In Dhital v. Nissan N. Am., Inc., No. A162817, 2022 Cal. App. LEXIS 887, at *11-22 (Ct. App. Oct. 26, 2022), the California Court of Appeal found that the economic loss rule did not bar a fraudulent inducement claim so long as the claim was completely separate and apart from the Song-Beverly warranty claim.

As noted, the trial court sustained Nissan’s demurrer to plaintiffs’ claim for fraudulent inducement—concealment on the ground it was barred by the economic loss rule. We conclude the economic loss rule does not bar plaintiffs’ fraud claim.  The economic loss rule provides that, “[i]n 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 [290 Cal. Rptr. 3d 834, 505 P.3d 625] (Sheen).) For claims arising from alleged product defects, “[e]conomic 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 … .”’”’” (Robinson, supra, 34 Cal.4th at p. 988.) The Sheen court noted the economic loss rule “has been applied in various contexts. First, it carries force when courts are concerned about imposing ‘“liability in an indeterminate amount for an indeterminate time to an indeterminate class.”’” (Sheen, supra, 12 Cal.5th at p. 922, quoting Southern California Gas Leak Cases (2019) 7 Cal.5th 391, 414 [247 Cal. Rptr. 3d 632, 441 P.3d 881].) Second, “[i]n another recurring set of circumstances, the rule functions to bar claims in negligence for pure economic losses in deference to a contract between litigating parties.” (Sheen, supra, 12 Cal.5th at p. 922, citing Robinson, supra, 34 Cal.4th at p. 988, and other cases.) The Restatement states this form of the economic loss rule as follows: “[T]here is no liability in tort for economic loss caused by negligence in the performance or negotiation of a contract between the parties.” (Rest.3d Torts, Liability for Economic Harm, § 3; see Sheen, supra, at p. 923.) The Robinson court explained: “‘“‘[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.’”…’ [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.’” (Robinson, supra, 34 Cal.4th at p. 988.)

The Court of Appeal found that the fraudulent inducement exception to the economic loss rule applied.

Here, the fraudulent inducement exception to the economic loss rule applies. Plaintiffs allege that Nissan, by intentionally concealing facts about the defective transmission, fraudulently induced them to purchase a car. Fraudulent inducement is a viable tort claim under California law. “The elements of fraud are (a) a misrepresentation (false representation, concealment, or nondisclosure); (b) scienter or knowledge of its falsity; (c) intent to induce reliance; (d) justifiable reliance; and (e) resulting damage. [Citations.] Fraud in the inducement is a subset of the tort of fraud. It ‘occurs when “‘the promisor knows what he is signing but his consent is induced by fraud, mutual assent is present and a contract is formed, which, by reason of the fraud, is voidable.’”’” (Hinesley v. Oakshade Town Center (2005) 135 Cal.App.4th 289, 294–295 [37 Cal. Rptr. 3d 364]; accord, Geraghty v. Shalizi (2017) 8 Cal.App.5th 593, 597 [215 Cal. Rptr. 3d 61].) . . .Applying Robinson here (and cognizant that our Supreme Court may soon provide additional guidance), we conclude plaintiffs’ claim for fraudulent inducement by concealment is not subject to demurrer on the ground it is barred by the economic loss rule. Robinson left undecided whether concealment-based claims are barred by the economic loss rule. What follows from its analysis, however, is that concealment-based claims for fraudulent inducement are not barred by the economic loss rule. The reasoning in Robinson affirmatively places fraudulent inducement by concealment outside the coverage of the economic loss rule. We now hold that the economic loss rule does not cover such claims. First, as discussed, Robinson identified fraudulent inducement as an existing exception to the economic loss rule, before it proceeded to analyze the particular claims at issue in that case relating to fraud during the performance of a contract. (Robinson, supra, 34 Cal.4th at pp. 989–990.) For fraudulent inducement and the other existing exceptions listed in Robinson, “‘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.’” (Id. at p. 990.) In our view, that independence is present in the case of fraudulent inducement (whether it is achieved by intentional concealment or by intentional affirmative misrepresentations), because a 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. In Anderson, supra, 74 Cal.App.5th 946, the Court of Appeal contrasted these two types of conduct, although not in the context of determining the applicability of the economic loss rule. (Id. at pp. 966–967.) In Anderson, after purchasing a pickup truck that turned out to be defective, the plaintiffs sued Ford and prevailed at trial on both a Song-Beverly Act warranty cause of action and a cause of action for “fraud in the inducement—concealment.” (Id. at p. 950.)  On appeal, Ford argued the plaintiffs could not recover both a statutory civil penalty under the Song-Beverly Act and punitive damages (the latter being based on the fraud claim and a claim under the Consumers Legal Remedies Act (CLRA) (Civ. Code, § 1750 et seq.)); Ford argued both awards were based on “‘substantially the same conduct.’” (Anderson, supra, 74 Cal.App.5th at pp. 950; id. at pp. 961, 966.) The appellate court disagreed and explained that “the punitive damages and statutory penalties were based on different conduct that took place at different times. The punitive damages were based on conduct underlying the fraud/CLRA causes of action and took place before the sale. The civil penalty was based on defendant’s postsale failure to comply with its Song-Beverly Act obligations to replace the vehicle or make restitution when reasonable attempts to repair had failed.” (Id. at p. 966.)  Similarly, here, plaintiffs’ fraudulent inducement claim alleges presale conduct by Nissan (concealment) that is distinct from Nissan’s alleged subsequent conduct in breaching its warranty obligations. As Nissan notes, plaintiffs’ SAC includes some allegations that do not fall neatly into one of these two categories. For example, in their fraudulent inducement cause of action, plaintiffs include some allegations about the failure of Nissan to make disclosures “on the date of each of the [postsale] repair attempts,” in addition to alleging presale concealment. But at the pleading stage, we decline to hold plaintiffs’ fraud claim (based in part on presale concealment) is barred by the economic loss rule.5 And contrary to Nissan’s view, we do not read Robinson’s discussion of the claims there involving fraud during contractual performance (and, within that category, permitting certain claims alleging affirmative misrepresentations but not reaching the viability of the accompanying intentional concealment claims) as a narrowing or limitation of the existing exception for fraudulent inducement claims or a requirement that all inducement claims must be supported by allegations of affirmative misrepresentations. (Robinson, supra, 34 Cal.4th at pp. 989–991.)  As the parties note and as the Ninth Circuit outlined in Rattagan, supra, 19 F.4th at pp. 1191–1192, courts in other states have reached differing conclusions as to the scope of the economic loss rule and the extent to which it precludes fraud claims. (Compare, e.g., Milan Supply Chain Solutions v. Navistar, Inc. (Tenn. 2021) 627 S.W.3d 125, 153–154 [declining to adopt “a broad rule either extending the economic loss rule to all fraud claims or exempting all fraud claims from the economic loss rule,” but holding fraudulent inducement claims are barred by the rule if the only misrepresentations concern the quality or character of the goods sold and the contract is “between sophisticated commercial business entities”], with, e.g., Van Rees v. Unleaded Software, Inc. (Colo. 2016) 2016 CO 51 [373 P.3d 603, 608] [economic loss rule did not bar fraudulent inducement claims; “The court of appeals seemed concerned that if it did not affirm the dismissal of the tort claims in this case, the purposes underlying the economic loss rule would not be served, as tort law would swallow contract law. [Citation.] However, we also must be cautious of the corollary potential for contract law to swallow tort law.”].)  Similarly (as also outlined by the parties and the Ninth Circuit), federal district courts applying California law have diverged on this point. (Compare, e.g., White v. FCA US LLC (N.D.Cal. 2022) 2022 U.S.Dist.LEXIS 146604, *9–*13 [under California law, fraudulent inducement claims fall within a well-recognized exception to the economic loss rule that is separate from the additional exception discussed in Robinson for some fraudulent performance claims], with, e.g., In re Ford Motor Co. DPS6 Powershift Transmission Products Liability Litigation (C.D.Cal. 2020) 483 F.Supp.3d 838, 848–850 [under California law, claim for fraudulent inducement by omission was barred by economic loss rule]; see Rattagan, supra, 19 F.4th at pp. 1191–1192 [noting district courts have reached different conclusions as to whether the economic loss rule bars claims of fraudulent concealment].)  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 (Robinson, supra, 34 Cal.4th at pp. 989–990), and plaintiffs allege fraudulent conduct that is independent of Nissan’s alleged warranty breaches.6 The trial court erred by sustaining Nissan’s demurrer to plaintiffs’ fraud claim on the ground it was barred by the economic loss rule.