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holding plaintiff "failed to allege an affirmative deceptive act by BMW sufficient to support a finding of fraudulent concealment" where "[t]he only affirmative statement" was made by "an authorized BMW dealer" and the "complaint contain[ed] no allegations that, if proved, would show that the authorized dealer that presumably repaired her vehicle was BMW's agent"
Summary of this case from Gonzalez v. Mazda Motor Corp.Opinion
CASE NO. CV 14-02363 MMM (PJWx)
10-03-2014
TRISH HERREMANS, individually, and on behalf of a class of similarly situated individuals, Plaintiff, v. BMW OF NORTH AMERICA, LLC, Defendant.
ORDER GRANTING DEFENDANT'S MOTION TO DISMISS
On March 27, 2014, Trish Herremans filed this putative class action on her own behalf and on behalf of a class of similarly situated individuals in California against BMW of North America, LLC ("BMW"). On June 6, 2014, Herremans filed a first amended complaint. BMW filed a motion to dismiss the amended complaint on July 17, 2014. Herremans opposes the motion.
Complaint, Docket No. 1 (Mar. 27, 2014).
First Amended Complaint ("FAC"), Docket No. 15 (June 6, 2014).
Motion to Dismiss ("Motion"), Docket No. 17 (July 17, 2014).
Opposition to Motion to Dismiss ("Opposition"), Docket No. 21 (Aug. 7, 2014).
I. FACTUAL BACKGROUND
On November 15, 2008, Herremans purchased a new 2009 Mini Cooper for personal, non-commercial purposes. The vehicle was manufactured, sold, distributed, advertised, and marketed by BMW. Herremans contends that BMW advertises that Mini Coopers are safe, reliable vehicles of the highest quality and durability, and that its marketing materials assert that "[n]ot all small cars are created equal." The Mini Cooper was covered by a standard manufacturer's limited warranty.
FAC, ¶ 16.
Id.
Id., ¶ 2.
Id., ¶ 39.
As of February 12, 2011, Herremans had driven the Mini Cooper 43,667 miles, and the vehicle's mechanical water pump, which was leaking, was repaired under the manufacturer's limited warranty. After repairing the water pump, BMW allegedly advised Herremans that the problem had been solved. On January 11, 2013, however, after Herremans had driven the vehicle 71,272 miles, Herremans found that the water pump was leaking once again, and took it in for repairs. These repairs was not covered by the limited warranty, and Herremans had to pay more than $1,700 for them. She asserts that the leaks were caused by a "water pump defect."
Id., ¶ 17.
Id.
Id.
Id.
Id.
On January 7, 2014, Herremans sent a letter concerning the water pump defect to BMW pursuant to the Consumer Legal Remedies Act. She alleges that BMW did not respond substantively to her request for a remedy.
Id., ¶ 18.
Id.
Herremans filed this action on behalf of all Californians who purchased or leased certain allegedly defective Mini Coopers designed, manufactured, distributed, marketed, sold, and leased by BMW. She identifies the following as class vehicles - Mini Cooper R55 model vehicles (model year 2007- present Mini Cooper Clubman); Mini Cooper R56 model vehicles (model year 2007-2013 Mini Cooper hardtop); Mini Cooper R57 model vehicles (model year 2009-present Mini Cooper convertibles); Mini Cooper R58 model vehicles (model year 2012 Mini Cooper Roadsters); and Mini Cooper R60 model vehicles (model year 2010-present Mini Cooper Countrymen) (collectively, the "class vehicles"). Herremans alleges that the class vehicles suffer from a water pump defect caused by the fact that the mechanical water pump installed in them was defectively designed, manufactured, and installed. Specifically, she asserts that the two row sealed ball bearing system that connects the water pump's metal shaft to a pulley driven by the engine and to an impeller, which circulates water through the engine. The ball bearings were allegedly encased in ball bearing cages, which were in turn encased in a sealed bearing system. The sealed bearing system allowed the metal shaft to spin while the remainder of the water pump remained bolted to the engine. The spinning of the metal shaft caused the impeller to spin, circulating water through the engine. The metal shaft was connected to a pulley driven by the engine. Herremans contends that the amount of stress placed on the sealed bearing system by the pulley "exceeds the engineering limitations of the two row ball bearing design." Consequently, the sealed bearing system has purportedly experienced a high failure rate, making it unreliable. When the sealed bearing system fails, the mechanical water pump allegedly leaks and makes noise. The metal shaft can also purportedly stop rotating. Both a water leak and failed rotation of the metal shaft can purportedly cause engine overheating. Herremans asserts this poses a serious safety hazard because when an engine overheats while it is being driven, catastrophic engine failure can result. This in turn can cause the vehicle to lose ability to accelerate, and affect the vehicle's steering and braking systems by causing a malfunction in power brake and steering systems.
Id., ¶ 3.
Id., ¶ 30.
Id., ¶¶ 5-7.
Id., ¶ 6.
Id., ¶ 5.
Id., ¶ 7.
Id.
The noise allegedly indicates that the mechanical water pump will soon leak. Id., ¶ 29.
Id., ¶ 7.
Id., ¶¶ 8, 29.
Id.
Herremans alleges, on information and belief, that BMW knew of the defect prior to distributing the class vehicles to Mini Cooper dealerships. She asserts that it learned of the defect through internal testing, pre-release testing data, customer complaints, dealership repair records, and "other internal sources." Nonetheless, she maintains, BMW failed to disclose and actively concealed the defect from consumers at the time they purchased and/or leased class vehicles despite the fact that consumers did not know of, and could not reasonably have discovered, it. She also asserts that BMW failed to provide a remedy for the defect to class members whose vehicles experienced mechanical water pump failure outside the warranty period. Specifically, she asserts that BMW redesigned the mechanical water pump so that the sealed bearing system had one row of bearings in a ball bearing configuration and a second row in a roller bearing configuration; this created more tensile strength, making the sealed bearing system is less prone to failure. Herremans contends, on information and belief, that this redesigned mechanical water pump was available as a replacement part in 2012; given the extensive research necessary to redesign the part, and the redesign effort undertaken, she asserts that BMW has been aware of the defect since as early as 2006.
Id., ¶¶ 33, 44.
Id., ¶¶ 33, 35, 43.
Id., ¶ 35.
Id.
Id., ¶¶ 36, 44.
Herremans alleges that BMW also learned of the defect because both it and the National Highway Traffic Safety Administration ("NHTSA") received numerous consumer complaints concerning the problem. BMW purportedly continues to conceal the defect and deny its existence while routinely denying consumer requests for reimbursement of expenses incurred as a result of it. She asserts that BMW had likewise not disclosed that repairs will not permanently fix the problem, and that the defect constitutes a serious safety hazard.
Id., ¶ 37.
Id., ¶¶ 37-38, 46-49.
Id., ¶ 47.
The water pump defect has allegedly caused consumers to incur repair expenses similar to the $1,700 Herremans paid to have her vehicle repaired, and has also diminished the value of the class vehicles.
Id., ¶ 32.
Herremans pleads claims for violation of the California Consumers Legal Remedies Act ("CLRA"), California Civil Code §§ 1770 (a)(4), (a)(5), (a)(7), (a)(9); violation of California's Unfair Competition Law ("UCL"), California Business and Professions Code § 17200, et seq.; and fraud by omission.
Id., ¶¶ 63-100.
II. DISCUSSION
A. Legal Standard Governing Motions to Dismiss Under Rule 12(b)(6)
A Rule 12(b)(6) motion tests the legal sufficiency of the claims asserted in the complaint. A Rule 12(b)(6) dismissal is proper only where there is either a "lack of a cognizable legal theory," or "the absence of sufficient facts alleged under a cognizable legal theory." Balistreri v. Pacifica Police Dept., 901 F.2d 696, 699 (9th Cir. 1988). The court must accept all factual allegations pleaded in the complaint as true, and construe them and draw all reasonable inferences from them in favor of the nonmoving party. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir. 1996); Mier v. Owens, 57 F.3d 747, 750 (9th Cir. 1995).
The court need not, however, accept as true unreasonable inferences or conclusory legal allegations cast in the form of factual allegations. See Bell Atlantic Corp. v. Twombly, 540 U.S. 544, 553-56 (2007) ("While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the 'grounds' of his 'entitle[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do"). Thus, a plaintiff's complaint must "contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.' . . . A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); see also Twombly, 550 U.S. at 545 ("Factual allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in fact)" (citations omitted)); Moss v. United States Secret Service, 572 F.3d 962, 969 (9th Cir. 2009) ("[F]or a complaint to survive a motion to dismiss, the non-conclusory 'factual content,' and reasonable inferences from that content, must be plausibly suggestive of a claim entitling the plaintiff to relief," citing Iqbal and Twombly).
B. Whether Herremans' CLRA and Fraud Claims are Time-Barred
BMW does not contend that Herremans' UCL claim is time-barred. The Ninth Circuit has held that UCL claims "are subject to a four-year statute of limitations which beg[i]n[s] to run on the date the cause of action accrue[s], not on the date of discovery." Karl Storz Endoscopy-America, Inc. v. Surgical Tech., Inc., 285 F.3d 848, 857 (9th Cir. 2002) (citing CAL. BUS. & PROF. CODE § 17208). Subsequent to the Ninth Circuit's decision, however, the California Supreme Court held that the statute of limitations governing UCL deceptive practices claims is subject to the delayed discovery rule. Aryeh v. Canon Business Solutions, Inc., 55 Cal.4th 1185, 1196 (2013) ("we conclude the UCL is governed by common law accrual rules to the same extent as any other statute. That a cause of action is labeled a UCL claim is not dispositive; instead, 'the nature of the right sued upon' . . . and the circumstances attending its invocation control the point of accrual. The common law last element accrual rule is the default . . . , while exceptions to that rule apply precisely to the extent the preconditions for their application are met, as would be true under any other statute," disapproving Snapp & Associates Ins. Services, Inc. v. Malcome Bruce Burlingame Robertson, 96 Cal.App.4th 884, 891 (2002)). Because Herremans' UCL claim is based on allegations of fraudulent omission, under the Aryeh rule, it would benefit from delayed accrual under the discovery rule. Broberg v. The Guardian Life Ins. Co. of America, 171 Cal.App.4th 912, 920-21 (2009) (just like common law fraud claims, a UCL deceptive practices claim based on fraud should accrue "only when a reasonable person would have discovered the factual basis for a claim"). Although the Ninth Circuit's interpretation of California law is "'binding in the absence of any subsequent indication from the California courts that [its] interpretation was incorrect,'" Jones-Hamilton Co. v. Beazer Materials & Servs., Inc., 973 F.2d 688, 696 n. 4 (9th Cir. 1992) (quoting Owen v. United States, 713 F.2d 1461, 1464 (9th Cir. 1983)), Aryeh clearly indicates that Karl Storz Endoscopy incorrectly held the delayed discovery rule does not apply to UCL claims. Plumlee v. Pfizer, Inc., Case No.: 13-CV-00414-LHK, 2014 WL 4275519, *6 n. 5 (N.D. Cal. Aug, 29, 2014). Consequently, to the extent Herremans can show that accrual of the claim was tolled by delayed discovery, it will be timely.
BMW first asserts that Herremans' CLRA and fraud claims are time-barred. The statute of limitations on both CLRA and fraud claims is three years. CAL. CIV. CODE § 1783; CAL. CODE CIV. PROC. § 338(d) (providing a three year limitations period for "action for relief on the ground of fraud"). A cause of action for fraud "is not to be deemed to have accrued until the discovery, by the aggrieved party, of the facts constituting the fraud or mistake." Id. "The discovery rule only delays accrual until the plaintiff has, or should have, inquiry notice of the cause of action." Fox v. Ethicon Endo-Surgery, Inc., 35 Cal.4th 797, 807 (2005); see Rosal v. First Federal Bank of California, 671 F.Supp.2d 1111, 1131 (N.D. Cal. 2009) ("Plaintiffs are charged with presumptive knowledge of an injury if they have information of circumstances to put them on inquiry or if they have the opportunity to obtain knowledge from sources open to their investigation," citing Fox, 35 Cal.4th at 807-08). Under the CLRA, the limitations period generally begins to run on the date the allegedly wrongful act was committed - here, the date Herremans purchased her vehicle. CAL. CIV. CODE § 1783 ("Any action brought under the specific provisions of [the CLRA] shall be commenced not more than three years from the date of the commission of such method, act, or practice" (emphasis added)). The limitations period can be tolled, however, by the delayed discovery rule. See Keegan v. American Honda Motor Co., Inc., 284 F.R.D. 504, 543 (C.D. Cal. 2012) ("The discovery rule tolls the statute of limitations for CLRA claims").
The complaint alleges that "on or about February 12, 2011, at 43,667 miles, [Herremans'] vehicle underwent repairs due to the mechanical water pump leaking." Citing this allegation, BMW argues that Herremans first became aware of the defect, and the limitations period on her CLRA and fraud claims began to run, that day. Since Herremans filed this action on March 27, 2014, more than three years later, BMW contends her CLRA and fraud claims are time-barred. Herremans counters that her claims are not time-barred because the statutes of limitations governing her claims were tolled under the delayed discovery rule and/or the doctrine of fraudulent concealment.
FAC, ¶ 17
Opposition at 6-7.
"In order to invoke [the delayed discovery exception] to the statute of limitations, the plaintiff must specifically plead facts which show (1) the time and manner of discovery and (2) the inability to have made earlier discovery despite reasonable diligence." In re Conseco Insurance Co. Annuity Marketing & Sales Practices Litigation, No C-05-04726 RMW, 2008 WL 4544441, *8 (N.D. Cal. Sep. 30, 2008) (quoting Saliter v. Pierce Bros. Mortuaries, 81 Cal.App.3d 292, 296 (1978)); see E-Fab, Inc. v. Accountants, Inc. Services, 153 Cal.App.4th 1308, 1319 (2007) ("A plaintiff whose complaint shows on its face that his claim would be barred without the benefit of the discovery rule must specifically plead facts to show (1) the time and manner of discovery and (2) the inability to have made earlier discovery despite reasonable diligence. The burden is on the plaintiff to show diligence, and conclusory allegations will not withstand demurrer," quoting McKelvey v. Boeing North American, Inc., 74 Cal.App.4th 151, 160 (1999)); see also Keilholtz v. Lennox Hearth Products Inc., No. C 08-00836 CW, 2009 WL 2905960, *3 (N.D. Cal. Sept. 8, 2009) ("To invoke the delayed discovery rule, the plaintiff must plead facts showing: '(a) Lack of knowledge. (b) Lack of means of obtaining knowledge (in the exercise of reasonable diligence the facts could not have been discovered at an earlier date). (c) How and when he did actually discover the [facts underlying the claim],'" quoting General Bedding Corp. v. Echevarria, 947 F.2d 1395, 1397 (9th Cir. 1991)). As the McKelvey court recognized, this rule applies even where plaintiff is prosecuting a class action. See McKelvey, 74 Cal.App.4th at 160-61 (applying the standard in a putative class action).
if the delayed discovery rule applies, the statute of limitations is tolled until "the plaintiff discovers, or has reason to discover, the cause of action." Fox, 35 Cal.4th at 807 (citing Norgart v. Upjohn Co., 21 Cal.4th 383, 398 (1999); Neel v. Magana, Olney, Levy, Cathcart & Gelfandi, 6 Cal.3d 176, 187 (1971)). A plaintiff has reason to discover a cause of action when he or she "has reason at least to suspect a factual basis for its elements." Norgart, 21 Cal.4th at 398 (citing Jolly v. Eli Lilly & Co., 44 Cal.3d 1103, 1100 (1988)).
Herremans asserts that the mere fact that her water pump leaked and was repaired, while under warranty, did not put her on notice that BMW had failed to disclose the water pump defect. She contends "[she] did not discover the defect based on the initial repair, since she was assured this repair rectified the problem," and that she only discovered the defect when the car needed repairs a second time. Her complaint, however contains no specific allegations concerning how or when she first discovered the defect. Nor does it plead why, in the exercise of reasonable diligence, she could not have discovered the defect earlier. Consequently, Herremans' allegations are not adequate to invoke the delayed discovery rule. Keilholtz, 2009 WL 2905960 at *3; E-Fab, Inc., 153 Cal.App.4th at 1319.
Opposition at 6.
The court cannot consider assertions contained in plaintiffs' opposition to BMW's motion to dismiss that are not alleged in the complaint. See Schneider v. California Dept. of Corrections, 151 F.3d 1194, 1197 n. 1 (9th Cir. 1998) ("The 'new' allegations contained in the inmates' opposition . . . are irrelevant for Rule 12(b)(6) purposes. In determining the propriety of a Rule 12(b)(6) dismissal, a court may not look beyond the complaint to a plaintiff's moving papers, such as a memorandum in opposition to a defendant's motion to dismiss," citing Harrell v. United States, 13 F.3d 232, 236 (7th Cir. 1993), and 2 MOORE'S FEDERAL PRACTICE, § 12.34[2] (Matthew Bender 3d ed.) ("The court may not . . . take into account additional facts asserted in a memorandum opposing the motion to dismiss, because such memoranda do not constitute pleadings under Rule 7(a)")).
Herremans also argues that BMW "actively concealed" the defect at the time of purchase and thereafter; specifically, she asserts that it concealed the defect from her when she brought the car in for repairs because it assured her the problem had been fixed. Thus, she contends, the statute of limitations was tolled under the doctrine of fraudulent concealment. "[W]hen the defendant is guilty of fraudulent concealment of the cause of action the statute [of limitations] is deemed not to become operative until the aggrieved party discovers the existence of the cause of action." Unruh-Haxton v. Regents of University of California, 162 Cal.App.4th 343, 367 (2008) (quoting Pashley v. Pacific Elec. Ry. Co. 25 Cal.2d 226, 229 (1944) (alterations original)). "A defendant's fraud in concealing a cause of action against him will toll the statute of limitations, and that tolling will last as long as a plaintiff's reliance on the misrepresentations is reasonable." Grisham v. Philip Morris U.S.A., Inc., 40 Cal.4th 623, 744 (2007).
Opposition at 8.
Id.
"Absent a fiduciary relationship, nondisclosure is not fraudulent concealment - affirmative deceptive conduct is required." Long v. Walt Disney Co., 116 Cal.App.4th 868, 874 (2004). See Rutledge v. Boston Woven Hose and Rubber Co., 576 F.2d 248, 250 (9th Cir. 1978) ("Silence or passive conduct of the defendant is not deemed fraudulent, unless the relationship of the parties imposes a duty upon the defendant to make disclosure"); Lauter v. Anoufrieva, 642 F.Supp.2d 1060, 1100 (C.D. Cal. 2009) (under California law, "[a] plaintiff alleging fraudulent concealment must establish that his failure to have notice of his claim was the result of the affirmative conduct by the defendant"). See also Keilholtz, 2009 WL 2905960 at *5 ("[t]he rule of fraudulent concealment is applicable whenever the defendant intentionally prevents the plaintiff from instituting suit," quoting Bernson v. Browning-Ferris Indus. of California, Inc., 7 Cal.4th 926, 931 (1994)).
"When a plaintiff relies on a theory of fraudulent concealment . . . to save a cause of action that otherwise appears on its face to be time-barred, he or she must specifically plead facts which, if proved, would support the theory." Mills v. Forestex Co., 108 Cal.App.4th 625, 641 (2003). "In order to establish fraudulent concealment, the complaint must show: (1) when the fraud was discovered; (2) the circumstances under which it was discovered; and (3) that the plaintiff was not at fault for failing to discover it or had no actual or presumptive knowledge of facts sufficient to put him on inquiry." Id. (quoting Baker v. Beech Aircraft Corp., 39 Cal.App.3d 315, 321 (1974)).
The Ninth Circuit has previously held that a claim that fraudulent concealment tolls an applicable state statute of limitations must be pled with particularity under Rule 9(b). 389 Orange Street Partners v. Arnold, 179 F.3d 656, 662 (9th Cir. 1999) (applying Connecticut's law of fraudulent concealment, which is in all material respects identical to California law, and holding that the circumstances constituting the fraud must be pled with particularity under Rule 9(b)); Suckow Borax Mines Consolidated v. Borax Consolidated, 185 F.2d 196, 209 (9th Cir. 1951) (applying California law and holding that a "bare allegation" of fraudulent concealment "is but a conclusion of law which falls far short of the particularity of statement required by Rule 9(b)"); Collins v. Nationalpoint Loan Services, No. 09cv1314 JM(CAB), 2009 WL 3213979, *3 (S.D. Cal. Sept. 29, 2009) ("As Plaintiff alleges fraudulent concealment, [Rule] 9(b) requires him to particularly set forth specific allegations demonstrating the tolling of the statute of limitations"); Juniper Networks v. Shipley, No. C 09-0696 SB, 2009 WL 1381873, *5 (N.D. Cal. May 14, 2009) (an allegation that a website represented that a firewall was functioning despite knowledge that the statement was untrue was "too vague to comply with the particularity requirements of Rule 9(b)," and or to allege fraudulent concealment adequately as a basis for tolling the statute of limitations); Rambus Inc. v. Samsung Electronics Co., Ltd., Nos. C-05-02298 RMW, C-05-00334 RMW, 2007 WL 39374, *6 (N.D. Cal. Jan. 4, 2007) ("Nevertheless, because fraud is the underlying theory of the doctrine of fraudulent concealment, the heightened pleading requirements of [Rule] 9(b) applies"); Deirmenjian v. Deutsche Bank, A.G., No. CV 06-00774 MMM, 2006 WL 4749756, *43 (C.D. Cal. 2006) (to plead that the statute of limitations is tolled under the doctrine of fraudulent concealment, plaintiff "must plead with particularity the circumstances surrounding the concealment and state facts showing his due diligence in trying to uncover the facts").
As noted, in the absence of a fiduciary relationship, non-disclosure will not support a finding of fraudulent concealment. The only affirmative statement that Herremans alleges is the assurance she was given following the first repair that the problem had been resolved. Herremans does not allege what entity repaired the vehicle and gave her this assurance; given that the car was still under warranty, however, the court can infer that it was an authorized BMW dealer. Herremans apparently contends that an authorized dealer is an agent of BMW, and thus its statements can be attributed to the manufacturer. Herremans cites no authority for this proposition, and such authority as the court has found is to the contrary. See Connor v. Ford Motor Co., No. 96 C 8343, 1997 WL 724528,*2 (N.D. Ill. Nov. 12, 1997) ("The relationship between automobile manufacturers and their dealers has been examined by a host of courts throughout the country, all of which have agreed that dealers are not 'agents' of manufacturers"); Ago v. Begg, Inc., 705 F.Supp. 613, 619 (D.D.C. 1988) ("When an automobile manufacturer or an oil company licenses its tradename, it represents to the public only that the dealer is authorized to sell the products manufactured or approved by the licensor. . . . The manufacturer does not, however, represent anything other than that the dealer sells its products; it does not represent that the dealer is its agent for matters other than the selling of goods. . .") ;see also Kent v. Celozzi-Ettleson Chevrolet, Inc., No. 99 C 2868, 1999 WL 1021044, *4 (N.D. Ill. Nov. 3, 1999) ("While it is certainly true that the mere fact that Celozzi-Ettleson is an authorized General Motors dealer does not make it General Motors' agent, it is equally true that an automobile dealership may under certain circumstances be an agent of the manufacturer").
Herremans' complaint contains no allegations that, if proved, would show that the authorized dealer that presumably repaired her vehicle was BMW's agent. Thus, she has failed to allege an affirmative deceptive act by BMW sufficient to support a finding of fraudulent concealment. See Friedman v. Mercedes Benz USA LLC, No. CV 12-7204 GAF (CWx), 2013 WL 8336127, *6 (C.D. Cal. June 12, 2013) ("Regarding the second allegation that MBUSA made various misrepresentations and omissions through its dealers - namely Keyes - acting as MBUSA's agents, it is evident that Plaintiff failed to adequately plead any kind of agency relationship. The Court already warned Plaintiff that an agency relationship cannot just be assumed, rather facts must be pleaded. Plaintiffs allege that 'Keyes, as an authorized Mercedes dealership, served as Mercedes' agent and representative in advertising the features of the 2012 CLS550.' Plaintiffs have alleged no facts that MBUSA has any relationship with Keyes whatsoever. Plaintiffs allege no facts that MBUSA authorizes dealerships, or that Keyes in any respect serves as MBUSA's agent. MBUSA, notably, is a distributor, not a manufacturer"); Keegan v. Am. Honda Motor Co., 838 F.Supp.2d 929, 953 (C.D. Cal. 2012) (concluding that allegations that "Honda's dealers" "are its agents for vehicle repairs," and that class members contacted "Honda and/or its authorized agents for vehicle repairs" were insufficient to establish a relationship between Honda (the manufacturer) and its dealers).
Nor has Herremans adequately alleged any affirmative act of fraud designed to deter her from filing a claim. She pleads no facts that would support a finding that the statement allegedly made by the dealership was intentionally fraudulent. Nor does she satisfy Rule 9(b) by alleging what was actually said, who said it, and what made it intentionally false.
Finally, as noted earlier, Herremans does not allege when she discovered the defect, or why, in the exercise of reasonable diligence, she could not have discovered it earlier. As is true with respect to the discovery rule, see Fox, 35 Cal.4th at 807 ("The discovery rule only delays accrual until the plaintiff has, or should have, inquiry notice of the cause of action"), a plaintiff who contends fraudulent concealment tolls the statute of limitations must include such allegations in her complaint, see Mills, 108 Cal.App.4th at 641 (noting that a complaint must contain facts showing that plaintiff was not at fault for failing to discover the cause of action and had no actual or presumptive knowledge of facts sufficient to put him on inquiry).
Because Herremans filed this action more than three years after having had a water pump leak in her vehicle repaired, and because she does not adequately allege facts showing that she can invoke the delayed discovery rule or the doctrine of fraudulent concealment, her CLRA and fraud claims, as pled, are time-barred. The court therefore grants BMW's motion to dismiss the claims on this ground.
C. Whether Herremans States a Claim under the CLRA or the UCL
1. Legal Standard Governing CLRA Claims
The CLRA makes illegal various "unfair methods of competition and unfair or deceptive acts or practices undertaken by any person in a transaction intended to result or which results in the sale or lease of goods or services to any consumer." CAL. CIV. CODE § 1770(a). Conduct that is "likely to mislead a reasonable consumer" violates the CLRA. Colgan v. Leatherman Tool Group, Inc., 135 Cal.App.4th 663, 680 (2006) (quoting Nagel v. Twin Laboratories, Inc., 109 Cal.App.4th 39, 54 (2003)). A "reasonable consumer" is an "ordinary consumer acting reasonably under the circumstances," who "is not versed in the art of inspecting and judging a product, [or] in the process of its preparation or manufacture. . . ." Id. (citing 1A CALLMANN ON UNFAIR COMPETITION, TRADEMARKS AND MONOPOLIES § 5:17 (4th ed. 2004)).
Section 1770(a)(4) bans the use of "deceptive representations . . . in connection with goods or services." Section 1770(a)(5) prohibits "[r]epresenting that goods or services have . . . characteristics, ingredients, uses, benefits, or quantities which they do not have. . . ." In addition, § 1770(a)(7) prohibits "[r]epresenting that goods or services are of a particular standard, quality, or grade . . . if they are of another." Finally, Section 1770(a)(9) bans "[a]dvertising goods or services with intent not to sell them as advertised." These sections of the CLRA encompass deceptive omissions as well as deceptive representations. Mui Ho v. Toyota Motor Corp., No. 12-2672 SC, 2013 WL 1087846, *6 (N.D. Cal. Mar. 14, 2013) (citing Daugherty v. American Honda Motor Company Inc., 144 Cal.App.4th 824, 835 (2006)). The CLRA is "liberally construed and applied to promote its underlying purposes, which are to protect consumers against unfair and deceptive business practices and to provide efficient and economical procedures to secure such protection." Colgan, 135 Cal.App.4th at 680.
2. Legal Standard Governing UCL Claims
Under the UCL, any person or entity that has engaged, is engaging, or threatens to engage "in unfair competition may be enjoined in any court of competent jurisdiction." CAL. BUS. & PROF. CODE §§ 17201, 17203. "Unfair competition" includes "any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising." Id., § 17200. The California Supreme Court has construed the term broadly. See Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co., 20 Cal.4th 163, 180 (1999) ("[Section 17200] defines 'unfair competition to include any unlawful, unfair or fraudulent business act or practice. . . . Its coverage is sweeping, embracing anything that can properly be called a business practice and that at the same time is forbidden by law. . . . By proscribing any unlawful business practice, section 17200 borrows violations of other laws and treats them as unlawful practices that the unfair competition law makes independently actionable. . . . However, the law does more than just borrow. The statutory language referring to any unlawful, unfair or fraudulent practice . . . makes clear that a practice may be deemed unfair even if not specifically proscribed by some other law. Because Business and Professions Code section 17200 is written in the disjunctive, it establishes three varieties of unfair competition - acts or practices which are unlawful, or unfair, or fraudulent" (internal quotations omitted)); see also Paulus v. Bob Lynch Ford, Inc., 139 Cal.App.4th 659, 676-77 (2006) ("The purpose of the UCL 'is to protect both consumers and competitors by promoting fair competition in commercial markets for goods and services. . . .' Thus, the scope of the UCL (Bus. & Prof. Code, § 17200 et seq.) is 'broad.' It 'covers a wide range of conduct'" (citations and footnote omitted)).
3. Whether Herremans Has Adequately Pled CLRA and UCL Claims
BMW attacks Herremans' CLRA and UCL claims in tandem, denominating them "plaintiff's omissions-based" claims. (Motion at 9.)
a. Whether Herremans' Allegations Satisfy the Heightened Pleading Requirement of Rule 9(b)
The parties agree that Herremans' CLRA and UCL claims "sound in fraud" because they are based on BMW's allegedly fraudulent omission and/or concealment of material information concerning the water pump defect. Such claims are subject to the heightened pleading requirements of Rule 9(b) of the Federal Rules of Civil Procedure. Kearns v. Ford Motor Co., 567 F.3d 1120, 1124 (9th Cir. 2009); In re Toyota Motor Corp. Unintended Acceleration Marketing, Sales Practices, and Products Liability Litigation, 754 F.Supp.2d 1145, 1170 n. 17 (C.D. Cal. 2010). Generally, a plaintiff must plead the "time, place, and specific content" of allegedly fraudulent conduct to satisfy Rule 9(b). See Swartz v. KPMG LLP, 476 F.3d 756, 764 (9th Cir. 2007); Cirulli v. Hyundai Motor Co., No. SACV 08-0854 AG (MLGx), 2009 WL 5788762, *4 (C.D. Cal. June 12, 2009) ("Generally, a plaintiff must plead 'with particularity' the time and place of the fraud, the statements made and by whom made, an explanation of why or how such statements were false or misleading when made, and the role of each defendant in the alleged fraud," citing In re GlenFed, Inc. Securities Litigation, 42 F.3d 1541, 1547-49 (9th Cir. 1994) (en banc); Lancaster County Hospital v. Antelope Valley Hosp. Dist., 940 F.2d 397, 405 (9th Cir. 1991)). When a claim rests on allegations of fraudulent omission, however, the Rule 9(b) standard is somewhat relaxed because "a plaintiff cannot plead either the specific time of [an] omission or the place, as he is not alleging an act, but a failure to act." Id. (citing Washington v. Baenziger, 673 F.Supp. 1478, 1482 (N.D. Cal. 1987)).
See Motion at 14; Opposition at 5-6.
Nonetheless, a plaintiff alleging fraudulent omission or concealment must still plead the claim with particularity. See Bias v. Wells Fargo & Co., 942 F.Supp.2d 915, 935 (N.D. Cal. 2013) ("Although Plaintiffs' allegations do allege a fraud based in part on omissions, a plaintiff must still plead such claim with particularity," citing Kearns, 567 F.3d at 1126 ("Because the Supreme Court of California has held that nondisclosure is a claim for misrepresentation in a cause of action for fraud, it (as any other fraud claim) must be pleaded with particularity under Rule 9(b)"); Marolda v. Symantec Corp., 672 F.Supp.2d 992, 1002 (N.D. Cal. 2009) ("The Ninth Circuit has recently clarified that claims of nondisclosure and omission, as varieties of misrepresentations, are subject to the pleading standards of Rule 9(b)")); see also Eisen v. Porsche Cars North America, Inc., No. CV 11-9405 CAS, 2012 WL 841019, * 3 (C.D. Cal. Feb. 22, 2012) ("Although claims based on an alleged fraudulent omission or concealment can succeed without the same level of specificity required by a normal fraud claim . . . the contention that . . . nondisclosure claims need not be pleaded with particularity is unavailing" (internal quotation marks and citations omitted)). Specifically, a plaintiff must "set forth an explanation as to why [the] omission complained of was false and misleading" to state a claim under Rule 9(b). Bias, 2013 WL 1787158 at *12 (citing In re GlenFed, Inc. Sec. Litig., 42 F.3d at 1548). "[T]o plead the circumstances of [the] omission with specificity, plaintiff must describe the content of the omission and where the omitted information should or could have been revealed, as well as provide representative samples of advertisements, offers, or other representations that plaintiff relied on to make her purchase and that failed to include the allegedly omitted information." Eisen, 2012 WL 84109 at *3 (citing Marolda, 672 F.Supp.2d at 1002).
BMW argues that Herremans has failed to plead the fraudulent omission adequately under Rule 9(b). It asserts that Herremans' CLRA and UCL claims relies on "conclusory allegations devoid of details or substance on critical elements." BMW cites as an example Herremans' allegation that it "knew" of the alleged defect and notes that she pleads no facts that would support a finding of knowledge. It also faults Herremans for failing to plead the date or dates on which it purportedly learned of the defect so as to demonstrate that it knew of the problem at the time she purchased her vehicle. BMW contends that Herremans'"reliance allegations suffer from the same defect" by omitting the specifics of her reliance on its alleged omission. Herremans counters that her claims are sufficient under Rule 9(b). She contends that she has adequately pled that BMW was in exclusive possession of certain facts; that BMW knew those facts had been withheld from consumers; that the facts withheld were material; and that she relied on the absence of any defect.
Motion at 21-22.
Id. at 22.
Id.
Id.
Id.
Opposition at 9, 13, 20, 23.
Id. at 2-5, 9, 12-13, 20-21.
The court concludes that Herremans has pled her fraudulent omission/concealment claims with sufficient particularity under Rule 9(b). Herremans pleads "who" engaged in concealment (BMW); "what" was omitted and/or concealed (a water pump defect that causes the class vehicles' engines to overheat and creates a risk of catastrophic engine failure); "why" the information was not disclosed (to sell more class vehicles at a premium price and to avoid having to reimburse costs incurred by customers associated with identifying and fixing the defect); and "how" BMW allegedly concealed the information (by denying, following the receipt of numerous customer complaints, that there was a known mechanical water pump problem, and by assuring Herremans and class members that repairs were permanent, rather were temporary, fixes for the problem). Herremans has thus adequately pled the particulars of BMW's allegedly fraudulent omissions. See In re Toyota Motor Corp., 754 F.Supp.2d at 1190-91 (finding that plaintiffs had sufficiently pled fraudulent concealment when they alleged "the 'what' (concealment of [a sudden unintended acceleration defect]. . . ), the 'why' (to induce customers to purchase Toyota cars at the prices sold . . . ), and the 'how' (instead of telling consumers about SUA problems, the problems were concealed so that Toyota's business would not be disrupted by NHTSA investigations and/or recalls and . . . negative publicity)"); Ehrlich v. BMW of North America, LLC, 801 F.Supp.2d 908 (C.D. Cal. 2010) (denying a motion to dismiss CLRA, UCL, and fraudulent concealment claims where plaintiff pled with particularity how the design was defective, how BMW discovered the defect, the steps BMW took to conceal the defect, and the fact that the defect posed an injury risk to a driver's head and neck); see also Falk v. General Motors Corp., 496 F.Supp.2d 1088, 1097 (N.D. Cal. 2007) ("Plaintiffs support their active concealment claim with several different factual allegations. First, the fact that various GM customers complained between 2003 and 2007 yet GM never made any attempt to notify other customers or effect a recall, suggests that GM may have attempted to actively conceal the alleged defect in their speedometers. Plaintiffs also argue that '[w]here GM replaced the Trucks' speedometers pursuant to warranty provisions, GM utilized equally defective speedometers and speedometer mechanisms such that the defect was not corrected even though GM informed consumers that it was.' This claim suggests that GM tried to gloss over the problems with its speedometers by replacing broken ones with the exact same model of speedometer, thereby giving the impression that any defects were unique cases. This might very well constitute active concealment of a systematic problem").
FAC, ¶ 19.
Id., ¶¶ 5-8, 29.
Id., ¶¶ 13, 35, 37, 40, 45, 47-50, 67. Herremans alleges that BMW knowingly failed to disclose a material defect to her and other class members at the time they purchased the class vehicles. (Id., ¶ 45.) She further alleges that she and other class members would not have purchased the class vehicles had they known of the defect. (Id.) Finally, she asserts that BMW advertised the vehicles as being of a particular "standard, quality, or grade" (i.e., non-defective), and had no intent to sell them as advertised. (Id., ¶ 67.) Construed in Herremans' favor, these allegations give rise to an inference that BMW failed to disclose the purported defect so that it could (1) sell more class vehicles (because the vehicles would not have been purchased had the defect been disclosed); or (2) sell class vehicles at a premium price (because a vehicle's value is reduced by the presence of a defect). Herremans also alleges explicitly that BMW failed to reimburse costs vehicle owners incurred in attempting to identify and repair the purportedly defective mechanical water pumps. (Id., ¶¶ 35, 37, 40, 47-50.)
Id., ¶¶ 12, 33, 46-51.
BMW's assertion that Herremans' allegations concerning its knowledge of the defect must satisfy Rule 9(b) is contradicted by the language of the rule itself. Rule 9(b) provides that "knowledge . . . may be alleged generally." Fed.R.Civ.Proc. 9(b). Such allegations must nonetheless satisfy Rule 8(a) and the Twombly/Iqbal plausibility standard. As discussed infra, Herremans' allegations do not.
It is not clear whether allegations of reliance are subject to Rule 9(b)'s heightened pleading requirement. Compare Andrews Farms v. Calcot, Ltd., 527 F.Supp.2d 1239, 1252 (E.D. Cal. 2007) (holding that Rule 9(b) does not "require[ ] more particular pleading for the element of reliance"); Anthony v. Yahoo Inc., 421 F.Supp.2d 1257, 1264 (N.D. Cal. 2006) (holding that the "heightened standards" of Rule 9(b) do not apply to allegations of reliance) with Kane v. Chobani, Inc., 973 F.Supp.2d 1120, 1135 (N.D. Cal. 2014) (holding that plaintiffs' allegations of reliance "fail[ ] to meet the heightened pleading requirement under Rule 9(b)"); In re Countrywide Fin. Corp. Sec. Litig., 588 F.Supp.2d 1132, 1198 (C.D. Cal. 2008) (holding that "[t]he reliance element is subject to the pleading requirements of Rule 9(b) because it is one of the 'circumstances constituting fraud'"). See also Lee Myles Associates Corp. v. Paul Rubke Enterprises, Inc., 557 F.Supp.2d 1134, 1143 (S.D. Cal. 2008) (concluding that Rule 9(b)'s heightened pleading requirements did not apply to allegations of reliance because the rule states that "conditions of mind . . . may be averred generally"). The court agrees with those courts that have concluded that reliance need not be pled with particularity under Rule 9(b) because it is a condition of mind. It addresses infra whether Herremans' pleading of reliance is adequate under Rule 8(a).
As in these cases, Herremans' allegations of fraudulent omission and concealment are sufficiently particular to satisfy Rule 9(b). Consequently, the court denies BMW's motion to dismiss Herremans' CLRA and UCL claims for failure to satisfy Rule 9(b)'s heightened pleading standard.
The court also declines to dismiss Herremans' fraud claim on this basis as well. Because the same pleading standard applies to fraud claims and CLRA and UCL claims sounding in fraud, Herremans' allegations are also sufficient to state a fraud claim under Rule 9(b).
b. Whether Herremans Has Adequately Alleged a Duty to Disclose
Herremans predicates her CLRA and UCL claims on BMW's allegedly knowing and intentional failure to disclose to class members that, as a result of the water pump defect, the class vehicles were "defectively designed or manufactured, would fail prematurely, and were not suitable for their intended use." She also contends that BMW's failure to disclose the defect was equivalent to a representation that the class vehicles were "of a particular standard, quality, or grade" when they were of another, and that when it advertised the class vehicles, it did not intend to sell them as advertised. Herremans contends that BMW's unfair and deceptive acts occurred repeatedly and were thus capable of deceiving a substantial portion of the purchasing public.
FAC, ¶ 69.
Id., ¶ 67.
Id., ¶ 68.
"Under California law, there are four circumstances in which an obligation to disclose may arise: (1) when the defendant is in a fiduciary relationship with the plaintiff; (2) when the defendant had exclusive knowledge of material facts not known to the plaintiff; (3) when the defendant actively conceals a material fact from the plaintiff; and (4) when the defendant makes partial representations but also suppresses some material facts." Smith v. Ford Motor Co., 749 F.Supp.2d 980, 987 (N.D. Cal. 2010) (citing Limandri v. Judkins, 52 Cal.App.4th 326, 337 (1997)); see also Cirulli v. Hyundai Motor Co., No. SACV 08-0854 AG (MLGx), 2009 WL 5788762, *3 (C.D. Cal. June 12, 2009) ("In Falk, the Northern District of California found that concealment or a failure to disclose can constitute actionable fraud under the CLRA in four situations: (1) when the defendant is in a fiduciary relationship with the plaintiff; (2) when the defendant had exclusive knowledge of material facts not known to the plaintiff; (3) when the defendant actively conceals a material fact from the plaintiff; and (4) when the defendant makes partial representations but also suppresses some material fact," citing Falk, 496 F.Supp.2d 1088 (quoting Limandri, 52 Cal.App.4th at 327)).
Herremans does not allege that she has a fiduciary relationship with BMW, nor that BMW made a partial representation. Rather, she contends that BMW had exclusive knowledge of material facts that it actively concealed from her and other putative class members. To support a failure to disclose claim, the facts within BMW's knowledge must have been material. See, e.g., Ostreicher v. Alienware Corp., 544 F.Supp.2d 964, 970-71 (N.D. Cal. 2008) (citing the Limandri factors and stating that "[t]he first condition is not in issue here. [A]ll of the other situations require materiality"), aff'd, 322 Fed. Appx. 489 (9th Cir. Apr. 2, 2009) (Unpub. Disp.). "[I]n order for non-disclosed information to be material, a plaintiff must show that 'had the omitted information been disclosed, one would have been aware of it and behaved differently.'" Ostreicher, 544 F.Supp.2d at 971 (quoting Falk, 496 F.Supp.2d at 1095, in turn quoting Mirkin v. Wasserman, 5 Cal.4th 1082, 1093 (1993)). As noted, "[m]ateriality . . . is judged by the effect on a 'reasonable consumer.'" Id. (citing Consumer Advocates v. Echostar Satellite Corp., 113 Cal.App.4th 1351, 1360 (2003)).
Opposition at 4-5; see FAC, ¶¶ 43-51.
"[W]here, as here, a plaintiff's claim is predicated on a manufacturer's failure to inform its customers of a product's likelihood of failing outside the warranty period, the risk posed by such asserted defect cannot be 'merely' the cost of the product's repair . . . ; rather, for the omission to be material, the failure must pose 'safety concerns.'" Smith, 2010 WL 3619853 at *4 (citing Daugherty v. Am. Honda Motor Co., Inc., 144 Cal.App.4th 824, 835-38 (2006)). "In other words, under California law, and as recently described by the Ninth Circuit: 'A manufacturer's duty to consumers is limited to its warranty obligations absent either an affirmative misrepresentation or a safety issue.'" Id. (citing Oestriecher, 322 Fed. Appx. at 493) (affirming the dismissal of CLRA, UCL and fraudulent concealment claims because plaintiff failed to allege that defendant had 'affirmatively misrepresented its products' or that the alleged defect 'posed a threat to his own safety or the safety of others')). See also Smith, 2010 WL 3619853 at *4 ("The California Court of Appeal has held that a manufacturer cannot be found liable under the CLRA for failure to disclose a defect that manifests itself after expiration of the warranty period unless such omission (1) is 'contrary to a representation actually made by the defendant' or (2) pertains to a 'fact the defendant was obligated to disclose,'" quoting Daugherty, 144 Cal.App.4th at 835-36).
Such rule is consistent with the policies underlying California warranty law. As noted in Daugherty:
"[V]irtually all product failures discovered in automobiles after expiration of the warranty can be attributed to a 'latent defect' that existed at the time of sale or during the term of the warranty. All parts will wear out sooner or later and thus have a limited effective life. Manufacturers always have knowledge regarding the effective life of particular parts and the likelihood of their failing within a particular period of time. . . . [M]anufacturers . . . can always be said to 'know' that many parts will fail after the warranty period has expired. A rule that would make failure of a part actionable based on such 'knowledge' would render meaningless time/mileage limitations on warranty coverage." Daugherty, 144 Cal.App.4th at 830-31 (quoting Abraham v. Volkswagen of Am., Inc., 795 F.2d 238, 250 (2d Cir. 1986) (alterations original))."Indeed, as noted by the district court in Oestreicher, 'the purpose of a warranty is to contractually mark the point in time during the useful life of a product when the risk of paying for repairs shifts from the manufacturer to the consumer.'" Smith, 2010 WL 3619853 at *5 (citing Oestreicher v. Alienware Corp., 544 F.Supp.2d 964, 972 (N.D. Cal. 2008), and Abraham, 795 F.2d at 250).
"[T]he rule set forth in Daugherty is consistent with the general policy stated by the California Supreme Court that although '[a] consumer should not be charged at the will of the manufacturer with bearing the risk of physical injury when he buys a product on the market,' the consumer nevertheless 'can . . . be fairly charged with the risk that the product will not match his economic expectations unless the manufacturer agrees that it will.'" Id. (citing Seely v. White Motor Co., 63 Cal.2d 9, 18 (1965)). See also Berenblat v. Apple Inc., Nos. 08-4969 JF (PVT), 09-1649 JF (PVT), 2009 WL 2591366, *5-7 (N.D. Cal. Aug. 21, 2009) (dismissing claims based on an allegedly defective computer component, because "[t]he failure to disclose a defect that might, or might not, shorten the effective life span of [a product] that functions precisely as warranted throughout the terms of the express warranty" is not actionable); Morgan v. Harmonix Music Systems, Inc., No. C08-5211 BZ, 2009 WL 2031765, *4 (N.D. Cal. July 7, 2009) (dismissing claims based on allegedly defective video game drum pedals because "[a]ccording to all of the relevant case law, defendants are only under a duty to disclose a known defect in a consumer product when there are safety concerns associated with the product's use"); Wilson v. Hewlett Packard Co., No. C-09-2253 RMW, 2009 WL 3021240, *1 (N.D. Cal. Sept. 17, 2009) (dismissing a CLRA claim based on a manufacturer's alleged duty to disclose where the omission did not implicate safety concerns); Hoey v. Sony Electronics, Inc., 515 F.Supp.2d 1099, 1105 (N.D. Cal. 2007) (finding that "[t]here is no authority that provides that the mere sale of a consumer electronics product in California can create a duty to disclose any defect that may occur during the useful life of the product").
i. Whether Herremans Has Adequately Alleged That the Purported Defect Poses a Safety Hazard
Herremans alleges that the water pump defect causes the engine to overheat. She further asserts that the defect can manifest at any time and, if it does so while the vehicle is being driven, the vehicle will experience "catastrophic engine failure." When catastrophic engine failure occurs, the vehicle purportedly is unable to accelerate, and experiences steering and braking problems associated with a malfunction of the power brake and power steering systems. Herremans contends these effects pose a serious safety hazard if the affected vehicle is in traffic. Because BMW purportedly concealed the defect from consumers, Herremans asserts that it concealed facts regarding an unreasonable safety risk that would have been material to the reasonable consumer. See Cholakyan v. Mercedes-Benz USA, LLC, 796 F.Supp.2d 1220, 1238 (C.D. Cal. 2011) ("Cholakyan has not alleged that the water leak defect caused engine stalling; rather, he asserts it causes sudden and unexpected engine failure that could result in personal injury or death. It is not implausible that the 'electrical faults' described in the TSB could give rise to the safety concerns alleged in the complaint. . . . Because Cholakyan has adequately alleged a safety defect, he has sufficiently pled a material failure to disclose for purposes of the UCL and CLRA"); Marsikian v. Mercedes Benz USA, LLC, No. CV 08-4876 AHM (JTLx), 2009 U.S. Dist. LEXIS 117012, *16-17 (C.D. Cal. May 4, 2009) (denying a motion to dismiss a CLRA claim where plaintiff alleged that Mercedes-Benz air intake systems were "susceptible to clogging," and that the defect could lead to "substantial electrical failure," because "it is not implausible that the [clogging] would cause 'catastrophic engine and electrical system failure' while the car is on the road").
FAC, ¶¶ 8, 29.
Id.
Id.
Id., ¶¶ 46-51.
See also Ehrlich, 801 F.Supp.2d at 918 ("Plaintiff has sufficiently alleged that the defective windshields in the MINIs create an unreasonable safety risk that would be material to a reasonable consumer. Plaintiff alleges that each MINI's windshield is part of the vehicle's safety restraint system and if a MINI with a cracked windshield is in a roll-over accident, the windshield can become dislodged, compromising roof-crush resistance and causing serious head and neck injuries, failure of the passenger side airbag to deploy, or the ejection of passengers from the vehicle. The alleged unreasonable risk of safety created by compromised windshields during rollover accidents is relevant to the materiality of BMW's omissions, and Plaintiff has alleged a plausible unreasonable safety risk that would have been material to the reasonable consumer. . . . Thus, the Court finds that Plaintiff has sufficiently alleged a duty to disclose the cracking defect and BMW's motion to dismiss Plaintiff's fraud-based CLRA and UCL claims on this ground is DENIED"); Falk, 496 F.Supp.2d at 1096 ("[P]laintiffs successfully allege that the potential for failed speedometers constitutes a safety hazard: . . . the risk of inadvertent speeding, driving at unsafe speeds, and accidents").
BMW urges the court to reject the safety-based disclosure obligation created in Falk v. General Motors Corp., 496 F.Supp. 2d 1088, 1096 (N.D. Cal. 2007) in cases such as this, where the plaintiff did not suffer physical injury as a result of the water pump defect. BMW argues that purporting to interpret Daugherty, the Falk court created a broad safety exception to Daugherty's holding that there is no duty to disclose under the CLRA absent physical injury or safety concerns posed by the defect. See Daugherty, 144 Cal.App.4th at 836. See also Bardin v. Daimlerchrysler Corp., 136 Cal.App.4th 1255, 1270 (2006) (holding that there was no duty to disclose because "[p]laintiffs did not allege any personal injury or safety concerns related to DCC's use of tubular steel exhaust manifolds" (emphasis added)). BMW argues that this extension is unwarranted to the extent it imposes a safety-based disclosure obligation that protects purely economic interests, and that it is inconsistent with Seely v. White Motor Co., 63 Cal. 2d 9 (1965), the California Supreme Court decision on which the Daughtery court relied. In Seely, the California Supreme Court held that a negligence or product liability claim based solely on economic harm, rather than any physical injury, was not cognizable under California law. Seely, 63 Cal.2d at 17-18. Citing Seely, BMW argues it would be anomalous for the court to impose a safety-based disclosure obligation protecting Herremans' purely economic interest.
Motion at 17-19. BMW asserts that Falk created an expansive "safety exception" that "extended Daughtery far beyond its contemplated reach." (Id.) As support for this argument, it cites Buller v. Sutter Health, 160 Cal.App.4th 981 (2008). There, the California Court of Appeal rejected a contention that a failure to disclose was actionable under the UCL if it satisfied one of the four tests for the tort of fraud by failure to disclose set forth in Limandri, 52 Cal.App.4th 326. Buller, 160 Cal.App.4th at 988 n. 3. Buller did not address the "safety exception" BMW seeks to have the court reject. Instead, Buller declined to apply Falk to the extent it compelled the conclusion that a health care provider had an obligation to disclose the availability of a prompt payment discount on its bills. The Buller court stated that as alleged by plaintiff, the failure to disclose could not be a fraudulent practice under the UCL because patients had no expectation of receiving such a discount and the failure to disclose was thus not likely to deceive the public. Id. at 987-88. This is in sharp contrast to the situation at issue in Falk and here, where a member of the public purchasing a vehicle undoubtedly has an expectation that the vehicle can safely transport those using it. Thus, Buller does not demonstrate that in the context of claims that an automobile manufacturer has failed to disclose a known safety hazard, Falk's analysis is in error.
Moreover, another California Court of Appeal reached a conclusion contrary to Buller in Collins v. eMachines, Inc., 202 Cal.App.4th 249, 255-56 (2011). Citing Falk, the Collins court applied the Limandri test in assessing whether a CLRA plaintiff could state a claim based on a manufacturer's failure to disclose a defect in its computers that could and did corrupt data stored on the computers. Id. at 255-59. The court similarly held that plaintiff had stated a claim under the UCL's fraudulent prong, because the complaint alleged that "eMachines knew [a material fact regarding the defective software] but failed to disclose and actively concealed it." Id. at 258-59.
Thus, at most, California Courts of Appeal disagree as to whether a failure to disclose can be actionable under the CLRA and UCL if one of the four tests set forth in Limandri is met. BMW has cited no California decision that has rejected Falk's conclusion that a known safety hazard in a vehicle is a material fact that the manufacturer is obligated to disclose.
Id. at 18-19.
The court cannot agree. Rather, the court agrees with Judge Alsup's reasoned analysis of Daugherty's discussion of "safety concerns" in Falk. There, plaintiffs brought CLRA and UCL fraudulent omissions claims, alleging that the speedometers in defendant's vehicles ceased to function properly after the vehicles' express warranty expired. Falk, 496 F.Supp.2d at 1092. Judge Alsup noted that the "Daugherty [court had] emphasized that an 'unreasonable' safety risk would lead to a duty to disclose," and concluded that a duty to disclose existed under the circumstances, despite the lack of physical injury to any plaintiff, because they had adequately alleged that the defective speedometers constituted a safety hazard. Id. at 1094, 1096 & n. *. Similarly, in Ehrlich, the court relied on Falk and Daugherty, and concluded that plaintiff had adequately alleged a duty to disclose despite a lack of physical injuries, because he pled that the allegedly defective windshields at issue in that case "create[d] an unreasonable safety risk that would be material to a reasonable consumer." Ehrlich, 801 F.Supp.2d at 918. The court noted specifically that it was not persuaded "that [p]laintiff must plead that consumers have been injured by the alleged unreasonable safety risk." Id.
The court agrees with this interpretation of Daughtery and Bardin. In Daugherty, the court noted specifically that although "Daugherty claim[ed] the complaint alleges Honda's knowledge of 'unreasonable risk' to plaintiffs at the time of sale, . . . the 'unreasonable risk' alleged [was] merely the risk of 'serious potential damages' - namely, the cost of repairs in the event the defect ever cause[d] an oil leak. The sole allegation mentioning 'safety' [was found in] the paragraph claiming punitive damages, [which] . . . merely assert[ed] a legal conclusion: that Honda's conduct was 'carried on with a willful and conscious disregard for the safety of Plaintiffs and others, entitling Plaintiffs to exemplary damages under Civil Code § 3294.'" Daugherty, 144 Cal.App.4th at 836. Where plaintiffs are able adequately to allege an unreasonable risk to safety - i.e., a risk of physical injury - as the result of an automotive defect, however, the court agrees with the Ehrlich court that they need not plead that they or another class member have suffered such injury to state a viable CLRA or UCL claim. Indeed, in Wilson v. Hewlett-Packard Co., 668 F.3d 1136 (9th Cir. 2012) - a case on which BMW heavily relies - the Ninth Circuit endorsed just such a rule. Id. at 1141-43; id. at 1141 ("A manufacturer's duty to consumers is limited to its warranty obligations absent either an affirmative misrepresentation or a safety issue" (internal quotation marks omitted)); id. at 1142 ("[F]for [an] omission to be material, the failure must [still] pose safety concerns" (internal quotation marks omitted)).
Indeed, the Daughtery court emphasized, in affirming the Superior Court's demurrer, that the plaintiff had not alleged "any instance of physical injury or any safety concerns posed by the defect." Daughtery, 144 Cal.App. 4th at 836-37. Had the court intended to limit the exception to instances in which a plaintiff alleged physical injury arising from the defect, it presumably would not have referenced "safety concerns" in addition to physical injuries.
BMW contends such a result is at odds with Seely, because there, the vehicle's brakes did not work and the vehicle overturned. (See Motion at 18; Seely, 63 Cal.2d at 12.) Nothing in the Court's opinion suggests that Seely argued the vehicle posed an unreasonable safety risk, however. Rather, he asserted a breach of warranty claim to recover monies paid to purchase and repair the truck as well as lost profits. Seely, 63 Cal.2d at 16. Seely had not suffered physical injuries, see id. at 12, and therefore did not attempt to recover for them. The Court's statement that "[a] consumer should not be charged at the will of the manufacturer with bearing the risk of physical injury when he buys a product on the market," see id. at 18 (emphasis added), moreover, appears to support the conclusion of the Falk and Erhlich courts that a plaintiff who alleges a manufacturer failed to disclose a defect posing an unreasonable safety hazard, i.e., a risk of physical injury, should be permitted to assert a claim under the CLRA and UCL even if he or she has not yet suffered physical injury. If the plaintiff is unable to prove the existence of such a hazard, then he or she is limited to such rights as exist under the manufacturer's warranty.
BMW next argues that, even if Daugherty supports imposition of a safety-based disclosure obligation, Herremans has failed to allege facts that establish a "sufficient nexus between [the purported] defect and [such a] risk." Specifically, it contends that Herremans fails to allege that the water pump defect, "when it manifests, does so without warning and immediately causes the vehicle's engine to stop working." It asserts that she instead alleges there are several warning signs of a potential water pump failure - e.g., the mechanical water pump often makes noise and then leaks water. It is only after "a sufficient amount of water" has leaked, or the metal shaft has stopped rotating that the engine can experience a catastrophic failure. BMW notes that Herremans does not allege that her safety was at risk on the two occasions her water pump failed, and acknowledges that that she does not know "if the Water Pump Defect has [actually] resulted in traffic accidents."
Motion at 19-20.
Id. at 20.
FAC, ¶¶ 29
Id., ¶ 8.
Id., ¶ 30.
Herremans has sufficiently alleged that the water pump defect creates an unreasonable safety risk. As noted, she alleges that the water pump defect causes the engine to overheat, that this can occur at any time and that if it happens while the vehicle is being driven, the vehicle will experience "catastrophic engine failure." When catastrophic engine failure occurs, the vehicle purportedly is unable to accelerate, and experiences steering and braking problems associated with a malfunction of the power brake and power steering systems. Allegations of the loss of a vehicle's braking and steering systems while in traffic suffice to plead a risk of physical injury to the driver that constitutes an unreasonable safety risk. See Cholakyan, 796 F.Supp.2d at 1238; Marsikian, 2009 U.S. Dist. LEXIS 117012 at *16-17.
FAC, ¶¶ 8, 29.
Id.
Herremans' allegation that the mechanical water pump makes noise, which "is often an indicator that [it] will soon leak and/or fail to function," does not negate her ability to prove that the purported defect poses an unreasonable safety hazard. Specifically, it does not plead facts showing definitively that there is sufficient time for a vehicle owner to react to the noise by, for example, seeking to have the vehicle repaired, prior to any engine failure. This could well be the case, or it could not. Similarly, the fact that a "sufficient amount" of water must allegedly leak from the vehicle before engine failure occurs does not establish that a reasonably careful vehicle owner could remedy the problem before the engine failed. Once again, the facts may show that this is the case, or they may not. To meet her pleading burden of seting forth a plausible claim, Herremans need not allege facts that eliminate any possibility BMW can prevail. She need only plead facts that indicate she has a plausible chance of prevailing.
Nor does the court find persuasive BMW's argument that the purported safety risk arising from the defect is speculative because Herremans has not suffered physical injury and knows of no class member who has. BMW appears to rely on Tietsworth v. Sears, Roebuck & Co., 720 F.Supp.2d 1123 (N.D. Cal. 2010). Tietsworth examined plaintiff's allegations of a safety defect in a different context, i.e., to assess whether plaintiff had alleged injury in fact. See Erhlich, 801 F.Supp.2d at 918 ("BMW points out that Plaintiff has not alleged that the defective windshields have actually caused injuries in any rollover accidents, relying on Tietsworth. . . . BMW further speculates that injuries would not occur unless an owner makes a conscious decision to drive a MINI with a cracked windshield and then gets into a rollover accident. The Court is not persuaded by Tietsworth or BMW's arguments that Plaintiff must plead that consumers have been injured by the alleged unreasonable safety risk. Tietsworth approached the safety defect issue in terms of actual injury to the named plaintiffs, finding that they 'lacked standing' to pursue their claims based on merely posited injuries. Here, Plaintiff has alleged that he was injured by the defective windshields by having to replace the cracked windshield in his MINIs twice; BMW has not argued that he lacks standing to pursue those claims"). Like Erhlich, Herremans has alleged actual injury sufficiently at this stage of the litigation. Accordingly, the court finds the discussion in Tietsworth inapposite. See Cholakyan, 796 F.Supp. 2d at 1238. Thus, the court finds that Herremans has alleged a safety defect.
ii. Whether Herremans Has Adequately Alleged That BMW Knew of the Defect
The next question is whether Herremans has sufficiently alleged that BMW had exclusive knowledge of the defect and thus had a duty to disclose under the CLRA and UCL. Although the court has concluded that Herremans can generally allege BMW's knowledge under Rule 9(b), it must assess whether, under Rule 8(a), her allegations plausibly plead that BMW knew of the defect prior to her purchase of a Mini-Cooper. Applying the Ninth Circuit's reasoning in Wilson v. Hewlett-Packard Co., 668 F.3d 1136 (9th Cir. 2012), the court concludes that Herremans' allegations are not sufficient. In Wilson, plaintiffs asserted CLRA and UCL claims against Hewlett-Packard ("HP"), alleging that it had concealed a design defect in its laptop computers that manifested after the expiration of the warranty period and created an unreasonable safety hazard. Wilson, 668 F.3d at 1138. Plaintiffs asserted that HP knew of the defect prior to the date they commenced their action, citing, inter alia, the fact that it had access to "aggregate information and data regarding the risk [that the laptops would] overheat[ ]," that consumer complaints had been filed, and that HP "became familiar with" and had been "on notice" of the defect at the time of manufacture and as early as 2002. Id. at 1146-47.
BMW argues that alleging that it had knowledge of the defect on information and belief is insufficient. Alleging knowledge of falsity or knowledge of a material, undisclosed fact on information and belief is not absolutely prohibited. Rather, where a fact is peculiarly within the defendant's possession, it can be alleged on information and belief so long as facts supporting the belief are alleged. See, e.g., Apodaca v. Whirlpool Corp., No. SACV 13-00725 JVS (ANx), 2013 WL 6477821, *4 (C.D. Cal. Nov. 8, 2013) ("[T]hough allegations based on information and belief are usually insufficient [under Rule 9(b)], in circumstances of corporate fraud, this rule may be relaxed as to matters within the opposing party's knowledge"); United States ex rel. Mason v. State Farm Mut. Auto. Ins. Co., No. CV07-297-S-EJL, 2008 WL 2857372, *13 (D. Idaho July 23, 2008) ("[A] lenient application of Rule 9(b) is allowed 'in a limited class of corporate fraud cases where the evidence of fraud is within a defendant's exclusive possession.' In such cases, a complaint based on information and belief is sufficient if it includes a statement of facts upon which the belief is based"). Because what BMW knew is a matter peculiarly within its possession, Herremans' allegation of knowledge on information and belief will be sufficient if supported by the pleading of adequate facts.
The court also noted that plaintiffs alleged that the laptops' "Design for Reliability" was inadequate. Id. at 1146-47. The opinion does not describe a "Design for Reliability," and states only that this "generalized assertion" was inadequate because it referenced "neither the specific defect . . . nor HP's knowledge of that defect." Id. at 1147.
The court noted that the allegations that HP was "on notice" and was "familiar with" the defect were deficient because they were "merely conclusory." Id. at 1147. It found plaintiffs' allegation that HP had "aggregate information and data regarding the risk of overheating" speculative because it did not suggest how tests or information would have alerted HP to the defect. Id. Finally, the court considered plaintiffs' allegations regarding HP's knowledge of consumer complaints. Id. It noted that plaintiffs had submitted fourteen customer complaints, but did not indicate where or how they were made - i.e., whether they were submitted directly to HP or posted on a general website. Id. at 1147-48. Twelve of the complaints were undated; two bore dates that were more than two years after plaintiffs purchased their laptops. Id. at 1148. Noting that "courts have rejected undated customer complaints offered as a factual basis for a manufacturer's knowledge of a defect because they provide no indication whether the manufacturer was aware of the defect at the time of sale," id. at 1147, the court distinguished Falk on the basis that the court there had considered "the amassed weight of [customer] complaints" together with other indications that GM had knowledge of the defect" in denying a motion to dismiss. Id. Because the consumer complaints Wilson had submitted did not demonstrate HP's knowledge of the defect at the time he purchased his laptop, the court affirmed the district court's dismissal. Id. at 1148.
BMW argues that Wilson compels dismissal of Herremans' CLRA and UCL claims. It asserts that she makes conclusory allegations concerning its knowledge that are "virtually indistinguishable" from those the Wilson court held were insufficient, and that she fails to "pin knowledge of the claimed defect on BMW . . . at the time plaintiff purchased her vehicle in 200[8]." Herremans alleges on information and belief, that "BMW, through its own internal testing, records of customer complaints, dealership repair records, and other internal sources, was well aware and knew of the Water Pump Defect prior to BMW distributing the Class Vehicles to Mini Cooper dealerships." She further alleges that consumers have made "numerous . . . complaints" about the defect to both BMW and NHTSA. These allegations are quite similar to the allegations in Wilson - they are vague, conclusory, and fail plausibly to allege BMW's knowledge of the defect.
Motion at 11 (emphasis original).
FAC, ¶ 33.
Id., ¶ 37.
First, Herremans' allegation that BMW "was well aware and knew" of the defect prior to distributing the class vehicles in 2006 is conclusory. Her general reference to "internal testing, records of customer complaints, dealership repair records, and other internal sources" provides little, if any, factual foundation her conclusion that BMW knew of the defect. Herremans does not describe the internal testing or what it shows. She does not identify the repair records, their volume, or how they revealed the defect. She provides no detail concerning the customer complaints, when they were submitted, what they said, or how many came directly to BMW and how many went to NHTSA. Finally, she offers no information concerning the "other internal sources" she references. In other paragraphs of the complaint, Herremans references "pre-release testing data, warranty data, customer complaint data, and replacement part sales data" as "other internal sources of aggregate information about the problem." This allegation is similarly conclusory and deficient because it does not plausibly indicate that BMW knew of the defect prior to the time it distributed the class vehicles. See Wilson, 668 F.3d at 1147 ("The allegation that HP, as the manufacturer, had 'access to the aggregate information and data regarding the risk of overheating' is speculative and does not suggest how any tests or information could have alerted HP to the defect").
Herremans does not explain how BMW could have "data from dealers regarding repairs and replacement parts" and "early consumer complaints" about the water pump defect prior to distributing class vehicles to Mini Cooper dealerships. It may be she alleges that the defect was present in earlier model year vehicles; she does not state this, however, as to when BMW purportedly received repair and replacement data, what that data was, or how it put BMW on notice that there was a water pump defect in the class vehicles. If her reference is to earlier model year cars, she does not state that the water pump design in the class vehicles was identical to that of earlier Mini-Coopers.
FAC, ¶ 44.
Although Herremans asserts BMW knew of the defect in 2006 "before [it] distribut[ed] the class vehicles," she alleges no facts as to when the pre-release testing she references took place, when consumer complaints were received, or when warranty data and dealer repair records began to reflect problems with the mechanical water pump. As in Wilson, absent additional facts, Herremans' references to internal information and external customer complaints does not plausibly plead knowledge because they give no sense of chronology - the complaint does not indicate when BMW purportedly received information or complaints and how they put it on notice of the defect in 2006. See id. (noting that "undated customer complaints . . . provide no indication whether the manufacturer was aware of the defect at the time of sale").
Id., ¶ 33 ("BMW, through its own internal testing, records of customer complaints, dealership repair records, and other internal sources, was well aware and knew of the Water Pump Defect prior to BMW distributing the Class Vehicles to Mini Cooper dealerships"); see also id., ¶ 44.
In short, Herremans' allegations fall far short of allegations in other cases that courts have found satisfactory. See, e.g., Falco v. Nissan North America, Inc., No. CV 13-00686 DDP (MANx), 2013 WL 5575065, *6-7 (C.D. Cal. Oct. 10, 2013) ("Plaintiffs have alleged particular facts which makes Plaintiffs' allegations more than merely speculative or conclusory. First, as noted above, Plaintiffs allege that on or around July 17, 2007, NNA issued the first of several Technical Service Bulletins to its dealerships instructing technicians to replace components of the Timing Chain Tensioning System in the vehicles covered by the complaint. Second, Plaintiffs allege that in or around 2006 or 2007, NNA replaced the chain guide of the Time Chain Tensioning System with a redesigned version of the part that does not suffer from the defect. These facts, if true, permit plausible inferences that NNA was aware of the defect at the time they sold the vehicles in 2005 and 2006 and that NNA acquired this knowledge through the sorts of internal data Plaintiffs allege. . . . [D]efendants allegedly provided their dealers with a technical service informational bulletin acknowledging the headlight defect and noting the availability of replacement parts. . . . NNA correctly points out that most of the alleged complaints to the NHTSA occurred post-sale, including those explicitly raising safety concerns. Were post-sale customer complaints the only basis for NNA's alleged knowledge at the time of sale, . . . NNA would have a stronger case. But . . . there are other adequate bases to permit an inference that NNA was aware of the alleged defect at the time of sale"); Avedisian v. Mercedes-Benz USA LLC, CV 12-00936 DMG (CWx), 2013 WL 2285237, *1, 7 (C.D. Cal. May 22, 2013) (holding that customer complaints sufficiently established defendant's knowledge of the defect at the time of plaintiff's purchase because plaintiff produced copies of consumer complaints with specific dates); Compare Baba v. Hewlett-Packard Co., No. C 09-05946 RS, 2010 WL 2486353, *4-5 (N.D. Cal. June 16, 2010) (holding that none of the consumer complaints alleged in the complaint "include[d] any dates, and therefore shed no light on when HP knew of the alleged defects"); Oestreicher, 544 F.Supp.2d at 974 n.9 ("Random anecdotal examples of disgruntled customers posting their views on websites at an unknown time is not enough to impute knowledge upon defendants. There is no allegations that Alienware knew of the customer complaints at the time plaintiff bought his computer").
Herremans also alleges that BMW knew of the defect before it distributed the class vehicles because it introduced a redesigned water pump in 2012. The gap between the redesign of the water pump in 2012 and Herremans' purchase of her vehicle in 2008 is simply too great plausibly to suggest that BMW knew of the water pump defect in 2008. By contrast, in Falco, the introduction of a redesigned part came approximately one year after plaintiffs purchased their vehicles. The court held that this, in combination with other facts alleged suggesting knowledge, plausibly gave rise to an inference that the manufacturer knew of the purported defect when it sold plaintiffs' vehicles. See Falco, 2013 WL 5575065 at *7 (allegations that defendants introduced a replacement part approximately one year after plaintiffs purchased their cars, in tandem with other allegations suggesting knowledge, "permit[ted] the plausible inferences that NNA was aware of the defect at the time theat they sold the vehicles" to plaintiffs). In Falco, plaintiffs alleged that the manufacturer had issued Technical Service Bulletins prior to the redesign, which plausibly suggested defendants knew of the defect and was adequate to support an inference that it was working to redesign it. Herremans' complaint contains no similar allegations or facts that would support a reasonable inference that, because BMW introduced a redesigned water pump in 2012, it knew of the purported defect six years earlier in 2006 or four years earlier in 2008.
See id., ¶ 36.
BMW contends Herremans' allegation concerning the redesigned water pump cannot be considered under Rule 407 of the Federal Rules of Evidence. (Motion at 16.) The court need not reach this point because, even if considered, the allegation is insufficient to support the inference Herremans seeks to have the court draw.
Because Herremans has failed adequately to allege BMW's knowledge of the defect when she purchased her car, the court concludes that she has not pled a material failure to disclose for purposes of the UCL and CLRA. The court therefore grants BMW's motion to dismiss the claims on this basis.
Because knowledge of falsity is a necessary element of a fraud claim, Herremans' fraud claim must be dismissed for the same reason as her CLRA and UCL claims. See, e.g., Small v. Fritz Cos., Inc., 30 Cal.4th 167, 173 (2003) (stating that in California, fraud claims have five elements: "(a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or 'scienter'); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage"); see also City Solutions Inc. v. Clear Channel Communications, Inc., 365 F.3d 835, 839 (9th Cir. 2004).
D. Whether Herremans Adequately Alleges Reliance
"For fraud-based claims under the CLRA and UCL, [p]laintiff must also plead actual reliance." Ehrlich, 801 F.Supp.2d at 919 (citing In re Tobacco II Cases, 46 Cal.4th 298, 326 (2009) (fraud claims under the UCL must allege actual reliance); Buckland v. Threshold Enters., 155 Cal.App.4th 798, 810 (2007) (CLRA claims "sounding in fraud" must allege actual reliance)); see also Lazar v. Superior Court, 12 Cal.4th 631, 638 (1996) ("justifiable reliance" is a required element of a fraud claim). Actual reliance is presumed (or at least inferred) if the omission is material. Tobacco II, 46 Cal.4th at 327. As noted, Herremans has sufficiently alleged that a reasonable consumer would have found the water pump defect material in deciding whether or not to purchase a class vehicle. The court may thus reasonably infer Herremans' actual reliance on the failure to disclose of that material information.
BMW nonetheless seeks to dismiss Herremans' claims because she fails to allege that she read, reviewed, or heard any statements concerning the class vehicles before purchasing a Mini- Cooper. Specifically, it contends she cannot claim reliance on an omission because she does not allege that she reviewed any advertisements or materials concerning Mini-Coopers prior to purchase. As support, BMW cites Mirkin, 5 Cal.4th 1082, for the proposition that Herremans must allege that, had the omitted information been disclosed, she would have been aware of it and acted differently.
Motion at 20-21.
Id.
Id. (citing Mirkin, 5 Cal.4th at 1093).
Herremans counters that she need not plead that she reviewed any materials about Mini-Coopers generally or the water pump specifically. She cites Doyle v. Chrysler Grp., LLC, SACV 13-00620 JVS, 2014 WL 3361770, *5-6 (C.D. Cal. July 3, 2014). In Doyle, Judge James V. Selna rejected Chrysler's argument on summary judgment that the plaintiff had not raised triable issues of fact as to whether he would have acted differently had the information not disclosed been communicated. The court agrees with Judge Selna's observation that precisely because reliance is presumed where an omission is material, such a showing is not required unless the defendant rebuts the presumption. See id. at *6. BMW, of course, cannot do so in the context of a motion to dismiss. It asserts, however, that to plead plausible claims, Herremans must "allege exposure to at least some pre-purchase marketing or other materials." The court does not agree. As in Doyle, Herremans alleges a "wholesale nondisclosure" of a material defect. Absent a showing by BMW that were was a document or communication that Herremans should have reviewed before purchase that contained information about the water pump, the court cannot find her claim implausible. BMW may be able to make such a showing at some future point in the litigation and rebut the presumption of actual reliance. Herremans, however, is not required to anticipate such proof and disprove what essentially amounts to a defense in her complaint.
Opposition at 21.
Reply at 19.
See FAC, ¶ 83.
Additionally, drawing all inferences in Herremans' favor, her allegations indicate that she was exposed to marketing materials concerning the Mini-Cooper before she made her purchase. Herremans alleges that "BMW widely advertises the Class Vehicles as being of the highest quality and durability, asserting in marketing materials that '[n]ot all cars are created equal,' and that Class Vehicles are safe and reliable vehicles." (FAC, ¶ 2.) This allegation indicates that she was exposed to marketing materials that stated the class vehicles were safe and reliable. Thus, even were there a requirement that a plaintiff in Herremans' position plead that she reviewed marketing materials concerning the product before she purchased it, this allegation would suffice to satisfy it.
Consequently, the court denies BMW's motion to dismiss Herremans' CLRA, UCL, and fraud claims on the basis that she has not adequately pled reliance.
III. CONCLUSION
For the reasons stated, BMW's motion to dismiss is granted. Herremans may file an amended complaint that addresses the deficiencies noted herein within twenty (20) days of the date of this order. No new claims may be pled and no new parties can be added. DATED: October 3, 2014
At the hearing, BMW argued that Herremans should not be granted leave to amend her time-barred CLRA and fraud claims because amendment would be futile. It asserted that Herremans' allegations show that a reasonable consumer would have been on notice of the defect in February 2011, and thus that Herremans cannot save her claim by invoking the delayed discovery doctrine. Herremans' allegations do not foreclose the possibility that she can plead facts that could support an inference that a reasonable consumer in her position would not have been on notice of a claim when her vehicle first experienced a water pump leak and was repaired under warranty.
BMW also argued that Herremans could not invoke the doctrine of fraudulent concealment because her claims are premised on alleged nondisclosures at the time of sale, making any post-sale fraudulent conduct irrelevant. BMW cites no authority supporting its position that a vehicle manufacturer's conduct after the sale of a defective vehicle is irrelevant for purposes of determining when the statute of limitations begins to run. The doctrine of fraudulent concealment is meant to "disarm a defendant who, by his own deception, has caused a claim to become stale and a plaintiff dilatory," Regents of University of California v. Superior Court, 20 Cal.4th 509, 533 (1999), and tolls the applicable statute of limitations for the period during which the claim "is undiscovered by plaintiff or until such time as plaintiff, by the exercise of reasonable diligence, should have discovered it," Sanchez v. South Hoover Hospital, 18 Cal.3d 93, 99 (1976). It is thus possible that the manufacturer's post-sale conduct could support a tolling of the statute of limitations.
Because Herremans may be able to amend to allege facts supporting the application of the delayed discovery or fraudulent concealment doctrines, the court grants Herremans leave to amend her CLRA and fraud claims. See Kendall v. Visa U.S.A., Inc., 518 F.3d 1042, 1051 (9th Cir. 2008) ("Dismissal without leave to amend is proper if it is clear that the complaint could not be saved by amendment"); California ex rel. California Department of Toxic Substances Control v. Neville Chemical Co., 358 F.3d 661, 673 (9th Cir. 2004) ("[D]enial of leave to amend is appropriate if the amendment would be futile," citing Foman v. Davis, 371 U.S. 178, 182 (1962)).
/s/_________
MARGARET M. MORROW
UNITED STATES DISTRICT JUDGE