United States District Court, S.D. California
WILLIAM Q. HAYES, District Judge.
The matters before the Court are the Motion to Dismiss Plaintiff's First Amended Complaint (ECF No. 21) and the Motion to Strike Portions of Plaintiff's First Amended Complaint (ECF No. 22) filed by Defendants.
On July 26, 2013, Plaintiff Tania Zambrano commenced this action against Defendants CarMax Auto Superstores, LLC ("CarMax"), Capital One, N.A. ("Capital One"), and Safeco Insurance Company of America ("Safeco") by filing the Complaint in the Superior Court of California, County of San Diego. On September 10, 2013, Defendants removed the action to this Court. (ECF No. 1).
On September 16, 2013, Defendants filed a motion to dismiss. (ECF No. 5). On January 21, 2014, the Court granted Defendants' motion to dismiss and dismissed the Complaint in its entirety without prejudice. (ECF No. 12).
On May 9, 2014, Plaintiffs filed the First Amended Complaint ("FAC"), which is the operative pleading in this case. On May 22, 2014, Defendants filed the Motion to Dismiss Plaintiff's First Amended Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) (ECF No. 21), accompanied by a request for judicial notice (ECF No. 21-2), and the Motion to Strike Portions of Plaintiff's First Amended Complaint pursuant to Federal Rule of Civil Procedure 12(f) (ECF No. 22). On June 9, 2014, Plaintiff filed an opposition (ECF No. 25), accompanied by a Request for Judicial Notice (ECF No. 25-1). On June 16, 2014, Defendants filed a reply. (ECF No. 24). On July 23, 2014, Plaintiff filed a Supplemental Request for Judicial Notice of a July 21, 2014 order in Knapp v. CarMax Auto Superstores California, LLC, United States District Court, Central District of California Case No. 5:14-CV-01112-BRO (SPx). (ECF No. 25). On July 24, 2014, Defendants filed an objection to the Supplemental Request for Judicial Notice. (ECF No. 26). On October 27, 2014, the Court issued an Order stating that "Defendants shall have until October 31, 2014 to respond to the information provided by" Knapp. (ECF No. 32). On October 31, 2014, Defendants filed a response to Plaintiff's Supplemental Request for Judicial Notice, accompanied by a Request for Judicial Notice. (ECF No. 33).
II. Allegations of the FAC
Plaintiff purchased an automobile from CarMax on February 25, 2012. On that date, Plaintiff met with CarMax saleswoman Elena Amaya, who represented that "all CarMax vehicles are good quality certified vehicles." (ECF No. 18 at 4). Plaintiff had also seen CarMax commercials that represented that CarMax sold certified vehicles. Sometime between February 25 and March 2, 2012, Plaintiff saw a 2007 Volkswagen Passat on the CarMax website, which also represented that its automobiles were "certified." Id. Because her automobile came with a five day option to return, Plaintiff decided to exchange her automobile for the Passat. On March 2, 2012, she again met with Elena Amaya, and "[n]othing was said that contradicted the first sales conversation and the representations...." Id. On March 2, 2012, Plaintiff purchased the Passat.
"Plaintiff WAS NOT, WAS NOT, provided' any form of inspection report or certificate of any kind prior to purchase of the subject vehicle or for that matter the first vehicle." Id. at 5. "CarMax did not provide Plaintiff with a completed inspection report indicating all components inspected' prior to sale, during the sale, or after the sale." Id. at 5. "Only after plaintiff contacted an attorney, many months after the purchase did Plaintiff find in her glove box a "certificate'...." Id. "It is CarMax's stated corporate policy to hide a generic list of components - a Carmax Quality Inspected ("CQI") Certificate' - that were purportedly inspected, without disclosing the results of the inspection. A generic list is not a completed inspection report.'" Id. at 5-6. "Further, it is CarMax's corporate policy to hide the generic certificate, inside the glove-box of the vehicle." Id. at 6. The CQI Certificate "itself indicates it is not a list of all components inspected" because it lists 125 components checked, "many items not even applicable to Plaintiff's vehicle including manual transmission, clutch, sunroof, etc." Id. at 6.
CarMax destroyed the "real checklist" for Plaintiff's vehicle. Id. Because CarMax had a duty to disclose the "real checklist" it destroyed pursuant to California Vehicle Code section 11713.18(a)(6), it has violated the Consumers Legal Remedies Act and California Business and Professions Code section 17200. Id. It was illegal for CarMax to use the term "certified" because the term cannot be used in advertising unless California Vehicle Code section 11713.18(a)(6) is complied with. Id. at 8. CarMax knowingly violated California Vehicle Code section 11713.18(a)(6) because it actively opposed its passage in the California Assembly and knowingly failed to train its regional VP general manager of the new law. Id. at 8-9.
Plaintiff would have paid less or not purchased the vehicle if CarMax did not represent that the vehicle was certified. Plaintiff was also damaged by being induced to purchase a "lousy defective vehicle." Id. at 6. "Plaintiff is informed and believes, and thereon alleges, that if she had reviewed the actual inspection report, she would not have purchased this vehicle and/or paid what she did. As CarMax destroyed this report, there is an evidentiary presumption against them and the only purpose for such destruction and non-disclosure is to mislead consumers." Id. at 7. "Plaintiff was also damaged because she received less than she paid for. Concerted marketing of Certified' pre-owned vehicles by auto manufacturers and dealers to consumers has created an association of high quality." Id. "Plaintiff was also damaged because she suffered opportunity costs due to CarMax's misrepresentations. Plaintiff relied on CarMax's representations that the vehicle was Certified.' Plaintiff suffered opportunity costs because CarMax's misrepresentations diverted Plaintiff from finding an authentic Certified' pre-owned vehicle." Id.
Plaintiff asserts the following claims for relief: (1) violation of the California Consumers Legal Remedies Act ("CLRA") against Defendants CarMax and Capital One; (2) violation of California Business & Professions Code section 17200 ("UCL") against Defendants CarMax and Capital One; and (3) violation of California Vehicle Code section 11711 against Defendant Safeco. Plaintiff requests damages, rescission of the purchase contract, incidental and consequential damages, punitive damages, equitable and injunctive relief pursuant to California Civil Code section 1780 and California Business & Professions Code section 17200, and attorneys' fees.
III. Motion to Dismiss (ECF No. 21)
A. Rule 12(b)(6) Standard
Federal Rule of Civil Procedure 12(b)(6) permits dismissal for "failure to state a claim upon which relief can be granted." Fed.R.Civ.P. 12(b)(6). Federal Rule of Civil Procedure 8(a) provides that "[a] pleading that states a claim for relief must contain... a short and plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a)(2). Dismissal under Rule 12(b)(6) is appropriate where the complaint lacks a cognizable legal theory or sufficient facts to support a cognizable legal theory. See Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990).
"[A] plaintiff's obligation to provide the grounds' of his entitle[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Fed.R.Civ.P. 8(a)). "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, 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). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. (citation omitted). "[T]he tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions. Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id. (citation omitted). "When there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief." Id. at 679. "In sum, for a complaint to survive a motion to dismiss, the non-conclusory factual content, and reasonable inferences from that content, must be plausibly suggestive of a claim entitling the plaintiff to relief." Moss v. U.S. Secret Serv., 572 F.3d 962, 969 (9th Cir. 2009) (quotations omitted).
B. CLRA and UCL Claims (First and Second Claims)
Defendants contend that Plaintiff has not adequately alleged damages under the CLRA or UCL to satisfy the standing requirements of those laws. Defendants contend that it is insufficient for Plaintiff to allege that her vehicle was uncertified because the inspection report was placed in the glove box of her car. Defendants contend that the alleged technical violation of California Vehicle Code section 11713.18(a)(6) is a "legal distraction" because it does not demonstrate a "tangible decrease in the quality of the certification." (ECF No. 21-1 at 15). Defendants further contend that Plaintiff's alleged missed opportunity costs is an implausible injury because the FAC alleges that CarMax inspected more than the 125 points listed in the CQI Certificate.
Plaintiff contends that she has adequately alleged damages because she has alleged that Defendant CarMax had a duty to provide Plaintiff with the real inspection report prior to purchase, and Plaintiff would not have paid the same amount for her vehicle had she seen the real inspection report. Plaintiff further contends that Plaintiff relied on Defendant CarMax's improper use of the term "certified" in advertising the vehicle.
California Business & Professions Code section 17204 provides that actions pursuant to the UCL may be brought by "a person who has suffered injury in fact and has lost money or property as a result of the unfair competition." Cal. Bus. & Prof. Code § 17204. To establish standing under the UCL, "a party must now (1) establish a loss or deprivation of money or property sufficient to qualify as injury in fact, i.e., economic injury, and (2) show that the economic injury was the result of, i.e., caused by, the unfair business practice or false advertising that is the gravamen of the claim." Kwikset Corp. v. Superior Court, 51 Cal.4th 310, 322 (2011) (emphasis in original). California Civil Code section 1780(a) provides that "[a]ny consumer who suffers any damage as a result of the use or employment by any person of a method, act, or practice declared to be unlawful by Section 1770 may bring an action against that person to recover or obtain any of the following...." Cal. Civ. Code § 1780(a). Under the CLRA, the consumer must allege that he or she has "suffered damage' as the result of unlawful practices, " i.e., "some kind of tangible increased cost or burden to the consumer." Meyer v. Sprint Spectrum L.P., 45 Cal.4th 634, 643 (2009).
California Vehicle Code section 11713.18, subdivision (a) provides:
(a) It is a violation of this code for the holder of any dealer's license issued under this article to advertise for sale or sell a used vehicle as "certified" or use any similar descriptive term in the advertisement or the sale of a used vehicle that implies the vehicle has been certified to meet the ...