. Code § 17200. The purpose of the UCL “is to protect both consumers and 6 competitors by promoting fair competition in commercial markets for goods and 7 services.” Kasky v. Nike, Inc., 45 P.3d 243, 249 (Cal. 2002). To establish standing 8 under the UCL, a consumer needs to establish that “(1) the defendant made a false 9 representation about a product, (2) the consumer purchased the product in reliance on 10 the misrepresentation, and (3) he would not have purchased the product otherwise.” 11 Hinojos v. Kohl’s Corp., 718 F.3d 1098, 1109 (9th Cir. 2013), as amended on denial 12 of reh’g and suggestion of reh’g en banc (July 8, 2013) (citation omitted). 13 The Court finds Plaintiffs’ allegation that Defendant concealed a material defect 14 sufficient to support a reasonable inference that Plaintiffs relied on the alleged non15 disclosure in deciding to purchase the vehicles. See supra section III.C.4; ECF No. 23 16 at ¶ 220; see also Huntzinger, 2015 WL 8664284, at *6 (finding an allegation of non17 disclosure was “sufficient to establish standing [under the UCL] if supported by 18 reasonable factual inferences.”). The Court finds that Plaintiffs have standing to bring 19 their UCL claim. 20 The UCL’s unlawful prong “permits violations of other laws to be treated as 21 unfair competition that is independently actionable.” Id. The statute applies to 22 “anything that can properly be called a business practice and that at the same time is 23 forbidden by law . . . be it civil, criminal, federal, state[.]” Sybersound Records, Inc. 24 v. UAV Corp., 517 F.3d 1137, 1151 (9th Cir. 2008) (citation omitted). Having found 25 that Plaintiffs adequately alleged a CLRA claim against Defendant, the Court concludes 26 Plaintiffs have adequately alleged a claim against Defendant for “unlawful” conduct in 27 violation of the UCL; see Herron v. Best Buy Co. Inc., 924 F. Supp.2d 1161, 1177 28 (E.D. Cal. 2013) (“CLRA violations may serve as the predicate for ‘unlawful’ business - 17 - 15cv2365-WQH-JMA 1 practice actions under the UCL.”). 2 The test for liability under the UCL’s “unfair” prong remains “in flux.” Lozano 3 v. AT&T Wireless Servs., Inc., 504 F.3d 718, 735 (9th Cir. 2007). Prior to 1999, courts 4 held that a business practice under the UCL is considered “unfair . . . when it offends 5 an established public policy or when the practice is immoral, unethical, oppressive, 6 unscrupulous or substantially injurious to consumers.” S. Bay. Chevrolet v. Gen. 7 Motors Acceptance Corp., 85 Cal. Rptr.2d 301, 316 (Cal. Ct. App. 1999) (citation 8 omitted). Under this approach, courts consider the business practice’s “impact on its 9 alleged victim, balanced against the reasons, justifications and motives of the alleged 10 wrongdoer[,]” and “weigh the utility of the defendant’s conduct against the gravity of 11 the harm to the alleged victim[.]” McKell v. Washington Mut., Inc., 49 Cal. Rptr.3d 12 227, 240 (Cal. Ct. App. 2006). However, the Supreme Court of California rejected this 13 approach in an anticompetitive practices case, and held that an “unfair” business 14 practice must “must be tethered to a constitutional or statutory provision or a regulation 15 carrying out statutory policy.” Cel-Tech, 973 P.2d at 543. While the Cel-Tech court 16 disapproved of the previous balancing approach, it stated that “[n]othing we say relates 17 to actions by consumers[.]” Id. at 544 n.12. Following Cel-Tech, a split of authority 18 developed concerning the “unfair” prong of the UCL. See Bardin v. Daimlerchrysler 19 Corp., 39 Cal. Rptr.3d 634, 639-43 (Cal. Ct. App. 2006) (reviewing split). Without 20 further guidance on the “unfair” prong, courts have applied both tests. See In re 21 Seagate Tech. LLC Litig., Case No. 16-cv-00523-JCS, 2017 WL 528398, at *16 (N.D. 22 Cal. Feb. 9, 2017) (“Absent guidance from the California courts about the proper 23 definition of an unfair business practice, federal courts have applied both tests.”) 24 (citation omitted). 25 In this case, the Amended Complaint alleges sufficient facts to support a 26 conclusion that Defendant violated the “unfair” prong of the UCL under either test. The 27 Court finds that Plaintiffs have adequately alleged that Defendant’s conduct violated 28 established public policy, and that this violation allegedly caused Plaintiffs to suffer an - 18 - 15cv2365-WQH-JMA 1 injury. Courts have recognized that automobile safety and disclosing safety hazards to 2 consumers are each important policy goals. See Mui Ho, 931 F. Supp.2d at 1000 3 (“failing to provide safety information is a practice that violates public policy”) (citation 4 omitted). The stated purpose of the federal standard used to regulate motor vehicle 5 headlights 6 7 8 is to reduce traffic accidents and deaths and injuries resulting from traffic accidents, by providing adequate illumination of the roadway, and by enhancing the conspicuity of motor vehicles on the public roads so that their presence is perceived and their signals understood, both in daylight and in darkness or other conditions of reduced visibility. 9 49 C.F.R. § 571.108 (2016). Further, the Court finds that the Amended Complaint 10 alleges an “unfair” business practice claim that is tethered to a legislatively declared 11 policy. Cel-Tech, 973 P.2d at 543. See ECF No. 23 at ¶¶ 52-57 (alleging violations of 12 the TREAD Act and a Federal Safety Standard set by the National Highway Traffic 13 Safety Administration). 14 To state a claim under the fraudulent prong of the UCL, Plaintiffs must 15 adequately plead a business practice “in which members of the public are likely to be 16 deceived.” Morgan v. AT&T Wireless Servs., Inc., 99 Cal. Rptr.3d 768, 784 (Cal. Ct. 17 App. 2009) (citation omitted). The standard under both the CLRA and the “fraudulent” 18 prong of the UCL is the “reasonable consumer” test, which requires a plaintiff to show 19 that members of the public are likely to be deceived by the business practice or 20 advertising at issue. Dorfman v. Nutramax Labs., No. 13cv0873 WQH (RBB), 2013 21 WL 5353043, at *10 (S.D. Cal. Sept. 23, 2013) (Hayes, J.). The Court has concluded 22 that Plaintiffs adequately alleged a CLRA claim against Defendant based on an 23 allegation of fraudulent omission. Therefore, the Court finds that Plaintiffs have pled 24 sufficient facts to support the conclusion that Defendant violated the fraudulent prong 25 of the UCL; see also Mui Ho, 931 F. Supp.2d at 1000. Defendant’s motion to dismiss 26 Plaintiffs’ UCL claim is denied. 27 28 6. Breach of Warranty Claims i. Song-Beverly Consumer Warranty Act: Breach of Express - 19 - 15cv2365-WQH-JMA 1 2 Warranty Defendant contends that Plaintiffs’ claim for breach of express warranty fails 3 because Plaintiffs do not describe the terms or coverage of the alleged warranty. 4 Plaintiffs contend that the vehicles were equipped with a warranty whereby Defendant 5 agreed to “repair, replace, or adjust defective parts on the Vehicles.” (ECF No. 34 at 6 24) (citing ECF No. 23 at ¶ 131). Plaintiffs contend that Defendant failed to repair or 7 remedy the alleged headlight defect, and Defendant refused to honor the limited 8 warranty as to two Plaintiffs. 9 The Song-Beverly Consumer Warranty Act provides, in relevant part, that 10 “nothing in this chapter shall affect the right of the manufacturer, distributor, or retailer 11 to make express warranties with respect to consumer goods.” Cal. Civ. Code § 1793. 12 “[T]o plead a cause of action for breach of express warranty, one must allege the exact 13 terms of the warranty, plaintiff’s reasonable reliance thereon, and a breach of that 14 warranty which proximately causes plaintiff injury.” Williams v. Beechnut Nutrition 15 Corp., 229 Cal. Rptr. 605, 608 (Cal. Ct. App. 1986); Daniel v. Ford Motor Co., 806 16 F.3d 1217, 1223-24 (9th Cir. 2015) (reviewing text of express warranty to address claim 17 for breach). “To prevail on a theory of breach of express warranty, [the plaintiffs] must 18 prove that [the defendant] made affirmations of fact or promises that became part of the 19 basis of the bargain.” Maneely v. Gen. Motors Corp., 108 F.3d 1176, 1181 (9th Cir. 20 1997). 21 In the Amended Complaint, Plaintiffs allege that “[t]hrough Limited New 22 Vehicle Warranties, Defendant expressly warranted to California Plaintiffs and 23 California Class members that they would repair, replace, or adjust defective parts on 24 the Vehicles.” (ECF No. 23 at ¶ 131). Plaintiffs do not “allege the exact terms of the 25 warranty” at issue in this case. Williams, 229 Cal. Rptr. at 608. In Maneely, the Court 26 of Appeals affirmed summary judgment in favor of the defendant on a breach of express 27 warranty claim because the plaintiffs had not identified “a specific and unequivocal 28 written statement[.]” 108 F.3d at 1181. The Court of Appeals found that the alleged - 20 - 15cv2365-WQH-JMA 1 express warranty, contained in print and television advertising, failed because it 2 “ma[de] no explicit guarantees.” Id. In this case, Plaintiffs have provided the Court 3 with only a general description of the alleged express warranty without reference to its 4 exact terms. The Court grants Defendant’s motion to dismiss Plaintiffs’ breach of 5 express warranty claim under the Song-Beverly Consumer Warranty Act. 6 ii. Song-Beverly Consumer Warranty Act: Breach of Implied 7 Warranty 8 Defendant contends that Plaintiffs fail to allege facts to support a breach of 9 implied warranty under both California and Texas law. Defendant contends that 10 Plaintiffs’ claim fails because the vehicles are still merchantable and Plaintiffs do not 11 allege that the headlights failed to function or perform as designed. Defendant contends 12 that one named Plaintiff’s claim fails because that Plaintiff traded in a vehicle to 13 Defendant, and Defendant accepted the vehicle without regard to the alleged defect. 14 Plaintiffs contend that Defendant breached the implied warranty of merchantability 15 because the headlights are “deficient, unsafe and unreliable [and] not merely ‘less 16 effective’ or ‘different.’” (ECF No. 34 at 25). Plaintiffs contend that a vehicle with 17 headlights that do not adequately illuminate the roadway “is not fit for its ordinary 18 purposes.” Id. at 26. 19 Under California law, “every sale of consumer goods that are sold at retail in this 20 state shall be accompanied by the manufacturer’s and the retail seller’s implied 21 warranty that the goods are merchantable.” Cal. Civ. Code. § 1792. This implied 22 warranty expires “one year following the sale of new consumer goods to a retail buyer” 23 if the duration of an express warranty is not stated. Cal. Civ. Code § 1791.1(c). 24 “Unlike express warranties, which are basically contractual in nature, the implied 25 warranty of merchantability arises by operation of law.” American Suzuki Motor Corp. 26 v. Superior Ct., 44 Cal. Rptr.2d 526, 529 (Cal. Ct. App. 1995), as modified on denial 27 of reh’g (Sept. 21, 1995). “Merchantable” goods are defined under California law to 28 be “fit for the ordinary purposes for which such goods are used[.]” Cal. Com. Code § - 21 - 15cv2365-WQH-JMA 1 2314(2)(c). “The core test of merchantability is fitness for the ordinary purpose for 2 which such goods are used.” Isip, 65 Cal. Rptr.3d at 700. The implied warranty of 3 merchantability “does not impose a general requirement that goods precisely fulfill the 4 expectation of the buyer. Instead, it provides for a minimum level of quality.” 5 American Suzuki, 44 Cal. Rptr.2d at 529 (citation omitted). A breach “occurs if the 6 product lacks ‘even the most basic degree of fitness for ordinary use.’” Birdsong, 590 7 F.3d at 958 (quoting Mocek v. Alfa Leisure, Inc., 7 Cal. Rptr.3d 546, 549 (Cal. Ct. App. 8 2003)). 9 In American Suzuki, the California Court of Appeal dismissed a proposed class 10 action complaint alleging a breach of implied warranty claim against a vehicle 11 manufacturer. 44 Cal. Rptr.2d at 531-32. The court found the consumers had failed to 12 state a claim for breach of implied warranty, based on allegations of a defect that 13 created an allegedly unsafe risk of roll-over accidents, because “the[] vehicles remained 14 fit for their ordinary purpose.” Id. at 531. To support this finding, the court relied on 15 a factual allegation that “the vast majority of the [vehicles] sold to the putative class did 16 what they were supposed to do for as long as they were supposed to do it[.]” Id. 17 (citation omitted). In American Suzuki, the evidence provided at the motion to dismiss 18 phase demonstrated “that only a small percentage of the [vehicles] sold during the class 19 period have been involved in rollover accidents” – and the court identified there was no 20 allegation that the plaintiffs suffered personal injuries or property damage. Id. at 528, 21 531. 22 The American Suzuki court concluded that “the implied warranty of 23 merchantability can be breached only if the vehicle manifests a defect that is so basic 24 it renders the vehicle unfit for its ordinary purpose of providing transportation.” Id. at 25 529. In Isip, the California Court of Appeal distinguished American Suzuki and this 26 “descriptive language” by finding it applied only to “cases in which no damage had 27 been suffered[.]” 65 Cal. Rptr.3d at 699. The court in Isip rejected the American Suzuki 28 standard for merchantability, and instead found that “[d]efining the warranty in terms - 22 - 15cv2365-WQH-JMA 1 of a vehicle that is “in safe condition and substantially free of defects” is consistent with 2 the notion that the vehicle is fit for the ordinary purpose for which a vehicle is used.” 3 Id. at 700. 4 In this case, Plaintiffs have alleged facts sufficient to support the inference that 5 the vehicles at issue “lack[] . . . [the] fitness for ordinary use” while driving in dark or 6 rural areas. Birdsong, 590 F.3d at 958 (citation omitted). The Court concludes 7 Plaintiffs have sufficiently pled a legally cognizable injury in being prevented from 8 properly observing signage and pedestrians while driving the vehicles in dark or rural 9 areas; see supra section III.C.1. This factual allegation is sufficient to support the 10 conclusion that Defendant breached the implied warranty of merchantability under Cal. 11 Civ. Code. § 1792. See Isip, 65 Cal. Rptr.3d at 700 (“We reject the notion that merely 12 because a vehicle provides transportation from point A to point B, it necessarily does 13 not violate the implied warranty of merchantability.”). Defendant’s motion to dismiss 14 Plaintiffs’ breach of implied warranty claim under the Song-Beverly Consumer 15 Warranty Act is denied. 16 17 iii. Breach of Implied Warranty: Tex. Bus. & Com. Code § 2.314 Under Texas state law, “a warranty that the goods shall be merchantable is 18 implied in a contract for their sale if the seller is a merchant with respect to goods of 19 that kind.” Tex. Bus. & Com. Code § 2.314(a). “For goods to breach this warranty, 20 they must be defective—that is, they must be unfit for the ordinary purposes for which 21 they are used because of a lack of something necessary for adequacy.” Gen. Motors 22 Corp. v. Brewer, 966 S.W.2d 56, 57 (Tex. 1998) (citation omitted). In Brewer, the 23 Supreme Court of Texas rejected a claim for breach of the implied warranty of 24 merchantability because the product at issue “merely fail[ed] to fulfill the precise 25 expectations of the consumer because the product is more cumbersome to use than 26 anticipated.” Id. The plaintiffs in Brewer alleged that seatbelts advertised as automatic 27 would sometimes fail to operate – but the plaintiffs could physically override the system 28 to manually secure the restraint. Id. at 56-57. The court held that a product does not - 23 - 15cv2365-WQH-JMA 1 breach the implied warranty “merely because it does not function as well as the buyer 2 would like[.]” Id. at 57. A later case identified that Brewer did not find a defect 3 because the seatbelt failure did not render the vehicle “[un]fit for its ordinary purpose 4 of protecting the” driver – it merely made the vehicle “more difficult to use than 5 anticipated[.]” Otis Spunkmeyer, Inc. v. Blakely, 30 S.W.3d 678, 688 (Tex. App. 2000). 6 In this case, unlike the plaintiffs in Brewer, Plaintiffs allege they suffer an alleged 7 injury even after taking the affirmative step of engaging the vehicles’ high beam 8 headlights. See ECF No. 23 at ¶ 31. As discussed above, Plaintiffs have pled facts 9 sufficient to support the conclusion that the headlights have caused Plaintiffs legally 10 cognizable injury. Defendant’s motion to dismiss Plaintiffs’ claims under Texas law 11 is denied. 12 13 iv. Magnuson-Moss Warranty Act Defendant contends that Plaintiffs fail to allege a Magnuson-Moss Warranty Act 14 claim because “Plaintiffs fail to state any valid state warranty claims[.]” (ECF No. 27-1 15 at 30). Plaintiffs contend that they have sufficiently pled a violation of the Magnuson16 Moss Warranty Act if their warranty claims under state law survive. 17 The Magnuson-Moss Warranty Act creates a federal cause of action for breach 18 of an implied warranty. 15 U.S.C. § 2310(d)(1)(B); see Gusse v. Damon Corp., 470 F. 19 Supp.2d 1110, 1116 (C.D. Cal. 2007) (“the Magnuson-Moss Act creates a separate 20 federal cause of action for breach of an implied warranty”). The substantive elements 21 of the Magnuson-Moss Warranty Act and the Song-Beverly Consumer Warranty Act 22 “are the same[,]” and both “require the plaintiffs to plead successfully a breach of state 23 warranty law.” Birdsong, 590 F.3d at 958 n.2. The Court has concluded that Plaintiffs 24 have alleged violations of California and Texas implied warranty laws – therefore, the 25 Court denies Defendant’s motion to dismiss Plaintiffs’ Magnuson-Moss Warranty Act 26 claim. See Clemens v. DaimlerChrysler Corp., 534 F.3d 1017, 1022 (9th Cir. 2008) 27 (“this court’s disposition of the state law warranty claims determines the disposition of 28 the Magnuson-Moss Act claims.”). - 24 - 15cv2365-WQH-JMA 1 7. Texas Deceptive Trade Practices Act 2 Defendant contends that the Texas Plaintiffs’ Texas Deceptive Trade Practices 3 Act (“DTPA”) claims are time-barred by the statute of limitations. Defendant contends 4 that the filing of a class action only tolls claims that the originally-named Plaintiffs had 5 standing to bring. Defendant contends that the Texas Plaintiffs’ DTPA claims should 6 not be tolled because none of the originally-named Plaintiffs purchased their vehicles 7 in Texas. Plaintiffs contend that Plaintiff Wilson’s DTPA claim is not time-barred 8 because filing the class action tolls the statute of limitations of the claims of potential 9 class members. Plaintiffs concede that “Mr. Stewart’s DTPA claims are time barred.” 10 (ECF No. 34 at 29). 11 The DTPA contains a two-year statute of limitations. Tex Bus. & Com. Code § 12 17.565. In American Pipe, the Supreme Court held that “the commencement of a class 13 action suspends the applicable statute of limitations as to all asserted members of the 14 class who would have been parties had the suit been permitted to continue as a class 15 action.” American Pipe & Const. Co. v. Utah, 414 U.S. 538, 554 (1974). Following 16 this decision, courts have held that the rule announced in American Pipe only tolls 17 claims that the named plaintiff in the original class action has standing to pursue. See 18 In re Countrywide Fin. Corp., 860 F. Supp.2d 1062, 1068 (C.D. Cal. 2012). 19 20 i. Plaintiff Stewart’s DTPA Claim In this case, the original Complaint was filed on October 19, 2015, and the 21 Amended Complaint was filed on April 29, 2016. Defendant contends the date of the 22 Amended Complaint should be used to determine when the statute of limitation expired, 23 and Plaintiffs do not address this issue in their opposition. See ECF No. 27-1 at 27. 24 Plaintiff Stewart allegedly purchased his vehicle in May 2013. (ECF No. 23 at ¶ 11). 25 Using either the date the original Complaint was filed or the date the Amended 26 Complaint was filed, the Court finds that Plaintiff Stewart’s DTPA claim is barred by 27 the two-year statute of limitations. The Court grants Defendant’s motion to dismiss 28 Plaintiff Stewart’s DTPA claim. - 25 - 15cv2365-WQH-JMA 1 2 ii. Plaintiff Wilson’s DTPA Claim The original Complaint asserted six causes of action against Defendant by two 3 named Plaintiffs: Plaintiff Armando J. Becerra, who allegedly purchased his vehicle in 4 Escondido, California; and Plaintiff Guillermo Ruelas, who allegedly purchased his 5 vehicle in Bakersfield, California. (ECF No. 1 at ¶¶ 7-8). The original Complaint does 6 not include named Plaintiffs who purchased vehicles in Texas. In American Pipe, the 7 Supreme Court identified that “the commencement of the original class suit tolls the 8 running of the statute for all purported members of the class[.]” 414 U.S. at 553 9 (emphasis added). Subsequent courts in this Circuit have interpreted American Pipe 10 to toll only the claims that the plaintiffs named in the first complaint filed in the case 11 had standing to pursue. See In re Countrywide, 860 F. Supp.2d at 1068 (“This Court 12 and others have achieved [a] balance by holding that American Pipe will only toll those 13 claims that the named plaintiff in the original class action had standing to pursue.”); 14 Maine State Retirement Sys. v. Countrywide Fin. Corp., 722 F. Supp.3d 1157, 1167 15 (C.D. Cal. 2010) (declining to “extend[] American Pipe tolling to class action claims 16 the original named plaintiffs had no standing to bring”). 17 To demonstrate standing to sue in a class action complaint, “even named 18 plaintiffs who represent a class must allege and show that they personally have been 19 injured, not that injury has been suffered by other, unidentified members of the class to 20 which they belong and which they purport to represent.” Lewis v. Casey, 518 U.S. 343, 21 357 (1996) (citations omitted). The original Complaint does not name Plaintiffs who 22 reside in Texas. Plaintiffs bear the burden of demonstrating standing. Lujan v. 23 Defenders of Wildlife, 504 U.S. 555, 561 (1992). The Court finds that neither of the 24 two Plaintiffs named in the original Complaint had standing to pursue a DTPA claim 25 on behalf of Plaintiff Wilson. See In re Ditropan XL Antitrust Litig., 529 F. Supp.2d 26 1098, 1107 (N.D. Cal. 2007) (“at least one named plaintiff must have standing with 27 respect to each claim the class representatives seek to bring.”). The Court grants 28 - 26 - 15cv2365-WQH-JMA 1 Defendant’s motion to dismiss Plaintiff Wilson’s DTPA claim.2 2 8. Unjust Enrichment 3 Defendant contends that Plaintiffs’ claim for unjust enrichment is derivative of 4 their other state law allegations and cannot survive “as a standalone cause of action[.]” 5 (ECF No. 27-1 at 12, 30). Defendant contends that if Plaintiffs have adequately pled 6 substantive causes of action, their claim for unjust enrichment should be denied because 7 Plaintiffs have pled a contract between the parties. Defendant contends that Plaintiffs’ 8 allegation of an express warranty between the parties requires dismissal of the claim for 9 unjust enrichment. Plaintiffs contend they have adequately pled their unjust enrichment 10 claim because it is grounded in equitable principles of restitution. Plaintiffs contend 11 they may plead alternative statements relating to their claim of express warranty 12 between the parties. 13 “[I]n California, there is not a standalone cause of action for ‘unjust enrichment,’ 14 which is synonymous with ‘restitution.’” Astiana v. Hain Celestial Grp., Inc., 783 F.3d 15 753, 762 (9th Cir. 2015) (citations omitted). However, “[u]nder California law, unjust 16 enrichment is an action in quasi-contract and is not cognizable when there is a valid and 17 enforceable contract between the parties.” Cont’l Cas. Co. v. Enodis Corp., 417 Fed. 18 Appx. 668, 670 (9th Cir. 2011). Plaintiffs have alleged the existence of a valid contract 19 between the parties to support their claim for breach of express warranty claim; see ECF 20 No. 23 at ¶ 131. 21 Federal Rule of Procedure 8(d) allows parties to plead claims in the alternative 22 or in an inconsistent manner, and courts in this Circuit have allowed unjust enrichment 23 and breach of contract claims to proceed simulatenously in one action. See Fed. R. Civ. 24 P. 8(d)(2-3) (“[a] party may set out 2 or more statements of a claim or defense 25 2 Plaintiffs’ eighth cause of action in the Amended Complaint includes claims 26 pursuant to various state laws (including the District of Columbia). The named Plaintiffs in the Amended Complaint allegedly purchased vehicles in California and 27 Texas. Plaintiffs’ eighth cause of action does not include claims pursuant to California or Texas law. (ECF No. 23 at ¶¶ 165-214). The Court grants Defendant’s motion to 28 dismiss Plaintiffs’ eighth cause of action, because the named Plaintiffs in the Amended Complaint bring claims under only California and Texas state laws. - 27 - 15cv2365-WQH-JMA 1 alternatively . . . [a] party may state as many separate claims or defenses as it has, 2 regardless of consistency.”); Longest v. Green Tree Servicing LLC, 74 F. Supp.3d 1289, 3 1302 (C.D. Cal. 2015) (citing cases “permitt[ing] unjust enrichment and breach of 4 contract claims to proceed simultaneously”). The Court finds that Plaintiffs have pled 5 their claim for unjust enrichment in the alternative to their breach of express warranty 6 claim. See Longest, 74 F. Supp.3d at 1302 (finding that the “plaintiffs have pleaded 7 their contract and unjust enrichment claims in the alternative, and [the court] declines 8 to dismiss the unjust enrichment claims on these grounds.”). The Court denies 9 Defendant’s motion to dismiss Plaintiffs’ unjust enrichment claim. 10 9. Request for Injunctive Relief 11 Defendant contends that the primary jurisdiction doctrine and the doctrine of 12 conflict preemption bar Plaintiffs’ claim for the institution of a recall. See ECF No. 23 13 at 62. Defendant contends that the remedy of instituting a recall “is precisely the type 14 of remedy that Congress established NHTSA [National Highway Traffic Safety 15 Administration] to investigate[.]” (ECF No. 27-1 at 31). Defendant contends that 16 Congress has created sixty pages of federal regulations concerning the design and 17 brightness of headlight systems. Defendant contends that the federal Safety Act 18 contains congressional directives on whether and how to institute a motor vehicle recall. 19 Plaintiffs contend that the primary jurisdiction doctrine is inapplicable because 20 Plaintiffs have not challenged a specific federal safety standard of regulation, or sought 21 to interfere with any ongoing federal investigation. Plaintiffs contend that consumer 22 motor vehicle safety is an area traditionally reserved for state regulation. Plaintiffs 23 contend that courts in this Circuit have found that judicially-imposed recalls are not 24 conflict preempted by federal law. 25 Under the Supremacy Clause of the United States Constitution, “state law that 26 conflicts with federal law is without effect.” Cipollone v. Liggett Grp., 505 U.S. 504, 27 516 (1992) (citation omitted). In the absence of “an express provision for preemption,” 28 there are two types of preemption: field preemption and conflict preemption. Crosby - 28 - 15cv2365-WQH-JMA 1 v. Nat’l Foreign Trade Council, 530 U.S. 363, 372 (2000). In this case, Defendant 2 contends that conflict preemption applies to Plaintiffs’ request for a judicially-instituted 3 recall because the federal NHTSA is tasked with investigating alleged vehicle defects 4 and instituting motor vehicle recalls. The Supreme Court has held that 5 6 7 [i]n all pre-emption cases, and particularly in those in which Congress has legislated . . . in a field which the States have traditionally occupied . . . we start with the assumption that the historic police powers of the States were not to be superseded . . . unless that was the clear and manifest purpose of Congress. 8 Wyeth v. Levine, 555 U.S. 555, 565 (2009) (citations and quotation marks omitted). If 9 Congress has enacted law or regulations “in a field which the States have traditionally 10 occupied,” courts must apply a presumption against conflict preemption “because 11 respect for the states as independent sovereigns in our federal system leads us to assume 12 that Congress does not cavalierly pre-empt state-law causes of action.” McDaniel v. 13 Wells Fargo Invs., LLC, 717 F.3d 668, 675 (9th Cir. 2013) (quoting Wyeth, 555 U.S. 14 at 565 n.3). Courts are “reluctant to invalidate . . . state legislation in the field of safety 15 where the propriety of local regulation has long been recognized.” Raymond Motor 16 Transp., Inc. v. Rice, 434 U.S. 429, 443 (1978) (citation omitted). “In no field has this 17 deference to state regulation been greater than that of highway safety regulation.” Id. 18 Courts in this Circuit have concluded that a court-instituted motor vehicle recall 19 “is a remedy rather than a substantive field of regulation” – and accordingly, “the 20 regulatory field in question is more properly defined as that of motor vehicle safety.” 21 In re Toyota Motor Corp. Unintended Accel. Mktg., 754 F. Supp.2d 1145, 1196 (C.D. 22 Cal. 2010); Chamberlan v. Ford Motor Co., 314 F. Supp.2d 953, 958-59 (N.D. Cal. 23 2004) (finding that “[m]otor vehicle safety is an area of traditional State police power” 24 and that “States historically have provided injunctive remedies in the field of vehicle 25 safety.”). The Safety Act allows citizens to petition the Department of Transportation 26 to investigate a potential defect, and provides that any remedy through the petition 27 process “is in addition to other rights and remedies under other laws of the United 28 States or a State.” 49 U.S.C. § 30103(d); see also 49 U.S.C. § 30118(b) (“The - 29 - 15cv2365-WQH-JMA 1 Secretary [of Transportation] may make a final decision that a motor vehicle . . . 2 contains a defect related to motor vehicle safety . . . Any interested person also shall be 3 given an opportunity to present information, views, and arguments.”). 4 The Court applies the presumption against conflict preemption against 5 Defendant, and denies Defendant’s motion to dismiss Plaintiffs’ claim for injunctive 6 relief in the form of a recall. See also Chamberlan, 314 F. Supp. 2d at 964 (applying 7 conflict preemption to preserve a claim for judicially-instituted recall because “the plain 8 meaning of the language in the savings clause . . . is that [] State law remedies are 9 preserved.”). 10 IV. Conclusion 11 IT IS HEREBY ORDERED that the Motion to Dismiss the Amended Complaint 12 filed by Defendant (ECF No. 27) is GRANTED in part and DENIED in part. Plaintiffs’ 13 fourth cause of action for breach of Song-Beverly Consumer Warranty Act (Express 14 Warranty) claim is dismissed. Plaintiffs’ seventh cause of action for violations of the 15 DTPA by Plaintiffs Stewart and Wilson is dismissed as to both Plaintiffs. Plaintiffs’ 16 eighth cause of action is dismissed. In all other respects, Defendant’s Motion to 17 Dismiss the Amended Complaint (ECF No. 27) is DENIED. 18 DATED: March 10, 2017 19 20 WILLIAM Q. HAYES United States District Judge 21 22 23 24 25 26 27 28 - 30 - 15cv2365-WQH-JMA

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