Court of Appeal (Cal.) Says that the Cost of a Consumer’s Exercise of Lease-End Purchase Option During Lemon Law Litigation Was Not the “Purchase” Price Under Song-Beverly

In Madadian v. Maserati N. Am., No. B293688, 2020 Cal. App. Unpub. LEXIS 3249, at *10-14 (May 26, 2020) , the Court of Appeal for the Second District held in an unpublished opinion that the costs a consumer incurred in exercising a lease-end purchase price were not recoverable as the “purchase price” under the Song-Beverly Act.

3. The vehicle purchase was a litigation expense. Madadian does not argue either that the $40,154.40 leaseend purchase option was an “actual price paid or payable” under the lease (§ 1793.2, subd. (d)(2)(B)) or that she would have been entitled to that residual—and a civil penalty thereon—even if Maserati had admitted liability before the lease expired. Instead, Madadian treats her lease payments and lease-end purchase as two separate transactions. And, as to the second transaction, she argues she is entitled to a civil penalty on the purchase price and interest payments because, by contesting liability, Maserati “forced [her] to purchase a defective vehicle … .” Even were we to accept this theory, however, the purchase price would not constitute “actual damages” for which Madadian could recover a civil penalty.  As discussed, under the Song—Beverly Act, a buyer’s damages are the sum of her restitution for the “actual price paid or payable” under section 1793.2, subdivision (d)(2)(B), and her incidental and consequential damages under section 1794, subdivision (b)(2). (§ 1794, subd. (b).) Those damages are the basis for any civil penalty awarded under section 1794, subdivision (c).  Section 1794, subdivision (d), in turn, provides that a prevailing buyer in an action arising under the Song—Beverly Act “shall be allowed by the court to recover as part of the judgment a sum equal to the aggregate amount of costs and expenses, including attorney’s fees based on actual time expended, determined by the court to have been reasonably incurred by the buyer in connection with the commencement and prosecution of such action.” (Italics added.) . . . Here, Madadian argues that “Maserati forced her to choose between returning the Vehicle at lease end, thus allowing Maserati to prevail [in the lawsuit], or instead preserving the evidence needed to vindicate her rights under California law” by buying the car. Put another way, Madadian claims that the car’s purchase price was “an expense[] … reasonably incurred by the buyer in connection with the commencement and prosecution” of her lawsuit against Maserati. (§ 1794, subd. (d).) If we accept this reasoning, the car’s purchase price necessarily constitutes a litigation expense under subdivision (d). And, while Madadian must be reimbursed for her litigation expenses under subdivision (d)—as she was here—those expenses are not “actual damages” for purposes of the civil penalty allowed under subdivision (c).

4. Madadian was not required to buy the car to protect the public. Madadian also argues that she had to exercise her lease-end purchase option to ensure Maserati branded the car’s title “‘Lemon Law Buyback'” under sections 1793.23 and 1793.24. We disagree. nder section 1793.23, subdivision (d), “Any manufacturer who reacquires or assists a dealer or lienholder to reacquire a motor vehicle in response to a request by the buyer or lessee that the vehicle be either replaced or accepted for restitution because the vehicle did not conform to express warranties” (ibid.), must “notify any subsequent transferee that the car was ‘reacquired’ because of a nonconformity.” (Martinez, supra, 193 Cal.App.4th at p. 194, fn. 4.) The manufacturer does so by prominently branding the vehicle’s title “‘Lemon Law Buyback.'” (§ 1793.24.) Madadian reasons that had she returned the car to its owner, the third-party lessor, at the end of her lease term in July 2017, with the lawsuit ongoing, the lessor would not have been reacquiring the car under the Act, and the car, therefore, would not be subject to the Act’s title-branding requirements. The defective vehicle could then be sold, with a clean title, to an unsuspecting member of the public. And, once Madadian prevailed in her lawsuit, there would be no practical way for Maserati to retrieve the vehicle from the stream of commerce to brand its title. Be that as it may, this statutory loophole was not Madadian’s problem to fix: The Act did not require her to keep her defective Maserati pending resolution of her claim. Although other states have adopted a different rule, “there is simply no requirement that California consumers be able to tender the alleged defective car for purposes of availing themselves of the remedies provided by the Act.” (Martinez, supra, 193 Cal.App.4th at p. 197.) Indeed, the “Act says nothing about the buyer having to retain the vehicle after the manufacturer fails to comply with its obligations under its warranty and the Act.” (Id. at p. 194.)