The California Court of Appeals decided yesterday in Benson v. Southern California Auto Sales, Inc., et al, Case No. G050484 (Aug. 27, 2015) that when a dealer has made an appropriate and timely correction offer in response to a Consumers Legal Remedies Act (“CLRA”) notice of violation, a plaintiff cannot subsequently recover attorneys’ fees or costs. This Decision adds another win to a string of recent victories for California dealers.
What is the Consumer Legal Remedies Act? A consumer may bring an action under the CLRA to recover damages and injunctive relief if a seller has committed one or more of the 23 unfair or deceptive acts or practices acts proscribed as unlawful under the Act. A consumer must give the seller written notice of the particular violation or violations. If the consumer “wins”, a court is required to award the consumer plaintiff fees and costs. However, the CLRA provides sellers with a 30 day “safe harbor” period to correct the violation. If the seller provides “an appropriate correction, repair, replacement, or other remedy” within 30 days of receiving this notice, the consumer cannot recover monetary damages.
How does Benson Change the Landscape? In Benson, the consumer complained that he was sold a vehicle with undisclosed frame damage, that the car’s price on the contract was $1,496 higher than the advertised price, and that the dealership failed to disclose a deferred down payment on the contract. Benson sent the statutorily required notice of violation of the CLRA demanding correction and other forms of relief, and then filed his lawsuit prior to the expiration of the 30 day safe harbor period. In response, the dealership offered to settle the matter by rescinding the contract, returning the vehicle to the dealership, refunding all car payments, satisfying of the debt to the lender, paying $2,500 for incidental and attorneys’ fees. The offer was, of course, conditioned on executing a mutual settlement and release of all claims, not just those asserted under the CLRA.
Like many consumers represented by “consumer rights” attorneys, Benson rejected the offer and continued to prosecute the lawsuit. Just prior to trial, the parties settled plaintiff’s claims, leaving Benson’s entitlement to attorneys’ fees for the court to decide. The trial court denied Benson’s attorney fee motion, finding that the dealership made an appropriate CLRA correction offer at the outset, which would have eliminated Benson’s damages and therefore Benson was not entitled to monetary damages or attorneys fees.
The Court of Appeals affirmed the decision and noted that the trial court is in the best position to determine whether an appropriate correction offer has been made by the seller and held that when an appropriate correction offer is made, a plaintiff cannot collect attorneys’ fees. The Court reasoned “[the CLRA] actually has two purposes. Protecting consumers is one; providing efficient and economical procedures to secure such protection is the other. It is neither efficient nor economical to engage in protracted litigation and to run up attorney fees when an appropriate correction has been offered at the very outset.” Noting, in essence, that such cases are driven by a fight for attorneys’ fees, the Court opined that the CLRA is not intended “to have lawyers receive a windfall when they make such claims.”
Benson is a win for dealers that underscores the importance of completing an investigation within thirty days of a consumer’s claim. When the facts indicate that the consumer may prevail, making a correction offer - such as an offer of rescission when appropriate – within thirty days of receiving a CLRA violation notice will negate the attorneys’ fees award in that case and discourage frivolous claims by overzealous consumer lawyers in the future.