Judge: Stephen Morgan, Case: 22AVCV00852, Date: 2023-07-11 Tentative Ruling
Case Number: 22AVCV00852 Hearing Date: July 11, 2023 Dept: A14
Background
This is a Song Beverly Consumer
Act action. Plaintiff Antonio Guzman Lomeli (“Antonio”) and Diego Armando
Lomeli (“Diego” and collectively “Plaintiffs”)1 allege that on April 9, 2017,
they entered into a warranty with Defendant General Motors, LLC (“Defendant”)
regarding a 2017 GMC Canyon with the Vehicle Identification Number
1GTG5CEA9H1217720 (“Subject Vehicle”) which was manufactured and/or distributed
by Defendant.¿Plaintiffs allege that the Subject Vehicle was delivered with serious
defects, including, but not limited to, structural, suspension, and
transmission system defects. Plaintiffs allege that Defendant purposely
concealed the defects pertaining to the Subject Vehicle. Plaintiffs contend
that the Subject Vehicle had defects and nonconformities that manifested within
the express warranty period and such defects and nonconformities substantially
impair the use, value, or safety of the Subject Vehicle, rendering it
worthless. Plaintiffs present that under the Song-Beverly Act, Defendant had a
duty to promptly offer to repurchase or replace the Subject Vehicle at the time
if it failed
to conform the Subject Vehicle to the terms of the express warranty after a
reasonable number of repair attempts, but failed to do so after Plaintiffs
presented the Subject Vehicle to Defendant’s authorized repair facility five
times within the span of one year.
¿On October 26, 2022, Plaintiffs
filed their Complaint alleging four causes of action: (1) Violation of
Song-Beverly Act- Breach of Express Warranty; (2) Violation of Song-Beverly
Act- Breach of Implied Warranty; (4)
Violation of the Song-Beverly Act Section 1793.2; and (4) Fraud-Fraudulent
Inducement-Concealment.
On November 30, 2022, Defendants
filed a declaration pursuant to
Cal. Code Civ. Proc. § 430.41, extending the time in which a demurring party
may file a responsive pleading if the party has failed to complete the
necessary meet and confer requirements five days prior to the deadline for a
demurrer.
On January 03, 2023,
Defendants filed Demurrer and Motion to Strike.¿
On March 08, 2023,
Plaintiffs filed their First Amended Complaint (“FAC”).¿
On April 07, 2023, Defendants
filed another declaration
pursuant to Cal. Code Civ. Proc. § 430.41, extending the time in which a
demurring party may file a responsive pleading if the party has failed to
complete the necessary meet and confer requirements five days prior to the
deadline for a demurrer.
On May 08, 2023,
Defendants filed Demurrer with Motion to Strike as to Plaintiffs’ FAC.¿
On June 26, 2023, Plaintiffs
filed their Opposition.¿
On July 05, 2023, Defendant filed its Reply.
-----
Legal Standard
Standard for a Demurrer – A demurrer for
sufficiency tests 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 context. (Taylor v. City of Los
Angeles Dept. of Water and Power (2006) 144 Cal.App.4th 1216, 1228.) In a
demurrer proceeding, the defects must be apparent on the face of the pleading
or by proper judicial notice. (CCP § 430.30(a).) 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.
(Id.) The only issue involved in a demurrer hearing is whether the complaint,
as it stands, unconnected with extraneous matters, states a cause of action. (Hahn,
supra, 147 Cal.App.4th at 747.)
-----
Standard for a Motion to Strike – 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. (CCP, § 436(a).) The court may also strike all or any part of any
pleading not drawn or filed in conformity with the laws of this state, a court
rule, or an order of the court. (Id., § 436(b).) The grounds for a
motion to strike are that the pleading has irrelevant, false or improper
matter, or has not been drawn or filed in conformity with laws. (Id. §
436.) The grounds for moving to strike must appear on the face of the pleading
or by way of judicial notice. (Id. § 437.)¿¿¿¿¿¿¿
-----
Meet and Confer Requirement– Before filing a demurrer or a motion to
strike, the demurring or moving party is required to meet and confer with the
party who filed the pleading demurred to or the pleading that is subject to the
motion to strike for the purposes of determining whether an agreement can be
reached through a filing of an amended pleading that would resolve the
objections to be raised in the demurrer. (CCP §§ 430.41 and 435.5.) The Court
notes that the Moving Party has complied with the meet and confer requirement.
(Decl. of Jesse Valencia ¶ 2.)
-----
Discussion
Application – Defendant
demurs only to Plaintiffs’ Fourth Cause of Action (Fraud-Fraudulent
Inducement-Concealment). Defendants believe that the claim is barred due to the
applicable statute of limitations and that the claim fails to state facts
relevant to the elements of the claim.
i.
Statute of Limitations
Defendants present that
Plaintiffs are barred for their fraud claim under CCP section 338(d).
Defendants argue that the plaintiffs filed two years and six months too late,
since they did not file their complaint until October 26, 2022. Additionally, Defendant
claims that Plaintiffs cannot invoke the delayed discovery rule because
Plaintiffs have alleged in the FAC that the Subject Vehicle was delivered with
defects.
Plaintiffs argue that the delayed
discovery rule applies because they could not have discovered the true nature
of the transmission defect before, during, or after their purchase of the
Subject Vehicle as Defendant “concealed its internal data, consumer complaints,
pre-release testing data, aggregate data from dealers to GM, dealership repair
orders, and GM service bulletins. Moreover, GM’s authorized repair facility
continued to assert that the Transmission Defect could be fixed, which further
concealed the true nature of the Defect.” (Opp. 8:11-14, citing FAC ¶¶ 8-14,
23-59, 61-79.) Plaintiffs rebut Defendant’s argument that the delayed discovery
rule is inapplicable as the Subject Vehicle was delivered with defects because Plaintiffs
were unaware of GM’s deception at the time of delivery and Defendant’s focus on
paragraph 11 of the FAC is misplaced as it makes no reference to Plaintiffs
discovery of the defects within the Subject Vehicle.
Defendants refute Plaintiffs’
opposing argument that the fraud claim is time-barred since there is a
five-year gap between the purchase and filing of the Complaint. Defendants
believe that Plaintiffs cannot argue that that they did not know about the
issues regarding the transmissions as a Plaintiff acting in due diligence would
have discovered the actions giving rise to their claim within the applicable
limitations period, particularly when Plaintiffs cite to publicly available
information related to alleged issues with the type of transmission installed
in the Subject Vehicle that pre-dates Plaintiffs’ purchase. Defendant
highlights Plaintiffs’ allegations in Paragraph 11,13, and 63.
As initial matter, the Court
notes that Defendant brings up various new arguments in its Reply – the
application of the repair doctrine, the discussion of the technical service
bulletins (“TSBs”), and repair attempts by third party dealerships, failure to
include allegations regarding representations by Defendant. These arguments
were not brought up in either moving or opposing briefs. New arguments in Reply
are improper and will not be considered. (See In re Marriage of Khera &
Sameer (2012) 206 Cal.App.4th 1467, 1477-78 [“ ‘Obvious reasons of fairness
militate against consideration of an issue raised initially in the reply brief
of an appellant. [Citations.]” (Varjabedian v. City of Madera (1977) 20
Cal.3d 285, 295, fn. 11 [142 Cal. Rptr. 429, 572 P.2d 43].) ‘ “[T]he rule is
that points raised in the reply brief for the first time will not be
considered, unless good reason is shown for failure to present them before.
[Citations.]” [Citation.]’ (People v. Smithey (1999) 20 Cal.4th 936,
1017, fn. 26 [86 Cal. Rptr. 2d 243, 978 P.2d 1171]).]”)
CCP 338(d) reads:
Within
three years:
[.
. .]
An action for relief
on the ground of fraud or mistake. The cause of action in that case is not
deemed to have accrued until the discovery, by the aggrieved party, of the
facts constituting the fraud or mistake.
Both parties concede that the
three years has passed. The question presented to the Court is: do Plaintiffs
allegations, including those regarding the concealment of information and the
representations of Defendant’s agents, provide a basis for the delayed
discovery rule.
Both parties rely on the
following cases for their arguments: Hobart v. Hobart Estate Co. (1945)
26 Cal.2d 412, 437; and Johnson v. Ehrgott (1934) 1 Cal.2d 136, 137. As
such, the Court focuses on these cases.
Hobart v. Hobart Estate Co.
(1945) 26 Cal.2d 412, 437 (“Hobart”) reads in relevant part:
The provision
tolling operation of the statute until discovery of the fraud has long been
treated as an exception and, accordingly, this court has held that if an action
is brought more than three years after commission of the fraud, plaintiff has
the burden of pleading and proving that he did not make the discovery until
within three years prior to the filing of his complaint. (See Sublette v.
Tinney (1858), 9 Cal. 423; Lady Washington C. Co. v. Wood, 113 Cal.
482 [45 P. 809]; Consolidated R. & P. Co. v. Scarborough, 216 Cal.
698 [16 P.2d 268]; Knapp v. Knapp, 15 Cal.2d 237, 242 [100 P.2d 759].)
Further, although negligence by the person defrauded is not a defense to a
promptly brought action based upon intentional misrepresentation (see Seeger
v. Odell, 18 Cal.2d 409, 414 [115 P.2d 977, 136 A.L.R. 1291]), the cases
construing section 338, subdivision 4, supra, have held that plaintiff
must affirmatively excuse his failure to discover the fraud within three years
after it took place, by establishing facts showing that he was not negligent in
failing to make the discovery sooner and that he had no actual or presumptive
knowledge of facts sufficient to put him on inquiry. (See Johnson v. Ehrgott,
1 Cal.2d 136, 137 [34 P.2d 144]; Original Min. & Mill. Co. v. Casad,
210 Cal. 71, 74 [290 P. 456]; Del Campo v. Camarillo, 154 Cal. 647, 657
[98 P. 1049].)
Under Hobart, there is an
exception to the statute of limitations set out by CCP 338 due to fraud;
however, a plaintiff has the burden of establishing facts showing that (1) the
plaintiff was not negligent in failing to make the discovery sooner, and (2)
that the plaintiff had no actual or presumptive knowledge of facts sufficient
to put him on inquiry.
The FAC alleges that Plaintiffs
presented the Subject Vehicle for repairs at Defendant’s authorized dealership
on the following occasions:
·
November 2018 for transmission defects (FAC ¶
63);
·
May 2020 for transmission defects (FAC ¶ 64);
·
December 2020 for transmission defects (FAC ¶
65);
Plaintiffs allege that they
relied on statements from the repair facility that Subject Vehicle had no
defects and that it was performing normally, thus the limitations period was
tolled until Plaintiffs filed the Complaint as that was when they learned of Defendant’s
deception. Plaintiff then provides that “Plaintiffs could not have discovered
through the exercise of reasonable diligence that Defendant was concealing
material information about the Transmission Defect.” (FAC ¶¶ 69-70, 72.) The rule
that a plaintiff’s allegations must be accepted as true for the purpose of
ruling on the demurrer does not apply to allegations expressing mere
conclusions of law, or allegations contradicted by the exhibits to the
complaint or by matters of which judicial notice may be taken.¿¿(Vance v.
Villa Park¿Mobilehome¿Estates¿(1995) 36 Cal.App.4th 698, 709.) The Court
looks at the FAC as a whole.
The statute of limitations begins
to run when the plaintiff suspects or should suspect that her injury was caused
by wrongdoing. (Jolly v. Eli Lilly & Co. (1988) 44 Cal.3d 1103,
1110.) “In order to rely on the discovery rule for delayed accrual of a cause
of action, ‘[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.’ [Citation.] In
assessing the sufficiency of the allegations of delayed discovery, the court places
the burden on the plaintiff to ‘show diligence’; ‘conclusory allegations will
not withstand demurrer.’” [Citation.]” (Fox v. Ethicon Endo-Surgery, Inc.
(2005) 35 Cal.4th 797, 808.)
Though the parties argue about
delayed discovery rule, this cause of action is based on tolling due to
fraudulent concealment. “It has long been established that the defendant’s
fraud in concealing a cause of action against him tolls the applicable statute
of limitations, but only for that period during which the claim is undiscovered
by plaintiff or until such time as plaintiff, by the exercise of reasonable
diligence, should have discovered it. [Citation.] Like the discovery rule, the
rule of fraudulent concealment is an equitable principle designed to effect
substantial justice between the parties; its rationale is that the culpable
defendant should be estopped from profiting by his own wrong to the extent that
it hindered an ‘otherwise diligent’ plaintiff in discovering his cause of
action. [Citations.]” (Bernson v. Browning-Ferris Indus (1994) 7 Cal.4th
926, 931, internal quotation marks omitted. For a plaintiff to establish
tolling due to fraudulent concealment, he or she must establish: “fraudulent
conduct by the defendant resulting in concealment of the operative facts,
failure of the plaintiff to discover the operative facts that are the basis of
its cause of action within the limitations period, and due diligence by the
plaintiff under discovery of those facts.” (Sagehorn v. Engle (2006) 141
Cal.App.4th 452, 460-61.)
The Court addresses both
applicable standards.
Here, the facts alleged in the
FAC show that Plaintiffs have taken the Subject Vehicle for repairs since 2018.
Based on the allegations, by December 2020, after three repairs (i.e., a
reasonable number of attempts), Plaintiffs could reasonably suspect that there
was an issue with the transmission defects. Three years from December 2020 is
December 2023. Further, the allegations show that Defendant had exclusive
knowledge of the issues related to the transmission defects due to “concealed
its internal data, consumer complaints, pre-release testing data, aggregate
data from dealers to GM, dealership repair orders, and GM service bulletins.
Moreover, GM’s authorized repair facility continued to assert that the
Transmission Defect could be fixed, which further concealed the true nature of
the Defect.” (Opp. 8:11-14, citing FAC ¶¶ 8-14, 23-59, 61-79.)
Accordingly, both the delayed
discovery rule and tolling due to fraudulent concealment support tolling of the
statute of limitations to at least December 2020. Three years from December
2020 is December 2023. Plaintiffs filed their Complaint on December 26, 2022.
Therefore, Plaintiffs’ Fraud claim does not appear to be time barred.
ii. Failure
to Plead Fraud with Specificity
Defendant presents that
Plaintiffs had an obligation to plead fraud with specificity, but failed to do
so as the FAC does not allege the names of the persons who made the allegedly
fraudulent representations, their authority to speak, Defendant’s knowledge
about the alleged defects in the Subject Vehicle, any interactions with
Defendant prior or during the purchase of the Subject Vehicle, or Defendant’s
intent to induce reliance by Plaintiffs to purchase the Subject Vehicle.
Plaintiff argues that the fraud
claim is well pled, highlighting the elements of a cause of action for fraud
based on concealment and the allegations within the FAC. Plaintiffs also
emphasize that the transmission defects posed a safety risk, giving rise to a
duty to disclose, and that such defects arose within the warranty period;
Defendant did not disclose the transmission defects; thus, Defendant engaged in
fraudulent concealment. Plaintiff highlights that this fact pattern is similar
to that in Dhital v. Nissan North America, Inc. (2022) 84 Cal.App.5th
725 and emphasizes that “A plaintiff cannot plead either the specific time of
the omission or the place, as he is not alleging an act, but a failure to act.
. . .[A]n omission cannot be described in terms of time, place, and contents of
the misrepresentation or the identity of the person making the
misrepresentation.” (Opp. 16:22-26, citing Morris
v. BMW of N. Am., LLC
(N.D. Cal. 2007) 2007 U.S. Dist.LEXIS 85513.) “In sum, Plaintiffs alleged the
‘who’ (GM), the ‘what’ (concealing material facts regarding a known
Transmission Defect that poses a safety risk), the ‘when’ (when purchase and
thereafter), the "how" (failing to disclose the existence of the
Defect when purchase and during subsequent repair visits), and the where (at GM’s
authorized repair facilities).” (Id. 16:27-28, 17:1-2.)
Regarding specificity, “[l]ess
specificity is required when it ‘appears from the nature of the allegations
that the defendant must necessarily possess full information concerning the
facts of the controversy.’ ” (Committee on Children's Television, Inc. v.
General Foods Corp. (1983) 35 Cal.3d 197, 216 [quoting Bradley v.
Hartford Acc.& Indem. Co. (1973) 30 Cal.App.3d 818, 825].) The
specificity requirement is greatly relaxed or eliminated under circumstances
where the defendant must necessarily possess superior information of the fraud.
(Id., at 216-217; see also Silberg v. Anderson (1990) 50 Cal.3d
205, 212-213.)
Here, the circumstances alleged
show that Defendant must necessarily possess superior information of the fraud.
(See FAC ¶¶ 8-14, 23-59, 61-79.) Thus, taking into consideration the
allegations and standard for specificity in light of alleged fraud, Plaintiffs’
fraud cause of action is pled with the requisite specificity.
iii. Disclosure
to Plaintiffs
Defendant presents that
Plaintiffs have failed to allege a fiduciary relationship or a transaction
involving direct dealings between the parties, thus failing to demonstrate a
duty to disclose. Absent such a duty, Defendant presents that a duty arises in
only three circumstances: (1) the defendant had exclusive knowledge of the
material fact; (2) the defendant actively concealed the material fact; or the
defendant made partial representations while also suppressing the material
fact. Defendant emphasizes that these circumstances are based on a presumption
of the existence of a relationship between the parties (i.e., a direct
dealing).
Plaintiffs present that they
purchased the Subject Vehicle at an authorized retail dealership, repair
facility, agent and representative of GM and, based on the FAC as a whole, they
have sufficiently alleged the existence of a transactional relationship between
Defendant and Defendant’s authorized dealer based on the express warranties
that backed the Subject Vehicle which constitutes a transactional relationship.
Plaintiffs also cite to Dhital v. Nissan North America, Inc. (2022) 84
Cal.App.5th 725 to highlight that fraud actions can be brought alongside
Song-Beverly statutory claims. Alternative, Plaintiffs present that Defendant
was under a duty to disclose as: (1) Defendant possessed exclusive knowledge of
material facts in the form of the transmission defect, and (2) Defendant
actively concealed material defects as the transmission defects impacted the
safety of the Subject Vehicle. Plaintiffs highlight that exclusive knowledge
does not mean that facts were known or accessible only to defendant and the law
only requires "superior" knowledge of defects, citing various federal
cases and LiMandri v. Judkins (1997) 52 Cal.App.4th 326. Plaintiffs
contend that they have adequately pled Defendant’s superior knowledge of the
transmission defect.
Defendant reiterates that
Plaintiffs’ fraud cause of action fails because it did not have any to disclose
as there is no fiduciary duty between the parties. Specifically, Defendant
presents four circumstances in which a duty to disclose arises: “(1) when the
defendant is in a fiduciary relationship with the plaintiffs, (2) when the
defendant had exclusive knowledge of material facts not known to the plaintiffs,
(3) when the defendant actively conceals a material fact from the plaintiffs;
[or] (4) when the defendant makes partial representations but also suppresses
some material facts.” (Reply 4:13-16, citing Heliotis v. Schuman (1986)
181 Cal.App.3d 646, 651.) Defendant reiterates that there is no fiduciary duty
and it is a general rule that a vendor not in a confidential relation to the
buyer is not under a duty to make full disclosure concerning the object that he
would sell. (Id. 4:18-20.) Defendant emphasizes that absent a fiduciary
duty, the duty to disclose arises only when “the defendant makes
representations but fails to disclose additional facts which materially qualify
the facts disclosed, or which render the disclosure likely to mislead.” (Id.
4:22-24, citing Roddenberry v. Roddenberry (1996) 44 Cal.App.4th 634,
666.)
First, the Court addresses the
issue of a transactional relationship. GM relies on Bigler-Engler v. Breg,
Inc. (2017) 7 Cal.App.5th 276 (“Bigler-Engler”), as the basis for
its argument that Plaintiffs cannot establish the requisite transaction or
relationship with Defendant to support a claim of fraud.
The Bigler-Engler Court
explained that a duty to disclose facts “arises only when the parties are in a
relationship that gives rise to the duty, such as ‘ “seller and buyer, employer
and prospective employee, doctor and patient, or parties entering into any kind
of contractual arrangement[]” ’ ” and, in the absence of a fiduciary
relationship, a fraudulent omission case may be grounded on one party's
exclusive knowledge of material facts, active concealment of material facts or
suppression of material facts in the context of a partial disclosure, but only
where the parties share some sort of relationship in which a duty to disclose may
arise. (Bigler-Engler, supra, 7 Cal.App.5th at p. 311 [citing to Shin
v. Kong (2000) 80 Cal.App.4th 498, 509].) The Bigler-Engler Court
goes further to state that "Such a transaction must necessarily arise from
direct dealings between the plaintiff and the defendant; it cannot arise
between the defendant and the public at large.” (Id. at 312.)
However, there is conflicting
case law on the need for a direct relationship between a plaintiff and a party
who is accused of failure to disclose material information. (See Jones v.
ConocoPhillips Co. (2011) 198 Cal.App.4th 1187, 1199; OCM Principal
Opportunities Fund, L.P. v. CIB World Markets Corp. (2007 157 Cal.App.4th
835, 859 [holding a vender "has a duty to disclose material facts not only
to the immediate purchasers, but also to subsequent purchaser when the vendor
has reason to expect that the item will be resold"].) The Court notes that
Plaintiffs cite to one of these cases.
In this case, the relationship
between Plaintiffs and GM arises from a specific contractual connection - an
express written warranty, a 3-year/36,000-mile express bumper to bumper
warranty, and a 5-year/60,000-mile powertrain warranty. (FAC ¶ 4.) It is likely
that this warranty is included in a manual given to Plaintiffs; however, as there
is no information regarding this, the Court cannot delineate the issue further.
Despite this, the FAC provides a
sufficient basis for disclosure without a transaction between the parties as it
pleads (i) Defendant had exclusive knowledge of material facts not known to
Plaintiffs via “pre-production testing data, early consumer complaints about
the Transmission Defect made directly to Defendant GM and its network of
dealers, aggregate warranty data compiled from Defendant’s network of dealers,
testing conducted by Defendant in response to these complaints, as well as
warranty repair and part replacements data received by Defendant from
Defendant’s network of dealers, amongst other sources of internal
information[]” (FAC ¶ 127(d)); and (ii) concealment of this safety defect was
material in that if “prior to Plaintiffs purchase of Subject Vehicle.
Plaintiffs would have been aware of the Transmission Defect and would not have
leased and/or purchased the Subject Vehicle if Defendant disclosed the
Transmission Defect and its associated safety hazards to its sale
representatives and/or the consumer public” (FAC ¶ 139.) Thus, under even
Defendant’s own cited case law, the pleadings support a finding of a duty to
disclose. (See Bigler-Engler, supra, 7 Cal.App.5th 276, 311; see also
LiMandri, supra, 52 Cal.App.4th 326, 336.)
Accordingly, the Demurrer is
OVERRULED.
----
Motion to Strike
Defendant argues that (i)
Plaintiffs’ first three causes of action are based upon the Song-Beverly Act
and punitive damages are not available under the Song-Beverly Act; (ii) the FAC
fails to plead the requisite facts to show malice, oppression, or fraud under
Cal. Civ. Code § 3294; and (iii) Plaintiffs’ Fourth Cause of Action, based in
fraud, fails to state facts sufficient to state a cause of action, readdressing
Defendants’ Demurrer.
Plaintiffs present that Defendant
mistakes that punitive damages are sought in regard to the claims regarding the
Song-Beverly Act. Plaintiffs clarify that they are seeking punitive damages
only to the Fourth Cause of Action (Fraud – Fraudulent Inducement and
Fraudulent Concealment). Plaintiffs argue that the request for punitive damages
is properly pled as the Fourth Cause of Action (Fraud – Fraudulent Inducement
and Fraudulent Concealment is properly pled, justifying punitive damages under
Cal. Civ. Code § 3294(c) as (1) Defendant engaged in fraud by concealing a
known fact, depriving of property or legal rights or otherwise causing injury;
(2) Defendant’s actions constituted malice as Defendant engaged in despicable
conduct with a willful and conscious disregard of the rights or safety of
others by failing to disclose a known defect that impacted the safety of the
Subject Vehicle; and (3) Defendant’s actions constituted oppression as it
subjected Plaintiffs to cruel, and unjust hardship in conscious disregard of
their rights. Plaintiffs direct the Court to specific paragraphs within the FAC
to justify the presentations. Plaintiffs further address the issues surrounding
the Demurrer as Defendants have presented such arguments in its moving papers.
Defendant’s Reply brief
reiterates the arguments presented in its moving papers.
The Court need not readdress the
issues surrounding the Demurrer as it has been analyzed fully, ante.
The issue presented before this Court is
whether a plaintiff can recover compensatory damages under the Song-Beverly Act
as well as punitive damages for fraud. The California Courts of Appeal have
addressed this issue.¿¿
¿¿
Court of Appeal of California, Fourth
Appellate District holds:¿¿
¿¿
We accept that a plaintiff cannot recover
both a statutory penalty and punitive damages based on the same conduct. (See
part VIII, post.) The present question, however, is whether a plaintiff can
recover compensatory damages on one claim and punitive damages on a different
claim. That issue simply was not presented in Fineman. As the treble damages
were $19.5 million, evidently the compensatory damages on the antitrust claim
were $6.5 million; the compensatory damages on the state law claim were $17.7
million. Thus, the plaintiff had no incentive to try to combine compensatory
damages on the antitrust claim with punitive damages on the state law
claim.¿¿
¿¿
Ford also cites Quest Medical, Inc. v.
Apprill (5th Cir. 1996) 90 F.3d 1080, which was decided under Texas law.
(See id. at pp. 1089–1090, 1093.) In Texas, however, attorney fees may be
awarded as an element of punitive damages. (Canales v. Zapatero
(Tex.App. 1989) 773 S.W.2d 659, 660; Carter v. Barclay (Tex.Civ.App.
1972) 476 S.W.2d 909, 917.) Hence, an award of both attorney fees and punitive
damages can constitute a double recovery. (JHC Ventures, L.P. v. Fast
Trucking, Inc. (Tex.App. 2002) 94 S.W.3d 762, 774–776, disapproved on other
grounds in Medical City Dallas, Ltd. v. Carlisle Corp. (Tex. 2008) 251 S.W.3d
55, 62.) That is not the law in California.¿¿
¿¿
Ford also cites Celeritas Technologies,
Ltd. v. Rockwell Internat. Corp. (Fed. Cir. 1998) 150 F.3d 1354, cert. den.
(1999) 525 U.S. 1106. There, however, the plaintiff had stipulated before trial
that, “to simplify the trial and avoid a duplicative recovery,” it would accept
the award on either its breach of contract, misappropriation of trade secrets,
or patent infringement theory, whichever was highest. (Id. at p. 1357.) The
appellate court held that, because of its stipulation, the plaintiff could not
recover both the compensatory damages awarded for breach of contract and the
punitive damages awarded for misappropriation. (Id. at p. 1362.) The
Bowsers entered no such stipulation.¿¿
¿¿
We therefore conclude that the Bowsers are
entitled to compensatory damages (and attorney fees) under the Song-Beverly Act
as well as punitive damages for fraud.¿¿
¿¿
(Bowser v. Ford Motor Co. (2022) 78
Cal.App.5th 587, 626-27.)¿¿
¿¿
Court of Appeal of California, Third
Appellate District holds:¿¿¿
¿¿
Ford also argues that “a defendant‘s conduct
is ‘substantially the same’ when it is part of a ‘unified course of conduct,’”
“even when multiple and distinct acts, giving rise to claims under different
legal theories, are involved.” And because the “facts” developed from the
evidence of its corporate communications overlap to show reprehensibility for
punitive damages and willfulness for the Song-Beverly Act violation, both
awards therefore address substantially the same conduct, or a unified course of
conduct, and therefore an award¿ of punitive damages and a Song-Beverly Act
civil penalty amount to Ford being punished twice for the same conduct. We do
not agree.¿¿
¿¿
We have already rejected Ford's assertion
that the underlying conduct need only be “substantially” the same to prohibit
the recovery of both punitive damages and civil penalties; rather, the recovery
of both punitive damages and civil penalties is prohibited when the underlying
conduct for both remedies is the same conduct, i.e., identical conduct. And as
we have said, the punitive damages award based on fraud and violation of the
CLRA were based on Ford's presale fraudulent conduct leading up to and
culminating in the sale, where Ford concealed problems relating to the
defective 6.0 liter Navistar diesel engine. The Song-Beverly Act civil penalty
related to Ford's willful postsale conduct in failing to promptly replace the
truck after a reasonable number of repair attempts or make restitution to
plaintiffs.¿¿
¿¿
[. . .]¿¿
¿¿
Ford appears to assert that plaintiff
effectively combined the conduct underlying the fraud/CRLA cause of action and
the Song-Beverly Act cause of action by arguing Ford engaged in a pattern and
practice of misconduct and thus the two awards were based on substantially the
same conduct. But plaintiffs are not prohibited from receiving both an award
for punitive damages based on presale fraudulent inducement and a postsale Song-Beverly
Act penalty based on willful noncompliance because they argued pattern and
practice in the trial court. “A pattern or practice of wrongful conduct is
often introduced as evidence of malice or oppression to justify a punitive
damage award.” (George F. Hillenbrand, Inc. v. Insurance Co. of North
America (2002) 104 Cal.App.4th 784, 820–821 [128 Cal. Rptr. 2d 586].) Thus,
whether Ford's conduct involved a pattern and practice of misconduct as well¿
as other factors, such as how reprehensible Ford's conduct was and whether Ford
disregarded the safety of others were all express considerations for the jury
to weigh in deciding the amount of punitive damages. (CACI No. 3942.) And the
amount of punitive damages is not limited to consideration of a pattern and
practice of misconduct presale. The jury could consider a pattern or practice
that continued beyond the date of the sale.¿¿
¿¿
Moreover, whether Ford engaged in an ongoing
pattern or practice of misconduct pertinent to the amount of punitive damages
award does not become an impermissible consideration by virtue of the fact that
plaintiffs were also separately alleging, and attempting to establish, that
Ford willfully failed to comply with the requirements of the Song-Beverly Act.
Nor does the proper consideration of whether Ford engaged in such a pattern or
practice, including pre- and postsale conduct, lead to the conclusion that the
fraud/CLRA claims and the Song-Beverly Act claim were based on the same
conduct. Plaintiffs did not argue to the jury that the failure to comply with
the Song-Beverly Act obligations to replace the vehicle or make restitution
supported the punitive damages award. In fact, in phase 2, plaintiffs' attorney
briefly discussed the Song-Beverly Act, noting, “[y]ou can be an honest
manufacturer and still have Song-Beverly issues, a customer came in multiple
times, there were defects, you didn't fix them.” Counsel then stated that the
Song-Beverly Act and its civil penalties were “totally separate.”¿¿
¿¿
Ford simply cannot escape liability for both
awards by virtue of the fact that it engaged in a pattern or practice of
deceitful misconduct throughout the course of the discrete events and conduct
involved here.¿¿
¿¿
We conclude that punitive damages and the
Song-Beverly Act civil penalty were both properly awarded to
plaintiffs.¿¿
¿¿
(Anderson v. Ford Motor Co. (2022) 74
Cal.App.5th 946, 970-73 (“Anderson”).)¿¿
¿¿
Here, as in Anderson, the
Song-Beverly claims are related to Defendant’s ability to replace the Subject Vehicle
or make restitution in accordance with the Song-Beverly Act while the Fifth
Cause of Action (Fraudulent Inducement – Concealment) is based on pre-sale
actions of fraudulent concealment which ultimately led to the purchase of the
Subject Vehicle.¿¿¿
¿¿
Accordingly, the Motion to Strike is
DENIED.¿¿¿
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Conclusion
Defendant General Motors, LLC’s Demurrer is
OVERRULED.