Honda Loses In Small Claims Court – What Next?

Posted: February 2, 2012 in Honda
Tags: , , ,

2006 Honda Civic Hybrid

On February 1, 2012, Heather Peters, owner of a defective 2006 Honda Civic Hybrid (HCH), was awarded $9,867.19 in her Small Claims Court suit against Honda Motor Co.  Ms. Peters has reached out to other disgrunteled HCH owners through her website DontSettleWithHonda.org.  She urges owners to opt out of the class action cases and sue Honda directly in Small Claims Court.

On January 3, 2012, the case, Heather Peters vs. American Honda Motor Co., Inc., was heard in Small Claims Court in Torrance, California (Honda’s US headquarters is in Torrance).  The court ordered an additional hearing on January 25, 2012, to tie up some loose ends.  Approximately 90 minutes of testimony was given on each day – a very long case for Small Claims Court.  We covered the case here.

This case has been closely watched both by Honda Civic Hybrid owners (model years 2003 – 2009) as well as the trial lawyers and big corporations.  Instead of settling for up to $200 and a $1,000 voucher towards the purchase of a new Honda or Acura vehicle, plaintiffs in a class action suit against Honda may opt out of the class action lawsuit and take their cases to small claims courts around the country, opening a floodgate of small claims court lawsuits that, in theory, class action claims were meant to stem.

Heather Peters with Neil Schmidt from Honda in Small Claims Court, Torrance, California.

Unfortunately, as most of us know, being included in some sort of class action – credit card fees, defective part, overpaid interest, etc. – doesn’t usually net you much. Sometimes you have to go back for years in your records to submit a claim.

For example, many people don’t have the time and inclination to spend hours going over credit card statements from 6 years ago to see how much they paid in foreign transaction fees. You have to read lengthy letters and small print and fill out confusing forms. You can remain in the class and (1) accept $10 for all the fees you may have overpaid during a 4 year period, (2) opt out of the settlement and sue the big corporation yourself (good luck), or (3) spend lots of time and effort going back over years of statements and submit a claim, with the appropriate paperwork, on a timely basis, in hopes of getting maybe $50 or $100.

Most people just give up and accept a small check that comes months or years after a claim is submitted and the matter is settled.

If you think that the only people who win in these cases are big corporations and an army of attorneys (on both sides), you’re not alone.  Ms. Peters was mad as hell and she wasn’t going to accept a paltry $200 from Honda while the attorneys made over $8 million.  And she won!

I’ll try and summarize the 26 page ruling by Superior Court Commissioner Douglas G. Carnahan:

  • Ms. Peters has the right to bring this case in small claims court.
  • She properly opted-out of the proposed class action settlement.
  • Both sides had stacks of “testimony” from happy HCH owners and dissatisfied HCH owners. The court really didn’t look at either of these submissions as dispositive of either Honda’s defense or Ms. Peter’s claims of monetary injury.
  • Ms. Peters paid $30,485.96 for her 2006 Honda Civic Hybrid on April 23, 2006 from Honda of Santa Monica.
  • She had always been dissatisfied with the fuel economy of her HCH. The EPA ratings of 50 mpg were never achieved and the performance of her HCH was closer to 40 mpg. Starting in March 2008, she began a series of technical consultations and repairs with the Honda dealer having to do with the hybrid operations of the vehicle. These lasted from 2008-2011.
  • In August of 2010, she received a “Product Update” from Honda to “fix” factory-installed software that made the hybrid battery deteriorate and fail before its normal useful life, particularly in warm weather.  It also rewrote the code for the start/stop engine function.
  • After the software update, the car’s performance deteriorated, not improved.  It went from around 40 mpg to 30 mpg.
  • Ms. Peters was eligible to participate in the class action lawsuit against Honda, Lockaby v. American Honda, pending in San Diego Superior Court. Under the settlement, she would have received $200 plus a $1,000 voucher towards the purchase of a new Honda or Acura vehicle.
  • Ms. Peters sued Honda for $122,113.46: (1) MSRP LX v. Hybrid premium, $5,440; (2) premium paid over MSRP for “Hybrid Premium,” $3,290; reduced resale value due to stigma, $5,208; actual increased gas cost to date, $1,110.48; future increased gas costs, $8,200; IMA battery replacement costs, $2,304.98; punitive damages for fraud, $91,585.09.  You go girl!

Findings of the court:

  • The court found that Honda had misrepresented the mileage of the 2006 HCH and that Honda’s advertising and printed literature was “misleading.”
  • Honda’s defense of “your mileage may vary” didn’t stick. The judge noted that drivers in large urban areas like Los Angeles are naturally going to experience stop-and-go driving and normally use their AC. Something Honda didn’t note anywhere in its advertising or literature.
  • Honda misrepresented at least one of the points of the Product Update (software) as the engine didn’t start sooner than represented. The engine in Ms. Peters’s car had trouble shutting off at stops, let alone restarting.
  • The court found Honda guilty of “negligent misrepresentation,” but not fraud. Fraud is very hard to prove.

Damages:

  • No punitive damages were imposed as the court did not find clear and convincing evidence that Honda concealed or misrepresented problems with the HCH generally, or with the software patch, out of oppression, malice or intentional fraud.
  • Damages, battery replacement: Ms. Peters is entitled to the replacement cost for the IMA battery, $2,304.98.
  • Damages, Federal Tax Credit: Ms Peters did not take the credit of $2,100 (bad tax preparer, IMHO) and Honda’s not responsible for her not taking it. Award, nothing.
  • Damages, fuel costs: For the period of purchase to the Product Update, the court awarded Ms. Peters $803.24 for the difference between 50 mpg and 40 mpg based on actual mileage.
  • Damages, fuel costs: From the date of the Product Update to the day the lawsuit was filed (December 2, 2011), when fuel economy dipped to 30 mpg from 40 mpg, the court awarded Ms. Peters $237.38.
  • Damages, loss of use:  Since Ms. Peters is keeping the car and there was no specific evidence before the court, Ms. Peters was awarded nothing.
  • Damages, diminution in value: The court found that Ms. Peters successfully argued that she was stuck with a car that had diminished resale value, and using Kelly Blue Book figures, the court awarded her $5,208 in compensation.
  • Damages, loss of future fuel costs: Ms. Peters claimed future loss of $8,200, assuming she keeps the car for 200,000 miles. The court applied a different loss methodology assuming she only kept the car for 150,000 miles, using the difference between 50 mpg and 40 mpg (assuming the replaced battery upped the fuel economy again).  Total award, $2,767.50.
  • Costs, prejudgement interest: The court awarded Ms. Peters $313.22 based on the battery replacement award of $2,304.98 over 496 days at 10% interest rate. [Where can I get 10% interest??]
  • Cost, filing and copying: The court found that Ms. Peters’ $247.87 for copying was reasonable and awarded her a reimbursement of her $85.00 filing fee.
  • Total award: $9,867.19.

Honda has already indicated that it intends to appeal the Small Claims decision to Superior Court in Los Angeles County. In Superior Court, Honda can bring in the heavy legal guns, including outside council Latham & Watkins.  It will be expensive for Ms. Peters to fight Honda in Superior Court, but in her February 1, 2012 press release, she says:

Honda has said it will appeal, but Heather anticipates being able to put on an even stronger case next time supported by additional evidence received through her website, including a Honda whistleblower.

No matter how this turns out, this is a public relations nightmare for Honda. This case has garnered national attention and it will continue to be closely watched.  And who doesn’t love whistleblower information? When you have the David v. Goliath thing going on, people tend to root for the underdog and Honda just comes off as the big bad corporation, not the gentle, humble, economical, earth-friendly, mass-market company Honda portrays itself in advertising.

Honda’s Japanese and American managers have done a terrible job here. This case should have been settled long before this legal action.

#dontsettlewithhonda

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Comments
  1. Alexander "Sandy" Kunzer says:

    Mr. Bianco,
    I followed your trail here from your comment on the Autoweek story on “The Talk”. A compromise for your parents in L.A. might be a Low Speed Vehicle; electric or gas. These are legal road vehicle on any U.S. road with a speed limit of 35 mph or lower. Not well publicized but if people can find their way on surface streets then the vehicles SHOULD be safer for them and the general public.
    Good Luck. Been there Done that.

    • Todd Bianco says:

      Hey Sandy, thanks for the great suggestion. Now the only problem would be convincing my father that he should buy a different vehicle – he swears his 98 Subaru will be his “last” car. All the streets they need to go on are surface streets. The only freeway is visiting me, and I usually come to them. They live just two or three miles from lots of grocery stores, a huge Kaiser facility, major shopping malls, a Home Depot, etc. If there was public transit that went from a stop near them to somewhere they want to go, that would be great, but there isn’t. Kaiser doesn’t offer any medical transit, which is surprising. Whatever happens, it won’t be a fun conversation. Thanks for your post, it’s much appreciated. Todd

  2. […] Superior Court is set to decide if the proposed settlement is fair.  Heather Peters, the woman who sued Honda in Small Claims Court and won nearly $10,000, has reactivated  her law license in order to argue against the proposed settlement ($100 – […]

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