Consumer Statutes: $11,425 Song-Beverly Act Fee Recovery, Out Of Requested $49,835 (Plus Multiplier), Reversed Where Plaintiff’s Rejection Of Prior Offer Resulted In Added Value And Where Court Improperly Focused On Contingency Retention Amount

Re-Do Required Based On These Two Errors.

            California’s lemon law statute can result in substantial fee awards under the Song-Beverly Act statutory fee-shifting provision.  However, the lodestar standard must be applied, which means an inquiry into the reasonable work even though prior CCP § 998 offers were rejected and irrespective of any inquiry into the contingency award to be paid to plaintiff’s counsel.

            In Chapman v. Hyundai Motor America, Case No. A158279 (1^st Dist., Div. 5 Jan. 28, 2021) (unpublished), plaintiff’s Hyundai Sonata had electrical problems which were not solved, leading to a Song-Beverly Act suit which sought damages, rescission, civil penalties, and attorney’s fees.  Plaintiff rejected three CCP § 998 offers: (1) $12,415.77; (2) $34,000 plus recovery of attorney’s fees to date; and (3) $50,000 plus recovery of fees.  However, plaintiff finally accepted a fourth 998 offer for $120,372 plus the ability to seek fees and costs by motion if no agreement could be reached on the amounts.  No agreement was reached, with plaintiff moving to recover $45,835 in lodestar fees, plus a 0.5 enhancement (total of $74,752.50), along with costs and expenses of $8,396.38.  Eventually, the lower court awarded $11,425 in fees, reducing the request based on the perceptions that the $34,000 second 998 offer should have been accepted (so that no work after that was reasonable) and that it could not gauge the reasonableness of the fee request without an inquiry into the contingency fee arrangement between plaintiff and its counsel.

            Plaintiff appealed, getting a reversal and remand win. 

            The main problems with the lower court’s reasoning was that plaintiff was seeking civil penalties such that the rejection of the $34,000 was reasonable, not to mention that the defense gave plaintiff 3.5 times the rejected second offer to resolve the case through the fourth 998 offer—tough to argue that the efforts after the second offer did not bear fruit.  On the contingency arrangement issue, the appellate panel agreed that the lodestar standard was the proper guidepost, agreeing with Reynolds v. Ford Motor Co., 47 Cal.App.5^th 1105, 1113-1114 (2020) [discussed in our April 23, 2020 post] that contingency arrangement was irrelevant to the fee inquiry.   “To the extent counsel ends up with a potential double recovery (or unconscionable fees) from the combination of the statutory fee award and amounts to be paid from the settlement proceeds under a contingency fee agreement, it is a matter between the attorney and client.”  (Slip Opn., p. 17.)