In Falk v. General Motors Corp., 2007 WL 1970123 (N.D. Cal. Jul. 3, 2007), the plaintiffs alleged that GM knowingly sold vehicles with defective speedometers. Judge William Alsup denied GM's motion to dismiss the plaintiffs' CLRA and UCL claims.
Analyzing the CLRA claim, Judge Alsup distinguished both Daugherty and Bardin, then held that the alleged problem with the speedometers was material and that GM had a duty to disclose it. As for the UCL claim, Judge Alsup applied the ordinary "likely to be deceived" formulation of the "fraudulent" prong and the pre-Cel-Tech formulation of the "unfair" prong. He concluded that a claim was stated under all three prongs of the UCL. The opinion concludes:
In closing, it is worth saying that ordinarily an express warranty begins and ends the manufacturer’s duty to replace an item like the one in question. Here, however, the large number of articulate and credible Internet postings set forth in the complaint strongly indicates that GM knew of the problem and very likely had far more information on a material defect. At least at the pleading stage, this complaint states a claim that GM knew and concealed that its speedometers were defective and likely to fail far more often than expected by the consuming public. Discovery may or may not bear this claim out. But enough is alleged to authorize plaintiffs and their counsel to proceed to take discovery.
For the reasons given, defendant’s motion to dismiss plaintiffs’ unjust enrichment claim is GRANTED without leave to amend. Plaintiffs, however, allege sufficient factual support for all of their other claims. Although Daugherty and Bardin bar CLRA claims for omissions when there is no duty to disclose and when defendants have made no representations to the contrary, plaintiffs adequately plead that GM had a duty to disclose here, which it violated. Defendant’s motion to dismiss under Rules 12(b)(6) and 9(b) is therefore DENIED as to plaintiffs’ CLRA, UCL and fraud by omission claims. Discovery may begin immediately.
Falk, 2007 WL 1970123 at *10 (slip op. at 14). Thanks to the blog reader who emailed a copy of this decision.