The Bentley Is A Lemon

From the Blog of Phyllis G. Pollack.

As many of my readers are aware, I mediate “lemon law” cases or matters brought under California’s Song-Beverly Consumer Warranty Act (Civ. Code §1790 et seq.). (“Song-Beverly Act”).

On June 8, 2009, Division Three of the Fourth Appellate District (i.e. Orange County) for the Court of Appeal of the State of California decided two appeals involving August B. Doppes and his 2001 Bentley Arnage.
The first appeal, Doppes v. Bentley Motors, Inc., Case No. G038734, focused more on the discovery abuses by Bentley’s counsel than the breach of warranty issues. But, it is interesting because the appellate court, in essence, imposed a civil penalty and granted the fraud claim as sanctions for discovery abuse. Further, the appellate court reaffirmed the lodestar approach in awarding attorneys’ fees.

The second appeal, Doppes v. Bentley Motors, Inc., Case No. G039922, involved the award of prejudgment interest on the repurchase of the Bentley under the Song-Beverly Act. But, more on this later.

In the first appeal (Case No. G038734), the issue before the appellate court was whether the “trial court [had] abused its discretion by failing to impose terminating sanctions against defendant for misuses of the discovery process.” (Id. at 2). The appellate court answered “yes,” finding that Bentley had engaged in “repeated and egregious violations of the discovery laws that not only impaired plaintiff’s rights but threatened the integrity of the judicial process.” (Id. at 2).

It seems that in April 2002, plaintiff August B. Doppes purchased a 2001 Bentley Arnage that had an “obnoxious odor” in the interior, causing the automobile to be out of service for 171 days. When Doppes demanded that Bentley replace or repurchase the vehicle in accordance with the Song-Beverly Act, Bentley refused. During the course of the litigation, Bentley withheld documents pertaining to its extensive knowledge about this odor concern, the other customer complaints, the fact that the odor emanated from corrosion protection wax, was prevalent in all of its model year 2001 four door cars, and related issues. (Id. at 4). Although, internal documents revealed that as early as June 2001, Bentley was aware of this concern, during discovery, it failed to provide such crucial but potentially damaging documents and continued to stonewall to the time of trial. However, the discovery referee, out of moderation, recommended issue sanctions rather than terminating sanctions. But, during trial, it became apparent that Bentley had engaged in further stonewalling and “hide the ball” tactics by not producing crucial e-mails and customer complaint files. Yet, the trial court still hesitated to issue terminating sanctions and allowed the jury to decide thecase.

Thereafter, the jury found that Bentley had violated the Song-Beverly Act and had concealed a material fact but found that neither the violation nor the concealment had been intentional. The jury also found that Bentley breached its express and implied warranties. The jury awarded Doppes the sum of $214,300 as reimbursement for a new vehicle  plus $100,000 for breach of the express and implied warranties. The court entered judgment for Doppes for $214,300 concurrent with the return of the vehicle to Bentley but to avoid double recovery, did not enter a judgment for the additional $100,000. The court also awarded prejudgment interest at seven percent per annum. (More on this later.)

After detailing the discovery abuses, the appellate court affirmed the judgment under the Song-Beverly Act and breach of express and implied warranty claims. But, as sanctions for the discovery abuse, it reversed the finding by the jury that Bentley did not commit fraud and did not intentionally violate the Song-Beverly Act. It remanded with directions, (1) to strike Bentley’s answer and to enter Bentley’s default on the fraud cause of action and to hold a default judgment prove-up hearing, and (2) to also enter a finding that Bentley intentionally violated the Song-Beverly Act such that civil penalties (typically two times the amount of actual damages) (California Civil Code §1794(c)) and other relief may be imposed against it at a subsequent hearing.

In the last part of its opinion, the appellate court discussed the award of attorneys’ fees noting that under the Song-Beverly Act, a prevailing buyer is entitled to recover attorney fees “reasonably incurred” and based on “actual time expended”. California Civil Code §1794(d). The court noted that, in essence, this statute is compatible with the lodestar adjustment method of calculating fees which requires “the trial court first to determine a touchstone or lodestar figure based on actual time spent and reasonable hourly compensation for each attorney.” (Id. at 37). Using this formula, the court determined that, in the main, the trial court did not abuse its discretion in awarding fees.

In the companion appeal, Doppes v. Bentley Motors, Case No. G039922, the appellate court affirmed the award of prejudgment interest at the rate of 7% per annum from the date of purchase in April 2002 to the date of entry of judgment in March 2007. Bentley appealed arguing that the Song-Beverly Act does not provide for the award of prejudgment interest, citing Duale v. Mercedes-Benz USA, LLC (2007) 148 Cal. App. 4th 718 (Duale) in support.

The appellate court distinguished Duale because there, the amount of damages owed to plaintiffs was not calculable prior to trial. The appellate court reasoned that the Duale appellate court “. . . did not hold prejudgment interest may never be recovered in a Song-Beverly Consumer Warranty Act case, but only that prejudgment interest was unrecoverable under section 3287 [Civil Code §3287] in this particular case because, under the facts, the amount of damages could not be resolved except by verdict.” (Id. at 7).

In contrast, in this case, the amount was known – $214,300 – prior to verdict. Noting that there is nothing in the Song-Beverly Act that bars recovery of prejudgment interest, the appellate court determined that under Civil Code §3287,  plaintiff was entitled to prejudgment interest.
With these two opinions, the appellate court provides much food for thought, including the use of the Song-Beverly Act’s civil penalty provisions as a “terminating” sanction for discovery abuses and the allowance of prejudgment interest from the date of purchase on a vehicle that is repurchased under this Act. Without doubt, these points will be much discussed within the “lemon law” community.

. . . Just something to think about.

                       

Phyllis Pollack

Phyllis Pollack with PGP Mediation uses a facilitative, interest-based approach. Her preferred mediation style is facilitative in the belief that the best and most durable resolutions are those achieved by the parties themselves. The parties generally know the business issues and priorities, personalities and obstacles to a successful resolution as… MORE >