Case Number: 21STCV37943    Hearing Date: April 20, 2023    Dept: 73

Avants v. General Motors, LLC, et al. (21STCV37943)

Counsel for Plaintiff/opposing party:  Thomas Avants, Tionna Dolin, and James Carroll (Strategic Legal Practices, APC)

Counsel for Defendant/moving party:  Mary McBride and Ryan Kay (Erskine Law Group, PC)

demurrer and motion to strike (filed November 9, 2022)

TENTATIVE RULING

Defendant’s demurrer is OVERRULED. Defendant’s motion to strike is DENIED.

Factual Background

On October 14, 2021, Plaintiff Thomas Avants brought this action against Defendant General Motors, LLC, arising from Plaintiff’s September 3, 2017 purchase of a 2018 Chevrolet Cruze (“Subject Vehicle”). Plaintiff’s Third Amended Complaint, filed on October 11, 2022, asserts four causes of action under the Song-Beverly Consumer Warranty Act (Civil Code section 1791 et seq. [the “SBA”]) and a single cause of action for fraudulent inducement by concealment. (TAC, ¶¶ 83-96.)

Plaintiff alleges the following: Defendant knew that Chevrolet Cruze vehicles in the model year 2017-2018 contained defects with their engine cooling system that causes engine overheating, odor, and engine malfunction. (TAC, ¶ 23.) The Cooling System Defect is a safety hazard because it can cause engine failure while the vehicle is being driven. (TAC, ¶ 26.) Defendant knew about the Defect from testing data and consumer complaints prior to Plaintiff purchasing the Subject Vehicle. (TAC, ¶ 30.) Had Defendant disclosed the Defect, Plaintiff would not have purchased the Vehicle. (TAC, ¶ 31.)

Procedural Background

On October 14, 2021, Plaintiff filed his original complaint.

On February 28, 2022, Plaintiff spontaneously filed a first amended complaint alleging four causes of action under the SBA and a single cause of action for fraudulent inducement by concealment. Plaintiff also prayed for punitive damages.

On March 30, 2022, Defendant demurred to the cause of action for fraudulent inducement by concealment and moved to strike Plaintiff’s prayer for punitive damages. On June 9, 2022, the Court sustained the demurrer and granted the motion to strike “for the reasons stated in the court’s oral tentative ruling.” (Minute Order, 6/9/22.)

On June 24, 2022, Plaintiff filed a Second Amended Complaint. The SAC still contained a cause of action for fraudulent inducement and a prayer for punitive damages. The factual allegations relating to the fraudulent inducement cause of action were largely the same as the FAC. However, the SAC included the following allegation: “Prior to Plaintiff’s purchase, she saw television ads and the window sticker applied to Subject Vehicle. The statements from GM contained details about the features and components of Chevy Vehicles such as Plaintiff’s but failed to mention the Cooling System Defect.” (SAC, ¶ 82.) In addition, instead of alleging that technicians found vibration in the steering wheel and an inoperable intake cam solenoid on separate visits to an authorized repair facility, the SAC simply alleged that an “authorized repair facility performed warranty repairs” to the Subject Vehicle on both visits. (SAC, ¶¶ 45, 46.)  

On July 28, 2022, Defendant again demurred to the cause of action for fraudulent inducement by concealment and moved to strike Plaintiff’s prayer for punitive damages. On September 30, 2022, the Court sustained the demurrer and ruled the motion to strike was moot. Pointing to paragraphs 45-47 of the SAC, the Court found that Plaintiff had failed to connect the malfunctions of the Subject Vehicle with the Cooling System Defect GM allegedly concealed.

On October 11, 2022, Plaintiff filed a Third Amended Complaint. The TAC still contains a cause of action for fraudulent inducement by concealment and a prayer for punitive damages, and the factual allegations are largely the same. However, the TAC addresses the deficiencies noted by the Court by specifying that an authorized repair facility replaced the intake cam solenoid on one occasion and Plaintiff presented the Subject Vehicle to an authorized repair facility with concerns related to the Vehicle’s inability to properly accelerate on another occasion. (TAC, ¶¶ 46, 47.) Unlike the FAC and SAC, the TAC includes footnotes stating that failed engine components (like the intake cam solenoid) and a failure to accelerate are symptoms of the Cooling System Defect. (Id., fns. 8, 9.)

On November 9, 2022, Defendant filed this demurrer to the TAC’s cause of action for fraudulent inducement by concealment. Defendant has also moved to strike Plaintiff’s prayer for punitive damages. On February 3, 2023, Plaintiff filed oppositions to the demurrer and motion to strike, and on April 13, 2023, Defendant filed replies.

Discussion

In support of its motions, Defendants argue:

·                     Plaintiff cannot maintain a tort cause of action for fraudulent inducement because such a claim is barred by the economic loss rule.

·                     Plaintiff’s claim is barred by the statute of limitations.

·                     Plaintiff fails to plead facts supporting his fraud claim with the requisite particularity.

·                     Plaintiff fails to plead facts showing that Defendant owed a duty to disclose any alleged defect—the nondisclosure of which could support a cause of action for fraud.

·                     Plaintiff’s prayer for punitive damages should be stricken because his fraud claim fails, and punitive damages are not available under his statutory causes of action for violation of the SBA.

In opposition, Plaintiff argues that:

·                     The economic loss rule does not bar Plaintiff’s fraudulent inducement claim. On October 26, 2022—after the Court sustained Defendant’s most recent demurrer—the Court of Appeal issued Dhital v. Nissan North America, Inc. (2022) 84 Cal.App.5th 300. The Dhital Court held that the economic loss rule does not bar claims for fraudulent inducement by concealment. The facts in Dhital are very similar to the facts here.

·                     Plaintiff’s claim is not time barred because the fraudulent concealment occurred every time that Plaintiff presented the vehicle for repairs at Defendant’s authorized repair facility—the last of which was on September 15, 2021, which is less than three years before the filing of the instant action on October 14, 2021. Plaintiff’s claim is also not time barred because the discovery rule tolled the statute of limitations until Plaintiff could have discovered the fraudulent inducement through reasonable diligence. The earliest point at which that could have occurred was after the last repair attempt on September 15, 2021.

·                     Plaintiff’s fraud claim is sufficiently pled given that the particularity requirement is relaxed for fraud claims based on omission and concealment, as Plaintiff’s claim is here. Furthermore, Plaintiff’s allegations far exceed the allegations in Dhital, and the Dhital Court found that the allegations of fraudulent inducement by concealment in that case were sufficient to overcome demurrer. Moreover, the TAC addresses the Court’s September 30, 2022 ruling by adding allegations connecting the alleged repair visits to the Cooling System Defect. The TAC alleges that the “engine concerns” (TAC, ¶ 46), the “concerns related to the Vehicle’s ability to properly accelerate” (Id., ¶ 47), and the multiple occasions where the engine “felt as if it was running at %50 or normal power” (Id., ¶ 48), are all connected to the Cooling System Defect.

·                     Defendant had a duty to disclose the Cooling System Defect because there was a transactional history between Plaintiff and Defendant, Defendant had exclusive knowledge of the Defect, and Defendant actively concealed the Defect.

·                     Plaintiff’s prayer for punitive damages should not be stricken because (1) Plaintiff successfully states a cause of action for fraud, and (2) punitive damages may be requested with SBA claims in cases of willful breach.

In reply, Defendants argue:

·                     Plaintiff has not plead any facts as to why he was not on notice of the alleged Defect with the Subject Vehicle within the applicable limitations period since he claims the Cruze vehicles suffer from “design and/or manufacturing defects” dating back to 2010. Insufficient facts are pled to support the application of the discovery rule to toll the statute of limitations on Plaintiff’s claim. Nor are there any allegations indicating equitable tolling should apply. Nor can Plaintiff invoke the “repair doctrine” because the repair doctrine only applies to warranty claims—not fraud claims.

·                     Plaintiff cannot show fiduciary duty or a transactional history between the parties. Thus, there was no duty for Defendant to disclose.

·                     Plaintiff fails to plead fraud with particularity.

§  Plaintiff does not allege any specific concealment on the part of Defendant. There are no facts pled that specify what information Defendant should have disclosed.

§  There are no facts pled to show that Defendant knew about the alleged Defect.

§  Plaintiff only offers conclusory allegations that Defendant intended to defraud Plaintiff.

§  Plaintiff does not adequately plead damages. For example, Plaintiff does not allege what they paid for the Subject Vehicle, the dates they experienced any alleged defects, the dates or costs of any associated repairs, or whether GM declined to cover the cost of a repair of an alleged defect.

·                     Plaintiff’s fraud claim fails and therefore so does Plaintiff’s prayer for punitive damages. Punitive damages are not allowed in contract actions, and this action arises out of a sales contract and warranty. Likewise, Punitive damages are not allowed for SBA claims. Plaintiff only cites to an unpublished federal district court opinion and a federal district court opinion with a very different procedural posture. Alternatively, Plaintiff does not allege oppression, fraud, or malice along with despicable conduct on the part of GM.

ANALYSIS

A.      Timeliness 

Both a demurrer and a motion to strike are due within 30 days of being served with a complaint. (Code Civ. Proc., §§ 430.40; 435, subd. (b)(1).)  

Plaintiff’s TAC was filed on October 11, 2022. Defendant filed the instant demurrer and motion to strike on November 9, 2022.  The motions are timely.

B.      Meet and Confer

A party is required to meet and confer 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 same is true for a motion to strike. (Code Civ. Proc., § 435.5, subd. (a).) The meet and confer effort must occur at least five days before the date the responsive pleading is due. (Code Civ. Proc., § 430.41, subd. (a)(2).)

Counsel for Defendant states: “Prior to filing GM’s Demurrer, this office attempted to meet and confer telephonically with Plaintiff’s counsel in an attempt to discuss the issues we had with Plaintiff’s Third Amended Complaint, but unfortunately, were unsuccessful in our attempts.” (Pappas Decl., ¶ 2.) No details are offered regarding the date on which counsel attempted to meet and confer.

By not providing dates, Defendant has technically failed its obligation to meet and confer as to either motion. However, Plaintiff does not raise this issue in opposition. The Court will consider the motions on their merits.

C.      Legal Standard for Demurrer

A demurrer tests the sufficiency of 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 contest—any 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. (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. (Code Civ. Proc., §§ 430.30, 430.70.) The only issue a demurrer is concerned with is whether the complaint, as it stands, states a cause of action. (Hahn, supra, 147 Cal.App.4th at 747.)

Analysis

Three issues are raised by the parties’ arguments: (i) whether the economic loss rule applies to Plaintiff’s fraudulent inducement by concealment claim; (ii) whether Plaintiff’s fraudulent inducement by concealment claim is time-barred; and (iii) whether Plaintiff has sufficiently pled his fraudulent inducement by concealment claim—including whether Defendant had a duty to disclose the alleged Cooling System Defect.

i.                    Economic Loss Rule

The Court of Appeal recently held —under pleading allegations similar to this case—that the trial court in that case "erred by sustaining [defendant's] demurrer to plaintiffs’ fraud claim on the ground it was barred by the economic loss rule.” (Dhital v. Nissan North America, Inc. (2022) 84 Cal.App.5th 828, 843.) The Dhital Court concluded that, under California law, fraudulent inducement claims fall within an exception to the economic loss rule. (Ibid.)

Plaintiff argues the Dhital opinion is binding on this Court. It is not. On February 3, 2023, the California Supreme Court granted review. (Dhital v. Nissan North America (Cal. 2023) 304 Cal.Rptr.3d 82.) The Court of Appeal decision is therefore persuasive only. (See Cal. R. Ct., rule 8.1115, subd. (e)(1) [“Pending review and filing of the Supreme Court's opinion, unless otherwise ordered by the Supreme Court under (3), a published opinion of a Court of Appeal in the matter has no binding or precedential effect, and may be cited for potentially persuasive value only. Any citation to the Court of Appeal opinion must also note the grant of review and any subsequent action by the Supreme Court.”].)

Nonetheless, until the California Supreme Court holds otherwise, it would be injudicious for the Court to find Plaintiff’s fraud claims are barred by the economic loss rule. Besides, Defendant abandoned its argument that the economic loss rule bars Plaintiff’s fraud claim after Plaintiff identified Dhital in his opposition.

Accordingly, the economic loss rule is not a ground to sustain the demurrer.

ii.                   Statute of Limitations

There is a three-year statute of limitations for fraud. (Code Civ. Proc., § 338, subd. (d).) The cause of action is not deemed to have accrued until the discovery, by the aggrieved party or his or her agent, of the facts constituting the fraud or mistake. (Id.)

Defendant argues that Plaintiff’s claim is time barred because the TAC alleges Plaintiff purchased the vehicle on September 3, 2017 and first brought the Vehicle in for repairs within a year of that date. (TAC, ¶ 45.) Thus, Defendant argues, more than three years passed between the time Plaintiff first should have known of the Cooling System Defect—and therefore Defendant’s alleged fraud—and the filing of this action on October 14, 2021.

In opposition, Plaintiff argues he could not have uncovered Defendant’s deception with respect to the Cooling System Defect until repair attempts were made. This argument is sufficient to withstand demurrer on the statute of limitations issue. Plaintiff alleges he took the vehicle in for repair on August 14, 2020 and September 15, 2021—both within three years of filing the instant action. (TAC, ¶¶ 46, 47.) Assuming Plaintiff’s allegations to be true, Plaintiff had no reason to know the Subject Vehicle exhibited the Defect until after these repair attempts failed to fix the problem.

Thus, the statute of limitations is not a ground to sustain the demurrer.

iii.                 Cause of Action for Fraudulent Inducement

Legal Standard

“Fraud actions...are subject to strict requirements of particularity in pleading...The effect of this rule is twofold: (a) General pleading of the legal conclusion of ‘fraud’ is insufficient; the facts constituting the fraud must be alleged. (b) Every element of the cause of action for fraud must be alleged in the proper manner (i.e., factually and specifically), and the policy of liberal construction of the pleadings ... will not ordinarily be invoked to sustain a pleading defective in any material respect.” (Committee On Children's Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 216, internal quotations omitted.) However, there are certain exceptions (Id. at 217.) “Less 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…” (Ibid.)

“[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.” (Boschma v. Home Loan Center, Inc. (2011) 198 Cal.App.4th 230, 248.) 

Analysis

In sustaining Defendant’s last demurrer, the Court pointed out that the SAC failed to establish a “connection between the ‘four occasions’ alleged in paragraph 47, on one hand, and the alleged cooling system defects and repair visits, on the other hand.” (Order, 9/30/22.) In other words, the SAC failed to allege that the Cooling System Defect caused the Subject Vehicle to need repair visits in August of 2020 and September of 2021 and caused the Vehicle to lose power four times afterwards.

In response, the TAC includes allegations that an authorized repair facility replaced the intake cam solenoid in August of 2020. (TAC, ¶ 46.) And instead of alleging that Plaintiff took the Vehicle to an authorized repair facility in September of 2021 with transmission concerns (SAC, ¶ 46), the TAC now alleges Plaintiff took the Vehicle to an authorized repair facility in September of 2021 with concerns related to the Vehicle’s ability to accelerate. (TAC, ¶ 47.) The TAC adds two footnotes which clarify that failed engine components (ostensibly like an intake cam solenoid) and failure to accelerate are symptoms of the Cooling System Defect. (Id., fn. 8, 9.) Assuming Plaintiff’s allegations to be true, which the Court does at the demurrer stage, Plaintiff has adequately pled that the Cooling System Defect caused his damages. 

Likewise, the first four elements of fraud by concealment are adequately pled in the TAC. Defendant argues the TAC fails to allege specific concealment because it does not explain what GM should have disclosed. But paragraph 23 states that that GM knew of manufacturing defects in their engine cooling systems that results in coolant leaking from the water pump. If true, this is what Defendant should have disclosed. Defendant argues the TAC does not allege that GM knew about the Cooling System Defect in the Subject Vehicle. But paragraph 30 states that GM acquired its knowledge of the Defect in 2010 through sources such as pre-production and postproduction testing data, early consumer complaints about the Cooling System Defect made directly to GM and its network of dealers, aggregate warranty data compiled from GM’s network of dealers, etc. Defendant argues the TAC fails to allege an intent to deceive. But paragraph 31 states GM intentionally concealed the Cooling System Defect from its sales and marketing materials. Paragraph 31 also states Plaintiff relied on the marketing materials which failed to disclose the Defect.

Finally, Defendant argues the TAC does not allege Defendant had a duty to disclose the Cooling System Defect. When a claim for fraud is based on an omission, one of the following must apply to establish a defendant’s duty to disclose: (1) the defendant is the plaintiff’s fiduciary; (2) the defendant has exclusive knowledge of material facts not known or reasonably accessible to the plaintiff; (3) the defendant actively conceals a material fact from the plaintiff; and (4) the defendant makes partial representations that are misleading because some other material fact has not been disclosed. (LiMandri v. Judkins (1997) 52 Cal.App.4th 326, 336.) 

Here, Plaintiff alleges the second LiMandri determinant—that Defendant had exclusive knowledge of material facts not known or reasonably accessible to Plaintiff. As noted, Plaintiff alleges “GM acquired its knowledge of the Cooling System Defect in 2010, prior to Plaintiff acquiring the Subject Vehicle, through sources not available to consumers such as Plaintiff.” (TAC, ¶ 30.) Plaintiff also alleges GM issued three technical service bulletins regarding the Defect to its authorized dealerships which were not available to the general public. (Id., ¶¶ 33-35.) Accepting these allegations as true, the TAC establishes Defendant had material facts regarding the Defect that were not accessible to Plaintiff. Thus, the TAC establishes Defendant had a duty to disclose.

Plaintiff’s TAC alleges all the elements of fraudulent inducement by concealment. Accordingly, the demurrer is OVERRULED. 

D.     Legal Standard for 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).)  “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.)

Defendant moves to strike the punitive damages on the grounds that (1) Plaintiffs have insufficiently pled their fraud cause of action and (2) that punitive damages cannot be awarded for SBA claims. In opposition, Plaintiff points out that to strike the prayer for punitive damages in its entirety Defendant must prove both points—that the fraud cause of action is insufficient and that punitive damages cannot be awarded in lemon law cases.

The Court need not address the second point. Defendant’s demurrer to the fraud cause of action is overruled, so this is not a basis to strike punitive damages. In reply to Plaintiff’s opposition, Defendant argues Plaintiff has not adequately pled that Defendant acted with malice, oppression, or fraud, nor that Defendant’s conduct was despicable. Plaintiff, however, has literally pled that Defendant acted with fraud. Furthermore, the Court of Appeal in Dhital reversed the trial court’s order striking punitive damages once it found the plaintiff in that case had stated a viable fraud claim. (Dhital, supra, 84 Cal.App.5th at 845.) This Court will follow the Dhital Court’s lead until the California Supreme Court holds otherwise.

Accordingly, Defendant’s Motion to Strike the request for punitive damages is DENIED.

E.      Conclusion

The demurrer to the fifth cause of action in Plaintiff’s Third Amended Complaint for fraudulent inducement by concealment is OVERRULED.

The motion to strike the prayer for punitive damages in Plaintiff’s Third Amended Complaint is DENIED.