Judge William A. Crowfoot, Case Number: 23AHCV02132, Date: 2024-01-16 Tentative Ruling

Judge: William A. Crowfoot, Case: 23AHCV02132, Date: 2024-01-16 Tentative Ruling

On September 14, 2023, plaintiff Jose Rodriguez filed this action against defendants Ford Motor Company (“Defendant”) and WC Performance Ford dba Performance Ford. Plaintiff alleges that on April 15, 2022, he purchased a new 2022 Ford Explorer (the “Subject Vehicle”). (Compl., ¶ 9.) Plaintiff alleges that the Subject Vehicle had a defective ten-speed automatic transmission (the “10R80 Transmission Defect”) which caused “abrupt harsh shift, erratic shifting, jerking (commonly known as “juddering or “shuddering”), lunging while slowing down, hesitation between gears, lack of acceleration, loss of power, stalling, slipping gears, failure to change gears, clunking or banging noises, and other drivability concerns that impede the driver’s safety, each and all of which prevent a 10R80 equipped vehicle from operating as intended by the driver.” (Compl., ¶ 14.)

On November 22, 2023, Defendant moved for judgment on the pleadings as to Plaintiff’s Second Cause of Action for fraudulent concealment. It argues that Plaintiff’s cause of action for fraudulent concealment fails to state sufficient facts and is barred by the economic loss rule.

Defendant requests judicial notice of “the fact that certain recalls, technical service bulletins, and consumer complaints posted on the [National Highway Transportation and Safety Administration (“NHTSA”)]’s website were made publicly available to the general public from 2021 to the present.” (RJN, p. 2.) Defendant cites to Evidence Code section 452(h), which permits judicial notice of “[f]acts and propositions that are not reasonably subject to dispute and are capable of immediate and accurate determination by resort to sources of reasonably indisputable accuracy.” The request is GRANTED.

Under Code of Civil Procedure section 438, the court may grant a defendant’s motion for judgment on a pleading on several grounds, including the ground that the pleading “does not state facts sufficient to constitute a cause of action against that defendant.” (Code Civ. Proc., § 438, subd. (c)(1)(B)(ii).) “The grounds for motion provided for in this section shall appear on the face of the challenged pleading or from any matter of which the court is required to take judicial notice.” (Code Civ. Proc., § 438, subd. (d).) "The standard for granting a motion for judgment on the pleadings is essentially the same as that applicable to a general demurrer, that is, under the state of the pleadings, together with matters that may be judicially noticed, it appears that a party is entitled to judgment as a matter of law.” (Schabarum v. California Legislature (1998) 60 Cal.App.4th 1205, 1216.) The court treats the complaint as “admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law.” (Schonfeldt v. State of California (1998) 61 Cal.App.4th 1462, 1465.)

“Concealment is a species of fraud or deceit.” (Blickman Turkus, LP v. MF Downtown Sunnyvale, LLC (2008) 162 Cal.App.4th 858, 868.) It occurs “the defendant conceals from the plaintiff a material fact of the subject matter of the transaction that the defendant has a duty to disclose.” (Barnhouse v. City of Pinole (1982) 133 Cal.App.3d 171, 187.) "[T]he elements of an action for fraud and deceit based on 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." (Marketing West, Inc. v. Sanyo Fisher (USA) Corp. (1992) 6 Cal.App.4th 603, 612–613.)

"In California, fraud must be pled specifically; general and conclusory allegations do not suffice." (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.) "[E]very element of a cause of action for fraud must be alleged both factually and specifically[.]” (Cooper v. Equity Gen. Insurance (1990) 219 Cal.App.3d 1252, 1262.) However, an exception exists, by which less specificity is required when, due to the nature of the allegations, the defendant possesses more facts of the fraudulent act than the plaintiff. (Committee On Children's Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 217.)

Defendant contends that Plaintiff did not allege sufficient facts suggesting that it “knowingly concealed” the alleged 10R80 Transmission Defect prior to Plaintiff’s purchase date because technical service bulletins (“TSBs”) were available to the public and cannot be used to establish knowledge of an alleged defect. (Motion, p. 3.) Defendant also argues that Plaintiff has not sufficiently pled a duty to disclose.

Plaintiff alleges that Defendant “has been fully aware of the 10R80 Transmission Defect” and failed to disclose or actively concealed: “a. any and all known material defects or material nonconformity of the Subject Vehicle, including the defects relating to the transmission; b. that the Subject Vehicle, including its transmission, was not in good working order, was defective, and was not fit for the intended purposes; and, c. that Subject Vehicle and its transmission were defective, despite the fact that [Defendant] learned of such defect through alarming failure rates, and customer complaints.” (Compl., ¶ 47.) Plaintiff alleges that Defendant “began receiving consumer complaints from NHSTA” and “knew that the 10R80 transmissions installed in its vehicles were prematurely failing [and] requiring repeated repair or replacement.” (Compl., ¶ 17.) Plaintiff also alleges that Defendant “tracks and monitors warranty spending by component part” and that knowledge of defects were “enhanced by its regular internal review of warranty spending on repairs for the 10R80 transmission and its component parts.” (Compl., ¶ 18.)

Plaintiff further argues that the fact that the TSBs were available to the public does not defeat a showing that Defendant had “exclusive knowledge” of a defect because the TSBs do not disclose that Defendant was unable to fix the underlying cause of the 10R80 Transmission Defect and only disclose “ineffective repair strategies” without ever fixing the underlying defect. (Opp., p. 12.) Plaintiff alleges that “[Defendant] knew that the repairs were inadequate and had no fix for the rampant problems.” (Compl., ¶ 17.) Plaintiff also alleges that the TSBs minimize the significance of the 10R80 Transmission Defect and that Defendant “falsely implies that the problems were attributed to the vehicle needing to be broken-in and that abrupt and harsh shifting is normal”, despite knowing that repairs would be ineffective in the long-term. (Compl., ¶ 22.) Based on these allegations, the Court concludes that Plaintiff has adequately pleaded that Defendant “knowingly concealed” the 10R80 Transmission Defect.

With respect to Defendant’s duty to disclose, Plaintiff argues that Defendant’s duty is based on its “superior knowledge of the transmission and its defects since at least 2018” and Defendant “knew or should have known” about the safety hazard posed by the defective transmissions based on pre-market testing, consumer complaints, warranty claims for repairs, and other sources which drove Defendant to issue TSBs and recalls acknowledging the transmission’s defect. (Opp., 10.)

The Court notes a similar situation in Dhital v. Nissan North America, Inc. (2022) 84 Cal.App.5th 828, wherein the plaintiffs sued a car manufacturer alleging a transmission defect. The Dhital court held that the plaintiffs sufficiently alleged a transactional relationship because they alleged that they bought the car from a dealership, that the car was backed by a warranty, and that the dealerships were authorized agents. (Dhital, supra, 84 Cal.App.5th 828 at 844.) Here, as in Dhital, Plaintiff alleges he purchased the Subject Vehicle from Bob Wondries Ford, one of Defendant’s authorized dealership, and was assisted by a salesperson and one of Defendant’s authorized agents. (Compl., ¶¶ 54, 56-57.) While the Court acknowledges that the California Supreme Court granted review of Dhital on February 1, 2023, the case remains published and the Court finds its analysis persuasive. Accordingly, the Court denies the motion for judgment on the pleadings on this ground.

B. Plaintiff’s Claim Falls Under the Fraud Exception to The Economic Loss Rule

“Where 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].) The policy behind the economic loss rule is that a defect in a product is simply damage to the product itself and is therefore covered under the warranty. (Robinson, supra, 34 Cal.4th at 989.) Unless there is to damage to “other property,” there can be no liability in tort.

There is an exception, however, by which a plaintiff may recover tort damages in a contract case when the contract was fraudulently induced. (Robinson, supra, 34 Cal.4th at p. 989.) The rationale is that fraud removes the dispute from the parties’ contractual agreement because "[n]o rational party would enter into a contract anticipating that they are or will be lied to." (Id. at p. 993.)

As stated above, although Dhital is currently on review, the Court finds its analysis persuasive. As in Dhital, the Court concludes that the economic loss rule does not bar Plaintiff’s claim because Defendant’s duty to not commit fraud is independent of contract, and Defendant’s alleged tortious conduct occurred prior to Plaintiff’s and Defendant’s contract formation.

Defendant argues that Plaintiff’s claim is distinct because it is based on its alleged non-performance under the contract, but this characterization dismisses Plaintiff’s allegations that Ford “[failed to disclose the 10R80 Transmission Defect” at the time Plaintiff purchased or leased the vehicle and each time the vehicle was presented for repair. (Compare Motion, p. 12 with Compl., ¶ 91.) Plaintiff also alleges that, had he known of the 10R80 Transmission Defect, he would not have bought the Vehicle. (Id., ¶¶ 92-93, 95.)

Based on this language, Plaintiff’s fraudulent concealment claim is rooted in the sale of the Vehicle. The facts are not analogous to Defendants’ authority, Food Safety Net Servs. v. Eco Safe Systems USA, Inc. (2012) 209 Cal.App.4th 118 (Eco Safe). In Eco Safe, a manufacturer of food disinfection equipment, Eco Safe, accused a testing agency, Food Safety, of making fraudulent statements to induce Eco Safe into hiring Food Safety to assess the efficacy of its disinfection product. The Court of Appeal held that Eco Safe’s fraud claim arose from their contract. This was because the alleged fraudulent statements were that Food Safety would perform the tests in a specific manner; and the contract between Eco Safe and Food Safety contained terms that explicitly reflected the requirement to utilize this manner of testing. (Id., 1125.) Since Eco Safe was accusing Food Safety of failing to conduct the tests in this manner, Eco Safe was disputing Food Safety’s performance under the contract.

Here, the Court is unaware of any term in the warranty under which Defendant promised to disclose all material defects affecting the Vehicle. This is the conduct that Plaintiff accuses Defendant of failing to do. The warranty, on the other hand, is a promise to fix certain defects that the purchaser becomes aware of; there is no obligation for Defendant to affirmatively disclose any defects under the warranty.

Therefore, the Court is satisfied that Plaintiff has pled allegations sufficient to satisfy the fraud exception to the economic loss rule.

On September 14, 2023, plaintiff Jose Rodriguez (“Plaintiff”) filed this action against defendant WC Performance Ford, Inc. dba Performance Ford (“Defendant”) for negligent repair of a 2022 Ford Explorer (the “Subject Vehicle”). On November 22, 2023, Defendant filed this motion for judgment on the pleadings on the grounds that: (1) Plaintiff’s action is barred by the economic loss rule and (2) Plaintiff fails to allege material facts supporting his cause of action.

On January 9, 2024, Defendant filed a notice of non-opposition informing the Court that Plaintiff did not file a brief opposing its motion by the deadline to do so – January 3, 2024. On the same day, Plaintiff filed an opposition brief and explained that it did not submit a brief by the deadline due to a calendaring error. Although Defendant requests the Court disregard Plaintiff’s brief, given Plaintiff’s explanation for the untimely brief and the lack of any apparent prejudice to Defendant, the Court exercises its discretion to consider Plaintiff’s brief when ruling on this motion for judgment on the pleadings.

Defendant argues that Plaintiff’s third cause of action for negligent repair is barred by the economic loss doctrine. 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.)

In opposition, Plaintiff argues that in a negligent performance case, a “plaintiff will be entitled to recover economic loss damages without the need to allege and prove personal injury or property damage” based on a consideration of the following factors: “(1) the extent to which the transaction was intended to affect the plaintiff, (2) the foreseeability of harm to the plaintiff, (3) the degree of certainty that the plaintiff suffered injury, (4) the closeness of the connection between the defendant’s conduct and the injury suffered, (5) the moral blame attached to the defendant’s conduct, and (6) the policy of preventing future harm.” (North American Chemical Co. v. Superior Court (1997) 59 Cal.App.4th 764, 782, 786.) “[T]he foreseeability of the economic harm to the plaintiff from the defendant’s negligent conduct [is] the critical factor.” (Id. at 782.)

Recently, in Sheen, the California Supreme Court found that the economic loss rule barred a borrower from pursuing tort liability against the bank regarding seeking a loan modification because the plaintiff could not recover in tort for damages that arose from the mortgage, rather than an independent duty. (Id. at 930.) The court distinguished professional cases in which a quasi-fiduciary duty exists from those that are merely typical commercial contracts. (Id. at 929.) In this case, there is no duty that the repairing dealership owed Plaintiff other than that imposed by the contract. Thus, the Court concludes that the economic loss rule bars the negligent repair cause of action.

And, even if the economic loss rule did not bar Plaintiff’s negligent repair cause of action, Plaintiff fails to allege sufficient facts to support his claim for negligent repair. First, Plaintiff alleges that Defendant’s technicians performed several tests and repairs on May 15, 2023, but does not identify which of those were performed negligently. (Compl., ¶¶ 60-62.) Also, Plaintiff alleges that all the repairs were covered under Ford’s written warranty and does not allege that he paid out of pocket expenses for the repairs. In essence, he fails to allege that he sustained any damages, which is a necessary element of a negligence cause of action. (Cnty v. Santa Clara v. Atl. Ritchfield Co. (2006) 137 Cal.App.4th 292, 318.)

In light of the foregoing, Defendant’s motion for judgment on the pleadings is GRANTED without leave to amend.

William A. Crowfoot

Judge of the Superior Court

Parties who intend to submit on this tentative must send an email to the Court at ALHDEPT3@lacourt.org indicating intention to submit on the tentative as directed by the instructions provided on the court website at www.lacourt.org. Please be advised that if you submit on the tentative and elect not to appear at the hearing, the opposing party may nevertheless appear at the hearing and argue the matter. Unless you receive a submission from all other parties in the matter, you should assume that others might appear at the hearing to argue. If the Court does not receive emails from the parties indicating submission on this tentative ruling and there are no appearances at the hearing, the Court may, at its discretion, adopt the tentative as the final order or place the motion off calendar.

William A. Crowfoot

Judge of the Superior Court