Since 1970, California’s Consumer Legal Remedies Act (“CLRA”) has protected consumers, particularly those who lack commercial sophistication, from unethical businesses practices. Often referred to as the state’s “Lemon Law,” the CLRA has most often been used against used car dealers.
Typical CLRA Allegations
Typical allegations have included claims that the dealer sold:
- Accident-damaged vehicles without appropriate notice to the purchaser
- Vehicles at prices greater than advertised
- Rental cars without disclosing the vehicles’ rental histories
- Sold what were classified as “certified” pre-owned vehicles, which did meet qualifications for the “certified” designation
Written Notice of “Violation” Required
In order to take advantage of the CLRA, the consumer must give the dealer written notice of the particular violation or violations. If the consumer prevails in his or her claim, the court is required to award attorney’s fees and costs to the consumer.
30-Day “Safe Harbor”
It is important to note that the CLRA provides the dealer with a 30-day “safe harbor” period to correct the alleged violation. Under the Act, if the seller provides “an appropriate correction, repair, replacement, or other remedy” within 30 days of receiving the written notice, the consumer cannot recover monetary damages.
Corrective Offer Can Deflate CLRA Civil Action
The power of an appropriately framed “corrective offer” became clear in a Court of Appeals decision late last summer. In the Benson case, the customer contended, among other things, that he had been sold a vehicle with undisclosed frame damage, and that the vehicle’s price exceeded the advertised price. The customer sent the required written notice, and also filed a lawsuit against the dealer. Before the expiration of the 30-day safe harbor time period, the dealer offered to “unwind” the transaction completely and to pay $2,500 in attorney fees. The customer refused and continued with the lawsuit. Later, the case was actually settled, but the issue of attorney fees still hung like a cloud. The trial court denied the request for attorney’s fees and the Court of Appeals affirmed.
CLRA Has Two Purposes, Not Just One
The Court said that the CLRA had two purposes. Its first purpose, of course, was to protect consumers. Second, the CLRA provided efficient and economical procedures to secure that sort of protection. To allow the consumer to engage in protracted litigation, and to run up attorney fees when an appropriate correction had been offered at the outset, was against the very purposes of the CLRA.
Bottom line: As was the case in Benson, where the defense to the CLRA allegations may not be strong, unwinding the transaction may be the least expensive way out for the dealer.
Facing CLRA Allegations?
Does your automobile dealership face CLRA allegations? Recognize that, while the CLRA is a powerful weapon in the hands of an aggressive consumer or consumer’s attorney, your business is not without power of its own. Under all circumstances, your business needs to conduct an early and aggressive investigation of the facts. Just as important, you need skilled, experienced legal counsel who are familiar with the CLRA, its defenses, and who are also skilled in negotiations.
CKB VIENNA LLP has a long history of representing clients in all phases of business litigation, including vigorous representation of dealers and other automotive businesses regarding alleged CLRA violations. Our team understands the complexity of the issues, and stands ready to assist your business. We have offices in Rancho Cucamonga, San Bernardino, and Los Angeles. Contact us by telephone at 909-980-1040, or complete our online form.