If you have ever bought a new car that turned out to be defective, you may be familiar with the California lemon law, which gives you the right to demand that the manufacturer either replace or repurchase your vehicle if it cannot be repaired after a reasonable number of attempts. But what if you decide to trade in your lemon for another car at a different dealership before suing the manufacturer? Can the manufacturer reduce your restitution by the amount of your trade-in credit? According to a recent decision by the California Court of Appeal, the answer is no.

In Williams v. FCA US LLC, decided on February 1, 2023, the plaintiffs, Melissa and Geoffrey Williams, bought a new 2016 Ram 1500 truck from an authorized dealer of FCA US LLC, the manufacturer of the truck. The truck came with a three-year or 36,000-mile express written warranty that covered repairs for defects in materials or workmanship.

Soon after buying the truck, the Williamses experienced various problems with it, such as engine stalling, transmission slipping, electrical malfunctions, and steering issues. They took the truck to authorized repair facilities several times, but the defects were not fixed. They also contacted FCA US LLC directly and requested that the manufacturer repurchase or replace the truck under the lemon law. The manufacturer refused.

In 2017, the Williamses traded in their defective truck for a new 2017 Ford F-150 at an unrelated dealership. They received a $29,500 credit for their trade-in, which they applied toward the purchase price of their new vehicle.

In 2018, they sued FCA US LLC for violating the lemon law, seeking restitution for their defective truck. They argued that they were entitled to receive an amount equal to the actual price they paid for the truck, which was $45,072.18, plus any collateral charges and incidental damages they incurred. They also sought a civil penalty for the manufacturer’s willful failure to comply with its obligations under the lemon law.

FCA US LLC argued that it was entitled to deduct the $29,500 trade-in value from the restitution amount, since that was what the Williamses received when they disposed of their defective truck.

The case went to trial in 2020. The trial court did not decide whether the trade-in value should be deducted from the restitution amount; instead, it left that question to the jury. The jury instructions stated that the jury had to determine what was included in “the actual price paid or payable by the buyer” under the lemon law.

The jury found that FCA US LLC breached its express written warranty and willfully failed to replace or repurchase the defective truck. It awarded the Williamses $15,572.18 in total damages and a $31,144.36 civil penalty. The damages amount was calculated by subtracting the $29,500 trade-in value from the $45,072.18 purchase price of the truck.

The Williamses appealed, arguing that the jury’s calculation was incorrect and that they should have received the full purchase price of their truck as restitution.

In February 2023, the Court of Appeal reversed the trial court’s judgment and ordered a new trial on damages. The Court of Appeal reasoned “[t]he legislative history supports our conclusion that ‘restitution’ in section 1793.2, subdivision (d) is not the plain vanilla common law kind.” Thus, a buyer may sell the defective vehicle and still seek restitution in an amount equal to “actual price paid or payable.” Here, Plaintiff’s paid $37,499 for their defective truck. Yes, they traded it in and received a $29,500 trade-in credit, but they still paid the full price. Whether or not the vehicle is sold or traded is immaterial to what the Lemon Law remedies provide.

The court reasoned that “the actual price paid or payable by the buyer” refers to the amount that the buyer agreed to pay for California’s Lemon Law was enacted to protect consumers. The law is clear.