Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—EDCal: Ford Purchasers Failed to Show Reliance to Support Claims Based on Defect, (Jun 10, 2013)

By Jody Coultas, J.D.

Ford Focus purchasers failed to state California Unfair Competition Law (UCL) and Consumers Legal Remedies Act (CLRA) claims against Ford Motor Company for allegedly failing to disclose a defect to consumers, the federal district court in Sacramento has held (Daniel v. Ford Motor Co., June 6, 2013, Shubb, W.).

The purchasers alleged that Ford knew or should have known that the Focus had a rear suspension defect which led to premature tire wear, decreased control in handling, steering, and stability, as well as the threat of catastrophic tire failure. Ford allegedly sent a letter to its dealers acknowledging the problem but never alerted consumers, never offered to repair the defect, and never offered to reimburse consumers for costs associated with the defect.

There was no genuine issue of material fact concerning whether the purchasers relied on Ford’s alleged omissions to support the UCL and CLRA claims, according to the court. CLRA claims based on omissions require the plaintiff to show that the omission was contrary to a representation actually made by the defendant, or an omission of a fact the defendant was obliged to disclose because it related to a safety issue. UCL claims require the plaintiff to show an injury in fact and lost money or property as a result of the unfair competition, and require actual reliance. Reliance on an omission may be proven by evidence that had the omitted information been disclosed one would have been aware of it and behaved differently. Because the purchasers were unable to show reliance, the claims failed. Even if Ford had a duty to disclose the defect, there was no evidence that the purchasers researched the maintenance history of Focuses, read the warranty or maintenance booklets before buying their vehicles, or otherwise saw Ford materials which could have contained any disclosure had it been made. The purchasers also failed to support their claims that the dealership salesmen were agents of Ford and were obligated to verbally disclose the alleged defect on Ford’s behalf.

The court found that there was insufficient evidence to support an inference of reliance. A court may infer reliance if the alleged omission was material. Even if the inference arises, it may be rebutted. Here, the claims were based on Ford’s failure to disclose the defect in any way rather than on an omission from a specific advertising campaign or brochure. Because the purchasers never viewed a website, advertisement, or other material that could plausibly contain the allegedly omitted fact, the inference did not arise and the claims failed. Although the purchaser’s discussions with the dealership salesmen may have been sufficient evidence to create an inference of reliance on another entity’s omissions, those discussions did not establish a presumption of reliance on Ford’s alleged omission.

However, the purchasers stated Song-Beverly Act and Magnuson-Moss Warranty Act claims against Ford, according to the court.

The case is No. 2:11-02890 WBS EFB.

Attorneys: John B. Thomas (Hicks Thomas, LLP) for Margie Daniel. David M George (Dykema Gossett PLLC) for Ford Motor Company.

Companies: Ford Motor Co.

Cases: StateUnfairTradePractices CaliforniaNews