Williams v. Tesla, Inc.

Background

Zachery Williams and Michael Ma sued Tesla, Inc. Ma’s claims were the subject of Tesla’s motion to dismiss; the court had stayed Williams’s claims until it ruled on that motion. Ma alleged that he bought a new 2014 Tesla Model S directly from Tesla and took delivery on September 9, 2014. In October 2019, he began hearing a rattling noise from the vehicle’s front suspension. Tesla serviced the vehicle in November 2019, and Ma alleged that he paid $1,320.12 for parts and labor.

Ma alleged that Model S and Model X vehicles manufactured during a specified period had a suspension defect affecting various control-arm and suspension-link components. According to the complaint, the defect could cause the components to loosen, wear, crack, or break, potentially causing loss of steering control. Ma alleged that Tesla knew about the defect through customer complaints, repair records, National Highway Traffic Safety Administration complaints, warranty claims, testing, and other sources, and that Tesla concealed the defect through technical service bulletins.

Ma asserted claims under the federal Magnuson-Moss Warranty Act, the California Consumer Legal Remedies Act, the California Unfair Competition Law, the California False Advertising Law, fraud, and express and implied warranty theories.

Legal standard

Tesla 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. The court generally accepts well-pleaded factual allegations as true and views them in the plaintiff’s favor, but it does not accept conclusory statements or unreasonable inferences as facts. Because several claims were based on alleged fraud or concealment, Federal Rule of Civil Procedure 9(b) required Ma to describe the alleged misconduct with particularity, including who, what, when, where, and how.

Alleged defect

Tesla argued that Ma had not plausibly alleged a defect because he identified only suspension components and symptoms, rather than the specific cause of the problems. The court rejected that argument at the pleading stage. It held that Ma described the affected components and symptoms and cited Tesla communications and National Highway Traffic Safety Administration complaints that supported the alleged defect. The court therefore found that Ma adequately alleged a defect and denied Tesla’s motion to dismiss on that ground.

Express warranty

Ma alleged that Tesla’s New Vehicle Limited Warranty covered defects for four years or 50,000 miles, whichever came first. He took the vehicle for repair on November 6, 2019, with 58,057 miles on the odometer, after the warranty period had expired. Ma argued that the warranty’s time and mileage limits were unconscionable, meaning allegedly so unfair that a court should refuse to enforce them.

The court held that Ma had not alleged facts showing substantive unconscionability. Substantive unconscionability concerns whether contract terms are overly harsh, one-sided, or shocking to the conscience. The court concluded that Ma’s allegations that Tesla knew about the suspension defect did not show that the warranty’s ordinary time and mileage limits were substantively unconscionable. It dismissed the express-warranty claims with leave to amend.

Implied warranty

Tesla argued that the implied-warranty claim was also barred. The court did not decide whether the warranty booklet Tesla submitted could be considered or whether its limitation was sufficiently noticeable. Instead, it held that the claim was barred by the statute of limitations. The court concluded that California’s delayed-discovery rule did not apply to this implied-warranty claim and that more than four years had passed between Ma’s September 2014 purchase and the November 2020 lawsuit. It dismissed the implied-warranty claims without leave to amend.

Magnuson-Moss Warranty Act claim

Ma did not dispute that his Magnuson-Moss claim depended on viable express or implied warranty claims. Because the court found no viable warranty claim as pleaded, it dismissed the Magnuson-Moss claim with leave to amend. The court specified that amendment was allowed only insofar as the claim depended on the express warranty.

Fraud-based claims

Ma’s claims under the California Consumer Legal Remedies Act, California Unfair Competition Law, California False Advertising Law, and his common-law fraudulent-concealment claim were fraud-based. The court dismissed them because the complaint did not describe the alleged omission with the particularity required by Rule 9(b). Ma alleged generally that Tesla should have disclosed the suspension defect, and he argued that the defect should have appeared on the vehicle’s pricing and equipment sticker. But he did not adequately allege what exactly Tesla should have disclosed, how it should have been disclosed, or that he reviewed that sticker before buying the vehicle. The court dismissed the fraud-based claims with leave to amend and did not reach Tesla’s other arguments concerning those claims.

Equitable and injunctive relief

Ma sought remedies including restitution and an injunction requiring Tesla to repair, recall, or replace defective suspension components and extend applicable warranties. Tesla argued that Ma had not shown that money damages were inadequate, a requirement for equitable relief. The court found that Ma had not identified an allegation showing that legal remedies were inadequate. It therefore dismissed the claims for equitable and injunctive relief with leave to amend.

The court also granted leave to amend to address Tesla’s argument that Ma had not alleged that he was likely to be harmed in the future, to the extent that argument challenged his standing to seek injunctive relief on behalf of a class.

Disposition

The court granted Tesla’s motion to dismiss as to all claims, with leave to amend except as otherwise stated. Ma had 28 days from the date of the order to file an amended complaint. Judge Haywood S. Gilliam, Jr. signed the order.