Nevada Fleet LLC v. Fedex Corp. ( 2022 )

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 11 NEVADA FLEET LLC, No. 2:17-cv-01732-TLN-KJN 12 Plaintiff, 13 v. ORDER 14 FEDEX CORPORATION; AUTOMOTIVE RENTALS, INC.; and DOES 1-50, inclusive, 15 Defendants. 16 17 18 19 This matter is before the Court on Defendants FedEx Corporation (“FedEx”) and 20 Automotive Rentals, Inc.’s (“ARI”) (collectively, “Defendants”) Motions to Dismiss. (ECF Nos. 21 111, 112.) Both motions are fully briefed. (ECF Nos. 115, 117, 120, 121.) For the reasons 22 discussed herein, the Court GRANTS FedEx’s motion and GRANTS in part and DENIES in part 23 ARI’s motion. 24 /// 25 /// 26 /// 27 /// 28 /// 1 I. FACTUAL AND PROCEDURAL BACKGROUND 2 This case arises from the sale of Defendants’ used commercial vehicles to Plaintiff 3 through third-party vehicle auction companies and other commercial vehicle resellers. (See ECF 4 No. 104.) Plaintiff, an independent automotive dealer licensed in California, specializes in the 5 wholesale purchase and sale of FedEx delivery vans, which it would purchase at commercial 6 auctions around the country and directly from ARI via ARI’s “ARI Direct” program. (Id. at ¶¶ 7 17–19, 21.) ARI is a corporate fleet management company that provides a variety of services for 8 corporate fleets. (Id. at ¶ 25.) Relevant here, ARI provides “vehicle remarketing” services, in 9 which ARI will take possession of a fleet vehicle that reaches “end of life,” market and sell it 10 through several sales channels and numerous auction houses around the country. (Id. at ¶¶ 27– 11 28.) ARI has had a Fleet Management Services Agreement (the “FMSA”) with FedEx since at 12 least June 1, 2009. (Id. at ¶ 37.) ARI and FedEx amended the FMSA on July 11, 2013 (the 13 “Ninth Amendment”), under which ARI provided vehicle remarketing services on behalf of 14 FedEx. (See id. at ¶¶ 44–50, 55.) 15 Plaintiff alleges it purchased FedEx delivery vans, the material conditions of which were 16 misrepresented, such as a gasoline truck delivered in place of a diesel freightliner truck, a diesel 17 freightliner truck delivered in place of a gasoline freightliner truck, non-air-conditioned vans sold 18 as having air conditioners, and inoperable vehicles sold as drivable. (See id. at ¶¶ 93–104.) 19 Plaintiff further alleges that when it began looking into these issues and complaining to auction 20 houses and ARI, it “was entirely rebuffed by the [a]uction [h]ouses and ARI . . . blaming each 21 other or FedEx.” (Id. at ¶ 106.) Plaintiff alleges it found it was locked out of ARI’s Auto Direct 22 website and this suspension “quickly spread across the industry and within a very short period of 23 time [Plaintiff] found itself locked out of bidding on all vehicles at the [a]uction [h]ouses as 24 well.” (Id. at ¶¶ 108–109.) 25 On August 18, 2017, Plaintiff initiated this action. (ECF No. 1.) On August 2, 2021, 26 Plaintiff filed the operative Second Amended Complaint (“SAC”), adding ARI as a Defendant. 27 (ECF No. 104.) Plaintiff asserts the following nine claims: (1) violation of the Vehicle 28 Information and Cost Savings Act, 49 U.S.C. § 32701; (2) intentional misrepresentation or 1 omission; (3) negligent misrepresentation or omission; (4) violation of the Racketeer Influenced 2 and Corrupt Organizations (“RICO”) Act, 18 U.S.C. § 1962(c); (5) intentional interference with 3 prospective economic advantage; (6) breach of express warranty by Defendants; (7) breach of the 4 implied warranty of merchantability; (8) violations of the California Unfair Competition Law, 5 California Business & Professions Code § 17200; and (9) violations of the Sherman Act, 15 6 U.S.C. § 1. (See id.) All claims are asserted against Defendants collectively with the exception 7 of the fifth and ninth claims, which are asserted against ARI alone. (See id.) On August 20, 8 2021, FedEx and ARI filed the instant motions to dismiss. (ECF Nos. 111, 112.) The Court will 9 address each in turn. 10 II. STANDARD OF LAW 11 A motion to dismiss for failure to state a claim upon which relief can be granted under 12 Federal Rule of Civil Procedure (“Rule”) 12(b)(6) tests the legal sufficiency of a complaint. 13 Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). Rule 8(a) requires that a pleading contain 14 “a short and plain statement of the claim showing that the pleader is entitled to relief.” See 15 Ashcroft v. Iqbal, 556 U.S. 662, 678–79 (2009). Under notice pleading in federal court, the 16 complaint must “give the defendant fair notice of what the claim . . . is and the grounds upon 17 which it rests.” Bell Atlantic v. Twombly, 550 U.S. 544, 555 (2007) (internal quotations omitted). 18 “This simplified notice pleading standard relies on liberal discovery rules and summary judgment 19 motions to define disputed facts and issues and to dispose of unmeritorious claims.” Swierkiewicz 20 v. Sorema N.A., 534 U.S. 506, 512 (2002). 21 On a motion to dismiss, the factual allegations of the complaint must be accepted as true. 22 Cruz v. Beto, 405 U.S. 319, 322 (1972). A court is bound to give the plaintiff the benefit of every 23 reasonable inference to be drawn from the “well-pleaded” allegations of the complaint. Retail 24 Clerks Int’l Ass’n v. Schermerhorn, 373 U.S. 746, 753 n.6 (1963). A plaintiff need not allege 25 “‘specific facts’ beyond those necessary to state his claim and the grounds showing entitlement to 26 relief.” Twombly, 550 U.S. at 570. 27 Nevertheless, a court “need not assume the truth of legal conclusions cast in the form of 28 factual allegations.” U.S. ex rel. Chunie v. Ringrose, 788 F.2d 638, 643 n.2 (9th Cir. 1986). 1 While Rule 8(a) does not require detailed factual allegations, “it demands more than an 2 unadorned, the defendant-unlawfully-harmed-me accusation.” Iqbal, 556 U.S. at 678. A 3 pleading is insufficient if it offers mere “labels and conclusions” or “a formulaic recitation of the 4 elements of a cause of action.” Twombly, 550 U.S. at 555; see also Iqbal, 556 U.S. at 678 5 (“Threadbare recitals of the elements of a cause of action, supported by mere conclusory 6 statements, do not suffice.”). Moreover, it is inappropriate to assume the plaintiff “can prove 7 facts that it has not alleged or that the defendants have violated the . . . laws in ways that have not 8 been alleged.” Associated Gen. Contractors of Cal., Inc. v. Cal. State Council of Carpenters, 459 9 U.S. 519, 526 (1983). 10 Ultimately, a court may not dismiss a complaint in which the plaintiff has alleged “enough 11 facts to state a claim to relief that is plausible on its face.” Iqbal, 556 U.S. at 697 (quoting 12 Twombly, 550 U.S. at 570). “A claim has facial plausibility when the plaintiff pleads factual 13 content that allows the court to draw the reasonable inference that the defendant is liable for the 14 misconduct alleged.” Id. at 680. While the plausibility requirement is not akin to a probability 15 requirement, it demands more than “a sheer possibility that a defendant has acted unlawfully.” 16 Id. at 678. This plausibility inquiry is “a context-specific task that requires the reviewing court to 17 draw on its judicial experience and common sense.” Id. at 679. 18 In ruling on a motion to dismiss, a court may only consider the complaint, any exhibits 19 thereto, and matters which may be judicially noticed pursuant to Federal Rule of Evidence 201. 20 See Mir v. Little Co. of Mary Hosp., 844 F.2d 646, 649 (9th Cir. 1988); Isuzu Motors Ltd. v. 21 Consumers Union of U.S., Inc., 12 F. Supp. 2d 1035, 1042 (C.D. Cal. 1998). 22 If a complaint fails to state a plausible claim, “‘[a] district court should grant leave to 23 amend even if no request to amend the pleading was made, unless it determines that the pleading 24 could not possibly be cured by the allegation of other facts.’” Lopez v. Smith, 203 F.3d 1122, 25 1130 (9th Cir. 2000) (en banc) (quoting Doe v. United States, 58 F.3d 494, 497 (9th Cir. 1995)). 26 /// 27 /// 28 /// 1 III. ANALYSIS 2 A. FedEx’s Motion to Dismiss 3 FedEx moves to dismiss all of Plaintiff’s claims pursuant to Rule 12(b)(6). (See ECF No. 4 111-1.) FedEx argues Plaintiff does not state an agency theory of liability against FedEx in the 5 claims asserted against it — Claims One through Four and Six through Eight. (Id. at 11–13.) 6 FedEx argues in the alternative that Plaintiff fails to state a claim in all of these claims. (Id. at 7 13–24.) Because the Court finds Plaintiff does not state a theory of liability against FedEx, it will 8 only address the sufficiency of the allegations regarding an agency theory of liability and decline 9 to address whether Plaintiff adequately states a claim. 10 FedEx argues that the SAC “provides no more factual support for its agency theories than 11 it did in its prior pleadings” — namely, Plaintiff “makes no allegations of fact demonstrating the 12 requisite elements of ostensible agency, including that [Plaintiff] reasonably believed that ARI 13 had agency authority, that FedEx somehow caused [Plaintiff] to believe ARI had agency 14 authority, or that [Plaintiff’s] purported reliance could be based on anything but its own 15 negligence.” (Id. at 11–12.) FedEx asks the Court to reject Plaintiff’s theory that FedEx was “the 16 selling party, [and] ultimately responsible for the manner in which its vehicles were marketed and 17 sold,” as it already rejected this exact theory based on exhibits Plaintiff attached to its First 18 Amended Complaint (“FAC”) that disprove the agency theory (which were not attached to the 19 SAC). (Id. at 12–13.) In opposition, Plaintiff asserts the SAC alleges both an actual agency 20 relationship between FedEx and ARI, as well as an ostensible agency relationship. (ECF No. 117 21 at 7–11.) Plaintiff further asserts the question of whether ARI was FedEx’s agent is a question of 22 fact that cannot be determined on a Rule 12 motion.1 (Id. at 10.) 23 The Court will first address whether Plaintiff sufficiently pleaded an actual agency 24 relationship and then whether Plaintiff sufficiently pleaded an ostensible agency relationship. 25 1 The Court agrees with FedEx (see ECF No. 121 at 8) and rejects this argument outright. 26 This Court, as well as other courts, have previously ruled on this issue in a Rule 12 motion. (See 27 ECF No. 91); see also Dakavia Mgmt. Corp. v. Bigelow, No. 1:20-cv-00448-NONE-SKO, 2022 WL 104245 (E.D. Cal. Jan. 10, 2022); Tuso v. Nat’l Health Agents, LLC, No. 2:20-cv-02130- 28 JAM-CKD, 2021 WL 253220 (E.D. Cal. June 21, 2021). 1 i. Actual Agency 2 Plaintiff argues that § 11(D) of the FMSA explicitly identifies ARI as the agent of FedEx. 3 (ECF No. 117 at 8–9.) Plaintiff contends “the intent was always for ARI to act as FedEx’s agent 4 in transferring ownership of these vehicles to a third party.” (Id. at 9.) Plaintiff further argues the 5 Ninth Amendment outlines a consignment agreement wherein ARI acts as FedEx’s agent in 6 disposition of FedEx’s vehicles for resale and “[a] true consignment constitutes an agency or 7 bailment relationship between the consignor and the consignee . . . .”2 (Id. at 8–10.) In reply, 8 FedEx asserts Plaintiff is incorrect the FMSA explicitly identifies ARI as an agent of FedEx, as § 9 9 of the FMSA states “in a section titled ‘Independent Contractor Relationship,’ that ‘[t]he parties 10 intend that an independent contractor relationship will be created by this Agreement.’”3 (ECF 11 No. 121 at 6 (citing ECF No. 111-1 at 27).) FedEx maintains, therefore, that the FMSA 12 “explicitly disavows an agency relationship between FedEx and ARI, and FedEx expressly agreed 13 that it did not have ‘the right to control the activities of the alleged agent.’” (Id.) FedEx states 14 Plaintiff ignores this and misconstrues the FMSA to rely on a single word in a different section 15 other than § 9, which is misleading and should not be read in isolation because “[a] single 16 reference in a section including a rep[resentation] and warranty about odometers cannot 17 fundamentally alter the nature of the relationship between FedEx and ARI.” (Id. at 6–7.) FedEx 18 finally disputes that the Ninth Amendment establishes a consignment agreement, rather than a 19 resale arrangement. (Id. at 7.) 20 “The essential characteristics of an agency relationship as laid out in the Restatement are 21 as follows: (1) [a]n agent or apparent agent holds a power to alter the legal relations between the 22 principal and third persons and between the principal and himself; (2) an agent is a fiduciary with 23 respect to matters within the scope of the agency; and (3) a principal has the right to control the 24 conduct of the agent with respect to matters entrusted to him.” Dakavia, 2022 WL 104245, at *6 25 2 It appears the full text of the Ninth Amendment is attached to FedEx’s motion that was 26 filed under seal. (See ECF No. 110-1.) 27 3 It appears part of the FMSA is also attached to FedEx’s motion that was filed under seal. 28 (See ECF No. 110-1.) The Court confirms that this language is as it appears in § 9. (Id.) 1 (citing Garlock Sealing Techs., LLC v. NAK Sealing Techs. Corp., 148 Cal. App. 4th 937, 964 2 (2007), as modified on denial of reh’g (Apr. 17, 2007)). “Although the precise details of the 3 agency relationship need not be pleaded to survive a motion to dismiss, sufficient facts must be 4 offered to support a reasonable inference that an agency relationship existed.” Id. (quoting 5 Kreiser v. Asset Mgmt. Grp., Inc., No. SACV 20-01794-JVS DFMx, 2021 WL 3579414, at *3 6 (C.D. Cal. Apr. 23, 2021); Imageline, Inc. v. CafePress.com, Inc., No. CV 10-9794 PSG 7 MANx, 2011 WL 1322525, at *4 (C.D. Cal. Apr. 6, 2011)). A plaintiff must also allege facts to 8 show the principal has control over the agent. Id. 9 Here, Plaintiff’s allegations of agency between FedEx and ARI in the SAC are as follows: 10 (1) “each and every [D]efendant was an agent, employee, partner, joint venture, predecessor-in- 11 interest and co-conspirator of the other [D]efendants, and in doing the things herein alleged, was 12 acting within the course and scope of such agency . . . .” (ECF No. 104 ¶ 7); (2) “[i]n remarketing 13 FedEx vehicles on behalf of FedEx, ARI was acting at all times as FedEx’s agent” (id. at ¶ 55); 14 (3) “[i]n addition to acting as agents for FedEx within the scope of the FMSA, ARI has acted 15 independently and on its own accord, including but not limited to locking [Plaintiff] out of its 16 ARI Direct platforms and out of the [a]uction [h]ouses” (id. at ¶ 121); (4) “FedEx failed to ensure 17 that its agent, ARI, disclosed the actual vehicle mileage for FedEx vehicles cosigned to ARI for 18 remarketing and sale” (id. at ¶ 131); (5) “FedEx was [receiving] and continues to receive 19 hundreds of thousands of dollars per month as a result of its agent ARI’s remarketing efforts” (id. 20 at ¶ 137); (6) “FedEx . . . fail[ed] to ensure that its agent, ARI, properly disclosed the actual 21 mileage on FedEx vehicles consigned to ARI for resale” (id. at ¶ 145); (7) “FedEx . . . failed to 22 ensure that its agent, ARI, properly disclosed the actual mileage on FedEx vehicles consigned to 23 ARI for resale” (id. at ¶ 157); (8) “FedEx via its agent ARI sold FedEx vehicles to [Plaintiff] . . . 24 FedEx and its agent ARI . . . made warranties regarding the quality and condition of the goods . . . 25 .” (id. at ¶ 208); and (9) “[Plaintiff] purchased FedEx vehicles through FedEx’s agent ARI, as 26 well as via ARI’s agents, the [a]uction [h]ouses . . . [which] were not the same quality as those 27 generally accepted in the trade as they did not meet the quality conditions . . . .” (id. at ¶ 213). 28 Nowhere in the foregoing allegations does Plaintiff explicitly plead nor can there be a 1 reasonable inference from these allegations that ARI “holds a power to alter the legal relations 2 between [FedEx] and third persons and between [FedEx] and [itself]” or that “[FedEx] has the 3 right to control the conduct of [ARI] with respect to the matters entrusted to [it].” See Dakavia, 4 2022 WL 104245, at *6. California law defines a fiduciary relationship as: 5 any relation existing between the parties to a transaction wherein one of the parties is in duty bound to act with the utmost good faith for 6 the benefit of the other party. Such relation ordinarily arises where a confidence is reposed by one person in the integrity of another, and 7 in such a relation the party in whom the confidence is reposed, if he voluntarily accepts or assumes to accept the confidence, can take no 8 advantage from his acts relating to the interest of the other party without the latter’s knowledge or consent . . . . 9 10 Wolf v. Superior Court, 107 Cal. App. 4th 25, 29 (2003). Accordingly, even under a liberal 11 construction of these allegations, Plaintiff does not plead that ARI “is in duty bound to act with 12 the utmost good faith for” FedEx. Instead, the majority of the allegations are conclusory 13 statements that ARI was acting as an agent for FedEx. 14 The parties in their briefing focus on a dispute over the language of the FMSA and the 15 Ninth Amendment and whether these documents explicitly provide for a certain kind of 16 relationship. Plaintiff argues there is an agency relationship based on the language of § 11(D): 17 “ARI warrants to FedEx that, as to any Vehicle it receives from FedEx, no tampering with the 18 odometer of such Vehicle will occur between the time ARI receives the Vehicle from FedEx and 19 the time of the transfer of ownership by ARI, as agent, from FedEx to the next succeeding 20 owner.” (ECF No. 117 at 8–9 (emphasis added).) Plaintiff further argues the Ninth Amendment 21 outlines a consignment agreement but does not point to any specific provisions that do so. (Id. at 22 9.) As previously noted, FedEx argues there is an independent contractor relationship based on § 23 9 of the FMSA. (ECF No. 121 at 6; see ECF No. 110-1.) 24 As a preliminary matter, the Court finds it troubling that Plaintiff did not attach the full 25 text of the FMSA to the SAC nor to its opposition to the instant motion. (See ECF Nos. 104, 26 117.) Additionally, the part of the FMSA attached to FedEx’s motion filed under seal does not 27 include § 11. (See ECF No. 110-1.) Even if the language of § 11(D) was included in the SAC or 28 attached to the SAC and the Court were to accept the language of the Ninth Amendment attached 1 to FedEx’s motion, the Court would still find an agency relationship does not exist because 2 Plaintiff fails to plead the essential elements of agency. Under the standards of Rule 8, the 3 allegations still would not “allow[] the court to draw the reasonable inference that [ARI] is liable 4 for the misconduct alleged.” Iqbal, 556 U.S. at 680. Thus, the Court finds Plaintiff’s actual 5 agency theory of liability fails. 6 ii. Ostensible Agency 7 With respect to ostensible agency specifically, Plaintiff argues it pleaded “the ultimate fact 8 that FedEx’s retired vans are sold one way or another through ARI” and “it is well-known in the 9 fleet management industry that ARI is FedEx’s agent for remarketing FedEx’s retired vans.” 10 (ECF No. 117 at 11 (citing ECF No. 104 ¶¶ 25–36, 197).) In reply, Defendant simply states that 11 this argument is “without merit.” (ECF No. 121 at 8.) 12 To plead ostensible agency, plaintiffs must allege: “(1) they reasonably believed the agent 13 had the authority to act on behalf of the principal; (2) the principal’s act or neglect caused them to 14 believe in the agent’s authority; and (3) their reliance on the agent was not due to negligence.” 15 Warwick v. Rejuvi Lab., Inc., No. 18-cv-02701-MEJ, 2018 WL 3609089, at *5 (N.D. Cal. July 27, 16 2018) (citing Associated Creditors’ Agency v. Davis, 13 Cal. 3d 374, 399 (1975)). In Warwick, 17 the court found the plaintiffs’ complaint contained each of these three elements because the 18 plaintiffs alleged: 19 [the agent] sold services and products developed by [the principal]; was trained by [the principal] to sell its products and services; told [one of the plaintiffs] she was 20 certified by [the principal] to perform the [principal’s] tattoo removal procedure and that she was in “constant communication” with [the principal]; and told [one 21 of the plaintiffs] she spoke directly with [the principle’s] CEO and chief scientist when [one of the plaintiffs] began suffering from the procedure. 22 23 Id. Thus, the court found the plaintiffs sufficiently alleged a plausible claim for fraud under an 24 ostensible agency theory. Id. 25 Here, all of Plaintiff’s allegations of actual or ostensible agency in the SAC are outlined 26 above. Nowhere in the foregoing allegations does Plaintiff explicitly plead nor can there be a 27 reasonable inference from these allegations that Plaintiff “reasonably believed [ARI] had the 28 authority to act on behalf of [FedEx],” “[FedEx’s] act or neglect caused [Plaintiff] to believe in 1 [ARI’s] authority,” or that “[Plaintiff’s] reliance on [ARI] was not due to negligence.” See 2 Warwick, 2018 WL 3609089, at *5. Again, the majority of the allegations are conclusory 3 statements that ARI was acting as an agent for FedEx. Accordingly, Plaintiff has not met its 4 initial burden in alleging enough facts to establish a plausible theory of ostensible agency. See 5 Ins. Co. of the State of Pa. v. Citizens of Humanity LLC, No. SACV 13-01564 JVS (DFMs), 2014 6 WL 12689271, at *4 (C.D. Cal. Feb. 24, 2014) (granting motion to dismiss all third-party claims, 7 including those based on agency theory, where third-party plaintiff’s “allegations regarding [the 8 third-party defendant’s] status as an agent of the insurers are conclusory and wholly lacking [] ] in 9 factual content.”); In re Cobb, No. CIV. S–10–587 FCD, 2010 WL 4942545, at *6 (E.D. Cal. 10 Nov. 24, 2010) (affirming bankruptcy court’s dismissal of adversary complaint including claim 11 based on agency theory because “appellant failed to allege any facts to show how [alleged 12 principal] Deutsche Bank authorized any other defendant or party to represent and/or bind it”) 13 (citing J.L. v. Children’s Inst., Inc., 177 Cal. App. 4th 388, 403–04 (2009)). Thus, Plaintiff’s 14 ostensible agency theory of liability fails. 15 Both of Plaintiff’s theories of liability fail and therefore FedEx’s motion as to Claims One 16 through Four and Six through Eight of the SAC is GRANTED. Because the Court cannot 17 definitively conclude that Plaintiff’s amended complaint “could not possibly be cured by the 18 allegation of other facts,” the motion is granted with leave to amend. See Lopez, 203 F.3d at 19 1130. 20 B. ARI’s Motion to Dismiss 21 ARI argues Claims One through Three are barred by the applicable statutes of limitation, 22 as Rule 15 prohibits amended complaints that relate back to the date of the original Complaint, 23 except in cases where a plaintiff can establish that its “failure to name a party was due to 24 mistaken identification” and Plaintiff cannot establish this exception applies. (ECF No. 112-1 at 25 11–15.) ARI further argues Plaintiff fails to adequately state a claim for Claims Two through 26 Nine of the SAC. (Id. at 11–26.) The Court will first consider whether ARI was properly added 27 as a Defendant under Rule 15(c) such that the applicable statutes of limitation do not apply. The 28 Court will then evaluate the claims on the merits, as it finds that ARI was properly added. 1 i. Whether ARI Was Properly Added Under Rule 15(c) 2 ARI notes Plaintiff filed its initial Complaint on August 18, 2017, which included a 3 section entitled “Odometers Not Represented on Condition Reports” with various allegations that 4 it had purchased vehicles with replaced odometers and referenced ARI “no less than fourteen 5 times” even though ARI was not a named defendant. (ECF No. 112-1 at 12.) ARI states it 6 therefore “cannot be disputed” that Plaintiff knew in early 2017 that “it purchased FedEx vehicles 7 that allegedly had replaced odometers and that ARI was involved in the sale.” (Id.) ARI 8 contends the limited exception available in Rule 15(c), which allows for amended complaints to 9 relate back to the date of the original complaint where the plaintiff can establish that its “failure to 10 name a party was due to mistaken identification,” is therefore not applicable. (Id. at 12–13.) 11 With respect to Claims Two and Three, ARI argues the applicable statutes of limitations for 12 intentional misrepresentation and negligent misrepresentation are three years and two or three 13 years.4 (Id. at 13–15.) ARI asserts Plaintiff knew of ARI and the facts underlying these claims in 14 January 2017 and absolutely no later than when it filed the FAC in August 2017, which 15 “contained the same allegations and raised the same issues that are now the subject of its claims 16 against ARI.” (Id.) 17 In opposition, Plaintiff asserts the Supreme Court’s decision in Krupski should govern, 18 which concluded that “the plaintiff’s failure to name [the defendant] initially was a mistake 19 within the meaning of [Rule 15(c)],” which asks “whether [the defendant] knew or should have 20 known that it would have been named as a defendant but for an error.” (ECF No. 115 at 9–10 21 (citing Krupski v. Costa Crociere S.p.A., 650 U.S. 528, 548–49, 555 (2010)).) Plaintiff further 22 asserts the decision of a court within the Eastern District should govern the issue of whether Rule 23 15(c) applies to both the substitution and addition of a party, as the court held that “Rule 15(c) 24 relation back applies irrespective of whether a party is being substituted or added.” (Id. at 10–11 25 (citing United States ex rel. Schmuckley v. Rite-Aid Corp. (Rite-Aid), No. 2:12-cv-01699-KJM- 26 EFB, 2021 WL 1295391, at * (E.D. Cal. Apr. 7, 2021)).) Plaintiff finally maintains that the three 27 4 ARI notes the applicable statute of limitations for negligent misrepresentation is two years 28 if the claim is based on negligence and three years if it is based on deceit or fraud. (Id. at 15.) 1 prongs of Rule 15(c) are met, as: (1) “the allegations against ARI arise out of the same ‘conduct, 2 transaction, or occurrence’ alleged in the original complaint as against FedEx”; (2) ARI was 3 immediately on notice of this suit as ARI’s counsel reached out to Plaintiff’s counsel within 4 weeks about potential settlement, has directed FedEx’s defense in this case, and has now formally 5 appeared on behalf of ARI; and (3) “ARI knew from the outset that [Plaintiff] in naming FedEx 6 had missed a seriously culpable party and main participant in the scheme at issue,” as ARI 7 reached out about potential settlement and told Plaintiff it would not be let back onto ARI’s 8 platform or auction houses unless the suit against FedEx was dropped. (Id. at 11.) 9 In reply, ARI maintains that Krupski and Rite-Aid are distinguishable because they 10 involved related corporate entities and defendants who either acknowledged or contributed to the 11 confusion surrounding the properly-named defendant. (ECF No. 120 at 7–8.) 12 Rule 15 provides that an amendment to a pleading relates back to the date of the original 13 pleading when: 14 the amendment change the party or the naming of the party against whom a claim is asserted, if Rule 15(c)(1)(B) is satisfied and if, 15 within the period provided by Rule 4(m) for serving the summons and complaint, the party to be brought in by amendment: (i) received 16 such notice of the action that it will not be prejudiced in defending on the merits; and (ii) knew or should have known that the action 17 would have been brought against it, but for a mistake concerning the proper party’s identity. 18 19 Fed. R. Civ. P. 15(c)(1)(C). Rule 15 “governs when an amended pleading ‘relates back’ to the 20 date of a timely filed original pleading and is thus itself timely even though it was filed outside an 21 applicable statute of limitations.” Krupski, 560 U.S. at 541. When an amended pleading seeks to 22 change a party or a party’s name, Rule 15 also requires that “the party to be brought in by 23 amendment . . . knew or should have known that the action would have been brought against it, 24 but for a mistake concerning the proper party’s identity.” Id. (citing Fed. R. Civ. P. 15(c)(1)(C)). 25 In Krupski, the plaintiff sought damages for a slip and fall while she was on board a cruise 26 ship and sued Costa Cruise Lines, the entity listed on the front of her cruise ticket. Id. at 542–43. 27 Costa Cruise then brought to the plaintiff’s attention the existence of Costa Crociere — the carrier 28 identified on the cruise ticket — multiple times. Id. at 542–43. The cruise ticket stated that an 1 injured party is to submit “written notice of the claim with full particulars . . . to the carrier or its 2 duly authorized agent within 185 days after the date of injury.” Id. Subsequently, Costa Cruise 3 filed a motion for summary judgment, which the district court denied, and the plaintiff filed an 4 amended complaint. Id. at 544. The district court found the amended complaint did not relate 5 back under Rule 15(c) and was untimely, and the Eleventh Circuit affirmed. Id. at 544–46. The 6 Supreme Court reversed, finding that the plaintiff’s “deliberate choice to sue one party instead of 7 another while fully understanding the factual and legal differences between the two parties is the 8 antithesis of making a mistake concerning the proper party’s identity.” Id. at 546, 549. 9 Specifically, the Supreme Court stated: 10 A plaintiff may know that a prospective defendant — call him party A — exists, while erroneously believing him to have the status of 11 party B. Similarly, a plaintiff may know generally what party A does while misunderstanding the roles that party A and party B played in 12 the “conduct, transaction, or occurrence” giving rise to her claim. If the plaintiff sues party B instead of party A under these 13 circumstances, she has made a “mistake concerning the proper party’s identity” notwithstanding her knowledge of the existence of 14 both parties. The only question under Rule 15(c)(1)(C)(ii), then, is whether party A knew or should have known that, absent some 15 mistake, the action would have been brought against him . . . [A] plaintiff might know the prospective defendant exists but nonetheless 16 harbor a misunderstanding about his status or role in the events giving rise to the claim at issue, and she may mistakenly choose to 17 sue a different defendant based on that misimpression. That kind of deliberate but mistaken choice does not foreclose a finding that Rule 18 15(c)(1)(C)(ii) has been satisfied. 19 Id. at 549. The Supreme Court ultimately held that “relation back under Rule 15(c)(1)(C) 20 depends on what the party to be added knew or should have known, not on the amending party’s 21 knowledge or its timeliness in seeking to amend the pleading.” Id. at 541. 22 Here, the parties also dispute the last provision under Rule 15(c)(1)(C), whether ARI 23 “knew or should have known that the action would have been brought against it, but for a mistake 24 concerning the proper party’s identity.” Fed. R. Civ. P. 15(c)(1)(C); (see ECF No. 115 at 9–12; 25 ECF No. 120 at 5–8.) The Court agrees with Plaintiff that Krupski governs. ARI contends there 26 is no mistake as to its identity as Plaintiff “knew of ARI and its potential claims against ARI in 27 2017.” (ECF No. 112-1 at 13.) However, the Court finds particularly convincing Plaintiff’s 28 assertion that “both the Complaint and the FAC make clear that [Plaintiff] thought, and justifiably 1 so, that FedEx was the party ultimately responsible for the sale of FedEx delivery vans, as well as 2 the party directing that [Plaintiff] be locked out of the market to purchase said vans. [Plaintiff] 3 had in part missed the mark and ARI knew it.” (ECF No. 115 at 11 (emphasis removed).) 4 Indeed, the Complaint and the FAC contain numerous allegations specifically referencing ARI. 5 (See ECF Nos. 1, 27.) Based on the foregoing, the Court finds it plausible that Plaintiff, similar to 6 the plaintiff in Krupski, might have “harbored a misunderstanding about [ARI’s] status or role in 7 the events giving rise to the claim at issue, and [Plaintiff] may mistakenly cho[sen] to sue a 8 different defendant based on that misimpression.” Krupski, 560 U.S. at 549. The Court therefore 9 concludes that ARI should have known that Plaintiff’s failure to name it as a defendant in the 10 Complaint or FAC was due to a mistake concerning the proper party’s identity. Accordingly, the 11 SAC relates back to the date of the original Complaint such that Plaintiff’s claims against ARI are 12 not time-barred by any applicable statutes of limitation. 13 ii. Claim One: Violation of the Odometer Act 14 ARI does not move to dismiss Claim One for failure to state a claim. (See ECF No. 112-1 15 at 11–13.) Indeed, Plaintiff notes that ARI “never actually argues that [Plaintiff] failed to plead 16 violations of the Odometer Act with the requisite particularity.” (ECF No. 115 at 12.) ARI does 17 not dispute this in its reply but rather states that Plaintiff “does not even attempt to argue” the 18 Odometer Act claim was pleaded with sufficient particularity. (See ECF No. 120 at 8.) 19 Accordingly, the Court finds that ARI did not move to dismiss Claim One and it stands. 20 iii. Claim Two: Intentional Misrepresentation 21 ARI argues Plaintiff does not meet the heightened pleading standard of Rule 9 as it “fails 22 to plead the required elements of the claim with any particularity, stating only in generalities that 23 ‘ARI materially misrepresented the mileage on at least 100 FedEx vehicles purchased by 24 [Plaintiff].’” (ECF No. 112-1 at 14 (citing ECF No. 104 ¶ 142).) In opposition, Plaintiff asserts 25 “paragraphs 57 through 92 set forth in detail how the scheme worked by going through step by 26 step through the mileage recordation and disclosures of two specific FedEx delivery vans in rote 27 details” and these allegations were incorporated by reference into this claim. (ECF No. 115 at 28 12.) In reply, ARI again states that Plaintiff “does not even attempt to argue” the negligent 1 misrepresentation claim was pleaded with sufficient particularity. (See ECF No. 120 at 8.) 2 Under California law, the elements of intentional misrepresentation are: “(1) 3 misrepresentation; (2) knowledge of falsity; (3) intent to defraud, i.e., to induce reliance; (4) 4 justifiable reliance; and (5) resulting damage.” Helo v. Bank of Am. Servicing Co., No. 1:14-cv- 5 01522-LJO, 2015 WL 4673890, at *3 (E.D. Cal. Aug. 5, 2015) (internal quotations omitted). 6 Federal courts will apply state law to determine whether the elements of fraud have been pleaded 7 adequately to state a cause of action, but Rule 9(b) requires that the circumstances establishing 8 fraud must be stated with sufficient particularity. Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 9 1103 (9th Cir. 2003). Specifically, Rule 9(b) requires that “[i]n alleging fraud or mistake, a party 10 must state with particularity the circumstances constituting fraud or mistake. Malice, intent, 11 knowledge, and other conditions of a person’s mind may be alleged generally.” Fed. R. Civ. P. 12 9(b). The allegations underlying a fraud claim must be “specific enough to give defendants 13 notice of the particular misconduct . . . so that they can defend against the charge.” Vess, 317 14 F.3d at 1106 (internal quotation marks omitted). “Averments of fraud must be accompanied by 15 ‘the who, what, when, where, and how’ of the misconduct charged.” Id. (citing Cooper v. Pickett, 16 137 F.3d 616, 627 (9th Cir. 1997)). “[A] plaintiff must set forth more than the neutral facts 17 necessary to identify the transaction. The plaintiff must set forth what is false or misleading 18 about a statement, and why it is false.” Id. (internal citation omitted). Claims for intentional 19 representation are fraud-based claims that must meet the heightened pleading standards of Rule 20 9(b). Avakian v. Wells Fargo Bank, N.A., 827 F. App’x 765, 766 (9th Cir. 2020). Accordingly, 21 Plaintiff’s intentional misrepresentation claim must meet these standards. 22 Here, with respect to the first element, Plaintiff alleges that “ARI materially 23 misrepresented the mileage on at least 100 FedEx vehicles,” but “incorporates by reference” the 24 previous allegations in the SAC. (ECF No. 104 at 23.) Plaintiff further alleges that one of the 25 vehicles, “Asset 221846[,] was one of approximately 1,600 FedEx vans in the last 84 months that 26 experienced an odometer change during the course of its life” and Asset 221846 “went in for 27 ‘preventative maintenance’ and repairs,” which included “an odometer replacement.” (Id. at 11.) 28 Plaintiff alleges that its maintenance on April 11, 2012, Asset 221846 was shown to have a 1 mileage of 256,973 miles” but the vehicle condition report transmitted to ARI that “would form 2 the basis for the online marketing of the vehicle for sale” disclosed the mileage as only 106,349 3 miles. (Id. at 11–12.) The SAC also states that Plaintiff “has to date confirmed that 98 FedEx 4 vans it purchased between 2013 and 2017 had undisclosed odometer changes,” such as Assets 5 227217 and 232266. (Id. at 14.) The Court finds it is a reasonable inference from these 6 allegations that Plaintiff alleges ARI misrepresented the mileage on these vehicles. With respect 7 to the second element, Plaintiff alleges “ARI knew the mileage on the odometers for these 8 vehicles was not the actual vehicle mileage, but marketed and sold the vehicles without disclosing 9 that the stated mileage was not the actual mileage” and ARI “had direct access” to the system that 10 contained the true vehicle mileage. (Id. at 23.) With respect to the third element, Plaintiff alleges 11 ARI was “motivated by money to either actively misrepresent the mileage on FedEx vehicles or 12 [was] willfully blind to the fact that vehicles were being marketed and sold with fraudulent 13 mileage numbers.” (Id. at 23–24.) With respect to the fourth element, Plaintiff alleges it 14 “justifiably relied upon the mileage numbers being purveyed by FedEx and ARI with respect to 15 FedEx vehicles being remarketed by ARI.” (Id. at 24.) With respect to the fifth element, Plaintiff 16 alleges it “was forced to expend additional money to repair and transport purchased vehicles that 17 were inaccurately represented in their disclosures, announcements, advertising, and Condition 18 Reports” and “was unable to fulfill obligations made its clients and suffered other injury and 19 damage to be proven at trial.” (Id.) Based on the foregoing, the Court finds that Plaintiff 20 adequately states a claim for intentional misrepresentation. Accordingly, ARI’s motion to 21 dismiss Claim Two is DENIED. 22 iv. Claim Three: Negligent Misrepresentation 23 ARI argues that this claim fails because “it is based entirely on supposed non-disclosure 24 of odometer changes, and non-disclosures or omissions cannot form the basis of a legally viable 25 negligent misrepresentation claim.” (ECF No. 112-1 at 15 (citing GemCap Lending, LLC v. 26 Quarles & Brady, LLP, 269 F. Supp. 3d 1007, 1040 (C.D. Cal. 2017)).) In opposition, Plaintiff 27 asserts ARI’s reliance on GemCap is misplaced because it “concluded that the defendants did not 28 conceal or suppress any material in fact in breach of a duty.” (ECF No. 115 at 12–13.) Plaintiff 1 further asserts that it alleges an affirmative misrepresentation made in allowing FedEx vehicles to 2 be remarketed and sold utilizing inaccurate mileage numbers and even if these allegations are 3 construed as non-disclosure, ARI had an obligation to Plaintiff “as a member of ‘a specific class 4 of persons’ involved in a transaction that the defendant ‘supplier of information intends the 5 information to influence.” (Id. at 13 (citing Bily v. Arthur Young & Co., 3 Cal. 4th 370, 414 6 (1992)).) In reply, ARI contends that it did not make representations, as they were contained in 7 the condition reports prepared by auction houses who conducted the vehicle sales, and Bily is 8 inapplicable here because it applies to “suppliers of commercial information to third persons who 9 are intended beneficiaries of that information.” (ECF No. 120 at 8–9.) 10 Under California law, the elements of negligent misrepresentation are the same as 11 intentional misrepresentation — minus the element of intent to induce reliance. Saldate v. 12 Wilshire Credit Corp., 268 F.R.D. 87, 101 (E.D. Cal. 2010) (citing Cadlo v. Owens-Illionis, Inc., 13 125 Cal. App. 4th 513, 519 (2004)). A negligent misrepresentation claim must also comply with 14 the heightened pleading standards of Rule 9(b). Id. 15 Here, the Court agrees with Plaintiff that it alleges an affirmative misrepresentation, as it 16 alleges “ARI materially misrepresented the mileage on at least 100 FedEx vehicles to [Plaintiff.]” 17 (ECF No. 104 at 24.) The Court has already found above that Plaintiff adequately alleges a claim 18 for intentional misrepresentation. Because the elements for a negligent misrepresentation claim 19 are the same as the elements for an intentional misrepresentation claim, minus the element of 20 intent to induce reliance, the Court finds that Plaintiff also adequately alleges a claim for 21 negligent misrepresentation. The Court therefore need not decide whether ARI had an obligation 22 to Plaintiff “as a member of a ‘specific class.’” Accordingly, ARI’s motion to dismiss Claim 23 Three is DENIED. 24 v. Claim Four: Violation of RICO 25 Plaintiff alleges three different counts within its RICO claim. The Court will consider 26 each in turn. 27 /// 28 /// 1 a) Violation of 18 U.S.C. § 1962(c) (“§ 1962(c)”) 2 “To state a RICO claim under § 1962(c), a plaintiff must allege[] (i) conduct (ii) of an 3 enterprise (ii) through a pattern (iv) of racketeering activity, and (v) injury in the plaintiffs’ 4 business or property by the conduct constituting the violation.” Comm. to Protect our Agric. 5 Water v. Occidental Oil & Gas Corp., 235 F. Supp. 3d 1132, 1172 (E.D. Cal. 2017). 6 ARI argues Plaintiff fails to adequately plead the existence of an enterprise, that there 7 were predicate acts of wire or mail fraud constituting a pattern of racketeering activity, and a 8 pattern of racketeering. (ECF No. 112-1 at 15–17.) The Court will consider each of ARI’s 9 arguments in turn. 10 1) Enterprise 11 ARI argues Plaintiff’s “only attempt to plead an enterprise is the conclusory allegation 12 that ‘ARI and FedEx constitute an enterprise engaged in and whose activities affect interstate 13 commerce.’” (ECF No. 112-1 at 16 (citing ECF No. 104 ¶ 77).) ARI contends this sole 14 allegation is insufficient to give the Court information “as to the form of that enterprise, the ways 15 in which decisions are made in the enterprise, or even the hierarchy of the alleged actors in the 16 enterprise.” (Id.) In opposition, Plaintiff contends that it sufficiently outlines the structure of the 17 enterprise in paragraphs 51 through 55 and that ARI and FedEx had a common purpose of 18 maximizing the sale price of the FedEx vehicles, which meant more revenue for both ARI and 19 FedEx. (ECF No. 115 at 14–15.) In reply, ARI maintains all that Plaintiff has pleaded “is that a 20 contract between the [p]arties existed,” which is insufficient to claim a RICO enterprise existed. 21 (ECF No. 120 at 9.) 22 To adequately plead the existence of an enterprise, a plaintiff must establish: (1) a 23 common purpose, or “that the group engaged in enterprise conduct distinct from their own 24 affairs”; (2) “an ongoing structure or organization to the enterprise, which may either be formal or 25 informal”; and (3) “the enterprise had the longevity necessary to accomplish its purpose.” Comm. 26 to Protect our Agric. Water, 235 F. Supp. 3d at 1173–74. 27 Here, with respect to the first element, Plaintiff cites to paragraphs in the SAC which 28 allege that “ARI and FedEx were motivated by money to either actively misrepresent the mileage 1 on FedEx vehicles or were willfully blind to the fact that vehicles were being marketed and sold 2 with fraudulent mileage numbers” and that “FedEx and ARI made out handsomely in terms of the 3 increased profits garnered from the sales.” (ECF No. 115 at 15 (citing ECF No. 104 ¶¶ 92, 149).) 4 Plaintiff therefore adequately establishes that the common purpose of the enterprise was to make 5 money. With respect to the second element, Plaintiff alleges the FMSA was a “longstanding 6 agreement for ARI to manage acquisition, licensing and maintenance of vehicles for FedEx,” 7 which was expanded to include vehicle remarketing services. (Id. (citing ECF No. 104 ¶¶ 38–39, 8 45, 51–55).) With respect to the third element, as just noted, Plaintiff alleges that “FedEx and 9 ARI made out handsomely in terms of the increased profits garnered from the sales.” (ECF No. 10 104 ¶ 92.) Accordingly, Plaintiff adequately alleges the existence of an enterprise and this 11 element is met. 12 2) Predicate Acts of Racketeering Activity 13 ARI contends Plaintiff’s allegations of predicate mail or wire fraud are conclusory and 14 boilerplate, as Plaintiff only alleges “Defendants’ activities include at least two acts of 15 racketeering activity” and that “in transmitting and marketing FedEx vehicles with false mileage 16 disclosures through interstate wires and mail, FedEx and ARI conducted and participated in the 17 affairs of an enterprise through a pattern of racketeering activity.” (ECF No. 112-1 at 16–17 18 (citing ECF No. 104 ¶¶ 175–76).) ARI argues this does not meet Rule 9(b)’s heightened pleading 19 standard. (Id. at 17.) In opposition, Plaintiff argues the SAC contains sufficient allegations to 20 establish false information regarding the mileage on FedEx vehicles which “was conveyed, via 21 the internet, by a New Jersey company [ARI] concerning the vehicle located in Washington for 22 sale to a company located in Nevada” and “this same practice was repeated numerous times.” 23 (ECF No. 115 at 15–16.) 24 The “racketeering activity” element of a RICO claim can be established by alleging 25 predicate acts of racketeering. See Schreiber Distrib. Co. v. Serv-Well Furniture Co., Inc. 26 (Schreiber), 806 F.2d 1393, 1398 (9th Cir. 1986); Comm. to Protect our Agric. Water, 235 F. 27 Supp. 3d at 1176. “To allege a violation of the mail fraud statute, it is necessary to show that[:] 28 (1) the defendants formed a scheme or artifice to defraud; (2) the defendants used the United 1 States mails or caused a use of United States mails in furtherance of the scheme; and (3) the 2 defendants did so with the specific intent to deceive or defraud.” Id. at 1399–1400. Similarly, the 3 elements to allege a violation of wire fraud are similar, except the second element is “use of the 4 United States wires or causing a use of the United States wires in furtherance of the scheme.” Id. 5 at 1400. Additionally, “when a RICO claim is based on a predicate offense of fraud, the 6 circumstances constituting fraud . . . shall be stated with particularity pursuant to [Rule] 9(b).” 7 Comm. to Protect our Agric. Water, 235 F. Supp. 3d at 1173. 8 Here, ARI is correct that Plaintiff only alleges in conclusory fashion that “Defendants’ 9 activities include at least two acts of racketeering activity” and their “conduct constitutes a 10 ‘pattern’ of racketeering activity.” (ECF No. 104 at 27.) With respect to the first element, 11 looking at the SAC in its entirety, the reasonable inference is that Defendants “formed a scheme 12 or artifice to defraud.” Schreiber, 806 F.2d at 1399–1400. The SAC includes allegations 13 regarding the FMSA and the Ninth Amendment for vehicle remarketing services, how both 14 worked in practice and that “FedEx and ARI made out handsomely in terms of the increased 15 profits garnered from the sales” of vehicles with allegedly incorrect odometer readings. (ECF 16 No. 104 at 7–14.) Further, the paragraphs in the SAC that Plaintiff specifically points to as 17 establishing mail or wire fraud are sufficient, as they describe the vehicles at issue, the mileage on 18 which were allegedly misreported, how neither FedEx nor ARI complied with federal law for a 19 sticker to be placed on the left door frame to specify “the mileage before the service . . . and the 20 date of service,” and how the condition reports used to market the sale of the vehicles falsely 21 reported mileage. (See ECF No. 1 at 15–16 (citing ECF No. 104 ¶¶ 57, 67, 74, 76, 78, 82–83, 87, 22 89, 93–94, 124).) Plaintiff also alleges that ARI had access to FedEx’s VAGIS system which 23 included detailed information for each vehicle.5 (Id. at 14–15 (citing ECF No. 104 ¶ 43); see also 24 ECF No. 104 ¶ 113.) With respect to the second element, Plaintiff alleges “ARI routinely used 25 interstate mail to send vehicle titles containing inaccurate statements of mileage to [a]uction 26 27 5 Although paragraph 43 is redacted in the SAC (ECF No. 104), a review of the sealed, unredacted SAC (ECF No. 95) reveals the allegations are consistent with what Plaintiff argues 28 here. 1 [h]ouses and purchasers” and FedEx and ARI “transmit[ed] and market[ed] FedEx vehicles with 2 false mileage disclosures through interstate wires and mail.” (ECF No. 104 at 20, 27.) With 3 respect to the third element, Plaintiff alleges “Defendants have knowingly, willfully and 4 intentionally conspired and agreed to conduct and participate in the conduct of the affairs of the 5 enterprise” of wire and mail fraud.” (Id. at 29.) Accordingly, Plaintiff adequately establishes the 6 predicate acts of mail and wire fraud and this element is met. 7 3) Pattern 8 ARI argues Plaintiff does not allege any threat of continued criminal activity and “[t]he 9 sale of vehicles to a single party in just over a year (and none since 2017) cannot plausibly 10 constitute a threat[.]” (ECF No. 112-1 at 17.) In opposition, Plaintiff states a period of one year 11 is generally required to establish a pattern of racketeering and the SAC alleges FedEx changed 12 odometers over an 84-month period and Plaintiff purchased vans with undisclosed odometer 13 changes over a four-year period. (ECF No. 115 at 16.) Plaintiff also contends the SAC alleges it 14 has continued to be locked out of the market. (Id.) In reply, ARI argues the SAC only identifies 15 vehicles purchased in 2016–2017 and Plaintiff’s argument that it is locked out of the market is 16 unfounded as its purported refusal to sell to Plaintiff does not constitute criminal activity nor do 17 the allegations that ARI controlled numerous auction houses or directed their actions as to 18 Plaintiff have any basis in fact. (ECF No. 120 at 10.) 19 “To plead a pattern of racketeering activity, plaintiffs must allege: (i) that the racketeering 20 predicates are related[;] and (ii) that they amount to or pose a threat of continued criminal 21 activity.” Comm. to Protect our Agric. Water, 235 F. Supp. 3d at 1177. With respect to the 22 former, “plaintiffs must allege that defendants committed at least two of the statutorily 23 enumerated predicate acts,” which include mail and wire fraud. Id. With respect to the latter, 24 “[t]he continuity requirement is satisfied if plaintiffs allege either a series of related predicates 25 extending over a substantial period of time, i.e., closed-continuity, or past conduct that by its 26 nature projects into the future with a threat of repetition, i.e., open-ended continuity.” Id. 27 (internal quotation marks and citations omitted). 28 /// 1 With respect to the first element, as noted above, Plaintiffs adequately allege that ARI has 2 committed the predicate acts of mail and wire fraud. With respect to the second element, the 3 Court agrees with Plaintiff that the SAC adequately alleges both closed and open-ended 4 continuity. (ECF No. 115 at 16.) Plaintiff alleges “approximately 1,600 FedEx vans in the last 5 84 months . . . experienced an odometer change” and Plaintiff “has to date confirmed that 98 6 FedEx vans it purchased between 2013 and 2017 had undisclosed odometer changes.” (ECF No. 7 104 at 11, 14.) Plaintiff further alleges that after it filed the instant suit, it “found itself locked out 8 of ARI’s Auto Direct website” and this suspension “quickly spread across the industry and . . . 9 [Plaintiff] found itself locked out of bidding on all vehicles at [a]uction [h]ouses as well.” (Id. at 10 18.) Plaintiff alleges it was told “that as a prerequisite to readmittance to the auctions [it] would 11 have to drop its lawsuit against FedEx.” (Id.) Plaintiff is further correct that the Ninth Circuit has 12 found a period of one year is generally required, which is met here. (ECF No. 115 at 16 (citing 13 Grimmett v. Brown, 75 F.3d 506, 512 (9th Cir. 1996)).) Accordingly, the pattern element is met. 14 With respect to the remaining elements of conduct and injury for a § 1962(c) claim, the 15 Court finds that the former is satisfied through the allegations regarding the racketeering activity 16 and the latter is satisfied though Plaintiff’s allegation that it “has been injured in its business and 17 property in that it has been duped into purchasing FedEx vans with excess mileage, or vans that 18 were inoperable or lacked represented equipment or features.” (ECF No. 104 at 27.) 19 Accordingly, the Court finds that Plaintiff adequately states a claim for a violation of § 1962(c) 20 and ARI’s motion to dismiss this count is DENIED. 21 b) Violation of 18 U.S.C. § 1962(a) (“§ 1962(a)”) 22 ARI argues Plaintiff’s allegations are mere recitations of the legal standard for a § 1962(a) 23 claim and that Plaintiff fails to sufficiently allege proximate causation and racketeering damages. 24 (ECF No. 112-1 at 18.) In opposition, Plaintiff alleges the SAC adequately establishes “how 25 Defendants utilized ‘racketeering income’ to exert influence over [a]uction [h]ouses to block 26 [Plaintiff] from purchasing FedEx vehicles from either ARI or the [a]uction [h]ouses.” (ECF No. 27 115 at 17.) In reply, ARI maintains Plaintiff alleges injury only from the predicate acts and 28 Plaintiff does not cite to anywhere in the SAC regarding its arguments about being locked out of 1 purchasing vehicles from ARI or auction houses. (ECF No. 120 at 10.) 2 “[A] plaintiff seeking civil damages for a violation of [§] 1962(a) must allege facts 3 tending to show that he or she was injured by the use or investment of racketeering income.” 4 Sybersound Recs., Inc. v. UAV Corp., 517 F.3d 1137, 1149 (9th Cir. 2008). A plaintiff must also 5 allege “that the investment of racketeering income was the proximate cause of its injury.” Id. 6 “Section 1962(a) prohibits the investment of money which has been earned through acts of 7 racketeering in an enterprise.” Schreiber, 806 F.2d at 1397. 8 Here, a review of the SAC reveals that Plaintiff does not allege ARI has used or invested 9 the money or profits earned through its predicate acts of mail and wire fraud. Although Plaintiff 10 cites to a number of paragraphs in the SAC regarding the income generated from the predicate 11 acts of mail and wire fraud, the Court agrees with ARI that Plaintiff does not cite to anywhere in 12 the SAC for its assertion that the racketeering income was used to block Plaintiff from purchasing 13 FedEx vehicles. (ECF No. 115 at 17; ECF No. 120 at 10.) Additionally, Plaintiff states in a 14 conclusory fashion that “[a]s a direct and proximate consequence of the conduct of Defendants . . 15 . Plaintiff has been injured in its business and property.” (ECF No. 104 at 28.) Plaintiff does not 16 show that the investment of the racketeering income is a proximate cause of its injury. 17 Accordingly, the Court finds Plaintiff has not adequately stated a claim for a violation of § 18 1962(a) and ARI’s motion to dismiss this count is GRANTED with leave to amend. 19 c) Violation of 18 U.S.C. § 1962(d) (“§ 1962(d)”) 20 ARI argues since Plaintiff fails to allege a substantive violation under §§ 1962(a) or (c), 21 its claim under § 1962(d) fails as well. (ECF No. 112-1 at 18.) In opposition, Plaintiff asserts it 22 alleges sufficient facts to establish the “racketeering enterprise for ARI to remarket FedEx 23 vehicles at inflated prices based on knowingly false Condition Reports.” (ECF No. 115 at 18.) 24 To plead a violation of § 1962(d), a plaintiff must allege “either an agreement that is a 25 substantive violation of RICO or that the defendants agreed to commit, or participated in, a 26 violation of two predicate offenses.” Comm. to Protect our Agric. Water, 235 F. Supp. 3d at 1172 27 (quoting Howard v. Am. Online, Inc., 208 F.3d 471, 751 (9th Cir. 2000)). “The illegal agreement 28 need not be express as long as its existence can be inferred from the words, actions, or 1 interdependence of activities and persons involved.” Id. (quoting Oki Semiconductor Co. v. Wells 2 Fargo Bank, Nat’l Ass’n, 298 F.3d 768, 775 (9th Cir. 2002)). “Under § 1962(d), while a 3 defendant need not have personally committed a predicate act, or even an overt act in furtherance 4 of the RICO conspiracy, the defendant must be aware of the essential nature and scope of the 5 enterprise and intended to participate in it.” Id. (internal quotation marks and citations omitted). 6 Here, the Court has already found that Plaintiff adequately alleges Defendants participated 7 in a violation of two predicate offense — mail and wire fraud. Accordingly, the Court finds that 8 Plaintiff adequately alleges a violation of § 1962(d) and ARI’s motion to dismiss this claim is 9 DENIED. 10 vi. Claim Five: Intentional Interference with Prospective Economic 11 Advantage 12 ARI argues Plaintiff “fails to identify specifically a third-party customer that ARI knew of 13 with whom [Plaintiff’s] relationship was harmed” and instead makes allegations regarding 14 relationships with customers. (ECF No. 112-1 at 19.) In opposition, Plaintiff asserts it received a 15 complaint from a FedEx ground customer in Everett, Washington, but that it can “easily identify 16 customers . . . that it can no longer sell to as it has no inventory to sell due to ARI’s actions.” 17 (ECF No. 115 at 18–19.) In reply, ARI maintains the SAC “does not allege anything about 18 [Plaintiff’s] relationship with [the Everett, Washington] customer or ARI’s interference, merely 19 that one customer made a single complaint.” (ECF No. 120 at 11 (citing ECF No. 104 ¶ 105).) 20 The elements required for a plaintiff to establish intentional interference with prospective 21 economic advantage are as follows: (1) an economic relationship between plaintiff and a third 22 party, with the probability of future economic benefit to plaintiff; (2) defendant’s knowledge of 23 the economic relationship; (3) intentionally wrongful acts by defendant designed to disrupt the 24 economic relationship; (4) actual disruption of the economic relationship; (5) economic harm to 25 plaintiff proximately caused by defendant’s wrongful act; and (6) defendant engaged in conduct 26 that was independently wrongful by some legal measure other than the interference itself. 27 Comercializadora Recmaq Limitada v. Hollywood Auto Mall, LLC, No. 12cv0945 AJB (MDD), 28 2013 WL 2248140, at *12 (S.D. Cal. May 20, 2013); Korea Supply Co. v. Lockheed Martin 1 Corp., 29 Cal. 4th 1134, 1153–54 (2003). 2 Here, the Court finds that ARI is correct that Plaintiff does not adequately establish 3 interference with a “particular individual,” which is necessary to fulfill the first element of this 4 claim. (ECF No. 112-1 at 19 (citing Damabeh v. 7-Eleven, Inc., No. 5:12-CV-1739-LHK, 2013 5 WL 1915867, at *10 (N.D. Cal. May 8, 2013); UMG Recordings, Inc. v. Glob. Eagle Ent., Inc., 6 117 F. Supp. 3d 1092, 1118 (C.D. Cal. 2015)).) Instead, Plaintiff only alleges that it received a 7 complaint from a FedEx ground customer in Everett, Washington (without identifying which 8 customer it was) and stating in a conclusory fashion that “ARI was well aware of the fact that 9 [Plaintiff] was a dealer in FedEx delivery vans and had established good relationships with 10 customers across the country” and “ARI deprived [Plaintiff] of access to inventory and drove 11 [Plaintiff] out of business, destroying its many customer relationships.” (ECF No. 104 ¶¶ 105, 12 200, 205.) Because the first element is not met, ARI’s motion to dismiss Claim Five is 13 GRANTED with leave to amend. 14 vii. Claim Six: Breach of Express Warranty 15 ARI argues it did not generate the condition reports, which Plaintiff alleges contained the 16 “warranties regarding the quality and condition of the goods[.]” (ECF No. 112-1 at 20 (citing 17 ECF No. 104 ¶ 208).) ARI further argues that Plaintiff’s allegations “do not provide the terms of 18 an express warranty, how that warranty led to the establishment of a bargain, or fatally under 19 California law, allegations of pre-suit notice of the alleged breach of warranty.” (Id. at 21.) In 20 opposition, Plaintiff concedes the exact terms of the warranty is required to be pleaded, but 21 contends — without providing any case law in support — that “[a] description of the goods at 22 issue can create an express warranty so long as it was part of the basis of the bargain between the 23 parties” and the condition reports provided specific descriptions about the vehicles being sold by 24 ARI. (ECF No. 115 at 20.) Plaintiff further asserts that the SAC specifically alleges Plaintiff 25 gave pre-suit notice of the issues set forth in this suit. (Id. at 21.) In reply, ARI asserts the 26 misrepresentations in the condition reports were not created by ARI nor is ARI responsible for the 27 representations of entities over which it has no control. (ECF No. 120 at 11.) 28 /// 1 “To state a claim for breach of express warranty under California law, a plaintiff must 2 allege (1) the exact terms of the warranty; (2) reasonable reliance thereon; and (3) a breach of 3 warranty which proximately caused plaintiff’s injury.” Minkler v. Apple, Inc., 65 F. Supp. 3d 4 810, 817 (N.D. Cal. 2014). “A plaintiff must also plead that he or she provided the defendant 5 with pre-suit notice of the breach.” Id. (citing Cal. Com. Code § 2607). 6 Here, although the Court has found that Plaintiff adequately alleges ARI made affirmative 7 misrepresentations in allowing FedEx vehicles to be remarketed and sold utilizing inaccurate 8 mileage numbers, the SAC does not set forth the exact terms of any warranty. Further, Plaintiff 9 does not provide any case law in support of the contention that the exact terms are not needed at 10 the pleading stage, nor can the Court find any such case law. Accordingly, because the first 11 element is not met, ARI’s motion to dismiss Claim Six is GRANTED with leave to amend. 12 viii. Claim Seven: Breach of Implied Warranty of Merchantability 13 ARI argues that Plaintiff fails to specify the statute under which it brings this claim in 14 violation of Rule 8. (ECF No. 112-1 at 21 (citing T&M Solar and Air Conditioning, Inc. v. 15 Lennox Int’l, Inc., 83 F. Supp. 3d 855, 874 n.6 (N.D. Cal 2015)).) ARI further argues Plaintiff 16 has not adequately pleaded that the commercial vehicles it purchased had the “fundamental 17 defect” of failing to “provide[] for a minimum level of quality.” (Id.) In opposition, Plaintiff 18 asserts that in the case cited by ARI, the district court “construed an implied warranty of 19 merchantability claim as arising under the Commercial Code despite no allegations of a specific 20 statute.” (ECF No. 115 at 21 (citing T&M Solar, 83 F. Supp. 3d at 874 n.6).) Plaintiff further 21 asserts that it has adequately pleaded facts based on FedEx and ARI’s concealment of odometer 22 alterations and it “need only allege facts showing that the vehicles would not ‘pass without 23 objection in the trade under the contract’ or are not ‘adequately . . . labeled as the agreement may 24 require’ or do not ‘[c]onform to the promises or affirmations of fact made on the . . . label, if 25 any.’” (Id. at 22 (emphasis removed).) In reply, ARI maintains that the footnote in T&M Solar 26 states that “‘[t]he lack of clarity about under what law [p]laintiffs bring their breach of warranty 27 claims is . . . problematic,’ as implied warranty claims brought under different statues have 28 different elements that must be pleaded.” (ECF No. 120 at 12 (citing T&M Solar, 83 F. Supp. 3d 1 at 874 n.6.) 2 “The implied warranty of merchantability does not impose a general requirement that 3 goods precisely fulfill the expectation of the buyer. Instead, it provides for a minimum level of 4 quality.” T&M Solar, 83 F. Supp. 3d at 878 (internal quotation marks and citation omitted). To 5 state this claim, a plaintiff must allege “a fundamental defect that renders the product unfit for its 6 ordinary purpose” and “[s]uch fitness is shown if the product is in safe condition and substantially 7 free of defects[.]” Id. (internal citations omitted). 8 Here, Plaintiff is correct that when the relevant statute under which the breach of warranty 9 claim is brought is not stated, “courts tend to read warranty claims as arising under the California 10 Commercial Code instead” and the T&M Solar court construed the plaintiffs’ claims (which 11 included an implied warranty of merchantability claim) as arising under California Commercial 12 Code § 2314. Id. at 874 n.6–7. This Court therefore also construes Plaintiff’s implied warranty 13 of merchantability claim as arising under California Commercial Code § 2314. The Court finds 14 that Plaintiff adequately alleges the FedEx vans it purchased are not “substantially free of 15 defects,” as Plaintiff alleges that they had incorrect odometer readings, gasoline trucks were 16 delivered in place of diesel trucks and vice versa, non-air-conditioned vans were sold as having 17 air conditioners, and inoperable vehicles were sold as drivable. (ECF No. 104 at 10–18.) 18 Accordingly, Plaintiff adequately states a claim for breach of an implied warranty of 19 merchantability and ARI’s motion to dismiss Claim Seven is DENIED. 20 ix. Claim Eight: Violation of the UCL 21 ARI argues Plaintiff “does not expressly premise its purported claim under the UCL on 22 any particular violation of law, public policy, or allegation of fraudulent conduct,” which does not 23 put ARI on notice of what conduct has allegedly violated the UCL. (ECF No. 112-1 at 22.) In 24 opposition, Plaintiff contends its UCL claim is adequately pleaded because it sets forth “in rote 25 detail” its claims for odometer fraud and intentional misrepresentation. (ECF No. 115 at 12 n.2.) 26 In reply, ARI maintains its claim in the SAC incorporates the allegations from previous 27 paragraphs, which does not meet the Rule 9(b) pleading standard. (ECF No. 120 at 13.) 28 /// 1 The UCL’s unlawful prong “borrows violations of other laws and treats them as unlawful 2 practices that the [UCL] makes independently actionable.” Cel-Tech Commc’ns, Inc. v. L.A. 3 Cellular Telephone Co., 20 Cal. 4th 163, 180 (1999). Here, the Court has already found that 4 Plaintiff has sufficiently pleaded claims for intentional misrepresentation, negligent 5 misrepresentation, a violation of §§ 1962(c) and (d) of the RICO Act, and breach of implied 6 warranty of merchantability. The Court therefore finds Plaintiff’s UCL claim is properly 7 premised on those violations of law. Accordingly, ARI’s motion to dismiss Claim Eight is 8 DENIED. 9 x. Claim Nine: Violation of the Sherman Act 10 ARI argues Plaintiff does not establish with “any factual detail what the relevant market 11 is, its scope and contours, . . . what other goods or services have interchangeable uses[,] . . . or 12 why ARI actually has market power in the relevant market.” (ECF No. 112-1 at 23.) ARI further 13 argues that only individuals who possess standing are permitted to bring an action and Plaintiff 14 “does not plead any facts suggesting any harm to competition and instead focuses solely on the 15 harm to itself.” (Id.) ARI contends Plaintiff fails to allege an agreement but merely that ARI had 16 “significant sway over [a]uction [h]ouses” and fails to allege parallel conduct and merely alleges 17 “it was barred from utilizing ARI’s sale platforms and the various auction houses.” (Id. at 23–24 18 (citing ECF No. 104 ¶¶ 221, 225).) 19 In opposition, Plaintiff asserts ARI used its power to restrain trade and “[t]he SAC sets 20 forth the relevant market of the FedEx vehicles sold through the specific [a]uction [h]ouses . . . , 21 ARI’s position as the sole remarketer of used FedEx vehicles . . . , and ARI’s dominating market 22 power and the influence it wields over the [a]uction [h]ouses.” (ECF No. 115 at 22–23 (citing 23 ECF No. 104 ¶¶ 19, 28–36, 50–51).) Plaintiff contends there is an agreement to restrain trade, as 24 ARI admitted to informing auction houses of its decision to lock Plaintiff out of the market. (Id. 25 at 23 (citing ECF No. 104 ¶ 116).) Plaintiff finally maintains it has standing and is a consumer in 26 the alleged violator’s goods in the restrained market. (Id. at 23–24.) 27 To establish liability under § 1 of the Sherman Act, a plaintiff must establish: (1) the 28 existence of an agreement; (2) an intent to harm or unreasonably restrain trade; (3) which actually 1 injures competition; and (4) that plaintiff was harmed by the defendant’s anti-competitive 2 agreement. See Fed. Trade Comm’n v. Qualcomm, Inc., 969 F.3d 974, 988 (9th Cir. 2020) 3 (emphasis omitted); Brantley v. NBC Universal, Inc., 675 F.3d 1192, 1197 (9th Cir. 2012). With 4 respect to the third element, a § 1 plaintiff must “at a minimum, sketch the outline of [the injury 5 to competition] with allegations of supporting factual detail.” Brantley, 675 F.3d at 1198. “Such 6 allegations must ‘raise a reasonable expectation that discovery will reveal evidence of’ an injury 7 to competition.” Id. (citing Twombly, 550 U.S. at 556). A § 1 plaintiff must also “plead an injury 8 to competition beyond the impact on the [plaintiff itself].” Id. 9 Here, the Court need not address all of ARI’s arguments because it finds that Plaintiff fails 10 to adequately plead the third element of injury to competition. Plaintiff fails to set forth sufficient 11 facts to “sketch the outline of [the injury to competition]” in the vehicle resale market generally 12 and injury to other vehicle resellers other than itself. Plaintiff only states in conclusory fashion 13 that “[a]s a direct and proximate result of ARI’s illegal boycott and resulting restraint on trade 14 and competition, [Plaintiff] has been damaged.” (ECF No. 104 at 33.) This is not enough. 15 Accordingly, ARI’s motion to dismiss Claim Nine is GRANTED with leave to amend. 16 /// 17 /// 18 /// 19 /// 20 /// 21 /// 22 /// 23 /// 24 /// 25 /// 26 /// 27 /// 28 /// 1 IV. CONCLUSION 2 For the foregoing reasons, the Court hereby GRANTS FedEx’s Motion to Dismiss with 3 | leave to amend. (ECF No. 111.) The Court also hereby GRANTS in part and DENIES in part 4 | ARI’s Motion to Dismiss (ECF No. 112) as follows: 5 1. ARI’s motion is DENIED as to Claims Two, Three, Four (the counts alleging a 6 violation of 18 U.S.C. §§ 1962(c) and (d)), and Seven; and 7 2. ARI’s motion is GRANTED as to Claims Four (the count alleging a violation of 8 18 U.S.C. § 1962(a)), Five, Six, Eight, and Nine with leave to amend. 9 Plaintiff may file an amended complaint not later than thirty (30) days from the date of 10 || electronic filing of this Order. Defendants’ responsive pleading is due twenty-one (21) days after 11 | Plaintiff files an amended complaint. 12 IT IS SO ORDERED. 13 | DATED: March 24, 2022 4 /) 1S “ \/ Lu 16 ae" ZA S Troy L. Nunley> } 17 United States District Judge 18 19 20 21 22 23 24 25 26 27 28 20