Opinion
2:22-cv-04631-MEMF(MRWx)
01-20-2023
ANTHONY MONACO, an individual, Plaintiff, v. MERCEDES-BENZ USA, LLC, a Delaware Limited Liability Company, Defendant.
ORDER GRANTING IN PART DEFENDANT'S MOTION TO DISMISS AND/OR STRIKE [ECF NO. 8] AND REQUEST FOR JUDICIAL NOTICE [ECF NO. 9]
MAAME EWUSI-MENSAH FRIMPONG, UNITED STATES DISTRICT JUDGE.
Before the Court is the Motion to Dismiss and/or Strike portions of the Complaint and Request for Judicial Notice filed by Defendant Mercedes-Benz USA, LLC. ECF Nos. 8, 9.
For the reasons stated herein, the Motion to Dismiss is GRANTED with leave to amend as it relates to Plaintiff's third cause of action. The Motion to Dismiss is DENIED as to Plaintiff's first and second causes of action. The Court also DENIES the Motion to Strike. The Court further GRANTS the Request for Judicial Notice. Plaintiff is ORDERED to file a First Amended Complaint within thirty (30) days of the date of this Order if he still desires to pursue the claim being dismissed with leave to amend.
BACKGROUND
Unless otherwise indicated, the following factual background is derived from the Complaint. ECF No. 1-1 (“Compl.”).
On or about June 15, 2021, Plaintiff Anthony Monaco (“Monaco”) purchased a new 2021 Mercedes-Benz GLE 53, VIN 4JGFD6BB9MA504140 (the “Vehicle”) manufactured by Defendant Mercedes-Benz USA (“MBUSA”) from Mercedes-Benz of Beverly-Hills. Compl. ¶¶ 5-7, 27. The Vehicle was issued under a written warranty. Id. Although the Vehicle was “purchased new within five (5) miles,” Monaco soon discovered that the Vehicle had a defective heating, ventilation, and air conditioning (“HVAC”) system that was emitting “moldy, smelly air” (the “Defect”) along with other nonconformities. Id. ¶¶ 14, 30.
II. Procedural History
On June 1, 2022, Monaco filed this action against MBUSA in Los Angeles County Superior Court asserting three causes of action: (1) breach of implied warranty of merchantability, pursuant to the Song-Beverly Act, CAL. CIV. CODE §§ 1791.1, 1792; (2) breach of express warranty, pursuant to the Song-Beverly Act, CAL. CIV. CODE §§ 1791.2, 1793.2(d); and (3) fraudulent concealment. See Notice of Removal, ECF No. 1 (“Notice”); Compl. On July 6, 2022, MBUSA appropriately filed a motion to remove the action to the Central District of California based on diversity jurisdiction. See Notice. On July 13, 2022, MBUSA filed the instant Motion to Dismiss and/or Strike Portions of the Complaint. Motion to Dismiss and/or Strike, ECF No. 8 (“Motion” or “Mot.”). Filed concurrently is MBUSA's Request for Judicial Notice. ECF No. 9 (“Request” or “RJN”). The Motion was fully briefed as of August 18, 2022. ECF Nos. 11 (“Opposition” or “Opp'n”); 13 (“Reply”). On September 12, 2022, the Court found these matters appropriate for resolution without oral argument and vacated the hearing set for September 15, 2022. ECF No. 15, see FED. R. CIV. P. 78(b); C.D. Cal. L.R. 7-15.
REQUEST FOR JUDICIAL NOTICE
I. Applicable Law
A court may take judicial notice of facts not subject to reasonable dispute where the facts “(1) [are] generally known within the trial court's territorial jurisdiction; or (2) can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned.” FED. R. EVID. 201(b). Under this standard, courts may take judicial notice of “undisputed matters of public record,” but generally may not take judicial notice of “disputed facts stated in public records.” Lee v. City of Los Angeles, 250 F.3d 668, 690 (9th Cir. 2001), overruled on other grounds by Galbraith v. Cnty. of Santa Clara, 307 F.3d 1119, 1125-26 (9th Cir. 2002). Although a district court generally may not consider any material beyond the pleadings in ruling on a motion to dismiss, the Court may take judicial notice of matters in the public record, without converting a motion to dismiss into one for summary judgment. Id. at 689-90. The Ninth Circuit has recognized public records, including judgments and other court documents, as proper subjects of judicial notice. See, e.g., United States v. Black, 482 F.3d 1035, 1041 (9th Cir. 2007); U.S. ex rel. Robinson Rancheria Citizens Council v. Borneo, Inc., 971 F.2d 244, 248 (9th Cir. 1992). When taking judicial records under notice, the Court may only do so “not for the truth of the facts recited therein, but for the existence of the opinion, which is not subject to reasonable dispute over its authenticity.” Lee, 250 F.3d at 690.
MBUSA submits-and asks the Court to take judicial notice of-five (5) exhibits in support of its Motion to Dismiss:
(1) The March 31, 2021 ruling in the Central District of California District Court case Nafisi v. Mercedes-Benz USA, LLC, No. 2:20-cv-9309 (ECF No. 23);
(2) The June 3, 2021 ruling in the Central District of California District Court case Clemente v. Mercedes Benz USA, LLC, No. 8:20-cv-01577 (ECF No. 29);
(3) The March 31, 2021 ruling in the Eastern District of California District Court case Shanmugan v. Mercedes-Benz USA, LLC, No. 2:20-cv-01647 (ECF No. 23);
(4) The December 14, 2021 tentative ruling in the Northern District of California District Court case Hanai v. Mercedes-Benz USA, LLC, No. 3:20-cv-06012 (ECF No. 34);
(5) The September 9, 2021 ruling in the Central District of California District Court case Arrington v. Mercedes-Benz USA, LLC, No. 5:20-cv-02292 (ECF No. 19);
Here, each of the exhibits submitted by MBUSA are orders issued in this district or in one of our sister districts. Accordingly, each exhibit falls into the category of judicial records deemed proper for judicial notice. See Reyn s Pasta Bella, LLC v. Visa USA, Inc., 442 F.3d 741, 746 n.6 (9th Cir. 2006) (“We may take judicial notice of court filings and other matters of public record.”).
The Court, therefore, GRANTS MBUSA's unopposed Request to take judicial notice of Exhibits 1-5.
MOTION TO DISMISS
I. Applicable Law
A. Motion to Dismiss Pursuant to Rule 12(b)(6)
Under Federal Rule of Civil Procedure Rule 12(b)(6), a party may file a motion to dismiss for “failure to state a claim upon which relief can be granted.” FED. R. CIV. P. 12(b)(6). The purpose of Rule 12(b)(6) is to “enable defendants to challenge the legal sufficiency of claims asserted in a complaint.” Rutman Wine Co. v. E. & J. Gallo Winery, 829 F.2d 729, 738 (9th Cir. 1987). A district court properly dismisses a claim under Rule 12(b)(6) if the complaint fails to allege sufficient facts to support a cognizable legal theory. Caltex Plastics, Inc. v. Lockheed Martin Corp., 824 F.3d 1156, 1159 (9th Cir. 2016).
“To survive a motion to dismiss, a complaint must contain sufficient factual matter . . . to ‘state a claim for relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting BellAtl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “The plausibility standard is not akin to a ‘probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Id. While a complaint does not need detailed factual allegations, a plaintiff's obligation to provide the grounds of his entitlement to relief requires more than “threadbare recitals of the elements of a cause of action.” Id. at 678. “Determining whether a complaint states a plausible claim for relief is ‘a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.'” Ebner v. Fresh, Inc., 838 F.3d 958, 963 (9th Cir. 2016) (quoting Iqbal, 556 U.S. at 679).
When evaluating a complaint under Rule 12(b)(6), the court “must accept all well-pleaded material facts as true and draw all reasonable inferences in favor of the plaintiff.” Caltex, 824 F.3d at 1159; Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008) (“We accept factual allegations in the complaint as true and construe the pleadings in the light most favorable to the nonmoving party.”). This tenet, however, is “inapplicable to legal conclusions.” Iqbal, 556 U.S. at 678.
B. Rule 9 Heightened Pleading Standard
While all complaints must plead sufficient factual allegations to survive a 12(b)(6) motion, allegations containing elements of fraud are held to a heightened pleading standard. Under Federal Rule of Civil Procedure 9(b), when alleging fraud or mistake, a party must state with “particularity the circumstances constituting fraud or mistake. Malice, intent, knowledge, and other conditions of a person's mind may be alleged generally.” FED R. CIV. P. 9(b). When evaluating the sufficiency of a pleading under Rule 9(b), a pleading is sufficient “if it identifies the circumstances constituting fraud so that a defendant can prepare an adequate answer from the allegations. While statements of the time, place, and nature of the alleged fraudulent activities are sufficient, mere conclusory allegations of fraud are insufficient.” Moore v. Kayport Package Exp., Inc., 885 F.2d 531, 540 (9th Cir. 1989) (citing Wool v. Tandem Computers, Inc., 818 F.2d 1433, 1439 (9th Cir. 1987)). Further, the Ninth Circuit has made clear that this heightened pleading standard also applies to fraudulent concealment claims. See Kearns v. Ford Motor, 567 F.3d 1120, 1126-27 (9th Cir. 2009).
C. Rule 12(f) Motion to Strike
Federal Rule of Civil Procedure 12(f) provides that a court may “strike from a pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter.” FED. R. CIV. P. 12(f). The function of a motion to strike is “to avoid the expenditure of time and money that must arise from litigating spurious issues by dispensing with those issues prior to trial.” Whittlestone, Inc. v. Handi-Craft Co., 618 F.3d 970, 973 (9th Cir. 2010) (citations omitted). A matter is “immaterial” if it “has no essential or important relationship to the claim for relief or the defenses being pleaded, or a statement of unnecessary particulars in connection with and descriptive of that which is material.” 5C CHARLES ALAN WRIGHT & ARTHUR R. MILLER, FEDERAL PRACTICE & PROCEDURE § 1382 (3ded. 2022). A matter is “impertinent” if it “consists of statements that do not pertain, and are not necessary, to the issues in question.” Id.
And while the district court has “considerable discretion in disposing of a Rule 12(f) motion to strike,” the motion should be resolved in favor of the non-moving party if there is “any doubt about whether the challenged material is redundant, immaterial, impertinent, or scandalous.” Id.
See also Nguyen v. CTSElecs. Mfg. Sols. Inc., 301 F.R.D. 337, 342-43 (N.D. Cal. 2014) (declining to strike allegations for redundancy); Ammi Innovation Corp. v. McFerran Home Furnishings, Inc., 301 F.R.D. 487, 491-92 (C.D. Cal. 2014) (declining to strike allegations for immateriality or impertinency).
D. Leave to Amend
A district court should generally grant leave to amend freely. Cervantes v. Countrywide Home Loans, Inc., 656 F.3d 1034, 1041 (9th Cir. 2011). However, “a district court may dismiss without leave where a plaintiff's proposed amendments would fail to cure the pleading deficiencies and amendment would be futile.” Id. at 1041.
II. Discussion
A. Monaco's breach of implied warranty claim is properly pleaded.
MBUSA seeks dismissal of Monaco's first cause of action for breach of implied warranty, asserting that: (1) the Complaint lacks “factual allegations regarding the specific issues [Monaco] allegedly experienced with the vehicle or its parts.” Mot. at 3-4.
Pursuant to the Song-Beverly Consumer Warranty Act, “every sale of consumer goods that are sold at retail in this state shall be accompanied by the manufacturer's and the retail seller's implied warranty that the goods are merchantable.” CAL. CIV. CODE § 1792. The elements of the claim of breach of implied warranty of merchantability are (1) the plaintiff bought a consumer good (i.e., a good used primarily for personal, family or household purposes) manufactured or distributed by the defendant; (2) the defendant was in the business of manufacturing or distributing the particular consumer good to retail buyers; and (3) the consumer good (a) was not of the same quality as those generally acceptable in the trade; or (b) was not fit for the ordinary purposes for which such goods are used; or (c) was not adequately contained, packed and labeled; or (d) did not measure up to the promises or facts stated on the container or label. See California Civil Jury Instructions (“CACI”) 3210. In general, only the first two tests- “fitness for ordinary purpose” and “pass without objection in trade”-are applied under the Song-Beverly Act.
MBUSA argues that Monaco's first cause of action must be dismissed because the Complaint “fails to include the necessary factual allegations to support a breach of warranty claim,” specifically those allegations addressing whether the Vehicle was “of the same quality as those generally acceptable in the trade” or “was not fit for the ordinary purposes for which such goods are used.” Mot. at 3. MBUSA argues that the Complaint is devoid of facts that indicate “when the alleged issues occurred and/or manifested, where [Monaco] presented the Subject Vehicle for repair, for which of the alleged issues the Subject Vehicle was presented to a Mercedes-Benz dealership for repair, what repairs were performed on the vehicle, the length of each service visit, and/or damages as a result of such claims” which thus makes it “impossible” for Monaco to show that the Vehicle is merchantable. Mot. at 3-4. In response, Monaco argues that he has pleaded sufficient facts indicating that the “moldy odor” produced by the Vehicle's HVAC system rendered the Vehicle not fit for ordinary purpose. Opp'n at 4.
Neither party disputes that Monaco purchased the vehicle from an authorized MBUSA dealer, meaning that the first two elements of this claim are satisfied. The Court must thus focus its analysis on the third element-whether the Complaint adequately alleges that the Vehicle “(a) was not of the same quality as those generally acceptable in the trade; or (b) was not fit for the ordinary purposes for which such goods are used.” See CACI 3210.
In support of the Vehicle's defect, Monaco alleges the following: due to a manufacturing defect, the Vehicle's HVAC system “produced a moldy odor- akin to a “pungent, mildew, sweaty, moldy sweat sock smell”- “under normal use conditions impairing [Monaco's] safety, comfort, enjoyment and use of the Vehicle.” Id. ¶¶ 23, 25. The Complaint further alleges that the HVAC system's defect “creates condensation that accumulates and does not evaporate as it normally does in a properly working HVAC system.” Id. ¶ 25. This condensation then “acts as a perfect breeding environment for the growth of mold spores and mildew” which can create various health problems such as skin rashes and hay fever-type symptoms and trigger asthma attacks. Id. ¶ 25. Monaco also alleges that he took the Vehicle into an authorized repair facility on two occasions-December 6, 2021, and again on April 6, 2022-seeking to have the HVAC system repaired. Id. ¶ 32. The Complaint also contains the following allegations concerning the purported breach:
92. The distribution and sale of the Vehicle was accompanied by the Defendants implied warranty that the Vehicle was merchantable.
93. Defendants, and each of them, impliedly warranted, inter alia, that the Vehicle would pass without objection in the trade under the Contract description; that the Vehicle was fit for the ordinary purposes for which it was intended; that the Vehicle was adequately assembled; and/or that the Vehicle conformed to the promises or affirmations of fact made to Plaintiff.
94. As evidenced by the defects, malfunctions, misadjustments, and/or nonconformities alleged herein, the Vehicle was not merchantable because it did not have the quality that a buyer would reasonably expect, because it could not pass without objection in the trade under the Contract and/or warranty description; because it was not fit for the ordinary purposes for which it was intended; because it was not adequately assembled; and/or because it did not or could not be conformed to the promises or affirmations of fact made to Plaintiff.
95. Upon discovery of the Vehicle's nonconformities, Plaintiff took reasonable steps to notify Defendants, and each of them, within a reasonable time that the Vehicle did not have the quality that a buyer would reasonably expect and, further, justifiably revoked acceptance of the nonconforming Vehicle. The Subject Vehicle was not of the same quality as those generally accepted in the trade because it was sold with one or more defective vehicle systems/components which manifested as electrical, engine, and transmission system defects.Id. ¶¶ 92-95.
The Court finds that Monaco has properly alleged this claim. The provided allegations state what was wrong with the Vehicle in detail, that the defect caused the Vehicle to not be fit for ordinary use, and that Monaco sought to have the system repaired on at least two occasions, neither of which were successful. Although MBUSA argues that Monaco must provide more than this, neither Rule 8 nor the Song-Beverly Act support this contention. See FED. R. CIV. P. 8 (a)(2) (a complaint need only contain “a short and plain statement of the claim showing that the pleader is entitled to relief'); Hicks v. Kaufman & Broad Home Corp., 107 Cal.Rptr.2d 761, 765 (Ct. App. 2001) (holding that establishing a Song-Beverly Act claim requires “only that [the vehicle] contains an inherent defect which is substantially certain to result in malfunction during the useful life of the product.'). Accordingly, the Court finds that the Complaint plausibly alleges a breach of implied warranty under Iqbal and Twombly.
The Court hereby DENIES MBUSA's Motion to Dismiss as to Monaco's first cause of action for breach of implied warranty.
B. Monaco's breach of express warranty claim is properly pleaded.
MBUSA seeks dismissal of Monaco's second cause of action for breach of express warranty claim in violation of the Song-Beverly Act, CAL. CIV. CODE §§1790, et seq, on the grounds that Monaco “has failed to plead the claim and material facts with certainty.” Mot. at 5.
The Song-Beverly Act provides that where a manufacturer of a motor vehicle sold in the state has made an express warranty, “[i]f the manufacturer . . . is unable to service or repair [that] new motor vehicle . . . to conform to the applicable express warranties after a reasonable number of attempts, the manufacturer shall either promptly replace the new motor vehicle . . . or promptly make restitution to the buyer.” CAL. CIV. CODE § 1793.2(d)(2). Monaco has pleaded that the Vehicle is covered by applicable express warranties. See Compl. ¶7. Accordingly, this provision of the Song -Beverly Act applies.
Section 1795.4(a) of the Song-Beverly Act extends the protections of express warranties afforded to buyers of consumer goods to lessees of consumer goods, providing in relevant part: “If express warranties are regularly furnished to purchasers of substantially the same kind of goods, (1) those warranties will be deemed .
There are three elements of an action for breach of express warranty under section 1790 of the Song-Beverly Act: (1) nonconformity; (2) presentation; and (3) failure to repair. Donlen v. Ford Motor Co., 158 Cal.Rptr.3d 180, 191 (Ct. App. 2013). The Court addresses each factor in turn.
i. The nonconformity element is sufficiently pleaded.
First, Monaco must plead that the Vehicle “had a nonconformity covered by the express warranty that substantially impaired the use, value or safety of the vehicle.” Donlen, 158 Cal.Rptr.3d at 191. Here, the Complaint explicitly defines the Defect as a “moldy sweat sock smell” and identifies the HVAC system as the source of the offending odor. Compl. ¶¶ 14, 30. This level of specificity surpasses a “threadbare recitation” of the cause of elements of the action, and puts MBUSA on notice of the basis of Monaco's claims. Twombly, 550 U.S. at 678; see id. at 555; FED. R. CIV. P. 8(a)(2). Monaco has thus met the nonconformity element.
ii. The presentation and failure to repair elements are sufficiently pleaded.
Monaco must also plead that the Vehicle “was presented to an authorized representative of the manufacturer of the vehicle for repair (the presentation element)” and “the manufacturer or his representative did not repair the nonconformity after a reasonable number of repair attempts (the failure to repair element).” Donlen, 158 Cal.Rptr.3d at 191.
Here, Monaco alleges that he presented the Vehicle to an authorized repair facility for repair of various “nonconformities,” including the smell emitting from the HVAC system, on two occasions: December 6, 2021, and April 6, 2022. Compl. ¶¶ 8-9, 30-33. Both repair attempts were covered by the Vehicle's written warranty. Id. ¶¶ 31-32. On both occasions, Monaco alleges that neither repair attempt was successful, despite repair technicians “spray[ing] a cleaning agent into the A/C system” and repeatedly representing that the Vehicle was safe to drive upon conclusion of the repairs. Id. ¶¶ 30-33.
The Court finds that Monaco has sufficiently pleaded both elements. First, neither party appears to dispute that Monaco presented the Vehicle to an authorized repair facility. Next, as the Complaint alleges more than one repair attempt, the number of attempts is “reasonable.” See Robertson v. Fleetwood Travel Trailers of California, Inc., 50 Cal.Rptr.3d 731, 741 (Ct. App. 2006) (“The reasonableness of the number of repair attempts is a question of fact to be determined in light of the circumstances, but at a minimum there must be more than one opportunity to fix the nonconformity.”) (citing Silvio v. Ford Motor Co., 135 Cal.Rptr.2d 846, 847-848(Ct. App. 2003)). Finally, the Complaint alleges that the repair facilities were unable to fix the Defect. Thus, Monaco has met the requirements of the second and third elements.
In sum, the Court finds that Monaco's second cause of action for breach of express warranty is sufficiently pleaded. Accordingly, MBUSA's Motion to Dismiss is DENIED on this claim.
C. Monaco's fraudulent concealment claim is improperly pleaded.
MBUSA seeks dismissal of Monaco's third cause of action for fraudulent concealment for failure to plead with particularity. Mot. at 5-6. MBUSA argues that Monaco has failed to meet the heightened pleading standard for fraud as is required under Federal Rule of Civil Procedure 9(b). Id. Although Monaco disputes the application of Rule 9(b) on this cause of action, see Opp'n at 6-8, as previously discussed, see supra I.B, the Ninth Circuit has held that the Rule 9(b) standard applies to claims sounding in fraud based on concealment and nondisclosure. See Kearns, 567 F.3d at 1126 27. Therefore, the Court assesses the adequacy of Monaco's third cause of action under Rule 9(b).
The elements of an action for fraudulent concealment are:
(1) the defendant must have concealed or suppressed a material fact; (2) the defendant must have been under a duty to disclose the fact to the plaintiff; (3) the defendant must have intentionally concealed or suppressed the fact with the intent to defraud the plaintiff (4) the plaintiff must have been unaware of the fact and would not have acted as he did if he had known of the concealed or suppressed fact, and (5) as a result of the concealment or succession of the fact, the plaintiff must have sustained damage.SCC Acquisitions Inc. v. Cent. Pac. Bank, 143 Cal.Rptr.3d 711, 715 (Ct. App. 2012) (citation omitted). Thus, the threshold question on a fraudulent concealment claim is whether the defendant had a duty to disclose the fact to the plaintiff.
i. As Monaco has not sufficiently alleged that the Vehicle posed a safety issue, the Court finds that Monaco has also not alleged that MBUSA had a duty to disclose
MBUSA argues that Monaco has failed to allege that it had a duty to disclose as the Complaint fails to allege “any transactional relationship between MBUSA and [Monaco] that would give rise to any duty by MBUSA to disclose any alleged defect with [the Vehicle].” Mot. at 12.
There are four circumstances in which a duty 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.LiMandri v. Judkins, 60 Cal.Rptr.2d 539, 543 (Ct. App. 1997) (quotation marks omitted) (quoting Heliotis v. Schuman, 226 Cal.Rptr. 509, 512 (Ct. App. 1986) (“Judkins factors”).
The parties only address the first Judkins factor-whether Monaco has sufficiently alleged a fiduciary relationship between himself and MBUSA. MBUSA argues that Monaco has failed to meet the first Judkins factor as the parties were not in a transactional relationship. Mot. at 11-12. The parties do not dispute that Monaco is not a transactional relationship with MBUSA. Instead, Monaco argues that he is exempt from the transactional relationship requirement because a plaintiff need not “show a direct contractual nexus or special relationship when there is a safety issue associated with the manufacturer's product.” Opp'n at 9.
Monaco cites to Daugherty to support this contention. Daugherty v. Am. Honda Co., Inc., 51 Cal.Rptr.3d 118 (Ct. App. 2006). In Daugherty, the court found that the plaintiff's fraudulent concealment claim was improperly pleaded as the complaint lacked “factual allegations showing any instance of physical injury [,] or any safety concerns posed by the defect” and lacked “a single affirmative representation by [the vehicle manufacturer] regarding [the specific defect].” Daugherty, 51 Cal.Rptr. 3d. at 127. As the plaintiff has only “alleged that the risk posed by the alleged defect was the cost to repair the product,” the court found that there was no duty to disclose. Wilson v. Hewlett-Packard Co., 668 F.3d 1136, 1141 (9th Cir. 2012) (discussing Daugherty); Daugherty, 51 Cal.Rptr.3d at 127-28.
However, Daugherty provides that the lack of such allegations is not fatal when the complaint proceeds on allegations that the defendant's omission is “contrary to a representation actually made by the defendant, or an omission of a fact the defendant was obliged to disclose.” Id. Daugherty implies that an “unreasonable” safety risk would trigger liability due to failure to disclose a fact. Id. “California federal courts have generally interpreted Daugherty as holding that ‘[a] manufacturer's duty to consumers is limited to its warranty obligations absent either an affirmative misrepresentation or a safety issue.'” Wilson, 668 F.3d at 1141 (collecting cases).
The Court does not find that Monaco has sufficiently alleged that the Defect poses a safety issue. The Complaint alleges that the odor emitting from the HVAC system is potentially linked to “condensation that accumulates and does not evaporate at it normally does in a properly working HVAC system” which creates “a perfect breeding environment for the growth of mold spores and mildew.” Compl. ¶ 25. This, Monaco alleges, can be detrimental to one's health and cause “allergic reactions in sensitive individuals,” “asthma attacks,” and “irritation to the eyes, skin, nose, throat, and lungs.” Id. However, this potentiality is not enough under the Rule 9(b) heightened pleading standard. At no point does Monaco affirmatively state that the Defect is caused by accumulated condensation or that he has personally experienced these negative health effects. Without such allegations, the Court is unable to determine whether the Defect is merely a foul odor or rises to the level of a safety issue. Thus, even viewing the allegations in the light most favorable to the plaintiff, the Court finds that Monaco has not established that MBUSA had a duty to disclose under the first factor. The Court now addresses the three remaining factors in turn.
ii. Monaco has not sufficiently alleged that MBUSA had exclusive knowledge of the defect.
The Court now turns to the second Judkins factor: whether MBUSA “had exclusive knowledge of material facts not known to the plaintiff.” Judkins, 60 Cal.Rptr.2d at 543. For information to qualify as “material,” a plaintiff must establish that “had the omitted information been disclosed, one would have been aware of it and behaved differently.” Mirkin v. Wasserman, 858 P.2d 568 (Cal. 1993).
The Court finds that Monaco has sufficiently alleged the existence of a material fact. Specifically, the Complaint alleges that Monaco “would not have acquired the Vehicle,” if MBUSA had “disclosed the issues relating to the Defective HVAC System,” Compl. ¶ 71, meaning that Monaco's knowledge of the Defect would have caused him to behave differently.
The Court does not find, however, that Monaco has sufficiently established that MBUSA had knowledge of said material fact. Monaco contends that MBUSA had “exclusive knowledge” of the Defect “at least as early as 2008.” See id. ¶¶ 37-66. He provides two examples to demonstrate MBUSA's knowledge of the Defect: Technical Service Bulletins (“TSBs”), which he explains are “issued by a vehicle manufacturer when there are several occurrences of an unanticipated problem . . . [and] provide repair instructions for service technicians,” and a consumer complaints database maintained by the National Highway Traffic Safety Administration (“NHTSA”)'s Office of Defects Investigation (“ODI”). Id. ¶¶ 47-54. While the TSBs document a few instances of HVAC issues dating from 2007 to 2016, it is unclear if the vehicles in the reports are the same make and model as the Vehicle. C.f. Falk v. Gen. Motors Corp., 496 F.Supp.2d 1088, 1096 (N.D. Cal. 2007) (where, at the very least, the consumer complaints involved defects in vehicles bought in the same year that plaintiffs purchased his vehicle up to the year of the filing of the complaint).
The NHTSA's ODI consumer complaints present a similar issue. Monaco provides seventeen sample consumer complaints in support of his allegation that the MBUSA was on notice of the Defect. Id. ¶ 57. However, as is the case with the TSBs, the consumer complaints do not indicate that any of the vehicles are the same model as the Vehicle. He further alleges that MBUSA was aware and monitoring these consumer complaints because manufacturers, such as MBUSA, “can and do access” NHTSA ODI's consumer complaint automated database and it provides manufacturers with this data, including MBUSA. Id. ¶ 54. Monaco however, fails to establish that MBUSA had knowledge of the alleged HVAC defect in his particular Vehicle and, thus, insufficient to satisfy the Rule 9(b) standard. And while courts consider consumer complaints as evidence of knowledge, such consideration is only appropriate when there is an “unusual volume” of complaints and the complaints predate the plaintiff's purchase of the vehicle. See Williams v. Yamaha Motor Co., 851 F.3d 1015, 1027 n.8 (9th Cir. 2017). Here, Monaco does not provide a total estimated number of consumer complaints, but instead simply states that “[t]he number and content of NHTSA consumer complaints highlight the systemic and yet to be addressed problems that continue to plague the Defective HVAC System.” See Compl. ¶ 55. As Monaco fails to provide the Court with number of the complaints, the Court is unable to determine whether the complaints reached an “unusual” volume. Indeed, seventeen example complaints does not appear to be unusual. See Williams, 851 F.3d at 1027 n.8 (collecting cases).
See also Peckerar v. Gen. Motors, LLC, No. EDCV182153DMGSP, 2019 WL 6825757, at *3 (C.D. Cal. July 24, 2019) (finding that nine consumer complaints “are not an unusually large volume of complaints and does not support a plausible allegation that Defendant had knowledge of the . . . defectâ€).
Finally, Monaco also references a November 2008 arbitration decision rendered against MBUSA regarding “a foul musty order” emitting from HVAC vents. Compl. ¶ 38. However, this decision is insufficient for the same reasons that the TSBs and customer complaints fail. This one arbitration decision is insufficient to show that MBUSA was aware of the specific defect plaguing Monaco's vehicle or even that the HVAC system at issue in the fourteen-year-old arbitration decision involved the same HVAC system at issue in this case.
It does not follow that Monaco can allege that MBUSA had exclusive knowledge of the Defect if MBUSA did not have knowledge of the defect at all. Accordingly, the Court finds that these allegations fall short of the specificity required under the second Judkins factor.
See, e.g., Shanmugam v. Mercedes-Benz USA, LLC, No. 2:20-CV-01647, 2021 WL 2227876, at *3 (E.D. Cal. June 2, 2021) (declining to find identical allegations sufficient to establish sufficiently pleaded.
iii. As Monaco fails to establish that MBUSA had knowledge of the Defect, he has failed to meet the third Judkins factor.
The Court next evaluates the third Judkins factor-whether “the defendant actively conceal[ed] a material fact from the plaintiff.” Judkins, 60 Cal.Rptr.2d at 543. To bring a claim under this factor, a plaintiff must allege specific “affirmative acts on the part of the defendants in hiding, concealing or covering up the matters complained of.” Lingsch v. Savage29 Cal.Rptr. 201, 204 (Ct. App. 1963). As already stated, Monaco fails to allege that MBUSA had any knowledge of the Defect. See supra Section B.ii. Even if Monaco had been able to sufficiently establish that MBUSA was aware of the Defect, the Complaint is devoid of any allegations indicating that the MBUSA took any affirmative steps to hide or otherwise conceal the existence of the Defect. Accordingly, Monaco is unable to establish a duty to disclose under the third Judkins factor.
iv. Monaco fails to establish a duty to disclose under the fourth Judkins factor.
Finally, the Court evaluates the fourth Judkins factor-whether MBUSA “makes partial representations but also suppresses some material facts.” Judkins, 60 Cal.Rptr.2d at 543. A partial representation claim may arise when “the defendant makes representations but does not disclose facts which materially qualify the facts disclosed, or which render his disclosure likely to mislead.” Warner Constr. Corp. v. City of Los Angeles, 466 P.2d 996, 1001 (Cal. 1970). As such, a defendant may not “suppress or conceal any facts within his knowledge which materially qualify those stated.” Mktg. W., Inc. v. Sanyo Fisher (USA) Corp., 7 Cal.Rptr.2d 859, 865 (1992) (emphasis added).
Monaco argues that his fraudulent concealment claim is based on MBUSA's omissions, not on its affirmative representations. See generally Compl. ¶¶ 36-88; Opp'n at 13 (“Plaintiff alleges that Mercedes-Benz USA, LLC concealed material facts that, if known by him, would have absolutely prevented him from purchasing the Subject Vehicle.”) (emphasis added). The Complaint does allege that MBUSA made representations regarding the overall quality of the make and model of the Vehicle through advertisements and brochures that “promote [the HVAC System] as a dualzone for (4-zone*) climate control with pollen and odor filters” Compl. ¶¶ 67-70. However, as previously stated, Monaco fails to establish that MBUSA was aware of the Defect at the time that he purchased the Vehicle. As it does not follow that a defendant can fail to disclose information that was not within its knowledge, the Court similarly finds that Monaco has not alleged a duty to disclose under the fourth Judkins factor.
In sum, the Court finds that Monaco fails to establish a duty to disclose as is required on a fraudulent concealment claim.
v. As Monaco's fraudulent concealment claim is dismissed with leave to amend, the Court need not reach a final conclusion on the economic loss rule.
MBUSA also argues that Monaco's fraudulent concealment claim is barred by the economic loss rule. Mot. at 13.
“Economic loss” allows a plaintiff to recover “damages for inadequate value, costs of repair and replacement of the defective product or consequent loss of profits-without any claim of personal injury or damages to other property.” Robinson Helicopter Co., Inc. v. Dana Corp., 102 P.3d 268, 273 (Cal. 2004) (citation omitted). “[W]here a purchaser's expectations in a sale are frustrated because the product he bought is not working properly,” the economic loss rule, limits the plaintiff's recovery to the contract alone “for he has suffered only ‘economic' losses.” Id. (internal quotation marks and alterations omitted). The rule thus “bar[s] a plaintiff's tort recovery of economic damages unless such damages are accompanied by some form of physical harm (i.e., personal injury or property damage).” North Am. Chem. Co. v. Sup. Ct., 69 Cal.Rptr.2d 466, 472 (Ct. App. 1997) (first emphasis added). Therefore, a plaintiff proceeding on a tort claim must be able to show “harm above and beyond a broken contractual promise.” Robinson Helicopter, 102 P.3d at 272 (emphasis added).
There are, however, exceptions to the economic loss rule. It does not apply when “the duty that gives rise to tort liability is either completely independent of the contract or arises from conduct which is both intentional and intended to harm.” Id. at 990 (citing Erlich v. Menezes, 981 P.2d 978, 990 (Cal. 1999) (emphasis added)). The doctrine also does not apply when: “(1) the breach is accompanied by a traditional common law tort, such as fraud or conversion; (2) the means used to breach the contract are tortious, involving deceit or undue coercion; or (3) one party intentionally breaches the contract intending or knowing that such a breach will cause severe, unmitigable harm in the form of mental anguish, personal hardship, or substantial consequential damages.” Id. (citation omitted).
MBUSA argues that Monaco's damages are “purely economic losses resulting from [his] purchase of an allegedly defective vehicle” which limits his recovery to a breach of warranty claim. Mot. at 14. This, MBUSA contends, means that Monaco is precluded from recovery because he seeks to attach a tort claim to the “defendant's alleged failure to make good on its contractual promises” because his fraudulent concealment claim is based on his breach of warranty claim. Id. In response, Monaco alleges that his fraudulent concealment claim is based on the “independent tort of fraud applying a fraudulent concealment theory because MBUSA knowingly and intentionally sold him a defective ‘bill of goods.'” Opp'n at 12-13. However, Monaco does not allege that the Defect caused him bodily harm or injury to his property. In short, Monaco's allegations rest purely on economic loss.
The exception to the economic loss rule recognized in Robinson Helicopter does not apply here because the Complaint explicitly alleges that Monaco relied upon MBUSA's concealed facts and omissions, not MBUSA's affirmative representations. See generally Compl. ¶¶ 36 - 88; Opp'n at 13 (“Plaintiff alleges that Mercedes-Benz USA, LLC concealed material facts that, if known by him, would have absolutely prevented him from purchasing the Subject Vehicle.”). While Monaco cites to Robinson Helicopter to support his argument that his fraudulent concealment claim is not barred under the economic loss doctrine, Opp'n at 12, he neglects the clear guidance of the California Supreme Court in Robinson: “Our holding . . . is narrow in scope and limited to a defendant's affirmative misrepresentations on which a plaintiff relies and which expose a plaintiff to liability for personal damages independent of the plaintiff's economic loss.” Robinson Helicopter, 102 P.3d at 276. Thus, as currently pleaded, Monaco's fraudulent concealment claim is barred by the economic loss doctrine.
The Court therefore GRANTS MBUSA's Motion to Dismiss with regards to Monaco's third cause of action for violation of fraudulent concealment. However, the Court does not find amendment to be futile as the nature of Monaco's claims imply that he may be able lodge a successful fraudulent concealment claim. Accordingly, this cause of action is dismissed WITH LEAVE TO AMEND. See Cervantes, 656 F.3d at 1041.
MOTION TO STRIKE
Finally, MBUSA seeks to strike from the Complaint paragraphs 21 and 120 and Monaco's request for punitive damages at paragraph E of the Prayer. Mot. at 16-17. MBUSA argues that Monaco is precluded from the recovery sought under California Civil Code section 3294 because Monaco has failed to plead “any specific allegations demonstrating despicable, malicious or oppressive conduct by MBUSA that would entitle Plaintiff to punitive damages as required under California or federal law” and that his punitive damages request for relief must fail because his fraudulent concealment claim fails. Mot. at 16. MBUSA further argues that Monaco has failed to establish that MBUSA's officer, director, or managing agent “perpetrated, authorized, or knowingly ratified” the alleged “oppression, fraud or malice.” Id.
California Civil Code section 3294 dictates that a plaintiff may only recover punitive damages on a claim arising from a breach of an obligation not arising from a contract “where it is proven by clear and convincing evidence that the defendant has been guilty of oppression, fraud, or malice.” CAL. CIV. CODE § 3294(a). When such punitive damages are sought against a corporation, the allegations must show malice on the part of the corporation's employees. Wilson v. S. California Edison Co., 184 Cal.Rptr.3d 26, 58-59 (Ct. App. 2015). “[T]he oppression, fraud, or malice must be perpetrated, authorized, or knowingly ratified by an officer, director, or managing agent of the corporation.” Id.
MBUSA seeks to strike the following portions of the Complaint:
• Paragraph 21: “As a direct result of Defendants' wrongful conduct, Plaintiff has been harmed and is entitled to actual damages, including damages for the benefit of the bargain Plaintiff struck when purchasing the Vehicle, the diminished value of the Vehicle, statutory damages, attorneys' fees, costs, restitution, punitive damages, and injunctive and declaratory relief.”
• Paragraph 120: “Defendants' intentionally concealed material information regarding the Defective HVAC System to drive up sales and maintain its
market power, as Plaintiff would not have purchased the Vehicle, or would have paid substantially less for it, had Plaintiff known the truth. Defendants' acts were done maliciously, oppressively, deliberately, and with intent to defraud, and in reckless disregard of Plaintiff's rights and well-being, and in part to enrich itself at the expense of consumers. Defendants' acts were done to gain commercial advantage over competitors, and to drive consumers away from consideration of competitor's vehicles. Defendants' conduct warrants an assessment of punitive damages in an amount sufficient to deter such conduct in the future.”
• Prayer for Relief at E (for punitive damages).
Monaco concedes that his punitive damage claim rests on his third cause of action for fraudulent concealment. See Opp'n at 17-18 (reiterating the same arguments regarding Monaco's fraudulent concealment claim in support of his request for punitive damages). As previously stated, Monaco's fraudulent concealment claim is dismissed with leave to amend. Monaco's request for punitive damages hinges on the success of his fraudulent concealment claim. However, as the Court finds that Monaco may be able to successfully plead his third cause of action, the Court finds ruling on MBUSA's motion to strike these allegations premature at this juncture. Accordingly, the Court DENIES the request to strike paragraph E of the Prayer for Relief and paragraph 120.
Further, the Court finds that paragraph 21 includes requests for statutory damages, attorneys' fees, costs, restitution, and injunctive and declaratory relief alongside the request for punitive damages. As the Court has dismissed Monaco's first and second causes of action with leave to amend, striking paragraph 21 is improper. Accordingly, the Court DENIES the request to strike the request for punitive damages from paragraph 21.
CONCLUSION
For the reasons stated above, the Court GRANTS MBUSA's Request for Judicial Notice, GRANTS IN PART MBUSA's Motion to Dismiss, and DENIES MBUSA's Motion to Strike. The Court ORDERS as follows:
1) The Court GRANTS MBUSA's Request for Judicial Notice of Exhibits 1-5;
2) The Court DENIES the Motion to Dismiss as to Monaco's first cause of action for breach of implied warranty claim, and second cause of action for breach of express warranty claim;
3) Monaco's third cause of action for fraudulent concealment is DISMISSED WITH LEAVE TO AMEND;
4) The Court DENIES MBUSA'S Motion to STRIKE;
5) To the extent that Monaco desires to pursue any of the claim dismissed with leave to amend, he is ORDERED to file a First Amended Complaint within thirty (30) days of the date of this Order.
IT IS SO ORDERED.