Judge Ronald F. Frank, Case Number: 22TRCV01477, Date: 2023-09-26 Tentative Ruling

Judge: Ronald F. Frank, Case: 22TRCV01477, Date: 2023-09-26 Tentative Ruling

Case Number: 22TRCV01477 Hearing Date: September 26, 2023 Dept: 8

Tentative Ruling¿

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HEARING DATE: September 26, 2023

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CASE NUMBER: 22TRCV01477

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CASE NAME: David A. Ortiz v. General Motors LLC

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MOVING PARTY: Defendant General Motors LLC

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RESPONDING PARTY: Plaintiff David A. Ortiz

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TRIAL DATE: Not Set

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MOTION:¿ (1) Demurrer and Motion to Strike as to the 4^th cause of action for fraudulent concelament

Tentative Rulings: (1) Demurrer OVERRULED

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I. BACKGROUND¿¿

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A. Factual¿¿

On December 13, 2022, Plaintiff David A. Ortiz (“Plaintiff”) filed this action against Defendant General Motors LLC (“Defendant”) and Does 1 to 10. This action arises out of Plaintiff’s purchase of a 2018 Cadillac CTS-V with an express written warranty from Defendant.

B. ¿ Procedural

On March 8, 2023, Plaintiff filed its first amended complaint, 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(b) and (4) Fraud—Fraudulent Inducement –Concealment. Defendant filed its first demurrer to the fourth cause of action and motion to strike portions of the first amended complaint. On May 9, 2023, the Court sustained the Demurrer with 30 days leave to amend as to the 4^th cause of action and denied the Motion to Strike as Moot.

On June 7, 2023, Plaintiff filed its Second Amended Complaint (“SAC”). On June 7, 2023, Defendant filed this demurrer and motion to strike. On September 12, 2023, Plaintiff filed its opposition to Defendant’s demurrer.

¿II. MEET AND CONFER

A party is required to 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 meet and confer effort must occur at least five days before the date the responsive pleading is due. Code Civ. Proc., § 430.41, subd. (a)(2).

Furthermore, § 435.5 requires that “[b]efore 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 whether an agreement can be reached that resolves the objections to be raised in the motion to strike.” Code Civ. Proc. § 435.5(a).

On June 7, 2023, Defendant’s counsel met and conferred with Plaintiff’s counsel by telephone to discuss the issues with Plaintiff’s SAC. (Valenti Decl. ¶2.) The parties remain at an impasse after attempting to meet and confer. (Id.) Accordingly, Defendant’s counsel’s meet and confer efforts are sufficient and the motion to strike is accompanied by a meet and confer declaration.

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¿III. ANALYSIS¿

A. Demurrer

Defendant demurs on the basis that the fourth cause of action fails to state facts relevant to the elements of the claim and fails to allege a transactional relationship giving rise to a duty to disclose.

“The party against whom a complaint or cross-complaint has been filed may object, by demurrer or answer as provided in Section 430.30, to the pleading on any one or more of the following grounds…The pleading does not state facts sufficient to constitute a cause of action.” Code Civ. Proc. § 430.10.

A demurrer tests the sufficiency of 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 contest—any 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. (SKF Farms v. Superior Court (1984) 153 Cal.App.3d 902, 905.) 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.) The only issue a demurrer is concerned with is whether the complaint, as it stands, states a cause of action. (Hahn, supra, 147 Cal.App.4th at 747.)

Fraudulent Inducement—Concealment

The elements of fraud are (a) a misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of its falsity; (c) intent to induce reliance; (d) justifiable reliance; and (e) resulting damage. (Lazar v. Superior Court (1996) 12 Cal.4th 631, 638.)

The elements of 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) intent 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) the plaintiff sustained damage as a result of the concealment or suppression of fact. (Hambridge v. Healthcare Partners Medical Group, Inc. (2015) 238 Cal.App.4th 124, 162.)

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; or (4) when the defendant makes partial representations but also suppresses some material fact.” (LiMandri v. Judkins (1997) 52 Cal.App.4th 326, 336.) 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. Conoco Phillips Co. (2011) 198 Cal.App.4th 1198, 1199.) The Court agrees that there are insufficient allegations of the existence of a fiduciary relationship, but that is only one of the four actionable circumstances where a duty to disclose may arise.

Defendant argues that this cause of action fails, among other reasons, because Plaintiff does not plead fraud with specificity. (Demurrer, at p. 8.) It is true that Plaintiff does not specifically identify the individuals at GM who concealed material facts about Plaintiff’s Cadillac. (Second Amended Complaint (“SAC”) ¶127.) However, Plaintiff does allege that Defendant “had 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. (Id. at ¶132.) In September 2014, Defendant issued numerous service bulletins to its dealers acknowledging problems of “harsh shifting, shuddering, jerking, clunking, and delays in acceleration or deceleration relating to the 8L90 and 8L45 transmissions.” (Id. at ¶4.) Plaintiff contends that Defendant’s fraudulent concealment was ongoing as since it continued to issue service bulletins to address and correct the transmission defect. (Id. at ¶83.)

In addition, Defendant “[k]nowingly and intentionally assured Plaintiff and confirmed that no defects/nonconformities previously existed … knowingly and intentionally concealed and omitted material information, as a means of inducing Plaintiff’s purchase of the subject vehicle.” (SAC ¶8.) “Plaintiff’s vehicle was sold after Defendant acknowledged these problems in transmission defect” and “Plaintiff did not know about the transmission defect at the time of sale.” (Id. at ¶138-139.) Given this information, Plaintiff provides sufficient facts to allege that Defendant intended to defraud Plaintiff to purchase the defective Cadillac at one of its authorized dealerships. As such, the Court finds that Plaintiff pled the fraudulent concealment claim with specificity in this case.

Defendant also argues that Plaintiff does not allege a “transactional relationship” giving rise to a duty to disclose. (Demurrer, at p. 9.) Here, Plaintiff alleges a transactional relationship was formed when Plaintiff purchased a certified pre-owned 2018 Cadillac on January 12, 2022, from PENSKE CADILLAC BUICK GMC SOUTH BAY. (“SAC ¶4.) Plaintiff also asserts Penske is the authorized retail dealership, repair facility, and representative of Defendant. (Id.) On the face of the pleading, Defendant provides that “Plaintiff and Penske conducted and executed the presale communications and ultimately the sale contract.” (Demurrer, at p.2.) Furthermore, Penske’s manager represented to Plaintiff that they were knowledgeable and authorized to address any pre-sale inquiries regarding the Cadillac. (SAC ¶5.) Hence, Plaintiff alleges that Defendant “[had a duty to disclose the defective and unrepairable Hydra-Matic 8L45/8L90.” (Id. at ¶12.) Although Plaintiff did not purchase its vehicle directly from Defendant, Defendant “developed the post-purchase owner’s manuals, warranty booklets and other information related to the maintenance recommendations and/or schedules for GM vehicles including the Subject Vehicle.” (Id. at ¶15.)

The Court finds the Dhital case to be instructive under these circumstances. In Dhital v. Nissan North America, Inc. (2022) 84 Cal.App.5th 828, 844), the defendant Nissan argued that Plaintiffs did not plead the existence of a buyer-seller relationship because plaintiffs purchased the car from a Nissan dealership instead of Nissan itself. The Court declined to bar plaintiffs’ claims on the defendant’s’ argued basis that there was no relationship requiring Nissan to disclose known defects. (Id.) Similarly, Plaintiff alleges that he bought the Cadillac from the GM dealership, that Plaintiff received an express warranty from Defendant and that Defendant’s authorized dealerships are its agents. (SAC ¶ 14-22, 31-67, 68-84.) As discussed above, the Court finds that Plaintiff’s allegations of a transactional relationship giving rise to a duty to disclose are sufficient.

GM’s Reply brief argues, among other things, that the SAC fails to allege that GM had knowledge that this specific plaintiff’s vehicle contained a defective transmission. While that argument is accurate, it does not compel sustaining of the Demurrer. The allegation is that GM had general knowledge that a significant percentage of vehicle equipped with the same or substantially identical transmission as in the Plaintiff’s vehicle might have a transmission defect of the same nature as GM reported to the NHTSA. That is a sufficient allegation to raise an inference, at least at the pleading stage, that GM knew or should have known that Plaintiff’s vehicle was at risk for containing the self-same transmission problem as many other GM models had experienced.

Based on the foregoing, Plaintiff’s SAC has alleged sufficient facts to state a cause of action for fraudulent inducement—concealment. Therefore, Defendant’s demurrer on this cause of action is OVERRULED.

B. Motion to Strike

The Code of Civil Procedure authorizes the Court to act on its own initiative to strike matters, empowering the Court to enter orders striking matter “at any time in its discretion, and upon terms it deems proper.” Code Civ. Proc. § 436. A motion to strike lies only where the pleading has irrelevant, false or improper matter, or has not been drawn or filed in conformity with laws.¿ Code Civ. Proc. § 436. The grounds for moving to strike must appear on the face of the pleading or by way of judicial notice. (Id. § 437.)

Punitive Damages

California Civil Code section 3294 authorizes the recovery of punitive damages “[i]n an action for the breach of an obligation not arising from contract, where it is proven by clear and convincing evidence that the defendant has been guilty of oppression, fraud, or malice . . . .” (Civ. Code § 3294(a), emphasis added.) “[A]n award of punitive damages is not recoverable for breach of the implied covenant of good faith and fair dealing outside the insurance context.” (Monaco v. Bear Stearns Residential Mortg. Corp. (C.D. Cal. 2008) 554 F.Supp.2d 1034, 1043 [citing Copesky v. Superior Court (1991) 229 Cal.App.3d 678, 690].)

Defendant moves to strike on the basis that Plaintiff may not recover punitive damages under the Song-Beverly Consumer Act, the SAC fails to state facts sufficient to support punitive damages and the fourth cause of action for fraudulent inducement-concealment does not support relief for punitive damages. In opposition, Plaintiff responds that he is not seeking punitive damages for the first three causes of action but only regarding the fourth cause of action for fraudulent concealment.

Here, Plaintiff has pled sufficient facts to state that Defendant engaged in fraud when its authorized dealer sold the Cadillac while knowing of the claimed defects in the transmission and alleged safety risks to Plaintiff. (SAC ¶ 4-22, 31-67, 68- 84, 126-146.) In light of the Court’s ruling that the SAC sufficiently pleads a cause of action for fraudulent inducement—concealment, the Motion to Strike punitive damages is denied.