Judge Theresa M. Traber, Case Number: 23STCV17259, Date: 2024-04-15 Tentative Ruling

Judge: Theresa M. Traber, Case: 23STCV17259, Date: 2024-04-15 Tentative Ruling

Case Number: 23STCV17259 Hearing Date: April 15, 2024 Dept: 47

Tentative Ruling

Judge Theresa M. Traber, Department 47

HEARING DATE: April 15, 2024 TRIAL DATE: NOT SET

CASE: Melton L. Mitchell et al. v. Ford Motor Company, et al.

CASE NO.: 23STCV17259

DEMURRER TO FIRST AMENDED COMPLAINT

MOVING PARTY: Defendants Ford Motor Company and Santa Monica Ford

RESPONDING PARTY(S): Plaintiffs Melton L. Mitchell and Stacey Mitchell

CASE HISTORY:

· 07/24/23: Complaint filed.

· 08/23/23: First Amended Complaint filed.

STATEMENT OF MATERIAL FACTS AND/OR PROCEEDINGS:

This is a lemon law action filed on July 24, 2023. Plaintiffs purchased a 2020 Ford Explorer equipped with a 10R60 transmission system which they allege has a series of known defects causing hesitation, shuddering, and shifting issues.

Defendants demur to the fifth cause of action for fraudulent concealment and the sixth cause of action for negligent repair.

TENTATIVE RULING:

Defendants’ Demurrer to the First Amended Complaint is OVERRULED.

DISCUSSION:

Defendants demur to the fifth cause of action for fraudulent concealment and the sixth cause of action for negligent repair.

Legal Standard

A demurrer 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 via proper judicial notice. (Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994.) “A demurrer tests the pleadings alone and not the evidence or other extrinsic matters. Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed.” (SKF Farms v. Superior Court (1984) 153 Cal.App.3d 902, 905.) “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 p. 747.) The ultimate facts alleged in the complaint must be deemed true, as well as all facts that may be implied or inferred from those expressly alleged. (Marshall v. Gibson, Dunn & Crutcher (1995) 37 Cal.App.4th 1397, 1403; see also Shields v. County of San Diego (1984) 155 Cal.App.3d 103, 133 [stating, “[o]n demurrer, pleadings are read liberally and allegations contained therein are assumed to be true”].) “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.)

Meet and Confer

Before filing a demurrer, the demurring party shall meet and confer in person or by telephone with the party who has filed the pleading subject to the demurrer and file a declaration detailing their meet and confer efforts. (Code Civ. Proc., § 430.41(a).) However, an insufficient meet and confer process is not grounds to overrule or sustain a demurrer. (Code Civ. Proc., § 430.41(a)(4).)

The Declaration of Chen Fei Liu in support of this motion states that counsel for the parties met and conferred telephonically on September 19, 2023, but were unable to resolve this dispute. (Declaration of Chen Fei Liu ISO Dem ¶ 3 Exh. C.) The Court therefore finds that Defendants have satisfied the statutory meet-and-confer obligations.

Fifth Cause of Action: Fraudulent Concealment

Defendants demur to the fifth cause of action for fraudulent concealment arguing failure to state facts sufficient to constitute a cause of action.

The elements of 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) intent 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) the plaintiff sustained damage as a result of the concealment or suppression of fact. (Hambridge v. Healthcare Partners Medical Group, Inc. (2015) 238 Cal.App.4th 124, 162.)

Defendants assert that this cause of action is without merit because it fails to adequately allege specific facts giving rise to the claim, because Plaintiff did not allege a transactional relationship, and because the claim is barred by the economic loss rule.

1. Specificity

Defendants argue that Plaintiffs failed to adequately allege fraudulent concealment with specificity because Plaintiffs did not plead the defect in the subject vehicle with adequate specificity. Defendants’ sole authority for this position is a 2019 unpublished ruling from a federal multi-district litigation on a motion to dismiss where certain claims did not identify the defects at issue. (In re Ford Motor Co. DPS6 Powershift Transmission Prod. Liab. Lit., Case Nos. ML 18-02814 AB (FFMx), CV 18-04817 AB (FFMx), CV 18-04190 AB (FFMx), CV 17-06656 AB (FFMx), CV 18-01912 AB (FFMx), 2019 WL 3000646, at *7 (N.D. Cal. May 22, 2019).) Here, however, a cursory review of the pleadings shows that Plaintiffs describe three Technical Service Bulletins issued by Defendant Ford after the date of purchase identifying potential causes of the transmission issues alleged. (FAC ¶¶ 28-30.) Construed in the light most favorable to Plaintiffs, these allegations specify the defects in the transmission system. Plaintiffs have thus alleged the defects with the specificity that is required.

Defendants have therefore failed to show that this cause of action is without merit on this basis.

2. Special or Transactional Relationship

Defendants next argue there is no duty to disclose any defect because there was no special or transactional relationship with Plaintiffs.

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; or (4) when the defendant makes partial representations but also suppresses some material fact.” (LiMandri v. Judkins (1997) 52 Cal.App.4th 326, 336.) A duty to disclose may also arise when a defendant possesses or exerts control over material facts not readily available to the plaintiff. (Jones v. ConocoPhillips Co. (2011) 198 Cal.App.4th 1198, 1199.)

“Even under the strict rules of common law pleading, one of the canons was that less particularity is required when the facts lie more in the knowledge of the opposite party.” (Alfaro v. Community Housing Improvement System & Planning Assn., Inc. (2009) 171 Cal.App.4th 1256, 1384.)

Defendants argue that this cause of action fails because, although the First Amended Complaint contends that Defendants had exclusive knowledge of and actively concealed material facts from Plaintiffs, the First Amended Complaint does not allege a transactional relationship between the parties. Ordinarily, a duty to disclose absent a fiduciary relationship “presupposes the existence of [a] relationship between the plaintiff and defendant in which a duty to disclose can arise.” (Bigler-Engler v. Breg, Inc. (2017) 7 Cal.App.5th 276, 311.) Defendant relies on the general rule to argue that, because Defendant is the manufacturer of Plaintiff’s vehicle, there was not a “direct dealing” between the parties that gives rise to a duty to disclose. (See Bigler-Engler, supra, at 311.) Defendant’s reliance on the Bigler-Engler rule is misplaced, as that case is both unpersuasive in this context and factually distinguishable.

Bigler-Engler is unpersuasive because, although a manufacturer does not have a transactional relationship with the “public at large” (id.), a vendor does have a duty to disclose material facts “not only to immediate purchasers, but also to subsequent purchasers when the vendor has reason to expect that the item will be resold.” (OCM Principle Opportunities Fund v. CIBC World Markets Corp. (2007) 157 Cal.App.4^th 835, 859-60.) Here, the essential allegation is that Plaintiff is not a member of the public at large, but a subsequent purchaser of a product manufactured by Defendant. Furthermore, Bigler-Engler is factually distinguishable from this case, as that action was, at its heart, a medical malpractice case in which the plaintiff was a patient who sued a physician, the physician’s medical group, and the manufacturer of the medical device involved. (Bigler-Engler, supra, 7 Cal.App.5th at 284.) Here, however, Plaintiff is a purchaser of the product himself, not merely the person on whom the product was used. The Court does not interpret existing precedent to require Plaintiff to allege any further relationship with the manufacturer of the vehicle exhibiting the defects giving rise to this action.

The Court therefore concludes that Defendants have not shown that the fifth cause of action does not state facts sufficient to constitute a cause of action on this basis.

3. Economic Loss Rule

Defendants also argue that the economic loss rule bars Plaintiffs’ fifth cause of action, because Plaintiffs are attempting to recover tort damages arising from a contract.

Under the economic loss rule, “[w]here a purchaser’s expectations in a sale are frustrated because the product he bought is not working properly, his remedy is in contract alone, for he has suffered only ‘economic losses.’” (Robinson Helicopter Co., Inc. v. Dana Corp. (2004) 34 Cal.4th 979, 988.) The economic loss rule “hinges on a distinction drawn between transactions involving the sale of goods for commercial purposes where economic expectations are protected by commercial and contract law, and those involving the sale of defective products to individual consumers who are injured in a manner which has traditionally been remedied by resort to the law of torts.” (Id.) Simply stated, the economic loss rule “prevents the law of contract and the law of tort from dissolving one into the other.” (Id.)

The restrictions on contract remedies serve purposes not found in tort law—they protect the parties’ freedom to bargain over special risks, and they promote contract formation by limiting liability to the value of the promise. (Harris v. Atlantic Richfield (1993) 14 Cal.App.4th 70, 77.) This encourages efficient breaches, resulting in increased production of goods and services at a lower cost to society. (Id.) Because of these overriding policy considerations, the California Supreme Court has proceeded with caution in carving out exceptions to the traditional contract remedy restrictions. (Id.)

Nevertheless, the most widely recognized exception to the economic loss rule is when a defendant’s conduct constitutes a tort as well as a breach of contract. (Id. at 78.) When one party commits fraud during the contract formation or performance, the injured party may recover in both contract and tort. (Id.)

Because Plaintiffs have adequately alleged fraud, their complaint is not barred by the economic loss rule. Allowing Plaintiffs’ fraud cause of action to proceed will further, rather than undermine, the public policy of allowing parties to freely bargain over special risks, because parties who are deprived of material facts governing their decision to enter into a contract do not “freely” enter into the contract. Therefore, the economic loss rule does not bar Plaintiffs’ fraud cause of action.

Accordingly, Defendants’ Demurrer to the fifth cause of action for fraudulent concealment is OVERRULED.

Sixth Cause of Action: Negligent Repair

Defendants also demur to the sixth cause of action for negligent repair asserted against Santa Monica Ford Lincoln as barred under the economic loss rule. Defendants assert that the negligent repair claim against Santa Monica Ford Lincoln arises out of the warranty contract with Ford Motor Company. Nothing in the First Amended Complaint supports this position beyond a rote incorporation by reference of the preceding allegations in the Complaint. (FAC ¶ 70.) Defendants’ conclusion is not sufficient to sustain a demurrer on the basis that this cause of action “arises” out of the warranty.

The Court is likewise unpersuaded by Defendants’ conclusory assertion that Plaintiffs have not pled damages because they have not shown that they paid out of pocket for repair work. The First Amended Complaint alleges that the failure to properly repair the vehicle was a proximate cause of Plaintiffs damages, which are alleged to be not less than $25,001. (FAC ¶¶ 23, 74.) For the purposes of a demurrer, this is sufficient.

Accordingly, Defendants’ Demurrer to the sixth cause of action for negligent repair is OVERRULED.

CONCLUSION:

Defendants’ Demurrer to the First Amended Complaint is OVERRULED.

Moving Parties to give notice.

IT IS SO ORDERED.

Dated: April 15, 2024 ___________________________________

Theresa M. Traber

Judge of the Superior Court

Any party may submit on the tentative ruling by contacting the courtroom via email at Smcdept47@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.