Judge Ronald F. Frank, Case Number: 23TRCV00503, Date: 2023-09-29 Tentative Ruling

On September 29, 2023, this Court previously Granted AHM’s Motion for Judgment on the Pleadings as to the second cause of action for Fraudulent Inducement – Concealment, but allowed leave to amend. Plaintiff did so, filing the FAC. On November 28, 2023, AHM filed a Demurrer and Motion to Strike the second cause of action. On December 29, 2023, Plaintiff filed opposition briefs to both motions. On January 2, 2024, AHM filed reply briefs to both.

II. GROUNDS FOR MOTIONS

Defendant AHM demurs to Plaintiff’s FC on the grounds that it argues Plaintiff’s FAC fails to state sufficient facts to state a cause of action based on the fact that Plaintiff does not establish: (1) Duty to Disclose; (2) Exclusive Knowledge; and (3) that the claim still lacks requisite factual specificity. AHM also asserts that Plaintiff’s FAC fails to state sufficient facts to support punitive damages.

Further, AHM seeks to strike the following from Plaintiff’s FAC:

Plaintiff’s prayer for punitive damages;

Plaintiff’s cause of action for Fraudulent Inducement – Concealment; and

Any mention of Plaintiff’s allegations of AHM acting with oppression, fraud, or malice.

III. ANALYSIS

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.)

Defendant asserts that Plaintiff’s cause of action for Fraudulent Inducement – Concealment failed to state sufficient facts. “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.) A concealment cause of action generally does not impose the same pleading rigor as an affirmative misrepresentation case, because before conducting discovery it is unrealistic for the Plaintiff to be obliged to identify the persons in the defendant company who withheld or concealed the claimed material facts, as distinct from an active fraud case where the affirmative misrepresentation is typically made to the plaintiff by a person who thus can be named in the pleading.

Transactional Relationship

Here, Defendant AHM again argues that Plaintiff does not adequately allege that Defendant had a duty to disclose. 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.)

Plaintiff bases its allegations on the theory that AHM had exclusive knowledge of the sensing defect. Plaintiff also suggests that AHM also had a duty to disclose because of the “direct transaction” between Plaintiff and Defendant, but there is no allegation that AHM itself actually negotiated the sale with Plaintiff or was present when the purchase contract was executed. As it did in the MJP, Defendant again points out that Plaintiff has not adequately alleged the existence of a transactional relationship because Plaintiff did not “directly” purchase the vehicle from Defendant, but instead from Defendant’s authorized dealership. However, as previously noted by this Court, this argument alone 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).

Plaintiff again argues in its opposition that the transactional relationship test can be met indirectly, i.e., by virtue of the allegation that he purchased the subject vehicle from an authorized Honda dealer. There is some support in published decisions for Plaintiff’s argument. The Court also recognizes the California Supreme Court’s granting of review of Dhital v. Nissan North America, Inc. (2022) 84 Cal.App.5th 828. Although not binding, the decision in Dhital may be cited to for its persuasive authority. The Court 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].) Plaintiff also argues he purchased the subject vehicle from a Honda Dealership. (FAC, ¶ 84.) Plaintiff also alleges that Defendant provided an express written warranty (FAC, ¶¶ 8-9, 103-104), and also that Honda’s authorized dealerships are its agents for purposes of the sale of Honda vehicles to consumers. (FAC, ¶120.) As noted previously, 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, the Court turns to the exclusive knowledge issue. Previously, in the arguments already ruled on MJOP, this Court informed the parties that references to the publicly disclosed NHTSA TSBs do not tend to show that Honda had exclusive knowledge; in fact, they establish the opposite. This Court also held that Plaintiff would need to make specific allegations of his unsuccessful efforts to learn about such pre-existing reported repair issues, e.g., specific questions at the point of sale and/or Defendant’s active blunting or interference with a buyer’s independent efforts to discover the content of the NHTSA website, in his pleading. Since then, Plaintiff argues that FAC alleges AHM’s exclusive knowledge of material facts came from sources not available to the public including Defendant’s own design expertise; Defendant’s own records of consumers’ complaints, dealership repair records, records from the NHTSA, warranty and post-warranty claims, and internal pre-sale durability testing and TSBs.

The Court does not see any other section of the pleading which may be referring to “Defendant’s own design expertise” except reference to: “American Honda’s pre-sale durability testing includes five metrics that allegedly “ensure high quality” by conducting “comprehensive quality assurance activities from the dual perspectives of design and manufacturing.” (FAC, ¶ 39) However, the FAC cites to publicized documents to support this portion of their pleading. Again, this Court is confused of what exact material fact AHM had that Plaintiff was allegedly not privy to. Almost everything cited by Plaintiff has a footnote with a public document link to it – indicating this information was readily available to Plaintiff prior to the purchase of the subject vehicle. Under Plaintiff’s section that references the alleged active concealment, Plaintiff merely states that AHM had been aware of the sensing defect, but that its agents actively concealed the existence and nature of the defect from plaintiff at the time of purchase, repair, and thereafter. (FAC, ¶ 71.) Specifically, Plaintiff argues AHM failed to disclose or actively concealed, at and after the time of purchase, lease or repair: (a) any and all known material defects or material nonconformity of the Subject Vehicle, including the defects relating to the computerized driver-assistance safety system, and collision mitigation braking system; (b) that the Subject Vehicle, including its computerized driver-assistance safety system, and collision mitigation braking system, was not in good working order, was defective, and was not fit for the intended purposes; and (c) that Subject Vehicle and its computerized driver-assistance safety system, and collision mitigation braking system were defective, despite the fact that AMERICAN HONDA learned of such defects “through alarming failure rates, and customer complaints.” (FAC, ¶ 71(a)-(c).) Plaintiff also argues that AHM never disclosed the sensing defect to consumers – through its dealerships or otherwise. (FAC, ¶ 75.) That allegation is inconsistent with other allegations in the FAC as to disclosure to NHTSA about an alleged sensing defect.

The alleged defects regarding the sensing system demonstrably have appeared on the NHTSA website, and Plaintiff so alleges. Plaintiff makes no mention, as requested by the Court, of Plaintiff’s efforts to discover the contents of the NHTSA website nor any questions he asked regarding the vehicle prior to purchasing the subject Pilot. The only allegation that appears to potentially raise a claim of exclusive knowledge is paragraph 62 of the FAC, where Plaintiff alleges that in October 2018, Honda revised its instructions to dealers on re-aiming Honda vehicles’ radars and admitted that many common and ordinary “environmental and roadway conditions can affect normal operation” of the Honda Sensing System. These conditions include: Rain, fog, and snow; Low sunlight; Strong light; Shadows from trees or buildings; Driving at night; Sudden changes between light and dark (such as the entrance or exit of a tunnel); Driving on curvy roads; and Driving on a hill. (FAC, ¶ 62.) Plaintiff claims this information was only provided to Honda dealers, but not published anywhere for the benefits of drivers or potential purchasers of affected vehicles. Plaintiff claims that he discussed this in paragraph 26, however there is no mention of this information there. Did counsel obtain this information from discovery in other cases, or from the NHTSA website? In short, the Court needs to better understand how plaintiff alleges that information provided to the Honda dealer body in October of 2018 was concealed from the public but is now known to him and his counsel, and how that information if disclosed to Plaintiff before the August of 2021 sale would have deterred plaintiff from purchasing the subject vehicle. Surely Plaintiff is not alleging that Honda knew in 2018 that vehicles it would not manufacture for another 2 or three years would contain a defect . . . .

Nonetheless, Plaintiff’s FAC does not address the concerns noted by the Court in its minute order to the previously decided MJOP. Plaintiff has failed to make more specific allegations regarding his efforts to learn about pre-existing reported repair issues, whether on specific questions at the point of sale and/or upon independent investigation and the lack of any such issues discovered, in his complaint. The Court does not observe any such allegations here. Finally, Plaintiff again attempts to argue that “superior knowledge” is enough to satisfy the “exclusive” knowledge requirement. Again, in the context of Plaintiff’s allegations and claims, this Court reiterates that 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 three model years later.

Based on the above, the Court’s tentative ruling is to SUSTAIN the demurrer with twenty (20) days leave to amend if Plaintiff believes it can amend its pleading to address the Court’s concerns.

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.)