Ruiz v. Volkswagen Group of America, Inc.

Background

Sonia Ruiz filed the action in state court, and Volkswagen Group of America, Inc. (VGA) and VW Credit, Inc. removed it to federal court. The court had previously dismissed Ruiz’s claims twice while allowing amendment. The Third Amended Complaint asserted two breach-of-contract claims: one against VW Credit concerning an alleged vehicle-loan overpayment, and one against VGA concerning an alleged settlement-agreement breach and an alleged failure to comply with a consent decree.

The caption also mentioned the California State Automobile Association, but the court had denied joinder of that entity and the Third Amended Complaint asserted no claims against it. The court therefore treated it as not being a party.

Legal standard

The defendants moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which permits dismissal when a complaint does not state a legally sufficient claim for relief. The court was required to accept well-supported factual allegations as true for purposes of the motion, but a complaint must allege enough facts to make entitlement to relief plausible. The court also granted the defendants’ request for judicial notice of public records concerning the Dieselgate litigation, including the settlement agreement and consent decree.

Claim against VW Credit

Ruiz alleged that VW Credit breached the loan agreement by demanding $10,613.62 when the vehicle’s loan balance was $2,317.73, refunding the overpayment late and in two payments, failing to explain the payments, and refusing to pay attorney’s fees and court costs.

The loan agreement, however, was between Ruiz’s husband, Andrew Wagdy Shalaby, and a Volkswagen dealership whose interest was assigned to VW Credit. Ruiz was not a party to the agreement. She did not argue that she was an intended third-party beneficiary, and the court found that her bare allegation of an assignment did not establish a valid assignment. The court also rejected her argument that marriage automatically made her a party to her spouse’s contract.

The court further held that, even assuming Ruiz could enforce the agreement, she had not alleged a cognizable breach. The provision she relied on addressed how credits reducing the debt would be applied to payments. It did not impose a deadline for refunds or require VW Credit to disclose how refund payments were allocated. The court therefore granted the motion to dismiss the breach-of-contract claim against VW Credit.

Claim against VGA

Ruiz alleged that VGA breached a settlement agreement by failing to provide free refills of AdBlue, also called diesel exhaust fluid, and by failing to disclose defects involving vehicle sunroofs and heating systems.

The court found that the settlement agreement covered registered owners or lessees of specified vehicles during the stated eligibility period. Ruiz argued that it protected people who repurchased eligible vehicles, but she did not allege that she was such a repurchaser or that the vehicle had been in her name during the relevant period. The court therefore concluded that she was not entitled to participate in the settlement program.

The court also held that, even if Ruiz were a settlement class member, she had not plausibly alleged a breach. The settlement’s promise to pay for an emissions-system modification did not amount to a promise to pay for additional fluid refills allegedly made necessary by that modification.

Ruiz separately relied on a consent decree entered in litigation between VGA and the Federal Trade Commission. The court held that Ruiz was not a party to that litigation and had not identified language making her an intended beneficiary, so she could not enforce the decree. The court also found that the decree addressed defeat devices and misrepresentations about emissions, environmental qualities, and resale value, while Ruiz’s allegations concerned sunroof and heater defects. The court therefore granted the motion to dismiss the breach-of-contract claim against VGA.

Disposition

Judge Sallie Kim found that Ruiz had failed to state viable contract claims and that she lacked standing to enforce the contracts at issue. Because she had received three opportunities to amend, had not cured the deficiencies, and further amendment would be futile, the court dismissed the Third Amended Complaint with prejudice. The court’s conclusion states that it granted the defendants’ motion to dismiss with prejudice.