The constantly changing world of consumer litigation

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In 2015, California automobile dealers applauded the holding of the Court of Appeal in Benson v. Southern California Auto Sales, Inc. (2015) 239 Cal.App.4th 1198, concluding attorneys fees and costs are not available to a plaintiff when a dealer made an appropriate and timely correction offer in response to a Consumer Legal Remedies Act demand. Since then, the Courts have been distinguishing the facts of Benson to chip away at its dealer-friendly applications.

Last week, in Valdez v. Seidner-Miller, Inc., 2019 S.O.S. 1461, the Court of Appeal dealt another blow to the effect of Benson. In Valdez, the dealership timely responded to a pre-litigation CLRA demand by offering to rescind the sales contract, provide restitution for the down payment and monthly payments, pay off the outstanding loan balance, and pay the requested attorney’s fees and costs. The settlement agreement prepared by the dealer required that the vehicle be returned in the same condition it was in at the time of the sale, normal wear and tear excepted, and contained a release of all known and unknown claims along with a covenant not to sue. The parties couldn’t agree on the terms of the settlement agreement and suit was filed for violations of the CLRA, Civil Code § 1632, and the UCL, and for fraud.

The dealership filed a motion for summary judgment based upon the Benson decision. The trial court ruled in favor of the dealership, finding that a timely and appropriate offer to correct the alleged CLRA violation was made, and also dismissed the non-CLRA causes of action since the conduct was “inextricably intertwined” with that of the CLRA claim.

The primary issues on appeal focused on whether the correction offer by the dealer was appropriate under the CLRA, and whether the correction offer barred a lawsuit by the consumer as to the other causes of action. The Court of Appeal reversed the ruling of the trial court. In its decision, the Court held that the settlement offer limiting plaintiff’s right to sue under other legal theories and requiring the vehicle be surrendered subject to the dealer’s subjective approval of its condition did not constitute an “appropriate correction” under the CLRA. The Court went on to state that an appropriate correction in response to the CLRA demand would be limited solely to a claim for damages under the CLRA; injunctive relief and other causes of action are not barred. “Seidner could have made an appropriate correction offer had it offered simply to refund Valdez’s down payment and monthly payments, pay off the outstanding loan balance, and pay attorney’s fees and costs. Although Valdez would have still been able to pursue his other claims, nothing would have prevented Seidner from attempting to negotiate a separate settlement of those claims.”

This decision means that dealers choosing to respond to a pre-litigation CLRA demand with a buyback offer may still face the uncertainty of a lawsuit for injunctive relief, civil penalties, or punitive damages. Careful consideration of an appropriate correction should evaluate whether other legal theories may survive a CLRA settlement and whether a separate settlement may be necessary.