Judge: Lee W. Tsao, Case: 23NWCV03541, Date: 2024-02-22 Tentative Ruling

Case Number: 23NWCV03541    Hearing Date: February 22, 2024    Dept: C

MELLO-NAVEJAS v. FORD MOTOR COMPANY

CASE NO.:  23NWCV03541

HEARING:  02/22/24

 

#5

 

Defendants FORD MOTOR COMPANY’s and NORM REEVES FORD’s Demurrer to Plaintiff’s Complaint is OVERRULED in part and SUSTAINED with 15 days leave to amend in part.

 

Moving Party to give notice.

 

This “lemon law” action was filed by KATHLEEN MELLO-NAVEJAS (“Plaintiff”) on November 2, 2023. Plaintiff alleges that Ford Motor Company (“Defendant” or “Ford”) did not disclose and actively concealed defects involving Ford’s Transmission Defect affecting Plaintiff’s 2018 Ford Expedition vehicle. (See e.g., Complaint  ¶¶9, 36.) Defendant Norm Reeves Ford Superstore (“Defendant” or “Norm”) is alleged to be the dealership wherein Plaintiff purchased the subject vehicle.

 

Plaintiff’s Complaint asserts the following causes of action:

 

(1) Violation of Cal. Civ. Code §1793.2

(2) Violation of Cal. Civ. Code §1793.2(b)

(3) Violation of Cal. Civ. Code §1793.2(A)(3)

(4) Breach of the Implied Warranty of Merchantability

(5) Fraudulent Inducement – Concealment

(6) Negligent Repair

(7) Violation of the Maguson-Moss Warranty Act

 

Defendants generally demur to the fifth and sixth causes of action.

 

Fifth Cause of Action – Fraudulent Inducement (Concealment)

 

Defendants argue that Plaintiff’s fifth cause of action is barred by the 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, Plaintiff basis 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 Plaintiff’s claim is not barred by the Economic Loss Rule. The Court proceeds to assess Defendant’s arguments related to the merits of Plaintiff’s claim.

 

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, Plaintiff alleges at ¶¶ 36, 67-71 that Defendant concealed and failed to disclose facts relating to the defects.  ¶¶ 65-66 alleges scienter and intent to induce reliance based on concealment.  ¶71 alleges 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.)

 

The Demurrer to the fifth cause of action is OVERRULED.

 

Sixth Cause of Action – Negligent Repair

 

Defendant argues that Plaintiff’s sixth cause of action, as alleged, is barred by the economic loss rule.

 

The economic loss rule provides that “where a purchaser’s expectations in a sale are frustrated because the product he bought is not working properly, his [or her] remedy is said to be in contract alone, for he [or she] has suffered only economic losses.”  (Robinson Helicopter Company v. Dana Corporation (2004) 34 Cal.4th 979, 988.)  “Tort damages have been permitted in contract cases where a breach of duty directly causes physical injury; for breach of the covenant of good faith and fair dealing in insurance contracts; for wrongful discharge in violation of fundamental public policy; or where the contract was fraudulently induced…. in each of these cases, the duty that gives rise to tort liability is either completely independent of the contract or arises from conduct which is both intentional and intended to harm.”  (Robinson, supra, 34 Cal.4th at 989–990.)

 

In Robinson, the California Supreme 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.  (Robinson, supra, 34 Cal.4th 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 Defendant engaged in any intentional misconduct or made any affirmative misrepresentations. As alleged, the economic loss rule bars Plaintiff’s recovery under the sixth cause of action.

 

The demurrer to the sixth cause of action is SUSTAINED with 15 days leave to amend. In the interests of justice, 15 days leave to amend is GRANTED.