Consumer Victory Against Car Dealer Bond

In a landmark appellate case, Kemnitzer, Barron & Krieg has won a court ruling that will help thousands of defrauded car buyers get the legal help they need. In Pierce v Western Surety Company, the California Court of Appeals held that a used car buyer could get attorneys fees under the Consumers Legal Remedies Act when he sued for fraud and misrepresentation on a dealer’s statutory bond. What does this mean?

Fly-by-night used car dealers that cheat consumers and then disappear are a real problem, and always have been. To address this injustice, the Vehicle Code requires licensed car dealers to file a $50,000 bond. Fraud victims have a claim against the surety on the bond up to the value of the car. So far, that sounds pretty good. The problem is that suing on the bond is not easily done without legal help. As long as no one could could get a lawyer to help them, the law was toothless.

In September 2008, Trenton Pierce bought a used truck from an outfit called Autorama. It turned out to be an undisclosed wreck. He contacted Bill Krieg in the San Francisco office of Kemnitzer, Barron & Krieg. Before filing a lawsuit Krieg sent a letter to Autorama under the Consumers Legal Remedies Act and copied the bond company, Western Surety. Failing a response, he sued. Autorama promptly went out of business.

Krieg tried to resolve the case with Western Surety multiple times. Lawyers for Western Surety settled separately with the lender, but refused to deal with Pierce, while using tactics that ran up legal fees in an effort to get him to just go away. Finally, about two years later, Western Surety agreed to settle with him for $10,000, excluding attorneys fees. It could have saved its own legal costs, as well as those Pierce incurred, if it had just done so earlier. Without a lawyer, Western Surety’s bullying tactics would have left Pierce with little or nothing at all. Krieg filed a motion to have the surety pay his fees, so that Pierce would not have to take legal costs out of his own recovery.

The surety argued that the Vehicle Code is silent as to recovery for attorneys fees. Krieg argued that Pierce was making a claim for fraud under the Consumers Legal Remedies Act, which protects consumers with a fee-shifting provision if the consumer prevails. The court found that the bond expressly covers claims for fraud and held in favor of Pierce.

At the heart of this battle is consumer access to the courts. Consumers cannot fight big business for years on end without legal help, and corporations know this. Fee shifting statutes, such as the Consumers Legal Remedies Act, the California lemon law and others, level the legal playing field. The holding in Pierce v Western Surety chocks one up for civil justice.