Judge: Curtis A. Kin, Case: 22STCV11847, Date: 2023-03-02 Tentative Ruling

Case Number: 22STCV11847    Hearing Date: March 2, 2023    Dept: 72

DEMURRER AND MOTION TO STRIKE

Date:               3/2/23 (9:30 AM)                                           

Case:              Kenneth MacKenzie v. General Motors, LLC (22STCV11847)

TENTATIVE RULING:

Defendant General Motors LLC’s Demurrer to First Amended Complaint is OVERRULED.

Defendant General Motors LLC’s Motion to Strike Punitive Damages from First Amended Complaint is DENIED.

Defendant General Motors LLC demurs to the fifth cause of action for fraudulent inducement-concealment on two grounds: (1) the cause of action is not pled with particularity; and (2) the cause of action is barred by the economic loss rule.

With respect to the first ground, the elements of a cause of action for fraud by omission 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.)

With respect to defendant’s concealment of material facts, plaintiff alleges that defendant concealed that the 2020 Chevrolet Bolt EV’s lithium-ion battery was subject to spontaneous combustion, overheating when charged to full capacity, and loss of power while driving. (FAC ¶¶ 22, 33, 80, 82.) The battery defect posed a serious risk of injury or accident to plaintiff, passengers in the subject vehicle, and other drivers sharing the road with plaintiff. (FAC ¶ 82.) Defendant allegedly knew about the battery defect since at least 2016, but defendant concealed and failed to disclose the battery defect to plaintiff during the time of sale and thereafter. (FAC ¶¶ 21, 24, 28, 33, 36, 84.) Plaintiff alleges where these omissions were made – sales materials, advertisements, publications, online marketing, television, radio, and other marketing campaigns, as well as at the time of sale and during repair visits. (FAC ¶¶ 31, 33.)

Defendant argues that plaintiff does not allege who from defendant made any representations to him or their authority to speak on behalf of GM. Plaintiff alleges that he spoke with defendant’s authorized dealership sales representatives prior to leasing the subject vehicle and that he reviewed marketing materials, but defendant concealed the battery defect. (FAC ¶ 35, 84.) The heightened pleading standard for fraud claims is less stringently applied (if at all) to claims for fraudulent concealment, as opposed to affirmative misrepresentations. (Alfaro v. Community Housing Improvement System & Planning Association, Inc. (2009) 171 Cal.App.4th 1356, 1384.)

With respect to defendant’s duty to disclose the defect to plaintiff, defendant was in a superior position to know about the battery defect through its exclusive knowledge obtained from sources not available to plaintiff, such as pre-production testing data, early consumer complaints about the defect made directly to defendant and its network of dealers, and aggregate warranty data. (FAC ¶¶ 28, 30, 83, 86(a); see LiMandri v. Judkins (1997) 52 Cal.App.4th 326, 336 [duty to disclose arises when the defendant had exclusive knowledge of material facts not known to the plaintiff].)

With respect to whether defendant intentionally concealed or suppressed the battery defect with the intent to defraud plaintiff, defendant allegedly concealed the battery defect, despite knowing about the defect, to induce plaintiff to purchase the subject vehicle. (FAC ¶¶ 87-89.)

With respect to whether plaintiff must have been unaware of the concealed fact and would not have acted as he did if he had known of the concealed or suppressed fact, had plaintiff known about the battery defect, he would not have purchased the vehicle. (FAC ¶¶ 35, 84, 88.)

With respect to whether plaintiff sustained damage due to the concealment of the battery defect, plaintiff sufficiently alleges that defendant’s alleged fraudulent concealment caused him to suffer damages. (FAC ¶ 90.)

Plaintiff adequately states a cause of action for fraudulent inducement by way of concealment.

With respect to the second ground, defendant argues that the fifth cause of action is barred under the economic loss rule because plaintiff has not alleged personal injuries or damages to physical property independent of the subject vehicle. “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.” (Robinson Helicopter Co., Inc. v. Dana Corp. (2004) 34 Cal.4th 979, 988.) However, tort damages may be recovered in contract cases where the contract was fraudulently induced. (Id. at 989-90, quoting Erlich v. Menezes (1999) 21 Cal.4th 543, 551-52; see also Harris v. Atlantic Richfield Co. (1993) 14 Cal.App.4th 70, 78 [“[W]hen one party commits a fraud during the contract formation or performance, the injured party may recover in contract and tort”].) Because plaintiff sufficiently states that defendant fraudulently induced him to purchase the vehicle, the economic loss rule does not bar the fifth cause of action.

The demurrer is OVERRULED.

Because plaintiff sufficiently states a cause of action for fraudulent inducement, defendant’s motion to strike the prayer for punitive damages is DENIED.

Ten (10) days to answer.