Defendant’s Timely Offer to Remedy Plaintiff’s Consumer Legal Remedies Act (CLRA) Demands Cuts Off Claims for Damages and Attorneys’ Fees Under the CLRA

In Benson v. Southern California Auto Sales, Inc., (Filed 8/27/2015, G050484) the California Court of Appeal, Fourth District, affirmed a trial court’s decision that an automobile seller’s letter to an unsatisfied consumer, offering certain remedies and corrections, was dispositive of the consumer’s claim against the seller under California’s Consumer Legal Remedies Act.

In October, 2011, Robert Benson purchased a used automobile from Southern California Auto Sales, Inc. (“Southern”). Benson subsequently learned that the vehicle had a damaged frame. Moreover, the contract price was approximately $1,500 higher than the advertised price for the vehicle, and incorrectly stated that Benson had failed to make a deferred down payment when he actually had. Benson retained an attorney who sent two letters to Southern, both dated December 10, 2012.

One letter was titled “Notice of Violation of California Law, Including but not Limited to the Consumer Legal Remedies Act,” and was written in an attempt to comply with the notice requirements of California Civil Code section 1782(a). Benson demanded rescission of the purchase contract, return of his car payments, a $5,000 penalty, and incidental damages in an unspecified amount.

Benson, however, did not wait for Southern to respond to his letter, but instead filed his complaint on January 2, 2013, less than thirty days after his counsel sent his demand letters to Southern. Under Civil Code section 1782(a), a consumer must serve a notice to the seller of the alleged violation of the Consumer Legal Remedies Act, and may not file a civil complaint for damages if “an appropriate correction, repair, replacement, or other remedy is given, or agreed to be given within a reasonable time…within 30 days after receipt of the notice.” The Complaint asserted a single cause of action for violation of the Consumer Legal Remedies Act.

Seven days later, on January 9, 2013, Southern responded to the notice letter. Southern denied any wrongdoing but nonetheless offered to resolve the matter on the following terms: (1) rescission of the purchase contract; (2) Benson would need to return the vehicle; (3) Southern would refund all car payments and satisfy the financed loan amount; (4) Southern would pay Plaintiff $2,500 in incidental damages; (5) and Benson would need to execute a mutual settlement and release agreement. Despite the fact Benson had driven the vehicle for approximately one year, Southern agreed to waive any claim for mileage.

Benson replied to Southern’s letter by demanding nearly $30,000 to settle the case, in addition to rescinding the contract. Benson’s reply included a demand for $8,500 to settle “all remaining causes of action” in addition to the Consumer Legal Remedies Act claim. Benson then filed an Amended Complaint asserting nine additional causes of action.

Southern settled the dispute before trial, agreeing to a stipulated judgment in the amount of $34,500 in exchange for an executed release and return of the vehicle. Benson then filed a motion for attorneys’ fees and costs pursuant to the Consumer Legal Remedies Act. The trial court denied the Motion, explaining that Benson could not maintain a cause of action for damages under the CLRA because Southern had offered him “an appropriate correction, repair, replacement or other remedy” pursuant to Civil Code section 1782(b), through its January, 2013 letter. Benson was thus precluded from obtaining attorneys’ fees and costs.

Benson appealed. The Court of Appeal, Fourth District affirmed, noting that the decision lies with the discretion of the trial court, which had not abused that discretion in concluding that the January, 2013, letter was “an appropriate correction, repair, replacement or other remedy” as described in Civil Code section 1782(b).

Recognizing this was an issue of first impression, the Court of Appeal held that the ruling would stand unless the trial court abused its discretion in denying the motion. The Court of Appeal noted “[i]n a case such as this, where the trial court has had the parties before it on multiple occasions during an 18-month period, it is far more conversant with nuances, subtleties, and the small but telling details that go into such a decision than an appellate court could ever be.” Thus, the trial court is granted discretion in deciding, based on the substantial evidence, whether the correction was “appropriate” as a matter of law. The Court of Appeal concluded that the substantial evidence supported the trial court’s determination that Southern’s January, 2013 letter met the criteria under Civil Code section 1782(b).

This decision operates as a reminder that a good faith attempt to offer an appropriate “correction, repair, replacement or other remedy” can ultimately be dispositive of a consumer’s action under the Consumer Legal Remedies Act. It also demonstrates the California Court of Appeals’ deference to the trial court’s discretion and unwillingness to reverse a trial court’s decision which is based upon issues to which the trial court is much better suited to address.

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September 3, 2015