Garcia v. Mercedes-Benz USA, LLC

A few weeks later, the trial court entered a judgment dismissing Garcia's lawsuit with prejudice. Garcia thereafter filed this timely appeal.

DISCUSSION

Garcia argues that the trial court erred in denying her attorney's fees and costs. Mercedes-Benz asserts that we need not reach these questions because the trial court's denial order is not appealable. We address the appealability question first.

The Act also grants new car buyers the right to sue when a manufacturer or retail seller "fail[s] to comply" with any "implied or express warranty." (§ 1794, subd. (a).) A buyer bringing suit may seek actual damages, which differ depending on whether she alleges a breach of implied warranty or a breach of an express warranty. (Compare §§ 1794, subd. (b), 1791.1, subd. (d); Cal. U. Com. Code, §§ 2711 - 2715 [remedies for breach of implied warranty] with §§ 1793.2, subd. (d), 1793.3 [remedies for breach of express warranty], 1795 ["persons other than the manufacturer of the goods" may make express warranties]; see generally Music Acceptance Corp. v. Lofing (1995) 32 Cal.App.4th 610 , 620-621, 39 Cal.Rptr.2d 159 [noting how remedies differ]; Brand , supra , 226 Cal.App.4th at p. 1548, 173 Cal.Rptr.3d 454 [same].) Unless a buyer's "claim [is] based solely on a breach of an implied warranty," the buyer may also seek a "civil penalty" (of up to two times the amount of actual damages) if the manufacturer's or retail seller's "failure to comply was willful." (§ 1794, subds. (c) & (e).)

Most pertinent here, a buyer who "prevails in [her] action" may recover "costs and expenses, including attorney's fees based on actual time expended, determined by the court to have been reasonably incurred by the buyer in connection with the commencement and prosecution" of her action under the Act. (§ 1794, subd. (d).) Making attorney's fees available to prevailing buyers (but not prevailing manufacturers or retail sellers) is designed to " 'provide [ ] injured consumers strong encouragement to seek legal redress in a situation in which a lawsuit might not otherwise have been economically feasible.' " ( Wohlgemuth , supra , 207 Cal.App.4th at p. 1262, 144 Cal.Rptr.3d 545 .)

The buyer bears the burden of showing that she prevailed. (See Robertson v. Fleetwood Travel Trailers of California, Inc. (2006) 144 Cal.App.4th 785 , 817-818, 50 Cal.Rptr.3d 731 ( Robertson ).)

2. Analysis

Because Mercedes-Benz offered to repurchase her car for the full amount save the dealer add-ons, Garcia pursued litigation, at most, to achieve one or more of the following objectives: (1) getting Mercedes-Benz to refund the amount of the dealer add-ons; (2) obtaining a civil penalty; and (3) seeking an award of attorney's fees under the Act. Because Garcia did not demand any civil penalty in any of her post-complaint negotiations with Mercedes-Benz, she seemingly abandoned her objective of obtaining a civil penalty; we will nevertheless continue to treat it as one of her litigation objectives.

Garcia assails two of the above stated reasons for concluding that a buyer cannot, under the Act, sue the manufacturer for a refund of goods and services purchased from the dealer. First, she argues that the Act does not

We are cognizant that our conclusion that a buyer is not a prevailing party under the Act's attorney's fees provision just because she convinces the manufacturer to pay for products and services supplied by the retail seller means that a buyer will not have a right to obtain a full refund for all outlay associated with her new defective car from a single party. And we recognize that a "one-stop" remedy for buyers may make good sense, especially when the buyer in most cases purchased the car as part of a "one-stop" shopping experience with the dealer. However, we are not free to disregard the Act's plain language to implement what might be otherwise good public policy; that task lies solely with our Legislature. ( Friends of Shingle Springs Interchange, Inc. v. County of El Dorado (2011) 200 Cal.App.4th 1470 , 1492, 133 Cal.Rptr.3d 626 ["Courts defer to the legislative branch in matters of public policy."].)

b. Civil penalty

A buyer's decision to proceed to trial to obtain a civil penalty under the Act can make her a prevailing party. ( MacQuiddy , supra , 233 Cal.App.4th at p. 1049, 182 Cal.Rptr.3d 691 .) In this case, however, substantial evidence supports the trial court's finding that the confidential nature of the settlement precluded Garcia from showing whether she achieved that litigation objective. We know the parties' prelitigation positions and that Garcia obtained some monetary recovery (a point the parties concede), but we do not know the exact terms they ultimately agreed to. The trial court's refusal to infer the parties' ultimate settlement terms from their final volley of a non-confidential settlement letter was reasonable, and we must indulge all reasonable inferences when evaluating a ruling for substantial evidence. (

B. Costs

As with attorney's fees under the Act, a plaintiff is entitled to her costs if she is a prevailing party. (§ 1794, subd. (d).) As noted above, the Act does not define what it means to be prevailing party. Fortunately, also as noted above, our Legislature has defined what the term means in the context of costs in Code of Civil Procedure section 1032, making it unnecessary for us to resort to the judicially developed definition of prevailing party we used, above, to assess attorney's fees. Under section 1032, a prevailing party includes a "party" who obtains "a net monetary recovery." ( Code Civ. Proc. § 1032, subd. (a)(4).) Our Supreme Court recently clarified that "a partial recovery, as long as it is a net monetary recovery, entitles a plaintiff to costs." ( DeSaulles , supra , 62 Cal.4th 1140 at p. 1157, 202 Cal.Rptr.3d 429 , 370 P.3d 996 .) Because Garcia obtained some net monetary recovery in her settlement with Mercedes-Benz (albeit of unknown amount), she is entitled to costs.

As a general rule, we may only entertain appeals from final judgments. ( Code Civ. Proc., § 904.1, subd. (a).) This rule is designed " 'to prevent piecemeal dispositions and costly multiple appeals.' [Citation.]" ( Howeth v. Coffelt (2017) 18 Cal.App.5th 126 , 133-134, 226 Cal.Rptr.3d 773 .) One corollary of this "one final judgment" rule is that " ' "interlocutory or interim orders are not appealable." ' " ( Id. at p. 133, 226 Cal.Rptr.3d 773 .) This corollary applies to an order denying interim (that is, prejudgment) attorney's fees. ( Sese v. Wells Fargo Bank N.A. (2016) 2 Cal.App.5th 710 , 716, 206 Cal.Rptr.3d 715 .) However, a second corollary of the "one final judgment" rule is that interim rulings that are not themselves appealable remain " ' " 'reviewable on appeal' from the final judgment." ' " ( Howeth , at p. 133, 226 Cal.Rptr.3d 773 .) Because "[a] dismissal with prejudice following a settlement constitutes a final judgment on the merits" ( Estate of Redfield (2011) 193 Cal.App.4th 1526 , 1533, 124 Cal.Rptr.3d 402 ; Code Civ. Proc., § 581d ), we have jurisdiction to review the trial court's prejudgment attorney's fees and costs order on appeal from the final judgment subsequently entered in this case.

Garcia contends that she is entitled to attorney's fees and costs as a prevailing party under the Act. We review a trial court's attorney's fees and cost rulings, including its determination of whether a party is the prevailing party for an abuse of discretion. ( Goglin v. BMW of North America, LLC (2016) 4 Cal.App.5th 462 , 470, 208 Cal.Rptr.3d 646 ( Goglin ); MacQuiddy v. Mercedes-Benz USA, LLC (2015) 233 Cal.App.4th 1036 , 1047, 182 Cal.Rptr.3d 691 ( MacQuiddy ); El Dorado Meat Co. v. Yosemite Meat & Locker Service, Inc. (2007) 150 Cal.App.4th 612 , 617, 58 Cal.Rptr.3d 590 [award of costs].) To the extent these inquires require us to construe statutes, our review is de novo ( Wohlgemuth v. Caterpillar Inc. (2012) 207 Cal.App.4th 1252 , 1258, 144 Cal.Rptr.3d 545 ( Wohlgemuth ) ); to the extent they require us to review the trial court's factual findings, we review for substantial evidence ( Stratton v. Beck (2017) 9 Cal.App.5th 483 , 496, 215 Cal.Rptr.3d 150 ).

The Act is colloquially known as California's "lemon law," and is a "strongly pro-consumer" law aimed at protecting, among others, new car buyers. (

A handful of courts have imported the definition of prevailing party from the general statute governing costs, Code of Civil Procedure section 1032. (See Reveles v. Toyota by the Bay (1997) 57 Cal.App.4th 1139 , 1158, 67 Cal.Rptr.2d 543 , disapproved on other grounds in Gavaldon v. DaimlerChrysler Corp. (2004) 32 Cal.4th 1246 , 1261, 13 Cal.Rptr.3d 793 , 90 P.3d 752 ; Kim v. Euromotors West/The Auto Gallery (2007) 149 Cal.App.4th 170 , 181, 56 Cal.Rptr.3d 780 .) Under that statute, the party who obtains "a net monetary recovery" is a prevailing party. ( Code Civ. Proc., § 1032, subd. (a)(4) ; DeSaulles v. Community Hospital of Monterey Peninsula (2016) 62 Cal.4th 1140 , 1157, 202 Cal.Rptr.3d 429 , 370 P.3d 996 ( DeSaulles ).)

A greater number of courts have elected to take a more "pragmatic" and less restrictive approach to assessing whether a buyer has prevailed. (See Wohlgemuth , supra , 207 Cal.App.4th at p. 1264, 144 Cal.Rptr.3d 545 ; MacQuiddy , supra , 233 Cal.App.4th at p. 1047, 182 Cal.Rptr.3d 691 ;

The trial court did not abuse its discretion in declining to find Garcia to be a prevailing party just because she pursued litigation to obtain the dealer add-ons from Mercedes-Benz. That is because she is not legally entitled, under the Act, to obtain a refund of those dealer add-ons from the manufacturer . (Cf. People v. Superior Court (Humberto S. ) (2008) 43 Cal.4th 737 , 746, 76 Cal.Rptr.3d 276 , 182 P.3d 600 ["when a trial court's discretion rests on an error of law, that decision is an abuse of discretion"].) Garcia purchased the add-ons from the dealer, not Mercedes-Benz. Except as to foodstuffs, a plaintiff seeking to recover for breach of an implied warranty of merchantability must prove privity with the breaching party. ( Burr v. Sherwin Williams Co. (1954) 42 Cal.2d 682 , 695, 268 P.2d 1041 ["privity of contract is required in an action for breach of ... implied warranty"]; Arnold v. Dow Chemical Co. (2001) 91 Cal.App.4th 698 , 720, 110 Cal.Rptr.2d 722 .) As to the dealer add-ons, Garcia's privity is with the dealer-not Mercedes-Benz.

The Act itself reinforces this conclusion. To begin, the Act recognizes that manufacturers and retail sellers (that is, dealers) are distinct entities. (Compare § 1791, subd. (j) [defining "[m]anufacturer"] with § 1791, subd. ( l ) [defining "[r]etail seller"].) Further, by granting only retail sellers the right to seek indemnity from manufacturers for any amounts they pay a buyer for breach of the implied warranty (§ 1792), the Act (1) reinforces that each entity is only to pay for its share of the buyer's loss, and (2) by negative implication affirms that manufacturers do not have a reciprocal right to seek indemnification from retail sellers for any amounts the manufacturers pay on retail sellers' behalf for a breach of the implied warranty. ( Spicer v. City of Camarillo (2011) 195 Cal.App.4th 1423 , 1427, 125 Cal.Rptr.3d 357 ["a statute may express the law by 'negative implication' "].) Yet Garcia is asking Mercedes-Benz to pay for the dealer's breach. Lastly, the Act affirmatively states that manufacturers are not required to refund buyers for the cost of "nonmanufacturer items installed by a dealer" (that is dealer add-ons) when the buyer sues for breach of an express warranty. (§ 1793.2 subd. (d)(2)(B).) This statutory carve-out for dealer add-ons would be largely nullified if we were to conclude that buyers had a right to make manufacturers pay for dealer add-ons under an implied warranty theory; all a buyer would have to do is restate her breach of express warranty claim as a breach of implied warranty claim, something that could be done in every case in which the defect is one that tenders the new car "[un]fit for the ordinary purposes for which [cars] are used" (thereby breaching the implied warranty) (§ 1791.1, subd. (a)(2) because such a defect necessarily renders the car "nonconforming" (thereby breaching any express warranty) (§ 1793.2, subd. (c)). We must avoid rulings that nullify statutes in whole or in part. (

Second, Garcia asserts that we need not be concerned that buyers will always do "end runs" around the statutory carve out for dealer add-ons that applies to an express warranty by recasting their claims as breaches of an implied warranty because buyers may seek a refund or a replacement vehicle (and may sue for the failure to provide such) under an express warranty theory only if the manufacturer is first given a reasonable opportunity to repair the vehicle. (§ 1792.3, subd. (d)(1) & (2); Oregel v. American Isuzu Motors, Inc. (2001) 90 Cal.App.4th 1094 , 1103, 109 Cal.Rptr.2d 583 ; Robertson , supra , 144 Cal.App.4th at p. 810, 50 Cal.Rptr.3d 731 ; see also Silvio v. Ford Motor Co. (2003) 109 Cal.App.4th 1205 , 1206-1207, 135 Cal.Rptr.2d 846 [affirming conclusion that manufacturer may insist upon two opportunities to repair vehicle].) But this precursor requirement establishes, at best, that not all implied warranty claims can be restated as express warranty claims. It does not speak to-or in any way undermine-our concern that many express warranty claims can be restated as implied warranty claims, thereby sidestepping and negating our Legislature's explicit limitation on express warranty claims.

Because Mercedes-Benz is not legally responsible to pay Garcia for the dealer add-ons, Garcia's success in getting Mercedes-Benz to pay more than the statute requires does not count as a cognizable litigation benefit. A buyer can be a prevailing party under the Act if she incurs attorney's fees after rejecting a settlement on terms the law does not require or permit. (E.g., Goglin , supra , 4 Cal.App.5th at pp. 471-472, 208 Cal.Rptr.3d 646 [buyer rejected settlement containing a broad waiver of rights; prevailing party];

c. Attorney's fees

Where, as here, the trial court could not have found Garcia to be a prevailing party because Mercedes-Benz refunded

DISPOSITION

The judgment is modified to award Garcia $750 in costs. As modified, the judgment is affirmed. Each party is to bear its own costs on appeal.

HOFFSTADT, J.

We concur:

LUI, P.J.

CHAVEZ, J.