District Court (Cal.) Says Failure to Disclose that Vehicle’s Destination Charge Also Includes Some Profit Was Not Material and Did Not Violate the UCL

In Romoff v. GM LLC, No. 21-cv-00938-WQH-BGS, 2021 U.S. Dist. LEXIS 231369, at *9 (S.D. Cal. Dec. 2, 2021), Judge Hayes dismissed a complaint alleging that a vehicle manufacturer’s disclosure of a destination charge was deceptive because it did not also disclose that such charge contained a profit element.

Plaintiffs allege that by calling the charge a “Destination Charge,” GM affirmatively “misleads reasonable consumers into believing its ‘Destination Charge’ reflects the actual cost of shipping its vehicles to their ‘destination,’ not the cost of shipping its vehicles plus profit.” (ECF No. 1 ¶ 26). The CLRA and the fraudulent prong of the UCL proscribe conduct that is “likely to deceive” a “reasonable consumer.” Williams v. Gerber Prods. Co., 552 F.3d 934, 938 (9th Cir. 2008). “[T]he reasonable consumer standard requires a probability ‘that a significant portion of the general consuming public or of targeted consumers, acting reasonably in the circumstances, could be misled.'” Ebner v. Fresh, Inc., 838 F.3d 958, 965 (9th Cir. 2016). . . . The Complaint alleges that the price stickers on vehicles sold by GM “break out [a] Destination Charge separate and apart from the base MSRP and include it as an add-on.” (ECF No. 1 ¶ 27). The Complaint alleges that this disclosure is mandated by the Federal Automobile Information Disclosure Act (“AIDA”), which requires manufacturers to list “the amount charged to the dealer for the transportation of the car to the place of delivery.” (Id. ¶ 32). The Complaint alleges that “[a] vehicle’s destination fee is generally understood in the automotive industry to reflect the manufacturer’s average cost of delivering one of its vehicles to a dealership.” (Id. ¶ 2). The Complaint alleges that “[l]ine items are intended to inform consumers of the reason they are being charged” and “[c]onsumers do not generally expect line-item costs to include hidden profit.” (Id. ¶ 32). The Complaint alleges that GM’s “‘Destination Charge’ has little to do with getting the vehicle to its intended destination” and instead is used as a “vessel for profit.” (Id. ¶¶ 27-28). The Complaint alleges that by labelling the charge a “Destination Charge,” GM “misleads reasonable consumers into believing its ‘Destination Charge’ reflects the actual cost of shipping its vehicles to their ‘destination,’ not the cost of shipping its vehicles plus profit.” (Id. ¶ 26). The word “charge”—as used in the Complaint—is defined as “the price demanded for something.” Charge, Merriam Webster, https://www.merriam-webster.com/dictionary/charge (last accessed Nov. 17, 2021); see also Moore, 966 F.3d at 1018 (discussing the dictionary definition of a term in analyzing whether a label was misleading to a reasonable consumer under California statutes); Hassler, 644 F. Supp. 2d at 516 (discussing dictionary definition in analysis of NJCFA claim). Reasonable or average consumers would not be surprised to learn that the price of goods often includes profit for the seller. The term “Destination Charge” does not reasonably imply an absence of profit. See Becerra v. Dr Pepper/Seven Up, Inc., 945 F.3d 1225, 1230 (9th Cir. 2019) (rejecting an argument that a term in a label was misleading “[j]ust because some consumers may unreasonably interpret the term differently”).  As alleged in the Complaint, the amount and existence of the Destination Charge and the total listed sticker price of GM’s vehicles were fully disclosed. Plaintiffs received the vehicles they were promised at the prices they agreed upon. GM’s alleged disclosure of the Destination Charge complied with the AIDA requirement that manufacturers divulge “the amount charged, if any, to such dealer for the transportation of such automobile to the location at which it is delivered to such dealer.” 15 U.S.C. § 1232(f)(3). The statutory language contained in the AIDA—requiring disclosure of “the amount charged” to the dealer—no more suggests the absence of profit than the term “Destination Charge” itself. In summary, the allegations concerning the context of the vehicles’ sales do not alter the common-sense understanding that a charge can include profit. See Ebner, 838 F.3d at 966 (affirming dismissal of UCL and CLRA claims because “[a]part from the accurate [ ] label, there are no other words, pictures, or diagrams adorning the packaging . . . from which any inference could be drawn or on which any reasonable belief could be based”). The Court concludes that the Complaint fails to allege facts to support an inference that Defendant made any affirmative misrepresentation.  In addition to alleging that the term “Destination Charge” is an affirmative misrepresentation, Plaintiffs also plead an omission theory of liability—that GM had a duty to disclose the existence of profit in the Destination Charge and failed to do so. To be actionable under the CLRA, UCL, or NJCFA, the omitted fact must be material.  . . .The Court has concluded that a reasonable or average consumer would not expect the Destination Charge to exclude profit. As a result, additional disclosure of the fact that the charge includes profit would not affect a reasonable or average consumer’s understanding of the composition of the Destination Charge. GM’s omission of additional information regarding the Destination Charge is not material.