Judge Maurice A. Leiter, Case 21STCV35538 2023-01-25 Tentative Ruling

DEFENDANTS TO FILE AND SERVE AN ANSWER TO THE FIRST AMENDED COMPLAINT WITHIN 20 DAYS OF NOTICE OF RULING.

If the parties wish to submit on the tentative, please email the courtroom at SMCdept54@lacourt.org with notice to opposing counsel (or self-represented party) before 8:00 am on the day of the hearing.

This is a lemon law action arising out of the purchase of a 2020 Ford Ranger manufactured and distributed by Defendant Ford Motor Company. Plaintiff brings this action for breach of the express and implied warranty, violations of the Song-Beverly Act and fraudulent concealment.

A demurrer to a complaint may be taken to the whole complaint or to any of the causes of action in it. (CCP § 430.50(a).) A demurrer challenges only the legal sufficiency of the complaint, not the truth of its factual allegations or the plaintiff's ability to prove those allegations. (Picton v. Anderson Union High Sch. Dist. (1996) 50 Cal. App. 4th 726, 732.) The court must treat as true the complaint's material factual allegations, but not contentions, deductions or conclusions of fact or law. (Id. at 732-33.) The complaint is to be construed liberally to determine whether a cause of action has been stated. (Id. at 733.)

Defendants demur the fifth cause of action for fraud by concealment on the grounds Plaintiff has failed allege sufficient facts and the cause of action is barred by the economic loss rule.

The elements of fraud are: “(a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or ‘scienter’); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage.” (Charnay v. Cobert (2006) 145 Cal.App.4th 170, 184.) California law recognizes four circumstances in which a 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.)

Generally, “[i]n California, fraud must be pled specifically; general and conclusory allegations do not suffice.” (Alfaro v. Community Housing Improvement System & Planning Assn., Inc. (2009) 171 Cal.App.4th 1356, 1384, internal quotations omitted.) Fraudulent concealment need not be pled with the same degree of specificity, as “it appears from the nature of the allegations that the defendant must necessarily possess full information concerning the facts of the controversy,” and it is necessarily difficult to specifically plead something that did not occur. (Id.) However, some level of specificity is required. (See Blickman Turkus, LP v. MF Downtown Sunnyvale, LLC (2008) 162 Cal.App.4th 858, 878 [“Concealment is a species of fraud, and ‘[f]raud must be pleaded with specificity.’”])

The Court of Appeal in Dhital v. Nissan North America, Inc. (2022) 84 Cal.App.5th 828, recently addressed issues almost identical to those in this demurrer. The Court found that these allegations were sufficient to state a cause of action for fraud: “plaintiffs alleged the CVT transmissions installed in numerous Nissan vehicles (including the one plaintiffs purchased) were defective; Nissan knew of the defects and the hazards they posed; Nissan had exclusive knowledge of the defects but intentionally concealed and failed to disclose that information; Nissan intended to deceive plaintiffs by concealing known transmission problems; plaintiffs would not have purchased the car if they had known of the defects; and plaintiffs suffered damages in the form of money paid to purchase the car.” (Id. at 844.) Plaintiff has alleged the same facts here. This is sufficient to establish fraud.

Dhital also addressed whether the economic loss rule bars claims for fraud by concealment under Robinson Helicopter Co., Inc. v. Dana Corp. (2004) 34 Cal. 4th 979. The Court explained,

Applying Robinson here (and cognizant that our Supreme Court may soon provide additional guidance)[1], we conclude plaintiffs’ claim for fraudulent inducement by concealment is not subject to demurrer on the ground it is barred by the economic loss rule. 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. (Robinson, supra, 34 Cal.4th at pp. 989–990, 22 Cal.Rptr.3d 352, 102 P.3d 268.) 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.’ ” (Id. at p. 990, 22 Cal.Rptr.3d 352, 102 P.3d 268.)

Plaintiff has alleged a claim for fraud by concealment. The economic loss rule does not act as a bar to this claim.

Defendants demur to the sixth cause of action for negligent repair on the ground that it too is barred by the economic loss rule. Defendants do not provide authority which states the economic loss rule specifically bars negligent repair actions. Under California state law, the economic loss rule does not apply to negligent performance of services. (See e.g. N. Am. Chem. Co. v. Superior Court (1997) 59 Cal. App. 4th 764, 777–81.)

[1] Rattagan v. Uber Technologies, Inc., 19 F.4th 1188, 1190-3 (9th Cir. 2021), certifying the question of whether concealment is an exception to the economic loss rule to the California Supreme Court.