Judge: Daniel S. Murphy, Case: 22STCV11736, Date: 2023-01-18 Tentative Ruling

Case Number: 22STCV11736    Hearing Date: January 18, 2023    Dept: 32

BACKGROUND

            On April 6, 2022, Plaintiff Baris Arikan initiated this “lemon law” action stemming from his purchase of a 2020 Chevrolet Bolt electric vehicle. Plaintiff alleges that the battery in the car was defective and prone to sudden failure. The operative First Amended Complaint, filed June 9, 2022, asserts causes of action for violation of the Song-Beverly Act, breach of implied warranty, and fraudulent inducement by concealment.

            On October 10, 2022, this Court sustained Defendant’s demurrer to the fraud claim based on the economic loss rule. However, on October 26, 2022, the Court of Appeal issued its decision in Dhital v. Nissan North America, Inc. (2022) 84 Cal.App.5th 828, holding that the economic loss rule does not bar fraudulent inducement claims.

            On December 15, 2022, Plaintiff filed the instant motion for reconsideration of the Court’s October 10 ruling in light of Dhital.

LEGAL STANDARD

“When an application for an order has been made to a judge, or to a court, and refused in whole or in part, or granted, or granted conditionally, or on terms, any party affected by the order may, within 10 days after service upon the party of written notice of entry of the order and based upon new or different facts, circumstances, or law, make application to the same judge or court that made the order, to reconsider the matter and modify, amend, or revoke the prior order. The party making the application shall state by affidavit what application was made before, when and to what judge, what order or decisions were made, and what new or different facts, circumstances, or law are claimed to be shown.” (Code Civ. Proc., § 1008(a).)

Additionally, “the trial court retains the inherent authority to change its decision at any time prior to the entry of judgment.” (Darling v. Kritt (1999) 75 Cal.App.4th 1148, 1156.) “[S]ection 1008 does not govern the court's ability, on its own motion, to reevaluate its own interim rulings.” (Ibid.) “[T]he only requirement of the court is that it exercise ‘due consideration’ before modifying, amending, or revoking its prior orders.” (Id. at p. 1157.)

DISCUSSION

            Per Dhital, “concealment-based claims for fraudulent inducement are not barred by the economic loss rule. The reasoning in [Robinson Helicopter Co., Inc. v. Dana Corp. (2004) 34 Cal.4th 979] affirmatively places fraudulent inducement by concealment outside the coverage of the economic loss rule.” (Dhital, supra, 84 Cal.App.5th at pp. 840-41.) “[A] defendant's conduct in fraudulently inducing someone to enter a contract is separate from the defendant's later breach of the contract or warranty provisions that were agreed to.” (Id. at p. 841.)

            Defendant acknowledges the Dhital decision but argues that the demurrer was correctly sustained due to other defects in the fraud claim. (Opp. at p. 2, fn. 1.) However, the Court sustained the demurrer solely based on the economic loss rule and did not comment on the sufficiency of the fraud allegations. (See Oct. 10, 2022 Ruling re Demurrer to FAC.) In any case, the fraud claim is adequately pled.

Fraud generally must be pleaded with specificity. (Small v. Fritz Companies, Inc. (2003) 30 Cal.4th 167, 184.) However, the rule “is intended to apply to affirmative misrepresentations.” (Alfaro v. Community Housing Improvement System & Planning Assn., Inc. (2009) 171 Cal.App.4th 1356, 1384.) “[I]t is harder to apply this rule to a case of simple nondisclosure. How does one show ‘how’ and ‘by what means’ something didn't happen, or ‘when’ it never happened, or ‘where’ it never happened?” (Ibid.) “Less specificity should be required of fraud claims when it appears from the nature of the allegations that the defendant must necessarily possess full information concerning the facts of the controversy.” (Ibid.)

            The allegations in the FAC are sufficient to place Defendant on notice of the nature of the claim. The FAC alleges that the subject vehicle contained a defective battery that overheats when charged and results in loss of power or spontaneous combustion. (FAC ¶ 21.) Defendant allegedly knew of the defect through internal testing, consumer complaints, warranty data, repair data, and other sources. (Id., ¶ 28.) Defendant allegedly concealed the known defect from Plaintiff. (Id., ¶ 33.) Plaintiff alleges that he would not have purchased the subject vehicle had he known of the defect. (Id., ¶ 35.) These allegations are sufficient to raise an inference of fraud at the pleading stage, and precise evidentiary facts should be left for discovery. (See Ludgate Ins. Co. v. Lockheed Martin Corp. (2000) 82 Cal.App.4th 592, 608.)

            Defendant also argues that it had no duty to disclose because there was no transactional relationship between it and Plaintiff since the vehicle was purchased from a dealership. However, “a vendor has a duty to disclose material facts not only to immediate purchasers, but also to subsequent purchasers when the vendor has reason to expect that the item will be resold.” (OCM Principal Opportunities Fund, L.P. v. CIBC World Markets Corp. (2007) 157 Cal.App.4th 835, 859.) The court in Dhital rejected the precise argument Defendant makes here. In Dhital, the plaintiffs adequately 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.” (Dhital, supra, 84 Cal.App.5th at p. 844.) Based on these allegations, the court “decline[d] to hold plaintiffs’ claim is barred on the ground there was no relationship requiring Nissan to disclose known defects.” (Ibid.) Plaintiff makes substantially similar allegations in his FAC. (See FAC ¶¶ 6-7, 34.)

            In sum, the fraudulent concealment claim is not barred by the economic loss rule or any other defect raised by Defendant. Accordingly, the Court’s prior order sustaining Defendant’s demurrer should be reversed.

CONCLUSION

            Plaintiff’s motion for reconsideration is GRANTED.