Case Title: Pulliam v. HNL Automotive, Inc.

Citation: 

Docket Number: S267576

State: california

Court: California Supreme Court

Date: 2022-05-26T00:00:00Z

Document:
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. 
 
1 
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” 
PULLIAM v. HNL AUTOMOTIVE INC.  
Opinion of the Court by Liu, J. 
 
2 
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 
PULLIAM v. HNL AUTOMOTIVE INC.  
Opinion of the Court by Liu, J. 
 
3 
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.   
PULLIAM v. HNL AUTOMOTIVE INC.  
Opinion of the Court by Liu, J. 
 
4 
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 
PULLIAM v. HNL AUTOMOTIVE INC.  
Opinion of the Court by Liu, J. 
 
5 
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).)   
PULLIAM v. HNL AUTOMOTIVE INC.  
Opinion of the Court by Liu, J. 
 
6 
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. 
PULLIAM v. HNL AUTOMOTIVE INC.  
Opinion of the Court by Liu, J. 
 
7 
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 
PULLIAM v. HNL AUTOMOTIVE INC.  
Opinion of the Court by Liu, J. 
 
8 
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.)   
PULLIAM v. HNL AUTOMOTIVE INC.  
Opinion of the Court by Liu, J. 
 
9 
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 
PULLIAM v. HNL AUTOMOTIVE INC.  
Opinion of the Court by Liu, J. 
 
10 
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 
PULLIAM v. HNL AUTOMOTIVE INC.  
Opinion of the Court by Liu, J. 
 
11 
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 
PULLIAM v. HNL AUTOMOTIVE INC.  
Opinion of the Court by Liu, J. 
 
12 
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 
PULLIAM v. HNL AUTOMOTIVE INC.  
Opinion of the Court by Liu, J. 
 
13 
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.”].) 
PULLIAM v. HNL AUTOMOTIVE INC.  
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14 
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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15 
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.) 
PULLIAM v. HNL AUTOMOTIVE INC.  
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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.  
PULLIAM v. HNL AUTOMOTIVE INC.  
Opinion of the Court by Liu, J. 
 
17 
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 
PULLIAM v. HNL AUTOMOTIVE INC.  
Opinion of the Court by Liu, J. 
 
18 
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 
PULLIAM v. HNL AUTOMOTIVE INC.  
Opinion of the Court by Liu, J. 
 
19 
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 
PULLIAM v. HNL AUTOMOTIVE INC.  
Opinion of the Court by Liu, J. 
 
20 
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 
PULLIAM v. HNL AUTOMOTIVE INC.  
Opinion of the Court by Liu, J. 
 
21 
“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 
PULLIAM v. HNL AUTOMOTIVE INC.  
Opinion of the Court by Liu, J. 
 
22 
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 
PULLIAM v. HNL AUTOMOTIVE INC.  
Opinion of the Court by Liu, J. 
 
23 
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 
PULLIAM v. HNL AUTOMOTIVE INC.  
Opinion of the Court by Liu, J. 
 
24 
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 
PULLIAM v. HNL AUTOMOTIVE INC.  
Opinion of the Court by Liu, J. 
 
25 
“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 
PULLIAM v. HNL AUTOMOTIVE INC.  
Opinion of the Court by Liu, J. 
 
26 
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 
PULLIAM v. HNL AUTOMOTIVE INC.  
Opinion of the Court by Liu, J. 
 
27 
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 
PULLIAM v. HNL AUTOMOTIVE INC.  
Opinion of the Court by Liu, J. 
 
28 
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 
PULLIAM v. HNL AUTOMOTIVE INC.  
Opinion of the Court by Liu, J. 
 
29 
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 
PULLIAM v. HNL AUTOMOTIVE INC.  
Opinion of the Court by Liu, J. 
 
30 
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 
PULLIAM v. HNL AUTOMOTIVE INC.  
Opinion of the Court by Liu, J. 
 
31 
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. 
PULLIAM v. HNL AUTOMOTIVE INC.  
Opinion of the Court by Liu, J. 
 
32 
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. 
 
 
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