MOLLOY, Senior District Judge:
The focus of this case is whether Ford Motor Company sold the plaintiffs a pig in the poke
The plaintiffs, Margie Daniel, Mary Hauser, Donna Glass, and Andrea Duarte
Plaintiffs allege that the Focus has a rear suspension "alignment/geometry" defect that leads to premature tire wear, which in turn leads to safety hazards such as decreased control in handling, steering, stability, and braking, the threat of catastrophic tire failure, and drifting while driving on wet or snow-covered roads. Ford allegedly knew or should have known about the defect through pre-release testing data, consumer complaints to Ford dealerships, testing conducted in response to those complaints, aggregate data from Ford's dealerships, and from other internal sources. Plaintiffs allege Ford had a duty to disclose the defect but failed to do so at the time of sale. Plaintiffs further allege that, had they known about the defect, they would not have purchased the Focus.
Plaintiffs instituted this putative class action against Ford on November 2, 2011, asserting five claims: (1) violation of California's Consumers Legal Remedies Act, Cal. Civ.Code §§ 1750-1784; (2) violation of California's Unfair Competition Law, Cal. Bus. & Prof.Code §§ 17200-17210; (3) breach of implied warranty under California's Song-Beverly Consumer Warranty Act, Cal. Civ.Code §§ 1790-1795.8; (4) breach of warranty under the Magnuson-Moss Warranty Act, 15 U.S.C. §§ 2301-2312; and (5) breach of express warranty under Cal. Com.Code § 2313.
After Plaintiffs moved to certify a class defined as "[a]ll individuals who purchased or leased any 2005 through 2011 Ford Focus vehicle in California and who currently reside in the United States," Ford moved for summary judgment. First, the district court granted summary judgment on Plaintiffs' Consumers Legal Remedies Act and Unfair Competition Law claims because the court concluded that Plaintiffs failed to show reliance. Second, the district court granted summary judgment on the Song-Beverly Consumer Warranty Act claims of Plaintiffs Hauser, Glass, and Duarte because the court concluded that they failed to present evidence that their vehicles became unmerchantable within the duration of the implied warranty. Third, the district court granted summary judgment on the breach of express warranty claims of Plaintiffs Daniel and Duarte because the court concluded that the New Vehicle Limited Warranty did not cover the alleged design defect. Finally, the district court granted summary judgment on Plaintiffs' Magnuson-Moss Warranty Act claims because those claims depend on Plaintiffs' warranty claims. The district court also denied Plaintiffs' motion for class certification. In accordance with Federal Rule of Civil Procedure 54(b), the district court entered final judgment. Plaintiffs timely appealed.
We have jurisdiction pursuant to 28 U.S.C. § 1291. "We review orders granting summary judgment de novo." Clevo Co. v. Hecny Transp., Inc., 715 F.3d 1189, 1193 (9th Cir.2013). We apply "the same principles as the district court: whether, with the evidence viewed in the light most favorable to the non-moving party, there are no genuine issues of material fact, so that the moving party is entitled to a judgment as a matter of law." Id. (quoting Bamonte v. City of Mesa, 598 F.3d 1217, 1220 (9th Cir.2010)).
A. Breach of Implied Warranty under the Song-Beverly Consumer Warranty Act
Pursuant to the Song-Beverly Consumer Warranty Act, "every sale of consumer goods that are sold at retail in this state shall be accompanied by the manufacturer's and the retail seller's implied warranty that the goods are merchantable." Cal. Civ.Code § 1792. Pertinent to this appeal, the Act contains a one-year durational limitation:
Cal. Civ.Code § 1791.1(c) (emphasis added). Yet the California Court of Appeal held in Mexia v. Rinker Boat Co. that "[t]here is nothing that suggests a requirement that the purchaser discover and report to the seller a latent defect within that time period." 174 Cal.App.4th 1297, 95 Cal.Rptr.3d 285, 295 (2009) (emphasis added).
"We `must follow the decision of the intermediate appellate courts of the state unless there is convincing evidence that the highest court of the state would decide differently.'" In re Schwarzkopf, 626 F.3d 1032, 1038 (9th Cir.2010) (quoting Owen ex. rel Owen v. United States, 713 F.2d 1461, 1464 (9th Cir.1983)). Here, there is not convincing evidence that the California Supreme Court would decide the latent defect discovery issue that was presented in Mexia differently. The California Supreme Court denied the Mexia defendants' petition for review and denied a nonparty's request for "depublication" of the opinion. See Appellate Courts Case Information, The Judicial Branch of California, http://appellatecases.courtinfo.ca.gov/search/case/ disposition.cfm?dist=0&doc_id=1914874&doc_no=S174901 (last visited Oct. 28, 2015). No published California Court of Appeal opinion has addressed or rejected the Mexia holding. Two unpublished decisions reiterated the one-year duration set forth in § 1791.1, but neither cited Mexia. Balakian v. Mercedes-Benz USA, LLC, No. F060461, 2011 WL 6826723, at *7 n. 8 (Cal.Ct.App. Dec. 29, 2011) (unpublished); Larsen v. Nissan N. Am., Inc., No. A121838, 2009 WL 1766797, at *6 (Cal.Ct.App. June 23, 2009) (unpublished). The two unpublished decisions that have referenced the Mexia rule did so without disapproval. Clark v. BMW of N. Am., LLC, B248593, 2014 WL 3907922, at *6 (Cal.Ct.App. Aug. 12, 2014) (unpublished); Lugo v. Good Guys Auto Sales, Inc., D061620, 2013 WL 5411650, at
Ford argues that Mexia conflicts with the earlier decision in Atkinson v. Elk Corp. of Texas, 142 Cal.App.4th 212, 48 Cal.Rptr.3d 247 (2006). But Mexia and Atkinson are not in "plain conflict." Cf. Owen ex. rel Owen, 713 F.2d at 1465. In Atkinson, the pertinent issue was "what is the duration of implied warranty of merchantability under Magnuson-Moss," and the court concluded that § 1791.1 controls. 48 Cal.Rptr.3d at 257-59. The precise issue of whether § 1791.1 "create[s] a deadline for discovering latent defects," which was addressed in Mexia, 95 Cal.Rptr.3d at 288, was not at issue in Atkinson. Additionally, the Mexia court relied on Atkinson approvingly without noting any inconsistency, id. at 295 n. 10, and Mexia is consistent with an earlier case, Hicks v. Kaufman & Broad Home Corp., 89 Cal.App.4th 908, 107 Cal.Rptr.2d 761, 768 (2001) (holding that "proof of breach of warranty does not require proof the product has malfunctioned but only that it contains an inherent defect which is substantially certain to result in malfunction during the useful life of the product"). Further, the Mexia, decision is in line with "the policy repeatedly expressed by California courts of the need to construe the Song-Beverly Act so as to implement the legislative intent to expand consumer protection and remedies." Mexia, 95 Cal.Rptr.3d at 296.
Absent convincing evidence that the California Supreme Court would decide the issue in Mexia differently, its rule that § 1791.1 "does not create a deadline for discovering latent defects or for giving notice to the seller," 95 Cal.Rptr.3d at 288, must be followed. Accordingly, the district court's order granting summary judgment as to the Song-Beverly Consumer Warranty Act claims of Plaintiffs Hauser, Glass, and Duarte is reversed.
B. Breach of Express Warranty under the California Commercial Code
California Commercial Code § 2313 governs express warranties by the seller. Ford provided Plaintiffs a New Vehicle Limited Warranty with the purchase of their Focuses. The express warranty states:
Ford relies on the first paragraph to argue that the warranty only guarantees against manufacturing defects. Plaintiffs rely on the second paragraph to argue that the defects that are guaranteed against include design defects.
"In relation to express warranties, the rules for interpreting them do not differ from those applied to other contracts." Miller v. Germain Seed & Plant Co., 222 P. 817, 193 Cal. 62, 222 P. 817, 829 (1924) (Seawell, J., dissenting) (internal quotation marks omitted). Where a contract provision is "clear and unambiguous," it is "not subject to questions of construction or interpretation." Neal v. State Farm Ins. Cos., 188 Cal.App.2d 690, 10 Cal.Rptr. 781, 783 (1961) (internal quotation marks omitted). "A . . . provision is ambiguous when it is capable of two or more constructions, both of which are reasonable." Producers Dairy Delivery Co. v. Sentry Ins. Co., 41 Cal.3d 903, 226 Cal.Rptr. 558, 718 P.2d 920, 924-25 (1986) (quoting Delgado v. Heritage Life Ins. Co., 157 Cal.App.3d 262, 203 Cal.Rptr. 672, 677 (1984)). "The rule that any ambiguities caused by the draftsman of the contract must be resolved against that party applies with peculiar force in the case of the contract of adhesion." Neal, 10 Cal.Rptr. at 784 (internal citations omitted). "Whether language in a contract is ambiguous is a question of law." Producers Dairy Delivery Co., 226 Cal.Rptr. 558, 718 P.2d at 925.
Ford argues that the "materials and workmanship" language in the first paragraph excludes guarantees against design defects. See Rice v. Sunbeam. Prods., Inc., No. CV 12-7923-CAS-(AJWx), 2013 WL 146270, at *12 (C.D.Cal. Jan. 7, 2013) (considering the phrase "free from defects in material and workmanship" in defendant's warranty); In re Toyota Motor Corp. Unintended Acceleration Mktg., Sales Practices, & Prods. Liab. Litig. (Toyota Motor Corp. Litig.), 754 F.Supp.2d 1145, 1177-78 (C.D.Cal.2010) (considering defendant's warranty language that stated, "This warranty covers repairs and adjustments needed to correct defects in material or workmanship of any part supplied by Toyota."); Brothers v. Hewlett-Packard Co., No. C-06-02254 RMW, 2007 WL, 485979, at *2 (N.D.Cal. Feb. 12, 2007) (considering language in defendant's warranty that stated, "HP warrants that the HP hardware product and all internal components of the product that you have purchased or leased from HP are free from defects in materials and workmanship under normal use during the Limited Warranty Period.").
However, unlike the warranties in the cases cited by Ford, Ford's express warranty is not simply a "materials and workmanship" warranty, as it references
Given the ambiguous terms of Ford's express warranty, the district court's order granting summary judgment as to the breach of express warranty claims of Plaintiffs Daniel and Duarte is reversed.
C. Consumers Legal Remedies Act and Unfair Competition Law
The Consumers Legal Remedies Act prohibits "unfair methods of competition and unfair or deceptive acts or practices undertaken by any person in a transaction intended to result or which results in the sale or lease of goods or services." Cal. Civ.Code § 1770(a). The Act proscribes "[r]epresenting that goods or services have . . . characteristics. . . uses, benefits, or quantities which they do not have," id. § 1770(a)(5), and "[r]epresenting that goods or services are of a particular standard, quality, or grade," id. § 1770(a)(7). The Unfair Competition Law proscribes "any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising." Cal. Bus. & Prof.Code § 17200. Fraudulent omissions are actionable under both consumer statutes. Klein v. Chevron U.S.A., Inc., 202 Cal.App.4th 1342, 137 Cal.Rptr.3d 293, 324-26 (2012).
An essential element for a fraudulent omission claim is actual reliance. Cohen v. DIRECTV, Inc., 101 Cal.App.4th 966, 101 Cal.Rptr.3d 37, 47-48 (2009) (Consumers Legal Remedies Act); In re Tobacco II Cases (Tobacco II), 46 Cal.4th 298, 93 Cal.Rptr.3d 559, 207 P.3d 20, 39 (2009) (Unfair Competition Law). To prove reliance on an omission, a plaintiff must show that the defendant's nondisclosure was an immediate cause of the plaintiff's injury-producing conduct. A plaintiff need not prove that the omission was the only cause or even the predominant cause, only that it was a substantial factor in his decision. Tobacco II, 93 Cal.Rptr.3d 559, 207 P.3d at 39. A plaintiff may do so by simply proving "that, had the omitted information been disclosed, one would have been aware of it and behaved differently." Mirkin v. Wasserman, 5 Cal.4th 1082, 23 Cal.Rptr.2d 101, 858 P.2d 568, 574 (1993).
That one would have behaved differently can be presumed, or at least inferred, when the omission is material. Tobacco II, 93 Cal.Rptr.3d 559, 207 P.3d at 39. An omission is material if a reasonable consumer "would attach importance to its existence or nonexistence in determining his choice of action in the transaction in question." Id. (quoting Engalla v. Permanente Med. Grp., Inc., 15 Cal.4th 951, 64 Cal.Rptr.2d 843, 938 P.2d 903, 919 (1997)). Alleged defects that create "unreasonable safety risks" are considered material. See Ehrlich v. BMW of N. Am., LLC, 801 F.Supp.2d 908, 917-19 (C.D.Cal. 2010) (windshield with high propensity to crack or chip); Falk v. Gen. Motors Corp., 496 F.Supp.2d 1088, 1095-96, 1096 n. *
Here, Plaintiffs have offered sufficient evidence to create a genuine issue of material fact as to the second sub-element of reliance—whether they would have behaved differently if Ford had disclosed the alleged defect. A reasonable fact finder could infer that a vehicle that experiences premature and more frequent tire wear would pose an unreasonable safety risk, such that it can be presumed that the nondisclosure of the safety risk impacted Plaintiffs' purchasing decision. Plaintiffs have put forth sufficient evidence, when viewed in a light most favorable to them, that the Focus experienced premature and more frequent tire wear, and that Ford circulated special service messages to its authorized dealerships informing them that "some 2005-2011 Focus vehicles may exhibit premature front/rear tire wear and/or a vehicle drift condition when driving on wet or snow packed roads." Plaintiffs' experts opined that worn tires can pose a safety hazard in terms of road and weather conditions and potential blowouts. Even Ford acknowledges that "it can be dangerous to let the tires on any vehicle become excessively worn before replacing them." Brief for Appellee at 25. Ford's evidence that routine monitoring of the tires would have prevented safety problems and that excessive tire wear is not uniquely attributable to the Focus does not conclusively rebut the presumption of reliance. See Engalla, 64 Cal.Rptr.2d 843, 938 P.2d at 919.
Whether Plaintiffs have created a genuine issue of material fact as to the first sub-element—that they would have been aware of a disclosure by Ford—is a closer question, but we ultimately conclude that they did. There are, of course, various ways in which a plaintiff can demonstrate that she would have been aware of a defect, had disclosure been made. Here, Plaintiffs chose to do so by showing that they would have been aware of the defect had Ford disclosed it to its dealerships. Ford presented evidence that conclusively establishes that Plaintiffs did not view any advertising materials produced by Ford prior to purchase.
Ford argues that Plaintiffs need to show more than that it was hypothetically possible for Ford to disseminate information through its dealerships. Ford suggests that Plaintiffs should be required to show that the dealerships were contractually obligated to pass on disclosures to consumers
Because Plaintiffs have raised a genuine issue of fact as to reliance, the district court's order granting summary judgment on their Consumers Legal Remedies Act and Unfair Competition Law claims is reversed.
D. Additional Issues Raised by Ford
Because the district court did not address duty to disclose, actual damages, statutorily-required notice, statute of limitations, equitable restitution, and sufficiency of the evidence of tire wear, we decline to do so on appeal. Peterson v. Boeing Co., 715 F.3d 276, 283 (9th Cir.2013) (declining to reach the "alternate, fact-intensive bases for affirming" when not first addressed by the district court).
E. Magnuson-Moss Warranty Act
Claims under the Magnuson-Moss Warranty Act "stand or fall with . . . express and implied warranty claims under state law." Clemens v. DaimlerChrysler Corp., 534 F.3d 1017, 1022 (9th Cir.2008). Because we reverse on Plaintiffs' implied and express warranty claims, the district court order granting summary judgment as to the Magnuson-Moss Warranty Act claims is also reversed.
We reverse the district court's summary judgment order and remand for further proceedings consistent with this opinion. In light of our reversal, we also instruct the district court to reconsider its denial of Plaintiffs' motion for class certification.