How (not) to resolve a customer complaint

While Irish law does not permit class actions in the way that they operate in the US, a recent small claims court case in the US looks like it may create a potential headache for companies, particularly in relation to marketing and advertisement-related claims.

Ms Heather Peters bought a Honda Civic Hybrid but was unhappy with the fuel efficiency of the car. She was particularly dissatisfied with the mileage that she achieved compared with some of Honda’s (statutorily mandated) fuel economy claims. Even though hybrid vehicles are still in a phase of rapid development, that didn’t stop a class action lawsuit being filed against Honda in the US. Ms Peters, however, was unhappy with the compensation she would have received under the class action so she opted out of the lawsuit and elected to sue Honda in the Los Angeles small claims court instead. Thanks to a blizzard of national US (and even some international) media and online publicity, her case became headline news and the US$9,867.19 award she received from the court on 25 January now risks snowballing into a much bigger problem for Honda in America.

The specific danger for Honda is that the publicity that has attached to her case (you can read a good summary here and you can access the Los Angeles County court order here) will trigger a rash of copycat actions across the USA and perhaps even further afield. Those claims could cost far more than Honda will have paid to settle the previous class action. Who would have thought that class actions – in an internet age – might actually be good for defendant companies?

Here in Ireland, companies need to be mindful of complaints from unhappy customers which have the potential to morph into a bigger problem. Customer complaint departments need to have clear escalation procedures in place to allow involvement of in house counsel (if available) or senior management (who can involve company legal advisors if needs be). Staff need to be trained to evaluate the potential of an issue snowballing in significance. The Irish Small Claims Procedure offers a collaborative way to resolve disputes. If however a dispute has broader ramifications (eg in relation to a business process that has been applied to many transactions over a long period of time or a product which has sold in significant numbers), companies need to make sure that even apparently trivial matters in the lower courts (such as the Small Claims Court, the District Court or even the Circuit Court) are not allowed to set a harmful precedent for a spate of follow-on or copycat claims from other customers.

Honda America have said they plan to appeal the US court’s judgement (they probably have no other option at this stage but it’s difficult to see how they can ‘win’ decisively from their current position). It will be interesting to see how the matter progresses. One thing is clear however, the ease with which an adverse judgement can spread virally over the internet is changing some of the old dynamics in consumer litigation and disputes.