Judge Michael E. Whitaker, Case Number: 24SMCV02077, Date: 2024-08-13 Tentative Ruling

Judge: Michael E. Whitaker, Case: 24SMCV02077, Date: 2024-08-13 Tentative Ruling

Case Number: 24SMCV02077 Hearing Date: August 13, 2024 Dept: 207

TENTATIVE RULING

DEPARTMENT	207
HEARING DATE	August 13, 2024
CASE NUMBER	24SMCV02077
MOTIONS	Demurrer and Motion to Strike Portions of Complaint
MOVING PARTY	Defendant American Honda Motor Co.
OPPOSING PARTIES	Plaintiffs Bertha Alcatraz De Barbosa and Alejandro Barbosa aka Alejandro Barboza

MOTIONS

On May 1, 2024, Plaintiffs Bertha Alcatraz De Barbosa and Alejandro Barbosa aka Alejandro Barboza (“Plaintiffs”) filed suit against Defendant American Honda Motor Co., Inc. (“Defendant”) alleging two causes of action for (1) violations of the Song-Beverly Act, and (2) fraudulent inducement-concealment.

Defendant demurs to the second cause of action for failure 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 Plaintiffs’ claim for punitive damages.

Plaintiffs oppose both motions and Defendants reply.

REQUESTS FOR JUDICIAL NOTICE

1. DEFENDANT’S REQUEST

Defendant requests judicial notice of the following documents it transmitted to the National Highway Traffic Safety Administration (“NHTSA”):

1. Safety Recall Report to NHTSA published in May 2015 cited at Paragraph 32 of Plaintiff’s Complaint. See NHTSA publications regarding recalls:

· https://www.nhtsa.gov/vehicle/2014/ACURA/RLX#recalls; and

· https://static.nhtsa.gov/odi/rcl/2015/RMISC-15V301-8257.pdf, last visited July 10, 2024.

2. Honda Tech Line Summary Article ATS 170102 published in January 2017 cited at Paragraph 51 of Plaintiff’s Complaint. See NHTSA’s publication of ATS 170102:

· https://static.nhtsa.gov/odi/tsbs/2017/MC-10098927-5233.pdf, last visited July 10, 2024.

3. Honda Tech Line Summary Article ATS 170204 published in February 2017 cited at Paragraph 53 of Plaintiff’s Complaint. See NHTSA’s publication of ATS 170204:

· https://static.nhtsa.gov/odi/tsbs/2017/MC-10108698-9999.pdf, last visited July 10, 2024.

4. Honda Technical Service Bulletin 17-064 published in September 2017 cited at Paragraph 55 of Plaintiff’s Complaint. See NHTSA’s publication of Technical Service Bulletin 17- 064 on September 3, 2017:

· https://static.nhtsa.gov/odi/tsbs/2017/MC-10118208-9999.pdf, last visited July 10, 2024.

Judicial notice may be taken of “official acts of the legislative, executive, and judicial departments of the United States and of any state in the United States” pursuant to Evidence Code section 452, subdivision (c). Judicial notice may also be taken of “facts and propositions that are not reasonably subject to dispute and are capable of immediate and accurate determination by resort to sources of reasonably indisputable accuracy” pursuant to subdivision (h).

Here, although these reports, articles, and technical service bulletins appear on the NHTSA’s official website, they represent information that Honda reported to the agency; the content of the reports do not represent an “official act” of the NHTSA itself.

Notwithstanding, the fact that these documents appear on the NHTSA’s website is not reasonably subject to dispute and is capable of immediate and accurate determination by resort to the NHTSA’s website. However, while the Court can take judicial notice of the fact that these reports are published on the NHTSA’s website, the Court cannot take judicial notice of the hearsay statements contained in the documents. Defendant appears to rely on these documents for the proposition that this information was released to the public. (See Demurrer at p. 11.) Therefore, the Court takes judicial notice of the fact that this information was publicly published on the NHTSA’s website.

2. PLAINTIFFS’ REQUEST

Plaintiffs request judicial notice of a conformed copy of the second amended complaint filed in Dhital v. Nissan North America, Inc., No RG19009260 in Alameda County.

Judicial notice may be taken of records of any court in this state. (Evid. Code, § 452, subd. (d)(1).) Because the Dhital complaint is a court record within this state, the Court may take judicial notice of it. (Ibid.) However, “while courts are free to take judicial notice of the existence of each document in a court file, including the truth of results reached, they may not take judicial notice of the truth of hearsay statements in decisions and court files. Courts may not take judicial notice of allegations in affidavits, declarations and probation reports in court records because such matters are reasonably subject to dispute and therefore require formal proof.” (Lockley v. Law Office of Cantrell, Green, Pekich, Cruz & McCort (2001) 91 Cal.App.4th 875, 882 [cleaned up].)

Accordingly, the Court takes judicial notice of the existence of the Dhital complaint and the facts that it was filed and contains the allegations listed therein, but not the truth of those allegations.

ANALYSIS

1. DEMURRER

“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.)

A. FAILURE TO STATE A CAUSE OF ACTION

Defendant contends the second cause of action for fraudulent inducement-concealment fails to state facts sufficient to constitute a cause of action because (1) it is preempted by federal law; (2) Plaintiffs fail to allege a duty to disclose; (3) the facts allege contradict the claim that Defendant had “exclusive knowledge” of the defect; and (4) the cause of action is not pled with sufficient particularity.

i. Preemption

Defendant first argues that Plaintiffs’ fraudulent concealment claim is premised upon Defendant’s alleged failure to disclose information that is protected by federal law. Specifically, the National Highway Traffic Safety Administration (“NHTSA”), which regulates vehicle safety, disclosure, and recall information, requires manufacturers to report to it various Early Warning Reporting (“EWR”) data, including incidents, notices, consumer complaints, warranty claims, and field reports relating to its vehicles’ safety and performance. The NHTSA has promulgated a rule that classes the raw EWR data “on production numbers (other than for light vehicles), the numbers of consumer complaints, warranty claims and field reports, copies of field report documents, and common green tire identifier information are confidential.” (Confidential Business Information, 72 Fed. R. 59434-01.)

As such, Defendant argues that Plaintiffs’ concealment claim seeks to hold Defendant liable for failing to disclose the confidential business information, and therefore the fraudulent concealment claim is preempted by federal law (i.e., the NHTSA’s regulations.) Specifically, Defendant argues that because the allegations in the Complaint regarding Defendant’s exclusive and/or superior knowledge of the defect are premised on this raw EWR data Defendant provided to the NHTSA, the second cause of action effectively accuses Defendant of failing to disclose the raw EWR data.

But the Complaint seeks to hold Defendant liable for failing to disclose that the 2021 Honda Accord had the “Honda Sensing” defect, which is alleged to be the same defect as the 2016-2020 Honda Accord models and the 2017-2020 Honda CR-V vehicles:

11. AMERICAN HONDA manufactured and/or distributed vehicles throughout the United States, including the Subject Vehicle, equipped with defective computerized driver-assistance safety systems called “Honda Sensing”. Honda Sensing relies on a radar sensor (near the lower front bumper), an interior camera (near the rearview mirror), along with computers and other technology. The autonomous braking system within Honda Sensing is called Collision Mitigation Braking System (or “CMBS”). The autonomous braking works to avoid front-end collisions by detecting vehicle speed and the speed of other vehicles and objects on the road— and can automatically deploy the brakes to avoid a front-end collision. Specifically, the Collision Mitigation Braking System “alert[s] the driver of a potential collision and take[s] steps to help mitigate the severity of a frontal collision if the system determines it to be unavoidable.”

12. The CMBS is capable of providing light brake application or strong brake application. According to Honda, the CMBS activates when:

• The speed difference between your vehicle and a vehicle or pedestrian detected in front of you is about 3 mph (5 km/h) and over with a chance of a collision;

• Your vehicle speed is about 62 mph (100 km/h) or less and the system determines there is a chance of a collision with another vehicle or a pedestrian in front of you;

• Your vehicle speed is above 62 mph (100 km/h), and the system determines there is a chance of a collision with a vehicle detected in front of you traveling in your same direction.

13. Computerized driver-assisting safety systems generally, and autonomous braking systems like CMBS in particular, must undergo careful testing and inspection to ensure they work properly. Otherwise, the systems put lives at risk. These features were originally designed and promoted to avoid accidents or greatly minimize the effects of a collision.

14. These defective computerized driver-assisting safety systems were installed in the Subject Vehicle and in all model year 2017-2020 Honda CR-V Vehicles and the 2016-2020 Honda Accord.

15. Honda Sensing is standard equipment on these vehicles and is touted by Honda as “an intelligent suite of safety and driver-assistive technologies designed to alert you to things you might miss while driving.”

16. The Honda Sensing system suffers from a defect that causes the various subsystems within it to malfunction dangerously while the vehicles are driven. This defect impedes the systems’ ability to reliably and accurately detect and appropriately respond to conditions on the roadway, causing malfunctions of the adaptive cruise control, the lane-departure system, and – most severely – the CMBS.

17. Specifically, Honda Sensing suffers from frequent malfunctions, causing (1) numerous warning messages to intermittently appear on the vehicles’ instrument cluster alerting drivers to a problem with Honda Sensing safety and driver-assist system, (2) the vehicles to fluctuate their highway speed without warning when adaptive cruise control is set, (3) the vehicles to alert drivers to apply brakes immediately although no obstruction is present, (4) the vehicles to apply brakes although no obstruction is present, (5) the vehicles to falsely alert drivers that they fail to drive their vehicle within road lane markings, and (6) the vehicles to steer themselves outside lane of travel.

18. As a result, drivers are brought to abrupt halts in traffic, and trailing vehicles have to slam on the brakes or swerve dangerously out of their lanes to avoid a crash.

19. The Honda Sensing Defect causes unsafe driving conditions because they cause Plaintiff(s) and the Class Vehicles’ drivers to become distracted. These conditions are hazardous because they severely affect their ability to control the vehicle and cause the vehicle to behave in unexpected and unpredictable manner.

20. According to a “Job’s Aid” Honda issued to its dealers, certain environmental and roadway conditions can affect operation of Honda Sensing safety and driver-assist system and include the following: Bad weather such as rain, fog, snow, etc.; Sudden changes between light and dark, such as an entrance or exit of a tunnel; Little contrast between objects and the background; Driving into low sunlight (at dawn or dusk); Strong light reflected onto the roadway; Driving in the shadows of trees, buildings, etc.; Roadway objects or structures misinterpreted as vehicles and pedestrians; Reflections on the interior of the windshield; Driving at night or in a dark condition such as a tunnel [sic]; Driving on a snowy or wet roadway (obscured lane marking, vehicle tracks, reflected lights, road spray, high contrast); Driving on curvy, winding, or undulating roads; and Hilly road or approaching the crest of a hill.

21. These “environmental” and “roadway” conditions that can cause fault with the Sensing encompass nearly every condition in which consumers operate the vehicle. Honda’s Owner’s Guide failed to disclose that Sensing can fail due to the aforementioned normal everyday driving conditions and Honda failed to make such disclosure to Plaintiff.

22. Plaintiff(s) reasonably expected that the Subject Vehicle would not experience computerized driver-assistance safety system malfunctions and collision mitigation braking system malfunctions. These are reasonable and objective consumer expectations.

[…]

110. AMERICAN HONDA and its agents intentionally concealed and failed to disclose facts relating to the Honda Sensing Defect as explained in detail above.

111. AMERICAN HONDA was the only party with knowledge of the Honda Sensing Defect. Information regarding the defect was never made publicly available, nor did Defendant publicly or privately disclose any of the information to Plaintiff. AMERICAN HONDA had exclusive knowledge of the defect as described in detail above.

(Complaint at ¶¶ 11-19, 110-111, footnotes omitted.)

Plaintiffs do not seek to have Defendant disclose any of the underlying EWR data that made Defendant aware of the defect. Rather, Plaintiffs point to the underlying EWR data as evidence that Defendant had been aware of the “Honda Sensing” defect for years, yet continued to install it in its vehicles, including the 2021 Honda Accord that Plaintiffs purchased, without disclosing that defect to consumers:

23. AMERICAN HONDA knew or should have known about the safety hazard posed by the Honda Sensing Defect before the sale of vehicles such as the Subject Vehicle from pre-market testing, consumer complaints to the National Highway Traffic Safety Administration (“NHTSA”), consumer complaints made directly to AMERICAN HONDA and its dealers, testing conducted in response to those complaints, high failure rates and replacement part sales data, and other sources which drove AMERICAN HONDA to issue Technical Service Bulletins acknowledging this defect. AMERICAN HONDA should not have sold, leased, or marketed vehicles equipped with the Honda Sensing Defect without a full and complete disclosure of the defect, and should have voluntarily recalled all vehicles equipped with the Honda Sensing Defect long ago.

24. Despite knowing about the Honda Sensing Defect and the danger it poses to consumers and other parties, AMERICAN HONDA sold, leased, and continues to sell and lease, vehicles equipped with the computerized driver-assistance safety systems called “Honda Sensing” which suffers from the Honda Sensing Defect.

25. AMERICAN HONDA knew about the Honda Sensing Defects contained in 2017-2020 Honda CR-V Vehicles and 2016-2020 Honda Accord vehicles equipped with Honda Sensing, along with the attendant safety problems and associated costs, and concealed the existence of those defects from Plaintiff(s) and other consumers prior to the time they purchased or leased their respective Accord/CR-V vehicles. AMERICAN HONDA continued this concealment from Plaintiff and other consumers following their respective sales or leases. AMERICAN HONDA’s concealment caused Plaintiff and other consumers to experience the effects of the Honda Sensing Defect throughout the life of the Subject Vehicle, including during use within the respective warranty periods.

26. AMERICAN HONDA has chosen financial gain at the expense of consumer safety by failing to disclose its knowledge of this critical safety defect to consumers.

27. The Subject Vehicle was purchased by Plaintiff(s) on July 1, 2021.

28. Upon information and belief, AMERICAN HONDA was aware, or should have been aware, of the Honda Sensing Defect present in the Subject Vehicle before it was purchased by Plaintiff.

29. American Honda and the rest of the automotive industry have known for years that driver-assisting safety systems, including automatic braking systems, must be calibrated appropriately, and vetted with testing and inspection before sale, to ensure that they are functioning properly and to ensure there are no false alarms (where the autonomous braking system activates even though there is no impending risk of a collision).

30. The National Transportation Safety Board, for example, released a special investigation report in 2015 analyzing the use of autonomous braking systems. As the report stated, autonomous braking systems are to activate “only in critical situations.”4 The report also found that such collision avoidance systems “depend[] heavily on the accuracy and timeliness of detection, which relies on the quality of the installed sensor, camera, or vision algorithm detecting targets.” (Id.)

31. Among the potential problems identified in the report was the possibility of false alarms, with “false alarm” defined as “the detection of a conflict when none is present.” (Id.) The report noted that among the limitations of a radar-based system is the reality that there will be “[i]ncreased interference from other sources resulting in more frequent misidentifications (e.g., identifying a bridge as a conflict vehicle).” (Id.)

32. In the month prior to this report coming out, in May of 2015, Honda recalled thousands of 2014-2015 Acura MDX and RLX vehicles due to a defect in the CMBS whereby the system may unexpectedly activate while in operation. Honda’s Safety Recall Report provided to NHTSA stated that “[i]n certain driving conditions, the Collision Mitigation Braking System (CMBS) may unexpectedly activate while operating the vehicle. In rare cases, the system may interpret certain roadside objects, such as metal fences or metal guardrails, as obstacles and apply emergency braking through the CMBS.” Honda further acknowledged that “If the CMBS applies unexpected emergency braking force during normal operation, it could increase the risk of a crash.” Honda issued a software update to remedy this issue.

33. In June of 2015, Honda Australia also recalled several thousand 2013- 2015 Accords and 2014-2015 CR-Vs for the same issue.

34. Although, on information and belief, these two recalls concern a version of the CMBS prior to its integration into Honda Sensing, the issues are emblematic of the problem at the core of the Honda Sensing Defect. The CMBS system essentially attempts to replicate human qualities—the ability to see the outside world and process such inputs in a meaningful way. Just as the CMBS in the Class Vehicles, the CMBS in these recalled vehicles was unable to properly process these inputs on a consistent basis.

35. As Honda has long known, Class Vehicles’ suite of driver-assisting safety systems, including the autonomous braking system, are dangerously defective. Drivers report that they frequently see an error message on their dashboard stating there is a problem with the CMBS. With this error, the CMBS (and other features including adaptive cruise control) may be deactivated. Worse, the CMBS frequently causes Class Vehicles to brake without warning, even when driving at high speed and with no plausible risk of collision ahead. This can be extremely dangerous—among other things, it creates a risk that vehicles trailing behind will either rear-end the Class Vehicle, have to slam on the brakes themselves, or swerve out of their lane to avoid a collision.

36. As one news report put it, there are “rising concerns that the system will brake for no reason at all”; thus, Honda’s “Collision mitigation braking assist … applies brake pressure when an unavoidable collision is determined or when an ‘unavoidable’ situation is created out of thin air by the robot mind of your car.”

37. Although AMERICAN HONDA knew of such Sensing faults and limitations from roughly the time the 2016 Vehicles became available for sale, and certainly at least as of November 16, 2017, when it published to its dealers Version 2 of the Sensing Job’s Aid (and sooner as Honda gathered information and data to prepare such publication), Honda has not disclosed such Sensing faults and limitations to consumers.

38. As early as 2016, AMERICAN HONDA was or should also have been aware through premarket testing, consumer complaints to the National Highway Traffic Safety Administration (“NHTSA”), consumer complaints made directly to AMERICAN HONDA and its dealers, dealership repair records, warranty and post-warranty claims, high failure rates caused by the Honda Sensing Defect, technical service bulletins (“TSBs”), and other sources.

39. AMERICAN HONDA’s pre-sale durability testing includes five metrics that allegedly “ensure high quality” by conducting “comprehensive quality assurance activities from the dual perspectives of design and manufacturing”. Honda admits that its “production departments implement manufacturing controls to keep variability within applicable standards based on drawings and develop production processes so that all workers can continue to achieve a consistent level of quality.” (Id.)

40. American Honda established a “Quality Center” whose stated goals include “quickly detecting … quality issues when they occur.” Honda’s vigilance in searching for all early signs of defects in its vehicles is enhanced by the use of sophisticated systems for detecting emerging vehicle problems as well as the devotion of resources and personnel to detecting those problems as early as possible. In modern day vehicle production, failures are typically measured per thousand vehicles or sometimes even per hundred thousand vehicles. As a result, defect trends are frequently identified after just a handful of reported failures.

41. Recognizing that automatic braking features require “the ultimate degree of precision,” Honda conducted self-described “endless testing” of these systems, which took “[m]any days.”8 According to Honda, its repeated “[b]rutal tests” made test drivers carsick after experiencing sudden braking “over and over.” (Id.)

42. In prior models equipped with CMBS, Honda employed two types of track tests specifically to evaluate the CMBS in “real world” situations. The testing involved a test driver driving toward targets and then evaluating whether the system reacted as intended. Honda used a combination of functionality and efficacy tests to estimate the effectiveness of the system in real-life situations9 . Honda also conducted tests on public roads to determine the accuracy of the system’s functions, particularly in different weather conditions10. Honda tested these systems “in as many situations and conditions as they could imagine.” (Id.)

43. Thus, AMERICAN HONDA knew or should have known of the Honda Sensing Defect through its comprehensive quality assurance activities and manufacturing controls.

44. NHTSA provides a system for motor vehicle owners to report complaints relating to safety defects that pose a risk of accidents, injuries, and even death in vehicles manufactured or imported in the United States, including safety defects relating to Honda Sensing Defect malfunctions. The safety defect complaints are entered into NHTSA’s consumer complaint automated database, which manufacturers can access. NHTSA also provides these consumer complaints to the vehicle’s manufacturer, including AMERICAN HONDA. All manufacturers including AMERICAN HONDA undoubtedly review NHTSA consumer complaints, as this information is used to determine if a recall should be issued.

45. In fact, Federal law requires automakers like Honda to be in close contact with NHTSA regarding potential auto defects, including imposing a legal requirement (backed by criminal penalties) compelling the confidential disclosure of defects and related data by automakers to NHTSA, including field reports, customer complaints, and warranty data. See TREAD Act, Pub. L. No. 106-414, 114 Stat. 1800 (2000).

46. Automakers have a legal obligation to identify and report emerging safety-related defects to NHTSA under the Early Warning Report requirements. (Id.) Similarly, automakers should and do monitor NHTSA databases for consumer complaints regarding their automobiles as part of their ongoing obligation to identify potential defects in their vehicles, including safety-related defects.

47. AMERICAN HONDA has received dozens if not hundreds of complaints submitted to the Office of Defects Investigation (“ODI”) of NHTSA, since as early as December of 2016, regarding the Honda Sensing Defect.

48. Below is a small sample of the complaints AMERICAN HONDA has received that most certainly put AMERICAN HONDA on notice of the Honda Sensing Defect as early as 2016:

[omitted]

49. Given its use of prerelease testing—which includes driving the vehicles for many miles— Honda surely discovered the Honda Sensing Defect before it sold the first-Class Vehicle. As the driver complaints to the NHTSA above show, the Class Vehicles often experience false alarms and dangerous, unnecessary braking shortly after drivers purchase or lease them. Given the immediacy with which the Defect often manifests, it would be nearly impossible for Honda to put Class Vehicles to market without discovering the Defect beforehand through its pre-release testing efforts (the results of which are exclusively within Honda’s control).

(Complaint at ¶¶ 23-49 [footnotes omitted].)

Because Plaintiffs point to the underlying EWR data to demonstrate Defendant’s prior knowledge of the defect, and fault Defendant for failing to disclose the defect, and not the underlying EWR data, the Court overrules Defendant’s demurrer on the basis of preemption.

ii. Duty

“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.)

“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.)

Here, Plaintiffs allege Defendant actively concealed the defect, both from the NHTSA and the public:

[…]

50. A series of Technical Service Bulletins (“TSBs”), Tech Line Summary Articles and Engineering Requests for Investigation issued quietly by Honda to its dealers since the introduction of Honda Sensing provide further evidence of Honda’s pre-sale knowledge of the Honda Sensing Defect. On information and belief, although these bulletins purport to address issues limited to particular vehicles, the Honda Sensing System in all Class Vehicles is similarly defective. Honda has attempted to define problems with Honda Sensing narrowly to avoid the liability and expense of acknowledging the true nature and scope of the problem. For this reason, Honda Sensing issues continue to plague the Class Vehicles.

51. For example, in January of 2017, Honda issued ATS 170102, titled “Radar Obstructed Message in the Driver Information Interface”. Therein, Honda explained: “If you see the message Some Driver Assist Systems Cannot Operate: Radar Obstructed in the driver information interface, it means something is blocking or covering the millimeter wave radar in the front grille, preventing it from detecting objects ahead of the vehicle. You may also see this message when driving in rain, snow, fog, etc. It’s not uncommon for it to intermittently come on when driving under those conditions… Although this info is covered in the owner’s guide and owner’s manual, some customers may thing (sic) there’s something wrong with the vehicle when they see that message. Be sure to pass this info along to the service advisors so they can educate their customers.”

52. On information and belief, this Tech Line Summary Article exemplifies Honda’s attempts to explain away and cover up issues with the CMBS rather than acknowledge the existence of the Defect.

53. Only a month later, in February of 2017, Honda issued ATS 170204 titled “ACC, Collision Mitigation Braking System, and Road Departure Mitigation, Indicators On with DTC P2583-76”. Honda blamed the factory’s radar aiming process and instructed dealers to re-aim the radar. Therein, Honda explained: Some early production vehicles undergoing PDI or coming in with low mileage may have this issue:

o The ACC (Adaptive Cruise Control), Collision Mitigation Braking System, and Road Departure Mitigation indicators are on. o DTC P2583-76 (temporary stop of integrated driver support system

o DTC B2A60-98 (multipurpose camera unit temperature too high) is set.

[misalignment millimeter wave radar] is set.

o The driver information interface shows Adaptive Cruise Control Problem, Collision Mitigation System Problem, and Road Departure Mitigation System Problem messages.

54. The very next month on March 29, 2017, Honda issued an Engineering Request for Investigation, titled “2017 CR-V MIL On with DTC P2583-76 Stored.” In this Request, Honda explains that it had received certain customer complaints of the Malfunction Indicator Lamp (MIL) on with DTC P2583-76 stored and “would like to collect specific parts from the vehicle prior to [the repair engineer] attempting a repair of any kind” in order to “fully understand the cause.”

55. On September 23, 2017, Honda issued TSB 17-064 titled “MID Displays ACC, LKAY, RDM, Brake Warnings and Other Listed Symptoms.” This TSB states: There is an internal issue with the millimeter wave radar software, which may lead to one or more of the following symptoms:

o The millimeter wave radar is improperly calibrated resulting in DTC P2583-76 (temporary stop of integrated driver support system [misalignment millimeter wave radar].

o Front radar blindness due to severe weather conditions (rain, snow, fog, etc.) may trigger a sporadic false Radar Obstructed message on the MID.

o The vehicle speed fluctuates at highway speeds when adaptive cruise control is set.

o DTC C0051-54 (steering angle neutral position learning incomplete), U041-68 (brake actuator malfunction), and U0416-92 (temporary stop of integrated driver support system [rejected control request by VSA system]) are set after the battery is replaced, disconnected, or jumped.

o During radar aiming, the Radar Obstructed message appears on the MID throughout the aiming procedure. o During radar aiming, 4 and No Target are not displayed on the MID.

o DTC B2A60-98 (multipurpose camera unit temperature too high) is set

56. As a corrective action, this TSB provides for a software update to the millimeter wave radar unit. Such purported fixes are common in the auto industry because they are inexpensive, but they are often ineffective.

57. As evident from Plaintiff’s experiences and those of other consumers, the software updates and millimeter wave radar re-aiming fail to correct the Honda Sensing Defect. The millimeter wave radar re-aiming procedure is complex and, when not done correctly, only contributes to the problem instead of correcting it. Furthermore, Honda knows that Sensing technology simply does not work in most ordinary road conditions.

[…]

67. AMERICAN HONDA had and continues to have a duty to disclose the Sensing Defect and the likelihood of the associated out-of-pocket repair costs to Plaintiff(s) and other consumers because: 1) the defect poses an unreasonable safety hazard; 2) AMERICAN HONDA has exclusive knowledge that is not reasonably discoverable by Plaintiff(s) and consumers; 3) AMERICAN HONDA has actively concealed the defect; 4) AMERICAN HONDA made representations but did not disclose facts that materially qualified the facts disclosed, or that rendered its disclosure likely to mislead.

[…]

71. While HONDA AMERICA has been fully aware of the Honda Sensing Defect affecting vehicles such as the Subject Vehicle, AMERICAN HONDA and its agents actively concealed the existence and nature of the Honda Sensing Defect from Plaintiff(s) at the time of purchase, repair, and thereafter. Specifically, AMERICAN HONDA failed to disclose or actively concealed, at and after the time of purchase or repair:

a. any and all known material defects or material nonconformity of the Subject Vehicle, including the defects relating to the computerized driver-assistance safety system, and collision mitigation braking system;

b. that the Subject Vehicle, including its computerized driver-assistance safety system, and collision mitigation braking system, was not in good working order, was defective, and was not fit for the intended purposes; and,

c. that Subject Vehicle and its computerized driver-assistance safety system, and collision mitigation braking system were defective, despite the fact that AMERICAN HONDA learned of such defects through alarming failure rates, and customer complaints.

[…]

110. AMERICAN HONDA and its agents intentionally concealed and failed to disclose facts relating to the Honda Sensing Defect as explained in detail above.

(Complaint ¶¶ 25, 50-57, 67, 71, 110.)

Further, “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.” (OCM Principal Opportunities Fund, L.P. v. CIBC World Markets Corp. (2007) 157 Cal.App.4th 835, 839.) In the context of automobile manufacturers, the appellate court has explained:

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.

(Dhital v. Nissan N. Am. Inc. (2022) 84 Cal.App.5th 828, 843-844.)

Here, Plaintiff alleges, “The Subject Vehicle was purchased by Plaintiff(s) on July 1, 2021 from an authorized AMERICAN HONDA dealership in Culver City.” (Complaint ¶ 84.)

Thus, Plaintiffs adequately allege Defendant owed a duty to disclose the defect, yet actively concealed it.

iii. Exclusive Knowledge

Defendant argues (1) the examples purportedly demonstrating Defendant’s knowledge of the defect pertain to other cars, and therefore do not establish Defendant’s knowledge of the defect in the 2021 Honda Accord; and (2) the Complaint “is replete” with allegations about publicly disclosed information about the “Honda Sensing” defect, demonstrating Defendant did disclose the defect.

As for Defendant’s first argument, as discussed above, Plaintiff alleges that despite being aware of the Honda Sensing defect due to its installation in the 2016-2020 Honda Accord models and the 2017-2020 Honda CR-V vehicles, Honda still installed it in the 2021 Honda Accord, without notifying customers that it had installed a known defect in the 2021 year model. Therefore, although the examples pertain to other vehicles, they demonstrate Honda’s knowledge of the defect.

With respect to the second argument, the publications were made about other vehicles in prior years. Thus, while Defendant knew that its Honda Sensing was defective, as evidenced by the publications, consumers were not necessarily aware that the same defective Honda Sensing system was continuing to be installed in the 2021 Honda Accord models. Further, Plaintiffs allege that the disclosures made minimize the scope and extent of the problem, and the proposed solution did not fix the issue:

o The millimeter wave radar is improperly calibrated resulting in DTC P2583-76 (temporary stop of integrated driver support system [misalignment millimeter wave radar].

o Front radar blindness due to severe weather conditions (rain, snow, fog, etc.) may trigger a sporadic false Radar Obstructed message on the MID.

o The vehicle speed fluctuates at highway speeds when adaptive cruise control is set.

o During radar aiming, the Radar Obstructed message appears on the MID throughout the aiming procedure. o During radar aiming, 4 and No Target are not displayed on the MID.

o DTC B2A60-98 (multipurpose camera unit temperature too high) is set

(Complaint ¶¶ 55-57.)

Therefore, the Complaint adequately alleges that Honda knew of the defect, but that Plaintiffs did not and could not have reasonably discovered the defect prior to purchasing the subject vehicle.

iv. Particularity

“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.)

“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.)

Defendant contends that the allegations constitute only legal conclusions devoid of the factual specificity required to plead a cause of action for fraud. As discussed above, Plaintiffs have alleged specific facts that (1) Defendant knew of the defect; (2) Defendant owed a duty to disclose the defect, both because it sold Plaintiffs the vehicle through its authorized dealer (Complaint ¶ 84) and because it actively concealed the defect by downplaying the severity of the defect and proposing a software fix that was ineffective (Complaint ¶ 56); (3) Defendant intended to defraud customers like Plaintiffs, prioritizing “financial gain at the expense of consumer safety” (Complaint ¶ 26). The Complaint also alleges, “Plaintiff(s) would not have purchased the Subject Vehicle, or would have paid significantly less for it, had they known of the Sensing Defect and the safety hazard it creates.” (Complaint ¶ 66.) Further, Plaintiff alleges:

123.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 Honda Sensing Defect at or prior to the acquisition. 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 computerized driver-assistance safety system 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.

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

125. Defendant’s concealment of the defect was a substantial factor in causing Plaintiff’s harm.

(Complaint at ¶¶ 123-125.)

Therefore, the Complaint alleges fraud with sufficient particularity.

2. MOTION TO STRIKE

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.

(Civ. Code, § 3294, subd. (c)(1)-(3), emphasis added.)

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].)

Defendants move to strike punitive damages from the Complaint. As discussed above, Plaintiffs have adequately alleged fraud to sustain a request for punitive damages generally. With respect to alleged conduct on the part of Defendant’s corporate leaders, however, the Complaint is devoid of any allegations with respect to the acts of Honda’s corporate leadership except for paragraph 7, which simply provides, “7. All acts of corporate employees as alleged were authorized or ratified by an officer, director or managing agent of the corporate employer.” (Complaint ¶ 7.) This conclusory statement, unsupported by any other specific facts regarding wrongdoing on the part of corporate leadership, is insufficient to state a claim for punitive damages against the corporation.

Therefore, the Court grants Defendant’s motion to strike punitive damages from the Complaint.

3. LEAVE TO AMEND

A plaintiff has the burden of showing in what manner the complaint could be amended and how the amendment would change the legal effect of the complaint, i.e., state a cause of action. (See The Inland Oversight Committee v. City of San Bernardino (2018) 27 Cal.App.5th 771, 779; PGA West Residential Assn., Inc. v. Hulven Int'l, Inc. (2017) 14 Cal.App.5th 156, 189.) A plaintiff must not only state the legal basis for the amendment, but also the factual allegations sufficient to state a cause of action or claim. (See PGA West Residential Assn., Inc. v. Hulven Int'l, Inc., supra, 14 Cal.App.5th at p. 189.) Moreover, a plaintiff does not meet his or her burden by merely stating in the opposition to a demurrer or motion to strike that “if the Court finds the operative complaint deficient, plaintiff respectfully requests leave to amend.” (See Major Clients Agency v Diemer (1998) 67 Cal.App.4th 1116, 1133; Graham v. Bank of America (2014) 226 Cal.App.4th 594, 618 [asserting an abstract right to amend does not satisfy the burden].)

Here, the Court grants Plaintiff leave to amend to add more specificity regarding Defendant’s corporate leadership’s alleged ratification and/or other wrongful conduct that would support Plaintiff’s claim for punitive damages.

CONCLUSION AND ORDER

For the reasons stated, the Court overrules Defendant’s Demurrer to the Second Cause of Action.

Further, the Court grants Defendant’s Motion to Strike punitive damages from the Complaint with leave to amend. Plaintiff shall file and serve the amended complaint on or before September 3, 2024.

Further, on the Court’s own motion, the Court continues the Case Management Conference from September 3, 2024 to December 13, 2024 at 8:30 A.M. in Department 207. All parties shall comply with California Rules of Court, rules 3.722, et seq., regarding Initial and Further Case Management Conferences. In particular, all parties shall adhere to the duty to meet and confer (Rule 3.724) and to the requirement to prepare and file Case Management Statements (Rule 3.725).

Defendant shall provide notice of the Court’s orders and file the notice with a proof of service forthwith.

DATED: August 13, 2024 ___________________________

Michael E. Whitaker

Judge of the Superior Court