Judge Stephen Morgan, Case 23AVCV00093 2023-05-02 Tentative Ruling

This is a Lemon Law action. Plaintiffs Shaun Lemon (“Shaun”)[1] and Heather Lemon (“Heather” and collectively “Plaintiffs”) allege that on August 04, 2017, they purchased a 2017 Chevrolet Silverado, VIN: 3GCUKSEC8HG361736 (the “Subject Vehicle”), and that Defendant General Motors, LLC (“Defendant”) issued various warranties, include a written warranty, a 3-year/36,000 mile express bumper to bumper warranty and a 5-year/60,000 mile powertrain warranty. Plaintiffs further allege that Defendant agreed to preserve or maintain the utility or performance of Plaintiffs’ vehicle or to provide compensation if there was a failure in such utility or performance. Plaintiffs present that the Subject Vehicle was delivered to them with serious defects and developed other serious defects and nonconformities to warranty including, but not limited to, transmission, electrical, structural, and suspension defects. Plaintiffs present that they were not made aware of the defects until the Subject Vehicle began to manifest them. Plaintiffs further allege that Defendant was unable to repair the Subject Vehicle after a number of reasonable opportunities, and Defendant failed to either promptly replace the new motor vehicle or to promptly make restitution in accordance with the Song-Beverly Act.

On January 26, 2023 Plaintiff filed his Complaint alleging four cases 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.

Standard for 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.)¿¿¿¿¿¿¿

A general demurrer admits the truth of all factual, material allegations properly pled in the challenged pleading, regardless of possible difficulties of proof.¿¿(Blank,¿supra, 39 Cal.3d at p. 318.)¿ Thus, no matter how unlikely or improbable, plaintiff’s allegations must be accepted as true for the purpose of ruling on the demurrer.¿¿(Del E. Webb Corp. v. Structural Materials Co.¿(1981) 123 Cal.App.3d 593, 604.)¿ Nevertheless, this rule 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.)¿ A general demurrer does not admit contentions, deductions, or conclusions of fact or law alleged in the complaint; facts impossible in law; or allegations contrary to facts of which a court may take judicial notice.¿¿(Blank,¿supra, 39 Cal.3d at p. 318.)¿¿¿¿¿¿¿¿

Pursuant to Code Civ. Proc. §430.10(e), the party against whom a complaint has been filed may object by demurrer to the pleading on the grounds that the pleading does not state facts sufficient to constitute a cause of action. It is an abuse of discretion to sustain a demurrer without leave to amend if there is a reasonable probability that the defect can be cured by amendment. (Schifando v. City of Los Angeles (2003) 31 Cal.4th 1074, 1082, as modified (Dec. 23, 2003).)

Standard for 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. (Code Civ. Proc., § 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.¿ (Cal. Code Civ.¿Proc. § 430.41 and § 435.5.)¿

No meet and confer occurred. Counsel for Defendant, Stacey Davis (“Davis”), informs the Court that her office attempted to meet and confer with Plaintiff’s counsel to discuss the issues Defendant had with the FAC, but was unsuccessful in their meet and confer attempts. (Decl. Davis ¶ 2.) Plaintiff’s counsel, Harry H. Terzian¹ (“Terzian”), presents that Defendant’s counsel did not contact his office or provide his office with the legal reasoning underlying Defendant’s Demurrer or Motion to Strike.

“A determination by the court that the meet and confer process was insufficient shall not be grounds to overrule or sustain a [demurrer/motion to strike].” (Cal. Code Civ. Proc. §§ 430.41(a)(4), 435.5(a)(4).)

Defendant first argues that the economic loss rule bars the fraud cause of action. Defendant presents: (1) [u]nder California law, a person “may not ordinarily recover in tort for the breach of duties that merely restate contractual obligations” (Opposition 7:25-26 [citing Aas v. Superior Court (2000) 24 Cal.4th 627, 64]); (2) the purchaser must “demonstrate harm above and beyond a broken contractual promise” (Opposition 7:28, 8:1-3, citing (Robinson Helicopter Co., Inc. v. Dana Corp. (2004) 34 Cal.4th 979, 988 (“Robinson”)); (2) Plaintiffs did not plead any facts alleging damages or harm for anything other than economic loss; (3) Robinson created an exception, but it is only applicable in cases were a defendant makes affirmative misrepresentations on which a plaintiff relies and which expose a plaintiff to liability for personal damages independent of the plaintiff’s economic loss; (4) cases following Robinson concluded that the Robinson exception does not extend to fraud claims based upon alleged concealment, omissions, or non-disclosures; and (5) thus, the economic loss rule bars Plaintiff’s claim.

Plaintiff’s Opposition does not address the economic loss rule. Instead, it addresses delayed discovery.

Defendant does not repeat its economic loss rule argument in its Reply as it was unaddressed by Plaintiffs.

A reading of Robinson indicates that, while Robinson itself analyzed a case involving fraudulent misrepresentations and disavows any views on application of the economic loss rule to fraudulent concealment, there is case precedent regarding fraudulent concealment in contracts:

We went on to describe several instances where tort damages were permitted in contract cases. “Tort damages have been permitted in contract cases where a breach of duty directly causes physical injury [citation]; for breach of the covenant of good faith and fair dealing in insurance contracts [citation]; for wrongful discharge in violation of fundamental public policy [citation]; or where the contract was fraudulently induced. [Citation.]” (Erlich v. Menezes, supra, 21 Cal.4th at pp. 551–552.) “[I]n each of these cases, the duty that gives rise to tort liability is either completely independent of the contract or arises from conduct which is both intentional and intended to harm. [Citation.]” (Id. at p. 552; see also Harris v. Atlantic Richfield Co. (1993) 14 Cal.App.4th 70, 78 [17 Cal. Rptr. 2d 649] [“when one party commits a fraud during the contract formation or performance, the injured party may recover in contract and tort”].)

The Supreme Court in Erlich v. Menezes (1999) 21 Cal.4th 543 (“Erlich”) supports the holding in Las Palmas Associates v. Las Palmas Center Associates (1991) 235 Cal.App.3d 1220, 1238-39 (“Las Palmas”):

We are aware of the danger of grafting tort liability on what ordinarily should be a breach of contract action. While society has a strong interest in the security of transactions, parties dealing at arm's length are permitted to reach a reasoned decision to breach an agreement, knowing their risk is limited to the reimbursement of the other side's compensatory losses. However, no public policy is served by permitting a party who never intended to fulfill his obligations to fraudulently induce another to enter into an agreement. In recognition of this principle, section 1710, subdivision (4) defines fraud as the making of a promise done without any intention of performing the obligation. “‘A promise to do something necessarily implies the intention to perform, and, where such an intention is absent, there is an implied misrepresentation of fact, which is actionable fraud. [Citations.]’ [Citations.]” (Joanaco Projects, Inc. v. Nixon & Tierney Constr. Co. (1967) 248 Cal. App. 2d 821, 831 [57 Cal. Rptr. 48], italics in original.)

Recognizing the adverse effect fraud has on commercial transactions, the law permits a defrauded party to seek punishment of the wrongdoer through the imposition of punitive damages. “Although punitive damages may not ordinarily be given for breach of contract, whether the breach be intentional, willful or in bad faith [citations], such damages may be awarded where a defendant fraudulently induces the plaintiff to enter into a contract. [Citations.] The words ‘oppression, fraud, or malice’ in Civil Code section 3294 being in the disjunctive, fraud alone is an adequate basis for awarding punitive damages. [Citations.]” (Glendale Fed. Sav. & Loan Assn. v. Marina View Heights Dev. Co. (1977) 66 Cal. App. 3d 101, 135 [135 Cal. Rptr. 802], fn. omitted.)

In proving fraud, however, rarely does a plaintiff have direct evidence of a defendant's fraudulent intent. Therefore, the subsequent conduct of a defendant, such as his failure to immediately carry out his pledge has some evidentiary value to show that a defendant made the promise without the intent to keep the obligation. But, “‘something more than nonperformance is required to prove the defendant's intent not to perform his promise.’ [Citations.]” (Tenzer v. Superscope, Inc. (1985) 39 Cal.3d 18, 30 [216 Cal. Rptr. 130, 702 P.2d 212].)

As in all substantial evidence challenges, the appellate court's power of review commences and ceases with the location of any substantial evidence, contradicted or uncontradicted, which will support the determination. (Gray v. Don Miller & Associates, Inc. (1984) 35 Cal.3d 498, 503 [198 Cal. Rptr. 551, 674 P.2d 253, 44 A.L.R.4th 763]; Bowers v. Bernards (1984) 150 Cal. App. 3d 870, 873-874 [197 Cal. Rptr. 925].) The appellate court cannot limit its review of the record to the evidence cited by the respondent; it must consider the entire record in determining whether the judgment is supported by sufficient evidence. (Bowers v. Bernards, supra, at p. 873.) Evidence is substantial if it is “reasonable in nature, credible, and of solid value.” (Estate of Teed (1952) 112 Cal. App. 2d 638, 644 [247 P.2d 54].) Moreover, the testimony of a single witness is sufficient to satisfy the test of the substantial evidence rule. (Kearl v. Board of Medical Quality Assurance (1986) 189 Cal. App. 3d 1040, 1052 [236 Cal. Rptr. 526].)

Defendant’s reliance on Robinson is misplaced. Robinson as not a fraudulent inducement case and, while the Robinson Court created a new exception to the economic loss rule in very narrow terms[2], it did not address or overrule the then-existing rule that a plaintiff can maintain a cause of action for fraudulent inducement against a defendant with whom he or she entered a contract without violating the economic loss rule. Rather, it cited to California an appellate court case, Erlich, which addressed that California appellate courts had repeatedly held that a cause of action for fraudulent inducement to enter a contract was not barred by the economic loss rule.

The Court next turns to Defendant’s other cited cases. Defendant’s other cited cases in this argument are federal cases. Federal cases are persuasive, rather than binding authority. (See Uecker v. Zentil (2016) 244 Cal.App.4th 789, 795.) Where California law is modeled on federal laws, federal decisions interpreting substantially identical statutes are unusually strong persuasive precedent on construction of our own laws. (Building Material & Construction Teamsters' Union v. Farrell (1986) 41 Cal. 3d 651, 658; Holmes v. McColgan (1941) 17 Cal. 2d 426, 430.) The Court looks to see how the federal cases align with binding California case precedent:

· Zagarian v. BMW of N. Am., LLC, 2019 U.S. Dist. LEXIS 200584/ 2019 WL 6111731 held that the economic loss rule applied where a plaintiff brought suit for fraud, generally. The Zagarian Court analyzed their fraud claim under Robinson’s exception and created an analogy to NuCal Foods, Inc. v. Quality Egg LLC (E.D. Cal. 2013) 918 F. Supp. 2d 1023, a federal case. It emphasized that the Robinson exception was not applicable as the plaintiff in the action did not allege that BMW of N. Am., LLC made any affirmative representations. The Zagarian Court did not address any of the California appellate law cited by Robinson regarding fraudulent concealment (i.e. Erlich).

· Similarly, Hammond v. BMW of N. Am., LLC (C.D. Cal.) 2019 U.S. Dist. LEXIS 113903/ 2019 WL 2912232 (“Hammond”) held that the exception in Robinson did not apply as the plaintiff did not allege that the defendant made any affirmative representations. Hammond, too, failed to address Robinson’s cited case in which it was presented that tort damages were allowed where the contract was fraudulently induced.

· Thompson v. BMW of N. Am. (C.D. Cal. 2019) 2019 U.S. Dist. LEXIS 134362/ 2019 WL 988694 (“Thompson”) held that the Robinson exception did not apply where a plaintiff’s claim was solely based on an omission regarding a vehicle’s oil consumption defect. As with the other cases, Thompson does not address Erlich, which was cited by the Robinson Court.

· Defendant fails to provide either a Westlaw or LexisNexis citation for Yi v. BMW of N. Am., LLC. A search of the case number provided pulls up various 2018 orders. Using the date of the opinion provided, the Court believes that Defendant is citing to Yi v. Bmw N. Am. (C.D. Cal. 2018) 2018 U.S. Dist. LEXIS 240135/ 2018 WL 11148443 (“Yi”). Yi again addresses a fraudulent concealment claim under the Robinson exception without addressing the California case precedent cited by Robinson.

· In Kelsey v. Nissan N. Am. (C.D. Cal. 2020) 2020 U.S. Dist. LEXIS 145411/ 2020 WL 4592744, the Kelsey Court once again cited to Robinson without addressing Robinson’s acceptance of Erlich. The “monstrously long” string cite that Defendant would like this Court to consider is only to federal cases.

· Hien Bui v. Mercedes-Benz USA, LLC (S.D. Cal.) 2021 U.S. Dist. LEXIS 13409/ 2021 WL 242936 (“Bui”), unlike the other cases, states: “Indeed, Robinson explicitly did not address application of the economic loss rule to a fraudulent concealment or omission claim. See Robinson, 34 Cal. 4th at 991 (noting that the court ‘need not address the issue of whether [Defendant's] intentional concealment constitutes an independent tort’). Thus, ‘[w]hile there is some conflict in the law, Robinson and the weight of authority within the Ninth Circuit suggest that the economic loss rule applies to fraudulent omission claims under California law.’ Sloan v. GM LLC, No. 16-CV-07244-EMC, 2020 U.S. Dist. LEXIS 71982, 2020 WL 1955643, at (N.D. Cal. Apr. 23, 2020) (granting summary judgment on fraudulent omission/concealment claim based on economic loss doctrine)” (Id. at 9.) Bui held that the economic loss rule barred their plaintiff’s claims for fraudulent omission because the complaint neither alleged any personal injury to Plaintiff or damage to physical property (independent of the vehicle in the action), nor alleged facts supporting a plausible inference that defendant Mercedez-Benz USA, LLC had any general duty to disclose the alleged air conditioning defect regardless of whether Plaintiff purchased a vehicle, meaning any omissions were not independent of any warranties related to the actual purchase. (Id. at 10.) The Bui Court states clearly: “If the complaint alleged that [Mercedez-Benz USA, LLC] made affirmative misrepresentations to induce Plaintiff to purchase the vehicle, the outcome here might be different because the element of a duty to disclose is not an element of fraud based on an affirmative misrepresentation. Because duty to disclose is an element of Plaintiff's fraudulent concealment claim, and to the extent there was any such duty, it existed solely as a result of Plaintiff's purchase of a vehicle manufactured by[Mercedez-Benz USA, LLC], Plaintiff's fraudulent concealment claim is dependent on [Mercedez-Benz USA, LLC]'s alleged breach of any warranties by failing to repair the air conditioning and barred by the economic loss rule.” (Ibid. at fn. 3.)

Defendant has only provided one viable citation to a federal court authority that addresses the fact that Robinson did not discuss application of the economic loss rule to a fraudulent concealment or omission claim. In that citation, the federal court clearly states that it might have ruled differently had the complaint contained different allegations.

The Court declines to follow the federal cases that do not encompass the totality of California case law. The Court emphasizes that it is bound by California case precedent.

In the present case, Plaintiffs’ allegations fit within the well-established fraudulent inducement exception to the economic loss rule. Plaintiffs allege that if Defendant had not intentionally concealed the design defect found in the 8L90 and 8L45 transmissions and marketed vehicles with the 8L90 and 8L45 transmissions, including the Subject Vehicle, as having “world-class performance” rivaling top performance vehicles, lightning-fast and smooth shifting, along with improved fuel efficiency, among other representations, Plaintiffs would have purchased the Vehicle.

For added clarity, the Court notes that the alleged marketing tactics by Defendant could be interpreted as affirmative representations, which are unlike Defendant’s cited federal cases as the majority of Defendant’s cited federal cases were based on complaints that did not allege any affirmative representations on behalf of the dealer defendants.

Defendant next argues that Plaintiff’s fraud claim fails as it is not pleaded with the requisite specificity as Plaintiff failed to allege (1) the identity of the individuals at Defendant’s corporation who purportedly concealed material facts or made untrue representations about the Silverado (2) their authority to speak and act on behalf of Defendant, (3) Defendant’s knowledge about alleged defects in Plaintiff’s Silverado at the time of purchase, (4) any interactions with Defendant before or during the purchase of Plaintiff’s Silverado, or (5) Defendant’s intent to induce reliance by Plaintiff to purchase the specific Silverado at issue. Finally, Defendant presents that Plaintiff does not allege a transactional relationship between the parties. That is, Plaintiff’s FAC does not allege that Plaintiff purchased his Silverado directly from Defendant or otherwise entered into a transaction with Defendant, thus, Plaintiff has not alleged facts demonstrating a duty to disclose.

Plaintiffs argue that they have alleged: (1) GM concealed or suppressed a material fact—that the Subject Vehicle’s transmission was defective, not repairable and unsafe; (2) GM was under a duty to disclose the fact to Plaintiffs where the transmission implicated a safety issue (see further analysis below); (3) GM intentionally concealed the defective and unsafe transmission from Plaintiffs with the intent to defraud by inducing Plaintiffs to purchase the Subject Vehicle; (4) Plaintiffs were unaware of the fact that the transmission was defective and unsafe and would not have purchased the vehicle had they known of the defective transmission. GM concealed these material facts; (5) Plaintiffs suffered damages as a result of the concealment and suppression of the material fact that the Subject Vehicle’s transmission was defective and unsafe as Plaintiffs paid money for an unsafe and defective vehicle. (See Complaint ¶¶ 4-14, 23-78, 120-140.) Plaintiff highlight that the rule of pleading fraud with specificity does not apply where the full information of facts lies in the knowledge of the opposing party. Thus, (1) fraudulent concealment actions can survive with less specificity, and (2) Defendant is seeking to impose an improper pleading standard on Plaintiffs’ Complaint. Plaintiffs reiterate their pleadings,[3] arguing that the pleadings support a duty to disclose under the holding in Daugherty v. Am. Honda Motor Co. (2006) 144 Cal.App.4th 824, that Plaintiffs’ actions influenced Plaintiffs’ choice to purchase the Subject Vehicle, and that Plaintiffs suffered damages.

Defendant’s Reply reiterates that high standard of specificity needed for fraud. Defendant argues that Plaintiffs do not allege concealment or information that Defendant should have disclosed and, instead, allege only in conclusory fashion that Defendant failed to disclose the defects. Next, Defendant further argues the Complaint does not show that Defendant knew about the defects in the Subject Vehicle with facts and Plaintiffs have failed to plead with specific facts that Defendant intended to defraud Plaintiff into purchasing the Subject Vehicle. Finally, Defendant presents that Plaintiffs have not pled damages.

“When a plaintiff alleges the fraudulent concealment of a cause of action, the same pleading and proof is required as in fraud cases: the plaintiff must show (1) the substantive elements of fraud, and (2) an excuse for late discovery of the facts. With respect to ... the belated discovery, the complaint must allege (1) when the fraud was discovered; (2) the circumstances under which it was discovered; and (3) that the plaintiff was not at fault for failing to discover it or had no actual or presumptive knowledge of facts sufficient to put him on inquiry.” (Community Cause v. Boatwright (1981) 124 Cal.App.3d 888, 900 [internal citation omitted].) As for the specificity requirement for fraudulent concealment, “[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.)

Regarding fraudulent concealment, Plaintiffs have pled that (1) “Defendant owed a continuous duty to disclose to Plaintiff the accurate character, quality, and nature of GENERAL MOTORS LLC vehicles suffering from the Transmission Defect, and the inescapable repairs, costs, and damages resulting from the Transmission Defect;” (Complaint ¶ 74); (2) Silence, where there is a duty to speak, may be the basis for equitable estoppel, citing Dettamanti v. Lompoc Union High School Dist. Of Santa Barbara County (1956) 143 Cal.App.2d 715, 720 [“The basis for an estoppel may be found in the failure of the party sought to be estopped to speak when he is under a duty to speak as well as in his speaking falsely and in a manner which tends to deceive.”] [see Complaint p. 17 fn. 1]; (3) “Plaintiff is informed and believe, and based thereon allege, that, prior to placing the [vehicles with the 8L90 and 8L45 transmissions] in the stream of commerce, GENERAL MOTORS LLC became aware of the Transmission Defect through sources not available to Plaintiff, including, but not limited to, preproduction testing, pre-production design failure mode and analysis data, production design failure mode and analysis data, early consumer complaints made exclusively to GENERAL MOTORS LLC’S network of dealers and directly to GENERAL MOTORS LLC, aggregate warranty data compiled from GENERAL MOTORS LLC’s network of dealers, testing conducted by GENERAL MOTORS LLC in response to consumer complaints, and repair order and parts data received by GENERAL MOTORS LLC from GENERAL MOTORS LLC’s network of dealers. On information and belief, GENERAL MOTORS LLC actively monitors and records consumer complaints made to GENERAL MOTORS LLC’s network of dealers as well as all service and repair work done related to the Transmission Defect at its network of dealers” (Complaint ¶ 25); and (4) Defendant began marketing the vehicles, including press releases in which vehicles with the 8L90 and 8L45 transmissions were paraded as high quality, including subject vehicle, in 2014 and continued to do so despite its knowledge of the transmission defect in these vehicles (See Complaint ¶¶ 28-30). Plaintiff further pleads that “Plaintiff could not have discovered through the exercise of reasonable diligence that Defendant was concealing material information about the Transmission Defect. See Cal. Com. Code § 2725(2).” (FAC ¶ 68.) Plaintiffs timeline for attempts to repair the defects/nonconformities is: (1) in December of 2018, Plaintiffs first presented the Subject Vehicle for repairs and Defendant’s dealership performed a “fast learn” and told Plaintiff that the vehicle was repaired; (2) Plaintiffs presented the Subject Vehicle again in June 2020 and Defendant’s dealership told Plaintiffs that the Subject Vehicle was operating normally and that no repairs were necessary; and (3) Plaintiffs again presented the Subject Vehicle to Defendants dealership in February of 2022 and Defendant authorized the dealership to perform a “re-learn” and told Plaintiffs the vehicle was repaired. (Complaint ¶¶ 62-64.) Plaintiffs allege that all defects were related to the alleged Transmission Defect. (Ibid.) Plaintiff alleges discovery of the fraud shortly before filing this action as the Transmission Defect was actively concealed. (Complaint ¶¶ 69, 73, 126, 127.)

The Court must accept these allegations as true for the purposes of a demurrer. (See Legal Standard, ante.) Based on the relaxed standards for fraudulent concealment, the Court believes that Plaintiffs have pled their claim with the requisite specificity. The Court believes this is akin to what was pled in Ehrlich, cited in Defendant’s Reply argument. (See Ehrlich, supra, 801 F.Supp.2d at 912 [“He alleges that BMW designed, manufactured, and sold BMW MINIs from 2001 to 2010 that it knew contained a design flaw that caused the windshield in those vehicles to have a high propensity to crack or chip under circumstances that would not cause non-defective windshields to similarly fail. (FAC ¶¶ 2—3.)”].) The Court notes that Defendant’s other cited case, Nelson v. Nissan N. Am., Inc. (D.N.J. 2012) 894 F.Supp.2d 558 (“Nelson”), addressed California Consumer Protection Claims such as the Consumer Legal Remedies Act ("CLRA") and Unfair Competition Law (“UCL”). Nelson does not address specificity of the pleadings for fraud under California law, but instead holds that a manufacturer must disclose a defect that poses a risk to personal safety. (Nelson, supra, 894 F.Supp.2d at 569-70.)

Regarding the argument over transactional relationships, substantial elements of an action for fraudulent concealment are:

“[T]he elements of an action for fraud and deceit based on a concealment are: (1) the defendant must have concealed or suppressed a material fact, (2) the defendant must have been under a duty to disclose the fact to the plaintiff, (3) the defendant must have intentionally concealed or suppressed the fact with the intent to defraud the plaintiff, (4) the plaintiff must have been unaware of the fact and would not have acted as he did if he had known of the concealed or suppressed fact, and (5) as a result of the concealment or suppression of the fact, the plaintiff must have sustained damage.”

Defendant does not believe that Plaintiffs have sufficiently plead all required elements as a transactional relationship was not alleged (affecting element number 2, ante). Defendant reiterates this argument in its Reply.

“A duty to speak may arise in four ways: it may be directly imposed by statute or other prescriptive law; it may be voluntarily assumed by contractual undertaking; it may arise as an incident of a relationship between the defendant and the plaintiff; and it may arise as a result of other conduct by the defendant that makes it wrongful for him to remain silent.” (SCC Acquisitions, Inc. v. Central Pacific Bank (2012) 207 Cal.App.4th 859, 860.)

Plaintiffs do not allege a fiduciary relationship between the parties. Plaintiff believes such an allegation is not needed as there is a safety issue, citing Daugherty v. Am. Honda Motor Co. (2006) 144 Cal.App.4th 824 (“Daugherty”) and its progeny. Plaintiffs further highlight that they have pled that Defendant made partial representations while also suppressing the material fact.

Daugherty does not involve fraudulent concealment. Specifically, plaintiff Daugherty asserted causes of action for breach of express warranty; violation of the Magnuson-Moss Warranty—Federal Trade Commission Improvement Act (15 U.S.C. § 2301 et seq.); unlawful, unfair and fraudulent business practices in violation of the unfair competition law; and violation of the CLRA (Civ. Code, § 1750 et seq.). (See Daugherty, supra, 144 Cal.App.4th at 829.) A discussion of fraudulent concealment occurs in the context of Outboard Marine Corp. v. Superior Court (1975) 52 Cal.App.3d 30, but does not discuss fiduciary relationships. The citation in Daugherty to Bardin v. DaimlerChrysler Corp. (2006) 136 Cal.App.4th 1255, 1261-62 (“Bardin”), which Plaintiff relies on, reads: “The complaint is devoid of factual allegations showing any instance of physical injury or any safety concerns posed by the defect. (See Bardin, supra, 136 Cal.App.4th at pp. 1261–1262, 1270 [plaintiffs alleged the manufacturer knew and concealed fact that tubular steel exhaust manifolds prematurely cracked and failed much earlier than conventional cast iron manifolds; plaintiffs did not allege any personal injury or safety concerns and did not allege use of the manifolds violated any warranty or other agreement].)” Bardin also relates to a CLRA claim and not one for fraudulent concealment under Cal. Civ. Code § 1710. The Bardin court further states: “ ‘It is fundamental that every affirmative misrepresentation of fact works a concealment of the true fact. … [¶] Fraud or deceit may consist of the suppression of a fact by one who is bound to disclose it or who gives information of other facts which are likely to mislead for want of communication of that fact.’ ” (Bardin, supra, 136 Cal.App.4th at 1276.)

California appellate courts have interpreted Daugherty as “holding the practice proscribed by Civil Code section 1770, subdivision (a)(7) ‘included “a proscription against a concealment of the characteristics, use, benefit, or quality of the goods contrary to that represented.” [Citation.] The court identified two categories of actionable nondisclosures by stating, ‘although a claim may be stated under the CLRA in terms constituting fraudulent omissions, to be actionable the omission must be [1] contrary to a representation actually made by the defendant, or [2] an omission of a fact the defendant was obliged to disclose.’ [Citation.]” (Gutierrez v. Carmax Auto Superstores California (2018) 19 Cal.App.5th 1234, 1254.) Examining both federal and California appellate court decision discussing safety concerns, the Gutierrez Court held: “a duty to disclose material safety concerns ‘can be actionable in four situations: (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.’ [Citation.]” (Id. at 1260.)

In fact, the Transmission Defect in the 8L90 and 8L45 transmissions causes unsafe conditions, including, but not limited to, the Subject Vehicle suddenly lurching forward, sudden acceleration, delayed acceleration, and sudden loss of forward propulsion. These conditions present a safety hazard because they severely affect the driver’s ability to control the car’s speed, acceleration, and deceleration. As an example, these conditions may make it difficult to safely merge into traffic, and drivers have reported sudden lurching into intersections when attempting to gradually accelerate from a stopped position and other dangerous driving conditions. Even more troubling, the Transmission Defect can cause the vehicle to delay downshifting and decelerating when the brakes are depressed.

The fact that the 8L90 or 8L45 transmissions installed in the Subject Vehicle is defective is also material because it presents a safety risk and places the driver and occupants at risk of serious injury or death. Because of the Transmission Defect, the Subject Vehicle may suddenly shift harshly or stall, thereby causing an accident. Drivers and occupants of the Subject Vehicle are at risk for rear-end collisions and other accidents caused by the Transmission Defect, and the general public is also at risk for being involved in an accident with a Subject Vehicle. . .

Plaintiffs allege that despite this risk, Defendant intentionally marketed the 8L90 transmission with affirmative misrepresentations such as being “tuned for world-class shift-response times;” “deliver[ing] shift performance that rivals the dual-clutch/semi-automatic transmissions found in many supercars – but with the smoothness and refinement that comes with a conventional automatic fitted with a torque converter;” and, in the context of a 2015 Corvette which had the same transmission, as having “comfort and drivability[,]” “lightning-fast shifts[,]” and “enhanc[ed] refinement, particularly during low-speed gear changes.” (Complaint ¶¶ 28-31.)

Plaintiffs have pled that the defect was a safety defect that could lead to serious injury. Plaintiff has also pled that Defendant had exclusive knowledge of the material facts. (See Complaint ¶¶ 25, 35, 126.) As such, an allegation of a fiduciary relationship is not needed between the parties.

Plaintiffs have pled that they were unaware of the fact as it was concealed (see Complaint [generally]) and would not have purchased the Subject Vehicle had he known about the Transmission Defect (FAC ¶¶ 12, 125, 139). The Court notes that the FAC at para. 125 concedes that Plaintiffs may have still purchased the Subject Vehicle, but not at the marketed price. Plaintiff further allege that they have suffered damages in the form of inescapable repairs and costs. (FAC ¶ 74.)

As such, Plaintiff’s FAC has pled that (1) Defendant concealed or suppressed a material fact; (2) Defendant was under a duty to disclose the fact to the plaintiff; (3) Defendant must have intentionally concealed or suppressed the fact with the intent to defraud not only Plaintiff, but the public through its press releases; (4) Plaintiff was unaware of the defect and would not have acted as he did if he had known of the it; and (5) as a result of the concealment or suppression of the fact, the plaintiff must have sustained damage. (See Boschma, supra, 198 Cal.App.4th 230, 248.)

Defendant seeks to strike punitive damages from Plaintiffs’ Prayer for Relief.

Defendant presents that punitive damages are not available under the Song-Beverly Act as the statute limits recovery to a refund of the purchase price paid and payable (or replacement of the subject vehicle), plus—under certain circumstances—a Civil Penalty not to exceed two times Plaintiff’s actual damages. Defendant believes that, Song-Beverly Act aside, the FAC fails to state facts sufficient to support punitive damages as it does not prove that Defendant has been guilty of oppression, fraud, or malice as defined in Cal. Civ. Code § 3294(c). Defendant also argues that, as the Fourth Cause of Action (Fraud - Fraudulent Inducement – Concealment) fails, it cannot support punitive damages.

Plaintiffs present that their Complaint supports punitive damages as it is only requested for the Fourth Cause of Action (Fraud - Fraudulent Inducement – Concealment) and they have properly pled facts from which it can reasonably be inferred that Defendant acted with malice, oppression, or fraud. Plaintiff reiterates arguments associated with the Demurrer in his Opposition to the Motion to Strike. Plaintiff further argues that the Fourth cause of Action (Fraud - Fraudulent Inducement – Concealment) is pled with the requisite specificity and that Plaintiffs need not show a fiduciary or direct relationship in a fraudulent concealment claim regarding a safety issue posed by the defect in the Subject Vehicle. These arguments are reiterations of those in the Demurrer. Plaintiffs also include a delayed discovery rule argument. As the Court mentioned, ante, delayed discovery is not at issue for this Demurrer. This applies to the Motion to Strike as well as no argument is presented regarding delayed discovery.

Defendant’s Reply reiterates that Plaintiffs have not alleged facts sufficient to sustain a claim for fraud, that Plaintiffs have not alleged a viable claim for punitive damages under Cal. Civ. Code § 3294, and that punitive damages are not available under the Song-Beverly Act.

The Court has overruled Defendant’s Demurrer. As such, Defendant’s argument regarding (Fraud - Fraudulent Inducement – Concealment) is now inapplicable to this Motion to Strike.

As the Fourth Cause of Action (Fraud - Fraudulent Inducement – Concealment) has been properly alleged, Plaintiffs have pled facts from which it can be reasonably inferred that Defendant acted with fraud under Cal. Civ. Code § 3294.

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.

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.

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 Fourth Cause of Action (Fraud - Fraudulent Inducement – Concealment) is based on pre-sale actions of fraudulent concealment which ultimately led to the purchase of the Subject Vehicle.

[1] Plaintiffs Shaun Lemon and Heather Lemon share the same surname. As such, the Court addresses each plaintiff by their individual names for the purpose of clarity. No disrespect is meant.

[2] The Robinson Court held: “Because [defendant's] affirmative intentional misrepresentations of fact … are dispositive fraudulent conduct related to the performance of the contract, we need not address the issue of whether [defendant's] intentional concealment constitutes an independent tort.” (Robinson, supra, 34 Cal.4th at p. 991.) The court further stated its holding was “narrow in scope and limited to a defendant's affirmative misrepresentations on which a plaintiff relies and which expose a plaintiff to liability for personal damages independent of the plaintiff's economic loss.” (Id. at 993.)

[3] One of Plaintiffs’ arguments addresses the Complaint as the “FAC” which stands for “First Amended Complaint.” There is no FAC in this action. The Court believes this is a Scrivener’s Error.