Judge Michael E. Whitaker, Case Number: 23SMCV05590, Date: 2024-05-15 Tentative Ruling

Judge: Michael E. Whitaker, Case: 23SMCV05590, Date: 2024-05-15 Tentative Ruling

Plaintiff Adam Mermel’s (“Plaintiff”) First Amended Complaint (“FAC”) alleges five causes of action against Defendant General Motors LLC (“Defendant” or “GM”) for (1) violation of Civil Code section 1793.2, subd. (d); (2) violation of Civil Code section 1793.2, subd. (b); (3) violation of Civil Code section 1793.2, subd. (a)(3); (4) breach of the implied warranty of merchantability; and (5) fraudulent inducement – concealment, stemming from Plaintiff’s purchase of a 2021 Chevrolet Silverado.

Defendant demurs to the fifth cause of action for fraudulent inducement – concealment on the grounds that it fails to state facts sufficient to constitute a cause of action, pursuant to Code of Civil Procedure section 430.10, subdivision (e). Defendant also moves to strike punitive damages from the FAC.

“It is black letter law that a demurrer tests the legal sufficiency of the allegations in a complaint.” (Lewis v. Safeway, Inc. (2015) 235 Cal.App.4th 385, 388.) In testing the sufficiency of a cause of action, a court accepts “[a]s true all material facts properly pled and matters which may be judicially noticed but disregard contentions, deductions or conclusions of fact or law. [A court also gives] the complaint a reasonable interpretation, reading it as a whole and its parts in their context.” (290 Division (EAT), LLC v. City & County of San Francisco (2022) 86 Cal.App.5th 439, 450 [cleaned up]; Hacker v. Homeward Residential, Inc. (2018) 26 Cal.App.5th 270, 280 [“in considering the merits of a demurrer, however, “the facts alleged in the pleading are deemed to be true, however improbable they may be”].)

Further, in ruling on a demurrer, a court must “liberally construe” the allegations of the complaint “with a view to substantial justice between the parties.” (See Code Civ. Proc., § 452.) “This rule of liberal construction means that the reviewing court draws inferences favorable to the plaintiff, not the defendant.” (Perez v. Golden Empire Transit Dist. (2012) 209 Cal.App.4th 1228, 1238.)

In summary, “[d]etermining whether the complaint is sufficient as against the demurrer on the ground that it does not state facts sufficient to constitute a cause of action, the rule is that if on consideration of all the facts stated it appears the plaintiff is entitled to any relief at the hands of the court against the defendants the complaint will be held good although the facts may not be clearly stated, or may be intermingled with a statement of other facts irrelevant to the cause of action shown, or although the plaintiff may demand relief to which he is not entitled under the facts alleged.” (Gressley v. Williams (1961) 193 Cal.App.2d 636, 639.)

“The required elements for fraudulent concealment are (1) concealment or suppression of a material fact; (2) by a defendant with a duty to disclose the fact to the plaintiff; (3) the defendant intended to defraud the plaintiff by intentionally concealing or suppressing the fact; (4) the plaintiff was unaware of the fact and would not have acted as he or she did if he or she had known of the concealed or suppressed fact; and (5) plaintiff sustained damage as a result of the concealment or suppression of the fact” (Hambrick v. Healthcare Partners Medical Group, Inc. (2015) 238 Cal.App.4th 124, 162.)

“In California, 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.” (Ibid.)

Defendant argues that the fifth cause of action fails because Plaintiff fails to allege with requisite specificity (i) who at GM concealed material facts or made untrue representations; (ii) their authority to speak on behalf of GM; (iii) GM’s knowledge about defects in Plaintiff’s car at the time of purchase; (iv) interactions with GM before or during the purchase; or (v) GM’s intent to induce reliance. Defendant also argues the fifth cause of action fails because the FAC does not allege that Plaintiff purchased the vehicle directly from Defendant or any other “direct dealings” with Defendant, other than the warranty agreement. The FAC alleges:

6. On or about January 24, 2021, Plaintiff entered into a warranty contract with Defendant GM regarding a 2021 Chevrolet Silverado vehicle identification number 1GCUYEED1MZ190346 (hereafter "Subject Vehicle" or “Vehicle”), which was manufactured and or distributed by Defendant GM. Subject Vehicle was purchased at Win Chevrolet Hyundai in Carson, CA (GM’s authorized dealer).

21. On or about July 6, 2023, with approximately 33,343 miles on the odometer, Plaintiff presented the Subject Vehicle to Defendant’s authorized repair facility with various concerns, including electrical concerns. The authorized repair facility performed warranty repairs, after which, the authorized repair facility represented to the Plaintiff that the Subject Vehicle had been repaired.

22. On or about September 5, 2023, with approximately 35,213 miles on the odometer, Plaintiff presented the Subject Vehicle to Defendant’s authorized repair facility with various concerns, including electrical concerns. The authorized repair facility performed warranty repairs, after which, the authorized repair facility represented to the Plaintiff that the Subject Vehicle had been repaired.

23. On or about September 28, 2023, with approximately 35,847 miles on the odometer, Plaintiff presented the Subject Vehicle to Defendant’s authorized repair facility with various concerns, including gas and electrical concerns. The authorized repair facility performed warranty repairs, after which, the authorized repair facility represented to the Plaintiff that the Subject Vehicle had been repaired.

24. Plaintiff has experienced symptoms of the Vehicle’s defects. Plaintiff has experienced: 1) repeated issues with the park assist function, as it would randomly turn on and off while driving, 2) a “park assist blocked” message coming on, 3) the Vehicle’s gas mileage going down. Subject Vehicle’s defects are a safety hazard.

38. Defendant (and its agents, representatives, officers, directors, employees, affiliates, and/or dealerships) concealed the defects, minimized the scope, cause, and dangers of the defects with inadequate TSBs and/or Recalls, and refused to investigate, address, and remedy the defects as it pertains to all affected vehicles as set forth herein.

39. Furthermore, Defendant’s fraudulent concealment was ongoing. Defendant blamed the symptoms of the defects on other issues and not the actual defect itself and purported to be able to repair.

62. Defendant GM committed fraud by allowing the Vehicle to be sold to Plaintiff without disclosing that the Vehicle and its 8-speed transmission were defective and susceptible to sudden and premature failure. Plaintiff purchased the Subject Vehicle equipped with GM’s defective 8-speed transmission.

63. Plaintiff is informed, believes, and thereon alleges that prior to Plaintiff acquiring the Vehicle, Defendant GM was well aware and knew that the 8-speed transmission installed on the Vehicle was defective but failed to disclose this fact to Plaintiff prior to and at the time of sale and thereafter.[1]

64. Specifically, Defendant GM knew that the 8-speed transmission had one or more defects that can result in various problems, including, but not limited to hard or harsh shifts, jerking, lurching, hesitation on acceleration, surging and/or inability to control the vehicle’s speed, acceleration, or deceleration (“Transmission Defect”). These conditions present a safety hazard and are unreasonably dangerous to consumers because they can suddenly and unexpectedly cause the driver to be unable to control the speed and acceleration/deceleration of the vehicle. Such unexpected inability to control the vehicle’s speed and acceleration/deceleration thereby exposes Plaintiff and his passengers (along with other drivers who share the road or garage with Plaintiff) to a serious risk of accident and injury.

65. Plaintiff is informed, believes and thereon alleges that Defendant GM acquired its knowledge of the Transmission Defect prior to Plaintiff acquiring the Vehicle, through sources not available to consumers such as Plaintiff, including but not limited to pre-production and postproduction testing data; early consumer complaints about the Transmission Defect made directly to Defendant GM and its network of dealers; aggregate warranty data compiled from Defendant GM’s network of dealers; testing conducted by Defendant GM in response to these complaints; as well as warranty repair and part replacements data received by Defendant GM from Defendant GM’s network of dealers, amongst other sources of internal information.

66. Plaintiff is a reasonable consumer who interacted with sales representatives, considered Defendant GM’s advertisement, and/or other marketing materials concerning GM Vehicles prior to purchasing Subject Vehicle. Had Defendant GM and its dealership(s) revealed the Transmission Defect in these disclosures, Plaintiff would have been aware of it and would not have purchased Subject Vehicle. For example, Defendant GM marketed and sold its new 8- speed automatic transmissions as having “world-class performance” rivaling top performance vehicles, lightning-fast and smooth shifting, along with improved fuel efficiency, among other representations. Defendant GM’s own press release dated January 13, 2014, introduced the new 8-speed transmission as being “tuned for world-class shift-response times,” and “deliver[ing] shift performance that rivals the dual-clutch/semi-automatic transmissions found in many supercars – but with the smoothness and refinement that comes with a conventional automatic fitted with a torque converter.”

67. However, prior to Plaintiff’s purchase of the Subject Vehicle, Defendant GM was internally referring the 8-speed transmission as a “neck snapper.” Defendant GM engineers even considered stopping production in 2015 (but did not) and in 2016, President Johan de Nysschen acknowledged customer frustration surrounding the Transmission Defect internally and meeting with its authorized repair facility. Nonetheless, Defendant GM continued to conceal the Transmission Defect from consumers, including in its marketing materials, and advised any complaining customers that poor shifts were “normal.”

68. In fact, Defendant GM’s Mark Gordon lamented in February 2019 that “shift quality issues are an ongoing concern with the 8-Speed transmission. Unfortunately, these issues have been through an Op-ex and a service solution is not going to be developed due to cost.”

69. From September 2014 to at least February 2019, Defendant GM issued many service bulletins and service bulletin updates to its dealers in the United States, but not its customers, acknowledging problems of harsh shifting, jerking, clunking, and delays in acceleration or deceleration relating to the 8-speed transmission.[2]

70. Therefore, Plaintiff is informed, believes, and thereon alleges that while Defendant GM knew about the Transmission Defect, and its safety risks since prior to Plaintiff’s purchase of the Subject Vehicle. Defendant GM and its directors, officers, employees, affiliates, and/or agents nevertheless concealed and failed to disclose the defective nature of the Vehicle, its 8- speed transmission to Plaintiff prior to and at the time of sale. Had Plaintiff known that the Vehicle suffered from the Transmission Defect, Plaintiff would not have purchased the Vehicle. In other words, Defendant GM’s concealment of this safety defect was material and Plaintiff relied on Defendant GM’s advertising materials which did not disclose the defect. As a result, the purchase of the Subject Vehicle was fraudulently induced.

71. To make matters worse, thereafter, Defendant GM continued to conceal the defect and its inability to repair it, making it difficult for Plaintiff to discover Defendant GM’s wrongdoing. For example, Defendant GM did not disclose its wrongdoing nor offer to rectify it during successive repair visits to Defendant GM’s authorized dealership. In addition, Plaintiff alleges that Defendant GM failed to disclose the existence of the Transmission Defect and rectify its wrongdoing.

72. Indeed, Plaintiff alleges that prior to the sale of the Vehicle to Plaintiff, Defendant GM knew that the Vehicle and its 8-speed transmission suffered from an inherent defect, was defective, would fail prematurely, and was not suitable for its intended use.

73. Defendant GM was under a duty to Plaintiff to disclose the defective nature of the Vehicle, its transmission, its safety consequences and/or the associated repair costs because:

a. Plaintiff is informed, believes and thereon alleges that Defendant GM acquired its knowledge of the Transmission Defect and its potential consequences prior to Plaintiff acquiring the subject vehicle, though sources not available to consumers such as Plaintiff, including but not limited to pre- production testing data, early consumer complaints about the Transmission Defect made directly to Defendant GM and its network of dealers, aggregate warranty data compiled from GM’s network of dealers, testing conducted by Defendant GM in response to these complaints, as well as warranty repair and part replacements data received by Defendant GM from Defendant GM’s network of dealers, amongst other sources of internal information;

b. Defendant GM was in a superior position from various internal sources to know (or should have known) the true state of facts about the material defects contained in vehicles equipped with the 8-speed transmission; and

c. Plaintiff could not reasonably have been expected to learn of or discover the Vehicle’s Transmission Defect and its potential consequences until well after Plaintiff purchased the Vehicle.

74. In failing to disclose the defects in the Vehicle’s 8-speed transmission, Defendant GM has knowingly and intentionally concealed material facts and breached its duty not to do so.

75. The facts concealed or not disclosed by Defendant GM (and its directors, officers, employees, affiliates, and/or agents) to Plaintiff are material in that a reasonable person would have considered them to be important in deciding whether or not to purchase the Vehicle. Had Plaintiff known that the Vehicle, and its 8-speed transmission, were defective prior to and at the time of sale, Plaintiff would not have purchased the Vehicle.

76. Plaintiff is a reasonable consumer who does not expect the 8-speed transmission to fail and not work properly. Plaintiff further expects and assumes that Defendant GM will not sell or lease vehicles with known material defects, including, but not limited to, those involving the vehicle’s 8-speed transmission and will disclose any such defect to its consumers before selling such vehicles.

77. All acts of corporate employees as alleged herein, were authorized or ratified by GM’s officers, directors or managing agents, including approving GM’s marketing materials and product disclosures which failed to disclose the Transmission Defect and which were relied upon by Plaintiffs, thereby inducing them into purchasing Subject Vehicle.

78. Defendant concealed the Transmission Defect with the intent to induce Plaintiff to purchase Subject Vehicle.

79. All acts of corporate employees as alleged herein, were authorized or ratified by GM’s officers, directors or managing agents, including approving GM’s marketing materials and product disclosures which failed to disclose the Transmission Defect and which were relied upon by Plaintiffs, thereby inducing them into purchasing Subject Vehicle.

80. All acts of corporate employees as alleged herein, were authorized or ratified by GM’s officers, directors or managing agents, including approving GM’s marketing materials and product disclosures which failed to disclose the Transmission Defect and which were relied upon by Plaintiffs, thereby inducing them into purchasing Subject Vehicle.

81. All acts of corporate employees as alleged herein, were authorized or ratified by GM’s officers, directors or managing agents, including approving GM’s marketing materials and product disclosures which failed to disclose the Transmission Defect and which were relied upon by Plaintiffs, thereby inducing them into purchasing Subject Vehicle.

With regard to Defendant’s argument that Plaintiff does not allege who specifically at GM concealed information from Plaintiff, “One of the purposes of the specificity requirement is notice to the defendant, to furnish the defendant with certain definite charges which can be intelligently met.” (Alfaro v. Community Housing Improvement System & Planning Assn., Inc. (2009) 171 Cal.App.4th 1356, 1384.) As such, less specificity is required “when it appears from the nature of the allegations that the defendant must necessarily possess full information concerning the facts of the controversy[.]” (Ibid.) “Even under the strict rules of common law pleading, one of the canons was that less particularity is required when the facts lie more in the knowledge of the opposite party.” (Ibid.)

Here, Plaintiff identifies GM President Johan de Nysschen (FAC ¶ 67) and Mark Gordon (FAC ¶ 68.) To the extent other individuals at GM concealed information about defective transmissions from the public, the identities of the specific individuals at GM are necessarily more within GM’s knowledge. Therefore, the FAC satisfies the pleading requirements with respect to identifying the individuals at GM who allegedly concealed information regarding the defective transmission.

Further, with respect to GM’s prior knowledge, the FAC is replete with examples of GM acknowledging the transmission problem prior to Plaintiff’s January 2021 purchase. (See FAC ¶ 67 [“prior to Plaintiff’s purchase of the Subject Vehicle, Defendant GM was internally referring the 8-speed transmission as a ‘neck snapper.’ Defendant GM engineers even considered stopping production in 2015 (but did not) and in 2016, President Johan de Nysschen acknowledged customer frustration surrounding the Transmission Defect internally and meeting with its authorized repair facility”]; ¶ 68 [“Defendant GM’s Mark Gordon lamented in February 2019 that ‘shift quality issues are an ongoing concern with the 8-Speed transmission. Unfortunately, these issues have been through an Op-ex and a service solution is not going to be developed due to cost.’”]; ¶ 69 [“From September 2014 to at least February 2019, Defendant GM issued many service bulletins and service bulletin updates to its dealers in the United States, but not its customers, acknowledging problems of harsh shifting, jerking, clunking, and delays in acceleration or deceleration relating to the 8-speed transmission.” (listing service bulletins)].)

Moreover, the FAC alleges GM had prior knowledge about the transmission defect from “pre- production testing data, early consumer complaints about the Transmission Defect made directly to Defendant GM and its network of dealers, aggregate warranty data compiled from GM’s network of dealers, testing conducted by Defendant GM in response to these complaints, as well as warranty repair and part replacements data received by Defendant GM from Defendant GM’s network of dealers.” (FAC ¶ 73 a.)

Therefore, the FAC adequately alleges GM’s prior knowledge with requisite specificity.

With regard to GM’s intent to induce reliance, paragraph 67 of the FAC alleges:

GM was internally referring the 8-speed transmission as a “neck snapper.” Defendant GM engineers even considered stopping production in 2015 (but did not) and in 2016, President Johan de Nysschen acknowledged customer frustration surrounding the Transmission Defect internally and meeting with its authorized repair facility. Nonetheless, Defendant GM continued to conceal the Transmission Defect from consumers, including in its marketing materials, and advised any complaining customers that poor shifts were “normal.”

The logical implication of these allegations that GM knew of the problem, but rather than stopping production of the faulty transmissions in 2015, chose instead to continue to market and sell new vehicles with the transmission defect, including in the 2021 Chevy Silverado sold to Plaintiff, was to induce customers to continue to purchase vehicles with the faulty transmission.

“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.” (Bigler-Engler v. Breg, Inc. (2017) 7 Cal.App.5th 276, 311 (hereafter Bigler-Engler).) In the absence of a fiduciary duty, “[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.” (Ibid.)

Defendant emphasizes the seller/buyer relationship example of Bigler-Engler, and contends that because there is no direct seller-purchaser relationship alleged between Defendant manufacturer and Plaintiff purchaser, Defendant does not owe a duty to disclose to Plaintiff. In support, Defendant points out that in Bigler-Engler the Court of Appeal reversed a verdict for fraudulent concealment against the manufacturer of a medical device on the basis that there was no direct transactional relationship with the plaintiff patient.

In opposition, Plaintiff cites to OCM Principal Opportunities Fund, L.P. v. CIBC World Markets Corp. (2007) 157 Cal.App.4th 835, 859 (hereafter OCM), which held, “Under California law, 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.” Plaintiff also relies on Dhital v. Nissan N. Am., Inc. (2022) 84 Cal.App.5th 828, 843-844 (hereafter Dhital), where the appellate court held:

In its short argument on this point in its appellate brief, Nissan argues plaintiffs did not adequately plead the existence of a buyer-seller relationship between the parties, because plaintiffs bought the car from a Nissan dealership (not from Nissan itself). At the pleading stage (and in the absence of a more developed argument by Nissan on this point), we conclude plaintiffs’ allegations are sufficient. 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.

Defendant does not address Plaintiff’s legal authority in reply. As such, the Court finds that Plaintiff has the better argument. Per OCM, GM has a duty to disclose material facts about its vehicles, not only to the dealerships immediately purchasing the vehicles from GM, but also to the customers who will ultimately purchase those vehicles. Here, Plaintiff specifically alleges that GM failed to do that. “From September 2014 to at least February 2019, Defendant GM issued many service bulletins and service bulletin updates to its dealers in the United States, but not its customers, acknowledging problems of harsh shifting, jerking, clunking, and delays in acceleration or deceleration relating to the 8-speed transmission.” (FAC ¶ 69.)

Moreover, per Dhital, allegations that the plaintiff purchased the vehicle from an authorized dealership (and therefore an agent of the manufacturer), that was backed with an express warranty, is sufficient to allege a relationship requiring the manufacturer to disclose known defects at the pleadings stage. (Dhital, supra, 84 Cal.App.5th at p. 844.) Similarly, here, Plaintiff alleges, “On or about January 24, 2021, Plaintiff entered into a warranty contract with Defendant GM regarding a 2021 Chevrolet Silverado vehicle identification number 1GCUYEED1MZ190346 (hereafter "Subject Vehicle" or “Vehicle”), which was manufactured and or distributed by Defendant GM. Subject Vehicle was purchased at Win Chevrolet Hyundai in Carson, CA (GM’s authorized dealer).” (FAC ¶ 6.)

Therefore, the Court finds the allegations sufficiently specific to withstand demurrer regarding the fifth cause of action.

Any party, within the time allowed to respond to a pleading, may serve and file a motion to strike the whole pleading or any part thereof. (Code Civ. Proc., § 435, subd. (b)(1); Cal. Rules of Court, rule 3.1322, subd. (b).) On a motion to strike, the court may: (1) strike out any irrelevant, false, or improper matter inserted in any pleading; or (2) strike out all or any part of any pleading not drawn or filed in conformity with the laws of California, a court rule, or an order of the court. (Code Civ. Proc., § 436, subd. (a)-(b); Stafford v. Shultz (1954) 42 Cal.2d 767, 782.)

In ruling on a motion to strike punitive damages, “judges read allegations of a pleading subject to a motion to strike as a whole, all parts in their context, and assume their truth.” (Clauson v. Superior Court (1998) 67 Cal.App.4th 1253, 1255.) To state a prima facie claim for punitive damages, a plaintiff must allege the elements set forth in the punitive damages statute, Civil Code section 3294. (College Hosp., Inc. v. Superior Court (1994) 8 Cal.4th 704, 721.) Per Civil Code section 3294, a plaintiff must allege that the defendant has been guilty of oppression, fraud, or malice. (Civ. Code, § 3294, subd. (a).) As set forth in the Civil Code,

(1) “Malice” means conduct which is intended by the defendant to cause injury to the plaintiff or despicable conduct which is carried on by the defendant with a willful and conscious disregard of the rights or safety of others. (2) “Oppression” means despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person's rights. (3) “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.

Further, a plaintiff must assert facts with specificity to support a conclusion that a defendant acted with oppression, fraud or malice. To wit, there is a heightened pleading requirement regarding a claim for punitive damages. (See Smith v. Superior Court (1992) 10 Cal.App.4th 1033, 1041-1042.) “When nondeliberate injury is charged, allegations that the defendant’s conduct was wrongful, willful, wanton, reckless or unlawful do not support a claim for exemplary damages; such allegations do not charge malice. When a defendant must produce evidence in defense of an exemplary damage claim, fairness demands that he receive adequate notice of the kind of conduct charged against him.” (G. D. Searle & Co. v. Superior Court (1975) 49 Cal.App.3d 22, 29 [cleaned up].) In Anschutz Entertainment Group, Inc. v. Snepp, the Court of Appeal noted that the plaintiffs’ assertions related to their claim for punitive damages were “insufficient to meet the specific pleading requirement.” (Anschutz Entertainment Group, Inc. v. Snepp (2009) 171 Cal.App.4th 598, 643 [plaintiffs alleged “the conduct of Defendants was intentional, and done willfully, maliciously, with ill will towards Plaintiffs, and with conscious disregard for Plaintiff's rights. Plaintiff's injuries were exacerbated by the malicious conduct of Defendants. Defendants' conduct justifies an award of exemplary and punitive damages”]; see also Grieves v. Superior Court (1984) 157 Cal.App.3d 159, 166 [“The mere allegation an intentional tort was committed is not sufficient to warrant an award of punitive damages. Not only must there be circumstances of oppression, fraud, or malice, but facts must be alleged in the pleading to support such a claim”].)

Moreover, “the imposition of punitive damages upon a corporation is based upon its own fault. It is not imposed vicariously by virtue of the fault of others.” (City Products Corp. v. Globe Indemnity Co. (1979) 88 Cal.App.3d 31, 36.) “Corporations are legal entities which do not have minds capable of recklessness, wickedness, or intent to injure or deceive. An award of punitive damages against a corporation therefore must rest on the malice of the corporation’s employees. But the law does not impute every employee’s malice to the corporation. Instead, the punitive damages statute requires proof of malice among corporate leaders: the officers, directors, or managing agents.” (Cruz v. Home Base (2000) 83 Cal.App.4th 160, 167 [cleaned up].)

Here, as discussed above, Plaintiff’s allegations sufficiently plead fraud on the part of GM’s upper management, including President Johan de Nysschen. Therefore, Defendant’s motion to strike the request for punitive damages is denied.

Having found Plaintiff’s allegations adequately allege fraud with requisite particularity, and that the fraud was specifically alleged as to Defendant’s upper management, the Court overrules Defendant’s demurrer to the fifth cause of action and denies Defendant’s motion to strike Plaintiff’s request for punitive damages.

Further, the Court orders Defendant to file an Answer to the First Amended Complaint on or before May 31, 2024.

Defendant shall provide notice of the Court’s ruling and file a proof of service regarding the same.

[1] Indeed, Defendant has issued various internal technical bulletins to its dealers (not consumers) concerning the Transmission Defect. For example, an August 2020 Technical Service Bulletin (“TSB”) designed to address harsh first shifts of the day notes that “[r]eplacing transmission components or complete assemblies will not improve the condition.”

[2] E.g. TSB 14-07-30-001 dated September 1, 2014, TSB 14876 dated December 2014, TSB 15-NA-007 dated September 15, 2015, TSB 16-NA-014 dated January 21, 2016, TSB 16-NA-019 dated January 25, 2016, TSB 16- NA-213 dated January 28, 2016, TSB PIP5437 dated November 8, 2016, TSB 16-NA-361 which has been updated annually including on January 26, 2022 to include 2022 model year vehicles equipped with the 8-speed transmission, etc.

DEPARTMENT	207
HEARING DATE	May 15, 2024
CASE NUMBER	23SMCV05590
MOTIONS	Demurrer and Motion to Strike Portions of First Amended Complaint
MOVING PARTY	Defendant General Motors LLC
OPPOSING PARTY	Plaintiff Adam Mermel