Crucial Consumer Remedy Preserved: US Supreme Court Declines to Review Decision Authorizing Attorneys’ Fees in Lawsuits Against Holders of Credit Contracts

January 25, 2023

Earlier this month, the U.S. Supreme Court denied certiorari in Pulliam v. HNL Automotive, meaning that the California Supreme Court’s decision in that case stands. In Pulliam, the California Supreme Court ruled that courts may award attorneys’ fees to consumers who successfully sue deceitful lenders for unfair practices under the Federal Trade Commission’s long-standing “Holder in Due Course Rule”. The Holder Rule requires that consumer credit contracts explicitly state that consumers may assert all claims and defenses against third-party financial companies that are “holders” of their credit contracts. The consumers’ recovery, however, is limited to the amount that they paid on the contract. 

In a critical victory for plaintiffs, the California Supreme Court concluded that a recovery under the Holder Rule may include attorneys’ fees as long as such an award is permitted under an applicable state law. As a result, the high court upheld an attorneys’ fees award to the purchaser of a used car who had won a jury verdict finding deceitful conduct against her by the dealership that sold her the car and the bank that held the contract. As the “holder” of the sales contract, the bank was subject to the FTC’s Holder Rule. After considering the language, history, and purpose of the Holder Rule, the California Supreme Court held that “[w]here 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.”

In the California Supreme Court, the Center filed an amicus brief in support of the plaintiff on behalf of eight consumer advocacy organizations. Our brief argued that recovery of attorneys’ fees is a critical factor in whether consumers are able to bring lawsuits challenging deceptive conduct at all. We also highlighted the difficulty that Californians have had in finding counsel willing to take their cases in light of recent appellate decisions that attorneys’ fees are not available. 

With its decision in Pulliam, the California Supreme Court affirmed the full spectrum of rights to which California consumers are entitled, including a right to attorneys’ fees. The U.S. Supreme Court’s denial of certiorari secures this victory for California consumers.