Demurrer; Motion to Strike
refute Defendants’ claims as to the amount collected, Defendants have failed to meet their burden for the Third Cause of Action. The Motion therefore is DENIED.
Counsel for Defendants to give notice of this ruling. 8 Hashimi v. O/C American Honda Motor Co., Inc. 9 Vo v. The unopposed Petition of Kristie Vo to Maintain Elder Abuse/Neglect Strawberry Action in the Name of Hang Vo, Deceased is GRANTED. Pond Healthcare, Ms. Vo has submitted a declaration which satisfies the requirements LLC of Code of Civil Procedure section 377.32. (See generally Declaration of Kristie Vo attached as Exhibit A to motion.)
The motion is thus GRANTED. (Wel. & Inst. Code, § 15657.3(d).)
Counsel for Ms. Vo is to submit a proposed order and is to give notice of this ruling. 10 Rancho O/C Domingo Townhomes Community Assn. v. Azardmard 11 Creditors O/C Adjustment Bureau, Inc. v. Matsunaga Enterprise, Inc. 12 Smith v. Kia A) Demurrer America, Inc. Defendant Kia America, Inc.’s (“Defendant”) Demurrer to plaintiff Wayne D. Smith’s (“Plaintiff”) First Amended Complaint (“FAC”) is OVERRULED.
Defendant demurs to the fifth cause of action (“COA”) for Fraudulent Inducement – Concealment based upon lack of sufficient facts (Civ. Proc. Code § 430.10(e)), uncertainty (Civ. Proc. Code § 430.10(f), and the Economic Loss Rule (“ELR”).
Sufficiency of Facts and Uncertainty
“California case law similarly has viewed fraud by concealment on equal footing with fraud by affirmative misrepresentation. “ ‘Where failure to disclose a material fact is calculated to induce a false belief, the distinction between concealment and affirmative misrepresentation is tenuous. Both are fraudulent.’ ” [Citations.] “[I]ntentional concealment of a material fact is an alternative form of fraud and deceit equivalent to direct affirmative misrepresentation.” ‘ “ (Rattagan, supra, 17 Cal. 5th at 39–40.)
“The required elements for fraudulent concealment are (1) concealment or suppression of a material fact; (2) by a defendant with a duty to disclose the fact; (3) the defendant intended to defraud the plaintiff by intentionally concealing or suppressing the fact; (4) the plaintiff was unaware of the fact and would have acted differently if the concealed or suppressed fact was known; and (5) plaintiff sustained damage as a result of the concealment or suppression of the material fact.” (Rattagan, supra, 17 Cal. 5th at 40.)
“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).” (Id., at 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.] “Such a transaction must necessarily arise from direct dealings between the plaintiff and the defendant; it cannot arise between the defendant and the public at large.” ‘ “ (Id., 40-41.)
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California also requires that fraud must be alleged with specificity. (Rattagan, supra, 17 Cal.5th at 43.) The requirement provides an important safeguard against the risk of tort recovery for fraud in every case involving conduct occurring during a contractual relationship. (Id.) “When affirmative misrepresentation fraud is alleged, “This particularity requirement necessitates pleading facts which ‘show how, when, where, to whom, and by what means the representations were tendered.’ ” (Id.)
California courts apply the same specificity standard to evaluate the factual underpinnings of a fraudulent concealment claim at the pleading stage, even though the focus of inquiry shifts to the unique elements of the claim. (Rattagan, supra, 17 Cal.5th at 43.) “The court must determine whether the plaintiff has alleged a sufficient factual basis for establishing a duty of disclosure on the part of the defendant independent of the parties' contract. If the duty allegedly arose by virtue of the parties' relationship and defendant's exclusive knowledge or access to certain facts, as Rattagan has alleged here, the complaint must also include specific allegations establishing all the required elements, including (1) the content of the omitted facts, (2) defendant's awareness of the materiality of those facts, (3) the inaccessibility of the facts to plaintiff, (4) the general point at which the omitted facts should or could have been revealed, and
(5) justifiable and actual reliance, either through action or forbearance, based on the defendant's omission. “[M]ere conclusionary allegations that the omissions were intentional and for the purpose of defrauding and deceiving plaintiff[] ... are insufficient for the foregoing purposes.” ‘ “ (Id., at 43-44.)
Plaintiff alleged the vehicle experienced engine defects, transmission defects, electrical defects, and others. (FAC ¶ 15.) The defects substantially impaired the use, value, or safety of the vehicle. (FAC ¶ 16.) Plaintiff alleged Defendant was aware of issues with the subject engine through internal data, testing data, consumer complaints, repair orders, testing, and other Defendant exclusive sources, and its related components and concealed them from Plaintiff. (FAC ¶¶ 50-51, 55, 61-63, 74.) The defects can result in loss of power, stalling, engine running rough, engine misfire(s), failure or replacement of the engine. (FAC ¶¶ 51, 52.)
The defects were not reasonably discoverable prior to purchase. (FAC ¶¶ 60, 67.) Defendant continued to conceal the issues with the engine. (FAC ¶¶ 70, 72.) Defendant’s repair strategy was to authorize only minor and ineffective repairs, which benefitted Defendant because consumers would have to pay for repairs after the warranty ended. (FAC ¶ 75.)
Prior to purchasing the vehicle, Plaintiff reviewed Defendant’s marketing and advertising materials, vehicle-specific window sticker, and took the vehicle for a test drive prior to purchase, but at no point was Plaintiff advised the engine was defective. (FAC ¶ 11.) Plaintiff purchased the vehicle from authorized dealership Folsom Lake Kia which conveyed information to Plaintiff using methods Defendant directed such as marketing brochures and floor displays. (FAC ¶¶ 8-11.) If Plaintiff had known of the defects at the time of the sale, Plaintiff would not have purchased the vehicle. (FAC ¶¶ 58, 64.) Plaintiff did not expect Defendant to fail to disclose such defects or to sell/lease vehicles with known safety defects. (FAC ¶¶ 65, 69.)
Plaintiff has pled sufficient facts at this stage to support this COA. (Dhital v. Nissan N. Am., Inc. (2022) 84 Cal. App. 5th 828, 844.) The demurrer is OVERRULED as to sufficiency of facts and uncertainty
Economic Loss Rule
The ELR provides that, in general, there is no recovery in tort for negligently inflicted “purely economic losses,” i.e., meaning financial harm unaccompanied by physical or property damage. (Dhital v. Nissan North America, Inc. (2022) 84 Cal.App.5th 828, 837.) For claims arising from alleged product defects, economic loss consists of damages for inadequate value, costs of repair and replacement of the defective product or consequent loss of profit, without any claim of personal injury or damages to other property. (Id.) “The economic loss rule “has been applied in various contexts. First, it carries force when courts are concerned about imposing ‘ “liability in an indeterminate amount for an indeterminate time to an indeterminate class.” ’ ” [Citation.] [¶] Second, “[i]n another recurring set of circumstances, the rule functions to bar claims in
negligence for pure economic losses in deference to a contract between litigating parties.” [Citations.] The Restatement states this form of the economic loss rule as follows: “[T]here is no liability in tort for economic loss caused by negligence in the performance or negotiation of a contract between the parties.” ‘ “ (Dhital, supra, 84 Cal. App. 5th at 837–38.) The ELR does not limit recovery for intentional tort claims like fraudulent inducement if the plaintiff can plead the elements independent of the contract. (Id., at 839.)
As Plaintiff has pled the elements of fraudulent inducement independent of the contract, the economic loss rule does not apply. The demurrer is OVERRULED regarding the economic loss rule.
B) Motion to Strike
Defendant’s Motion to Strike is DENIED.
A party may move to strike a portion of the complaint, which the court may grant at its discretion to strike out any irrelevant, false, or improper matter inserted in any pleading or any part of any pleading not drawn or filed in conformity with the laws of this state. (Civ. Proc. Code §§ 435(b)(1) and 436.)
Defendant requests the court strike the following from the Prayer in FAC:
- “e. For punitive damages;” (FAC at p. 12:17.)
Defendant’s initial argument is the fraud cause of action of the FAC is barred by the ELR and the fraudulent concealment cause of action is uncertain and does not state sufficient facts. These arguments were not compelling as noted in the demurrer analysis above. Plaintiff has sufficiently pled a cause of action for fraud, which would support a punitive damage claim under Civ. Code § 3294(c). Punitive damages under Civ. Code § 3294 may not be recoverable for a breach of contract, however they are available where a defendant fraudulently induces the plaintiff to enter into a contract. (Walker v. Signal Companies, Inc. (1978) 84 Cal. App. 3d 982, 996; Las Palmas Assocs. v. Las Palmas Ctr. Assocs. (1991) 235 Cal. App. 3d 1220, 1238–39.)
As: 1) Plaintiff has pled a viable cause of action for fraud; 2) the punitive damage request may be based upon that fraud cause of action for acts Defendant took to induce a Plaintiff to purchase/lease the vehicle; and 3) as punitive damages under Civ. Code § 3294 may be recovered for acts taken to fraudulently induce a Plaintiff into the purchase/lease of the vehicle, the punitive damage request is viable.
The motion is DENIED.
Plaintiff to give notice.