Opinion
NOT TO BE PUBLISHED
Super. Ct. No. 06CS00347.
BUTZ, J.
This is an appeal from a judgment denying a petition for a writ of administrative mandamus seeking to overturn a decision by the New Motor Vehicle Board (the Board). (Veh. Code, § 3000.) The Board rejected the protest claim of appellant Forty-Niner Sierra Resources, Inc., a Subaru dealer, and Richard E. Wilmshurst, its owner (collectively, Forty-Niner) that real party in interest and respondent Subaru of America, Inc. (Subaru) was not affording reasonable reimbursement for warranty work. The rejection was on the ground of res judicata, because the claim had been determined adversely to Forty-Niner in an earlier federal court judgment. The trial court agreed with the Board. Forty-Niner contends that the trial court erred in this conclusion. Finding no merit in the contention, we shall affirm the judgment.
FACTUAL AND PROCEDURAL BACKGROUND
In 1998 Forty-Niner filed an action in Calaveras County Superior Court against Subaru seeking damages for alleged underpayment of reimbursement for warranty service Forty-Niner had provided. The action was removed to the federal district court. In the action Forty-Niner claimed that it was entitled to receive the same reimbursement rate for parts that it used as the price it charges to retail customers for non-warranty repairs. Forty-Niner’s principal legal theory was that the retail rate was required by the Song-Beverly Consumer Warranty Act (Civ. Code, §§ 1790 et seq., 1793.5, subd. (b)). Forty-Niner also claimed that, failing to pay the retail rate was an unlawful business practice, under California’s unfair competition law (Bus. & Prof. Code, § 17200 et seq.).
Civil Code section 1793.5, subdivision(b) provides: “Every manufacturer making express warranties who does not provide service and repair facilities within this state pursuant to subdivision (a) of Section 1793.2 shall be liable as prescribed in this section . . . as follows: [¶] . . . [¶] (b) In the event of service and repair, in an amount equal to that which would be received by the retail seller for like service rendered to retail consumers who are not entitled to warranty protection, including actual and reasonable costs of the service and repair and the cost of transporting the goods, if such costs are incurred, plus a reasonable profit.”
Business and Professions Code section 17200 provides: “As used in this chapter, unfair competition shall mean and include any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising and any act prohibited by Chapter 1 (commencing with Section 17500) of Part 3 of Division 7 of the Business and Professions Code.”
During the litigation Subaru maintained that the action was premature, as the Board had primary jurisdiction, under Vehicle Code section 3065, with respect to any claim concerning warranty reimbursement. Forty-Niner consistently replied that exhaustion of any remedy under that statute was not required. Ultimately, in January of 2005, the district court granted summary judgment against Forty-Niner on the merits. The district court concluded that Civil Code section 1793.5, subdivision (b) has no application to the warranty repairs in issue because Subaru did provide service and repair facilities within this state. As to an unlawful business practice, the district court held that reimbursement at less than retail price was not unfair, within the meaning of Business and Professions Code section 17200, because the difference was attributable to a “‘good faith discount,’” within the meaning of Civil Code section 1793.2, subdivision (a)(1)(B), reasonably “related to the dealer’s reduced credit risk and [Subaru’s] general overhead cost factors.”
Vehicle Code section 3065, subdivision (a) provides: “Every franchisor shall properly fulfill every warranty agreement made by it and adequately and fairly compensate each of its franchisees for labor and parts used to fulfill that warranty when the franchisee has fulfilled warranty obligations of repair and servicing and shall file a copy of its warranty reimbursement schedule or formula with the board. The warranty reimbursement schedule or formula shall be reasonable with respect to the time and compensation allowed the franchisee for the warranty work and all other conditions of the obligation. The reasonableness of the warranty reimbursement schedule or formula shall be determined by the board if a franchisee files a notice of protest with the board.”
In September of 2005, Forty-Niner filed a notice of protest with the Board under Vehicle Code section 3065. Its principal contention was that Subaru failed to reimburse its dealers for parts used in warranty repairs at the same rate billed to retail customers for non-warranty repairs. The Board rejected the protest in a written decision, on the ground that Forty-Niner’s protest claim was barred by the judgment in the federal district court. The trial court denied the petition to set aside this decision on the ground that res judicata bars the protest claim.
The judgment in Forty-Niner Sierra Resources, Inc. v. Subaru of America, Inc. (2005) 416 F.Supp.2d 875 was then on appeal to the Ninth Circuit Court of Appeals but was settled and dismissed on March 17, 2006. “A federal judgment is as final in California courts as it would be in federal courts.” (Calhoun v. Franchise Tax Bd. (1978) 20 Cal.3d 881, 887; see Burdette v. Carrier Corp. (2008) 158 Cal.App.4th 1668, 1682.) The federal rule is that “‘a judgment or order, once rendered, is final for purposes of res judicata until reversed on appeal.’” (Calhoun, at p. 887.)
DISCUSSION
I. Claim Preclusion
Forty-Niner contends that the trial court erred in upholding the Board’s determination that the district court judgment barred the administrative protest claim, under Vehicle Code section 3065, that Subaru’s warranty reimbursement schedule or formula is unreasonable. Forty-Niner argues that res judicata: (1) does not apply because this is not “the same controversy” as that in the earlier case and (2) the doctrine should not apply because this case falls within an exception to res judicata because the public policy of Vehicle Code section 3065 is to allow a franchisee to have the Board to weigh the reasonableness of warranty reimbursement. The arguments are unpersuasive.
“Taken together the rules in the Restatement, Second, of Judgments are commonly referred to as the rules of res judicata.” (Rest.2d Judgments, Introduction, com. a, p. 1.) The res judicata doctrine addresses the preclusion effect of prior adjudication. It has two aspects: claim preclusion and issue preclusion. “The rule of claim preclusion . . . is that a party ordinarily may not assert a civil claim arising from a transaction with respect to which he has already prosecuted such a claim, whether or not the two claims wholly correspond to each other. The rule of issue preclusion, sometimes referred to as collateral estoppel, . . . is that a party ordinarily may not relitigate an issue that he fully and fairly litigated on a previous occasion.” (Id., p. 1, citations omitted.) “Court decisions and legal commentators often refer generally to ‘res judicata,’ without distinguishing between the two aspects.” (People v. Damon (1996) 51 Cal.App.4th 958, 968 (Damon).)
Where claim preclusion applies, it extinguishes all remedial rights pertaining to the transaction at issue in the earlier litigation. As described, Forty-Niner argues that preclusion should not apply because this is not “the same controversy”; i.e., in the earlier case it sought relief based on violation of Civil Code section 1793.5, while here its theory is unreasonable reimbursement under Vehicle Code section 3065. However, claim preclusion applies regardless of different evidence, grounds, theories of the case, or seeking remedies or forms of relief not demanded in the first action. (See Rest.2d Judgments, § 24, com. a, pp. 196-197.)
Forty-Niner submits that claim preclusion does not apply whenever remedies in a civil action are different from those in an administrative action, citing Damon, supra, 51 Cal.App.4th 958. However, the crux of Damon is that administrative decisions should not be given res judicata effect if the statutory scheme explicitly or implicitly shows a contrary intent. (Id. at p. 969.) Here the decision invoked in favor of preclusion is a judicial judgment and, as appears, there is no showing of an intent contrary to issue preclusion in the statutory scheme.
Section 24, subdivision (1) of the Restatement Second of Judgments at page 196, provides for claim preclusion as follows: “When a valid and final judgment rendered in an action extinguishes the plaintiff’s claim pursuant to the rules of merger or bar (see §§ 18, 19), the claim extinguished includes all rights of the plaintiff to remedies against the defendant with respect to all or any part of the transaction, or series of connected transactions, out of which the action arose.”
As Forty-Niner notes, there are exceptions to claim preclusion of an earlier judgment. (See generally Rest.2d Judgments, § 26, pp. 233-234.) The only such exception suggested by Forty-Niner’s argument is for permitting a second action where that is impelled by the policy of a statutory scheme. (Id., § 26, subd. (d), p. 234.) However, no persuasive reason appears to warrant this exception.
Section 26 of the Restatement Second of Judgments, in pertinent part, is as follows:
Vehicle Code section 3065 assigns to the Board the issue of reasonableness of warranty reimbursement by automobile manufacturers. Forty-Niner suggests that it should be permitted to pursue its claim because that would advance the policy that the issue of reasonableness should be resolved by the Board. However, the policy of the statute does not favor adjudication of the issue before the Board. It merely affords a remedy for a franchisee who claims the reimbursement scheme is unreasonable. Forty-Niner chose to forgo that remedy and to pursue litigation of a claim only for a remedy under Civil Code section 1793.5 and Business and Professions Code section 17200. In these circumstances, allowing successive litigation of the claim for inadequate reimbursement would only defeat the policies that the claim preclusion doctrine serves. Accordingly, we conclude that claim preclusion bars any claim for a remedy before the Board for all of the transactions at issue in the earlier federal litigation.
II. Issue Preclusion
While Forty-Niner is subject to claim preclusion, that preclusion only extends as far as the claim at issue. Forty-Niner submits that the trial court’s decision improperly prevents administrative review of Subaru’s warranty scheme under Vehicle Code section 3065, without a limit in time. Its major argument before the Board was that the federal judgment should not bar it from a determination of reasonableness of the warranty reimbursement for the year 2005, after the federal judgment. In light of this, we asked the parties to address the question whether Forty-Niner is bound by either claim preclusion or issue preclusion on the legal theory of violation of the reasonableness requirement of section 3065 with respect to warranty reimbursement transactions occurring after the earlier judgment.
The scope of a cause of action for purposes of the rule against splitting is transactional. (See Rest.2d Judgments, § 24, subd. (2), p. 196.) The claim includes all rights to remedies with respect to the transactions out of which the earlier action arose. (Ibid.) In this case, those transactions include any warranty reimbursements occurring before the entry of judgment in the federal litigation. However, “‘[c]laim,’ in the context of res judicata, has never been broader than the transaction to which it related.” (Id., § 24, com. a, p. 196.) Forty-Niner could not have tendered a claim for a remedy for inadequate reimbursement in warranty transactions that had not yet occurred.
Section 24, subdivision (2) of the Restatement Second of Judgments, at page 196, provides: “What factual grouping constitutes a ‘transaction,’ and what groupings constitute a ‘series,’ are to be determined pragmatically, giving weight to such considerations as whether the facts are related in time, space, origin, or motivation, whether they form a convenient trial unit, and whether their treatment as a unit conforms to the parties’ expectations or business understanding or usage.”
Preclusion with respect to such warranty transactions could only stem from issue preclusion. “When an issue of fact or law is actually litigated and determined by a valid and final judgment, and the determination is essential to the judgment, the determination is conclusive in a subsequent action between the parties, whether on the same or a different claim.” (Rest.2d Judgments, § 27, p. 250.) As related, in this case the earlier judgment involved two issues: (1) Was Subaru’s reimbursement insufficient because Civil Code section 1793.5, subdivision (b) requires warranty parts reimbursement at the same rate as paid by other retail customers? and (2) Was it insufficient because it was unfair under Business and Professions Code section 17200?
The first issue would not suffice; the central issue of law in this case is on another ground: Was Subaru’s reimbursement insufficient for violation of the requirement of Vehicle Code section 3065 that it be “reasonable with respect to . . . compensation”? The determination that Civil Code section 1793.5 does not apply to Subaru has no issue preclusion effect as to the section 3065 issue. (See Rest.2d Judgments, § 27, com. c, illus. 6, p. 254; see generally Burdette v. Carrier Corp., supra, 158 Cal.App.4th at pp. 1688-1689.)
Illustration 6 is as follows: “A brings an action against B to recover an installment payment due under a contract. B’s sole defense is that the contract is unenforceable under the statute of frauds. After trial, judgment is given for A, the court ruling that an oral contract of the kind sued upon is enforceable. In a subsequent action by A against B to recover a second installment falling due after the first action was brought, B is precluded from raising the statute of frauds as a defense, whether or not on the basis of arguments made in the prior action, but is not precluded from asserting as a defense that the installment is not owing as a matter of law on any other ground.” (Rest.2d Judgments, § 27, com. c., illus. 6, p. 254.)
However, as Subaru suggests, the second issue--Is reimbursement for parts below the retail rate unfair?--overlaps the issue Forty-Niner seeks to litigate before the Board: Is that lesser rate of compensation reasonable? The federal court decided that Subaru had made a good faith discount from the rates to be paid for warranty repair parts. The evidence showed the discount “‘related to the dealer’s reduced credit risk and [Subaru’s] general overhead cost factors arising from [Subaru’s] payment of warranty charges directly to its dealers.’” Forty-Niner did not allege that the rates set were not in good faith or unrelated to reduced credit risks or overhead costs. “‘[B]etween 1994 and 1997 [Forty-Niner] voluntarily sold parts to third parties at a gross profit margin nearly identical to that provided by [Subaru’s] reimbursements. Even if the mere existence of a discount could show bad faith, it does not in this case given [Forty-Niner’s] apparent willingness to accept the same gross profit margin from its own transactions.’”
“Determining the issue foreclosed by the prior judgment is one of the most difficult problems in applying the rule of issue preclusion. (Rest.2d Judgments, § 27, com. c, p. 252.) In making this determination, we consider several factors: ‘Is there a substantial overlap between the evidence or argument to be advanced in the second proceeding and that advanced in the first? Does the new evidence or argument involve application of the same rule of law as that involved in the prior proceeding? Could pretrial preparation and discovery relating to the matter presented in the first action reasonably be expected to have embraced the matter sought to be presented in the second? How closely related are the claims involved in the two proceedings?’ (Ibid.)” (Burdette v. Carrier Corp., supra, 158 Cal.App.4th at pp. 1688-1689.)
There is a substantial overlap between the evidence or argument that would be advanced in a Board proceeding to determine reasonableness of the warranty reimbursement rate and that advanced to show unfairness of the rate in the federal court proceeding. The “new” argument that the rate is unreasonable involves application of a rule of law very close, if not identical, to that involved in the prior proceeding. Pretrial preparation and discovery relating to the matter presented in the first action embraced the same matter that would be presented to the Board.
In view of this, the claims involved in the two proceedings are sufficiently close so that issue preclusion should apply. Forty-Niner is bound by claim preclusion or issue preclusion on the legal theory of violation of the reasonableness requirement of Vehicle Code section 3065 with respect to all warranty reimbursement transactions. The trial court did not err in upholding that determination by the Board.
DISPOSITION
The judgment is affirmed. Subaru shall recover its costs of this appeal. (Cal. Rules of Court, rule 8.278(a)(2).)
We concur: BLEASE, Acting P.J., CANTIL-SAKAUYE, J.
“(1) When any of the following circumstances exists, the general rule of [section] 24 does not apply to extinguish the claim, and part or all of the claim subsists as a possible basis for a second action by the plaintiff against the defendant:
“[¶] . . . [¶]
“(d) The judgment in the first action was plainly inconsistent with the fair and equitable implementation of a statutory or constitutional scheme, or it is the sense of the scheme that the plaintiff should be permitted to split his claim.” (Rest.2d Judgments, § 26, subd. (1)(d), pp. 233-234.)