Justia Consumer Law Opinion Summaries

In 2008, California enacted a Property Assessed Clean Energy program (PACE) as a method for homeowners to finance energy and water conservation improvements. A PACE debt was created by contract and secured by the improved property. But like a tax, the installment payments were billed and paid as a special assessment on the improved property, resulting in a first-priority tax lien in the event of default. The named plaintiffs in these putative class actions were over 65 years old and entered into PACE contracts. The defendants were private companies who either made PACE loans to plaintiffs, were assigned rights to payment, and/or administered PACE programs for municipalities. The gravamen of the complaint in each case was that PACE financing was actually, and should have been treated as, a secured home improvement loan. Plaintiffs alleged that defendants engaged in unfair and deceptive business practices by violating consumer protection laws, including Civil Code section 1804.1(j), which prohibited taking a security interest in a senior citizen’s residence to secure a home improvement loan. Generally, a taxpayer could not pursue a court action for a refund of property taxes without first applying to the local board of equalization for a reduction and then filing an administrative claim for a refund. Here, defendants demurred to the complaints on the sole ground that plaintiffs failed to allege they first exhausted administrative remedies. The trial court agreed, sustained the demurrers without leave to amend, and entered a judgment of dismissal in each case. On appeal, plaintiffs primarily contend they were not required to pursue administrative remedies because they have sued only private companies and do not challenge “any aspect of the municipal tax process involved.” The Court of Appeal found that despite their assertions to the contrary, plaintiffs did challenge their property tax assessments. And although they did not sue any government entity, the “consumer protection statutes under which plaintiffs brought their action cannot be employed to avoid the limitations and procedures set out by the Revenue and Taxation Code.” Thus, the Court concluded plaintiffs were required to submit their claims through the administrative appeals process in the first instance. "Their failure to do so requires the judgments to be affirmed." View "Morgan v. Ygrene Energy Fund, Inc." on Justia Law

The Council for Education and Research on Toxics (CERT) brought these actions under Proposition 65 (Prop. 65) against Respondents, dozens of companies that roast, distribute, or sell coffee. CERT claimed that Respondents had failed to provide required Prop. 65 warnings for their coffee products based on the presence of acrylamide. While the litigation was pending, the Office of Environmental Health Hazard Assessment (the Agency) adopted a new regulation providing that “exposures to chemicals in coffee, listed on or before March 15, 2019, as known to the state to cause cancer, that are created by and inherent in the processes of roasting coffee beans or brewing coffee do not pose a significant risk of cancer.”   CERT moved for summary adjudication, challenging the regulation’s validity on various grounds. In opposing summary judgment, CERT also contended that regardless of the regulation, triable issues remained regarding the presence of acrylamide resulting from additives. CERT challenged the trial court’s grant of summary judgment for Respondents, its denial of its motion for fees, and its award of section 998.   The Second Appellate Court affirmed the trial court’s orders granting summary judgment and denying attorney fees. The court reversed the order denying CERT’s motion to tax costs. The court explained that Respondents’ assertion ignores claims beyond the scope of CERT’s actions that were to be released under the offers. Given that the proposed releases in section 998 offers covered this and other potential claims, the trial court could not have determined that the offers were more favorable than the judgment. Thus, the offers were invalid for purposes of section 998. View "Council for Education and Research etc. v. Starbucks Corp." on Justia Law

Plaintiffs sued Nissan, alleging the transmission in a 2013 Nissan Sentra they purchased was defective, bringing statutory claims under the Song-Beverly Consumer Warranty Act (Civ. Code 1790) and a common law fraud claim alleging that Nissan, by fraudulently concealing the defects, induced them to purchase the car. The trial court dismissed the fraudulent inducement claim as barred by the “economic loss rule.” The court also struck the plaintiffs’ request for punitive damages.The court of appeal reversed. Under California law, the economic loss rule does not bar the fraudulent inducement claim. The fraudulent inducement exception to the economic loss rule applies; fraudulent inducement is a viable tort claim under California law. The plaintiffs adequately pleaded that the transmissions installed in numerous Nissan vehicles (including the one they purchased) were defective; Nissan knew of the defects and the hazards they posed; Nissan had exclusive knowledge of the defects but intentionally concealed and failed to disclose that information; Nissan intended to deceive plaintiffs by concealing known transmission problems; plaintiffs would not have purchased the car if they had known of the defects; and plaintiffs suffered damages in the form of money paid to purchase the car. View "Dhital v. Nissan North America, Inc." on Justia Law

Plaintiff purchased a new pickup truck. FCA US LLC (FCA) is the manufacturer of the truck. Within 900 miles the truck engine overheated and the truck had to be towed to the dealership for repair. The dealership replaced a defective radiator hose clamp, and visually inspected the cylinder heads for cracks that are often caused by overheating. The dealership did not undertake a standard dye test for leaks. The engine continued to overheat and after a few thousand miles the water pump failed. The dealership replaced the water pump under warranty. Plaintiff filed a complaint against FCA alleging causes of action for breach of express warranty and breach of implied warranty. FCA made an offer of settlement of $30,000. Plaintiff refused the offer, and the matter went to jury trial. The jury found FCA breached its express warranty and awarded $20,154 in compensatory damages plus a $10,000 civil penalty, for a total of $30,154. The jury also found FCA breached its implied warranty and awarded $30,154 in compensatory damages.   The Second Appellate District affirmed. The court reasoned that FCA failed to show that any of the damages the jury awarded included registration renewal fees or insurance premiums. The jury simply awarded a lump sum of damages. With such an undifferentiated award, there is no way to determine what portion, if any, of the verdict was rewarded on an improper basis. Further, FCA refused to repurchase the truck or even investigate whether it was a lemon. That is more than sufficient to show a willful violation. View "Figueroa v. FCA US" on Justia Law

Plaintiff’s complaint alleged Circle K violated the Fair Credit Reporting Act (FCRA) by failing to provide him with proper FCRA disclosures when it sought and received his authorization to obtain a consumer report about him in connection with his application for employment, and by actually obtaining the consumer report in reliance on that authorization. Plaintiff appealed from a judgment of dismissal entered in favor of respondent Circle K Stores Inc. (Circle K) and against Plaintiff after the trial court sustained Circle K’s demurrer to Plaintiff’s CLASS ACTION COMPLAINT (complaint) without leave to amend.     The Fifth Appellate affirmed the judgment of dismissal. The court explained that Plaintiff did not allege he did not receive a copy of the consumer report that Circle K obtained. Plaintiff does not allege the consumer report obtained by Circle K contains any defamatory content or other per se injurious content. He does not allege the consumer report contained false or inaccurate information. Similarly, there are no allegations of any exposure to a material risk of future harm, imminent or substantial. Thus, there was no injury to Plaintiff’s protected interest in ensuring fair and accurate credit (or background) reporting. The court also rejected Plaintiff’s claims he suffered “informational injury” sufficient to confer upon him standing to maintain his action. “Informational injury that causes no adverse effects”—e.g., where required information is provided but is provided in the wrong format as in the present case—has been held insufficient to satisfy Article III standing. View "Limon v. Circle K Stores" on Justia Law

Michael O’Connor signed up for a loyalty program when he bought a pair of shoes and socks from Road Runner Sports, Inc. and Road Runner Sports Retail, Inc. (collectively, “Road Runner”). He alleged Road Runner did not tell him the loyalty program was an automatic renewal subscription and that his credit card would be charged an annual subscription fee. After discovering he had been charged for four years of subscription fees, he joined as the named plaintiff in a class action lawsuit alleging Road Runner had violated California’s Automatic Renewal Law and consumer protection statutes. Road Runner asserted O’Connor was bound by an arbitration provision it added to the online terms and conditions of the loyalty program, some three years after he enrolled. Although Road Runner conceded O’Connor did not have actual or constructive notice of the arbitration provision, it contended O’Connor created an implied-in-fact agreement to arbitrate when he obtained imputed knowledge of the arbitration provision through his counsel in the course of litigation and failed to cancel his membership. The Court of Appeal disagreed this was sufficient under California law to prove consent to or acceptance of an agreement to arbitrate. Accordingly, the Court affirmed the trial court’s order denying Road Runner’s motion to compel arbitration. View "Costa v. Road Runner Sports" on Justia Law

Young claims her employer told her that it had received a wage garnishment order in 2019. Young then discovered the existence of a 2010 default judgment against her, in favor of Midland, for a purported debt of $8,529.93 plus interest. Young sued to set aside the 2010 default judgment, based on extrinsic mistake or fraud. She sought damages, penalties, and reasonable attorney fees and costs under the Rosenthal Fair Debt Collection Practices Act (Civ. Code, 1788), arguing that Midland was a debt collector of consumer debt and had engaged in false and deceptive conduct in attempting to collect that debt, citing her contention that she was never served with process. Midland denied Young’s allegations, asserted affirmative defenses, and filed an anti-SLAPP motion (section 425.16) to strike Young’s claims.The trial court granted the anti-SLAPP motions, finding Young did not show she would probably prevail on the merits of her claims and awarded Midland attorney fees and costs. The court of appeal vacated. Young showed she would probably prevail on the merits of her Rosenthal Act claim, producing prima facie evidence that Midland falsely represented substituted service on her was accomplished. She was not required to show that Midland knowingly made this false representation. Young’s Rosenthal Act cause of action was not time-barred. View "Young v. Midland Funding, LLC" on Justia Law

Borrower took out a $5.6 million dollar bridge loan, with 8.5% interest per annum, secured by a deed of trust on real property. They defaulted on a monthly payment of $39,667, triggering late fee provisions: a one-time 10% fee assessed against the overdue payment ($3,967) and a default interest charge of 9.99% per annum assessed against the total unpaid principal balance. Borrower filed a demand for arbitration, alleging the loan was in violation of Business & Professions Code 10240 and the late fee was an unlawful penalty in violation of section 1671. The arbitrator rejected both claims and denied the demand for arbitration. Borrower petitioned to vacate the decision, arguing that the arbitrator exceeded their authority by denying claims in violation of “nonwaivable statutory rights and/or contravention of explicit legislative expressions of public policy.”The court of appeal reversed the denial of that petition. The trial court erroneously failed to vacate an award that constitutes an unlawful penalty in contravention of public policy set forth in section 1671. Liquidated damages in the form of a penalty assessed during the lifetime of a partially matured note against the entire outstanding loan amount are unlawful penalties. There is no precedent upholding a liquidated damages provision where a borrower missed a single installment and then was penalized pursuant to such a provision. View "Honchariw v. FJM Private Mortgage Fund, LLC" on Justia Law

Sream manufactures water pipes (bongs). According to Sream, its packaging and labels have long included the statement that such products “should be sold, marketed or used for legal, non-prohibited use only.” Since July 2020, Sream has also placed the following label on its products as a “purely defensive” measure: “WARNING: This product can expose you to chemicals including arsenic, which is known ... to cause cancer."EHA filed a private enforcement action, alleging Sream had failed to provide a warning that its products exposed consumers to marijuana smoke in violation of California’s Safe Drinking Water and Toxic Enforcement Act (Health & Safety Code, 25249.5, “Proposition 65”). Section 25249.6 provides: “No person in the course of doing business shall knowingly and intentionally expose any individual to a chemical known to the state to cause cancer or reproductive toxicity without first giving clear and reasonable warning to such individual.” “Marijuana smoke” was added to the list of carcinogens in 2009.The trial court granted Sream judgment on the pleadings, finding EHA had not alleged that Sream’s products require marijuana to function or can only be used with marijuana. The court of appeal affirmed. EHA does not allege direct contact, but instead that individuals “may be exposed to marijuana smoke” if they use Sream’s water pipes with marijuana. Requiring a warning for possible indirect contact, depending on how a consumer chooses to use the product, would introduce confusion into that decision-making process. View "Environmental Health Advocates, Inc. v. Sream, Inc." on Justia Law

After Plaintiff-appellant David Salazar bought Walmart, Inc.’s “Great Value White Baking Chips” incorrectly thinking they contained white chocolate, he filed this class action against Walmart for false advertising under various consumer protection statutes. The trial court sustained Walmart’s demurrers without leave to amend, finding as a matter of law that no reasonable consumer would believe Walmart’s White Baking Chips contain white chocolate. The thrust of Salazar's claims was that he was reasonably misled to believe the White Baking Chips had real white chocolate because of the product’s label and its placement near products with real chocolate. Salazar also alleged that the results of a survey he conducted show that 90 percent of consumers were deceived by the White Baking Chips’ advertising and incorrectly believed they contained white chocolate. “California courts . . . have recognized that whether a business practice is deceptive will usually be a question of fact not appropriate for decision on demurrer. ... These are matters of fact, subject to proof that can be tested at trial, even if as judges we might be tempted to debate and speculate further about them.” After careful consideration, the Court of Appeal determined that a reasonable consumer could reasonably believe the morsels had white chocolate. As a result, the Court found Salazar plausibly alleged that “‘a significant portion of the general consuming public or of targeted consumers, acting reasonably in the circumstances, could be misled’” by the chips' advertising. Judgment was reversed and the matter remanded for further proceedings. View "Salazar v. Walmart, Inc." on Justia Law