Ron Blasco Real Estate v. FCA US CA4/2

Filed 3/4/22 Ron Blasco Real Estate v. FCA US CA4/2
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FOURTH APPELLATE DISTRICT
DIVISION TWO
RON BLASCO REAL ESTATE, INC. et
al.,
E072999
Plaintiffs and Appellants,
(Super.Ct.No. CIVDS1609641)
v.
OPINION
FCA US, LLC,
Defendant and Respondent.
APPEAL from the Superior Court of San Bernardino County. Janet M. Frangie,
Judge. Affirmed.
Knight Law Group, Steve B. Mikhov, Radomir R. Kirnos; Hackler Daghighian
Martino & Novak, Sepehr Daghighian, Erik K. Schmitt; Greines, Martin, Stein &
Richland, Cynthia E. Tobisman, and Gary J. Wax for Plaintiffs and Appellants.
Horvitz & Levy, Andrea L. Russi, Lisa Perrochet, Curt Cutting; Hawkins Parnell
& Young, Barry R. Schirm, and Ryan K.C. Marden for Defendant and Respondent.
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Appellants Blasco Real Estate, Inc. and Ron Blasco (Blasco) sued FCA US, LLC
(Chrysler) for fraudulent concealment of problems with the Totally Integrated Power
Module (TIPM) component of the 2011 Dodge Durango that Blasco purchased in June
2011. He also brought a claim under the Song-Beverly Consumer Warranty Act (Song-
Beverly Act), Civil Code section 1790 et seq. (the “lemon law” statute) based on
Chrysler’s refusal to refund the purchase price when it became evident the car had
substantial defects. He sought compensatory damages, punitive damages, and a civil
penalty available under the Song-Beverly Act for willful refusal to refund the purchase
price.
The trial judge, San Bernardino County Superior Court Judge Janet Frangie, ruled
Chrysler had conceded violating the Song-Beverly Act, and a jury found Chrysler liable
for fraudulent concealment and awarded Blasco the purchase price of the vehicle and a
civil penalty of twice the compensatory damage award. However, the trial judge granted
a nonsuit on Blasco’s request for punitive damages on the fraud claim, and that issue did
not go to the jury. The trial judge gave two reasons for her ruling—first, that there was
insufficient evidence of punishable conduct by an officer, director, or managing agent at
Chrysler and second, that awarding both the civil penalty under the Song-Beverly Act
and punitive damages on the fraudulent concealment claim would constitute an improper
double recovery.
Blasco argues he was entitled to recover punitive damages based on Chrysler’s
fraudulent concealment. He identifies evidence that specific Chrysler employees who had
2
knowledge of the defects were officers, directors, or managing agents of the company,
which he argues was sufficient to send the issue of punitive damages to the jury. He also
argues the severity of problems with the TIPM beginning in 2007 warrants the inference
that higher-ups knew of the problem when Blasco purchased his vehicle. He argues both
remedies were available because punitive damages would punish Chrysler for their
fraudulent concealment of the problems with the TIPM component, which induced him to
make the purchase in the first place, while the civil penalty punishes Chrysler’s willful
refusal to buy back the vehicle after it proved to have substantial problems. He contends
the two acts were distinct and subject to separate punishments.
Chrysler defends the ruling on several grounds. First, they argue the trial judge
was correct to conclude no evidence supported finding any of its officers, directors, or
managing agents were responsible for the fraudulent concealment. Second, they attack
the evidence of the underlying tort. They argue they were not obligated to inform
consumers of the chance they would experience problems with the TIPM because they
believed they would be able to address any problems under the vehicle warranties. They
also argue Blasco offered no evidence anyone at Chrysler knew 2011 Durangos would
have TIPM problems because he relied on evidence Chrysler had previously recalled
different vehicle models due to flaws in a different version of the TIPM. They argue these
last two deficiencies in the evidence establish Blasco suffered no prejudice from the trial
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judge ruling because there was no ground for the jury’s fraudulent concealment verdict
1
and therefore no basis for awarding punitive damages.
Finally, Chrysler argues the trial judge was right to conclude punitive damages
would be duplicative of the Song-Beverly Act civil penalty. They argue the Legislature
created a statutory scheme for awarding compensatory damages against a manufacturer
who sells a “lemon” to a consumer and determined willful conduct violating the act gives
rise to a maximum penalty of two times the amount of compensatory damages. They
argue a punitive damages award for failing to notify the car-buying public of a potential
defect would punish Chrysler a second time because the civil penalty already punished
them for failing to repair the defect.
We conclude there was insufficient evidence that any managing agent of Chrysler
was involved in the decision not to disclose problems with the TIPM component and
affirm for that reason.
1 Chrysler do not cross-appeal the jury’s fraudulent concealment verdict, which
ordinarily would prevent them from attacking the evidence supporting the verdict. They
argue Code of Civil Procedure section 906 allows them to do so as a means of
establishing Blasco suffered no prejudice from the punitive damages ruling because he
wasn’t entitled to any relief at all. We don’t reach the issue because we conclude the trial
judge correctly concluded there was insufficient evidence of corporate responsibility.
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I
FACTS
A. Blasco’s 2011 Dodge Durango
In June 2011, appellants Ron Blasco and his business, Blasco Real Estate, Inc.,
purchased a new 2011 Dodge Durango from Jeep Chrysler Dodge of Ontario, California
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for $42,802. Chrysler, who are respondents and manufactured the vehicle, issued a three-
year or 36,000-mile warranty and a five-year or 100,000-mile limited warranty. Blasco
financed the purchase, but had paid the vehicle off in full by the time of trial.
In July 2011, less than a month after Blasco purchased the vehicle, Chrysler issued
a “service bulletin” to its dealers, alerting them to an electrical problem in the 2011
Dodge Durango. A service bulletin functions as an addendum to the service manual. The
bulletin reported the vehicles would sometimes fail to start and the remote keyless entry
system wouldn’t work. It prescribed a flash reprogramming of the wireless ignition node
(WIN) module with new software to correct these problems. Blasco’s expert witness said
he attributed the problems to an “unsteady power supply through the TIPM-7 to the
wireless ignition node.”
The next month, in August 2011, Chrysler issued a second service bulletin about
TIPM failures in 2011 Dodge Durangos and several other vehicle models. The bulletin
reported “[t]he vehicle theft alarm intermittently sounds for no apparent reason,” and
“[m]ultiple attempts are required to start the vehicle before the vehicle will start.”
2Blasco sued the dealer as well as Chrysler, but they were dismissed with
prejudice after a settlement.
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Chrysler recommended dealers “Flash reprogram the TIPM” to resolve the problems.
These service bulletins are not public documents, and Chrysler did not make them
available to purchasers like Blasco. Blasco testified the dealer never told him that
Chrysler had identified problems with the electrical system of the Durango when he
purchased the vehicle.
Over the next two years, Blasco reported and sought service for multiple problems
with his vehicle’s electrical system. The warning lights on the dashboard came on,
including the check engine light. The hazard lights turned on for no reason a few times.
Chrysler was unable to verify that problem, and it stopped occurring. The spare remote
key failed to unlock the doors or start the vehicle. Later, the dashboard lights came on
again and the vehicle wouldn’t go any faster than 45 miles per hour. Though Chrysler
told him these problems were fixed after he presented the vehicle for service, Blasco said
his problems with the vehicle continued.
Later Blasco brought his vehicle back to the dealer to report yet more serious
electrical failures. First, in September 2013, the vehicle wouldn’t start. Blasco would
press the start button, but the “engine would just start to crank and keep cranking and not
start.” Blasco said he took the car in for service after this problem happened two or three
times, but the problem persisted. Chrysler told him they had to order a part and asked him
to bring the car back later. To address the failure to start, the dealer ordered a new TIPM,
but had none in stock for an immediate fix. According to Blasco’s expert mechanic,
Thomas Lepper, Chrysler had a problem with TIPMs being on backorder because “there
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were so many failures, they couldn’t make them fast enough.” He said, “I saw a lot of the
Chrysler work on that, even to the point of them going through and seeing if they could
refurbish them. So they just had to do something, and the external relay was the patch.”
A month later, Blasco took the car back in because it was exhibiting a new
problem. He would start the car, “step on the gas and it felt like it wanted to go and then
it would just stop. The entire engine would shut off.” This problem would occur while he
was driving the car. “It would be like at a stop sign, you step on the gas and it starts to go
and then it just stops.” The car continued to exhibit the crank and no start problem, which
he said happened about 50 times over the years he owned the vehicle. The dealer again
told Blasco they would have to order the part to complete a repair. No one told Blasco
Chrysler knew customers across the country were reporting the same “intermittent crank”
and “no start” defects or that Chrysler had issued a service bulletin on his vehicle
instructing its dealers how to bypass the TIPM to get the car running.
Following Chrysler’s instructions, the dealer did perform a bypass to move the
fuel pump relay outside the TIPM. As Lepper testified, the fuel pump is a small electric
pump that sends gas from the gas tank over to the engine. The fuel pump receives
electricity from the fuel pump relay, which is a small switch located inside the TIPM.
When the fuel pump relay doesn’t work, the fuel pump won’t receive electricity, and the
engine will die or fail to start. Installing the fuel pump relay bypass involved installing a
new fuel pump relay on the outside of the TIPM unit with the goal of getting electricity
consistently to the fuel pump. Lepper explained Chrysler “identified the problem [was]
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the printed circuit boards inside the circuit board with the TIPM [were] overheating. They
realized that the current draw from that built-in fuel pump relay was causing that. So this
was developed to get that electrical load out of the TIPM and run it through a relay that’s
separate.”
When Blasco picked up the vehicle after the dealer installed the fuel pump relay
bypass, they told him it was fixed. However, Chrysler’s engineers privately called the
bypass procedure a “MacGyver trick” and “a temporary work around to get cars back on
the road.” Blasco’s expert mechanic opined that the workaround was not an adequate
remedy. “I believe the problems with the TIPM and the unsteady power supply that it
provides to the vehicle has affected his safety of the vehicle, has affected his use of the
vehicle and will affect the value of his vehicle. I think the repairs that were done to this
vehicle were both unreasonable in what they were trying to do. They knew it wouldn’t
work. I think they were unreasonable because the amount of times they tried the same
thing.”
Lepper testified that many of the problems with the electrical system traced to the
vehicle’s TIPM. He explained the factory fuel pump relay “overworks the circuit board,
overheats the circuit board, and causes either the engine to stall or not start. That then
compounds into other areas where that overheated circuit board won’t properly flow
electricity and affects windshield wipers, the alarm system, the hazard lights. Anything
that electrically that gets funneled through the TIPM can be affected by the problems
with it overheating.” He said he had seen the problem with the illumination of the brake,
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traction, and ABS lights in other vehicle models with TIPMs. He explained, “what’s
happening here is the fuel pump relay is overheating the circuit board and the power
won’t flow through. When you get an electrical item hot . . . you burn your fingers, but
that resistance sucks up a lot of electricity. There’s not enough power left to supply the
systems. . . . So when that happens it’s not transferring the power out, and these various
systems don’t have enough power to work and will shut down.” He said the same
problem caused the malfunctioning of the hazard lights, which was “a known problem on
TIPM vehicles.” “What’s happening there is we’re getting enough problems in the TIPM.
It’s overheating the [hazard light] relay and is turning on and holding itself on because of
that heat.” He testified the overheating also caused the problems Blasco experienced with
the remote key fob, the check engine light, the exhaust cam phasers, dashboard light
illumination, and limited acceleration. He said the failure to start was a problem which
went “[r]ight to the heart of TIPM problems,” which is why Chrysler responded by
ordering him a new TIPM, though the part was out of stock.
Blasco continued to have problems with the vehicle after the dealer performed the
fuel pump relay bypass. Though they told him at the time that the problem was fixed, the
car continued to have trouble starting and continued to stall while being driven. He also
later reported problems with the key fob not working, the check engine light coming on,
the dashboard lights coming on. Blasco stopped driving the vehicle because the electrical
defects were never resolved, and he was concerned stalling could cause the car to crash.
He said at the time of trial the car was no longer in working condition.
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B. Blasco’s Attempt to Get a Refund
Concerned with the continued problems, with ensuring he had reliable
transportation, and with his safety, Blasco decided to call Chrysler’s customer service
number to report his vehicle was a lemon and request a refund. The agent who took his
call advised Blasco she would look into the matter and put him on hold. Blasco waited
for about 30 minutes, but he was disconnected and no one called him back.
The next day, Blasco’s wife called the customer service line. She told the agent
they had spoken to an attorney who recommended calling Chrysler again to resolve the
issue before hiring counsel and filing a lawsuit. She reported the vehicle had “a lot of
problems” and asked Chrysler to refund them the purchase price. Blasco got on the phone
because the car was in his name. Chrysler’s agent told him the vehicle didn’t qualify for a
buyback and also said they couldn’t talk to him any more if he was working with an
attorney.
Blasco then hired an attorney. He later learned there was a class action suit against
Chrysler, and he was a putative class member. In October 2015, he opted out of the class
because he didn’t think a settlement would make him whole. He said he had been a
member in other class actions and received minimal compensation. Blasco said he
understood Chrysler ultimately offered to settle with the class by offering an extended
warranty on the fuel pump relay and a lifetime warranty on the TIPM. He said he found
that inadequate because he had already purchased a lifetime warranty on the vehicle.
10
On March 4, 2016, five months after he had opted out, Chrysler sent Blasco a
letter offering to repurchase his vehicle for “the actual price paid or payable for that
vehicle, including any incidental and consequential expenses incurred,” in compliance
with the Song-Beverly Act. Blasco said he felt the offer was too little too late. By that
point, he had hired an attorney and learned his car model had multiple electrical problems
going back several years and that Chrysler knew about them. He said he felt cheated
because, “if they knew that they had all those problems, they should have either fixed
them or replaced the parts or do whatever they had to do to get the car so that it would
keep running.” Rather than accept their offer, Blasco filed this lawsuit in June 2016.
Blasco still has the Durango, but it doesn’t run, and he bought another vehicle to
replace it.
C. Chrysler’s Knowledge of the Problems with TIPMs
A TIPM—which includes a circuit board—is essentially “a smart fuse box,” or
power “hub” for the vehicle. A TIPM processes power from a vehicle’s alternator and
battery and distributes it to the components that use power to function, like windshield
wipers, headlights, the fuel pump, and the ignition. A TIPM isn’t supposed to wear out or
be replaced; it’s a component meant to work for the life of the vehicle.
According to Blasco’s expert mechanic, Thomas Lepper, problems with
Chrysler’s TIPMs have resulted in the malfunction of numerous electrical components of
their vehicles. He testified the biggest problem is with the fuel pump relay. “It overworks
the circuit board, overheats the circuit board, and causes either the engine to stall or not
11
start. That then compounds into other areas where that overheated circuit board won’t
properly flow electricity and affects windshield wipers, the alarm system, the hazard
lights. Anything that electrically gets funneled through the TIPM can be affected by the
problems with it overheating.” As we’ve discussed, he testified that several of the
problems Blasco had with the Durango were caused by the TIPM. He also testified these
were problems Chrysler was having with earlier models of vehicles with TIPM modules.
Before Blasco purchased his vehicle, Chrysler employees knew about problems
with its TIPM components and electrical systems in several other models of vehicles.
Lepper said Chrysler first started noticing problems with the TIPM component in 2007,
and in July 2007 there was a safety recall of the version of the TIPM installed in 2007
Wranglers and 2007 Nitros. Though the TIPM in use at that time had a slightly different
model number, Lepper testified it was substantially the same. The problems included the
same failure to start and stalling problems Blasco experienced with his later model
Durango. According to the expert mechanic, the problems were the same, and the
evidence showed Chrysler knew about the problems that would come to affect Blasco’s
vehicle. “[I]t shows the problem with the TIPM, the known problems with the TIPM, the
attempts to patch the TIPM, all these things occurred before Mr. Blasco even bought his
truck.”
Lepper said he had reviewed internal Chrysler documents related to the problems
as well as documents related to a government investigation. He said Chrysler tried
different fixes over the years. When the recall issued, “they were trying to control the
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electrical load through the TIPM, such that it wouldn’t let the engine stall” by installing
“a new flash program to control that power flow.” However, Chrysler vehicles were still
stalling due to problems with power flow through the TIPM in 2009.
In 2009, a group of Chrysler engineers discussed the problem by e-mail. One
engineer, Rick Peck, wrote, “How about you fix the TIPM since it is the root cause of the
failures?” Nazmi Sabi responded, “Yes there is a fix for the TIPM in 2011. But what I am
talking about is a field fix and the remaining of 2010 [model year].” Peck suggested
Sabi’s group “fix the TIPM for 2010 as a V2 rather [than] have me do it. Pull your
changes into 2010 and fix the issue.” Nazmi responded that kind of fix couldn’t be
accomplished for 2010 models, and reiterated that Peck’s group might be the right one to
design the fix because of their “expertise about relays and wire harnesses,” but
acknowledged “If we have to go to service for a field fix we will do so.”
According to Blasco’s expert, Chrysler hadn’t found the root cause of the
problems by the time Blasco bought his vehicle, and they were still trying to find a way
to stop the malfunctions. First, they issued a service bulletin in July 2011, one month
after Blasco purchased his vehicle, trying to address the problems with starting the engine
and the using key fob. That bulletin prescribed reprogramming the wireless ignition node.
Then in August 2011, they issued a second service bulletin recommending Chrysler
mechanics perform a fuel pump relay bypass, which involved taking “the fuel pump relay
module out, doubl[ing] its size, . . . and set[ting] it out where it will be cooler and not
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affect the circuit board of the TIPM.” As we discussed above, the dealer performed this
bypass fix on Blasco’s car in late 2013.
By 2013, Chrysler engineers had come to believe heat generated in the TIPM was
causing a protective conformal coating made of silicone to melt and interfere with other
relays in the TIPM module. On August 21, 2013, a Chrysler engineer named Dennis
Gauthier e-mailed a group of Chrysler engineers and engineers from the company who
manufactured the TIPM module to explain the source of the problem. “According to
different studies, silicone in a gaseous state can cover the contacts in a relay, increase the
resistance, and subsequently reduce the life of the relay. This is why [the relay
manufacturer] states that the use of silicone is highly prohibited.” Lepper explained
Gauthier was telling them “the problem’s a lot greater than they think. He’s giving them a
quick overview of the silicone and how it off-gases it into silane and contaminating the
relays.” “We saw the physical effects of that discussion. We saw how that melted silicone
was in there contaminating that relay. It looked like a fried egg or a bunch of short
circuits within the contact points. And we saw the effect of heat damaging those contact
points.”
By mid to late 2013, Chrysler had also figured out the fuel pump relay was the
component generating the heat which was melting the conformal coating and damaging
other relays. In May 2013, they began recommending their dealers perform the fuel pump
relay bypass to remove the source of heat from inside the TIPM. On September 27, 2013,
Christopher Pare, whose e-mail signature identifies him as a manager of body electronics,
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wrote to other Chrysler engineers, “There is an issue with TIPM failure on 2011
[Cherokees and Durangos] with the fuel pump relay. It was found that [the TIPM
manufacturer] was conformal coating the boards with a product containing silicon. The
higher current draw for the fuel pump is shown to cause failure over time. This same
conformal coating was used through March 2013. Service is running short on TIPMs, and
several techs are coming up with alternate, unapproved work around methods.” Lepper
said these documents “strengthen my opinion and backed it up. We see that they are
finding problems with the [con]formal coating. We find that there are problems, they
acknowledge the problems with the TIPM, and the fuel pump power is the central issue at
this time.”
Though the dealer performed the fuel pump relay bypass on Blasco’s vehicle, it
continued to have the same problems, even up to the time the parties’ expert mechanics
inspected the vehicle in preparation for this litigation.
Blasco put on an expert witness, Dr. Barbara Luna, to testify as an expert fraud
examiner. She spoke about Chrysler’s problems with the TIPM units and focused on the
extent to which officers, directors, and managing agents of Chrysler were aware of the
TIPM problems. She also testified about damages, including how a punitive damages
award would relate to the net worth of Chrysler.
Dr. Luna identified Alan Amici as a high level management employee who was
aware of problems with the TIPM. She said she had reviewed e-mails produced by
Chrysler to determine whether upper management in the company understood the
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problems. She said, “[T]he corrective action process issue detail reports shows as early as
2007 a fellow by the name of Alan Amici . . . knew about a number of TIPM problems
and was on the team as [Chrysler] was testing TIPM issues.” She said, based on her
review of Chrysler’s e-mails, Amici knew about the TIPM problems beginning in 2007
and continuing through 2011. She concluded that “prior to [Blasco’s] purchase of the
Durango I would say that what I have information is this fellow Alan Amici” was aware
of the problems with the TIPM.
Dr. Luna described how she reached her conclusions about the positions and
responsibility of Chrysler’s employees. She said she concluded Amici was a “high up
management person” by “looking at his position we looked at the e-mails to see what the
positions were.” She described her team’s process of reviewing Chrysler’s documents to
identify potential management personnel and explained that she supplemented that work
with searches on the business social media site LinkedIn. “Where we didn’t see the
positions, we then looked up people on LinkedIn to try to get their positions. And he did
have a LinkedIn page as well, and it showed that he, at the time of the—when he first
started in 2007, he was a director. And by 2009, I believe, he was a vice president.” In
Amici’s case, she didn’t identify in her testimony specific documents that led her to
conclude Amici had a management position or was aware of the problems with the
TIPM. In his briefs in this court, Blasco relies on Dr. Luna’s testimony rather than cite
documents identifying Amici’s knowledge or role.
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In the end, Dr. Luna concluded Amici’s position of director put him in an “upper
management” position at Chrysler. She said Amici was “responsible for a group that was
investigating the TIPM and electrical issues.” He “supervis[ed] a number of the
engineering folks in the electrical area” and was copied on “corrective action” reports
along with other senior engineers. However, on cross-examination, she acknowledged
she didn’t know how many people he supervised. She said he was on “a whole big string
of people investigating the TIPM from, you could see on the various corrective action
issue process detail reports. I assumed he was supervising those people.” Asked what
Amici’s job duties were in 2011, she responded, “He would be supervising a number of
the engineering folks in the electrical area. I think I could get out the page from LinkedIn
if you want me to.” She said it was “[p]robably true” that Amici was not an officer of
Chrysler and that he was not a member of its board of directors. She refused to say
whether he was a “managing agent,” calling that a legal conclusion. She also
acknowledged she didn’t know who Amici reported to, by name or title.
The only other “high level” Chrysler employee Dr. Luna identified was Matt
Liddane, who she identified as the vice president of vehicle concepts integration,
functional sciences and regulatory affairs/safety development and vice president of
assistance and components. She said that was his position as of November 20, 2013 but
acknowledged she didn’t know his title or role at the time Blasco purchased his vehicle.
The Chrysler document which mentions Liddane was an e-mail exchange from
November 20, 2013 in which a product investigator wrote to an engineer that he had been
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asked to put the TIPM malfunction issue “on the radar screen with Matt Liddane (in a
regular review we have with him) tomorrow. Since the awareness of this issue is going to
my VP in my organization . . . I just wanted to make sure your upper management chain
is aware that there is an issue being investigated.” The engineer responded that his team
“will be meeting on Friday with Bustamante and root cause team to review status.” He
copied David Bustamante on the e-mail and asked him to “see below escalation to
Liddane tomorrow.” We know nothing else about Liddane’s knowledge of the TIPM
issue or his role at Chrysler either from Dr. Luna or the documents included in the record
on appeal.
D. Trial Court Rulings and Verdict
Blasco and Blasco Real Estate, Inc., sued Chrysler, alleging Chrysler breached an
express warranty under the Song-Beverly Act (Civ. Code, § 1793.2, subd. (d)) by failing
to promptly repurchase or replace the vehicle after a reasonable number of repair
opportunities. Blasco also sued for fraudulent concealment, alleging Chrysler knowingly
concealed the TIPM modules in their vehicles were defective when he purchased his
Durango. Blasco sought compensatory damages, a civil penalty equal to twice his actual
damages, and punitive damages.
In their opening statement, Chrysler’s attorney stated Chrysler remained willing to
repurchase Blasco’s vehicle. “FCA is here to stand behind its offer to repurchase the
Plaintiffs’ vehicle that was made in March of 2016.” Blasco moved for a partial directed
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verdict on his Song-Beverly Act claim based on what he construed as Chrysler’s
admission it was liable for failing to promptly repurchase his vehicle.
The trial judge granted Blasco’s motion. She held the admission was a “strategic
decision” binding on Chrysler. She directed a partial verdict in favor of Blasco and later
instructed the jury that all six elements of the Song-Beverly Act claim were met,
including that Chrysler failed to “promptly replace or buy back the vehicle.” Chrysler has
not appealed that ruling.
As a result, the only issues left for the jury to decide were (1) the amount of
compensatory damages, (2) whether Chrysler’s conduct was willful, justifying a civil
penalty under the Song-Beverly Act, (3) whether Chrysler fraudulently concealed the
problems with his vehicle’s TIPM, (4) whether the evidence of fraud was sufficient to
support an award of punitive damages, and if so, (5) the appropriate amount of punitive
damages.
However, the trial judge took the punitive damages issues away from the jury. At
the close of Blasco’s evidence, Chrysler moved for a nonsuit on punitive damages. They
argued there was insufficient evidence that a managing agent authorized or ratified
Chrysler’s fraudulent conduct. The trial judge granted Chrysler’s motion. She held there
was sufficient evidence to send the fraudulent concealment claim to the jury but ruled the
evidence that Chrysler had acted with callous indifference and through the conduct of a
managing agent did not meet the clear and convincing standard required to impose
punitive damages.
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The jury found Chrysler liable for fraudulent concealment. They also found
Chrysler had willfully failed to repurchase or replace Blasco’s vehicle. The jury awarded
Blasco $39,030 in compensatory damages and $78,060 in civil penalties under the Song-
Beverly Act. The court entered judgment against Chrysler on the jury’s verdict in the
amount of $121,107.
Blasco moved for a new trial based on the trial judge’s punitive damages ruling.
The trial judge denied the motion, holding Blasco had not submitted sufficient evidence
to reach the jury on whether Chrysler’s managing agents had knowledge of the TIPM
problems and, in the alternative, that awarding punitive damages would improperly
duplicate Blasco’s recovery of civil penalties under the Song-Beverly Act.
Blasco filed a timely notice of appeal.
II
ANALYSIS
A. Multiple Punishments
Blasco challenges the trial judge’s conclusion that allowing punitive damages on
top of the Song-Beverly Act civil penalties would constitute an improper double
recovery. Chrysler defends the order granting a nonsuit on that basis.
The principle against double recovery is sound, but it isn’t implicated by this case.
“California courts have held that if a defendant is liable for a statutory penalty or multiple
damages under a statute, the award is punitive in nature, and the award penalizes
essentially the same conduct as an award of punitive damages. The plaintiff cannot
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recover punitive damages in addition to that recovery but must elect its remedy.”
(Fassberg Construction Co. v. Housing Authority of City of Los Angeles (2007) 152
Cal.App.4th 720, 759-760, italics added.) Here, the punitive damages and the civil
penalties punish different conduct. Specifically, Blasco alleged and proved Chrysler
engaged in fraudulent concealment to induce him to purchase their vehicle, and then later
acted willfully in violating his statutory rights to receive compensation under the lemon
law statute. “It’s not a double recovery to obtain damages from two separate allegations
of misconduct.” (Cieslikowski v. Fiat Chrysler (C.D.Cal., Dec. 21, 2020) 2020 WL
7868128, *3.)
We therefore conclude the trial court erred by relying on this principle as a basis
for granting a nonsuit on punitive damages.
B. Involvement of an Officer, Director, or Managing Agent
Blasco argues the trial judge erred by granting a nonsuit on punitive damages
because there was sufficient evidence to allow the jury to find Chrysler’s managing
agents knew the company was fraudulently concealing material information about the
defects in the Durango Blasco purchased in June 2011, as well as that managing agents
authorized or ratified the concealment.
The Legislature authorized the award of punitive damages (exemplary damages) in
Civil Code section 3294. “In an action for the breach of an obligation not arising from
contract, where it is proven by clear and convincing evidence that the defendant has been
guilty of oppression, fraud, or malice, the plaintiff, in addition to the actual damages, may
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recover damages for the sake of example and by way of punishing the defendant.” (Civ.
Code, § 3294, subd. (a).) The Legislature defined “malice” as “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,”
“oppression” as “despicable conduct that subjects a person to cruel and unjust hardship in
conscious disregard of that person’s rights,” and “fraud” as “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.” (Civ. Code, § 3294, subd. (c)(1)-(3).)
For the acts of an agent to expose an employer to punitive damages, the plaintiff
must prove the defendant “had advance knowledge of the unfitness of the employee and
employed him or her with a conscious disregard of the rights or safety of others or
authorized or ratified the wrongful conduct for which the damages are awarded or was
personally guilty of oppression, fraud or malice.” (Civ. Code, § 3294, subd. (b).) For a
corporate employer to be liable for the acts of an agent, “the advance knowledge and
conscious disregard, authorization, ratification or act of oppression, fraud, or malice must
be on the part of an officer, director, or managing agent of the corporation.” (Civ. Code,
§ 3294, subd. (b).)
In specifying that the actor must be an officer, director, or managing agent, the
Legislature sought to “avoid imposing punitive damages on employers who were merely
negligent or reckless and to distinguish ordinary respondeat superior liability from
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corporate liability for punitive damages.” (White v. Ultramar, Inc. (1999) 21 Cal.4th 563,
572 (White).) The California Supreme Court interpreted these provisions as “limit[ing]
corporate punitive damage liability to those employees who exercise substantial
independent authority and judgment over decisions that ultimately determine corporate
policy.” (Id. at p. 573.) However, the “principal liability for punitive damages [is] not
depend[ent] on [the] employees’ managerial level.” (Id. at pp. 576-577.) Only
“supervisors who have broad discretionary powers and exercise substantial discretionary
authority in the corporation could be managing agents.” (Id. at p. 577.) As a result, “to
demonstrate that an employee is a true managing agent under section 3294, subdivision
(b), a plaintiff seeking punitive damages would have to show that the employee exercised
substantial discretionary authority over significant aspects of a corporation’s business.”
(Ibid., italics added.)
As we’ve discussed, the trial judge determined the evidence was not sufficient to
tie Chrysler’s fraudulent concealment to a managing agent of the company. We review an
order granting a nonsuit de novo, standing in the shoes of the trial judge to determine
whether substantial evidence supported sending the issue to the jury. (Saunders v. Taylor
(1996) 42 Cal.App.4th 1538, 1541.) “‘A defendant is entitled to a nonsuit if the trial court
determines that, as a matter of law, the evidence presented by plaintiff is insufficient to
permit a jury to find in his favor.’ [Citation.] In determining the sufficiency of the
evidence, the trial court must not weigh the evidence or consider the credibility of the
witnesses. Instead, it must interpret all of the evidence most favorably to the plaintiff’s
23
case and most strongly against the defendant, and must resolve all presumptions,
inferences, conflicts, and doubts in favor of the plaintiff. If the plaintiff’s claim is not
supported by substantial evidence, then the defendant is entitled to a judgment as a matter
of law, justifying the nonsuit.’” (Mejia v. Community Hospital of San Bernardino (2002)
99 Cal.App.4th 1448, 1458.) To convince us the evidence was sufficient to send the issue
of punitive damages to the jury in this case, Blasco leans heavily on the testimony of Dr.
Luna, his expert fraud examiner, to show Chrysler agents, Alan Amici and Matt Liddane,
were managing agents who were involved in concealing defects in the TIPM units.
We agree with the trial judge that the evidence pertaining to Amici’s role at
Chrysler was not sufficient to establish he was a managing agent. Dr. Luna testified that
documents produced by Chrysler showed Amici was aware of problems with the TIPM
unit in 2007 and concluded that “prior to [Blasco’s] purchase of the Durango I would say
that what I have information is this fellow Alan Amici” was aware of the problems with
the TIPM. However, her evidence that Amici was a managing agent was lacking. She
refused to say he was a managing agent on the ground that was a legal conclusion. (Cf.
White, supra, 21 Cal.4th at p. 567 [the scope of a corporate employee’s discretion and
authority under the managing agent test is a question of fact].) And though she did
conclude he was a “high up management person” by looking at his position as listed in e-
mails and on LinkedIn, she gathered no real information about his actual job duties. Dr.
Luna didn’t identify in her testimony any specific documents that led her to conclude
Amici had substantial discretionary authority.
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Blasco emphasizes Dr. Luna testified Amici was “responsible for a group that was
investigating the TIPM and electrical issues” and “supervis[ed] a number of the
engineering folks in the electrical area” and was copied on “corrective action” reports
along with other senior engineers. However, she acknowledged she didn’t know how
many people he supervised, saying only that he was on “a whole big string of people
investigating the TIPM” and had merely “assume[d] he was supervising those people.”
(Italics added.) She also concluded that in 2011 he was “supervising a number of the
engineering folks in the electrical area,” but offered no specific information about his
responsibilities, and instead offered to read from a printout from Amici’s LinkedIn
profile (in the end she didn’t). She also acknowledged Amici probably wasn’t an officer
of Chrysler, wasn’t a member of its board of directors, and she admitted she didn’t know
who Amici reported to, by name or title. We conclude, as the trial judge did, that her
testimony was insufficient to show Amici exercised any discretionary authority over
significant aspects of Chrysler’s business, much less substantial discretion over aspects of
the business related specifically to addressing the problems they were having with TIPM
modules. (White, supra, 21 Cal.4th at p. 577.)
“The determination whether employees act in a managerial capacity does not
hinge solely on their level or position in the corporate hierarchy. [Citations.] ‘Rather, the
critical inquiry is the degree of discretion the employees possess in making decisions that
will ultimately determine corporate policy.’” (Hobbs v. Bateman Eichler, Hill Richards,
Inc. (1985) 164 Cal.App.3d 174, 193.) Dr. Luna’s testimony focused almost exclusively
25
on Amici’s titles when he worked at Chrysler, and too little on his degree of discretion in
making corporate decisions. Dr. Luna said he was a “director” in 2007 and promoted to
vice president in 2009, but we know nothing of the scope of his responsibilities, we have
no indication that he exercised discretion in carrying out his job, and even the evidence
that he was involved in the project of addressing problems with the TIPM units is
underwhelming. We know only that he was copied on some e-mails and reports. Even
then, we have only Dr. Luna’s assurances, as the e-mails and reports in the appellate
record are not linked to him. The bottom line is Blasco did not provide sufficient
information about Amici to justify concluding he exercised substantial discretion in
setting Chrysler’s response to the TIPM issue and therefore warrant imposing punitive
damages on Chrysler.
Though Dr. Luna also emphasized the role of Matt Liddane, who as a vice
president was informed of the ongoing TIPM problem in 2013, Dr. Luna’s testimony
about his role in the corporation’s decision-making was even less informative. One
document mentions the need to inform Liddane about the malfunction “to make sure your
upper management chain is aware that there is an issue being investigated.” However,
this occurred in 2103 and Dr. Luna provided no other information about Liddane’s
knowledge of the TIPM issue or his role at Chrysler. Such limited evidence is not
sufficient to tie a managing agent to the decision to keep the TIPM problems from the
public at the time Blasco purchased the vehicle or to show someone responsible at
Chrysler authorized or ratified the decision.
26
The contrast with the cases Blasco relies on is stark. In White, the corporate
employee, Salla, “[a]s the zone manager for Ultramar, . . . was responsible for managing
eight stores, including two stores in the San Diego area, and at least sixty-five employees.
The individual store managers reported to her, and Salla reported to department heads in
the corporation’s retail management department.” (White, supra, 21 Cal.4th at p. 577.)
Moreover, Salla’s superiors testified “they delegated most, if not all, of the responsibility
for running these stores to her.” (Ibid.) In Egan v. Mutual of Omaha Ins. Co. (1979) 24
Cal.3d 809, the corporate employees were insurance claims department managers. One of
them testified “he was manager of the Los Angeles claims department for Mutual, and in
that capacity had ultimate supervisory and decisional authority regarding the disposition
of all claims, like that of plaintiff, processed through the Los Angeles office.” (Id. at
p. 823.) No one in this case offered comparable testimony.
The difference is even more marked in Mazik v. Geico General Ins. Co. (2019) 35
Cal.App.5th 455. There, the corporate employee was a regional liability administrator for
Geico with responsibility for the settlement of insurance claims in Orange County, Los
Angeles, San Bernardino, and Alaska. (Id. at p. 465.) The employee testified about his
own role and said he had approval authority over 100 claims adjusters for claims up to
$50,000, which required him to have about 18 to 20 meetings a day with claims adjusters
seeking his approval or direction for handling claims. (Id. at pp. 465-466.) Moreover, he
testified it was “an important part of his job . . . to establish settlement standards within
27
his region” for the purpose of maintaining consistency in settlement valuations. (Id. at
p. 466.)
The other cases Blasco cites are similar. In Hobbs v. Bateman Eichler, Hill
Richards, Inc., supra, 164 Cal.App.3d at p. 193, the corporate agent “testified that he was
the office manager and he signed himself as such on the Customer Option Agreement and
Information Form. . . . [He] stated that he supervised the trades being made for clients to
be certain no advantage was taken of them, that he supervised all 8,000 accounts in the
office, that semi-annually he checked to see if suitable securities were being purchased
for clients, that he was responsible for making sure the accounts were not being
‘churned,’ and that in general he was in charge of compliance in the Woodland Hills
office.” He also testified that he had authorized the specific purchases challenged in the
lawsuit after the fact despite knowing the customer hadn’t agreed to that kind of purchase
and said he would approve them again if presented with the same situation in the future.
(Id. at pp. 193-194.) In Major v. Western Home Ins. Co. (2009) 169 Cal.App.4th 1197,
1220-1221, the Court of Appeal held there was sufficient evidence an employee of an
insurance company was a managing agent where she managed 35 employees, oversaw
the claims operation, supervised lower ranking supervisors, trained adjusters, supervised
some files, authorized payment of benefits, and “made the decision to refuse to pay the
benefits ultimately awarded by the jury on the basis, later proven untrue, that the receipts
were illegible because they were faxed.” In Powerhouse Motorsports Group, Inc. v.
Yamaha Motor Corp., U.S.A. (2013) 221 Cal.App.4th 867, 886, the Court of Appeal
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upheld the jury’s finding that an employee was a managing agent where “[t]he evidence
established [he] was the ‘Regional Sales Manager for the Western Region’ which
included . . . between 140 and 240 dealerships. He managed a group of ‘district
managers’ and, as he testified, was ‘ultimately responsible for the total well-being of
Yamaha Motor Corporation Dealers.’ Further, evidence shows that [he] was directly
involved in the Powerhouse/MDK sale and was responsible for the decision to terminate
the dealership.” These cases show the kind of evidence required to establish a corporate
employee was acting as a managing agent, and Blasco simply failed to meet that mark.
Blasco relies on Romo v. Ford Motor Co. (2002) 99 Cal.App.4th 1115, 1139,
certiorari granted and judgment vacated by Ford Motor Co. v. Romo (2003) 538 U.S.
1028, to argue we should conclude the evidence showing the information in Chrysler’s
possession together with the evidence about the structure of management decisionmaking
“permits an inference that the information in fact moved upward to a point where
corporate policy was formulated.” However, what was at issue in Romo was the entire
process of “design, production, and marketing of an automobile,” which involved the
entire organization in the acts that constituted malice—specifically, the decisions to
ignore the corporation’s own safety standards for vehicle roof strength, not to test the
roof strength prior to production, and to create the appearance of including the roll bar in
the roof structure. (Romo v. Ford, at pp. 1139-1140, 1144-1145.) When the company
later tested the vehicle, it turned out, unsurprisingly, to be unsafe. (Ibid.) A former Ford
executive testified that “in the ordinary course of business, the responsible executives
29
within the light truck division would have known about the safety engineers’ conclusions
concerning the use of unreinforced fiberglass for passenger compartment panels. These
executives clearly had the power within the corporation to enforce or not enforce as
company policy the safety engineers’ findings.” (Id. at p. 1145.) That executive’s
testimony tied the malicious conduct directly to the corporation in a way that properly put
it on the hook for punitive damages despite the lack of evidence tying the malicious
conduct to a specific actor. In this case, the problem involved the operation of a module
in the vehicle and there was no testimony establishing that decisions about the problem
would make their way up the chain of command before the new vehicles went into
production. We conclude Blasco failed to “present evidence that ‘permits a clear and
convincing inference that within the corporate hierarchy authorized persons acted
despicably in “willful and conscious disregard of the rights or safety of others.”’” (Butte
Fire Cases (2018) 24 Cal.App.5th 1150, 1173, as mod., rehg. den.)
Blasco also argues the jury should have been allowed to infer corporate knowledge
of the ongoing problems with the TIPM based on the “recall in 2007 regarding the same
TIPM model that was later used in Blasco’s vehicle.” While it is true that Blasco’s expert
mechanic testified the TIPM modules in the 2007 vehicles and the 2011 vehicles were
substantially the same, we don’t believe the jury could infer from the mandatory recall in
2007 that managing agents of the corporation knew the same issues persisted in 2011.
The reason is simple. The recall required action on Chrysler’s part to address the problem
they had identified, and the fix involved a software update designed to relieve the
30
problem. Blasco’s expert mechanic testified that Chrysler tried “to control the electrical
load through the TIPM, such that it wouldn’t let the engine stall” by installing “a new
flash program to control that power flow,” but that problems with the TIPM continued to
plague Chrysler vehicles in 2009. Whether the fix simply failed is open to question, but
the fact that Chrysler undertook to repair the problem—absent evidence that they knew
the fix was a sham or that managing agents became aware the problem persisted despite
the repair—cuts the link required to impose punitive damages on the corporation. In other
words, though we agree with Blasco that “a reasonable jury could conclude that
Chrysler’s knowledge of a federal-government-triggered recall would rise to the top of
Chrysler’s corporate hierarchy,” we don’t agree a reasonable jury could conclude from
that fact alone that Chrysler’s knowledge of later problems with the same module had
risen to the top of the hierarchy as well.
Blasco’s reliance on California Shipbuilding Corp. v. Industrial Acc. Commission
(1947) 31 Cal.2d 270, offers no further support. In that case, an employee “was burned
by electricity when the boom of a locomotive crane . . . came in contact with a high-
voltage electric line. (Id. at p. 272.) The employee sought compensatory damages but also
an increase of compensatory damages under the Labor Code section 4553 on the basis
that the maintenance of the unsafe work conditions was willful misconduct on the part of
an executive, managing officer, or general superintendent. (Id. at p. 271.) The Industrial
Accident Commission found the employee’s injury “was proximately caused by the
serious and wilful misconduct of the employer, consisting of a violation of” electrical
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safety orders “which forbids operation of equipment which can be brought within 6 feet
of high-voltage lines.” (Ibid.) The California Supreme Court held the evidence supported
the inference that managing agents were involved. (Id. at p. 274.) However, unlike in this
case, the dangerous conditions were open and obvious. High-voltage wires had hung
throughout the yard over a period of three and a half years. The employer had gradually
taken some of the wires down because employees were running into them too often, and
about a year before the most recent incident, “a similar accident involving the same crane
had happened at about the same place under similar conditions,” an accident that was
“known to the superintendent of transportation and to the foreman who dispatched the
crane to the road.” (Id. at p. 273.) Here Blasco failed to make the evidentiary connection
between the prior problems with the TIPM, which Chrysler management did know about,
and the later problems with the same unit.
We also reject Blasco’s argument that the jury could infer corporate awareness of
the problems before Blasco purchased his vehicle from evidence that Chrysler’s
managing agents were aware of the TIPM problems in 2013 and chose not to disclose
them at that time. Blasco relies on Johnson v. Ford Motor Co. (2005) 35 Cal.4th 1191,
for the proposition that the evidence of later concealment could support the jury’s
inference that managing agents knew about the prior concealment or authorized or
ratified it. However, in Johnson, the California Supreme Court was concerned with the
distinct question whether evidence of conduct toward nonparties could justify a larger
punitive damages award for plaintiff because “‘such evidence may be relevant to the
32
determination of the degree of reprehensibility of the defendant’s conduct.’” (Id. at
pp. 1202-1203.) In other words, if Blasco had established corporate involvement in the
fraudulent concealment before he purchased the vehicle, he could rely on the later
concealment to establish Chrysler had an ongoing corporate policy and practice of
concealing the problem to justify a larger punitive damages award, but he can’t use that
evidence of later concealment to establish corporate involvement in concealing the
problem at the earlier time.
III
DISPOSITION
We affirm the judgment. Appellants shall pay costs on appeal.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
SLOUGH
J.
We concur:
MILLER
Acting P. J.
CODRINGTON
J.
33