It’s nice once in awhile when a court understands how the real world works. It’s also nice when a court holds a statute means what it says. The Court of Appeal recently did both those things in Benson v. Southern California Auto Sales, Inc. (August 27, 2015) ___ Cal.App.4th ___ (Fourth Appellate Dist. G050484). This was a case involving California’s Consumer Legal Remedies Act, Civil Code Section 1750 and following, (often known as the “CLRA”).
First, some background: Section 1790 of the CLRA declares some 23 practices in the sale of goods or services to be “unfair methods of competition” and “unfair or deceptive acts or practices.” The itemized proscribed practices are quite broad, including “Passing off goods or services as those of another,” “Representing that goods or services are of a particular standard, quality, or grade, or that goods are of a particular style or model, if they are of another,” or “Inserting an unconscionable provision in the contract.” The 23 practices are sufficiently broad that consumer plaintiff attorneys can often find one that matches just about anything their clients are unhappy about.
More after the jump.
The CLRA allows for injunctive relief, compensatory damages, punitive damages and class certification to a would-be class representative who can show:
(1) It is impracticable to bring all members of the class before the court; (2) The questions of law or fact common to the class are substantially similar and predominate over the questions affecting the individual members;(3) The claims or defenses of the representative plaintiffs are typical of the claims or defenses of the class; [and] (4) The representative plaintiffs will fairly and adequately protect the interests of the class.
These are similar but not identical to the Federal Rules of Civil Procedure, Rule 23 criteria.
California has other consumer statutes as well, including the Automobile Sales Finance Act, The Song-Beverly Consumer Warranty Act, Song Beverly Credit Card Act, Unfair Competition Law, Unfair Advertising Law and others.
But the CLRA has a provision that none of the other statutes have: a requirement (in Civil Code section 1782) that the customer give the company 30 days to try and fix the problem before he can bring suit for damages:
(a) Thirty days or more prior to the commencement of an action for damages pursuant to this title, the consumer shall do the following: (1) Notify the person alleged to have employed or committed methods, acts, or practices declared unlawful by Section 1770 of the particular alleged violations of Section 1770. (2) Demand that the person correct, repair, replace, or otherwise rectify the goods or services alleged to be in violation of Section 1770. The notice shall be in writing and shall be sent by certified or registered mail, return receipt requested, to the place where the transaction occurred or to the person's principal place of business within California.
And section 1784 provides:
No award of damages may be given in any action based on a method, act, or practice declared to be unlawful by Section 1770 if the person alleged to have employed or committed such method, act, or practice (a) proves that such violation was not intentional and resulted from a bona fide error notwithstanding the use of reasonable procedures adopted to avoid any such error and (b) makes an appropriate correction, repair or replacement or other remedy of the goods and services according to the provisions of subdivisions (b) and (c) of Section 1782.
While the CLRA has been around for decades, there has never been any meaningful appellate authority dealing with this “safe harbor defense” . . . until last month. Then here is what happened in the Benson case:
Benson bought a used car from the defendant auto dealer, then learned the car had a damaged frame, the contract price was higher than the advertised price and the contract failed to disclose his deferred down payment, a violation of the Automobile Sales Finance Act. More than a year after he bought the car, Plaintiff’s counsel sent the dealership two letters. In the first, specifically identified as a CLRA pre-filing letter, he demanded rescission, return of all payments, a $5,000 penalty and incidental damages in an unspecified amount. In the second letter, he proposed to settle for “damages” as per the other letter, including attorneys’ fees and costs, all court costs, $38,500, plus $2,850 and return of the car.
Benson filed the complaint before the thirty days had run. But within the thirty days, the dealer offered the following: rescission of the contract, return of the vehicle, refund of all payments, satisfaction of the debt to the lender, $2,500 for “incidental and attorney fees,” waiver of any claim for mileage and execution of a mutual settlement and release agreement. In other words, Benson could walk away from his obligation, having had free use of the car for more than a year.
Benson countered, the case didn’t settle at that point, and 18 months later it was on the verge of trial when the parties did settle: they stipulated to a judgment for return of the car, payment of $34,500, waiver of the loan balance and release by Benson of the defense. The judgment also recited that Benson could make a motion for attorneys fees and costs, while the dealer could contest the fee motion “on any grounds available,” including a contention that the dealer was the prevailing party n light of the CLRA pre-litigation offer.
Benson filed a fee motion seeking a mere $182,273 in fees and costs. The trial court denied the motion, ruling that because the dealer had offered “an appropriate correction, repair, replacement or other remedy,” Benson was not entitled to fees and costs. While Benson argued the offer was not “appropriate” because of its requirement that Benson release the dealer from all of its causes of action, not just the CLRA, the Court responded that his claims were “inextricably intertwined with the CLRA claim and based on the same conduct.”
And the Court of Appeal affirmed:
- Dealer “in effect offered to undo the entire transaction and to pay Benson (really his lawyers) a reasonable sum for assembling a couple of largely boilerplate letters.”
- “Filing a complaint before the response period expired was Benson’s (really his lawyers’) decision.” They could “easily have waited until after . . . the correction offer. The fact that the lawsuit was filed before . . .strongly suggests that the correction offer . . . would have no effect on Benson’s (really his lawyers’) plan to sue.”
- And “As for giving up non-CLRA claims as part of the deal, which he argues renders the correction offer inappropriate, Benson has not shown these claims added any value to the claim that prompted the CLRA notice and that evoked the correction offer. ‘Regardless of the nature or number of legal theories advanced by the plaintiff, he is not entitled to more than a single recovery for each distinct item of compensable damage supported by the evidence.’ (Tavaglione v. Billings (1993) 4 Cal.4th 1150, 1158.)”
Finally, it didn’t matter whether he was the prevailing party or not:
We conclude that if a suit for damages cannot be maintained under the CLRA because a merchant offered an appropriate correction in response to a consumer's notice, then a plaintiff cannot collect attorney fees for such a suit.
Among other things, it’s great to see a Court of Appeal once in awhile that understands how the real world works, that this is all attorneys’ fee driven and all driven by the consumers’ attorneys. And it’s good to see the statute actually working the way it was intended.
Photo credit: Heather Phillips. No changes made. Licensed Under Creative Commons.
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