Judge: Stephen P. Pfahler, Case: 23STCV13765, Date: 2024-01-26 Tentative Ruling


Case Number: 23STCV13765    Hearing Date: January 26, 2024    Dept: 68

Dept. 68

Date: 1-26-24

3Case #: 2STCV13765

Trial Date: Not Set

 

DEMURRER TO THE FIRST AMENDED COMPLAINT

 

MOVING PARTY: Defendant, General Motors, LLC

RESPONDING PARTY: Plaintiff, Garrett Matsunaga

 

RELIEF REQUESTED

Demurrer to the Fist Amended Complaint

·         1st Cause of Action: Fraud – Concealment

·         2nd Cause of Action: Violations of Business & Professions Code section 17200

 

Motion to Strike the Claim for Punitive Damages

 

SUMMARY OF ACTION

On July 6, 2018, plaintiff Garrett Matsunaga leased a Chevrolet Bolt vehicle, with defects in the battery and front seat belt pretensioner. On June 14, 2023, Plaintiff filed a complaint for Fraud – Concealment, Negligent Misrepresentation, Violation of Business and Professions Code section 17200, Violation of Song Beverly Act – Breach of Express Warranty, Violation of Song-Beverly Act – Breach of Implied Warranty, and Violation of Song Beverly Act –Civil Code section 1793.2, subdivision (b). On October 26, 2023, the court sustained the demurrer to the first, second and third causes of action based on the unopposed argument under the statute of limitations, and on the opposed argument for lack of sufficient factual particularity. The court also granted the motion to strike.

 

On November 15, 2023, Plaintiff filed a first amended complaint for Fraud – Concealment, Violation of Business and Professions Code section 17200, Violation of Song Beverly Act – Breach of Express Warranty, Violation of Song-Beverly Act – Breach of Implied Warranty, and Violation of Song Beverly Act –Civil Code section 1793.2, subdivision (b).

 

RULING

Demurrer: Overruled.

General Motors, LLC (GM) brings the subject demurer to the first and second causes of action for Fraud – Concealment and Violations of Business & Professions Code section 17200 in the first amended complaint on grounds that the first and second causes of action are barred by the statute of limitations, and lacks facts in support of the claims. Plaintiff counters that the causes of action were both timely filed and sufficiently pled. GM in reply reiterates the statute of limitations bar, and lack of factual basis.

 

A demurrer is an objection to a pleading, the grounds for which are apparent from either the face of the complaint or a matter of which the court may take judicial notice. (Code Civ. Proc., § 430.30, subd. (a); see also Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) The purpose of a demurrer is to challenge the sufficiency of a pleading “by raising questions of law.” (Postley v. Harvey (1984) 153 Cal.App.3d 280, 286.) “In the construction of a pleading, for the purpose of determining its effect, its allegations must be liberally construed, with a view to substantial justice between the parties.” (Code Civ. Proc., § 452.) The court “ ‘ “treat[s] the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law . . . .” ’ ” (Berkley v. Dowds (2007) 152 Cal.App.4th 518, 525.) In applying these standards, the court liberally construes the complaint to determine whether a cause of action has been stated.  (Picton v. Anderson Union High School Dist. (1996) 50 Cal.App.4th 726, 733.)

 

“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; Williams v. Beechnut Nutrition Corp. (1986) 185 Cal.App.3d 135, 139 [“[U]nder our liberal pleading rules, where the complaint contains substantive factual allegations sufficiently apprising defendant of the issues it is being asked to meet, a demurrer for uncertainty should be overruled or plaintiff given leave to amend.]

 

The operative complaint relies on allegations that GM failed to disclose a known defect in the battery system within the vehicle at the time of the lease, of which Plaintiff only discovered upon a November 13, 2020, vehicle recall announcement for the vehicle. Additional recalls on the battery system and seatbelt pretensioner occurred on July 23, 2021, and December 15, 2022, respectively.

 

1st Cause of Action: Fraud – Concealment

GM challenges the fraud – concealment cause of action on grounds of the three-year statute of limitations and insufficient factual particularity.

 

The statute of limitation on a fraud claim is three years with accrual only upon acquiring “knowledge of facts sufficient to make a reasonably prudent person suspicious of fraud, thus putting him on inquiry.” (Code Civ. Proc., § 338, subd. (d); Vega v. Jones, Day, Reavis & Pogue (2004) 121 Cal.App.4th 282, 298 accord Hobart v. Hobart Estate Co. (1945) 26 Cal.2d 412, 437.) GM relies on the allegation in the operative complaint regarding the delivery of a defective vehicle on July 6, 2018, with the complaint not filed until June 14, 2022. [First Amend. Comp., ¶ 10.] Plaintiff concedes to taking possession of the defective vehicle in 2018, but only first discovered any defects upon the first recall on November 13, 2020. [First Amend. Comp., ¶ 18.]

 

For purposes of the demurrer, the court finds the allegations sufficiently articulate the delayed discovery of the defects no earlier than November 13, 2020 via the recall notice, with the complaint subsequentl filed less than three years from the date of said first recall. The court is required to accept the allegations in the complaint as true.  Although the arguments in the reply may have merit, the court may not consider the new argument submitted in the reply regarding the accrual of the statute of limitations on July 6, 2018. The argument apparently relies on other indicators constituting a form of inquiry notice, which constitutes inference beyond the four corners of the operative pleading. The court overrules the demurrer as to the statute of limitations.  This issue may be more properly addressed via summary judgment.

 

GM next challenges the lack of sufficient factual particularity on the fraud claim, including any identification of a GM representative responsible for concealing said material information, thereby inducing reliance. Plaintiff maintains the cause of action is both properly pled, and no additional heightened pleading standards apply regarding specific identification of a GM representative.

 

“[T]he elements of a cause of action for fraud based on 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.” (Bank of America Corp. v. Superior Court (2011) 198 Cal.App.4th 862, 870 [internal quotations omitted]; Marketing West, Inc. v. Sanyo Fisher (USA) Corp. (1992) 6 Cal.App.4th 603, 612–613.)

 

“‘Active concealment or suppression of facts by a nonfiduciary “is the equivalent of a false representation, i.e., actual fraud.” [Citation.] (Citation).)’ A fraud claim based upon the suppression or concealment of a material fact must involve a defendant who had a legal duty to disclose the fact. (Civ.Code, § 1710, subd. (3) [a deceit includes “[t]he 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”]; Citation.)” (Hoffman v. 162 North Wolfe LLC (2014) 228 Cal.App.4th 1178, 1186.) “A plaintiff's burden in asserting a fraud claim against a corporate employer is even greater. In such a case, the plaintiff must ‘allege the names of the persons who made the allegedly fraudulent representations, their authority to speak, to whom they spoke, what they said or wrote, and when it was said or written.’” (Lazar v. Superior Court, (1996) 12 Cal.4th 631, 645.)

 

“There are ‘four circumstances in which nondisclosure or concealment may constitute actionable fraud: (1) when the defendant is in a fiduciary relationship with the plaintiff; (2) when the defendant had exclusive knowledge of material facts not known to the plaintiff; (3) when the defendant actively conceals a material fact from the plaintiff; and (4) when the defendant makes partial representations but also suppresses some material facts. [Citation.]’” (LiMandri v. Judkins (1997) 52 Cal.App.4th 326, 336.) “Each of the other three circumstances in which nondisclosure may be actionable presupposes the existence of some other relationship between the plaintiff and defendant in which a duty to disclose can arise. … 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.” (Id. at pp. 336–337.) In addition to the authority cited above, California law also provides for disclosure obligations by resellers. “Under California law, a vendor has a duty to disclose material facts not only to immediate purchasers, but also to subsequent purchasers when the vendor has reason to expect that the item will be resold.” (OCM Principal Opportunities Fund, L.P. v. CIBC World Markets Corp. (2007) 157 Cal.App.4th 835, 859.)

 

The court finds the complaint properly alleges the lease of the GM vehicle from an authorized dealership, with the represented warranty and required merchantability. [First Amend. Comp., ¶¶ 8-9.] Plaintiff details knowledge of the defects prior to the execution of the lease. [Comp., ¶¶ 10-17.]

 

Neither party addresses the relationship of GM to its licensed dealership. A recent case, also not presented by either party, addressed similar claims.

 

“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. In light of these allegations, we decline to hold plaintiffs’ claim is barred on the ground there was no relationship requiring Nissan to disclose known defects. In light of these allegations, we decline to hold plaintiffs’ claim is barred on the ground there was no relationship requiring Nissan to disclose known defects.” (Dhital v. Nissan North America, Inc. (2022) 84 Cal.App.5th 828, 844.)

 

The case was granted review by the California Supreme Court. “Grant of review by the Supreme Court of a decision by the Court of Appeal does not affect the appellate court's certification of the opinion for full or partial publication under rule 8.1105(b) or rule 8.1110, but any such Court of Appeal opinion, whether officially published in hard copy or electronically, must be accompanied by a prominent notation advising that review by the Supreme Court has been granted. [¶] (2) The Supreme Court may order that an opinion certified for publication is not to be published or that an opinion not certified is to be published. The Supreme Court may also order depublication of part of an opinion at any time after granting review.” (Cal. Rules of Court, rule 8.1105(e)(1)(B), (e)(2).) The California Supreme Court specifically denied the request for depublication was denied. Given the potential change to California law on the subject matter following an opinion on the action, the court considers the case, the court considers the First Appellate District opinion as persuasive authority.

 

The withheld information constituted a material fact that impacts a purchase decision. The court also finds that even without an explicit allegation of an agency relationship, the circumstances of the dealership delegated responsibility for provision of warranty services establishes a relationship for purposes of ruling on the demurrer. In other words, the court declines to make any finding as a matter of law regarding the scope of any agency relationship, especially given the review of Dhital v. Nissan North America, as well as other cases potentially addressing the scope of agency in regards to enforcement of arbitration clauses on manufacture warranty claims through dealership purchased vehicles pending (See Ford Motor Warranty Cases (2023) 89 Cal.App.5th 1324). Given the allegations of a failure to disclose the known defect, the complaint sufficiently articulates said claim pending further clarification from the California Supreme Court.

 

The court declines to further consider the arguments in reply challenging the basis of “exclusive knowledge” or the lack of sufficient damages. Again, the arguments are extrinsic to the standards required for the claim. The scope of damages is the diminished capacity of the vehicle during the relevant period.  The demurrer is overruled.

 

2nd Cause of Action: Violations of Business & Professions Code section 17200

GM challenges the violations of Business & Professions Code section 17200 claims on grounds of insufficient facts due to a lack of any misrepresentation.

 

“The UCL does not proscribe specific acts, but broadly prohibits ‘any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising....’” [¶] “‘A private plaintiff must make a twofold showing: he or she must demonstrate injury in fact and a loss of money or property caused by unfair competition.’ (Citation.)” (Durell v. Sharp Healthcare (2010) 183 Cal.App.4th 1350, 1359.) Fact specific pleading is not required in order to allege an unfair business practice. (Quelimane Co. v. Stewart Title Guaranty Co. (1998) 19 Cal.4th 26, 46–47.

 

An “unlawful” practice “means any practices forbidden by law, be it civil or criminal, federal, state, or municipal, statutory, regulatory, or court-made.… ‘Unfair’ simply means any practice whose harm to the victim outweighs its benefits. (Citation.) ‘Fraudulent,’ as used in the statute, does not refer to the common law tort of fraud but only requires a showing members of the public ‘“are likely to be deceived.”’” (Saunders v. Superior Court (1994) 27 Cal.App.4th 832, 838–839.) Fundamentally, recovery requires a direct harm to the consumer, and actual reliance. (Kwikset Corp. v. Superior Court (2011) 51 Cal.4th 310, 326–327.)

 

As addressed in the fraud cause of action, the court finds the withheld information of the knowing defect constitutes an “unfair” business practice for purposes of the demurrer. The demurrer is overruled.

 

Motion to Strike

GM moves to strike the prayer for punitive damages. GM contends the operative complaint insufficiently articulates fraud, and therefore cannot support the claim for punitive damages.

 

Civil Code section 3294, subdivision (c) authorizes punitive damages upon a showing of malice, oppression, or fraud, which are defined as follows:

 

(1) “Malice” means conduct which is intended by the defendant to cause injury to the plaintiff or despicable conduct which is carried on by the defendant with a willful and conscious disregard of the rights or safety of others.

(2) “Oppression” means despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person’s rights.

(3) “Fraud” means an intentional misrepresentation, deceit, or concealment of a material fact known to the defendant with the intention on the part of the defendant of thereby depriving a person of property or legal rights or otherwise causing injury.

 

Plaintiff only seeks punitive damages as part of the first cause of action for fraud-concealment. [First Amend. Comp., ¶ 37.] The court overruled the demurrer to the fraud cause of action and otherwise declines to separately and independently consider the factual foundation in the instant motion to strike. Allegations of fraud may be the basis of punitive damages.  As such, the motion to strike is therefore denied.

 

In summary, the demurrer is overruled, and the motion to strike denied. GM to answer the first amended complaint within 10 days of this order.

 

Defendant to give notice.