1 2 3 4 5 6 7 UNITED STATES DISTRICT COURT 8 SOUTHERN DISTRICT OF CALIFORNIA 9 HIEN BUI, Case No.: 20-CV-1530-CAB-WVG

10 Plaintiff, ORDER ON MOTION FOR 11 v. JUDGMENT ON PLEADINGS

12 MERCEDES-BENZ USA, LLC, [Doc. No. 16] 13 Defendant. 14 15 16 This matter is before the Court on a motion for judgment on the pleadings by 17 Defendant Mercedes-Benz USA, LLC (“MBUSA”). The motion has been fully briefed, 18 and the Court deems it suitable for submission without oral argument. As discussed below, 19 the motion is granted. 20 I. Background 21 On May 26, 2020, Plaintiff filed this lawsuit in San Diego County Superior Court. 22 The complaint purports to assert three state law claims, including two under California’s 23 Song-Beverly Consumer Warranty Act (the “Song-Beverly Act”), and one common law 24 “fraudulent inducement – concealment” claim, arising out of alleged defects in a 2017 25 Mercedes-Benz GLS450 automobile (the “Vehicle”) that Plaintiff purchased in May or 26 June 2017. [Doc. No. 1-3 at 11-19.] The complaint alleges that Plaintiff took the Vehicle 27 for service at least three times related to “issues with bad smell from air conditioning.” [Id. 28 at 12, ¶ 10.] This issue, however, was never adequately repaired. [Id. at 13, ¶ 12.] The 1 complaint contains no other factual allegations concerning the details of this alleged defect 2 or the alleged failure to repair it. On August 7, 2020, MBUSA removed the case to this 3 Court on the basis of diversity jurisdiction. MBUSA had filed an answer to the complaint 4 while it was still in state court, and now it moves for judgment on the pleadings with respect 5 to the fraudulent inducement claim and Plaintiff’s prayer for punitive damages. 6 II. Legal Standards 7 Under Federal Rule of Civil Procedure 12(c), any party may move for judgment on 8 the pleadings at any time after the pleadings are closed but within such time as not to delay 9 the trial. Fed. R. Civ. P. 12(c). “Because a Rule 12(c) motion is functionally identical to 10 a Rule 12(b)(6) motion, the same standard of review applies to motions brought under 11 either rule.” Gregg v. Hawaii, Dep't of Pub. Safety,

(9th Cir. 2017) 12 (internal quotation marks and citation omitted). Thus, “[a]s under a Rule 12(b)(6) motion 13 to dismiss, a Rule 12(c) motion for judgment on the pleadings is properly granted only 14 when, ‘taking all the allegations in the pleadings as true, the moving party is entitled to 15 judgment as a matter of law.’” Herrera v. Zumiez, Inc.,

(9th Cir. 16 2020) (quoting Heliotrope Gen., Inc. v. Ford Motor Co.,

, 978–79 (9th Cir. 17 1999)). 18 III. Discussion 19 MBUSA’s motion argues that the complaint fails to plead the fraudulent inducement 20 claim with adequate specificity under Federal Rule of Civil Procedure 9(b) and that the 21 claim is barred by the economic loss rule. The motion also argues that Plaintiff is not 22 entitled to punitive damages because the fraud claim fails and because the complaint does 23 not allege facts supporting a request for punitive damages. Finally, the motion argues that 24 Plaintiff’s request for repurchase or replacement for breach of implied warranty is not 25 permitted as a matter of law. Each argument is addressed in turn. 26 A. Failure to Plead Fraud With Particularity Under Rule 9(b) 27 Under California law, “[t]he elements of fraudulent concealment are ‘(1) 28 concealment or suppression of a material fact; (2) by a defendant with a duty to disclose 1 the fact to the plaintiff; (3) the defendant intended to defraud the plaintiff by intentionally 2 concealing or suppressing the fact; (4) the plaintiff was unaware of the fact and would not 3 have acted as he or she did if he or she had known of the concealed or suppressed fact; and 4 (5) plaintiff sustained damage as a result of the concealment or suppression of the fact.’” 5 Dent v. Nat’l Football League,

(9th Cir. 2018) (quoting Hambrick v. 6 Healthcare Partners Med. Grp., Inc.,

(Cal. Ct. App. 2015)). 7 Among other things, MBUSA argues that the complaint fails to plead with particularity 8 that it knew of the defect alleged in the complaint or that it had a duty to disclose that 9 defect. 10 In his opposition, Plaintiff argues that he is not required to plead his fraudulent 11 concealment claim with specificity. Plaintiff is mistaken. “The Federal Rules of Civil 12 Procedure apply irrespective of the source of subject matter jurisdiction, and irrespective 13 of whether the substantive law at issue is state or federal.” Vess v. Ciba-Geigy Corp. USA, 14

(9th Cir. 2003) (citing Hanna v. Plumer,

(1965)). To 15 that end, “[i]t is established law . . . that Rule 9(b)’s particularity requirement applies to 16 state-law causes of action.” Id. at 1103. “‘[W]hile a federal court will examine state law 17 to determine whether the elements of fraud have been pled sufficiently to state a cause of 18 action, the Rule 9(b) requirement that the circumstances of the fraud must be stated with 19 particularity is a federally imposed rule.’” Kearns v. Ford Motor Co.,

, 1125 20 (9th Cir. 2009) (quoting Vess,

. “Because the Supreme Court of California 21 has held that nondisclosure is a claim for misrepresentation in a cause of action for fraud, 22 it (as any other fraud claim) must be pleaded with particularity under Rule 9(b).”

at 23 1127; see also Madani v. Volkswagen Grp. of Am., Inc., No. 17-CV-07287-HSG,

3753433, at *7 (N.D. Cal. Aug. 8, 2019) (“[F]raudulent concealment must be pleaded with 25 particularity under Federal Rule of Civil Procedure 9(b).”). 26 According to his opposition brief, Plaintiff’s fraudulent concealment claim is 27 premised on MBUSA’s purported failure to disclose the “defective nature of [the 28 Vehicle’s] air conditioning system.” [Doc. No. 17 at 8.] “When a claim rests on allegations 1 of fraudulent omission, the Rule 9(b) standard is somewhat relaxed because a plaintiff 2 cannot plead either the specific time of an omission or the place, as he is not alleging an 3 act, but a failure to act. Nonetheless, a plaintiff alleging fraudulent omission or 4 concealment must still plead the claim with particularity.” Lessin v. Ford Motor Co., No. 5 319CV01082AJBAHG,

, at *10 (S.D. Cal. Nov. 6, 2020) (internal 6 quotation marks and citation omitted). In light of this “relaxed” standard, “to successfully 7 allege fraudulent concealment of an automobile defect, Plaintiffs need only allege facts 8 raising a plausible inference that Defendant knew of the defect at the time of the sale.” 9 Benkle v. Ford Motor Co., No. SACV161569DOCJCGX,

, at *5 (C.D. 10 Cal. Dec. 22, 2017) (internal quotation marks and citation omitted). However, “Plaintiffs 11 are still required to plead the ‘what,’ ‘why,’ and ‘how’ to establish a claim based on fraud.” 12 Lessin,

, at *10. Further, “[t]o comport with Rule 9(b), a plaintiff 13 alleging the existence of a duty to disclose must offer specific substantiating facts 14 demonstrating that the defendant has exclusive knowledge about an alleged defect—not 15 merely that the defendant has a superior understanding about the product’s design 16 generally.” Taragan v. Nissan N. Am., Inc., No. C 09-3660 SBA,

, at 17 *6 (N.D. Cal. June 20, 2013) (internal quotation marks and citation omitted). 18 The complaint here contains only a conclusory statement that “Defendant had 19 knowledge that the air conditioning system contained a defect or defects which resulted in 20 malodorous odors emanating from the air conditioning system.” [Doc. No. 1-3 at 18, ¶ 36.] 21 This solitary conclusion constitutes the entirety of the allegations supporting the fraudulent 22 concealment claim. The complaint lacks any factual allegations that raise a plausible 23 inference for this conclusion that MBUSA knew of this defect.1 See Shamamyan v. FCA 24

25 26 1 The opposition attempts to frame this air conditioning issue as a design defect common to the type of Vehicle he purchased. The complaint, however, contains no factual allegations supporting this argument. 27 To the contrary, the only plausible inference from the complaint is that the specific Vehicle Plaintiff purchased had an air conditioning problem specific to that Vehicle only. It is therefore implausible based 28 1 US LLC, No. CV195422DMGFFMX,

, at *8 (C.D. Cal. Apr. 1, 2020) 2 (dismissing fraud claim based on failure to disclose premature oxidation of vehicles 3 manufactured by defendant); cf. Benkle,

, at *5 (holding complaint 4 adequately pled concealment of vehicle defect based on allegations of thousands of 5 consumer complaints). 6 Nor does the complaint allege how or why MBUSA had a duty to disclose this 7 alleged defect. “[A] manufacturer’s duty to consumers is limited to its warranty obligations 8 absent either an affirmative misrepresentation or a safety issue.” Wilson v. Hewlett– 9 Packard Co.,

(9th Cir. 2012) (citation omitted); see also Daugherty 10 v. Am. Honda Motor Co.,

(2006)). The complaint does not allege 11 any affirmative representations by MBUSA concerning the air conditioning system, or any 12 allegations supporting the conclusion that MBUSA knew of this alleged defect at the time 13 of the sale of the Vehicle. Nor are there any allegations as to how or why the alleged odor 14 coming from the air conditioning created a safety issue that MBUSA had a duty to 15 disclose.2 Indeed, the complaint is so lacking in factual allegations supporting the 16 fraudulent concealment claim that it does not even satisfy the lesser pleading requirements 17 of Rule 8, let alone the specificity required by Rule 9(b). Accordingly, MBUSA is entitled 18 to judgment on the pleadings on this claim for this reason alone. 19 B. Economic Loss Rule 20 Even if the complaint adequately pled fraudulent concealment under Rule 9(b), the 21 claim is subject to dismissal pursuant to the economic loss rule. “The economic loss rule 22 23 24 was going to have air conditioning problems prior to Plaintiff purchasing the Vehicle and that they actively 25 concealed that problem to induce Plaintiff to purchase the Vehicle. 2 The complaint contains a conclusory allegation that “the vehicle is defective and unsafe,” [Doc. No. 1- 26 3 at 18, ¶ 41], but contains no allegations as to how or why a bad smell from the air conditioning is a safety issue. In the opposition brief, Plaintiff contends that the defect could arise from mold growth, but 27 then he effectively concedes that he is merely engaging in speculation by acknowledging that “at best, the odor is an annoyance.” [Doc. No. 17 at 5.] Regardless, the complaint lacks any factual allegations of 28 1 requires a purchaser to recover in contract for purely economic loss due to disappointed 2 expectations, unless he can demonstrate harm above and beyond a broken contractual 3 promise.” Robinson Helicopter Co. v. Dana Corp.,

,

, 4 272 (2004). “Thus, in actions arising from the sale or purchase of a defective product, 5 plaintiffs seeking economic losses must be able to demonstrate that either physical damage 6 to property (other than the defective product itself) or personal injury accompanied such 7 losses; if they cannot, then they would be precluded from any tort recovery in strict liability 8 or negligence.” Hsieh v. FCA US LLC,

, 1162 (S.D. Cal. 2020) 9 (internal quotation marks and citation omitted). “Numerous California federal courts 10 sitting in diversity have applied the economic loss rule to prohibit a follow-on fraudulent 11 inducement claim in run-of-the-mill Song-Beverly Act warranty breach actions.” Kelsey 12 v. Nissan N. Am., No. CV 20-4835 MRW,

, at *2 (C.D. Cal. July 15, 13 2020) (citing cases). 14 Plaintiff argues that the economic loss rule does not apply based on an exception 15 created in Robinson. In Robinson, the California Supreme Court held that the economic 16 loss rule did not bar the plaintiff’s affirmative misrepresentation claims because they were 17 independent of the alleged breach of contract, and because those misrepresentations 18 exposed the plaintiff to personal liability and members of the public to harm. Robinson 19 Helicopter Co.,

. “Although Robinson permitted a claim for fraud, its 20 holding does not apply to every fraud claim between contracting parties. The Robinson 21 court emphasized that its holding was ‘narrow in scope and limited to a defendant’s 22 affirmative misrepresentations on which a plaintiff relies and which expose a plaintiff to 23 liability for personal damages independent of the plaintiff’s economic loss.’” Alexsam Inc. 24 v. Green Dot Corp., No. 215CV05742CASPLAX,

, at *5 (C.D. Cal. 25 June 5, 2017) (citing Robinson,

). 26 Indeed, Robinson explicitly did not address application of the economic loss rule to 27 a fraudulent concealment or omission claim. See Robinson,

(noting that 28 the court “need not address the issue of whether [Defendant’s] intentional concealment 1 constitutes an independent tort”). Thus, “[w]hile there is some conflict in the law, 2 Robinson and the weight of authority within the Ninth Circuit suggest that the economic 3 loss rule applies to fraudulent omission claims under California law.” Sloan v. Gen. Motors 4 LLC, No. 16-CV-07244-EMC,

, at *24 (N.D. Cal. Apr. 23, 2020) 5 (granting summary judgment on fraudulent omission/concealment claim based on 6 economic loss doctrine). 7 Here, the complaint does not allege any personal injury to Plaintiff or damage to 8 physical property (independent of the Vehicle itself). To the contrary, the only allegations 9 of harm caused by the alleged omission was that Plaintiff purchased the Vehicle that he 10 would not have otherwise purchased. [Doc. No. 1-3 at 18, ¶ 39.] Nor does the complaint 11 allege facts supporting a plausible inference that MBUSA had any general duty to disclose 12 the alleged air conditioning defect regardless of whether Plaintiff purchased a vehicle, 13 meaning any omissions were not independent of any warranties related to the actual 14 purchase.3 Accordingly, the economic loss rule bars Plaintiff’s fraudulent concealment 15 claim, and because Plaintiff’s damages are strictly economic and arise out of the same 16 conduct as the breach of warranty claims, no amendment to the complaint would be able 17 to avoid this outcome. See Hsieh,

, 1163 (S.D. Cal. 2020) (dismissing 18 fraud claim without leave to amend because the fact that the lawsuit involved “alleged 19 omissions, not affirmative misrepresentations [precluded] Plaintiff's ability to avoid the 20 economic loss rule.”). 21 22 23

24 25 3 If the complaint alleged that MBUSA made affirmative misrepresentations to induce Plaintiff to purchase the vehicle, the outcome here might be different because the element of a duty to disclose is not an element 26 of fraud based on an affirmative misrepresentation. Because duty to disclose is an element of Plaintiff’s fraudulent concealment claim, and to the extent there was any such duty, it existed solely as a result of 27 Plaintiff’s purchase of a vehicle manufactured by MBUSA, Plaintiff’s fraudulent concealment claim is dependent on MBUSA’s alleged breach of any warranties by failing to repair the air conditioning and 28 1 C. Punitive Damages 2 In his opposition, Plaintiff makes no argument that his punitive damages claim can 3 || survive if his fraudulent concealment claim does not. Accordingly, any such argument is 4 waived. Because the fraudulent concealment claim is dismissed, Plaintiff's prayer for 5 || punitive damages related to the fraudulent concealment claim is dismissed as well. 6 D. Repurchase or Replacement Remedy For Breach of Implied 7 Warranty 8 Finally, MBUSA argues that Plaintiff is not entitled to repurchase or replacement of 9 || the Vehicle as a remedy for the breach of implied warranty claim. Although the complaint 10 |/explicitly demands such a remedy for breach of implied warranty [Doc. No. 1-3 at 15, □ 11 Plaintiff appears to concede that such a remedy is allowed only for a breach of express 12 || warranty claim, which he also asserts in the complaint. Accordingly, the motion 1s granted 13 || with respect to the request for repurchase or replacement of the Vehicle for breach of 14 ||implied warranty. Plaintiff’s demand for repurchase or replacement related to his breach 15 ||of express warranty claim remains in the case. 16 IV. Conclusion 17 For the foregoing reasons, it is hereby ORDERED that MBUSA’s motion for 18 ||judgment on the pleadings is GRANTED. The third claim for fraudulent inducement — 19 ||}concealment and prayer “F” for punitive damages are DISMISSED WITH PREJUDICE. 20 It is SO ORDERED. 21 Dated: January 25, 2021 € Z 22 Hon. Cathy Ann Bencivengo 23 United States District Judge 24 25 26 27 28