On February 4, 2010, the California Court of Appeal, Second Appellate District, issued its opinion in Lukather v. General Motors, LLC, Case No. B209979. (Lukather v. GM ) Because this is a “lemon law” case, it caught my interest. (I conduct a lot of “lemon law” mediations.)
Plaintiff’s story unfolds as follows:

On April 25, 2005, Paul Lukather leased a Cadillac. Within a month, the Cadillac began exhibiting intermittent but recurring problems in the electronic stability control system. Lukather first brought the car in for repair on June 1, 2005 when the vehicle had been driven only 854 miles. Between June 5, 2005 and January 30, 2007, he brought the car in for repair of this same concern on more than four occasions.

Then, in February 2007, the brakes came on by themselves making the Cadillac difficult to drive. So, Lukather took the car to the dealer, requested that General Motors (“GM”) repurchase it and left it. He refused to pick it up, although he continued to make the lease and insurance payments on it. Although GM paid for a rental vehicle for two months, it refused to do so after April 4, 2002.  Lukather  paid $21,290.46 in car rental fees.

For the next two months, GM went back and forth with Lukather, trying to determine  whether Lukather would accept a replacement vehicle or was insisting on a repurchase. Lukather wanted his lease money back. According to GM, it was unclear what resolution Lukather was seeking. In April 2007, a GM representative told Lukather that it would take GM several months to decide whether to repurchase the Cadillac.

Frustrated, if not angry, Lukather hired an attorney. Suit was filed under the Song-Beverly Consumer Warranty Act (“ACT”), Civil Code §1790 et seq.

In March 2008, the matter went to trial before the Honorable Dewey Lawes Falcone, Ventura County Superior Court Judge (Case No. VC 048559). The trial court tentatively ruled that GM had violated the Act. In May 2008, it issued its statement of decision determining that GM did not act promptly in offering to repurchase the Cadillac and that such actions were “willful.” Consequently, in addition to awarding actual damages of $61,389.13, the trial court imposed a civil penalty in the same amount - $61,389.13 - in addition to prejudgment interest and attorneys’ fees and costs and expenses.

GM appealed contending that: (1) the evidence was insufficient to support  the findings that GM violated the Act, and did so willfully; (2) the Court erred in rejecting GM’s mitigation of damages defense; and (3) the Court abused its discretion in awarding prejudgment interest and attorneys’ fees and costs.

The appellate court affirmed. It determined that approximately six weeks (March 8 to April 12, 2007) was more than enough time for GM to decide to repurchase the Cadillac. The appellate court noted that there was “. . .[n]o evidence [to] support(s) GM’s assertion that . . . restitution was a labor intensive process that required months to accomplish.” (Id. at 9).

Citing Kwan v. Mercedes-Benz of North America, Inc. (1994) 23 Cal. App. 4th 174,( kwan-vs-mbz) the appellate court affirmed the trial court’s determination that GM had acted “willfully” in that it made decisions “ “. . .without the use of reasonable available information germane to that decision. . ..” ” and thus were not “reasonable, good faith decision(s)” (Lukather,supra, at 12).

The appellate court rejected GM’s mitigation of damages defense. GM argued that Lukather’s refusal to respond to GM was the cause of his approximate $21,000 car rental expense. The appellate court, noting that there is no authority in the Act for this defense, found that GM, in essence, was attempting to offset this expense. Noting that the Act does not provide for this type of offset, the appellate court rejected this defense.

Further, the court rejected the contention that the trial court abused its discretion in awarding prejudgment interest. GM urged that Lukather prevented GM from performing and so should not be awarded interest. The appellate court disagreed.

Finally, it found no basis to reverse the award of attorneys’ fees and costs.

This case is significant because it upheld the awards of a civil penalty, and prejudgment interest. No doubt, it will cause much discussion within the “lemon law” community.

. . .Just something to think about.

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A judge declared that a mysterious noise makes a man’s $250,000 Lamborghini a lemon. KNXV’s Christopher Sign reports.

        What is the duration of the implied warranty of merchantability under California’s Song-Beverly Consumer Warranty Act (Civil Code §1790 et seq.) (“The Song-Beverly Act”)? Is its duration simply as set forth in Civil Code § 1791.1(c):

      “The duration of the implied warranty of merchantability. . . shall be coextensive in duration with an express warranty which accompanies the consumer goods, provided the duration of the express warranty is reasonable; but in no event shall such implied warranty have a duration of less than 60 days nor more than one year following the sale of new consumer goods to a retail buyer. . . .”

       Or, is it something different? Does the statute mean what it says or something else?

       In Mexia v. Rinker Boat Company, Inc., (Case No. E045443), Division Two of the Fourth Appellate District of the Court of Appeal in California (June 15, 2009) held that these words do not mean what they say, but, indeed, mean something different.

       On April 12, 2003, Jess Mexia purchased a boat manufactured by defendant Rinker Boat Company (“Rinker”) and sold to him by Miller Landing (“Miller”). By July 2006, the boat needed repairs due to defects relating to corrosion in the engine. (Id. at 4). He returned the boat on July 8, 2005 for the repairs. When defendants allegedly failed to repair the boat so that it would conform to the applicable warranties, Mexia filed suit in November 2006.

      The trial court sustained the demurer without leave of Rinker and Miller on the grounds that this statute is a one year statute of limitations and thus barred Mexia’s claim. Mexia appealed the trial court’s judgment dismissing his lawsuit.

       On appeal, Rinker and Miller changed their argument to urge that although the applicable statute of limitations is four years, this lawsuit is still barred because Mexia was required to discover and report the defect within the time specified by the statute.

       The appellate court rejected this argument. The court determined that given the plain language of the statute, it “. . . creates a limited, prospective duration for the implied warranty of merchantability; it does not create a deadline for discovering latent defects or for giving notice to the seller.”  (Id. at 3).

       The appellate court rejected the notion proffered by Rinker and Miller “that latent defects must be discovered and reported to the seller within a specified time” (Id. at 17), claiming that this theory had no support in the text of the statute. The appellate court reasoned  that “if the legislature had intended the duration provision to impose a deadline for consumers to give notice of defect. . . it could have easily done so. It did not” (Id. at 18).

       Rather, the appellate court interpreted this “duration provision” - Civil Code § 1791.1(c) – as providing the implied warranties under the Song-Beverly Act with a limited prospective existence beyond the date of delivery” (Id. at 20) but as not imposing any sort of notification deadline. (Id. at 18).

         Based on its determination, the appellate court reversed: Mexia could allege a breach of the implied warranty even though he did not first raise the issue until more than two years after he purchased the boat.

       The morale of this story: a statute does not always mean what says. Especially where as here, the statute is consumer oriented, and enacted to expand consumer protection and remedies, a court will provide an expansive interpretation whenever possible. It will construe the statute as broadly as possible so as to implement what it views to be the legislative intent.

      . . . Just something to think about.

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As many of my readers are aware, I mediate “lemon law” cases or matters brought under California’s Song-Beverly Consumer Warranty Act (Civ. Code §1790 et seq.). (“Song-Beverly Act”).

On June 8, 2009, Division Three of the Fourth Appellate District (i.e. Orange County) for the Court of Appeal of the State of California decided two appeals involving August B. Doppes and his 2001 Bentley Arnage.
The first appeal, Doppes v. Bentley Motors, Inc., Case No. G038734, focused more on the discovery abuses by Bentley’s counsel than the breach of warranty issues. But, it is interesting because the appellate court, in essence, imposed a civil penalty and granted the fraud claim as sanctions for discovery abuse. Further, the appellate court reaffirmed the lodestar approach in awarding attorneys’ fees.

The second appeal, Doppes v. Bentley Motors, Inc., Case No. G039922, involved the award of prejudgment interest on the repurchase of the Bentley under the Song-Beverly Act. But, more on this later.

In the first appeal (Case No. G038734), the issue before the appellate court was whether the “trial court [had] abused its discretion by failing to impose terminating sanctions against defendant for misuses of the discovery process.” (Id. at 2). The appellate court answered “yes,” finding that Bentley had engaged in “repeated and egregious violations of the discovery laws that not only impaired plaintiff’s rights but threatened the integrity of the judicial process.” (Id. at 2).

It seems that in April 2002, plaintiff August B. Doppes purchased a 2001 Bentley Arnage that had an “obnoxious odor” in the interior, causing the automobile to be out of service for 171 days. When Doppes demanded that Bentley replace or repurchase the vehicle in accordance with the Song-Beverly Act, Bentley refused. During the course of the litigation, Bentley withheld documents pertaining to its extensive knowledge about this odor concern, the other customer complaints, the fact that the odor emanated from corrosion protection wax, was prevalent in all of its model year 2001 four door cars, and related issues. (Id. at 4). Although, internal documents revealed that as early as June 2001, Bentley was aware of this concern, during discovery, it failed to provide such crucial but potentially damaging documents and continued to stonewall to the time of trial. However, the discovery referee, out of moderation, recommended issue sanctions rather than terminating sanctions. But, during trial, it became apparent that Bentley had engaged in further stonewalling and “hide the ball” tactics by not producing crucial e-mails and customer complaint files. Yet, the trial court still hesitated to issue terminating sanctions and allowed the jury to decide thecase.

Thereafter, the jury found that Bentley had violated the Song-Beverly Act and had concealed a material fact but found that neither the violation nor the concealment had been intentional. The jury also found that Bentley breached its express and implied warranties. The jury awarded Doppes the sum of $214,300 as reimbursement for a new vehicle  plus $100,000 for breach of the express and implied warranties. The court entered judgment for Doppes for $214,300 concurrent with the return of the vehicle to Bentley but to avoid double recovery, did not enter a judgment for the additional $100,000. The court also awarded prejudgment interest at seven percent per annum. (More on this later.)

After detailing the discovery abuses, the appellate court affirmed the judgment under the Song-Beverly Act and breach of express and implied warranty claims. But, as sanctions for the discovery abuse, it reversed the finding by the jury that Bentley did not commit fraud and did not intentionally violate the Song-Beverly Act. It remanded with directions, (1) to strike Bentley’s answer and to enter Bentley’s default on the fraud cause of action and to hold a default judgment prove-up hearing, and (2) to also enter a finding that Bentley intentionally violated the Song-Beverly Act such that civil penalties (typically two times the amount of actual damages) (California Civil Code §1794(c)) and other relief may be imposed against it at a subsequent hearing.

In the last part of its opinion, the appellate court discussed the award of attorneys’ fees noting that under the Song-Beverly Act, a prevailing buyer is entitled to recover attorney fees “reasonably incurred” and based on “actual time expended”. California Civil Code §1794(d). The court noted that, in essence, this statute is compatible with the lodestar adjustment method of calculating fees which requires “the trial court first to determine a touchstone or lodestar figure based on actual time spent and reasonable hourly compensation for each attorney.” (Id. at 37). Using this formula, the court determined that, in the main, the trial court did not abuse its discretion in awarding fees.

In the companion appeal, Doppes v. Bentley Motors, Case No. G039922, the appellate court affirmed the award of prejudgment interest at the rate of 7% per annum from the date of purchase in April 2002 to the date of entry of judgment in March 2007. Bentley appealed arguing that the Song-Beverly Act does not provide for the award of prejudgment interest, citing Duale v. Mercedes-Benz USA, LLC (2007) 148 Cal. App. 4th 718 (Duale) in support.

The appellate court distinguished Duale because there, the amount of damages owed to plaintiffs was not calculable prior to trial. The appellate court reasoned that the Duale appellate court “. . . did not hold prejudgment interest may never be recovered in a Song-Beverly Consumer Warranty Act case, but only that prejudgment interest was unrecoverable under section 3287 [Civil Code §3287] in this particular case because, under the facts, the amount of damages could not be resolved except by verdict.” (Id. at 7).

In contrast, in this case, the amount was known - $214,300 – prior to verdict. Noting that there is nothing in the Song-Beverly Act that bars recovery of prejudgment interest, the appellate court determined that under Civil Code §3287,  plaintiff was entitled to prejudgment interest.
With these two opinions, the appellate court provides much food for thought, including the use of the Song-Beverly Act’s civil penalty provisions as a “terminating” sanction for discovery abuses and the allowance of prejudgment interest from the date of purchase on a vehicle that is repurchased under this Act. Without doubt, these points will be much discussed within the “lemon law” community.

. . . Just something to think about.

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       It seems that no matter where we turn our focus, we hear about  our environment and how it needs to be “greener.” To this end, the automakers (especially to avoid further insolvency) are emphasizing hybrid and other types of environmentally friendly automobiles; “fuel economy” seems to be the “magic words “ for this mode of transportation.

       No doubt, some consumer has already purchased a hybrid and is unhappy with the fuel efficiency of the vehicle, claiming that it is not as advertised.
 

      Gaetano Paduano is one such consumer and sued American Honda Motor Company, Inc. (“Honda”) claiming that the fuel efficiency of his new 2004 Honda Civil Hybrid was only half of what was stated on the Monroney sticker – the federally mandated new car label that states the fuel economy estimate required by the Environmental Protection Agency (EPA) pursuant to the Energy Policy and Conservation Act (EPCA), 49 U.S.C. §32901 et seq.

       After Honda refused his request to repurchase the vehicle, Paduano sued it in San Diego County Superior Court under the California Song-Beverly Consumer Warranty Act, the Federal Magnuson-Moss Warranty Act, and under California’s Consumer Legal Remedies Act (CLRA) and Unfair Competition Law (UCL.) (Paduano v. American Honda Motor Company, Inc., California Court of Appeal, Fourth Appellate District, Division One, Case No. D050112, January 12, 2009.)
 

      In his suit, Paduano claimed that Honda breached the warranty because the vehicle did not obtain the fuel economy as stated on the Monroney sticker and further Honda made deceptive and misleading advertising statements on its brochure when it stated:

       “Just drive the hybrid like you would a conventional car and save on fuel bills.”
“IS THERE ANYTHING SPECIAL I HAVE TO DO. You just have to love saving money and getting terrific gas mileage.”  (Dissent at 2.)    

       Paduano contended that after he purchased the vehicle, an unspecified employee at a Honda dealership told him that “. . .driving conditions affect the fuel efficiency of hybrid vehicles, and that his Civic Hybrid could achieve higher fuel efficiency only if he significantly altered his driving habits.” (Id. at 2.)

       Defendant Honda moved for summary judgment contending that the federal law – EPCA – pre-empted all of Paduano’s claims. The trial court agreed, granting summary judgment to Honda.

       The appellate court disagreed in part. While it agreed that federal law pre-empted the warranty claims, it determined that Paduano’s deceptive advertising claims were not pre-empted and so were viable. It therefore affirmed summary adjudication in favor of Honda on the warranty claims but reversed the trial court’s judgment on plaintiff’s deceptive advertising claims.

       One justice, O’Rourke J., dissented, on the belief that summary judgment in favor of Honda should have been affirmed in total. Agreeing with the majority that the warranty claims were pre-empted by federal law, the justice believed that Paduano’s false advertising claims were also pre-empted by this same federal statute – the EPCA. Further, the dissent pointed out that plaintiff failed to plead the false advertising claims in the complaint but raised them only in his opposition to Honda’s summary judgment. Thus, in the dissent’s view, these claims should not be considered  part of the case. Alternatively, the dissent believed that the statements at issue did not rise to the level of “false or deceptive” misrepresentations, but were mere “puffery” and nothing more. As puffery, such statements cannot support claims of liability in tort. (Dissent at 20.)
 

      As I have mentioned previously, I mediate “lemon-law” cases. In an effort to keep both the reader and me up to date on what the courts are saying about “lemons,” I decided to devote this blog to a “lemon” with a “twist” –a hybrid (excuse the pun!)

       . . .Just something to think about.