Case Number: 19STCV21468 Hearing Date: July 14, 2020 Dept: 31
DEMURRER IS OVERRULED; MOTION TO STRIKE IS DENIED.
Background
On June 19, 2019, Plaintiffs Jessica Stevens and Frederick Stevens filed the instant action against Defendants NBA Automotive, Inc. dba Nissani Bros. Chevrolet (hereinafter “Nissani”); TD Auto Finance, LLC (“TD Auto Finance”); Merchants Bonding Company (Mutual) (“Merchants”); and Does 1 through 75. On January 2, 2020, Plaintiffs filed the Third Amended Complaint (“TAC”), which includes Defendant General Motors, LLC. The TAC asserts causes of action for:
- Violation of the Consumers Legal Remedies Act;
- Violation of the Song-Beverly Consumer Warranty Act;
- Violation of Business and Professions Code § 17200, et seq.;
- Fraud and Deceit;
- Negligent Misrepresentation; and
- Violation of Vehicle Code § 11711, et seq.
Defendant General Motors, LLC (hereinafter “Defendant” or “GM”) demurs to the first, fourth, and fifth causes of action.
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”].)
Discussion
Defendant demurs to the first, fourth, and fifth causes of action arguing that each fails to state facts sufficient to constitute a cause of action against it.
First Cause of Action for Violation of the Consumers Legal Remedies Act
The Court notes that Defendant again demurs to the first cause of action for violation of the Consumers Legal Remedies Act (“CLRA”). On December 13, 2019, the Court overruled Defendant’s demurrer to this exact cause of action. (December 13, 2019 Ruling on Submitted Matter.) The Court notes that the allegations with regard to the first cause of action have remained substantially the same in the third iteration of Plaintiffs’ complaint. More importantly, Defendant’s arguments also remain the same. The Court is thus foreclosed from rendering a new determination of the viability of that claim absent new facts or circumstances brought to the Court’s attention by Defendant. (Bennett v. Suncloud (1997) 56 Cal.App.4th 91, 96–97.)
Based on the foregoing, Defendant’s demurrer to the first cause of action is OVERRULED.
Fourth Cause of Action for Fraud & Deceit
The necessary elements of fraud are: (1) misrepresentation (false representation, concealment, or nondisclosure), (2) knowledge of falsity (scienter), (3) intent to defraud (i.e., to induce reliance), (4) justifiable reliance, and (5) resulting damage. (Alliance Mortgage Co. v. Rothwell (1995) 10 Cal.4th 1226, 1239.) The necessary elements of negligent misrepresentation are: (1) misrepresentation of a past or existing material fact; (2) without reasonable ground for believing it to be true; (3) intent to defraud; (4) ignorance of the truth and justifiable reliance; and (5) resulting damage. (Hydro-Mill Co., Inc. v. Hayward, Tilton & Rolapp Ins. Associates, Inc. (2004) 115 Cal.App.4th 1145, 1154.)
“‘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.)
“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 demurs to the fourth cause of action for fraud and deceit on the same grounds it previously demurred to the fourth cause of action. Defendant argues that no relationship exists between the parties that require disclosure. Citing to Bigler-Engler v. Breg, Inc. ((2017) 7 Cal.App.5th 276, 312), Defendant argues that a transaction that gives rise to a duty to disclose “must necessarily arise from direct dealings between the plaintiff and the defendant; it cannot arise between the defendant and the public at large.” Defendant asserts that the complaint does not allege a material fact of which GM had exclusive knowledge, a material fact that GM actively concealed, or a material fact that GM suppressed while making a partial representation, nor could it. Defendant contends that Plaintiffs have not alleged that GM was aware that Nissani was advertising the Tahoe, let alone advertising it as a CPO vehicle. Defendant argues that additionally, Plaintiffs did not interact with GM concerning the subject vehicle at any time before they bought it used from Nissani. Defendant asserts that any alleged “concealment” by GM is completely nonexistent.
Defendant additionally demurs to the fourth cause of action for fraud and deceit on the grounds that it is barred by the economic loss rule. Defendant argues that Plaintiffs entered into a sales contract with Nissani. Defendant asserts that to the extent Plaintiffs incurred an economic loss as a result of some alleged misrepresentations by Nissani, their remedy is a breach of contract claim against Nissani, not a fraud claim against GM.
In opposition, Plaintiffs argue that they have sufficiently alleged their cause of action for fraud and deceit.
The Court finds that Plaintiffs have alleged facts sufficient to state a cause of action for fraud and deceit against Defendant. As noted above, Plaintiffs need not allege that Defendant was in a fiduciary relationship with Plaintiff. Plaintiffs have 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, “[a]lthough, 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 Plaintiffs. (TAC ¶ 23.)
Moreover, the Court finds that Plaintiffs’ cause of action for fraud and deceit is not barred by the economic loss rule. Tort damages are permitted in contract cases where the contract has been fraudulently induced. Given that Plaintiffs have pled facts sufficient to state a cause of action for fraud and deceit and has alleged that “Plaintiffs would not have purchased the Vehicle if they knew the Vehicle was not a GM Certified Pre-Owned,” the economic loss rule does not apply.
Based on the foregoing, the demurer to the fourth cause of action is OVERRULED.
Fifth Cause of Action for Negligent Misrepresentation
“‘The elements of negligent misrepresentation are well established. A plaintiff must prove the following in order to recover. “[M]isrepresentation of a past or existing material fact, without reasonable ground for believing it to be true, and with intent to induce another’s reliance on the fact misrepresented; ignorance of the truth and justifiable reliance on the misrepresentation by the party to whom it was directed; and resulting damage….”’ [Citation.]
“California courts have recognized a cause of action for negligent misrepresentation, i.e., a duty to communicate accurate information, in two circumstances. The first situation arises where providing false information poses a risk of and results in physical harm to person or property. The second situation arises where information is conveyed in a commercial setting for a business purpose.” [Citation.]” (Hydro-Mill Co., Inc. v. Hayward, Tilton & Rolapp Ins. Associates, Inc. (2004) 115 Cal.App.4th 1145, 1154.)
“Negligent misrepresentation is a separate and distinct tort, a species of the tort of deceit.” (Bock v. Hansen (2014) 225 Cal.App.4th 215, 228.)
“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.)
Defendant demurs to the fifth cause of action for negligent misrepresentation arguing that the TAC does not allege a single, specific, concrete misrepresentation or omission by GM. Defendant asserts that Plaintiffs do not, and cannot, allege facts supporting a negligent misrepresentation claim against GM.
In opposition, Plaintiffs allege that they have sufficiently alleged their cause of action for negligent misrepresentation.
The Court finds that Plaintiffs have pled facts sufficient to state a cause of action for negligent misrepresentation. Despite Defendant’s arguments otherwise, the TAC sufficiently alleges that “GM made the following misrepresentations to Plaintiff[s]: (1) advertising the Vehicle as “certified” when the Vehicle did not pass the GM Certified Pre-Owned Vehicle certification requirements; (2) selling the Vehicle as “certified” when the Vehicle did not pass the GM Certified Pre-Owned Vehicle certification requirements; (3) allowing Nissani to advertise and sell the Vehicle as “certified” when GM itself does not certify, supervise, and/or participate in the certification; and (4) allowing Nissani to sell vehicles as “certified” when they are not.” (TAC ¶ 92.)
Based on the foregoing, Defendant’s demurrer to the fifth cause of action is OVERRULED.
Motion to Strike
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 the prayer for punitive damages in the complaint, arguing that the complaint fails to state facts sufficient to state facts sufficient to support punitive damages.
Given the Court’s overruling of Defendant’s demurrer to the first, fourth, and fifth causes of action for violation of the CLRA, fraud and deceit, and negligent misrepresentation, the Court finds that Plaintiffs have stated a prima facie claim for punitive damages, as Plaintiffs have successfully alleged that Defendant is guilty of fraud. Moreover, Plaintiffs have sufficiently alleged that Defendant is guilty of oppression, fraud, or malice pursuant as to their cause of action under the CLRA, having alleged that the violations by Defendant were not cured within thirty (30) days of the filing of the suit. (TAC ¶ 42.)
Based on the foregoing, Defendant’s motion to strike is DENIED.
Conclusion
Defendant’s demurrer to the TAC 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.