ORDER GRANTING MOTION TO DISMISS
PHYLLIS J. HAMILTON, District Judge.
Defendant's motion for an order dismissing the complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim came on for hearing before this court on August 20, 2014. Plaintiffs appeared by their counsel Richard Wirtz, and defendant Ford Motor Company ("Ford") appeared by its counsel Frank Kelly and Amir Nassihi. Having read the parties' papers and carefully considered their arguments, and the relevant legal authority, the court hereby GRANTS the motion as follows.
Plaintiffs Michael Durkee and Leslie Durkee allege that they experienced "consistent and substantial problems" with a 2005 Ford F-250 truck that Michael purchased for more than $60,000 from Ford of Marin. In 2012, they contacted Ford and demanded that it repair or replace the truck under the "Lemon Law" provisions of the Song-Beverly Consumer Warranty Act.
After reviewing the matter, Ford sent a letter offering either a replacement or a refund. The letter also stated that plaintiffs would be responsible for "missing equipment, abnormal wear or damages evident on [the] vehicle (i.e., worn tires, missing radio, cracked windshield)" and that "[a]ny missing equipment, abnormal wear, or damage must be corrected prior to completing of the reacquired vehicle transaction."
Plaintiffs selected the "Replacement Transaction" option, and indicated that the current mileage of the truck was 111795. However, after inspecting the vehicle and determining it had suffered "major body damage," Ford informed plaintiffs that they would be responsible for paying more than $10,000 for repairs before Ford would complete the transaction.
On February 10, 2014, plaintiffs filed the present complaint as a proposed class action, asserting causes of action under the Song-Beverly Act, California Civil Code § 1790, et seq.; the Unfair Competition Law (UCL), California Business & Professions Code § 17200; and the Consumer Legal Remedies Act (CLRA), California Civil Code § 1770, et seq. Ford now seeks an order dismissing the complaint for failure to state a claim.
A. Legal Standard
A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) tests for the legal sufficiency of the claims alleged in the complaint.
A complaint may be dismissed under Rule 12(b)(6) for failure to state a claim if the plaintiff fails to state a cognizable legal theory, or has not alleged sufficient facts to support a cognizable legal theory.
A motion to dismiss should be granted if the complaint does not proffer enough facts to state a claim for relief that is plausible on its face.
Although the court generally may not consider material outside the pleadings when resolving a motion to dismiss for failure to state a claim, the court may consider matters that are properly the subject of judicial notice.
Finally, in actions alleging fraud, "the circumstances constituting fraud or mistake shall be stated with particularity." Fed. R. Civ. P. 9(b). Under Rule 9(b), falsity must be pled with specificity, including an account of the "time, place, and specific content of the false representations as well as the identities of the parties to the misrepresentations."
B. Defendant's Motion
Ford asserts that the claims for equitable relief (UCL and CLRA claims) must be dismissed because plaintiffs have an adequate remedy at law; that the CLRA claim must be dismissed for the further reason that a transaction involving repurchase/replacement of a vehicle pursuant to a claim under the Song-Beverly Act does not fall under the CLRA; that the claims are barred by the litigation privilege; that the complaint fails to state a claim because it sounds in fraud but the claims are not pled with particularity as required by Rule 9(b); and that each of the causes of action fails to plead facts sufficient to state a claim.
1. Whether the UCL and CLRA claims should be dismissed.
Ford argues, first, that the UCL and the CLRA causes of action should be dismissed because those claims seek equitable relief, and plaintiff has an adequate remedy at law, under the Song-Beverly Act. The motion is GRANTED.
Apart from civil penalties, which are not at issue here, the UCL provides only equitable remedies.
Because the UCL provides for only equitable remedies, and plaintiffs have an adequate remedy at law for the alleged Song-Beverly Act violation, plaintiff's UCL claim must be dismissed.
Ford also seeks to dismiss the injunctive relief portion of the CLRA claim, on the same basis. The CLRA provides for damages, as a legal remedy intended to compensate those who suffer actual damage.
As a further basis for dismissing the CLRA claim, Ford asserts that plaintiffs fail to state a claim under the CLRA because none of the alleged conduct was undertaken as part of a sales "transaction" with a consumer. The CLRA proscribes 25 "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 to any consumer. . . ." Cal. Civ. Code § 1770(a). Ford argues that a vehicle repurchase or replacement transaction is not a "transaction" that was "intended to result," or which did "result[ ] in the sale or lease of goods or services" to a consumer, and thus is not covered by the CLRA. Plaintiffs do not respond to this argument in their opposition.
The motion is GRANTED. The transaction involving the repurchase/replacement of plaintiffs' truck does not fall under the CLRA, as it was not intended to result, and did not result, in the sale or lease of goods or services to a consumer. Moreover, a CLRA claim cannot be based on events following a sales transaction.
2. Whether the Song-Beverly Act claim is barred by the litigation privilege
Ford argues that the complaint must be dismissed because plaintiffs' claims are based on the protected activity of engaging in settlement discussions regarding threatened litigation. "A privileged publication is one made . . . [i]n any judicial proceeding. . . ." Cal. Civ. Code § 47(b). This provision applies not only to language used inside a courtroom, but also to statements made outside a courtroom and/or prior to anticipated litigation.
Here, Ford asserts, it made a settlement offer which plaintiffs claim was illegally low, and which they also allege concealed information about the operation and legal effect of the Song-Beverly Act. Ford contends that even if plaintiffs' allegations were true, the claims would still be barred by the litigation privilege, because Ford's statements were made in connection with litigation.
The court finds that the litigation privilege does not bar any claims related to Ford's offer to replace plaintiffs' vehicle, or to refund the purchase price. Plaintiffs believed that under the Song-Beverly Act, they were entitled to a buy-back of the truck; and they did in fact contact Ford to request such a buy-back. It appears from the allegations in the complaint that at the time Ford sent the letter, both sides agreed that either a buy-back or a replacement of the vehicle was appropriate — or at least, Ford did not seem to have rejected the concept. A pre-litigation communication is privileged only so long as it "relates to litigation that is contemplated in good faith and under serious consideration."
3. Whether the complaint states a claim for violation of the Song-Beverly Act
Ford argues that the Song-Beverly Act cause of action should be dismissed for failure to state a claim, and for failure to plead fraud with particularity. Ford makes three main arguments — that plaintiffs have not alleged facts sufficient to support the elements of a claim under the Song-Beverly Act, but have instead alleged only conclusory statements; that to the extent that plaintiffs are claiming that Ford's offer to replace the truck consisted of or included fraudulent misrepresentations or omissions, they have not pled with particularity as required by Rule 9(b), and have not alleged facts showing that they actually relied on such misrepresentations or omissions; and that plaintiffs' claim fails because it is based on an incorrect interpretation of the Song-Beverly Act.
First, Ford argues that plaintiffs have not alleged facts sufficient to support the elements of a claim under the Song-Beverly Act. To state a claim under the Song-Beverly Act, the plaintiff must allege (1) that the vehicle had a defect that was covered by an express warranty that substantially impaired its use, value or safety, (2) that plaintiff delivered the vehicle to defendant or its authorized repair facility for repair, (3) that defendant or its authorized repair facility failed to repair the vehicle to match the express warranty after a reasonable number of opportunities to do so, and (4) that defendant did not promptly replace or buy back the vehicle.
In the complaint, plaintiffs allege that they sought a repurchase or replacement "[a]fter consistent and substantial problems" with the truck, Cplt ¶ 11; that the truck was "delivered with serious defects and non-conformities [sic] to warranty and developed other serious defects and nonconformities to warranty[,] and that "[t]he defects and nonconformities manifested themselves within the applicable express warranty period [and] substantially impair the use, value and/or safety of the vehicle[ ];" Cplt ¶¶ 37-38; that plaintiffs "delivered the vehicle to Ford" to repair the nonconformities, Cplt ¶ 43; and that "a reasonable number of [repair] attempts" were made without success, Cplt ¶ 45.
However, Ford notes that plaintiffs do not say what the problems were, and do not plead any facts showing that the problems were "consistent" or "substantial." Nor, Ford asserts, have plaintiffs described the alleged nonconformities, or described the warranty period, or alleged how many repair attempts were made without success (or when), or stated what happened when they did take the truck in for repairs.
In opposition, plaintiffs contend that they have pled all of the elements necessary to state a claim under the Song-Beverly Act — (a) that the vehicle had a nonconformity covered by the express warranty, which substantially impaired the use, value, or safety of the vehicle; (b) that the vehicle was presented to an authorized representative of the manufacturer of the vehicle for repair; and (c) that the manufacturer or representative did not repair the nonconformity after a reasonable number of repair attempts.
Further, at the hearing, plaintiffs' counsel cited to ¶ 13 of the complaint, where plaintiffs allege that Ford "knows or should have known" that it violated the Song-Beverly Act when it
Cplt ¶ 13.
Plaintiffs assert that in addition to pleading facts that support the required elements, they have pled that, in lieu of complying with its duties under the Song-Beverly Act, Ford demanded that plaintiffs make more than $10,000 worth of repairs to the vehicle, and also attempted to charge for improper deductions and utilized an improper calculation of plaintiffs' "use" of the vehicle. Plaintiffs argue that these additional facts show willfulness — that Ford's failure to replace or refund was not the result of a good-faith belief that the Act did not apply.
The court finds, however, that plaintiffs have not pled facts sufficient to state a claim under the Song-Beverly Act. While it may be true that they have pled the necessary elements, the allegations are conclusory and merely repeat the language of the statute. The complaint alleges that plaintiffs sought replacement or repurchase after unidentified "consistent and substantial problems," but it is devoid of the necessary
Second, Ford contends that Ford argues that the complaint sounds in fraud, but that plaintiffs have failed to plead fraud with particularity as required by Rule 9(b). The elements of fraud, which give rise to an action for deceit under California law, are (a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (scienter); (c) intent to defraud (intent to induce reliance); (d) justifiable reliance; and (e) resulting damage.
The complaint occasionally refers to affirmative "representations," but no details are provided, except to the extent that plaintiffs are referring to the statements in the offer letter — that is, statements relating to what Ford was legally required to do in response to plaintiffs' claim for repair or replacement. However, plaintiffs fail to explain how anything in the letter (which does not mention the Song-Beverly Act) is false. Moreover, plaintiffs do not allege that they actually relied on anything in the letter, to their detriment, and do not allege any facts showing that any reliance on representations made by an opposing party was justifiable.
In opposition, plaintiffs assert that they are not suing for fraud, and thus, the heightened pleading standard of Rule 9(b) does not apply to any cause of action alleged in the complaint. It is true that plaintiffs do not specifically allege any fraudulent conduct in the Song-Beverly Act cause of action. They assert only that Ford "determined and acknowledged" that plaintiffs' vehicle was a "lemon" under the Song-Beverly Act standards, and that it nonetheless "failed to promptly offer a repurchase or replacement of [the] vehicle in accordance with the requirements of the [Act]." Cplt ¶ 46. They assert further that they are entitled to "all damages set forth in Song-Beverly including reimbursement of all down payments, [and] payments" and that "Ford was entitled to take a deduction only for that amount directly attributable to [p]laintiffs' use of the subject vehicle prior to the manifestation of the nonconformities." Cplt ¶¶ 47-48.
Nevertheless, in the "Summary and Operative Facts" section of the complaint, which is incorporated by reference into each cause of action, plaintiffs allege that Ford's Replacement/Repurchase letter "misrepresents (1) that a replacement vehicle is one that is of equal or greater value (the consumer having to pay the difference in a greater value) rather than the statutory requirement that a replacement vehicle be `substantial [sic] identical'" and that "(2) [the] consumer must pay for `vehicle upgrade' charges[;]" that Ford "does not inform consumers (3) how any mileage offset will be calculated and (4) of the fact that Ford is required by law to pay certain damages (pursuant to the Song-Beverly Act); e.g. incidental and consequential damages[;]" and that Ford "also states, as if it were a matter of law, that it is entitled to abnormal wear and tear on repurchased vehicles. In fact, the law specifically provides for no such deductions." Cplt ¶ 12.
In addition, in the CLRA cause of action, plaintiffs allege that Ford "made material misrepresentations and omitted material facts in its transactions with [p]laintiffs and class members regarding the replacement and/or restitution of vehicles under the Song-Beverly Act" and that Ford "knew that consumers would rely on its misrepresentations and omissions, including [p]laintiff and other class members . . . ." Cplt ¶¶ 66-67.
According to plaintiffs, those "misrepresentations" included "misrepresenting the nature and characteristics of replacement vehicles that Ford is required to provide under Song-Beverly;" placing "surcharges, taxes, upgrade fees and other charges on the replacement vehicles;" taking "improper mileage deductions for both replacement and repurchase transactions;" taking "deductions for what it terms `abnormal wear and tear' for both replacement and repurchase transactions;" and requiring consumers "to perform repairs in order to consummate a replacement or repurchase transaction." Cplt ¶ 69.
At the hearing, in response to the court's questions regarding the allegations in the CLRA cause of action regarding misrepresentations, plaintiff's counsel stated that the false statements or misrepresentations were contained in Ford's letter to plaintiffs, and related to statements concerning the law. Although it is not entirely clear, it appears that plaintiffs' position is that Ford misrepresented facts regarding the requirements of the Song-Beverly Act, and deceived customers into believing a false statement of the applicable law.
Finally, in the UCL cause of action, plaintiffs allege that Ford committed unlawful, unfair, and fraudulent business acts and practices, in both the violation of the Song-Beverly Act and the CLRA. Cplt ¶ 55. Plaintiffs assert that "Ford's acts and business practices are likely to and do deceive consumers as to their legal rights and Ford's obligations under Song-Beverly, and is [sic] likely to preclude consumers from exercising their legal rights[;]" and further, that "Ford's acts and practices involved material misrepresentations and omissions from which it may be presumed and inferred that class members relied on such misrepresentations and omissions." Cplt ¶¶ 57-58.
When a plaintiff "allege[s] a unified course of fraudulent conduct and rel[ies] entirely on that course of conduct as the basis of a claim . . . the claim is said to be `grounded in fraud' or to `sound in fraud,' and the pleading of that claim as a whole must satisfy the particularity requirement of Rule 9(b)."
Here, even though the Song-Beverly Act cause of action, taken alone, may not clearly allege fraudulent conduct, the remainder of the complaint is plainly grounded in fraud, but does not plead fraud with particularity. The court has dismissed the UCL and CLRA causes of action, but in amending the complaint, plaintiffs must choose between deleting all references to misrepresentations or fraudulent omissions, or pleading the alleged misrepresentations/omissions with particularity, as required by Rule 9(b). To the extent that plaintiffs allege fraud by omission, they must plead facts showing that Ford had a duty to disclose what plaintiffs claim was withheld.
In general, misrepresentations of the law are not actionable as fraud, because statements of the law are considered opinions and may not be relied upon,
Third, Ford argues that plaintiffs' claim fails because it is based on an incorrect interpretation of the Song-Beverly Act. Ford contends that plaintiffs seem to assume that Ford was required to accept their "Lemon" claim at face value, and that the claim itself was enough to establish an obligation on Ford's part. Ford asserts, however, that a consumer is not entitled to anything under the Song-Beverly Act unless the legal requirements are met.
To the extent the Song-Beverly Act cause of action is premised on the allegation that Ford's "settlement offer" violated the Act, Ford asserts that its conduct would have complied with the statute even if the vehicle had been adjudicated to have been a lemon. Plaintiffs' position is that it was unlawful for Ford to condition its offer to repurchase or replace plaintiffs' truck on their repair of or payment for damage to their vehicle, but Ford argues that the Song-Beverly Act does not prohibit such a practice.
Rather, Ford asserts, common law principles of law and equity apply to claims under the Song-Beverly Act, including rules regulating the equitable right to offset. Ford argues that if this principle were not applied, a consumer could return significantly damaged or vandalized vehicles and obtain disproportionate recoveries — as plaintiffs have attempted to do here. Ford contends that in alleging that the Song-Beverly Act precludes any requirement that the consumer pay a setoff for damage for which the consumer is justly responsible, plaintiffs have misinterpreted the Act.
Here, Ford contends, plaintiffs' truck was so heavily damaged that it needed an "entire new body." A portion of the vehicle's structure — the tailgate — was missing, and essentially every part of the vehicle was damaged. Ford argues that under
In opposition, plaintiffs argue that their complaint is not based on an incorrect reading of the Song-Beverly Act, as the statute does not define what cannot be deducted, but rather only what
Because the Song-Beverly Act claim is so deficiently pled, the court takes no position on whether plaintiffs' claim is based on an incorrect interpretation of the Act. The court notes, however, that the list of eight "acts" that plaintiffs claim violated the Song-Beverly Act,
The motion to dismiss the Song-Beverly Act is GRANTED. The dismissal is with leave to amend. In amending this cause of action, plaintiffs must provide supporting facts sufficient to state a claim that is plausible on its face, as required by Rule 8(a), in accordance with
In accordance with the foregoing, Ford's motion to dismiss is GRANTED. Because the court finds that no amendment can cure the deficiencies in the UCL and CLRA claims, those causes of action are dismissed WITH PREJUDICE. The Song-Beverly Act cause of action is dismissed WITH LEAVE TO AMEND. Any amended complaint must be filed no later than September 30, 2014. No new parties or claims may be added without stipulation of the parties or leave of court.