Case Number: 19STCV37312 Hearing Date: July 14, 2020 Dept: 31
DEMURRER IS OVERRULED; MOTION TO STRIKE IS DENIED.
On October 18, 2020, Plaintiff Daniel Kang filed the instant action against Volvo Cars of North America, LLC aka Volvo Cars US, LLC (“Volvo NA”); Volvo of Santa Monica (“Volvo SM”); and Does 1 through 10. On January 15, 2020, Plaintiff filed the First Amended Complaint (“FAC”). The FAC asserts causes of action for:
- Violation of Subdivision (d) of Civil Code Section 1793.2 (against Volvo NA);
- Violation of Subdivision (b) of Civil Code Section 1793.2 (against Volvo NA);
- Violation of Subdivision (a)(3) of Civil Code Section 1793.2 (against Volvo NA);
- Breach of Express Written Warranty (Civ. Code § 1791.2, subd. (a); § 1794) (against Volvo NA);
- Breach of the Implied Warranty of Merchantability (Civ. Code § 1791.1; § 1794; § 1795.5) (against Volvo NA);
- Fraud by Omission (against Volvo NA); and
- Negligent Repair (against Volvo SM).
Defendant Volvo NA (hereinafter “Defendant”) demurs to the first through sixth causes of action against it.
Legal Standard on 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. (Wilson v. Transit Authority of City of Sacramento (1962) 199 Cal.App.2d 716, 720-21.) 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.) “A demurrer tests the pleading alone, and not on the evidence or facts alleged.” (E-Fab, Inc. v. Accountants, Inc. Servs. (2007) 153 Cal.App.4th 1308, 1315.) As such, the court assumes the truth of the complaint’s properly pleaded or implied factual allegations. (Id.) However, it does not accept as true deductions, contentions, or conclusions of law or fact. (Stonehouse Homes LLC v. City of Sierra Madre (2008) 167 Cal.App.4th 531, 538.)
Legal Standard on Motion to Strike
Any party, within the time allowed to respond to a pleading may serve and file a notice of motion to strike the whole or any part thereof. (Code of Civ. Proc., § 435, subd. (b)(1); Cal. Rules of Court, Rule 3.1322(b).) The court may, upon a motion or at any time in its discretion and upon terms it deems proper: (1) strike out any irrelevant, false, or improper matter inserted in any pleading; or (2) strike out all or any part of any pleading not drawn or filed in conformity with the laws of California, a court rule, or an order of the court. (Code of Civ. Proc., § 436, subds. (a)-(b); Stafford v. Shultz (1954) 42 Cal.2d 767, 782 [“Matter in a pleading which is not essential to the claim is surplusage; probative facts are surplusage and may be stricken out or disregarded”].)
The Court notes at the outset that Defendant filed an untimely Reply on July 8, 2020. Pursuant to CRC Rule 3.1300(d), the Court exercises its discretion to refuse to consider it.
First through Fifth Causes of Action under the Song-Beverly Act
Statute of Limitations
“The Song–Beverly Act does not include its own statute of limitations. [Citation.] California courts have held that the statute of limitations for an action for breach of warranty under the Song–Beverly Act is governed by the same statute that governs the statute of limitations for warranties arising under the Uniform Commercial Code: section 2725 of the Uniform Commercial Code. [Citations.] Under this statute, “(1) An action for breach of any contract for sale must be commenced within four years after the cause of action has accrued. . . . [¶] (2) 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.” [Citation.]” (Mexia v. Rinker Boat Co., Inc. (2009) 174 Cal.App.4th 1297, 1305-1306.)
Under the Song-Beverly Act, the duration of the implied warranty of merchantability is “coextensive in duration with an express warranty which accompanies the consumer goods, provided the duration of the express warranty is reasonable; but in no event shall such implied warranty have a duration of less than 60 days nor more than one year following the sale of new consumer goods to a retail buyer.” (Civ. Code § 1791.1(c).) By including a duration provision, the legislature intended for the implied warranty to have a prospective existence beyond tender of delivery. (Mexia, supra, 174 Cal.App.4th at 1311.)
“The implied warranty of merchantability may be breached by a latent defect undiscoverable at the time of sale. [Citations.] Indeed, “[u]ndisclosed latent defects … are the very evil that the implied warranty of merchantability was designed to remedy.” [Citation.] In the case of a latent defect, a product is rendered unmerchantable, and the warranty of merchantability is breached, by the existence of the unseen defect, not by its subsequent discovery.” (Id. at 1304–1305.)
So long as a latent defect existed within one year following the sale of the goods, its subsequent discovery beyond that time period does not defeat an implied warranty claim so long as the claim is still brought within the appropriate statute of limitations. “There is nothing that suggests a requirement that the purchaser discover and report to the seller a latent defect within that time period.” (Id. at 1310.) “[T]he statute merely creates a limited, prospective duration for the implied warranty of merchantability; it does not create a deadline for discovering latent defects or for giving notice to the seller.” (Id. at 1301.)
A demurrer may lie “where plaintiff has included allegations that clearly disclose some defense or bar to recovery.” (Edmon & Karnow, Cal. Prac. Guide: Civ. Proc. Before Trial (The Rutter Group 2017) ¶ 7:49.) As a result, “[w]here the dates alleged in the complaint show the action is barred by the statute of limitations, a general demurrer lies. . . . The running of the statute must appear “clearly and affirmatively” from the face of the complaint. It is not enough that the complaint might be time-barred.” (Id. at ¶ 7:50; Committee for Green Foothills v. Santa Clara County Bd. of Supervisors (2010) 48 Cal.4th 32, 42.) “The courts, however, will not close their eyes to situations where a complaint contains allegations of fact inconsistent with attached documents, or allegations contrary to facts which are judicially noticed.” (Del E. Webb Corp. v. Structural Materials Co. (1981) 123 Cal.App.3d 593, 604.) “If facts appearing in the exhibits contradict those alleged, the facts in the exhibits take precedence.” (Holland v. Morse Diesel Int’l, Inc., 86 Gal.App.4th 1443, 1447 (2001).)
“When a plaintiff reasonably should have discovered facts for purposes of the accrual of a cause of action or application of the delayed discovery rule is generally a question of fact, properly decided as a matter of law only if the evidence (or, in this case, the allegations in the complaint and facts properly subject to judicial notice) can support only one reasonable conclusion.” (Broberg v. The Guardian Life Ins. Co. of Am. (2009) 171 Cal.App.4th 912, 921.) The discovery rule applies to the Song-Beverly Act. (Krieger v. Nick Alexander Imports, Inc. (1991) 234 Cal.App.3d 205, 218.)
Defendant first demurs to the first through fifth causes of action brought under the Song-Beverly Act arguing that each are barred by the statute of limitations. Defendant argues that Plaintiff listed a cornucopia of alleged defects that according to Plaintiff, all occurred “at the time of purchase, or within one-year thereafter, the Vehicle contained or developed the defects set forth [at Paragraph 10].” (FAC ¶ 62.) Defendant asserts that Plaintiff also mentions that the defects manifested during the warranty period – here, a four-year/50,000-mile express warranty. (FAC ¶ 40.) Defendant contends that in other words, the defects occurred between 2009 and 2010, but even in the light most favorable to Plaintiff, absolutely no later than 2013. Defendant argues that Plaintiff purchased the vehicle at issue in 2009 and the alleged defects occurred within four years after 2009 (no later than 2013.) Defendant asserts that it logically follows that the Song-Beverly and related warranty causes of action accrued in 2010 or, at best for Plaintiff, no later than 2013 – when the alleged breach was or should have been discovered by Plaintiff. Defendant contends that as a result, even assuming these alleged defects occurred at the tail-end of the warranty period, at best for Plaintiff, the statute of limitations expired in September 2017, more than two years before Plaintiff filed this lawsuit.
In opposition, Plaintiff argues that the face of the complaint does not disclose a statute of limitations defense. Plaintiff asserts that here, the FAC alleges that Defendant’s misconduct began on or about September 19, 2009 and continued through and beyond the repeat repair attempted by Defendant’s authorized repair facilities. (FAC ¶ 10-30, 38.) Plaintiff contends that indeed, he did not discover, and could not reasonably have discovered, that the defects could not be repaired until in or around May 2019, when Plaintiff asked Defendant to buy back the subject vehicle. (FAC ¶ 8.)
Plaintiff further argues that the discovery rule applies to Plaintiff’s Song-Beverly claims and that he has pled facts showing that he did not know of, and could not have discovered within any applicable limitations period, the defective nature of the subject vehicle, including its engine, about which Defendant had exclusive knowledge. Plaintiff asserts that additionally, Plaintiff could not have known that the symptoms he experienced constituted irreparable latent defects and cannot confirm the existence of any defect, including the Engine Defect, without discovery. (People v. Highland Fed. Save & Loan (1993) 14 Cal.App.4th 1692, 1716.)
The Court finds that Plaintiffs’ causes of action under the Song-Beverly Act are not barred by the statute of limitations at the demurrer stage. As noted above, a demurrer based on the running of the statute of limitations will lie only when the running of the statute appears “clearly and affirmatively” from the face of the complaint. It is not enough that the complaint might be time-barred. Here, the allegations of the FAC do not belie a running of the statute clearly and affirmatively, only that the subject vehicle “contained or developed defects” during the applicable warranty periods. As noted above, there is nothing in the Song-Beverly Act that suggests a requirement that the purchaser discover and report to the seller a latent defect within that time period.
Moreover, when a plaintiff reasonably should have discovered facts for purposes of the accrual of a cause of action or application of the delayed discovery rule is generally a question of fact, properly decided as a matter of law only if the allegations in the complaint and facts properly subject to judicial notice can support only one reasonable conclusion. Here, the allegations do not provide only one reasonable conclusion as to when Plaintiff reasonably should have discovered the alleged defects.
Based on the foregoing, Defendant’s demurrer to the first through fifth causes of action under the Song-Beverly Act is OVERRULED on this ground.
Third Cause of Action for Violation of Subdivision (a)(3) of Civil Code Section 1793.2
Civil Code section 1793.2 provides in relevant part:
(a) Every 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.
(Civ. Code, § 1793.2(a)(3).)
Defendant demurs to the third cause of action also arguing that Plaintiff’s third cause of action is based on a conclusory allegation that Defendant failed to supply its authorized repair facilities with adequate service literature and replacement parts necessary to repair the subject vehicle. Defendant asserts that the cause of action is insufficient because it fails to identify any facility relevant to Plaintiff’s claims or to allege in even cursory fashion what literature or replacement parts supposedly were unavailable to any such repair facilities.
In opposition, Plaintiff argues that he has alleged his cause of action for violation of Civil Code section 1793.2(a)(3).
The Court finds that Plaintiff has alleged facts sufficient to state a cause of action for violation of Civil Code section 1793.2(a)(3). Contrary to Defendant’s arguments, Plaintiff’s allegations are not conclusory, but are, in fact, supported by factual allegations. The FAC alleges that the defects are non-conformities that substantially impair the use, value, and safety of the subject vehicle, that the subject vehicle was presented repeatedly for repair to Defendant’s authorized dealer in Santa Monica, California but continued to exhibit symptoms, and that the repairs were attempted pursuant to “various engine-related repair measures in the form of Service Actions, Technical Journals and recalls” issued by Defendant, yet the symptoms persisted. (FAC ¶ 10-27, 33, 36, 40, 53.) From such allegations, it is reasonable to infer that Defendant failed to make available to its authorized service and repair facilities sufficient service literature and replacement parts to effect repairs during the warranty period and the tolling period.
Based on the foregoing, Defendant’s demurrer to the third cause of action is OVERRULED on this ground.
Fourth Cause of Action for Breach of Express Warranty (Civ. Code § 1791.2, subd. (a); § 1794)
The Song-Beverly Consumer Warranty Act (Civ. Code, section 1790 et seq.) governs warranties for consumer goods. “A plaintiff pursuing an action under Song-Beverly [must allege] that: (1) the vehicle had a nonconformity covered by the express warranty that substantially impaired the use, value or safety of the vehicle (the nonconformity element); (2) the vehicle was presented to an authorized representative of the manufacturer of the vehicle for repair (the presentation element); and (3) the manufacturer or his representative did not repair the nonconformity after a reasonable number of repair attempts (the failure to repair element).” (Orgel v. American Isuzu Motors, Inc. (2001) 90 Cal.App.4th 1094, 1101, citing Civ. Code, § 1793.2.)
A contract must be pled verbatim in the body of the complaint, be attached to the complaint and incorporated by reference, or be pled according to its legal effect. (Bowden v. Robinson (1977) 67 Cal.App.3d 705, 718.) “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.)
Defendant demurs to the fourth cause of action also arguing that Plaintiff has not made a pleading describing the warranty. Defendant asserts that no written contract or written warranty is attached or recited in Plaintiff’s FAC. Defendant contends that moreover, Plaintiff’s fourth cause of action is wholly redundant of the first cause of action, which also seeks remedies for violation of the express written warranty.
In opposition, Plaintiff argues that he has sufficiently alleged Defendant’s express warranty, as he may plead the legal effect of the warranty rather than its precise language.
The Court finds that Plaintiff has alleged facts sufficient to state a cause of action for breach of express warranty. Here, the FAC alleges: “In connection with the purchase, Plaintiff received an express written warranty, including, a 4-year/50,000 mile express bumper to bumper warranty, a 4-year/50,000 mile powertrain warranty which, inter alia, covers the engine and transmission. Defendant undertook to preserve or maintain the utility or performance of the Subject Vehicle or to provide compensation if there is a failure in utility or performance for a specified period of time. The warranty provided, in relevant part, that in the event a defect developed with the Subject Vehicle during the warranty period, Plaintiff could deliver the Vehicle for repair services to Defendant’s representative and the Vehicle would be repaired.” (FAC ¶ 39.) Such allegations are sufficient to allege the legal effect of the express warranty at issue here.
As to Defendant’s single-sentence argument that the fourth cause of action is duplicative of the first cause of action, “A point which is merely suggested by [a party’s] counsel, with no supporting argument or authority, is deemed to be without foundation and requires no discussion.” (Do It Urself Moving & Storage v. Brown, Leifer, Slatkin & Berns (1992) 7 Cal.App.4th 27, 35; Schaeffer Land Trust v. San Jose City Council (1989) 215 Cal.App.3d 612, 619, fn 2.)
Based on the foregoing, Defendant’s demurrer to the fourth cause of action is OVERRULED on this ground.
Fifth Cause of Action for Breach of the Implied Warranty of Merchantability (Civ. Code § 1791.1; § 1794; § 1795.5)
Under the Song-Beverly Act, “non-conformity” is defined as: “a nonconformity which substantially impairs the use, value, or safety of the new motor vehicle to the buyer or lessee.” (Civil Code § 1793.22(e)(1).)
Defendant demurs to the fifth cause of action arguing that rather than allege facts specific to the alleged defects in Plaintiff’s subject vehicle, Plaintiff merely recites a laundry list of potential defects affecting Volvo vehicles of various makes, models, and years. Defendant asserts that Plaintiff’s FAC contains nothing more than a list of elements and broad allegations of engine and oil defects in Volvo vehicles of models and model years. Defendant contends that generic claims about an entire class of vehicles offer no factual support for Plaintiff’s individual claims.
In opposition, Plaintiff argues that his cause of action for breach of the implied warranty of merchantability is well pled.
The Court finds that Plaintiff has alleged facts sufficient to state a cause of action for breach of the implied warranty of merchantability. Contrary to Defendant’s arguments, even a cursory review of the FAC evidences that Plaintiff has alleged facts specific to his vehicle. (FAC ¶ 9-27.) Accordingly, Defendant’s arguments are unpersuasive and must fail.
Based on the foregoing, Defendant’s demurrer to the fifth cause of action is OVERRULED on this ground.
Sixth Cause of Action for Fraud by Omission
Statute of Limitations
Code of Civil Procedure section 338 provides that a cause of action for relief on the ground of fraud or mistake must be brought within three years. (CCP § 338(d).) “The cause of action in that case is not deemed to have accrued until the discovery, by the aggrieved party, of the facts constituting the fraud or mistake.” (Id.)
“[A] mere averment of ignorance of a fact which a party might with reasonable diligence have discovered is not enough to postpone the running of the statute.” (Bradbury v. Higginson (1914) 167 Cal. 553, 558.) “A plaintiff whose complaint shows on its face that his claim would be barred without the benefit of the discovery rule must specifically plead facts to show (1) the time and manner of discovery and (2) the inability to have made earlier discovery despite reasonable diligence. The burden is on the plaintiff to show diligence, and conclusory allegations will not withstand demurrer.” (McKelvey v. Boeing North American, Inc. (1999) 74 Cal.App.4th 151, 160.)
Defendant first demurs to the sixth cause of action for fraud by omission arguing that it is barred by the three-year statute of limitations. Defendant asserts that it is evident on the face of the FAC that Plaintiff’s fraud claim was complete with all requisite elements at the time of sale in September 2009. Defendant contends that Plaintiff expressly alleges that “at the time of purchase, or within one-year thereafter, the Vehicle contained or developed the defects set forth [at paragraph 40].” (FAC ¶ 62.) Defendant argues that Plaintiff further alleges that Defendant “knew about the Oil Defect, and its safety risks since at least 2009,” but “nevertheless concealed and failed to disclose the defective nature of the Vehicle and its engine to Plaintiff at the time of sale and thereafter.” (FAC ¶ 70.) Defendant asserts that Plaintiff finally alleges “Had Plaintiff known that the Vehicle and its engine were defective [at the time of sale] he would not have purchased the Vehicle. (First Amended Complaint ¶ 70 [emphasis added].)
Defendant contends that on the face of the FAC, Plaintiff’s operative allegations – defects, nonconformities, concealment, knowledge of falsity, justifiable reliance, and injury – effectively coalesced into a complete cause of action for fraud when Plaintiff purchased the Subject Vehicle with its allegedly latent defects, on September 19, 2009. (FAC ¶ 40, 62, 70, 72.)
Defendant argues that moreever, Plaintiff provides no facts whatsoever to establish any of the tolling doctrines alleged in the FAC.
In opposition, Plaintiff argues, as above, that the face of the complaint does not disclose a statute of limitations defense. Plaintiff asserts that moreover, the discover rule applies here and under it, his cause of action does not accrue until discovery of all the elements of the fraud.
The Court finds that Plaintiff’s cause of action for fraud by omission is not barred by the statute of limitations at demurrer. As noted above, Plaintiff’s FAC does not include allegations that clearly and affirmatively show that that action is barred; again, it is not enough that the complaint might be time-barred. Here, the FAC only alleges that the subject vehicle “contained or developed defects” during the applicable warranty periods. Such allegations do not clearly and affirmatively show that the action is barred. Moreover, Plaintiff has sufficiently alleged the time and manner of discovery (FAC ¶ 8, 35) and the inability to have made earlier discovery despite reasonable diligence. (FAC ¶ 10-29.)
Based on the foregoing, the demurrer to the sixth cause of action is OVERRULED on this ground.
Fraud by Omission
The elements of an action for 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 damage.” (Mktg. W., Inc. v. Sanyo Fisher (USA) Corp. (1992) 6 Cal.App.4th 603, 612-613.) Fraud must be pleaded specifically. To survive demurrer, plaintiff must plead facts that “show how, when, where, to whom, and by what means the representations were tendered.” (Hamilton v. Greenwich Investors XXVI, LLC (2011) 195 Cal.App.4th 1602, 1614.)
“The requirement of specificity in a fraud action against a corporation requires the plaintiff to 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.” (Tarmann v. State Farm Mut. Auto Ins. Co., (1991) 2 Cal.App.4th 153, 157.)
Although the general rule states that a fraud claim must be specifically pleaded, less specificity is required if “it appears from the nature of allegations that defendant 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.) “‘[T]he courts should not . . . seek to absolve the defendant from liability on highly technical requirements of form in pleading. Pleading facts in ordinary and concise language is as permissible in fraud cases as in any others, and liberal construction of the pleading is as much a duty of the court in these as in other cases.’” (Appollo Capital Fund, LLC v. Roth Capital Partners, LLC (2007) 158 Cal.App.4th 226, 242.)
Furthermore, the rule of specificity of pleading is intended to apply only to affirmative representations and not to fraud by concealment. (See Alfaro v. Community Housing Improvement System & Planning Assn., Inc. (2009) 171 Cal.App.4th 1356, 1384; Jones v. ConocoPhillips (2011) 198 Cal.App.4th 1187, 1200 [concealment is sufficiently pled when the complaint as a whole provides sufficient notice of the claims against defendants].) “If the duty to disclose arises from the making of representations that were misleading or false, then those allegations should be described.” (Id.)
“‘There are ‘four circumstances 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.’ [Citations] . . . [O]ther than the first instance, in which there must be a fiduciary relationship between the parties, “the other three circumstances in which nondisclosure may be actionable presuppose[ ] the existence of some other relationship between the plaintiff and defendant in which a duty to disclose can arise. . . . ‘[W]here material facts are known to one party and not to the other, failure to disclose them is not actionable fraud unless there is some relationship between the parties which gives rise to a duty to disclose such known facts.’ [Citations] A relationship between the parties is present if there is ‘some sort of transaction between the parties. [Citations.] Thus, a duty to disclose may arise from the relationship between seller and buyer, employer and prospective employee, doctor and patient, or parties entering into any kind of contractual agreement.’” (Hoffman v. 162 North Wolfe LLC (2014) 228 Cal.App.4th 1178, 1186-1187.)
Defendant next demurs to the sixth cause of action arguing that Plaintiff fails to allege actionable fraudulent conduct with requisite specificity and that, as a matter of law, there is no fiduciary relationship between Defendant and Plaintiff. (De Spirito v. Andrews (1957) 151 Cal.App.2d 126, 130.) Defendant asserts that Plaintiff does not state when, where, or with whom he interacted, nor does he allege any particular factual omissions upon which he relied. Defendant contends that Plaintiff does not allege when the alleged “concealment” or “partial representations” by Defendant occurred, what specifically Defendant should have disclosed and when, how and through what means Plaintiff would supposedly have become aware of such a disclosure, and what damages he personally suffered as a result of the alleged non-disclosure. Defendant argues that finally, Plaintiff provides no facts to support a connection between the alleged fraud and his claim for damages: Plaintiff received a car, does not allege that it is worthless, and fails to give any information about the actual damages he alleges resulted from the supposed omission.
In opposition, Plaintiff argues that the FAC sufficiently alleges a cause of action for fraud by omission.
The Court finds that Plaintiff has alleged facts sufficient to state a cause of action for fraud by omission. As noted above, Plaintiff need not allege that Defendant was in a fiduciary relationship with Plaintiff. Here, Plaintiff has sufficiently pled that Defendant had exclusive knowledge of the facts and that the parties had a relationship, that of manufacturer and buyer. As held by our Court of Appeal, “Although, typically, a duty to disclose arises when a defendant owes a fiduciary duty to a plaintiff [citation], a duty to disclose may also arise when a defendant possesses or exerts control over material facts not readily available to the plaintiff. (See, e.g., Magpali v. Farmers Group, Inc. (1996) 48 Cal.App.4th 471, 482, 55 Cal.Rptr.2d 225 [“ ‘[t]he duty to disclose may arise without any confidential relationship where the defendant alone has knowledge of material facts which are not accessible to the plaintiff’ ”].)” (Jones v. ConocoPhillips Co. (2011) 198 Cal.App.4th 1187, 1199.) In Jones, the court held that the plaintiffs (family members of a deceased worker exposed to toxic chemicals) had alleged facts sufficient to support a claim of fraudulent concealment against the chemical manufacturers. Specifically, plaintiffs alleged that defendants alone were aware of their products’ toxicity, it was a fact not available to the decedent, and the defendants concealed that fact. (Id. at 1199-1200.) Here, Plaintiffs have sufficiently pled that Defendant, the manufacturer, had knowledge of material facts that were not accessible to Plaintiff.
As to Defendant’s arguments regarding specificity, less specificity is required when the facts lie more in the knowledge of the opposing party. Fraud causes of actions must be pled with specificity in order to give notice to the defendant and to furnish him or her with definite charges. (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal. 3d 197, 216, superseded by amendments to the Unfair Competition Law contained in Proposition 64 on unrelated grounds.) Here, Plaintiff has sufficiently given Defendant notice and furnished it with definite charges.
Finally, the Court finds that Plaintiff has sufficiently tied Defendant’s alleged fraud to his damages. Contrary to Defendant’s arguments, Plaintiff need not allege that the car is worthless to sufficiently allege that he was harmed by the purchase of the vehicle.
Based on the foregoing, Defendant’s demurrer to the sixth cause of action is OVERRULED on this ground.
Economic Loss Rule
“Economic loss consists of damages for inadequate value, costs of repair and replacement of the defective product or consequent loss of profits-without any claim of personal injury or damages to other property. 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 (citations omitted).)
“Tort damages have been permitted in contract cases where a breach of duty directly causes physical injury; for breach of the covenant of good faith and fair dealing in insurance contracts; for wrongful discharge in violation of fundamental public policy; or where the contract was fraudulently induced. In each of these cases, the duty that gives rise to tort liability is either completely independent of the contract or arises from conduct which is both intentional and intended to harm.” (Id. at 989-990.)
Defendant finally demurs to sixth cause of action arguing that it is barred by the economic loss rule.
The Court finds that Plaintiff’s cause of action for fraud by omission is not barred by the economic loss rule. Tort damages are permitted in contract cases where the contract has been fraudulently induced. Given that Plaintiff has pled facts sufficient to state a cause of action for fraud by omission and has alleged that had he known of the defects “he would not have purchased the Vehicle,” the economic loss rule does not apply.
Based on the foregoing, Defendant’s demurrer to the sixth cause of action is OVERRULED on this ground.
Motion to Strike
Defendant moves to strike allegations in the complaint relating to (1) punitive damages and (2) the claim for civil penalties under Civil Code section 1794(c) in paragraph 54.
Punitive damages may be imposed where it is proven by clear and convincing evidence that the defendant has been guilty of oppression, fraud, or malice. (Civ. Code, § 3294, subd. (a).) “Malice” is conduct intended by the defendant to cause injury to the plaintiff or despicable conduct which is carried on with a willful and conscious disregard of the rights or safety of others. (Civ. Code, § 3294, subd. (c)(1).) Despicable conduct is “conduct which is so vile, base, contemptible, miserable, wretched or loathsome that it would be looked down upon and despised by ordinary decent people. Such conduct has been described as ‘having the character of outrage frequently associated with crime.’” (Tomaselli v. Transamerica Ins. Co. (1994) 25 Cal.App.4th 1269, 1287.) “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 of thereby depriving a person of property or legal rights or otherwise causing injury. (Civ. Code, § 3294, subd. (c).) “‘Punitive damages are proper only when the tortious conduct rises to levels of extreme indifference to the plaintiff’s rights, a level which decent citizens should not have to tolerate.’ [Citation.]” (Lackner v. North (2006) 135 Cal.App.4th 1188, 1210.)
A motion to strike punitive damages is properly granted where a plaintiff does not state a prima facie claim for punitive damages, including allegations that defendant is guilty of oppression, fraud or malice. (Turman v. Turning Point of Cent. California, Inc. (2010) 191 Cal.App.4th 53, 63.) “Mere negligence, even gross negligence, is not sufficient to justify such an award” for punitive damages. (Kendall Yacht Corp. v. United California Bank (1975) 50 Cal.App.3d 949, 958.)
Defendant moves to strike allegations related to punitive damages arguing that the FAC fails to state facts sufficient to support a claim for punitive damages.
Given the Court’s overruling of Defendant’s demurrer to the sixth cause of action for fraud by omission, the Court finds that Plaintiff has stated a prima facie claim for punitive damages, as Plaintiff has sufficiently alleged that Defendant is guilty of fraud.
Based on the foregoing, Defendant’s motion to strike punitive damages is DENIED.
Civil Code § 1794(c)
Civil Code section 1794 provides, in relevant part:
(a) Any buyer of consumer goods who is damaged by a failure to comply with any obligation under this chapter or under an implied or express warranty or service contract may bring an action for the recovery of damages and other legal and equitable relief.
(b) The measure of the buyer’s damages in an action under this section shall include the rights of replacement or reimbursement as set forth in subdivision (d) of Section 1793.2, and the following:
(1) Where the buyer has rightfully rejected or justifiably revoked acceptance of the goods or has exercised any right to cancel the sale, Sections 2711, 2712, and 2713 of the Commercial Code shall apply.
(2) Where the buyer has accepted the goods, Sections 2714 and 2715 of the Commercial Code shall apply, and the measure of damages shall include the cost of repairs necessary to make the goods conform.
(c) If the buyer establishes that the failure to comply was willful, the judgment may include, in addition to the amounts recovered under subdivision (a), a civil penalty which shall not exceed two times the amount of actual damages. This subdivision shall not apply in any class action under Section 382 of the Code of Civil Procedure or under Section 1781, or with respect to a claim based solely on a breach of an implied warranty.
(Civil Code § 1794(a)-(c).)
Defendant moves to strike paragraph 54 of the FAC relating to civil penalties under Section 1794(c). Defendant argues that Plaintiff’s third cause of action is brought under Section 1793.2(a)(3), but Section 1793.2(d)(1) specifies that the only remedy available under Section 1793.2(a)(3) is for Defendant to accept the return of non-conforming goods or reimburse Plaintiff for purchasing the goods from an independent seller. Defendant asserts that nowhere in the statute does it provide for any sort of civil penalties for a violation of Section 1793.2(a)(3).
In opposition, Plaintiff argues that Section 1794 expressly states that a civil penalty may be made in addition to recovery of damages for a failure to comply with any obligation under Song-Beverly, if a plaintiff establishes that the failure to comply was willful. Plaintiff asserts that given Plaintiff’s successful pleading of a cause of action for fraud, Plaintiff has sufficiently alleged that Defendant’s conduct was despicable and carried on with a willful and conscious disregard of Plaintiff’s rights and safety.
The Court finds that Plaintiff has sufficiently alleged an entitlement to civil penalties under Section 1794(c). Despite Defendant’s arguments otherwise, Section 1793.2(d)(1) does not specify the only remedy available under Section 1793.2(a)(3). Rather, Section 1793.2(d)(1) specifies a manufacturer’s obligations if it does not service or repair the goods to conform to the applicable express warranties after a reasonable number of attempts. As correctly noted by Plaintiff, Section 1794(c) expressly provides that civil penalties may be recovered in addition to damages recovered as a result of a defendant’s failure to comply with any obligation under the Song-Beverly Act. Here, it is undisputed that Section 1793.2 is a part of the Song-Beverly Act.
Based on the foregoing, Defendant’s motion to strike paragraph 54 is DENIED.
Defendant’s demurrer is OVERRULED in its entirety. Defendant’s motion to strike is similarly DENIED in its entirety.
The parties are strongly encouraged to attend all scheduled hearings by telephone or CourtCall. All social distancing protocols will be observed at the Courthouse and in the courtrooms.
Moving party to give notice.