CLRA redress offer requiring waiver of claims can't defeat consumer's right to sue

Valdez v. Seidner-Miller, Inc., 33 Cal.App.5th 600 (2019)

Valdez alleged that Seidner violated the CLRA, the UCL, and Civil Code section 16321 (requiring translation of certain contracts), and committed fraud in connection with Seidner’s lease of a vehicle to Valdez and his wife. The trial court ruled that Seidner made a timely and “appropriate” offer to correct the alleged CLRA violations, barring Valdez’s claim under the CLRA for damages and injunctive relief, as well as his other claims, because those other claims were “inextricably intertwined” and based on the same conduct. The court of appeals reversed; although the correction offer was timely, it wasn’t appropriate because it conditioned an offer to remedy a violation of the CLRA on Valdez waiving his right to injunctive relief and remedies under other statutes and common law. “Neither can the business demand as part of its correction offer that the consumer consent to additional settlement terms unrelated to the compensation necessary to make the consumer whole.”

In 2015, Valdez sent Seidner a “notice of rescission and demand for rectification” under the CLRA. Valdez and his wife had entered into an agreement with Seidner to lease a 2014 Toyota Camry. “The negotiations were conducted in Spanish, but Seidner did not provide Valdez and his wife a Spanish translation of the lease agreement.” Although he wanted to buy and not lease, he was told he lacked sufficient credit to do so, and that certain charges were required by law.  When he returned to the dealership approximately 10 months later, he learned he could not refinance the car at the initial price.

The CLRA notice sought rescission of the transaction; removal of the transaction from Valdez’s credit report; a refund of $1,500 for the down payment, $4,626 for the monthly payments, and $1,500 for insurance; and payment of $2,750 for attorney’s fees and costs. Seidner’s attorney provided a draft settlement agreement denying all the allegations in Valdez’s CLRA notice. Seidner agreed to pay off the outstanding loan balance, pay $5,126 to reimburse the down payment and monthly payments, and $2,750 for attorney’s fees and costs within 10 days after surrender of the vehicle. The draft required Valdez to return the vehicle “without damage or vandalism, save normal wear and tear,” and allowed Seidner to void the settlement agreement if it determined the vehicle was “in unacceptable condition.” It required confidentiality and contained a release of all known and unknown claims and a covenant not to sue.

During negotiations, Valdez disclosed the vehicle had been in an accident in October 2014 and the repair costs were approximately $3,300. According to Seidner, the vehicle history report showed the vehicle was also in an accident in 2015.  The parties nearly came to an agreement, but Seidner requested inspection of the vehicle before it would provide Valdez with the settlement funds. This was unacceptable to Valdez: “There is no way this agreement can be based upon your client’s subjective review of the car’s condition.” Seidner was prepared to remove the covenant not to sue language and confidentiality provision, but not the requirement the vehicle be inspected prior to release of the settlement funds. Valdez indicated that he would agree to an inspection if Seidner paid the costs of his attorney and expert to be present, but Seidner didn’t agree.

At least 30 days “prior to the commencement of an action for damages” under the CLRA, the consumer must provide written notice “of the particular alleged violations of Section 1770” and “[d]emand that the person correct, repair, replace, or otherwise rectify the goods or services alleged to be in violation of Section 1770.” Further, “no action for damages may be maintained under Section 1780 if an appropriate correction, repair, replacement, or other remedy is given, or agreed to be given within a reasonable time, to the consumer within 30 days after receipt of the notice.” Seidner’s offer was timely; it was sent 32 days after Seidner received the CLRA notice, but day 30 was a Saturday and it was allowed to go to Monday.

However, by conditioning relief on release of claims not subject to the CLRA’s prelitigation notice requirements and on compliance with other settlement terms, including Seidner’s subjective approval of the vehicle’s condition, the settlement offer wasn’t an appropriate correction offer under the CLRA.

The offer’s broad release language and covenant not to sue would have prohibited Valdez from asserting his section 1632, UCL, and fraud claims and his claim for injunctive relief under the CLRA. “Yet Valdez had a right to bring those claims without first providing notice under the CLRA.” Among other things, Valdez sought injunctive relief prohibiting Seidner “from entering into lease agreements without providing appropriate translations, prior to execution, when negotiations are conducted primarily in a language other than English ....” Since the draft settlement agreement did not provide the requested injunctive relief, it wasn’t appropriate for Seidner to condition its correction offer on release of Valdez’s claims for injunctive relief. A “reasonable correction offer prevent[s] [the plaintiff] from maintaining a cause of action for damages under the CLRA, but [does] not prevent [the plaintiff] from pursuing remedies based on other statutory violations or common law causes of action based on conduct under those laws.”

The court also pointed to Valdez’s claim under a fascinating California law providing that “Any person engaged in a trade or business who negotiates primarily in Spanish, Chinese, Tagalog, Vietnamese, or Korean, orally or in writing, in the course of entering into [covered vehicle leases], shall deliver to the other party to the contract or agreement and prior to the execution thereof ... a translation of every term and condition in that contract or agreement ....” The statute’s goal was “to increase consumer information and protections for the state’s sizable and growing Spanish-speaking population.” It provides for rescission of the agreement as a remedy for a violation. Seidner admitted that “a Spanish translation of the subject contact was orally made to plaintiff before the plaintiff signed the document but inadvertently no written translated document or written Spanish language contract was provided to [Valdez].”

And there were also UCL and fraud claims. The court pointed out that, if Valdez hadn’t added a CLRA claim, there’d be no notice/voluntary correction issue.  It would be anomalous to then hold that, once he added a CLRA claim, all those claims would be barred by a correction offer.

Finally, Seidner’s correction offer “improperly allowed Seidner unilaterally to void the proposed settlement agreement if it determined after an inspection that the vehicle was in an unacceptable condition.”  Damage beyond normal wear and tear would entitle Seidner to an offset for the damage. “But conditioning CLRA remedies on Seidner’s subjective determination whether the vehicle was in an acceptable condition rendered Seidner’s offer illusory.”

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 still have been able to pursue his other claims, nothing would have prevented Seidner from attempting to negotiate a separate settlement of those claims. But Seidner’s effort to exact additional concessions from Valdez as part of a global settlement [didn’t satisfy the] CLRA.