Judge Ronald F. Frank, Case 22TRCV01477 2023-05-09 Tentative Ruling

Judge: Ronald F. Frank, Case: 22TRCV01477, Date: 2023-05-09 Tentative Ruling

Case Number: 22TRCV01477 Hearing Date: May 9, 2023 Dept: 8

Tentative Ruling

HEARING DATE: May 9, 2023¿

CASE NUMBER: 22TRCV01477

CASE NAME: David Ortiz v. General Motors, LLC, et al.

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MOVING PARTY: Defendant, General Motors, LLC

RESPONDING PARTY: Plaintiff, David Ortiz

MOTION:¿ (1) Defendant’s Demurrer to Fraudulent Concealment Cause of Action

(2) Defendant’s Motion to Strike

Tentative Rulings: (1) SUSTAINED with leave to amend

(2) MOOTED.

Plaintiff’s Complaint ¶ 40 et seq alleges that GM issued over 60 TSBs, but the Court can take judicial notice that TSBs are given to NHTSA which in turn makes them publicly available. Complaint ¶ 125 and 126 alleges that “none of this information was available to the public” and that GM “had exclusive knowledge of the defect” and actively concealed information from the public. The Court’s tentative is that Plaintiff needs to make further allegations as to GM’s failure to disclose what are normally publicly available TSBs to NHTSA, and whether there is a general duty that the law imposes on automotive manufacturers to disclose the existence of warranty claims or repair procedures for its models. Defendant’s Motion to Strike is dependent on the argument over the Demurrer.

I. BACKGROUND¿

A. Factual¿

¿¿ On December 13, 2022, Plaintiff, David A. Ortiz (“Plaintiff”) filed this action against Defendant, General Motors, LLC (“Defendant”), and DOES 1 through 10. On March 8, 2023, Plaintiff filed a First Amended Complaint (“FAC”) alleging causes of action for: (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 March 8, 2023, Plaintiff filed his Amended Complaint. Defendant, General Motors, LLC (“GM”) has now filed a demurrer to the fourth cause of action and a motion to strike portions of the FAC.

B. Procedural

On April 7, 2023, GM filed its Demurrer and Motion to Strike. On April 27, 2023, Plaintiff filed an opposition to both motions. On May 2, 2023, GM filed reply briefs for both.

¿II. GROUNDS FOR MOTIONS

GM demurs to the fourth cause of action for Fraud – Fraudulent Inducement – Concealment on the grounds that GM argues it fails to state facts relevant to the elements of the claim, and therefore does not constitute a cause of action, and because GM claims it fails to allege a transactional relationship giving rise to a duty to disclose. GM also filed a Motion to Strike ¶ 6 of Plaintiff’s prayer of relief for Punitive Damages, which is predicated on the fraudulent concealment cause of action.

III. ANALYSIS ¿

A. Demurrer

A demurrer can be used only to challenge defects that appear on the face of the pleading under attack or from matters outside the pleading that are judicially noticeable. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) “To survive a demurrer, the complaint need only allege facts sufficient to state a cause of action; each evidentiary fact that might eventually form part of the plaintiff’s proof need not be alleged.” (C.A. v. William S. Hart Union High School Dist. (2012) 53 Cal.4th 861, 872.) For the purpose of testing the sufficiency of the cause of action, the demurrer admits the truth of all material facts properly pleaded. (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 966-967.) A demurrer “does not admit contentions, deductions or conclusions of fact or law.” (Daar v. Yellow Cab Co. (1967) 67 Cal.2d 695, 713.)¿

A pleading is uncertain if it is ambiguous or unintelligible. (Code Civ. Proc., § 430.10, subd. (f).) A demurrer for uncertainty may lie if the failure to label the parties and claims renders the complaint so confusing defendant cannot tell what he or she is supposed to respond to.¿ (Williams v. Beechnut Nutrition Corp. (1986) 185 Cal.App.3d 135, 139, fn. 2.) However, “[a] demurrer for uncertainty is strictly construed, even where a complaint is in some respects uncertain, because ambiguities can be clarified under modern discovery procedures.” (Khoury v. Maly's of California, Inc. (1993) 14 Cal.App.4th 612, 616.)¿

Fraudulent Inducement – Concealment

“The elements of fraud,” including a cause of action for fraudulent inducement, “are (a) a misrepresentation (false representation, concealment, or nondisclosure); (b) scienter or knowledge of its falsity; (c) intent to induce reliance; (d) justifiable reliance; and (e) resulting damage.” (Hinesley v. Oakshade Town Ctr. (2005) 135 Cal.App.4th 289, 294.) The facts constituting the alleged fraud must be alleged factually and specifically as to every element of fraud, as the policy of “liberal construction” of the pleadings will not ordinarily be invoked. (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.) To properly allege fraud against a corporation, the plaintiffs must plead the names of the persons allegedly making the false representations, their authority to speak, to whom they spoke, what they said or wrote, and when it was said or written. (Tarmann v. State Farm Mut. Auto. Ins. Co. (1991) 2 Cal.App.4th 153, 157.)

“The elements of a cause of action for fraudulent concealment are: (1) concealment of a material fact; (2) by a defendant with a duty to disclose; (3) the defendant intended to defraud by failing to disclose; (4) plaintiff was unaware of the fact and would not have acted as it did had it known the fact; and (5) damages.” (Butler America, LLC v. Aviation Assurance Company, LLC (2020) 55 Cal.App.5th 136, 144.) The facts constituting the alleged fraud must be alleged factually and specifically as to every element of fraud, as the policy of “liberal construction” of the pleadings will not ordinarily be invoked. (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.) To properly allege fraud against a corporation, the plaintiffs must plead the names of the persons allegedly making the false representations, their authority to speak, to whom they spoke, what they said or wrote, and when it was said or written. (Tarmann v. State Farm Mut. Auto. Ins. Co. (1991) 2 Cal.App.4th 153, 157.) Of course, a concealment cause of action has a more relaxed specificity requirement as compared to affirmative misrepresentations because a concealment claim does not assert that GM actively or affirmatively defrauded the public in general of Plaintiff in particular.

Concealment

Here, GM argues that Plaintiff has not pleaded fraud with the requisite specificity. The Court disagrees. The allegations in Plaintiff’s Complaint are exceptionally detailed, much more so than in the cases Plaintiff cites in its opposition. While it is true that the Complaint fails to allege the names of the persons who concealed facts or who knew of a transmission flaw, details of that nature are required in affirmative misrepresentation cases, not concealment cases.

Plaintiff’s Complaint alleges that GM and its agents intentionally and knowingly falsely concealed, suppressed, and/or omitted material facts including the standard, quality of grade of the GM’s 8L90 and 8L45 transmissions were defective and susceptible to sudden and premature failure, exposing drivers, occupants, and members of the public to safety risks, all with the intent that Plaintiff rely on GM’s omissions. Plaintiff claims that as a direct result of Defendant’s fraudulent conduct, Plaintiff has suffered actual damages. (FAC, ¶ 120.) Plaintiff alleges that GM intentionally concealed the design defect found in the 8L90 and 8L45 transmission because of the common architecture of the transmission that causes “harsh shifts” in lower gears, which can feel like jerking, lurching, and/or hesitations. (FAC, ¶ 121.) Plaintiff contends that the Transmission Defects also cause premature wear to the 8L90 and 8L4 Transmissions’ components and other vehicle parts, which can require repeated and/or expensive repairs, including replacement of the transmission and its related components. (FAC, ¶ 122.)

Plaintiff also asserts that Defendant was the only party with knowledge of the Transmission Defect because that knowledge came from internal reports such as pre-release testing data, customer complaints made directly to Defendant, and technical service bulletins. (FAC, ¶ 125.) Plaintiff complains that GM actively concealed information from the public, preventing Plaintiff from discovering any of the concealed facts. (FAC, ¶ 126.) Plaintiffs claim GM intended to deceive Plaintiff by concealing the known issues with the Transmission Defect in an effort to sell the Subject Vehicle at maximum price, and knew of the specific issues affecting the Subject Vehicle, including the Transmission Defect, prior to the sale of the Subject Vehicle as alleged by Plaintiff. (FAC, ¶¶ 129, 130.)

This Court finds that such specificity meets the requisite pleading standard for fraudulent concealment. But that is only one step in the analysis.

Transactional Relationship

GM also argues that Plaintiff’s fraud claim fails because Plaintiff does not allege a transactional relationship between GM and Plaintiff, or other circumstances giving rise to a duty to disclose. GM contends that because the FAC does not allege that Plaintiff purchased the vehicle directly from GM or otherwise entered into a transaction with GM, Plaintiff has not alleged facts demonstrating a duty to disclose. GM notes that absent a fiduciary relationship between the parties, a duty to disclose can arise in only three circumstances: (1) the defendant had exclusive knowledge of the material fact; (2) the defendant actively concealed the material fact; or (3) the defendant made partial representations while also suppressing the material fact. (BiglerEngler v. Breg, Inc. (2017) 7 Cal.App.5th 276, 311; LiMandri v. Judkins (1997) 52 Cal.App.4th 326, 336.) GM further cites to Bigler-Engler, noting that the Court of Appeals reversed a verdict for fraudulent concealment against the manufacturer of a medical device because the manufacturer and the plaintiff (who was injured by using the device) did not have the required direct transactional relationship. (Bigler-Engler, supra, 7 Cal.App.5th at 314-15.) There, the plaintiff did not obtain the device directly from the manufacturer but from a medical group that sold and leased such devices. (Id. at 287, 314.) The Court of Appeals went on to explain, the lack of direct dealings between the plaintiff and the manufacturer was fatal to the plaintiff’s argument that the manufacturer had a duty to disclose. (Id. at 312 [“Where, as here, a sufficient relationship or transaction does not exist, no duty to disclose arises even when the defendant speaks.”].)

GM argues that the same is true here. GM contends that the FAC does not allege that Plaintiff purchased the Cadillac directly from GM. Thus, GM argues that any alleged concealment by GM did not arise in a direct transaction between Plaintiff and GM.

GM also argues that Plaintiff’s fraud claim fails because Plaintiff does not allege a transactional relationship between GM and Plaintiff, or other circumstances giving rise to a duty to disclose. GM cites to Heliotis v. Schuman (1986) 181 Cal.App.3d 646 for the proposition that a duty to disclose only arises from a narrowly limited set of relationships and circumstances, none of which includes manufacturer and retail customer. In Heliotis, the Court held as a matter of law that there was not duty to disclose on an attorney who merely acts as a conduit for sellers in a real estate transaction. The four circumstances in which nondisclosure or concealment impose a legal duty of disclosure were quoted as follows: “(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.” (Heliotis, supra, 181 Cal.App.3d at p. 651.) Plaintiff here attempts to fit within the 2^nd and 3^rd of these circumstances, exclusive knowledge and active concealment.

In a fraud action based on nondisclosure, if the duty to disclose arises from the making of representations that were misleading or false, then those allegations should be described. (Alfaro, supra, 171 Cal.App.4th at p. 1384.) Further, “mere conclusionary allegation that the omissions were intentional and for the purpose of defrauding and deceiving plaintiffs and bringing about the purchase…and that plaintiffs relied on the omissions in making such purchase are insufficient to show fraud by concealment.” (Goodman v. Kennedy (1976) 18 Cal.3d 335, 347.) GM argues that the Complaint does not allege that Plaintiff purchased her Cadillac directly from GM, and thus, any alleged concealment by GM did not arise in a direct transaction between Plaintiff and GM. Further, there is no allegation of an affirmative representation that GM made that was false or misleading as to the performance of the subject transmission series in its vehicles. But the Complaint does allege exclusive knowledge and active concealment.

Here, Plaintiff claims that GM failed to disclose to Plaintiff, at any time, the Transmission Defect and safety concerns known to GM beginning as early as 2014. Plaintiff alleges that GM issued more than 60 Technical Service Bulletins and updates to its dealerships (but not to the public or to Plaintiff) regarding transmission safety concerns from 2014 to the present. But the Court can take judicial notice that since at least 2011 federal law required manufacturers to provide TSBs to NHTSA and that for several years NHTSA has posted manufacturer TSBs on its website, hence making them available to the public. The Complaint does not allege that GM issued any transmission TSB that it failed to disclose to NHTSA. This issue may affect the allegation of both exclusive knowledge and active concealment.

Plaintiff also alleges that GM had knowledge of the issues with the defective transmission including harsh shifting, delayed acceleration, shifts that slip, bucking, kicking, jerking, lurching and shuddering of the transmission and therefore the vehicle) years before Plaintiff purchased the Subject Vehicle, yet GM did not tell consumers or Plaintiff about these known defects and safety issues. (See Complaint ¶¶ 4-14, 23- 78, 120-140.) Plaintiff further notes that her complaint states that GM’s Transmission Defects pose material safety concerns, which GM has allegedly long known from multiple sources including from NHTSA, complaints, consumer field reports, internal reports, testing data and the issuance of TSBs to deal with the transmission problems which include, inter alia, the vehicle lurching forward, sudden acceleration and deceleration, failure to engage in gears, bucking, shuddering and a host of other terrifying safety and defect concerns.

The Court invites oral argument from both sides bearing on the TSB and NHTSA issue. The Court’s tentative is to require Plaintiff to amend, if he truthfully can do so, because TSBs are generally available to the general public through the NHTSA which is inconsistent with Plaintiff’s allegation of concealment from the general public.

Plaintiff also argues that she need not show a fiduciary or direct relationship in fraudulent concealment cases because there is a “safety” issued posed by the defect in the vehicle, citing Daugherty v. American Honda Motor Co., Inc. (2006) 144 Cal.App.4th 824, 836. Apparently Plaintiff contends there is a 5^th circumstance where a duty to disclose arises. But Daugherty does not stand for the proposition cited. In that case, on the cited page, the word “safety” does appear, but the Second District held that the plaintiff there “did not state a viable non-disclosure claim under the CLRA.” (emphasis added.) The Daugherty court found that plaintiff’s complaint as to Honda engine models was “devoid of factual allegations showing any instance of physical injury or any safety concerns posed by the defect.” If anything, this precedent helps GM more than plaintiffs because the Court of Appeal affirmed the sustaining of a demurrer without leave to amend as to the failure to disclose claim, breach of warranty, Magnuson-Moss, and Section 17200 of the Business & Professions Code.

Plaintiff also cites to Bardin v. DaimlerChrysler Corp. (2006) 136 Cal.App.4th 1255, a Fourth District case where again the trial court sustained a demurrer without leave to amend and the Court of Appeal affirmed. In Bardin, at the cited pages of 1261-62, the Fourth District quotes extensively from the plaintiff’s complaint, but is not addressing there the issue of a duty to disclose to the general public and is not addressing a fraudulent concealment claim anywhere in the opinion. But beginning at page 1274, the Bardin Court explained why the plaintiffs there had failed to state a cause of action under the “fraudulent” prong of the Unfair Competition Law, in part because the allegations vaguely asserted that members of the public would likely be deceived by allegedly concealed facts about the durability of the components used for exhaust manifolds. “The second amended complaint did not allege (1) members of the public had any expectation or made any assumptions that DCC's exhaust manifolds would be made from cast iron, as opposed to tubular steel, (2) the public had any expectation or made any assumptions regarding the life span of the exhaust manifold of a DCC vehicle, or (3) facts showing DCC had made any representation of any kind, much less any misrepresentation, regarding its vehicles.” (Bardin, supra, 136 Cal.App.4th at p. 1275.) As to the CLRA claim, plaintiff in Bardin alleged concealment of the allegedly inferior materials but the pleading failed to allege “acts showing DCC was ‘bound to disclose’ its use of tubular steel exhaust manifolds, nor alleged facts showing DCC ever gave any information of other facts which could have the likely effect of misleading the public.” (Id. at p. 1276.) In other words, the complaint there did not raise the issue of a legal duty to disclose, and the issue of a “safety” concern was not even raised in that case.

As to the exclusive knowledge and active concealment allegations, the Court will invite oral argument as to whether there exists any general duty by a motor vehicle manufacturer to disclose to a consumer that it has had warranty complaints or reports of malfunctions or that a component or system in a prior version of a transmission has been the subject of repair recommendations or procedures. The creation of such a duty seems better left to the policy-making branches of government rather than the judiciary. Such a duty seems to implicate balancing the burden that would be placed on manufacturers of such a broad duty against the perceived value that disclosures of such a wide array of information might yield for consumers. The law already recognizes a duty to recall or retrofit (see, e.g., Hernandez v. Badger Construction Equipment Co. (1994) 28 Cal.App.4^th 1791, 1827; Lunghi v. Clark Equipment Co. (1984) 153 Cal.App.3d 485, 494), but such a cause of action requires harm in the form of personal injury rather than the economic losses alleged in the Complaint here.

Motion to Strike

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 Civ. Proc., § 435, subd. (b)(1).) The court may, upon a motion, or at any time in its discretion, and upon terms it deems proper, strike any irrelevant, false, or improper matter inserted in any pleading. (Code Civ. Proc., § 436, subd. (a); Stafford v. Shultz (1954) 42 Cal.2d 767, 782 [“Matter in a pleading which is not essential to the claim is surplusage; probative facts are surplusage and may be stricken out or disregarded”].) The court may also strike all or any part of any pleading not drawn or filed in conformity with California law, a court rule, or an order of the court. (Code Civ. Proc., § 436, subd. (b).) An immaterial or irrelevant allegation is one that is not essential to the statement of a claim or defense; is neither pertinent to nor supported by an otherwise sufficient claim or defense; or a demand for judgment requesting relief not supported by the allegations of the complaint. (Code Civ. Proc., § 431.10, subd. (b).) The grounds for moving to strike must appear on the face of the pleading or by way of judicial notice. (Code Civ. Proc., § 437.)¿¿

Here, GM bases its Motion to Strike Plaintiff’s prayer for Punitive Damages on the argument that Plaintiff has not plead the fraud cause of action with the specificity required. The Court believes the motion to strike is predicated on the outcome of the demurrer issue. The Court’s tentative on the Demurrer is to sustain with leave to amend consistent with this ruling, which would moot the motion to strike.