Judge Robert S. Draper, Case Number: 19STCV30915, Date: 2023-04-26 Tentative Ruling

In August 2013, Plaintiffs Luis Gonzalez (”Gonzalez”) and Maria Horta (“Horta” and with Gonzalez, “Plaintiffs”) purchased a 2013 Kia Optima with an express, written warranty, plus a subsequent 10-year/120,000 mile warranty extension for the engine. (Compl. ¶¶ 9-10.) During the warranty period, the vehicle developed various engine defects. (Compl. ¶ 11.) Defendant Kia Motors America, Inc. (“Kia”) knew before Plaintiffs purchased the vehicle that a certain engine defect was common in the type of engine used in this vehicle, but failed to disclose it. (Compl. ¶¶ 15-53.) Kia has failed to repair or repurchase the vehicle or offer restitution. (Compl. ¶ 51.)

A party may move for summary judgment “if it is contended that the action has no merit or that there is no defense to the action or proceeding.” (Code Civ. Proc. § 437c, subd. (a).) “[I]f all the evidence submitted, and all inferences reasonably deducible from the evidence and uncontradicted by other inferences or evidence, show that there is no triable issue as to any material fact and that the moving party is entitled to judgment as a matter of law,” the moving party will be entitled to summary judgment. (Adler v. Manor Healthcare Corp. (1992) 7 Cal.App.4th 1110, 1119.)

The moving party bears an initial burden of production to make a prima facie showing of the nonexistence of any triable issue of material fact, and if he does so, the burden shifts to the opposing party to make a prima facie showing of the existence of a triable issue of material fact. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850; accord Code Civ. Proc. § 437c, subd. (p)(2).) To establish a triable issue of material fact, the party opposing the motion must produce substantial responsive evidence. (Sangster v. Paetkau (1998) 68 Cal.App.4th 151, 166.)

Neither a moving nor responding party may rely on the mere allegations or denials of its pleadings. A moving party must submit specific admissible evidence showing that the responding party cannot establish at least one element of his, her or its cause of action or defense. The responding party, to defeat the motion, must submit specific admissible evidence showing that a triable issue of material fact does exist as to that element of the cause of action or defense. (Sangster v. Paetkau (1998) 68 Cal.App.4th 151, 166.)

“The “Golden Rule” on a motion for summary judgment or summary adjudication is that “if [a fact] is not set forth in the separate statement, it does not exist.” (Zimmerman, Rosenfeld, Gersh & Leeds LLP v. Larson (2005) 131 Cal.App.4th 1466, 1477, citing United Community Church v. Garcin (1991) 231 Cal.App.3d 327, 337.)

First, Kia moves for summary adjudication of the First and Fourth Causes of Action for Violation of Subdivision D of Civil Code Section 1793.2 and Breach of the Express Written Warranty, respectively.

An “express warranty” for purposes of the Song-Beverly Act is, as relevant here, “a written statement arising out of a sale to the consumer of a consumer good pursuant to which the manufacturer, distributor, or retailer undertakes to preserve or maintain the utility or performance of the consumer good or provide compensation if there is a failure in utility or performance.” (Civ. Code, §¿1791.2, subd. (a)(1).) Under the Song-Beverly Act, “[a]ny buyer of consumer goods who is damaged by a failure to comply with any obligation under this chapter or under an implied or express warranty… may bring an action for the recovery of damages and other legal and equitable relief.” (Civ. Code, §¿1794, subd. (a).)

Under Civil Code section 1793.2(d)(2), “if the manufacturer or its representative . . . is unable to service or repair a new motor car . . . to conform to the applicable express warranties after a reasonable number of attempts, the manufacturer shall either promptly replace the new motor vehicle . . . or promptly make restitution to the buyer. . . .”

Here, Kia notes that Plaintiffs brought the subject vehicle into a dealership for repair seven times during the express warranty period. (UMF Nos. 5, 10, 15, 19, 24, 29, 33.) Kia contends that the dealerships promptly repaired the Subject Vehicle to conform to the applicable warranty at no cost to Plaintiffs, and therefore, by law Kia conformed the Subject Vehicle to the applicable express warranties within a reasonable number of attempts. (UMF Nos. 8-9, 12-14, 17, 22-23, 26-27, 31-32, 35-36.)

Kia contends that where multiple defects are alleged, the manufacturer must fail to repair each defect after a reasonable number of repair attempts. (See Mega RV Corporation v. HWH Corporation (2014) 225 Cal.App.4th 1318, 1333.)

Kia has met its initial burden of showing the nonexistence of any triable issue of material fact demonstrating that Kia failed to repair the Subject Vehicle to conform to the applicable express warranty. The burden now shifts to Plaintiffs to show the existence of such triable issue of material fact.

In Opposition, Plaintiffs note that under the SBA, a consumer’s only obligation is to give a warrantor the opportunity to repair a vehicle. (Oregel v. Am. Isuzu Mot., Inc., (2001) 90 Cal. App. 4th 1094, 1101-1104.) Additionally, Plaintiffs note that a consumer need only present a vehicle for repair on two occasions to constitute a reasonable number of attempts, and that the question of reasonableness is a question of fact. (Robertson v. Fleetwood Travel Trailers of California, Inc. (2006) 144 Cal.App.4th 785, 799.)

Here, Plaintiffs contend that, though the Subject Vehicle was returned to Plaintiffs ostensibly repaired after each presentation, and though Plaintiffs were told that the Subject Vehicle had been repaired to conform to the warranty, a reasonable trier of fact could determine that the defects were related, and that the dealership did not actually conform the Subject Vehicle to the express warranty.

Plaintiffs note that, after Kia replaced the engine in the Subject Vehicle, the Subject Vehicle continued to suffer defects related to a faulty engine. (SGD Nos. 18-20.) Additionally, Plaintiffs contend that the dangerous defects in the Theta II engine remained after the engine swap. (SGD Nos. 11-16.)

The Court finds that Plaintiffs have met their burden of showing the existence of a triable fact as to whether Plaintiffs gave Kia a reasonable number of chances to conform the Subject Vehicle to the applicable warranties, and that Kia failed to do so.

Similarly, as Kia’s Motion for Summary Adjudication of the Second Cause of Action for Violation of Civil Code section 1793.2(b) is predicated on Kia’s contention that all repairs were completed within thirty days of delivery of the Subject Vehicle, Kia’s Motion for Summary Adjudication of that cause of action is DENIED, as a reasonable trier of fact could find that the alleged engine defects remained after the Subject Vehicle was returned to Plaintiffs.

Under § 1793.2(a)(3), a manufacturer must “[m]ake available to authorized service and repair facilities sufficient service literature and replacement parts to effect repairs during the express warranty period.”

Here, Kia contends that Plaintiffs have presented no evidence demonstrating that any dealership Plaintiffs visited had insufficient literature and replacement parts during the express warranty period.

Under the implied merchantability warranty, “every sale of consumer goods that are sold at retail in this state shall be accompanied by the manufacturer's and the retail seller's implied warranty that the goods are merchantable.” (Civil Code § 1792.) The warranty arises by operation of law and therefore applies despite its omission from a purchase contract. (Mega RV Corp. v. HWH Corp. (2014) 225 Cal.App.4th 1318, 1330; American Suzuki Motor Corp. v. Superior Court (1995) 37 Cal.App.4th 1291, 1295.) Merchantability, as pertinent here, means that the goods “[p]ass without objection in the trade under the contract description,” and are “fit for the ordinary purposes for which such goods are used.” (Civil Code § 1791.1, subd. (a).) When there has been a breach of the implied warranty of merchantability, a buyer may bring an action for the recovery of damages and other legal and equitable relief. (Civil Code § 1794, subd. (a).)

The duration of the implied warranty of merchantability and where present the implied warranty of fitness shall be coextensive in duration with an express warranty which accompanies the consumer goods, provided the duration of the express warranty is reasonable; but in no event shall such implied warranty have a duration of less than 60 days nor more than one year following the sale of new consumer goods to a retail buyer. Where no duration for an express warranty is stated with respect to consumer goods, or parts thereof, the duration of the implied warranty shall be the maximum period prescribed above. (Cal. Civ. Code § 1791.1(c).)

Here, Kia contends that Plaintiffs’ Fifth Cause of Action fails as Plaintiffs did not present the Subject Vehicle to Kia for repair within a year of purchasing the Subject Vehicle. (UMF Nos. 81-84.)

In Opposition, Plaintiffs contend that the subsequent repairs to the Subject Vehicle demonstrate that there was a latent defect in the Subject Vehicle, and that the implied warranty of merchantability may be breached by a latent defect undiscoverable at the time of sale. (See Mexia v. Rinker Boat Co., Inc. (2009) 174 Cal.App.4th 1297, 1304-05.)

In Mexia, plaintiff consumer filed suit against defendant manufacturer after a boat manufactured by defendant began breaking down two years after plaintiff’s purchase. The trial court sustained defendant’s demurrer to the complaint, finding that as plaintiff did not bring the boat into repair in the first two years of ownership, the alleged defect was not covered by the implied warranty of merchantability.

The Mexia Court reversed, finding that “There is nothing that suggests a requirement that the purchaser discover and report to the seller a latent defect within that time period.” (Mexia, 174 Cal.App.4th at 1310.) The Court noted that “[i]f the Legislature intended the duration provision to impose a deadline for consumers to give notice of defects under the Song–Beverly Act, it could have easily done so. It did not.” (Ibid.)

Kia also contends that Plaintiffs’ Fifth Cause of Action is time-barred by the relevant four-year statute of limitations. However, as Plaintiffs note in Opposition, the statute of limitations is tolled where a defendant, through fraud, prevents the timely discovery of the defect. (Am. Pipe & Const. Co. v. Utah (1974) 414 U.S. 538.)

As will be addressed below, Plaintiffs have stated sufficient facts to support a cause of action for fraud by omission. Accordingly, the statute of limitations on Plaintiffs’ Fifth Cause of Action was tolled while Kia allegedly prevented Plaintiffs from gaining knowledge of the defect.

The elements of fraud are: “(a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or ‘scienter’); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage.” (Charnay v. Cobert (2006) 145 Cal.App.4th 170, 184.) In California, fraud, including negligent misrepresentation, must be pled with specificity. (Small v. Fritz Companies, Inc. (2003) 30 Cal.4th 167, 184.) “The particularity demands that a plaintiff plead facts which show how, when, where, to whom, and by what means the representations were tendered.” (Cansino v. Bank of America (2014) 224 Cal.App.4th 1462, 1469.)

Nondisclosure or concealment may constitute actionable fraud when: (1) there is a fiduciary relationship between the parties; (2) the defendant had exclusive knowledge of material facts not known to the plaintiff; (3) the defendant actively conceals a material fact from the plaintiff; and (4) the defendant makes partial representations but also suppresses some material facts. (See Id.)

First, Kia argues that Plaintiffs’ Sixth Cause of Action fails as Kia was under no duty to disclose the alleged defect in the Subject Vehicle to Plaintiffs as Plaintiffs did not directly deal with Kia.

Kia notes that Plaintiffs purchased the vehicle from Car Pros Kia, an independent third-party dealer that is not affiliated with Kia. (UMF Nos. 89, 110, 115.) Additionally, Kia argues that Plaintiffs do not allege they relied on any marketing by Kia in purchasing the Subject Vehicle.

Kia’s argument is unavailing. In Varwig v. Anderson-Behel Porsche/Audi, Inc. (1997) 74 Cal.App.3d 578, plaintiff purchased a vehicle from a wholesaler who claimed the vehicle had clear title. The wholesaler acquired it from defendant car dealership, who had misrepresented the state of title to the wholesaler. When the car was repossessed, plaintiff filed suit against the dealership for fraud. The trial court granted summary judgment on the basis that plaintiff had no direct dealings with defendant dealership. The Court of Appeal reversed, finding that defendant was on notice that the wholesaler intended to sell the car to the consuming public and thus his representation regarding title was an “indirect misrepresentation to plaintiff, who purchased the car in reliance upon [the wholesaler’s] repetition of the representation.” (Varwig at pp. 581-82.)

Kia contends that Bigler-Engler v. Breg, Inc. (2017) 7 Cal.App.5th 276, is controlling here, and stands for the proposition that, absent a direct relationship with a defendant, no duty to disclose on defendant’s part exists.

In Bigler-Engler, plaintiff was injured following the use of a medical device manufactured by defendant manufacturer and prescribed by defendant doctor. At trial, the jury found both manufacturer and doctor liable for both economic and noneconomic damages.

Defendant manufacturer appealed on several grounds, including that the evidence at trial could not support the jury’s verdict on the intentional concealment cause of action as there was no transactional relationship between plaintiff and defendant manufacturer. The Bigler-Engler court reversed, finding that the duty to disclose was absent “because there was no evidence of a relationship between [plaintiff and defendant manufacturer] sufficient to give rise to a duty to disclose. [Manufacturer] did not transact with [plaintiff] in any way.” (Bigler-Engler at p. 314.)

However, the Bigler-Engler court also noted that the evidence did not show that defendant manufacturer directly advertised its products to consumers such as plaintiff or that it derived any monetary benefit directly from plaintiff’s rental of the medical device. The court further noted that the medical group that rented plaintiff the defective device purchased the device itself for rental to patients several years before plaintiff obtained the device. (Ibid.)

Here, the situation is much more analogous to Varwig v. Anderson-Behel Porsche/Audi, Inc., supra, as Kia sold the Subject Vehicle to the dealership aware that the Subject Vehicle would then be sold to consumers, whereas in Bigler-Engler the manufacturer had no such knowledge, and indeed the defective device was not sold directly to a consumer. The Bigler-Engler court found a degree of attenuation between plaintiff and manufacturer that is not present in Varwig or here.

Accordingly, a reasonable trier of fact could find that Kia sold the Subject Vehicle to Car Pros Kia with the knowledge that Car Pros Kia would sell that vehicle to the consuming public, and therefore any concealment or misrepresentation can be actionable on Plaintiff’s part.

In Opposition, Plaintiffs note that an internal email exchanged between Kia executives identifies the engine defect in the Subject Vehicle as “more serious than some of the others.” (UMF No. 28.) This email was sent in December 2011, two years before Plaintiffs purchased the Subject Vehicle. (SGD No. 1.)

However, Plaintiff alleges that the Subject Vehicle was worth substantially less than what Plaintiff paid for it due to the unknown engine defects, and that they would not have purchased the Subject Vehicle had they known of the defects. (SGD Nos. 21-26.) That a defective vehicle is worth less than a fully operational vehicle is common sense, and should Plaintiff need to obtain specific evidence evincing such, the Court is certain Plaintiff would have no difficulty doing so.

Economic loss consists of “damages for inadequate value, costs of repair and replacement of the defective product or consequent loss of profits—without any claim of personal injury or damages to other property.” (Robinson Helicopter Co., Inc. v. Dana Corp. (2004) 34 Cal.4th 979, 988.) The economic loss rule requires a purchaser to recover in contract for purely economic loss due to disappointed expectations, unless the purchaser “can demonstrate harm above and beyond a broken contractual promise,” such as some form of personal injury or damage to property other than the defective product itself. (Ibid.) The economic loss rule exists to prevent “the law of contract and the law of tort from dissolving one into the other.” (Ibid.)

“[T]he economic loss rule is not a defense to a cause of action. Rather, the existence of damages other than purely economic loss is an element of a plaintiff’s common law cause of action.” (Greystone Homes, Inc. v. Midtec, Inc. (2008) 168 Cal.App.4th 1194, 1215; see also Rosen v. State Farm General Ins. Co. (2003) 30 Cal.4th 1070, 1079 [“Under the economic loss rule, ‘appreciable, nonspeculative, present injury is an essential element of a tort cause of action.’ ”].)

“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. [Citation.]” (Harris v. Atlantic Richfield Co., 14 Cal. App. 4th 70, 78 (1993).) California courts recognize an exception to the economic loss rule in cases of fraudulent inducement. (Robinson, 34 Cal. 4th at 991 [“We hold the economic loss rule does not bar [plaintiff’s] fraud and intentional misrepresentation claims because they were independent of [defendant’s] breach of contract. [Citation.]”].) This exception is based on the policy that “California also has a legitimate and compelling interest in preserving a business climate free of fraud and deceptive practices. [Citation.].” (Id. at 992.)

In the recently decided Dhital v. Nissan North America, Inc. (2022) 84 Cal.App.5th 828 , a lemon law action, plaintiffs argued that defendant manufacturer manufactured or distributed more than 500,000 vehicles that were equipped with defective variable transmissions, including plaintiff’s vehicle. Additionally, plaintiffs alleged defendant should have known of the defect due to premarket testing, consumer complaints to the National Highway Traffic Safety Administration, consumer complaints made directly to Nissan and its dealers, and other sources which drove defendant to issue technical service bulletins.

In finding that plaintiff successfully stated a claim for fraudulent concealment, the Dhital court stated that the Robinson Helicopter independence exception applies to fraudulent concealment “because a defendant’s conduct in fraudulently inducing someone to enter a contract is separate from the defendant’s later breach of the contract or warranty provisions that were agreed to. [Citation.] (Dhital v. Nissan North America, Inc., supra, 84 Cal.App.5th at 841.) The Dhital court stated that “plaintiff’s fraudulent inducement claim alleges presale conduct by [defendant] that is distinct from [defendant’s] alleged subsequent conduct in breaching its warranty obligations.” (Ibid.)

As in Dhital, here Plaintiffs introduce evidence that Kia actively concealed information regarding defects in the Subject Vehicle to induce Plaintiffs to purchase the subject vehicle, then failed to remedy same defects when its symptoms began to show in the Subject Vehicle. Accordingly, the fraudulent concealment is independent of the breach of warranty, and Dhital applies.

Next, Kia contends that Plaintiffs’ fraud cause of action is barred by the applicable three-year statute of limitations. (Civil Code § 338(d).) Kia argues that the statute of limitations began accruing when Plaintiffs purchased the vehicle in 2013. (UMF No. 1.) Kia argues that the delayed discovery rule does not apply, and even if it did, Plaintiffs discovered the alleged defects on January 20, 2016, when they took the Subject Vehicle in for engine failure, and Kia replaced the engine. (UMF Nos. 90-91.)

“The discovery rule only delays accrual until the plaintiff has, or should have, inquiry notice of the cause of action.” (Fox v. Ethicon Endo-Surgery, Inc. (2005) 35 Cal.4th 797, 807 (Fox); Nelson v. Indevus Pharms, Inc. (2006) 142 Cal.App.4th 1202, 1206 (Nelson).) “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. The burden is on the plaintiff to show diligence, and conclusory allegations will not withstand demurrer.” (McKelvey v. Boeing N. Am. (1999) 74 Cal.App.4th 151, 160 (McKelvey), superseded by statute on unrelated grounds as stated in Grisham v. Philip Morris U.S.A., Inc. (2007) 40 Cal.4th 623, 637 (Grisham).)

Here, Plaintiffs have presented evidence that Kia affirmatively concealed the defect present in the Subject Vehicle, and that Plaintiff only discovered that defect after repeatedly bringing the car in for repair. This is the textbook situation where the delayed discovery rule applies.