Judge: Armen Tamzarian, Case: 21STCV07199, Date: 2023-01-18 Tentative Ruling

Case Number: 21STCV07199    Hearing Date: January 18, 2023    Dept: 52

Defendant Ford Motor Company’s Demurrer to the First Amended Complaint

Defendant Ford Motor Company demurs to the sixth cause of action for “fraudulent inducement – concealment” alleged by plaintiff Raymond Gutierrez’s first amended complaint. 

Plaintiff alleges sufficient facts for the sixth cause of action.  Fraud by concealment requires that: (1) defendant omitted or concealed a material fact; (2) defendant had a duty to disclose the fact to plaintiff; (3) defendant intentionally omitted or concealed the fact with intent to defraud plaintiff; (4) plaintiff must have been unaware of the fact and would have acted otherwise if he had known of the concealed fact; and (5) the omission caused damages.  (Boschma v. Home Loan Center, Inc. (2011) 198 Cal.App.4th 230, 248 (Boschma).)  

Generally, “[e]very element of the cause of action for fraud must be alleged in the proper manner and the facts constituting the fraud must be alleged with sufficient specificity to allow defendant to understand fully the nature of the charge made.”  (Tarmann v. State Farm Mut. Auto. Ins. Co. (1991) 2 Cal.App.4th 153, 157, internal quotes omitted.)  That requirement, however, is relaxed in claims of fraud by omission because one cannot “show ‘how’ and ‘by what means’ something didn’t happen, or ‘when’ it never happened, or ‘where’ it never happened.”  (Alfaro v. Community Housing Improvement System & Planning Assn., Inc. (2009) 171 Cal.App.4th 1356, 1384 (Alfaro).   

The Alleged Omission

Ford argues plaintiff fails to specifically allege what Ford concealed.  The first amended complaint’s allegations mirror those in Dhital v. Nissan North America, Inc. (2022) 84 Cal.App.5th 828 (Dhital).  There, the court rejected the same argument by a vehicle manufacturer.  “Nissan also contends plaintiffs did not provide specifics about what Nissan should have disclosed.  But plaintiffs alleged the CVT transmissions were defective in that they caused such problems as hesitation, shaking, jerking, and failure to function.”  (Id. at p. 844.)  The court held “plaintiffs’ fraud claim was adequately pleaded.”  (Ibid.) 

Plaintiff’s first amended complaint alleges analogous facts.  It alleges Ford “knew that vehicles equipped with the same 6F35 transmission as the Vehicle suffered from one or more defects that can cause the vehicles and their 6F35 transmissions to experience hesitation and/or delayed acceleration; harsh and/or hard shifting; jerking, shaking, shuddering, and/or juddering; and start and stop issues.”  (FAC, ¶ 22.)  These allegations suffice on demurrer. 

Duty to Disclose

            Ford argues plaintiff did not allege sufficient facts showing it owed a duty to disclose.  The duty to disclose does not require an affirmative misrepresentation or a direct transaction.  (Heliotis v. Schuman (1986) 181 Cal.App.3d 646, 651.)  A defendant can be liable for fraud by omission “when the defendant had exclusive knowledge of material facts not known to the plaintiff.”  (Ibid.; accord LiMandri v. Judkins (1997) 52 Cal.App.4th 326, 336.) 

Plaintiff alleges Ford had exclusive knowledge of a material fact.  The transmission defect is a material fact because it can result in problems such as “hesitation upon acceleration, harsh shifting, delay upon shifting, slamming into gear, and transmission failure,” which “present a safety hazard… because they can suddenly and unexpectedly affect the driver’s ability to control the vehicle’s speed, acceleration, deceleration, and/or overall responsiveness.”  (FAC, ¶ 60.) 

Plaintiff alleges Ford had exclusive knowledge of that material fact “through sources not available to consumers such as Plaintiff, including but not limited to pre-production and post-production testing data, early consumer complaints about the transmission defect made directly to FMC and its network of dealers, aggregate warranty data compiled from FMC’s network of dealers, testing conducted by FMC in response to these complaints, as well as warranty repair and part replacements data received by FMC from FMC’s network of dealers.”  (FAC, ¶ 61.)  These allegations suffice to show Ford owed a duty to disclose the transmission defect to plaintiff.

Economic Loss Rule

Finally, Ford argues the economic loss rule bars plaintiff’s sixth cause of action for fraudulent inducement.  The rule does not apply.  In Dhital, the court held, “[U]nder California law, the economic loss rule does not bar plaintiffs’ claim… for fraudulent inducement by concealment.  Fraudulent inducement claims fall within an exception to the economic loss rule recognized by our Supreme Court.”  (Dhital, supra, 84 Cal.App.5th at p. 843.)  As in Dhital, plaintiff alleges Ford fraudulently induced the sales contract.  “Had Plaintiff known that the Subject Vehicle suffered from the Transmission Defect, they would not have purchased the Subject Vehicle.”  (FAC, ¶ 62.)  Fraudulently inducing a contract violates an independent tort duty.

Disposition

Defendant Ford Motor Company’s demurrer is overruled.  Defendant is ordered to answer within 15 days.