Randy Kohn vs Ford Motor Company et al

Case Number

24CV03205

Case Type

Hearing Date / Time

Fri, 02/21/2025 - 10:00

Nature of Proceedings

CMC; OSC Sanctions; Demurrer

Tentative Ruling

For all reasons discussed herein, the demurrer of defendant Ford Motor Company to the sixth cause of action alleged in plaintiff’s first amended complaint is overruled.

Background:

On July 12, 2024, plaintiff Randy Kohn commenced this action by filing his original complaint alleging six causes of action: (1) violation of subdivision (d) of Civil Code section 1793.2 (against defendant Ford Motor Company only [FMC]); (2) violation of subdivision (b) of Civil Code section 1793.2 (against FMC); (3) violation of subdivision (a)(3) of Civil Code section 1793.2 (against FMC); (4) breach of the implied warranty of merchantability (against FMC); (5) negligent repair (against defendant Perry Ford Mazda [Perry Ford]; and (6) fraudulent inducement – concealment (against FMC). As alleged in plaintiff’s original complaint:

On November 5, 2021, plaintiff entered into a warranty contract (the warranty contract) with FMC regarding a 2021 Ford F150 (the vehicle) manufactured and distributed by FMC. (Compl., ¶ 7.) The warranty contract included bumper-bumper, powertrain, and emission warranties. (Id. at ¶ 8 & Exh. A.)

Before plaintiff’s purchase of the vehicle, FMC knew that other vehicles equipped with the same 10-speed transmission suffered from defects that can cause the vehicles and their transmissions to experience hesitation, delayed acceleration, harsh or hard shifting, jerking, shuddering, or juddering (collectively, the Transmission Defects). (Compl., ¶ 24.) FMC acquired knowledge of the Transmission Defects through pre-production testing; design failure mode and analysis data; production failure mode and analysis data; consumer complaints made to FMC’s network of dealers and directly to FMC; warranty data compiled from FMC’s network of dealers; testing conducted by FMC in response to consumer complaints; and repair order and parts data received by FMC from its network of dealers. (Id. at ¶ 25.) As a result of its internal knowledge and investigations of the Transmission Defects, FMC issued technical service bulletins or TSBs which failed to fix the Transmission Defects. (Id. at ¶¶ 26-33.)

Defects, including the Transmission Defects, manifested in the vehicle during the warranty period which impair its use, value, and safety. (Compl., ¶¶ 12-13.) Plaintiff delivered the vehicle to Perry Ford for repairs, but Perry Ford failed to repair the vehicle in accordance with industry standards. (Id. at ¶¶ 70-71.) FMC failed to conform the vehicle to the terms of the warranty after a reasonable number of repair attempts, and failed to replace the vehicle or make restitution. (Id. at ¶¶ 15-16.)

Although it was aware of the Transmission Defects at the time of purchase and repair of the vehicle, FMC concealed from plaintiff the existence and nature of the Transmission Defects. (Compl., ¶ 35.) Given the unsafe nature of the Transmission Defects, plaintiff would not have purchased or would have paid less for the vehicle had plaintiff known of the Transmission Defects. (Id. at ¶ 34.)

On July 12, 2024, FMC filed a demurrer to the sixth cause of action, for fraudulent inducement - concealment, alleged in the complaint. The demurrer was opposed by plaintiff.

On October 11, 2024, the demurrer was sustained with leave to amend. Among the findings of the court were: (1) plaintiff alleges no facts from which it can be inferred that a transactional relationship, such as a buyer and seller agreement, exists between FMC and plaintiff, (2) allegations that plaintiff entered into a warranty contract with FMC is, without more, insufficient to demonstrate the type of relationship that may give rise to a duty to disclose, (3) the economic loss rule may operate, under the facts alleged in the complaint, as a bar to sixth cause of action, (4) allegations of the complaint do not show, apart from the warranty contract, that FMC was the vendor or otherwise involved in plaintiff’s purchase of the vehicle sufficient to give rise to a duty by FMC to disclose any purported defects in the vehicle under the circumstances alleged in the complaint, and (5) plaintiff does not allege a theory of recovery based on strict products liability or facts that would give rise to a duty by FMC to warn consumers notwithstanding whether there exists a relationship between FMC and plaintiff.

Plaintiff filed his first amended complaint (FAC) on October 21, 2024, alleging the same six causes of action.

The background factual allegations of the FAC are, with minor occasional differences, identical to the factual allegations of the original complaint. However, there are additional operative facts included in the FAC, relative to fraudulent concealment, that were absent from the original complaint.

FMC again demurs to the sixth cause of action for fraudulent inducement - concealment, on the grounds that the cause of action is barred by the economic loss rule and fails to plead facts sufficient to constitute a cause of action.

Plaintiff opposes the demurrer.

Following the filing of the demurrer, FMC also filed an answer to the FAC setting forth a general denial and asserting 22 affirmative defenses.

Analysis:

“The party against whom a complaint or cross-complaint has been filed may object, by demurrer or answer as provided in Section 430.30, to the pleading on any one or more of the following grounds:

            “(a) The court has no jurisdiction of the subject of the cause of action alleged in the pleading.

            “(b) The person who filed the pleading does not have the legal capacity to sue.

            “(c) There is another action pending between the same parties on the same cause of action.

            “(d) There is a defect or misjoinder of parties.

            “(e) The pleading does not state facts sufficient to constitute a cause of action.

            “(f) The pleading is uncertain. As used in this subdivision, “uncertain” includes ambiguous and unintelligible.

            “(g) In an action founded upon a contract, it cannot be ascertained from the pleading whether the contract is written, is oral, or is implied by conduct.

            “(h) No certificate was filed as required by Section 411.35.” (Code Civ. Proc., § 430.10.)

“When any ground for objection to a complaint, cross-complaint, or answer appears on the face thereof, or from any matter of which the court is required to or may take judicial notice, the objection on that ground may be taken by a demurrer to the pleading.” (Code Civ. Proc., § 430.30, subd. (a).) “Our consideration of the facts alleged includes ‘those evidentiary facts found in recitals of exhibits attached to [the] complaint.’ [Citation.]” (Alexander v. Exxon Mobil (2013) 219 Cal.App.4th 1236, 1250.)

“[A] court must treat a demurrer as admitting all material facts properly pleaded, it does not, however, assume the truth of contentions, deductions or conclusions of law.” (Travelers Indem. Co. of Connecticut v. Navigators Specialty Ins. Co. (2021) 70 Cal.App.5th 341, 358, citing Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 967.)

As grounds for its demurrer to the sixth cause of action for fraudulent inducement-concealment, FMC contends that plaintiff has failed to plead sufficient facts to support the cause of action, and that the cause of action is barred by the economic loss rule. More specifically, regarding failure to plead sufficient facts, FMC argues that the FAC “still does not plead any facts establishing Ford’s duty to disclose at the time Plaintiff purchased the vehicle. He does not allege any kind of fiduciary relationship, nor plead the requisite direct transactional relationship with Ford to trigger a duty to disclose.” (Opp., p. 6, ll. 13-15.)

“ ‘The required elements for 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) the defendant intended 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) plaintiff sustained damage as a result of the concealment or suppression of the fact. [Citation.]’ ” (Hambrick v. Healthcare Partners Medical Group, Inc. (2015) 238 Cal.App.4th 124, 162.)

“[F]raud must be pled specifically; general and conclusory allegations do not suffice. . . . This particularity requirement necessitates pleading facts which show how, when, where, to whom, and by what means the representations were tendered.” (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.)

“Less specificity should be required of fraud claims “ ‘when ‘it appears from the nature of the allegations that the defendant must necessarily possess full information concerning the facts of the controversy,’ ” [citation]; “ ‘[e]ven 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. . . .’ ” [Citation.] (Alfaro v. Community Housing Improvement System & Planning Assn., Inc. (2009) 171 Cal.App.4th 1356, 1384.)

Plaintiffs’ allegations essentially mimic the allegations at issue in Dhital v. Nissan North America, Inc. (2022) 84 Cal.App.5th 828, (Dhital). Unlike cases cited by FMC, which tend to apply to the present situation by analogy, Dhital is directly on point here. It should be noted that, at one point, the analysis presented by the Dhital court was in question and review was granted. The review was subsequently dismissed on December 18, 2024, effectively affirming the holding of Dhital for present purposes.

To the extent that FMC relies on California Supreme Court case of Rattagan v. Uber Technologies, Inc. (2024) 17 Cal.5th 1, for their argument, the Court made clear that Dhital is distinguishable: “Rattagan’s tort claims are, of course, based on alleged conduct committed during the contractual relationship but purportedly outside the parties’ chosen rights and obligations. This court has granted review in two other cases — Dhital v. Nissan North America, Inc. (2022) 84 Cal.App.5th 828, 300 Cal.Rptr.3d 715, review granted Feb. 1, 2023, S277568 and Kia America v. Superior Court (Feb. 3, 2022, D079858) [nonpub. opn.], review granted Apr. 20, 2022, S273170 — both of which involve claims of fraudulent inducement by concealment claims as well as the potential interplay with remedies available under the Song-Beverly Consumer Warranty Act (Civ. Code, § 1791 et seq.). We do not address these issues here.” (Id. at p. 41, fn. 12.)

As with the demurrer to the original complaint, FMC next argues that the sixth cause of action for fraudulent concealment fails because plaintiff does not allege a transactional relationship between himself and FMC giving rise to a duty to disclose.

The same argument that FMC makes was made in Dhital. The Dhital court held that “[a]t the pleading stage (and in the absence of a more developed argument by Nissan on this point), we conclude plaintiffs’ allegations are sufficient. Plaintiffs alleged that they bought the car from a Nissan dealership, that Nissan backed the car with an express warranty, and that Nissan’s authorized dealerships are its agents for purposes of the sale of Nissan vehicles to consumers. In light of these allegations, we decline to hold plaintiffs’ claim is barred on the ground there was no relationship requiring Nissan to disclose known defects.” Here, plaintiff has set forth those same allegations in his FAC.

“Under California law, a vendor has 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 Principal Opportunities Fund, L.P. v. CIBC World Markets Corp. (2007) 157 Cal.App.4th 835, 859.)

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.” (Heliotis v. Schuman (1986) 181 Cal.App.3d 646, 651.)

A “transactional relationship,” as argued by FMC, is not required. Even if it were, the warranty itself evidences a transactional relationship between the parties with respect to the vehicle.

Plaintiff has alleged that FMC had exclusive knowledge of material facts not known to plaintiffs and that FMC actively concealed material facts from plaintiff. At the pleading stage, plaintiff has alleged sufficient facts to overcome demurrer on these grounds. The demurrer, based on lack of a transactional relationship, and duty to disclose, will be overruled.

Likewise, the economic loss rule does not bar plaintiff’s fraudulent inducement claim. “We acknowledge the differing views taken by courts that have considered this issue. But for the reasons we have discussed above, we conclude that, under California law, the economic loss rule does not bar plaintiffs’ claim here for fraudulent inducement by concealment. Fraudulent inducement claims fall within an exception to the economic loss rule recognized by our Supreme Court [citation], and plaintiffs allege fraudulent conduct that is independent of Nissan’s alleged warranty breaches. The trial court erred by sustaining Nissan’s demurrer to plaintiffs’ fraud claim on the ground it was barred by the economic loss rule.” (Dhital, supra, 84 Cal.App.5th at p. 843.)

Plaintiff has added sufficient allegations to overcome FMC’s demurrer, and the demurrer will be overruled.