JESSE GRADY vs. FCA US, LLC; ET AL.

Case No. CU25-01670

Demurrer and Motion to Strike re: First Amended Complaint

Defendants FCA US, LLC (“FCA”) and HANLEES CHRYSLER DODGE JEEP RAM OF NAPA (“HANLEES”) demur to Plaintiff JESSE GRADY’s first amended complaint (“1AC”) alleging (1) violation of Civil Code section 1793.2, subdivision (d), (2) violation of subdivision (b) of the same, (3) violation of subdivision (a)(3) of the same, (4) breach of the implied warranty of merchantability pursuant to Civil Code section 1791.1, (5) negligent repair, and (6) fraudulent inducement. Summarized, Plaintiff’s complaint alleges that FCA violated the Song-Beverly Consumer Warranty Act in that it failed to repair or repurchase Plaintiff’s 2018 Chrysler Pacifica (the “Vehicle”) after the Vehicle manifested defects within the warranty period and FCA concealed existence of the Vehicle’s 9-speed transmission defect from Plaintiff prior to purchase. HANLEES negligently stored, prepared, and/or repaired the Vehicle.

Defendants simultaneously move to strike the complaint’s prayer for punitive damages.

Legal Standard on Demurrer. “The function of a demurrer is to test the sufficiency of the complaint as a matter of law.” (Holiday Matinee, Inc. v. Rambus, Inc. (2004) 118 Cal.App.4th 1413, 1420.) A complaint is sufficient if it alleges ultimate rather than evidentiary facts, but the plaintiff must set forth the essential facts of his or her case “with reasonable precision and with particularity sufficient to acquaint [the] defendant with the nature, source and extent” of the plaintiff’s claim. (Doheny Park Terrace Homeowners Assn., Inc. v.

Truck Ins. Exchange (2005) 132 Cal.App.4th 1076, 1099.) Legal conclusions are insufficient. (Id. at 1098–1099; Doe v. City of Los Angeles (2007) 42 Cal.4th 531, 551, fn. 5 [ultimate facts sufficient].) The Court “assume[s] the truth of the allegations in the complaint, but do[es] not assume the truth of contentions, deductions, or conclusions of law.” (California Logistics, Inc. v. State of California (2008) 161 Cal.App.4th 242, 247.)

Statute of Limitations. Code of Civil Procedure section 871.21, subdivision (a) provides that an action covered by section 871.20 shall be commenced within one year of expiration of the applicable warranty. Section 871.21, subdivision (b) provides a sixyear statute of repose for the same actions, stating that no such action shall be brought later than six years after the date of original delivery of the motor vehicle. Plaintiff obtained the Vehicle on April 24, 2018, which means that his statute of limitations on the applicable five-year warranty and the statute of repose both expired on April 24, 2024. (1AC at ¶¶ 7-8, Exhibit A [warranty showing five-year duration].)

However, section 871.21 only went into effect on January 1, 2025. It would be unjust to hold Plaintiff to a statute of repose that expired before it existed. The court finds that section 871.21 does not bar any of Plaintiff’s causes of action.

Rosefield Packing Co. v. Superior Court (1935) 4 Cal.2d 120 (Rosefield) does not support applying Code of Civil Procedure section 871.21’s time limitation to the instant case. Rosefield featured a lawsuit by Planters against Rosefield Packing Company, filed August 17, 1929. (Id. at p. 121.) At the time Code of Civil Procedure section 583 stated than an action not brought to trial within five years after the filing of the answer was subject to mandatory dismissal; on August 21, 1933 that statute was amended to state that an action not brought within five years of the filing of the action, rather than the answer, was subject to mandatory dismissal. (Ibid.)

Rosefield moved to dismiss Planters’s action for lack of prosecution under the amended statute on October 11, 1934. (Id. at pp. 121-122.) Our state high court observed first off that the statute at issue was expressly retroactive. (Id. at p. 122.) It then stated that while a retroactive statute applying to criminal matters or depriving a person of a vested right is unconstitutional a statute merely applying a retroactive change to rules of civil procedure, particularly including statutes of limitation and the like, may “be made applicable to pending proceedings” if there is a reasonable time permitted for the affected party to avail himself of his remedy before the statute takes effect. (Ibid.)

The statute at issue in Rosefield was constitutional as applied to Planters because it went into effect on August 21, 1933 and Planters’s new trial deadline was August 17, 1934; this meant Planters had nearly a year to arrange for trial. (Id. at p. 123.) Our state high court distinguished cases Planters offered to support its position on the basis that in those cases the newly shortened periods for action expired before the shortening laws became effective. (Ibid.)

Rosefield hinges its decision supporting a shortened timer on the fact that the plaintiff there had a year to act after the relevant statute became effective. It pointedly distinguished situations like that FCA’s argument would effect in the instant case where the period for action expires before the statute becomes effective. Further, the statute under analysis in Rosefield was expressively retroactive but Code of Civil Procedure section 871.21 is not.

Sufficiency of Pleading Fraudulent Inducement. Dhital v. Nissan North America Inc. (2022) 84 Cal.App.5th 828 (Dhital) offers applicable precedent as to the sufficiency of Plaintiff’s fraudulent inducement cause of action.

In Dhital the plaintiff brought a lemon law action over his Nissan vehicle’s faulty transmission and additionally alleged fraudulent inducement. (Dhital, supra, 84 Cal.App.5th at p. 834.) The trial court sustained Nissan’s demurrer on the fraudulent inducement cause of action, deciding that the economic loss rule barred the claim. (Id. at p. 835-836.) The appellate court reversed, finding both that the economic loss rule did not bar the claim and that the plaintiff’s allegations sufficiently stated fraudulent inducement (insufficiency of pleading being an alternative ground for affirming the trial court ruling that Nissan urged on appeal). (Id. at p. 845.)

Regarding the economic loss rule, the Dhital court first described the rule: “[i]n general, there is no recovery in tort for negligently inflicted ‘purely economic losses,’ meaning financial harm unaccompanied by physical or property damage.” (Sheen v. Wells Fargo Bank, N.A. (2022) 12 Cal.5th 905, 922; Dhital, supra, 84 Cal.App.5th at p. 837.) “[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...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.” (Robinson Helicopter Co., Inc. v.

Dana Corp. (2004) 34 Cal.4th 979, 988 (Robinson).) Examples of such harm include “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.” (Id. at pp. 989-990.) “[I]n 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. (Ibid.)

The Dhital court noted that Robinson states its point quite plainly: fraudulent inducement is an exception to the economic loss rule. (Dhital at p. 839.) Dhital further observed that although Robinson discussed affirmative misrepresentations from the defendant as opposed to fraudulent concealment it did not state that only cases of affirmative misrepresentation qualify for the exception. (Ibid.) Rather, Robinson’s plain statement was that tort recovery should be allowed where the underlying duty is independent of the contract, and fraudulent inducement by concealment originates independent of the resulting contract because it literally predates formation of the contract. (Id. at pp. 840-841.)

Robinson and Dhital make it clear that the economic loss rule does not bar Plaintiff’s fraudulent inducement claim in the instant case. Plaintiff’s claim is based on conduct independent of the resulting contract and is expressly authorized in Robinson.

Regarding sufficiency of pleading, the Dhital court again first discussed the basic law. Fraudulent inducement is a subset of fraud and so requires the same elements be proven: (1) a misrepresentation, (2) knowledge of falsity, (3) intent to induce reliance, (4) justifiable reliance, and (5) damages. (Dhital, supra, 84 Cal.App.5th at p. 843; Hinesley v. Oakshade Town Center (2005) 135 Cal.App.4th 289, 294-295.) Fraud must always be pleaded with specificity. (Linear Technology Corp. v. Applied Materials, Inc. (2007) 152 Cal.App.4th 115, 132.)

The Dhital plaintiff’s allegations included that Nissan manufactured and distributed more than 500,000 vehicles with faulty transmissions; that Nissan knew or should have known of the faults from premarket testing and consumer complaints to both the National Highway Traffic Safety Administration (“NHTSA”) and to Nissan itself; and that Nissan issued Technical Service Bulletins (“TSBs”) regarding the transmission problem. (Dhital at pp. 833-834.) The Dhital court found all of this sufficient: the allegations stated that Nissan made lemons with transmission defects, Nissan knew of the transmission defects and the hazards they posed, Nissan had exclusive knowledge of the defects but did not disclose them to consumers, Nissan intended to conceal the information, and the plaintiff would not have bought the vehicle in question had the plaintiff known the information. (Id. at p. 844.)

Allegations that the plaintiff bought the car from a Nissan dealership with a Nissan-backed warranty and that dealerships are Nissan’s agents for purposes of sale sufficed to state a buyer-seller relationship between the parties. (Ibid.) The court rebuffed Nissan’s argument that the plaintiff was not specific enough about what it should have disclosed where the plaintiff described the effects of the transmission defect and alleged that Nissan knew of these effects from premarket testing and consumer complaints. (Ibid.)

Plaintiff’s allegations line up with those approved in Dhital. Plaintiff here describes the transmission defect at issue as causing “hesitation on acceleration, loss of power, hard and/or harsh shifts, and/or jerking.” (1AC at ¶ 29.) Plaintiff alleges that FCA knew or should have known of the transmission system defect from pre- and post-production market testing, consumer complaints, and warranty data. (Id. at ¶ 32.) Plaintiff alleges that FCA concealed information about the transmission defect that would have changed Plaintiff’s purchase decision had it been known to Plaintiff. (Id. at ¶¶ 33-34.) Plaintiff states sufficient allegations of a transactional relationship with FCA where Plaintiff alleges acquiring the Vehicle from FCA’s authorized dealer. (Id. at ¶ 9.)

Economic Loss and Negligent Repair. Per the above, the economic loss rule prevents “recovery in tort for negligently inflicted ‘purely economic losses,’ meaning financial harm unaccompanied by physical or property damage.” (Sheen v. Wells Fargo Bank, N.A. (2022) 12 Cal.5th 905, 922; Dhital, supra, 84 Cal.App.5th at p. 837.) Plaintiff’s cause of action for negligent repair states that he took the Vehicle to HANLEES for repair but HANLEES did not properly store, prepare, and/or repair the Vehicle, causing damages. (1AC at ¶¶ 90-94.) The complaint does not state that the cause of action is based on a contract between Plaintiff and HANLEES, nor does it show that Plaintiff suffered only economic loss. The economic loss rule does not bar Plaintiff’s cause of action for negligent repair.

Motion to Strike. Code of Civil Procedure section 436, subdivision (a) permits a court to strike out any irrelevant, false, or improper matter inserted in any pleading, upon a motion or in its discretion. Irrelevant matters are those not essential to the statement of a claim or defense or not pertinent to or supported by an otherwise sufficient claim or defense and demands for relief not supported by the allegations. (Code Civ. Proc. § 431.10.) “The grounds for a motion to strike shall appear on the face of the challenged pleading or from any matter of which the court is required to take judicial notice;” therefore, a motion to strike may not be based upon extrinsic evidence such as a declaration. (Code Civ. Proc. § 437, subd. (a).)

Civil Code section 3294, subdivision (a) provides that punitive damages are only available in actions not arising from breach of contract if is “proven by clear and convincing evidence that the defendant has been guilty of oppression, fraud, or malice.” This means that a plaintiff’s pleading asking for punitive damages must plead facts to support a finding of oppression, fraud, or malice. (Grieves v. Superior Court (1984) 157 Cal.App.3d 159, 166.) “Malice” means conduct intended to cause injury or despicable conduct carried on with a willful and conscious disregard of the rights or safety of others; “oppression” means despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person’s rights; and “fraud” means intentional misrepresentation, deceit, or concealment of a material fact with intention to cause injury. (Civ.

Code § 3294, subd. (c).) “Despicable” conduct refers to that which is “base, vile, or contemptible” and is something more than simple willful and conscious disregard for others. (College Hospital Inc. v. Superior Court (1994) 8 Cal.4th 704, 725.)

Plaintiff has sufficiently stated a cause of action sounding in fraud, which supports imposition of punitive damages. (Civ. Code, § 3294, subd. (a) [fraud as basis for punitive damages].) This is so even where he simultaneously alleges lemon law violations. (Anderson v. Ford Motor Co. (2022) 74 Cal.App.5th 946 [permitting punitive damages on fraudulent inducement claim alongside civil penalties on Song-Beverly claim].)

Conclusion. Defendants’ demurrer is overruled. Defendants’ motion to strike is denied.

VIDA LARA; ET AL. vs. WINNRESIDENTIAL CALIFORNIA L.P.; ET AL.