Judge Christian R. Gullon, Case Number: 22PSCV03120, Date: 2023-08-08 Tentative Ruling

Judge: Christian R. Gullon, Case: 22PSCV03120, Date: 2023-08-08 Tentative Ruling

(1) GENERAL MOTORS LLC’S DEMURRER TO PLAINTIFF’S FIRST AMENDED COMPLAINT (FAC) is OVERRULED.

(2) GENERAL MOTORS LLC’S MOTION TO STRIKE PUNITIVE DAMAGES FROM PLAINTIFF’S FIRST AMENDED COMPLAINT is DENIED.

On December 30, 2022, Plaintiff filed the instant action pertaining to the purchase of the 2021 Chevrolet Silverado 1500, which Plaintiff alleges had the following defects: “transmission defects; engine defects; a/c defects; suspension defects; brake defects; among other defects and nonconformities.” (FAC ¶13.)

Defendant demurs to the 5^th cause of action (COA) for Fraudulent Inducement—Concealment (Fraud) on two grounds:

1. COA fails to state facts relevant to the elements of the claim, and therefore does not constitute a cause of action.

2. COA fails to allege a transactional relationship giving rise to a duty to disclose.

“[T]he elements of a cause of action for fraud 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.”’” (Jones v. ConocoPhillips Co. (2011) 198 Cal. App. 4th 1187, 1198, quoting Kaldenbach v. Mutual of Omaha Life Ins. Co. (2009) 178 Cal.App.4th 830, 850). As for pleading the fourth element of inducement, “mere conclusionary allegations that the omissions were intentional and for the purpose of defrauding and deceiving plaintiffs and bringing about the purchase ... and that plaintiffs relied on the omissions in making such purchase are insufficient [to show fraud by concealment].” (Demurrer p. 9, quoting Linear Tech. Corp. v. Applied Materials, Inc. (2007) 152 Cal. App. 4th 115, 132.) Additionally, as for pleading fraud against a corporate defendant, “it was necessary for him to allege the name of the person who spoke, his authority to speak, to whom he spoke, what he said or wrote, and when it was said or written.” (Mason v. Drug, Inc. (1939) 31 Cal.App.3d 697, 703.) Thus, absent pleading facts to support the elements above without specificity, will not be presumed. (Mason v. Drug Inc. (1939) 31 Cal.App.2d 697, 703; see also Tenet Healthsystem Desert, Inc. v. Blue Cross of California (2016) 245 Cal. App. 4th 821, 838, quoting Lazar v. Superior Court (1996) 12 Cal.4th 631, 638 [“[F]raud must be pled specifically; general and conclusory allegations do not suffice. Thus, ‘the policy of liberal construction of the pleadings ... will not ordinarily be invoked to sustain a pleading defective in any material respect.’”].)

Defendant GM committed fraud by allowing the Vehicle to be sold to Plaintiff without disclosing that the Vehicle and its 8-speed transmission were defective and susceptible to sudden and premature failure . . . Defendant GM’s own press release dated January 13, 2014, introduced the new 8-speed transmission as being “tuned for world-class shift-response times,” and “deliver[ing] shift performance that rivals the dual-clutch/semi-automatic transmissions found in many supercars – but with the smoothness and refinement that comes with a conventional automatic fitted with a torque converter.” However, prior to Plaintiff’s purchase of Subject Vehicle, Defendant GM was internally referring the 8-speed transmission as a “neck snapper.” Defendant GM engineers even considered stopping production in 2015 (but did not) and in 2016, president Johan de Nysschen acknowledged customer frustration surrounding the Transmission Defect internally and meeting with its authorized repair facility. Nonetheless, Defendant GM . . . advised any complaining customers that poor shifts were “normal. In fact, Defendant GM’s Mark Gordon lamented in February 2019 that “shift quality issues are an ongoing concern with the 8-Speed transmission . . . From September 2014 to at least February 2019, Defendant GM issued many service bulletins and service bulletin updates to its dealers in the United States, but not its customers, acknowledging problems of harsh shifting, jerking, clunking, and delays in acceleration or deceleration relating to the 8-speed transmission.

Defendant avers that Plaintiff has “failed to allege (i) the identity of the individuals at GM who purportedly concealed material facts or made untrue representations about his Silverado, (ii) their authority to speak and act on behalf of GM, (iii) GM’s knowledge about alleged defects in Plaintiff’s Silverado at the time of purchase, (iv) any interactions with GM before or during the purchase of the Silverado, or (v) GM’s intent to induce reliance by Plaintiff to purchase the specific Silverado at issue.” (Demurrer p. 9:6-11.)

Here, the court disagrees with Defendant that Plaintiff has not pled any facts for fraud. Plaintiff has pled (i) identity of individuals (i.e., engineers and specifically named individuals); (ii) their authority (presumably president of the corporation has authority to speak); and (iii) GM’s knowledge (statements made to dealers and internal statements). As for the element of inducement, which is found in paragraph 71 of the FAC,[1] while the allegation is somewhat conclusive, it is sufficient for purposes of a demurrer. (See Opp. pp. 2-3, citing to Dhital v. Nissan N. Am. Inc., (2022) 84 Cal.App.5th 828 at 844 [holding that upon similar facts, the complaint was sufficient for fraud].)[2]

Therefore, the court overrules the demurrer on the grounds that the FAC fails to plead sufficient facts.

As Defendant’s second and last argument, it argues that under California law it cannot be liable for concealment absent a fiduciary relationship between the parties (i.e., direct dealings between the parties). (Demurrer p. 9, Reply p. 1.)

But California law does not support Defendant’s position which is, plainly, that Defendant is immunized from liability and responsibility in allegedly concealing material facts. As iterated by the court in Dhital, supra, “[s]uppression of a material fact is actionable when there is a duty of disclosure, which may arise from a relationship between the parties, such as a buyer-seller relationship.” (Dhital, supra, 84 Cal.App.5th 828, 843.) And to the extent that Plaintiff interacted with a dealership (not GM directly), Dhital again addressed that very argument: “At the pleading stage (and in the absence of a more developed argument by Nissan on this point), we conclude plaintiffs’ allegations are sufficient. Plaintiffs alleged that they bought the car from a Nissan dealership, that Nissan backed the car with an express warranty, and that Nissan's authorized dealerships are its agents for purposes of the sale of Nissan vehicles to consumers. In light of these allegations, we decline to hold plaintiffs’ claim is barred on the ground there was no relationship requiring Nissan to disclose known defects.” (Id. at p. 844.) And lemon law cases aside, this principle that a party is to disclose material facts even absent a fiduciary relationship to subsequent purchasers (not just immediate purchasers) “when the vendor has reason to expect that the item will be resold.” (Opp. p. 3 , quoting OCM Principal Opportunities Fund, L.P. v. CIBC World Markets Corp. (2007) 157 Cal.App.4th 835, 851.) And here, Defendant certainly expects its dealerships to sell its vehicles to purchasers as the very purpose of dealerships is to sell a manufacturer’s vehicles.

To the extent that Defendant’s primariy rely upon Bingler v. Breg, Inc. (2017) 7 Cal.App.5th 276 to support its proposition that a direct dealing between the plaintiff and defendant is required, the court is unpersuaded. For one, Bingler is procedurally disanalogous as it did not address a demurrer but an appeal after a jury trial, meaning numerous factual determinations had been made and were considered on appeal. Second, Bingler is factually disanalogous as it was a medical malpractice case wherein a plaintiff sued, amongst others, the manufacturer a medical device. On this note, Defendant’s reply does not address the Dhital case, which is a case squarely analogous in its facts; thus, reliance upon a non-lemon law case proves less influential. Moreover, Defendant’s quotation to Bingler that “a duty to disclose arises in this context only where there is already a sufficient relationship or transaction between the parties” (id. at p. 312) is taken out of context as the entirety of the passage pertained to the issue of the duty to speak to clarify misleading half-truths. (Ibid. [“Where, as here, a sufficient relationship or transaction does not exist, no duty to disclose arises even when the defendant speaks.”].)

Therefore, absent instructive authority, the court overrules the demurrer on the grounds that a fiduciary relationship is needed to for a fraud cause of action predicated upon nondisclosure.

In sum, Plaintiff’s FAC sufficiently states a viable fraudulent inducement-concealment cause of action for pleading purposes. Based thereon, as Plaintiff has adequately pled fraud, the motion to strike punitive damages is DENIED.

Based on the foregoing, the demurrer is OVERRULED and the motion to strike is DENIED.

[1] See Opp. p. 2 citing to paragraph 71 [“The facts concealed or not disclosed by Defendant GM (and its directors, officers, employees, affiliates, and/or agents) to Plaintiff is material in that a reasonable person would have considered them to be important in deciding whether or not to purchase the Vehicle. Had Plaintiff known that the Vehicle, and its 8-speed transmission, were defective prior to and at the time of sale, Plaintiff would not have purchased the Vehicle.”].)

[2] The Reply does not address Dhital.