Judge Christopher K. Lui, Case Number: 24STCV09164, Date: 2025-01-15 Tentative Ruling

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

Defendant General Motors LLC. demurs to the First Amended 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 at the Prayer for Relief, ¶ g at 16:4.

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

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.)

67. Plaintiff is a reasonable consumer who interacted with sales representatives, considered Defendant GM’s advertisement, and/or other marketing materials concerning GM Vehicles prior to purchasing Subject Vehicle. Had Defendant GM and its dealership(s) revealed the Transmission Defect in these disclosures, Plaintiff would have been aware of it and would not have purchased Subject Vehicle. For example, Defendant GM marketed and sold its new 8- speed automatic transmissions as having “world-class performance” rivaling top performance vehicles, lightning-fast and smooth shifting, along with improved fuel efficiency, among other representations. Defendant GM’s own press release dated January 13, 2014, introduced the new 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

Plaintiff does not allege that she was exposed to Defendant’s marketing materials and exactly what statements were made in the materials upon which Plaintiff relied in making her purchase decision. 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.)

To the extent that the court in Dhital v. Nissan N. Am. Inc. (2022) 84 Cal.App.5^th 828, 844 held that less specific allegations were sufficient at the pleading stage, the California Supreme Court has recently reiterated that the specificity requirement applies to fraudulent concealment claims:

As an additional point, Robinson emphasized California’s pleading requirement that fraud must be alleged with specificity. The requirement provides an important safeguard against the risk of tort recovery for fraud in every case involving conduct occurring during a contractual relationship. (Robinson, supra, 34 Cal.4th at p. 993.) When affirmative misrepresentation fraud is alleged, “‘“This particularity requirement necessitates pleading facts which ‘show how, when, where, to whom, and by what means the representations were tendered.”‘” (Ibid.; see Hills Trans. Co. v. Southwest Forest Industries, Inc. (1968) 266 Cal.App.2d 702, 707 [72 Cal. Rptr. 441].) Uber argues that, because a fraudulent concealment claim “concerns a defendant’s alleged failure to speak,” the pleading standard is necessarily more relaxed, thus weakening this safeguard. Not so.

California courts apply the same specificity standard to evaluate the factual underpinnings of a fraudulent concealment claim at the pleading stage, even though the focus of inquiry shifts to the unique elements of the claim. (Goodman v. Kennedy (1976) 18 Cal.3d 335, 347 [134 Cal. Rptr. 375, 556 P.2d 737]; Boschma v. Home Loan Center, Inc. (2011) 198 Cal.App.4th 230, 248 [129 Cal. Rptr. 3d 874]; Cansino v. Bank of America (2014) 224 Cal.App.4th 1462, 1472 [169 Cal. Rptr. 3d 619].) For instance, in a case such as this, the court must determine whether the plaintiff has alleged a sufficient factual basis for establishing a duty of disclosure on the part of the defendant independent of the parties’ contract. If the duty allegedly arose by virtue of the parties’ relationship and the defendant’s exclusive knowledge or access to certain facts, as Rattagan has alleged here, the complaint must also include specific allegations establishing all the required elements, including (1) the content of the omitted facts, (2) the defendant’s awareness of the materiality of those facts, (3) the inaccessibility of the facts to the plaintiff, (4) the [*44] general point at which the omitted facts should or could have been revealed, and (5) justifiable and actual reliance, either through action or forbearance, based on the defendant’s omission. “[M]ere conclusionary allegations that the omissions were intentional and for the purpose of defrauding and deceiving plaintiff[] … are insufficient for the foregoing purposes.” (Goodman, at p. 347.)

(Rattagan v. Uber Technologies, Inc. (2024) 17 Cal.5th 1, 43-44 [bold emphasis and underlining added].)

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 could have 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. However, as discussed above, Plaintiff did not meet this pleading standard. So this ground for demurrer is persuasive based upon the present allegations.

The relationship between the manufacturer of medical devices in Bigler-Engler v. Breg, Inc. (2017) 7 Cal.App.5th 276, cited by Defendant for the proposition that there is an insufficient transactional relationship, is different than the relationship between a car manufacturer and a car buyer. In Bigler-Engler, the evidence did not show that the manufacturer directly advertised its products to consumers, nor that it derived any monetary benefit directly from the consumer’s rental of the medical device. (Id. at 314.)

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

u Prayer for Relief, ¶ g at 16:4 (punitive damages): GRANTED with leave to amend.

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).)