LISA NIEDERMEIER,
S266034
IN THE SUPREME COURT OF CALIFORNIA
March 4, 2024
Second Appellate District, Division One B293960; Los Angeles County Superior Court BC638010
Justice Evans authored the opinion of the Court, in which Chief Justice Guerrero and Justices Corrigan, Liu, Groban, and Jenkins concurred.
Justice Kruger filed a concurring opinion, in which Justices Groban and Jenkins concurred.
NIEDERMEIER v. FCA US LLC
S266034
Opinion of the Court by Evans, J.
California‘s lemon law protects consumers who purchase defective vehicles or other goods. The lemon law, officially known as the Song-Beverly Consumer Warranty Act (
The questions before us are whether, in an action under
We conclude that in an action pursuant to
I. FACTUAL AND PROCEDURAL BACKGROUND
In January 2011, Lisa Niedermeier purchased a new Jeep Wrangler (hereafter the vehicle) from FCA US LLC (hereafter FCA) for approximately $40,000. Almost immediately, and throughout the warranty period, Niedermeier experienced a variety of problems with the vehicle‘s transmission, engine, and exhaust. These problems caused the vehicle to jerk, make rattling and grinding noises, and emit noxious gases. They caused the floorboard of the vehicle to heat up and impaired the vehicle‘s braking, acceleration, and turning. Niedermeier presented the vehicle to FCA‘s authorized repair facilities a total of 16 times over four years, but the facilities were unable to remedy the defects. Niedermeier‘s vehicle was out of commission for 75 days during the failed repair attempts.
In April 2015, Niedermeier asked FCA to buy back the vehicle, but FCA declined. Niedermeier renewed her request in early June 2015, and made a
In October 2016, Niedermeier filed a lawsuit against FCA asserting causes of action for breach of express warranty under the Act, breach of implied warranty under the Act, fraudulent inducement and concealment, and negligent repair. A jury found in Niedermeier‘s favor on her claims for breach of express warranty and breach of implied warranty and awarded her $98,961.08. The jury found against Niedermeier on her claim for fraudulent inducement/concealment. The jury also found that FCA willfully violated the Act. The damages award included: the purchase price of the vehicle, including charges for transportation and manufacturer-installed options, finance charges, sales tax, license fees, and other official fees pursuant to
Following the verdict, FCA filed a postjudgment motion requesting a $19,000 offset from the awarded damages (the amount of the trade-in credit Niedermeier received on the Yukon‘s purchase price), to be imposed before the civil penalty was assessed. This would have resulted in a total award of $51,461.07. The trial court denied FCA‘s motion. It reasoned that reducing the jury‘s award by the trade-in amount would be inconsistent with the pro-consumer policy supporting the Act. The court concluded an offset for the trade-in “would reward defendant for its delay in replacing the car or refunding plaintiff‘s money when defendant had complete control over the length of that delay, and an affirmative statutory duty to replace or refund promptly. . . . ‘No one can take advantage of his own wrong.’ (
FCA appealed. It made three arguments before the Court of Appeal: (1) by obtaining a full refund under
The Court of Appeal agreed with FCA‘s first and third arguments and reversed. It declined to consider FCA‘s second argument. The Court of Appeal held, as a matter of first impression, that the Act‘s restitution remedy — “set at ‘an amount equal to the actual price paid or payable’ for the vehicle” — does not include any amount a plaintiff receives from trading in the defective vehicle. (Niedermeier, supra, 56 Cal.App.5th at p. 1061.) The Court of Appeal reasoned that the Legislature‘s use of the word “restitution” in
The Court of Appeal also opined that allowing the full restitution refund under
We granted review. Since that time, another division of the Second Appellate District has disagreed with Niedermeier and held that a manufacturer is not entitled to a reduction in restitution damages under
More recently, the Third Appellate District also disagreed with Niedermeier. It agreed with Figueroa that a buyer‘s restitution under the Act does not exclude the credit a buyer receives when trading in a defective vehicle. (Williams v. FCA US LLC (2023) 88 Cal.App.5th 765, 772
II. DISCUSSION
We are first asked to determine whether a consumer‘s restitution damages award, defined in
On the other hand, “‘[i]f the statutory language permits more than one reasonable interpretation, courts may consider other aids, such as the statute‘s purpose, legislative history, and public policy.‘” (Kirzhner, supra, 9 Cal.5th at p. 972.) When more than one statutory construction is arguably possible, our policy is “to favor the construction that leads to the more reasonable result.” [Citation.] This policy derives largely from the presumption that the Legislature intends reasonable results consistent with the apparent purpose of the legislation. [Citation.] Thus, our task is to select the construction that comports most closely with the Legislature‘s apparent intent, with a view to promoting rather than defeating the statutes’ general purpose, and to avoid a construction that would lead to unreasonable, impractical, or arbitrary results.” (Imperial Merchant Services, Inc. v. Hunt (2009) 47 Cal.4th 381, 388.) We also keep in mind that the Act is “manifestly a remedial measure, intended for the protection of the consumer; it should be given a construction calculated to bring its benefits into action.‘” (Murillo v. Fleetwood Enterprises, Inc. (1998) 17 Cal.4th 985, 990 (Murillo); see also People ex rel. Lungren v. Superior Court (1996) 14 Cal.4th 294, 313 [“civil statutes for the protection of the
A. The Plain Text of Section 1794 and the Statutory Restitution Remedy Do Not Support an Offset for a Trade-in Credit or Sale Proceeds
Resolution of the first issue before us requires us to interpret several interrelated provisions of the Act. First,
In turn,
1. The Statutory Restitution Remedy Does Not Allow a Restitution Award to Be Reduced by a Trade-in Credit or Sale Proceeds
The parties disagree how the restitution remedy in
We agree with Niedermeier and conclude the plain language of the Act does not support FCA‘s construction of
Nowhere does
As noted above, the statute excludes nonmanufacturer-installed options from the restitution calculation (
Moreover, trade-in or sale proceeds obtained years after the purchase of a defective vehicle are not part of “the actual price paid or payable”
We rejected Kirzhner‘s argument that the phrase “actual price paid or payable” indicated a legislative intent to ensure the manufacturer paid the consumer what the consumer actually paid as of the time of the repurchase rather than at the time of contracting. We explained, “[t]he word ‘price’ means ‘[t]he cost at which something is obtained’ or ‘[t]he consideration given for the purchase of a thing.‘” (Kirzhner, supra, 9 Cal.5th at pp. 972-973, citing Black‘s Law Dict. (6th ed. 1990) p. 1188, col. 2); see also Black‘s Law Dict. (11th ed. 2019) [price means “[t]he amount of money or other consideration asked for or given in exchange for something else; the cost at which something is bought or sold“].) We noted the word “payable” in
The Court of Appeal here acknowledged
We find the Court of Appeal‘s reliance on Mitchell to be misplaced. In Mitchell, the court considered whether the “actual price paid or payable” in
In interpreting “restitution,” the Mitchell court relied on Alder v. Drudis (1947) 30 Cal.2d 372, 384, in which we observed, “The purpose of restitution as a remedy for breach is the restoration of the status quo ante as far as is practicable, and in the absence of qualifying circumstances, the plaintiff must return any consideration he has received in order to obtain specific restitution.” (Italics omitted.) Alder, however, predates the Act‘s enactment by more than 20 years, did not concern breach of a product warranty, and considers only common law restitution and rules of equity. The plain language of
2. Section 1794‘s Reference to the California Uniform Commercial Code Does Not Provide a Basis to Reduce Restitution Damages by a Trade-in Credit or Sale Proceeds
FCA next contends that Niedermeier‘s damages must be reduced by the amount she received when she traded in the defective vehicle since
We conclude that the Act‘s restitution and replacement remedies are distinct from the available California Uniform Commercial Code remedies referenced in
“[A]s the conjunctive language in Civil Code section 1794 indicates, the statute itself provides an additional measure of damages beyond replacement or reimbursement (
FCA‘s statutory interpretation not only disregards the plain language of
The language of the statutory restitution remedy itself further supports our conclusion that it is distinct from the California Uniform Commercial Code remedies identified in
The California Uniform Commercial Code remedies referenced in
FCA‘s reliance on Kwan, Bishop, and Kirzhner is misplaced. These cases address whether certain damages not explicitly enumerated in the Act were recoverable under it. (Kwan, supra, 23 Cal.App.4th at p. 192 [emotional distress damages not recoverable for violations of the Act]; Bishop, supra, 44 Cal.App.4th at pp. 757-758 [emotional distress and loss of use damages for time period plaintiff had no replacement vehicle after defective vehicle was destroyed not recoverable under Act]; Kirzhner, supra, 9 Cal.5th at p. 981 [registration renewal and nonoperation fees incurred after purchase of vehicle not recoverable under the Act as collateral charges, but may be recoverable as incidental damages].) For various reasons, these cases found it appropriate to turn to the California Uniform Commercial Code provisions referenced in
FCA argues a few out-of-state cases support a conclusion that the relevant provisions of the California Uniform Commercial Code should reduce the statutory restitution remedy.6 None of these cases, however, address the issue before us: whether alternate California Uniform Commercial Code remedies should reduce damages calculated pursuant to the express statutory restitution formula contained in California‘s lemon law. The cases cited by FCA merely found that damages for certain breaches of warranty were to be determined under the relevant state equivalents of the model Uniform Commercial Code. In California, as discussed above, the Uniform Commercial Code provides additional damages affected consumers can elect to pursue under
In sum, we hold that “restitution” has the meaning provided in
B. Offsets for a Trade-in Credit or Sale Proceeds Are Not Consistent with the Legislative History of Sections 1794 and 1793.2, Subdivision (d) or the Purpose of the Act
As discussed above, we conclude that the language of
The Legislature adopted the Act in 1970 to address problems with enforcing consumer warranties for new products, including the problem of manufacturers reaping the advertising benefits of warranties without bearing the costs of promised repairs. (Stats. 1970, ch. 1333, § 1, p. 2478 et seq.) The original restitution remedy provided, “[s]hould the manufacturer be unable to make such return of merchantable goods, he shall either replace the goods or reimburse the buyer in an amount equal to the purchase price paid by the buyer, less that amount directly attributable to use by the buyer prior to discovery of the defect.” (Former
In 1982, the Legislature amended the Act in several ways. It amended
accepted the goods, Sections 2714 and 2715 of the Commercial Code shall apply, and the measure of damages shall include the cost of repairs necessary to make the goods conform.” (Former
After these amendments to the lemon law, however, there were numerous complaints from new car buyers concerning its implementation, including that manufacturers were not paying full restitution or replacement awards and were seeking excessive offsets for rental cars. (See Dept. Consumer Affairs, Enrolled Bill Rep. on Assem. Bill No. 2057 (1987-1988 Reg. Sess.) Sept. 25, 1987, pp. 2-3; see also Assembly 3d reading analysis of Assem. Bill No. 2057 (1987-1988 Reg. Sess.) as amended June 11, 1987, at p. 4; Sen. Com. on Judiciary, Analysis of Assem. Bill No. 2057 (1987-1988 Reg. Sess.) as amended August 17, 1987, p. 3.)
As a result, the Legislature again amended the Act in order to protect consumers. Among other things, the Legislature amended
FCA argues the 1982 version of
FCA also relies on legislative history addressing the 1970 version of
The legislative history reveals little legislative analysis addressing the language of the current statutory restitution remedy, including the meaning of “the actual price paid or payable.” (See also Mitchell, supra, 80 Cal.App.4th at p. 39 [” ‘interpretive commentary’ on the statute‘s replacement or refund remedy is practically nonexistent“].) Nevertheless, we can draw insight from the history of the amendments to
The evolution of the Act also indicates a legislative intent to ensure buyers receive full compensation under the Act, to make it easier for buyers to
C. The Act‘s Labeling and Notification Provisions Do Not Support an Offset to the Statutory Restitution Remedy for a Trade-in Credit or Sale Proceeds
FCA maintains that Niedermeier‘s interpretation of the statutory restitution remedy would undercut the labeling and notification provisions in
In FCA‘s view, no rational owner would return their defective vehicle to the manufacturer if they could instead resell their vehicles to third parties. The Court of Appeal similarly could not “conceive why a buyer would ever return a vehicle to the manufacturer rather than obtain the extra proceeds from a resale or trade. Return of the vehicle to the manufacturer would be the rare exception rather than the rule.” (Ibid.) We disagree.
As FCA concedes,
Neither FCA nor the Court of Appeal provide any basis for their opinion that no rational owner would return their defective vehicle or that returning a defective vehicle would become the rare exception rather than the rule, and we question these assumptions. Niedermeier made three separate requests to return the vehicle after multiple attempts to repair it over four years failed. It was not until FCA repeatedly declined to buy back the vehicle that Niedermeier gave up, purchased a new vehicle, and traded in the defective one. Even if a buyer is entitled to recover the full statutory restitution remedy in an action under
FCA and the Court of Appeal also overlook the fact that a buyer‘s decision to trade in or sell a vehicle is made in real time. It would be quite risky for a buyer to choose to trade in or sell a defective vehicle to a third party before a manufacturer is able to comply with its statutory obligation to promptly repurchase or replace the vehicle. The Act requires a buyer to deliver the defective vehicle to the manufacturer‘s service and repair facility for the purpose of allowing the manufacturer a reasonable number of repair attempts. (
pp. 969, 971, 986; Krotin, supra, at pp. 302-303.) In this way, the Act itself curbs the concern that buyers will not return defective vehicles to the manufacturer for service and labeling.
FCA also argues the labeling and notification provisions, “contemplate[] that, in exchange [for the full restitution remedy], the buyer will return the car to the manufacturer. This is made clear by Section 1793.23, which states in four different places that a defective vehicle is ‘accepted for restitution’ by the manufacturer.” FCA instructs us to assume, however, that consumers who cannot return a vehicle are still entitled to statutory restitution under
The “accepted for restitution” language in the Act, however, is only present in the labeling and notification provisions. (
D. Additional Public Policy Considerations Support Not Reducing a Restitution Award by a Trade-in Credit or Sale Proceeds
There are a number of additional public policy reasons to conclude the statutory restitution remedy does not permit a reduction for a trade-in credit or sale proceeds.
First, the Court of Appeal‘s (and FCA‘s) interpretation would incentivize manufacturers to drag out the process of offering restitution in hopes of paying reduced damages. Specifically, manufacturers would be encouraged to wait for consumers to become fed up with delays and give up and sell or trade in their defective (if not dangerous) vehicles, at which point the manufacturers could request that the consumers’ damages be reduced accordingly. If the statutory restitution remedy can be reduced by a trade-in credit or sale proceeds, manufacturers will be relieved of the obligation to pay the full restitution amount required by statute. Such a rule would encourage “the manufacturer‘s unforthright approach and stonewalling of fundamental warranty problems.” (Krotin, supra, 38 Cal.App.4th at p. 303.)10
Similarly, allowing a reduction to the statutory restitution remedy in actions pursuant to
88 Cal.App.5th at p. 785 [manufacturer‘s interpretation “would, in essence, reward manufacturer for declining or not offering to reacquire the vehicle“].) If a manufacturer fails to comply with the Act, a buyer may spend months or years pursuing futile repair attempts and years in litigation pursuing remedies. Any delay in paying restitution increases the likelihood that a buyer will be forced to trade in or resell the defective vehicle or relinquish the vehicle to a lienholder, relieving manufacturers of the obligation to label the vehicles lemons.
FCA contends that reducing the restitution remedy by the amount of a trade-in credit or sale will not encourage delay. According to FCA, there is no economic difference from the manufacturer‘s perspective between a scenario in which a buyer returns the car to the manufacturer and the manufacturer is liable for the purchase price of the vehicle, and a scenario in which a buyer sells or trades in a car to a third party and the manufacturer pays the buyer reduced damages. This argument is not well taken. FCA ignores that manufacturers independently benefit from delays that cause buyers to trade in or sell defective vehicles because manufacturers are relieved of the burden of complying with the Act‘s labeling and notification requirements. Not only that, incidental damages cease accruing when buyers trade in or sell defective vehicles, further reducing the amount manufacturers have to pay in damages. FCA‘s interpretation would result in significant incentives for delay. Encouraging manufacturer delays would undermine the prompt restitution obligation imposed on manufacturers under the Act and contravene the Act‘s pro-consumer purpose. “Interpretations that would significantly vitiate a manufacturer‘s incentive to comply with the Act should be avoided.” (Jiagbogu, supra, 118 Cal.App.4th at p. 1244; see also Kwan, supra, 23 Cal.App.4th at p. 184.)
The Court of Appeal was unpersuaded by the argument that a buyer trading in a defective vehicle bears all or part of the cost of the manufacturer‘s delay, and observed that Niedermeier “can recover the full purchase price through a combination of the trade-in and restitution from defendant.” (Niedermeier, supra, 56 Cal.App.5th at p. 1073.) The Court of Appeal fails to account for the fact that buyers are always forced to bear a burden when a manufacturer delays in promptly reimbursing or exchanging a vehicle. These burdens may include considerable stress and time diverted from work, school, family, or leisure activities while attempting to repair or return a defective vehicle. At a minimum, a manufacturer‘s failure to promptly reimburse a buyer imposes a financial burden on the buyer, who must continue to shoulder payments for a defective vehicle and — if the buyer can afford it — pay out of pocket for a new vehicle. This, by itself, is inconsistent with the pro-consumer purpose of
The Court of Appeal‘s interpretation of “actual price paid or payable” as not including trade-in or sale amounts could also compel buyers to choose replacement over restitution. Faced with the choice of a manufacturer delaying payment of restitution on the one hand, and a replacement option that requires a manufacturer to provide an alternate vehicle that is likely already available on the other hand, buyers may ultimately select replacement. This, however, would be in direct contravention of the Act‘s explicit directive that “the buyer shall be free to elect restitution in lieu of replacement, and in no event shall the buyer be required by the manufacturer to accept a replacement vehicle.” (
FCA argues that manufacturers have “ample incentive” to promptly comply with the Act because they are already subject to attorney fee awards and civil penalties for willful violations of the Act. The facts of this case prove otherwise. Niedermeier took the vehicle in for repair a total of 16 times over four years, rendering the vehicle out of commission for 75 days without it ever being repaired. Niedermeier made three separate demands for restitution — which she was not required to do under the Act (see Krotin, supra, 38 Cal.App.4th at pp. 302-303) — but FCA declined to repurchase the vehicle. Attorney fees and penalties were a real possibility in this case, and in fact were imposed on FCA for willfully violating the Act, but FCA still failed to promptly comply with the Act. As Niedermeier points out, “the most defective vehicles... are the vehicles most likely to be traded-in for a safe vehicle, yet those are the ones by which a manufacturer would reap the best benefit for its delay.” To the extent FCA contends that manufacturers already have sufficient incentives to comply with the Act or that buyers will receive windfalls if the statutory restitution remedy is not reduced by the trade-in credit or sale proceeds, these are competing policy concerns that are more appropriately directed to the Legislature. (See Brennon B. v. Superior Court (2022) 13 Cal.5th 662, 696 [“The proper balancing of these competing priorities is ultimately and unquestionably ‘a policy issue that lies within the province of the legislative, rather than the judicial, branch’ “].)
For these reasons, we decline to adopt a rule that reduces a buyer‘s statutory restitution award by a trade-in credit or sale proceeds at least where, as here, a consumer has been forced to trade in or sell the defective vehicle due to the manufacturer‘s failure to comply with the Act. Once restitution is available to a plaintiff as a remedy, the measure of restitution is as described
The concurrence maintains a rule that categorically entitles consumers to obtain the full statutory restitution remedy without a reduction for trade-in or sale proceeds “would raise significant questions of fairness.” (Conc. opn. of Kruger, J., post, at p. 15.)11 To be sure, we do not mean to suggest that
a consumer has the right to sell or trade in a vehicle at any time. Our holding is narrower and applies to the measure of restitution described in
III. DISPOSITION
As we conclude that neither a trade-in credit nor sale proceeds reduce the statutory restitution remedy, at least where a consumer has been forced to trade in or sell a defective vehicle due to the manufacturer‘s failure to comply with the Act, we do not reach the issue of whether the amount a buyer recovers should be assessed before or after calculating penalties. We reverse the judgment of the Court of Appeal.
EVANS, J.
We Concur:
GUERRERO, C. J.
CORRIGAN, J.
LIU, J.
GROBAN, J.
JENKINS, J.
NIEDERMEIER v. FCA US LLC
S266034
Concurring Opinion by Justice Kruger
Car manufacturer FCA US LLC willfully violated its duties under California’s lemon law when it repeatedly refused to accept the return of Lisa Niedermeier’s defective Jeep for replacement or a
FCA’s argument is all but self-refuting, and the court rightly rejects it. The majority opinion holds that under California’s lemon law, a car buyer is entitled to a full refund for a defective vehicle even if the buyer has in the meantime traded it in or sold it to a third party — with the qualification that this rule applies “at least” where, as in this case, the buyer “has been forced” to trade in or sell the defective vehicle because of “the manufacturer’s failure to comply with the [Song-Beverly Consumer Warranty] Act.” (Maj. opn., ante, at p. 3.) I write separately to explain how I understand this holding, including both the rule and the suggestion that the rule may have limits. I also write to explain why, in my view, such limits are important to a full understanding of the lemon law in light of its overarching consumer-protection purposes.
As I read the law, if a car proves defective, the buyer ordinarily must return the car to the manufacturer in order to receive a replacement vehicle or refund. The car manufacturer may then resell the returned car, but first must disclose to prospective buyers that the car has been designated a lemon. This usual order of operations ensures that original buyers are appropriately compensated when their cars cannot be made to conform to their warranties within a reasonable time, while also protecting prospective buyers from inadvertently purchasing vehicles that have a history of serious defects. But all bets are necessarily off if the manufacturer willfully thwarts the buyer’s efforts to return the vehicle for a replacement or refund, which is what happened here. If the car buyer then engages in reasonable self-help by selling the car or trading it in for another vehicle, the manufacturer is not entitled to pocket the proceeds and thereby profit from its willful misconduct.
I.
California’s lemon law, formally known as the Song-Beverly Consumer Warranty Act (the Act),
The dispute in this case centers on the meaning of various provisions of the lemon law addressing what happens when a car manufacturer is unable to make a car conform to its warranty after a reasonable number of attempts. One set of provisions concerns a buyer’s remedies. The first of these provisions,
This process is meant to work without court involvement. But if a manufacturer does not comply with its obligation to promptly repurchase or replace the defective vehicle, the buyer may turn to a second provision of the law,
The law also provides for penalties to punish and deter willful violations. Appellate case law treats the manufacturer’s violation as not willful “if [its] failure to replace or refund was the result of a good faith and reasonable belief the facts imposing the statutory obligation were not present. This might be the case, for example, if the manufacturer reasonably believed the product did conform to the warranty, or a reasonable number of repair attempts had not been made, or the buyer desired further repair rather than replacement or refund.” (Kwan v. Mercedes-Benz of North America, Inc. (1994) 23 Cal.App.4th 174, 185.) If, however, a manufacturer violates the statute without such a good faith and reasonable belief, the judgment may include a civil penalty of up to two times the amount of actual damages. (
Specifically, before the manufacturer resells, leases, or transfers the car, the manufacturer must instruct the Department of Motor Vehicles to “inscribe the ownership certificate with the notation ‘Lemon Law Buyback,’” and “affix a decal to the vehicle” indicating that it has been designated a “‘Lemon Law Buyback.’” (
II.
The threshold question in this case is whether the plain language of the statute forecloses FCA’s argument for calculating Niedermeier’s damages by subtracting the trade-in value of the Jeep from the original purchase price. The plain-language argument goes something like this:
The majority walks through this argument (maj. opn., ante, at pp. 10–23), but it also, in the end, acknowledges that a “potential ambiguity” in the statutory language makes it appropriate to consider legislative history and the purposes and policies underlying the lemon law in arriving at the conclusions the court reaches today (id. at p. 24). I emphatically agree the statute is ambiguous.
Looking at
(1947) 30 Cal.2d 372, 384 [“[t]he purpose of restitution as a remedy for [contract] breach is the restoration of the status quo ante as far as is practicable“].)
But the more fundamental reason, as I see it, relates to the relationship between
Again, recall that
This assumption is most clearly evident in the Act’s labeling and notification provisions governing “Lemon Law Buyback” (
None of this is, or should be, especially controversial. Indeed, Niedermeier’s counsel acknowledged at oral argument that the idea that a car buyer will return the defective vehicle in exchange for replacement or full refund is “embedded” in the statutory framework that describes what is supposed to transpire when a manufacturer cannot conform a vehicle to its warranty, even if the lemon law may not say so in explicit terms. The restitutionary remedy
The problem we confront here raises a set of issues as to which the statute provides no express instruction. What happens if the buyer doesn’t return the vehicle — because, as occurred here, the manufacturer refuses to take the car back — and the buyer then trades it in or sells it to a third party? Is the buyer entitled to a full refund or replacement? The statute offers no clear answers.
To navigate this hazy area of the lemon law, we can look, as the majority says, to the legislative history and, ultimately, to the law’s purposes as they relate to the issue before us. (Maj. opn., ante, at p. 24.) As I understand the majority opinion, the dispositive consideration is an essentially equitable one that focuses on the circumstances of this case and others like it. If Niedermeier did not return the defective Jeep, it was not for lack of trying. It was, rather, because FCA willfully refused to accept the return of the Jeep and promptly pay restitution, as it was statutorily required to do. If the result was that Niedermeier ultimately sold the Jeep in a manner that undercut the labeling and notification requirements, the fault belongs with FCA, which effectively forced Niedermeier into that position. FCA should not then be permitted to profit from its intransigence by subtracting the likely inflated trade-in credit Niedermeier received from the total amount it would otherwise owe Niedermeier in damages. (Maj. opn., ante, at pp. 30–31, 35–38.) This is not a particularly novel concept, nor one unique to the lemon law. It is, rather, essentially a statute-specific application of the well-established equitable principle that “[n]o one can take advantage of his own wrong.” (
Consideration of unjust enrichment principles offers an explanation for the conclusion that a manufacturer obligated to pay lemon law damages may not withhold the amounts it would otherwise save through its willful violation of
The trial court in this case invoked these principles when it rejected FCA’s request for a reduction in damages, expressly citing the tenet that “ ‘[n]o one can take advantage of his own wrong.’ ” And in other cases — also, as it happens, against FCA — courts have rejected similar requests for a reduction in damages with the observation that FCA should not “be compensated for its own willful violation of the law.” (Figueroa v. FCA US, LLC (2022) 84 Cal.App.5th 708, 713; see also Williams v. FCA US LLC (2023) 88 Cal.App.5th 765, 785 [agreeing with Figueroa and declining to interpret the Act to “reward manufacturer” for its willful refusal to reacquire the vehicle].) Regardless of whether Niedermeier would otherwise be entitled to trade in her Jeep and pocket the proceeds, any
III.
The majority opinion suggests — but does not outright hold — that the result might be different in a different case. It says that the statute entitles a plaintiff car buyer to a full refund, without any deductions for trade-in or resale value, but adds this qualification: “at least where, as here, a consumer has been forced to trade in or sell a defective vehicle due to the manufacturer’s failure to comply with the Act.” (Maj. opn., ante, at p. 3.) The majority also makes clear that its holding is limited to circumstances like those presented in this case, and is leaving open whether the same rule would apply in a case involving a good-faith, reasonable mistake about whether the Act’s replace-or-refund provision applies to a particular vehicle. (Id. at pp. 32–33, fn. 8.)
In my view, the result the court reaches today makes sense precisely because of the circumstances we confront. Although the majority opinion leaves the limits of its holding for exploration in a future case, those limits are, in my view, important to a full understanding of the law.
There is no real question that a rule the majority applies today results in something of a windfall for the buyer, in that it leaves her better off than she was before she purchased the defective car. (Accord, maj. opn., ante, at p. 24.) In a case where she has been forced to sell the car because of the manufacturer’s willful failure to promptly refund or replace the car in accordance with the law, none of this matters. The reason the buyer in Niedermeier’s position is entitled to a full refund is not because all the money is necessary to make her whole; it is, rather, because it is necessary for the manufacturer to relinquish any claim on the money, in order to avoid
But it is not hard to see why the Court of Appeal in this case was concerned about adopting a rule that would extend similar treatment across the board, to any buyer of a defective vehicle who might choose to trade in or sell the vehicle for profit rather than give it back to the manufacturer. Certainly some buyers might choose continued repairs rather than getting rid of the vehicle and “resorting to litigation.” (Maj. opn., ante, at p. 31; see also Kwan v. Mercedes-Benz of North America, Inc., supra, 23 Cal.App.4th at p. 186 [the plaintiff “repeatedly agreed to allow continued repair efforts rather than insisting on replacement or refund”].) But a rule that guaranteed full reimbursement on top of trade-in or resale profit would almost certainly alter some consumers’ calculations. If trade-in or resale always yielded the potential for double recovery, one would expect a good number of consumers to go that route. And as the Court of Appeal explained, the result would be to undermine the operation of the labeling and notification provisions, which depend on buyers returning their defective cars to manufacturers rather than selling their unlabeled lemons into the used-car market. (Niedermeier v. FCA US LLC, supra, 56 Cal.App.5th at pp. 1071–1072.)
An across-the-board rule giving lemon law plaintiffs a categorical entitlement to full reimbursement (or else a new replacement car) plus the proceeds of resale or trade-in would also raise significant questions of fairness. A rule permitting this sort of double recovery in every case would mean that plaintiffs who buy luxury vehicles could wind up turning a substantial profit if those vehicles later prove defective, while plaintiffs who buy economy cars probably could not — for reasons that have nothing to do with the extent of their actual losses or the extent of the manufacturer’s wrongdoing. It is unclear why the Legislature would have set up a remedial scheme that would authorize this additional recovery based solely on the price tag of the car, and thus, by extension, the financial means of the buyer.
KRUGER, J.
We Concur:
GROBAN, J.
JENKINS, J.
See next page for addresses and telephone numbers for counsel who argued in Supreme Court.
Name of Opinion Niedermeier v. FCA US LLC
Procedural Posture (see XX below)
Original Appeal
Original Proceeding
Review Granted (published) XX 56 Cal.App.5th 1052
Review Granted (unpublished)
Rehearing Granted
Opinion No. S266034
Date Filed: March 4, 2024
Court: Superior
County: Los Angeles
Judge: Daniel S. Murphy
Counsel:
Gibson, Dunn & Crutcher, Thomas H. Dupree, Jr., Matt Gregory, Shaun Mathur; Clark Hill and David L. Brandon for Defendant and Appellant.
Knight Law Group, Steve Mikhov, Roger Kirnos, Amy Morse; Hackler Daghighian Martino & Novak, Sepehr Daghighian, Erik K. Schmitt; Greines, Martin, Stein & Richland, Cynthia E. Tobisman, Joseph V. Bui; Public Justice and Leslie A. Brueckner for Plaintiff and Respondent.
Consumer Law Practice and Daniel T. LeBel for Consumers for Auto Reliability and Safety as Amicus Curiae on behalf of Plaintiff and Respondent.
Counsel who argued in Supreme Court (not intended for publication with opinion):
Thomas H. Dupree, Jr.
Gibson, Dunn & Crutcher LLP
1050 Connecticut Avenue, NW
Washington, DC 20036
(202) 955-8547
Cynthia E. Tobisman
Greines, Martin, Stein & Richland LLP
6420 Wilshire Boulevard, Suite 1100
Los Angeles, CA 90048
(310) 859-7811