Ceja v. Volkswagen Group of America, Inc.

A trial court’s determination of a motion for judgment on the pleadings accepts as true the pleading’s factual allegations, and it gives them a liberal construction. (Gerawan Farming, Inc. v. Lyons (2000) 24 Cal.4th 468, 515-516.)

Cause of Action 5 – Negligent Repair

The first amended complaint (“FAC”) sufficiently alleges the ultimate facts to state a cause of action for negligent repair. (See FAC ¶¶ 74-77.) Defendants’ argument that this claim is barred by the economic loss rule is not persuasive. The duty to use ordinary care in performing repairs to a vehicle is independent of Audi South Coast’s contractual duty. The economic loss rule does not apply to bar negligence claims arising from deficient performance of a contract for services.

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(See North American Chemical Co. v. Superior Court (1997) 59 Cal.App.4th 764, 777.)

Cause of Action 6 – Fraudulent Inducement – Concealment

Defendants argue that the Sixth Cause of Action is deficient because (1) it is not pleaded with particularity; (2) the economic loss rule bars tort remedies; and (3) there is no transactional relationship alleged sufficient to constitute a duty to disclose. None of these arguments is persuasive.

“[T]he elements of an action for fraud and deceit based on a concealment are: (1) the defendant must have concealed or suppressed a material fact, (2) the defendant must have been under a duty to disclose the fact to the plaintiff, (3) the defendant must have intentionally concealed or suppressed the fact with the intent to defraud the plaintiff, (4) the plaintiff must have been unaware of the fact and would not have acted as he did if he had known of the concealed or suppressed fact, and (5) as a result of the concealment or suppression of the fact, the plaintiff must have sustained damage.” (Boschma v. Home Loan Center, Inc. (2011) 198 Cal.App.4th 230, 248; Dhital v. Nissan North America (2022) 84 Cal.App.5th 828, 843.)

The “ ‘particularity requirement necessitates pleading facts which show how, when, where, to whom, and by what means the representations were tendered.’ ” (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.) This standard, however, “is harder to apply [] to a case of simple nondisclosure.” (Alfaro v. Community Housing Improvement System & Planning Assn., Inc. (2009) 171 Cal.App.4th 1356, 1384.) “One of the purposes of the specificity requirement is ‘notice to the defendant, to furnish the defendant with certain definite charges which can be intelligently met.’” (Id.) “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,” [citation]; “[e]ven 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 . . . .” ’ ” (Id.)

Specificity

VW argues Plaintiffs’ fraudulent concealment claims rely exclusively on conclusory and vague statements. However, Plaintiff has alleged that, prior to and at the time Plaintiff acquired the vehicle, VW had exclusive knowledge that there

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was a potentially hazardous defect with its 3.0-liter engine and/or its related components, and it obtained such knowledge from pre-release testing data, early consumer complaints about the defect, dealership repair orders, testing conducted in response to complaints, and other internal sources of information possessed exclusively by VW and its agents. (See, e.g., FAC ¶84.)

Despite having this exclusive knowledge, VW concealed the existence of this material defect from Plaintiff at the time of sale, repair, and thereafter. (See, e.g., FAC ¶86.) Plaintiff alleges VW concealed the defects by either refusing to acknowledge the defect’s existence, or by performing superficial and ineffectual repairs. (Id.)

Plaintiffs’ allegations align with the allegations considered, and found sufficiently pleaded, in Dhital, where the plaintiffs alleged Nissan sold vehicles with a defective CVT transmission that caused a potential safety hazard, which it had exclusive knowledge of, yet which it intentionally concealed from consumers in order to induce consumers to purchase vehicles equipped with the defective transmission. (Dhital 84 Cal.App.5th at 833-834.)

Economic Loss Rule

“[C]laims for fraudulent inducement by concealment [are] not subject to demurrer on the ground it is barred by the economic loss rule.” (Dhital, supra., 84 Cal.App.5th at 840.)

Examining Robinson Helicopter Co., Inc. v. Dana Corp. (2004) 34 Cal.4th 979, the Dhital court recognized Robinson crafted an exception to the economic loss rule for contracts that were fraudulently induced. (Dhital, supra., 84 Cal.App.5th at 838.)

While “Robinson left undecided whether concealment-based claims are barred by the economic loss rule,” “[w]hat follows from its analysis ... 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.” (Dhital, supra., 85 Cal.App.5th at 840-841; see also County of Santa Clara v. Atlantic Richfield Co. (2006) 137 Cal.App.4th 292, 331 [alleged misrepresentations refuting and concealing evidence that low levels of lead exposure could be hazardous were sufficient to support a fraud cause of action, notwithstanding the economic loss rule]; see also Harris v. Atlantic Richfield Co. (1993) 14 Cal.App.4th 70, 78 [knowing nondisclosure during the contract

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formation, or the performance of the contract, allows the injured party to recover in both contract and tort].)

The purpose of the fraud exception is to protect the public interest of holding those accountable for committing fraud, deterring such conduct, promoting a business climate free from fraud, and not allowing the economic loss rule to serve as a license to cheat or defraud others. (Robinson Helicopter, supra., 34 Cal.4th at 992; see Munoz v. Patel (2022) 81 Cal.App.5th 761, 779 [in pursuing a valid fraud action, a plaintiff advances the public interest in punishing intentional misrepresentations and in deterring such misrepresentations in the future].)

Defendants’ reliance on Rattagan v. Uber Technologies, Inc. (2024) 17 Cal.5th 1, is misplaced, as Rattagan expressly disclaims that the opinion addresses the issues of “claims of fraudulent inducement by concealment claims as well as the potential interplay with remedies available under the Song- Beverly Consumer Warranty Act” (See Id. at 13, fn. 12.)

Transactional Relationship

VW argues there is no duty to disclose because no direct transaction between it and Plaintiff is alleged.

Plaintiff, however, alleges that she entered into a warranty contract with VW. (See, e.g., FAC ¶¶ 7-8; See also Dhital v. Nissan North America, Inc. (2022) 84 Cal.App.5th 828, 844 [rejecting Nissan’s similar arguments because plaintiffs alleged the manufacturer backed the car with an express warranty]; see Kiluk v. Mercedes-Benz USA, LLC (2019) 43 Cal.App.5th 334, 337, 343 [manufacturer stepped into the role of the distributor and retail seller by issuing an express warranty]; see Fortune v. Nissan North America, Inc. (N.D. Cal., Feb. 16, 2023, No. 22-CV-05247-KAW) 2023 WL 2065043, at *5 [transactional relationship where manufacturer issued a warranty].)

In any event, “it is clear in California that an action for deceit does not require contractual privity.” (Shapiro v. Sutherland (1998) 64 Cal.App.4th 1534, 1549.) This is true because “a defendant cannot escape liability if he or she makes a representation to one person while intending or having reason to expect that it will be repeated to and acted upon by the plaintiff.” (Id. at 1548.)

Here, Plaintiff alleges VW was well-aware of a serious, and potentially hazardous, underlying defect with its 3.0-liter engine and/or its related components, yet it actively concealed

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this defect from the public. (FAC ¶¶80-86.) In fact, Plaintiff alleges that VW refused to acknowledge the existence of the defect, and the existence of the defect was never disclosed to consumers such as Plaintiff prior to acquisition of vehicles equipped with the defective engine. (Id.)

Plaintiff shall provide notice of this ruling.

60. Donovan v. Defendant Jorge Burtin’s Application for Determination of Taft Good Faith Settlement is GRANTED. Settling Defendant has adequately demonstrated that the settlement amount is within 2021- “the ballpark” of their potential proportionate share of liability 01225158 for Plaintiff’s total damages. (See Tech-Bilt, Inc. v. Woodward- Clyde & Assoc. (1985) 38 Cal. 3d 488, 499.)

The Court has reviewed the evidence submitted in support of the Motion, and has assessed this evidence in light of the factors identified in Tech-Bilt. The Court finds there is substantial evidence supporting the good faith basis of this settlement.

Furthermore, the motion is unopposed, and no other party has demonstrated any basis to question the genuineness of this settlement.

Moving Defendant shall provide notice of this ruling.

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