Judge Lynette Gridiron Winston, Case Number: 24PSCV04377, Date: 2025-03-25 Tentative Ruling

Judge: Lynette Gridiron Winston, Case: 24PSCV04377, Date: 2025-03-25 Tentative Ruling

Defendants Ford Motor Company and Colley Ford’s Demurrer to Plaintiff’s Complaint

The Court SUSTAINS Defendants’ demurrer to the Fifth Cause of Action without leave to amend. The Court OVERRULES the demurrer to the Sixth Cause of Action. Defendant Colley shall submit an order of dismissal and Defendant Ford shall file an answer to the complaint within 10 calendar days.

Defendants are ordered to give notice of the Court’s ruling within five calendar days of this order.

This is a lemon law case. On December 19, 2024, plaintiff George Young (Plaintiff) filed this action against defendants Ford Motor Company, Colley Ford (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-concealment.

On February 11, 2025, Defendants demurred to the complaint. On March 12, 2025, Plaintiff opposed the demurrer. On March 18, 2025, Defendants 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 (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.)

Per Code of Civil Procedure section 430.41, subdivision (a), Defendants were 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 Defendants’ efforts to meet and confer sufficient. (Patel Decl., ¶ 2.)

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 demur to the Fifth Cause of Action for negligent repair on the grounds that Plaintiff fails to allege facts sufficient to state a cause of action and on the grounds that it is barred by the economic loss rule.[1] Defendants contend the crux of Plaintiff’s claim is that Colley failed to repair Plaintiff’s vehicle to conform to the warranty, which arises from and is not independent of the warranty contract, and that there are no allegations of any such independent duty or physical damage or personal injury. Defendants contend Plaintiff only seeks damages for the cost of the repair to the subject vehicle. Defendants also contend that the economic loss rule applies to service contracts per Sheen v. Wells Fargo Bank, N.A. (2022) 12 Cal.5th 905 (Sheen). Defendants then contend that Plaintiff’s negligent repair claim fails to plead facts showing that Colley’s conduct resulted in any damages.

In opposition, Plaintiff contends that he alleged he delivered the vehicle to Colley for repairs, Colley breached the duty to use skill and care, and that breach was a proximate cause of Plaintiff’s damages. Plaintiff contends whether he paid out of pocket for the repair work is irrelevant, and that the complaint puts Colley sufficiently on notice of Plaintiff’s claim. Plaintiff then contends the economic loss rule does not bar Plaintiff’s negligent repair claim, and that the complaint does not affirmatively disclose that the damages alleged are only economic losses. Plaintiff contends Colley agreed to perform repairs on Plaintiff’s vehicle, which imposed an implied duty of care, and breaching that duty of care and causing damage gives rise to a cause of action.

The Court finds the complaint does not allege sufficient facts to support a claim for negligent repair. The complaint alleges in a conclusory manner that Colley owed Plaintiff a duty of care, and that Colley breached its duty of care by failing to properly store and repair the subject vehicle. (Compl., ¶¶ 58-62.) The complaint does not allege facts demonstrating that Colley owed Plaintiff a duty of care independent of the warranty agreement. (See Compl., ¶ 11.) “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.” (Seo v. All-Makes Overhead Doors (2002) 97 Cal.App.4th 1193, 1202.) The complaint does not allege that Colley caused the transmission defect, or any facts demonstrating damages other than those sought under the lemon law statutory violations. (Compl., ¶¶ 24-35; 58-62.)

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 Colley owed Plaintiff a duty of care independent of the warranty agreement. In fact, the complaint expressly alleges that Plaintiff’s causes of action are predicated upon those warranty obligations. (Compl., ¶¶ 11, 58-62.) Moreover, the Court finds that the exceptions to the economic loss rule do not apply to the repair of a motor vehicle. Therefore, the complaint fails to state a cause of action for negligent repair.

Based on the foregoing, the Court SUSTAINS the demurrer to the Fifth Cause of Action without leave to amend.

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.) A complaint for fraudulent concealment “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) 17 Cal.5th 1, 43-44 (Rattagan).)

Defendants demur to the Sixth Cause of Action for fraudulent inducement-concealment on the grounds that it fails to state a cause of action and on the grounds that Plaintiff cannot establish the elements of his fraudulent concealment claim independently of the parties’ contractual rights and obligations.[2] Defendants contend Plaintiff fails to allege the content of omitted facts by failing to allege with particularity the defect Ford allegedly concealed and by failing to identify by name who made the alleged omissions when he purchased the subject vehicle.

Defendants then contend Plaintiff fails to allege facts to establish a duty to disclose, as Plaintiff has not pleaded a fiduciary relationship or direct transactional relationship with Ford. Defendants contend that the warranty alone is insufficient to create the requisite transactional relationship, and there is no evidence that Plaintiff purchased the vehicle directly from Ford, interacted with Ford when purchasing the subject vehicle from an independent dealership, or that the purchase from an independent dealership benefited Ford. Defendants contend Plaintiff fails to plead Ford had exclusive knowledge of the purported transmission defect at the time of sale to trigger a duty to disclose, but that Plaintiff’s claim is based on conclusory allegations. Defendants then contend Plaintiff fails to plead active concealment, but instead relies on generic facts and fails to allege with any specificity the information Ford is alleged to have concealed.

Defendants further contend Plaintiff fails to allege justifiable and actual reliance. Defendants contend Plaintiff’s allegations here are general and conclusory, and therefore inadequate to meet the heightened pleading standard applicable to fraud claims. Defendants contend that in providing an express warranty, Ford informed Plaintiff that the vehicle could be defective.

Finally, Defendants contend Plaintiff’s fraudulent concealment claim is barred by the economic loss rule under Rattagan. Defendants contend the warranty contract shows Plaintiff cannot establish that Ford’s injury-causing conduct violated a duty that is independent of the duties and rights assumed by the parties when he entered into the warranty contract, and that the Ford’s conduct must have caused injury that was not reasonably contemplated by the parties when the contract was formed. Defendants contend the risk that the transmission might be defective is one of the risks contemplated by the warranty. Defendants contend Plaintiff’s claim is based on disappointed expectations under the warranty contract, not on any physical injury or property damages outside of the vehicle itself.

In opposition, Plaintiff contends to have sufficiently alleged the elements of a fraudulent concealment claim under Dhital v. Nissan N. Am., Inc. (2022) 84 Cal.App.5th 828 (Dhital) by alleging misrepresentation/concealment, knowledge of falsity, intent to induce reliance, justifiable reliance, and damages. Plaintiff contends he alleged that he entered into a warranty relationship with Ford around May 26, 2021, that he identified the material facts Ford knew and withheld before Plaintiff purchased the vehicle, Defendant had superior knowledge of the facts, 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 that a transactional relationship does not require privity of contract for the manufacturer to have a duty to disclose. Plaintiff contends to have adequately pleaded that Ford had exclusive knowledge of the true extent of the transmission defect and actively concealed that information to induce Plaintiff to purchase the subject vehicle. Plaintiff contends the transmission defect is a material fact, poses safety risks, and arose during the warranty period.

Plaintiff further contends that his fraudulent inducement-concealment claim is not barred by the economic loss rule. Plaintiff contends Rattagan addressed fraud in the performance, whereas Plaintiff’s claim here is about fraud in the inducement. Plaintiff contends to have alleged that the duty Ford breached is the duty in tort of fair dealing, which bars pre-sale suppression of information. Plaintiff then contends that the Rattagan test is inapplicable because the scope of the transaction is for the purchase of a vehicle without known material defects, Ford has an independent tort duty to refrain from fraudulent practices in the sale of its vehicles, and the tort elements of fraudulent inducement through concealment are independent of the rights and duties assumed by the parties.

The Court finds the complaint alleges sufficient facts to state a cause of action for fraudulent concealment. The complaint satisfies the heightened pleading requirement. The complaint identifies the material defects and facts that Ford allegedly knew and withheld from Plaintiff before purchasing the subject vehicle. (Compl., ¶¶ 24-35, 63-78.) The complaint alleges facts showing that Ford had superior knowledge of the facts and how such knowledge was obtained, (Compl., ¶¶ 24-35, 66-70); the safety risks posed by the transmission defect, (Compl., ¶¶ 69, 77-78); the materiality of that information, (Compl., ¶¶ 71-74); that Plaintiff was unaware of the concealed defect and would not have leased or purchased the subject vehicle had Plaintiff known of the concealed defect, (Compl., ¶¶ 74, 77); 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., ¶¶ 65-66, 69, 71-74.) The Court of Appeal in Dhital found similar allegations sufficient to withstand demurrer. (Dhital, supra, 84 Cal.App.5th at p. 844.) This Court likewise finds these allegations sufficient, and satisfy the pleading requirements set forth in Rattagan, including the content of the omitted facts. (Rattagan, supra, 17 Cal.5th at pp. 43-44.)

The Court also finds the complaint adequately alleges a relationship imposing a duty to disclose. 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.) The complaint alleges that Plaintiff and Ford entered into a warranty agreement for the subject vehicle, and 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., ¶¶ 7-8, 24-35, 65-74, Ex. A.) The complaint also alleges facts demonstrating that Plaintiff relied on Ford’s nondisclosure when purchasing the vehicle, as Plaintiff alleges he would not have purchased the vehicle had he known about the defect. (Compl., ¶¶ 73-74.) The Court of Appeal in Dhital found similar allegations sufficient to withstand demurrer. (Dhital, supra, 84 Cal.App.5th at p. 844.) This Court also finds them sufficient.

The Court further finds that the economic loss rule does not bar Plaintiff’s fraudulent inducement-concealment claim. “[T]he economic loss rule does not apply to limit recovery for intentional tort claims like fraud,” but applies instead to negligently inflicted economic losses devoid of physical or property damage. (Rattagan, supra, 17 Cal.5th at p. 38.) This cause of action is an intentional tort fraud claim. Given the Court’s finding that the complaint alleges sufficient facts to state a cause of action for fraudulent inducement-concealment, the Court also finds this cause of action falls outside the scope of the economic loss rule.

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

Defendants are ordered to give notice of the Court’s ruling within five calendar days of this order.

[1] The Court notes that the demurrer is not entirely clear as to who is demurring to this cause of action. On the one hand, the preamble sentence says Ford and Colley are demurring to the complaint, but the language that follows indicates only Ford is demurring to this cause of action. (See Demurrer, p. 3 of pdf.) The Court assumes Defendants meant for Colley to demur to this cause of action since this cause of action is alleged only against Colley. (Compl., ¶¶ 58-62.)

[2] As noted above, the demurrer is not entirely clear as to who is demurring to this cause of action. On the one hand, the preamble sentence says Ford and Colley are demurring to the complaint, but the language that follows indicates only Ford is demurring to this cause of action. (See Demurrer, p. 3 of pdf.) The Court assumes Defendants meant for Ford to demur to this cause of action since this cause of action is alleged only against Ford. (Compl., ¶¶ 63-78.)