Judge: Theresa M. Traber, Case: 23STCV18736, Date: 2024-05-06 Tentative Ruling

Case Number: 23STCV18736    Hearing Date: May 6, 2024    Dept: 47

Tentative Ruling

 

Judge Theresa M. Traber, Department 47

 

 

HEARING DATE:     May 6, 2024               TRIAL DATE: NOT SET

                                                          

CASE:                         Moayed Harb v. Ford Motor Company, et al.

 

CASE NO.:                 23STCV18736           

 

DEMURRER TO COMPLAINT

 

MOVING PARTY:               Defendant Ford Motor Company

 

RESPONDING PARTY(S): Plaintiff Moayed Harb

 

STATEMENT OF MATERIAL FACTS AND/OR PROCEEDINGS:

           

            This is a lemon law action filed on August 8, 2023. Plaintiff purchased a 2019 Ford F150 equipped with a 10R80 transmission system which is alleged to have a series of known defects causing hesitation, shuddering, and shifting issues.

 

Defendant Ford Motor Company demurs to the third cause of action for violation of Civil Code section 1793.2(a)(3) and the fifth cause of action for fraudulent concealment.

           

TENTATIVE RULING:

 

            Defendant’s Demurrer to the Complaint is OVERRULED.

 

DISCUSSION:

 

Defendant Ford Motor Company demurs to the third cause of action for violation of Civil Code section 1793.2(a)(3) and the fifth cause of action for fraudulent concealment.

 

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 R. Dallin Sopp in support of this motion states that counsel for the parties met and conferred telephonically on September 26, 2023, but were unable to resolve this dispute. (Declaration of R. Dallin Sopp ISO Dem ¶ 3 Exh. 1.) The Court therefore finds that Defendant has satisfied the statutory meet-and-confer obligations.

 

Third Cause of Action: Violation of Civil Code Section 1793.2(a)(3)

 

            Defendant demurs to the third cause of action for violation of Civil Code section 1793.2(a)(3) for failure to state facts sufficient to constitute a cause of action.

 

            The code section on which this claim is based states that every manufacturer of consumer goods for which the manufacturer has made an express warranty shall “[m]ake available to authorized service and repair facilities sufficient service literature and replacement parts to effect repairs during the express warranty period.” (Civ. Code § 1793.2(a)(3).)

 

            Defendant contends that this cause of action is insufficiently pled because it merely contains conclusory recitations of the applicable law, without factual allegations of the violating conduct or resulting damages. It is true that, as Defendant argues, the substantive paragraphs within this cause of action only contain bare recitations of the law. (Complaint ¶¶ 49-50.) However, paragraph 48 incorporates, by reference, all preceding paragraphs, including the substantive factual allegations contained within the “Factual Background” section of the Complaint. (¶ 48, see ¶¶ 9-36.) These allegations identify various Technical Service Bulletins concerning the defective transmission system. (Complaint ¶¶ 27-33.) Further, the Complaint clearly alleges that these TSBs do not suffice to fix the transmission defects. (¶ 34.) Plaintiff also directly alleges damages resulting from the diminution in value of the subject vehicle. (Complaint ¶¶ 15-16; 23.) These allegations are sufficient to maintain a cause of action for breach of Civil Code section 1793.2(a)(3).

 

            Accordingly, Defendant’s Demurrer to the third cause of action is OVERRULED.

 

Fifth Cause of Action: Fraudulent Concealment

 

            Defendant also demurs to the fifth cause of action for fraudulent concealment for 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.)  

 

Defendant asserts 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

 

Defendant argues Plaintiff has failed to allege fraudulent concealment with specificity because Plaintiff did not plead the identity of the individuals at Ford who purportedly concealed material facts or made untrue representations or their authority to speak and act on behalf of Ford. Defendant relies on the general rule for pleading fraud against a corporation, which requires a plaintiff to allege the identity of the speaker, their authority, to whom they spoke, what they said, and when it was said. (See, e.g., Tarmann v. State Farm Mut. Auto Ins. Co. (1991) 2 Cal.App.4th 153, 157.) However, as Plaintiff correctly states in opposition, this rule is inapplicable to a claim of fraudulent concealment. (Alfaro v. Community Housing Improvement System & Planning Association, Inc. (2009) 171 Cal.App.4th 1356, 1384 [“How does one show ‘how’ and ‘by what means’ something didn’t happen, or ‘when’ it never happened, or ‘where’ it never happened?”].) Instead, such details, in the context of a fraudulent concealment claim, “are properly the subject of discovery, not demurrer.” (Id. at 1384-85.)

 

Defendant also argues that Plaintiff did not adequately allege active concealment or detrimental reliance with sufficient specificity. As Plaintiff argues, however, the specificity requirement is “relaxed when it is apparent from the allegations that the defendant necessarily possesses knowledge of the facts.” (Quelimane Co. v. Steward Title Guaranty Co. (1998) 19 Cal.4th 26, 27.)

 

Finally, Defendant argues that the Complaint is self-defeating because it relies on Technical Service Bulletins that predated the purchase of the vehicle. (See Complaint ¶¶ 27-34.) In opposition, Plaintiff contends that the TSBs demonstrate Ford’s “accretion of knowledge” that is not public, but do not themselves disclose the full scope of the defects in the transmission and therefore do not defeat the claim of Ford’s exclusive knowledge. (See In re MyFord Touch Consumer Litigation (N.D.Cal. 2014) 46 F.Supp.3d 936, 960.) As all allegations must be construed in the light most favorable to Plaintiff, the Court is persuaded that, under the interpretation offered by Plaintiff, the fifth cause of action is pled with adequate specificity.

 

2.      Special or Transactional Relationship

 

            Defendant next argues that there is no duty to disclose any defect because there was no special or transactional relationship with Plaintiff.

 

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 the 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.4th 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

 

Defendant also argues that the economic loss rule bars Plaintiff’s fifth cause of action, because Plaintiff is 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.)  Here Plaintiff has adequately alleged fraud, so the Complaint should not be barred by the economic loss rule. Indeed, as Plaintiff’s argue, the First District Court of Appeal expressly ruled late last year that the economic loss rule does not apply to fraudulent concealment claims in Song-Beverly actions. (Dhital v. Nissan North America, Inc. (2022) 84 Cal.App.5th 828, 843 [review granted February 1, 2023].) Although our Supreme Court has granted review of this opinion and deferred pending consideration and disposition of a related issue in Rattagan v. Uber Technologies, Inc. (S272113), (see Dhital v. Nissan North America (2023) 304 Cal.Rptr.3d 82 (Mem)), the appellate opinion remains published and therefore controlling authority.   The Court finds Dhital to be persuasive and, thus, overrules the demurrer on this ground.

 

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

 

CONCLUSION:

 

            Accordingly, Defendant’s Demurrer to the Complaint is OVERRULED.

 

            Moving Party to give notice.

 

IT IS SO ORDERED.

 

Dated:  May 6, 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.