Case Number: EC067976 Hearing Date: August 31, 2018 Dept: NCD

TENTATIVE RULING

Calendar: 3

Date: 8/31/18

Case No: EC 067976 Trial Date: None Set

Case Name: Manvelyan v. Carmax

DEMURRER

MOTION TO STRIKE

[CCP §430.10 et. seq.]

Moving Party: Defendant Carmax Auto Superstores California, LLC

Responding Party: Plaintiff Mary Manvelyan

RULING:

The court notes that the oppositions are untimely, filed and served one court day late. The court has in its discretion considered the oppositions, only because the reply has addressed the oppositions on their merits. Counsel for plaintiff is cautioned that in the future the court may refuse to consider pleadings not filed in conformity with the statutes, rules and procedures governing this litigation.

Defendant CarMax Auto Superstores California, LLC’s Demurrer to Plaintiff Mary Manvelyan’s First Amended Complaint:

Demurrer is SUSTAINED WITH LEAVE TO AMEND as to the third cause of action for Violation of Vehicle Code Section 11713.18(a) on the ground that while the FAC alleges that the vehicle inspection report provided was deficient, it does not explain how the report, attached as Exhibit 3 to the pleading, fails to comply with the section. The attachment appears to list all the components inspected, which is all that is required under the statute.

Demurrer on all other grounds and to all other causes of action is OVERRULED.

Ten days leave to amend the third cause of action only, if possible.

The parties are ordered to meet and confer in full compliance with CCP § 430.41 before any further demurrer may be filed.

Defendant CarMax Auto Superstores California, LLC’s Motion to Strike Portions of Plaintiff Mary Manvelyan’s First Amended Complaint is DENIED.

Meet and Confer? Yes

RELIEF REQUESTED:

Sustain demurrer to First Amended Complaint

Strike Attorneys’ Fees, Punitive Damages, Injunctive Relief

CAUSES OF ACTION: from First Amended Complaint

1) Violation of Consumer Legal Remedies Act

2) Violation of Song-Beverly Consumer Warranty Act

3) Violation of California Vehicle Code §11713.18(a)(6)

4) Violation of California Business & Professions Code 17200

5) Declaratory Relief

SUMMARY OF FACTS:

Plaintiff Mary Manvelyan alleges that in June of 2016, she purchased a CarMax certified vehicle from defendant Carmax as the seller, pursuant to a Retail Installment Sales Contract, and was provided with a Buyer’s Guide, providing plaintiff a 30 day warranty. Plaintiff was also provided with a CarMax Certified Quality Inspection Report showing the vehicle “has passed the rigorous CarMax 125-Point Quality Inspection.” Plaintiff alleges that she saw and relied on the CarMax advertisements concerning the CarMax Quality Certified Seal.

Shortly after the purchase, the vehicle began experiencing serious mechanical problems, as the vehicle is consuming excessive oil, and it is recommended it has valve stem seals replaced, and that the problem persists despite plaintiff having taken the vehicle to Pacific BMW on five occasions, and having the valve stem seals replaced.

ANALYSIS:

Procedural

Opposition Untimely

The reply argues that the opposition papers were untimely and should be disregarded by the court.

Under CCP §1005(b):

“All papers opposing a motion…shall be filed with the court and a copy served on each party at least nine court days… before the hearing.”

Under CRC Rule 3.1300(d), “If the court, in its discretion, refuses to consider a late filed paper, the minutes or order must so indicate.”

Here, the opposition was served and filed on August 21, 2018, for an August 31, 2018 hearing date, which is only eight court days prior to the hearing, so one court day late. The court, in its discretion could refuse to consider the untimely oppositions, but elects not do so.

Demurrer

First Cause of Action—Violations of Consumers’ Legal Remedies Act

The cause of action is brought under the Consumer Legal Remedies Act. Under Civil Code section 1761:

“As used in this title:

(a) “Goods” means tangible chattels bought or leased for use primarily for personal, family, or household purposes, including certificates or coupons exchangeable for these goods, and including goods that, at the time of the sale or subsequently, are to be so affixed to real property as to become a part of real property, whether or not they are severable from the real property.

(b) “Services” means work, labor, and services for other than a commercial or business use, including services furnished in connection with the sale or repair of goods.

(c) “Person” means an individual, partnership, corporation, limited liability company, association, or other group, however organized.

(d) “Consumer” means an individual who seeks or acquires, by purchase or lease, any goods or services for personal, family, or household purposes.

(e) “Transaction” means an agreement between a consumer and any other person, whether or not the agreement is a contract enforceable by action, and includes the making of, and the performance pursuant to, that agreement.”

Civil Code section 1770 provides, in pertinent part:

“(a) The following unfair methods of competition and unfair or deceptive acts or practices undertaken by any person in a transaction intended to result or which results in the sale or lease of goods or services to any consumer are unlawful:

(1) Passing off goods or services as those of another.

(2) Misrepresenting the source, sponsorship, approval, or certification of goods or services.

(3) Misrepresenting the affiliation, connection, or association with, or certification by, another.

(4) Using deceptive representations or designations of geographic origin in connection with goods or services.

(5) Representing that goods or services have sponsorship, approval, characteristics, ingredients, uses, benefits, or quantities which they do not have or that a person has a sponsorship, approval, status, affiliation, or connection which he or she does not have.

(6) Representing that goods are original or new if they have deteriorated unreasonably or are altered, reconditioned, reclaimed, used, or secondhand.

(7) Representing that goods or services are of a particular standard, quality, or grade, or that goods are of a particular style or model, if they are of another.

(8) Disparaging the goods, services, or business of another by false or misleading representation of fact.

(9) Advertising goods or services with intent not to sell them as advertised.

(10) Advertising goods or services with intent not to supply reasonably expectable demand, unless the advertisement discloses a limitation of quantity.

(11) Advertising furniture without clearly indicating that it is unassembled if that is the case.

(12) Advertising the price of unassembled furniture without clearly indicating the assembled price of that furniture if the same furniture is available assembled from the seller.

(13) Making false or misleading statements of fact concerning reasons for, existence of, or amounts of price reductions.

(14) Representing that a transaction confers or involves rights, remedies, or obligations which it does not have or involve, or which are prohibited by law.

(15) Representing that a part, replacement, or repair service is needed when it is not.

(16) Representing that the subject of a transaction has been supplied in accordance with a previous representation when it has not.

(17) Representing that the consumer will receive a rebate, discount, or other economic benefit, if the earning of the benefit is contingent on an event to occur subsequent to the consummation of the transaction.

(18) Misrepresenting the authority of a salesperson, representative, or agent to negotiate the final terms of a transaction with a consumer.

(19) Inserting an unconscionable provision in the contract.”

Under Civil Code section 1780:

“a) Any consumer who suffers any damage as a result of the use or employment by any person of a method, act, or practice declared to be unlawful by Section 1770 may bring an action against that person to recover or obtain any of the following:

(1) Actual damages, but in no case shall the total award of damages in a class action be less than one thousand dollars ($1,000).

(2) An order enjoining the methods, acts, or practices.

(3) Restitution of property.

(4) Punitive damages.

(5) Any other relief that the court deems proper.”

The pleading alleges violation of various sections of 1770(a), including (2), (5), (7) and (9). [Paras. 22]. Plaintiff alleges that had CarMax’s inspection process met their high standards, as advertised, they would have noticed the mechanical problems, which still exist. [Para. 22].

Plaintiff relies on federal district court cases in which it is recognized that the CarMax certification process may constitute a violation of the CRLA. In Macisaac v. CarMax Auto Superstores Cal., LLC (2014 U.S.D.C, C.D. Cal.) 2014 U.S. Dist LEXIS 185021, the federal district court denied a motion to dismiss, finding the pleading properly stated a CLRA claim under the theory that CarMax failed to inspect the subject vehicle as advertised, reasoning:

“The FAC specifically alleges that CarMax advertises that its cars undergo a rigorous inspection process so that every car meets CarMax’s “high standards.” (FAC ¶ 15.) In reliance on such ads, the MacIsaacs purchased their car from CarMax. (FAC ¶ 15.) However, the car they received purportedly came with defects suggestive of a failure either to perform the inspection in its entirety or to inspect in such a perfunctory and careless way that it was meaningless. (FAC ¶ 16.) Taken as true, such conduct by CarMax is likely to mislead a reasonable consumer and constitutes a violation of the CLRA. See Stelzer, WL 6815029 at *3 (explaining that an allegation that “CarMax’s certification process consists of little more than tire-kicking . . . may well be actionable under the CLRA.”)”

Macisaac, at 11-12

Defendant argues that the fraudulent conduct here is not alleged with particularity to meet the heightened fraud standard. Plaintiff fairly clearly alleges that representations were made to her on the date of purchase, alleged to be June 15, 2016, in a writing attached to the which sets forth the promise of twelve hour renewal process. [Para. 12, Ex. 4].

Defendant also argues that it appears that the problems did not occur until month later, but it is alleged that the problems developed “shorty after purchase,” and that plaintiff tried to address them informally before seeking service. [Para. 12]. Defendant also argues that the alleged oil consumption is not material, but does not cite to any authority under which such a problem is not actionable as a matter of law, when the pleading alleges it is “serious,” and evidently there has been a need for other repairs. [Para. 14]. The demurrer is overruled.

Second Cause of Action—Violation of Song-Beverly Act

Defendant argues that the cause of action is not sufficiently stated, because plaintiff has alleged she did not take the vehicle for repairs until after the expiration of the implied warranty period, which would be in this case coextensive with the express warranty period of one moth. [Para. 12].

Under Civil Code § 1791.1(c):

“(c) The duration of the implied warranty of merchantability and where present the implied warranty of fitness shall be coextensive in duration with an express warranty which accompanies the consumer goods, provided the duration of the express warranty is reasonable; but in no event shall such implied warranty have a duration of less than 60 days nor more than one year following the sale of new consumer goods to a retail buyer. Where no duration for an express warranty is stated with respect to consumer goods, or parts thereof, the duration of the implied warranty shall be the maximum period prescribed above.”

Plaintiff argues that the defect in this matter was a latent defect, and it is alleged to have been so, as it immediately began consuming excessive oil, and so cannot be considered substantially fee of defects, as it is not able to provide safe and reliable transportation in such a condition.

Defendant actually cites Mexia v. Rinker Boat Co., Inc. (2009) 174 Cal. App.4th 1297, 1301, in which the court of appeal reversed the trial court’s sustaining, without leave to amend, of a consumer’s action for breach of implied warranty of merchantability under the Song-Beverly Act, finding that the claim had not been barred as a matter of law where the allegations were that plaintiff had not sought repair of the good, in that case, a boat, until after the one year warranty period had expired. The court of appeal found that this delay did not compel a conclusion that the boat was merchantable as a matter of law, as the defect could have been shown to be a latent defect.

“Rinker and Miller further assert that “the boat was fit for its ordinary purpose since Mexia did not seek repair from the defendants until over two years from the time of purchase.” They appear to argue that the delay in seeking repairs after the defect was discovered compels the conclusion that the boat was merchantable as a matter of law at the time of sale. This argument ignores the distinction between unmerchantability caused by a latent defect and the subsequent discovery of the defect; the fact that the alleged defect resulted in destructive corrosion two years after the sale of the boat does not necessarily mean that the defect did not exist at the time of sale. To be sure, the failure to seek repair until after two years could mean, as Rinker and Miller suggest, that the boat was merchantable at the relevant time and that the subsequent corrosion was, as they contend, a “maintenance issue” not covered by the implied warranty. At this stage of the case, of course, there is no evidence in the record one way or the other as to whether the alleged defects existed at the time of sale (or within the duration period); all we have are allegations that we must assume are true. Although the evidence produced at later stages of the case could show that the corrosion was due to improper maintenance, it is also possible that Mexia can present evidence that the corrosion was due to a defect that existed at the time of sale but remained latent and undiscoverable for two years. Resolution of the issue is necessarily dependent upon the facts and, if there be any conflict in the evidence, is a matter for a jury. (See Fry v. Pro-Line Boats, Inc. (2008) 163 Cal.App.4th 970, 977 [77 Cal. Rptr. 3d 622].) At this point in the proceeding, we cannot hold that the boat was merchantable as a matter of law.”

Mexia, at 1308

This does not appear to be an issue to be resolved at the demurrer stage, and the demurrer is overruled.

It is alleged here at paragraph 40 that the defect renders the vehicle not fit for its intended purposes, and the Second District recognizes that a vehicle being “not fit for the ordinary purpose for which such vehicles are used,” can provide the basis of a Song-Beverly Act claim. Isip v. Mercedes Benz USA, LLC (2007) 155 Cal.App.4th 19, 23.

Third Cause of Action—Violation of California Vehicle Code § 11713.18(a)(6)

Under Vehicle Code § 11713.18 (a)(6):

(a) 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 following apply:…

(6) Prior to sale, the dealer fails to provide the buyer with a completed inspection report indicating all the components inspected.

Here, the pleading alleges that the vehicle inspection report provided was deficient, but does not explain how the report, attached as Exhibit 3 to the pleading, fails to comply with the section. The attachment appears to list all the components inspected. [Ex. 3]. This kind of allegation was expressly rejected as insufficient by a federal district court in Macisaac, relied upon by plaintiff:

“The MacIsaacs have failed to state a CLRA claim under their first theory of liability—the alleged violation of the Vehicle Code. The MacIsaacs allege that the CQI Certificate was not a “completed inspection report” for purposes of Vehicle Code section 11713.18 because it was not specific to their car and it listed features not on the Vehicle. (FAC ¶¶ 22, 24; Exh. 2.) Nothing in the plain, unambiguous language of section 11713.18 requires CarMax to disclose a completed inspection report that is specific to each vehicle. The statute merely requires dealers to list the components inspected. The MacIsaacs have not pointed to any case law or statutory authority suggesting that a more detailed disclosure is required.”

Macisaac, at 10.

The demurrer accordingly is sustained with one opportunity to amend, if possible.

Fourth Cause of Action—Violation of Business & Professions Code § 17200, et seq.

To state a cause of action for Unfair Business Practices, a plaintiff must allege the following elements:

1) Defendant has engaged in more than one unlawful, unfair, or fraudulent transaction, including unfair, deceptive, untrue or misleading advertising

2) Plaintiff’s right to restitution, if any. Damages are not recoverable.

3) Plaintiff’s right to injunctive relief, if any.

Bus. & Prof. Code § 17200 et seq.; Dean Witter Reynolds, Inc. v. Superior Court (1989) 211 Cal.App.3d 758.

All elements have been alleged based on the preceding causes of action. The demurrer is overruled.

Fifth Cause of Action—Declaratory Relief

CCP § 1060 provides that a person “who desires a declaration of his or her rights or duties with respect to another, or in respect to another, or in respect to or over or upon property… , may, in cases of actual controversy relating to the legal rights and duties of the respective parties…bring an…action…for a declaration of his or her rights or duties.”

A very liberal pleading standard applies:

“A complaint for declaratory relief is sufficient if it sets forth facts showing the existence of an actual controversy relating to the legal rights and duties of the respective parties… and requests that these rights and duties be adjudged by the court.”

Wellenkamp v. Bank of America (1978) 21 Cal.3d 943, 947.

Here, the FAC alleges that an actual controversy exists and requests a declaration of rights. [Paras. 60, 63]. While the pleading is a bit confusing as it asserts the controversy as involving misleading representations and unfair and deceptive practices, there is also reference to duties under a Contract. However, there is a request for a declaration concerning a claim for attorneys’ fees as well. [See Paragraphs 60-63]. The demurrer is sustained with one opportunity to more clearly allege this claim.

Motion to Strike

The motion to strike seeks to strike allegations seeking an order enjoining CarMax from continuing to harm plaintiff by enforcing the sales contract. However, as defendant concedes, under Civil Code § 1780 (a):

“a) Any consumer who suffers any damage as a result of the use or employment by any person of a method, act, or practice declared to be unlawful by Section 1770 may bring an action against that person to recover or obtain any of the following:

(1) Actual damages, but in no case shall the total award of damages in a class action be less than one thousand dollars ($1,000).

(2) An order enjoining the methods, acts, or practices.

(3) Restitution of property.

(4) Punitive damages.

(5) Any other relief that the court deems proper.”

Broad relief is permitted, and the motion should be denied.

The motion also seeks to strike the claim for attorneys’ fees sought under CCP § 1021.5.

CCP § 1021.5 provides, in pertinent part:

“Upon motion, a court may award attorneys’ fees to a successful party against one or more opposing parties in any action which has resulted in the enforcement of an important right affecting the public interest if: (a) a significant benefit, whether pecuniary or nonpecuniary, has been conferred on the general public or a large class of persons, (b) the necessity and financial burden of private enforcement, or of enforcement by one public entity against another public entity, are such as to make the award appropriate, and (c) such fees should not in the interest of justice be paid out of the recovery, if any.”

The opposition argues that the court should not strike such fees sought in a consumer protection statute context. Although not cited by the parties, there is legal authority under which it has been held error to strike from a pleading a request for attorneys’ fees under CCP § 1021.5, precisely because no prayer is required for this theory to be relied upon:

“There is no requirement that the intent to seek attorney fees under section 1021.5 must be pleaded in the underlying action. [Citation.] Such fees are not part of the underlying cause of action, but are incidents to the cause and are properly awarded after entry of a … judgment … .” (Washburn v. City of Berkeley (1987) 195 Cal.App.3d 578, 583 [240 Cal. Rptr. 784], italics added.) As there was no requirement they be pled at all, the trial court erred in striking Snatchko’s prayer for attorney fees based on a failure to adequately plead their basis, and Snatchko’s failure to reallege his request for fees in his first amended complaint does not waive or forfeit his ability to seek them at the conclusion of this case.

Snatchko v. Westfield, LLC (2010) 187 Cal.App.4th 469, 497 (italics in original).

The motion to strike accordingly is denied.

The motion to strike also seeks to strike the claim for punitive damages. Such damages are recoverable under both the CLRA and the Song-Beverly Act, and the motion to strike accordingly is denied.