Gutierrez v. Carmax Auto Superstores Cal.
19 Cal. App. 5th 1234, 228 Cal. Rptr. 3d 699 (2018)
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Rule of Law:
A seller's failure to disclose a material fact, such as a safety recall, constitutes a deceptive practice actionable under the California Consumer Legal Remedies Act (CLRA) when the seller makes partial representations about the product's quality that are misleading without the disclosure.
Facts:
- On May 6, 2013, Tammy Gutierrez purchased a 2008 Hyundai Elantra from CarMax.
- Before the purchase, CarMax sales staff advised Gutierrez that the car was in excellent condition because it had passed a rigorous 125-point quality inspection, which covered the vehicle's braking and lighting systems.
- At the time of sale, the Hyundai was subject to a national safety recall for its stop lamp switch, a component Gutierrez alleged was critical to the vehicle's braking system.
- CarMax did not disclose the existence of this outstanding safety recall to Gutierrez.
- Shortly after the purchase, the vehicle began experiencing transmission problems.
- When Gutierrez brought the vehicle to CarMax for repairs on June 7, 2013, CarMax replaced the transmission and also replaced the stop lamp switch pursuant to the recall.
Procedural Posture:
- Tammy Gutierrez sued CarMax Auto Superstores California, LLC in a California trial court.
- The trial court sustained CarMax's demurrers to Gutierrez's original, first, and second amended complaints, each time granting leave to amend.
- Gutierrez filed a third amended complaint alleging, among other things, violations of the Consumer Legal Remedies Act (CLRA) and the Unfair Competition Law (UCL).
- CarMax filed a demurrer to the third amended complaint, arguing it failed to allege sufficient facts to constitute a cause of action.
- The trial court sustained CarMax's demurrer without leave to amend, resulting in a judgment of dismissal in favor of CarMax.
- Gutierrez, as appellant, appealed the judgment of dismissal to the California Court of Appeal.
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Issue:
Does a used car dealer's failure to disclose a safety recall, while simultaneously representing that the vehicle passed a rigorous quality inspection, constitute a deceptive practice actionable under California's Consumer Legal Remedies Act (CLRA)?
Opinions:
Majority - Franson, J.
Yes, a seller's failure to disclose a material fact like a safety recall can be an actionable deceptive practice under the CLRA when accompanied by partial representations that are misleading due to the omission. The court reasoned that the CLRA, which must be liberally construed to protect consumers, prohibits not just affirmative misrepresentations but also material omissions. A duty to disclose arises when a seller makes partial representations—such as touting a 125-point inspection of the braking and lighting systems—that become misleading by omitting a related, material fact like a safety recall on the stop lamp switch. For a CLRA claim, a consumer suffers 'any damage' by alleging they were induced to buy a product they would not have purchased had the true facts been known, which is sufficient to seek restitution. The court also held the Unfair Competition Law (UCL) claim was valid, as the CLRA violation served as the necessary predicate 'unlawful' act. However, the court found the breach of implied warranty claim failed because Gutierrez did not allege the stop lamp switch in her specific vehicle was actually defective or that its use was impaired by the recall's existence.
Dissenting - Poochigian, Acting P.J.
No, the failure to disclose the recall is not an actionable deceptive practice under the specific CLRA provisions alleged because those sections prohibit affirmative misrepresentations, not omissions. The dissent argues that the plain meaning of the words 'representing' and 'advertising' in the cited CLRA paragraphs refers to affirmative statements. The legislature demonstrated it knew how to prohibit omissions by explicitly doing so in other sections of the CLRA, but chose not to in the sections at issue. To interpret these sections as creating broad liability for omissions improperly supplants the body of law governing the implied warranty of merchantability, which is better suited to address claims about a product's minimum quality in the absence of seller deception.
Analysis:
This decision significantly clarifies that under California's CLRA, a seller cannot create a misleading impression by selectively disclosing positive information while omitting negative, material facts. It establishes that a duty to disclose arises when a seller makes partial representations, particularly about a product's quality or safety, thereby preventing sellers from hiding behind technically true but incomplete statements. The ruling reinforces a broad interpretation of the 'any damage' requirement for CLRA standing, confirming that the harm of being induced into a transaction one would have otherwise avoided is sufficient. This strengthens consumer protections by holding sellers accountable for the overall impression created by their representations, especially concerning safety-related issues.
