Judge Thomas D. Long, Case Number: 23STCV17293, Date: 2024-10-31 Tentative Ruling

On January 11, 2024, Plaintiffs William Jones and Robert Pina filed a first amended complaint (“FAC”) against Defendants Ford Motor Company (“FMC”) and Southbay Ford arising from Plaintiffs’ purchase of an allegedly defective vehicle.

On February 13, 2024, FMC filed a 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, accepting the alleged facts as true. (Nolte v. Cedars-Sinai Medical Center (2015) 236 Cal.App.4th 1401, 1406.)

A. The Fifth Cause of Action Does Not Sufficiently Allege a Relationship Between the Parties.

FMC argues that the fifth cause of action for Fraudulent Inducement – Concealment does not allege sufficient facts. (Demurrer at pp. 10-15.)

Fraud based on concealment requires that “(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.” (Bigler-Engler v. Breg, Inc. (2017) 7 Cal.App.5th 276, 310-311 (Bigler-Engler).)

An essential element of intentional concealment includes the duty to disclose, which must be based upon a transaction, or a special relationship, between plaintiff and defendant. (Id. at p. 314.) “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.’” (Id. at p. 311.) “[O]ther than the first instance, in which there must be a fiduciary relationship between the parties, ‘the other three circumstances in which nondisclosure may be actionable presuppose[ ] the existence of some other relationship between the plaintiff and defendant in which a duty to disclose can arise. . . . “[W]here material facts are known to one party and not to the other, failure to disclose them is not actionable fraud unless there is some relationship between the parties which gives rise to a duty to disclose such known facts.” [Citation.]’ [Citation.]” (Hoffman v. 162 North Wolfe LLC (2014) 228 Cal.App.4th 1178, 1187 (Hoffman).)

“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.)

Plaintiff alleges that FMC knew since at least March 2018 that there was a transmission defect that caused hesitation and/or delayed acceleration; harsh and/or hard shifting; jerking, shuddering, and/or juddering. (See, e.g., FAC ¶¶ 51-62, 89.) Because of these defects, “Plaintiffs unknowingly exposed themselves to the risk of accident, injury, and/or liability to others as a result of the nature or the Transmission Defect, which can lead to hesitation, loss of power, and other shifting issues while driving at highway speeds.” (FAC ¶ 63.) Plaintiffs did not know about these defects and problems, and FMC, who had superior knowledge of the defect, did not disclose the defects when Plaintiffs purchased the vehicle. (FAC ¶¶ 63-64, 93.) The allegations are specific enough to allege the information that was concealed and the danger posed. (See Jones v. ConocoPhillips Co. (2011) 198 Cal.App.4th 1187, 1199-1200.)

However, Plaintiffs do not allege the existence of a relationship between the parties that gives rise to a duty to disclose facts. (See Hoffman, supra, 228 Cal.App.4th at p. 1187.) Plaintiffs allege only that “Defendant FMC was under a duty to Plaintiffs to disclose” because it had superior knowledge before Plaintiffs’ purchase. (FAC ¶ 93.) The demurrer is sustained on this ground.

FMC argues that the fifth cause of action is barred by the economic loss rule. (Demurrer at pp. 15-17.) 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 said to be in contract alone, for he has suffered only ‘economic’ losses.” (Robinson Helicopter Co., Inc. v. Dana Corp. (2004) 34 Cal.4th 979, 988 (Robinson), quotation marks omitted.) However, tort damages may be permitted when the breach of contract is accompanied by a tort such as fraud. (Id. at pp. 989-990.) To plead around the economic loss rule, a party must plead the existence of a duty that arises independent of any contractual duty and independent injury, other than economic loss, that arises from the breach of that duty. (Id. at pp. 988-991.)

“[U]nder California law, the economic loss rule does not bar [a claim] for fraudulent inducement by concealment. Fraudulent inducement claims fall within an exception to the economic loss rule recognized by our Supreme Court” in Robinson, and such claims allege fraudulent conduct that is independent of the alleged warranty breaches. (Dhital v. Nissan North America, Inc. (2022) 84 Cal.App.5th 828, 843.) The Supreme Court recently confirmed that “the economic loss rule does not apply to limit recovery for intentional tort claims like fraud.” (Rattagan v. Uber Technologies, Inc. (2024) 17 Cal.5th 1, 38.) “A plaintiff may assert a tort claim for fraudulent concealment based on conduct occurring in the course of a contractual relationship, if the elements of the cause of action can be established independently of the parties' contractual rights and obligations and the tortious conduct exposes the plaintiff to a risk of harm beyond the reasonable contemplation of the parties when they entered into the agreement.” (Ibid.)

The demurrer is SUSTAINED IN PART and OVERRULED IN PART as set forth above. Plaintiffs are granted 30 days’ leave to amend.

Parties who intend to submit on this tentative must send an email to the Court at SMCDEPT48@lacourt.org indicating intention to submit. Parties intending to appear are encouraged to appear remotely and should be prepared to comply with Dept. 48’s new requirement that those attending court in person wear a surgical or N95 or KN95 mask.

Hon. Thomas D. Long

Judge of the Superior Court