Cholakyan v. Mercedes-Benz USA, LLC

• Citation: 796 F.Supp.2d 1220
• Decision Date: 30 June 2011
• Docket Number: Case No. CV 10–05944 MMM (JCx).
• Parties: Tigran CHOLAKYAN, individually and behalf of all others similarly situated, Plaintiff, v. MERCEDES–BENZ USA, LLC, Defendant.
• Court: U.S. District Court — Central District of California

796 F.Supp.2d 1220

Tigran CHOLAKYAN, individually and behalf of all others similarly situated, Plaintiff,

v.MERCEDES–BENZ USA, LLC, Defendant.

Case No. CV 10–05944 MMM (JCx).

United States District Court, C.D. California.

June 30, 2011.

Dara Tabesh, Erotech Law Group PC, San Francisco, CA, Matthew Mendelsohn, Mazie Slater Katz & Freeman LLC, Roseland, NJ, Payam Shahian, Strategic Legal Practices, APC, Los Angeles, CA, Robert L. Starr, Law Office of Robert L. Starr, Woodland Hills, CA, for Plaintiff.

Troy M. Yoshino, Billie D. Salinas, Eric J. Knapp, Matthew J. Kemner, Carroll Burdick & McDonough LLP, San Francisco, CA, for Defendant.

ORDER DENYING DEFENDANT'S MOTION TO DISMISS UNDER RULE 12(B)(1); GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION TO DISMISS UNDER RULE 12(B)(6); DENYING DEFENDANT'S MOTION TO STRIKE CLASS ALLEGATIONS

MARGARET M. MORROW, District Judge.

On August 10, 2010, plaintiff filed this putative class action against Mercedes–Benz, USA, LLC (“MBUSA”) claiming (1) violations of California's Consumer Legal Remedies Act (CLRA), California Civil Code § 1750 et seq.; (2) violations of California's Secret Warranty Law, California Civil Code § 1795.90 et seq.; (3) violations of California's Unfair Competition Law (“UCL”), California Business & Professions Code § 17200 et seq.; and (4) breach of implied warranty under the Song–Beverly Consumer Warranty Act, California Civil Code §§ 1792 and 1791.1 et seq.¹ On December 13, 2010, defendant filed a motion to dismiss and/or strike.² Plaintiff opposes defendant's motion.³

I. FACTUAL BACKGROUND

Plaintiff Tigran Cholakyan is a California citizen residing in Los Angeles County, California.⁴ On August 7, 2008, Cholakyan purchased a Certified Pre–Owned 2005 E–320 Mercedes Benz, with approximately 28,841 miles on its odometer, from Mercedes–Benz of Calabasas, California.⁵ In January 2010, he parked the vehicle at Burbank Airport before leaving for a weekend trip to Las Vegas.⁶ Upon his return, Cholakyan discovered that it had rained in Los Angeles, and that water had entered and flooded the interior cabin of his vehicle. Subsequently, in March 2010, the interior cabin of plaintiff's vehicle flooded again.⁷

Following the March 2010 incident, Cholakyan brought the vehicle to a Mercedes–Benz authorized dealer, and complained about the water leak and the damage that it had caused.⁸ He asserts that the dealer “verified” that the vehicle was experiencing a “water leak defect,” ⁹ and advised Cholakyan that he would have to pay several hundred dollars, in addition to a diagnostic fee, to repair the water leak defect and resulting damage. ¹⁰ The cost of repairs was not covered under the Certified Pre–Owned vehicle warranty covering the vehicle.¹¹

Cholakyan seeks to represent a class of similarly situated persons who purchased or leased certain “defective Mercedes–Benz E–Class vehicles sold by defendant ... [during] model year[s] 2002 through 2009.” ¹² He contends that defendant knew or should have known that the “Class Vehicles” contain one or more design and/or manufacturing defects that cause them to be highly prone to water leaks and flooding, including, but not limited to, defects in the Class Vehicles' water drainage system that is supposed to prevent water from entering the vehicle.¹³ Cholakyan alleges that the Class Vehicles' water drainage system is uniformly and inherently defective in materials, design, and workmanship because it fails to prevent water from entering the interior of the vehicle.¹⁴

Cholakyan also alleges that the Class Vehicles are inherently defective because the water leaks and water damage cause the vehicles to experience electrical failures.¹⁵ He asserts that, in light “of the danger of catastrophic engine and/or electrical system failure as a result of water entering and flooding a vehicle's interior cabin while the vehicle is in operation,” the Class Vehicles present a safety hazard and are unreasonably dangerous to consumers. Specifically, Cholakyan contends that “the water leak defect can cause engine failure, suddenly and unexpectedly, at any time and under any driving condition or speed, thereby contributing to traffic accidents, which can result in personal injury or death.” ¹⁶

In addition to these safety hazards, Cholakyan asserts that the cost of repairing the water leak defect is exorbitant, since consumers are “required to pay hundreds, if not thousands, of dollars ... to diagnose and repair the water leak defect and to repair the extensive damage that it causes to a vehicle's electrical system, computer system, and other” parts of the vehicle.¹⁷ As a result, Cholakyan alleges on information and belief, the Class Vehicles are not fit for their intended purpose of providing consumers with safe and reliable transportation.¹⁸

Cholakyan contends that defendant actively concealed the water leak defect from him and other putative class members at the time they purchased or leased their vehicles, and at all times thereafter. He asserts on information and belief that as the number of consumer complaints about the water leak defect began to rise in 2008, defendant issued a secret technical service bulletin (“TSB”) to its dealers, acknowledging the water leak defect and implementing cheap, albeit temporary, fixes, such as clearing and/or cleaning the water drainage system, adding seam sealers to parts of the vehicle that are susceptible to the water leak defect, and modifying the Class Vehicles' water drainage system by “[d]rill[ing] [an] additional drain hole.” ¹⁹ The TSB describes the water leak defect as follows:

“Water Entry at A–Pillar: ²⁰ If you receive customer reports in the [Class Vehicles] of water entry in the driver/front passenger foot well and in some cases accompanied with electrical faults due to water in the control units, this may be caused by a few different issues.... (2) Blocked water drain in the upper longitudinal member ²¹ under the front fender (blocked by debris).... (3) Rising water penetrates the interior compartment because of a lack of seam sealer on the double panel of the firewall/longitudinal member on the inside at the top.... (4) Mounting hole for the tilting/sliding roof drain hose, water may back up and overflow into interior.... ²²

The TSB directs MBUSA dealers to perform the clearing, cleaning, resealing, and drainage system modification at no cost to consumers under warranty. ²³ Cholakyan contends, however, that the “clandestine, free clearing, resealing and drainage system modification” is not available to all customers, but is “strictly limited to the most persistent customers ... who complain loudly enough, regardless of whether or not their vehicles are covered under MBUSA's warranty.” ²⁴ He asserts that, to mollify such customers, defendant implemented “another clandestine program to secretly reimburse or pay for repair costs of those Class Vehicles that suffer from the water leak defect and the related damage it causes,” even when the damage occurs outside the vehicle's warranty period.

25 This second “clandestine program” is also strictly limited to those customers who “continuously persisted and demanded free repairs, modifications, or reimbursements for water-leak-defect-related damage.” He asserts that, although defendant refused to provide cost-free modifications or repairs for him and other prospective class members, it paid for such repairs when demanded by “noisy consumers.” ²⁶

Cholakyan alleges on information and belief that “if defendant's secret, temporary fixes, including the modification of the drainage system, [are] successful, the effect of these fixes only last long enough to ensure that the manifestation of the water leak defect occurs outside of the warranty period [;] ... they will not permanently remedy the water leak defect.” ²⁷ This, he asserts, leaves consumers with defective vehicles that are “substantially certain” to experience a recurrence of the water leak defect, additional damage, and associated safety hazards.²⁸ Cholakyan contends, on information and belief, that defendant is aware that resealing and water drainage system modification does not fix the water leak defect; rather, he asserts, defendant has implemented these temporary fixes to prolong the amount of time that will elapse before the water leak defect again manifests itself, thus helping to ensure that the water leak defect occurs outside of the warranty period and shifting financial responsibility for the water leak defect to Class Members and their insurers.²⁹

Cholakyan alleges that, although defendant received notice of the water leak defect from “numerous consumer complaints and dealership repair orders,” it did not offer customers a suitable repair or replacement free of charge, nor to reimburse class members for costs they incurred diagnosing and repairing water damage.³⁰ He contends that defendant knew and concealed the defects present in every Class Vehicle, together with the attendant safety problems and repair costs, both at the time of sale and thereafter.³¹ He maintains that, had he and other class members known of the defects at the time they purchased or leased their vehicles, they would not have purchased or leased, or would have paid a lesser price to take the defects into account.³² As a result, he asserts, class members have “suffered ascertainable loss of money, property, and/or value of their Class Vehicles.” ³³ In addition, he maintains that class members have suffered damage as a consequence of continuous, progressive, and repeated problems associated with the water leaks. ³⁴

II. DISCUSSION

A. Legal Standard Governing Motions To Dismiss Under Rule 12(b)(1)

A party mounting a Rule 12(b)(1) challenge to the court's jurisdiction may do so either on the face of the pleadings or by presenting extrinsic evidence for the court's consideration. See White v. Lee, 227 F.3d 1214, 1242 (9th Cir.2000) (“Rule 12(b)(1) jurisdictional attacks can be either facial or...