1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 STEVEN CHARLES POSTON, Case No. 24-cv-0082-BAS-JLB
12 Plaintiff, ORDER: 13 v. 1. GRANTING IN PART AND DENYING IN PART 14 GENERAL MOTORS, LLC, a limited DEFENDANT’S MOTION TO liability company; DOES 1 through 10, 15 DISMISS (ECF No. 5), and inclusive, 2. DENYING DEFENDANT’S 16 Defendants. REQUEST FOR JUDICIAL 17 NOTICE (ECF No. 5-2)
19 This case is about an allegedly defective electric car purchased by the plaintiff and 20 manufactured by the defendant. The plaintiff has sued the defendant car manufacturer, 21 alleging breach of warranty claims under the Song-Beverly Act as well as claims for 22 common-law fraud and violation of California’s Unfair Competition Law (“UCL”). 23 Presently before the Court is Defendant General Motors, LLC’s (“GM” or 24 “Defendant”) Motion to Dismiss the Complaint of Plaintiff Steven Charles Poston 25 (“Poston” or “Plaintiff”). (ECF No. 5.) Defendant moves to dismiss on the grounds that 26 Plaintiff fails to plead a claim upon which relief may be granted. (Id.) Plaintiff opposes. 27 (ECF No. 6.) Defendant replies. (ECF No. 7.) Defendant additionally requests judicial 28 notice of publicly available information. (ECF No. 5-2.) Plaintiff does not oppose. 1 The Court finds the motions suitable for determination on the papers submitted and 2 without oral argument. Fed. R. Civ. P. 78(b); CivLR 7.1(d)(1). For the reasons set forth 3 below, the Court DENIES Defendant’s Request for Judicial Notice (ECF No. 5-2), and 4 GRANTS IN PART and DENIES IN PART Defendant’s Motion to Dismiss the 5 Complaint (ECF No. 5). 6 I. BACKGROUND 7 Poston brings this automobile “lemon law” and fraud action against GM, alleging 8 the vehicle Poston purchased, manufactured by GM, does not function as GM represented 9 it would. On either April 29, 2021, or September 6, 2020, Poston purchased a new 2021 10 Chevrolet Bolt from “Kearny Mesa Chevrolet, an authorized dealer and agent of 11 [GM].” (ECF No. 1-2, Ex. A (“Compl.”) ¶¶ 4–6, 25.) As part of that transaction, GM 12 “issued an express warranty which would only be issued by [GM] as a result of the sale of 13 the vehicle.” (Id. ¶ 6.) GM does “not sell vehicles directly to members of the general 14 public.” (Id.) According to Poston, however, the sale of the Bolt by a GM dealership, 15 coupled with the issuance of the express warranty, created a transactional and contractual 16 relationship between GM and Poston such that the dealership was an agent of GM for the 17 purpose of the transaction. (Id.) At the time Poston acquired the Bolt in 2020 or 2021, 18 GM had advertised it “as a long range . . . electric vehicle on its website,” and GM 19 “dealership personnel assured Plaintiff of the long-range and safe nature of the vehicle.” 20 (Id. ¶ 26.) 21 When it announced production of the Bolt in October 2015, GM touted the Bolt as 22 an affordable, long-range vehicle. (Id. ¶ 14.) Then, in a January 2016 press release, GM 23 represented that the Bolt would have a battery range over 200 miles because GM had 24 improved the battery’s thermal operating performance. (Id. ¶ 15.) 25 By December 2016, GM became aware of issues with the Bolt’s battery and energy 26 management systems; in response, GM instituted a battery exchange program to replace 27 defective Bolt batteries. (Id. ¶ 16.) Despite this knowledge, GM began running 28 1 commercials in January 2017 that featured the range of the Bolt’s battery and advertised 2 the Bolt as a “long range” vehicle. (Id. ¶ 17.) 3 In October 2017, the National Highway Traffic Safety Administration (“NHTSA”) 4 “published a warning that overcharging lithium ion batteries, such as the battery in the Bolt, 5 can result in spontaneous ignition.” (Id. ¶ 18.) In November 2017 and April 2018, GM 6 created Bolt repair programs in response to “issues with low voltage batteries” and “to 7 update the vehicle’s software for a low voltage condition and reports of vehicles losing 8 propulsion.” (Id. ¶¶ 19–20.) Then, in August 2018, GM “created another program related 9 to the battery’s software and its ability to monitor the charge of the battery.” (Id. ¶ 22.) 10 A little over six months later, in March 2019, GM became aware of the first battery 11 fire involving the Bolt. (Id. ¶ 23.) Despite GM’s knowledge of the fire risk posed by 12 charging the battery to full capacity, in October of that same year, GM held an event to 13 address questions regarding the Bolt, and one of its employees and Bolt battery expert, 14 Adam Piper, stated the following: “We engineered the battery system so that you can 15 charge to 100% and maximize range. Do whatever is best for your personal circumstances. 16 If you want maximum range, charge to 100%.” (Id. ¶ 24.) By August 2020, GM “was 17 aware of at least [twelve] fires” involving the Bolt. (Id. ¶ 25.) Yet, GM did not “disclose 18 the battery issues to Plaintiff or alter its marketing campaign” for the Bolt. (Id. ¶ 23) The 19 marketing materials for the 2020 Bolt pictured the vehicle as capable of being charged 20 indoors in a garage. (Id. ¶ 29.) 21 In October 2020, the NHTSA opened an investigation into the Bolt specifically. (Id. 22 ¶ 27.) Then, on an unspecified date in 2021, GM issued a recall notice for the Bolt, “stating 23 that its batteries may ignite when nearing a full charge.” (Id. ¶ 30.) Through this recall, 24 GM “warned Plaintiff that the vehicle’s charge should not exceed 90%, the battery mileage 25 should not fall below seventy (70) miles remaining, and the vehicle should not be parked 26 indoors overnight.” (Id.) 27 In sum, GM “marketed the subject vehicle in [a] false and misleading manner by 28 advertising it as safe and function[al],” when in fact it “is neither safe nor functional for 1 normal use due to the presence of defective and dangerous lithium-ion battery modules.” 2 (Id. ¶ 28.) In fact, the vehicle’s “batteries may ignite when they are either fully charged or 3 fall below seventy (70) miles remaining mileage,” and “[t]he vehicle also cannot be parked 4 inside overnight due to fire risk.” (Id. ¶ 13.) These alleged affirmative misrepresentations 5 and fraudulent omissions by Defendant caused Poston to suffer injury in the form of 6 anxiety, fear, and emotional distress. (Id. ¶¶ 32, 44, 93.) 7 In his Complaint, Poston brings five claims against GM under California law: three 8 claims of breach of warranties in violation of the Song-Beverly Consumer Warranty Act; 9 a claim of common-law fraud; and a claim under California’s UCL, California Business 10 and Professions Code §§ 17200, et seq.. (Compl. at 1.) 11 GM moves to dismiss Poston’s fourth and fifth claims. (ECF No. 5.)1 GM argues 12 Poston fails to plead each element of his fraud claims and argues that the economic loss 13 rule bars one of his theories of liability. (See id.) GM further argues that Poston fails to 14 plead his UCL claims because he does not specifically state a predicating statute and fails 15 to reference any established public policy GM’s actions may have violated. (See id.) 16 II. LEGAL STANDARDS 17 A. Rule 12(b)(6) Motion to Dismiss 18 General Motors brings this motion pursuant to Federal Rule of Civil Procedure 19 (“Rule”) 12(b)(6). Under Rule 12(b)(6), the Court may dismiss a cause of action for 20 “failure to state a claim upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6). “A 21 Rule 12(b)(6) dismissal may be based on either a ‘lack of a cognizable legal theory’ or ‘the 22 absence of sufficient facts alleged under a cognizable legal theory.’” Johnson v. Riverside 23 24
25 1 Defendant’s motion to dismiss also questions whether the Complaint adequately alleges a Song-Beverly 26 Act claim, (ECF No. 5 at 2 n.1), but the Court cautions Defendant that successive motions to dismiss under Rule 12(b)(6) are generally impermissible and, in the instant motion, Defendant did not move to 27 dismiss Plaintiff’s Song-Beverly Act claims. See Rule 12(g)(2) (providing, in relevant part, “a party that makes a motion under this rule must not make another motion under this rule raising a defense or objection 28 1 Healthcare Sys., LP, 534 F.3d 1116, 1121 (9th Cir. 2008) (quoting Balistreri v. Pacifica 2 Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1990)). 3 “To survive a motion to dismiss, a complaint must contain sufficient factual matter, 4 accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 5 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). 6 The court must accept all factual allegations pleaded in the complaint as true and draw all 7 reasonable inferences in favor of the nonmoving party. Cahill v. Liberty Mut. Ins. Co., 80 8 F.3d 336, 337–38 (9th Cir. 1996). The court need not accept conclusory allegations as 9 true; rather, it must “examine whether conclusory allegations follow from the description 10 of facts as alleged by the plaintiff.” Holden v. Hagopian, 978 F.2d 1115, 1121 (9th Cir. 11 1992) (citation omitted). 12 “A claim has facial plausibility when the plaintiff pleads factual content that allows 13 the court to draw the reasonable inference that the defendant is liable for the misconduct 14 alleged.” Iqbal, 556 U.S. at 678. A pleading is insufficient if it offers mere “labels and 15 conclusions” or “a formulaic recitation of the elements of a cause of action.” Twombly, 16 550 U.S. at 555; see also Iqbal, 556 U.S. at 678 (“Threadbare recitals of the elements of a 17 cause of action, supported by mere conclusory statements, do not suffice.”). 18 Ultimately, a court may not dismiss a complaint in which the plaintiff has alleged 19 enough facts to “state a claim to relief that is plausible on its face.” Iqbal, 556 U.S. at 20 697 (quoting Twombly, 550 U.S. at 570). Only where a plaintiff fails to “nudge[ ] [his or 21 her] claims . . . across the line from conceivable to plausible[,]” is the complaint properly 22 dismissed. Iqbal, 556 U.S. at 680. While the plausibility requirement is not akin to a 23 probability requirement, it demands more than “a sheer possibility that a defendant has 24 acted unlawfully.” Id. at 678. 25 When a court dismisses a complaint, it must also decide whether to grant leave to 26 amend. Under Rule 15(a)(2), granting leave to amend rests within the trial court’s sound 27 discretion. Swanson v. U.S. Forest Serv., 87 F.3d 339, 343 (9th Cir. 1996). The Ninth 28 1 Circuit has held that leave to amend should be freely granted. See Morongo Band of 2 Mission Indians v. Rose, 893 F.2d 1074, 1079 (9th Cir. 1990). 3 B. Rule 9(b) Heightened Pleading Standard for Fraud 4 In analyzing the sufficiency of a claim for fraud, federal courts apply Rule 9(b)’s 5 heightened pleading standard. Kearns v. Ford Motor Co., 567 F.3d 1120, 1125 (9th Cir. 6 2009). “Rule 9(b) demands that the circumstances constituting the alleged fraud be 7 ‘specific enough to give defendants notice of the particular misconduct . . . so that they can 8 defend against the charge and not just deny that they have done anything wrong.’” Id. at 9 1124 (quoting Bly-Magee v. California, 236 F.3d 1014, 1019 (9th Cir. 2001)). This means 10 that allegations of fraud must be stated with “specificity including an account of the ‘time, 11 place, and specific content of the false representations as well as the identities of the parties 12 to the misrepresentations.’” Swartz v. KPMG LLP, 476 F.3d 756, 764 (9th Cir. 2007) 13 (quoting Edwards v. Marin Park, Inc., 356 F.3d 1058, 1066 (9th Cir. 2004)).2 14 III. ANALYSIS 15 Plaintiff’s opposition brief is largely unhelpful and does not address the vast majority 16 of the arguments advanced by Defendant in its motion to dismiss. Apart from some 17 argument regarding the economic loss rule and the existence of a transactional relationship 18 between the parties, Plaintiff’s Response recapitulates his Complaint and recites the 19 applicable legal standards for Rule 12(b)(6) motions and Rule 9(b)’s particularity 20
21 2 Defendant argues that Poston must satisfy California’s additional fraud pleading requirements for a 22 “corporate defendant” and cites to a California Court of Appeal case for support. (See ECF No. 5 at 5:25– 6:1 (citing Tarmann v. State Farm Mut. Auto. Ins. Co., 2 Cal. App. 4th 153, 157 (Cal. Ct. App. 1991)).) 23 The court in Tarmann specifies additional requirements for pleading fraud against a corporation under California law. See Tarmann, 2 Cal. App. 4th at 157 (holding that, when suing a corporate defendant for 24 fraud, a plaintiff must include “the names of the persons who made the allegedly fraudulent 25 representations, their authority to speak, to whom they spoke, what they said or wrote, and when it was said or written”). However, the Ninth Circuit has held “that Rule 9(b)’s particularity requirement applies 26 to state-law causes of action.” Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1103 (9th Cir. 2003) (quoting Hayduk v. Lanna, 775 F.2d 441, 443 (1st Cir. 1985)). As a result, the Court only applies Rule 27 9(b)’s requirements in determining the sufficiency of Plaintiff’s Complaint. See Erie R.R. Co. v. Tompkins, 304 U.S. 64 (1938) (holding that federal courts sitting in diversity shall apply state substantive 28 1 requirement. (ECF No. 6.) Indeed, by his silence, Plaintiff appears to concede the merits 2 of the bulk of Defendant’s arguments. See Franchise Tax Bd. of Cal. v. Hyatt, 587 U.S. 3 230, 235 n.1 (2019) (deeming an argument waived where the defendant failed to raise an 4 issue in the opposition brief). Nonetheless, the Court will analyze whether Plaintiff has 5 sufficiently alleged cognizable fraud and UCL claims. 6 A. Request for Judicial Notice 7 Defendant requests the Court take judicial notice that “the United States 8 Environmental Protection Agency (‘EPA’) estimated that 2020–2022 model-year 9 Chevrolet Bolts have a total range of 259 miles.” (ECF No. 5-2 at 2:1–4.) “A court may 10 consider evidence on which the complaint ‘necessarily relies’ if: (1) the complaint refers 11 to the document; (2) the document is central to the plaintiff’s claim; and (3) no party 12 questions the authenticity of the copy attached to the 12(b)(6) motion.” Marder v. Lopez, 13 450 F.3d 445, 448 (9th Cir. 2006). 14 The Court declines to take judicial notice of these EPA estimates because it finds 15 them unnecessary to resolve the instant motion. See Ecological Rts. Found. v. PacifiCorp, 16 --- F. Supp. 3d ---, No. 23-CV-05179-JST, 2024 WL 3186566, at *4 (N.D. Cal. June 26, 17 2024) (denying request for judicial notice of documents the court did not consider in 18 deciding the motion); see also Cal. Sportfishing Prot. All. v. Shiloh Grp., LLC, 268 F. Supp. 19 3d 1029, 1039 (N.D. Cal. 2017) (same). Accordingly, Defendant’s request for judicial 20 notice is denied. 21 B. Fraud 22 Defendant avers that the Complaint does not allege fraud with the level of specificity 23 required by Rule 9(b). In his Response, Plaintiff does not address the bulk of Defendant’s 24 arguments and instead claims only that a transactional relationship exists between Plaintiff 25 26 27 28 1 and Defendant and that Plaintiff should be given leave to amend his Complaint. (ECF No. 2 6 at 7:23–8:25.3) 3 “A cause of action for fraud requires proof of five elements: (1) misrepresentation; 4 (2) knowledge of the statement’s falsity; (3) intent to induce reliance; (4) justifiable 5 reliance; and (5) resulting damage.” Body Jewelz, Inc. v. Valley Forge Ins. Co., 241 F. 6 Supp. 3d 1084, 1091 (C.D. Cal. 2017) (citing Hunter v. Up-Right, Inc., 6 Cal. 4th 1174, 7 1184 (Cal. 1993); Lazar v. Superior Court, 12 Cal. 4th 631, 638 (Cal. 1996)). To state a 8 cognizable fraud claim, a plaintiff must allege facts to satisfy these elements with the 9 requisite particularity and specificity of Rule 9(b). See Moore v. Mars Petcare US, Inc., 10 966 F.3d 1007, 1019 (9th Cir. 2020); see also Kearns, 567 F.3d at 1124. 11 As to the first element of his fraud claim, Plaintiff alleges fraud under two separate 12 theories: affirmative misrepresentation and fraudulent concealment. (Compl. ¶¶ 79–93.) 13 1. Affirmative Misrepresentation 14 A plaintiff fails to allege affirmative misrepresentation in a consumer action for 15 fraud where she fails to state what advertisements or sales materials specifically stated, 16 when she was exposed to them, or which ones she found to be material. Kearns, 567 F.3d 17 at 1126; see also In re Volkswagen “Clean Diesel” Mktg., Sales Pracs., & Prod. Liab. 18 Litig., 349 F. Supp. 3d 881, 914–15 (N.D. Cal. 2018) (holding fraud was not pleaded with 19 sufficient particularity where a plaintiff claimed the vehicle she purchased “could not 20 deliver the advertised combination of low emissions, high performance, and fuel 21 economy,” but she did not “identify when and where she saw this advertising, what type 22 of advertising it was, or what the advertising actually represented,” nor did she identify 23 which statement(s) she relied upon in her decision to purchase the vehicle (citation 24 omitted)). 25 26
27 3 Plaintiff’s Response does not contain page numbers. (See ECF No. 6.) The page numbers here cited by the Court refer to the page number provided on the PDF. Plaintiff is cautioned that future failure to 28 1 While Poston lays out GM employee, Adam Piper’s, exact words in October of 2019 2 (Compl. ¶ 24), Poston fails to achieve that same level of specificity where he more broadly 3 refers to “marketing . . . on GM’s website . . . . that the vehicle had a long-range and was 4 safe” (Id. ¶ 80). Crucially, whether these and similar alleged misrepresentations were 5 specific or broad, Poston does not state when he was exposed to any of them and therefore 6 insufficiently pleads fraud. Kearns, 567 F.3d at 1126. Poston also does not detail which 7 misrepresentations he found to be material, rather, he conclusively states that they were 8 material. (Compl. ¶¶ 34, 81, 86, 89, 131.) The misrepresentation’s impact on him is the 9 operative component here, and Poston fails to supply it. 10 By failing to plead the who, what, when, where, how of the alleged 11 misrepresentations, Poston denies GM the opportunity to respond. Kearns, 567 F.3d at 12 1126. Thus, Plaintiff does not plead facts with sufficient particularity to allege fraud based 13 on affirmative misrepresentation. 14 2. Fraudulent Concealment 15 To state a claim for fraudulent concealment, a plaintiff must establish: 16 (1) concealment or suppression of a material fact; (2) by a defendant with a duty to disclose the fact to the plaintiff; (3) the 17 defendant intended to defraud the plaintiff by intentionally 18 concealing or suppressing the fact; (4) the plaintiff was unaware of the fact and would not have acted as he or she did if he or she 19 had known of the concealed or suppressed fact; and (5) plaintiff 20 sustained damage as a result of the concealment or suppression of the fact. 21
22 Graham v. Bank of Am., N.A., 172 Cal. Rptr. 3d 218, 228 (Cal. Ct. App. 2014) 23 (citation omitted). 24 GM moves to dismiss the claim on the grounds that Plaintiff fails to plead GM’s 25 fraud with Rule 9(b)’s requisite specificity. (ECF No. 5 at 1:13–17.) GM also moves to 26 dismiss this claim because Poston fails to allege facts plausibly showing that GM knew of 27 and concealed any material facts before Plaintiff bought his Bolt. (Id. at 1:18–20.) Finally, 28 GM argues Poston’s fraudulent concealment claims must fail because they are barred by 1 California’s economic loss rule and because Plaintiff cannot allege a transactional 2 relationship with GM that would give rise to a duty to disclose. (Id. at 1:23–26, 11:8–12:9, 3 13:15–14:9.) 4 Some courts have used a relaxed Rule 9(b) standard where the claim rests on an 5 alleged fraudulent concealment because, when the fraud is conducted by concealment, the 6 plaintiff is inherently less able to plead the specific time, place, or content of the omission 7 relative to an active misrepresentation. See, e.g., UMG Recordings, Inc. v. Glob. Eagle 8 Ent., 117 F. Supp. 3d 1092, 1107 (C.D. Cal. 2015); see also Huntair, Inc. v. Gladstone, 9 774 F. Supp. 2d 1035, 1044 (N.D. Cal. 2011). However, even where this somewhat relaxed 10 standard is applied, it does not eliminate Rule 9(b)’s requirements that the plaintiff plead 11 with particularity all other elements of his claim. See Kearns, 567 F.3d at 1127. 12 Therefore, Plaintiff’s claim of fraudulent concealment fails because Plaintiff does 13 not allege with sufficient specificity the who, what, when, where of GM’s fraudulent 14 concealment. Fraudulent concealment is more than the simple nondisclosure of material 15 facts. Cho v. Hyundai Motor Co., Ltd., 636 F. Supp. 3d 1149, 1166 (C.D. Cal. 2022). “To 16 plead active concealment, [p]laintiffs must point to specific affirmative acts [d]efendants 17 took ‘in hiding, concealing[,] or covering up the matters complained of.’” Id. (quoting 18 Herron v. Best Buy Co. Inc., 924 F. Supp. 2d 1161, 1176 (E.D. Cal. 2013). In his 19 Complaint, Plaintiff does not plead facts pointing to any specific acts GM took to cover up 20 the potential dangers of the Bolt battery or its shorter-than-quoted range. Contra Collins 21 v. eMachines, Inc., 134 Cal. Rptr. 3d 588, 594 (Cal. Ct. App. 2011), as modified (Dec. 28, 22 2011) (holding a complaint sufficiently alleged active concealment of a product defect 23 where it alleged corporate directives to continue selling the defective product and “a 24 customer service campaign designed to preclude consumer discovery” of the defect). Thus, 25 Poston fails to plead the first element of fraudulent concealment—the concealment or 26 suppression of a material fact—with the level of specificity required by Rule 9(b). Because 27 the Court finds Poston failed to plead this first element, it need not reach GM’s remaining 28 arguments. 1 C. UCL Claim 2 The UCL prohibits “any unlawful, unfair[,] or fraudulent business act or practice.” 3 Cal. Bus. & Prof. Code § 17200. The statute is “violated where a defendant’s act or 4 practice violates any of the [UCL’s] prongs.” Davis v. HSBC Bank Nevada, N.A., 691 F.3d 5 1152, 1168 (9th Cir. 2012). 6 A plaintiff may pursue a claim under California’s UCL via any or all of three prongs: 7 the “unlawful” prong, which bars practices that are forbidden by any other law; the “unfair” 8 prong, which bars unfair conduct; and the “fraudulent” prong, which bars practices that are 9 likely to deceive the public. In re Toyota RAV4 Hybrid Fuel Tank Litig., 534 F. Supp. 3d 10 1067, 1100 (N.D. Cal. 2021). 11 Poston claims that GM’s conduct violated all three prongs of the UCL. (Compl. 12 ¶¶ 98–131.) In its motion to dismiss, GM argues that the Complaint fails to adequately 13 allege that GM violated these prongs. (ECF No. 5 at 14:10–16:8.) GM supports this 14 argument by claiming that Rule 9(b)’s heightened pleading standards apply to claims for 15 violations of the UCL. (See id. at 4:19–22 (citing Kearns, 567 F.3d at 1125).) This 16 misrepresents the holding of Kearns, which required a pleading to satisfy Rule 9(b) where 17 the claims were “grounded in fraud.” See Kearns, 567 F.3d at 1125. Because Plaintiff 18 alleges claims beyond fraud, including violations of the Song-Beverly Act, this Court shall 19 apply Rule 9(b)’s heighted pleading standard only to his fraud claim, his UCL fraudulent 20 practices claim, and his UCL unlawfulness claim to the extent it is predicated upon fraud. 21 Poston’s claims otherwise brought under the unfair and unlawful practices prongs of the 22 UCL shall be evaluated under Rule 12(b)(6)’s plausibility standard. 23 1. Unfair Business Practices 24 Plaintiff’s Complaint alleges unfairness under the UCL by claiming Plaintiff’s injury 25 outweighs GM’s reasons or justifications for its conduct. (Compl. ¶¶ 99–105.) GM moves 26 to dismiss this claim on the grounds that the Complaint does not reference any established 27 public policy that GM’s actions have violated, or claim that the conduct is immoral, 28 unethical, oppressive, or unscrupulous. (ECF No. 5 at 16:1–4.) 1 GM’s representation of the UCL’s requirements is incomplete. “The UCL does not 2 define the term ‘unfair.’ In fact, the proper definition of ‘unfair’ conduct against consumers 3 ‘is currently in flux’ among California courts.” Hodsdon v. Mars, Inc., 891 F.3d 857, 866 4 (9th Cir. 2018) (quoting Davis v. HSBC Bank Nev., N.A., 691 F.3d 1152, 1169 (9th Cir. 5 2012)). The California Supreme Court lately noted that courts currently apply three 6 different tests to analyze UCL unfairness claims, but the court did not approve or 7 disapprove of any. Nationwide Biweekly Administration, Inc. v. Superior Court of 8 Alameda County, 462 P.3d 461, 472 n.10 (Cal. 2020). First, there is a line of cases applying 9 the “balancing test,” which courts apply in the consumer context and requires courts to 10 “weigh the utility of the defendant’s conduct against the gravity of the harm to the alleged 11 victim.” Id. at 471 n.9 (citation omitted). Second, there are cases applying the “tethering 12 test,” particularly in the competitor context, which requires that the wrongfulness of the 13 conduct at issue “be tethered to specific constitutional, statutory[,] or regulatory 14 provisions”—or the policy or spirit of such a law—even if there may be no precise violation 15 of those provisions. Id. at 472 n.10 (citation omitted). And third, there is the “section 5 16 test,” which is drawn from that provision of the Federal Trade Commission Act, and which 17 asks whether there is substantial injury to consumers that is not outweighed by 18 countervailing benefits to consumers and competition and is of a character that consumers 19 themselves could not have reasonably avoided. Id. 20 Unlike a common-law fraudulent concealment claim, pleading a claim under the 21 unfair prong of the UCL does not require the plaintiff to allege a duty to disclose. See 22 Torres v. Botanic Tonics, LLC, --- F. Supp. 3d ---, No. 23-CV-01460-VC, 2023 WL 23 8852754, at *1 (N.D. Cal. Dec. 21, 2023) (“Depending on the facts, if a seller knows that 24 a product poses a serious danger to its consumers and chooses to sell it without warning of 25 the danger, that seller could potentially be liable under the unfair-practices prong even if 26 there would be no liability for failure to disclose under any other statutory or common law 27 cause of action.”). Therefore, the Court need not analyze GM’s arguments concerning the 28 duty to disclose. 1 Given that this case appears in the consumer context where courts frequently apply 2 the balancing test, Poston frames his claim around the balancing test. Sufficiently alleging 3 a theory of liability under even one test allows Poston to plausibly state a claim for relief, 4 so the Court, too, shall apply the balancing test. Nationwide Biweekly Administration, Inc., 5 462 P.3d at 472 n.9. 6 Poston plausibly alleges that the gravity of his harm—the inadvertent purchase of a 7 dangerous and underperforming vehicle that causes him anxiety—could outweigh the 8 utility of GM’s conduct in continuing to market and sell a vehicle with known defects. GM 9 is incorrect when it argues Plaintiff fails to allege a basis for concluding his injury 10 outweighs the reasons, justifications, and motives of GM. (ECF No. 5 at 16:5–7.) GM 11 issued a vehicle recall notice and informed consumers that the vehicle should not be parked 12 indoors overnight due to the danger it may ignite as the battery nears a full charge. (Compl. 13 ¶ 30.) Plaintiff points out the possibility of vehicle will catch fire inherently presents a 14 safety risk, and that, as a result, he “is forced to make unforeseen accommodations and take 15 precautions that interfere with [his] normal and expected use of the vehicle.” (Id. ¶ 31.) 16 Further, Plaintiff alleges that the knowledge of the danger causes him “anxiety, fear[,] and 17 emotional distress.” (Id. ¶ 32.) It is therefore entirely plausible that such injuries outweigh 18 GM’s reasons, justifications, and motives for selling a faulty vehicle and thus the claim 19 surmounts Rule 12(b)(6)’s pleading threshold. Plaintiff has sufficiently alleged a cause of 20 action under the unfairness prong of the UCL. 21 2. Unlawful Business Practices 22 The unlawful prong of the UCL “‘borrows’ violations of other laws and treats them 23 as unlawful practices.” Martinez v. Welk Grp., Inc., 907 F. Supp. 2d 1123, 1139 (S.D. Cal. 24 2012) (citations omitted). The pleading must allege the way in which the alleged practices 25 violated the “borrowed” law by “stat[ing] with reasonable particularity the facts supporting 26 the statutory elements of the violation.” Khoury v. Maly’s of Cal., Inc., 14 Cal. App. 4th 27 612, 619 (Cal. Ct. App. 1993). The unlawful prong includes business practices “forbidden 28 by law, be it civil or criminal, federal, state, or municipal, statutory, regulatory, or court- 1 made.” Shroyer v. New Cingular Wireless Servs., 622 F.3d 1035, 1043–1044 (9th Cir. 2 2010) (citation omitted). Where a plaintiff cannot state a claim under a “borrowed” law, 3 he or she cannot state a claim under the UCL’s unlawful prong either. See, e.g., Pellerin 4 v. Honeywell Int’l, Inc., 877 F. Supp. 2d 983, 992 (S.D. Cal. 2012) (“A UCL claim must 5 be dismissed if the plaintiff has not stated a claim for the predicate acts upon which he 6 bases the claim.”). 7 GM argues that Plaintiff’s claim under the unlawful prong is deficient because 8 Poston does not identify an underlying statute to borrow from. (ECF No. 5 at 14:17–23.) 9 GM further argues that, insofar as Plaintiff’s unlawful prong claim may be predicated upon 10 GM’s violation of the Song-Beverly Act, the claim must be dismissed because an alleged 11 breach of warranty is a breach of contract, and a breach of contract is not an unlawful act 12 for the purposes of the UCL. (Id. at 14:24–15:13.) As already noted, Poston did not 13 respond to any of GM’s arguments regarding his UCL claim. (See generally ECF No. 6.) 14 Although the Court recognizes that Plaintiff does not specify upon which statute(s) 15 he predicates his UCL unlawfulness claim, the Court shall move forward with its analysis 16 based on Plaintiff’s claims for common-law fraud and violations of the Song-Beverly Act. 17 To the extent Poston intends for his UCL claim to borrow from his insufficiently 18 alleged fraud claims, his UCL claim under the unlawful prong fails because, as discussed 19 above, he has not pled fraud with sufficient specificity. See supra Section III.B. 20 To the extent Poston intends for his UCL claim to borrow from his claims of breach 21 of express and implied warranties in violation of the Song-Beverly Act, it stands. While 22 GM cites district court cases holding that a UCL unlawfulness claim cannot be based on a 23 breach of contract, (see, e.g., ECF No. 5 at 14:26–15:3 (citing Boland, Inc. v. Rolf C. Hagen 24 (USA) Corp., 685 F. Supp. 2d 1094, 1110 (E.D. Cal. 2010))), here, the Song-Beverly Act 25 provides for a statutory violation beyond mere breach of an express warranty or breach of 26 a contract. 27 The Song-Beverly Act imposes additional requirements beyond those contractual 28 duties “voluntarily undertaken by the parties to the contract, not imposed by state or federal 1 law.” Boland, 685 F. Supp. 2d at 1110 (quoting Smith v. Wells Fargo Bank, N.A., 38 Cal. 2 Rptr. 3d 653, 672 (Cal. Ct. App. 2005), as modified on denial of reh’g (Jan. 26, 2006)). 3 For instance, Plaintiff appears to make a breach of express warranty under the Song- 4 Beverly Act claim pursuant to California Civil Code Section 1793.2(d)(1), which requires 5 a manufacturer that “does not service or repair the goods to conform to the applicable 6 express warranties after a reasonable number of attempts” to “either replace the goods or 7 reimburse the buyer in an amount equal to the purchase price paid by the buyer.” This 8 provision creates a requirement beyond an express warranty or duty GM voluntarily 9 contracted to undertake. Poston claims GM’s actions violated this statutory requirement. 10 He states that, “[a]lthough [GM] was unable to service or repair the [Plaintiff’s car] to 11 conform to the applicable express warranties after a reasonable number of attempts, [GM] 12 failed to replace the [Plaintiff’s car] or make restitution to [Poston] in accordance with the 13 [Song-Beverly Act].” (Compl. ¶ 52.) 14 While breach of whatever express warranty GM gave to Plaintiff at the time of sale 15 may be a breach of contract and thus insufficient to constitute breach of the UCL’s unlawful 16 prong on its own, Plaintiff’s Complaint specifies provisions of the Song-Beverly Act that 17 GM violated above and beyond breach of the express warranty. Therefore, this is exactly 18 the kind of statutory breach for which the UCL’s unlawfulness prong provides an additional 19 cause of action. Shroyer, 622 F.3d at 1043–1044. 20 Without contemplating the sufficiency of Plaintiff’s allegations under the Song- 21 Beverly Act, because Defendant does not here challenge them, breach of the Song- 22 Beverly’s express warranty provision, Cal. Civ. Code § 1793.2, suffices as a statutory 23 violation upon which a UCL unlawfulness claim may be predicated. 24 Further, to the extent Poston predicates his UCL unlawful prong claim on his claim 25 of breach of implied warranties in violation of the Song-Beverly Act, that alleged violation 26 may serve as a predicate for his UCL claim because it also constitutes a statutory breach. 27 See In re Seagate Tech. LLC Litig., 233 F. Supp. 3d 776, 797 (N.D. Cal. 2017) (denying a 28 motion to dismiss a UCL unlawful claim where it was predicated on California’s express 1 and implied warranty statutes, but granting the motion where it was based on breach of an 2 express warranty); see also Elias v. Hewlett-Packard Co., No. 12-cv-00421-LHK, 2014 3 WL 493034, at *11, n.12 (N.D. Cal. Feb. 5, 2014) (holding that the Song-Beverly Act 4 creates an implied warranty, meaning when breach of that implied warranty is sufficiently 5 alleged, it constitutes a statutory breach under the UCL and thus can be borrowed by the 6 UCL unlawful prong). Thus, the Court will grant GM’s motion to dismiss this claim only 7 as it relates to Poston’s fraud claim, but not as it relates to Plaintiff’s claims under the Song- 8 Beverly Act. (ECF No. 5.) 9 3. Fraudulent Business Practices 10 Distinct from common-law fraud, violation of the UCL fraudulent business practices 11 prong requires only a showing that members of the public are likely to be deceived and that 12 the plaintiff suffered economic injury as a result of the deception. Beaver v. Tarsadia 13 Hotels, 29 F. Supp. 3d 1294, 1316 (S.D. Cal. 2014), aff’d, 816 F.3d 1170 (9th Cir. 2016). 14 As noted above, however, Rule 9(b)’s heightened pleading standard applies to claims under 15 the fraud prong of the UCL. Kearns, 567 F.3d at 1125. Because Poston failed to plead 16 common-law fraud with sufficient specificity under Rule 9(b), his UCL fraud claim also 17 fails and must be dismissed. See supra Section III.B. 18 IV. CONCLUSION 19 Accordingly, the Court DENIES Defendant’s Request for Judicial Notice. (ECF 20 No. 5-2.) The Court further rules as follows on Defendant’s Motion to Dismiss Plaintiff’s 21 Complaint (ECF No. 5): 22 1. GRANTED as to Plaintiff’s fraud claim; 23 2. GRANTED IN PART and DENIED IN PART as to Plaintiff’s UCL Claim 24 a. DENIED as to Plaintiff’s claim under the unfair prong; 25 b. GRANTED as to Plaintiff’s claim under the fraudulent practices prong. 26 c. GRANTED as to Plaintiff’s claim under the unlawful prong insofar as it 27 borrows from his insufficiently alleged fraud claim; and 28 l d. DENIED as to Plaintiff's claim under the unlawful prong insofar as it 2 relates to violations of the Song-Beverly Act. 3 To the extent the Court dismisses Plaintiff's claims, it does so without prejudice. 4 ||See Morongo Band of Mission Indians v. Rose, 893 F.2d 1074, 1079 (9th Cir. 1990) 5 ||(affirming that leave to amend should be freely granted). If Plaintiff wishes to file an 6 || Amended Complaint, he must do so on or before July 31, 2024. If Plaintiff fails to amend, 7 || Defendant is ordered to file its response on or before August 7, 2024. 8 IT IS SO ORDERED.
10 || DATED: July 22, 2024 Lin A (Lyohaa 6 11 United States District Judge 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 —417_