Judge Michael Shultz, Case Number: 23CMCV00949, Date: 2024-03-07 Tentative Ruling

[TENTATIVE] ORDER DENYING DEFENDANT’S MOTION TO STRIKE THE CLAIM FOR PUNITIVE DAMAGES

The first amended complaint alleges that Defendant, General Motors, LLC (“GM” or “Defendant”) issued a written warranty in connection with Plaintiffs’ purchase of a 2019 Chevrolet Silverado. The vehicle allegedly developed transmission and other defects, which GM failed to disclose or remedy. Plaintiffs allege three claims for violations under the Song-Beverly Consumer Warranty Act (“SBA”) and a fourth cause of action for fraudulent inducement and concealment.)

GM demurrers to the fourth cause of action on grounds Plaintiffs did not allege direct dealings with GM that would give rise to a duty to disclose. The claim is not alleged with specificity. The parties have not resolved their differences despite efforts to meet and confer.

In opposition, Plaintiffs argue that the specificity ordinarily required in alleging a claim for fraudulent misrepresentation does not apply to a claim for concealment. The alleged facts adequately support the claim.

In reply, GM argues that Plaintiffs’ opposition establishes their failure to allege facts supporting GM’s alleged duty to disclose. Plaintiffs did not meet the heightened standards for alleging a fraud claim.

A demurrer tests the sufficiency of a complaint as a matter of law and raises only questions of law. (Schmidt v. Foundation Health (1995) 35 Cal.App.4th 1702, 1706.) The court must assume the truth of (1) the properly pleaded factual allegations; (2) facts that can be reasonably inferred from those expressly pleaded; and (3) judicially noticed matters. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) The court may not consider contentions, deductions, or conclusions of fact or law. (Moore v. Conliffe (1994) 7 Cal.4th 634, 638.)

Plaintiff must allege facts sufficient to establish every element of each cause of action. (Rakestraw v. California Physicians Service (2000) 81 Cal.App.4th 39, 43.) Where the complaint fails to state facts sufficient to constitute a cause of action, courts should sustain the demurrer. Code Civ. Proc., § 430.10(e); (Zelig v. County of Los Angeles (2002) 27 Cal.4th 1112, 1126.) The Plaintiff is required to allege facts "with reasonable precision and with particularity sufficiently specific to acquaint the defendant with the nature, source, and extent of his cause of action.” (Gressley v. Williams (1961) 193 Cal.App.2d 636, 643-644.) Whether the Plaintiff will be able to prove the pleaded facts is irrelevant. (Stevens v. Superior Court (1986) 180 Cal.App.3d 605, 609–610.)

A demurrer may also be sustained if a complaint is “uncertain.” Uncertainty exists where a complaint’s factual allegations are so confusing, they do not sufficiently apprise a defendant of the issues it is being asked to meet. (Williams v. Beechnut Nutrition Corp. (1986) 185 Cal.App.3d 135, 139, fn. 2; Code Civ. Proc., § 430.10 subd. (f).)

Plaintiffs allege that GM intentionally concealed and failed to disclose facts relating to the transmission defects (FAC, ¶¶ 130-131.) GM had exclusive knowledge of this information which it obtained from its internal reports, customer complaints, and technical service bulletins all of which GM failed to make available, and which Defendant actively concealed. (FAC, ¶ 135.) GM allegedly induced Plaintiffs to buy the vehicle by marketing the vehicle as having “world-class performance” and improved fuel efficiency, among other representations. (FAC, ¶ 145-146.) Plaintiffs interacted with GM’s sales representatives and reviewed materials distributed by GM concerning its vehicles prior to Plaintiffs’ purchase of the vehicle. (FAC, ¶ 147.)

The elements of a fraud claim 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, (4) the plaintiff must have been unaware of the fact and would not have acted as he did if he had known of the concealed or suppressed fact, and (5) as a result of the concealment or suppression of the fact, the plaintiff must have sustained damage.” (Bigler-Engler v. Breg, Inc. (2017) 7 Cal.App.5th 276, 310–311.)

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.” (Id. at 311.) If a fiduciary relationship does not exist, but the latter three circumstances are present, plaintiff must still show “the existence of some other relationship between the plaintiff and defendant from which a duty to disclose can arise.” (Id. at 311.)

Contrary to GM’s argument, Plaintiffs adequately alleged that GM concealed material facts with respect to its transmission as previously outlined.

GM’s contention that Plaintiffs must allege “direct contact” or a “transactional relationship” with GM lacks merit. A duty to disclose may arise as a result of a transaction between the parties. However, the transaction "must necessarily arise from direct dealings between the plaintiff and the defendant; it cannot arise between the defendant and the public at large." (Bigler-Engler at 312 [noting that the duty of a manufacturer to warn consumers of a product’s hazards and faults applies in the context of strict products liability actions but does not apply in a suit for intentional misrepresentation.].)

As previously noted, GM’s direct contact with Plaintiffs allegedly arose from the materials distributed by GM which Plaintiffs reviewed concerning the vehicle’s safety and performance as well as from Plaintiffs’ interaction with GM’s sales representatives. (FAC, ¶ 147.) Plaintiffs allege that the authorized dealership that sold Plaintiffs the vehicle is an agent and representative of GM. (FAC, ¶ 4-5.) Plaintiffs allege they inquired with the dealership’s personnel about prior transmission issues, but GM’s authorized representatives stated that no such defects existed at the time. (FAC, ¶

Plaintiffs cite Dhital v. Nissan North America, Inc. (2022) 84 Cal.App.5th 828,^{^[1]} on which the Court relies for persuasive value given the case is pending review by the California Supreme Court although it has not been depublished. (Cal Rules of Court, Rule 8.1115 (e)(1).) Dhital determined that the allegations were sufficient to support the existence of a buyer-seller relationship between the plaintiff and the manufacturer in support of the claim for fraudulent concealment since “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 [the manufacturer’s] agents for purposes of the sale of Nissan vehicles to consumers. In light of these allegations, we decline to hold plaintiffs’ claim is barred on the ground there was no relationship requiring Nissan to disclose known defects." (Dhital. at 844.)

Based on the foregoing, demurrer to Plaintiffs’ first amended complaint is overruled. GM shall file an answer within 10 days.

GM separately moves to strike the prayer for punitive damages on grounds Plaintiffs did not allege facts showing that Defendants acted with malice, fraud, or oppression to warrant recovery of such damages. The fraudulent concealment claim is defective and cannot serve as a predicate to support recovery of punitive damages.

In opposition, Plaintiffs argue that the fraudulent concealment is not defective as alleged and supports recovery of punitive damages.

In reply, GM argues that Plaintiffs did not allege what specific misrepresentations were made and whether the person making the representation was an agent of GM. GM is not liable for the independent negligence of a dealership employee or third-party entity.

The court may, upon motion or at any time in its discretion and upon terms it deems proper: (1) strike out any irrelevant, false, or improper matter inserted in any pleading; or (2) strike out all or any part of the 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)). Grounds for the motion to strike are limited to matters that appear on the face of the pleading or on any matter which the court shall or may take judicial notice. (Code Civ. Proc., § 437).

Plaintiffs may recover exemplary damages if they establish “by clear and convincing evidence that the defendant has been guilty of oppression, fraud, or malice.” (Civ. Code, § 3294 subd. (a)). The predicate acts to support a claim for punitive damages must be intended to cause injury or must constitute “malicious” or “oppressive” conduct as defined by statute. “Malice” is defined as “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.” (Civ. Code, § 3294 subd. (c)(1); College Hospital Inc. v. Superior Court (1994) 8 Cal.4th 704, 725 ["malice involves awareness of dangerous consequences and a willful and deliberate failure to avoid them"]). "Oppression" is defined as “despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person's rights.” (Civ. Code, § 3294 subd. (a) subd. (c)(2)).

Absent an intent to injure the plaintiff, the conduct must be “despicable” which is defined as “base, vile, or contemptible.” (College Hospital Inc. at 725.) Plaintiffs must demonstrate that “the defendant acted in such an outrageous and reprehensible manner that the jury could infer that he knowingly disregarded the substantial certainty of injury to others." (Dawes v. Superior Court (1980) 111 Cal.App.3d 82, 90).

As explained in the order overruling GM’s demurrer, the claim for fraudulent concealment is well stated and provides the predicate acts necessary to recover punitive damages based on intentional concealment. Plaintiffs also allege that all acts of corporate employees were authorized by or ratified by an officer, director, or managing agent of the corporate employer. (FAC, ¶ 24.)

GM cites Mel Clayton Ford v. Ford Motor Co. (2002) 104 Cal.App.4th 46, 49 for the proposition that “in California, an automaker is not liable for the independent negligence of a dealership employee or a third-party entity with no relationship to GM.” (Reply, 3:12-14.) The case is inapposite because at issue was the manufacturer’s duty to defend and indemnify a dealership for a product liability claim asserted by a consumer. Moreover, Plaintiffs allege that the dealership was an agent and representative of GM under the Song-Beverly Consumer Warranty Act (“SBA”). (FAC, ¶ 4.) Plaintiffs allege that the dealership personnel, as GM’s agents and representatives, told Plaintiffs that no transmission defects existed in response to Plaintiffs direct inquiry. (FAC, ¶ 5.)

Relying on Avalon Painting Co. v. Alert Lumber Co. (1965) 234 Cal.App.2d 178, GM also contends that representations by dealership employees are not representations of an agent of GM. (Reply, 2:16-22.) That case is equally distinguishable in that the case involved omitted material allegations in an amended pleading that called into question whether an agency relationship existed as between a paint seller and a paint manufacturer.

Here, Plaintiffs’ contentions are not based solely in part on the relationship between the dealer and GM since Plaintiffs also allege that GM had prior knowledge of the transmission issues yet prepared materials touting the vehicle’s performance, which were contrary to what GM allegedly knew from its internal information and investigation.

Based on the foregoing, GM’s motion to strike is DENIED. GM is ordered to answer within 10 days.

^{^[1]} Review of the issue of whether claims for fraudulent concealment are exempted from the economic loss rule is being reviewed by the California Supreme Court in (Rattagan v. Uber Technologies, Inc. (Feb. 9, 2022, No. S272113) ___Cal.5th___ [2022 Cal. LEXIS 490]).