Judge: Andrew E. Cooper, Case: 22CHCV01453, Date: 2023-08-30 Tentative Ruling

Counsel wishing to submit on a tentative ruling may inform the clerk or courtroom assisant in North Valley Department F51, 9425 Penfield Ave., Chatsworth, CA 91311, at (818) 407-2251.  Please be aware that unless all parties submit, the matter will still be called for hearing and may be argued by any appearing/non-submitting parties. If the matter is submitted on the court's tentative ruling by all parties, counsel for moving party shall give notice of ruling. This may be done by incorporating verbatim the court's tentative ruling. The tentative ruling may be extracted verbatim by copying and specially pasting, as unformatted text, from the Los Angeles Superior Court’s website, http://www.lasuperiorcourt.org. All hearings on law and motion and other calendar matters are generally NOT transcribed by a court reporter unless one is provided by the party(ies).

Case Number: 22CHCV01453    Hearing Date: August 30, 2023    Dept: F51

DEMURRER WITH MOTION TO STRIKE

Demurrer with Motion to Strike Filed: 6/12/23

MOVING PARTY: Defendant American Honda Motor Company, Inc. (“Defendant”)

RESPONDING PARTY: Plaintiffs Lourdes Barreto; and Franco Barreto (collectively, “Plaintiffs”)

NOTICE: OK 

RELIEF REQUESTED: Defendant demurs to the second cause of action in Plaintiffs’ first amended complaint (“FAC”). Defendant also seeks an order striking Plaintiffs’ prayer for punitive damages.

TENTATIVE RULING: The demurrer is overruled, and the motion to strike is denied. Defendant shall file and serve an answer to Plaintiffs’ FAC within 30 days.

REQUEST FOR JUDICIAL NOTICE: Defendant’s request for judicial notice is granted.

On 6/12/23, Defendant filed the instant demurrer and motion to strike. On 8/18/23, Plaintiffs filed their opposition. On 8/21/23, Defendant filed its reply.

DEMURRER

Meet-and-Confer 

Here, Defendant’s counsel declares that on 6/7/23, he met and conferred telephonically with Plaintiffs’ counsel regarding the issues raised in the instant demurrer and motion to strike, but the parties were unable to come to a resolution. (Decl. of Patrick J. Raue ¶ 3.) Therefore, counsel has satisfied the preliminary meet and confer requirements of Code of Civil Procedure section 430.41, subdivision (a).

Legal Standard 

“A demurrer tests the pleading alone, and not the evidence or facts alleged.” (E-Fab, Inc. v. Accountants, Inc. Servs. (2007) 153 Cal.App.4th 1308, 1315.) As such, the court assumes the truth of the complaint’s properly pleaded or implied factual allegations. (Ibid.) The only issue a demurrer is concerned with is whether the complaint, as it stands, states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747.) 

Here, Defendant¿demurs to Plaintiffs’ second cause of action on the bases that the FAC fails¿to allege facts sufficient to¿state¿a cause of action for fraudulent concealment, and is also uncertain.

A.    Fraudulent Concealment

Plaintiffs’ second cause of action alleges fraudulent concealment against Defendant. “The required elements for fraudulent concealment are (1) concealment or suppression of a material fact; (2) by a defendant with a duty to disclose the fact to the plaintiff; (3) the defendant intended to defraud the plaintiff by intentionally concealing or suppressing the fact; (4) the plaintiff was unaware of the fact and would not have acted as he or she did if he or she had known of the concealed or suppressed fact; and (5) plaintiff sustained damage as a result of the concealment or suppression of the fact.” (Hambrick v. Healthcare Partners Medical Group, Inc. (2015) 238 Cal.App.4th 124, 162.)

1.      Particularity

Fairness requires that allegations of fraud be pled “with particularity” so that the court can weed out nonmeritorious actions before a defendant is required to answer. (Small v. Fritz Companies, Inc. (2003) 30 Cal.4th 167, 184.) The particularity requirement typically necessitates pleading facts that “show how, when, where, to whom, and by what means the representations were tendered.” (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.)

In the FAC, Plaintiffs allege that Defendant had actual knowledge of the transmission defect through prior consumer complaints, and issued a number of service bulletins acknowledging problems with the transmission. (FAC ¶¶ 20–41.) Despite this knowledge, Defendant allegedly “continued to fail to disclose this unresolved safety defect to new and subsequent purchasers and lessees of 9-Speed Transmission -equipped vehicles, including Plaintiff(s). AMERICAN HONDA continues to manufacture and sell AMERICAN HONDA vehicles equipped with the defective 9-Speed Transmissions without any disclosure to consumers about these hidden safety defects.” (Id. at ¶ 46.)

Here, Defendant argues that Plaintiffs fail to meet the particularity requirement for pleading a fraud cause of action because the FAC fails to allege any direct transaction between the parties, Defendant’s intent to defraud Plaintiffs, and the alleged misrepresentation on which Plaintiffs relied. (Dem. 11:12–23.)

Notwithstanding Defendant’s argument, “less specificity should be required of fraud claims when it appears from the nature of the allegations that the defendant must necessarily possess full information concerning the facts of the controversy; even under the strict rules of common law pleading, one of the canons was that less particularity is required when the facts lie more in the knowledge of the opposite party.” (Alfaro v. Community Housing Improvement & Planning Assn., Inc. (2009) 171 Cal.App.4th 1356, 1384 [internal quotations and citations omitted].) In Alfaro, the Court of Appeal found that plaintiffs, home purchasers in a housing development, were sufficiently specific in pleading fraud based on the defendant vendors' alleged nondisclosure of deed restrictions, even though plaintiffs did not allege that the nondisclosure occurred by a certain means or at a certain time or place, because the defendants possessed the records of their dealings with plaintiffs. (Id. at 1385.)

Here, Plaintiffs allege that Defendant has exclusive access to “consumer complaints to the National Highway Traffic Safety Administration (‘NHTSA’), consumer complaints made directly to AMERICAN HONDA and its dealers, testing conducted in response to those complaints, high failure rates and replacement part sales data, and other sources which drove AMERICAN HONDA to issue Technical Service Bulletins acknowledging the transmission’s defect.” (FAC ¶ 16.)

Based on the foregoing, the Court finds that the specificity pleading standard is relaxed based on the facts alleged in the FAC, namely that Defendant possesses the full information concerning the transmission defect. Accordingly, the Court finds that Plaintiffs have sufficiently alleged facts to meet the relaxed pleading standard.

2.      Duty to Disclose

“Fraudulent concealment requires the ‘suppression of a fact, by one who is bound to disclose it.’” (Huy Fong Foods, Inc. v. Underwood Ranches, LP (2021) 66 Cal.App.5th 1112, 1121, quoting Civ. Code § 1710, subd. 3.)  “Although, typically, a duty to disclose arises when a defendant owes a fiduciary duty to a plaintiff …, a duty to disclose may also arise when a defendant possesses or exerts control over material facts not readily available to the plaintiff.” (Jones v. ConocoPhillips Co. (2011) 198 Cal.App.4th 1187, 1199.)

Here, Defendant further argues that Plaintiff does not allege any direct dealings with Defendant, and therefore has not alleged that Defendant had any requisite duty to disclose. (Dem. 1:17–18.) Defendant argues that no duty to disclose exists where, as here, a plaintiff brings its claims against a manufacturer from which it did not directly obtain the product in question. (Id. at 5:18–26, citing Bigler-Engler v. Breg, Inc. (2017) 7 Cal.App.5th 276, 311.)

In Bigler-Engler, the Fourth District Court of Appeal found that the defendant manufacturer of a medical device owed the plaintiff patient no duty to disclose where there was insufficient evidence that the parties transacted in any way. (7 Cal.App.5th at 314.) Here, as Defendant argues, “there is no direct transaction alleged between Plaintiffs and AHM,” thus no transactional relationship exists between the parties. (Dem. 7:24–28.)

The Court, as previously discussed, finds that Plaintiffs have sufficiently alleged that Defendant, as the manufacturer, “always had superior knowledge of the Transmission Defect through sources not available to consumers, including Defendant’s own design expertise, Defendant’s own records of customers’ complaints, dealership repair records, records from the National Highway Traffic Safety Administration (NHTSA), warranty and post-warranty claims, and internal pre-sale durability testing and technical service bulletins (TSBs).” (Pls.’ Opp. 3:17–21.)

Defendant maintains that no duty to disclose arises if there is no direct transaction between the parties wherein the allegedly concealed material facts could be disclosed. (Dem. 7:5–12.) However, as further discussed below, the Court is satisfied that Plaintiffs have alleged that Defendant possesses superior knowledge of the material facts concerning the transmission defect.

In Jones, the Second District Court of Appeal found that the plaintiffs, a deceased worker's family members, sufficiently pleaded that a defendant chemical manufacturer owed a duty to disclose the hazardous nature of a chemical product to the decedent worker, as would support fraudulent concealment, where the plaintiffs alleged that the defendant alone had knowledge of the toxic properties of the product, that it made representations regarding the product that were likely to mislead, and that studies attesting to the product’s toxicity had been published several years before worker began the employment where he was exposed to manufacturer’s product. (198 Cal.App.4th at 1199–1200.) The Jones court mentioned no requirement that the manufacturer and the decedent transacted directly with one another which would presuppose the duty to disclose.

Based on the foregoing, the Court finds that at this demurrer stage, Plaintiffs have alleged facts sufficient to support a finding that Defendant owed Plaintiffs a duty to disclose, as required in a fraudulent concealment cause of action.  However, the Court welcomes argument on this issue at the hearing. 

3.      Statute of Limitations

The statute of limitations for an action for relief on the ground of fraud or mistake is three years, but “is not deemed to have accrued until the discovery, by the aggrieved party, of the facts constituting the fraud or mistake.” (Code Civ. Proc. § 338, subd. (d).) “In order to rely on the discovery rule for delayed accrual of a cause of action, ‘[a] plaintiff whose complaint shows on its face that his claim would be barred without the benefit of the discovery rule must specifically plead facts to show (1) the time and manner of discovery and (2) the inability to have made earlier discovery despite reasonable diligence.’” (Fox v. Ethicon Endo-Surgery, Inc. (2005) 35 Cal.4th 797, 808.)

Here, Defendant argues that Plaintiffs’ allegation that the subject vehicle was delivered to Plaintiffs with serious defects operates as an admission against Plaintiffs’ delayed discovery of such defects. (Dem. 12:9–17.) However, as Plaintiffs observe, they have alleged in the FAC that they “could not have discovered Plaintiffs’ fraud claims prior to June 15, 2022, which is the first time the Transmission Defect manifested itself in the Subject Vehicle.” (Pls.’ Opp. 7:21–23, citing FAC ¶ 73.)

Specifically, Plaintiffs allege that although they presented the subject vehicle at an authorized dealership for repair of issues relating to the transmission defect on numerous occasions, they were told each time that the vehicle was successfully repaired and safe to drive. (FAC ¶¶ 61–64.) Based on the foregoing, the Court finds it sufficient at the demurrer stage that Plaintiffs allege that they reasonably relied on these statements, and did not discover Defendants’ alleged concealment of the defect until 6/15/22. (Id. at ¶ 73.)

2. Uncertainty 

Generally speaking, “demurrers for uncertainty are disfavored and thus are strictly construed because ambiguities can reasonably be clarified under modern rules of discovery. Such demurrers are granted only if the pleading is so incomprehensible that defendant cannot reasonably respond.” (Cal.Jur.3d § 137.) “Where the complaint contains substantive factual allegations sufficiently apprising defendant of the issues it is being asked to meet, a demurrer for uncertainty should be overruled or plaintiff given leave to amend.” (Williams v. Beechnut Nutrition Corp. (2011) 185 Cal.App.3d 135, 139 fn.2.)  

Here, Defendant argues that Plaintiffs’ second cause of action is uncertain pursuant to Code of Civil Procedure section 430.10, subdivision (f) because “the allegations regarding prepurchase disclosures conflict with, and are contradictory to, other pleading allegations” and “there is no contract or direct transaction alleged between AHM and Plaintiffs.” (Dem. 1:22–23, 2:4–5.) In applying the stringent standard for demurrers filed on this ground, the Court finds that the FAC is not “so incomprehensible” that Defendant cannot respond, especially given the extensive analyses it has offered in attacking the pleading.

Based on the foregoing, the demurrer to Plaintiffs’ second cause of action is overruled.

MOTION TO STRIKE

The court may, upon a motion, or at any time in its discretion, and upon terms it deems proper, strike any irrelevant, false, or improper matter inserted in any pleading. (Code Civ. Proc., § 436, subd. (a).) The court may also strike all or any part of any pleading not drawn or filed in conformity with the laws of this state, a court rule, or an order of the court. (Id., § 436, subd. (b).) The grounds for moving to strike must appear on the face of the pleading or by way of judicial notice. (Id., § 437.) Here, Defendant moves to strike Plaintiff’s prayer for punitive damages.

A.    Punitive Damages

Punitive damages may be recovered upon a proper showing of malice, fraud, or oppression by clear and convincing evidence. (Civ. Code § 3294, subd. (a).) “Malice” is defined as conduct intended to cause injury to a person or despicable conduct carried on with a willful and conscious disregard for the rights or safety of others. (Id. at subd. (c); Turman v. Turning Point of Cent. Cal., Inc. (2010) 191 Cal.App.4th 53, 63.) “Oppression” means despicable conduct subjecting a person to cruel and unjust hardship, in conscious disregard of the person’s rights. (Ibid.) “Fraud” is an intentional misrepresentation, deceit, or concealment of a material fact known by defendant, with intent to deprive a person of property, rights or otherwise cause injury. (Ibid.)

Punitive damages must be supported by factual allegations. Conclusory allegations, devoid of any factual assertions, are insufficient to support a conclusion that parties acted with oppression, fraud or malice. (Smith v. Superior Court (1992) 10 Cal.App.4th 1033, 1042; Anschutz Entertainment Group, Inc. v. Snepp (2009) 171 Cal.App.4th 598, 643.)

1.      Particularity

Defendant argues that Plaintiff has failed to allege facts with sufficient particularity as to show Defendant’s “malice, fraud, or oppression by clear and convincing evidence.” (Civ. Code § 3294, subd. (a).) “There are no allegations tied to any claim that give rise to punitive damages in the FAC. Plaintiffs’ pleading is rife with contradictory allegations cobbled together in effort to get over the hump at the pleading stage, but when examined closer, it becomes clear that these allegations do not make sense, nor give rise to punitive damages.” (MTS 8:18–21.)

In opposition, Plaintiffs argue that they sufficiently alleged that Defendant acted with malice, fraud, and oppression through their allegations that (1) the transmission defect may cause serious problems with the vehicle; (2) Defendant had prior knowledge of the defect; (3) Defendant’s sources were not available to consumers; and (4) Defendant nevertheless concealed the defective nature of the vehicle from Plaintiff prior to purchase. (MTS Opp. 5:21–6:21, citing FAC ¶¶ 17–18, 37, 44–46, 48–49, 56–59, 96–103, and 106.)

Based on the foregoing, the Court finds that Plaintiffs have sufficiently alleged facts to support their prayer for punitive damages under the “fraud” prong of Civil Code section 3294. The issue of Defendant’s intent to defraud is a question of fact that the Court declines to address at the demurrer stage. (Beckwith v. Dahl (2012) 205 Cal.App.4th 1039, 1061.)

2.      Corporate Ratification

“An employer shall not be liable for [punitive] damages … based upon acts of an employee of the employer, unless the employer … authorized or ratified the wrongful conduct for which the damages are awarded or was personally guilty of oppression, fraud, or malice. With respect to a corporate employer, the advance knowledge and conscious disregard, authorization, ratification or act of oppression, fraud, or malice must be on the part of an officer, director, or managing agent of the corporation.” (Civ. Code § 3294, subd. (b).)

Here, Defendant argues that “Plaintiffs’ claim for punitive damages against AHM is insufficient as a matter of law because Plaintiffs have not alleged that an officer, director or managing agent of AHM authorized, ratified or personally engaged in any oppressive, malicious or fraudulent conduct, as required by Civil Code section 3294(b).” (MTS 9:16–19.) In opposition, Plaintiffs observe that they “have alleged that ‘all acts of corporate employees as alleged were authorized or ratified by an officer, director, or managing agent of the corporate employer’ (Defendant).” (MTS Opp. 4:23–24, quoting FAC ¶ 7.)

Based on the foregoing, the Court is satisfied at the pleading stage that Plaintiffs have alleged Defendant’s ratification of employee conduct. Accordingly, the motion to strike Plaintiffs’ prayer for punitive damages is denied.

CONCLUSION 

The demurrer is overruled, and the motion to strike is denied. Defendant shall file and serve an answer to Plaintiffs’ FAC within 30 days.