In Niedermeier v. FCA US LLC, the Supreme Court today holds that restitution a manufacturer owes under the Song-Beverly Act (Civ. Code, § 1790 et seq.) to the buyer of a lemon vehicle is not reduced by proceeds a buyer has received when trading in or selling the vehicle. That rule applies “at least where, as here, a consumer has been forced to trade in or sell a defective vehicle due to the manufacturer’s failure to comply with the Act.”

It’s a 6-0-3 opinion, as all the justices but Justice Leondra Kruger sign the court’s opinion by Justice Kelli Evans. Justice Kruger writes a separate concurrence. Justices Joshua Groban and Martin Jenkins join both opinions.

The Act provides generally that restitution — which can be required “if the manufacturer . . . does not service or repair the goods to conform to the applicable express warranties after a reasonable number of attempts” — is to be “in an amount equal to the actual price paid or payable by the buyer.” The court concludes its no-reduction-for-trade-in-or-sale rule is compelled both by plain statutory language (“The Legislature recognized there were multiple sources of potential offsets to the restitution remedy yet did not include trade-in credits or sales proceeds in the statute”) and because a reduction “would be inconsistent with the legislative history and the Act’s consumer protective purpose.”

Justice Kruger’s opinion says the court’s rule must be a qualified one. She claims the statute is ambiguous and she eschews an interpretation that “categorically entitles a car buyer to trade in or sell a defective vehicle to a third party, retain the proceeds, and still demand a full refund of the purchase price (or even a brand-new replacement vehicle from the manufacturer),” because that “would seem to provide an avenue for double recovery in every lemon law case, regardless of whether the manufacturer has done anything wrong.” The no-reduction rule works in the present case “because [the defendant manufacturer] willfully refused to accept the return of the [defective vehicle] and promptly pay restitution, as it was statutorily required to do” and because the manufacturer’s “wrongdoing should not be rewarded in any measure.” This is so, Justice Kruger writes, even though the result is “something of a windfall for the buyer, in that it leaves her better off than she was before she purchased the defective car.”

The court reverses the Second District, Division One, Court of Appeal’s published opinion. It also approvingly cites two cases that are grant-and-holds for today’s opinion: Figueroa v. FCA US LLC (see here) and Williams v. FCA US LLC (see here). Horvitz & Levy is counsel for the defendant in Figueroa and Williams.


Supreme Court expands possible “lemon law” damages