Coelho v. Hyundai Motor America

Background

Nadia Coelho alleged that she purchased a used 2017 Hyundai Sonata on June 6, 2021. She alleged that the vehicle was covered by written express and implied warranties, including Hyundai’s New Vehicle Limited Warranty. She further alleged that, after she took the vehicle to an authorized repair facility, she reported problems involving recalls, warning lights, and battery failure, and that Hyundai Motor America had not repaired the vehicle.

Coelho asserted four claims: breach of express warranty under California’s Song-Beverly Act; breach of implied warranty of merchantability under that Act; breach of express warranty under California Commercial Code section 2313; and violation of the federal Magnuson-Moss Warranty Act. Hyundai moved under Rule 12(b)(6), which allows dismissal when a complaint does not state a legally sufficient claim. Hyundai also moved under Rule 12(f) to strike Coelho’s requests for rescission and attorney’s fees under the Magnuson-Moss Act.

The court took judicial notice of three other district court opinions because they were public court records, but it did not accept as judicially noticed the facts described in those opinions.

Song-Beverly Act Express-Warranty Claim

The court held that Coelho had not plausibly alleged that her used vehicle qualified as a “new motor vehicle” under the Song-Beverly Act. The court explained that, under the California decisions discussed in the opinion, a consumer who purchased a used vehicle must allege that the manufacturer or its agent provided a full new-car warranty when the vehicle was sold.

Coelho alleged that Hyundai’s warranty was provided to Hyundai customers, but she did not identify who issued the warranty or allege facts showing that Hyundai or its agent provided it. The court also found that her allegation that the defendants were agents of one another was a legal conclusion unsupported by facts. The court therefore granted Hyundai’s motion to dismiss this claim, with leave to amend.

Song-Beverly Act Implied-Warranty Claim

The court held that Coelho had not adequately alleged an implied-warranty claim against Hyundai based on the sale of a used vehicle. Under the authorities discussed, distributors or sellers of used goods generally have the implied-warranty obligations for those sales, rather than manufacturers of new goods, unless the manufacturer directly sold the vehicle and therefore acted as the retailer.

The complaint did not allege facts showing that Hyundai participated in selling the vehicle to Coelho or acted as the retailer. The court granted Hyundai’s motion to dismiss this claim, with leave to amend, while noting that it was unclear whether Coelho could allege sufficient facts to support it.

California Commercial Code Express-Warranty Claim

Hyundai argued that Coelho’s express-warranty claim under California Commercial Code section 2313 should be dismissed because she did not allege the required contractual relationship, or “privity,” with Hyundai. The court rejected that argument at the pleading stage. Relying on its earlier discussion of California law, the court stated that a plaintiff may state an express-warranty claim without privity or actual reliance on the warranty. The court denied Hyundai’s motion to dismiss this claim.

Magnuson-Moss Warranty Act Claim

Hyundai argued that the Magnuson-Moss claim should be dismissed because the related state-law claims failed and because Coelho had not alleged facts about Hyundai’s informal dispute-resolution process. The court rejected both arguments. Because Coelho stated a valid California Commercial Code express-warranty claim, the court found that the federal warranty claim could not be dismissed on the basis that the state-law claims were inadequately pleaded.

The court also held that Coelho did not have to negate in her complaint any failure to participate in an informal dispute-resolution process because that issue could be an affirmative defense. Hyundai separately argued in its reply brief that Coelho had not pleaded compliance with the federal statute’s pre-suit notice requirement. The court did not consider that argument because Hyundai raised it for the first time in its reply. The court denied Hyundai’s motion to dismiss the Magnuson-Moss claim.

Motion to Strike

The court denied Hyundai’s motion to strike Coelho’s requests for rescission and attorney’s fees under the Magnuson-Moss Act. As to rescission, the court found it premature to decide whether Coelho had revoked acceptance within a reasonable time. Hyundai cited no authority showing that the Magnuson-Moss Act itself imposed that requirement, and the court noted that Coelho’s Song-Beverly Act claims could be amended. As to attorney’s fees, the court found that Hyundai had not provided an adequate basis for striking the request.

Order

Judge Beth Klabson Freeman ordered that Hyundai’s motions to dismiss the Song-Beverly Act express-warranty and implied-warranty claims were granted with leave to amend. The motions to dismiss the California Commercial Code express-warranty claim and the Magnuson-Moss claim were denied. Hyundai’s motion to strike the requests for rescission and attorney’s fees was denied. Any amended complaint was due by June 29, 2023.