In Fierro v. Capital One, N.A., No. 22-cv-00493-BAS-BLM, 2023 U.S. Dist. LEXIS 25253, at *6-9 (S.D. Cal. Feb. 13, 2023), Judge Bashant allowed a UCC claim to proceed for a “totaled” vehicle, despite no “disposition” of it.

In dismissing Plaintiff’s first attempt to raise a claim under California’s Commercial Code, the Court expressed doubt that Plaintiff could plead a violation of § 9616 in these circumstances. The Court reasoned that Plaintiff “does not allege that she is a consumer obligor liable for a deficiency under § 9615, which is a prerequisite to invoking § 9616(b).” (Dismissal Order 8:10-11.) Moreover, given Plaintiff’s allegations, “Defendant did not dispose of the security interest—Plaintiff’s car—after she defaulted on the Sales Contract. Her car was totaled.” (Id. 8:21-22.)  Plaintiff’s First Amended Complaint overhauls her § 9616 claim to address these deficiencies. At the outset, Plaintiff alleges she “purchased the vehicle primarily for personal, family, or household use,” making her a consumer obligor. (FAC ¶ 45.) She also pleads the Sales Contract for the vehicle created a security interest in both the vehicle and any proceeds received for it. (Id. ¶ 44.) Indeed, under § 9315(a)(2), “[a] security interest attaches to any identifiable proceeds of collateral.” Further, Plaintiff alleges the Sales Contract defines a “default” to include where “[t]he vehicle is lost, damaged, or destroyed.” (FAC ¶ 47.) Hence, Plaintiff alleges that she was in “default” under the Sales Contract after her vehicle was damaged in a collision and her insurer determined it was totaled. (Id.) With her in default, Plaintiff avers that Defendant “disposed” of the collateral by “directing State Farm to pay [Defendant] the proceeds of Plaintiff’s insurance settlement in exchange for releasing its lien on the vehicle’s title.” (Id. ¶ 50.) Defendant chose this option in lieu of taking possession of the damaged vehicle and selling it for salvage value. (Id. ¶ 51.) Defendant then applied the cash proceeds from its disposition of the collateral to Plaintiff’s loan and claimed she owed a deficiency “in excess of $2,000.” (Id. ¶ 52.) Plaintiff next alleges that after Defendant’s disposition and her receipt of the deficiency claim, she had a statutory right under § 9616 to request Defendant “provide an explanation of how it calculated her purported obligation to pay the deficiency.” (FAC ¶ 52.) Plaintiff sent Defendant “an authenticated request for an explanation of the deficiency,” but she did not receive the required explanation. (Id. ¶¶ 54-55.) Consequently, Plaintiff alleges Defendant violated § 9616. (Id. ¶ 58.) Overall, in contrast to her initial Complaint, Plaintiff now includes specific allegations to plead into the statutory framework for § 9616. Defendant argues these allegations “conveniently overlook the spirit of the Commercial Code, which is the proper disposition of the collateral,” and still do not show a “disposition” occurred. (Mot. 6:16-7:13.) The Court is unpersuaded by this holistic argument. Viewing the allegations in the light most favorable to Plaintiff, the Court concludes she plausibly pleads she was entitled under § 9616 to an explanation of how Defendant calculated her deficiency. The Court thus denies Defendant’s request to dispose of Plaintiff’s California Commercial Code claim.

The District Court dismissed the Plaintiff’s CLRA claim based on the GAP product and representations related to it.

To state a misrepresentation claim under the CLRA, “a plaintiff must allege (1) a misrepresentation; (2) reliance on that misrepresentation; and (3) damages caused by that misrepresentation.” Rojas-Lozano v. Google, Inc., 159 F. Supp. 3d 1101, 1112 (N.D. Cal. 2016) (quoting In re Sony PS3 Other OS Litig., 551 F. App’x 916, 920 (9th Cir. 2014)).   Defendant argues Plaintiff’s misrepresentation claim is missing the reliance element. (Mot. 9:11-26.) This element requires “actual reliance” on the misrepresentation. E.g., Cohen v. DIRECTV, Inc., 178 Cal. App. 4th 966, 973 (2009). To illustrate, several consumers challenged a tobacco company’s announcement to end a customer-rewards program as being unfair and deceptive. Sateriale v. R.J. Reynolds Tobacco Co., 697 F.3d 777, 793 (9th Cir. 2012). But because the consumers failed to allege they purchased additional cigarettes or otherwise detrimentally relied on the company’s announcement, they failed to plead actual reliance under the CLRA. Id. at 793-94.  Plaintiff alleges Defendant Capital One made several misrepresentations concerning the GAP Addendum, but these events occurred many years after she purchased her vehicle and signed the GAP Addendum. (See FAC ¶¶ 13, 20-31, 68-69.) Defendant, therefore, argues Plaintiff “does not allege (nor can she) that she entered into the [Sales Contract] pursuant to any representation whatsoever that [Defendant]” made regarding the GAP Addendum. (Mot. 9:18-22.)  The Court agrees. The CLRA safeguards consumers from deceptive practices that are “intended to result or which result[ ] in the sale or lease of goods or services.” Cal. Civ. Code § 1780(a). “By definition, the CLRA does not apply to unfair or deceptive practices that occur after the sale or lease has occurred.” Moore v. Apple, Inc., 73 F. Supp. 3d 1191, 1201 (N.D. Cal. 2014) (collecting cases); see also Daugherty v. Am. Honda Motor Co., Inc., 144 Cal. App. 4th 824, 837 n.6 (2006) (“In any event, those representations, such as they were, occurred in 2000 and 2001, not at the time of sale [nearly a decade earlier].”); Ross v. AT&T Mobility, LLC, No. 19-cv-06669-JST, 2020 WL 9848766, at *16 (N.D. Cal. May 14, 2020) (concluding claim lacked plausibility where the plaintiff did not allege the defendant’s conduct occurred before the “decision to initially contract”). Given that Defendant’s purported misrepresentations concerning the GAP Addendum occurred many years after Plaintiff purchased her vehicle, she does not plausibly allege she relied on these misrepresentations when entering into the transaction.1 Hence, the Court grants Defendant’s request to dismiss her claim to the extent it relies on this conduct without leave to amend. Plaintiff also alleges, however, that misrepresentations occurred when she purchased the vehicle and signed the GAP Addendum. She claims dealership employees “said the monthly payment [for her loan] included GAP insurance, which was required.” (FAC ¶ 14.) In truth, the GAP Addendum “added $795” to the Sales Contract. (Id.) Plaintiff further claims [*14] the GAP Addendum was deceptive for various reasons. (Id. ¶¶ 15-18.) Although Defendant did not commit these alleged misrepresentations, Plaintiff correctly argues that Defendant—as the assignee who stepped into the shoes of the dealership—is subject to the same claims and defenses that Plaintiff could allege against the dealership. (Opp’n 11:5-6.) See Pulliam v. HNL Auto. Inc., 13 Cal. 5th 127, 131-35 (2022) (explaining why holder of installment sales contract is subject to CLRA claim); Lafferty v. Wells Fargo Bank, 213 Cal. App. 4th 545, 563 (2013) (same). In response to Plaintiff’s assertion that Defendant is liable for the dealership’s conduct, Defendant argues Plaintiff encounters a different problem: the statute of limitations. (Reply 4:19-5:14.) “As noted in the FAC, the dealer’s purported representations regarding the GAP contract occurred in August 2014—more than seven years before this lawsuit was filed.” (Id.) Given Plaintiff’s vehicle was totaled in 2017 and this action was filed in 2022, Defendant argues “this [claim] is well outside the three-year statute of limitations for claims brought under the CLRA.” (Id.) The Court agrees. See Cal. Civ. Code § 1783 (“Any action brought under the specific provisions of Section 1770 shall be commenced not more than three years from the date of the commission of such method, act, or practice.”); see also Nguyen v. Nissan N. Am., Inc., 487 F. Supp. 3d 845, 856-57 (N.D. Cal. 2020) (applying statute of limitations for CLRA claim). Moreover, Plaintiff has the burden to demonstrate otherwise. See, e.g., Nguyen, 487 F. Supp. 3d at 856. The Court therefore dismisses Plaintiff’s CLRA claim based on the dealership’s conduct with leave to amend and does not consider whether this claim is otherwise plausible and satisfies Rule 9(b)’s particularity requirement. See Kearns v. Ford Motor Co., 567 F.3d 1120, 1125 (9th Cir. 2009) (holding Rule 9(b) applies to CLRA claims sounding in fraud).