Judge Randolph M. Hammock, Case Number: 24STCV33296, Date: 2025-04-04 Tentative Ruling

Judge: Randolph M. Hammock, Case: 24STCV33296, Date: 2025-04-04 Tentative Ruling

Plaintiff Rafael Litenatsky brings this action against Ford Motor Company for violations of the Song-Beverly Act and fraudulent concealment. Plaintiff alleges that his 2018 Ford Edge exhibits transmission defects, among other things, and that Ford concealed the existence of these defects before Plaintiff purchased the vehicle.

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. (Taylor v. City of Los Angeles Dept. of Water and Power (2006) 144 Cal. App. 4th 1216, 1228.) In a demurrer proceeding, the defects must be apparent on the face of the pleading or by proper judicial notice. (CCP § 430.30(a).) A demurrer tests the pleadings alone and not the evidence or other extrinsic matters. (SKF Farms v. Superior Court (1984) 153 Cal. App. 3d 902, 905.) Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed. (Id.) The only issue involved in a demurrer hearing is whether the complaint, as it stands, unconnected with extraneous matters, states a cause of action. (Hahn, 147 Cal.App.4th at 747.)

“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; (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 have acted differently if the concealed or suppressed fact was known; and (5) plaintiff sustained damage as a result of the concealment or suppression of the material fact.” (Rattagan, supra, 17 Cal. 5th at 40.) “Suppression of a material fact is actionable when there is a duty of disclosure, which may arise from a relationship between the parties, such as a buyer-seller relationship. (Hoffman v. 162 North Wolfe LLC (2014) 228 Cal.App.4th 1178, 1185–1186.) Fraud, including concealment, must be pleaded with specificity. (Linear Technology Corp. v. Applied Materials, Inc. (2007) 152 Cal.App.4th 115, 132.)

In the Complaint, Plaintiff alleges that “Defendant FMC committed fraud by allowing the Vehicle to be sold to Plaintiff without disclosing that the Vehicle and its 6-speed Transmission were defective and susceptible to sudden and premature failure.” (Compl. ¶ 52.) Plaintiff alleges that “prior to Plaintiff acquiring the Vehicle, Defendant FMC was well aware and knew that the 6-speed Transmission installed on the Vehicle was defective but failed to disclose this fact to Plaintiff prior to and at the time of sale and thereafter.” (Id. ¶ 53.) “Defendant FMC knew that the 6-speed Transmission had one or more defects that can result in (1) hesitation or delayed acceleration, (2) harsh or hard shifting, (3) jerking, (4) shuddering, or juddering; (5) surging and/or inability to control the vehicle’s speed, acceleration, or deceleration, (6) symptoms requiring reprogramming of the transmission control module (“TCM”) and/or powertrain control module (“PCM”), (7) failure or replacement of the transmission ("Transmission Defect").” (Id. ¶ 54.)

Plaintiff further alleges Ford knew about the defects before he acquired the vehicle, “through sources not available to consumers such as Plaintiff, including but not limited to pre-production and post-production testing data; early consumer complaints about the Transmission Defect made directly to Defendant FMC and its network of dealers; aggregate warranty data compiled from Defendant FMC's network of dealers; testing conducted by Defendant FMC in response to these complaints; as well as warranty repair and part replacements data received by Defendant FMC from Defendant FMC's network of dealers, amongst other sources of internal information.” (Id. ¶ 55.) Plaintiff alleges that if he had “known that the Vehicle suffered from the Transmission Defect, Plaintiff would not have purchased the Vehicle.” (Id. ¶ 57.)

Here, considering the allegations, Plaintiff has alleged all elements of fraudulent inducement by concealment, and has done so with the specificity required at the pleading stage. (See Collins v. eMachines, Inc. (2011) 202 Cal.App.4th 249, 255 [under the LiMandri factors, a duty to disclose arises when a Defendant “actively conceals a material fact” or “makes partial representations that are misleading because some other material fact has not been disclosed.”].) It is also worth noting that the facts of the alleged transmission defects are likely within the knowledge of the moving parties. (Comm. On Children's Television, Inc. v. Gen. Foods Corp. (1983) 35 Cal. 3d 197, 217 [“Less specificity is required when ‘it appears from the nature of the allegations that the defendant must necessarily possess full information concerning the facts of the controversy.’”].)

Next, Defendant argues that the cause of action is barred by the economic loss rule. “[T]he 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.’ 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 ‘prevents the law of contract and the law of tort from dissolving one into the other.” (Food Safety Net Services v. Eco Safe Systems USA, Inc. (2012) 209 Cal.App.4th 1118, 1130 [citing Robinson Helicopter Co., Inc. v. Dana Corp. (2004) 34 Cal.4th 979, 988].)

As discussed by the parties, in Rattagan v. Uber Techs., Inc., the Ninth Circuit certified the following question for the California Supreme Court: “Under California law, are claims for fraudulent concealment [as opposed to affirmative deception] exempted from the economic loss rule?” (Rattagan v. Uber Techs., Inc. (2024) 17 Cal. 5th 1, 38.) The Supreme Court reframed the question as: “Can a plaintiff assert an independent claim of fraudulent concealment in the performance of a contract?” (Id.)

The Court answered that question in the affirmative, holding that “[a] plaintiff may assert a tort claim for fraudulent concealment based on conduct occurring in the course of a contractual relationship, if the elements of the cause of action can be established independently of the parties' contractual rights and obligations and the tortious conduct exposes the plaintiff to a risk of harm beyond the reasonable contemplation of the parties when they entered into the agreement.” (Id.)

In Dhital, which was a Song-Beverly action, the Court of Appeal addressed the economic loss rule in the specific context of fraudulent inducement by concealment. (Dhital v. Nissan N. Am., Inc. (2022) 84 Cal. App. 5th 828, 840.) [FN 1] The Court held concealment-based claims for fraudulent inducement are not barred by the economic loss rule “because a defendant's conduct in fraudulently inducing someone to enter a contract is separate from the defendant's later breach of the contract or warranty provisions that were agreed to.” (Id. at 841.)

Dhital further held that the following allegations were sufficient at the pleading state to state the claim: “[P]laintiffs 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.)

Here, because Dhital specifically allowed a claim for fraudulent inducement by concealment against an auto manufacturer, it is directly on point with the case here. The Court therefore need not address the test articulated in Rattagan which appears to apply only “in the performance of a contract,” and not, as in Dhital, prior to entering the contract. (Rattagan, supra, 17 Cal. 5th at 38.) Thus, applying Dhital, this court concludes that Plaintiff’s claim for fraudulent inducement by concealment is not barred by the economic loss rule.

Judge of the Superior Court

FN 1 - Notably, the California Supreme Court initially agreed to hear Dhital. However, according to the Supreme Court’s docket, it stayed the case pending considering of a “related issue” in Rattagan, supra, 17 Cal. 5th.) On December 18, 2024, approximately three months after issuing its decision in Rattagan, the Court dismissed the appeal in Dhital without hearing the case.

Any party may submit on the tentative ruling by contacting the courtroom via email at Smcdept49@lacourt.org by no later than 4:00 p.m. the day before the hearing. All interested parties must be copied on the email. It should be noted that if you submit on a tentative ruling the court will still conduct a hearing if any party appears. By submitting on the tentative you have, in essence, waived your right to be present at the hearing, and you should be aware that the court may not adopt the tentative, and may issue an order which modifies the tentative ruling in whole or in part.