Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_10-cv-01345/USCOURTS-casd-3_10-cv-01345-2/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1441 Petition For Removal--Other Contract

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UNITED STATES DISTRICT COURT

 SOUTHERN DISTRICT OF CALIFORNIA

PERSHING PACIFIC WEST, LLC,

Plaintiff,

v.

FERRETTI GROUP, USA, INC., et al.,

Defendants.

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Case No. 10-cv-1345-L(DHB)

ORDER GRANTING FERRETTI

AND MARINEMAX’S MOTION TO

DISMISS PORTIONS OF THE

FIRST AMENDED COMPLAINT

[DOC. 65]

On May 24, 2010, Plaintiff Pershing Pacific West, LLC (“Pershing”) commenced this

action in the San Diego Superior Court against Defendants Ferretti Group, USA, Inc.

(“Ferretti”), MarineMax, Inc., and MTU Detroit Diesel, Inc., doing business as Detroit Diesel

Corporation (“MTU DD”). About a month later, Ferretti and MarineMax removed this action to

federal court. On April 12, 2012, after receiving leave from the Court, Pershing filed its First

Amended Complaint (“FAC”) in order to add Defendant MTU Friedrichshafen GmbH (“MTU

GmbH”) to this action. Ferretti and MarineMax now move to dismiss three causes of action. 

Pershing opposes.

The Court found this motion suitable for determination on the papers submitted and

without oral argument. See Civ. L.R. 7.1(d.1). (Doc. 74.) For the following reasons, the Court

GRANTS Ferretti and MarineMax’s motion to dismiss.

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I. BACKGROUND

A. Sale of the Yacht

On August 22, 2008, Pershing and MarineMax entered into a written Purchase Agreement

in which Pershing agreed to buy a 73-foot power boat (“yacht”) manufactured by Pershing 1 2

S.p.A., an Italian corporation wholly owned by the Ferretti Group, for $5,000,000. (FAC ¶ 9,

Ex. A.) The yacht was built in 2008 with two new Series 2000 Detroit Diesel engines, separately

manufactured by MTU DD and MTU GmbH (collectively, “MTU”). (Id. ¶¶ 5, 11.) Pershing

alleges that the Purchase Agreement sought to disclaim all warranties and referred Pershing to

the manufacturer’s warranty. (Id. ¶ 10.) At the time of sale, and despite Pershing’s request,

Defendants each failed to provide the warranties upon which Pershing was directed to rely upon. 

(Id.) Pershing also alleges that “[n]either at the time of sale nor anytime thereafter was

[Pershing] provided with the terms and conditions of the warranty.” (Id.)

Sometime thereafter, Defendants delivered the yacht to Pershing in Fano, Italy. (FAC ¶

12.) At the time Pershing took delivery of the yacht, and “despite continued representations as to

the existence of warranties,” Defendants failed to provide Pershing with any warranties. (Id.) 

Rather, Pershing was promised “such warranty information would thereafter be provided.” (Id.) 

Pershing alleges that it was not provided with such warranty information, and that it was not

given a “reasonable opportunity” to inspect the yacht. (Id.)

B. Allegations of the Yacht’s Defective Condition

On September 9, 2008, during the yacht’s first trip from Fano, Italy to Croatia, a high fuel

temperature warning light activated for the port engine. (FAC ¶ 13.) The next day, the high fuel

temperature alarm activated for the same engine again. (Id.) After returning to Fano, Italy, the

warning could not be reproduced. (Id.)

 Pershing is a limited liability company formed for the purpose of purchasing the yacht, 1

and is wholly owned by Eric B. Benson. (FAC ¶ 1.)

 The parties describe the yacht as a 72-foot vessel in their moving papers. However, 2

Pershing alleges that the yacht is 73 feet (FAC ¶ 9).

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On December 16, 2008, the yacht was delivered to Port Everglades, Florida. (FAC ¶ 14.) 

Then, on December 26, 2008, while leaving the Bahamas Islands, another high temperature fuel

warning occurred, and the engine failed to come up to a normal cruising speed of 2400 rpms. 

(Id.) Pershing alleges that the engines would not exceed 1800 rpms. (Id.)

From September 2008 to the present, MTU, “either directly or through its authorized

service representative, has attempted to fix the problems of [the] high fuel temperature to the

port diesel engine and the inability of the port diesel engine to reach its normal cruising speed of

2400 rpms.” (FAC ¶ 16.) Pershing alleges that the fuel temperature on the port engine has run

as high as 40 degrees above the fuel temperature on the starboard engine, exceeding 203

degrees. (Id.) Other problems have included a fuel leak from the overflow valve on the port

engine on June 29, 2009, and a leak in the fuel pump also in the port engine on June 30, 2009. 

(Id.) The fuel pump has since been replaced, and so has a defective injector. (Id.) Fuel line

leaks have also been detected at connections on June 27, 2009. (Id.)

During the same time period when the problems arose, MTU and its authorized

representatives made numerous inspections of the port engine and attempted repairs on more

than five different occasions, seeking to resolve the fuel-overheating problem and the port

engine’s inability to reach regular speeds. (FAC ¶ 17.) Pershing alleges a myriad of detailed

repair attempts that occurred at least fourteen times between June 2009 and January 2010. (Id.) 

On March 28, 2010, the yacht sustained another fuel leak in the port engine resulting in the

deposit of more than 4 inches of fuel in the main bilge. (Id. ¶ 18.) In response, MTU and its

authorized representatives again attempted repairs of the engine. (Id.)

On April 23, 2010, Pershing’s counsel sent a formal correspondence, advising Ferretti,

MarineMax, and MTU DD of the “persistent defective condition of the boat and communicated

its intent to seek a judicial remedy in the absence of an acceptable response.” (FAC ¶ 19; see

also Compl. Ex. B.) To date, Pershing has not received a response to that correspondence. 

(FAC ¶ 20.)

On May 2, 2010, the yacht was once again taken out for sea trials. (FAC ¶ 20.) Again,

while attempting to bring the yacht up to speed, both the high pressure fuel alarm and fire alarms

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sounded. (Id.) Ultimately, the yacht was taken back into the port. (Id.) As of the date Pershing

filed its complaint, the deficiencies associated with the yacht have not been repaired. (Id.) In

addition to the engine-related problems, the yacht also experienced “persistent and uncured

deficiencies” with the Besenzoni System and port Trim Tab. (Id. ¶ 21.) These problems also

have not been repaired. (Id.) Pershing alleges that “[a]s a consequence of the malfunctions . . .

[it] has had to repeatedly cancel planned trips and seldom been able to use [the yacht].” (Id. ¶

21.) “[T]he engines have been used in total only about 200 hours, much of which time was spent

in sea trials after repairs and for the purpose of determining whether repairs were successful.” 

(Id.)

On May 24, 2010, Pershing commenced this action in San Diego Superior Court, alleging

causes of action for: (1) revocation of acceptance; (2) rescission; (3) breach of contract; (4)

breach of implied warranty of merchantability; (5) negligence; and (6) breach of express

warranty. About a month later, Ferretti and MarineMax removed this action to federal court. 

(Doc. 1.) After obtaining leave from the Court, Pershing filed its FAC on April 12, 2012,

alleging the same causes of action, but adding MTU GmbH as a defendant. Ferretti and

MarineMax now move to dismiss the causes of action for breach of contract, negligence, and

breach of the implied warranty of merchantability. (Doc. 65.) Pershing opposes.

II. LEGAL STANDARD

The court must dismiss a cause of action for failure to state a claim upon which relief can

be granted. Fed. R. Civ. P. 12(b)(6). A motion to dismiss under Rule 12(b)(6) tests the legal

sufficiency of the complaint. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). The court

must accept all allegations of material fact as true and construe them in light most favorable to

the nonmoving party. Cedars-Sanai Med. Ctr. v. Nat’l League of Postmasters of U.S., 497 F.3d

972, 975 (9th Cir. 2007). Material allegations, even if doubtful in fact, are assumed to be true. 

Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). However, the court need not “necessarily

assume the truth of legal conclusions merely because they are cast in the form of factual

allegations.” Warren v. Fox Family Worldwide, Inc., 328 F.3d 1136, 1139 (9th Cir. 2003)

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(internal quotation marks omitted). In fact, the court does not need to accept any legal

conclusions as true. Ashcroft v. Iqbal, 556 U.S. 662, — , 129 S. Ct. 1937, 1949 (2009) 

“While 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.” Twombly, 550 U.S. at 555 (internal citations omitted). Instead, the

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

level.” Id. “To survive a motion to dismiss, a complaint must contain sufficient factual matter,

accepted as true, to ‘state a claim to relief that is plausible on its face.’” Iqbal, 129 S. Ct. at

1949 (citing 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.” Id. “The plausibility standard is not akin to a ‘probability

requirement,’ but it asks for more than a sheer possibility that a defendant has acted unlawfully.” 

Id. A complaint may be dismissed as a matter of law either for lack of a cognizable legal theory

or for insufficient facts under a cognizable theory. Robertson v. Dean Witter Reynolds, Inc., 749

F.2d 530, 534 (9th Cir. 1984).

Generally, courts 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, documents specifically identified in the complaint whose authenticity

is not questioned by parties may also be considered. Fecht v. Price Co., 70 F.3d 1078, 1080 n.1

(9th Cir. 1995) (superceded by statutes on other grounds). Moreover, the court may consider the

full text of those documents, even when the complaint quotes only selected portions. Id. It may

also consider material properly subject to judicial notice without converting the motion into one

for summary judgment. Barron v. Reich, 13 F.3d 1370, 1377 (9th Cir. 1994). Ferretti and

MarineMax request judicial notice of a Northern District of California order, and two

declarations that have been filed at some point earlier in this action. (Doc. 65-2.) Pershing has

not opposed. Accordingly, the Court GRANTS Ferretti and MarineMax’s request.

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III. DISCUSSION

A. Breach of Contract Against MarineMax

Pershing asserts a breach-of-contract cause of action based on MarineMax’s “fail[ure] to

supply a watercraft free from defects.” (FAC ¶ 26.) MarineMax argues that the claim fails

because the Purchase Agreement states that the sale of the yacht was “as is” and disclaimed all

express or implied warranties. (Defs.’ Mot. 7:26–28.) The parties agree that California

Commercial Code § 2316 applies here.

1. California Commercial Code § 2316

Under California Commercial Code § 2316, to exclude or modify the implied warranty of

merchantability or any part of it, the language must mention merchantability, and in case of a

writing, must be conspicuous. Cal. Com. Code § 2316(2). To exclude or modify any implied

warranty of fitness, the exclusion must be by a writing and conspicuous. Id. Notwithstanding

the aforementioned provisions of § 2316(2), “all implied warranties are excluded by expressions

like ‘as is,’ ‘with all faults’ or other language which in common understanding calls the buyer’s

attention to the exclusion of warranties and makes plain that there is no implied warranty.” Id. §

2316(3)(a). The Uniform Commercial Code Comment 7 for § 2316 further explains that terms

such as “as is,” “as they stand,” “with all faults,” and the like in ordinary usage are “understood

to mean that the buyer takes the entire risk as to the quality of the goods involved.”

Pershing attached the Purchase Agreement as an exhibit to its FAC, and it includes a

disclaimer of warranties. (See FAC Ex. A.) The Seller’s Disclaimer of Warranties states

Unless Seller gives Buyer a written warranty on its own behalf or Seller

enters into a service contract in connection with this sale or within 90

days ofthis sale, THE BOAT, MOTOR AND ACCESSORIES BEING

PURCHASED PURSUANT TOTHISAGREEMENTARESOLDBY

SELLER “AS IS” AND SELLER MAKES NO WARRANTIES ON

ITS OWN BEHALF, EXPRESS OR IMPLIED, INCLUDING THE

IMPLIEDWARRANTIESOFMERCHANTABILITYANDFITNESS

FOR A PARTICULAR PURPOSE. The entire risk as to quality and

performance of the boat, motor and accessories is with the Buyer

subject to Buyer’s rights under the manufacturer’s warranty, if any. If

the boat, motor and/or accessories proved defective, Buyer and not

Seller assumes the entire cost of all necessary servicing and repair,

subject to buyer’s rights under the manufacturer’s warranty, if any.

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(FAC Ex. A (emphasis in original).) A representative of Pershing acknowledged the disclaimer

by initialing it. (Id.) The Purchase Agreement also states that “BUYER ACKNOWLEDGES

RECEIVING A FULLY COMPLETED COPY OF THIS AGREEMENT, BUYER

ACKNOWLEDGES READING AND UNDERSTANDING ALL OF THE TERMS AND

CONDITIONS IN THIS AGREEMENT INCLUDING THE TERMS AND CONDITION ON

THE REVERSE SIDE OF THIS AGREEMENT.” (Id. (emphasis in original).) A representative

from Pershing also acknowledged this provision by signing the Purchase Agreement. (Id.) The

Purchase Agreement also incorporates the Additional Terms and Conditions found on the

reverse side of the agreement, which also addresses the disclaimer of warranties. (See id.) That

provision states that 

THE BOAT, MOTOR AND ACCESSORIES BEING PURCHASED

PURSUANT TO THIS AGREEMENT ARE SOLD BY SELLER “AS

IS” AND SELLER MAKES NO WARRANTIES ON ITS OWN

BEHALF, EXPRESS OR IMPLIED, INCLUDING THE IMPLIED

WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A

PARTICULAR PURPOSE, unless Seller gives Buyer a written

warranty on its own behalf or Seller enters into a service contract in

connection with this sale or within 90 days of sale. If Seller gives

Buyer a written warranty on its own behalf or enters into a service

contract in connection with this sale or within 90 days of sale, then any

implied warranties shall be limited in duration to the duration of

Seller’s written warranty or service contract. IN ALL CASES,

SELLER SHALL NOT BE LIABLE FOR ANY INCIDENTAL OR

CONSEQUENTIAL DAMAGES ARISING FROM THE BREACH

OF THIS AGREEMENT, ANY EXPRESS OR IMPLIED

WARRANTY OR OTHERWISE, TO THE MAXIMUM EXTENT

PERMITTED BY APPLICABLE LAW.

(FAC Ex. A (emphasis in original).) 

These provisions as written satisfy § 2316's requirements to express that the implied

warranties are being disclaimed by identifying the implied warranties of merchantability and

fitness for a particular purpose, and having the disclaimer language be conspicuous by making

the text all capitalized. See Cal. Com. Code § 2316(2). To add to the conspicuousness of the

disclaimers, the Seller’s Disclaimer of Warranties required initialing and it is located

immediately above the signature block for the agreement, and the Disclaimer of Warranties is

the second provision under the Additional Terms and Conditions, located right at the top of the

page. See id. The disclaimers also use the expression “as is,” which § 2316 provides as an

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example for language that satisfies the section’s requirements. See id. § 2316(3)(a). Thus, the

disclaimer language included in the Purchase Agreement complies with § 2316 to disclaim the

implied warranties of merchantability and fitness. Consequently, the implied warranties were 3

properly disclaimed under the Purchase Agreement. See Cal. Com. Code § 2316.

2. Magnuson-Moss Warranty Act (“MMWA”)

Pershing also argues that its breach-of-contract cause of action is adequately pled because

MarineMax “fail[ed] to fulfill its obligations imposed by contract and controlling law.” (Pl.’s

Opp’n 7:26–8:6.) The controlling law that Pershing refers to is the MMWA. (Id. at 8:18–10:5.) 

Specifically, Pershing contends that MarineMax failed to comply with the MMWA’s

requirements when MarineMax and the other defendants “failed to provide the required

warranty-related information and further failed to provide [Pershing] with a reasonable

opportunity to inspect the vessel prior to sale.” (Pl.’s Opp’n 9:23–25.)

Under the MMWA, “a consumer who is damaged by the failure of a supplier, warrantor,

or service contractor to comply with any obligation under this chapter, or under a written

warranty, implied warranty, or service contract, may bring suit for damages and other legal or

equitable relief.” 15 U.S.C. § 2310(d)(1). Section 702.3 of the Code of Federal Regulations, 16

C.F.R. § 702.3, presents the obligations of a seller under the MMWA. That section provides

that, with certain exceptions, “the seller of a consumer product with a written warranty shall

make a text of the warranty readily available for examination by the prospective buyer by: (1)

Displaying it in close proximity to the warranted product, or (2) Furnishing it upon request prior

to sale and placing signs reasonably calculated to elicit the prospective buyer’s attention in

prominent locations in the store or department advising such prospective buyers of the

availability of warranties upon request.” 16 C.F.R. § 702.3(a). 

 Pershing contends that § 2316(3)(b) creates a remedy under an implied warranty when a 3

buyer has not had the opportunity to conduct a meaningful inspection. (Pl.’s Opp’n 8:13–17.) 

The plain language of the statute does not support this conclusion. Therefore, without further

explanation, the Court cannot conclude that any such remedy exists under § 2316(3)(b).

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In its request for judicial notice, MarineMax includes a document that memorialized

Pershing’s acceptance of the yacht, titled “Acceptance of Vessel,” dated and signed by the buyer

and a witness on August 20, 2008. (Tefft Decl. Ex. A.) That document was first included as an

exhibit to Ferretti and MarineMax’s motion to dismiss filed in July 2010. (Doc. 8.) Pershing 4

opposed that motion, but after a cursory review, it appears that Pershing did not challenge the

authenticity of the acceptance form at that time. (Doc. 11.) Pershing also has not challenged the

authenticity of the document here.

The acceptance form unequivocally states that the buyer “received the Manufacturer’s

Warranty and Owner’s Manuals and a full warranty procedure explanation.” (Tefft Decl. Ex.

A.) The form also acknowledges that the buyer “received a copy of this form and Copies of All

Paperwork requested.” (Id.) Therefore, based on the acknowledgment in the acceptance form,

and consequently by Pershing’s own admission, MarineMax complied with the MMWA to

furnish the text of the warranty to Pershing prior to the completion of the sale in August 2008. 

See 16 C.F.R. § 702.3.

Alternatively, it is unclear how a failure to comply with the MMWA’s warrantyfurnishing provision gives rise to a breach-of-contract cause of action. The breach-of-contract

cause of action is based on MarineMax’s “fail[ure] to supply a watercraft free from defects.” 

(FAC ¶ 26.) Failure to comply with the MMWA’s warranty-furnishing requirements does not

appear to be substantially related to the alleged breach of the contractual obligation for

MarineMax to provide a yacht “free from defects.” Pershing does not explain how this alleged

statutory violation is related to the breach of contract. In fact, the way Pershing framed the

issue—“failure to fulfill its obligations imposed by contract and controlling law”—suggests that

MarineMax allegedly breached contractual obligations, but also independently failed to comply

with statutory obligations. The latter simply does not give rise to a breach-of-contract cause of

action. See Acoustics, Inc. v. Trepte Constr. Co., 14 Cal. App. 3d 887, 913 (1971) (enumerating

 After fully briefing the motion, which also included a sur-reply, MarineMax and Ferretti 4

withdrew the motion on November 29, 2010 (Doc. 33) in order to stay this action so the parties

may pursue further settlement negotiations (Doc. 32).

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the elements for a breach-of-contract cause of action). Thus, the Court alternatively rejects

Pershing’s MMWA argument based these grounds.

B. Breach of the Implied Warranty of Merchantability Against Ferretti5

Under California law, a plaintiff asserting a breach-of-warranty cause of action must

stand in vertical contractual privity with the defendant. Anunziato, 402 F. Supp. 2d at 1141. A

buyer and seller stand in privity if they are in adjoining links of the distribution chain. Osborne

v. Subaru of Am. Inc., 198 Cal. App. 3d 646, 656 n.6 (1988). Thus, an end consumer who buys

from a retailer is not in privity with a manufacturer. Id.

“Courts, however, have recognized an exception to the privity requirement—when a

plaintiff pleads that he or she is a third party beneficiary, he or she may assert a claim for the

implied warranty’s breach.” In re Google Phone Litig., No. 10-CV-1177, 2012 WL 3155571, at

*9 (N.D. Cal. Aug. 2, 2012) (citing In re Toyota Motor Corp., 754 F. Supp. 2d 1145, 1185 (C.D.

Cal. 2005)). California has codified third-party-beneficiary liability as follows: “A contract,

made expressly for the benefit of a third person, may be enforced by him at any time before the

parties thereto rescind it.” Cal. Civ. Code § 1559. “Because third party beneficiary status is a

matter of contract interpretation, a person seeking to enforce a contract as a third party

beneficiary ‘must plead a contract which was made expressly for his or her benefit and one in

which it clearly appears that he or she was a beneficiary.’” Schauer v. Mandarin Gems of Cal.,

Inc., 125 Cal. App. 4th 949, 957 (2005).

Pershing alleges that MarineMax “engaged in the sale of pleasure boats” and Ferretti

“engaged in the business of manufacturing, selling, and repairing pleasure boats.” (FAC ¶¶ 2,

6.) For all intents and purposes, Pershing is the end consumer, MarineMax is the retailer, and

Ferretti is the manufacturer of the yacht. Thus, there is no vertical privity between Pershing and

 The parties apply both California and Florida law in their respective analyses. The 5

privity requirement for implied-warranty causes of action under both states’ laws are

substantially similar under California and Florida law. See Kuhlman v. Louisville Ladder, Inc.,

No. 12-cv-1238, 2012 WL 5989435, at *2 (M.D. Fla. Nov. 30, 2012); Anunziato v. eMachines,

Inc., 402 F. Supp. 2d 1133, 1141 (C.D. Cal. 2005).

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Ferretti. Moreover, Pershing fails to cite any law or identify any allegations in the FAC that

support its contention that it falls under the privity exception as a third-party beneficiary. See In

re Google Phone Litig., 2012 WL 3155571, at *9. Consequently, Pershing fails to establish

privity with Ferretti to sustain its implied-warranty cause of action. See Osborne, 198 Cal. App.

3d at 656 n.6. The Court reaches the same conclusion under Florida law. See Kuhlman, 2012

WL 5989435, at *2 (“[U]nder Florida law, ‘to recover for breach of a warranty, either express or

implied, the plaintiff must be in privity of contract with the defendant.’”).

C. Negligence Against Ferretti and MarineMax6

The economic loss rule “prevent[s] the law of contract and the law of tort from dissolving

one into the other.” Robinson Helicopter Co., Inc. v. Dana Corp., 34 Cal. 4th 979, 988 (2004)

(internal quotations marks omitted). The rule generally bars tort actions for contract breaches,

thereby limiting contracting parties to contract damages. Aas v. Superior Court, 24 Cal. 4th 627,

643 (2000). It precludes recovery for “purely economic loss due to disappointed expectations,”

unless the plaintiff “can demonstrate harm above and beyond a broken contractual promise.” 

Robinson Helicopter, 34 Cal. 4th at 988. In other words, “[a] person may not ordinarily recover

in tort for the breach of duties that merely restate contractual obligations.” Aas, 24 Cal. 4th at

643. “[I]n actions for negligence, a manufacturer’s liability is limited to damages for physical

injuries and there is no recovery for economic loss alone.” Seely v. White Motor Co., 63 Cal. 2d

9, 18 (1965).

Ferretti and MarineMax argue that Pershing’s negligence cause of action is barred by the

economic loss rule. (Defs.’ Mot. 9:22–28.) Specifically, they contend that Pershing’s alleged

damages are purely economic, and that the complaint is devoid of any allegations that the

“Yacht’s alleged defects, or Defendants’ acts and omissions, injured any person or property, or

 The parties are litigating the sufficiency of a negligence cause of action against 6

MarineMax, but such a claim has not been asserted. (FAC ¶¶ 48–52.) Apparently, neither party

has noticed this. The Court will nonetheless address the merits of the parties’ arguments

regarding MarineMax’s alleged negligence.

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caused non-economic loss of any kind.” (Id.) In response, Pershing does not challenge the

applicability of the economic loss rule. Rather, it argues that the negligence cause of action is

adequately pled because its “damage suffered may be properly attributed to component to

component damage resulting from the alleged negligence.” (Pl.’s Opp’n 10:8–11.) To support

its argument, Pershing relies almost exclusively on Jimenez v. Superior Court, 29 Cal. 4th 473

(2002).

In Jimenez, the California Supreme Court held that a manufacturer of windows installed

in a mass-produced home during its construction could be strictly liable in tort for injuries to

other parts of the structure in which the defective windows were installed. Jimenez, 29 Cal. 4th

at 476. The court also emphasized that “the economic loss rule allows a plaintiff to recover in

strict products liability in tort when a product defect causes damage to ‘other property,’ that is,

property other than the product itself. The law of contractual warranty governs damage to the

product itself.” Id. at 483 (emphasis added). Tort recovery was permissible against the window

manufacturer because “California decisional law has long recognized that the economic loss rule

does not necessarily bar recovery in tort for damage that a defective product (e.g., a window)

causes to other portions of a larger product (e.g., a house) into which the former has been

incorporated . . . . ‘[T]he concept of recoverable physical injury or property damage’ ha[s] over

time ‘expanded to include damage to one part of a product caused by another, defective part.’”

Id. at 483-84 (quoting Aas, 24 Cal. 4th at 641).

To apply the economic loss rule under Jimenez, the court “must first determine what the

product at issue is.” Jimenez, 29 Cal. 4th at 483. “Only then do we find out whether the injury

is to the product itself (for which recovery is barred by the economic loss rule) or to the property

other than the defective product (for which plaintiffs may recover in tort).” Id. 

“[D]istinguishing between ‘other property’ and the defective product itself in a case involving

component-to-component damage requires a determination whether the defective part is a

sufficiently discrete element of the larger product that it is not reasonable to expect its failure

invariably to damage other portions of the finished product.” KB Home v. Superior Court, 112

Cal. App. 4th 1076, 1087 (2003).

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Here, the product at issue is the yacht, which Pershing contends was damaged by the

“failure of some of [its] components.” (Pl.’s Opp’n 10:25–11:6 (emphasis in original).) To

loosely analogize to Jimenez, the yacht is the equivalent to the house and the engines are

equivalent to the windows. See Jimenez, 29 Cal. 4th 483-84. However, unlike Jimenez, where

the plaintiffs sought recovery from the window manufacturer, Pershing seeks recovery from

Ferretti (the yacht manufacturer) and MarineMax (the yacht retailer) for damages caused by

components in the yacht which neither Ferretti nor MarineMax are alleged to have

manufactured. In other words, there are no allegations in the FAC that a component

manufactured by either Ferretti or MarineMax caused damage to some other component of the

yacht or to the yacht itself. Based on the allegations in the FAC, MarineMax cannot be liable for

component-to-component damages because it is not a manufacturer of anything related to the

yacht. See Jimenez, 29 Cal. 4th at 483. And Ferretti also cannot be liable for component-tocomponent damage because Pershing’s contention is not that the yacht damaged some

component, but rather some components—not necessarily manufactured by Ferretti—damaged

the yacht. See id.

IV. CONCLUSION & ORDER

In light of the foregoing, the Court GRANTS Ferretti and MarineMax’s motion to

dismiss. Accordingly, the Court:

(1) GRANTS WITHOUT LEAVE TO AMEND the motion to dismiss as to the

causes of action for breach of contract against MarineMax and negligence against

MarineMax, see Cervantes v. Countrywide Home Loans, Inc., 656 F.3d 1034, 1041

(9th Cir. 2011) (“[A] district court may dismiss without leave where . . .

amendment would be futile.”); and

(2) GRANTS WITH LEAVE TO AMEND the motion to dismiss as to the causes of

action for the breach of the implied warranty of merchantability, and negligence

against Ferretti.

//

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If Pershing chooses to amend either of its causes of action for negligence or breach of the

implied warranty of merchantability against Ferretti, it must do so by February 7, 2013.

IT IS SO ORDERED.

DATED: January 24, 2013

M. James Lorenz

United States District Court Judge

COPY TO: 

HON. DAVID H. BARTICK

UNITED STATES MAGISTRATE JUDGE

ALL PARTIES/COUNSEL

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