Happy belated 2021. Spring has arrived and warmer temperatures are on the way, which puts us all in a better mood. Also, we have some great news to report from the West Virginia Legislature. Senate Bill 5 was passed March 18, 2021, and becomes effective June 19, 2021. The new piece of legislation offers long-sought-after protections for automobile dealers. The following provides a summary of this new section of laws.

1. Clarification of the calculation of attorney’s fees.

In consumer cases, the West Virginia Legislature clarified and expanded the factors that are considered when determining the amount of attorney’s fees and expenses that a consumer may be awarded. As you are aware, we have always faced the reality that the greatest exposure in our consumer cases lies from attorney’s fees and costs and not the amount of alleged consumer damages. Under common law, any success on settlement or judgment by a consumer could expose our dealers to significant and unrelated amounts of attorney fees and costs. There have been many times where we have faced a claim of a few thousand dollars but have attorneys seeking recovery in the tens of thousands of dollars. This type of exposure made it very difficult to defend and take to trial cases that had little merit or were highly questionable.

In setting forth a new statutory 12-factor test to consider under West Virginia Code § 46A-5-104, one of the most important additions is that the Court is now required to consider the “amount involved and the amount of the judgment.”

Consequently, moving forward, we will be able to now argue that the amount of the dispute or a small recovery shall be considered by the Court in determining the amount of fees and costs to award, if any, to a consumer attorney. There can now be substantive arguments of how much more an attorney should be allowed to receive than his client.

2. Expansion of the Right of Cure.

One of the significant changes in Senate Bill 5 was to allow an automobile dealer more time to gather information and respond to a settlement demand from the plaintiff before suit can be filed. Instead of having only 20 days under the existing law, we have been able to increase a motor vehicle dealer’s optional response time to 45 days. This statutory change to 45 days makes cure offers consistent for all retailers. Our previous statutes had only allowed 20 days for automobile dealers and 45 days for other creditors, debt collectors and lenders. We now find ourselves on equal ground with these other potential defendants.

As before, the statute of limitations is tolled during this 45 day period in order to give the parties a chance to resolve their disagreement. If any subsequent verdict is not greater than what was offered, then the consumer’s attorney fees and court costs are stopped as of the date of delivery of your cure offer. With this expanded time, more considered evaluation can occur, and a strategy developed with a cure offer.

3. Offers of Settlement have been given significant legal weight and importance.

Under Senate Bill 5, a brand-new section of West Virginia Code was created, which allows a dealer to make up to three offers of settlement up to 30 days before trial. This offer of settlement can then limit the recovery of attorney’s fees and expenses. In other words, these offers of settlement can work like our prior cure offer section. This is a significant change from prior law in which an offer of settlement had no impact on limiting attorney fees and costs and certainly no leverage as set forth below.

Under this new statutory section, the dealer must meet certain requirements with the settlement offer. The offer of settlement must be in writing, and state that it is being made pursuant to the applicable code section, identify the party or parties making the proposals and the party or parties to whom the proposal is made, identify the specific claim the proposal applies to, state whether or not attorney’s fees and expenses are being offered at the time and any other relevant conditions to the offer. It must be served with a certificate of service and by certified mail, postage prepaid or by overnight delivery. Remember these requirements when making these important offers of settlement.

The strength of this new offer of settlement section is that the plaintiff is not entitled to then recover attorney’s fees and expenses from the date of the offer if the final judgment is one of no liability or if the final judgment attained by the plaintiff is less than 75% of your offer.

These three offers of settlement can be made at any time after 30 days of the service of the Summons and Complaint up to 30 days before trial.

The importance of this offer of settlement is that it gives the dealer the opportunity to do some investigation or formal discovery even after a lawsuit is filed and then attempt to reasonably resolve the case. Pressure is then placed on the plaintiff’s counsel since they may not be able to recover fees and costs past that date. It will make both sides evaluate their cases more reasonably and accurately.

4. Defense Counsel now has the opportunity to recover attorney fees.

Perhaps the most significant addition of Senate Bill 5 was to allow for fee-shifting to occur in favor of an auto vehicle dealer. Specifically, if a judgment is obtained for less than 75% of a motor vehicle dealer’s offer of settlement, the defendant may petition the Court for reasonable fees and expenses incurred from the day of offer of settlement to the entry of judgment. The Court can award these reasonable fees and expenses if it finds the plaintiff acted without “substantial justification” or “without good faith” in rejecting the motor vehicle dealer’s offer. The language does not allow a consumer’s attorney to just rely upon some justification, but they must have substantial justification in order to prevent this award. Consequently, when a dealer has been reasonable and is able to prove that through the result at trial, they are now going to have the ability to seek recovery of the fees and costs incurred after the date of the offer of settlement.

Consequently, it certainly makes strategic sense that dealers should evaluate their claims as soon as possible, and if a cure offer is not made, to make an offer of settlement as soon as the 30 days after the service of the Summons and Complaint. This time frame would be around your Answer due date.

5. This law does not apply to manufacturers and lemon law cases.

These amendments and changes to West Virginia Code do not apply to the West Virginia lemon law statute, which is set forth at West Virginia Code §46A-6A-1 et seq. These limitations and new defense tools for the dealer are not available to the manufacturer. Consequently, there is more pressure upon manufacturers to resolve these lemon law claims, and perhaps more important, consumer attorneys will be encouraged to follow the lemon law statute and sue manufacturers only, without adding the dealer, the lender, the finance manager and the salesperson. Previously, the lemon law was clear and been interpreted by case law that it does not apply against the dealer but only against manufacturers. Unfortunately, dealers frequently get named in lemon law cases unnecessarily, along with lenders and other individuals. Hopefully, these changes will encourage these types of lawsuits to lessen against dealers, but only time will tell.

It has been great to start off the first Counselor’s Corner of 2021 with such good news on behalf of the automobile dealer industry. As you move forward, I hope you find these new statutory tools useful in defending questionable and frivolous claims. Should you have any questions, the Association and I stand ready to answer and to assist in these matters.