A brochure for the Honda Civic Hybrid that Gaetano Paduano bought in June 2004 promised amazing fuel efficiency: an Environmental Protection Agency (EPA) estimate of up to 51 miles per gallon for the model with a manual transmission. "Just drive the Hybrid like you would a conventional car and save on fuel bills," the brochure read. That's what Paduano did--and for a year found himself back at the gas pump twice as often as he anticipated.
Paduano asked a dealership service employee what he could do to bring his fuel efficiency closer to the EPA estimates. The employee told him that compared to cars with conventional engines, hybrid efficiency is much more dependant on factors such as whether the windows are open or the air conditioner is on. The employee also said Paduano would have to significantly alter his driving habits--to the point that he would "create a driving hazard"--to near the EPA estimate. Feeling misled, Paduano tried to return the car, but Honda refused to buy it back.
Paduano sued Honda, alleging one federal and two state law causes of action for breach of warranty and two state law causes of action for deceptive advertising. The trial court granted Honda's motion for summary judgment on the grounds the federal Energy Policy and Conservation Act pre-empted all of Paduano's claims, while agreeing with the company's assertion that Paduano's allegations lacked substance.
On Jan. 12, the California Court of Appeal affirmed in a 2-1 decision the trial court's judgment on the warranty claims in Paduano v. American Honda Motor Company because there was nothing defective about the car. But the appeals court reversed the decision on the deceptive advertising claims, holding they are not pre-empted by federal law and allowing a trial to proceed on that claim.
The case exemplifies the complications a company can encounter over "greenwashing," or advertisements that exaggerate the environmental benefits of a product. It also adds fire to the discussion over the issue of federal pre-emption.
"Pre-emption is a very sexy, current topic," says Saul Perloff, who heads Fulbright & Jaworski's false advertising group. "If the doctrine of pre-emption is applied very broadly, many claims will simply go away, so it's hugely important--very important for manufacturers, very important for consumers and very important for the courts."
The brochure in question used fuel efficiency numbers Honda pulled from the vehicle's Monroney Sticker, a federally mandated label on all new cars that lists mileage ratings from EPA tests. The label says Civic Hybrid models with a continuously variable transmission, such as the one Paduano bought, can get 47 miles per gallon for city driving and 48 miles per gallon for highway driving. The manual transmission model, highlighted in the brochure Paduano read, has a highway rating of 51 mpg. The sticker qualifies the estimates with the statement, "ACTUAL MILEAGE will vary with options, driving conditions, driving habits and vehicle[']s condition."
Under the shield of the Monroney Sticker, Perloff says car companies can advertise the EPA numbers all they want, even if it's impossible to achieve the mileage by driving normally. But because Honda's brochure claimed you could get the mileage rating while driving the hybrid like a conventional car, the company went beyond the Monroney sticker's protection, the appeals court found. As a result, California's state false advertising laws pre-empted the federal mandate.
The appeals court cited True v. America Honda Motor Co., a 2007 class action suit that challenged Honda's advertising tactics for the Civic Hybrid. The class alleged Honda's ads weakened the sticker's disclaimer by saying fuel efficiency "may" vary rather than the more definitive statement on the sticker that mileage "will" vary.
"You could have a true statement, but it could be couched in such a way that reasonable consumers would look at it and feel they were being misled or deceived," says Brooks Beard, a partner at Morrison Foerster.
Paduano's lawyer, Michael Lindsey, says that's exactly what happened.
"Mr. Paduano, when he bought this thing, sincerely said, 'Oh great, I'm doing something green. I'm doing something economical. I'm doing something that will help the country reduce our dependency on foreign oil,'" he says. "He wound up totally at odds with his original purpose."
Honda's lawyer, Donald Falk, declined to comment.
Paduano's argument could run into several stumbling blocks at trial over factors Justice Terry O'Rourke highlighted in his dissent. In his initial complaint, Paduano focused on the EPA estimate as the crux of his discontent. Since federal law pre-empts any claims over EPA ratings, on appeal Paduano switched tactics by attacking the language in the brochure. O'Rourke wrote that the marketing statements were related closely enough to the EPA ratings that they should be protected by the same federal statute.
"What could happen is that those statements are removed and Honda would simply modify their marketing materials to say, 'Based upon the EPA standards and this federally mandated sticker, there's the potential to get this gas mileage,'" Beard says.
O'Rourke called the brochure "non-actionable puffery" and determined a reasonable person wouldn't purchase the Civic Hybrid based only on the statements in question.
With the burden of proof on Paduano, Perloff says the battle may be tough to win.
"He's going to have to show that brochure is something that a significant number of potential buyers would actually look at and rely on, and that it would fool them," he says.