Consumer Statutes, Section 998: $278,057 Lemon Law Fee Award And $56,882.89 Costs Award Affirmed On Appeal

The Reason—A Prejudgment Interest Award Of $2,600 Beat The Defense CCP § 998 Offer; Yes, It Was That Close—With Around $335,000 In Fees/Costs Being The Burden At The End.

            The Song-Beverly Act (better known as California’s lemon law) has a pro-plaintiff fee shifting provision; however, it is subject to Code of Civil Procedure section 998 fee/cost shifting features.  (Murillo v. Fleetwood Enterprises, Inc., 17 Cal.App.4^th 985, 1000 (1998).)  In the next case, unbelievably (but this is what case law is about), a car manufacturer failed to beat its CCP § 998 offer by $2,600 in prejudgment interest, exposing it to around $335,000 in fees and costs for a gamble that was not won.

            In Kadkhoda v. Daimler Vehicle Innovations USA, LLC, Case No. B293587 (2d Dist., Div. 5 Oct. 27, 2020) (unpublished), vehicle defendant—four months after filing its answer—sent a Code of Civil Procedure section 998 offer to repurchase plaintiff’s vehicle as well as pay plaintiff’s recoverable court costs, expenses, and reasonably-incurred expenses.  (Although plaintiff challenged many respects of the 998 offer, the appellate court—as did the trial judge—found the offer to be sufficiently valid and certain in nature, something defendant attorneys can look at because the exact 998 language was quoted in the opinion with respect to structuring 998 offers)  However, the problem was that the 998 offer did not address prejudgment interest, with the parties eventually agreeing that $2,600 was the figure.  That set off the normal fire storm of fee/costs motions, with the trial judge eventually awarding $278,057 in Song-Beverly fees and $56,882.89 in costs to plaintiff based on the perception that the defense 998 offer was beat based on the prejudgment interest award.

            The 2/5 DCA panel affirmed.  Plaintiff was entitled to prejudgment interest under the circumstances.  Because the 998 offer did not include prejudgment interest, plaintiff prevailed so that all of the awarded fees and costs were legitimate.  So, the lesson in this one is to make sure prejudgment interest is addressed in a 998 offer – so it would be to include repurchase language, plus prejudgment interest as awarded by the jury or court.  (However, you practitioners need to frame as necessary for a case, only saying …. Because you must draft as necessary in a given case.)