Auto Law Blog

Welcome

Auto Law Blog

Automobile warranty and related consumer claims amount to some of the most common and troublesome legal issues auto dealers face in the course of doing business.

Partner Chris Bruni of Sinunu Bruni LLP provides automobile dealerships effective legal counsel in avoiding and defending these types of claims.  He has successfully tried cases for dealerships involving “Lemon Law” allegations, manufacturing defects and Business and Professions Code 17200 claims. In addition, he was counsel for all DaimlerChrysler-insured dealerships in California for more than seven years, and has handled more than 400 cases on behalf of auto dealerships.  The Auto Law Blog is dedicated to providing analysis and discussion on legal issues impacting auto dealers and manufacturers nationwide.

Not So Fast!

Recently I came across this case decided by the Fourth Appellate District in San Bernardino that deals with the complexities of "indemnity" among dealerships, manufacturers and component part suppliers.It is an unpublished case--which means it can't be officially cited in court--but it does give some insight as to how cross-complaints against co-defendants are sometimes handled.

In Tiffin Motorhomes, Inc.v Superior Court, 2011 Cal. App. Unpublished, LEXIS 9051, the court determined that an engine manufacturer could not settle with the purchaser of an allegedly defective motor home  and then file a "Good Faith Settlement" motion to bar any cross-complaint by the motor home manufacturer or selling dealership.

In this case, the purchaser had complained of various engine problems when using the motor home. When the problems weren't resolved to the purchaser's satisfaction, suit was filed against the selling dealership, the motor home manufacturer and the engine manufacturer. The purchaser sued under the California Lemon Law for breach of warranty, but alleged there were multiple warranties given by the various defendants.

The engine manufacturer settled directly with the purchaser and then brought a motion for "Good Faith Settlement" under California Civil Code Section 877.6, which the Trial Court granted. As a result the selling dealership and motor home manufacturer were barred from pursuing a claim for indemnity or contribution against the engine manufacturer.

"Not so fast" said the remaining defendants. They took the matter up with the Appellate Court, which ruled that Civil Code Section 877.6 did not apply to the current situation, as the defendants were not "co-obligors on a single contract." The Trial Court's ruling was reversed, leaving the non-settling defendants free to pursue a cross-complaint against the engine manufacturer.

As noted, indemnity claims can be tricky, especially when you have multiple parties. When one party attempts to settle out, you need to make sure you have retained your indemnity rights so you can pursue them later if necessary. Best to keep this in mind as you approach trial or arbitration.

This is Heavy!

Last month the Third District of the California Court of Appeals came out with an heavy decision regarding the definition of a "New Motor Vehicle" under the Song-Beverly Act. In Joyce v Ford Motor Company, No. C064453, California Court of Appeal, Third District,  Sept. 6, 2011, the Court determined that a truck purchased for business use, qualified for inclusion under the Song-Beverly Act, also known as the "Lemon Law". I say "heavy  decision" because one of the defenses in the case was that since the vehicle had a Gross Vehicle Weight Rating in excess of 10,000 pounds it was exempt from the Lemon Law.

The law is a little tricky here: Civil Code Section 1793.22, subdivision (e)(2), defines "new motor vehicle" as "a new motor vehicle that is bought or used primarily for personal, family, or household purposes." However, `New motor vehicle' also means a new motor vehicle with a gross vehicle weight under 10,000 pounds that is bought or used primarily for business purposes by a person, including a partnership, limited liability company, corporation, association, or any other legal entity, to which not more than five motor vehicles are registered in this state."

Vehicle owner’s manuals typically specify both a vehicle’s gross vehicle weight (often referred to as the “GVW”) and the vehicle’s gross vehicle weight rating (called the “GVWR”). The GVW refers to actual weight of the vehicle, while the GVWR specifies the fully-loaded (with passengers and gear) weight capacity that the vehicle is designed to handle. So the GVWR is substantially greater than the GVW.

In Joyce, Ford didn't actually dispute that the truck weighed less than 10,000 pounds. The invoice stated that the truck's shipping weight was 6,787 pounds. Joyce added a diesel fuel tank,which weighed about 700 pounds when full. Joyce also added a rack to hold pipe, an isolator to provide an additional power source, and a back-up camera. Nor did Ford contend that these additions brought the vehicle's weight to 10,000 pounds. Instead, Ford argued that when the Legislature drafted section 1793.22, subdivision (e)(2), the phrase "gross vehicle weight" was intended to mean "gross vehicle weight rating." And because the F-250 had a gross vehicle weight rating of 10,000 pounds, it did not qualify as a "new motor vehicle" within the meaning of the Act.

Although the Court felt it was a close call, ultimately it weighed in on the side of the consumer. The Court of Appeal rejected Ford’s argument, and ruled that the California Lemon Law’s weight limit in Civil Code Section 1793.22 refers to the vehicle’s GVW.

As a result, dealerships and manufacturers have one less defense when attempting to tip the scales of justice in their favor.

Supreme Court Rules

 

Well, from a Defense perspective they do "rule" on this one.

In the long awaited opinion in the case of Howell v Hamilton Meats,the California Supreme Court has now ruled in favor of reducing an often inflated component of damages. In a 6-1 decision, the Court held that when an injured plaintiff receives medical care for his or her injuries, and the provider of that medical care accepts payment in full at a lesser amount, the plaintiff is not allowed to claim the full amount of the medical bills as economic damages at the time of trial. 

What does this mean for a defendant in a personal injury case? Let's assume that you are sued because your employee injured another driver in an auto accident. The injured driver sues your company for a 5 day stay in the hospital, and the hospital bill amounts to $10,000 dollars. However, the injured driver's insurance company-- which had a pre-existing contract with the hospital--settles the $10,000 bill for $3,000.

Pursuant to the Supreme Court's ruling, the injured driver cannot claim as damages the $10,000 "billed" amount. He or she may only recover the "paid" amount, in this case $3,000.

To my way of thinking, this makes sense, and in a 6-1 ruling it apparently made sense to the Supreme Court as well.

Tutti Arbitration!

I'm half Italian. My family also owned a linen supply company for close to 100 years. So when I saw this case titled Tutti Mangia Italian Grill v American Re Textile Maintenance Company, 2011 Cal. App. LEXIS 924, I knew I had to read it.

Putting the family connection aside, this is an interesting case for any business owner, particularly an automobile dealer.

In a newly published case, the Second Appellate District (LA) ruled that an arbitration clause in a  contract between a restaurant and a linen supply company was self-executing and therefore, once a dispute arose between the parties, no formal order from the court was necessary to compel arbitration.

In this case Tutti contracted with American for restaurant linens. The agreement contained an arbitration clause that provided that all contractual disputes would be resolved pursuant to the American Arbitration Association, (AAA).  When a dispute arose, American sent Tutti a letter demanding arbitration. They did not file suit. They did not go to Court. They did not get an order from a Judge. They simply sent a letter demanding arbitration. When Tutti did not respond, American went  to arbitration and got an award in their favor.

Of course Tutti complained and file a declaratory relief action, but the trial court and the Appellate Court both ruled that where the arbitration clause is self-executing--that is it permits and provides for arbitration under incorporated rules-- the parties do not have to go to court to compel arbitration. In this case, since the contract stated that any dispute shall be resolved pursuant to the rules of the American Arbitration Association the clause was sufficiently comprehensive to make it self-executing.

Nice to know if you want to save costs and avoid a trip to court.