In Pulliam v. HNL Automotive Inc., the Supreme Court today holds that a Federal Trade Commission rule allowing a consumer to sue not only the seller of defective goods but also the third-party holder of a credit contract on the sale does not prevent the consumer from getting attorney fees from the creditor. This despite the so-called Holder Rule expressly providing that “[r]ecovery hereunder by the debtor shall not exceed amounts paid by the debtor hereunder.”

The court’s unanimous opinion by Justice Goodwin Liu concludes that the Holder Rule’s recovery limit does not preclude an attorney fee award under state law, “as long as the existence of such liability is not due to the Holder Rule extending the seller’s liability for attorney’s fees to the holder.” The Rule’s history, the court says, “indicates that the FTC intended the Rule to serve as a national floor, not to restrict the application of state laws authorizing additional awards of damages or attorney’s fees against a seller or holder.”

The court thus allows the plaintiff to collect almost $170,000 in attorneys fees after a jury awarded about $22,000 for a violation of California’s Song-Beverly Consumer Warranty Act (commonly known as the “lemon law”) in the sale of a used car, because Song-Beverly says prevailing consumers can recover attorney fees.

The court affirms the Second District, Division Five, Court of Appeal, published opinion. It disapproves a 2018 Third District decision and a 2020 decision by the First District, Division Five.