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Garcia v. Harley-Davidson Motor Co., Inc.

United States District Court, N.D. California

November 15, 2019

RONALD GARCIA, Plaintiff,
v.
HARLEY-DAVIDSON MOTOR COMPANY, INC., et al., Defendants.

          ORDER REGARDING MOTION TO DISMISS FIRST AMENDED COMPLAINT RE: DKT. NO. 41

          JOSEPH C. SPERO, CHIEF MAGISTRATE JUDGE.

         I. INTRODUCTION

         In this putative class action, Plaintiff Ronald Garcia alleges that several models of motorcycles sold by Defendant Harley-Davidson Motor Company, Inc. (“Harley-Davidson”) included a defective antilock braking system (“ABS”) prone to premature failure during normal operation of the motorcycle. Harley-Davidson moves to dismiss Garcia's first amended complaint under Rule 12(b)(6) of the Federal Rules of Civil Procedure. The Court hearing on November 15, 2019. For the reasons discussed below, the motion is GRANTED in part and DENIED in part. Garcia may file a second amended complaint no later than December 6, 2019.[1]

         II. ALLEGATIONS OF THE COMPLAINT

         Plaintiff Ronald Garcia purchased a new 2008 Harley-Davidson Street Glide motorcycle equipped with ABS from a dealer in Oakland, California in 2008, and paid a premium as compared to motorcycles without ABS. 1st Am. Compl. (“FAC, ” dkt. 19) ¶¶ 4, 26, 58, 77.[2] Harley-Davidson represented in promotional materials that the ABS feature performed effectively and increased emergency braking performance. Id. ¶¶ 27-31. Unbeknownst to Garcia, Harley-Davidson was aware at that time of internal tests showing that normal operation of the motorcycle-specifically, turning the front wheel back and forth-would cause a wire necessary to the ABS system to break well before the expected useful life of the product. See Id. ¶¶ 3, 35- 37. If the wire broke, the ABS would not function, and while the motorcycles were equipped with a warning light to indicate issues with the ABS, Garcia alleges that the light would not work to reveal this issue. Id. ¶¶ 38-39.

         Although the motorcycle's basic “foundation” brakes would continue to function if the ABS failed, Garcia alleges that the undetectable failure of the ABS would nevertheless pose a danger to riders, because Harley-Davidson recommended different methods of using the brakes for motorcycles with or without ABS. Id. ¶¶ 32-34, 38, 40. On motorcycles without ABS, riders were instructed to manually release and reapply the brakes to prevent the wheels from locking and the motorcycle from skidding out, which Harley-Davidson stated “could result in death or serious injury.” Id. ¶ 33. For motorcycles equipped with ABS, Harley-Davidson instructed riders “not [to] modulate or ‘pump' the brake controls, ” but instead to “apply consistent pressure” in order to allow the ABS to automatically control the rate of braking. Id. ¶ 32 (emphasis added). Garcia alleges that a rider who followed those instructions unaware that the ABS had failed could lose control and be killed or injured. Id. ¶ 40.

         Although Harley-Davidson was aware of this issue with the ABS wiring harness in 2008 and began working to change the design, it did not inform owners of the affected motorcycles, and continued to use the same wiring harness in several motorcycle models for the 2008, 2009, and 2010 model years, only replacing the wiring harness for the 2011 model years. Id. ¶¶ 42-46.

         In 2016, the National Highway Traffic Safety Administration (“NHTSA”) investigated a separate ABS issue affecting certain Harley-Davidson motorcycles, including the motorcycles at issue in this case. Id. ¶ 49. That issue related to hydraulic fluid, not wiring, and could cause the brake lever to feel hard and become difficult or impossible to operate. Id. ¶¶ 49-50. Harley-Davidson conducted a recall of the affected motorcycles, but the investigation did not relate to the purported wiring harness defect at issue in this case, and Harley-Davidson did not make the public aware of the wiring harness issue. Id. ¶¶ 52-53. Garcia alleges that ABS failures on the Harley-Davidson motorcycles have led to crashes and serious injury, and that Harley-Davidson has received complaints about ABS failures, but his complaint does not make clear whether those failures were caused by the hydraulic fluid issue addressed in the NHTSA investigation or by the wiring issue that is the subject of this case. Id. ¶¶ 41, 47.[3]

         Garcia learned of the defect in March of 2019 when information about it was released for the first time on the internet. Id. ¶¶ 62, 64, 67. Garcia's motorcycle has not overtly indicated that the ABS system has failed, but he has observed “braking characteristics that were inconsistent with other ABS-equipped motorcycles he has ridden.” Id. ¶ 60. He is now “leery of [his] motorcycle and unable to rely on it in an emergency braking situation.” Id. There is no indication in the complaint that Garcia has had his motorcycle inspected by a mechanic to determine whether the ABS is functioning or that he has sought to have it repaired.

         Garcia asserts the following claims, for which he seeks to represent a class of California purchasers: (1) unlawful, unfair, and fraudulent business practices, in violation of California's Unfair Competition Law (the “UCL”), FAC ¶¶ 69-87; (2) breach of express warranty under section 2313 of the California Commercial Code, FAC ¶¶ 88-96; (3) breach of implied warranty under section 2314 of the California Commercial Code, FAC ¶¶ 97-103; and (4) breach of implied warranty in violation of California's Song-Beverly Act, FAC ¶¶ 104-11. For the following remaining claims, Garcia seeks to represent a nationwide class: (5) violation of the federal Magnuson-Moss Warranty Act, FAC ¶¶ 112-123; (6) unjust enrichment, id. ¶¶ 124-129; and (7) a claim for declaratory judgment, id. ¶¶ 130-38.

         III. ANALYSIS

         A. Legal Standard

         A complaint may be dismissed for failure to state a claim on which relief can be granted under Rule 12(b)(6) of the Federal Rules of Civil Procedure. “The purpose of a motion to dismiss under Rule 12(b)(6) is to test the legal sufficiency of the complaint.” N. Star Int'l v. Ariz. Corp. Comm'n, 720 F.2d 578, 581 (9th Cir. 1983). Generally, a claimant's burden at the pleading stage is relatively light. Rule 8(a) of the Federal Rules of Civil Procedure states that a “pleading which sets forth a claim for relief . . . shall contain . . . a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a).

         In ruling on a motion to dismiss under Rule 12(b)(6), the court takes “all allegations of material fact as true and construe[s] them in the light most favorable to the non-moving party.” Parks Sch. of Bus. v. Symington, 51 F.3d 1480, 1484 (9th Cir. 1995). Dismissal may be based on a lack of a cognizable legal theory or on the absence of facts that would support a valid theory. Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990). A pleading must “contain either direct or inferential allegations respecting all the material elements necessary to sustain recovery under some viable legal theory.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 562 (2007) (citing Car Carriers, Inc. v. Ford Motor Co., 745 F.2d 1101, 1106 (7th Cir. 1984)). “A pleading that offers ‘labels and conclusions' or ‘a formulaic recitation of the elements of a cause of action will not do.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 555). “[C]ourts ‘are not bound to accept as true a legal conclusion couched as a factual allegation.'” Twombly, 550 U.S. at 555 (quoting Papasan v. Allain, 478 U.S. 265, 286 (1986)). “Nor does a complaint suffice if it tenders ‘naked assertion[s]' devoid of ‘further factual enhancement.'” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 557). Rather, the claim must be “‘plausible on its face, '” meaning that the claimant must plead sufficient factual allegations to “allow the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. (quoting Twombly, 550 U.S. at 570).

         B. UCL Claim

         1. Injury in Fact

         Harley-Davidson contends that Garcia's UCL claim must be dismissed because Garcia has not alleged sufficient injury, relying primarily on the California appellate decision Daugherty v. American Honda Motor Co., Inc., 144 Cal.App.4th 824 (2006), and similar authority. See Mot. (dkt. 41) at 7-11. The court in Daugherty held that “failure to disclose a defect that might, or might not, shorten the effective life span of an automobile part that functions precisely as warranted throughout the term of its express warranty cannot be characterized as causing a substantial injury to consumers, and accordingly does not constitute an unfair practice under the UCL.” Daugherty, 144 Cal.App.4th at 839 (2006). Subsequent cases have held “that something more is required than simply alleging an overpayment for a ‘defective' product.” E.g., In re Toyota Motor Corp., 790 F.Supp.2d 1152, 1165 n.11 (C.D. Cal. 2011). As Harley-Davidson acknowledges, however, a “safety defect” can constitute the “something more” needed to establish cognizable injury. Mot. at 8 n.1; see In re Toyota, 790 F.Supp.2d at 1165. Moreover, the In re Toyota decision on which Harley-Davidson relies went on to explain that plaintiffs can clear this hurdle by “not simply alleg[ing] that their . . . vehicles are ‘defective,' but rather offer[ing] detailed, non-conclusory factual allegations of the product defect.” 790 F.Supp.2d at 1166. By alleging specifically that his motorcycle includes an ABS wiring harness prone to failure as a result of turning the front wheel during normal operation, causing the ABS system to become disabled with no obvious sign to the rider and potentially leading to the wheels locking when the rider applies the brakes, FAC ¶¶ 37-40, Garcia has alleged a non-conclusory defect and safety issue. Such allegations, coupled with Garcia's allegation that he would not have purchased the motorcycle at the same price had he known of the defect, id. ¶ 79, are sufficient to allege injury under the UCL.[4]

         Harley-Davidson argues that Garcia's allegations of safety issues are speculative. Unlike the cases on which Harley-Davidson relies, however, the defect that Garcia alleges here goes directly to a feature designed to improve the safety of the motorcycles at issue. Cf., e.g., Williams v. Yamaha Motor Co. Ltd., 851 F.3d 1015, 1028-29 (9th Cir. 2017) (holding that plaintiffs did not sufficiently allege safety hazards arising from a defect in an outboard motor exhaust system); Smith v. Ford Motor Co., 749 F.Supp.2d 980, 990 (N.D. Cal. 2010) (holding that a defect preventing a vehicle from starting did not establish a non-speculative safety hazard), aff'd, 462 Fed.Appx. 660 (9th Cir. 2011); Missaghi v. Apple Inc., No. CV 13-02003 GAF (AJWx), 2013 WL 12114470, at *8 (C.D. Cal. Aug. 28, 2013) (holding that an alleged defect affecting the ability to operate the power button on an iPhone did not establish a safety hazard). Garcia alleges that the defect at issue disables the ABS system-which is intended to prevent a motorcycle from skidding when braking hard-increasing the chances of a motorcycle skidding and crashing when the rider attempts to stop quickly. Garcia alleges that the danger is compounded by the different braking techniques prescribed for ABS and non-ABS motorcycles, with Harley-Davidson advising riders to pump the brakes on a non-ABS motorcycle but to apply constant pressure on an ABS-equipped motorcycle. FAC ¶¶ 32-34, 40. According to Garcia, Harley-Davidson specifically advised that applying the constant pressure appropriate for an ABS-equipped motorcycle to a motorcycle without ABS could cause the wheels to lock, and that a “locked wheel will skid and can cause a loss vehicle control, which could result in death or serious injury.” Id. ¶¶ 33-34.

         Harley-Davidson contends that the actual danger of such an accident is remote because a warning light will advise riders of ABS failures, a rider can tell from the feel of the brakes whether the ABS system is working, and there is no evidence that motorcycle ABS systems actually prevent accidents. Mot. at 9-11. Garcia alleges that the ABS warning light does not work to alert riders to this issue; at this stage of the case, the Court takes that allegation as true. FAC ¶ 39. As for the feel of the brakes, it is not clear from the complaint that a rider should be able to tell whether the ABS system is functioning properly before a safety hazard manifests. While Garcia alleges that Harley-Davidson advised riders that they would feel a pulsing sensation in the brakes when the system was working, it is reasonable to infer at the pleading stage that the pulsing sensation results from the ABS system automatically releasing and reapplying the brakes to prevent the motorcycle from skidding, which in a well-functioning system would not occur until just before the motorcycle begins to skid. It is not clear how a rider would know at any point before the wheels locked that the absence of that sensation indicated a defect requiring the rider to manually pump the brakes. And with respect to the efficacy of ABS to prevent accidents, the National Highway Traffic Safety Administration (“NHTSA”) rules and studies on which Harley-Davidson relies may be evidence supporting its position, but Harley-Davidson cites no authority allowing this Court to take the NHTSA's conclusions as unrebuttable fact sufficient to reject Garcia's allegations at the pleading stage. Garcia has alleged a plausible means by which the purported ABS defect could endanger riders in normal operation of their motorcycles. At this stage of the case, that is enough. The motion to dismiss is DENIED as to this argument.

         2. Affirmative Misrepresentations

         Harley-Davidson argues that Garcia's UCL claim cannot proceed based on affirmative misrepresentations because Garcia has not alleged with particularity, as required by Rule 9(b) of the Federal Rules of Civil Procedure, that he relied on any specific representation by Harley-Davidson. Mot. at 11-13. Rule 9(b) sets a heightened pleading standard for claims based on fraud. “In alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake.” Fed.R.Civ.P. 9(b). The Ninth Circuit has held that in order to meet this standard, a “complaint must specify such facts as the times, dates, places, benefits received, and other details of the alleged fraudulent activity.” Neubronner v. Milken, 6 F.3d 666, 672 (9th Cir. 1993); see also McMaster v. United States, 731 F.3d 881, 897 (9th Cir. 2013). “Rule 9(b) demands that the circumstances constituting the alleged fraud ‘be 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)) (ellipsis in original).

         Garcia alleges that beginning in 2007, Harley-Davidson made a number of representations about the effectiveness of its ABS product in press releases, product catalogs, promotional videos, and perhaps “other such representations.” FAC ¶¶ 27-31 (quoting a number of promotional materials released by Harley-Davidson). He also alleges that he “relied upon these representations when purchasing his . . . motorcycle in 2008, ” id. ¶ 77, but does not identify the particular representations on which he relied. While Garcia's complaint could perhaps be construed as alleging that Garcia saw and relied on all of the promotional materials quoted earlier in the complaint, his opposition brief appears to disclaim such a broad interpretation, conceding that he “does not allege which of these representations he relied upon or the exact date of viewing.” Opp'n (dkt. 46) at 17. The Court declines to read the complaint more broadly than Garcia intended.

         Garcia argues that reliance falls within the “state of mind” exception to Rule 9(b)'s heightened pleading requirement. Id. While the Court agrees that Garcia need not allege with particularity why he relied on a particular representation, his failure to identify which representations he relied on, or even which representations he viewed before purchasing his motorcycle, [5] warrants dismissal even if the Court applies the normal pleading standard of Rule 8 and Iqbal. Without such allegations, Harley-Davidson lacks notice of the particular representations that give rise to Garcia's claims, and thus lacks the ability to raise potential arguments specific to those representations-for example, that they were truthful, were mere puffery, or otherwise cannot support a claim. To the extent that Garcia's UCL claim is based on affirmative misrepresentations, it is DISMISSED with leave to amend.

         3. Omissions

         “To state a claim for failing to disclose a defect, a party must allege ‘(1) the existence of a design defect; (2) the existence of an unreasonable safety hazard; (3) a causal connection between the alleged defect and the alleged safety hazard; and that the manufacturer knew of the defect at the time a sale was made.'” Williams, 851 F.3d at 1025 (citation omitted) (considering claims under California's UCL and similar laws of other states). California law may also permit claims based on failure to disclose defects central to the functioning of a product even when not related to safety, but the law is unsettled as to such claims. See Hodsdon v. Mars, Inc., 891 F.3d 857, 862- 64 (9th Cir. 2018) (comparing the rule of Wilson v. Hewlett-Packard Co., 668 F.3d 1136 (9th ...


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