Judge Christopher K. Lui, Case 22STCV20586 2023-03-24 Tentative Ruling

Pursuant to California Rule of Court 3.1308(a)(1), the Court does not desire oral argument on the demurrer addressed herein. As required by Rule 3.1308(a)(2), any party seeking oral argument must notify ALL OTHER PARTIES and the staff of Department 76 of their intent to appear and argue. Notice to Department 76 may be sent by email to smcdept76@lacourt.org or telephonically at 213-830-0776. If notice of intention to appear is not given and the parties do not appear, the Court will adopt the tentative ruling as the final ruling.

Plaintiff alleges that Defendant has failed to repair the subject vehicle to conform to applicable warranties and concealed the existence of a Cooling System Defect.

Defendant General Motors LLC. demurs to the Complaint and moves to strike portions thereof.

Defendant General Motors LLC’s demurrer to the First Amended Complaint is SUSTAINED with leave to amend as to the fifth cause of action. The motion to strike is GRANTED with leave to amend as the request for punitive damages in the Prayer, ¶ d.

The Declaration of Arash Yaraghchian reflects that Defendant satisfied the meet and confer requirement set forth in Civ. Proc. Code, § 430.41.

Defendant argues that this cause of action is barred by the three-year statute of limitations set forth in Civ. Proc. Code § 338(d). Defendant argues that Plaintiff’s fraud claim was complete with all requisite elements at the time of the purchase on May 15, 2018. (1AC, ¶ 6.) Thus, Defendant argues, Plaintiff had until May 15, 2021 to bring this fraud cause of action. The Complaint was filed in this action on June 23, 2022.

A cause of action for relief on the ground of fraud or mistake is subject to a three-year statute of limitations. (Civ. Proc. Code., § 338(d)). “The cause of action in that case is not deemed to have accrued until the discovery, by the aggrieved party, of the facts constituting the fraud or mistake.” (Id.) However, if the facts pled in the complaint show that discovery occurred outside of the limitations period, the plaintiff must allege the date and manner of such discovery and why the delay in discovery is excused. (Wilson v. Wilson (1962) 199 Cal.App.2d 542, 544-45.)

It is true that the three-year statute does not commence to run against an action for fraud or mistake until discovery thereof (Citations [*545] omitted). But the burden is upon plaintiff to allege and prove facts which show the date and manner of such discovery.

As it is often stated, plaintiff must plead facts to excuse the late discovery (Citations omitted). It is not sufficient merely to allege ignorance at one time and discovery at another (Citation omitted). Rather, the circumstances of the claimed discovery must be pleaded (citation omitted), and it is then for the court to determine from such allegations whether the delay was excusable (Citation omitted).

Here, Plaintiff’s fraud by concealment claim is based upon Defendant’s alleged failure to disclose the existence of the engine cooling system defect. (1AC, ¶ 71.) Plaintiff alleges that the Defect causes various engine problems which can result in sudden and unexpected engine failure. (Id. at ¶ 73.) More specifically, ¶ 22 of the 1AC alleges:

GM knew since 20210, if not earlier, that model year 2011 Chevrolet Cruze vehicles (hereinafter “Chevy Vehicles”), contained one or more design and/or manufacturing defects in their engine cooling systems (i.e., the “Cooling System Defect”) that results in an engine coolant leak from the water pump, water pump weep reservoir, and/or water pump shaft seal. This defect – which typically manifests itself during and shortly after the limited warranty period has expired – will cause Chevy Vehicles to experience reduced cooling performance, engine overheating, coolant odor, reduced engine power, stalling, and/or total engine failure.

39. On June 8, 2020, Plaintiff presented Subject Vehicle to Defendant’s authorized repair facility with various concerns, including engine issues. The authorized repair facility performed warranty repairs.

40. On June 24, 2020, Plaintiff presented Subject Vehicle to Defendant’s authorized repair facility with various concerns, including Stabilitrac issues. The authorized repair facility performed warranty repairs.

41. On July 7, 2020, Plaintiff presented Subject Vehicle to Defendant’s authorized repair facility with various concerns, including engine issues. The authorized repair facility performed warranty repairs.

42. Thereafter, Plaintiff has continued to experience symptoms of the Subject Vehicle’s defects despite the foregoing. The Stabilitrac warning light comes on approximately every other day. This problem was reported to the dealership while under warranty and has persisted even after the authorized dealership purported to fix the issue. Plaintiff will have to

43. Plaintiff discovered Defendant’s wrongful conduct alleged herein shortly before the filing of the complaint, as the Vehicle continued to exhibit symptoms of the defects following Defendant’s unsuccessful attempts to repair them. However, Defendant failed to provide restitution pursuant to Song-Beverly and/or Magnuson-Moss Warranty Act.

Thus, Plaintiff alleges that in June and June 2020—about two years after she purchased the vehicle—she experienced two engine issues. (1AC, ¶¶ 39, 41.) (Of course, Plaintiff might not have alleged earlier repair visits to attempt to avoid the statute of limitations bar, which is a matter for discovery.)

It is a question of fact as to whether Plaintiffs should have reasonably discovered that Defendant knowingly concealed the existence of a known engine cooling system defect (and thus committed fraudulent concealment), prior to the expiration of the three-year statute of limitations relative to the June 23, 2022 filing of the Complaint, i.e., before June 23, 2019. (E-Fab, Inc. v. Accountants, Inc. Services (2007) 153 Cal.App.4th 1308, 1320.)

“Resolution of the statute of limitations issue is normally a question of fact.” (Fox, supra, 35 Cal.4th at p. 810.) More specifically, as to accrual, “once properly pleaded, belated discovery is a question of fact.” (Bastian v. County of San Luis Obispo, supra, 199 Cal. App. 3d at p. 527.) As our state's high court has observed: “There are no hard and fast rules for determining what facts or circumstances will compel inquiry by the injured party and render him chargeable with knowledge. [Citation.] It is a question for the trier of fact.” (United States Liab. Ins. Co. v. Haidinger-Hayes, Inc., supra, 1 Cal.3d at p. 597 [reversing judgment after demurrer].) “However, whenever reasonable minds can draw only one conclusion from the evidence, the question becomes one of law.” (Snow v. A. H. Robins Co. (1985) 165 Cal. App. 3d 120, 128 [211 Cal. Rptr. 271] [reversing summary judgment].) Thus, when an appeal is taken from a judgment of dismissal following the sustention of a demurrer, “the issue is whether the trial court could determine as a matter of law that failure to discover was due to failure to investigate or to act without diligence.” (Bastian v. County of San Luis Obispo, at p. 527.)

(E-Fab, Inc. v. Accountants, Inc. Services (2007) 153 Cal.App.4th 1308, 1320.)

In light of the foregoing, the Court does not address tolling allegations in the 1AC, which may become relevant at trial if the jury believes the statute of limitations expired before June 23, 2019.

Fraud causes of action must be pled with specificity. (Hills Transportation Co. v. Southwest Forest Ind., Inc. (1968) 266 Cal.App.2d 702, 707.) The complaint must allege facts as to “‘how, when, where, to whom, and by what means the representations were tendered.’” (Stansfield v. Starkey (1990) 220 Cal.App.3d 59, 73.) “The requirement of specificity in a fraud action against a corporation requires the plaintiff 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. (Citations omitted.)” (Tarmann v. State Farm Mut. Auto. Ins. Co. (1991) 2 Cal.App.4^th 153, 157.)

Less specificity is required to plead fraud by concealment. (Jones v. ConocoPhillips Co. (2011) 198 Cal.App.4th 1187, 1199.) However, “[i]f a fraud claim is based upon failure to disclose, and ‘the duty to disclose arises from the making of representations that were misleading or false, then those allegations should be described.’ (Citation omitted.)” (Morgan v. AT&T Wireless Services, Inc. (2009) 177 Cal.App.4th 1235, 1262.)

31. Plaintiff is a reasonable consumer who interacted with sales representatives, considered GM’s advertisement, and/or other marketing materials concerning Chevy Vehicles prior to purchasing the Subject Vehicle. Specifically, prior to purchase, Plaintiff researched the features and components of the Chevy Cruze on GM’s website, reviewed brochures made available at the dealership and saw the window sticker affixed to Subject Vehicle. Had GM revealed the Cooling System Defect prior to purchase, Plaintiff would have been aware of it and would not have purchased the Subject Vehicle.

More specificity is required as to when, if at all, Plaintiff was exposed to Defendant’s marketing materials and exactly what statements were made in the materials upon which Plaintiff relied. Plaintiff must allege statements which would constitute, at the very least, half-truths if not outright misrepresentations as to the subject vehicle, and actual reliance upon such statements.

Civil Code § 1710(3)(deceit is defined to include “[t]he suppression of a fact, by one who is bound to disclose it, or who gives information of other facts which are likely to mislead for want of communication of that fact. . . .”)(bold emphasis added).

In a misleading half-truth situation, where the defendant undertakes to provide some information, the defendant is “obliged to disclose all other facts which ‘materially qualify’ the limited facts disclosed. (Citations omitted.)” (Randi W. v. Muroc Joint Unified School Dist. (1997) 14 Cal.4th 1066, 1082.)

[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. [Citation.]’ [Citation.]” (Citation omitted.)

(Kaldenbach v. Mutual of Omaha Life Ins. Co. (2009) 178 Cal.App.4th 830, 850.)

Plaintiff does not sufficiently allege with specificity the statements made in the marketing materials upon which she relied, including what was said, when and respectively, in what manner, and why the Cooling System Defect was a material omission relative to such representations.

Defendant argues that no transactional relationship between GM and Plaintiff is alleged which gives rise to a duty to disclose.

“There are ‘four circumstances in which nondisclosure or concealment may constitute actionable fraud: (1) when the defendant is in a fiduciary relationship with the plaintiff; (2) when the defendant had exclusive knowledge of material facts not known to the plaintiff; (3) when the defendant actively conceals a material fact from the plaintiff; and (4) when the defendant makes partial representations but also suppresses some material facts. [Citation.]’ ” (Citations omitted.) Where, as here, there is no fiduciary relationship, the duty to disclose generally presupposes a relationship grounded in “some sort of transaction between the parties. [Citations.] Thus, a duty to disclose may arise from the relationship between seller and buyer, employer and prospective employee, doctor and patient, or parties entering into any kind of contractual agreement. [Citation.]” (Citation omitted.)

(OCM Principal Opportunities Fund, L.P. v. CIBC World Markets Corp. (2007) 157 Cal.App.4th 835, 859 [bold emphasis added].)

Thus, if Plaintiff can specifically plead the misrepresentations to which she was exposed in promotional materials, the fact that Defendant had exclusive knowledge of material facts not known to Plaintiff and which Defendant actively concealed from Plaintiff would give rise to a duty to disclose in the promotional materials.

The Declaration of Arash Yaraghchian reflects that Defendant satisfied the meet and confer requirement set forth in Civ. Proc. Code, § 435.5.

For the reasons discussed above re: the demurer, Plaintiff has not sufficiently pled fraud with specificity.

Moreover, although it appears that punitive damages are available as to the Song-Beverly Act claims (Johnson v. Ford Motor Co. (2005) 135 Cal.App.4th 137, 141, 143), so long as they are not awarded for the same acts for which a civil penalty is recovered (Troensegaard v. Silvercrest Indus. (1985) 175 Cal.App.3d 218, 228.), Plaintiff has not pled malice, oppression or fraud[1] in connection with the Song-Beverly Act violations.

“The Johnsons sued Ford and Decker for intentional and negligent misrepresentation and concealment, violations of the Song-Beverly Consumer Warranty Act (Civ. Code, §§ 1790–1795.7) (Lemon Law), the Consumer Legal Remedies Act (Civ. Code, §§ 1750–1784), the unfair competition law (Bus. & Prof. Code, §§ 17200–17210), and the prohibition on false or misleading advertising (Bus. & Prof. Code, § 17500). Plaintiffs settled with Decker prior to trial and, after the jury verdict, voluntarily dismissed their unfair competition and false advertising causes of action against Ford.” (Johnson, supra, 35 Cal.4th at pp. 1197–1198, fn. omitted.)

The jury awarded plaintiffs $ 17,811.60 in compensatory damages and punitive damages of $ 10 million. The Supreme Court summarized our disposition of defendant's appeal: “The Court of Appeal found substantial evidence not only that Ford had fraudulently concealed material facts from the Johnsons by failing to provide them the warranty buyback notice required under section 1793.24, but also that punitive damages against the corporation were justified because ‘defendant's entire customer response program was structured precisely to short-circuit lemon law claims whenever defendant plausibly could,’ by restrictively interpreting state lemon laws and ignoring the possibility of nonpresumptive lemons.” (Johnson, supra, 35 Cal.4th at p. 1200.) In conducting our de novo review of the punitive damages for constitutional excessiveness, however, we modified the $ 10 million judgment, concluding that punitive damages of $ 53,435 (three times the compensatory damages) was the maximum award permitted under the due process clause of the federal Constitution.

(Johnson v. Ford Motor Co. (2005) 135 Cal.App.4th 137, 141, 143 [bold emphasis added].)

As we stated in our earlier opinion in this case, the Song-Beverly Consumer Warranty Act is the most comparable statutory regulation of the kind of conduct involved in this case. Song-Beverly provides for a civil penalty equal to twice the compensatory damages award when the defendant has committed a “willful” violation of the act. Here, however, the jury found, in essence, that defendant intentionally concealed information with the intent to defraud plaintiffs. Thus, on the one hand, the statutory scheme does not (with its double damages penalty) “tend to support the present award of [$ 10 million] in punitive damages, a sum [560] times the financial harm defendant's fraud caused plaintiff.” (Simon, supra, 35 Cal.4th at p. 1184 [in Simon the bracketed amounts were $ 1.7 million and 340 times the compensatory damages, respectively].) On the other hand, the present intentional conduct (based, as it was, on formal company-wide practices and policies) was [*149] significantly more egregious than the minimum “willful” conduct sufficient to support a Song-Beverly civil penalty. Accordingly, in our view, the comparison with Song-Beverly does not begin to justify the $ 10 million punitive damages award, but neither does Song-Beverly represent a legislative determination that punitive damages for the intentional conduct before us must be limited to the lower end of the ordinary range of such damages.

We conclude that punitive damages of $ 175,000, or just less than 10 times the compensatory award, will sufficiently vindicate California's “legitimate interests in punishing unlawful conduct and deterring its repetition.” (BMW, supra, 517 U.S. at p. 568.)

(Johnson, supra, 135 Cal.App.4th at 148-149, 150 [bold emphasis and underlining added].)

It also appears that punitive damages and a civil penalty cannot be recovered for the same acts, i.e., double recovery is not permitted, and Plaintiffs may eventually be found to have waived punitive damages:

We are of the opinion that had the Legislature, by Civil Code sections 3294 (permitting punitive damages) and 1794 (permitting a civil penalty), intended a double recovery of punitive and penal damages for the same willful, oppressive, malicious, and oppressive acts, it would in some appropriate manner have said so. And we believe that by seeking a "civil penalty" and also attorney's fees and all reasonable expenses as allowed by Civil Code section 1794, plaintiff had in effect elected to waive punitive damages under section 3294.

[1]

(1) “Malice” means conduct which is intended by the defendant to cause injury to the plaintiff or despicable conduct which is carried on by the defendant with a willful and conscious disregard of the rights or safety of others.

(2) “Oppression” means despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person’s rights.

(3) “Fraud” means an intentional misrepresentation, deceit, or concealment of a material fact known to the defendant with the intention on the part of the defendant of thereby depriving a person of property or legal rights or otherwise causing injury.

(Civ. Code, § 3294 (Deering).)