Bad Faith And Lack Of Specificity Arguments Rejected.
California’s Song-Beverly Consumer Warranty Act, known as the Lemon Law, has a pro-plaintiff attorney’s fees provision. However, Code of Civil Procedure section 998 can tilt the risk against a defendant by cutting off post-offer fees and costs if the 998 offer is properly crafted. Plus, the defendant can recover routine costs, which may be extensive based on expert and trial expenses, if the 998 offer was calibrated correctly to the jury verdict or court award to plaintiff.
Shakouri v. Tesla Motors, Case No. B307273 (2d Dist., Div. 4 June 30, 2022) (unpublished) illustrates how the defendant obtained a costs award of $143,624.59 as a section 998 offeror and held to a minimum the fees and costs which could be recouped by plaintiff under the Lemon Law.
In this one, Tesla put out a 998 offer with two options for plaintiff’s evaluation: (1) accept $97,519.31 as a car repurchase plus consequential expenses; or (2) accept a lump sum of $115,000 for repurchase, consequential losses, and unspecified interest, plus attorney’s fees, conditioned on showing that the returned car had factory equipment (the intent being Tesla did not want to take back a stripped-down car). In discovery responses, plaintiff confirmed that the car had no prior accident damages which had to be repaired. Plaintiff’s pre-offer fees and costs were only about $14,500 because the 998 was made before plaintiff’s counsel expended much in resources. Later, after about 3 years of litigation, the jury awarded plaintiff $96,145.
So, the issue naturally turned to whether plaintiff had beat the defense’s 998 offer. Plaintiff moved for $907,548.24 in fees/costs, while Tesla filed a costs memorandum because it could not recover fees under the Lemon Law. Plaintiff argued that the 998 offer was not made in good faith and lacked specificity based on the factory equipment part return language. The trial court disagreed, awarding plaintiff $12,245.50 in pre-offer fees as the prevailing party and $2,356.03 in costs. However, it disagreed that the 998 offer was invalid, awarding Tesla $143,624.59 in costs.
The appellate court affirmed plaintiff’s challenge to the Tesla cost award. The offer was made in good faith because it was in the reasonable range of a result for plaintiff, as the ultimate jury verdict vindicated. The factory equipment part return condition was specific enough, given that plaintiff could reasonably evaluate it—the car had no accident damage repairs and the offer simply wanted to make sure that the car was not stripped down from its mainly original condition. The 2/4 DCA distinguished cases which made defendants the sole arbiters of “normal wear and tear,” with the condition in the offer before it being objectively verifiable in nature because Tesla was not requiring plaintiff to trace every part back to the factory.
BLOG OBSERVATION—This case is a good one for showing that a smartly crafted section 998 pre-trial offer can be a big game changer. Also, plaintiff’s counsel in the Lemon Law area should take advantage of case law encouraging a 998 offeree to ask for clarification or exchange information with the offeror for purposes of evaluating a 998 offer if the offeree feels it is unclear.
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