Tammy Gutierrez v. CarMax Auto Superstores California

Tammy Gutierrez sued defendant CarMax Auto Superstores California,

LLC (CarMax) alleging breaches of express and implied warranties, intentional and

negligent misrepresentation, breach of contract, unfair competition under Business and

Professions Code section 17200 (UCL), and a violation of the Consumer Legal Remedies

Act (CLRA; Civ. Code, § 1750 et seq.). CarMax demurred to Gutierrez’s third amended

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complaint and the trial court sustained the demurrer without leave to amend. Gutierrez

appealed, contending her allegations about an undisclosed safety recall adequately stated

causes of action for breach of an implied warranty of merchantability and violations of

the UCL and CLRA.

As to the alleged breach of the implied warranty of merchantability, we conclude

CarMax’s express limitations on the remedies available apply to such a breach. Gutierrez

obtained the remedy authorized under the contract and its limitations for a breach of

warranty. Specifically, the potentially defective stop lamp switch subject to a safety

recall was replaced at no charge for the parts and labor. Having obtained her contractual

remedy, Gutierrez is unable to state of a cause of action for breach of an implied

warranty.

In contrast, Gutierrez has alleged sufficient facts to establish CarMax engaged in

unfair or deceptive practices in violation of the CLRA. Gutierrez alleged CarMax

engaged in deceptive practices by (1) representing the vehicle passed a 125-point quality

inspection and (2) failing to disclose the safety recall for the vehicle’s stop lamp switch.

She alleged the switch was a critical safety-related component of the vehicle’s braking

system and CarMax did not disclose the recall because it deemed making money more

important than protecting its customers from dangers relating to serious safety recalls. As

to the elements of reliance and the causation of harm, Gutierrez alleged she would not

have purchased the vehicle if she had known its true condition, including recall history.

Case law establishes this allegation adequately states Gutierrez suffered “any damage” as

that term is used in the CLRA and, therefore, might be entitled to restitution under the

statute. Also, the contractual limitations on remedies for a breach of warranty do not

control or restrict the availability of restitution or other relief specified in the CLRA.

On the question whether Gutierrez pleaded sufficient facts to establish CarMax

had a duty to disclose the safety recall, we conclude her allegations are sufficient.

Gutierrez contends the duty to disclose existed because CarMax (1) had actual knowledge

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of the recall before the sale of the vehicle and (2) made partial representations about the

vehicle that were misleading because the existence of the recall, a material fact, had not

been disclosed. We conclude her allegations are sufficient to establish for pleading

purposes the existence of the safety recall was a material fact and, by reasonable

inference, the existence of CarMax’s knowledge of the recall before the sale. As the stop

lamp switch is related to the vehicle’s braking and lighting systems, Gutierrez’s

allegations about the rigorous inspection of the vehicle’s braking and lighting systems,

and its misleading character in the absence of a disclosure about the safety recall, are

sufficient to plead the remaining factual element of a duty to disclose. Therefore, we

conclude she has alleged sufficient facts to state a claim for a deceptive practice

actionable under the CLRA.

Gutierrez also has stated a cause of action under the UCL. We conclude the

violation of the CLRA serves as the predicate violation of law necessary to establish the

unlawful practice variety of unfair competition that is actionable under the UCL.

We therefore reverse the judgment of dismissal.

FACTS

On May 6, 2013, Gutierrez purchased a 2008 Hyundai Elantra from defendant

CarMax at its dealership in Bakersfield. The vehicle came with a 30-day limited

warranty. The vehicle’s purchase agreement stated:

“The CarMax Warranty Brochure contains the details of the Limited

Warranty.

“LIMITATION OF WARRANTIES: CARMAX MAKES NO EXPRESS

WARRANTIES UNLESS SEPARATELY SET FORTH IN WRITING.

ANY AND ALL IMPLIED WARRANTIES APPLICABLE TO THE

PRODUCTS SOLD HEREUNDER, INCLUDING THE IMPLIED

WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A

PARTICULAR PURPOSE, ARE LIMITED TO THE DURATION OF

THE WRITTEN LIMITED WARRANTY GIVEN BY CARMAX, IF

ANY.”

4.

The document containing the limited warranty stated the duration of the warranty

was 30 days and listed the systems covered. The document also stated: “The dealer will

pay 100% of the labor and 100% of the parts for the covered systems that fail during the

warranty period.”

Before Gutierrez purchased the vehicle, she was advised by CarMax sales staff

that the Hyundai was in excellent condition because it had passed a rigorous 125-point

quality inspection. Gutierrez also received a document with the heading “CQI CarMax”1

that stated: “This vehicle has passed the rigorous CarMax 125-Point Quality Inspection”

and listed the 125 points. The following sentence appeared at the top of the document:

“Your signed CQI certificate can be found in your vehicle’s glove compartment.”

At the time of the sale, the Hyundai was subject to a national recall relating to the

stop lamp switch, which Gutierrez alleges was a critical safety-related component of the

vehicle’s braking system that materially affects a person’s ability to operate the vehicle

safely. She further alleges it is unsafe to operate a vehicle with a defective stop lamp

switch, but has not alleged the switch on her vehicle malfunctioned or was actually

defective.

CarMax did not disclose to Gutierrez that there was an outstanding safety recall

relating to the stop lamp switch. The operative complaint does not explicitly address

what CarMax knew about the recall at the time of sale. However, the complaint alleges

CarMax “should have either disclosed to Gutierrez that the Hyundai was the subject of

the recall, or had the safety recall work performed” and the only reason CarMax did not

disclose the recall because it placed more importance on money than protecting its

customers.2

We conclude these allegations can be reasonably interpreted as implying



1 CQI stands for certified quality inspection.

2 Gutierrez’s interpretation of her complaint has changed slightly during the course

of this appeal. Initially, her opening brief addressed CarMax’s knowledge by stating that

CarMax made the representation about the vehicle passing the quality inspection “either

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CarMax actually knew the recall had been issued when it sold the Hyundai to Gutierrez.

(See Code Civ. Proc., § 452 [construction of pleadings]; Mendoza v. Continental Sales

Co. (2006) 140 Cal.App.4th 1395, 1401-1402 [when construing a complaint, court

assumes the truth of facts that (i) can be inferred reasonably from the allegations and

exhibits and (ii) are favorable to the plaintiff].)

Shortly after Gutierrez purchased the vehicle, it began having transmission

problems, which included making a grinding noise and failing to accelerate in traffic.

Gutierrez presented the vehicle to CarMax for repairs on June 7, 2013. The transmission

problem was a known defect for which Hyundai had issued a technical service bulletin.

The June 7, 2013, repair order stated (1) the stop lamp switch was replaced because of

recall campaign 110 and (2) the transmission failed a bulletin’s stall test in second gear

and the bulletin advised to replace the transmission. As advised in the bulletin, the

transmission was replaced.3



PROCEEDINGS

In November 2014, Gutierrez prepared and filed a complaint against CarMax

using a form complaint approved by the Judicial Council of California. Demurrers to her

first and second amended complaints were filed and sustained with leave to amend.



knowing that there was an open safety recall, or knowing that Carmax did not investigate

whether or not there was an open safety recall.” Subsequently, Gutierrez’s reply brief

asserted “CarMax knew about the stop lamp switch recall for Gutierrez’s vehicle but did

not disclose it.”

3 Multiple paragraphs of the complaint allege “the vehicle was never properly

repaired, and the herein mentioned problems were never resolved” despite Gutierrez’s

attempts to have it repaired. Gutierrez’s opening brief does not mention the failure to

repair as the factual basis for an adequately alleged cause of action and, consequently, we

do not consider whether Gutierrez’s allegations about the failure to repair the

transmission or the stop lamp switch are sufficient to state a cause of action.

6.

In October 2015, Gutierrez’s attorney prepared and filed the third amended

complaint (complaint), which is the operative pleading in this appeal. In November

2015, CarMax filed another demurrer.

At a January 14, 2016, hearing, the trial court sustained the demurrer without leave

to amend and directed CarMax to give notice of the order. The order stated the complaint

failed to allege sufficient facts to constitute (1) a breach of warranty, (2) a

misrepresentation that was not remedied or limited by the terms of the express warranty,

or (3) a breach of contract. The order explained these conclusions by stating:

“The warranty was expressly limited to 30 days, and all the alleged

misrepresentations [Gutierrez] complains of, were disclaimed by the

warranty, or could not be reasonably relied upon due to the time limitations

of the warranty. Since [Gutierrez] failed to present the subject vehicle for

repair until after the warranty expired, no breach of a duty or contractual

obligation, and no misrepresentation or reliance has yet to be sufficiently

pleaded, and likely cannot be pleaded from the facts as alleged in the four

attempts in this case.”

The order also stated Gutierrez had not presented any facts or allegations that

would cure the defects apparent on the face of the pleadings and, consequently, leave to

amend was denied. In February 2016, Gutierrez filed a notice of appeal.

DISCUSSION

I. STANDARD OF REVIEW FOR DEMURRERS

When a demurrer is sustained, appellate courts conduct a de novo review to

determine whether the pleading alleges facts sufficient to state a cause of action under

any possible legal theory. (City of Dinuba v. County of Tulare (2007) 41 Cal.4th 859,

870 (Dinuba); Villery v. Department of Corrections & Rehabilitation (2016) 246

Cal.App.4th 407, 413 (Villery).) Appellate courts treat the demurrer as admitting all

material facts properly pleaded, but do not assume the truth of contentions, deductions or

conclusions of law. (Ibid.) The pleader’s contentions or conclusions of law are not

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controlling because appellate courts must independently decide questions of law without

deference to the legal conclusions of the pleader or the trial court. (Ibid.)

Legal questions include the interpretation of a statute and the application of a

statutory provision to facts assumed to be true for purposes of the demurrer. (Villery,

supra, 246 Cal.App.4th at p. 413.) In this appeal, all three legal theories raised by

Gutierrez involve statutes.

II. BREACH OF IMPLIED WARRANTY

A. Contentions of the Parties

1. Gutierrez’s Legal Theory

Gutierrez contends the breach of implied warranty cause of action is based on the

implied warranty of merchantability that is implied in every contract for the sale of

consumer goods by Civil Code section 1792.4

Gutierrez contends goods are

“merchantable” if they are fit for the ordinary purposes for which such goods are used.

Gutierrez further contends the ordinary purpose of a vehicle is safe driving and, therefore,

a vehicle is not merchantable when it is not fit for safe driving.5



Applying this legal theory to her vehicle, Gutierrez argues the Hyundai was not

merchantable when sold to her because “it had the unresolved and undisclosed stop lamp

switch issue” identified in the safety recall. In Gutierrez’s view, this breach of the

implied warranty of merchantability occurred at the time of sale and, as a result, the cause



4 Civil Code section 1792 states: “Unless disclaimed in the manner prescribed by

this chapter, every sale of consumer goods that are sold at retail in this state shall be

accompanied by the manufacturer’s and the retail seller’s implied warranty that the goods

are merchantable.”

5 Gutierrez supports this point by citing a federal safety standard for motor vehicles

that provides vehicles must have adequate, functioning lights (49 C.F.R. § 571.108) and

the discussion of the implied warranty of merchantability in American Suzuki Motor

Corp. v. Superior Court (1995) 37 Cal.App.4th 1291 at page 1296.

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of action does not depend on the timing of her discovery of (1) the safety recall or (2)

CarMax’s failure to fix the vehicle as specified in the recall.

2. CarMax’s Contentions

CarMax challenges Gutierrez’s cause of action for breach of an implied warranty

on multiple grounds. First, CarMax contends the theory that the vehicle was not

merchantable because of the unresolved and undisclosed stop lamp switch issue is a new

theory of liability set forth for the first time on appeal. Thus, CarMax argues Gutierrez

has waived her “claim that the recall rendered the vehicle unmerchantable.”

Second, CarMax contends Gutierrez “wholly fails to cite to the record and

presents no cognizable legal argument to show that the recall was a violation of the

implied warranty under any theory.” CarMax argues this failure to present specific

argument on the issue also operates as a waiver.

Third, CarMax contends the breach of implied warranty claim is deficient because

there is no allegation that the recall affected the vehicle’s usability. CarMax notes

Gutierrez did not allege the stop lamp switch on her vehicle was actually defective or did

not function properly, but only alleged there was an outstanding recall. CarMax

contends, “An outstanding recall, by itself, does not render a product unfit for use.”

Thus, in CarMax’s view, the cause of action must include allegations showing there were

problems with the specific vehicle that rendered it unfit for ordinary purposes, rather than

showing a precautionary replacement of a properly functioning part. In addition, CarMax

contends the stop lamp switch was replaced at no cost to plaintiff in accordance with the

limitations on remedies for breach of warranties specified in the contract.

Fourth, CarMax contends the implied warranties expired on June 5, 2013, which

was 30 days after the May 6, 2013, purchase date. CarMax contends Gutierrez did not

present the vehicle for repair until June 7, 2013, by which time the implied warranties

had expired.

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B. Demurrers and New Legal Theories on Appeal

1. General Rule

CarMax relies on the general rule “‘that issues not raised in the trial court cannot

be raised for the first time on appeal.’” (Johnson v. Greenelsh (2009) 47 Cal.4th 598,

603; 9 Witkin, Cal. Procedure (5th ed. 2008) Appeal, § 400 [point not properly raised

below].) The cases cited by CarMax—Tiernan v. Trustees of Cal. State University &

Colleges (1982) 33 Cal.3d 211 and Reyes v. Kosha (1998) 65 Cal.App.4th 451—arose in

the procedural context of a denial of a petition for writ of mandate and motion for

summary judgment, respectively. These cases are of little precedential value in the

present appeal because the rule about raising new issues on appeal was not applied to the

review of a general demurrer.6



2. Rule Applicable to Demurrers

CarMax’s reliance on the general rule is contrary to the precedent established by

the California Supreme Court, which is binding on this court and all state trial courts.

The Supreme Court has repeatedly stated that appellate courts reviewing a general

demurrer make a de novo determination of whether the complaint alleges “facts sufficient

to state a cause of action under any possible legal theory.” (Dinuba, supra, 41 Cal.4th at

p. 870, italics added; Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 967 [any

possible legal theory].) The term “any” is a broad term that ordinarily means “‘of

whatever king’” or “‘without restriction.’” (Zabrucky v. McAdams (2005) 129

Cal.App.4th 618, 628.) Here, we presume the Supreme Court understood this meaning

and note the court did not add any restrictions following its phrase “any possible legal

theory.” For instance, the court did not refer to any possible legal theory raised in the



6 Generally, attorneys should “think carefully about the persuasive force of the

precedent” cited in a brief. (Herrmann, The Curmudgeon’s Guide to Practicing Law

(ABA 2006) 4.) Here, the cases with the most persuasive force are those that address

raising new legal theories on appeal in the procedural context presented in this case—

that is, where a demurrer has been sustained without leave to amend.

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trial court. Indeed, the Supreme Court rejected restrictions of this type when,

immediately after mentioning “any possible legal theory,” it stated: “We are not limited

to plaintiffs’ theory of recovery or ‘“form of action”’ pled in testing the sufficiency of the

complaint.” (Dinuba, supra, at p. 870.)7

Accordingly, the “any possible legal theory” standard encompasses a legal theory

presented for the first time in an opening appellant’s brief. The standard also includes

legal theories first raised by the reviewing court. (E.g., Genesis Environmental Services

v. San Joaquin Valley Unified Air Pollution Control Dist. (2003) 113 Cal.App.4th 597,

[Fifth District vacates order sustaining demurrer after determining the facts alleged stated

a violation of the right to equal protection—a legal theory first raised by the court in a

request for supplemental briefing under Gov. Code, § 68081].) In short, an appellate

court “may consider new theories on appeal from the sustaining of a demurrer.”

(Simpson v. The Kroger Corp. (2013) 219 Cal.App.4th 1352, 1367.) CarMax’s argument

to the contrary misstates California law.

Consequently, we conclude Gutierrez did not waive, forfeit or abandon the legal

theory that the existence of an undisclosed and unresolved safety recall constitutes a

breach of the implied warranty of merchantability.

C. Alleged Deficiencies in Gutierrez’s Brief

1. Insufficient Argument and Legal Authority

CarMax argues that consideration of Gutierrez’s legal theory is barred because her

“brief also violates subsection (a)(1)(A) of [California Rules of Court] rule 8.883 by



7 A contrary rule of law would be difficult to harmonize with the Legislature’s

approach to showings of the ability to cure a defective pleading by alleging additional

facts. (See Code Civ. Proc., § 472c, subd. (a).) Our Supreme Court has interpreted the

statute to mean: “The issue of leave to amend is always open on appeal, even if not

raised by the plaintiff.” (City of Stockton v. Superior Court (2007) 42 Cal.4th 730, 746-

747, italics added.) Under this statutory interpretation, a proposed amendment can be

presented for the first time on appeal.

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failing to provide substantive legal argument on the issues pertinent to this appeal

supported by citation to relevant legal authority.” We reject this argument.

First, the cited rule applies to the appellate division of the superior court, not to the

Court of Appeal. (See Cal. Rules of Court, rule 8.800(a).) Second, Gutierrez has

provided substantive legal argument regarding the legal theory that the existence of the

undisclosed and unresolved safety recall constituted a breach of the implied warranty of

merchantability. She has cited the statutory provision that imposes the implied warranty,

referred to the standard that the goods sold must be fit for ordinary purposes, and argued

that a vehicle subject to a safety recall is not fit for the ordinary purpose of safe driving.

Third, the lack of a citation to legal authority supporting her specific argument for when a

vehicle is not fit for ordinary purposes does not violate the rules governing appellate

briefs. Such a citation to authority is required “if possible.” (Cal. Rules of Court, rule

8.204(a)(1)(B).) This rule does not bar appellants from presenting (or this court from

considering) novel legal theories not explicitly considered or adopted in a published

opinion.

2. Citations to the Record

CarMax also argues Gutierrez’s opening brief wholly fails to cite to the record in

the argument section and, as a result, this court should deem her to have waived those

arguments. This court has recognized that California Rules of Court, rule 8.204(a)(1)(C)

requires any reference to a matter in the record be supported by a citation to the volume

and page number of the record where the matters appears. (Sky River LLC v. Kern

County (2013) 214 Cal.App.4th 720, 741.) In addition, this court has concluded the

requirement “applies to matter[s] referenced at any point in the brief, not just in the

statement of facts.” (Ibid.)

In this case, however, we will not treat Gutierrez’s failure to include citations to

her complaint and its exhibits as constituting a waiver or forfeiture. The court became

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familiar with the complaint and its exhibits in the course of its review and, as this appeal

is narrowly focused on whether the operative pleading stated a cause of action, we

experienced no inefficiencies by the omissions of repeated citations to the complaint.

Consequently, we will exercise our discretionary authority such that the omissions of

citations to the record are not deemed a waiver or forfeiture of the related arguments.

D. Implied Warranty Cause of Action

1. Elements of a Claim—Implied Warranty of Merchantability

CACI No. 1231 sets forth the essential factual elements of a cause of action for

breach of the implied warranty of merchantability. If these elements are applied to the

facts of this case, Gutierrez must prove that (1) she bought the Hyundai from CarMax; (2)

at the time of purchase, CarMax was in the business of selling vehicles; (3) the Hyundai

was not fit for the ordinary purposes of which such goods are used; (4) Gutierrez took

reasonable steps to notify CarMax within a reasonable time that the Hyundai did not have

the expected quality; (5) Gutierrez was harmed; and (6) the failure of the Hyundai to have

the expected quality was a substantial factor in causing Gutierrez’s harm.

The elements that are subject to dispute on appeal are whether Gutierrez has

alleged sufficient facts to show (1) the Hyundai was not fit for ordinary purposes, (2)

Gutierrez was harmed, and (3) the harm was proximately causes by the breach of the

implied warranty. In addition, CarMax argues the express and implied warranties lasted

only 30 days and, therefore, any implied warranties had expired by the time Gutierrez

brought the Hyundai in for repair on June 7, 2013.

2. Duration of Implied Warranty

The duration of CarMax’s limited warranty was 30 days and the warranty

documents clearly stated the implied warranty of merchantability was limited to the

duration of CarMax’s written limited warranty. This limitation on the duration of an

implied warranty is authorized by Civil Code section 1795.5, subdivision (c).

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The question presented by CarMax’s argument is whether the purchaser must

notify the seller of the breach of the implied warranty during the warranty period or,

alternatively, whether the purchaser is allowed to provide notice after the warranty period

has expired so long as the breach occurred during the warranty period. We reject

CarMax’s argument that Gutierrez was required to present the vehicle to CarMax during

the warranty period. This argument is contrary to the express language of the warranty

itself. The warranty states: “The dealer will pay 100% of the labor and 100% of the

parts for the covered systems that fail during the warranty period.” (Italics added.) This

language does not require presentation of the claim during the warranty period. Instead,

it covers a breach of the warranty that occurs during the warranty period.

Applying this interpretation of the warranty to the facts of this case, we conclude

the alleged breach of the implied warranty (i.e., the existence of an unresolved safety

recall) existed during the warranty period. It is not a problem that first cropped up after

the warranty had expired. Therefore, CarMax’s argument about the duration of the

warranty does not preclude Gutierrez from stating a cause of action for breach of the

implied warranty of merchantability.

3. Warranty’s Limitations as to Remedy

Immediately below the language in the purchase agreement that limited the

duration of the implied warranties to the same duration as the written limited warranty

given by CarMax, the purchase agreement stated: “To the extent allowed by applicable

law, CarMax shall not be liable for any damages relating to loss of use of the products,

loss of time, inconvenience or commercial loss, or any other incidental or consequential

damages.” This language reinforces the language of the limited warranty that stated

CarMax “will pay 100% of the labor and 100% of the parts for the covered systems that

fail during the warranty period.” The combined effect of the language in the purchase

agreement and the terms of the limited warranty is to limit the remedies available to

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Gutierrez for a breach of the implied warranty of merchantability to the repair of the

vehicle so that it complies with the warranty.

Here, the allegations in the earlier pleadings and the repair order attached to the

complaint establish that the stop lamp switch was replaced after Gutierrez presented the

vehicle on June 7, 2013. The repair order does not list a price charged, but has the word

“warranty” in the column for the amount charged for the services listed. Consequently,

Gutierrez has obtained the contractually specified remedy for the alleged breach of

implied warranty. As a result, we conclude Gutierrez cannot state a cause of action for

breach of the implied warranty of merchantability. The alleged breach of the implied

warranty was fixed when the stop lamp switch was replaced and the express limitations

on the remedies available for a breach of a warranty preclude Gutierrez from obtaining

additional relief under this legal theory.

III. CONSUMER LEGAL REMEDIES ACT

A. Unfair and Deceptive Acts and Practices

1. Statutory Text

The CLRA prohibits “unfair methods of competition and unfair or deceptive acts

or practices” in transactions involving the sale of goods or services to any consumer.

(Civ. Code, § 1770.) Gutierrez relies on paragraphs (5), (7) and (9) of subdivision (a) of

Civil Code section 1770, which prohibit “[r]epresenting that goods … have …

characteristics [or] benefits ... that they do not have”; “[r]epresenting that goods … are of

a particular standard, quality, or grade … if they are of another”; and “[a]dvertising goods

… with intent not to sell them as advertised.” A question of statutory construction

presented by this text is whether concealment, omissions or failures to disclose are

prohibited.

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2. Statutory Construction—Ambiguous or Plain Meaning

California’s rules of statutory interpretation are well established. (See Merced

Irrigation Dist. v. Superior Court (2017) 7 Cal.App.5th 916, 924-926.) The first question

is whether the statutory language is ambiguous—that is, susceptible to more than one

reasonable interpretation—or, alternatively, has a plain meaning. (Id. at pp. 924-925.)

Here, a dispute has arisen over whether the action verb “representing” is ambiguous or

has a plain meaning.

One view is that “representing” has a plain meaning, which includes making oral

and written statements and excludes omitting or failing to disclose information. A

different view is that “representing” is ambiguous because, in certain contexts,

representations can be expressed in words (i.e., oral or written) and also can be implied.8

Dictionaries are one place to look for a word’s usual, ordinary meaning. (Wasatch

Property Management v. Degrate (2005) 35 Cal.4th 1111, 1121-1122.) Webster’s

defines the verb “represent” as “‘[t]o bring clearly before the mind: [to] cause to be

known …: [to] present esp. by description.’” (U.S. v. Alvarez (9th Cir. 2010) 617 F.3d

1198, 1238.) A subsequent definition states “to describe as having a specified character

or quality.” (Webster’s 3d New Internat. Dict. (1993) p. 1926.) These definitions do not

address the distinction between expressed and implied statements. The related term

“representation” means “[a] presentation of fact—either by words or by conduct—made

to induce someone to act, esp. to enter into a contract.” (Black’s Law Dict. (9th ed. 2009)

p. 1415.)

We conclude the statutory term “representing” is ambiguous and does not have

single plain meaning. It is possible to interpret “representing” narrowly to mean



8 By way of comparison, contracts can be express or implied. (BAJI No. 10.56

[express or implied contracts].) “Express” contracts are stated in words, either oral or

written. (Civ. Code, §§ 1620, 1622; BAJI No. 1057 [oral and written contracts].)

“Implied” contracts are manifested by conduct or implied in law. (Weitzenkorn v. Lesser

(1953) 40 Cal.2d 778, 794; BAJI No. 10.56; Civ. Code, § 1621 [implied by conduct].)

16.

presenting written or oral statements of fact to another, which interpretation excludes

omissions of fact or nondisclosures. For example, the tort of negligent misrepresentation

usually “exclude[es] liability for mere nondisclosure or other failure to act.” (Randi W. v.

Muroc Joint Unified School Dist. (1997) 14 Cal.4th 1066, 1084.) In contrast,

“representing” also can be reasonably interpreted as encompassing statements of fact that

are express, implied-in-fact or implied-in-law.9

Under this broader interpretation, placing

the modifiers “actually” or “affirmatively” before the verb “represents” is not superfluous

because the modifiers address the word’s ambiguity and reduce the probability that the

modified verb would be interpreted to include implied representations. (See Randi W.,

supra, 14 Cal.4th at p. 1084 [affirmative representations in recommendation letter

strongly implied school administrator was fit to interact appropriately with female

students, which was a misleading half-truth; demurrer to negligent misrepresentation

claim should have been overruled]; People v. Fedalizo (2016) 246 Cal.App.4th 98, 107

[courts routinely rely on the express and implied representations of attorneys on a wide

range of matters].)

When statutory language is ambiguous, the court must adopt the interpretation that

best effectuates the legislative intent or purpose. (Beal Bank, SSB v. Arter & Hadden,

LLP (2007) 42 Cal.4th 503, 508.) In identifying the best interpretation, courts may

consider a variety of extrinsic sources. (Ibid.)

3. Other Statutory Provisions

Ambiguous statutory language is construed in context—that is, it must be read in

conjunction with the other words of the section and in light of the statutory scheme as a



9 An example of a representation implied-in-law involves the duty to disclose a

material fact. If a defendant subject to such a duty does not disclose the material fact, the

defendant has impliedly represented that the material fact—usually negative information

about the good being purchased—does not exist. This implication arises by virtue of the

law that created the duty to disclose the material fact.

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whole. (Merced Irrigation Dist. v. Superior Court, supra, 7 Cal.App.5th at p. 925.)

Accordingly, we consider the other language in Civil Code section 1770 and other

provisions of the CLRA, as those provisions might aid our resolution of the ambiguity.

Civil Code section 1770 expressly prohibits the failure to provide particular types

of information. The advertising of furniture “without clearly indicating” it is

unassembled or the assembled price (if available assembled) is prohibited. (Civ. Code, §

1770, subd. (a)(11), (12).) “Advertising goods or services with intent not to supply

reasonably expectable demand, unless the advertisement discloses a limitation of

quantity” is prohibited, which is only place the word “disclose” or its variants is used in

Civil Code section 1770. (Id., subd. (a)(10), italics added.) Other provisions prohibit (1)

advertising a specific price plus percentage markup unless other pricing information is

included and (2) disseminating unsolicited prerecorded telephone messages that do not

first provide information specified in the statute. (Id., subd. (a)(20), (22).)10

Other statutory text relevant to our construction of the provisions Gutierrez has

alleged were violated is the Legislature’s express statement of the CLRA’s purposes:

“This title shall be liberally construed and applied to promote its underlying

purposes, which are to protect consumers against unfair and deceptive

business practices and to provide efficient and economical procedures to

secure such protection.” (Civ. Code, § 1760, italics added.)

The reference to “efficient and economical procedures” is somewhat ambiguous in

scope. It could be intended to refer to procedures that are efficient and economical to the

consumer seeking the CLRA’s protection. Alternatively, the CLRA could be concerned

with efficiency and economy on a broader, societal scale—that is, for all persons and

entities involved in consumer transactions. Under this broader perspective, courts would



10 These provisions demonstrate the Legislature was capable of explicitly addressing

failures to provide information and, thus, support the inference that the Legislature did

not intend the provisions at issue in this appeal to reach omissions and failures to disclose

information. (Blankenship v. Allstate Ins. Co. (2010) 186 Cal.App.4th 87, 94-95.)

18.

weigh any inefficiencies a particular statutory construction might create for scrupulous

businesses and balance those inefficiencies (i.e., burdens) against the protection (i.e.,

benefits) provided to consumers. Therefore, the Legislature’s expression of the CLRA’s

purposes is ambiguous, which creates uncertainty in how to interpret the statute. (See

Apple Inc. v. Superior Court (2013) 56 Cal.4th 128, 135 [fundamental goal of statutory

interpretation is to effectuate the purpose of the statute].)

4. Legislative History

The ambiguity about efficient and economical procedures is not addressed in the

Legislative Counsel’s Digest for the bill enacting the CLRA, which states in full:

“Enacts [CLRA] which provides specific legal remedies for consumers who suffer

damage as a result of method, act, or practice declared to be unlawful by the act.” (Legis.

Counsel’s Dig., Assem. Bill No. 292, 2 Stats. 1970 (Reg. Sess.) Summary Dig., p. 223;

see Broughton v. Cigna Healthplans (1999) 21 Cal.4th 1066, 1099 [this summary is

relevant to interpretation of CLRA].)

Other materials in the legislative history from the year of the CLRA’s enactment,

provide a stronger foundation for drawing inferences about the legislative purpose. One

report states the act was designed “‘to provide affirmative remedies for consumers which

will protect them from unscrupulous business practices while insulating responsible

businessmen from spurious or vexatious lawsuits.’ (Assem. Com. on Judiciary, Rep. on

Assem. Bill No. 292 (1970 Reg. Sess.) Sept. 23, 1970.)” (Benson v. Southern California

Auto Sales, Inc. (2015) 239 Cal.App.4th 1198, 1205.) This statement supports the view

that an appropriate interpretation of the CLRA takes into account efficiency and economy

from a societal perspective and is not limited to consideration of what is efficient and

economical for the consumer. We resolve the ambiguity in the Civil Code section 1760

as to purpose by adopting the broader, societal perspective because the CLRA was “a

product of intense extended negotiation with representatives of virtually all segments of

19.

the business community and, not unnaturally under such circumstances, is a

compromise.” (Reed, Legislating for the Consumer: An Insider's Analysis of the

Consumers Legal Remedies Act (1971) 2 Pacific L.J. 1, 8, fn. omitted.)

Next, we consider whether the CLRA’s legislative history is useful in determining

whether the provisions invoked by Gutierrez should be construed to prohibit omissions or

nondisclosures of fact. The materials we have reviewed are not definitive and can be

used to support conflicting inferences on the nondisclosure question. One report gave an

example of how each of the 16 subdivisions of Civil Code section 1770 enacted in 1970

could be violated. (Assem. Com. on Judiciary, Rep. on Assem. Bill No. 292 (1970 Reg.

Sess.) Sept. 23, 1970.)11

The example for the provision that is now subdivision (a)(6) of

Civil Code section 177012 is the only example that refers to the failure to disclose

information, and it states: “It would be a deceptive practice for a salesman to fail to

disclose that products are reprocessed even though the reprocessed products are as good

as new. FTC v. Colgate Palmolive, 85 S. Ct. 1035.”13

(Assem. Com. on Judiciary, Rep.



11 This report is reproduced as Appendix B to Reed, Legislating for the Consumer:

An Insider’s Analysis of the Consumers Legal Remedies Act, supra, 2 Pacific L.J. at

pages 25 through 26.

12 The text of this provision, which has not been altered since its adoption in 1970,

prohibits: “Representing that goods are original or new if they have deteriorated

unreasonably or are altered, reconditioned, reclaimed, used, or secondhand.”

13 In FTC. v. Colgate-Palmolive Co. (1965) 380 U.S. 374, the court considered a

television advertisement for Rapid Shave shaving cream in which the announcer stated,

“‘To prove RAPID SHAVE’S super-moisturizing power, we put it right from the can

onto this tough, dry sandpaper. It was apply … soak … and off in a stroke.’” (Id. at p.

376.) The advertisement did not show actual sandpaper; instead, it used a mock-up or

simulated prop made of plexiglass to which sand had been applied. (Ibid.) If sandpaper

had been used, it would have required a substantial soaking period of about 80 minutes.

(Ibid.) The Federal Trade Commission found the undisclosed use of a plexiglass

substitute for sandpaper was a material misrepresentation and, thus, a deceptive act that

violated section 5 of the Federal Trade Commission Act. (FTC. v. Colgate-Palmolive

Co., supra, at pp. 375-376, 377.) The Supreme Court upheld the finding, stating “the

undisclosed use of plexiglass in the present commercials was a material deceptive

20.

on Assem. Bill No. 292 (1970 Reg. Sess.) Sept. 23, 1970, italics added.) This example

supports the inference that the Legislature was aware that the terms “deceptive act” and

“representing” used in the CLRA could be interpreted to include the failure to disclose

information about the goods being sold.

5. Statutes and Case Law Existing in 1970

A principle of statutory construction states the Legislature is deemed to be aware

of existing statutes and judicial decisions when it adopts a statute. (People v. Harrison

(1989) 48 Cal.3d 321, 329.) Under this principle, we consider some of the statutes and

case law in place in 1970 when the CRLA was enacted.

The existing statutes included the Civil Code provisions adopted in 1872 to define

fraud and deceit. (Civ. Code, § 1572 [fraud], 1710 [deceit].) Both these definitions

encompass omissions and nondisclosures. Deceit includes the “suppression of a fact, by

one who is bound to disclose it, or who gives information of other facts which are likely

to mislead for want of communication of that fact.” (Civ. Code, § 1710, subd. 3.) Fraud

includes “suppression of that which is true, by one having knowledge or belief of the

fact.” (Civ. Code, § 1572, subd. 3.)

Existing judicial decisions included General Acc. etc. Corp. v. Indus. Acc. Com.

(1925) 196 Cal. 179, a case in which the California Supreme Court reviewed a workers’

compensation award to the dependents of a deceased employee. (Id. at p. 181.) The

litigation addressed whether an insurance policy was in effect or whether the employer

would be responsible for paying the award. The specific issue was “whether or not the

policy was obtained by fraudulent concealment of a material fact on the part of [the

employer]” because, under the circumstances, the employer had a duty to disclose facts

not known or suspected by the insurance company. (Id. at p. 186.) The court stated:



practice, independent and separate from the other misrepresentation found.” (Id. at p.

390.)

21.

“Respondent Commission attempts to point out a distinction between a concealment of a

material fact and a misrepresentation as to such fact. The legal effect in each instance

amounts to the same thing, fraud.’”

14

(Id. at p. 190.) This decision provides a basis for

inferring the Legislature was aware that the CLRA’s reference to “unfair or deceptive

acts” involving “representing” would be interpreted to include both affirmative

misrepresentations of fact and the nondisclosure of material facts. Similarly, the United

State Supreme Court’s decision in FTC v. Colgate-Palmolive Co., supra, 380 U.S. 374,

had been in place for five years and would have informed the Legislature that the term

“deceptive act” used in a federal statute had been interpreted to encompass the

nondisclosure of material information. (Id. at p. 390.)

6. Subsequent Judicial Decisions and Amendments of the CLRA

Another principle of statutory construction provides that courts generally presume

“the Legislature is aware of court opinions existing at the time it amends legislation.”

(Estate of Burden (2007) 146 Cal.App.4th 1021, 1030.) Under this principle, when the

Legislature reenacts the statute without changing the interpretation given to the statute by

the courts, the Legislature is presumed to have been aware of, and acquiesced in, the

courts’ construction of that statute. (People v. Bouzas (1991) 53 Cal.3d 467, 475.) This

principle is applicable because of case law stating nondisclosures or omissions are

actionable under the CLRA and the many times the statute has been amended without

contradicting this interpretation.

The first published case to discuss whether the suppression or omission of facts

was actionable under the CLRA was the Third District’s 1975 decision in Outboard



14 The view that the words “representing” and “misrepresenting” have a plain

meaning that is limited to written and oral statements of fact and excludes omissions and

nondisclosures is an attempt to adopt a distinction as the only reasonable interpretation

when the distinction itself was rejected long ago. Moreover, we have found no published

California decision stating “representing” has a plain meaning (i.e., is not ambiguous).

22.

Marine Corp. v. Superior Court (1975) 52 Cal.App.3d 30 (Outboard Marine). The court

referred to (1) California precedent stating fraud or deceit included the suppression of a

fact by one bound to disclose it or by one who states other facts that are likely to mislead

without a disclosure of the suppressed fact; (2) the statement from General Acc. etc.

Corp. v. Indus. Acc. Com., supra, 196 Cal. at page 190, that concealment of a material

fact and misrepresentation of a material fact, in legal effect, was the same thing, fraud;

and (3) a legal encyclopedia stating “‘the distinction between concealment and

affirmative misrepresentation is tenous’” because the force and effect is the same.

(Outboard Marine, supra, at p. 37.) Ultimately, the court concluded there were no

demonstrable differences between the allegation in the plaintiff’s causes of action for

misrepresentation and for concealment as the particular affirmative misrepresentations

worked to conceal true facts about the off-road vehicle’s braking and handling. (Ibid.)

Consequently, the court’s discussion of material omissions of fact was not necessary to

its conclusion that “[t]he conduct described in the first amended complaint reasonably

and unquestionably falls within the activities proscribed by Civil Code section 1770.”

(Id. at p. 36.)

In Bardin v. DaimlerChrysler Corp. (2006) 136 Cal.App.4th 1255 (Bardin), the

Fourth District interpreted Outboard Marine as holding “that [Civil Code] section 1770

prohibited concealment or suppression of material facts: ‘It is fundamental that every

affirmative misrepresentation of fact works a concealment of the true fact…. [¶] Fraud or

deceit may consist of the suppression of a fact by one who is bound to disclose it or who

gives information of other facts which are likely to mislead for want of communication of

that fact.’” (Bardin, supra, at p. 1276.) The court then concluded the claim for violation

of the CLRA failed because the pleading “neither alleged facts showing [defendant] was

‘bound to disclose’ its use of tubular steel exhaust manifolds, nor alleged facts showing

[defendant] ever gave any information of other facts which could have the likely effect of

misleading the public ‘for want of communication’ of the fact it used tubular steel

23.

exhaust manifolds.” (Ibid.) Accordingly, the Fourth District affirmed the judgment

entered after the trial court sustained a demurrer without leave to amend. (Id. at pp.

1277-1278.) We interpret Bardin’s statements about concealment and suppression of

facts as dicta because those statements are not necessary to the decision that a cause of

action under the CLRA had not been alleged.15

Later in 2006, the Second District filed Daugherty v. American Honda Motor Co.,

Inc. (2006) 144 Cal.App.4th 824 (Daugherty), which interpreted Outboard Marine as

holding the practice proscribed by Civil Code section 1770, subdivision (a)(7) “included

‘a proscription against a concealment of the characteristics, use, benefit, or quality of the

goods contrary to that represented.’” (Daugherty, supra, at p. 834.) The court identified

two categories of actionable nondisclosures by stating, “although a claim may be stated

under the CLRA in terms constituting fraudulent omissions, to be actionable the omission

must be [1] contrary to a representation actually made by the defendant, or [2] an

omission of a fact the defendant was obliged to disclose.” (Id. at p. 835.)16

The court

analyzed the particular allegations and concluded “Daugherty did not state a viable

nondisclosure claim under the CLRA.” (Id. at p. 837.) We interpret the statements in

Daugherty about omissions and nondisclosure, like those in Bardin, to be dicta because

they were not necessary to concluding a CLRA claim had not been alleged.

In McAdams v. Monier, Inc. (2010) 182 Cal.App.4th 174 (McAdams), the Third

District referred to its 35-year-old decision in Outboard Marine, stating it “held that the

CLRA, pursuant to its list of proscribed practices in [Civil Code] section 1770, includes



15 In some contexts, the word “holding” means “both of the result of the case and

‘those portions of the opinion necessary to that result by which we are bound.’ (Seminole

Tribe of Florida v. Florida, 517 U.S. 44, 66-67, 116 S.Ct. 1114, 134 L.Ed.2d 252

(1996).” (U.S. v. Kaley (11th Cir. 2009) 579 F.3d 1246, 1253, fn. 10.) We use the word

“necessary” in this sense.

16 The issues raised in this appeal are related to the second category. Therefore, the

first category is not discussed in detail.

24.

the concealment or suppression of material facts.” (Id. at p. 185.) The Third District also

stated the decision in Bardin “illustrates how Outboard Marine applies to an alleged

misrepresentation under the CLRA that comprises a failure to disclose.” (McAdams,

supra, at p. 185.) In McAdams, the Third District concluded the plaintiff’s CLRA cause

of action, which was based on an alleged failure to disclose known information about the

erosion of color composition of roof tiles represented to have a 50-year life span, was

suitable for class treatment. (Id. at p. 186.) As a result, the court reversed the order

denying certification of the proposed CLRA and UCL classes. (McAdams, supra, at p.

192.) We interpret the statement in McAdams about failures to disclose being actionable

under the CLRA as being necessary for the disposition, which allowed certification of the

CLRA claims based on failures to disclose.

In Klein v. Chevron U.S.A., Inc. (2012) 202 Cal.App.4th 1342 (Klein), the

plaintiffs sued a company for selling motor fuel to consumers without (1) adjusting for

temperature expansion of the fuel or (2) disclosing the effect of temperature increases on

motor fuel. (Id. at p. 1353.) The plaintiffs alleged specific acts and omissions that

constituted violations of the UCL and qualified as misrepresentations as to the

characteristics and quantities of motor fuel in violation of Civil Code section 1770,

subdivision (a)(5). The Second District stated:

“Plaintiffs’ allegations are sufficient to state a CLRA claim predicated on a

material omission, which ‘“consist[s] of the suppression of a fact by one

who ... gives information of other facts which are likely to mislead for want

of communication of that fact.”’ (McAdams, supra, 182 Cal.App.4th at p.

185, italics omitted.)” (Klein, supra, at p. 1383.)

We interpret Klein’s statements about omissions of material fact to be necessary to

the outcome of reversing the judgment on the pleadings.17

(Cf. Rubenstein v. The Gap,



17 In Daniel v. Ford Motor Co. (9th Cir. 2015) 806 F.3d 1217, the Ninth Circuit cited

Klein for the legal conclusion that fraudulent omissions are actionable under both the

CLRA and the UCL. (Daniel, supra, at p. 1225.) The Ninth Circuit reversed the grant of

summary judgment on CLRA and UCL claims, concluding the genuine issue of material

25.

Inc. (2017) 14 Cal.App.5th 870, 881 (Rubenstein) [statement that material nondisclosures

are actionable under the CLRA was dicta because it was not necessary to conclusion that

plaintiff had failed to allege a claim under CLRA].)

The line of cases beginning with Outboard Marine, including McAdams, and

ending with Klein is relevant to our interpretation of the CLRA provisions because the

Legislature amended Civil Code section 1770 many times after Outboard Marine and

before McAdams and did not address the interpretation of that section to reach omissions

or nondisclosures of material facts. (See 2 Stats. 1979, ch. 819, § 4, pp. 2827-2828; 2

Stats. 1984, ch. 1171, §1, pp. 4013-4014; 3 Stats. 1986, ch. 1497, § 1, pp. 5368-5369; 5

Stats. 1990, ch. 1641, § 1, pp. 7852-7853; 1 Stats. 1995, ch. 255, § 2, pp. 878-879; 3

Stats. 1996, ch. 684, § 1, pp. 3777-3780.) Similarly, since McAdams was decided, there

have been many amendments to Civil Code section 1770 without the Legislature

expressing its disapproval of the interpretation extending its provisions to omissions or

nondisclosures. (See Stats. 2008, ch. 479, § 1; Stats. 2009, ch. 140, § 26; Stats. 2011, ch.

79, § 1; Stats. 2012, ch. 653, § 1; Stats. 2013, ch. 541, § 1; Stats. 2015, ch. 246, § 1; Stats.

2016, ch. 86, § 19.)

7. National Consumer Act

Another type of analysis used when interpreting the CLRA is comparing the

provisions adopted by the Legislature to the model legislation upon which the CLRA was

based—namely, “the National Consumer Act proposed by the National Consumer Law

Center at Boston College. (Assem. Com. on Judiciary, analysis of Assem. Bill No. 292

(1970 Reg. Sess.) Apr. 20, 1970, p. 1; see Reed, Legislating for the Consumer: An

Insider’s Analysis of the Consumers Legal Remedies Act (1971) 2 Pacific L.J. 1, 11.)”

(Fairbanks v. Superior Court (2009) 46 Cal.4th 56, 61.) In Fairbanks, the Supreme



fact existed as to whether the plaintiffs in fact relied on Ford’s omissions when they

purchased a Ford Focus.

26.

Court used this comparative analysis to support the interpretation that life insurance was

not a “good” or a “service” covered by the CLRA. (Fairbanks, supra, at p. 61.) After

determining those terms were ambiguous, the court resolved the ambiguity by noting the

Legislature had omitted the reference to insurance in the definition of “services”

proposed in the model act. (Ibid.) The court concluded the Legislature’s omission

indicated its intent not to treat insurance as a service under the CLRA. (Fairbanks,

supra, at p. 61.)

Here, a comparison of the model act to the CLRA shows that paragraphs (5), (7)

and (9) of subdivision (a) of Civil Code section 1770 track verbatim the paragraphs (e),

(g) & (i) of Section 3.201(1) of the National Consumer Act, first final draft (Jan. 1970).

However, the 16 types of unfair or deceptive acts or practices made unlawful by Civil

Code section 1770, did not include the last two listed in the model act, which stated: “(q)

Engaging in any other conduct which similarly creates a likelihood of confusion or of

misunderstanding; or [¶] (r) Engaging in any act or practice which is unfair or deceptive

to the consumer.” These provisions were general in scope and could have been

interpreted as encompassing omissions of material facts not covered by the provisions

referring to “representing” and “advertising.”

A number of other aspects of the National Consumer Act might merit discussion

here if we were the first court to interpret the CLRA. However, those aspects are of less

significance in view of the judicial decisions and amendments to the CLRA that have

occurred over the last 45 years.

8. Omissions of Material Fact are Actionable Under the CLRA

Based on the statutory text, legislative history (which includes the National

Consumer Act), the judicial decisions and statutes that existed when the CLRA was

enacted, the subsequent case law, and the many amendments to the CLRA from 1975

through 2016, we join Klein, McAdams and the other cases concluding that failures to

27.

disclose material facts are actionable under the CLRA. In particular, we conclude

paragraphs (5), (7) and (9) of subdivision (a) of Civil Code section 1770 proscribe

material omissions in certain situations.

Not every omission or nondisclosure of fact is actionable. Consequently, we must

adopt a test identifying which omissions or nondisclosures fall within the scope of the

CLRA. Stating that test in general terms, we conclude an omission is actionable under

the CLRA if the omitted fact is (1) “contrary to a [material] representation actually made

by the defendant” or (2) is “a fact the defendant was obliged to disclose.” (Daugherty,

supra, 144 Cal.App.4th at p. 835; see Rubenstein, supra, 14 Cal.App.5th at p. 881;

Collins v. eMachines, Inc. (2011) 202 Cal.App.4th 249, 255 (Collins).) Under the facts

alleged in this case, we are concerned only with the second type of omitted fact and the

question of whether CarMax had a duty to disclose a fact not made known to the plaintiff.

In Collins, the court identified four situations in which a failure to disclose a fact

constitutes a deceptive practice actionable under the CLRA. (Collins, supra, 202

Cal.App.4th at p. 255.) Those situations arise when the defendant is plaintiff’s fiduciary,

when the defendant has exclusive knowledge of material facts not known or reasonably

accessible to the plaintiff, and when the defendant actively conceals a material fact. In

addition, the duty to disclose exists “when the defendant makes partial representations

that are misleading because some other material fact has not been disclosed.” (Ibid.) In

the context of the CLRA, a fact is “material” if a reasonable consumer would deem it

important in determining how to act in the transaction at issue. (Collins, supra, at p.

256.) In other words, a defendant has a duty to disclose when the fact is known to the

defendant and the failure to disclose it is “‘misleading in light of other facts … that [the

defendant] did disclose.’” (Klein, supra, 202 Cal.App.4th at p. 1382; see Civ. Code, §

1710, subd. 3.)

28.

9. Duty to Disclose Safety Concerns

A legal question presented in this appeal is whether an independent duty of

disclosure is imposed on retail sellers of automobiles when the fact omitted implicates

safety concerns. As an alternative to characterizing the disclosure of safety concerns as

an independent duty, it can be viewed as a specific application of the duty to disclose (1)

when defendants have exclusive knowledge of material facts not known or reasonably

accessible to the plaintiff or (2) when defendants make partial representations that are

misleading because some other material fact has not been disclosed. (Collins, supra, 202

Cal.App.4th at p. 255; Smith v. Ford Motor Co. (N.D.Cal. 2010) 749 F.Supp.2d 980, 987;

see Oestreicher v. Alienware Corp. (9th Cir. 2009) 322 Fed.Appx. 489, 493 [CLRA,

UCL and fraudulent concealment claims dismissed; plaintiff had not alleged the defect

posed a threat to his safety or the safety of others].)

The possibility of a duty to disclose safety defects was raised in Bardin, supra,

136 Cal.App.4th 1255, where the plaintiffs attempted to state UCL and CLRA claims by

alleging the defendant manufacturer failed to disclose exhaust manifolds were made of

tubular steel instead of more durable and more expensive cast iron. (Bardin, supra, at p.

1260.) The trial court sustained the manufacturer’s demurrer and the Fourth District

affirmed. In rejecting various legal theories not supported by the allegations, the Fourth

District stated the plaintiffs had not alleged “any personal injury or safety concerns

related to [the manufacturer’s] use of tubular steel exhaust manifolds.” (Id. at p. 1270.)

This was the opinion’s only reference to “safety.”

In Daugherty, supra, 144 Cal.App.4th 824, the Second District addressed whether

Honda had a duty to disclose an alleged engine defect. The court concluded no duty

existed despite the allegation that Honda knew at the time of sale there was an

unreasonable risk of potential serious damages—specifically, the cost of repairs in the

event the alleged engine defect ever caused an oil leak. (Id. at pp. 836-837.) The court

discussed safety concerns in greater detail than in Bardin, but also concluded a claim

29.

under the CLRA had not been stated because the complaint was “devoid of factual

allegations showing … any safety concerns posed by the defect.” (Daugherty, supra, at

p. 836.) In sum, neither Bardin nor Daugherty actually held sellers of automobiles are

subject to an independent duty to disclose safety concerns. Rather, the references to

safety concerns in those opinions appear in dicta.

In Mui Ho v. Toyota Motor Corp. (N.D.Cal 2013) 931 F.Supp.2d 987 (Mui Ho),

the federal district court stated Daugherty and a 2007 federal case following Daugherty

“held that a fact can give rise to a duty to disclose and an actionable omission if it

implicates safety concerns that a reasonable consumer would find material. [Citations.]”

(Mui Ho, supra, at p. 997.) The district court described this conclusion as “a basic rule of

California law.” (Ibid.) The court also stated that simply invoking the word “safety” was

insufficient to establish a duty to disclose and “plaintiffs must still plead facts showing a

material safety defect.” (Ibid.) Next, the court considered the plaintiffs’ allegations

regarding the headlamp flickering or going out at night or during inclement weather and

determined the allegations were sufficient to establish a duty to disclose because the

alleged defect put the car’s driver in danger. (Id. at pp. 997-998.) In comparison, the

court referred to a case where the plaintiffs had failed to adequately plead a safety defect

because they had not shown how problems with the car ignition lock affecting the

driver’s ability to start or shut off the car’s engine posed an unreasonable safety hazard.

(Id. at p. 997, citing Smith v. Ford Motor Company, supra, 749 F.Supp.2d 980, affd.

mem. (9th Cir. 2011) 462 Fed.Appx. 660, 663 [no duty to disclose failure rate of ignition

locks].)

Based on our examination of the federal and Court of Appeal decisions discussing

safety concerns, we conclude there is no independent duty to disclose such concerns.

Rather, a duty to disclose material safety concerns “can be actionable in four situations:

(1) when the defendant is in a fiduciary relationship with the plaintiff; (2) when the

defendant had exclusive knowledge of material facts not known to the plaintiff; (3) when

30.

the defendant actively conceals a material fact from the plaintiff; or (4) when the

defendant makes partial representations but also suppresses some material fact.” (Mui

Ho, supra, 931 F.Supp.2d at p. 996.) In Mui Ho, the plaintiffs alleged the failure to

disclose facts about the headlamps was “actionable because (1) Defendants had exclusive

knowledge of the material fact that the headlamps were defective, or, alternatively, (2)

Defendants actively concealed that material fact.” (Id. at pp. 996-997.) Thus, Mui Ho

does not establish the existence of an independent duty to disclose safety concerns that

exists outside the four situations where a duty to disclose is recognized by California

courts.

B. Duty to Disclose Element

The foregoing discussion addressed the substantive principles pertaining to

nondisclosures of fact actionable under the CLRA and the circumstances that must exist

for the defendant to have a duty to disclose a material fact. Here, we consider the

procedural rules that govern the proper pleading of a claim under the CLRA based on a

breach of a duty to disclose a material fact.

1. Specificity of the Pleading

A general rule of pleading in civil cases is that “the complaint should set forth the

ultimate facts constituting the cause of action, not the evidence by which plaintiff

proposes to prove those facts.” (Committee on Children’s Television, Inc. v. General

Foods Corp. (1983) 35 Cal.3d 197, 212 (Committee).) An exception to this general rule

requires fraud to be pled specifically, which necessitates pleading facts which show how,

when, where, to whom and by what means the representations were tendered. (Robinson

Helicopter Co., Inc. v. Dana Corp. (2004) 34 Cal.4th 979, 993.)

The application of the general rule and its exception to claims under the CLRA

and UCL asserting deceptive acts or practices based on fraud-like allegations of

concealment or a failure to disclose material facts is not entirely clear. For example, in

31.

Committee, the Supreme Court stated: “The requirement that fraud be pleaded with

specificity, discussed in part III of this opinion, does not apply to causes of action under

the consumer protection statutes.” (Committee, supra, 35 Cal.3d at p. 212, fn. 11.)

Fifteen years later, the Supreme Court rejected an insurance company’s argument “that,

because the potential scope of UCL liability is very broad, particularized fact-pleading

should be required in UCL claims.” (Quelimane Co. v. Stewart Title Guaranty Co.

(1998) 19 Cal.4th 26, 46.) The court reiterated “that fraud is the only remaining cause of

action in which specific pleading is required.” (Id. at p. 47; see Morgan v. AT&T

Wireless Services, Inc. (2009) 177 Cal.App.4th 1235, 1256 [under the fraudulent business

practices prong of the UCL, actual falsity and reasonable reliance are not required to be

pleaded with specificity].) In comparison, the Second District stated “[a] plaintiff

alleging unfair business practices under [the Unfair Practices Act] must state with

reasonable particularity the facts supporting the statutory elements of the violation.”

(Khoury v. Maly’s of California, Inc. (1993) 14 Cal.App.4th 612, 619.) Based on the

foregoing, we conclude causes of action under the CLRA and UCL must be stated with

reasonable particularity, which is a more lenient pleading standard than is applied to

common law fraud claims.

2. Sufficiency of Gutierrez’s Allegations

We conclude Gutierrez’s allegations are sufficient to establish CarMax had a duty

to disclose the existence of the recall and the fact that the Hyundai’s stop lamp switch had

not been replaced in accordance with the recall.

First, the complaint alleged (1) the recall related to the stop lamp switch, which

was a critical safety-related component of the vehicle’s braking system, and (2) it was

unsafe to operate a vehicle with a defective stop lamp switch. Also, the name of the part,

“stop lamp switch,” reasonably supports the inference that the malfunctioning of the part

will affect the operation of the vehicles brake lights, which are an important safety-

32.

related feature that alerts other drivers the vehicle is braking and thereby reduces the risk

of a rear end collision. (See 49 C.F.R. § 571.108 [federal motor vehicle safety standards

use the term “stop lamp”].) Therefore, the complaint adequately alleges facts about the

stop lamp switch that implicate safety concerns and would be important to the reasonable

consumer considering whether to buy the Hyundai.

18

Accordingly, we conclude the

factual allegation are sufficient to establish the “materiality” of the facts about the recall

and the vehicle that CarMax did not disclose.

Of course, materiality usually is a question of fact. (Engalla v. Permanente

Medical Group, Inc. (1997) 15 Cal.4th 951, 977.) In certain cases, a court can determine

the factual misrepresentation or omission is so obviously unimportant that the jury could

not reasonably find that a reasonable person would have been influence by it. (Ibid.) At

the pleading stage of this case, we cannot determine as a matter of law that the

nondisclosure of the recall information was obviously unimportant. Therefore, we cannot

uphold the order sustaining the demurrer to the CLRA claim on the ground that the

materiality of the omitted fact was inadequately pleaded.

Second, the complaint alleged facts relevant to establishing a duty to disclose the

material information by alleging the stop lamp switch was “a critical safety related

component of the Hyundai braking system” and sales staff advised Gutierrez “that the

Hyundai was in excellent condition since it passed a rigorous 125-point quality

inspection.” A copy of the inspection certificate was attached to the complaint and it

listed specific points relating to both the vehicle’s brake system and its lighting system,

with “Brake lights” one of the specific 125 points inspected. The complaint also alleged



18 These facts are “intrinsic” to the particular vehicle sold to Gutierrez and do not

relate to “extrinsic” matters. (See Wonnell, The Structure of a General Theory of

Nondisclosure (1991) 41 Case W. Res. L.Rev. 329, 332 [the law tends to take a stricter

position regarding the nondisclosure of intrinsic facts, which pertain to the item being

sold and not the general environment affecting the economic value of the item].)

33.

CarMax engaged in misleading business practices by representing the vehicle passed a

rigorous 125-point quality inspection, but not disclosing the vehicle was subject to a

safety recall. A duty to disclose cannot exist if the defendant was not aware of the facts

that were not disclosed. Here, the complaint did not specifically allege CarMax knew of

the safety recall and that the stop lamp switch on the Hyundai had not been replaced in

accordance with the recall notice. However, we conclude the facts alleged are sufficient

to reasonably infer CarMax’s knowledge. For instance, the complaint alleges the only

reason CarMax did not disclose the recall or have the recall work performed was CarMax

deemed making money more important than protecting its customers from dangers

relating to serious safety recalls. As the lack of knowledge would be a separate reason

for not disclosing the recall, it is reasonable to infer from this allegation that CarMax

actually knew of the recall. (See Code Civ. Proc., § 452 [construction of pleadings].)

We conclude these allegations are sufficient to plead the existence of a duty to

disclose information about the safety recall on the ground CarMax made partial

representations about the vehicle’s braking and lighting systems and those representations

were likely to mislead for want of communication of the facts about the recall. (See

Klein, supra, 202 Cal.App.4th at p. 1382; Civ. Code, § 1710, subd. 3.)

C. “Any Damage” Element of a CLRA Claim

1. Legal Principles

The CLRA authorizes any consumer “who suffers any damage” because of a

unlawful method, act or practice to bring an action for various forms of relief, including

(1) actual damages, (2) an order enjoining the methods, acts, or practices, (3) restitution

of property, (4) punitive damages, and (5) any other relief the court deems proper. (Civ.

Code, § 1780, subd. (a).) “This statutory language makes clear that, to obtain relief under

the CLRA, [Gutierrez] must have suffered some damage caused by a practice deemed

34.

unlawful under Civil Code section 1770.” (Steroid Hormone Product Cases (2010) 181

Cal.App.4th 145, 156.)

Accordingly, a plaintiff pursuing a CLRA action must plead facts showing he or

she suffered “any damage” as that phrase is used in Civil Code section 1780, subdivision

(a), which is not synonymous with “actual damages” and may encompass harms other

than pecuniary damages. (Meyer v. Sprint Spectrum L.P. (2009) 45 Cal.4th 634, 640

(Meyer).)19

In Steroid Hormone Product Cases, a plaintiff “alleged in this case that, in

reliance on [defendant’s] deceptive conduct, he bought an illegal product he would not

have bought had he known it was illegal. He does not seek actual damages, but instead

seeks restitution.” (Steroid Hormone Product Cases, supra, 181 Cal.App.4th at p. 156.)

The court concluded (1) the plaintiff had stated a claim under the CLRA, (2) he could

represent the class, and (3) the trial court erred in denying class certification of the CLRA

claim. (Id. at p. 157.)

2. Gutierrez’s Allegations

Paragraph 13 of the complaint alleges that if Gutierrez “had known the true

condition, including recall history, of the Hyundai before the purchase, she would not

have purchased it.” Gutierrez incorporated this paragraph into her eighth cause of action,

which alleged violations of the CLRA. Paragraph 77 of the complaint, which is part of

the CLRA cause of action, alleges Gutierrez is entitled to various forms of relief,

including an injunction and “restitution of property.”



19 CarMax interprets Meyer to mean Gutierrez must “allege facts showing that she

suffered the requisite actual damage.” We disagree with this interpretation and read Civil

Code section 1780 and Meyer as requiring an allegation of “any damage,” which is a

broad category that includes “actual damage.” (Meyer, supra, 45 Cal.4th at p. 640; see

Civ. Code, § 1780, subd. (a)(1) [actual damages].)

35.

3. Application of Legal Principles to Facts Alleged

Gutierrez’s allegations that she would not have purchased the Hyundai if she had

known its recall history and her request for restitution adequately alleged that she

suffered “any damage” as that phrase is used in Civil Code section 1780, subdivision (a).

The same type of damage was alleged by the plaintiff in Steroid Hormone Product Cases,

and that plaintiff was granted class certification of a CLRA claim. (Steroid Hormone

Product Cases, supra, 181 Cal.App.4th at pp. 156-157.) In other words, we interpret

Steroid Hormone Product Cases to mean an allegation that the plaintiff would not have

purchased the goods if he or she had known the undisclosed information, is sufficient to

allege the purchaser suffered “any damage.” Therefore, we conclude Gutierrez

adequately alleged the any-damage element of a CLRA claim.

CarMax contends we are required to find as a matter of law that the Gutierrez did

not experience “any damage” for purposes of Civil Code section 1780, subdivision (a)

because the potentially defective part (i.e., the stop lamp switch on the Hyundai) was

replaced without charge. CarMax, however, has cited no authority for the principle that

replacement negates “any damage” that a consumer might have experienced and thereby

precludes the consumer from pursuing an injunction or restitution under Civil Code

section 1780, subdivision (a)(2) & (3).

20

Furthermore, based on the timing of the

replacement of the Hyundai’s recalled stop lamp switch, it does not logically preclude

Gutierrez from alleging and proving that the purchase would not have been made if the

undisclosed information had been made known before the sale.



20 For instance, CarMax did not argue Civil Code section 1782, subdivision (b)

should be interpreted in this manner. That subdivision states: “Except as provided in

subdivision (c), no action for damages may be maintained under Section 1780 if an

appropriate correction, repair, replacement, or other remedy is given, or agreed to be

given within a reasonable time, to the consumer within 30 days after receipt of the

notice” of the alleged violations of Civil Code section 1770. (Italics added.)

36.

In addition, the limiting language in CarMax’s purchase agreement and warranty

document does not preclude Gutierrez’s CLRA cause of action. The CLRA expressly

declares that “[a]ny waiver by a consumer” of the CLRA’s provisions “is contrary to

public policy and shall be unenforceable and void.” (Civ. Code, § 1751.) Accordingly,

we conclude the limitations in CarMax’s warranty do not operate as a waiver of

Gutierrez’s right to obtain restitution if she proves CarMax engaged in an unlawful

practice.

IV. UNFAIR COMPETITION LAW

A. Overview

The UCL prohibits, and provides civil remedies for, unfair competition. (Kwikset

Corp. v. Superior Court (2011) 51 Cal.4th 310, 320 (Kwikset).) “[U]nfair competition”

includes “any unlawful, unfair or fraudulent business act or practice.” (Bus. & Prof.

Code, § 17200.) The purpose of the UCL is to protect both consumers and competitors

by promoting fair competition in commercial markets for goods and services. (McGill v.

Citibank, N.A. (2017) 2 Cal.5th 945, 954 (McGill).)

“Actions for relief pursuant to” the UCL shall be prosecuted exclusively by

designated government officials “or by a person who has suffered injury in fact and has

lost money or property as a result of the unfair competition.” (Bus. & Prof. Code, §

17204.) The “injury in fact” and causation requirements were added by the voters in

2004 when they passed Proposition 64. (McGill, supra, 2 Cal.5th at p. 958.)

As to the relief that can be obtained in an “[a]ction for relief” pursuant to the UCL,

injunctions are the primary form of relief available under the UCL to protect consumers

from unfair business practices and restitution is a type of ancillary relief. (Kwikset,

supra, 51 Cal.4th at p. 337.) Thus, the remedies available in a UCL action generally are

limited to injunctive relief and restitution. (Veera v. Banana Republic, LLC (2016) 6

Cal.App.5th 907, 915.)

37.

The UCL’s definition of unfair competition uses the terms “unlawful, unfair or

fraudulent” in the disjunctive. (Bus. & Prof. Code, § 17200.) Consequently, the

definition establishes three varieties of unfair competition. (Cel-Tech Communications,

Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163, 180.) By prescribing

“any unlawful” business practice, the UCL borrows violations of other laws and treats

them as unlawful practices that the UCL makes independently actionable. (Ibid.)

Virtually any statute or regulation (federal or state) can serve as a predicate for a UCL

unlawful practice cause of action. (Klein, supra, 202 Cal.App.4th at p. 1383.)

Consequently, the alleged violations of Civil Code section 1770, subdivision (a)(5), (7)

and (9), which are provisions of the CLRA, are sufficient to satisfy the unlawful practice

variety of unfair competition under the UCL. (See Hale v. Sharp Healthcare (2010) 183

Cal.App.4th 1373, 1383.) In other words, a violation of the CLRA can serve as the

predicate for a UCL cause of action.

B. Gutierrez Has Stated a UCL Claim

CarMax does not dispute the legal conclusion that a CLRA violation can serve as

the predicate for a UCL cause of action. Instead, CarMax appears to accept this

conclusion, arguing Gutierrez’s UCL claim “is substantively dependent upon the CLRA

claim” and, therefore, “fails because the CLRA claim[] fails on the merits.” We reject

this argument because Gutierrez’s CLRA claim did not fail on its merits. Therefore, we

conclude Gutierrez has stated a cause of action for an unlawful practice that is actionable

under the UCL because (1) she has alleged facts sufficient to state a cause of action for a

violation of the CLRA and (2) restitution is a type of relief available under both statutes.

The judgment is reversed. The trial court is directed to vacate its order sustaining the demurrer without leave to amend and to enter a new order overruling the demurrer as to the seventh (UCL) and eighth (CLRA) causes of action. Gutierrez shall recover her costs on appeal.