However, Lender Was Responsible For Routine Costs As The Non-Prevailing Party.
In actuality, this is really a fee-shifting limitation and quasi-legislative limitation on consumer recovery post.
“The Holder Rule, 16 Code of Fed. Regs. § 433.2, was prominent in dictating the result in Lafferty v. Wells Fargo Bank, N.A., Case No. C080535 (3d Dist. July 19, 2018) (published).
The underlying case involved plaintiffs’ purchase of a defective motor home from an RV business where the motor home was financed through a Wels Fargo installment loan. The Holder Rule, promulgated by the FTC for inclusion in every consumer installment sale contract that is funded by a commercial lender, provides the commercial lender is subject to all claims and defenses which the buyer could assert against the original seller but that any recovery by the buyer (the borrower) cannot exceed the amount they paid under the terms of the loan by the commercial lender. The parties in Lafferty had agreed plaintiffs paid $68,000 under the loan after buyers prevailed through a negligence and Consumer Legal Remedies Act (CLRA) claim that the motor home was defective. After two earlier appeals, the trial judge awarded $8,384.33 in routine costs to the buyers as the prevailing parties but denied their motion for requested attorney’s fees of almost $2.5 million for post-trial and post-appeal work and denied their request for $16,816.15 in non-statutory costs. Wells Fargo appealed the routine costs award against it, while plaintiff buyers cross-appealed from the denial of fees and non-statutory costs. (However, assuming the Holder Rule cap did not apply, the lower court found $223,170 was a reasonable fee award to plaintiffs—an advisory ruling made to end the fee issue if the appellate court concluded the fees were not capped, a smart move in our view.) All of these post-judgment orders were affirmed by the Third District.
The routine costs award against Wells Fargo was sustained because the trial judge awarded the costs to plaintiffs as the prevailing party in the action rather than simply recovery under a cause of action. As such, the Holder Rule cap did not apply because it “is silent about cost awards under state law to a prevailing party in an action.”
Different matter as far as fees were concerned. Plaintiffs had sought fees under Civil Code section 1717, Civil Code section 1770 (the CLRA), and the private attorney general statute (Code of Civil Procedure section 1021.5). Because “recovery” is a broad term encompassing compensatory damages, punitive damages, attorney’s fees, and costs, the Holder Rule cap did apply. The appellate court then examined each fee entitlement basis claimed by plaintiffs. With respect to section 1717, plaintiffs did not prevail on their contract claim, but only on the negligence and CLRA claims such that section 1717 could not afford a fee entitlement basis. The CLRA fee predicate was unavailable because the claim applied to Wells Fargo only under the Holder Rule such that the cap applied. On the private attorney general statute anchor, the action only sought benefits for plaintiffs themselves and they obtained no injunctive relief of a broader public interest.
The non-statutory costs request was properly denied, because plaintiffs failed to rebut that (1) the Holder Rule barred them from recovery of these costs; (2) they were not properly sought through a memorandum of costs; (3) plaintiffs were not entitled to recovery of their attorney’s overhead as costs; and (4) plaintiffs already recovered non-statutory costs from the RV business so it would be an impermissible “double dip.”
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