Judge: Michelle Williams Court, Case: 22STCV00418, Date: 2022-10-26 Tentative Ruling

Case Number: 22STCV00418    Hearing Date: October 26, 2022    Dept: 74

22STCV00418           ERI CORTEZ vs AMERICAN HONDA MOTOR COMPANY

Demurrer and Motion to Strike Portions of the First Amended Complaint

TENTATIVE RULING: American Honda Motor Co., Inc.’s Demurrer to First Amended Complaint is OVERRULED. American Honda Motor Co., Inc.’s Motion to Strike First Amended Complaint is GRANTED in part. The motion is GRANTED without leave to amend as to footnotes 4,  12, 15, and 16 as well as the cited portion of paragraph 7. The motion is otherwise DENIED.  Defendant shall have 20 days to answer the First Amended Complaint.

Background

On January 5, 2022, Plaintiffs Eri Cortez and Eunice Cortez filed this action against Defendant American Honda Motor Co., Inc. The First Amended Complaint asserts causes of action for: (1) Violation of Subdivision (d) of Civil Code Section 1793.2, (2) Violation of Subdivision (b) of Civil Code Section 1793.2, (3) Violation of Subdivision (a)(3) of Civil Code Section 1793.2, (4) Breach of Implied Warranty of Merchantability, and (5) Fraudulent Inducement – Concealment. The FAC alleges Plaintiffs 2019 Honda Pilot suffered from various defects, including those related to the infotainment system.

Demurrer and Motion to Strike

On August 24, 2022, Defendant American Honda Motor Co., Inc. filed its demurrer to the fifth cause of action for fraudulent inducement – concealment as well as its motion to strike various allegations related to punitive damages, the duty to disclose, and other litigation.

Opposition

In opposition, Plaintiffs contend the FAC adequately states a cause of action for fraudulent concealment, including Defendant’s duty to disclose the known defect, the fifth cause of action is not barred by the economic loss rule, and the FAC adequately asserts a claim for punitive damages.

Reply

In reply, Defendant reiterates its arguments from the initial motion papers.

Meet and Confer

Defendant submitted the declaration of Linda Echegaray, which satisfies the requirements of Code of Civil Procedure sections 430.41 and 435.5.

Demurrer

Standard

A demurrer for sufficiency tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747.) When considering demurrers, courts read the allegations liberally and in context. In a demurrer proceeding, the defects must be apparent on the face of the pleading or via proper judicial notice. (Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994.) “A demurrer tests the pleadings alone and not the evidence or other extrinsic matters. Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed. (Code Civ. Proc., §§ 430.30, 430.70.) At the pleading stage, a plaintiff need only allege ultimate facts sufficient to apprise the defendant of the factual basis for the claim against him. (Semole v. Sansoucie (1972) 28 Cal. App. 3d 714, 721.) A complaint need not allege evidentiary facts noting plaintiff’s proof. (C.A. v. William S. Hart Union High School Dist. (2012) 53 Cal.4th 861, 872.) A “demurrer does not, however, admit contentions, deductions or conclusions of fact or law alleged in the pleading, or the construction of instruments pleaded, or facts impossible in law.” (S. Shore Land Co. v. Petersen (1964) 226 Cal.App.2d 725, 732.)

A special demurrer to a complaint is appropriate when the grounds of the pleading are uncertain, ambiguous, or unintelligible. (Code Civ. Proc. § 430.10(f); Beresford Neighborhood Assn. v. City of San Mateo (1989) 207 Cal.App.3d 1180, 1191.) Courts typically disfavor demurrers based on uncertainty, which the court strictly construes even when the pleading is uncertain in some respects. (Khoury v. Maly’s of California, Inc. (1993) 14 Cal.App.4th 612, 616.)

If the demurrer is sustained, plaintiff must prove the possibility of cure by amendment. (Czajkowski v. Haskell & White, LLP (2012) 208 Cal.App.4th 166, 173 (citing Grinzi v. San Diego Hospice Corp. (2004) 120 Cal.App.4th 72, 78-79).) Leave to amend must be allowed where there is a reasonable possibility of successfully stating a cause of action. (Schulz v. Neovi Data Corp. (2007) 152 Cal.App.4th 86, 92.) 

Fraudulent Inducement – Concealment (Fifth Cause of Action)

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.)

The specificity requirements of alleging “how, when, where, to whom, and by what means” the fraud was tendered by defendant does not apply to a fraudulent concealment claim. (Alfaro v. Community Housing Imp. System & Planning Ass'n, Inc. (2009) 171 Cal.App.4th 1356, 1384 (“This statement of the rule reveals that it is intended to apply to affirmative misrepresentations. . . . As plaintiffs accurately respond, it is harder to apply this rule to a case of simple nondisclosure. How does one show ‘how’ and ‘by what means' something didn't happen, or ‘when’ it never happened, or ‘where’ it never happened?”).) Additionally, “even in the pleading of fraud, the rule is relaxed when it is apparent from the allegations that the defendant necessarily possesses knowledge of the facts.” (Quelimane Co. v. Stewart Title Guaranty Co. (1998) 19 Cal.4th 26, 47.)

Defendant first argues Plaintiffs did not allege facts sufficient to support their fraudulent inducement by concealment claim. (Dem. at 11:11-17:5.) Defendant contends “Plaintiffs fail to allege a specific defect with their vehicle related to the infotainment system” and therefore they lack standing. (Dem. at 13:14-25.) However, the FAC alleges 2019 Honda Pilot vehicles, and other vehicles, utilize the same defective infotainment system. (FAC ¶ 14.) The FAC alleges “Defendant designed, manufactured, tested, warranted, advertised, distributed, sold, and leased the Honda Vehicles, including the Subject Vehicle, which contain a defective integrated in-vehicle communication, navigation, and entertainment system – commonly referred to as an “infotainment system” – that causes many of the Vehicles’ features (e.g., navigation system, rear-entertainment system, audio system, backup camera, cabin watch system) to malfunction.” (FAC ¶ 25.) The FAC further alleges “the defect makes Honda Vehicles, including the Subject Vehicle, unfit for the use for which they were intended in that they cannot be relied upon as a safe and reliable means of transport.” (FAC ¶ 26.) The FAC alleges Defendant was aware of the defect at the time of sale, continues to sell vehicles containing the defect without disclosing it, and cannot repair the defect. (FAC ¶¶ 28-30.) Plaintiffs would not have purchased the vehicle had they known of the defects. (FAC ¶¶ 50, 83, 87.) Defendant’s standing argument lacks merit.

Defendant’s demurrer addresses the sufficiency of allegations for pleading a fraud claim based upon an affirmative misrepresentation. (Dem. at 13:26-15:18.) As noted by Plaintiffs in opposition, the fifth cause of action is based upon concealment and Defendant’s arguments are inapplicable. (Opp. at 8:16-28.) Defendant also contends Plaintiffs failed to allege Defendant’s knowledge of the defect. (Dem. at 16:5-17:5.) However, the FAC alleges Defendant has long known of the infotainment problems, or should have known from multiple sources, including “pre-release design, manufacturing, and testing data; warranty claims data; consumer complaints made directly to Defendant, collected by the National Highway Transportation Safety Administration (“NHTSA”), and/or posted on public online forums; testing done in response to those complaints; aggregate data and complaints from authorized dealers; and other sources.” (FAC ¶ 7. See also FAC ¶ 81 (“Defendant knew that the Vehicle and its infotainment system suffered from an inherent defect, was defective, would fail prematurely, and was not suitable for its intended use.”).)

Defendant further argues the complaint fails to allege facts demonstrating it owed a duty to disclose information to Plaintiffs. (Dem. at 17:6-19:12.) Courts have held that manufacturers and initial sellers, such as Defendant Honda, owe a duty of disclosure to subsequent purchasers. (See e.g. Khan v. Shiley Inc. (1990) 217 Cal.App.3d 848, 858 (“[A] manufacturer of a product may be liable for fraud when it conceals material product information from potential users. This is true whether the product is a mechanical heart valve or frozen yogurt.”); OCM Principal Opportunities Fund, L.P. v. CIBC World Markets Corp. (2007) 157 Cal.App.4th 835, 859 (“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.”); Geernaert v. Mitchell (1995) 31 Cal.App.4th 601, 608.); Jones v. ConocoPhillips Co. (2011) 198 Cal.App.4th 1187, 1199.)

Additionally, the FAC alleges sufficient facts to demonstrate Defendant had exclusive knowledge of the defect. (FAC ¶ 7. See Falk v. General Motors Corp. (N.D. Cal. 2007) 496 F.Supp.2d 1088, 1097 (“It is true that prospective purchasers, with access to the Internet, could have read the many complaints about the failed speedometers (as quoted in the complaint). Some may have. But GM is alleged to have known a lot more about the defective speedometers, including information unavailable to the public. Many customers would not have performed an Internet search before beginning a car search. Nor were they required to do so.”).) In reply, Defendant suggests Falk is only a CLRA case, (Reply at 6:14-15), which is inaccurate. (Id. at 1099 (“Plaintiffs adequately state a claim of fraud by omission.”).)

Finally, Defendant argues the fifth cause of action is barred by the economic loss rule. (Dem. at 19:13-20:23.) However, the economic loss rule does not apply to Plaintiffs’ fraudulent inducement claim. “The most widely recognized exception is when the defendant's conduct constitutes a tort as well as a breach of the contract. For example, when one party commits a fraud during the contract formation or performance, the injured party may recover in contract and tort.” (Harris v. Atlantic Richfield Co. (1993) 14 Cal.App.4th 70, 78.) “Tort damages have been permitted in contract cases where . . . where the contract was fraudulently induced. . . . the duty that gives rise to tort liability is either completely independent of the contract or arises from conduct which is both intentional and intended to harm.” (Erlich v. Menezes (1999) 21 Cal.4th 543, 552.)

Moreover, Plaintiffs’ allegation of actual reliance, (FAC ¶¶ 50, 83, 87-89), is also sufficient to avoid application of the economic loss rule. (Gawara v. U.S. Brass Corp. (1998) 63 Cal.App.4th 1341, 1354 (“plaintiffs who suffer only economic losses, i.e., Coles and those homeowners who suffered no property damage, are required to show actual reliance.”); Fassberg Construction Co. v. Housing Authority of City of Los Angeles (2007) 152 Cal.App.4th 720, 757 (“A plaintiff seeking to recover damages for economic loss caused by fraud must show that the plaintiff actually relied on the defendant's misrepresentation or nondisclosure, that the reliance was reasonable, and that the plaintiff suffered damages as a result.”).)

The Court finds the First Amended Complaint alleges sufficient facts to support the fifth cause of action. The demurrer is OVERRULED.

Motion to Strike

Defendant moves to strike eleven items from the FAC, including a general allegation regarding class action tolling, allegations in footnotes and exhibits, allegations regarding Defendant’s duty to disclose, and allegations related to punitive damages.

Standard

Any party, within the time allowed to respond to a pleading may serve and file a notice of motion to strike the whole or any part thereof. (Code of Civ. Proc. § 435(b)(1); Cal. Rules of Court, rule 3.1322(b).) The court may, upon a 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 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(a)-(b); Stafford v. Shultz (1954) 42 Cal.2d 767, 782.) As used in Section 436, “irrelevant matter” is defined as “any of the following: (1) An allegation that is not essential to the statement of a claim or defense. (2) An allegation that is neither pertinent to nor supported by an otherwise sufficient claim or defense. (3) A demand for judgment requesting relief not supported by the allegations of the complaint or cross-complaint.” (Code Civ. Proc. § 431.10.)

“In order to survive a motion to strike an allegation of punitive damages, the ultimate facts showing an entitlement to such relief must be pled by a plaintiff. [Citations.] In passing on the correctness of a ruling on a motion to strike, judges read allegations of a pleading subject to a motion to strike as a whole, all parts in their context, and assume their truth. [Citations.] In ruling on a motion to strike, courts do not read allegations in isolation. [Citation.]” (Clauson v. Superior Court (1998) 67 Cal.App.4th 1253, 1255.) “Pleading in the language of the statute is not objectionable when sufficient facts are alleged to support the allegation.” (Perkins v. Superior Court (1981) 117 Cal.App.3d 1, 6-7.)

Discussion

Defendant first argues that “conflicting allegations should be stricken,” citing “the referenced portions of footnotes 4, 12, and paragraphs 72 and 85(c).” (Mot. at 12:25-14:2.) Footnote 4 cites a recently certified federal class action, Jimmy Banh, et al. v. American Honda Motor Co., Inc., 2:19-cv-05984 RGK (ASx), which involved the infotainment system in 2019 and 2020 Acura RDX vehicles manufactured by Defendant. The Court agrees this allegation is immaterial and irrelevant to Plaintiffs’ claims. (Code Civ. Proc. §§ 431.10(b)(1); 436(a).) The motion is GRANTED without leave to amend as to footnote 4.

Footnote 12 cites TSB 18-037, which Plaintiffs contend “which evidences Honda’s knowledge of defects within Honda Vehicles.” (FAC ¶ 44 n.12.) The exhibit is a Service Bulletin dated April 4, 2018 entitled “2019 Odyssey: PDI of the Navigation System.” (FAC Ex. C.) Defendant notes it does not reference the 2019 Pilot or any other model. Plaintiffs do not address this footnote in its opposition. The motion is GRANTED without leave to amend as to footnote 12.

Plaintiffs’ allegations regarding their ability to discover the defects are not contradicted by the alleged availability of public complaints. As noted above, Plaintiffs are not required to scour the internet for complaints related to their vehicle. The motion is DENIED as to paragraphs 72 and 85(c).

Defendant also argues that it did not have a duty to disclose and therefore “[t]he portions of footnote 1, Paragraphs 85 and 86 should be stricken.” (Mot. at 14:3-15:8.) As noted above, the Court finds the allegations sufficient to allege Defendant owed a duty of disclosure. The motion is DENIED as to footnote 1, Paragraphs 85 and 86.

Defendant contends references to class-actions “Footnotes 4 (page 6, lines 27-28), including Exhibit B, Exhibit C of 12 (page 11, line 28), footnote 15 (page 20, line 28 – page 21, line 16), 16 (page 21, lines 22-24), and Paragraph 7 (page 1, line 28 – page 2, lines 1-3) must be stricken as irrelevant.” (Mot. at 15:9-16:18.) Plaintiffs do not address footnotes 15 and 16 or paragraph 7 in their opposition. The Court agrees these allegations are immaterial and irrelevant to Plaintiffs’ claims. (Code Civ. Proc. §§ 431.10(b)(1); 436(a).) A complaint does not properly include citations to case authority. (See generally Krug v. Meehan (1952) 109 Cal.App.2d 274, 277 (“The complaint must allege ultimate facts, not evidentiary facts or conclusions of law.”).) The motion is GRANTED without leave to amend as to footnotes 15 and 16 and the cited portion of paragraph 7: “and/or class action tolling (e.g., the American Pipe rule), by the filing of Conti v. American Honda Motor Co., Inc., et al. (United States District Court for the Central District of California, Case No. 2:19-cv-2160) on March 22, 2019.”

Finally, Defendant argues the claim for punitive damages is improper because Plaintiffs failed to adequately allege a fraud claim. (Mot. at 16:19-27.) As noted above, the Court finds the fraud claim adequately stated. In reply, Defendant contends “the law is clear Plaintiffs waive punitive damages for the same acts they seek[] civil penalties for under Song-Beverly” and therefore the punitive damages should be stricken. (Reply at 6:28-7:3.) This argument has been rejected by the Court of Appeal. (Anderson v. Ford Motor Co. (2022) 74 Cal.App.5th 946, 965-966 (“Ford relies on a series of cases in arguing its proposed ‘no-double-punitives’ rule, all of which involved multiple causes of action grounded on the same conduct. . . . Here . . . the punitive damages and statutory penalties were based on different conduct that took place at different times. The punitive damages were based on conduct underlying the fraud/CLRA causes of action and took place before the sale. The civil penalty was based on defendant's post-sale failure to comply with its Song-Beverly Act obligations to replace the vehicle or make restitution when reasonable attempts to repair had failed.”).) The motion is DENIED as to paragraph (f) of the Prayer.