Garlough v. FCA US LLC ( 2021 )

1 2 3 4 5 6 7 UNITED STATES DISTRICT COURT 8 EASTERN DISTRICT OF CALIFORNIA 9 10 BRIAN GARLOUGH, No. 2:20-cv-01879-JAM-AC 11 Plaintiff, 12 v. ORDER GRANTING DEFENDANT LITHIA’S MOTION TO DISMISS AND 13 FCA US LLC, a Delaware GRANTING IN PART AND DENYING IN limited liability company, et PART DEFENDANT FCA’S MOTION TO 14 al., DISMISS 15 Defendants. 16 17 I. FACTUAL ALLEGATIONS AND PROCEDURAL BACKGROUND1 18 On July 5, 2018 Brian Garlough (“Plaintiff”) purchased a 19 2018 Dodge Demon in Texas that he had shipped to his home state 20 of California. Second Am. Compl. (“SAC”) ¶¶ 19-21; see also SAC 21 Ex. A. One of the most prominent features of the car is the 45 22 square inch, air-grabber hood scoop (“hood scoop”). SAC ¶ 13. 23 Based on information and belief, Plaintiff alleges that Defendant 24 FCA, who marketed and produced the Dodge Demon, was aware of 25 issues with the hood scoop but concealed this defect from 26 27 1 This motion was determined to be suitable for decision without oral argument. E.D. Cal. L.R. 230(g). The hearing was 28 scheduled for February 9, 2021. 1 consumers and continued to market the car. Id. ¶¶ 17, 18. 2 Specifically, Plaintiff alleges that the hood expands, contracts, 3 warps, and vibrates when the car is used which chips, scrapes, 4 and cracks the original factory paint, causing damage to the 5 car’s hood, including rust. Id. ¶ 17. 6 In early August 2018, Plaintiff claims he noticed damage to 7 the car caused by the hood. Id. ¶ 22. Plaintiff immediately 8 took his car to the Lodi Dodge Dealership where he was instructed 9 to call the hotline specific for FCA’s high-end SRT cars. Id. 10 When Plaintiff contacted the hotline, he was told to take the car 11 back to the dealership and was informed that FCA had authorized 12 the dealership to repaint the hood. Id. ¶ 23. However, when 13 Plaintiff pointed out that the problem would persist, he was told 14 to contact SRT. Id. Plaintiff contacted SRT about three times. 15 Each time he was told FCA was working on a solution. Id. ¶ 24. 16 When he contacted the hotline again in February 2019, he was told 17 FCA was redesigning the hood scoop. Id. ¶ 25. 18 On December 4, 2019, a technical service bulletin was 19 released that called for the replacement of the hood scoop bezel 20 with a smaller one. Id. ¶ 27. However, Plaintiff alleges this 21 repair is inadequate since it doesn’t prevent the new hood scoop 22 bezel from also causing damage to the hood. Id. In February 23 2020, Plaintiff was contacted by a repair facility which provided 24 a quote to repaint the hood and replace the hood scoop bezel with 25 the redesigned part. Id. ¶ 28. Plaintiff refused the repair 26 because the facility was unable to guarantee matching paint and 27 the quote was more than double what FCA offered to pay for the 28 repair. Id. 1 Plaintiff subsequently brought this action for: (1) false 2 advertising in violation of California law; (2) violation of the 3 California Consumer Legal Remedies Act; (3) violation of the 4 express warranty under the Song-Beverly Consumer Warranty Act; 5 (4) violation of the implied warranty under the Song-Beverly 6 Consumer Warranty Act; (5) violation of manufacturer’s duties 7 under the Song-Beverly Consumer Warranty Act; (6) unfair business 8 practices in violation of California law; (7) violation of the 9 Magnuson-Moss Warranty Act; (8) breach of express warranty; 10 (9) fraudulent concealment; (10) negligent misrepresentation; 11 (11) breach of contract; and (12) unjust enrichment. SAC at 6- 12 19. Plaintiff’s eleventh cause of action for breach of contract 13 was brought against Lithia Motors and Lithia DMID, id. at 17, the 14 dealership where Plaintiff purchased his car. Id. ¶¶ 5, 109-110. 15 All the other causes of action were brought against FCA. 16 FCA then filed this motion to dismiss for lack of personal 17 jurisdiction and failure to state a claim. FCA’s 12(b)(2) Mot., 18 ECF No. 23; FCA’s 12(b)(6) Mot., ECF No. 24. Lithia DMID and 19 Lithia Motors also brought a motion to dismiss for lack of 20 personal jurisdiction and failure to state a claim. Lithia’s 21 12(b)(2) Mot., ECF No. 29; Lithia’s 12(b)(6) Mot., ECF No. 30. 22 Plaintiff opposed these motions. Pl.’s Opp’n to FCA’s 12(b)(2) 23 Mot., ECF No. 31; Pl.’s Opp’n to FCA’s 12(b)(6) Mot., ECF No. 32; 24 Pl.’s Opp’n to Lithia’s 12(b)(2) Mot., ECF No. 34; Pl.’s Opp’n to 25 Lithia’s 12(b)(6) Mot., ECF No. 35. Defendants replied. FCA’s 26 12(b)(2) Reply, ECF No. 36; FCA’s 12(b)(6) Reply, ECF No. 37; 27 Lithia’s 12(b)(2) Reply, ECF No. 38; Lithia’s 12(b)(6) Reply, ECF 28 No 39. 1 II. OPINION 2 A. Judicial Notice 3 FCA requested the Court take judicial notice of the 4 warranty booklet for 2018 Dodge gas vehicles. See FCA’s Req. 5 for Judicial Notice, ECF No. 25. The Court may consider the 6 warranty under the incorporation by reference doctrine, which 7 permits courts to take into account documents “whose contents 8 are alleged in a complaint and whose authenticity no party 9 questions, but which are not physically attached to the 10 plaintiff’s pleading.” Knievel v. ESPN, 393 F.3d 1068, 1076 11 (9th Cir. 2005). Because Plaintiff’s complaint relies on the 12 warranty, see SAC ¶ 20, and he has not contested its accuracy, 13 the Court may consider it. Accordingly, FCA’s request is 14 granted. 15 B. Personal Jurisdiction 16 Rule 12(b)(2) of the Federal Rules of Civil Procedure 17 authorizes a defendant to seek dismissal of an action for a lack 18 of personal jurisdiction. Fed. R. Civ. P. 12(b)(2). Plaintiffs 19 bear the burden of showing that jurisdiction is proper but 20 “[w]here, as here, the motion is based on written material 21 rather than an evidentiary hearing, plaintiff need only make a 22 prima facie showing of jurisdictional facts.” Schwarzenegger v. 23 Fred Martin Motor Co., 374 F.3d 797, 800 (9th Cir. 2004). But 24 “the plaintiff cannot simply rest on the bare allegations of his 25 complaint.” Id. Uncontroverted allegations in the complaint 26 are accepted as true, and factual disputes created by 27 conflicting affidavits are resolved in plaintiff’s favor. Id. 28 “When no federal statute governs personal jurisdiction, the 1 district court applies the law of the forum state.” Boschetto 2 v. Hansing, 539 F.3d 1011, 1015 (9th Cir. 2008). California’s 3 long-arm statute allows the exercise of personal jurisdiction to 4 the full extent permissible under the U.S. Constitution. See 5 Cal. Civ. Proc. Code § 410.10. Accordingly, California courts 6 may exercise personal jurisdiction over a defendant so long as 7 it comports with due process. Boschetto, 539 F.3d at 1015. 8 “For a court to exercise personal jurisdiction over a 9 nonresident defendant [in accordance with due process], that 10 defendant must have at least ‘minimum contacts’ with the 11 relevant forum such that the exercise of jurisdiction ‘does not 12 offend traditional notions of fair play and substantial 13 justice.’” Schwarzenegger, 374 F.3d at 801 (quoting 14 International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)). 15 There are two kinds of personal jurisdiction a forum state may 16 exercise over a defendant: general jurisdiction and specific 17 jurisdiction. Boschetto, 539 at 1016. 18 1. General Jurisdiction 19 The first type of personal jurisdiction, general 20 jurisdiction, allows a court to hear any and all claims against 21 a defendant. Martinez v. Aero Caribbean, 764 F.3d 1062, 1066 22 (9th Cir. 2014). A court may exercise general jurisdiction over 23 a defendant when their affiliations with the State are so 24 “continuous and systematic” as to render them essentially at 25 home in the forum state. Daimler AG v. Bauman, 571 U.S. 117, 26 127 (2014) (internal quotations and citations omitted). For a 27 corporation, the paradigm forum for the exercise of general 28 jurisdiction is its place of incorporation and principal place 1 of business. Id. at 137. Only in an “exceptional” case will a 2 “corporation’s operations in a forum other than its formal place 3 of incorporation or principal place of business [. . .] be so 4 substantial and of such a nature as to render the corporation at 5 home in that State.” Id. at 139 n. 19. 6 While the Court did not define what such an exceptional 7 case would be, it did cite to Perkins v. Benguet Consolidated 8 Mining Co., 342 U.S. 437 (1952), as an example indicating “the 9 bar for such a finding is very high.” Cahen v. Toyota Motor 10 Corp., 147 F.Supp.3d 955, 965 (N.D. Cal. 2015). Perkins 11 involved a mining company based out of the Philippines. 342 12 U.S. at 447. The Court found general jurisdiction over the 13 corporation was proper in Ohio because during the Japanese 14 occupation of the Philippines the president was directing all of 15 the company’s activities from there. Id. at 447-448. The Court 16 in Daimler explained that general jurisdiction was appropriate 17 in Perkins because “[g]iven the wartime circumstances, Ohio 18 could be considered a surrogate for the place of incorporation 19 or head office.” Daimler, 571 U.S. at 130 n. 8. 20 Here, FCA’s place of incorporation is Delaware and its 21 principal place of business is Michigan. SAC ¶ 2. Plaintiff 22 relying on pre-Daimler cases argues, that despite this, FCA’s 23 contacts with California are so continuous and systematic as to 24 render it essential at home here. Pl.’s Opp’n to FCA’s 12(b)(2) 25 Mot. at 5. The Court disagrees. There is nothing exceptional 26 about this case that would extend general jurisdiction beyond 27 the states where FCA is incorporated and has its principal place 28 of business. FCA does not design, manufacture, or assemble any 1 motor vehicles in California. Terry Decl. ¶ 3. And its 2 operations in this state are limited to two facilities, which, 3 together, employ fewer than 200 people, comprising less than 4 .32% of FCA’s workforce. Id. ¶ 4. While Plaintiff also alleges 5 Defendant markets in California and “sells and transports 6 hundreds and thousands of cars in the State,” Opp’n at 5, this 7 does not make FCA essentially at home in California warranting 8 general jurisdiction. See Daimler, 571 U.S. at 139 (“If 9 [defendant’s] California activities sufficed to allow 10 adjudication of this Argentina-rooted case in California, the 11 same global reach would presumably be available in every other 12 State in which [defendant’s] sales are sizable.”) 13 Similarly, Lithia Motors’ place of incorporation and 14 principal place of business are in Oregon. SAC ¶ 3. Lithia 15 DMID, a subsidiary of Lithia Motors, is a Texas corporation with 16 its principal place of business in Oregon. SAC ¶ 4. Plaintiff, 17 however, argues that Lithia Motors is at home in California 18 because it has a large physical presence in the State. Pl.’s 19 Opp’n to Lithia’s 12(b)(2) Mot. at 5. Specifically, Lithia 20 Motors has 45 dealerships in California, maintains a permanent 21 workforce in the State, is licensed to do business here, pays 22 taxes, and advertises in California. Id. But doing business in 23 the State is not enough to justify general jurisdiction as “[a] 24 corporation that operates in many places can scarcely be deemed 25 at home in all of them.” Daimler, 571 U.S. at 139 n. 20. 26 Because all of Defendants’ place of incorporation and 27 principal place of business are outside of California and 28 Plaintiff has not demonstrated this is one of the “exceptional 1 cases” where any of Defendants’ contacts are “so substantial and 2 of such a nature as to render” them essentially at home in 3 California, the Court finds California does not have general 4 jurisdiction over Defendants. Id. at 761 n. 19. 5 2. Specific Jurisdiction 6 Specific jurisdiction on the other hand, allows a court to 7 exercise jurisdiction when the suit arises out of or relates to 8 the defendant’s contacts with the forum. Bristol-Myers Squibb 9 Co. v. Superior Ct. of California, San Francisco Cty., 137 S. 10 Ct. 1773, 1780 (2017). In the Ninth Circuit, specific 11 jurisdiction is appropriate if: (1) a non-resident defendant 12 purposefully directs their activities towards the forum or 13 performs some act by which they purposefully avail themselves of 14 the privilege of conducting activities in the forum, thereby 15 invoking the benefits and protections of its laws; (2) the claim 16 arises out of or relates to the defendant’s forum related 17 activities; and (3) the exercise of jurisdiction comports with 18 fair play and substantial justice. Schwarzenegger v. Fred 19 Martin Motor Co., 374 F.3d 797, 802 (9th Cir. 2004). The 20 plaintiff bears the burden of satisfying the first two prongs of 21 the test. Id. If the plaintiff fails to satisfy either of 22 these prongs, personal jurisdiction is not established in the 23 forum state. Id. If the plaintiff does satisfy the first two 24 prongs “the burden then shifts to the defendant to ‘present a 25 compelling case’ that the exercise of jurisdiction would not be 26 reasonable.” Id. (quoting Burger King Corp. v. Rudzewicz, 471 27 U.S. 462, 477-78 (1985)). 28 FCA and Lithia Motors argue specific jurisdiction is 1 inappropriate in California because Plaintiff purchased his car 2 in Texas. FCA’s 12(b)(2) Mot. at 5; Lithia’s 12(b)(2) Mot. at 3 3. They insist that because Plaintiff purchased the car out of 4 state, he cannot show that his claims arise from or relate to 5 their activities in California. FCA’s 12(b)(2) Mot. at 5; 6 Lithia’s 12(b)(2) Mot. at 3. While the present Motions were 7 pending, the Supreme Court decided Ford Motor Company v. Montana 8 Eight Judicial District Court, 141 S.Ct. 1017 (2021), 9 foreclosing this argument. FCA and Lithia attempted to 10 distinguish the case at hand from that of Ford Motor, but as 11 explained below, the Court finds their arguments unavailing. 12 See Lithia’s Suppl. Br., ECF No. 45; FCA Suppl. Br., ECF No. 46. 13 Ford Motor involved two cases arising from car accidents in 14 Montana and Minnesota against Ford. Id. at 1023. While Ford 15 did substantial business in both states including advertising, 16 selling, and servicing the model of the car the suits claimed 17 were defective, Ford contended specific jurisdiction was 18 improper because the particular car involved in the accidents 19 had been purchased, manufactured, and designed out of state. 20 Id. at 1022. Ford argued, as FCA and Lithia Motors do here, 21 that the State only had jurisdiction if the company’s conduct in 22 the State had given rise to the plaintiff’s claims. Id. at 23 1023. That causal link existed, Ford contended, only if the 24 company had designed, manufactured, or sold the particular car 25 involved in the accident in the State. Id. 26 The Supreme Court rejected this argument, finding specific 27 jurisdiction exists when a company “serves a market for a 28 product in the forum State and the product malfunctions there.” 1 Id. at 1027. In so holding, the Court noted that Ford urged 2 Montanans and Minnesotans to buy its car through advertisements, 3 their cars were available for sale in the states, and their 4 dealers regularly maintained and repaired Ford cars. Id. 5 Accordingly, Ford had purposefully availed itself of the 6 privilege of conducting business with Montana and Minnesota. 7 Id. The Court also found plaintiffs’ claims were related to 8 these contacts as “Ford had systematically served a market in 9 Montana and Minnesota for the very vehicles that the plaintiffs 10 allege[d] malfunctioned and injured them in those States” even 11 though the cars were purchased elsewhere. Id. at 1028. 12 Similarly, here, Plaintiff has alleged that FCA and Lithia 13 Motors, have served a market in California for the Dodge Demon, 14 which they do not dispute. SAC ¶¶ 1, 3, 10, 12; see Lithia’s 15 12(b)(2) Mot. at 3; see generally FCA’s 12(b)(2) Reply; Lithia’s 16 12(b)(2) Reply. Specifically, Plaintiff has alleged that FCA 17 markets and sells cars in California, including the Dodge Demon, 18 as well as owns a parts distribution and business center here. 19 Id. ¶¶ 3, 10, 12. Plaintiff alleges that Lithia Motors is a 20 large automotive retailer who generates approximately a quarter 21 of its revenue from California. Id. ¶ 3. Because Plaintiff 22 alleges that FCA and Lithia Motors have systematically served a 23 market in California for the very car that Plaintiff alleges 24 malfunctioned here, there is specific jurisdiction in California 25 over Plaintiff’s claims arising out of the car’s deficiencies, 26 even though it was purchased in Texas. See Ford Motor, 141 27 S.Ct. at 1027. 28 Contrastingly, Plaintiff has made no showing that Lithia 1 DMID, who operates the dealership he purchased the car from in 2 Texas and a subsidiary of Lithia Motors, has any contacts with 3 California. See SAC ¶¶ 4, 5. Plaintiff contends that Lithia 4 DMID purposefully availed itself of the privileges of doing 5 business in California by selling him, a California resident, 6 the vehicle. Pl.’s Opp’n to Lithia’s 12(b)(2) Mot. at 7. But 7 this is not enough to establish sufficient minimum contacts 8 justifying jurisdiction. See Boschetto, 539 F.3d at 1017 (“the 9 formation of a contract with a nonresident defendant is not, 10 standing alone, sufficient to create jurisdiction.”) 11 Accordingly, the Court GRANTS Defendant Lithia DMID’s Motion to 12 Dismiss for lack of personal jurisdiction. FCA and Lithia 13 Motor’s 12(b)(2) Motions are DENIED. 14 C. Failure to State a Claim 15 A Rule 12(b)(6) motion challenges the complaint as not 16 alleging sufficient facts to state a claim for relief. F. R. 17 Civ. P. 12(b)(6). “To survive a motion to dismiss [under 18 12(b)(6)], a complaint must contain sufficient factual matter, 19 accepted as true to state a claim for relief that is plausible 20 on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) 21 (internal quotation marks and citation omitted). While 22 “detailed factual allegations” are unnecessary, the complaint 23 must allege more than “[t]hreadbare recitals of the elements of 24 a cause of action, supported by mere conclusory statements.” 25 Id. “In sum, for a complaint to survive a motion to dismiss, 26 the non-conclusory ‘factual content,’ and reasonable inferences 27 from that content, must be plausibly suggestive of a claim 28 entitling the plaintiff to relief. Moss v. U.S. Secret Serv., 1 572 F.3d 962, 969 (9th Cir. 2009). 2 1. Whether Plaintiff May Assert California Law 3 Claims When the Car was Purchased in Texas 4 FCA first argues that Plaintiff’s California statutory law 5 claims: violation of the False Advertising Law (“FAL”), 6 violation of the California Consumer Legal Remedies Act 7 (“CLRA”), unfair business practices (“UCL”), and Song-Beverly 8 Act fail as these statutes do not apply to purchases made 9 outside of California. FCA’s 12(b)(6) Mot. at 5. In support, 10 FCA notes that “California law presumes that the legislature did 11 not intend a statute to be operative, with respect to 12 occurrences outside the state.” Id. (quoting Wilson v. Frito- 13 Lay N. Am., Inc., 961 F.Supp.2d 1134, 1147 (N.D. Cal. 2013)). 14 But the basis of Plaintiff’s FAL, CLRA, and UCL claims, the 15 fraudulent misrepresentations, occurred in California. See 16 Sullivan v. Oracle Corp., 51 Cal.4th 1191, 1208 n. 10 (2011) 17 (noting that when the unlawful conduct that forms the basis of 18 the claims, namely fraudulent misrepresentations made to induce 19 consumer transactions, occurs in California, application of 20 California law is appropriate.) FCA points to no persuasive 21 authority that this is insufficient and that these statutes only 22 apply to purchases in state. 23 Further, under the Song-Beverly Act every sale of consumer 24 goods sold at retail in California, unless properly disclaimed, 25 is accompanied by the manufacturer’s and retail seller’s implied 26 warranty that the goods are merchantable. Cal. Civ. Code 27 § 1792. A “sale” occurs under California law at the time title 28 to the goods passes from the seller to the buyer. Id. 1 § 1791(n). Unless otherwise explicitly agreed, title passes to 2 the buyer at the time and place at which the seller completes 3 his performance with reference to the physical delivery of the 4 goods. Cal. Com. Code. § 2401(2); see also Cal. State 5 Electronics Ass’n v. Zeos Int’l Ltd., 41 Cal.App.4th 1270, 1276 6 (Ct. App. 1996) (Section 2401 determines where title passes for 7 Song-Beverly purposes). Thus, if the sales contract requires 8 the seller to send the goods to the buyer but does not require 9 the seller to deliver them at a specific destination, title 10 passes to the buyer at the time and place of shipment. Galicia 11 v. Country Coach, Inc., 324 F. App’x 687, 888-89 (9th Cir. 12 2009). However, if the contract requires delivery at a specific 13 destination, title passes on tender at that destination. Id. 14 Here, Plaintiff alleges that the car was shipped from the 15 dealership in Texas to Manteca, California. SAC ¶ 21. While he 16 does not specifically allege that this was a destination 17 contract, viewed in the light most favorable to him, it is 18 plausible that this was a destination contract. Accordingly, 19 title would have passed in California, making the Song-Beverly 20 Act applicable. 21 2. Requirements of Rule 9(b) 22 Generally, under Rule 8(a)(2) of the Federal Rules of Civil 23 Procedure a plaintiff’s pleading need only contain “a short and 24 plain statement of the claim showing the pleader is entitled to 25 relief.” Fed. R. Civ. P. 8(a)(2). Rule 9(b), however, requires 26 that allegations of fraud be stated with particularity. Fed. R. 27 Civ. P. 9(b). Conditions of the mind, such as knowledge and 28 intent may be alleged generally though. Id. 1 The parties dispute which of Plaintiff’s claims are subject 2 to the heightened pleading requirement of Rule 9(b). FCA argues 3 that Plaintiff’s FAL, CLRA, UCL, fraudulent concealment, 4 negligent misrepresentation, and unjust enrichment claims must 5 all meet the requirements of 9(b). FCA’s 12(b)(6) Mot. at 6. 6 Plaintiff concedes that his fraudulent concealment claim is 7 subject to the heightened pleading requirement but argues that 8 his FAL, CLRA, UCL, negligent misrepresentation, and unjust 9 enrichment claims are not subject to rule 9(b) as they are not 10 based on fraud. See Opp’n to FCA’s 12(b)(6) Mot. at 10. 11 Accordingly, the Court first addresses whether these claims must 12 meet the heightened particularity requirement of Rule 9(b). 13 In a case where fraud is not an essential element of the 14 claim, only allegations of fraudulent conduct must satisfy the 15 heightened pleading requirements of Rule 9(b). Vess v. Ciba- 16 Geigy Corp. USA, 317 F.3d 1097, 1105 (9th Cir. 2003). In 17 California fraud requires: (1) misrepresentation (false 18 representation, concealment, or nondisclosure); (2) knowledge of 19 falsity; (3) intent to defraud, i.e. to induce reliance; 20 (4) justifiable reliance; and (5) resulting damage. Kearns v. 21 Ford Motor Co., 567 F.3d 1120, 1126 (9th Cir. 2009) (quoting 22 Engalla v. Permanente Med. Group, Inc., 938 P.2d 903 (Cal. 23 1997)). 24 Fraud is not an essential element of FAL, CLRA, UCL, 25 negligent misrepresentation, or unjust enrichment claims. See 26 Kearns, 567 F.3d at 1225 (“fraud is not a necessary element of a 27 claim under the CLRA and UCL”); Lyles v. Sangadeo-Patel, 225 28 Cal.App.4th 759, 767 (Ct. App. 2014 B.L.M. v. Sabo & Deitsch, 55 1 Cal.App.4th 823, 834 (Ct. App. 1997) (to have a claim for 2 negligent misrepresentation the representation need not be made 3 with knowledge of actual falsity). However, Plaintiff must 4 still satisfy the requirements of Rule 9(b) if he has alleged a 5 unified course of fraudulent conduct and relies on that course 6 of conduct as a basis of the claims. Kearns, 567 F.3d at 1225. 7 Here, Plaintiff has alleged a unified course of fraudulent 8 conduct as he alleges FCA made material misrepresentations about 9 the Dodge Demon (SAC ¶¶ 12-14, 17) with knowledge of their 10 falsity (SAC ¶ 17), which Plaintiff relied upon in purchasing 11 the car (SAC ¶ 15). Because his FAL, CLRA, UCL, negligent 12 misrepresentation, and unjust enrichment claims all rely on this 13 fraudulent course of conduct, specifically because Plaintiff 14 alleges FCA knew the claims they made were false, these claims 15 are subject to the heightened pleading requirement of Rule 9(b). 16 See generally SAC. 17 Having found these claims are subject to Rule 9(b), the 18 Court next determines whether the claims satisfy its heightened 19 requirements. To satisfy Rule 9(b) a plaintiff must state with 20 particularity the circumstances constituting fraud or mistake. 21 Fed. R. Civ. P. 9(b). 22 Affirmative Representations 23 For allegations of affirmative misrepresentations this 24 means the plaintiff must allege “the who, what, when, and how of 25 the misconduct charged,” including what is false or misleading 26 about a statement, and why it is false. Ebeid ex rel. United 27 States v. Lungwitz, 616 F.3d 993, 998 (9th Cir. 2010) (internal 28 citations and quotations omitted). FCA argues that Plaintiff 1 has failed to meet this requirement as his fraud claims are 2 based on “non-specific generalized allegations of 3 advertisements” without alleging whether he in fact was ever 4 exposed to any specific affirmative representation made by FCA, 5 and if so where and when this occurred, or how any alleged 6 statement was actually false. FCA’s 12(b)(6) Mot. at 7-8. In 7 response, Plaintiff points to a specific FCA blogpost referenced 8 in the complaint, which states that the car’s hood was “the 9 largest functional hood scoop.” SAC ¶ 14 (emphasis added). 10 Plaintiff alleges that this statement was false as the hood 11 scoop is not functional since it expands, contracts, warps, and 12 vibrates when the car is used which damages the car’s hood. Id. 13 ¶ 17.2 Accordingly, the Court finds Plaintiff has sufficiently 14 alleged how FCA’s statement that the hood scoop was functional 15 was false. However, Plaintiff never specifies if he in fact saw 16 this blog post, and if so when. See SAC ¶ 15. Plaintiff also 17 alleges that “the Dodge Demon was advertised extensively, 18 including over the internet and on television shows such as Jay 19 Leon’s Garage and Top Gear” and that these advertisements 20 “touted the Dodge Demon’s workmanship, value, and future 21 collectability.” SAC ¶ 12. Plaintiff merely alleges that 22 “[a]fter viewing FCA’s advertisements, [he] became interested in 23 purchasing a Dodge Demon.” Id. ¶ 15. But Plaintiff doesn’t 24 specify what advertisements he saw, when or where he saw them, 25 2 FCA also argues that an affirmative representation claim cannot be premised on a non-specific word like “functional” because such 26 words constitute non-actionable puffery. See FCA’s 12(b)(6) 27 Reply at 2. Because FCA raises this argument for the first time in its reply, which Plaintiff did not have a chance to respond 28 to, the Court will not address it. 1 what specific representations were made in them or how these 2 representations were false. Accordingly, Plaintiff’s 3 affirmative fraud-based claims are not pled with enough 4 particularity to satisfy Rule 9(b). 5 Omission Based Claims 6 In order to plead the circumstances of fraudulent omission 7 with particularity a plaintiff “must describe the content of the 8 omission and where the omitted information should or could have 9 been revealed, as well as provide representative samples of 10 advertisements, offers, or other representations that plaintiff 11 relied on to make their purchase and that failed to include the 12 allegedly omitted information.” Marolda v. Symantec Corp., 672 13 F.Supp.2d 992, 1002 (N.D. Cal. 2009). Additionally, “[t]o 14 maintain a cause of action for fraud through nondisclosure or 15 concealment of facts, there must be allegations demonstrating 16 that the defendant was under a legal duty to disclose those 17 facts.” Immobiliare LLC v. Westcor Land Title Ins. Co., 424 18 F.Supp.3d 882, 888 (E.D. Cal. 2019) (citation omitted). A duty 19 to disclose exists: “(1) when the defendant is in a fiduciary 20 relationship with the plaintiff; (2) when the defendant had 21 exclusive knowledge of material facts not known to the 22 plaintiff; (3) when the defendant actively conceals a material 23 fact from the plaintiff; and (4) when the defendant makes 24 partial representation but also suppresses some material facts,” 25 with the later circumstances requiring “some other relationship 26 between the plaintiff and defendant.” Id. 27 FCA argues that to the extent Plaintiff bases his FAL, 28 CLRA, UCL, fraudulent concealment, and unjust enrichment claims 1 on an omission-based theory, they also fail to state a claim.3 2 FAC’s 12(b)(6) Mot. at 9. First, FCA argues that Plaintiff has 3 failed to plead any facts about the content of any purported 4 omission or where such information could or should have been 5 revealed so that he would have seen and relied on it if it had 6 not been omitted. Id. Plaintiff, however, did plead the 7 purported omission. Specifically, that the Dodge Demon’s hood 8 scoop “expands, contracts, warps, and vibrates when the Dodge 9 Demon is used, which in turn, chips, scrapes and cracks the 10 original factory paint and causes damage to the Dodge Demon’s 11 hood, including rust.” SAC ¶ 17. Plaintiff also includes in 12 his complaint representative advertisements like the blog post 13 stating the car has “the largest functional hood scoop.” Id. 14 ¶ 14. While not explicitly stated, the reasonable inference 15 from this is that such information should have been included in 16 these advertisements about the hood. 17 FCA also argues that Plaintiff has not adequately alleged a 18 duty to disclose. FCA’s 12(b)(6) Mot. at 10. First FCA 19 contends that Plaintiff has failed to sufficiently allege a duty 20 based on exclusive knowledge because those allegations are 21 conclusory. Id. at 10. The Court agrees. Plaintiff merely 22 pleads that “FCA was aware that the Dodge Demon was experiencing 23 issues with the Air-Grabber Hood Scoop.” SAC ¶ 17. He does not 24 plead any details about how or when FCA became aware of these 25 issues. See generally SAC. Such conclusory allegations do not 26 27 3 Negligent misrepresentation requires a positive assertion so it cannot be based on an omission. UMG Recordings, Inc. v. Glob. 28 Eagle Entm’t, Inc., 117 F.Supp.3d 1092, 1111 (C.D. Cal. 2015). 1 suffice. See Wilson v. Hewlett-Packard Co., 668 F.3d 1136, 2 1146-47 (9th Cir. 2012). 3 Plaintiff, however, relies on another theory—that FCA made 4 partial representations about the hood but also suppressed some 5 material facts i.e. the issues with the hood, recounted above. 6 Pl.’s Opp’n to FCA’s 12(b)(6) Mot. at 13; see also SAC ¶¶ 14-18. 7 Plaintiff alleges that he signed a 2018 Dodge Challenger SRT 8 Customer Acknowledge for FCA establishing a relationship between 9 the two and creating a duty to disclose. Pl.’s Opp’n to FCA’s 10 12(b)(6) Mot. at 13 n.7. FCA does not address this argument nor 11 point to any authority indicating this is insufficient. 12 Accordingly, the Court finds Plaintiff has alleged a plausible 13 claim for relief based on fraudulent omission for his FAL, CLRA, 14 UCL4, fraudulent concealment, and unjust enrichment claims. 15 3. Economic Loss Rule 16 FCA argues that Plaintiff’s fraudulent concealment and 17 negligent misrepresentation claim are barred by the economic 18 loss rule. FCA’s 12(b)(6) Mot. at 12. Under the economic loss 19 rule, a manufacturer or distributor may be liable “in tort when 20 a product defect causes damage to other property, that is, 21 property other than the product itself,” where “[t]he law of 22 contractual warranty governs damage to the product itself.” 23 Jimenez v. Super. Ct., 29 Cal. 4th 473, 483 (2002). However, 24 “the economic loss rule does not necessarily bar recovery in 25 26 4 FCA also argues that because Plaintiff’s FAL and CLRA claims fail his UCL claim, which relies on them, fails too. See FCA’s 27 12(b)(6) Reply at 3. But as discussed, FCA has not shown that Plaintiff’s FAL and CLRA claims fail and thus hasn’t demonstrated 28 his UCL claim should be also be dismissed for this reason. 1 tort for damage that a defective product (e.g., a window) causes 2 to other portions of a larger product (e.g., a house) into which 3 the former has been incorporated.” Jimenez v. Super. Ct., 29 4 Cal. 4th 473, 483 (2002) (finding the manufacturer of a 5 defective window installed in a mass-produced home may be held 6 strictly liable in tort for damage the window’s defect caused to 7 other parts of the home). 8 Plaintiff, relying on Jimenez, argues that the economic 9 loss rule does not bar his claims, as the defective product, the 10 hood-scoop, caused damage to other portions of the larger 11 product, the car. Pl.’s Opp’n to FCA’s 12(b)(6) Mot. at 15. 12 Jimenez involved defective windows that caused damage to the 13 homes they were installed in. Jimenez, 29 Cal. 4th at 452. The 14 California Supreme Court held that the economic loss rule did 15 not bar the plaintiff’s claims. Id. at 457. In so holding the 16 Court noted that at first it had to determine what the “product” 17 at issue was. Id. at 456. The Court found that the windows 18 were a separate product and that the economic loss rule thus did 19 not bar tort recovery for damage it caused to the larger product 20 (the house) of which it was incorporated. Id. at 457. 21 The Appellate Court in KB Home v. Superior Court listed 22 several factors relevant to determining what the product at 23 issue is but noted that resolution of this issue should 24 ultimately be left to the trier of fact. 112 Cal.App.4th 1076, 25 1087 (Ct. App. 2003). Whether or not the hood scoop is a 26 separate “product” is a question of fact, and FCA therefore 27 cannot demonstrate that Plaintiff’s ninth and tenth causes of 28 action fail as a matter of law to allege a plausible claim for 1 relief based on the economic loss rule. See Sabicer v. Ford 2 Motor Co., 362 F.Supp.3d 837, 841 (C.D. Cal. 2019)(finding 3 defendants failed to show the economic los rule necessarily 4 precluded plaintiff’s claim as there may be recovery in tort for 5 damage that subcomponents caused to the engine as a whole or for 6 damage that the engine caused to the vehicle in which it has 7 been incorporated.) 8 4. Express Warranty Claims 9 “In California, express warranties covering defects in 10 materials and workmanship exclude defects in design.” Troup v. 11 Toyota Motor Corp., 545 Fed. App’x 668, 668-69 (9th Cir. 2013) 12 (citing Daugherty v. Am. Honda Motor Co., Inc., 144 Cal. App. 13 4th 824, 830 (2006)). 14 Here, Plaintiff’s car came with a warranty which “covers 15 the cost of all parts and labor needed to repair any item on 16 your vehicle when it left the manufacturing plant that is 17 defective in material, workmanship or factory preparation.” SAC 18 ¶ 20. Accordingly, the warranty does not include design 19 defects. Daugherty, 144 Cal. App. at 830. FCA argues that 20 because Plaintiff complains of a design defect, not covered by 21 the warranty, he fails to state an express warranty claim. 22 FCA’s 12(b)(6) Mot. at 13. Plaintiff contests FCA’s 23 characterization of his claim as alleging a design defect 24 arguing that he never actually calls the hood scoop issue a 25 “design defect” but rather refers to it as a “defect, defective, 26 or nonconforming.” Pl.’s Opp’n at 15. Plaintiff’s argument is 27 unpersuasive. While he may not have specifically referred to 28 the hood issues as a “design defect” that is, in fact, what he 1 is alleging. A design defect exists when the product is built 2 in accordance with its intended specifications, but the design 3 itself is inherently defective. McCabe v. Am. Honda Motor Co., 4 100 Cal. App. 4th 111, 1120 (2002). Plaintiff here does not 5 claim there was something uniquely wrong with his car. Rather 6 he alleges there was a problem with all Dodge Demon hoods, a 7 problem with how it was designed. See SAC ¶ 17 (“FCA was aware 8 that the Dodge Demon was experiencing issues with the Air- 9 Grabber Hood Scoop [. . .] specifically, that the Dodge Demon’s 10 Air-Grabber Hood Scoop expands, contracts, warps, and vibrates 11 when the Dodge Demons is used.”) 12 Because Plaintiff alleges a design defect not covered by 13 the warranty, he has failed to state an express warranty claim. 14 Accordingly, FCA’s motion to dismiss claims three and eight is 15 GRANTED. FCA’s motion to dismiss Plaintiff’s seventh cause of 16 action is GRANTED in part, to the extent it is based on the 17 express warranty. 18 5. Implied Warranty Claims 19 The Song-Beverly Act “was enacted to regulate warranties 20 and strengthen consumer remedies for breaches of warranty.” 21 Cholakyan v. Mercedes-Benz USA, LLC, 796 F.Supp.2d 1220, 1241 22 (C.D. Cal. 2011). Thus, “[u]nless specific disclaimer methods 23 are followed, an implied warranty of merchantability accompanies 24 every retail sale of consumer goods in the state.” Id. The 25 Song-Beverly Act provides that the implied warranty of 26 merchantability means that consumer goods: (1) pass without 27 objection in the trade under the contract description; (2) are 28 fit for the ordinary purposes for which such goods are used; 1 (3) are adequately packaged and labeled; and (4) conform to the 2 affirmations of fact included on the container or label. See 3 Cal. Civ. Code § 1791.1(a). The Act defines consumer goods as 4 “any new product or part thereof that is used, bought, or leased 5 for use primarily for personal, family, or household purpose.” 6 Cal. Civ. Code § 1791(a). 7 FCA argues that Plaintiff has failed to adequately allege 8 an implied warranty claim because what Plaintiff complains of is 9 an entirely cosmetic issue. FCA’s 12(b)(6) Mot. at 14. 10 Plaintiff responded to this argument in his opposition but 11 because it was over the Court’s page-limit on opposition 12 memoranda the Court will not consider it. See Pl.’s Opp’n to 13 FCA’s 12(b)(6) Mot.; see also Order re Filing Requirements, ECF 14 No. 2-2. The Court agrees with FCA. Plaintiff has not made any 15 allegations that the car is unfit for driving, the ordinary 16 purpose for which it is used. The issue Plaintiff complains of 17 is that the hood “expands, contracts, warps, and vibrates when 18 the Dodge Demon is used, which in turn, chips, scrapes and 19 cracks the original factory paint and causes damage to the Dodge 20 Demon’s hood, including rust.” SAC ¶ 17. This is merely a 21 cosmetic issue. Because Plaintiff has not alleged the defect 22 renders the car unfit for its intended purpose, Plaintiff has 23 failed to state an implied warranty claim. See e.g. Troup v. 24 Toyota Motor Corp., 545 Fed. Appx. 668, 669 (9th Cir. 2013) 25 (affirming dismissal of implied warranty claim where plaintiffs 26 “failed to allege that their Prius was unfit for its intended 27 purpose, as the alleged defect did not compromise the vehicle’s 28 safety, render it inoperable, or drastically reduce tis mileage 1 range”); Resnick v. Hyundai Motor Am., Inc., 2017 WL 1531192, 2 at *12 (C.D. Cal. 2017)(“implied warranty of merchantability 3 requires something beyond mere aesthetic concerns”); Avedisian 4 v. Mercedes-Benz USA, LLC, 43 F.Supp.3d 1071, 1074, 1079 (C.D. 5 Cal. 2014) (“peeling chrome trim on certain interior car 6 components” did not support implied warranty claim because it 7 “did not impact the operability of Plaintiff’s vehicle”). 8 Accordingly, FCA’s motion to dismiss Plaintiff’s implied 9 warranty claims, claims four and seven, is GRANTED. 10 6. Violation of Manufacturers Duties 11 Finally, FCA moves to dismiss Plaintiff’s fifth claim for 12 relief, based on an alleged violation of the manufacturer’s 13 duties under the Song-Beverly Act. FCA’s 12(b)(6) Mot. at 15. 14 Plaintiff, in his complaint, notes that the express warranty 15 covers “the cost of all parts needed to repair any item on your 16 vehicle when it left the manufacturing plant that is defective 17 in material, workmanship or factory preparation.” SAC ¶ 65. 18 Pursuant to California Civil Code Section 1793.2(a)(1) and (3), 19 FCA is obligated to (1) maintain or designate sufficient service 20 and repair facilities reasonably close to all areas where the 21 Dodge Demons are sold to carry out the terms of its warranties 22 and (2) make available to authorized service and repair 23 facilities sufficient literature and replacement parts to effect 24 repairs during the express warranty period. 25 Plaintiff claims FCA has violated these obligations in 26 failing to maintain or designate authorized repair facilities 27 “that are able to guarantee that paint repairs, necessitated by 28 the Air-Grabber Hood Scoop issues, will conform to the factory 1 specifications in violation of its obligation to carry out its 2 warranties.” SAC ¶ 67. But as FCA points out, nothing in these 3 cited provisions requires either a manufacturer or its repair 4 facilities provide any “guarantees”. FCA’s 12(b)(6) Mot. at 15. 5 Further, as discussed in detail above, Plaintiff has not alleged 6 any violation of the warranties such that a failure to have a 7 repair facility available to make his desired fixes would also 8 violate the manufacturer’s duties of the Song-Beverly Act. 9 Because Plaintiff has not alleged a plausible claim for relief 10 for violation of the manufacturer’s duties under the Song- 11 Beverly Act, the Court GRANTS FCA’s Motion to Dismiss 12 Plaintiff’s fifth cause of action. 13 7. Breach of Contract 14 Lithia Motors and Lithia DMID (“Lithia”) move to dismiss 15 Plaintiff’s sole claim against them, the breach of contract 16 claim. Lithia’s 12(b)(6) Mot. First, Lithia argues that 17 Plaintiff has failed to state a claim against Lithia Motors as 18 they were not a party to the contract. Id. at 2-3. The Court 19 agrees. The contract, attached to Plaintiff’s complaint, shows 20 that only Lithia DMID was a party to the contract. See SAC at 21 Ex. A. Although Plaintiff alleges that Lithia DMID is the 22 subsidiary of Lithia Motors, it is a general principle of 23 corporate law that a parent corporation is not liable for the 24 acts of its subsidiaries. U.S. v. Bestfoods, 524 U.S. 51, 61 25 (1998). Plaintiff points to no contrary authority. See Pl.’s 26 Opp’n to Lithia’s 12(b)(6) Mot. at 6. Because the Court has 27 already dismissed Lithia DMID for a lack of personal 28 jurisdiction, the Court GRANTS Lithia’s Motion to Dismiss em IE IE OS EIEIO IS OO mE 1 Plaintiff’s eleventh cause of action for breach of contract. 2 IIl. ORDER 3 For the reasons set forth above, Lithia DMID’s 12(b) (2) 4 |} Motion to Dismiss for lack of personal jurisdiction is GRANTED 5 | WITHOUT PREJUDICE. Lithia Motor’s 12(b) (6) Motion to Dismiss 6 Plaintiff’s eleventh cause of action, for breach of contract, is 7 also GRANTED WITHOUT PREJUDICE. FCA’s and Lithia Motor’s 8 12 (b) (2) Motions to Dismiss for lack of personal jurisdiction are 9 DENIED. FCA’s 12(b) (6) Motion to Dismiss is GRANTED in part and 10 DENIED in part. The Court GRANTS FCA’s Motion to Dismiss claims 11 three, four, five, seven, eight, and ten WITHOUT PREJUDICE. 12 FCA’s Motion to Dismiss claims one, two, six, nine, and twelve is 13 GRANTED WITHOUT PREJUDICE only to the extent they are based on 14 fraudulent affirmative misrepresentations. FCA’s Motion to 15 Dismiss the remaining claims is DENIED.° If Plaintiff elects to 16 amend his complaint, he shall file an Amended Complaint within 17 twenty (20) days of this Order. Defendants’ responsive pleadings 18 are due twenty (20) days thereafter. 19 IT IS SO ORDERED. 20 Dated: April 19, 2021 21 Me 29 HN A. MENDEZ, UNITED STATES DISTRICT 23 24 □ ° The Court acknowledges that FCA provided an additional argument 29 as to why Plaintiff’s twelfth cause of action for unjust 26 enrichment should be dismissed. See FCA’s 12(b) (6) Mot. at 16. However, because this argument exceeded the Court’s page-limit on 27 | memoranda of law in support of motions, the Court will not consider or address it. See id.; see also Order re Filing 28 | Requirements, ECF No. 2-2. 26