Late last year, I mediated a “family” dispute involving facts that were stranger than fiction. It seems that Jane Jones (fictional name) had a relationship with Joseph Smith (again, a fictional name). They had two children together, although they never married. They, then, went their separate ways.
 

      However, Ms. Jones went to family court and obtained orders requiring that Mr. Smith pay child support. Years went by, and Mr. Smith did not pay the child support. So, Ms. Jones went to the Child Support Services Department (“CSSD”) to obtain enforcement of the child support orders. CSSD agreed to do what was necessary to enforce these orders for the outstanding child support which by this time amounted to about $50,000.

       It seems that Mr. Smith had a mother (Mother Smith, another fictional name) who lived outside of the city but owned a piece of commercial real estate within the city that required remodeling. So Mother Smith wired $50,000 into her son’s bank account for his use to oversee and pay for the remodeling of  her commercial real estate.

       As fate would have it, when she wired the funds into her son’s account, there was a levy on the account by the CSSD for the outstanding child support. So, CSSD took the $50,000 (meant for remodeling Mother Smith’s property) and applied it to the outstanding support obligation of Mr. Smith.

       Suddenly, Ms. Jones found herself with $50,000. Mr. Smith, quite upset at this turn of events, telephoned Ms. Jones requesting  that she return the money, claiming that it belonged to his mother and was meant to pay to remodel his mother’s commercial real property.
 

      This is where the facts get muddled.

      During the ensuing litigation, Mr. Smith claimed that Ms. Jones agreed to return the money, acknowledging that the money belonged to Mother Smith, not  to Mr. Smith. In this connection, Mr. Smith contended that Ms. Jones met him at the Child Support Services Department and agreed to and,  in fact, signed a Stipulation and Order Waiving Unassigned Arrears (“Stipulation”) which in essence, would order the return of the money to Mr. Smith.
 

      However, Ms. Jones, during the ensuing litigation, disputed this claim, contending that while she, did, indeed, meet Mr. Smith at the CSSD’s office, she never signed the Stipulation to waive the arrears, but rather her signature was forged. She further denied ever acknowledging that the $50,000 belonged to Mother Smith or that she agreed to return the money.
 

      The Stipulation did have a signature on it, which Mr. Smith claimed to be that of Ms. Jones, and was, in fact, notarized. (Ms. Jones later claimed she signed a blank notarial form). Based on the Stipulation, the court entered an order authorizing the return of the $50,000 to Mr. Smith.

       When Ms. Jones refused to comply with the court order and return the funds, claiming her signature was forged, Mr. Smith and his mother, Mother Smith, sued Ms. Jones for the return of the money.

       So here they were. . . at my offices for mediation. A father and grandmother seeking to recover $50,000 that the father owed in back child support,  because the grandmother had sent it to her son (the father) to use for remodeling some commercial real estate. Despite the fact that the mother – Ms. Jones – claimed she had used the money to pay the mortgage (to keep a roof over the children’s heads) and other expenses for the kids, plaintiffs still wanted the money returned.
 

      Throughout the mediation, Ms. Jones – representing herself – insisted that her signature was forged and that she had never agreed to return the money. She further insisted that she had signed the notarial form in blank. Nonetheless, to avoid the  trauma of trial, she agreed to take less in child support each month so that Mr. Smith could pay the difference to his mother – Mother Smith – to pay back the $50,000 over time.
 

      At the very last moment, Mother Smith refused to sign the settlement agreement: she wanted more money and sooner. So, after a full day of mediation, the case did not settle.

       I did not hear anything more about this matter until two weeks before trial. The plaintiffs’ attorney called to tell me that he had convinced Mother Smith to accept the original settlement. He asked if I would inquire of Ms. Jones whether she would agree.
 

      Over the next two weeks, the phone calls went back and forth. Initially, Ms. Jones would not agree, but then as it drew closer to trial, she agreed, but with new terms. Finally, on the day before the trial was to start, Ms. Jones agreed to the original deal. I  advised plaintiffs’ attorney of this so that he  could formalize the agreement by putting it in writing and fax it to Ms. Jones for her signature that afternoon.

      I assumed the case had settled.

      My assumption was wrong. Around mid-morning on the next day, I received a telephone call from plaintiffs’ attorney. Ms. Jones never signed the agreement but instead showed up in court. She refused to settle, claiming her signature had been forged. The plaintiffs’ attorney thinking the case had settled, had released his witnesses from their subpoenas to appear at trial to testify and had otherwise not prepared for trial. When the court heard that the case had, in fact, not settled, it ordered the parties back that afternoon to begin trial. The plaintiffs’ attorney called me to see if I could assist in some way to settle the case. I was not successful. Ms. Jones did not want to settle but wanted to take her chances at trial. She still insisted that her signature had been forged. So, trial started that afternoon.

       The next day I telephoned plaintiffs’ counsel to learn the outcome. I was told that once under cross-examination, and  sworn to tell the truth, Ms. Jones admitted that she had, indeed, signed the Stipulation – it was not a forgery – and that she had, indeed, acknowledged to both plaintiffs that the money belonged to Mother Smith  and that she would return it.
 

      Then an even stranger thing happened. The plaintiffs’ attorney told me that based on this admission, he was about to move the court for a judgment  against Ms. Jones and in favor of his client Mr. Smith  when his client Mr. Smith stopped him and asked to confer  privately with him. Mr. Smith – about to obtain a judgment for $50,000 against Ms. Jones – wanted to renew the settlement proposal to Ms. Jones (that is, she simply pay less child support every month so that he could  pay the difference to his mother, Mother Smith). The attorney, although quite taken aback by his client’s instructions, offered the settlement to Ms. Jones and this time, she accepted, on the record in open court. Mr. Smith’s rational: “she is still the mother of my kids.”

       What a strange ending! During the mediation, Ms. Jones had the plaintiffs’ attorney convinced that her signature on the stipulation was a forgery. From the facts, it appeared to Ms. Jones that the plaintiffs were cold, heartless and selfish for wanting the money back that was owed and in fact was used to take care of the kids. But, in the end, it was the plaintiff  Mr. Smith who had the “heart” and the defendant Ms. Jones who was making it all up for reasons known only to her.

       Credibility is a hard thing to judge. You don’t always get it “right”.  Trials can be dangerous; that is why it is always better to settle. 

       . . . Just something to think about.

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       In late May 2009, I flew back to my childhood home to help my siblings move our mother into an assisted living facility. As she had been living in the family home for close to sixty years, it was the move from *!!##*##!!*,  to say the least. (See, The Greatest Generation.)
 

      Because our mother was so ornery about the move due to her inability to comprehend her situation (thanks to severe dementia), it was suggested that my siblings and I petition the court to become her legal co-guardians, and thus have her declared legally incompetent.
 

      We did so and at the hearing, the only issue about which the judge expressed concern was whether the three of us (my siblings and I) got along well enough that we would not reach an impasse or come to blows in making decisions about our mother’s care and well being. We assured the court that this would not be an issue. Accepting our responses ( as we had all been sworn to tell the truth), the court granted our petition. Each of us became a legal co-guardian of our mother.
 

      Since that day in June, I have not thought much about the judge’s concern . . .until this past week. I had a mediation involving a partition of real estate. A mother had left real property with a large home on it to her children. The children could not agree who should contribute how much to pay the mortgage and other expenses of the property. One of the children, plaintiff, claimed that the others were not contributing at all to these monthly expenses such that she was paying for everything. Due to her limited income, she could not continue to do this, indefinitely. (The situation was so bad that although the siblings were living in the same house, they were not  even speaking to each other). To prevent a foreclosure from occurring at some point in the future, thereby ruining her credit, the plaintiff sibling filed a petition requesting partition of the real property which, once granted, would lead to a forced sale of the property.
 

      So, the court set the matter for trial in late 2009 and sent the matter for mediation.  In reviewing the briefs submitted for the mediation, I quickly realized that starting with separate sessions was the proper strategy: to put the siblings in the same room initially would only lead to fireworks, an explosion of tempers and one or more of them storming out of the mediation.
 

      I met and spoke first with plaintiff and her counsel and then met with defendants and their counsel. My goal was to provide the dose of reality that if they did not stop squabbling and bickering, the house would be sold out from underneath them, and due to the downturn in the real estate market, they would end up with zero. In fact, they would be lucky because thanks to the wisdom of the California legislature during the last horrendous economic downturn (aka The Great Depression), they would not have to pay any deficiency or shortfall if the sale of the real property brought in less than what was owed on the mortgage.
 

      Slowly, I made some headway, to the point where the parties agreed in principle to sit down each month at the kitchen table in the home and go through the bills and jointly pay them. To see if this could, indeed, become a reality, since at present they were not even speaking to each other, and with everyone’s consent (their lawyers included), I held a joint session to work out the details of their plan to work together every month to make sure all of the bills were paid.
 

      Needless to say, it was a very stormy session. Each sibling had to get the anger and frustration out and off her chest. The old wounds did not heal immediately despite the apologies. When one sibling suggested a provision, the others jumped all over her, ascribing evil motives and bringing up alleged past wrongdoings, and the squabbling would begin again for a few minutes until I  “suggested” a truce.
 

      More than once, both I and their attorneys had to remind them that if they were unwilling to cooperate and work together, the real property would be sold, courtesy of a court order, and they would end up with nothing. . .  absolutely  nothing, and that this would occur before year’s end.
 

      Finally, what I and their attorneys had been telling them for more than a couple of hours, sunk in. They saw the “light” and realized they had to work together for their mutual benefit or else lose everything. They were at the tipping point, and they now realized it. (Nash’s equilibrium was at work: it became more beneficial to work together than independently towards the same goal.) They finally saw the “big picture” and stopped getting lost in the forest for the trees.      
 

      After an hour or so more, the details of an agreement were all worked out and they left with a rocky truce and sort of as a “family” again.
 

      But, watching them together, squabbling, gave me a whole  new insight into the judge’s concerns about whether my siblings and I got along well enough that we would not lose sight of the Big Picture: taking care of our mother.
 

      The lesson I learned watching these folks: Do not let minor issues distract you from focusing on your goal. There can be an awful lot of trees in a forest: don’t get lost in them.
 

     . . . Just something to think about.

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        Last week, I mediated a very contentious dispute that was fueled by a misassumption. Only late in the mediation did the parties realize the existence of the misassumption. In the words of our President, it became a “teachable moment.” The teaching: never assume.

      The dispute was simple. A homeowner suffered a fire loss and so made a claim to her insurance company. Eventually, the claim was settled and the insurer issued two checks, payable jointly to the homeowner and her lender or mortgage company. The homeowner allegedly forged the endorsement of the mortgage company and attempted to negotiate both checks. She was able to negotiate one of them but the bank became suspicious and was able to have its depositor, the insurer, request a stop payment on the other. The homeowner then vanished. The mortgage company then requested the insurer to re-issue the second check and send it directly to the mortgage company. The insurer refused, contending it owed a duty to the insured to pay her and was concerned that the insured might reappear and request the payment. Thus, the dispute arose.          
  

      For more than a year, the parties corresponded: the mortgage company insisting that it was entitled to the re-issued check, while the insurer, citing various reasons, claimed it should hold the funds to be given to the insured, if and when she reappeared. Themes of bad faith and entitlement to punitive damages were flying between the parties.
 

      In preparation for the mediation, the insurer’s counsel sent a very thorough, detailed brief containing many exhibits. It was signed by the attorney (I will call her “Esquire, Senior”) who had been handling the matter from the beginning. Counsel for the mortgage company submitted her brief and again it was signed by the attorney (I will call her “Mortgage Attorney”) who had been handling the matter throughout.
 

      The parties then appeared for the mediation session. The Mortgage Attorney and a senior representative of the mortgage company arrived at the mediation. But, on behalf of the insurer, a junior attorney (“Esquire, Junior”) appeared without her client who was appearing by telephone. Immediately, the Mortgage Attorney and her representative became upset: they felt disrespected. They believed that – deep down – the insurer knew it  had no valid reason to not re-issue the checks for the past year or more and so  sent Esquire, Junior to “take the heat” for its “bad faith” tactics and otherwise unprofessional behavior. They believed that Esquire, Senior was “playing dirty” by not showing up  but, instead, took  the “cowardly” road of sending a junior associate to handle what  would be a very contentious and unpleasant mediation.
 

      So, if the mortgage company and its counsel were not livid about this case before, they  certainly became so. They, immediately opined: “Esquire, Senior does not even have the “guts” to show up herself.” However, being polite, they did not raise this directly with Esquire, Junior. Instead, they seethed, silently, and/or vented to the mediator during the separate sessions.
 

      Only, many hours later, as the matter was settling, did Esquire, Junior mention that solely because of a family emergency arising late the prior afternoon, Esquire, Senior could not be there: otherwise, she would have been present to “take the heat” herself. She further mentioned that it was and is not Esquire Senior’s “style” to send an associate to do her “dirty work”.
 

      Upon being told this, a palpable shift in attitude appeared on the faces of the Mortgage Attorney and her representative. They had ascribed evil motives where there were none which had fueled their anger and infected their negotiations. They had assumed, and had done so, erroneously. Had they not done so, perhaps, the mediation would not have been as contentious or taken as long to resolve.

       I have always said that litigation occurs mainly due to a lack of communication or a miscommunication. People assume the wrong things or take a communication the wrong way and sue over it, only to find out years later the error of their thinking. Here, the mediation got off to a bad beginning and lasted longer than it should have because of a misstep and misassumption.
 

      The lesson: never assume, just ask instead.

       . . .Just something to think about.

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        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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