Case Number: 18STCV07395 Hearing Date: December 10, 2019 Dept: 34

SUBJECT: Motion for Judgment on the Pleadings

Moving Party: Defendant BMW of North America, LLC

Resp. Party: Plaintiff Nabil Fadel

Defendant BMW of North America, LLC’s motion for judgment on the pleadings is DENIED.

Plaintiff’s request for judicial notice is GRANTED.

BACKGROUND:

Plaintiff Nabil Fadel commenced this lemon law action on December 6, 2018 against Defendants BMW of North America, LLC and BMW of Santa Maria for (1) violation of Civil Code section 1793.2 subdivision (d); (2) violation of Civil Code section 1793.2 subdivision (b); (3) violation of Civil Code section 1793.2 subdivision (a)(3); (4) breach of express written warranty; (5) breach of implied warranty of merchantability; and (6) fraud.

For Plaintiff’s sixth cause of action for fraud, Plaintiff alleges that Defendant BMW of North America, LLC (“BMW NA”) failed to disclose that the N63 engine in the 2012 BMW 550i he bought on October 9, 2012 had an “oil consumption defect” that caused it “to improperly burn off and/or consume abnormally high amounts of oil.” (Complaint, ¶¶ 34-42.)

On May 1, 2019, the Court denied Defendants’ motion for change of venue.

On July 26, 2019, the Court denied BMW NA’s motion to compel arbitration.

On September 4, 2019, the Court denied BMW NA’s motion for protective order prohibiting the deposition of BMW NA employee Michael J. Murray.

On September 30, 2019, the Court denied BMW NA’s ex parte application for an order withdrawing order compelling additional deposition of Michael J. Murray and the Court ordered the deposition of Michael Murray to be held by October 21, 2019.

On October 23, 2019, the Court ordered Michael J. Murray to produce the approximate 18 PuMA Reports he offered.

On November 5, 2019, BMW NA filed the instant motion for judgment on the pleadings with respect to Plaintiff’s sixth cause of action for fraud, on the grounds that it is barred by the economic loss rule. (Notice of Motion, p. 2:4-10.)

ANALYSIS:

A. Legal Standard

“A motion for judgment on the pleadings performs the same function as a general demurrer, and hence attacks only defects disclosed on the face of the pleadings or by matters that can be judicially noticed.” (Burnett v. Chimney Sweep (2004) 123 Cal.App.4th 1057, 1064.) “In deciding or reviewing a judgment on the pleadings, all properly pleaded material facts are deemed to be true, as well as all facts that may be implied or inferred from those expressly alleged.” (Fire Ins. Exchange v. Superior Court (2004) 116 Cal.App.4th 446, 452.) A motion for judgment on the pleadings does not lie as to a portion of a cause of action. (Id.) “In the case of either a demurrer or a motion for judgment on the pleadings, leave to amend should be granted if there is any reasonable possibility that the plaintiff can state a good cause of action.” (Gami v. Mullikin Medical Ctr. (1993) 18 Cal.App.4th 870, 876.) A non-statutory motion for judgment on the pleadings may be made any time before or during trial. (Stoops v. Abbassi (2002) 100 Cal.App.4th 644, 650.)

B. Request for Judicial Notice

Plaintiff requests that the Court take judicial notice of the following documents:

· Exhibit 1: Order Denying Defendants’ Motion to Dismiss Plaintiffs’ Fraudulent Concealment Claims in Mary A. Rhodeman, et al. v. Ocwen Loan Servicing, LLC, et al. , United States District Court, Central District, Case No. EDCV 18-2363 JGB (KKx)

· Exhibit 2: Order Denying Defendant’s Motion to Dismiss Plaintiff’s Fraudulent Concealment Cause of Action in a lemon law case against an automobile manufacturer, Bales v. FCA US LLC, 2019 WL 6219750, at *3 (N.D. Cal. Nov. 21, 2019).

· Exhibit 3: Order in NuCal Foods, Inc. v. Quality Egg LLC, 918 F. Supp. 2d 1023 (E.D. Cal. 2013), holding in part that the economic loss doctrine did not apply to bar fraud claims. (RJN, p. 1:8-18.)

Plaintiff’s request for judicial notice is GRANTED. (Evid. Code, § 452, subd. (d).)

C. Discussion

BMW NA argues that Plaintiff’s fraud claim is barred by the economic loss rule because: (1) he has only suffered economic losses related to the defective vehicle; and (2) that he has not alleged any fraudulent representations as to matters which were independent from those contained in the contract which exposed Plaintiff to personal injury damages. (Motion, pp. 1:13-19, 3:18-20.)

Economic loss consists of “‘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….’ ” [Citation.]” [Citation.] Simply stated, the economic loss rule provides: “‘“[W]here 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.”’ This doctrine hinges on a distinction drawn between transactions involving the sale 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.” [Citation.] The economic loss rule requires a purchaser to recover in contract for purely economic loss due to disappointed expectations, unless he can demonstrate harm above and beyond a broken contractual promise. [Citation.] Quite simply, the economic loss rule “prevent[s] the law of contract and the law of tort from dissolving one into the other.” [Citation.]

In Jimenez v. Superior Court [(2002) 29 Cal.4th 473], we set forth the rationale for the economic loss rule: “‘The distinction that the law has drawn between tort recovery for physical injuries and warranty recovery for economic loss is not arbitrary and does not rest on the “luck” of one plaintiff in having an accident causing physical injury. The distinction rests, rather, on an understanding of the nature of the responsibility a manufacturer must undertake in distributing his products.’ [Citation.] We concluded that the nature of this responsibility meant that a manufacturer could appropriately be held liable for physical injuries (including both personal injury and damage to property other than the product itself), regardless of the terms of any warranty. [Citation.] But the manufacturer could not be held liable for ‘the level of performance of his products in the consumer’s business unless he agrees that the product was designed to meet the consumer’s demands.’ [Citation.]” [Citation.]

(Robinson Helicopter Co., Inc. v. Dana Corp. (2004) 34 Cal.4th 979, 988-989.)

“Tort damages have been permitted in contract cases where a breach of duty directly causes physical injury [citation]; for breach of the covenant of good faith and fair dealing in insurance contracts [citation]; for wrongful discharge in violation of fundamental public policy [citation]; or where the contract was fraudulently induced. [Citation.]” [Citation.] “[I]n each of these cases, the duty that gives rise to tort liability is either completely independent of the contract or arises from conduct which is both intentional and intended to harm. [Citation.]”

(Id. at pp. 989-990.) The court in Robinson Helicopter found that the defendant’s alleged misrepresentations in supplying false certificates of conformance, upon which the plaintiff justifiably relied by accepting delivery and using the nonconforming products, constituted conduct separate from the breach of contract claim based on the provision of the nonconforming products. (Id. at pp. 990-991.) Thus, the court found that the fraud was a tort independent of the contract breach and the economic loss rule did not bar the fraud claims. (Id. at p. 991.)

BMW NA argues that this case is distinguishable from Robinson Helicopter because Robinson Helicopter set out an exception that is “narrow in scope and limited to a defendant’s affirmative misrepresentations” and not fraud by omission. (Motion, p. 3:13-25 [quoting Robinson Helicopter, 34 Cal. 4th at 993].) Thus, BMW NA argues that the exception is inapplicable here as BMW NA did not make any affirmative misrepresentations and the economic loss rule applies. (Id. at p. 3:25-27.)

In his opposition, Plaintiff contends that material omissions may preclude the application of the economic loss rule because at least one federal court construing Robinson has concluded that there is no meaningful distinction between intentional concealment and intentional misrepresentation for purposes of applying the economic loss rule. (See Opposition, p. 8:8-18 [citing NuCal Foods, Inc. v. Quality Egg LLC (E.D. Cal. 2013) 918 F. Supp. 2d 1023, 1032].) The Court finds that the reasoning of NuCal to be persuasive.

The fraud claim in NuCal arose “out of a massive recall in August 2010 of shell eggs precipitated by and outbreak of Salmonella Enteritidis (“SE”) that sickened as many as 62,000 people.” (See NuCal Foods, Inc., supra, at p. 1025.) The plaintiff had alleged that “defendant intentionally concealed, omitted, and/or failed to disclose that its farms and hens were contaminated with SE. . . . Moreover, plaintiff alleges that as of July 9, 2010, defendant falsely represented it would comply with the new FDA egg rule, which required defendant to disclose positive SE tests.” (Id. at p. 1031.) There, as here, defendant argued that the Robinson Helicopter exception to the economic loss rule applied only to affirmative misrepresentations. (Id.) The court disagreed, concluding that “the [Robinson] opinion strongly suggests no meaningful distinction exits between intentional concealment and intentional misrepresentation; rather, the material distinction is whether the tortious conduct was intentional or negligent.” (Id.) In NuCal, the defendants “failed to disclose problems at their farms to NuCal because they knew that NuCal would have stopped purchasing from defendants.” (Id. at 1032.) As a result, defendants’ omission had the effect of exposing thousands of people to a dangerous illness for the sole purpose of protecting defendant’s own business relationship.

In this case, Plaintiff sufficiently alleges exposure to potential liability, by alleging that the Engine Defect in the vehicle pose safety hazards that are unreasonably dangerous to consumers as the defects can cause, among others, “excessive oil consumption.” (Complaint, ¶ 10.) Further, Plaintiff alleges that BMW NA failed to disclose problems with Plaintiff’s vehicle for the purpose of making a single sale. (See Complaint, ¶¶ 36-37, 41-43.) The difference is one of quantity, not quality. Whether or not the economic loss rule applies should not depend on the number of people affected. The Court concludes that Plaintiff’s claim is not barred by the economic loss rule.

Accordingly, BMW NA’s motion for judgment on the pleadings as to the sixth cause of action is DENIED.