Williams v. Tesla, Inc.

Background

Tesla moved to dismiss Plaintiff Michael Ma’s claims in the third amended complaint. Ma alleged that he purchased a new 2014 Tesla Model S directly from Tesla and later experienced a rattling noise from the vehicle’s front suspension. Tesla replaced certain suspension parts, and Ma alleged that he paid $1,320.12 for parts and labor.

Ma alleged that Model S and Model X vehicles produced between September 17, 2013, and October 15, 2018, had a latent suspension defect that could cause suspension components to loosen, wear, crack, or break. He claimed the defect increased the risk of a crash and threatened drivers’ and passengers’ safety. He further alleged that Tesla knew about the defect before his purchase through customer complaints, repair records, National Highway Traffic Safety Administration records, warranty claims, testing, a safety recall in China, and technical service bulletins.

Ma asserted claims under the California Consumer Legal Remedies Act, California Unfair Competition Law, and California False Advertising Law. The court had previously dismissed his claims and allowed him another opportunity to amend.

Legal standard

The court applied Federal Rule of Civil Procedure 12(b)(6), which permits dismissal when a complaint does not state a legally sufficient claim. At this stage, the court accepts well-pleaded factual allegations as true and views them favorably to the plaintiff, but it does not accept conclusory allegations or unreasonable inferences. The complaint must contain enough facts to make the claim plausible.

Analysis

The court explained that a manufacturer’s duty to disclose a defect under the California Consumer Legal Remedies Act can arise when, among other circumstances, the manufacturer has exclusive knowledge of important facts, actively hides an important fact, or makes partial representations that leave out important information. The Unfair Competition Law prohibits fraudulent, unfair, or unlawful business practices, and the False Advertising Law prohibits statements connected with the sale of property that are untrue or misleading.

For a failure-to-disclose claim involving a defect, the plaintiff must plausibly allege a design defect, an unreasonable safety hazard, a connection between the defect and hazard, and that the manufacturer knew of the defect when the sale occurred. The court emphasized that the manufacturer’s pre-sale knowledge must concern the specific defect alleged.

The court found that Ma again failed to plausibly allege that Tesla knew or should have known about the alleged suspension defect before selling him the car. The only document Ma identified that predated his purchase was a December 10, 2013 technical service bulletin. Although Ma added allegations that his 2014 Model S used the same parts as vehicles covered by that bulletin, the court found that the bulletin still did not describe the same specific defect alleged in the complaint.

The bulletin referred to free play, accelerated wear, and clicking or clunking noises that would become louder. It did not mention the alleged safety hazards involving sudden loss of steering control or suspension parts detaching and causing a wheel to fold inward. The court therefore concluded that the bulletin did not plausibly show that Tesla knew, at the time of sale, about the more serious suspension defect alleged by Ma. The court also stated that, even if Tesla should have known of the defect, Ma had not plausibly alleged that either.

Because Ma failed to state his claims under the Consumer Legal Remedies Act and False Advertising Law, his claim under the Unfair Competition Law’s unlawful-practices theory also failed. The court noted that this theory depended on alleged violations of the other laws.

Disposition

The court granted Tesla’s motion to dismiss without leave to amend and dismissed Ma’s claims with prejudice. The court stated that this was Ma’s third unsuccessful attempt to correct the complaint and that he had already been given a final opportunity to state a viable claim. The clerk was directed to terminate Ma as a plaintiff. The court also set a case-management conference concerning how to proceed with the remaining case.