Judge: Michael E. Whitaker, Case: 23SMCV05170, Date: 2024-02-28 Tentative Ruling

Case Number: 23SMCV05170    Hearing Date: February 28, 2024    Dept: 207

TENTATIVE RULING

MOTION

This case arises from alleged defects to the vehicle Plaintiff Eddie Baruta (“Plaintiff”) purchased from Defendants Ford Motor Company and Santa Monica Ford Lincoln. 

Plaintiff’s First Amended Complaint (“FAC”) alleges seven causes of action: the first three alleging breach of express warranty under the Song-Beverly Act, the fourth alleging breach of implied warranty under the Song-Beverly Act, the fifth for fraudulent inducement-concealment, the sixth for negligent repair (against Defendant Santa Monica Ford Lincoln only), and the seventh for violation of the Consumer Legal Remedies Act. 

Defendant Ford Motor Company (“Defendant” or “Ford”) demurs to the first five causes of action in the FAC for failure to state a cause of action pursuant to Code of Civil Procedure section 430.10, subdivision (e).

Plaintiff opposes the demurrer and Ford replies.

MEET AND CONFER REQUIREMENT

            Code of Civil Procedure section 430.41, subdivision (a) requires that “Before filing a demurrer pursuant to this chapter, the demurring party shall meet and confer in person or by telephone with the party who filed the pleading that is subject to demurrer for the purpose of determining whether an agreement can be reached that would resolve the objections to be raised in the demurrer.” 

The statute further requires “As part of the meet and confer process, the demurring party shall identify all of the specific causes of action that it believes are subject to demurrer and identify with legal support the basis of the deficiencies.”  (Code Civ. Proc., § 430.41, subd. (a)(1).)  “The party who filed the complaint, cross-complaint, or answer shall provide legal support for its position that the pleading is legally sufficient or, in the alternative, how the complaint, cross-complaint, or answer could be amended to cure any legal insufficiency.”  (Ibid.)

“The parties shall meet and confer at least five days before the date the responsive pleading is due.  (Code Civ. Proc. § 430.41, subd. (a)(2).)  “The demurring party shall file and serve with the demurrer a declaration stating either” the means by which the parties met and conferred, or that the party who filed the pleading subject to demurrer failed to respond to the meet and confer request.  (Id., subd. (a)(3).) 

Here, Ford met and conferred with Plaintiff prior to filing the first demurrer to the original complaint.  In lieu of opposing Ford’s first demurrer, Plaintiff filed the First Amended Complaint, adding, among other things, allegations regarding the tolling of the applicable statute of limitations.  Ford did not meet and confer prior to filing its second demurrer, which raises the same arguments as the first demurrer. 

Upon comparing the first demurrer to the second demurrer, it is clear that Ford does address the newly-added allegations, including allegations regarding tolling the applicable statutes of limitation.  While the Court agrees that the better practice is to meet and confer again prior to demurring to the FAC, the Court does not find that additional meet and confer efforts are likely to be fruitful here.  Ultimately, Plaintiff believes the previously identified deficiencies were cured by the new allegations and Ford does not.

Therefore, the Court finds that the parties have satisfied the meet and confer requirement.

ANALYSIS

1.      DEMURRER

“It is black letter law that a demurrer tests the legal sufficiency of the allegations in a complaint.”  (Lewis v. Safeway, Inc. (2015) 235 Cal.App.4th 385, 388.)  In testing the sufficiency of a cause of action, a court accepts “[a]s true all material facts properly pled and matters which may be judicially noticed but disregard contentions, deductions or conclusions of fact or law.  [A court also gives] the complaint a reasonable interpretation, reading it as a whole and its parts in their context.”  (290 Division (EAT), LLC v. City & County of San Francisco (2022) 86 Cal.App.5th 439, 450 [cleaned up]; Hacker v. Homeward Residential, Inc. (2018) 26 Cal.App.5th 270, 280 [“in considering the merits of a demurrer, however, “the facts alleged in the pleading are deemed to be true, however improbable they may be”].)

Further, in ruling on a demurrer, a court must “liberally construe” the allegations of the complaint “with a view to substantial justice between the parties.”  (See Code Civ. Proc., § 452.)  “This rule of liberal construction means that the reviewing court draws inferences favorable to the plaintiff, not the defendant.”  (Perez v. Golden Empire Transit Dist. (2012) 209 Cal.App.4th 1228, 1238.)  

In summary, “[d]etermining whether the complaint is sufficient as against the demurrer on the ground that it does not state facts sufficient to constitute a cause of action, the rule is that if one consideration of all the facts stated it appears the plaintiff is entitled to any relief at the hands of the court against the defendants the complaint will be held good although the facts may not be clearly stated, or may be intermingled with a statement of other facts irrelevant to the cause of action shown, or although the plaintiff may demand relief to which he is not entitled under the facts alleged.”  (Gressley v. Williams (1961) 193 Cal.App.2d 636, 639.)

A.    FAILURE TO STATE A CAUSE OF ACTION

                                                                    i.            First, Second, and Third Causes of Action – Breach of Express Warranty under the Song-Beverly Act

“The [Song-Beverly] Act regulates warranty terms, imposes service and repair obligations on manufacturers, distributors, and retailers who make express warranties, requires disclosure of specified information in express warranties, and broadens a buyer’s remedies to include costs, attorney’s fees, and civil penalties.”  (Krieger v. Nick Alexander Imports, Inc. (1991) 234 Cal.App.3d 205, 213 (hereafter Krieger).)           

Ford contends the first three causes of action, alleging breach of the express warranty under the Song-Beverly Act, are time barred, because Plaintiff allegedly received the subject defective vehicle on January 27, 2018, yet did not file this lawsuit until nearly six years later, on November 1, 2023.

Breaches of the express warranty under the Song-Beverly Act are subject to the four-year statute of limitations under Commercial Code section 2725.  (Krieger, supra, 234 Cal.App.3d at pp. 213–214.)  Further, Section 2725 provides that an action for breach of warranty accrues on tender of delivery.  (Id. at p. 215.)  “An exception is made where a warranty ‘explicitly extends to future performance of the goods and discovery of the breach must await the time of such performance.’ ”  (Ibid.)  Because the Song-Beverly Act contemplates attempts to repair the vehicle, it would undermine the legislative purpose of the Song-Beverly Act for causes of action alleging a failure to repair the defect to accrue when the vehicle was originally delivered, “before the seller has an opportunity to repair any defects.”  (Id. at p. 218.)

Here, Plaintiff alleges:

8.  Plaintiff discovered Defendant's wrongful conduct alleged herein shortly before the filing of the complaint, as the Vehicle continued to exhibit symptoms of defects following FMC's unsuccessful attempts to repair them. However, FMC failed to provide restitution pursuant to the Song – Beverly Consumer Warranty Act.

[and]

13. As a result of the foregoing, Plaintiff did not become suspicious of Defendant’s concealment of the latent defects and its inability to repair it until shortly before the filing of the complaint, when the issue persisted following Defendant’s representations that the Vehicle was repaired. 

(FAC ¶¶ 8, 13.)

            Specifically, Plaintiff alleges he took the vehicle to Defendant’s authorized repair facility on October 22, 2018; December 4, 2021; February 1, 2022; and March 23, 2023; finally getting the vehicle back for the last time on May 5, 2023.  (FAC ¶¶ 42-45.)  Each time, Plaintiff alleges Defendant represented that the vehicle was working as designed.  (Ibid.) 

Therefore, Plaintiff has adequately alleged that the statute of limitations has not run for purposes of withstanding demurrer.

                                                                  ii.            Fourth Cause of Action – Breach of Implied Warranty

Ford similarly argues that the fourth cause of action for breach of implied warranty, under the Song-Beverly Act, is time barred.

The statute of limitations for breach of the implied warranty under Song-Beverly is also four years, pursuant to Commercial Code section 2725.  (Mexia v. Rinker Boat Co., Inc. (2009) 174 Cal.App.4th 1297, 1306 (hereafter Mexia).)

Ford contends that because an implied warranty arises by operation of law, rather than express agreement of the parties, an implied warranty does not explicitly extend to future performance, and therefore cannot be tolled.  (Demurrer at p. 12, citing Hauter v. Zogarts (1975) 14 Cal.3d 104, 117.)  However, the case relied upon by Ford does not involve sale of a vehicle under the Song-Beverly Act.

There is a split of authority as to whether a breach of the implied warranty can be tolled to when a plaintiff discovers or should have discovered a latent defect that existed at the time of delivery.  (Compare, Mexia, supra, 174 Cal.App.4th at pp. 1308-1311 [cause of action accrues when the plaintiff discovered or should have discovered the latent defect] with Cardinal Health 301, Inc. v. Tyco Electronics Corp. (2008) 169 Cal.App.4th 116, 134 [because implied warranty arises by operation of law rather than by express agreement of the parties, it is not a warranty that explicitly extends to future performance].) 

However, most California state courts follow Mexia, whereas federal district courts tend to hold that the implied warranty cannot be tolled until discovery.  (See Daniel v. Ford Motor Co. (9th Cir. 2015) 806 F.3d 1217, 1223 [noting “California federal district courts have given Mexia mixed treatment” but Mexia represents California state law authority].)

Thus, because Plaintiff alleges Defendant concealed latent defects until shortly before Plaintiff filed the complaint, the Court cannot sustain Ford’s demurrer to the fourth cause of action.

                                                                iii.            Fifth Cause of Action – Fraudulent Inducement - Concealment

Ford contends Plaintiff fails to state a claim for fraudulent concealment because (1) it is time barred; (2) Plaintiff fails to allege all required elements with the requisite particularity; and (3) Plaintiff’s fraudulent concealment claim is barred by the economic loss doctrine.

Statute of Limitations

Actions for fraud have a three-year statute of limitations, but are not deemed to have accrued until the discovery of the facts constituting the fraud.  (Code Civ. Proc., § 338, subd. (d).)  As discussed above, Plaintiff has adequately alleged that despite diligently taking the car back to Defendant for repairs, Plaintiff did not discover the latent defects, until sometime after May 2023, when Plaintiff received the car back from Defendant for the last time, because Defendant continually concealed the nature of the defect.  Therefore, the Court cannot sustain Ford’s demurrer on the basis of the statute of limitations.

Pleading with Particularity

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.”  (Hambrick v. Healthcare Partners Medical Group, Inc. (2015) 238 Cal.App.4th 124, 162.)  

“In California, fraud must be pled specifically; general and conclusory allegations do not suffice.”  (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.)  “This particularity requirement necessitates pleading facts which show how, when, where, to whom, and by what means the representations were tendered.”  (Ibid.) 

The purpose of the particularity requirement is “to apprise the defendant of the specific grounds for the charge and enable the court to determine whether there is any basis for the cause of action.”  (Chapman v. Skype Inc. (2013) 220 Cal.App.4th 217, 230-231.)  As such, “the requirement of specificity is relaxed when the allegations indicate that the defendant must necessarily possess full information concerning the facts of the controversy or when the facts lie more in the knowledge of [the defendant]”  (Tarmann v. State Farm Mut. Auto. Ins. Co. (1991) 2 Cal.App.4th 153, 158.)

Ford alleges Plaintiff fails to allege with requisite specificity (1) what defect Ford allegedly concealed; or (2) facts giving rise to a duty to disclose.

With regard to the defect, Plaintiff alleges

47. Prior to Plaintiff purchasing the Vehicle, Defendant FMC knew that vehicles equipped with the same 10-speed transmission as the Vehicle suffered from one or more defects that can cause the vehicles and their 10-speed transmissions to experience hesitation and/or delayed acceleration; harsh and/or hard shifting; jerking, shuddering, and/or juddering ("Transmission Defect").

48. Plaintiff is informed and believe, and thereon allege, that Defendant acquired this knowledge prior to Plaintiff purchasing the Vehicle through various 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 network 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.

49. As a result of this internal knowledge and investigations, Defendant FMC subsequently issued technical service bulletins ("TSBs") concerning the Transmission Defect.

50. For example, on or about March 2, 2018, Defendant FMC issued TSB 18-2079, entitled "10R80 Automatic Transmission – Harsh or Delayed Shift Concerns And/Or Illuminated MIL – DTC P0711 – Built On or Before 1-Aug-2017," which covers 2017 F-150 vehicles equipped with a 10R80 automatic transmission (the same type of transmission in the Subject Vehicle). According to the TSB, "[s]ome 2017 F-150/Raptor vehicles equipped with a 10R80 automatic transmission built on or before 1-Aug-2017 may exhibit harsh or delayed shifts and/or an illuminated malfunction indicator lamp (MIL) with diagnostic trouble code (DTC) P0711 stored in the transmission control module (TCM)."

[image of TSB 18-2079 omitted]

51. In TSB 18-2079, Defendant FMC attributed the transmission issues to problems with the vehicles' powertrain control module ("PCM")—specifically, to problems with the vehicles' "adaptive transmission shift strategy which allows the vehicle's computer to learn the transmission's unique parameters and improve shift quality."

(FAC ¶¶ 47-51.)  Therefore, Plaintiff adequately pleads specific facts about the transmission defect.

With respect to duty, a duty to disclose can arise (1) when plaintiff and defendant are in a fiduciary relationship; (2) when the defendant has exclusive knowledge of the defect; (3) when defendant actively conceals the defect from plaintiff; or (4) when the defendant makes partial representations but suppresses some material facts.  (LiMandri v. Judkins (1997) 52 Cal.App.4th 326, 336.)

Ford argues that Plaintiff fails to allege a direct transactional relationship with Ford, Ford’s exclusive knowledge of the defect, or Ford’s active concealment, giving rise to a duty for Ford to disclose the transmission defect. 

With regard to a direct transactional relationship, Plaintiff alleges he entered an express warranty contract directly with Ford:

26. On or about January 27, 2018, Plaintiff entered into a warranty contract with Defendant FMC regarding a 2018 Ford F150 vehicle identification number 1FTFW1RG9JFB45258 (hereafter "Vehicle"), which was manufactured and/or distributed by Defendant FMC.

27. The warranty contract contained various warranties, including but not limited to the bumper-bumper warranty, powertrain warranty, emission warranty, etc. […]

(FAC ¶¶ 26-27.)   

Concerning knowledge of falsity, Plaintiff alleges:

47. Prior to Plaintiff purchasing the Vehicle, Defendant FMC knew that vehicles equipped with the same 10-speed transmission as the Vehicle suffered from one or more defects that can cause the vehicles and their 10-speed transmissions to experience hesitation and/or delayed acceleration; harsh and/or hard shifting; jerking, shuddering, and/or juddering ("Transmission Defect").

48. Plaintiff is informed and believe, and thereon allege, that Defendant acquired this knowledge prior to Plaintiff purchasing the Vehicle through various 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 network 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.

49. As a result of this internal knowledge and investigations, Defendant FMC subsequently issued technical service bulletins ("TSBs") concerning the Transmission Defect.

50. For example, on or about March 2, 2018, Defendant FMC issued TSB 18-2079, entitled "10R80 Automatic Transmission – Harsh or Delayed Shift Concerns And/Or Illuminated MIL – DTC P0711 – Built On or Before 1-Aug-2017," which covers 2017 F-150 vehicles equipped with a 10R80 automatic transmission (the same type of transmission in the Subject Vehicle). According to the TSB, "[s]ome 2017 F-150/Raptor vehicles equipped with a 10R80 automatic transmission built on or before 1-Aug-2017 may exhibit harsh or delayed shifts and/or an illuminated malfunction indicator lamp (MIL) with diagnostic trouble code (DTC) P0711 stored in the transmission control module (TCM)."

[image of TSB 18-2079 omitted]

51. In TSB 18-2079, Defendant FMC attributed the transmission issues to problems with the vehicles' powertrain control module ("PCM")—specifically, to problems with the vehicles' "adaptive transmission shift strategy which allows the vehicle's computer to learn the transmission's unique parameters and improve shift quality."

(FAC ¶¶ 47-51.) 

With respect to misrepresentation/concealment, Plaintiff alleges:

42. On or about Oct. 22, 2018, with approximately 4,125 miles on the odometer, Plaintiff presented the Subject Vehicle to Defendant’s authorized repair facility with engine complaints, transmission complaints, and electrical/body complaints, including inter alia, an illuminated oil light, malfunctioning passenger door lock, and performance of Safety Recall 18S10, which relates to a malfunctioning transmission selector lever cable. Defendant’s technician inspected the Vehicle, verified Plaintiffs’ complaints, and performed repairs under warranty, including performance of Safety Recall 18S10. At pick up, Plaintiff was advised the Vehicle was working as designed.

43. On or about Dec. 4, 2021, with approximately 19,927 miles on the odometer, Plaintiff presented the Subject Vehicle to Defendant’s authorized repair facility with ongoing engine complaints, including inter alia, performance of Customer Satisfaction Program 21B10, which relates to engine rattling and reprogramming the Powertrain Control Module. Defendant’s technician inspected the Vehicle, verified Plaintiff’s complaints, and reprogrammed the Powertrain Control Module under warranty. At pick up, Plaintiff was advised the Vehicle was working as designed.

44. On or about February 1, 2022, with approximately 21,900 miles on the odometer, Plaintiff presented the Subject Vehicle to Defendant’s authorized repair facility with ongoing engine complaints and electrical/body complaints, including inter alia, a malfunctioning sunroof.

45. On or about March 23, 2023, with approximately 33,407 miles on the odometer, Plaintiff presented the Subject Vehicle to Defendant’s authorized repair facility with ongoing engine complaints, transmission complaints, and body complaints, including inter alia, harsh transmission shifting, unintended tail gate opening, and engine shudders due to reprograming the PCM. Defendant’s technician inspected the Vehicle, verified Plaintiff’s complaints, and performed warranty repairs, including removing and overhauling the entire transmission, and updating the Powertrain Control Module. The Vehicle was returned to Plaintiff over a month later, on or around May 5, 2023. At pick up, Defendant’s technician advised that the Vehicle had been repaired and was working as designed.

46. Thereafter, despite a reasonable number of repair opportunities, Plaintiff continued to experience the symptoms of the alleged defects.

(FAC ¶¶ 42-46.)

Therefore, Plaintiff adequately alleges that, despite having exclusive knowledge of the transmission defect, it was not disclosed when Plaintiff purchased the vehicle, and each time Plaintiff brought the subject vehicle to Defendant’s authorized repair facility on October 22, 2018; December 4, 2021; February 1, 2022; and March 23, 2023, Defendant did not disclose that Plaintiff’s vehicle had the transmission defect, and represented to Plaintiff, upon Defendant’s return of the vehicle to Plaintiff, that the subject vehicle was operating normally, continually concealing the known transmission defect.

Thus, Plaintiff adequately alleges Ford had a duty to disclose the defect.

Economic Loss Doctrine

“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.”  (Robinson Helicopter Co., Inc. v. Dana Corp. (2004) 34 Cal.4th 979, 988 (hereafter Robinson Helicopter).)  “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.”  (Ibid.)

However, “Tort damages have been permitted in contract cases where a breach of duty directly causes physical injury; for breach of the covenant of good faith and fair dealing in insurance contracts; for wrongful discharge in violation of fundamental public policy; or where the contract was fraudulently induced.”  (Robinson Helicopter, supra, 34 Cal. 4th at pp. 989–990.)

Here, as discussed above, Plaintiff alleges he was fraudulently induced into purchasing the subject vehicle, due to Ford’s concealment of the transmission defect.  Therefore, the economic loss doctrine does not bar Plaintiff’s fraud claim.

CONCLUSION AND ORDER

For the reasons stated, the Court overrules Ford’s Demurrer in its entirety. 

Further, the Court orders Ford to file an Answer to the Complaint on or before March 15, 2024. 

Ford shall provide notice of the Court’s ruling and file a proof of service regarding the same. 

DATED:  February 28, 2024                                                  ___________________________

                                                                                          Michael E. Whitaker

                                                                                          Judge of the Superior Court