Hazdovac v. Mercedes-Benz USA, LLC

[6] 7 UNITED STATES DISTRICT COURT 8 NORTHERN DISTRICT OF CALIFORNIA [9] CORY HAZDOVAC, 10 Case No. 20-cv-00377-RS Plaintiff, [11] v. ORDER GRANTING MOTION TO 12 STRIKE AND DENYING MOTION TO MERCEDES-BENZ USA, LLC, DISMISS [13] Defendant. [14] 15 I. INTRODUCTION 16 In this putative class action concerning Mercedes misrepresenting which car parts are 17 covered by a certain warranty, Plaintiff moved to file a Second Amended Complaint (“SAC”) and 18 appended that proposed amended Complaint. Plaintiff was given leave to file “the” proposed 19 Complaint. Instead of filing that Complaint, Plaintiff filed a different amended Complaint, with 20 many changes. This was inappropriate, especially as the changes affected the substance of the case 21 in at least some way. Mercedes’s motion to strike the currently filed SAC is granted, and Plaintiff 22 is directed to file the approved SAC in its stead. 23 Mercedes also moves to dismiss the Complaint, on a plethora of different grounds: Rule 24 9(b), equitable abstention, primary jurisdiction, various standing issues, knowledge and reliance, 25 adequate remedies at law, choice of law rules for non-California buyers, issues with the warranty, 26 and supposed problems with specific parts of the Complaint. Mercedes throws much at the wall 27 but ultimately nothing sticks. Its motion to dismiss (“MTD”) is denied. Both motions are suitable 1 7-1(b). 2 II. BACKGROUND 3 The full background of this case is set out in previous orders. In brief, Plaintiff avers that 4 Mercedes systematically misclassifies certain parts as not being emissions-related or not being 5 high-priced, which allows them to give lesser warranties on those parts than California law would 6 require if they were classified correctly. For example, Plaintiff argues Mercedes misuses the prices 7 given to dealers instead of consumers. Plaintiff’s previous motion to amend sought to clarify that 8 her suit reached all parts Mercedes misclassified. While Mercedes argued this was a drastic 9 expansion of the suit, the motion was granted because Plaintiff had sought injunctive relief 10 requiring Mercedes to identify all misclassified parts throughout the suit. 11 III. LEGAL STANDARD 12 Pursuant to Rule 12(f), a court may strike claims from a pleading for failure to comply 13 with a court order. See, e.g., Siskiyou Reg'l Educ. Project v. U.S. Forest Serv., No. CIV. 03-3013- 14 CO, 2005 WL 2675189, at *2 (D. Or. Oct. 19, 2005) (striking claims because they were in 15 contravention of the court's previous order limiting such claims), aff'd, 565 F.3d 545 (9th Cir. 16 2009). Striking is a severe measure and facts should be viewed in the light most favorable to 17 plaintiffs, yet there is wide discretion in this area. Jeanniton v. City of Honolulu, 2021 U.S. Dist. 18 LEXIS 145737 at *9 (D. Haw. Aug. 4, 2021); Fantasy, Inc. v. Fogerty, 984 F.2d 1524, 1528 (9th 19 Cir. 1993), rev'd on other grounds by Fogerty v. Fantasy, Inc., 510 U.S. 517 (1994). 20 A complaint must contain “a short and plain statement of the claim showing that the 21 pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). A motion to dismiss for failure to meet this 22 standard may be based either on the “lack of a cognizable legal theory” or on “the absence of 23 sufficient facts alleged under a cognizable legal theory.” Balistreri v. Pacifica Police Dep’t, 901 24 F.2d 696, 699 (9th Cir. 1990). In other words, the complaint must contain “factual content 25 allow[ing] the court to draw the reasonable inference that the defendant is liable for the 26 misconduct alleged,” Ashcroft v. Iqbal, 556 U.S. 662, 663 (2009), and be “sufficiently detailed to 27 give fair notice to the opposing party of the nature of the claim so that the party may effectively 1 defend against it[.]” Sensible Foods, LLC v. World Gourmet, Inc., 2011 WL 5244716 , at *3 (N.D. 2 Cal. Nov. 3, 2011) (citing Starr v. Baca, 633 F.3d 1191, 1204 (9th Cir. 2011)). 3 IV. DISCUSSION 4 A. Motion to Strike 5 Plaintiff was not granted leave to file whatever Complaint she wished. She was granted 6 leave to file a specific proposed Complaint, and any assumption otherwise was not reasonable. 7 The motion was so predicated; the order discussed the specifics of the proposed Complaint; and 8 granted leave to file only “the” proposed Complaint. The new Complaint is littered with hundreds 9 of changes compared to the proposed complaint, with paragraph after paragraph of new material in 10 certain sections. While Plaintiff may be correct that these new averments do not significantly 11 change the heft of the Complaint, they do modify the substance to at least some degree. In any 12 case, filing anything but the proposed complaint was inappropriate. (This is unlike a situation in 13 which plaintiffs have not submitted a specific proposed amended complaint, or an order is phrased 14 as granting leave to file a complaint amending a specific count.) Thus, as in Hyatt v. Miller, 15 striking the overreaching Complaint is an appropriate remedy. 2020 U.S. Dist. LEXIS 177179 , at 16 *5-*6 (W.D.N.C. Sept. 25, 2020); see also, e.g., F.D.I.C. v. Kooyomjian, 220 F.3d 10, 15 (1st Cir. 17 2000). 18 The purpose of motions to strike is to avoid time and cost on spurious litigation. Material 19 should be stricken only if it should have no impact on the outcome of the litigation. Given Plaintiff 20 herself argued her previous motion to amend was only out of an abundance of caution, and the 21 previous order granted it more to clarify the pleadings than to change them, striking is appropriate 22 here. See Wailua Assocs. v. Aetna Cas. & Sur. Co., 183 F.R.D. 550, 554 (D. Haw. 1998). While 23 the material stricken is not itself spurious, it still furthers the policy aim of Rule 12 to strike it. 24 Parties should not have to run redlines on filed documents to make sure there has been no funny 25 business. Plaintiff filed a proposed amended Complaint, and the parties and the court focused on 26 the specifics of that proposed Complaint. If Plaintiff had sought a more general leave to amend, 27 this motion might have been avoided. Instead, by committing to a specific proposed amended 1 complaint, and not indicating it was merely an example of the sort of amendment she had in mind, 2 Plaintiff has now wasted time of the court and other litigants. 3 The sole remaining question on this motion is whether to force Plaintiff to revert to the 4 First Amended Complaint, or to allow her to file the originally proposed Second Amended 5 Complaint. Courts striking material in this situation generally do not force a further rollback to a 6 previous version of the Complaint. See, e.g., Kooyomjian, 220 F.3d at 15 . In this case, the 20 days 7 given for filing the proposed Complaint might have contributed to the assumption that further 8 changes were permissible, even though that would not have been a reasonable interpretation. Still, 9 it is enough reason that no further sanctions are justified beyond striking the unapproved 10 Complaint. Plaintiffs are directed to file the approved SAC within two days of this order. 11 B. Motion to Dismiss 12 1. Rule 9(b) 13 Mercedes moves to dismiss the Complaint, on a long list of grounds. (Several of these are 14 effectively motions for reconsideration from the previous MTD.) First, it argues Plaintiff’s 15 Consumer Legal Remedies Act (“CLRA”) and Unfair Competition Law (“UCL”) claims must 16 satisfy Rule 9(b)’s heightened pleading standard requiring specifics for claims sounding in fraud. 17 (Somewhat ironically, Mercedes itself advances this argument in only a conclusory fashion.) Not 18 all claims under these statutes must satisfy the heightened pleading requirements; only those 19 grounded in fraud. Kearns v. Ford Motor Co., 567 F.3d 1120, 1125 (9th Cir. 2009). Plaintiff does 20 not address this issue in her opposition. Elsewhere in her brief, however, Plaintiff makes clear that 21 her case does not depend on there being an intentional misrepresentation. See Opp. at 17-18 22 (discussing reliance and scienter). Thus, Rule 9(b) is not a bar at this stage. 23 2. Equitable Abstention 24 Mercedes next argues adjudication of Plaintiff’s UCL claim and the equitable portion of 25 her CLRA claim should be subject to abstention on equitable grounds. Specifically, Mercedes 26 argues Plaintiff effectively asks for a judicial assumption of the role of the California Air 27 Resources Board (“CARB”), the group that approves the list of warranted parts. Mercedes notes 1 that determining whether something is a high-priced emissions-related part can involve repeated 2 consultation with CARB and detailed technical investigation inappropriate for resolution through a 3 lawsuit. Further, courts “cannot assume general regulatory powers … through the guise of 4 enforcing [the UCL].” Samura v. Kaiser Found. Health Plan, Inc., 17 Cal. App. 4th 1284 , 13015 02 (1993). 6 That is not at all what Plaintiff asks for here. She seeks only a determination of whether 7 Mercedes is complying with the law generally or flouting it systematically, using basic factfinding 8 and statutory interpretation litigation tools. Courts are well-suited for this task. See, e.g., Arce v. 9 Kaiser Foundation Health Plan, Inc., 181 Cal. App. 4th 471, 495-96 (2010). Plaintiff does not 10 knock on the courthouse door again and again with a motley collection of quibbles about different 11 classifications, each with unique reasoning. Instead, she levels a few general allegations, e.g., 12 Mercedes uses the wrong type of price across the board in classifying parts. 13 Thus, this case is unlike Alvarado, where, in Mercedes’s words, the court was asked to 14 “apply the statute’s formula … calculate the legally mandated staffing levels, and to determine the 15 defendant’s compliance or noncompliance in each skilled nursing facility serving the class.” Mot. 16 at 9, citing Alvarado v. Selma Convalescent Hosp., 153 Cal. App. 4th 1292, 1297 (2007). Finally, 17 it bears mentioning that Mercedes’s concern for CARB is curious given CARB has submitted a 18 declaration in support of one of Plaintiff’s positions earlier in the case without objecting to the 19 case as a whole. Equitable abstention is inappropriate on this ground. 20 Mercedes also argues for equitable abstention because administrative remedies are 21 available and more effective. In outlining these supposed remedies, Mercedes simply describes the 22 existing regulatory process through which CARB approves lists of parts. This does not advance 23 Mercedes’ case. Mercedes does not point to any mechanism by which Plaintiff can petition CARB 24 directly for review of Mercedes’ parts, or any similar administrative remedy. Plaintiff argues the 25 existing administrative process has failed, and asks the court for redress. Equitable abstention is 26 not justified in this case. [27] 1 3. Primary Jurisdiction 2 Mercedes also argues the Complaint should be dismissed in deference to CARB under the 3 prudential primary jurisdiction doctrine. “The primary jurisdiction doctrine allows [a district] 4 court[] to stay proceedings or to dismiss a complaint without prejudice pending the resolution of 5 an issue within the special competence of an administrative agency.” Clark v. Time Warner Cable, [6] 523 F.3d 1110, 1114 (9th Cir. 2008). Mercedes walks through the factors that are traditionally 7 considered in this area: in short, the need to resolve an issue placed by Congress with the 8 jurisdiction of an administrator with a comprehensive regulatory scheme requiring expertise or 9 uniformity. Mercedes makes a superficially convincing case for why that applies here. 10 Yet declining jurisdiction under this doctrine is inappropriate, for similar reasons as to why 11 equitable abstention is unjustified. Mercedes’ argument would justify declining jurisdiction in 12 nearly every case involving the auto industry, and a host of others. This doctrine is reserved for a 13 “limited set of circumstances” that “‘requires resolution of an issue of first impression, or of a 14 particularly complicated issue that Congress has committed to a regulatory agency.’” In re JUUL 15 Labs, Inc., Marketing, Sales Practices, and Products Liability Litigation, 497 F. Supp. 3d 552 , 580 16 (N.D. Cal. 2020) (quoting Astiana v. Hain Celestial Group, Inc., 783 F.3d 753, 760 (9th Cir. 17 2015.) The existence of an administrative agency with a mandate from Congress does not mean 18 jurisdiction should be declined in the normal case; as is the situation here. Further, “common sense 19 tells us that even when agency expertise would be helpful, a court should not invoke primary 20 jurisdiction when the agency is aware of but has expressed no interest in the subject matter of the 21 litigation.” Astiana, 783 F.3d at 761 . Here, CARB has not objected to this case proceeding. To the 22 contrary, it submitted a declaration for Plaintiff. 23 4. Remedies at Law 24 Another reason Plaintiff’s Complaint should be dismissed, Mercedes argues, is because she 25 has an adequate remedy at law. Unlike the two discretionary doctrines discussed above, if there is 26 an adequate remedy at law a plaintiff’s claim for equitable relief must be dismissed. Sonner v. 27 Premier Nutrition Corp., 971 F.3d 834, 841-44 (9th Cir. 2020). Plaintiff requests money damages 1 under the CLRA and restitution under the CLRA and UCL. Plaintiff argues she lacks an adequate 2 remedy at law because she makes a restitution claim for her out of pocket expenses, distinct from 3 damages for the diminished value of her vehicle’s warranty. Mercedes argues Sharma rejected this 4 sort of logic as a distinction without a difference. Sharma v. Volkswagen AG, 524 F. Supp. 3d 891 5 (N.D. Cal. 2021). Sharma involved misrepresentations about a braking system; plaintiffs alleged a 6 loss of money or value. This case is arguably closer to another case Mercedes cites, Gibson, when 7 a court held that plaintiffs had an adequate remedy at law for Jaguar improperly denying high8 priced warranty coverage for certain parts. Gibson v. Jaguar Land Rover N. Am., 2020 U.S. Dist. 9 LEXIS 168724 , at *9 (C.D. Cal. Sept. 9, 2020). It is true that a nominal difference in value 10 between restitution and damages does not necessarily excuse plaintiffs from complying with 11 Sonner. 12 Plaintiff responds that the order on the previous motion to dismiss decided this issue, and 13 there is no reason to revisit it. Dkt. No. 33. Further, she argues recent caselaw has limited Sonner’s 14 scope, e.g., Martin v. Ford, CV 20-10365-DMG (JPRx) (C.D. Cal. Feb. 17, 2022). (Plaintiff’s 15 Request for Judicial notice of this decision and its other similar requests are denied as moot; any 16 court’s public order can be considered without such a request.) Martin allowed both theories to 17 survive a MTD because “[i]f Plaintiff fails to prove deception but still establishes unlawfulness, 18 restitution would be the only available remedy.” Id. at 8. Just such an outcome seems possible 19 here, so it is not clear Plaintiff indeed has an adequate remedy at law, and Mercedes’s motion 20 cannot be granted on this basis. 21 Mercedes also argues injunctive relief is inappropriate as the complained-of future 22 environmental harms are neither real nor imminent. Clark v. City of Lakewood, 259 F.3d 996 , 23 1007 (9th Cir. 2001). It notes Plaintiff repaired each defect despite the lack of warranty coverage. 24 Yet there are likely some Mercedes owners who do not perform a repair because it is not covered 25 by the warranty, or at least delay it, which—assuming there is at least one misclassified emissions26 related part under Plaintiff’s theory—would lead to environmental harm. Thus, assuming Plaintiff 27 is correct about at least one part, and the factual inferences must be drawn in her favor for this 1 motion, there is real environmental harm. 2 5. Knowledge or Reliance 3 Mercedes also argues Plaintiff’s UCL and CLRA claims should be dismissed because she 4 has not sufficiently pled that Mercedes knew its parts list was incomplete, or that Plaintiff relied 5 on any misrepresentation or omission about the high-priced parts warranty. See Wilson v. Hewlett6 Packard Co., 668 F.3d 1136, 1145 (9th Cir. 2012). Mercedes notes it obtained CARB’s approval 7 for its list. That does not show Mercedes lacked knowledge that its list was incomplete. Indeed, 8 Plaintiff avers that Mercedes knew it had omitted parts, at least after a certain date. SAC at ¶ 44. 9 (All citations to a specific paragraph of the SAC refer to the approved SAC.) Plaintiff adequately 10 pleads at least the possibility that Mercedes knew its representations were false, which is all these 11 statutes require. 12 As to reliance, eventually Plaintiff must show the misrepresentation was an immediate 13 cause of her purchase, and “in its absence the plaintiff in all reasonable probability would not have 14 engaged in the injury-producing conduct.” In re Tobacco II Cases, 46 Cal. 4th 298, 326 (2009) 15 (internal quotation marks omitted). Mercedes argues that Plaintiff makes only a “single allegation” 16 about reliance: “In evaluating the repair costs to be charged, Plaintiff and members of the Classes 17 have justifiably relied on the information in the warranty booklets about parts that should be 18 covered under the high-priced emissions warranty[.]” SAC ¶ 205. To be sure, Plaintiff may not be 19 able to prove there was reliance. Yet the “single allegation” Plaintiff makes is enough to survive a 20 motion to dismiss, as all facts must be inferred in favor of the nonmoving party. Indeed, this was 21 ruled on in the prior MTD order. Dkt. No. 33 at 8–9. 22 6. Standing for Unpurchased Vehicles and Repairs 23 Next on Mercedes’ list of reasons why the Complaint should be dismissed, at least in part, 24 is that Plaintiff asserts claims on behalf of all Mercedes owners who bought vehicles with 25 misclassified parts. This is effectively a motion to reconsider, as the purpose of the previous 26 motion for leave to amend was to clarify that Plaintiff could make claims for all purportedly 27 misclassified parts. The cases Mercedes cites here are inapposite; indeed they actually support 1 Plaintiff’s position, e.g., she suffered a “similar or same injury,” that is, Mercedes misclassifying 2 parts, Wiener v. Dannon, 255 F.R.D. 658, 666 (C.D. Cal. 2009), and as a named Plaintiff she 3 personally sustained some direct injury as a result of the challenged conduct, Armstrong v. Davis, [4] 275 F.3d 849, 860 (9th Cir. 2001). 5 7. Non-California Class Members 6 Mercedes also frames an issue around the non-California class members. Plaintiff’s SAC 7 asserts claims on behalf of purchasers in 12 states outside California. Mercedes argues Mazza 8 forecloses Plaintiff sweeping these consumers into this suit, because it held that under California’s 9 choice of law rules, “each class member’s consumer protection claim should be governed by the 10 consumer protection laws of the jurisdiction in which the transaction took place.” Mazza v. Am. 11 Honda Motor Co., 666 F.3d 581, 594 (9th Cir. 2012). This was so even though American Honda 12 had its headquarters in California, so the alleged misrepresentations emanated from within the 13 state. Here, Mercedes notes, it is headquartered in Delaware. It argues that there is no nexus 14 between the misrepresentations and California. 15 There are multiple clear nexuses between California and the other states: each state at issue 16 chose to use California’s Emissions Warranty law (Opp. at 15); Mercedes chose to incorporate 17 California’s emissions warranty into its warranty in other states (see SAC at ¶ 158); and Mercedes 18 allegedly made misrepresentations to California’s regulator, CARB. Further, as Plaintiff points 19 out, there is no credible allegation that these other states would choose to apply their own 20 consumer protection law in this situation, given that they have already chosen to piggyback off 21 California’s consumer protection law. California and the other states each have an interest in 22 having California’s law interpreted correctly: their interests are not in tension, and even if they 23 must be balanced, California’s outweighs the other states’. Mazza, 666 F.3d at 590 . 24 8. Defect in Materials or Workmanship 25 Mercedes next argues Plaintiff does not allege facts showing that the defects were from 26 materials or workmanship, and the product warranty was limited to those defects, i.e., not design 27 defects. Plaintiff responds that the California Emissions Warranty covers both design defects and 1 materials and workmanship defects. 13 Cal. Code Regs. § 2037(b) (“The manufacturer of each 2 motor vehicle or motor vehicle engine shall warrant […] that the vehicle or engine is (1) designed, 3 built and equipped so as to conform […] and (2) free from defects in materials and workmanship 4 [for greater or lesser periods of time or mileage depending on whether the part is a high-priced 5 emissions-related part or not].”) Mercedes, in turn, contends that the warranty it provided to 6 customers does not mention design defects. Yet Mercedes incorporated the California Emissions 7 Warranty into its own warranty, and California’s includes design defects. Reading the facts in the 8 light most favorable to Plaintiff, as required, Plaintiff has framed her case so that either type of 9 defect would qualify. (Drawing inferences in favor of Plaintiff at this stage also means the points 10 Mercedes raises in its reply, about the parts possibly being excluded from coverage because of 11 alterations or incorrect maintenance, for example, do not pose an issue for Plaintiff.) 12 9. Vacuum Pump 13 Finally, Mercedes argues that Plaintiff alleges no facts showing that the vacuum pump 14 should have been covered by the high-priced warranty. To the contrary, Plaintiff asserts that this 15 part’s failure causes the check engine light to illuminate, which seems to be enough for CARB 16 (per its declaration). Mercedes is understandably confused as to how CARB can assert this 17 position, which may sweep nearly every part into the high-priced warranty, and conflicts with 18 CARB’s approving a list without it, but that is a question to answer down the road. Plaintiff’s 19 assertions regarding the vacuum pump are sufficient for this stage of litigation. 20 V. CONCLUSION 21 For the reasons set forth above, Mercedes’s motion to strike the filed SAC is granted; 22 Plaintiff is directed to file the originally proposed SAC within two days. Mercedes’ MTD is 23 denied. [24] 25 IT IS SO ORDERED. [26] 27 Dated: June 15, 2022 RICHARD SEEBORG 2 Chief United States District Judge [16] = 17 Z 18 [27] 28 ORDER ON MOTION TO STRIKE AND MTD CASE No. 20-cv-00377-RS