Case Name: Jason Horsman, et al. v. General Motors LLC, et al.
Case No.: 17CV317369

I. Background

This case brought by Jason Horsman and Lacey Horsman (collectively “Plaintiffs”) against General Motors LLC (“Defendant”), arises from Plaintiffs’ purchase of a vehicle manufactured and distributed by Defendant.

According to the allegations of the complaint, Plaintiffs purchased a 2011 GMC Terrain. When they purchased the vehicle, Plaintiffs received several warranties. During the warranty period the vehicle contained or developed numerous defects. 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 failed to make available authorized service and repair facilities, service literature, and replacement parts. Despite opportunity to repair the vehicle Defendant failed to fix it. Defendant also failed to replace the vehicle or make restitution to Plaintiffs. Defendant’s failure to repair, replace, or pay for the vehicle violated express and implied warranties.

Furthermore, Plaintiffs allege Defendant was aware the vehicle’s engine was defective well before Plaintiffs purchased it. Specifically, Plaintiffs allege Defendant was aware the vehicle’s engine was susceptible to several flaws, including sudden engine failure and excessive oil consumption. Defendant became aware of the flaws based upon “sources not available to consumers such as Plaintiffs.” (Complaint, ¶¶ 71-72, 75.) Defendant had a duty to disclose these defects to Plaintiffs, but did not disclose them.

The complaint 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.

Currently before the Court is a demurrer to the seventh cause of action for fraud by omission and a motion to strike the prayer for punitive damages. The Court addresses the demurrer first.

II. Merits of the Demurrer

Defendant demurs on the grounds of failure to state facts sufficient to constitute a cause of action pursuant to Code of Civil Procedure section 430.10, subdivision (e), and uncertainty pursuant to Code of Civil Procedure section 430.10, subdivision (f).

As a preliminary matter, although Defendant states in its notice of demurrer that one of the grounds for its demurrer is uncertainty, Defendant does not support this with argument in its points and authorities. Defendant must include in its memorandum “any arguments relied upon, and a discussion of the statutes, cases, and textbooks cited in support of the position advanced.” (Cal. Rules of Court, rule 3.1113(b).) Defendants do not clearly advance uncertainty as a ground for their demurrer. Thus, the Court does not construe the demurrer as being predicated on that particular statutory ground.

Defendant presents several arguments in support of the ground of failure to state sufficient facts. First, Defendant argues that the fraud claim was brought outside the applicable three-year statute of limitation, and Plaintiffs fail to adequately allege tolling. Next, Defendant asserts Plaintiffs have not adequately pled the elements of fraud or done so with sufficient specificity. Additionally, Defendant claims Plaintiffs have not pled fraud with specificity. Lastly, Defendant argues the economic loss rule bars Plaintiffs’ claim.

A. Statute of Limitations

The defense of statute of limitations may be raised by a demurrer on the ground of failure to state sufficient facts to constitute a cause of action. (E-Fab, Inc. v. Accountants, Inc. Services (2007) 153 Cal.App.4th 1308, 1315–1316.) A demurrer on this basis is sustainable only if the defect clearly and affirmatively appears on the face of the complaint. (Ibid.) In evaluating whether claims are time-barred, “two basic questions drive [the] analysis: (a) What statutes of limitations govern the plaintiff’s claims? (b) When did the plaintiff’s causes of action accrue?” (Id. at p. 1316.)

The parties agree the statute of limitations for fraud is three years. (See Alfaro v. Comm. Housing Improvement System & Planning Assn., Inc. (2009) 171 Cal.App.4th 1356, 1391, citing Code Civ. Proc., § 338, subd. (d).) The parties dispute when the cause of action accrued and whether it was tolled.

Plaintiffs allege they purchased the vehicle “on or about October of 2011” (Complaint, ¶ 17.) According to Plaintiffs, Defendant committed fraud at the time of the sale by allowing the vehicle to be sold without disclosing its engine was defective. (Complaint, ¶¶ 58, 59, 63, 73, 77.) Three years after the time of sale and related fraud would be approximately October 2014. Plaintiffs also allege “[d]uring the warranty period, the Vehicle contained or developed defects[.]” (Complaint, ¶ 19.) Plaintiffs do not allege when exactly these defects arose, or when Plaintiffs became aware of the fraud. On October 13, 2017 approximately six years after the sale, Plaintiffs filed the instant complaint.

Plaintiffs, perhaps anticipating they would face a demurrer on this basis, included allegations regarding the statute of limitation in the complaint. Plaintiffs allege several doctrines have tolled the statute of limitations, including “equitable tolling, the discovery rule, the fraudulent concealment rule, equitable estoppel, the repair rule, and/or class action tolling (e.g. the American Pipe rule) arising from the pendency of the Parenteau v. General Motors, LLC matter (C.D. Cal. No. 14-04961).” (Complaint, ¶ 6.) Of these, only the discovery rule, class action tolling, and equitable tolling are supported, either in the complaint or Plaintiffs’ opposition. In the opposition, Plaintiffs state in a cursory manner that the discovery rule, equitable estoppel doctrine, and fraudulent concealment doctrine are each “independent basis for the tolling of the applicable time period.” (Opp., p. 12:5-7.) However, in the opposition Plaintiffs support only the discovery rule with argument and citation to authority. An unsupported contention requires no discussion by the court. (See People v. Dougherty (1982) 138 Cal.App.3d 278, 282.) Thus, the Court rejects Plaintiffs’ unsupported arguments for tolling.

Plaintiffs first assert that because the date of the fraud is not alleged in the complaint, their fraud claim is not necessarily barred by the statute of limitations and the demurrer cannot be sustained on this basis. To sustain a demurrer based upon the statute of limitations the cause of action must be necessarily time barred. (Guardian North Bay, Inc. v. Superior Court (2001) 94 Cal.App.4th 963, 971–972.) The allegations plainly state the car was sold to Plaintiffs “on or about October of 2011” and Defendant committed fraud by allowing the vehicle to be sold without disclosing its engine was defective. (Complaint, ¶¶ 17, 58, 63, 73.) Thus, the complaint alleges fraud by omission occurred “on or about October of 2011.” (Ibid.) The statute of limitations for fraud is three years. (Code Civ. Proc., § 338, subd. (d).) The complaint was filed on or about October of 2017, roughly six years after the fraud, or twice the period of the statute of limitations. Even giving the widest possible latitude to the phrase “on or about,” the face of the complaint indicates the purchase and simultaneous fraud by omission occurred more than three years prior to the filing of the complaint. Therefore, Plaintiffs’ non-compliance with the statute of limitations appears on the face of the complaint.

Defendant argues Plaintiffs must allege facts regarding their discovery of the fraud to invoke the discovery rule. According to Defendant, absent specific allegations regarding delayed discovery Plaintiffs cannot assert the delayed discovery rule, and the cause of action accrues from the date of the fraud, i.e. the date of sale.

For background, the discovery rule “postpones accrual of a cause of action until the plaintiff discovers, or has reason to discover, the cause of action.” (Norgart v. Upjohn Co. (1999) 21 Cal.4th 383, 397.) In the case of fraud, the discovery rule is written into statute. (Code Civ. Proc., § 338, subd. (d).) “Because the discovery rule operates as an exception to the statute of limitations, ‘if an action is brought more than three years after commission of the fraud, plaintiff has the burden of pleading and proving that he did not make the discovery until within three years prior to the filing of his complaint.’ To excuse failure to discover the fraud within three years after its commission, a plaintiff also must plead ‘facts showing that he was not negligent in failing to make the discovery sooner and that he had no actual or presumptive knowledge of facts sufficient to put him on inquiry.’ To that end, a plaintiff must allege facts showing ‘the time and surrounding circumstances of the discovery and what the discovery was.’ Conclusory allegations will not withstand a demurrer. The discovery related facts should be pleaded in detail to allow the court to determine whether the fraud should have been discovered sooner.” (Cansino v. Bank of America (2014) 224 Cal.App.4th 1462, 1472, internal citations omitted (“Cansino”).)

The Sixth District Court of Appeal’s analysis in Cansino is instructive. In Cansino, a fraud action was brought in 2011, six years after the alleged fraud occurred in 2005. (Cansino, supra, 224 Cal.App.4th at 1473.) The Court of Appeal reviewed the trial court’s decision to sustain a demurrer without leave to amend on the basis of the statute of limitations. (Id. at 1464.) The plaintiffs alleged that the fraud was not discovered “until sometime in 2010” and that it could not have been discovered sooner by the plaintiffs’ diligent attention. (Id. at 1473.) The Cansino court described these allegations as “insufficient to establish the timeliness of plaintiffs’ fraud claim.” (Ibid.) The Cansino court stated the allegations did “not explain how plaintiffs made the discovery” or how the discovery informed them of the fraud. (Ibid.) The Cansino court also dismissed the allegation that discovery occurred “in 2010” as vague, and rejected the argument that discovery could not occur until a significant time after the date of the fraud. (Ibid.) “On appeal, plaintiffs argue that ‘discovery of the falsity of [defendants’] statements could not readily be identified until a significant amount of time had passed.’ … In the same vein, they contend that defendants concealed the fraud which ‘could not be discovered until after the statute of limitations had run.’ These conclusory arguments miss the point. The basis of the discovery must be pleaded with specificity, and the second amended complaint falls short of this pleading requirement.” (Ibid.)

Here Plaintiffs present the same arguments the plaintiffs in Cansino did, and even less information regarding the discovery of the fraud. Plaintiffs do not allege when they discovered Defendant’s fraud, but instead allege “Plaintiffs could not reasonably have been expected to learn or discover of the Vehicle’s Oil Consumption Engine Defect … until well after Plaintiffs purchased the Vehicle.” (Complaint, ¶ 75.) Plaintiffs do not identify even the year they discovered the fraud, a fact rejected as insufficient in Cansino. (See Cansino, supra, 224 Cal.App.4th at 1473.)

In the opposition, Plaintiffs contend that they need not plead a specific date of discovery, and that discovery of the fraud is a factual question not suitable for resolution on demurrer. This argument is plainly contrary to the reasoning of Cansino, which states if the discovery rule is invoked to extend the statute of limitations, discovery must be pleaded in some detail. (See Cansino, supra, 224 Cal.App.4th at 1473.) Thus, the discovery rule will not save Plaintiffs’ complaint from the statute of limitations absent additional allegations.

Plaintiffs also assert that because the complaint states the fraud by omission began at the time of sale, but does not state when the fraud by omission ended, the continuing omission continually extended the statute of limitations. Plaintiffs rely upon a case involving civil conspiracy, holding the statute of limitation is tolled until the last overt act in furtherance of the conspiracy. (See Wyatt v. Union Mortgage Co. (1979) 24 Cal.3d 773, 786.) The cited case is distinguishable in that there is no allegation of conspiracy in the instant case.

Even if this case was treated as if it was a civil conspiracy or tolled until “the last overt act” the fraud claim still would not be compliance with the statute of limitations. In a civil conspiracy the statute of limitations begins to run upon the successful completion of the substantive offense which is the primary goal of the conspirators. (Livett v. F. C. Financial Associates (1981) 124 Cal.App.3d 413, 419.) This offense must be identified by the would be plaintiff. (Ibid.) “Once this offense has been completed, the statute of limitations on the conspiracy commences running, and subsequent conduct related to the conspiracy, such as flight or concealment, do not constitute ‘overt acts’ sufficient to recommence the statutory period.” (Ibid.) Were Plaintiffs to allege a conspiracy, which they do not, they would need to identify Defendant’s goal or primary objective. Here, the only act alleged which could be the primary goal of Defendant or its conspirators would be to sell a defective vehicle to Plaintiffs and thereby profit. Plaintiffs’ purchase of the vehicle would therefore start statute of limitations. Subsequent concealment of the fraud would not prevent accrual under this line of reasoning. (See Livett v. F. C. Financial Associates, supra, 124 Cal.App.3d at 419.) In sum, the authority cited by Plaintiffs does not convince the Court that the statute of limitations was continually reset based upon the continuing omission.

Plaintiffs also allege “the statute of limitations is equitably tolled due to Defendant’s fraudulent conduct alleged herein.” (Complaint, ¶ 16.) While Plaintiffs state the statute of limitations is “tolled” in the body of the complaint, they support this assertion with argument in a footnote regarding equitable estoppel. It is unclear whether Plaintiffs intend to assert equitable tolling or equitable estoppel.

Equitable estoppel and equitable tolling are distinct doctrines. (Lantzy v. Centex Homes (2003) 31 Cal.4th 363, 383.) Equitable tolling applies “[w]hen an injured person has several legal remedies and, reasonably and in good faith, pursues one designed to lessen the extent of the injury or damages, the statute of limitations does not run on the other while he is thus pursuing the one.” (Myers v. County of Orange (1970) 6 Cal.App.3d 626, 634.) Here, there is no allegation Plaintiffs pursued a second remedy, except perhaps through a class action which is discussed below. Insomuch as Plaintiffs rely on equitable tolling, they have not sufficiently supported it. The cases cited by Plaintiffs in support of equitable estoppel do not show it would extend the time for filing suit beyond the requirements of the discovery rule. (See Kimball v. Pacific Gas & Elec. Co. (1934) 220 Cal. 203, 210 [fraudulent concealment tolls statute of limitations until discovery].) As discussed above, Plaintiffs do not adequately plead when they discovered the fraud, and thus cannot rely upon delayed discovery.

Plaintiffs also allege that the statute of limitations was tolled under the American Pipe rule because they were members of a prospective class in a related class action lawsuit. The American Pipe rule allows that “under limited circumstances, if class certification is denied, the statute of limitations is tolled from the time of commencement of the suit to the time of denial of certification for all purported members of the class who either make timely motions to intervene in the surviving individual action [citation], or who timely file their individual actions.” (Jolly v. Eli Lilly & Co. (1988) 44 Cal.3d 1103, 1119.)

Plaintiffs allege they were members of the putative Parenteau class, which included owners of vehicles with the same engine defect. Defendant disputes whether Plaintiffs could were part of the Parenteau class. Disputed facts are not decided on demurrer, and the Court interprets all factual allegations as true. (See Ramsden v. Western Union (1977) 71 Cal.App.3d 873, 879.) Thus, the Court accepts the allegation Plaintiffs were part of Parenteau as true. Plaintiffs allege that their fraud claim was tolled from “June 25, 2014 (the date the Parenteau action commenced) to September 17, 2015 (the date the Parenteau class action was dismissed).” (Complaint, ¶ 15.)

Defendant counters that, assuming arguendo Plaintiffs’ fraud claim was so tolled, that would only delay the statute of limitations by approximately fifteen months. Defendant reasons the complaint was filed more than fifteen months after the statute of limitation had run, thus class action tolling is not sufficient to explain Plaintiffs’ delay in filing the complaint.

The Court agrees with Defendant’s calculation. The alleged period the Parenteau action could have tolled the claim, June 2014 to September 2015, does not explain the delay from the alleged fraud at the time of purchase in 2011 until filing this case in 2017. Assuming class action tolling is applicable, Plaintiffs must rely on another theory to explain the remaining period prior to filing the fraud claim. No argument advanced by Plaintiffs explains this remaining period.

Defendant’s argument that Plaintiffs’ fraud claim is barred by the statute of limitations is well taken. Plaintiffs have not alleged when they discovered the fraud, and so cannot rely on the delayed discovery doctrine. Plaintiffs’ other arguments are unpersuasive. Accordingly, the demurrer is sustainable on the basis of failure to comply with the statute of limitations. Plaintiffs may cure this flaw in the complaint through additional allegations regarding discovery of the defect.

B. Failure to Plead Facts Supporting Fraud by Omission

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.) “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.)

Defendant argues Plaintiffs have not alleged facts supporting the element of misrepresentation. Defendant points out Plaintiffs have not alleged any direct contact with Defendant, nor specific statements made by Defendant. Insomuch as Defendant argues Plaintiffs must allege a specific false representation by Defendant to Plaintiffs, Defendant misunderstands Plaintiffs’ theory. Plaintiffs allege 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.)

Defendant next contends that Plaintiffs’ allegations regarding Defendant’s knowledge of the defects are inadequate. Defendant reasons that unless Plaintiffs allege that Defendant had knowledge of the defects, Plaintiffs cannot allege Defendant concealed or failed to disclose defects. Defendant’s argument is inapt in that Plaintiffs do allege Defendant had knowledge of the defects prior to the sale. The complaint states that knowledge of the defects was acquired 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…” (Complaint, ¶¶ 72, 75.) On demurrer the Court must accept the pleadings as true, and cannot weigh the likelihood of their truth. (Del E. Webb Corp. v. Structural Materials Co. (1981) 123 Cal.App.3d 593, 604.) Therefore, for purposes of demurrer the Court must presume Defendant had knowledge of the defects.

Additionally, Defendant asserts Plaintiffs fail to plead how they have been damaged. Defendant does not support this point through citation to law or reference to the complaint. An unsupported contention requires no discussion by the court. (See People v. Dougherty, supra, 138 Cal.App.3d at 282.)

The parties disagree about whether fraud by concealment or failure to disclose has been adequately alleged. Defendant relies upon Daugherty v. American Honda Motor Co., Inc. (2006) 144 Cal.App.4th 824, 835-6, (“Daugherty”) to establish Plaintiffs must allege Defendant knew of the defects and had a duty to disclose them. Daugherty is inapt in that it does not analyze fraud but the pleading requirements for a violation of the Consumers Legal Remedies Act, Civil Code section 1770, subdivision (a), and the Unfair Competition Law, Business and Professions Code section 17200. (See Id. at 838.)

Defendant next argues that it had no duty to disclose anything to Plaintiffs, and thus it could not commit fraud by concealment or nondisclosure. As Defendant notes, 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.)

The Court agrees that one of these four circumstances must be alleged in order to allege fraud by concealment or nondisclosure. (See LiMandri v. Judkins, supra, 52 Cal.App.4th at 336.) Plaintiffs contend they have alleged two of these four circumstances, exclusive knowledge and active concealment. There is no dispute Defendant had no fiduciary relationship with the Plaintiffs, and that Defendant did not make partial representations to Plaintiffs. Plaintiffs allege that Defendant had exclusive knowledge of the defects present in the defective engine through a variety of sources available only to Defendant, such as warranty data from dealerships, complaints, and tests. Plaintiffs further allege that they were unaware of the defective engine at the time of sale, and would not have bought the vehicle if they had been aware of it. A fact is ordinarily considered material if it is likely to affect the conduct of a reasonable person. (Wood v. Kalbaugh (1974) 39 Cal.App.3d 926, 930.) According to the complaint engine defect could cause injury to Plaintiffs or their passengers, and Plaintiffs would not have bought the vehicle if they were aware of it. Therefore, Plaintiffs sufficiently allege Defendant had exclusive knowledge of the defective engine, and it was a material fact. Accordingly, Defendant had a duty to disclose the fact.

Thus, Defendant has not demonstrated that Plaintiffs failed to allege sufficient facts to support fraud by omission. Accordingly, the demurrer is not sustainable on this basis.

C. Lack of Specificity in Pleading Fraud

It is not sufficient to plead general facts supporting each element of fraud. Fraud must be plead with particularity. (See Lazar v. Superior Court, supra, 12 Cal.4th at 645.)

Defendant argues that Plaintiffs fail to plead with the requisite specificity. Defendant contends that fraud must be plead with additional particularity against a corporate defendant. According to Defendant, Plaintiffs must 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.” (Dem., p. 12:7-13.)

This is indeed a requirement for pleading fraud against a corporate defendant based upon false representation. (See Tarmann v. State Farm Mut. Auto. Ins. Co. (1991) 2 Cal.App.4th 153, 157.) However, in the instant case Plaintiffs do 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.) In sum, insomuch as Defendant argues Plaintiffs 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 asserts the allegations regarding intent to defraud are insufficient. Defendant argues that to show intent to defraud Plaintiffs must allege Defendant made some statement or some omission while Defendant knew it to be false. Defendant’s argument relies upon Tenzer v. Superscope, Inc. (1985) 39 Cal.3d 18, 30. That case dealt with fraud in the context of one party making an affirmative promise, and then breaking it. (Ibid.) Defendant’s argument is flawed in two respects. First, Plaintiffs have plead that Defendant knew about the defective engine at the time of purchase. Second, Tenzer v. Superscope, Inc. is distinguishable in that there is no promise or false statement at issue in the instant case, but rather an omission. In conclusion, the Court is not persuaded by Tenzer v. Superscope, Inc.

Furthermore, an allegation that a nondisclosure of material fact was made with the intent to deceive, or any other general allegation with similar nature, is sufficient at this stage. (See Woodruf v. Howes (1891) 88 Cal. 184, 190; Wennerholm v. Stanford University School of Medicine (1942) 20 Cal. 2d 713, 716.) Thus, the allegation Defendant “knowingly and intentionally concealed material facts” is sufficient to show fraudulent intent. (Complaint, ¶ 76.)

Less specificity is required where the Defendant has full knowledge of the allegations. (Alfaro v. Community Housing Imp. System & Planning Ass’n, Inc. (2009) 171 Cal.App.4th 1356, 1384.) Plaintiffs allege that Defendant’s knowledge of the defective engine was based upon information known only to Defendant. According to the allegations, Defendant has full information about the defect from various sources. Therefore, a lesser degree of specificity is required.

Defendant has not shown a lack of specificity in the complaint. Therefore, the demurrer is not sustainable on the basis of a lack of specificity.

D. The Economic Loss Rule

Defendant claims that the fraud cause of action is barred by the economic loss rule. “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, (“Robinson”) internal citations omitted.)

Defendant asserts that the economic loss rule applies here and prevents recovery for fraud because the fraud cause of action is “contractual in nature since the allegations relate to the sales contract and the warranty contract themselves.” (Dem., p. 14:27-29.) Defendant further asserts Plaintiffs have not plead any loss besides the defects in the vehicle itself, and thus have not plead any independent tort that might entitle them to damages beyond the value of the vehicle.

Plaintiffs respond that Defendant fraudulently induced them to purchase the vehicle, which is an independent tort, thus falling within an exception to the economic loss rule. Plaintiffs cite Erlich v. Menzes, (1999) 21 Cal. 4th 543, 552, 554 to support their argument. Erlich v. Menzes does not discuss the economic loss rule in any depth, but merely lists fraudulent inducement as one of four circumstances where courts have found tort liability based upon conduct independent of a contract or where the harm was intentional and intended. (Ibid.) This cursory discussion of the exceptions to the economic loss rule offers Plaintiffs only limited support.

The economic loss rule is discussed in greater depth in Robinson, where a supplier sold a batch of cranks to a helicopter manufacturer that did not match the typical standards for that part. (Robinson, supra, 34 Cal.4th at 986.) The supplier issued certificates stating that that the defective cranks complied with the applicable standards. (Robinson, supra, 34 Cal.4th at 992.) The helicopter manufacturer sued the supplier for fraud, and the supplier attempted to assert the economic loss rule. (Robinson, supra, 34 Cal.4th at 988.)

The Robinson court found that the false representations which induced the manufacturer to accept the defective parts were independent of the breach of contract, and therefore not subject to the economic loss rule. (See Robinson, supra, 34 Cal.4th at 991.) Having found false representations, the Robinson court did not decide whether inducement by concealment or omission was a sufficient independent tort. (Robinson, supra, 34 Cal.4th at 991.)

Here, as in Robinson, Plaintiffs allege fraudulent inducement, in that they would not have purchased the vehicle absent Defendant’s fraud. However Plaintiffs do not allege false representation, but fraud by omission. Defendant argues Robinson is inapplicable in that there is no allegation of an affirmative misrepresentation, and thus the economic loss rule applies.

The parties do not cite, and the Court is unaware of, any California case deciding if Robinson’s applies only to false representations, or its reasoning applies equally to other forms of fraud based upon omission. However, a federal district court found that Robinson should not be read to apply only false statements. (See NuCal Foods, Inc. v. Quality Egg LLC (E.D. Cal. 2013) 918 F.Supp.2d 1023, 1031 [“The opinion strongly suggests no meaningful distinction exists between intentional concealment and intentional misrepresentation…”].) The Court is persuaded by this interpretation of Robinson, and unpersuaded by Defendant’s attempt to distinguish Robinson based upon the lack of a false representation.

Robinson was a narrow ruling. In Robinson the court limited its holding to facts where the plaintiff was exposed to personal damages in excess of their economic loss. (Robinson, supra, 34 Cal.4th at 991.) For instance, in Robinson although no accidents resulting in personal injury actually occurred, the defective parts could have caused accidents and needed to be replaced. (See Id. at 986-87.) Similarly, although no personal injury has yet occurred in this case, Plaintiffs allege the defective engine exposes them to personal injury damages as a result of accidents. (See Ibid; Complaint, ¶ 71 [“thereby, expos[ing] Plaintiffs and their passengers (along with other drivers who share the road with her) to a serious risk of accident and injury”].)

Accordingly, this case falls within the exception created by Robinson, and the demurrer is not sustainable on the basis of the economic loss rule.

E. Conclusion

In conclusion, 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 SUSTAINED, with ten days leave to amend, based upon Plaintiffs’ failure to comply with the statute of limitations.

III. Motion to Strike

Defendant moves to strike the prayer for punitive damages.

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.)

The motion to strike is not focused upon the fraud cause of action like the demurrer, but applies generally to the complaint. Therefore, although the Court sustained the demurrer with leave to amend, the Court nevertheless addresses the motion to strike because it relates to the entire complaint.

Defendant presents three arguments in support of the motion to strike. First, that punitive damages are not available under the Song-Beverly Warranty Act or Magnuson-Moss Warranty Act. Defendant cites to Civil Code section 1794, subdivision (c), which allows civil penalties up to two times the amount of actual damages. (Civ. Code, § 1794, subd. (c).) Defendant does not explain how this statute prohibits punitive damages by allowing civil penalties up to two times actual damages. Plaintiffs respond punitive damages are permitted under the two statutes, relying on federal district court cases.

California courts have held that where a statute allows recovery of a civil penalty, unless the law explicitly allows for recovery of both the penalty and punitive damages, a prospective plaintiff must choose between the two. (See generally, Fassberg Const. Co. v. Housing Authority of City of Los Angeles (2007) 152 Cal.App.4th 720, 760; De Anza Santa Cruz Mobile Estates Homeowners Assn. v. De Anza Santa Cruz Mobile Estates (2001) 94 Cal.App.4th 890, 915); Clauson v. Superior Court (1998) 67 Cal.App.4th 1253, 1256.) Civil Code section 1794 is one such statute, which requires a plaintiff to elect their remedy. (Troensegaard v. Silvercrest Industries, Inc. (1985) 175 Cal.App.3d 218, 228.)

Plaintiffs pray “[f]or a civil penalty in the amount of two times Plaintiffs’ actual damages pursuant to Civil Code section 1794, subdivision (c) or (e)” and also “[f]or punitive damages.” (Complaint, p. 16:12-13, 17.) Plaintiffs cannot have both remedies for the same conduct, and must elect one. (See Troensegaard v. Silvercrest Industries, Inc., supra, 175 Cal.App.3d at 228.)

However, Defendant has not persuaded the Court that punitive damages are unavailable on these facts, only that at some later point Plaintiffs may have to elect a remedy. Plaintiffs could well elect to pursue punitive damages rather than statutory penalties. Thus, Defendant has not presented a sufficient argument for striking the prayer for punitive damages.

Defendant’s second argument is that Plaintiffs have failed to allege facts supporting punitive damages under Civil Code 3294. To allege facts supporting punitive damages Plaintiffs must allege facts showing oppression, fraud, or malice. (Civ. Code, § 3294(a).) Fraud is the only one of these three at issue in the instant case, insomuch as neither party argues malice or oppression is present based upon the facts in the complaint. Fraud is defined by statute to mean “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(c).) Defendant argues that Plaintiffs have not plead facts supporting fraud. This argument mirrors an similar one raised in the demurrer, but with less precision. As stated above with respect to the demurrer, Plaintiffs have alleged the elements of fraud.

Defendant’s final argument in support of the motion to strike is to repeat its demurrer in miniature, stating “GM LLC hereby incorporates the arguments set forth in its concurrently-filed Demurrer as if fully set forth herein, in order. If Plaintiffs’ underlying fraud cause of action fails for any reason … then the corresponding punitive damage claim must be stricken per Newman, supra.” (Motion to strike, p. 5:20-24.) As discussed in reference to the demurrer, Plaintiffs fail to adequately allege they brought their fraud claim within the statute of limitations, and the Court sustained the demurrer with leave to amend. The issue of whether punitive damages are appropriate based upon the fraud claim is therefore moot, pending the filing of an amended complaint.

Accordingly, the motion to strike is DENIED.