Joseph Kaufman & Associates is proud to announce that an article written by its CEO has been published in the Daily Journal.
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Approximately 3.5 million used cars sold in California in 2024 will no longer be eligible for the refund-or-replace remedy, significantly affecting consumer protections. However used car buyers can still pursue claims against dealers and distributors.
by Joseph Kaufman
The lemon law landscape in California is changing rapidly. Assembly Bill 1755 (AB 1755) was signed into law less than two months ago, limiting the consumer protections of the Song-Beverly Consumer Warranty Act (Song-Beverly Act), colloquially referred to as California’s Lemon Law. Among other changes to the lemon law, AB 1755 created pre-suit notice requirements as a prerequisite to pursuing civil penalty damages, and post-suit procedures that will delay and limit discovery in lemon law cases. The changes will also allow car companies to take a negative equity deduction from consumers when they buy back lemons, a change that will ultimately cost consumers millions of dollars.
Following AB 1755, the California Supreme Court’s recent decision in Everardo Rodriguez v. FCA US LLC further reshapes California’s lemon law by holding that the refund-or-replace remedy of Civil Code section 1793.2, subdivision (d)(2), no longer applies to most used vehicles. The Court stated, “We conclude that a motor vehicle purchased with an unexpired manufacturer’s new car warranty does not qualify as a ‘motor vehicle sold with a manufacturer’s new car warranty’ under section 1793.22, subdivision (e)(2)’s definition of ‘new motor vehicle’ unless the new car warranty was issued with the sale.” The refund-or-replace provision is what most consumers rely on to force car companies to repurchase defective vehicles that cannot be repaired after a reasonable number of repair attempts.
Used motor vehicles purchased at retail with the remainder of the manufacturer’s new vehicle warranty have for decades been considered a “new motor vehicle,” and thus were routinely subject to the Song-Beverly Act’s refund-or-replace remedy. See Jensen v. BMW of North America, Inc. (1995) 35 Cal. App. 4th 112, 123 (“We conclude the words of section 1793.22 are reasonably free from ambiguity and cars sold with a balance remaining on the manufacturer’s new motor vehicle warranty are included within its definition of ‘new motor vehicle.’”). The Jensen decision was based on, and was consistent with, the statute’s remedial purpose and the statutory language. The Song-Beverly Act’s definition of a “new motor vehicle” specifically includes “other motor vehicle[s] sold with a manufacturer’s new car warranty …” California Civil Code § 1793.22(e)(2). However, the Rodriguez decision disapproved of this broader interpretation, limiting the Act’s application to exclude most used vehicles with remaining factory warranties.
The impact of the Everardo Rodriguez decision will be significant. Californians are expected to buy or lease about 1.75 million new cars in 2024, and used car sales typically double new car sales, meaning approximately 3.5 million used cars will be bought in California in 2024 that are no longer subject to the refund-or-replace remedy of the lemon law. Proponents of the recent changes to California’s lemon law claimed that courts were backlogged due, in part, to an influx of lemon law cases, with an estimated 22,000 lemon law filings in 2023. But the number of lemon law filings in California is barely a drop in the bucket compared to the actual number of vehicles sold in the state.
The case arose when the plaintiffs, Everardo Rodriguez and his wife, purchased a used Dodge Ram with a balance of its manufacturer warranty still active. When they experienced mechanical issues, they sought relief under the Song-Beverly Act, arguing that the vehicle, despite being used, should still be considered “new” due to its remaining warranty. FCA, the manufacturer, contended that the Act was intended solely for the protection of consumers buying new vehicles, and thus did not apply to Rodriguez’s case. The trial court and appellate court sided with FCA, prompting Rodriguez to appeal to the state Supreme Court.
In a unanimous decision, the Supreme Court held that the Act’s language refers to “new” vehicles and includes specific exceptions, such as dealer-owned cars and demonstrators sold with a new car warranty, and used vehicles sold as manufacturer-certified pre-owned vehicles accompanied by the manufacturer’s certified pre-owned warranty, but those exceptions do not include ordinary used vehicles. The court emphasized that if the Legislature intended to include used vehicles within the Act’s scope, it would have stated so explicitly.
With further legislative changes coming to address the problems with AB 1755, the Supreme Court perhaps invited further legislative change with its decision: “We express no view on the parties’ policy arguments as to whether the Song-Beverly Act strikes an appropriate balance between protecting buyers of cars with unexpired new car warranties and cabining manufacturers’ liability for the refund-or-replace remedy. Those arguments are best directed to the Legislature, which remains free to amend the definition of ‘new motor vehicle’ to include used vehicles with a balance remaining on the manufacturer’s new car warranty.”
Not all hope is lost for purchasers of used lemons, however, as the decision spent considerable attention emphasizing that used car purchasers still have remedies against the distributors and retail sellers of used vehicles. The Court wrote: “For new products, liability extends to the manufacturer; for used products, liability extends to the distributor or retail seller and not to the manufacturer, at least where the manufacturer has not issued a new warranty or played a substantial role in the sale of a used good,” meaning manufacturer certified pre-owned vehicles.
The Court also emphasized that in addition to bringing used car lemon law claims against car dealers, used car purchasers have potential remedies against car companies under the California Uniform Commercial Code and the federal Magnuson-Moss Warranty Act. Used car purchasers may also bring claims against car companies pursuant to the Consumer Legal Remedies Act related to representations made in manufacturer warranty manuals, and pursuant to other provisions of the lemon law, including potentially the thirty-day repair provision of section 1793.2(b). While the decision represents a narrowing of the Song-Beverly Act, the limitations of the decision are limited to the refund-or-replace remedy. As the decision leaves millions of Californians with less protection, hopefully Sacramento takes up the Supreme Court’s charge and amends “the definition of ‘new motor vehicle’ to include used vehicles with a balance remaining on the manufacturer’s new car warranty.”
Joseph A. Kaufman is the founder of Joseph Kaufman and Associates.
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