Case Number: 19STCV41356 Hearing Date: February 18, 2020 Dept: 34

SUBJECT: Demurrer and Motion to Strike Complaint

Moving Party: Defendant General Motors, LLC

Resp. Party: Plaintiffs Gavin Henderson and Jeannie Henderson

Defendant’s demurrer is OVERRULED.

Defendant’s motion to strike is DENIED.

BACKGROUND:

Plaintiffs’ case arises out of the warranty obligations of Defendant for a 2011 Buick Enclave vehicle Plaintiff purchased on June 30, 2011. (See Complaint, ¶ 6-8.)

On November 18, 2019, Plaintiffs Gavin Henderson and Jeannie Henderson commenced this lemon law action against Defendant General Motors 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 warranty; (5) breach of implied warranty; (6) violation of the Magnuson-Moss Warranty Act; and (7) fraud by omission.

On January 21, 2020, Defendant filed the instant demurrer to the seventh cause of action in the complaint and motion to strike the request for punitive damages in the complaint.

ANALYSIS:

I. Demurrer

A. Legal Standard

A demurrer is a pleading used to test the legal sufficiency of other pleadings. It raises issues of law, not fact, regarding the form or content of the opposing party’s pleading. It is not the function of the demurrer to challenge the truthfulness of the complaint; and for purpose of the ruling on the demurrer, all facts pleaded in the complaint are assumed to be true, however improbable they may be. (Code Civ. Proc., §§422.10, 589.)

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.) No other extrinsic evidence can be considered (i.e., no “speaking demurrers”). A demurrer is brought under Code of Civil Procedure section 430.10 (grounds), section 430.30 (as to any matter on its face or from which judicial notice may be taken), and section 430.50(a) (can be taken to the entire complaint or any cause of action within).

A demurrer may be brought under Code of Civil Procedure section 430.10(e) if insufficient facts are stated to support the cause of action asserted. A demurrer for uncertainty will be sustained only where the complaint is so bad that the defendant cannot reasonably respond. (Code Civ. Proc., § 430.10(f).)

B. Discussion

Defendant demurs to Plaintiffs’ fraud cause of action on the grounds that: (1) it is barred by the applicable statute of limitations; (2) it is barred by the economic loss rule; and (3) it fails to state facts sufficient to establish the fraud cause of action. (Motion, p. 2:4-15.)

1. Statute of Limitations

Code of Civil Procedure section 338 provides that a cause of action for relief on the ground of fraud or mistake must be brought within three years. (Code Civ. Proc., § 338, subd. (d).) “The cause of action in that case is not deemed to have accrued until the discovery, by the aggrieved party, of the facts constituting the fraud or mistake.” (Id.)

A demurrer may lie “where plaintiff has included allegations that clearly disclose some defense or bar to recovery.” (Edmon & Karnow, Cal. Prac. Guide: Civ. Proc. Before Trial (The Rutter Group 2017) ¶ 7:49.) As a result, “[w]here the dates alleged in the complaint show the action is barred by the statute of limitations, a general demurrer lies. . . . The running of the statute must appear “clearly and affirmatively” from the face of the complaint. It is not enough that the complaint might be time-barred.” (Id. at ¶ 7:50; Committee for Green Foothills v. Santa Clara County Bd. of Supervisors (2010) 48 Cal.4th 32, 42.) “The courts, however, will not close their eyes to situations where a complaint contains allegations of fact inconsistent with attached documents, or allegations contrary to facts which are judicially noticed.” (Del E. Webb Corp. v. Structural Materials Co. (1981) 123 Cal.App.3d 593, 604.) “If facts appearing in the exhibits contradict those alleged, the facts in the exhibits take precedence.” (Holland v. Morse Diesel Int’l, Inc., 86 Gal.App.4th 1443, 1447 (2001).)

“[A] mere averment of ignorance of a fact which a party might with reasonable diligence have discovered is not enough to postpone the running of the statute.” (Bradbury v. Higginson (1914) 167 Cal. 553, 558.) “A plaintiff whose complaint shows on its face that his claim would be barred without the benefit of the discovery rule must specifically plead facts to show (1) the time and manner of discovery and (2) the inability to have made earlier discovery despite reasonable diligence. The burden is on the plaintiff to show diligence, and conclusory allegations will not withstand demurrer.” (McKelvey v. Boeing North American, Inc. (1999) 74 Cal.App.4th 151, 160.)

“When a plaintiff reasonably should have discovered facts for purposes of the accrual of a cause of action or application of the delayed discovery rule is generally a question of fact, properly decided as a matter of law only if the evidence (or, in this case, the allegations in the complaint and facts properly subject to judicial notice) can support only one reasonable conclusion.” (Broberg v. The Guardian Life Ins. Co. of Am. (2009) 171 Cal.App.4th 912, 921.) “In order that one who claims to have been defrauded be charged with constructive knowledge of the facts constituting the fraud, it must appear not only that he had notice of facts sufficient to put a prudent person upon inquiry, but also that means for the discovery of the facts were available to him.” (Sime v. Malouf (1949) 95 Cal.App.2d 82, 107.)

Defendant first demurs to the seventh cause of action for fraud by omission arguing that it is barred by the three-year statute of limitations. (Demurrer, p. 8:2-4.) Defendant asserts that the complaint makes clear that Plaintiffs’ claim is time barred as the only date alleged is the date Plaintiffs purchase the subject vehicle – “[i]n or around June 30, 2011.” (Id. at p. 8:19-21 [citing Complaint, ¶ 6].) Defendant contends that while Plaintiffs state that the subject vehicle contained or developed defects “during the warranty period,” the complaint contains no other reference to when Plaintiffs “discovered” the alleged defects during said period. (Id. at p. 8:21-24 [citing Complaint ¶ 8].) Defendant argues that based on the June 30, 2011 purchase date, Plaintiffs had to file their fraud claim no later than June 30, 2014 for it to be timely. (Id. at p. 8:24-25.)

In opposition, Plaintiffs argue that their fraudulent omission claim is not time-barred because the running of the statute of limitations does not appear “clearly and affirmatively” on the face of the complaint. (Opp., p. 3:11-12.) Plaintiffs assert that moreover, even if the statute of limitations appeared on the face of the complaint, Plaintiffs’ claim is nonetheless timely because of the discovery rule. (Id. at p. 4:3-5.)

The Court finds that Plaintiffs’ cause of action for fraud by omission is not, at the demurrer stage, barred by the statute of limitations. Plaintiffs’ complaint does not include allegations that clearly and affirmatively show that that action is barred; again, it is not enough that the complaint might be time-barred. As correctly noted by Defendant, the complaint only alleges that the subject vehicle was purchased on or around June 30, 2011 and that the subject vehicle contained or developed the alleged defects “during the warranty period.” (Complaint ¶ 6, 8.) Such allegations do not clearly and affirmatively show that the action is barred. Moreover, Plaintiffs allege that “Plaintiffs only became aware of the facts giving rise to their claims in or about April 2019.” (Complaint, ¶ 61.)

The demurrer to the seventh cause of action is OVERRULED on this ground.

2. Specificity of Fraud by Omission Allegations

The elements of an action for fraud based on 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.” (Mktg. W., Inc. v. Sanyo Fisher (USA) Corp. (1992) 6 Cal.App.4th 603, 612-613.) Fraud must be pleaded specifically. To survive demurrer, plaintiff must plead facts that “show how, when, where, to whom, and by what means the representations were tendered.” (Hamilton v. Greenwich Investors XXVI, LLC (2011) 195 Cal.App.4th 1602, 1614.)

“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.)

Although the general rule states that a fraud claim must be specifically pleaded, less specificity is required if “it appears from the nature of allegations that defendant must necessarily possess full information,” or if the “facts lie more in the knowledge of” opposing parties. (Alfaro v. Community Housing Improvement System & Planning Assn., Inc. (2009) 171 Cal.App.4th 1356, 1384.) “‘[T]he courts should not . . . seek to absolve the defendant from liability on highly technical requirements of form in pleading. Pleading facts in ordinary and concise language is as permissible in fraud cases as in any others, and liberal construction of the pleading is as much a duty of the court in these as in other cases.’” (Appollo Capital Fund, LLC v. Roth Capital Partners, LLC (2007) 158 Cal.App.4th 226, 242.)

Furthermore, the rule of specificity of pleading is intended to apply only to affirmative representations and not to fraud by concealment. (See Alfaro v. Community Housing Improvement System & Planning Assn., Inc. (2009) 171 Cal.App.4th 1356, 1384; Jones v. ConocoPhillips (2011) 198 Cal.App.4th 1187, 1200 [concealment is sufficiently pled when the complaint as a whole provides sufficient notice of the claims against defendants].) “If the duty to disclose arises from the making of representations that were misleading or false, then those allegations should be described.” (Id.)

“‘There are ‘four circumstances 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.’ [Citations] . . . [O]ther than the first instance, in which there must be a fiduciary relationship between the parties, “the other three circumstances in which nondisclosure may be actionable presuppose[] the existence of some other relationship between the plaintiff and defendant in which a duty to disclose can arise. . . . ‘[W]here material facts are known to one party and not to the other, failure to disclose them is not actionable fraud unless there is some relationship between the parties which gives rise to a duty to disclose such known facts.’ [Citations] A relationship between the parties is present if there is ‘some sort of transaction between the parties. [Citations.] Thus, a duty to disclose may arise from the relationship between seller and buyer, employer and prospective employee, doctor and patient, or parties entering into any kind of contractual agreement.’” (Hoffman v. 162 North Wolfe LLC (2014) 228 Cal.App.4th 1178, 1186-1187.)

Defendant additionally demurs to the seventh cause of action arguing that the complaint fails to allege facts sufficient to state a cause of action for fraud by omission. (Demurrer, p. 2:7-8.) Defendant asserts that Plaintiffs fail to allege that they purchased the subject vehicle directly from Defendant or otherwise entered into a transaction with Defendant such that Plaintiffs have not alleged facts demonstrating that Defendant was under a duty to disclose. (Id. at p. 11:5-9.)

Defendant further contends that “the complaint does not allege that Plaintiffs saw or relied on any marketing materials or statements by [Defendant] when deciding to purchase their vehicle.” (Id. at p. 11:13-15.) Defendant argues that “consequently, even if [Defendant’s] advertisements or marketing materials had included statements that Plaintiffs contend should have been included, it would not have made any difference; Plaintiffs would have purchased the vehicle regardless.” (Id. at p. 11:15-17.) Defendant asserts that “Plaintiffs, therefore, have not alleged that any omissions by [Defendant] caused their injuries.” (Id. at p. 11:18-19.)

Defendant also contends that the complaint fails to plead fraud with the required specificity. (Id. at p. 11:23.) Defendant argues that “Plaintiffs fail to identify from whom they purchased the subject vehicle, the salesperson with whom Plaintiffs spoke, when Plaintiffs had any conversations with salespeople regarding the subject vehicle, what advertisements or marketing brochures Plaintiffs reviews or relied upon in purchasing the subject vehicle, and whether those materials, if any, were prepared by [Defendant] or someone else.” (Id. at p. 12:1-5.) Defendant asserts that “Plaintiffs have also failed to plead with specificity facts supporting any allegation that [Defendant] intended to defraud them by either making affirmative statements or failing to disclose material facts.” (Id. at p. 12:7-9.)

In opposition, Plaintiffs argue that they have sufficiently alleged their fraud by omission cause of action. (Opp., p. 7:1.)

The Court finds that Plaintiffs have alleged facts sufficient to state a cause of action for fraud by omission. As to Defendant’s argument regarding an allegation that Plaintiffs purchased the subject vehicle directly from Defendant, Plaintiffs have sufficiently pled that Defendant had exclusive knowledge of the facts and that the parties had a relationship, that of manufacturer and buyer. As held by our Court of Appeal, “Although, typically, a duty to disclose arises when a defendant owes a fiduciary duty to a plaintiff [citation], a duty to disclose may also arise when a defendant possesses or exerts control over material facts not readily available to the plaintiff. (See, e.g., Magpali v. Farmers Group, Inc. (1996) 48 Cal.App.4th 471, 482, 55 Cal.Rptr.2d 225 [“ ‘[t]he duty to disclose may arise without any confidential relationship where the defendant alone has knowledge of material facts which are not accessible to the plaintiff’ ”].)” (Jones v. ConocoPhillips Co. (2011) 198 Cal.App.4th 1187, 1199.) In Jones, the court held that the plaintiffs (family members of a deceased worker exposed to toxic chemicals) had alleged facts sufficient to support a claim of fraudulent concealment against the chemical manufacturers. Specifically, plaintiffs alleged that defendants alone were aware of their products’ toxicity, it was a fact not available to the decedent, and the defendants concealed that fact. (Id. at 1199-1200.) Here, Plaintiffs have sufficiently pled that Defendant, the manufacturer, had knowledge of material facts that were not accessible to Plaintiffs.

Finally, as to Defendant’s arguments regarding specificity, less specificity is required when the facts lie more in the knowledge of the opposing party. Fraud causes of actions must be pled with specificity in order to give notice to the defendant and to furnish him or her with definite charges. (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal. 3d 197, 216, superseded by amendments to the Unfair Competition Law contained in Proposition 64 on unrelated grounds.) Here, Plaintiffs have sufficiently given Defendant notice and furnished it with definite charges.

Defendant’s demurrer to the seventh cause of action is OVERRULED on this ground.

3. Economic Loss Rule

“Economic loss consists of damages for inadequate value, costs of repair and replacement of the defective product or consequent loss of profits-without any claim of personal injury or damages to other property. Simply stated, the economic loss rule provides: ‘[W]here a purchaser’s expectations in a sale are frustrated because the product he bought is not working properly, his remedy is said to be in contract alone, for he has suffered only ‘economic’ losses.’ This doctrine hinges on a distinction drawn between transactions involving the sale of goods for commercial purposes where economic expectations are protected by commercial and contract law, and those involving the sale of defective products to individual consumers who are injured in a manner which has traditionally been remedied by resort to the law of torts. The 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. Quite simply, the economic loss rule ‘prevent[s] the law of contract and the law of tort from dissolving one into the other.” (Robinson Helicopter Co., Inc. v Dana Corp. (2004) 34 Cal.4th 979, 988 (citations omitted).)

“Tort damages have been permitted in contract cases where a breach of duty directly causes physical injury; for breach of the covenant of good faith and fair dealing in insurance contracts; for wrongful discharge in violation of fundamental public policy; or where the contract was fraudulently induced. In each of these cases, the duty that gives rise to tort liability is either completely independent of the contract or arises from conduct which is both intentional and intended to harm.” (Id. at 989-990.)

Defendant finally demurs to seventh cause of action arguing that it is barred by the economic loss rule. (Demurrer, p. 12:13.)

The Court finds that Plaintiffs’ cause of action for fraud by omission is not barred by the economic loss rule. Tort damages are permitted in contract cases where the contract has been fraudulently induced. Given that Plaintiffs have pled facts sufficient to state a cause of action for fraud by omission and have alleged that had they known of the defects “they would not have purchased the Subject Vehicle,” the economic loss rule does not apply.

Defendant’s demurrer to the seventh cause of action is OVERRULED on this ground.

II. Motion to Strike

Any party may file a timely notice of a motion to strike the whole or any part of a pleading. (Code Civ. Proc., § 435, subd. (b).) For the purpose of a motion to strike, the Code of Civil Procedure defines a “pleading” as a demurrer, answer, complaint, or cross-complaint. (Code Civ. Proc., § 435, subd. (a)(2).) Irrelevant allegations include: allegations that are not essential to the statement of a claim, allegations that are not pertinent to or supported by the claim, and demands for judgment requesting relief not supported by the allegations. (Code Civ. Proc., § 431.10, subd. (b), (c).)

Punitive damages may be imposed where it is proven by clear and convincing evidence that the defendant has been guilty of oppression, fraud, or malice. (Civ. Code, § 3294, subd. (a).) “Malice” is conduct intended by the defendant to cause injury to the plaintiff or despicable conduct which is carried on with a willful and conscious disregard of the rights or safety of others. (Civ. Code, § 3294, subd. (c)(1).) Despicable conduct is “conduct which is so vile, base, contemptible, miserable, wretched or loathsome that it would be looked down upon and despised by ordinary decent people. Such conduct has been described as ‘having the character of outrage frequently associated with crime.’” (Tomaselli v. Transamerica Ins. Co. (1994) 25 Cal.App.4th 1269, 1287.) “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).) “‘Punitive damages are proper only when the tortious conduct rises to levels of extreme indifference to the plaintiff’s rights, a level which decent citizens should not have to tolerate.’ [Citation.]” (Lackner v. North (2006) 135 Cal.App.4th 1188, 1210.)

A motion to strike punitive damages is properly granted where a plaintiff does not state a prima facie claim for punitive damages, including allegations that defendant is guilty of oppression, fraud or malice. (Turman v. Turning Point of Cent. California, Inc. (2010) 191 Cal.App.4th 53, 63.) “Mere negligence, even gross negligence, is not sufficient to justify such an award” for punitive damages. (Kendall Yacht Corp. v. United California Bank (1975) 50 Cal.App.3d 949, 958.)

Defendant moves to strike Plaintiffs’ punitive damages claim. (Motion to Strike, p. 2:3.) Defendant argues that Plaintiffs have not pled a viable fraud claim or any other cause of action that can support a punitive damages claim. (Id. at p. 3:5-8.)

Given the Court’s overruling of Defendant’s demurrer to the seventh cause of action for fraud by omission, the Court finds that Plaintiffs have stated a prima facie claim for punitive damages, as Plaintiffs have sufficiently alleged that Defendant is guilty of fraud.

Defendant’s motion to strike punitive damages is DENI