Judge: David B. Gelfound, Case: 23CHCV03594, Date: 2024-04-25 Tentative Ruling

Case Number: 23CHCV03594    Hearing Date: April 25, 2024    Dept: F49

LOS ANGELES SUPERIOR COURT

NORTH VALLEY DISTRICT

DEPARTMENT F-49

DEMURRER WITH MOTION TO STRIKE

Motion filed: 4/3/24

MOVING PARTY: Defendant General Motors LLC (“GM” or the “Moving Defendant”)

RESPONDING PARTY: Plaintiffs Elliot Minge Brown and Deborah Ali Kelson (“Plaintiffs”)

NOTICE: OK¿¿¿ 

RELIEF REQUESTED: An order to grant GM’s demurrer to the Fourth and Fifth Cause of Action in Plaintiffs’ First Amended Complaint, and to strike the prayer for exemplary or punitive damages.

TENTATIVE RULING: The demurrer is OVERRULED. The motion to strike is DENIED.

BACKGROUND

Plaintiffs filed this Song-Beverly Consumer Warranty Act lawsuit over alleged defects in their 2022 Chevrolet Bolt (the Vehicle), which was manufactured by Defendant GM. Plaintiffs purchased the Vehicle in new condition on July 18, 2021, from Stewart Chevrolet, an authorized dealership of GM. (FAC., ¶¶ 4-6.)

On November 27, 2023, Plaintiffs initiated this action. Subsequently, on March 1, 2024, Plaintiffs filed their First Amended Complaint (“FAC”) in response to a demurrer filed by GM on December 27, 2023, resulting in GM’s withdrawal of the December 27, 2023, demurrer.

On April 3, 2024, GM filed the instant Demurrer (the “Demurrer”) with Motion to Strike (the “Motion”). Subsequently, on April 16, 2024, Plaintiffs filed their Opposition. On April 17, 2024, GM replied.

ANALYSIS

A demurrer can be used only to challenge defects that appear on the face of the pleading under attack; or from matters outside the pleading that are judicially noticeable. (Blank v. Kirwan (1985) 39 Cal 3d 311, 318.) No other extrinsic evidence can be considered.

A demurrer for sufficiency tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal. App. 4th 740, 747 (Hahn).)  When considering demurrers, courts read the allegations liberally and in context.  (Taylor v. City of Los Angeles Dep’t of Water & Power (2006) 144 Cal. App. 4th 1216, 1228.)  In a demurrer proceeding, the defects must be apparent on the face of the pleading or via proper judicial notice.  (Donabedian v. Mercury Ins. Co. (2004) 116 Cal. App. 4th 968, 994.) 

“A demurrer tests the pleadings alone and not the evidence or other extrinsic matters.  Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed.”  (SKF Farms v. Superior Ct. (1984) 153 Cal. App. 3d 902, 905.)  “The only issue involved in a demurrer hearing is whether the complaint, as it stands, unconnected with extraneous matters, states a cause of action.”  (Hahn, supra, 147 Cal.App.4th at 747.) 

A.    Request for Judicial Notice

GM requests the Court to take judicial notice that the United States Environmental Protection Agency (“EPA”) estimated that 2020-2022 model-year Chevrolet Bolts have a total range of 259 miles, as reported on the government website www.fueleconomy.gov. Defendant cites authority under Evidence Code section 452, subdivisions (b) and (h).

Pursuant to Evidence Code section 452, “Judicial notice may be taken of the following matters ... [:] (b) Regulations and legislative enactments issued by or under the authority of the United States or any public entity in the United States.... (h) acts and propositions that are not reasonably subject to dispute and are capable of immediate and accurate determination by resort to sources of reasonably indisputable accuracy.”

Given that the source of the publication is deemed reliable, and the information is capable of immediate and accurate determination by resort to EPA’s publication. The Court GRANTS the request, pursuant to Evidence Code section 452, subdivision (h).

B.     Meet and Confer Requirement

A party filing a demurrer “shall meet and confer in person or by telephone with the party who filed the pleading that is subject to demurrer for the purpose of determining whether an agreement can be reached that would resolve the objections to be raised in the demurrer.” (Code Civ. Proc., section 430.41(a).) A failure to meet and confer does not constitute grounds to sustain or overrule a demurrer. (See Code Civ. Proc., sections 430.41 (a)(4).)

            Here, GM’s counsel attests that he met and conferred with Plaintiffs’ counsel via videoconference on March 1, 2024, discussing the issues raised in the Demurrer and the Motion. However, the parties were unable to reach an agreement. (Park Decl., ¶ 1.)

            Accordingly, the Court concludes that the meet and confer requirement has been satisfied.

C.    Fourth Cause of Action - Fraud

The FAC alleges fraud claims under both affirmative misrepresentation and fraudulent concealment legal theories. (FAC., at p. 15-16.)

1.      Affirmative Misrepresentation

A claim for fraud must plead all of the following elements: (1) misrepresentation; (2)¿knowledge of falsity; (3) intent to induce reliance; (4) justifiable reliance; and (5) resulting damage.  (Odorizzi v. Bloomfield School Dist. (1966) 246 Cal.App.2d 123, 128; Wilhelm v. Pray, Price, Williams & Russell (1986) 186 Cal.App.3d 1324, 1332.) 

Fraud actions are subject to strict requirements of particularity in pleading.  (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 216.)  Particularity requires facts that show how, when, where, to whom, and by what means the representations were tendered.  (Lazar v. Superior Court (1996) 12¿Cal.4th 631, 645.) 

            GM contends that Plaintiff’s Fraud claims do not meet the specificity standards by failing to allege: (i) the identity of the GM employee that made the representations to, or concealed the facts from, Plaintiff; (ii) the employee’s authority to speak and act on behalf of GM; (iii) GM’s

knowledge about alleged defects in the Bolt at the time of Plaintiff’s purchase, (iv) what specific

GM representations reviewed and relied upon in purchasing the Subject Vehicle; (v) how long prior to purchasing the Vehicle the representations were reviewed, if even reviewed pre-purchase, and which representation therein was relied upon; and (vi) whether those materials were prepared by GM or someone else (such as an independent dealership).” (Dem., at p.9.)

The Court finds these arguments unpersuasive. Plaintiffs allege GM’s affirmative misrepresentation presents, through venues including vehicle brochures, websites, print and television advertisement, that “a vehicle that was functional and safe ... the battery could be charged to 100 percent and could be charged safely indoors.” (FAC, ¶¶ 32, 39, 49.) Moreover, the FAC alleges that “GENERAL MOTORS knew this was false because of the reported fires and the previous advisory NHTSA in 2017 warning about charging batteries to 100 percent. In fact, once the recall was issued, Plaintiffs was not able to charge her vehicle’s battery to full capacity.” (Id., ¶ 32.) Furthermore, it is stated that “Plaintiffs would not have bought the vehicle if they had known it was neither safe nor functioned as advertised, based on Defendant’s standards for normal use.” (Id., ¶ 49.)

The Court finds that these allegations provide Defendant with sufficient notice to prepare its case. (See Harris v. City of Santa Monica (2013) 56 Cal.4th 203, 240.) The specifics of where, when and from whom Plaintiff received Defendant’s commercial brochure containing the alleged misrepresentation does not seem to add much utility. And the production of the alleged misrepresentation by verbatim can be adduced during discovery.

GM also argues that the FAC alleges that Defendant advertised a competitive 259 miles electric range (FAC, ¶ 38), which, as a matter of law, does not constitute a misrepresentation as there is nothing false or misleading when a car manufacturer’s advertising that identifies the EPA fuel economy estimates for the car, citing Gray v. Toyota Motor Sales, U.S.A. Inc. (9th Cir. 2014) 554 Fed. Appx. 608, 609 (Gary). However, this narrow interpretation of the pleading does not align with the standards of reviewing a demurrer. In such rulings, the allegations of the complaint must be liberally construed, with a view to substantial justice between the parties. (Glennen v. Allergan, Inc. (2016) 247 Cal.App.4th 1, 6.) While a demurrer admits all facts properly pleaded, it does not admit contentions, deductions or conclusions of law or fact. (George v. Automobile Club of Southern California (2011) 201 Cal.App.4th 1112, 1120, 135.)

Applying the liberal construction principle, the Court finds that the FAC alleges GM’s affirmative misrepresentation encompasses more than EPA estimates but also safety associated with the use and charging of the battery, which falls outside the ruling in the Gary case.

            Accordingly, the Court OVERRULES the Demurrer on this basis.

2.      Fraudulent Concealment

“[T]he elements of an action for fraud and deceit 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.”  (Boschma v. Home Loan Ctr., Inc. (2011) 198 Cal. App. 4th 230, 248, [internal citations omitted].) 

                                i.            Economic Loss Rule

Defendant argues that the “economic loss rule” limits damages to those sounding in contract alone because the damages arise out of a warranty. However, the Court also finds that the Economic Loss Rule does not bar the claim.

As held by the court in Robinson Helicopter Co., Inc. v. Dana Corp., 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 (Robinson).) However, the doctrine does not apply “where the contract was fraudulently induced.” (Id. at p. 989–90.)

Although Robinson considers intentional misrepresentation claims, it held that any fraud cause of action that involves “dispositive fraudulent conduct related to the performance of [a] contract” is sufficient to act as an exception to the economic loss rule. (Robinson, supra, 34 Cal.4th at p. 991.) Further, under California law, conduct amounting to a breach of contract becomes tortious when it also violates a duty independent of the contract arising from principles of tort law. (Erlich v. Menezes (1999) 21 Cal.4th 543, 551.) An omission to perform a contract obligation is never a tort, unless that omission is also an omission of a legal duty. (Id., at p. 551.), This is applicable in situations like the current case, where the contract was fraudulently induced. (Id., at p. 553.)

Consequently, the Court finds that a fraudulent concealment cause of action is also a tort independent of a breach of a warranty contract. As noted above, Plaintiffs allege that “Had Plaintiffs known of these safety issues and use limitations a month prior, he would not have purchased the vehicle.” (FAC, ¶ 108.) Therefore, the Court concludes that the economic loss doctrine does not apply here because Plaintiffs sufficiently allege that the contract was fraudulently induced.

                              ii.            Duty to Disclose Material Facts

Next, GM contends that Plaintiffs have not sufficiently alleged any duty owed by GM to disclose any material facts about the Vehicle. (Dem., at p. 13-14.)

“[T]o establish fraud through nondisclosure or concealment of facts, it is necessary to show the defendant ‘was under a legal duty to disclose them.’”  (OCM Principal Opportunities Fund v. CIBC World Markets Corp. (2007) 157 Cal.App.4th 835, 845.)  “‘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.’”  (Hoffman v. 162 N. Wolfe LLC (2014) 228 Cal. App. 4th 1178, 1186.)  “A relationship between the parties is present if there is ‘some sort of transaction between the parties.’”  (Ibid.) (Underlines added.)

A duty to disclose that is based upon a “transaction must necessarily arise from direct dealings between the plaintiff and the defendant; it cannot arise between the defendant and the public at large.” (Bigler-Engler v. Breg, Inc. (2017) 7 Cal.App.5th 276, 312.)  Even where the defendant has volunteered information, it does not have a further obligation to correct half-truths where no sufficient relationship or transaction exists.  (Id. at p.312.)  Simply speaking does not give rise to a duty to disclose.  (Ibid.)  In Bigler-Engler, the court noted that the manufacturer in that case was not involved “in any way” with the patient, and that there was no evidence that the manufacturer “directly advertised its products to consumers such as” the patient.  (Id. at p.314.)

Here, the Court finds that Plaintiffs have adequately alleged a duty to disclose based on Defendant’s superior knowledge. To plead that a defendant had a duty to disclose a material fact, a plaintiff must allege that “the defendant has exclusive knowledge of material facts not known or reasonably accessible to the plaintiff.” (See Collins v. eMachines, Inc. (2011) 202 Cal.App.4th 249, 255.) Plaintiffs allege that “knowledge and information regarding the vehicle’s defects were in the exclusive and superior possession of Defendant and their dealers, and were not provided to Plaintiffs, who could not reasonably discover the defect through due diligence.” (FAC, ¶ 99.) Moreover, the FAC presents, “Defendant had exclusive knowledge of the material, suppressed facts ... Defendant made partial representations about the mileage range, battery safety, and performance of the vehicle that were misleading without disclosure o[f] the fact that the vehicle contained unsafe batteries[.]” (Id., ¶ 101.)

GM contends that “the mere fact that fires occurred in a miniscule number of Bolts, GM issues a recall notice, NHTSA opened an investigation, and GM sent a letter indicating that it would replace the vehicle’s battery is not enough to plausibly allege that GM knew of and intentionally misrepresented or concealed any material facts from Plaintiff at the time Plaintiff purchased the vehicle,” and argue that “the NHTSA investigation case doubt” on GM’s exclusive knowledge of material facts “when such information seems to have been publicly available.” (Dem., at p. 11.)

The Court finds this argument essentially disputes Plaintiff’s factual allegation. However, as the Court has explained previously, at the stage of demurrer, it is required to presume all the material factual allegations in the complaint as true (Aubry v. TriCity Hospital Dist. (1992) 2 Cal 4th 962, 966-967), without weighting or determining the credibility of conflicting evidence.

Consequently, the Court concludes the FAC sufficiently alleges the existence of GM’s duty to disclose.

Accordingly, the Court OVERRULES the Demurrer as to the Fourth Cause of Action.

D.    Fifth Cause of Action – Violation of Business & Professions Code Section 17200 (Unfair Competition Law)

California Business and Professions Code section 17200 prohibits “any unlawful, unfair or fraudulent business act or practice.” (Bus. & Prof. Code § 17200; see Clark v. Superior Court (2010) 50 Cal.4th 605, 610.) “An unlawful business practice or act is an act or practice, committed pursuant to business activity, that is at the same time forbidden by law.” (Klein v. Earth Elements, Inc. (1997) 59 Cal.App.4th 965, 969.)¿

GM acknowledges that “while an act that breaches a contract could also breach the UCL, the underlying act must be unfair, unlawful or fraudulent for some additional reason, referencing Boland, Inc. v. Rolf C. Hagen (USA) (E.D.Cal.2010) 685 F. Supp.2d 1094, 1110.

As the Court has previously concluded that the FAC presents sufficient pleading to state the cause of action for fraud, it further finds that the “fraudulent prong” sufficiently pleaded for the UCL claim.  Notably, a demurrer should not be sustained if the plaintiff has stated a cause of action under any possible legal theory. (Barquis v. Merchants Collection Assn. (1972) 7 Cal.3d 94, 103.)

Therefore, the Court OVERRULES the Demurrer as to the Fifth Cause of Action.

E.     Motion to Strike

The court may, upon a motion, or at any time in its discretion, and upon terms it deems proper, strike any irrelevant, false, or improper matter inserted in any pleading. (Code Civ. Proc., § 436, subd. (a).) The court may also strike all or any part of any pleading not drawn or filed in conformity with the laws of this state, a court rule, or an order of the court. (Code Civ. Proc., § 436, subd. (b).) The grounds for a motion to strike are that the pleading has irrelevant, false, or improper matter, or has not been drawn or filed in conformity with laws. (Code Civ. Proc., § 436.) The grounds for moving to strike must appear on the face of the pleading or by way of judicial notice. (Code Civ. Proc., § 437.)

In its Motion to Strike, GM seeks to strike the following portions from the Prayer for Relief in the FAC:

            Paragraph f (portion): “... and exemplary or punitive damages ...”

            GM moves to strike Plaintiffs’ prayer for exemplary or punitive damages from the FAC on the grounds that no causes of action support the recovery of punitive damages.

The complete paragraph f clearly states that the prayer for the exemplary or punitive damages sought is only based on the Fourth Cause of Action for fraud. (FAC, at p. 23.) Consequently, the Court deems GM’s contentions irrelevant as to punitive damages cannot sustained by the breach of warranty causes of action. Furthermore, as analyzed above, the Fourth Cause of Action in the FAC sufficiently state claims based on fraud. As such, it can give rise to a recovery of punitive damages.

Thus, GM’s Motion to Strike is therefore DENIED.

CONCLUSION

Defendant’s Demurrer is OVERRULED. Defendant’s Motion to Strike is DENIED.

Defendant is ordered to file and serve its Answer to the First Amended Complaint within 20 days.

Moving party to give notice.