Judge: Gregory Keosian, Case: 22STCV15257, Date: 2022-07-28 Tentative Ruling
Case Number: 22STCV15257 Hearing Date: July 28, 2022 Dept: 61
Defendant
General Motors, LLC’s Demurrer and Motion to Strike Portions of the Complaint are
OVERRULED and DENIED. Defendant to answer within 30 days.
I.
DEMURRER
A demurrer should be sustained only where the defects appear
on the face of the pleading or are judicially noticed. (Code Civ. Pro., §§
430.30, et seq.) In particular, as is
relevant here, a court should sustain a demurrer if a complaint does not allege
facts that are legally sufficient to constitute a cause of action. (See
id. § 430.10, subd. (e).) As the Supreme Court held in Blank v. Kirwan (1985) Cal.3d 311: “We
treat the demurrer as admitting all material facts properly pleaded, but not
contentions, deductions or conclusions of fact or law. . . . Further, we give
the complaint a reasonable interpretation, reading it as a whole and its parts
in their context.” (Id. at p.
318; see also Hahn. v. Mirda (2007)
147 Cal.App.4th 740, 747 [“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. [Citation.]”)
“In determining whether the complaint is sufficient as
against the demurrer … if on consideration of all the facts stated it appears
the plaintiff is entitled to any relief at the hands of the court against the
defendants the complaint will be held good although the facts may not be
clearly stated.” (Gressley v. Williams (1961) 193 Cal.App.2d 636, 639.)
“A demurrer
for uncertainty is strictly construed, even where a complaint is in some
respects uncertain, because ambiguities can be clarified under modern discovery
procedures.” (Khoury v. Maly’s of Cal., Inc. (1993) 14 Cal.App.4th 612,
616.) Such demurrers “are disfavored,
and are granted only if the pleading is so incomprehensible that a defendant
cannot reasonably respond.” (Mahan v.
Charles W. Chan Insurance Agency, Inc. (2017) 14 Cal.App.5th 841, 848.)
A demurrer should not be sustained without leave to amend if
the complaint, liberally construed, can state a cause of action under any
theory or if there is a reasonable possibility the defect can be cured by
amendment. (Schifando v. City of Los Angeles, supra, 31 Cal.4th at p.
1081.) The demurrer also may be sustained without leave to amend where the
nature of the defects and previous unsuccessful attempts to plead render it
probable plaintiff cannot state a cause of action. (Krawitz v. Rusch
(1989) 209 Cal.App.3d 957, 967.)
Defendant argues that the
Complaint does not properly allege a cause of action for concealment because
its allegations are insufficiently specific, because it fails to allege that GM
had a duty to disclose, and because the claim is barred by the economic loss
rule. (Demurrer at pp. 8–15.)
The elements of fraud are: (1)
misrepresentation or concealment, (2) knowledge of its falsity, (3) intent to
defraud, (4) justifiable reliance and (5) resulting damage. (Gil v. Bank of
America, Nat. Ass'n (2006) 138 Cal. App. 4th 1371, 1381; Barbara A.
v. John G. (1983) 145 C.A.3d 369, 376.)
“‘The required elements for
fraudulent concealment are (1) concealment or suppression of a material fact;
(2) by a defendant with a duty to disclose the fact to the plaintiff; (3) the
defendant intended to defraud the plaintiff by intentionally concealing or
suppressing the fact; (4) the plaintiff was unaware of the fact and would not
have acted as he or she did if he or she had known of the concealed or
suppressed fact; and (5) plaintiff sustained damage as a result of the
concealment or suppression of the fact. [Citation.]’ [Citation.]” (Hambrick
v. Healthcare Partners Medical Group, Inc. (2015) 238 Cal.App.4th 124,
162.)
Fraud causes of action must be
pleaded with particularity, meaning that the plaintiff must allege “how, when,
where, to whom, and by what means the representations were tendered.” (Lazar v. Superior Court (1996) 12
Cal.4th 631, 645.)
Defendant argues that Plaintiff
does not allege a single concrete or specific concealment made by Defendant, or
facts sufficient to state that it knew of and intended Plaintiff to rely on any
omission. (Demurrer at pp. 13–14.) This argument is unpersuasive. The Complaint
specifically alleges the nature of the defect by reference to the symptoms
experienced by Plaintiff and the vehicle’s repair history. (Complaint ¶¶
30–53.) And the Complaint alleges that Defendant knew of these problems before
sale of the vehicle through sources unavailable to consumers, such as testing
data and consumer complaints. (Complaint ¶¶ 46–65.) The Complaint also alleges
that Plaintiff reviewed Defendant’s marketing materials prior to purchasing the
vehicle. (Complaint ¶¶ 35–37.) Thus concealment is alleged with sufficient
detail.
Defendant argues that there was
no transactional relationship such that a fraud claim might lie. (Demurrer at
pp. 14–15; see Bigler-Engler v. Breg,
Inc. (2017) 7 Cal.App.5th 276, 312 [transaction giving rise to duty to
disclose “must necessarily arise from direct dealings between the plaintiff and
the defendant; it cannot arise between the defendant and the public at
large”].) But such a relationship exists here. Although Plaintiff is alleged to
have purchased the vehicle from a dealership and not from Defendant directly,
it was Defendant that provided Plaintiff with the warranty that Defendant is
alleged to have breached here. (Complaint ¶ 12.) The warranty formed part of
the exchange, and thus Defendant is alleged to have engaged in a transaction
with Plaintiff.
Defendant also argues that it
had no duty to disclose under the facts alleged because it owed no fiduciary
duty to Plaintiffs. (Demurrer at p. 12.) 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.” (Heliotis v. Schuman (1986) 181 Cal.App.3d
646, 651.)
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.)
The Complaint here alleges that Defendant acquired its knowledge of the defect
through “sources not available to consumers such as Plaintiffs” including
internal reports and customer complaints. (Complaint ¶ 58.) This is
sufficient to state a duty to disclose for the purposes of the present
demurrer.
Defendant finally argues that the “economic loss rule” limits damages
to those sounding in contract alone because the damages arise out of a
warranty. (Demurrer at pp. 14–18.)
“Economic loss consists of
‘“‘“damages for inadequate value, costs of repair and replacement of the
defective product or consequent loss of profits—without any claim of personal
injury or damages to other property . . . .”'” [Citation.]’ [Citation.] Simply
stated, the economic loss rule provides: ‘“‘[W]here a purchaser's expectations
in a sale are frustrated because the product he bought is not working properly,
his remedy is said to be in contract alone, for he has suffered only “economic”
losses.’” This doctrine hinges on a distinction drawn between transactions
involving the sale of goods for commercial purposes where economic expectations
are protected by commercial and contract law, and those involving the sale of
defective products to individual consumers who are injured in a manner which
has traditionally been remedied by resort to the law of torts.’ [Citation.] 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. [Citation.] Quite simply, the
economic loss rule “prevent[s] the law of contract and the law of tort from dissolving
one into the other.” (Robinson Helicopter Co., Inc. v. Dana Corp. (“Robinson”) (2004) 34 Cal.4th 979, 988.)
Defendant neglects, however,
that “‘tort damages have been permitted in contract
cases . . . where the contract was fraudulently induced.” (Robinson, supra, 34 Cal.4th
at p. 990.) As Plaintiff alleges that her purchase of the vehicle was the
product of fraudulent concealment, the economic loss rule does not apply. (FAC
¶ 84.)
Defendant cites a number of federal cases holding that the economic
loss rule bars fraudulent concealment claims brought on the same basis as
breach of warranty claims. (See,
e.g., Zagarian v. BMW of North America, LLC (C.D. Cal., Oct. 23, 2019, No. CV 18-4857-RSWL-PLA) 2019 WL 6111731,
at *3; Hammond v. BMW of North America,
LLC (C.D. Cal., June 26, 2019, No.
CV 18-226 DSF (MRWX)) 2019 WL 2912232, at *3; Thompson v. BMW of North America, LLC (C.D. Cal., Jan. 10, 2019, No. SACV 17-01912-CJC-KS) 2019 WL 988694,
at *5; Kelsey v. Nissan North
America (C.D. Cal., July 15, 2020,
No. CV 20-4835 MRW) 2020 WL 4592744, at *2.) None are binding upon this court,
and opinion on the issue is not unanimous even among the federal courts that
Defendant cites. (See Scherer v. FCA US, LLC (S.D. Cal., Oct. 5, 2021,
No. 320CV02009AJBBLM) 2021 WL 4621692, at *5 [holding that economic loss rule
did not bar claim for fraudulent concealment where it was alleged that
concealment induced the contract]; see also LMNO Cable Group, Inc. v.
Discovery Communications, LLC (C.D. Cal., May 15, 2020, No. LACV1604543JAKSKX)
2020 WL 10759618, at *12.) Moreover,
none of Defendant’s cases addresses
the Robinson court’s express admonition that plaintiffs
are not bound merely to economic losses when the contract itself forming the basis for that limitation is induced by fraud. The Robinson court
explained the reason for such an exception was because “the duty that gives
rise to tort liability is either completely independent of the contract or
arises from conduct which is both intentional and intended to harm.” (Id. at p. 990.) Here, it is alleged not
merely that Defendant breached its contract in a fraudulent way, as was the
underlying fact-pattern of Robinson, but that Defendant fraudulently
induced Plaintiff to enter into a purchase contract that they otherwise would
not have entered into. The economic loss rules forms no basis to sustain the
demurrer here.
The demurrer is therefore
OVERRULED.
II.
MOTION TO
STRIKE
Any
party, within the time allowed to respond to a pleading, may serve and file a
notice of motion to strike the whole or any part thereof. (Code Civ. Proc., §
435(b)(1)). The notice of motion to strike a portion of a pleading shall quote
in full the portions sought to be stricken except where the motion is to strike
an entire paragraph, cause of action, count or defense. (California Rules of
Court Rule 3.1322.)
The grounds for a motion to
strike shall appear on the face of the challenged pleading or form any matter
of which the court is required to take judicial notice. (Code Civ. Proc., §
437(a)). The court then may strike out any irrelevant, false, or improper
matter inserted in any pleading and strike out 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.) When the defect which
justifies striking a complaint is capable of cure, the court should allow leave
to amend. (Perlman v. Municipal Court
(1979) 99 Cal.App.3d 568, 575.)
Defendant moves to strike the
prayer for punitive damages.
Punitive damages are allowed in non-contract cases when a
defendant is guilty of “oppression, fraud, or malice . . . .” (Civ. Code §
3294.) The terms are defined as:
“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.
“Oppression” means despicable conduct that subjects a person to
cruel and unjust hardship in conscious disregard of that person's rights.
“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.
Something more than the mere commission of a
tort is always required for punitive damages. (Taylor v. Superior Court (1979) 24 Cal.3d 890, 894.) Proof of negligence,
gross negligence, or recklessness is insufficient to warrant an award of
punitive damages. (Dawes v. Sup.Ct.
(Mardian) (1980) 111 Cal.App.3d 82, 88–89.) Punitive damages may be
recovered in an action for negligence or other nonintentional torts if the
plaintiff pleads and proves that the defendant acted with the state of mind
described as “conscious disregard” of the potential dangers to others. (Pfeifer v. John Crane, Inc. (2013) 220
Cal.App.4th 1270, 1299.) When malice is based on a defendant’s conscious
disregard of Plaintiff’s rights, the conduct must be both despicable and
willful. (College Hospital v. Superior
Court (1994) 8 Cal.4th 794, 713 (“College
Hospital”).)
Defendant argues that punitive
damages are not available for a Song Beverly claim. They are available,
however, for fraud, and Plaintiff’s fraud claim survives Defendant’s demurrer,
discussed above.
The motion to strike is therefore DENIED.