Thursday, February 8, 2018

FYI: Cal App Ct (2nd Dist) Holds Correction Offer Under CLRA Did Not Preclude Other Claims

The California Court of Appeals for the Second District recently held that a correction offer under the California Consumer Legal Remedies Act, Civ. Code § 1750, et seq. (CLRA) did not prevent a consumer from pursuing causes of action for fraud and violation of the California Unfair Competition Law, Bus. & Prof. Code § 17200, et seq. (UCL) based on the same conduct because the CLRA's remedies are cumulative and non-exhaustive.

A copy of the opinion is available at:  Link to Opinion

An automotive dealer (Dealer) published print advertisements showing low prices for specific cars to attract customers to the dealership.  Small print at the bottom of the advertisements state that the price expired at 12:00 p.m. on the day of publication. 

A customer who called before noon to inquire about the car in an advertisement will be quoted the sale price.  If the customer arrived at the dealership in the afternoon, the advertisement expired and the car is sold for full price.  The Dealer also posted the advertisements online for about three hours.  The advertisements online do not contain expiration information and were simply taken down after three hours.

In April 2013, the plaintiff saw the Dealer's advertisement for a black 2009 Dodge Charger for $9,995.  The Dealer told the plaintiff over the phone that he might be able to drop the price to $9,000, that the car was in excellent condition, and there were no mechanical issues with the car.

The next day, the plaintiff drove to the dealership and the Dealer showed her a black 2009 Dodge Charger with body damage and substantially higher mileage than what she was told.  The Dealer said it was the only black Charger on the lot, but the dealership could repair the damage.  The plaintiff thought the car might still be worth purchasing and proceeded to discuss the paperwork.  The salesperson told her that the $9,000 price was for a cash payment and the plaintiff's purchase price would be the advertised price of $9,995.

However, one document listed the sale price as $16,995.  The plaintiff's mother noticed that another document stated the amount financed as $17,401 and asked why the document did not say $9,995.  The Dealer said not to worry about it because they were just throwing numbers out and that number would not stay.  Also, the plaintiff signed an optional gap insurance contract for $895 without reading it or receiving any explanation.

On the drive home, the check engine light went on and the plaintiff brought the car to a mechanic and obtained a list of repairs that were needed.  The Dealer said it would fix the car within three days, but it never fixed the car as promised.

In June 2013, the plaintiff filed a complaint against Dealer and the financing company (Finance Company) alleging several causes of action, including violation of the CLRA, violation of the UCL, fraud, violation of the Song-Beverly Consumer Warranty Act, Civ. Code § 1790, et seq. (Song-Beverly Act), and violation of the federal Magnuson-Moss Consumer Warranty Act, 15 U.S.C. § 2301, et seq. (Magnuson-Moss Act). 

The Dealer argued that the price stated in the print advertisements expired at noon on the day of publication and was subject to approved credit.  Because the plaintiff did not purchase the car in cash, on the day that the advertisement was published, the Dealer argued that the sale price had expired.

Dealer offered to fully rescind the contract, refund all payments, and provide an additional $1,500 for incidental costs.  In exchange, the plaintiff would have to return the car in substantially the same condition as she received it.  If plaintiff rejected the offer, Dealer would deposit with the court the amount that Dealer believed to be a full remedy and seek a determination that it was the prevailing party entitled to fees and costs, including attorney fees, for being forced to respond to a complaint after a full remedy was offered.

After a bench trial, the trial court held that the Dealer made a valid settlement offer to resolve the situation in good faith, and therefore, damages were not justified as to either defendant for violation of the CLRA.  The trial court also found in favor of Dealer and Finance Company on the cause of action for fraud.  However, the trial court found violations of the UCL, Song-Beverly Act, and the Magnuson-Moss Act based on breach of warranty.

The plaintiff filed a motion for an award of attorney fees of $80,927.25 under the Song-Beverly Act.  Dealer and Finance Company opposed the motion and filed a motion to set aside and vacate the judgment on several grounds. 

After a hearing, the trial court revised its finding and the judgment.  The trial court noted that injunctive relief, rescission, and restitution were available under the UCL.  The trial court found an injunction was proper to enjoin unfair competition under the UCL and did not change that portion of the judgment awarding injunctive relief under the UCL. 

However, the trial court declined to change its ruling of the CLRA cause of action in favor of Dealer and Finance Company.  The trial court noted that the remedies of the CLRA were cumulative of other types of relief. 

Additionally, the trial court reversed its ruling under the Song-Beverly Act because there had been only one attempt to have Dealer repair the car, and therefore, the trial court found no liability under the Song-Beverly Act or Magnuson-Moss Act.

The trial court also reconsidered its finding on the fraud cause of action.  Fraudulent misrepresentation had been made about the car in telephone conversations to induce the plaintiff to drive to the dealership, which violated the CLRA and the UCL; Dealer's misrepresentations of the terms of the sales contract violated the CLRA and the UCL; and Dealer's representation that the repairs were performed was a violation of the Song-Beverly Act.  Thus, the trial court found in favor of plaintiff on the fraud cause of action and awarded damages of $15,409.25.

The trial court also awarded attorney's fees for the plaintiff under California Code of Civil Procedure section 1021.5.  However, the trial court reduced the fees to $24,278.18 to reflect the causes of action eligible for fees under the statute on which the plaintiff had prevailed for the public benefit. 

This appeal followed.

The primary issue on appeal was whether the CLRA provided excusive relief for conduct encompassed by the CLRA.

Dealer and Finance Company argued that the plaintiff cannot recover for fraud or violation of the UCL based on the same conduct supporting her CLRA cause of action.  They also argued that the reasonable correction offer barred the plaintiff from maintaining an action for damages under the CLRA, and the plaintiff cannot maintain an action for damages based on the same conduct under another statutory or common law cause of action.

As you may recall, the remedies of the CLRA are cumulative of other rights.  The CLRA expressly states: 

The provisions of this title are not exclusive.  The remedies provided herein for violation of any section of this title or for conduct proscribed by any section of this title shall be in addition to any other procedures or remedies for any violation or conduct provided for in any other law  If any act or practice proscribed under this title also constitutes a cause of action in common law or a violation of another statute, the consumer may assert such common law or statutory cause of action under the under the procedures and with the remedies provided for in such law.

Cal. Civ. Code § 1752.

Additionally, the CLRA prohibits enumerated unfair methods of competition and deceptive practices that result in the sale or lease of goods or services to a consumer, including in pertinent part:

(7) 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
(9) Advertising goods or services with intent not to sell them as advertised
(13) Making false or misleading statements of fact concerning reasons for, existence of, or amounts of, price reductions
(16) Representing that the subject of a transaction has been supplied in accordance with a previous representation when it has not
(17) Representing that the consumer will receive a rebate, discount, or other economic benefit, if the earning of the benefit is contingent on an event to occur subsequent to the consummation of the transaction
(19) Inserting an unconscionable provision in the contract.

Cal. Civ. Code § 1770(a).

Dealer and Finance Company relied on two opinions as support for their argument that the conduct described ins section 1770 was governed exclusively by the CLRA, notwithstanding the plain language of section 1752 stating that the remedies under the CLRA are not exclusive.

In Vasquez, the court concluded that class actions filed after the effective date of the CLRA which concern deceptive practices specified in the state were governed exclusively by the provisions of the CLRA and must follow the class action procedures specified in the act.  Vasquez v. Superior Court (1971) 4 Cal.3d 800, 818-19. 

In Outboard, the court relied on Vasquez and held that if a cause of action alleged conduct specified in the CLRA, the procedures of the CLRA must be followed regardless of the nature of the cause of action pled in the complaint.  Outboard Marine Corp. v. Superior Court (1975) 52 Cal.App.3d 30, 35. 

However, the Appellate Court here noted that both Vasquez and Outboard were decided prior to the California Legislature's amendment of section 1752 in 1975.  The 1975 amendment affirmed the non-exclusive nature of the remedies by adding that the remedies "for violation of any section of this title or for conduct proscribed by any section of this title" were in addition to any other procedures or remedies "for any violation or conduct" provided under any other law.  Stats 1975, ch. 615, § 1, p. 1344.

Dealer and Finance Company also argued that plaintiff cannot avoid the safe harbor provided for a reasonable correction offer under the CLRA by recasting her claim as a violation of the UCL. 

However, in the Appellate Court's view, the plaintiff's UCL claim was based directly on evidence of fraudulent advertising practices and was not dependent on filing an underlying violation of the CLRA.  The CLRA expressly states that the effect of a reasonable correction offer prevented the consumer from maintaining an action for damages under California Civil Code section 1780, but the remedies of the CLRA are cumulative and the consumer may assert other common law or statutory causes of action under the procedures and with the remedies provided for in those laws. 

Finally, for the first time on appeal Dealer and Finance Company argued that there was no cause of action before the trial court for violation of the UCL, because the plaintiff dismissed her cause of action and never amended the complaint to add a new cause of action under the UCL.  The Appellate Court concluded that Dealer and Lender did not raise this argument at trial or in the multiple post-judgment pleadings, Dealer and Finance Company forfeited the issue on appeal.

Accordingly, the Appellate Court affirmed the judgment.


Eric Tsai
Maurice Wutscher LLP 
71 Stevenson Street, Suite 400
San Francisco, CA 94105
Direct: (415) 529-7654
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Email: etsai@MauriceWutscher.com

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