McKenzie v. Ford Motor Co.

• Decision Date: 12 June 2015
• Docket Number: G049772
• Court: California Court of Appeals Court of Appeals
• Parties: James MCKENZIE, Plaintiff and Appellant, v. FORD MOTOR COMPANY et al., Defendants and Respondents.

238 Cal.App.4th 695

189 Cal.Rptr.3d 560

James MCKENZIE, Plaintiff and Appellant

v.FORD MOTOR COMPANY et al., Defendants and Respondents.

G049772

Court of Appeal, Fourth District, Division 3, California.

Filed June 12, 2015

Anderson Law Firm and Martin W. Anderson for Plaintiff and Appellant.

Sanders Roberts & Jewett, Los Angeles, Reginald Roberts, Jr. ; Snell & Wilmer, Mary–Christine Sungaila, and Jenny Hua, Costa Mesa, for Defendants and Respondents.

OPINION

RYLAARSDAM, J.

James McKenzie appeals from the trial court's order awarding him only $28,350 of the nearly $48,000 in attorney fees he sought in this case, following the parties' settlement of McKenzie's claim under the automobile “lemon law” provisions of the Song–Beverly Consumer Warranty Act (Civ. Code, § 1790 et seq. ). He contends the court abused its discretion by awarding him none of the attorney fees he incurred following Ford Motor Company's initial offer to compromise in April 2013, even though the case did not settle until months later.

The trial court refused to award McKenzie any of the attorney fees incurred in the wake of Ford's initial offer because it viewed the compromise offer ultimately accepted by McKenzie as essentially identical to the offer he had initially rejected—distinguished only by his “demand that [he] be allowed to file [a fee] motion.” The court concluded the entire 42 hours billed by McKenzie's counsel in the wake of Ford's initial offer amounted to “plaintiff's counsel exaggerating the amount of their fees to increase their prized fees.” In short, the court concluded McKenzie unreasonably delayed settlement for the sole purpose of “ginning up” his fee award. As further support for that determination, the court also found that after receipt of Ford's initial offer, McKenzie's two attorneys billed for “many” hours of duplicative work, which the court deemed unreasonable.

We reverse. The trial court's comparative assessment of Ford's two settlement offers was erroneous as a matter of law. Even Ford concedes its initial settlement offer incorporated numerous extraneous provisions—including broad releases of both Ford and nonparties, an illegal confidentiality clause characterized as “material” to the settlement, and what amounted to an opt-out provision in Ford's favor—all of which were excised from the offer McKenzie later accepted. These differences are significant, and thus McKenzie's rejection of the initial offer was reasonable, requiring his counsel to continue working on the case. Moreover, contrary to the court's belief, both of Ford's compromise offers had the same attorney fee provision, allowing McKenzie the option of either accepting $15,000 in full payment of his reasonable fees and costs, or filing a motion to obtain an award of fees in a higher amount. Given that McKenzie had already incurred over $28,000 in fees and costs by the time of Ford's initial offer—almost twice what Ford was offering to pay without a motion—it was not unreasonable for him to opt for pursuing that fee motion. And the fees reasonably incurred in pursuing the fee motion were properly includable in McKenzie's attorney fees award.

The trial court's erroneous comparison of Ford's initial compromise offer with the offer McKenzie later accepted fatally undermines its conclusion that the entire amount of hours billed by McKenzie's counsel in the wake of that initial offer was unjustified. The court's additional finding, that McKenzie's two attorneys also engaged in instances of duplicative billing after Ford's initial offer, does not support a complete denial of fees for that period. Consequently, we remand the matter to the trial court with directions to reconsider the fee award.

FACTS

McKenzie filed his complaint in May 2012, alleging causes of action arising out of his purchase of a defective Ford Fiesta automobile in July 2011. McKenzie's complaint prayed for damages and restitution of approximately $23,000, civil penalties equal to two times his damages for each violation of his warranty, an order enjoining Ford from engaging in any act or practice constituting a violation of Business and Professions Code section 17531, and an award of attorney fees and costs. McKenzie was represented in the lawsuit by two separate attorneys, Martin W. Anderson of the Anderson Law Firm and Jeffrey Kane of the Law Office of Jeffrey Kane.

Ford filed its answer in July 2012, and it subsequently responded to McKenzie's written discovery, which was completed in August 2012. In November 2012, a jury trial was scheduled for June 2013.

In January 2013, Ford substituted new counsel into the case, and on April 24, 2013, Ford moved ex parte for an order continuing the trial so that it would have additional time to conduct its own discovery. McKenzie opposed the motion on the basis Ford had the opportunity to conduct discovery, but failed to do so in a timely manner. McKenzie claimed that having completed his own discovery, he was ready to proceed to trial as scheduled. The trial date was continued for two months, to September 2013.

The day after trial was continued, Ford served an offer to compromise on McKenzie's claim, pursuant to Code of Civil Procedure section 998 (section 998 ). The financial provisions of the offer were that Ford would repurchase McKenzie's automobile for the sum of $25,000 and would either pay McKenzie $15,000 in attorney fees, or agree that McKenzie could move the court for an award of reasonable attorney fees in some other amount. However, Ford's offer was explicitly based on the following factual premises: that “[e]very concern presented by [McKenzie to Ford] was repaired within a reasonable number of repair attempts. The vehicle did not meet the statutory presumption for reasonable number of repair attempts. The vehicle did not meet the statutory presumption for reasonable number of repair attempts when [McKenzie] called Ford requesting a repurchase. Much of [McKenzie's] attorneys' fees were incurred unreasonably and unnecessarily [and] Ford contends that [McKenzie] has no viable claims against it in this action.”

Moreover, the offer expressly required McKenzie to “execute a release of all claims and causes of action arising out of any breach of implied warranty or breach of express warranty for the subject vehicle.” However, because no specific release was appended to the offer, McKenzie's counsel asked Ford's counsel for a copy of Ford's proposed release to review before deciding whether to accept the offer. After several more requests, Ford provided the proposed release approximately two weeks later.

The release provided by Ford amounted to a full-blown settlement agreement containing in excess of six single-spaced pages. Among other things, it included provisions requiring that McKenzie waive any and all claims in “as broad [a manner] as can possibly be created.” By its terms, this release included claims both known and unknown—and even those claims “not yet accrued” or which McKenzie “may ever obtain” in the future—against not only Ford, but also against any dealerships involved in selling or servicing the automobile. The agreement also required McKenzie to effectively warrant the condition of the vehicle at the time it was surrendered to Ford, and to have the vehicle repaired at his own expense if deemed not “in acceptable condition.” And it allowed Ford to declare the agreement “null and void” if it rejected the vehicle's condition. Finally, the agreement required McKenzie to refrain from disclosing the content of the settlement to anyone, including “newspapers, members of the press or legal reporting services, consumer organizations, owner or prospective owners of vehicles distributed by Ford Motor Company, experts, consultants, attorney, government agencies, governmental entities or elected representatives.” This confidentiality provision was expressly characterized as a “material part of this Agreement.” Such confidentiality provisions are explicitly prohibited by Civil Code section 1793.26, subdivision (a)(2).

McKenzie countered Ford's proposed settlement with his own formal section 998 offer: to allow judgment to be entered in his favor for $25,000.01 (one penny more than Ford had offered), plus reasonable attorney fees and court costs to be determined by the court, in exchange for which McKenzie would return the automobile to Ford with clear title. Following that offer, McKenzie's counsel emphasized to Ford's counsel that McKenzie was anxious to put the matter to rest, and was willing to settle the matter on essentially the same financial terms Ford had proposed, but without the added release language. Ford allowed McKenzie's offer to lapse without response.

Approximately two months later, Ford proposed a new section 998 compromise which was essentially identical to McKenzie's lapsed offer (although it knocked the payment back down to $25,000—deleting McKenzie's one-cent increase). Ford's proposal was devoid of any reference to the provisions of its earlier six-page release document and required only that McKenzie return his defective automobile with clear title in exchange for the money. Ford's new offer once again proposed to pay McKenzie $15,000 in attorney fees and costs, but again preserved his right to instead file a motion for an award of reasonable fees and costs in a different amount. McKenzie accepted that offer promptly, and judgment was thereafter entered thereon in September 2013.

McKenzie filed a cost memorandum seeking routine litigation costs, plus fees to be decided by motion. And in November 2013, he filed a motion seeking an order awarding him $47,491.25 in attorney fees and other costs totaling $808.83. The motion was supported by declarations, billing records, and prior court orders documenting large attorney fee awards to counsel in similar cases.

The 42 hours billed by McKenzie's attorneys in the period following Ford's initial offer included time spent reviewing and communicating with Ford's counsel about the initial...