Judge Bruce G. Iwasaki, Case Number: 23STCV06951, Date: 2023-08-31 Tentative Ruling

Tentative Ruling: The Demurrer to the first and second causes of action are sustained with leave to amend, and the demurrer is overruled as to third cause of action. The Motion to Strike is granted.

This is a Song-Beverly action. In June 2021, Plaintiff Mandy Cohen (Plaintiff) purchased a 2021 Chevrolet Bolt EV (Vehicle). On March 30, 2023, Plaintiff sued Defendant General Motors, LLC (GM) alleging three breach of warranty claims under Song-Beverly, and causes of action for fraudulent concealment, negligent misrepresentation and violation of Business and Professions Code section 17200. The Complaint alleges that GM was aware of and concealed a known defect with the Vehicle’s battery (Defective Battery).

Defendant General Motors, LLC (GM) now demurs to the first through third causes of action in the Complaint. Defendant GM also moves to strike the request for punitive damages in the Complaint. Plaintiff Cohen filed an opposition to both the demurrer and the motion to strike.[1]

The Court sustains the demurrer as to the first and second causes of action with leave to amend and overrules as to the third cause of action. The motion to strike is granted.

A demurrer is an objection to a pleading, the grounds for which are apparent from either the face of the complaint or a matter of which the court may take judicial notice. Code Civ. Proc. § 430.30, subd. (a); see also Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) The purpose of a demurrer is to challenge the sufficiency of a pleading “by raising questions of law.” (Postley v. Harvey (1984) 153 Cal.App.3d 280, 286.) “In the construction of a pleading, for the purpose of determining its effect, its allegations must be liberally construed, with a view to substantial justice between the parties.” (Code Civ. Proc. § 452.) The court “ ‘ “treat[s] the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law . . . .” ’ ” (Berkley v. Dowds (2007) 152 Cal.App.4th 518, 525.) In applying these standards, the court liberally construes the complaint to determine whether a cause of action has been stated. (Picton v. Anderson Union High School Dist. (1996) 50 Cal.App.4th 726, 733.)

Defendant GM argues the fraudulent misrepresentation and fraudulent concealment claims contained within the first cause of action fail state a claim.

The elements of intentional misrepresentation “are (1) a misrepresentation, (2) knowledge of falsity, (3) intent to induce reliance, (4) actual and justifiable reliance, and (5) resulting damage.” (Chapman v. Skype Inc. (2013) 220 Cal.App.4th 217, 230–231.)

With respect to the intentional misrepresentation claim, Defendant contends that the Complaint does not identify any affirmative representation made by GM that GM knew to be false when it was made. (Dem., 8:5-9:9.)

In opposition, Plaintiff argues that only a claim for concealment has been alleged—seemingly conceding that no claim for an intentional, affirmative misrepresentation forms the basis for any claim in the Complaint. (Opp. 2:23-6:3.)

The Complaint fails to allege facts sufficient to support fraudulent concealment.

Defendant also argues that the Complaint does not state a claim because Plaintiff has not alleged fraud with the requisite specificity and the allegations are insufficient to demonstrate a duty to disclose.

Defendant contends that the Complaint fails to allege (i) the identity of the individuals at GM who purportedly concealed material facts or made untrue representations about her Vehicle, (ii) their authority to speak and act on behalf of GM, (iii) GM’s knowledge about alleged defects in Plaintiff’s Vehicle at the time of sale, (iv) any interactions with GM before or during the lease of her Vehicle, or (v) GM’s intent to induce reliance by Plaintiff to lease the specific Vehicle at issue. (Dem., 9:25-10:2.)

To state a claim for fraudulent inducement-concealment, Plaintiffs must allege: (1) the defendant “concealed or suppressed a material fact,” (2) the defendant was “under a duty to disclose the fact to the plaintiff,” (3) the defendant “intentionally concealed or suppressed the fact with the intent to defraud the plaintiff,” (4) the plaintiff was “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.” (BiglerEngler v. Breg, Inc. (2017) 7 Cal.App.5th 276, 310-311.)

Plaintiff alleges the concealment of material fact: the defective battery. (Compl., ¶¶ 27, 30 [“Had Plaintiff known at the time of purchase of the true range of the Vehicle and the propensity of the batteries installed in the vehicle to burst into flame, she would not have purchased the Vehicle.”]) Based on this material fact, the allegation claiming Defendant intended to induce reliance and to defraud are adequate. (Compl., ¶¶ 41-43.)

Defendant GM’s argument that the concealment is not alleged with adequate specificity is also not well-taken.

The ordinary rule about pleading fraud with specificity is less demanding when the alleged fraud is concealing the truth. Ordinarily, “fraud must be pleaded specifically; general and conclusory allegations do not suffice.” (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.). “This particularity requirement necessitates pleading facts which show how, where, to whom, and by what means” the alleged fraud occurred. (Id.) The purpose of the particularity requirement is to “separate meritorious and nonmeritorious cases, if possible in advance of trial.” (Small v. Fritz Companies, Inc. (2003) 30 Cal.4th 167, 184.)

Some cases, however, conclude that this standard is less stringent when the defendant already has “ ‘full information concerning the facts of the controversy.’ ” (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 217, superseded by statute on other grounds as stated in Californians for Disability Rights v. Mervyn's, LLC (2006) 39 Cal.4th 223, 227.) Relaxation of the specificity requirement is particularly appropriate in a concealment case. Unlike intentional misrepresentation, which requires some affirmative representation or promise, a fraudulent concealment is the absence of something, the suppression of a fact. (Civ. Code § 1710.)

This distinction was recognized in Turner v. Milstein (1951) 103 Cal.App.2d 651. In rejecting a demurrer based on uncertainty, the Turner court pointed out:

“The only specification of uncertainty was that it could not be determined how, or in what manner, Milstein concealed from plaintiff the time and place of the sale of the real property. The ultimate fact is pleaded. It is an old and elemental rule of pleading that a demurrer for uncertainty does not lie if what is sought is a statement of matter already within the knowledge of the demurring party.... If, in truth, Milstein concealed from plaintiff the fact that the property was to be sold, he knows it and he knows the time and place of concealment, if there was a time and place. It would seem that concealment is negative and that it would occur without any time or place. Milstein knows the facts. (103 Cal.App.2d at p. 658.)

Thus, based on the nature of this type of claim, a plaintiff in a fraud by omission suit will not be able to specify the time, place, and specific content of an omission as precisely as would a plaintiff in a false representation claim. Here, the Court cannot conclude that the contents of the alleged concealment was not pleaded with the adequate level of specificity.

In reply, Defendant also argues for that the Complaint does not adequately allege exclusive knowledge of the material facts such that there was no duty to disclose.

Absent a fiduciary relationship between the parties (which Plaintiff does not allege here), a duty to disclose can arise in only three circumstances: (1) the defendant had exclusive knowledge of the material fact; (2) the defendant actively concealed the material fact; or (3) the defendant made partial representations while also suppressing the material fact. (BiglerEngler, supra, 7 Cal.App.5th at p. 311; LiMandri v. Judkins (1997) 52 Cal.App.4th 326, 336.) The California Supreme Court “has described the necessary relationship giving rise to a duty to disclose as a ‘transaction’ between the plaintiff and defendant ….” (Bigler-Engler, supra, 7 Cal.App.5th at p. 311; Warner Construction Corp. v. City of Los Angeles (1970) 2 Cal.3d 285, 294 [“In transactions which do not involve fiduciary or confidential relations”]; Hoffman v. 162 North Wolfe LLC (2014) 228 Cal.App.4th 1178, 1187–89 [rejecting concealment claim where plaintiffs “were not involved in a transaction with the parties they claim defrauded them”]; LiMandri, supra, 52 Cal.App.4th at p. 337 [“such a relationship can only come into being as a result of some sort of transaction between the parties”].)

Defendant GM argues there are no facts alleged that would support a duty to disclose. The Complaint contains no allegations of any direct dealing with GM. Instead, the Complaint alleges Plaintiff visited and purchased the Vehicle from Culver City Chevrolet. (Compl., ¶ 8.)

In opposition, Plaintiff argues that GM had exclusive knowledge of the Defective Battery. In support, Plaintiff cites Falk v. General Motors Corp. (N.D. Cal. 2007) 496 F.Supp.2d 1088.

In Falk, the plaintiffs alleged that General Motors (“GM”) had exclusive knowledge of the defect because “only GM had access to the aggregate data from its dealers, only GM had access to prerelease testing data, and only GM had access to the numerous complaints from its customers.” (Id. at 1096.)

Plaintiffs also cite Daniel v. Ford Motor Co. (E.D. Cal. May 18, 2016) 2016 WL 2899026 which discussed the duty to disclose in the context of the Consumers Legal Remedies Act claim and Unfair Competition Claim. In Daniel v. Ford Motor Co., the court explained: “Generally, courts have not defined ‘exclusive’ literally, but have found such claims cognizable if the defendant had ‘superior’ knowledge of a defect that was not readily apparent and there is no or only ... limited publicly available information about the defect.” (Daniel v. Ford Motor Co., supra, 2016 WL 2899026, *4.)

Here, the Complaint does not adequately allege GM’s exclusive knowledge of the Battery Defect. Although, Plaintiff cites to Paragraphs 13 to 23, these citations do not contain allegations to support the exclusive knowledge over a Battery Defect in Plaintiff’s 2021 Bolt EV; instead, these allegations pertain to previous years’ models with no indication that the technology was the same for her Vehicle. (Compl., ¶¶ 13-23.) The Complaint fails to allege facts giving rise to a duty to disclose. The Court sustains the demurrer to the first cause of action with leave to amend.

As with the intentional misrepresentation claim, Defendant argues Plaintiff has failed to allege any misrepresentation to support this cause of action.

The elements of negligent misrepresentation are: “(1) the misrepresentation of a past or existing material fact, (2) without reasonable ground for believing it to be true, (3) with intent to induce another's reliance on the fact misrepresented, (4) justifiable reliance on the misrepresentation, and (5) resulting damage.” (Apollo Capital Fund LLC v. Roth Capital Partners, LLC (2007) 158 Cal.App.4th 226, 243.)

“California courts have recognized a cause of action for negligent misrepresentation, i.e., a duty to communicate accurate information, in two circumstances. The first situation arises where providing false information poses a risk of and results in physical harm to person or property. The second situation arises where information is conveyed in a commercial setting for a business purpose.” (Friedman v. Merck Co. (2003) 107 Cal.App.4th 454, 477, 131 Cal.Rptr.2d 885.)

Here, the Opposition fails to identify any specific representation made by Defendant to Plaintiff. As noted above, the Complaint fails to allege any facts show any direct dealings between the parties.

Alternatively, relying on Daniel v. Ford Motor Company (2015) 806 F.3d 1217, Plaintiff attempts to impute “omissions by a dealership” on Defendant GM. (Opp. 7:3-11.)

This opposition argument fails for multiple reasons. First, a negligent misrepresentation claim requires a misrepresentation of fact; as such, an omission will not suffice. Additionally, this argument is not well-taken because it relies on the federal case of Daniel v. Ford Motor Co. (9th Cir. 2015) 806 F.3d 1217, 1227; reliance on Daniel v. Ford Motor Co. is misplaced as this case involved a summary judgment analysis in a products liability action. Further, Plaintiff failed to name the dealership in her Complaint and while “a [manufacturer’s] dealer or retailer may in a layman’s view be an agent of the [manufacturer]” “he is not an agent in the legal sense of that relationship.” (Avalon Painting Co. v. Alert Lumber Co. (1965) 234 Cal.App.2d 178, 184 [citing Vandermark v. Ford Motor Co. (1964) 61 Cal.2d 256.].) Thus, representations by dealership employees are not representations of an agent of GM itself.

Lastly, Plaintiff alleges that GM issued marketing material that Plaintiff relied upon, which were essential to Plaintiff’s decision to purchase the Vehicle. (Compl., ¶¶ 8, 49.) Plaintiff cites no legal authority that such marketing materials to the general public support a negligent misrepresentation claim. Further, Plaintiff does not plead these facts with the specificity required for a fraud-like claim.[2]

Third Cause of Action for Violation of Business and Profession Code section 17200

The UCL proscribes “unlawful, unfair or fraudulent business act[s] or practice [s].” (Bus. & Prof. Code § 17200.)

In demurring to this claim, Defendant argues that the UCL claim is derivative of the fraud claims and, thus, the UCL claim fails of the same reasons as the fraud claims. However, in opposition, Plaintiff does not assert that claim may be stated under the “fraud” prong.[3] In any case, the Court has sustained the demurrer to the fraud-based claims.

Plaintiff attempts to state a UCL violation under the UCL's “unlawful” prong. Here, by prohibiting any unlawful business practice, section 17200 necessarily “borrows” violations of other laws, in this case, the Song-Beverly Act. “Virtually any statute or regulation (federal or state) can serve as a predicate for a UCL unlawful practice cause of action.” (See Gutierrez v. Carmax Auto Superstores California (2018) 19 Cal.App.5th 1234, 1265.) Therefore, this claim is sufficiently pled.

In Reply, Defendant does not address Plaintiff’s purported basis of the UCL claim under the derivative Song-Beverly allegations. The demurrer to the third cause of action is overruled.

“The court may, upon a motion made pursuant to Section 435, or at any time in its discretion, and upon terms it deems proper: (a) Strike out any irrelevant, false, or improper matter inserted in any pleading. (b) Strike out 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.”¿(Code Civ. Proc. § 436.) “Immaterial” or “irrelevant” matters include allegations not essential to the claim, allegations neither pertinent to nor supported by an otherwise sufficient claim or a demand for judgment requesting relief not supported by the allegations of the complaint. (Code Civ. Proc. § 431.10, subds. (b)(1)-(3).)

Defendant GM moves to strike the request for punitive damages in the Complaint. Defendant argues, based on its demurrer arguments, Plaintiffs lack a viable fraud claim to support the punitive damage request. Further, even with the fraud claim, GM argues the allegations in the Complaint do not satisfy the statutory standards required to seek punitive damages.

Punitive damages are recoverable where the defendant has been guilty of oppression, fraud, or malice, express or implied. (Civ. Code § 3294.) “Something more than the mere commission of a tort is always required for punitive damages. There must be circumstances of aggravation our outrage, such as spite or malice, or a fraudulent or evil motive on the part of the defendant, or such a conscious and deliberate disregard of the interests of others that his conduct may be called willful or wanton.” (Taylor v. Superior Court (1979) 24 Cal.3d 890, 894.) Specific intent to injure is not necessary for a showing of malice—it is sufficient that the defendant’s conduct was so “wanton or so reckless as to evince malice or conscious disregard of others’ rights.” (McConnell v. Quinn (1925) 71 Cal. App. 671, 682.)

A request for punitive damages that is not supported with specific allegations of oppression, fraud, or malice is subject to a motion to strike. Conclusory allegations that defendants acted “willfully,” “maliciously,” or with “oppression, fraud, or malice” are not, without more, sufficient to give rise to a claim for punitive damages, but such language is permissible where the complaint contains sufficient factual support for the conclusions. (Perkins v. Superior Court (1981) 117 Cal.App.3d 1, 6-7.)

Based on the Court’s ruling on the demurrer to the fraud-based causes of action, the motion to strike is granted; the Complaint is devoid of adequate allegations of fraud to support a request for punitive damages.

Further, punitive damages are not available under the remaining claims for violations under the Song-Beverly Consumer Warranty Act. (See Civ. Code § 1794.)[4]

The demurrer is sustained in part and overruled in part. The motion to strike is granted. Plaintiff shall have leave to amend. The amended complaint shall be served and filed on or before September 21, 2023.

[1] In opposition to the motion to strike, Plaintiff’s Opposition now includes two named Plaintiffs, Howard Ruby and Mandy Cohen. Defendant argues that whether inadvertent or intentional, Plaintiff must not be allowed to add parties to this claim without undergoing the requisite procedural process. The Court agrees.

[2] “California courts have never decided whether the tort of negligent misrepresentation, alleged in the complaint here, must also be pled with specificity. But such a requirement is implied in the reasoning of two decisions (Committee on Children's Television, Inc. v. General Foods Corp., supra, 35 Cal.3d at p. 216; B.L.M. v. Sabo & Deitsch (1997) 55 Cal.App.4th 823, 835-837) and was asserted expressly in Justice Mosk's dissenting opinion in Garcia v. Superior Court (1990) 50 Cal.3d 728, 748. Because of the potential for false claims, we hold that a complaint for negligent misrepresentation in a holder's action should be pled with the same specificity required in a holder's action for fraud. (We express no view on whether this pleading requirement would apply in other actions for negligent misrepresentation.)” (Small v. Fritz Companies, Inc. (2003) 30 Cal.4th 167, 184.) Nonetheless, applying the heightened pleading standard here appears appropriate where “[t]he only significant difference from the standpoint of pleading is in the element of ‘scienter.’ “ (5 Witkin, Cal. Procedure (2023) Pleading, § 727.) Moreover, as stated by the high court in Small, both claims contain the inherent dangers of false accusations and severe reputational stigma, the policy bases for requiring specificity in pleadings.

[3] Unlike common law fraud, a UCL fraud claim “can be shown even without allegations of actual deception, reasonable reliance and damage”; what is required to be shown is “that members of the public are likely to be deceived.” (In re Tobacco II Cases (2009) 46 Cal.4th 298, 311–312; see also Morgan v. AT & T Wireless Services, Inc. (2009) 177 Cal.App.4th 1235, 1254-1257].)

[4] Although, Defendant GM is incorrect in its assertion that Plaintiff cannot demand both a civil penalty under Song-Beverly and punitive damages pursuant to other claims. (Anderson v. Ford Motor Co. (2022) 74 Cal.App.5th 946, 972.)

Judge Bruce G. Iwasaki

Department 58