Feb. 8, 2012 at 7:47 AM ET
Honda is bracing for a possible flood of legal challenges if the California courts uphold a recent verdict awarding nearly $10,000 to a woman who claimed her 2006 Civic Hybrid delivered significantly lower fuel economy than the maker had promised.
Heather Peters is by no means the only Honda owner upset by the gap between the mileage on the Civic’s window sticker and what the car actually delivered in use. But she decided to take a very different approach to other owners, many of whose legal claims have been consolidated into a class action now before a court in San Diego.
The 46-year-old Peters, herself a former corporate attorney, chose to take her dispute to a small claims court in suburban Los Angeles. While Peters says she recognized she wouldn’t be able to collect all the money she insists she lost on added fuel costs and a lower trade-in value, she felt she’d have a better chance of getting a reasonable judgment in small claims.
Such courts are typically used for minor disputes – and they normally bar the use of attorneys, meaning an individual can sue a large corporation without facing a bank of legal experts – or running up bills that would far exceed the maximum claim, which ranges from $2,500 to $15,000 depending on the state. In California, the cap is $10,000, and Peters was awarded $9,867 this month by Superior Court Commissioner Douglas Carnahan.
Prior to her trial, the Civic Hybrid owner lamented that while her car was rated at 50 miles per gallon, “they didn't say if you run your air conditioning and you remain in stop-and-go traffic, you're going to get 29 to 30 miles per gallon.”
In court, a Honda representative, technical specialist Neil Schmidt, insisted it wasn’t the company’s fault. He argued that Honda simply posted the numbers set by the EPA, which conducts government fuel economy testing.
“We have no choice,” testified Schmidt. “We have to put those numbers on the label.”
The EPA only limits manufacturers like Honda at the high end. They cannot post a number on the car’s so-called Munroney sticker higher than what was achieved in the government’s tests. But a maker like Honda can post a lower number if it chooses to do so. Facing competitors likely to maximize their own numbers, few if any carmakers have ever gone with anything other than the EPA posting. That's in part, noted Dave Sullivan, an analyst with AutoPacific, Inc., because it was generally thought that using the federal figures provided legal cover.
But that argument may no longer hold. Honda isn’t the only maker sued over optimistic mileage figures. Others, including Toyota, have also fielded legal heat. The EPA, meanwhile, has struggled to get its own test procedures in order. In 2008, it completely revised its processes which resulted in a particularly sharp dip in mileage numbers for gas-electric vehicles like the Honda Civic Hybrid.
Peters declared the verdict in her small claims suit “a victory for Honda Civic owners everywhere.” She has meanwhile created a website, “DontSettleWithHonda.org,” to convince other owners not to accept a proposed class action settlement that will be ruled on by another California judge in March. That agreement would provide just $100 to $200 in cash to each owner along with a $1,000 discount certificate good for the purchase of another Honda product.
Critics have argued that the settlement really is a way for the Japanese maker to get frustrated owners back into its showrooms. The plaintiff’s attorneys handling the case have also been criticized as they stand to get an $8.5 million payoff for their work.
A statement from Honda said, "We disagree with the judgment rendered in this case, and we plan to appeal the decision." The timing of that appeal is uncertain.
But a company source said the maker is clearly worried about the potential precedent that could be set if the Peters judgment is allowed to stand. It raises the possibility that hundreds of Civic Hybrid owners could see little to gain from the class-action settlement and more opportunity in taking their own claims into the local small claims courtroom.
The industry is watching closely too, said a Ford executive, asking not to be identified by name. While automakers routinely lament the legal climate they often prefer a class action to countless local suits. And small claims actions place a severe limit on their legal power which is normally a potent tool in overcoming consumer complaints.