Judge: Cherol J. Nellon, Case: 24STCV26223, Date: 2025-01-23 Tentative Ruling

Case Number: 24STCV26223    Hearing Date: January 23, 2025    Dept: 14

#8

Case Background

This is a lemon law action.

On October 9, 2024, Plaintiff Adalberto Rojas filed his Complaint against Defendant American Honda Motor Co., Inc.

On November 12, 2024, Defendant filed this demurrer.

On January 9, 2025, Plaintiff filed an opposition.

On January 15, 2025, Defendant filed a reply.

Instant Pleading

Defendant demurs to the Fifth Cause of Action for Fraudulent Inducement – Concealment.

Defendant moves to strike Plaintiff’s demand for punitive damages.

Decision

Defendant’s demurrer is OVERRULED.

Defendant’s motion to strike is DENIED.

Defendant must file an answer within 20 days of this order.

Discussion

1.     Demurrer

Defendant demurs to the Fifth Cause of Action for fraudulent inducement by concealment on the grounds that (1) the Complaint does not state Defendant owed Plaintiff a duty of disclosure, (2) the Complaint does not meet the heightened pleading standard for fraud, and (3) the cause of action for fraud is barred under the economic loss rule.

A.    Duty of Disclosure

Defendant first argues that the Complaint does not allege that Plaintiff owed a duty of disclosure because it fails to plead that Defendant had exclusive knowledge of the alleged defect or that Plaintiff had a direct transaction with Defendant.

“[T]he 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 Center, Inc. (2011) 198 Cal.App.4th 230, 248.)

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. (Bigler-Engler v. Breg, Inc. (2017) 7 Cal.App.5th 276, 311 (Bigler-Engler); LiMandri v. Judkins (1997) 52 Cal.App.4th 326, 336.)

Here, the Complaint alleges that Defendant and its agents concealed the existence and nature of the defect from Plaintiff when he purchased the vehicle, during the repair, and thereafter. (Compl., ¶53.) Because the Complaint alleges that Defendant actively concealed the alleged defect, the facts pled are sufficient to establish that Defendant owed a duty to disclose the existence of the defect. The Court declines to consider Defendant’s remaining arguments on this element.

Defendant’s demurrer is OVERRULED on this ground.

B.    Sufficiency

Defendant next argues that the cause of action for fraudulent inducement by concealment is not pled with sufficient specificity because the Complaint merely pleads pure legal conclusions without specific facts.

Fraud causes of actions must be pled with specificity in order to give notice to the defendant and to furnish him or her with definite charges. (Committee on Children's Television, Inc. v. General Foods Corp. (1983) 35 Cal. 3d 197, 216, superseded by amendments to the Unfair Competition Law contained in Proposition 64 on unrelated grounds.)  “(a) General pleading of the legal conclusion of ‘fraud’ is insufficient; the facts constituting the fraud must be alleged.  (b) Every element of the cause of action for fraud must be alleged in the proper manner (i.e., factually and specifically), and the policy of liberal construction of the pleadings … will not ordinarily be invoked to sustain a pleading defective in any material respect.” (Ibid.)  

The specificity standard is less stringent “when ‘it appears from the nature of the allegations that the defendant must necessarily possess 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, quoting Bradley v. Hartford Acc. & Indem. Co. (1973) 30 Cal.App.3d 818, 825.)

Here, the Complaint alleges that Plaintiff entered into a warranty contract with Defendant in May 2024. (Compl., ¶6.) Defendant knew that the vehicle was defective prior to the sale and concealed the defect from Plaintiff. (Id., ¶¶50-53.) Plaintiff was unaware of the defect and purchased the vehicle. (Id., ¶57.) If Plaintiff knew of the defect, he would not have purchased the vehicle. (Id., ¶58.) As a result of the concealment, Plaintiff was harmed when he purchased a vehicle he would not have purchased had he known of the subject defect. (Id., ¶¶66.)

The Complaint pleads each element of fraud with sufficient specificity because it contains facts to support each element of fraud and sufficient detail to give Defendant notice of the charges against it. Any missing details would reasonably be in Defendant’s possession because Defendant was a party to the transaction described in the Complaint.

Defendant’s demurrer is OVERRULED on this ground.

C.    Economic Loss Rule

Defendants next argue that the fraud cause of action violates the economic loss doctrine.

The economic loss rule posits that a purchaser of a product that does not live up to the buyer’s expectations can only recover in contract and not tort, “unless [the purchaser] can demonstrate harm above and beyond a broken contractual promise.” (Food Safety Net Services v. Eco Safe Systems USA, Inc. (2012) 209 Cal.App.4th 1118, 1130 (quoting Robinson Helicopter Company, Inc. v. Dana Corporation (2004) 34 Cal.4th 979, 988).) Conduct constituting a breach of contract may become tortious if it also violates a duty independent of the contract arising from principles of tort law or arises from conduct that is both intentional and intended to harm. (Robinson Helicopter, supra, 34 Cal.4th at 989, 990.) A tort claim for fraud must be sufficiently independent from a breach of contract claim for which the plaintiff suffered economic loss. (Id. at p. 991.)

Plaintiff, citing Dhital v. Nissan North America, Inc. (2022) 84 Cal.App.5th, 828 (Dhital) and Rattagan v. Uber Technologies, Inc. (2024) 324 Cal.Rptr.3d 433, 449 (Rattagan), argues that the economic loss rule does not apply to claims for fraudulent inducement. Courts in both cases held that fraud based on concealment may fall within the exception to the economic loss rule because the fraudulent conduct is independent from a breach of contract. (Rattagan at pp. 1237-1248; Dhital at pp.841-843.)

Here, as discussed above, the Complaint adequately pleads a cause of action for fraudulent inducement by concealment. The cause of action is not barred by the economic loss rule.

The demurrer is OVERRULED on this ground.

2.     Motion to Strike

Defendant moves to strike Plaintiff’s demand for punitive damages on the grounds that the Complaint fails to state facts sufficient to support the demand.

In order to state a prima facie claim for punitive damages, a complaint must set forth the elements as stated in the general punitive damage statute, Civil Code section 3294. (College Hospital, Inc. v. Superior Court (1994) 8 Cal.4th 704, 721.) These statutory elements include allegations that the defendant has been guilty of oppression, fraud or malice. (Civ. Code, § 3294, subd. (a).) 

Here, as discussed above, the Complaint adequately pleads a cause of action for fraud. Because the Complaint alleges Defendant engaged in fraudulent conduct, the Complaint adequately supports a demand for punitive damages. Additionally, the Complaint adequately alleges that Defendant’s officer, director, or managing agents ratified the alleged fraudulent conduct. (Compl., ¶49.) The motion to strike is DENIED.

Conclusion

Defendant’s demurrer is OVERRULED.

Defendant’s motion to strike is DENIED.

Defendant must file an answer within 20 days of this order.