California’s Lemon Law: A sweet deal for lawyers, sour for consumers

Los Angeles Daily News published version here

By Kyla Christoffersen Powell

In 2023, ‘lemon law’ lawsuits for defective automobiles surged in California at an alarming rate, with 22,655 cases filed statewide. These cases represented a staggering 52% increase from the previous year. According to statistics gathered by the law firm Bowman and Brooke, 2024 is on track to be another record-breaking year for these types of lawsuits. 

The situation is particularly dire in Los Angeles County, where lemon law cases spiked 1400 percent in its branch courts between 2021 and 2023.  This flood of litigation isn’t a sign of declining vehicle quality. Instead, it’s evidence of a growing problem: opportunistic trial lawyers exploiting California’s laws for financial gain. The situation demands our immediate attention and action because it is disrupting our courts and impeding access to justice.

California’s lemon law, the Song-Beverly Act, was enacted with good intentions. It aimed to protect consumers by ensuring swift replacement or repurchase of defective vehicles. However, the law has become a lucrative playground for a handful of law firms, who have turned consumer protection into a profitable industry at the expense of consumers and our overburdened court system.

The state of California’s courts is severe, with judges in Los Angeles County struggling under the weight of ballooning caseloads. Judge Tony L. Richardson recently admitted to having over 800 cases on his docket. Judge H. Jay Ford III reported a similar burden of about 760 cases.  These aren’t isolated incidents. Over the past decade, the average caseload for lawsuits in Los Angeles County seeking $25,000 or more in damages has nearly doubled, from 443 cases per courtroom in 2014 to 847 in 2023.   While these figures don’t specify case types, Song-Beverly case filings are surely exacerbating the situation.

A small group of law firms drives the deluge of Song-Beverly cases. In 2023, just seven firms filed 54% of all lemon law cases in the state. The most prolific of these firms increased their filings almost 75% between 2022 and 2023.

Why the dramatic increase? The answer lies in attorney’s fees. When a consumer prevails in a lemon law case, the manufacturer pays their attorney’s fees. The opportunity to collect outsize attorney’s fees creates a perverse incentive for lawyers to prolong litigation, driving up their billable hours at the expense of swift consumer resolution.

The results can devastate the consumers the law is supposed to protect. In one case, a consumer was offered a vehicle repurchase before filing suit. That plaintiff rejected the repurchase and another $75,000 settlement offer before settling for only $10,000 five years later.  Another consumer was awarded only $1 after rejecting an earlier offer for almost $30,000. Meanwhile, the plaintiff’s attorney requested nearly $1 million in fees. 

Unfortunately, cases like these aren’t unusual. Instead, they are part of a troubling pattern in which consumers are encouraged by their attorneys to reject fair settlements to keep the meter running on their fees.

This occurs even though California law provides for the Arbitration Certification Program (ACP). Regulated by the Department of Consumer Affairs, this program offers consumers a free and fast way to resolve their lemon law claims with auto manufacturers.

The arbitration program is a win-win. Consumers avoid costly and protracted legal battles, and the courts get some relief. Even with these apparent benefits, arbitration under California’s lemon law remains underutilized, mainly because attorneys lure consumers into litigation so those attorneys can line their pockets with fees.

We can improve California’s lemon law with a few common-sense changes to restore its original intent and effectiveness, including:

1. Implement a pre-lawsuit notice system: This would require potential plaintiffs to inform manufacturers of their grievances before initiating legal proceedings. A system like this could get consumers the resolution they seek without needing protracted court battles and associated costs.
2. Limit attorney’s fees: Tie lawyers’ earnings directly to consumer outcomes, encouraging attorneys to focus on the best result for the consumer instead of padding billable hours. This nuanced approach could disincentivize unnecessarily drawing out litigation while ensuring fair compensation for legitimate legal work.
3. Develop a consumer education initiative: Launch a state-wide campaign to educate consumers on the benefits of arbitration and show them how it works.

These proposed reforms are crucial for preserving consumer rights and the integrity of our judicial system. San Diego Superior Court Judge Timothy Taylor underscored this urgent need for systemic change when he noted that certain attorneys are “emboldened to over-litigate cases the manufacturers regularly seek to settle, with no benefit to the injured consumer.”

By implementing reforms like these, we can create a system where consumers facing automotive issues have a clear, efficient path to resolution. We can turn the “lemon” of a defective vehicle into the “lemonade” of a fast and fair settlement without the bitterness of prolonged legal battles and diminished compensation.

Kyla Christoffersen Powell is president and CEO of the Civil Justice Association of California, a source of expertise in legal reform and advocacy for almost half a century.