Judge: Lynette Gridiron Winston, Case: 24PSCV02140, Date: 2024-10-08 Tentative Ruling
Case Number: 24PSCV02140 Hearing Date: October 8, 2024 Dept: 6
CASE NAME: Edward A. Garcia v. Ford Motor Company, et al.
Defendant Ford Motor Company’s Demurrer to Plaintiffs’ [sic] Complaint
TENTATIVE RULING
The Court OVERRULES the demurrer to the Third and Sixth Causes of Action. Defendant Ford Motor Company must file an answer to the complaint within 10 days of the Court’s order.
Plaintiff 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 July 3, 2024, plaintiff Edward A. Garcia (Plaintiff) filed this action against defendants Ford Motor Company (Ford), Ken Grody Ford – Buena Park (Ken Grody), 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, fraudulent inducement – concealment, and negligent repair.
On August 9, 2024, Ford demurred to the complaint. On September 24, 2024, Plaintiff opposed the demurrer. Ford did not reply.
LEGAL STANDARD
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 (Donabedian).) 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. at pp. 993-994.)
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 pleading, cause of action, or affirmative defense. (See Cal. Rules of Court, rule 3.1320, subd. (a); 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, 1046-1047.)
DISCUSSION
Meet and Confer
Per Code of Civil Procedure section 430.41, subdivision (a), Ford was required to meet and confer in person, by telephone, or by video conference before bringing this demurrer. (Code Civ. Proc., § 430.41, subd. (a).) The Court finds Ford’s efforts to meet and confer sufficient. (Cronin Decl., ¶¶ 3-4.)
Third Cause of Action – Violation of subdivision (a)(3) of Civil Code section 1793.2
“(a) Every manufacturer of consumer goods sold in this state and for which the manufacturer has made an express warranty shall:… (3) Make available to authorized service and repair facilities sufficient service literature and replacement parts to effect repairs during the express warranty period.” (Civ. Code, § 1793.2, subd. (a)(3).) Statutory violations must be pleaded with particularity. (Covenant Care, Inc. v. Superior Ct. (2004) 32 Cal.4th 771, 790.)
Ford demurs to the Third Cause of Action for violation of subdivision (a)(3) of Civil Code section 1793.2 on the grounds that it fails to state sufficient facts alleging a failure to provide sufficient literature and replacement parts. Ford contends the complaint only states generalized recitations of the Civil Code and conclusions of law, and that there are no facts to give Ford an idea of what portion of the Civil Code was violated. Ford contends Plaintiff failed to allege what parts or literature were not available at any repair facilities. Ford further contends this cause of action fails to allege any facts regarding damages.
In opposition, Plaintiff contends the complaint alleges that repairs were unsuccessfully attempted on the subject vehicle, and that the technical service bulletins provided failed to resolve the problems with the subject vehicle. Plaintiff further contends that Ford’s argument regarding what parts or literature were not available at any repair facilities is unavailing because only Ford has that information.
The Court finds the complaint alleges sufficient facts to state a cause of action for violation of subdivision (a)(3) of Civil Code section 1793.2. The complaint alleges that Ford issued various technical service bulletins regarding the transmission defects, and that that they failed to fix that defect. (Compl., ¶¶ 25-32.) Moreover, the Court finds persuasive Plaintiff’s contention that Ford, as the manufacturer of the subject vehicle, would be in the best position to know what necessary information and parts were not produced or provided to repair facilities. Less particularity is required when the defendant may be assumed to know as much as, if not more than, the plaintiff. (Rutherford Holdings, LLC v. Plaza Del Rey (2014) 223 Cal.App.4th 221, 236.)
Based on the foregoing, the Court OVERRULES the demurrer to the Third Cause of Action.
Fifth 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.)
For a fraudulent concealment claim, “the complaint must also include specific allegations establishing all the required elements, including (1) the content of the omitted facts, (2) defendant's awareness of the materiality of those facts, (3) the inaccessibility of the facts to plaintiff, (4) the general point at which the omitted facts should or could have been revealed, and (5) justifiable and actual reliance, either through action or forbearance, based on the defendant's omission.” (Rattagan v. Uber Techs., Inc. (2024) 553 P.3d 1213, 1240 (Rattagan).)
Ford demurs to the Sixth Cause of Action for fraudulent inducement-concealment on the grounds that it fails to state sufficient facts alleging fraud. Ford contends there is no transactional relationship between Ford and Plaintiff, as Ford did not sell the subject vehicle to Plaintiff; rather, Plaintiff purchased it from a dealer, who is an entity separate from Ford, so Ford had no duty to disclose. Ford contends Plaintiff’s claim does not contain specific allegations of agency. Ford also contends the complaint fails to identify any individual authorized to speak on Ford’s behalf.
Ford then contends Plaintiff has not pleaded facts with the requisite specificity. Ford contends the complaint fails to explain how Plaintiff’s complaints regarding the transmission were due to Ford’s statements or that Plaintiff relied on any communications with Ford about the transmission before he purchased the subject vehicle. Ford contends Plaintiff’s claim here is improperly based on an assumption that Ford would sell or lease vehicles with a known defect, and that Ford’s only alleged misconduct here is inaction and silence regarding the purported transmission defects. Ford also contends the complaint is self-defeating because it includes publicly available technical service bulletins.
Ford further contends the economic loss rule bars Plaintiff’s fraudulent concealment claim because it arises from the alleged breach of warranty claim, and the only alleged harm is that Plaintiff would not have leased or purchased the subject vehicle had he known about the transmission defect. Ford contends the economic loss rule bars fraudulent concealment claims that are not based on affirmative misrepresentations, and Plaintiff has not alleged any affirmative misrepresentations. Ford also contends that the complaint contains no facts demonstrating that authorized dealers acted as Ford’s agent in executing the sales contracts.
In opposition, Plaintiff contends the complaint sufficiently alleges facts to support a claim for fraudulent inducement under Dhital v. Nissan North America, Inc. (2022) 84 Cal.App.5th 28 (Dhital). Plaintiff contends he alleged he entered into a warranty contract with Ford, identified the material facts Ford knew before Plaintiff purchased the subject vehicle and with held from Plaintiff, that Ford had superior knowledge, the safety risks posed by the transmission defect, the materiality of that information, Plaintiff’s reliance on the non-disclosure, and damages.
Plaintiff then contends a transactional relationship does not require privity of contract for the manufacturer to have a duty to disclose, and that the complaint adequately pleaded Ford had exclusive knowledge of the true extent of the transmission defect, and actively concealed this information with the intent to induce Plaintiff and others into purchasing the subject vehicle. Plaintiff further contends the transmission defect is a material fact, the transmission defect poses safety risks, and the transmission defect arose during the warranty period.
Plaintiff further contends the economic loss rule does not bar Plaintiff’s fraudulent inducement claim. Plaintiff cites the recent California Supreme Court decision in Rattagan and contends that case makes clear the economic loss rule does not apply to claims for fraudulent concealment claims. Plaintiff also contends that the test set forth in Rattagan regarding fraud in the performance of the contract does not apply here because Plaintiff’s claim is based on fraud in the inducement.
The Court finds the complaint alleges sufficient facts to state a cause of action for fraudulent concealment. The complaint identifies the material defects and facts that Ford allegedly knew and withheld from Plaintiff before purchasing the subject vehicle. (Compl., ¶¶ 71-85.) The complaint alleges facts showing that Ford had superior knowledge of the facts and how such knowledge was obtained, (Compl., ¶¶ 25-31, 71-85); the safety risks posed by the transmission defect, (Compl., ¶¶ 13, 33, 74, 76-78); the materiality of that information, (Compl., ¶ 80); 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, 76, 80); 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., ¶¶ 77, 79, 83-85).
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 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, 71-85.) Also, under OCM Principal Opportunities Fund, L.P. v. CIBC World Markets Corp. (2007) 157 Cal.App.4th 835, 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. In the recently issued Rattagan decision, the California Supreme Court addressed the question left unanswered in Robinson Helicopter Co., Inc. v. Dana Corp. (2004) 34 Cal.4th 979 regarding the applicability of the economic loss rule in the context of a fraudulent concealment claim, and held that:
[T]he economic loss doctrine applies when the parties have entered into a contract; the plaintiff sues for tort damages, alleging defendant failed to perform as the contract requires; and negligently caused economic losses flowing from the breach. In such a case, plaintiffs are generally limited to recovery of those economic damages and cannot seek to expand their remedies beyond those available in contract. The doctrine does not apply if defendant's breach caused physical damage or personal injury beyond the economic losses caused by the contractual breach and defendant violated a duty flowing, not from the contract, but from a separate, legally recognized tort obligation.
A case in which the plaintiff sues a contractual party for fraud based on conduct committed during the course of a contractual relationship falls outside the economic loss doctrine.
(Rattagan, supra, 553 P.3d at pp. 1240-1241, italics in original.)
The analysis from Rattagan focuses on whether the cause of action can be alleged independently of the parties’ contractual rights and obligations. (Ibid.) Given the Court’s finding that the complaint sufficiently alleges Ford has a duty to disclose as a manufacturer, the Court also finds Plaintiff’s fraudulent concealment claim is independent of the parties’ alleged contractual relationship, and therefore falls outside the scope of the economic loss rule.
Based on the foregoing, the Court OVERRULES the demurrer to the Sixth Cause of Action.
CONCLUSION
The Court OVERRULES the demurrer to the Third and Sixth Causes of Action. Defendant Ford Motor Company must file an answer to the complaint within 10 days of the Court’s order.
Plaintiff is ordered to give notice of the Court’s ruling within five calendar days of this order.