Case Study
Lukather v. General Motors, LLC
Outcome
Judgment Affirmed for Plaintiff
Total Award
$185,306.57
Key Issue
Willful failure to promptly make restitution
Parties
Paul Lukather, Plaintiff and Respondent
v.
General Motors, LLC, Defendant and Appellant
Counsel
Ruben & Sjolander and David N. Ruben for Defendant and Appellant.
Lawrence J. Hutchens for Plaintiff and Respondent.
Opinion
After a bench trial, the court awarded plaintiff Paul Lukather damages, a civil penalty, prejudgment interest, and attorney fees and costs against defendant General Motors, LLC (GM), under the Song-Beverly Consumer Warranty Act (Act), Civil Code section 1790 et seq., known as California's "lemon law." We affirm the judgment, rejecting GM's contentions that (1) the evidence is insufficient to support the findings that GM violated Civil Code section 1793.2(d)(2) and that it did so willfully so as to incur a civil penalty; (2) the court erred in rejecting GM's mitigation of damages defense; and (3) the court abused its discretion in awarding prejudgment interest and attorney fees and costs.
Background
On April 25, 2005, Cadillac of Whittier leased to Lukather a new 2005 Cadillac manufactured by GM. The lease was financed by GMAC. Within a month the Cadillac began to exhibit an intermittent but recurring malfunction in the electronic stability control system. Lukather first brought the Cadillac into the dealer on June 1, 2005, when the car had been driven only 854 miles. Between June 5, 2005, and January 30, 2007, Lukather brought the Cadillac to the dealer for service for the same malfunction on more than four occasions.
Lukather was driving the Cadillac on the freeway on February 12, 2007, when the brakes came on by themselves, making the car hard to drive. The Cadillac remained at the dealer up to the time of trial in March 2008. At the time of trial, Lukather was still making lease and insurance payments. Beginning in February 2007, GM paid for a rental car for Lukather, but stopped making those payments on April 4, 2007. Lukather paid $21,290.46 for his rental car from April 5, 2007, through trial.
GM's expert admitted at trial that the malfunction was unable to be repaired after reasonable attempts. GM conceded at trial that the Cadillac qualified as a "lemon" under the Act. Thus, the principal contested issues at trial were whether GM violated section 1793.2(d)(2) by failing promptly to make restitution, and if so, whether the failure was willful so as to permit the assessment of a civil penalty.
Timeline of Key Events
Apr 25, 2005
Lukather leases new 2005 Cadillac from Cadillac of Whittier
Jun 1, 2005
First repair visit — stability control malfunction at 854 miles
Jun 2005 – Jan 2007
More than four additional repair visits for the same malfunction
Feb 12, 2007
Brakes engage unexpectedly on freeway — vehicle brought to dealer
Mar 8, 2007
Lukather requests vehicle repurchase from GM's call center
Mar 22, 2007
GM district service manager admits car "basically qualifies for lemon law"
Apr 4, 2007
GM stops paying for Lukather's rental car
Apr 12, 2007
Lukather files complaint against GM through his attorney
May 25, 2007
GM sends repurchase offer (less than statutory damages)
Mar 2008
Bench trial concludes — court rules in Lukather's favor
Aug 2008
GM repurchases Cadillac and refunds all lease payments
Sep 26, 2008
Amended judgment entered: $185,306.57 total award
Feb 4, 2010
Court of Appeals affirms judgment on all grounds
Award Breakdown
Actual Damages
$61,398.13
Civil Penalties (2× damages)
$61,398.13
Prejudgment Interest
$4,754.62
Attorney Fees, Costs & Expenses
$57,755.69
Total Award
$185,306.57
Discussion
A. Sufficiency of Evidence — Violation of Section 1793.2(d)(2)
GM argued that the evidence was insufficient to support the finding that it violated section 1793.2(d)(2), maintaining that making restitution is a "labor intensive process" requiring months. The Court of Appeals disagreed.
The trial court did not impose a duty on GM to make restitution on the very first day it determined the Cadillac was a lemon. Rather, it found that on March 8, 2007, Lukather communicated his desire for a vehicle repurchase and for weeks thereafter GM did not try to comply, instead trying "to persuade him to accept a replacement rather than the repurchase he initially and periodically requested."
Once GM decided to make an offer of restitution, it took GM two days to determine the amount it needed to do so. The record thus belies GM's assertion that the process of restitution is labor intensive and requires months to accomplish.
Willful Violation & Civil Penalty
Civil Code section 1794(c) provides that if a buyer establishes a willful failure to comply with the Act, the judgment may include a civil penalty not exceeding two times actual damages. The Kwan standard (23 Cal.App.4th 174) defines willful: a violation is not willful if the failure was the result of a good faith and reasonable belief the statutory obligation was not present.
GM knew or reasonably should have known from information available from the dealer on March 8, 2007, that the Cadillac was a lemon and that Lukather had selected the restitution option. Nevertheless, for the next two months GM actively discouraged Lukather from pursuing this remedy — telling him the Cadillac was repaired, that he should select another car, that he would not get all of his money back, and that it would take several months for GM to act. This supported the willfulness finding and the imposition of the civil penalty.
B. Mitigation of Damages Defense
GM maintained that Lukather's refusal to respond to GM caused him to unnecessarily incur approximately $21,000 in rental car expenses. The Court rejected this defense, following Jiagbogu v. Mercedes-Benz USA (2004), 118 Cal.App.4th 1235.
"To give [the manufacturer] an offset for that use would reward it for its delay in replacing the car or refunding Jiagbogu's money when it had complete control over the length of that delay, and an affirmative statutory duty to replace or refund promptly. No one can take advantage of his own wrong." (§ 3517.)
C. Prejudgment Interest; Attorney Fees and Costs
The Court rejected GM's contention that the trial court abused its discretion in awarding prejudgment interest beginning March 22, 2007. The evidence did not establish that Lukather prevented GM from paying the debt. The award of attorney fees and costs stood as the Court did not reverse civil penalties or prejudgment interest.
Disposition
The judgment is affirmed. Respondent Paul Lukather is entitled to costs on appeal. Chaney, J., and Johnson, J., concurred.
Key Precedents Cited
Krotin v. Porsche Cars North America, Inc. (1995)
38 Cal.App.4th 294
Manufacturer has affirmative duty to replace or make restitution; consumer need not reject or revoke acceptance within a specific time.
Kwan v. Mercedes-Benz of North America, Inc. (1994)
23 Cal.App.4th 174
Defines "willful" under Section 1794(c) — a violation is not willful if based on a good faith reasonable belief.
Jiagbogu v. Mercedes-Benz USA (2004)
118 Cal.App.4th 1235
Manufacturer cannot claim an equitable offset against buyer's damages for continued vehicle use after requesting buyback.
Why This Case Matters
Lukather v. General Motors is a landmark California Lemon Law decision that reinforces manufacturers' affirmative duty to act promptly on restitution requests — not merely to investigate indefinitely. It confirms that stalling tactics and attempts to pressure consumers toward replacement rather than refund can constitute willful violations subject to civil penalties of up to twice actual damages. The case also establishes that rental car and incidental costs incurred during the manufacturer's delay are fully recoverable.