Judge Ronald F. Frank, Case Number: 23TRCV00146, Date: 2023-04-26 Tentative Ruling

Judge: Ronald F. Frank, Case: 23TRCV00146, Date: 2023-04-26 Tentative Ruling

Case Number: 23TRCV00146 Hearing Date: September 15, 2023 Dept: 8

Tentative Ruling

HEARING DATE: September 15, 2023¿

CASE NUMBER: 23TRCV00146

CASE NAME: Sandra Esqueda v. General Motors, LLC, et al.

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MOVING PARTY: Defendant, General Motors, LLC

RESPONDING PARTY: Plaintiff, Sandra Esqueda

MOTION:¿ (1) Defendant’s Demurrer to the fraudulent concealment cause of action

(2) Defendant’s Motion to Strike

Tentative Rulings: (1) Defendant’s Demurrer is OVERRULED. GM shall file and Answer within 20 days

(2) Defendant’s Motion to Strike is DENIED

I. BACKGROUND¿

A. Factual¿

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On January 17, 2023, Sandra Esqueda (“Plaintiff”) filed a complaint against General Motors LLC (“GM”), and DOES 1 through 10. On May 2, 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 the Song-Beverly Act Section 1793.2; and (4) Fraud – Fraudulent Inducement – Concealment. This action is based on Plaintiff’s purchase of a 2017 Chevrolet Colorado, having VIN No.: 1GCGSDEN7H1308051 (“the Subject Vehicle”) on April 3, 2022.

Previously, on April 26, 2023, this Court sustained Defendant’s Demurrer to the original complaint. Defendant GM now demurs and files a Motion to Strike portions of the FAC.

B. Procedural

On August 22, 2023, GM filed its Demurrer and Motion to Strike. On August 30, 2023, Plaintiff filed an opposition to both motions. To date, no reply brief has been filed.

¿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 filed a Motion to Strike Plaintiff’s prayer of relief for Punitive Damages.

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.

The rule of specifically pleading how, when, where, to whom and by what means, misrepresentations were communicated is intended to apply to affirmative misrepresentations and not to concealment. (Alfaro v. Community Housing Improvement System & Planning Assn, Inc. (2009) 171 Cal.App.4th 1356 at 1384.) Thus, citations in GM’s briefs to cases such as Apollo Capital Fund, LLC v. Roth Capital Partners, LLC (2007) 158 Cal.App.4th 226 are not as instructive as they could be. Further, Apollo Capital is distinguishable because it involved securities brokers where fiduciary duties exist between investor and investment advisor, not to the manufacturer - consumer relationship at issue here.

Concealment

Here, GM again attempts to argue that Plaintiff’s fraud claim fails as a matter of law because Plaintiff did not plead fraud with the requisite specificity. The Court will abstain from discussing this issue in much detail as it has already outlined, in its April 26, 2023 minute order, that it disagrees with this argument. Even prior to the amending of the Complain, this Court noted that Plaintiff’s allegations in the original complaint were exceptionally detailed, much more so than in the cases Plaintiff cited in its opposition to the prior demurrer. This Court also noted previously that while it is true that the Complaint failed 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. In Plaintiff’s FAC, she alleges the same, if not more sufficient allegations as to the fraud claim. As such, the Court does not sustain the demurrer on this issue alone.

Under California law, a duty to disclose material facts may arise (1) when the defendant is in a fiduciary relationship with the plaintiff; (2) when the defendant has 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 facts. (Falk v. General Motors Corp. (N.D. Cal. 2007) 496 F.Supp.2d 1088, 1098-1099 citing LiMandri v. Judkins (1997) 52 Cal.App.4th 326.) The Opposition alleges that the FAC contains allegations supporting three of these four circumstances.

Transactional Relationship

GM again 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 argues that the FAC is devoid of any allegations that Plaintiff purchased her Colorado directly from GM. But that argument by itself is insufficient. As LiMandri made clear, the second, third, and fourth circumstances giving rise to a duty to disclose “presupposes the existence of some ... relationship between the plaintiff and defendant.” 52 Cal. App. 4th at 336-37 (emphasis added). For purposes of duties to disclose, the California Supreme Court has defined a “relationship” as a “transaction” between the parties. Warner Constr. Corp. v. City of Los Angeles (1970) 2 Cal. 3d 285, 294; see LiMandri, 52 Cal. App. 4th at 337 (“As a matter of common sense, such a relationship can only come into being as a result of some sort of transaction between the parties.”) (emphasis in original). The Opposition argues that the transactional relationship test can be met indirectly, i.e., by virtue of the allegation that she purchased her Colorado from an authorized GM dealer. There is some support in published decisions for Plaintiff’s argument.

The crucial difference between Plaintiff’s last opposition and the current opposition is the reliance on the case of Dhital v. Nissan North America, Inc. (2022) 84 Cal.App.5th 828. The Court notes that the California Supreme Court granted review of Dhital, and thus, although not binding, its decision may be cited for its persuasive authority. The decision in Dhital found the allegations sufficient to overcome Nissan’s demurrer there.

The Opposition notes that Dhital states: “Plaintiffs alleged that they bought the car from a Nissan dealership, that Nissan backed the car with an express warranty, and that Nissan’s authorized dealerships are its agents for purposes of the sale of Nissan vehicles to consumers.” (Dhital, supra, 84 Cal.App.5th at 844 [emphasis added].) Similarly, here, Plaintiff alleges that she bought the vehicle from Penske Cadillac Buick GMC South, an authorized dealership, agent, and representative. (FAC, ¶ 4.) Plaintiff also alleges that GM provided an express written warranty. (FAC, ¶ 5) covering the transmission defect and allegedly actively concealed the same, by virtue of its authorized dealership and agent’s purportedly fraudulent pre-sale conduct. (FAC, ¶¶ 40-43, 81, 138-132.) Although the Court views it as a close question, the persuasive authority in Dhital is more compelling than some less well reasoned and unpublished federal district court decisions that have granted motions for judgment on the pleadings or dismissed fraudulent concealment claims at the pleading stage.

Next, Plaintiff alleges that GM had exclusive knowledge. (FAC, ¶¶ 33-35, 39, 40.) The Court notes that Plaintiff references the NHTSA, as to which manufacturer-provided TSBs are available to the public. Given the list of TSBs and other service information referenced in the FAC and the Opposition, it is not at all clear that GM has “exclusive” knowledge since TSBs are publicly available on the NHTSA website. Further, GM dealers also are issued TSBs so the selling dealer also has knowledge of the contents of technical literature addressing the existing of harsh shifts in low mileage vehicles. Arguably, if the absence of any reported repair issues were so material to a buyer that she would not have made the purchase if the pre-existing technical issues were known, Plaintiff would need to make specific allegations of efforts to learn about pre-existing reported repair issues, whether on specific question at the point of sale and/or upon independent investigation and the lack of any such issues discovered, in her Complaint. The Court does not observe any such allegations here. Instead, the FAC alleges that a reasonable person would have considered the allegedly undisclosed history GM had experience with other customers’ complaints and repair literature to its dealer body about transmission shifting would have considered them in deciding to purchase a GM product. (FAC ¶¶ 73-76, 127, 141.) The Court is required to accept those allegations as true for purposes of a demurrer.

Lastly, Plaintiff alleges that GM actively concealed material facts. Plaintiff contends that GM committed fraud by knowingly and intentionally concealing from Plaintiff that the Vehicle and its Transmissions were defective, dangerous, and susceptible to sudden and premature failure, including by issuing TSBs that purported to address the Defect when they were in fact lurching, shuddering and jerking. (FAC ¶¶ 14, 15, 35, 36, 42, 43, 45, 60, 62, 63, 126). But the very issuance of publicly available TSBs demonstrates an absence of affirmative concealment. Unless Plaintiff is alleging that the TSBs which were issued neglected to mention the nature of transmission issues Plaintiff herself experienced, the Court would be inclined to find that there could not be affirmative, active, intentional concealment of repair issues discussed in a published TSB. The contention that GM has “superior knowledge” to Plaintiff’s does not, in the Court’s view, satisfy the “exclusive” knowledge requirement giving rise to a duty to disclose. Every manufacturer and issuer of repair instructions has knowledge superior to a retail buyer about technical and repair issues. The mere existence of knowledge that some prior models have experienced customer complaints is not, in the Court’s view, sufficient by itself to establish an affirmative duty to disclose the existence of such complaints for purposes of alleging a punitive damages cause of action for fraud. But on balance, the Court finds that the FAC’s exceptionally detailed allegations are sufficient to withstand demurrer. Accordingly, the Demurrer is overruled.

B. 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. Plaintiff’s prayer for punitive damages, and Defendant’s argument against it, are intrinsically intertwined with the fraudulent inducement – concealment cause of action, and as such, the Court’s ruling as to the Motion to Strike is determined by the Court’s ruling of the demurrer. The Motion to Strike is thus denied.