Judge Bryant Y. Yang, Case Number: 22PSCV01057, Date: 2024-01-16 Tentative Ruling

Defendant American Honda Motor Co., Inc.’s Demurrer to
Plaintiffs’ Second Amended Complaint is SUSTAINED with leave to amend.

Defendant American Honda Motor Co., Inc.’s Motion to
Strike Plaintiff’s Prayer for Punitive Damages is DENIED as moot.

Plaintiff, Norma
Perez Villarreal, (“Plaintiff”) alleges that, in 2021, she purchased a used 2019
Honda Odyssey (“the Subject Vehicle”) from Car Pros Honda El Monte. Plaintiff alleges that Defendant, American
Honda Motor Co., Inc., (“Defendant”) manufactured the Subject Vehicle, which includes
a “9-Speed Transmission” (“Transmission”).
According to Plaintiff, Defendant has known that the Transmission is
defective and dangerous since 2014; yet, despite this knowledge, Defendant
concealed the existence of the defects from Plaintiff and other consumers.

On September 15,
2022, Plaintiff filed suit against Defendant, asserting two causes of action:
(1) Violation of Song-Beverly Act - Breach of Express Warranty; and (2)
Fraudulent Inducement – Concealment. On
October 19, 2022, Defendant filed a Demurrer and a Motion to Strike, which the
court sustained with leave to amend and denied as moot, respectively.

On January 20,
2023, Plaintiff filed its First Amended Complaint (“FAC”) and Defendant again filed
a Demurrer and a Motion to Strike. On
August 14, 2023, the Court sustained Defendant’s Demurrer to Plaintiff’s second
cause of action for fraudulent inducement/concealment with leave to amend and
denied Defendant’s Motion to Strike Plaintiff’s prayer for punitive damages as
moot. (08/14/23 Minute Order.)

On September 13,
2023, Plaintiff filed the Second Amended Complaint (“SAC”). On October 6, 2023, Defendant’s counsel met
and conferred telephonically with Plaintiff’s counsel, but they were unable to
reach a resolution. On November 8, 2023,
Defendant filed the present Demurrer and Motion to Strike. On November 30, 2023, Plaintiff filed an Opposition.
On December 7, 2023, Defendant filed a Reply.

Defendant demurs
to the second cause of action for fraudulent inducement – concealment, arguing
that Plaintiff’s allegations are insufficient to state a cause of action as a
matter of law and that the second cause of action is barred by the economic
loss rule. For the following reasons,
the Court SUSTAINS Defendant’s demurrer with leave to amend.

A party may
demur to a complaint on the grounds that it “does not state facts sufficient to
constitute a cause of action.” (Code
Civ. Proc., § 430.10, subd. (e).) A
demurrer tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th
740, 747 (Hahn).) When
considering demurrers, courts accept all well pleaded facts as true. (Fox v. JAMDAT Mobile, Inc. (2010) 185
Cal.App.4th 1068, 1078.) “A demurrer
tests the pleadings alone and not the evidence or other extrinsic matters. Therefore, it lies only where the defects
appear on the face of the pleading or are judicially noticed.” (SKF Farms v. Superior Court (1984) 153
Cal.App.3d 902, 905.) “The only issue
involved in a demurrer hearing is whether the complaint, as it stands,
unconnected with extraneous matters, states a cause of action.” (Hahn, supra, 147 Cal.App.4th at
p. 747.)

2.
Defendant Has Not
Established that the Economic Loss Rule Bars the Second Cause of Action.

Defendant
argues that Plaintiff’s fraudulent inducement-concealment cause of action fails
as a matter of law because it is barred by the economic loss rule. (Mem. P&A at pp. 13-17; Reply Br. at pp.
2-7.) Plaintiff cites Dhital v.
Nissan N. Am., Inc. (2022) 84 Cal.App.5th 828,[i]
asserting that the second cause of action is not subject to demurrer on those
grounds. (Opp’n at pp. 8.) The Court finds Dhital persuasive and
overrules Defendant’s demurrer based on the economic loss rule without
prejudice.

“[T]he economic loss rule provides: Where a purchaser’s expectations in a sale are
frustrated because the product he bought is not working properly, his remedy is
said to be in contract alone, for he has suffered only ‘economic losses.’ 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. Quite simply, the economic loss rule ‘prevents the law of contract and the law of
tort from dissolving one into the other.” (Food Safety Net Services v. Eco Safe
Systems USA, Inc. (2012) 209 Cal.App.4th 1118, 1130 [citing Robinson
Helicopter Co., Inc. v. Dana Corp. (2004) 34 Cal.4th 979, 988].) A party alleging fraud or deceit in connection
with a contract may recover in tort if he or she can “establish tortious
conduct independent of a breach of the contract itself, that is violation of
some duty arising from tort law.” (Ibid.)

Dhital is strikingly apropos to the case at issue. In that case, the plaintiffs sued a car
manufacturer, asserting claims under the Song-Beverly Consumer Warranty Act and
a common law fraud claim for concealing defects in the transmission of the
purchased vehicle. (Dhital v. Nissan
N. Am., Inc., supra, 84 Cal.App.5th at p. 832.) The trial court sustained a demurrer to the
fraudulent inducement claim without leave to amend based on the economic loss
rule and struck the request for punitive damages. (Ibid.) On appeal, the Court of Appeal reversed. (Id. at p. 833.) Although the appellate court acknowledged
that “differing views [have been] taken by courts that have considered this
issue,” it concluded that, “under California
law, the economic loss rule does not bar plaintiffs’ claim . . . for fraudulent
inducement by concealment.” (Id.
at p. 843.) The Court of Appeal relied
heavily on the Supreme Court’s decision in Robinson Helicopter Co. v. Dana
Corp. (Id. at pp. 840-841.) On February 1, 2023, the Supreme Court
granted review in Dhital and deferred further action pending disposition
of a related case, Rattagan v. Uber Techs., Inc., S272113. (Dhital v. Nissan N. Am. (Cal. 2023)
523 P.3d 392.) The Supreme Court also
denied a request for an order depublishing the opinion in Dhital. (Ibid.)

The Court
recognizes that Dhital has no binding or precedential effect, but
nonetheless finds it persuasive. In Robinson,
the Supreme Court expressly identified “several instances where tort damages
were permitted in contract cases,” including “where the contract was
fraudulently induced.” (Robinson
Helicopter Co. v. Dana Corp., supra, 34 Cal.4th at 989.) Moreover, as cited in Plaintiff’s Opposition,
substantial case law supports the conclusion reached in Dhital – that
the economic loss rule does not bar a cause of action for fraudulent inducement
by concealment because such a claim is independent of the breach of the
contract. (See e.g., Erlich v.
Menezes (1999) 21 Cal.4th 543, 552; Harris v. Atl. Richfield Co.
(1993) 14 Cal.App.4th 70, 78 [“The most widely recognized exception is when the
defendant’s conduct constitutes a tort as well as a breach of the contract. For example, when one party commits a fraud
during the contract formation or performance, the injured party may recover in
contract and tort.”]; Kuchta v. Allied Builders Corp. (1971) 21
Cal.App.3d 541, 549.)

Therefore,
the Court overrules Defendant’s demurrer based on the economic loss rule
without prejudice. Defendant may file a
motion for judgment on the pleadings should the Supreme Court hold in Dhital
or Rattagan that the economic loss rule bars Plaintiff’s second
cause of action for fraudulent inducement by concealment.

3.
Plaintiff’s Second
Cause of Action Is Not Pled with Specificity to State a Claim of Fraud.

Defendant
contends that Plaintiff has failed to plead with sufficient particularity her cause
of action for fraudulent inducement by concealment. (Mem. P&A at pp. 6-13.) Plaintiff argues otherwise. (Opp’n 3-7.)
The Court agrees with Defendant.

The
elements of an action for fraud and deceit based on a 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. (Boschma v. Home Loan Ctr., Inc. (2011)
198 Cal.App.4th 230, 248, see also CACI 1901.) Additionally, fraud must be pled specifically
wherein a plaintiff shows “how, when, where, to whom, and by what means the
representations were tendered.” (Stansfield v. Starkey (1990) 220 Cal.App.3d
59, 74.) Furthermore, in an action against a corporation, a plaintiff must
“allege the names of the persons who made the allegedly
fraudulent representations, their authority to speak, to whom they spoke,
what they said or wrote, and when it was said or written.” (Tarmann v. State Farm Mut. Auto. Ins. Co. (1991)
2 Cal.App.4th 153, 157.)

First, Plaintiff
has failed to allege specific facts as to the third element of fraud by
concealment or suppression, namely that Defendant
must have intentionally concealed or suppressed the material fact with the
intent to defraud Plaintiff. In the Second Amended Complaint, Plaintiff only
provides the conclusory allegation that Defendant “intended to deceive
Plaintiff by concealing the known issues with the Transmission Defect in an
effort to sell the Subject Vehicle.”
(SAC ¶ 94.) However, “mere
conclusionary allegations that the omissions were intentional and for the
purpose of defrauding and deceiving” Plaintiff “are insufficient” to state a
cause of action for fraud. (See Goodman
v. Kennedy (1976) 18 Cal.3d 335, 347.)

Second,
Plaintiff has not identified who made what statements, how such statements were
made, when those statements were made, and where she reviewed them. In the Second Amended Complaint, Plaintiff
alleges that Defendant “drafted, produced, and distributed marketing materials
to the public containing factual representations about the Subject Vehicle” and
that she “reviewed marketing brochures, viewed television commercials and/or
heard radio commercials.” (SAC ¶
62.) She further alleges that she “relied
on the statements made during the sales process by AMERICAN HONDA’s agents and
within the marketing materials written by AMERICAN HONDA.” (Ibid.) These general allegations lack the
specificity to give notice to Defendant with sufficiently definite charges and
to allow the Court to determine whether there is foundation for a charge of
fraud. Plaintiff does not identify the
marketing materials or the statements made by Defendant’s agents that induced
her to purchase the Subject Vehicle.
Plaintiff does not allege when she reviewed Defendant’s marketing
brochures, television commercials, and radio commercials. Plaintiff does not allege where she reviewed
the marketing materials or heard the agents’ statements.

Third, Plaintiff
fails to identify the agents of Defendant with whom she negotiated during the
sales process. As explained above, under
controlling case law, Plaintiff must allege the names of the persons who
allegedly made the fraudulent representations or omissions because Defendant is
a corporate entity. She has not
identified the salespeople at Car Pros Honda El Monte from whom she purchased
the Subject Vehicle.

Plaintiff
argues that she is relieved of the duty to plead with specificity because
Defendant necessarily possess full information concerning the facts of the
controversy. (Opp’n at p. 7.) This argument is unpersuasive. Although Defendant necessarily knows who
authored its promotional advertisements, Defendant does not know which
advertisement was reviewed by Plaintiff, when Plaintiff reviewed those
advertisements, and what representation Plaintiff relied on in purchasing the
Subject Vehicle. Moreover, the exception
to the specificity requirement is inapplicable where Plaintiff has the
knowledge to plead with particularity.
Here, there is no reason to believe that Defendant would have exclusive
knowledge or more knowledge than Plaintiff about the identities of the
salespeople who negotiated the sale with Plaintiff.

Tarmann v. State Farm Mut. Auto. Ins. Co., supra, 2 Cal.App.4th at 158, is
apposite to the case at hand. In that
case, the plaintiff sued an insurance company for fraud and negligent
misrepresentation. (Id. at p. 156.)
The plaintiff alleged that the defendant’s
employees and agents represented to her that she was authorized to have her
vehicle repaired, that they were obligated to indemnify her for her damages,
and that it would pay the plaintiff after the completion of repairs. (Ibid.) The plaintiff
alleged that the representations were false and the insurance company had no
intention of paying for her repairs. (Id.
at p. 157.) The trial court sustained a demurrer to the fraud claim without leave to
amend. (Id. at p. 159.) The Court of
Appeal affirmed because the plaintiff had failed to “allege the names of the
persons who made the allegedly fraudulent representations, their authority to
speak, to whom they spoke, what they said or wrote, and when it was said or
written.” (See id. at pp.
157-158.) The
appellate court found that the exception to the requirement of specificity was
inapplicable because the defendant “ha[d] no more reason to know who made the
allegedly false representation to [the plaintiff] than [the plaintiff].” (Id. at p. 158.)

Here, as in Tarmann, Plaintiff alleges that the
salespersons at Car Pros Honda El Monte were agents of Defendant and
that she relied on their statements. And
just as in Tarmann, Plaintiff has failed to identify the salespersons,
what they said or wrote, and when it was said or written. Defendant has no more reason to know who made
allegedly false representations or failed to disclose the Transmission Defect to
Plaintiff than Plaintiff. As such, the
exception to the requirement of specificity in a fraud action against a
corporation is not applicable in this case – at least to material facts that
should be known to Plaintiff.

Accordingly, the
Court sustains Defendant’s demurrer as to the second cause of action because
Plaintiff has failed to plead with the specificity required for fraud claims. Even though this is Plaintiff’s third attempt
to sufficiently plead her second cause of action, the Court is not yet
persuaded that there is no reasonable possibility that Plaintiff can cure the
defects identified above. Because “[l]eave
to amend is liberally allowed,” the Court will grant Plaintiff leave to file a
Third Amended Complaint. (See, e.g., Kempton
v. City of Los Angeles (2008) 165 Cal.App.4th 1344, 1348.)

Defendant
moves to strike punitive damages from Plaintiffs’ Second Amended Complaint on
the grounds that Plaintiff’s fraudulent inducement by concealment cause of
action fails as a matter of law and, therefore, any prayer for punitive damages
must also fail and be stricken.

Upon a
party’s motion or the court’s own motion, the court may strike any irrelevant,
false, or improper matter inserted in any pleading. (Code Civ. Proc., § 436, subd. (a).) The court may also “[s]trike 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, subd. (b).) “The
grounds for a motion to strike shall appear on the face of the challenged
pleading or from any matter of which the court is required to take judicial
notice.” (Code Civ. Proc., § 437, subd.
(a).)

As
explained above, the Court sustains the Demurrer as to Plaintiff’s second cause
of action with leave to amend. In light
of the Court’s ruling on the Demurrer, Defendant’s Motion to Strike is DENIED
as moot.

For the foregoing reasons,
Defendant’s Demurrer to Plaintiff’s Second Cause of Action in the Second
Amended Complaint is SUSTAINED with leave to amend. Defendant’s Motion to Strike portions of
Plaintiffs’ Second Amended Complaint is DENIED as MOOT. Plaintiff is granted 60 days to amend and
shall file her Third Amended Complaint by March 18, 2024.

[i] Plaintiff failed to comply with
California Rules of Court, rule 8.1115(e).
In her Opposition, Plaintiff failed to note that the Supreme Court has
granted review and that Dhital has no binding or precedential effect.