Judge: Lee W. Tsao, Case: 23NWCV00716, Date: 2023-08-31 Tentative Ruling

Case Number: 23NWCV00716    Hearing Date: August 31, 2023    Dept: SEC

GATEWOOD v. AMERICAN HONDA MOTOR CO., INC.

CASE NO.:  23NWCV00716

HEARING:  08/31/23

 

#6

 

     I.        Defendant AMERICAN HONDA MOTOR CO., INC.’s Demurrer to Plaintiffs’ Complaint is OVERRULED.

 

    II.        Defendant AMERICAN HONDA MOTOR CO., INC.’s Motion to Strike Portions of Plaintiff’s First Amended Complaint is DENIED.

 

Opposing Party to give notice.

 

This “lemon law” action was filed by Plaintiffs SHEENA GATEWOOD and ISAAC LUKE (“Plaintiffs”) on March 9, 2023. Plaintiffs alleges that Defendant AMERICAN HONDA MOTOR CO., INC. (“Defendant” or “Honda”) did not disclose and actively concealed a defect known as the “Honda Sensing Defect” affecting Plaintiff’s 2022 Honda Accord vehicle. (See e.g., Complaint ¶¶8, 11-64.)

 

Plaintiffs’ Complaint asserts the following causes of action: (1) Violation of Song-Beverly Act (Breach of Express Warranty; and (2) Fraudulent Inducement – Concealment.

 

Defendant generally demurs to the second cause of action.

 

Second Cause of Action – Fraudulent Inducement (Concealment)

Defendant argues that Plaintiffs’ second cause of action is barred by the economic loss rule.

 

In Opposition, Plaintiffs rely on Dhital v. Nissan North America, Inc., wherein the Court of Appeal held that the plaintiff’s claim for fraudulent inducement (concealment) was not barred by the economic loss rule (Id. (2022) 84 Cal.App.5th 828, 837.) Similar to the instant case, the Dhital plaintiffs alleged that “Nissan, by intentionally concealing facts about the defective transmission, fraudulently induced them to purchase a car.” (Id. at 838.). The Court of Appeal ruled that “Robinson did not hold that any claims for fraudulent inducement are barred by the economic loss rule. Quite the contrary, the Robinson court affirmed that tort damages are available in contract cases where the contract was fraudulently induced.” (Id. at 839.) “[A] defendant’s conduct in fraudulently inducing someone to enter a contract is separate from the defendant’s later breach of the contract or warranty provisions that were agreed to.” (Id.)

 

Here, Plaintiffs base their claim on Defendant’s alleged presale concealment, which is distinct from Defendant’s alleged subsequent breach of its warranty obligations. Accordingly, based on the existing persuasive authority— Dhital, the Court finds that the economic loss rule does not bar Plaintiff’s claim. This court is aware that this very issue is pending before the Supreme Court in Rattagan v. Uber Tech., Inc. (Case No. S272113) and in Kia v. Superior Court (Case No. S273170).  Until the Supreme Court states otherwise, this court will follow Dhital for its “potentially persuasive value” (CRC Rule 8.1115(e)(1)), and finds that Plaintiff’s claim is not barred by the Economic Loss Rule. The Court proceeds to assess Defendant’s arguments related to the merits of Plaintiff’s claim.

 

The elements of a cause of action for intentional fraud are 1) misrepresentation (false representation, concealment, or nondisclosure); 2) knowledge of falsity (scienter); 3) intent to defraud or induce reliance; 4) justifiable reliance; and 5) damages. (See Cal. Civ. Code §1709.) “[T]he elements of a cause of action for fraud and deceit based on concealment are: (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, (f) 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.” (Marketing West, Inc. v. Sanyo Fisher (USA) Corp. (1992) 6 Cal.App.4th 603, 612-613.)

 

Fraudulent inducement is a viable tort claim under California law. ‘The elements of fraud are (a) a misrepresentation (false representation, concealment, or nondisclosure); (b) scienter or knowledge of its falsity; (c) intent to induce reliance; (d) justifiable reliance; and (e) resulting damage. Fraud in the inducement is a subset of the tort of fraud. It ‘occurs when ‘the promisor knows what he is signing but his consent is induced by fraud, mutual assent is present and a contract is formed, which, by reason of the fraud, is voidable.’”  (Dhital v. Nissan North America, Inc. (2022) 84 Cal.App.5th 828, 838-839.)

 

Here, Plaintiffs allege at ¶¶ 25-63 that Defendant concealed and failed to disclose facts relating to the defects.  ¶¶115-118 alleges scienter and intent to induce reliance based on concealment.  ¶¶122-123 allege Plaintiffs’ resulting damages.

 

The court finds that the Complaint alleges sufficient prior knowledge at this pleading stage. Less specificity 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.)

 

The Demurrer to the second cause of action is OVERRULED.

 

Motion to Strike

Defendant’s accompanying motion to strike punitive damages is DENIED. The court finds that the Complaint sufficiently pleads malicious conduct by concealment.  Corporate ratification is alleged at ¶7.  Less specificity 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; 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”.)