Case Name: Salih Suljic v. General Motors, LLC, et al.
Case No.: 17CV317722

I. Background

This is a lemon law action brought by Jason Salih Suljic (“Plaintiff”) against General Motors LLC (“Defendant”).

According to the allegations of the First Amended Complaint (“FAC”), Plaintiff purchased a 2011 Chevrolet Equinox. He received several warranties pursuant to which Defendant was to preserve or maintain the vehicle’s utility or performance, or provide compensation in the case of failure of either in a specified period of time. The vehicle contained or developed numerous defects during the warranty period. These defects included, but were not limited to, excessive oil consumption, defects related to the transmission, defects causing the engine to malfunction, defects related to the brake pedal, and defects related to the seat belts. Defendant was unable to repair the vehicle to conform to the warranties after a reasonable number of opportunities, yet failed to replace or pay restitution. Defendant’s failure to repair, replace, or pay for the vehicle violated express and implied warranties.

Defendant knew the vehicle’s engine was defective well before Plaintiff purchased it. Specifically, Defendant knew the vehicle’s engine was susceptible to several flaws, including sudden engine failure and excessive oil consumption, based on sources not available to consumers. Defendant did not notify Plaintiff of the defects at the time of sale.

Plaintiff alleges causes of action for (1) violation of Civil Code section 1793.2, subdivision (d); (2) violation of Civil Code section 1793.2, subdivision (b); (3) violation of Civil Code section 1793.2, subdivision (a)(3); (4) breach of express written warranty; (5) breach of the implied warranty of merchantability; (6) violation of the Magnuson-Moss Warranty Act; and (7) fraud by omission.

Defendant previously filed a similar demurrer to the seventh cause of action and motion to strike the prayer for punitive damages from the complaint. The Court sustained the demurrer with leave to amend. The Court required Plaintiff to allege where and from whom the defective vehicle was purchased. The Court granted the motion to strike punitive damages because punitive damages were not available under the Song-Beverly and Magnuson-Moss Acts. Plaintiff filed the FAC. Here, Defendant presents in large part the same arguments the Court considered previously.

Currently before the Court is Defendant’s demurrer to the seventh cause of action in the FAC, and motion to strike the prayer for punitive damages. Plaintiff filed an opposition, and Defendant a reply as to each.

II. Demurrer

Defendant demurs to the seventh cause of action for fraud by omission on the grounds of failure to state facts sufficient to constitute a cause of action and uncertainty. (See Code Civ. Proc., §§ 430.10, subds. (e), (f).) This demurrer re-argues both the issue on which the Court sustained the prior demurrer, and others that the Court previously overruled.

A. Failure to State Sufficient Facts

Defendant contends the fraud cause of action fails to state a claim because it was brought after the statute of limitations had run and Plaintiff fails to allege facts sufficient to support the elements of fraud.

1. Statute of Limitations

Previously the Court reasoned that the allegations of concealment in 2013 were critical to determining the statute of limitations question because they meant that the cause of action may or may not be barred by the statute of limitations. These allegations remain in the FAC. (FAC, ¶¶ 65-67.) This issue is not addressed in the instant demurrer. Thus, these arguments do not alter the analysis in the Court’s prior ruling on the previous demurrer.

“ ‘The defense of statute of limitations may be asserted by general demurrer if the complaint shows on its face that the statute bars the action.’ [Citations.] There is an important qualification, however: ‘In order for the bar of the statute of limitations to be raised by demurrer, the defect must clearly and affirmatively appear on the face of the complaint; it is not enough that the complaint shows merely that the action may be barred.’ [Citations.]” (E-Fab., Inc. v. Accountants, Inc. Services (2007) 153 Cal.App.4th 1308, 1315-1316.) In assessing whether a claim is time-barred, two fundamental questions drive the analysis: (a) What statute of limitations governs the plaintiff’s cause of action? (b) When did the cause of action accrue? (Id. at p. 1316.) The running of the statute must appear clearly and affirmatively from the dates alleged—it is not enough that the complaint might be barred. (Committee for Green Foothills v. Santa Clara County Board of Supervisors (2010) 48 Cal.4th 32, 42.) Generally, the limitations period starts running when the last element of a cause of action is complete.” (NBC Universal Media, LLC v. Super. Ct. (2014) 225 Cal.App.4th 1222, 1231.) Under CCP § 338(d), the cause of action accrues once the aggrieved party discovers the facts constituting the fraud. (Britton v. Girardi (2015) 235 Cal .App.4th 721, 734.)

Plaintiff alleges he purchased the vehicle on or about January 2011. Three years after the time of sale and related fraud would be approximately January 2014. According to Plaintiff, Defendant committed fraud in 2013 by allowing the vehicle to be sold without disclosing its engine was defective. (See FAC, ¶¶ 58, 59, 63, 73, 77.) Plaintiff also alleges “[d]uring the warranty period, the Vehicle contained or developed defects[.]” (FAC, ¶ 19.) Plaintiff does not allege when exactly these defects arose, or when he became aware of the fraud. On October 19, 2017, more than six years after the sale, he filed the complaint.

The parties agree the three-year limitations period prescribed by Code of Civil Procedure section 338, subdivision (d) applies to Plaintiff’s fraud claim. That statute explicitly states the cause of action “is not deemed to have accrued until the discovery, by the aggrieved party, of the facts constituting the fraud or mistake.” Here, the parties dispute when the cause of action accrued and whether it was tolled.

Plaintiff asserts that fraudulent concealment tolled the statute of limitations. Plaintiff’s fraudulent concealment argument appears tied to Plaintiff’s equitable estoppel argument, in that where the allegations discuss fraudulent concealment they are accompanied by a footnote claiming equitable estoppel. (See FAC, ¶ 16, fn. 3.) To plead equitable estoppel a party must plead four factors: “ ‘(1) The party to be estopped must know the facts; (2) he must intend that his conduct shall be acted upon, or must so act that the party asserting the estoppel had the right to believe that it was so intended; (3) the party asserting the estoppel must be ignorant of the true state of facts; and, (4) he must rely upon the conduct to his injury.” (Doheny Park Terrace Homeowners Ass’n, Inc. v. Truck Ins. Exchange (2005) 132 Cal.App.4th 1076, 1099.) “ ‘To create an equitable estoppel, “it is enough if the party has been induced to refrain from using such means or taking such action as lay in his power, by which he might have retrieved his position and saved himself from loss.’ … ‘… Where the delay in commencing action is induced by the conduct of the defendant it cannot be availed of by him as a defense.’ ” (Lantzy v. Centex Homes (2003) 31 Cal.4th 363, 384.) “When a plaintiff relies on a theory of fraudulent concealment, delayed accrual, equitable tolling, or estoppel to save a cause of action that otherwise appears on its face to be time-barred, he or she must specifically plead facts which, if proved, would support the theory.” (Mills v. Forestex Co. (2003) 108 Cal.App.4th 625, 641.)

Plaintiff’s alleges that in February 2013 Defendant took steps intended to conceal the existence of the alleged defect from vehicle owners and allay suspicions including a software update which recommended more frequent oil changes. (FAC, ¶¶ 63-66.) The FAC does not state for how long this concealment prevented Plaintiff from bringing his claim. Thus, the fraudulent concealment may or may not be sufficient to overcome the statute of limitations. Where claim may or may not be barred by the statute of limitations a demurrer on that basis should be overruled. (McMahon v. Republic Van & Storage Co. (1963) 59 Cal.2d 871, 874.)

Accordingly, the demurrer on the grounds of failure to state sufficient facts is not sustainable on the basis of the statute of limitations. Thus, the Court need not address the remaining arguments regarding the statute of limitations.

2. Pleading the Elements of Fraud

A general demurrer is appropriately sustained on the ground of failure to state sufficient facts to constitute a cause of action if a plaintiff does not plead facts to support each essential element of a cause of action. (See Rakestraw v. California Physicians’ Service (2000) 81 Cal.App.4th 39, 42–43, 96 Cal.Rptr.2d 354.) Defendant presents three overlapping sections which purport to address Plaintiff’s failure to plead the elements of fraud. Defendant advances the same arguments as its prior demurrer. The Court again combines these sections into a single analysis to improve clarity and prevent duplication.

“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.” (Lazar v. Superior Court (1996) 12 Cal.4th 631, 638.) “Active concealment or suppression of facts by a nonfiduciary ‘is the equivalent of a false representation, i.e., actual fraud.’” (Vega v. Jones, Day, Reavis & Pogue (2004) 121 Cal.App.4th 282, 291, internal citation omitted.) Fraud must be plead with particularity and the doctrine of liberal construction of pleadings does not apply. (Lazar v. Superior Court, supra, 12 Cal.4th at 638.).) There are four scenarios “in which nondisclosure or concealment may constitute actionable fraud: (1) when the defendant is in a fiduciary relationship with the plaintiff; (2) when the defendant had exclusive knowledge of material facts not known to the plaintiff; (3) when the defendant actively conceals a material fact from the plaintiff; and (4) when the defendant makes partial representations but also suppresses some material facts.” (LiMandri v. Judkins (1997) 52 Cal.App.4th 326, 336; Heliotis v. Schuman (1986) 181 Cal.App.3d 646, 651.)

Defendant argues Plaintiff has not alleged facts supporting the element of misrepresentation or omission. Defendant asserts Plaintiff has not alleged any direct contact with Defendant, nor specific statements made by Defendant. Insomuch as Defendant argues Plaintiff must allege a specific communication between the parties, Defendant misunderstands Plaintiff’s theory. Plaintiff alleges fraud not through false representation, but by concealment or nondisclosure. Allegation of a false representation is not required to allege fraud, instead omission or concealment may be relied upon. (See Vega v. Jones, Day, Reavis & Pogue, supra, 121 Cal.App.4th at 291.) Fraud by omission does not require the omitted fact to be contrary to some affirmative statement. (See LiMandri v. Judkins, supra, 52 Cal.App.4th at 336; Heliotis v. Schuman, supra, 181 Cal.App.3d at 651 [listing four situations when fraud by omission is adequately pleaded].) Plaintiff has alleged that Defendant had a duty to disclose the defect and did not do so. Accordingly, Plaintiff has sufficiently alleged the element of misrepresentation.

Defendant cites Heliotis v. Schuman (1986) 181 Cal.App.3d 646 for the proposition “a duty to disclose arises in four circumstances: ‘(1) when the defendant is in a fiduciary relationship with the plaintiff; (2) when the defendant had exclusive knowledge of material facts not known to the plaintiff; (3) when the defendant actively conceals a material fact from the plaintiff; and (4) when the defendant makes partial representations but also suppresses some material facts.’ ” (Heliotis v. Schuman (1986) 181 Cal.App.3d 646, 651.)

This proposition is generally correct, but does not support Defendant’s position because Plaintiff does allege two of those four categories. He alleges that Defendant had exclusive knowledge of a material defect that was unknown to himself. He also alleges Defendant took active steps to conceal the defect from him by advising owners like him to change their oil more frequently. Plaintiff needs to allege only one of the four scenarios. Thus, the argument he alleges none of these four circumstances is not well-taken.

Defendant cites Bigler-Engler v. Breg, Inc. (2017) 7 Cal.App.5th 276 for the proposition it had no duty to disclose any defects to Plaintiff. There, a court reversed a jury verdict for a plaintiff based on a failure to provide evidence of a relationship that would give rise to a duty to disclose. (Bigler-Engler v. Breg, Inc. (2017) 7 Cal.App.5th 276, 314 (Bigler-Engler).)
This case is inapposite in that there no transaction creating a duty of disclosure. (Bigler-Engler, supra, 7 Cal.App.5th at p. 312 [“Where, as here, a sufficient relationship or transaction does not exist, no duty to disclose arises even when the defendant speaks”].) The court acknowledged, a duty to disclose can arise based on a transaction in several circumstances such as: “ ‘(2) the facts are known or accessible only to defendant, and defendant knows they are not known to or reasonably discoverable by the plaintiff; (3) the defendant actively conceals discovery from the plaintiff.’ ” (Id. at p. 311.)

Here, Plaintiff alleges both exclusive knowledge and active concealment of a material fact by the Defendant related to a transaction. Thus, Bigler-Engler is distinguishable and does not support Defendant’s point.

Moreover, Defendant asserts that it had no duty to disclose because there is no allegation it made a partial representation while suppressing other facts. Rather, all statements came from a dealership, and an automaker is not responsible for the actions or statements of a dealership.

This argument is unavailing because Plaintiff need not plead a partial representation. It is one of several circumstances which cause a duty to disclose. Plaintiff has alleged two others. Thus, he does not need to plead a third.

Defendant also asserts Plaintiff has not met the requirements for pleading fraud with specificity against a corporate defendant. According to Defendant, Plaintiff must allege certain specific details when alleging fraud against a corporation, including “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.” (Dem., p. 11:17-20.)

It is true that to plead fraud against a corporate defendant based upon false representation a plaintiff must allege, among other things, who precisely made the fraudulent statement and their authority for speaking. (See Tarmann v. State Farm Mut. Auto. Ins. Co. (1991) 2 Cal.App.4th 153, 157.) However, in the instant case Plaintiff does not allege Defendant made a false representation, but rather it had a duty to speak and did not. Courts have found reduced specificity requirements in cases involving nondisclosure or omission, based upon logical necessity. (See Jones v. ConocoPhilips, (2011) 198 Cal. App. 4th 1187, 1199.) A plaintiff cannot allege when or where something did not happen. (Ibid.) Here, where Plaintiff alleges fraud by omission, the specificity requirements for pleading fraud are reduced. (See ibid.) Insomuch as Defendant argues that Plaintiff should be required to plead exactly what words were spoken, who spoke them, and when they were spoken, Defendant overstates the specificity requirement for fraud by omission.

Defendant also argues that Plaintiff fails to even allege fraud with sufficient specificity in that the FAC does not state from whom the subject vehicle was purchased. (Dem., p. 11:25-26.) The Court previously sustained the demurrer on this basis. The Court reasoned while the specific pleading requirement is relaxed where fraudulent non-disclosure is alleged, it is not eliminated. Where and from whom the vehicle was purchased are facts within Plaintiff’s knowledge and that should have been alleged.

In response, Plaintiff included in the FAC an additional allegation that “Plaintiff purchased the Vehicle at Capitol Chevrolet located at 905 Capitol Expressway Auto Mall, San Jose, CA, 95136 an entity engaged in the business of manufacturing, distributing, or selling consumer goods at retail.” (FAC, ¶ 17.) This new allegation definitively states where the subject vehicle was purchased, and the dealership from which it was purchased.

Defendant claims that this is insufficient detail in that it does not allege which salespeople Plaintiff spoke to, when any conversations occurred, or what written materials were relied on in making the purchase. The level of detail Defendant demands goes beyond what Plaintiff might reasonably know and what is required. “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.) Plaintiff has alleged ultimate facts regarding where and from whom he obtained the subject vehicle.

Defendant also contends—once again—that Plaintiff has not alleged knowledge of the defects at the time of sale. This contention is simply inaccurate. He alleges that Defendant acquired knowledge of the defective engine before the date of sale through “pre-production testing data, early consumer complaints … aggregate warranty data … testing conducted by GM in response to these complaints, as well as warranty repair and part replacement data received by GM from GM’s network of dealers, amongst other sources of information…” (FAC, ¶¶ 72, 73, 75.) The demurrer is not sustainable on the basis of a lack of allegations regarding knowledge.

In sum, the demurrer to the seventh cause of action for fraud is not sustainable on the basis of a failure to plead sufficient facts.

3. Economic Loss Rule

Defendant argues the economic loss rule is fatal to the fraud cause of action. It made a similar argument in its reply to the previous demurrer. The Court rejected this argument because it was raised for the first time on reply.

The economic loss rule, in summary, is that no tort cause of action will lie where the breach of duty is nothing more than a violation of a promise which undermines the expectations of the parties to an agreement. (JMP Securities LLP v. Altair Nanotechnologies Inc. (N.D. Cal. 2012) 880 F.Supp.2d 1029, 1042.) Simply stated, the economic loss rule generally bars tort claims based on contract breaches, thereby limiting parties to contract damages. (UMG Recordings, Inc. v. Global Eagle Entertainment, Inc. (C.D. Cal. 2015) 117 F.Supp.3d 1092, 1103.) With regards to the economic loss rule, the Ninth Circuit has stated:

Broadly speaking, the economic loss doctrine is designed to maintain a distinction between damage remedies for breach of contract and for tort. The term ‘economic loss’ refers to damages that are solely monetary, as opposed to damages involving physical harm to person or property. The economic loss doctrine provides that certain economic losses are properly remediable only in contract. The doctrine has roots in common law limitations on recovery of damages in negligence actions in the absence of physical harm to person or property.

(Giles v. General Motors Acceptance Corp. (9th Cir. 2007) 494 F.3d 865, 873.)

In addition, the California Supreme Court has noted that the economic loss rule is necessary to prevent the law of contract and the law of tort from dissolving into one another. (Robinson Helicopter Co., Inc. v. Dana Corp. (2004) 34 Cal.4th 979, 988 (Robinson).)

Defendant argues that pursuant to Robinson, the economic loss rule is limited to affirmative misrepresentations. Thus, it does not apply to omissions of the sort alleged here.

The Court questions whether that distinction between omissions and affirmative misrepresentations is critical to Robinson. (See NuCal Foods, Inc. v. Quality Egg LLC (E.D. Cal. 2013) 918 F.Supp.2d 1023, 1031 (NuCal Foods, Inc. ) [“[Robinson] strongly suggests no meaningful distinction exists between intentional concealment and intentional misrepresentation; rather, the material distinction is whether the tortious conduct was intentional or negligent”].) What is alleged here is intentional concealment of defects. Robinson did not expressly address fraud by omission or concealment of this sort because in that case there were affirmative statements regarding the quality of the product. (See id. at p. 1031; Robinson, supra, 34 Cal. 4th at p. 991 [“[W]e need not address the issue of whether Dana’s intentional concealment constitutes an independent tort”].)

In reply, Defendant argues that NuCal Foods, Inc. is not controlling and factually distinguishable. This argument is misplaced. Neither Plaintiff nor the Court cites NuCal Foods, Inc. as controlling authority or based on similar facts. It is cited as persuasive authority for its interpretation of Robinson.

Moreover, Defendant’s point is not well-taken because Robinson acknowledged several instances where tort damages are permitted in contract cases, one of which applies here. Robinson listed exceptions to the economic loss rule laid out in a prior case. (Robinson, supra, 34 Cal. 4th at pp. 989-990.) Among these was when a contract was entered into through fraudulent inducement. (Ibid.) This list was not expressly changed by Robinson. (See id. at p. 990 [discussing fraudulent inducement only while describing Erlich v. Menezes (1999) 21 Cal.4th 543, 551 (Erlich)].)

Here, Plaintiff alleges that he would not have purchased the subject vehicle absent the fraudulent omission by Defendant. Thus, he alleges fraudulent inducement to enter into a contract. The tortious conduct at issue was prior to and separate from any warranty.

Therefore, the argument the seventh cause of action is defective under Robinson because it is based on omission rather than affirmative statement is not well-taken.

In addition, Defendant asserts that Plaintiff must and does not specifically allege he has suffered personal injury or property damage outside of the warranty. As Plaintiff points out, Robinson listed allegations of potential tort liability as a damage supporting tort liability. (See Robinson, supra, 34 Cal. 4th at p. 991 [listing as basis for independent tort exposure to liability for personal damages if a crash occurred and citing Erlich].)

Here, Plaintiff has alleged that the defects could have subjected them to a vehicular collision and related personal injury. The Court agrees with Plaintiff that the risk of personal injury goes beyond the simple economic harm of purchasing a defective vehicle. Therefore, the argument Plaintiff has not alleged an independent injury is without merit.

Furthermore, as stated above, Robinson acknowledges that tort damages are available when a party is fraudulently induced to enter a contract. (Robinson, supra, 34 Cal. 4th at p. 990.) Plaintiff alleges he would not have bought the subject vehicle absent the fraud. Thus, fraudulent inducement is a sufficient basis for tort damages even if Plaintiff does not allege any other harms.

Accordingly, the economic loss rule does not warrant sustaining the demurrer.

4. Puffery

Defendant argues that a fraud cause of action cannot be based on puffery, citing Consumer Advocates v. EchoStar Satellite Corp. (2003) 113 Cal. App. 4th 1351. There, the court noted that the representation a signal was “crystal clear” was mere puffery that could not support a cause of action for fraud. (Consumer Advocates v. Echostar Satellite Corp. (2003) 113 Cal.App.4th 1351, 1361, fn. 3.)

Defendant apparently asserts that whatever statements were made about the subject vehicle were mere puffery. However, this argument is unavailing because no specific statements are alleged. The instant allegations are about the failure to speak, not about any false representations of quality.

Therefore, the Defendant’s argument regarding puffery does not support sustaining the demurrer.

5. Conclusion

Thus, the demurrer to the seventh cause of action for fraud on the ground of failure to state sufficient facts to constitute a cause of action is OVERRULED.

B. Uncertainty

Despite the Court pointing out the lack of citation and argument supporting the ground of uncertainty in its previous ruling, Defendant again lists uncertainty in its notice but does not support it in its memorandum of points and authorities. Accordingly, the demurrer to the seventh cause of action upon the ground of uncertainty is OVERRULED.

III. Motion to Strike

Defendant moves to strike Plaintiff’s request for punitive damages pursuant to Code of Civil Procedure sections 435 and 436. A motion to strike lies to remove “any irrelevant, false, or improper matter inserted in any pleading” or to “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 Court may strike a request punitive damages if there are not properly pleaded. (Grieves v. Superior Court (1984) 157 Cal.App.3d 159, 164.)

Punitive damages can be plead based upon “oppression, fraud, or malice.” (Civ. Code, § 3294, subd. (a).) Here there is no argument of oppression or malice in the FAC, however there is a fraud cause of action. Thus, the Court addresses only fraud. A fraud cause of action is sufficient to plead the fraud necessary for punitive damages. (See Stevens v. Superior Court (1986) 180 Cal.App.3d 605, 610.) Therefore, if Plaintiff adequately alleges fraud, those same allegations will support a claim for punitive damages. (See Ibid.) Conversely, a plaintiff cannot recover punitive damages based on a fraud claim if said claim is not properly pleaded.

Defendant incorporates its demurrer into its motion to strike, arguing that because Plaintiff fails to plead sufficient facts to support fraud, the prayer for punitive damages should be stricken. As discussed in the demurrer, Plaintiff has adequately alleged a cause of action for fraud. No further allegations are required to support a prayer for punitive damages. Thus, the prayer for punitive damages is proper.

Additionally, the parties dispute whether punitive damages are appropriate based on the Song-Beverly Consumer Warranty Act and the Magnuson-Moss Warranty Act. The Court notes that its previous ruling addressed this issue. Regardless, the Court need not reach this issue to resolve the instant motion to strike. The only portion of the FAC that Defendant moves to strike is the prayer for punitive damages. That prayer is adequately supported by the fraud cause of action regardless of the other causes of action.

Accordingly, the motion to strike is DENIED.