MANNING LEAVER LEGAL LANE Overview of the CLRA and Available Remedies In 1970, the Legislature enacted the Consumers Legal Remedies Act (CLRA) in an effort to protect consumers from deceptive and unlawful business practices in transactions involving the sale or lease of goods or services. The CLRA prohibits about two dozen unfair or deceptive acts and practices, including falsely claiming a product has benefits or characteristics it does not have, misrepresenting the source or quality of goods or services, selling used goods as new, and making false advertising claims. In order to sue under the CLRA, a person must be a “consumer,” which is defined as one who “seeks or acquires, by purchase or lease, any goods or services for personal, family or household purposes.” Consequently, the CLRA does not apply to individuals who purchase or lease goods or services for business purposes. A plaintiff suing under the CLRA can seek actual damages for any monetary losses, an injunction prohibiting unlawful acts and practices, restitution of property and punitive damages. Consumers who purchase or lease vehicles frequently seek rescission (i.e. cancellation) of the contract which involves returning the vehicle and receiving a refund of their downpayment, monthly payments and a payoff of any outstanding loan on the vehicle. The CLRA allows for an additional award of up to $5,000 to senior citizens or disabled persons where certain conditions can be satisfied, including that they suffered substantial physical, emotional or economic damage. Notably, the CLRA explicitly provides attorneys’ fees to plaintiffs if they prevail on their claim. A plaintiff is considered the prevailing party on a CLRA claim when a “net monetary recovery” is obtained. Notice Requirements and Defenses Under the CLRA The CLRA has a preliminary notice requirement which obligates a consumer seeking damages to send the dealer a CLRA demand letter by certified mail, return receipt requested, at least 30 days before filing a lawsuit, in order to notify the dealer of the alleged violations and request that the issues be rectified. The purpose of the notice requirement is to give the dealer sufficient notice of the alleged violations so that the dealer has a reasonable opportunity to offer appropriate corrective action and to facilitate the settlement of claims out of court before legal proceedings begin. The CLRA demand letter is typically sent by the consumer’s attorney and must be delivered to the place where the transaction occurred or to the dealer’s principal place of business in California. Instead of sending a CLRA demand letter, some plaintiffs’ attorneys rely on a statutory exception and file a lawsuit seeking only injunctive relief and then 30 days later they file an amendment in the lawsuit to seek damages for the CLRA claim. A consumer’s failure to comply with the preliminary notice provision can be fatal to their CLRA claim. In addition, the CLRA contains an affirmative defense which allows the dealer that is sued to avoid damages by proving the alleged violation was not intentional, resulted from a bona fide error, and that a reasonable correction was offered to the consumer within 30 days of receiving the CLRA demand letter. Why Is the CLRA So Popular With Plaintiffs’ Attorneys? The CLRA has gained considerable favor with plaintiffs’ attorneys for two reasons. First of all, proving liability for a CLRA claim is easier than it is for other misrepresentation claims, such as fraud. That is because a fraud claim requires the plaintiff to prove that the false statement was knowingly made by the business. A CLRA claim, however, has a relaxed standard of proof and does not require proof that the business knew the statement was false at the time it was made. Secondly, and perhaps the most significant aspect of the CLRA that has made it attractive for plaintiffs’ attorneys, is that it is one of the few laws that allows prevailing plaintiffs Navigating the CLRA WHAT AUTOMOBILE DEALERS NEED TO KNOW TO PROTECT THEIR BUSINESS By Daniel F. Berberich, Esq., Partner, Manning, Leaver, Bruder & Berberich LLP 20 California New Car Dealer Quarterly
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