Judge: Gary I. Micon, Case: 24CHCV03889, Date: 2025-03-10 Tentative Ruling
Case Number: 24CHCV03889 Hearing Date: March 10, 2025 Dept: F43
Dept. F43
Date: 03-10-25
Case # 24CHCV03889, Cortez v. FCA US, LLC,
et al.
Trial Date: None set.
DEMURRER
MOVING PARTY: Defendant FCA US, LLC
RESPONDING PARTY: Plaintiff Connie Cortez
RELIEF REQUESTED
Order sustaining demurrer to the third and sixth
causes of action.
RULING: Demurrer
to the Third and Sixth Causes of Action is sustained with leave to amend.
SUMMARY OF ACTION:
Plaintiff Connie Cortez (Plaintiff) filed
this lemon law case against defendant FCA US, LLC (Defendant) on October 24,
2024, alleging violations of the Song-Beverly Act section 1793.2, negligent
repair, and fraudulent inducement - concealment. Plaintiff alleges that she entered into a
warranty contract with Defendant regarding her 2020 Jeep Compass. (Compl., ¶¶ 10-11, Exh. A.) Plaintiff alleges that there was a serious Engine
Defect in the vehicle (Compl., ¶ 18.), that Defendant knew about the Engine
Defect prior to Plaintiff purchasing the vehicle (Compl., ¶ 19), and that the Engine
Defect makes the vehicle unsafe. (Compl.,
¶¶ 18-21, 25-27.) Defendant failed to
repair or replace the vehicle and failed to provide its authorized repair
facilities with sufficient service literature and replacement parts. (Compl., ¶ 30-34, 51.)
Defendant demurs to the third cause of action
for violation of section 1793.2(a)(3) and the sixth cause of action for
fraudulent inducement – concealment. Plaintiff
opposes, and Defendant filed a reply.
MEET AND CONFER
Before filing a demurrer, the parties must
meet and confer “in person, by telephone, or by video conference.” (Code Civ. Proc., § 430.41, subd. (a).) The moving party must file and serve a meet
and confer declaration stating either: (1) the means by which the parties met
and conferred, that the parties did not reach an agreement resolving the issues
raised in the demurrer; or (2) that the party who filed the pleading subject to
the demurrer failed to respond to the meet and confer request or failed to meet
and confer in good faith. (Code Civ.
Proc., §§ 430.41, subd. (a)(3).) Defense
counsel sent Plaintiff’s counsel a meet and confer letter on November 15, 2024
but received no response. (Declaration
of Sydney O. Sloas, ¶¶ 3-4, Exh. 1.)
ANALYSIS
As a general matter, a¿party may respond to a pleading
against it by demurrer based on any single or combination of eight enumerated
grounds, including¿that¿“the pleading does not state facts sufficient to
constitute a cause of action” and is uncertain, meaning “ambiguous and
unintelligible.” (Code Civ. Proc., § 430.10, subds. (e) and
(f)). The grounds for demurring must be apparent from either the
face of the complaint or a matter of which the court may take judicial notice. (Code Civ. Proc., § 430.30, subd. (a); see
also Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) The purpose of a demurrer is to challenge the
sufficiency of a pleading “by raising questions of law.” (Postley v. Harvey (1984) 153
Cal.App.3d 280, 286.) “In the
construction of a pleading, for the purpose of determining its effect, its
allegations must be liberally construed, with a view to substantial justice
between the parties.” (Code Civ. Proc.,
§ 452.) The court “treat[s] the demurrer
as admitting all material facts properly pleaded, but not contentions,
deductions or conclusions of fact or law[.]”
(Berkley v. Dowds (2007) 152 Cal.App.4th 518, 525.) In applying these standards, the court
liberally construes the complaint to determine whether a cause of action has
been stated. (Picton v. Anderson
Union High School Dist. (1996) 50 Cal.App.4th 726, 733.)
Third
Cause of Action: Violation of Civil Code § 1793.2(a)(3)
Defendant demurs to the third cause of action for failure
to allege sufficient facts to constitute a cause of action. Defendant contends that Plaintiff fails to
state what parts or literature were not available to service providers. Plaintiff only pleads conclusory statements
of law and only gives Defendant notice of what the Civil Code says. Plaintiff also fails to allege factual
allegations regarding damages.
Plaintiff opposes stating that because the parts and
literature which were not available at any repair facilities and several
necessary facts are solely within Defendant’s knowledge, less particularity is
required. (citing Doe v. City of Los
Angeles (2007) 42 Cal.4th 531, 549-50.)
Additionally, further detail will be revealed during discovery.
In reply, Defendant notes that Plaintiff admits to not
pleading “particular facts” giving rise to this claim. Complaint paragraph 66(a) alleges that the
“literature” was within the possession of Defendant’s dealerships. Additionally, Plaintiff admits that Defendant
and its dealerships had data and information about the Engine Defect from
testing, customer complaints, and data received from Defendant’s dealerships. (Compl., ¶¶ 22, 66(a).) Plaintiff’s opposition does not address Defendant’s
damages argument.
To plead a claim under Civil Code section 1793.2,
subdivision (a)(3), the complaint must establish that the vehicle manufacturer
failed to “[m]ake available to authorized service and repair facilities
sufficient service literature and replacement parts to effect repairs during
the express warranty period.” (Civ.
Code, § 1793.2, subd. (a)(3).) Where a
complaint seeks statutory remedies, plaintiff must plead the facts with
particularity. (Carter v. Prime
Healthcare Paradise Valley LLC (2011) 198 Cal.App.4th 396, 410.) “The particularity required in pleading facts
depends on the extent to which the defendant in fairness needs detailed
information that can be conveniently provided by the plaintiff; less
particularity is required where the defendant may be assumed to have knowledge
of the facts equal to that possessed by the plaintiff.” (Jackson v. Pasadena City School District
(1963) 59 Cal.2d 876, 879.)
The complaint fails to allege sufficient facts to
constitute a violation of section 1793.2(a)(3) because Plaintiff alleges
unsupported conclusory statements and does not allege facts to support her
request for “actual damages”. Plaintiff
alleges that during the express warranty period, Plaintiff’s 2020 Jeep Compass began
exhibiting issues related to an Engine Defect and that Defendant and its
representatives were unable to repair the vehicle. (Compl., ¶¶ 15-18, 40.) Plaintiff merely alleges that Defendant
failed to provide sufficient service literature and replacement parts to its
authorized service and repair facilities to effect repairs, and that Defendant did
not correct its failure to provide the mandated literature. (Compl., ¶¶ 51-52.) As a result, Plaintiff suffered damages and
seeks civil penalties of two times her actual damages. (Compl., ¶ 51.) More facts are needed to support these conclusory
statements.
Accordingly, Defendant’s demurrer to the Third Cause of
Action is sustained with leave to amend.
Sixth
Cause of Action: Fraudulent Inducement - Concealment
Defendant demurs to the sixth cause of action for failure
to allege sufficient facts to constitute a cause of action and failure to meet
the heightened pleading standard for fraud.
The complaint fails to allege facts establishing Defendant’s duty to
disclose the alleged Engine Defect. Plaintiff
does not allege a fiduciary or transactional relationship between Plaintiff and
Defendant because Plaintiff purchased her 2020 Jeep Compass from an entity that
is not Defendant or Defendant’s agent. Plaintiff
does not even allege the entity who sold her the 2020 Jeep Compass. The complaint fails to identify a single
individual who allegedly made misrepresentations to Plaintiff, and Plaintiff’s
claim is barred under the economic loss rule.
Plaintiff opposes arguing that no direct transactional
relationship is required between the manufacturer of a product and subsequent
purchasers of the product because manufacturers must also disclose material
facts to immediate and subsequent purchasers.
Regardless, Plaintiff sufficiently alleges a buyer-seller relationship
between Defendant and Plaintiff. The
complaint also sufficiently alleges nondisclosure by stating that Plaintiff
reviewed Defendant’s advertising and other marketing materials prior to
purchasing the Jeep Compass and that Defendant had superior knowledge of the
material facts of the 2.4L Engine Defect and actively concealed the
defect. Finally, the economic loss rule
does not apply to fraudulent inducement claims even if affirmative
misrepresentations or concealment is involved.
A fraudulent inducement cause of action based on
concealment requires a plaintiff to plead and prove: “(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.” (Rattagan v. Uber Technologies,
Inc. (2024) 17 Cal.5th 1, 40.) Fraud
must be pled with specificity, alleging “‘how, when, where, to whom and by what
means the representations were tendered.’”
(Stansfield v. Starkey (1990) 220 Cal.App.3d 59, 73 [quoting Hills
Trans. Co. v. Southwest (1968) 266 Cal.App.2d 702, 707].) Fraud claims against corporations must
“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.”
(Rattagan, supra, 17 Cal.5th at p. 40.)
1. The
complaint sufficiently pleads facts giving rise to Defendant’s duty to disclose
the Engine Defect.
Plaintiff sufficiently pleads a duty to disclose if the plaintiff
alleges (1) the omission was material; (2) the alleged defect was necessary for
the vehicle’s function, and (3) defendant is plaintiff’s fiduciary, has
exclusive knowledge of the material facts, actively conceals the material
facts, or makes misleading partial representations. (LiMandri, supra, 52
Cal.App.4th at p. 337.) “[A] vendor has
a duty to disclose material facts not only to immediate purchasers, but also
to subsequent purchasers when the vendor has reason to expect
that the item will be resold.” (OCM
Principal Opportunities Fund, L.P. v. CIBC World Markets Corp. (2007) 157
Cal.App.4th 835, 851.) However, the duty
to disclose to subsequent purchasers requires plaintiff to show the “seller” of
the product had reason fraud would be passed on to subsequent purchasers. (Geernaert v. Mitchell
(2007) 31 Cal. App. 4th 601, 605-609.)
The complaint adequately pleads that Defendant had a duty
to disclose because Plaintiff alleges that Defendant had superior and exclusive
knowledge of the Engine Defect. (Compl.,
¶¶ 25-26, 28-29, 66(a)-(c).) Plaintiff establishes
that the omission of the Engine Defect was material because the Engine Defect
was a safety concern that could suddenly affect a driver’s ability to control
the vehicle and cause the vehicle to fail without warning while moving at
highway speeds. (Compl., ¶ 20.) Plaintiff also alleges that Defendant knew
about the Engine Defect from “various internal sources,” including
pre-production testing data, early consumer complaints about the Engine Defect
made directly to Defendant and its network of dealers, and aggregate warranty
data compiled from Defendant’s network of dealers. (Compl., ¶ 65(a).) These sources were not available to Plaintiff
and other consumers. (Ibid.)
2. The
complaint fails to allege what the marketing materials said about the Engine
Defect.
It is sufficient for a plaintiff to allege that there was
a defect; that the car manufacturer knew of the defect and its hazards; that
the car manufacturer had exclusive knowledge of the defect and intentionally
concealed and failed to disclose that information; that the car manufacturer
intended to deceive the plaintiff by concealing the known defect; that
plaintiff would not have purchased the car if they had known of the defects;
and that plaintiff suffered damages in the form of money paid to purchase the
car. (See Dhital v. Nissan North
America, Inc. (2022) 84 Cal.App.5th 828, 844, review dismissed by Dhital
v. Nissan North America (2024) 559 P.3d 1083.) However, claims based on nondisclosure must
allege a concealed fact that is (1) contrary to a representation defendant
actually made, or (2) an omission of a fact the defendant was required to
disclose. (Hodsdon v. Mars (9th
Cir. 2018) 891 F.3d 857, 861.)
Although less specificity is required when “it appears
from the nature of the allegations that the defendant must necessarily possess
full information concerning the facts of the controversy” (Committee on
Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197,
217.),
Rattagan emphasized
that the heightened pleading standard is not relaxed for fraudulent concealment
claims based on a duty of disclosure. (Rattagan,
supra, 17 Cal.5th at p. 43. But see Dhital, supra, 84
Cal.App.5th at pp. 843-844.) The
complaint must also include specific allegations, including (1) the content of
the omitted facts, (2) defendant’s awareness of the materiality of those facts,
(3) the inaccessibility of the facts to plaintiff, (4) the general point at
which the omitted facts should or could have been revealed, and (5) justifiable
and actual reliance, either through action or forbearance, based on the
defendant’s omission. (Rattagan, supra,
17 Cal.5th at pp. 43-44; see also Bigler-Engler v. Breg, Inc. (2017) 7
Cal.App.5th 276, 312.) Conclusory
allegations that omissions were intentional for the purpose of defrauding and
deceiving a plaintiff are insufficient.
(Rattagan, supra, 17 Cal.5th at p. 44.)
Plaintiff’s complaint contains most of the allegations
needed to constitute a fraudulent concealment cause of action. However, the complaint fails to state what Defendant’s
marketing materials said about the 2020 Jeep Compass’s engine, other than
stating that Defendant did not disclose the Engine Defect to its sales
representatives or customers. (Compl., ¶¶
21, 23-24, 67.) Plaintiff’s fraudulent
concealment allegations are insufficient in this regard because Plaintiff fails
to plead specific statements. (Morgan
v. AT&T Wireless Services, Inc. (2009) 177 Cal.App.4th 1235, 1262.)
3. Economic Loss Rule
Defendant also argues that Plaintiff’s fraudulent
inducement claim is barred by the economic loss rule pursuant to Rattagan v.
Uber Technologies, Inc.
A fraudulent inducement cause of action would not be
barred by the economic loss rule. It is a long-standing principle in California
law that a party may recover for both breach of contract and fraud. (See Rattagan, supra, 17 Cal.5th
at p. 44; Dhital, supra, 84 Cal.App.5th at p. 840; Lazar v.
Superior Court (1996) 12 Cal.4th 631, 645; see also Freeman & Mills,
Inc. v. Belcher Oil Co. (1995) 11 Cal.4th 85, 108.) “Although punitive damages may not be awarded
where defendant merely breaches a contract . . . such damages may be awarded
where defendant fraudulently induces Plaintiffs to enter into a contract. Fraudulent inducement to enter into a contract
constitutes a tort.” (Kuchta v.
Allied Builders Corp. (1971) 21 Cal.App.3d 541, 549; see also Walker v.
Signal Companies, Inc. (1978) 84 Cal.App.3d 982, 996.)
According to Rattagan, “[i]f the alleged breach is
based on a failure to perform as the contract provides, and the parties
reasonably anticipated and allocated the risks associated with the breach, the
cause of action will generally sound only in contract because a breach deprives
an injured party of a benefit it bargained for. However, if the contract reveals the
consequences were not reasonably contemplated when the contract was entered and
the duty to avoid causing such a harm has an independent statutory or public
policy basis, exclusive of the contract, tort liability may lie.” (Rattagan, supra, 17 Cal.5th at
p. 276.)
In Lemon Law cases such as this, a party purchasing a
vehicle does not bargain with the expectation that the car manufacturer is
concealing known material defects from them.
The risks of such a concealment are not allocated within the
warranty. There are also public policy
reasons, exclusive of the contract, for not wanting a car manufacturer to
withhold information on such defects, including safety. Public policy views fraudulent concealment on
equal footing with affirmative misrepresentations. (Id. at p. 462.) These public policy reasons are exclusive of a
warranty contract, and therefore, tort liability would exist in such instances
of fraudulent concealment.
Therefore, the economic loss rule does not bar
Plaintiff’s fraudulent concealment cause of action.
However, Plaintiff’s allegations are insufficient to
state a fraudulent concealment claim—Plaintiff has not stated what the
marketing materials she viewed said.
Accordingly, the demurrer to the Sixth Cause of Action is
sustained with leave to amend.
CONCLUSION
Defendant’s demurrer to Plaintiffs’ Third and Sixth
Causes of Action is sustained with leave to amend.
Plaintiff has 30 days to file Amended Complaint.
Defendant FCA US, LLC to give notice.