Court Opinion

ID: 619286
Source: CourtListenerOpinion
Date Created: 2011-12-20 01:01:49+00
Date Added: 2024-06-11T17:50:48.109738
License: Public Domain

FILED
                            NOT FOR PUBLICATION                             DEC 19 2011

                                                                        MOLLY C. DWYER, CLERK
                    UNITED STATES COURT OF APPEALS                       U .S. C O U R T OF APPE ALS

                            FOR THE NINTH CIRCUIT

RICHARD SMITH; REBECCA KLEIN,                    No. 10-17321
individually and on behalf of all others
similarly situated,                              D.C. No. 3:06-cv-00497-MMC

              Plaintiffs - Appellants,
                                                 MEMORANDUM *
  v.

FORD MOTOR COMPANY,

              Defendant - Appellee.

                   Appeal from the United States District Court
                      for the Northern District of California
                Maxine M. Chesney, Senior District Judge, Presiding

                     Argued and Submitted November 29, 2011
                             San Francisco, California

Before: THOMAS and CLIFTON, Circuit Judges, and EZRA, District Judge. **

       Plaintiffs Richard Smith and Rebecca Klein appeal the district court’s grant

of summary judgment to defendant Ford Motor Company. We affirm.

        *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.

        **    The Honorable David A. Ezra, District Judge for the U.S. District
Court for the District of Hawaii, sitting by designation.
I.    CLRA Claims

      Plaintiffs’ claim under the Consumers Legal Remedies Act is based on the

failure of Ford to disclose the risk that ignition locks in its Focus vehicles from

model years 2000 through 2006 would fail after the warranty expired. A

manufacturer cannot be found liable under the CLRA for failure to disclose a

defect that manifests itself after expiration of the warranty period unless such

omission (1) is “contrary to a representation actually made by the defendant” or (2)

pertains to a “fact the defendant was obligated to disclose.” Daugherty v. Am.

Honda Motor Co., Inc., 51 Cal. Rptr. 3d 118, 126 (Cal. Ct. App. 2006). As

plaintiffs do not allege that Ford made affirmative representations concerning the

ignition locks, the parties agree that plaintiffs cannot prevail absent a duty to

disclose by Ford.

      Under California’s general law of fraud, a duty to disclose may arise, inter

alia, when the defendant had exclusive knowledge of material facts not known to

the plaintiff or when the defendant actively conceals a material fact from the

plaintiff. See Limandri v. Judkins, 60 Cal. Rptr. 2d 539, 543 (Cal. Ct. App. 1997).

This appeal largely centers on the question of whether California law creates a duty

to disclose non-safety related defects that manifest only after the warranty period,

absent any affirmative representations regarding those defects by the manufacturer.

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We agree with the district court that, under Daugherty, where a plaintiff’s claim is

predicated on a manufacturer’s failure to inform its customers of a product’s

likelihood of failing outside the warranty period, the risk posed by such asserted

defect cannot be merely the economic cost of the product’s repair but must

constitute a safety concern. 51 Cal. Rptr. 3d at 127-128.

      Plaintiffs argue that the district court erred by deciding that the ignition-lock

defect did not pose a safety risk as a matter of law. Specifically, plaintiffs contend

that the failure rate of the Focus ignition locks was related to safety because a

defective lock may prevent the driver from starting the engine, thereby leaving the

driver stranded on the roadway, or may prevent the enging from being shut off,

                                          -3-
rendering the vehicle vulnerable to runaway or theft.1 We agree with the district

court that the “safety” concerns raised by plaintiffs were too speculative, as a

matter of law, to amount to a safety issue giving rise to a duty of disclosure. We

affirm the grant of summary judgment on the CLRA claims.

II.   Fraudulent Concealment Claims

      Common law fraudulent concealment under California law requires that “the

defendant must have been under a duty to disclose some fact to the plaintiff.” Hahn

v. Mirda, 54 Cal. Rptr. 3d 527, 530 (Cal. Ct. App. 2007). Because Ford was under

no duty to disclose the failure rate of the ignition locks in the Focus, we affirm the

district court’s grant of summary judgment on this ground.

      1
        Plaintiffs also appeal two related evidentiary rulings by the district court.
First, plaintiffs appeal the district court’s consideration, over objection, of an
affidavit submitted by Ford from Paul Taylor, Ph.D, an expert in mechanical
engineering. Dr. Taylor opined that the ignition lock defect at issue could not result
in an inability to turn off the engine. We conclude that the district court did not
abuse its discretion in finding that Dr. Taylor’s opinion was the product of reliable
principles and methods. See Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579,
593-94 (1993). Second, plaintiffs argue that the district court abused its discretion
by refusing to admit records from Ford’s AWS warranty database and Ford’s
Customer Quality Indicator System based on a determination that they were
inadmissible hearsay. Because plaintiffs do not dispute that these records were
hearsay and offer unpersuasive arguments as to why they fall under an exception,
we conclude that the district court did not abuse its discretion in ruling them
inadmissible. Further, given the apparent unreliability of the records in
demonstrating ignition lock-failures, the plaintiffs were not prejudiced by this
decision.

                                          -4-
III.     Unconscionable Warranty Claims

         Smith argues that Ford’s standard three-year, 36,000 mile warranty was

unconscionable because it was non-negotiable and contained durational limitations

that Ford enforced with respect to the known latent defect in the ignition locks.

Under California law, unconscionability includes both a procedural and substantive

element. Aron v. U-Haul Co. of Cal., 49 Cal. Rptr. 3d 555, 564 (Cal. Ct. App.

2006).

         While California courts have rejected the notion that “the availability in the

marketplace of substitute employment, goods, or services alone can defeat a claim

of procedural unconscionability,” Nagrampa v. Mailcoups, Inc, 469 F.3d 1257,

1283 (9th Cir. 2006), the existence of meaningful substitutes can. See, e.g., Dean

Witter Reynolds, Inc. v. Superior Court, 259 Cal. Rptr. 789, 796-97 (Cal. Ct. App.

1989) (noting that “even though a contract may be adhesive, the existence of

‘meaningful’ alternatives available to such contracting party in the form of other

source of supply tends to defeat any claim of unconscionability”). Smith was

presented with a meaningful choice, not just the option of purchasing a different

vehicle from a different manufacturer, but also the option of purchasing a different

warranty with an extended durational limit from Ford. We agree with the district

court that Smith failed to provide sufficient evidence to support a finding in his

                                            -5-
favor regarding procedural unconscionability. Further, because Ford was under no

duty to disclose the failure rate of the ignition locks, and Smith has offered no

evidence that Ford’s warranty created “overly harsh or one-sided results as to

shock the conscience,” Aron, 49 Cal. Rptr. 3d at 564 (internal citations omitted),

we affirm the district court’s finding regarding the unconscionability of Ford’s

warranty.

IV. Secret Warranty Law Claims

      California’s Secret Warranty Law provides that:

                    [a] manufacturer shall, within 90 days of the
             adoption of an adjustment program, subject to priority for
             safety or emission-related recalls, notify by first-class mail
             all owners or lessees of motor vehicles eligible under the
             program of the condition giving rise to and the principal
             terms and conditions of the program.

Cal. Civ. Code § 1795.92(a). An “adjustment program” is defined as follows:

             any program or policy that expands or extends the
             consumer’s warranty beyond its stated limit or under which
             a manufacturer offers to pay for all or any part of the cost
             of repairing, or to reimburse consumers for all or any part
             of the cost of repairing, any condition that may
             substantially affect vehicle durability, reliability, or
             performance, other than service provided under a safety or
             emission-related               recall       campaign.

                                          -6-
Cal. Civ. Code § 1795.90(d). The law further provides that an adjustment program

“does not include ad hoc adjustments made by a manufacturer on a case-by-case

basis.” Id.

       We agree with the district court that plaintiffs failed to offer sufficient

evidence to support a finding that Ford’s After-Warranty Assistance program fell

within the statutory exception for “ad hoc” adjustments. Plaintiffs’ allegation that

the program was an “adjustment program,” as applied to ignition locks in the

Focus, boiled down to the fact that Ford had replaced more than 16,000 Focus

ignition locks under the program by the end of 2008. According to plaintiffs, the

sheer number of repairs indicated that this was more than an “ad hoc” policy.

However, Ford’s internal materials emphasized that repair decisions were to be

made on a case-by-case basis, did not reference ignition locks specifically, and

offered only vague guidelines, such as whether there was a potential for a customer

relations impact.

       Plaintiffs did not carry their burden in showing that there was a genuine

issue of material fact as to whether Ford’s program was in violation of the Secret

Warranty Law.

V. UCL Claims

                                           -7-
      The California Unfair Competition Law prohibits business acts or practices

that are (1) fraudulent, (2) unfair, or (3) unlawful. See Cal. Bus. & Prof. Code

§ 17200; see also Daugherty, 51 Cal. Rptr. 3d at 128. We affirm the district court’s

grant of summary judgement in favor of Ford on all three prongs.

      To prevail on a claim under the fraudulent conduct prong of the UCL, the

plaintiff must show that “members of the public are likely to be deceived” by the

alleged practices. Bardin v. DaimlerChrysler Corp., 39 Cal. Rptr. 3d 634, 647 (Cal.

Ct. App. 2006); see also Daugherty, 51 Cal. Rptr. 3d at 128. When dealing with a

complex mechanical system sold under warranty, such as a vehicle, the expectation

of the reasonable consumer regarding the life span of an individual component is

that it will function properly for the length of the express warranty. See Daugherty,

51 Cal. Rptr. 3d at 128-29. Plaintiffs failed to provide sufficient evidence to

support a decision in their favor on the fraudulent conduct prong.

      An act or practice is unfair under the UCL “if the consumer injury is

substantial, is not outweighed by any countervailing benefits to consumers or to

competition, and is not an injury the consumers themselves could reasonably have

avoided.” Id. at 129 (citing Camacho v. Auto. Club of S. Cal., 48 Cal. Rptr. 3d 770,

777 (Cal. Ct. App. 2006)). Further:

             the failure to disclose a defect that might, or might not,

                                          -8-
             shorten the effective life span of an automobile part that
             functions precisely as warranted throughout the term of its
             express warranty cannot be characterized as causing a
             substantial injury to consumers, and accordingly does not
             constitute an unfair practice under the UCL.

Id. at 130. Here, just as the injury in Daugherty was deemed to not be substantial,

the increased failure rate of the ignition locks in the Focus after the warranty period

was not substantial and Ford’s practices did not represent unfair conduct under the

UCL.

       The unlawful conduct prong of the UCL is derivative of other California

laws, including the CLRA, common law fraudulent concealment, and the Secret

Warranty Law. As discussed, plaintiffs failed to carry their burden as to any of

these claims. As such, there was no violation under the unlawful prong of the UCL.

VI. Unjust Enrichment Claim

       Plaintiffs also appeal the district court’s ruling that unjust enrichment is not

an independent cause of action in California. This argument has no merit. Jogani v.

Superior Court, 81 Cal. Rptr. 3d 503, 511 (Cal. Ct. App. 2008); Melchior v. New

Line Prods., Inc., 131 Cal. Rptr. 2d 347, 357 (Cal. Ct. App. 2003)); see

also Oestreicher v. Alienware Corp., 544 F. Supp. 2d 964, 975 (N.D. Cal. 2008)

(dismissing unjust enrichment claim because it had no basis after plaintiffs’s fraud-

based claims were dismissed); Berenblat v. Apple, Inc., 2009 WL 2591366, at *6

                                           -9-
(N.D. Cal. 2009) (“[A] claim for unjust enrichment cannot stand alone without a

cognizable claim under a quasi-contractual theory or some other form of

misconduct.”).

VII. Motion to Certify Questions to the California Supreme Court

      Plaintiffs’ motion to certify questions to the California Supreme Court

is denied. As discussed above, sufficient controlling precedent exists from the

California appellate courts to address the questions posed, and there is no

indication that the California Supreme Court would decide these issues differently.

See Cal. Rules of Court 8.548; Bills v. U.S. Fid. & Guar. Co., 280 F.3d 1231, 1237

n.1 (9th Cir. 2002) (“[A] federal court is obligated to follow the decisions of the

state’s intermediate appellate courts where there is no convincing evidence that the

state supreme court would decide differently.”).

      AFFIRMED.

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