Judge Ralph C. Hofer, Case Number: 23GDCV00548, Date: 2023-08-11 Tentative Ruling

Plaintiff Gregory Pratt alleges that in February of 2019 plaintiff leased a 2019 Lincoln Nautilus vehicle which was leased as a new motor vehicle with defendant Ford Motor Company’s new vehicle warranty. Following the completion of plaintiff’s lease term in June of 2022, plaintiff purchased the vehicle with the remaining balance of defendant Ford’s new motor vehicle warranty. Plaintiff alleges that defendant Ford warranted the subject vehicle, and agreed to preserve or maintain the utility or performance of the vehicle or provide compensation if there was a failure in such utility or performance.

Defendant Ford argues that plaintiff’s Song-Beverly Act causes of action fail because plaintiff alleges plaintiff purchased the subject vehicle used with a “remaining balance” of the warranty issued by Ford, which precludes the claims under the Song-Beverly Act, as the remedy under the Song-Beverly Act is only available if the car is sold with a “manufacturer’s new car warranty.”

Defendant indicates, in a footnote, that the California Supreme Court has recently granted a petition for review of the Rodriguez case, but that pending review the opinion of the court of appeal may be cited, not only for its persuasive value, but also for the limited purpose of establishing the existence of a conflict in authority which would permit the trial courts to exercise discretion to choose sides between any such conflict.

“(B) Grant of review by the Supreme Court of a decision by the Court of Appeal does not affect the appellate court's certification of the opinion for full or partial publication under rule 8.1105(b) or rule 8.1110, but any such Court of Appeal opinion, whether officially published in hard copy or electronically, must be accompanied by a prominent notation advising that review by the Supreme Court has been granted.”

Pending review and filing of the Supreme Court's opinion, unless otherwise ordered by the Supreme Court under (3), a published opinion of a Court of Appeal in the matter has no binding or precedential effect, and may be cited for potentially persuasive value only. Any citation to the Court of Appeal opinion must also note the grant of review and any subsequent action by the Supreme Court.”

“As provided in Standing Order Exercising Authority Under California Rules of Court, Rule 8.1115(e)(3), Upon Grant of Review or Transfer of a Matter with an Underlying Published Court of Appeal Opinion, Administrative Order 2021-04-21, under this subdivision, when the Supreme Court grants review of a published Court of Appeal opinion, the opinion may be cited, not only for its persuasive value, but also for the limited purpose of establishing the existence of a conflict in authority that would in turn allow superior courts to exercise discretion under Auto Equity, supra, 57 Cal.2d at page 456, to choose between sides of any such conflict. Superior courts may, in the exercise of their discretion, choose to follow a published review-granted Court of Appeal opinion, even if that opinion conflicts with a published, precedential Court of Appeal opinion. Such a review-granted Court of Appeal opinion has only this limited and potential precedential effect, however; superior courts are not required to follow that opinion's holding on the issue in conflict. Nor does such a Court of Appeal opinion, during the time when review is pending, have any precedential effect regarding any aspect or holding of the Court of Appeal opinion outside the part(s) or holding(s) in conflict. Instead it remains, in all other respects, “potentially persuasive only.”

Pending review, the opinion of the Court of Appeal, which is currently published at 77 Cal.App.5th 209, 292 Cal.Rptr.3d 382, may be cited, not only for its persuasive value, but also for the limited purpose of establishing the existence of a conflict in authority that would in turn allow trial courts to exercise discretion under Auto Equity Sales, Inc. v. Superior Court (1962) 57 Cal.2d 450, 456, 20 Cal.Rptr. 321, 369 P.2d 937, to choose between sides of any such conflict. (See Standing Order Exercising Authority Under California Rules of Court, Rule 8.1115(e)(3), Upon Grant of Review or Transfer of a Matter with an Underlying Published Court of Appeal Opinion, Administrative Order 2021-04-21; Cal. Rules of Court, rule 8.1115(e)(3) and corresponding Comment, par. 2.)

The Supreme Court docket indicates that the Rodriguez appeal was “fully briefed” as of May 12, 2023. (California Supreme Court Case No. S274625). The Court then received several applications to file amicus curiae briefs, and on June 23, 2023, granted permission to file amicus curiae briefs to seven applicants, which briefs were filed the same date. On July 14, 2023, the Court granted an application for an extension of time for appellant and respondent to respond to the amicus briefs. The time to serve and file responses has been extended to August 23, 2023.

“Of course, the rule under discussion has no application where there is more than one appellate court decision, and such appellate decisions are in conflict. In such a situation, the court exercising inferior jurisdiction can and must make a choice between the conflicting decisions.”

The FAC alleges that plaintiff leased the subject vehicle from Lincoln South Coast in Santa Ana, “as a new vehicle with FORD MOTOR COMPANY’s new motor vehicle warranty,” and that, “Following the completion of Plaintiff’s lease term…Plaintiff purchased the Subject Vehicle from Lincoln South Coast with the remaining balance of FORD MOTOR COMPANY’s new motor vehicle warranty.” [FAC, paras. 2, 3].

Plaintiff argues that the situation here, where the vehicle was new when leased, was purchased by the same consumer pursuant to the lease, and the same consumer retained the warranty, is one involving not a used vehicle but a “new motor vehicle” pursuant to any interpretation of that term under statute or the Rodriguez case, and also argues that Rodriguez makes an analysis and reaches a conclusion which conflicts with that of another court of appeal decision, Jensen v. BMW of North America, Inc. (1995) 35 Cal.App.4th 112.

In Jensen, the court of appeal affirmed in part a judgment on a jury verdict in a suit for violation of the Song-Beverly Act in favor of a lessor of a vehicle which was obtained as a vehicle represented as a demonstrator from a dealership, which vehicle was subject to defendant manufacturer’s new car warranty.

“Section 1793.22, subdivision (e)(2), defines a “new motor vehicle” as “a new motor vehicle which is used or bought for use primarily for personal, family, or household purposes. ‘New motor vehicle’ includes the chassis, chassis cab, and that portion of a motor home devoted to its propulsion, but does not include any portion designed, used, or maintained primarily for human habitation, a dealer-owned vehicle and a ‘demonstrator’ or other motor vehicle sold with a manufacturer's new car warranty but does not include a motorcycle or a motor vehicle which is not registered under the Vehicle Code because it is to be operated or used exclusively off the highways. A ‘demonstrator’ is a vehicle assigned by a dealer for the purpose of demonstrating qualities and characteristics common to vehicles of the same or similar model and type.” (Emphasis added.)

“We conclude the words of section 1793.22 are reasonably free from ambiguity and cars sold with a balance remaining on the manufacturer's new motor vehicle warranty are included within its definition of “new motor vehicle.” The use of the word “or” in the statute indicates “demonstrator” and “other motor vehicle” are intended as alternative or separate categories of “new motor vehicle” if they are “sold with a manufacturer's new car warranty.” (White v. County of Sacramento (1982) 31 Cal.3d 676, 680, 183 Cal.Rptr. 520, 646 P.2d 191.)

The court of appeal also rejected various arguments that the trial court’s interpretation of the Act’s definition of “new motor vehicle” created a conflict with general definitions in the Vehicle Code and in connection with consumer goods, applying the more specific definition as the one governing the more general definitions. Jensen, at 126.

“Our conclusion section 1793.22 includes cars sold with a balance remaining on the new motor vehicle warranty is consistent with the Act's purpose as a remedial measure. (Kwan v. Mercedes–Benz of North America, Inc. (1994) 23 Cal.App.4th 174, 184, 28 Cal.Rptr.2d 371.) It is also consistent with the Department of Consumer Affairs' regulations which interpret the Act to protect “any individual to whom the vehicle is transferred during the duration of a written warranty.” (Cal.Code Regs., tit. 16, § 3396.1, subd. (g).)

Addressing the final step in statutory construction which applies reason, practicality, and common sense to the language in question (Halbert's Lumber, Inc. v. Lucky Stores, Inc., supra, 6 Cal.App.4th at p. 1239, 8 Cal.Rptr.2d 298), BMW argues the Legislature could not have intended to grant protection to every used car with a balance remaining on the new car warranty because of the economic impact on consumers. Specifically BMW maintains “[t]he subsequent owner would have the benefit of all of Song–Beverly's generous presumptions, without having undertaken the same risks as the purchaser of a really new car. Further, while the subsequent (perhaps third or fourth in the line of owners) will receive the benefit of these presumptions, the manufacturer will find it tremendously more difficult to raise defenses under Song–Beverly—such as the defense that the owner used the vehicle unreasonably—because it will be harder to trace multiple owners and determine their use or abuse of the vehicle.” BMW contends the increased costs will result in higher car prices or the shortening of warranties to the statutory minimum. It argues “[t]hese alternatives would inevitably result in a manifest decline in trade and commerce in this state, creating great inconvenience for consumers. It is impossible that the legislature intended this highly intractable result.”

We acknowledge manufacturers such as BMW incur costs in honoring express warranties to service and repair the cars they sell in this state. We also presume the decision to offer a warranty of a specified length involves weighing the benefit of increased sales against the cost of providing service and repair for the effective duration of the warranty. It may be the equation factors in the impact of resale during the warranty period. However, as noted by BMW, manufacturers are free to change the terms of express warranties they offer. The Act merely reflects the Legislature's intent to make car manufacturers live up to their express warranties, whatever the duration of coverage.

Moreover, in this case the vehicle is argued to have been “used” at the time it was purchased, but that purchase was made by the same party which had originally leased the vehicle, not to a third party, and the warranty was not transferred to a third party, but remained in place in favor of the same party holding the warranty under the lease upon the formal sale. Many of the concerns which Jensen recognized in dealing with a third party purchaser and the transfer of a new vehicle warranty would not even arise in this case.

In Rodriguez, the court of appeal affirmed the trial court’s granting of summary judgment in favor of a manufacturer of a truck which plaintiffs had purchased from a used car dealership, after the manufacturer’s basic warranty had expired, but when a limited powertrain warranty had not.

“The sole issue in this case is whether the phrase “other motor vehicle sold with a manufacturer's new car warranty” covers sales of previously owned vehicles with some balance remaining on the manufacturer's express warranty. We conclude it does not and that the phrase functions instead as a catchall for sales of essentially new vehicles where the applicable warranty was issued with the sale.”

The court of appeal in Rodriguez considered the plain language of the statute, and concluded that the definition of new vehicle does not extend to used vehicles, other than a narrow class of vehicles—those previously driven, but basically new, in effect, not previously sold. Rodriguez, at 220. The conclusion was based on an analysis of the language and the nature of demonstrator vehicles:

“Plaintiffs argue the phrase “other motor vehicle sold with a manufacturer's new car warranty” describes their truck because it still had a balance remaining on an express warranty from the manufacturer—the limited powertrain warranty—when Pacific Auto Center sold it to them. FCA argues the phrase qualifies dealer-owned cars and demonstrators and thus refers to vehicles that, like those two types of vehicles, have not been previously sold and are sold with new or full warranties. FCA argues plaintiffs' interpretation is at odds with the rest of the Act's definition of “new motor vehicles.” While we acknowledge that in isolation the phrase “other motor vehicle sold with a manufacturer's new car warranty” could arguably refer to any car sold with a manufacturer's warranty still in force, we agree with FCA that context clearly requires a more narrow interpretation. Context is a fundamental aspect of statutory interpretation, and here it's key to discerning the phrase's meaning. (Kirzhner, supra, 9 Cal.5th at p. 972, 266 Cal.Rptr.3d 346, 470 P.3d 56 [“We do not consider statutory language in isolation; instead, we examine the entire statute to construe the words in context”].)

To begin with, the phrase appears in a definition of new motor vehicles. That fact alone strongly suggests the Legislature did not intend the phrase to refer to used (i.e., previously sold) vehicles. But, more importantly, the phrase is preceded by “a dealer-owned vehicle and demonstrator,” which comprise a specific and narrow class of vehicles. Though they have not been previously sold to a consumer, demonstrators and dealer-owned cars are used in the sense that they will have been driven for various purposes before sale. As such, they will necessarily have more miles on their odometers than the typical vehicle in a dealer's new car inventory. What makes these vehicles unique is that even though they aren't technically new, manufacturers (or their dealer-representatives) treat them as such upon sale by providing the same type of manufacturer's warranty that accompany new cars.

In other words, demonstrators and dealer-owned vehicles comprise a narrow category of basically new vehicles—they have never been previously sold to a consumer and they come with full express warranties. Given this context, we think the most natural interpretation of the phrase “other motor vehicle sold with a manufacturer's new car warranty” is that it, too, refers to vehicles that have never been previously sold to a consumer and come with full express warranties.

The court of appeal also addressed certain questions raised by interpreting the phrase to include vehicles with a manufacturer warranty remaining, such as, for example, whether a buyer who purchases a used car with only a few miles remaining on the original warranty would be entitled to the same protections as the original buyer. Rodriguez, at 221.

“Our examination of the entire Act yields two additional reasons for concluding the phrase doesn't cover subsequent sales of vehicles with unexpired manufacturer's warranties. First, the Act defines “express warranty” as any “written statement arising out of a sale to the consumer of a consumer good pursuant to which the manufacturer ... undertakes to preserve or maintain the utility or performance of the consumer good ....” (§ 1791.2, subd. (a)(1), italics added.) In plaintiffs' case, the limited powertrain warranty did not “aris[e] out of” the sale, it transferred to plaintiffs by operation of law along with title to the truck. The warranty arose from the initial sale to the truck's first buyer.

Second, as part of the Motor Vehicle Warranty Adjustment Programs (§§ 1795.90-1795.93), the Act requires manufacturers to notify all “consumers” of any warranty adjustments regarding safety or emissions-related recalls, and defines “consumer” as “any person to whom the motor vehicle is transferred during the duration of an express warranty.” (§ 1795.90, subd. (a), italics added.) This definition of “consumer” indicates the Legislature is aware of the distinction between warranties that arise out of a sale and those that transfer to subsequent purchasers as a result of a sale. The lack of reference to transferred warranties in the definition of “new motor vehicle” suggests the Legislature made a deliberate choice not to include sales of used vehicles accompanied by unexpired express warranties.

The Rodriguez court of appeal characterized the issue as one of first impression: “no California court has addressed whether a used car purchased from a retail seller unaffiliated with the manufacturer qualifies as a ‘new motor vehicle’ simply because there is some balance remaining on the manufacturer’s warranty.” Rodriguez, at 223.

The Rodriguez court distinguished the Jensen case on the ground that factually the case involved a vehicle which had been represented to have been previously used as a demonstrator, but had not in fact been used as a demonstrator, as the result of which the dealership leasing the vehicle to Jensen gave her a warranty “on top” of the miles already on the odometer. Rodriguez, at 223-224. The court of appeal reasoned that the Jensen case reached its conclusion when the manufacturer tried to use the fact that the vehicle had never actually been a demonstrator to its advantage. The Rodriguez court of appeal indicated that Jensen was “easily distinguishable,” because it involved “a lease by a manufacturer-affiliated dealer who issued a full new car warranty along with the lease.” Rodriguez, at 223, italics in the original.

“Having examined the statutory provision, its place within the Act as a whole, and its legislative history, we conclude the phrase “other motor vehicles sold with a manufacturer's new car warranty” refers to cars sold with a full warranty, not to previously sold cars accompanied by some balance of the original warranty.

Plaintiff here argues that Rodriguez itself made distinctions which would exclude the current situation from its rationale, including its observation that a warranty which is transferred by operation of law does not arise out of a sale, and its observation that Jensen involved warranty activity by a manufacturer affiliated dealer, which is also the case here, where plaintiff purchased the vehicle which plaintiff had leased as a new vehicle from the same manufacturer affiliated dealer. As plaintiff points out, here there has been continuing privity throughout between plaintiff and the vehicle and its warranty.

In any case, as noted above, according to the Standing Order and the order of the Supreme Court granting review, pursuant to the current posture of Rodriguez being reviewed by the California Supreme Court, this court has discretion to consider Rodriguez persuasive, and to consider it conflicting precedent, and, to the extent there is a conflict, choose between the conflicting decisions, pursuant to Auto Equity Sales.

Plaintiff argues that Jensen should be treated as the controlling precedent, as it captures the remedial spirit and pro-consumer impetus of the Act, while Rodriguez essentially marginalizes a class of consumers on the basis of their inability to afford a new vehicle. Plaintiff also argues that the fact that the Supreme Court has granted review is telling and should not be taken lightly.

Overall, it appears that the situation here is distinguishable from the concerns raised in Rodriguez. However, to the extent Jensen’s conclusions concerning the definition of new vehicle for purposes of application of the Song-Beverly Act was broader than suggested by Rodriguez, creating a conflict between the analysis and conclusions in the two cases, as set forth above, under Auto Equity Sales, “the court exercising inferior jurisdiction can and must make a choice between the conflicting decisions.” Auto Equity Sales, at 456.

This court has carefully reviewed the analysis of both Jensen, and Rodriguez, as well as the language of the statutory provision, and the competing treatment in each decision of the overall provisions in consumer protection law, and the legislative history. The court has also noted the court of appeal concession in Rodriguez that in the statute itself the operative plain language could refer to any car sold with a manufacturer’s warranty in force. The court has also considered the consumer protection focus of the Jensen court, and its conclusion that its definition is consistent with the Song-Beverly Act’s purpose as a remedial measure. This court at this juncture accordingly opts to apply the analysis set forth in Jensen, finding that the reasoning is sound.

Defendant also argues that the second cause of action for breach of implied warranty is barred because the Song-Beverly Act does not support implied warranty claims against a manufacturer for used cars, as such claims require privity, which requires that defendant and plaintiff be in adjoining links of the distribution chain.

The FAC alleges the name of the dealer from which the vehicle was leased and eventually purchased, Lincoln South Coast. [FAC, paras. 2, 3]. The FAC also alleges elsewhere in the pleading that that Lincoln South Coast is “Defendant’s authorized repair facility.” [FAC, paras. 7, 8]. It does not appear from the face of the pleading that the dealer was not an authorized Ford dealer. There does not appear to be any authority cited under which there is an affirmative pleading requirement to allege that the dealer was an authorized Ford dealer, when the alleged basis of the claim is the warranty.

Plaintiff argues that case law interpreting implied warranties is irrelevant for express warranty claims, specifically, that applying the express provisions of the Song-Beverly Act, not general implied warranty authorities, Section 1792 requires manufacturers to provide implied warranties to “new” consumer goods, without providing a special statutory definition of that term, while the refund or replace provisions set forth the special definition set forth above, which includes vehicles sold with a balance on the original manufacturer’s warranty, and this specific definition overrides any commonly understood definition applied to undefined terms.

The court of appeal in Jensen rejected arguments similar to those raised by defendant here with respect to the implied warranty recognized in Song-Beverly Act actions. Jensen, at 126 (“the more specific definition found in the current section 1793.22 governs the more general definition found in section 1791,” citation omitted); Jensen, at 128 (“the Act applies to new motor manufacturers who make express warranties. (§§ 1791.2 and 1793.2.) There is no privity requirement.”)

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