Neil Schmidt, American Honda technical specialist, left, and Arnel Maala,… (Allen J. Schaben, Los Angeles…)
In a legal victory for Honda Motor Co., a judge has reversed a small-claims judgment that would have forced the automaker to pay a Civic hybrid owner nearly $10,000 for overstating the vehicle's fuel economy.
But while the ruling ends a high-profile battle with hybrid owner Heather Peters, Honda still faces numerous legal fights in Small Claims Courts across the country.
In an unusual move that garnered national attention, the Los Angeles woman rejected a class-action settlement that would have paid Civic hybrid owners as little as $100 to $200 each and rebates on a new Honda purchase. She sued Honda in Small Claims Court and won $9,867.19 in damages. Honda appealed, and late Tuesday, Los Angeles County Superior Court Judge Dudley W. Gray II in Torrance reversed the small-claims judgment.
But her action prompted others to seek similar recourse, and as a result Honda has had to defend or is still facing at least 36 lawsuits in Small Claims Court over its fuel-economy claims for the Civic in jurisdictions from New Bedford, Mass., to St. Louis to Multnomah County in Oregon and Arlington, Wash.
It has won 18 of the suits, including the appeal earlier this week, and faces trial in 17 more. Honda has lost one case, in Santa Barbara, involving a 2003 Civic hybrid.
Although Honda's victory on appeal will prompt others considering the Peters strategy to take "a second look," the approach still could be valid depending on the circumstances, said Donald Earl Childress III, who teaches civil procedure at Pepperdine University School of Law.
But consumers who want "to take matters into their own hands and not depend on class-action lawyers to vindicate their interests" will have to make sure that they have a good case and can prove damages, Childress said.
And despite the automaker's victory, the Peters case will make big companies such as Honda take a longer look at class-action settlements and could increase their litigation expenses. Increasing numbers of people opting out of settlements and filing their own claims becomes expensive if done en masse.
"If 18 turned into 180 or 1,800, the resources that Honda would have to expend would be quite substantial," Childress said.
Honda, and a business in a similar situation, would have to use its legal staff to analyze the merits and risks of each claim. In states where lawyers are barred from Small Claims Court, these companies would have to train non-attorney employees on how to mount a courtroom defense.
In the Peters case, Gray ruled that the automaker was within its rights to advertise the Environmental Protection Agency-derived fuel-economy ratings for the vehicle and rejected the idea that it misled Peters with the claims.
"Federal regulations control the fuel-economy ratings posted on vehicles and advertising claims related to those fuel-economy ratings," Gray wrote in the ruling.
The judge also noted that the EPA's estimated miles-per-gallon ratings are for comparison among vehicles and don't take into account variations, such as how people drive and the conditions of their vehicles, that may affect fuel economy.
"Of course I'm disappointed," said Peters, "but I'm still glad that I raised awareness that Honda is no longer the great brand that it used to be. They used to go the extra mile in customer service; now they go the extra mile fighting customers in court."
Peters was ordered to pay Honda $75 in court fees. The court decision is final because California Small Claims Court rules do not allow for further appeals.
In a statement, Honda said it was "pleased with the court's decision which affirms that Honda was truthful in its advertising of the fuel economy potential of the 2006 Honda Civic Hybrid."
Last year, Peters launched a crusade attacking Honda's fuel-economy claims and a class-action settlement that would pay trial lawyers $8.5 million. Peters said Honda bragged that the car would get as much as 50 miles per gallon, a level of fuel economy Peters claimed she was never able to achieve and that grew worse after Honda did a software update on the car to try to preserve battery life.
Honda has acknowledged problems with 2006- through 2008-model Civic hybrids. Previously it had said that the battery that helps power the vehicles "may deteriorate and eventually fail" earlier than expected. When the battery pack can't be charged to full capacity, the car relies more on the gasoline engine and fuel economy suffers.
Peters opted out of the class-action settlement, created a DontSettleWithHonda.org website and filed the small-claims lawsuit against the company. After filing the case and then winning, Peters gained notoriety as an underdog fighting a giant corporation.
Peters, who had worked previously as an attorney and recently reactivated her license, said she believed that Small Claims Court would be the best venue because it prevented Honda from using attorneys to mount a defense. California law — and statutes in some other states — prohibits companies from using lawyers in Small Claims Court.
While disappointed with the final ruling, Peters said her approach was "effective to get the news out. It got a lot of people engaged. I am glad I did it."