Demurrer (Judge William J. Elfving)


Case Name: Ortega v. Ford Motor Company

Case No.: 2016-1-CV-292296

Defendant Ford Motor Company (?Defendant?) demurs to the complaint filed by plaintiff Sylvia Ortega (?Plaintiff?).

This action arises out of the purchase of a motor vehicle.? In January of 2012, Plaintiff purchased a 2012 Ford Fiesta with a dual clutch transmission (a ?DPS6 transmission? or ?Power Shift 6 Transmission?) which was manufactured by Defendant.? (Complaint, ? 6.)? In connection with the purchase, Plaintiff received an express written warranty which provided that in the event a defect developed with the vehicle during the warranty period, Plaintiff could deliver the vehicle for repair services to Defendant?s representative.? (Id., ? 7.)

During the warranty period, the vehicle contained or developed numerous defects relating to its transmission which substantially impaired the use, value or safety of the vehicle.? (Complaint, ? 8.)? Defendant and its representatives have been unable to service or repair the vehicle to conform to the applicable express warranties after a reasonable number of opportunities and despite this, have failed to promptly replace the vehicle or make restitution to Plaintiff as required by Civil Code section 1793.2, subdivision (d), and Civil Code section 1793.1, subdivision (a)(2).? (Id., ? 9.)

As relevant here, Plaintiff further alleges that Defendant committed fraud by allowing the vehicle to be sold to her without disclosing that its DPS6 transmission was deceptive and susceptible to sudden and premature failure.? (Complaint, ? 46.)? Defendant knew, or should have known, that problems caused by the defects presented a safety hazard in that they can suddenly and unexpectedly affect the driver?s ability to control the vehicle?s speed, acceleration, and deceleration.? (Id., ? 48.)? Defendant is alleged to have known about the transmission defect since early 2011.? (Id., ? 50.)? Had she known about the defect, Plaintiff alleges, she would not have purchased the vehicle.? (Id.)

On March 3, 2016, Plaintiff filed the Complaint asserting the following causes of action: (1) violation of Civil Code section 1793.2, subd. (d); (2) violation of Civil Code section 1793.2, subd. (b); (3) violation of Civil Code section 1793.2, subd. (a)(3); (4) breach of express warranty (Civ. Code, ?? 1791.2, subd. (a) and 1794); (5) breach of the implied warranty of merchantability (Civ. Code, ?? 1791.1 and 1794); (6) violation of the Magnuson-Moss Warranty Act; and (7) fraud by omission.

On April 11, 2016, Defendant filed the instant demurrer to seventh cause of action in the Complaint on the ground of failure to state facts sufficient to constitute a cause of action.? (Code Civ. Proc., ? 430.10, subd. (e).)? Plaintiff filed her opposition on April 22, 2016.? On May 19, 2016, Defendant filed its reply.

Plaintiff?s request for judicial notice is GRANTED IN PART.? Plaintiff?s request is DENIED as to Exhibit 1, which is purportedly a copy of the 2013 Model Year Ford Warranty Guide.? Plaintiff has not identified the specific basis for which she is seeking judicial notice of this item and it does not fall within any of the categories of documents that are permissible matters for judicial notice under Evidence Code sections 451, 452 or 453.? However, Plaintiff?s request is GRANTED as to Exhibits 2-5, which are court records and therefore proper subjects of judicial notice pursuant to Evidence Code section 452, subdivision (d).

Turning to the substance of the instant motion, in asserting that its demurrer to the seventh cause of action should be sustained, Defendant makes the following arguments: (1) Plaintiff fails to plead sufficient facts establishing fraud; (2) the claim is barred by the statute of limitations; and (3) the claim is barred by the economic loss rule.

Defendant first contends that Plaintiff fails to sufficiently plead all of the required elements of a fraud claim, particularly its intent to deceive and the damages Plaintiff purportedly suffered.? As a general matter, the essential elements of fraud are: (1) misrepresentation (false representation, concealment, or nondisclosure); (2) knowledge of falsity (scienter); (3) intent to defraud (i.e., to induce to reliance); (4) justifiable reliance; and (5) resulting damage.? (Anderson v. Deloitte & Touche (1997) 56 Cal.App.4th 1468, 1474.)? Fraud must be pleaded with specificity, which necessitates pleadings facts which show ?how, when, where, to whom, and by what means the representations were tendered.?? (Stansfield v. Starkey (1990) 220 Cal.App.3d 59, 73.)

Here, Defendant argues that Plaintiff fails to allege any supporting facts and only makes conclusory allegations of its intent to deceive her and therefore has insufficiently pleaded her fraud claim.? However, intent is a fact and thus the averment that a representation (or nondisclosure of a material fact) was made with the intent to deceive the plaintiff, or any other general allegation with similar purport, is sufficient.? (Woodroof v. Howes (1891) 88 Cal. 184, 190; Wennerholm v. Stanford University School of Medicine (1942) 20 Cal.3d 713, 716.)? Plaintiff alleges that Defendant ?knowingly and intentionally concealed materials facts and breached its duty not to do so.?? (Complaint,? ? 53.)? Accordingly, Plaintiff has sufficiently pleaded this element.

As for the element of damages, Defendant similarly argues that no supporting facts are pleaded and Plaintiff only pleads damages resulting from alleged concealment as a legal conclusion.? This argument is not well taken, however, because Plaintiff clearly alleges that but for Defendant?s fraudulent omissions, she would not have purchased the subject vehicle in the first place.? (Complaint, ? 54.)? Consequently, Plaintiff has sufficiently set forth the injury or damages she purportedly suffered and their causal connection to Defendant?s alleged fraud, and therefore has adequately pleaded the element of damages.? (See, e.g., Williams v. Graham (1948) 83 Cal.App.2d 649, 652.)

Defendant next argues that the seventh cause of action is barred by the applicable three-year statute of limitations.? (Code Civ. Proc., ? 338, subd. (d).)? Under this code section, a cause of action for fraud does not accrue ?until the discovery, by the aggrieved party, of the facts constituting the fraud ?.? (Id.)? Generally, a cause of action accrues on the date of injury, but the ?discovery rule,? which is codified in the foregoing code subdivision, delays accrual until the plaintiff obtains knowledge of facts sufficient to make a reasonably prudent person suspicious of fraud. (Jolly v. Eli Lilly & Co. (1988) 44 Cal.3d 1103, 1110; see also Fox v. Ethicon Endo-Surgery, Inc. (2005) 35 Cal.4th 797, 807.)? Here, the only date referenced in the Complaint is January 2012, when Plaintiff purchased the vehicle, which is the day that she suffered injury based on her allegation that but for Defendant?s fraudulent omissions regarding the defective transmission, she would not have purchased the vehicle.? (Complaint, ?? 6, 54.)? Accordingly, absent delayed discovery, the statute of limitations on Plaintiff?s fraud claim concluded in January 2015, rendering the fraud claim, filed in March 2016, untimely.

?In order to rely on the discovery rule for delayed accrual of a cause of action, a plaintiff whose complaint shows on its face that his claims would be barred without the benefit of the discovery rule must specifically plead facts to show (1) the time and manner of discovery and (2) the inability to have made earlier discovery despite reasonable diligence.?? (Fox, supra, 35 Cal.4th at 808.)? Here, Plaintiff fails to plead delayed discovery, with no facts alleged demonstrating when Plaintiff discovered the alleged fraud committed by Defendant or her inability to have made the discovery at an earlier point despite reasonable diligence.

In her opposition, Plaintiff first responds that the limitations period on her fraud claim was equitably tolled by the filing of the Vargas v. Ford Motor Company (?Vargas?) class action in federal district court, in which she was a putative class member, per the doctrine outlined in American Pipe & Construction Co. v. Utah (1974) 414 U.S. 538 (?American Pipe?).? In that case, the court ruled that the commencement of a class action tolls the limitation period for each member of the purported class until certification is denied, at which point the limitations period resumes running.? (American Pipe & Construction Co., 414 U.S. at 552-553.)? According to Plaintiff, Vargas was filed on September 28, 2012 and has yet to be certified, resulting in the continued tolling of the limitations period for her fraud claim.

As a general matter, equitable tolling applies ?occasionally and in special situations? in order to ?soften the harsh impact of technical rules which might otherwise prevent a good faith litigant from having a day in court.?? (Addison v. State of California (1978) 21 Cal.3d 313, 319; see also McDonald v. Antelope Valley Community College Dist. (2008) 45 Cal.4th 88, 99.)? The doctrine set forth in American Pipe has been held to have limited application in California; whether it applies in state court is decided on a case-by-case basis as to ?whether claims asserted in the class action have placed the defendant on notice of the claims at issue in the individual action.?? (San Francisco Unified School District v. W.R. Grace & Co. (1995) 37 Cal.App.4th 1318, 1337 [citing Jolly, supra, 44 Cal.3d at 1122-1123.)

Here, the Complaint contains no allegations or facts regarding tolling such that the Court can make a proper American Pipe tolling analysis.? Even if Vargas applies and certification is pending, there are no facts pleaded regarding when Plaintiff became a part of the class or whether she has opted out.? Without these allegations, Plaintiff has not pleaded facts demonstrating that her claim is timely based on the American Pipe tolling doctrine.

Plaintiff next argues that the limitations period was tolled by Defendant?s fraudulent concealment of the transmission defect.? Fraudulent concealment has been described as a ?close cousin of the discovery rule? which provides that a ?defendant?s fraud in concealing a cause of action against him tolls the applicable statute of limitations, but only for that period during which the claim is undiscovered by plaintiff or until such time as plaintiff, by the exercise of reasonable diligence, should have discovered it.?? (Bernson v. Browning-Ferris Industries (1994) 7 Cal.4th 926, 931 [internal citations omitted].)

In the Complaint, Plaintiff pleads generally that Defendant concealed the transmission defect but fails to plead facts establishing that concealment, when she discovered the defect, and that her reliance on Defendant?s representations regarding the soundness of the vehicles transmission was reasonable.? Consequently, Plaintiff has not pleaded sufficient facts to establish tolling of the limitations period based on fraudulent concealment.

Defendant lastly contends that Plaintiff?s claim is barred by the economic loss rule, which provides that ?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 Company v. Dana Corporation (2004) 34 Cal.4th 979, 988 [internal citations and quotations omitted].)? This doctrine hinges on a ?distinction drawn between transactions involving the sales 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. [internal citations omitted].)? The rule requires a purchase to recover solely in contract for purely economic loss due to disappointed expectations, unless he can demonstrate harm ?above and beyond a broken contractual promise.?? (Id. [internal citation omitted].)

In Robinson Helicopter Company, supra, the California Supreme Court carved out an exception to the rule, holding that it does not bar claims for fraud and intentional misrepresentation which are independent of the contract that is alleged to have been breached.? (Robinson Helicopter Company, 34 Cal.4th at 991.)? The court reasoned that a breach of contract remedy assumes the parties to a contract can negotiate the risk occasioned by a breach, and thus, given this negotiation, it is ?appropriate to enforce only such obligations as each party voluntarily assumed, and to give him only such benefits as he expected to receive ?.?? (Id., citing Applied Equipment Corp. v. Litton Saudi Arabia Ltd. (1994) 7 Cal.4th 503, 517.)? However, because a party to a contract could not ?rationally calculate the possibility that the other party will deliberately misrepresent terms critical to that contract,? the court explained that public policy demanded that the party who is deceived be permitted to recover damages not limited to the contract.? (Id.)? To hold otherwise, the court concluded, would essentially increase the certainty in contractual relationships by encouraging fraudulent conduct at the expense of an innocent party.? (Id.)? Thus, where one party commits fraud during the contract formation or performance, the injured party may recover in contract and tort.? (Id.; see also Harris v. Atlantic Richfield Co. (1993) 14 Cal.App.4th 70, 78.)? Here, such conduct by Defendant has been alleged, with Plaintiff pleading that she would not have purchased the vehicle, i.e., entered into the sales agreement, if Defendant had not failed to disclose the material fact of a known defective transmission.? Accordingly, Plaintiff’s fraud claim is not barred by the economic loss rule.

 

Ultimately, Plaintiff?s fraud claim, as currently pleaded, is untimely.? Consequently, Defendant?s demurrer to the seventh cause of action on the ground of failure to state facts sufficient to constitute a cause of action is SUSTAINED WITH 10 DAYS? LEAVE TO AMEND.