PRIORITY SEND - Class Actions Lawsuits

PRIORITY SENDUNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES -- GENERAL

Case No. EDCV 14-00700-VAP (DTBx) Date: February 20, 2015

Title: SHAUN SATER et al. -v- CHRYSLER GROUP LLC===============================================================PRESENT: HONORABLE VIRGINIA A. PHILLIPS, U.S. DISTRICT JUDGE

Marva Dillard None PresentCourtroom Deputy Court Reporter

ATTORNEYS PRESENT FORPLAINTIFFS:

ATTORNEYS PRESENT FORDEFENDANTS:

None None

PROCEEDINGS: MINUTE ORDER GRANTING IN PART AND DENYING INPART DEFENDANT'S MOTION TO DISMISS THE SECONDAMENDED COMPLAINT (IN CHAMBERS)

Some parts integral to the steering assembly on some Dodge Ram trucks soldby Defendant Chrysler Group LLC (or its predecessor) are allegedly defective, soPlaintiff Shaun Sater and four other current or former truck owners filed a putativeclass action pressing breach of warranty and consumer fraud claims. Plaintiffsamended their complaint twice, and Chrysler has filed a motion to dismiss theoperative pleading under Rule 12(b)(6). (Doc. No. 65.) After considering the paperstimely filed in support of and in opposition to the motion, the second amendedcomplaint and its exhibits, and the parties' arguments a the January 26, 2015hearing, the Court GRANTS the motion in part and DENIES the motion in part.

I. BACKGROUND

MINUTES FORM 11 Initials of Deputy Clerk _________CIVIL -- GEN Page 1

Case 5:14-cv-00700-VAP-DTB Document 75 Filed 02/20/15 Page 1 of 25 Page ID #:1645

EDCV 14-00700-VAP (DTBx)SHAUN SATER et al. v. CHRYSLER GROUP LLCMINUTE ORDER of February 20, 2015

A. Procedural HistoryPlaintiff Shaun Sater filed this case as a class action under the Class Action

Fairness Act, 28 U.S.C. § 1332(d)(2), in April 2014. Chrysler moved to dismiss thecomplaint under Rule 12(b)(6), but rather than oppose the motion Sater amendedthe complaint, as was his prerogative under Rule 15(a)(1)(B). Chrysler moved todismiss the first amended complaint, arguing (1) the Court lacked subject matterjurisdiction over the case because it was made prudentially moot by the ongoingrecall supervised by the National Highway Traffic Safety Administration ("NHTSA"),see Winzler v. Toyota Motor Sales U.S.A., Inc., 681 F.3d 1208 (10th Cir. 2012), and(2) even if the Court's subject matter jurisdiction extended over the controversy theFAC failed to state any claims upon which relief could be granted. (See Doc. Nos.26, 27.) The Court denied Chrysler's Rule 12(b)(1) motion and granted Sater leaveto amend his complaint again under Rule 15(a)(2), making moot Chrysler's Rule12(b)(6) motion. (See Doc. No. 60.)

Sater filed a second amended complaint in October 2014 ("SAC"; Doc. No.61.), which Chrysler moved to dismiss under Rule 12(b)(6), (see Doc. No. 65).

B. Factual Background1. The Trucks and the DefectsChrysler1 designs, manufactures, and sells Dodge Ram trucks. (SAC ¶ 24.)

Chrysler provides owners and lessees of the Trucks with a New Vehicle LimitedWarranty ("NVLW"), which states: "[the NVLW] covers the cost of all parts and laborneeded to repair any item on your vehicle when it left the manufacturing plant that isdefective in material, workmanship or factory preparation." (SAC ¶ 118; SAC Ex. 8at 7.) Plaintiffs complain that the "steering linkage systems" in certain Dodge Ramtrucks ("Trucks") suffer from design defects. (SAC ¶ 29.) In particular, the allegeddefects include faulty "tie rods"; "drag link inner joint[s]"; and loose "steering damper

1 Plaintiffs filed this suit against Chrysler, but they allege Chrysler hasassumed the liabilities of its predecessor entities. (See SAC. ¶¶ 4, 12.) The Courttakes as true, for purposes of this motion, Plaintiffs' claim that Chrysler bothassumed its forebear's liabilities, and that Old Chrysler's knowledge is imputed toDefendant (see SAC at 13 n.6).




brackets." (SAC ¶ 29.)

Each of these defects can affect a vehicle's steering, and the SAC claimsloose or faulty tie rods can "lead to a loss of steering control and potentially a fatalcar accident" or "excessive shimmy, or . . . a 'death wobble,' which is [a]. . . sometimes uncontrollable front end vibration . . . and can only be controlled bybringing the vehicle to a stop." (SAC ¶¶ 26, 27.) The SAC maintains the defects are"widespread and manifest without warning," and "cause[ ] a sudden loss of steeringcontrol, a vibrating and swaying of the [v]ehicles . . . and have even resulted inserious wrecks, including vehicle rollover, consumers crashing or being thrown intorivers, trees, ditches, fences, telephone poles and concrete barriers, as well asserious physical injuries." (SAC ¶¶ 31, 32.)

The SAC alleges Chrysler knew of the Trucks' defects as early as 2005, butreacted lazily to the pressing threat to road safety. (See generally SAC ¶¶ 36–44.) In particular, Chrysler fielded "hundreds" of consumer complaints implicating theallegedly defective parts on the Trucks, which it produced to NHTSA as part of theagency's initial investigation of some of the Trucks' safety. (See, e.g., SAC ¶¶ 37,39, 43.) The SAC further alleges Chrysler learned of the defects from additionalsources: safety-related complaints forwarded from NHTSA to Chrysler (SAC¶¶ 45–48); internet fora where disgruntled owners posted about their defectivetrucks (which Chrysler monitors) (SAC ¶¶ 49–52); and "pre-production testing, pre-production design failure mode and analysis data, production design failure modeand analysis data, early consumer complaints . . . , aggregate warranty data . . . ,testing and investigations conducted by Chrysler in response to consumercomplaints, and repair order and parts data . . . ." (SAC ¶ 55.)

Chrysler, allegedly, has undertaken no fewer than seven recalls to deal withthe steering linkage defects, but all the recalls have been "woefully deficient." (SAC¶¶ 56, 58.) Chrysler initiated the first recall in 2009, but the early recalls coveredonly a relatively small subset of the Trucks. (See SAC ¶¶ 59, 60, 62.) A secondgroup of recalls, labelled K28 (commenced in December 2010) and L16 (begun inSeptember 2011), expanded somewhat the scope of recall-eligible vehicles, butcustomers whose trucks were supposedly "repair[ed]" in these recalls filed a "litanyof complaints" because they "continued to experience tie rod failures." (SAC




¶¶ 65–67, 72, 75–76.)

Chrysler finally announced three much broader recalls (N49, N62, and N63) inNovember 2013, which included vehicles that had been repaired under previousrecalls. (SAC ¶¶ 77–82.) The problems persisted, however, and Chrysler haltedrecalls N49 and N62 in February 2014 because of "parts quality concerns." (SAC¶ 86.) Plaintiffs allege that as of April 2014 they "continue to wait for necessaryparts and have been left with dangerous Vehicles and no true fix in sight." (SAC¶ 88.)

The SAC maintains Chrysler knowingly concealed the defects from itscustomers, who were placed unnecessarily in harm's way. (See SAC ¶¶ 91, 92.) Further, Chrysler's recalls were intentionally underinclusive, meaning Chrysler knewthe steering-linkage problem was more widespread than it admitted. (See SAC¶¶ 93–97.) Finally, the SAC alleges Chrysler still has not come up with a solution forthe defective truck parts, so Trucks with the faulty tie rods are still out on the roadand their owners cannot get the parts replaced even if they want to. (SAC¶¶ 105–106.)

C. Legal Claims and Proposed ClassesThe SAC seeks to certify three separate classes of Dodge Ram truck owners

or lessees. The differences lie in each class's territorial scope and legal claimsasserted. The proposed nationwide class2 alleges negligence (theories of "failure to

2 The proposed nationwide class consists of:

All current or former purchasers and lessees in the United States of thefollowing Vehicles: 2008-2012 Dodge Ram 2500 4x4, 3500 4x4 and 3500 CabChassis 4x2 trucks, 2008 Dodge Ram 1500 Mega Cab 4x4 trucks, and 2008-2012 Dodge Ram 4500 4x4 and 5500 4x4 trucks; and 2004-2008 Dodge RAM2500 4x4 and 3500 4x4 trucks, 2007-2008 Dodge RAM 3500 4x2 Cab Chassistrucks and 2006-2008 Dodge Ram 1500 Mega Cab 4x4 trucks manufacturedJune 11, 2004 through February 13, 2008, that had a MOPAR service part

(continued...)




warn"; "failure to test"; and "negligent misrepresentation"); violations of theMagnuson-Moss Warranty Act ("MMWA"); and "unjust enrichment." The Californiasubclass3 asserts claims for breach of state law warranties (express and implied);violation of California's Song-Beverly Warranty Act (over breach of impliedwarranties of merchantability and fitness); violation of the California Consumer LegalRemedies Act ("CLRA"); and violation of California Business and Profession Code§ 17200 et seq. ("UCL"). The Texas subclass4 brings claims for violations of statelaw warranties (express and implied); and violation of the Texas Deceptive TradePractices Act ("TDTPA").

The claims can be roughly separated into two groups: breach of warranty andconsumer fraud. But the gist of this class action is Chrysler's allegedrepresentations to consumers that the Trucks would be "free from defects,"notwithstanding Chrysler's knowledge to the contrary. Chrysler has moved todismiss the SAC, arguing that not one of the eleven claims plausibly states a claimupon which relief can be granted. Plaintiffs oppose the motion.

II. LEGAL STANDARDA. Motions to Dismiss Under Rule 12(b)(6)

Federal Rule of Civil Procedure 12(b)(6) allows a party to bring a motion to

2(...continued)steering linkage installed.

(SAC ¶ 131.)3 "All current or former purchasers and lessees of one or more of the Vehicles

who resided in or purchased or leased their Vehicles in California (other than forpurposes of resale or distribution)." (SAC ¶ 132(a).)

4 "All current or former purchasers and lessees of one or more of the Vehicleswho resided in or purchased or leased their Vehicles in Texas (other than forpurposes of resale or distribution)." (SAC ¶ 132(b).)




dismiss for failure to state a claim upon which relief can be granted. Rule 12(b)(6) isread in conjunction with Rule 8(a), which requires only a short and plain statement ofthe claim showing that the pleader is entitled to relief. Fed. R. Civ. P. 8(a)(2); BellAtl. Corp. v. Twombly, 550 U.S. 544, 555 (2007); Conley v. Gibson, 355 U.S. 41, 47(1957). When evaluating a Rule 12(b)(6) motion, a court must accept all materialallegations in the complaint -- as well as any reasonable inferences to be drawn fromthem -- as true and construe them in the light most favorable to the non-movingparty. See Doe v. United States, 419 F.3d 1058, 1062 (9th Cir. 2005); Moyo v.Gomez, 32 F.3d 1382, 1384 (9th Cir. 1994).

To survive a motion to dismiss, a plaintiff must allege "sufficient factual matter. . . to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S.662, 678 (2009) (quoting Twombly, 550 U.S. at 570). "The plausibility standard isnot akin to a 'probability requirement,' but it asks for more than a sheer possibilitythat a defendant has acted unlawfully." Iqbal, 556 U.S. at 678 (quoting Twombly,550 U.S. at 556). The Ninth Circuit has clarified that (1) a complaint must "containsufficient allegations of underlying facts to give fair notice and to enable theopposing party to defend itself effectively," and (2) "the factual allegations that aretaken as true must plausibly suggest an entitlement to relief, such that it is not unfairto require the opposing the party to be subjected to the expense of discovery andcontinued litigation." Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011).

B. Heightened Pleading Standard Under Rule 9(b)A party alleging fraud must "state with particularity the circumstances

constituting fraud." Fed. R. Civ. P. 9(b). Rule 9(b) requires a plaintiff to make morespecific allegations so a defendant "can defend against the charge and not just denythat they have done anything wrong." Kearns v. Ford Motor Co., 567 F.3d 1120,1024 (9th Cir. 2009) (quoting Bly-Magee v. California, 236 F.3d 1014, 1019 (9th Cir2001)); see also Neubronner v. Milken, 6 F.3d 666, 671–72 (9th Cir. 1993).

The Court addresses more fully below which claims must comply with Rule9(b)'s standard.

III. DISCUSSION




Chrysler's motion asserts various discrete arguments. For simplicity's sake,the Court addresses Chrysler's contentions in the order its motion raises them,unless one ground disposes of a particular count of the SAC.

For the reasons described below, the Court grants the motion to dismissPlaintiffs' express warranty claims; grants in part and denies in part the motionregarding their implied warranty claims (and derivatively, their Magnuson-Moss Actclaims); denies the motion to dismiss the SAC's Song-Beverly Consumer WarrantyAct claims; denies Chrysler's motion to dismiss Plaintiffs' consumer fraud andnegligent misrepresentation claims; denies the motion to dismiss the negligenceclaims based on the economic loss rule; and grants the motion to dismiss Plaintiffs'final claim for "unjust enrichment."

A. Express Warranty ClaimsThe SAC alleges Chrysler expressly warranted, in writing and orally, that the

Trucks were "free from defects in material and workmanship," but the Trucks "failedto comply with the express warranties because they suffered from inherent Defects,that . . . rendered the Vehicles unfit for their intended use and purpose." (SAC¶¶ 165, 167.) In particular, the SAC alleges two different express warranties: (1) theNVLW, and (2) representations made by Chrysler, usually on its webpage, to theeffect that its vehicles were safe and reliable. (SAC ¶¶ 164, 165.)

1. Express Written Warranty (the NVLW)a. The NVLW Does Not Extend to Design Defects

Chrysler provides purchasers and lessees of the Trucks with the NVLW, whichstates: "[the NVLW] covers the cost of all parts and labor needed to repair any itemon your vehicle when it left the manufacturing plant that is defective in material,workmanship or factory preparation." (SAC ¶ 118; SAC Ex. 8 at 7) (emphasisadded.) Chrysler makes two related arguments to dismiss the SAC's expresswarranty claims based on the NVLW. Both essentially contend that the NVLW, byits terms, simply does not extend to design defects, the SAC has only alleged designdefects, so the NVLW could not have been breached based on the SAC's factualassertions.

The Court agrees that the NVLW does not warrant against design defects, and




thus could not have been breached by the Trucks' allegedly defective parts. Othercourts have read similar express warranties in like fashion See, e.g., Gertz v.Toyota Motor Corp., No. CV 10–1089–PSG (VBKx), 2011 WL 3681647, at *3 (C.D.Cal. Aug. 22, 2011) ("[B]ecause the terms of [the defendant's express warranty] donot extend to design defects, Plaintiffs fail to state a claim for breach of expresswarranty."); Cali v. Chrysler Group LLC, No. 10 Civ. 7606 (JSR), 2011 WL 383952,at *2 (S.D.N.Y. Jan. 18, 2011).

Plaintiffs maintain they have alleged manufacturing defects, and quote theSAC: the Trucks "suffered from inherent design and/or manufacturing defects," andthe Trucks were "not free from defects in material and workmanship." (SAC ¶¶ 165,178.) The substance of the 90-page, 247-paragraph SAC, however, belies theseoffhand references to manufacturing defects. For example, the SAC states Chryslerhad knowledge of the problems from "pre-production design failure mode andanalysis data" (SAC ¶ 55); alleges Chrysler has completely redesigned newermodels to fix the steering linkage defects (SAC ¶¶ 128–130); and defines the classas all purchasers or lessees of the Trucks -- indicating the trucks were built in themanner Chrysler intended (but the intended manner was faulty), which in turn meansthis case is about a design defect not a manufacturing one. See McCabe v. Am.Honda Motor Co., 100 Cal. App. 4th 1111, 1120–21 (2002) ("[A manufacturing]defect is often demonstrated by showing the product performed differently from otherostensibly identical units of the same product line. . . . A design defect, in contrast,exists when the product is built in accordance with its intended specifications, but thedesign itself is inherently defective."). The SAC makes




consistent and specific allegations of a uniform design defect; Plaintiffs' argumentthat this lawsuit is actually about the Trucks' "factory preparation" lacks facial plausibility.5

The NVLW does not warrant against design defects, which is what the SAChas alleged. Accordingly, Plaintiffs' express warranty claims, to the extent they arebased on the NVLW, are dismissed.

2. Express Oral WarrantyThe SAC alleges that various safety-related statements made on Chrysler's

website amount to express warranties. Chrysler points out that the NVLW disclaimsall other express warranties, so any statements made by Chrysler through itswebsite or otherwise would have been excluded from the bargain between dealerand purchaser. (See SAC Ex. 8 at 6) (explaining in the NVLW's first provision: "[t]hewarranties contained in this booklet are the only express warranties [Chrysler]makes for your vehicle.") Plaintiffs argue that disclaimer does not bar their claim,because the warranty booklet is stashed in the Trucks' glove boxes and onlybecame available to a purchaser after the time of sale.

Even if Chrysler's safety-related statements6 on its website could amount to awarranty, the NVLW effectively disclaims them. In response to Plaintiffs' argumentthat the NVLW was "unavailable" to them before they purchased their Trucks,

5 Of course, Plaintiffs may plead in the alternative if they wish to allege bothdesign and manufacturing defects, see Fed. R. Civ. P. 8(a)(3). But stripping theSAC of all references to, or factual allegations that implicate, design defects (in thesense of McCabe, see above) leaves only sporadic and conclusory contentions ofdefects which would be covered by the NVLW's plain language.

6 See, e.g., SAC ¶ 114 (alleging Chrysler represented the Trucks were "safeand reliable" or that "Chrysler Group is committed to helping keep drivers andpassengers safe when riding in motor vehicles").




Chrysler highlights that the SAC alleges the very opposite. (See SAC ¶ 166) ("Inreliance upon these express warranties, Plaintiffs and the members of thesubclasses purchased or leased the Vehicles.")

The cases cited by Plaintiffs do not alter the outcome. For example, in Clark v.LG Elecs. U.S.A., Inc., No. 13–cv–485 JM (JMAx), 2013 WL 5816410, at *13 (S.D.Cal. Oct. 29, 2013), the court found a disclaimer of an implied warranty insufficientlyconspicuous where it was packed in a refrigerator box and "not provided to [plaintiff]until after her purchase of the refrigerator," and when the plaintiff later read thedisclaimers she was "surprised." Here, the SAC notably does not allege the NVLWwas not available to class members (a glove box is a convenient and obviouslocation to find a warranty booklet for a new truck, in contrast to having to open up acumbersome refrigerator box to get at fine print), and neither does it allege theNVLW's disclaimer upset any settled expectations about the terms of the sales ofthe Trucks.

The NVLW disclaims all other express warranties, and Plaintiffs allege theyrelied on the NVLW when purchasing the Trucks. Hence, the representations madeby Chrysler on its website and elsewhere were not part of any express warranty;Plaintiffs express warranty claims, to the extent they are premised on suchstatements, are dismissed without leave to amend.

B. Implied Warranty ClaimsAccording to the SAC, Chrysler was in the business of marketing, selling, and

distributing Trucks, and it impliedly warranted (through "statements, descriptions,and affirmations of fact") that its Trucks were of "merchantable quality . . . and werefree of material defects," but the Trucks "suffered from inherent design and/ormanufacturing defects" so Chrysler breached its implied warranty. (SAC ¶¶ 176,178.) Plaintiffs also contend they are in privity with Chrysler, and even if they are notsuch a lack of privity does not scuttle their implied warranty claims. (SAC ¶ 181.)

Chrysler's four-fold argument to dismiss the implied warranty claims maintains:(1) the NVLW excludes all other warranties (including implied ones); (2) two Plaintiffs




lack privity with Chrysler so "their implied warranty claims must be dismissed" underCalifornia law; (3) the statute of limitations bars the implied warranty claim of onenamed Plaintiff; and (4) Plaintiffs drove the Trucks for "tens of thousands of mileswithout incident" so the Trucks met a "minimum level of quality" which precludes abreach of the warranty of merchantability.

Before examining Chrysler's contentions, the Court calls attention to an issuethat bears on its analysis: California law provides two sources for implied warrantyclaims, the Song-Beverly Consumer Warranty Act ("SBA"), see Cal. Civ. Code§ 1790 et seq., and the California version of the Uniform Commercial Code, see Cal.Com. Code § 2314. Plaintiffs' implied warranty claim ("Count III" of the SAC) arisesunder California Civil Code § 1792,7 (see SAC ¶ 174), which is part of the SBA, notunder § 2314. The upshot is that these two provisions are worded differently, servedifferent purposes, and are controlled by different case law.

1. The SBA's Time and Duration Limits Do Not Preclude the Breach ofImplied Warranty Claims

Chrysler first argues that because the "vehicles performed without incidentthroughout the duration . . . of the implied warranty" Plaintiffs may not assert a claimfor its breach. Essentially, Chrysler thinks it cannot be liable for breach of impliedwarranty if the defects manifested outside the time limits of the warranty. Althoughsome courts disagree, California law recognizes that discovery of a latent defectoutside the statutory time limit of an implied warranty can amount to a breach, soChrysler's argument fails.

Under the SBA, the term of an implied warranty (either of merchantability or offitness) "shall be coextensive in duration with an express warranty whichaccompanies the consumer goods . . . but in no event shall such implied warrantyhave a duration of . . . more than one year following the sale of new consumer goodsto a retail buyer." Cal. Civ. Code. § 1791.1(c). A retail consumer may assert breach

7 A potential source of confusion is Count IV of the SAC, which is titled:"Violation of the Song-Beverly Warranty Act and Breach of Implied Warranty ofMerchantability." (SAC at 75.)




of implied warranty when a latent defect manifests outside the SBA's one-year limit,but the defect existed before the one-year limit elapsed. See Mexia v. Rinker BoatCo., 174 Cal. App. 4th 1297 (2009). Federal courts, however, disagree on the forceof Mexia's precedential value. Compare Grodzitsky v Am. Honda Motor Co., No.2:12–cv–1142–SVW (PLAx), 2013 WL 2631326, at *10–11 (C.D. Cal. June 12,2013) (finding reasons why Mexia is "contrary to established California caselaw,"and a latent defect's discovery outside the SBA's one-year limit does not breachan implied warranty), with Ehrlich v. BMW of N. Am., LLC, 801 F. Supp. 2d 908, 922(C.D. Cal. 2010) (following Mexia's rule and allowing an SBA implied warranty claim"so long as a latent defect existed within the one-year period," notwithstanding thedefect's untimely discovery).

A federal court sitting in diversity must "defer" to a state's appellate court'sinterpretation of the state's law unless "there is convincing evidence" that state'ssupreme court would "decide the matter differently." Cal. Pro-Life Council, Inc. v.Getman, 328 F.3d 1088, 1099 (9th Cir. 2003). The Court respectfully disagrees withthose cases that disregard Mexia's holding. Mexia carefully explored the text,structure, and policy of the SBA before reaching its result, and its interpretation ofthe SBA was central to that outcome (in other words, Mexia's reading of the SBA isnot dicta). See 174 Cal. App. 4th at 1303–05. What is more, the Court cannotlocate any California appellate court decision that has questioned the case -- mostcite Mexia's rule without hesitation. See, e.g., Brand v. Hyundai Motor Am., 226 Cal.App. 4th 1538, 1546 (2014). In sum, the Court is not convinced the Supreme Courtof California would interpret the SBA differently. That court likely would haveaddressed the issue by now if it so desired -- Mexia has been on the books for overfive years and deals with a heavily litigated issue. Plaintiffs have alleged the Trucks'defects, even if discovered outside the SBA's one-year limit on an implied warranty'sduration, existed at the time of purchase (that is, they were latent defects). UnderCalifornia law, that is enough to state a claim for breach of implied warranty.

Texas law, however, is different. Chrysler points to Deburro v. Apple, Inc., No.A–13–CA–784–SS, 2013 WL 5917665, at *6 (W.D. Tex. Oct. 31, 2013), whichexplains that a manufacturer's disclaimer of implied warranties was valid under




Texas law because it was both in writing and conspicuous. Plaintiffs answer that athree-year limitation on the implied warranty is unconscionable, but their supportderives from a district court case applying North Carolina law, which is not relevantto Texas law. The NVLW limits the duration of state law implied warranties to threeyears, and does so on its first page of substantive material. (See SAC Ex. 8 at 6.) Plaintiffs have not challenged the validity of the NVLW's disclaimer under Texas law,so the Court dismisses all Texas breach of implied warranty claims based onbreaches that allegedly occurred more than three years (or 36,000 miles) after thetime of sale, (see id. at 9).

Accordingly, Chrysler's motion to dismiss the California implied warrantyclaims is denied, but its motion to dismiss the Texas implied warranty claims isgranted to the extent the breaches occurred outside the NVLW's three-year or36,000-mile limitation.

2. The SBA Does Not Require PrivityChrysler next maintains that Plaintiffs may not assert an implied warranty claim

because they are not in privity of contract with Chrysler.

The SBA does not require privity to assert an implied warranty claim (either formerchantability or fitness).8 In relevant part, its text states:

Every sale of consumer goods that are sold at retail in [California] shall beaccompanied by the manufacturer's and the retail seller's implied warranty thatthe goods are merchantable. And [e]very sale of consumer goods that aresold at retail in [California] by a manufacturer who has reason to know at the

time of the retail sale that the goods are required for a particular purpose andthat buyer is relying on the manufacturer's skill . . . shall be accompanied bysuch manufacturer's implied warranty of fitness.

8 Plaintiffs' implied warranty claim arises under the SBA, not the CaliforniaCommercial Code.




Cal. Civ. Code §§ 1792, 1792.1. Other courts have recognized the text of the SBAmeans what it says and does not require privity for a plaintiff to assert an impliedwarranty claim. E.g., In re MyFord Touch Consumer Litig., —– F. Supp. 2d —– ,2014 WL 2451291, at *29–30 (N.D. Cal. May 30, 2014) ("For an implied warrantyclaim under the Song-Beverly Act, there is no privity requirement.").

Even if the SBA required privity between consumer and manufacturer, a well-established exception to that rule, which entitles intended third-party contractualbeneficiaries to assert their own breach of warranty claims, would permit Plaintiffs'claims.9 See In re Toyota Motor Corp. Unintended Acceleration Marketing, SalesPractices, and Prods. Liab. Litig., 754 F. Supp. 2d 1145, 1184 (2010) ("[W]here aplaintiff pleads that he or she is a third-party beneficiary to a contract . . . she mayassert a claim for the implied warranty's breach."). Here, like in the ToyotaAcceleration case, Plaintiffs allege they purchased their Trucks from dealers whoform part of Chrysler's network, (see SAC ¶¶ 4, 5, 152), so Plaintiffs are third-partybeneficiaries under § 1559 and dismissal of their implied warranty claims is notappropriate.

Chrysler's motion to dismiss Plaintiffs' breach of implied warranty claims basedon lack of privity is denied.

3. The Statute of Limitations Does Not Bar Plaintiff Sater's ImpliedWarranty Claim

Chrysler's next ground for dismissal asserts Plaintiff Sater's individual claim isuntimely because he bought his Truck in January 2010 but filed his claim in April

9 The third-party beneficiary exception arises by statute. See Cal. Civ. Code§ 1559 ("A contract, made expressly for the benefit of a third person, may beenforced by him at any time . . . ."). California courts read "expressly" to mean "thenegative of incidentally." See Gilbert Fin. Corp. v. Steelform Contracting Co., 82Cal. App. 3d 65, 70 (1978) (internal quotation marks omitted).




2014, exceeding the four-year statute of limitations for breach of warranty actions. Plaintiffs' response contends the statute of limitations on Sater's claim should beequitably tolled because Chrysler fraudulently concealed the defect from him.

In California, the statute of limitations for an implied warranty claim under theSBA is four years. See Cal. Com. Code § 2725(1); Krieger v. Nick AlexanderImports, Inc., 234 Cal. App. 3d 205, 218–19 (1991) (applying § 2725's limitationsperiod to SBA claims). Section 2725(2) explains a "cause of action accrues whenthe breach occurs, regardless of the aggrieved party's lack of knowledge," but§ 2725(4) codifies "the law on tolling of the statute of limitations." Sater's claimaccrued at the time of purchase, see MacDonald v. Ford Motor Co., —– F. Supp. 2d—– , 2014 WL 1340339, at *10–11 (N.D. Cal. Mar. 31, 2014) (holding impliedwarranty claim accrued at time of delivery, because plaintiff "allege[d] that the defectwas inherent, and existed at the time of sale"). Chrysler's fraudulent concealment ofthe defects, however, tolled the statute of limitations until Sater reasonably couldhave learned of the defects.

Fraudulent concealment tolls a statute of limitations when a plaintiff pleads "(a)the substantive elements of fraud, and (b) an excuse for late delivery of the facts." Investors Equity Life Holding Co. v. Schmidt, 195 Cal. App. 4th 1519, (2011). TheSAC specifically alleges facts that show Chrysler's fraudulent concealment.10 (SeeSAC ¶¶ 18–20.) In particular, it alleges Chrysler "intentionally kept Plaintiffs andother Class members ignorant of vital information essential to the pursuit of theirclaims," and that Chrysler "continued to manufacture, advertise, sell, lease, andwarrant" the Trucks without disclosing the defects. (SAC ¶ 18.)

Sater also had good reason to fail to discover the underlying breach. At thetime of his purchase, January 2010, Chrysler had already instituted some of itsrecalls, but those early recalls did not include the model of Sater's Truck (a "DodgeRam 2500"). It was wholly reasonable for Sater to think his Truck would be defect-

10 Plaintiff Sater has the burden to plead and prove equitable tolling under atheory of fraudulent concealment. See Investors Equity, 195 Cal. App. 4th at 1533.




free if Chrysler was recalling other Trucks but not his. The statute of limitations onSater's claim was tolled (at least) until his model Truck was recalled in September2011.

The limitations period on Sater's implied warranty claim was tolled until he hadreason to learn of the defects in his Truck, and he filed his claim within the four-yearwindow provided by the statute of limitations, so Chrysler's motion to dismiss Sater'simplied warranty claim is denied.

4. The Trucks Were Not of Merchantable QualityChrysler's last shot at dismissal argues it did not breach an implied warranty

because the Trucks were of merchantable quality because Plaintiffs were able todrive them for thousands of miles, despite their defects. A cursory survey of thecase law of what is or is not a merchantable good dispatches this argument.

In California, a merchantable good must "[p]ass without objection in the trade"and be "fit for the ordinary purposes for which such goods are used." Cal. Civ. Code§§ 1791.1(a)(1), (2). The ordinary purpose of a truck is to provide "safe, reliabletransportation." Am. Suzuki Motor Corp. v. Super. Ct., 37 Cal. App. 4th 1291, 1297(1995). A later case interpreting the SBA's implied warranty of merchantability hassaid a vehicle must be "in safe condition and substantially free from defects," andmust do more than "provide[ ] transportation from point A to point B." Isip v.Mercedes-Benz USA, LLC, 155 Cal. App. 4th 19, 27 (2007) ("[Defendant]'s attemptto define a vehicle as unfit only if it does not provide transportation is an unjustifieddilution of the implied warranty of merchantability.").

Courts have been hesitant to dismiss cases at the pleading stage which allegepotential safety risks caused by defective automotive parts -- choosing instead totreat a close question of merchantability as one for the fact-finder. See, e.g.,MyFord Touch, 2014 WL 2451291, at *27–28 (declining to dismiss class alleging adefective "infotainment" system due to potential safety risk); Cholakyan v. Mercedes-Benz USA, LLC, 796 F. Supp. 2d 1220, 1243–44 (C.D. Cal. 2011) (denying motionto dismiss implied warranty claim because vehicle's alleged water leak could "causeengine failure, suddenly and unexpectedly," creating safety concern).




Chrysler cites one Texas case addressing automobile defects, Gen'l MotorsCorp v. Brewer, 966 S.W.2d 56 (1998), which does not compel a different result forthe Texas class. In Brewer, a class tried to bring an implied warranty claim overautomatic seatbelts on certain vehicles which, allegedly, "were neither automatic norpassive" due to their poor design. Id. at 56–57. The Supreme Court of Texasexplained: "[a] product which performs its ordinary function adequately does notbreach the implied warranty of merchantability merely because it does not functionas well as the buyer would like, or even as well as it could." Id. at 57. In this case,however, Plaintiffs do not claim inconvenience, they allege vehicle-crippling defects.

The Court declines to hold, as a matter of law, that the Trucks aremerchantable under either California or Texas law. The SAC alleges drivers cansuddenly lose control of the Trucks because of their defective steering assemblies,rendering them useless or unsafe with little or no notice. Whether and to whatextent the latent defects rendered the Trucks unmerchantable is a question of factbetter left for a jury. Accordingly, Chrysler's motion to dismiss is denied to the extentit argues trucks with latent defects affecting steering are merchantable.

C. Magnuson-Moss Warranty Act ClaimsClaims under the Magnuson-Moss Warranty Act derive from state law warranty

claims. See 15 U.S.C. § 2310(d). Thus, Chrysler's motion to dismiss Plaintiffs'MMWA claims rises or falls with its motion to dismiss the express and impliedwarranty claims. Clemens v. DaimlerChrysler Corp., 534 F.3d 1017, 1022 & n.3 (9thCir. 2008) ("[T]his court's disposition of the state law warranty claims determines thedisposition of the Magnuson-Moss Act claims.").

Plaintiffs' MMWA claim is dismissed as well, but only to the extent the Courthas dismissed the express and implied warranty claims on which the MMWA claim ispredicated.

D. Song-Beverly Consumer Warranty Act ClaimsThe SAC's "Count IV" alleges Chrysler breached implied warranties of

merchantability and fitness within the meaning of various provisions of the SBA.




(SAC ¶¶ 184–192.) It is not clear to how this claim differs from the implied warrantyclaims asserted earlier in the SAC -- the SBA is (one of) California's laws controllingimplied warranties, and the SAC's "Count III" already asserts breach of impliedwarranties of merchantability and fitness under § 1792.

In any event, Chrysler reprises its argument that the Song-Beverly Act claimsare "time-barred," because that law limits the duration of implied warranties to "oneyear following the sale of new consumer goods to a retail buyer." The Court deniesChrysler's motion to dismiss the California class's Song-Beverly Act claims to thesame extent and for the same reasons as it already has in this order.

E. Consumer Fraud Claims (Cal. Civ. Code § 1750 et seq.; Cal. Bus. & Prof.Code § 17200 et seq.; Tex. Bus. & Com. Code § 17.46 et seq.) andNegligent Misrepresentation Claims Chrysler's motion next shifts its focus from warranty claims to consumer fraud

claims. Chrysler logically lumps these claims together because they all deal withChrysler's allegedly deceptive sales practices (for example, Chrysler knew about thedefects but made contrary representations about the Trucks to the purchasers, orknew its recalls were ineffective but did not alert consumers). Chrysler does notoffer any substantive challenges to these claims; instead it repeatedly points to Rule9(b). Plaintiffs respond that Rule 9(b) does not apply to all the claims in theconsumer fraud grouping, and even if it does the SAC is specific enough to allowChrysler to prepare an adequate answer to its allegations.

1. Which Pleading Standards ApplyThe Court first parses out which claims are actually subject to Rule 9(b). If any

of this subset of claims (CLRA, UCL, TDTPA, and negligent misrepresentation) neednot be pleaded with specificity, then Chrysler's argument fails as to those claimsbecause the Rule 9(b) argument is the only one Chrysler has put forth to challengethis section of the SAC.

All agree Plaintiffs' CLRA and UCL claims must meet Rule 9(b)'s standard.See Kearns v. Ford Motor Co., 567 F.3d 1120, 1125 (9th Cir. 2009) ("Rule 9(b)'sheightened pleading standards apply to claims for violations of the CLRA and UCL").




The TDTPA's pleading standard depends on whether fraud claims areintertwined with the TDTPA claims.11 See Kennard v. Indianapolis Life Ins. Co., 420F. Supp. 2d 601, 609 (N.D. Tex. 2006) ("Rule 9(b) should not be applied to[plaintiff's] DTPA" claim because non-fraud TDTPA claims must comply with Rule9(b) only when they are "so intertwined" with fraud averments). The SAC does notassert one TDTPA claim, it asserts nine of them. Four assert breach of warranty orcontractual unconscionability -- no fraud allegations intertwined with those. (SAC¶¶ 217(b), (c), (d), (e)) (asserting claims under Tex. Bus. & Com. Code § 17.50.) Paragraph 217(a) of the SAC, however, asserts claims for the use of "false,misleading, or deceptive acts or practices as defined in" five different subsections of§ 17.46(b), which track substantially the language in the CLRA. See, e.g.,§ 17.46(b)(5) (representing goods have characteristics which they do not have);§ 17.46(b)(7) (representing goods are of a particular standard when they areanother); § 17.46(b)(24) (failing to disclose material information concerning goodswhich was known at the time of transaction with intent to induce reliance). Accordingly, the TDTPA claims in the SAC's ¶ 217(a) must comply with Rule 9(b)because they allege misleading or deceptive trade practices which sound in fraud inmuch the same way as do claims under the CLRA or UCL.

Finally, courts do not subject allegations of negligent misrepresentation12 toRule 9(b)'s more exacting criteria because that tort relies on an objective standard ofreasonableness, unlike common law fraud which contains a scienter requirement,

11 The TDTPA, codified at Tex. Bus. & Com. Code § 17 et seq., is an omnibusconsumer protection statute with widely ranging provisions. Hence, the Courtcannot simply state Rule 9(b) does or does not apply; it must look at what underlyingviolations the SAC has alleged.

12 It is not clear which state's negligent misrepresentation law applies to thisclaim, which is asserted on behalf of the nationwide class. See Mazza v. Am.Honda Motor Co., Inc., 666 F.3d 581, 589–590 (9th Cir. 2012). Chrysler has onlyargued that Texas and California negligent misrepresentation claims are subject toheightened pleading, however, so the Court need not address the question toresolve Chrysler's motion.




and Rule 9(b) requires heightened specificity for allegations of fraud, not a lack ofdue care. Petersen v. Allstate Indem. Co., 281 F.R.D. 413, 417–18 (C.D. Cal. 2012)(discussing text of Rule 9(b) and contrasting elements of California tort of negligentmisrepresentation with fraud); Gen'l Elec. Capital Corp. v. Posey, 415 F.3d 391, 394& n.2 (5th Cir. 2005) (affirming district court's refusal to apply Rule 9(b) to negligentmisrepresentation claim because "[plaintiff] had not alleged any fraud claims"). Tothe extent later district court cases hold otherwise, e.g. Berry v. Indianapolis Life Ins.Co., 608 F. Supp. 2d 785, 799 (N.D. Tex. 2009), they do so because the negligentmisrepresentation claims arose out of the same factual allegations as other claimsfor fraud. See id. ("[W]hen the parties have not urged a separate focus on thenegligent misrepresentation claims, the Fifth Circuit has found negligentmisrepresentations [sic] claims subject to Rule 9(b)."). Here, the claims all arise outof the same facts, but there are no claims for fraud in this case. To be sure,Plaintiffs' deceptive trade practices claims may sound in fraud, but the Courtdeclines to stray from Rule 9(b)'s text to extend the Fifth Circuit's rule.13

Accordingly, Chrysler's motion to dismiss the TDTPA and negligentmisrepresentation claims is denied to the extent those claims are not governed byRule 9(b).

2. The SAC Contains Enough Specific Allegations to Allow Chrysler toProvide a Meaningful Answer and Plan its Defense.

Chrysler, invoking Rule 9(b), echoes the mantra that a plaintiff must state the"who, what, when, where, and how" of the fraudulent misconduct charged. Kearns,567 F.3d at 1125. The Court evaluates Plaintiffs' consumer fraud claims with thatstandard in mind, but also the purposes of Rule 9(b), which are to "providedefendants with adequate notice to allow them to defend the charge and deterplaintiffs from the filing of complaints as a pretext for the discovery of unknownwrongs"; to protect a defendant's reputation from the smear of fraud charges; and toprevent plaintiffs from "unilaterally imposing upon the court, the parties and society

13 For the reasons given below, even if the negligent misrepresentation claimswere subject to Rule 9(b) scrutiny, they would survive this motion to dismiss.




enormous social and economic costs absent some factual basis."14 Kearns, 567F.3d at 1152 (internal quotation marks and citation omitted).

This case is not a fishing expedition; even a cursory examination of the SACshows an extraordinarily detailed set of factual allegation about the Trucks' defectsand Chrysler's knowledge of and responses to those defects. (SAC ¶¶ 56–106.) And Chrysler has allegedly turned over to NHTSA numerous documents that showthe Trucks contain defective parts, (see SAC ¶¶ 36–43), so it is difficult to see howChrysler could argue, if the SAC's allegations are taken as true, that risk of reputational harm should shield it from (at least) the initial stages of discovery.

That leaves the final policy rationale underlying Rule 9(b) -- will Chrysler beable to defend itself intelligently based on the SAC's allegations. The SAC providesmore than enough detail for Chrysler to prepare its defense. The CLRA, at base,aims to prevent or punish unfair or deceptive trade practices (and the UCL andTDTPA operate similarly). See Cal. Civ. Code § 1770 (listing methods of unlawfulcompetition and deceptive acts). As Plaintiffs' opposition argues, "[a]t the heart ofthis case is Chrysler's failure to adequately disclose the Defects."15 (Doc. No. 66 at21.) The SAC has pleaded detailed facts purporting to show Chrysler's exclusiveknowledge of the defects, (SAC ¶¶ 36–55); Chrysler's or Chrysler's agents' failure to

14 Tracing the "who, what, when, where, how" standard back through the casesshows that standard was meant to provide a non-exhaustive list of possible facts aplaintiff could plead to satisfy Rule 9(b), rather than a list of requirements. SeeNeubronner v. Milken, 6 F.3d 666, 672 (9th Cir. 1993) (explaining that to satisfy Rule9(b), "[t]he complaint must specify such facts as the times, dates, places, benefitsreceived, and other details of the alleged fraudulent activity") (emphases added).

15 A failure to disclose or concealment can constitute actionable fraud when,among other things, "the defendant had exclusive knowledge of material facts notknown to the plaintiff [or] when the defendant actively conceals a material fact fromthe plaintiff." Falk v. Gen'l Motors Corp., 496 F. Supp. 2d 1088, 1094–95 (N.D. Cal.2007). In this case, Plaintiffs have alleged Chrysler's exclusive knowledge ofmaterial facts, and Chrysler's active concealment of material facts.




disclose those defects at the time of sale or its recalling fewer Trucks than it knewhad defective parts, (e.g., SAC ¶¶ 91–95); failing to alert owners or lesseesregarding the efficacy of the recalls, (SAC ¶ 58); and Plaintiffs' detrimental relianceon Chrysler's non-disclosures, (e.g., SAC ¶¶ 198). It is difficult to imagine whatmore Chrysler needs -- at the pleading stage -- to devise its defense to the claims forviolations of the relevant consumer protection statutes. See Cal. Civ. Code§ 1770(a)(7) (proscribing representations "that goods or services are of a particularstandard . . . if they are of another"); Tex. Bus. & Com. Code § 17.46(a)(7) (same). Cf. Cholakyan, 196 F. Supp. 2d at 1237–38; Ehrlich, 801 F. Supp. 2d at 918–19.

Chrysler's motion to dismiss the SAC's consumer fraud and negligentmisrepresentation claims for failure to comply with Rule 9(b) is denied.

F. The Economic Loss RuleChrysler contends Plaintiffs' negligence claims are barred by the economic

loss rule because the SAC only alleges damage to the Trucks. The result dependson which state's economic loss rule applies.

The economic loss rule (in one of its forms) bars tort claims that seek torecover only economic losses, that is, damage to a defective good caused by thedefect. Robinson Helicopter Co., Inc. v. Dana Corp., 34 Cal. 4th 979, 988 (2004)("The economic loss rule requires a purchaser to recover in contract for purelyeconomic loss due to disappointed expectations, unless he can demonstrate harmabove and beyond a broken contractual promise."). One nuance to the general ruleholds that a plaintiff may recover in tort for damage to property "other than theproduct itself," Jiminez v. Super. Ct., 29 Cal. 4th 473, 456 (2002), which leads to theproblem of "first determin[ing] what the product at issue is." Id. If the "product" inthis case is the Trucks, then the economic loss rule bars the negligence claims, but ifthe product is defined more narrowly as the defective steering assemblies then therule loses force due to the SAC's allegations of, among other injuries, increased tirewear.

In Jiminez, the California Supreme Court offered some guidance about how toapply the economic loss rule when a "defective product (e.g., a window) causes[damage] to other portions of a larger product (e.g., a house) into which the former




has been incorporated." Id. at 483. The tenor of Jiminez makes clear that thedefect in this case is the steering assembly, not the truck, and so the economic lossrule does not bar tort claims to the extent the SAC asserts them for personal injuryor property damage apart from the allegedly defective component parts. See alsoAas v. Super. Ct., 24 Cal. 4th 627, 641 (2000) (collecting cases where economicloss rule does not bar recovery in tort for damage to a larger product caused bydefective component part).

The rule, and the relevant exception, are worded the same in Texas, but Texascourts construe them differently. See Equistar Chems., L.P. v. Dresser-Rand Co.,240 S.W.3d 864, 867 (Tex. 2007) ("The [economic loss] rule does not preclude tortrecovery if a defective product causes physical harm to the ultimate user orconsumer or other property of the user or consumer in addition to causing damageto the product itself."). "Other property," under Texas law, does not include aproduct that contains a defective component part.16 See Sanitarios Lamosa, S.A. deC.V. v. DBHL, Inc., No. Civ.A H–04–22973, 2005 WL 2405923, at *6 (S.D. Tex.Sept. 29, 2005) (economic loss rule barred tort suit against toilet seller for damage totoilets caused by defective "ballcocks," which are component parts of toilets); AlcanAluminum Corp. v. BASF Corp., 133 F. Supp. 2d 482, 503–04 (N.D. Tex. 2001)("When a plaintiff purchases a machine as a whole from the defendant, withoutbargaining separately for individual components, injury to the machine as a wholecaused by a defective component is still economic loss."). A helpful summary of theTexas rule explains: "[e]conomic loss includes injury to the product that is itself thesubject of the contract." Alcan Aluminum, 133 F. Supp. 2d at 503. In this case, thesale of the Trucks (the contract at issue) covered the whole Truck, not the individualcomponent parts. Thus, the economic loss rule, as applied by Texas courts, bars

16 Texas's economic loss rule is less settled than California's, see Teague v.Norcold, Inc., 774 F. Supp. 2d 817, 820–21 (N.D. Tex. 2011) (economic loss rule didnot preclude recovery for fire damage to recreational vehicle caused by defectiverefrigerator within the RV, but did preclude recovery for the value of the refrigerator),but the weight of Texas authority indicates a far narrower exception to the rule forrecovery in tort for personal injury or damage to other property caused by adefective component part.




Plaintiffs' negligence claims. Accordingly, the Court denies Chrysler's motion to dismiss Plaintiffs'

negligence claims (under California law) because of the economic loss rule, butgrants the motion as it relates to negligence claims brought under Texas law.

G. "Unjust Enrichment" ClaimThe SAC alleges Chrysler has been "unjustly enriched" because of its

"collection of money from the sale of Vehicles and the avoidance of or refusal toincur expenses associated with repair of said defective Vehicles." (SAC ¶ 244.)

Chrysler correctly argues California and Texas do not recognize unjustenrichment as an independent cause of action.17 See Tae Hee Lee v. Toyota MotorSales, U.S.A., Inc., 992 F. Supp. 2d 962, 981 (C.D. Cal. 2014) (citing Jogani v.Super. Ct., 165 Cal. App. 4th 901, 911 (2008)); Hoffman v. L & M Arts, 774 F. Supp.2d 826, 848 n.18 (N.D. Tex. 2011) ("Unjust enrichment is not an independent causeof action under Texas law."). Even if an unjust enrichment cause of action underTexas law exists, it only operates in the absence of a contract, which is not the casehere. See Bancroft Life & Cas. ICC, Ltd. v. GRBR Ventures, L.P., 12 F. Supp. 3d980, 996 (S.D. Tex 2014) ("[W]hen a valid, express contract covers the subjectmatter of the parties' dispute, there can be no recovery under a quasi-contracttheory such as unjust enrichment.").

Neither Texas nor California recognize unjust enrichment as an independentcause of action, and in any event the SAC alleges the case is about the terms of acontract –- that is, the terms of the sales of the Trucks and the scope of Chrysler'salleged warranties. Accordingly, Plaintiffs' unjust enrichment claim is DISMISSEDWITHOUT LEAVE TO AMEND.

17 Some states might recognize unjust enrichment as a cause of action, butusually only if such claims do not rely on the same "factual predicates" as other tortor contract theories. See In re Ford Tailgate Litig., No. 11–CV–2953–RS, 2014 WL1007066 at *5 (N.D. Cal. Mar. 12, 2014).




IV. CONCLUSIONFor the foregoing reasons, Chrysler's motion to dismiss is granted in part and

denied in part.

IT IS SO ORDERED.



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