Watkins v. MGA Entertainment, Inc.Watkins v. MGA Entertainment, Inc.
Case Information
UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA ROBIN WATKINS, et al., Case No. 21-cv-00617-JCS Plaintiffs,
v. ORDER GRANTING MOTION TO DISMISS SECOND AMENDED COMPLAINT MGA ENTERTAINMENT, INC., Defendant. Re: Dkt. No. 35 I. INTRODUCTION
This product defect case was originally brought as a putative class action by Plaintiffs Robin Watkins and Adam Sensney under the Class Action Fairness Act (“CAFA”), 28 U.S.C. § 1332(d)(1). They asserted claims for negligence, breach of express and implied warranties, and violation of California’s Consumer Legal Remedies Act (“CLRA) and Unfair Competition Law (“UCL”) against MGA Entertainment, Inc. (“MGA”), which manufactures, sells and distributes a
toy line called L.O.L. Surprise!, based on allegations that a product in the line, the 2-in-1 Glamper Fashion Camper (“Glamper”), had a defective button in which a child’s finger could become trapped. MGA brought a motion to dismiss, which the Court granted with leave to amend in its July 26, 2021 Order (dkt.31) (“the July 26 Order”). The Second Amended Complaint (“SAC”) was filed on August 27, 2021. Presently before the Court is MGA’s Motion to Dismiss Second Amended Complaint (“Motion”). The Court finds that the Motion can be decided without oral argument and therefore vacates the motion hearing set for December 17, 2021 pursuant to Civil Local Rule 7-1(b). The Further Case Management Conference set for the same date is also vacated. For the reasons stated below, the Motion is GRANTED. [1]
II. BACKGROUND
The factual allegations in the Second Amended Complaint (“SAC”) are largely the same as those in the First Amended Complaint (“FAC”) and therefore, the Court does not summarize them here, except as relevant. Among other things, the factual allegations in the SAC are amended to remove an ambiguity in the FAC as to who purchased a Glamper for Sensney’s daughter. See July 26 Order at 4 n. 2 (“Despite the suggestion in Paragraph 66 [of the FAC] that the Glamper may have been purchased by Sensney himself, Plaintiffs’ counsel stipulated at oral argument that the Glamper was, in fact, purchased by his mother-in-law.”). The SAC makes clear that Sensney did not purchase the Glamper for his daughter but instead, that his mother-in-law purchased the Glamper for Sensney’s daughter from an online retailer. SAC ¶¶ 28 (“Plaintiff Sensney came in possession of the Glamper when his mother-in-law purchased the Glamper for $89.99 from an online retailer for the benefit of Plaintiff Sensney’s daughter, G.S., age 7, and shipped it to Plaintiff Sensney’s home in Walnut Creek.”); 51 (“Plaintiff’s close family member purchased the Glamper manufactured by Defendant for his child’s use because the child requested the Glamper as a present.”). The SAC also alleges additional facts as to where the alleged express warranty (“Age 3+”) was printed, alleging that it appeared on “the outside packaging of the Glamper” and on “the cover of the manual.” SAC. ¶¶ 63–64.
The SAC also differs from the FAC in that only Sensney is named as a plaintiff; Watkins has been dropped as a plaintiff. In addition, only two claims are asserted in the SAC: 1) a claim for breach of implied warranty of merchantability (Claim One); and 2) breach of express warranty that the Glamper was safe for “Age 3+” (Claim Two).
MGA contends both of the claims asserted in the SAC are insufficiently alleged and asks the Court to dismiss them with prejudice. Motion at 1. With respect to the implied warranty claim, MGA argues that it fails because such a claim requires both horizontal and vertical privity under California law, and the SAC concedes there is no vertical privity. Motion at 5-9. MGA further contends the claim fails because Sensney has not alleged facts showing that the Glamper is unfit for its ordinary purpose and therefore “unmerchantable.” Id. at 9-12.
MGA argues that the breach of express warranty claim fails because Plaintiff has not pled
the precise terms of the warranty.
Id.
at 12-15. MGA further contends that to state a claim for
breach of express warranty, Plaintiff must allege facts establishing that the express warranty was
“part of the basis of the bargain” and Plaintiff fails to do so because he did not purchase the
Glamper from MGA and thus, is not in privity with MGA.
Id.
at 15-17. MGA argues that while
there is an exception to the privity requirement where an individual actually relied on an express
warranty, that exception does not apply here because Plaintiff does not allege actual reliance.
Id.
(citing
Burr v. Sherwin Williams Co.
,
In response to MGA’s challenges to his breach of express warranty claim, Plaintiff argues that the words “Age 3+” are sufficient to allege the existence of an express warranty. Id. at 7-8. Moreover, he contends, because these words were printed on the packaging, they became part of the “basis of the bargain.” Id. at 8 (citing Weinstat v. Dentsply Internat’l, Inc ., 180 Cal. App. 4th 1213 (2010)).
III. ANALYSIS
A. Legal Standards Under Rule 12(b)(6)
A complaint may be dismissed under Rule 12(b)(6) of the Federal Rules of Civil Procedure
for failure to state a claim on which relief can be granted. “The purpose of a motion to dismiss
under Rule 12(b)(6) is to test the legal sufficiency of the complaint.”
N. Star Int’l v. Ariz. Corp.
Comm’n
,
In ruling on a motion to dismiss under Rule 12(b)(6), the court analyzes the complaint and
takes “all allegations of material fact as true and construe[s] them in the light most favorable to the
non-moving party.”
Parks Sch. of Bus. v. Symington
,
B. Breach of Implied Warranty Claim (Claim One) MGA challenges Plaintiff’s breach of implied warranty claim on two grounds – failure to allege vertical privity and failure to adequately allege unmerchantability. Because the Court finds that the claim fails on the first ground, it need not reach the second.
As a preliminary matter, MGA’s argument requires that the Court revisit its discussion of
privity in the July 26 Order. In that Order, the Court found that the family exception to privity
under
Hauter v. Zogarts
,
Section 2314 of the California Commercial Code provides that “a warranty that the goods
shall be merchantable is implied in a contract for their sale,” which includes a warranty that the
goods are “fit for the ordinary purposes for which such goods are used.” Cal. Com. Code § 2314.
“The general rule is that privity of contract is required in an action for breach of either express or
implied warranty and that there is no privity between the original seller and a subsequent
purchaser who is in no way a party to the original sale.”
Burr v. Sherwin Williams Co
., 42 Cal.2d
682, 695,
Courts in this district have gone both ways on whether in the consumer warranty context there is a third-party beneficiary exception to the vertical privity requirement under California law. The undersigned has concluded that there is not. See In re Seagate Tech. LLC Litig ., 233 F. Supp. 3d 776, 786–88 (N.D. Cal. 2017). In In re Seagate , the Court reasoned as follows:
The parties dispute whether the third-party beneficiary exception is
viable in the consumer warranty context. . . .
Cases finding a third-party beneficiary exception generally trace their holding to [ Gilbert Fin. Corp. v. Steelform Contracting Co ., 82 Cal. App. 3d 65, 69 (Cal. Ct. App. 1978)], in which a California appellate court held that the owner of a building could bring an implied warranty of fitness claim against a subcontractor who installed a leaky roof, despite a lack of privity, because the owner was an intended beneficiary of the contract between the subcontractor and the general contractor that the owner had hired. See Gilbert ,82 Cal.App.3d at 67 , 69,145 Cal.Rptr. 448 . As far as the Court is aware, Seagate is correct that no published decision of a California court has applied this doctrine in the context of a consumer claim against a product manufacturer. Recognizing that federal district courts have reached different conclusions, the Court holds that such an approach would be inconsistent with the Ninth Circuit authority. In Clemens , the purchaser of [a] Dodge Neon automobile argued that “similar equities,” beyond certain specific exceptions not applicable here, supported an exception to the privity requirement for his implied warranty claim against the car manufacturer. Clemens , 534 F.3d at 1023. The Ninth Circuit “decline[d] this invitation to create a new exception that would permit [the] action to proceed.” Id . at 1023–24. Although the Ninth Circuit acknowledged authority from other jurisdictions finding the privity requirement “an archaism in the modern consumer marketplace,” it held that “California courts have painstakingly established the scope of the privity requirement under California Commercial Code section 2314, and a federal court sitting in diversity is not free to create new exceptions to it.” Id . at 1024.
Some district court decisions have held that Clemens forecloses the type of claim Plaintiffs seek to bring here. See [ Xavier v. Philip Morris USA Inc .,787 F.Supp.2d 1075 , 1082-1083 (N.D. Cal. 2011)]; Long v. Graco Children’s Prods. Inc ., No. 13-CV-01257-WHO, 2013 WL 4655763, at *12 (N.D. Cal. Aug. 26, 2013). Others have distinguished Clemens on the basis that it did not explicitly consider a third-party beneficiary argument, and instead rejects an exception vaguely based on “similar equities” to those recognized by the California courts. See [ In re MyFord Touch Consumer Litig ., 46 F. Supp. 3d 936, 984 (N.D. Cal. 2014)]; [ In re Toyota Motor Corp. Unintended Acceleration Mktg ., Sales Pracs., & Prod. Liab. Litig.,754 F. Supp. 2d 1145 , 1185 (C.D. Cal. 2010)]. Although it appears that the majority of district court decisions to consider the question have held that a consumer who purchased a product from a retailer can invoke the third party beneficiary exception to bring an implied warranty claim against the manufacturer, this Court cannot square that outcome with Clemens . In that case, the Ninth Circuit held that “an end consumer . . . who buys from a retailer is not in privity with a manufacturer” and therefore cannot bring an implied warranty claim under section 2314 against the manufacturer. Clemens ,534 F.3d at 1023 (citing Osborne , 198 Cal.App.3d at 656 n.6, 243 Cal.Rptr. 815). According to the Ninth Circuit, allowing exceptions beyond those clearly recognized by the California courts would improperly undermine a rule “painstakingly established” by the state courts. Id . at 1024. It is difficult to imagine a more thorough nullification of the rule stated in Clemens than to hold that consumers, simply by virtue of their status
as end users of a product, are implied beneficiaries of distribution
contracts between manufacturers and retailers, and thus entitled to
bring implied warranty claims under section 2314. Nor is it clear that
Gilbert
, a case considering a subcontract to build a roof for a specific,
identifiable customer,
see
82 Cal.App.3d at 67, 145 Cal.Rptr. 448,
compels relaxing the privity rule for all end purchasers of products
sold through retailers. Although the privity requirement in this context
may well be an “archaism,” see
Clemens
,
Id. at 786–88. The same reasoning applies here. Therefore, the Court concludes that Plaintiff’s breach of implied warranty claim fails because the SAC does not allege facts showing vertical privity, instead alleging that Sensney’s mother-in-law purchased the Glamper from an online retailer, thus establishing that there was no vertical privity.
C. Breach of Express Warranty Claim
To prevail on a theory of breach of express warranty, Plaintiff must prove that (1) MGA
“made affirmations of fact or promises” that (2) “became part of the basis of the bargain.”
Maneely v. Gen. Motors Corp
.,
To establish the existence of an express warranty, a plaintiff must point to “a specific and
unequivocal written statement.”
Id.
For example, in
Hauter v. Zogarts
, the words “completely
safe ball will not hit player” were sufficient to give rise to an express warranty that the product
was “a safe training device for all golfers regardless of ability and regardless of how squarely they
hit the ball.”
In addition, Plaintiff has not alleged the second required element, namely, that MGA’s
alleged express warranty became part of the “basis for the bargain.” As the court in
In re 100%
Grated Parmesan Cheese Mktg. and Sales Prac. Litig
. observed, California law is “unsettled” with
respect to this requirement.
Pre-U.C.C. California Supreme Court decisions held that express warranty plaintiffs must plead and prove reliance. See, e.g., Burr v. Sherwin Williams Co .,42 Cal.2d 682 ,268 P.2d 1041 , 1048-49 (1954) (holding that reliance is required absent privity); Grinnell v. Charles Pfizer & Co ., 274 Cal.App.2d 424, 79 Cal. Rptr. 369, 378 (1969) (holding that reliance is an “essential ingredient[ ]” of any express warranty claim). But the court later recognized in Hauter v. Zogarts ,14 Cal.3d 104 ,120 Cal.Rptr. 681 ,534 P.2d 377 (1975) (en banc), that the U.C.C.’s adoption in California worked “a significant change in the law of warranties” by replacing the traditional reliance element with a requirement that the challenged representation form the “basis of the bargain.” Id ., 120 Cal.Rptr. 681, 534 P.2d at 383 (citing Grinnell ). Specifically, Hauter held that this basis-of-the-bargain requirement either “shift[ed] the burden of proving non-reliance to the seller” or “eliminat[ed] the concept of reliance altogether.” Id . at 384.
Hauter
found support for each of those competing views in the U.C.C.
commentary and scholarly work on the subject, and ultimately
declined to decide between them.
Ibid
. (citing Cal. Com. Code § 2313
cmt. nn.3-4).
No consensus on that question has emerged since
Hauter
. Most
decisions hold that the basis-of-the-bargain requirement has one of
three effects: (1) eliminating the reliance requirement,
see, e.g.,
Weinstat v. Dentsply Internat., Inc.
,
16
F. Supp. 3d 888, 915-16 (N.D. Cal. 2018);
Karim v. Hewlett-Packard
Co
., 311 F.R.D. 568, 574-75 (N.D. Cal. 2015); (2) keeping the
17
reliance requirement, but shifting the burden to the defendant to show
that the “bargain d[id] not rest at all on the representation,”
Keith v.
18
Buchanan
,
20
2017 WL 2972608, at *13 (E.D. Cal. July 12, 2017);
Karim v.
Hewlett-Packard Co
., 2014 WL 555934, at *6 (N.D. Cal. Feb. 10,
21
2014); or (3) changing the role of reliance where the parties are in
privity, but maintaining the reliance requirement where the parties are
22
not in privity,
see Hardage Hotels X, LLC v. First Co
., 2010 WL
1512138, at *9 (Cal. App. Apr. 16, 2010);
Wiley v. Yihua Int'l Grp
.,
23
24
Bos. Sci. Corp
.,
25
Here, MGA argues that the third approach is the correct statement of California law, that
26
is, that while express warranties printed on product packaging or materials are part of the basis of
27
the bargain regardless of actual reliance where the parties were in privity, the reliance requirement
28
continues to apply where they are not in privity. Plaintiff does not address
Hauter
but cites to
Weinstat v. Dentsply Internat., Inc
.,
In
Weinstat
, the court concluded that California Commercial Code section 2313 abandoned
the “Pre–Uniform Commercial Code law governing express warranties requir[ing] the purchaser
to prove reliance on specific promises made by the seller.”
There is no dispute that Plaintiff was not in privity with MGA, in contrast to the parties in Weinstat . Nor has Plaintiff alleged actual reliance, as is required under California law in the absence of privity to establish that an express warranty was part of the benefit of the bargain. Therefore, Plaintiff has not adequately alleged that the second requirement of his claim for breach of express warranty is met. See Coleman v. Bos. Sci. Corp., No. 1:10-CV-01968-OWW, 2011 WL 3813173, at *4 (E.D. Cal. Aug. 29, 2011) (holding that breach of express warranty claim was insufficiently alleged where plaintiff alleged “neither privity nor reliance as the basis for [her] express warranty claim” and rejecting argument based on Weinstat that she was not required to allege reliance).
For these reasons, the Court finds that Plaintiff’s breach of express warranty claim fails to state a claim under Rule 12(b)(6). D. Whether the Court Should Grant Leave to Amend After a party has amended a pleading once as a matter of course, it may only amend further
after obtaining leave of the court, or by consent of the adverse party. Fed.R.Civ.P. 15(a).
Generally, Rule 15 advises the court that “leave shall be freely given when justice so requires.”
This policy is “to be applied with extreme liberality.”
Owens v. Kaiser Found. Health Plan, Inc
.,
Rule 16(b)(4) provides that scheduling orders “may be modified only for good cause and with the judge’s consent.” Fed. R. Civ. P. 16(b)(4). As the Ninth Circuit explained in Johnson :
“A court’s evaluation of good cause is not coextensive with an inquiry
into the propriety of the amendment under ... Rule 15.” [
Forstmann
v. Culp
, 114 F.R.D. 83, 85 (M.D.N.C. 1987)]. Unlike Rule 15(a)’s
liberal amendment policy which focuses on the bad faith of the party
seeking to interpose an amendment and the prejudice to the opposing
party, Rule 16(b)’s “good cause” standard primarily considers the
diligence of the party seeking the amendment. The district court may
modify the pretrial schedule “if it cannot reasonably be met despite
the diligence of the party seeking the extension.” Fed.R.Civ.P. 16
advisory committee's notes (1983 amendment);
Harrison Beverage
Co. v. Dribeck Importers, Inc
., 133 F.R.D. 463, 469 (D.N.J.1990);
Amcast Indus. Corp. v. Detrex Corp
., 132 F.R.D. 213, 217
1
(N.D.Ind.1990);
Forstmann
,
4
Cir.1992) (carelessness not a ground for relief under Rule 60(b));
Martella v. Marine Cooks & Stewards Union
,
for seeking modification. See Gestetner Corp. v. Case Equip. Co ., 108 F.R.D. 138, 141 (D.Me.1985). If that party was not diligent, the inquiry should end.
Id.
Plaintiff has requested leave to amend if the Court finds his claims are insufficiently
alleged. As to the claim for breach of implied warranty, he seeks to allege additional facts
showing he is a third-party beneficiary. If the Court rejects his argument that the third-party
beneficiary exception applies to the privity requirement in the consumer products context, he
would like to assert a claim under the Song Beverly Act instead. As to the breach of express
warranty claim, Plaintiff does not point to any additional facts he could allege to save this claim.
The Court rejects Plaintiff’s request. First, amendment to allege additional facts showing
Plaintiff is a third-party beneficiary would not save his breach of implied warranty claim for the
reasons discussed above and therefore, such an amendment would be futile.
See Saul v. United
States
,
As to Plaintiff’s request that he now be permitted to assert a new claim under the Song Beverly Act based on the same alleged facts, Plaintiff has not shown that he acted diligently with respect to asserting that claim and therefore, the Court rejects his request under Rule 16(b)(4). The Court set a schedule in this case, which set a November 1, 2021 deadline for amending pleadings. Dkt. 30. Plaintiff’s request would require the Court to extend that deadline. Further, although the parties stipulated to a 90-day extension of the December 17, 2021 deadline for the completion of fact discovery in order to allow time to resolve the instant motion, the new deadline would need to be extended if Plaintiff were permitted to file a third amended complaint in order to allow time for another motion to dismiss to be briefed and decided.
Therefore, the Court denies Plaintiff’s request for leave to amend.
IV. CONCLUSION
For the reasons stated above, the Court GRANTS the Motion and dismisses this action with prejudice. The Clerk is instructed to enter judgment in favor of MGA and close the file. IT IS SO ORDERED.
Dated: December 10, 2021 ______________________________________ JOSEPH C. SPERO Chief Magistrate Judge
Notes
[1] The parties have consented to the jurisdiction of a United States Magistrate Judge pursuant to 28 28 U.S.C. § 636(c).