the sale of a used vehicle, claims for fraud or negligent misrepresentation regarding the condition of the vehicle at the time of sale and the representations made by the sales staff, and Consumers Legal Remedies Act (CLRA) claims regarding the condition of the vehicle. AB 1755 Becomes Law Gov. Gavin Newsom recently signed into law Assembly Bill 1755 (AB 1755), which significantly modifies the California Lemon Law and introduces mandatory mediation and seeks to streamline these cases. The bill had an unusual path to becoming law. AB 1755 was originally a measure intended to deal with child support, but with less than two weeks left in the legislative session, the bill was wholly revised, with all provisions regarding child support removed, and the lemon law language inserted. The bill was negotiated between some consumer attorneys and some manufacturers, notably General Motors, while other consumer attorney groups and many manufacturers were opposed to it. Dealerships were not given an opportunity to meaningfully weigh in. The new law becomes effective April 1, 2025, and is intended to apply to the sales of new vehicles and certified used vehicles where manufacturers face potential exposure. It would also apply to the sale of a used vehicle wherein the dealership provides an express warranty with the sale.5 Pre-Litigation Requirements The law requires the customer to demand repurchase in writing at least 30 days prior to filing a suit in order to be eligible to recover civil penalties. If a customer does not send a compliant pre-litigation demand, he/she is prohibited from seeking civil penalties. Additionally, the customer is required to be in possession of the vehicle at the time of the demand and retain possession for at least 30 days after the manufacturer receives the notice. Even if the customer forgoes the pre-litigation demand discussed above, and thereby forgoes the right to recover civil penalties, the customer must have possession of the vehicle at the time the suit is filed. If the manufacturer offers to buy back or replace the vehicle and pay reasonable attorneys’ fees and costs within 30 days of receiving the written demand, and performs the buyback or replacement within 60 days, the customer cannot seek recovery of civil penalties. This safe harbor provision gives manufacturers an opportunity to resolve problematic cases before they go into litigation and prevents unscrupulous plaintiffs’ attorneys from running up attorneys’ fees and costs. Discovery and Mediation Requirements The new law has specific initial information exchange requirements intended to promote early settlement. It appears that these requirements would only apply to the customer and warrantor defendant (manufacturer, distributor on new vehicles and CPOs), and would not apply to a dealership named on non-lemon law claims, such as negligent repair or fraud. The law requires the manufacturer and customer to exchange specific documents relevant to the dispute within 60 days after the responsive pleading is filed.6 Within 120 days of the filing, the manufacturer has the right to depose the plaintiff for up to two hours, and the plaintiff has the right to depose the manufacturer’s person most qualified as to specific topics for up to two hours. All other discoveries are stayed until mediation is completed, and the parties are required to submit the matter to mediation within 150 days after the filing of the responsive pleading. There are prescribed penalties if the parties fail to comply with the exchange and mediation requirements, albeit unbalanced ones. Initial violations of the exchange and deposition requirements result in a $1,500 sanction against plaintiff’s counsel or a $2,500 sanction against defense counsel. Clearly these are unequal sanctions, but the real imbalance is in the law’s penalties for repeated noncompliance. Repeated violations by plaintiff’s counsel results in the case being dismissed without prejudice, and plaintiff’s counsel responsible for paying the manufacturer’s costs. While inconvenient, oftentimes a case dismissed without prejudice can simply be refiled. On the other hand, repeated violations by the manufacturers’ or defense counsel results in evidentiary sanctions precluding the manufacturer or defendant from introducing evidence at trial regarding whether the vehicle was defective or whether it was repaired. This seemingly prevents the manufacturer from being able to put up a viable defense at trial — a far more severe penalty than the plaintiff’s attorney faces. If the provisions promoting early settlement are effective, it would be a blessing for dealerships. 32 California New Car Dealer Quarterly
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