Citations
- 295 F. Supp. 3d 927
Full opinion text
EDWARD M. CHEN, United States District Judge
TABLE OF CONTENTS
I. FACTUAL & PROCEDURAL BACKGROUND...941
A. Parties...941
B. Main Allegations in the FAC...947
C. Claims...944
II. STANDING...944
A. Injury-in-Fact...945
1. Promised Performance of Class Vehicles...946
2. More Than Regulatory Violation...946
3. Sufficiency of Allegations of Overpayment...947
a. Identification of Specific Advertisements...947
b. Decline in Vehicle Value...949
4. Theoretical Future Injuries...951
B. Traceability...951
C. Standing To Bring Certain State-Law Claims...953
1. In re Carrier IQ ...954
2. Melendres ...954
3. Analysis...955
D. Dealer Plaintiff Chatom's Standing...956
III. RICO CLAIMS...957
A. Statutory Standing...957
1. RICO's Injury Requirement...957
a. Theories of Injury...958
b. Injury to "Business or Property"...959
c. Concrete Financial Loss...961
i. Mendoza and Diaz ...961
ii. Application...962
iii. Out-of-Circuit Decisions...963
d. RICO Injury Summary...964
2. Proximate Cause...965
a. Fraud-on-the-Regulators Theory...965 i. Bridge , Anza , and Rezner ...965
ii. Application...966
b. Direct Relationship Requirement...967
c. Difficulty Apportioning Damages...968
d. Fraud on the Market...969
B. Merits of the Section 1962(c) RICO Claim...972
1. Racketeering Activity...972
a. Knowing Participants in Scheme to Defraud...973
i. Bosch GmbH and Bosch LLC...973
ii. VW Italy and VM America...974
iii. FCA N.V. and FCA US...974
iv. Mr. Marchionne...976
v. Rule 9(b)...976
b. Specific Intent to Defraud...977
c. Use of the Mails and Wires...978
2. Pattern of Racketeering Activity...980
3. Enterprise Requirement...980
4. Conducting the Affairs of the Enterprise...982
C. RICO Conspiracy Claim...984
D. RICO Aider and Abettor Liability...984
IV. CLAIMS FOR COMMON LAW FRAUDULENT CONCEALMENT and VIOLATION OF CONSUMER PROTECTION STATUTES...986
A. Fraud on Consumers...986
1. Factual Predicate for Fraud-on-Consumer Claims...986
2. Mr. Marchionne...988
3. Bosch Defendants...989
B. Preemption...990
1. Express Preemption...990
a. Affirmative Misrepresentation Theory...992
b. Fraudulent Concealment Theory...998
c. Summary...1000
2. Field Preemption...1000
3. Conflict Preemption...1004
C. Common Law Fraud Claims...1003
1. Damages...1003
2. Intent to Deceive...1003
3. Affirmative Misrepresentation Theory: Puffery...1004
4. Fraudulent Concealment Theory: Cognizability of Fraudulent Concealment Claims...1007
5. Fraudulent Concealment Theory: Duty to Disclose...1008
a. Fiduciary Relationship...1008
b. Arm's Length Transaction...1010
c. Exclusive Knowledge...1012
6. Fraudulent Concealment Theory: Reliance...1012
D. Consumer Protection Claims...1015
1. Joint Appendix...1015
2. Prohibitions on Class Actions...1016
3. Prohibitions on Actions for Damages and Standing for Injunctive Relief...1017
4. Heightened Pleading Requirements re Injury and Scienter...1017
5. Economic Loss Doctrine...1020
6. Privity...1021
7. Punitive Damages...1023
8. Identification of False Advertisements...1023 9. Attorney General Approval...1023
V. Warranty Claims...1024
A. State Law Warranty Claims: Preemption...1024
B. Federal MMWA Warranty Claim...1026
VI. PERSONAL JURISDICTION...1027
VII. CONCLUSION...1030
The above-referenced case is a multidistrict litigation ("MDL"). Private Plaintiffs (hereinafter, "Plaintiffs") are individuals or companies who purchased certain trucks marketed under the Jeep and Ram 1500 model names. More specifically, these trucks (2014-2016 models) had diesel engines that were branded "EcoDiesel." Plaintiffs have brought class action claims against (1) the manufacturers of the cars and their chief executive (the FCA Defendants); (2) the companies who manufactured the EcoDiesel engines (the VM Motori Defendants); and (3) the companies who supplied the electronic diesel control ("EDC") units that were used to control the emissions from the engines (the Bosch Defendants). The gist of Plaintiffs' complaint is that Defendants concealed the fact that they had installed "defeat devices" in Plaintiffs' cars-i.e. , devices that reduced the effectiveness of the emissions control system under conditions which may reasonably be expected to be encountered in normal vehicle operation and use. In other words, Plaintiffs contend that the vehicles emit excessive emissions under normal driving conditions and that the vehicles are in fact not eco-friendly. Based on that allegation, Plaintiffs have brought (1) fraud-based claims and (2) warranty-based claims.
Currently pending before the Court are two motions to dismiss: one brought by the FCA and VM Defendants and the other brought by the Bosch Defendants. Having considered the parties' briefs as well as the oral argument of counsel, the Court hereby GRANTS in part and DENIES in part both motions.
I. FACTUAL & PROCEDURAL BACKGROUND
A. Parties
The operative complaint is the first amended consolidated consumer class action complaint ("FAC"). See Docket No. 225 (FAC). The named plaintiffs in the FAC are primarily individual consumers but also include a dealer/reseller of motor vehicles (Chatom Motor Co., Inc.).
As for Defendants, as indicated above, there are three groups: (1) the FCA Defendants, (2) the VM Motori Defendants, and (3) the Bosch Defendants.
The FCA Defendants are:
(1) FCA US LLC ("FCA US");
(2) Fiat Chrysler Automobiles N.V. ("FCA N.V."), the corporate parent of FCA; and
(3) Sergio Marchionne, the CEO of both FCA US and FCA N.V.
As alleged in the complaint, FCA US is a motor vehicle manufacturer. It distributes and sells motor vehicles under various brands, including Jeep and Ram. See FAC ¶ 13. The motor vehicles at issue in the instant case are the 2014-2016 EcoDiesel trucks marketed under the Jeep Grand Cherokee and Ram 1500 model names (the "Class Vehicles"). See FAC ¶¶ 1, 14, 105.
The VM Motori Defendants are:
(1) VM Motori S.p.A. ("VM Italy"); and
(2) VM North America, Inc. ("VM America").
As alleged in the complaint, FCA N.V. owns both VM Italy and VM America. VM Italy is an auto parts manufacturer. It designed and manufactured the diesel engines at issue in the instant case (i.e. , the EcoDiesel). See FAC ¶ 19. VM America supports VM Italy customers and activities in North America. See FAC ¶ 20.
The Bosch Defendants are:
(1) Robert Bosch LLC ("Bosch LLC"); and
(2) Robert Bosch GmbH ("Bosch GmbH"), the parent of Bosch LLC.
As alleged in the complaint, the Bosch Defendants developed and manufactured the EDC unit (known as EDC Unit 17) which they supplied to the FCA Defendants and/or VM Defendants for use in the Class Vehicles to control emissions. See FAC ¶ 30.
B. Main Allegations in the FAC
The main allegations in Plaintiffs' operative complaint are as follows.
Emission standards for motor vehicles are set by the Environmental Protection Agency ("EPA") or the California Air Resources Board ("CARB"). Motor vehicle manufacturers must certify to the EPA or CARB that their motor vehicles comply with the applicable emission standards. See FAC ¶¶ 2, 108.
Every motor vehicle sold in the United States must be covered by an EPA-issued Certificate of Conformity ("COC") and every vehicle sold in California must be covered by a CARB-issued Executive Order ("EO"). See FAC ¶¶ 2, 108. To obtain a COC or EO, an automaker "must submit an application, which lists all auxiliary emission control devices installed in the vehicle, a justification for each, and an explanation of why the control device is not a defeat device." FAC ¶ 128. A defeat device is generally "defined as any auxiliary emission control device 'that reduces the effectiveness of the emission control system under conditions which may reasonably be expected to be encountered in normal vehicle operation and use.' " FAC ¶ 128 (quoting 40 C.F.R. § 86.1803-01 ).
"Diesel engines pose a unique challenge" with respect to emissions because "the greater the power and fuel efficiency [i.e. , the benefits of a diesel engine], the dirtier and more harmful the emissions." FAC ¶ 110. Notably, "[d]iesel combustion produces NOx"; "NOx pollution contributes to nitrogen dioxide [and] particulate matter in the air, and reacts with sunlight in the atmosphere to form ozone. Exposure to these pollutants has been linked with serious health dangers." FAC ¶ 111.
"Given the [health] risks, minimizing NOx is paramount." FAC ¶ 112. For the Class Vehicles, FCA US sought to minimize NOx through the EcoDiesel engine (supplied by the FCA N.V.-owned VM Motori Defendants). See FAC ¶ 113 (alleging that "[e]mission reductions start in the cylinder with advanced fuel injection strategies" and, "[a]fter the byproducts of combust ion leave the engine, the EcoDiesel® technology treats these emissions using a diesel oxidation catalyst, diesel particulate filter, and SCR [selective catalytic reduction]"). To control emissions from the EcoDiesel engine, the FCA entities used Bosch Defendants' EDC Unit 17. See FAC ¶¶ 114-15.
Bosch's EDC Unit 17 controls emissions by periodically reading sensor values, evaluating a control function, and controlling actuators based on the control signal. Sensor readings include crankshaft position, air pressure, air temperature, air mass, fuel temperature, oil temperature, coolant temperature, vehicle speed, exhaust oxygen content, as well as driver inputs such as accelerator pedal position, brake pedal position, cruise control setting, and selected gear. Based on sensor input, EDC [Unit] 17 controls and influences the fuel combustion process including, in particular, fuel injection timing, which affects engine power, fuel consumption, and the composition of the exhaust gas.
FAC ¶ 116.
According to Plaintiffs, the FCA Defendants worked with the VM Motori Defendants and the Bosch Defendants
to customize the EDC Unit 17 to allow Class Vehicles to simulate "passing" the EPA and CARB [emission] testing. Unlike during testing, the software [in the EDC Unit 17] disables or restricts certain of the emission controls during real-world driving conditions. When the emission controls are de-activated on the road, the Class Vehicles emit up to 20 times the legal limits of NOx.
FAC ¶ 123; see also FAC ¶ 125 (alleging that all Defendants worked together "to develop and implement a specific set of software algorithms for implementation in the Class Vehicles, which enabled FCA to adjust fuel levels, exhaust gas recirculation, air pressure levels, and even urea injection rates"). Plaintiffs maintain that the software controls used for the EcoDiesel engines "were concealed from regulators on COC and EO applications for the Class Vehicles, thus deceiving the EPA and CARB into approving the Class Vehicles for sale throughout the United States and California." FAC ¶ 124.
On January 12, 2017, the EPA issued a Notice of Violation ("NOV") against the FCA entities for failing to disclose eight auxiliary emission control devices-which potentially were defeat devices (as defined in federal regulations)-in the 2014-2016 Ram 1500s and Jeep Grand Cherokees. See FAC ¶¶ 3, 169. On the same day, CARB also issued a NOV. See FAC ¶¶ 4, 169.
According to Plaintiffs, not only were government regulators deceived by Defendants but also consumers-i.e. , Defendants concealed from consumers the fact that defeat devices were installed in the Class Vehicles.
Notably, the lawsuits comprising this MDL followed in the wake of the Volkswagen "clean diesel" scandal. In the fall of 2015, the public learned that Volkswagen had installed a defeat device in 11 million diesel cars sold worldwide, including over 565,000 vehicles sold in the United States. See FAC ¶¶ 156-57. News of the scandal gave rise to considerable civil and criminal litigation against the company. The civil cases filed in federal courts were transferred to the Hon. Charles R. Breyer in this District as part of an MDL. Classes of consumers who had purchased or leased affected Volkswagen vehicles ultimately settled their claims with the company and other defendants. See In re Volkswagen "Clean Diesel" Mktg., Sales Practices, and Prods. Liab. Litig. ("VW 3.0-Liter Settlement Approval Order "), MDL No. 2672 CRB (JSC), 2017 WL 2212783 (N.D. Cal. May 17, 2017) ; In re Volkswagen "Clean Diesel" Mktg., Sales Practices, and Prods. Liab. Litig. ("VW 2.0-Liter Settlement Approval Order "), MDL No. 2672 CRB (JSC), 2016 WL 6248426 (N.D. Cal. Oct. 25, 2016). Other litigation in Volkswagen is ongoing. Among the ongoing matters is a case by Volkswagen-branded franchise dealers against the Bosch Defendants. The franchise dealers allege that the Bosch Defendants participated in a RICO enterprise to deceive regulators and consumers about the defeat device used in Volkswagen's "clean diesel" vehicles. In October 2017, Judge Breyer entered an order denying the Bosch Defendants' motion to dismiss the franchise dealers' RICO claim. See In re Volkswagen "Clean Diesel" Mktg., Sales Practices, and Prods. Liab. Litig. ("VW Franchise Dealers "), MDL No. 2672 CRB (JSC), 2017 WL 4890594 (N.D. Cal. Oct. 30, 2017)
C. Claims
Based on, inter alia , the above allegations, Plaintiffs in the case at bar have asserted the following nationwide class claims:
• violation of RICO predicated on mail and wire fraud, see 18 U.S.C. § 1962(c) - (d) ;
• common law fraudulent concealment; and
• violation of the Magnuson-Moss Warranty Act ("MMWA") (breach of both written and implied warranties). See 15 U.S.C. § 2301 et seq.
Plaintiffs have also asserted state-specific class claims:
• violation of consumer protection statutes;
• breach of express warranty; and
• breach of implied warranty.
Although Plaintiffs have raised the various claims noted above, the claims may loosely be categorized as (1) fraud claims and (2) warranty claims. Plaintiffs' fraud claims, in turn, may be subcategorized as (a) claims asserting fraud on government regulators (the RICO claim) and (b) claims asserting fraud on consumers (the common law fraudulent concealment claim and the claims for violation of consumer protection statutes).
In their motions to dismiss, Defendants have challenged all claims. Defendants' motions raise issues of standing, failure to state a claim for relief, preemption, and personal jurisdiction.
II. STANDING
Standing is a threshold jurisdictional requirement derived from Article III's case-or-controversy condition. See U.S. Const. art. III, § 2, cl. 1. To satisfy this requirement, the plaintiff bears the burden of establishing three elements:
First, the plaintiff must have suffered an injury in fact-an invasion of a legally protected interest which is (a) concrete and particularized, and (b) actual or imminent, not conjectural or hypothetical. Second, there must be a causal connection between the injury and the conduct complained of-the injury has to be fairly traceable to the challenged action of the defendant, and not the result of the independent action of some third party not before the court. Third, it must be likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision.
Lujan v. Defenders of Wildlife , 504 U.S. 555, 560-61, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992) (internal quotation marks omitted).
Because standing relates to a federal court's subject matter jurisdiction, an assertion that the requirements of standing are not satisfied is properly raised in a motion brought pursuant to Federal Rule of Civil Procedure 12(b)(1). See White v. Lee , 227 F.3d 1214, 1242 (9th Cir. 2000). A party moving to dismiss under Rule 12(b)(1) may make a facial challenge, as Defendants do here, by asserting that "the allegations contained in the complaint are insufficient on their face to invoke federal jurisdiction." Safe Air for Everyone v. Meyer , 373 F.3d 1035, 1039 (9th Cir. 2004). In ruling on a facial challenge, the court "must accept as true all material allegations of the complaint and must construe the complaint in favor of the complaining party." Warth v. Seldin , 422 U.S. 490, 501, 95 S.Ct. 2197, 45 L.Ed.2d 343 (1975). "At the pleading stage, general factual allegations of injury resulting from the defendant's conduct may suffice ...." Lujan , 504 U.S. at 561, 112 S.Ct. 2130.
* * *
Defendants contend that Plaintiffs have not satisfied the first element of standing-an injury-in-fact. The Bosch Defendants also challenge the second element-asserting that, to the extent Plaintiffs were injured, their injury is not fairly traceable to the Bosch Defendants' conduct. Defendants further raise two narrower standing arguments, asserting that Plaintiffs lack standing to assert claims under the laws of states in which no named Plaintiff resides or purchased or leased a Class Vehicle, and that named Plaintiff Chatom Motor Company, Inc. cannot plausibly allege an injury that is traceable to Defendants' conduct because of the timing of its Class Vehicle purchase.
A. Injury-in-Fact
The Ninth Circuit has held that when a consumer alleges that he or she would not have purchased property, or would have paid less for it, had the seller not misrepresented the property or failed to disclose its limitations, the consumer has plausibly alleged an injury-in-fact. See, e.g. , Hinojos v. Kohl's Corp. , 718 F.3d 1098 (9th Cir. 2013) ; Mazza v. Am. Honda Motor Co. , 666 F.3d 581 (9th Cir. 2012) ; Maya v. Centex Corp. , 658 F.3d 1060 (9th Cir. 2011).
In Hinojos , consumers alleged that they would not have purchased "on sale" merchandise, or would have paid less for it, had they known that the retailer routinely sold the merchandise at the advertised sale price, and that the "original" price did not reflect prevailing market prices. See Hinojos , 718 F.3d at 1101-02. The Ninth Circuit held that, "when, as here, Plaintiffs contend that class members paid more for a product than they otherwise would have paid, or bought it when they otherwise would not have done so they have suffered an Article III injury in fact." Id. at 1104 n.3 (internal quotation marks omitted).
In Mazza , consumers asserted that they would not have purchased Honda's collision mitigation braking system, or would have paid less for it, had Honda disclosed the system's limitations, including that the system might not warn drivers in time to avoid an accident. See Mazza , 666 F.3d at 586-87. The Ninth Circuit held that "[t]o the extent that class members were relieved of their money by Honda's deceptive conduct-as Plaintiffs allege-they have suffered an injury in fact." Id. at 595 (internal quotation marks omitted).
Finally, in Maya , plaintiffs alleged that they would not have purchased homes in a new housing development, or would have paid less for them, had the homebuilders disclosed that they were marketing the homes to "unqualified buyers" who were likely to default on their home loans and abandon the properties. See Maya , 658 F.3d at 1065-66. The Ninth Circuit held that the plaintiffs' economic loss constituted an injury in fact: "Allegedly, plaintiffs spent money that, absent defendants' actions, they would not have spent. This is a quintessential injury-in-fact." Id. at 1069.
In the instant case, Plaintiffs allege the same type of economic loss as the plaintiffs in Hinojos , Mazza , and Maya . They contend that they decided to buy and lease the Class Vehicles based in part on FCA US's representations that the vehicles were " 'EcoDiesel' vehicle[s] (i.e., reduced emissions)." FAC ¶¶ 34-96. Had Defendants disclosed that the Class Vehicles actually emitted NOx at levels up to 20 times legal limits; could not achieve advertised towing power, performance, or fuel economy without cheating emissions tests; and were each equipped with an emission treatment system that was designed to de-activate during real-world driving conditions, i.e. , a "defeat device," Plaintiffs contend that they would not have bought and leased the Class Vehicles, or would have paid less to do so. See FAC ¶¶ 34-96 (named Plaintiffs' individual allegations); FAC ¶ 123 (allegations regarding on-road NOx emission levels).
Hinojos , Mazza , and Maya are on point. Nonetheless, Defendants contend that Plaintiffs' injury allegations are insufficient because (1) the Class Vehicles work as promised; (2) Plaintiffs cannot base their overpayment theory on a mere regulatory violation; and (3) the allegations of overpayment are not particular enough.
1. Promised Performance of Class Vehicles
In support of their overpayment theory, Plaintiffs allege that consumers "paid a significant premium for the EcoDiesel features that [FCA US] falsely advertised." FAC ¶ 191. Specifically: "[C]onsumers paid between $3,120 and $5,000 more for the EcoDiesel option than for the comparable gasoline vehicles. In return, FCA promised power, performance, fuel economy, and environmental friendliness (and vehicles that were legal to drive)." FAC ¶ 191. Focusing on these allegations, Defendants contend that Plaintiffs' overpayment injury is not plausible because Plaintiffs do not allege that the "power, performance, or fuel economy of the Vehicles is anything other than what was advertised," or that "any named Plaintiff paid a single penny for just 'environmental friendliness.' " FCA/VM Mot. at 21, 23.
Defendants reading of the FAC picks apart and separates the four characteristics of the EcoDiesel that together are alleged to have supported the premium. Plaintiffs allege that the EcoDiesel premium was for a car that offered "a 'green' alternative to gasoline with reduced emissions coupled with diesel's benefits of greater torque, power, and fuel efficiency." FAC ¶ 6 (emphasis added). Plaintiffs contend that they did not receive this collection of benefits because the Class Vehicles "could not achieve the advertised towing power, performance, and/or fuel economy without cheating emission tests." FAC ¶¶ 34-96. By focusing only on towing power, performance, and fuel economy, Defendants segment the allegations in a way that misses the point of Plaintiffs' overpayment theory. Defendants' argument is meritless.
2. More Than Regulatory Violation
Defendants next argue that the only injury alleged is a mere regulatory violation; specifically, that the Class Vehicles emit NOx at levels that exceed emission limits and contain unauthorized defeat devices. Defendants assert that these regulatory violations cannot support standing under Spokeo, Inc. v. Robins , --- U.S. ----, 136 S.Ct. 1540, 194 L.Ed.2d 635 (2016).
The Supreme Court held in Spokeo that "Article III standing requires a concrete injury even in the context of a statutory violation," and that "a bare procedural violation, divorced from any concrete harm, [cannot] satisfy the injury-in-fact requirement of Article III." Id. at 1549. After articulating this standard, the Court in Spokeo remanded the case to the lower court to apply the standard in the context of the plaintiff's action against a consumer reporting agency for violation of his rights under the Fair Credit Reporting Act. Before doing so, the Court provided an example of a FCRA violation that could be divorced from any concrete harm, noting that a consumer reporting agency may disseminate an incorrect zip code for an individual, but that "[i]t is difficult to imagine how [that] dissemination ... , without more, could work any concrete harm." Id. at 1550.
In the instant case, Plaintiffs allege more than "a bare procedural violation, divorced from any concrete harm," unlike the zip code example in Spokeo . Id. at 1549. Even if Plaintiffs' claims were tied to EPA and CARB emission standards-and as discussed in the preemption analysis further below, they are not, see Part IV.B, infra -Plaintiffs allege that they paid money for the Class Vehicles that they would not have otherwise spent but for Defendants' misrepresentations and concealment of material facts. There was no similar expenditure of money in Spokeo ; this expenditure "is a quintessential injury-in-fact." Maya , 658 F.3d at 1069 ; see also Mazza , 666 F.3d at 595 ("To the extent that class members were relieved of their money by Honda's deceptive conduct-as Plaintiffs allege-they have suffered an injury in fact.") (internal quotation marks omitted). Because Plaintiffs allege a financial injury, Spokeo does not support dismissal of their case.
3. Sufficiency of Allegations of Overpayment
Defendants assert that Plaintiffs' allegations of overpayment are not particular enough because the allegations do not support that (a) Plaintiffs relied on specific advertisements about the Class Vehicles' emission levels in making their purchasing decisions; or (b) that the Class Vehicles have declined in value.
a. Identification of Specific Advertisements
Defendants have not cited any authority that requires Plaintiffs to identify specific advertisements upon which they relied in order to sufficiently plead an injury-in-fact for purposes of establishing standing under Article III. Defendants cite to Davidson v. Kimberly-Clark Corp. , 873 F.3d 1103 (9th Cir. 2017), a false advertising case involving "flushable" wipes that were not in fact flushable. But the only Article III issue addressed there was whether a previously deceived consumer had standing to seek injunctive relief. See id. at 1112-16. Here, in contrast, the question is whether Plaintiffs have standing to seek damages for a financial injury. Further, even in the context addressed in Davidson , the court did not require the plaintiff to satisfy a particularity requirement in order to support Article III standing. Defendants also cite to In re Ford Motor Co. Securities Litigation , 381 F.3d 563 (6th Cir. 2004), and Elias v. Hewlett-Packard Co. , 903 F.Supp.2d 843 (N.D. Cal. 2012), but those decisions addressed the specificity needed to plausibly allege certain substantive statutory violations, not to satisfy Article III. See In re Ford , 381 F.3d at 570-71 (vague "puffing statements" insufficient to support a Rule 10b-5 securities fraud claim); Elias , 903 F.Supp.2d at 854-55 (generalized misrepresentations insufficient to plead California UCL, FAL, and CLRA claims). Whether allegations are sufficient to state a substantive claim, e.g. , fraud or fraudulent concealment or breach of contract, is a separate inquiry from whether the Court has Article III jurisdiction over the dispute.
Not only do Defendants fail to cite authority for their particularity requirement, but such a requirement is at odds with the principle that Article III requires only "general factual allegations of injury resulting from the defendant's conduct" at the pleading stage. Lujan , 504 U.S. at 561, 112 S.Ct. 2130 ("[O]n a motion to dismiss we presume that general allegations embrace those specific facts that are necessary to support the claim.") (internal quotation marks omitted). The Ninth Circuit's decision in Mazza is instructive. The court noted there that it was "likely that many class members were never exposed to the allegedly misleading advertisements, insofar as advertising of the challenged [collision mitigation braking] system was very limited." Mazza , 666 F.3d at 595. Yet the court concluded that the plaintiffs had adequately pled an injury-in-fact because they alleged that they "paid more for the [system] than they otherwise would have paid, or bought it when they otherwise would not have done so, because Honda made deceptive claims and failed to disclose the system's limitations." Id. Consistent with Lujan , Mazza demonstrates that only generalized allegations of injury are needed to plead an injury-in-fact under Article III.
Also instructive is Counts v. General Motors, LLC , 237 F.Supp.3d 572 (E.D. Mich. 2017). Similar to this case, the plaintiffs in Counts alleged that they overpaid for cars with "clean diesel" features. See id. at 577-80. On a motion to dismiss, General Motors argued that the plaintiffs lacked standing "because they did not plausibly allege that [they] saw and relied upon specific advertisements or other false statements in deciding to buy [GM's Diesel Cruze]." Id. at 584. The Counts court rejected this argument, noting that "GM has not established that Plaintiffs must actually plead reliance in order to establish standing." Id.
Plaintiffs do not need to identify specific advertisements on which they relied in order to support an Article III injury-in-fact. But even if they did need to identify specific advertising, they have done so. Plaintiffs allege that they relied on FCA US's representation that the Class Vehicles had an EcoDiesel engine. See FAC ¶¶ 34-96. One does not need to look far to find this representation: as alleged, it appeared on the Class Vehicles themselves, which each had an "EcoDiesel" logo that used a leaf and green coloring. See FAC ¶ 145. Regardless of whether this is sufficient to state a plausible claim of, e.g. , fraud, this would be sufficient to establish Article III standing.
Additionally, Plaintiffs not only allege that they were misled by FCA US's EcoDiesel advertising, but that Defendants concealed that the Class Vehicles were equipped with one or more defeat devices and emitted NOx at levels well in excess of legal limits. See FAC ¶¶ 34-96, 123. This is a fraudulent concealment theory. And as discussed in more detail in the Court's analysis of the merits of this theory, see Part IV.C, infra , a party's failure to disclose a fact during a commercial transaction may be actionable if, e.g. , there is a duty to disclose and the fact withheld could have justifiably induced the other party to the transaction to have acted differently. See Restatement (Second) of Torts § 551 (1977) (outlining circumstances in which such a duty to disclose arises). Because this concealment theory is not tied to any particular affirmative misrepresentations, there is no need as a matter of substantive law-certainly none under Article III-to identify specific advertisements to support injury (and Article III jurisdiction) on this basis. Allegations of overpayment based on a defendant's failure to disclose a product's limitations are clearly sufficient to satisfy Article III's injury-in-fact requirement. See Maya , 658 F.3d at 1069 (injury-in-fact requirement satisfied where plaintiffs alleged that "they would not have purchased their homes had defendants made the disclosures").
b. Decline in Vehicle Value
Defendants also contend that the FAC lacks allegations supporting that Plaintiffs' Class Vehicles have declined in value. For example, Defendants note that the FAC does not identify reduced trade-in values for the Class Vehicles.
This argument misconstrues the alleged injury. Whether the value of the Class Vehicles has dropped is not Plaintiffs' focus. Instead, like the home buyers in Maya , Plaintiffs contend that they overpaid for the Class Vehicles "at the time of sale. " Maya , 658 F.3d at 1069 ; see also FAC ¶ 191 ("Class members paid a significant premium for the EcoDiesel features that FCA falsely advertised."); FAC ¶ 195 ("[H]ad regulators or the public known the true facts, Plaintiffs ... would not have purchased or leased the Class Vehicles ... or would have paid substantially less for them.").
Defendants rely on cases in which courts have held that alleged overpayment injuries were speculative, or needed to be pled with more detail, because they were based on product defects that had not yet manifested. See, e.g. , Barakezyan v. BMW of N. Am., LLC , No. 16-cv-00173 SJO (GJSx), 2016 WL 2840803, at *4 (C.D. Cal. Apr. 7, 2016) ("Plaintiff has not alleged an economic injury because he has not alleged the Subject Vehicle failed to perform as advertised ...."); Tae Hee Lee v. Toyota Motor Sales, U.S.A., Inc. , 992 F.Supp.2d 962, 972 (C.D. Cal. 2014) ("Plaintiffs have not alleged an actual economic injury because they have not had any negative experience with the [vehicles] ...."); In re Toyota Motor Corp. Unintended Acceleration Mktg., Sales Practices & Prods. Liab. Litig. ("In re Toyota I "), 790 F. Supp. 2d 1152, 1165 n.11 (C.D. Cal. 2011) ("When the economic loss is predicated solely on how a product functions, and the product has not malfunctioned , the Court agrees that something more is required than simply alleging an overpayment for a 'defective' product.") (emphasis added); Contreras v. Toyota Motor Sales USA, Inc. , No. C 09-06024 JSW, 2010 WL 2528844, at *2 (N.D. Cal. June 18, 2010) (overpayment allegations insufficient to support standing where "Plaintiffs do not allege that their Vehicles have manifested this defect"), aff'd in part, rev'd in part on other grounds , 484 Fed.Appx. 116 (9th Cir. 2012).
For the reasons stated above, these cases are not persuasive. In any event, Plaintiffs here, in contrast, have alleged that the Class Vehicles are currently defective. Indeed, they were allegedly defective when first sold. The Class Vehicles emit NOx at levels up to 20 times legal limits, and each contains an "emission treatment system [that] was designed to de-activate during real-world driving conditions," i.e. , a defeat device. FAC ¶¶ 7, 34-96. Because the Class Vehicles are alleged to have been defective from the outset, Plaintiffs' overpayment allegations are plausible and distinguish the instant case from the authorities relied upon by Defendants. See Sloan v. Gen. Motors LLC , No. 16-cv-07244-EMC, 2017 WL 3283998, at *2, 4 (N.D. Cal. Aug. 1, 2017) (holding that plaintiffs had sufficiently alleged an injury-in-fact where they alleged that they overpaid for vehicles with engines that were "inherently defective"); In re Toyota I , 790 F.Supp.2d at 1166 ("As long as Plaintiffs do not simply allege that their Toyota vehicles are 'defective,' but rather offer detailed, non-conclusory factual allegations of the product defect, the economic loss injury flows from the plausibly alleged defect at the pleadings stage.").
The Ninth Circuit's unpublished decision in Cahen v. Toyota Motor Corp. , 717 Fed.Appx. 720, 2017 WL 6525501 (9th Cir. Dec. 21, 2017), which the FCA and VM Motori Defendants submitted as a supplemental authority after oral argument, see Docket No. 278, is not inconsistent with the above analysis. The plaintiffs in Cahen alleged that they overpaid for vehicles that lacked certain software security features, which rendered the vehicles susceptible to hacking. But the plaintiffs did not allege "that any of their vehicles ha[d] actually been hacked, or that they [were] aware of any vehicles that ha[d] been hacked outside of controlled environments." Cahen v. Toyota Motor Corp. , 147 F.Supp.3d 955, 959 (N.D. Cal. 2015). Reasoning that the plaintiffs' alleged economic injury "rest[ed] solely upon the existence of a speculative risk of future harm," the district court dismissed the complaint for lack of Article III standing. Id. at 971.
The Ninth Circuit affirmed. In doing so, it noted that the plaintiffs "[did] not allege that any of their vehicles ha[d] actually been hacked," and that "nearly 100% of cars on the market include wireless technologies that could pose vulnerabilities to hacking or privacy intrusions." Cahen , 717 Fed.Appx. at 723, 2017 WL 6525501, at *2. Against this backdrop, the Ninth Circuit concluded that the plaintiffs' overpayment allegations were "conclusory and unsupported by any facts." Id. The Ninth Circuit also cited favorably to certain observations that the district court had made, which included that the plaintiffs had failed to allege that the software defect had "a demonstrable effect on the market for their specific vehicles based on documented recalls or declining Kelley Bluebook values." Id. The absence of such allegations lent further support to the Ninth Circuit's conclusion that the plaintiffs' "economic loss theory [was] not credible." Id.
Cahen is consistent with the decisions cited in the preceding paragraphs. Because the plaintiffs in Cahen only alleged that their vehicles could be hacked in the future, "something more" was required than general allegations of overpayment. See In re Toyota I , 790 F.Supp.2d at 1165 n.11 ("[S]omething more is required than simply alleging an overpayment for a 'defective' product" when "the product has not malfunctioned ") (emphasis added). In contrast, when a complaint includes concrete allegations of a current universal vehicle defect, as the FAC does here, those allegations plausibly and specifically support an overpayment theory of injury. This is because "[a] vehicle with a defect is worth less than one without a defect." Id. at 1163. Because Plaintiffs have offered concrete allegations of current defects in the Class Vehicles, this case is distinguishable from Cahen .
Nor does the Volkswagen "Clean Diesel" MDL support a different conclusion. Defendants assert that the injury allegations there were more detailed than those here, as the consumer plaintiffs in Volkswagen alleged, for example, that they had seen reduced trade-in values for the affected Volkswagen vehicles. See FAC/VM Mot. at 25-26 (citing Volkswagen amended consolidated consumer class action complaint). The consumer plaintiffs and defendants in Volkswagen settled their claims before the court considered a motion to dismiss. See VW 3.0-Liter Settlement Approval Order , 2017 WL 2212783 ; VW 2.0-Liter Settlement ApprovalOrder , 2016 WL 6248426. The Volkswagen court accordingly did not consider the sufficiency of the injury allegations, let alone rule that the level of detail pled there was required to support an injury-in-fact under Article III.
4. Theoretical Future Injuries
Plaintiffs also allege potential future injuries arising from efforts to bring the Class Vehicles into compliance. If the FCA Defendants are not able to devise an emissions fix, Plaintiffs contend that the vehicles "will have to be removed from the road." FAC ¶ 192. Plaintiffs also allege that, "even if FCA can bring the Class Vehicles into compliance with emission standards, it will not be able to do so without substantially degrading their performance characteristics, including their horsepower and/or fuel efficiency and/or maintenance requirements." FAC ¶ 193.
Defendants argue that these injuries are too speculative to support standing. If these were the only injuries alleged, the Court would have to undertake a closer analysis of such a singular basis for standing. While it is possible that the Class Vehicles may need to be removed from the road, or that an emissions fix will materially reduce performance, the likelihood of these outcomes is not clear. See Clapper v. Amnesty Intern. USA , 568 U.S. 398, 409, 133 S.Ct. 1138, 185 L.Ed.2d 264 (2013) ("[W]e have repeatedly reiterated that 'threatened injury must be certainly impending to constitute injury in fact,' and that '[a]llegations of possible future injury' are not sufficient.") (second alteration in original) (quoting Whitmore v. Arkansas , 495 U.S. 149, 158, 110 S.Ct. 1717, 109 L.Ed.2d 135 (1990) ). As the analysis above demonstrates, however, Plaintiffs do not, in any event, rely on solely these future injuries to support standing. Instead, they contend that they suffered economic injury at the time of sale of the Class Vehicles. Uncertainty as to the sufficiency of their allegations of future injury, standing alone, does not negate the Article III standing with respect to the claims asserted in the FAC.
Under the Ninth Circuit's decisions in Hinojos , Mazza , and Maya , Plaintiffs' allegations of overpayment satisfy Article III's injury-in-fact requirement.
B. Traceability
The Bosch Defendants separately argue that Plaintiffs' alleged economic injury is not fairly traceable to them because (1) Plaintiffs have not identified any statement that the Bosch Defendants made to Plaintiffs that could support a purportedly inflated price for the Class Vehicles; and (2) the Bosch Defendants were not a party to a contract with Plaintiffs and therefore have not deprived Plaintiffs of the benefit of their bargain with respect to the Class Vehicles. The Court does not find either of these arguments persuasive.
The thrust of Plaintiffs' allegations against the Bosch Defendants is not that these entities made misrepresentations directly to Plaintiffs, or that the Bosch Defendants entered into, and then breached, contracts with Plaintiffs. Rather, Plaintiffs allege that the Bosch Defendants participated in a scheme and conspiracy with the FCA and VM Motori Defendants to develop, implement, and conceal software used in the Class Vehicles to cheat emissions tests. See FAC ¶¶ 215, 231, 238-40. Plaintiffs' alleged economic injuries are traceable to this conduct in at least two ways.
First, the hidden software is part of what has rendered the Class Vehicles defective and, consequently, worth less. See In re Toyota I , 790 F.Supp.2d at 1163 ("A vehicle with a defect is worth less than one without a defect."). Because the Bosch Defendants allegedly had a hand in developing and implementing this software, their conduct plausibly caused Plaintiffs' economic loss. See In re Toyota Motor Corp. Unintended Acceleration Mktg., Sales Practices & Prods. Liab. Litig. ("In re Toyota II "), 826 F.Supp.2d 1180, 1191 (C.D. Cal. 2011) (concluding that Article III's traceability requirement was satisfied where the plaintiffs alleged that Toyota's "defective designs resulted in devaluation of their vehicles purchased under the guise of defect-free vehicles").
Second, to the extent the Bosch Defendants knowingly concealed the software installed in the Class Vehicles from regulators and consumers, Plaintiffs' economic injuries are also fairly traceable to that conduct. This is because Plaintiffs contend that they would not have bought or leased the Class Vehicles, or would have paid less to do so, if Defendants had disclosed that the Class Vehicles were equipped with software used to cheat emissions tests. See FAC ¶¶ 34-96; see also Juarez v. Quintero , 530 F.Supp. 267, 273 (N.D. Cal. 1981) (holding that plaintiffs' allegations of economic loss were "fairly traceable to the defendants' failure to disclose"). Plaintiffs' economic injuries are accordingly traceable to the Bosch Defendants' failure to disclose.
As the above demonstrates, Plaintiffs do not need to identify a statement on which they relied that was made by the Bosch Defendants to plausibly trace their economic injuries to these entities. Nor do Plaintiffs need to allege that they had a contract with the Bosch Defendants. The Bosch Defendants played a role in designing the accused device that caused vehicles to perform in a way that deceived consumers and regulators, and allegedly did so knowingly and purposefully as part of a conspiracy with the other Defendants. The injuries suffered by Plaintiffs are sufficiently traceable to the Bosch Defendants.
Faced with nearly identical allegations, the district court in In re Duramax Diesel Litigation , No. 17-cv-11661, --- F.R.D. ----, 2018 WL 949856, 2018 U.S. Dist. LEXIS 26543 (E.D. Mich. Feb. 20, 2018), recently reached the same conclusion. The plaintiffs there alleged that they overpaid for General Motors diesel vehicles, which GM marketed as having low emissions, but which utilized defeat devices and actually emitted NOx at levels that exceeded EPA limits. See id. at ---- - ----, at *1-2, 2018 U.S. Dist. LEXIS 26543 at *4-5. The plaintiffs also alleged that the affected vehicles utilized Bosch's EDC Unit 17, and that Bosch collaborated with GM to develop, manufacture, and test the defeat devices. See id. at ---- - ----, at *2-3, 2018 U.S. Dist. LEXIS 26543 at *7-9. Although the Bosch Defendants argued that the plaintiffs' injuries were not traceable to their conduct-because Bosch did not advertise the vehicles to consumers, establish the vehicles' price, or enter into vehicle-purchase contracts with the plaintiffs-the district court rejected the argument. See id. at ---- - ----, at *6-8, 2018 U.S. Dist. LEXIS 26543 at *18-25. In denying Bosch's motion to dismiss, the district court reasoned that the plaintiffs allegedly "overpaid for their vehicles because Bosch worked closely with GM to install working defeat devices in the Duramax vehicles." Id. at ---- - ----, at *7-8, 2018 U.S. Dist. LEXIS 26543 at *23. The plaintiffs' injuries were therefore traceable to the Bosch Defendants' conduct. For the reasons stated above, the same is true here.
The Bosch Defendants rely on Koronthaly v. L'Oreal USA, Inc. , 374 Fed.Appx. 257 (3d Cir. 2010), and Young v. Johnson & Johnson , No. 11-4580 (JAP), 2012 WL 1372286 (D.N.J. Apr. 19, 2012), in arguing that Plaintiffs' economic injuries are not traceable to them. These cases are factually distinguishable, and the Bosch Defendants' reliance on them is misplaced.
In both L'Oreal and Johnson & Johnson , consumers alleged that they were misled by product packaging into purchasing goods that they believed were unhealthy (lipstick with trace amounts of lead in L'Oreal and a butter/margarine substitute that contained trans fats in Johnson & Johnson ). The consumers asserted that, had they known that the products had these "health" defects, they would not have purchased them. See L'Oreal , 374 Fed.Appx. at 258-59 ; Johnson & Johnson , 2012 WL 1372286, at *1, 3.
In each case, the court held that the plaintiffs lacked standing to assert their claims. Specifically, each court held that the alleged health defects were speculative, in part because the FDA had approved the product labeling. See L'Oreal , 374 Fed.Appx. at 259 ; Johnson & Johnson , 2012 WL 1372286, at *3. Separately, both courts concluded that the plaintiffs had mistakenly relied in part on a benefit-of-the-bargain theory of injury. Both courts held that this was an erroneous theory because the plaintiffs did not allege that they had purchased the products pursuant to a contract. See L'Oreal , 374 Fed.Appx. at 259 ; Johnson & Johnson , 2012 WL 1372286, at *1, 4.
The Bosch Defendants seize on this last component of the L'Oreal and Johnson & Johnson decisions-regarding the benefit-of-the-bargain theory-and argue that Plaintiffs must allege that they purchased the Class Vehicles pursuant to a contract with them in order to support traceability. But the courts in L'Oreal and Johnson & Johnson never held that a plaintiff must have a contractual relationship with a defendant in order to assert a cognizable overpayment injury. Instead, those courts simply noted that the plaintiffs there had invoked a benefit-of-the-bargain theory of injury, but could not maintain such a theory because they had not entered into contracts with the defendants. Here, Plaintiffs do not allege that they entered into contracts with the Bosch Defendants, which were then breached. Rather, Plaintiffs assert that the Bosch Defendants played a role in designing, implementing, and concealing software that was used in the Class Vehicles to cheat emissions tests. This is not a benefit-of-the-bargain theory. It is a theory that sounds in tort and "exists independent of any contract." In re MyFord Touch Consumer Litig. , 46 F.Supp.3d 936, 966 (N.D. Cal. 2014). The benefit-of-the-bargain contract analysis in L'Oreal and Johnson & Johnson is therefore inapplicable.
Further, as is evident from the above summary of L'Oreal and Johnson & Johnson , those decisions were not based on traceability, but on the absence of a concrete injury. Because the FDA had approved the product labeling at issue, the courts held that the plaintiffs' claims of overpayment were speculative. That is not the case here, as Plaintiffs allege that each of the Class Vehicles contained software that qualified as a defeat device, which is clearly prohibited by federal regulations. See 40 C.F.R. § 86.1803-01. Regulatory approval of the Class Vehicles does not, under these circumstances, break the chain of traceability.
For the reasons stated above, the Court rejects the Bosch Defendants' traceability arguments.
C. Standing To Bring Certain State-Law Claims
Plaintiffs bring claims on behalf of a putative nationwide class and allege injury under the laws of the 50 states and the District of Columbia. No named Plaintiff, however, is alleged to reside or have purchased or leased a Class Vehicle in seven states or the District of Columbia. Defendants assert that claims under the laws of those states and the District of Columbia should therefore be dismissed for lack of standing. Plaintiffs respond that the determination of standing with respect to these claims is better addressed after class certification.
This Court previously addressed a similar issue in In re Carrier IQ, Inc., Consumer Privacy Litigation , 78 F.Supp.3d 1051 (N.D. Cal. 2015), which is a decision on which Plaintiffs and Defendants both rely. The Ninth Circuit's intervening decision in Melendres v. Arpaio , 784 F.3d 1254 (9th Cir. 2015), may govern instead of In re Carrier IQ . Under either case, however, dismissal of the state-law claims at this time is not warranted.
1. In re Carrier IQ
In In re Carrier IQ , individuals from 13 different states filed claims against Carrier IQ, Inc. under a number of states' privacy and consumer protection statutes. See In re Carrier IQ , 78 F.Supp.3d at 1059. On a motion to dismiss, defendants argued that the plaintiffs lacked standing to assert claims under state laws from states in which they did not reside. See id. at 1065.
The Court noted that this dispute turned on an issue for which there was no clear precedent; that issue being "whether the Court should adjudicate the standing question now at the pre-certification pleading stage as measured by the named plaintiffs only or ... after deciding class certification." Id. at 1068. The Court noted that at that time "the Ninth Circuit recognized this question was an open one, expressly declining to reach the 'difficult chicken-and-egg question of whether class certification should be decided before standing.' " Id. at 1069 (quoting Perez v. Nidek Co. , 711 F.3d 1109 (9th Cir. 2013) ). After reviewing relevant Supreme Court and Ninth Circuit precedent, as well as decisions from various district courts and analysis by legal commentators, see id. at 1069-73, the Court concluded "that it ha[d] the discretion to defer questions of standing until after class certification," which it could decide to exercise on a case-by-case basis. Id. at 1074.
On the facts of In re Carrier IQ , the Court declined to exercise this discretion, and instead decided, "as a matter of case management, to require the Plaintiffs to present a named class member who possesses individual standing to assert each state law's claims against Defendants." Id. The Court did so for several reasons. First, the Court noted that the "number of consumers from 35 other states in which state law claims are asserted is vast relative to the claims to which the named Plaintiffs have standing." Id. Because of this, the Court expressed "reservations of subjecting the [Defendants] to the expense and burden of nationwide discovery without Plaintiffs first securing actual plaintiffs who clearly have standing and are willing and able to assert claims under these state laws." Id. Second, the Court reasoned that "given the breadth of the proposed class and the number of state law claims asserted on behalf of the class, there is a meaningful risk that the requirements of class certification under Rule 23 may not be met or, if they are, subclasses may have to be created which would engender delay (adding that any new named plaintiffs would likely be subject to another round of discovery and further class certification motion practice)." Id. at 1074-75. As a result, the Court concluded that "[i]t makes sense to address standing to bring some 35 state law claims before class certification," and in doing so the Court concluded that "the named Plaintiffs do not have standing to assert claims from states in which they do not reside or did not purchase their mobile device." Id. at 1075.
2. Melendres
Three months after In re Carrier IQ , the Ninth Circuit decided Melendres , 784 F.3d 1254. That case was an appeal from a district court judgment against Sheriff Joseph Arpaio and the Maricopa County Sheriff's Office, which enjoined them from, among other things, using race as a factor in deciding whether to stop any vehicle with a Latino occupant. See id. at 1258. The injunction applied to stops during both "saturation patrol"-when the defendant officers would saturate a particular area for the purpose of enforcing immigration laws-and nonsaturation patrols. See id. at 1258-59. On appeal, the defendants argued that the plaintiffs lacked standing to bring constitutional claims on behalf of class members stopped during nonsaturation patrols, because the named plaintiffs had been stopped only during saturation patrols. See id. at 1259. The Ninth Circuit disagreed. It observed that, "when courts have found a disjuncture between the claims of named plaintiffs and those of absent class members, they have not always classified the disjuncture consistently, some referring to it as an issue of standing, and others as an issue of class certification." Id. at 1261.
The "standing approach" treats dissimilarities between the claims of named and unnamed plaintiffs as affecting the "standing" of the named plaintiff to represent the class. In other words, if there is a disjuncture between the injuries suffered by named and unnamed plaintiffs, courts applying the standing approach would say the disjuncture deprived the named plaintiff of standing to obtain relief for the unnamed class members. See, e.g., Blum v. Yaretsky , 457 U.S. 991, 999-1002, 102 S.Ct. 2777, 73 L.Ed.2d 534 (1982). The "class certification approach," on the other hand, "holds that once the named plaintiff demonstrates her individual standing to bring a claim, the standing inquiry is concluded, and the court proceeds to consider whether the Rule 23(a) prerequisites for class certification have been met." NEWBERG ON CLASS ACTIONS § 2:6.
Melendres , 784 F.3d at 1261-62.
After summarizing these two approaches, the court in Melendres adopted the "class certification approach." Id. at 1262. Accordingly, the court noted that "any issues regarding the relationship between the class representative and the passive class members-such as dissimilarity in injuries suffered-are relevant only to class certification, not to standing." Id. at 1262 (quoting NEWBERG § 2:6 ).
3. Analysis
The disjuncture between the claims of named plaintiffs and those of absent putative class members in this case is the same type of disjuncture that was at issue in In re Carrier IQ . In both instances, the named plaintiffs seek to bring claims under the laws of states where they reside or transacted with defendants, as well as under the laws of states where they do not reside and where they did not transact with defendants, but where other putative class members do or did. See In re Carrier IQ , 78 F.Supp.3d at 1072 (referring to this as the "sister state" law scenario). The disjuncture in Melendres was different. The claims there were federal and constitutional claims, so standing to assert state-law claims was not at issue. Rather, the disjuncture was factual, with plaintiffs who were stopped during saturation patrol seeking to being claims on behalf of others who were stopped during nonsaturation patrol. Ultimately, however, this distinction appears immaterial. As in Melendres , there is a "disjuncture between the claims of the named plaintiffs and absent class members." Melendres , 784 F.3d at 1261. And when such a disjuncture exists, Melendres requires courts in the Ninth Circuit to apply the "class certification approach." That is, once the named plaintiffs demonstrate their individual standing to sue, as Plaintiffs have done here, see Part II.A-B, supra , the standing inquiry may be concluded; the disjuncture may better be addressed in the context of class certification. See id. at 1262.
Even if Melendres does not sweep so broadly as to impose a per se rule, however, and district courts retain discretion to address standing before or after class certification in the "sister state" law scenario, it is appropriate to defer the standing analysis here. In In re Carrier IQ , the Court chose to address standing before class certification in part because the named plaintiffs had ties to less than a third of the states for which state-law claims were asserted. (The named plaintiffs came from 13 states, and there were no named plaintiffs from 35 other states.) See In re Carrier IQ , 78 F.Supp.3d at 1074. Here, the ratio of states with named Plaintiffs to states without is almost the opposite: the named Plaintiffs reside in or purchased or leased Class Vehicles in 43 states, and there are no named Plaintiffs for only seven states and the District of Columbia. As a result, Defendants would need to engage in near-nationwide discovery even if the Court dismissed the state-law claims for states that do not have a named Plaintiff. There is therefore less concern here, as compared to in In re Carrier IQ , about "subjecting the [Defendants] to the expense and burden of nationwide discovery without Plaintiffs first securing actual plaintiffs who clearly have standing and are willing and able to assert claims under these state laws." Id.
The other factor considered in In re Carrier IQ was whether deferral of the standing issue could lead to delay at the class certification stage. See id. at 1074-75. Deferring consideration of the standing issue in this case, as in In re Carrier IQ , poses a risk of delay at the class certification stage. But because the number of states without a named Plaintiff is substantially smaller than in In re Carrier IQ , such delay, if any, is likely to be short. Thus, even under a discretionary standard, the Court chooses to defer consideration of the standing issue for the "sister state" law claims.
D. Dealer Plaintiff Chatom's Standing
Plaintiff Chatom Motor Company, Inc., a vehicle dealer/reseller, alleges that it bought a Class Vehicle "on or about February 1, 2017." FAC ¶ 45. Chatom's purchase was approximately 20 days after the EPA and CARB issued their NOVs to the FCA Defendants on January 12, 2017. See FAC ¶¶ 4, 169.
Defendants argue that Chatom cannot plausibly allege that its purchase was "fairly traceable" to their conduct so as to support standing. Instead, Defendants argue that Chatom's purchase is traceable to its "own decision to purchase the Vehicle despite the EPA's well-publicized allegations." FCA/VM Mot. at 26 n.8; see also Bosch Mot. at 13.
Although Chatom purchased a Class Vehicle after the EPA and CARB issued their NOVs, Chatom alleges that, "[a]t the time of purchase, [it] did not know that the Class Vehicle ... emitted NOx at levels that are greater than advertised and above legal limits." FAC ¶ 45 (emphasis added). Chatom also alleges that it did not know that the Class Vehicle it purchased "was equipped with undisclosed and unauthorized emission control devices designed to cheat emission tests," and that the vehicle "could not achieve the advertised towing power, performance, and/or fuel economy without cheating emission tests." FAC ¶ 45.
In considering Defendants' facial challenge to subject matter jurisdiction under Rule 12(b)(1), Chatom's allegations must be taken as true. See Seldin , 422 U.S. at 501, 95 S.Ct. 2197. Defendants' argument is a factual one that turns on, among things, whether news of the EPA and CARB NOVs was widespread, and whether Chatom was put on notice of the NOVs. The allegations in the FAC do not answer these questions, which are best addressed at a later stage in the proceedings.
* * *
For all of the reasons discussed above, the Court denies Defendants' Rule 12(b)(1) motion to dismiss for lack of Article III standing.
III. RICO CLAIMS
Plaintiffs' RICO claims are predicated on a fraud-on-the-regulators theory. They allege that Defendants formed an enterprise to fraudulently obtain COCs from the EPA and EOs from CARB in order to sell the Class Vehicles throughout the United States and California, even though the Class Vehicles emitted unlawful levels of NOx and co