The Song-Beverly Consumer Warranty Act (“Act”), known as the California Lemon Law, is one of the most pro-consumer pieces of legislation on California’s books today. In Kwan v. Mercedes-Benz of North America Inc., (1994) 23 Cal. App. 4th 174, the court re-emphasized the importance of civil penalties to maintain the protective purpose of the law.
“[T]he Act is manifestly a remedial measure, intended for the protection of the consumer; it should be given a construction calculated to bring its benefits into action.” (Kwan, at p. 184.) Civil penalty damages (up to 2x the amount of actual damages – i.e. repurchase/replacement) serve as a deterrent to stop manufacturers from being tempted not to comply with the Act’s requirements because they are “secure in the knowledge” that their liability would be “limited to refund or replacement.” (Id.) The Kwan court aptly opined that: “Any interpretation that would significantly vitiate the incentive to comply should be avoided.”
First, “[a] decision made without the use of reasonably available information germane to that decision is not a reasonable, good faith decision” (Id. at 186) and is therefore likely a willful violation under the Act. Most automakers have computer systems that are linked directly to their authorized repair facilities (“dealership”). These computer systems are used to provide the automakers with real time information about repairs being made to its vehicles under warranty. The information is then stored in databases under the automakers’ control. An automaker’s failure to monitor its warranty claim database for repair histories that qualify vehicles for a repurchase under the California Lemon Law can justify the imposition of civil penalties.
Second, the Kwan court confirmed that an automaker’s failure to have written policies on analyzing, handling and processing claims under the California Lemon Law can be evidence of a lack of good faith by the automaker. (Id. at 186.) Several automakers simply refer to the BBB’s California Lemon Law Summary and hide behind a “case-by-case” analysis. Others create complicated flow charts or have multiple employees or call center personnel “touch” the file as a pretext of good faith. And still others outsource the review to a third-party company. None of these corporate practices takes the place of written policies for implementing automakers’ affirmative duties under the California Lemon Law to buy back cars and trucks that qualify as lemons under the California Lemon Law and can justify an award of civil penalties.
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