Asghari v. Volkswagen Grp. of Am., Inc.

• Decision Date: 04 November 2013
• Docket Number: Case No. CV 13–02529 MMM VBKx.
• Citation: 42 F.Supp.3d 1306
• Parties: Ali ASGHARI, Augustino Lamia, Barbara Calver, Supalak Prasobratana, and Daniel Tran, individually, and on behalf of all others similarly situated, Plaintiffs, v. VOLKSWAGEN GROUP OF AMERICA, INC., et al., Defendants.
• Court: U.S. District Court — Central District of California

42 F.Supp.3d 1306

Ali ASGHARI, Augustino Lamia, Barbara Calver, Supalak Prasobratana, and Daniel Tran, individually, and on behalf of all others similarly situated, Plaintiffs

v.VOLKSWAGEN GROUP OF AMERICA, INC., et al., Defendants.

Case No. CV 13–02529 MMM VBKx.

United States District Court, C.D. California.

Signed Nov. 4, 2013.

Payam Shahian, Karen Emily Nakon, Ramtin Shahian, Strategic Legal Practices APC, Cody R. Padgett, Jordan L. Lurie, Capstone Law APC, Los Angeles, CA, Dara Tabesh, Erotech Law Group PC, San Francisco, CA, for Plaintiffs.

Craig L. Winterman, Larry Dean Smith, Jr., Herzfeld and Rubin LLP, Los Angeles, CA, Jeffrey L. Chase, Michael B. Gallub, Herzfeld and Rubin PC, New York, NY, for Defendants.

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTIONS TO DISMISS

MARGARET M. MORROW, District Judge.

On May 1, 2012, Ali Asghari filed this action on his own behalf and on behalf of a nationwide class of similarly situated individuals, against Volkswagen Group of America, Inc. (“VW Group”), Volkswagen AG, and Audi AG (collectively, “defendants”).¹ On August 10, 2012, Asghari filed a first amended complaint, joining Augustino Lamia, Barbara Calver, Supalak Prasobratana, and Daniel Tran as named plaintiffs (collectively, “plaintiffs”).²

VW Group moved to dismiss the first amended complaint on March 1, 2013.³ Plaintiffs oppose the motion.⁴ Volkswagen AG and Audi AG (collectively, “VW/Audi AG”) jointly filed a motion to dismiss the first amended complaint on May 16, 2013.⁵ Plaintiffs oppose that motion as well.⁶

I. BACKGROUND

A. Facts Alleged in the First Amended Complaint

Plaintiffs are California citizens who leased or purchased allegedly defective Audi A4 and A5 vehicles designed, manufactured, distributed, marketed, sold and/or leased by defendants.⁷ Plaintiffs bring this lawsuit on their behalf and on behalf of a nationwide class of all current and former owners or lessees of any 2007 through 2013 model year Audi or Volkswagen vehicle equipped with a 2.0 litre turbocharged engine (the “class vehicles”).⁸ Plaintiffs seek to represent three sub-classes: all members of the nationwide class who reside in the state of California (“the California sub-class”); all members of the nationwide class who reside in the state of New York (“the New York sub-class”); and all members of the nationwide class who purchased or leased their vehicles in the state of California (“the Implied Warranty sub-class”).⁹

Plaintiffs allege that prior to 2007, defendants knew of the following design and/or manufacturing defects in the class vehicles: (1) that the engine is unable to utilize engine oil properly; and (2) that the engine improperly burns off and consumes “abnormally high amounts of oil” (collectively “the oil consumption defect”).¹⁰ Plaintiffs assert that an appropriate amount of oil is essential for the engine to function properly and safely, and that the oil consumption defect prevents the engine from maintaining the proper level of oil.¹¹ They allege that the defect thus creates a safety risk, because it can cause engine failure while the vehicle is in operation.¹² Because the engine can allegedly fail at any time, under any driving condition, and at any speed, plaintiffs assert that the defect creates a serious risk of injury.¹³

Plaintiffs contend that the rate of oil consumption can be as high as one quart every 500 miles.¹⁴ This high rate of consumption purportedly requires that the engine receive “substantial amounts of oil” between scheduled oil changes.¹⁵ As a result, many consumers report that they carry an extra supply of oil in their vehicles at all times.¹⁶

Plaintiffs allege that the oil consumption defect was not reasonably foreseeable to the named plaintiffs or to class members,¹⁷ and that consumers reasonably expected there would be no such defect.¹⁸ Finally, plaintiffs assert that: (1) defendants knew or should have known of the defect;¹⁹ (2) knew about and concealed the defect, and its attendant safety hazards, from plaintiffs and class members, at the time of sale and thereafter;²⁰ and (3) did not recall class vehicles despite receiving notice of the defect from internal sources.²¹

Plaintiffs plead the following claims against all defendants on their own behalf and on behalf of the nationwide class and California sub-class: (1) violation of California's Consumer Legal Remedies Act (“CLRA”), California Civil Code § 1750 et seq.

, and (2) violation of California's Unfair Competition Law (“UCL”), California Business & Professions Code § 17200 et seq. They plead claims against Volkswagen for breach of written warranty under the Magnuson–Moss Warranty Act, 15 U.S.C. § 2310 et seq., and breach of express warranty under California Commercial Code § 2313. On their own behalf and on behalf of the Implied Warranty sub-class, plaintiffs plead a claim for breach of implied warranty against all defendants under the Song–Beverly Consumer Warranty Act, California Civil Code §§ 1792 and 1791.1 et seq. Asghari, on his behalf and on behalf of the New York sub-class, pleads a claim against all defendants for violation of the Consumer Protection from Deceptive Acts and Practices Act, New York General Business Law § 349, et seq., as well as a claim against Volkswagen for violation of express warranty under § 2–313 of New York's U.C.C. Law.

II. DISCUSSION

A. Legal Standard Governing Motions to Dismiss under Rule 12(b)(6)

A Rule 12(b)(6) motion tests the legal sufficiency of the claims asserted in a complaint. A Rule 12(b)(6) dismissal is proper only where there is either a “lack of a cognizable legal theory” or “the absence of sufficient facts alleged under a cognizable legal theory.” Balistreri v. Pacifica Police Department, 901 F.2d 696, 699 (9th Cir.1988). In deciding a Rule 12(b)(6) motion, the court generally looks only to the face of the complaint and documents attached thereto. Van Buskirk v. Cable News Network, Inc., 284 F.3d 977, 980 (9th Cir.2002) ; Hal Roach Studios, Inc. v. Richard Feiner & Co., Inc., 896 F.2d 1542, 1555 n. 19 (9th Cir.1990).

The court must accept all factual allegations pleaded in the complaint as true, and construe them and draw all reasonable inferences from them in favor of the nonmoving party. Cahill v. Liberty Mutual Insurance Co., 80 F.3d 336, 337–38 (9th Cir.1996) ; Mier v. Owens, 57 F.3d 747, 750 (9th Cir.1995). It need not, however, accept as true unreasonable inferences or legal conclusions cast in the form of factual allegations. See Ashcroft v. Iqbal, 556 U.S. 662, 681, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (“[B]are assertions ... amount[ing] to nothing more than a ‘formulaic recitation of the elements' of a constitutional discrimination claim” are not entitled to an assumption of truth, quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ); see also Moss v. U.S. Secret Service, 572 F.3d 962, 969 (9th Cir.2009) (“Such allegations are not to be discounted because they are ‘unrealistic or nonsensical,’ but rather because they do nothing more than state a legal conclusion—even if that conclusion is cast in the form of a factual allegation”).

To survive a motion to dismiss, plaintiff's complaint must “contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ ... A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678, 129 S.Ct. 1937. See also id. (“The plausibility standard is not akin to a ‘probability requirement,’ but it asks for more than a sheer possibility that a defendant has acted unlawfully.... Where a complaint pleads facts that are ‘merely consistent with’ a defendant's liability, it ‘stops short of the line between possibility and plausibility of “entitlement to relief,” ’ ” quoting Twombly, 550 U.S. at 557, 127 S.Ct. 1955 ); Twombly, 550 U.S. at 545, 127 S.Ct. 1955 (“While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the ‘grounds' of his ‘entitle[ment] to relief’ requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do. Factual allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in fact)” (citations omitted)). See also, e.g., Moss, 572 F.3d at 969 (“[F]or a complaint to survive a motion to dismiss, the non-conclusory ‘factual content,’ and reasonable inferences from that content, must be plausibly suggestive of a claim entitling the plaintiff to relief,” citing Iqbal and Twombly ).

B. Whether Plaintiffs State a Claim under the CLRA or the UCL

1. Legal Standard Governing CLRA Claims

The CLRA makes illegal various “unfair methods of competition and unfair or deceptive acts or practices undertaken by any person in a transaction intended to result or which results in the sale or lease of goods or services to any consumer.” Cal. Civ.Code § 1770(a). Conduct that is “likely to mislead a reasonable consumer” violates the CLRA. Colgan v. Leatherman Tool Group, Inc., 135 Cal.App.4th 663, 680, 38 Cal.Rptr.3d 36 (2006) (quoting Nagel v. Twin Laboratories, Inc., 109 Cal.App.4th 39, 54, 134 Cal.Rptr.2d 420 (2003) ). A “reasonable consumer” is an “ordinary consumer acting reasonably under the circumstances,” who “is not versed in the art of inspecting and judging a product, [or] in the process of its preparation or manufacture....” Id. (citing 1A Callmann on Unfair Competition, Trademarks and Monopolies § 5:17 (4th ed.2004) ).

Section 1770(a)(5) prohibits “[r]epresenting that goods or services have ... characteristics, ingredients, uses, benefits, or quantities which they do not have....” In addition, § 1770(a)(7) prohibits “[r]epresenting that goods or services are of...