Judge: Stephen Morgan, Case: 23AVCV00884, Date: 2023-10-31 Tentative Ruling
Case Number: 23AVCV00884 Hearing Date: October 31, 2023 Dept: A14
Background
This is a lemon law action. Plaintiff
Caryn Cay (“Plaintiff”) alleges that on or about February 06, 2022, Plaintiff
entered into a warranty contract with Defendant Ford Motor Company (“FMC”)
regarding a 2022 Ford Explorer with vehicle identification number
1FMSK7DH5NGA19648 (the “Subject Vehicle”). Plaintiff alleges that defects and
nonconformities to warranty with the Subject Vehicle manifested themselves
within the applicable express warranty period and FMC failed to either promptly
replace the Subject Vehicle or to promptly make restitution in accordance with
the Song-Beverly Act. Plaintiff further alleges that Defendant Diamond Ford
(“Diamond” and collectively “Defendants”) owed a duty to Plaintiff to use
ordinary care and skill in storage, preparation and repair of the Subject
Vehicle in accordance with industry standards and breached said duty.
On August 10, 2023, Plaintiff
filed her Complaint alleging causes of action for: (1) Violation of Cal. Civ.
Code § 1793.2(d) against FMC, (2) Violation of Cal. Civ. Code § 1793(b) against
FMC, (3) Violation of Cal. Civ. Code § 1793.2(a)(3) against FMC, (4) Breach of
the Implied Warranty of Merchantability (Cal. Civ. Code §§ 1791.1, 1794,
1795.5) against FMC, (5) Fraudulent Inducement – Concealment against FMC, (6)
Negligent Repair against Diamond.
On September 19, 2023, Defendants
filed their Demurrer.
On October 18, 2023, Plaintiff
filed her Opposition.
On October 24, 2023, Defendants
filed their Reply.
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Legal Standard
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.¿ (Cal. Code Civ. Proc. § 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 v. Kirwan (1985) 39
Cal.3d 311, 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).)¿¿¿¿¿¿¿¿¿
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¿¿¿
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. (Cal. Code Civ. Proc. §§ 430.41 and 435.5.) The Court
notes that this requirement has been satisfied. (Decl. Chen Fei Liu ¶ 3.)
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Discussion
Application – Defendants
demur to the Fifth Cause of Action (Fraudulent Inducement – Concealment) and
the Sixth Cause of Action (Negligent Repair).
i. Fifth
Cause of Action (Fraudulent Inducement – Concealment)
Defendants argues that
Plaintiff’s Complaint does not adequately plead a claim for fraudulent
concealment as (1) Plaintiff’s counsel
has used boiler plate language, so there is no particularity as to the
defect FMC allegedly concealed; (2) Plaintiff fails to allege where the omitted
information should or could have been revealed; (3) Plaintiff does not identify
by name who made the alleged omissions when she purchased the Subject Vehicle;
(4) Plaintiff has failed to plead a duty to disclose under LiMandri v.
Judkins (1997) 52 Cal.App.4th 326 (“LiMandri”); (4) Plaintiff fails
to plead a transactional relationship between herself and FMC; (5) Plaintiff
fails to plead exclusive knowledge under Roe v. Ford Motor Co. (E.D.
Mich. Aug. 6, 2019) Case No. 2:18-cv-12528-LJM-APP, 2019 WL 3564589 and Callaghan
v. BMW of N. Am., LLC (N.D. Cal. Nov. 21, 2014) No. 13-CV-04794-JD, 2014 WL
6629254; (6) Plaintiff fails to plead active concealment because Plaintiff does
not specify what information FMC is alleged to have concealed or the manner
which it purportedly concealed it is insufficient to meet the requisite
pleading standard; and (7) Plaintiff’s fraud claim is barred by the economic
loss rule, comparing Robinson Helicopter Co., Inc. v. Dana Corp. (2004)
34 Cal. 4th 979, 988 (“Robinson”) and Dhital v. Nissan North America,
Inc. (2022) 84 Cal.App.4th 828 (“Dhital”)
among other cases.
Plaintiff argues that her
Complaint contains all the necessary elements for fraudulent inducement. Plaintiff
highlights that the heightened pleading standard for fraud is lessened in cases
of non-disclosure and where a defendant necessarily possesses knowledge of the
facts. Plaintiff further argues that a transactional relationship is not
required under California law nor is the claim barred by the economic loss rule
under California law.
Defendants highlight that OCM
Principal Opportunities Fund, L.P. v. CIBC World Markets Corp. (2007) 157
Cal.App.4th 835 requires disclosure where there is no fiduciary relationship
and Plaintiff’s non-disclosure argument conflicts with LiMandri and Dhital. Defendants believe that Plaintiff has no pled facts establishing that
there is a defect in the Subject Vehicle. Defendants cite Salcedo v. Nissan
N. Am., Inc. (C.D. Cal. Nov. 2, 2022) No. CV 22-4152-GW-MARX, 2022 WL
16705004, at *4, arguing that the Court considered that Dhital as
persuasive authority. Defendants further argue that: (1) Plaintiff’s
allegations fail to identify a defect specific to the subject Vehicle; (2)
Plaintiff’s allegations are conclusory; and (3) Plaintiff does not plead
exclusive knowledge and active concealment under LiMandri. Defendants
reiterate that the economic loss rule bars Plaintiff’s fraud claim as other
courts have interpreted Robinson to hold that fraud claims are allowed
in contract actions when defendants have made affirmative misrepresentations on
which plaintiffs rely, and which expose plaintiffs to liability for personal
damages independent of the Plaintiffs’ economic loss and Plaintiff has failed
to plead fraudulent inducement that falls into Robinson’s exception.
As an initial matter, Defendants
rely heavily on federal case precedent, including federal courts outside of
this state. Federal case precedent is, generally, not binding precedent on this
Court, but rather persuasive precedent.
Regarding specificity, “[l]ess 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.’ ” (Committee
on Children's Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197,
216 [quoting Bradley v. Hartford Acc.& Indem. Co. (1973) 30 Cal.App.3d 818, 825].) The
specificity requirement is greatly relaxed or eliminated under circumstances
where the defendant must necessarily possess superior information of the fraud.
(Id., at 216-217; see also Silberg v. Anderson (1990) 50 Cal.3d
205, 212-213.)
Here, the Complaint alleges FMC’s superior
and/or exclusive knowledge of the transmission defect in paragraphs 25 to 36,
citing to technical service bulletins ("TSBs") concerning the
Transmission Defects from 2018 to 2021. Specificity is not at issue.
For clarity, the Court addresses
Defendants’ arguments regarding the allegations for exclusive knowledge. Roe
v. Ford Motor Co. (E.D. Mich. Aug. 6, 2019) Case No. 2:18-cv-12528-LJM-APP,
2019 WL 3564589 is not binding on this Court. It appears Defendants are citing
to page 9 and not page 3 as presented in their moving papers. The section
Defendants are citing to reads in its totality:
Whether plaintiffs
have satisfied the minimum requirements to plead a claim under FRCP 8, however,
is a different matter, and it is in that context that the Court finds the
vagueness of plaintiffs' allegations to be a fatal deficiency. As the Supreme
Court has expressly stated, to avoid dismissal, a complaint must allege
"enough facts to state a claim to relief that is plausible on its
face." Twombly, 550 U.S. at 570. "Plausibility requires
pleading facts, as opposed to conclusory allegations or the 'formulaic
recitation of the elements of a cause of action,' Twombly, 550 U.S. at
555," and plaintiffs' allegations "must rise above the mere
conceivability or possibility of unlawful conduct that entitles the pleader to
relief, Iqbal, 556 U.S. at 678-79." Somers v. Apple, Inc., 729 F.3d
953, 959-60 (9th Cir. 2013). "Where a complaint pleads facts that are
merely consistent with a defendant's liability, it stops short of the line
between possibility and plausibility of entitlement to relief." Iqbal,
556 U.S. at 678 (internal quotation marks and citation omitted).
The most that
plaintiffs have said about the alleged "defect" upon which their case
is built is that the Mini Cooper S model vehicles' automatic transmissions are
"prone to premature failure." Dkt. No. 43 ¶ 3; see also id. ¶ 6
(transmissions are "prone to premature failure, before the end of the
useful life of the Class Vehicles"; plaintiffs allege on information and
belief that "a vehicle's transmission is intended and reasonably expected
to last at least ten years"). While plaintiffs also say this premature
failure is "unavoidable," id. ¶ 7, and "dangerous," id. ¶
59, their allegations never descend below this 10,000 foot level of generality,
and it is impossible to discern from the allegations the specific nature of
this supposedly unavoidable, classwide "defect." Plaintiffs'
allegations remain firmly on the mere "possibility" side of the line.
This results in
insurmountable defects in pleading viability. Assuming the Court were to let
the plaintiffs go forward with the current version of their complaint, what
discovery requests would they be permitted to serve on defendants? Under the
current vague generalities, the scope of discovery arguably would include a
request calling for defendants to produce everything relating to the automatic
transmissions of the Mini Cooper S model vehicles. This is too broad.
Transmissions can fail for a myriad of different reasons. As was quoted by the
Supreme Court in Twombly, 550 U.S. at 558, "some threshold of plausibility
must be crossed at the outset before a patent antitrust case should be
permitted to go into its inevitably costly and protracted discovery
phase." Asahi Glass Co. v. Pentech Pharmaceuticals, Inc., 289 F.
Supp. 2d 986, 995 (N.D. Ill. 2003). The same can be said of this consumer class
action, and plaintiffs' second amended complaint does not cross that threshold.
The impermissibly
vague "defect" is at the heart of each of plaintiffs' eight claims
for relief. See, e.g., Dkt. No. 43 ¶¶ 114, 132, 139, 154, 164, 171, 177, 185.
Consequently, the Court dismisses the entire second amended complaint for
failure to satisfy the pleading standards of FRCP 8, as it has been clarified
in cases such as Twombly, 550 U.S. 544, 127 S. Ct. 1955, 167 L. Ed. 2d
929 and Iqbal, 556 U.S. 662, 129 S. Ct. 1937, 173 L. Ed. 2d 868. The
Court, however, grants plaintiffs leave to amend, as discussed below.
(Callaghan v. BMW of N. Am.,
LLC (N.D. Cal. Nov. 21, 2014) No. 13-CV-04794-JD, 2014 WL 6629254 at *7-10
(“Callaghan”.)
First, this section focuses on
Federal rules of Civil Procedure Rule 8 which discusses general rules of
pleading and not fraud. Further, unlike the plaintiff in Callaghan,
Plaintiff has pled more than an automatic transmission that is “prone to
premature failure.” (Id. at *8.) Plaintiff’s pleadings allege that FMC
had knowledge prior to sale that there was a transmission defect in vehicles
equipped with the 10R80 automatic transmission as early as 2018 and that the
Subject Vehicle was equipped with a 10R80 automatic transmission, with no
warnings to consumers such as Plaintiff, despite this knowledge. Thus, under
Defendants’ own cited case, the pleadings are sufficient.
Regarding the duty to disclose
argument, LiMandri provides:
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. [Citation.]" ( Heliotis
v. Schuman (1986) 181 Cal. App. 3d 646, 651 [226 Cal. Rptr. 509].)
(LiMandri, supra, 52
Cal.App.4th at 336.)
The Court notes that the LiMandri
holding has been questioned by the United States Court of Appeals for the Ninth
Circuit, but not California courts.
Based on the allegations of the
Complaint, this is a case where when the defendant, FMC, had exclusive
knowledge of material facts not known to the plaintiff through the TSBs. Thus,
the LiMandri standard has been met.
As argued by Defendants,
Plaintiff must plead a direct transactional relationship or one of the latter
three circumstances in LiMandri. As the Court stated, ante, one
of those circumstances, exclusive knowledge of defendant, has been pled.
Accordingly, the argument that Plaintiff must plead a direct transactional
relationship is no longer at issue. Likewise, Defendants’ argument that active
concealment must be pled fails for the same reasons.
Dhital addresses the economic loss rule in the
context of vehicle sales:
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.
(Dhital, supra, 84
Cal.App.5th at 837-39.)
While Dhital has been granted
review, the California Supreme Court has expressly denied an order directing
depublication of the opinion. (See Dhital v. Nissan North America, Inc.
(Feb. 01, 2023) 2023 Cal. LEXIS 569.) Accordingly, Dhital remains
binding case precedent on this Court. The California Supreme Court has held
that an exception to the economic loss rule exists in fraudulent inducement
claims.
To plead a claim for fraudulent
inducement, Plaintiff must plead the following elements: (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. (See Dhital, supra,
84 Cal.App.5th at 838.) Plaintiff has pled that (1) there was concealment
and/or nondisclosure of the transmission defect by FMC; (2) FMC had knowledge
of the transmission defect (i.e., knowledge of falsity); (3) FMC intentionally concealed such facts and
such facts are important in a consumer’s determination of whether to purchase a
vehicle (Complaint ¶¶ 65, 70), (4) Plaintiff relied on the representations as
she is a reasonable consumer that did not expect the transmission to fail
(Complaint ¶ 67); and (5) damages exist in that Plaintiff unknowingly exposed
herself to the risk of liability, accident and injury as a result of
Defendant's fraudulent concealment of the Transmission Defect (Complaint ¶ 71.)
Plaintiff has pled the required elements.
Accordingly, the Fifth Cause of
Action (Fraudulent Inducement – Concealment) is sufficiently pled. The Demurrer
to the Fifth Cause of Action (Fraudulent Inducement – Concealment) is
OVERRULED.
ii. Sixth
Cause of Action (Negligent Repair)
Defendants argue that Plaintiff
cannot state a claim for negligent repair as Plaintiff’s claim arises from and
is not dependent of the warranty contract; thus, it is barred by the economic
loss rule. Defendants further argue that Plaintiff’s Complaint fails to plead
facts to show that Daimond’s conduct resulted in damages.
Plaintiff emphasizes that a
demurrer focuses on whether the complaint in question states a cause of action
and, here, Plaintiff has pled all essential elements of negligent repair. Plaintiff
argues that the economic loss rule does not bar negligent repair claims under
California law and, even if it did, a resolution at the pleading stage is
inappropriate. Plaintiff highlights that even federal courts in California have
consistently applied such a standard.
Defendants’ Reply emphasizes that
Plaintiff has not analyzed North American Chemical Co. v. Superior Court
(1997) 59 Cal.App.4th 764, 774 (“North American”) though Plaintiff uses
it as cited cause precedent. Defendants emphasize that the six factors
reiterated in North American Chemical are inapposite as the parties are
in privity with each other. Further, Defendants direct the parties and Court to
Sheen v. Wells Fargo Bank, N.A. (2022) 12 Cal.5th 905, 942 (“Sheen”);
Erlich v. Menezes (1999) 21 Cal.4th 543 (“Elrich”); and Robinson
to show that the economic loss rule applies to service contracts. Defendants
also argue that Plaintiff’s cited case, Jimenez v. Superior Court (2002)
29 Cal.4th 473, is misplaced as it discusses strict liability. Defendants
further highlight that the Complaint fails to plead damages as to this claim.
To maintain an action based on
negligence, Plaintiff’s must allege facts showing (1) defendant's legal duty of
care toward plaintiff, (2) defendant's breach of duty (the negligent act or
omission), (3) injury to plaintiff as a result of the breach (proximate or
legal cause); and (4) damage to plaintiff. (Wise v. Superior Ct. (1990)
222 Cal. App. 3d 1008, 1013.) Whether a duty of care exists is a question of
law for the court. (Jones v. Grewe (1987), 189 Cal.App.3d 950, 954
[citing Wilson v. All Service Ins. Corp. (1979) 91 Cal.App.3d 793, 796
and Raymond v. Paradise Unified School Dist. (1963), 218 Cal. App. 2d 1,
8-9].)
North American provides,
in relevant part:
This court recently
endorsed the general rule that where the "negligent" performance of a
contract amounts to nothing more than a failure to perform the express terms of
the contract, the claim is one for contract breach, not negligence. ( Wilmington
Liquid Bulk Terminals, Inc. v. Somerset Marine Inc. (1997) 53 Cal. App. 4th
186, 195 [61 Cal. Rptr. 2d 727].) However, for 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 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. As we discuss below,
that is an important distinction. A contract to perform services gives rise to
a duty of care which requires that such services be performed in a competent
and reasonable manner. A negligent failure to do so may be both a breach of
contract and a tort. ( Perry v. Robertson (1988) 201 Cal. App. 3d 333,
340 [247 Cal. Rptr. 74].) In such a hybrid circumstance, the plaintiff is
entitled to pursue both legal theories until an occasion for an election of
remedies arises. (Ibid.)
Additionally, the North
American court held that (1) “in actions arising from the sale or purchase
of a defective product, plaintiffs seeking economic losses must be able to
demonstrate that either physical damage to property (other than the defective
product itself) or personal injury accompanied such losses; if they cannot,
then they would be precluded from any tort recovery in strict liability or
negligence[]” (Id. at 780-81); and (2) “in negligent performance cases,
the reasoning of J'Aire and the six criteria on which it relies will
determine the existence of the necessary special relationship and it does not
matter whether the plaintiff and defendant are in privity or not. In addition,
if those six criteria are satisfied the plaintiff will be entitled to recover
economic loss damages without the need to allege and prove personal injury or
property damage[]” (Id. at 785.) Specifically, the North American Court
highlighted that J’Aire held: where a special relationship exists
between the parties, a plaintiff may recover for loss of expected economic
advantage through the negligent performance of a contract although the parties
were not in contractual privity; out of the six factors in Biakanja v.
Irving (1958) 49 Cal. 2d 647the foreseeability of the economic harm to the
plaintiff from the defendant's negligent conduct was the critical factor, and prospective
economic damages claimed by a plaintiff need not be accompanied by personal
injury or property damage in order to be recoverable. (Id. at 781-83.)
Sheen states clearly:
Not all tort claims
for monetary losses between contractual parties are barred by the economic loss
rule. But such claims are barred when they arise from—or are not independent
of—the parties' underlying contracts. (See Robinson, supra, 34
Cal.4th at p. 991 [holding that “the economic loss rule does not bar [the
plaintiff's] fraud and intentional misrepresentation claims because they were
independent of [the defendant's] breach of contract”]; Erlich, supra,
21 Cal.4th at pp. 551, 552 [explaining that “[t]ort damages have been permitted
in contract cases” when “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”].) Plaintiff's claim here arises from, and is
not independent of, the mortgage contract.
(Sheen, supra, 12
Cal.5th at 923-34.)
The Sheen opinion
encompasses the Elrich and Robinson holdings and acknowledges
that they hold that certain tort claims when parties in privity are not barred
by the economic loss rule.
Plaintiff does not argue that the
warranties alleged encompass repair of the Subject Vehicle. Plaintiff argues
that she is not barred by the economic loss rule due to California case
precedent. This would appear to be correct under the North American
precedent so long as the economic damage was foreseeable.
However, the Complaint does not provide a clear
statement regarding damages in the Sixth Cause of Action (Negligent Repair).
(See Complaint ¶ 76 [Defendant DIAMOND's negligent breach of its duties owed to
Plaintiff was a proximate cause of Plaintiff's damages].) As it is unclear what
damages Plaintiff seeks against Diamond, an essential element of the claim is
missing and the Court can analyze no further.
Accordingly, the Demurrer to the
Sixth Cause of Action (Negligent Repair) is SUSTAINED.
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Leave to Amend
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.)
As the Sixth Cause of Action
(Negligent Repair) is unclear as to an essential element (i.e., damages), the
Court allows leave to amend as there may be a possibility of a successful
amendment.
-----
Conclusion
Defendants Ford Motor Company and
Diamond Ford’s Demurrer is OVERRULED in part as to the Fifth Cause of Action
(Fraudulent Inducement – Concealment) and SUSTAINED with leave to amend as to
the Sixth Cause of Action (Negligent Repair).