Judge John J. Kralik, Case Number: 24NNCV01338, Date: 2024-08-09 Tentative Ruling

Plaintiffs Benedict Fernandes, Christina Fernandes, and Lily Fernandes (“Plaintiffs”) allege that on July 10, 2021, they purchased a new 2021 Honda Pilot. They allege they entered into an express written New Vehicle Limited Warranty with Defendant American Honda Motor Co., Inc. (“Defendant”). (Compl., ¶9.) Plaintiffs allege that the subject vehicle was equipped with a defective 9-Speed Transmission. (Id., ¶¶12, 56.) They allege that they visited a car dealership, were assisted by a salesperson, and had reviewed Defendant’s marketing brochures and commercials regarding the vehicle and relied on such representations and Defendant’s reputation when purchasing the vehicle. (Id., ¶¶57-59.)

Plaintiffs allege that they delivered the subject vehicle to an authorized repair facility with complaints that the subject vehicle felt like it was going to stall while driving and was heavy idling, that oil may be leaking due to oil marks and the oil being low, the Bluetooth was not connecting, and the air conditioning would drop in speed. (Id., ¶68.) Plaintiffs delivered the vehicle to a repair facility again on September 20, 2021, October 4, 2021, November 1, 2021, January 31, 2022, June 27, 2023, June 30, 2023, July 8, 2023, July 13, 2023, September 25, 2023, and November 11, 2023 for various issues. (Id., ¶¶61-70.)

The complaint, filed May 2, 2024, alleges causes of action for: (1) violation of Song-Beverly Act – breach of express warranty; (2) violation of Song-Beverly Act – breach of implied warranty; and (3) fraudulent inducement – concealment.

On June 7, 2024, Defendant filed a demurrer and motion to strike portions of the complaint.

Defendant demurs to the 3^rd cause of action, arguing that it fails to allege sufficient facts to constitute a cause of action against it.

The elements for fraudulent concealment are the following: (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. (Lovejoy v. AT&T Corp. (2004) 119 Cal. App. 4th 151, 157-158.) “As with all fraud claims, the necessary elements of a concealment/suppression claim consist of (1) misrepresentation (false representation, concealment, or nondisclosure); (2) knowledge of falsity (scienter); (3) intent to defraud (i.e., to induce reliance); (4) justifiable reliance; and (5) resulting damage. [Citations.]” (Hoffman v. 162 North Wolfe LLC (2014) 228 Cal.App.4th 1178, 1185–1186 [internal quotation marks and citations omitted].) This cause of action is a tort of deceit and the facts constituting each element must be alleged with particularity; the claims cannot be saved by referring to the policy favoring liberal construction of pleadings. (Committee on Children's Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 216.) Since the claim must be pleaded with particularity, the cause of action based on misrepresentations must allege facts showing how, when, where, to whom, and by what means the misrepresentations were tendered. (Stansfield v. Starkey (1990) 220 Cal.App.3d 59, 73.)

In the 3^rd cause of action, Plaintiffs allege that Defendant and its agents intentionally concealed and failed to disclose facts relating to the transmission defect. (Compl., ¶100.) Plaintiffs allege that Defendant was the only party with exclusive knowledge of the transmission defect and that information about the defect was never made publicly available. (Id., ¶101.) Plaintiffs allege that Defendant produced and distributed marketing materials (brochures and manuals) to its authorized dealerships to communicate indirectly with consumers and provide information about Defendant’s vehicles to customers like Plaintiff. (Id., ¶¶102-104.) Plaintiffs allege that the marketing brochures and Defendant’s agents touted the characteristics of the subject vehicle and its 9-Speed Transmission, while not disclosing the transmission’s defects. (Id., ¶105.) Plaintiffs allege that Defendant actively concealed information from the public, such that Plaintiff did not know about the Transmission Defect at the time of acquisition. (Id., ¶¶106-107.) Plaintiffs allege Defendant intended to deceive Plaintiffs by concealing the defect, had an opportunity to disclose the defect, and fraudulently induced Plaintiffs to purchase the subject vehicle. (Id., ¶¶108-110.) They allege that they were exposed to potential physical harm, they were harmed by purchasing the vehicle and Defendant’s concealment, and that would not have purchased it had the true facts of the transmission defect been disclosed prior to the sale. (Id., ¶¶112-114.)

Defendant demurs to the 3^rd cause of action, arguing that the complaint does not allege fraud with the requisite specificity, Plaintiffs have not alleged that Defendant owed them a duty of disclosure, and the cause of action is barred by the economic loss doctrine.

The Court will address the economic loss doctrine first. The economic loss rule prevents the law of contract and law of tort from dissolving into one another. (Robinson Helicopter Co., Inc. v. Dana Corp. (2004) 34 Cal.4th 979, 988.) Economic losses consist of damages for inadequate value, cost of repair, replacement of defective products or consequent loss of profits—without any claim of personal injury or damages to other property. (Id.) The rule requires a purchaser to recover in contract for purely economic loss due to disappointed expectations, unless he can demonstrate harm above and beyond a broken contractual promise. (Id.) “Tort damages have been permitted in contract cases where a breach of duty directly causes physical injury [citation]; for breach of the covenant of good faith and fair dealing in insurance contracts [citation]; for wrongful discharge in violation of fundamental public policy [citation]; or where the contract was fraudulently induced. [Citation.] 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. [Citation.]” (Erlich v. Menezes (1999) 21 Cal.4th 543, 551–552.)

Here, Plaintiffs allege that they would not have purchased the subject vehicle had they known the true facts about the Transmission Defect and that they unknowingly exposed themselves to the risk of liability, accident, and injury as a result of Defendant’s fraudulent concealment of the Transmission Defect. (Compl., ¶¶112-113.) Although there are allegations that Defendant made representations touting the characteristics of the transmission in its brochures or through its agents,[1] the cause of action is for fraudulent inducement based on concealment. Plaintiffs’ injury is based on fraudulent omission/concealment and not based on an affirmative misrepresentation, such that it is purely economic and derives from Defendant’s alleged breach of warranty. (See Catherine Petersen v. FCA US LLC (C.D. Cal., July 8, 2021, No. CV 21-1386 DSF (EX)) 2021 WL 3207960, at *5.)

In opposition, Plaintiffs argue that Defendant’s superior knowledge coupled with its failure to disclose the defect to Plaintiffs establishes its intent to conceal the material information, which is sufficient to constitute an independent tort of fraud that causes harm beyond disappointed economic expectations. (Opp. at p.6.)

However, Plaintiffs have not alleged facts that the vehicle suffered physical damages or that Plaintiffs suffered from a physical injury—the only damages alleged are the defective nature of the vehicle. As alleged in the complaint:

112. Plaintiff(s) has been exposed numerous times to potential personal injury, physical harm, and related liability from motor vehicle accidents caused by the Transmission Defect and problems presented by the Subject Vehicle as a result of AMERICAN HONDA’s fraudulent concealment in failing to disclose the Transmission Defect to Plaintiff(s) at the time they purchased the Subject Vehicle and each time they presented the Subject Vehicle for repair.

113. Plaintiff(s) was harmed by purchasing the Subject Vehicle that Plaintiff(s) would not have purchased had AMERICAN HONDA and/or its agents disclosed the true facts about the Transmission Defect at or prior to the sale. Plaintiff(s) also suffered diminution in the value of Plaintiff(s)’s vehicle, out-of-pocket expenses, damages in the amount of the difference between the value of the vehicle equipped with a defective transmission and the value of the vehicle if it had been equipped as warranted, and reliance damages. Plaintiff(s) also incurred expenses relating to registration, insurance, and maintenance of the Subject Vehicle.

114. Plaintiff(s) was harmed by Defendant’s concealment of the Transmission Defect because Plaintiff(s) was induced to acquire a vehicle that Plaintiff(s) would not have otherwise purchased.

(Compl., ¶¶112-114.) As currently alleged, Plaintiffs have not alleged a breach of a tort duty independent from Defendant’s contractual duties under the warranties. Plaintiffs have suffered no loss that takes this case out of the ordinary commercial venue in which the parties specifically bargained for a commercial solution to an economic issue. While Plaintiffs allege that Defendant had exclusive knowledge of the defect, this in itself is not sufficient to merit taking this out of the economic loss doctrine. For these reasons, the fraudulent inducement – concealment cause of action is barred by the economic loss rule.

As the fraud claim is barred by the economic loss rule, the Court declines to discuss whether the fraud cause of action was adequately pled with specific facts.

Defendant moves to strike the allegations for punitive damages in the prayer for damages, arguing that the underlying cause of action for fraud is not sufficiently alleged such that it cannot be the basis for a punitive damages award.

In light of the ruling on the demurrer to the 3^rd cause of action, the motion to strike is taken off-calendar as moot.

Defendant American Honda Motor Co., Inc.’s demurrer to the 3^rd cause of action is sustained without leave to amend.

In light of the ruling on the demurrer to the 3^rd cause of action, the motion to strike is taken off-calendar as moot.

[1] The Court notes that the complaint fails to allege what specific statements were made in the marketing material (brochures, television commercials, and radio commercials). Plaintiffs also do not allege the identity of the agent they spoke to at the time of purchasing the vehicle, what statements were made, how they were made, etc. The 3^rd cause of action is for fraudulent concealment. To the extent Plaintiffs were attempting to allege fraud based on an affirmative misrepresentation, they have not pled the elements of fraud with the requisite specificity.

Superior Court of California

County of Los Angeles

Department B