Judge Stephen Morgan, Case 22AVCV01063 2023-04-25 Tentative Ruling

This is a Lemon Law action. Plaintiff James Edwards (“Plaintiff”) alleges that on or about September 02, 2018, he entered into a warranty contract with Defendant Ford Motor Company (“FMC”) regarding a 2018 Ford F150, VIN: 1FTEW1E56JFA95094 (the “Subject Vehicle”), which was manufactured or distributed by FMC. Plaintiff further alleges that the warranty contract contained various warranties, including but not limited to the bumper-bumper warranty, powertrain warranty, and emission warranty. Plaintiff presents that the Subject Vehicle contained defects and nonconformities which manifested themselves within the applicable express warranty period including but not limited to, transmission defects, engine defects, and electrical system defects; that FMC failed to conform the Subject Vehicle to the terms of the express warranty after a reasonable number of repair attempts; and FMC did not either replace the Subject Vehicle or make restitution as required under the Song-Beverly Act. Plaintiff also believes that FMC had knowledge of the transmission defect and actively concealed the existence and nature of the defect from Plaintiff at the time of purchase, repair, and thereafter.

As to Defendant Autonation Ford Valencia (“Ford Valencia” and with FMC “Defendants”), Plaintiff alleges: (1) he delivered the Subject Vehicle to Ford Valencia for substantial repair on at least one occasion; (2) Ford Valencia owed a duty to Plaintiff to use ordinary care and skill in storage, preparation, and repair of the Subject Vehicle in accordance with industry standard; (3) Ford Valencia breached said duty; and (4) Ford Valencia’s breach was a proximate cause of Plaintiff’s damages.

On December 21, 2022, Plaintiff filed his Complaint alleging six causes of action for: (1) Violation of Cal. Civ. Code § 1793.2(d) against FMC; (2) Violation of Cal. Civ. Code § 1793.2(b) against FMC; (3) Violation of Cal. Civ. Code § 1793.2(a)(3) against FMC; (4) Breach of Implied Warranty of Merchantability (Cal. Civ. Code §§ 1791.1, 1794, and 1795.5) against FMC; (5) Fraudulent Inducement – Concealment against FMC; and (6) Negligent Repair against Ford Valencia.

On April 18, 2023, a hearing was held on this matter. There were no appearances for Plaintiff. Defendant submitted on the Court’s tentative. The Court took the matter under submission. Later, the Court was advised that there was an issue with remote appearances via LA CourtConnect and that counsel for Plaintiff was on hold. The Court continued the hearing on the Demurrer to April 25, 2023.

Standard for Demurrer – 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.¿¿(Ibid.)¿¿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,¿supra,¿147 Cal.App.4th at 747.)¿¿¿¿¿¿¿ ¿¿¿¿¿¿¿

A general demurrer admits the truth of all factual, material allegations properly pled in the challenged pleading, regardless of possible difficulties of proof.¿¿(Blank,¿supra, 39 Cal.3d at p. 318.)¿ Thus, no matter how unlikely or improbable, plaintiff’s allegations must be accepted as true for the purpose of ruling on the demurrer.¿¿(Del E. Webb Corp. v. Structural Materials Co.¿(1981) 123 Cal.App.3d 593, 604.)¿ Nevertheless, this rule does not apply to allegations expressing mere conclusions of law, or allegations contradicted by the exhibits to the complaint or by matters of which judicial notice may be taken.¿¿(Vance v. Villa Park¿Mobilehome¿Estates¿(1995) 36 Cal.App.4th 698, 709.)¿ A general demurrer does not admit contentions, deductions, or conclusions of fact or law alleged in the complaint; facts impossible in law; or allegations contrary to facts of which a court may take judicial notice.¿¿(Blank,¿supra, 39 Cal.3d at p. 318.)¿¿¿¿¿¿¿¿ ¿¿¿¿¿¿¿

Pursuant to¿Code Civ. Proc.¿§430.10(e), the party against whom a complaint has been filed may object by demurrer to the pleading on the grounds that the pleading does not state facts sufficient to constitute a cause of action.¿ It is an abuse of discretion to sustain a demurrer without leave to amend if there is a reasonable probability that the defect can be cured by amendment.¿¿(Schifando¿v. City of Los Angeles¿(2003) 31 Cal.4th 1074, 1082,¿as modified (Dec. 23, 2003).)¿¿¿¿¿¿¿¿ ¿¿

Meet and Confer Requirement – Before filing a demurrer or a motion to strike, the demurring or moving party is required to meet and confer with the party who filed the pleading demurred to or the pleading that is subject to the motion to strike for the purposes of determining whether an agreement can be reached through a filing of an amended pleading that would resolve the objections to be raised in the demurrer. (CCP §§ 430.41 and 435.5.) The Court notes that the Moving Party has complied with the meet and confer requirement. (Decl. of Colin P. Cornin ¶¶ 2-6.)

FMC states that Plaintiff’s Complaint fails to state sufficient facts to the cause of action. (Demurrer, 3:27-28.) FMC cites Carter v. Prime Healthcare Paradise Valley LLC (2011) 198 Cal. App. 4th 396, 410, stating, “[f]acts not conclusions, must be pleaded” and those facts “must be pleaded with particularity.” FMC believes that Plaintiff’s Complaint specifically in regard to the Third cause of action states “generalized recitations” of the Civil Code with conclusions of the law but does not provide facts or any indication of what they purportedly violated within the section. (Demurrer, 4:1-12.)

Plaintiff cites in both his Complaint and Opposition that FMC is required to “[m]ake available to authorized service and repair facilities sufficient service literature and replacement parts to effect repairs during the express warranty period.” (Comp., 9:14-15, 2:26-28, 3:1, Cal. Civ. Code § 1793.2 (a)(3).) Plaintiff argues that he has adequately shown facts showing Defendant failed “to make available to its authorized service and repair facilities sufficient service literature and replacement parts to effect repairs” as required by the Song-Beverly Act. (Comp., 9:13-24.) Further, he alleges that FMC authorized repairs on the Subject Vehicle. (Ibid., see also Id. at 7:14-27, 13:19-21, 14:10-11) and knew about the transmission faults on Subject Vehicle per the two Technical Service Bulletins (“TSB”) filed prior to purchase – TSB 18-2079 filed August 2, 2017, and TSB 18-2274 filed May 15, 2018 (Ibid., 5-6.) Plaintiff also cites to Navarro v. Block (2001) 250 F.3d 729, 732 where it is stated that “all material allegations of the complaint are accepted as true, as well as all reasonable inferences to be drawn from them.”

FMC argues that Plaintiff’s Opposition fails to address the issues it raised in its Demurrer. That is, FMC believes that (1) Plaintiff has conceded that he failed to allege any particular facts giving rise to his claim and relies on inferences, (2) Plaintiff’s argument is self-defeating as the TSBs were at all times publicly available through multiple sources, (3) Plaintiff’s argument concedes that FMC’s authorized repair facilities had such information as Plaintiff’s Opposition argues that the “information is entirely in the possession of either FORD or its authorized dealerships or both” (Opposition 3:21-22), and (4) Plaintiff fails to address FMC’s argument that no allegations are pled to support the notion that any damages were suffered by Plaintiff.

For a claim under Cal. Civ. Code § 1793.2(a)(3) to be successful, Plaintiff must allege factual evidence in support of assertion that defendant failed to “[m]ake available to authorized service and repair facilities sufficient service literature and replacement parts to effect repairs during the express warranty period.” (Farrales v. Ford Motor Co. (N.D. Cal. 2022) 2022 U.S. Dist. LEXIS 76768, 19-20 [discussing Cal. Civ. Code § 1793.2; dismissing cause of action under 1793.2(a)(3) where plaintiff failed to allege facts and instead merely parroted language of the statute].

“. . .[t]he essence is fairness in pleading in order to give the defendant sufficient notice of the cause of action stated against him so that he will be able to prepare his case. (Bradley v. Hartford Acc. & Indem. Co. (1973) 30 Cal.App.3d 818, 825 [overruled in Silberg v. Anderson (1990) 50 Cal.3d 205 as to the exception to the privilege prescribed by Cal. Civ. Code § 47(2) for communications not made for the purpose of promoting the “interest of justice].)

Here, Plaintiff has not proffered factual evidence in support of his claim under Cal. Civ. Code § 1793.2(a)(3). Specifically, Plaintiff’s Complaint alleges “[i]n violation of Civil Code section 1793.2, subdivision (a)(3), Defendant FMC failed to make available to its authorized service and repair facilities sufficient service literature and replacement parts to effect repairs during the express warranty period.” (Comp. 9:12-15.) Plaintiff incorporates by reference the allegations contained in prior paragraphs which includes the TSBs presented in the Factual Background Section. Plaintiff has not provided proper notice to FMC through the two TSB filings prior to purchase as these allegations still fail to provide notice to Defendant of what literature and/or replacement parts Plaintiff believes should have been provided. (Comp., pp. 5-6; see Farrales, supra, 2022 U.S. Dist. LEXIS 76768 at 19-20.) Such information is needed so that FMC may prepare its case. (See Bradley, supra, 30 Cal.App.3d at 825.)

FMC presents that “[a]n action for breach of any contract for sale must be commenced within four years after the cause of action has accrued.” (Cal. Com. Code § 2725; Demurrer, 5:4-5.) The Complaint states that the Plaintiff entered into a warranty contract with FMC on September 02, 2018, regarding Subject Vehicle.[1] This means Plaintiff had until September 02, 2022, to file his Complaint, but filed on December 15, 2022. (Demurrer, 5:20-21.)

Plaintiff presents that he discovered FMC alleged wrongful conduct shortly before the filing. (Comp., 2:3-4.) Given that the defect was latent, Plaintiff argues that while the earliest a cause of action for breach accrues is at delivery, it is not limited to the time of delivery. (Opp., 5:8-12, Mexia v. Rinker Boat Co. (2009) 174 Cal. App. 4th 1297, 1306-09.) Plaintiff states that a cause of action may accrue from the time a consumer discovers a latent defect and has notified seller within a reasonable time. (Ibid.) Additionally, Plaintiff argues that the “future performance” exception applies, where “[a] breach of warranty occurs when trend of delivery is made, except that where a warranty explicitly extends to future performance of the goods and discovery of the breach must await the time of such performance the cause of action accrues when the breach is or should have been discovered.” (Cal. Com. Code § 2725(2).) He states that as he received express warranties that addressed future performance, the statute of limitations was tolled by these warranties, and did not run until the defects became known. (Opp., 6:5-7.)

FMC argues that Plaintiff did not address Cal. Civ. Code § 1791.1(c) or Cal. Com. Code § 2725 in his Opposition. FMC reiterates that the statute of limitations begins running upon tender of delivery, citing to Krieger v. Nick Alexander Imports, Inc. (1991) 234 Cal.App.3d 205, 211. FMC presents that the future performance of the vehicle has nothing to do with the merchantability of the vehicle at the time of sale and Plaintiff’s arguments regarding federal opinions should not prevail as federal opinions are not citable.

The Court emphasizes that federal cases may be cited to as persuasive precedent rather than binding. (See Uecker v. Zentil (2016) 244 Cal.App.4th 789, 795.) Where California law is modeled on federal laws, federal decisions interpreting substantially identical statutes are unusually strong persuasive precedent on construction of our own laws. (Building Material & Construction Teamsters' Union v. Farrell (1986) 41 Cal. 3d 651, 658; Holmes v. McColgan (1941) 17 Cal. 2d 426, 430.)

While Cal. Code 1791.1 controls the length of the implied warranty of merchantability, the statute of limitations is set out is laid out in Cal. Com. Code § 2725. Cal. Com. Code § 2725 provides that a breach of any contract for sale must be commenced within four years after the cause of action accrued.

“A cause of action accrues when the breach occurs regardless of the aggrieved party’s lack of knowledge of the breach. A breach of warranty occurs when tender of delivery is made” (Cal. Com. Code § 2725.) However, Emergency Rules related to COVID-19 were in effect from April 06, 2020, until June 30, 2022. (Judicial Council of California, App. 1, Emergency Rules Related to COVID-19 <https://www.courts.ca.gov/documents/appendix-i.pdf> [as of Apr. 11, 2023].) This allows for tolling of the statute of limitations that are 180 days or less from April 6, 2020, until August 3, 2020. (Ibid. at Emergency Rule 9(b).)

The Court need not address the issue of when the statute of limitations began as FMC does not address the tolling period due to the COVID-19 pandemic.

Plaintiff alleges delivery of the vehicle on September 02, 2018, prior to the enactment of the COVID-19 Emergency Rules. The statute of limitations for a breach of a contract for sale is four years as mentioned, ante. Four years from the date of delivery is September 02, 2022. This encompasses the time in which the COVID-19 Emergency Rules were enacted.

Here, Plaintiff filed his Complaint on December 21, 2022. From the alleged date of delivery of the vehicle and with the tolling of 180 days as set out by Emergency Rule 9, Plaintiff had until March 01, 2023, to file his Complaint. Thus, the filing meets the timing requirements under the Emergency Rule 9 tolling of statute of limitations for civil causes of actions.

i. Transactional Relationship – FMC claims no transactional relationship exists between itself and Plaintiff, and, as such, no fiduciary relationship exists. FMC states that “franchisor’s general advertising display of the logo, trade name, or trademark does not establish agency.” (Emery v. Visa Internat. Service Assn., (2002) Cal. App. 4th 952, 961.)

Plaintiff argues that FMC could “certainly expect dealerships to re-sell vehicles to purchasers.” (Opp. 8:25-26.) Additionally, citing Khan v. Shiley Inc. (1990) 217 Cal. App. 3d 848, 850-51, Plaintiff states that privity of contract is not required for a deceit cause of action. Plaintiff cites the following holding that addresses transactional relationships and privity:

At the pleading stage (and in the absence of a more developed argument by Nissan on this point), we conclude plaintiffs’ allegations are sufficient. Plaintiffs alleged that they bought the car from a Nissan dealership, that Nissan backed the car with an express warranty, and that Nissan’s authorized dealerships are its agents for purposes of the sale of Nissan vehicles to consumers. In light of these allegations, we decline to hold plaintiffs’ claim is barred on the ground there was no relationship requiring Nissan to disclose known defects.

(Dhital v. Nissan N. Am., Inc. (2022) 84 Cal. App. 5th 828, 844 (“Dhital”).)

FMC’s Reply highlights that Dhital supports their argument. That is, Dhital requires that a claim for fraud, including concealment, must be pled with specificity. FMC reiterates that the Complaint does not allege that it sold the subject vehicle to Plaintiff and fails to allege any legally cognizable agency on behalf of FMC.

The Court emphasizes that Dhital states: “Plaintiffs alleged that they bought the car from a Nissan dealership, that Nissan backed the car with an express warranty, and that Nissan’s authorized dealerships are its agents for purposes of the sale of Nissan vehicles to consumers.” (Dhital, supra, 84 Cal.App.5th at 844 [emphasis added].) Here, unlike Dhital, Plaintiff’s Complaint has no discussion regarding an authorized dealership for the sale of the Subject Vehicle. Regarding how Plaintiff attained the vehicle, Plaintiff alleges only that he “entered into a warranty contract with Defendant FMC regarding a Ford F150 vehicle identification number 1FTEW1E56JFA95094 (hereafter "Vehicle"), which was manufactured and or distributed by Defendant FMC.” (Comp., 2:8-11.) Further, Plaintiff only references FMC’s representatives in regard to repairs of the vehicle. (Comp. 7:14-15.) As presented, there is no transactional relationship established.

ii. Fraudulent Inducement – “[T]he elements of an action for fraud and deceit based on a 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.” (Boschma v. Home Loan Center, Inc. (2011) 198 Cal.App.4th 230, 248.)

FMC states that Plaintiff fails to present that concerns regarding Subject Vehicle were due to FMC’s statements or lack thereof. (Demurrer, 8:13-15.) FMC presents that Plaintiff fails to state facts to support that Plaintiff relied on communication from FMC and did not allege facts in support of his claim of concealment of the defective nature of the Subject Vehicle. (Ibid. at 8:14-19.) Further, FMC argues that its alleged silence is not enough to support Plaintiff’s claim of fraudulent concealment, adding that his explanation is vague. (Ibid. at 8:20-26.) As the TSBs were publicly available documents, FMC states that Plaintiff cannot claim that they both “concealed it from the public and also that the information was openly issued to the public in Technical Service Bulletins.” (Demurrer, 9:4-10.)

Plaintiff reiterates that he has met each element establishing fraudulent concealment in his Complaint, noting that Defendant had “superior knowledge of the facts regarding the transmission defect (Comp., 6:25-28, 7:1-8.), the safety risks posed by the transmission defect (Ibid. at 3:1-2, 11:15-21, 12:2-6.), the materiality of that information (Ibid. at 6:25-28, 7:1-5, 13:6-18.), Plaintiff’s reliance on the non-disclosure, (Ibid. at 6:25-28, 7:1-5, 13:9-18.) and damages (Ibid. at 4:1-2, 13:22-27.). Plaintiff cites Dhital, supra, 84 Cal.App.5th at 834-44 as follows:

Nissan also contends plaintiffs did not provide specifics about what Nissan should have disclosed. But plaintiffs alleged the CVT transmissions were defective in that they caused such problems as hesitation, shaking, jerking, and failure to function. The SAC also alleged Nissan was aware of the defects as a result of premarket testing and consumer complaints that were made both to NHTSA and to Nissan and its dealers. It is not clear what additional information Nissan believes should have been included. We decline to hold (again in the absence of a more developed argument on this point) that plaintiffs were required to include in the SAC more detailed allegations about the alleged defects in the CVT. We conclude plaintiffs’ fraud claim was adequately pleaded.

FMC argues that Plaintiff has failed to allege who at Ford Motor Company purportedly failed to disclose the information and Plaintiff is required “to allege the names of the persons who made the allegedly fraudulent representations, their authority to speak, to whom they spoke, what they said or wrote, and when it was said or written.” (Reply 6:20-23, citing Tarmann v. State Farm Mut. Auto Ins. Co. (1991) 2 Cal.App.4th 153, 157). FMC also states that Plaintiff’s failure to provide detail to his fraud claim extends to constitutional issues to the extent that such allegations are the basis for punitive damages.

The Court notes that FMC’s Reply arguments were not presented in the moving papers. "The salutary rule is that points raised in a reply brief for the first time will not be considered unless good cause is shown for the failure to present them before." (Balboa Ins. Co. v. Aguirre (1983) 149 Cal.App.3d 1002, 1010.) This applies to new evidence as well – “[t]he general rule of motion practice … is that new evidence is not permitted with reply papers.” (Jay v. Mahaffey (2013) 218 Cal.App.4th 1522, 1537.) “This rule is based on the same solid logic applied in the appellate courts, specifically, that ‘[p]oints raised for the first time in a reply brief will ordinarily not be considered, because such consideration would deprive the respondent of an opportunity to counter the argument.’ ” (Id. at 1538 [citing American Drug Stores, Inc. v. Stroh (1992) 10 Cal.App.4th 1446, 1453; Browne v. County of Tehama (2013) 213 Cal.App.4th 704, 720, fn. 10].) As such, the Court does not consider FMC’s new arguments raised in the Reply brief.

“Fraud, including concealment must be pleaded with specificity.” (Id. 84 Cal.App.5th at 844, citing Linear Technology Corp. v. Applied Materials, Inc. (2007) 152 Cal.App.4th 115, 132.) The Dhital Court held that there was enough specificity where: (1) “plaintiffs alleged the CVT installed in numerous Nissan vehicles (including the one plaintiffs purchased) were defective;” (2) “ Nissan knew of the defects and the hazards they posed;” (3) “Nissan had exclusive knowledge of the defects but intentionally concealed and failed to disclose that information;” (4) “Nissan intended to deceive plaintiffs by concealing known transmission problems;” (5) “plaintiffs would not have purchased the car if they had known of the defects;” and (6) “plaintiffs suffered damages in the form of money paid to purchase the car.” (Id. at 844.) The Dhital Court went further to address Nissan’s arguments regarding information that should have been disclosed. That is, the Dhital Court felt that the allegations in the complaint for their action was sufficient even though the plaintiffs did not address what information should have been disclosed because: (1) “Plaintiffs alleged the CVT were defective in that they caused such problems as hesitation, shaking, jerking, and failure to function;” and (2) “Nissan was aware of the defects as a result of premarket testing and consumer complaints that were made both to National Highway Traffic Safety Administration and to Nissan and its dealers.” (Id. 84 Cal. App. 5th at 844-45.)

Applying this to our case, Plaintiff alleges the transmission was defective and unsafe and would not have purchased the Subject Vehicle if he had known the risk “which can lead to hesitation, loss of power, and other shifting issues while drive at highway speeds.” (Comp., 6:25-28, 7:1.) The two TSBs show that FMC was aware of the transmission defect. Additionally, consumers had made complaints about such transmission defect. (Comp. 13:1-2.) While FMC had knowledge of the transmission defect, they failed to inform Plaintiff of it and as such, he was harmed by purchasing the Subject Vehicle. (Comp. 7:6-8, 14:1-2.) However, Plaintiff’s allegations are not limited solely to the transmission defect. Plaintiff alleges that the “defect and nonconformities to warranty manifested themselves within the applicable express warranty period including, but not limited, to transmission defects; engine defects; electrical system defects; among other defects and non-conformities,” but Plaintiff’ has not proffered any evidence to claims beyond the transmission defect (Comp. 2:25-27.) As applied, Plaintiff has not met the necessary specificity requirements for a fraudulent concealment claim.

iii. Economic Loss Doctrine – FMC argues that the economic loss doctrine bars Plaintiff from bringing this claim altogether. (Demurrer, 10:1-2.) Defendant accurately notes that “where a purchaser’s expectation is 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 …. 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 (“Robinson”.)

Plaintiff counters that the economic loss rule is not applicable to a fraudulent inducement cause of action as the “tortious conduct occurs prior to contract formation” and that one’s duty to not perpetrate fraud is independent from the contract. (Opp., 12:3:5, Elrich v. Menezes (1999) 21 Cal. 4th 543, 551-52.) Plaintiff cites Dhital, supra, 84 Cal. App. 5th at 843, where the court found that the economic loss rule did not bar fraudulent inducement where the claim was separate and apart from Plaintiff’s warranty claim:

[W]e conclude that, under 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), and plaintiffs allege fraudulent conduct that is independent of Nissan’s alleged warranty breaches.

FMC presents that Robinson permitted a claim for fraud, but it does not apply to every fraud cause between contracting parties. FMC believes that 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 979 at 276.) FMC believes that Plaintiff cited only cases decided before Robinson and inapposite cases. FMC then, despite its previous argument that federal cases are not citable, cites to a federal case titled Altamirano-Torres v. Ford Motor Co., et al. (C.D. Cal. 2020) 2020 WL 5267567 which it believes to properly interpret Robinson.

As the Court mentioned, ante, federal cases are not binding, but rather persuasive authority.

FMC has not addressed Plaintiff’s citation to Dhital in the context of this argument.

The economic loss rule provides that, “[i]n general, there is no recovery in tort for negligently inflicted ‘purely economic losses,’ meaning financial harm unaccompanied by physical or property damage.” (Sheen v. Wells Fargo Bank, N.A. (2022) 12 Cal.5th 905, 922 [290 Cal. Rptr. 3d 834, 505 P.3d 625] (Sheen).) For claims arising from alleged product defects, “[e]conomic loss consists of ‘“‘“damages for inadequate value, costs of repair and replacement of the defective product or consequent loss of profits—without any claim of personal injury or damages to other property … .”’”’” (Robinson, supra, 34 Cal.4th at p. 988.)

The Sheen court noted the economic loss rule “has been applied in various contexts. First, it carries force when courts are concerned about imposing ‘“liability in an indeterminate amount for an indeterminate time to an indeterminate class.”’” (Sheen, supra, 12 Cal.5th at p. 922, quoting Southern California Gas Leak Cases (2019) 7 Cal.5th 391, 414 [247 Cal. Rptr. 3d 632, 441 P.3d 881].)

Second, “[i]n another recurring set of circumstances, the rule functions to bar claims in negligence for pure economic losses in deference to a contract between litigating parties.” (Sheen, supra, 12 Cal.5th at p. 922, citing Robinson, supra, 34 Cal.4th at p. 988, and other cases.) The Restatement states this form of the economic loss rule as follows: “[T]here is no liability in tort for economic loss caused by negligence in the performance or negotiation of a contract between the parties.” (Rest.3d Torts, Liability for Economic Harm, § 3; see Sheen, supra, at p. 923.)

The Robinson court explained: “‘“‘[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.’”…’ [Citation.] 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, supra, 34 Cal.4th at p. 988.)

The Robinson court also described instances where tort damages are permitted in contract cases. “‘Tort damages have been permitted in contract cases where a breach of duty directly causes physical injury [citation]; for breach of the covenant of good faith and fair dealing in insurance contracts [citation]; for wrongful discharge in violation of fundamental public policy [citation]; or where the contract was fraudulently induced. [Citation.]’ [Citation.] ‘[I]n each of these cases, 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.’” (Robinson, supra, 34 Cal.4th at pp. 989–990.)

Here, the fraudulent inducement exception to the economic loss rule applies. Plaintiffs allege that Nissan, by intentionally concealing facts about the defective transmission, fraudulently induced them to purchase a car. Fraudulent inducement is a viable tort claim under California law. “The elements of fraud are (a) a misrepresentation (false representation, concealment, or nondisclosure); (b) scienter or knowledge of its falsity; (c) intent to induce reliance; (d) justifiable reliance; and (e) resulting damage. [Citations.] Fraud in the inducement is a subset of the tort of fraud. It ‘occurs when “‘the promisor knows what he is signing but his consent is induced by fraud, mutual assent is present and a contract is formed, which, by reason of the fraud, is voidable.’”’” (Hinesley v. Oakshade Town Center (2005) 135 Cal.App.4th 289, 294–295 [37 Cal. Rptr. 3d 364]; accord, Geraghty v. Shalizi (2017) 8 Cal.App.5th 593, 597 [215 Cal. Rptr. 3d 61].)

To hold, at the demurrer stage, that plaintiffs' fraud claim is barred by the economic loss rule, we would need to conclude, as Nissan urges us to do, that (1) despite the Supreme Court's statement in Robinson, there is no exception to the economic loss rule for fraudulent inducement claims (or at least no exception that encompasses the claim plaintiffs allege in the SAC), or (2) plaintiffs have not adequately pleaded a claim for fraudulent inducement under California law (a question we address in pt. II.C., post). We reject both arguments and conclude the economic loss rule does not bar plaintiffs' claim.

Here, while the Supreme Court has held that an exception to the economic loss rule exists in fraudulent inducement claims, the Court has found that Plaintiff has not adequately pleaded a claim for fraudulent inducement, ante. Thus, as plead, Plaintiff’s fraud claim is barred by the economic loss rule. However, should Plaintiff properly plead his Fraudulent Inducement claim, he will not be barred by the economic loss rule as the Supreme Court in Robinson, supra, held that fraudulent inducement by concealment is placed outside the coverage of the economic loss rule. (See Dhital, supra, 84 Cal.App.5th at 840-41, citing Robinson, supra, 34 Cal.4th 979.)

Leave to amend must be allowed where there is a reasonable possibility of successful amendment. (Goodman v. Kennedy¿(1976), 18 Cal.3d 335, 348.) While under California law leave to amend is liberally granted, “leave to amend should not be granted where, in all probability, amendment would be futile.” (Vaillette v. Fireman's Fund Ins. Co. (1993), 18 Cal. App. 4th 680, 685).¿ “A trial court does not abuse its discretion when it sustains a demurrer without¿leave to amend¿if either (a) the facts and the nature of the claims are clear and no liability exists, or (b) it is probable from the nature of the defects and previous unsuccessful attempts to plead that the plaintiff cannot state a claim.” (Cantu v. Resolution Trust Corp.¿(1992)¿4 Cal.App.4th 857, 889.)¿¿

· The Thirds Cause of Action for Violation of Cal. Civ. Code § 1793.2(a)(3), may be rectified with an amendment as the issues is the current Complaint is that, as pled, the Plaintiff has not included sufficient information to provide notice to Defendant for a claim under Cal. Civ. Code § 1793.2(a)(3);

· The Fourth Cause of Action for Breach of Implied Warranty of Merchantability is OVERRULED; and

· The Fifth Cause of Action for Fraudulent Inducement – Concealment, may be rectified with amendments to each argument:

o Transactional Relationship – The current Complaint does not include sufficient information regarding an authorized dealership to establish a transactional relationship.

o Fraudulent Inducement – The Complaint does not provide sufficient information to address all claims related to the defects stated in Complaint.

o Economic Loss Doctrine – The Complaint does not adequately plead a claim for fraudulent inducement.

Accordingly, the Demurrer is SUSTAINED as to the Third and Fifth Causes of Action. Demurrer is OVERRULED as to the Fourth Cause of Action. Leave to amend is granted as to the Third Cause of Action (Violation of Cal. Civ. Code § 1793.2(a)(3)) and Fifth Cause of Action (Fraudulent Inducement – Concealment).

Defendant Ford Motor Company’s Demurrer is SUSTAINED as to the Third Cause of Action (Violation of Cal. Civ. Code § 1793.2(a)(3)) and Fifth Causes of Action (Fraudulent Inducement – Concealment) with leave to amend.

Defendant Ford Motor Company’s Demurrer is OVERRULED as to the Fourth Cause of Action.

[1] The Court notes that FMC’s Demurrer states that the date of sale was September 02, 2019. (See Demurrer 5:11.) The Court believes this to be a Scrivener’s Error as the Complaint alleges that the date of sale/date in which Plaintiff entered into a warranty contract with FMC was September 02, 2018. (See Comp., ¶ 9.)