Judge: Mark A. Young, Case: 23SMCV04248, Date: 2024-04-09 Tentative Ruling
Case Number: 23SMCV04248 Hearing Date: April 9, 2024 Dept: M
CASE NAME: DeBiase, v.
Ford Motor Co., et al.
CASE NO.: 23SMCV04248
MOTION: Demurrer
to the Complaint
HEARING DATE: 4/9/2024
Legal
Standard
A
demurrer for sufficiency tests whether the complaint states a cause of action.
(Hahn v. Mirda (2007)
147 Cal.App.4th 740, 747.) When considering demurrers, courts read the
allegations liberally and in context. In a demurrer proceeding, the defects
must be apparent on the face of the pleading or via proper judicial notice. (Donabedian v. Mercury Ins. Co.
(2004) 116 Cal.App.4th 968, 994.) A demurrer tests the pleadings alone and not
the evidence or other extrinsic matters. Therefore, it lies only where the
defects appear on the face of the pleading or are judicially noticed. (CCP §§
430.30, 430.70.) At the pleading stage, a plaintiff need only allege ultimate
facts sufficient to apprise the defendant of the factual basis for the claim
against him. (Semole v. Sansoucie
(1972) 28 Cal. App. 3d 714, 721.) A “demurrer does not, however, admit
contentions, deductions or conclusions of fact or law alleged in the pleading,
or the construction of instruments pleaded, or facts impossible in law.” (S. Shore Land Co. v. Petersen
(1964) 226 Cal.App.2d 725, 732, internal citations omitted.)
“Liberality in permitting amendment
is the rule, if a fair opportunity to correct any defect has not been given.” (Angie
M. v. Superior Court (1995) 37 Cal.App.4th 1217, 1227.) It is an abuse of
discretion for the court to deny leave to amend where there is any reasonable
possibility that plaintiff can state a good cause of action. (Goodman v.
Kennedy (1976) 18 Cal.3d 335, 349.) The burden is on plaintiff to
show in what manner plaintiff can amend the complaint,
and how that amendment will change the legal effect of the
pleading. (Id.)
Analysis
Defendants Ford Motor Company and Santa Monica Ford Lincoln demur to the complaint’s
fifth cause of action for fraudulent inducement – concealment against Ford and
sixth cause of action for negligent repair against Santa Monica Ford.
Request for
Judicial Notice
Defendants submitted the declaration of Chen Fei Liu in support of their demurer. The Liu declaration is substantively a request
for judicial notice of complaints filed by Plaintiff’s counsel in other actions
against third parties. The Court will not
consider these documents at the demurrer stage.
Plaintiff’s counsel’s other claims against other manufacturers for
different vehicles are irrelevant for the determination of this demurrer, even
if Plaintiff’s counsel uses substantially similar allegations in other cases.
Fraudulent
Inducement – Concealment
Ford asserts that the fraud claim fails to state sufficient facts under
the heightened pleading standard for fraud and is barred by the economic loss
rule. “ ‘[T]he elements
of an action for fraud and deceit based on concealment are: (1) the defendant
must have concealed or suppressed a material fact, (2) the defendant must have
been under a duty to disclose the fact to the plaintiff, (3) the defendant must
have intentionally concealed or suppressed the fact with the intent to defraud
the plaintiff, (4) the plaintiff must have been unaware of the fact and would
not have acted as he did if he had known of the concealed or suppressed fact,
and (5) as a result of the concealment or suppression of the fact, the
plaintiff must have sustained damage.’ [Citations.]” (Blickman Turkus, LP v. MF
Downtown Sunnyvale, LLC (2008) 162 Cal.App.4th 858, 868.)
Although a fraud claim must be
specifically pleaded, less specificity is required if it appears
from the nature of allegations that defendant must necessarily possess full
information, or if the facts lie more in the knowledge of opposing parties. (Alfaro
v. Community Housing Improvement System & Planning Assn., Inc. (2009)
171 Cal.App.4th 1356, 1384-1385 [“it does not appear necessary to require each
of the 38 plaintiffs to allege each occasion on which an agent of either
defendant could have disclosed …. Surely defendants have records of their
dealings with the plaintiffs”] accord Bushell v. JPMorgan Chase Bank, N.A.
(2013) 220 Cal.App.4th 915, 931 [“plaintiffs did not have to specify the …
personnel who prepared these documents because that information is uniquely
within … [defendant’s] knowledge”].) “‘[T]he courts should not ... seek to
absolve the defendant from liability on highly technical requirements of form
in pleading. Pleading facts in ordinary and concise language is as permissible
in fraud cases as in any others, and liberal construction of the pleading is as
much a duty of the court in these as in other cases.’” (Appollo Capital
Fund, LLC v. Roth Capital Partners, LLC (2007) 158 Cal.App.4th 226, 242.) Moreover, the rule of
specificity of pleading logically applies only to affirmative representations, and
not to fraud by concealment. (See Alfaro, supra, 171 Cal.App.4th
at 1384.) As the Alfaro court observed: “it is harder to apply [the
requirement of specificity] to a case of simple nondisclosure. ‘How does one
show “how” and “by what means” something didn't happen, or “when” it never
happened, or “where” it never happened?’” (Ibid.;
see Jones v. ConocoPhillips (2011) 198 Cal.App.4th 1187, 1200
[concealment is sufficiently pled when the complaint as a
whole provides sufficient notice of the claims against defendants].)
Ford argues that the defect
allegedly concealed is not specifically pled. However, the complaint provides
sufficient details regarding the identified “Transmission Defect” to put Ford
on notice of the specific nature of the defect. The complaint arises from the sale of a 2020
Ford Explorer, vehicle identification number 1FMSK7DH4LGD10235. (Compl., ¶ 9.) After
the sale, the Vehicle exhibited symptoms of a known transmission defect. (¶¶ 8,
14, 25.) Specifically, the vehicle had a defect in its 10-speed transmission
where it would cause the vehicle to “experience hesitation and/or
delayed acceleration; harsh and/or hard shifting; jerking, shuddering, and/or
juddering.” (¶¶ 25, 57.) The complaint further describes Ford’s knowledge of
this defect due to a series of TSBs and other internal documents demonstrating knowledge
of defects in vehicles having a 10R80 automatic transmission included in 2020
Ford vehicles such as the Vehicle. (¶¶ 25-36.) This defect is fairly considered
a safety hazard, since it caused the Vehicle to suddenly and unexpectedly affect a
driver's ability to control the vehicle's speed, acceleration and deceleration. (¶¶ 35, 60.) As pled, the
existence of such a safety defect would be material to the sale of the vehicle.
(¶¶ 64-67.)
Ford does not explain why the pled hesitation,
delayed acceleration, harsh/hard shifting, jerking, and shuddering caused by the
Vehicle’s automatic transmission could not be considered a material defect
in the Vehicle. Ford cites no authority that suggests a plaintiff must provide further
details on the transmission defect at the pleading stage.
Ford also argues that there is no
pled duty to disclose. For liability based on nondisclosure of facts, a
plaintiff must allege that the party was under a legal duty to disclose such
facts, either because of a fiduciary or confidential relationship, privity of
contract, or other special circumstances. (Warner Constr. Corp. v. City of
Los Angeles (1970) 2 Cal.3d 285, 294.) Generally, the duty to disclose
arises in four circumstances: (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. (LiMandri v. Judikins (1997) 52 Cal. App. 4th 326, 336; see Collins
v. eMachines, Inc. (2011) 202 Cal.App.4th 249, 255, 259
[finding plaintiffs sufficiently pled common law fraud in connection with
defendant’s failure to disclose a material fact]; Warner Constr. Corp. v.
City of Los Angeles¿(1970) 2 Cal.3d 285, 294 [a duty to disclose may arise
when “the facts are known or accessible only to defendant, and
defendant knows they are not known to or reasonably discoverable by
the plaintiff.”].) For example, a
manufacturer’s omission from its customers posing a safety concern may breach
this duty. (Jones, supra, 98 Cal.App.4th at
1198-99 [stating that the
general rule that “ ‘manufacturers have a duty to warn
consumers about the hazards inherent in their products’ ” is “equally
pertinent to the scope of the defendants’ duty to
disclose”].)
Ford was allegedly “in a superior
position from various internal sources to know (or should have known) the true
state of facts about the material defects contained in vehicle equipped with
the defective transmission.” (Compl., ¶ 64(b).) In fact, the complaint provides
detailed facts showing Ford’s exclusive knowledge of the defect prior to the
sale. (¶¶ 25-36, 64.) As discussed, Ford had knowledge of the Transmission Defect
as evidenced by consumer complaints and a series of TSBs concerning the defect.
(¶ 27.) Given the material nature of the defect and Ford’s exclusive knowledge,
Ford was under a duty to disclose the defect to the sale of the Vehicle. (¶
62.)
Ford also argues that the economic loss rule (ELR) bars this cause of
action. The ELR provides:
[W]here 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. [Citation.]
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. (2004) 34 Cal.4th 979, 988, citations omitted; see also Dhital
v. Nissan North America, Inc., (2022) 84 Cal.App.4th 828 [discussing
Robinson exception in the context of lemon law].)
In Robinson,
a helicopter manufacturer sued a parts supplier for fraud among other claims
based on the supplier providing nonconforming parts and false certificates of
conformance. The Robinson Court held that the fraud (false certificates
of conformance) was separate from the breach of contract itself and the misrepresentations exposed the plaintiff to personal liability
and members of the public to harm. (Robinson, supra, 34 Cal.4th
at 991.) Thus, the ELR did not bar the fraud and intentional misrepresentation
claims. (Id.) The Court cautioned that its holding was “narrow in scope
and limited to a defendant's affirmative misrepresentations on which a
plaintiff relies and which expose a plaintiff to liability for personal damages
independent of the plaintiff's economic loss.” (Id. at 993.) The Court expressly
did not address application of the rule to a fraudulent omission claim.
(Id. at 991 [court “need not address the issue of whether [Defendant's]
intentional concealment constitutes an independent tort”].)
Considering Robinson’s
expressed exception for intentional fraud, the ELR would also not apply
to intentional concealment designed to induce a party to enter a contract. Such
a fraud claim relies on an independent tort duty, separate from the contract at
issue. However, after careful examination of the complaint, there are no
allegations showing Ford intended Plaintiff rely on the omission to
induce Plaintiff into purchasing the vehicle. The complaint only provides the
conclusion that by failing to disclose the defect, Ford “knowingly and
intentionally concealed material facts and breached its duty” to disclose. (Compl.,
¶ 65.) This allegation does not state that Ford intended for Plaintiff to rely
on its non-disclosure to induce Plaintiff into the sale. Without such an intent,
Plaintiff shows only economic loss due
to disappointed expectations regarding the warranty. Simply put, Plaintiff has
not alleged harm above and beyond a broken contractual promise. For this same
reason, Plaintiff has not pled the required element that Ford intentionally
concealed or suppressed the material fact with the intent to induce reliance.
Therefore, Plaintiff must allege further facts to establish all the elements of
intentional fraud and to avoid the ELR bar.
Accordingly, the demurrer is SUSTAINED
with leave to amend as to the fraud cause of action.
Negligent Repair
Santa Monica Ford Lincoln (SMFL) asserts that the negligent repair cause
of action fails to allege sufficient facts and is barred by the economic loss
rule. The complaint pleads that SMFL
owed a duty to Plaintiff to use ordinary care and skill in storage, preparation
and repair of the Subject Vehicle in accordance with industry standards.
(Compl., ¶ 74.) Plaintiff delivered the Subject Vehicle to SMFL for repair. (Id.)
SMFL breached their duty “by failing to properly store, prepare and repair the
Subject Vehicle in accordance with industry standards.” (¶ 75.) At best, these
allegations only establish that SMFL failed to repair the vehicle as required
by the contractual warranty. The complaint does not allege separate damages
from the breach of warranty, such as damage to the vehicle from the allegedly
negligent storage, preparation and repair of the vehicle. Thus, Plaintiff has
not pled any damages separate from the disappointed
expectations that Defendants would repair the vehicle in line with their
warranty. Therefore, the ELR would bar the claim as pled. Further facts are
required to take this cause of action out of the ELR.
Accordingly, the
demurrer is SUSTAINED with leave to amend.
Plaintiff has 20
days to file an amended complaint.