Bales v. FCA US LLC

Background

James C. Bales alleged that he bought a 2013 RAM 1500 pickup truck in November 2013. The truck repeatedly developed warning-light and operating problems, including airbag and check-engine lights and an apparent “limp mode” condition. After several visits to an FCA-authorized repair facility, Bales alleged that he first learned in February 2018 about a defect in the truck’s electrical architecture.

Bales alleged that FCA vehicles used electrical architectures and modules known as TIPM, BCM, and PowerNet, and that FCA had known about related defects since at least 2007. He pointed to recalls, technical service bulletins, testing, consumer complaints, and investigations by the National Highway Traffic Safety Administration. He alleged that FCA did not disclose the PowerNet defect to him or instruct its sellers and repair facilities to disclose it.

Bales asserted four claims: breach of express warranty under the Song-Beverly Consumer Warranty Act, breach of implied warranty under that Act, violation of section 1793.2 of the Act, and fraudulent inducement by concealment. FCA moved to dismiss the fourth claim under Rule 12(b)(6), which allows dismissal when a complaint does not state a legally sufficient claim. FCA also moved under Rule 12(f) to strike portions of the complaint as immaterial, impertinent, or scandalous.

Motion to Dismiss

The court held that Bales sufficiently stated a claim for fraudulent concealment. Under California law, the claim required allegations that FCA concealed a material fact, had a duty to disclose it, intentionally concealed it to defraud Bales, that Bales was unaware of the fact and would have acted differently if he knew it, and that the concealment caused damage.

The court found that Bales alleged each required element. He alleged that FCA concealed the PowerNet defect, had superior or exclusive knowledge of the defect, actively concealed information about the system’s quality, caused him to believe the truck was safe, and caused him financial and property-related losses. The court also found that Bales alleged enough specific facts about FCA’s knowledge, including consumer complaints and testing reports, to satisfy the heightened pleading requirement for fraud under Rule 9(b).

The court rejected FCA’s argument that the economic-loss rule barred the fraud claim because it repeated a warranty claim. The court stated that, under California law, fraud claims may accompany contract claims and that Bales was not barred from suing FCA for fraud in addition to pursuing his warranty claims. The motion to dismiss was DENIED.

Motion to Strike

The court denied FCA’s request to strike allegations about alleged electrical defects in Bales’s truck and other FCA vehicles. It found those allegations relevant because the BCM and PowerNet systems were alleged to be present in Bales’s truck, and because TIPM was described as a predecessor to BCM with similar symptoms. The court also found that allegations supporting Bales’s fraud claim contained case-specific and material facts. The request to strike paragraphs 14–152, 160–173, and 188–209 was DENIED.

The court granted FCA’s request to strike paragraphs 4–7, which concerned the bankruptcy or bailout of FCA’s predecessors. Although the court recognized that those matters were publicly known, it found them immaterial and impertinent to the allegations in this case. Thus, the motion to strike was DENIED in part and GRANTED in part.

Disposition

Judge William Alsup denied the motion to dismiss and denied in part and granted in part the motion to strike. The parties consented to magistrate-judge jurisdiction for all purposes, and the case was reassigned to a randomly selected magistrate judge.