Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_12-cv-01580/USCOURTS-caed-2_12-cv-01580-5/pdf.json

Nature of Suit Code: 370
Nature of Suit: Other Fraud
Cause of Action: 28:1332 Diversity-Petition for Removal

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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

BOR PHA and NOU LEE,

Plaintiffs,

v.

YIA YANG; YIA YANG dba YIA’S 

AUTO SALES; YIA YANG dba

PLATINUM FINANCIAL; YIA’S AUTO 

SALES, INC.; GREAT AMERICAN 

INSURANCE COMPANY and DOES 3 

through 10, inclusive,

Defendants.

No. 2:12-cv-01580-TLN-DAD

MEMORANDUM AND ORDER

This matter is before the Court on Defendant Great American Insurance Co.’s (“Great 

American”) motion to dismiss Plaintiffs’ second amended complaint and to strike Plaintiffs’ 

prayer for punitive damages. (Mot. to Dismiss, Strike Pls.’ Prayer for Pun. Damages, ECF No. 

75.) Plaintiffs opposed the motion. (Mem. P.&A. Opp’n, ECF No. 79.) The Court heard oral 

argument on August 8, 2013, with counsel for all parties in attendance. For the reasons set forth

at hearing and also set forth below, Great American’s motion to dismiss is GRANTED in part, 

and DENIED in part. Great American’s motion to strike Plaintiffs’ prayer for punitive damages 

against Great American is GRANTED.1 

 

1 Great American also moved to stay briefing on class certification. (ECF No. 75.) In light of 

this Court’s denial of Plaintiffs’ Motion for Class Certification without prejudice to refile at a 

Case 2:12-cv-01580-TLN-DAD Document 86 Filed 08/27/13 Page 1 of 8
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BACKGROUND

This case is a putative class action brought by Plaintiffs Bor Pha and Nou Lee 

(“Plaintiffs”). Plaintiffs allege that defendants Yia Yang and Yia’s Auto Sales, Inc.2sold 

automobiles and arranged financing for those automobiles without providing purchasers with the 

statutorily required disclosures concerning the terms and condition of credit. Specifically, 

Plaintiffs allege that the Dealer Defendants listed the annual interest rate as 12% even though the 

actual rate was in excess of 20%. (Second Am. Compl., ECF No. 73 at ¶ 2.)

Plaintiffs set forth six causes of action for (1) violation of the Rees-Levering Automotive 

Sales Finance Act, Civil Code § 2983.3 et seq., (2) violation of the Consumer Legal Remedies 

Act, Civil Code § 1770, et seq., (3) violation of the California Business and Professions Code § 

17200 et seq., (4) violation of the Unruh Civil Rights Act, Civil Code § 51 et seq., (5) conversion,

and (6) fraud – intentional misrepresentation. Plaintiffs allege the first, fourth, and fifth causes of 

action against the Dealer Defendants only. Plaintiffs allege the second, third, and sixth causes of 

action against all defendants including Great American.

Plaintiffs also allege that Great American was a party to a bond executed in favor of 

defendant Yia’s Auto Sales, Inc. pursuant to California Vehicle Code §§ 11710 and 11711. (ECF 

No. 73 at ¶¶ 28–34.) Great American now moves to dismiss the second amended complaint 

under Rule 12(b)(6) and moves to strike Plaintiffs’ prayer for punitive damages against it. 

STANDARD

Federal Rule of Civil Procedure 8(a) requires that a pleading contain “a short and plain 

statement of the claim showing that the pleader is entitled to relief.” Ashcroft v. Iqbal, 556 U.S. 

662, 678–79 (2009). Under notice pleading in federal court, the complaint must “give the 

defendant fair notice of what the claim . . . is and the grounds upon which it rests.” Bell Atlantic 

v. Twombly, 550 U.S. 544, 555 (2007) (internal quotations omitted). “This simplified notice 

pleading standard relies on liberal discovery rules and summary judgment motions to define 

 

later date (Minute Order, ECF No. 78), that portion of the motion is moot.

2

Plaintiffs name Defendants Yia Yang, Yia Yang dba Yia’s Auto Sales, Yia Yang dba Platinum 

Financial, and Yia’s Auto Sales, Inc. For brevity, the Court will refer to these Defendants 

collectively as the “Dealer Defendants.”

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disputed facts and issues and to dispose of unmeritorious claims.” Swierkiewicz v. Sorema N.A., 

534 U.S. 506, 512 (2002).

On a motion to dismiss, the factual allegations of the complaint must be accepted as true. 

Cruz v. Beto, 405 U.S. 319, 322 (1972). A court is bound to give plaintiff the benefit of every 

reasonable inference to be drawn from the “well-pleaded” allegations of the complaint. Retail 

Clerks Int’l Ass’n v. Schermerhorn, 373 U.S. 746, 753 n.6 (1963). A plaintiff need not allege 

“‘specific facts’ beyond those necessary to state his claim and the grounds showing entitlement to 

relief.” Twombly, 550 U.S. at 570. “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 (citing Twombly, 550 U.S. at 556). 

Nevertheless, a court “need not assume the truth of legal conclusions cast in the form of 

factual allegations.” United States ex rel. Chunie v. Ringrose, 788 F.2d 638, 643 n.2 (9th Cir. 

1986). While Rule 8(a) does not require detailed factual allegations, “it demands more than an 

unadorned, the defendant-unlawfully-harmed-me accusation.” Iqbal, 556 U.S. at 678. A 

pleading is insufficient if it offers mere “labels and conclusions” or “a formulaic recitation of the 

elements of a cause of action.” Twombly, 550 U.S. at 555; see also Iqbal, 556 U.S. at 678 

(“Threadbare recitals of the elements of a cause of action, supported by mere conclusory 

statements, do not suffice.”). Moreover, it is inappropriate to assume that the plaintiff “can prove 

facts that it has not alleged or that the defendants have violated the . . . laws in ways that have not 

been alleged.” Associated Gen. Contractors of Cal., Inc. v. Cal. State Council of Carpenters, 459 

U.S. 519, 526 (1983).

Ultimately, a court may not dismiss a complaint in which the plaintiff has alleged “enough 

facts to state a claim to relief that is plausible on its face.” Iqbal, 556 U.S. at 697 (quoting 

Twombly, 550 U.S. at 570). Only where a plaintiff has failed to “nudge[] [his or her] claims . . .

across the line from conceivable to plausible” is the complaint properly dismissed. Id. at 680. 

While the plausibility requirement is not akin to a probability requirement, it demands more than 

“a sheer possibility that a defendant has acted unlawfully.” Id. at 678. This plausibility inquiry is 

“a context-specific task that requires the reviewing court to draw on its judicial experience and 

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common sense.” Id. at 679. 

If a complaint fails to state a plausible claim, “‘a district court should grant leave to amend 

even if no request to amend the pleading was made, unless it determines that the pleading could 

not possibly be cured by the allegation of other facts.’” Lopez v. Smith, 203 F.3d 1122, 1130 (9th 

Cir. 2000) (en banc) (quoting Doe v. United States, 58 F.3d 494, 497 (9th Cir. 1995)); see also 

Gardner v. Marino, 563 F.3d 981, 990 (9th Cir. 2009) (finding no abuse of discretion in denying 

leave to amend when amendment would be futile). Although a district court should freely give 

leave to amend when justice so requires under Rule 15(a)(2), “the court’s discretion to deny such 

leave is ‘particularly broad’ where the plaintiff has previously amended its complaint[.]” 

Ecological Rights Found. v. Pac. Gas & Elec. Co., 713 F.3d 502, 520 (9th Cir. 2013) (quoting 

Miller v. Yokohama Tire Corp., 358 F.3d 616, 622 (9th Cir. 2004)).

ANALYSIS

1. California Vehicle Code §§ 11710 and 11711

Great American argues that Plaintiffs have failed to set forth plausible facts alleging a 

cause of action under the California Vehicle Code. California Vehicle Code § 11710(a) provides:

Before any dealer’s or remanufacturer’s license is issued or 

renewed by the department to any applicant therefor, the applicant 

shall procure and file with the department a bond executed by an 

admitted surety insurer, approved as to form by the Attorney 

General, and conditioned that the applicant shall not practice any 

fraud or make any fraudulent representation which will cause a 

monetary loss to a purchaser, seller, financing agency, or 

governmental agency.

Additionally, California Vehicle Code § 11711(a) provides:

If any person . . . shall suffer any loss or damage by reason of any 

fraud practiced on him or fraudulent representation made to him by 

a licensed dealer or one of such dealer’s salesmen acting for the 

dealer, in his behalf, or within the scope of the employment of such 

salesman and such person has possession of a written instrument 

furnished by the licensee, containing stipulated provisions and 

guarantees which the person believes have been violated by the 

licensee, . . . then any such person shall have a right of action 

against such dealer, his salesman, and the surety upon the dealer’s 

bond, in an amount not to exceed the value of the vehicle purchased 

from or sold to the dealer.

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(emphasis added).

Great American argues that because § 11711 references “fraud” that Plaintiffs must allege 

all of the elements of fraud to state a claim under § 11711. (ECF No. 75 at 4:7–15 (citing 

Beverly Fin. Co. v. Amer. Cas. Co., 273 Cal. App. 2d 259 (1969) and Am. Air Equip., Inc. v. 

Pacific Employers Ins. Co., 37 Cal. App. 3d 322 (1974).) However, there is no indication in the 

statute or the cases cited that Plaintiffs must allege that the surety itself committed fraud. Rather, 

the plain language of the statute just requires fraud by “any person.” Here, Plaintiffs allege 

Defendant Yia’s Auto Sales, Inc. committed fraud (ECF No. 73 at ¶¶ 19–22, 24–27, 81–87) and 

that Great American was the surety who executed a bond under California Vehicle Code § 11711 

(ECF No. 73 at ¶¶ 28–34). Therefore, the Court finds that Plaintiffs have sufficiently set forth a 

claim for relief under California Vehicle Code § 11711 against Great American. 

2. Consumers Legal Remedies Act, Civil Code § 1770, et seq., and California 

Business and Professions Code § 17200 et seq.

Great American also moves to dismiss Plaintiffs’ Second Cause of Action for violation of 

the Consumer Legal Remedies Act (“CLRA”) (Civil Code § 1770, et seq.), and Plaintiffs’ Third 

Cause of action for violation of California’s Unfair Competition Law (“UCL”) (Business and 

Professions Code § 17200 et seq.). Great American alleges that Plaintiffs have failed to allege 

any facts attributing any wrongful conduct to Great American’s conduct. Plaintiffs effectively 

concede this point but argue that because they have sufficiently alleged these causes of action 

against Defendant Yia’s Auto Sales, Inc., they are not required to allege additional facts against 

Great American relying on Pierce v. Western Surety Co., 207 Cal. App. 4th 83 (2012), review 

denied. (See ECF No. 79 at 7:1–10, 9:17–23, 11:1-10.) 

Plaintiffs’ reliance on Pierce is misplaced. The plaintiff in Pierce obtained a default 

judgment against the culpable auto dealer for fraud; subsequently the plaintiff brought an 

independent action against the defendant, a surety who held the auto dealer’s bond pursuant to 

California Vehicle Code §§ 11710 and 11711. The plaintiff settled with the surety and 

subsequently sought to recover his attorney’s fees in bringing the action. Although attorney’s 

fees were not expressly recoverable under the California Vehicle Code, the court awarded fees to 

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the plaintiff under the CLRA. The Court held the plaintiff could seek attorney’s fees pursuant to

the CLRA because the right of action under the California Vehicle Code depended on finding the 

auto dealer liable for fraud. 

This Court declines to interpret Pierce to bypass Plaintiffs’ requirement under Rule 8 to 

allege plausible facts against Great American. See Iqbal, 556 U.S. at 678–79; Twombly, 550 U.S. 

at 555. Furthermore, Plaintiffs have not directed this Court to any other authority suggesting that 

California Vehicle Code § 11711 obviates the need to plead plausible facts with respect to the 

CLRA or UCL. Therefore, the Court finds that Plaintiffs have failed to state a claim for relief

under the CLRA and failed to state a claim for relief under the UCL against Great American.3 

3. Fraud and Punitive Damages

Great American also moves to dismiss Plaintiffs’ Sixth Cause of Action for Fraud, 

Intentional Misrepresentation, arguing that Plaintiffs have not sufficiently alleged fraud with 

particularity. (ECF No. 75 at 7–8.) Great American also moves to strike Plaintiffs’ prayer for 

punitive damages. (ECF No. 75 at 8.) Plaintiffs concede that they do not allege any independent 

facts against Great American, but again argue that they are not required to by virtue of Great 

American’s status as a surety under California Vehicle Code §§ 11710 and 11711. 

Under California law, to state a claim for relief for fraud as an intentional 

misrepresentation, a plaintiff must allege as follows: that a defendant made a false representation; 

that the defendant knew the representation was false or made the representation recklessly 

without regard for its truth; that the defendant intended that plaintiff rely on the representation; 

that the plaintiff reasonably relied on the representation; and that the plaintiff’s reliance on the 

representation was a substantial factor in causing harm. CACI No. 1900 (Intentional 

Misrepresentation). Under the Federal Rules, fraud must be pled with particularity. Fed. R. Civ. 

P. 9(b) (“In alleging fraud or mistake, a party must state with particularity the circumstances 

constituting fraud or mistake. . . .”). Pleadings alleging fraud must “articulate the who, what, 

 

3

Plaintiffs conceded at oral argument that Great American’s alleged liability is derivative – not 

independent – of any liability of the Dealer Defendants. Therefore, the Court doubts that 

Plaintiffs can state any cause of action against Great American for the CLRA, UCL, or fraud 

independent of California Vehicle Code § 11711. 

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when, where, and how of the misconduct alleged.” Kearns v. Ford Motor Co., 567 F.3d 1120, 

1126 (9th Cir. 2009). 

Additionally, under California law, punitive damages are appropriate where a plaintiff 

establishes by clear and convincing evidence that the defendant is guilty of (1) fraud, (2) 

oppression, or (3) malice. Cal. Civ. Code § 3294 (a) (“In an action for the breach of an obligation 

not arising from contract, where it is proven by clear and convincing evidence that the defendant 

has been guilty of oppression, fraud, or malice, the plaintiff, in addition to the actual damages, 

may recover damages for the sake of example and by way of punishing the defendant.”).

For the same reasons above, the Court grants Great American’s motion to dismiss the 

Sixth Cause of Action and also grants Great American’s motion to strike Plaintiffs’ prayer for 

relief seeking punitive damages against it. Plaintiffs fail to set forth any facts that Great 

American acted fraudulently, with malice, or oppressively. Rather, as set forth above, all of 

Plaintiffs’ allegations concern defendant Yia’s Auto Sales, Inc.’s conduct and only assert that 

Great American is liable by virtue of its alleged liability as a surety. For the same reasons above, 

this Court declines to interpret Pierce to bypass Plaintiffs’ requirement under Rule 9 to allege 

fraud with particularity against Great American. Furthermore, Plaintiffs have not directed this 

Court to any other authority suggesting that the California Vehicle Code § 11711 obviates the 

need to plead plausible facts with respect to fraud or punitive damages. 

CONCLUSION

Therefore, the Court DENIES Great American’s motion in part and GRANTS it in part. 

(ECF No. 75.) 

1. The Court DENIES Great American’s motion to dismiss with respect to the 

California Vehicle Code § 11711 claim. For clarity, the Court ORDERS Plaintiffs to set forth a 

separate cause of action alleging their claim for relief against Great American in the amended 

complaint.

2. The Court GRANTS Great American’s motion to dismiss the second, third, and 

sixth causes of action against it. 

3. The Court FURTHER GRANTS Great American’s motion to strike Plaintiffs’ 

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prayer for punitive damages against Great American. 

4. The Court DENIES Plaintiffs’ motion to stay briefing on class certification motion 

as moot.

5. Plaintiffs are ordered to file within seven (7) days from the date of entry of this 

order a Third Amended Complaint addressing the deficiencies in the referenced claims against 

Great American. Plaintiffs will not be given further leave to amend the complaint without a 

showing of good cause. 

IT IS SO ORDERED. 

Dated: August 26, 2013

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