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declining "to bar ‘the pursuit of alternative remedies at the pleadings stage.’ "
Summary of this case from Chapman v. Gen. Motors LLCOpinion
Case No. 18-cv-07054-JST
2019-07-02
IN RE: GENERAL MOTORS LLC CP4 FUEL PUMP LITIGATION
ORDER REGARDING DEFENDANT'S MOTION TO DISMISS
Re: ECF No. 39
JON S. TIGAR, United States District Judge
Before the Court is Defendant General Motors LLC ("GM")'s motion to dismiss. ECF No. 39. The Court will grant the motion in part and deny it in part.
I. BACKGROUND
Plaintiffs Christopher Moonan, Sean T. Smith, Isaiah Rudy, Sean M. Buob, Richard Samson, Ryan Arthur Jensen, Anthony Raymond Smith, Bradley Rice, Bruce K. Garlock, Chris S. McAlister, Colby Barry, Douglas Hughes, Geoff Cochems, John Thomas White, Kevin Allen Lawson, Kevin Sutherland, Michael L. McCoy, Milton Leon Huss, Jr., Stacy Wade Sizelove, Thorin Jay Askin, Ryan Maduro, Michele Diniz, Brandon Tirozzi, and Calvin Smith bring this suit on behalf of themselves and a putative class of owners of GM vehicles. ECF No. 36 ("Compl.") at 4. The proposed class is defined as "[a]ll persons or entities who have purchased or leased one of the [Class Vehicles] in the state of California," excluding those who have personal injury claims resulting from the complained-of defects. Id. ¶¶ 140-41. Plaintiffs allege that they, along with the other class members, "paid a premium for their diesel vehicles, and were harmed by being sold vehicles with a defective fuel injection pump that is substandard for American fuel." Id. ¶ 7. Specifically, Plaintiffs assert that the Bosch-supplied CP4 high-pressure fuel injunction pump, which came standard in their vehicles, is incompatible with American diesel fuel. Id. ¶ 1.
The vehicles at issue ("Class Vehicles") "consist of the following GM-manufactured diesel-fueled U.S. automobiles: 2011–2016 2500 HD Silverado 6.6L V8 Duramax Diesel Trucks with LML engines; 2011–2016 3500 HD Silverado 6.6L V8 Duramax Diesel Trucks with LML engines; 2011–2016 2500 HD Sierra 6.6L V8 Duramax Diesel Trucks with LML engines; 2011–2016 3500 HD Sierra 6.6L V8 Duramax Diesel Trucks with LML engines; 2010–2011 Chevrolet Express van with Duramax LGH engines; 2010–2011 GMC Savana van with Duramax LGH engines; 2010–2011 GMC Sierra trucks with RPO ZW9 (chassis cabs or trucks with pickup box delete) with Duramax LGH engines; 2011–2012 2500 HD 3500 Silverado 6.6L V8 Duramax Diesel Trucks with LGH engines; and 2011–2012 2500 HD 3500 Sierra 6.6L V8 Duramax Diesel Trucks with LGH engines." Compl. ¶ 40.
American diesel is cleaner than European diesel and therefore provides less lubrication. Id. ¶ 3. When "run through the fast-moving, high-pressure, lower volume CP4 pump," the cleaner, thinner diesel fuel "allows air pockets to form inside the pump during operation, causing metal to rub against metal, generating metal shavings which are dispersed throughout the fuel injection system" and the engine, "until it suddenly and catastrophically fails without warning." Id. While the pump offers increased fuel efficiency and power, that "comes at the cost of running the pump nearly dry so that it destroys itself" and eventually "destroys the fuel injection system and the engine altogether," a process that "begins at the very first fill of the tank" and can result in repair bills from $8,000 to $20,000. Id. ¶¶ 2, 4. Plaintiffs accuse GM of choosing to include the CP4 fuel pump in its engines despite knowing of this defect. Id. ¶ 6.
Plaintiffs now bring suit against GM asserting seven causes of action on behalf of themselves and the putative class. Id. ¶¶ 150-251. Count I alleges fraud by concealment. Id. ¶¶ 150-70. Count II asserts violations of California's Unfair Competition Law ("UCL"), California Business and Professions Code § 17200 et seq. Id. ¶¶ 171-87. Count III alleges violations of the Consumer Legal Remedies Act ("CLRA"), California Civil Code § 1750 et seq. Id. ¶¶ 188-99. Count IV pleads unjust enrichment. Id. ¶¶ 200-11. Count V asserts breach of the implied warranty of merchantability under California Commercial Code §§ 2314 and 10212. Id. ¶¶ 212-26. Count VI alleges breach of the implied warranty of merchantability under California Civil Code § 1791 et seq. Id. ¶¶ 227-34. Finally, Count VII alleges violation of the Magnuson-Moss Warranty Act ("MMWA"), 15 U.S.C. § 2301 et seq. Id. ¶¶ 235-51.
GM moves to dismiss each of Plaintiffs' causes of action. ECF No. 39. Plaintiffs oppose the motion. ECF No. 44. GM has filed a reply. ECF No. 48.
II. LEGAL STANDARD
A complaint must contain a short and plain statement of the claim showing that the pleader is entitled to relief in order to give the defendant fair notice of what the claim is and the grounds upon which it rests. Fed. R. Civ. P. 8(a)(2) ; Bell Atl. Corp. v. Twombly , 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). To survive a Rule 12(b)(6) motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face. Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). "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." Id. In determining whether a plaintiff has met this plausibility standard, the Court accepts all factual allegations as true and construes the pleadings in the light most favorable to the plaintiff. Knievel v. ESPN , 393 F.3d 1068, 1072 (9th Cir. 2005).
Under Federal Rule of Civil Procedure 9(b), a complaint asserting fraud must supply "the circumstances constituting the alleged fraud" with a description " ‘specific enough to give defendants notice of the particular misconduct ... so that they can defend against the charge and not just deny that they have done anything wrong.’ " Kearns v. Ford Motor Co. , 567 F.3d 1120, 1124 (9th Cir. 2009) (citation omitted). Fraud claims must allege "an account of the time, place, and specific content of the false representations as well as the identities of the parties to the misrepresentations." Swartz v. KPMG LLP , 476 F.3d 756, 764 (9th Cir. 2007) (per curiam) (internal quotation marks omitted); see also Vess v. Ciba-Geigy Corp. USA , 317 F.3d 1097, 1106 (9th Cir. 2003) ("Averments of fraud must be accompanied by the who, what, when, where, and how of the misconduct charged.") (internal quotation marks omitted).
III. DISCUSSION
A. Fraud Claims (Counts I, II, and III)
In Count I, Plaintiffs allege common-law fraud by concealment, claiming "GM intentionally concealed and suppressed material facts concerning the durability and performance of the Bosch CP4 Pump and ... of the Class Vehicles and their engine, in order to defraud and mislead the Class about the true nature of the Class Vehicles." Compl. ¶ 153. In Count II, Plaintiffs assert that GM violated the UCL by failing to disclose that the CP4 pump was "out of specification for use with diesel fuel in the United States" and would eventually fail; by selling and leasing Class Vehicles with the defective pump; by knowing and intentionally concealing that the pumps would fail when used with American diesel fuel; by "marketing Class Vehicles for their durability, reliability, and performance" despite knowing of the fuel-incompatibility issue; and by violating other California laws. Id. ¶ 176. Count III brings a claim under the CLRA based on the same underlying conduct. Id. ¶ 192.
GM alleges that these three fraud-based claims must fail because Plaintiffs have not (1) pleaded them with particularity, as required by Rule 9(b), (2) alleged facts establishing that GM had knowledge of the alleged defect at the time of sale, or (3) alleged GM had a duty to disclose. ECF No. 39 at 7. The Court will reject each of these arguments.
The Court turns first to the question of whether Plaintiffs have pleaded their claims with sufficient particularity. Under Rule 9(b), a complaint alleging fraud must contain "the who, what, when, where, and how of the misconduct charged" and "what is false or misleading about a statement, and why it is false." Vess , 317 F.3d at 1106. GM asserts that Plaintiffs' allegations of misrepresentations by GM fail because, rather than allege the facts surrounding the fraud with specificity, Plaintiffs merely assert that "at unspecified times and in unspecified places, plaintiffs saw or heard GM's television commercials, radio commercials, internet advertisements, sales brochures, and statements from dealer sales representatives about the vehicle's superior horsepower, fuel efficiency, reliability, and durability." ECF No. 39 at 8. A representative excerpt from the complaint asserts as follows:
In the days and weeks preceding his purchase, Plaintiff [Isaiah] Rudy saw and heard Chevrolet's television commercials, radio advertisements, and printed brochures and advertisements wherein Chevrolet claimed the Duramax diesel truck, like the one Plaintiff would purchase, had superior horsepower and durability compared to other diesel trucks in the American market. On the date that Plaintiff Rudy purchased the vehicle, and in purchasing the vehicle, Plaintiff Rudy relied on representations that the vehicle was compatible with American diesel fuel, was durable, and was reliable.
Compl. ¶ 11. GM is correct that these general allegations are insufficient to meet the requirements of Rule 9(b) for claims asserting affirmative misrepresentation. For instance, in Kearns , the plaintiff alleged he was misled by "(1) Ford's televised national marketing campaign; (2) sales materials found at the dealership where he bought his vehicle; and (3) sales personnel working at the dealership where he bought his vehicle." 567 F.3d at 1125-26. The Ninth Circuit held these allegations insufficient because they failed to set forth "the particular circumstances surrounding such representations," including "what the television advertisements or other sales material specifically stated" or "which sales material [Kearns] relied upon in making his decision to buy" the accused vehicle. Id. at 1126.
Here, the complaint does quote from specific press releases, brochures, and advertisements to identify the accused misrepresentations. Compl. ¶¶ 113-24. However, Plaintiffs fail to assert which of these specific materials, if any, they actually saw and relied upon in deciding to purchase their vehicles. See Great Pac. Sec. v. Barclays Capital, Inc. , 743 F. App'x 780, 782-83 (9th Cir. 2018) (affirming dismissal where plaintiff failed to plead that it received and was aware of "the specific marketing materials and representations cited" in the complaint); Swartz , 476 F.3d at 764 (fraud claims must set forth "an account of the time, place, and specific content of the false representations as well as the identities of the parties to the misrepresentations" (emphasis added)). Thus, Plaintiffs have failed to adequately plead their fraud-based claims as required by Rule 9(b).
Moreover, the Court concludes that the representations Plaintiffs cite – including broad claims of "reliability" and "durability" as well as marginally more specific references to "superior fuel economy," "torque," "horsepower," and "emission performance" – amount to mere sales puffery. See ECF No. 44 at 21-22; Compl. ¶¶ 113-24. As GM argues, such statements are non-actionable. See ECF No. 39 at 8-9; Finney v. Ford Motor Co. , Case No. 17-cv-06183-JST, 2018 WL 2552266, at *1, *8 (N.D. Cal. June 4, 2018) ("Defendant's statements that the truck had the ‘best in-class: horsepower, gas torque, unsurpassed diesel horsepower’ " and "superior power and tow capacity" were puffery); see also Elias v. Hewlett-Packard Co. , 903 F. Supp. 2d 843, 854 (N.D. Cal. 2012) (vague and unspecified "statements about performance and power constitute non-actionable puffery"). Finally, in what can only be charitably described as a stretch, Plaintiffs also note that "[a]ll of GM's U.S. advertisements show the Class Vehicles driving in America, though the vehicles are not compatible with U.S. diesel fuel." ECF No. 44 at 21 (citing Compl. ¶¶ 1, 2, 6, 104-05). The Court is familiar with the adage that "a picture is worth a thousand words," F.C.C. v. CBS Corp. , 567 U.S. 953, 953, 132 S.Ct. 2677, 183 L.Ed.2d 712 (2012) (Roberts, C.J., concurring in the denial of certiorari), but still finds it impossible to read these generic pictures as affirmative misstatements about GM vehicles' compatibility with low-lubricity diesel fuel.
As the foregoing suggests, Plaintiffs' fraud-based claims fail to the extent they rely on affirmative misrepresentations. The gist of Plaintiffs' claims, however, is omission rather than affirmative misrepresentation. "Where a fraudulent act is pleaded as an omission, a lower level of specificity is required." Allen v. Verizon Cal., Inc. , No. SA CV 08-0774 DOC (ANx), 2009 WL 10697990, at *8 (C.D. Cal. June 8, 2009). " ‘[A] plaintiff in a fraud by omission suit will not be able to specify the time, place, and specific content of an omission as precisely as would a plaintiff in a false representation claim,’ and such a claim ‘will not be dismissed purely for failure to precisely state the time and place of the fraudulent conduct.’ " Holley v. Gilead Scis., Inc. , 379 F.Supp.3d 809, 817 (N.D. Cal. 2019) (quoting Falk v. Gen. Motors Corp. , 496 F. Supp. 2d 1088, 1098-99 (N.D. Cal. 2007) ); see also Allen , 2009 WL 10697990, at *8 ("Allen cannot state the time of an omission except to allege when the contract was entered into. There is no ‘place’ where the omission occurred, because plaintiffs are not alleging an act, they are alleging a failure to act.").
Accordingly, the relevant questions here are whether Plaintiffs have adequately alleged (1) that GM had knowledge of the defect, and (2) that defect was material. The Court now turns to these questions.
The parties do not specifically address the separate question of reliance, but the Court concludes that Plaintiffs have adequately pled this element.
To state a claim for fraudulent omission under the CLRA, a plaintiff first must show that she actually relied on the omission in the sense that "had the omitted information been disclosed, one would have been aware of it and behaved differently." Daniel v. Ford Motor Co. , 806 F.3d 1217, 1225 (9th Cir. 2015) (citing Mirkin v. Wasserman , 5 Cal. 4th 1082 [23 Cal.Rptr.2d 101, 858 P.2d 568] (1993) ). A court may infer that a plaintiff would have behaved differently where the omission was material. Id. Then, a plaintiff must allege that she would have been aware of a disclosure, which can be shown through interactions with sales representatives at an authorized dealership. Id. at 1226.
Finney v. Ford Motor Co. , No. 17-CV-06183-JST, 2018 WL 2552266, at *5 (N.D. Cal. June 4, 2018). The named plaintiffs allege generally that, "in purchasing the vehicle, [s/he] relied on representations" from GM "that the vehicle was compatible with American diesel fuel," and that "absent these representations [s/he] would not have purchased the vehicle and/or would have paid less for it." Compl. ¶¶ 11-33; see also id. ¶ 182. Under Finney , this is adequate provided that Plaintiffs also allege a material defect.
The Court first addresses GM's argument that Plaintiffs have not adequately alleged GM's knowledge of the defect. "While circumstances constituting fraud must be alleged with particularity, knowledge may be alleged generally." Parenteau v. Gen. Motors, LLC , No. CV 14-04961-RGK (MANx), 2015 WL 1020499, at *6 (C.D. Cal. Mar. 5, 2015) (citing Fed. R. Civ. P. 9(b) ); see also Luong v. Subaru of Am., Inc. , No. 17-CV-03160-YGR, 2018 WL 2047646, at *5 (N.D. Cal. May 2, 2018) ("For purposes of Rule 9(b), [GM]'s knowledge need only be alleged generally, with non-conclusory, plausible allegations."). "In addition, the pleading standard may be relaxed as to matters that are exclusively within the opposing party's knowledge." MacDonald v. Ford Motor Co. , 37 F. Supp. 3d 1087, 1092 (N.D. Cal. 2014) (citing Moore v. Kayport Package Exp., Inc. , 885 F.2d 531, 540 (9th Cir. 1989) ).
Plaintiffs allege that GM became aware of the need to install equipment capable of handling low lubricity diesel fuel many years before manufacturing the vehicles at issue here, because the entire automobile industry had "experience[d] ... widespread catastrophic fuel injection pump failures when cleaner diesel standards were first implemented in the 1990s." Compl. ¶ 6. When low-sulfur diesel "first appeared in the American market in the 1990's," an "estimated ... 65 million fuel injection pumps failed as a result." Id. ¶ 67. Moreover, "[b]y 2002, the Truck & Engine Manufacturers Association (‘EMA’) – of which GM is a member company – acknowledged" that low-sulfur, lower-lubricity American diesel "could cause catastrophic failure" in fuel-injection components, like the CP4, that "are made to European diesel specifications." Id. ¶ 6.
Plaintiffs allege that GM was further put on notice in February 2011, when the National Highway Transportation Safety Authority's Office of Defect Investigations ("ODI") "opened an investigation [into] certain major automotive manufacturers for a potential defect in predecessor diesel high-pressure fuel injection pumps as well as certain model year vehicles containing the CP4 pump." Id. ¶ 53. As part of that investigation, in October 2011 ODI requested "peer vehicle" information from GM, specifically regarding (among other things) an "[a]lleged defect" involving "[a]ny one or more of the following symptoms or conditions ... : (1) HPFP failure; (2) Metallic debris/contamination in the fuel system ; (3) Repairs involving fuel system replacement; (4) General allegations of fuel pump failure (i.e. , the specific fuel pump is not identified); or (5) All other allegations of fuel system failures or malfunctions resulting in engine stall." Id. (emphasis in original). GM responded that "in the 2nd quarter of 2011 alone, it was aware of at least ninety-nine (99) field reports of high-pressure fuel pump failure in the 2011 Chevrolet Silverado HD, thirty (30) of which involved moving stalls." Id. ¶ 54. Plaintiffs also allege that although industry publications amply described the need for American diesel fuel pumps to withstand low lubricity diesel fuel, GM equipped its vehicles with a Bosch CP4 Pump whose specifications plainly showed they were inadequate to process American diesel fuel. Id. ¶¶ 68-72.
The complaint also alleges that in August 2014, GM issued an internal "Preliminary Information" service bulletin to dealers regarding certain vehicles using the CP4 pump. Id. ¶ 100. The bulletin "stated that if a customer with one of the aforementioned vehicles came into a dealership with ‘a hard start or a no start’ problem, and the normal diagnostic procedure led the dealer to conclude that fuel injection pump replacement was necessary," the dealer should not only replace the fuel pump, but should also "remove the fuel injection pump and pressure regulator and ‘inspect[ ] for magnetic metal debris,’ and if metal debris was found," send those items back to GM "for an engineering inspection." Id. In March 2017, GM reissued the Preliminary Information as a Technical Service Bulletin, expanding the affected model years to include 2016. Id. ¶ 101. After the 2016 model year, GM stopped equipping its vehicles with the CP4 pump altogether. Id. ¶ 102.
Approximately 60 percent of the Plaintiffs purchased their vehicles after August 2014. See Compl. ¶¶ 10-34.
Defendants argue that these allegations are inadequate. They place great weight on the Ninth Circuit's 2012 decision in Wilson v. Hewlett-Packard Co. , 668 F.3d 1136 (9th Cir. 2012) to argue that Plaintiffs' allegations of knowledge are insufficient. In Wilson , the plaintiffs alleged conclusorily that HP was on notice that its laptops "were seriously defective and hazardous" from "the time it began manufacturing and selling" them. Id. at 1146. They alleged that HP "was also aware of the defect because it had ‘access to the aggregate information and data regarding the risk of overheating’ and there had been another lawsuit involving the same defect on a different model of laptop computers." Id. "Plaintiffs also submitted several customer complaints to support their allegation that HP had knowledge of the defect." Id. The Ninth Circuit found "[t]he allegation that HP, as the manufacturer, had ‘access to the aggregate information and data regarding the risk of overheating’ " was "speculative and does not suggest how any tests or information could have alerted HP to the defect." Id. at 1147. It was at best unclear that the prior lawsuit actually involved the same defect. Id. at 1146. And there was no information about where the alleged customer complaints were posted or even when the complaining consumers had purchased their laptops – except for two consumers who purchased their laptops after the Wilson plaintiffs. Id. at 1148.
The caselaw does not speak with one voice concerning the sufficiency of allegations of a vehicle manufacturer's knowledge of a vehicle defect. At this stage, however, "where the Court is bound to accept the pleadings as true, the pleadings form a plausible basis for belief that Defendant[ ] knew or reasonably should have known of a defect ... they had a duty to disclose." Reniger v. Hyundai Motor Am. , 122 F. Supp. 3d 888, 900 (N.D. Cal. 2015). The allegations here are more like those in cases that have distinguished Wilson. In Reniger , for example, the court reached that result based on defendant's "exclusive access to pre-production, pre-release, and post-release testing data, early consumer complaints, high warranty reimbursement rates and repair orders, replacement part sales data, and data from dealerships." Id. at 899.. The Reniger court explicitly considered Wilson , but found that the Reniger plaintiffs had "provide[d] more than merely conclusory allegations of knowledge," basing their allegations on Hyundai's access to data collected in a NHTSA database and Hyundai's issuance of Technical Service Bulletins regarding the alleged defect. Id. at 900. Similarly, Zuehlsdorf v. FCA US LLC , No. EDCV 18-1877 JGB (KKx), 2019 WL 2098352 (C.D. Cal. Apr. 30, 2019), distinguished Wilson as follows:
Unlike the plaintiff in Wilson , Plaintiff gives several plausible explanations of how Defendant became aware of the alleged defect, including "pre-production testing, design failure mode analysis, calls to its customer service hotline, and customer complaints made to dealers[,]" and alleges that "this knowledge and information was exclusively in the possession of FCA US and its network of dealers."
Id. at *9 ; see also Steele v. Gen. Motors LLC , No. CV 17-04323 TJH (SKx), 2018 WL 6039838, at *2 (C.D. Cal. Aug. 8, 2018) ("Steele and Campos adequately alleged that GM was in a superior position to know about the Headlight Defect because they alleged that GM had ‘exclusive custody and control [over the Cadillacs'] pre-production design failure mode and analysis data, production design failure mode and analysis data, pre-release testing data, early consumer complaints ... high failure rates and replacement part sales data, and other aggregate data from Cadillac dealers.’ ") (alterations in original). The allegations in the complaint before the Court are much more similar to those in Reniger , Zuehlsdorf , and Steele than they are to those in Wilson. Plaintiffs here allege that GM has known since the introduction of cleaner diesel fuel that its fuel pumps would have to be able to process low-lubricity fuel; that its vehicles experienced widespread catastrophic fuel injection pump failures when cleaner diesel standards were first implemented in the 1990s; that it nonetheless equipped class members' vehicles with a fuel pump whose specifications showed the pump would not be able to process low-lubricity fuel; that it participated in an NHTSA investigation into the CP4 and similar fuel pumps; that the data GM provided in that investigation showed there was a problem with the CP4; and that it advised its dealers to check for metal debris throughout a customer's fuel system if they concluded that the fuel pump needed to be replaced because of a hard start/no start condition. At this stage, the Court finds that Plaintiffs have adequately pled knowledge.
The Court does not include the complaint's allegations regarding customer complaints in its analysis because Plaintiffs have not provided a reason to distinguish Wilson 's holding as to that category of information.
Defendants also argue that even if GM knew of the CP4 defect, it had no duty to disclose it because Plaintiffs do not allege a "safety issue," and thus, the defect is not material. ECF No. 39 at 7; id. at 13 (citing Wilson , 668 F.3d at 1141 ). As Plaintiffs point out, however, defects that affect a "central function" of a product are also material under California law. Beyer v. Symantec Corp. , 333 F. Supp. 3d 966, 978-79 (N.D. Cal. 2018). Here, assuming the truth of Plaintiffs' allegation that the CP4 fuel pump "secretly deposits metal shavings and debris throughout the fuel injection system and the engine until it suddenly and catastrophically fails without warning," Compl. ¶ 3, the Court concludes that the alleged defect is central to the vehicle's function and that Plaintiffs have therefore alleged a material defect.
For the foregoing reasons, GM's motion to dismiss Counts I, II, and III of the complaint is denied.
B. Unjust Enrichment Claim (Count IV)
Count IV of the complaint asserts unjust enrichment insofar as "GM charged a higher price for the Class Vehicles than the Vehicles' true value and GM, therefore, obtained monies that rightfully belong to Plaintiffs and other Class members." Compl. ¶ 203. GM argues this claim cannot proceed because (1) unjust enrichment is not viable where there is an enforceable express contract like the written warranties Plaintiffs allege covered their vehicles, (2) the claim is not available where there is an adequate remedy at law for the conduct alleged, (3) Plaintiffs who purchased used vehicles from third parties conferred no benefit on GM and thus cannot state a claim, and (4) Plaintiffs fail to meet the Rule 9(b) requirements in pleading the allegedly fraudulent underlying conduct. ECF No. 39 at 14-15.
GM's first argument fails because Plaintiffs' unjust enrichment claim relies upon pre-sale conduct which falls outside the scope of the warranty: GM concealing the fuel pump defect before Plaintiffs purchased their vehicles. ECF No. 44 at 22; see Glenn v. Hyundai Motor Am. , 2016 WL 7507766, at *6 (C.D. Cal. Nov. 21, 2016) (declining to dismiss unjust enrichment claim premised on "fraudulent concealment before the contract" was entered because said conduct is "not within the scope of the warranty"). GM's second argument also falls short because, while it is true that Plaintiffs may not recover for unjust enrichment if they obtain relief on other claims, this Court declines to bar "the pursuit of alternative remedies at the pleadings stage." Aberin v. Am. Honda Motor Co., Inc. , No. 16-CV-04384-JST, 2018 WL 1473085, at *9 (N.D. Cal. Mar. 26, 2018). GM's third argument is equally unavailing. The fact that some Plaintiffs did not purchase their vehicles directly from GM does not bar their claims, because California law imposes no requirement of privity to make out an unjust enrichment claim. Process Specialties, Inc. v. Sematech, Inc. , No. CIV S-00-414 FCD PAN, 2002 WL 35646610, at *19 (E.D. Cal. Jan. 18, 2002). Finally, GM's fourth argument fails because, as outlined above, Plaintiffs have adequately pleaded their fraud-based claims with the specificity required by Rule 9(b).
GM's motion to dismiss Count IV is denied.
C. Implied Warranty Claim (Count V)
Count V of the complaint accuses GM of breach of the implied warranty of merchantability, claiming that due to the fuel pump defect "[t]he Class Vehicles, when sold or leased and at all times thereafter, were not in merchantable condition and are not fit for the ordinary purpose for which vehicles are used." Compl. ¶ 220. Plaintiffs further allege that "privity is not required here because Plaintiffs and each of the other Class members are intended third-party beneficiaries of contracts between GM and its dealers, and specifically, of GM's implied warranties. The dealers were not intended to be the ultimate consumers of the Class Vehicles and have no rights under the warranty agreements provided with the Class Vehicles; the warranty agreements were designed for and intended to benefit consumers." Compl. ¶ 248.
GM argues first, that a plaintiff cannot recover for breach of implied warranty under California law unless he directly purchased the product from the defendant. ECF No. 39 at 16. Thus, Plaintiffs who purchased vehicles from independent dealerships cannot make out this claim. Second, GM argues that plaintiffs do not qualify for the third-party beneficiary or advertising exceptions to this rule. Id. Third, GM asserts that Plaintiffs fail to allege facts showing either that their vehicles were not fit for the ordinary purpose of providing transportation at the time of sale, or that their vehicles were purchased within the term of the implied warranty. Id. at 18.
The Court disagrees that direct privity is strictly required to make out a breach of implied warranty claim. As this Court has held in an analogous context, under California law, "a third party beneficiary can enforce a contract made expressly for his benefit.... A contract made expressly for a third party's benefit does not need to specifically name the party as the beneficiary; the only requirement is that the party is more than incidentally benefitted by the contract." Aberin , 2018 WL 1473085, at *7 (citation omitted). As Plaintiffs assert, the third-party beneficiary exception applies to them as the intended beneficiaries of GM's contracts with its dealers. ECF No. 44 at 24; Keegan v. Am. Honda Motor Co. , 838 F. Supp. 2d 929, 947 (C.D. Cal. 2012) ("[I]ndividuals who purchase a vehicle from an authorized dealership can maintain an implied warranty cause of action against the manufacturer as third party beneficiaries.").
The Court also concludes that Plaintiffs' implied warranty claims are adequately and timely pleaded. "In the case of a latent defect, a product is rendered unmerchantable, and the warranty of merchantability is breached, by the existence of the unseen defect, not by its subsequent discovery." Mexia v. Rinker Boat Co., Inc. , 174 Cal. App. 4th 1297, 1305, 95 Cal.Rptr.3d 285 (2009). Where, as here, Plaintiffs allege that their vehicles were unmerchantable due to an alleged latent safety defect that was present at the time of sale and that they could not reasonably have discovered sooner, see Compl. ¶ 47, they have set forth sufficient facts to defeat a motion to dismiss. See Reniger , 122 F. Supp. 3d at 904-05 (denying motion to dismiss where complaint alleged "the vehicles were unmerchantable at the time of purchase due to an alleged latent safety defect which could not reasonably have been discovered by Plaintiffs sooner ... but w[as] already present within the vehicle's engine such that breaking down was simply a matter of time"). Despite GM's suggestion to the contrary, ECF No. 39 at 17-18, whether the Class Vehicles were unmerchantable at the time of sale is a question of fact the Court cannot resolve at the pleadings stage. See Baranco v. Ford Motor Co. , 294 F. Supp. 3d 950, 977 (N.D. Cal. 2018) ; see also In re MyFord Touch Consumer Litig. , 291 F. Supp. 3d 936, 947 (N.D. Cal. 2018) (holding that "the law does not require Plaintiffs to introduce proof that the vehicles were not in fact used to demonstrate unmerchantability," but that they "can also demonstrate unmerchantability by introducing evidence that their vehicles were affected by a persistent defect that so affected their safety, reliability, or operability as to render them unfit").
Accordingly, GM's motion to dismiss is denied as to Count V.
D. Song-Beverly Act Claim (Count VI)
GM argues Plaintiffs fail to state a claim under the Song-Beverly Act because they do not allege facts showing their vehicles were not fit for the ordinary purpose of providing transportation. ECF No. 39 at 19. The Court has already rejected this contention as to Plaintiffs' implied warranty claim. Taking the facts in the light most favorable to Plaintiffs, Plaintiffs have adequately pleaded unfitness. GM next argues that Plaintiffs who purchased used vehicles cannot state a claim under the Song-Beverly Act. Id. GM is correct. Under the Song-Beverly Act, "the distributor or retailer is liable for the sale of used products, not the original product manufacturer." Hindsman v. Gen. Motors LLC , No. 17-CV-05337-JSC, 2018 WL 2463113, at *14 (N.D. Cal. June 1, 2018). Plaintiffs make no argument to the contrary. See ECF No. 44 at 29.
Accordingly, Count VI is dismissed as to Plaintiffs Moonan, Cochems, Buob, Sutherland, Samson, A.R. Smith, Askin, Diniz, and Tirozzi, without leave to amend. See Compl. ¶¶ 14, 16, 17, 23, 25, 27, 29, 31, 32.
E. Magnuson-Moss Warranty Act Claim (Count VII)
As the parties agree, Plaintiffs' Magnuson-Moss Warranty Act claim rises or falls with their implied warranty claim under California law. See ECF Nos. 39 at 19, 44 at 29; see also Clemens v. DaimlerChrysler Corp. , 534 F.3d 1017, 1022 (9th Cir. 2008) ("[T]he claims under the Magnuson-Moss Act stand or fall with [Plaintiff's] express and implied warranty claims under state law."). Because the Court has declined to dismiss Plaintiffs' implied warranty claim, Plaintiffs' MMWA claim also survives.
Accordingly, GM's motion is denied as to Count VI.
F. Individual Deficiencies: Standing and Statutes of Limitations
Finally, GM alleges that 16 Plaintiffs lack Article III standing because they do not allege that their vehicles have experienced a defect and therefore have not suffered an injury-in-fact. ECF No. 39 at 20. GM further contends that 12 Plaintiffs' claims are time-barred in whole or in part because they purchased their vehicles too long before they filed the complaint. Id. at 21-22. These contentions are not persuasive.
First, as Plaintiffs point out, ECF No. 44 at 29-30, "[a]llegations of overpayment based on a defendant's failure to disclose a product's limitations are clearly sufficient to satisfy Article III's injury-in-fact requirement." In re Chrysler-Dodge-Jeep Ecodiesel Mktg., Sales Practices, & Prod. Liab. Litig. , 295 F. Supp. 3d 927, 948-49 (N.D. Cal. 2018) (citing Maya v. Centex Corp. , 658 F.3d 1060, 1069 (9th Cir. 2011) (injury-in-fact requirement satisfied where plaintiffs alleged that "they would not have purchased their homes had defendants made the disclosures")). Because here, all Plaintiffs allege that they would have paid far less – or would not have bought their vehicles at all – had they known of the fuel pump defect, all Plaintiffs have adequately alleged injury-in-fact for standing purposes. See Compl. ¶ 7.
Second, as Plaintiffs contend, the discovery rule operates here to toll their claims. See ECF No. 44 at 33-34. The "discovery rule postpones accrual of a cause of action until the plaintiff discovers, or has reason to discover, the cause of action." Philips v. Ford Motor Co. , No. 14-CV-02989-LHK, 2015 WL 4111448, at *7 (N.D. Cal. July 7, 2015) (quoting Aryeh v. Canon Bus. Solutions, Inc. , 55 Cal.4th 1185, 151 Cal.Rptr.3d 827, 292 P.3d 871, 875 (2013) ). "In order to rebut this presumption and toll the statute of limitations through the discovery rule, a plaintiff must plead facts showing (1) the time and manner of discovery and (2) the inability to have made earlier discovery despite reasonable diligence in investigating." Id. at *7-8 (internal quotation marks and citation omitted). Here, Plaintiffs did not have reason to discover the defects in their vehicles until they experienced adverse effects resulting from those defects or were informed by counsel of said defects. The earliest discoveries alleged in the complaint took place in 2017. See Compl. ¶¶ 11, 28. Given the three-and four-year statutes of limitations applicable to Plaintiffs' asserted causes of action, no Plaintiffs' claims are time-barred.
CONCLUSION
For the reasons above, the motion is granted in part and denied in part. When granting a motion to dismiss, the court should grant leave to amend "unless it determines that the pleading could not possibly be cured by the allegation of other facts." Doe v. United States , 58 F.3d 494, 497 (9th Cir. 1995) (internal quotation marks and citation omitted). Because the defects in the Song-Beverly claims of Plaintiffs Moonan, Cochems, Buob, Sutherland, Samson, A.R. Smith, Askin, Diniz, and Tirozzi are incurable, those claims are dismissed with prejudice.