Case Name: Annabel Sanchez, et al. v. General Motors, LLC
Case No.: 18-CV-321625

I. Background

This is a lemon law action. Plaintiffs Annabel and Santiago Sanchez (collectively, “Plaintiffs”) allege the 2009 Acadia they purchased from defendant General Motors, LLC (“GM”) had a steering defect, which GM knew about at the time of the sale. (Compl., ¶¶ 1-4, 10, 25.) Plaintiffs allege GM did not repair or replace the vehicle and, thus, violated the Song-Beverly Consumer Warranty Act and the federal Magnuson-Moss Warranty Act. (See Civ. Code, § 1790 et seq.; 15 U.S.C. § 2301 et seq.) Plaintiffs assert causes of action against GM 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 implied warranty of merchantability; (6) violation of the Magnuson-Moss Warranty Act; and (7) fraud by omission.

GM demurs to the seventh cause of action on the grounds of uncertainty and failure to state facts sufficient to constitute a cause of action. GM also moves to strike the prayer for punitive damages.

II. Demurrer

A. Uncertainty

A party may demur on the ground of uncertainty to challenge a pleading as uncertain, ambiguous, or unintelligible. (Code Civ. Proc., § 430.10, subd. (f).) “[D]emurrers for uncertainty are disfavored and are granted only if the pleading is so incomprehensible that a defendant cannot reasonably respond.” (Lickiss v. Financial Industry Reg. Authority (2012) 208 Cal.App.4th 1125, 1135.) “A special demurrer for uncertainty is not intended to reach the failure to incorporate sufficient facts in the pleading, but is directed at the uncertainty existing in the allegations actually made.” (Butler v. Sequeira (1950) 100 Cal.App.2d 143, 145-46.)

In its memorandum of points and authorities, GM focuses exclusively on whether Plaintiffs allege facts sufficient to constitute a cause of action. GM does not argue the pleading is so incomprehensible it cannot reasonably respond. Accordingly, GM does not substantiate its demurrer on the ground of uncertainty, which is therefore OVERRULED.

B. Failure to State Sufficient Facts

GM demurs to the seventh cause of action on the ground of failure to state facts sufficient to constitute a cause of action. In support, GM argues the statute of limitations and economic loss rule bar the cause of action and Plaintiffs otherwise do not allege all of the essential elements of fraud with specificity.

1. Statute of Limitations

In general, a party may demur on the ground of failure to state facts sufficient to constitute a cause of action if “‘the complaint shows on its face that the statute [of limitations] bars the action.’ [Citation.]” (E-Fab, Inc. v. Accountants, Inc. Services (2007) 153 Cal.App.4th 1308, 1315.) A court may only sustain a general demurrer on this basis if the challenged cause of action is clearly and affirmatively barred by the statute of limitations based on the allegations on the face of the pleading. (Id. at p. 1316.) In evaluating a demurrer on this basis, a court must determine (1) which statute of limitations applies and (2) when the claim accrued. (Ibid.)

Neither side disputes the statute of limitations for a fraud cause of action is three years pursuant to Code of Civil Procedure section 338, subdivision (d). (See Alfaro v. Comm. Housing Improvement System & Planning Assn., Inc. (2009) 171 Cal.App.4th 1356, 1391.) Thus, the central issue is when Plaintiffs’ fraud cause of action accrued.

“Generally, the limitations period starts running when the last element of a cause of action is complete.” (NBCUniversal Media, LLC v. Super. Ct. (2014) 225 Cal.App.4th 1222, 1231.) But, “[b]y statute, the discovery rule applies to fraud actions.” (E-Fab, supra, 153 Cal.App.4th at p. 1318, citing Code Civ. Proc., § 338, subd. (d).) Thus, a fraud cause of action does not accrue “‘until the plaintiff discovers, or has reason to discover the cause of action.’ [Citation.]” (E-Fab, supra, 153 Cal.App.4th at p. 1318.) The plaintiff must allege when he or she discovered the cause of action and that it could not be discovered sooner despite reasonable diligence. (Grisham v. Philip Morris U.S.A., Inc. (2007) 40 Cal.4th 623, 638.)

GM concludes Plaintiffs’ claim accrued on July 17, 2009, the date they purchased their car, and the statute of limitations thus expired in 2012. GM’s logic and legal reasoning is particularly unclear and is not obviously based on the allegations in the pleading or applicable law on accrual. GM’s position is apparently that because Plaintiffs do not adequately allege delayed discovery of the fraud, their claim accrued on the date of purchase.

But Plaintiffs allege they discovered GM’s fraud in September 2017 when they requested that it repurchase their car. (Compl., ¶ 97.) Thus, to demonstrate Plaintiffs’ fraud claim is clearly and affirmatively barred by the statute of limitations, GM must address whether they adequately allege they could not have discovered the fraud sooner and/or when they reasonably should have discovered the fraud. But GM does not explicitly address these points. While GM asserts in passing that Plaintiffs allege their car suffered from obvious defects in the steering system, it does not explain how these allegations pertain to the discovery of the cause of action. To the extent GM’s position is that Plaintiffs did or should have discovered the fraud when the defects manifested, it does not provide any explanation or authority to support its position.

Finally, GM does not explain and there is no basis for concluding the cause of action necessarily accrued on the date of purchase. Rather, the cause of action accrued, if not in September 2017, at the time Plaintiffs reasonably should have discovered the fraud. GM does not explain and it is not otherwise obvious Plaintiffs reasonably should have discovered the fraud either on the date of purchase or at some point more than three years prior to the filing of the complaint.

In conclusion, GM does not demonstrate Plaintiffs’ fraud claim is clearly and affirmatively barred by the statute of limitations. Because GM does not substantiate its statute of limitations argument in the first instance, the Court does not address its additional argument about tolling based on American Pipe & Construction Co. v. Utah (1974) 414 U.S. 538.

2. Economic Loss Rule

GM also argues the seventh cause of action is barred by the economic loss rule.

The economic loss rule is rooted in the traditional distinction between tort and contract law. (Erlich v. Menezes (1999) 21 Cal.4th 543, 550-51.) This distinction is exemplified by the rule that “conduct amounting to a breach of contract becomes tortious only when it also violates a duty independent of the contract arising from principles of tort law.” (Id. at pp. 551-52.) In the context of the sale of goods, there has been 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.” (Robinson Helicopter Co. v. Dana Corp. (2004) 34 Cal.4th 979, 988 [internal quotation marks and citation omitted].)

The economic loss rule developed to preserve this distinction. (Robinson, supra, 34 Cal.4th at pp. 988-89.) It “requires a purchaser to recover in contract for purely economic loss due to disappointed expectations, unless he [or she] can demonstrate harm above and beyond a broken contractual promise.” (Ibid.) Put differently, a plaintiff cannot recover in tort for purely economic losses, defined as “damages for inadequate value, costs of repair and replacement of the defective product or consequent loss of profits,” in the absence of a “claim of personal injury or damages to other property.” (Ibid. [internal quotation marks and citations omitted].) A plaintiff may recover in tort for claims independent of a breach of contract claim, such as for fraud. (Ibid.)

Although GM clearly takes the position that the economic loss rule applies, it does not explain why. The seventh cause of action is for fraud and is not clearly based on a pure economic loss, such as the cost of repairing the steering defect and/or replacing the vehicle. Thus, GM does not demonstrate the economic loss rule applies, and the demurrer is not sustainable on this basis.

3. Sufficiency of Allegations

Finally, GM argues Plaintiffs do not allege with specificity all of the essential elements of their fraud claim.

The seventh cause of action is for fraud by omission, which is more commonly known as fraudulent concealment. “The required elements for fraudulent concealment are (1) concealment or suppression of a material fact; (2) by a defendant with a duty to disclose the fact to the plaintiff; (3) the defendant intended to defraud the plaintiff by intentionally concealing or suppressing the fact; (4) the plaintiff was unaware of the fact and would not have acted as he or she did if he or she had known of the concealed or suppressed fact; and (5) plaintiff sustained damage as a result of the concealment or suppression of the fact.” (Hambrick v. Healthcare Partners Medical Group, Inc. (2015) 238 Cal.App.4th 124, 162; see also Jones v. ConocoPhillips (2011) 198 Cal.App.4th 1187, 1198.) Because fraudulent concealment is a species of fraud, these essential elements must be pleaded with specificity. (Apollo Capital Fund, LLC v. Roth Capital Partners, LLC (2007) 158 Cal.App.4th 226, 240.)

Although GM takes the position that Plaintiffs do not adequately and specifically allege these essential elements, its supporting analysis is not a model of clarity. GM’s analysis does not follow any clear structure and consists of many bald, conclusory, and often repetitive statements that are not supported by a discussion of the allegations in the pleading and applicable law. For example, GM states the complaint contains “nothing other than speculative and conclusory statements cloaked in broad and sweeping allegations” and “there is no triable issue of fact as to whether GM had a duty to disclose. . . .” But GM does not thereafter explain or justify its characterization of the allegations. Furthermore, the existence of a triable issue of material fact precludes summary judgment and is not relevant to whether a cause of action has been stated for purposes of a demurrer. (See Code Civ. Proc., §§ 430.10, 437c; see also Fremont Indemnity Co. v. Fremont General Corp. (2007) 148 Cal.App.4th 97, 113-14.)

A “trial court [has] no obligation to undertake its own search of the record ‘backwards and forwards to try to figure out how the law applies to the facts’ of the case. [Citation.]” (Quantum Cooking Concepts, Inc. v. LV Associates, Inc. (2011) 197 Cal.App.4th 927, 934.) “‘Where a point is merely asserted by counsel without any argument of or authority for its proposition, it is deemed to be without foundation and requires no discussion.’ [Citation.]” (People v. Dougherty (1982) 138 Cal.App.3d 278, 282; Cal. Rules of Court, rule 3.1113(b) [required contents of supporting memorandum]; see also Badie v. Bank of America (1998) 67 Cal.App.4th 779, 784-85.) Accordingly, the Court does not attempt to catalog all of the disjointed and unsupported assertions in GM’s memorandum of points and authorities and will consider its arguments on an element by element basis.

GM asserts it has no fiduciary relationship with Plaintiffs. GM does not substantiate this assertion or explain its significance. Presumably, GM makes this point to support the conclusion that Plaintiffs do not adequately allege the existence of a duty to disclose. “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.” (Jones, supra, 198 Cal.App.4th at p. 1199.) Accordingly, to the extent GM’s position is that a fiduciary relationship is required to establish the element of duty for purposes of a fraudulent concealment claim, it is incorrect. Plaintiffs allege GM knew about the steering defect prior to the time they purchased the vehicle based on testing results, warranty information, and consumer complaints, which information was not available to them and would have caused them not to purchase the vehicle. (Compl., ¶¶ 67-69.) Consequently, Plaintiffs adequately allege facts giving rise to a duty to disclose. (See, e.g., Jones, supra, 198 Cal.App.4th at pp. 1199-1200.)

GM also asserts Plaintiffs do not adequately allege concealment or suppression of a material fact. In support, GM argues Plaintiffs must allege the misrepresentation they relied upon and specific facts about the misrepresentation, such as who made the misrepresentation and the dealership where the misrepresentation was made. But Plaintiffs’ fraud claim is not based on an affirmative misrepresentation, it is based on a failure to disclose. A plaintiff need not allege an affirmative misrepresentation and the specific circumstances of the misrepresentation to state a cause of action for fraudulent concealment. (Vega v. Jones, Day, Reavis & Pogue (2004) 121 Cal.App.4th 282, 296.) Accordingly, GM’s argument is inapt and unmeritorious. GM does not otherwise explain how the allegation that it failed to disclose the steering defect is insufficient. Thus, there is no basis for concluding Plaintiffs do not adequately allege this essential element of their claim.

GM also argues Plaintiffs do not adequately allege “the knowledge element of the fraud claim.” (Mem. of Pts. & Auth. at p. 10:27-28.) It is not particularly clear what element GM is referring to as knowledge is not, itself, an essential element of a fraud claim. (Jones, supra, 198 Cal.App.4th at p. 1198.) Furthermore, contrary to what GM represents in its memorandum of points and authorities, Plaintiffs do in fact allege it knew about the steering defect based on testing, warranty data, and consumer complaints. (Compl., ¶ 66.) Thus, GM’s argument is not persuasive.

GM does not address the elements of intent, reliance, or damages, and does not otherwise advance any other arguments about the sufficiency or specificity of the allegations.

In conclusion, the demurrer is not sustainable based on a failure to adequately and specifically allege the essential elements of a fraud claim.

4. Conclusion

GM does not substantiate any of the arguments advanced in support of its demurrer to the seventh cause of action on the ground of failure to state facts sufficient to constitute a cause of action. The demurrer is therefore OVERRULED.

III. Motion to Strike

GM moves to strike the request for punitive damages in the prayer for relief. (See Compl. at p. 20:11.)

A party may move to strike improper allegations in a pleading. (Code Civ. Proc., §§ 435, subd. (b)(1), 436.) If a claim for punitive damages is not properly pleaded, it may be stricken. (Grieves v. Super. Ct. (1984) 157 Cal.App.3d 159, 164.) In order to plead a claim for punitive damages, a plaintiff must allege the defendant was guilty of malice, oppression, or fraud and the ultimate facts underlying such allegations. (Civ. Code, § 3294, subd. (a); Clauson v. Super. Ct. (1998) 67 Cal.App.4th 1253, 1255.)

GM first argues “[a]s a matter of law, Plaintiffs may not recover punitive damages based upon the Song-Beverly Consumer Warranty Act.” (Mem. of Pts. & Auth. at p. 3:22-23.) GM does not elaborate or explain how this argument justifies striking the prayer for punitive damages. While the Song-Beverly Consumer Warranty Act does not authorize a plaintiff to recover punitive damages, and instead authorizes civil penalties for willful violations, it does not logically follow that it necessarily prohibits a plaintiff from recovering punitive damages. (See Civ. Code, § 1794, subd. (c); see also Johnson v. Ford Motor Co. (2005) 35 Cal.4th 1191, 1199-1200.) Furthermore, Plaintiffs do not seek punitive damages exclusively in connection with their claims under the Song-Beverly Consumer Warranty Act, they assert a claim for fraud as well. Consequently, GM’s argument does not justify striking the prayer for punitive damages.

Next, GM argues Plaintiffs do not adequately allege malice, oppression, or fraud. But while GM quotes the statutory definitions of malice, oppression, and fraud set forth in Civil Code section 3294, subdivision (c), it does not actually provide any analysis of these definitions or the allegations in the pleading to demonstrate the allegations are insufficient.

Finally, GM argues Plaintiffs cannot recover punitive damages because they do not state a cause of action for fraud, relying on its concurrently filed demurrer. But GM did not substantiate its demurrer to the fraud cause of action. Consequently, this argument lacks merit.

In conclusion, GM does not substantiate any of the arguments advanced in support of its motion to strike. The motion to strike the prayer for punitive damages is therefore DENIED.