Valdovinos v. Kia Motors America, Inc. ( 2024 )

Filed 9/24/24 (unmodified opinion attached)
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION TWO
LUIS VALDOVINOS, et al., B324418
Plaintiffs and Appellants, (Los Angeles County
Super. Ct. No. BC633283)
v.
ORDER MODIFYING
KIA MOTORS AMERICA, OPINION
INC.,
NO CHANGE IN THE
Defendant and Appellant. JUDGMENT
THE COURT:
It is ordered that the opinion filed herein on August 29, 2024, be
modified as follows:
1. On page thirteen, in the first full paragraph, replace the
final sentence stating “The choice of remedies is the
consumer’s to make. (§ 1793.2, subd. (d)(2).)” with:
Where, as here, the manufacturer offers replacement
or restitution, the choice of remedies is the
consumer’s to make. (§ 1793.2, subd. (d)(2).)
* * *
There is no change in the judgment.
——————————————————————————————
ASHMANN-GERST, Acting P. J. CHAVEZ, J. HOFFSTADT, J.
2
Filed 8/29/24 (unmodified opinion)
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION TWO
LUIS VALDOVINOS et al., B324418
Plaintiffs and Appellants, (Los Angeles County
Super. Ct. No. BC633283)
v.
KIA MOTORS AMERICA,
INC.,
Defendant and Appellant.
APPEALS from a judgment of the Superior Court of Los
Angeles County, Steven J. Kleifield, Judge. Affirmed in part,
reversed in part, and remanded with directions.
Gupta Wessler, Jessica E. Garland, Jennifer D. Bennett;
Knight Law Group and Radomir Roger Kirnos for Plaintiffs and
Appellants.
Horvitz & Levy, Lisa Perrochet, Shane H. McKenzie, John
B. Sprangers; Lehrman, Villegas, Chinery & Douglas, Kate S.
Lehrman and Jacqueline Bruce-Chinery for Defendant and
Appellant.
******
California’s Song-Beverly Consumer Warranty Act (Civ.
Code, § 1790 et seq.) 1 (the Act) spells out the procedures and
remedies available to California consumers when the new motor
vehicle they purchase is a so-called “lemon.” Among other things,
the Act obligates the manufacturer, distributor, or retailer of
such a vehicle to buy back the defective vehicle as long as the
consumer grants it a “reasonable” opportunity to fix the defect,
and, if the defect persists, empowers the consumer to sue for
breach of any express warranty to obtain “restitution” and, if the
violation of the Act is “willful,” a civil penalty up to twice the
amount of the “restitution” award. (§§ 1793.2, subd. (d), 1794,
subd. (c).) The Act is “strongly pro-consumer” (Murillo v.
Fleetwood Enterprises, Inc. (1998) 17 Cal.4th 985, 990 (Murillo),
superseded on other grounds by Code Civ. Proc., § 998), so
restitution under the Act is not the “‘plain vanilla common law
kind’” that aims to make an injured party whole (Williams v. FCA
US LLC (2023) 88 Cal.App.5th 765, 780 (Williams)); instead, the
Act’s definition of “restitution” is more like vanilla topped with a
generous scoop of pro-consumer sprinkles that can go so far as to
entitle consumers to be made more than whole and thereby to
obtain a windfall from buying a “lemon” (Niedermeier v. FCA US,
LLC (2024) 15 Cal.5th 792, 801 (Niedermeier)).
This appeal presents three questions regarding the breadth
of the Act’s pro-consumer remedies. First, is a consumer entitled
1 All further statutory references are to the Civil Code unless
otherwise indicated.
2
to recover as “restitution” amounts paid to a third party for a
service contract on the vehicle? Second, is a consumer entitled to
recover as “restitution” all insurance premiums paid on the
vehicle should the consumer continue to drive it (as opposed to
only those premiums attributable to coverage against property
damage)? Third, is a manufacturer’s, distributor’s, or retailer’s
violation of the Act willful as a matter of law if the violation was
negligent or if it adequately investigated but could not confirm
the existence of a defect yet nevertheless offered to buy back the
vehicle on terms that were reasonable at the time the offer was
made? We hold that the answer to all three questions is “no.”
We accordingly (1) reverse the trial court’s posttrial orders
declining to strike from the “restitution” award the amounts of
the service contract and certain amounts of insurance premiums,
(2) reverse the trial court’s posttrial order striking the civil
penalty for insufficient evidence, but (3) affirm the trial court’s
posttrial order granting a new trial on the civil penalty. We
direct the trial court to amend the judgment consistent with this
opinion and we remand for a new trial on the civil penalty.
FACTS AND PROCEDURAL BACKGROUND
I. Facts
A. Plaintiff buys a 2014 Kia Optima
On May 10, 2014, Luis Valdovinos (plaintiff) purchased a
new 2014 Kia Optima with just 19 miles on it.
The sales contract listed the “Total Sale Price” as $30,127,
which included (1) $299 for an “(Optional) Theft Deterrence
Device” paid to a third-party company called Security Etch, and
(2) $2,298 for an “(Optional) Service Contract” paid to a third-
party company called American Financial. Plaintiff made a down
3
payment of $8,000 in cash and received a $2,000 “Manufacturer’s
Rebate”; he financed the remaining balance of $19,171.
Plaintiff purchased the vehicle from Kia of Cerritos, which
is a franchise Kia dealership not owned by Kia Motors America,
Inc. (Kia). 2 Kia is a distributor of Kia vehicles.
Plaintiff’s Optima had a basic warranty that expired after
five years or 60,000 miles, and a drive train warranty that
expired after 10 years or 100,000 miles.
B. Plaintiff starts having problems with his
Optima
1. August 5, 2014 visit
In early August 2014, plaintiff had his Optima towed to Kia
of Cerritos, and reported that the vehicle would not “go into
reverse [gear] intermittently.” The dealership mechanics were
unable to replicate the problem, and thus were unable to do
anything to fix it.
After the dealership forwarded its paperwork to Kia, Kia
tried to call plaintiff three times on the days immediately
following his August 5, 2014 visit. Plaintiff did not return any of
the calls. Although plaintiff later testified he did not remember
the voicemails Kia left for him, he did not deny that Kia had tried
to reach him.
When Kia received no response from plaintiff, it closed his
case.
2. December 20, 2014 visit
In mid-December 2014, plaintiff noticed that (1) one of the
windows of his Optima was not properly rolling up, and (2) the
Optima was still sometimes “not go[ing] in reverse when in the
2 At some point, Kia’s corporate name became Kia America,
Inc.
4
reverse gear.” Plaintiff brought the vehicle into the dealership on
December 20, 2014. The dealership mechanics repaired the
window, but “could not duplicate” the gear-shifting problem and
found “no codes in [the] system” after hooking the car up to
diagnostic computers; the dealership consequently concluded the
“vehicle [was] working as designed.”
Although the dealership’s paperwork contained no
contemporaneous notation, plaintiff testified at trial that his
Optima would not go into reverse when he was leaving the
dealership during his December 2014 visit, that plaintiff
summoned an unknown “individual” who had given him “all the
paperwork,” that the individual then summoned his “supervisor,”
that the three of them pushed the vehicle back to the service
garage, and that no mechanic could find any problem.
C. Plaintiff’s first buyback request
On January 12, 2015, plaintiff called Kia to inform the
distributor that he took his Optima to the dealership because it
had “not go[ne] into reverse,” that the dealership had been
“unable to duplicate” the issue and thus “cannot find what is
wrong,” and demanded that Kia buy back his car. Although Kia’s
paperwork contains no contemporaneous notation, plaintiff
testified at trial that he also told Kia on that call that two
dealership employees had witnessed the defect as plaintiff was
leaving the December 2014 appointment.
In response to plaintiff’s calls, Kia re-opened plaintiff’s case
and arranged for a Kia field technician to examine his Optima at
the dealership. The technician examined plaintiff’s Optima on
February 16, 2015. Unable to duplicate the concern, the
technician installed a “flight recorder” to plaintiff’s Optima to
record its transmission’s operation. The technician removed the
5
flight recorder in late March 2015, and reviewed the data. The
data “indicate[d] that [the] transmission is operating correctly.”
In light of its inability to verify any defect with plaintiff’s
Optima, Kia denied plaintiff’s request for a buyback.
D. Plaintiff’s further visits to the dealership prior
to Kia’s first offer
Between April 2015 and December 2015, plaintiff brought
his Optima to the dealership three more times. During an
October 14, 2015 visit, plaintiff did not mention anything about
the car’s intermittent failure to go in reverse. During a
November 10, 2015 visit, plaintiff reported that his Optima would
“los[e] power” and would “not go into reverse sometimes.” The
dealership mechanics were unable to duplicate that issue after
driving the car for two miles. The dealership recommended that
plaintiff install the flight recorder again, but he declined. During
a December 9, 2015 visit, plaintiff again reported that the car
would “intermittently” not go into reverse. The dealership
mechanics were unable to duplicate the issue, even after
updating the software governing the Optima’s transmission.
In early February 2016, Kia offered to refund plaintiff five
of his monthly car payments for his inconvenience. Plaintiff
rejected the offer.
E. Kia’s formal offer to replace or repurchase
plaintiff’s Optima
On February 9, 2016, Kia sent plaintiff an offer letter that
presented him with three options—namely, Kia offered to (1)
replace plaintiff’s vehicle with a “comparable” Optima; (2)
repurchase plaintiff’s vehicle by (a) paying him $11,800.36, and
(b) paying off the outstanding balance of his loan on the Optima;
or (3) send a field technician “for the purpose of inspecting and
6
repairing the vehicle” along with paying plaintiff $10,000 “as a
one-time goodwill gesture” for plaintiff to accept as a full
settlement. The $11,800.36 repurchase amount in the second
option was calculated as the sum of plaintiff’s $8,000 down
payment plus $6,709 in monthly payments plaintiff had already
made, less a $299 deduction for the third-party security device, a
$2,299 deduction for the third-party service contract, and a
$310.64 deduction for the 1,533 miles on the Optima at the time
of plaintiff’s first visit to the dealership reporting the problem in
August 2014. The offer letter explained that the first and second
options were “contingent on [a] physical inspection of the vehicle
for damage and/or excessive wear and tear,” and that plaintiff
would be “required” to provide a cashier’s check for any
diminution in value. (The Optima had no damage at this time.)
The offer letter also explained that plaintiff would be “require[d]”
to “sign[] [a] settlement release agreement” but did not provide
further details on the content of that agreement. The offer letter
asked plaintiff to select which option he preferred and to sign the
letter, but contemplated that it would take “45-60 days” to
“complet[e] . . . this process.”
The letter declared the “[o]ffer [v]alid” for one week.
The offer lapsed without any response from plaintiff.
F. Postoffer visits to the dealership
Other than bringing his Optima into the dealership for an
oil change in late August 2016, plaintiff’s next action was to sue
Kia under the Act.
Plaintiff nevertheless continued to use the car, albeit on a
more “limited” basis, through March 2022. During the five and a
half years between plaintiff’s initiation of his lawsuit and his
decision to stop driving the car, plaintiff brought the Optima into
7
Kia dealerships 10 more times—in October 2017, in January
2018, in April 2018, in August 2018, in October 2018, in
November 2018, in May 2019, in September 2019, in July 2020,
and in August 2021. Plaintiff mentioned issues with his
transmission during four of those visits (in April 2018, October
2018, November 2018, and May 2019), including the one visit (in
April 2018) to conduct an inspection as part of the discovery for
this lawsuit. The dealership mechanics were unable to replicate
the defect plaintiff reported, despite test driving the car for
extended periods during these visits. However, plaintiff’s expert
witness later testified that he personally experienced a
transmission defect while driving the Optima to the April 2018
inspection.
II. Procedural Background
A. Complaint
On September 8, 2016, plaintiff sued Kia for violating the
Act. 3
B. Trial
The matter did not proceed to trial until May 2022.
At trial, plaintiff introduced a video that was filmed in 2019
showing the problems with his Optima’s reverse gear. Plaintiff
also (1) introduced insurance bills from three policy years (half of
2014, 2015-2016, and 2021-2022); and (2) testified that he paid
approximately $1,364 in premiums each year to insure the
Optima between 2015 and March 2022.
Kia did not put on any defense witnesses or evidence.
After just two hours of deliberations, the jury returned a
special verdict finding that Kia violated the Act by breaching the
3 The suit was also brought by plaintiff’s son, Luis J.
Valdovinos.
8
express warranty as well as the implied warranty of
merchantability. The jury awarded plaintiff restitution of
$42,568.90 comprised of the $30,127 “purchase price of the
vehicle” plus $12,912 in “incidental and consequential damages”
minus $380.10 for mileage. The jury also found that Kia’s
violation of the Act was “willful[]” and awarded twice the
restitution amount—$85,317.80—as a civil penalty. The total
verdict for plaintiff was $127,976.70.
C. Postverdict litigation
1. First round of postjudgment motions
Following entry of judgment, Kia filed a motion for
judgment notwithstanding the verdict (JNOV) and a motion for
new trial. As pertinent to this appeal, Kia argued that (1)
restitution should not include the amounts for (a) the
manufacturer’s rebate, (b) the third-party theft deterrent device,
(c) the third-party service contract, and (d) any insurance
premiums paid prior to the second time plaintiff brought his
Optima to the dealership; and (2) there was insufficient evidence
that Kia “willfully” violated the Act for purposes of the civil
penalty. After full briefing and a hearing on August 29, 2022, the
trial court accepted plaintiff’s election to receive damages only for
breach of the express warranty and issued a written order
denying the JNOV and new trial motions on the first ground
regarding restitution but granting the JNOV and new trial
motions on the second ground regarding the civil penalty. With
respect to its grant of relief on the JNOV motion, the court
explained that a distributor does not “willfully” violate the Act if
it has a “good faith and reasonable belief” that it has not violated
the Act, and found “no substantial evidence that Kia knew that
the [Optima] had a defect that it could not repair” because “Kia
9
could not confirm that there was a defect.” With respect to its
grant of relief on the new trial motion, the court explained that it
“sits as a ‘thirteenth juror’” and that, if the JNOV ruling is
“reversed on appeal,” it “concurrently grants a partial new trial
solely on the claim for civil penalties.”
2. Second round of posttrial motions
After the trial court issued an amended judgment that
struck the civil penalty, Kia filed another motion for a partial
JNOV on the same grounds regarding amounts that should be
excluded as restitution, but further specified that any premiums
pertinent to insurance for using the car (as opposed to premiums
for coverage that preserved its value as property) were not
recoverable. Following a full round of briefing, the trial court
issued a minute order summarily denying the motion.
D. Appeals
Plaintiff filed a notice of appeal challenging the trial court’s
amended judgment, and Kia thereafter filed a notice of cross-
appeal.
DISCUSSION
I. The Law, Generally
A. The Act
The Act, which is also known as California’s “lemon law,” is
a “strongly pro-consumer” and “‘remedial’” statutory scheme
meant to grant additional remedies to California consumers
saddled with defective products and, in particular and as
pertinent here, defective new vehicles. (Murillo, supra, 17
Cal.4th at p. 990; Niedermeier, supra, 15 Cal.5th at p. 804; §§
1790.3, 1790.4; Anderson v. Ford Motor Co. (2022) 74 Cal.App.5th
946, 970-971 (Anderson).)
10
1. Liability, generally
To achieve its ends, and as pertinent here, the Act (1)
requires all manufacturers, distributors, and retailers of
“consumer goods” to extend an implied warranty of
merchantability to consumers that assures that goods are “fit for
the ordinary purposes for which [they] are used” (§§ 1791.1,
subds. (a)(2) & (b), 1792, 1792.2, 1793); and (2) regulates how any
express warranties are created and enforced (§§ 1793.1, 1793.2,
1793.3, 1795). Breaches of implied and express warranties are
distinct, and each has its own remedies. (Brand v. Hyundai
Motor America (2014) 226 Cal.App.4th 1538, 1548.)
2. Breach of an express warranty 4
Although the Act regulates “consumer goods” generally (see
§§ 1793.2, subds. (a), (c) & (d)(1), 1793.3, 1795), the Act has a
provision—namely, section 1793.2, subdivision (d)(2)—that
specifically regulates express warranties on “new motor
vehicle[s].” (Niedermeier, supra, 15 Cal.5th at p. 807, fn. 4
[noting how this provision differs from the general provisions
regarding express warranties]; Cummins, Inc. v. Superior Court
(2005) 36 Cal.4th 478, 485 [“new motor vehicle” provision added
in 1982]; § 1793.22, subd. (e)(2) [defining “new motor vehicle”])
Specifically, a “manufacturer” of a “new motor vehicle” or “its
4 Because plaintiff affirmatively elected to recover only the
Act’s remedies for breach of an express warranty, the Act’s
provisions on implied warranties (see generally §§ 1794, subd.
(a), 1791.1, subd. (d); Cal. U. Comm. Code §§ 2711-2715; Music
Acceptance Corp. v. Lofing (1995) 32 Cal.App.4th 610, 620-621)
are no longer at issue in this case. We will not discuss them
further.
11
representative in this state” 5 breaches an express warranty
under the Act if (1) the consumer (which includes buyers or
lessees) “deliver[s]” the “nonconforming” vehicle to an authorized
“service and repair facility” (§ 1793.2, subds. (c) & (d)(2);
Niedermeier, at p. 818); (2) the manufacturer is given a
“reasonable number of attempts”—that is, a reasonable number
of opportunities—to “service or repair [the vehicle] . . . to conform
to the applicable express warrant[y]” (§ 1793.2, subd. (d)(2);
Robertson v. Fleetwood Travel Trailers of California, Inc. (2006)
144 Cal.App.4th 785, 799 (Robertson) [only a “‘reasonable
opportunity’” is required, “even if no repairs are actually
undertaken”]); and (3) there is still a nonconformity that
“substantially impairs the use, value, or safety of the new motor
vehicle” to the consumer (§ 1793.22, subd. (e)(1); Ramos v.
Mercedes-Benz USA, LLC (2020) 55 Cal.App.5th 220, 222 [no
breach where “defect [does] not substantially impair the vehicle’s
use, value or safety”]). Where a “new motor vehicle” has less
than 18,000 miles on its odometer or the consumer took delivery
less than 18 months prior, the Act defines a “reasonable number
of attempts” as (1) “two or more” if the “nonconformity results in
a condition that is likely to cause death or serious bodily injury”
and “the [consumer] has at least once directly notified the
manufacturer of the need for the repair,” or (2) “four or more” in
any other case if “the [consumer] has at least once directly
notified the manufacturer of the need for the repair.” (§ 1793.22,
subd. (b).)
5 While Kia is a distributor, we will use the term
“manufacturer” for the sake of simplicity and for consistency with
the language of the Act.
12
Upon a breach, the manufacturer has an “affirmative duty”
to either (1) “replace the [consumer’s] vehicle with a new motor
vehicle substantially identical to the vehicle replaced” (along with
providing the same warranties and covering all taxes and fees
attendant to new cars) (§ 1793.2, subd. (d)(2)(A)); or (2) “promptly
make restitution to the [consumer]” (id., subd. (d)(2), italics
added). (Krotin v. Porsche Cars North America, Inc. (1995) 38
Cal.App.4th 294, 303.) This duty exists even if the consumer
never requests it (Santana v. FCA US, LLC (2020) 56
Cal.App.5th 334, 347 (Santana); Krotin, at p. 303), even if the
consumer no longer possesses the vehicle (Martinez v. Kia Motors
America, Inc. (2011) 193 Cal.App.4th 187, 194), and even if the
“cause of the purported defect” is not “establish[ed]”
(Mikhaeilpoor v. BMW of North America, LLC (2020) 48
Cal.App.5th 240, 255 (Mikhaeilpoor)). The choice of remedies is
the consumer’s to make. (§ 1793.2, subd. (d)(2).)
If a manufacturer does not comply with the Act, the
consumer may sue. (§ 1794, subd. (a).)
a. Restitution
In the ensuing lawsuit, a consumer may recover
“restitution” for the breach of the express warranty as to a new
motor vehicle. (§ 1793.2, subd. (d)(2).) For these purposes, the
Act specially defines “restitution” as (1) “the actual price paid or
payable by the [consumer], including any charges for
transportation and manufacturer-installed options,” as
“determined at the time of the vehicle’s purchase”; plus (2)
“collateral charges,” “such as sales or use tax, license fees,
registration fees, and other official fees”; plus (3) “incidental
damages.” (Id., subd. (d)(2)(B); Niedermeier, supra, 15 Cal.5th at
p. 808; see generally Niedermeier, at p. 809 [“restitution” under
13
the Act is a “term of art separate from the evolving common law
concept that shares the name”].) The Act permits a
manufacturer to subtract from the amount of “restitution” (1) the
cost of any “nonmanufacturer items installed by a dealer or the
[consumer]” (§ 1793.2, subd. (d)(2)(B)); and (2) any “amount[s]
directly attributable to use by the [consumer]”—chiefly, use
attributable to mileage—prior to the consumer “first deliver[ing]
the vehicle to the manufacturer or distributor, or its authorized
service and repair facility[,] for correction of the problem” based
on a statutorily prescribed formula (§ 1793.2, subd. (d)(2)(C)).
Because these are the sole authorized deductions, a manufacturer
may not subtract any other deductions, including money a
consumer receives for trading in the vehicle, even if that ends up
giving the consumer a “windfall” of a total recoupment in excess
of the actual price paid for the car. (Niedermeier, at p. 801;
Williams, supra, 88 Cal.App.5th at pp. 785-786 [the Act permits
consumer to “receive a financial windfall”].)
b. Civil penalty
If the manufacturer’s “failure to comply [with the Act] was
willful,” the consumer may also obtain a “civil penalty” up to “two
times the amount of” the “restitution” award. (§ 1794, subd. (c),
italics added.) 6
6 The Act has a separate provision barring the award of a
civil penalty if the manufacturer “maintains a qualified third-
party dispute resolution process” and the consumer invokes that
process in writing. (§ 1794, subd. (e)(2).) Because this provision
was not invoked here, and because this provision is cumulative to
the general civil penalty provision (Jernigan v. Ford Motor Co.
(1994) 24 Cal.App.4th 488, 491-492), we need not discuss this
alternative further.
14
c. Reasonable costs
If the consumer prevails in a lawsuit under the Act, the
consumer may also recover “costs and expenses,” which include
“attorney’s fees based on actual time expended, determined by
the court to have been reasonably incurred by the [consumer] in
connection with the commencement and prosecution” of the
lawsuit. (§ 1794, subd. (d).)
B. Posttrial motions
1. JNOVs
A motion for JNOV may be granted if the verdict (1) is not
supported by substantial evidence, or (2) is incompatible with the
law. (Code Civ. Proc., § 629.)
Where the challenge to the verdict raises questions
regarding the substantiality of the evidence, the trial court’s role
is “severely limited.” (Teitel v. First Los Angeles Bank (1991) 231
Cal.App.3d 1593, 1603 (Teitel).) That is because relief may be
granted only if it appears from the record—viewed in the light
most favorable to the party securing the verdict and without any
reweighing of the evidence or judging of witness credibility—that
there is no substantial evidence to support the verdict. (Teitel, at
pp. 1602-1603.) On appeal, we independently examine whether a
trial court granting relief on this ground correctly concluded that
no substantial evidence supports the jury’s findings. (Hirst v.
City of Oceanside (2015) 236 Cal.App.4th 774, 782 (Hirst).)
Where the challenge to the verdict raises purely legal
questions, we independently review a trial court’s JNOV ruling.
(Hirst, supra, 236 Cal.App.4th at p. 782.) Such questions include
the legal viability of a category of damages (Hensley v. San Diego
Gas & Electric Co. (2017) 7 Cal.App.5th 1337, 1346), as well as
the attendant interpretation of any statutes (Niedermeier, supra,
15
15 Cal.5th at p. 804). 7 “As with all cases of statutory
interpretation, ‘“[w]e first examine the statutory language, giving
it a plain and commonsense meaning”’” and examining it in
context. (Niedermeier, at p. 804.) If that statutory language is
unambiguous, “‘there is no need . . . to resort to indicia of the
intent of the Legislature’ to interpret the statute.” (Ibid.)
2. New trial
A motion for new trial may be granted where, as pertinent
here, there is “[i]nsufficien[t]” evidence “to justify the verdict.”
(Code Civ. Proc., § 657, subd. (6).) When a party seeks a new
trial on this ground, the trial court sits as a thirteenth juror who
is empowered to reweigh the evidence and to decide whether, in
its view, the weight of the evidence supports a different finding
than the jury’s and hence justifies a new trial. On appeal, we
generally review the grant of a new trial for an abuse of
discretion but specifically review whether substantial evidence
supports the trial court’s different finding. (Oakland Raiders v.
National Football League (2007) 41 Cal.4th 624, 636 (Oakland
Raiders); Johnson & Johnson Talcum Powder Cases (2019) 37
Cal.App.5th 292, 335-336 (Johnson & Johnson).) In so doing, we
presume the trial court’s finding is correct, and that presumption
is overcome only if the opposing party demonstrates that no
reasonable finder of fact—viewing the evidence in the light most
favorable to the trial court’s finding—could have found for the
7 We accordingly reject plaintiff’s assertion that Kia’s
challenge to the “restitution” award may be reviewed only under
the “[e]xcessive or inadequate damages” ground of the new trial
statute. (Code Civ. Proc., § 657, subd. (5).) This assertion ignores
that Kia is challenging the legal validity of the damages award,
not its factual sufficiency.
16
moving party on the trial court’s theory. (Lane v. Hughes Aircraft
Co. (2000) 22 Cal.4th 405, 412 (Lane).) Where, as here, the trial
court’s finding is made against the party bearing the burden of
proof, this standard is met only where the evidence compels a
finding contrary to the trial court’s as a matter of law. (Estate of
Berger (2023) 91 Cal.App.5th 1293, 1307.)
We may separately analyze a new trial order if we
determine that an order granting a JNOV must be reversed.
(Johnson & Johnson, supra, 37 Cal.App.5th at p. 336.)
II. The “Restitution” Award
Kia argues that the trial court erred in denying its posttrial
motions seeking to reduce the jury’s “restitution” award by the
amount of (1) the $2,000 manufacturer’s rebate; (2) the two
optional items supplied by third parties—namely, (a) the $299
theft deterrent device, and (b) the $2,298 optional service
contract—and (3) the insurance premiums plaintiff incurred (a)
for coverage prior to December 2014, and (b) for any coverage
other than property damage. Plaintiff concedes on appeal that
the $2,000 manufacturer’s rebate, the $299 theft deterrent
device, and insurance premiums incurred for coverage prior to
December 2014 are not recoverable under the Act. Thus, we need
only decide whether the optional service contract and the full
amount of the post-December 2014 insurance premiums are
properly awarded as “restitution” under the Act as (1) part of the
“actual price paid or payable by the [consumer],” (2) collateral
charges, or (3) incidental damages.
A. Optional service contract
1. Actual price paid
As pertinent here, the Act provides that a consumer may
recover as “restitution” from a manufacturer “the actual price
17
paid or payable by the [consumer],” and goes on to specify that
this amount “includ[es] any . . . manufacturer-installed options”
but “exclud[es] nonmanufacturer items installed by a dealer or
the [consumer].” (§ 1793.2, subd. (d)(2)(B).) Because the optional
service contract for plaintiff’s Optima was supplied by American
Financial, it is not a “manufacturer-installed option[]” and is
instead a “nonmanufacturer item installed by” someone else;
under the plain text of the Act, the optional service contract is not
part of the “actual price paid” by plaintiff for his Optima.
Although no published California decision has come to this
conclusion, the federal courts applying the Act have uniformly
come to this conclusion for this very reason. (Hernandez v. FCA
US LLC (C.D. Cal., March 18, 2022, 1:21-cv-0745) 2022 U.S. Dist.
LEXIS 49190, *10-*11; Herrera v. Ford Motor Co. (C.D. Cal., Feb.
24, 2022, CV 21-4731) 2022 U.S. Dist. LEXIS 33002, *14; Carillo
v. FCA USA, LLC (C.D. Cal. 2021) 546 F. Supp. 3d 995, 1002;
Rupay v. Volkswagen Group of America, Inc. (C.D. Cal., Nov. 15,
2012, CV 12-4478) 2012 U.S. Dist. LEXIS 180404, *17.)
Plaintiff resists this conclusion, asserting that the Act’s
language only refers to physical items that can be “installed” in a
vehicle, that a service contract is not a physical item, and that
excluding nonphysical items like service contracts from the
“actual price paid” would impermissibly rewrite the Act. We
disagree. Textually, the Act defines two sides of the same coin—
that “the actual price paid” includes “manufacturer-installed
options” but excludes “nonmanufacturer-installed items”—yet the
terms “options” and “items” can refer to physical or nonphysical
things and are not otherwise expressly limited to only those
options and items that have tangible corporeality. The Act’s use
of the term “installed” cannot bear the weight plaintiff ascribes to
18
it. (Accord, CACI No. 3241 [excluding from the “purchase price”
“any charges for items supplied by someone other than [the
manufacturer]”], italics added.) Contextually, the “actual price
paid” is consideration for the vehicle; the service contract is not
paid in exchange for the vehicle, it is instead an add-on supplied
by someone else. (See Kirzhner v. Mercedes-Benz USA, LLC
(2020) 9 Cal.5th 966, 972-973 (Kirzhner) [defining
“consideration”].) Practically, plaintiff’s construction would
obligate manufacturers to pay restitution for any nonphysical
items purchased from third parties, such as satellite radio
subscriptions. Although the Act’s definition of “restitution” tosses
on some pro-consumer sprinkles, plaintiff’s broad construction
would convert that definition into a full-blown pro-consumer
sundae without any textual mandate for doing so. (Nunez v. FCA
US LLC (2021) 61 Cal.App.5th 385, 397 [despite the Act’s
“‘“manifestly”’” pro-consumer purpose, courts “may [not]
disregard ‘“‘the actual words of the statute,’”’ or fail to give them
‘“‘a plain and commonsense meaning’”’”].)
2. Collateral charges
“Restitution” under the Act also includes “collateral
charges.” (§ 1793.2, subd. (d)(2)(B).) As the name suggests, these
are charges collateral to—and thus, part and parcel with—the
purchase of the new vehicle itself. (Kirzhner, supra, 9 Cal.5th at
p. 973 [“collateral charges” reach “charges and expenses” that are
“part of” and that “accompany the price of the vehicle”].) Thus,
the Act expressly defines “collateral charges” to include “sales or
use tax, license fees, registration fees, or other official fees” paid
as part of, and at the time of, the sale. (§ 1793.2, subd. (d)(2)(B).)
Courts have further defined the term to include finance charges
on any purchase loan for the car. (Kirzhner, at p. 973; Robertson,
19
supra, 144 Cal.App.4th at p. 814.) But “collateral charges” do not
include “all charges and expenses that may later be incurred in
connection with the ownership or use of [a] vehicle.” (Kirzhner,
at p. 973.) Thus, collateral charges do not include the fees a
buyer pays to renew the car’s registration after the purchase. (Id.
at p. 977.) Here, plaintiff’s purchase of an optional service
contract is not a charge collateral to the sale because it is not part
and parcel with the purchase of the vehicle itself, as consumers
have the option of forgoing such service contracts.
3. Incidental damages
“Restitution” under the Act also includes “incidental
damages.” (§ 1793.2, subd. (d)(2)(B).) Although the Act defines
“incidental damages” as “including, but not limited to, reasonable
repair, towing, and rental car costs actually incurred by the
[consumer]” (ibid.), the Act also cross-references—and hence
incorporates—the Commercial Code’s definition, which reaches
costs “incurred in inspection, receipt, transportation and care and
custody” of the vehicle (ibid.; § 1794, subd. (b)(2); Cal. U. Com.
Code, § 2715, subd. (1); Kirzhner, supra, 9 Cal.5th at pp. 974-975,
979). In Kirzhner, our Supreme Court held that costs that
qualify as recoverable “incidental damages” must (1) be “incurred
in the ‘inspection, receipt, transportation and care and custody’ of
[the] vehicle”; (2) “‘result[] from’ or [be] incurred ‘incident to’ a
manufacturer’s breach of warranty or other violation of the Act”;
and (3) be “‘reasonably incurred.’” (Kirzhner, at p. 979, italics
added.) In determining which costs qualify as those incurred for
the “care and custody” of a vehicle, Kirzhner drew a distinction
between costs incurred for the manufacturer’s benefit (defined as
costs incurred to “preserv[e] and maintain” the vehicle and
“protect [it] from damage or theft” “pending [its] return to the
20
[manufacturer]” while the consumer acts as a sort of bailee) and
costs incurred for the consumer’s benefit (defined as costs incurred
to make it possible to “drive the vehicle and keep it operational”
pending its return); the former are recoverable as incidental
damages under the Act, but the latter are not. (Id. at pp. 979-
982; Lanners v. Whitney (1967) 428 P.2d 398, 404 [drawing
distinction between costs to maintain nonconforming airplanes
from costs incurred to fly the airplanes, which is discussed
favorably in Kirzhner].) Because an optional service contract
functions as a prospective payment for the costs of keeping a
vehicle serviced—and hence operational and able to be driven—it
is for the consumer’s benefit (not the manufacturer’s), and
accordingly does not satisfy Kirzhner’s prerequisites for recovery
as “incidental damages” under the Act.
B. Insurance premiums
Because plaintiff’s payments for insurance premiums were
by definition incurred after he purchased the Optima, they are
neither part of the “actual price paid” nor “collateral charges.”
(See Kirzhner, supra, 9 Cal.5th at p. 977 [legally required
registration renewal fees are “not recoverable as collateral
charges”].) Thus, the issue comes down to whether the full
amount of insurance premiums plaintiff paid between Kia’s
conceded violation of the Act in December 2014 (after the second
opportunity to repair the defect) and March 2022 (when plaintiff
stopped driving the car) qualify as “incidental damages.”
The full amount of the insurance premiums are not
“incidental damages.” Consistent with Kirzhner’s distinction
between postviolation costs incurred for the manufacturer’s
benefit and postviolation costs incurred for the consumer’s
benefit, consumers may recover as “incidental damages” only
21
those insurance premiums incurred to “safeguard the vehicle
from damage due to a collision, theft, vandalism, fire, and similar
risks” because those would “reduce the value of the
manufacturer’s interest in the vehicle.” (Crayton v. FCA US LLC
(2021) 63 Cal.App.5th 194, 209 (Crayton).) Thus, only “payments
of property damage premiums” are recoverable as “incidental
damages” (ibid.); payments for liability insurance attendant to
the use of the vehicle are not recoverable. The trial court
therefore erred in not striking from the “restitution” award
amounts that plaintiff paid for liability-related insurance
premiums.
Plaintiff responds with three arguments. First, he argues
that Kia waived its right to object to the award of insurance
premiums paid for liability-related insurance by not raising this
distinction until its second posttrial motion. Although the failure
to raise the issue during trial necessitates further proceedings to
nail down how the distinction applies to the facts of this case, the
chief question raised by Kia’s appeal—were these premiums
improperly awarded?—is a question of law raised below and that
we may consider for the first time on appeal even if it was not.
(Meridian Financial Services, Inc. v. Phan (2021) 67 Cal.App.5th
657, 699-700.) Second, plaintiff argues that California law
requires drivers to maintain liability insurance and
uninsured/underinsured driver’s insurance. (Ins. Code, §
11580.1, subds. (a) & (b)(1).) That may be so, but that
requirement only kicks in if a consumer elects to drive the vehicle,
which is up to the consumer (since a car can be garaged without
insurance) and in no way benefits the manufacturer. Third, and
citing Mai v. HKT Cal, Inc. (2021) 66 Cal.App.5th 504, 519-520,
plaintiff argues that his presentation of some insurance bills
22
along with his trial testimony establish a prima facie case of
entitlement to recover the entirety of his insurance premiums.
But the issue here is whether plaintiff carried his burden of proof
(not merely his burden of production to establish a prima facie
case) on the full amount of his recoverable insurance premiums;
because the bills submitted include some liability insurance, the
jury’s “restitution” award overcompensates plaintiff.
Although the line between insurance premiums incurred to
protect against damage to the vehicle and premiums incurred to
enable use of the vehicle was clear at the time Crayton was
decided, the evidence plaintiff adduced at trial does not enable us
to parse apart the recoverable premiums from the nonrecoverable
premiums for the period from December 2014 to March 2022.
Accordingly, plaintiff’s recovery of insurance premiums as
incidental damages is limited to only those property damage
premiums he specifically established, which is $1,595 for the
2015-2016 and 2021-2022 policy periods. (See Teitel, supra, 231
Cal.App.3d at p. 1605, fn. 6 [JNOV “for an amount less than the
jury verdict” only appropriate “where there can be no dispute as
to the amount”]; Cardinal Health 301 Inc. v. Tyco Electronics
Corp. (2008) 169 Cal.App.4th 116, 153 [“If the plaintiff had a ‘full
and fair opportunity’ to present the supporting evidence, and the
evidence was insufficient as a matter of law to support a damage
award, a reviewing court may strike the award without ordering
a retrial”]; Licudine v. Cedars-Sina Medical Center (2016) 3
Cal.App.5th 881, 889-900 [“a trial ‘is not a practice run’” so “[i]f
the plaintiff did not adduce sufficient evidence in the first trial,”
they should not “be given a second bite at the apple”]; Gillan v.
City of San Marino (20076) 147 Cal.App.4th 1033, 1053 [rule that
“a defendant who fails to request a special verdict segregating the
23
elements of damages forfeits the right to challenge a separate
element of damages on appeal” not applicable where the
defendant asserts the award of damages necessarily exceeds
what is recoverable under the plaintiff’s claims], disapproved on
other grounds by Leon v. County of Riverside (2023) 14 Cal.5th
910, 931.)
C. Remedy
The trial court is accordingly directed to further amend the
judgment for plaintiff by striking the following amounts from the
“restitution” award:
– $2,000 (based on plaintiff’s concession to eliminate
the cost of the manufacturer’s rebate);
– $299 (based on plaintiff’s concession to eliminate the
cost of the theft deterrent device);
– $2,298 (based on our holding that the cost of the
optional service contract is not recoverable); and
– All but $1,595 for the recoverable insurance premium
payments (based on plaintiff’s concession to eliminate the cost of
premiums paid prior to Kia’s breach and based on our holding
that plaintiff can recover only the cost of property damage
premiums plaintiff proved).
III. The Civil Penalty
Plaintiff argues that the trial court erred in striking the
civil penalty from the jury verdict. As noted above, the Act
authorizes a civil penalty if the “failure to comply [with the Act]
was willful.” (§ 1794, subd. (c), italics added.)
A. Willfulness
1. The standard
The term “willful” is a chameleon, a “slipper[y]” term of art
that changes to suit the context in which it is used. (Kwan v.
24
Mercedes-Benz of North America, Inc. (1994) 23 Cal.App.4th 174,
183 (Kwan).) Because a “willful” violation of the Act is what
triggers the Act’s civil penalty, the term “willful” necessarily
draws its meaning from the purposes of that civil penalty. The
courts have identified three such purposes. First, the Act’s civil
penalty is intended to function as an “important” “deterrent to
deliberate violations” of the Act. (Kwan, at p. 184; cf. Jiagbogu v.
Mercedez-Benz USA (2004) 118 Cal.App.4th 1235, 1244
(Jiagbogu) [“Interpretations that would significantly vitiate a
manufacturer’s incentive to comply with the Act should be
avoided”]; Niedermeier, supra, 15 Cal.5th at p. 821 [same].)
Second, the Act “establishes a two-tier system of damages for
willful and nonwillful violations” of the Act that must remain
distinct and not be blurred. (Kwan, at p. 184; Kirzhner, supra, 9
Cal.5th at p. 984 [so noting].) Lastly, the Act’s civil penalty is
“akin to punitive damages” and hence meant to be “imposed as
punishment” in addition to “[to] deter[].” (Kwan, at pp. 184-185;
see Naranjo v. Spectrum Security Services, Inc. (2024) 15 Cal.5th
1056, 1075 (Naranjo) [“the purpose of imposing civil penalties is
typically, as with punitive damages, not primarily to compensate,
but to deter and punish”].)
The courts have articulated and examined several possible
definitions of what it means for a manufacturer to “willful[ly]”
violate the Act. Those definitions exist along a spectrum from
most to least onerous.
a. Deliberate violations of the Act
While a deliberate violation of the Act—that is, where the
party sued maliciously and in a blameworthy manner failed to
comply with the Act—certainly constitutes a “willful” violation,
such moustache-twirling malevolence is not required to show
25
“willfulness.” (Suman v. BMW of North America, Inc. (1994) 23
Cal.App.4th 1, 12 (Suman); Ibrahim v. Ford Motor Co. (1989) 214
Cal.App.3d 878, 894 (Ibrahim); Kwan, supra, 23 Cal.App.4th at p.
181.)
b. Knowing violations of the Act
As with deliberate violations, a knowing violation of the
Act—that is, where the manufacturer is subjectively aware that
it is violating the Act—also constitutes a “willful” violation (see
Hatheway v. Industrial Acc. Com. of Cal. (1939) 13 Cal.2d 377,
380-381), but such knowledge is not required to show
“willfulness” (Kwan, supra, 23 Cal.App.4th at p. 185).
c. Unknowing violations of the Act, where
manufacturer has a reasonable, good faith belief that it is
complying
A manufacturer does not act “willfully” if its failure to
comply with the Act is an “honest mistake” because it “acted with
a good faith and reasonable belief” that it was complying. (Kwan,
supra, 23 Cal.App.4th at p. 185; Oregel v. American Isuzu Motors,
Inc. (2001) 90 Cal.App.4th 1094, 1104 (Oregel); Jensen v. BMW of
North America, Inc. (1995) 35 Cal.App.4th 112, 136 (Jensen);
accord, Lusardi Construction Co. v. Aubry (1992) 1 Cal.4th 976,
996-997 [“courts refuse to impose civil penalties against a party
who acted with a good faith and reasonable belief in the legality
of his or her actions”].) Immunizing such manufacturers from
liability for the Act’s civil penalty makes sense because “[t]hose
who proceed on a reasonable, good faith belief that they have
conformed their conduct to the law’s requirements do not need to
be deterred from repeating their mistake, nor do they reflect the
sort of disregard of the requirements of the law and respect for
others’ rights that penalty provisions are frequently designed to
26
punish.” (Naranjo, supra, 15 Cal.5th at p. 1075.) Under this
standard, a manufacturer is not acting with a good faith and
“reasonable” belief if it is acting like an ostrich by refusing to “use
. . . reasonably available information germane to [its] decision”
and thus is remaining deliberately ignorant. (Kwan, at p. 186;
Figueroa v. FCA US, LLC (2022) 84 Cal.App.5th 708, 715
(Figueroa) [manufacturer who “turn[s] a blind eye to a problem”
cannot “claim innocence” and avoid the Act’s civil penalty
premised on willfulness].)
Applying this standard, “a violation [of the Act] is not
willful if the [manufacturer’s] failure to replace or refund was the
result of a good faith and reasonable belief the facts imposing the
statutory obligation were not present,” such as when “the
manufacturer reasonably believed the product did conform to the
warranty, or a reasonable number of repair attempts had not
been made, or the [consumer] desired further repair rather than
replacement or refund.” (Kwan, supra, 23 Cal.App.4th at p. 185.)
d. Negligent violations of the Act
A manufacturer’s negligent failure to comply with the Act is
not “willful.” (Kirzhner, supra, 9 Cal.5th at p. 984 [“the Act
creates a ‘two-tier system of damages’ for willful and negligent
violations of any of the Act’s affirmative obligations”], italics
added.)
Plaintiff resists this conclusion, urging that negligent
violations of the Act are willful violations because violations
committed “with a good faith and reasonable belief” are not
willful, such that unreasonable violations are willful.
We reject this argument for what boils down to two
reasons.
27
First, the net effect of plaintiff’s argument is to substitute
the word “willful” in section 1794, subdivision (c), with
“negligent.” Yet these two concepts are antithetical to one
another. (Donnelly v. Southern Pacific Co. (1941) 18 Cal.2d 863,
869 [“Willfulness and negligence are contradictory terms”]; J. C.
Penney Casualty Ins. Co. v. M.K. (1991) 52 Cal.3d 1009, 1021 [“‘It
is settled that “willful act” [under the statute at issue] means
“something more than the mere intentional doing of an act
constituting [ordinary] negligence”’”]; McLaughlin v. Richland
Shoe Co. (1988) 486 U.S. 128, 133 [willfulness “is generally
understood to refer to conduct that is not merely negligent”].) We
decline to treat them as synonymous, where doing so would
impermissibly blur the two tiers of remedies under the Act.
Instead, we honor our Legislature’s choice to use the word
“willful” instead of “negligent” in section 1794, subdivision (c).
Second, plaintiff’s argument rests on an erroneous premise.
He plucks the word “reasonable” out of a phrase used to describe
when conduct is not willful (namely, when the manufacturer acts
“with a good faith and reasonable belief”), and then asserts that
un-“reasonable” conduct is therefore willful. But this ignores the
context in which the word “reasonable” appears. (Cf. Skidgel v.
Cal. Unemployment Ins. Appeals Bd. (2021) 12 Cal.5th 1, 14
[when interpreting a statute, “‘we construe the words in question
in context, keeping in mind the statute’s nature and obvious
purposes’”].) This is fallacious. A murder of crows is not
necessarily homicidal, and an unkindness of ravens is not
necessarily hurtful or mean. Context matters. In defining
willfulness to exclude a manufacturer who harbors “a good faith
and reasonable belief” that it is complying with the Act, the word
“reasonable” qualifies the nature of the manufacturer’s “good
28
faith” “belief”; “reasonableness” separate and apart from the
manufacturer’s subjective belief is not a requirement of the
exclusion, so objective unreasonableness separate and apart from
the manufacturer’s subjective belief is not a basis for finding
conduct to be willful. This is why the definition of willfulness
always looks to the party’s subjective state of mind (Robertson,
supra, 144 Cal.App.4th at p. 815 [error not to admit evidence of
the manufacturer’s “belief” in its compliance]; Jensen, supra, 35
Cal.App.4th at p. 136 [looking to the manufacturer’s subjective
state of mind]), which would not be the case if objective
unreasonableness alone were relevant. And, more to the point, it
is why a party can “act[] in good faith and with a reasonable
belief . . . even where [it] was negligent or committed some error.”
(Plate v. Sun-Diamond Growers (1990) 225 Cal.App.3d 1115,
1124; People v. Harris (2015) 234 Cal.App.4th 671, 700 [same];
Kwan, supra, 23 Cal.App.4th at pp. 184-185 [violation of the Act
due to an “honest mistake” is not willful].)
e. Nonaccidental violations of the Act
According to some California courts, a manufacturer acts
willfully whenever it acts “intentionally”—that is, as long as the
manufacturer “‘knows what [it] is doing, intends to do what [it] is
doing, and is a free agent.’” (Suman, supra, 23 Cal.App.4th at p.
12; Ibrahim, supra, 214 Cal.App.3d at p. 894; Santana, supra, 56
Cal.App.5th at p. 346.) We reject this standard, as it would
entitle a consumer to a civil penalty whenever a manufacturer’s
noncompliance with the Act is merely nonaccidental. Because
the decision whether to replace or repurchase a vehicle is
necessarily intentional, this standard would make the Act’s civil
penalty available whenever the Act is simply violated. This
would obliterate the two tiers of penalties under the Act, and
29
eliminate the punitive purpose of the civil penalty. At least one
court has likewise rejected this overly permissive definition of
willfulness. (Kwan, supra, 23 Cal.App.4th at p. 185 [“equat[ing] .
. . willfulness with volition . . . would render ‘willful’ virtually all
cases of refusal to replace or refund”].) We join Kwan in rejecting
it.
2. The pertinent window of time
The inquiry into whether a manufacturer’s conduct in
“fail[ing] to comply” with the Act was “willful” necessarily focuses
on a specific window of time.
The pertinent window starts once the consumer has
presented a sufficiently nonconforming vehicle to an authorized
“service or repair” facility and provided the manufacturer a
“reasonable number of attempts” to fix that nonconformity (§
1793.2, subd. (d)(2)), because only after the consumer has taken
these steps is the manufacturer’s duty under the Act to replace or
repurchase triggered, and therefore, only then could there be a
willful violation of the Act. This starting point also is dictated by
the plain text of the Act itself: The Act’s civil penalty provision
focuses on whether the manufacturer’s violation of the Act was
willful (§ 1794, subd. (c)); conduct occurring before there was any
violation is accordingly irrelevant.
The pertinent window ends once the consumer has invoked
the right to sue under the Act. This end point is implied from the
function of the Act’s civil penalty—that is, to deter dilatory
conduct by manufacturers and thereby to encourage the prompt
replacement or repurchase of defective vehicles. (Kwan, supra,23 Cal.App.4th at p. 185.) At the moment a consumer files suit,
the deterrence and encouragement functions of the civil penalty
provision have obviously failed. More to the point, allowing juries
30
to examine a manufacturer’s conduct after litigation has
commenced would undoubtedly place pressure on manufacturers
to settle on terms favorable to the consumer, for settlement offers
that fell short of what the consumer wants would end up in front
of the jury as evidence of the manufacturer’s willfulness. Only by
recognizing an end point to the inquiry into willfulness is it
possible to avoid turning the civil penalty into a Sword of
Damocles that browbeats manufacturers into offering settlements
containing every term on the consumer’s litigation wishlist or
else risk having the consumer’s restitution award trebled. (See
generally Cowan v. Superior Court (1996) 14 Cal.4th 367, 392
(conc. & dis. opn. of Brown, J.) [“A rule that creates . . . a perverse
set of incentives is untenable”]; accord, Bishop v. Hyundai Motor
Am. (1996) 44 Cal.App.4th 750, 760 (Bishop) [noting trial court’s
initial ruling excluding evidence of settlement offers made after
litigation commenced].)
B. Analysis
In light of these principles, the pertinent question
regarding the propriety of the civil penalty against Kia is
whether Kia’s violation of the Act was “willful”—that is, whether
it was deliberate, knowing, or not based on a good faith and
reasonable belief that it was complying with the Act during the
21-month window between Kia’s second opportunity to repair the
Optima in December 2014 and plaintiff’s filing of his lawsuit in
September 2016.
1. Grant of JNOV motion
The trial court’s order granting Kia’s JNOV motion on the
ground that the jury’s willfulness finding was not supported by
the evidence may be upheld only if there is no substantial
evidence in the record that Kia’s failure to comply with the Act
31
was deliberate, knowing, or not based on a good faith and
reasonable belief that it was complying with the Act. After
independently reviewing the evidence, we cannot uphold the trial
court’s order because there is substantial evidence to support the
jury’s finding that Kia knowingly violated the Act or did not
perform under a good faith and reasonable belief that it was
complying with the Act. 8 Admittedly, the evidence as to whether
Kia knew that plaintiff’s Optima had a qualifying nonconformity
was conflicting: Plaintiff testified that the dealership mechanics
personally witnessed the Optima’s inability to move in reverse as
plaintiff’s December 2014 visit to the dealership was wrapping
up, but the dealership’s contemporaneous records reflect no such
interaction with or revelation to the mechanics. However,
because we must presume that the jury resolved this conflict in
plaintiff’s favor, there is substantial evidence that the
dealership—and hence Kia—had verified the defect in plaintiff’s
Optima in December 2014 and yet did not offer to replace or
repurchase his vehicle for another 14 months. This is why we
disagree with the trial court’s finding that there was “no
substantial evidence that Kia knew that the [Optima] had a
defect that it could not repair.”
Kia makes three arguments in response.
First, Kia argues that it is improper to impute the
dealership’s knowledge of the defect to Kia because the
dealership here is an independent franchisee and hence not an
agent of Kia’s from whom knowledge may be imputed. Citing
8 Because there is substantial evidence to support liability
for the civil penalty on these bases, we need not examine whether
there is substantial evidence to support a finding that Kia
deliberately violated the Act.
32
Ibrahim, supra, 214 Cal.App.3d 878, plaintiff responds that a
dealership’s knowledge is always imputed to a manufacturer or
distributor under the Act. Both parties are wrong. Ibrahim held
it was appropriate to aggregate the number of opportunities to
repair a vehicle no matter whether the facilities were owned by
the manufacturer or by a dealer; it did not speak to the
imputation of knowledge. (Id. at p. 889.) And while Kia is
correct that the Act treats manufacturers, distributors, and
retailers as distinct entities (compare § 1791, subd. (j) [defining
“manufacturer”] with id., subd. (e) [defining “distributor”] and
with id., subd. (l) [defining “retailer”]; Kiluk v. Mercedes-Benz
USA, LLC (2019) 43 Cal.App.5th 334, 340 [noting “assumption
baked into [the Act] is that the manufacturer and the
distributor/retailer are distinct entities”]), and is correct that
imputation of knowledge runs chiefly from agents to their
principals (§ 2332 [“[a]s against a principal, both principal and
agent are deemed to have notice of whatever either has notice
of”]; Tsasu LLC v. U.S. Bank Trust, N.A. (2021) 62 Cal.App.5th
704, 724), these distinctions are not dispositive here because a
manufacturer is not acting with a good faith and reasonable
belief that it is complying with the Act—and hence it remains
liable for the Act’s civil penalty—if the manufacturer ignores
“reasonably available information germane to [its] decision,”
which would include information available from the dealership
that services vehicles on its behalf (Kwan, supra, 23 Cal.App.4th
at pp. 185-186).
Second, Kia argues that there is no evidence that anyone,
including the dealership mechanics, ever identified the cause of
the defect with plaintiff’s Optima. But this is not an element of a
violation (Mikhaeilpoor, supra, 48 Cal.App.5th at p. 255), and for
33
good reason: In cases like this one, where there is a proverbial
“ghost in the machine” that cannot be exorcized, the Act declares
that the consumer is entitled to relief and places the onus on the
manufacturer to replace or refund the accursed vehicle. The
failure to do so violates the Act, and the “willful” failure to do so
renders a manufacturer liable for the Act’s civil penalty.
Third, Kia argues that it started to investigate the defect
with plaintiff’s vehicle soon after the December 2014 visit. But
Kia’s acquisition of knowledge of the defect after plaintiff
previously reported that defect and gave Kia’s authorized dealer
two opportunities to repair it triggered its duty to replace or
make restitution, not merely a duty to investigate. (§ 1793.2,
subd. (d)(2)(A).)
2. Grant of new trial motion
The trial court’s order granting a new trial on the issue of
the civil penalty must be upheld as long as there is substantial
evidence to support the trial court’s finding that Kia did not
“willfully” fail to comply with the Act or, put differently, as long
as the record does not compel a finding that Kia’s violation of the
Act was willful. A manufacturer does not act willfully under the
Act if it “reasonably believed the product did conform to the
[express] warranty.” (Kwan, supra, 23 Cal.App.4th at p. 185.)
Here, and as noted above, the evidence as to whether Kia knew
that plaintiff’s Optima was defective was conflicting: Kia’s
contemporaneous records indicated that none of the dealership’s
mechanics had witnessed the vehicle’s problems shifting into
reverse, while plaintiff testified that they had. Acting as a
thirteenth juror, the trial court was within its rights to resolve
that conflict differently than the jury and thus to disbelieve
plaintiff’s testimony and to conclude that Kia did not ever verify
34
the existence of any defect with plaintiff’s vehicle. This supports
the trial court’s finding that Kia harbored a good faith and
reasonable belief that the Optima was not defective and hence
conformed to the warranty, and that Kia’s refusal to make a
timely offer to repurchase the vehicle was not a willful violation
of the Act. (Accord, Dominguez v. American Suzuki Motor Corp.
(2008) 160 Cal.App.4th 53, 59 [manufacturer’s refusal to offer to
repurchase a motorcycle was not willful when it was “unable to
replicate the [reported] problem”].)
What is more, there is substantial evidence supporting the
trial court’s implicit finding that Kia’s good faith belief was
reasonable because Kia adequately investigated the defect
plaintiff reported: Kia’s local repair facility (that is, the
dealership) looked at the Optima once without finding a defect;
Kia immediately thereafter called plaintiff three times to gather
more information, but he ignored the calls; the dealership looked
at the Optima a second time without finding a defect; when
plaintiff called in January 2015 to demand a buyback, Kia
arranged for one of its field technicians to examine the vehicle;
the Kia field technician installed a flight recorder to collect data
on the Optima’s transmission for more than a month; Kia
declined plaintiff’s demand for a buyback only after examining
the month’s worth of data that indicated no malfunction; the
dealership looked at the Optima two more times in late 2015, and
both times could not replicate the problem; and Kia ultimately
offered to buy back the Optima two months after the last
attempt. This is not ostrich-like conduct.
Plaintiff raises a stampede of arguments that we have
wrestled into five corrals.
35
First, plaintiff argues that the trial court’s new trial order
is procedurally defective and thus is void. To be sure, the statute
governing the granting of new trials obligates a trial court to
“specify” the statutory ground(s) for granting a new trial as well
as the “reasons” for granting relief on those grounds (Code Civ.
Proc., § 657), and the court’s “reasons must refer to evidence, not
ultimate facts” (Oakland Raiders, supra, 41 Cal.4th at pp. 633-
635). Although “strict compliance” is required (id. at p. 634),
unnecessary duplication is not: Trial courts are not required to
“reiterat[e] what [they] ha[ve] already said at length” elsewhere
in their posttrial orders, so a trial court’s new trial ruling may
“borrow” the findings the court made in support of its JNOV
ruling. (Lane, supra, 22 Cal.4th at pp. 413, 415.) That is what
happened here. The trial court’s posttrial ruling set forth the
correct thirteenth juror standard for assessing evidence on a new
trial motion and, by granting a new trial in the alternative,
borrowed from the court’s earlier discussion in that same order of
why it felt a JNOV was appropriate—namely, an absence of any
evidence that Kia could confirm any defect with plaintiff’s
vehicle. Although that reason was not supported by the record
using the prism applicable to granting JNOV motions, it was
supported using the prism applicable to granting new trial
motions.
Second, plaintiff makes several arguments that all suffer
from the same underlying flaw—namely, they apply the wrong
legal standard. Plaintiff asserts that Kia acted willfully as a
matter of law because Kia “should have been able” to verify that
the Optima was defective (and was negligent for not doing so),
and because the 2019-made video provides that verification. But
these assertions ignore that the correct definition of “willful”
36
conduct under the Act is not tied to the manufacturer’s
negligence and does not look at evidence of the manufacturer’s
conduct after litigation commences (which in this case was years
before the video was created). Plaintiff asserts that the evidence
at trial supports a finding that Kia was deliberately ignorant of
any defect with the vehicle. But this assertion ignores that the
pertinent question under our standard of review of an order
granting a new trial is whether the evidence compels such a
finding, and here it does not. Plaintiff asserts that Kia’s inability
to replicate the Optima’s defect is not an automatic defense to a
violation of the Act. This assertion is correct, but ignores that the
inability to replicate can still support a finding that a violation
was not willful because that inability can support a good faith
and reasonable belief that there was no defect and hence no duty
under the Act to replace or repurchase the seemingly
nondefective vehicle.
Third, plaintiff argues that Kia’s “endless” investigation
into the defect with his Optima in the 21 months between its
violation of the Act in December 2014 and plaintiff’s lawsuit in
September 2016 renders Kia’s violation willful as a matter of law.
It does not. If it did, manufacturers would be placed in the
impossible position of being “damned if they do, and damned if
they don’t” because active investigation of a reported defect and
the failure to actively investigate a reported defect would both
constitute willful conduct subjecting a manufacturer to the Act’s
civil penalty. Because the civil penalty was not meant to be
awarded for every violation, we reject a construction of the Act
that would lead to that impermissible outcome.
Fourth, plaintiff argues that precedent mandates a ruling
in his favor. It does not, as all the cases he cites are
37
distinguishable. The courts in Schreidel v. American Honda
Motor Co. (1995) 34 Cal.App.4th 1242; Figueroa, supra, 84
Cal.App.5th 708; and Jensen, supra, 35 Cal.App.4th 112 all
upheld a finding of a willful violation of the Act after the
manufacturer was unable to duplicate the defect in the
consumer’s vehicle, but in each case the manufacturer made
either “minimal” attempts to duplicate the defect, outright
refused to investigate the defect at all, or had independent
corroboration of the defect’s existence. (Schreidel, at p. 1254
[“minimal” “attempt[s]” to duplicate]; Figueroa, at p. 715
[outright refusal]; Jensen, at pp. 136-137 [manufacturer issued
“technical bulletin” alerting dealerships that the vehicle had
specific defect at issue].) The courts in Lukather v. General
Motors, LLC (2010) 181 Cal.App.4th 1041 and Anderson, supra,
74 Cal.App.5th 946 upheld a finding of a willful violation of the
Act after the manufacturer had confirmed the defect in the
vehicle but was unable to fix it. (Lukather, at pp. 1051-1052;
Anderson, at pp. 953-954.) The court in Oregel, supra, 90
Cal.App.4th 1094 upheld a finding of a willful violation of the Act
when the manufacturer’s refusal to offer a replacement or
repurchase was based on its “internal policies that erected hidden
obstacles to the ability of an unwary consumer to obtain redress
under the Act.” (Id. at p. 1105.) In this case, the trial court
sitting as a thirteenth juror had substantial evidence upon which
to find that Kia had not independently corroborated the existence
of a defect, that Kia had not otherwise confirmed the existence of
a defect, and that Kia’s decision to wait until February 2016 to
offer to repurchase plaintiff’s Optima was based on the facts of
plaintiff’s case rather than any internal policy aimed at
confounding consumers’ rights under the Act.
38
Fifth and lastly, plaintiff argues that the terms of Kia’s
February 2016 offer to repurchase his vehicle—which plaintiff
pejoratively characterizes as “predatory”—establish the
willfulness of Kia’s violation of the Act as a matter of law. More
particularly, plaintiff offers a two-part argument: He criticizes
six specific terms of Kia’s offer, and then he cites case law
establishing that at least some of those terms are “unreasonable.”
We reject plaintiff’s arguments for several reasons.
For starters, the cases he cites in support of the second step
of his argument—chiefly, Goglin v. BMW of North America, LLC
(2016) 4 Cal.App.5th 462 (Goglin); McKenzie v. Ford Motor Co.
(2015) 238 Cal.App.4th 695 (McKenzie); Gezalyan v. BMW of
North America, LLC (C.D. Cal. 2010) 697 F.Supp.2d 1168(Gezalyan); and Etcheson v. FCA US LLC (2018) 30 Cal.App.5th
831 (Etcheson)—all arise in a different context, and do not
support his argument that Kia’s violation of the Act was willful.
All of these cases address whether a consumer can recover
attorney fees under the Act when those fees were incurred after
the consumer’s attorney rejected the manufacturer’s offer to
repurchase and when that offer contained, as proposed terms,
either a release of liability or a confidentiality clause. (Goglin, at
p. 472; McKenzie, at pp. 705-707; Gezalyan, at p. 1170; Etcheson,
at pp. 845-846.) This is a different question than whether a
manufacturer’s inclusion of specific terms in an offer to
repurchase a vehicle is itself evidence of that manufacturer’s
willful violation of the Act. Indeed, under the line of precedent
plaintiff cites, a consumer can still recover attorney fees after
their attorney rejects an offer to repurchase due to the offer’s
failure to include an extra payment akin to the Act’s civil penalty.
(Etcheson, at pp. 847-848.) If, as plaintiff urges, this line of
39
precedent applied here, a manufacturer’s failure to offer to pay
the Act’s civil penalty in any repurchase offer would itself be
evidence of willfulness that would, in turn, justify the imposition
of the Act’s civil penalty in subsequent litigation. Such sophistry
is impressive but, for obvious reasons, is unpersuasive.
Next, we reject plaintiff’s general premise that a
manufacturer’s offer to repurchase itself constitutes evidence of
willfulness. Plaintiff asks: Why would a manufacturer offer to
repurchase a vehicle unless it had done something wrong? This
question completely ignores that the Act places an affirmative
duty on manufacturers to make such offers and that this duty
exists whether or not the manufacturer has done anything wrong.
We therefore decline to construe a mandatory obligation imposed
by the Act as conclusive evidence of willfulness entitling
consumers to what effectively amounts to treble damages.
The six specific terms in Kia’s February 2016 offer to
repurchase that plaintiff finds offensive are neither sufficient nor
compelling evidence of willfulness. 9
The first three specific terms plaintiff attacks—namely,
that Kia did not offer to pay plaintiff for (1) the $2,000
manufacturer’s rebate, (2) the optional security device and
optional service plan supplied by third parties, or (3) the full
amount of his insurance premiums—are terms that plaintiff has
conceded or that we have concluded are entirely proper under the
Act, and hence cannot be considered evidence of a willful
violation of the Act.
The fourth term plaintiff attacks is the offer’s condition
that plaintiff “sign[] [a] settlement release agreement.” Plaintiff
9 Thus, the fact that Kia’s 2016 offer may have been a
standard offer is not evidence of willfulness.
40
urges that no such agreement was attached to the February 2016
offer letter, and that it was inappropriate to ask plaintiff to sign a
release without knowing its content. As between construing the
offer letter as a demand that plaintiff agree to a release of
liability sight unseen and construing the offer letter as the first
step in a multistep settlement process that would include
plaintiff having the opportunity to review a settlement
agreement given to him in the future, the latter construction is
more reasonable. More to the point, that latter construction is in
no way inappropriate because one contract may anticipate the
execution of future contracts (e.g., City of Galt v. Cohen (2017) 12
Cal.App.5th 367, 381) and because there is no reason to assume
that the release Kia would propose would be unlawfully
overbroad (Covert v. FCA USA, LLC (2022) 73 Cal.App.5th 821,
839 [rejecting notion an anticipated release would reach
impermissibly broader than the claims at issue under the Act];
Goodstein v. Bank of San Pedro (1994) 27 Cal.App.4th 899, 907
[presuming that release would only permissibly reach the claims
at issue in that case]; cf. Valdez v. Seidner-Miller, Inc. (2019) 33
Cal.App.5th 600, 615-616 (Valdez) [terms of release violated the
Consumer Legal Remedies Act]; Rheinhart v. Nissan North
America, Inc. (2023) 92 Cal.App.5th 1016, 1035-1036 [terms of
release impermissibly sought to cover future rights under the
Act]; McKenzie, supra, 238 Cal.App.4th at pp. 705-707 [release
was “breathtakingly broad”]; Goglin, supra, 4 Cal.App.5th at pp.
471-472 [release was a “general release” covering all future
litigation]; Gezalyan, supra, 697 F.Supp.2d at p. 1170 [same];
Etcheson, supra, 30 Cal.App.5th at pp. 845-846 [requirement of
release in first offer replaced with an “insufficiently specific”
release in second offer]).
41
The fifth term plaintiff attacks is the requirement that Kia
conduct a “physical inspection of the vehicle” for “excessive wear
and tear” and that plaintiff provide a blank cashier’s check by
which Kia could offset the amount of any such excessive wear and
tear. The offset for excessive wear and tear is not problematic,
let alone evidence of willfulness. Although a consumer acts as a
bailee of sorts for the manufacturer once the manufacturer has
failed to comply with the Act (which is why postbreach insurance
premiums protecting against property damage are recoverable as
“incidental damages”), the consumer may still use the vehicle and
the consumer is accordingly not liable for diminution in value due
to normal wear and tear. However, excessive wear and tear goes
beyond such ordinary use of the asset in the consumer’s care and
may therefore be offset. (Accord, Jiagbogu, supra, 118
Cal.App.4th at p. 1244 [“deliberate vandalism by a [consumer] . . .
may well justify a defense to the [consumer’s] claim”]; cf. Valdez,
supra, 33 Cal.App.5th at pp. 615-616 [offset for “normal wear and
tear” not permitted under the Consumer Legal Remedies Act];
MacQuiddy v. Mercedes-Benz USA, LLC (2015) 233 Cal.App.4th
1036, 1049-1050 [offer that required offset for “normal wear and
tear” is too “uncertain[]” to constitute a firm offer under Code of
Civil Procedure section 998].) The mechanism in Kia’s offer for
providing the offset, through the use of a cashier’s check, is also
not problematic, especially where, as here, the record indicates
that the vehicle had no dents or dings or damage in February
2016.
The sixth term plaintiff attacks is that Kia’s offset for 1,533
miles on the odometer prior to plaintiff’s first August 2014 visit to
the dealership impermissibly included the 19 miles on the
odometer at the time plaintiff first purchased the Optima. Even
42
if we assume this was an error under the Act (although the Act
does not expressly provide for this carve out (§ 1793.2, subd.
(d)(2)), any such error translates to a $7.79 overcharge which is
too de minimis to support, let alone compel, a finding that Kia
willfully violated the Act.
3. Scope of new trial
The new trial on the issue of whether Kia willfully violated
the Act should be conducted on remand subject to the guardrails
clarified in this opinion. Specifically, the scope of evidence
relevant to willfulness does not include Kia’s conduct outside the
pertinent window of time identified in this opinion (that is, the
relevant scope includes only the 21 months between Kia’s
violation in December 2014 and plaintiff’s lawsuit in September
2016), 10 and in assessing the evidence adduced at the new trial,
the jury should be instructed, consistent with this opinion, that
Kia’s violation of the Act was “willful” for purposes of the civil
penalty only if Kia’s failure to comply was deliberate, knowing, or
not based on a good faith and reasonable belief that it was
complying with the Act. In the event the jury makes the
necessary willfulness finding, the civil penalty imposed “shall not
exceed two times” the amount of the “restitution” award as
amended consistent with this opinion.
10 We further note that while plaintiff testified at the first
trial to his personal feelings about how Kia’s conduct affected
plaintiff or his family, such evidence would not be relevant at the
new trial on willfulness as such testimony injects emotional
distress-type damages into the dispute, which are not recoverable
under the Act. (Kwan, supra, 23 Cal.App.4th at p. 192; Bishop,
supra, 44 Cal.App.4th at pp. 757-758; Erlich v. Menezes (1999) 21
Cal.4th 543, 558.)
43
DISPOSITION
The judgment is affirmed in part and reversed in part, and
the trial court is directed to strike from plaintiff’s “restitution”
award the amounts set forth in this opinion and to conduct a new
trial consistent with this opinion on the issue of the civil penalty.
The parties are to bear their own costs on appeal.
CERTIFIED FOR PUBLICATION.
______________________, J.
HOFFSTADT
We concur:
_________________________, Acting P. J.
ASHMANN-GERST
_________________________, J.
CHAVEZ
44