CALIFORNIA ATTORNEY'S FEES

Consumer Statutes, Section 998: Because Section 998 Does Apply To Lemon Law Cases, Fee/Costs Award Had To Be Reduced By Post-Fees Covered By Defense 998 Offer

However, Majority And Dissenting Justices Disagreed On Whether Section 998 Applied To A Litigation Ended Through A Settlement.

            Ayers v. FCA US, LLC, Case No. B315884 (2d Dist., Div. 8 Feb. 27, 2024) (published) is an interesting decision involving the interplay between the Song-Beverly Act “lemon law” fee/costs shifting provisions and pretrial offers under CCP § 998.  Section 998 prevailed in this case, although the majority and dissenting justices weighed in on the Madrigal issue being considered by the California Supreme Court—whether section 998 applies to litigation concluded through a settlement agreement.

            In a Jeep lemon law matter, the record showed that plaintiff and defendant traded numerous settlement proposals and CCP § 998 offers over a lengthy time frame, both before a lawsuit was filed and after litigation commenced.   During the course of the litigation, an appellate decision found a change in law on how to value “trade in” mitigation by the plaintiff in lemon law cases, although the law is not necessarily uniform in this area.  But, salient for the ultimate disposition in this case, the lower court granted fees and costs to plaintiff, with some reductions, but did not decide whether any defense 998 offers made any difference, although a 2018 offer would have eliminated about $74,523.50 in further fee exposure.

            The justices in the majority decided that the February 2018 CCP § 998 offer was valid and reduced the fee award to the lemon law plaintiffs.  In doing so, they recognized the following:  (1) section 998 does apply to lemon law cases, relying on Duale v. Mercedes-Benz USA, LLC, 148 Cal.App.4^th 748 (2007); (2) section 998 applies to litigation terminated by settlement, accepting the majority’s analysis in Madrigal (which is currently under review by the California Supreme Court); (3) section 998 offers do allow the court to consider changes in the law (such as on the “trade-in” reduction issue); and (4) payment and deposit terms do not render a section 998 offer uncertain. 

            Justice Viramontes, in his dissent, believed that section 998 does not apply to litigation terminated by settlement, discussing legislative history which bolstered his conclusion to the contrary given the equally susceptible competing interpretations set forth in Madrigal.

Consumer Statutes: 2/4 DCA Reverses Trial Court’s Denial For Untimely Filing Of $119,470.98 Fees Motion Made By Prevailing Song-Beverly Plaintiff

Trial Court Violated Rules Of Court, Rule 3.1702, By Shortening Deadline For Plaintiff To File His Attorney’s Fee Motion.

            In Javidian v. Subaru of America, Case No. B322136 (2d Dist., Div. 4 February 16, 2024) (unpublished), Song-Beverly Plaintiff and Defendant reached a verbal settlement through mediation – with the parties agreeing the terms would be memorialized through a Code Civ. Proc. § 998 offer to be served by Plaintiff.  During a final status conference that same day, the trial court was notified of the agreement.  As a result, the trial court vacated the trial date and set a status conference.  However, the 998 offer was not finalized and executed by the date of the status conference, and the trial court set an order to show cause hearing, for less than two months out, on why the case should not be dismissed.  Additionally, the trial court ordered that any motion for attorney fees be filed and heard before the OSC hearing.  At the OSC hearing, the trial court was notified that Defendant accepted Plaintiff’s 998 offer, and the trial court dismissed Plaintiff’s first amended complaint but retained jurisdiction to enforce the terms of the settlement.  When Plaintiff later filed his motion for $119,470.98 in attorney’s fees, the trial court denied it as untimely. 

            Plaintiff appealed, arguing the trial court violated Rules of Court, rule 3.1702 by setting the deadline for him to file his fees motion on a date that fell before the entry of dismissal of his first amended complaint.  The 2/4 DCA agreed and reversed.  Rule 3.1702 expressly authorizes a trial court for good cause to extend the deadline for filing a fee motion, but does not authorize it to shorten the deadline.  Plaintiff’s motion was timely under Rule 3.1702.

            Although Plaintiff first raised this Rule 3.1702 issue on appeal, the 2/4 DCA exercised its discretion in considering his argument because his appeal raised a purely legal question to which Defendant responded. 

Consumer Statutes, Special Fee Shifting Statutes: $264,440 In Attorney’s Fees Affirmed Against Bond Surety Defendant That Issued $50,000 Bond To Auto Dealer Who Used Fraudulent Tactics To Sell A Used Car To Plaintiff

Plaintiff Was Unable to Collect Arbitration Award For Violations Of The Consumers Legal Remedies Act, Leading Her To Successfully Seek Summary Judgment Against Surety Under Veh. Code Section 11711 For Dealership’s Fraudulent Representation

            In Gonzalez v. Hudson Insurance Co., Case Nos. D080166/D081686 (4^th Dist., Div. 1 February 13, 2024) (unpublished), auto dealer sold a car to plaintiff and falsely represented to her that the car had been in no accidents, had not sustained prior collision damage, and had no frame damage.  When Plaintiff became aware that auto dealer’s representations were fraudulent, she sued for violations of the Consumers Legal Remedies Act, among other causes of action, and received an arbitration award against the auto dealer for each of her causes of action, including the fraud-based violations of the CLRA. 

            Plaintiff was unable to collect from the dealership – leading her to successfully seek summary judgment against the dealership’s bond surety under Veh. Code § 11711.  Plaintiff then moved for attorney’s fees and costs against bond surety – arguing that fees were mandatory under the CLRA because she had prevailed on her CLRA cause of action, and the bond surety’s liability was in line with the dealership’s liability.  The trial court agreed, and ordered a $264,440 fee award to Plaintiff, with $120,581 of the award from arbitration-related fees and the balance from post-arbitration fees with a 0.5 multiplier.

            Bond surety appealed both the summary judgment grant and the fees award, but provided no legal analysis and citation to the record to support its claim that the trial court erred in finding it liable on the bond/granting summary judgment – resulting in the 4/1 DCA affirming the summary judgment.

            As to the fees order, bond surety argued that section 11711 does not authorize a fees award, that the combined liability for damages and attorney’s fees exceeded the amount of the bond it issued the dealership, and that the trial court abused its discretion in calculating the fees award because it applied a 0.5 multiplier to the lodestar for the post-arbitration fees.

            The appellate panel was not persuaded.  Following the holdings in Harris v. Northwestern National Ins. Co. (1992) 6 Cal.App.4th 1061, Pierce v. Western Surety Co. (2012) 207 Cal.App.4th 83, and Karton v. Ari Design & Construction, Inc. (2021) 61 Cal.App.5th 734, the 4/1 DCA affirmed.  First, the fees were awarded under the CLRA, not section 11711, and as the prevailing plaintiff under the CLRA’s mandatory fee provision, Plaintiff was entitled to recover her attorney’s fees from the dealership as an item of costs.  Under Civ. Code § 2808, the liability of a surety is commensurate with that of the principal, meaning where the dealership was liable for fees as an item of costs based on conduct secured by the bond, so too was the surety – even where the award exceeds the amount of the bond.  As to the trial court’s application of the 0.5 multiplier, the panel found no abuse of discretion.

Consumer Statutes, Reasonableness Of Fees: Plaintiff Accepting CCP § 998 Settlement Offer In Lemon Law Case Was Properly Awarded Drastically Reduced Attorney’s Fees Where Inflated Billings Were Demonstrated

Higher Claimed Hourly Rates For Riverside Attorneys Properly Reduced, As Well As Inflated Work Effort Requests.

            In contrast to the Edmundson decision which we recently posted on, the 4/3 DCA did affirm a substantially reduced fee award under a lemon law case in Jacobs v. American Honda Motor Co., Inc., Case No. G062739 (4^th Dist., Div. 3 Dec. 8, 2023) (unpublished), with the facts and record being much different in degree.  Jacobs involved a substantial fee request after a CCP § 998 offer was accepted in a non-complex, not hugely contested litigation matter.  Given those facts and the fee “ask,” there are differences which led to a drastic cut in the fees, a determination affirmed by our local appellate court in an opinion authored by Justice Motoike.

            What happened in this case is that defendant in a Song-Beverly Act case, which has a fee shifting statute favoring the car purchaser, made a CCP § 998 offer including a component allowing attorney’s fees to be determined by the lower court (the base offer on the merits was $38,751.06).  Plaintiff accepted that offer, prompting his attorneys to file a fee request for $319,138.50 by the lead attorney and $23,530 by a secondary attorney, with the lead attorney claiming $675 per hour and secondary attorney claiming $650 per hour for a Riverside-venued matter.  The Riverside trial judge set $450 as the reasonable hourly rate for Riverside counsel, but he found lead attorney’s lodestar request was “grossly inflated” based on vague block billing and vague time entries in a routine case which did not involve a lot of pre-trial activity.   In the end, his fee request was reduced to $5,895 but the secondary attorney was granted total work effort but diminished by the lower hourly rate.

            The appellate court affirmed.  The hourly rate determinations were sustained based on the venue and the lower court’s observation of the work effort by plaintiff’s attorneys.  With respect to the big haircut for lead counsel’s fees, that was no abuse of discretion because the bad billing practices by counsel made it difficult to cipher reasonable work effort, resulting in a fee award which is substantially reduced or denied in entirety.  (In re Marriage of Nassimi, 3 Cal.App.5^th 667, 695-696 (2016).)

Consumer Statutes: Lee v. Cardiff Now Published

Dealt With Fee Denial Under Swimming Pool Fee-Shifting Statute.

            On July 16, 2023, we posted on Lee v. Cardiff, Case No. A163817 (1^st Dist., Div. 1 July 13, 2023), which was unpublished at the time and dealt with an attorney’s fees denial because a plaintiff did not prevail on a statutory swimming pool fee-shifting statute but broader home improvement issues.  We can now report that the opinion was certified for publication on August 11, 2023.

 

Consumer Statutes: Plaintiff Not Recovering On A Majority Of Her Swimming Pool/Spa Claims Was Not Entitled To Attorney’s Fees Under Business & Professions Code Section 7168

Plaintiff Did Obtain Compensatory Damages On Other Claims, But No Need To Award Other Fees Where Plaintiff Did Not Prevail On The Swimming Pool Claims.

            In Lee v. Cardiff, Case No. A163817 (1^st Dist., Div. 1 July 13, 2023) (unpublished), plaintiff brought claims relating to a swimming pool/spa and other constructions claims.  Plaintiff did prevail on many of the claims, but the lower court rejected most of her swimming pool/spa claims.  Plaintiff moved for attorney’s fees under Business & Professions Code section 7168, which is only limited to swimming pool issues.  The lower court denied fees under this provision because plaintiff did not prevail on the swimming pool issues even though she did under more expansive home improvement issues.

            The First District affirmed.  Section 7168 is limited to swimming pool issues, not other home improvement issues, such that a plaintiff not prevailing on the swimming pool issues was dispositive based on the limited swimming pool “prevailing party” status.  The appellate court determined that the statute could not be expanded to cover other home improvement issues.

BLOG COMMENTARY—This case takes co-contributor Mike back away.  He started out as a law clerk on the Fifth District Court of Appeal.  He helped contribute to the swimming pool opinion in King v. Hinderstein, 122 Cal.App.3d 430 (1981) when he clerked for Justice Zenovich.  That opinion of the legislative history behind the remedial purposes of section 7168.

Consumer Statutes, Section 998: Chen v. BMW Case Now Published

Lemon Law Plaintiff Obtained Significantly Less Fees Based On Rejected Section 998 Defense Offer.

            On December 30, 2022, we posted on Chen v. BMW of North America, a Sixth District unpublished opinion in which a significantly reduced lemon law fees award to a plaintiff, who rejected a defense CCP § 998 offer, was found to be valid and reasonable.  Plaintiff was only awarded a little over $53,000 out of a requested $436,000.  We can now report that Chen was certified for publication on January 23, 2023, posted on January 24, 2023.

Consumer Statutes: Plaintiff In Lemon Law Case Did Not Beat 998 Offer Such That Most Post-Offer Fees And Costs Were Properly Disallowed

$53,509.51 In Pre-Offer Fees Were Allowed, Not Plaintiff’s Almost $470,000 Fees/Costs Request.

            Under recent posts, we have shown how a good defense offer under CCP § 998 will not pay dividends for a plaintiff who does not properly assess it and does not accept the offer.  That lesson again resonated in Chen v. BMW of North America, Case Nos. H048257/H048444 (6^th Dist. Dec. 29, 2022) (unpublished).

            A year into the case, BMW made a 998 offer for $160,000, exclusive of pre-offer costs and fees to be determined by the court, plus any other fees and costs to be determined by the court through a noticed motion.  Plaintiff did not accept the 998 offer, but two years later he settled on just about the same terms as the prior 998 offer.  Plaintiff moved for $436,071.82 in fees and costs under the lemon law statute, but the trial court awarded just $53,509.51 (mainly pre-offer fees/costs, augmented by 45 days of post-offer fees/costs).

            Plaintiff’s appeal was unsuccessful.  The appellate court decided that the 998 offer was specific enough and was made in good faith—plaintiff could evaluate the worth of the offer.  With respect to lemon law expenses recoverable separate from attorney’s fees and costs, nothing in the offer prevented plaintiff from moving for them.  Even though the court awarded 45 days of post-offer expenses (which technically was improper), BMW did not cross-appeal such that plaintiff got a little bit of a boondoggle. 

Consumer Statutes, Section 998: $143,624.59 Costs Award To Lemon Law Defendant, Based On A Successful CCP § 998 Offer, Is Affirmed On Appeal

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.

Consumer Statutes, Preemption: FTC’s Holder Rule Does Not Limit Recovery Against Lender Where State Prevailing Party Fee Statute Allows For Recovery Of Fees By Installment Credit Sale Debtor

California Supreme Court Resolves Split In DCA Thinking, Disapproving Lafferty And Spikener Decisions.

            In Pulliam v. HNL Automotive Inc., Case No. S267576 (Cal. Supreme Ct. May 26, 2022) (published), our state supreme court confronted the FTC’s Holder Rule which requires consumer credit contracts to contain warnings that (1) all defenses against the seller of a good/service can also be asserted against a third-party creditor, and (2) any recovery by the debtor shall not exceed the amounts paid by debtors thereunder.  Plaintiff purchased a used car from a dealership defendant and took out paper from a third-party creditor under an installment credit contract with the Holder Rule warnings.  Plaintiff sued both defendants under the Song-Beverly Consumer Warranty Act (California’s lemon law), recovering $21,957.25 in damages and then requesting $169,602 in attorney’s fees based on the lemon law’s fee shifting provision.  Creditor defendant argued that the Holder Rule limited the ability to recoup fees, a contention rejected by the trial court in awarding fees against both defendants.  The DCA affirmed, with the California Supreme Court granting review of the case to resolve an intermediate split in appellate thinking on the issue.

            The state high court decided that the Holder Rule limitation did not bar plaintiff’s recovery of fees against the creditors where the plaintiff seeks fees from a holder under a state prevailing party statute such as the lemon law fee shifting provision.  In doing so, it disapproved the two appellate decisions determining that the Holder Rule did so limit fee recovery, namely, Lafferty v. Wells Fargo Bank, N.A., 25 Cal.App.5^th 398, 418-419 (2018) [discussed in our post of July 20, 2018] and Spikener v. Ally Financial, Inc., 50 Cal.App.5^th 151, 159-163 (2020) [reviewed in our June 11, 2020 post].

Consumer Statutes: Split Ninth Circuit Panel Decides That Attorney’s Fees Can Be Included In Determining $50,000 Amount In Controversy Jurisdictional Threshold Under The Federal Magnuson-Moss Warranty Act

Dissent Disagrees; However, Because No Fee Entitlement Was Available Under Michigan State Statutes, Fees Were Not Includable So Federal Jurisdiction Was Not Present—A Conclusion Endorsed By All The Panel Justices.

            The federal Magnuson-Moss Warranty Act (MMWA) has a $50,000 amount-in-controversy jurisdictional threshold (exclusive of interests and costs), computed on the basis of all claims in the suit.  15 U.S.C. § 231(d)(3)(B).   In the particular case before it, in Shoner v. Carrier Corp., Case No. 20-56327 (9^th Cir. Apr. 14, 2022) (published), plaintiff brought a putative class action against Carrier for a defective air conditioner which was based on Michigan implied/warranty claims and the Michigan Consumer Protection Act.  The Ninth Circuit had to determine a split in sister circuit on whether attorney’s fees were “costs” which had to be excluded and further determine if there was fee entitlement anyway so as to confer federal jurisdiction on the district court with respect to the MMWA claim.

            In a 2-1 opinion, the majority found that attorney’s fees could be included in determining the jurisdictional threshold and were not “costs,” disagreeing with four sister circuit courts and siding with the Seventh Circuit on the issue.  The dissent believed that this issue did not have to be resolved based on the ultimate conclusion of the majority, but the dissenting justice had strong doubts that fees were to be counted in the calculus.

            However, that brought the panel to the issue of whether fees were allowable under the Michigan state law claims for purposes of being included.  Unanimously (with the dissenting justice concurring in this conclusion), the panel concluded there was no fee entitlement under Michigan law such that the statutory threshold could not be met and the MMWA claim was dismissed.

Consumer Statutes, Preemption: FTC Holder Rule Was To Be Applied Retroactively Such That Attorney’s Fees Denial Should Be Reversed

Civil Code Section 1495.5 Recent Enactments Sealed The Result.

            The Fifth District, in Reyes v. Beneficial State Bank, Case No. F080827 (5^th Dist. Mar. 2022) (published), had to confront a FTC Holder Rule argument that it capped attorney’s fees as “recovery” by its terms.  The appellate court, relying on Pulliam (see our Feb. 2, 2021 post), agreed that this was the case, but reversed an attorney’s fees denial because Civil Code section 1459.5 retroactively nullified the impact of this rule so that the Holder Rule cap did not apply. 

Consumer Statutes: $406,154.25 Fee Award Under The Song-Beverly Act And The CLRA Affirmed Despite Reversal of CLRA Restitutionary Award

Despite Finding Defendant Made A Proper Offer Of Correction, CLRA Injunctive Relief and Fee Entitlement Under The Lemon Law Justified Entry Of The Trial Judge’s Fee Award.

            In DeNike v. Mathew Enterprise, Inc., Case No. H046718 (6^th Dist. Mar. 16, 2022) (unpublished), plaintiff suing for vehicle problems under the Song-Beverly Consumer Warranty Act (Lemon Law) and Consumers Legal Remedies Act (CLRA) obtained a jury verdict that defendant violated both Acts, determining that plaintiff was entitled to an award of $36,192.79 as well as injunctive relief under the CLRA.  The trial judge awarded plaintiff $406,154.25 in attorney’s fees, the lodestar request plus a 1.5 multiplier.  On appeal, the 6^th District vacated the CLRA jury verdict after determining that restitution was not warranted based on an appropriate correction offer by the defendant.  The injunctive relief was not disturbed.

            Defendant appealed the fees award based on the reversal of the CLRA jury verdict, but that did not change the award in favor of plaintiff.  Defendant argued that under Benson v. Southern California Auto Sales, Inc., 239 Cal.App.4^th 1198, 1212 (2015), no attorney’s fees could be collected in a CLRA case where a proper correction offer was made by a defendant.  The Sixth District, however, did not believe that Benson applied to the Lemon Law claim and jury verdict under that Act, such that the fee order was justified for that reason.  However, the appellate court also determined that it did not have to go that far because plaintiff did obtain CLRA injunctive relief, which justified fees and with Benson expressly declining to address the issue of fee entitlement if injunctive relief was obtained.  So, the trial court did not have to reconsider its fees ruling such that it stood after the judgment was modified via the published decision to delete the CLRA restitutionary jury verdict. 

Consumer Statutes, Reasonableness Of Fees: 4/2 DCA Affirms Trial Court’s Almost $400,000 Haircut To Prevailing Song-Beverly Plaintiffs’ Fee Request

The Panel Found No Abuse Of Discretion In Trial Court’s Finding That The Hourly Rate And Number Of Hours Requested Were Excessive For A Case That Was Not Complex And Involved Little, If Any, Law And Motion Work.

            In Mallonee v. Toyota Motor Sales, Case No. E075088 (4^th Dist., Div. 2 March 10, 2022) (unpublished), Song-Beverly plaintiffs filed an unlimited action concerning a Prius they had purchased that they believed to have electrical issues. Following an eight day trial, the jury awarded plaintiffs the $19,559.88 their counsel argued for in closing arguments, which consisted of $6,519.96 (representing the amount plaintiffs paid toward the car before it was totaled in an accident) and a Song-Beverly penalty of $13,039.92.  Afterward, plaintiffs moved for $307,316 in fees, plus a multiplier of .4 – for a total of $430,242.40 in requested fees – and submitted time records showing that nine attorneys spent about 780 hours on the case, and paralegals/law clerks spent another 143.4 hours on the case.  However, the trial court found the work performed in the case did not justify the fee request – given the case was not complex and involved little, if any, law and motion work – and awarded $40,875 after reducing the number of attorneys necessary and reasonable for the case to two, reducing their and the paralegal’s hourly rates, and reducing the attorneys’ reasonably expended hours to a combined total of 135 and the paralegal’s to 25 hours.

            Plaintiffs appealed – arguing that the trial court improperly reduced the fee award based on the amount of the jury award.  Not so, said the 4/2 DCA. First, trial courts have the discretion to significantly reduce fee awards or award no fees at all when a fee request is unreasonably excessive.  (Chavez v. City of Los Angeles, 47 Cal.4th 970, 990 (2010); Christian Research Institute v. Alnor, 165 Cal.App.4th 1315, 1318-1319 (2008); Guillory v. Hill, 36 Cal.App.5th 802, 815 (2019); and 569 East County Boulevard LLC v. Backcountry Against the Dump, Inc., 6 Cal.App.5th 426, 432 fn. 7 (2016).)  Second, although the trial court had commented that it was “bothered” that the case should have been a limited jurisdiction case, the comment was not a final finding and could not impeach the trial court’s written ruling (Key v. Tyler, 34 Cal.App.5^th 505, 539, fn. 16 (2019)), and the written ruling confirmed that the fee award was reduced because the trial court found it to be excessive.

Consumer Statutes: $643,615 Lemon Law Fee Recovery Stands Even Though $227,715.60 Compensatory/Civil Penalty/Punitive Damages Award Was At Issue

Goes To Show How Recoverable Fees Can Eclipse The Merits Award.

            Anderson v. Ford Motor Co., Case No. C089603 (3d Dist. Feb. 8, 2022) (partially published; fee discussion not published) illustrates how statutory fee-shifting provisions, in this case, a lemon law Song-Beverly Act statute can be more oppressive than the merits judgment with respect to amounts awarded in a case.  Here, plaintiff obtained a $227,715.60 award consisting of $47,715.60 in compensatory damages, $30,000 in civil penalties, and $150,000 in punitive damages.  Those merit damages were affirmed on appeal.  Once that was done, the lower court’s award of $643.615 in Song-Beverly Act fees was also sustained.  Who says that fees do not drive the result in many cases?  We do not, because we have seen it too often in our posts over the years.

Consumer Statutes, Costs: Recovery Of $133,239.75 In Attorney Fees, Pre-Judgment Interest And Costs Affirmed For Song-Beverly Plaintiff Who Had Paid Only $6,204.68 Under A Consumer Credit Contract.

2/8 DCA Agreed With Pulliam That The Holder Rule Cap Does Not Preclude Recovery Of Attorney Fees And Further Determines That The Cap Does Not Preclude Recovery Of Costs, Nonstatutory Costs, Or Prejudgment Interest.

            In Melendez v. Westlake Services, LLC, Case No. B306976 (2d Dist., Div. 8 January 28, 2022) (published), plaintiff who purchased a car through a retail installment contract sued the seller and holder of the contract for violations of CLRA, the Song-Beverly Consumer Warranty Act (California’s lemon law, Civ. Code, § 1790 et seq.), Civil Code § 1632 (requiring translation of contracts negotiated primarily in Spanish), and the unfair competition law (Bus. & Prof. Code, § 17200 et seq.), along with fraud and negligent misrepresentation claims. Through a settlement agreement, plaintiff ultimately recovered the $6,204.68 he had paid under the retail installment contract, with the remaining contract balance waived.  Additionally, pursuant to the terms of the agreement, plaintiff moved for and was awarded recovery of $115,987.50 in attorney fees, $2,956.62 in prejudgment interest, and $14,295.63 in costs.

            Defendant appealed and argued that the Federal Trade Commission’s Holder Rule – promulgated in 1975 as a consumer protection measure by which the holder of a consumer credit contract is subject to all claims the debtor could assert against the seller of goods/services obtained under the contract – limits the debtor’s recovery from the holder to the amount paid by the debtor under the contract. The 2/8 DCA disagreed.

            In affirming the trial court’s fees award, the panel followed the conclusions set forth in Pulliam v. HNL Automotive Inc., 60 Cal.App.5^th 396 (2021) [discussed in our February 02, 2021 post] – that the Holder-Rule limitation on recovery does not apply to attorney fees, and that the FTC’s contrary interpretation is not entitled to deference.  The panel also affirmed the trial court’s prejudgment interest and costs award to plaintiff – applying Pulliam’s fee recovery rationale, along with the conclusions set forth in Lafferty v. Wells Fargo Bank, N.A., 25 Cal.App.5^th 398 (2018) [discussed in our July 20, 2018 and June 11, 2020 posts] as to prejudgment interest and costs – though disagreeing with Lafferty’s conclusion on fee recovery.

Consumer Statutes, Section 998: 4/1 DCA Decides That Pragmatic, Litigation Objective Test Governs Lemon Law Cases, Not The Net Monetary Award Test Under CCP § 1032

Section 998 Offer By The Defense Was Too Uncertain—A “Moving Target.”

            In Duff v. Jaguar Land Rover North America, LLC, Case No. D078100 (4^th Dist., Div. 1 Jan. 27, 2022) (published), the 4/1 DCA departed company from its prior approach as far as awarding lemon law fees to a prevailing plaintiff under Civil Code section 1794(d).  It earlier, in Reveles v. Toyota by the Bay, 57 Cal.App.4^th 1139, 1158 (1997), had applied a “net monetary award” test borrowed from CCP § 1032 to determine the prevailing party, even though a majority of subsequent cases had eschewed this approach and determined that a more rigorous “pragmatic, litigation objectives” test should be adopted.  The Duff court decided that the majority approach should now be followed, reversing a $684,250 attorney’s fees award where the lemon law plaintiff only obtained nominal damages of $1.00 after a determination that no actual damages were proven.  So, a remand was necessary in light of the adoption of the more rigorous pragmatic test.  The appellate court also determined that the defense CCP § 998 offer was too uncertain—a “moving target”—in offering to settle for a set repurchase amount or higher amount as could be subject to future substantiation by plaintiff. 

Consumer Statutes, Special Fee Shifting Statutes: Trial Court’s Significant Reduction To Prevailing CLRA Plaintiffs’ Attorneys Fees Request And Denial Of Costs Award Was Abuse Of Discretion

The Trial Court Improperly Based Its Fee/Costs Awards Entirely On Defendant’s Counsel’s Arguments Which Were Made Without Any Supporting Evidence.

            In Solis v. MVP Cars, Case No. E075101 (4^th Dist., Div. 2 January 24, 2022) (unpublished), defendant was sued under the Consumer Legal Remedies Act (Civ. Code, §§ 1750 et seq.) for its failures to perform a smog check on, and register with the DMV, a vehicle it had sold – despite buyer having paid the smog check and registration fees. Six to seven months into the litigation, and after defendant filed a motion to have buyer’s wife added as a plaintiff and the parties had conducted discovery, defendant finally smogged the vehicle and registered it with the DMV.  As a result, plaintiffs then dismissed the lawsuit, but sought $1,045 in costs and $21,360 in attorney fees ($17,800 lodestar with 1.2 multiplier).  The trial court, however – adopting defendant’s opposition claims that the fees/costs request was unjustified because the issues with the vehicle could have been resolved with a phone call and litigation was unnecessary – denied plaintiffs’ request for costs and awarded them only $1,925 in pre-litigation attorney fees. Plaintiffs appealed.

            In a 3-0 opinion, authored by Justice Codrington, the 4/2 DCA reversed – finding the trial court had abused its discretion by improperly resting its significantly reduced fee award entirely on defendant’s counsel’s arguments which were made with no supporting evidence whatsoever.  (Gdowski v. Gdowski, 175 Cal.App.4th 128, 139 (2009) [“Statements and arguments by counsel are not evidence”]; Villacorta v. Cemex Cement, Inc., 221 Cal.App.4th 1425, 1433 (2013) [appellate court will “not consider counsel’s argument in determining whether there is substantial evidence to support the verdict” because “[a]rgument by counsel is not evidence”].)  Additionally, the panel concluded that the trial court’s finding that the matter could have been resolved without litigation lacked evidentiary support given that defendant litigated the matter for at least six months before finally smogging and registering the vehicle. 

Consumer Statutes, Section 998: Covert Decision Now Published

Case Deals With Lemon Law Section 998 Offer Terms and Validity.

            In our January 4, 2022 post, we posted on Covert v. FCA USA, LLC, Case No. B303663 (2d Dist., Div. 7 Jan. 4, 2022), unpublished at the time.  It considered CCP § 998 offers in a lemon law case, specifically what terms are appropriate and whether the offers were valid.  We can now report that the decision was certified for publication on January 11, 2022.

Consumer Statutes, Section 998: Because Defense Section 998 Offers Were Valid, Trial Judge Had To Restudy Costs And Fee Rulings To Determine If The First Defense Offer Was In Good Faith

Costs And Fee Awards Will Have To Be Reexamined.

            In Covert v. FCA USA, LLC, Case No. B303663 (2d Dist., Div. 7 Jan. 4, 2022) (unpublished), an automaker was found liable to the vehicle owner for $48,416 under a Song-Beverly Act lemon law case.  However, earlier, automaker made two separate CCP § 998 offers for $51,000 two months after the lawsuit was filed and $145,000 three weeks before trial, containing terms that plaintiff claimed were ambiguous and vague (to be discussed) even though both offers indicated that pre-acceptance fees and costs would be determined on a noticed motion if the parties could not agree to those amounts plus the base sums and the case would be dismissed rather than entry of judgment.  After plaintiff obtained some costs and significant attorney’s fees, the defense appealed and obtained a reversal with instructions on remand.

            The 2/7 DCA decided that the prior 998 offers were valid, except that the lower court needed to decide whether the first offer was premature/not made in good faith, which was not fully borne out by the record below.  However, in so doing, here are the takeaways from the appellate court, which diverged from lower court rulings as to ambiguity in the two offers:

• • • Post-offer fees not addressed. No way.  The offer quoted language from Civil Code section 1794(d) under the lemon law scheme, such that these fees were potentially in play.
    • Prejudgment/postjudgment interest not addressed. The offer was definite enough for plaintiff to assess whether prejudgment interest had to be factored in (with the lower court denying this ultimate request).  As far as postjudgment interest, the offer indicated there would be only a dismissal such that this type of interest was a “no.”
    • Failure to specify whether defendant would require a separate release. The offers did not include a release requirement, plus, any release would be limited to the claims in the case.
    • Failure to include an express good faith provision. Plaintiff offered no authority for why an offer had to include a good faith settlement provision.
    • Lack of specific payment date. Although cases had decided that the lack of a specific payment date is not an uncertainty, plaintiff controlled when the dismissal would be entered and a fee motion prosecuted, which prevented gamesmanship by the defense.
    • Lack of vehicle surrender date. Although having superficial appeal, plaintiff had plenty of information to evaluate whether to take the offer even if there was some delay on this issue.

Because factual issues remained on whether the first 998 offer was valid, the matter was remanded with instructions on what to do with respect to costs and fees depending as to how the trial judge ruled on whether the first offer was premature and not a good faith offer.  This meant that a costs/fee award to plaintiff of around $251,000 went away depending on what happened on remand, which might mean no fees to plaintiff and some costs to defense as the prevailing party.  BLOG CONCLUSION—uncertainty, uncertainty!

Consumer Statutes, Settlement: Attorney’s Fees Award In Lemon Law Case Affirmed As To Settling Party’s Responsibility, With Other Party Not Agreeing To Pay Fees Not Responsible

Given Merits Judgment Was Paid, Other Party Was Not Responsible For Fees.

            The next case we post on, Carter v. Mike Thompson Recreational Vehicles, Case No. G058205 (4^th Dist., Div. 3 Sept. 14, 2021) (unpublished), shows how care needs to be given to drafting settlement agreements as far as preserving attorney’s fees exposure to different defendants.  Justice Bedsworth authored the 3-0 panel decision.

            What occurred here is that manufacturer EHGNA and dealer Thompson entered into a settlement agreement for a lemon law dispute.  Although both defendants were liable to fund the merits settlement, only ENGNA was liable for fees.  That settlement was dispositive on appeal.  EHGNA went into Canada receivership, such that plaintiff car owner shifted sites to Thompson as far as fee recovery.  That did not work.  Both the lower and appellate courts honored the settlement agreement entered into between the parties.  Only EHGNA, not Thompson, was responsible for fees, with plaintiff agreeing to this allocation such that there was no unenforceable waiver of lemon law fees given the bargain between the parties. 

Consumer Statutes, Section 998, Special Fee Shifting Statutes: Abuse Of Discretion Where Trial Court Reduced Song-Beverly Attorney Fees By Almost $100,000 Because Plaintiffs Rejected § 998 Offer That Was Only $8,500 Less Than Ultimate Settlement

The Trial Court Improperly Cut Off Fees Incurred After Plaintiffs’ Rejection Of The § 998 Offer Instead Of Engaging In A Lodestar Analysis Of The Entire Case Pursuant to Civil Code § 1794(d).

            In Reck v. FCA US LLC, Case No. A157966 (1^st Dist., Div. 1 May 24, 2021) (published), the trial court awarded attorney fees of only $30,237 ($20,158 lodestar with a .5 multiplier) out of a requested $187,247 ($124,831 lodestar with a .5 multiplier) to Song-Beverly plaintiffs.  The trial court determined the reduction was appropriate because plaintiffs beat defendant’s pretrial Code of Civil Procedure § 998 offer by only $8,500 during a mandatory settlement conference two days after trial began, and had incurred almost $100,000 in fees between the time they rejected the § 998 offer and ultimately settled.  The trial court also excluded fees incurred by plaintiffs for two unsuccessful motions.  Plaintiffs appealed.

            The 1/1 DCA reversed and remanded – finding the trial court abused its discretion by failing to base its award – pursuant to the Song-Beverly Act (California’s Lemon Law) – on “actual time expended” for hours that were “reasonably incurred.” (Civil Code § 1794(d).)   The trial court improperly cut off all attorney fees incurred after plaintiffs’ rejection of the § 998 offer instead of properly engaging in a lodestar analysis of the entire case – one where the final settlement represented more than a 10% increase over the § 998 offer and also resulted in a .5 multiplier being added to plaintiffs’ recovery. 

Consumer Statutes, Multiplier, Reasonableness Of Fees: Trial Court Did Not Abuse Its Discretion In Awarding $20,000 Fee Award Out Of Requested $40,113.75 Base Lodestar

The Problem Was That The Case Was Routine Such That Hours Billed For “Cut And Paste” Activities Were Excessive, With A 25% Positive Multiplier Properly Denied.

            In Fishback v. FCA US, LLC, Case No. B298677 (2d Dist., Div. 3 May 14, 2021) (unpublished), a lemon law plaintiff was awarded a lesser sum of attorney’s fees of $20,000 out of a requested $52,834,30 ($40,113.75 lodestar plus a 25% positive enhancement).  Plaintiff was not satisfied with this fee awarding, triggering an appeal.  When it comes to the amount of fees, plaintiff could not surmount the deferential abuse of discretion standard.  The lower court found that this was a routine case, the discovery was “cookie-cutter” and “cut and paste,” there was no law and motion proceedings except for the fee motion, there was limited discovery, and a settlement was reached early in the case.  None of these conclusions were disturbed on appeal.  However, we will give an example of fees found to be excessive—counsel traveling by car from Rancho Palos Verdes to Burlingame and back to defend a deposition, given a flight from LAX to SFO takes about one hour—did not justify counsel’s billing for 16.1 hours of automobile travel, as the trial judge could determine as not being reasonable in nature. 

            Also, the 25% positive enhancement correctly rejected due to the lower court’s conclusion that this was a garden-variety lemon law case. 

Consumer Statutes: Reversal of Lemon Law Compensatory Damages Component For A Limited Restudy Also Required A Limited Re-Do On The Fee Award

$29,357.35 Lemon Law Fee Award May Need To Be Increased Somewhat On Remand.

            We have to say that appellate courts try to “telegraph” to litigants what needs to be done when there is a limited remand where fee recovery is involved.  That is what happened in Crayton v. FCA US, LLC, Case Nos. B294528 et al. (2d Dist., Div. 5 Mar. 30, 2021) (partially published; fee discussion not published).

            Plaintiff won $86,953 in a car lemon law case.  He then sought $142,183.50 in fees under the Song-Beverly Act, but the trial judge awarded only $29,357.35 based on the fees incurred before the defense admitted liability.  The 2/5 DCA reversed the compensatory award, because plaintiff was entitled to some registration renewal and insurance fees as part of the lemon law compensatory award.  That meant that the fee recovery had to be reversed, with the appellate court signaling that the remand consideration should focus on the increased fees incurred to obtain any further compensatory damages and maybe something for winning on appeal. 

Consumer Statutes: Reversal And Remand Of $45,378.99 Judgment Entered In Favor Of Lemon Law Plaintiff Due To Erroneous Special Jury Instruction Necessitates Reversal Of $179,510 In Attorneys’ Fees Awarded To Plaintiff

The Trial Court’s Error In Giving The Jury Plaintiff’s Special Instruction That Took Out Of Context The Statutory Requisites For Tolling Express Warranties, As Are Properly Embodied In CACI 3231, Was Prejudicial.

            In Nunez v. FCA US LLC, Case Nos. B297453/B299208 (2d Dist., Div. 8 February 26, 2021) (published), plaintiff brought a Song-Beverly Consumer Warranty Act (Civ. Code § 1790 et seq.) (commonly known as California’s lemon law) against the manufacturer of the Jeep Patriot she had purchased as a used car regarding a throttle issue she began experiencing over two-and-a-half years after purchase, and that the original owner had experienced about a month before plaintiff’s purchase. 

            The case went to jury trial, and at the close of plaintiff’s case in chief, defendant moved for nonsuit on all causes of action – with the trial court granting as to plaintiff’s breach of implied warranty claim.  On the remaining claims, the jury returned unanimous special verdicts in plaintiff’s favor – awarding plaintiff $15,126.33 in damages plus a penalty of two times the damages amount, for a total of $45,378.99, based on findings that the car had a warranty covered defect that substantially impaired its use, value or safety which defendant failed to repair after a reasonable number of opportunities, that defendant willfully failed to begin repairs within a reasonable time and complete repairs within 30 days, and that defendant willfully failed to replace or repurchase the vehicle.  The trial court denied defendant’s motion for a new trial and judgment notwithstanding the verdict, and awarded plaintiff $179,510 in fees and $31,888.49 in costs – out of a requested $383,758.02.

            Defendant appealed the judgment due to instructional error, along with the post-trial orders, and the fees award.  Plaintiff cross-appealed – seeking reversal of the trial court’s order granting a nonsuit on the implied warranty claim should defendant succeed in reversing the judgment.

            As to defendant’s appeal of the judgment, the 2/8 DCA reversed and remanded – finding prejudice occurred with the trial court’s error in giving the jury plaintiff’s special instruction that took out of context the statutory requisites for tolling express warranties and conflicted with CACI No. 3231, which properly embodies the statutory requisites and was also given to the jury.  This reversal necessitated reversal of the fees awarded to plaintiff.

            As to plaintiff’s cross-appeal, the panel affirmed – finding plaintiff’s implied warranty claim failed because under the lemon law only distributors and retail sellers, not manufacturers, are liable for breach of implied warranties in the sale of a used car where, as in this case, the manufacturer did not offer the used car for sale to the public.

Allocation, Consumer Statutes, Multipliers, Preemption: Prevailing Lemon Law Plaintiff Winning Only $21,957.25 In Damages At Jury Trial Properly Awarded $169,602 In Attorney Fees, Inclusive Of .2 Multiplier, Against Dealership And Finance Company

Apportionment Was Not Necessary Due To Intertwined Claims, Multiplier Was Appropriate Given Plaintiff’s Counsel’s Contingency Risk, And – Contrary To Lafferty And Spikener – 2/5 DCA Determined That The Holder Rule Does Not Limit The Attorney Fees A Plaintiff May Recover From A Creditor-Assignee.

            For a great discussion on the Holder Rule cap and its applicability to attorney fees, we commend Pulliam v. HNL Automotive Inc. et al., Case No. B293435 (2d Dist., Div. 5 January 29, 2021) (published) to our readers.

            In Pulliam, a Song-Beverly Act (California’s lemon law) plaintiff was awarded $169,602 in attorney fees, consisting of a $141,335 lodestar plus a .2 multiplier, after prevailing at jury trial and being awarded $21,957.25 in damages against dealership and the finance company that accepted assignment of the retail installment sales contract for her purchase of a “Certified Pre-Owned” 2015 Nissan Altima. 

            Defendants appealed – arguing: (1) plaintiff’s counsel failed to provide evidence of their hourly rates, (2) the trial court erred in refusing to apportion attorney’s fees between plaintiff’s successful and unsuccessful causes of action, (3) the trial court erred in applying a lodestar multiplier because the lawsuit was not exceptionally difficult and plaintiff’s counsel was not exceptionally skilled, and (4) finance company was not liable for attorney’s fees under title 16, section 433.2 of the Code of Federal Regulations (2020) (the Holder Rule) because its liability could not exceed the amount plaintiff paid to it. 

            The 2/5 DCA, in a 3-0 opinion authored by Justice Rubin, affirmed – finding no abuse of discretion, and concluding the Holder Rule does not limit the attorney fees a plaintiff may recover from a creditor-assignee.  First, plaintiff’s counsel attached a declaration – which included a copy of the firm’s invoice identifying the timekeepers, the work performed, and the timekeepers’ hourly rates – to plaintiff’s fee motion.  Additionally, plaintiff’s counsel’s declaration described the firm’s rates and the qualifications of each timekeeper, along with a national survey of prevailing rates among consumer protection attorneys – including California attorneys.  Second, the record supported the trial court’s view that apportionment of the fees was not possible because the successful and unsuccessful claims involved a common core of facts and intertwined theories.  Third, the panel found the multiplier was modest and accounted for the risk plaintiff’s counsel took in litigating the case against defendants whom the court found made the case challenging and protracted.

            Finally, as to the Holder Rule – promulgated by the Federal Trade Commission in 1975 as a consumer protection measure to abrogate the holder in due course rule for consumer installment sales contracts funded by a commercial lender – the panel found its cap does not apply to attorney fees.  The final sentence of the Holder Rule states that recovery by the debtor shall not exceed the amounts paid by the debtor under the installment sales contract. Finance company asserted that this cap limited plaintiff’s recovery of both damages and attorney fees from it to the amount she paid under the installment contract – relying on Lafferty v. Wells Fargo Bank, N.A., 25 Cal.App.5th 398 (2018) [discussed in our July 20, 2018 post] and Spikener v. Ally Financial, Inc., 50 Cal.App.5th 151 (2020) [discussed in our June 11, 2020 post].  However, as the panel pointed out, many opinions on this issue have been contradictory, and it concluded that to include attorney’s fees in the Holder Rule’s limitation on recovery would be out of sync with its objective of reallocating the costs of the seller’s misconduct from the consumer back to the seller and creditor.  Additionally, the California Legislature had taken a similar view in enacting Civil Code § 1459.5 – intending to repeal Lafferty and allow recovery of fees in excess of the Holder Rule’s cap.  As to financial company’s argument that, as held in Spikener, the FTC’s Rule Confirmation (holding fees are included in the cap) is entitled to deference and preempts § 1459.5, the panel disagreed – finding the FTC’s Confirmation did not meet the four-marker test set forth in Kisor v. Wilkie, 139 S. Ct. 2400 (2019) for determining when regulatory deference is appropriate.  “[I]n considering deference, ‘a court must make an independent inquiry into whether the character and context of the agency interpretation entitles it to controlling weight. [Citations.]’” (Id. at p. 2416.)

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.)

Consumer Statutes, Section 998: Plaintiff Only Suing For Injunctive Relief And Not Proving Damage Liability Under CLRA, Where Accepted 998 Offer Was Silent On Liability, Fees, And Costs, Did Not Give Rise to Fee Recovery

Case Is A Real Attention Getter With Respect to Acceptance Of 998 Offers Which Are Carefully Drafted.

            We like this next case because if offers practitioners on both sides of the aisle an opportunity to carefully craft and accept CCP § 998 offer in certain consumer-oriented areas of the law.  Mikki v. Lifemark Group, Inc., Case No. D076885 (4^th Dist., Div. 1 Jan. 20, 2021) (unpublished) is the opinion we next discuss.

            What happened here is that the plaintiff sued defendant, in a dispute about a cemetery space, for injunctive relief primarily under the Consumers Legal Remedies Act (CLRA) and expressly disclaimed damages in the complaint.  Early on, the defense served, and plaintiff accepted, a CCP § 998 offer to pay her $5,000.01 “exclusive of attorneys’ fees and costs incurred as of the date of this offer,” although nothing in the offer stipulated to liability or acknowledged that plaintiff was the prevailing party.  Plaintiff moved for $67,000 in attorney’s fees under CLRA, but the lower court only ordered the defense to pay $38,000 in fees.  Defendant appealed.

            The defense won a reversal as a matter of law with respect to the fee award.

            Initially, the defense argued that no fee award was justified because plaintiff served no CLRA pre-lawsuit demand.  However, that argument was rejected because it only applies to damages claims, not an injunctive situation which was involved here.

            However, as all opinions must, that brought the appellate court to consider whether plaintiff was a prevailing party under the CLRA.  She was not.  The problem was that the section 998 offer only offered a payment, such that plaintiff did not establish she suffered some tangible damage given that the complaint only sought injunctive relief.  (Cf.  Meyer v. Sprint Spectrum L.P., 45 Cal.4^th 634, 644-645 (2009) [likely the holding; but, if dicta, should be followed here].)  There was no finding of damages liability, which is necessary under the CLRA, Unruh Act, and Disabled Persons Act, and no liability was not conceded under the 998 offer.  That silence was dispositive.  So, the attorney’s fees award went POOF! as a matter of law. 

Consumer Statutes, Fee Clause Interpretation, Settlement: $65,000 Attorney’s Fees Award And $7,987.40 Costs Award Under Lemon Law Settlement Stipulation Are Affirmed On Appeal

Lower Court Properly Harmonized Seemingly Conflicting Terms Of Settlement Stipulation.

            In Boykin v. Premier Universal, Inc., Case No. F078689 (5^th Dist. Dec. 17, 2020) (unpublished), the parties settled a lemon law case, but reserved the issue of recovery of attorney’s fees for a subsequent motion.  The problem was that the settlement stipulation had conflicting terms: (1) “fees and costs are to be resolved by motion to the Court;” and (2) “there will be no prevailing party status and no admission of liability.”  The defense seized on (2), in opposing a fees/costs motion, to boldly contend that plaintiff stipulated that there would be no prevailing party such that fee entitlement did not lie.  The lower court harmonized the two settlement provisions and determined fees/costs were justified to the tune of $65,000 in fees and $7,087.40 in costs.  The Fifth District affirmed, because the (1) settlement stipulation would be rendered meaningless, and the trial judge deciding the issue was the one presiding over the settlement colloquy such that any reasonable inferences on stipulation construction was guided by the substantial evidence rule.  (Winograd v. American Broadcasting Co., 68 Cal.App.4^th 624, 627, 632-633 (1998).)

Consumer Statutes, Section 998: $83,000 Fee Award Affirmed To Lemon Law Plaintiffs Because, As Far As Fee Recovery, Post-Offer Conduct Activities Can Give Rise To Lemon Law Further Fee Recovery

Section 998 Activity Is A Gestalt As Far As Fee Recovery Under The Song-Beverly Act.

            Although unpublished, Regueiro v. FCA US, LLC, Case No. B301772 (2d Dist., Div. 1 Nov. 19, 2020) (unpublished) is an interesting case which involved the intersection between the lemon law fee-shifting provision and CCP § 998 offer provision.  In the end, a “reasonable range” rule was endorsed.

            What happened in Regueiro was that the lemon law plaintiffs prevailed in a Song-Beverly Act case with a fee-shifting provision on an implied warranty claim (despite losing other claims).  A jury awarded $25,586 in favor of the lemon law plaintiffs.  However, well before that, the defense provided various defense CCP § 998 offers of $50,000, $92,695, and then $141,00O.  After lemon law plaintiff prevailed after trial, they moved to recover $362,467.50 in fees plus a 1.5 multiplier for a total of $543,701.25.  The lower court awarded $83,000 in attorney’s fees under the Song-Beverly Act, prompting an appeal by the defense.

            The 2/1 DCA affirmed.

            The primary appeal challenge was that the lower court failed to limit the fees award to fees incurred as of the time of the initial 998 offer.  The Court of Appeal decided that there was no “bright line” rule with respect to considering 998 offers under the Song-Beverly Act rubric.  Rather, instead, “the trial court must consider all the circumstances of the individual case to determine if the plaintiff acted reasonably in pursuing litigation after rejecting a section 998 offer.”  (Slip Opn., p. 5.)  Given that case law, section 998 did not mandate a cessation of attorney’s fees such that the lower court’s refusal to do in connection with a first section 998 “cut off” was no abuse of discretion.

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.)

Allocation, Consumer Statutes, Lodestar, Multipliers: Santana Decision Now Published

Apportionment Between Song-Beverly Act Fees/Costs And Other Causes Of Action, Where Fees Are Not Permitted, Not Necessary Where Claims Are Inextricably Intertwined.  

            In our September 29, 2020 post, we discussed Santana v. FCA US, LLC, Case Nos. G057244/G058020 (4^th Dist., Div. 3), which was unpublished at the time.

            In Santana, the trial court awarded Song-Beverly Act fees/costs of $510,637.87, including a 2.0 multiplier, after a jury found defendant liable for breach of the express and implied warranty, and fraudulent concealment for plaintiff’s claims arising from the defective vehicle he purchased.

            On appeal, the 4/3 DCA vacated a significant portion of damages awarded to plaintiff when it reversed on the fraudulent concealment claim.  However, the appellate panel affirmed the entirety of the fees/costs awarded by the trial court – finding no abuse of discretion because apportionment between the Song-Beverly claims and non-fee claims was not needed given that plaintiff’s causes of action stemmed from an issue common to all of his claims.  As such, plaintiff’s claims were inextricably intertwined such that apportionment would be impracticable, if not impossible.

            Santana was certified for publication on October 23, 2020.

Consumer Statutes, Reasonableness Of Fees, Section 1717: $284,482.48 Attorney’s Fee/Costs Awards, Allocated Between Two Groups Of Defendants, Affirmed Under Consumer Statutes and Section 1717

Inadequate Record, Discretionary Apportionment Principles, And Failure To Show Abuse Of Discretion Led To Affirmance Of Awards.

            Defendants apparently were shocked by a trial judge awarding a combined $284,482.48 in attorney’s fees and costs against two groups of defendants and in favor of a plaintiff in a case alleging that defendants failed to disclose that a sold vehicle had been previously stolen and damaged so as to cause the right-front suspension to fail while plaintiff was driving on the freeway.  The lower court did so under the Consumer Legal Remedies Act, the Song-Beverly Act, and a contractual fees clause under a settlement agreement with the defendants.  Various defense challenges on appeal were not accepted as persuasive by the 2/2 DCA in Horvath v. HC Automotive, Inc., Case No. B295116 (2d Dist., Div. 2 Oct. 7, 2020) (unpublished).

            The argument that plaintiff violated CRC requirements for the fee motion failed because they failed to include the alleged defective notice of motion and motion for fees.  The settlement agreement clearly allowed plaintiff to seek fees, with three bases for fee entitlement being presented.  The trial court has broad discretion to allocate a fees award among various defendants, with the defense side having the opportunity to present their positions on the issue.  The amount of fees awarded was no clear abuse of discretion, given that there is a presumption the lower court is presumed to follow the appropriate factors—with a 40-page minute order showing that to be the case. 

Allocation, Consumer Statutes, Lodestar, Multiplier: Although Fraudulent Concealment Compensatory And Punitive Damages Were Reversed, $510,637.87 Fee/Costs Award Under Song-Beverly Act Case Affirmed On Appeal

Failure To Apportion/Double Counting Lodestar And Enhancement Arguments Not Supported By The Record.

            In many cases, a fees-seeking litigant needs to apportion between fee entitlement and non-fee entitlement claims, unless the thrust of the case involved a fee entitlement case so that it was inextricably intertwined with a non-fee case.  If so, even a reversal of the non-fee case upholds the fee award on the intertwined fee entitlement basis of the case.

            That is what occurred in Santana v. FCA US, LLC, Case Nos. G057244/G058020 (4^th Dist., Div. 3 Sept. 29, 2020) (unpublished).

            In a defective vehicle case for Song-Beverly Act violations and fraudulent concealment, plaintiff was awarded $1,229,531.71 (of which $1 million was punitive damages under the fraud count) and then awarded Song-Beverly Act fees/costs of $510,637.87 inclusive of a positive 2.0 multiplier, but less than 2.5 multiplier requested by plaintiff. 

            The 4/3 DCA affirmed the fees/costs award in a 3-0 panel decision authored by Justice Ikola, although there was a large scale-back of the fraud damages, paring about $1.134 million from the overall award.

            The defense argued that there needed to be an apportionment, but that did not resonate based on the fraudulent concealment being intertwined and with the defense not offering a realistic apportionment proposal for the trial or appellate courts to consider.

            With respect to the “double dip” argument, the appellate court indicated that a plaintiff could not rely on a contingency risk argument if it was being used to justify the lodestar and an enhancement.  However, that did not occur here because the trial judge did not use the contingency risk to justify the hourly lodestar rate but only used it for true enhancement, also mentioning complexity and attorney skill which would have gotten to the same result.

UPDATE: Santana was certified for publication on October 23, 2020.

Consumer Statutes: Reversal Of Substantial Punitive Damages Award Required Reversal Of $953,793.90 CLRA/Song-Beverly Act Fee Award

Compensatory Award Was $72,564.04, Song-Beverly Act Civil Penalties Were $141,973.30, and Punitive Damages Award Was $725,640.40 (After Plaintiff Accepted A Remitted Amount From A $1,451,973.30 Jury Punitive Award).

            Margeson v. Ford Motor Co., Case No. B287445 (2d Dist., Div. 5 Sept. 22, 2020) (unpublished) involved a substantial jury verdict and large attorney’s fees award under the Consumers Legal Remedies Act (CLRA) and Song-Beverly Consumer Warranty Act (Song-Beverly Act) based on a defective new Ford F-350 truck equipped with a 6.0-liter, 350 horsepower diesel engine.  The jury awarded plaintiff $72,564.04 in compensatory damages (a stipulated amount), $141,973.30 in civil penalties under the Song-Beverly Act, and $1,451,973.30 in punitive damages (20 times the compensatory damages, reduced to $725,640.40 by the trial judge—a reduction accepted by plaintiff in order to avoid a new trial on the punitive damages issue).  Subsequently, the lower court awarded plaintiff $953,793.90 under the CLRA and Song-Beverly Act fee-shifting provisions (with the lodestar amount augmented by a 1.8 multiplier in reaching this amount).

            The 2/5 DCA reversed the punitive damages award for a retrial because plaintiff’s expert impermissibly invaded the jury’s province in testifying on how punitive damages should be calculated.  Since resolution of the punitive damages question might figure in the determination of attorney’s fees, the partial reversal of the judgment compelled reversal of the fee award as well.  (California Grocers Assn., Inc. v. Bank of America, 22 Cal.App.4^th 205, 220 (1994).)  Goes to show you how substantial fee awards can occur under consumer fee-shifting statutes, even though we should guess the punitive damage and fee issues will be settled before there is a new trial or renewed fee proceeding.

Consumer Statutes, Prevailing Party: Attorney Fees Of $144,200 Plus Costs Of $5,969.15 Awarded Under Section 1794 To Song-Beverly Plaintiff Affirmed On Appeal Despite Lack of Prevailing Party Ruling

The Trial Court Made An Implied Finding, Which Was Supported By Substantial Evidence, That Plaintiff Obtained His Litigation Objective And Was The Prevailing Party.

            Civ. Code § 1794(d) allows a prevailing buyer to recover reasonable attorney fees incurred in connection with the commencement and prosecution of an action under Civ. Code § 1790 et. seq. – the Song-Beverly Warranty Act (commonly known as California’s “lemon law”.

            In Giamela v. Jaguar Land Rover North America, Case No. B299729 (2d Dist., Div. 2 September 1, 2020) (unpublished), a Song-Beverly plaintiff, who settled with defendant for the repurchase of plaintiff’s vehicle, moved for section 1794 fees of $144,200 plus a 1.25 multiplier for a total of $180,250, and $5,969.15 in costs – with the trial court awarding the full request minus the requested 1.25 multiplier. 

            On appeal, defendant argued the fees/costs award had to be reversed because the trial court did not make an express finding that plaintiff was the prevailing party, substantial evidence did not support a finding that plaintiff achieved his litigation objective, and the trial court applied the wrong legal standard if it determined plaintiff was the prevailing party.

            The 2/2 DCA affirmed.  First, the absence of an express finding is no basis for reversal, and an implied finding – if reached by applying the correct legal standard – must be upheld if supported by substantial evidence.  Second, substantial evidence supported the trial court’s implied finding that plaintiff obtained his litigation objective.  Plaintiff’s acceptance of defendant’s repurchase settlement offer supported a logical and reasonable inference that obtaining repurchase was plaintiff’s litigation objective.  Finally, defendant failed to meet its obligation to affirmatively show that the trial court failed to apply the correct legal standard of achieving litigation objective in reaching its implied finding that plaintiff was the prevailing party in this action.

Consumer Statutes, Preemption: FTC’s Holder Rule For Consumer Installment Sale Contracts Does Limit Consumer’s Fee Recovery Per FTC Construction

California Civil Code Section 1459.5’s Effort To Repeal Was Preempted By FTC Interpretation.

            Lafferty v. Wells Fargo Bank, N.A., 25 Cal.App.5^th 398, 410-414 (2018) [reviewed in our July 20, 2018 post] held that a debtor cannot recover damages and attorney’s fees for a Holder Rule claim under a consumer installment sales contract where a seller assigned the credit facility to a lender where the damages/fees exceeded the amount paid by debtor under the installment sales contract (the “Holder Rule”).  Well, the California Legislature enacted Civil Code section 1459.5 to repeal the Holder Rule.  A car buyer got a rescission of a car transaction and moved for fees beyond what the buyer paid.  The trial denied them based on Lafferty.  The car buyer appealed.  So, to borrow from a Clint Eastwood line in the Dirty Harry movies for car buyer, “Do I feel lucky? Well, do ya, punk?”  Car buyer thought so, but the appellate court did not agree with his gamble on appeal and affirmed the fee denial request.

            In Spikener v. Ally Financial, Inc., Case No A157301 (1^st Dist., Div. 5 June 9, 2020) (published), the appellate court agreed with the FTC’s subsequent interpretation by which the agency hitched itself to the Lafferty limitation of recovery.  With respect to section 1459.5, that was preempted at the federal level so that the fee denial was a correct decision. 

Consumer Statutes: Lemon Law Plaintiff, Only Awarded $2,221.95 In Fees/Costs Out Of $163,205.60, Has Order Reversed Given That She Achieved Triple The Amount Communicated In Informal/Section 998 Offers During The Course Of The Litigation

Given Substantial Reduction In Lodestar Request, De Novo Review Resulted In A Reversal.

            We can definitely tell you that there has been a surge in published and unpublished decisions on the proper standards to be employed in awarding fees under the Song-Beverly Act, commonly known as California’s Lemon Law.  The next unpublished decision joins the ranks.

            In Palombi v. Chrysler Group LLC, Case No. A156166 (1^st Dist., Div. 3 May 20, 2020) (unpublished), plaintiff buying a $25,749 Dodge Avenger had engine/transmission problems that apparently could not be solved, taking her vehicle to an authorized repair facility 11 times over a 16 month period of time.  She finally filed suit under the Lemon Law against the car distributor, which shortly resulted in an informal offer to make restitution of the purchase price and other items as well as asking for “a fully executed Release for all defendants.”  After discovery was ongoing, defendant served four CCP § 998 offers (some of which had ambiguous release and other terms), with plaintiff accepting the fourth offer by which she would be paid $75,000 and reasonable costs, expenses, and attorney’s fees under the Lemon Law (by stipulation or by court-determined motion) in exchange for a case dismissal with prejudice.

            Plaintiff moved for $163,205.60, $19,445.60 in costs, and $95,840 in fees (plus a 1.5 multiplier on the lodestar fee request).  The defense principally argued that the initial informal offer to settle for around $25,000 made further litigation efforts unproductive.  The trial judge bought it hook, line, and sinker, only awarding $1,750 in fees and $471.95 in costs for an aggregate of $2,221.95.

            The 1/3 DCA panel reversed.

            Based on the substantial lodestar fee reduction, the appellate court independently reviewed whether the proper legal principles were followed with respect to the fee award—and they were not.  The defense position ignored these key points:  (1) plaintiff obtained almost a tripling in value over the prior defense offers as far as an actual recovery (from $25,000 to $75,000), hardly limited success under the circumstances; (2) plaintiff was within her rights to reject settlement offers that had unfavorable or vague terms (such as undefined releases or undefined vehicle condition return language such as “undamaged condition (save normal wear and tear)”); and (3) plaintiff did “prevail” within the Lemon Law fee-shifting language, with no obligation to prove that she would have won on the civil penalties issue. 

            Here is a close-to-concluding language by the appellate court: “[Defendant] essentially urges that we adopt a rule requiring that a buyer must abandon a claim to civil penalties when the vendor offers restitution of the original purchase price.  We decline to do so.  Such a rule is particularly inappropriate where, as here, the vendor’s settlement offer features the unfavorable and invalid terms outlined above.”  (Slip Op., p. 13.)

Consumer Statutes, Multipliers, Reasonableness Of Fees: Mikhaeilpoor Opinion Now Published

Prevailing Plaintiff’s Request For Fees In A Straightforward Lemon Law Case Was Properly And Significantly Reduced For Overstaffing, Lack Of Efficiency, Excessive Hourly Rates, And Denial Of Lodestar Multiplier.

            We discussed the then unpublished case of Mikhaeilpoor v. BMW of North America, LLC, Case No. B293987 (2d Dist., Div. 1 April 1, 2020) in our April 2, 2020 post, and can now report that it was published on April 24, 2020.

            Plaintiff won a $35,805.80 jury verdict in an “uncomplicated” lemon law vehicle case, then moved for $344,639 in fees – including a .5 lodestar multiplier – which the trial court reduced to $94,864 after denial of the requested multiplier and reductions for overstaffing, excessive hourly rates, and other inefficiencies.  Plaintiff appealed, but the 2/1 DCA affirmed -- finding no abuse of discretion under the circumstances of the case.

Consumer Statutes: Contingency Agreements Are Not To Be Considered In Establishing the Lodestar For An Award Of Attorney’s Fees Under The Song-Beverly Act

1/3 DCA Eschews The Idea Plaintiff’s Attorney Would Try A “Double Dip” On Fees, Believing They Would Do The Ethical Thing.

            In Reynolds v. Ford Motor Co., Case No. A154811 (1^st Dist., Div. 3 Apr. 21, 2020) (published), plaintiff purchased a diesel engine truck from Ford, having the truck repaired 15 times without success.  Ford denied plaintiff’s request for a buyback/replacement under the Song-Beverly Act, which triggered plaintiff to “lawyer up.”  Plaintiff filed suit and, after extensive litigation, the parties settled the case in entirety, with Ford paying $277,500 to plaintiff and agreeing that plaintiff’s attorney’s fees and costs would be resolved by agreement/motion before the trial judge. 

            Plaintiff moved for $308,696.25 in aggregate fees, comprised of a $205,797.50 lodestar plus a $102,898.75 positive multiplier of 1.5.  Plaintiff submitted his attorneys’ declarations, verified billing statements, fee surveys, and 51 court orders/rulings in lemon law cases approving counsel’s requested hourly rates and fee requests.  Plaintiff affirmed that the case was taken on a contingency basis.  Ford opposed primarily on the ground that plaintiff’s counsel was not entitled to “double dip”—recover both a contingency fee and statutory fee.  Plaintiff replied that the existence of a contingency fee agreement was not a relevant factor for purposes of awarding lemon law fees.

            The lower court conducted a lodestar analysis, awarding plaintiff an aggregate $201,891 in fees, based upon compensation for 457.85 hours at hourly rates ranging from $225-500/hour plus a 1.2 positive multiplier.  It also rebuffed Ford’s argument that a contingency fee agreement was relevant in establishing the lemon law fee lodestar.

            The 1/3 DCA affirmed, agreeing with plaintiff’s analysis of the issue.

            The lodestar methodology was the one mandated by the fee-shifting statute (Civil Code § 1794(d)), rendering the fee terms of the contingency agreement irrelevant to a calculation of fees when using the lodestar method.  In response to Ford’s argument that lemon law plaintiff’s counsel might be tempted to take a “double dip” (both a contingency fee and statutory fee award), the appellate panel concluded it was not called for under the fee-shifting statute, there is no assurance that the contingency fee would be higher than the lodestar, a lodestar was a clear “bright line” test, and it assumed that the attorneys, as officers of the court, would abide by ethical obligations to not exact an unconscionable fee from their clients.