April 19, 2012

Big Win for Motorcycle Buyers

In a case involving the sale of new motorcycles, Kemnitzer Barron & Krieg has achieved a major victory for consumers in the Second District Court of Appeals in Los Angeles. In a decision filed March 27, 2012 and certified for publication this week, a three-judge appellate panel unanimously overturned the erroneous decision by a L.A. trial court judge who had denied the Plaintiff and a class of 4,100 other motorcycle buyers relief for unlawful sales practices. The dealer in the case, Honda of North Hollywood, was selling motorcycles without proper notice of charges added onto the price of the motorcycle.

The California Vehicle Code requires that motorcycles can only be sold with what is called a “hang tag” attached to the vehicle on the sales lot. The buyer is entitled to see all of the dealer charges, including freight or destination fees and other “add-ons” before they have a contract written up. This has been a huge problem in the motorcycle sales industry where dealers add charges to the advertised or agreed upon price of a new motorcycle. California law requires that a dealer who sells a new motorcycle must disclose the total price (excluding tax and license) up front on the vehicle, when it is displayed for sale on the lot.

The purpose of the law is to prohibit deceptive advertising and sales practices such as "bait-and-switch" pricing– increasing the price by adding dealer charges which are not disclosed up front on a label or "hang tag" on the bike. This kind of bait-and-switch was exactly what happened here.

Plaintiff and class representative Audrey Medrazo bought a new Honda motorcycle from Honda of North Hollywood for an agreed price of $8,700. The dealer then added $2,284 of dealer "freight and prep" which were not disclosed to Medrazo until she sat down to sign her final purchase papers. That upcharge increased the cost by more than 25%.

Medrazo filed a class action lawsuit seeking a refund (restitution) for about 4,100 buyers of Honda of North Hollywood’s new motorcycles. After achieving another significant victory for class members in 2008 in the Court of Appeals at the class certification stage (see, Medrazo v. Honda of North Hollywood (2008) 166 Cal.App.4th 89) the case proceeded to trial in October 2010. The trial court ruled for the dealer even before the defense had put on its case. The Court of Appeals reversed, holding that "Medrazo was not required to show actual reliance on Honda of North Hollywood's alleged non-disclosure — by herself or by the class members — to be entitled to restitution under the ‘unlawful’ prong of the [Unfair Competition Law]," and that by purchasing the motorcycle, she had suffered injury in fact.

KBKlegal partner William Krieg, along with attorney Steve Simons, represented Medrazo and the class in the lawsuit.