Judge: Andrew E. Cooper, Case: 23CHCV00418, Date: 2025-02-26 Tentative Ruling

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Case Number: 23CHCV00418    Hearing Date: February 26, 2025    Dept: F51

LOS ANGELES SUPERIOR COURT

NORTH VALLEY DISTRICT

DEPARTMENT F-51

DEMURRER

Demurrer filed: 11/21/24                                                                              Jury Trial: 6/30/25

MOVING PARTY: Defendant Ford Motor Company (“Defendant”)

RESPONDING PARTY: Plaintiffs Emmanuel Gutierrez-Munoz; Kevin Zaguilan; and Reyna Espino (collectively, “Plaintiffs”)

NOTICE: OK

RELIEF REQUESTED: Defendant demurs to the third cause of action in Plaintiffs’ second amended complaint (“SAC”).

TENTATIVE RULING: The demurrer is overruled. Defendant shall file and serve an answer to Plaintiff’s SAC within 30 days.

BACKGROUND

On 7/14/19, Plaintiffs allegedly purchased a vehicle from dismissed defendant Sunrise Ford of North Hollywood (“Sunrise”), manufactured by Defendant, and now bring this action under the Song-Beverly Consumer Warranty Act (Civil Code § 1790 et seq.), alleging that defects and nonconformities manifested themselves during the warranty period. (SAC ¶¶ 10–11.) Plaintiffs presented the subject vehicle to Defendants for repair on numerous occasions, but Defendants were unable to “unable to repair the vehicle in accordance with the written warranty or the consumer protection and warranty laws of the State of California.” (Id. at ¶¶ 7, 69–78.)

On 2/15/23, Plaintiffs filed their complaint, alleging the following causes of action: (1) Violation of Song-Beverly Act – Breach of Express Warranty (against Defendant); (2) Violation of Song-Beverly Act section 1793.2 (against Defendant); and (3) Negligent Repair (against Sunrise). On 8/11/23, after the Court sustained a demurrer against Plaintiffs’ third cause of action, Plaintiffs filed their first amended complaint (“FAC”), alleging the same causes of action.

On 9/20/24, Plaintiffs filed their SAC, alleging the following causes of action against Defendant: (1) Violation of Song-Beverly Act – Breach of Express Warranty; (2) Violation of Song-Beverly Act section 1793.2; and (3) Fraudulent Inducement – Concealment.

On 11/21/24, Defendant filed the instant demurrer. On 2/11/25, Plaintiffs filed their opposition. On 2/19/25, Defendant filed its reply.

ANALYSIS

As a general matter, a party may respond to a pleading against it by demurrer on the basis of any single or combination of eight enumerated grounds, including that “the pleading does not state facts sufficient to constitute a cause of action.” (Code Civ. Proc., § 430.10, subd. (e).) In a demurrer proceeding, the defects must be apparent on the face of the pleading or via proper judicial notice.¿(Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994.)¿

“A demurrer tests the pleading alone, and not the evidence or facts alleged.” (E-Fab, Inc. v. Accountants, Inc. Servs. (2007) 153 Cal.App.4th 1308, 1315.) As such, the court assumes the truth of the complaint’s properly pleaded or implied factual allegations. (Ibid.) The only issue a demurrer is concerned with is whether the complaint, as it stands, states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747.) 

Here, Defendant¿demurs to Plaintiffs’ third cause of action on the basis that the SAC fails¿to allege facts sufficient to¿state¿a cause of action for fraudulent concealment.

A.    Meet-and-Confer 

Defendant’s counsel declares that on 11/20/24, he met and conferred telephonically with Plaintiffs’ counsel regarding the issues raised in the instant demurrer, but the parties were unable to come to a resolution. (Decl. of Chen Fei Liu ¶ 2.) Therefore, counsel has satisfied the preliminary meet and confer requirements of Code of Civil Procedure section 430.41, subdivision (a).

B.     Fraudulent Inducement – Concealment

Plaintiffs’ third cause of action alleges Fraudulent Inducement – Concealment against Defendant. “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 to the plaintiff; (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 not have acted as he or she did if he or she had known of the concealed or suppressed fact; and (5) plaintiff sustained damage as a result of the concealment or suppression of the fact.” (Hambrick v. Healthcare Partners Medical Group, Inc. (2015) 238 Cal.App.4th 124, 162.)

1.      Particularity

Fairness requires that allegations of fraud be pled “with particularity” so that the court can weed out nonmeritorious actions before a defendant is required to answer. (Small v. Fritz Companies, Inc. (2003) 30 Cal.4th 167, 184.) The particularity requirement typically necessitates pleading facts that “show how, when, where, to whom, and by what means the representations were tendered.” (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.)

In the SAC, Plaintiffs allege that Defendant had actual knowledge of the transmission defect through prior consumer complaints, and issued a number service bulletins acknowledging the subject transmission defect. (SAC ¶¶ 22–46.) Despite this knowledge, “Ford and its agents actively concealed the existence and nature of the 10R80 Transmission Defect from Plaintiff at the time of purchase or lease, repair, and thereafter.” (Id. at ¶ 54.)

Here, Defendant argues that Plaintiffs fail to meet the particularity requirement for pleading a fraud cause of action. Specifically, Defendant argues that “Plaintiffs fail entirely to allege where the omitted information should or could have been revealed by Ford and failed to identify the requisite representative samples of advertisements, offers, or other representations by Ford that consumers relied upon to make their purchase. Additionally, Plaintiffs fail entirely to identify by name who made the alleged omissions when they purchased the Subject Vehicle.” (Dem. 10:6–10.)

“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; even 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.” (Alfaro v. Community Housing Improvement & Planning Assn., Inc. (2009) 171 Cal.App.4th 1356, 1384 [internal quotations and citations omitted].) In Alfaro, the Court of Appeal found that plaintiffs home purchasers in a housing development were sufficiently specific in pleading fraud based on the defendant vendors' alleged nondisclosure of deed restrictions, even though plaintiffs did not allege that the nondisclosure occurred by a certain means or at a certain time or place, because the defendants possessed the records of their dealings with plaintiffs. (Id. at 1385.)

Plaintiffs argue in opposition that the particularity requirement is relaxed when, as here, a plaintiff brings a cause of action for fraudulent concealment as opposed to fraud. (Pl.’s Opp. 7:13–15, citing Alfaro, 171 Cal.App.4th at 1384 [“it is not practical to allege facts showing how, when and by what means something did not happen.”].) Here, as Plaintiffs allege, Defendant has exclusive access to sources not available to consumers, therefore Defendant “has exclusive knowledge that is not reasonably discoverable by Plaintiff and consumers.” (SAC ¶ 49.)

Based on the foregoing allegations, the Court finds that the particularity requirement for pleading a fraud cause of action is relaxed at this stage, and Plaintiffs have sufficiently alleged facts to meet the relaxed standard.

2.      Duty to Disclose

“Fraudulent concealment requires the ‘suppression of a fact, by one who is bound to disclose it.’” (Huy Fong Foods, Inc. v. Underwood Ranches, LP (2021) 66 Cal.App.5th 1112, 1121, quoting Civ. Code § 1710, subd. 3.)  “Although, typically, a duty to disclose arises when a defendant owes a fiduciary duty to a plaintiff …, a duty to disclose may also arise when a defendant possesses or exerts control over material facts not readily available to the plaintiff.” (Jones v. ConocoPhillips Co. (2011) 198 Cal.App.4th 1187, 1199.)

Here, Defendant further argues that Plaintiffs do not allege any direct dealings with Defendant, and therefore has not alleged that Defendant had any requisite duty to disclose. (Dem. 10:12–13.) Defendant argues that no duty to disclose exists where, as here, a plaintiff brings its claims against a manufacturer from which it did not directly obtain the product in question. (Id. at 11:1–2, citing Bigler-Engler v. Breg, Inc. (2017) 7 Cal.App.5th 276, 311.)

In Bigler-Engler, the Court of Appeal found that the defendant manufacturer of a medical device owed the plaintiff patient no duty to disclose where there was insufficient evidence that the parties transacted in any way. (7 Cal.App.5th at 314.) Here, as Defendant argues, “there is no allegation that Plaintiffs purchased the vehicle directly from Ford nor other allegations from which the Court could conclude that a direct transactional relationship exists between Plaintiffs and Ford.” (Dem. 12:2–4.)

Notwithstanding Defendant’s argument, the Court, as previously discussed, finds that Plaintiffs have sufficiently alleged that Defendant, as the manufacturer, had exclusive or superior knowledge about the alleged defect(s). Absent a fiduciary relationship between the parties, Defendant may nevertheless have a duty to disclose based on such control over the material facts underlying the action. (Jones, 198 Cal.App.4th at 1199.)

Based on the foregoing, the Court is satisfied at the pleading stage, that Plaintiffs have alleged facts sufficient to support a finding that Defendant had the requisite duty to disclose, giving rise to a fraudulent concealment cause of action.

3.      Economic Loss Rule

“The economic loss rule provides that, in general, there is no recovery in tort for negligently inflicted ‘purely economic losses,’ meaning financial harm unaccompanied by physical or property damage. … 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 profits—without any claim of personal injury or damages to other property.” (Dhital v. Nissan North America, Inc. (2022) 84 Cal.App.5th 828, 837 review granted Feb. 1, 2023, 523 P.3d 392 [internal quotations and citations omitted].)[1]

Here, Defendants argue that “Plaintiffs’ fraudulent concealment claim amounts to Ford’s alleged non-performance under the contract; it is not distinct from the warranty contract to give rise to an independent duty.” (Dem. 16:17–19; see also Food Safety Net Servs. v. Eco Safe Sys. USA, Inc. (2012) 209 Cal.App.4th 1118, 1130 [“a party alleging fraud or deceit in connection with a contract must establish tortious conduct independent of a breach of the contract itself, that is, violation of some independent duty arising from tort law.”].)

Plaintiffs argue in opposition that “the economic loss rule does not apply to fraudulent inducement because the duty not to commit fraud is independent of the contract and the fraud occurs prior to the contract formation.” (Pl.’s Opp. 3:21–22, citing Erlich v. Menezes (1999) 21 Cal.4th 543, 551–552.) Plaintiffs contend that here, they have sufficiently alleged that Defendant fraudulently induced them into purchasing the subject vehicle by intentionally concealing a material fact concerning the subject defect, a tort independent from Defendant’s alleged breach of the warranty contract.

As the Court finds that Plaintiffs have alleged facts sufficient to constitute a cause of action for Fraudulent Inducement – Concealment, as outlined above, the Court likewise finds that this tort is independent from any alleged breach of the warranty contract itself. Accordingly, the Court finds that the economic loss rule does not apply to bar Plaintiffs’ third cause of action.

Based on the foregoing, the demurrer to Plaintiffs’ third cause of action is overruled.

CONCLUSION

The demurrer is overruled. Defendant shall file and serve an answer to Plaintiff’s SAC within 30 days.