Woo v. American Honda Motor Co., Inc.

Background

Tony Woo, Daniel Rifkin, and Douglas P. Schwert alleged that display screens in their Honda CR-V vehicles were defective. According to the First Amended Complaint, the screens could dim, go dark, freeze, or shine at full brightness, sometimes unexpectedly while the vehicles were moving. The plaintiffs alleged that these problems distracted drivers, could blind them at night, and made the vehicles’ information centers inoperable. They also alleged that Honda knew about complaints concerning the problem before the plaintiffs bought their vehicles and did not disclose the problem.

The plaintiffs asserted nine causes of action based on express warranties, implied warranties of merchantability, and alleged deceptive or unfair business practices. They sued under the Magnuson-Moss Warranty Act, state warranty laws, the California Consumers Legal Remedies Act, and California’s unfair-competition law. They sought to represent nationwide and state classes. Honda moved to dismiss every claim and argued that the plaintiffs could not pursue a nationwide class.

Jurisdiction over the Magnuson-Moss claim

The court held that it lacked federal-question and diversity jurisdiction over the Magnuson-Moss Warranty Act claim because the complaint named only three plaintiffs and did not allege facts showing that their combined claims exceeded the statute’s $50,000 amount-in-controversy requirement. The court also rejected the plaintiffs’ argument that the Class Action Fairness Act supplied jurisdiction for the Magnuson-Moss claim.

The court nevertheless denied Honda’s request to dismiss the Magnuson-Moss claim for lack of jurisdiction. It concluded that the claim could be heard through supplemental jurisdiction because the court had original jurisdiction over other claims arising from the same controversy.

Claims based on express and implied warranties

The court dismissed the express-warranty portion of the First Cause of Action. The New Vehicle Limited Warranty covered parts defective in “material or workmanship.” Applying the law cited by the parties, the court explained that this type of warranty does not cover a design defect. The plaintiffs alleged that the same display-screen problem affected the 2017–2019 CR-V models generally, but did not provide facts showing that their vehicles performed differently from otherwise identical vehicles. The court found that the allegations therefore pointed toward a design defect rather than a manufacturing defect.

The court did not dismiss the implied-warranty portion of the First Cause of Action as asserted by Woo and Rifkin. It held that the allegations that the display problem compromised the vehicles’ safety were sufficient at the motion-to-dismiss stage. The court dismissed that theory as asserted by Schwert because he bought his vehicle in Tennessee, and the complaint relied on California and Colorado implied-warranty law rather than Tennessee law.

The court dismissed the Second Cause of Action, which alleged breach of express warranties under California law, and the Third Cause of Action, which alleged breach of express warranty on behalf of Woo under California law. The court dismissed the Fourth Cause of Action as asserted by Rifkin and Schwert but did not dismiss it as asserted by Woo. The Fourth Cause of Action alleged breach of California’s implied warranty of merchantability, and the court held that California’s statute applies only to goods sold in California.

The court dismissed the Seventh Cause of Action, which alleged that Honda breached Rifkin’s Colorado express warranty. It did not dismiss the Eighth Cause of Action, which alleged that Honda breached Rifkin’s Colorado implied warranty of merchantability. The court dismissed the Ninth Cause of Action, which alleged that Honda breached Schwert’s Tennessee express warranty.

California consumer-protection claims

The Fifth Cause of Action alleged that Honda violated the California Consumers Legal Remedies Act by selling vehicles while knowing about and concealing the display-screen defect. The court found that the allegations were sufficient to show an unreasonable safety hazard. For Woo, the allegations also adequately supported an inference that Honda knew about the problem when he bought his vehicle. The complaint identified consumer complaints predating his purchase and a Honda dealer communication issued shortly afterward that acknowledged the problem and described a temporary solution.

The court found the allegations insufficient to show that Honda knew about the defect when Rifkin or Schwert bought their vehicles. The identified complaints postdated Rifkin’s purchase. Although some complaints predated Schwert’s purchase, the court found that they generally described annoyances rather than safety hazards, and none came from someone identifying the same 2018 CR-V Touring model that Schwert bought. The court therefore did not dismiss the Fifth Cause of Action as asserted by Woo but dismissed it as asserted by Rifkin and Schwert.

Because the Fifth Cause of Action alleged concealment and fraud-like conduct, the court applied the heightened pleading requirement in Federal Rule of Civil Procedure 9(b). It held that Woo’s allegations identified what Honda allegedly failed to disclose, when and where the disclosure should have occurred, and why Woo could have acted differently if the information had been disclosed. The court therefore found the pleading sufficient for Woo.

The Sixth Cause of Action alleged a violation of California’s unfair-competition law and was derivative of the Second through Fifth Causes of Action. The court dismissed it except to the extent it was based on the Fourth and Fifth Causes of Action as asserted by Woo.

Nationwide class allegations

The court dismissed the California Consumers Legal Remedies Act claim to the extent it was asserted on behalf of a nationwide class. It relied on differences among state consumer-protection laws, including differences concerning knowledge, reliance, damages, restitution, and other remedies. The court concluded that the law of the state where each class member bought a vehicle would govern that person’s consumer-protection claim, and California’s interest in applying its law to purchases made elsewhere was not sufficient to support the proposed nationwide class. The plaintiffs had already clarified that they did not seek to pursue the California implied-warranty claim on behalf of a nationwide class.

Disposition

The court granted in part and denied in part Honda’s motion to dismiss. Specifically:

- The First Cause of Action was dismissed except insofar as it alleged breach of an implied warranty on behalf of Woo and Rifkin. - The Second, Third, Seventh, and Ninth Causes of Action were dismissed. - The Fourth and Fifth Causes of Action were dismissed except insofar as they were asserted on behalf of Woo. - The Sixth Cause of Action was dismissed except insofar as it was based on the Fourth and Fifth Causes of Action as asserted on behalf of Woo. - The Eighth Cause of Action was not subject to dismissal. - The California Consumers Legal Remedies Act claim was subject to dismissal to the extent it was asserted on behalf of a nationwide class.

The court gave the plaintiffs leave to file a Second Amended Complaint by June 19, 2020, to address the identified deficiencies. If they did not amend by that date, the case would proceed on the remaining claims in the First Amended Complaint. The court also continued the case-management conference to July 31, 2020.