ELTON EALY v. GENERAL MOTORS, LLC

Case No. CU25-03660

Demurrer to First Amended Complaint

Defendant GENERAL MOTORS, LLC demurs to the cause of action for fraudulent inducement within Plaintiff ELTON EALY’s first amended complaint. Summarized, the complaint alleges that on May 31, 2024 Plaintiff bought a 2024 GMC Sierra 1500 (the “Vehicle”) that came with Defendant’s express warranty. The Vehicle manifested defects notably including a defective engine that causes loss of power, stalling, misfires, and engine failure. Defendant has not obeyed its obligations under the Song-Beverly Consumer Warranty Act (the “lemon law”) and fraudulently concealed its knowledge of the engine defect while effecting the sale of the Vehicle.

Notice of Tentative Ruling. Defendant’s notice of demurrer does not advise the recipient that the Solano County Superior Court uses a tentative ruling system, as is required under Local Rule 3.9, subdivision (d). Defendant is advised to observe local rules going forward.

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.)

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 should 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 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 in the instant complaint are not sufficient. Plaintiff alleges only in general and conclusory terms that Defendant knew or should have known of the engine defect from pre- and post-production market testing, consumer complaints, and warranty data. (First Amended Complaint at ¶¶ 49, 63.) This contrasts with Dhital (and other lemon law actions seen in this court), where the plaintiff alleged that the manufacturer defendant had knowledge of the defect due to specific sources such as technical service bulletins issued that concerned the defect. (Dhital, supra, 84 Cal.App.5th at pp. 833-834.)

Leave to Amend. Leave to amend is proper where identified defects are amenable to cure. (Vaccaro v. Kaiman (1998) 63 Cal.App.4th 761, 768.) The court finds identified defects are amenable to cure.

Conclusion. Defendant’s demurrer is sustained with leave to amend.

BRODERICK v. STAVRINIDES