470 P.3d 56
Cal.2020Background
- Plaintiff Allen Kirzhner leased a new Mercedes in 2012 and alleged multiple warranty defects that Mercedes could not repair after a reasonable number of attempts.
- Kirzhner accepted a Code of Civil Procedure § 998 offer from Mercedes under which Mercedes agreed to provide either replacement or restitution; the precise restitution amount (including collateral charges and incidental damages) was reserved for court determination.
- The trial court awarded restitution but excluded post‑initial registration renewal fees and a 2015 nonoperation fee (totaling $680); the Court of Appeal affirmed.
- The Supreme Court reviewed statutory interpretation of the Song–Beverly Consumer Warranty Act (Civ. Code § 1790 et seq.), focusing on whether registration renewal and nonoperation fees are recoverable as (1) collateral charges under § 1793.2(d)(2)(B) or (2) incidental damages under § 1794 (incorporating UCC provisions).
- The Court held initial registration fees paid at purchase are recoverable as collateral charges, but subsequent renewal and nonoperation fees are not collateral charges.
- The Court also held those later fees may be recoverable as incidental damages if they were incurred as a result of the manufacturer's failure to promptly provide restitution or replacement; because causation wasn’t adjudicated, the case was remanded for further proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Are registration renewal and nonoperation fees recoverable as collateral charges under § 1793.2(d)(2)(B)? | Renewal/nonoperation fees are part of the "actual price paid or payable" and thus recoverable (analogize to finance charges). | Only charges collateral to the purchase price (e.g., initial registration, taxes, finance charges) are recoverable; later renewal fees are not part of the purchase price. | Not recoverable as collateral charges; only the initial registration fee paid at purchase is a collateral charge. |
| Are renewal/nonoperation fees recoverable as incidental damages under § 1794 (UCC § 2711/2715)? | Fees are recoverable as incidental damages since they are expenses incurred because of the defective vehicle and the manufacturer's conduct. | Such fees are ordinary ownership costs and not incidental damages caused by the breach. | May be recoverable as incidental damages, but only those fees incurred after the manufacturer's duty to promptly provide restitution/replacement arose and only if causation (but‑for the delay) is proven. |
| Can a manufacturer’s failure to promptly provide restitution/replacement under § 1793.2(d)(2) serve as a basis for incidental damages? | Yes—delay in repurchase/replacement causes costs and can support incidental damages. | Alleged promptness duty is only a basis for civil penalties when willful, not for damages. | Yes; § 1794 permits damages for failures to comply with Act’s obligations (both negligent and willful), so delay can support incidental damages (civil penalties are separate). |
| Does acceptance of a § 998 offer that reserves collateral/incidental damages preclude Plaintiff from proving causation for incidental damages? | No; acceptance of § 998 that promises to pay incidental damages preserves the dispute over the amount and causation. | The § 998 settlement is not an admission of liability and should bar later claims about causation. | The § 998 offer does not bar proof of causation; the offer concedes liability for incidental damages generally but leaves the amount and causal basis for court determination. |
Key Cases Cited
- Mitchell v. Blue Bird Body Co., 80 Cal.App.4th 32 (Cal. Ct. App. 2000) (construed "actual price paid or payable" to include finance charges incurred in financing purchase)
- Jiagbogu v. Mercedes‑Benz USA, 118 Cal.App.4th 1235 (Cal. Ct. App. 2004) (discussed differences in wording between replacement and restitution remedies under Song–Beverly)
- Kwan v. Mercedes‑Benz of N. Am., 23 Cal.App.4th 174 (Cal. Ct. App. 1994) (Song–Beverly permits damages for negligent/nonwillful statutory violations, distinct from civil penalties for willful misconduct)
- Lanners v. Whitney, 428 P.2d 398 (Or. 1967) (post‑revocation preservation and storage costs held recoverable as incidental damages)
- Delhomme Indus., Inc. v. Houston Beechcraft, Inc., 735 F.2d 177 (5th Cir. 1984) (expense not recoverable as incidental damage when buyer would have incurred it even if goods were nondefective)