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Class Action Defense Cases–Medrazo v. Honda of North Hollywood: California State Court Reverses Denial Of Class Action Certification Holding Trial Court Erred In Considering Merits Of Class Action Claims

Trial Court Erred in Denying Class Action Treatment of Class Action Complaint Alleging Failure of Dealer to Attach Hang Tags to Motorcycles because Whether Defendant Violated Statute may not be Determined at Class Action Certification Stage California State Court Holds

Plaintiffs filed a class action against Honda of North Hollywood, which sells new and used Honda, Suzuki and Yamaha motorcycles, for violations of sections 11712.5 and 24014 of California’s Vehicle Code; specifically, the class action complaint alleged that defendant violated California law by failing to attach a label (or “hang tag”) setting forth the manufacturer’s suggested retail price for the motorcycle and defendant’s added charges. Medrazo v. Honda of North Hollywood, ___ Cal.App.4th ___ (Cal.App. August 21, 2008) [Slip Opn., at 2]. The class action alleged that defendant’s conduct violated California’s Unfair Business Practices Act and its Consumer Legal Remedies Act, and sought injunctive and restitutionary relief, disgorgement of the charges imposed by defendant but not disclosed on the hang tag, and damages under the CLRA. Id., at 3. About a year after she filed her class action complaint, plaintiff moved the district court for an order certifying the litigation as a class action, id., at 3-4. Defense attorneys opposed class action treatment on several grounds, including that plaintiff purchased a Honda, and therefore could not assert claims on behalf of purchasers of Suzuki or Yamaha motorcycles, and that it did not violate California law with respect to Suzuki or Yamaha motorcycles because “section 11712.5 is violated only when the manufacturer supplies hang[] tags and the dealer fails to attach them, and Suzuki and Yamaha did not supply any hang[] tags.” Id., at 5. The trial court denied plaintiff’s motion for class action certification finding that (1) dealers are not obligated to attach hang tags unless they are supplied by the manufacturer, which neither Suzuki or Yamaha provided to defendant, (2) the sales agreement plaintiff signed detailed the dealer-added costs, so “she had notice of those costs before she entered the agreement,” and (3) the class was not ascertainable in that “there is nothing in [defendant’s] records to indicate which motorcycles had hang[] tags attached to them.” Id., at 6. The Court of Appeal reversed.

With respect to the failure of Suzuki and Yamaha to supply hang tags, plaintiff argued that California law prohibited defendant from selling motorcycles without hang tags regardless of whether they have been supplied by the manufacturer. Medrazo, at 8. Defense attorneys argued that the statute expressly limits defendant’s obligation to hang tags “furnished by the manufacturer,” id. (citation and italics omitted). Plaintiff countered that resolution of this legal issue was premature at the class action certification stage of the litigation, and the appellate court agreed. Id., at 8-9. (The author finds the court’s reasoning to be wanting: The parties should not be required to prolong litigation, taxing the resources of the parties and the courts, when a legal ruling would resolve an issue central to the litigation. Simply adding the words “class action” to the caption of a complaint should not serve as a talisman to preclude trial courts from making legal rulings that, sooner or later, must be made. In this case, it was not possible for the defense to file a demurrer to the class action complaint because the class action alleged that Suzuki and Yamaha supplied hang tags that defendant failed to attach to its motorcycles. Because the trial court may properly consider evidence in ruling on a motion for class action certification, defense attorneys provided evidence that no such hang tags had been provided; plaintiff had no evidence to the contrary. The legal issue was proper for resolution, and the Court of Appeal should have addressed whether the trial court properly interpreted section 24014, an issue it left unresolved. See id., at 9 n.4.)

The Court of Appeal also ruled that the trial court erred in finding that plaintiff’s claims were not typical of her proposed class: the Court held that plaintiff had standing to prosecute the class action because “she purchased a motorcycle that did not have a hang[] tag disclosing the dealer-added costs,” and that the class action alleged that “she was subjected to the same alleged wrong, by the same defendant, as other members of the putative class.” Medrazo, at 10. In short, the appellate court found that plaintiff’s interests were not antagonistic to those of the class and that defendant did not have a “defense unique to the class representative,” id., at 11. In the alternative, the appellate court concluded that the trial court should give plaintiff the opportunity to add as class representatives individuals who purchased Suzuki and Yamaha motorcycles from defendant, id. The Court recognized that “each Honda purchaser will be required to establish that there was no hang[] tag attached to the motorcycle he or she purchased and/or that the dealer-added costs were not disclosed on the hang[] tag, and all purchasers will be required to establish the suggested retail price of their motorcycles and the amount of dealer-added costs included in their purchases (if it is determined that the class is entitled to a monetary recovery measured by those items).” Id., at 12 (footnote omitted). Nevertheless, the appellate court found that common issues outweighed these individual issues, id.

Finally, with respect to the ascertainability of the class, the Court of Appeal held that it was sufficient if individual class members could identify themselves and if notice reasonably can be provided to them. Medrazo, at 13-14. “As long as the potential class members may be identified without unreasonable expense or time and given notice of the litigation, and the proposed class definition offers an objective means of identifying those persons who will be bound by the results of the litigation, the ascertainability requirement is met.” Id., at 14. Here, the Court reasoned, notice could be given to every individual who purchased a motorcycle from defendant during the class period, and recipients of the notice would know (presumably) whether a hang tag was on the motorcycle they purchased. Id. The fact plaintiff could not yet identify the members of the class was “irrelevant to class certification.” Id. Accordingly, the Court reversed the order denying class action certification and directed the trial court to certify the class. Id., at 15.

NOTE: Briefly, Section 11712.5 provides that a car dealer may not “sell, offer for sale, or display” a new motorcycle “unless there is securely attached thereto a statement as required by Section 24014.” Section 24014, in turn, requires that car dealers securely attach to the handlebar of motorcycles a label “approved by the Department of Motor Vehicles, furnished by the manufacturer, on which the manufacturer shall clearly indicate” various items, including the MSRP of the motorcycle and of “each accessory or item of optional equipment physically attached to the motorcycle at the time of its delivery to the dealer,” any dealer charge “over and above the suggested retail price for transportation to the dealership,” any amount charged to assemble or prepare the motorcycle, any amount charged for dealer added accessories or optional equipment, and the total recommended retail price of the motorcycle.

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