Court of Appeal (Cal.) Finds in Unpublished Decision that Judgment Against Defaulting Dealer Does Not Bind Holder of Automobile RISC under FTC Holder Rule

In Lafferty v. Wells Fargo Bank, 2015 WL 1383659 (Cal.App. 3 Dist. 2015), the California Court of Appeal found the FTC Holder Rule did not deprive a holder of a RISC of the opportunity to defend itself merely because the automobile purchaser had obtained a default judgment against the selling dealer.

The Laffertys argue they are necessarily already the prevailing party because of the judgment they obtained against Geweke, the codefendant of Wells Fargo. We reject the argument. The trial court severed trial against Geweke from the action against Wells Fargo. Although Geweke had a judgment entered against it after Geweke failed to appear at trial, Wells Fargo has not yet won or lost at trial. ( Lafferty I, supra, 213 Cal.App.4th at pp. 556, 572–573.) “A party’s default does not bind nondefaulting codefendants, even when the basis for the action against the codefendants is vicarious liability arising from the acts of the defaulting defendant.” ( Western Heritage Ins. Co. v. Superior Court (2011) 199 Cal.App.4th 1196, 1211.)