Judge Jill Feeney, Case Number: 19STCV33384, Date: 2023-05-11 Tentative Ruling

On February 9, 2012, Plaintiff Albert Addis (“Plaintiff”) purchased a new 2012 Kia Sportage (the Subject Vehicle”) from Defendant Kia Motors America, Inc.’s (“Kia”) authorized retailer, First Kia. (FAC ¶ 10.) In connection with the purchase, Plaintiff received an express 5-year/60,000 mile bumper to bumper warranty, and a 10-year/100,000 mile powertrain warranty. (FAC ¶ 11.) During the express warranty period, the Subject Vehicle developed various defects that rendered the Subject Vehicle inoperable. (FAC ¶ 15.) Defendant and its authorized dealer failed to conform the Subject Vehicle despite a reasonable number of opportunities. (FAC ¶ 28.) Additionally, Defendant failed to offer restitution as required by the SBA. (Ibid.)

On November 14, 2022, the matter came for hearing. Kia argued that the hearing should be continued such that the Court could consider Kia’s Reply and evidentiary objections. The Court continued the hearing and allowed Plaintiff to file a supplemental briefing responding to Kia’s Reply and evidentiary objections, should he choose to do so.

The court may take judicial notice of “official acts of the legislative, executive, and judicial departments of the United States and of any state of the United States,” “[r]ecords of (1) any court of this state or (2) any court of record of the United States or of any state of the United States,” and “[f]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.” (Evid. Code § 452, subds. (c), (d), and (h).)

Evidence Code Section 452 provides that judicial notice may be taken for facts 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.” (Cal. Evid. Code § 452(h).) Further, “a court may take judicial notice of [recorded documents and] the fact of a document's recordation, the date the document was recorded and executed, the parties to the transaction reflected in a recorded document, and the document's legally operative language, assuming there is no genuine dispute regarding the document's authenticity. From this, the court may deduce and rely upon the legal effect of the recorded document, when that effect is clear from its face.” (Scott v. JPMorgan Chase Bank, N.A. (2013) 214 Cal.App.4th 743, 745-755.)

Taking judicial notice of a document is not the same as accepting the truth of its contents or accepting a particular interpretation of its meaning. (Fremont Indem. Co. v. Fremont General Corp. (2007) 148 Cal.App.4th 97, 113-14 (citations and internal quotations omitted).) In addition, judges “consider matters shown in exhibits attached to the complaint and incorporated by reference.” (Performance Plastering v. Richmond American Homes of California, Inc. (2007) 153 Cal.App.4th 659, 665.) However, “[w]hen judicial notice is taken of a document . . . the truthfulness and proper interpretation of the document are disputable.” (Aquila, Inc. v. Sup. Ct. (2007) 148 Cal.App.4th 556, 569 (quoting StorMedia Inc. v. Sup. Ct. (1999) 20 Cal.4th 449, 457 n. 9).)

The party requesting judicial notice must (a) give each adverse party sufficient notice of the request to enable the adverse party to prepare to meet the request and (b) provide the court with sufficient information to enable it to take judicial notice of the matter. (Cal. Evid. Code § 453.)

1. Los Angeles Superior Court Order denying Kia Motors America, Inc.’s Motion for Summary Adjudication of plaintiff’s 6th cause of action for fraud by omission concerning Theta II engine defects in the matter of Maria I. Torres v. Kia Motors America, Inc., No. 18STCV00967 (order filed May 17, 2021). (Ex. 1.)

A party may move for summary judgment “if it is contended that the action has no merit or that there is no defense to the action or proceeding.” (Code Civ. Proc. § 437c, subd. (a).) “[I]f all the evidence submitted, and all inferences reasonably deducible from the evidence and uncontradicted by other inferences or evidence, show that there is no triable issue as to any material fact and that the moving party is entitled to judgment as a matter of law,” the moving party will be entitled to summary judgment. (Adler v. Manor Healthcare Corp. (1992) 7 Cal.App.4th 1110, 1119.)

The moving party bears an initial burden of production to make a prima facie showing of the nonexistence of any triable issue of material fact, and if he does so, the burden shifts to the opposing party to make a prima facie showing of the existence of a triable issue of material fact. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850; accord Code Civ. Proc. § 437c, subd. (p)(2).) To establish a triable issue of material fact, the party opposing the motion must produce substantial responsive evidence. (Sangster v. Paetkau (1998) 68 Cal.App.4th 151, 166.)

Neither a moving nor responding party may rely on the mere allegations or denials of its pleadings. A moving party must submit specific admissible evidence showing that the responding party cannot establish at least one element of his, her or its cause of action or defense. The responding party, to defeat the motion, must submit specific admissible evidence showing that a triable issue of material fact does exist as to that element of the cause of action or defense. (Sangster v. Paetkau (1998) 68 Cal.App.4th 151, 166.)

“The “Golden Rule” on a motion for summary judgment or summary adjudication is that “if [a fact] is not set forth in the separate statement, it does not exist.” (Zimmerman, Rosenfeld, Gersh & Leeds LLP v. Larson (2005) 131 Cal.App.4th 1466, 1477, citing United Community Church v. Garcin (1991) 231 Cal.App.3d 327, 337.)

First, Kia moves for summary adjudication of the first four causes of action, all of which allege that Kia failed to repair the Subject Vehicle in a reasonably timely fashion such that it conformed to the express warranties.

To recover under the SBA, a plaintiff must show that “(1) the vehicle had a nonconformity covered by the express warranty that substantially impaired the use, value or safety of the vehicle (the nonconformity element); (2) the vehicle was presented to an authorized representative of the manufacturer of the vehicle for repair (the presentation element); and (3) the manufacturer or his representative did not repair the nonconformity after a reasonable number of repair attempts (the failure to repair element). [Citations.]”¿¿(Oregel v. American Isuzu Motors, Inc.¿(2001) 90 Cal.App.4th 1094, 1101.)

Here, Kia argues that Plaintiff has failed to present a nonconformity covered by an express warranty. Kia notes that the Subject Vehicle was sold with two express warranties: the standard 5-year/60,000 mile warranty, and the 10-year/100,000 mile powertrain limited warranty. (UMF No. 9.) Kia argues that none of the presentations of the Subject Vehicle to an authorized repair facilities constituted a customer concern that was covered under Kia’s warranty within the first 10 years/100,000 miles. (UMF Nos. 14, 15-28.) Although the vehicle was brought in for service thirteen times, all these visits occurred after expiration of the standard warranty and were classified as not covered by the still existing limited powertrain warranty. (UMF Nos. 15-18.)

Accordingly, Kia has met its initial burden of showing the nonexistence of a triable material fact regarding the nonconformity element of Plaintiff’s SBA claim. The burden now shifts to Plaintiff to show the existence of such a triable material fact.

In Opposition, Plaintiff argues that the car was brought to Kia for service twelve times while the emission and limited powertrain warranties were still in effect. (PSSMF Nos. 12-18.) Plaintiff contends that, though the dealership classified these repairs as not covered by the warranty, it is a question of fact whether they were covered. Additionally, Plaintiff notes that the only evidence Kia presents demonstrating the unwarrantability of these issues is the deposition of Nicolas Mojica (“Mojica”), an Escalated Case Administrator within the Consumer Affairs department at Kia. In same deposition, Mojica states that he did not have the requisite technical expertise to address the warrantability of the repairs, that he was not familiar with the repairing dealership’s diagnostics, and that if the issues were engine or emission related, they should have been covered by the extended warranties. (PSSUMF No. 75.)

The Court finds that a triable issue off material fact exists as to whether Plaintiff’s repeated service visits were properly covered under the limited powertrain warranty or the emission warranty. Accordingly, Kia’s Motion for Summary Judgment is DENIED on this ground. As this is the only argument Kia raises regarding the First, Second and Fourth Causes of Action, the Court will not address these causes of action further.

Under section 1793.2, subdivision (a)(3), a manufacturer must “[m]ake available to authorized service and repair facilities sufficient service literature and replacement parts to effect repairs during the express warranty period.”

Here, Kia argues that Plaintiff has presented no evidence showing the absence of such literature and replacement parts. Kia contends that Plaintiff’s discovery responses regarding such allegations are deficient. (UMF No. 151.)

In Opposition, Plaintiff contends that Mojica stated in his deposition that Kia does not make literature available regarding odd engine noise. However, the cited evidence does not contain such a statement and does not address available literature. (Pardo Decl., Ex. 25 at 135:12-14.)

The elements of fraud are: “(a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or ‘scienter’); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage.” (Charnay v. Cobert (2006) 145 Cal.App.4th 170, 184.) In California, fraud, including negligent misrepresentation, must be pled with specificity. (Small v. Fritz Companies, Inc. (2003) 30 Cal.4th 167, 184.) “The particularity demands that a plaintiff plead facts which show how, when, where, to whom, and by what means the representations were tendered.” (Cansino v. Bank of America (2014) 224 Cal.App.4th 1462, 1469.)

Nondisclosure or concealment may constitute actionable fraud when: (1) there is a fiduciary relationship between the parties; (2) the defendant had exclusive knowledge of material facts not known to the plaintiff; (3) the defendant actively conceals a material fact from the plaintiff; and (4) the defendant makes partial representations but also suppresses some material facts. (See id.)

First, Kia argues that Plaintiff’s Sixth Cause of Action fails as Kia was under no duty to disclose the alleged defect in the Subject Vehicle to Plaintiff as Plaintiff did not directly deal with Kia.

Kia notes that Plaintiff purchased the vehicle from First Kia, an independent third-party dealer that is not affiliated with Kia. (UMF No. 5.) Additionally, Kia argues that Plaintiff does not allege he relied on any marketing by Kia in purchasing the Subject Vehicle.

Kia’s argument is unavailing. In Varwig v. Anderson-Behel Porsche/Audi, Inc. (1997) 74 Cal.App.3d 578, plaintiff purchased a vehicle from a wholesaler who claimed the vehicle had clear title. The wholesaler acquired it from defendant car dealership, who had misrepresented the state of title to the wholesaler. When the car was repossessed, plaintiff filed suit against the dealership for fraud. The trial court granted summary judgment on the basis that plaintiff had no direct dealings with defendant dealership. The Court of Appeal reversed, finding that defendant was on notice that the wholesaler intended to sell the car to the consuming public and thus his representation regarding title was an “indirect misrepresentation to plaintiff, who purchased the car in reliance upon [the wholesaler’s] repetition of the representation.” (Varwig at pp. 581-82.)

Accordingly, a reasonable trier of fact could find that Kia sold the Subject Vehicle to First Kia with the knowledge that First Kia would sell that vehicle to the consuming public, and therefore any concealment or misrepresentation can be actionable on Plaintiff’s part.

Next, Kia argues that Plaintiff has failed to show that Kia had actual knowledge of a defect in the Subject Vehicle prior to Plaintiff’s purchase. Kia notes that the recall campaign that the First Amended Complaint focuses on was for the Theta II GDI engine. Kia contends that, as the Subject Vehicle had a 2.4L MPI engine, the recall is irrelevant to the Subject Vehicle and Plaintiff has shown no evidence of Kia’s knowledge of a defect present in the Subject Vehicle. (UMF No. 3.)

In Opposition, Plaintiff contends that the vehicle came equipped with the Theta II GDI engine that was subject to the recall in question. (PRUMF No. 3.) Accordingly, there is a triable issue of material fact as to whether the Subject Vehicle came equipped with the engine that was subject to the recall.

However, Plaintiff alleges that the Subject Vehicle was worth substantially less than what Plaintiff paid for it due to the unknown engine defects. (PSSUMF No. 25.) That a defective vehicle is worth less than a fully operational vehicle is common sense, and should Plaintiff need to obtain specific evidence evincing such, the Court is certain Plaintiff would have no difficulty doing so.

However, in the recently decided Dhital v. Nissan North America, Inc. (October 26, 2022) 2022 WL 14772909, the California Court of Appeal held, in facts substantially similar to those here, that “under California law, the economic loss rule does not bar plaintiffs’ claim here for fraudulent inducement by concealment. Fraudulent inducement claims fall within an exception to the economic loss rule recognized by our Supreme Court [Citation], and plaintiffs allege fraudulent conduct that is independent of [defendant’s] alleged warranty breaches.”

Next, Kia contends that Plaintiff’s fraud cause of action is barred by the applicable three-year statute of limitations. (Civil Code § 338(d).) Kia argues that the statute of limitations began accruing when Plaintiff purchased the vehicle on February 9, 2022. (UMF No. 1.) Kia contends that the delayed discovery rule is unsubstantiated by the evidence.

“The discovery rule only delays accrual until the plaintiff has, or should have, inquiry notice of the cause of action.” (Fox v. Ethicon Endo-Surgery, Inc. (2005) 35 Cal.4th 797, 807 (Fox); Nelson v. Indevus Pharms, Inc. (2006) 142 Cal.App.4th 1202, 1206 (Nelson).) “A plaintiff whose complaint shows on its face that his claim would be barred without the benefit of the discovery rule 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. The burden is on the plaintiff to show diligence, and conclusory allegations will not withstand demurrer.” (McKelvey v. Boeing N. Am. (1999) 74 Cal.App.4th 151, 160 (McKelvey), superseded by statute on unrelated grounds as stated in Grisham v. Philip Morris U.S.A., Inc. (2007) 40 Cal.4th 623, 637 (Grisham).)

Here, Plaintiff has presented evidence that Kia affirmatively concealed the defect present in the Subject Vehicle, and that Plaintiff only discovered that defect after repeatedly bringing the car in for repair. This is the textbook situation where the delayed discovery rule applies.

California Civil Code section 3294 authorizes the recovery of punitive damages in non-contract cases where “the defendant has been guilty of oppression, fraud, or malice . . . .” (Civ. Code § 3294(a).) “‘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.” (Id. § 3294(c)(1).) Punitive damages thus require more than the mere commission of a tort. (See Taylor v. Superior Court (1979) 24 Cal.3d 890, 894-95.) Specific facts must be pleaded in support of punitive damages. (See Hillard v. A.H. Robins Co. (1983) 148 Cal.App.3d 374, 391-92.)

When the defendant is a corporation, “the oppression, fraud, or malice must be perpetrated, authorized, or knowingly ratified by an officer, director, or managing agent of the corporation.” (Wilson v. Southern California Edison Company (2015) 234 Cal.App.4th 123, 164; see Civ. Code § 3294(b).)

Here, Kia argues first that Plaintiff has not presented any evidence that anyone at Kia has acted with malice, fraud, or oppression. However, as Plaintiff has presented a viable fraud cause of action, this argument is unavailing.

However, Plaintiff has presented evidence that Kia had knowledge of the Theta II GDI engine defects prior to Plaintiff’s purchase of the subject vehicle but did nothing to remedy or disclose the issue. A reasonable trier of fact could find that such corporate action required the ratification of Kia’s directors, and accordingly, Kia’s Motion for Summary Adjudication of Plaintiff’s prayer for punitive damages is DENIED.

At the hearing on this matter held on November 14, 2022, Kia’s Counsel represented to the Court that Kia had timely filed a Reply and Evidentiary Objections that the Court failed to consider in its tentative.

Kia’s Reply was filed on Thursday, November 10, 2022. Friday, The hearing was held on Monday, November 14, 2022. A summary judgment reply is due five days prior to hearing. (CCP Section 473c(b)(3).) Accordingly, Kia’s Reply and Evidentiary Objections were filed one day late.

At the February 14, 2023 hearing on this matter, Kia’s Counsel informed the Court that it had filed a Notice of Supplemental Authority on February 6, 2023. As the Court had not considered that supplemental authority, the hearing was continued for thirty days.

In its Notice of Supplemental Authority, Kia notes that the California Supreme Court granted a Petition for Review in Dhital v. Nissan N. Am., Inc., (Cal. Ct. App. Oct. 26, 2022), upon which the Court relied in denying Kia’s Motion for Summary Adjudication of the Sixth Cause of Action for Fraud by Omission. Kia notes that while Dhital is under review, the case is citable for its persuasive value, but is not binding or precedential.

The Court continues to find the Dhital Court’s logic persuasive and finds that Plaintiff has alleged fraudulent conduct falling under the Robinson Helicopter exception to the economic loss rule.

Kia argued that Plaintiff could not state a claim for Fraudulent Concealment for three reasons: because there was no contractual privity between Plaintiff and Kia; because Plaintiff’s evidence does not demonstrate that Kia had knowledge of any alleged defect in the Subject Vehicle; and, because the exception to the economic loss rule as articulated in Dhital does not apply to the instant claim.

First, Kia contends that the lack of contractual privity between Plaintiff and Kia precludes a fraudulent concealment cause of action. At hearing, Kia noted that the Court’s tentative decision failed to address Bigler-Engler v. Breg, Inc. (2017) 7 Cal.App.5th 276, upon which Kia relied extensively in its motion. Kia contends that Bigler-Engler is the most recent and on-point authority on this matter and contends that Bigler-Engler stands for the proposition that, absent a direct relationship with a defendant, no duty to disclose on defendant’s part exists.

In Bigler-Engler, plaintiff was injured following the use of a medical device manufactured by defendant manufacturer and prescribed by defendant doctor. At trial, the jury found both manufacturer and doctor liable for both economic and noneconomic damages.

Defendant manufacturer appealed on several grounds, including that the evidence at trial could not support the jury’s verdict on the intentional concealment cause of action as there was no transactional relationship between plaintiff and defendant manufacturer. The Bigler-Engler court reversed, finding that the duty to disclose was absent “because there was no evidence of a relationship between [plaintiff and defendant manufacturer] sufficient to give rise to a duty to disclose. [Manufacturer] did not transact with [plaintiff] in any way.” (Bigler-Engler at p. 314.)

However, the Bigler-Engler court also noted that the evidence did not show that defendant manufacturer directly advertised its products to consumers such as plaintiff or that it derived any monetary benefit directly from plaintiff’s rental of the medical device. The court further noted that the medical group that rented plaintiff the defective device purchased the device itself for rental to patients several years before plaintiff obtained the device. (Ibid.)

Here, the situation is much more analogous to Varwig v. Anderson-Behel Porsche/Audi, Inc., supra, as Kia sold the Subject Vehicle to the dealership aware that the Subject Vehicle would then be sold to consumers, whereas in Bigler-Engler the manufacturer had no such knowledge, and indeed the defective device was not sold directly to a consumer. The Bigler-Engler court found a degree of attenuation between plaintiff and manufacturer that is not present in Varwig or here.

Next, at hearing Kia argued that Plaintiff’s evidence did not demonstrate that Kia had any knowledge of the alleged defect. Kia contended that the evidence presented with Plaintiff’s Opposition relates to defects in engines that the Subject Vehicle does not contain.

The Court finds that whether Plaintiff can establish prior knowledge based on these bulletins, and whether the “engine knock” that the Subject Vehicle suffered from was caused by the same defect addressed in recall SC147, is a question of fact improperly decided on summary judgment.

Finally, Kia argued at hearing that, even if the Court takes Dhital v. Nissan North America, Inc. (2022) 84 Cal.App.5th 828 as persuasive, Dhital does not except the instant case from the economic loss rule. Kia directed the Court’s attention to Footnote 5 of Dhital.

Footnote 5 states that the Dhital court does “not preclude the possibility that, depending on the evidentiary record developed at summary judgment or trial, a fraudulent inducement claim could be found not to be independent of a plaintiff’s contract or warranty claims.”

In Dhital, a lemon law action, plaintiffs argued that defendant manufacturer manufactured or distributed more than 500,000 vehicles that were equipped with defective variable transmissions, including plaintiff’s vehicle. Additionally, plaintiffs alleged defendant should have known of the defect due to premarket testing, consumer complaints to the National Highway Traffic Safety Administration, consumer complaints made directly to Nissan and its dealers, and other sources which drove defendant to issue technical service bulletins.

In finding that plaintiff successfully stated a claim for fraudulent concealment, the Dhital court stated that the Robinson Helicopter independence exception applies to fraudulent concealment “because 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. [Citation.] (Dhital v. Nissan North America, Inc., supra, 84 Cal.App.5th at 841.) The Dhital court stated that “plaintiff’s fraudulent inducement claim alleges presale conduct by [defendant] that is distinct from [defendant’s] alleged subsequent conduct in breaching its warranty obligations.” (Ibid.)

As in Dhital, here Plaintiff introduces evidence that Kia actively concealed information regarding defects in the Subject Vehicle to induce Plaintiff to purchase the subject vehicle, then failed to remedy same defects when its symptoms began to show in the Subject Vehicle. Accordingly, the fraudulent concealment is independent of the breach of warranty, and Dhital applies.