In Chulick–Perez v. Carmax Auto Superstores California, LLC, 2014 WL 2154479 (E.D.Cal. 2014), Judge Nunley granted a car dealer’s motion to dismiss a Plaintiff’s claim that a dealer’s used-vehicle certification program violated Song-Beverly, the CLRA and the UCL.  The facts were as follows:

On December 16, 2011, Plaintiff Michelle Chulick–Perez (hereinafter “Plaintiff”) bought a 2003 BMW X5 (hereinafter “the vehicle”) from Defendant CarMax Auto Superstores, LLC (hereinafter “Defendant”) in Roseville, California. (ECF No. 1–1 ¶ 6.) Plaintiff also purchased a MaxCare Service contract. (ECF No. 1–1 ¶ 8.) Plaintiff felt secure buying a vehicle from Defendant because of its representations regarding the certification, quality, and inspection of its vehicles, as made by Defendant in its radio and television advertisements. (ECF No. 1–1 ¶ 7.) Plaintiff also met with a salesperson employed by Defendant who told her the vehicle had been inspected and was in great condition. (ECF No. 1–1 ¶ 8.)  Plaintiff alleges Defendant makes extensive use of the term “certified” in its sales, promotions, and advertising. Plaintiff alleges specifically that the vehicles it sells are “CarMax Quality Certified” and that the inspection it performs is a “Certified Quality Inspection.” (ECF 1–1 No. ¶ 12.) Plaintiff was not provided the results of Defendant’s inspection report, and instead found a “generic list” of inspected components in the glove box after purchasing the vehicle. (ECF 1–1 No. ¶¶ 14–15.) Plaintiff further claims that Defendant, pursuant to a company policy, actively suppressed and concealed the results of its true inspection of her vehicle, which is contained in a “CarMax Quality Inspected” (“CQI”) checklist and/or report. (ECF 1–1 ¶ 16–17.) Plaintiff contends that Defendant destroyed the CQI checklist prior to her purchase. (ECF No. 1–1 ¶ 16.)  On January 11, 2012, Plaintiff took her car to Defendant’s repair facility because the windshield wipers weren’t working and one of the tires, at the time of purchase, was a spare. (ECF No. 1–1 ¶ 28.) Plaintiff states that since the date of purchase she has taken the vehicle to repair facilities at least thirteen times in order to repair defects that include: a leaking valve gasket, shaking of the vehicle at speeds over 55 MPH, rattling of the doors, failure of the air conditioner, the “check engine” light turning on multiple times, and problems with the rear control arm bushings, steering rack, and the left front turn signal.FN1 (ECF No. 1–1 ¶ 29.) Plaintiff also states the vehicle had 59,000 miles on the odometer at the time of purchase, though Plaintiff questions the accuracy of this reading. (ECF No. 1–1 ¶ 30.)

Judge Nunley found no Song-Beverly violation, explaining:

Given the context-specific task of adjudicating a motion to dismiss, a review of recent federal case law indicates that both standards are relevant. This Court considers whether the vehicle is fit for its intended purpose of transportation, as indicated by American Suzuki. However, a bright-line, total inoperability is not required to survive dismissal, as indicated by Isip. Relevant to the Court’s review is whether the defect is alleged to “compromise the vehicle’s safety, render it inoperable, or drastically reduce its mileage range.” Troup v. Toyota Motor Corp., 545 Fed. Appx. 668, 669 (9th Cir.2013) (also discussing that “the alleged defect in Isip drastically undermined the ordinary operation of the vehicle … By contrast, the defect alleged by [plaintiff] did not implicate the [vehicle’s] operability; rather, it merely required [plaintiff] to refuel more often”). See Avedisian v. Mercedes–Benz USA, LLC 2013 WL 2285237, at * 5 (C.D.Cal. May 22, 2013) (allegations that coating of vehicle’s interior trim pieces flaked, cracked, and peeled, thereby creating sharp edges that caused lacerations on passenger’s arms; district court applied the Isip standard and found plaintiff had adequately pled a claim); Aguila v. General Motors LLC 2013 WL 3872502, at *7 (E.D.Cal. July 25, 2013) (allegations of steering wheel locking, loss of power steering while in motion, steering wheel instability, knocking, bumping or grinding noises while turning, and/or total steering wheel failure; district court considered Isip and American Suzuki and found plaintiff had adequately pled a claim); Keegan v. American Honda Motor Co., 838 F.Supp.2d 929, 946 (C.D.Cal. Jan.6, 2012) (allegations of a defective rear suspension; district court considered Isip and American Suzuki and found Plaintiff had adequately pled a claim). See also Carlson v. General Motors Corp., 883 F.2d 287, 297 (4th Cir.1989) (“Since cars are designed to provide transportation, the implied warranty of merchantability is simply a guarantee that they will operate in a safe condition and substantially free of defects. Thus, where a car can provide safe, reliable transportation, it is generally considered merchantable.”).  Here, Plaintiff does not allege that the vehicle’s safety has been compromised or that its mileage range has been drastically reduced. See Troup, 545 Fed. Appx. at 669. Plaintiff does not allege that the vehicle lacks a basic degree of fitness for ordinary use. See Mocek, 114 Cal.App.4th at 405, 7 Cal.Rptr.3d 546. Plaintiff does not allege that the car has failed to provide safe, reliable transportation. See Carlson, 883 F.2d at 289. The combination of defects alleged by Plaintiff also does not match the degree to which the defects drastically undermined the vehicle’s operation in Isip. See Isip 155 Cal.App.4th at 22, 65 Cal.Rptr.3d 695; Troup, 545 Fed. Appx. at 669. Plaintiff contends that the vehicle “had substantial mechanical defects,” but does not allege with sufficient factual specificity the degree to which these defects implicate the vehicle’s fitness or operability. ( See ECF No. 1–1 ¶ 56.) Therefore, Plaintiff has not maintained a viable claim for breach of implied warranty of merchantability, on the basis of the alleged defects. Plaintiff has not alleged sufficient factual content to withstand the motion to dismiss. This claim is dismissed with leave to amend.

The District Court found no CLRA or UCL violation, either.  First, the District Court found that the pleadings sounded in fraud, so they must meet the standard of FRCP Rule 9(b):

Accordingly, this Court must determine whether Plaintiff’s claims “sound in fraud.” The Court finds that they do. Among other misrepresentations regarding the vehicle’s quality and condition, Plaintiff claims as follows: that Defendant misrepresented that the vehicle was certified; that these misrepresentations were made via advertisement and via a salesperson at a CarMax facility; that Plaintiff relied upon these misrepresentations in purchasing the vehicle; and that these representations resulted in damages, for which Plaintiff is seeking both compensatory and punitive relief. ( See ECF No. 1–1 ¶¶ 6–31.) Based on the Court’s finding that Plaintiff’s claims “sound in fraud,” Plaintiff’s pleading must comport with the requirements of Fed. R. Civ. Proc. 9(b).

The District Court found that the Legislature, in enacting the Car Buyers’ Bill of Rights, did not impose the disclosure obligations that Plaintiff alleged:

The Court must now determine if Defendant omitted information in violation of a duty to disclose this information. Section 11713.18(a) of the California Vehicle Code, which is part of California’s Car Buyer’s Bill of Rights, states:  It is a violation of this code for the holder of any dealer’s license issued under this article to advertise for sale or sell a used vehicle as “certified” or use any similar descriptive term in the advertisement or the sale of a used vehicle that implies the vehicle has been certified to meet the terms of a used vehicle certification program if any [of the listed provisions (1)-(9) of this section] apply”. Cal. Veh.Code § 11713.18(a). Provision (6) of § 11713.18(a) provides for a violation when: “Prior to sale, the dealer fails to provide the buyer with a completed inspection report indicating all the components were inspected.” Plaintiff claims that § 11713.18(a)(6) is violated because no completed inspection report was provided, either before or after the sale. (ECF No. 1 ¶ 77.) Plaintiff claims that pursuant to a corporate policy, Defendant placed a generic report and/or checklist in the glove box, which Plaintiff did not discover until she purchased the vehicle. Plaintiff claims this report is insufficient. (ECF No. 1 ¶ 78.) Plaintiff elaborates as follows: the checklist lists “Exhaust”, without an indication of whether an exhaust system is installed or inspected; and the vehicle does not have a manual transmission, yet the CQI lists “Manual (starts w/clutch in only” and “Clutch operation (manual trans.)”. (ECF No. 8 at 14.) Plaintiff further claims that Defendant prepares a valid inspection report, a “CQI” report and/or checklist, as a standard part of its reconditioning process of vehicles, but that it is Defendant’s corporate policy to destroy this checklist. (ECF No. 8 at 15.)  Defendant argues in response that the statute only requires that car dealers provide purchasers with a report stating the parts that were inspected, and that it had no duty under the statute to disclose defects found during inspection. (ECF No. 35 at 26.)  Looking first to the language of § 11713.18(a)(6), nothing in this language explicitly requires Defendant to disclose the results of the inspection, but only that a report must list the components the car dealer inspected. Interestingly, a review of the legislative history of the statute leads the Court to find that car dealers are not required to disclose the results of a pre-sale inspection.FN7 The legislature enacted the Car Buyer’s Bill of Rights, Cal. Veh.Code § 11713.18, et seq. , to “place limits and restrictions on motor vehicle dealers.” (AB 68, § 1(b); ECF No. 9–1, Ex. 4 at 106.) A May 5, 2005 draft of the bill required that the reports “indicat[e] all the components inspected pursuant to the vehicle certification program and certif[y] that all of the inspected components meet the express written standards of the vehicle certification program.” ( See Amend. to AB 68, May 5, 2005; ECF No. 9–1, Ex. 1 at 57.) Future drafts of the bill, however, delete this language; by June 9, 2005, the current statutory text, which requires only that the report “indicat [e] all the components inspected,” had been substituted.FN8 ( See Amend. to AB 68, June 9, 2005; ECF No. 9–1, Ex. 2 at 82.)    [FN7. See Murphy v. Kenneth Cole Productions, Inc., 40 Cal.4th 1094, 1102–03, 56 Cal.Rptr.3d 880, 155 P.3d 284 (2007) (discussing that, in construing a statute, “it is well-settled that [courts] must look first to the words of the statute”; where the plain language of the statute is susceptible of more than one interpretation, courts “look to extrinsic sources, such as the ostensible objectives to be achieved by the statute, the evils to be remedied, the legislative history, public policy, contemporary administrative construction and the statutory scheme of which the statute is a part.”) Additionally, Defendant requests that the court take judicial notice of the legislative history of the Car Buyer’s Bill of Rights, Cal. Veh.Code § 11713.18 et seq. ( See ECF No. 9–1, Ex. 1–4.) Under Rule 201 of the Federal Rules of Evidence, the court may take judicial notice of the legislative history of state statutes. See e.g., Territory of Alaska v. Am. Can Co., 358 U.S. 224, 226, 79 S.Ct. 274, 3 L.Ed.2d 257 (1959); Chaker v. Crogan, 428 F.3d 1215, 1223 n. 8 (9th Cir.2005). The Court accordingly grants Defendant’s request for judicial notice of the legislative history of the Car Buyer’s Bill of Rights.]  “The rejection of a specific provision contained in an act as originally introduced is ‘most persuasive’ that the act should not be interpreted to include what was left out.” Murphy, 40 Cal.4th at 1107, 56 Cal.Rptr.3d 880, 155 P.3d 284. That the California legislature considered, and rejected, an earlier draft of the Car Buyer’s Bill of Rights that would have required disclosure of the results of an inspection is persuasive that it did not intend to require that car dealers provide more than a list of the components inspected. Plaintiff does not direct the Court to any authority indicating that Defendant had a duty to reveal the results of an internal inspection report. Consequently, the Court cannot find that Defendant had this duty. Accordingly, Plaintiff has not adequately alleged a fraudulent omission under the CLRA or the UCL.    However, Plaintiff could allege in a subsequent complaint that Defendant had a duty to disclose material defects in the vehicle. “Under California law, there are four circumstances in which an obligation to disclose may arise: (1) when the defendant is in a fiduciary relationship with the plaintiff; (2) when the defendant had exclusive knowledge of material facts not known to the plaintiff; (3) when the defendant actively conceals a material fact from the plaintiff; and (4) when the defendant makes partial representations but also suppresses some material facts.” Smith v. Ford Motor Co., 749 F.Supp.2d 980, 987 (N.D.Cal.2010). Plaintiff may be able to provide adequate foundation for one of these circumstances.  Plaintiff has not alleged sufficient factual content regarding the CLRA and the UCL to withstand Defendant’s dismissal motion, and therefore these claims are dismissed with leave to amend.