Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—E.D. Cal.: General Motors may be liable for failing to disclose steering defect, (Jul 26, 2013)

By Jody Coultas, J.D.

The federal district court in Fresno, California dismissed a vehicle purchaser’s California Consumers Legal Remedies Act (CLRA) claim and Unfair Competition Law (UCL) claim for fraudulent business practices against General Motors LLC, but allowed UCL claims for unlawful and unfair business practices to proceed (Aguilar v. General Motors LLC, July 25, 2013, O’Neill, L.).

After the purchaser bought a vehicle manufactured by GM, he sought to bring a purported class action against GM for allegedly failing to disclose a defect. The purchaser’s vehicle suffered from steering defect that resulted in loss of power steering, hard steering, forceful pulling to the left and right, and loss of steering control. GM allegedly replaced the defective steering system parts with the same defective components and temporary masked the issue to ensure that the steering defect would manifest outside of the class vehicles’ express warranty period.

Because the purchaser was unable to show that GM knew of the defect at the time of sale, the court dismissed the CLRA and UCL fraudulent prong claims. The purchaser alleged that GM violated the CLRA and the UCL’s fraudulent business practices prong by knowingly and intentionally concealing the steering defect from the purchaser. Manufacturers are not liable for a fraudulent omission concerning a latent defect under the CLRA unless the omission was contrary to a representation actually made, or an omission of a material fact. A steering defect resulting in the potential failure of power steering, pulling to the left and right, and loss of steering control while driving would be material to a reasonable consumer. However, GM was only required to disclose the defect if it knew of that defect at the time of sale. The purchaser was unable to show when GM actually learned about the defect.

Unlawful acts. Because the purchaser stated claims under the Song-Beverly Consumer Warranty Act against GM, the court held that the purchaser was also able to state a UCL claim under the unlawful prong. Taking the purchaser’s allegations as true, the claim adequately alleged that GM has acted unlawfully.

Unfair acts. The purchaser sufficiently alleged that GM’s business practices, if proven, were unfair under the UCL, according to the court. Under the UCL’s unfairness prong, courts look at the impact an allegedly unfair business practice has on its alleged victim, and balance that against the motives behind the business practices. The purchaser alleged that GM sold class vehicles with a steering defect that could result in serious safety issues to consumers and merely replaced the steering components with the same defective parts to ensure that it would fall outside of the express warranty period. These practices would be substantially injurious to consumers.

The case is No. 1:13-CV-00437-LJO-GSA.

Attorneys: Cody Robert Padgett (Capstone Law APC) for Chris Aguilar. Gregory Oxford (Issacs Clouse Crose & Oxford) for General Motors LLC.

Companies: General Motors LLC

Cases: StateUnfairTradePractices CaliforniaNews