Reck v. Fca U.S. LLC

• Decision Date: 24 May 2021
• Docket Number: A157966
• Citation: 279 Cal.Rptr.3d 175,64 Cal.App.5th 682
• Court: California Court of Appeals Court of Appeals
• Parties: Kathy L. RECK et al., Plaintiffs and Appellants, v. FCA US LLC et al., Defendants and Respondents.

64 Cal.App.5th 682

279 Cal.Rptr.3d 175

Kathy L. RECK et al., Plaintiffs and Appellants,

v.FCA US LLC et al., Defendants and Respondents.

A157966

Court of Appeal, First District, Division 1, California.

Filed May 24, 2021

Rosner, Barry & Babbit, Hallen D. Rosner, Arlyn L. Escalante, San Diego; Knight Law Group, Steve Mikhov, Los Angeles, Roger Kirnos; Century Law Group, Edward O. Lear, Los Angeles, for Plaintiffs and Appellants.

Nixon Peabody, Jennifer A. Kuenster, Leon Roubinian, San Francisco, Aaron M. Brian, Los Angeles; Law Office of David Tennant, David H. Tennant and Kathy L. Eldredge for Defendants and Respondents.

SANCHEZ, J.

Appellants Kathy L. Reck and Thomas Reck appeal from an order awarding them attorney fees under the Song-Beverly Consumer Warranty Act (Song-Beverly Act; Civ. Code, § 1790, et seq. )¹ after their lawsuit over a defective vehicle was settled for $89,500 on the second day of trial. They contend that the trial court erred when it denied all recovery of attorney fees and costs incurred following their rejection of an earlier Code of Civil Procedure section 998 ( section 998 ) settlement offer that was $8,500 less than the offer they ultimately accepted. We agree that the trial court erred in its attorney fee award, though not entirely for the reasons advanced by appellants.

The Song-Beverly Act is a consumer protection statute that mandates the recovery of reasonable attorney fees to a prevailing plaintiff based upon "actual time expended." ( § 1794, subd. (d).) The trial court here did not undertake a lodestar analysis of fees reasonably incurred following appellants’ rejection of the settlement offer, concluding instead that it was unreasonable for appellants to have prolonged the litigation by rejecting defendant's reasonable offer of compromise. Because the trial court's approach here was based on a mistake of law, we shall reverse. We conclude that in the context of public interest litigation with a mandatory fee shifting statute such as the Song-Beverly Act, it is an error of law for the trial court to categorically deny or reduce an attorney fee award on the basis of a plaintiff's failure to settle when the ultimate recovery exceeds the section 998 settlement offer.

I. FACTUAL AND PROCEDURAL BACKGROUND

A. The Underlying Action

In April 2011, appellants purchased a new 2011 Dodge Challenger manufactured by FCA US LLC (FCA) from Fremont Chrysler,² a local automobile dealer, for a total price (including financing) of $51,945. Following the purchase, appellants experienced frequent issues with the vehicle. FCA arranged for numerous repairs, however the problems persisted. Appellants contacted FCA customer service and requested the repurchase of the vehicle. The request was denied. Appellants traded in the vehicle in March 2015. At the time of trade-in appellants had paid $41,956 of the original purchase price.

In October 2016, appellants filed this action against FCA and Fremont Chrysler. As to FCA, appellants’ complaint alleged claims for breach of express and implied warranties in violation of the Song-Beverly Act. Their prayer for relief included claims for damages, for a civil penalty equal to two times the damages, and for attorney fees and costs.

B. Settlement History

In November 2016, FCA served appellants with a section 998 offer to compromise. The offer did not set forth a specific monetary settlement amount. Appellants rejected the offer as vague and premature.³ The parties conducted discovery, with each side propounding document requests and interrogatories.

On April 23, 2018, FCA served appellants with a second section 998 offer. This time the offer proposed to settle the matter for $81,000 plus reasonable costs, expenses, and attorney fees "based on actual time expended, pursuant to Civil Code section 1794(d) as stipulated by the parties or, if the parties cannot agree, upon motion to the Court having jurisdiction over this action." At the time the offer was made, appellants’ counsel, Knight Law Group, LLP (Knight Law), had incurred approximately $15,000 in legal fees. Appellants rejected the offer. They made no counteroffer or other settlement demand.

The following month, Knight Law associated in Century Law Group LLP (Century Law) to try the case for appellants. Trial commenced on July 30, 2018. Two days later, during a mandatory settlement conference, the case settled for $89,500 plus reasonable attorney fees and costs to be determined separately. Knight Law filed two post-settlement motions, one to enforce the settlement and the other for discovery sanctions. Appellants withdrew their motion to enforce the settlement on the same date the trial court denied their motion for sanctions.

C. Appellants’ Motion for Attorney Fees

Counsel for appellants filed a motion for attorney fees under section 1794, subdivision (d). The fees component of the request included a lodestar of $124,831 in base fees with a requested multiplier of .5 for a total fee request of $187,247. The base fees reflected $46,487.50 in legal services provided by Knight Law and $78,344 in legal services provided by Century Law. The request also sought $22,765.21 in costs.

The motion was supported by declarations and exhibits detailing the basis for the requested fees. Declarations from appellants’ counsel at both law firms described the experience and skill of appellants’ attorneys and their hourly rates. Attached as exhibits to those declarations were the records of services provided by each law firm detailing the work, time spent, hourly rates, and fees incurred in this matter. The exhibits also included copies of minute orders and notices of rulings on fee motions in other Song-Beverly Act cases wherein fees had been awarded to appellants’ counsel.

FCA opposed the attorney fee motion on several grounds, arguing that appellant counsels’ fees were unreasonable because there was nothing particularly complicated about the case and it did not warrant the assignment of thirteen attorneys.⁴ FCA maintained the fee claim was excessive, noting that appellants had incurred approximately $100,000 in attorney fees between April 2018, when the $81,000 section 998 settlement offer was refused, and August 2018, when appellants agreed to settle for $89,500. FCA further argued that adding a second law firm to try the case resulted in unnecessary duplication of effort. FCA specifically objected to the inclusion of fees for three motions filed by appellants’ counsel that had been denied or withdrawn.

D. The Trial Court's Ruling

After citing to section 1794, subdivision (d) and cases construing that statute, the trial court found that this case was "not particularly complex" and was instead a "typical lemon law case that had standard procedural demands and required counsel with average skill resulting in a good settlement for [appellants]." The court rejected appellants’ claim that all the services provided were necessary, emphasizing that respondents had presented a reasonable section 998 offer to settle the lawsuit in April 2018 for $81,000 plus fees and costs, appellants had rejected that offer and presented no counteroffer, and the parties ultimately settled for $89,500 on August 1, 2018. "Given that close to $100,000 of the fees incurred were incurred between the time of the [April 2018 section] 998 offer and the date of the settlement," the court found that the fees incurred during this time period "were not reasonable or necessary."

The trial court awarded appellants their attorney fees "incurred up through the rejection of the [April 2018] section 998 offer" along with certain "fees incurred after the settlement" and excluded fees incurred in connection with the two unsuccessful motions filed by appellants. Appellants were awarded a total of $20,158 in attorney fees along with the requested .5 multiplier for a total fee award of $30,237. The court stated that it found this amount sufficient based on the amounts at stake, the complexity of the case and its procedural demands, the necessity of the legal services, the results achieved, and other factors cited to by the parties in light of "the Court's experience with this case from its inception." Specifically, the court found that the $8,500 difference between the rejected pre-trial April 2018 section 998 offer and the final settlement did not justify an award of attorney fees for any of the hours appellants’ attorneys spent preparing for trial. This appeal followed.

II. DISCUSSION

A. Standard of Review

The abuse of discretion standard applies to appellate review of an award of attorney fees under the Song-Beverly Act. ( Goglin v. BMW of North America, LLC (2016) 4 Cal.App.5th 462, 470-471, 208 Cal.Rptr.3d 646 ( Goglin ).) However, the trial court must exercise its discretion in awarding fees subject to the legal standards that apply to its decision. ( Etcheson v. FCA US LLC (2018) 30 Cal.App.5th 831, 841, 242 Cal.Rptr.3d 35 ( Etcheson ).) We review de novo any issues of law involved in determining whether the criteria for an award of attorney fees has been satisfied. (See Conservatorship of Whitley (2010) 50 Cal.4th 1206, 1213, 117 Cal.Rptr.3d 342, 241 P.3d 840.) Accordingly, " ‘the determination of whether the trial court selected the proper legal standards in making its fee determination is reviewed de novo [citation] and, although the trial court has broad authority in determining the amount of reasonable legal fees, the award can be reversed for an abuse of discretion when it employed the wrong legal standard in making its determination.’ " ( Etcheson, supra, 30 Cal.App.5th at p. 841, 242 Cal.Rptr.3d 35, quoting 569 East County Boulevard LLC v. Backcountry Against the Dump, Inc. (2016) 6 Cal.App.5th 426, 434, 212 Cal.Rptr.3d 304.)

B. Song-Beverly Act

The Song-Beverly Act is 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.) Under the Act, "[i]f the manufacturer ... is unable to service or...