Judge William A. Crowfoot, Case Number: 23AHCV02228, Date: 2024-03-08 Tentative Ruling

Judge: William A. Crowfoot, Case: 23AHCV02228, Date: 2024-03-08 Tentative Ruling

On September 26, 2023, plaintiff Julia Sarabi (“Plaintiff”) filed this action for violation of the Song-Beverly Consumer Warranty Act and fraudulent concealment against defendant American Honda Motor Co., Inc. (“Defendant”). Plaintiff’s fraud claim arises from the concealment of material facts at the time she purchased a new 2022 Honda Odyssey (the “Vehicle”). (Compl., ¶¶ 4 8.) Specifically, Plaintiff claims that Defendant concealed the existence and nature of a defect with the Vehicle’s computerized driver-assistance safety systems called “Honda Sensing” (the “Sensing Defect”). The Sensing Defect impedes the Vehicle’s subsystems from reliably and accurately detecting and appropriately responding to conditions on the roadway, causing malfunctions of the adaptive cruise control, the lane-departure system, and the autonomous braking system called Collision Mitigation Braking System (“CMBS”). (Compl., ¶¶ 11-19.)

Defendant demurs to Plaintiff’s cause of action for fraud and moves to strike Plaintiff’s prayer for punitive damages.

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.) A demurrer may be brought if insufficient facts are stated to support the cause of action asserted. (Code Civ. Proc., § 430.10, subd. (e).)

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 thereof. (Code Civ. Proc., § 435, subd. (b)(1).) 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, subd. (a); Stafford v. Shultz (1954) 42 Cal.2d 767, 782 [“Matter in a pleading which is not essential to the claim is surplusage; probative facts are surplusage and may be stricken out or disregarded”].) The court may also strike all or any part of any pleading not drawn or filed in conformity with California law, a court rule, or an order of the court. (Code Civ. Proc., § 436, subd. (b).) An immaterial or irrelevant allegation is one that is not essential to the statement of a claim or defense; is neither pertinent to nor supported by an otherwise sufficient claim or defense; or a demand for judgment requesting relief not supported by the allegations of the complaint. (Code Civ. Proc., § 431.10, subd. (b).) The grounds for moving to strike must appear on the face of the pleading or by way of judicial notice. (Code Civ. Proc., § 437.)

Defendant demurs to Plaintiff’s second cause of action for fraudulent inducement – concealment. The tort of deceit or fraud requires a plaintiff to plead and prove: “(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.” (Lazar v. Superior Court (1996) 12 Cal.4th 631, 638.) Defendant argues that Plaintiff failed to plead facts sufficient to establish a duty to disclose, intent to defraud, justifiable reliance, or resulting damages. Defendant also argues that Plaintiff’s fraud claim is barred by the economic loss rule.

When any claim for fraud is based on an omission, one of the following four circumstances must apply in order to establish the defendant’s duty to disclose information to the plaintiff: (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.)

Defendant argues that Plaintiff cannot prove that there was a duty to disclose because a duty to disclose cannot arise between a defendant and the public at large. (Demurrer, 11:10-12:3.) In Bigler-Engle v. Breg, Inc. (2017) 7 Cal.App.5th 276, the court of appeal reversed a jury verdict in favor of the plaintiffs on a claim for intentional concealment on the grounds that there was no “transaction” arising from direct dealings between the plaintiff and defendant manufacturer of a medical device. However, there was no evidence in Bigler that the device manufacturer “directly advertised its products to consumers” whereas, here, Plaintiff alleges that she relied on statements and marketing materials by Defendant and its authorized agents. (Compl., ¶ 87.)

Defendant also argues that it owes no duty to disclose to Plaintiff because it did not possess “exclusive” knowledge of the Sensing Defect. Defendant argues that the information of about the Sensing Defect was equally available to Plaintiff because technical service bulletins (“TSBs”) are reported to the National Highway Transportation Safety Association and made public. (Motion, 12:4-13:14.) Plaintiff argues in opposition that Defendant had a duty to disclose the Transmission Defect because federal courts have interpreted “exclusive” knowledge of material facts to mean “superior” knowledge, that is, if a car manufacturer is “alleged to have known a lot more about the [defect], including information unavailable to the public.” (Opp. at p. 5, citing Falk v. Gen. Motors Corp. (N.D. Cal. 2007) 496 F.Supp.2d 1088, 1096-97 [courts have not defined "exclusive" literally but have found the standard met if the defendant had "superior" knowledge of a defect].)

Plaintiff has the better argument at this point of the litigation. Whether Plaintiff possessed actual knowledge or knowledge equivalent to that of Defendant about the Sensing Defect is an issue of proof to be determined at a later stage in the case.

Next, the Court addresses Defendant’s claim that Plaintiff’s fraud claim is barred by the economic loss rule. (Demurrer at pp. 15-19.) The seminal case, Robinson v. Helicopter Co., Inc. v. Dana Corp. (2004) 34 Cal.4th 979, 988 holds that “[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.” In opposition, Plaintiffs argue that tort damages are available in contract cases where a contract was fraudulently induced. Plaintiffs also cite to Dhital v. Nissan North America, Inc. (2022) 84 Cal.App.5th 828, 838, in which the Court of Appeal applied the fraudulent inducement exception to allow a fraud claim against a car manufacturer to proceed, explaining that a defendant’s fraudulent inducement is independent of a later breach of the contract or warranty provisions that were agreed to. (Id. at p. 840-841

The Court agrees with the Dhital court’s expansion of Robinson. Fraudulent concealment of facts to induce the making of a contract is conduct distinguishable from a subsequent breach of said contract. In Dhital, the court of appeal reasoned that the car manufacturer defendant’s conduct before the sale forms the basis for the plaintiff’s fraud claim while defendant’s conduct after the sale forms the basis for the warranty claim. (Dhital, supra, 84 Cal.App.5th at pp. 841-842.) This Court also looks to the California Supreme Court’s discussion of public policy in Robinson. Allowing Plaintiffs’ fraudulent concealment claim to go forward “advances the public interest in punishing intentional misrepresentations” and “preserves a business climate free of fraud and deceptive practices.” (Robinson, supra, 34 Cal.4th at p. 992 [citing to Diamond Multimedia Systems, Inc. v. Superior Court (1999) 19 Cal.4th 1036, 1064].)

Last, the Court addresses the sufficiency of Plaintiff’s allegations. Defendant argues that Plaintiff fails to plead that it concealed or suppressed a material fact about the Sensing Defect. (Demurrer, pp. 8-9.) This is unpersuasive. Plaintiff alleges that Defendant and its agents “actively concealed the existence and nature of the Sensing Defect”; specifically, “a. any and all known material defects or material nonconformity of the [Vehicle], including defects relating to the computerized driver-assistance safety system and collision mitigation braking system; b. that the [Vehicle], including its computerized driver-assistance safety system, and collision mitigation braking system, was not in good working order, was defective, and was not fit for the intended purposes; and, c. that [Vehicle] and its computerized driver-assistance safety system, and collision mitigation braking system, were defective, despite the fact that [Defendant] learned of such defects through alarming failure rates, [sic] and customer complaints.” (Compl., ¶ 71.) Plaintiff additionally alleges that the Sensing Defect is triggered by certain conditions, including nearly every condition in which consumers operate their vehicles, and that Defendant’s Owner’s Guide failed to disclose that the Sensing Defect can fail due to normal everyday driving conditions. (Compl., ¶ 21.) Further, Plaintiff claims that the Sensing Defect “suffers from frequent malfunctions, causing (1) numerous warning messages to intermittently appear on the vehicles’ instrument cluster alerting drivers to a problem with Honda Sensing safety and driver-assist system, (2) the vehicles to fluctuate their highway speed without warning when adaptive cruise control is set, (3) the vehicles to alert drivers to apply brakes immediately although no obstruction is present, (4) the vehicles to apply brakes although no obstruction is present, (5) the vehicles to falsely alert drivers that they fail to drive their vehicle within road lane markings, and (6) the vehicles to steer themselves outside lane of travel.” (Compl., ¶ 17.)

The Court is also unpersuaded by Defendant’s claim that Plaintiff fails to plead with specificity the representations that she relied on in purchasing the vehicle. (Demurrer, pp. 13-14.) The rule of specifically pleading how, when, where, to whom and by what means, misrepresentations were communicated is intended to apply to affirmative misrepresentations and not to concealment. (Alfaro v. Community Housing Improvement System & Planning Assn, Inc. (2009) 171 Cal.App.4th 1356 at 1384.) “The requirement of specificity is relaxed when the allegations indicate that ‘the defendant must necessarily possess full information concerning the facts of the controversy.” (Tarmann v. State Farm (1991) 2 Cal.App.4th 153, 58.)

Last, Defendant argues that no representations were made by Defendant because there are no allegations of direct contact with Defendant (as opposed to the dealership). (Demurrer, pp. 10.) Defendant claims that any representations, misstatements, or omissions by dealers are not attributable to or actionable against it without allegations of agency. However, Plaintiff alleges that she was assisted by a salesperson and that she relied on the statements made during the sales process by Defendant’s agents. (Compl., ¶¶ 87-88.) Plaintiff also alleges she relied upon marketing materials, television commercials, and radio commercials that Defendant issued. (Compl., ¶¶ 87-88.) While Plaintiff ultimately bears the burden to prove any agency relationship, the allegations pleaded in the Complaint are sufficient for purposes of pleading at this stage of the litigation.

Defendant moves to strike Plaintiff’s prayer for punitive damages on the grounds that Plaintiff fails to plead facts with requisite specificity to support a punitive damages claim.

Punitive damages are allowed in non-contract cases when a defendant is guilty of “oppression, fraud, or malice . . . .” (Civ. Code § 3294.) Here, because Plaintiff alleges a viable fraud claim, she has pleaded fraud for the purposes of entitlement to punitive damages under Civil Code § 3294.
IV. CONCLUSION

William A. Crowfoot

Judge of the Superior Court

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.