After Honda verdict, will consumers head to court?

Mon Feb 6, 2012 6:20pm EST

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(Reuters) - Heather Peters' win in a Los Angeles small claims court against Honda Motor Co has all the makings of a David vs. Goliath battle, but some experts are skeptical it will spur angry consumers nationwide to do what she did: abandon complaint lines, class-action suits and lawyers, and just go it alone through the legal system.

Peters won a $9,867 judgment against the automaker after she complained that her 2006 hybrid only got 30 miles to the gallon, not the 50 she said Honda led her to expect.

To file the suit, she opted out of a class action that included some 200,000 consumers and that is proposing a settlement that would amount to a fraction of her judgment amount.

"The wonderful news here is consumers can fight back. The headline is: 'Consumers win this round,'" says John Mattes, a San Diego-based consumer attorney who runs his own practice. "She opened the door for consumers all over the country. The consumer army marching into small claims court is a very powerful force."

Mattes says he'd love to see a message sent by consumers to companies -- and also to class-action lawyers who sometimes collect more than the class of people they're representing.

But not every consumer can sue every company they have a beef with. In the first place, many consumer contracts on everything from credit cards to cellular phone contracts to car rental agencies have clauses that require consumers to go to arbitration instead of filing lawsuits.

Other clauses require consumers to waive their right to participate in class-action suits. (These clauses are controversial and there has been some push-back. Last week the Financial Industry Regulatory Authority sued Charles Schwab Corp, accusing the online brokerage of adding a provision to account agreements that would preclude customers from starting or joining class actions against the company.)

As much as some would like to see Peters' maneuver become the foundation of a grassroots effort to upset often consumer unfriendly class-action settlements, those who deal with these cases are skeptical it will lead to a groundswell.

UPHILL BATTLE

Some reasons they cite are Peters' legal training (which most consumers don't have), the amount of time it can take to wage a court battle, the ability of the defense to appeal and a general discomfort with going to court.

Peters, who had let her attorney's license lapse, nevertheless is both trained in and has practiced law.

"Is a regular person really going to be able to tangle with Honda like that?" asks Robert Bodzin, a partner at the law firm of Burnham Brown in Oakland, California. "Most people without legal training are afraid of going into the courtroom on their own. That alone is going to stop a lot of people," says Karen Kahle, a product liability and class-action attorney with Steptoe & Johnson in West Virginia.

Furthermore, Peters just won the first round of a fight that could get big, expensive, ugly and protracted.

Appeals take time and move to a higher court, where hiring a lawyer might be necessary.

"The thing to remember, however, is that Honda is already promising to appeal and it may take years for this issue to be finally resolved," says James Pizzirusso, a partner in Hausfeld LLP's Washington, D.C. office.

However, Peters says that California small claims appeals, like the cases themselves, are governed by informal rules intended to bring about quick resolution of claims. The cases get one appeal that can be heard within weeks, she notes.

Short of duking it out one on one, however, there is another tack consumers can take that could have an impact. Some attorneys suggest that rather than piling into small claims court by following Peters' win, consumers might try to send a message by rejecting or objecting to the terms of a proposed settlement with the idea of forcing a more favorable settlement.

Instead of tuning out the emails or letters they get saying they're part of a class-action suit, Mattes tells consumers to read the proposed settlement.

"If you don't like the deal that they've struck, then consumers ought to say 'maybe I ought to go to small claims myself.'"

Some consumer attorneys, like Dina Micheletti of Fazio Micheletti in San Ramon, California, raise concerns that the Honda case is an "anomaly" that will discourage consumers from participating in valuable class-action suits. Most class-action cases don't warrant consumers to opt out, she says.

Micheletti says she is concerned consumers will see this case as a validation that small claims court could be a substitute for class-action lawsuits. "The reality is that 99 percent of the time that simply is not true."

SMALL CLAIMS BENEFITS

Beyond this case and others of its scope, consumer advocates still like the idea of small claims court. It remains a place where consumers can fight their fights without a lawyer. There are many reasons why it's a good place to bring your disputes.

The general rule of pursuing a case is be sure it's worth the effort and expense. Is the amount more than the filing fee? It can cost anything from $15 to more than $100 to pursue a case. The maximum payout can be $10,000 or as little as $2,500, depending on the state.

"Wading into the small claims process with a small company, somebody that does your driveway, the contractor that puts in your bathroom sink upside down -- those are times when it's well worth it to go to small claims," Bodzin says.

As for Peters, she is renewing her law license and says she'll support her fellow class members, who number about 200,000. The settlement proposes to pay out $100 to 200 per person, along with a voucher to get a discount on a new car ($500-$1,500, which can be sold) as well as an additional warranty.

She may do even better with her new celebrity status: She's now selling CDs of the evidence in her case for $15 and says she'll represent anyone who wants to opt out of the settlement for $50 a pop.

(The writer is a Reuters contributor. The opinions expressed are his own.; Reporting by Mitch Lipka; Editing by Linda Stern, Chelsea Emery, Dave Zimmerman and Steve Orlofsky)

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