Judge Lynette Gridiron Winston, Case Number: 24PSCV00828, Date: 2024-09-10 Tentative Ruling

Judge: Lynette Gridiron Winston, Case: 24PSCV00828, Date: 2024-09-10 Tentative Ruling

Case Number: 24PSCV00828 Hearing Date: September 10, 2024 Dept: 6

CASE NAME: Adrian S. Pelina v. Ford Motor Company, et al.

Defendants' Motion for Judgment on the Pleadings

TENTATIVE RULING

The Court GRANTS the motion for judgment on the pleadings as to the Fifth Cause of Action without leave to amend. The Court DENIES the motion as to the Sixth Cause of Action. Defendant Puente Hills Ford is ordered to submit a Proposed Judgment of Dismissal within ten calendar days.

Defendant Ford Motor Company is ordered to give notice of the Court’s ruling within five calendar days of this order.

BACKGROUND

This is a lemon law case. On March 18, 2024, plaintiff Adrian S. Pelina (Plaintiff) filed this action against defendant Ford Motor Company (Ford), Puente Hills Ford (Puente Hills) (collectively, Defendants), and Does 1 through 10, 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, violation of subdivision (a)(3) of Civil Code section 1793.2, breach of the implied warranty of merchantability, negligent repair, and fraudulent inducement. On April 25, 2024, Defendants answered the complaint.

On July 30, 2024, Defendants moved for judgment on the pleadings. On August 27, 2024, Plaintiff opposed the motion. On September 3, 2024, Defendants replied.

LEGAL STANDARD

A defendant may move for judgment on the pleadings when the “complaint does not state facts sufficient to constitute a cause of action against that defendant.” (Code Civ. Proc., § 438, subds. (b)(1), (c)(1)(B)(ii).)

A motion for judgment on the pleadings tests the legal sufficiency of the complaint and is analyzed in all material respects as though it were a demurrer. (Wise v. Pacific Gas & Electric Co. (2005) 132 Cal.App.4th 725, 738; Kapsimallis v. Allstate Insurance Co. (2002) 104 Cal.App.4th 667, 672.)

“A motion for judgment on the pleadings performs the same function as a general demurrer, and hence attacks only defects disclosed on the face of the pleadings or by matters that can be judicially noticed.” (Cloud v. Northrop Grumman Corp. (1998) 67 Cal.App.4th 995, 999 [citations omitted].)

DISCUSSION

Meet and Confer

Per Code of Civil Procedure section 439, subdivision (a), Defendants were required to meet and confer in person or by telephone before bringing this demurrer. (Code Civ. Proc., § 439, subd. (a).) The Court finds Defendants’ efforts to meet and confer sufficient. (Liu Decl., ¶ 2.)

Fifth Cause of Action – Negligent Repair

To state a cause of action for negligence, the plaintiff must allege facts demonstrating the existence of a duty, breach of that duty, causation, and damages. (Seo v. All-Makes Overhead Doors (2002) 97 Cal.App.4th 1193, 1202.)

Defendants move for judgment as to the Fifth Cause of Action for negligent repair on the grounds that it fails to allege sufficient facts to state a cause of action and is barred by the economic loss rule. Defendants contend the economic loss rule bars this cause of action because it arises from and is not independent of the warranty contract. Defendants contend the complaint does not allege intentional conduct by Defendant Puente Hills or any physical damage to property or personal injury, but instead only seeks damages for the cost of the repair to the subject vehicle. Defendants also contend the economic loss rule applies to service contracts. Defendants contend the complaint does not allege facts evidencing damages or that Plaintiff paid out-of-pocket for any repairs performed by Puente Hills.

In opposition, Plaintiff contends the complaint alleges sufficient facts to state a cause of action for negligent repair, such as delivering the subject vehicle to Defendant Puente Hills for repairs, who breached its duty to use the proper skills. Plaintiff contends whether Plaintiff paid out-of-pocket for the work is irrelevant and that Plaintiff does not need to plead facts necessarily in the control of Puente Hills. Plaintiff further contends the economic loss rule does not bar this negligence claim, contending that the economic loss rule does not apply to negligent repair claims where subcomponents of a vehicle cause damage to a larger component or where the component causes damage to the vehicle in which it was incorporated.

The Court finds the complaint fails to allege sufficient facts to state a cause of action for negligent repair. The complaint alleges in a conclusory manner that Puente Hills owed Plaintiff a duty of care, that Puente Hills breached that duty, and that the breach damaged Plaintiff. (Compl., ¶¶ 68-72.) The complaint does not allege facts showing that Puente Hills owed Plaintiff a duty of care independent of the warranty agreement. (Compl., ¶ 11; see also Seo v. All-Makes Overhead Doors (2002) 97 Cal.App.4th 1193, 1202 [“Any duty of the repairer arises out of its contract with the owner to repair the equipment for a specified fee and no justification exists to extend that contractual duty beyond the intent of the contracting parties. That the repairer has superior knowledge and may recognize the design defect is not sufficient in and of itself to create a duty to third parties.”]) The complaint alleges that Puente Hills did not cause the transmission defect. (Compl., ¶¶ 26-32.) The complaint also does not allege facts demonstrating any damages different than that sought under the lemon law statutory violations. (See Compl., ¶¶ 68-72.)

The Court also agrees with Defendants that this cause of action would be barred by the economic loss rule. “Not all tort claims for monetary losses between contractual parties are barred by the economic loss rule. But such claims are barred when they arise from — or are not independent of — the parties’ underlying contracts. [Citation.]” (Sheen v. Wells Fargo Bank, N.A. (2022) 12 Cal.5th 905, 923.) As noted above, the complaint does not allege Puente Hills owed Plaintiffs a duty independent of the warranty agreement. (Compl., ¶ 11.) In fact, the complaint expressly alleges that Plaintiff’s causes of action are predicated upon those warranty obligations. (Id.) Therefore, the complaint fails to state a cause of action for negligent repair.

Based on the foregoing, the Court GRANTS the motion for judgment on the pleadings as to the Fifth Cause of Action without leave to amend.

Sixth Cause of Action – Fraudulent Inducement-Concealment

To plead a 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.]” (Hambrick v. Healthcare Partners Med. Grp., Inc. (2015) 238 Cal.App.4th 124, 162.) “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.)

Defendants demur to the Sixth Cause of Action for fraudulent inducement-concealment on the grounds that the complaint fails to state a cause of action and on the grounds that it is barred by the economic loss rule. Defendants contend Plaintiffs fail to plead the defect that Defendant Ford allegedly concealed. Defendants contend Plaintiff fails to allege a duty to disclose, such as a direct transactional relationship, Ford’s exclusive knowledge, active concealment, or that Ford made partial representations while suppressing material facts.

Defendants further contend this cause of action is barred by the economic loss rule. Defendants argue the complaint does not contain any allegations that Ford did not intend to honor its contractual promises when Plaintiffs entered into the warranty agreement, and that Plaintiffs’ fraud claim is the same as their warranty claims.

In opposition, Plaintiff contends that the heightened pleading standard for fraud claims is relaxed in cases of fraudulent concealment. Plaintiff contends to have alleged sufficient facts to comply with Dhital v. Nissan North America, Inc. (2022) 84 Cal.App.5th 828 (Dhital) for purposes of a fraudulent concealment claim. Plaintiff contends a direct transactional relationship is not required for the manufacturer to have a duty to disclose. Plaintiff also argues that the transmission defect is a material fact, that the transmission defect poses safety risks, and that the transmission defect arose during the warranty period. Plaintiff further contends that the economic loss rule does not bar a fraudulent concealment claim because the duty of fair dealing is independent of the contract and because the tortious conduct occurs before contract formation.

The Court finds that Plaintiff has alleged sufficient facts to state a cause of action for fraudulent concealment. First, the heightened pleading standard for fraud claims is relaxed for fraudulent concealment claims. (See Alfaro v. Community Housing Improvement System Planning Assn. (2009) 171 Cal.App.4th 1356, 1384.) Either way, the complaint alleges fraudulent concealment with sufficient specificity. The complaint identifies the material defects and facts that Ford allegedly knew and withheld from Plaintiff before purchasing the subject vehicle. (Compl., ¶¶ 74-81.) The complaint alleges facts showing that Ford had superior knowledge of the facts and how such knowledge was obtained, (Compl., ¶¶ 23-34, 74-80); the safety risks posed by the transmission defect, (Compl., ¶¶ 13, 33, 77); the materiality of that information, (Compl., ¶ 83); that Plaintiff was unaware of the concealed defect and would not have purchased the subject vehicle had Plaintiff known of the concealed defect, (Compl., ¶¶ 33, 79, 81, 83, 87); and that Ford intended to defraud Plaintiff by selling the subject vehicle to Plaintiff with its known transmission defects without disclosing them to Plaintiff, resulting in damages to Plaintiff, (Compl., ¶¶ 83, 86-88).

Second, with respect to a relationship imposing a duty to disclose, the Court finds the complaint adequately alleges the existence of a transactional relationship. (See LiMandri v. Judkins, supra, 52 Cal.App.4th at p. 336.) The Court reviewed Bigler-Engler v. Breg, Inc. (2017) 7 Cal.App.5th 276, 313-315, and is not persuaded otherwise at the pleading stage. The complaint alleges that Plaintiff and Ford entered into a warranty agreement for the subject vehicle. (Compl., ¶¶ 7-8, Ex. A.) As noted above, the complaint alleges that Ford was aware of the transmission defect before the subject vehicle was sold to Plaintiff but did not disclose that knowledge to Plaintiff. (Compl., ¶¶ 33, 74-83.) The Court also finds that OCM Principal Opportunities Fund, L.P. v. CIBC World Markets Corp. (2007) 157 Cal.App.4th 835 stands for the proposition that a manufacturer has a duty to disclose material facts to subsequent purchasers when the manufacturer has reason to expect that the item will be resold, which the Court finds applicable in the context of a manufacturer selling vehicles through a dealership. (See Id., at p. 851.)

Third, the Court finds that the economic loss rule does not bar this fraudulent concealment claim. The Court agrees with Defendants that the holding in Robinson Helicopter Co., Inc. v. Dana Corp. (2004) 34 Cal.4th 979, 993 (Robinson Helicopter) was limited to affirmative misrepresentations. However, the Court still finds that the economic loss rule does not apply to Plaintiff’s fraudulent concealment claim.

The California Supreme Court granted review in Dhital on February 1, 2023, such that Dhital no longer has precedential effect on the issue of the economic loss rule; however, it may be cited for persuasive value. (Cal. Rules of Court, rule 8.1115, subd. (e).) Defendant argues that the limited ruling in Robinson Helicopter should not extend to fraudulent omission claims.

The California Supreme Court in Robinson Helicopter specifically refused to address the issue of whether the economic loss rule applies to concealment. (Robinson Helicopter, supra, 34 Cal.4th at p. 991.) This issue is currently pending before the California Supreme Court in Rattagan v. Uber Technologies, review granted February 9, 2022, S272113. In Dhital, however, the Court of Appeal expressly found that the economic loss rule did not apply to the plaintiffs’ concealment claim, stating:

To hold, at the demurrer stage, that plaintiffs’ fraud claim is barred by the economic loss rule, we would need to conclude, as Nissan urges us to do, that (1) despite the Supreme Court's statement in Robinson, there is no exception to the economic loss rule for fraudulent inducement claims (or at least no exception that encompasses the claim plaintiffs allege in the SAC), or (2) plaintiffs have not adequately pleaded a claim for fraudulent inducement under California law …. We reject both arguments and conclude the economic loss rule does not bar plaintiffs’ claim.

(Dhital, supra, 84 Cal.App.5th at p. 839.) The Court of Appeal further stated:

Robinson left undecided whether concealment-based claims are barred by the economic loss rule. What follows from its analysis, however, is that concealment-based claims for fraudulent inducement are not barred by the economic loss rule. The reasoning in Robinson affirmatively places fraudulent inducement by concealment outside the coverage of the economic loss rule. We now hold that the economic loss rule does not cover such claims. First, as discussed, Robinson identified fraudulent inducement as an existing exception to the economic loss rule, before it proceeded to analyze the particular claims at issue in that case relating to fraud during the performance of a contract. [Citation.] For fraudulent inducement and the other existing exceptions listed in Robinson, “ ‘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.’ ” [Citation.]

In our view, that independence is present in the case of fraudulent inducement (whether it is achieved by intentional concealment or by intentional affirmative misrepresentations), because 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., at pp. 840-841.) This Court is persuaded by the reasoning in Dhital and similarly finds the duty exists independent of the contract. Plaintiff’s fraudulent concealment claim therefore falls outside the coverage of the economic loss rule.

Accordingly, the Court DENIES the motion for judgment on the pleadings as to the Sixth Cause of Action.

CONCLUSION

Defendant Ford Motor Company is ordered to give notice of the Court’s ruling within five calendar days of this order.