Judge Theresa M. Traber, Case 22STCV18068 2023-01-30 Tentative Ruling

Judge: Theresa M. Traber, Case: 22STCV18068, Date: 2023-01-30 Tentative Ruling

Case Number: 22STCV18068 Hearing Date: January 30, 2023 Dept: 47

Tentative Ruling

Judge Theresa M. Traber, Department 47

HEARING DATE: January 30, 2023 TRIAL DATE: NOT SET

CASE: Stephen Suh v. American Honda Motor Co., Inc.

CASE NO.: 22STCV18068

(1) DEMURRER TO COMPLAINT

(2) MOTION TO STRIKE PORTIONS OF COMPLAINT

MOVING PARTY: (1)(2) Defendant American Honda Motor Co., Inc.

RESPONDING PARTY(S): (1)(2) Plaintiff Stephen Suh

STATEMENT OF MATERIAL FACTS AND/OR PROCEEDINGS:

This is a lemon law action filed on June 1, 2022. Plaintiff alleges he purchased a 2019 Honda Odyssey which had electrical, transmission, and engine defects.

Defendant demurs to the fifth cause of action for fraudulent concealment and moves to strike the allegations relating to that cause of action.

TENTATIVE RULING:

Defendant’s Demurrer to the fifth cause of action is OVERRULED.

Defendant’s Motion to Strike is DENIED.

DISCUSSION:

Plaintiff’s Request for Judicial Notice

Plaintiff requests that the Court take judicial notice of the rulings in select California Appellate cases and in US District Court cases. As these materials are irrelevant to the Court’s ruling, Plaintiff’s requests are DENIED. (Gbur v. Cohen (1979) 93 Cal.App.3d 296, 301 (“[J]udicial notice . . . is always confined to those matters which are relevant to the issue at hand.”].)

Demurrer to Complaint

Defendant demurs to the fifth cause of action for fraudulent concealment for failure to state facts sufficient to constitute a cause of action.

Legal Standard

A demurrer 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 via proper judicial notice. (Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994.) “A demurrer tests the pleadings alone and not the evidence or other extrinsic matters. Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed.” (SKF Farms v. Superior Court (1984) 153 Cal.App.3d 902, 905.) “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 p. 747.) The ultimate facts alleged in the complaint must be deemed true, as well as all facts that may be implied or inferred from those expressly alleged. (Marshall v. Gibson, Dunn & Crutcher (1995) 37 Cal.App.4th 1397, 1403; see also Shields v. County of San Diego (1984) 155 Cal.App.3d 103, 133 [stating, “[o]n demurrer, pleadings are read liberally and allegations contained therein are assumed to be true”].) “This rule of liberal construction means that the reviewing court draws inferences favorable to the plaintiff, not the defendant.” (Perez v. Golden Empire Transit Dist. (2012) 209 Cal.App.4th 1228, 1238.)

Meet and Confer

Before filing a demurrer, the demurring party shall meet and confer in person or by telephone with the party who has filed the pleading subject to the demurrer and file a declaration detailing their meet and confer efforts. (Code Civ. Proc., § 430.41(a).) However, an insufficient meet and confer process is not grounds to overrule or sustain a demurrer. (Code Civ. Proc., § 430.41(a)(4).)

The Declaration of Linda Echegaray states that Defendant’s counsel attempted to meet and confer with Plaintiff’s counsel electronically multiple times between June 29, 2022 and August 5, 2022, but never received a response. (Declaration of Linda Echegaray ISO Demurrer ¶¶ 2-6.) The Court therefore finds that Defendant has satisfied the statutory meet and confer requirements.

Analysis

Defendant demurs to the fifth cause of action for fraudulent concealment for failure to state facts sufficient to constitute a cause of action.

The elements of fraud are (a) a misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of its falsity; (c) intent to induce reliance; (d) justifiable reliance; and (e) resulting damage. (Lazar v. Superior Court (1996) 12 Cal.4th 631, 638.)

The elements of fraudulent concealment are (1) concealment or suppression of a material fact; (2) by a defendant with a duty to disclose the fact to the plaintiff; (3) intent to defraud the plaintiff by intentionally concealing or suppressing the fact; (4) the plaintiff was unaware of the fact and would not have acted as he or she did if he or she had known of the concealed or suppressed fact; and (5) the plaintiff sustained damage as a result of the concealment or suppression of fact. (Hambridge v. Healthcare Partners Medical Group, Inc. (2015) 238 Cal.App.4th 124, 162.)

Defendant advances several arguments in support of its position: first, that Plaintiff lacks standing to bring this claim; second, that Defendant had no duty to disclose any facts; and third, that Plaintiff’s fraud claim is barred by the economic loss rule.

1. Standing

Defendant first attacks this cause of action for lack of standing because it does not allege any defects in Plaintiff’s vehicle. Defendant argues that the Complaint is defective in this respect because it states that the vehicle had defects in the “electrical, transmission, and/or engine systems,” among others. (Complaint ¶ 15) As the Court must construe these allegations as true for the purposes of a demurrer, Defendant’s argument is plainly without merit.

2. Duty to Disclose

Defendant next attacks this cause of action on the grounds that Plaintiff has not adequately alleged facts giving rise to a duty to disclose.

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; or (4) when the defendant makes partial representations but also suppresses some material fact.” (LiMandri v. Judkins (1997) 52 Cal.App.4th 326, 336.) A duty to disclose may also arise when a defendant possesses or exerts control over material facts not readily available to the plaintiff. (Jones v. ConocoPhillips Co. (2011) 198 Cal.App.4th 1198, 1199.)

“Even under the strict rules of common law pleading, one of the canons was that less particularity is required when the facts lie more in the knowledge of the opposite party.” (Alfaro v. Community Housing Improvement System & Planning Assn., Inc. (2009) 171 Cal.App.4th 1256, 1384.)

Defendant first argues that there is no fiduciary relationship between the parties. Plaintiff concedes this line of argument, as the Complaint instead alleges that liability arises from Defendant’s exclusive knowledge and concealment of material facts.

Defendant’s second argument that the Complaint does not adequately identify the material facts of which Defendant had exclusive knowledge is plainly without merit. Defendant contends that the Complaint does not allege any basis for Defendant to have exclusive knowledge of the defects in Plaintiff’s vehicle specifically. This argument is directly contradicted by the face of the Complaint. The complaint alleges a variety of defects, stating that “[d]efects and/or nonconformities to warranty manifested themselves . . . including . . . the electrical, transmission, and/or engine systems.” (Complaint ¶ 15.) Plaintiff next alleges specific facts demonstrating that Defendant acquired information showing that “the transmission installed on the subject vehicle was defective.” (Id. ¶¶ 47-48.) Further, the Complaint also contains sufficient allegations to support Defendant’s duty to disclose the defect, because it alleges that Defendant had exclusive knowledge of the defect and that the defect was not known by Plaintiff. (Id. ¶ 51.) Defendant’s argument—unsupported by reference to any authority—that these allegations are somehow self-defeating in that they tend to show that the information was known to Defendant’s dealers, and not solely Defendant itself, is similarly unpersuasive.

Defendant’s third argument that the Complaint does not allege facts showing active concealment is also without merit. Plaintiff alleges that he did not know about the defect, and, had he known, he would not have purchased the vehicle. (Complaint ¶ 49.) Plaintiff further alleges that Defendant did know about the defect and deliberately failed to disclose it. (Id. ¶¶ 49-51.) Taken as true, these allegations are sufficient to establish active concealment for the purposes of a demurrer.

Defendant’s final argument is that the Complaint does not allege any representations made by Defendant to Plaintiff that could give rise to a duty to disclose on the basis of partial representations. Plaintiff also concedes this line of argument, as the Complaint alleges that the duty to disclose arises on other grounds.

In sum, the Court finds that the Complaint alleges sufficient facts to establish a duty to disclose for the purposes of a demurrer on the basis that Defendant allegedly either had exclusive knowledge of material facts or actively concealed material facts. Defendant has therefore failed to show that the fifth cause of action does not state sufficient facts to support a cause of action on this basis.

3. Economic Loss.

Defendant also argues that the economic loss rule bars Plaintiff’s fifth cause of action, because Plaintiff is attempting to recover tort damages arising from a contract.

Under the economic loss rule, “[w]here a purchaser’s expectations in a sale are frustrated because the product he bought is not working properly, his remedy is in contract alone, for he has suffered only ‘economic losses.’” (Robinson Helicopter Co., Inc. v. Dana Corp. (2004) 34 Cal.4th 979, 988.) The economic loss rule “hinges on a distinction drawn between transactions involving the sale of goods for commercial purposes where economic expectations are protected by commercial and contract law, and those involving the sale of defective products to individual consumers who are injured in a manner which has traditionally been remedied by resort to the law of torts.” (Id.) Simply stated, the economic loss rule “prevents the law of contract and the law of tort from dissolving one into the other.” (Id.)

The restrictions on contract remedies serve purposes not found in tort law—they protect the parties’ freedom to bargain over special risks, and they promote contract formation by limiting liability to the value of the promise. (Harris v. Atlantic Richfield (1993) 14 Cal.App.4th 70, 77.) This encourages efficient breaches, resulting in increased production of goods and services at a lower cost to society. (Id.) Because of these overriding policy considerations, the California Supreme Court has proceeded with caution in carving out exceptions to the traditional contract remedy restrictions. (Id.)

Nevertheless, the most widely recognized exception to the economic loss rule is when a defendant’s conduct constitutes a tort as well as a breach of contract. (Id. at 78.) When one party commits fraud during the contract formation or performance, the injured party may recover in both contract and tort. (Id.)

Because Plaintiffs have adequately alleged fraud, their complaint is not barred by the economic loss rule. Allowing Plaintiffs’ fraud cause of action to proceed will further, rather than undermine, the public policy of allowing parties to freely bargain over special risks, because parties who are deprived of material facts governing their decision to enter into a contract do not “freely” enter into the contract. Therefore, the economic loss rule does not bar Plaintiffs fraud cause of action.

Conclusion

Accordingly, Defendant’s Demurrer to the fifth cause of action is OVERRULED.

Motion to Strike

Defendant moves to strike portions of paragraph 8 and the entirety of paragraphs 51, 52, and 55 of the Complaint, as well as subsection (f) of the prayer for relief.

Legal Standard

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. “When the defect which justifies striking a complaint is capable of cure, the court should allow leave to amend.” Vaccaro v. Kaiman (1998) 63 Cal.App.4th 761, 768. A motion to strike can be used where the complaint or other pleading has not been drawn or filed in conformity with applicable rules or court orders. Code Civ. Proc., § 436(b). This provision is for "the striking of a pleading due to improprieties in its form or in the procedures pursuant to which it was filed." Ferraro v. Camarlinghi (2008) 161 Cal.App.4th 509, 528 (emphasis in original).

Meet and Confer

Before filing a motion to strike, the moving party shall meet and confer in person or by telephone with the party who has filed the pleading subject to the motion to strike and file a declaration detailing their meet and confer efforts. (Code Civ. Proc., § 435.5(a).) However, an insufficient meet and confer process is not grounds to grant or deny a motion to strike. (Code Civ. Proc., § 435.5(a)(4).)

For the reasons stated above in connection with the Demurrer, the Court finds that Defendant has complied with the statutory meet and confer requirements.

Analysis

Defendant argues that paragraphs 51, 52, and 55 should be stricken as irrelevant or improper for the same reasons raised in the demurrer to the fifth cause of action. As the Court has rejected this argument in connection with the demurrer, Defendant’s motion to strike these allegations likewise fails.

Defendant also argues that portions of paragraph 8 should be stricken as irrelevant. Paragraph 8 of the Complaint states:

To the extent there are any statutes of limitation applicable to Plaintiff’s claims—including, without limitation, her express warranty, implied warranty, and fraudulent omission claims—the running of the limitation periods has been tolled by, inter alia, the following doctrines or rules: equitable tolling, the discovery rule, the fraudulent concealment rule, equitable estoppel, the repair doctrine, and/or class action tolling (e.g., the American Pipe rule), by the filing of Conti v. American Honda Motor Co., Inc, et al. (United States District Court for the Central District of California, Case No. 2:19-cv-2160) on March 22, 2019.

(Complaint ¶ 8.) Defendant argues that the allegations as to Conti v. American Honda should be stricken as irrelevant because this is not a class action. Plaintiff does not address this argument in opposition. In the Court’s view, striking this allegation is unnecessary, as the Complaint expressly states that the allegation is a defense to a statute of limitations argument “[t]o the extent there are any statutes of limitation applicable.”

Defendant also seeks to strike subsection (f) of the prayer for relief, which seeks punitive damages. Defendant argues that because Plaintiff’s fraud cause of action fails, the prayer for punitive damages must be stricken. This argument fails for two independent reasons. First, as Defendant does not address whether punitive damages are available for any of Plaintiff’s other causes of action, striking a prayer for punitive damages as to the Complaint in its entirety is wholly improper. Second, as stated above, the Court has concluded that Plaintiff has adequately pled a cause of action for fraudulent concealment. Punitive damages are explicitly authorized when fraud is pled. (See Civ. Code § 3294.)

Conclusion

Accordingly, Defendant’s Motion to Strike is DENIED.

CONCLUSION:

Accordingly, Defendant’s Demurrer to the fifth cause of action is OVERRULED.

Defendant’s Motion to Strike is DENIED.

Moving Party to give notice.

IT IS SO ORDERED.

Dated: January 30, 2023 ___________________________________

Theresa M. Traber

Judge of the Superior Court

Any party may submit on the tentative ruling by contacting the courtroom via email at Smcdept47@lacourt.org by no later than 4:00 p.m. the day before the hearing. All interested parties must be copied on the email. It should be noted that if you submit on a tentative ruling the court will still conduct a hearing if any party appears. By submitting on the tentative you have, in essence, waived your right to be present at the hearing, and you should be aware that the court may not adopt the tentative, and may issue an order which modifies the tentative ruling in whole or in part.