Judge Lynette Gridiron Winston, Case Number: 21PSCV00515, Date: 2023-10-16 Tentative Ruling

Judge: Lynette Gridiron Winston, Case: 21PSCV00515, Date: 2023-10-16 Tentative Ruling

Defendant Ford Motor Company’s Demurrer to Plaintiff’s First Amended Complaint

The Court OVERRULES the demurrer to the Sixth, Seventh and Eighth causes of action.

Defendant is ordered to file an answer to the FAC within 10 days of the date of this order.

This is a lemon law case. On June 21, 2021, Plaintiff Amin David Chacon (Plaintiff) filed this action against Defendant Ford Motor Company (Defendant) and Does 1 through 50. On June 26, 2023, Plaintiff filed the operative First Amended Complaint (FAC), alleging causes of action for violation of subdivision (d) of Civil Code section 1793.2, violation of subdivision (b) of Civil Code section 1793.2, subdivision (a)(3) of Civil Code section 1793.2, breach of express written warranty, breach of the implied warranty of merchantability, violations of the Consumer Legal Remedies Act (CLRA), violations of the Unfair Competition Law (UCL), and fraud by omission.

On August 4, 2023, Defendant filed the instant demurrer. On October 2, 2023, Plaintiff opposed. On October 9, 2023, Defendant replied.

A demurrer is a pleading used to test the legal sufficiency of other pleadings. It raises issues of law, not fact, regarding the form or content of the opposing party's pleading (complaint, answer or cross-complaint). (Code Civ. Proc., § 422.10; see Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994.) It is not the function of the demurrer to challenge the truthfulness of the complaint; and for purposes of ruling on the demurrer, all facts pleaded in the complaint are assumed to be true. (Id.)

A demurrer can be used only to challenge defects that appear on the face of the pleading under attack; or from matters outside the pleading that are judicially noticeable. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318; Donabedian, supra, 116 Cal.App.4th at p. 994.) No other extrinsic evidence can be considered. (Ion Equip. Corp. v. Nelson (1980) 110 Cal.App.3d 868, 881 [error for court to consider facts asserted in memorandum supporting demurrer]; see also Afuso v. United States Fid. & Guar. Co. (1985) 169 Cal.App.3d 859, 862 [disapproved on other grounds in Moradi-Shalal v. Fireman’s Fund Ins. Cos. (1988) 46 Cal.3d 287] [error to consider contents of release not part of court record].)

A demurrer can be utilized where the “face of the complaint” itself is incomplete or discloses some defense that would bar recovery. (Guardian North Bay, Inc. v. Superior Court (2001) 94 Cal.App.4th 963, 971-972.) The “face of the complaint” includes material contained in attached exhibits that are incorporated by reference into the complaint; or in a superseded complaint in the same action. (Frantz v. Blackwell (1987) 189 Cal.App.3d 91, 94; see also Barnett v. Fireman’s Fund Ins. Co. (2001) 90 Cal.App.4th 500, 505 [“[W]e rely on and accept as true the contents of the exhibits and treat as surplusage the pleader’s allegations as to the legal effect of the exhibits.”]).

A demurrer can only be sustained when it disposes of an entire cause of action. (Poizner v. Fremont General Corp. (2007) 148 Cal.App.4th 97, 119; Kong v. City of Hawaiian Gardens Redev. Agency (2003) 108 Cal.App.4th 1028, 1046.)

The Court DENIES Defendant’s request for judicial notice as to Exhibit 1. Defendant has not provided sufficient information to demonstrate that the proffered copy of the Retail Installment Sales Contract is not reasonably subject to dispute and is "capable of immediate and accurate determination by resort to sources of reasonably indisputable accuracy." (Evid. Code § 452, subd. (h).) The case law cited by Defendant in support of the request for judicial notice are both federal cases which are not binding on this Court, (see People v. Beltran (2013) 56 Cal.App.4th 935, 953, internal citations omitted), and also rely upon the Federal Rules of Evidence, which do not apply in this case. Also, the quotation Defendant attributed to Knievel v. ESPN (9th Cir. 2005) 393 F.3d 1068 is nowhere to be found in that case, nor is there any discussion of requests for judicial notice by the majority opinion therein. (See generally Id.) Even if the Court were to grant judicial notice, it would only be as to the “the existence, content and authenticity of public records and other specified documents”; it would not be as to the truthfulness of the factual matters asserted in those documents. (Dominguez v. Bonta (2022) 87 Cal. App. 5th 389, 400.)

The Court GRANTS Defendant’s request for judicial notice as to Exhibit 4. (Evid. Code § 452, subd. (a).)

Per Code of Civil Procedure section 430.41, subdivision (a), the parties were required to meet and confer in person or by telephone before bringing this demurrer. (Code Civ. Proc., § 430.41, subd. (a).) The Court finds the parties’ efforts to meet and confer sufficient.

A cause of action under the CLRA “must be stated with reasonable particularity, which is a more lenient pleading standard than is applied to common law fraud claims.” (Gutierrez v. Carmax Auto Superstore California (2018) 19 Cal.App.5th 1234, 1261.) The CLRA protects individuals engaging in consumer transactions. It prohibits “unfair methods of competition and unfair or deceptive acts or practices undertaken by any person in a transaction intended to result or which results in the sale or lease of goods or services to any consumer.” (Civ. Code, § 1770, subd. (a).) It sets forth twenty-seven (27) different “unfair or deceptive acts or practices” that may constitute a violation of the CLRA. (Ibid.) In assessing whether the representations made in the course of the consumer transaction violate the CLRA, courts use the reasonable consumer standard—i.e., whether a reasonable consumer would be misled by the representation. (Consumer Advocates v. Echostar Satellite Corp. (2003) 113 Cal.App.4th 1351, 1360.) To the extent an alleged violation is based on the defendant’s omission of a material fact, “to be actionable the omission must be contrary to a representation actually made by the defendant, or an omission of a fact the defendant was obliged to disclose.” (Daugherty v. American Honda Motor Co., Inc. (2006) 144 Cal.App.4th 824, 835.)

Defendant demurs to the Sixth cause of action on the grounds that it fails to state sufficient facts alleging a failure to provide sufficient service literature and replacement parts. The Court disagrees.

The Court finds that the majority of Defendant’s demurrer to the Sixth cause of action focuses on disputed facts rather than addressing the allegations, the latter of which the Court assumes the truth of on a demurrer. (Donabedian, supra, 116 Cal.App.4th at p. 994.) The Court does not resolve disputed facts on a demurrer. (Panterra GP, Inc. v. Superior Court of Kern County (2022) 74 Cal. App. 5th 697, 709.) Defendant’s moving papers also say very little about Plaintiff purportedly failing to allege sufficient facts regarding service literature and replacement parts.

The Court finds the FAC alleges sufficient facts to demonstrate that a reasonable consumer would have been misled here. (See Consumer Advocates, supra, 113 Cal.App.4th at p. 1360.) Plaintiff alleges that the subject vehicle had an engine defect involving excess consumption of oil, (FAC, ¶¶ 18-54), that this alleged defect was unreasonably dangerous because it could cause the engine to stall at any time during operation of the subject vehicle, (FAC, ¶ 26), that Defendant had a duty to disclose this information because Defendant knew of this information before Plaintiff purchased the subject vehicle, (FAC, ¶¶ 35-54), and that Defendant actively concealed and failed to disclose this information when the subject vehicle was sold to Plaintiff, (FAC, ¶¶ 102-110). Plaintiff also alleges that the technical service bulletins were only disclosed to dealerships; the FAC says nothing of their being disclosed to the public. (FAC, ¶¶ 35-36.) Even if they had been disclosed, Plaintiff alleges that the language in the technical service bulletins is written in a language not easily understood by lay persons. (FAC, ¶ 36.)

Moreover, Plaintiff can state a claim under the CLRA without having entered into a consumer transaction directly with Defendant. Plaintiff alleges that he purchased the subject vehicle manufactured by Defendant with an express written warranty by Defendant. (FAC, ¶¶ 6, 10.) As set forth above, Plaintiff alleges that Defendant knowingly and intentionally concealed known defects from Plaintiff and that such failures to disclose caused Plaintiff damage. (FAC, ¶¶ 18-54, 102-111.) This is sufficient to plead a "transaction" against Defendant. “[A] cause of action under the CLRA may be established independent of any contractual relationship between the parties," such as a claim against a manufacturer of a product, even where purchasers may not have bought the product from manufacturer but through independent distributors. (McAdams v. Monier, Inc. (2010) 182 Cal.App.4th 174, 186 [citing Chamberlan v. Ford Motor Co. (N.D. Cal. 2005) 369 F.Supp.2d 1138, 1144].)

Furthermore, Defendant’s reliance upon the case of Durkee v. Ford Motor Company (N.D. Cal. 2014) 2014 WL 4352184 is unavailing because it is an unpublished federal district court opinion, and therefore is not binding upon this Court. (Aguirre v. Amscan Holdings, Inc. (2015) 234 Cal.App.4th 1290, 1298 fn. 5.)[1] It is also factually distinguishable since the plaintiff in Durkee had only requested injunctive relief under the CLRA. (Durkee, supra, 2014 WL 4352184 at p. 3). Here, Plaintiff is requesting all available relief under the CLRA. (FAC, ¶ 112).

Based on the foregoing, the Court OVERRULES the demurrer to the Sixth cause of action.

California Business and Professions Code section 17200 prohibits “any unlawful, unfair or fraudulent business act or practice.” (Bus. & Prof. Code § 17200; see Clark v. Superior Court (2010) 50 Cal.4th 605, 610.) “An unlawful business practice or act is an act or practice, committed pursuant to business activity, that is at the same time forbidden by law.” (Klein v. Earth Elements, Inc. (1997) 59 Cal.App.4th 965, 969.) As for fraud, to establish a fraudulent practice under the UCL, the plaintiff must show that members of the public are likely to be deceived. (See West v. JPMorgan Chase Bank, N.A. (2013) 214 Cal.App.4th 780, 806.) Lastly, “[a] business practice is unfair within the meaning of the UCL if it violates established public policy or if it is immoral, unethical, oppressive or unscrupulous and causes injury to consumers which outweighs its benefits.” (McKell v. Washington Mutual, Inc. (2006) 142 Cal.App.4th 1457, 1473.)

Defendant demurs to the Seventh cause of action on the grounds that it fails to state sufficient facts alleging a failure to provide sufficient service literature and replacement parts. Defendant otherwise argues that Plaintiff has failed to allege sufficient facts to state a UCL cause of action. The Court disagrees.

The Court finds much of Defendant’s arguments here to be conclusory and still otherwise fail to address the purported issues with respect to service literature and replacement parts. As noted above, the FAC alleges facts demonstrating that Defendant was aware of engine defects in connection with the subject vehicle and that Defendant concealed and failed to disclose those defects when Plaintiff purchased the subject vehicle. (FAC, ¶¶ 18-54.) The Court finds Defendant’s arguments that the FAC lacks sufficient allegations to put Defendant on notice to be disingenuous. Plaintiff has provided extensive allegations regarding the engine defects at issue and Defendant’s failure to disclose those defects before Plaintiff purchased the subject vehicle. (Id.)

Moreover, since the Court found that Plaintiff alleged sufficient facts to state a cause of action under the CLRA, Plaintiff has also then alleged sufficient facts to state a cause of action under the UCL (FAC, ¶ 115) since the UCL is often predicated on other violations of law. “By proscribing ‘any unlawful’ business practice, ‘[Business and Professions Code] section 17200 ‘borrows’ violations of other laws and treats them as unlawful practices’ that the unfair competition law makes independently actionable. [Citation.] ‘Thus, a violation of another law is a predicate for stating a cause of action under the UCL's unlawful prong.’ [Citation.]” (Rubenstein v. The Gap, Inc. (2017) 14 Cal.App.5th 870, 879–880.)

Based on the foregoing, the Court OVERRULES the demurrer to the Seventh cause of action.

For fraudulent concealment, the plaintiff must allege facts demonstrating “’(1) concealment or suppression of a material fact; (2) by a defendant with a duty to disclose the fact to the plaintiff; (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 not have acted as he or she did if he or she had known of the concealed or suppressed fact; and (5) plaintiff sustained damage as a result of the concealment or suppression of the fact. [Citation.]’” (Daneshmand v. City of San Juan Capistrano (2021) 60 Cal.App.5th 923, 931–932, internal citations omitted). “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.]’ [Citation.]” (LiMandri v. Judkins (1997) 52 Cal.App.4th 326, 336.)

“’In transactions which do not involve fiduciary or confidential relations, a cause of action for non-disclosure of material facts may arise in at least three instances: (1) the defendant makes representations but does not disclose facts which materially qualify the facts disclosed, or which render his disclosure likely to mislead; (2) the facts are known or accessible only to defendant, and defendant knows they are not known to or reasonably discoverable by the plaintiff; (3) the defendant actively conceals discovery from the plaintiff.’ (Warner Construction Corp. v. City of Los Angeles (1970) 2 Cal.3d 285, 294, 85 Cal.Rptr. 444, 466 P.2d 996, italics added, fns. omitted.) Other cases have described the requisite relationship with the same term. (See, e.g., Hoffman v. 162 North Wolfe LLC (2014) 228 Cal.App.4th 1178, 1187, 175 Cal.Rptr.3d 820 (Hoffman); LiMandri, supra, 52 Cal.App.4th at p. 337, 60 Cal.Rptr.2d 539 [‘As a matter of common sense, such a relationship can only come into being as a result of some sort of transaction between the parties.’].)

Defendant demurs to the Eighth cause of action on the grounds that it fails to allege sufficient facts to state a cause of action for fraud. More specifically, Defendant contends there is no transactional relationship between Plaintiff and Defendant, the FAC lacks the requisite specificity necessary for a fraud claim, and the economic loss rule bars Plaintiff’s fraudulent concealment claim. The Court disagrees.

An actionable claim for fraud based on non-disclosure can be stated where the facts are known or accessible only to defendant, and defendant knows they are not known to or reasonably discoverable by the plaintiff. (Warner Construction Corp., supra, 2 Cal.3d at p. 294. The FAC alleges that Defendant committed fraud by failing to disclose to Plaintiff that the engine was defective, (FAC, ¶ 123), that Defendant knew the engine was inherently defective prior to the purchase (FAC, ¶ 124), that Defendant acquired knowledge of the engine defect through sources not available to consumers such as Plaintiff (FAC, ¶ 125.a.), that Defendant was in a superior position from various internal sources to know about the defects (FAC, ¶ 125.b), and that Plaintiff could not reasonably have been expected to learn of or discover the engine defects before purchasing the vehicle (FAC, ¶ 125.c.) These allegations, taken as true, are sufficient to establish a duty to disclose and an actionable claim for fraud by non-disclosure. The FAC also alleges extensive specific allegations regarding the engine defects at issue and Defendant’s failure to disclose those defects before Plaintiff purchased the subject vehicle.

Finally, Defendant argues that the Eighth cause of action for fraud by omission is barred by the economic loss rule. The economic loss rule posits that a purchaser of a product that does not live up to the buyer's expectations can only recover in contract and not tort, "unless [the purchaser] can demonstrate harm above and beyond a broken contractual promise." (Robinson Helicopter Company, Inc. v. Dana Corporation (2004) 34 Cal.4th 979, 988.) A tort claim for fraud must be sufficiently independent from a breach of contract claim for which the plaintiff suffered economic loss. (Id. at p. 991.) Thus, in order to plead around the economic loss rule, a party must plead the existence of a duty that arises independent of any contractual duty and independent injury, other than economic loss, that arises from the breach of that duty. (Robinson, supra, 34 Cal.4th at 988-91.)

In Robinson, the California Supreme Court carved out an exception to the economic loss rule, holding that claims for fraud and intentional misrepresentations, which are independent of the contract alleged to have been breached, are not barred by the economic loss rule.. (Robinson, supra, 34 Cal.4th at p. 991.) In Dhital v. Nissan North America, Inc. (2022) 84 Cal.App.5th 828, 838, the Court held that claims for fraudulent inducement by concealment are not barred by the economic loss rule. Here, this Court concludes that Plaintiff’s' claim for fraudulent omission is also not barred by the economic loss rule because the fraudulent exception applies.

Plaintiff alleges that Defendant, by intentionally concealing facts about the defective transmission, fraudulently induced him to purchase the subject vehicle. (FAC, ¶¶ 53, 127-129.) Plaintiff alleges that a reasonable person would have considered the engine defect important in deciding whether to purchase the vehicle and that had Plaintiff known that the vehicle had the engine defect, he would not have purchased the vehicle. (FAC, ¶¶ 127, 129.) These allegations are sufficient to show that the economic loss rule does not bar the claim for fraudulent omission.

Based on the foregoing, the Court OVERRULES the demurrer to the Eighth Cause of Action.

The Court OVERRULES the demurrer to the Sixth, Seventh and Eighth causes of action.

Defendant is ordered to file an answer to the FAC within 10 days of the date of this order.

[1] The Court also declines to address the parties’ respective arguments regarding other federal cases cited in support of or in opposition to the motion since they are not binding on this Court.