Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_08-cv-01021/USCOURTS-casd-3_08-cv-01021-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Other Contract

---

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

-1- 08-CV-1021 W (NLS)

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

EUGENE GENCHEV,

Plaintiff,

CASE NO.08-CV-1021 W (NLS)

ORDER (1) GRANTING INPART AND DENYING INPART MOTION TO DISMISS

AND (2) DENYING AS MOOT

MOTION TO STRIKE

vs.

DETROIT DIESEL CORPORATION,

et al., 

Defendants.

This is a diversity action between Plaintiff, Eugene Genchev (“Plaintiff”), and

Defendant Detroit Diesel Co. (“Detroit”). On April 15, 2008, Plaintiff filed this lawsuit

in California Superior Court alleging breach of contract, violations of the commercial

code, breach of warranties and negligence. On June 6, 2008, Detroit removed the

action to this Court. Detroit now moves to dismiss the Complaint pursuant to Federal

Rule of Civil Procedure 12(b)(6) and, in the alternative, moves for summary judgment

pursuant to Rule 56(c).

The Court decides the matter on the papers submitted and without oral

argument. See S.D. Cal Civ. R. 7.1(d.1). For the reasons stated below, the Court

DENIES IN-PART and GRANTS IN-PART Detroit’s motion to dismiss (Doc. No.4)

and DENIES AS MOOT Detroit’s motion to strike (Doc. No. 16).

Case 3:08-cv-01021-JAH-NLS Document 17 Filed 10/02/08 Page 1 of 10
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

-2- 08-CV-1021 W (NLS)

I. BACKGROUND

On August 2, 2004, Plaintiff purchased a 2004 Freightliner CL 120 tractor from

Albuquerque Freightliner in New Mexico. (Compl. ¶6; Def.’s Supp. Mem. 1.) On March

3, 2005, Plaintiff purchased a 2005 Freightliner FLD from Murray’s Freightliner in

Pennsylvania. (Compl. ¶7; Def.’s Supp. Mem. 1.) Both Freightliners contain engines

manufactured and warrantied by Detroit. (Compl. ¶10; Def.’s Supp. Mem. 1.)

As early as January 2005, Plaintiff began having problems with the 2004

Freightliner. (Def.’s Supp. Mem. Ex. 3 at 103.) Those problems included oil, fuel and

coolant leaks. (Id.) Soon thereafter, similar problems arose with the 2005 Freightliner.

(Id.) The vehicles also had “leaning nonconformities,” as well as battery and electronic

control module problems. (Id.) 

On October 11, 2005, Plaintiff filed a complaint against Freightliner, LLC,

(“Freightliner”) for breach of contract, violations of the California Commercial Code,

breach of warranties, fraud, negligent misrepresentation, negligence and unjust

enrichment relating to the 2004 Freightliner (“the Freightliner Action”). (Def.’s Supp.

Mem. 1.) After the case was removed to federal court, Plaintiff amended the complaint

to include problems arising from the 2005 Freightliner. (Id.) The lawsuit stemmed from

Freightliner’s alleged failure to disclose nonconformities known to Freightliner before

Plaintiff purchased the trucks, and from Freightliner’s failure to pay for certain

warrantied repairs. The Freightliner warranties expressly excluded any problems with

the vehicles’ engines. (Pl.’s Opp’n Mem. 1.)

In the Freightliner Action, Plaintiff prevailed at trial on the breach of warranties,

fraud, and negligent misrepresentation claims and was awarded $39,908.62 in damages.

(Def.’s Supp. Mem. 1.) Before the punitive damages phase of trial, Plaintiff settled with

Freightliner for $60,000, and the lawsuit was dismissed.(Id.; Pl.’s Supp. Mem. 2.)

On April 18, 2008, Plaintiff filed this Complaint alleging that Detroit expressly

warrantied the engines, and that, despite due demand, Detroit failed to conform the

engines to those warranties. (Compl. ¶10–12.) Plaintiff is therefore suing Detroit for

Case 3:08-cv-01021-JAH-NLS Document 17 Filed 10/02/08 Page 2 of 10
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

1

Detroit moved under two different federal rules. Noticeably absent from its papers was a discussion regarding the relevant legal standard for each rule. More importantly, Detroit failed to clarify which of the arguments raised in the motion were based on the Rule 12(b)(6) standard, and which were based on the Rule 56(c) standard. And Detroit did not reference Rule 12(b)(6) in any of the arguments. Nevertheless, the Court will analyze Detroit’s res judicata and issue preclusion arguments under the Rule 56(c) standard and the remainder of the arguments under the Rule 12(b)(6) standard. Detroit is cautioned, however, that in the

future its indolence will not be tolerated, and will result in summary denial of its motion.

-3- 08-CV-1021 W (NLS)

breach of contract, breach of warranties and negligence, as well as for violations of the

California Commercial Code. (Id. ¶11.) 

On June 6, 2008, Detroit removed the case to this Court. On June 13, 2008,

Detroit filed this motion to dismiss and, in the alternative, motion for summary

judgment. On July 21, 2008, Plaintiff filed an opposition. On July 28, 2008, Detroit

filed its reply. 

II. Legal Standard1

A. Motion to Dismiss

This motion is governed by Federal Rule of Civil Procedure 12(b)(6), which

mandates that the Court dismiss a cause of action that fails to state a claim upon which

relief can be granted. A motion to dismiss under Rule 12(b)(6) tests the complaint’s

sufficiency. See North Star Int’l. v. Arizona Corp. Comm’n., 720 F.2d 578, 581 (9th

Cir. 1983). All material allegations in the complaint, “even if doubtful in fact,” are

assumed to be true. Id. The court must assume the truth of all factual allegations and

must “construe them in the light most favorable to the nonmoving party.” Gompper v.

VISX, Inc., 298 F.3d 893, 895 (9th Cir. 2002); see also Walleri v. Fed. Home Loan Bank

of Seattle, 83 F.3d 1575, 1580 (9th Cir. 1996).

As the Supreme Court recently explained, “[w]hile 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 ‘entitlement to relief’ requires more than labels

and conclusions, and a formulaic recitation of the elements of a cause of action will not

do.” Bell Atlantic Corp. v. Twombly,127 S.Ct. 1955, 1964 (2007). Instead, the

Case 3:08-cv-01021-JAH-NLS Document 17 Filed 10/02/08 Page 3 of 10
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

-4- 08-CV-1021 W (NLS)

allegations in the complaint “must be enough to raise a right to relief above the

speculative level.” Id. at 1964–65. . 

Generally, the court may not consider material outside the complaint when ruling

on a motion to dismiss. Hal Roach Studios, Inc. v. Richard Feiner & Co., 896 F.2d

1542, 1555 n.19 (9th Cir. 1990). However, the court may consider any documents

specifically identified in the complaint whose authenticity is not questioned by the

parties. Fecht v. Price Co., 70 F.3d 1078, 1080 n.1 (9th Cir. 1995). Moreover, the

court may consider the full text of those documents, even when the complaint quotes

only selected portions. Id. The court may also consider material properly subject to

judicial notice. Barron v. Reich, 13 F.3d 1370, 1377 (9th Cir. 1994) (citing Mack v.

South Bay Beer Distribs., Inc., 798 F.2d 1279, 1282 (9th Cir. 1986) abrogated on other

grounds by Astoria Federal Savings and Loan Ass’n v. Solimino, 501 U.S. 104 (1991)).

B. Summary Judgment

Summary judgment is appropriate under Rule 56(c) when the moving party

demonstrates the absence of a genuine issue of material fact and entitlement to

judgment as a matter of law. See Fed. R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477

U.S. 317, 322 (1986). 

The party seeking summary judgment always bears the initial burden of

establishing the absence of a genuine issue of material fact. Celotex, 477 U.S. at 323.

The moving party can satisfy this burden in two ways: (1)by presenting evidence that

negates an essential element of the nonmoving party’s case; or (2) by demonstrating that

the nonmoving party failed to make a showing sufficient to establish an element

essential to that party’s case on which that party will bear the burden of proof at trial.

Id. at 322-23. “Disputes over irrelevant or unnecessary facts will not preclude a grant

of summary judgment.” T.W. Elec. Serv., Inc. v. Pacific Elec. Contractors Ass’n, 809

F.2d 626, 630 (9th Cir. 1987). 

“The district court may limit its review to the documents submitted for the

purpose of summary judgment and those parts of the record specifically referenced

Case 3:08-cv-01021-JAH-NLS Document 17 Filed 10/02/08 Page 4 of 10
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

-5- 08-CV-1021 W (NLS)

therein.” Carmen v. San Francisco Unified School Dist., 237 F.3d 1026, 1030 (9th Cir.

2001). Therefore, the court is not obligated “to scour the record in search of a genuine

issue of triable fact.” Keenan v. Allen, 91 F.3d 1275, 1279 (9th Cir. 1996) (citing

Richards v. Combined Ins. Co., 55 F.3d 247, 251 (7th Cir. 1995)).

III. DISCUSSION

A. Claim Preclusion Does Not Bar Plaintiff’s Claims

Detroit argues that Plaintiff’s claims are barred by California’s res judicata

doctrine. (Def.’s Supp. Mem. 2–8.) Plaintiff opposes on the ground that the claims

related to the engines were not “actually litigated,” and therefore he is not precluded

from asserting them in the present action. (Pl.’s Opp’n Mem. 3–4.)

As an initial matter, the Court notes that Detroit relied on California’s “primary

rights theory” to support its contention. (Def.’s Supp. Mem. 4-7.) However, federal

courts sitting in California apply federal standards to determine the res judicata effect

of an earlier federal court litigation, regardless of whether the court is sitting in diversity.

Intermedics, Inc. v. Ventitex, Inc., 804 F.Supp. 35, 39 (N.D. Cal. 1992)(citing

Constantini v. Trans World Airlines, 681 F.2d 1199, 1201 (9th Cir. 1982)).

Under federal law, claim preclusion bars “lawsuits on ‘any claims that were raised

or could have been raised’ in a prior action.” Stewart v. U.S. Bancorp, 297 F.3d 953,

956 (9th Cir.2002) (quoting Owens v. Kaiser Found. Health Plan, Inc., 244 F.3d 708,

713 (9th Cir.2001)). Claim preclusion requires the moving party to satisfy three

elements: (1) an identity of the claims, (2) the previous action must have resulted in a

final judgment on the merits, and (3) the present action must involve the same parties

or persons in privity of interest. Providence Health Plan v. McDowell, 385 F.3d 1168,

1173–1174 (9th Cir. 2004).

The Court need not address the first two elements of Detroit’s claim preclusion

argument because Detroit fails to establish that privity exists between Detroit and

Case 3:08-cv-01021-JAH-NLS Document 17 Filed 10/02/08 Page 5 of 10
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

2

Subject to limited exceptions including cases involving indemnification and derivative liability relationships. See Tartt v. Northwest Community Hosp., 453 F.3d 817, 822–823 (7th Cir. 2006); Turner v. Crawford Square Apartments III, L.P., 449 F.3d 542, 548–549 n. 11 (3rd

Cir. 2006).

-6- 08-CV-1021 W (NLS)

Freightliner. Indeed, Detroit failed to even argue privity. Although many courts have

abandoned the strict mutuality requirement in cases involving issue preclusion (instead

adopting a rule that nonmutual issue preclusion is permitted unless it would be unfair),

in claim preclusion the mutuality requirement stands2

. See Providence, 385 F.3d at

1173–1174; Kaiser, 244 F.3d at 713. Accordingly, the Court rejects Detroit’s argument

that Plaintiff is barred by claim preclusion and DENIES Detroit’s motion insofar as it

is based on claim preclusion.

B. Collateral Estoppel Does Not Bar Plaintiff’s Claims

Detroit contends Plaintiff’s claims are barred by collateral estoppel. (Def.’s Supp.

Mem. 8–10.) Plaintiff disagrees, arguing that there are material differences between the

issues decided in the Freightliner Action and the current action against Detroit. (Pl.’s

Opp’n Mem. 3–4.)

Collateral estoppel, or issue preclusion, bars “successive litigation of an issue of

fact or law actually litigated and resolved in a valid court determination essential to the

prior judgment.” Taylor v. Sturgell, 128 S.Ct. 2161, 2171 (2008)(quoting New

Hampshire v. Maine, 532 U.S. 742, 748 (2001)). Issue preclusion bars relitigation of

issues adjudicated in an earlier proceeding if three requirements are met: (1) the issue

necessarily decided at the previous proceeding is identical to the one which is sought to

be relitigated; (2) the first proceeding ended with a final judgment on the merits; and

(3) the party against whom collateral estoppel is asserted was a party or in privity with

a party at the first proceeding. Reyn's Pasta Bella, LLC v. Visa USA, Inc.,442 F.3d 74,

746 (9th Cir. 2006).

An issue is actually litigated when it is “properly raised by the pleadings or

otherwise, is submitted for determination, and is determined.” RESTATEMENT (SECOND)

Case 3:08-cv-01021-JAH-NLS Document 17 Filed 10/02/08 Page 6 of 10
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

3

To determine what issues were actually litigated in the Freightliner action, the Court takes judicial notice of Plaintiff’s complaint, amended complaint, the jury verdict, and the dismissal in the Freightliner action. The court also takes judicial notice of relevant portions of Genchev deposition I and Genchev deposition II, the purchase orders of both the 2004 and

2005 tractors, and Genchev’s opposition to Freighliner’s motion in limine no. 2, all from the

Freightliner Action.

-7- 08-CV-1021 W (NLS)

OF JUDGMENTS § 27 cmts. d, e.3 The party asserting preclusion has the burden of

showing that the issue as to which estoppel is claimed was actually adjudicated in a prior

proceeding. Chew v. Gates, 27 F.3d 143, 1438 (9 th Cir. 1994); See also Hernandez v.

City of Los Angeles, 624 F.2d 935, 937 (9th Cir.1980). Necessary inferences from the

judgment, pleadings, and evidence will be given preclusive effect, but if there is doubt

as to the scope of the prior judgment, collateral estoppel will not be applied. Chew, 27

F.3d at 1438; See also Davis & Cox v. Summa Corp., 751 F.2d 1507, 1518 (9th

Cir.1985). 

Here, Detroit has failed to identify the specific issues Plaintiff is seeking to

relitigate. Instead, Detroit states vaguely:

The issues to be determined in this action were decided in the prior 

action against Freightliner. [Plaintiff] had a full trial on these issues, 

had ample opportunity to raise issues and present evidence, after which 

the court did in fact render a decision on the issues. 

(Def.’s Supp. Mem. 9.)

Although Detroit contends that “the issues” were litigated and determined, it

does not identify the issues. As the moving party, Detroit bears the burden of showing

what issues should be given preclusive effect by illustrating that the issues were actually

litigated and necessarily decided in the Freightliner Action. Detroit failed to do so. On

this ground alone, the Court rejects Detroit’s argument that Plaintiff is barred from

asserting his engine nonconformity claims.

In its discussion of claim preclusion, Detroit states that Plaintiff’s “depositions are

replete with testimony about the engine problems, the Detroit Diesel warranties and the

repairs at authorized Detroit Diesel repair facilities” and that Plaintiff, “had every

opportunity to litigate his contract and warranty claims against Detroit” in the

Freightliner Action (Def.’s Supp. Mem. 4.) Even if, arguendo, the Court assumes these

Case 3:08-cv-01021-JAH-NLS Document 17 Filed 10/02/08 Page 7 of 10
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

4

Plaintiff’s reliance on Robinson is misplaced. The Robinson court held that fraud and

intentional misrepresentation claims were not barred by the economic loss rule because the

misrepresentations of fact were not related to the performance of the contract. .Robinson, 34

Cal.4th at 988. Here, Plaintiff does not allege fraud or intentional misrepresentation, but rather negligence in that Detroit “failed to reasonably repair the vehicles.” (Compl. ¶27.)

-8- 08-CV-1021 W (NLS)

are the issues as to which Detroit seeks preclusion, the deposition testimony alone is

insufficient to show that the issues were actually litigated and necessarily decided in the

Freightliner Action. In short, although there is some evidence before the Court that the

engine problems may have been raised in the Freightliner Action, there is no evidence

that the issues were actually litigated. Accordingly, the Court DENIES Detroit’s

motion insofar as it is based on collateral estoppel.

C. The Economic Loss Rule Bars Plaintiff’s Negligence Claim

Detroit contends that the “economic loss rule” bars Plaintiff’s negligence claim.

(Def.’s Supp. Mem. 10–11.) Plaintiff disagrees, arguing instead that a party’s contractual

obligations may create a legal duty, the breach of which may support a tort action.4

 (Pl.’s

Opp’n Mem. 5.)

Simply stated, the economic loss rule provides: “Where a purchaser’s expectations

in a sale are frustrated because the product he bought is not working properly, his

remedy is said to be in contract alone, for he has suffered only ‘economic’ losses.”

Robinson Helicopter Co., Inc. v. Dana Corp., 34 Cal.4th 979, 988 (Cal. 2004). “This

doctrine hinges on a distinction drawn between transactions involving the sale of goods

for commercial purposeswhere economic expectations are protected by commercial and

contract law, and those involving the sale of defective productsto individual consumers

who are injured in a manner which has traditionally been remedied by resort to the law

of torts.” Id. The law of contractual warranty governs damages to the product itself.

Jimenez v. Superior Court, 29 Cal.4th 473, 482–483 (Cal. 2002). The economic loss rule

“requires a purchaser to recover in contract for purely economic loss due to disappointed

expectations, unless he can demonstrate harm above and beyond a broken contractual

promise. Robinson, 34 Cal.4th. at 988

Case 3:08-cv-01021-JAH-NLS Document 17 Filed 10/02/08 Page 8 of 10
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

-9- 08-CV-1021 W (NLS)

Here, Plaintiff alleges that Detroit had “a duty to reasonably repair the vehicles”

and that Detroit breached that duty. Plaintiff does not allege a harm above and beyond

a broken contractual promise. Because warranty law governs damages and problems

with the product itself, Plaintiff is barred from asserting a negligence cause of action

arising out of damage to the engine. 

Accordingly, the Court GRANTS Detroit’s motion to dismiss as to Plaintiff’s

negligence cause of action.

D. Plaintiff Need Not Attach the Engine Warranty

Detroit argues that Plaintiff failed to plead a claim for breach of contract because

Plaintiff “did not attach the warranty to the complaint.” Further, Detroit contends that

in order to plead a cause of action for breach of warranty Plaintiff must allege the exact

terms of the warranty. (Def.’s Supp. Mem. 11–12.) 

To satisfy federal notice pleading, plaintiff need only provide a “short and plain

statement of the claim showing that the pleader is entitled to relief.” Rule 12(b)(6); see

Leatherman v. Tarrant County Intelligence & Coordination Unit, 507 U.S. 163, 168

(1993) (noting that the “liberal system of ‘notice pleading’ does not require detailed

factual pleadings.”). A plaintiff in federal court is not expected to “plead his evidence

or specific factual details.” Gibson v. United States, 781 F.2d 1334, 1340 (9th Cir.1986)

(internal quotations omitted). Nothing in the Federal Rules of Civil Procedure requires

plaintiff to attach any document to the complaint.

Accordingly, Detroit's motion to dismiss Plaintiff’s breach of contract and breach

of warranties claims is DENIED.

E. Plaintiff May Claim Violations of the Commercial Code

Detroit’s final argument concerns Plaintiff’s claim for violations of the

Commercial Code. Detroit states that this “is an action against a manufacturer of a

component of two Freightliner tractors for consequential damages from the alleged

Case 3:08-cv-01021-JAH-NLS Document 17 Filed 10/02/08 Page 9 of 10
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 5

Detroit relies on the California Commercial Code’s statute of limitation in support of its Motion. (Def.’s Supp. Mem. 13.) Although the statute of limitations has yet to run with regard to Plaintiff’s claim, Detroit implicitly admits it governs a breach of warranty action.

-10- 08-CV-1021 W (NLS)

breach of warranty, not a claim for remedies under the Commercial Code.” (Def.’s Supp.

Mem. 12.)

The California Commercial Code, however, expressly sets forth the measure of

damages for breach of warranty. See CAL. COM. CODE §2714 (2002). Further,

California Commercial Code section 2725 sets forth the statute of limitations for breach

of warranty claims.5

 Because the Commercial Code expressly governs actions for breach

of warranty, Detroit’s argument must fail.

Accordingly, the Court DENIES Detroit’s Motion to dismiss Plaintiff’s

Commercial Code Violation claim.

IV. CONCLUSION AND ORDER

In light of the foregoing, the Court GRANTS IN-PART and DENIES 

IN-PART Detroit’s motion to dismiss (Doc. No. 4) and DISMISSES WITH LEAVE

TO AMEND Plaintiff’s fourth cause of action for negligence. The remainder of

Detroit’s motion is DENIED. Additionally, because the Court did not consider the

Genchev Declaration, Detroit’s motion to strike is DENIED as moot.

IT IS SO ORDERED.

DATED: October 2, 2008

Hon. Thomas J. Whelan

United States District Judge

Case 3:08-cv-01021-JAH-NLS Document 17 Filed 10/02/08 Page 10 of 10