Yeager v. Ford Motor Company ( 2020 )

1 2 3 4 5 6 UNITED STATES DISTRICT COURT 7 NORTHERN DISTRICT OF CALIFORNIA 8 9 10 ROBERT YEAGER, 11 Plaintiff, No. C 19-06750 WHA 12 v. 13 FORD MOTOR COMPANY; GOSCH ORDER REMANDING ACTION FORD TEMECULA; and DOES 1 TO STATE COURT 14 through 10, inclusive, 15 Defendants. 16 17 INTRODUCTION 18 This is an automobile “Lemon Law” case brought under California law. Defendants 19 removed. Plaintiff seeks remand. The crux is whether an in-state defendant was fraudulently 20 joined. Finding recovery against the in-state defendant is possible, the motion to remand is 21 GRANTED. 22 STATEMENT 23 Plaintiff purchased a Ford F-250 pickup truck in May 2014 from defendant Gosch Ford 24 Temecula. The truck came covered by a three-year/36,000-mile express bumper-to-bumper 25 warranty and a five-year/60,000-mile powertrain warranty (First Amd. Compl. ¶ 8). 26 During the warranty period, multiple defects developed. In June 2014, plaintiff brought 27 the truck to Gosch over excessive wobble while driving. Gosch’s technicians measured the 1 He returned less than a month later with an illuminated check-engine light. Gosch 2 technicians ran diagnostic tests, including a scan for fault codes that indicated an exhaust-gas- 3 temperature sensor failure. Using the repair procedure outlined in a Ford technical service 4 bulletin, a technician replaced the sensor. During the visit, plaintiff repeated his excessive 5 wobble concerns (id. at ¶ 15). 6 During a routine maintenance visit in October 2014, Gosch replaced “exhaust emission 7 control” parts, according to records from the visit. No further notes were made (id. ¶ 16). 8 Five months later, plaintiff brought the truck in over excessive wobble for the third time. 9 On this visit, Gosch technicians identified the wobble issue as a repeat concern, contacted 10 Ford’s technical hotline, and replaced the truck’s tires (id. ¶ 17). 11 A month later, still within a year of purchase, the engine cranked, but failed to start. 12 Plaintiff towed his truck back to Gosch. The technicians ran diagnostic tests and determined 13 that the complete fuel system needed replacement. The technicians also reprogrammed the 14 power control module and programmed new fuel-injector related codes (id. ¶ 18). Gosch 15 represented that the truck had been repaired when plaintiff picked it up. 16 Plaintiff returned three more times. In April 2016, the primary radiator needed 17 replacement following a coolant leak. In January 2018, the check-engine light illuminated, the 18 camera ceased to work, and the coolant tanks needed flushing. In September 2018, the check- 19 engine light came back on and Gosh technicians performed further repairs involving the 20 exhaust system, as prescribed by a different technical service bulletin. Gosch continued to tell 21 plaintiff the issues were repaired (id. ¶ 19, 20, 21). 22 Later, however, plaintiff learned that a part installed in his truck, the Ford CP4 high- 23 pressure fuel-injection pump, suffered a common defect that leads to various problems, such as 24 deposits of metal shavings and debris in the fuel injection system, sudden engine failure, no 25 start, and rough running (id. ¶¶ 49, 65). When he learned of defendants’ wrongful conduct in 26 February 2019, plaintiff requested that defendants repurchase or replace the vehicle. 27 Defendants refused (id. ¶ 65). 1 On September 12, 2019, plaintiff filed this action in state court claiming various 2 violations of California’s Song-Beverly Consumer Warranty Act. Against Gosch, plaintiff 3 alleged only a breach of the implied warranty of merchantability under the Song-Beverly Act. 4 All defendants removed. Plaintiff filed the first amended complaint on November 18. 5 Plaintiff now moves for remand. This order follows full briefing, extended oral 6 argument, and supplemental briefing following the hearing (Dkt. Nos. 31, 32). 7 ANALYSIS 8 A defendant may remove a case to federal court under diversity jurisdiction if the parties 9 are diverse and the amount in controversy exceeds $75,000. 28 U.S.C. 1332, 1441. But, the 10 defendant bears the burden to prove the circumstances supporting removal jurisdiction. There 11 is a “strong presumption against removal jurisdiction” and all ambiguity is resolved in favor of 12 remand. Hunter v. Philip Morris USA, 582 F.3d 1039, 1042 (9th Cir. 2009). 13 Although complete diversity is required under Section 1332, district courts may ignore 14 the fraudulent joinder of nondiverse defendants in determining whether diversity jurisdiction 15 exists. There are two ways to establish fraudulent joinder: (1) actual fraud in the pleading of 16 jurisdictional facts, or (2) inability of the plaintiff to establish a cause of action against the non- 17 diverse party in state court. GranCare, LLC, v. Thrower, 889 F.3d 543, 548 (9th Cir. 2018). 18 The bar is high; a plaintiff’s inability to recover against the non-diverse party must be “obvious 19 according to the settled rules of the state.” Ritchey v. Upjohn Drug Co., 139 F.3d 1313, 1318 20 (9th Cir. 1998). “If there is a possibility that a state court would find that the complaint states a 21 cause of action against any of the resident defendants, the federal court must find that the 22 joinder was proper and remand the case to the state court.” Hunter, 582 F. 3d at 1046. And, a 23 “district court must consider . . . whether a deficiency in the complaint can possibly be cured 24 by granting plaintiff leave to amend.” GranCare, 889 F.3d at 550. 25 Defendants contend that plaintiff’s implied-warranty claim against Gosch is hopeless 26 because it is barred by the statute of limitations. Not so. 27 The Song-Beverly Consumer Warranty Act provides that “every sale of consumer goods 1 seller’s implied warranty that the goods are merchantable.” Cal. Civ. Code § 1792. The Act 2 does not have its own statute of limitations. Instead, Section 2725 of California’s Commercial 3 Code applies for all violations of the Act. Mexia v. Rinker Boat Co., Inc., 174 Cal. App. 4th 4 1297, 1305–06 (2009). Section 2725 provides: 5 (1) An action for breach of any contract for sale must be commenced within four years after the cause of action has accrued . 6 . . . 7 (2) A cause of action accrues when the breach occurs, regardless of the aggrieved party’s lack of knowledge of the breach. A breach 8 of warranty occurs when tender of delivery is made, except that where a warranty explicitly extends to future performance of the 9 goods and discovery of the breach must await the time of such performance the cause of action accrues when the breach is or 10 should have been discovered. 11 Unlike the Commercial Code, under which the implied warranty could be breached only 12 at the time of delivery, the Song-Beverly Act’s implied warranty is “coextensive in duration 13 with an express warranty which accompanies the consumer goods . . . but in no event shall 14 such implied warranty have a duration of . . . more than one year following the sale of new 15 consumer goods to a retail buyer.” Cal. Civ. Code § 1791.1(c). “[B]y giving the implied 16 warranty a limited prospective existence beyond the time of delivery, the Legislature created 17 the possibility that the implied warranty could be breached after delivery.” Mexia, 174 Cal. 18 App. 4th at 1309. 19 At oral argument, defense counsel agreed that the duration of the implied warranty here 20 was one year but insisted that the claim for relief still accrued at the time of purchase. Even if 21 counsel is wrong and plaintiff could tack on a year to the four-year limitations period, that is 22 insufficient. Plaintiff brought this action more than five years after purchase. 23 The issue is whether a purchaser can sue more than five years after the purchase on the 24 theory that a latent defect lurked within the vehicle not reasonably discoverable by him until 25 after the year ran such that the four-year limitations period began only upon discovery. 26 The answer is yes. The implied warranty of merchantability may be breached by a latent 27 defect undiscoverable at the time of sale. Mexia, 174 Cal. App. 4th 1297, 1304, 1308–10 1 Where a latent defect exists, the statute of limitations is tolled “until the plaintiff discovers, or 2 has reason to discover, the cause of action[.]” Fox v. Ethicon Endo-Surgery, Inc., 35 Cal.4th 3 797, 807 (2005). 4 Defendants claim plaintiff is wrong on the applicable law (Dkt. No. 20 at 7). In doing so, 5 defendants do not mention Mexia, let alone provide any California authority that disapproves 6 of Mexia. Defendants do address an earlier decision that also seemingly applied a delayed- 7 discovery theory to an implied warranty claim, Krieger v. Nick Alexander Imports, Inc., 8 234 Cal. App. 3d 205 (1991), but again, defendants fail to provide any California authority that 9 disapproves of or overrules Krieger. No such decision exists. Instead, defendants provide a 10 collection of district court decisions that conclude that Krieger was an outlier. These decisions 11 are all unavailing. The question, as our court of appeals has pointed out, is whether California 12 law — not federal courts’ interpretation of California law — obviously forecloses plaintiff’s 13 claim. See GranCare, 889 F.3d at 550. 14 Notably, our court of appeals reversed a district court decision granting summary 15 judgment because the district court declined to follow Mexia’s holding that latent defects may 16 breach the implied warranty even when the defects are not discovered within the implied 17 warranty’s duration. Daniel v. Ford Motor Co., 806 F.3d 1217, 1222–23 (9th Cir. 2015). In so 18 doing, Daniel expressly recognized the mixed treatment district courts have given Mexia. 19 Daniel concluded that “we must adhere to state court decisions — not federal court 20 decisions — as the authoritative interpretation of state law.” Id. at 1223. 21 So too here. 22 The one California decision defendants rely on to support their position is Cardinal 23 Health 301, Inc. v. Tyco Electronics Corp., 169 Cal. App. 4th 116 (2008). Cardinal Health 24 addressed the “future-performance exception” of Section 2725, which provides that an 25 implied-warranty claim may accrue upon discovery instead of delivery if the warranty in 26 question “explicitly extend[s] to future performance of the goods.” Comm. Code § 2725. The 27 dispute, importantly, arose in the context of a commercial sale. The Commercial Code, not the 1 by law, as defendants assert, they are limited by their statutory definition. The Commercial 2 Code does not write in a prospective existence for the implied warranty of merchantability that 3 it provides (Comm. Code § 2314), so, as Cardinal Health explains, an implied-warranty claim 4 under the Commercial Code accrues at the time of the sale. The Song-Beverly Act, in a 5 departure from the Commercial Code, writes in a prospective existence for implied warranties 6 governed by the Act, allowing for the claim to accrue later, upon discovery. Mexia, 174 Cal. 7 App. 4th at 1309. Mexia was decided after Cardinal Health and cites Cardinal Health without 8 disapproval. Defendants do not explain why Cardinal Health rather than Mexia applies here. 9 Defendants do not mention Mexia at all. The omission is telling. 10 When pressed on Mexia during oral argument, defense counsel decided to address 11 Krieger instead, never returning to Mexia. This order pauses to note that at the hearing, 12 supplementary briefing was ordered to address an unrelated issue. After quickly conceding the 13 issue in its brief, defendant decided to use the allotted pages to rehash its statute of limitations 14 argument. This time, however, for the first time ever, defendants cited Mexia. Nevertheless, it 15 was to no avail. Defendants cited Mexia to support their contention that “as a matter of law, 16 the ‘discovery rule’ does not apply to claims for breach of implied warranty” (Dkt. No. 32 17 at 2). To the contrary, “[t]he implied warranty of merchantability may be breached by a latent 18 defect undiscoverable at the time of sale.” Mexia, 174 Cal. App. 4th at 1304. 19 The binding California precedent here is Mexia: Plaintiff can sue more than five years 20 after the purchase on the theory that a latent defect lurked within the vehicle not reasonably 21 discoverable until after the year ran such that the four-year limitations period began only upon 22 discovery. The first amended complaint alleges that discovery was in or around 23 February 2019, because, among other reasons, Gosch represented that the repairs had fixed the 24 problems and plaintiff had relied on those representations (First Amd. Compl. ¶¶ 60, 65). 25 Defendants do not address these allegations and thus fail to meet their burden of showing 26 that California law obviously forecloses plaintiff’s claim against Gosch. This order need not 27 and does not reach plaintiff’s other tolling theories. The action must be remanded. Hunter, 1 In a last-ditch effort, defendants assert that even if this order finds that the dealership was 2 not fraudulently joined, the undersigned should exercise his discretion under Rule 21 to 3 dismiss the dealership anyway, in order to “preserve” or “perfect” federal jurisdiction, because 4 plaintiff can obtain complete relief from Ford (Dkt. No. 20 at 13-14). Ford’s only support for 5 this argument is a district court decision denying joinder of a new defendant after removal 6 where the proposed party would destroy complete diversity (Dkt. No. 20 at 14, citing 7 Keledjian v. Jabil Circuit, Inc., 2017 WL 3437652 (S.D. Cal. Aug. 10, 2017) Judge Michael 8 Anello)). The question here is whether removal was authorized, not whether the district judge 9 should tidy up the party alignment. If removal was improper — as it surely was — then 10 remand is compulsory and there is no occasion or jurisdiction to tidy up the pleadings on a 11 nunc pro tunc basis or any other basis. 12 CONCLUSION 5 13 For the foregoing reasons, plaintiff's motion to remand is GRANTED. This order does not 14 bless plaintiff's allegations or conclude that his claim against Gosch was timely brought. It 3 15 may well be that plaintiff should have discovered the breach earlier or even that California 16 courts will abandon Mexia. These decisions, however, are for a California state court to 3 17 decide. Defendants’ motions to dismiss (Dkt. Nos. 22, 23) are deemed as moot without 18 prejudice to renewal by way of demurrer on remand. The clerk shall please CLOSE THIS FILE. 19 The Court will retain jurisdiction to determine whether attorney’s fees should be awarded 20 after the forty-two other actions removed by Ford under similar circumstances and randomly 21 assigned within our district have run their course. 22 23 IT IS SO ORDERED. 24 25 Dated: January 8, 2020. 26 27 i A j iene LIAM ALSUP 28 UNITED STATES DISTRICT JUDGE