Pulliam v. HNL Auto. Inc.

• Decision Date: 29 January 2021
• Docket Number: B293435
• Citation: 274 Cal.Rptr.3d 547,60 Cal.App.5th 396
• Court: California Court of Appeals Court of Appeals
• Parties: Tania PULLIAM, Plaintiff and Respondent, v. HNL AUTOMOTIVE INC. et al., Defendants and Appellants.

60 Cal.App.5th 396

274 Cal.Rptr.3d 547

Tania PULLIAM, Plaintiff and Respondent,

v.HNL AUTOMOTIVE INC. et al., Defendants and Appellants.

B293435

Court of Appeal, Second District, Division 5, California.

Filed January 29, 2021

McCreary, PC and Duncan J. McCreary ; McGuirewoods, Leslie M. Werlin, Los Angeles, Jamie D. Wells and Anthony Q. Le, San Francisco, for Defendants and Appellants.

Rosner, Barry & Babbit, Hallen D. Rosner, Arlyn L. Escalante, San Diego, and Serena D. Aisenman for Plaintiff and Respondent.

RUBIN, P.J.

INTRODUCTION

Defendants HNL Automotive Inc. and TD Auto Finance, LLC (TD) appeal the trial court's award of attorney's fees to plaintiff following a jury trial on plaintiff's lemon law claims. Defendants argue: (1) plaintiff's counsel failed to provide evidence of their hourly rates, (2) the trial court erred in refusing to apportion attorney's fees, (3) the trial court erred in applying a lodestar multiplier, and (4) TD was not liable for attorney's fees under title 16, section 433.2 of the Code of Federal Regulations (2020) (the Holder Rule). We affirm the amount of attorney's fees awarded, finding no abuse of discretion. We affirm the court's ruling that TD is liable for attorney's fees, and conclude that the Holder Rule does not limit the attorney's fees that a plaintiff may recover from a creditor-assignee.

FACTS AND PROCEDURAL BACKGROUND

1. Plaintiff's Vehicle Purchase

In July 2016, plaintiff purchased a "Certified Pre-Owned" 2015 Nissan Altima from HNL Automotive Inc. (the dealership) pursuant to a retail installment sales contract. The contract included the following language from title 16, section 433.2 of the Code of Federal Regulations :

"NOTICE: ANY HOLDER OF THIS CONSUMER CREDIT CONTRACT IS SUBJECT TO ALL CLAIMS AND DEFENSES WHICH THE DEBTOR COULD ASSERT AGAINST THE SELLER OF GOODS OR SERVICES OBTAINED PURSUANT HERETO OR WITH THE PROCEEDS HEREOF. RECOVERY HEREUNDER BY THE DEBTOR SHALL NOT EXCEED AMOUNTS PAID BY THE DEBTOR HEREUNDER."

This language is commonly referred to as the Holder Rule. ( Lafferty v. Wells Fargo Bank, N.A. (2018) 25 Cal.App.5th 398, 404, 235 Cal.Rptr.3d 842 ( Lafferty ).) We discuss in depth the Holder Rule and who is a holder in the final portion of our Discussion section below. Following plaintiff's purchase, TD accepted assignment of the retail installment sales contract and became the "Holder" of plaintiff's retail installment sales contract.

Advertisements for the particular vehicle plaintiff purchased showed that it had cruise control, 6-way power-adjustable seats, and other specific features. Plaintiff is disabled, and because of her disabilities, cruise control and power-adjustable seats were necessary features. After the purchase, plaintiff learned that the vehicle did not have cruise control or 6-way power-adjustable seats, and did not meet the requirements of the Nissan Certified Pre-Owned program as advertised.

2. Plaintiff's Complaint and Trial

In September 2016, less than two months after purchasing the vehicle, plaintiff filed this lawsuit against the dealership and TD in the trial court. Her complaint had six causes of action, alleging misrepresentation in violation of the Consumer Legal Remedies Act related to the vehicle's certification, breach of implied warranty under the Song-Beverly Consumer Warranty Act (Song-Beverly) codified in Civil Code section 1790 et seq., fraud and deceit, negligent misrepresentation, violation of Business and Professions Code section 17200, and violation of Vehicle Code section 11711 (vehicle fraud).¹ Plaintiff alleged that due to the inclusion of the Holder Rule language in the retail installment sales contract, TD was liable for all of the dealership's misconduct in the sale of the vehicle.

Trial occurred in April 2018. The cause was submitted to the jury with directions to return a verdict on four causes of action. The jury found for plaintiff on one cause of action—violation of the implied warranty of merchantability under Song-Beverly. The jury's findings established plaintiff purchased a motor vehicle from the dealership, the dealership was in the business of selling motor vehicles to retail buyers, the dealership failed to adequately package and label the 2015 Nissan, and the vehicle failed to conform to the promises or affirmations of fact made on the container or label. The jury found that the purchase contract for the vehicle was assigned from the dealership to TD.

The jury found that plaintiff's total damages were $21,957.25. On May 29, 2018, the court entered judgment in favor of plaintiff and against the dealership and TD, jointly and severally, in the amount of $21,957.25. The judgment left blank the amount of costs, attorney's fees, and prejudgment interest to be awarded.²

3. Posttrial Motion for Attorney's Fees

On July 26, 2018, plaintiff filed a posttrial motion seeking the award of attorney's fees. Plaintiff sought $169,602, which consisted of a lodestar figure of $141,335 and a 0.2 multiplier. Plaintiff supported the motion with declarations from Hallen D. Rosner and Michael A. Klitzke, respectively the partner and associate from Rosner, Barry & Babbit LLP, who had been working on her case. Rosner's declaration authenticated the firm's attached billing records, provided citation to similar cases where the firm's hourly rates had previously been approved, described each attorney's experience and qualifications, noted that the firm's rates were not increased in contingency matters, and explained the risks the firm weathered in taking this used-vehicle case on a contingency basis. Klitzke's declaration authenticated documents related to the litigation, as well as various communications between himself and opposing counsel. He also described his legal experience and explained his hourly rate.

In the motion, plaintiff asserted that TD was liable for attorney's fees in addition to the amounts plaintiff paid under the retail installment sales contract. Plaintiff argued the Holder Rule did not bar plaintiff's recovery of attorney's fees from TD.

In its opposition, defendants objected to the declarations of plaintiff's counsel in support of the motion, and argued plaintiff failed to provide evidence of Rosner's hourly rate. Defendants asserted that the fee award should be reduced by 83 percent because plaintiff succeeded on only one of the six causes of action that had been alleged. Defendants also argued the lodestar multiplier was not appropriate because the lawsuit was not exceptionally difficult and plaintiff's counsel was not exceptionally skilled. Lastly, citing Lafferty v. Wells Fargo Bank (2013) 213 Cal.App.4th 545, 563, 153 Cal.Rptr.3d 240, defendants argued pursuant to title 16, section 433.2 of the Code of Federal Regulations, that TD was not liable for the attorney fees because as the holder of the retail installment sales contract, its liability could not exceed the amount plaintiff paid to TD.

On August 29, 2018, the trial court heard argument from counsel. In response to defendants’ argument that plaintiff's fees should be apportioned, the court found that defendants’ "mathematical" proposal of giving plaintiff one-sixth of the fees was not appropriate. The court stated: "I've decided they [plaintiff's counsel] have satisfied the burden establishing that there is no need for any sort of allocation, and it in fact would be impossible, and your failure to make any suggestion to the contrary other than your mathematical equation I think demonstrates that. It's just the facts and the legal theories were completely intertwined, and I don't think that there is any way that the court can or should be required to go through on a line-by-line basis and try to figure out what work went – somehow went to a fraud cause of action that did not also relate to the successful cause of action."

In response to defendants’ argument that a multiplier should not be applied to the lodestar figure because it was a simple case, the court stated: "You didn't make it simple, Mr. McCreary [defense counsel], nor did your client. I was here for this, so this is not just counsel amongst themselves discussing how, you know, difficult discovery ... which is out of the presence of the jury. I saw plenty in my handing of this case, and whether it was because of your client or for some other reason, what would have been or could have been a fairly simple case was made much more complicated by your client's posture in this matter from the beginning to the end, as far as the court's concerned."

In an eleven-page minute order explaining its decision, the court awarded plaintiff $169,602 in attorney's fees.³ The court reiterated that apportionment was not necessary or possible based on intertwined facts of the case and that $141,335 in fees was reasonably incurred by plaintiff in prosecuting the action. The court indicated it was capable of assessing whether the lodestar was reasonable. The court also stated Rosner's hourly rate was obvious from the billing records, and pointed out that defendants did not claim his rate to be unreasonable. The court largely overruled defendants’ evidentiary objections to plaintiff's counsel's declarations.⁴

DISCUSSION

Defendants contend on appeal that (1) plaintiff's attorneys failed to provide evidence of their hourly rates and failed to establish that their hourly rates are the prevailing rates in the community; (2) attorney's fees should be reduced because plaintiff did not succeed on all claims; (3) the court abused its discretion by applying a lodestar multiplier to the fees, and (4) TD is not liable for attorneys’ fees in this matter. We address each issue in turn.

1. Legal Overview for Awarding Attorney's Fees in Lemon Law Cases

The jury found defendants liable for breach of the implied warranty of merchantability under Song-Beverly, commonly known as the automobile "lemon law." ( Duale v. Mercedes–Benz USA, LLC (2007) 148 Cal.App.4th 718, 721, 56 Cal.Rptr.3d 19.) In its more typical application,...