Case Name: Salih Suljic v. General Motors, LLC, et al.
Case No.: 17CV317722

I. Background

This is a lemon law action brought by Jason Salih Suljic (“Plaintiff”) against General Motors LLC (“Defendant”).

According to the allegations of the complaint, Plaintiff purchased a 2011 Chevrolet Equinox. He received several warranties pursuant to which Defendant was to preserve or maintain the vehicle’s utility or performance, or provide compensation in the case of failure of either in a specified period of time. The vehicle contained or developed numerous defects during the warranty period. 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 was unable to repair the vehicle to conform to the warranties after a reasonable number of opportunities, yet failed to replace it or pay restitution. Defendant’s failure to repair, replace, or pay for the vehicle violated express and implied warranties.

Defendant knew the vehicle’s engine was defective well before Plaintiff purchased it. Specifically, Defendant knew the vehicle’s engine was susceptible to several flaws, including sudden engine failure and excessive oil consumption, based on sources not available to consumers. Defendant did not notify Plaintiff of the defects at the time of sale.

Plaintiff 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 Defendant’s demurrer to the seventh cause of action (continued from 3/20/18) and motion to strike the prayer for punitive damages.

II. Demurrer

Defendant demurs to the seventh cause of action for fraud by omission on the grounds of failure to state facts sufficient to constitute a cause of action and uncertainty. (See Code Civ. Proc., §§ 430.10, subds. (e), (f).)
A. Failure to State Sufficient Facts

Defendant contends the fraud cause of action fails to state a claim because it is time-barred and Plaintiff fails to allege facts sufficient to support the elements of fraud.

1. Statute of Limitations

“ ‘The defense of statute of limitations may be asserted by general demurrer if the complaint shows on its face that the statute bars the action.’ [Citations.] There is an important qualification, however: ‘In order for the bar of the statute of limitations to be raised by demurrer, the defect must clearly and affirmatively appear on the face of the complaint; it is not enough that the complaint shows merely that the action may be barred.’ [Citations.]” (E-Fab., Inc. v. Accountants, Inc. Services (2007) 153 Cal.App.4th 1308, 1315-1316.) In assessing whether a claim is time-barred, two fundamental questions drive the analysis: (a) What statute of limitations governs the plaintiff’s cause of action? (b) When did the cause of action accrue? (Id. at p. 1316.) The running of the statute must appear clearly and affirmatively from the dates alleged—it is not enough that the complaint might be barred. (Committee for Green Foothills v. Santa Clara County Board of Supervisors (2010) 48 Cal.4th 32, 42.) 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.) Under CCP § 338(d), the cause of action accrues once the aggrieved party discovers the facts constituting the fraud. (Britton v. Girardi (2015) 235 Cal .App.4th 721, 734.)

The parties agree the three-year limitations period prescribed by Code of Civil Procedure section 338, subdivision (d) applies to Plaintiff’s fraud claim. That statute explicitly states the cause of action “is not deemed to have accrued until the discovery, by the aggrieved party, of the facts constituting the fraud or mistake.” Here, the parties dispute when the cause of action accrued and whether it was tolled.

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

To survive demurrer Plaintiff must plead some basis for tolling or delaying the accrual of his fraud cause of action. Plaintiff alleges 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 fraudulent concealment are supported in the opposition.

Plaintiff asserts that fraudulent concealment tolled the statute of limitations. Plaintiff’s fraudulent concealment argument appears tied to Plaintiff’s equitable estoppel argument, in that where the allegations discuss fraudulent concealment they are accompanied by a footnote claiming equitable estoppel. (See Complaint, ¶ 16, fn. 2.) To plead equitable estoppel a party must plead four factors: “ ‘(1) The party to be estopped must know the facts; (2) he must intend that his conduct shall be acted upon, or must so act that the party asserting the estoppel had the right to believe that it was so intended; (3) the party asserting the estoppel must be ignorant of the true state of facts; and, (4) he must rely upon the conduct to his injury.” (Doheny Park Terrace Homeowners Ass’n, Inc. v. Truck Ins. Exchange (2005) 132 Cal.App.4th 1076, 1099.) “ ‘To create an equitable estoppel, “it is enough if the party has been induced to refrain from using such means or taking such action as lay in his power, by which he might have retrieved his position and saved himself from loss.’ … ‘… Where the delay in commencing action is induced by the conduct of the defendant it cannot be availed of by him as a defense.’ ” (Lantzy v. Centex Homes (2003) 31 Cal.4th 363, 384.) “When a plaintiff relies on a theory of fraudulent concealment, delayed accrual, equitable tolling, or estoppel to save a cause of action that otherwise appears on its face to be time-barred, he or she must specifically plead facts which, if proved, would support the theory.” (Mills v. Forestex Co. (2003) 108 Cal.App.4th 625, 641.)

Plaintiff alleges that in February 2013 Defendant took steps intended to conceal the existence of the alleged defect from vehicle owners and allay suspicions including a software update which recommended more frequent oil changes. (Complaint, ¶ 64-70.) The complaint does not state for how long this concealment prevented Plaintiff from bringing his claim. Thus, the fraudulent concealment may or may not be sufficient to overcome the statute of limitations. Where a claim may or may not be barred by the statute of limitations a demurrer on that basis should be overruled. (McMahon v. Republic Van & Storage Co. (1963) 59 Cal.2d 871, 874.)

Accordingly, the demurrer on the grounds of failure to state sufficient facts is not sustainable on the basis of the statute of limitations. Thus, the Court need not address the remaining arguments regarding the statute of limitations.

2. Pleading the Elements of Fraud

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.) Defendant presents three overlapping sections which purport to address Plaintiff’s failure to plead the elements of fraud. The Court combines these sections into a single analysis for clarity and to prevent duplication.

“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.) Fraud must be pleaded with particularity and the doctrine of liberal construction of pleadings does not apply. (Lazar v. Superior Court, supra, 12 Cal.4th at 638.).) 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.)

Defendant argues Plaintiff has not alleged facts supporting the element of misrepresentation or omission. Defendant asserts Plaintiff has not alleged any direct contact with Defendant, nor specific statements made by Defendant. Insomuch as Defendant argues Plaintiff must allege a specific communication between the parties, Defendant appears to misunderstand Plaintiff’s theory. Plaintiff alleges fraud not through false representation, but by concealment or nondisclosure. Allegation of a false representation is not required to allege fraud – rather, alleged omission or concealment may be relied upon. (See Vega v. Jones, Day, Reavis & Pogue, supra, 121 Cal.App.4th at 291.) Fraud by omission does not require the omitted fact to be contrary to some affirmative statement. (See LiMandri v. Judkins, supra, 52 Cal.App.4th at 336; Heliotis v. Schuman, supra, 181 Cal.App.3d at 651 [listing four situations when fraud by omission is adequately pleaded].) Plaintiff has alleged that Defendant had a duty to disclose the defect and did not do so. Accordingly, Plaintiff has sufficiently alleged the element of misrepresentation.

Similarly, Defendant asserts Plaintiff has not met the requirements for pleading fraud against a corporate defendant. According to Defendant, Plaintiff must allege certain specific details when alleging fraud against a corporation, including “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. 9:9-17.) It is true that to plead fraud against a corporate defendant based upon false representation a plaintiff must allege, among other things, who precisely made the fraudulent statement and their authority for speaking. (See Tarmann v. State Farm Mut. Auto. Ins. Co. (1991) 2 Cal.App.4th 153, 157.)

However, in the instant case Plaintiff does 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.) Here, where Plaintiff alleges fraud by omission, the specificity requirements for pleading fraud are reduced. (See Ibid.) In sum, as Defendant argues that Plaintiff 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 also argues that the Complaint fails to even allege where and from whom the subject vehicle was purchased, a fact that must be known to Plaintiff. (Dem., p. 9:22-23.) The complaint merely alleges that Plaintiff “purchased the Vehicle from a person or entity engaged in the business of manufacturing, distributing, or selling consumer goods at retail.” (Complaint, ¶ 17.) The Court agrees this lack of detail is not sufficient. While the specific pleading requirement is relaxed where fraudulent non-disclosure is alleged, it is not eliminated, and where and from whom the vehicle was purchased are facts within Plaintiffs’ knowledge that should be alleged. The demurrer is sustainable on this basis.

Defendant also mentions in passing Plaintiff has not alleged the element of damage. Defendant does not support this point with argument or explanation in the demurrer. Defendant expands on this in the reply, relying on federal district court cases as examples. Defendant argues that more specific allegations were sufficient to allege damages in those cases. “[P]oints raised for the first time in a reply brief will ordinarily not be considered, because such consideration would deprive the respondent of an opportunity to counter the argument.” (Am. Drug Stores Inc. v. Stroh (1992) 10 Cal.App.4th 1446, 1453.) Furthermore, even if raised in the demurrer these cases are not controlling and would not establish a floor. Plaintiff has alleged that as a result of Defendant’s fraud Plaintiff purchased a defective and hazardous vehicle which he would not otherwise have purchased, and he was damaged by that purchase. (Complaint, ¶¶ 71, 73, 77.) Plaintiff has sufficiently alleged damage.

Additionally, Defendant asserts Plaintiff has not alleged knowledge or intent. According to Defendant, without knowledge of the defect or direct contact with Plaintiff, “there could not be an omission of an alleged material fact at the time of sale on the part of GM or a failure to disclose a material alleged fact at the time of the sale as it relates to the Subject Vehicle…” (Dem., p. 12:5-9.)

Defendant’s contention Plaintiff has not alleged knowledge is inaccurate. Plaintiff alleges that Defendant acquired knowledge of the defective engine before the date of sale 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, 73, 75.) With respect to intent, Plaintiff alleges that Defendant deliberately concealed this information using through a “software update” that told owners to change their oil more frequently. (Complaint, ¶¶ 64-70.) When ruling on a 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.) Thus, the Court must presume Defendant had knowledge of the defective engine, and intentionally concealed it.

3. 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 a failure to plead where and from whom the vehicle was purchased.

B. Uncertainty

Code of Civil Procedure section 430.10, subdivision (f) permits a party to demur if the complaint is uncertain. (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; see Khoury v. Maly’s of Calif., Inc. (1993) 14 Cal.App.4th 612, 616.)

Defendant does not support the ground of uncertainty with an argument and citation to law. The only mention of uncertainty in the demurrer is a single sentence which begins “Plaintiff’s allegations are uncertain as to …” and then lists several facts. (Dem., p. 10:12-22.) Defendant appears to conflate a failure to plead additional details with uncertainty. A demurrer for uncertainty lies where the facts that have been plead are ambiguous, not where additional facts would clarify the pleadings. (See People v. Lim (1941) 18 Cal.2d 872, 883.) Thus, insomuch as Defendant argues the lack of any particular fact renders the complaint uncertain Plaintiff applies the wrong standard.

The complaint is adequately specific to apprise Defendant of the claims against it, which is all that is required to overrule a demurrer based upon uncertainty. For instance, Defendant recognizes the case is, at its core, a “lemon law matter” with an additional fraud allegation. (Dem., p. 4:2-3.) Defendant’s understanding demonstrates the complaint is not so uncertain Defendant cannot respond. Accordingly, the demurrer to the seventh cause of action upon the ground of uncertainty is OVERRULED.

III. Motion to Strike

Defendant moves to strike Plaintiff’s request for punitive damages pursuant to Code of Civil Procedure sections 435 and 436. 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 for punitive damages if it is not properly pleaded. (Grieves v. Superior Court (1984) 157 Cal.App.3d 159, 164.)

The motion to strike differs from the demurrer in that it is not focused upon the fraud cause of action, but applies generally to the complaint. Therefore, although the Court will sustain the demurrer with leave to amend, the Court also will address the motion to strike.

Defendant first argues that the fraud cause of action does not support punitive damages because it lacks sufficient facts. Subsequently, Defendant also argues punitive damages are not recoverable under the Song-Beverly Consumer Warranty Act and Magnuson Moss Act.

Punitive damages can be pleaded based upon “oppression, fraud, or malice.” (Civ. Code, § 3294, subd. (a).) Here there is no argument of oppression or malice in the complaint, however there is a fraud cause of action. Thus, the Court addresses only fraud. A fraud cause of action is sufficient to plead the fraud necessary for punitive damages. (See Stevens v. Superior Court (1986) 180 Cal.App.3d 605, 610.) Therefore, if Plaintiff adequately alleges fraud, those same allegations will support a claim for punitive damages. (See Ibid.) Conversely, a plaintiff cannot recover punitive damages based on a fraud claim if said claim is not properly pleaded. Because Plaintiff’s seventh cause of action does not survive demurrer, it may not serve as a basis for the request for punitive damages.

Turning to Defendant’s argument that there can be no punitive damages under the Song-Beverly Act and, by extension, the Magnuson Moss Act. Defendant argues that neither of the foregoing statutes permit the recovery of punitive damages and, instead, a Song-Beverly Act plaintiff is only permitted to recover a refund of the purchase price/replacement of the subject vehicle and a civil penalty. The Court finds Defendant’s arguments persuasive, despite Plaintiff’s citation to several unpublished federal decisions that hold to the contrary.

Plaintiff’s argument that punitive damages are available under the Song-Beverly and Magnuson-Moss Acts is erroneous. The federal cases relied upon by Plaintiff in support of punitive damages under the Song-Beverly and Magnuson-Moss Acts refer to Civil Code section 1794, subdivision (c) which provides for a civil penalty of two and a half times the actual damages. (See Civ. Code, § 1794, subd. (c); Romo v. FFG Ins. Co. (C.D. Cal. 2005) 397 F.Supp.2d 1237, 1240–1241 [“civil penalties that are akin to punitive damages under the Song–Beverly Act”.] Brilliant v. Tiffin Motor Homes, Inc. (N.D. Cal., July 7, 2010, No. C 09-04568 SI) 2010 WL 2721531, at *3; Clark v. LG Electronics U.S.A., Inc. (S.D. Cal., Oct. 29, 2013, No. 13-CV-485 JM JMA) 2013 WL 5816410, at *14.) These cases do not hold that punitive damages under Civil Code section 3294, subdivision (a) are permitted. (See Ibid.)

Plaintiff has not provided any case law holding that punitive damages are 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].)

In the reply Defendant makes several arguments not raised in the motion to strike. Generally arguments raised for the first time in a reply brief are not considered based upon due process and fairness. (See Reichardt v. Hoffman (1997) 52 Cal.App.4th 754, 764.) Defendant argues that Plaintiff has not alleged Defendant’s intent to conceal or damages with sufficient specificity. Also in reply Defendant argues punitive damages under Civil Code section 3294 are only available for actions not arising from contract, and this action arises from a warranty or purchase contract. These arguments were not raised in the motion to strike, and are rejected based upon due process and fairness.

Accordingly, the motion to strike is GRANTED, with 10 days leave to amend.