Barrio v. Gisa Investments LLC

CourtDistrict Court, D. Arizona
DecidedOctober 15, 2020
Docket2:20-cv-00991
StatusUnknown

This text of Barrio v. Gisa Investments LLC (Barrio v. Gisa Investments LLC) is published on Counsel Stack Legal Research, covering District Court, D. Arizona primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Barrio v. Gisa Investments LLC, (D. Ariz. 2020).

Opinion

1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA 8

Gabrie l Barrio, et al., ) No. CV-20-00991-PHX-SPL ) 9 ) 10 Plaintiffs, ) ORDER vs. ) ) 11 ) Gisa Investments LLC, et al., ) 12 ) 13 Defendants. ) ) 14 )

15 Before the Court is Defendants’ Motion to Dismiss (Doc. 20) filed pursuant to 16 Federal Rule of Civil Procedure (“Rule”) 12(b)(6). The Motion is fully briefed and ready 17 for consideration. (Docs. 20, 23, 28) For the following reasons, the Motion will be granted 18 in part. 19 I. BACKGROUND 20 This case arises out of an agreement between Plaintiff Gabriel Barrio, a resident of 21 Washington, and Defendant Tophat U.S., LLC (“Tophat”), a car importing and 22 refurbishing company located in Arizona. (Doc. 18 at ¶¶2–4) Mr. Barrio and a Tophat 23 representative signed an agreement on April 5, 2016, stating that Tophat would custom- 24 build a Land Rover Defender 110 for Mr. Barrio, and that Mr. Barrio would pay $120,000 25 for the vehicle, with a $36,000 deposit. (Doc. 20-1) The agreement included the 26 specifications to which the vehicle would be built. (Doc. 20-1) It also included a warranty 27 for materials incorporated into the car and a one-year unlimited mileage warranty on the 28 engine and transmission. (Doc. 20-1) 1 Plaintiffs first brought this cause of action on May 21, 2020 against Tophat and 2 Defendant Gisa Investments, LLC (“Gisa”). (Doc. 1) Plaintiffs filed a First Amended 3 Complaint (“FAC”) on July 17, 2020, (Doc. 18) asserting the following claims: (1) a 4 violation of the Arizona Consumer Fraud Act (“ACFA”), (2) common law fraud, (3) breach 5 of implied warranty, (4) additional breach of warranty claims under the Magnuson-Moss 6 Warranty Act (“MMWA”), (5) breach of contract, (6) aiding and abetting, (7) negligent 7 misrepresentation, and (8) rescission. Plaintiffs assert the vehicle was not built to their 8 satisfaction nor did it satisfy the terms of the agreement. (Doc. 18 at ¶¶18–19, 27) 9 Defendants filed a Motion to Dismiss on August 7, 2020 for failure to state a claim 10 under Rule 12(b)(6). (Doc. 20) Defendants seek to dismiss the claims for (1) common law 11 fraud, (2) negligent misrepresentation, (3) violation of the ACFA, and (4) aiding and 12 abetting. (Doc. 20 at 2) Defendants also seek to dismiss all claims against Gisa because 13 Gisa was not party to the contract giving rise to the claims. (Doc. 20 at 2) The Court will 14 now consider the Motion. 15 II. LEGAL STANDARDS 16 To survive a motion to dismiss, a complaint must contain “a short and plain 17 statement of the claim showing that the pleader is entitled to relief” so that the defendant 18 is given fair notice of the claim and the grounds upon which it rests. Bell Atl. Corp. v. 19 Twombly, 550 U.S. 544, 555 (2007) (quoting Fed. R. Civ. P. 8(a)(2)). A court may dismiss 20 a complaint for failure to state a claim under Rule 12(b)(6) for two reasons: (1) lack of a 21 cognizable legal theory, or (2) insufficient facts alleged under a cognizable legal theory. 22 Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1990). When deciding a 23 motion to dismiss, all allegations of material fact in the complaint are taken as true and 24 construed in the light most favorable to the nonmoving party. Cousins v. Lockyer, 568 F.3d 25 1063, 1067 (9th Cir. 2009). 26 III. DISCUSSION 27 The Court will address each cause of action individually. 28 /// 1 A. Fraud 2 Common law fraud is a tort claim. See CIT Fin. LLC v. Treon, Aguirre, Newman & 3 Norris PA, No. CV-14-00800-PHX-JAT, 2016 WL 6610604, at *5 (D. Ariz. Nov. 9, 2016). 4 Sometimes, tort claims arising out of breach of contract actions are barred by the Economic 5 Loss Rule (“ELR”). The ELR “limits a contracting party to contractual remedies for the 6 recovery of economic losses unaccompanied by physical injury to persons or other 7 property.” Firetrace USA, LLC v. Jesclard, 800 F. Supp. 2d 1042, 1050 (D. Ariz. 2010) 8 citing Flagstaff Affordable Hous. Ltd. P’ship v. Design Alliance, Inc., 223 Ariz. 320 (2010). 9 Here, Defendants allege that a number of Plaintiffs’ claims are barred under the ELR, 10 though Plaintiffs argue it does not apply in this case. (Doc. 20 at 4; Doc. 23 at 5–6) 11 Plaintiffs argue that the ELR 1) does not apply to fraud and misrepresentation claims, and 12 2) does not apply to non-economic harm such as emotional damages, the travel time to buy 13 the vehicle and repair it, and their inability to obtain insurance for the vehicle. (Doc. 23 at 14 6, 8–9) 15 Plaintiffs rely on old case law for the proposition that the ELR does not apply to 16 fraud and misrepresentation claims; more recently this Court and Arizona state courts have 17 found it does apply in that context. See, e.g., CIT Fin. LLC, 2016 WL 6610604, at *5 (fraud 18 and negligent misrepresentation claims dismissed because ELR applies when a contract 19 governs); Del Mar Land Partners, LLC v. Stanley Consultants, Inc., No. CV-11-8013- 20 PCT-PGR, 2012 WL 1019066, at *2 (D. Ariz. Mar. 26, 2012) (fraud claim dismissed 21 because ELR applies); Sherman v. PremierGarage Sys., LLC, No. CV 10-0269-PHX- 22 MHM, 2010 WL 3023320, at *4 (D. Ariz. July 30, 2010) (ELR applies to fraud, intentional 23 misrepresentation, and negligent misrepresentation claims); Cook v. Orkin Exterminating 24 Co., 227 Ariz. 331, 335 (Ariz. Ct. App. 2011) (fraud, negligence and misrepresentation 25 claims are barred by ELR unless contract otherwise provides). Another case this Court 26 finds compelling is Van Go LLC v. Potts, No. CV-16-00054-PHX-JJT, 2016 WL 4974968 27 (D. Ariz. June 7, 2016). In that case, this Court declined to apply the ELR to a fraud claim 28 involving a car sale, however, the sale of the car was under much different circumstances. 1 Id. at *4. There, the vehicle at issue was sold at auction, without negotiation or discussion 2 between the buyer and seller. Id. The buyer later alleged the vehicle’s history and certificate 3 of authenticity were falsified, bringing, among others, a fraud claim. Id. at *1–2. The Court 4 determined that the auction setting made the ELR inapplicable. Id. at *4. The parties in 5 Van Go did not “bargain, define remedies, or plan for contingencies like in other contract 6 negotiations.” Id. This Court noted, citing Firetrace, that the purpose of the ELR is to 7 “encourage private ordering of economic relationships and to uphold the expectations of 8 the parties by limiting a plaintiff to contractual remedies for the loss of the benefits of the 9 bargain.” Id. citing 800 F.Supp 2d at 1050. In the instant case, the parties bargained over 10 the price of the vehicle, then signed a contract that defined remedies, listed warranties, and 11 planned for contingencies. (Doc. 18 at ¶¶9, 28–30; Doc. 20-1 at 2–4) In a situation where 12 there is a contract providing remedies, it makes sense for a court to hold the parties to that 13 contract. Therefore, the ELR does bar Plaintiffs’ fraud claims to the extent that their harm 14 is economic. 15 As to Plaintiffs’ alleged noneconomic damages, Plaintiffs did not assert their 16 inability to find insurance for the vehicle until their Response. (Doc. 23 at 9) As such, it 17 will not be considered. See Andasola v. Capital One Bank NA, No. CV 12-02467-PHX- 18 JAT, 2013 WL 1149663, at *4 (D. Ariz. Mar. 19, 2013) (Court would not consider new 19 allegations asserted in plaintiff’s response to a motion to dismiss, except to consider 20 granting leave to amend).

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Related

Bell Atlantic Corp. v. Twombly
550 U.S. 544 (Supreme Court, 2007)
FIRETRACE USA, LLC v. Jesclard
800 F. Supp. 2d 1042 (D. Arizona, 2010)
Cook v. Orkin Exterminating Co., Inc.
258 P.3d 149 (Court of Appeals of Arizona, 2011)
Cheatham v. ADT Corp.
161 F. Supp. 3d 815 (D. Arizona, 2016)

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Barrio v. Gisa Investments LLC, Counsel Stack Legal Research, https://law.counselstack.com/opinion/barrio-v-gisa-investments-llc-azd-2020.