Judge: Anne Richardson, Case: 24STCV07272, Date: 2024-07-29 Tentative Ruling

Case Number: 24STCV07272    Hearing Date: July 29, 2024    Dept: 40

Superior Court of California

County of Los Angeles

Department 40

Plaintiff Hector Lopezmagana (“Plaintiff”) sues Defendants Ford Motor Company and Sunrise Ford of North Hollywood (“Defendants”), on the grounds that Plaintiff purchased a 2023 Ford F150 from Defendants which Plaintiff alleges had defects, and that Defendants failed to conform the vehicle to the terms of the express warranty after a reasonable number of attempts. The complaint alleges causes of action under the Song Beverly Act (SBA) for: (1) Violation of Subdivision (d) of Civil Code section 1793.2, (2) Violation of Subdivision (b) of Civil Code section 1793.2, (3) Violation of Subdivision (a)(3) of Civil Code section 1793.2, (4) Breach of Implied Warranty of Merchantability, (5) Negligent Repair, and (6) Fraudulent Concealment.

Defendants now bring an opposed Demurrer to the fifth and sixth causes of action for negligent repair and fraudulent concealment in the complaint based on the alleged insufficiency of the pleadings and the economic loss rule.

After review, and for the following reasons, the Court SUSTAINS the Demurrer.

Demurrer: SUSTAINED, With Leave.

Legal Standard

A demurrer for sufficiency tests whether the complaint states a cause of action.¿ (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747; see Code Civ. Proc., § 430.10, subd. (e).)¿ This device can be used only to challenge defects that appear on the face of the pleading under attack or from matters outside the pleading that are judicially noticeable.¿ (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.)¿ “To survive a [general] demurrer, the complaint need only allege facts sufficient to state a cause of action; each evidentiary fact that might eventually form part of the plaintiff’s proof need not be alleged.”¿ (C.A. v. William S. Hart Union High School Dist. (2012) 53 Cal.4th 861, 872.)¿ In testing the sufficiency of the cause of action, the demurrer admits the truth of all material facts properly pleaded.¿ (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 966-67.)¿ A demurrer, however, “does not admit contentions, deductions or conclusions of fact or law.”¿ (Daar v. Yellow Cab Co. (1967) 67 Cal.2d 695, 713.)¿ When considering demurrers, courts read the allegations liberally and in context.¿ (Taylor v. City of Los Angeles Dept. of Water and Power (2006) 144 Cal.App.4th 1216, 1228, disapproved on other grounds, Jones v. Lodge at Torrey Pines Partnership (2008) 42 Cal.4th 1158, 1162.)¿ The face of the complaint includes exhibits attached to the complaint.¿ (Frantz v. Blackwell (1987) 189 Cal.App.3d 91, 94.)¿ If facts appearing in the exhibits contradict those alleged, the facts in the exhibits take precedence.¿ (Holland v. Morse Diesel Intern., Inc. (2001) 86 Cal.App.4th 1443, 1447.) 

Fifth Cause of Action, Negligent Repair: OVERRULED.

Defendant argues that Plaintiff’s cause of action for negligent repair is barred by the economic loss rule. The economic loss rule provides that, “[i]n general, there is no recovery in tort for negligently inflicted ‘purely economic losses,’ meaning financial harm unaccompanied by physical or property damage.” (Sheen v. Wells Fargo Bank, N.A. (2022) 12 Cal.5th 905, 922.)   However, there is a “recognized exception to the economic loss rule for consumers who contract for certain kinds of professional services.”  (Id., at 933.)   

“In that context, … a cause of action for negligence ensures that the consumer receives the services the professional agreed to provide.  In such settings, professionals generally agree to provide ‘careful efforts’ in rendering contracted for services, but ‘most clients do not know enough to protect themselves by inspecting the professional’s work or by other independent means.’”  (Id. (citations omitted).)  “Given this disparity, a claim for professional negligence can serve the important purpose of ensuring that professionals render the ‘careful efforts’ they have contracted to provide.”  (Id. (citations omitted).) 

Here, Plaintiff delivered his car for repair—a professional service. The holding in North American that the economic loss rule does not apply to contracts for services was recently reaffirmed by the Court of Appeal in Sheen v. Wells Fargo, where the Court of Appeal acknowledged there is a “recognized exception to the economic loss rule for consumers who contract for certain kinds of professional services.”  (Sheen, supra, 12 Cal.5^th at 933.)  At the pleading stage, the Court cannot exclude the possibility that the professional services exception to the economic loss rule may apply. Defendants’ demurrer to the fifth cause of action for negligent repair is overruled on this ground.

As an additional ground for demurrer, Defendant argues that Plaintiff fails to plead facts that Defendant’s conduct resulted in any damages.  The Court disagrees.  The elements of a negligence cause of action are duty, breach, causation and damages.  (Cnty v. Santa Clara v. Atl. Ritchfield Co. (2006) 137 Cal.App.4^th 292, 318.)  The Complaint expressly alleges that the “defects and nonconformities to warranty manifested themselves within the applicable express warranty period.”  (Compl. ¶ 12.)  The Complaint also alleges that the value of the vehicle is “worthless and/or de minimis,” (Compl. ¶ 14) and that the negligent breach of its duties was a proximate cause of Plaintiff’s damages. (Compl. ¶ 73.) There is no heightened burden of pleading as to damages; such information can be obtained in discovery. “The plaintiff is required only to set forth the essential facts of his case with particularity sufficient to acquaint a defendant with the nature, source and extent of his cause of action.”  (Alch v. Superior Court (2004) 122 Cal.App.4th 339, 382.) The demurrer to the fifth cause of action for negligent repair is overruled on this ground.

Sixth Cause of Action, Fraudulent Concealment: OVERRULED.

To state a claim for fraudulent inducement-concealment, Plaintiff must allege: (1) the defendant “concealed or suppressed a material fact,” (2) the defendant was “under a duty to disclose the fact to the plaintiff,” (3) the defendant “intentionally concealed or suppressed the fact with the intent to defraud the plaintiff,” (4) the plaintiff was “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.” (BiglerEngler v. Breg, Inc. (2017) 7 Cal.App.5th 276, 310-311.)

Defendants argue that Plaintiff fails to plead with particularity what defect Defendants concealed, where the omitted information should or could have been revealed by Ford, and failed to identify by name who made the alleged omissions.

Ordinarily, “fraud must be pleaded specifically; general and conclusory allegations do not suffice.” (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.) “This particularity requirement necessitates pleading facts which show how, where, to whom, and by what means” the alleged fraud occurred. (Id.) The purpose of the particularity requirement is to “separate meritorious and nonmeritorious cases, if possible in advance of trial.” (Small v. Fritz Companies, Inc. (2003) 30 Cal.4th 167, 184.)

Some cases, however, conclude that this standard is less stringent when the defendant already has “ ‘full information concerning the facts of the controversy.’ ” (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 217, superseded by statute on other grounds as stated in Californians for Disability Rights v. Mervyn's, LLC (2006) 39 Cal.4th 223, 227.) Relaxation of the specificity requirement is particularly appropriate in
a concealment case. Unlike intentional misrepresentation, which requires some affirmative representation or promise, a fraudulent concealment is the absence of something, the suppression of a fact. (Civ. Code § 1710.)

Courts have ruled that specificity as to fraud claims is not required if it appears from the nature of allegations that defendant must necessarily possess full information, or if the facts lie more in the knowledge of opposing parties. (Alfaro v. Community Housing Improvement System & Planning Assn., Inc. (2009) 171 Cal.App.4th 1356, 1384-1385 [“it does not appear necessary to require each of the 38 plaintiffs to allege each occasion on which an agent of either defendant could have disclosed …. Surely defendants have records of their dealings with the plaintiffs”] accord Bushell v. JPMorgan Chase Bank, N.A. (2013) 220 Cal.App.4th 915, 931 [“plaintiffs did not have to specify the … personnel who prepared these documents because that information is uniquely within … [defendant’s] knowledge”].) “‘[T]he courts should not ... seek to absolve the defendant from liability on highly technical requirements of form in pleading. Pleading facts in ordinary and concise language is as permissible in fraud cases as in any others, and liberal construction of the pleading is as much a duty of the court in these as in other cases.’” (Appollo Capital Fund, LLC v. Roth Capital Partners, LLC (2007) 158 Cal.App.4th 226, 242.)¿ 

Here, the Complaint alleges that the vehicle contained transmission, suspension and electrical defects. (Compl., ¶12.) Additionally, the specificity requirements for fraud are relaxed here because Plaintiff gave Ford a reasonable number of repair attempts. (Id., ¶15.) Thus, Ford would have records of its own attempts to cure the defects, meaning Ford would reasonably have access to the exact nature of the defects about which Plaintiff complained. 

Defendants next argue that Plaintiff fails to allege a transactional relationship giving rise to a duty to disclose. Absent a fiduciary relationship between the parties, a duty to disclose can arise in only three circumstances: (1) the defendant had exclusive knowledge of the material fact; (2) the defendant actively concealed the material fact; or (3) the defendant made partial representations while also suppressing the material fact. (BiglerEngler, supra, 7 Cal.App.5th at p. 311; LiMandri v. Judkins (1997) 52 Cal.App.4th 326, 336.)

The California Supreme Court “has described the necessary relationship giving rise to a duty to disclose as a ‘transaction’ between the plaintiff and defendant ....” (Bigler-Engler, supra, 7 Cal.App.5th at p. 311; Warner Construction Corp. v. City of Los Angeles (1970) 2 Cal.3d 285, 294 [“In transactions which do not involve fiduciary or confidential relations”]; Hoffman v. 162 North Wolfe LLC (2014) 228 Cal.App.4th 1178, 1187–89 [rejecting concealment claim where plaintiffs “were not involved in a transaction with the parties they claim defrauded them”]; LiMandri, supra, 52 Cal.App.4th at p. 337 [“such a relationship can only come into being as a result of some sort of transaction between the parties”].)

However, such a transaction has occurred here. In an analogous case, Dhital v. Nissan North America, Inc., “Plaintiffs alleged that they bought [a] car from a Nissan dealership, that Nissan backed the car with an express warranty, and that Nissan's authorized dealerships are its agents for purposes of the sale of Nissan vehicles to consumers. In light of these allegations, we decline to hold plaintiffs’ claim is barred on the ground there was no relationship requiring Nissan to disclose known defects.” (Dhital v. Nissan North America, Inc. (2022) 84 Cal.App.5th 828, 844.) In that case, the court concluded that at the pleading stage, these allegations sufficiently allege a relationship which could give rise to a duty to disclose. 

Ford’s second point—that the economic loss rule bars concealment claims where only economic losses exist—is not availing. Concealment of material facts relating to a purchased vehicle and the manufacturer’s obligation to conform a purchased vehicle to express and implied warranties involve different primary rights, i.e., the right to be free from injury related to purchasing an auto that contains defects concealed by the manufacturer and the right to be free from injury related to a manufacturer failing to conform a vehicle to warranty. (See Dhital, supra, 84 Cal.App.5th at 834, “under California law, the economic loss rule does not bar Plaintiffs’ claim … for fraudulent inducement by concealment … [because such a] claim[] fall[s] within an exception to the economic loss rule recognized by … Robinson]” Helicopter]; see also Anderson v. Ford Motor Co. (2022) 74 Cal.App.5th 946, 966, 969, reh’g denied [in decision that did not discuss the economic loss rule, finding that punitive damages were recoverable where re-sale fraudulent inducement and post-sale noncompliance with the Song-Beverly Consumer Warranty Act constituted separate and standalone conduct—as well as involved different primary rights—for the purpose of deciding punitive damages and civil penalties where the alleged wrongs took place at different times].)

The Court notes that the California Supreme Court has granted review of Dhital. As such, the holding may be cited only for persuasive value. (See Cal. Rules of Court, Rule 8.1115(e)(1).) The Court adopts the persuasive reasoning of Dhital for the purposes of this demurrer and overrules the demurrer. Given its persuasiveness, until the Supreme Court disapproves this reasoning, it would be premature to dismiss such a cause of action on this ground. (See also Rattagan v. Uber Technologies, Inc. (9th Cir. 2021) 19 F.4th 1188, 1193 (certifying to the Supreme Court the question whether, under California law, claims for fraudulent concealment are exempted from the economic loss rule.) The Court awaits further guidance from the Supreme Court.

Conclusion 

Defendants’ demurrer to Plaintiff’s cause of action for negligent repair and fraudulent concealment is OVERRULED.