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Gerstle v. American Honda Motor Co., Inc.

United States District Court, N.D. California

April 25, 2017

MARK GERSTLE, et al., Plaintiffs,
v.
AMERICAN HONDA MOTOR COMPANY, INC., Defendant.

          ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION TO DISMISS

          JON S. TIGAR United States District Judge.

         Before the Court is Defendant American Honda Motor Co., Inc.'s Motion to Dismiss Certain Counts in Plaintiffs' Complaint and Defendant's Requests for Judicial Notice. ECF Nos. 42, 44, 59. Plaintiffs oppose both the motion to dismiss and Defendant's first request for judicial notice.[1] ECF No. 56 & 57. The Court will grant the motion to dismiss in part and deny it in part, and grant the requests for judicial notice.

         I. FACTUAL BACKGROUND

         In this purported class action, twelve named plaintiffs (collectively “Plaintiffs”)[2] allege that they purchased new or used Acura vehicles manufactured by Defendant American Honda Motor Company, Inc. (“AHM” or “Honda” or “Acura”). ECF No. 29.[3] Their Acura vehicles were equipped with a defective Bluetooth system, the Hands Free Link (“HFL”) system, that caused a “parasitic drain” on their electrical systems. Id. The system was advertised as a convenient and safe way for a driver to connect her phone to the vehicle and enjoy hands-free phone calls and other advantages. Id. ¶ 194. Plaintiffs bought AHM's vehicles based on Acura's reputation for luxury and paid a premium for the HFL system. Id. ¶ 196.

         Within a few years of purchase, Plaintiffs began to experience electronic issues with their vehicles. See Id. ¶ 206. Most frequently, Plaintiffs experienced premature battery death. Id. Plaintiffs were forced to purchase several new batteries at their own expense, as well as make other costly repairs. Unbeknownst to the Plaintiffs, their electronic systems were failing because the HFL system drained the battery at an unusually high rate and affected other electronic devices, such as the alternator. Id. ¶ 198. Since at least 2005, consumers such as Plaintiffs purchased Defendant's vehicles without knowing that they were defective and posed a safety hazard. Id. ¶¶ 206-207, 210.

         Defendant, however, was aware of the defect in the HFL's design. Id. ¶ 199. On June 29, 2005, AHM issued an internal Technical Service Bulletin (“TSB”) to dealers that stated that the HFL system “does not work.” Id. The TSB stated that the HFL system may cause a dead or low battery. Id. While it was clear there was a defect, it “effectively elude[d] diagnosis.” Id. ¶ 200. “Once the HandsFreeLink™ defect compromises the battery, the system can ‘reset, ' hiding the problem until the system gets stuck again.” Id. In 2008 and 2012, AHM issued similar TSBs notifying dealers that the HFL system did not function properly. Id. ¶ 202- 203. The only “fix” was to replace the HFL system, but that did not solve the problem because the new system might have had the same defect. Id. ¶ at 207. The Defendant did not disclose the defect to Plaintiffs. As the HFL system often went unidentified as the cause for the hastened drain on Plaintiffs' electrical systems, Plaintiffs allege they paid for new batteries and other electronic parts more frequently than they otherwise would have. Id. ¶ 209.

         Plaintiffs also allege that in some circumstances the defect caused a safety hazard. Id. ¶ 210. For instance, Plaintiff Gerstle's 2004 Acura TL stopped operating while he was on a highway about to enter a tunnel. Id. ¶ 168. Numerous complaints have been lodged with the National Highway Transportation Safety Administration (“NHTSA”), alleging that the defect caused vehicles to stop operating while on the road. Id. ¶ 213.

         Overall, Plaintiffs allege they did not know that the cause of their problems was the HFL system. Id. ¶ 8-185. If they had known of the problem, they would not have purchased their vehicles or would have paid less for them. Id.

         II. PROCEDURAL BACKGROUND

         Plaintiffs filed this putative class action against Defendant on August 3, 2016. ECF No. 1. Plaintiffs subsequently filed a first amended complaint (“FAC”) on October 17, 2016, alleging sixty-nine counts under eleven states' laws related to the defective HFL in their vehicles. ECF No. 29. Generally, plaintiffs' claims relate to state consumer protection statutes, fraudulent concealment, breaches of express and implied warranty pursuant to state and federal laws, and unjust enrichment. Defendant previously filed a motion to transfer venue, which the Court denied. See ECF No. 48. Defendant now moves to dismiss all of Plaintiffs' claims brought as a national class, Plaintiffs' request for injunctive relief, most of Plaintiffs' claims brought under different statutory laws, and breaches of contract claims because they are untimely or fail as a matter of law. ECF No. 42.

         III. JUDICIAL NOTICE

         Defendant requests the Court take judicial notice of the Acura Warranty Booklets applicable to Plaintiffs' vehicles and copies of the TSBs that Plaintiffs referred to in their FAC. ECF No. 44 & 59. A court may take judicial notice of documents whose contents are alleged in the complaint and whose authenticity no party questions.[4] Branch v. Tunnell, 14 F.3d 449, 454 (9th Cir.1994). A court may also take judicial notice of documents incorporated by reference in the complaint, but which are not physically attached to the pleading. Knievel v. ESPN, 393 F.3d 1068, 1076 (9th Cir. 2005) (“The rationale of the ‘incorporation by reference' doctrine applies with equal force to internet pages as it does to printed material.”).

         Plaintiffs argue that the warranties do not fall under the incorporation doctrine and are not relevant or necessary. ECF No. 44 at 2. The Court disagrees. The warranties are relevant because they detail the terms of the warranty presented to Plaintiffs at the time they purchased their vehicles. The TSBs contain the same language Plaintiffs have quoted or referred to in their FAC. The Court may consider the terms of the express warranties where those terms are not in dispute, See Lee v. City of Los Angeles, 250 F.3d 668, 689-90 (9th Cir. 2001), particularly given that Plaintiffs have brought claims for breach of express warranty. See ECF No. 29 at 69.[5]

         IV. LEGAL STANDARD

         Claims of fraud are subject to a heightened pleading standard. “In alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake.” Fed.R.Civ.P. 9(b). Defendant moves under Federal Rules of Civil Procedure Rule 9(b) to dismiss Plaintiffs' fraudulent concealment claims, California Consumer Legal Remedies Act (“CLRA”) claims and Unfair Competition Law (“UCL”) claims, on the basis that they fail to allege any factual circumstances with the required specificity. See ECF No. 42. To satisfy Rule 9(b), a complaint must supply “the circumstances constituting the alleged fraud” with a description “‘specific enough to give defendants notice of the particular misconduct . . . so that they can defend against the charge and not just deny that they have done anything wrong.'” Kearns v. Ford Motor Co., 567 F.3d 1120, 1124 (9th Cir. 2009) (quoting Bly-Magee v. California, 236 F.3d 1014, 1019 (9th Cir. 2001)).

         “[I]ntent, knowledge, and other conditions of a person's mind” need not be stated with particularity, and “may be alleged generally.” Fed.R.Civ.P. 9(b). Fraud claims must allege “an account of the time, place, and specific content of the false representations as well as the identities of the parties to the misrepresentations.” Swartz v. KPMG LLP, 476 F.3d 756, 764 (9th Cir. 2007) (per curiam) (internal quotation marks omitted); see also Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003) (“Averments of fraud must be accompanied by the who, what, when, where, and how of the misconduct charged.” (internal quotation marks omitted)). “Plaintiff[s] need not provide every factual detail supporting [their] fraud claim. Instead, a plaintiff must set forth what is false or misleading about a statement, and why it is false.” In re GlenFed, Inc. Securities Litig., 42 F.3d 1541, 1548 (9th Cir. 1994) (en banc), superseded by statute on other grounds as stated in Marksman Partners, L.P. v. Chantal Pharmaceutical Corp., 927 F.Supp. 1297, 1309 (C.D. Cal. 1996).

         Defendant also argues the Plaintiffs fail to state a claim under Federal Rules of Civil Procedure 12(b)(6). While the Court accepts the material facts alleged in the complaint, along with all reasonable inferences to be drawn from those facts, as true, Navarro, 250 F.3d at 732, “the tenet that a court must accept a complaint's allegations as true is inapplicable to threadbare recitals of a cause of action's elements, supported by mere conclusory statements, ” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). To be entitled to the presumption of truth, a complaint “must contain sufficient allegations of underlying facts to give fair notice and to enable the opposing party to defend itself effectively.” Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011).

         V. DISCUSSION

         A. Application of California Law

         Defendant argues that the presumption against extraterritoriality and conflict of law principles should preclude Plaintiffs from applying California law to its nationwide claims. ECF No. 42 at 17-20. Plaintiffs counter that California law should be applied to the nationwide class because Defendant is located in California and has violated various California consumer protection laws and warranties governed by California law. ECF No. 29 ¶¶ 186, 240-346. The Court concludes that the presumption against extraterritorial application of California law does not govern and that a conflict of law analysis is premature.

         1. Presumption Against Extraterritorial Application of California Law

         Defendant argues that a nationwide class cannot rely on California law because not all Plaintiffs purchased their vehicles in California. ECF No. 42 at 17.

         While California has a presumption against extraterritorial application of its own law, Sullivan v. Oracle Corp., 51 Cal.4th 1191, 1207 (2011), “state statutory remedies may be invoked by out-of-state parties when they are harmed by wrongful conduct occurring in California.” TRC & Assocs. v. NuScience Corp., No. 2:13-CV-6903-ODW CWX, 2013 WL 6073004, at *5 (C.D. Cal. Nov. 18, 2013), quoting Tidenberg v. Bidz.com, Inc., No. 08-cv-5553-PSG, 2009 WL 605249, at *4 (C.D. Cal. Mar. 4, 2009). To determine whether sufficient wrongful conduct occurred in California, “the courts consider where the defendant does business, whether the defendant's principal offices are located in California, where class members are located, and the location from which advertising and other promotional literature decisions were made.” In re Toyota Motor Corp., 785 F.Supp.2d 883, 917 (C.D. Cal. 2011). The Court looks to the nexus between California and the alleged wrongful conduct to determine whether sufficient wrongful conduct occurred in California. See Ehret v. Uber Techs., Inc., 68 F.Supp.3d 1121, 1132 (N.D. Cal. 2014).

         In Ehret, the plaintiffs alleged that California law should apply to their claims, despite the presumption against extraterritoriality, because Uber's misrepresentations were developed in California, contained on websites and Uber's application maintained in California, and because billing and payment of services went through servers located in California. Ehret, 68 F.Supp.3d at 1132. The court found that those allegations presented “a sufficient nexus between California and the misrepresentations which form[ed] the basis of [the plaintiff's] claims.” Id. Similarly here, Plaintiffs allege that Defendant has conducted and maintained operations in California for several decades. ECF No. 29 ¶¶ 186-189. Moreover, Plaintiffs allege that Defendant is headquartered in Torrance, California, where it conducts “sales, service, and coordinating functions” and where decisions are made regarding the manufacture, development, distribution, marketing, sales, and serving of Acura-brand automobiles. Id. ¶190. These allegations form the requisite connection to California.

         Defendant cites In re Toyota Motor Corp., 785 F.Supp.2d 883, 916-916 (C.D. Cal. 2011) for the proposition that the mere fact that the Defendant is located in California does not provide sufficient contacts. There, the court dismissed a nationwide class because the plaintiffs had failed to allege that the advertising materials at issue were disseminated from California. Id. But here, by contrast, Plaintiffs have alleged that all decisions regarding the marketing and sales of the HFL, including the decision to not disclose the alleged defect, were “in whole or substantial part” made from the Defendant's Torrance, California headquarters. ECF No. 29 ¶ 190. Moreover, when Defendant argued for a change of venue in a prior motion, it stated that five of the six witnesses who tested the HFL were located in California. ECF No. 32 ¶¶ 10-11. Since AHM conducted marketing and advertising in California and tested the HFL system in California, the Court finds that Plaintiffs have alleged that sufficient wrongful conduct occurred in California, and therefore denies Defendant's motion to dismiss on this ground.

         2. Choice of Law

         Defendant contends that California's choice of law rules bar the nine non-California Plaintiffs from invoking California law. ECF No. 42 at 18. Defendant asks the Court to apply the three-part conflict of law test set out in Mazza v. Am. Honda Motor Co., 666 F.3d 581, 590 (9th Cir. 2012) to determine if California law should apply to the named Plaintiffs' claims. Mazza 666 F.3d 590.

         A detailed choice-of-law analysis is a fact-heavy analysis and is generally inappropriate on a motion to dismiss where the parties have not yet developed a factual record. Clancy v. The Bromley Tea Co., 308 F.R.D. 564, 572 (N.D. Cal. 2013). Defendant argues that the Court “should [nonetheless] undertake the Mazza inquiry now because Mazza's reasoning ‘applies generally and is instructive even when addressing a motion to dismiss.'” Frezza v. Google Inc., No. 5:12-CV-00237-RMW, 2013 WL 1736788 at *6 (C.D. Cal. Ap. 22, 2013). That is only true, however, when some discovery has taken place. Such was the case in Todd v. Tempur-Sealy Int'l, Inc., No. 13-CV-04984-JST, 2016 WL 344479, at *6 (N.D. Cal. Jan. 28, 2016), where this Court concluded that the choice-of-law analysis was appropriate because “of the advanced stage of litigation and the extensive discovery that [had] already been completed.” Id. at *6. Defendant's reliance on Todd is thus misplaced. ECF No. 42 at 19, fn 2. Even there, this Court noted that dismissal at the pleading stage would be premature prior to discovery and the development of a factual record. Todd 2016 WL 344479, at *6.

         Here, the Court has no factual record to decide which state has a greater interest in applying its laws. While Mazza will of course be relevant to the decision whether to certify any proposed class or sub-class, at this early stage of the litigation, ‘it would be premature to speculate about whether the difference in various states' consumer protection laws are material in this case.'” Clancy, 308 F.R.D. at 572 (quoting Forcellati v. Hyland's Inc., 876 F.Supp.2d 1155, 1159 (C.D. Cal. 2012)). The Court declines to dismiss any of Plaintiffs' claims on choice-of-law grounds now.

         B. Primary Jurisdiction as Grounds for Dismissing Request for Injunctive Relief

         Defendant argues that the Court should dismiss Plaintiffs' request for injunctive relief because the National Highway Traffic Safety Administration (“NHTSA”) has general authority over Plaintiffs' claims. ECF No. 42 at 21-22.

         “The primary jurisdiction doctrine allows courts to stay proceedings or to dismiss a complaint without prejudice pending the resolution of an issue within the special competence of an administrative agency.” Clark v. Time Warner Cable, 523 F.3d 1110, 1114 (9th Cir. 2008). The Ninth Circuit provides four factors for consideration: “(1) the need to resolve an issue that (2) has been placed by Congress within the jurisdiction of an administrative body having regulatory authority (3) pursuant to a statute that subjects an industry or activity to a comprehensive regulatory authority that (4) requires expertise or uniformity in administration.” Syntek Semiconductor Co. v. Microchip Tech. Inc., 307 F.3d 775, 781 (9th Cir. 2002). Given the nature of Plaintiffs' claims and the lack of conflict with any current agency action, the Court is not persuaded that the primary jurisdiction doctrine applies.

         Defendant fails to argue why court action would infringe on the NHTSA's authority or why resolution of Plaintiffs' claims requires special agency expertise. ECF No. 42 at 21-22. Courts have held that the primary jurisdiction doctrine does not apply if the defendant fails to identify “any specific conflict” with an on-going NHTSA investigation or regulation. Kent v. DaimlerChrysler Corp., 200 F.Supp.2d 1208, 1218 (N.D. Cal. 2002) (failing to show “the need for ‘uniformity and consistency in the regulation of business'” because defendant did not point to any conflicts with the NHTSA actions or regulations). Courts have also refused to invoke the primary jurisdiction doctrine when plaintiffs are bringing state contract and tort claims, regardless of any NHTSA action. See Lassen v. Nissan N. Am., Inc., No. CV1506491ABMRWX, 2016 WL 5868101, at *7 (C.D. Cal. Sept. 30, 2016) 2016 WL 5868101, at *7 (finding that safety, not NHTSA authority, will be the overriding factor when deciding to grant injunctive relief in the form of a recall). Here, Defendant only generally asserts that the request for injunctive relief is within the province of the NHTSA and that courts routinely defer to the NHTSA's general authority to “investigate and remedy design defects in vehicles in circumstances” where an administrative remedy is available. ECF No. 61 at 7, [6] see also 49 U.S.C.A. § 30120 (2016) (NHTSA's authority to issue recalls). Although consumers have complained to the NHTSA, ECF No. 29 ECF No. 29 ¶ 213, AHM cites no agency investigation or action that would conflict with this case. ECF No. 56 at 16. Plaintiffs bring their claims under state laws, not the Safety Act, which grants the NHTSA its authority. ECF No. 29; 49 U.S.C.A. § 30000 et. seq. Accordingly, there is no conflict between this case and any NHTSA action or authority that would require the invocation of the primary jurisdiction doctrine.

         Moreover, Defendant makes no argument as to why any issue before the Court requires the technical expertise or uniformity in administration provided by the NHTSA. ECF No. 42 at 21-22; ECF No. 61 at 11-12. “[W]arranty and consumer protection claims based on an alleged design defect [that are] . . . not based on NHTSA regulations, safety standards, or agency-specific statutes” are “not outside the conventional experiences of judges, and [do] not involve issues that are within the NHTSA's discretion.” Ford v. Ford Motor Co., No. CV 13-8335 PSG (SSX), 2014 WL 12570925, at *5 (C.D. Cal. Jan. 17, 2014). Such claims therefore do not require application of the primary jurisdiction doctrine. Id. In Ford, plaintiffs argued that a specific axle design in certain Ford Windstar minivans was defective because it was predisposed to premature wear and failure. Id. The NHTSA had already found that the design was defective. Id. Even if the NHTSA had not made such a finding, the court reasoned that the specificity of the design defect was a narrow question of the kind commonly answered by courts. Id.

         Plaintiffs' complaint is similarly narrow. Plaintiffs allege that Acura's HFL is defective because it drains the vehicle's battery without the Plaintiffs' knowledge and, therefore, causes economic harm. ECF No. 29 ¶¶ 198-205. Plaintiffs do not assert that the HFL's design does not comply with an industry-wide standard, nor do they base their claims on an omitted safety feature. Instead, they allege that the HFL is defectively designed because it causes a parasitic draw on the electrical system. ECF No. 29 ¶ 198. This narrow claim does not require the NHTSA's expertise.

         Furthermore, there is little to no danger to the uniformity of administration of the NHTSA's regulations, because Plaintiffs' suit claims a broad putative class related to one specific feature available in all Acura makes and models. See Reniger v. Hyundai Motor Am., 122 F.Supp.3d 888, 907 (N.D. Cal. 2015). In Reniger, plaintiffs alleged that the Kia Santa Fe had a safety defect that caused their vehicles to stall. Id. at 891-982. The court concluded that application of the primary jurisdiction doctrine was improper because the suit was broadly styled to capture many drivers during a certain timeframe, such that there was no danger of inconsistent outcomes - particularly given that “[t]here is no pending investigation and no reason to believe that the NHTSA has any interest in this case.” Id. at 907. Similarly, Plaintiffs here have brought a broadly styled suit focused on a single, common design defect, and there is no indication that the NHTSA is addressing that defect. ECF No. 29 ¶¶ 206-209. Plaintiffs' suit presents no danger to uniformity.

         C. Tolling of Statute of Limitations

         Plaintiffs allege that the statute of limitations should be tolled for all claims based on the discovery rule, for unspecified claims based on fraudulent concealment, and for all statutes of limitations based on estoppel. No. 29 ¶¶ 221-229. Defendant contends that Plaintiffs have not adequately invoked the discovery rule, and that the statutes of limitations for several of the claims are not subject to tolling. Specifically, Defendant argues the following claims are untimely: unjust enrichment under California, Delaware, Florida, Kansas, and Virginia law; breach of the implied warranty of merchantability and breach of the express warranty under California, Delaware, Florida, Kansas, Missouri, New Hampshire, Ohio, Texas, and Virginia law; breach of the Magnuson-Moss Warranty Act; and violations of consumer-protection statues under California, Delaware, Florida, Kansas, Missouri, New Hampshire, Ohio, Texas, and Virginia law. ECF No. 42 at 24-32.

         1. Discovery Rule

         Plaintiffs allege that the “discovery rule” should toll all applicable statutes of limitations. ECF No. 29 ¶¶ 221-224. The discovery rule in California requires the plaintiff to plead facts “which show (1) the time and manner of discovery and (2) the inability to have made earlier discovery despite reasonable diligence . . . . However, mere conclusory assertions that delay in discovery was reasonable are insufficient.” In re Conseco Ins. Co. Annuity Mktg. & Sales Practices Litig., No. C-05-04726 RMW, 2008 WL 4544441, at *8 (N.D. Cal. Sept. 30, 2008) (internal citations omitted); see also Asghari v. Volkswagen Grp. of Am., Inc., 42 F.Supp.3d 1306, 1320-21 (C.D. Cal. 2013).

         “The burden of pleading and proving belated discovery of a cause of action falls on the plaintiff.” Inv'rs Equity Life Holding Co. v. Schmidt, 195 Cal.App.4th 1519, 1533 (2011), as modified (June 15, 2011) (internal citations omitted). To determine whether Plaintiffs could not have reasonably discovered the cause of action within the statute of limitations, they must allege the time and manner by which they discovered the cause of action. See Philips v. Ford Motor Co., No. 14-CV-02989-LHK, 2015 WL 4111448, at *8 (N.D. Cal. July 7, 2015); In re Conseco Ins. Co. Annuity Mktg. & Sales Practices Litig., No. C-05-04726 RMW, 2008 WL 4544441, at *9 (N.D. Cal. Sept. 30, 2008), citing Community Case v. Boatwright, 124 Cal.App.3d 888, 900 (1981). Here, the Court is unable to determine the date the statute of limitations began to run because Plaintiffs do not provide the time and manner by which each named Plaintiff discovered the alleged defect.

         Defendant argues that Plaintiffs cannot assert the discovery rule to toll the statute of limitations because Plaintiffs had notice of the alleged wrongdoing and, through reasonable due diligence, could have discovered the defect within the respective statutes of limitations. ECF No. 42 at 22-23. Before reaching those arguments, however, the Court examines whether Plaintiffs have provided sufficient facts to invoke the affirmative defense of the discovery rule, and concludes that Plaintiffs fail to allege the time and the manner by which each plaintiff discovered the defect that was affecting the car battery. ECF No. 29 ¶¶ 221-224. Plaintiffs may only benefit from the discovery rule when they can show they acted reasonably and diligently. Plumlee v. Pfizer, Inc., No. 13-CV-00414-LHK, 2014 WL 4275519, at *6 (N.D. Cal. Aug. 29, 2014), aff'd, No. 14-16924, 2016 WL 6610223 (9th Cir. Nov. 9, 2016). The discovery rule may be invoked for each named plaintiff based on the time and manner provided for each named plaintiff. Id. at *8 (determining for each plaintiff if the discovery rule properly tolled UCL and CLRA claims). For several Plaintiffs, the Complaint asserts that the defect was brought to their attention when they visited mechanics for assistance with failing batteries and other electronics in their vehicles.[7] ECF No. 29. For the remaining Plaintiffs, however, the FAC only alleges whether drivers had the HFL disabled or not. Id. The Court will not infer a discovery time and manner for each plaintiff where none is alleged.

         Without the time and manner of discovery, the Court cannot establish a tolling date or evaluate which date should be used when deciding whether a plaintiff could have filed the suit on an earlier date based on his or her reasonable due diligence. The Court will allow Plaintiffs to amend their complaint to provide the additional information required to invoke the discovery rule.

         2. Fraudulent ...


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