Judge: Randy Rhodes, Case: 22CHCV00874, Date: 2023-05-01 Tentative Ruling
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Case Number: 22CHCV00874 Hearing Date: May 1, 2023 Dept: F51
Dept. F-51
Date: 5/1/23
Case #22CHCV00874
DEMURRER WITH MOTION TO STRIKE
Demurrer with Motion to Strike Filed: 3/15/23
MOVING PARTY: Defendant General Motors LLC, a Delaware limited liability company (“Defendant”)
RESPONDING PARTY: Plaintiffs Margarit Sarkisyan, an individual; and Artur Stepanyan, and individual (collectively, “Plaintiffs”)
NOTICE: OK
RELIEF REQUESTED: Defendant demurs to the fourth cause of action in Plaintiffs’ first amended complaint (“FAC”). Defendant also seeks an order striking Plaintiffs’ prayer for punitive damages.
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TENTATIVE RULING: The demurrer is overruled, and the motion to strike is denied. Defendants shall file and serve an answer to Plaintiffs’ complaint within 30 days.
BACKGROUND:
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On 5/4/18, Plaintiffs allegedly purchased a vehicle manufactured by Defendant, and now bring this action under the Song-Beverly Consumer Warranty Act (Civil Code § 1790 et seq.), alleging that Defendant had actual knowledge of a transmission defect in the vehicle model while concealing such knowledge and continuing to market and sell the vehicles under the representation that they were “world-class.” (FAC ¶ 9.) Plaintiffs allege that they later discovered the transmission defects, but the authorized dealerships were unable to resolve the issues. (Id. at ¶¶ 13–14.)
On 10/13/22, Plaintiffs filed their original complaint against Defendant, alleging the following causes of action: (1) Violation of Song-Beverly Act – Breach of Express Warranty; (2) Violation of Song-Beverly Act – Breach of Implied Warranty; (3) Violation of Song-Beverly Act section 1793.2; and (4) Fraud/Fraudulent Inducement – Concealment. On 1/17/23, Plaintiffs filed their FAC, alleging against Defendant the same causes of action.
On 3/15/23, Defendant filed the instant demurrer and motion to strike. On 4/18/23, Plaintiffs filed their opposition. On 4/24/23, Defendant filed its reply.
DEMURRER:
Meet-and-Confer
Before filing its demurrer, “the demurring party shall meet and confer in person or by telephone with the party who filed the pleading that is subject to demurrer for the purpose of determining whether an agreement can be reached that would resolve the objections to be raised in the demurrer.” (Code Civ. Proc. § 430.41, subd. (a).) The demurring party must file and serve a meet and confer declaration stating either: “(A) The means by which the demurring party met and conferred with the party who filed the pleading subject to demurrer, and that the parties did not reach an agreement resolving the objections raised in the demurrer;” or “(B) That the party who filed the pleading subject to demurrer failed to respond to the meet and confer request of the demurring party or otherwise failed to meet and confer in good faith.” (Id. at subd. (a)(3).)
Here, Defendant’s counsel declares that his “office attempted to meet and confer telephonically with Plaintiffs’ counsel to discuss the issues we had with Plaintiffs’ First Amended Complaint, but unfortunately, were unsuccessful in our attempts.” (Decl. of Jesse Valencia, ¶ 2.) In opposition, Plaintiffs’ counsel declares that “Defendant’s counsel did not contact my office nor provide the legal reasoning underlying Defendant’s Demurrer or Motion to Strike.” (Decl. of Harry Terzian, ¶ 4.) Therefore, it is unclear whether Defendant’s counsel has satisfied the preliminary meet and confer requirements of Code of Civil Procedure section 430.41, subdivision (a). The Court is not going to delay the proceedings by ordering definitive meet and confer at this stage considering a finding “that the meet and confer process was insufficient shall not be grounds to overrule or sustain a demurrer.” (Code Civ. Proc. § 430.41, subd. (a)(4).).
Legal Standard
As a general matter, a party may respond to a pleading against it by demurrer on the basis of any single or combination of eight enumerated grounds, including that “the pleading does not state facts sufficient to constitute a cause of action” and uncertainty (Code Civ. Proc., § 430.10, subds. (e) and (f).) 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 pleading alone, and not the evidence or facts alleged.” (E-Fab, Inc. v. Accountants, Inc. Servs. (2007) 153 Cal.App.4th 1308, 1315.) As such, the court assumes the truth of the complaint’s properly pleaded or implied factual allegations. (Ibid.)
A. Statute of Limitations
The statute of limitations for an action for relief on the ground of fraud or mistake is three years, but “is not deemed to have accrued until the discovery of the facts constituting the fraud or mistake.” (Code Civ. Proc. § 338, subd. (d).) “In order to rely on the discovery rule for delayed accrual of a cause of action, ‘[a] plaintiff whose complaint shows on its face that his claim would be barred without the benefit of the discovery rule must specifically plead facts to show (1) the time and manner of discovery and (2) the inability to have made earlier discovery despite reasonable diligence.’” (Fox v. Ethicon Endo-Surgery, Inc. (2005) 35 Cal.4th 797, 808.)
Here, Defendant argues that Plaintiffs’ allegation that “The Subject Vehicle was delivered to Plaintiffs with serious defects” as an admission against Plaintiffs’ delayed discovery of such defects. (Dem. 7:16–28, quoting FAC ¶ 11.)
However, as Plaintiffs observe, they have alleged in the FAC that they “did not discover the true nature of the Transmission Defect until shortly before filing this lawsuit and could not have discovered, even with diligence, the nature of the concealed facts before, during, and after their purchase of the Subject Vehicle, as Defendant concealed its internal data, consumer complaints, pre-release testing data, aggregate data from dealers to GM, dealership repair orders, and GM service bulletins.” (Pls.’ Opp. 2:20–26; quoting FAC ¶¶ 61–78.)
Specifically, Plaintiffs allege that although they presented the subject vehicle at an authorized dealership for repair of issues relating to the transmission defect on numerous occasions, they were told each time that the vehicle was operating as intended. (FAC ¶¶ 62–64.) The Court finds it sufficient that Plaintiffs allege that they reasonably relied on these statements, and did not discover Defendants’ alleged concealment “until Plaintiffs filed this Complaint.” (Id. at ¶¶ 65, 67.)
Accordingly, the demurrer is overruled as to this issue.
B. Fraudulent Concealment
Plaintiffs’ fourth cause of action alleges fraudulent concealment against Defendant. “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.)
Particularity
Fairness requires that allegations of fraud be pled “with particularity” so that the court can weed out non meritorious actions before a defendant is required to answer. (Small v. Fritz Companies, Inc. (2003) 30 Cal.4th 167, 184.) The particularity requirement necessitates pleading facts that “show how, when, where, to whom, and by what means the representations were tendered.” (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.)
In the FAC, Plaintiffs allege that Defendant had actual knowledge of the transmission defect through prior consumer complaints, and issued at least 60 service bulletins “acknowledging problems of harsh shifting, shuddering, jerking, clunking, and delays in acceleration or deceleration relating to the 8L90 and 8L45 transmissions.” (FAC ¶¶ 35, 40.) Despite this knowledge, Defendant allegedly “marketed and sold its new eight-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.” (Id. at ¶ 28.)
Here, Defendant argues that Plaintiffs fail to meet the particularity requirement for pleading a fraud cause of action because the FAC “has no well-pleaded facts about the how, when, where, to whom, and by what means the fraud occurred.” (Dem. 5:16–17.) Specifically, “Plaintiffs’ First Amended Complaint fails to provide critical facts necessary to state a claim, such as (1) whether Plaintiffs had any interaction with GM before or after the sale, (2) GM’s knowledge of the alleged ‘defects,’ (3) how GM intended to ‘defraud’ Plaintiffs, and (4) the lack of privity with GM.” (Id. at 6:7–10.)
Plaintiffs argue in opposition that the particularity requirement is relaxed when, as here, a plaintiff brings a cause of action for fraudulent concealment as opposed to fraud. (Pls.’ Opp. 4:10–12; “Plaintiffs are alleging fraudulent concealment and inducement, which, by their very nature, cannot be described in terms of time, place, and contents of the misrepresentation or the identity of the person making the misrepresentation.” Id. at 4:23–25.)
“Less specificity should be required of fraud claims when it appears from the nature of the allegations that the defendant must necessarily possess full information concerning the facts of the controversy; 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.” (Alfaro v. Community Housing Improvement & Planning Assn., Inc. (2009) 171 Cal.App.4th 1356, 1384 [internal quotations and citations omitted].)
In Alfaro, the Court of Appeal found that plaintiffs home purchasers in a housing development were sufficiently specific in pleading fraud based on the defendant vendors' alleged nondisclosure of deed restrictions, even though plaintiffs did not allege that the nondisclosure occurred by a certain means or at a certain time or place, because the defendants possessed the records of their dealings with plaintiffs. (Id. at 1385.) Here, as Plaintiffs allege, Defendant has access to such records as “exclusive knowledge of non-public, internal data about the Transmission Defect, including: pre-release testing data,” consumer complaints, aggregate dealership data, dealership repair orders, and service bulletins. (FAC ¶ 35.)
The defendant does not address this argument in its reply. Accordingly, the Court finds that the particularity requirement for pleading a fraud cause of action is relaxed at this stage, and Plaintiffs have sufficiently alleged facts to meet the relaxed standard.
Duty to Disclose
“Fraudulent concealment requires the ‘suppression of a fact, by one who is bound to disclose it.’” (Huy Fong Foods, Inc. v. Underwood Ranches, LP (2021) 66 Cal.App.5th 1112, 1121, quoting Civ. Code § 1710, subd. 3.) “Although, typically, a duty to disclose arises when a defendant owes a fiduciary duty to a plaintiff …, a duty to disclose may also arise when a defendant possesses or exerts control over material facts not readily available to the plaintiff.” (Jones v. ConocoPhillips Co. (2011) 198 Cal.App.4th 1187, 1199.)
Here, Defendant further argues that Plaintiffs do not allege any direct dealings with Defendant, and therefore have not alleged that Defendant had any duty to disclose. (Dem. 10:3–5.) Defendant argues that no duty to disclose exists where, as here, a plaintiff brings its claims against a manufacturer from which it did not directly obtain the product in question. (Id. at 10:23–11:6, citing Bigler-Engler v. Breg, Inc. (2017) 7 Cal.App.5th 276, 311.)
In Bigler-Engler, the Court of Appeal found that the defendant manufacturer of a medical device owed the plaintiff patient no duty to disclose where there was insufficient evidence that the parties transacted in any way. (7 Cal.App.5th at 314.) Here, as Defendant argues, “the First Amended Complaint does not allege that Plaintiffs purchased their Sierra directly from GM,” thus no transactional relationship exists between the parties. (Dem. 11:7–8.)
Notwithstanding Defendant’s argument, the Court, as previously discussed, finds that Plaintiffs have sufficiently alleged that Defendant, as the manufacturer, “had exclusive knowledge of the Transmission Defect as early as 2014 through the present from consumer complaints, litigation, from GM’s exclusive knowledge of non-public internal data about the Transmission Defect.” (Pls.’ Opp. 10:19–21.) Absent a fiduciary relationship between the parties, Defendant may nevertheless have a duty to disclose based on such control over the material facts underlying the action. (Jones, 198 Cal.App.4th at 1199.)
Based on the foregoing, the Court finds that Plaintiffs have alleged facts sufficient to support a finding that Defendant had the requisite duty to disclose, giving rise to a fraudulent concealment cause of action. The Court takes note of Plaintiffs’ arguments regarding a manufacturer’s duty to disclose safety hazards, but need not reach it based on the foregoing finding. Accordingly, Defendant’s demurrer to Plaintiffs’ fourth cause of action is overruled.
MOTION TO STRIKE
Meet and Confer
“Before filing a motion to strike pursuant to this chapter, the moving party shall meet and confer in person or by telephone with the party who filed the pleading that is subject to the motion to strike for the purpose of determining if an agreement can be reached that resolves the objections to be raised in the motion to strike.” (Code Civ. Proc. § 435.5, subd. (a).) The parties are required to meet and confer at least five days before the date a motion to strike must be filed, otherwise the moving party is granted a 30-day extension to file the motion. (Ibid.)
See above re: meet and confer.
A. Punitive Damages
Punitive damages may be recovered upon a proper showing of malice, fraud, or oppression by clear and convincing evidence. (Civ. Code § 3294, subd. (a).)
Punitive damages must be supported by factual allegations. Conclusory allegations, devoid of any factual assertions, are insufficient to support a conclusion that parties acted with oppression, fraud or malice. (Smith v. Superior Court (1992) 10 Cal.App.4th 1033, 1042; Anschutz Entertainment Group, Inc. v. Snepp (2009) 171 Cal.App.4th 598, 643.)
Here, Defendant argues that punitive damages are not recoverable under the Song-Beverly Act, and that “Plaintiffs’ opposition erroneously states that Song-Beverly permits punitive damages.” (MTS 2:25; MTS Reply 3:6–7.) However, Defendant’s argument to this point is incorrect and thus irrelevant, as Plaintiffs expressly state that they “are not alleging a claim for punitive damages with regard to their first three causes of action,” but in relation to their fourth cause of action for fraudulent concealment. (MTS Opp. 2:18–19.) As the Court finds that Plaintiffs have stated a viable cause of action against Defendant for fraudulent concealment, they may proceed with a prayer for relief derivative thereof.
Defendant further argues that Plaintiffs have failed to allege facts with sufficient particularity as to show Defendant’s “malice, fraud, or oppression by clear and convincing evidence.” (Civ. Code § 3294, subd. (a).) “The Complaint alleges that GM concealed defects, but it fails to allege well-pleaded facts to support that conclusory allegation.” (MTS 3:27–4:1.)
In opposition, Plaintiffs argue that the FAC “meets the requirements for pleading fraud in support of their request for punitive damages. Plaintiffs plead specific facts that justify punitive damages including ¶¶ 4-14, 23-59, 61-78, and 120-140 of the FAC.” (MTS Opp. 3:13–15.) As Plaintiffs observe, these portions of the complaint allege that “Defendant knew of the defects in the transmission. Defendant intentionally failed to disclose the defects in the transmission, and knew that Plaintiffs had no way of knowing of the deception regarding the transmission.” (Id. at 3:18–20.) Specifically, the cited portions allege that Defendant had actual knowledge of the defect through litigation, consumer complaints, and service bulletins, yet concealed this information from members of the public including Plaintiffs to induce them into purchasing the vehicle. (FAC ¶¶ 126–140.)
The Court finds that Plaintiffs have sufficiently alleged facts to support their prayer for punitive damages under the “fraud” prong of Civil Code section 3294. As Plaintiffs observe, the issue of Defendant’s intent to defraud is a question of fact that the Court declines to address at the demurrer stage. (MTS Opp. 6:20–21, citing Beckwith v. Dahl (2012) 205 Cal.App.4th 1039, 1061.) While the Court finds Plaintiffs’ arguments that they are entitled to recover punitive damages based on malice and oppression to be conclusory in fashion, they may nevertheless proceed in their prayer for relief under the “fraud” prong.
Based on the foregoing, the motion to strike Plaintiffs’ prayer for punitive damages is denied.
CONCLUSION¿
The demurrer is overruled, and the motion to strike is denied. Defendants shall file and serve an answer to Plaintiffs’ complaint within 30 days.