Richard Smith v. Ford Motor Company ( 2011 )

FILED
NOT FOR PUBLICATION DEC 19 2011
MOLLY C. DWYER, CLERK
UNITED STATES COURT OF APPEALS U .S. C O U R T OF APPE ALS
FOR THE NINTH CIRCUIT
RICHARD SMITH; REBECCA KLEIN, No. 10-17321
individually and on behalf of all others
similarly situated, D.C. No. 3:06-cv-00497-MMC
Plaintiffs - Appellants,
MEMORANDUM *
v.
FORD MOTOR COMPANY,
Defendant - Appellee.
Appeal from the United States District Court
for the Northern District of California
Maxine M. Chesney, Senior District Judge, Presiding
Argued and Submitted November 29, 2011
San Francisco, California
Before: THOMAS and CLIFTON, Circuit Judges, and EZRA, District Judge. **
Plaintiffs Richard Smith and Rebecca Klein appeal the district court’s grant
of summary judgment to defendant Ford Motor Company. We affirm.
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
** The Honorable David A. Ezra, District Judge for the U.S. District
Court for the District of Hawaii, sitting by designation.
I. CLRA Claims
Plaintiffs’ claim under the Consumers Legal Remedies Act is based on the
failure of Ford to disclose the risk that ignition locks in its Focus vehicles from
model years 2000 through 2006 would fail after the warranty expired. 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.” Daugherty v. Am.
Honda Motor Co., Inc., 51 Cal. Rptr. 3d 118, 126 (Cal. Ct. App. 2006). As
plaintiffs do not allege that Ford made affirmative representations concerning the
ignition locks, the parties agree that plaintiffs cannot prevail absent a duty to
disclose by Ford.
Under California’s general law of fraud, a duty to disclose may arise, inter
alia, when the defendant had exclusive knowledge of material facts not known to
the plaintiff or when the defendant actively conceals a material fact from the
plaintiff. See Limandri v. Judkins, 60 Cal. Rptr. 2d 539, 543 (Cal. Ct. App. 1997).
This appeal largely centers on the question of whether California law creates a duty
to disclose non-safety related defects that manifest only after the warranty period,
absent any affirmative representations regarding those defects by the manufacturer.
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We agree with the district court that, under Daugherty, where 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 economic cost of the product’s repair but must
constitute a safety concern. 51 Cal. Rptr. 3d at 127-128.
Plaintiffs argue that the district court erred by deciding that the ignition-lock
defect did not pose a safety risk as a matter of law. Specifically, plaintiffs contend
that the failure rate of the Focus ignition locks was related to safety because a
defective lock may prevent the driver from starting the engine, thereby leaving the
driver stranded on the roadway, or may prevent the enging from being shut off,
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rendering the vehicle vulnerable to runaway or theft.1 We agree with the district
court that the “safety” concerns raised by plaintiffs were too speculative, as a
matter of law, to amount to a safety issue giving rise to a duty of disclosure. We
affirm the grant of summary judgment on the CLRA claims.
II. Fraudulent Concealment Claims
Common law fraudulent concealment under California law requires that “the
defendant must have been under a duty to disclose some fact to the plaintiff.” Hahn
v. Mirda, 54 Cal. Rptr. 3d 527, 530 (Cal. Ct. App. 2007). Because Ford was under
no duty to disclose the failure rate of the ignition locks in the Focus, we affirm the
district court’s grant of summary judgment on this ground.
1
Plaintiffs also appeal two related evidentiary rulings by the district court.
First, plaintiffs appeal the district court’s consideration, over objection, of an
affidavit submitted by Ford from Paul Taylor, Ph.D, an expert in mechanical
engineering. Dr. Taylor opined that the ignition lock defect at issue could not result
in an inability to turn off the engine. We conclude that the district court did not
abuse its discretion in finding that Dr. Taylor’s opinion was the product of reliable
principles and methods. See Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579,
593-94 (1993). Second, plaintiffs argue that the district court abused its discretion
by refusing to admit records from Ford’s AWS warranty database and Ford’s
Customer Quality Indicator System based on a determination that they were
inadmissible hearsay. Because plaintiffs do not dispute that these records were
hearsay and offer unpersuasive arguments as to why they fall under an exception,
we conclude that the district court did not abuse its discretion in ruling them
inadmissible. Further, given the apparent unreliability of the records in
demonstrating ignition lock-failures, the plaintiffs were not prejudiced by this
decision.
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III. Unconscionable Warranty Claims
Smith argues that Ford’s standard three-year, 36,000 mile warranty was
unconscionable because it was non-negotiable and contained durational limitations
that Ford enforced with respect to the known latent defect in the ignition locks.
Under California law, unconscionability includes both a procedural and substantive
element. Aron v. U-Haul Co. of Cal., 49 Cal. Rptr. 3d 555, 564 (Cal. Ct. App.
2006).
While California courts have rejected the notion that “the availability in the
marketplace of substitute employment, goods, or services alone can defeat a claim
of procedural unconscionability,” Nagrampa v. Mailcoups, Inc, 469 F.3d 1257,
1283 (9th Cir. 2006), the existence of meaningful substitutes can. See, e.g., Dean
Witter Reynolds, Inc. v. Superior Court, 259 Cal. Rptr. 789, 796-97 (Cal. Ct. App.
1989) (noting that “even though a contract may be adhesive, the existence of
‘meaningful’ alternatives available to such contracting party in the form of other
source of supply tends to defeat any claim of unconscionability”). Smith was
presented with a meaningful choice, not just the option of purchasing a different
vehicle from a different manufacturer, but also the option of purchasing a different
warranty with an extended durational limit from Ford. We agree with the district
court that Smith failed to provide sufficient evidence to support a finding in his
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favor regarding procedural unconscionability. Further, because Ford was under no
duty to disclose the failure rate of the ignition locks, and Smith has offered no
evidence that Ford’s warranty created “overly harsh or one-sided results as to
shock the conscience,” Aron, 49 Cal. Rptr. 3d at 564 (internal citations omitted),
we affirm the district court’s finding regarding the unconscionability of Ford’s
warranty.
IV. Secret Warranty Law Claims
California’s Secret Warranty Law provides that:
[a] manufacturer shall, within 90 days of the
adoption of an adjustment program, subject to priority for
safety or emission-related recalls, notify by first-class mail
all owners or lessees of motor vehicles eligible under the
program of the condition giving rise to and the principal
terms and conditions of the program.
Cal. Civ. Code § 1795.92(a). An “adjustment program” is defined as follows:
any program or policy that expands or extends the
consumer’s warranty beyond its stated limit or under which
a manufacturer offers to pay for all or any part of the cost
of repairing, or to reimburse consumers for all or any part
of the cost of repairing, any condition that may
substantially affect vehicle durability, reliability, or
performance, other than service provided under a safety or
emission-related recall campaign.
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Cal. Civ. Code § 1795.90(d). The law further provides that an adjustment program
“does not include ad hoc adjustments made by a manufacturer on a case-by-case
basis.” Id.We agree with the district court that plaintiffs failed to offer sufficient
evidence to support a finding that Ford’s After-Warranty Assistance program fell
within the statutory exception for “ad hoc” adjustments. Plaintiffs’ allegation that
the program was an “adjustment program,” as applied to ignition locks in the
Focus, boiled down to the fact that Ford had replaced more than 16,000 Focus
ignition locks under the program by the end of 2008. According to plaintiffs, the
sheer number of repairs indicated that this was more than an “ad hoc” policy.
However, Ford’s internal materials emphasized that repair decisions were to be
made on a case-by-case basis, did not reference ignition locks specifically, and
offered only vague guidelines, such as whether there was a potential for a customer
relations impact.
Plaintiffs did not carry their burden in showing that there was a genuine
issue of material fact as to whether Ford’s program was in violation of the Secret
Warranty Law.
V. UCL Claims
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The California Unfair Competition Law prohibits business acts or practices
that are (1) fraudulent, (2) unfair, or (3) unlawful. See Cal. Bus. & Prof. Code
§ 17200; see also Daugherty, 51 Cal. Rptr. 3d at 128. We affirm the district court’s
grant of summary judgement in favor of Ford on all three prongs.
To prevail on a claim under the fraudulent conduct prong of the UCL, the
plaintiff must show that “members of the public are likely to be deceived” by the
alleged practices. Bardin v. DaimlerChrysler Corp., 39 Cal. Rptr. 3d 634, 647 (Cal.
Ct. App. 2006); see also Daugherty, 51 Cal. Rptr. 3d at 128. When dealing with a
complex mechanical system sold under warranty, such as a vehicle, the expectation
of the reasonable consumer regarding the life span of an individual component is
that it will function properly for the length of the express warranty. See Daugherty,
51 Cal. Rptr. 3d at 128-29. Plaintiffs failed to provide sufficient evidence to
support a decision in their favor on the fraudulent conduct prong.
An act or practice is unfair under the UCL “if the consumer injury is
substantial, is not outweighed by any countervailing benefits to consumers or to
competition, and is not an injury the consumers themselves could reasonably have
avoided.” Id. at 129 (citing Camacho v. Auto. Club of S. Cal., 48 Cal. Rptr. 3d 770,
777 (Cal. Ct. App. 2006)). Further:
the failure to disclose a defect that might, or might not,
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shorten the effective life span of an automobile part that
functions precisely as warranted throughout the term of its
express warranty cannot be characterized as causing a
substantial injury to consumers, and accordingly does not
constitute an unfair practice under the UCL.
Id. at 130. Here, just as the injury in Daugherty was deemed to not be substantial,
the increased failure rate of the ignition locks in the Focus after the warranty period
was not substantial and Ford’s practices did not represent unfair conduct under the
UCL.
The unlawful conduct prong of the UCL is derivative of other California
laws, including the CLRA, common law fraudulent concealment, and the Secret
Warranty Law. As discussed, plaintiffs failed to carry their burden as to any of
these claims. As such, there was no violation under the unlawful prong of the UCL.
VI. Unjust Enrichment Claim
Plaintiffs also appeal the district court’s ruling that unjust enrichment is not
an independent cause of action in California. This argument has no merit. Jogani v.
Superior Court, 81 Cal. Rptr. 3d 503, 511 (Cal. Ct. App. 2008); Melchior v. New
Line Prods., Inc., 131 Cal. Rptr. 2d 347, 357 (Cal. Ct. App. 2003)); see
also Oestreicher v. Alienware Corp., 544 F. Supp. 2d 964, 975 (N.D. Cal. 2008)
(dismissing unjust enrichment claim because it had no basis after plaintiffs’s fraud-
based claims were dismissed); Berenblat v. Apple, Inc., 2009 WL 2591366, at *6
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(N.D. Cal. 2009) (“[A] claim for unjust enrichment cannot stand alone without a
cognizable claim under a quasi-contractual theory or some other form of
misconduct.”).
VII. Motion to Certify Questions to the California Supreme Court
Plaintiffs’ motion to certify questions to the California Supreme Court
is denied. As discussed above, sufficient controlling precedent exists from the
California appellate courts to address the questions posed, and there is no
indication that the California Supreme Court would decide these issues differently.
See Cal. Rules of Court 8.548; Bills v. U.S. Fid. & Guar. Co., 280 F.3d 1231, 1237
n.1 (9th Cir. 2002) (“[A] federal court is obligated to follow the decisions of the
state’s intermediate appellate courts where there is no convincing evidence that the
state supreme court would decide differently.”).
AFFIRMED.
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