Judge: Lee W. Tsao, Case: 23NWCV03464, Date: 2024-08-13 Tentative Ruling
Case Number: 23NWCV03464 Hearing Date: August 13, 2024 Dept: C
Francisco Soto vs Ford Motor
Company, et al.
Case No.: 23NWCV03464
Hearing Date: August 13, 2024 @ 9:30 a.m.
#6
Tentative Ruling
Defendants’ Demurrer is SUSTAINED with 10 days
leave to amend.
Defendants to give notice.
This lemon law action was filed on October 27, 2023 by Plaintiff
Francisco Soto (“Plaintiff”) alleging that Defendants Ford Motor, Co. and Ken
Grody Ford (“Defendants”) did not disclose and actively concealed defects
involving a 2019 Ford Ranger.
Plaintiff’s Complaint asserts the following causes of
action: (1) Violation of Civil Code § 1793.2(d); (2) Violation of Civil Code §
1793.2(b); (3) Violation of Civil Code § 1793.2(a)(3); (4) Breach of Implied
Warranty of Merchantability; (5) Fraudulent Inducement – Concealment; (6)
Negligent Repair; and (7) Violation of the Magnuson-Moss Warranty Act.
Defendant Ford demurs to the Fifth Cause of Action on the
grounds that the Complaint fails to allege facts sufficient to state a cause of
action and that it is barred by the economic loss rule. Defendant Ken Grody
demurs to the Sixth Cause of Action on the grounds that the Complaint fails to
allege facts sufficient to state a cause of action and that it is barred by the
economic loss rule.
Fifth Cause of Action – Fraudulent Inducement
(Concealment)
Defendant Ford argues that Plaintiff’s fifth cause of
action is barred by the economic loss rule.
Defendant also argues that Plaintiff does not allege any kind of a
fiduciary relationship with Ford.
Economic Loss Rule
In Dhital v. Nissan North America, Inc., wherein the
Court of Appeal held that the plaintiff’s claim for fraudulent inducement
(concealment) was not barred by the economic loss rule (Id. (2022) 84
Cal.App.5th 828, 837.) Similar to the instant case, the Dhital
plaintiffs alleged that “Nissan, by intentionally concealing facts about the
defective transmission, fraudulently induced them to purchase a car.” (Id.
at 838.). The Court of Appeal ruled that “Robinson did not hold that any
claims for fraudulent inducement are barred by the economic loss rule. Quite
the contrary, the Robinson court affirmed that tort damages are
available in contract cases where the contract was fraudulently induced.” (Id.
at 839.) “[A] defendant’s conduct in fraudulently inducing someone to enter a
contract is separate from the defendant’s later breach of the contract or
warranty provisions that were agreed to.” (Id.)
Here, Plaintiffs base their claim on Defendant’s alleged
presale concealment, which is distinct from Defendant’s alleged subsequent
breach of its warranty obligations. Accordingly, based on the existing
persuasive authority— Dhital, the Court finds that the economic loss
rule does not bar Plaintiff’s claim. This
court is aware that this very issue is pending before the Supreme Court in Rattagan
v. Uber Tech., Inc. (Case No. S272113) and in Kia v. Superior Court
(Case No. S273170). Until the Supreme
Court states otherwise, this court will follow Dhital for its
“potentially persuasive value” (CRC Rule 8.1115(e)(1)), and finds that
Plaintiffs’ claim is not barred by the Economic Loss Rule. The
Court proceeds to assess Defendant’s arguments related to the merits of
Plaintiffs’ claim.
Sufficiency
of Cause of Action
The elements of a
cause of action for intentional fraud are 1) misrepresentation (false
representation, concealment, or nondisclosure); 2) knowledge of falsity
(scienter); 3) intent to defraud or induce reliance; 4) justifiable reliance;
and 5) damages. (See Cal. Civ. Code §1709.)
“[T]he elements of a cause of action for fraud and deceit based on concealment
are: (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, (f) 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.” (Marketing West, Inc.
v. Sanyo Fisher (USA) Corp. (1992) 6 Cal.App.4th 603, 612-613.)
Fraudulent inducement is a viable tort
claim under California law. ‘The elements of fraud are (a) a misrepresentation
(false representation, concealment, or nondisclosure); (b) scienter or
knowledge of its falsity; (c) intent to induce reliance; (d) justifiable
reliance; and (e) resulting damage. Fraud
in the inducement is a subset of the tort of
fraud. It ‘occurs when ‘the promisor knows what he is signing but his consent
is induced by fraud, mutual assent is present and a contract is formed, which,
by reason of the fraud, is voidable.’” (Dhital v. Nissan North America, Inc.
(2022) 84 Cal.App.5th 828, 838-839.)
Here, ¶¶25-26, 58-64
allege that Defendant Ford concealed and failed to disclose facts relating to
the defects. ¶¶65-67 allege scienter and
intent to induce reliance based on concealment.
¶¶69-71 allege Plaintiff’s resulting damages.
The court finds that the Complaint alleges sufficient prior
knowledge at this pleading stage. Less specificity is required if it appears from the nature of
allegations that defendant must necessarily possess full information, or if the
facts lie more in the knowledge of opposing parties. (Alfaro v. Community Housing Improvement
System & Planning Assn., Inc. (2009) 171 Cal.App.4th 1356,
1384-1385.)
Agency
A duty to disclose only exists where there is some
relationship, whether fiduciary or transactional, between the parties, and that
such relationship must be alleged. (CACI 1901; Hoffman v. 162 North
Wolfe, LLC (2014) 228 Cal.App.4th 1178, 1187.)
A duty to disclose does not exist in all circumstances. The
tort of fraudulent concealment is only viable where it does. “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.]”’ (LiMandri v. Judkins
(1997) 52 Cal.App.4th 326, 336.)
Defendant argues that there is no transactional
relationship between itself and Plaintiff.
Plaintiff argues that Defendant expects its dealerships to sell its
vehicles to purchasers. Additionally,
citing Khan v. Shiley Inc. (1990) 217 Cal. App. 3d 848, 850-51,
Plaintiff states that privity of contract is not required for a deceit cause of
action. Plaintiff cites the following holding that addresses transactional
relationships and privity:
“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.”
(Dhital v. Nissan N. Am., Inc. (2022) 84 Cal. App.
5th 828, 844 (emphasis added).)
Here, however, Plaintiff fails to allege an agency
relationship between the manufacturer and the dealership.
Accordingly, the demurrer to the fifth cause of action is SUSTAINED
with 10 days leave to amend.
Sixth Cause of Action –Negligent Repair
Defendant
Ken Grody Ford argues
that Plaintiff’s Sixth Cause of Action for Negligent Repair is barred by the
economic loss rule because Plaintiff claims solely economic damages. (Mot., p. 4)
“Simply stated, the economic loss rule provides: ‘ “ ‘[W]here a purchaser's
expectations in a sale are frustrated because the product he bought is not
working properly, his remedy is said to be in contract alone, for he has
suffered only ‘economic’ losses.’ ” ’ ” (Robinson Helicopter Co., Inc. v.
Dana Corp. (2004) 34 Cal.4th 979, 988.)
Plaintiff argues there is an exception to the
economic loss rule where the contract involves services rather than the sale of
goods. (Opp., p. 14:12-14; North American Chemical Co. v. Superior Court (1997)
59 Cal.App.4th 764.) North American Chemical recognized the “fundamental
principle” that “accompanying every contract is a common-law duty to perform
with care, skill, reasonable expedience, and faithfulness the thing agreed to
be done, and a negligent failure to observe any of these conditions is a tort,
as well as a breach of contract.” (Id. at p. 774.)
Since North American Chemical was
decided, however, the California Supreme Court has narrowed the exceptions to
the economic loss rule. In Erlich v. Menezes (1999) 21 Cal.4th 543, the
court determined that homeowners could not recover tort damages for emotional
distress caused by a contractor’s negligent construction of their home. A
breach of contract is tortious “only when some independent duty arising from
tort law is violated. [citation] If every negligent breach of a contract gives
rise to tort damages, the limitation [upon tort damages] would be meaningless,
as would the statutory distinction between tort and contract remedies.” (Id.
at p. 554.) “The benefits of broad compensation must be balanced against the
burdens on commercial stability. ‘Courts should be careful to apply tort
remedies only when the conduct in question is so clear in its deviation from
socially useful business practices that the effect of enforcing such tort
duties will be … to aid rather than discourage commerce.’” (Ibid.
(citing Freeman & Mills, Inc. v. Belcher Oil Co. (1995) 11 Cal.4th
85, 109).)
The Robinson court held “the economic
loss rule does not bar [Plaintiff’s] fraud and intentional misrepresentation
claims because they were independent of [Defendant’s] breach of contract.” (Robinson
Helicoptor v. Dana Corp, supra, 34 Cal.4th 979, 991.) The court carved out
a “narrow” and “limited” exception to the economic loss rule, holding that “a
defendant's affirmative misrepresentations on which a plaintiff relies and
which expose a plaintiff to liability for personal damages independent of the
plaintiff's economic loss” is excluded from the economic loss rule. (Id.
at 993.) Here, Plaintiff alleges a claim for negligent repair which does not
fall within the narrow exceptions carved out by the California Supreme Court in
Robinson. Plaintiff does not allege that Audi engaged in any intentional
misconduct or made any affirmative misrepresentations. Nor does Plaintiff
adequately allege an independent duty giving rise to tort liability. (Erlich
v. Menezes, supra, 21 Cal.4th 543, 554.) As alleged, the Fifth Cause of Action
for Negligent Repair is barred by the economic loss rule.
As to damages, Plaintiff argues that the
Complaint does not affirmatively disclose that damages were suffered only in
the form of economic losses, and not property damage (i.e., to the car
itself). Given the Court’s finding that
the Sixth Cause of Action, as currently alleged, is barred by the economic loss
rule, the Court does not reach the issue of damages.
Defendant Ken
Grody Ford’s demurrer is SUSTAINED with 10 days leave to amend.