Judge John J. Kralik, Case 22BBCV00467 2023-02-17 Tentative Ruling

Plaintiff Aram Petrosyan (“Plaintiff”) alleges that on February 10, 2020, Defendant BMW of North America, LLC (manufacturer, “BMWNA”) manufactured and distributed into the stream of commerce a 2019 BMW M850i vehicle. He alleges that on February 10, 2020, Gamer Aleksanian (transferor) leased the vehicle from an authorized BMW dealership. On July 31, 2020, Plaintiff entered into an agreement with BMW Financial Services NA, LLC (“BMWFS”) for the acquisition of the vehicle and assignment of the February 10, 2020 lease. BMWFS consented to the assumption on October 6, 2020. On September 17, 2020, the original lessee signed a BMW Financial Services Lease Transfer Agreement. Plaintiff alleges that at the time of acquisition, Plaintiff received written warranties and other express and implied warranties including, but not limited to, warranties from BMWNA and Defendant Finchey Corporation of California dba Pacific BMW (dealer, “Pacific BMW”).

Plaintiff alleges that after taking possession of the vehicle, he presented the vehicle on multiple occasions for warrantable non-conformities/defects, such as the vehicle making unusual noises while driving, vibrating while driving, and/or leaking, glass popping out of place, and illuminating check-engine lights substantially affecting the value, use, and safety of the vehicle. Plaintiff alleges that he made a pre-litigation demand on BMWNA for statutory restitution and rejection of goods, but BMWNA has denied his written request.

On October 17, 2022, Plaintiff filed the first amended complaint (“FAC”) for: (1) breach of implied warranty of merchantability; (2) breach of express warranty; and (3) failure to comply with Civil Code, § 1793.2(b).

On November 17, 2022, BMWNA filed a demurrer to the 1^st to 3^rd causes of action in the FAC.

On February 6, 2023, Plaintiff filed his declaration in support of the opposition brief.

With the opposition papers, Plaintiff requests judicial notice of: (1) the declaration of Tyler Weight in support of a motion to compel arbitration and stay action in LASC Case No. 19STCV41123 and (2) the declaration of Aaron Grener in support of a motion to compel arbitration and stay proceedings in LASC Case No. 21STCV34167. The Court notes that these declarations appear to be Exhibit B of the FAC. The Court takes judicial notice of the documents pursuant to Evidence Code, § 452(d).

BMWNA demurs to each cause of action in the FAC, arguing that Plaintiff lacks standing to bring a claim under the Song-Beverly Act because Plaintiff is not a “buyer” of a “consumer good” from a “retail seller.” BMWNA argues that non-party Gamar Aleksanian is the “retail buyer” who purchased the “consumer good” from the “retail seller”—not Plaintiff. In opposition, Plaintiff argues that this is a case of first impression and that the only purchase/lease agreement at issue is the original lease in which BMWNA by way of BMWFS expressly consented to allowing Plaintiff to assume the rights and interests flowing from the original lease.

(a) “Consumer goods” means any new product or part thereof that is used, bought, or leased for use primarily for personal, family, or household purposes, except for clothing and consumables. “Consumer goods” shall include new and used assistive devices sold at retail.

(b) “Buyer” or “retail buyer” means any individual who buys consumer goods from a person engaged in the business of manufacturing, distributing, or selling consumer goods at retail. As used in this subdivision, “person” means any individual, partnership, corporation, limited liability company, association, or other legal entity that engages in any of these businesses.

…
(l) “Retail seller,” “seller,” or “retailer” means any individual, partnership, corporation, association, or other legal relationship that engages in the business of selling or leasing consumer goods to retail buyers.

In Dagher v. Ford Motor Co. (2015) 238 Cal.App.4th 905, the plaintiff purchased a used Ford truck from the Audelos, who had purchased the vehicle new from a dealer and sold it to plaintiff after driving 12,500 miles on it with 2 years left in the 5-year express manufacturer’s warranty. (Dagher, supra, 238 Cal.App.4th at 912.) The plaintiff had trouble with the engine and took it for numerous warranty repairs at Ford dealers, then filed an action under the Act against Ford. Ford challenged the plaintiff’s claim, arguing that plaintiff was not a “buyer” within the meaning of the Act, whereas the plaintiff argued he should qualify as an assignee of the rights of the original purchasers of the Act because his right of action under the Act was based on the express warranty and thus arose from Ford’s legal obligations. (Id. at 912-913.) The Court of Appeal discussed the standing issue. It stated, “The prerequisites for standing to assert statutorily-based causes of action are determined from the statutory language, as well as the underlying legislative intent and the purpose of the statute.” (Id. at 916.) To determine if the plaintiff can prevail on a claim under the Act, there is a three-part inquiry: (1) “under section 1791, subdivision (a),[] was the purchase one of ‘consumer goods’ at all?”; (2) “under section 1791, subdivision (b), was the purchaser a ‘buyer’ or ‘retail buyer,’ as an individual ‘who buys consumer goods from a person engaged in the business of manufacturing, distributing or selling consumer goods at retail[?]’”; and (3) “did the plaintiff purchase goods from a statutory ‘retail seller,’ a person that ‘engages in the business of selling or leasing consumer goods to retail buyers[?]’” (Id. at 917 [italics in original].) The Court of Appeal stated:

Even though assignability of a claim is the rule, highly personalized rights of recovery are not assignable. (Reichert, supra, 68 Cal.2d 822, 834, 69 Cal.Rptr. 321, 442 P.2d 377; § 954.) Likewise, the Act specifies in great detail those types of buyers and sellers who are subject to its provisions, and only those buyers and sellers can properly assert its protections. … As a transferee, Plaintiff is still subject to the barrier that he purchased the used vehicle from private parties, even though its written warranty had not yet expired. Such a transfer of a written warranty did not effectively also transfer the original buyers' right to sue under the Act, because the Act defines standing to obtain the additional protections that it provides in a different manner, by restricting the types of sellers and goods, as well as buyers, that qualify for its protection.

Specifically, the Act “ ‘regulates warranty terms, imposes service and repair obligations on manufacturers, distributors, and retailers who make express warranties, requires disclosure of specified information in express warranties, and broadens a buyer's remedies to include costs, attorney's fees, and civil penalties. [Citations.] It supplements, rather than supersedes, the provisions of the California Uniform Commercial Code.’ ” (Park City Services, supra, 144 Cal.App.4th 295, 301–302, 50 Cal.Rptr.3d 373.) Since the Act creates more and different statutory rights (e.g., implied warranties) than the express warranty contractual transfer could have conferred on Plaintiff, he would have to individually qualify under the Act's definitions of buyer and seller and consumer goods, to assert those additional enforcement remedies. (See Cummins, supra, 36 Cal.4th at p. 484, 30 Cal.Rptr.3d 823, 115 P.3d 98.)

(Id. at 926.) The Court of Appeal declined to changes the scope of the statute by reading language into it or reading language out of it. (Id. at 927.)[1]

The parties dispute whether Plaintiff’s assumption of Gamar Aleksanian’s initial lease agreement confers standing upon Plaintiff under the Act. Based on the allegations of the FAC, Gamar Aleksanian leased the vehicle from the BMW dealership on February 10, 2020. (FAC, ¶6.) Thereafter, on July 31, 2020, Plaintiff entered into an agreement with BMWFS for the acquisition of the vehicle and assignment of the original February 10, 2020 lease and BMWFS consented to the assumption on October 6, 2020. (Id., ¶8.) Exhibit A of the FAC includes the BMW Financial Services – Lease Transfer Agreement – (Transferee) showing that Gamar Aleksanian (Transferor/Original Lessee) was transferring the lease agreement to Plaintiff (Transferee/New Lessee). The document is signed by Plaintiff on July 31, 2020 and signed by BMWFS on October 6, 2020. (FAC, Ex. A.) Exhibit C of the FAC includes the BMW Financial Services – Lease Transfer Agreement – (Transferor) showing that Gamar Aleksanian was transferring the lease agreement to Plaintiff. The document is signed by Gamar Aleksanian on September 17, 2020. (FAC, Ex. C.)

Here, similar to the facts of Dagher, Plaintiff is the buyer or lessee of a “consumer good”—i.e., “any new product … that is used, bought, or leased for use….” (Civ. Code, § 1791(a).) (The Court notes that subsection (a) specifically carves out an exception for “new or used” assistive devices sold at retail; however, no similar exception for used vehicles is stated.) Based on the allegations of the FAC, Plaintiff was transferred the remainder of Gamar Aleksanian’s lease agreement, such that he obtained a used vehicle. As stated by the Dagher Court, “Even though assignability of a claim is the rule, highly personalized rights of recovery are not assignable. [Citation.] Likewise, the Act specifies in great detail those types of buyers and sellers who are subject to its provisions, and only those buyers and sellers can properly assert its protections. … Such a transfer of a written warranty did not effectively also transfer the original buyers' right to sue under the Act, because the Act defines standing to obtain the additional protections that it provides in a different manner, by restricting the types of sellers and goods, as well as buyers, that qualify for its protection.” (Dagher, supra, 238 Cal.App.4th at 926.) As recognized by the Leber Court, this result may be less than ideal, but the face of the Act clearly defines those buyers/lessees who may bring an action under the Act.

In opposition, Plaintiff argues that Dagher and the cases cited by Defendant are distinguishable because none of those cases included an assumption of the original lease or purchase agreement with the express consent of the manufacturer/distributor’s financing arm. Plaintiff argues that he has stepped into the shoes of the original lessee by assuming the rights, interests, and obligations of the original new car lease of the vehicle. However, Plaintiff has not presented any case law regarding the assumption of an original lease or purchase agreement and its effect on Song Beverly causes of action. Again, the Dagher Court discussed the assignability of personalized rights of recovery and that the Act clearly defined the standing requirements. Although Plaintiff raises some points of distinction, Plaintiff has not otherwise presented opposing case law.

Thus, the demurrer based on lack of standing is sustained. The Court will discuss with the parties at the hearing whether leave to amend is proper.

BMWNA demurs to the 1^st and 3^rd causes of action arguing that they each fail to allege sufficient facts to constitute causes of action against it.

However, the Court briefly addresses the demurrer to the 1^st and 3^rd causes of action.

With respect to the 1^st cause of action, BMWNA argues that a cause of action for breach of the implied warranty is improper against it because BMWNA is a distributor and not a manufacturer or retail seller. Taking the allegations of the FAC as true, the FAC alleges that BMWNA is the manufacturer and engaged in the manufacture, sale, warranting, and/or distribution of BMW vehicles. (FAC, ¶2.) Although BMWNA disputes this in its demurrer papers, the Court takes the allegations of the pleadings as true at the demurrer stage.

With respect to the 3^rd cause of action, BMWNA argues that Plaintiff fails to allege that any single repair took longer than 30 days without an applicable exception as required under Civil Code, § 1793.2(b). BMWNA argues that Plaintiff has not alleged facts showing that exceptions did not apply, such as the COVID-19 pandemic that may have caused global supply chain shortages. In the 3^rd cause of action, Plaintiff alleges that he delivered the vehicle to manufacturer BMWNA or its authorized repair facilities to repair the vehicle and it failed to repair/service the vehicle to conform to vehicle warranties within 30 days. (FAC, ¶38.) However, Plaintiff adequately alleges that repairs and servicing were not completed within 30 days as required. Whether this was excusable based on other factors, such as the COVID-19 pandemic causing a supply shortage, can be a defense raised by BMWNA at a later time.

Nevertheless, for the reasons stated above, the Court sustains the demurrer to the FAC on the grounds that Plaintiff has not established standing to bring a claim under the Song-Beverly Act.

Defendant BMW of North America, LLC’s demurrer to the First Amended Complaint is sustained. The Court will discuss at the hearing whether leave to amend will be permitted based on the standing issue.

[1] The Court of Appeal in Leber v. DKD of Davis, Inc. (2015) 237 Cal.App.4th 402 found that the truck purchased by the plaintiff was not “new” so as to trigger the implied warranties under the Song-Beverly Act. While the Court of Appeal agreed with the plaintiff that, as a remedial measure, the Act should be construed broadly, it also recognized that interpretive rules only came into play when a statutory ambiguity was tendered. (Id. at 410.) The Court found that there was no ambiguity in the application of the Act.

Also, in Rodriguez v. FCA US, LLC (2022) 77 Cal.App.5th 209, the Court of Appeal found that the plaintiffs’ purchase of a 2-year-old truck from a used car dealership (the manufacturer’s basic warranty had expired, but the limited powertrain warranty had not) did not constitute as “new motor vehicle” for the purposes of the Act.

Superior Court of California

County of Los Angeles

Department B