Ford adopts new legal strategy in fight against lemon law firms

Less than three months after a federal judge threw out Ford Motor Co.'s racketeering lawsuit against a major California lemon law firm, the automaker is back in court with a new fraud case targeting another firm and advancing many of the same concerns about attorney fee practices in California's lemon law industry.

Ford on Thursday sued Los Angeles based Quill & Arrow LLP in federal court, alleging the firm orchestrated a billing fraud scheme to improperly collect more than $25 million in attorney fee payments by billing work performed by overseas nonlawyers as attorney time at California rates.

The firm did not respond to a request for comment left through its call center Friday.

The lawsuit follows Ford's unsuccessful civil RICO action against attorneys affiliated with Knight Law Group, which U.S. District Judge Michelle Williams Court dismissed with prejudice in March. Ford has appealed that ruling to the 9th U.S. Circuit Court of Appeals.

Although the new complaint centers on a different law firm, Ford says the case reflects what it views as a broader problem in California lemon law litigation.

"Ford's complaint alleges sweeping violations of law by lawyers who abused California's lemon law to enrich themselves through brazen and systematic fraud at the expense of Ford, other automakers, California taxpayers and even their own clients," Daniel Saunders, the Kasowitz LLP partner leading Ford's case, said in an interview.

Consumer attorney Joseph A. Kaufman of Pasadena, who is not involved in the litigation, said he views the new lawsuit as a continuation of Ford's broader campaign against plaintiffs' lemon law firms following the defeat of its case against Knight Law Group.

"I think it's a PR stunt just like the one against Knight Law Group," Kaufman said Friday. "That didn't go anywhere."

The lawsuit also drew immediate attention from the American Tort Reform Association, which said the case highlights longstanding concerns about alleged abuses of California's Song-Beverly Consumer Warranty Act, commonly known as the lemon law.

In a statement Thursday, the organization characterized the lawsuit as the latest response to what it described as widespread exploitation of the statute's fee-shifting provisions. The group has repeatedly cited lemon law litigation in its annual Judicial Hellholes reports and currently ranks Los Angeles as the nation's top Judicial Hellhole jurisdiction.

"While California's lemon law was originally intended to provide consumers quick resolution for defective vehicles, a handful of law firms have created a cottage market, abusing the law to target perceived deep pockets for their own gain," Lauren Sheets Jarrell, the group's vice president and counsel for civil justice policy, said in a statement.

The Quill lawsuit differs from Ford's earlier case against Knight Law Group in one significant respect: It does not rely on federal racketeering claims. Instead, Ford alleges violations of California Penal Code Section 496, which permits civil recovery and potentially treble damages for property obtained through theft or fraud, and California's Unfair Competition Law.

Ford alleges Quill used nonlawyer personnel, including offshore virtual assistants in Asia and South America, to perform legal work in thousands of Song-Beverly cases while attributing that work to California attorneys billing between $350 and $950 per hour.

According to the complaint, Quill filed more than 20,000 lemon law cases over a five-year period and received approximately $100 million in attorney fee payments from Ford. The automaker contends roughly half of those fees were attributable to fraudulently billed work.

The automaker also alleges Quill discouraged consumers from accepting early vehicle repurchases in order to generate larger fee awards through litigation. According to the complaint, the firm instructed clients not to engage with Ford regarding buyback offers, thereby prolonging disputes that otherwise could have been resolved before suit.

In one of the complaint's central allegations, Ford contends Quill "systematically corrupts the attorney-client relationship" by steering consumers away from prelitigation resolutions that would have served their interests and, in some instances, filing lawsuits without their knowledge or consent.

Kaufman said he believes that allegation undercuts Ford's broader argument.

"Within paragraph three is the tacit admission by Ford that a consumer with a lawyer is treated differently from a consumer without one," Kaufman said. "That's not an argument against consumer lawyers. It's an argument for why consumers need them."

Kaufman, who has written on the subject, acknowledged that some high-volume lemon law firms have drawn criticism from judges and defense lawyers but argued that California lawmakers recently addressed those concerns by adopting new procedures intended to streamline litigation and police misconduct on both sides.

"There are about three mills -- Knight Law Group, Quill & Arrow and Strategic Legal Practices," Kaufman said. "The Legislature has already looked at this and given Ford the tools it needs."

Specifically, Kaufman pointed to Code of Civil Procedure Section 871.26, which authorizes sanctions for noncompliance with California's recently enacted lemon law procedures. According to Kaufman, automakers can use those provisions to challenge firms that fail to properly manage large caseloads.

"All Ford needs to do is seek sanctions," he said. "If it did that, it would be able to get rid of these mills because these mills would not be able to stay in business."

The lawsuit reflects Ford's continuing effort to challenge the economics of California lemon law litigation, where fee-shifting provisions require manufacturers to pay successful consumers' attorney fees. Critics of the system, including the American Tort Reform Association, argue that the fee-shifting structure creates incentives for excessive litigation and inflated billing practices, while consumer advocates and plaintiffs' lawyers maintain that the law is necessary to ensure vehicle manufacturers honor warranty obligations.

Kaufman argued that Ford's reluctance to rely on the new procedural framework stems from its own compliance challenges. The law requires manufacturers to produce warranty-related documents, lemon law policies and procedures, and corporate witnesses for depositions early in litigation.

"GM has met this challenge by hiring enough people to produce witnesses. Stellantis has met this challenge by hiring people to produce enough witnesses. Ford has not met the challenge," Kaufman said. "Ford cannot produce witnesses for deposition because it has made a decision not to hire sufficient human resources."

The complaint was filed in the U.S. District Court for the Central District of California as Ford Motor Co. v. Quill & Arrow LLP, No. 2:26-cv-06614.