Judge: Yolanda Orozco, Case: 21STCV36222, Date: 2023-01-06 Tentative Ruling
Case Number: 21STCV36222 Hearing Date: January 6, 2023 Dept: 31
DEMURRER WITH A MOTION TO STIKE
TENTATIVE RULING
Defendant’s Demurrer is
OVERRULED and the Motion to Strike is DENIED.
Background
On September 30,
2021, Plaintiffs Mario Villa and Marta Elisa Villa filed a Complaint against
Defendant General Motors, (“GM”) and
Does 1 to 10 for violations of the Song-Beverly Act.
Th operative
First Amended Complaint (FAC) alleges causes of action for:
1) Violation of
Civil Code section 1793.2(d);
2) Violation of
Civil Code section 1793.2(b);
3) Violation of
Civil Code section 1793.2(a)(3);
4) Breach of
Express Written Warranty (Civil Code sections 1791.1; 1794; 1795.5);
5) Fraudulent
Inducement – Concealment
On June 09, 2022,
Defendant filed a demurrer with a Motion to Strike Plaintiff’s First Amended
Complaint and prayer for punitive damages.
Plaintiff filed
opposing papers on December 22, 2022.
A reply was filed
on December 29, 2022.
MEET AND CONFER
Before filing a demurrer, the demurring party is required to meet and confer with the party who filed the pleading demurred, in person or telephonically, to determine whether an agreement can be reached through a filing of an amended pleading that would resolve the objections to be raised in the demurrer. (Code Civ. Proc. (CCP) § 430.41.)
the meet and confer requirement has been met. (VonDielingen
Decl. ¶ 2.)
Legal Standard
A. Demurrer¿¿¿¿
¿¿¿
A demurrer can be used only to challenge defects that
appear on the face of the pleading under attack or from matters outside the
pleading that are judicially noticeable.¿ (Blank v. Kirwan (1985) 39
Cal.3d 311, 318.)¿ “To survive a demurrer, the complaint need only allege facts
sufficient to state a cause of action; each evidentiary fact that might
eventually form part of the plaintiff’s proof need not be
alleged.”¿ (C.A. v. William S. Hart Union High School Dist. (2012)
53 Cal.4th 861, 872.)¿ For the purpose of testing the sufficiency of the cause
of action, the demurrer admits the truth of all material facts properly
pleaded.¿ (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962,
966-967.)¿ A demurrer “does not admit contentions, deductions or conclusions of
fact or law.”¿ (Daar v. Yellow Cab Co. (1967) 67 Cal.2d 695,
713.)¿¿¿
¿¿
B. 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 thereof.
(Code of Civ. Proc., § 435(b)(1); Cal. Rules of Court (CRC), Rule 3.1322(b).)
The court may, upon a motion or at any time in its discretion and upon terms it
deems proper: (1) strike out any irrelevant, false, or improper matter inserted
in any pleading; or (2) strike out all or any part of any pleading not drawn or
filed in conformity with the laws of California, a court rule, or an order of
the court. (Code of Civ. Proc., § 436, subds. (a)-(b); 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”].)¿¿¿¿
¿¿¿
C. Leave to Amend¿¿¿¿
¿¿¿
“Where the defect raised by a motion to strike or by demurrer
is reasonably capable of cure, leave to amend is routinely and liberally
granted to give the plaintiff a chance to cure the defect in question.” (CLD
Construction, Inc. v. City of San Ramon (2004) 120 Cal.App.4th 1141, 1146.)
The burden is on the complainant to show the Court that a pleading can be
amended successfully. (Goodman v. Kennedy (1976) 18 Cal.3d 335, 348.)¿¿¿
DISCUSSION
Allegations
in FAC
This
action is a lemon law case that arose out of the purchase of a 2017 Chevrolet
Bolt (“subject vehicle”) on or about November 14, 2017. (FAC ¶ 9.) The subject
vehicle was purchased from and manufactured by Defendant GM with various
warranties. (Id. ¶ 10, Ex. A.) During the applicable express warranty
period, the subject vehicle had various defects and nonconformities, including
but not limited to the battery and electrical system that substantially
impaired the use, value, and safety of the subject vehicle. (Id. ¶¶ 14, 15.) Plaintiffs allege
Defendant violated the Song-Beverly Act by failing to either promptly replace
the subject vehicle or make restitution under the Act. (Id. ¶ 18.)
The
Plaintiffs’ fraudulent inducement claim arises out of Defendant’s failure to
disclose the battery defect in the subject vehicle. Plaintiffs allege that
since 2016, GM knew that model year 2017 or newer Chevrolet Bolt EV vehicles,
including the 2017 Chevrolet Bolt model contained one or more design and/or
manufacturing defects in the battery (the “Battery Defect”). (FAC ¶ 24.) The
Battery Defect caused the high voltage battery to overhead when charged to full
capacity, loss of propulsion power while driving, catastrophic fire, no crank,
reduced range, thermal runaway, and/or spontaneous combustion. (Id.) The
Battery defect can result in catastrophic damage to Chevy Vehicles and the
surrounding property or persons. (Id. ¶ 25) The Plaintiffs experienced
symptoms of the Batter Defect as is evidenced in the repair history for the
subject vehicle. (Id.)
The
Battery Defect posed a significant safety hazard and was unreasonably dangerous
to consumers because it could suddenly and unexpectedly cause overheating and
spontaneous combustion at any time, exposing Plaintiffs, passengers, and other
drivers who share the road or garage with Plaintiffs, to serious risk of
accident and injury. (FAC ¶ 26.) Plaintiffs allege that prior to acquiring the
subject vehicle, GM was well aware and knew that the lithium-ion battery
installed on the subject vehicle was defective, but GM and its dealership
failed to disclose the fact to Plaintiffs at the time of sale or thereafter,
including repair visits. (Id. ¶ 27.)
Plaintiffs
believe that GM acquired knowledge of the Battery Defect in 2016 from sources
not available to consumers, such as Plaintiffs, including pre-production and
post-production testing data, early consumer complaints about the Battery
Defect made directly to GM and its network of dealers, aggregate warranty date
complied from GM’s network of dealers, testing conducted by GM in response to
complaints about the Battery Defect, as well as warranty repair and part
replacement data received by GM from GM’s network of dealers, among other
sources of internal information. (FAC ¶ 31.) Plaintiffs allege that since 2016,
GM made several communications to the National Highway Traffic Safety
Administration (“NHTSA”) relating to the “battery” components of the Chevrolet
Bolt EV vehicles and GM had superior and exclusive knowledge about the Battery
Defect and knew or should have known that the Battery Defect was not known or
reasonably discoverable by Plaintiffs before they purchased or leases the
subject vehicle. (Id. ¶¶ 32, 33.)
Plaintiffs
allege that GM actively concealed the existence and nature of the Battery
Defect at the time of purchase, repair, and thereafter. (FAC ¶ 34.) Despite GM
being inundated with complaints regarding the Battery Defect rather than repair
the problem under warranty, GM dealers either informed consumers that their
vehicles are functioning properly or conducted repairs that merely masked the
defect. (Id.¶ 35.) Despite knowing about the Battery Defect and its
safety risk since at least 2016, GM and its authorized dealerships nevertheless
concealed and failed to disclose the defect to its sales representatives and to
Plaintiffs either at the time of sale or during repair visits when the problems
with the Battery Defect arouse and persisted. (Id. ¶ 36.)
GM
also concealed the existence, nature, extent, and scope of the Battery Defect
with ineffective repair procedures published directly to its dealerships and
not consumers, such as Plaintiffs. (Id.)
The
FAC also alleges that GM omitted mention of the Battery Defects in its sales
materials, advertisements, publications, and other marketing campaigns for
Chevy Vehicles. (FAC ¶ 36.) By placing Chevy Vehicles into the steam of
commerce, GM had a duty to disclose the existence, nature, and scope of the
Battery Defect. (Id. ¶ 37.) Plaintiffs interacted with sales
representatives and considered GM’s advertisements, and/or marketing materials
concerning Chevy Vehicles prior to purchasing the subject vehicle. (Id.
¶ 38.) Had GM and its dealership(s) disclosed the Batter Defect, the Plaintiffs
would have been aware of the defect and would not have purchased the subject
vehicle. (Id. ¶ 38.)
Despite
knowing about the Battery Defect via customer complaints, warranty claims, and
GM’s own investigations confirming the Battery Defect, GM failed to provide
adequate repairs to consumers or disclose the defect to potential buyers. (FAC
¶ 39.) As the number of complaints
increased regarding the Battery Defect, the NHTSA issued a recall on November
13, 2020, regarding the Battery Defect. (Id.) The repair procedures call
for dealers to program the vehicles to limit the full charge of the battery to
90%. (Id.) This software fix cannot resolve the defect in the battery
that leads to fire and or explosion of the battery and the fact that consumers
are left with less range than advertised by GM, which is a key consideration
for purchasers/lessees of electric vehicles. (Id. ¶ 39.)
On
July 14, 2021, GM instructed owners and lessees of the Chevy Vehicles to “pack
their vehicles outside away from homes and other structures immediately after
charging and…not leave their vehicles charging overnight.” (FAC ¶ 40.) Despite
the software update, the problem was not solved, and Chevy Bolt vehicles
continued to catch fire and cause serious harm to people and property, making
the vehicles unsafe and a serious safety hazard. (Id.) Moreover, rather
than offering restitution, GM issued a recall which has been insufficient to
repair the Battery Defect. (Id. ¶ 41.) Plaintiffs discovered GM’s
wrongful conduct, shortly before filing the Complaint after numerous
unsuccessful attempts to repair the subject vehicle during which time GM
concealed the existence, nature, and scope of the Battery Defect. (Id. ¶
42.)
I.Demurrer to Fifth Cause of Action
Defendant
GM demurrers to Plaintiffs’ fifth cause of action for Fraudulent Inducement-Concealment
on the basis that the fifth cause of action fails to state facts sufficient to
establish fraud and that the fifth cause of action is barred by the economic
loss rule.
Fraud
Claim is Sufficiently Pled
“In
California, fraud must be pled specifically; general and conclusory allegations
do not suffice.” (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.)
“The elements of fraud, which give rise to the tort action for deceit, 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.” (Id. at
638.)
“The requirement
of specificity in a fraud action against a corporation requires the plaintiff
to allege the names of the persons who made the allegedly fraudulent
representations, their authority to speak, to whom they spoke, what they said
or wrote, and when it was said or written.” (Tarmann v. State Farm Mut.
Auto. Ins. Co. (1991) 2 Cal.App.4th 153, 157.) “We acknowledge that the
requirement of specificity is relaxed when the allegations indicate that ‘the
defendant must necessarily possess full information concerning the facts of the
controversy’ (Citation) or ‘when the facts lie more in the knowledge of the
opposite party[.]’ (Citation.)” (Id. at 158.)
Defendant
asserts that Plaintiffs failed to plead fraud with particularity and do not
allege facts showing who at GM concealed facts about the subject vehicle, or
when, where, and how GM concealed facts or how Plaintiffs interacted with GM
before the purchase of the subject vehicle.
Plaintiffs
point out that less specificity is required because GM had superior and
exclusive knowledge about the Battery Defect. (FAC ¶ 3.) Moreover, the
specificity requirement is harder to meet when the fraud cause of action is
based on nondisclosure. (See Alfaro v. Community Housing
Improvement System & Planning Assn., Inc. (2009) 171
Cal.App.4th 1356, 1384 [“How does one show ‘how’ and ‘by what means' something didn't
happen, or ‘when’ it never happened, or ‘where’ it never happened?”].) “One of
the purposes of the specificity requirement is ‘notice to the defendant, to furnish
the defendant with certain definite charges which can be intelligently met.’
(Citation.)” (Id. at 1384 [internal quotations omitted].) “Also
‘considerations of practicality enter in,’ when multiple plaintiffs and
defendants are involved. (Citation.)” (Id.)
Plaintiff
sufficiently alleged that GM as the manufacturer had superior knowledge of the
Battery Defect since at least 2016 through pre-production and post-production
testing data, early consumer complaints, aggregate warranty data, and testing
conducted by GM in response to complaints about the Battery Defect, as well as
warranty repair and part replacement data received by GM from GM’s network of
dealers, among other sources of internal information. (FAC ¶ 31.)
In Jones v. ConocoPhillips, Co. (2011), the Second District Appeal Court found that the plaintiff’s fraudulent concealment claim against multiple defendants was adequately pled when material facts known to defendants were not disclosed and the defendant had exclusive knowledge of the material facts not known to the plaintiffs and defendants actively concealed the material fact from plaintiffs. (See Jones v. ConocoPhillips Co. (2011) 198 Cal.App.4th 1187, 1199-1200 [“Each defendant is therefore on notice that it allegedly concealed or failed to disclose the toxic properties of the product it sold to Goodyear and Upjohn during the course of Carlos's employment. Although sparse, nothing more is required at this early stage of the litigation.”].) Here, there is only one Defendant, GM, one product sold, and a specific alleged defect. These facts are sufficient to put GM on notice of the claims against it without Plaintiffs needing to specify the name of the agent(s) who specifically concealed the Battery Defect.
Moreover, the Plaintiffs sufficiently alleged the “what”, which is the concealment of the Battery Defect and its potential risk, and the “when”, which is before the purchase of the subject vehicle and during subsequent rapiers. The “how” is the failure to disclose the defect to the Plaintiffs, omitting the defect from its marketing materials, and then masking the defect with ineffective repairs. (FAC ¶¶ 27, 34, 35, 36, 39.) Plaintiffs also allege that the nondisclosure was material because if Plaintiff knew about the Battery Defect, they would not have purchased the vehicle. (FAC ¶ 72.) Plaintiffs also pled their reliance on the non-disclosure and the damages they suffered. (FAC ¶¶ 38, 68, 72, 75.)
Therefore, the Court
finds that the Plaintiffs’ fifth cause of action is sufficiently pled. Defendant’s
arguments are better raised through a summary judgment motion.
Fraud Claim is not Barred by the Economic Loss Rule
Defendant also demurrers on the basis that the fifth
cause of action is barred by the economic loss rule. California law does not
permit a plaintiff to recover tort damages for contract claims. As explained by
the California Supreme Court, “the economic loss rule prevents the law of
contract and the law of tort from dissolving into the other.” (Robinson
Helicopter Co., Inc. v. Dana Corp. (2004) 34 Cal. 4th 979, 989.)
In Dhital v. Nissan North America, Inc., the
Appellate Court held that the economic loss rule does not bar claims for
fraudulent inducement, including, as alleged here, fraudulent concealment: “[W]e conclude 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” in Robinson
Helicopter Co., Inc. v. Dana Corp. (2004) 34 Cal.4th 979. (Dhital v. Nissan North America, Inc. (2022) 84 Cal.App.5th 828, review
filed (Dec. 2, 2022).) Recently, the California
Supreme Court granted the Ninth Circuit’s request for certification of the question
whether claims from fraudulent concealment are exempted from the economic loss
rule in Rattagan v. Uber Technologies, Inc. (9th Cir. 2021) 19 F.4th
1188.
Since tort damages are permitted in contract cases where the
contract has been fraudulently induced, the Court finds that Plaintiff’s fifth
cause of action is not barred by the economic loss rule. (See Robinson Helicopter Co., Inc., supra, 34 Cal.4th at 989-800 [“Tort
damages have been permitted in contract cases where . . . the contract was
fraudulently induced.”].)
The demurrer to
Plaintiff’s Fifth Cause of Action is OVERRULED.
II.Motion to Strike Punitive Damages¿
To state a claim for punitive damages under Civil Code section 3294, a plaintiff must allege specific facts showing that the defendant has been guilty of malice, oppression or fraud. (Smith v. Superior Court (1992) 10 Cal. App. 4th 1033, 1042.) The basis for punitive damages must be pled with specificity; conclusory allegations devoid of any factual assertions are insufficient. (Id.) “Malice” is defined in section 3294(c)(1) as “conduct which is intended by the defendant to cause injury” or “despicable conduct which is carried on by the defendant with a willful and conscious disregard of the rights or safety of others.” “Oppression” is defined in section 3294(c)(2) as “despicable conduct subjecting a person to cruel and unjust hardship in conscious disregard of that person’s rights.” The term “despicable” has been defined in the case law as actions that are “base,” “vile,” or “contemptible.” (Shade Foods, Inc. v. Innovative Products Sales & Marketing, Inc. (2000) 78 Cal. App. 4th 847, 891.) Fraud means “an intentional misrepresentation, deceit, or concealment of a material fact known to the defendant with the intention on the part of the defendant of thereby depriving a person of property or legal rights or otherwise causing injury.” (Civ. Code, § 3294, subd. (c) (3).)
Defendant moves to strike Plaintiff’s demand for punitive damages in the FAC’s Prayer for Relief. (FAC at 15:9.)
The FAC alleges that GM knew that the subject vehicle contained a battery defect and its dangerous consequences. (FAC ¶¶ 34, 36.) GM knew that the Battery Defect could result in losses of propulsion power while driving, catastrophic fire, no crank, reduced range, thermal runaway, and/or spontaneous combustion, posing a safety hazard and making the Battery Defect unreasonably dangerous to consumers. (FAC ¶¶ 24, 25.) The FAC also alleges that Defendant knew about the Battery Defect and knowingly and intentionally concealed the fact (Id. ¶¶ 69, 71.) GM actively concealed the Battery Defect by failing to inform consumers about the defect or conducting repairs to merely mask the defect. (Id. ¶ 33.)
First, the demurrer for fraudulent inducement was overruled because the fraud cause of action was properly pled. Secondly, the Court finds the conduct alleged above supports an allegation of malice based on despicable conduct carried on by Defendant in its willful and conscious disregard for the safety of others by concealing the Battery Defect and its known dangers.
Lastly, the Court notes that despite Plaintiffs’ reliance on Federal District Court cases, no California state court has found that punitive damages are recoverable purely for willful violations of the Song-Beverly Act.
Willful violations of the Song-Beverly Act may entitle the consumer to a civil penalty “which shall not exceed two times the amount of actual damages.” (Civ. Code, § 1794, subd. (c).) Punitive damages and a Civil Penalty under the Song-Beverly Act were awarded to the plaintiff in Anderson v. Ford Motor Co. (2022) because the fraud cause of action arose from different conduct than the violations of the Song-Beverly Act. (Anderson v. Ford Motor Co. (2022) 74 Cal.App.5th 946, 971 [“[P]unitive damages punished Ford for oppression, fraud, or malice related to its pre-sale fraud and concealment. It separately received a penalty for willfully failing to comply with its Song-Beverly Act obligations — a penalty that was based on conduct that took place after the conduct underlying the pre-sale fraudulent concealment.”)
Like the plaintiff in Anderson, Plaintiffs can recover punitive damages for pre-sale fraudulent misconduct rather than Song-Beverly Act violations, even if the fraudulent conduct continues beyond the sale date and intertwines with the Song-Beverly Act violations. (See Anderson, supra, 74 Cal.App.5th at 972.) Moreover, the fact that Plaintiffs may simultaneously seek to recover both punitive damages and statutory penalties at the pleading stage, does not mean that punitive damages are available for willful violations of the Song-Beverly Act. (See Clauson v. Superior Court (1998) 67 Cal.App.4th 1253, 1256.)
Since the Plaintiffs’ fraud cause of action is sufficiently pled, the motion to strike punitive damages is DENIED.
Conclusion
Defendant’s Demurrer is OVERRULED and the Motion to Strike is DENIED.
Moving party to give notice.