Judge Kerry Bensinger, Case Number: 24STCV12333, Date: 2024-11-19 Tentative Ruling

MOVING PARTY: Defendants Ford Motor Company and Cerritos Ford Inc. dba Norm Reeves Ford Superstore

On May 15, 2024, plaintiff Elgie Luse (Plaintiff) filed this Song-Beverly action against defendants Ford Motor Company (FMC) and Cerritos Ford Inc. dba Norm Reeves Ford Superstore (Dealership) (collectively, Defendants). In 202o, Plaintiff purchased a 2020 Ford F150 (the Vehicle) with an express warranty. As alleged in the Complaint, the Dealership failed to repair defects which presented in the Vehicle and FMC concealed the defects at the time of Plaintiff’s purchase. The Complaint alleges causes of action for (1) Violation of Subdivision (d) of Civil Code Section 1793.2, (2) Violation of Subdivision (b) of Civil Code Section 1793.2, (3) Violation of Subdivision (a)(3) of Civil Code Section 1793.2, (4) Breach of the Implied Warranty of Merchantability, (5) Negligent Repair, and (6) Fraudulent Inducement - Concealment. The fifth cause of action is the only cause of action asserted against the Dealership.

On June 17, 2024, Defendants filed this Demurrer to the fifth and sixth causes of action.

A demurrer for sufficiency tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747.) When considering demurrers, courts read the allegations liberally and in context, accepting the alleged facts as true. (Nolte v. Cedars-Sinai Medical Center (2015) 236 Cal.App.4th 1401, 1406.) “Because a demurrer challenges defects on the face of the complaint, it can only refer to matters outside the pleading that are subject to judicial notice.” (Arce ex rel. Arce v. Kaiser Found. Health Plan, Inc. (2010) 181 Cal.App.4th 471, 556.)

Defendants demur to the fifth and sixth cause of action. The court addresses the demurrers in turn.

The fifth cause of action for negligent repair is based on the following allegations: Plaintiff delivered the vehicle to the Dealership for substantial repair on at least one occasion (Complaint, ¶ 70); the Dealership owed a duty to use ordinary care and skill in storage, preparation and repair of the Vehicle in accordance with industry standards (Complaint, ¶ 71); the Dealership breached that duty (Complaint, ¶ 72); and the Dealership’s negligent breach of its duties owed to Plaintiff was a proximate cause of Plaintiff’s damages. (Complaint, ¶ 73.)

The Dealership argues the negligent repair claim fails for two reasons: (1) the economic loss rule bars Plaintiff’s negligent repair claim; and (2) Plaintiff does not allege the element of damages. The court agrees in considerable part with the Dealership’s second argument.

Here, Plaintiff fails to specify the type of damages she suffered because of the Dealership’s alleged negligence in either her complaint or her opposition brief. Plaintiff is required to allege specific facts showing that the Dealership’s negligence caused or contributed to a non-economic injury. (See County of Santa Clara v. Atlantic Richfield Co. (2006) 137 Cal.App.4th 292, 318 318 [“economic loss alone, without physical injury, does not amount to type of damage that causes negligence cause of action to accrue]; see also Seely v. White Motor Co. (1965) 63 Cal.2d 9, 17-18; Robinson Helicopter Co., Inc. v. Dana Corp. (2004) 34 Cal.4th 979, 988 (Robinson).) The negligent repair claim is not sufficiently pleaded.

Further, because it is not clear what damages Plaintiff suffered as a result of the Dealership’s negligence, the court cannot determine the merits of the Dealership’s economic loss argument.

The economic loss rule provides that, “[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.)¿¿¿ “California Courts define economic loss as ‘damages for inadequate value, costs of repair and replacement of the defective product or consequent loss of profits—without any claim of personal injury or damages to other property.’” (Department of Water & Power v. ABB Power T & D Co. (C.D .Cal. 1995) 902 F.Supp. 1178, 1186, fn. 4.) The economic loss rule requires a purchaser to recover in contract for purely economic loss due to disappointed expectations unless she can demonstrate harm above and beyond a broken contractual promise. (Robinson, supra, 34 Cal.4th at pp. 988, 993 [economic loss rule prevents law of contract and law of tort “from dissolving one into the other”].)

There exist four (4) exceptions to the economic loss rule barring recovery in tort in a breach of contract action: (1) where the breach of duty directly caused physical injury; (2) where there was a breach of the covenant of good faith and fair dealing in insurance contracts; (3) for wrongful discharge in violation of fundamental public policy; or (4) where the contract was fraudulently induced. (See Erlich v. Menezes (1999) 21 Cal.4th 543, 551-552; see Robinson, supra, 34 Cal.4th at pp. 989-990.)

Plaintiff argues an exception to the economic recovery loss rule applies to Plaintiff’s negligent repair claim. However, without properly identifying Plaintiff’s damages, the arguments are undeveloped. For instance, Plaintiff argues the economic loss rule does not necessarily bar recovery in tort for damage 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. However, there are no allegations of a defect in the Vehicle that caused damage to another portion of the Vehicle. The court sustains the demurrer to the fifth cause of action.

The Sixth Cause of Action is for Fraudulent Inducement – Concealment.¿ Fraud based on concealment requires that “(1) the defendant must have concealed or suppressed a material fact, (2) the defendant must have been under a duty to disclose the fact to the plaintiff, (3) the defendant must have intentionally concealed or suppressed the fact with the intent to defraud the plaintiff, (4) the plaintiff must have been unaware of the fact and would not have acted as he did if he had known of the concealed or suppressed fact, and (5) as a result of the concealment or suppression of the fact, the plaintiff must have sustained damage.”¿ (Bigler-Engler v. Breg, Inc.¿(2017) 7 Cal.App.5th 276, 310-311 (Bigler-Engler); CACI No. 1901.)¿ An essential element of intentional concealment includes the duty to disclose, which must be based upon a transaction, or a special relationship, between plaintiff and defendant.¿ (Id.¿at p. 314.) “[T]o establish fraud through nondisclosure or concealment of facts, it is necessary to show the defendant ‘was under a legal duty to disclose them.’”¿ (OCM Principal Opportunities Fund v. CIBC World Markets Corp. (2007) 157 Cal.App.4th 835, 845 (OCM Principal).)¿

FMC attacks Plaintiff’s fraudulent concealment claim.¿ Because the court finds that FMC’s argument as to the second element, duty to disclose, is dispositive, the court does not address FMC’s other challenges to the fraud claim.¿ FMC argues it had no duty to disclose because there was no direct transactional relationship between Plaintiff and FMC.¿

In¿Bigler-Engler, the plaintiff, Engler, injured her knee and had surgery.¿ After the surgery, the doctor recommended use of an “ice” machine.¿ The doctor prescribed the Polar Care 500 ice machine which was manufactured by defendant Breg, Inc (Breg).¿ The ice machine made things worse and caused additional injuries.¿ Engler sued Breg for intentional concealment.¿ The jury returned a verdict in plaintiff’s favor.¿ The Court of Appeal reversed finding that Breg did not owe Engler a duty of care. The¿Bigler-Engler¿Court described the circumstances that give rise to a duty of care as follows: ¿

“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. [Citation.] Where, as here, a fiduciary relationship does not exist between the parties, only the latter three circumstances may apply. These three circumstances, however, presuppose the existence of some other relationship between the plaintiff and defendant in which a duty to disclose can arise. [Citation.] A duty to disclose facts arises only when the parties are in a relationship that gives rise to the duty, such as seller and buyer, employer and prospective employee, doctor and patient, or parties entering into any kind of contractual arrangement.¿ [Citation.]”

(Bigler-Engler,¿supra, at p. 311 [cleaned up].) “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.”¿ (Id.¿at p. 312.)¿

Here, Plaintiff does not point to any allegation showing or otherwise suggesting direct dealings between FMC and Plaintiff.¿ Indeed, Plaintiff appears to concede as much by arguing that a direct transactional relationship is not required to give rise to a manufacturer’s duty to disclose material facts. For this proposition, Plaintiff cites¿OCM¿Principal,¿supra,¿157 Cal.App.4th 835.¿ Plaintiff misstates¿OCM Principal.¿ There, the Court of Appeal stated, “Where . . . there is no fiduciary relationship, the duty to disclose generally presupposes a relationship grounded in “some sort of transaction between the parties.” ¿(OCM Principal, at p. 859.)¿ This principle is consistent with¿Bigler-Engler. ¿

Based on the foregoing, the demurrers to the Fifth and Sixth Causes of Action are SUSTAINED. Leave to amend is GRANTED as to the fifth cause of action only.

Plaintiff is ordered to serve and file the First Amended Complaint within 30 days of the date of this order.

Kerry Bensinger

Judge of the Superior Court