Judge Bruce G. Iwasaki, Case Number: 24STCV23577, Date: 2024-12-03 Tentative Ruling

Tentative Ruling: The Demurrer to the Complaint is sustained. The Motion to Strike is granted.

This is a Song-Beverly action. In December 2022, Plaintiffs Christopher T. Moore and Bethany E. Moore (Plaintiffs) obtained a 2022 Honda Pilot (Vehicle). On September 12, 2024, Plaintiffs sued Defendant American Honda Motor Co., Inc. (Honda) alleging four breach of warranty claims under Song-Beverly, and a cause of action for fraudulent concealment. The Complaint alleges that Honda was aware of and concealed a known defect with the Vehicle’s defective computerized driver-assisting safety system (Sensing Defect).

Defendant Honda now demurs to the fifth cause of action for fraudulent concealment in the Complaint. Defendant Honda also moves to strike the request for punitive damages in the Complaint. Plaintiffs filed an opposition to both the demurrer and the motion to strike.

The Court sustains the demurrer with leave to amend. As a result, the motion to strike is now 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 Honda argues the Complaint fails to allege facts sufficient to state a claim for fraudulent concealment and the fraudulent concealment claim is barred by the economic loss rule.

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

The gravamen of Plaintiffs’ fraudulent concealment claim is that “[w]hile Defendant has been fully aware of the Sensing Defect affecting the Subject Vehicle, Defendant and its agents concealed the existence and nature of the Defect from Plaintiffs at the time of purchase (and/or lease), repair, and thereafter.” (Compl., ¶ 53.)

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, 310–11.)

Absent a fiduciary relationship between the parties (which Plaintiffs do 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 Honda argues there is no transactional relationship alleged that would support a duty to disclose. The Complaint does not allege with whom Plaintiffs obtained the Vehicle. (Compl., ¶ 6.) In fact, the Complaint contains no allegations of any direct dealing with Honda. Nor does the Complaint allege there were ever representations by Honda or a dealership about the sensing features of the Vehicle on which they relied.[1] Defendant Honda argues that under Bigler-Engler v. Breg, Inc. (2017) 7 Cal.App.5th 276, these allegations are deficient. (Dem., 12:15-19.)

The Complaint does not adequately allege a transaction between Honda and Plaintiffs that gave rise to a duty to disclose assertedly unstated facts. This is a further ground for sustaining the demurrer.

Honda also alleges that the fraudulent concealment cause of action lacks specificity. Because the Court has found that the duty element is lacking, it need not address the specificity requirement. But the ordinary rule about pleading fraud with specificity is less demanding when the alleged fraud is concealing the truth. For the benefit of the parties, the Court sets forth the law on this topic.

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.)

Here, the Court cannot conclude that contents of Honda’s alleged concealment was insufficiently pleaded. Rather, this case turns on whether Honda and Plaintiffs had a relationship that gave rise to a duty to disclose, not on the specificity of what, assertedly, was unexpressed.

Because the fraudulent concealment claim fails to allege a duty to speak, the demurrer to the fifth cause of action is sustained.[2]

“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 Honda 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, Honda 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 cause of action, the motion to strike is granted. There is no longer a fraud cause of action to support a request for punitive damages.

The demurrer is sustained. The motion to strike is granted. Plaintiff shall have leave to amend. The amended complaint shall be served and filed on or before January 3, 2025.

[1] The Complaint alleges “Plaintiffs are a reasonable consumer who interacted with sales representatives, considered Defendant's advertisement, and/or other marketing materials concerning the HONDA Vehicles prior to purchasing the Subject Vehicle. Had HONDA revealed the Sensing Defect, Plaintiffs would have been aware of it and would not have purchased the Subject Vehicle.” (Compl., ¶ 58.) However, to the extent these allegations would support an intentional fraudulent misrepresentation claim against Defendant Honda, this claim fails for a lack of specificity as discussed in the case authority cited below.

[2] Honda also demurs on the grounds that Plaintiffs’ fraudulent concealment claim is barred by the economic loss rule. “The economic loss rule 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.) Economic losses include “damages for inadequate value, the costs of repair or replacement, and any consequent lost profits.” (Jimenez v. Superior Court (2002) 29 Cal.4th 473, 482.) The rule bars a plaintiff's tort recovery of economic damages unless such damages are accompanied by some form of physical harm (i.e., personal injury or property damage). (North American Chemical Co. v. Superior Court (1997) 59 Cal.App.4th 764, 777.) One exception to the economic loss doctrine is “where the contract was fraudulently induced” due to an affirmative misrepresentation. (Robinson, 34 Cal. 4th at 989–91 [citation omitted]; Rattagan v. Uber Techs, Inc. (9th Cir. 2021) 19 F.4th 1188, 1191 [“In Robinson, the California Supreme Court held that the economic loss rule does not bar fraud claims premised on affirmative misrepresentations.”].) However, “[w]hether California's economic loss rule bars fraudulent omissions claims based on purely economic injury is unsettled.” (Anderson v. Apple Inc. (N.D. Cal. 2020) 500 F. Supp. 3d 993, 1019 [emphasis added].) Then, in 2022, the California Court of Appeal's decision in Dhital v. Nissan N. Am., Inc. (2022) 84 Cal. App. 5th 828, 844,), review granted, 304 Cal.Rptr.3d 82, 523 P.3d 392 (2023) stated that “[t]he reasoning in Robinson affirmatively places fraudulent inducement by concealment outside the coverage of the economic loss rule.” (Id. at 840-841.) However, Dhital is currently pending before the California Supreme Court, and thus has “no binding or precedential effect, and may be cited for potentially persuasive value only.” (Cal. R. Ct. 8.1115(e)(1).)

Judge Bruce G. Iwasaki

Department 58