Judge Lynne M. Hobbs, Case Number: 23STCV11463, Date: 2024-10-09 Tentative Ruling

Judge: Lynne M. Hobbs, Case: 23STCV11463, Date: 2024-10-09 Tentative Ruling

Case Number: 23STCV11463 Hearing Date: October 9, 2024 Dept: 61

MARTIN VILLARREAL, et al. vs FORD MOTOR COMPANY, et al.

TENTATIVE

Defendants Ford Motor Company and Ford of Montebello’s Motion for Judgment on the Pleadings is DENIED.

Plaintiff to give notice.

DISCUSSION

A party may move for a judgment on the pleadings as to an entire complaint or as to a particular cause of action in a complaint. (Code Civ. Proc. § 438 subd. (c)(2)(A).) If a defendant moves for a judgment on the pleadings and argues that a complaint does not state facts sufficient to constitute a cause of action against that defendant, then the court should grant a defendant’s motion only if the court finds as a matter of law that the complaint fails to allege facts sufficient to constitute the cause of action. (See id., § 438 subd. (c)(1)(B)(ii); see also Mechanical Contractors Assn. v. Greater Bay Area Assn. (1998) 66 Cal.App.4th 672, 677.)

“The standard for granting a motion for judgment on the pleadings is essentially the same as that applicable to a general demurrer, that is, under the state of the pleadings, together with matters that may be judicially noticed, it appears that a party is entitled to judgment as a matter of law.” (Bezirdjian v. O’Reilly (2010) 183 Cal.App.4th 316, 321.) When considering a motion for judgment on the pleadings, the court not only should assume that all facts alleged in the SAC are true but also should give those alleged facts a liberal construction. (See Gerawan Farming, Inc. v. Lyons (2000) 24 Cal.4th 468, 515–516, 101 Cal.Rptr.2d 470, 12 P.3d 720.) In particular, the court should liberally construe the alleged facts “‘with a view to attaining substantial justice among the parties.’ [Citation.]” (See Alliance Mortgage Co. v. Rothwell (1995) 10 Cal.4th 1226, 1232, 44 Cal.Rptr.2d 352, 900 P.2d 601.)

Defendants Ford Motor Company and Ford of Montebello (Defendants) move for judgment on the fifth and sixth causes of action for fraud and negligent repair in Plaintiffs Martin Villareal and Rosalind Vasquez’s (Plaintiffs) complaint. They argue that the claims are both barred by the economic loss rule, and that the fraud claim is not pleaded with adequate specificity. (Motion at pp. 10–22.)

A. ECONOMIC LOSS RULE

“Economic loss consists of damages for inadequate value, costs of repair and replacement of the defective product or consequent loss of profits—without any claim of personal injury or damages to other property. Simply stated, the economic loss rule provides: where a purchaser's expectations in a sale are frustrated because the product he bought is not working properly, his remedy is said to be in contract alone, for he has suffered only ‘economic’ losses.’ This doctrine hinges on a distinction drawn between transactions involving the sale of goods for commercial purposes where economic expectations are protected by commercial and contract law, and those involving the sale of defective products to individual consumers who are injured in a manner which has traditionally been remedied by resort to the law of torts. The economic loss rule requires a purchaser to recover in contract for purely economic loss due to disappointed expectations, unless he can demonstrate harm above and beyond a broken contractual promise. Quite simply, the economic loss rule prevent[s] the law of contract and the law of tort from dissolving one into the other.

(Robinson Helicopter Co., Inc. v. Dana Corp. (“Robinson”) (2004) 34 Cal.4th 979, 988, internal quotation marks and citations omitted.)

Defendants argue that Plaintiffs’ claims for fraud and negligent repair are barred by the above doctrine, as Plaintiff has alleged commercial transactions in which Defendants have failed to deliver products of the quality promised, and no resulting damage beyond economic losses. (Motion at pp. 17–19.)

Defendants neglect, however, that “‘tort damages have been permitted in contract cases . . . where the contract was fraudulently induced.” (Robinson, supra, 34 Cal.4th at p. 990.) As Plaintiff alleges that the purchase of the vehicle was the product of fraudulent concealment, the economic loss rule does not apply to the fifth cause of action for fraud.

Defendant cites a number of federal cases holding that the economic loss rule bars fraudulent concealment claims brought on the same basis as breach of warranty claims. (See, e.g., Hammond v. BMW of North America, LLC (C.D. Cal., June 26, 2019, No. CV 18-226 DSF (MRWX)) 2019 WL 2912232, at *3; Kelsey v. Nissan North America (C.D. Cal., July 15, 2020, No. CV 20-4835 MRW) 2020 WL 4592744, at *2.) None are binding upon this court, and opinion on the issue is not unanimous even among the federal courts that Defendant cites. (See Scherer v. FCA US, LLC (S.D. Cal., Oct. 5, 2021, No. 320CV02009AJBBLM) 2021 WL 4621692, at *5 [holding that economic loss rule did not bar claim for fraudulent concealment where it was alleged that concealment induced the contract]; see also LMNO Cable Group, Inc. v. Discovery Communications, LLC (C.D. Cal., May 15, 2020, No. LACV1604543JAKSKX) 2020 WL 10759618, at *12.)

Moreover, none of Defendant’s cases addresses the Robinson court’s express admonition that plaintiffs are not bound merely to economic losses when the contract itself forming the basis for that limitation is induced by fraud. The Robinson court explained the reason for such an exception was because “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 p. 990.) Here, it is alleged not merely that Defendant breached its contract in a fraudulent way, as was the underlying fact-pattern of Robinson, but that Defendant fraudulently induced Plaintiff to enter into a purchase contract that they otherwise would not have entered into. The economic loss rule forms no basis to dismiss the fraudulent concealment claim.

Nor does Defendant’s authority support application of the economic loss rule to a claim for negligent repair. Defendant’s chief authority for this proposition — Sheen v. Wells Fargo Bank, N.A. (2022) 12 Cal.5th 905, 933 — held for the proposition that a plaintiff in a loan contract with a bank could not recover in tort for the bank’s negligent failure to process a loan modification application. The court compared the situation to two other circumstances in which recovery had been allowed in tort despite the existence of a contractual relationship — the insurance context and contracts for the provision of “certain kinds of professional services” — and found them inapposite, given the unique posture of insurance companies toward their insureds and the “indeterminateness and breadth” of the duty that the plaintiff there sought to impose. (Sheen, supra, 17 Cal.5th at pp. 639–640.) This case acknowledged the availability of tort remedies “to ensure the consumer receives the benefits or services for which he or she has contracted.” (Id. at p. 932.) This case says little to foreclose a consumer from seeking tort recovery against a mechanic who negligently fails to repair a vehicle. And once more, although Defendants cite federal cases in their favor, other federal cases disagree with their position. (See Sabicer v. Ford Motor Company (C.D. Cal. 2019) 362 F.Supp.3d 837, 841.)

Thus the economic loss rule does not bar either claim.

B. ELEMENTS & SPECIFICITY

The elements of fraud are: (1) misrepresentation or concealment, (2) knowledge of its falsity, (3) intent to defraud, (4) justifiable reliance and (5) resulting damage. (Gil v. Bank of America, Nat. Ass'n (2006) 138 Cal. App. 4th 1371, 1381; Barbara A. v. John G. (1983) 145 C.A.3d 369, 376.)

“‘The required elements for fraudulent concealment are (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.]’ [Citation.]” (Hambrick v. Healthcare Partners Medical Group, Inc. (2015) 238 Cal.App.4th 124, 162.) The elements of concealment, as with ordinary fraud, must be pleaded with specificity. (See Cansino v. Bank of America (2014) 224 Cal.App.4th 1462, 1472.) Fraud causes of action must be pleaded with particularity, meaning that the plaintiff must allege “how, when, where, to whom, and by what means the representations were tendered.” (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.)

Defendants argue that Plaintiffs fail to plead any defects occurring in their vehicle, but allege only defects manifesting in other vehicles. (Motion at pp. 11–12.) Defendants argue that Plaintiffs fail to plead a duty to disclose, because there was no transactional relationship between Plaintiffs and Defendants, or that Defendants had exclusive knowledge of the defect. (Motion at pp. 12–16.)

Defendant’s argument as to the failure to plead a defect is unpersuasive. The Complaint alleges the existence of a “transmission defect” and describes it according to the symptoms experienced by users of the same type of vehicle. (Complaint ¶ 25.) It is alleged that the subject vehicle likewise contains this defect and that Plaintiffs brought in the vehicle for service related to transmission defects. (Complaint ¶¶ 14, 32, 55.)

Defendants argue that there was no transactional relationship between the manufacturer and Plaintiffs such that Defendants owed a duty to disclose the alleged defect. (Motion at pp. 12–16; see Bigler-Engler v. Breg, Inc. (2017) 7 Cal.App.5th 276, 312 [transaction giving rise to duty to disclose “must necessarily arise from direct dealings between the plaintiff and the defendant; it cannot arise between the defendant and the public at large”].) But such a relationship exists here. Although Plaintiffs do not allege that they purchased their vehicle from Defendant, it was Defendant that provided them with the warranty that they are here alleged to have breached. (Complaint ¶ 9.) Thus a transactional relationship is alleged.

Plaintiffs also adequately allege a duty to disclose based on Defendants’ exclusive knowledge of the defect. 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.” (Heliotis v. Schuman (1986) 181 Cal.App.3d 646, 651.)

To plead that a defendant had a duty to disclose a material fact, a plaintiff must allege that “the defendant has exclusive knowledge of material facts not known or reasonably accessible to the plaintiff.” (See Collins v. eMachines, Inc. (2011) 202 Cal.App.4th 249, 255.) The Complaint here alleges that GM acquired its exclusive knowledge of the defect through “sources of information, including but not limited to pre-production testing, pre-production design failure mode and analysis data, production failure mode and analysis data, early consumer complaints made exclusively to Ford’s network of dealers and directly to Ford, aggregate warranty data compiled from Ford’s networks of dealers, testing conducted by Ford in response to consumer complaints, and repair order and parts data received by Ford from Ford’s network of dealers. (Complaint ¶ 26.) Defendant’s authority for the proposition that this allegation of knowledge is inadequate comes from non-binding federal district cases applying federal standards of pleading not applicable to this court. (See Roe v. Ford Motor Company (E.D. Mich., Aug. 6, 2019, No. 218CV12528LJMAPP) 2019 WL 3564589, at p. •2.)

Defendants finally argue that Plaintiffs do not plead damages resulting from the negligent repair of their vehicle. (Motion at p. 22.) But the Complaint alleges that the negligent repair caused Plaintiffs’ damages. (Complaint ¶ 73.) Although Defendants argue that other allegations in the Complaint imply that all repairs were under warranty and therefore likely caused Plaintiffs no out of pocket expenses, the truth or falsity of Plaintiffs’ damage allegations is not the proper subject of a motion on the pleadings. (Gerawan Farming, Inc., supra, 24 Cal.4th at pp. 515–516.)

The motion is therefore DENIED.