Judge Jill Feeney, Case Number: 23STCV26600, Date: 2024-04-04 Tentative Ruling

This is an action for violations of the Song-Beverly Warranty Ac, fraudulent concealment, negligent misrepresentation, and violations of Business and Professions Code, section 17200. Plaintiff alleges that he leased a 2020 Chevrolet Bolt EV from Defendant in 2020. The vehicle arrived with defects that Defendant failed to repair despite a reasonable number of opportunities. Plaintiff alleges that as early as 2017, Defendant knew about a dangerous battery defect in Chevrolet Bolt vehicles that triggered a recall in 2021. Defendant misrepresented that the vehicle’s battery could last for 259 miles on a single charge, that the vehicle could be charged indoors, and that the battery was safe at the time it sold the vehicle to Plaintiff.

A demurrer for sufficiency tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747.) When considering demurrers, courts read the allegations liberally and in context. 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. (Code Civ. Proc., §§ 430.30, 430.70.) At the pleading stage, a plaintiff need only allege ultimate facts sufficient to apprise the defendant of the factual basis for the claim against him. (Semole v. Sansoucie (1972) 28 Cal. App. 3d 714, 721.) A “demurrer does not, however, admit contentions, deductions or conclusions of fact or law alleged in the pleading, or the construction of instruments pleaded, or facts impossible in law.” (S. Shore Land Co. v. Petersen (1964) 226 Cal.App.2d 725, 732 (internal citations omitted).)

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).) “The parties shall meet and confer at least five days before the date the responsive pleading is due. If the parties are not able to meet and confer at least five days prior to the date the responsive pleading is due, the demurring party shall be granted an automatic 30-day extension of time within which to file a responsive pleading, by filing and serving, on or before the date on which a demurrer would be due, a declaration stating under penalty of perjury that a good faith attempt to meet and confer was made and explaining the reasons why the parties could not meet and confer.” (Code Civ. Proc., section 430.41(a)(2).) 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, Defendant argues that the statute of limitations had run by the time Plaintiff filed his Complaint in October 2023 because Plaintiff conceded the subject vehicle was delivered with serious defects in January 2020. Defendant alleges more than three years had passed between the time the vehicle was delivered and when Plaintiff filed his Complaint.

The Complaint alleges that Defendant represented the subject vehicle could travel 259 miles on a single charge, that it could be charged indoors at his home, and that the vehicle was safe. (Compl., ¶8.) Defendant also represented that it would repair any defects with the vehicle under an express warranty within the warranty period at no charge to Plaintiff. (Id.) Defendant made these representations in advertisements and publications about these vehicles which were confirmed by a salesperson who sold the vehicle to Plaintiff. (Id.) Defendant knew of defects in batteries it used in Chevrolet Bolt vehicles manufactured between 2017 and 2019. (Compl., ¶¶13-16.) The defects include problems with the vehicle’s ability to detect and display the battery’s state of charge, fires related to the vehicle’s battery, reduced charging capacity, and fires related to a seatbelt pretensioner. (Compl., ¶¶11-24.) Defendant continued to manufacture Chevrolet Bolt vehicles using the same type of batteries between 2020 and 2023 in newer Chevrolet Bolt vehicles. (Id., ¶17.) Defendant recalled batteries in 2020-2022 Chevrolet Bolt vehicles in August 2021. (Id., ¶23.) Despite repeatedly presenting the vehicle to Defendant’s authorized repair facilities, Defendant has been unable to conform the vehicle to its express warranties and it remains in a defective condition. (Id., ¶25.)

The facts alleged in the Complaint show that Plaintiff could not have discovered the alleged fraud until August 2021 at the earliest. As Plaintiff points out, the statute of limitations did not begin to accrue until Plaintiff discovered the facts constituting the fraud or mistake. The Complaint alleges that although Defendant was aware Chevrolet Bolt vehicles exhibited problems displaying the state of charge, problems with reduced charge, and defects which could set fires, Defendant continued to represent to Plaintiff that the vehicle could travel 259 miles on a single charge, that the vehicle could be charged indoors, and that the vehicle was safe. Although Plaintiff alleges the vehicle was delivered in a defective condition, Plaintiff did not discover the defects which revealed the alleged fraudulent nature of Defendant’s representations until Defendant issued a recall in August 2021.

Based on these facts, the statute of limitations did not begin to accrue until August 2021 at the earliest. Plaintiff filed his Complaint in October 2023, within three years of when Plaintiff discovered the alleged fraud. Therefore, Plaintiff filed his Complaint before the statute of limitations had run.

Defendant next argues that the Complaint fails to plead a cause of action for fraud with sufficient specificity. Defendant argues that (1) the First cause of action fails because Plaintiff did not identify an affirmative misrepresentation by or from Defendant, (2) the Complaint fails to identify a material fact regarding the subject vehicle that Defendant concealed or suppressed, (3) the Second cause of action fails because Plaintiff failed to identify any misrepresentation that Defendant made, and (4) the Third cause of action fails because the Complaint fails to allege that Defendant engaged in unlawful conduct.

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.)

The specificity standard is less stringent when the defendant already has “‘full information concerning the facts of the controversy.’” (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 217, superseded by statute on other grounds as stated in Californians for Disability Rights v. Mervyn's, LLC (2006) 39 Cal.4th 223, 227.) Relaxation of the specificity requirement is particularly appropriate in a¿concealment¿case. Unlike intentional misrepresentation, which requires some affirmative representation or promise, a fraudulent¿concealment¿is the absence of something, the suppression of a fact. (Civ. Code § 1710.)

The courts have ruled that specificity as to fraud claims is required if it appears from the nature of allegations that defendant must necessarily possess full information, or if the facts lie more in the knowledge of opposing parties. (Alfaro v. Community Housing Improvement System & Planning Assn., Inc. (2009) 171 Cal.App.4th 1356, 1384-1385 [“it does not appear necessary to require each of the 38 plaintiffs to allege each occasion on which an agent of either defendant could have disclosed …. Surely defendants have records of their dealings with the plaintiffs”] accord Bushell v. JPMorgan Chase Bank, N.A. (2013) 220 Cal.App.4th 915, 931 [“plaintiffs did not have to specify the … personnel who prepared these documents because that information is uniquely within … [defendant’s] knowledge”].) “‘[T]he courts should not ... seek to absolve the defendant from liability on highly technical requirements of form in pleading. Pleading facts in ordinary and concise language is as permissible in fraud cases as in any others, and liberal construction of the pleading is as much a duty of the court in these as in other cases.’” (Appollo Capital Fund, LLC v. Roth Capital Partners, LLC (2007) 158 Cal.App.4th 226, 242.)

Here, Defendant first argues that Plaintiff did not identify any affirmative misrepresentation from Defendant. As discussed above, the Complaint alleges that Defendant knew the subject vehicle contained defective parts which could cause problems displaying the state of charge, problems with reduced charge, and an increased risk of fire. Despite knowing about these defects as early as 2017, Defendant’s written materials about the vehicle and sales personnel represented to Plaintiff that the vehicle could travel 259 miles on a single charge, the vehicle could be charged indoors, and that the vehicle was safe. Because the Complaint alleges Defendant affirmatively stated facts about the subject vehicle which Defendant knew were false, the Complaint sufficiently states Defendant made affirmative misrepresentations about the subject vehicle to Plaintiff.

Defendant also argues that Plaintiff did not allege that Defendant intended Plaintiff to rely on a specific representation in purchasing the vehicle, that Plaintiff reasonably relied on Defendant’s representations, or that Plaintiff’s reliance was a substantial factor in causing him to lease the vehicle or caused him harm.

The Complaint sufficiently alleges that Defendant made misrepresentations with respect to the distance the subject vehicle could travel on a single battery charge, that it was safe, and that the vehicle could be repaired under an express warranty to induce Plaintiff to purchase the vehicle. (Compl., ¶39.) Even if this allegation is conclusory, knowledge of whether Defendant made these misrepresentations to induce Plaintiff to purchase the vehicle would lie more with Defendant. The specificity requirement is relaxed because Defendant would know whether it made these misrepresentations to induce Plaintiff to purchase the vehicle. Therefore, the Complaint sufficiently states Defendant intended to induce Plaintiff to purchase the vehicle.

The Complaint sufficiently alleges that Plaintiff reasonably relied on the misrepresentations and that his reliance caused him to lease the vehicle, causing Plaintiff’s damages. As discussed above, the Complaint alleges that Defendant made misrepresentations about the subject vehicle through its advertisements and publications and a salesperson confirmed the same representations when Plaintiff leased the vehicle. It is reasonable to infer that Plaintiff reasonably relied on Defendant’s representations because the representations were repeated in written materials and by Defendant’s sales personnel. Additionally, the Complaint sufficiently states Plaintiff relied on Defendant’s misrepresentations because it states Plaintiff believed the vehicle could fit his specific needs and that Plaintiff would not have purchased the vehicle if he knew of the true range of the vehicle and the risk of fire caused by the vehicle’s defective battery. (Compl., ¶¶8, 28.) Therefore, the Complaint sufficiently states Plaintiff reasonably relied on Defendant’s misrepresentations.

Finally, the Complaint sufficiently alleges Defendant’s misrepresentations caused Plaintiff’s harm because Plaintiff leased the vehicle in reliance of Defendant’s misrepresentations and the vehicle remains in a defective condition. Plaintiff suffered harm as a result of the misrepresentations because Plaintiff expected a safe vehicle that could travel 259 miles on a single charge and instead received a defective vehicle. Therefore, the Complaint sufficiently states Plaintiff suffered harm as a result of his reliance on Defendant’s misrepresentations.

Defendant next argues that Plaintiff failed to identify a material fact regarding the subject vehicle that Defendant concealed or suppressed. However, the Complaint states that at the time Plaintiff leased the vehicle and thereafter, Defendant concealed the fact that the subject vehicle contained a defective battery and that Defendant could not replace the defective battery. (Compl., ¶¶30-38.) Because the Complaint states specifically what facts Defendant allegedly concealed, the Complaint sufficiently states Defendant concealed facts about the subject vehicle.

Defendant also argues the cause of action for fraud lacks the requisite specificity because Complaint fails to identify (1) the identity of the individuals who purportedly concealed material facts or made untrue representations about the vehicle, (2) their authority to speak and act on behalf of Defendant, (3) that Defendant suppressed the facts to defraud Plaintiff, (4) any interactions with Defendant before or during the purchase, or (5) Defendant’s intent to induce Plaintiffs’ reliance. However, because fraudulent concealment requires the suppression of a fact, the specificity requirement is relaxed.

Defendant’s first argument that Plaintiff was required to name the employees who concealed material facts or made misrepresentations about the vehicle fail because it is not necessary for a complaint to name the specific employee who sold the vehicle to Plaintiff. This information is within Defendant’s knowledge because Defendant would reasonably maintain records of the employees’ identities and Plaintiff’s transaction.

Next, Defendant’s argument that the Complaint failed to state the employees who sold the vehicle were authorized to act on Defendant’s behalf fails because the FAC does state that the employees who sold Plaintiff the vehicle were authorized sales representatives. The Complaint also adequately describes interactions with Defendant because it states Defendant’s advertisements, publications, and sales personnel described the vehicle’s range and safety.

Finally, the Complaint alleges sufficient facts to show that Defendant intended to induce Plaintiff’s reliance on its failure to disclose the alleged defects. Plaintiff chose to buy the vehicle after seeing advertisements and other publications and speaking to a salesperson about the vehicle. It is reasonable to infer from the advertisements and the salesperson’s concealment of the defects that Defendant intended to induce Plaintiff into relying on the concealment to purchase the vehicle. Additionally, whether Defendant intended Plaintiff to rely on the concealment would fall more in Defendant’s knowledge, meaning the specificity standard is relaxed here.

The elements of a cause of action for negligent misrepresentation are “misrepresentation of a past or existing material fact, without reasonable ground for believing it to be true, and with intent to induce another’s reliance on the fact misrepresented; ignorance of the truth and justifiable reliance on the misrepresentation by the party to whom it was directed; and resulting damage.” (Hydro-Mill Co., Inc. v. Hayward, Tilton & Rolapp Ins. Associates, Inc. (2004) 115 Cal.App.4th 1145, 1154, quotation marks omitted.)

Here, Defendant demurs to the cause of action for negligent misrepresentation on the grounds that Plaintiff did not identify any misrepresentation Defendant negligently made. Defendant’s argument fails for the same reasons as the cause of action for fraud. Plaintiff’s Complaint adequately states Defendant made misrepresentations about the subject vehicle’s range and safety despite knowing the vehicle contained defects shortening the vehicle’s charging capacity and which could ignite fires. Plaintiff leased the vehicle in reliance of those misrepresentations and now possesses a defective vehicle. The Court finds that the Complaint sufficiently states facts which support a cause of action for negligent misrepresentation.

To successfully plead a UCL claim for unfair business practices, a plaintiff must allege facts justifying relief in the form of protecting the public from unfair business practices or deceptive advertising. (Day v. AT&T Corp. (1998) 63 Cal.App.4th 325, 331-332.) A plaintiff must plead and prove that the defendant engaged in a business practice that was either unlawful (i.e., is forbidden by law) or unfair (i.e., harm to victim outweighs any benefit) or fraudulent (i.e., is likely to deceive members of the public). (Albillo v. Intermodal Container Services, Inc. (2003) 114 Cal.App.4th 190, 206.)

“[T]he ‘practice’ requirement envisions something more than a single transaction . . . ; it contemplates a ‘pattern of conduct’ [citation], ‘on-going . . . conduct’, ‘a pattern of behavior’ [citation], or ‘a course of conduct’ . . . .” (Hewlett v. Squaw Valley Ski Corp. (1997) 54 Cal.App.4th 499, 519 (quoting State of California ex rel. Van de Kamp v. Texaco, Inc. (1988) 46 Cal.3d 1147, 1169-70).)

The remedies for UCL claims brought by private individuals are limited to (1) injunctive relief to prevent practices of unfair competition and (2) restitution. (See, e.g., Prakashpalan v. Engstrom, Lipscomb and Lack (2014) 223 Cal.App.4th 1105, 1133; Bus. & Prof. Code, section 17203.)

Here, As discussed above, Plaintiff adequately pled that Defendant engaged in a fraudulent practice by misrepresenting or concealing facts about the condition of Chevy Bolt vehicles. Additionally, the Complaint establishes that Defendant’s alleged fraud was a pattern of conduct because Defendant falsely marketed and misrepresented the vehicles’ safety and functionality to the public at large. (Compl., ¶¶53-55.) Thus, the Complaint adequately alleges facts which support a cause of action for violations of the UCL.

Defendant demurs to the cause of action for violations of the UCL on the grounds that Plaintiff failed to establish he suffered injury as a result of unfair competition. However, as discussed above, Plaintiff suffered injury as a result of Defendant’s alleged fraud because he now possesses a defective vehicle. Thus, Defendant’s argument is without merit.

Defendant next argues Plaintiff made no showing that he can plead facts necessary to support a cause of action under the UCL for injunctive relief. Specifically, Defendant argues Plaintiff has not identified how an injunction could be enforced to prevent practices of unfair competition. The Complaint does not describe how injunctive relief would prevent fraudulent practice. The Complaint does not state that the alleged fraudulent practice continued after Defendant issued the most recent recall. Because the Complaint fails to show that injunctive relief would prevent the alleged fraudulent business practice, the demurrer is sustained as to this cause of action.

“If the buyer establishes that the failure to comply was willful, the judgment may include, in addition to the amounts recovered under subdivision (a), a civil penalty which shall not exceed two times the amount of actual damages. This subdivision shall not apply in any class action under Section 382 of the Code of Civil Procedure or under Section 1781, or with respect to a claim based solely on a breach of an implied warranty.”

In interpreting this section, courts have found that “…the penalty under section 1794(c), like other civil penalties, is imposed as punishment or deterrence of the defendant, rather than to compensate the plaintiff. In this, it is akin to¿punitive¿damages.” (Kwan v. Mercedes-Benz of North America, Inc.¿(1994) 23 Cal.App.4th 174, 184.) Accordingly, courts have barred recovery of both civil penalties and punitive damages based on the same conduct, providing:

“We are of the opinion that had the Legislature, by Civil Code sections 3294 (permitting punitive damages) and 1794 (permitting a civil penalty), intended a double recovery of punitive and penal damages for the same willful, oppressive, malicious, and oppressive acts, it would in some appropriate manner have said so. And we believe that by seeking a ‘civil penalty’ and also attorney's fees and all reasonable expenses as allowed by Civil Code section 1794, plaintiff had in effect elected to waive punitive damages under section 3294.” (Troensegaard v. Silvercrest Industries, Inc. (1985) 175 Cal.App.3d 218, 228.)

In Troensegaard v. Silvercrest Industries, Inc. (1985) 175 Cal.App.3d 218, a plaintiff mobile home owner brought an action against the manufacturer of the mobile home for “damages for personal injuries based on breach of express warranty, products liability, and fraudulent concealment,” specifically seeking compensatory and punitive damages as well as civil penalties under Civil Code section 1794. (Troensegaard at 220-221.) After trial, the plaintiff “obtained a judgment on a jury verdict against the manufacturer for $90,000 compensatory damages, $55,000 punitive damages, and $90,000 as a ‘civil penalty,’” and attorneys’ fees and costs under Civil Code section 1794. (Id. at 221.)

On the manufacturer’s appeal from the judgment, the appellate court determined that although plaintiff was entitled to a punitive damage award based on the manufacturer’s intentional concealment, the $55,000 punitive damage award and $90,000 civil penalty award were “based upon the substantially the same conduct of [the manufacturer]. And both were made for the purpose of punishing, and making an example of, [the manufacturer]; in their effect both constituted punitive damage awards.” (Id. at 226-227; emphasis in the original.) Accordingly, the appellate court struck the punitive damage award. (Id. at 227.)

Here, like the plaintiff in Troensegaard, Plaintiff has causes of action for both violations of the Song-Beverly Act and fraud. Plaintiff also seeks both a civil penalty under Civ. Code, section 1794 and punitive damages under Civ. Code 3294. Defendant argues that because Plaintiff may not recover both punitive damages and a civil penalty, the demand for punitive damages must be stricken from the Complaint.

However, the courts have ruled that at the pleading stage a plaintiff seeking civil penalties and punitive damages may plead both and elect one or the other later should he prevail. (Clauson v. Superior Court (1998) 67 Cal.App.4th 1253, 1256.) Although Clauson involves civil penalties for wiretapping laws, the defendant there also relied on Troensgaard. (Id.) The court there determined that the plaintiff there was entitled to seek both remedies in their complaint but did not rule on whether both could actually be recovered. (Id.) No court has ruled on whether both punitive damages and civil penalties may be pled simultaneously. The Court finds that there is no prohibition on pleading both punitive damages and civil penalties simultaneously because it is theoretically possible to recover both if they are based on different conduct.

In order to state a prima facie claim for punitive damages, a complaint must set forth the elements as stated in the general punitive damage statute, Civil Code section 3294. (College Hospital, Inc. v. Superior Court (1994) 8 Cal.4th 704, 721.) These statutory elements include allegations that the defendant has been guilty of oppression, fraud or malice. (Civ. Code, § 3294, subd. (a).)

“[T]he imposition of punitive damages upon a corporation is based upon its own fault. It is not imposed vicariously by virtue of the fault of others.” (City Products Corp. v. Globe Indemnity Co. (1979) 88 Cal.App.3d 31, 36.) “Corporations are legal entities which do not have minds capable of recklessness, wickedness, or intent to injure or deceive. An award of punitive damages against a corporation therefore must rest on the malice of the corporation’s employees. But the law does not impute every employee’s malice to the corporation. Instead, the punitive damages statute requires proof of malice among corporate leaders: the ‘officer[s], director[s], or managing agent[s].’” (Cruz v. Home Base (2000) 83 Cal.App.4th 160, 167 [citation omitted].) As to ratification, “[a] corporation cannot confirm and accept that which it does not actually know about.’” (Ibid., citing College Hospital, Inc., supra, 8 Cal.4th at p. 726 [for ratification sufficient to justify punitive damages against corporation, there must be proof that officers, directors, or managing agents had actual knowledge of the alleged misconduct].)

Here, as discussed above, the Complaint adequately pleads a cause of action for fraud. Punitive damages are permitted under Civ. Code, section 3294 where a defendant is guilty of fraud. However, the Complaint fails to name an officer, director or managing agent who engaged in or ratified the fraudulent conduct. Thus, the Complaint fails to meet the requirements of alleging punitive damages against a corporation. The motion to strike is granted with leave to amend.