Case Name: Pineda v. General Motors, LLC, et al.
Case No.: 17CV318913

I. Factual and Procedural Background

This action arises from the purchase of a purportedly defective motor vehicle. According to the allegations of the Complaint, around December 2016, plaintiff Abraham Pineda (“Plaintiff”) purchased a 2017 GMC Acadia (the “Vehicle”) which was manufactured and/or distributed by defendant General Motors, LLC (“Defendant”). (Complaint, ¶ 6.) In connection with the purchase, Defendant provided Plaintiff with an express warranty that it would maintain the utility or performance of the Vehicle or provide compensation if the Vehicle failed during a specified period of time. (Id. at ¶ 7.)

During the warranty period, the Vehicle developed numerous problems including: steering defects; abnormal noises coming from the engine area; defects necessitating replacement of the steering wheel; inability to start due to the key fob not being detected; steering wheel horn failure; brake lamp defects; brake switch defects; failure of the front collision detection; failure of the blind side alert system; failure of the lane departure system; failure of the front camera; and defects necessitating replacement of the remote control door lock. (Id. at ¶ 8.) Despite these problems, Defendant and its representatives failed to service or repair the Vehicle in conformity with the express warranty. (Id. at ¶ 9.) They also did not promptly replace the Vehicle or make restitution to Plaintiff as required by Civil Code sections 1793.1, subdivision (a)(2) and 1793.2, subdivision (d). (Ibid.)

Plaintiff alleges Defendant knew as early as 2010 that the steering system installed on the Vehicle was defective and would cause it to be susceptible to sudden and premature failure. (Id. at ¶¶ 46-47, 50.) Defendant had knowledge of this defect through pre-production and post-production testing data, early consumer complaints about the steering defect made directly to it and its network of dealers, testing it performed in response to these complaints, aggregate warranty data compiled from its dealer network, as well as warranty repair and part replacements data it received from its dealer network. (Id. at ¶ 49.) Defendant even issued various internal technical bulletins to its dealers regarding the steering defect. (Id. at ¶ 47.) Despite these facts, Defendant concealed and failed to disclose the defect to Plaintiff at the time of the sale. (Id. at ¶ 50.) Had he known of the defect, Plaintiff would not have purchased the Vehicle. (Ibid.)

Plaintiff’s Complaint asserts causes of action against Defendant for violations of the Song-Beverly Consumer Warranty Act, violations of the Magnuson-Moss Warranty Act, and fraud by omission.

Currently before the Court is Defendant’s demurrer to the seventh cause of action for fraud by omission and its motion to strike the prayer for punitive damages from the Complaint. Plaintiff opposes both motions.

II. Demurrer

Plaintiff’s seventh cause of action is for fraud by omission. Plaintiff alleges Defendant knew the Vehicle had a steering defect that could have serious consequences on its safety and handling yet intentionally concealed this fact at the time of the sale.

Defendant demurs to this claim on the grounds of uncertainty and failure to state facts sufficient to constitute a cause of action. (Code Civ. Proc., § 430.10, subds. (e) and (f).)

A. Uncertainty

Defendant argues the seventh cause of action is “uncertain as to [a whole host of allegations]” including: the terms of the express warranty, when it became aware of the defect in the Vehicle, whether it knew of the defect at the time of the sale, how it concealed or failed to disclose the defect, whether Plaintiff had direct dealings or communication with it prior to the sale, how a threat of serious bodily injury or death is attributable to the defect, where the Vehicle was serviced, what repairs were made and how long those repairs took. It does not explain why these allegations are uncertain but proceeds in a vein of argument that is directed towards Plaintiff’s purported failure to allege sufficient facts to state a cause of action. It appears Defendant misunderstands the nature of uncertainty as a ground for demurrer.

The law is settled that “[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 already made.” (Butler v. Sequiera (1950) 100 Cal.App.2d 143, 145-146.) Moreover, demurrers for uncertainty are disfavored and will be sustained only where the allegations of the pleading are so unintelligible the defendant cannot reasonably respond them, i.e., he or she cannot reasonably determine what issues must be admitted or denied, or what counts or claims are directed against him or her. (Khoury v. Maly’s of Calif., Inc. (1993) 14 Cal.App.4th 612, 616.)

This standard for uncertainty is not addressed at all in Defendant’s demurrer. Though Defendant asserts in a conclusory manner that a number of the Complaint allegations are uncertain, it does not discuss how they are so unintelligible it cannot reasonably respond to them. Rather, its main contentions are that Plaintiff has failed to allege facts sufficient to state a fraud by omission claim and aver them with the requisite specificity. Regardless of how Defendant couches the argument, these assertions are not directed towards uncertainty existing in the allegations made but toward a failure to incorporate sufficient facts in the pleading. As such, Defendant does not substantiate its demurrer based on uncertainty.

Accordingly, the demurrer to the seventh cause of action on the ground of uncertainty is OVERRULED.

B. Failure to State Facts Sufficient to Constitute a Cause of Action

Defendant argues the allegations in the seventh cause of action are of insufficient quality because they require evidentiary support, are inadequately pled and lack the requisite specificity. It also contends this claim is barred by economic loss rule.

1. Sufficiency of Factual Allegations

a. Lack of Evidentiary Support

First, Defendant argues the allegations in the Complaint fail to establish fraud by omission because Plaintiff does not “provide evidentiary support for…[its] statements and allegations [regarding Defendant’s failure to disclose the Vehicle’s safety risks].” (Dem. at p. 4:7-8.) It therefore asserts “there is no triable issue of fact as to whether [Defendant] had a duty to disclose facts [relating to the defect].” (Id. at 4:25-26.) Defendant’s argument appears to be predicated on a fundamental misunderstanding regarding the purpose and function of a demurrer.

A demurrer tests only the legal sufficiency of the pleading. (Whitcombe v. County of Yolo (1977) 73 Cal.App.3d 698, 702.) It admits the truth of all factual allegations in the complaint and “the question of plaintiff’s ability to prove these allegations, or the possible difficulty in making such proof does not concern the reviewing court.” (Alcorn v. Anbro Eng’g, Inc. (1970) 2 Cal.3d 493, 496.) Unlike a motion for summary judgment, where evidence is weighed to determine if there is a triable issue of material fact, a demurrer tests the pleadings alone and not the evidence. (See, e.g., Aguilar v. Atl. Richfield Co. (2001) 25 Cal.4th 826, 850; SKF Farms v. Superior Court (1984) 153 Cal.App.3d 902, 905; Childs v. State of California (1983) 144 Cal.App.3d 155, 163.)

Defendant’s focus on the lack of evidentiary support for the fraud allegations and its reference to the standard applied to summary judgment motions is misplaced. The only issue relevant on this demurrer is whether the seventh cause of action, as it stands, states a claim for fraud by omission. (See SKF Farms, supra, 153 Cal.App.3d at 905.) Thus, the demurrer is not sustainable on the basis Plaintiff lacks evidence to support his allegations or has failed to demonstrate a triable issue of material fact.

b. Duty to Disclose

Second, Defendant contends the fraud by omission claim is insufficiently pled because it had no duty to disclose the steering defect to Plaintiff. In support, it argues it had no fiduciary relationship with Plaintiff, there are no facts demonstrating it had exclusive knowledge of a material fact not known to him, and there are no allegations it made affirmative misrepresentations to him.

As a preliminary matter, to the extent Defendant asserts this cause of action fails because Plaintiff does not plead any affirmative misrepresentations it made and cites cases discussing the pleading requirements for a fraud by misrepresentation claim, this contention and such reliance is misplaced. An action for fraud does not lie only where an affirmative misrepresentation is made but also where there has been concealment or nondisclosure. (Jones v. ConocoPhillips (2011) 198 Cal.App.4th 1187, 1198 [“Not every fraud arises from an affirmative misstatement of material fact.”]; see also Lazar v. Superior Court (1996) 12 Cal.4th 631, 638; 5 Witkin, Summary of Cal. Law (11th ed. 2017) Torts, § 890.) Here, Plaintiff’s fraud cause of action is based on his allegations Defendant concealed facts relating to the steering defect when he purchased the Vehicle. As Plaintiff’s claim for fraud is based on concealment, Defendant’s argument fails because no affirmative misrepresentations are required.

Returning to Defendant’s primary argument, there are four circumstances in which a duty to disclose may arise: “(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.)

Here, Plaintiff’s seventh cause of action alleges the second of these circumstances. Plaintiff alleges Defendant had exclusive knowledge of the steering defect through sources not available to consumers, including pre-production and post-production testing data; early consumer complaints about the defect; aggregate warranty date compiled from its network of dealers; testing it conducted in response to the complaints; and warranty repair and part replacements data it received from its dealers. (Complaint, ¶ 49.) It also alleges this steering defect was a material fact Defendant had a duty to disclose to consumers as it has “serious consequences on the handling, maneuvering and stability of the subject vehicle…thereby contributing to car accidents, which can cause personal injury and death” and would affect a reasonable person’s decision to purchase the vehicle. (Id. at ¶¶ 48, 53.)

Though Defendant contends the facts omitted were not material because they did not relate to “characteristics and benefits [the Vehicle] did not have” or the “particular standard, quality, or grade [of the Vehicle] when it was of another [standard, quality or grade],” citing Daugherty v. Am. Honda Motor Co. (2006) 144 Cal.App.4th 824 (“Daugherty”) in support, its reliance on this case is misplaced. In Daugherty, the court addressed the issue of what must be pled to state a claim under the Consumer Legal Remedies Act (“CLRA”), which prohibits deceptive practices in the sale of goods to consumers, including “[r]epresenting that goods … have … characteristics … which they do not have” and “[r]epresenting that goods … are of a particular standard, quality, or grade … if they are of another.” (Id. at p. 833, citing Civ. Code, § 1770, subd. (a).) Here, Plaintiff has pled fraud by omission, not a CLRA claim, and Defendant has not indicated why resort should be made to the CLRA’s list of proscribed practices for purposes of determining if an omitted fact is material. Moreover, Defendant’s argument lacks merit because the issue of materiality is generally a question of fact that cannot be resolved on demurrer. (See e.g. Engalla v. Permanente Med. Grp., Inc. (1997) 15 Cal.4th 951, 977.)

Defendant also asserts Plaintiff fails to allege it was aware of the defect at the time of the sale. However, this contention is directly controverted by allegations in which Plaintiff avers Defendant was “well-aware and knew that the steering system installed on the Vehicle was defective…at the time of the sale” and that it acquired such knowledge through various sources unavailable to consumers. (Complaint, ¶¶ 47, 52.) Though Defendant argues in its reply that the facts regarding the means by which it acquired knowledge of the defect are conclusory and insufficient, it cites no legal authority in support of that contention. Accordingly, Defendant fails to substantiate its argument it had no duty to disclose the steering defect.

c. Requisite Specificity

Third, Defendant argues Plaintiff fails to state a cause of action because he does not allege his fraud claim with the requisite specificity, i.e. with facts describing the how, when, where, to whom and by what means the representations were tendered. This argument is misguided as it again ignores the distinction between a fraud claim based on an affirmative misrepresentation and one based on concealment or nondisclosure.

It is well-established that where a concealment or nondisclosure is alleged, it is more difficult to apply the requirement of specificity that exists for fraud claims based on misrepresentations. (Alfaro v. Community Housing Imp. System & Planning Ass’n., Inc. (2009) 171 Cal.App.4th 1356, 1384; see also Jones, supra, 198 Cal.App 4th at 1199.) This is simply because “it is harder to apply this rule to a case of simple nondisclosure.” (Ibid.) “How does one show ‘how’ and ‘by what means’ something didn’t happen, or ‘when’ it never happened, or ‘where’ it never happened?” (Ibid.) Therefore, less specificity is required when it appears from the nature of the allegations that the defendant must necessarily possess full information concerning the facts of the controversy. (Ibid.) So long as the fraudulent concealment allegations provide the defendants with sufficient notice of the claims alleged against them, they are adequately plead. (See Jones, supra, 198 Cal.App.4th at 1200.)

Here, it is alleged Defendant possesses exclusive and superior knowledge regarding steering defects in vehicles like the one purchased by Plaintiff. Moreover, the seventh cause of action adequately apprises Defendant of the claims brought against it – namely, that it failed to disclose the steering defect to Plaintiff despite having knowledge of it several years before the Vehicle (identified by its specific vehicle identification number) was purchased. (Complaint, ¶¶ 6, 46-55.) As such, Defendant’s contention lacks merit.

Defendant also argues this cause of action is insufficiently specific because Plaintiff does not adequately plead damages or an intent to defraud.

With respect to the allegation of damages, Defendant cites two federal district court cases – Nelson v. Nissan N. Am., Inc. (D.N.J. 2012) 894 F.Supp.2d 558 and Ehrlich v. BMW of N. Am., LLC (C.D. Cal. 2010) 801 F.Supp.2d 908 – for the proposition Plaintiff was required to plead facts relating to the mileage of the Vehicle when he purchased it, the date he first began experiencing issues with the Vehicle, the specific types of damages to the Vehicle that occurred and the cost of repairing those damages. This argument is not persuasive because neither of these cases discuss the issue of what specific facts must be pled to adequately allege damages for purposes of a fraud by omission claim. Rather, the facts Defendant points to are merely listed in each court’s recitation of the allegations of the complaint in the factual background portion of its opinion. Accordingly, the argument Plaintiff fails to adequately plead damages lacks merit.

Defendant’s assertion regarding the insufficiency of the allegation of intent is also not persuasive. Though Defendant cites Lovejoy v. AT&T Corp. (2001) 92 Cal.App.4th 85 (“Lovejoy”) in support of its contention Plaintiff was required to plead either its intent to induce reliance or reliance was reasonably expected to occur, its dependence on this case is misplaced. The court in Lovejoy did not hold that a plaintiff must specifically use the words “intent to induce reliance” or “reliance was reasonably expected to occur” to properly plead intent. (See Id. at 96.) Rather, the court inferred fraudulent intent from the facts of the complaint, stating it could be assumed the defendant concealed the material fact for the purpose of making a profit. (Ibid.) This reasoning has equal applicability in the present matter.

Here, Plaintiff alleges that “[i]n failing to disclose the defects in the Vehicle’s steering system, Defendant has knowingly and intentionally concealed material facts and breached its duty not to do so.” (Complaint, ¶ 53.) As in Lovejoy, it can reasonably be inferred that Defendant concealed this fact for the purpose of making a profit through the sale of vehicles to consumers who were unaware of the defect. Moreover, Plaintiff specifically alleges the fact of intent in this allegation, which is sufficient for purposes of pleading a viable fraud claim. (Woodroof v. Howes (1891) 88 Cal.184, 190 [holding that intent is a fact and any general allegation of such fact is sufficient]; Wennerholm v. Stanford University School of Medicine (1942) 20 Cal.3d 713, 716.)

Accordingly, the argument the seventh cause of action fails for lack of specificity is without merit.

2. Economic Loss Rule

Defendant argues the fraud by omission claim is barred by the economic loss rule because Plaintiff’s allegations amount to no more than breaches of the sales or warranty contract that governed the purchase of his Vehicle. As such, it contends Plaintiff is required to allege either personal injury or damage to property other than the Vehicle to recover damages beyond his economic loss. This argument is not well-taken.

Under the 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. v. Dana Corp. (2004) 34 Cal.4th 979, 988, internal citations and quotations omitted.) The purpose of the rule is to prevent the law of contract and the law of tort from dissolving into one another by drawing a distinction between economic loss such as damages for inadequate value, costs of repair, or loss of profits due to the unsatisfactory purchase (which would be governed by contract law) and physical harm to person and property (which would be governed by tort law). (Ibid.) As such, unless the purchaser can demonstrate a “harm above and beyond a broken contractual promise,” he or she can only recover in contract due to disappointed expectations in the purchase. (Ibid.)

In Robinson, a supplier sold clutches to a helicopter manufacturer that did not conform to the Federal Aviation Administration requirements and further issued false certificates of conformance for the clutches. (Id. at 986.) As a result, the manufacturer was required to recall and replace all the faulty clutch assemblies. (Id. at 986-87.) It sued the supplier for breach of contract and breach of warranty as well as for negligent and intentional misrepresentation. (Id. at 987.) The supplier argued the economic loss rule barred the manufacturer’s fraud claims because they were not independent of the contract. (Id. at 992.) The California Supreme Court disagreed and held the issuance of false certificates of conformance was tortious conduct separate from the breach of contract. (Id. at 991.) Whereas the breach only involved the supplier’s provision of nonconforming clutches under the contract, the tortious conduct consisted of affirmative misrepresentations made by the supplier regarding the conforming nature of the clutches which the manufacturer relied on to its detriment. (Ibid.)

Here, as in Robinson, the seventh cause of action alleges tortious conduct beyond the breach of the sales and warranty contracts the parties entered into when Plaintiff purchased the Vehicle. Specifically, Plaintiff alleges Defendant committed fraud by failing to disclose the steering defect despite having exclusive knowledge of the defect since 2010 and such omission led to his purchase of a defective vehicle. (Complaint, ¶¶ 46-50.) This alleged concealment does not arise out of the parties’ obligations under either the sales or warranty contracts. Moreover, it predates the parties’ entry into these contracts as the omission occurred before the Vehicle was purchased. As such, the economic loss rule does not bar the claim for fraud by omission.

3. Conclusion

For the reasons stated, the demurrer to the seventh cause of action on the ground of failure to state facts sufficient to constitute a cause of action is OVERRULED.

III. Motion to Strike

The motion to strike the prayer for punitive damages is brought pursuant to Code of Civil Procedure sections 435 and 436. Under these statutes, a party may move to strike “irrelevant, false, or improper matter inserted in any pleading.” (Code Civ. Proc., §§ 435, 436.) If a claim for punitive damages is not properly pleaded, the claim and/or related allegations may be stricken. (Grieves v. Superior Court (1984) 157 Cal.App.3d 159, 164.)

Defendant argues that none of the causes of action contained in the Complaint can support a claim for punitive damages. With respect to the Song-Beverly and Magnuson-Moss causes of action, Defendant contends punitive damages are not an available form of relief. With respect to the claim of fraud by omission, Defendant contends the Complaint does not state facts sufficient to demonstrate fraud under Civil Code section 3294 (“Section 3294”).

The argument the Song-Beverly and Magnuson-Moss causes of action cannot support a claim of punitive damages is well-taken. Punitive damages are not available under the Song-Beverly and Magnuson-Moss Acts. (See Troensegaard v. Silvercrest Indust. (1985) 175 Cal.App.3d 218, 228 [punitive damages not available under Song-Beverly Act]; Kelly v. Fleetwood Enterprises, Inc. (9th Cir. 2004) 377 F.3d 1034, 1039 [punitive damages not independently available under the Magnuson-Moss Act].)

Though, in opposition, Plaintiff cites two unpublished federal district court cases in support of the proposition punitive damages are recoverable under the Song-Beverly and Magnuson-Moss Acts, his reliance on these cases is misplaced. In stating that the Song-Beverly Act (and the Magnuson-Moss Act through its resort to state law remedies) provides for the recovery of punitive damages, both of these cases relied on the holding of a third district court case – Romo v. FFG Ins. Co. (2005) 397 F.Supp.2d 1237 (“Romo”). Romo, however, did not hold punitive damages were available under the Song-Beverly Act (the “Act”). Rather, the court in its decision stated that because the Act authorizes civil penalties of up to two times the amount of actual damages, California courts have analogized them to punitive damages because they are intended to punish and deter defendants rather than compensate plaintiffs. (Id. at 1240.) As such, the court treated the Song-Beverly civil penalties as punitive damages for purposes of calculating the amount in controversy in determining diversity jurisdiction. (Ibid.) Therefore, the Romo opinion cannot be properly read as holding punitive damages are an available remedy under either the Song-Beverly or Magnuson-Moss Acts.

Turning to the fraud by omission cause of action, 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. Superior Court (1998) 67 Cal.App.4th 1253, 1255.) The Complaint does not contain an allegation specifically charging Defendant with malice, oppression or fraud for purposes of punitive damages. It does however include a cause of action for fraud by omission. As malice or oppression are not otherwise pled, the parties only discuss the issue of fraud, and Plaintiff does not suggest his request for punitive damages is predicated on malice or oppression, the question presented is whether Plaintiff has sufficiently alleged fraud within the meaning of Section 3294.

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 to deprive a person of property or legal rights or a resulting injury. (Civ. Code, § 3294, subd. (c)(3).)

Defendant argues Plaintiff’s allegations of fraud are insufficient because he fails to aver the facts constituting fraud with the requisite specificity, i.e. “the who, what, when and where type of allegations necessary to plead a cause of action for fraud,” and does not allege if the person making the representations was its agent. (Mtn. to Strike, p. 4:21-22.) It also contends Plaintiff does not factually substantiate his assertion Defendant concealed the Vehicle’s steering defects at the time of the sale. These arguments are not well-taken.

Defendant’s assertions essentially amount to a contention that Plaintiff has not stated facts sufficient to state a cause of action for fraud. In fact, it specifically states it is incorporating its demurrer arguments regarding the insufficiency of the fraud allegations or the bar on the fraud claim because of the economic loss rule. Defendant does not cite and the Court is not aware of any authority supporting the proposition that the type of specificity or substantiation it references are required for purposes of adequately pleading a punitive damages request as opposed to an underlying cause of action for fraud. (See e.g. Stansfield v. Starkey (1990) 220 Cal.App.3d 59, 73 [enumerating the fraud pleading requirements for purposes of surviving a demurrer].) Defendant’s attempt to advance these arguments again in the present motion to strike is therefore essentially a challenge to the propriety of the fraud claim. This is inapt. (See Quiroz v. Seventh Ave. Ctr. (2006) 140 Cal.App.4th 1256, 1281 [where a whole cause of action is subject to a challenge, the proper procedural vehicle is a demurrer and not a motion to strike]; see also CLD Construction, Inc. v. City of San Ramon (2004) 120 Cal.App.4th 1141, 1146 [motion to strike is not the appropriate vehicle for raising defects properly raised by demurrer].) Even if it were not, as discussed above, a cause of action for fraud has been sufficiently stated. That pleading is therefore sufficient to support a request for punitive damages. (See Stevens v. Superior Court (1986) 180 Cal.App.3d 605, 610.)

Accordingly, the motion to strike is DENIED.