Alice Glover, et al. v. Ford Motor Company, et al.

II. Fraudulent Concealment

A. Statute of Limitations

Section 338, subdivision (d) provides a three-year statute of limitations for “[a]n action for relief on the ground of fraud or mistake. The cause of action in that case is not deemed to have accrued until the discovery, by the aggrieved party, of the facts constituting the fraud or mistake.” (Code Civ. Proc., § 338, subd. (d).)

Ford argues that “the Complaint contradicts its own reliance on the discovery rule. Plaintiffs affirmatively alleges that the Vehicle exhibited symptoms of the alleged defect since at least the date of purchase, April 25, 2020. (Complaint, ¶ 7.)” (Dem., p. 13, ll. 6-8.) The allegation at paragraph 7 of the complaint, however, does not allege that the Subject Vehicle exhibited any symptoms.

Ford also argues that the complaint fails to allege facts showing delayed discovery. (Dem., p. 9, l. 13 – p. 12, l. 3.) To the contrary, Plaintiffs make the following allegations:

37. Plaintiffs discovered Defendant’s wrongful conduct alleged herein shortly before the filing of the complaint, as the Vehicle continued to exhibit symptoms of defects following FORD’s unsuccessful attempts to repair them. However, FORD failed to provide restitution pursuant to the Song – Beverly Consumer Warranty Act.

75. Plaintiffs only became suspicious that the Vehicle suffered from the transmission defect after presenting the Vehicle to Defendant for a reasonable number of repair attempt[s] to no avail.

(Cmp., ¶¶ 37, 75.)

The allegations of delayed discovery in the complaint are sufficient.

B. Specificity of Fraud Allegations

Ford contends that the elements of fraudulent concealment are not pled with sufficient specificity. The elements of a fraudulent concealment cause of action are: (1) concealment or suppression of a material fact; (2) by a defendant with a duty to disclose the fact; (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 have acted differently if the concealed or suppressed fact was known; and (5) plaintiff sustained damage as a result of the concealment or suppression of the material fact. (Rattagan v. Uber Technologies, Inc. (2024) 17 Cal.5th 1, 40 (Rattagan).)

In Rattagan, supra, the Supreme Court emphasized that “California courts apply the same specificity standard to evaluate the factual underpinnings of a fraudulent concealment claim at the pleading stage, even though the focus of the inquiry shifts to the unique elements of the claim.” (Rattagan, supra, at p. 43.) The Rattagan court stated that a fraudulent concealment claim must include “specific allegations”, including “(1) the content of the omitted facts, (2) defendant’s awareness of the materiality of those facts, (3) the inaccessibility of the facts to plaintiff, (4) the general point at which the omitted facts should or could have been revealed, and (5) justifiable and actual reliance, either through action or forbearance, based on the defendant’s omission.” (Id. at pp. 43-44.) “ ‘[M]ere conclusionary allegations that the omissions were intentional and for the purpose of defrauding and deceiving plaintiff[] ... are insufficient for the foregoing purposes.’ ” (Ibid. [citing Goodman v.

Kennedy (1976) 18 Cal.3d 335, 347].)

The allegations in the complaint satisfy the Rattagan pleading requirements as follows:

Content of omitted facts: “Defendant FORD committed fraud by allowing the Subject Vehicle to be sold to Plaintiffs without disclosing that the Subject Vehicle and its transmission was defective and susceptible to sudden and premature failure.” (Cmp., ¶ 65.)

Defendant’s awareness of the materiality of those facts and inaccessibility of the facts to Plaintiffs: “In particular, the Plaintiffs are informed, believe and thereon allege that prior to Plaintiffs acquiring the Vehicle, FORD was well aware and knew that the transmission installed in the Vehicle was defective but failed to disclose this fact to the Plaintiffs at the time of the sale and thereafter.” (Cmp., ¶ 66.) “Specifically, Defendant FORD knew that vehicles equipped with the same 10 speed transmission as the Vehicle suffered from one or more defects that can cause the vehicles and their 10-speed transmissions to experience hesitation and/or delayed acceleration; harsh and/or hard shifting; jerking, shuddering, and/or juddering (“Transmission Defect”). These conditions present a safety hazard and are unreasonably dangerous to consumers because they can suddenly and unexpectedly affect the driver’s ability to control the vehicle’s speed, acceleration, deceleration, and/ or overall responsiveness of the vehicle in various driving conditions.” (Cmp., ¶ 67.)

Plaintiffs are informed and believe, and thereon allege, that Defendant acquired this knowledge prior to Plaintiffs purchasing the Vehicle through various sources of information, including but not limited to pre-production testing, pre-production design failure mode and analysis data, production failure mode and analysis data, early consumer complaints made exclusively to Ford’s network of dealers and directly to Ford, aggregate warranty data compiled from Ford’s network of dealers, testing conducted by Ford in response to consumer complaints, and repair order and parts data received by Ford from Ford’s network of dealers. (Cmp., ¶ 25.)

General point at which the omitted facts should or could have been revealed: “Plaintiffs are informed, believe and thereon allege that FORD acquired its knowledge of the Transmission Defect prior to Plaintiffs acquiring the Subject Vehicle, through sources not available to consumers such as Plaintiffs, including but not limited to pre-production and post-production testing data, early consumer complaints about the transmission defect made directly to FORD and its network of dealers, aggregate warranty data compiled from FORD’s network of dealers, testing conducted by FORD in response to these complaints, as well [sic] warranty repair and part replacements data received by FORD from FORD’s network of dealers, amongst other sources of internal information.” (Cmp., ¶ 68; see also Cmp., ¶¶ 26-32 [allegations of Technical Service Bulletins Ford issued re transmission problem].)

“Plaintiffs are informed, believe, and thereon allege that while Defendant knew about the Transmission Defect, and its safety risks, Defendant nevertheless concealed and failed to disclose the defective nature of the Vehicle and its transmission to Plaintiffs at the time of sale, repair, and thereafter. Had Plaintiffs known that the Subject Vehicle suffered from the Transmission Defect, they would not have purchased the Subject Vehicle.” (Cmp., ¶ 69.)

Justifiable and actual reliance, either through action or forbearance, based on the defendant’s omission: “The facts concealed or not disclosed by Defendant FORD to Plaintiffs are material in that a reasonable person would have considered them to be important in deciding whether or not to purchase the Subject Vehicle. Had Plaintiffs known that the Subject Vehicle and its transmissions were defective at the time of sale, they would not have purchased the Subject Vehicle.” (Cmp., ¶ 73.) “Plaintiffs are reasonable consumers who does not expect his transmission to fail and do not properly [sic].

Plaintiffs further expect and assume that Defendant FORD will not sell or lease vehicles with know material defect, including but not limited to those involving the vehicle’s transmission and will disclose any such defect to it’s consumer before selling such vehicle.” (Cmp., ¶ 74.) “Plaintiffs only became suspicious that the Vehicle suffered from the transmission defect after presenting the Vehicle to Defendant for a reasonable number of repair attempt to no avail.” (Cmp. ¶ 75.)

C. Transactional Relationship Giving Rise to a Duty to Disclose

“A duty to disclose a material fact can arise if (1) it is imposed by statute; (2) the defendant is acting as plaintiff’s fiduciary or is in some other confidential relationship with plaintiff that imposes a disclosure duty under the circumstances; (3) the material facts are known or accessible only to defendant, and defendant knows those facts are not known or reasonably discoverable by plaintiff (i.e., exclusive knowledge); (4) the defendant makes representations but fails to disclose other facts that materially qualify the facts disclosed or render the disclosure misleading (i.e., partial concealment); or (5) defendant actively conceals discovery of material fact from plaintiff (i.e., active concealment). (Civ.

Code, § 1710, subd. (3); Warner Constr. Corp. v. City of Los Angeles (1970) 2 Cal.3d 285, 294, 85 Cal.Rptr. 444, 466 P.2d 996; LiMandri v. Judkins (1997) 52 Cal.App.4th 326, 336, 60 Cal.Rptr.2d 539; see generally, 5 Witkin, Summary of Cal. Law (11th ed. 2023) Torts §§ 913−919.)” (Rattagan, supra, at p. 40.)

“Circumstances (3), (4), and (5) presuppose a preexisting relationship between the parties, such as ‘between seller and buyer, employer and prospective employee, doctor and patient, or parties entering into any kind of contractual agreement.’ ” (Rattagan, supra, at p. 40.) The warranty contract between Ford and Plaintiff supports a duty to disclose.

Plaintiffs allege they entered into a warranty contract with Ford regarding the Subject Vehicle. (Cmp., ¶ 7.) Thus, the parties entered into a contractual agreement which is a basis for a duty to disclose according to Rattagan. Ford cites Bigler-Engler v. Breg, Inc. (2017) 7 Cal.App.5th 276 (Bigler-Engler) as authority that the warranty agreement is not sufficient. (See Dem., p. 21, ll. 3- 7.) However, there was no warranty agreement between the manufacturer and plaintiff in that case. Nor was there evidence that the manufacturer advertised directly to consumers or directly profited from the plaintiff’s purchase. The manufacturer simply sold the product to a doctor who rented it to the patient.

Here, there is a warranty contract between Plaintiffs and Ford, Ford advertises to consumers, and Ford presumably profited directly by selling the Subject Vehicle to Plaintiff.

D. Exclusive Knowledge and Active Concealment

A duty to disclose may arise when the defendant has exclusive knowledge of material facts not known to the plaintiff. (LiMandri v. Adkins (1997) 52 Cal.App.4th 326, 336.) Ford contends that the complaint alleges insufficient facts as to Ford’s exclusive knowledge of the transmission defect and concealment of such knowledge. Contrary to Ford’s description of the allegations, the complaint alleges Ford acquired its knowledge “through various sources of information, including but not limited to pre-production testing, pre-production design failure mode and analysis data, production failure mode and analysis data, early consumer complaints made exclusively to Ford’s network of dealers and directly to Ford, aggregate warranty data compiled from Ford’s network of dealers, testing conducted by Ford in response to consumer complaints, and repair order and parts data received by Ford from Ford’s network of dealers.” (Cmp., ¶ 25.)

The complaint also alleges the content of, and includes a depiction of, Technical Service Bulletins (TSBs) that Ford issued regarding 10R80 transmissions with harsh or delayed shift concerns. (Cmp., ¶¶ 26-32.) The complaint alleges that the TSBs do not fix the transmission defects. (Cmp., ¶ 33.) The complaint further alleges that the “Plaintiffs would not have purchased the Subject Vehicle, or would have paid less for it, had Plaintiffs known of the Transmission Defect, given the unsafe nature of the Defect.” (Cmp., ¶ 34.)

Only “ultimate facts,” those upon which liability depends, as opposed to “evidentiary facts” and “legal conclusion,” must be pled in a complaint. (See, e.g., C.A. v. William S. Hart Union High School Dist. (2012) 53 Cal.4th 861, 872; Foster v. Sexton (2021) 61 Cal.App.5th 998, 1019- 1020.) In Chavez v. Alco Harvesting, LLC (2024) 102 Cal.App.5th 866, the appellate court found the plaintiff sufficiently pled fraudulent concealment as an exception to worker’s compensation exclusivity acknowledging that the allegations must be construed liberally and specific elements of fraudulent concealment may be pled in general terms. (Id. at pp. 871-872.)

Plaintiffs’ allegations specify how Ford allegedly obtained exclusive knowledge of the Transmission Defect and failed to disclose the defect at the time of sale. The allegations assert active concealment.

E. Economic Loss Rule

Ford argues that Plaintiffs have not pled facts sufficient to establish the fraudulent inducement exception to the economic loss rule.

The economic loss rule “is deceptively easy to state: In 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.) “[U]nder the economic loss rule, tort recovery for breach of a contract duty is generally barred ... unless two conditions are satisfied. A plaintiff must first demonstrate the defendant’s injurycausing 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.” (Rattagan, supra, at pp. 20-21.)

“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.” (Rattagan, supra, at p. 27.)

Ford argues that Plaintiffs have not alleged or argued that it would be unreasonable to expect that a vehicle could potentially be defective. (Reply, p. 5, ll. 19-20.) The warranty did not, however, contemplate the risk that Ford would conceal a known defect that cannot be corrected. (See, Dhital v. Nissan North America, Inc. (2022) 84 Cal.App.5th 828, 841 [“defendant’s conduct in fraudulently inducing someone to enter a contract is separate from the defendant’s later breach of the contract or warranty provisions that were agreed to”].)

There are also public policy reasons, exclusive of the contract, for not wanting an automotive manufacturer to withhold information on such defects, including safety. As noted by the Rattagan court, public policy has viewed fraudulent concealment on equal footing with affirmative misrepresentations. (Rattagan, supra, at p. 39.) These public policy reasons are exclusive of the contract, and therefore tort liability would exist in such instances of fraudulent concealment. Accordingly, the Court finds that Plaintiffs’ fraudulent concealment claim is not barred by the economic loss rule.

The demurrer to the sixth cause of action is overruled.

ORDER (PROPOSED)

The demurrer to the sixth cause of action is overruled.

Ford shall have ten days from service of notice of this ruling to file and serve an answer to the complaint. (Cal. Rules of Court, rule 3.1320, subd. (j)(1).) Plaintiffs shall serve notice.

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