offer to make good can preclude restitution claim under CLRA

DeNike v. Mathew Enterprise, Inc., 76 Cal.App.5th 371, H046420 (Mar. 16, 2022)

DeNike bought a 2014 Jeep Wrangler with a hardtop from defendant. Soon after, DeNike discovered that the vehicle was originally manufactured as a soft top and that the hardtop had been installed at some point after it left the factory. Before buying, DeNike asked if everything on the vehicle was “factory installed” and the salesman assured him it was. After purchase, problems quickly developed with the wipers, and he soon found that the hardtop had been installed, improperly, after the vehicle left the factory.

DeNike ultimately filed a lawsuit and a jury found in favor of DeNike on his claims under the Consumers Legal Remedies Act and the Song-Beverly Consumer Warranty Act, and for intentional misrepresentation. The trial court issued a permanent injunction against SCJ and awarded DeNike attorney fees.

The court of appeals found the restitution claim under the CLRA was barred because of defendant’s offers of correction before suit, but sustained the rest of the verdict, including permanent injunctive relief. DeNike’s counsel wrote to defendant asking for rescission of the purchase agreement, payment of the vehicle loan, plus attorney fees and costs pursuant to the CLRA. Several weeks later, defendant offered to: (1) repair the vehicle if DeNike still wanted it, and provide a loaner vehicle while it was repaired; or (2) rescind the purchase agreement, refund all payments DeNike had made, pay off the remaining balance on the vehicle, reimburse DeNike for any repairs or out-of-pocket costs, and pay DeNike’s “reasonable attorney’s [sic] fees.” “The parties exchanged additional letters seeking to resolve the dispute, but negotiations ultimately failed when they could not reach an agreement on the amount of attorney fees.”

The jury awarded $36,192.79, consisting of $26,001.61 for restitution/rescission, plus incidental damages of $10,191.18. The trial court enjoined defendant from: “a. selling a new vehicle that has been modified, and/or had additions made to it, from its factory-delivered condition without an addendum sticker attached to the vehicle disclosing such modification and/or addition as required by law; and b. failing to disclose to a customer as required by law the fact or existence of a modification and/or addition having been made to a new vehicle from its factory-delivered condition before the customer enters into a written agreement to purchase the vehicle.” The trial court further ordered it to “implement policies, procedures, and training to apprise its employees of, and to ensure compliance with” the terms of the injunction.

The CLRA provides: “[N]o action for damages may be maintained … 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.” This provision extends to restitution. Though it’s true that damages and restitution are different remedies, the specific language and structure of the law counseled in favor of reading “damages” capaciously, including the statute’s goal to “facilitate precomplaint settlements of consumer actions wherever possible.” “If an appropriate offer of correction under section 1782, subdivision (b) applies only to bar claims for monetary damages, that provision’s safe harbor is neutered.”

However, the evidence supporting the misrepresentation verdict was sufficient; the jury appropriately found that DeNike reasonably relied on the representation that the vehicle had a “factory installed” hardtop. [DeNike was apparently aided by his practice of taking notes on his entire buying journey, apparently including at different dealers, which certainly validates some of my spouse’s habits.]

Also, there was no need to instruct the jury that DeNike had to show “impaired safety” in order to prevail on his cause of action for violation of an implied warranty under the Song-Beverly Act. It was enough on this element that the vehicle did not have the quality that a buyer would reasonably expect. The implied warranty certainly covers safety, but that’s not all; it also has to “[c]onform to the promises or affirmations of fact made on the container or label.” Even if that makes Song-Beverly duplicative of other California statutes prohibiting false advertising, it expressly provides that its “remedies ... are cumulative and shall not be construed as restricting any remedy that is otherwise available.”

And injunctive relief under the CLRA was appropriate. The trial court noted that “the viability of injunctive relief here comes down to the extent of the threat of continuing CLRA violations as established by the evidence.” It commented that defendant “offered no facts or theories at trial to explain just how the Jeep came to be sold to DeNike in its altered or modified condition or why there was no internal documentation reflecting replacement of the original soft top with the [hardtop] and no accurate addendum affixed reflecting this change and the costs associated with it.” Given “the void in the evidence about how or why this occurred; the inconsistent understanding on the part of defendant’s employees of internal documentary systems that arguably should have prevented the sale of the vehicle to DeNike in violation of the CLRA; and the seeming lack of recognition by defendant of the need to ensure its policies and procedures are sufficient to not just capture profit but to also satisfy full and accurate disclosure and compliance with the law,” injunctive relief was warranted.

Defendant argued that injunctive relief was improper because: (1) DeNike “received a benefit” due to its failure to charge him for the dealer-installed hardtop; (2) there was no evidence to support DeNike’s expressed desire not to have any dealer-installed features based on his fear of potential effects on the manufacturer’s warranty; and (3) there was no evidence the violation was likely to recur. But defendant’s own failure to explain what happened, along with the rest of the evidence, supported the injunction.