Judge: Joel R Wohlfeil, Case: 37-2022-00037109-CU-BC-CTL, Date: 2024-03-07 Tentative Ruling

SUPERIOR COURT OF CALIFORNIA,

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HALL OF JUSTICE

TENTATIVE RULINGS - February 07, 2024

02/09/2024  09:00:00 AM  C-73 COUNTY OF SAN DIEGO

JUDICIAL OFFICER:Joel R. Wohlfeil

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Civil - Unlimited  Breach of Contract/Warranty Summary Judgment / Summary Adjudication (Civil) 37-2022-00037109-CU-BC-CTL DIENES VS AMERICAN HONDA MOTOR CO INC [IMAGED] CAUSAL DOCUMENT/DATE FILED: Motion for Summary Judgment and/or Adjudication, 11/21/2023

The Motion (ROA # 68) of Defendant American Honda Motor Co., Inc. ('Defendant or 'AHM') for an order for summary adjudication of the Second Cause of Action for fraudulent inducement in the Complaint by Plaintiffs LEON DIENES and AMBER DIENES ('Plaintiffs'), is DENIED.

Defendant's objections (ROA # 103) are OVERRULED IN PART and SUSTAINED IN PART. The objections are SUSTAINED except as follows: nos. 2 and 3 are OVERRULED.

Defendant's objections (ROA # 104) are OVERRULED IN PART and SUSTAINED IN PART. The objections are SUSTAINED except as follows: nos. 2 and 3 are OVERRULED.

A cause of action for fraudulent concealment requires (1) concealment or suppression of a material fact; (2) by Defendant with a duty to disclose the fact to Plaintiff; (3) Defendant intended to defraud Plaintiff by intentionally concealing or suppressing the fact; (4) 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. Hambrick v. Healthcare Medical Group, Inc. (2015) 238 Cal. App. 4th 124, 162.

Transactional Relationship There are four circumstances in which a duty to disclose arises such that nondisclosure or concealment may constitute actionable fraud: (1) when Defendant is in a fiduciary relationship with Plaintiff; (2) when Defendant had exclusive knowledge of material facts not known to Plaintiff; (3) when Defendant actively conceals a material fact from Plaintiff; and (4) when Defendant makes partial representations but also suppresses some material facts. LiMandri v. Judkins (1997) 52 Cal. App. 4th 326, 336.

The latter three circumstances in which nondisclosure may be actionable presupposes the existence of some type of relationship between Plaintiff and Defendant in which a duty to disclose can arise. Id. at 336, 337.

As a matter of common sense, such a relationship can only come into being as a result of some sort of transaction between the parties. Id. at 337.

A duty to disclose may arise from the relationship between seller and buyer, employer and prospective employee, doctor and patient, or parties entering into any kind of contractual agreement. Id. Calendar No.: Event ID:  TENTATIVE RULINGS

3059057 CASE NUMBER: CASE TITLE:  DIENES VS AMERICAN HONDA MOTOR CO INC [IMAGED]  37-2022-00037109-CU-BC-CTL The FAC in this action alleges the existence of a transactional relationship. It alleges Plaintiffs purchased the vehicle from an authorized Honda dealership (¶ 78), Plaintiffs and Honda entered into an express warranty contract (¶ 9), and the dealership was Honda's agent for purposes of the sale of Honda vehicles to consumers (¶ 108).

Although review of Dhital v. Nissan North America, Inc. (2022) 84 Cal. App. 5th 828 has been granted (see Dhital v. Nissan North America (Cal. 2023) 304 Cal. Rptr. 3d 82, 523 P. 3d 392), it is still persuasive authority. See California Rules of Court, Rule 8.1115(e)(1).

Dhital expressly holds that this transactional relationship could exist.

Defendant does not submit any evidence raising a dispute as to these allegations. As a result, Honda has not met its initial burden with respect to this argument. See Aguilar v. Atlantic Richfield Co. (2001) 25 Cal. 4th 826, 850 and 854 (party moving for summary judgment has initial burden of production to make a showing of nonexistence of any triable issue of material fact; defendant moving for summary judgment must present evidence, and not simply point out that the plaintiff does not possess and cannot obtain needed evidence).

Evidence of Intentional Concealment Defendant argues: 'Plaintiffs have failed to come forward with evidence of any active concealment by AHM .... Plaintiffs have identified no active concealment by AHM of anything affecting their decision to purchase the Subject Vehicle.' Moving Brief at page 12, lines 23 - 26.

In support of this argument, Defendant cites Separate Statement fact numbers 6 - 10, 12, 14 - 16, 22, 23, 26, 27 and 32 - 34.

Fact numbers 6 - 10, 12, 14 - 16, 22, 23, 26 and 27 do not address whether Defendant actively concealed a transmission defect. Instead, these fact statements address Plaintiffs' knowledge, conduct and state of mind prior to making the vehicle purchase.

Fact number 32 states: 'Prior to purchasing the Subject Vehicle, Plaintiffs did not have any communications with AHM.' However, this statement does not also establish Honda did not, in fact, conceal the defect from consumers.

Fact number 33 states: 'Plaintiffs have not identified any statements of AHM they relied upon during the process of purchasing the Subject Vehicle.' The response references 'all evidence cited by Defendant in UMF Nos. 10 & 16.' This evidence tends to establish that Plaintiffs relied on the vehicle's reputation as safe in making their decision to purchase the vehicle, and did not possess knowledge of a transmission defect. There is also evidence that Honda distributes promotional materials and other information about its vehicles to consumers through dealerships and advertising. There is evidence these materials touted the vehicle's reliability and safety, and that Plaintiffs saw some of these promotional materials.

There is evidence the dealership's salesperson told Plaintiff Amber Dienes that the nine speed transmission afforded was a smooth ride. Thus, this fact statement is disputed. Evidence also exists creating a dispute regarding the existence of a transmission defect affecting the safety of the vehicle.

See Additional Fact nos. 2 and 5.

Fact number 34 states: 'Plaintiffs have not identified any facts or documents that support their contention that AHM and its agents intentionally concealed and failed to disclose facts related to the alleged transmission defect.' In support of this fact statement, Defendant cites responses from each Plaintiff to special interrogatories, form interrogatories and requests for production of documents, 69 pages of documents produced by plaintiffs, and 48 pages consisting of Plaintiffs' supplemental document production. See Exhibits 6 - 13 attached to the declaration of Marcia M. LaCour.

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3059057 CASE NUMBER: CASE TITLE:  DIENES VS AMERICAN HONDA MOTOR CO INC [IMAGED]  37-2022-00037109-CU-BC-CTL The party moving for summary judgment bears an initial burden of production to make a prima facie showing of the nonexistence of any triable issue of material fact. Aguilar v. Atlantic Richfield Co., supra at 850.

A burden of production entails the presentation of evidence. Id. All that Defendant need do is to show that Plaintiff cannot establish at least one element of the cause of action. Id. at 853.

Defendant moving for summary judgment must 'present evidence, and not simply point out that the plaintiff does not possess, and cannot reasonably obtain, needed evidence.' Id. at 854 (footnote omitted).

The exhibits cited in support of fact statement 34 consist of hundreds of pages of documents. Defendant fails to identify any specific discovery response(s) or any specific document(s). The exhibits themselves are not highlighted. There is simply no way for the Court to sift through these documents to determine if this evidence does, in fact, support the asserted fact statement. This massive 'document dump' does not constitute the presentation of evidence tending to negate this element of the fraudulent concealment claim. Therefore, Defendant has not satisfied its burden of production with respect to negating the element of intentional concealment.

Damages 'One defrauded in the purchase, sale or exchange of property is entitled to recover the difference between the actual value of that with which the defrauded person parted and the actual value of that which he received, together with any additional damage arising from the particular transaction, including any of the following: ... ¶ ...Amounts actually and reasonably expended in reliance upon the fraud.' Civ.

Code 3343(a).

In the typical case involving a fraudulent vendor and a defrauded vendee, section 3343 provides the exclusive measure of damages. Walsh v. Hooker and Fay (1963) 212 Cal. App. 2d 450, 458.

'It is a recognized rule that the owner of property, whether generally familiar with such values or not, is competent to estimate its worth, the lack of knowledge going to the weight rather than the admissibility of the testimony.' Shook v. Beals (1950) 96 Cal. App. 2d 963, 974.

Plaintiffs present evidence creating a dispute regarding the existence of a defect. Specifically, there is evidence of sudden accelerations and episodes where the vehicle lurches forward. There is also evidence presented that Plaintiffs would not have purchased the vehicle if they had known about these problems. This evidences both a diminution in the value of the vehicle as well as reliance damages.

Economic Loss Rule Defendant also argues that the 'economic loss rule' bars this cause of action. However, this argument is not persuasive.

'...[T]he economic loss rule allows a plaintiff to recover in strict products liability in tort when a product defect causes damage to 'other property,' that is, property other than the product itself. The law of contractual warranty governs damage to the product itself.' Jimenez v. Superior Court (2002) 29 Cal. 4th 473, 483.

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. Robinson Helicopter Co., Inc. v. Dana Corp. (2004) 34 Cal. 4th 979, 988.

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3059057 CASE NUMBER: CASE TITLE:  DIENES VS AMERICAN HONDA MOTOR CO INC [IMAGED]  37-2022-00037109-CU-BC-CTL The economic loss rule provides that where a purchaser's expectations in a sale are frustrated because the product purchased is not working properly, the remedy is in contract alone: the purchaser has suffered only 'economic' losses. Id. The economic loss rule requires a purchaser to recover in contract for purely economic loss due to disappointed expectations, unless they can demonstrate harm above and beyond a broken contractual promise. Id. The economic loss rule prevents the law of contract and the law of tort from dissolving one into the other.

Id.

However, tort damages have been permitted in contract cases where a breach of duty directly causes physical injury; for breach of the covenant of good faith and fair dealing in insurance contracts; for wrongful discharge in violation of fundamental public policy; or where the contract was fraudulently induced. Id. at 989, 990 (quoting Erlich v. Menezes (1999) 21 Cal. 4th 543, 551, 552).

'In summary, under current California law, tort liability has been imposed for essentially contract-based claims only where (1) the breach is also a tort, (2) the parties to the contract have the requisite 'special relationship,' or (3) the breach is accompanied by bad faith denial of the contract.' Harris v. Atlantic Richfield Co. (1993) 14 Cal. App. 4th 70, 80.

In each of these cases, 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. Robinson Helicopter Co., Inc. v. Dana Corp., supra at 990.

Generally, outside the insurance context, a tortious breach of contract may be found when (1) the breach is accompanied by a traditional common law tort, such as fraud or conversion; (2) the means used to breach the contract are tortious, involving deceit or undue coercion; or (3) one party intentionally breaches the contract intending or knowing that such a breach will cause severe, unmitigable harm in the form of mental anguish, personal hardship, or substantial consequential damages. Id. Focusing on intentional conduct gives substance to the proposition that a breach of contract is tortious only when some independent duty arising from tort law is violated. Id. Fraud is an independent tort such that the economic loss rule does not bar the claim for fraud. Although the Robinson Helicopter case was premised, in part, on fraud via affirmative misrepresentations (the certifications), there is no reason to assume that its rationale would not also apply in the context of a concealment claim such as the one pled in this action. An intentional decision to conceal damaging material facts in order to induce action (a vehicle purchase) is functionally indistinguishable from an intentional misrepresentation. Thus, this Court agrees with, and finds persuasive, the following statement: 'Robinson explicitly did not address the question whether a case involving material omissions, rather than affirmative misrepresentation, would similarly be exempt from the economic loss rule. Robinson, 34 Cal. 4th at 991.

The opinion strongly suggests no meaningful distinction exists between intentional concealment and intentional misrepresentation; rather, the material distinction is whether the tortious conduct was intentional or negligent. Id. at 990 (noting that California courts have found exceptions to the economic loss rule in this non-contractual duty category where Defendant's conduct was committed 'intending or knowing that such a breach will cause severe, unmitigable harm in the form of mental anguish, personal hardship, or substantial consequential damages').' NuCal Foods, Inc. v. Quality Egg LLC (E. D. Cal. 2013) 918 F. Supp. 2d 1023, 1031.

It is important to note the opinion in Robinson Helicopter relied on the opinion in Erlich v. Menezes, which in turn relied on Las Palmas Associates v. Las Palmas Center Associates (1991) 235 Cal. App. 3d Calendar No.: Event ID:  TENTATIVE RULINGS

3059057 CASE NUMBER: CASE TITLE:  DIENES VS AMERICAN HONDA MOTOR CO INC [IMAGED]  37-2022-00037109-CU-BC-CTL 1220, and the concurring and dissenting opinion of Justice Mosk in Freeman & Mills, Inc. v. Belcher Oil Co. (1995) 11 Cal. 4th 85.

Erlich refers to fraudulent inducement and states that '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.' Erlich v. Menezes (1999) 21 Cal. 4th 543, 552.

Quoting Justice Mosk, the opinion also refers to a finding of a tortious breach of contract when the breach is accompanied by a traditional common law tort, such as fraud or conversion; or when the means used to breach the contract are tortious, involving deceit or undue coercion. Id. at 553, 554.

In Las Palmas Associates v. Las Palmas Center Associates, the opinion states: 'We are aware of the danger of grafting tort liability on what ordinarily should be a breach of contract action. While society has a strong interest in the security of transactions, parties dealing at arm's length are permitted to reach a reasoned decision to breach an agreement, knowing their risk is limited to the reimbursement of the other side's compensatory losses. However, no public policy is served by permitting a party who never intended to fulfill his obligations to fraudulently induce another to enter into an agreement.' Id. at 1238.

Recognizing the adverse effect fraud has on commercial transactions, the law nonetheless permits a defrauded party to seek punishment of the wrongdoer through the imposition of punitive damages. Id. at 1238, 1239.

'Applying this framework of principles to the present case, the record contains credible evidence from which a trier of fact could conclude sellers committed fraud and then systematically attempted to avoid honoring the guaranties.' Id. at 1239.

Even though Robinson Helicopter is necessarily limited by its facts, the authority it cites does not support the same narrow interpretation. In this context, there is simply no reason to distinguish between fraud by an overt statement and fraud by omission. Fraud or deceit may consist of the suppression of a fact by one who is bound to disclose it, or who gives information or other facts which are likely to mislead for want of communication of that fact. Outboard Marine Corp. v. Superior Court (1975) 52 Cal. App. 3d 30, 37.

Where failure to disclose a material fact is calculated to induce a false belief, the distinction between concealment and affirmative misrepresentation is tenuous. Id. Both are fraudulent. Id. No public policy is served by permitting a party who never intended to fulfill an obligation to fraudulently induce another to enter into a transaction, whether that fraud consists of a misrepresentation or a concealment. An active concealment has the same force and effect as a representation which is positive in form. Id. 'Respondent Commission attempts to point out a distinction between a concealment of a material fact and a misrepresentation as to such fact. The legal effect in each instance amounts to the same thing, fraud.' General Acc. Fire & Life Assur. Corp., Limited, of Perth, Scotland, v. Industrial Acc. Commission (1925) 196 Cal. 179, 190.

In addition, the First Appellate District recently affirmed that 'concealment-based claims for fraudulent inducement are not barred by the economic loss rule.' Dhital v. Nissan North America, Inc., supra at 840.

As discussed above, although review has been granted this is still persuasive authority.

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3059057 CASE NUMBER: CASE TITLE:  DIENES VS AMERICAN HONDA MOTOR CO INC [IMAGED]  37-2022-00037109-CU-BC-CTL This Court also finds persuasive the following statement in the district Court opinion of Lewis v. Ford Motor Co. (E. D.Cal. 2023) No. 2:21-cv-02367-TLN-JDP; 2023 WL 1823760: 'The economic loss rule states that a party to a contract cannot recover 'purely economic loss' in tort, 'unless he can demonstrate harm above and beyond a broken contractual promise.' Rattagan v. Uber Techs., Inc., 19 F. 4th 1188, 1191 (9th Cir. 2021) (internal citations and quotations omitted). The California Supreme Court set forth an exception to the economic loss rule when '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.' Robinson Helicopter Co. v. Dana Corp., 34 Cal. 4th 979, 990, 22 Cal. Rptr. 3d 352, 102 P. 3d 268 (2004) (quoting see Erlich v. Menezes, 21 Cal. 4th 543, 552, 87 Cal. Rptr. 2d 886, 981 P. 2d 978 (1999)). Several courts have found that fraudulent inducement is an exception to the economic loss rule. Id. at 989–90, 22 Cal. Rptr. 3d 352, 102 P. 3d 268 ('Tort damages have been permitted in contract cases ... where the contract was fraudulently induced.') (citing Erlich, 21 Cal. 4th at 551–52, 87 Cal. Rptr. 2d 886, 981 P. 2d 978); Dhital v. Nissan North Am., Inc., 84 Cal. App. 5th 828, 843, 300 Cal. Rptr. 3d 715 (2022) ('[W]e conclude that, under California law, the economic loss rule does not bar plaintiffs' claim here for fraudulent inducement by concealment'); Kroutilin v. FCA US, LLC, No. 822CV00929FWSDFM, 2022 WL 18278602, at *5 (C. D. Cal. Dec. 7, 2022) ('[B]ased on the existing persuasive authority, the court finds that Plaintiff's sixth cause of action for fraudulent inducement - concealment is not barred by the economic loss rule.') (citing Dhital, 84 Cal. App. 5th 828, 300 Cal. Rptr. 3d 715); Flier v. FCA US LLC, No. 21-CV-02553-CRB, 2022 WL 16823042, at *6–7 (N. D. Cal. Nov. 8, 2022) (same); Scherer v. FCA US, LLC, 565 F. Supp. 3d 1184, 1193 (S. D. Cal. 2021) (same). The Court agrees with these well-reasoned decisions and concludes the economic loss rule does not bar Plaintiff's claim.' Id. at *4.

Given the legal authority cited above, this action is not barred by the 'economic loss rule.' Calendar No.: Event ID:  TENTATIVE RULINGS

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