On March 27, 2012, Kemnitzer, Barron & Krieg, LLP achieved a major victory in the Second District Court of Appeals in Los Angeles. The Court unanimously overturned a decision by a Los Angeles Superior Court judge who denied the Plaintiff and about 4,100 new motorcycle buyers any compensation for “freight and preparation” or “destination” charges that the defendant motorcycle dealer, added to the price of new motorcycles, but did not disclose to buyers until they were signing the final purchase papers.
This has been a huge problem in the motorcycle sales industry. Dealers add charges (other than tax and license) to the advertised or agreed upon price a new motorcycle. California law requires that a dealer, who sells a new motor vehicle or motorcycle, disclose the total price (excluding tax and license) “up front” on the vehicle when it is displayed for sale on the lot, including the manufacturer’s “suggested retail price” and any “dealer added charges.” The purpose of the law is to prohibit deceptive advertising and pricing practices such as “bait-and-switch” pricing — increasing the price by adding charges which are not disclosed “up front” on a “label” or “hang tag” displayed on the bike.
In this case, Plaintiff Audrey Medrazo bought a new Honda motorcycle from Honda of North Hollywood’s (HNH) for an agreed price of $8,700. HNH then added $2,284 of dealer “freight and prep” charges which were first disclosed to Medrazo when she sat down to sign her final purchase papers. Medrazo filed a class action lawsuit seeking a refund (restitution) for herself and about 4,100 buyers of HNH’s new motorcycles. KBK partner William Krieg and attorney Steve Simons represented Medrazo and the class in the lawsuit.
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. Regrettably, the trial court ruled incorrectly that Ms. Medrazo and each class member needed to show that they relied on the price misrepresentation or undisclosed charges, and refused to find HNH liable. Medrazo appealed, and in March 2012, the Court of Appeals reversed the trial court, holding that “Medrazo was not required to show actual reliance on HNH’s alleged non-disclosure — by herself or by the class members — to be entitled to restitution under the ‘unlawful’ prong of the UCL.” (Slip Op., p. 10) The case will now be scheduled for re-trial, or possibly settlement in light of the appeal court’s favorable decision.