Hazdovac v. Mercedes-Benz USA, LLC

Background

This proposed class action concerns allegations that Mercedes systematically misclassified vehicle parts as either not emissions-related or not high-priced emissions-related parts. Hazdovac alleged that the classifications allowed Mercedes to provide shorter warranties than California law required. She also alleged, for example, that Mercedes used dealer prices rather than consumer prices when classifying parts. The proposed second amended complaint sought to cover all parts that Mercedes allegedly misclassified, including claims involving purchasers in 12 states outside California.

Motion to Strike

The court had previously allowed Hazdovac to file a specific proposed second amended complaint. Instead, she filed a different amended complaint containing hundreds of changes and substantial new material in some sections. Under Rule 12(f), a court may strike claims or material from a pleading when it does not comply with a court order. The court held that Hazdovac was not authorized to file whatever complaint she wished and that filing a version different from the approved proposal was improper.

The court granted Mercedes’s motion to strike the filed second amended complaint. It did not require Hazdovac to return to the first amended complaint. Instead, the court directed her to file the originally proposed, approved second amended complaint within two days of the order.

Motion to Dismiss

The court denied Mercedes’s motion to dismiss.

Under Rule 9(b), claims based on fraud must be pleaded with particular details. The court concluded that the claims under California’s Consumer Legal Remedies Act and Unfair Competition Law did not depend on intentional misrepresentation at this stage, so Rule 9(b) did not bar them.

The court rejected Mercedes’s request for equitable abstention, which would have asked the court to refrain from deciding the dispute because the California Air Resources Board had regulatory expertise. The court understood Hazdovac’s claims as asking whether Mercedes was systematically complying with the law, a question the court considered suitable for ordinary fact-finding and statutory interpretation. The court also rejected Mercedes’s request to defer under the primary-jurisdiction doctrine, reasoning that this was not the limited type of unusually complicated or first-impression issue requiring agency resolution. The court noted that the California Air Resources Board had not objected to the case and had previously submitted a declaration supporting one of Hazdovac’s positions.

The court also declined to dismiss the claims for equitable relief based on an allegedly adequate remedy at law. Hazdovac sought damages under the Consumer Legal Remedies Act and restitution under that law and the Unfair Competition Law. The court said it was not clear that damages would provide an adequate remedy because restitution might be the only available remedy if Hazdovac proved unlawfulness but not deception. The court further concluded, at this stage, that the alleged future environmental harm could be real and imminent if at least one emissions-related part had been misclassified and some owners delayed repairs because the warranty did not cover them.

The court held that Hazdovac adequately alleged that Mercedes knew its parts list might be incomplete. It also held that her allegation that she and class members relied on warranty-booklet information about covered parts was enough to survive dismissal, even though proving reliance might later be difficult.

The court rejected Mercedes’s standing arguments concerning vehicles and repairs that Hazdovac did not personally purchase or make. It said the alleged injury—misclassification of parts—was sufficiently similar and that Hazdovac personally alleged a direct injury from the challenged conduct.

The court also rejected Mercedes’s argument concerning proposed class members outside California. It identified connections between California and the other states, including those states’ use of California’s emissions-warranty law, Mercedes’s incorporation of that law into warranties in other states, and the alleged misrepresentations to California’s regulator. The court concluded that California’s interest in interpreting its emissions-warranty law outweighed the other states’ interests at this stage.

Finally, the court held that Hazdovac had adequately pleaded that the warranty covered the alleged defects, including design defects, because Mercedes incorporated California’s emissions warranty, which covers both design defects and defects in materials and workmanship. The court also found sufficient the allegations that a vacuum-pump failure caused the check-engine light to illuminate and therefore might qualify for the high-priced emissions warranty. The court left the ultimate factual questions for a later stage.

Disposition

Judge Richard Seeborg granted Mercedes’s motion to strike the filed second amended complaint, directed Hazdovac to file the originally proposed second amended complaint within two days, and denied Mercedes’s motion to dismiss.