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Court of Appeal:
Conditional Offer Satisfied Duty Under State’s ‘Lemon Law’
Justice Adams Says, in Dissent, That Permissibility, Under Statute, of Nondisclosure Proviso, as to Financial Terms, in a Settlement Agreement Did Not Obligate Lessor of Defective Car to Accept Offer by Maker of Volkswagens
By a MetNews Staff Writer
The Court of Appeal for this district has affirmed a summary judgment in favor of the maker of Volkswagens in a suit under the state’s “Lemon Law,” holding, in a 2-1 decision, that the plaintiff cannot prove damages because the defendant offered to refund the amounts paid under a lease, minus a reasonable usage charge, with a “goodwill” allotment of $3,000 in attorney fees tossed in—with the proviso, however, that financial terms be kept confidential.
It was the effect of the proviso that divided Div. Three.
Presiding Justice Lee Edmon wrote majority opinion, joined in by Los Angeles Superior Court Judge Mark K. Hanasono, sitting on assignment. Justice Rashida Adams dissented.
Edmon declared that because the Lemon Law—known, formally, as the Song–Beverly Consumer Warranty Act—authorizes confidentiality provisions in settlement agreements, to the extent that they relate to financial terms, inclusion of the condition by Volkswagen Group of America, Inc. (“VWGA”) in a pre-litigation proposed settlement with Terry Carver, was an “Act-compliant offer of restitution,” precluding liability. Adams took the stance that while VWGA permissibly insisted on confidentiality as to the settlement terms, Carver was not obliged to accept the offer so long as it placed on him the burden of silence.
Efforts by his attorney to settle with the condition removed were unsuccessful.
Along with suing VWGA, Carver named Galpin Volkswagen, LLC, as a defendant. That San Fernando Valley company had been unable to fix the car Carver leased because there was a long delay in obtaining from VWGA an essential part.
Both defendants were beneficiaries of the summary judgment, granted by Los Angeles Superior Court Judge John Kralik.
The issue was whether VWGA was in compliance with Civil Code §1792.2(d)(1), a part of the Song-Beverly Act. That provision says that “if the manufacturer or its representative in this state does not service or repair the goods to conform to the applicable express warranties after a reasonable number of attempts, the manufacturer shall either replace the goods or reimburse the buyer in an amount equal to the purchase price paid by the buyer, less that amount directly attributable to use by the buyer prior to the discovery of the nonconformity.” Civil Code §1793.26(a)(2) proscribes “a confidentiality clause, gag clause, or similar clause prohibiting the buyer or lessee from disclosing information to anyone about the problems with the vehicle” and subd. (b) declares any such proviso to be “null and void.” However, subd. (c) says:
“Nothing in this section is intended to prevent any confidentiality clause, gag clause, or similar clause regarding the financial terms of the reacquisition of the vehicle.”
It was based on subd. (c) that Edmon concluded that VWGA was in compliance.
Maxim Cited
Edmon invoked the maxim “expressio unius est exclusio alterius”—“the expression of one thing is the exclusion of another.” She wrote:
““Had the Legislature intended to prohibit vehicle manufacturers from conditioning repurchase on confidentiality provisions of any kind, it would have been an easy matter to say so. Instead, it adopted a much more limited reacquisition prohibition: It said that manufacturers may not condition repurchase of lemon vehicles on a consumer’s promise not to disclose the vehicle’s mechanical problems, and it clarified that the section was not intended to prevent any confidentiality clause regarding the financial terms of a vehicle’s reacquisition. Reading these clauses together, as we must, the most reasonable interpretation of the statute is that repurchase offers may be conditioned on financial nondisclosure agreements.”
Adams countered in her dissent:
““There can be no dispute that section 1793.26, subdivision (c) does not prohibit confidentiality clauses regarding the financial terms of the reacquisition of a vehicle pursuant to section 1793.2, subdivision (d). The language of section 1793.26, subdivision (c) is clear and unambiguous on that point. What is less clear is whether, by not preventing such provisions, the Legislature intended to allow manufacturers to require that a consumer agree to such provisions in order to receive the restitution the statute otherwise mandates the manufacturer provide. On this point, I disagree with the majority.”
She went on to say:
“[A]llowing a manufacturer to avoid complying with statutory mandates under the Act by insisting on the consumer’s agreement to an extraneous term the statute permits, but does not require, would seem to be entirely at odds with the Act’s consumer protective purpose.”
References to Anomalies
The jurists dueled over what would create an anomaly.
Edmon said: “[I]it would be anomalous if the Legislature intended negotiations about financial nondisclosure terms—which the statute expressly permits—to derail lemon buybacks, thereby increasing litigation and delaying consumer recovery. We therefore conclude that the Legislature intended to allow vehicle manufacturers to condition lemon buybacks on the purchaser’s consent to financial nondisclosure terms.”
Adams set forth:
“It would be anomalous if, despite not requiring that a consumer take any affirmative steps to obtain relief, the Act also permitted a manufacturer to deny that relief entirely if the consumer refuses to agree to terms that are not set forth in section 1793.2, subdivision (d).
Edmon, in a footnote, recited Adams’s view, and remarked: “But as the dissent acknowledges, the statute undoubtedly permits manufacturers to include some terms not detailed in the statute, such as predicating repurchase on the consumer’s transfer of title to a lemon vehicle.”
VWGA’s Offers
The offer by VWGA was to pay Carver $8,542.85—comprised of a $6,332.00 downpayment, $4,626.72 in payments made on the lease, minus a $2,415.87 usage charge, with the $3,000 payment for attorney fees added. A return of the car was required.
In the alternative, it offered to pay the all-inclusive sum of $7,500, with Carver retaining the vehicle.
Other issues raised by Carver in the appeal were decided in the defendants’ favor.
The case is Carver v. Volkswagen Group of America, Inc., 2024 S.O.S. 3856.
Burbank attorney Nicholas A. Bravo represented Carver. Sean P. Conboy, Nathaniel K. Fisher, Shaun Kim, and Paul Czer of the downtown Los Angeles firm of Squire Patton Boggs acted for VWGA and Galpin.
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