Judge Gregory Keosian, Case Number: BC717012, Date: 2024-01-09 Tentative Ruling

Judge: Gregory Keosian, Case: BC717012, Date: 2024-01-09 Tentative Ruling

Case Number: BC717012 Hearing Date: January 9, 2024 Dept: 61

Plaintiffs Eugenio Soriano Alvarez and Cristabel Alvarez de Gonzalez’s Motion to Bifurcate is DENIED.

Plaintiffs to provide notice.

I. MOTION TO BIFURCATE

“The court, in furtherance of convenience or to avoid prejudice, or when separate trials will be conducive to expedition and economy, may order a separate trial of any cause of action . . . or of any separate issue . . . .” (Code Civ. Proc., § 1048, subd. (b).) Additionally, “[t]he court may, when the convenience of witnesses, the ends of justice, or the economy and efficiency of handling the litigation would be promoted thereby, on motion of a party, after notice and hearing, make an order . . . that the trial of any issue or any part thereof shall precede the trial of any other issue or any part thereof in the case . . . .” (Code Civ. Proc., § 598.)

“It is within the discretion of the court to bifurcate issues or order separate trials of actions, such as for breach of contract and bad faith, and to determine the order in which those issues are to be decided.” (Royal Surplus Lines Ins. Co., Inc. v. Ranger Ins. Co. (2002) 100 Cal.App.4th 193, 205.) “The major objective of bifurcated trials is to expedite and simplify the presentation of evidence.” (Foreman & Clark Corp. v. Fallon (1971) 3 Cal.3d 875, 888.)

Plaintiffs Eugenio Soriano Alvarez and Cristabel Alvarez de Gonzalez seek a bifurcation of trial, with a preliminary phase for the court to determine the legal issue of whether negative equity can legally be deducted from a manufacturer’s repurchase offer for a lemon vehicle under the Song Beverly Act. “Negative equity” refers to the situation where a car-purchaser trades in an older vehicle to assist in the purchase of a new one, and the older vehicle’s agreed value is less than the amount remaining on the debt balance for the vehicle. In that situation, “in addition to financing the purchase of a new product, a creditor agrees to finance the remaining credit or lease balance owing on the property being traded in.” (Thompson v. 10,000 RV Sales, Inc. (2005) 130 Cal.App.4^th 950, 969.) Which is to say that the total amount of financing obtained for the purchase of the new vehicle increases by the amount of the “negative equity” in the trade-in vehicle.

Plaintiffs’ motion was previously denied without prejudice on June 5, 2023, in Department 14. The court’s order found that a motion to bifurcate was an improper procedural vehicle for seeking adjudication of “substantive legal disputes.” The court also presented its analysis of the negative equity issue, in which it found Plaintiffs’ position “does not make sense. Forgiving that debt because Plaintiff subsequently bought a lemon has the whiff of windfall about it.”

The court went on:

The language of the statute itself does not provide a clear answer to the negative equity issue. As quoted above, Section 1793.2(d)(2)(B) requires restitution “in an amount equal to the actual price paid or payable by the buyer,” with certain inclusions and exclusions expressly listed. Plaintiff has taken the position that since negative equity is not one of " the listed exclusions, it must be included and repaid. Defendant Ford quite reasonably responds that negative equity is not part of the “actual price paid or payable” for this vehicle — it is part of the price paid or payable for a different vehicle, included in the loan for this vehicle only as a form of refinancing.

For what it may be worth, the California Department of Consumer Affairs has historically taken Plaintiff’s position, though its opinions and handouts contain no unique or compelling legal analysis. (Plaintiff’s Request for Judicial Notice Exhibits 1-5). More importantly, Plaintiff claims support from the Court of Appeal for the Third District in a case decided two months ago: Williams v. FCA US LLC (2023) 88 Cal.App.5™ 765.

The problem with Plaintiff’s citation to Williams is that the facts of that case were entirely different than the facts here. In Williams, the plaintiffs bought a truck for around $54,000 (85000 down, over $39,000 in the remaining sticker price, and just under $10,000 in finance charges). Id. at 772. That truck turned out to be a lemon. Id. at 772-773. The manufacturer refused to buy it back. Id. at 772-773. Desperate for a reliable vehicle, the buyers took the truck to an unrelated dealer and traded it in for a truck made by a different manufacturer. Id. at 773. The new dealer credited the buyers $29,500 for the lemon truck and rolled $5,453.33 in negative equity into the loan for the new truck. Id. The buyers then sued the manufacturer of the lemon truck, who then argued to the jury that the $29,500 trade-in credit received by the buyers should be an offset to damages. Id. at 773-774.

In that scenario, the previous vehicle was the lemon and the subsequent vehicle was not, which is exactly the reverse of the facts in this case. And the issue wasn’t negative equity at all — it was whether the trade-in credit for the lemon vehicle was an offset to damages. The Court of Appeal framed and addressed the issue in Williams thus:

“To resolve whether the jury's award in this case was insufficient as a matter of law, we must review de novo the statutory interpretation question whether a buyer's trade-in credit for the defective vehicle forms part of the “actual price paid or payable” calculus set forth in the restitution provision.” Id. at 775.

The panel then conducted an extensive analysis of the statute, legislative history, and case law, which included expressly disagreeing with a recent published opinion from the Second District.? But the question it was answering is not the question presented here.

Returning to that question, the intuitive analysis of the issue remains compelling. The $4,169.70 in negative equity from the previous, non-lemon vehicle is not part of the “actual price paid or payable” for the current, lemon vehicle. As the California Supreme Court has recently explained (albeit in a different context), a party cannot, by focusing on the word “payable,” read the word “price” out of the statute. Kirzhner v. Mercedes-Benz USA, LLC (2020) 9 Cal.5" 966, 974. The $4,169.70 was a pre-existing debt which Plaintiff was obligated to pay before she ever laid eyes on the vehicle at issue here. Her decision to roll that pre-existing debt into her new car loan does not make that pre-existing debt part of the actual price of the new car.

Defendant Ford was not required to account for the negative equity in its repurchase offer.

(6/6/2023 Order.)

This analysis is persuasive and is supported by the weight of judicial authority. No mandatory California case authority addresses the negative equity issue, but the body of federal court opinion embraces the opinion set out above. (See Herrera v. Ford Motor Company (C.D. Cal., Feb. 24, 2022, No. CV 21-4731 PA (MARX)) 2022 WL 562267, at *4; Canesco v. Ford Motor Company (S.D. Cal. 2021) 570 F.Supp.3d 872, 894; Rivera v. Ford Motor Company (C.D. Cal., Feb. 10, 2020, No. CV1807798DSFPJWX) 2020 WL 1652534, at *4; De Leon v. Ford Motor Company (C.D. Cal., Nov. 13, 2019, No. CV187975PSGFFMX) 2019 WL 7195325, at *4.) Plaintiffs present no case authority holding in favor of their position.

The motion is therefore DENIED.