Judge: Joel L. Lofton, Case: 24AHCV00345, Date: 2024-05-02 Tentative Ruling
Case Number: 24AHCV00345 Hearing Date: May 2, 2024 Dept: X
Tentative Ruling
Judge Joel L. Lofton,
Department X
HEARING DATE: May 2, 2024 TRIAL DATE: No date set.
CASE: IRENE GARCIA, et
al. vs FORD MOTOR COMPANY, et al.
CASE NO.: 24AHCV00345
DEMURRER
MOVING PARTY: Defendants Ford Motor Company and
Cerritos Ford, Inc. dba Norm Reeves Ford Superstore
RESPONDING PARTY: Plaintiffs
Irene Garcia and Sharon Griffith
SERVICE: Filed March 22, 2024
OPPOSITION: Filed April 19, 2024
REPLY: Filed April 24, 2024
RELIEF
REQUESTED
Defendants demur to Plaintiffs’ sixth cause of action for fraudulent
inducement, and fifth cause of action for negligent repair.
BACKGROUND
This is a lemon law case. Plaintiffs
allege that on December 16, 2019, they entered
into a warranty contract with Defendant Ford Motor regarding a 2019 Ford Ranger.
Plaintiffs allege that defects and nonconformities
to warranty manifested themselves within the applicable express warranty
period, including but not limited to, transmission defects and engine defects,
among other defects and non-conformities. Defendant
Ford Motor has failed to either promptly replace the subject vehicle or to
promptly make restitution in accordance with the Song-Beverly Act. Further,
Plaintiffs allege that prior to Plaintiffs purchasing the vehicle, Defendant Ford
Motor knew 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.
Plaintiff filed this action February
20, 2024, alleging causes of action for violations of the Song Beverly Act,
breach of implied warranty of merchantability, negligent repair, and fraudulent
inducement – concealment.
TENTATIVE RULING
Defendants’
demurrer to the sixth cause of action for fraudulent concealment is OVERRULED,
and the demurrer to the fifth cause of action for negligent repair is SUSTAINED
with leave to amend.
LEGAL STANDARD
A general
demurrer may be taken to a complaint where “[t]he pleading does not state facts sufficient to
constitute a cause of action.” (Code of Civ. Proc. § 430.10(e).) A demurrer for sufficiency tests whether the
complaint states a cause of action. (Hahn
v. Mirda (2007) 147 Cal. App. 4th 740, 747.) In a demurrer proceeding, the
defects must be apparent on the face of the pleading or by proper judicial
notice. (Code Civ. Proc. section
430.30(a).) A demurrer tests the pleadings alone and not the evidence or
other extrinsic matters. (SKF Farms v. Superior Court (1984) 153
Cal. App. 3d 902, 905.) The only issue involved in a demurrer hearing is
whether the complaint, as it stands, unconnected with extraneous matters,
states a cause of action. (Hahn v.
Mirda, supra, 147 Cal.App.4th 740, 747.)
Additionally, a
special demurrer to a complaint may be brought on the ground the pleading is
uncertain, ambiguous, or unintelligible. Code Civ. Proc section 430.10(f); Beresford Neighborhood Assn. v. City of
San Mateo (1989) 207 Cal.App.3d 1180, 1191.) A demurrer based
on uncertainty is disfavored and will be strictly construed even when the
pleading is uncertain in some respects. (Khoury v. Maly's of California, Inc. (1993) 14
Cal.App.4th 612, 616.) A demurrers based on uncertainty are “granted only if
the pleading is so incomprehensible that a defendant cannot reasonably
respond.” (Lickiss v. Financial Industry Regulatory Authority (2012) 208
Cal.App.4th 1125, 1135.)
DISCUSSION
Defendants demur to Plaintiffs’ sixth cause of action for fraudulent
inducement based on concealment and fifth cause of action for negligent repair.
Fraud
Economic Loss Rule
Under the economic loss rule, a plaintiff cannot recover
for purely economic losses—e.g. “damages for inadequate value, costs of repair
and replacement of the defect product or consequent loss of profits”—absent
physical injury to persons or damage to other property caused by the defect. (Jimenez
v. Sup. Ct (T.M. Cobb.) (2002) 29 Cal.4th 473, 481-84.) The doctrine was
created to ensure that tort and contract claims are kept separate and that tort
remedies cannot be recovered on a contract claim. It protects a manufacturer
from being “held liable for the level of performance of [its] products in the
consumer’s business unless [it] agrees that the product was designed to meet
the consumer’s demands.” (Id. at p. 482.)
Under the doctrine, a purchaser may only recover in
contract for purely economic loss due to disappointed expectations unless the
purchaser can demonstrate harm above and beyond the broken contractual promise.
(Robinson Helicopter Co., Inc. v. Dana Corp. (2004) 34 Cal.4th 979,
988.) However, tort damages are permitted in certain contract cases. (Id.
at pp. 989-990 [stating tort damages available for breach of the covenant of
good faith and fair dealing, wrongful discharge, or where the contract was
fraudulently induced.].) Additionally, 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. . .” (Id. at p. 990.)
Defendant relies heavily on unpublished, nonbinding,
district court cases to support its argument that the economic loss rule bars
omission and concealment-based fraud claims. However, the Court instead looks
to the persuasive authority in Dhital v. Nissan North America, Inc.
(2022) 84 Cal.App.5th 828, 989-90 [review granted, Feb. 1, 2023], where a
California appellate court specifically found that the economic loss rule, as
articulated in Robinson Helicopter Co., does not bar fraudulent
concealment claims. The Court thus rejects Ford Motor’s arguments regarding the
economic loss rule as it applies to the fraud cause of action. At this
point in time it cannot be said that the fraudulent concealment claim is barred
by the economic loss doctrine. If Dhital is
reversed while this action is pending, Defendant may revisit the issue.
Fraud Particularity
Procedurally, allegations of fraud “must be pled with more
detail than other causes of action.” (Apollo Capital Fund, LLC v. Roth
Capital Partners, LLC (2007) 158 Cal.App.4th 226.) “Every element of the
cause of action for fraud must be alleged . . . factually and specifically[,]
and the policy of liberal construction of the pleadings . . . will not
ordinarily be invoked to sustain a pleading defective in any material respect.
[Citations.]” (Committee on Children’s Television, Inc. v. General Foods
Corp. (1983) 35 Cal.3d 197, 216.) Accordingly, a plaintiff pleading fraud
must plead facts showing “how, when, where, to whom, and by what means” the
allegedly fraudulent representations were tendered. (Lazar v. Superior Court
(1996) 12 Cal.4th 631, 645.)
¿
Plaintiffs’ Complaint alleges that Defendant knew of, and
failed to disclose that there were serious defects with the transmission
installed in this car. (Complaint, ¶¶24-35.) Plaintiffs alleged that Defendant
was aware of the safety issues that this transmission creates, the ways that
the issue manifests for the driver, and that Defendants sold the car despite
being aware of the issues. (Ibid.) Plaintiffs allege that Defendant
acquired this knowledge prior to Plaintiffs purchasing the Vehicle through
various sources of information, including but not limited to 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. As a result of this internal knowledge and
investigations, Defendant FMC subsequently issued technical service bulletins
("TSBs") concerning the Transmission Defect. (Id. at ¶¶25-26.) The Court thus finds that Plaintiffs have pled fraudulent
concealment with adequate particularity.
Transactional Relationship
Defendant argues that Plaintiffs need to be in a direct
transactional relationship with Ford Motor to be owed a duty to disclose.
However, Defendant only cites a trial court case that is at best persuasive
authority that found the relationship of a manufacturer who also provided a
warranty to a car buyer is an insufficient relationship to create a duty to
disclose. However, in LiMandri v. Judkins (1997) 52 Cal.App.4th
326, 336-337, the appellate court found a duty to disclose can be founded on
“any kind of contractual agreement.” Here, Plaintiff alleged that Ford Motor
issued a warranty to Plaintiff, which is a contractual agreement. Thus,
Plaintiff has properly alleged a required relationship to create a duty to
disclose.
Duty to Disclose
Defendant argues that it did not owe Plaintiff a duty to
disclose the alleged transmission defects because they fail to plead
facts sufficient to establish that Ford Motor had exclusive knowledge, actively
concealed any material fact, or made any partial representation that could
plausibly trigger a duty to disclose. (Dem. at p. 7.)
However, as discussed above, Plaintiffs allege exclusive knowledge of the
specific defects with this transmission.
The Court also notes that Defendant’s argument that
Plaintiff needs to plead what exactly Defendants learned from their testing
data is supported only by an unpublished federal trial court decision out of
Michigan.
Accordingly, the demurrer to the sixth cause of action for
fraud is OVERRULED.
Negligent Repair
Economic Loss Rule
The economic loss doctrine precludes recovery in tort where
a plaintiff’s damages consist solely of alleged economic losses. (Seely v.
White Motor Co. (1965) 63 Cal.2d 9, 17-18.) The rule “prevents the law of
contract and the law of tort from dissolving one into the other” by preventing
recovery in tort for the breach of a contract when there has not been the
breach of a duty other than the duties arising from the contractual
obligations. (Robinson Helicopter, supra, 34 Cal.4th at 988, 991.) In other words,
in order to state a claim for negligence based on the breach of a warranty, the
plaintiff must plead that there was some other loss above and beyond the
economic loss engendered by the breach of warranty. Examples of damages that go
beyond economic loss – and to which the economic loss rule therefore does not
apply – include personal injuries and damage to other property that result from
the defective product. (Sacramento Regional Transit Dist. v. Grumman Flxible
(1984) 158 Cal.App.3d 289, 295.)
The economic loss rule bars recovery even in most service
contracts. Although some cases have found that the economic loss rule does not
apply to cases involving the negligent performance of services, (North
American Chemical Co. v. Superior Court (1997) 59 Cal.App.4th 764, 777-781
[holding the economic loss rule does not apply in cases involving the negligent
performance of services that results in foreseeable economic loss]; J’Aire
Corp. v. Gregory (1979) 24 Cal.3d 799, 804 [“Even when only injury to prospective
economic advantage is claimed, recovery is not foreclosed. Where a special
relationship exists between the parties, a plaintiff may recover for loss of
expected economic advantage through the negligent performance of a contract
although the parties were not in contractual privity.”],) in Sheen v. Wells
Fargo Bank, N.A. (2022) 12 Cal.5th 905, 922, the California Supreme Court
made the most recent, definitive statement on this issue. In Sheen, the
court found that the economic loss rule barred a borrower from pursuing tort
liability against the bank regarding seeking a loan modification. (Ibid.)
It found that the plaintiff could not recover in tort for damages that arose
from the mortgage, rather than an independent duty. (Id. at 930.) It
distinguished professional cases in which a quasi-fiduciary duty exists from
those that are merely typical commercial contracts. (Id at 929.) In this
case, there is no duty that the repairing dealership owed Plaintiffs other than
that imposed by the contract. Additionally, the damages that were allegedly
incurred because of the negligent repair appear to be fully recoverable through
a breach of contract action.
Subcomponent Exception
“‘California decisional law has
long recognized that the economic loss rule does not necessarily bar recovery
in tort for damage that a defective product (e.g., a window) causes to other
portions of a larger product (e.g., a house) into which the former has been
incorporated.’” (Opp. at p. 14, quoting Jimenez v. Superior Court
(2002) 29 Cal.4th 473, 483.) Plaintiffs argue that their allegations bring
their claim within the exception delineated in Jimenez.
Defendant argues in reply that
there is no allegation in the Complaint that Norm Reeves damaged a component of
a product. The Court agrees. The allegations fall short of pleading that
Defendant caused damage to any component of the vehicle beyond its allegedly
defective nature.
Based on the foregoing, the Court
finds that Plaintiffs’ claims against Defendant are for purely economic losses,
which are barred by the economic loss rule. Accordingly, the demurrer to the
fifth cause of action for negligent repair is SUSTAINED with leave to amend.
CONCLUSION
Defendants’
demurrer to the sixth cause of action for fraudulent concealment is OVERRULED,
and the demurrer to the fifth cause of action for negligent repair is SUSTAINED
with 20 days leave to amend.
Dated: May 2, 2024 ___________________________________
Joel
L. Lofton
Judge
of the Superior Court
Parties
who intend to submit on this tentative must send an email to the court
indicating their
intention
to submit. alhdeptx@lacourt.org