Wieg v. General Motors LLC

Opinion

1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 MARY WIEG, et al., Case No. 23-cv-04358-SI

8 Plaintiffs, ORDER GRANTING DEFENDANT’S 9 v. MOTION TO DISMISS PLAINTIFFS’ COMPLAINT WITH LEAVE TO 10 GENERAL MOTORS LLC, AMEND 11 Defendant. Re: Dkt. No. 11

12 13 Defendant has filed a motion to dismiss the fourth and fifth causes of action of plaintiffs’ 14 complaint. Dkt. No. 11. Plaintiffs request leave to file a First Amended Complaint. Dkt. No. 19. 15 Defendant does not oppose permitting plaintiffs to serve an Amended Complaint, but requests that 16 the Court dismiss the fraud claims for failure to state a cause of action on which relief may be 17 granted. Dkt. No. 21 at 3. For the reasons set forth below, the Court GRANTS defendant’s motion 18 to dismiss WITH LEAVE TO AMEND. Plaintiffs shall file their first amended complaint no later 19 than November 17, 2023. 20 21 BACKGROUND 22 I. Factual Allegations1 23 This action arises from plaintiffs Mary Wieg and Stanley Wieg’s (“plaintiffs’”) purchase of 24 a new 2019 Chevrolet Bolt (“Bolt”). Dkt. No. 1 (“Compl.”) ¶¶ 7-9. On December 29, 2018, 25 plaintiffs bought the Bolt from an “authorized dealer and agent” of General Motors (“GM”) in 26

27 1 For the purposes of this motion to dismiss, the Court treats as true the factual allegations 1 California. Id. ¶ 9. 2 In 2021, GM issued a recall notice for the Bolt stating that its batteries may ignite when 3 nearing a full charge. Id. ¶¶ 18, 27. In that recall notice, GM warned that the vehicle’s charge 4 should not exceed 90%, the battery mileage should not fall below 70 miles, and the vehicle should 5 not be parked indoors overnight due to fire risk. Id. According to plaintiffs, GM “falsely 6 represented” that the Bolt was “safe and functional for normal use.” Id. ¶ 16.2 Plaintiffs argue 7 defendant’s misrepresentation is proven by the recall notice. Id. ¶ 84. 8 According to plaintiffs, defendant “marketed the vehicle in a false and misleading manner 9 by advertising it as safe and function[al],” which it was not due to the “presence of defective and 10 dangerous lithium-ion battery modules.” Id. ¶ 17; see also id. ¶ 28 (alleging that GM “falsely 11 represented the safety of the vehicle”). GM also “willfully, falsely, and knowingly marketed the 12 [Bolt] as having the range capability to reach 259-miles on a full charge.” Id. ¶ 69. The mileage 13 range was at the center of GM’s marketing efforts and “featured prominently in virtually every 14 advertisement and consumer communication.” Id. ¶ 74. GM “pervasively and consistently 15 represented that the vehicle had the best-in-class fuel economy and touted its specific mileage range 16 on a single charge, as well as its supposedly superior battery, that was presumably safe.” Id. ¶ 74. 17 Based on GM’s advertising, plaintiffs “believed that they were purchasing a vehicle that was 18 functional and safe” and “could not have reasonably understood or expected these representations 19 to be untrue at the time of acquisition.” Id. ¶¶ 24-25. GM’s representations were false because the 20 vehicle’s lithium-ion battery causes the vehicle to overheat during prolonged use, “resulting in a 21 substantial reduction in the range capability of the vehicle.” Id. ¶ 70. GM “knew the representations 22 were false and intended Plaintiffs to rely on them,” as evidenced by GM’s advertising which stresses 23 the Bolt’s 259-mile range. Id. ¶¶ 71, 79. Defendant “took affirmative actions” to conceal and 24 suppress the fact, about which GM had exclusive knowledge, “that the vehicle could not achieve its 25 expected range and safety due to the overheating battery.” Id. ¶¶ 75, 78. Plaintiffs bought the 26 vehicle “based in part on the false and misleading representations” that were part of an “extensive 27 1 advertising campaign.” Id. ¶¶ 72, 80. “Knowledge and information about the vehicle’s defects were 2 in the exclusive and superior possession of the Defendant and their dealers” and plaintiffs “could 3 not reasonably discover the defect through due diligence.” Id. ¶ 76. Plaintiffs “reasonably and 4 detrimentally relied on Defendant’s misrepresentations when purchasing the vehicle and, had they 5 known the truth, they would not have purchased the vehicle or would have paid significantly less 6 for the vehicle.” Id. ¶ 81. 7 Regarding damages, plaintiffs allege they are entitled to replacement of the Bolt or 8 restitution of the amount paid or payable, plus prejudgment interest; incidental damages plus 9 interest; consequential damages plus interest; attorneys’ fees; civil penalties two times the amount 10 of actual, incidental, and consequential damages; and punitive damages. Id. ¶¶ 37-39, 43-46, 120. 11 Plaintiffs argue that due to the battery defect and risk of fire, they were forced “to make unforeseen 12 accommodations and take precautions that interfere with their normal and expected use of the 13 vehicle.” Id. ¶¶ 19, 30. “Plaintiffs expected to use the vehicle without fear of the vehicle igniting 14 and causing serious bodily harm or death” and “have suffered constant anxiety and loss of sleep as 15 a direct result of the risk the vehicle may spontaneously ignite.” Id. ¶¶ 29, 33. 16 Plaintiffs further allege an injury of overpaying for the vehicle and receiving a quality of 17 vehicle less than what they expected to receive. Id. ¶ 91. They argue they paid an unwarranted 18 premium and “would not have purchased the vehicle if they had known that the vehicle contained a 19 defective, unsafe battery.” Id. ¶ 100. Plaintiffs emphasize their “severely limited” and “significantly 20 diminished” use and enjoyment of the Bolt. Id. ¶¶ 31, 117. 21 22 II. Procedural History 23 On July 26, 2023, plaintiffs filed this action in the Alameda County Superior Court against 24 General Motors and Doe defendants 1 through 10. Compl. The complaint alleges three causes of 25 action under the Song-Beverly Consumer Warranty Act, a fourth case of action claiming fraud, and 26 a fifth cause of action alleging violations of California Business & Professions Code § 17200. Id. 27 At issue in this motion to dismiss are the fourth and fifth causes of action alleging fraud 1 Professions Code § 172003 (collectively the “fraud claims”). Dkt. No. 11 at 1. On August 24, 2023, 2 defendant filed a Notice of Removal based on diversity jurisdiction. Dkt. No. 1. On September 22, 3 2023, plaintiffs filed a motion for remand to state court, which this Court denied on October 26, 4 2023. Dkt. No. 27. 5 6 LEGAL STANDARD 7 Under Federal Rule of Civil Procedure 12(b)(6), a district court must dismiss a complaint if 8 it fails to state a claim upon which relief can be granted. To survive a Rule 12(b)(6) motion to 9 dismiss, the plaintiff must allege “enough facts to state a claim to relief that is plausible on its face.” 10 Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). This “facial plausibility” standard requires 11 the plaintiff to allege facts that add up to “more than a sheer possibility that a defendant has acted 12 unlawfully.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). While courts do not require “heightened 13 fact pleading of specifics,” a plaintiff must allege facts sufficient to “raise a right to relief above the 14 speculative level.” Twombly, 550 U.S. at 555, 570. 15 In deciding whether the plaintiff has stated a claim upon which relief can be granted, the 16 court must assume that the plaintiff’s allegations are true and must draw all reasonable inferences 17 in the plaintiff’s favor. Usher v. City of Los Angeles, 828 F.2d 556, 561 (9th Cir. 1987). However, 18 the court is not required to accept as true “allegations that are merely conclusory, unwarranted 19 deductions of fact, or unreasonable inferences.” In re Gilead Scis. Sec. Litig., 536 F.3d 1049, 1055 20 (9th Cir. 2008). A pleading must contain allegations that have “factual content that allows the court 21 to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 22 U.S. at 678. Dismissal under Rule 12(b)(6) is proper when the complaint “lacks a cognizable legal 23 theory” or “fails to allege sufficient facts to support a cognizable legal theory.” Somers v. Apple, 24 Inc., 729 F.3d 953, 959 (9th Cir. 2013). 25 26 3 California’s Unfair Competition Law, Cal. Bus. & Prof. Code Section 17200, et seq., 27 prohibits “any unlawful, unfair… or fraudulent business act or practice.” Defendant does not move 1 Under Rule 9(b), fraud claims must be pled with particularity. Rule 9(b)’s heightened 2 pleading requirements demand that “[a]verments of fraud must be accompanied by the who, what, 3 when, where, and how” of the misconduct charged and “must set forth what is false or misleading 4 about a statement, and why it is false.” Vess v. Ciba-Geigy Corp. U.S.A., 317 F.3d 1097, 1106 (9th 5 Cir. 2003) (internal quotation marks omitted). Specifically, fraud allegations must include the “time, 6 place, and specific content of the false representations as well as the identities of the parties.” Swartz 7 v. KPMG LLP, 476 F.3d 756, 764 (9th Cir. 2007). However, “[m]alice, intent, knowledge, and other 8 conditions of a person’s mind may be alleged generally.” Fed. R. Civ. P. 9(b). California Business 9 & Professions Code § 17200 claims based on fraud “must satisfy the particularity requirement of 10 Rule 9(b).” Swartz, 476 F.3d at 1105. 11 If the Court dismisses the complaint, it must then decide whether to grant leave to amend. 12 The Ninth Circuit has “repeatedly held that a district court should grant leave to amend even if no 13 request to amend the pleading was made, unless it determines that the pleading could not possibly 14 be cured by the allegation of other facts.” Lopez v. Smith, 203 F.3d 1122, 1130 (9th Cir. 2000) 15 (citations and internal quotation marks omitted). 16 17 DISCUSSION 18 I. Dismissal of Fraud (Affirmative Misrepresentation and Concealment) Claims Based 19 on Pleading Deficiencies 20 GM argues that plaintiffs’ fraud claims are not pled with particularity because they do not 21 contain “the required how, where, to whom, and by what means any misrepresentation or 22 concealment occurred.” Dkt. No. 11 at 4. GM further argues that plaintiffs’ fraud claims should be 23 dismissed for failure to plead the necessary element of justifiable reliance. Id. at 6. GM also argues 24 that setting aside plaintiffs’ failure to meet the Rule 9(b) heightened pleading standard, the fraud 25 claims should be dismissed because plaintiffs “did not allege facts plausibly showing the 26 circumstances of GM’s alleged knowledge, what was allegedly known, or how it was discovered 27 before Plaintiffs purchased the Subject Vehicle” and fraud claims “must be based upon conduct 1 Plaintiffs do not address defendant’s arguments about the complaint’s inadequacies but 2 request leave to amend, indicating they can plead the how, when, to whom and by what means the 3 fraud occurred. Dkt. No. 19.4 Plaintiffs indicate they will amend the complaint to allege that GM 4 knew of the risk of fires in the Bolt vehicles dating back to 2019, prior to the sale of the subject 5 vehicle, and that GM knew of at least twelve fires involving the Bolt by August 2020. Id. 6 The elements of fraud are: “(1) a misrepresentation (false representation, concealment, or 7 nondisclosure); (2) knowledge of falsity (or scienter); (3) intent to defraud, i.e., to induce reliance; 8 (4) justifiable reliance; and (5) resulting damages.” Robinson Helicopter Co., Inc. v. Dana Corp., 9 34 Cal. 4th 979 (2004) (citations omitted).5 10 The Court agrees with defendant that plaintiffs’ fraud claims are not pled with the 11 particularity required by Rule 9(b). Plaintiffs’ complaint is identical to five other complaints before 12 this Court and includes boilerplate and conclusory allegations of fraud. Plaintiffs do not plead facts 13 about the who, when, how, and where with respect to misrepresentations about or concealment of 14 the battery defect. The complaint does not include allegations about the specific content of the 15 allegedly false representations, nor the identity of the GM employee(s) who made the allegedly false 16 statements. It is unclear whether plaintiffs allege GM had knowledge of the battery defect at the 17 time of sale. Intent to defraud and justifiable reliance are pled in only a conclusory fashion, and it 18 is unknown what specific advertisements or marketing materials plaintiffs relied on in purchasing 19 the Bolt. 20 The Court thus dismisses the fraud claims for lack of factual support. However, the factual 21 deficiencies in the pleading could be cured by the allegation of additional facts, so the Court grants 22 4 Plaintiffs’ brief does not contain page numbers. 23

5 Under California law, intentional concealment can be a separate cause of action. See 24 Kaldenbach v. Mutual of Omaha Life Ins. Co., 178 Cal. App. 4th 830, 850 (2009). The elements of a cause of action for “fraud based on concealment” are: “(1) the defendant must have concealed or 25 suppressed a material fact, (2) the defendant must have been under a duty to disclose the fact to the plaintiff, (3) the defendant must have intentionally concealed or suppressed the fact with the intent 26 to defraud the plaintiff, (4) the plaintiff must have been unaware of the fact and would not have acted as he did if he had known of the concealed or suppressed fact, and (5) as a result of the 27 concealment or suppression of the fact, the plaintiff must have sustained damage.” Id. (internal 1 plaintiffs leave to amend. See Lopez, 203 F.3d at 1130. 2 3 II. Whether Plaintiffs’ Fraudulent Concealment Claims Fail as a Matter of Law 4 A. Whether Plaintiffs’ Fraudulent Concealment Claims are Barred by the 5 Economic Loss Rule 6 Defendant argues that plaintiffs second theory of fraud, fraudulent concealment, fails as a 7 matter of law for two reasons. Dkt. No. 11 at 7. The first reason is because plaintiffs seek purely 8 economic damages, “which are barred by the economic loss rule.” Id. 9 The California economic loss rule provides that when “a purchaser’s expectations in a sale 10 are frustrated because the product he bought is not working properly, his remedy is said to be in 11 contract alone, for he has suffered only economic losses.” Robinson Helicopter Co., Inc. v. Dana 12 Corp., 34 Cal. 4th 979, 988 (2004) (internal quotation marks omitted). Economic loss consists of 13 “damages for inadequate value, costs of repair and replacement of the defective product or 14 consequent loss of profits—without any claim of personal injury or damages to other property.” Id. 15 In Robinson, the California Supreme Court held that the economic loss rule did not bar the plaintiff’s 16 fraud and intentional misrepresentations claims because they were independent of the breach of 17 contract. Id. at 991. The court clarified that this holding was “narrow in scope and limited to a 18 defendant’s affirmative misrepresentations on which a plaintiff relies and which expose a plaintiff 19 to liability for personal damages independent of the plaintiff’s economic loss.” Id. at 993. 20 Defendant argues that federal courts “routinely apply the economic loss rule to bar claims 21 for fraudulent concealment against vehicle manufacturers.” Dkt. No. 13 at 7. The cases defendant 22 cites (and the string citations contained in those cases) are all non-binding District Court decisions, 23 mostly decided on the merits and not at the motion to dismiss stage. The Robinson court based its 24 determination that the plaintiff’s fraud claim was not barred by the economic loss rule on the 25 defendant’s “affirmative intentional misrepresentations of fact,” but did not address whether the 26 defendant’s “intentional concealment constitutes an independent tort.” 34 Cal. 4th at 991. The 27 Court cannot find at this stage that the economic loss rule bars plaintiffs’ fraud claims as a matter 1 motions. 2 3 B. Whether Plaintiffs’ Fraudulent Concealment Claims Fail Because Plaintiffs 4 Didn’t Purchase the Bolt Directly From GM 5 Defendants next argue that plaintiffs’ fraudulent concealment claims fail as a matter of law 6 because “California law does not permit a cause of action for concealment that did not arise in a 7 fiduciary relationship, or from a transaction involving direct dealings between plaintiff and 8 defendant” and plaintiffs do not allege that they purchased the Bolt directly from GM or otherwise 9 entered into a transaction with GM. Dkt. No. 11 at 7. 10 Plaintiffs respond that a transactional relationship with GM does exist because plaintiffs 11 purchased the vehicle from a GM dealership, GM backed the purchase with an express warranty, 12 and GM’s authorized dealerships are its agents for the purposes of the sale of GM vehicles. Dkt. 13 No. 19. For purposes of the motion to dismiss, the Court takes as true plaintiffs’ allegation that they 14 bought the Bolt from “an authorized dealer and agent” of GM. Compl. ¶ 9. 15 One of the elements of a claim for fraudulent concealment is that the defendant was under a 16 duty to disclose the concealed fact to the plaintiff. Kaldenbach, 178 Cal. App. 4th at 850. “A duty 17 to disclose facts arises only when the parties are in a relationship that gives rise to the duty, such as 18 seller and buyer, employer and prospective employee, doctor and patient, or parties entering into 19 any kind of contractual arrangement.” Bigler-Engler v. Breg, Inc., 7 Cal. App. 5th 276, 311 (2017). 20 The California Supreme Court has described the necessary relationship as a “transaction” between 21 plaintiff and defendant. Id. (citing Warner Constr. Corp. v. City of Los Angeles, 2 Cal. 3d 285, 294 22 (1970). “Such a transaction must necessarily arise from direct dealings between plaintiff and 23 defendant.” Id. at 312. 24 The Court finds that dismissal as a matter of law would be inappropriate at this stage. The 25 relationship between the “authorized dealer” from whom plaintiffs bought the Bolt and GM is a 26 factual matter, and all inferences must be drawn in favor of plaintiffs. GM argues this case is similar 27 to Bigler-Engler, where a California Court of Appeal reversed a jury verdict for fraudulent 1 relationship” between the plaintiff and the manufacturer “sufficient to give rise to a duty to 2 || disclose.” 7 Cal. App. 5th at 314. The plaintiff had obtained the medical device from a third-party 3 without the manufacturer’s involvement. Jd. There are factual differences between Bigler-Engler 4 and this case that are inappropriate for resolution at the motion to dismiss stage.©° Defendants may 5 raise and further brief this issue in future dispositive motions. 6 7 CONCLUSION 8 For the foregoing reasons and for good cause shown, the Court hereby DISMISSES 9 || plaintiffs’ fourth cause of action (fraud) and the “fraudulent prong” of their fifth cause of action 10 (violations of California Business & Professions Code § 17200) WITH LEAVE TO AMEND. 11 Plaintiffs shall file their amended complaint no later than November 17, 2023. a 12

IT IS SO ORDERED.

v 14 || Dated: November 7, 2023 Site WU tee

15 2 SUSAN ILLSTON a 16 United States District Judge

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Z 18 19 20 21 22 23 24 25 © For example, in Bigler-Engler the evidence did now show that the manufacturer knew prior 26 || to the lawsuit that the plaintiff was a potential user of the medical device, that plaintiff was prescribed the device, or that plaintiff used the device. 7 Cal. App. 5th at 314. The evidence also 7 did not show that the manufacturer “directly advertised its products to consumers” or that it received any monetary benefit directly from plaintiffs individual rental of the medical device. /d. Here, 2g || plaintiffs allege that GM advertised the Bolt directly to consumers, and it is unknown whether GM knew that plaintiffs had purchased a Bolt from the “authorized dealer.”