Judge: Armen Tamzarian, Case: 24STCV26360, Date: 2025-01-09 Tentative Ruling
Case Number: 24STCV26360 Hearing Date: January 9, 2025 Dept: 52
Defendant American Honda Motor Co.’s Demurrer
and Motion to Strike Portions of Complaint
Demurrer
Defendant American Honda Motor Co., Inc. demurs to the complaint by
plaintiff Flosieta Davis.
Statutes
of Limitations
Defendant argues all causes of
action are untimely. A
demurrer should be sustained where “the complaint shows on its face that the
statute [of limitations] bars the action.”
(E-Fab, Inc. v. Accountants, Inc. Services (2007) 153
Cal.App.4th 1308, 1315.) “[T]he
defect must clearly and affirmatively appear on the face of the complaint; it
is not enough that the complaint shows merely that the action may be
barred.” (Id. at p. 1316.) The court must determine which statute of
limitations applies and when the claim accrued.
(Ibid.)
A. 1st,
2nd, & 3rd Causes of Action Under Song-Beverly Act
Defendant contends the four-year statute of
limitations under Commercial Code section 2725 bars plaintiff’s first three
causes of action under the Song-Beverly Act.
Commercial Code section 2725 provides: “(1) An action for breach of
any contract for sale must be commenced within four years after the cause of
action has accrued. By the original
agreement the parties may reduce the period of limitation to not less than one
year but may not extend it. [¶] (2) A
cause of action accrues when the breach occurs, regardless of the aggrieved
party’s lack of knowledge of the breach. A breach of warranty occurs when tender of
delivery is made, except that where a warranty explicitly extends to future
performance of the goods and discovery of the breach must await the time of
such performance the cause of action accrues when the breach is or should have
been discovered.”
Defendant argues the final sentence of section
2725, subdivision (2) does not apply. It
does. Defendant contends, “The warranty
provides repairs, not guaranteed future performance.” (Reply, p. 3.) The Court of Appeal has held the opposite: “A
promise to repair defects that occur during a future period is the very
definition of express warranty of future performance” under the Song-Beverly
Act. (Krieger v. Nick Alexander
Imports, Inc. (1991) 234 Cal.App.3d 205, 217.) “Civil Code section 1791.2 defines an express
warranty under the Act to include ‘[a] written statement arising out of a sale
to the consumer of a consumer good pursuant to which the manufacturer,
distributor, or retailer undertakes to preserve or maintain the utility or
performance of the consumer good or provide compensation if there is a failure
in the utility or performance; ...’ The
promise to repair in this case is plainly within this definition.” (Ibid.)
Plaintiff alleges she did not discover the breach
until “shortly before filing this Complaint as the Subject Vehicle continued to
exhibit symptoms of defects following Defendant's unsuccessful attempts to
repair them.” (Comp., ¶ 23.) She therefore filed the complaint less than
four years after these causes of action accrued under Commercial Code section
2725, subdivision (2).
B. 4th
Cause of Action for Breach of Implied Warranty of Merchantability
The face of the complaint does not
show that this cause of action is untimely.
Again, the delayed accrual rule under Commercial Code section 2725,
subdivision (2) applies. That provision
of the Commercial Code is not viewed in isolation because “in the duration
provision in the Song–Beverly Act, ‘[which gives] the implied warranty a
limited prospective existence beyond the time of delivery, the Legislature
created the possibility that the implied warranty could be breached after
delivery.’ ” (Jones v. Credit Auto
Center, Inc. (2015) 237 Cal.App.4th Supp. 1, 10, quoting Mexia v. Rinker Boat Co., Inc. (2009) 174 Cal.App.4th 1297,
1309.) “By providing a duration period [up to one year] for the implied warranty
of merchantability,” the Song-Beverly Act “contemplates that a breach may occur
either when the goods are first purchased, or afterwards, when a latent defect
is discovered by the buyer.” (Id. at
p. 9 [applying section on used goods, relying on authority about section on new
goods].)
Plaintiff alleges she entered the warranty contract
with defendant on August 1, 2020. (Comp.,
¶ 6.) As discussed above, plaintiff
alleges she only discovered the breach “shortly before filing this
Complaint.” (¶ 23.) Under the Song-Beverly Act, the implied
warranty of merchantability extended for one year from purchase, until August
1, 2021. (Civ. Code, § 1791.1, subd.
(c).) The breach therefore could have
occurred as late as August 1, 2021.
Plaintiff had four years from that date to file the complaint. Plaintiff filed this action on October 10,
2024, within that period.
C. 5th
Cause of Action for Fraudulent Concealment
The face of the
complaint does not show that this cause of action is untimely. Fraud has a three-year statute of
limitations, which begins running when the plaintiff discovers the facts
constituting the fraud. (Code Civ.
Proc., § 338, subd. (d).) This provision
“effectively codifies the delayed discovery rule in connection with actions for
fraud, providing that a cause of action for fraud ‘is not to be deemed to have
accrued until the discovery, by the aggrieved party, of the facts constituting
the fraud or mistake.’ ” (Brandon G. v. Gray (2003) 111
Cal.App.4th 29, 35.)
To rely on the
discovery rule, the plaintiff “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.) “When a
plaintiff reasonably should have discovered facts for purposes of the accrual
of a cause of action or application of the delayed discovery rule is generally
a question of fact, properly decided as a matter of law only if… the allegations
in the complaint… can support only one reasonable conclusion.” (Stella v. Asset Management Consultants, Inc.
(2017) 8 Cal.App.5th 181, 193.)
Plaintiff adequately alleges the necessary
facts. She alleges she “discovered
Defendant’s wrongful conduct alleged herein shortly before filing this
Complaint as the Subject Vehicle continued to exhibit symptoms of defects
following Defendant’s unsuccessful attempts to repair them.” (Comp., ¶ 23.) She alleges she “did not discover and could
not have discovered this defect through reasonable diligence” because defendant
“continues to conceal” that there is “no effective fix” for the allegedly
defective sensing system. (¶ 56.) She further alleges defendant “continues to
conceal the fact that the software updates and replacement components it
provides in a false attempt to repair the defect are equally defective.” (Ibid.) Based on these allegations, the court cannot conclude that, as a
matter of law, plaintiff should have discovered the defect more than three
years before filing this action. The complaint’s
allegations support a reasonable conclusion that plaintiff could not have
discovered the defect earlier.
Other
Arguments on 5th Cause of Action for Fraudulent Concealment
A.
Sufficiency of Allegations
Plaintiff alleges sufficient facts for
this cause of action. Fraud by
concealment requires that: (1) defendant omitted or concealed a material fact;
(2) defendant had a duty to disclose the fact to plaintiff; (3) defendant intentionally
omitted or concealed the fact with intent to defraud plaintiff; (4) plaintiff
must have been unaware of the fact and would have acted otherwise if he had
known of the concealed fact; and (5) the omission caused damages. (Boschma v. Home Loan Center, Inc.
(2011) 198 Cal.App.4th 230, 248.)
First,
plaintiff specifically alleges defendant omitted or concealed a material fact:
the “sensing defect” in 2020 Honda Accord vehicles, which impacts the
“driver-assisting safety system.”
(Comp., ¶¶ 45-47.) Plaintiff
alleges facts showing the omission was material. Facts regarding unreasonable safety risks are material. (See Daugherty
v. American Honda Motor Co., Inc. (2006) 144 Cal.App.4th 824, 835-836;
Falk v. General Motors Corp. (N.D. Cal. 2007) 496 F.Supp.2d 1088, 1096.) Plaintiff alleges, “As a result of the
Sensing Defect, HONDA Vehicles brake abruptly even though there is nothing
around that risks a collision, warning lights display without explanation,
brakes deploy seemingly randomly, and parts of the system like adaptive cruise
control malfunction. These malfunctions
pose a safety risk because the vehicle may abruptly and without warning halt in
traffic, and trailing vehicles have to slam on the brakes or swerve dangerously
out of their lanes to avoid a crash. Additionally,
the speed of the vehicle may abruptly change and warnings may distract the
driver. All of these malfunctions result
in an increased risk of accident, injury, and liability to third parties.” (Comp., ¶ 47.) The court cannot conclude that, as a matter
of law, these symptoms do not pose unreasonable safety risks.
Second, plaintiff alleges sufficient facts
showing defendant had a duty to disclose.
The duty to disclose does not require an affirmative misrepresentation
or a direct transaction. (Heliotis v. Schuman (1986) 181
Cal.App.3d 646, 651.) A defendant can be
liable for fraud by omission “when the defendant had exclusive knowledge of
material facts not known to the plaintiff.”
(Ibid.; accord LiMandri v. Judkins (1997) 52 Cal.App.4th
326, 336.) “[A] vendor has a duty to disclose material
facts not only to the immediate purchasers, but also to subsequent
purchasers when the vendor has reason to expect that the item will be
resold.” (OCM Principal Opportunities
Fund, L.P. v. CIBC World Markets Corp. (2007) 157 Cal.App.4th 835, 859;
accord Dhital v. Nissan North America, Inc. (2022) 84 Cal.App.5th
828, 844 (Dhital), review granted Feb. 1, 2023, S277568, review dism. Dec. 18, 2024 [holding duty to disclose where
plaintiffs alleged “they bought
the car from a Nissan dealership, that Nissan backed the car with an express
warranty, and that Nissan’s authorized dealerships are its agents for purposes
of the sale of Nissan vehicles to consumers”].)
Plaintiff alleges defendant “acquired its
knowledge of the Sensing Defect and its potential consequences prior to
Plaintiff acquiring the Vehicle, through sources not available to consumers
such as Plaintiff, including but not limited to pre-production testing data,
early consumer complaints about the Sensing Defect made directly to HONDA and
its network of dealers, aggregate warranty data compiled from HONDA’s network
of dealers, testing conducted by HONDA in response to these complaints, as well
as warranty repair and part replacements data received by HONDA from HONDA’s
network of dealers.” (Comp., ¶
62.a.) “HONDA was in a superior position
from various internal sources to know (or should have known) the true state of
facts about the material defects of the sensing systems contained in HONDA
Vehicles.” (¶ 62.b.) “Plaintiff could not reasonably have been
expected to learn or discover of the Vehicle’s Sensing Defect and its potential
consequences until well after Plaintiff purchased the Vehicle.” (¶ 63.b.)
These allegations suffice to show defendant owed a duty to disclose due
to its exclusive knowledge of a safety defect.
Defendant’s
reliance on Bigler-Engler v. Breg,
Inc. (2017) 7 Cal.App.5th
276 (Bigler-Engler) is misplaced.
There, the court held there was no “relationship … sufficient to give
rise to a duty to disclose” where, among other things, the evidence did “not
show that [defendant] directly advertised its products to consumers … or that
it derived any monetary benefit directly from [plaintiff’s] individual rental
of the” product. (Id. at p. 314.) Here, plaintiff alleges defendant “advertised
… 2020 Honda Accord vehicles” (Comp., ¶ 45) and plaintiff “considered
Defendant’s advertisement [and] other marketing materials concerning Honda
vehicles prior to purchasing the Subject Vehicle” (¶ 58).
Moreover, the complaint permits the reasonable inference that defendant
derived monetary benefits from plaintiff’s purchase of the product. In Bigler-Engler, a medical group
“obtained the” product from the defendant manufacturer “several years before”
plaintiff used it, and the medical group “maintained the device itself for
rental to its patients.” (7 Cal.App.5th
at p. 314.) Those facts may be analogous
to a plaintiff who rents a Honda from a rental company, but not to one who
purchases a new Honda from a dealership. Defendant’s business model relies on
distributing vehicles to dealerships, who then lease or sell them to
consumers. (See Bader v. Johnson
& Johnson (2022) 86 Cal.App.5th 1094, 1132 [distinguishing Bigler-Enger
for reasons including “evidence showing that (defendant) was involved in retail
sales … to consumers and profited therefrom”].)
Third,
plaintiff sufficiently alleges intent to defraud. “[T]he only intent by a defendant necessary
to prove a case of fraud is the intent to induce reliance. Moreover,
liability is affixed not only where the plaintiff's reliance is intended by
the defendant but also where it is reasonably expected to
occur.” (Lovejoy v. AT&T Corp. (2001)
92 Cal.App.4th 85, 93.) “It may be
inferred that [defendant] concealed [a material fact] with fraudulent intent,
for the purpose of making a profit; it may also be inferred that plaintiff, who
was unaware of the [fact], would have acted differently had he known of the
suppressed fact.” (Id. p. 96.)
The
complaint alleges defendant concealed a safety defect in the 2020 Honda Accord. Defendant reasonably would have expected
potential purchasers to rely on its nondisclosure of the alleged defect. The complaint alleges sufficient facts to
infer defendant concealed the defect for the purpose of profit.
Fourth,
plaintiff alleges she relied on defendant’s omission because, had defendant
disclosed the alleged sensing defect, she “would not have purchased the Subject
Vehicle.” (Comp., ¶ 58.)
Finally,
plaintiff alleges she suffered damages resulting from her reliance. She alleges defects, including the “sensing
defects” “manifested themselves” in her vehicle (Comp., ¶ 11), and those
defects “substantially impair the use, value, or safety of the Vehicle” (¶ 12). The price of purchasing a vehicle she would
not have otherwise purchased also may constitute damages for fraudulent
concealment.
B.
Economic Loss Rule
Defendant argues the economic loss
rule bars plaintiff’s cause of action for fraud by concealment. “[U]nder California law, the economic loss
rule does not bar” claims “for fraudulent inducement by concealment. Fraudulent inducement claims fall within
an exception to the economic loss rule recognized by our Supreme Court.” (Dhital, supra, 84
Cal.App.5th at p. 843.) Plaintiff alleges defendant fraudulently
induced the contract by concealing material defects before the purchase. (Comp., ¶¶ 57-59, 64-66.) The economic loss rule therefore does not
apply.
Defendant relies on inapplicable authority about “fraud during the
performance of a contract”, which “identified fraudulent inducement as an
existing exception to the economic loss rule.”
(Dhital, supra, 84 Cal.App.5th at p. 841, citing Robinson
Helicopter Co., Inc. v. Dana Corp. (2004) 34 Cal.4th 979, 989-990.) Similarly, Rattagan v. Uber Technologies,
Inc. (2024) 17 Cal.5th 1 partially extended Robinson’s exception for affirmative fraud to fraud
by omission during performance of a contract.
(Id. at pp. 38-45.) Rattagan acknowledged the
existing rule that the economic loss rule does not apply to fraudulent
inducement of a contract. (Id. at p. 41 [“ ‘fraudulent
inducement of contract … is not a context where the ‘traditional separation of
tort and contract law’ [citations] obtains”, in contrast with “fraudulent
concealment claims based on conduct occurring after the contract has been
formed].) Plaintiff alleges fraudulent
inducement of the contract, not fraudulent concealment in performance during
the contract.
Motion
to Strike
Defendant moves to strike
plaintiff’s prayer for punitive damages.
A motion to strike a prayer for
punitive damages must be granted when punitive damages are unavailable as a
matter of law or where the facts alleged fail to constitute oppression, fraud,
or malice. (Grieves v. Superior Court (1984) 157 Cal.App.3d 159, 164; see
Civ. Code, § 3294(a).)
Plaintiff may
recover punitive damages for fraudulent concealment. She alleges defendant
engaged in malicious or fraudulent conduct sufficient for punitive
damages. As discussed above, the
complaint alleges defendant concealed a dangerous defect in plaintiff’s vehicle. That allegation suffices for despicable
conduct done with a willful and conscious disregard for plaintiff’s
safety. (Civ. Code, § 3294(c)(1).)
Defendant also relies on Civil Code section 3294, subdivision (b),
which provides: “An employer shall not be liable for” punitive damages
“based upon acts of an employee of the employer, unless the employer had
advance knowledge of the unfitness of the employee and employed him or her with
a conscious disregard of the rights or safety of others or 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.” This
provision “limit[s] corporate punitive damage liability to those employees who
exercise substantial independent authority and judgment over decisions that
ultimately determine corporate policy.”
(White v. Ultramar, Inc. (1999) 21 Cal.4th 563, 573.)
Plaintiff meets this standard. She alleges, “All acts of corporate employees
as alleged herein were authorized or ratified by an officer, director, or
managing agent of the corporate employer.”
(Comp., ¶ 49.) Plaintiff also
alleges large-scale corporate activity that one could reasonably infer was committed
or authorized by managing agents. She
alleges that due to testing, complaints, and warranty claims data, defendant
knew of a dangerous defect affecting an entire model of vehicles but, rather
than disclosing it, defendant concealed it and continued to sell dangerous
vehicles. (¶¶ 50-51, 53, 56-63.) The reasonable inference in plaintiff’s
favor is that marketing and distributing an entire line of allegedly defective
vehicles requires acts or ratification by defendant’s officers, directors, or
managing agents.
Disposition
Defendant
American Honda Motor Co., Inc.’s
demurrer is overruled.
Defendant’s motion to strike is denied. Defendant is ordered to answer within 20
days.