Judge: Joel R Wohlfeil, Case: 37-2023-00042370-CU-BC-CTL, Date: 2024-01-26 Tentative Ruling

SUPERIOR COURT OF CALIFORNIA,

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HALL OF JUSTICE

TENTATIVE RULINGS - January 24, 2024

01/26/2024  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 Demurrer / Motion to Strike 37-2023-00042370-CU-BC-CTL RODRIGUEZ VS AMERICAN HONDA MOTOR CO INC [IMAGED] CAUSAL DOCUMENT/DATE FILED: Demurrer, 12/01/2023

1. The special and general Demurrer (ROA # 11) of Defendant American Honda Motor Co., Inc.

('Defendant' or 'AHM') to the Second Cause of Action in the First Amended Complaint ('FAC') by Plaintiffs Christina Rodriguez and Martin Rodriguez ('Plaintiffs'), is OVERRULED.

Defendant is ordered to file and serve its Answer within 20 days of this hearing.

Defendant's Request (ROA # 14) for judicial notice is DENIED.

Plaintiffs' Requests (ROA # 21, 25) for judicial notice is DENIED.

Regarding the special Demurrer, cause of action 2 is not fatally ambiguous or unintelligible. Code Civ.

Proc. 430.10(f).

The remainder of this ruling addresses the general Demurrer.

Federal Preemption The Court agrees that this argument is premature. The scope of the duties and responsibilities of the National Highway Traffic Safety Administration is a question of fact that cannot be determined on this Demurrer. Even assuming judicial notice of the various documents is proper, this argument still involves a fact intensive analysis.

Congress does not cavalierly pre-empt state-law causes of action. Medtronic, Inc. v. Lohr (1996) 518 U.

S. 470, 485.

In all pre-emption cases, and particularly in those in which Congress has legislated in a field which the States have traditionally occupied, there is an assumption that the historic police powers of the States are not to be superseded by the Federal Act unless that was the clear and manifest purpose of Congress. Id. The critical question in any pre-emption analysis is always whether Congress intended that federal regulation supersede state law. Louisiana Public Service Com'n v. F.C.C. (1986) 476 U. S. 355, 357.

It is not apparent from the authority cited by Defendant that federal law governing motor vehicle safety standards was expressly intended to preempt the 'field' of state tort law addressing fraudulent Calendar No.: Event ID:  TENTATIVE RULINGS

3060423 CASE NUMBER: CASE TITLE:  RODRIGUEZ VS AMERICAN HONDA MOTOR CO INC [IMAGED]  37-2023-00042370-CU-BC-CTL statements. States have traditionally occupied the area of tortious fraud claims. Defendant fails to cite any legal authority in which a state law claim for fraud in the sale of a motor vehicle has been found to be preempted by federal law regulating vehicle safety standards.

Whether Sufficient Facts are Alleged? Fraud must be pled specifically; general and conclusory allegations do not suffice. Lazar v. Superior Court (1996) 12 Cal. 4th 631, 645.

This particularity requirement necessitates pleading facts which show how, when, where, to whom and by what means the representations were tendered. Id. Plaintiff's burden in asserting a fraud claim against a corporate employer is even greater. Id. Plaintiff must allege the names of the persons who made the allegedly fraudulent representations, their authority to speak, to whom they spoke, what they said or wrote, and when it was said or written. Id. However, less specificity is required when it appears from the nature of the allegations that Defendant must necessarily possess full information concerning the facts of the controversy. Committee On Children's Television, Inc. v. General Foods Corp. (1983) 35 Cal. 3d 197, 217.

The rule of particularity when pleading fraud is intended to apply to affirmative misrepresentations.

Alfaro v. Community Housing Improvement System & Planning Assn., Inc. (2009) 171 Cal. App. 4th 1356, 1384.

It is harder to apply this rule to a case of simple nondisclosure. Id. There are four circumstances in which 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.

Thus, 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. The FAC in this action alleges the existence of a transactional relationship. It alleges Plaintiffs purchased the vehicle from an authorized Honda dealership (¶ 78), that Plaintiffs and Honda entered into an express warranty contract (¶ 9), and that 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. Thus, the FAC alleges sufficient facts regarding a duty to disclose.

Sufficient facts are alleged regarding what was concealed.

Calendar No.: Event ID:  TENTATIVE RULINGS

3060423 CASE NUMBER: CASE TITLE:  RODRIGUEZ VS AMERICAN HONDA MOTOR CO INC [IMAGED]  37-2023-00042370-CU-BC-CTL Reliance is sufficiently alleged based on the information that was not disclosed. It is reasonable to infer that a vehicle safety system is an important element factoring into the decision to purchase a vehicle.

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.

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.

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 Calendar No.: Event ID:  TENTATIVE RULINGS

3060423 CASE NUMBER: CASE TITLE:  RODRIGUEZ VS AMERICAN HONDA MOTOR CO INC [IMAGED]  37-2023-00042370-CU-BC-CTL 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.

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 has 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 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. Calendar No.: Event ID:  TENTATIVE RULINGS

3060423 CASE NUMBER: CASE TITLE:  RODRIGUEZ VS AMERICAN HONDA MOTOR CO INC [IMAGED]  37-2023-00042370-CU-BC-CTL 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.

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. Again, although review has been granted this is still persuasive authority.

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.' _____ 2. Defendant's Motion (ROA # 17) to strike portions of Plaintiffs' FAC, is DENIED.

As discussed within the concurrent ruling overruling the Demurrer, the claim for fraudulent concealment is sufficiently pled. A properly pled fraud claim will itself support recovery of punitive damages. No Calendar No.: Event ID:  TENTATIVE RULINGS

3060423 CASE NUMBER: CASE TITLE:  RODRIGUEZ VS AMERICAN HONDA MOTOR CO INC [IMAGED]  37-2023-00042370-CU-BC-CTL allegations of 'malice' or intent to injure plaintiff are required because fraud is an alternative and independent basis for recovery. See Civ. Code 3294(a); Stevens v. Superior Court (1986) 180 Cal. App. 3d 605, 610; and Las Palmas Associates v. Las Palmas Center Associates (1991) 235 Cal. App. 3d 1220, 1239.

Thus, the facts and circumstances supporting the claim for punitive damages are sufficiently alleged.

Although there are no allegations within the body the second cause of action expressly referencing punitive damages, this is the only cause of action which could support such an award.

Section 3294(b) states: 'An employer shall not be liable for damages pursuant to subdivision (a), based upon acts of an employee of the employer, unless the employer had advance knowledge of the unfitness of the employee and employed him or her with a conscious disregard of the rights or safety of others or authorized or ratified the wrongful conduct for which the damages are awarded or was personally guilty of oppression, fraud, or malice. With respect to a corporate employer, the advance knowledge and conscious disregard, authorization, ratification or act of oppression, fraud, or malice must be on the part of an officer, director, or managing agent of the corporation.' Paragraph 8 of the FAC states: 'All acts of corporate employees as alleged were authorized or ratified by an officer, director or managing agent of the corporate employer.' This allegation, by itself, is conclusory and not sufficient. However, this allegation is supported by additional fact pleading. The FAC contains detailed facts regarding Defendant's knowledge of the 'sensing defect,' how this defect was concealed and its ability to inform consumers. FAC at ¶¶ 27 - 65. This evidences authorization and ratification. The Motion is also denied on this basis.

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