Judge Gail Killefer, Case Number: 23STCV25819, Date: 2024-03-08 Tentative Ruling

TENTATIVE: Defendants’ demurrer is overruled as to the fifth cause of action for fraudulent inducement-concealment and sustained with leave to amend as to the sixth cause of action for negligent repair. Plaintiffs are given 30 days leave to amend. OSC re: Amended Complaint set for April 19, 2024, at 8:30 a.m. Defendants to give notice.

On October 23, 2023, Elliott Boys and Shannon White (“Plaintiffs”) filed a Complaint against Ford Motor Company; South Bay Ford Inc. (collectively “Ford Defendants”); and Does 1 to 10. The Complaint alleges six causes of action for violations of: (1) Civ. Code § 1793.2(d); (2) Civ. Code § 1793.2(b); (3) Civ. Code § 1793.2(a)(3); (4) breach of the implied warranty of merchantability; (5) fraudulent inducement; and (6) negligent repair.

On November 27, 2023, the Ford Defendants filed a demurrer to Plaintiffs’ Complaint. Plaintiffs oppose the demurrer. The matter is now before the court.

Discussion

Where pleadings are defective, a party may raise the defect by way of a demurrer. (Coyne v. Krempels (1950) 36 Cal.2d 257, 262.) A demurrer tests the sufficiency of a pleading, and the grounds for a demurrer must appear on the face of the pleading or from judicially noticeable matters.¿ (CCP, § 430.30(a); Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) In evaluating a demurrer, the court accepts the complainant’s properly pled facts as true and ignores contentions, deductions, and conclusory statements. (Daar v. Yellow Cab Co. (1976) 67 Cal.2d 695, 713; Serrano v. Priest (1971) 5 Cal.3d 584, 591.) Moreover, the court does not consider whether a plaintiff will be able to prove the allegations or the possible difficulty in making such proof. (Fisher v. San Pedro Peninsula Hospital (1989) 214 Cal.App.3d 590, 604.)

Leave to amend must be allowed where there is a reasonable possibility of successful amendment. (Goodman v. Kennedy (1976) 18 Cal.3d 335, 348.)¿ The burden is on the complainant to show the Court that a pleading can be amended successfully. (Ibid.)

Defendants demur to Plaintiffs’ fifth cause of action for fraudulent inducement and sixth cause of action for negligent repair.

The complaint asserts that on October 31, 2020, the Plaintiffs purchased a 2020 Ford Explorer (the “subject vehicle”) which was manufactured and disturbed by Defendant Ford Motor Company. (Compl. ¶ 9.) The Complaint asserts that Defendants had superior knowledge that vehicles equipped with a 10-speed transmission as the subject vehicle suffered from a “Transmission Defect” such as “hesitation and/or delayed acceleration; harsh and/or hard shifting; jerking, shuddering, and/or juddering[.]” (Compl. ¶ 25.)

The Complaint alleges that Defendants has superior knowledge of the Transmission Defect through various sources of information including “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.) This resulted in Ford issuing a technical service bulletins (“TSB”) regarding the Transmission Defect, including a TSB on March 2, 2018, regarding the Ford 2017 F-150 that had the same type of transmission as the subject vehicle. (Compl. ¶ 28.) Ford subsequently issued other TSB regarding transmission troubles such as TSB 18-2079, TSB 18-2274, TSB 18-2079, TSB 18-02274, and TSB 21-2315. (Compl. ¶¶ 29-32.)

The Complaint alleges that despite Ford knowing about the Transmission Defect, they failed to fix the defects that affect the Subject Vehicle and Plaintiffs would not have purchased the vehicle or paid less had they known about the Transmission Defect. (Compl. ¶¶ 34, 35.) Plaintiffs further assert that the Transmission Defect exposed Plaintiffs to the risk of accident, injury, and/or liability to others and that they expected the Subject Vehicle to be safe and free of defects and that Defendants would not sell or lease a vehicle with known safety-related defects. (Compl. ¶ 35.) The Complaint assert that because Defendant ford was fully aware of the Transmission Defect, it actively concealed the existence and nature of the defect from Plaintiffs at the time of purchase, repair, and thereafter. (Compl. ¶ 36.)

“In California, fraud must be pled specifically; general and conclusory allegations do not suffice.” (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.) “The elements of fraud, which give rise to the tort action for deceit, are (a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or ‘scienter’); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage.” (Id. at p. 638.)¿¿

“The requirement of specificity in a fraud action against a corporation requires the plaintiff to allege the names of the persons who made the allegedly fraudulent 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.) “We acknowledge that the requirement of specificity is relaxed when the allegations indicate that ‘the defendant must necessarily possess full information concerning the facts of the controversy’ [citation] or ‘when the facts lie more in the knowledge of the opposite party[.]’ [Citation.]” (Id. at 158.)¿

The court finds that the Plaintiffs have properly pled facts to show that the defect that Defendants concealed was the transmission defect and that Defendants had a duty to disclose the defect because they had superior knowledge of the Defect. (Compl. ¶¶ 29-32.) 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.” (Heliotis v. Schuman (1986) 181 Cal.App.3d 646, 651.)

Ford’s superior knowledge of the Transmission Defect came from “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.) It also came from previous TSBs that were issued and warned about the same problems with the transmission in vehicles that had the same transmission as the subject vehicle. (Compl. ¶¶ 29-32.) Accordingly, due to Ford’s superior knowledge, it had a duty to disclose a known defect to Defendants. “Whether the plaintiff will be able to prove the pleaded facts is irrelevant to ruling upon the demurrer.” (Stevens v. Superior Court (1986) 180 Cal.App.3d 605, 609–610.)

Moreover, the specificity requirement is harder to meet when the fraud cause of action is based on nondisclosure. (See Alfaro v. Community Housing Improvement System & Planning Assn., Inc.¿(2009) 171 Cal.App.4th 1356, 1384 [“How does one show ‘how’ and ‘by what means' something didn't happen, or ‘when’ it never happened, or ‘where’ it never happened?”].) “One of the purposes of the specificity requirement is ‘notice to the defendant, to furnish the defendant with certain definite charges which can be intelligently met.’ ” (Id. at p. 1384 [internal quotations omitted].) “Also ‘considerations of practicality enter in,’ when multiple plaintiffs and defendants are involved.¿[Citation.]” (Ibid.)

In Jones v. ConocoPhillips, Co. (2011) 198 Cal.App.4th 1187, the appellate court found that the plaintiff’s fraudulent concealment claim against multiple defendants was adequately pled when material facts known to the defendants were not disclosed and the defendant had exclusive knowledge of the material facts not known to the plaintiffs and defendants actively concealed the material fact from plaintiffs. (Id. at pp. 1199-1200 [“Each defendant is therefore on notice that it allegedly concealed or failed to disclose the toxic properties of the product it sold to Goodyear and Upjohn during the course of Carlos's employment. Although sparse, nothing more is required at this early stage of the litigation.”].) Here, the fifth cause of action is pled only against one defendant, Ford, and the defect specifically relates to issues in the transmission of the Subject Vehicle. The facts as pled are sufficient to put Defendant Forn on notice of the claims alleged against it without Plaintiff needing to specify the name of the agent(s) who specifically concealed the transmission defect.

Furthermore, Defendant Ford fails to cite case law to show that under the Song-Beverly Act, Plaintiff must plead a direct transactional relationship or show privity with the vehicle manufacturer to bring a claim. Moreover, the court disagrees that under the Song-Beverly Act, the plaintiff must plead a direct transactional relationship or privity with the manufacturer to allege fraud. “‘[W]here material facts are known to one party and not to the other, failure to disclose them is not actionable fraud unless there is some relationship between the parties which gives rise to a duty to disclose such known facts.’ ” (LiMandri v. Judkins (1997) 52 Cal.App.4th 326, 337.) “Actionable fraud may be found where the defendant has exclusive knowledge of material facts not known to the plaintiff and actively conceals the material facts, but the “failure to disclose them is not actionable fraud unless there is some relationship between the parties which gives rise to a duty to disclose such known facts.” (Hoffman v. 162 North Wolfe LLC (2014) 228 Cal.App.4th 1178, 1187.) “Thus, a duty to disclose may arise from the relationship between seller and buyer[.]” (Id. at p. 1187.)

While Ford was not the direct seller of the Subject Vehicle, Ford was the manufacturer and the source of the vehicle warranty. Moreover, it was foreseeable that the Subject Vehicle would be sold through its network of dealers. Moreover, the rule in California is that “a vehicle manufacturer owes a duty to purchasers of its vehicles to disclose known defects.” (Gilead Tenofovir Cases (2024) 98 Cal.App.5th 911, 949.) Accordingly, Ford’s argument that direct transactional relationship or privity is required for Ford to have a duty to disclose is without merit.

Lastly, Defendant Ford argues that the economic loss rule bars the Plaintiffs’ claim for fraudulent concealment. California law does not permit a plaintiff to recover tort damages for contract claims. As explained by the California Supreme Court, “the economic loss rule prevents the law of contract and the law of tort from dissolving into the other.” (Robinson Helicopter Co., Inc. v. Dana Corp. (2004) 34 Cal. 4th 979, 989 (Robinson).) However, if the claim is based on fraudulent inducement, such claims are not barred by the economic loss rule. (Id. at p. 989-800 [“Tort damages have been permitted in contract cases where . . . the contract was fraudulently induced”].) Hence, tort damages have been permitted in contract cases where the contract was fraudulently induced, where “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, 552.)

In Dhital v. Nissan North America, Inc. (2022) 84 Cal.App.5th 828, the appellate court held that the economic loss rule does not bar claims for fraudulent concealment. “Applying Robinson here (and cognizant that our Supreme Court may soon provide additional guidance), we conclude plaintiffs’ claim for fraudulent inducement by concealment is not subject to demurrer on the ground it is barred by the economic loss rule.” (Id. at p. 840.) Recently, the California Supreme Court granted the review of Dhital in relation to the Ninth Circuit’s request for certification of the question of whether claims from fraudulent concealment are exempted from the economic loss rule in Rattagan v. Uber Technologies, Inc. (9th Cir. 2021) 19 F.4th 1188.¿

The court finds that because no defects exist on the face of the Complaint, the court will allow the Plaintiff to proceed with a claim for fraudulent inducement via concealment. Accordingly, the demurrer to the fifth cause of action is overruled.

“The elements of a cause of action for negligence are well established. They are (a) a legal duty to use due care; (b) a breach of such legal duty; [and] (c) the breach as the proximate or legal cause of the resulting injury.” (Ladd v. County of San Mateo (1996) 12 Cal.4th 913, 917 [internal quotations omitted].) “A duty may arise through statute, contract, or the relationship of the parties.” (Lichtman v. Siemens Industry Inc. (2017) 16 Cal.App.5th 914, 920 [internal quotations and citations omitted].) The existence of a legal duty is a question of law for the court to decide. (Adams v. City of Fremont (1998) 68 Cal.App.4th 243, 265.) “However, the elements of breach of that duty and causation are ordinarily questions of fact for the jury's determination.” (Vasquez v. Residential Investments, Inc. (2004) 118 Cal.App.4th 269, 278.) “One who undertakes repairs has a duty arising in tort to do them without negligence.” (Southwest Forest Industries, Inc. v. Westinghouse Elec. Corp. (9th Cir. 1970) 422 F.2d 1013, 1020.)

The sixth cause of action is alleged against Defendant South Bay Ford Inc. (“South”). The Complaint alleges that the Subject Vehicle was delivered to Defendant South for substantial repair on at least one occasion and that South owed a duty to use ordinary care and skill in “storage, preparation and repair of the Subject Vehicle in accordance with industry standards. (Compl. ¶ 73, 74.) Defendant South breached its duty to use ordinary care and skill by failing to properly store, prepare and repair the Subject Vehicle in accordance with industry standards and the breach of a proximate cause of Plaintiff’s damages. (Compl. ¶¶ 75, 76.)

Plaintiff’s opposition argues that an exception to the economic loss rule does bar recovery for damage to a defective product such as when a manufacturer’s defective product, like a window, causes damage other portions of the larger product, such as a house. (Jimenez v. Superior Court (2002) 29 Cal.4th 473, 483.) “

Multiple district courts have recognized the potential applicability of the component exception in cases involving negligent repair claims against parties sought to be joined in breach of warranty cases against manufacturers” (Velasco v. Ford Motor Company (S.D. Cal., June 24, 2022, No. 22-CV-366-MMA (DEB)) 2022 WL 2287258, at p. *4.)

The court need not decide if the component exception applies because Plaintiff’s sixth cause of action fails to allege facts to show Defendant South damaged certain components of the product. In other words, Plaintiff fails to state what defects or damage to components of the Subject Vehicle substantially impaired, the safety, use, and/or value of the subject vehicle such that the component exception to the economic loss rule should apply.

Therefore, the demurrer to the sixth cause of action is sustained with leave to amend.

Defendants’ demurrer is overruled as to the fifth cause of action for fraudulent inducement-concealment and sustained with leave to amend as to the sixth cause of action for negligent repair. Plaintiffs are given 30 days leave to amend. OSC re: Amended Complaint set for April 19, 2024, at 8:30 a.m. Defendants to give notice.

[1] Pursuant to CCP § 430.41, the meet and confer requirement has been met. (Patel Decl. ¶ 3, Ex. D.)