Judge: Mark H. Epstein, Case: 22SMCV02004, Date: 2023-04-27 Tentative Ruling
Case Number: 22SMCV02004 Hearing Date: April 27, 2023 Dept: R
Plaintiffs filed a Song-Beverly action against Defendant
Honda. Plaintiffs allege they bought a
Honda pilot. According to the complaint,
the 2018 Honda Pilot was a type of car Honda manufactured or distributed that
had defective transmissions. (Compl. ¶11.) The defective transmission caused the
transmission to jerk or shake suddenly and violently, to hesitate while
accelerating, and to accelerate unexpectedly.
(Id. at ¶¶12-13.) Plaintiffs
assert that Honda knew of the defect due to several Technical Service Bulletins
(TSB) issued as well as from consumer complaints, but that Honda failed to
disclose the defect to plaintiffs before the car was purchased. (Id., at ¶¶21-42.) Plaintiffs’ car had this defect. Plaintiffs sue for fraud, claiming that Honda
had a duty to disclose the problem, but failed to do so. Honda demurs to that cause of action. The parties’ requests for judicial notice are
GRANTED.
The demurrer based on uncertainty is OVERRULED. Generally, uncertainty only lies where the complaint is incomprehensible. (Lickiss v. Financial Industry Regulatory Authority (2012) 208 Cal.App.4th 1125.) To the extent that the demurrer is a failure to plead fraud with particularity, such is not the gravamen of the motion.
Fraudulent concealment is a flavor of fraud that is more limited than other forms. There is a general duty not to lie to another person—fraud by misrepresentation. (Of course, not every lie is actionable; it must be a lie upon which the defendant intends the plaintiff to rely, the plaintiff must in fact rely, the reliance must be reasonable, and the lie must have caused harm.) But fraud by concealment is not an affirmative misstatement; it is the failure to disclose or to suppress something. For that tort to lie, there must first be a duty to disclose. (Lingsch v. Savage (1963) 213 Cal.App.2d 729.) There are four relationships that give rise to such a duty: (1) where defendant is plaintiff’s fiduciary, where the defendant has exclusive knowledge of material facts of which plaintiff is unaware, where the defendant actively conceals a fact, and where the defendant makes a partial representation that essentially conceals a material fact. (Hoffman v. 162 North Wolfe LLC (2014) 228 Cal.App.4th 1178.) These all require some kind of existing relationship between plaintiff and defendant. (Id., at p. 1187.) Other than in the fiduciary context (which is not at issue here), that occurs where there is some kind of transaction between the parties, such as buyer and seller, employer and potential employee, doctor and patient, or parties who are entering into a contract. (Ibid.)
Accordingly, the court agrees with Honda that plaintiffs must allege some kind of direct transactional relationship. However, there is a split of authority on what will satisfy such a relationship. Plaintiffs rely on the recently-decided case Dhital v. Nissan north America, Inc. (2022) 84 Cal.App.5th 828, review granted Jan. 30, 2023, S277568. Honda relies on Bigler-Engler v. Breg, Inc. (2017) 7 Cal.App.5th 276 and LiMandri v. Judkins (1997) 52 Cal.App.4th 326. Dhital, in which the Supreme Court granted and held the petition for review but did not depublish, was a case arising from the appeal of an order of dismissal on demurrer. There, as here, the plaintiff purchased a car that had a defect. Plaintiffs in Dhital sued the manufacturer and alleged a defective transmission—indeed the symptoms of the defective transmission there are remarkably similar to the allegations in the case at bench. The Dhital plaintiffs alleged that Nissan knew or should have known of the problem because of consumer complaints and TSB’s—just like this case. Nissan demurred on the basis of the economic loss rule, which bars a tort recovery for negligence causing purely economic losses, arguing that the rule precluded a fraudulent concealment claim. The Court of Appeal reversed the trial court’s order sustaining the demurrer based on that doctrine. The appellate court concluded that fraudulent concealment was an exception to the economic loss rule, and thus found that the demurrer should have been overruled. That is the question that our Supreme Court has agreed to answer based on a request by the Ninth Circuit in Rattagan v. Uber Technologies, Inc. (9th Cir. 2021) 19 F.4th 1188. Dhital was held pending resolution of that case.
Although Dhital was mostly concerned with the economic loss rule, the court also addressed a “short argument” by Nissan that plaintiffs did not adequately plead the existence of a buyer-seller relationship between the parties because plaintiffs bought the car from a dealership and not from Nissan directly. The Court of Appeal concluded that, at the pleading stage, the allegations were sufficient because the dealership sold them a car backed by an express warranty from the manufacturer and that the manufacturer’s authorized dealerships were agents for these purposes. Thus, the Dhital court did hold—and it is a holding, not dicta—that there was a sufficient transaction alleged in that case between the buyer and the manufacturer even though the car was purchased from a dealer to satisfy the relationship requirement for fraudulent concealment.
To the extent that Dhital stands alone, the court must follow it as a matter of power; that is, this court cannot choose whether or not to follow appellate court precedent. This court is an inferior court to the appellate court and appellate published decisions are binding. On the other hand, where there is a true split of authority, this court is free to follow the line of cases that this court finds most persuasive. It matters not the district from which the appellate decision issued, nor does it matter the number of cases on each side of the split. Where the Court of Appeal is divided, this court is free to follow the more persuasive authority until and unless that split is resolved by our Supreme Court. Honda claims that there is such a split, citing Engler and LiMandri.
Engler involved a surgical device. The plaintiff—the patient—sued the manufacturer of the device, even though they only rented it from another party. The Court of Appeal reversed an jury verdict against the manufacturer. The court noted the transaction requirement and held that it must be between the parties—it “cannot arise between the defendant and the public at large.” (Id., at p. 312.) The appellate court therefore rejected liability on the theory that a manufacturer has a general duty to warn consumers. That duty might well exist in the sense of warranty law, the court held, but it does not give rise to a cause of action for fraud by concealment. (Ibid.) LiMandri involved a case following a successful demurrer. At issue was a concealment suit in which the plaintiff alleged that defendant did not disclose certain facts regarding the settlement of a legal action in connection with the eventual assertion of a lien on the settlement proceeds. The LiMandri court concluded that a duty to disclose could only arise where there was some transaction between the parties, but there was no transaction alleged in that case.
The court agrees with the general proposition that a transaction of some sort is required to assert a cause of action for fraudulent concealment. But neither Engler nor LiMandri addressed the sort of situation we have here: where a car that defendant manufactured is sold by an authorized dealer and it has a defect. The court recognizes the tension between Dhital and at least Engler on this point. Engler distinguished the situation where there was a warranty or the like and found that such a warranty was not sufficient to satisfy the transaction requirement for fraudulent concealment, whereas Dhital seemed to find that it was. The court is also aware that the Dhital court’s discussion on the subject was rather cursory and brief—likely because (reading between the lines) the manufacturer asserted it almost as a throwaway argument. But Dhital remains good law and, although review has been granted, the case has not been depublished. Therefore, the court believes that the proper course at the moment is to await the Supreme Court’s decision in Rattagan. First, that decision may essentially moot the cause of action here at issue—if the Supreme Court holds that the economic loss rule bars the fraud cause of action, then the court would want briefing of the effect of that decision on the fraud cause of action alleged here. Second, the Court might address the issue whether the dealer is essentially the manufacturer’s agent. Along those lines, the court notes that a car is different than a medical device. The medical device is prescribed by a physician; the physician is not an “authorized dealer” and lacks the sorts of rules and regulations that govern the relationship between a car dealer and manufacturer. The Supreme Court might well discuss that issue in deciding Rattagan.
In any case, for now the court will hold the demurrer in abeyance pending the decision in Rattagan (and any further action in Dhital). In the interim, the case is not stayed and discovery on the remaining part of the case may proceed.