California Court Revives Advertising Claims, Finding No Preemption
California’s Fourth District Court of Appeal issued an opinion last Monday that illustrates once again why splitting the baby is never a satisfying result. See Paduano v. American Honda Motor Co., 2009 WL 57806 (Cal. App. Jan. 12, 2009). The case was straightforward enough: plaintiff bought a hybrid car expecting it to get 51 miles per gallon, which was what the brochure said was the EPA’s fuel economy estimate for manual transmission versions of the car. But the car didn’t come close. Instead, it averaged roughly 30 miles per gallon when plaintiff drove the car. Apparently EPA’s method of testing hybrid cars differs substantially from how some drivers typically drive them, so that the EPA estimates can be significantly better than actual experience.
Plaintiff sued for breach of one federal and two state warranty statutes, as well as for violations of California’s Unfair Competition Law (“UCL”) and its Consumer Legal Remedies Act (“CLRA”).
The trial court granted summary judgment on all claims, finding, inter alia, that they were preempted by the federal Energy Policy and Conservation Act. The Court of Appeal, however, affirmed dismissal of the warranty claims, but reversed on the UCL and CLRA claims, holding that they were not preempted.
The court was right to affirm dismissal of the warranty claims because Honda clearly made no warranty about the EPA’s fuel economy estimate. Rather, the label stated – as required by federal law – “ACTUAL MILEAGE will vary with options, driving conditions, driving habits and vehicle’s conditions.” And 49 U.S.C. § 32908(d) “clearly provides that ‘[a] disclosure about fuel economy or estimate annual fuel costs under this section does not establish a warranty under the law of the United States or a State.’” Id. at *7.
Ultimately, however, the majority held that the plaintiff’s UCL and CLRA claims were not preempted. In doing so, it applied a presumption against preemption from the California Supreme Court’s “colored salmon” case: Farm Raised Salmon Cases, 42 Cal.4th 1077, 1087-88 (2008), cert. denied sub nom., Albertson’s, Inc. v. Kanter, 2009 WL 56199 (U.S. Jan. 12, 2009). Paduano, 2009 WL 57806 at *12-*13. It then applied the U.S. Supreme Court’s recent decision in Altria Group v. Good, 2008 WL 5204477 (U.S. Dec. 15, 2008) to hold that the language of the Energy Policy and Conservation Act does not expressly preempt the plaintiff’s claims. Paduano, 2009 WL 57806 at *15. Because the UCL and the CLRA are laws of general applicability that are not based specifically on the disclosure of fuel economy or fuel operating costs, the court held that the federal act’s express preemption provision did not apply.
The majority then found that there might be viable UCL and CLRA claims arising out of two statements from the defendant’s sales brochure: (1) “Just drive the Hybrid like you would a conventional car and save on fuel bills,” and (2) “IS THERE ANYTHING SPECIAL I HAVE TO DO? You just have to love saving money and getting terrific gas mileage.” Id. at *10-*11.
As Justice Terry O’Rourke points out in the dissent, these statements are “mere unspecific, nonfactual assertions constituting non-actionable puffery.” Id. at *32-*33. And the first statement, taken in context, is actually just differentiating this Hybrid from an electric car the owner would have to plug in to charge. Id. at *23.
But more important, Justice O’Rourke makes it plain that the plaintiff’s sole theory of liability is premised exclusively on the EPA’s mileage estimate, and that the sought-after relief – eliminating or reducing the EPA’s mileage estimate – actually was expressly preempted by the federal statute because it would impose a legal obligation “related to fuel economy standards.” Id. at *25. The Supreme Court’s recent Good decision, Justice O’Rourke explains, is wholly irrelevant to the issue at hand.
The majority and dissenting opinions in Paduano highlight the difficulty of consistently applying the Supreme Court’s preemption precedents. There is much too much detail in the two sides’ positions to analyze in this blog post. But certain fundamental questions – such as when to apply the presumption against preemption, and when does a statute of general applicability “impose” obligations within the meaning of an express preemption provision – clearly remain hotly disputed. One hopes the California Supreme Court will accept review of Paduano, which seems certain to be appealed, and provide some additional clarity in this area.
