Judge Andrew E. Cooper, Case Number: 23CHCV03338, Date: 2024-05-13 Tentative Ruling

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MAY 10, 2024

Los Angeles Superior Court Case # 23CHCV03338

RESPONDING PARTY: Plaintiffs Daryl Haghighi; and Esther Gold (collectively, “Plaintiffs”)

RELIEF REQUESTED: Moving Defendant demurs to the fifth cause of action in Plaintiffs’ complaint.

TENTATIVE RULING: The demurrer is overruled. Moving Defendant to file and serve an answer to Plaintiffs’ complaint within 30 days.

On 12/1/20, Plaintiffs allegedly purchased a vehicle manufactured by Moving 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. (Compl. ¶¶ 9, 14.)

On 10/31/23, Plaintiffs filed their complaint, alleging against Moving Defendant and the nonmoving dealership the following causes of action: (1) Violation of Civil Code Section 1793.2(d); (2) Violation of Civil Code Section 1793.2(b); (3) Violation of Civil Code Section 1793.2(a)(3); (4) Breach of the Implied Warranty of Merchantability; (5) Fraudulent Inducement – Concealment; and (6) Negligent Repair. All causes of action except for the sixth are alleged against Moving Defendant.

On 12/18/23, Moving Defendant filed the instant demurrer. On 4/30/24, Plaintiffs filed their opposition. On 5/6/24, Moving Defendant filed its reply.

Here, Moving Defendant demurs to Plaintiffs’ fifth cause of action on the basis that Plaintiffs fail¿to allege facts sufficient to¿state¿a cause of action for Fraudulent Inducement – Concealment.

Moving Defendant’s counsel declares that he met and conferred telephonically with Plaintiffs’ counsel to discuss the issues raised in the instant demurrer, but the parties were unable to come to a resolution. (Decl. of Chen Fei Liu, ¶ 3.) Therefore, counsel has satisfied the preliminary meet and confer requirements of Code of Civil Procedure section 430.41, subdivision (a).

A defendant must file a demurrer to the complaint within 30 days of service unless extended by stipulation or court order. (Code Civ. Proc. § 430.40 subd. (a).)

Here, Plaintiffs’ complaint was personally served on Moving Defendant’s authorized agent on 11/2/23. The instant demurrer was served on 12/18/23, 46 days after Moving Defendant was served with the complaint. Therefore, as Plaintiffs note, the instant demurrer is untimely. (Pls.’ Opp. 3:14.)

Notwithstanding the foregoing, the Court exercises its discretion to consider the untimely-filed demurrer, particularly where Plaintiffs do not argue that any prejudice would occur by should the Court consider Moving Defendant’s demurrer on its merits. (Code of Civ. Proc. § 473, subd. (a)(1); see also Jackson v. Doe (2011) 192 Cal.App.4th 742, 750 [appellate court determined that trial court properly exercised its discretion in considering untimely demurrer].)

Plaintiffs’ fifth cause of action alleges Fraudulent Inducement – Concealment against FMC. “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.)

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 Complaint, Plaintiffs allege that Moving Defendant had actual knowledge of the transmission defect through prior “pre-production testing, pre-production design failure mode and analysis data, production failure mode and analysis data, early consumer complaints made exclusively to Ford's network of dealers and directly to Ford, aggregate warranty data compiled from Ford's network of dealers, testing conducted by Ford in response to consumer complaints, and repair order and parts data received by Ford from Ford's network of dealers.” (Compl. ¶ 26.) “Plaintiffs are informed, believe, and thereon allege that while Defendant knew about the Transmission Defect, and its safety risks, Defendant nevertheless concealed and failed to disclose the defective nature of the Vehicle and its transmission to Plaintiffs at the time of sale, repair, and thereafter. Had Plaintiffs known that the Subject Vehicle suffered from the Transmission Defect, they would not have purchased the Subject Vehicle.” (Id. at ¶ 62.) “In failing to disclose the defects in the Vehicle's transmission, Defendant FMC has knowingly and intentionally concealed material facts and breached its duty not to do so.” (Id. at ¶ 65.)

Here, Moving Defendant argues that Plaintiffs fail to meet the particularity requirement for pleading a fraud cause of action because “Plaintiffs’ fraudulent inducement claim fails to allege with particularity the defect Ford allegedly concealed.” (Dem. 9:7–8.) Specifically, Moving 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.” (Id. 9:24–27.)

“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.)

Here, Plaintiffs argue in opposition that the particularity requirement is relaxed when, as here, a plaintiff brings a cause of action for fraudulent concealment. (Pls.’ Opp. 4:18–19, citing Quelimane Co. v. Stewart Title Guaranty Co. (1998) 19 Cal.4th 26, 47.) Here, as Plaintiffs allege, Moving Defendant had superior and/or exclusive knowledge of the transmission defect, as it “was in a superior position from various internal sources to know (or should have known) the true state of facts about the material defects contained in vehicle equipped with the defective transmission.” (Compl. ¶ 64b.)

Based on the foregoing, the Court finds that the particularity requirement for pleading a fraud cause of action is relaxed at this stage, and that Plaintiffs have sufficiently alleged facts to meet the relaxed standard. To the extent that Moving Defendant contends that the complaint lacks factual allegations identifying to the purported defect in Plaintiffs’ vehicle, the Court notes that Plaintiffs sufficiently allege that the subject transmission defects detailed in the complaint affect the subject vehicle. (Id. at ¶¶ 25–35.)

“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, Moving Defendant further argues that Plaintiffs do not allege any direct dealings with it, and therefore has not alleged that Moving Defendant had any requisite duty to disclose. (Dem. 10:17.) Moving 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 11:14–17.)

In Bigler-Engler v. Breg, Inc. (2017) 7 Cal.App.5th 276, 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 Moving Defendant argues, “Plaintiffs fail to allege facts establishing any direct transactional relationship between Plaintiffs and Ford at the time of the alleged non-disclosure.” (Dem. 11:13–14.)

Notwithstanding Moving Defendant’s argument, the Court, as previously discussed, finds that Plaintiffs have sufficiently alleged that Moving Defendant, as the manufacturer, had superior and/or exclusive knowledge of the transmission defect, and that despite this knowledge, “Defendant FMC actively concealed the existence and nature of the Defect from Plaintiffs at the time of purchase, repair, and thereafter.” (Compl. ¶ 36.) Absent a fiduciary relationship between the parties, Moving 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 finds that Plaintiffs have alleged facts sufficient to support a finding that Moving Defendant had the requisite duty to disclose, giving rise to a fraudulent concealment cause of action.

“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, Moving Defendant argues that Plaintiffs’ fraud claim is barred by the economic loss rule because it is based on an alleged fraudulent omission rather than affirmative misrepresentation, seeks purely economic losses, and derives from Moving Defendant’s alleged non-performance under the warranty contract. (Dem. 14:2–16:14; 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.” (Pls.’ Opp. 9:17–19, citing Erlich v. Menezes (1999) 21 Cal.4th 543, 551–552.) Plaintiffs contend that here, they have sufficiently alleged that Moving Defendant fraudulently induced them to enter into purchasing the subject vehicle by intentionally concealing a material fact concerning the subject transmission defect, a tort independent from Moving 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’ fourth cause of action.

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

The demurrer is overruled. Moving Defendant to file and serve an answer to Plaintiffs’ complaint within 30 days.

[1] “Pending review and filing of the Supreme Court's opinion, … a published opinion of a Court of Appeal in the matter has no binding or precedential effect, and may be cited for potentially persuasive value only.” (Cal. Rules of Ct., rule 8.1115(e)(1).) Here, the Court cites to Dhital as nonbinding persuasive authority.