Appellate Case Highlights Importance Of Pre-Litigation Offer Under CLRA

Benson v. Southern California Auto Sales, Inc., a recent California Court of Appeal decision, illustrates the importance of a business promptly responding to a Consumer Legal Remedies Act (“CLRA”) notice and making a timely correction offer.

The plaintiff, Robert Benson (“Benson”), purchased a used car from defendant, Southern California Auto Sales, Inc. (“SCAS”).   After purchasing the car, Benson learned the car had a damaged frame and, through counsel, sent letters to SCAS providing notice of alleged violations of the CLRA (Cal. Civ. Code section 1750 et seq.), demanding rescission of the purchase contract, requesting a refund of all car payments Benson had made to date, asking for monetary penalties, and other relief.

Under California Civil Code section 1782, subdivision (b), a merchant has 30 days to respond to a request for a correction of an alleged violation of the CLRA.  Within 30 days from the date of Benson’s notice letter, SCAS responded by offering to settle the matter by, among other things, rescinding Benson’s purchase contract, refunding Benson’s car payments made to date, accepting back the car in question, paying $2,500 in attorneys’ fees, and other terms.

Benson, however, did not accept the offer.  Ultimately, after filing suit, Benson and SCAS settled the action for a stipulated judgment against SCAS in the amount of  $34,500 against SCAS “on the complaint.”  Following the settlement, Benson made a motion to recover an additional $171,915 in attorneys’ fees and $10,358 in costs (a total of $182,273) under the CLRA.  The trial court denied Benson’s motion because it found SCAS satisfied section 1782’s requirement that it make an offer of correction in response to Benson’s initial notice.

Benson argued SCAS’ correction offer was not sufficient because SCAS’ correction offer only addressed Benson’s CLRA claims and did not address Benson’s other claims under the Unfair Competition Law, False Advertising Law, and various sections of the Business and Professions Code.

In affirming the trial court’s denial of Benson’s motion for attorneys’ fees, the Court of Appeal held Benson’s additional claims under statutes other than the CLRA were essentially all different versions of Benson’s same underlying CLRA claims.  As a result, SCAS’ offer to make a correction of the alleged CLRA violations would also have resolved Benson’s claims under other statutes that arose out of the same set of facts.  Thus, SCAS’ initial correction offer was appropriate (even though SCAS’ correction offer did not address each of the legal theories advanced in Benson’s FAC) and precluded Benson from recovering additional attorneys’ fees and costs.

The discrepancy between the amount of the stipulated judgment Benson received, $34,500, and the amount of attorneys’ fees and costs Benson sought, $182,273, demonstrates how important it is for businesses to make a timely correction offer as required under the CLRA.  If SCAS had not responded to Benson’s initial demand letter within 30 days, it may have been liable for attorneys’ fees that were more than 6 times greater than the underlying judgment.