Judge Kerry Bensinger, Case Number: 21STCV34189, Date: 2024-01-12 Tentative Ruling

This is a lemon law case. On September 15, 2021, Plaintiff Hermelinda Alvarez, filed a complaint against Defendant Kia America, Inc. (“Kia”). Plaintiff filed a First Amended Complaint (FAC) on May 5, 2022, for (1) Violation of Song-Beverly Act, Breach of Express Warranty; (2) Violation of the Song-Beverly Act, Breach of Implied Warranty; (3) Fraudulent Inducement – Concealment; and (4) Fraudulent Inducement – Misrepresentation.

Plaintiff purchased a new 2017 Kia Sportage from Allstar Kia on September 17, 2016. Plaintiff alleges the vehicle was defective. Plaintiff asserts statutory claims under the Song-Beverly Act as well as common law claims for fraudulent concealment and misrepresentation.

Kia timely filed this motion for summary adjudication of the Third and Fourth Causes of Action and claim for punitive damages. Plaintiff filed an opposition. Kia replied.

The court heard argument on January 12, 2024. After argument, the court took the matter under submission. Shortly thereafter, the court ordered further briefing on the issue of fraudulent inducement – concealment.

In reviewing a motion for summary judgment, courts must apply a three-step analysis: “(1) identify the issues framed by the pleadings; (2) determine whether the moving party has negated the opponent’s claims; and (3) determine whether the opposition has demonstrated the existence of a triable, material factual issue.” (Hinesley v. Oakshade Town Center (2005) 135 Cal.App.4th 289, 294.)

“[T]he initial burden is always on the moving party to make a prima facia showing that there are no triable issues of material fact.” (Scalf v. D. B. Log Homes, Inc. (2005) 128 Cal.App.4th 1510, 1519.) A defendant moving for summary judgment or summary adjudication “has met his or her burden of showing that a cause of action has no merit if the party has shown that one or more elements of the cause of action . . . cannot be established, or that there is a complete defense to the cause of action.” (Code Civ. Proc., § 437c, subd. (p)(2).) A moving defendant need not conclusively negate an element of plaintiff’s cause of action. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 854.)

To meet this burden of showing a cause of action cannot be established, a defendant must show not only “that the plaintiff does not possess needed evidence” but also that “the plaintiff cannot reasonably obtain needed evidence.” (Aguilar, supra, 25 Cal.4th at p. 854.) It is insufficient for the defendant to merely point out the absence of evidence. (Gaggero v. Yura (2003) 108 Cal.App.4th 884, 891.) The defendant “must also produce evidence that the plaintiff cannot reasonably obtain evidence to support his or her claim.” (Ibid.)¿ The supporting evidence can be in the form of affidavits, declarations, admissions, depositions, answers to interrogatories, and matters of which judicial notice may be taken. (Aguilar, 25 Cal.4th at p. 855.)

“Once the defendant … has met that burden, the burden shifts to the plaintiff … to show that a triable issue of one or more material facts exists as to the cause of action or a defense thereto.” (Code Civ. Proc., § 437c, subd. (p)(2).) The plaintiff may not merely rely on allegations or denials of its pleadings to show that a triable issue of material fact exists, but instead, “shall set forth the specific facts showing that a triable issue of material fact exists as to the cause of action.” (Ibid.) “If the plaintiff cannot do so, summary judgment should be granted.” (Avivi v. Centro Medico Urgente Medical Center (2008) 159 Cal.App.4th 463, 467.)

The court must “liberally construe the evidence in support of the party opposing summary judgment and resolve all doubts concerning the evidence in favor of that party,” including “all inferences reasonably drawn therefrom.” (Yanowitz v. L’Oreal USA, Inc. (2005) 36 Cal.4th 1028, 1037; Aguilar, supra, 25 Cal.4th at pp. 844-45.) “On a summary judgment motion, the court must therefore consider what inferences favoring the opposing party a factfinder could reasonably draw from the evidence. While viewing the evidence in this manner, the court must bear in mind that its primary function is to identify issues rather than to determine issues. [Citation.] Only when the inferences are indisputable may the court decide the issues as a matter of law. If the evidence is in conflict, the factual issues must be resolved by trial.” (Binder v. Aetna Life Ins. Co. (1999) 75 Cal.App.4th 832, 839.) “Put another way, have defendants conclusively negated a necessary element of the [plaintiff’s] case or demonstrated that under no hypothesis is there a material issue of fact that requires the process of trial?” (Jeld-Wen, Inc. v. Superior Court (2005) 131 Cal.App.4th 853, 860 [cleaned up].) Further, “the trial court may not weigh the evidence in the manner of a factfinder to determine whose version is more likely true. [Citation.] Nor may the trial court grant summary judgment based on the court’s evaluation of credibility. [Citation.]” (Id. at p. 840; see also Weiss v. People ex rel. Department of Transportation (2020) 9 Cal.5th 840, 864 [“Courts deciding motions for summary judgment or summary adjudication may not weigh the evidence but must instead view it in the light most favorable to the opposing party and draw all reasonable inferences in favor of that party”].)

In its Reply, Kia submits 9 objections to the Declaration of Jeffery Mukai. The Court need not rule on these objections because they are not material to the disposition of the motion. (Code Civ. Proc., § 437c, subd. (q).)

Kia argues the Third and Fourth Causes of Action fail because (1) Kia did not withhold any information from Plaintiff or make any misrepresentations to Plaintiff, (2) there were no direct dealings between the parties giving rise to a duty to disclose, and (3) the causes of action are barred by the economic loss rule.[1] Kia also argues the requests for punitive damages fails because without the underlying fraud claims, there is no basis for punitive damages.

Fraud based on concealment requires that “(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.” (Bigler-Engler v. Breg, Inc. (2017) 7 Cal.App.5th 276, 310-311 (Bigler-Engler); CACI No. 1901.) An essential element of intentional concealment includes the duty to disclose, which must be based upon a transaction, or a special relationship, between plaintiff and defendant. (Id. at p. 314.) “[T]o establish fraud through nondisclosure or concealment of facts, it is necessary to show the defendant¿‘was under a legal duty to disclose them.’” (OCM Principal Opportunities Fund v. CIBC World Markets Corp.¿(2007) 157 Cal.App.4th 835, 845 (OCM Principal).)

Kia argues the second element, duty to disclose, is absent because there was no transactional relationship between Plaintiff and Kia. Defendant argues Plaintiff’s transaction was with the independent dealership – Allstar Kia. The parties wrestle over the application of Bigler-Engler. Defendant wins this argument. Bigler-Engler applies.

In Bigler-Engler, the plaintiff, Engler, injured her knee and had surgery. After the surgery, the doctor recommended use of an “ice” machine. The doctor prescribed the Polar Care 500 ice machine which was manufactured by defendant Breg, Inc (Breg). The ice machine made things worse and caused additional injuries. Engler sued Breg for intentional concealment. The jury returned a verdict in plaintiff’s favor. The Court of Appeal reversed finding that Breg did not owe Engler a duty of care. The Bigler-Engler Court described the circumstances that give rise to a duty of care as follows:

“There are¿four circumstances in which nondisclosure or concealment may constitute actionable fraud: (1) when the defendant is in a fiduciary relationship with the plaintiff; (2) when the defendant had exclusive knowledge of material facts not known to the plaintiff; (3) when the defendant actively conceals a material fact from the plaintiff; and (4) when the defendant makes partial representations but also suppresses some material facts. [Citation.] Where, as here, a fiduciary relationship does not exist between the parties, only the latter three circumstances may apply. These three circumstances, however, presuppose the existence of some other relationship between the plaintiff and defendant in which a duty to disclose can arise. [Citation.] A duty to disclose facts arises only when the parties are in a relationship that gives rise to the duty, such as seller and buyer, employer and prospective employee, doctor and patient, or parties entering into any kind of contractual arrangement. [Citation.]”

(Bigler-Engler, supra,¿at p. 311 [cleaned up].) “Such a transaction must necessarily arise from direct dealings between the plaintiff and the defendant; it cannot arise between the defendant and the public at large.” (Id. at p. 312.)

Trying to avoid application of the transaction-relationship test, Plaintiff argues that other doctrines, such as product liability law, “impose liability even without evidence of a transaction between the plaintiff and the defendant.” The Bigler-Engler Court rejected the argument because “[product liability law involves a set of circumstances, elements and doctrines that are independent from and not directly applicable to, fraud. The duties underlying each cannot simply be applied to the other.” (Bigler-Engler, supra, at p. 312.) The court went on to hold that “where, as here, a sufficient relationship does not exist, no duty to disclose arises even when the defendant speaks.” (Ibid.)

Relying on Bigler-Engler, Kia argues it did not owe Plaintiff a duty to disclose material facts regarding the Subject Vehicle because Plaintiff bought the Subject Vehicle from an independent third-party dealer, Allstar Kia. (Kia’s Undisputed Material Facts (UMF) 1, 2.) Kia argues “that no court has held the existence of an express warranty gives rise to a duty to disclose.” (Kia Supp. Pg. 1.) Without a purchase from an authorized dealer, Kia maintains that the express warranty does not create a duty under Bigler-Engler because there were no “direct dealings” between the plaintiff and the defendant. (Bigler-Engler, supra, at p. 312.) Kia presents sufficient evidence that the relationship necessary to create a duty to disclose is absent. The burden shifts to Plaintiff to offer evidence that Kia had a duty to disclose.

Plaintiff argues Kia had a duty to disclose because Plaintiff purchased the Subject Vehicle with a warranty from an authorized dealership. Based upon these two points, Plaintiff argues Plaintiff entered a transactional relationship with Kia. Plaintiff cites Dhital v. Nissan North America, Inc. (2022) 84 Cal.App.5th 828 (Dhital) in support of its argument. In Dhital, the trial court sustained a demurrer to plaintiffs’ claim for fraudulent inducement by concealment. The Court of Appeal reversed, stating “Plaintiffs alleged that they bought the car from a Nissan dealership, that Nissan backed the car with an express warranty, and that Nissan's authorized dealerships are its agents for purposes of the sale of Nissan vehicles to consumers. In light of these allegations, we decline to hold plaintiffs’ claim is barred on the ground there was no relationship requiring Nissan to disclose known defects.” (Dhital at p. 844, emphasis added.)

Dhital does not help Plaintiff’s cause. Dhital concerned the sufficiency of allegations at the pleading stage. By contrast, summary adjudication concerns whether there are triable issues of material fact based on evidence. Here, Plaintiff has not provided any evidence to support its allegations that Allstar Kia is an authorized dealership or that a principal-agent relationship existed between Kia and Allstar Kia. The undisputed evidence before the court is that Allstar Kia is an independent third-party dealer, not owned by Kia. (UMF 2,7). Moreover, even if Allstar Kia were an authorized dealer, that does not automatically make Allstar Kia an agent for the purpose of selling vehicles. (See, e.g.,¿Avalon Painting Co. v. Alert Lumber Co. (1965) 234 Cal.App.2d 178, 184 [noting that whether an agency relationship exists depends on the facts of each case and holding the facts pled in the instant amended complaint and prior complaints established a probability that the relationship between paint manufacturer and dealer was one of buyer and seller as opposed to principal and agent and whether an agency relationship existed can only be determined after taking evidence, not on demurrer].)

Two of the critical points noted in Dhital are missing here: (1) that Allstar Kia is an authorized Kia dealership and (2) that Allstar Kia is authorized agent of Kia for purposes of the sale of Kia vehicles. In fact, the only evidence before the court is that Allstar Kia is an independent third-party dealer. (UMF 2, 7.) Plaintiff does not dispute this fact.

Gilead Tenofovir Cases addressed the issue of fraudulent concealment in the development and sale of medications to treat HIV/AIDS. (Gilead Tenofovir Cases (2024) 98 Cal.App.5th 911.) But the Gilead Court skipped over the analysis and “assumed that plaintiffs’ use of Gilead’s product, TDF, created the relationship necessary to invoke the law of concealment.” (Id.) While the Gilead Court pointed to Dhital in support of its assumption, the court did not offer any analysis, and none was needed because the Court of Appeal found Gilead did not have a duty to disclose information about TAF for an independent reason – the information at issue was not material to the transaction that created the disclosure relationship. Gilead does not assist Plaintiff’s argument.

In short, Plaintiff argues an express warranty satisfies the Bigler-Engler’s transactional relationship test. But no case cited by Plaintiff supports this broad reading of Bigler-Engler’s test.[2]

In a similar move to the plaintiff in Bigler-Engler, Plaintiff tries to avoid the application of the transaction-relationship test by pointing to a different doctrine of law – the indirect communication doctrine. Plaintiff argues that “a vendor has a duty to disclose material facts not only to immediate purchasers, but also to subsequent purchasers when the vendor has reason to expect that the item will be resold.” (Opposition, pp. 4:27-5:2.) Just as the court did not apply product liability law in Bigler-Engler, the indirect communication doctrine does not apply here. Plaintiff refers to four cases to invoke the doctrine.[3] Plaintiff does not discuss these cases nor the application of the doctrine. Plaintiff’s undeveloped argument is unavailing. The indirect communication doctrine rests upon Restatement Second of Torts section 533.[4] The doctrine does not apply here because Plaintiff fails to present any evidence that Kia made a misrepresentation about the car to a third party (Allstar Kia), who then communicated the misrepresentation to Plaintiff, let alone that Plaintiff relied on that indirect communication. Plaintiff fails to present evidence that she was actually aware of, or reassured by, and relied upon, the misrepresentation when purchasing the vehicle. Plaintiff admitted at her deposition she was not aware of any false statements that were made to her in connection with her purchase of her Subject Vehicle; and she was not aware of any information that Kia or its dealers withheld from her in connection with her purchase of the Subject Vehicle. (Plaintiff’s Depo., pp. 24:20-26:7.) There is no evidence that Kia, the manufacturer, committed fraud upon the dealer (Allstar Kia) as an initial purchaser of the vehicle.

Based upon the foregoing, Plaintiff does not have the required relationship with the manufacturer to support Plaintiff’s claim for fraudulent concealment. In short, Plaintiff has not established there were any “direct dealings between the plaintiff and the defendant.” (Bigler-Engler, supra, at p. 312.) Plaintiff’s supplemental briefing does not offer any new argument directing a different result.

Kia’s Motion for Summary Adjudication of the Third Cause of Action is GRANTED.

B. Fourth Cause of Action for Fraudulent Inducement – Intentional Misrepresentation

To establish a claim for deceit based on intentional misrepresentation, the plaintiff must prove seven¿essential elements: (1) the defendant represented to the plaintiff that an important fact was true; (2) that representation was false; (3) the defendant knew that the representation was false when the defendant made it, or the defendant made the representation recklessly and without regard for its truth; (4) the defendant intended that the plaintiff rely on the representation; (5) the plaintiff¿reasonably relied on the¿representation;¿(6) the plaintiff was harmed; and (7) the plaintiff's reliance on the defendant's representation was a substantial factor in causing that harm to the plaintiff.¿ (Manderville¿v. PCG & S Group, Inc.¿(2007) 146 Cal.App.4th 1486, 1498; CACI No. 1900.)¿

Here, Kia challenges elements (1), (4), (5), and (7). Kia provides evidence that it did not make an intentional misrepresentation regarding the Subject Vehicle to Plaintiff. First, it is undisputed that Allstar Kia is not Kia’s agent. (UMF 7.) As such, the parties did not have any direct dealings. Second, Kia points out that Plaintiff could not identify what misrepresentations were made to induce her purchase of the Subject Vehicle. (UMF No. 10.) Kia presents sufficient evidence that¿it did not make an intentional misrepresentation to Plaintiff or that Plaintiff relied upon any affirmative misrepresentation made by Kia to her.

The burden shifts. Plaintiff is unable to rebut this shifted burden. Plaintiff argues that the existence of a warranty constitutes an intentional misrepresentation about the vehicle. However, as noted in Santana v. FCA US, LLC (2020) 56 Cal.App.5th 334, 345, “The very existence of a warranty presupposes that some defects may occur.” The existence of a warranty is insufficient to establish intentional misrepresentation. And, as discussed above, there is no evidence of any statements, false or otherwise, that Kia made to induce Plaintiff’s purchase of the Vehicle or that Plaintiff relied upon Kia’s affirmative misrepresentations.

Kia’s Motion for Summary Adjudication of the Fourth Cause of Action is GRANTED.

Punitive damages may be imposed where it is proven by clear and convincing evidence that the defendant has been guilty of oppression, fraud, or malice. (Civ. Code, § 3294, subd. (a).) “Malice” is conduct intended by the defendant to cause injury to the plaintiff or despicable conduct, which is carried on with a willful and conscious disregard of the rights or safety of others. (Civ. Code, § 3294, subd. (c)(1).) Despicable conduct is “conduct which is so vile, base, contemptible, miserable, wretched or loathsome that it would be looked down upon and despised by ordinary decent people. Such conduct has been described as ‘having the character of outrage frequently associated with crime.’” (Tomaselli v. Transamerica Ins. Co. (1994) 25 Cal.App.4th 1269, 1287.) “Fraud” means an intentional misrepresentation, deceit, or concealment of a material fact known to the defendant with the intention on the part of the defendant of thereby depriving a person of property or legal rights or otherwise causing injury. (Civ. Code, § 3294, subd. (c).) “‘Punitive damages are proper only when the tortious conduct rises to levels of extreme indifference to the plaintiff’s rights, a level which decent citizens should not have to tolerate.’ [Citation.]” (Lackner v. North (2006) 135 Cal.App.4th 1188, 1210.)

Plaintiff’s prayer for punitive damages is premised solely on her Third and Fourth Causes of Action for fraud. Given the Court’s ruling as to the fraud claims, summary adjudication is also proper to the punitive damages claim.[5]

Accordingly, the Motion for Summary Adjudication of the Third and Fourth Causes of Action and the claim for punitive damages is GRANTED.

[1] Given the Court’s ruling, the Court need not and does not address the economic loss rule.

[2] Plaintiff cites Dagher v. Ford Motor Co. (2015) 238 Cal.App.4th 905, 928 (Dagher) for the proposition that a warranty establishes a transactional relationship. Dagher does not stand for this proposition. Dagher involved the question whether a purchaser of a used vehicle at a private sale had standing to bring suit under the Song-Beverly Act. The plaintiff in Dagher did not sue for fraud, and the court did not address the question of the existence of a transactional relationship between Ford and the plaintiff.

[3] OCM Principal, supra; Varwig v. Anderson-Behel Porsche/Audi, Inc. (1977) 74 Cal.App.3d 578; Geernaert v. Mitchell (1995) 31 Cal.App.4th 601; and Barnhouse v. City of Pinole (1982) 133 Cal.App.3d 171.

[4] This section states: “The maker of a fraudulent misrepresentation is subject to liability for pecuniary loss to another who acts in justifiable reliance upon it if the misrepresentation, although not made directly to the other, is made to a third person and the maker intends or has reason to expect that its terms will be repeated or its substance communicated to the other, and that it will influence his conduct in the transaction or type of transaction involved.”

[5] For this reason, the Court rejects Plaintiff’s argument challenging the procedural defect of Kia’s Separate Statement, which does not include punitive damages as an issue for adjudication.