Judge: Teresa A. Beaudet, Case: 22STCV11826, Date: 2022-10-28 Tentative Ruling

Case Number: 22STCV11826    Hearing Date: October 28, 2022    Dept: 50

Superior Court of California

County of Los Angeles

Department 50

            Background

Plaintiff Imelda Ortiz (“Plaintiff”) filed this lemon law action on April 7, 2022, against Defendant General Motors LLC (“GM”). Plaintiff filed the operative First Amended Complaint (“FAC”) on June 13, 2022, asserting causes of action for (1) violation of subdivision (d) of Civil Code section 1793.2, (2) violation of subdivision (b) of Civil Code section 1793.2, (3) violation of subdivision (a)(3) of Civil Code section 1793.2, (4) breach of the implied warranty of merchantability, and (5) fraudulent inducement-concealment. 

In the FAC, Plaintiff alleges that on or about June 3, 2017, she entered into a warranty contract with GM regarding a 2017 Chevrolet Bolt EV vehicle (the “Vehicle”), which was manufactured and/or distributed by GM. (FAC, ¶ 8.) Plaintiff alleges that defects and nonconformities to warranty manifested themselves within the applicable express warranty period, including, but not limited to, the battery and the electrical system, among other defects and nonconformities. (FAC, ¶ 13.)

GM now demurs to the fifth cause of action for fraudulent inducement-concealment. GM also moves to strike Plaintiff’s request for punitive damages. Plaintiff opposes both.

Discussion

A.    Demurrer

A demurrer can be used only to challenge defects that appear on the face of the pleading under attack or from matters outside the pleading that are judicially noticeable. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) “To survive a demurrer, the complaint need only allege facts sufficient to state a cause of action; each evidentiary fact that might eventually form part of the plaintiff’s proof need not be alleged.” (C.A. v. William S. Hart Union High School Dist. (2012) 53 Cal.4th 861, 872.) For the purpose of testing the sufficiency of the cause of action, the demurrer admits the truth of all material facts properly pleaded. (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 966-967.) A demurrer “does not admit contentions, deductions or conclusions of fact or law.” (Daar v. Yellow Cab Co. (1967) 67 Cal.2d 695, 713.)

GM contends that the fifth cause of action for fraudulent inducement-concealment must fail because Plaintiff failed to plead this cause of action with the required specificity.

The elements of an 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.” (Marketing West, Inc. v. Sanyo Fisher Corp. (1992) 6 Cal.App.4th 603, 612-613.)

GM asserts that the fraudulent-inducement concealment cause of action must fail because

Plaintiff failed to allege (i) the identity of the individuals at GM who purportedly concealed material facts or made untrue representations about her Bolt, (ii) their authority to speak and act on behalf of GM, (iii) GM’s knowledge about alleged defects in Plaintiff’s Bolt at the time of purchase, (iv) any interactions with GM before or during the purchase of her Bolt, or (v) GM’s intent to induce reliance by Plaintiff to buy the specific Bolt at issue. GM notes that “[t]he requirement of specificity in a fraud action against a corporation requires the plaintiff to 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.” (Tarmann v. State Farm Mut. Auto. Ins. Co. (1991) 2 Cal.App.4th 153, 157.)

            Plaintiff counters that its fraudulent-inducement concealment cause of action is “strictly based on a failure to disclose.” (Opp’n at p. 6:16-17.) Plaintiff notes that in Alfaro v. Community Housing Improvement System & Planning Assn., Inc. (2009) 171 Cal.App.4th 1356, 1384, the Court of Appeal noted that “[i]n California, fraud must be pled specifically; general and conclusory allegations do not suffice…Thus the policy of liberal construction of the [pleadings]…will not ordinarily be invoked to sustain a pleading defective in any material respect…This particularity requirement necessitates pleading facts which show how, when, where, to whom, and by what means the representations were tendered…This statement of the rule reveals that it is intended to apply to affirmative misrepresentations…it is harder to apply this rule to a case of simple nondisclosure. How does one show how and by what means something didn’t happen, or when it never happened, or where it never happened?” (Internal quotations omitted.)

            GM also asserts that the allegations of the FAC do not establish GM’s intent to defraud Plaintiff. As GM notes, Plaintiff does not plead specific facts as to how GM specifically intended to defraud her to induce her to purchase the Subject Vehicle. Rather, Plaintiff alleges in a conclusory fashion that “[i]n failing to disclose the defects in the Vehicle’s lithium-ion battery, Defendant has knowingly and intentionally concealed material facts and breached its duty not to do so.” (FAC, ¶ 92.)

Plaintiff counters that the requisite intent here is the intent to induce reliance. Plaintiff cites to Lovejoy v. At&T Corp. (2001) 92 Cal.App.4th 85, 93, which provides, “the only intent by a defendant necessary to prove a case of fraud is the intent to induce reliance. Moreover, liability is affixed not only where the plaintiff’s reliance is intended by the defendant but also where it is reasonably expected to occur.” (Internal emphasis omitted.) Plaintiff points to her allegations that “GM failed to disclose the existence of the Battery Defect at GM’s authorized dealership and during direct calls to Defendant. Had Plaintiff known that the Vehicle suffered from the Battery Defect, he would not have purchased the Vehicle.” (FAC, ¶ 89.)

            GM also asserts that the economic loss rule precludes the fraudulent inducement-concealment claim. The Court agrees. “[C]onduct amounting to a breach of contract becomes tortious only when it also violates a duty independent of the contract arising from principles of tort law.” (Erlich v. Menezes (1999) 21 Cal.4th 543, 551.) In other words, “[t]he economic loss rule requires a purchaser to recover in contract for purely economic loss due to disappointed expectations, unless he can demonstrate harm above and beyond a broken contractual promise.” (Robinson Helicopter Co., Inc. v. Dana Corp. (2004) 34 Cal.4th 979, 988.) Thus, “[t]ort damages have been permitted in contract cases where a breach of duty directly causes physical injury; for breach of the covenant of good faith and fair dealing in insurance contracts; for wrongful discharge in violation of fundamental public policy; or where the contract was fraudulently induced.” (Id. at pp. 989-990 [references to “citation” omitted].)

In Robinson Helicopter, the tort claim at issue was a fraud and misrepresentation claim. (Id. at p. 990.) The California Supreme Court held that “the economic loss rule does not bar [plaintiff’s] fraud and intentional misrepresentation claims because they were independent of [defendant’s] breach of contract.” (Id. at p. 991.) This 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   p. 993.) In addition, the California Supreme Court specifically declined to address the issue of whether “intentional concealment constitutes an independent tort.” (Id. at p. 991.)

Here, Plaintiff acknowledges there are no allegations of any affirmative misrepresentations on which Plaintiff relied. (See Opp’n to Demurrer at p. 4:21-23, “[b]ut Robinson Helicopter does not answer the question whether fraudulent inducement-concealment claims, where no ‘affirmative’ misrepresentations are made, also count as an exception to the rule”; see also Opp’n to Motion to Strike at p. 2:12-13, “Plaintiff is alleging fraudulent inducement-concealment, not fraud by affirmative misrepresentation…”)

In addition, GM asserts that Plaintiff did not plead any facts alleging damages or harm for anything other than economic loss (i.e., her decision to buy the Vehicle). As GM notes, Plaintiff alleges that “[h]ad GM and its dealership(s) revealed the Battery Defect, Plaintiff would have been aware of it and would not have purchased the Subject Vehicle” (FAC, ¶ 37.) In the opposition, Plaintiff asserts that she “has expressly alleged that the Battery Defect in Subject Vehicle is a safety hazard and is unreasonably dangerous to consumers because it can suddenly and unexpectedly cause overheating and spontaneous combustion at any time. Such unexpected battery failure and catastrophic fire, thereby, exposes Plaintiff and her passengers (along with other drivers who share the road or garage with Plaintiff) to a serious risk of accident and injury.” (Opp’n at p. 4:4-9, citing to FAC, ¶¶ 25, 39, and 87.) But Plaintiff does not identify any allegations of actual physical injury caused to Plaintiff, her passengers, or other drivers.

Based on the foregoing, the Court finds that GM has demonstrated that the economic loss rule prevents Plaintiff from proceeding with the fraudulent inducement-concealment cause of action.

            Lastly, Plaintiff notes that the United States Court of Appeals for the Ninth Circuit recently issued an “Order Certifying Question to the Supreme Court of California” in the matter Rattagan v. Uber Techs., Inc. (9th Cir. 2021) 19 F.4th 1188. Per the December 6, 2021 Order, the following question was certified to the Supreme Court of California: “Under California law, are claims for fraudulent concealment exempted from the economic loss rule?” (Id. at p. 1193.) Plaintiff notes that the Supreme Court of California granted the request for certification (Rattagan v. Uber Technologies, Inc. (Feb. 9, 2022, No. S272113)), and that the case is currently pending. Plaintiff argues that “[i]f the court does not overrule GM’s demurrer on economic loss rule grounds, Plaintiff requests the Court overrule the demurrer without prejudice.[1] If the Supreme Court in Rattagan rules that the economic loss rule bars a claim for fraudulent concealment, then Defendants shall be permitted to re-raise this issue with the Court.” (Opp’n at p. 5:19-22.) However, Plaintiff fails to identify any proposed amendments to the fraudulent inducement-concealment cause of action that would cure the defects identified above.

B.    Motion to Strike

GM also moves to strike the demand for punitive damages contained in the FAC. (FAC, p. 17:9.) Because the demurrer to the fraudulent inducement-concealment cause of action is sustained, and because no other cause of action in the FAC can support a claim for punitive damages, the Court grants GM’s motion to strike.[2]

Conclusion

For the foregoing reasons, the Court sustains GM’s demurrer to the fifth cause of action for fraudulent inducement-concealment without leave to amend, because Plaintiff has not proffered any basis for such amendment. GM’s motion to strike punitive damages is granted.

GM is ordered to file its answer to the FAC within 10 days of this Order.

GM is ordered to give notice of this Order.

DATED:  October 28, 2022                           ________________________________

Hon. Teresa A. Beaudet

Judge, Los Angeles Superior Court