Consumer Warranties in California are regulated by the Song-Beverly Consumer Warranty Act, appearing at California Civil Code section 1790 and following. The act contains a very complex, very comprehensive set of rules. While we most frequently see it in cases involving new cars, the law applies to most new consumer goods. It is enforceable against manufacturers and retailers, although the retailers usually have upstream rights against the manufacturer. There aren’t an enormous number of statutory defenses, and it was both good and fair to see the Court of Appeal expand one of them today. And in an off-hand observation, the court may have done more than that.
More after the jump.
The act provides that if a product fails to conform to express warranties, the manufacturer or its in-state delegate must either (a) repair the goods to conform to the warranties within a reasonable number of attempts; or (b) replace the products or reimburse the buyer in an amount equal to the purchase price, less the amount attributable to use by the consumer before the nonconformity was discovered.
For new vehicles, the rules are much stricter. Among other things, it is presumed that a reasonable number of attempts has been made if the nonconformity is one that substantially impairs the use, value or safety of the vehicle, and within the first 18 months of 18,000 miles, (a) the same nonconformity has been the subject of at least four repair attempts, and the consumer has notified the manufacturer directly; or (b) the vehicle has been out of service for repairs for a cumulative total of 30 days or more; or (c) if the nonconformity is likely to cause death or serious bodily harm, there have been two tries at a repair, and the buyer has directly notified the manufacturer.
If the vehicle doesn’t get repaired, the manufacturer has to take back the old vehicle, give the consumer a new one, and pay all the resulting sales tax, registration, “plus any incidental fees.” Or, if the consumer wants, he can simply unwind the purchase, and the manufacturer has to pay back everything the consumer has paid or incurred in connection with the vehicle, other than after-market products.
But wait – there’s more! If the manufacturer doesn’t do all of the things it is supposed to – and this isn’t just cars, this is all consumer products – the consumer can get all compensatory damages, plus, if the manufacture acted “willfully,” an additional penalty twice the actual damages. Also, of course, attorneys’ fees and costs. It is not uncommon to have the fee claim far exceed the amount of the actual damages.
When we defend one of these cases, and it looks as though the consumer is likely to win, we try to use something called Code of Civil Procedure section 998, California's "offer of judgment" statute. We immediately determine what the consumer is likely to recover, then make what’s called an “offer of judgment,” offering him or her all of the likely damages, plus costs and attorneys’ fees up to that date. Of course, we don’t know what those fees are, so we tell the consumer’s lawyer that we’ll let the court decide. The idea is this: we’ve offered the consumer everything he or she is entitled to, including all the attorneys’ fees up to this point (and at the beginning of the case, fees don't usually amount to much). If the consumer and his attorney turn down the offer (and they almost always do) our position is that even if they win at trial, if they don’t get more in damages than we’ve offered, they have no right to attorneys’ fees. They shouldn’t be able to turn down a fair settlement offer just because the lawyer wants to spend the next year litigating and generating fees.
Although we’ve been advising clients for some time that this should work, there has never been any California authority directly on point. Well, now there is: Today, the Court of Appeal decided in Duale v. Mercedes-Benz USA LLC that if a Song-Beverly Consumer Warranty Act case, if the defendant company offers the consumer damages plus fees to be decided by the court, the consumer says no and doesn't get a better result at trial, the consumer attorney gets no fees:
“. . .no articulated public policy is served by allowing [the consumer] to maintain a lawsuit that loses its economic viability by virtue of the seller’s willingness to settle on terms better than those a jury will award.”
Here here!
But here's something that may even be bigger: In dictum in footnote 4 (for you non-lawyers, "dictum" is an observation made by the court that isn't necessary for the court's decision), the court suggests that if it had asked for them, the defendant might have been able to recover its attorneys fees against the plaintiff. I don't know how this dictum will fare in the future, but we'll be workin' it when we use offers of judgment in consumer warranty cases.
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