DOUTHETT VS FCA US LLC

Motion to Strike is denied.

REQUEST FOR JUDICIAL NOTICE

Defendant FCA US requests judicial notice of a printout from the California Department of Consumer Affairs website to show that it elected to opt in to new lemon law procedures (CCP §§871.20-871.30). The court declines to consider this request because it is not dipositive on the present motion.

SPECIAL DEMURRER

Demurrers for uncertainty will only be sustained where the defendant cannot reasonably determine what issues must be admitted or denied, or what claims are directed against him. (Khoury v. Maly’s of California, Inc. (1993) 14 Cal.App.4th 612, 616.) Demurrers for uncertainty are to be overruled when addressed to inconsequential matters, the facts are within the knowledge of the defendant or ascertainable in discovery, or not

dispositive of one or more causes of action. (Id.) Here, the claims are not so uncertain that Defendants cannot determine what issues must be admitted or denied.

A general demurrer lies where the pleading does not state facts sufficient to constitute a cause of action. (Civ. Proc. Code, § 430.10(e).) A demurrer tests the legal sufficiency of the pleading, but not the truthfulness of the allegations. (Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994.) In a demurrer proceeding, the defects must be apparent on the face of the pleading or via proper judicial notice. (Id.)

FRAUDULENT INDUCEMENT-CONCEALMENT (6TH CAUSE OF ACTION)

Concealment requires: “(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.) While particularity is required as to affirmative misrepresentations, applying it to concealment claims would be hard as it would require plaintiff to describe something that did not happen. (Alfaro v. Community Housing Improvement System & Planning Association, Inc. (2009) 171 Cal.App.4th 1356, 1384.) Defendants argue that this fraud claim is not pled with specificity, fails to establish a duty to disclose, and is barred by the economic loss rule.

These arguments are unpersuasive.

The case of Dhital v. Nissan North America, Inc. (2022) 84 Cal.App.5th 828 addressed the sufficiency for concealment for pleading purposes in fraud in a lemon law case. The Dhital court found that it was sufficient that plaintiffs alleged a transmission defect in numerous vehicles, including the plaintiff’s, the defendant knew of the defect and the hazards they posed, defendant had exclusive knowledge of the defect and failed to disclose that information, defendant intended to deceive plaintiffs by concealing known defects, the plaintiffs would not have purchased the car if they had known of the defects, and they suffered damages on the sums paid to purchase the vehicle. (Id. at 843-844.)

Here, the FAC alleges that “the 2023 Jeep Compass vehicles equipped with the 2.0L engine have one or more defects that can result loss of power, stalling, engine running rough, engine misfires, failure or replacement of the engine (the “Engine Defect”).” (FAC ¶ 21.) Specifically, the “Engine Defect is a safety concern because it can suddenly affect the driver’s ability to control the vehicle or cause a non-collision vehicle fire.” (Id., ¶22.) It can also “cause the vehicle to fail without warning, while the Vehicle is moving at highway speeds.” (Id.)

The FAC then alleges that FCA had knowledge of this defect from internal sources such as “pre-production testing data, early consumer complaints about the Engine Defect made directly to FCA and its network of dealers, aggregate warranty data compiled from FCA’s network of dealers, testing conducted by FCA in response to these complaints, as well as warranty repair and part replacements data

received by FCA from FCA’s network of dealers,” among others. (Id., ¶72.) It further alleges that “while FCA knew about the Engine Defect, and its safety risks since prior to Plaintiffs purchasing the Subject Vehicle, FCA nevertheless concealed and failed to disclose” such facts to induce purchase. (Id., ¶25.) Finally, it alleges that “[h]ad FCA revealed the Engine Defect, Plaintiffs would have been aware of it and would not have purchased the Subject Vehicle.” (Id.) Plaintiffs suffered damages as a result. (Id., ¶40.) This is sufficient for pleading purposes.

DUTY TO DISCLOSE

In general, a duty to disclose may arise from parties entering into any kind of contractual agreement. (OCM Principal Opportunities Fund, L.P. v. CIBC World Markets Corp. (2007) 157 Cal.App.4th 835, 859.) “Suppression of a material fact is actionable fraud when there is a duty of disclosure, which may arise from a relationship between the parties, such as a buyer-seller relationship. [Citation.]” (Dhital, supra, 84 Cal.App.5th at 844.) “For purposes of duties to disclose, the California Supreme Court has defined a ‘relationship’ as a ‘transaction’ between the parties.” (Warner Constr. Corp. v. City of Los Angeles (1970) 2 Cal.3d 285, 294.)

Defendant FCA US argues that Plaintiffs purchased the vehicle from the dealer and has no direct dealings with FCA US. Here, however, the FAC alleges that Plaintiffs “entered into a warranty contract with Defendant FCA” on 7/14/23 (FAC ¶ 7). This demonstrates a transactional relationship for pleading purposes, which can impose a duty of disclosure.

ECONOMIC LOSS RULE

The economic loss rule requires a purchaser whose product is not working properly be limited to a contract remedy; to avoid the economic loss rule, the purchaser must “demonstrate harm above and beyond a broken contractual promise.” (Robinson Helicopter Co., Inc. v. Dana Corp. (2004) 34 Cal.4th 979, 988.) This is to avoid contract and tort law from “dissolving one into the other.” (Ibid.)

In Robinson, the plaintiff was a helicopter manufacturer which used sprag clutches manufactured by the defendant. (Id. at 985.) Under federal law, aircraft manufactures must obtain a “type certificate” such that every aircraft must be produced in accordance to the certificate. (Id.) The defendant changed its sprag clutches without notifying the FAA or the plaintiff. (Id. at 985-986.) The plaintiff later had problems with the sprag clutches cracking, and as a result, was required to recall and replace all of the sprag clutches. (Id. at 986.) The plaintiff’s fraud claim was based on the false certificates of conformance that were mandatorily required. (Id. at 990.) The court found that the economic loss rule did not bar the fraud claims because they were independent of the breach of contract claim. (Id. at 991.)

In cases involving the performance of services, the California Supreme Court in J’Aire Corp. v. Gregory (1979) 24 Cal.3d 799 allowed recovery of expected economic losses where a special relationship existed between the parties despite the lack of a contractual privity. The issue depended on the six factors set forth in Biakanja v. Irving

(1958) 49 Cal.2d: (1) the extent the transaction was intended to affect the plaintiff, (2) the foreseeability of harm, (3) the degree of certainty of injury, (4) the closeness of the connection between the defendant’s conduct and the injury, (5) the moral blame, and (6) the policy of preventing future harm. (J’Aire Corp. v. Gregory, supra, 24 Cal.3d at 804.) The Court of Appeal in North American Chemical Co. v. Superior Court (1997) 59 Cal.App.4th 764 thereafter recognized that the reasoning of J’Aire applied to cases where the parties are in contractual privity, where the contracts were for services. (Id. at 783.)

Economic loss includes “damages for inadequate value, costs of repair and replacement of the defective product or consequent loss of profits - without any claim of personal injury or damages to other property.” (Jimenez v. Superior Court (2002) 29 Cal.4th 473, 482.) Although the plaintiff must show damage to property other than the subject product itself, the economic loss rule does not necessarily bar recovery in tort for damage that a defective product causes to other portions of a larger product. (Id. at 483.)

In Rattagan v. Uber Technologies, Inc. (2024) 17 Cal.5th 1, 20-21 the California Supreme Court explained:

[U]nder the economic loss rule, tort recovery for breach of a contract duty is generally barred [citations] unless two conditions are satisfied. A plaintiff must first demonstrate the defendant's injury-causing conduct violated a duty that is independent of the duties and rights assumed by the parties when they entered the contract. Second, the defendant’s conduct must have caused injury to persons or property that was not reasonably contemplated by the parties when the contract was formed.

The Court further stated:

The guiding and distinguishing principle is this. If the alleged breach is based on a failure to perform as the contract provides, and the parties reasonably anticipated and allocated the risks associated with the breach, the cause of action will generally sound only in contract because a breach deprives an injured party of a benefit it bargained for. However, if the contract reveals the consequences were not reasonably contemplated when the contract was entered and the duty to avoid causing such a harm has an independent statutory or public policy basis, exclusive of the contract, tort liability may lie.

(Id. at 27.) The Court repeated the public policy reason stated in Robinson supports holding fraud a deviation from usual business practice, and a plaintiff advances the public interest in punishing intentional misrepresentations. (Id. at 30-34.) Therefore, a plaintiff may recover out-of-pocket damages in addition to benefit-of-the bargain damages. (Id. at 33-34.) Robinson clarified that fraud was not an exception to the economic loss rule, but rather, the doctrine did not apply at all. (Id.) The Court reiterated that “Broader tort liability only arises if a defendant violates an independent

legal duty and the type of harm that ensues was not reasonably contemplated or accounted for by the contractual parties.” (Id. at 37.)

Ultimately, the Court found that a plaintiff can assert an independent claim of fraudulent concealment in the performance of the contract. (Id. at 38.) However, the Court noted that Rattagan’s claims were based on fraud committed during the contractual relationship but allegedly outside the parties’ contractual rights and obligations. (Id. at 41, n. 12.) The Court stated as it had granted review of Dhital regarding fraudulent inducement by concealment claims under Song-Beverly, and declined to address the issues in Rattagan. (Ibid.)

“But to be held liable in tort, a defendant must commit a tort. If all the defendant has allegedly done is violate the terms of the parties’ contract, depriving the plaintiff of the benefits the contract ensures, the defendant’s liability is limited by the contract. Broader tort liability only arises if a defendant violates an independent legal duty and the type of harm that ensues was not reasonably contemplated or accounted for by the contractual parties.” (Id. at 37.) Here, Plaintiffs have pled fraudulent concealment, that is, an independent duty to disclose facts. They allege a tort independent of the subsequent warranty contract’s performance obligations.

In Dhital, supra, 84 Cal.App.5th 828, the court expressly found that the economic loss rule did not apply to the fraudulent inducement by concealment claim for purposes of pleading. Here, the court continues to follow Dhital.

BREACH OF IMPLIED WARRANTY (4TH CAUSE OF ACTION)

Defendants argue that the implied warranty claim is time-barred and that the FAC fails to allege facts showing the vehicle’s nonconformities manifested within the one-year implied warranty period.

Statute of Limitations

A demurrer based on a statute of limitations defense must clearly and affirmatively show that the claim is barred. (Lockley v. Law Office of Cantrell, Green, Kekich, Cruz & McCort (2001) 91 Cal.App.4th 875, 881.) “It is not sufficient that the complaint might be barred.” (Roman v. County of Los Angeles (2000) 85 Cal.App.4th 316, 324.) Historically, the Song-Beverly Act (“SBA”) contained no express statute of limitations. (Mexia v. Rinker Boat Co., Inc. (2009) 174 Cal.App.4th 1297, 1305.) As such, an action for breach of warranty under the SBA has been held to be governed by the Uniform Commercial Code 2725, which governs the statute of limitations for warranties. (Id. at 1306; Krieger v.

Nick Alexander Imports, Inc. (1991) 234 Cal.App.3d 205, 215 [The California Uniform Commercial Code section 2725 ‘controls rather than the general provision of Code of Civil Procedure section 338, subdivision (a) for liabilities created by statute”].) The statute of limitation is subject to tolling. (See Cal. U. Com. Code, § 2725; see Krieger, supra, 234 Cal.App.3d at 214, fn. 5.)

“Because an implied warranty is one that arises by operation of law rather than by an express agreement of the parties, courts have consistently held it is not a warranty that

‘explicitly extends to future performance of the goods.’” (Cardinal Health 301, Inc. v. Tyco Electronics Corp. (2008) 169 Cal.App.4th 116, 134.) Thus, the statute of limitations for a breach of implied warranty is four years from date of delivery. (Cal. U. Com. Code, § 2725; see also Cardinal Health 301, Inc., supra, 169 Cal.App.4th at 129 [“[U]nder section 2725, the general limitations rule for a breach of warranty cause of action is four years from the date the goods are delivered (regardless of the date the buyer discovers the breach)...”].)

However, the SBA was revised after Krieger, Mexica, and Cardinal Health. The revised SBA provides that notwithstanding section 871.20(a) discussed above, “[a]n action covered by Section 871.20 shall not be brought later than six years after the date of original delivery of the motor vehicle.” (Code Civ. Proc., § 871.21(b

Section 871.20 applies to “an action, brought against a manufacturer who has elected under Section 871.29 to proceed under this chapter, seeking restitution or replacement of a motor vehicle pursuant to subdivision (b) or (d) of Section 1793.2, Section 1793.22, or Section 1794 of the Civil Code, or for civil penalties pursuant to subdivision (c) of Section 1794 of the Civil Code, where the request for restitution or replacement is based on noncompliance with the applicable express warranty.” (Code Civ. Proc., § 871.20(a), emphasis added.)

Here, this 4th cause of action is an implied warranty claim. (FAC ¶ 59-63.) Thus, it does not fall within the scope of §871.20. The governing statute of limitations remains the 4-year period from the date of delivery under Cal. U. Com. Code § 2725. The FAC alleges that Plaintiffs purchased the vehicle on 7/14/23. (FAC ¶ 7.) The original complaint was filed on 6/26/25. This is within the 4-year statute of limitations. Therefore, the claim is not time-barred on its face. The court need not reach the merits of the equitable tolling doctrines arguments advanced by Defendants.

The One-Year Implied Warranty Period

Defendants also argue that Plaintiffs failed to allege that the defects manifested within the one-year warranty period.

Here, the FAC alleges that the vehicle’s defects “manifested themselves within the applicable express warranty period.” (FAC ¶ 17.) At the demurrer stage, this allegation is sufficient. Whether the defects actually manifested within that one-year period is a question of fact not to be resolved here.

NEGLIGENT REPAIR (5TH CAUSE OF ACTION)

Defendants argue that this claim is barred by the economic loss rule and fails to plead negligence. This claim alleges that Crystal, the repairing dealership, breached its duty “to use ordinary care and skill by failing to properly store, prepare and repair the Subject Vehicle.” (FAC ¶ 67.) The duty to repair the vehicle arose from the express warranty issued by FCA, which Crystal performed as a service facility. The relationship between Plaintiffs and Crystal is therefore contractual. As they are in contractual privity, the

analysis is governed by the California Supreme Court’s more recent decision in Sheen v. Wells Fargo Bank, N.A. (2022) 12 Cal.5th 905.

In Sheen, the Court stated: “Not all tort claims for monetary losses between contractual parties are barred by the economic loss rule. But such claims are barred when they arise from — or are not independent of — the parties’ underlying contracts.” (Id. at 923.) In Sheen, a claim for the negligent handling of a mortgage modification was barred because the duty to handle the application arose from the underlying mortgage contract and was not independent of it. The Court noted that “we have, in certain contexts, allowed tort actions to proceed even though they arise from, and are not independent of, a contract, despite the economic loss rule.

Specifically, we have allowed for tort recovery in some cases involving insurance policies and contracts for professional services.” (Id. at 929.) However, the Court declined to find mortgage lending and modification to be within the scope of those exceptions. (Id. at 929-931.)

Here, Plaintiffs fail to demonstrate that Crystal breached any duty independent of its contractual obligation to perform warranty repairs. The alleged negligence is a failure to perform the repair competently, that is, a duty that flows directly from the service contract under the warranty. Plaintiffs’ claim that Crystal performed this duty negligently is a claim for contract breach, not a separate tort. Plaintiffs’ damages are purely economic. This is not a contract for professional services. The economic loss rule applies.

The court sustains the demurrer with leave to amend.

CIV. CODE, § 1793.2(A)(3) (THIRD CAUSE OF ACTION)

This section requires a manufacturer to make available “sufficient service literature and replacement parts to effect repairs during the express warranty period.” (Civ. Code, § 1793.2(a)(3).)

Defendants argue that the FAC pleads no facts as to what parts or literature Defendant failed to provide, instead stating conclusions without facts.

Plaintiffs argue that the FAC sufficiently notifies Defendant of the Song-Beverly claims, and that Defendant FCA US has exclusive knowledge of the specific parts or literatures that were unavailable.

“The Song-Beverly Act is a remedial statute designed to protect consumers who have purchased products covered by an express warranty.” (Robertson v. Fleetwood Travel Trailers of California, Inc. (2006) 144 Cal.App.4th 785, 740.) “If a manufacturer elects to provide an express warranty for consumer goods such as motor vehicles, the Act protects buyers in a number of ways.” (Jensen v. BMW of North America, Inc. (1995) 35 Cal.App.4th 112, 121.) One of such protection is the requirement that the manufacturers of consumer goods sold in this state are to maintain service and repair facilities or designate independent repair or service facilities “reasonably close to all areas where its consumer goods are sold to carry out the terms of the warranties.” (Civ. Code, §1793.2(a)(1)(A).) In complying with this requirement, the manufacturer must “[m]ake

available to authorized service and repair facilities sufficient service literature and replacement parts to effect repairs during the express warranty period.” (Id. §1793.2(a)(3).)

The Act goes on to provide that “Where...service or repair of goods is necessary because they do not conform with the applicable express warranties, service and repair shall be commenced within a reasonable time by the manufacturer or its representative in this state...[and] the goods shall be serviced or repaired so as to conform to the applicable warranties within 30 days.” (Civ. Code § 1793.2(b).) “If the manufacturer or its representative...is unable to service or repair a new motor vehicle...to conform to the applicable express warranties after a reasonable number of attempts, the manufacturer shall either promptly replace the new motor vehicle...or promptly make restitution to the buyer...” (Id., § 1793.2(d)(2).)

The FAC here alleges “Defendant FCA and its representative failed to commence the service or repairs within a reasonable time and failed to service or repair the Vehicle so as to conform to the applicable warranties within 30 days.” (FAC ¶ 52.) In the 3rd cause of action, Plaintiffs sufficiently allege the ultimate fact that “Defendant FCA failed to make available to its authorized service and repair facilities sufficient service literature and replacement parts to effect repairs during the express warranty period.” (Id. at ¶ 38.)

The particular facility that is deficient or the literature not available are evidentiary facts which Plaintiffs ultimately need to demonstrate, but not at the pleading stage. The rules of pleading require that only ultimate facts be alleged; evidentiary facts supporting the allegation of ultimate fact need not be pled. (McKelly v. Washington Mutual, Inc. (2006) 142 Cal.App.4th 1457, 1469.) The distinction between “ultimate facts” and “conclusions” depends on whether the pleading gives adequate notice of the claims/defenses to be presented. (Estate of Lind (1989) 209 Cal.App.3d 1424, 1434.) The complaint gives Defendant adequate notice of the claims presented.

The court overrules the demurrer.

MOTION TO STRIKE

A motion to strike may be applied to any irrelevant, false or improper matter, or any pleading not drawn or filed in conformity with the laws of the state, court rule, or court order. (Code Civ. Proc., § 436.) The grounds must appear on the face of the pleading or judicial notice. (Id. at § 437.)

In order to plead punitive damages, a plaintiff must plead allegations of fraud, malice, or oppression with sufficient particularity. (Hilliard v. AH Robbins Co. (1983) 148 Cal.App.3d 374, 392.) Generally, claims for punitive damages must be pleaded with particularity as to the facts constituting the alleged egregious conduct. (G.D. Searle & Co. v. Superior Court (1975) 49 Cal.App.3d 22, 29.) However, the court may read the complaint as a whole so that conclusory allegations may be sufficient when read in context with the facts alleged as to the defendant’s wrongful conduct. (Perkins v. Superior Court (1981) 117 Cal.App.3d 1, 6-7.)

Malice is currently defined in the statute as “conduct which is intended by the defendant to cause injury to the plaintiff or despicable conduct which is carried on by the defendant with a willful and conscious disregard of the rights or safety of others.” (Civ. Code §3294(c)(1).) Oppression is defined as “despicable conduct that subjects a person to a cruel and unjust hardship in conscious disregard of that person’s rights. (Id. §3294(c)(2).) Fraud is “an intentional misrepresentation, deceit, or concealment of a material fact known to the defendant with the intention on the part of the defendant of thereby depriving a person of property or legal rights or otherwise causing injury.” (Id. § 3294(c)(3).)

Punitive damages are available for fraud claims despite the fact that there is a Song- Beverly claim. (Anderson v. Ford Motor Co. (2022) 74 Cal.App.5th 946, 971-972.) Here, fraud is sufficiently pled. Because the fraudulent inducement claim survives, the prayer for punitive damages is proper.