Judge: Elaine Lu, Case: 21STCV11044, Date: 2023-03-08 Tentative Ruling
Case Number: 21STCV11044 Hearing Date: March 8, 2023 Dept: 26
Defendant’s ex parte application to
advance its motion for judgment on the pleadings is GRANTED. Defendant’s motion for judgment on the
pleadings is ADVANCED to today’s date and denied for the following reasons:
Sixth Cause of Action for Fraud by
Omission
“[T]he elements of
an action for fraud and deceit based on concealment are: (1) the defendant must
have concealed or suppressed a material fact, (2) the defendant must have been
under a duty to disclose the fact to the plaintiff, (3) the defendant must have
intentionally concealed or suppressed the fact with the intent to defraud the
plaintiff, (4) the plaintiff must have been 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.” (Boschma v. Home Loan Ctr., Inc. (2011)
198 Cal. App. 4th 230, 248, [internal citations omitted].)
“Fraud allegations ‘involve a serious
attack on character’ and therefore are pleaded with specificity. [Citation.]
General and conclusory allegations are insufficient. [Citation.]
The particularity requirement demands that a plaintiff plead facts which
‘‘‘show how, when, where, to whom, and by what means the representations were
tendered.’’’ [Citation.]” (Cansino v. Bank of America (2014) 224
Cal.App.4th 1462, 1469.) “[E]ach element
must be pleaded with specificity.
[Citations.]” (Daniels v. Select
Portfolio Servicing, Inc. (2016) 246 Cal.App.4th 1150, 1166.) However, “[a]s one court has aptly observed,
“it is harder to apply [the requirement of specificity] to a case of simple
nondisclosure. ‘How does one show “how”
and “by what means” something didn’t happen, or “when” it never happened, or
“where” it never happened?’ ” (Jones v.
ConocoPhillips Co. (2011) 198 Cal.App.4th 1187, 1199 [citing Alfaro v.
Community Housing Improvement System & Planning Assn., Inc. (2009) 171
Cal.App.4th 1356, 1384 and Committee on Children's Television, Inc. v. General
Foods Corp. (1983) 35 Cal.3d 197, 217, [“ ‘[e]ven 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 ...’ ”].)
“In considering a fraudulent concealment
claim, ‘[the Court] begin[s] with the threshold question of duty.
[Citation.]’ [Citation.]” (Hoffman
v. 162 North Wolfe LLC (2014) 228 Cal.App.4th 1178, 1193.) “[T]o establish
fraud through nondisclosure or concealment of facts, it is necessary to show
the defendant ‘was under a legal duty to disclose them.’ [Citation.]”
(OCM Principal Opportunities Fund,
L.P. v. CIBC World Markets Corp.
(2007) 157 Cal.App.4th 835, 845; see also
Los Angeles Memorial Coliseum Com. v. Insomniac, Inc. (2015) 233
Cal.App.4th 803, 831.)
“ ‘There are ‘four circumstances in which
nondisclosure or concealment may constitute actionable fraud: (1) when the
defendant is in a fiduciary relationship with the plaintiff; (2) when the
defendant had exclusive knowledge of material facts not known to the plaintiff;
(3) when the defendant actively conceals a material fact from the plaintiff;
and (4) when the defendant makes partial representations but also suppresses
some material facts. [Citation.]’ [Citation.]’
[Citation.]” (Hoffman, supra, 228 Cal.App.4th at 1186-1187.)
Here, as the instant action alleges fraud
by omission, less particularity is required as to how, when, where, to whom,
and by what means representations were not made.
Defendant argues
that Plaintiff fails to establish that Defendant owed a duty to disclose. The Court disagrees. Plaintiff has alleged facts demonstrating Defendant’s
exclusive and superior knowledge of the defects. (Complaint ¶¶ 40-43.) Defendant’s reliance on Milman v. FCA US
LLC (2018 WL 5867481, *10 [C.D.Cal.2018]) and In re Ford Motor Co. DPS6
Powershift Transmission Products Liability Litigation (C.D. Cal. 2020)
483.Supp.3d. 83 is misplaced. Milman and In re Ford Motor Co. DPS6 Powershift Transmission Products Liability
Litigation are not binding on this
court. Even published “federal district
court decisions [are] not binding authority in this court even on questions of
federal law.” (Tanguilig v. Bloomingdale's, Inc. (2016) 5 Cal.App.5th 665, 674,
Fn.3.) At most, the Court “may consider
relevant, unpublished federal district court opinions as persuasive.” (Futrell
v. Payday California, Inc. (2010)
190 Cal.App.4th 1419, 1433.)
Defendant’s
contention that Plaintiff fails to allege any resulting injuries is also
unavailing. Under California
Civil Code section 3343, the measure of damages for a fraud claim is “the
difference between the actual value of that with which the defrauded person has
parted and the actual value of that which he received, together with any additional
damage arising from the particular transaction.” (Civ. Code § 3343(a).) This
amount may include “amounts actually and reasonably expended in reliance upon
the fraud” and “an amount which would compensate the defrauded party for the
loss of use and enjoyment of the property to the extent that any such loss was
proximately caused by the fraud.” (Civ. Code § 3343(a)(1–2).) Here, Plaintiff
has adequately alleged causation and harm from Defendant’s fraudulent omission:
“Had Plaintiff known that the Vehicle and its electrical system were defective
at the time of sale, she would not have purchased the Vehicle.” (Complaint ¶ 45.)
Finally, Defendant’s
argument based on the economic loss rule is equally unavailing. “[T]he economic loss rule provides: [W]here a
purchaser’s expectations in a sale are frustrated because the product he bought
is not working properly, his remedy is said to be in contract alone, for he has
suffered only ‘economic’ losses.” (Robinson Helicopter Co., Inc. v. Dana
Corp. (2004) 34 Cal.4th 979, 988 (Robinson). Accordingly, under
these circumstances, the economic loss rule precludes recovery of tort damages
for a purely economic harm. However, there are exceptions to the rule:
“Generally,
outside the insurance context, ‘a tortious breach of contract . . . may be
found when (1) the breach is accompanied by a traditional common law tort, such
as fraud or conversion; (2) the means used to breach the contract are tortious,
involving deceit or undue coercion; or (3) one party intentionally breaches the
contract intending or knowing that such a breach will cause severe, unmitigable
harm in the form of mental anguish, personal hardship, or substantial
consequential damages.’ [Citation.] (Id. at p. 990 [quoting Erlich v.
Menezes (1999) 21 Cal.4th 543, 553–554].)
The court in Robinson
noted that the focus on intentional conduct served to preserve the statutory
distinction between tort and contract remedies. (Robinson, supra,
34 Cal.4th at p. 990) A tort claim for fraud must be sufficiently independent
from a breach of contract claim for which the plaintiff suffered economic loss.
(Id. at p. 991). However, “[t]ort damages have been permitted in
contract cases where a breach of duty directly causes physical injury
[Citation]; for breach of the covenant of good faith and fair dealing in
insurance contracts [Citation}; for wrongful discharge in violation of
fundamental public policy [Citation]; or where the contract was fraudulently
induced. [Citation.] In each of these cases, the duty that gives rise to tort
liability is either completely independent of the contract or arises from
conduct which is both intentional and intended to harm.” [Erlich v. Menezes (1999)
21 Cal.4th 543, 551–552.) Thus, in order to state a claim notwithstanding the
economic loss rule, a party must plead (1) the existence of a duty that arises
independent of any contractual duty and (2) independent injury, other than
economic loss, that arises from the breach of that duty. (Robinson, supra,
34 Cal.4th at pp. 988–991.)
As to an
independent duty, fraudulent inducement of the contract is one means by which
California law recognizes the existence of a duty independent of the duties
imposed by the contract. (See Erlich, supra, 21 Cal.4th at pp. 551–552.)
Fraud in the inducement occurs where a party’s assent to a contract is obtained
through “conscious misrepresentation, or concealment, or non-disclosure of a
material fact which induces the innocent party to enter the contract.” (Odorizzi
v. Bloomfield School Dist. (1966) 246 Cal.App.2d 123, 128; see also Civ.
Code, § 1572.)
As to an
independent injury, “[e]conomic 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’” (Robinson,
supra, 34 Cal.4th at p. 988 [quoting Jimenez v. Superior Court (2002)
29 Cal.4th 473, 482].) However, where a party is fraudulently induced to a
contract, allegations that as a result of the fraudulent inducement the induced
party was exposed to potential liability may be sufficiently independent to
avoid being barred by the economic loss rule. (See Robinson, supra,
34 Cal.4th at p. 993.)
In Robinson,
the plaintiff manufactured helicopters, and defendant manufactured a “sprag
clutch,” a helicopter safety mechanism, for plaintiff. (Id. at p. 985.)
As an aircraft manufacturer, plaintiff was required to obtain a “type
certification” from the Federal Aviation Administration. (Ibid.) This
freezes the design as the date it was issued and requires that any aircraft
made under that certificate must be produced exactly in accordance with that
certificate; any changes must be first submitted and approved by the Federal
Aviation Administration. (Ibid.) Pursuant to the type certification that
the plaintiff had obtained from the Federal Aviation Administration, the sprag
clutch had to be a specific hardness. (Ibid.) For twelve years,
the defendant produced the sprag clutches at the required hardness but in July
of 1996 changed the process to a higher level of hardness. (Ibid.)
However, the defendant continued to provide written certificates to plaintiff
with every delivery of the sprag clutch that the clutches had been manufactured
in conformance with the plaintiff’s written specifications, which prohibited
unapproved changes in the manufacturing process. (Id. at p.986.) This
resulted in a significantly higher rate of failure of the sprag clutch. (Ibid.)
“Fortunately,
these clutch failures did not result in any helicopter accident and there were
no incidents of injury or property damage that were caused by any clutch defect
or failure, nor did any of the defective clutches cause any damage to other
parts of the helicopters in which they had been installed.” (Ibid.)
However, the plaintiff was ultimately required by the Federal Aviation
Administration and its British equivalent to recall and replace all of the
faulty clutch assembles, which were made in part by the faulty sprag clutches
with the higher hardness. (Ibid.)
At the trial court, the
jury found in favor of the plaintiff for its claim of breach of contract and
fraud and awarded punitive damages. (Id. at p.987.)
The Court Appeal affirmed the breach of contract action but found that
the fraud claim was barred by the economic loss rule and reversed the punitive
award damages. (Id. at p.988.)
On certiorari, the Supreme Court disagreed, reversing the Court of
Appeal and affirming the trial court and found that the economic loss rule did
not bar Plaintiff’s claim for damages. (Id. at p.994.) The Court concluded that both an
independent duty and in independent injury existed.
By issuing false certificates of conformance,
[the defendant] unquestionably made affirmative representations that [the
plaintiff] justifiably relied on to its detriment. But for [the defendant’s]
affirmative misrepresentations by supplying the false certificates of
conformance, [the plaintiff] would not have accepted delivery and used the nonconforming
clutches over the course of several years, nor would it have incurred the cost
of investigating the cause of the faulty clutches. Accordingly, [the
defendant’s] tortious conduct was separate from the breach itself, which
involved [the defendant’s] provision of the nonconforming clutches. In
addition, [the defendant’s] provision of faulty clutches exposed [the
plaintiff] to liability for personal damages if a helicopter crashed and to
disciplinary action by the FAA. Thus, [the defendant’s] fraud is a tort
independent of the breach. (Robinson, 34 Cal.4th at 991
[emphasis added].)
The
Supreme Court clarified that “[its] holding [was] narrow in scope and limited
to a defendant’s affirmative misrepresentations on which a plaintiff relies and
which expose a plaintiff to liability for personal damages independent of the
plaintiff’s economic loss.” (Id. at p. 993.) Here,
Defendant alleges that Plaintiff fails on both counts, arguing that Defendant
did not make any affirmative misrepresentations and that Plaintiff has not been
exposed to personal damages. Defendant notes that “[t]he express language of [Robinson] does not cover omissions . . . absent
allegations of the additional, intentional, post-sale acts, a fraud claim fails
to meet the first requirement of the Robinson exception.” (Memo
p.19:7–9.) However, the Court does not read Robinson to hold that the economic loss rule bars claims for fraudulent
inducement in the absence of an affirmative misrepresentation. Robinson did not involve an action for fraudulent inducement but rather a claim for fraud in the performance of the contract. Robinson expressly noted that fraudulent inducement is a settled exception to
the economic loss rule. (Robinson, supra, 34 Cal.4th at pp.989-990, [“Tort
damages have been permitted in contract cases where a breach of duty
directly causes physical injury [citation]; for breach of the covenant of good
faith and fair dealing in insurance contracts [citation]; for wrongful
discharge in violation of fundamental public policy [citation]; or where the
contract was fraudulently induced. [Citation.]”, [bold added].) Thus, Robinson created a new exception to the economic loss rule for affirmative
misrepresentations made in fraudulent performance of a contract; it did not disturb
the precedents on fraudulent inducement. (Robinson, supra, 34 Cal.4th at p. 990-991.)
More
recently, the Court of Appeal expressly concluded that this interpretation of Robinson was correct.
(Dhital v. Nissan North America, Inc. (2022) 84 Cal.App.5th
828, 839 [“the Robinson court affirmed that tort damages are available
in contract cases where the contract was fraudulently induced.”].) Thus, “under California law, the economic
loss rule does not bar plaintiffs’ claim here for fraudulent inducement by
concealment.” (Dhital, supra, 84
Cal.App.5th at p.843.)
As
binding authority has clearly and unequivocally held that the economic loss
rule is inapplicable to fraud in the inducement claims such as the one here, Defendant
fails to demonstrate any entitlement to judgment on the pleadings as to the
sixth cause of action for fraud by omission.
In
sum, Defendant fails to demonstrates that it is entitled to judgment as a
matter on the sixth cause of action for fraud by omission.
Seventh Cause of Action for Negligent Repair
Plaintiff’s
seventh cause of action arises from Defendant Cerritos’s breach of its
duty to apply the ordinary standard of care in repairing Plaintiff’s vehicle,
which is a tort that is separate and independent of any duties or obligations
that arise from the Sales Agreement that sets forth the terms of Plaintiff’s
purchase of the subject vehicle. In
other words, Plaintiff’s negligence claim against Defendant Cerritos stands
alone regardless of whether there was ever a Sales Agreement governing Plaintiff’s
purchase of the subject vehicle, regardless of whether FCA
FCA breached its warranty obligations under any
Sales Agreement, and regardless of whether FCA made fraudulent omissions during
Plaintiff’s purchase of the subject vehicle.
Accordingly,
Defendant’s motion for judgment on the pleadings of the seventh cause of action
is DENIED.
CONCLUSION
AND ORDER
Based on the foregoing, Defendants FCA and
Cerritos Dodge’s motion for judgment on
the pleadings is DENEID.
Defendants are to give notice to all
parties.