Ford Class Action Defense Cases–Kearns v. Ford Motor: Ninth Circuit Affirms Dismissal Of Class Action Under California UCL/CLRA Holding Class Action Complaint Failed To Satisfy Rule 9(b)’s Heightened Pleading Requirements

Jul 9, 2009 | By: Michael J. Hassen

Class Action Alleging Violations of California’s Unfair Competition Law (UCL) and Consumers Legal Remedies Act (CLRA) Properly Dismissed because Heightened Pleadings Requirements of Rule 9(b) for Fraud Applied to Allegations in Class Action Complaint and Plaintiff Failed to Allege Fraud with Requisite Specificity Ninth Circuit Holds

Plaintiff filed a putative class action in California state court against Ford Motor and certain dealerships (collectively “Ford”) alleging violations of California’s Unfair Competition Law (UCL) and Consumers Legal Remedies Act (CLRA); specifically, the class action complaint . Kearns v. Ford Motor Co., 567 F.3d 1120, 1122 (9th Cir. 2009). Defense attorneys removed the class action to federal court on grounds of diversity; the district court denied plaintiff’s motion to remand the class action to state court under the “local controversy exception” to the Class Action Fairness Act (CAFA). Id., at 1123. According to the allegations underlying the class action, Ford sells vehicles as either new, used, or Certified Pre-Owned (CPO) – “CPO vehicles are late model used vehicles, which Ford purports to put through a rigorous inspection process in order to certify that the vehicle’s safety, reliability, and road-worthiness surpass non-certified used vehicles.” Id., at 1122. Ford sells CPA vehicles for more than it sells non-certified used vehicles, id., at 1122-23, and the class action alleged that Ford “acted illegally to increase sales of [its CPO] vehicles, in violation of the CLRA and UCL,” id., at 1122. Defense attorneys moved to dismiss the third amended class action complaint on the grounds that the UCL and CLRA claims were premised on allegations of fraud, and that the class action complaint failed to plead fraud with the particularity required by Rule 9(b). Id. The district court granted the motion to dismiss but gave plaintiff an additional opportunity to amend the class action complaint; plaintiff refused, believing that the complaint satisfied the requisite pleading requirements, and the district court dismissed the class action, id., at 1123-24. Plaintiff appealed, and the Ninth Circuit affirmed.

The gravamen of the class action complaint is that “Ford makes false and misleading statements concerning the safety and reliability of its CPO vehicles.” Kearns, at 1123. According to the class action, “by making such false statements, Ford conspires to mislead class members into believing that the CPO program guarantees a safer, more reliable, and more roadworthy used vehicle.” Id. Ford allegedly charges an additional $1,000 dollars for CPO vehicles, but fails to disclose that provides “very little oversight…over the certification process.” Id. The class action complaint further alleged “that Ford misrepresents (1) the quality of the complete repair and accident-history report; (2) the level of training of CPO technicians; and (3) the rigorous certification inspection.” Id. Plaintiff claims “the inspection is not rigorous; the warranty does not cover all components; and the CPO vehicles are not any safer, more reliable, or more roadworthy than a regular used vehicle.” Id.

The Ninth Circuit rejected plaintiff’s argument that his class action claims are not subject to Rule 9(b), Kearns, at 1124. The Circuit Court held that “It is well-settled that the Federal Rules of Civil Procedure apply in federal court, ‘irrespective of the source of the subject matter jurisdiction, and irrespective of whether the substantive law at issue is state or federal.’” Id., at 1125 (citations omitted). And because both the CLRA and the UCL prohibit “fraudulent” or “deceptive” acts, the Ninth Circuit previously has held that the heighted pleading requirements of Rule 9(b) apply to those claims, id. (citation omitted). The Circuit Court also rejected plaintiff’s argument that “some of his claims are not grounded in fraud, and so should not be subject to Rule 9(b).” Id. The Court agreed that where fraud is “not an essential element of a claim,” such as in UCL and CLRA claims, then “‘only allegations…of fraudulent conduct must satisfy the heightened pleading requirements of Rule 9(b).’” Id., at 1126 (citation omitted). But the Ninth Circuit explained at pages 1125 and 1126 that, considering the class action complaint as a whole, plaintiff alleges that Ford engaged in a fraudulent course of conduct consisting, in part, of fraudulent representations to consumers. But plaintiff “fails to allege in any of his complaints the particular circumstances surrounding such representations.” Id., at 1126. For example, the class action does not “specify what the television advertisements or other sales material specifically stated,” does not “specify when [plaintiff] was exposed to them or which ones he found material,” and does not “specify which sales material he relied upon in making his decision to buy a CPO vehicle.” Id. As to plaintiff’s other allegations, he “failed to articulate the who, what, when, where, and how of the misconduct alleged.” Id. For the same reasons, the district court did not err in failing to determine whether the UCL claim survived if considered only under the “unfairness” prong of the UCL, id., at 1127. Accordingly, the district court properly dismissed the class action complaint, id., at 1127-28.

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