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Michael Lopez et al v. Nissan North America

December 5, 2011

MICHAEL LOPEZ ET AL., PLAINTIFFS AND APPELLANTS,
v.
NISSAN NORTH AMERICA, INC. ET AL., DEFENDANTS AND RESPONDENTS.



APPEAL from a judgment of the Superior Court of Los Angeles County, Carolyn Kuhl, Judge. Affirmed. (Los Angeles County Super. Ct. No. JCCP4513)

The opinion of the court was delivered by: Willhite, J.

CERTIFIED FOR PUBLICATION

introduction

To regulate the accuracy of commercial measuring instruments, California has adopted the tolerance standards set by the National Institute of Standards and Technology (NIST). Business and Professions Code section 12500, subdivision (c),*fn1 provides, in substance, that any commercial measuring instrument that is accurate within the relevant NIST tolerance standard is "correct."

The instant case, a class action brought by plaintiffs Michael Lopez, Gale Somadi, Nu Butthajit, Thomas Estrada, and Calvin Chambers against defendants Nissan North America, Inc. and Nissan Motor Acceptance Corporation (collectively, Nissan), involves the accuracy of passenger vehicle odometers, one of the measuring instruments governed by the NIST standards.*fn2 The odometers at issue allegedly overregister mileage by approximately two percent. Although the alleged miscalibration is within the applicable four percent tolerance, plaintiffs contend that the odometers nonetheless are not "correct" under section 12500, subdivision (c).

We hold that passenger vehicle odometers are "correct" if they register actual mileage within the four percent tolerance and the designer or manufacturer does not deliberately miscalibrate them to underregister or overregister mileage. This standard is substantially the same as that applied by the trial court in granting summary judgment for Nissan.

We also hold that section 12500, subdivision (c), is a "safe harbor" provision (Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163, 182) under which odometers are, as a matter of law, "correct" if they meet the relevant tolerance standard and were not deliberately miscalibrated. Because such deliberate miscalibration has not been shown here, the statute bars plaintiffs' claims under consumer protection statutes (§§ 17200, 17500; Civ. Code, § 1750, et seq.) based on the alleged inaccuracy of odometers that meet the NIST standard or based on the failure to disclose such alleged inaccuracy.

Applying these holdings, we affirm the grant of summary judgment.

BACKGROUND

Plaintiffs' operative pleading is the first amended complaint (the complaint), which alleges causes of action for: (1) breach of warranty; (2) breach of contract; (3) breach of covenant of good faith and fair dealing; (4) unlawful business practices (§ 17200 et seq. (UCL)); (5) unfair and fraudulent business practices (UCL); (6) unfair or deceptive trade practices (Consumer Legal Remedies Act, Civ. Code, § 1750 et seq. (CLRA)); (7) negligent and intentional misrepresentation; and (8) false advertising (§ 17500 et seq. (FAL)).

The claims are premised on allegations that Nissan purposefully designed, calibrated, and altered the odometers on its vehicles to overregister the actual miles driven by at least two percent, that Nissan concealed the odometer overregistration from its customers with the intent to deceive them, and that the overregistration resulted in overpayment for vehicles, loss of resale value, premature expiration of warranties, improper repair costs, and excessive lease payments and end-of-lease charges.*fn3 The putative class contains all California residents who, in California, bought or leased a new model year 2004 through 2007 Nissan or Infinity vehicle.

Nissan moved for summary judgment, arguing that none of the causes of action could stand, because California law considers an automobile odometer "correct" if it registers the actual mileage within a tolerance of plus or minus four percent (§ 12500, subd. (c)), and plaintiffs had no evidence to show Nissan deliberately designed its odometers to overregister mileage. The trial court granted summary judgment for Nissan, concluding that California's "safe harbor" provision - section 12500, subdivision (c) - does not protect manufacturers from liability for intentional miscalibration, but that plaintiffs failed to raise a triable issue as to whether Nissan had deliberately designed its odometers to overregister mileage.

Plaintiffs appeal from the judgment. They contend that the standard applied by the trial court is incorrect. According to plaintiffs, for Nissan's odometers to be deemed "correct," Nissan must have in good faith done everything that was technologically possible to center the odometers on zero. Plaintiffs also contend that, even assuming the trial court applied the correct standard, disputed issues of material fact exist such that granting summary judgment was inappropriate. Finally, although the thrust of their complaint is that Nissan deliberately miscalibrated its odometers to overregister mileage by approximately two percent, with the intent to deceive consumers, in their reply brief on appeal plaintiffs shift their theory, contending that even if Nissan's odometers are "correct" under the trial court's standard, Nissan can still be liable for failing to disclose to consumers that its odometers overregister mileage.

We affirm the trial court's judgment in all respects. We begin with the appropriate definition of "correct" odometers under section 12500, subdivision (c).

DISCUSSION

I. "Correct" Odometers Under California Law

A. Tolerance For Inaccuracy In Odometer Readings

An odometer consists of a system of interconnected components that measure and record the distance a vehicle travels. To measure mileage, the odometer system counts the number of wheel revolutions as the car travels. The number of wheel revolutions is multiplied by the circumference of the tires to yield a distance measurement.

Several factors can limit the precision of odometer systems. First, tires have inherent variations in their circumference in part due to manufacturing tolerances that permit tires of the same designated size and type to vary in their circumference. Differences in tire design, construction and the type of tread from the same or different manufacturers also impact actual tire size. Further, a tire's actual circumference may change over time and during operation of the vehicle: a new tire is larger in circumference than an older tire with worn tread; an under-inflated tire is smaller in circumference than an over-inflated tire; and vehicle speed, the load carried by the vehicle, outside temperature conditions, and road surface also all affect tire size.

Recognizing the limitations on odometer accuracy, the Society of Automotive Engineers (SAE), a non-profit educational and scientific organization whose 90,000 engineers and scientists develop technical information on automobiles and other vehicles, recommends that variations of plus or minus a four percent inaccuracy should be permitted for odometers. Such an allowance for a particular measure of inaccuracy is called a "tolerance."

Likewise, NIST, the agency within the United States Department of Commerce directed by Congress to develop national standards of measurement (15 U.S.C. § 272(b)(2)), recommends a plus or minus four percent tolerance for odometers in its "Handbook 44 'Specifications, Tolerances, and other Technical Requirements for Weighing and Measuring Devices'" (the NIST Handbook). (NIST Handbook, § 5.53, A.1, T.1, T.2 (2008).)*fn4

California law provides that the director of the California Department of Food and Agriculture (the Department) "shall establish tolerances and specifications and other technical requirements for commercial weighing and measuring. In doing so, the director shall adopt, by reference, the latest standards as recommended by the [NIST Handbook] except as specifically modified, amended, or rejected by regulation adopted by the director." (§ 12107; see §§ 12002, 12003.) The devices subject to such regulation include odometers. (§ 12500, subd. (e).) Accordingly, California has adopted the NIST Handbook's recommended tolerance of plus or minus four percent for odometers in passenger vehicles.*fn5 Under section 12500, subdivision (c), any odometer that registers within this tolerance, like any other measuring instrument that meets the NIST standard for that instrument, is "correct."*fn6

B. Interpreting Section 12500, Subdivision (c)

In moving for summary judgment, Nissan asserted that plaintiffs had tacitly asked the trial court to create an exception to section 12500, subdivision (c), such that odometers that comply with the four percent tolerance nevertheless would not be considered "correct" if they were knowingly designed or calibrated to inflate the distance traveled. Assuming for the sake of argument that deliberately miscalibrated odometers are not "correct" under section 12500, subdivision (c), Nissan premised its summary judgment motion on the argument that plaintiffs had no evidence of any such intentional miscalibration, and to the contrary, the evidence demonstrated that Nissan centered its odometers on zero where feasible. In opposing summary judgment, plaintiffs argued, in part, that Nissan's odometers were not "correct" because Nissan intentionally set its odometer systems to overregister mileage.

Before deciding the summary judgment motion, the trial court issued a notice to the California Attorney General and the Department requesting the Department's position on "whether the tolerances set by California law and by the Director of the Department of Food and Agriculture create a 'safe harbor' such that commercial activity is permitted so long as measuring devices comply with the established tolerances; or rather whether businesses that comply with the tolerances nevertheless may be sanctioned for intentionally manipulating equipment to the advantage of the business and the disadvantage of the customer." In an amicus curiae brief on behalf of the Department, the Attorney General stated that no four percent "safe harbor" exists where deliberate miscalibration of an odometer is involved. Rather, the Department's position was that even if an odometer overstates mileage by less than four percent, deliberately miscalibrating an odometer constitutes a violation of California's consumer protection laws and odometer tolerance regulations. The trial court agreed, holding that "the tolerance regulations do not provide a safe harbor for deliberate miscalibration of an odometer. Devices shall not facilitate the perpetration of fraud."

Having conducted a de novo review of the question of the proper interpretation of section 12500, subdivision (c) (Goodman v. Lozano (2010) 47 Cal.4th 1327, 1332), we agree with the Department and the trial court that it would be unfair to construe section 12500, subdivision (c) to permit manufacturers to deliberately design odometers that overregister mileage close to, but not above, the tolerance. As the NIST Handbook states, "[e]quipment owners should not take advantage of tolerances by deliberately adjusting their equipment to have a value, or to give performance, at or close to the tolerance limit." (NIST Handbook, "Fundamental Considerations Associated with the Enforcement of Handbook 44 Codes" (Appx. A) § 2.3 (2008).) Section 12500, subdivision (c) must be construed in a manner consistent with the NIST standard that California law has adopted. Thus, like the NIST standard, section 12500 does not protect deliberate manipulation by the designer or manufacturer to overregister or underregister mileage.

Plaintiffs further contend that an odometer should be considered "correct" under section 12500, subdivision (c) only if a manufacturer has made "every effort to center the odometer on zero," using every "technologically possible" means. They contend that the NIST Handbook supports their interpretation. We disagree.

The NIST Handbook emphasizes that "[u]niformity of specifications and tolerances is an important factor in the manufacture of commercial equipment. Deviations from standard designs to meet the special demands of individual weights and measures jurisdictions are expensive, and any increase in costs of manufacture is, of course, passed on to the purchaser of equipment. On the other hand, if designs can be standardized by the manufacturer to conform to a single set of technical requirements, production costs can be kept down, to the ultimate advantage of the general public." (NIST Handbook, Appx. A, § 1.1.) If we were to adopt plaintiffs' suggested standard and hold that designers and manufacturers are bound to create and manufacture odometers that not only comply with the four percent tolerance, but also utilize the most accurate technology possible, we would be imposing on them the very sort of "special demand[]" that NIST cautions would result in increased costs inevitably passed on to the consumer. (Ibid.) While the NIST-recommended four percent tolerance would continue to apply in other jurisdictions, manufacturers would have to meet a different, stricter standard in California. The resulting inconsistency in the standards would undermine the very purpose of a nationwide standard tolerance.

Further, the particular tolerance of plus or minus four percent for odometers represents NIST's determination of the best compromise between consumer protection (precise measurement) and business reality (the need for uniformity and for consideration of cost and other business-related constraints). The Handbook explains that "errorless value or performance of mechanical equipment is unattainable. Tolerances are established, therefore, to fix the range of inaccuracy within which equipment will be officially approved for commercial use." (NIST Handbook, Appx. A, § 2.1.) "Tolerance values are so fixed that the permissible errors are sufficiently small that there is no serious injury to either the buyer or the seller of commodities, yet not so small as to make manufacturing or maintenance costs of equipment disproportionately high. Obviously, the manufacturer must know what tolerances his equipment is required to meet, so that he can manufacture economically. His equipment must be good enough to satisfy commercial needs, but should not be subject to such stringent tolerance values as to make it unreasonably costly, complicated, or delicate." (NIST Handbook, Appx. A, § 2.2.) In assigning a plus or minus four percent as the tolerance for odometers, NIST has already struck what it believes to be the necessary practical balance between precision and cost. NIST publishes an updated Handbook every year, and presumably can and will narrow the tolerance range in the event that technological advances are made such that greater precision is possible without significantly raising the design and manufacture costs.

As support for their contention that manufacturers and designers must design to a more stringent standard than the plus or minus four percent tolerance, plaintiffs rely on the interpretation of the NIST standard urged by the Department in the trial court, as well as several portions of the Handbook cited by the Department. Of course, we are not bound by the Department's interpretation. "An agency interpretation of the meaning and legal effect of a statute is entitled to consideration and respect by the courts; however . . . , the binding power of an agency's interpretation of a statute or regulation is contextual: Its power to persuade is both circumstantial and dependent on the presence or absence of factors that support the merit of the interpretation." (Yamaha Corp. of America v. State Bd. of Equalization (1998) 19 Cal.4th 1, 7.) "Courts must, in short, independently judge the text of the statute, taking into account and respecting the agency's interpretation of its meaning, of course, whether embodied in a formal rule or less formal representation. Where the meaning and legal effect of a statute is the issue, an agency's interpretation is one among several tools available to the ...


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