Judge: James L. Crandall, Case: 20-1162881, Date: 2022-11-03 Tentative Ruling
1. Demurrer
Defendant Kia Motors America, Inc.’s Demurrer to the Second Amended Complaint is:
OVERRULED as to the first, second, and fourth causes of action and
SUSTAINED as to the third, fifth, sixth, and seventh causes of action.
Defendant Kia Motors America, Inc. demurs to the 1st (Violation of Civil Code section 1793.2(d), 2nd (Violation of Civil Code section 1793.2(b)), 3rd (Violation of Civil Code § 1793.2(a)(3)), 6th (Fraud by Omission) and 7th (Violation of Consumers Legal Remedies Act) causes of action in Plaintiffs’ Second Amended Complaint.
On 4/15/21, the Court sustained Defendant’s demurrer to the third, fifth, sixth, and seventh causes of action in the original complaint with leave to amend.
On 5/5/22, the Court sustained the demurrer to the 3rd, 5th, 6th, and 7th COAs in the First Amended Complaint with leave to amend.
Plaintiffs filed the Second Amended Complaint (SAC) on 6/6/22.
Defendants now demur to all seven causes of action in the SAC.
First Cause of Action for Violation of Civil Code § 1793.2(d)
Defendant demurs to the 1st COA based on the statute of limitations under Commercial Code § 2725(2). Defendant fails to explain why it did not demur to this cause of action in prior iterations of the complaint. Code of Civil Procedure section 430.41(b) states, “(b) A party demurring to a pleading that has been amended after a demurrer to an earlier version of the pleading was sustained shall not demur to any portion of the amended complaint, cross-complaint, or answer on grounds that could have been raised by demurrer to the earlier version of the complaint, cross-complaint, or answer.”
Moreover, Defendant’s statute of limitations argument lacks merit. Commercial Code section 2725 provides in part, “(1) An action for breach of any contract for sale must be commenced within four years after the cause of action has accrued. By the original agreement the parties may reduce the period of limitation to not less than one year but may not extend it. [¶] (2) A cause of action accrues when the breach occurs, regardless of the aggrieved party’s lack of knowledge of the breach. A breach of warranty occurs when tender of delivery is made, except that where a warranty explicitly extends to future performance of the goods and discovery of the breach must await the time of such performance the cause of action accrues when the breach is or should have been discovered. . . . [¶] (4) This section does not alter the law on tolling of the statute of limitations nor does it apply to causes of action which have accrued before this code becomes effective.”
Krieger v. Nick Alexander Imports, Inc. (Krieger) (1991) 234 Cal.App.3d 205, 215, held, “The Act was intended to supplement the provisions of the California Uniform Commercial Code, rather than to supersede the rights and obligations created by that statutory scheme. (See Civ. Code, § 1790.3.) California Uniform Commercial Code section 2725 specifically governs actions for breach of warranty in a sales context. We conclude that this special statute of limitations controls rather than the general provision of Code of Civil Procedure section 338, subdivision (a) for liabilities created by statute.” (Footnote 5 omitted.)
Cardinal Health 301, Inc. v. Tyco Electronics Corp. (Cardinal Health) (2008) 169 Cal.App.4th 116, 130, explains, “The scope of the ‘future performance’ exception has been the subject of numerous, and sometimes conflicting, decisions throughout the country. [Citations.] But the majority view is that the exception must be narrowly construed, and that it applies only when the seller has expressly agreed to warrant its product for a specific and defined period of time. [Citations.]”
“Cardinal alternatively contends the parties’ repair efforts tolled the statute of limitations. Although a defendant’s repair efforts can toll the section 2725 limitations period (§ 2725, subd. (4)), here there were no facts showing T & B engaged in any repair efforts.” (Id., at p. 133.) “Cardinal’s implied warranty claim is also governed by section 2725, subdivision (2), and is barred for the same reason that the express warranty claim is barred. Because an implied warranty is one that arises by operation of law rather than by an express agreement of the parties, courts have consistently held it is not a warranty that ‘explicitly extends to future performance of the goods . . . . [Citations.]” (Id., at p. 134.)
Here, Plaintiffs have adequately alleged the existence of a warranty guaranteeing future performance, including a 5-year/60,000-mile bumper to bumper warranty, a 10-year/100,000-mile powertrain warranty, and a 10-year/120,000-mile warranty extension. (SAC, ¶ 11.)
Unlike in Cardinal Health, Plaintiffs are not a sophisticated commercial business and the alleged warranty specified a time period of future performance. (See Cardinal Health, supra, 169 Cal.App.4th at 131.)
Plaintiffs allege facts giving rise to discovery of the defect within the warranty period after purchase of the vehicle on 10/2/14, with such defects becoming apparent at the earliest on or about September 2017. (SAC ¶ 63.) Plaintiffs filed suit in April 2020, within four years of discovery of such facts. Therefore, the cause of action is timely and the demurrer is overruled as to the first cause of action.
Second Cause of Action for Violation of Civil Code § 1793.2(b)
Defendant’s demurrer to the second cause of action raises similar arguments to those discussed above under the first cause of action and is overruled for the same reasons.
Third Cause of Action for Violation of Civil Code § 1793.2(a)(3):
Defendant contends, “Plaintiffs’ Third Cause of Action still fails to identify any facility relevant to Plaintiffs’ claims or to allege in even cursory fashion what literature or replacement parts supposedly were unavailable to any such repair facilities. As this Court previously properly found, merely alleging that KA “failed to make available. . . sufficient service literature and replacement parts to effect repairs during the express warranty period” (SAC ¶ 104), is insufficient to support an allegation under the Song-Beverly Act. It is merely a “contention” or “conclusion” that will not suffice to state a claim. (Blank, supra, 39 Cal. 3d at 318.)” (Demurrer, p. 11.)
Pursuant to CC § 1793.2(a)(3), every manufacturer of expressly warranted goods must: “[m]ake available to authorized service and repair facilities sufficient service literature and replacement parts to effect repairs during the express warranty period.” In their amended complaint, Plaintiffs allege that they took the Sportage in for a repairs on four occasions. Plaintiffs first took the car in for a knocking
noise on 9/27/17. SAC, ¶ 63. On 10/18/18, Plaintiffs took the vehicle in for failure to start, and Defendants’ facility performed an ECU upgrade and oil feed line repair. SAC ¶ 64. On 6/7/19, Plaintiffs took the vehicle in for complaints of having to jump start the vehicle. SAC ¶ 66. On 6/13/19, Plaintiffs took the vehicle in with “complaints of the Vehicle only cranking intermittently,” at which time the starter was replaced. SAC ¶ 68.
The Court previously sustained the demurrer to this cause of action based on Plaintiffs’ failure to allege facts supporting their assertion that Defendant failed to “make available . . . sufficient service literature and replacement parts to effect repairs . . .”
In the SAC, Plaintiffs still don’t plead sufficient facts to constitute this cause of action. In their opposition, Plaintiffs fail to identify any new or different allegations in the SAC in support of this cause of action. Defendant’s demurrer to the 3rd cause of action is therefore SUSTAINED without leave to amend.
Fourth Cause of Action for Breach of Express Warranty
Defendant’s demurrer to the fourth cause of action raises similar arguments to those discussed above under the first cause of action and is overruled for the same reasons.
Fifth Cause of Action for Breach of the Implied Warranty of Merchantability:
Defendant argues the 5th cause of action is barred by the applicable four-year statute of limitations and Plaintiffs’ delayed discovery, fraudulent concealment and tolling arguments are insufficient to plead around the statute of limitations defense.
The four-year statute of limitations under Comm. Code § 2725 applies to claims under the Song-Beverly Act, including a claim for breach of warranty. Krieger v. Nick Alexander Imports, Inc. (1991) 234 Cal.App.3d 205, 215. Section 2725 reads, in pertinent parts:
“(1) An action for breach of any contract for sale must be commenced within four years after the cause of action has accrued. By the original agreement the parties may reduce the period of limitation to not less than one year but may not extend it.
(2) A cause of action accrues when the breach occurs, regardless of the aggrieved party’s lack of knowledge of the breach. A breach of warranty occurs when tender of delivery is made, except that where a warranty explicitly extends to future performance of the goods and discovery of the breach must await the time of such performance the cause of action accrues when the breach is or should have been discovered.
. . .
(4) This section does not alter the law on tolling of the statute of limitations nor does it apply to causes of action which have accrued before this code becomes effective.”
However, although claims under § 2725 typically arise upon tender of delivery, a Song-Beverly claim is different. The Song-Beverly Act provides: “[t]he duration of the implied warranty of merchantability ... shall be coextensive in duration with an express warranty which accompanies the consumer goods, provided the duration of the express warranty is reasonable; but in no event shall such implied warranty have a duration of less than 60 days nor more than one year following the sale of new consumer goods to a retail buyer.” CC § 1791.1(c).
As the court explained in Mexia v. Rinker Boat Company, Inc. (2009) 174 Cal.App.4th 1297, 1309: “By giving the implied warranty a limited prospective existence beyond the time of delivery, the Legislature created the possibility that the implied warranty could be breached after delivery. As discussed above, this is a change from the California Uniform Commercial Code, under which the implied warranty could be breached only at the time of delivery.”
Section 1791.1(c) recognizes that a warranty on goods subject to Song-Beverly is a warranty that extends to future performance. See Krieger v. Nick Alexander Imports, Inc. (1991) 234 Cal.App.3d 205, 217 (“A promise to repair defects that occur during a future period is the very definition of express warranty of future performance, not only under the Act (Civ. Code, § 1791.2), but also in the California Uniform Commercial Code section 2313.”) However, under § 1791.1(c), the implied warranty does not extend “more than one year from the sale.” Therefore, any claim for a breach of implied warranty of merchantability claim must be filed no later than five years from the date of tender of delivery or, in this case, 10/2/19. This action was not filed until 9/18/20.
In the SAC, Plaintiffs attempt to plead delayed discovery, fraudulent concealment, and tolling. If successfully alleged, any one of those theories could extend the statute of limitations beyond 10/2/19.
Delayed discovery: “[U]nder the delayed discovery rule, a cause of action accrues and the statute of limitations begins to run when the plaintiff has reason to suspect an injury and some wrongful cause, unless the plaintiff pleads and proves that a reasonable investigation at that time would not have revealed a factual basis for that particular cause of action. In that case, the statute of limitations for that cause of action will be tolled until such time as a reasonable investigation would have revealed its factual basis.” Fox v. Ethicon Endo-Surgery, Inc. (2005) 35 Cal.4th 797, 803 (Fox).
A plaintiff asserting delayed discovery, “must specifically plead facts to show (1) the time and manner of discovery and (2) the inability to have made earlier discovery despite reasonable diligence. In assessing the sufficiency of the allegations of delayed discovery, the court places the burden on the plaintiff to show diligence; conclusory allegations will not withstand demurrer.” Fox, 35 Cal.4th at 808 (internal quotation marks and citations omitted).
In their opposition, Plaintiffs fail to identify new or different factual allegations supporting their delayed discovery contention. Plaintiffs have failed to allege new facts in the SAC sufficient to demonstrate delayed discovery.
Fraudulent concealment: “A close cousin of the discovery rule is the well accepted principle ... of fraudulent concealment. It has long been established that the defendant’s fraud in concealing a cause of action against him tolls the applicable statute of limitations, but only for that period during which the claim is undiscovered by plaintiff or until such time as plaintiff, by the exercise of reasonable diligence, should have discovered it.” Bernson v. Browning-Ferris Industries (1994) 7 Cal.4th 926, 931 (internal quotation marks and citations omitted).
“When a plaintiff alleges the fraudulent concealment of a cause of action, the same pleading and proof is required as in fraud cases: the plaintiff must show (1) the substantive elements of fraud, and (2) an excuse for late discovery of the facts. With respect to ... the belated discovery, the complaint must allege (1) when the fraud was discovered; (2) the circumstances under which it was discovered; and (3) that the plaintiff was not at fault for failing to discover it or had no actual or presumptive knowledge of facts sufficient to put him on inquiry.” Community Cause v. Boatwright (1981) 124 Cal.App.3d 888, 900 (internal citation omitted).
Plaintiffs’ allegations of fraudulent concealment are generic and seem unrelated to Plaintiffs’ individual claims. Plaintiffs’ opposition fails to identify new or different facts in the SAC which support their fraudulent concealment contention. Fraudulent concealment is not sufficiently alleged in the SAC.
Tolling: Plaintiffs allege three forms of tolling: (1) tolling due to repairs; (2) equitable estoppel; and (3) tolling under American Pipe & Construction Co. v. Utah (1974) 414 U.S. 538, 554. Plaintiffs do not sufficiently allege facts to support any assertion of tolling.
“A defendant may be equitably estopped from asserting a statutory or contractual limitations period as a defense if the defendant’s act or omission caused the plaintiff to refrain from filing a timely suit and the plaintiff’s reliance on the defendant’s conduct was reasonable.” Superior Dispatch, Inc. v. Insurance Corp. of New York (2010) 181 Cal.App.4th 175, 186 (internal citations omitted).
“A party claiming an estoppel must prove four elements: (1) the party to be estopped must know the facts; (2) the estopped party must intend that his conduct shall be acted upon, or must act in a way that causes the other party to believe that was his intent; (3) the party asserting estoppel must be unaware of the true facts; and (4) he must detrimentally rely on the other party’s conduct.” Estate of Bonzi (2013) 216 Cal.App.4th 1085, 1106. “Tolling during a period of repairs generally rests upon the same legal basis as does an estoppel to assert the statute of limitations, i.e., reliance by the plaintiff on the words or actions of the defendant that repairs will be made.” Cardinal Health, 169 Cal.App.4th at 133-134. Plaintiffs do not allege that they refrained from filing suit based on Defendant’s words or actions that repairs would be made. They do not allege how they relied on Defendant’s words or actions or how they were damaged by any reliance.
Plaintiffs also argue that the applicable statutes of limitations were tolled under the class action tolling rule articulated in American Pipe & Construction Co. v. Utah (1974) 414 U.S. 538, 554 under which “the commencement of a class action suspends the applicable statute of limitations as to all asserted members of the class who would have been parties had the suit been permitted to continue as a class action.”
Plaintiffs argue the statutes of limitations were tolled by two federal class actions: (1) Wallis v. Kia Motors America, Inc. (C.D. Cal. No. 8:16-cv-01033), filed on 6/2/16 and dismissed on 11/7/16; and (2) In re: Kia Engine Litigation (C.D. Cal. No. 8:17-cv-00838), filed on 5/10/17 and still pending. These allegations do not help Plaintiffs. A recent case from our appellate district, Montoya v. Ford Motor Company (2020) 46 Cal.App.5th 493, 503, held that the statute of limitations is not tolled during a second class action, particularly where it would defeat “the efficient class action feature that seeks to bind all members of the class into one judgment.” As the Montoya court stated at the outset of the case (p. 494): “The question of whether the equitable tolling made possible in American Pipe should extend to a second class action is a question our federal compatriots have addressed at some length, and we find ourselves in agreement with their resolution of the issue. Therefore, in this case we determine that to toll the statute of limitations during the period of a second class action contravenes the judicial economy and efficiency that American Pipe was trying to achieve.” Thus, Plaintiffs are only entitled to just over five months of tolling from the Wallis action.
The opposition fails to specifically identify new facts supporting the application of tolling. Plaintiffs’ SAC fails to allege new facts alleging a timely claim for breach of implied warranty. Defendant’s demurrer to the 5th cause of action is therefore SUSTAINED without leave to amend.
Sixth Cause of Action for Fraud by Omission and Seventh Cause of Action for Violation of Consumers Legal Remedies Act:
The sixth and seventh causes of action are both based on Defendant’s alleged concealment of a defective engine “susceptible to sudden and premature failure.” FAC, ¶¶ 112-135.
Defendant argues the 6th c/a and 7th c/a are barred by the applicable three-year statute of limitations. CC § 338; CC § 1783. The claims are subject to a three-year statute of limitations and, absent any delayed discovery, equitable estoppel or tolling, they are time-barred. As set forth above, Plaintiffs’ allegations of delayed discovery, equitable estoppel and tolling are not sufficient to plead around the time bar.
Defendant also argues that the sixth and seventh causes of action fail to plead facts sufficient to state the causes of action. Plaintiffs claim that Defendant concealed the fact that the engine used in Plaintiffs’ car was faulty. “The 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. Fraud must be pleaded with specificity rather than with general and conclusory allegations.” Boschma v. Home Loan Center, Inc. (2011) 198 Cal.App.4th 230, 248 (internal quotation marks and citations omitted); see also Cansino v. Bank of America (2014) 224 Cal.App.4th 1462, 1472 (“the requirement that ‘fraud must be pleaded with specificity . . .’ applies equally to a cause of action for fraud and deceit based on concealment”).
A duty to disclose supporting a claim of fraud by concealment only arises in four circumstances: “(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.” LiMandri v. Judkins (1997) 52 Cal.App.4th 326, 336.
As the court explained in Bigler-Engler v. Breg, Inc. (2017) 7 Cal.App.5th 276, 311: “Where, as here, a fiduciary relationship does not exist between the parties, only the latter three circumstances may apply. These three circumstances, however, presuppose[] the existence of some other relationship between the plaintiff and defendant in which a duty to disclose can arise. A duty to disclose facts arises only when the parties are in a relationship that gives rise to the duty, such as seller and buyer, employer and prospective employee, doctor and patient, or parties entering into any kind of contractual arrangement.” (Internal quotation marks and citations omitted.)
In other words, the duty to disclose only arises where there is a fiduciary relationship or there is a “transaction” between the plaintiff and defendant. Bigler-Engler, 7 Cal.App.5th at 311-312.
“Such 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, 7 Cal.App.5th at 312.
Here, Plaintiffs fail to allege a “transaction” between themselves and Defendant. Plaintiffs allege that Defendant manufactured and or distributed the Sportage. They further allege that the purchased the Sportage from a person or entity engaged in the business of manufacturing, distributing, or selling consumer goods at retail. They do not allege that they entered into a direct transaction or with Defendant regarding purchase of the vehicle.
In the absence of a transaction, Plaintiffs’ claim of fraudulent concealment is not sufficiently pled.
Further, Plaintiffs argue they sufficiently alleged that Defendant had exclusive knowledge of material facts which it did not disclose and actively concealed those material facts. The FAC generally alleges that Defendant knew or should have known, since 2009, that certain of its 2011-2019 vehicles included an engine defect that led to stalling while driving and non-collision fires. Plaintiffs do not allege that the Sportage they purchased stalled or caught fire. They do not allege that their vehicle suffered from the alleged “Engine defect.” Plaintiffs fail to allege exactly what Defendant failed to disclose or actively concealed relating to their purchase of their car. The allegations of concealment are not sufficiently tied to Plaintiffs’ individual claims. Compare Gutierrez v. Carmax Auto Superstores California (2018) 19 Cal.App.5th 1234, 1239, 1239, 1261 (the facts not disclosed were "the existence of the recall” and the fact that the part had not been replaced in accordance with the recall.)
The Court previously ruled that the fraud claim was also barred under the economic loss rule. However, the Court recognizes that recent authority is contrary to the Court’s prior analysis of this issue. (Dhital v. Nissan North America, Inc. (Cal. Ct. App., Oct. 26, 2022, No. A162817) 2022 WL 14772909.) However, the defects discussed above are sufficient to sustain the demurrer so the Court need not reach the issue of the economic loss rule.
Plaintiffs’ amended complaint does not resolve the defects of these claims. Therefore, Defendant’s demurrers to the 6th and 7th causes of action are SUSTAINED without leave to amend.
In summary, Defendant’s demurrer is OVERRULED as to the first, second, and fourth causes of action and SUSTAINED as to the third, fifth, sixth, and seventh causes of action.
Plaintiffs have not shown that further leave to amend is likely to resolve the defects in the complaint. (See Ivanoff v. Bank of America, N.A. (2017) 9 Cal.App.5th 719, 726 [leave to amend should not be granted where amendment would be futile].) Therefore, the demurrer is sustained without leave to amend.
2.Motions to Strike Portions of Complaint
Defendant’s motion to strike Plaintiffs’ prayer for punitive damages is GRANTED.
As discussed above, Plaintiffs’ claims based on fraud and violation of the CLRA are not viable and therefore these causes of action cannot support Plaintiffs’ demand for punitive damages.
Plaintiffs’ remaining claims are under the Song-Beverly Act, and these claims give rise to civil penalties, not punitive damages under Civil Code section 3294. (See Civ. Code § 1794.)
In their opposition, Plaintiffs cite several federal decisions to contend that Song-Beverly Act damages may include punitive damages. However, Plaintiffs don’t cite any California authority supporting this proposition.
Therefore, the motion to strike is granted.
Future hearing dates
5/19/23 – MSC
6/19/23 – Jury Trial