Niedermeier v. FCA US

543 P.3d 935

318 Cal.Rptr.3d 483

Lisa NIEDERMEIER, Plaintiff and Respondent,

v.FCA US LLC, Defendant and Appellant.

S266034

Supreme Court of California.

March 4, 2024

Second Appellate District, Division One, B293960, Los Angeles County Superior Court, BC638010, Daniel S. Murphy, Judge

Gibson, Dunn & Crutcher, Thomas H. Dupree, Jr., Matt Gregory, Shaun Mathur, Irvine; Clark Hill and David L. Brandon, Los Angeles, for Defendant and Appellant.

Knight Law Group, Steve Mikhov, Los Angeles, Roger Kirnos, Amy Morse, Los Angeles; Hackler Daghighian Martino & Novak, Sepehr Daghighian, Beverly Hills, Erik K. Schmitt; Greines, Martin, Stein & Richland, Cynthia E. Tobisman, Los Angeles, Joseph V. Bui; Public Justice and Leslie A. Brueckner, Oakland, 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.

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 (Civ. Code, § 1791 et seq.;¹ hereafter the Act or the Song-Beverly Act), permits new vehicle buyers who have been damaged by a manufacturer’s failure to comply with the Act to sue under section 1794 for the recovery of damages and other relief. (§ 1794, subd. (a).) The measure of a buyer’s damages in such an action includes "replacement or reimbursement as set forth in subdivision (d) of Section 1793.2 …."(Id., subd. (b).) If a manufacturer is unable to repair a new vehicle after a reasonable number of attempts, section 1793.2, subdivision (d) requires the manufacturer to promptly replace the vehicle or promptly pay restitution "in an amount equal to the actual price paid or payable by the buyer," as specified. (Id., subd. (d)(2)(B).) The manufacturer is entitled to reduce the amount of restitution by the "amount directly attributable" to the buyer’s use of the vehicle prior to the time the buyer first delivered the vehicle for repair. (Id., subd. (d)(1); see also id., subd. (d)(2)(C).)

The questions before us are whether, in an action under section 1794, the statutorily-defined measure of restitution set forth in section 1793.2, subdivision (d)(2) (hereafter sometimes referred to as the statutory restitution remedy) must be reduced by proceeds a buyer has received when trading in or selling a defective vehicle and, if so, whether the reduction should be assessed before or after penalties are calculated.² The Court of Appeal below held that the statutory restitution remedy did not include the amount a plaintiff recovered after trading in a defective vehicle, and thus reduced the plaintiff’s damages award by the trade-in amount (here, $19,000). (Niedermeier v. FCA US LLC (2020) 56 Cal.App.5th 1052, 1060, 1061, 271 Cal.Rptr.3d 43 (Niedermeier).)

We conclude that in an action pursuant to section 1794, neither a trade-in credit nor sale proceeds reduce the statutory restitution remedy set forth in section 1793.2, subdivision (d)(2) 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. Given this conclusion, we do not reach the issue of when such a reduction, if it were authorized, should be assessed. Accordingly, we reverse the judgment of the Court of Appeal.

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 fob 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 third buyback demand in late June 2015. FCA, however, declined to repurchase the vehicle. By the time Niedermeier made the third buyback request, she had presented the vehicle for repair 14 times. In October 2015, after additional repair attempts failed, Niedermeier traded in the vehicle for a new GMC Yukon. The purchase price of the Yukon was $80,000, and the dealership gave Niedermeier a $19,000 trade-in credit towards that purchase.

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 section 1793.2, subdivision (d)(2)(B), a total of $39,799; incidental and consequential damages of $5,000; and a deduction of $5,214.57, reflecting the amount attributable to Niedermeier’s use of the vehicle before she first delivered it to FCA’s authorized facilities for repairs pursuant to section 1793.2, subdivision (d)(2)(C). The award also included a penalty of $59,376.65 pursuant to section 1794, subdivision (c) due to FCA’s willful failure to repurchase the vehicle.

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 plaintiffs 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.’ (§ 3517.) Nor can principles of equity be used to avoid a statutory mandate."

FCA appealed. It made three arguments before the Court of Appeal: (1) by obtaining a full refund under section 1793.2, subdivision (d)(2) in addition to proceeds from the trade-in of the vehicle, Niedermeier received a windfall, which is inconsistent with the concept of restitution; (2) provisions of the California Uniform Commercial Code incorporated into section 1794 of the Act recognize that a buyer’s recovery is reduced by the amount the buyer obtains by reselling the vehicle; and (3) allowing Niedermeier a full refund on top of trade-in proceeds she received would undermine legislative protections for downstream consumers in the used car market by effectively nullifying the Act’s requirement that manufacturers notify subsequent purchasers of defects in reacquired vehicles.

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, 271 Cal.Rptr.3d 43.) The Court of Appeal reasoned that the Legislature's use of the word "restitution" in section 1793.2, subdivision (d)(2)(B) indicates an intent to restore the status quo ante as far as practicable and return buyers to the financial position they would have been in had they not purchased the vehicle. (Niedermeier, at p. 1071, 271 Cal.Rptr.3d 43.) It concluded that allowing Niedermeier the full restitution remedy after she received a credit for trading in the vehicle would place her in a better position than if she had never purchased the vehicle, a result inimical to the concept of restitution. (Ibid.)

The Court of Appeal also opined that allowing the full restitution refund under section 1793.2, subdivision (d)(2)(B) would thwart the lemon law’s labeling and notification requirements. It noted that the labeling and notification provisions are only triggered when a manufacturer reacquires the defective vehicle. It reasoned that allowing buyers to recover the full restitution remedy after receiving trade-in proceeds would incentivize buyers to reintroduce defective vehicles into the market without the statutorily required Lemon notifications, rendering the labeling and notification provisions "largely meaningless, a result contrary to the rules of statutory construction." (Niedermeier, supra, 56 Cal.App.5th at p. 1072, 271 Cal.Rptr.3d 43.)

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 section 1793.2, subdivision (d)(2) for the net cash a plaintiff receives after selling a defective vehicle to a third party. (Figueroa v. FCA US, LLC (2022) 84 Cal.App.5th 708, 713–714, 300 Cal.Rptr.3d 644 (Figueroa).) We granted review in Figueroa on February 1, 2023, and deferred further action...