Courant vs. FCA US, LLC

FCA first contends Plaintiff’s claim for breach of implied warranty of merchantability is time-barred. “California courts have held that the statute of limitations for an action for breach of warranty under the Song-Beverly Page 2 of 36

Act is governed by the same statute that governs the statute of limitations for warranties arising under the California Uniform Commercial Code: section 2725 of the California Uniform Commercial Code.” (Mexia v. Rinker Boat Co., Inc. (2009) 174 Cal.App.4th 1297, 1305; see also Com. Code, § 2725, subd. (1); Krieger v. Nick Alexander Imports, Inc. (1991) 234 Cal.App.3d 205, 215.)

Additionally, the Song-Beverly Act provides that the duration of the implied warranty of merchantability may extend to a period of not more than one year after purchase when accompanied by an express warranty of future performance spanning one year or longer. (Civ. Code § 1791.1, subd. (c).) This provision has been held to extend an implied warranty to future performance, such that “the implied warranty of merchantability may be breached by a latent defect undiscoverable at time of sale.” (Mexia, supra, 174 Cal.App.4th at p. 1308.)

While such breach must occur within the oneyear time limit set forth in section 1791.1, subdivision (c), it need not be discovered or reported within such a period. (Id. at p. 1297 [noting that while the duration provision of section 1791.1(c) provides that an implied warranty of merchantability may not extend longer than one year, “[t]here is nothing that suggests a requirement that the purchaser discover and report to the seller a latent defect within that time period.”].) “In the case of a latent defect ... the warranty of merchantability is breached, by the existence of the unseen defect, not by its subsequent discovery.” (Id. at p. 1305.)

FCA argues Plaintiff’s implied warranty claim fails because Plaintiff did not allege any defect arose within the implied warranty’s duration period. The FAC alleges Plaintiff entered into a warranty contract with FAC regarding a 2023 Alfa Romeo Stelvio (“Subject Vehicle”) on or about November 4, 2023. (FAC ¶ 7.) The FAC further alleges the subject vehicle was sold with one or more latent defect(s). (Id. at ¶ 57.)

There are no allegations in the FAC to indicate that defects developed in the Subject Vehicle past the one-year implied warranty period. Whether the defects in fact existed within one year of delivery or came into existence more than Page 3 of 36

one year after delivery is a dispute of fact which may not be resolved on demurrer. Additionally, the initial Complaint was filed on March 14, 2025 (ROA 2), well within four years of November 2023, the earliest date a cause of action for breach of implied warranty could have accrued.

FCA next contends Plaintiff’s implied warranty cause of action fails because there was no privity between Plaintiff and FCA. FCA cites Burr v. Sherwin Williams Co. (1954) 42 Cal. 2d 682 for the proposition that privity of contract between the manufacturer and consumer is generally required in an action for breach of warranty and that “there is no privity between the original seller and a subsequent purchaser who is in no way a party to the original sale.” (Id. at p. 695.)

Burr, however, is unpersuasive because it addressed then-existing Civil Code section 1735, not the implied warranty of merchantability under Civil Code section 1792. Moreover, section 1792 expressly clarifies that every dealer and every manufacturer that sells a new automobile does so with an implied warranty.

The demurrer is OVERRULED as to the fourth cause of action.

Sixth Cause of Action for Fraudulent Inducement Concealment FCA asserts that the sixth cause of action for fraudulent concealment fails because the Complaint’s fraud allegations lack the required specificity.

Specific to a fraudulent concealment or omission claim, the plaintiff must allege: (1) the defendant concealed a material fact; (2) the defendant had a duty to disclose the fact to the plaintiff; (3) the defendant intentionally concealed the fact with the intent to defraud the plaintiff; (4) the plaintiff was unaware of the fact and would not have acted as he did if he had known of the concealed fact; and (5) as a result of the concealment of the fact, the plaintiff sustained damage. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 748.) Page 4 of 36

“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. [Citation.]’ [Citation.]” (LiMandri v. Judkins (1997) 52 Cal.App.4th 326, 336.)

A duty to disclose may also arise when a defendant possesses or exerts control over material facts not readily available to the plaintiff. (Jones v. ConocoPhillips Co. (2011) 198 Cal.App.4th 1198, 1199; Alfaro v. Community Housing Improvement System & Planning Assn., Inc. (2009) 171 Cal.App.4th 1256, 1384 [“Even under the strict rules of common law pleading, one of the canons was that less particularity is required when the facts lie more in the knowledge of the opposite party”].)

The Complaint alleges Plaintiff entered into a warranty contract with FCA regarding the Subject Vehicle, which was manufactured and/or distributed by FCA. (Compl. ¶ 7.) The Complaint also alleges the Subject Vehicle contained a “Engine Defect” that manifested in the Subject Vehicle’s loss of power, stalling, engine running rough, engine misfire(s), or failure or replacement of the engine. (Id. at ¶ 65.) The Complaint alleges that the Engine Defect can cause the Subject Vehicle to fail without warning while the vehicle is moving at highway speeds. (Id.) According to the Complaint, these conditions present a safety concern because they can affect the driver’s ability to control the vehicle or cause a non-collision vehicle fire. (Id.)

FCA acquired its knowledge of the Engine Defect prior to Plaintiff acquiring the Subject Vehicle, through sources not available to consumers such as Plaintiff. (Id. at ¶ 67.) Plaintiff alleges that FCA knew about, and concealed, the Engine Defect present in the Subject Vehicle, along with the Engine Defect’s attendant dangerous safety and drivability problems from Plaintiff at the time of sale and thereafter. (Compl. ¶ 20.) Had Page 5 of 36

Plaintiff known about the defects at the time of sale, Plaintiff alleges that she would not have purchased the Subject Vehicle. (Id. at ¶¶ 69-70.) Plaintiff relied on FCA and its agent’s omissions and concealment of the Engine Defect. (Id. at ¶ 55.) The Complaint alleges Plaintiff “was harmed and suffered actual damages in that the Subject Vehicle’s engine is substantially certain to fail before its expected useful life has run.” (Id.) Plaintiff alleges Kia “had superior and exclusive knowledge of the Engine Defect and knew or should have known that the Engine Defect was not known or reasonably discoverable by Plaintiff before Plaintiff purchased the Subject Vehicle.” (Id. at ¶ 67.)

With respect to fraudulent concealment claims, a plaintiff is not required to allege with the usual detail required in connection with fraud claims based on affirmative representations. In Vega v. Jones, Day, Reavis & Pogue (2004) 121 Cal.App.4th 282, the Court of Appeal found that the trial court had improperly sustained a demurrer to a concealment cause of action on the ground the cause of action on the ground plaintiff had failed to allege the cause of action “with the requisite degree of specificity,” noting “The pertinent question in a concealment case is not who said what to whom ....” (Id. at 296.)

Additionally, if the defendant is in a better position to know the facts concerning the alleged fraud, the requirement of specificity is relaxed. (See Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 217, superseded by statute on other grounds in Branick v. Downey Savings & Loan Assn. (2006) 39 Cal.4th 235.)

“Less specificity should be required of fraud claims when it appears from the nature of the allegations that the defendant must necessarily possess full information concerning the facts of the controversy; even under the strict rules of common law pleading, one of the canons was that less particularity is required when the facts lie more in the knowledge of the opposite party.” (Alfaro v. Community Housing Improvement & Planning Assn., Inc. (2009) 171 Cal.App.4th 1356, 1384 [internal quotations Page 6 of 36

and citations omitted].) In Alfaro, the Court of Appeal found that the plaintiff home purchasers in a housing development were sufficiently specific in pleading fraud based on the defendant vendors’ alleged nondisclosure of deed restrictions, even though plaintiffs did not allege that the nondisclosure occurred by a certain means or at a certain time or place, because the defendants possessed the records of their dealings with plaintiffs. (Id. at 1385.)

Here, the specificity requirement is relaxed due to the nature of Plaintiff’s claim as a concealment-based cause of action. The Complaint alleges fraudulent concealment with sufficient specificity. As in Alfaro, FCA possesses the information FCA asserts Plaintiff failed to allege. (Alfaro, supra, 171 Cal.App.4th at 1384 [details such as the names of the corporate employees with whom plaintiffs interacted are “properly the subject of discovery not demurrer”].)

FCA next contends that Plaintiff fails to allege any breach of a tort duty that is independent of FCA’s contractual duties under Plaintiff’s purchase of the Subject Vehicle. In Bigler- Engler, Inc. (2017) 7 Cal.App.5th 276, the Court of Appeal held that: “A duty to disclose facts arises only when the parties are in a relationship that gives rise to the duty, such as ‘seller and buyer, employer and prospective employee, doctor and patient, or parties entering into any kind of contractual arrangement.’” (Id. at 311.)

“[The California] Supreme Court has described the necessary relationship giving rise to a duty to disclose as a ‘transaction’ between the plaintiff and defendant: ‘In transactions which do not involve fiduciary or confidential relations, a cause of action for non-disclosure of material facts may arise in at least three instances: (1) the defendant makes representations but does not disclose facts which materially qualify the facts disclosed, or which render his disclosure likely to mislead; (2) the facts are known or accessible only to defendant, and defendant knows they are not known to or reasonably discoverable by the plaintiff; (3) the defendant actively conceals discovery from the plaintiff.’” (Id.) “Such a transaction must necessarily arise from direct dealings Page 7 of 36

between the plaintiff and the defendant; it cannot arise between the defendant and the public at large.” (Id. at 312.)

The Court of Appeal directly addressed this issue in Dhital v. Nissan North America, Inc. (2022) 84 Cal.App.5th 828, 844, and found that a car buyer need not allege a contract with the manufacturer in order to allege a duty to disclose:

“Nissan argues plaintiffs did not adequately plead the existence of a buyer-seller relationship between the parties, because plaintiffs bought the car from a Nissan dealership (not from Nissan itself). At the pleading stage (and in the absence of a more developed argument by Nissan on this point), we conclude plaintiffs’ allegations are sufficient. Plaintiff alleges that they bought the car from a Nissan dealership, that Nissan backed the car with an express warranty, and that Nissan’s authorized dealerships are its agents for purposes of the sale of Nissan vehicles to consumers. In light of these allegations, we decline to hold plaintiffs’ claim is barred on the ground there was no relationship requiring Nissan to disclose known defects.”

(Dhital, supra, 84 Cal.App.5th at 844.)

Here, the Complaint adequately alleges FCA had knowledge of the Engine Defect that was unknown to Plaintiff. (Compl. at ¶¶ 22-25, 65-67.) The allegations sufficiently allege that Defendant actively concealed the Engine Defect. (Id.) Further, while Plaintiff does not allege he purchased the Subject Vehicle directly from FCA, Plaintiff alleges the parties entered into a warranty contract. (Id. at ¶ 7.) This is sufficient at the pleading stage. (See Dhital v. Nissan North America, Inc. (2022) 84 Cal.App.5th 828, 844.)

Lastly, FCA contends that the economic loss rule bars Plaintiff’s fraudulent concealment cause of action. The economic loss rule provides that “ ‘[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’ Page 8 of 36

losses.’ ” (Robinson Helicopter Co. v. Dana Corp. (2004) 34 Cal.4th 979, 988, quoting Jimenez v. Superior Court (2002) 29 Cal.4th 473, 482.)

In general, the economic loss rule bars “tort recovery for a breach of contract duty ... unless two conditions are satisfied.” (Rattagan v. Uber Technologies, Inc. (2024) 17 Cal.5th 1, 20–21.) “A plaintiff must first demonstrate the defendant’s injury-causing conduct violated a duty that is independent of the duties and rights assumed by the parties when they entered the contract. Second, the defendant’s conduct must have caused injury to persons or property that was not reasonably contemplated by the parties when the contract was formed.” (Id.)

FCA argues Plaintiff’s fraudulent concealment claim should be barred by the economic loss doctrine because Plaintiff’s injuries are purely economic and are within the reasonable contemplation of the parties’ contractual relationship. The Dhital court, applying and expanding upon the holding in Robinson Helicopter Co., Inc. v. Dana Corp. (2004) 34 Cal. 4th 979, concluded that a claim for fraudulent inducement by concealment is not subject to demurrer simply on the ground that it is barred by the economic loss rule. (See Dhital, supra, 84 Cal. App. 5th at 840- 841.)

The ruling by the California Supreme Court in Rattagan v. Uber Technologies, Inc. (2024) 17 Cal.5th 1 did not disturb the ruling in Dhital. (Rattagan, supra, 17 Cal.5th at p. 13.) Further, it has long been held that where a duty separate from the contract is breached, the economic loss rule does not apply, such as “where the contract was fraudulently induced.” (Erlich v. Menezes (1999) 21 Cal.4th 543, 552.) As discussed above, Plaintiff has sufficiently alleged fraudulent inducement.

The demurrer is OVERRULED as to the sixth cause of action.

Motion to Strike Portions of Complaint

Defendant FAC US, LLC (“FCA”) moves to strike the prayer for punitive damages in the Complaint filed by Plaintiff Lyann Courant. Page 9 of 36

A court may, upon motion, or at any time in its discretion, strike any irrelevant, false, or improper matter inserted in any pleading. (Code Civ. Proc., § 436, subd. (a).) Furthermore, a court may also strike 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, subd. (b).) The grounds for moving to strike must appear on the face of the pleading or by way of judicial notice. (Code Civ. Proc., § 437.)

“In an action for the breach of an obligation not arising from contract, where it is proven by clear and convincing evidence that the defendant has been guilty of oppression, fraud, or malice, the plaintiff, in addition to the actual damages, may recover damages for the sake of example and by way of punishing the defendant.” (Civil Code §3294 subd. (a).) As used in this section, “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.” (Civil Code §3294 subd. (c)(3).)

FCA moves to strike Plaintiff’s prayer for punitive damages. Specifically, FCA contends that Plaintiff’s Complaint fails to state a viable fraudulent concealment cause of action and, thus, Plaintiff fails to state any allegations capable of supporting a punitive damages award. Additionally, FCA argues that the Complaint’s allegations are not sufficient to support corporate liability for punitive damages.

As discussed in connection with FCA’s demurrer, the Complaint sufficiently states a cause of action for fraudulent inducement and concealment. However, the Complaint fails to contain allegations sufficient to establish the advanced knowledge and conscious disregard, authorization, ratification, or act of oppression, fraud, or malice on the part of an officer, director, or managing agent of FCA.

The Complaint’s conclusory allegations that FCA knowingly and intentionally concealed material facts without any factual allegations Page 10 of 36

about the individuals involved and their authority are insufficient to plead a claim for punitive damages even if the complaint sufficiently alleges a fraud cause of action to survive demurrer. The motion to strike is granted. The prayer for punitive damages is stricken from the Complaint.