Valdovinos v. Kia Motors Am., Inc.

325 Cal.Rptr.3d 29

Luis VALDOVINOS et al., Plaintiffs and Appellants,

v.KIA MOTORS AMERICA, INC., Defendant and Appellant.

B324418

Court of Appeal, Second District, Division 2.

Filed August 29, 2024

As Modified September 24, 2024

APPEALS from a judgment of the Superior Court of Los Angeles County, Steven J. Kleifield, Judge. Affirmed in part, reversed in part, and remanded with directions. (Los Angeles County Super. Ct. No. BC633283)

Gupta Wessler, Jessica E. Garland, Newport Beach, Jennifer D. Bennett; Knight Law Group and Radomir Roger Kirnos, Los Angeles, for Plaintiffs and Appellants.

Horvitz & Levy, Lisa Perrochet, Burbank, Shane H. McKenzie, Burbank, John B. Sprangers; Lehrman, Villegas, Chinery & Douglas, Kate S. Lehrman, Los Angeles, and Jacqueline Bruce-Chinery, Los Angeles, for Defendant and Appellant.

HOFFSTADT, J.

California’s Song-Beverly Consumer Warranty Act (Civ. Code, § 1790 et seq.)¹ (the Act) spells out the procedures and remedies available to California consumers when the new motor vehicle they purchase is a so-called "lemon." Among other things, the Act obligates the manufacturer, distributor, or retailer of such a vehicle to buy back the defective vehicle as long as the consumer grants it a "reasonable" opportunity to fix the defect, and, if the defect persists, empowers the consumer to sue for breach of any express warranty to obtain "restitution" and, if the violation of the Act is "willful," a civil penalty up to twice the amount of the "restitution" award. (§§ 1793.2, subd. (d), 1794, subd. (c).) The Act is "strongly pro-consumer" (Murillo v. Fleetwood Enterprises, Inc. (1998) 17 Cal.4th 985, 990, 73 Cal.Rptr.2d 682, 953 P.2d 858 (Murillo), superseded on other grounds by Code Civ. Proc., § 998), so restitution under the Act is not the " ‘plain vanilla common law kind’ " that aims to make an injured party whole Williams v. FCA US LLC (2023) 88 Cal. App.5th 765, 780, 304 Cal.Rptr.3d 474 (Williams)); instead, the Act’s definition of "restitution" is more like vanilla topped with a generous scoop of pro-consumer sprinkles that can go so far as to entitle consumers to be made more than whole and thereby to obtain a windfall from buying a "lemon" (Niedermeier v. FCA US, LLC (2024) 15 Cal.5th 792, 801, 318 Cal. Rptr.3d 483, 543 P.3d 935 (Niedermeier)).

This appeal presents three questions regarding the breadth of the Act’s pro-consumer remedies. First, is a consumer entitled to recover as "restitution" amounts paid to a third party for a service contract on the vehicle? Second, is a consumer entitled to recover as "restitution" all insurance premiums paid on the vehicle should the consumer continue to drive it (as opposed to only those premiums attributable to coverage against property damage)? Third, is a manufacturer’s, distributor’s, or retailer’s violation of the Act willful as a matter of law if the violation was negligent or if it adequately investigated but could not confirm the existence of a defect yet nevertheless offered to buy back the vehicle on terms that were reasonable at the time the offer was made? We hold that the answer to all three questions is "no."

We accordingly (1) reverse the trial court’s posttrial orders declining to strike from the "restitution" award the amounts of the service contract and certain amounts of insurance premiums, (2) reverse the trial court’s posttrial order striking the civil penalty for insufficient evidence, but (3) affirm the trial court’s posttrial order granting a new trial on the civil penalty. We direct the trial court to amend the judgment consistent with this opinion and we remand for a new trial on the civil penalty.

FACTS AND PROCEDURAL BACKGROUND

I. Facts

A. Plaintiff buys a 2014 Kia Optima

On May 10, 2014, Luis Valdovinos (plaintiff) purchased a new 2014 Kia Optima with just 19 miles on it.

The sales contract listed the "Total Sale Price" as $30,127, which included (1) $299 for an "(Optional) Theft Deterrence Device" paid to a third-party company called Security Etch, and (2) $2,298 for an "(Optional) Service Contract" paid to a third-party company called American Financial. Plaintiff made a down payment of $8,000 in cash and received a $2,000 "Manufacturer’s Rebate"; he financed the remaining balance of $19,171.

Plaintiff purchased the vehicle from Kia of Cerritos, which is a franchise Kia dealership not owned by Kia Motors America, Inc. (Kia).² Kia is a distributor of Kia vehicles.

Plaintiff’s Optima had a basic warranty that expired after five years or 60,000 miles, and a drive train warranty that expired after 10 years or 100,000 miles.

B. Plaintiff starts having problems with his Optima

1. August 5, 2014 visit

In early August 2014, plaintiff had his Optima towed to Kia of Cerritos, and reported that the vehicle would not "go into reverse [gear] intermittently." The dealership mechanics were unable to replicate the problem, and thus were unable to do anything to fix it.

After the dealership forwarded its paperwork to Kia, Kia tried to call plaintiff three times on the days immediately following his August 5, 2014 visit. Plaintiff did not return any of the calls. Although plaintiff later testified he did not remember the voicemails Kia left for him, he did not deny that Kia had tried to reach him.

When Kia received no response from plaintiff, it closed his case.

2. December 20, 2014 visit

In mid-December 2014, plaintiff noticed that (1) one of the windows of his Optima was not properly rolling up, and (2) the Optima was still sometimes "not go[ing] in reverse when in the reverse gear." Plaintiff brought the vehicle into the dealership on December 20, 2014. The dealership mechanics repaired the window, but "could not duplicate" the gear-shifting problem and found "no codes in [the] system" after hooking the car up to diagnostic computers; the dealership consequently concluded the "vehicle [was] working as designed."

Although the dealership’s paperwork contained no contemporaneous notation, plaintiff testified at trial that his Optima would not go into reverse when he was leaving the dealership during his December 2014 visit, that plaintiff summoned an unknown "individual" who had given him "all the paperwork," that the individual then summoned his "supervisor," that the three of them pushed the vehicle back to the service garage, and that no mechanic could find any problem.

C. Plaintiff’s first buyback request

On January 12, 2015, plaintiff called Kia to inform the distributor that he took his Optima to the dealership because it had "not go[ne] into reverse," that the dealership had been "unable to duplicate" the issue and thus "cannot find what is wrong," and demanded that Kia buy back his car. Although Kia’s paperwork contains no contemporaneous notation, plaintiff testified at trial that he also told Kia on that call that two dealership employees had witnessed the defect as plaintiff was leaving the December 2014 appointment.

In response to plaintiff’s calls, Kia reopened plaintiff’s case and arranged for a Kia field technician to examine his Optima at the dealership. The technician examined plaintiff’s Optima on February 16, 2015. Unable to duplicate the concern, the technician installed a "flight recorder" to plaintiff’s Optima to record its transmission’s operation. The technician removed the flight recorder in late March 2015, and reviewed the data. The data "indicate[d] that [the] transmission is operating correctly."

In light of its inability to verify any defect with plaintiff’s Optima, Kia denied plaintiff’s request for a buyback.

D. Plaintiff’s further visits to the dealership prior to Kia’s first offer

Between April 2015 and December 2015, plaintiff brought his Optima to the dealership three more times. During an October 14, 2015 visit, plaintiff did not mention anything about the car’s intermittent failure to go in reverse. During a November 10, 2015 visit, plaintiff reported that his Optima would "los[e] power" and would "not go into reverse sometimes." The dealership mechanics were unable to duplicate that issue after driving the car for two miles. The dealership recommended that plaintiff install the flight recorder again, but he declined. During a December 9, 2015 visit, plaintiff again reported that the car would "intermittently" not go into reverse. The dealership mechanics were unable to duplicate the issue, even after updating the software governing the Optima’s transmission.

In early February 2016, Kia offered to refund plaintiff five of his monthly car payments for his inconvenience. Plaintiff rejected the offer.

E. Kia's formal offer to replace or repurchase plaintiff's Optima

On February 9, 2016, Kia sent plaintiff an offer letter that presented him with three options—namely, Kia offered to (1) replace plaintiff's vehicle with a "comparable" Optima; (2) repurchase plaintiff's vehicle by (a) paying him $11,800.36, and (b) paying off the outstanding balance of his loan on the Optima; or (3) send a field technician "for the purpose of inspecting and repairing the vehicle" along with paying plaintiff $10,000 "as a one-time goodwill gesture" for plaintiff to accept as a full settlement. The $11,800.36 repurchase amount in the second option was calculated as the sum of plaintiff's $8,000 down payment plus $6,709 in monthly payments plaintiff had already made, less a $299 deduction for the third-party security device, a $2,299 deduction for the third-party service contract, and a $310.64 deduction for the 1,533 miles on the Optima at the time of plaintiff's first visit to the dealership reporting the problem in August 2014. The offer letter explained that the first and second options were "contingent on [a] physical inspection of the vehicle for damage and/or excessive wear and tear," and that plaintiff would be "required" to provide a cashier’s check for any diminution in value. (The Optima had no damage at this time.) The offer letter also explained that plaintiff would be "require[d]" to "sign[] [a]...