SUPERIOR COURT OF THE STATE OF CALIFORNIA FOR THE COUNTY OF LOS ANGELES

Transcription

1 SUPERIOR COURT OF THE STATE OF CALIFORNIA FOR THE COUNTY OF LOS ANGELES AUDREY MEDRAZO, an individual, on behalf of ) Case No. BC Herself and all others similarly aggrieved by Defendants' ) Conduct as alleged herein, ) Plaintiff ) Statement of ) Intended Decision v- ) Phase 1 s CONFORMED COPY ) o ORIGINAL FILED \ Superior Court of Calrfomia ; County of Los Angelas HONDA OF NORTH HOLLYWOOD, ) a business entity of unknown form, BILL ROBERTSON & ) JAN SONS, INC., a California Corporation ) _. v Shern R. Carter, Executive Officer/Clerk This matter is a class action brought by Plaintiff AUDREY MEDRAZO on behalf of herself and others under the unfair competition law (UCL) pursuant to Business & Professions Code section AUDREY MEDRAZO seeks restitution and injunctive relief based on an alleged hanger tag violation under Vehicle Code sections and The case first proceeded to trial in 2011 before the Honorable John P. Shook on a CRLA cause of action and under both the fraud and unlawful prongs of the UCL. At the first trial, the Court granted Defendant BILL ROBERTSON & SONS, INC. DBA HONDA OF NORTH HOLLYWOOD (hereinafter HONDA OF NORTH HOLLYWOOD)'s motion for judgment following Plaintiffs case in chief. The Court of Appeal affirmed as to the CRLA and the fraud prong of the UCL but reversed and remanded the case for trial as to the unlawful prong of the UCL. The Court of Appeal found that Plaintiff had established standing to sue. Medrazo v. Honda ofnorth Hollywood (Medrazo II) (2012) 205 Cal.App.4th 1. By Jeff W. Lipp, Deputy The primary issues on retrial are whether the sale of a motorcycle without a hanger tag is unlawful, whether the motorcycle sold to AUDREY MEDRAZO was displayed for sale without a hanger tag, if AUDREY MEDRAZO has standing, and whether AUDREY MEDRAZO is entitled to injunctive relief. If the Court finds that Plaintiff suffered economic injury as a result of the unlawful conduct, the Court must determine Plaintiffs 1

2 entitlement to restitution and a formula for restitution. The parties do not dispute that the law provides that sale of a motorcycle without a hanger tag is unlawful. The other issues are in dispute. The bench re-trial of this matter began on October 14, 2013 in Department 40 of the Los Angeles Superior Court, Judge Michelle R. Rosenblatt, Presiding. Plaintiff Class Representative AUDREY MEDRAZO was represented by WILLIAM R. KREIG, KEMNITZER, BARRON & KRIEG, LLP and the LAW OFFICE OF STEVE A. SIMONS. Defendant BILL ROBERTSON & SONS, INC. dba HONDA OF NORTH HOLLYWOOD (hereinafter HONDA OF NORTH HOLLYWOOD) was represented by DAVID R. SIDRAN, TOSCHE, SIDRAN, COLLINS & DOYLE. The parties agreed that as discovery regarding the class had not been provided prior to trial, should Plaintiff prevail, the trial would be bifurcated as to the amount of restitution to the class. The Evidence In the Plaintiffs case, David Denman, sales manager for Honda of North Hollywood testified pursuant to Evidence Code section 776, Plaintiff Audrey Medrazo testified, Brandi Coy, Rubin Garay, Maksim Labutin each testified to their experiences in purchasing a motorcycle from Honda of North Hollywood, and Plaintiffs expert Stephen Fifield testified. On September 30, 2005, Audrey Medrazo went to Honda of North Hollywood with her boyfriend, who wanted to purchase a motorcycle. She planned to co-sign. They looked at a couple of motorcycles before looking at the Honda. Some of the motorcycles had stickers on them. Medrazo testified that the Honda they were interested in did not have a sticker or hanger tag. Before even being told the price of the motorcycle, the salesman ran the credit of Medrazo's boyfriend. As he did not qualify for credit, the salesman asked Medrazo if he could run her credit since she was going to co-sign. She consented. She still did not know the price of the motorcycle. After the salesman ran her credit, he told them that the cash price of the motorcycle was $8700. He tried to sell them Lojack and gap insurance, which they did not want. He told her that the motorcycle would be

3 delivered to the house and that destination charges would be an additional $2284. She never had a chance to ask further about the destination charges because the salesman kept returning to the subject of Lojack and gap insurance. In fact, she was taken into the office and told to sign the contract even before she was told the total price would be $12, The salesman pulled out the sales contract with all the figures on it before she agreed to purchase the motorcycle. Medrazo testified that she felt obligated to buy the motorcycle after the credit check because the paperwork had been done. The salesman reviewed the contract, explained the interest rate and ultimately the price. She was not tricked into signing the contract. She had limited experience with vehicle sales: she had previously purchased one car with a parent. She could have read the contract and asked questions. She received the motorcycle on September 30, She made two payments and still owes over $18,000. Brandi Coy is a regular motorcycle rider and is experienced purchasing motorcycles. She knew what type of motorcycle she wanted and did some on line research as to the MSRP before she went to Honda of North Hollywood. She was looking for a specific Yamaha. She does not recall if she asked the price or found out when she sat down. There was no hang tag on the two bikes she looked at. When she sat down with the salesman, this is the firs time she was introduced to the freight and set up charges. She thought the freight was exorbitant but the salesman told her it was standard in the industry. She read the contract without signing it, but entered into the transaction willingly. Ruben Garay is a regular motorcycle rider who knew what make and model he was interested in and went to Honda of North Hollywood to look but not buy a bike. However, when he got there he saw the bike he wanted in 50 anniversary retro yellow, which Yamaha had not made since When he saw it, he knew he had to have it. There was no price sticker on this particular bike. He asked the price. He is not sure if he was quoted the cash price or something else. The salesperson used a worksheet. He does not recall if he noticed charges for freight and set up, but he recalls wondering what the "DEST" charge was. He did not ask. He was surprised at the price of $9, $7,099 was in the range in which he had previously found the price. He did not object to the price but asked them to throw in something.

4 Maksim Labutin testified that he purchased a motorcycle from Honda of North Hollywood on June 13, He just went there to look at motorcycles. He spent time looking at them. There were not price tags or stickers on any of the Honda or Suzuki models that he was looking at. The salesperson told him there was a special on the Yamaha lease and he could get the lowest financing. They did not discuss the price of the motorcycle or the final price; only what the best monthly payment would be. He sat down with the salesperson, who ran a credit check. After they discussed the monthly payment and established that Labutin wanted to purchase the motorcycle, a Yanaha YZFR6, he was given the final price. He said it was too high. He was presented with a second offer which he accepted. There was a worksheet (Exhibit 59.2) that he signed. They discussed $2484 in dealer destination fees that were on the worksheet. He was told that these were standard fees and not subject to negotiation. The cash price was $9,359,84, the destination fees were $ and the total sales price was $12, He was asked what was most important to him and he said it was the monthly payment. He has purchased another motorcycle from Honda of North Hollywood since that time. Stephen Fifield qualified as an expert in automotive sales techniques and practices, including in the use of code compliant hang tags. Fifield testified that in his opinion the advantage to a dealer such as Honda of North Hollywood of not displaying complete hang tags on its new motor cycles is that it puts the dealership in an advantageous position with customers and other dealers and gives them an industry edge because by displaying the destination, prep and freight as a fee later in the negotiation it allows the dealership to make a larger gross profit on transactions. He testified that in his opinion the advantage of having the MSRP but not the total price on the hanger tags is that the freight and dealer prep fees may vary between dealerships and once the customer is late into the process and is hit with these fees rather than seeing the full price and walking out the door earlier in the process, it is harder for the customer to leave. He testified that in his opinion another advantage to the dealer is that if Honda of North Hollywood waits until the customer has sat down to talk about the destination, dealer prep and freight, the customer may think these are fees that are always added. In his opinion if the customer is not provided with any price information while selecting a motorcycle on the floor and is

5 first provided any price information while selecting a motor cycle on the floor and is then first presented with a price when he or she sits down with the sales person and is bombarded with numbers, charges and fees, it confuses many customers. The goal is to get the customer to sit down and start negotiating. It lets the salesperson guide the customer to certain numbers. The longer it takes to give the customer the price, the sales person can guide the customer to a different issue. In his opinion, and as commonly taught in sales and sales management training in the industry, there is a greater chance of making a sale if the sales person can get the customer sits down and feel like an owner. The lack of a hanger tag or a hanger tag with only the MSRP is a disadvantage to consumers because with the total sales price, the customer can see at a glance. In his opinion, if a four square (worksheet) is used, it makes the charges look like a fee as opposed to a portion of the purchase price. Certain consumers shop to find the right bike at the right price. If they see a complete hanger tag, they have a starting price. If there is no tag, they ask a sales person, who now has the advantage of being able to speak with the customer. In his opinion, had Audrey Medrazo seen a hanger tag with the total price and charges on the bike, she would have spoken to her boyfriend about it and would have shopped further. By the time she was aware of all the charges, they were on the work sheet and all the paperwork was ready. Defendant made a motion for judgment on injunctive relief and on restitution and the Court exercised its discretion to defer ruling on the issue of injunctive relief. The Court denied the motion for judgment on restitution and found that the out-of-pocket rule is not the applicable formula for restitution to the class. In the defense case, David Denman, sales manager for Honda of North Hollywood testified. He testified, in part, that between 2002 and 2006 it was difficult to find out if his dealership was competitive because no one used hanger tags. He was unaware that the law has been in existence since Since the lawsuit, a salesperson replaces any missing hang tags daily. Denman showed the hang tags that they now use for Honda, Suzuki and Yamaha. They did not use hang tags for Suzuki or Yamaha because neither manufacturer provided hanger tags. He also discussed the general process previously

6 used with worksheets and the specific worksheet that the salesman used for Medrazo's sale. He also described his understanding of Honda of North Hollywood's profit goal as a four percent net profit and that this profit is not always met. He testified that in any individual motorcycle sale, the profit is reflected in the destination, freight and assembly charges. In rebuttal, attorney Steven A. Simons testified that in 2010 he requested copies of the deal jackets from the defense. He was invited to the prior defense counsel's office where the defense had randomly selected 196 files. At his direction, a spot check of 40 files was conducted. The total of all the cash prices was $1,204,448.29; the average price of each vehicle being $6, The total of destination charges was $159,931.62, the average price of destination charges per vehicle being $ The total of assembly charges was $65,762; $ being the average assembly charge. Some of the file jackets did not record the destination or assembly charges and some had charges on the four square but not on the jacket. Findings offact The Court finds that there was no hanger tag displayed on the Honda motorcycle purchased by Audrey Medrazo. The Court finds that there were hanger tags displayed on only some Honda motorcycles sold by Honda of North Hollywood during the class period. The Court finds that there were no hanger tags displayed on the Suzuki and Yamaha motorcycles during the class period. The Court finds that neither Suzuki nor Yamaha provided hanger tags to Honda of North Hollywood during the class period. The Court finds that Audrey Medrazo's testimony was credible. The Court finds that dealerships add charges to the MSRP and that the dealer added charges (whether called destination fees or freight and prep or delivery fees) are not standard, i.e. they can vary between dealerships.

7 The Court finds that Honda of North Hollywood had Audrey Medrazo in the sales office with a credit check run on both her boyfriend and herself and a sales contract drawn up before they disclosed the dealer added charges and the total price. The Court finds that Stephen Fiefield is a qualified expert in automotive sales practices and techniques, including code compliant tags. The Court accepts his opinions and the facts upon which they are based. The Court finds that not having the hanger tags on the motorcycle causes an injury in fact to the consumer, here Audrey Medrazo, by placing her in a position in which she is pressured or feels obligated to make the purchase rather than shop around for a better price. The Court finds that Honda of North Hollywood now uses hanger tags that contain both the MSRP and the dealer added charges and are compliant with the California Vehicle Code. Findings oflaw The Court finds that in selling Medrazo a motor cycle without a hanger tag, Honda of North Hollywood made an illegal sale. The Court finds that Audrey Medrazo has made substantial payments toward the motor cycle and has standing to bring this action under the UCL. Due to the illegal conduct of Defendant Bill Robertson & Son dba Honda of North Hollywood, Medrazo suffered injury in fact and therefore has standing to sue. The Court finds that Honda of North Hollywood now uses hanger tags for their Honda, Suzuki and Yamaha motorcycles that are compliant with the California Vehicle Code and that Plaintiff is not entitled to injunctive relief as a result thereof. Standing and entitlement to restitution are separate issues. The Court finds that Audrey Medrazo suffered economic injury for which she should be awarded restitution. Measure ofrestitution The evidence provided through Plaintiffs case in chief is that Plaintiff was injured by not having the immediate disclosure via hanger tags of the dealer added charges. As this lack of disclosure lead to a chain of events resulting in the purchase of the Honda motorcycle

8 without having shopped around where she could see what other dealers were charging as their total price, arguably the measure of damages should be the dealer added charges. The evidence provided through David Denman's testimony relevant to the measure of restitution is that in deciding what to charge for individual models, Honda of North Hollywood uses the dealership's Profit and Loss Statement. The dealership tries to operate on a two to four percent profit margin after costs. The dealer added charges attempt to recapture a small profit. Assembly charges are not always specified on the deal jacket. Some of the deal jackets or worksheets have the word DEST for all dealer added charges. The charges vary and are dependent, to a certain extent, on what profit the dealership wants to make, on whether there are Meiko charges and on the size of the motorcycle. The Court has rejected the out-of-pocket rule under Civil Code section 3343 for fraud in the sale of property as inapplicable under Kwikset v. Benson (2011)51 Cal.4th 310. The Court has the discretion to fashion an equitable remedy. The Court is considering Plaintiffs position that the dealer added charges are the proper measure of restitution. In consideration of the evidence that the Defendant's profit is between two and four percent, and reviewing the testimony of the small survey done by Mr. Simons, the charges for destination and freight is one measure of restitution being considered by the Court. The Court is considering Defendant's position that although Medrazo's economic injury flows from the lack of opportunity to shop prices upon seeing a hanger tag, restitution of the full amount of dealer added charges is more than that to which Plaintiffs are entitled. Another measure of restitution being considered by the Court equitably considers the economic harm to the Plaintiffs as well as the effect of the restitution order on the Defendant's profitability. This measure of restitution consists of half of the dealer added charges or the amount of assembly and prep (if separately listed), whichever is less. This would be an easily measurable amount for each member of the class and would return to them a significant portion of the hidden fees.

9 The Court will accept supplemental briefs regarding the measure of restitution and sets a trial setting conference for ^?-^7"/V o at which time the measure of restitution may be further argued. One brief is to be submitted by each party five days before the hearing with a courtesy copy to the court. This statement of intended decision will remain tentative pending the completion of the second phase of the trial, at which time a revised statement of intended decision will be issued by the Court and an opportunity provided to counsel to provide objections in accordance with the local rules and CRC. Dated: January 17, 2014 MICHELLE R» ROSENBLATT Michelle R. Rosenblatt, Judge

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11 SUPERIOR COURT OF CALIFORNIA, COUNTY OF LOS ANGELES DATE: 01/21/14 DEPT. 4 0 honorable Michelle R. Rosenblatt judge J. Lipp DEPUTY CLERK HONORABLE JUDGE PRO TEM ELECTRONIC RECORDING MONITOR Deputy Sheriff none Reporter 8:30 am BC AUDREY MEDRAZO VS HONDA OF NORTH HOLLYWOOD ET AL Plaintiff Counsel Defendant Counsel non-appearance JUDGE KLEIFIELD NON-COMPLEX ; FR NATURE OF PROCEEDINGS: COURT ORDER (RE: SUBMITTED MATTER) The Court issues Statement of Intended Decision- Phase I, as of 1/17/14. This Statement of Decision is enclosed in the mailing of this minute order this date. The Court's rulings and intsructions are more fully set forth in the Statement of Decision. This statement of intended decision shall remain tentative pending the completion of the second phase of trial, at which time a revised statement of intended decision will be issued by the Court and an opportunity provided to counsel to provide objections in accordance with the local rules and CRC. A Trial-Setting Conference is set for 2/27/14, at 8:30 a.m. CLERK'S CERTIFICATE OF MAILING I, the below-named Executive Officer/Clerk of the above-entitled court, do hereby certify that I am not a party to the cause herein, and that on this date I served the Statement of Intended Decision Phase I, and the above minute order upon each party or counsel named below by placing Page 1 of DEPT. 4 0 MINUTES ENTERED 01/21/14 COUNTY CLERK

12 SUPERIOR COURT OF CALIFORNIA, COUNTY OF LOS ANGELES DATE: 01/21/14 DEPT. 40 honorable Michelle R. Rosenblatt judge J. Lipp DEPUTY CLERK HONORABLE JUDGE PRO TEM ELECTRONIC RECORDING MONITOR Deputy Sheriff none Reporter 8:30 am BC AUDREY MEDRAZO VS HONDA OF NORTH HOLLYWOOD ET AL Plaintiff Counsel Defendant Counsel non-appearanc e JUDGE KLEIFIELD NON-COMPLEX ; FR NATURE OF PROCEEDINGS: the document for collection and mailing so as to cause it to be deposited in the United States mail at the courthouse in Los Angeles, California, one copy of the original filed/entered herein in a separate sealed envelope to each address as shown below with the postage thereon fully prepaid, in accordance with standard court practices. Dated: 1/21/14 Sherri R. Carter, Executive Officer/Clerk By: Jeff Lipp Law Offices of Steven A. Simons Magnolia Blvd., Suite 308 Sherman Oaks, CA KEMNITZER, BARRON & KRIEG, LLP 2014 Tulare Street, Suite 700 Fresno, CA Toschi, Sidran, Collins, & Doyle Johnson Drive Pleasanton, CA Page 2 of DEPT. 4 0 MINUTES ENTERED 01/21/14 COUNTY CLERK

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