Judge: Thomas Falls, Case: 22PSCV00800, Date: 2022-11-21 Tentative Ruling

Case Number: 22PSCV00800    Hearing Date: November 21, 2022    Dept: R

KRISTAL AVILA, et al. v. GENERAL MOTORS, LLC (22PSCV00800)

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DEFENDANT GENERAL MOTORS, LLC’S DEMURRER TO PLAINTIFFS’ COMPLAINT; DEFENDANT GENERAL MOTORS, LLC’S MOTION TO STRIKE PUNITIVE DAMAGES FROM PLAINTIFFS’ COMPLAINT

                        Responding Party: Plaintiff Kristal Avila

Tentative Ruling

DEFENDANT GENERAL MOTORS, LLC’S DEMURRER TO PLAINTIFFS’ COMPLAINT is SUSTAINED, with leave to amend. 

DEFENDANT GENERAL MOTORS, LLC’S MOTION TO STRIKE PUNITIVE DAMAGES FROM PLAINTIFFS’ COMPLAINT IS DENIED AS MOOT.

Background

This action arises from the alleged defective condition of a vehicle manufactured and sold by General Motors, LLC (“Defendant”) to Kristal Avila and Maria S. Medina (collectively, “Plaintiffs”).  On June 4, 2015, Plaintiffs entered into a warranty contract with Defendant regarding a 2014 Chevrolet Cruze (“Subject Vehicle”).  (Compl., ¶ 7.)  The warranty contract contained various express warranties, including, but not limited to, bumper to bumper warranty, powertrain warranty, and emission warranty.  (Id., ¶ 8, Ex. A.)  Prior to the sale of the Subject Vehicle to Plaintiffs, Defendant allegedly knew that the Subject Vehicle’s coolant system was defective, but failed to disclose and concealed such defects from Plaintiffs.  (Id., ¶¶ 71-72.)  Due to the preexisting coolant system defect within the Subject Vehicle, the Subject Vehicle experienced repeated engine failures, which Defendant was unable to repair and conform to the express warranties issued at the time of the sale of the Subject Vehicle.  (Id., ¶¶ 12, 14-15.)  Despite Defendant’s failure to conform the Subject Vehicle to the aforementioned express warranties, Defendant failed to replace the Subject Vehicle or reimburse Plaintiffs the price paid for the Subject Vehicle.  (Id., ¶¶ 16-17.)

On August 1, 2022, Plaintiff commenced the present action by filing a Complaint against Defendant and Does 1 through 10.  Plaintiff’s Complaint alleges the following causes of action: (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; (5) Violation of Consumer Legal Remedies Act; and (6) Violation of the Magnuson-Moss Warranty Act.

On October 14, 2022, Defendant filed the present Demurrer to Plaintiffs’ Complaint, and Motion to Strike Punitive Damages from Plaintiffs’ Complaint.

On November 7, 2022, Plaintiff filed an Opposition to Defendant’s Demurrer and Motion to Strike.

On November 14, 2022, Defendant filed a Reply.

Legal Standard

            A.        Legal Standard—Demurrer

The moving party against whom a complaint or cross-complaint is directed may object by demurrer to the pleading on one of several grounds outlined by section 430.10.  (Code Civ. Proc., § 430.10, subd. (a)-(h).)  These grounds include lack of jurisdiction, lack of legal capacity to sue, uncertain pleadings, or pleadings that do not state facts sufficient to constitute a cause of action, among others.  (Ibid.)

A demurrer¿advanced on the ground the pleading does not state facts sufficient to constitute a cause of action “tests the legal sufficiency of the factual allegations in a complaint.”  (Ivanoff v. Bank of America, N.A.¿(2017) 9 Cal.App.5th 719, 725; Code Civ. Proc., § 430.10, subd. (e).)  The court looks to whether “the complaint alleges facts sufficient to state a cause of action or discloses a complete defense.”  (Id.)  The court does not “read passages from a complaint in isolation; in reviewing a ruling on a demurrer, we read the complaint ‘as a whole and its parts in their context.’ [Citation.]”  (West v. JPMorgan Chase Bank, N.A. (2013) 214 Cal.App.4th 780, 804.)  The court “assume[s] the truth of the properly pleaded factual allegations, facts that reasonably can be inferred from those expressly pleaded, and matters of which judicial notice has been taken.”  (Fremont Indemnity Co v. Fremont General Corp. (2007) 148 Cal.App.4th 97, 111.)  “The court does not, however, assume the truth of contentions, deductions or conclusions of law. [Citation.]”  (Durell v. Sharp Healthcare (2010) 183 Cal.App.4th 1350, 1358.)

Code of Civil Procedure section 430.41 requires, “[b]efore filing a demurrer pursuant to this chapter, the demurring party shall meet and confer in person or by telephone with the party who filed the pleading that is subject to demurrer for the purpose of determining whether an agreement can be reached that would resolve the objections to be raised in the demurrer.”  (Code Civ. Proc., § 430.41, subd. (a).)  The parties are to meet and confer at least five days before the date the responsive pleading is due.  (Code Civ. Proc., § 430.41, subd. (a)(2).)  Thereafter, the demurring party shall file and serve a declaration detailing their meet and confer efforts.  (Code Civ. Proc., § 430.41, subd. (a)(3).)

            B.        Legal Standard—Motion to Strike

“Any party, within the time allowed to respond to a pleading, may serve and file a notice of motion to strike the whole or any part” of that pleading.  (Code Civ. Proc., § 435, subd. (b)(1).)  “The Court may, upon a motion made pursuant to Section 435, or at any time in its discretion, and upon terms it deems proper: (a) Strike out any irrelevant, false or improper matter asserted in any pleading; (b) Strike out 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.”  (Code Civ. Proc., § 436.)  “The grounds for a motion to strike shall appear on the face of the challenged pleading or from any matter of which the court is required to take judicial notice.”  (Code Civ. Proc., § 437, subd. (a).)  “Where the motion to strike is based on matter of which the court may take judicial notice pursuant to Section 452 or 453 of the Evidence Code, such matter shall be specified in the notice of motion, or in the supporting points and authorities, except as the court may otherwise permit.”  (Code Civ. Proc., § 437, subd. (b).)

“Before filing a motion to strike pursuant to this chapter, the moving party shall meet and confer in person or by telephone with the party who filed the pleading that is subject to the motion to strike for the purpose of determining if an agreement can be reached that resolves the objections to be raised in the motion to strike.”  (Code Civ. Proc., § 435.5, subd. (a).)  The parties are to meet and confer at least five days before the date the responsive pleading is due.  (Code Civ. Proc., § 435.5, subd. (a)(2).)  Thereafter, the demurring party shall file and serve a declaration detailing their meet and confer efforts.  (Code Civ. Proc., § 435.5, subd. (a)(3).)

Discussion

Defendant presently demurs to Plaintiffs’ Fifth Cause of Action for Violation of the Consumer Legal Remedies Act, as alleged within Plaintiffs’ operative Complaint.  Additionally, Defendant moves to strike Plaintiff’s prayer for punitive damages, prayed for in connection with Plaintiff’s Fifth Cause of Action for Violation of the Consumer Legal Remedies Act.  The Court considers Defendant’s Demurrer and Motion to Strike, in turn, below.

            A.        Discussion—Demurrer

Defendant demurs to Plaintiffs’ Fifth Cause of Action for Violation of the Consumer Legal Remedies Act (hereinafter, “Fifth Cause of Action”) on three separate grounds.  First, Defendant contends Plaintiffs’ Fifth Cause of Action is barred by the applicable statute of limitations.  Second, Defendant argues Plaintiffs’ Fifth Cause of Action has not been pled with the requisite specificity.  Lastly, Defendant argues Plaintiffs’ Fifth Cause of Action is barred by the Economic Loss Rule.  The Court considers the aforementioned three grounds for demurrer below.

                        a.         Meet and Confer

Preliminarily, the Court finds Defendant has properly met and conferred with Plaintiff by telephone prior to filing the present Demurrer, in compliance with Code of Civil Procedure section 430.41, subdivision (a).  (Code Civ. Proc., § 430.41, subd. (a); Kay Decl., ¶ 2 [“Prior to filing GM’s Demurrer and Motion to Strike, on September 22, 2022, I met and conferred telephonically with Plaintiffs’ counsel in an attempt to discuss the issues we had with Plaintiffs’ Complaint, but unfortunately, the parties remained at an impasse.”].)

                        b.         Fifth Cause of Action—Violation of Consumer Legal Remedies Act

                                    1.         Statute of Limitations

First, Defendant challenges the sufficiency of Plaintiffs’ Fifth Cause of Action on the ground the cause of action is barred by the statute of limitations.  Specifically, Defendant argues, pursuant to Civil Code section 1783, causes of action under the Consumer Legal Remedies Act (hereinafter, “CLRA”) “shall be commenced not more than three years from the date of the commission of [the unfair or deceptive] . . . method, act, or practice [which is punishable under the CLRA].”  (Civ. Code, § 1783.)  Defendant argues, Plaintiffs’ Fifth Cause of Action alleges the punishable, unfair or deceptive act or practice committed by Defendant purportedly took place on the date of purchase of the Subject Vehicle on June 5, 2015, during which time Defendant allegedly concealed the fact that the Subject Vehicle’s coolant system was defective.  (Compl., ¶ 72 [“Plaintiffs are informed, believe, and thereon allege that[,] while Defendant knew about the Cooling System Defect, . . . [Defendant] nevertheless concealed and failed to disclose the defective nature of the Vehicle and its engine to Plaintiffs at the time of sale . . . .  Had Plaintiffs known that the Vehicle suffered from the Cooling System Defect, they would not have purchased the Vehicle.”].)  However, Defendant argues, Plaintiffs failed to commence the present action within three years of June 5, 2015, or in other words, by June 5, 2018.  Rather,  Defendant specifies Plaintiff commenced this action nearly four years after the statute of limitations periods had lapsed, on approximately August 1, 2022.

In Opposition, Plaintiffs argue the three-year statute of limitations periods articulated within Civil Code section 1783 does not operate to bar Plaintiffs’ Fifth Cause of Action as the Delayed Discovery Rule is applicable to causes of action brought under the CLRA and has effectively tolled the statute of limitations period to a time later than June 5, 2018, rendering Plaintiff’s Complaint timely.

Here, following consideration of the parties’ arguments, the Court concludes Plaintiffs’ Fifth Cause of Action is not susceptible to Defendant’s Demurrer advanced on statute of limitations grounds.  The Court finds the allegations of Plaintiffs’ operative Complaint do not demonstrate that Plaintiffs’ Fifth Cause of Action is necessarily barred by the three-year statute of limitations period enumerated within Civil Code section 1783 and, therefore, Plaintiffs’ Fifth Cause of Action may properly survive Defendant’s Demurrer.

The Court notes, if on the face of the complaint, the action appears barred by the statute of limitations, then a plaintiff has an obligation to anticipate the defense and plead facts to demonstrate that the statute of limitations does not bar the claim.  (Union Carbide Corp. v. Superior Court (1984) 36 Cal.3d 15, 25.)  However, when nothing appearing on the face of the complaint suggests that the action is barred by the statute of limitations, there are no grounds for a demurrer.  (Ibid.)  Further, a demurrer on the ground of the bar of the statute of limitations does not lie where the complaint merely shows that the action may have been barred.  (Valvo v. University of Southern California (1977) 67 Cal.App.3d 887, 895.)  Instead, it must appear affirmatively that, upon the facts stated, the right of action is necessarily barred.  (Ibid.) 

As noted above, pursuant to Civil Code section 1770, a cause of action under the CLRA must be commenced not more than three years from the date of the commission of [the unfair or deceptive] . . . method, act, or practice [which is punishable under the CLRA].”  (Civ. Code, § 1783.)  However, the three-year statute of limitations period does not begin to commence under the CLRA until “a reasonable person would have discovered the basis for [the] . . . claim.”  (Massachusetts Mutual Life Ins. Co. v. Superior Court (2002) 97 Cal.App.4th 1282, 1295; Meyer v. Sprint Spectrum L.P. (2009) 45 Cal.4th 634, 645 [“Moreover, the statute of limitations set forth in section 1783 has been interpreted to run ‘ “from the time a reasonable person would have discovered the basis for a claim.” ’ ”].)  In other words, the Delayed Discovery Rule is applicable to causes of action under the CLRA.

Here, the Court concludes the allegations within Plaintiffs’ operative Complaint do not sufficiently demonstrate that Plaintiffs’ Fifth Cause of Action is necessarily barred by the applicable statute of limitations enumerated within Civil Code section 1783.  The Court discerns that Plaintiffs’ Complaint alleges Plaintiffs discovered Defendant’s wrongful act under the CLRA—that is, Defendant’s concealment of the fact that the Subject Vehicle contained a cooling system defect—“shortly before the filing of the complaint . . . .”  (Compl., ¶ 33 [“Plaintiffs did not become suspicious of Defendant’s concealment of the latent defects and its inability to repair it until shortly before the filing of the complaint . . . .”].)  In other words, Plaintiffs’ Complaint fails to state with certainty the exact date upon which Plaintiffs’ discovered Defendant’s wrongful and deceptive acts punishable under the CLRA.   (Ibid.)  As a result, the Court is unable to determine precisely when the three-year statute of limitations period began to commence, and, in turn, whether Plaintiffs’ Complaint is necessarily barred by the three-year statute of limitations period enumerated within Civil Code section 1783.  While Plaintiffs’ Complaint may be barred, this is an insufficient to sustain Defendant’s Demurrer.  (Valvo, supra, 67 Cal.App.3d at p. 895 [“ ‘[A] demurrer on the ground of the bar of the statute of limitations does not lie, where the complaint merely shows that the action may have been barred.  It must appear affirmatively that, upon the facts stated, the right of action is necessarily barred.’ ”].)

However, while acknowledging the legal principles enumerated within Valvo, supra, 67 Cal.App.3d at p. 895, the Court is inclined to provide Plaintiffs with an opportunity to sufficiently allege facts demonstrating Plaintiffs’ Fifth Cause of Action is not barred by the applicable statute of limitations (i.e., identifying the date of discovery).  As will be revealed below, the Court has found Plaintiffs’ Fifth Cause of Action is not sufficiently pled as the cause of action has not been pleaded with the requisite particularity.  Considering the Court has sustained Defendant’s Demurrer on particularity grounds (as explained more extensively below), the Court finds it would be proper to permit Plaintiffs to further amend the Complaint to resolve the statute of limitations issue.

Based on the foregoing, Defendant’s Demurrer to Plaintiff’s Complaint on statute of limitations grounds is SUSTAINED, with leave to amend.

                                    2.         Particularity of Factual Allegations

Second, Defendant demurs to Plaintiffs’ Fifth Cause of Action on the ground Plaintiffs have failed to plead a cause of action under the CLRA with the requisite specificity.  Specifically, Defendant argues Plaintiffs have failed to allege the exact misrepresentations and/or omissions made by Defendant which are actionable under the CLRA.

In Opposition, Plaintiffs contend the Fifth Cause of Action has been properly plead with the requisite specificity.  The Court considers the parties’ arguments below.

The CLRA protects individuals engaging in consumer transactions.  The CLRA prohibits “unfair methods of competition and unfair or deceptive acts or practices undertaken by any person in a transaction intended to result or which results in the sale or lease of goods or services to any consumer.”  (Civ. Code, § 1770, subd. (a).)  The CLRA sets forth twenty-seven (27) different “unfair or deceptive acts or practices” that may constitute a violation of the statute.  (Ibid.)  In assessing whether the representations made in the course of the consumer transaction violate the CLRA, courts use the reasonable consumer standard—i.e., whether a reasonable consumer would be misled by the representation.  (Consumer Advocates v. Echostar Satellite Corp. (2003) 113 Cal.App.4th 1351, 1360.)  To the extent an alleged violation is based on the defendant’s omission of a material fact, “to be actionable the omission must be contrary to a representation actually made by the defendant, or an omission of a fact the defendant was obliged to disclose.”  (Daugherty v. American Honda Motor Co., Inc. (2006) 144 Cal.App.4th 824, 835.)  A cause of action under the CLRA “must be stated with reasonable particularity, which is a more lenient pleading standard than is applied to common law fraud claims.”  (Gutierrez v. Carmax Auto Superstore California (2018) 19 Cal.App.5th 1234, 1261.) 

Here, following a liberal reading of the operative Complaint, the Court concludes Plaintiffs’ Fifth Cause of Action is not stated with the requisite particularity, and, as a result, the cause of action is susceptible to Defendant’s Demurrer.  Plaintiffs’ Complaint alleges, prior to purchasing the Subject Vehicle from Defendant, Defendant “fail[ed] to disclosed and conceal[ed] the defective nature of the cooling system from Plaintiffs,“ resulting in Plaintiffs’ purchase of the Subject Vehicle without knowing of the aforementioned defect.  (Compl., ¶ 69.)  Specifically, Plaintiffs allege, rather than disclosing the actual defective condition of the Subject Vehicle, Defendant concealed the existence of the defect and, instead, made the following misrepresentations: (a) Defendant “represented that the Vehicle and its cooling system had characteristics and benefits that they do not have,” and (b) Defendant “represented that the Vehicle and its cooling system were of a particular standard, quality, or grade when they were of another.”  (Ibid.)  The Court finds Plaintiffs’ Fifth Cause of Action insufficiently pled as Plaintiffs have failed to specify the particular “characteristics and benefits” which Defendant represented the Subject Vehicle did affirmatively have, but, in reality, did not have.  (Ibid.)  Further, Plaintiffs have failed to expressly state the specific “standard, quality, or grade” which Defendant represented the Subject Vehicle did have, which, in reality, it did not have.  (Ibid.)  In sum, Plaintiffs have failed to plead facts detailing the specific misrepresentations made by Defendant.

Based on the foregoing, Defendant’s Demurrer to Plaintiffs’ Fifth Cause of Action on particularity grounds is SUSTAINED, with leave to amend.

                                    3.         Economic Loss Rule

Lastly, Defendant demurs to Plaintiffs’ Fifth Cause of Action on the ground the cause of action is barred by the Economic Loss Rule. 

The parties’ arguments with respect to whether or not Plaintiffs’ Fifth Cause of Action is barred by the Economic Loss Rule concerns the interpretation of the “fraudulent inducement exception” enumerated within Robinson Helicopter Co., Inc. v. Dana Corp. (2004) 34 Cal.4th 979 (Robinson Helicopter) by the California Supreme Court (“Supreme Court”).

In Robinson Helicopter, prior to discussing the fraudulent inducement exception, the Supreme Court provided  “a brief background on the economic loss rule.”  (Robinson Helicopter, supra, 34 Cal.4th at p. 987.)  “Economic loss consists of ‘ “ ‘ “damages for inadequate value, costs of repair and replacement of the defective product or consequent loss of profits—without any claim of personal injury or damages to other property . . . .” ’ ” [Citation.]’  [Citation.]  Simply stated, the economic loss rule provides: ‘ “ ‘[W]here a purchaser’s expectations in a sale are frustrated because the product he bought is not working properly, his remedy is said to be in contract alone, for he has suffered only “economic” losses.’ ”  This doctrine 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 customers who are injured in a manner which has traditionally been remedies by resort to the law of torts.’  [Citation.]  The 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.  [Citation.]  Quite simply, the economic loss rule ‘prevent[s] the law of contract and the law of tort from dissolving one into the other.’  [Citation.].”  (Ibid.)

Following a recitation of the legal principles governing the Economic Loss Rule, the Supreme Court “went on to describe several instances where tort damages [may be] . . . 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.]’  [Citation.]  ‘[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.]’  [Citation.]”  (Robinson Helicopter, supra, 34 Cal.4th at pp. 989-990; Harris v. Atlantic Richfield Co. (1993) 14 Cal.App.4th 70, 78 [“when one party commits a fraud during the contract formation or performance, the injured party may recover in contract and tort”].)

The Supreme Court went on to state that, a breach of contract will be tortious and, a plaintiff may properly recover damages in contract and in tort (i.e., the Economic Loss Rule would not apply to bar tort recovery for a breach of contract), where “ ‘ “(1) the breach is accompanied by a traditional common law tort, such as fraud or conversion; (2) the means used to breach the contract are tortious, involving deceit or undue coercion; or (3) one party intentionally breaches the contract intending or knowing that such breach will cause severe, unmitigable harm in the form of mental anguish, personal hardship, or substantial consequential damages.”  [Citation.]  Focusing on intentional conduct gives substance to the proposition that a breach of contract is tortious only when some independent duty arising from tort is violated.  [Citation.]  If every negligent breach of a contract gives rise to tort damages the limitation would be meaningless, as would the statutory distinction between tort and contract remedies.’  [Citation.]”  (Robinson Helicopter, supra, 34 Cal.4th at p. 990.)

Thereafter, the Supreme Court proceeded to examine the factual circumstances of the case at bar.  (Robinson Helicopter, supra, 34 Cal.4th at p. 990.)  The issue before the Supreme Court in Robinson Helicopter concerned “whether the economic loss rule, which is some circumstances bars a tort action in the absence of personal injury or physical damage to other property, applies to [i.e., bars] claims for intentional misrepresentation or fraud in the performance of a contract.”  (Id., at p. 984.)  Robinson Helicopter concerned Robinson Helicopter, Co. (“Robinson”), a manufacturer of helicopters,  and Dana Corporation (“Dana Corp.”), a manufacturer of helicopter parts.  (Ibid.)  Robinson filed an action, alleging, in part, causes of action for intentional misrepresentation and fraud, based upon certain misrepresentations and acts of concealment perpetrated by Dana Corp. in the performance of a contract.  Pertinently, Robinson alleged it had entered into a contract to purchase “sprang clutches” from Dana Corp., whereby Dana Corp. agreed to manufacture such “sprang clutches” pursuant to Robinson’s exacting specifications.  (Id., at pp. 985-986.)  Robinson maintained Dana Corp. sold a certain number of “sprang clutches” to Robinson, representing pursuant to a “certificate” that the “sprang clutches” were manufactured in accordance with Robinson’s specifications.  (Ibid.)  However, in reality, such representations were false, and Dana Corp. sold certain “sprang clutches” to Robinson while knowing that the “clutches” were not manufactured in accordance with Robinson’s exacting specifications.  (Ibid.)  Dana Corp. additionally concealed the fact, and failed to disclose, that certain “spring clutches” were not properly manufactured in compliance with Robinson’s specifications.  (Ibid.)  The “sprang clutches” which were not manufactured in accordance with Robinson’s specifications were defective, and had the potential of causing accidents with respect to the helicopters in which the defective “sprang clutches” were installed.  (Id., at p.p. 986-987.)  Ultimately, Robinson was required to purchase new “spring clutches” and replace all defective “spring clutches” which were manufactured by Dana, Corp., at Robinson’s own expense.  (Ibid.)  In addition to filing a cause of action for breach of contract, Robinson additionally advanced causes of action for fraud and intentional misrepresentation.  (Ibid.)  “After a nine-day trial, the jury returned a verdict in favor of Robinson for $1,533,924 in compensatory damages and $6 million in punitive damages.  The jury found that Dana had not only breached its contract with Robinson and the warrantied made thereunder, but also had made false misrepresentations of fact and have knowingly misrepresented or concealed material facts with the intent to defraud.”  (Id., at p. 987.)  Subsequently, Dana Corp. appealed the jury verdict, in part, arguing the Economic Loss Rule barred Robinson’s fraud and intentional misrepresentation claims because Robinson only suffered economic losses, and therefore, Robinson could not recover in tort.  (Ibid.)

Ultimately, following review, the Supreme Court in Robinson Helicopter concluded the causes of action for intentional misrepresentation and fraud were not barred by the Economic Loss Rule because these causes of action were based on actions “independent of Dana’s breach of contract.”  (Robinson Helicopter, supra, 34 Cal.4th at p. 991.)  The Supreme Court clarified that, while causes of action for breach of a contractual promise are normally limited to the recovery of contract damages, a party will be entitled to tort remedies as well where the actions underlying the breach of contract constitute tortious, intentional conduct.  (Ibid.)  In reaching this conclusion, the Supreme Court solely relied upon “Dana’s provision of the false certificates of conformance,” as opposed to Dana Corp.’s fraudulent concealment concerning the “sprang clutches”.  (Id. at p. 990.)  The Supreme Court stated, “[b]y issuing false certificates of conformance, Dana unquestionable made affirmative representations that Robinson justifiably relied on to its detriment.  But for Dana’s affirmative representations by supplying false certificates of conformance, Robinson would not have accepted delivery [of the sprang clutches] and used the nonconforming clutches over the course of several years, nor would it have incurred the cost of investigating the cause of the faulty clutches.  Accordingly, Dana’s provision of faulty clutches exposed Robinson to liability for personal damages if a helicopter crashed and to disciplinary action by the FAA.  Thus, Dana’s fraud is a tort independent of the breach.”  (Id., at p. 990-991.) 

The Supreme Court made clear that its holding was “narrow in scope and limited to defendant’s affirmative misrepresentations on which a plaintiff relied and which expose a plaintiff to liability for personal damages independent of the plaintiff’s economic loss.”  (Robinson Helicopter, supra, 34 Cal.4th at p. 993.)  The Supreme Court apparently left open the question of whether or not a parties’ fraudulent, intentional concealment of material facts (as opposed to affirmative misrepresentations) could additionally constitute sufficient fraudulent conduct which is independent of a breach of contract.  Indeed, the Supreme Court stated, “[b]ecause Dana's affirmative intentional misrepresentations of fact (i.e., the issuance of the false certificates of conformance) are dispositive fraudulent conduct related to the performance of the contract, we need not address the issue of whether Dana's intentional concealment constitutes an independent tort.”  (Id., at p. 991.) 

This question, which is pertinent to the present case, and which has been left unanswered by Robinson Helicopter, has resulted in an analytical split in authority between California and federal courts.  Defendant, citing a string of unreported federal case law, argues the holding in Robinson Helicopter affirmatively stands for the proposition that the Economic Loss Rule applies, and properly bars, causes of action which are based on fraudulent omissions and concealment.  (Dem., at p. 11:20-14:17 [citing to only unreported federal cases].)  The string of unreported federal cases conclude, Robinson Helicopter has been interpreted to hold that affirmative representations, as opposed to omissions or concealment, are required to avoid the application of the Economic Loss Rule.  (Ibid.)  Defendant argues, as Plaintiffs’ Fifth Cause of Action is premised only upon fraudulent omissions and concealment (i.e., Defendant’s concealment of the fact that the Subject Vehicle has a cooling system defect), as opposed to an affirmative fraudulent misrepresentation made by Defendant, Plaintiffs’ Fifth Cause of Action is susceptible to the Economic Loss Rule and is barred.

In Opposition, Plaintiffs argue the Fifth Cause of Action is not barred by Economic Loss Rule, relying upon a recent California Court of Appeal case entitled, Dhital v. Nissan North America, Inc. (Oct. 26, 2022, A162817) __ Cal.Rptr.3d __ [2022 WL 14772909] (Dhital). 

Dhital concerned Sobita Dhital and Daniel Newman’s (“Buyers”) purchase of a 2013 Nissan Sentra (“Vehicle”) from Nissan North America, Inc. (“Nissan”).  (Id., at p. 1.)  Buyers alleged that, prior to the sale of the Vehicle to Buyers, Nissan was aware that the Vehicle contained a “continuously variable transmissions (CVT)” defect.  (Id., at p. 2.)  Buyers alleged that Nissan intentionally concealed and failed to disclose the existence of the defect, in order to induce Buyer’s purchase of the Vehicle.  (Ibid.)  Buyers alleged that the defect and the resulting “[u]ncertain and unpredictable performance” of the transmission increased the risk of an accident and thus placed Buyers at a risk of physical harm.  (Ibid.)  Subsequently, Buyers commenced an action against Nissan, alleging, among others, a cause of action for fraudulent inducement and concealment.  (Ibid.)  The trial court, ultimately, sustained Nissan’s demurrer to Buyer’s cause of action for fraudulent inducement and concealment, concluding that the cause of action was barred by the Economic Loss Rule.  (Ibid.)  The trial court held, “ ‘[t]he only injury identified by Plaintiffs is that they purchase[d] a vehicle they would have otherwise bought if they knew of its alleged defects.  Such an injury is insufficient to overcome the economic loss rule.’ ”  (Ibid.)

Upon review of the trial court’s sustaining of Nissan’s Demurrer, the Court of Appeal in Dhital concluded the trial court erred, and found that the Economic Loss Rule did not bar Buyer’s cause of action for fraudulent inducement and concealment.  (Dhital, supra, at p. 5.)  The Court of Appeal recognized the Supreme Court in Robinson Helicopter inexplicably stated that an exception to the Economic Loss Rule included “where the contract was fraudulently induced.”  (Ibid.)  The Court of Appeal held, “[h]ere, the fraudulent inducement exception to the economic loss rule applies. Plaintiffs allege that Nissan, by intentionally concealing facts about the defective transmission, fraudulently induced them to purchase a car. Fraudulent inducement is a viable tort claim under California law[,]” and is a sufficient basis to withhold the application of the Economic Loss Rule.  (Ibid.) 

The Court of Appeal in Dhital additionally addressed Nissan’s assertion that, under Robinson Helicopter, Buyer’s cause of action is barred pursuant to the Economic Loss Rule because the cause of action concerns fraudulent concealment (as opposed to affirmative misrepresentations).  (Dhital, supra, at p. 6.)  The Court of Appeal concluded, “[w]e do not agree with the trial court's and Nissan's reading and application of Robinson.  Robinson did not hold that any claims for fraudulent inducement are barred by the economic loss rule.  Quite the contrary, the Robinson court affirmed that tort damages are available in contract cases where the contract was fraudulently induced.  [Citation.].”  (Ibid.)  The Court of Appeal noted, the Supreme Court in Robinson Helicopter “left undecided whether concealment-based claims are barred by the economic loss rule.”  (Id., at p. 7.)  The Court of Appeal concluded, “[w]hat follows from [the Supreme Court’s] analysis, however , is that concealment-based claims for fraudulent inducement are not barred by the economic loss rule.  The reasoning in Robinson [Helicopter] affirmatively placed fraudulent inducement by concealment outside the coverage of the economic loss rule.  We now hold that the economic loss rule does not cover such claims.  First, as discussed, Robinson [Helicopter] identified fraudulent inducement as an existing exception to the economic loss rule, before it proceeded to analyze the particular claims at issue in that case relating to fraud during the performance of a contract.  [Citation.]  For fraudulent inducement and other existing exceptions listed in Robinson [Helicopter], ‘ “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.]  In our view, that independence is present in the case of fraudulent concealment (whether it is achieved by intentional concealment or by intentional affirmative misrepresentations), because a defendant’s conduct in fraudulently inducing someone to enter a contract is separate from the defendant’s later breach of contract or warranty provisions that were agreed to.”  (Ibid.)  The Court of Appeal ultimately stated, “for the reasons we have discussed above, we concluded that, under California law, the economic loss rule does not bar plaintiffs’ claim here for fraudulent inducement by concealment.  Fraudulent inducement claims fall within an exception to the economic loss rule recognized by our Supreme Court [citing Robinson Helicopter], and plaintiffs allege fraudulent conduct that is independent of Nissan’s alleged warranty breaches.”  (Id., at p. 9.)

Here, the Court is guided by Dhital and concludes Plaintiffs’ Fifth Cause of Action is not barred by the Economic Loss Rule.  As stated in Dhital, “the economic loss rule does not bar plaintiffs’ claim . . . for fraudulent inducement by concealment.”  (Dhital, supra, at p. 9.)  Plaintiffs’ Fifth Cause of Action for Violation of the CLRA is based upon those exacting allegations which are exempt from application of the Economic Loss Rule.  Plaintiffs’ Fifth Cause of Action alleges Defendant knew, but intentionally failed to disclose and concealed, that the Subject Vehicle included a cooling system defect, which exposed the Subject Vehicle to sudden engine failure at any time.  (Compl., ¶¶ 68-69.)  Plaintiffs’ Fifth Cause of Action alleges Defendant failed to disclose and concealed the existence of the cooling system defect in order to ensure Plaintiffs’ purchase of the Subject Vehicle, and “[h]ad Plaintiffs known that the [Subject] Vehicle suffered from the Cooling System Defect, they would not have purchased the [Subject] Vehicle.”  (Id., ¶¶ 72-73.)  Based upon the aforementioned allegation, the Court concludes Plaintiffs’ Fifth Cause of Action is not barred by the Economic Loss Rule as Plaintiffs’ allegations equate to a claim of fraudulent concealment.  (Dhital, supra, at p. 9.)  The Court notes that, in Reply, Defendant concedes this fact, and acknowledges that Dhital is controlling law on this issue.  (Reply, at p. 1, fn. 1 [“While GM acknowledges the recent Dhital v. Nissan N. Am., Inc., No. A162817, 2022 WL 14772909 (Cal. Ct. App. Oct. 26, 2022) decision, provided by the Court since the filing of GM’s demurrer, GM’s demurrer should be sustained because of the remaining failures in Plaintiffs’ pleadings.”].)

Based on the foregoing, Defendant’s Demurrer to Plaintiff’s Fifth Cause of Action on the ground the cause of action is barred by the Economic Loss Rule is overruled. However, Defendant’s Demurrer to Plaintiff’s Fifth Cause of Action is Sustained as discussed above.

            B.        Discussion—Motion to Strike

Defendant moves for an Order striking Plaintiffs’ prayer for punitive damages, which is prayed for in connection with Plaintiffs’ Fifth Cause of Action only.  (Compl., ¶ 80 [“If, within 30 days of notice of Defendant’s CLRA violation, Defendant fails to provide the appropriate relief of its violation of the CLRA, Plaintiffs will amend this Complaint and seek monetary, compensatory, restitution, rescission, punitive damages, in addition to the injunctive and/or equitable relief he seeks now.”].)  As the Court has sustained Defendant’s Demurrer to Plaintiffs’ Fifth Cause of Action, the Court concludes Defendant’s Motion to Strike is moot.  Accordingly, Defendant’s Motion to Strike Punitive Damages from Plaintiffs’ Complaint is DENIED as MOOT.

Conclusion