Case Number: 19STCV32276 Hearing Date: December 10, 2019 Dept: 20

Tentative Ruling

Judge Dalila C. Lyons

Department 20

Hearing Date: Tuesday, December 10, 2019

Case Name: Francisco Perez, et al. v. Kia Motors America, Inc.

Case No.: 19STCV32276

Motion: Demurrer to Complaint

Moving Party: Defendant Kia Motors America, Inc.

Responding Party: Plaintiffs Francisco Perez and Jorge Perez

Ruling: Defendant Kia Motors America, Inc.’s demurrer to the Third, Fourth, and Sixth Causes of Action is SUSTAINED WITH 10 DAYS LEAVE TO AMEND.

Defendant Kia Motors America, Inc.’s demurrer to the Fifth Cause of Action is SUSTAINED WITHOUT LEAVE TO AMEND.

Defendant Kia Motors America, Inc.’s motion to strike prayer for damages (f) is DENIED WITHOUT PREJUDICE. Defendant Kia Motors America, Inc’s motion to strike paragraph 100 is MOOT.

Moving party to give notice.

BACKGROUND

On September 11, 2019, Plaintiffs Francisco Perez and Jorge Perez (“Plaintiffs”) filed the Complaint against Defendant Kia Motors America, Inc. (“Defendant”); and Does 1 through 10 alleging (1) violation of Civil Code § 1793.2(d); (2) violation of Civil Code § 1793.2(b); (3) violation of Civil Code § 1793.2(a)(3); (4) breach of express warranty – Civil Code §§ 1791.2(a) & 1794; (5) breach of the implied warranty of merchantability – Civil Code §§ 1791.1, 1794, 1795.5; (6) fraud by omission.

Plaintiffs allege, on March 25, 2013, they leased a new 2013 Kia Optima VIN 5XXGM4A70DG190179 (the “Vehicle”) which was manufactured or distributed by Defendant. On November 11, 2015, Plaintiffs purchased the Vehicle. Plaintiffs allege the Vehicle was covered by various express warranties. Plaintiffs allege that the Vehicle suffered from defects affecting several systems, most notably the engine oil system (“Defect”). Plaintiffs allege the Defects were known to Defendant because Technical Service Bulletins were published to Defendant’s dealerships since 2012. Plaintiffs presented the Vehicle for repairs on May 17, 2016; July 31, 2017; January 16, 2019; and May 16, 2019. The Defects persisted and Defendant refused to buy back the Vehicle.

MOVING PARTY POSITION

Defendant demurs to the Third, Fourth, Fifth, and Sixth Causes of Action because (1) the Fifth and Sixth Causes of Action are time-barred; (2) the Fifth Cause of Action does not allege defects in Plaintiffs’ Vehicle; (3) the Sixth Cause of Action fails to allege a fiduciary relationship or exclusive knowledge of the Defects and is barred by the economic loss rule; (4) the Fifth Cause of Action is time-barred; (5) the Third Cause of Action is insufficiently pleaded; and (6) the Fourth Cause of Action fails to allege a contract verbatim and is redundant of the First Cause of Action.

Defendant moves to strike the prayer for punitive damages because fraud is not sufficiently alleged to support punitive damages and the Beverly-Song Act does not allow recovery of punitive damages. Defendant moves to strike the prayer for civil penalties under the Third Cause of Action because civil penalties are not available under that code section.

OPPOSITION

Plaintiffs oppose the demurrer because (1) the Sixth Cause of Action alleges material defects of which Defendants had exclusive knowledge but actively concealed those defects; (2) the statute of limitations on the Sixth Cause of Action was tolled by the discovery rule, American Pipe tolling, Defendant’s fraudulent concealment, equitable estoppel; and the repair doctrine; (3) the Economic Loss Rule does not apply; (4) the Fifth Cause of Action alleges defects in the Vehicle and the express warranty on the Vehicle extended the implied warranty until Plaintiffs discovered the Defects; (5) The Third Cause of Action describes failed repair attempts and alleges Defendant did not develop sufficient service literature to permanently fix the Defects; and (6) the Fourth Cause of Action need not plead the express terms of a contract and is not redundant of the First Cause of Action.

Plaintiffs oppose the motion to strike because fraud is sufficiently alleged, the Beverly-Song Act permits recovery of punitive damages, and the code section violated in the Third Cause of Action allows for civil penalties.

REPLY

Defendant argues the Sixth Cause of Action is not pleaded with the required specificity. The Fifth and Sixth Causes of Action are facially time-barred because Plaintiffs should have suspected a defect and are charged with the knowledge that a reasonable investigation would have revealed. Defendant repeats its arguments against delayed discovery and class action tolling. The economic loss rule applies because Defendant made no affirmative misrepresentations.

ANALYSIS

I. Demurrer

A demurrer for sufficiency tests whether the complaint states a cause of action. Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747. When considering demurrers, courts read the allegations liberally and in context. In a demurrer proceeding, the defects must be apparent on the face of the pleading or via proper judicial notice. Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994; Weil & Brown, Civ. Pro. Before Trial (The Rutter Group 2011) ¶7:8. “A demurrer tests the pleadings alone and not the evidence or other extrinsic matters. Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed (Code Civ. Proc., §§ 430.30, 430.70). The only issue involved in a demurrer hearing is whether the complaint, as it stands, unconnected with extraneous matters, states a cause of action.” Hahn 147 Cal.App.4th at 747. A complaint will be upheld against a demurrer if it pleads facts sufficient to place the defendants on notice of the issues sufficient to enable the defendants to prepare a defense. Doe v. City of Los Angeles (2007) 42 Cal.4th 531, 549-50.

A. Third Cause of Action – Lack of Service Literature and Replacement Parts

Defendant argues that the Third Cause of Action for violation of Civil Code § 1793.2(a)(3) fails to state facts sufficient to constitute a cause of action because the Complaint’s allegations do not identify any facility relevant to Plaintiffs’ claims and alleges in mere conclusory fashion that literature and replace parts were unavailable.

Civil Code § 1793.2(a)(3) provides in relevant part “[e]very manufacturer of consumer goods sold in this state and for which the manufacturer has made an express warranty shall…(3) make available to authorized service and repair facilities sufficient service literature and replacement parts to effect repairs during the express warranty period.” CCP § 1793.2(a)(3).

Here, Plaintiffs have not alleged sufficient facts to state a cause of action under Civil Code § 1793.2(a)(3) because Plaintiffs do not allege any facts supporting their contention that Defendant did not provide sufficient service literature or replacement parts. The Complaint contains no allegations that any Kia repair facility lacked sufficient service literature or replacement parts. In fact, Plaintiffs fail to identify a single Kia repair facility that serviced the Vehicle but lacked sufficient replacement parts. Plaintiffs even alleges an authorized repair facility, Car Pros Kia in Carson, California, had sufficient replacement parts to replace the engine in 2017 and to replace the battery in 2019. Complaint ¶¶ 62, 63. Plaintiffs’ argument against this demurrer fails to convince because Plaintiffs do not cite any law holding Defendant can violate Civil Code § 1793.2(a)(3) by failing to develop service literature or replacement parts to permanently fix a car.

Accordingly, Defendant’s demurrer to the Third Cause of Action is SUSTAINED WITH 10 DAYS LEAVE TO AMEND.

B. Fourth Cause of Action – Breach of Express Warranty

Defendant argues that the Fourth Cause of Action for breach of express warranty fails because Plaintiff has not pleaded the terms of the purported express warranty, and because the Fourth Cause of Action is redundant of the First Cause of Action.

Any action based on a written contract must set out verbatim the terms of the contract or attach a copy of the contract to the complaint. Otworth v. So. Pac. Trans. Co. (1985) 166 Cal.App.3d 452, 459. “In order to plead a contract by its legal effect, plaintiff must allege the substance of its relevant terms. This is more difficult, for it requires a careful analysis of the instrument, comprehensiveness in statement, and avoidance of legal conclusions.” McKell v. Washington Mutual, Inc. (2006) 142 Cal.App.4th 1457, 1489.

Here, Plaintiffs have not sufficiently alleged the terms of the express warranty because Plaintiffs do not attach a copy of the warranty contract to the Complaint, do not set out the terms of the warranty contract verbatim, and do not sufficiently alleges the substance of the warranty’s relevant terms. In attempting to allege the warranty by its legal effect, Plaintiffs allege the warranty included (1) a 5-year/60,000 mile bumper to bumper warranty and (2) a 10-year/100,000 mile powertrain warranty which covers the engine and transmission. Plaintiffs allege the warranty was a commitment by Defendant to preserve or maintain the utility or performance of the Vehicle, and that Plaintiffs could get the Vehicle repaired by Defendant’s representative. This description lacks the careful analysis of the instrument and comprehensiveness of statement required by McKell because Plaintiffs do not specify what “preserve and maintain the utility or performance” is supposed to mean. The terms of the warranty contract are not sufficiently defined for a finder of fact to determine if Defendant breached any obligation under the warranty.

Accordingly, Defendant’s demurrer to the Fourth Cause of Action is SUSTAINED WITH 10 DAYS LEAVE TO AMEND.

C. Fifth Cause of Action – Breach of Implied Warranty of Merchantability

Defendant argues that Plaintiffs’ claim for breach of implied warranty is time-barred by the four-year statute of limitations in Commercial Code section 2725. Defendant argues the implied warranty of merchantability is not a warranty that extends to future performance and therefore does not toll the statute of limitations. Defendant argues the Mexia v. Rinker Boat Co., Inc. case does not extend the statute of limitations in Commercial Code section 2725. 174 Cal.App.4th 1297, 1306. Mexia only extends the one-year duration of the implied warranty enumerated in Civil Code section 1791.1(c). Id. at p. 1310.

Commercial Code section 2725 states: “(1) An action for breach of any contract for sale must be commenced within four years after the cause of action has accrued…” Comm. Code § 2725(1). “A cause of action accrues when the breach occurs, regardless of the aggrieved party’s lack of knowledge of the breach. A breach of warranty occurs when tender of delivery is made, except that where a warranty explicitly extends to future performance of the goods and discovery of the breach must await the time of such performance the cause of action accrues when the breach is or should have been discovered.” Comm. Code § 2725(2) (emphasis added).

Here, Plaintiffs’ Fifth Cause of Action is barred by the limitations period in Commercial Code section 2725 because the implied warranty of merchantability is not a warranty that explicitly extends to future performance of the goods. “Because an implied warranty is one that arises by operation of law rather than by an express agreement of the parties, courts have consistently held it is not a warranty that ‘explicitly extends to future performance of the goods…’” Cardinal Health 301, Inc. v. Tyco Electronics Corp. (2008) 169 Cal.App.4th 116, 134. Plaintiffs’ cited federal case, Ehrlich v. BMW of North America (2010) 801 F.Supp.2d 908, stating that an express warranty on a car extends the limitations period in which a plaintiff may assert an implied warranty claim is neither binding nor convincing. The plain language of Commercial Code section 2725 commands that Plaintiff bring an implied warranty claim within four years of accrual, which was the March 25, 2013 date Defendant tendered the Vehicle because an implied warranty is not one that explicitly extends to future performance. Plaintiff brought this action on September 11, 2019: almost two-and-a-half years too late.

The cause of action is time-barred on its face. Plaintiff gives the Court no indication of how this cause of action can be amended. Goodman v. Kennedy (1976) 18 Cal.3d 335, 349 (the plaintiff bears the burden to show in what manner the complaint can be amended and how the amendment will change the legal effect of the complaint).

Accordingly, Defendant’s demurrer to the Fifth Cause of Action is SUSTAINED WITHOUT LEAVE TO AMEND.

D. Sixth Cause of Action – Fraud by Omission or Concealment

The elements of 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 da andmage.” Boschma v. Home Loan Center, Inc. (2011) 198 Cal.App.4th 230, 248.

Generally, fraud must be pled with particularity. E.g., Hills Transportation Co. v. Southwest Forest Ind., Inc. (1968) 266 Cal.App.2d 702, 707). Pleadings must allege facts as to “how, when, where, to whom, and by what means the representations were tendered.” Stansfield v. Starkey (1990) 220 Cal. App. 3d 59, 73; accord Wald v. Truspeed Motorcars, LLC (2010) 184 Cal.App.4th 378, 393; Morgan v. AT&T Wireless Services, Inc. (2009) 177 Cal.App.4th 1235, 1262; Cf. also Goldrich v. Natural Y Surgical Specialties, Inc. (1994) 25 Cal. App. 4th 772, 783 (“conclusory allegations offer no facts at all and it is impossible to determine what was said or by whom or in what manner.”).

Less specificity as to fraud claims is required if it appears from the nature of allegations that defendants 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, 1384-85 (“it does not appear necessary to require each of the 38 plaintiffs to allege each occasion on which an agent of either defendants could have disclosed …. Surely defendants have records of their dealings with the plaintiff.”); accord Bushell v. JPMorgan Chase Bank, N.A. (2013) 220 Cal. App. 4th 915, 931 (“Plaintiff did not have to specify the … personnel who prepared these documents because that information is uniquely within … [defendant’s] knowledge.”). However, complainants need not plead specific information that should be within the knowledge of defendant. West v. JPMorgan Chase Bank, N.A. (2013) 214 Cal.App.4th 780, 793 (identity of document preparer was uniquely in bank’s knowledge). See also Cansino v. Bank of Amer. (2014) 224 Cal.App.4th 1462, 1471 (“complaint fails to demonstrate why defendant would ‘necessarily possess full information’….”).

1. Economic Loss Rule

Where 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. Robinson Helicopter Co., Inc. v. Dana Corp. (2004) 34 Cal.4th 979, 988 (quotations omitted). However, the Supreme Court in Robinson Helicopter, 34 Cal.4th at p. 992, carved out an exception to this general rule, holding that the economic loss rule did not bar claims for intentional tortious acts, such as those caused by affirmative misrepresentations. Under the economic loss rule, “appreciable, non-speculative, present injury is an essential element of a tort cause of action.” Jimenez v. Superior Court (2002) 29 Cal.4th 473, 483.[1]

Defendant argues the Sixth Cause of Action for concealment is barred by the Economic Loss Rule because Plaintiffs fail to plead any damages beyond property damage to the Vehicle and Plaintiffs fail to plead any affirmative misrepresentations by Defendant that would cause the Robinson Helicopter exception to apply. Defendant’s argument is well-taken.

Despite characterizing the Defects as a safety issue, Plaintiffs have not alleged any present injury beyond the Vehicle being defective and Defendant failing to disclose the Defects. Therefore, Plaintiffs have not alleged an appreciable, non-speculative, present injury besides the Defects in the Vehicle and Plaintiffs’ Sixth Cause of Action fails because Plaintiffs’ only remedy for the Defects is in contract unless an exception to the Economic Loss Rule applies.

Plaintiffs’ allegations that Defendant failed to disclose the Defects and concealed the Defects are insufficient to qualify the Sixth Cause of Action for the Robinson Helicopter exception to the Economic Loss Rule because Plaintiffs have not alleged any affirmative misrepresentations by Defendant. The Robinson Helicopter exception is “narrow in scope and limited to a defendant’s affirmative misrepresentations on which a plaintiff relies…” 34 Cal.4th at p. 993 (emphasis added). In opposition, Plaintiffs cannot point to any affirmative misrepresentations by Defendant, instead arguing this Court should expand the exception to the Economic Loss Rule to include defendants who “actively conceal” a defect by failing to disclose the defect after a consumer brings a defective product in for repairs. The Court declines Plaintiffs’ invitation. Therefore, no exception to the Economic Loss Rule applies.

Accordingly, the demurrer to the Sixth Cause of Action is SUSTAINED WITH 10 DAYS LEAVE TO AMEND.

III. Motion to Strike

Motions to strike are used to reach defects or objections to pleadings that are not challengeable by demurrer (i.e., words, phrases, prayer for damages, etc.). CCP §§ 435, 436 & 437. A party may file a motion to strike in whole or in part within the time allowed to respond to a pleading, however, if a party serves and files a notice of motion to strike without demurring to the complaint, the time to answer is extended. CCP §§ 435(b)(1), 435(c).

A motion to strike lies only where the pleading has irrelevant, false or improper matter, or has not been drawn or filed in conformity with laws. CCP § 436. The grounds for moving to strike must appear on the face of the pleading or by way of judicial notice. CCP § 437; Weil & Brown, Civ. Pro. Before Trial (The Rutter Group 2011) ¶7:168.

A. Punitive Damages and Allegations Supporting the Second Cause of Action

Defendant moves to strike the prayer for punitive damages.

Plaintiffs assert they are entitled to punitive damages under the Beverly Song Act. Plaintiffs are mistaken because by “seeking a civil penalty and also attorney’s fees and all reasonable expenses as allowed by Civil Code section 1794, plaintiff had in effect elected to waive punitive damages under section 3294.” Troensegaard v. Silvercrest Industries, Inc. (1985) 175 Cal.App.3d 218, 228. “[H]ad the Legislature, by Civil Code section 3294 (permitting punitive damages) and 1794 (permitting a civil penalty), intended a double recovery of punitive and penal damages for the same willful, oppressive, malicious, and oppressive acts, it would in some appropriate manner have said so.” Ibid. Kwan v. Mercedes-Benz of N. America (1994) 23 Cal.App.4th 174 demonstrates that a civil penalty and punitive damages serve the same purpose and therefore to allow both would be to permit double recovery. 23 Cal.App.4th at p. 184 (“The penalty under section 1794(c), like other civil penalties, is imposed as punishment or deterrence of the defendant, rather than to compensate the plaintiff. In this, it is akin to punitive damages.”). Therefore, Plaintiffs remaining causes of action–all based on provisions of the Beverly-Song Act–cannot support an award of punitive damages, unless the fraud claim is amended.

The Court has sustained Defendant’s demurrer to the Sixth Cause of Action with leave to amend. Therefore, Plaintiffs might be able to amend the Sixth Cause of Action to state a claim for punitive damages based on fraud. Given the possibility that Plaintiffs could later allege a fraud cause of action and consequently a punitive damages claim, Defendant’s motion to strike the prayer for punitive damages is DENIED WITHOUT PREJUDICE.

B. Civil Penalty for Third Cause of Action

Because the Court has sustained with leave to amend Defendant’s demurrer to the Third Cause of Action, the motion to strike paragraph 100 dealing with civil penalties from the Complaint is MOOT.

[1] Plaintiffs’ citation to Erlich v. Menezes (1999) 21 Cal. 4th 543 is unavailing because Robinson Helicopter and Jimenez came later and clarified the Economic Loss Rule exception applies to affirmative misrepresentations only.