Judge: Elaine W. Mandel, Case: 24SMCV01906, Date: 2024-09-11 Tentative Ruling

Case Number: 24SMCV01906    Hearing Date: September 11, 2024    Dept: P

Tentative Ruling

James v. Ford Motor Company, et al. Case No. 24SMCV01906

Hearing Date: September 11, 2024

Defendants Ford Motor Company and Peyton Cramer Ford’s Demurrer to the Complaint

James brings Song-Beverly claims against defendants Ford and Cramer Ford, who demur and argue the third and fourth causes of action are barred under the economic loss rule.

The economic loss rule provides “[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. The Supreme Court rejected the argument that the economic loss rule bars a fraud claim, reasoning that parties cannot, and should not, be expected to anticipate fraud and dishonesty in every transaction. Robinson Helicopter Co., Inc. v. Dana Corp. (2004) 34 Cal.4th 979, 993. Doing so would require increased certainty in contractual relationships that run contrary to public policy. Id. James alleges fraud in the inducement; thus, the economic loss rule does not apply to the third cause of action.

The economic loss rule does not apply to the negligent repair claim because James alleges defendants’ negligent performance of repair services caused further damages to his vehicle, which is an exception to the rule. KB Home v. Superior Court (2003) 112 Cal.App.4th 1076, 1079, as modified on denial of reh'g (Nov. 19, 2003). James asserts he left his car for repairs, but defendants failed to repair it properly. Compl. ¶¶ 60-62. Th rule does not apply to the negligent repair claim.

Defendants contend the complaint fails to allege facts with specificity to support its claim or fraudulent inducement. The elements of fraud, including a cause of action for fraudulent inducement, “are (a) a misrepresentation (false representation, concealment, or nondisclosure); (b) scienter or knowledge of its falsity; (c) intent to induce reliance; (d) justifiable reliance; and (e) resulting damage.” Hinesley v. Oakshade Town Ctr. (2005) 135 Cal.App.4th 289, 294. The facts constituting the alleged fraud must be alleged specifically as to every element of fraud. Lazar v. Superior Court (1996) 12 Cal.4th 631, 645. To allege fraud against a corporation, plaintiffs must plead the names of persons allegedly making the false representations, their authority to speak, to whom they spoke, what they said or wrote and when it was said or written. Tarmann v. State Farm Mut. Auto. Ins. Co. (1991) 2 Cal.App.4th 153, 157.

The complaint alleges the 10R80 transmissions installed in numerous Ford vehicles, including the one purchased by the plaintiffs, were defective. Compl. ¶¶12-15. Ford is alleged to be aware of the defects and the hazards they posed, allegedly having exclusive knowledge of them, but are also alleged to have intentionally concealed and failed to disclose that information. Id. ¶¶16-17, 95. It is also alleged that Ford intended to deceive James by concealing known transmission problems, and that he would not have purchased the car had the defects been known. Id. ¶¶96-99. The plaintiffs allegedly suffered damages from money paid to buy the car. Id. ¶102. This is enough to have alleged a cause of action at the pleading stage.

Defendants assert the negligent repair claims fail to allege damages because it does not plead facts that AutoNation Ford’s conduct resulted in damages. In opposition, James argues he noticed the vehicle was experiencing the same problems complained about previously and towed the car back to Sunrise Ford. The complaint alleges AutoNation Ford’s breach was the proximate cause of James’s damages, to be determined according to proof. Compl. ¶112. At the pleadings stage, this is sufficient to state a cause of action. OVERRULED. Defendants must answer within ten days.