Judge William A. Crowfoot, Case 22AHCV00430 2023-04-13 Tentative Ruling

Judge: William A. Crowfoot, Case: 22AHCV00430, Date: 2023-04-13 Tentative Ruling

On June 29, 2022, plaintiffs Jack De La Torre, Jennifer Jean De La Torre, and Alyssa M. De La Torre (collectively, “Plaintiffs”) filed this action against defendants Volkswagen Group of America, Inc. (“Volkswagen Group of America”) and Volkswagen Alhambra (collectively, “Defendants”). On December 21, 2022, by stipulation of the parties, Plaintiffs filed the operative Second Amended Complaint (titled as the “First Amended Complaint” on the caption page). Plaintiffs assert causes of action for: (1) breach of express warranty obligations under the Song-Beverly Consumer Warranty Act, (2) breach of implied warranty obligations under the Song-Beverly Consumer Warranty Act, (3) violation of Consumer Legal Remedies Act (“CLRA”), (4) intentional misrepresentation and concealment, (5) negligently misrepresentation and concealment, and (6) rescission.

On March 1, 2023, Defendants filed this demurrer on the grounds that the Third, Fourth, Fifth, and Sixth Causes of Action fail to state sufficient facts. Plaintiffs allegedly purchased a Certified Pre-Owned Volkswagen Jetta (the “Vehicle”) from Volkswagen Alhambra on January 18, 2020. Plaintiffs claim that Defendants represented to Plaintiffs that the Vehicle had undergone a thorough inspection (“100+ Point Dealer Inspection”) but that such representation was not true. On September 23, 2021, they allegedly discovered that the 40,000 mile maintenance service was not performed during the 100+ Point Dealer Inspection and the sparks plugs were not replaced. Plaintiffs claim that “many or all” of the subsequent problems with the Vehicle are a result of the failure to complete that service and replacement. (SAC, ¶¶ 9-10.)

Defendants argue that Plaintiffs’ claims against Volkswagen Group of America based on the CLRA fail because Plaintiff do not allege that there was a transaction between them. Defendants also argue that Alyssa M. De La Torre (“Alyssa”) cannot assert any claims against them because she is not identified as a “buyer” on the purchase contract. Defendants additionally contend that Plaintiffs’ CLRA claim against Volkswagen Group of America as well as their fraud-based claims against both Defendants fail because they are not pled with specificity. Defendants further claim that Plaintiffs’ claims for intentional and negligent misrepresentation and concealment are barred by the economic loss rule. Last, Defendants argue that Plaintiffs’ cause of action against Volkswagen Alhambra for rescission fails because it is a remedy, not a cause of action.

Plaintiffs withdrew their cause of action for rescission in their opposition brief; accordingly, the Court only addresses Defendants’ demurrer to Plaintiffs’ CLRA and fraud-based claims.

A demurrer tests the legal sufficiency of the pleadings and will be sustained only where the pleading is defective on its face. (City of Atascadero v. Merrill Lynch, Pierce, Fenner & Smith, Inc. (1998) 68 Cal.App.4th 445, 459.) “We treat the demurrer as admitting all material facts properly pleaded but not contentions, deductions or conclusions of fact or law. We accept the factual allegations of the complaint as true and also consider matters which may be judicially noticed. [Citation.]” (Mitchell v. California Department of Public Health (2016) 1 Cal.App.5th 1000, 1007; Del E. Webb Corp. v. Structural Materials Co. (1981) 123 Cal.App.3d 593, 604 [“the facts alleged in the pleading are deemed to be true, however improbable they may be”].) Allegations are to be liberally construed. (Code Civ. Proc., § 452.)

In order to bring a CLRA claim against Defendants, Plaintiffs must plead the following: (1) Plaintiffs are consumers, (2) Plaintiffs entered into a transaction with Defendants that resulted or intended to result in the purchase of the subject vehicle, (3) Defendants made a representation to Plaintiffs in connection with the purchase; (4) the representation was false; (5) Plaintiff relied on Defendants’ representations, (5) Plaintiffs were damaged, and (6) Defendants’ alleged wrongful conduct caused Plaintiffs’ damages. (Civil Code, § 1770(a).)

Defendants argue that Plaintiffs cannot assert a claim against Volkswagen Group of America under the CLRA because there was no “transaction” between them. The CLRA broadly defines “transaction” as “an agreement between a consumer and any other person, whether or not the agreement is a contract enforceable by action, and includes the making of, and the performance pursuant to, that agreement.” (Civ. Code § 1761, subd. (e).) Here, Defendants contend that the “transaction” only involved Volkswagen Alhambra, Jack De La Torre, and Jennifer Jean De La Torre, as evidenced by the purchase contract attached as Exhibit 3 to the SAC. (Demurrer, 7:1-8:10.)

In their opposition brief, Plaintiffs argue that the “transaction” underlying their claims against Volkswagen Group of America, as the manufacturer, is the issuance of the Certified Pre-Owned warranty. Plaintiffs allege that Volkswagen Group of America issued a Certified Vehicle Inspection and Condition Report and made misrepresentations about undergoing a 100+ Point Dealer Inspection. (SAC, ¶¶ 47-48, 50 55.) Plaintiffs allegedly relied on these misrepresentations and were damaged. This is sufficient to plead a “transaction” against Volkswagen Group of America. “[A] cause of action under the CLRA may be established independent of any contractual relationship between the parties,” such as a claim against a manufacturer of a product, even where purchasers may not have bought the product from manufacturer but through independent distributors. (McAdams v. Monier, Inc. (2010) 182 Cal.App.4th 174, 186 [citing Chamberlan v. Ford Motor Co. (N.D. Cal. 2005) 369 F.Supp.2d 1138, 1144].)

Next, Defendants argue that to the extent Plaintiffs ground their CLRA claim in fraud, Plaintiffs have failed to satisfy the “heightened pleading standard” because they have not identified the employee who made the alleged misrepresentations. (Demurrer, 8:19-9:2.) Defendants are incorrect. Causes 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 Superstores California (2018) 19 Cal.App.5th 1234, as modified on denial of reh'g (Feb. 22, 2018).) Here, Plaintiffs have adequately pleaded a CLRA claim by attaching the CPO checklist to their SAC as well as various advertisements and claims regarding the 100+ Point Dealer Inspection. (SAC, Ex. B.)

Last, Defendants argue that Alyssa cannot bring a claim under the CLRA because she is not a “consumer.” As used in the CLRA, the term “consumer” means “an individual who seeks or acquires, by purchase or lease, any goods or services for personal, family, or household purposes.” (Civ. Code, § 1761, subd. (d).) In Schauer v. Mandarin Gems of Cal., Inc. (2005) 125 Cal.App.4th 949, the court of appeal held that statutory remedies under the CLRA were unavailable to a woman asserting claims relating to an engagement ring where her ownership of the ring was not acquired as a result of her own consumer transaction with the defendant but was purchased for her by her ex-fiance. The court only allowed the plaintiff to pursue a contract-based claim as a third-party beneficiary. (Id. at pp. 957-958.)

The Court SUSTAINS Defendants’ demurrer to Alyssa’s cause of action under the CLRA without leave to amend. Although Plaintiffs argue that Alyssa has standing because the vehicle was purchased for her, this is akin to a third-party beneficiary contract claim, and precludes any recovery under the CLRA.

B. Fourth and Fifth Causes of Action for Intentional and Negligent Misrepresentation

The elements of fraud are: “(a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or ‘scienter’); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage.” (Charnay v. Cobert (2006) 145 Cal.App.4th 170, 184.)

As with Defendants’ demurrer to Plaintiffs’ third cause of action, Defendants argue that Plaintiffs have failed to plead their fraud-based claims with sufficient specificity. This argument fails. While fraud causes of action must be pleaded with particularity, this means that the plaintiff must allege “how, when, where, to whom, and by what means the representations were tendered.” (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645 [emphasis added].)

Here, Defendants take issue with Plaintiffs’ failure to identify the employees who “knew” about the allegedly missing 40,000 mile service and spark plugs. Defendants also argue that Plaintiffs failed to allege facts supporting scienter. (See Demurrer, 10:7-10.) An exception to the specificity rule arises “where it appears from the nature of the allegations that the defendant must necessarily possess full information concerning the facts of the controversy.” (Bradley v. Hartford Acc. & Indem. Co. (1973) 30 Cal.App.3d 818, 825 (disapproved of on separate grounds in Silberg v. Anderson (1990) 50 Cal.3d 205).) Defendants’ knowledge of the misrepresentations is a matter that is within their possession and therefore does not need to be pleaded with specificity.

Next, Defendants argue that Plaintiffs’ fraud-based claims are barred by the economic loss rule. The Court disagrees. Recently in Dhital v. Nissan , the Court of Appeal held that “[f]raudulent inducement claims fall within an exception to the economic loss rule” when it is conduct that is independent of a car manufacturer’s alleged warranty breaches. (Dhital v. Nissan North America, Inc. (2022) 84 Cal.App.5th 828, 843.) Defendants’ citations to federal case law and older state court cases are unpersuasive.

Last, Defendants argue that Alyssa has no standing to bring these claims because she did not purchase the Vehicle. (Demurrer, 9:23-2; 10:26-11:4.) In opposition, Plaintiffs argue that the vehicle was purchased for the purpose of allowing Alyssa to drive it. (Opp., 5:22-6:2.)

The Court agrees that there are no allegations that Alyssa relied on any representations or was otherwise induced to act. Also, because Alyssa did not purchase the vehicle, it is unclear what her damages are. Plaintiffs state in their brief that Alyssa “caused” the vehicle to be purchased for her, but it is unclear what this means. Accordingly, Defendants’ demurrer as to Alyssa’s Fourth and Fifth Causes of Action is SUSTAINED with leave to amend.

Defendants’ demurrer to the Third, Fourth and Fifth Causes of Action is SUSTAINED only as to Alyssa’s claims. Plaintiffs have 10 days to amend Alyssa’s claims in connection with the Fourth and Fifth Causes of Action ONLY.

Parties who intend to submit on this tentative must send an email to the Court at ALHDEPT3@lacourt.org indicating intention to submit on the tentative as directed by the instructions provided on the court website at www.lacourt.org. Please be advised that if you submit on the tentative and elect not to appear at the hearing, the opposing party may nevertheless appear at the hearing and argue the matter. Unless you receive a submission from all other parties in the matter, you should assume that others might appear at the hearing to argue. If the Court does not receive emails from the parties indicating submission on this tentative ruling and there are no appearances at the hearing, the Court may, at its discretion, adopt the tentative as the final order or place the motion off calendar.

William A. Crowfoot

Judge of the Superior Court