Pulliam v. HNL Automotive, Inc.

IN THE SUPREME COURT OF
CALIFORNIA

TANIA PULLIAM,
Plaintiff and Respondent,
v.
HNL AUTOMOTIVE INC. et al.,
Defendants and Appellants.

S267576

Second Appellate District, Division Five
B293435

Los Angeles County Superior Court
BC633169

May 26, 2022

Justice Liu authored the opinion of the Court, in which Chief
Justice Cantil-Sakauye and Justices Corrigan, Kruger,
Groban, Jenkins, and Robie* concurred.

*
Associate Justice of the Court of Appeal, Third Appellate
District, assigned by the Chief Justice pursuant to article VI,
section 6 of the California Constitution.
 PULLIAM v. HNL AUTOMOTIVE INC.
S267576

Opinion of the Court by Liu, J.

The Federal Trade Commission’s “Holder Rule” requires
consumer credit contracts to include specific language
permitting a consumer to assert against third party creditors all
claims and defenses that could be asserted against the seller of
a good or service. (16 C.F.R. § 433.2(a) (1975).) The required
notice further states that “recovery hereunder by the debtor
shall not exceed amounts paid by the debtor hereunder.” (Ibid.,
capitalization omitted here and hereafter.)
Tania Pulliam (Pulliam) purchased a used vehicle from
HNL Automotive Inc. (the dealership) pursuant to an
installment sales contract that included this notice. The
contract was subsequently assigned to TD Auto Finance (TDAF;
now merged into TD Bank), which became the “holder” of the
contract. (Pulliam v. HNL Automotive Inc. (2021) 60
Cal.App.5th 396, 402 (Pulliam).) Pulliam filed suit against the
dealership and TDAF alleging misconduct by the dealership in
the sale of the car. A jury found for Pulliam on one of her causes
of action — breach of the implied warranty of merchantability
under the Song-Beverly Consumer Warranty Act (Song-Beverly
Act; Civ. Code, § 1790 et seq.) — and awarded her $21,957.25 in
damages. Pulliam filed a posttrial motion seeking attorney’s
fees in the amount of $169,602 under the Song-Beverly Act. (See
Civ. Code, § 1794, subd. (d).) TDAF argued that it could not be
liable for attorney’s fees based on the provision of the Holder
Rule limiting recovery to the “amount[] paid by the debtor”

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Opinion of the Court by Liu, J.

under the contract. (16 C.F.R. § 433.2(a) (1975).) The trial court
disagreed and granted Pulliam’s motion. The Court of Appeal
affirmed. (Pulliam, at p. 401.)
We granted review to address whether “recovery” under
the Holder Rule (hereafter sometimes Rule) includes attorney’s
fees and limits the amount of fees plaintiffs can recover from
holders to amounts paid under the contract. The Courts of
Appeal are divided on this issue. (Compare Pulliam, supra, 60
Cal.App.5th at p. 401 [Holder Rule does not limit the attorney’s
fees a plaintiff may recover] with Lafferty v. Wells Fargo Bank,
N.A. (2018) 25 Cal.App.5th 398, 418–419 (Lafferty) [Holder
Rule’s limitation on recovery applies to attorney’s fees sought
under Civil Code § 1780 of the Consumers Legal Remedies Act
(CLRA)] and Spikener v. Ally Financial, Inc. (2020) 50
Cal.App.5th 151, 159–163 (Spikener) [Holder Rule’s limitation
on recovery applies to attorney’s fees sought under the CLRA or
Civil Code § 1459.5].)
We conclude that the Holder Rule does not limit the award
of attorney’s fees where, as here, a buyer seeks fees from a
holder under a state prevailing party statute. The Holder Rule’s
limitation extends only to “recovery hereunder.” This caps fees
only where a debtor asserts a claim for fees against a seller and
the claim is extended to lie against a holder by virtue of the
Holder Rule. Where state law provides for recovery of fees from
a holder, the Rule’s history and purpose as well as the Federal
Trade Commission’s repeated commentary make clear that
nothing in the Rule limits the application of that law.
I.
In July 2016, Pulliam bought a “Certified Pre-Owned”
2015 Nissan Altima from HNL Automotive Inc. pursuant to a

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Opinion of the Court by Liu, J.

retail sales contract that included the Holder Rule Notice
(Notice). The dealership advertised the car as having cruise
control and six-way power-adjustable seats. After buying the
car, Pulliam learned that it did not meet the requirements of the
Certified Pre-Owned program or have the advertised features
she needed due to a disability.
In September 2016, Pulliam filed suit against the
dealership and TDAF, which had accepted assignment of the
contract. She alleged six causes of action based on the
dealership’s misconduct, including violation of the CLRA,
breach of implied warranty under the Song-Beverly Act, fraud
and deceit, negligent misrepresentation, violation of Business
and Professions Code section 17200, and violation of Vehicle
Code section 11711.
Following trial in April 2018, a jury found that the
dealership failed to adequately package and label the car at
issue and that the vehicle failed to conform to the promises of
fact made on the label, in violation of the Song-Beverly Act. The
jury awarded Pulliam $21,957.25 in damages. The court
entered judgment in this amount jointly and severally against
the dealership and TDAF.
Pulliam filed a posttrial motion seeking $169,602 in
attorney’s fees against both defendants under Civil Code section
1794, subdivision (d), which permits a buyer who prevails in an
action under the Song-Beverly Act to recover attorney’s fees.
The dealership and TDAF raised several objections related to
the amount of fees. TDAF also argued that it could not be liable
for attorney’s fees based on the Holder Rule’s limitation on
holder liability to amounts paid under the contract. The trial
court rejected these arguments and granted Pulliam’s motion.

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Opinion of the Court by Liu, J.

The Court of Appeal affirmed the trial court’s award,
concluding that the Holder Rule does not limit liability for
attorney’s fees. (Pulliam, supra, 60 Cal.App.5th at p. 401.) We
granted review.
II.
The Federal Trade Commission (FTC) promulgated the
Holder Rule in 1975 in response to rapid growth in consumer
installment debt in the United States. (Promulgation of Trade
Regulation Rule and Statement of Basis and Purpose, 40
Fed.Reg. 53506–53507 (Nov. 18, 1975); Guidelines on Trade
Regulation Rule Concerning Preservation of Consumers’ Claims
and Defenses, 41 Fed.Reg. 20022 (May 14, 1976).) Before the
Holder Rule, a third party who purchased a consumer’s
promissory note did so “free and clear of any claim or grievance
that the consumer may have with respect to the seller.” (40
Fed.Reg. 53506.) This “holder in due course rule” meant a
creditor could seek payment from a buyer on goods never
delivered or not delivered as promised while remaining immune
from the buyer’s claims of fraud, misrepresentation, or breach of
contract or warranty against the seller.
The FTC recognized that the application of the holder in
due course rule to consumer credit sales was “anomalous”
because consumers are not “in an equivalent position [to
commercial entities] to vindicate their rights against a payee.”
(40 Fed.Reg., supra, at p. 53507.) “Between an innocent
consumer, whose dealings with an unreliable seller are, at most,
episodic, and a finance institution qualifying as ‘a holder in due
course,’ the financer is in a better position both to protect itself
and to assume the risk of a seller’s reliability.” (Id. at p. 53509.)
The FTC recognized that “[c]reditors and sellers are in a position

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Opinion of the Court by Liu, J.

to engage in meaningful, arms-length, bargaining,” which
differentiates them from buyers who sign adhesion contracts
with sellers. (Id. at p. 53523.) Allocating the costs of seller
misconduct to the creditor makes it much more likely that the
“market will be policed” of “unscrupulous merchant[s],” that the
market will reflect “a more accurate price for consumer goods,”
and that “all parties will benefit accordingly.” (Ibid.)
To effect this allocation, the Holder Rule requires that the
following Notice appear in consumer credit contracts “[i]n
connection with any sale or lease of goods or services to
consumers, in or affecting commerce”: “Any holder of this
consumer credit contract is subject to all claims and defenses
which the debtor could assert against the seller of goods or
services obtained pursuant hereto or with the proceeds hereof.
Recovery hereunder by the debtor shall not exceed amounts paid
by the debtor hereunder.” (16 C.F.R. § 433.2(a) (1975).) This
provision gives consumers the ability to “defend a creditor suit
for payment of an obligation by raising a valid claim against the
seller as a set-off” and to “maintain an affirmative action against
a creditor who has received payments for a return of monies paid
on account.” (40 Fed.Reg., supra, at p. 53524.)
In 2015, the FTC requested public comment on “the
overall costs and benefits, and regulatory and economic impact”
of the Holder Rule “as part of the agency’s regular review of all
its regulations and guides.” (Rules and Regulations Under the
Trade Regulation Rule Concerning Preservation of Consumers’
Claims and Defenses, 80 Fed.Reg. 75018 (Dec. 1, 2015).) In
2019, following completion of that review, the FTC “determined
to retain the Rule in its present form.” (Trade Regulation Rule
Concerning Preservation of Consumers’ Claims and Defenses,
84 Fed.Reg. 18711 (May 2, 2019) (Rule Confirmation).)

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Opinion of the Court by Liu, J.

In its Rule Confirmation, the FTC noted that it had
received six comments addressing “whether the Rule’s
limitation on recovery to ‘amounts paid by the debtor’ allows or
should allow consumers to recover attorneys’ fees above that
cap.” (84 Fed.Reg., supra, at p. 18713.) The FTC considered
these comments and concluded that “if a federal or state law
separately provides for recovery of attorneys’ fees independent
of claims or defenses arising from the seller’s misconduct,
nothing in the Rule limits such recovery. Conversely, if the
holder’s liability for fees is based on claims against the seller
that are preserved by the Holder Rule Notice, the payment that
the consumer may recover from the holder — including any
recovery based on attorneys’ fees — cannot exceed the amount
the consumer paid under the contract.” (Ibid.)
In January 2022, the FTC issued an advisory opinion to
address the Holder Rule’s “impact on consumers’ ability to
recover costs and attorneys’ fees.” (FTC, Commission Statement
on the Holder Rule and Attorneys’ Fees and Costs (Jan. 18,
2022) p. 1 (FTC Advisory Opinion).) The opinion observed that
the issue “has arisen repeatedly in court cases, with some courts
correctly concluding that the Holder Rule does not limit recovery
of attorneys’ fees and costs when state law authorizes awards
against a holder, and others misinterpreting the Holder Rule as
a limitation on the application of state cost-shifting laws to
holders.” (Ibid., fn. omitted.)
III.
Several recent Court of Appeal decisions have considered
an award of attorney’s fees in the context of a claim against a
seller under the Holder Rule.

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In Lafferty, the Laffertys sued the seller of a motor home
and Wells Fargo, which had accepted assignment of their
installment sales contract. (Lafferty, supra, 25 Cal.App.5th at
p. 405.) The parties entered into a stipulated judgment
awarding recovery to the Laffertys based on negligence and
violation of the CLRA in the amount of $68,000, the “total
amount Plaintiffs actually paid toward (or under) their
installment contract for the purchase of [the] motorhome.” (Id.
at p. 407.) The Laffertys then moved for an award of attorney’s
fees and costs. Wells Fargo opposed the motion as exceeding the
Holder Rule’s cap on recovery. The trial court awarded the
Laffertys costs but denied their request for fees. (Id. at pp. 407–
408.) The Court of Appeal affirmed, holding that costs awarded
to the Laffertys under Code of Civil Procedure section 1032,
subdivision (b), “as the prevailing party in this action rather
than as part of the recovery secured through the cause of action
provided by the Holder Rule,” were “not curtailed by the Holder
Rule.” (Lafferty, at p. 415.) Similarly, it concluded that the
Laffertys were entitled to prejudgment interest because “Civil
Code section 3287 applies to every person entitled to recover
damages — without reference to the underlying cause(s) of
action for which damages are awarded.” (Lafferty, at p. 416.)
But it held that attorney’s fees sought under the fee-shifting
provision of the CLRA were limited by the Holder Rule’s cap
because the cause of action under the CLRA was originally
alleged against the seller and “applied to Wells Fargo only under
the Holder Rule.” (Id. at p. 419; id. at p. 414.)
In response to Lafferty, the Legislature enacted Civil Code
section 1459.5, which provides: “A plaintiff who prevails on a
cause of action against a defendant named pursuant to Part 433
of Title 16 of the Code of Federal Regulations or any successor

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thereto, or pursuant to the contractual language required by
that part or any successor thereto, may claim attorney’s fees,
costs, and expenses from that defendant to the fullest extent
permissible if the plaintiff had prevailed on that cause of action
against the seller.” (All undesignated statutory references are
to the Civil Code.) The bill aimed to “legislatively correct
Lafferty by restoring the courts’ previous interpretation of the
Holder Rule, thereby ensuring fairness and legal recourse to
defrauded consumers.” (Assem. Com. on Judiciary, Analysis of
Assem. Bill No. 1821 (2019–2020 Reg. Sess.) as introduced Mar.
6, 2019, p. 1.)
In Spikener, the court considered whether a buyer who
prevailed on a CLRA cause of action against a holder could
subsequently recover attorney’s fees based on section 1459.5.
(Spikener, supra, 50 Cal.App.5th 151.) It assumed that the
Holder Rule was ambiguous and determined that the FTC’s
interpretation in its Rule Confirmation was entitled to
deference. (Id. at p. 159.) The court considered the FTC to have
construed the Holder Rule as “limit[ing] a plaintiff’s total
recovery, including attorney fees, on a claim asserted pursuant
to the Holder Rule to the amount the plaintiff paid under the
contract, regardless of whether the state claim being asserted
pursuant to the Holder Rule contains fee-shifting provisions.”
(Id. at p. 162.) The court found that “[t]his demonstrates a clear
intent to prohibit states from authorizing a recovery that
exceeds this amount on a Holder Rule claim” and concluded that
“to the extent section 1459.5 authorizes a plaintiff’s total
recovery — including attorney fees — for a Holder Rule claim to
exceed the amount the plaintiff paid under the contract, it
directly conflicts with the Holder Rule and is therefore
preempted.” (Id. at pp. 162–163.)

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In the case before us, the Court of Appeal disagreed with
Lafferty’s conclusion that the Holder Rule’s limitation on
recovery applies to attorney’s fees. (Pulliam, supra, 60
Cal.App.5th at pp. 412–416.) It also disagreed with Spikener’s
conclusion that the FTC’s Rule Confirmation was entitled to
deference. (Pulliam, at pp. 416–422.) Because it concluded that
“the Holder Rule cap does not include attorney fees within its
limit on recovery and that the FTC’s interpretation to the
contrary is not entitled to deference,” it found the Holder Rule
consistent with section 1459.5 and did “not address whether
section 1459.5 independently applies.” (Pulliam, at p. 422.)
IV.
The parties’ dispute before us centers on two main
arguments. First, TDAF argues that the Holder Rule, by
capping “recovery” to “amounts paid by the debtor,” limits a
plaintiff’s ability to recover attorney’s fees based on the Rule’s
plain language. Pulliam maintains, as did the Court of Appeal,
that “recovery” under the Rule does not include attorney’s fees
and relies on the regulatory history and purpose of the Rule.
Second, TDAF argues that if the meaning of the Rule is
ambiguous, the FTC’s interpretation in its Rule Confirmation is
entitled to deference and precludes recovery of attorney’s fees.
Pulliam contends that under Kisor v. Wilkie (2019) 588 U.S. __
[139 S.Ct. 2400] (Kisor), the FTC’s interpretation does not
warrant deference.
We must exhaust “all the standard tools of interpretation”
to determine if a regulation is “genuinely ambiguous” before
considering deference to an agency’s own interpretation of its
regulation. (Kisor, supra, 588 U.S. at p. __ [139 S.Ct. at
p. 2414].) As explained below, we find that the most persuasive

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reading of the Rule, in light of its history and purpose, is that its
cap on “recovery hereunder” does not include attorney’s fees for
which a holder may be liable under state law, as long as the
existence of such liability is not due to the Holder Rule
extending the seller’s liability for attorney’s fees to the holder.
And we need not decide whether the FTC’s interpretation in the
Rule Confirmation is entitled to deference because the FTC’s
statements on the topic are consistent with our interpretation.
A.
We begin with the text of the Holder Rule. “ ‘ “We
interpret relevant terms in light of their ordinary meaning,
while also taking account of any related provisions and the
overall structure of the statutory scheme to determine what
interpretation best advances the Legislature’s underlying
purpose.” ’ [Citation.] ‘If we find the statutory language
ambiguous or subject to more than one interpretation, we may
look to extrinsic aids, including legislative history or purpose to
inform our views.’ ” (In re A.N. (2020) 9 Cal.5th 343, 351–352.)
We “ ‘must construe [remedial provisions] broadly,
not . . . restrictively’ ” (Kelly v. Methodist Hospital of So.
California (2000) 22 Cal.4th 1108, 1114), “ ‘so as to afford all the
relief’ that their ‘language . . . indicates . . . the Legislature
intended to grant’ ” (Skidgel v. California Unemployment Ins.
Appeals Bd. (2021) 12 Cal.5th 1, 23). (See Kisor, supra, 588 U.S.
at p. __ [139 S.Ct. at p. 2415] [courts interpreting agency
regulations take the “ ‘traditional’ ” approach of “ ‘carefully
consider[ing]’ the [regulation’s] text, structure, history, and
purpose”].)
The Notice required by the Rule provides: “Any holder of
this consumer credit contract is subject to all claims and

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Opinion of the Court by Liu, J.

defenses which the debtor could assert against the seller of
goods or services obtained pursuant hereto or with the proceeds
hereof. Recovery hereunder by the debtor shall not exceed
amounts paid by the debtor hereunder.” (16 C.F.R. § 433.2(a)
(1975).) The question is under what circumstances, if any,
“recovery hereunder by the debtor” includes attorney’s fees
sought by a debtor from a holder.
In ordinary parlance, the phrase “recovery hereunder by
the debtor” might be interpreted to limit a consumer’s recovery
for compensatory or consequential damages, i.e., the amount the
debtor ultimately receives. (See 40 Fed.Reg., supra, at p. 53526
[“While the wording of the notice is legalistic, we believe that it
will be understood by most consumers.”].) Attorney’s fees would
not be considered part of a consumer’s recovery because any fees
collected end up not with the consumer but with the consumer’s
attorney. This interpretation has particular salience in the
consumer fraud context where contingency fees are
commonplace. When plaintiffs represented under contingency
arrangements recover attorney’s fees based on fee-shifting
provisions, they are not recouping an amount they have already
paid to their attorneys; instead, they are being awarded fees
that “belong to the attorneys who labored to earn them.”
(Flannery v. Prentice (2001) 26 Cal.4th 572, 575.)
At the same time, “recovery hereunder by the debtor”
could mean any money a debtor receives, even if the money does
not come to rest with the debtor. TDAF contends that
“[c]ommon usage by courts and in statutes confirms that
‘recovery’ means all ‘recoverable litigation costs,’ and that
‘recoverable litigation costs do include attorney fees.’ ” (Quoting
Santisas v. Goodin (1998) 17 Cal.4th 599, 606.) The Court of
Appeal in Lafferty similarly relied on the fact that “[c]ourts have

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used the term ‘recovery’ to include attorney fees and interest
awarded as part of a judgment.” (Lafferty, supra, 25
Cal.App.5th at p. 412.) But we do not find instructive the use of
the term “recovery” by courts in contexts where the meaning of
the term was not at issue.
TDAF also relies on the current version of Black’s Law
Dictionary in arguing that the Notice’s language is
unambiguous in limiting recovery of attorney’s fees to amounts
paid under the contract. Black’s Law Dictionary defines
“recovery” as: “1. The regaining or restoration of something lost
or taken away. . . . 2. The obtainment of a right to something
(esp. damages) by a judgment or decree. . . . 4. An amount
awarded in or collected from a judgment or decree.” (Black’s
Law Dict. (11th ed. 2019) p. 1528.) Westlake Services, LLC
(Westlake), appearing as amicus curiae, argues that the version
of Black’s Law Dictionary contemporaneous to promulgation of
the Rule should be used. At that time, recovery was defined as:
“In its most extensive sense, the restoration or vindication of a
right existing in a person, by the formal judgment or decree of a
competent court, at his instance and suit, or the obtaining, by
such judgment, of some right or property which has been taken
or withheld from him.” (Black’s Law Dict. (4th rev. ed. 1968)
p. 1440.)
Neither of these definitions conclusively answers our
inquiry. Attorney’s fees are more naturally characterized as
something earned or awarded after a party prevails in an action
than as a right or property “which has been taken or withheld.”
(Black’s Law Dict. (4th rev. ed. 1968) p. 1440.) Moreover, the
meaning of “recovery” in the context of the Holder Rule must be
considered in light of the words that surround it. The question
is whether the Holder Rule’s limitation on “recovery hereunder

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by the debtor” applies to the circumstances here. (16 C.F.R.
§ 433.2(a) (1975).) The fact that attorney’s fees may be a type of
“recovery” in some contexts because they are “collected” or
“obtain[ed]” by a judgment (see Black’s Law Dict. (11th ed. 2019)
p. 1528) does not necessarily mean that such fees constitute
“recovery . . . by the debtor” or “recovery hereunder” within the
meaning of the Holder Rule (16 C.F.R. § 433.2(a) (1975), italics
added). The Rule subjects a creditor “to all claims and defenses
which the debtor could assert against the seller” and limits
“recovery hereunder by the debtor” to “amounts paid by the
debtor” on the contract. (Ibid., italics added.) Even if “recovery”
included attorney’s fees, the language of the Rule does not reveal
whether its cap applies to fees sought directly against a holder
under a state law.
Finally, TDAF argues that the meaning of the Rule is
unambiguous because the Rule “limits a consumer’s ‘recovery,’
. . . not by kind, but by amount.” In TDAF’s view, limiting
“recovery” to “amounts paid by the debtor hereunder” confirms
the “broad sweep” of the word “recovery.” But the limitation on
recovery to amounts paid by the debtor under the contract is
readily understood to support the opposite conclusion —
namely, that the FTC had damages rather than attorney’s fees
in mind. After all, the quantity of attorney’s fees sought after
judgment bears little relationship to the amount of the cap,
while the “amounts paid by the debtor” under the contract may
often be exactly the quantity sought in damages. (See, e.g., 40
Fed.Reg., supra, at p. 53527 [“In a case of nondelivery, total
failure of performance, or the like, we believe that the consumer
is entitled to a refund of monies paid on account.”].)

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B.
Because the language of the Rule is ambiguous with
regard to the issue before us, we turn to extrinsic sources. (See,
e.g., Gardebring v. Jenkins (1988) 485 U.S. 415, 428, fn. 14
[examining regulation’s adoption history].) We look first to
materials shedding light on the Rule’s history and purpose
before considering the agency’s own interpretation of the Rule
in its 2019 and 2022 statements. (Kisor, supra, 588 U.S. at p. __
[139 S.Ct. at p. 2415].)
In examining the history of the Holder Rule, we observe
that attorney’s fees are absent from the FTC’s discussions of
what constitutes recovery under the Rule until its 2019 Rule
Confirmation. The regulatory materials issued prior to the Rule
Confirmation do not refer to attorney’s fees. Instead, they
suggest that the FTC had damages in mind when it referred to
“recovery” in the Holder Rule Notice. In its Statement of Basis
and Purpose, the FTC referred to the recovery of consumers’
damages when discussing why affirmative suits by consumers
against sellers were an inadequate remedy for seller
misconduct. (40 Fed.Reg., supra, at pp. 53511–53512 [“The
amount of a consumer’s damages in such a case may be
substantial in real terms, . . . but such damages are rarely
enough to attract competent representation.”].) And in
surveying the record, the FTC was troubled by the “magnitude
or extent of consumer injury from forfeited claims and defenses
in credit sale transactions.” (Id. at p. 53510.) When discussing
the affirmative actions against creditors that would be available
under the Holder Rule, the FTC referred repeatedly to a return
of monies paid on account. (See id. at p. 53524 [“[A] consumer
can . . . maintain an affirmative action against a creditor who
has received payments for a return of monies paid on account.”];

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id. at p. 53527 [“In a case of nondelivery, total failure of
performance, or the like, we believe that the consumer is
entitled to a refund of monies paid on account.”].)
Guidance issued by the FTC on the day the Rule went into
effect suggests that “consequential damages and the like” are
considered “recovery” under the Holder Rule and available up to
the “amount[] paid by the debtor” under the contract. (41
Fed.Reg., supra, at p. 20023.) While the guidance notes that it
has “not been formally reviewed or adopted by the Commission”
(id. at p. 20022), the FTC later highlighted its statements
without disagreement in its 2019 Rule Confirmation. (84
Fed.Reg., supra, at p. 18713, fn. 30; see Kisor, supra, 588 U.S.
at p. __ [139 S.Ct. at p. 2416] [published staff guidance can be
an appropriate source of insight], citing Ford Motor Credit Co.
v. Milhollin (1980) 444 U.S. 555, 566, fn. 9, 567, fn. 10.) The
guidance said: “[T]he consumer may assert, by way of claim or
defense, a right not to pay all or part of the outstanding balance
owed the creditor under the contract; but the consumer will not
be entitled to receive from the creditor an affirmative recovery
which exceeds the amounts of money the consumer has paid in.
[¶] Thus, if a seller’s conduct gives rise to damages in an amount
exceeding the amounts paid under the contract, the consumer
may (1) sue to liquidate the unpaid balance owed to the creditor
and to recover the amounts paid under the contract and/or (2)
defend in a creditor action to collect the unpaid balance. The
consumer may not assert [against] the creditor any rights he
might have against the seller for additional consequential
damages and the like.” (41 Fed.Reg., supra, at p. 20023, italics
added.) “[C]onsequential damages and the like” that exceed the
amounts of money the consumer has paid in would not be
recoverable based solely on the Holder Rule. (Ibid.)

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During congressional testimony shortly after the Rule’s
passage, the acting director of the FTC’s Bureau of Consumer
Protection similarly described the “one express cautionary
limitation on a creditor’s exposure[:] The consumer may never
recover consequential damages under the provision which
exceed the amount of the credit contract.” (Consumer Claims
and Defenses, Hearings before House Com. on Interstate and
Foreign Commerce, Subcom. on Consumer Protection and
Finance, 94th Cong., 2d Sess., at p. 23 (1976).) “The consumer,
in all cases, is limited to the exact amount of legal damages.
Only when a consumer’s legal damages exceed the amounts he
still owes a creditor under the contract will the consumer be in
a position to seek a return of all or part of the monies he has
already paid.” (Ibid.)
Amici curiae in support of TDAF argue that the FTC’s
repeated references to damages in its Statement of Basis and
Purpose demonstrate that “if the FTC had intended to limit only
damage awards it would have rewritten the Rule’s second
sentence thus: ‘Recovery of damages hereunder by the debtor
shall not exceed amounts paid by the debtor hereunder.’ ”
(Italics added.) Amici curiae argue that the FTC “deliberately
began the Holder Rule’s second sentence with a different word
having a broader meaning.” But they cite nothing in the
regulatory history of the Rule that would lead us to so conclude;
there is no discussion of recovery of costs, attorney’s fees, or
anything but damages. Had the FTC intended its Rule to sweep
so broadly, we would expect to see some discussion of other types
of awards, not just damages.
In sum, the FTC had damages in mind when limiting
recovery under the Rule, and there is no indication that
attorney’s fees were intended to be included within its scope.

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The FTC was aware of the diversity among states when it came
to consumer protection and other laws. (See, e.g., 40 Fed.Reg.,
supra, at pp. 53510, 53512, 53520–53521.) In California,
“attorney’s fees qua attorney’s fees” — that is, the fees
“attributable to the bringing of the . . . action itself” — are not
an element of damages. (Brandt v. Superior Court (1985) 37
Cal.3d 813, 818, 817.) Instead, they are defined as “costs.”
(Code Civ. Proc., § 1033.5, subd. (a)(10).) And, except as
otherwise expressly provided by statute, a prevailing party in
California “is entitled as a matter of right to recover costs in any
action or proceeding.” (Id., § 1032, subd. (b).) California’s costs
statute further specifies attorney’s fees are allowable as costs
when authorized by contract, statute, or law. (Id., § 1033.5,
subd. (a)(10).) The Song-Beverly Act is one such statute. Under
Civil Code section 1794, subdivision (b), buyers of consumer
goods may seek “damages . . . includ[ing] the rights of
replacement or reimbursement.” Subdivision (d) separately
provides that buyers may, “as part of the judgment,” recover
“costs and expenses, including attorney’s fees.” The regulatory
history provides no reason to think the FTC intended to alter
this state-specific statutory framework.
C.
The Holder Rule’s regulatory history also demonstrates
the FTC’s expectation that buyers would be able to assert
defenses against creditor claims based on the Holder Rule as
well as pursue affirmative litigation against creditors for seller
misconduct, which would be financially infeasible for many
buyers if attorney’s fees were not recoverable.
The Holder Rule was designed to abrogate “[t]he
insulation obtained by creditors in consumer transactions” and

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Opinion of the Court by Liu, J.

to address “the loss of legitimate consumer claims” by the
application of the holder in due course doctrine. (40 Fed.Reg.,
supra, at pp. 53509–53510.) The FTC’s “primary concern” in
promulgating the Rule was “the distribution or allocation of
costs occasioned by seller misconduct in credit sale
transactions.” (Id. at p. 53522.) Rather than allocate these costs
to the consumer, as the holder in due course rule had done, the
new rule recognized that “the creditor is always in a better
position than the buyer to return seller misconduct costs to
sellers, the guilty party,” and was designed to “compel[]
creditors to either absorb seller misconduct costs or return them
to sellers.” (Id. at p. 53523.)
The FTC recognized that “the problems associated with
the holder in due course doctrine are most keenly felt by the poor
in our society . . . .” (40 Fed.Reg., supra, at p. 53510.) It
considered the challenges, including high legal costs, for
consumers associated with bringing suits against sellers as an
impetus to adopting the new rule: “[A]ggrieved consumers are
often not in a position to take advantage of the legal system.
Where seller misconduct in a credit sale transaction has given
rise to consumer injury, the consumer is theoretically in a
position to seek damages or other relief from the seller in
court. . . . The amount of a consumer’s damages in such a case
may be substantial in real terms . . . but such damages are rarely
enough to attract competent representation. The sheer costs of
recourse to the legal system to vindicate a small claim, together
with the days of work that must be missed in order to prosecute
such a claim to judgment, render recourse to the legal system
uneconomic. In addition, the worst sellers are likely to be the
most volatile entities where market tenure is concerned. They
prove difficult to locate and serve, and the marginal liquidity

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which characterizes their operations makes collection of a
judgment difficult or impossible even if they are successfully
served. Bankruptcy or insolvency becomes a final barrier to
recovery.” (Id. at pp. 53511–53512, italics added; see also id. at
p. 53521 [“Judicial relief requires more time and money than
most consumers can afford . . . .”].)
The FTC recognized similar costs associated with
defending against a creditor’s suit for payment under the old
rule: When responding to a creditor’s assertion of “ ‘holder in
due course status,’ ” a consumer’s “success depends on obtaining
skilled counsel; and heavy expenses must be incurred to obtain
the discovery and documentation needed to show concerted
efforts on the part of the seller and creditor.” (40 Fed.Reg.,
supra, at p. 53512.) The FTC highlighted a comment by a
private attorney describing the experience of one Northern
Virginia family that was “unable to provide themselves with
counsel” in defending against a claim by a creditor because of
the legal costs “necessary to establish a link between the lender,
the financier and the seller of the goods. Most attorneys,
especially in a case of this kind where ‘new ground is being
plowed[,]’ require a sizeable deposit for costs . . . . Additionally,
[] the total attorney’s fee in a matter such as this may be well
over $500.00. When faced with this set of realistic facts most
clients who get into such a situation in the first place are unable
to provide themselves with protection in the form of adequate
counsel.” (Ibid.)
Based in part on these challenges, the FTC determined
that a creditor “is always in a better position than the buyer to
return seller misconduct costs to sellers . . . because (1) he
engages in many transactions where consumers deal
infrequently; (2) he has access to a variety of information

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systems which are unavailable to consumers; (3) he has recourse
to contractual devices which render the routine return of seller
misconduct costs to sellers relatively cheap and automatic; and
(4) the creditor possesses the means to initiate a lawsuit and
prosecute it to judgment where recourse to the legal system is
necessary.” (40 Fed.Reg., supra, at p. 53523, italics added.)
The Holder Rule reallocates seller misconduct costs by
placing the creditor “in the shoes of the seller,” subjecting the
creditor “to all claims and defenses which the debtor could assert
against the seller.” (41 Fed.Reg., supra, at p. 20023, italics
added, capitalization omitted.) Thus, the FTC provided two
ways for buyers to effect this reallocation: by “defend[ing] a
creditor suit for payment of an obligation by raising a valid claim
against the seller as a set-off” or by “maintain[ing] an
affirmative action against a creditor who has received payments
for a return of monies paid on account.” (40 Fed.Reg., supra, at
p. 53524.) The FTC expressly rejected requests to limit the rule
to provide a consumer the ability to assert his rights “only as a
matter of defense or setoff against a claim by the assignee or
holder.” (Id. at p. 53526.) It envisioned affirmative suits
against creditors over seller misconduct as one of the ways that
creditors would be forced to internalize the costs of seller
misconduct and would thus be incentivized to police the market
for “unscrupulous merchant[s].” (Id. at p. 53523.) It anticipated
that “[a]s legal services offices, consumer groups, and individual
consumers test the rule by periodic lawsuits against creditors
and sellers, . . . the rule will enjoy increasing knowledge and use
on the part of all consumers.” (Id. at p. 53526.)
The Holder Rule therefore took shape with the FTC
contemplating affirmative suits while expressly recognizing
that the cost of suit in a case involving consumer damages may

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“render recourse to the legal system uneconomic.” (40 Fed.Reg.,
supra, at p. 53512.) It nonetheless expected affirmative claims
against sellers and creditors — not just defenses to debt
collection — to help allocate risks and rationalize the market.
Given these expectations, it seems unlikely that the FTC
intended without comment or explanation to include attorney’s
fees in its limitation on creditor liability under the Rule. A
consumer’s ability to obtain attorney’s fees often proves critical
for consumers to access the judicial system. It is true that by
obviating the need for lengthy legal proceedings over a creditor’s
status, the Rule might decrease the legal costs consumers must
incur. But it is unlikely that this would materially alter many
consumers’ ability to vindicate their rights given the high costs
that remain “to vindicate a small claim.” (40 Fed.Reg., supra, at
p. 53512; see, e.g., Assem. Com. on Judiciary, Analysis of Assem.
Bill No. 1821 (2019–2020 Reg. Sess.) as introduced Mar. 6, 2019,
p. 6 [“The vast majority of customers who pay for items such as
cars and furniture in monthly installments can’t afford to hire
attorneys.”].) Were attorney’s fees part of the Holder Rule’s
limit on recovery, the effective result for many, if not most,
consumers would be the same as their options were under the
holder in due course rule that the FTC sought to supplant.
TDAF argues that if attorney’s fees were “so central to the
Holder Rule’s success,” the Rule’s text or guidance would have
“expressly remove[d] attorney’s fees from the Rule’s use of the
otherwise broad term ‘recovery.’ ” But the history of the Rule
leaves us no reason to believe that the FTC thought it was
addressing attorney’s fees at all by reference to “recovery.” To
the contrary, given the FTC’s discussion of the legal costs facing
consumers, one would expect the FTC to have expressly stated

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a limitation on collection of attorney’s fees if that is what it had
intended the Rule to encompass.
TDAF also argues that recovery of uncapped attorney’s
fees would be contrary to the Rule’s express constraint on
liability and its consumer protection purposes because it could
jeopardize the availability of consumer financing. The FTC was
aware of creditors’ concerns at the time of promulgating the
rule. (40 Fed.Reg., supra, at pp. 53517–53518.) Nonetheless, it
rejected proposals to include an absolute upper limit on the
amount a consumer could recover, considering such a cap
unnecessary to protect the market for consumer debt. (Id. at
p. 53527.) While the FTC considered creditors’ concerns about
exposure, it ultimately chose to provide consumers with
recovery up to amounts paid on the contract, irrespective of the
size of the contract, to better reallocate the costs of seller
misconduct. (Ibid.) The FTC was not as single-mindedly
concerned with creditors’ bottom lines as TDAF suggests.
D.
In any event, the history of the Holder Rule indicates that
the FTC intended the Rule to serve as a national floor, not to
restrict the application of state laws authorizing additional
awards of damages or attorney’s fees against a seller or holder.
(See FTC, FTC Finds Broad Compliance Among Auto Dealers
with Rule That Protects Consumers with Car Loans (May 16,
2011) [“Without the Rule, consumers would not have this
protection in states that preclude them from asserting against
lenders the claims and defenses they have against dealers if the

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Opinion of the Court by Liu, J.

lenders bought the credit contracts in good faith and without
knowledge of these claims and defenses.”].)
In promulgating the Rule, the FTC detailed the patchwork
of state laws in existence and anticipated further state action.
(40 Fed.Reg., supra, at p. 53521.) Around the time the FTC was
considering the Holder Rule, Congress created the National
Commission on Consumer Finance (NCCF) “to study and make
recommendations on the need for further regulation of the
consumer finance industry.” (Pub.L. No. 90-321 (May 29, 1968)
82 Stat. 146.) In the FTC’s initial proceedings, it declined to
“withhold action until the report of the [NCCF] was completed
and published.” (40 Fed.Reg., supra, at p. 53521.) In
promulgating the Rule, the FTC again declined to wait until “the
individual states [] have an opportunity to enact the NCCF
recommendations.” (Ibid.) Importantly, the NCCF not only
“recommended abolition of the holder in due course doctrine,” as
the FTC sought to accomplish with the Holder Rule, but also
“urged restrictions on remedies such as garnishment,
repossession, and wage assignment,” and “recommended
abolition of . . . confessions of judgment[] and harassing tactics
in debt collections.” (NCCF, Consumer Credit in the United
States (Dec. 31, 1972) p. iii.) The FTC clearly anticipated that
states implementing NCCF recommendations could and would
take actions more protective than the Holder Rule.
In promulgating the Rule, the FTC also addressed the
argument that “state action has made Commission action
unnecessary.” (40 Fed.Reg., supra, at p. 53521.) To this, the
FTC responded that “only a few [states] have enacted a
comprehensive measure” and that “partial limitations [in some
other states] do not reach the full extent of the problem.” (Ibid.)
The FTC noted that “[m]any witnesses agree that a trade

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Opinion of the Court by Liu, J.

regulation rule would encourage rather than discourage further
state action.” (Id. at p. 53522, fn. 65.) It concluded that “th[e]
Rule will serve as a model for further state legislation and give
states which lack legislation impetus to act.” (Id. at p. 53521.)
The staff guidance reaffirms that the FTC contemplated
that state law might offer greater protections for consumers. It
describes how under the Notice, “[t]he creditor stands in the
shoes of the seller” subject to “an important limitation on the
creditor’s liability.” (41 Fed.Reg., supra, at p. 20023.) The last
sentence of the Notice — that “recovery hereunder by the debtor
shall not exceed amounts paid by the debtor hereunder” —
“limits the consumer to a refund of monies paid under the
contract, in the event that an affirmative money recovery is
sought.” (Ibid., capitalization omitted.) But, it explained, “[t]he
limitation on affirmative recovery does not eliminate any other
rights the consumer may have as a matter of local, state, or
federal statute. The words ‘recovery hereunder’ which appear in
the text of the Notice refer specifically to a recovery under the
Notice. If a larger affirmative recovery is available against a
creditor as a matter of state law, the consumer would retain this
right.” (Ibid., italics added.) The FTC highlighted these
statements without disagreement in its 2019 Rule
Confirmation. (84 Fed.Reg., supra, at p. 18713, fn. 30.) Where
the FTC has disagreed with the guidance, it has expressly said
so. (See FTC, FTC Staff Issues Note on Holder Rule and Large
Transactions (Apr. 14, 2021) [“The new staff note corrects an
erroneous statement in [the] 1976 pamphlet by FTC staff that
the Holder Rule did not apply to transactions larger than
$25,000.”].)
This understanding of the Holder Rule also flows
naturally from the text of the Notice which provides that

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Opinion of the Court by Liu, J.

“recovery hereunder by the debtor shall not exceed amounts paid
by the debtor hereunder.” (16 C.F.R. § 433.2(a) (1975), italics
added.) The Holder Rule extended claims and defenses by a
consumer against a seller based on state law or common law so
that such claims and defenses would lie against third party
creditors. The words “recovery hereunder” limit this extension
to “amounts paid by the debtor” under the contract. (Ibid.) But
this limitation says nothing about the ability of states to provide
consumers greater recovery against creditors than that
available solely under the Holder Rule or to provide for the
award of fees from creditors following suit.
TDAF argues that the Rule “does not allow uncapped
attorney’s fees because doing so would run contrary to the Rule’s
goal of efficiently allocating the risks of seller misconduct
without making creditors the guarantors of sellers’
performance.” Westlake similarly maintains that creditor
liability for attorney’s fees would be in excess of that intended
by the Rule. To be sure, the FTC chose to limit creditor liability
under the Holder Rule to amounts paid by the debtor under the
contract rather than pass on all seller misconduct costs to
creditors. (See 41 Fed.Reg., supra, at p. 20023.) But, as noted,
the FTC anticipated further state action and only limited
“recovery hereunder” to amounts paid by the debtor. (Ibid.,
italics added, capitalization omitted.) Accordingly, the fact that
consumers may be able to claim attorney’s fees in suits against
creditors based on state law is not at odds with the Holder Rule’s
purpose.
Neither the language of the Holder Rule nor its history
suggest that it was intended to displace or prevent state law
from authorizing greater recovery than what a plaintiff may
recover based on the language of the Notice alone. In

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Opinion of the Court by Liu, J.

repudiating the holder in due course doctrine and expanding
creditor liability up to a point, the FTC made clear it was setting
a national floor, not a ceiling that states may not exceed. It cited
several states’ preexisting consumer protection statutes —
including California’s Unruh Act (§ 1801 et seq.) — as examples
informing its decision to act in the first place. (40 Fed.Reg.,
supra, at p. 53527.) It is difficult to imagine the FTC citing such
laws favorably if it intended, without comment, to
simultaneously squelch any of their fee-shifting provisions and
hamper state initiative in the consumer protection context.
TDAF takes issue with the Court of Appeal’s ruling in this case
because, in its view, the award of attorney’s fees “creates an
opportunistic litigation landscape for consumers’ attorneys” and
“ultimately harms consumers by discouraging financing of
consumer loans.” But given the FTC’s preservation of
consumers’ rights under state law, TDAF’s contentions amount
to a policy argument against fee-shifting provisions like those in
the Unruh Act, section 1459.5, or section 1794, subdivision (d).
Those contentions should be directed at the Legislature or the
FTC.
In sum, the FTC was cognizant of the challenges facing
consumers bringing suit, including high legal costs, and it
intended and expected affirmative suits by consumers to help
correct the market failures it identified. In light of this history,
it would be antithetical to the purpose of the Holder Rule to
conclude that the FTC intended to “render . . . uneconomic” one
of the two ways it provided to address the concerns it sought to
alleviate by implicitly limiting a consumer’s ability to obtain
attorney’s fees. (40 Fed.Reg., supra, at p. 53512.) The FTC was
focused on consumers’ recovery of damages and intended the
Rule to provide a minimum, not maximum, liability rule for the

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nation. In light of the FTC’s contemporaneous explanation of
the Rule’s purposes, we find it unlikely that the FTC intended
the Rule’s limitation on recovery to apply to attorney’s fees
sought by a consumer from a holder under state law.
E.
TDAF argues that to the extent the Holder Rule’s
language is ambiguous, we should defer to the FTC’s
interpretation. But whether or not deference is warranted, the
result is the same in this case because, as we now explain, the
FTC’s interpretation in its 2019 Rule Confirmation, insofar as it
relates to what qualifies as “recovery hereunder,” accords with
our own.
The FTC wrote that “if a federal or state law separately
provides for recovery of attorneys’ fees independent of claims or
defenses arising from the seller’s misconduct, nothing in the
Rule limits such recovery. Conversely, if the holder’s liability
for fees is based on claims against the seller that are preserved
by the Holder Rule Notice, the payment that the consumer may
recover from the holder — including any recovery based on
attorneys’ fees — cannot exceed the amount the consumer paid
under the contract.” (84 Fed.Reg., supra, at p. 18713.)
We understand these statements to mean that if there is
no federal or state law authorizing fees against the holder, a
buyer cannot use the Holder Rule to secure from the holder a
claim for fees against the seller in excess of amounts paid on the
contract. It is significant that the FTC uses the phrase “if the
holder’s liability for fees is based on claims against the seller that
are preserved by the Holder Rule Notice.” (84 Fed.Reg., supra,
at p. 18713, italics added.) The sentence that immediately
follows likewise provides: “Claims against the seller for

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Opinion of the Court by Liu, J.

attorneys’ fees or other recovery may also provide a basis for set
off against the holder that reduces or eliminates the consumer’s
obligation.” (Ibid., italics added.) In other words, the FTC’s
interpretation is that the Holder Rule’s cap on recovery applies
to attorney’s fees where a plaintiff’s claim to attorney’s fees lies
against a seller and, by virtue of the Holder Rule, is extended to
lie against third party creditors. It does not apply where the
claim for fees lies against the third party creditor in the first
instance. If state law authorizes fees against a holder, the FTC
agrees that the Holder Rule places no limitation on their
recovery. In such circumstances, it is of no moment that the
buyer’s substantive claims against the holder may be related to
the seller’s misconduct.
TDAF interprets the Song-Beverly Act’s fee-shifting
provision to allow a prevailing party buyer to recover attorney’s
fees from the holder “based on claims against the seller that are
preserved by the Holder Rule Notice” (84 Fed.Reg., supra, at
p. 18713) because TDAF was only brought into the suit based on
Pulliam’s claims against the dealership that were extended to
lie against TDAF under the Holder Rule. But Pulliam’s claim
for attorney’s fees against TDAF is based on section 1794,
subdivision (d), which permits any buyer who “prevails in an
action under this section” to “recover . . . attorney’s fees”; it is
not “based on claims against the seller” for attorney’s fees (84
Fed.Reg., supra, at p. 18713, italics added). TDAF also contends
that section 1794, subdivision (d) is not “independent of claims
or defenses arising from the seller’s misconduct” (84 Fed.Reg.,
supra, at p. 18713) because TDAF’s liability to suit in this case
is based on the Holder Rule. But this interpretation similarly
confuses a buyer’s claim for statutory attorney’s fees as a
prevailing party in the litigation against a creditor with a

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Opinion of the Court by Liu, J.

buyer’s claim against a seller that is extended to the creditor
only by virtue of the Holder Rule.
The parties do not dispute that Pulliam could pursue an
action under the Song-Beverly Act against TDAF because of the
Holder Rule. (See § 1794, subd. (a) [“Any buyer of consumer
goods who is damaged by a failure to comply with any obligation
under this chapter or under an implied or express warranty or
service contract may bring an action for the recovery of damages
and other legal and equitable relief.”].) After Pulliam prevailed,
the trial court entered judgment in Pulliam’s favor jointly and
severally against TDAF and the dealership. Pulliam then
moved for attorney’s fees against TDAF under section 1794,
subdivision (d). (See Folsom v. Butte County Assn. of
Governments (1982) 32 Cal.3d 671, 677 [costs, including
attorney’s fees, “ ‘constitute no part of a judgment at the moment
of its rendition’ ”].) Section 1794 contains no language limiting
fee awards to sellers as opposed to any other parties against
whom a buyer has prevailed. (See Murillo v. Fleetwood
Enterprises, Inc. (1998) 17 Cal.4th 985, 990 [Song-Beverly “ ‘is
manifestly a remedial measure, intended for the protection of
the consumer; it should be given a construction calculated to
bring its benefits into action’ ”].) It provides for fees against any
losing defendant who chose to oppose a consumer’s claim. Thus,
section 1794, subdivision (d) provided the basis for Pulliam’s
claim for fees against TDAF and was unaffected by the Holder
Rule’s limitation on “recovery hereunder” for claims asserted by
a buyer against a seller and extended to lie against a holder.
This understanding of the Rule and the Rule Confirmation
is in agreement with a recent Advisory Opinion issued by the
FTC, which states that “the Holder Rule does not limit recovery
of attorneys’ fees and costs when state law authorizes awards

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against a holder.” (FTC Advisory Opn., supra, at p. 1.) The
opinion further explains that “whether costs and attorneys’ fees
may be awarded against the holder . . . is determined by the
relevant law governing costs and fees,” and “[n]othing in the
Holder Rule states that application of [prevailing party statutes]
to holders is inconsistent with Section 5 of the FTC Act or that
holders should be wholly or partially exempt from these laws.”
(Id. at p. 2.) “Further, if the applicable law requires or allows
costs or attorneys’ fee awards against a holder, the Holder Rule
does not impose a cap on such an award. The sentence in the
Holder Rule Notice that limits recovery to ‘amounts paid by the
debtor’ applies only to monetary recovery against holders based
on the Holder Rule Notice . . . ; the Rule places no cap on a
consumer’s right to recover from the holder for other reasons.”
(Id. at p. 3.) The FTC expressly disavowed reading the Rule
Confirmation “as mandating a different result.” (Ibid.) “Neither
the Rule itself nor the 2019 Rule Confirmation notice say that
the Holder Rule invalidates state law or that there is a federal
interest in limiting state remedies. To the contrary, the 2019
Rule Confirmation says that nothing in the Holder Rule limits
recovery of attorneys’ fees if a federal or state law separately
provides for recovery of attorneys’ fees independent of claims or
defenses arising from the seller’s misconduct.” (Id. at pp. 3–4.)
The FTC gave the example of a consumer authorized to
recover fees from parties that unsuccessfully oppose the
consumer’s claims. “In this scenario,” which is squarely on
point, “the . . . fee award is separate and supported by a law that
is independent of the Holder Rule. Thus, the Holder Rule Notice
does not limit . . . attorneys’ fees that the applicable law directs
or permits a court to award against a holder because of its role
in litigation.” (FTC Advisory Opn., supra, at p. 3.) It is only

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where a “consumer is awarded fees in a suit solely against the
seller, or the law allows awards only against a seller that has
engaged in specified conduct,” that “the seller’s liability for . . .
fees may be raised against the holder because of the Holder Rule
Notice”; in that case, the Holder Rule “authorizes the consumer
to recover such an award from the holder up to the amount
paid.” (Ibid.)
TDAF argues that the FTC Advisory Opinion “lacks any
persuasive effect,” citing Christensen v. Harris County (2000)
529 U.S. 576, 587. But the FTC’s interpretation of the Rule and
the Rule Confirmation is consistent with the Rule’s text, history,
and purpose, including the FTC’s repeated statements that it
did not intend to interfere with state laws authorizing
additional awards. (See 40 Fed.Reg., supra, at p. 53521; 41
Fed.Reg., supra, at p. 20023; 84 Fed.Reg., supra, at p. 18713.)
It is clear that the FTC contemplated that state law might
offer greater protections for consumers and that these
protections might be accompanied by recovery in excess of the
amounts paid on the contract. We have found no reason to
interpret the Rule’s limitation on “recovery hereunder” to extend
more broadly than its plain language suggests or more broadly
than the FTC intended. Where state law provides for attorney’s
fees against a holder, nothing in the Rule prevents their award
to the full extent provided by state law. We disapprove of
Lafferty v. Wells Fargo Bank, N.A., supra, 25 Cal.App.5th 398
and Spikener v. Ally Financial, Inc., supra, 50 Cal.App.5th 151
to the extent they are inconsistent with this opinion.

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Opinion of the Court by Liu, J.

CONCLUSION
We affirm the judgment of the Court of Appeal.
LIU, J.

We Concur:
CANTIL-SAKAUYE, C. J.
CORRIGAN, J.
KRUGER, J.
GROBAN, J.
JENKINS, J.
ROBIE, J.*

*
Associate Justice of the Court of Appeal, Third Appellate
District, assigned by the Chief Justice pursuant to article VI,
section 6 of the California Constitution.

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See next page for addresses and telephone numbers for counsel who
argued in Supreme Court.

Name of Opinion Pulliam v. HNL Automotive Inc.
__________________________________________________________

Procedural Posture (see XX below)
Original Appeal
Original Proceeding
Review Granted (published) XX 60 Cal.App.5th 396
Review Granted (unpublished)
Rehearing Granted
__________________________________________________________

Opinion No. S267576
Date Filed: May 26, 2022
__________________________________________________________

Court: Superior
County: Los Angeles
Judge: Barbara Marie Scheper
__________________________________________________________

Counsel:

McCreary, Duncan J. McCreary; McGuireWoods, Leslie M. Werlin,
Tanya L. Greene, Jamie D. Wells and Anthony Q. Le for Defendants
and Appellants.

Madison Law, Jenos Firouznam-Heidari, James S. Sifers and Brett K.
Wiseman for Westlake Services, LLC, as Amicus Curiae on behalf of
Defendant and Appellant TD Auto Finance LLC.

Severson & Werson and Jan T. Chilton for American Bankers
Association, American Financial Services Association, California
Financial Services Association and Consumer Bankers Association as
Amici Curiae on behalf of Defendant and Appellant TD Auto Finance
LLC.

U.S. Chamber Litigation Center, Janet Galeria; Akin Gump Strauss
Hauer & Feld, Aileen McGrath and Sina Safvati for Chamber of
Commerce of the United States of America as Amicus Curiae on behalf
of Defendant and Appellant TD Auto Finance LLC.
Rosner, Barry & Babbit, Hallen D. Rosner, Arlyn L. Escalante, Serena
D. Aisenman and Michael A. Klitzke for Plaintiff and Respondent.

Eliza J. Duggan and Seth E. Mermin for UC Berkeley Center for
Consumer Law and Economic Justice, Centers for Public Interest Law
at the University of San Diego, Consumers for Auto Reliability and
Safety, Consumer Federation of California, East Bay Community Law
Center, Housing and Economic Rights Advocates, National Consumer
Law Center and Public Law Center as Amici Curiae on behalf of
Plaintiff and Respondent.
Counsel who argued in Supreme Court (not intended for
publication with opinion):

Tanya L. Greene
McGuireWoods LLP
355 South Grand Avenue, Suite 4200
Los Angeles, CA 90071
(213) 457-9879

Arlyn L. Escalante
Rosner, Barry & Babbitt, LLP
10085 Carroll Canyon Road, Suite 100
San Diego, CA 92131
(858) 348-0916