Litigation

New Auto Dealership Case: New Cars, Used Cars and the Consumer Legal Remedies Act

By Bruce Nye

This is a development of potential significance to our automobile dealership clients. The most valuable California statute for the plaintiff in consumer litigation is often the Consumer Legal Remedies Act (CLRA; Civ.Code section 1750 et seq.)  The CLRA lists 23 business practices as "unlawful" (Id., section 1770, subd.(a)), and is intended to "protect consumers against unfair and deceptive business practices."  Subdivision (a)(6) makes it unlawful for a seller to represent goods are new "if they have deteriorated unreasonably or are altered, reconditioned, reclaimed, used or secondhand."  The statute applies to the sale of any consumer goods.

On the other hand, Vehicle Code section 430 defines a "new" vehicle as one "constructed entirely from new parts that has never been the subject of a retail sale, or registered" with a government agency or authority.  And  Vehicle Code section 9990 requires motor vehicle dealers to disclose prior repaired material damage, while section 9991 defines "material"  damage is damage requiring repairs costing more than 3 per cent of the MSRP or $500, whichever is greater.

So what happens when the CLRA and the Vehicle Code collide?  That was the question in Bourgi v. West Covina Motors (September 24, 2008) ___Cal.App.4th___ (Second Dist., Div. Eight, B195738). 

More after the jump.

So, in Bourgi, the Plaintiff bought a Hummer for $69,597.  This was back in the good old days when gasoline in California was running only about $1.80 per gallon. Yep, less than five years ago.  The Hummer had been vandalized by a bunch of Earth Liberation Front demonstrators, then repaired at a cost of about 1.32% of the MSRP of the vehicle.  So, it should have been within the 3% provision of the Vehicle Code, and there should have been no disclosure requirement, right?

Well, maybe.  The trial court denied summary judgment to the defendant, the case went to trial, and the court ordered (a) rescission of the deal;  (b)  $46,972 in down payment and installment payments; (c) prejudgment interest of $8,000;  and (d) $132,000 in attorneys' fees and costs.

The Court of Appeal reversed the judgment on the basis of instructional error, holding that Vehicle Code sections 9990 and 9991 create a true safe harbor from liability under subdivision (a)(6) of the CLRA so long as the vehicle was actually repaired -- i.e., 'the repairs actually restored the car to its pre-damaged condition" and the "replacement parts and equipment used were original manufacturer's."  Because these were factual issues, the trial court correctly denied summary judgment for the dealer, and the case would have to go back for another trial on these issues of fact, with correct instructions.

So, while this is a win for the dealer (and for the California New Car Dealers Association, which filed an amicus brief), I have to wonder how big a win it will really be in real life.  In real life, we can expect that the plaintiff will always have an expert ready to say that the repairs were inadequate and failed to restore the vehicle to its pre-accident condition.  So at a minimum, these cases will always be horse races.

Full post as published by CalBizLit on September 25, 2008 (boomark / email).