Different Approaches To CLRA Damages

Austin B Kenney
Colin T Murphy

Authors:
Austin B. Kenney &
Colin T. Murphy

Is a car buyer’s ability to recover attorneys’ fees and costs under California’s Consumer Legal Remedies Act (the “CLRA”) limited by the seller’s timely tender of an attempted “cure”? Three recent cases address the issue in different ways, running the gamut from “no effect” to rejecting any award for attorneys’ fees. Benson v. S. California Auto Sales, Inc., 239 Cal. App. 4th 1198 (2015); Goglin v. BMW of N. Am. LLC, 4 Cal. App. 5th 462 (2016); Gonzales v. CarMax Auto Superstores LLC, 845 F.3d 916 (9th Cir. 2017).

The CLRA (Cal. Civ. Code Section 1750, et seq.) allows recovery of money damages and injunctive relief against sellers of consumer goods who commit unfair and deceptive practices. A prevailing consumer can recover attorneys’ fees and costs, while a prevailing seller can do so only if the consumer did not prosecute the action in good faith. “Who prevailed” often turns on whether the seller tendered an offer to “correct, repair, replace, or otherwise rectify” the offending goods within the required 30-day period from the purchaser’s pre-litigation notice. These three recent decisions provide some guidance, but their teaching is also somewhat inconsistent.

Benson denied a purchaser’s request for $182,273 of attorneys’ fees and costs after the purchaser rejected the seller’s pre-litigation tender. Benson sent a 30-day pre-litigation notice related to the defective vehicle. The dealer timely responded, offering to rescind the contract, to satisfy the customer’s debt, and to pay $2,500 for incidental damages and attorneys’ fees. But the dealer also required that Benson sign a mutual release and that the release waive Benson’s non-CLRA claims, too. Benson rejected the offer. After much litigation, the trial court entered judgment in Benson’s favor, but denied his claim for damages, attorneys’ fees and costs because the dealer’s tender satisfied the CLRA.

The 4th District Court of Appeal, Division 3 agreed, applying “a hybrid standard [of review] to evaluate whether the circumstances identified in the statute as criteria for an award exist [and] . . . whether substantial evidence supports the exercise of the court’s discretion.” The Court of Appeal rejected Benson’s contention that the dual requirements of a mutual release and giving up non-CLRA claims rendered the seller’s cure inadequate. The Court of Appeal found no error in the trial court’s conclusion that the non-CLRA claims added no value to Benson’s CLRA claim (and found that requiring a mutual release was both routine and wise).

A year later, the same Court of Appeal, Division 1 held in Goglin that a pre-litigation Benson-type tender had no effect outside the CLRA context. 4 Cal. App. 5th at 472. Goglin was awarded $185,214.19 despite the dealer’s response to a pre-litigation CLRA letter, offering to rescind the deal, pay off the contract and reimburse Goglin for reasonable attorneys’ fees. Like Benson, the tender also required Goglin to sign a mutual release, but, this time, required confidentiality and non-disparagement.

The Court of Appeal approved the award, arguing that Goglin moved for fees under the Song-Beverly Act, and not the CLRA. The Court of Appeal held that Benson offered no guidance despite the existence of the CLRA cause of action and the Benson tender, because the Song-Beverly Act prohibited the confidentiality clause and because Goglin sought attorneys’ fees solely under the Song-Beverly Act, which has no pre-litigation notice requirement like the CLRA.

The Ninth Circuit Court of Appeals also recently distinguished Benson in its Gonzales decision. As in Goglin, the court focused on whether the claim or relief sought required pre-litigation notice. Gonzales served a pre-litigation CLRA notice, even though he technically was not required to because he did not seek damages, only injunctive relief. The dealer made a timely Benson tender, which Gonzales rejected. The dealer removed the case to federal court, prevailed on summary judgment, and sought attorneys’ fees. The Court of Appeals instead granted summary judgment to Gonzales on his CLRA claim, and held that the dealer’s tender did not protect the dealer against an attorneys’ fees award because Gonzales did not seek damages under the CLRA. The Court of Appeals remanded for the district court “to determine in the first instance whether Gonzales qualifies as a prevailing plaintiff.” Unfortunately, the case was settled and dismissed, so there will be no answer on remand.

Benson and Goglin beg the vexing question—still unanswered—as to whether a trial court should focus in the first instance on the CLRA claim or the non-CLRA claim (such as a Song-Beverly claim) when both are pleaded and a Benson-style tender is made. Gonzales, despite outward appearances, did not bridge the gap left by Benson, which had “declined to ‘address the requirements for an attorney fee award based on a request for injunctive relief.’” 845 F.3d at 918. Gonzales instead only muddied the waters further by remanding the case to determine whether the purchaser prevailed in the first instance.

Adherence to Benson suggests a carrot-and-stick approach, enticing sellers to make prompt curative offers while threatening denial of attorneys’ fees to consumers who reject reasonable offers. Benson thus eliminates the unpredictability of judicial draw preserved by the hybrid standard of review adopted by appellate courts. On the other hand, Goglin—and (depending on the outcome on remand) Gonzales—encourage the worst kind of policy born from the CLRA’s notice requirement, which is that consumers armed with favorable attorneys’ fees statutes can continue to litigate cases despite having received make-whole offers. Thus, while Benson offers consistency and predictability, its progeny should not be applied in a way that discourages the CLRA’s pre-litigation give-and-take or reward those who reject or fail to engage that process.

This article is reprinted with permission from the Daily Journal. For more information regarding attorneys’ fees under the CLRA, contact Austin B. Kenney at abk@severson.com or Colin T. Murphy at ctm@severson.com.

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