Judge Bruce G. Iwasaki, Case 21STCV31368 2022-08-03 Tentative Ruling

Tentative Ruling: The Motion for Judgment on the Pleadings is granted, with 20 days leave to amend.

This is an action under the Song-Beverly Act in which Juan Arellanes Fausto and Patricia Diego (Plaintiffs) allege defects of their 2016 Honda Pilot. The Complaint asserts claims for breach of express and implied warranty, and fraudulent inducement by concealment.

The factual basis of the Complaint is a defective transmission. Plaintiffs argue that the transmissions in model years 2014-2019 Honda Pilot suffered a defect that caused it to deteriorate faster than normal. (Complaint, ¶ 18.) The defect caused sudden and violent jerking, along with ineffectual acceleration.

Plaintiffs allege that Honda knew about the defects as early as 2012 and did not disclose the defect when they purchased the vehicle on May 28, 2020. (Id. at ¶ 28.) Instead, Honda merely issued a series of technical service bulletins to address the issues. (Id. at ¶¶ 29-35.) The Complaint summarizes a list of consumer complaints that were transmitted to the National Highway Traffic Safety Administration as to the transmission defect. (Id. at ¶¶ 39(a)-(e).)

As to the Subject Vehicle, the Complaint alleged that Plaintiffs delivered the vehicle for repair on four occasions due to jerking, smoke form the exhaust, and emissions problems. (Complaint, ¶¶ 55-58.)

Honda moves for judgment on the pleadings on the third cause of action for fraudulent concealment. It argues that the Complaint fails to state sufficient facts, the claim is barred by the economic loss rule, and is preempted by federal law.

Plaintiffs oppose. They argue that Honda had superior knowledge of the defective transmission from its own records, the economic loss rule does not apply to fraudulent inducement cases, and that preemption is inapplicable.

In its Reply, Honda reiterates that the Complaint is vague because there was no transaction between Honda and Plaintiffs, the dealership is not the agent of Honda, the exception to the economic loss rule for affirmative misrepresentations does not apply, and the fraud claim is preempted.

Because the claim for fraudulent concealment relies on general advertising and not the transaction for the vehicle Plaintiffs acquired, and because they allege only economic damages, the demurrer to the third cause of action is sustained.

“A motion for judgment on the pleadings may be made at any time either prior to the trial or at the trial itself. [Citation.]” (Ion Equipment Corp. v. Nelson (1980) 110 Cal.App.3d 868, 877.) A motion for judgment on the pleadings “may be made on the same ground as those supporting a general demurrer, i.e., that the pleading at issue fails to state facts sufficient to constitute a legally cognizable claim or defense.” (Stoops v. Abbassi (2002) 100 Cal.App.4th 644, 650.)

The standard for granting “ ‘a motion for judgment on the pleadings is essentially the same as that applicable to a general demurrer[;] that is, under the state of the pleadings, together with matters that may be judicially noticed, it appears that a party is entitled to judgment as a matter of law.’ ” (Bezirdjian v. O'Reilly (2010) 183 Cal.App.4th 316, 321-322.) “All allegations in the complaint and matters upon which judicial notice may be taken are assumed to be true.” (Rippon v. Bowen (2008) 160 Cal.App.4th 1308, 1313.)

Defendant contends that the Complaint does not contain sufficient facts because there are no allegations of a duty of disclosure, there is no transactional relationship between parties to give rise to fraud, and there are no allegations that Defendant had exclusive knowledge of or actively concealed material facts. In addition, Honda argues that the fraud claim is barred by the economic loss rule bars and is preempted by federal statutes.

The Complaint does not sufficiently plead facts to support fraud by concealment.

“ ‘ [T]he elements of an action for fraud and deceit based on concealment are: (1) the defendant must have concealed or suppressed a material fact, (2) the defendant must have been under a duty to disclose the fact to the plaintiff, (3) the defendant must have intentionally concealed or suppressed the fact with the intent to defraud the plaintiff, (4) the plaintiff must have been unaware of the fact and would not have acted as he did if he had known of the concealed or suppressed fact, and (5) as a result of the concealment or suppression of the fact, the plaintiff must have sustained damage.’ ” (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 748.) Fraud must be pled specifically, not with “general and conclusory allegations.” (Small v. Fritz Companies, Inc. (2003) 30 Cal.4th 167, 184.)

A claim of fraudulent inducement requires a showing that the defendant “did not intend to honor its contractual promises when they were made.” (Food Safety Net Services v. Eco Safe Systems USA (2012) 209 Cal.App.4th 1118, 1131.) Fraudulent intent may be established by circumstance evidence, but there must be “ ‘ “something more than nonperformance . . . to prove the defendant’s intent not to perform his promise.” ’ ” (Ibid.)

Plaintiffs assert that prior to purchasing their vehicle, they “reviewed marketing brochures, viewed television commercials and/or heard radio commercials about the qualities of the 2016 Pilot . . . [and] relied on AMERICAN HONDA’s reputation as an established and experienced auto manufacturer. (Complaint, ¶ 51.) They assert that they “relied on the statements made during the sales process by AMERICAN HONDA’s agents and within the marketing brochures provided.” (Id. at ¶ 52.)

Plaintiffs do not allege that they reviewed marketing brochures and/or heard commercials about the qualities of the Subject Vehicle itself, upon which they relied on in making the decision to purchase. Instead, the allegation is to commercials about the “2016 Pilot” generally.[1] This is too vague and generalized.

Similarly, the allegation that Plaintiffs “relied on” Honda’s reputation is ambiguous and conclusory. While the Complaint asserts that statements were made “during the sales process” by Honda’s agents, Plaintiffs fail to state the contents of those statements. (Complaint, ¶ 52.) There are no specific allegations to show that the Subject Vehicle that Plaintiffs purchased could not contain transmission defects. Rather, Plaintiffs attempt to allege that Honda omitted disclosure of the defect, despite no allegation that Honda knew that the Subject Vehicle itself contained the defect. This is insufficient to satisfy the particularity requirement for fraud claims. (Stansfield v. Starkey (1990) 220 Cal.App.3d 59, 73 [“This particularity requirement necessitates pleading facts which ‘show how, when, where, to whom, and by what means the representations were tendered”].)

Less specificity is required to plead fraud by concealment. (Jones v. ConocoPhillips Co. (2011) 198 Cal.App.4th 1187, 1199.) However, “[i]f a fraud claim is based upon failure to disclose, and ‘the duty to disclose arises from the making of representations that were misleading or false, then those allegations should be described.’ ” (Morgan v. AT&T Wireless Services, Inc. (2009) 177 Cal.App.4th 1235, 1262.) There are no allegations here as to the contents of the marketing brochures and commercials and whether Defendant made affirmative misrepresentations in those advertisements.

Plaintiffs allege that Honda issued a series of Technical Service Bulletins since 2012. (Complaint, ¶¶ 30-35.) But none of these bulletins relate to Honda’s knowledge of the defect at the time of the purchase of the Subject Vehicle. Plaintiffs fail to provide any specific factual allegations to support their claim that Honda knew of the alleged transmission defect and intended to conceal it from Plaintiffs before or at the time the Vehicle was sold. Plaintiffs do not allege that Honda had exclusive knowledge of the defect in the Vehicle at the time Plaintiffs acquired it, or how Honda concealed this fact from them.

In addition, the Complaint does not allege that Defendant had any duty to disclose a material fact. Plaintiffs cite the “ ‘four circumstances in which nondisclosure or concealment may constitute actionable fraud: (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 the defendant actively conceals a material fact from the plaintiff; and (4) when the defendant makes partial representations but also suppresses some material facts.’ ” (LiMandri v. Judkins (1997) 52 Cal.App.4th 326, 336.) However, unless the parties were in a fiduciary relationship, the other three circumstances “presupposes the existence of some other relationship between the plaintiff and defendant in which a duty to disclose can arise.” (Id. at p. 337.)

The Complaint does not allege a fiduciary or “some other relationship between” the parties. Plaintiffs’ reliance on non-binding, federal authorities for the proposition that simply having “superior” knowledge of a defect imposes a duty is unpersuasive. For example, two of the cited cases, Falk v. GMC (N.D. 2007) 496 F.Supp.2d 1088, 1091, and In re Toyota Motor Corp. Unintended Acceleration Marketing, Sales Practices, and Products Liability Litigation (C.D. 2010) 754 F.Supp.2d 1145, 1174, were in the context of a putative class action.

Plaintiffs also argue that a relationship exists because a “manufacturer communicates with consumers through its authorized dealerships.” This argument fails. This is not a products liability action and Plaintiffs failed to name the dealership in their Complaint. Plaintiffs’ reliance on the federal case of Daniel v. Ford Motor Co. (9th Cir. 2015) 806 F.3d 1217, 1227 is misplaced – that case involved summary judgment and the appellate court specifically declined to address the issue of “duty to disclose” because it was not raised in the trial court below. Therefore, the fraud allegations in this Complaint are improper and raised between Honda and “the public at large.” (Bigler-Engler v. Breg, Inc. (2017) 7 Cal.App.5th 276, 312.)

Even assuming Honda had a duty to disclose the defect, the Complaint inadequately alleges that Honda did so with the intent to defraud Plaintiffs. The only allegation is in Paragraph 93 that Honda intended to deceive Plaintiffs “in an effort to sell affected vehicles at maximum price.” There are no specific allegations to support this inference.

Finally, the Complaint also fails to allege any actual damages to Plaintiffs for the alleged fraudulent concealment other than defects to the car covered by the express warranty.

The Court acknowledges that plaintiffs who were deceived by concealment may have difficulty alleging every detail of a defendant’s fraudulent scheme. But the Complaint here is devoid of any details suggesting that Honda breached a duty to disclose with fraudulent intent, as opposed to simply failing to provide the Plaintiffs with a car that worked as promised.

Given that the Complaint is insufficiently pled, the Court only briefly addresses the economic loss rule.

Defendant also contends that Plaintiffs' fraud claims are barred by the “economic loss rule,” which generally “requires a purchaser to recover in contract for purely economic loss due to disappointed expectations, unless he can demonstrate harm above and beyond a broken contractual promise.” (Robinson Helicopter Co., Inc. v. Dana Corp. (2004) 34 Cal.4th 979, 988 (Robinson).) However, “the economic loss rule does not bar [a plaintiff’s] fraud and intentional misrepresentation claims because they were independent of [defendant’s] breach of contract.” (Id. at p. 991.)

Here, Plaintiffs’ harm is economic only because they allege that the damage is to the vehicle with no physical damage to property or personal injury. (See generally Complaint.) Plaintiffs do not claim that the Vehicle’s alleged defects caused any personal injury or damage to property other than the vehicle. (Robinson, supra, 34 Cal.4th at p. 988.) Instead, they allege that the transmission defect “increases risk of crashes” and “a serious safety risk that can lead to accidents, injuries, or even death.” (Complaint, ¶ 20.) This merely constitutes potential, speculative exposure to harm. Therefore, the economic loss rule bars any recovery.

Plaintiffs argue that the economic loss rule does not bar recovery under a theory of fraudulent inducement to enter into the contract and that Robinson specifically upheld that exception. However, the holding is not as broad as Plaintiffs believe.

The California Supreme Court in Robinson cautioned that the exception was “narrow in scope and limited to a defendant’s affirmative misrepresentations on which a plaintiff relies and which expose a plaintiff to liability for personal damages independent of the plaintiff’s economic loss.” (Robinson, supra, 34 Cal.4th at p. 993, italics added.) The Court declined to extend the scope of the exception to the economic loss rule to include fraud by omission. (Id. at p. 994, fn. 9 [“We only address the Court of Appeal’s application of the economic loss rule to [defendant’s] affirmative misrepresentation and do not decide any other issues”]; see also Rattagan v. Uber Technologies (9th Cir. 2021) 19 F.4th 1188, 1192 [“California Courts of Appeal have not addressed whether this Robinson exception applies to fraudulent concealment”].) Thus, the economic loss rule is an independent ground to grant the motion.

As the motion is granted on the above grounds, the Court does not reach the merits of the preemption argument.

The Court grants the of the Motion for Judgment on the Pleadings on the third cause of action for fraudulent inducement by omission, with 20 days leave to amend.

[1] Plaintiffs argue that they do not need to produce the names of those who authored the advertisements because that is exclusively within Honda’s control. However, the contents of the advertisements upon which Plaintiffs supposedly relied upon in making their purchase decision is within Plaintiffs’ control since that is based on personal observation.

Judge Bruce G. Iwasaki

Department 58