Judge Gail Killefer, Case Number: 24STCV32653, Date: 2025-04-24 Tentative Ruling

TENTATIVE: Defendant Ford’s demurrer to the fifth cause of action is overruled. Defendant Ford must file an Answer by May 5, 2025. A Case Management Conference is set for May 30, 2025, at 8:30 a.m.

On December 22, 2024, Gary Endersbe and Yolanda Endersbe (collectively “Plaintiffs”) filed this lemon law action against Ford Motor Company (“Ford”); Gosch Ford Temecula[1] (collectively “Defendants”) and Does 1 to 10.

The Complaint alleges five causes of action: (1) Violation of Civ. Code § 1793.2(d); (2) Violation of Civ. Code § 1793.2(b); (3) Violation of Civ. Code § 1793.2(A)(3); (4) Breach of the Implied Warranty of Merchantability; (5) Fraudulent Inducement – Concealment; and (6) Negligent Repair.

Defendant Ford now demurs to the 5th cause of action for fraudulent inducement based on concealment. Plaintiffs oppose the Motion. The matter is now before the court.

Demurrer[2]

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.)

Defendant Ford asserts that Plaintiffs’ fraudulent inducement claims fails because there is no transactional relationship between Plaintiffs and Defendant Ford, such that Ford is not obligated to disclose.

A duty to disclose a material fact can arise if (1) it is imposed by statute; (2) the defendant is acting as plaintiff's fiduciary or is in some other confidential relationship with plaintiff that imposes a disclosure duty under the circumstances; (3) the material facts are known or accessible only to defendant, and defendant knows those facts are not known or reasonably discoverable by plaintiff (i.e., exclusive knowledge); (4) the defendant makes representations but fails to disclose other facts that materially qualify the facts disclosed or render the disclosure misleading (i.e., partial concealment); or (5) defendant actively conceals discovery of material fact from plaintiff (i.e., active concealment). [Citations.] Circumstances (3), (4), and (5) presuppose a preexisting relationship between the parties, such as “between seller and buyer, employer and prospective employee, doctor and patient, or parties entering into any kind of contractual agreement. [Citation.] All of these relationships are created by transactions between parties from which a duty to disclose facts material to the transaction arises under certain circumstances.” [Citation.] “Such a transaction must necessarily arise from direct dealings between the plaintiff and the defendant; it cannot arise between the defendant and the public at large.” [Citation.]

The Rattagan case was brought by a foreign national against Uber, Technologies, Inc. for fraudulent concealment claims arising during the contract, whereas Plaintiffs’ claims in this action relate to Defendant Ford’s pre-sale conduct. “Rattagan's tort claims are, of course, based on alleged conduct committed during the contractual relationship but purportedly outside the parties' chosen rights and obligations.” (Rattagan, supra, 17 Cal.5th at p. 41, fn. 12 [italics original].) The California Supreme Court in Rattagan noted that it had granted review of Dhital v. Nissan North America, Inc. (2022) 84 Cal.App.5th 828 (Dhital) “which involve claims of fraudulent inducement by concealment claims” which the Rattagan Court does not address. (Ibid. [“We do not address these issues here.”].) Review of Dhital was granted by the California Supreme Court and held for Rattagan, and then dismissed on December 18, 2024. (Cal. Rules of Court, rule 8.528(b)(1).) Thus, the Court of Appeal decision in Dhital is binding law on this court.

On appeal from a demurrer as to the plaintiff’s claim against the manufacture for fraudulent inducement by concealment, the Dhital Court found that “under California law, the economic loss rule does not bar plaintiffs’ fraudulent inducement claim.” (Dhital, supra, 84 Cal.App.5th at p. 833.) “[T]he plaintiffs’ fraudulent inducement claim alleges presale conduct by Nissan (concealment) that is distinct from Nissan's alleged subsequent conduct in breaching its warranty obligations.” (Id. at p. 841.)

The Dhital Court also found the plaintiffs had adequately pled a transactional relationship sufficient to impose a duty on Nissan as the manufacturer to disclose defects about the defective transmission.

At the pleading stage (and in the absence of a more developed argument by Nissan on this point), we conclude plaintiffs’ allegations are sufficient. Plaintiffs alleged that they bought the 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.

On review from a motion for summary judgment, the Ninth Circuit in Daniel v. Ford Motor Co. (9th Cir. 2015) 806 F.3d 1217 (Daniel) similarly found that Ford as a vehicle manufacturer had a transactional relationship with its customers who purchase their vehicles:

Plaintiffs do have evidence that Ford communicates indirectly through its authorized dealerships. Plaintiffs received information about the “characteristics,” “benefits,” and “quality,” Cal. Civ.Code § 1770(a)(5), (7), of the Ford Focus from Ford's dealerships, which is also where they could obtain certain brochures and booklets about Ford's vehicles. Under the terms of Ford's express warranty, Plaintiffs needed to return to Ford dealerships to perform warranty repairs. And it is through its dealership network that Ford circulated its special service messages and technical service bulletins when issues arose with the Focus. Based on this evidence, a reasonable fact finder could conclude that Ford knew that its consumers depended at least in part on its authorized dealerships for information about its vehicles and that Ford's authorized dealerships would have disclosed the alleged rear suspension defect to consumers if Ford had required it.

(Id. at p. 1227.) Therefore, both Dhital and Daniel support the proposition that a vehicle manufacturer can have a transactional relationship with its vehicle purchasers sufficient to give rise to the duty to disclose. Defendant Ford fails to cite a single case holding that a vehicle manufacturer cannot have a transactional relationship with the purchasers of their vehicles.

Here, the Complaint alleges that Defendant Ford “knew about the Transmission Defect, and its safety risks” including the fact that “vehicles equipped with the same 10- speed transmission as the Vehicle suffered from one or more defects that can cause the vehicles and their 10-speed transmissions to experience hesitation and/or delayed acceleration; harsh and/or hard shifting; jerking, shuddering, and/or juddering (‘Transmission Defect’).” (Compl., ¶¶ 61, 63.) Defendant Ford had exclusive knowledge about the Transmission Defect through its “pre-production testing data, early consumer complaints about the Transmission Defect made directly to Defendant FORD and its network of dealers, aggregate warranty data compiled from Defendant FORD's network of dealers, testing conducted by Defendant FORD in response to these complaints, as well as warranty repair and part replacements data received by Defendant FORD from Defendant FORD's network of dealers[.]” (Id. ¶ 65(b).)

Furthermore, the Technical Service Bulletins (“TSBs”) issued by Ford concerning the Transmission Defect instructed its network of dealers to inform complete repairs related to the Transmission Defect. (Compl., ¶¶ 26, 28, 30.) Despite knowing about the Transmission Defect, Defendant Ford “actively concealed the existence and nature of the Defect from Plaintiffs at the time of purchase, repair, and thereafter.” (Id. ¶ 34.) “Plaintiffs only became suspicious that the Vehicle suffered from the transmission defect after presenting the Vehicle to Defendant for a reasonable number of repair attempt to no avail.” (Id. ¶ 69.) “Plaintiffs would not have purchased the Subject Vehicle, or would have paid less for it, had Plaintiffs known of the Transmission Defect, given the unsafe nature of the Defect.” (Id. ¶ 33.)

Like the Dhital Court, the court finds that Plaintiffs’ Complaint sufficiently alleges a claim for fraudulent inducement via concealment because Plaintiffs entered into a warranty contract with Defendant Ford involving the Subject Vehicle that was manufactured and/or distributed by Defendant Ford. (Compl., ¶ 7.) Defendant Ford issued TSBs to its network of dealers regarding the Transmission Defect but failed to disclose the defect to its vehicle purchasers. (Id. ¶¶ 26, 28, 30, 63, 66)

That Plaintiffs do not name or identify a person who omitted the existence of a Transmission Defect does not mean the fraudulent inducement by concealment claim fails. The rule of specificity of pleading is intended to apply only to affirmative representations and not to fraud by concealment. (See Alfaro, supra, 171 Cal.App.4th at 1384.) As the Alfaro court 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?’ ” (Ibid.; see Jones v. ConocoPhillips (2011) 198 Cal.App.4th 1187, 1200 [concealment is sufficiently pled when the complaint as a whole provides sufficient notice of the claims against defendants].)¿¿

Next, Defendant Ford asserts that Plaintiffs’ claim for active concealment fails by citing Taragan v. Nissan North America, Inc. (N.D. Cal., June 20, 2013, No. C 09-3660 SBA) 2013 WL 3157918: “An allegation of active concealment must plead more than an omission; rather, a plaintiff must assert affirmative acts of concealment; e.g., that the defendant ‘sought to suppress information in the public domain or obscure the consumers' ability’ to discover it.” (Id. at p. *7.)

However, active concealment is not an element of fraudulent concealment claim, but as explained by the Rattagan Court, one of five circumstances that gives rise to a duty to disclose: “A duty to disclose a material fact can arise if . . . (5) defendant actively conceals discovery of material fact from plaintiff (i.e., active concealment).” (Rattagan, supra, 17 Cal.5th at p. 40.) “The required elements for fraudulent concealment are (1) concealment or suppression of a material fact; (2) by a defendant with a duty to disclose the fact; (3) the defendant intended to defraud the plaintiff by intentionally concealing or suppressing the fact; (4) the plaintiff was unaware of the fact and would have acted differently if the concealed or suppressed fact was known; and (5) plaintiff sustained damage as a result of the concealment or suppression of the material fact.” (Ibid.)

Lastly, Defendant Ford asserts that the fraudulent concealment claim fails because by providing a warranty on the subject vehicle, Defendant Ford specifically informed Plaintiffs that the vehicle could be defective. Moreover, that a warranty was included meant Defendant Ford disclosed as a matter of law that the product may have some sort of defect. The court is not persuaded by this argument.

Taking Plaintiffs’ allegations as true for purposes of the demurrer, Plaintiffs assert that had they known about the Transmission Defect they would not have purchased the vehicle or would have paid less. (Compl., ¶ 33.) Defendant Ford fails to point to any allegation in the Complaint that shows Plaintiffs’ decision to purchase the vehicle was based exclusively on Ford’s warranty and Plaintiffs would nevertheless have purchased the vehicle for the same price even if they had known about the transmission defect. Moreover, Defendant Ford failed to repair the defect and conform the Vehicle to the applicable warranties after a reasonable number of repair opportunities. (Compl., ¶ 39.) Defendant Ford also failed to replace the Vehicle or make restitution as required by the Song Beverly Act. (Ibid.)

Defendant’s reliance on Seely v. White Motor Co. (1965) 63 Cal. 2d 9 is also misplaced

In Seely, it was reasonable to conclude the parties envisioned the manufacturer might deliver a defective truck. The warranty guarded against that possibility by ensuring the manufacturer would deliver a serviceable truck and repair any defect. The parties could not have reasonably expected, however, that the manufacturer would be liable in strict liability for “all the detriment proximately caused” by the breach of the warranty whether “anticipated or not.”

(Rattagan, supra, 17 Cal.5th at p. 37 [italics original].) Here, Plaintiffs did not expect Ford to sell a Vehicle with a known defect that affected the quality and safety of the Vehicle, and which was not repairable.

The Complaint asserts that Plaintiffs “expect and assume that Defendant FORD will not sell or lease vehicles with known material defect, including but not limited to those involving the vehicle's transmission and will disclose any such defect to its consumer before selling such vehicle.” (Compl., ¶ 68) Accordingly, Plaintiffs at the time of purchase expected the warranty to allocate risk regarding unknown defects, not defects known exclusively by Ford, and which Ford would ultimately fail in repairing despite a reasonable number of repair attempts. (Id. ¶ 15.) In other words, at the time that Plaintiffs purchased the vehicle, they “did not consider, or allocate the risk for, the manufacturer lying about the quality” of the vehicle sold, “and thus, they could not have been reasonably expected to allocate the risks of harm that resulted when the manufacturer” concealed the Transmission Defect. (Rattagan, supra, 17 Cal.5th at pp. 37-38.)

Defendant Ford’s demurrer to the fifth cause of action is overruled. Defendant Ford must file an

Answer by May 5, 2025. A Case Management Conference is set for May 30, 2025, at 8:30 a.m.

[1] Plaintiffs dismissed Gosch Ford Temecula on April 18, 2025.

[2] Pursuant to CCP § 430.41, the meet and confer requirement has been met. (Liu Decl., ¶ 2.)