Nguyen vs. Toyota Motor Sales, U.S.A., INC.

7 25-01531711 1) Motion to Strike Complaint 2) Demurrer to Complaint Nguyen vs. Toyota Motor Sales, U.S.A., Demurrer INC. Defendant Toyota Motor Sales, U.S.A., Inc.’s Demurrer to the Complaint is SUSTAINED in part with leave to amend and OVERRULED in part.

Statute of Limitations

Plaintiff purchased the vehicle on January 23, 2021. (Compl., ¶ 7.) The fraud statute of limitations is 3 years and the implied warranty claim is four years. (Code Civ. Proc., § 338(d); Civil Code § 1791.1(c).)

“In order to rely on the discovery rule for delayed accrual of a cause of action, 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. In assessing the sufficiency of the allegations of delayed discovery, the court places the burden on the plaintiff to show diligence; conclusory allegations will not withstand demurrer.” (Fox v. Ethicon Endo-Surgery, Inc. (2005) 35 Cal.4th 797, 808, (cleaned up).)

Plaintiff has sufficiently alleged the time and manner of discovery. Claims for breach of implied warranty do not accrue until “the breach is or should have been discovered.” (Comm. Code § 2725(2).) Plaintiff alleges they “discovered Defendants' wrongful conduct alleged herein shortly before the filing of the complaint, as the Vehicle continued to exhibit symptoms of defects following TOYOTA's unsuccessful attempts to repair them.” (Compl., ¶ 25.) Plaintiff was unable to determine if the product was defective while Toyota was attempting to repair it.

As to the fraud claim, Plaintiff alleges “TOYOTA knew, or should have known, about the Engine Defect through its exclusive knowledge of non-public, internal data about the Engine Defect” and “actively concealed the Engine Defect and failed to disclose this defect to Plaintiff at the time of purchase of the Subject Vehicle or thereafter.” (Compl., ¶ 57.) The defendant’s representations lulling a plaintiff into a sense of security is important factor to consider when determining if a plaintiff acted reasonably in failing to discover facts supporting a fraudulent concealment claim. (See Hobart v. Hobart Estate Co. (1945) 26 Cal.2d 412, 439.)

Accordingly, the demurrer is overruled as to the ground the claims are barred by the statute of limitations.

Economic Loss Rule

Under California law, the economic loss rule does not bar a plaintiff’s claim for fraudulent inducement by concealment, and fraudulent

inducement claims fall within an exception to the economic loss rule recognized in Robinson. (Dhital, supra, 84 Cal.App.5th at p. 843.) “A plaintiff may assert a fraudulent concealment clause of action based on conduct occurring in the course of a contractual relationship if the elements of the claim can be established independently of the parties’ contractual rights and obligations, and the tortious conduct exposes the plaintiff to a risk of harm beyond the reasonable contemplation of the parties when they entered into the contract.” (Rattagan, supra, 17 Cal.5th at p. 13.) Based on the above authorities, the economic loss rule does not outright bar a plaintiff’s claim for fraudulent inducementconcealment.

At issue is the extent to which the test set forth in Rattagan applies, if at all, and whether Dhital is controlling.

Rattagan is distinguishable and Dhital is controlling.

Rattagan is not a Song-Beverly case, and the California Supreme Court distinguished Rattagan from Dhital as follows:

“Rattagan's tort claims are, of course, based on alleged conduct committed during the contractual relationship but purportedly outside the parties' chosen rights and obligations. This court has granted review in two other cases — Dhital v. Nissan North America, Inc. (2022) 84 Cal.App.5th 828, 300 Cal.Rptr.3d 715, review granted Feb. 1, 2023, S277568 and Kia America v. Superior Court (Feb. 3, 2022, D079858) [nonpub. opn.], review granted Apr. 20, 2022, S273170 — both of which involve claims of fraudulent inducement by concealment claims as well as the potential interplay with remedies available under the Song- Beverly Consumer Warranty Act (Civ. Code, § 1791 et seq.). We do not address these issues here.”

(Rattagan, supra, 17 Cal.5th at p. 41, fn. 12.)

Plaintiff’s claim here for fraudulent inducement by concealment is not premised upon conduct occurring during a contractual relationship, but presale conduct by concealing the Transmission Defect.

This distinction between Rattagan and Dhital was recently noted by the Northern District Court of California:

“By expressly calling out the distinction between Rattagan's facts and the fraudulent inducement cases and then dismissing the appeal of Dhital without vacating, reversing, or otherwise altering the court of appeal's opinion, the California Supreme Court indicated that the reasoning in Dhital should guide claims—like those before this Court—of fraudulent inducement by omission. See Dhital v. Nissan N. Am., 559 P.3d 1083 (2024); see also Ladanowsky v. FCA US LLC, No. 24-cv-07197, 2024 WL 5250357, at *4–5 (N.D. Cal. Dec. 30, 2024) (discussing the distinction between Rattagan and Dhital and applying Dhital where the plaintiff alleged fraudulent inducement to enter a

contract); Antonov v. Gen. Motors LLC, No. 23-cv-01593, 2024 WL 217825, at *9 (C.D. Cal. Jan. 19, 2024) (collecting cases following Dhital to find that the economic loss rule does not bar fraudulent inducement claims).”

(Moore v. American Honda Motor Co., Inc. (N.D. Cal., Mar. 28, 2025) 2025 WL 948114, at *7.)

Because the dismissal left Dhital’s reasoning and conclusion intact, the court concluded “that the California Supreme Court's three-step analysis from Rattagan controls fraudulent concealment within contractual relationships, whereas Dhital controls fraudulent concealment inducing the formation of a contractual relationship.” (Ibid. [italics in original].)

Additionally, and importantly, the California Supreme Court granted review of Dhital, but after the California Supreme Court’s ruling in Rattagan, the California Supreme Court dismissed the appeal of Dhital without vacating, reversing, or otherwise altering the court of appeal’s opinion. (Dhital v. Nissan North America (2024) 559 P.3d 1083, 327 Cal.Rptr.3d 898 (Mem), 898-99.) “An order dismissing review does not affect the publication status of the Court of Appeal opinion unless the Supreme Court orders otherwise.” (Cal. Rules of Ct., rule 8.528, subd. (b)(3).) Thus, Dhital is binding precedent.

Based on the foregoing, the three-part test in Rattagan does not apply to Plaintiff’s fraudulent inducement-concealment claim here. The facts and issues in Dhital are on all fours with the instant case and involved the precise issue of a fraudulent inducement – concealment claim based on presale conduct in the purchase of a vehicle such that it is controlling.

As the Dhital court explained: “The economic loss rule provides that, ‘[i]n general, there is no recovery in tort for negligently inflicted ‘purely economic losses,’ meaning financial harm unaccompanied by physical or property damage.’” (Dhital, supra, 84 Cal.App.5th at p. 837.) “For claims arising from alleged product defects, ‘[e]conomic 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...’ ” (Ibid., citing Robinson, supra, 34 Cal.4th at p. 988.)

The Dhital court also found that “Robinson did not hold that any claims for fraudulent inducement are barred by the economic loss rule. Quite the contrary, the Robinson court affirmed that tort damages are available in contract cases where the contract was fraudulently induced.” (Dhital, supra, 84 Cal.App.5th at 839 [italics in the original].)

The Dhital court concluded:

“Applying Robinson here (and cognizant that our Supreme Court may soon provide additional guidance), we conclude plaintiffs’ claim for fraudulent inducement by concealment is not subject to demurrer on the ground it is barred by the economic loss rule. Robinson left undecided whether concealment-based claims are barred by the economic loss rule. What follows from its

analysis, however, is that concealment-based claims for fraudulent inducement are not barred by the economic loss rule. The reasoning in Robinson affirmatively places fraudulent inducement by concealment outside the coverage of the economic loss rule. We now hold that the economic loss rule does not cover such claims. First, as discussed, Robinson identified fraudulent inducement as an existing exception to the economic loss rule, before it proceeded to analyze the particular claims at issue in that case relating to fraud during the performance of a contract. (Robinson, supra, 34 Cal.4th at pp. 989–990.) For fraudulent inducement and the other existing exceptions listed in Robinson, ” ’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.’ ”

(Dhital, supra, 84 Cal.App.5th at pp. 724–725 [emphasis added].)

The Dhital court further reasoned “that independence is present in the case of fraudulent inducement (whether it is achieved by intentional concealment or by intentional affirmative misrepresentations), because a defendant’s conduct in fraudulently inducing someone to enter a contract is separate from the defendant’s later breach of the contract or warranty provisions that were agreed to.” (Dhital, supra, 84 Cal.App.5th at p. 841.) Thus, Dhital found that the plaintiffs’ fraudulent inducement claim alleged presale conduct by Nissan (concealment) that was distinct from Nissan’s alleged subsequent conduct in breaching its warranty obligations, and concluded that “under California law, the economic loss rule does not bar plaintiffs’ claim here for fraudulent inducement by concealment”, that fraudulent inducement claims fall within an exception to the economic loss rule recognized in Robinson, and that the plaintiffs’ alleged fraudulent conduct that was independent of Nissan’s alleged warranty breaches. (Id. at pp. 841, 843.)

Applying Dhital here, the economic loss rule does not bar Plaintiff’s cause of action for fraudulent inducement – concealment. Plaintiff’s fraudulent inducement claim alleges presale conduct by Toyota in concealing and failing to disclose material facts relating to the engine defect that was known to Toyota prior to purchase. (Compl., ¶ 57.) Plaintiff alleges Toyota failed to disclose the defect at the time of sale or thereafter. (Compl., ¶ 57.) However, I recommend finding this allegation is sufficient to allege conduct was in inducing the contract rather than performance of the contract. Plaintiff claims they would not have purchased the vehicle if they “knew about these defects at the time of sale” which would only make sense if the alleged fraud was in inducing the contract. (Compl., ¶ 60.)

Thus, the demurrer is overruled as to this ground.

Duty to Disclose

Transactional Relationship

“A duty to disclose a material fact can arise if (1) it is imposed by statute; (2) the defendant is acting as plaintiff's fiduciary or is in some other confidential relationship with plaintiff that imposes a disclosure duty under the circumstances; (3) the material facts are known or accessible only to defendant, and defendant knows those facts are not known or reasonably discoverable by plaintiff (i.e., exclusive knowledge); (4) the defendant makes representations but fails to disclose other facts that materially qualify the facts disclosed or render the disclosure misleading (i.e., partial concealment); or (5) defendant actively conceals discovery of material fact from plaintiff (i.e., active concealment).” (Rattagan, supra, 17 Cal.5th at p. 40.) “Circumstances (3), (4), and (5) presuppose a preexisting relationship between the parties, such as ‘between seller and buyer, employer and prospective employee, doctor and patient, or parties entering into any kind of contractual agreement. [Citation.] All of these relationships are created by transactions between parties from which a duty to disclose facts material to the transaction arises under certain circumstances.’ [Citation.]” (Id. at 40-41.)

Dhital v. Nissan North America, Inc. (2022) 84 Cal. App. 5th 828 addressed the issue of a transactional relationship and found that a car buyer need not allege a contract with the manufacturer 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 p. 844, petition for review granted, 523 P.3d 392 (Cal. Feb. 1, 2023) and dismissed and remanded, 559 P.3d 1083, 327 Cal.Rptr.3d 898 (Mem), 898-99 (Cal. Dec. 18, 2024).

Unlike in Dhital, where the plaintiffs alleged they purchased the vehicle from an authorized retail dealership which was defendant’s agent, here Plaintiff simply alleges they “entered into a warranty contract with Defendant TOYOTA ....” (Compl., ¶ 7.) This allegation is insufficient to impose a duty to disclose. Thus, the demurrer is sustained as to the 6th cause of action.

Motion to Strike

Defendant Toyota Motor Sales, U.S.A., Inc.’s Motion to Strike is GRANTED with leave to amend.

“In order to survive a motion to strike an allegation of punitive damages, the ultimate facts showing an entitlement to such relief must be pled by a plaintiff.” (Clauson v. Superior Court (1998) 67 Cal.App.4th 1253, 1255.) Additionally, “[i]n passing on the correctness of a ruling on a motion to strike, judges read allegations of a pleading subject to a motion to strike as a whole, all parts in their context, and assume their truth.” (Ibid.)

A demand for punitive damages for the commission of any tort requires more than the mere allegation of the “oppression, fraud, and malice” language found in Civil Code section 3294. (See Perkins v Superior Court (1981) 117 Cal.App.3d 1, 6-7.) “[F]acts must be alleged in the pleading to support such a claim.” (Grieves v. Superior Court (1984) 157 Cal.App.3d 159, 166.) The facts alleged must show the defendant “act[ed] with the intent to vex, injure or annoy, or with a conscious disregard of the plaintiff's rights.” (Silberg v. California Life Ins. Co. (1974) 11 Cal.3d 452, 462.)

Section 3294, subdivision (c) defines malice, oppression and fraud as follows: “(1) ‘Malice’ means conduct which is intended by the defendant to cause injury to the plaintiff or despicable conduct which is carried on by the defendant with a willful and conscious disregard of the rights or safety of others. [¶] (2) ‘Oppression’ means despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person's rights. [¶] (3) ‘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.”

Based on the Court’s ruling sustaining Defendant’s demurrer as to Plaintiff’s fraud cause of action, the Court finds no allegations of oppression, fraud, or malice to support a claim for punitive damages. 11 25-01458863 1) Motion to Compel Answers to Special Interrogatories 2) Motion to Compel Answers to Special Interrogatories Satin vs. HH Law Firm 3) Motion to Compel Further Responses to Special Interrogatories 4) Motion to Compel Production 5) Motion to Compel Production 6) Motion to Deem Facts Admitted

Plaintiff Ken Satin’s motion to compel defendant Hani Habbas to provide further responses, without objection, to Plaintiff’s Special Interrogatories (Set One) is CONTINUED to _______.

The rule requiring a good faith effort to meet and confer about discovery disputes “is designed to encourage the parties to work out their differences informally so as to avoid the necessity for a formal order . . . [t]his, in turn, will lessen the burden on the court and reduce the unnecessary expenditure of resources by litigants through promotion of informal, extrajudicial resolution of discovery disputes.” (Stewart v. Colonial Western Agency, Inc. (2001) 87 Cal.App.4th 1006, 1016.) “The level of effort at informal resolution which satisfies the ‘reasonable and good faith