Contingency Fee Arrangement Has Probative Value, But It Is No Dispositive Indicator.
Litigants and their counsel in lemon law cases must keep in mind that the there is an attorney’s fees shifting provision, Civil Code section 1794(d), which allows fees to the prevailing product buyer “based on actual time reasonably expended, determined by the court to have been reasonably incurred by the buyer in connection with the commencement and prosecution of such action.” However, many of these cases are taken on a contingency basis. So, for a prevailing plaintiff buyer in these cases, what is the measure of recovery where the Song-Beverly Act fee-shifting provision allows for recovery of “actual time expended” by buyer’s attorneys?
The answer is the classic lodestar, not impacted by any percentage of recovery, said the 2/7 DCA in Hanna v. Mercedes-Benz USA, LLC, Case No. B283776 (2d Dist., Div. 2 June 18, 2019) (published).
After four CCP § 998 offers by the defense, plaintiff accepted the fourth one indicating that Mercedes would pay plaintiff “a sum equal to the aggregate amount of costs and expenses, including attorney’s fees based on actual time reasonably incurred in connection with the commencement and prosecution of this action pursuant to Civil Code Section 1794(d), to be determined by court motion if the parties cannot agree.” They could not. Plaintiff then requested $274,615.82 in fees and costs (inclusive of a 1.5 multiplier on the lodestar request of $172,712.50). [NOTE TO ALL—The car purchase was for $52,948.54, showing you how hefty lemon law fees can be if a resolution is not accomplished early on, although it looked like Mercedes tried here.] After an opposition and reply, the lower court awarded $60,869 in fees, principally based on limiting recovery of fees after a certain date to $15,000 due to its interpretation of the contingency agreement between plaintiff and her counsel.
The problems here were basically three-deep in number. First of all, the fee limitation after a certain date was error given that additional fees incurred to establish liability or damages are properly includable in a fees award under section 1794(d), even though settlement efforts produced the additional “recovery.” Second, although the contingency agreement could be considered in awarding fees, the lower court misread the retainer which applied actually to all time expended. However, the third reason was the killer: the lodestar approach, not a contingency arrangement, is the governing standard for fee awards in the Song-Beverly Act area.
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