Judge: Richard S. Whitney, Case: 37-2023-00017190-CU-BC-CTL, Date: 2023-12-15 Tentative Ruling

SUPERIOR COURT OF CALIFORNIA,

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HALL OF JUSTICE

TENTATIVE RULINGS - December 13, 2023

12/15/2023  10:30:00 AM  C-68 COUNTY OF SAN DIEGO

JUDICIAL OFFICER:Richard S. Whitney

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Civil - Unlimited  Breach of Contract/Warranty Demurrer / Motion to Strike 37-2023-00017190-CU-BC-CTL GUTIERREZ VS FORD MOTOR COMPANY [IMAGED] CAUSAL DOCUMENT/DATE FILED:

TENTATIVE RULING: DEFENDANTS FORD MOTOR COMPANY'S AND SEDANO FORD OF LM, INC.'S DEMURRER TO PLAINTIFFS' COMPLAINT is SUSTAINED, in part, and OVERRULED, in part.

Defendants FORD MOTOR COMPANY ('FORD') and SEDANO FORD OF LM, INC. DBA SEDANO FORD ('SEDANO') (collectively 'Defendants') challenge Plaintiffs VANESSA GUTIERREZ and ADRIAN PLASCENCIA's ('Plaintiffs') second cause of action for 'Fraudulent Inducement – Concealment' and the third cause of action for negligent repair.

FORD first argues Plaintiffs have not alleged sufficient facts to support fraud. '[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.' (Lovejoy v. AT&T Corp. (2001) 92 Cal.App.4th 85, 96 [Citation omitted].) Fraud must be pled with particularity; however, such rule of particularity is harder to apply 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?' ... One of the purposes of the specificity requirement is 'notice to the defendant, to 'furnish the defendant with certain definite charges which can be intelligently met.' ' (Committee on Children's Television, Inc. v. General Foods Corp., supra, 35 Cal.3d 197, 216, 197 Cal.Rptr. 783, 673 P.2d 660.) Less specificity should be required of fraud claims 'when 'it appears from the nature of the allegations that the defendant must necessarily possess full information concerning the facts of the controversy,' ...

(Alfaro v. Community Housing Improvement System & Planning Assn., Inc. (2009) 171 Cal.App.4th 1356, 1384–1385.) Plaintiffs have alleged that FORD failed to disclose the '10R80 Transmissions Defect,' which Plaintiffs allege was in Plaintiffs' vehicle, that FORD had a duty to disclose the defect, that FORD and its agents 'intentionally concealed and failed to disclose material facts relating to the defective 10R80 transmission,' that FORD intended to deceive Plaintiffs in an effort to sell or lease the subject vehicle, that Plaintiffs were unaware of the '10R80 Transmissions Defect,' that Plaintiffs would not have Calendar No.: Event ID:  TENTATIVE RULINGS

2991720  60 CASE NUMBER: CASE TITLE:  GUTIERREZ VS FORD MOTOR COMPANY [IMAGED]  37-2023-00017190-CU-BC-CTL purchased or leased the vehicle had the known of the defect, and that they were damaged. (Complaint, ¶¶ 82-100.) Plaintiffs describe the '10R80 Transmissions Defect' in detail and that '[d]uring the powertrain warranty period, Plaintiffs presented the Subject Vehicle to a FORD authorized dealership for repair after experiencing drivability concerns stemming from the 10R80 Transmission Defect on at least one occasion.' (Complaint, ¶¶ 12-15, 58.) Whether any of Plaintiffs' repair visits fit the description of the '10R80 Transmissions Defect' is a factual dispute that need not be addressed at this stage. The Court finds these allegations are sufficient.

FORD has a duty to disclose if it 'has exclusive knowledge of material facts not known or reasonably accessible to the plaintiff.' (Collins v. eMachines, Inc. (2011) 202 Cal.App.4th 249, 255.) '[M]ateriality is generally a question of fact unless the fact misrepresented is so obviously unimportant that the jury could not reasonably find that a reasonable man would have been influenced by it.' (Stearns v. Ticketmaster Corp. (9th Cir. 2011) 655 F.3d 1013, 1022.) A safety concern is a material fact that a manufacturer has a duty to disclose. (See Jones v. ConocoPhillips (2011) 198 Cal.App.4th 1187, 1198.) Plaintiffs allege FORD's knowledge of safety concerns with '10R80 equipped FORD vehicles' and supporting facts as to how FORD had such knowledge and why such information was not reasonably accessible to Plaintiffs. (Complaint, ¶¶ 14-39, 41-45.) Specifically as to it being a safety concern, Plaintiffs allege '[t]his Transmission Defect creates unreasonably dangerous situations while driving and increases the risk of a crash when trying to accelerate from a stop; when slowing down to a stop, at low speeds when drivers intend to accelerate to merge with highway traffic; and when attempting to drive uphill.' (Complaint, ¶ 15.) The allegations are enough to support a duty to disclose.

FORD also asserts the lack of a direct transaction relationship.

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.

(Bigler-Engler v. Breg, Inc. (2017) 7 Cal.App.5th 276, 311 [Citation and quotes omitted].) Aside from a fiduciary relationship, the three other circumstances 'presuppose[ ] the existence of some other relationship between the plaintiff and defendant in which a duty to disclose can arise.' (Id. [Citation and quotes omitted].) Our Supreme Court has described the necessary relationship giving rise to a duty to disclose as a 'transaction' between the plaintiff and defendant: 'In transactions which do not involve fiduciary or confidential relations, a cause of action for non-disclosure of material facts may arise in at least three instances: (1) the defendant makes representations but does not disclose facts which materially qualify the facts disclosed, or which render his disclosure likely to mislead; (2) the facts are known or accessible only to defendant, and defendant knows they are not known to or reasonably discoverable by the plaintiff; (3) the defendant actively conceals discovery from the plaintiff.' (Warner Construction Corp. v. City of Los Angeles (1970) 2 Cal.3d 285, 294, 85 Cal.Rptr. 444, 466 P.2d 996, italics added, fns.

omitted.) (Id.) 'Such a transaction must necessarily arise from direct dealings between the plaintiff and the defendant; it cannot arise between the defendant and the public at large.' (Id. at 312.) 'Where...a sufficient relationship or transaction does not exist, no duty to disclose arises even when the defendant speaks.' (Id.) 'Plaintiffs must show a transaction before a duty to disclose may arise....' (Scherer v. FCA US, LLC (S.D. Cal. 2021) 565 F.Supp.3d 1184, 1194.) The Court agrees with the court in Scherer that the contractual warranty relationship is sufficient to Calendar No.: Event ID:  TENTATIVE RULINGS

2991720  60 CASE NUMBER: CASE TITLE:  GUTIERREZ VS FORD MOTOR COMPANY [IMAGED]  37-2023-00017190-CU-BC-CTL establish a relationship that creates a duty to disclose. (See Scherer, supra, 565 F.Supp.3d at 1194 wherein the court distinguishes Bigler-Engler based on the existence of a contractual relationship with the defendant based on a warranty.) Further, in an analogous case the court found a similar argument unpersuasive. (Dhital v. Nissan North America, Inc. (2022) 84 Cal.App.5th 828, 844.) The Court finds Dhital persuasive. FORD's argument in this regard fails.

'[T]he only intent by a defendant necessary to prove a case of fraud is the intent to induce reliance.

Moreover, liability is affixed not only where the plaintiff's reliance is intended by the defendant but also where it is reasonably expected to occur.' (Lovejoy, supra, 92 Cal.App.4th at 93.) The Court finds Plaintiffs have alleged sufficient facts to support that FORD could reasonably expect that Plaintiffs would rely upon the intentional nondisclosures in making their decision to purchase or lease the vehicle.

Finally, FORD asserts the economic loss rule bars Plaintiffs' fraud claim. 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.' (Robinson Helicopter Co., Inc. v. Dana Corp. (2004) 34 Cal.4th 979, 988.) Robinson's 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.' (Robinson, supra, 34 Cal.4th at 993.) Robinson did not decide whether fraudulent concealment would be barred by the economic loss rule. However, in Nu Cal Foods, Inc. v. Quality Egg LLC (E.D. Cal. 2013) 918F.Supp.2d 1023, the court found Robinson 'strongly suggests no meaningful distinction exists between intentional concealment and intentional misrepresentation' and found the economic loss rule did not bar a claim for intentional omissions. (Id. at 1031-1033.) Where a duty separate from the contract is breached, the economic loss rule does not apply, such as 'where the contract was fraudulently induced.' (Erlich v. Menezes (1999) 21 Cal.4th 543, 552.) '[U]nder California law, the economic loss rule does not bar plaintiffs' claim here for fraudulent inducement by concealment. Fraudulent inducement claims fall within an exception to the economic loss rule recognized by our Supreme Court (Robinson, supra, 34 Cal.4th at pp. 989–990, 22 Cal.Rptr.3d 352, 102 P.3d 268), and plaintiffs allege fraudulent conduct that is independent of Nissan's alleged warranty breaches.' (Dhital, supra, 84 Cal.App.5th at 843.) While Dhital is not binding on this Court, the Court agrees with the reasoning in Dhital. FORD's argument fails. The demurrer as to the second cause of action for 'Fraudulent Inducement – Concealment' is overruled.

SEDANO asserts the economic loss rule bars the third cause of action for negligent repair. 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.' (Robinson, supra, 34 Cal.4th 979, 988.) 'California decisional law has long recognized that the economic loss rule does not necessarily bar recovery in tort for damage that a defective product (e.g., a window) causes to other portions of a larger product (e.g., a house) into which the former has been incorporated.' (Jimenez v. Superior Court (2002) 29 Cal.4th 473, 483.) 'The distinction that the law has drawn between tort recovery for physical injuries and warranty recovery for economic loss is not arbitrary and does not rest on the 'luck' of one plaintiff in having an accident causing physical injury.' (Id. at 482.) Plaintiffs assert the negligent repair claim is based on a service contract, which can give rise to a separate duty beyond those stated in the contract. ''[L]iability in negligence for purely economic losses ...

is 'the exception, not the rule,' under our precedents.'' (Sheen v. Wells Fargo Bank, N.A. (2022) 12 Cal.5th 905, 920 [Citation omitted].) However, the California Supreme Court has 'allowed for tort recovery in some cases involving insurance policies and contracts for professional services.' (Id. at 929.) Plaintiffs cite North American Chemical Co. v. Superior Court (1997) 59 Cal.App.4th 764 for support.

The court in North American Chemical stated: [F]or over 50 years California has also recognized the fundamental principle that ' '[a]ccompanying every contract is a common-law duty to perform with care, skill, reasonable expedience, and faithfulness Calendar No.: Event ID:  TENTATIVE RULINGS

2991720  60 CASE NUMBER: CASE TITLE:  GUTIERREZ VS FORD MOTOR COMPANY [IMAGED]  37-2023-00017190-CU-BC-CTL the thing agreed to be done, and a negligent failure to observe any of these conditions is a tort, as well as a breach of the contract.' The rule which imposes this duty is of universal application as to all persons who by contract undertake professional or other business engagements requiring the exercise of care, skill and knowledge; the obligation is implied by law and need not be stated in the agreement [citation].' (Roscoe Moss Co. v. Jenkins (1942) 55 Cal.App.2d 369, 376 [130 P.2d 477]; see also Kuitems v. Covell (1951) 104 Cal.App.2d 482, 485 [231 P.2d 552].) Both Roscoe Moss Co. and Kuitems involved contracts for the performance of services rather than the sale of goods.

(North American Chemical Co. v. Superior Court (1997) 59 Cal.App.4th 764, 774.) '[I]t does not matter whether the plaintiff and defendant are in privity or not.' (Id. at 785.) The Court agrees SEDANO had a duty to exercise care, skill and knowledge because it was in contractual privity, as SEDANO concedes, with Plaintiffs to undertake professional services. '[T]his Court is persuaded by the 'growing body of case law recognizing that local dealerships can be liable to plaintiffs who assert negligent repair claims.'' (Viveros v. Ford Motor Company (S.D. Cal., July 28, 2021, No. 21-CV-527 TWR (BGS)) 2021 WL 5989365, at *8 [Citation omitted].) This Court agrees. However, the Court finds the economic loss rule bars Plaintiffs' claim to the extent Plaintiffs do not allege separate damages from those of the warranty claims. Plaintiffs allege 'Defendant SEDANO FORD breached its duty to Plaintiffs to use ordinary care and skill by failing to properly store, prepare and repair of the Subject Vehicle in accordance with industry standards.' (Complaint, ¶ 104.) Plaintiffs' allegations do not indicate there were separate damages from an independent duty. The demurrer is sustained as to the negligent repair cause of action.

Unless the complaint shows on its face that it is incapable of amendment, denial of leave to amend constitutes an abuse of discretion [...] Liberality in permitting amendment is the rule....' (McDonald v. Superior Court (1986) 180 Cal.App.3d 297, 303-04.) The face of the complaint does not indicate Plaintiffs could not possibly amend the complaint as to the cause of action for negligent repair. Plaintiffs are granted ten (10) days leave to amend.

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