Honda Messed With the Wrong Woman

Things to note about Heather Peters, the 46-year-old consumer who recently humiliated American Honda Motor Co. Inc. in a California small claims court and turned an ordinary customer dispute into a public relations nightmare:

* She used to drive BMWs and other high-end vehicles. She bought her 2006 Honda Civic Hybrid because she was down on her luck and thought it would get 50 mpg as advertised.

* She wasn't some failed, two-bit lawyer who let her law license lapse. She practiced business litigation, defending corporations. She worked at Barger & Wolen, which has offices in Los Angeles, San Francisco, Newport Beach, Calif., New York and London.

* She also worked as a mediator in business disputes in her own practice.

* She came to a point in her life when she had lost her health, her marriage and her career. She was diagnosed with multiple sclerosis and laid flat on her back. "Everything came apart at the same time," she told me in a telephone interview. "I decided I didn't have anything to lose."

* She had been raised by hippie parents in Greenwich Village. Her mother worked as a fruit-bedecked dancer at the legendary Copacabana. She went to art school. She sells her flower art at mobileartgarden.com. And yet she became a Republican.

*She ran for governor of California amid the 2003 recall election of Gray Davis. She challenged none other than Arnold Schwarzenegger. Her campaign slogan was "California needs a mediator, not a Terminator."

* Schwarzenegger terminated her bid. But then he appointed her "Deputy Secretary for Business Regulation And Housing" and chair of his "Interdepartmental Task Force On Non-Traditional Mortgages." Not only was she helping "Mr. Universe" deal with the housing crisis, but she kept this job under Gov. Jerry Brown until just recently.

American Honda is now appealing the $9,867 judgment Peters won in a small claims court after complaining that her car got far less than the 50 mpg Honda advertised.

Honda spokesman Chris Martin declined to comment beyond the statement the company released last week: "American Honda believes that the judgment in this case is a radical and unprecedented departure from California and federal law."

"Yeah, it's radical all right," Peters chuckled. "It's radical that the American consumer stopped rolling over and just taking it when big corporations come up against them."

Peters -- clearly, not your average car consumer -- has whipped up a media frenzy with her personal end-run around class-action litigation filed against Honda. If there's one thing people hate as much as big corporations, it's the class-action lawyers who get the biggest checks in any lawsuit the little guys file against big corporations.

Peters rejected a tiny class-action settlement between Honda and its hybrid customers and took matters into her own hands. She not only filed her own lawsuit in small claims court, but notified the Los Angeles Times.

The national media then packed a tiny small-claims courtroom and watched her win. She swiftly became a media folk hero, appearing everywhere from ABC's Good Morning America and NBC's Nightly News to CNN and FOX News.

"I watched Schwarzenegger work the press," Peters said, "and I learned how to be relevant."

Peters launched a website called dontsettlewithhonda.org where she is selling CDs of the evidence she gathered against Honda for $15. She also is re-activating her law license and is advising other unhappy Honda owners on how to file their own small claims cases as an alternative to a low-ball, class-action settlement.

She says she's been hearing from hundreds of Honda owners and hasn't even found time to answer all their emails.

Some legal observers say she could stoke a grassroots movement in consumer litigation. Others say filing small claims cases is too cumbersome for most people to bother.

Peters told me she would have happily settled with Honda before her case went to trial. She said she would have accepted $7,500, an offer to buy back the car at Bluebook value, or even just a trade-in for used non-hybrid, 2006 Civic.

"I wasn't looking to get rich," she said. "I was ready to take an old car."

Instead, she says she is now doing to Honda everything she promised she would do: "They didn't believe me when I told them, this is what I'm going to do to you, and I'm not kidding. I'm really serious about it."

Honda hopes to win this case in an appellate court where it can deploy corporate lawyers. Lawyers aren't allowed in small claims court.

"I fully anticipate they will bring to bear the best and the brightest lawyers money can buy," Peters said. "But I have confidence in my evidence."

Whatever happens, Peters has put a dent in Honda's reputation that will cost more than $9,867 to repair. Honda likely will pay its lawyers many times the price of a used, Honda Civic to fight Peters.

Are there even lawyers clever enough to go up against this wild card?

The ongoing problem for Honda is that Peters has nothing to lose.

"Even if I lose, I will be still thrilled that I stood up for myself and for others," she said.

(Al's Emporium, written by Dow Jones Newswires columnist Al Lewis, offers commentary and analysis on a wide range of business subjects through an unconventional perspective. Contact Al at al.lewis@dowjones.com or tellittoal.com)