Smalley v. Subaru of Am.

• Decision Date: 13 December 2022
• Docket Number: G059904,G060441
• Parties: MICHAEL SMALLEY, Plaintiff and Appellant, v. SUBARU OF AMERICA, INC., Defendant and Respondent.
• Court: California Court of Appeals Court of Appeals

MICHAEL SMALLEY, Plaintiff and Appellant,
v.
SUBARU OF AMERICA, INC., Defendant and Respondent.

G059904, G060441

California Court of Appeals, Fourth District, Third Division

December 13, 2022

NOT TO BE PUBLISHED

Appeal from postjudgment orders of the Superior Court of Orange County, No. 30-2017-00901612 Charles Margines, Judge. Appeal No. G059904 affirmed. Appeal No. G060441 dismissed.

Rosner, Barry & Babbitt, Hallen D. Rosner, Arlyn L. Escalante; Strategic Legal Practices, Payam Shahian; California Consumer Attorneys and Michael H. Rosenstein for Plaintiff and Appellant.

Dykema Gossett, James S. Azadian, Derek S. Whitefield, Cory L. Webster and Nina Moreno for Defendant and Respondent.

OPINION

MOTOIKE, J.

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Michael Smalley sued Subaru of America, Inc. (Subaru) under California's lemon law. Pursuant to Code of Civil Procedure section 998 (section 998), Subaru made a settlement offer to Smalley (the section 998 offer). Smalley did not accept the section 998 offer and the matter went to trial. At trial, Smalley prevailed, but recovered less than the section 998 offer. In accordance with the fee shifting rules of section 998, the trial court awarded Smalley his preoffer costs, but awarded Subaru its postoffer costs. Smalley appealed.

We conclude the section 998 offer was valid, reasonable, and made in good faith. Therefore, we affirm the trial court's costs awards.

Because of the pendency of the appeal on the costs awards, the trial court deferred a ruling on Smalley's motion for attorney fees. Smalley also appealed from the order delaying ruling on the attorney fees motion. We conclude that order is not appealable, and no grounds exist to construe it as an extraordinary writ. That appeal shall be dismissed.

STATEMENT OF FACTS AND PROCEDURAL HISTORY

In 2013, Smalley bought a 2014 Subaru Forester. While under warranty, the vehicle suffered defects Subaru could not fix. Smalley's request to Subaru to repurchase the vehicle was denied.

In July 2016, Smalley filed a complaint against Subaru alleging violations of the Song-Beverly Consumer Warranty Act (Civ. Code, § 1790 et seq.) (Song-Beverly Act) and the Magnuson-Moss Warranty Act (15 U.S.C. § 2301 et seq.). In May 2017, Subaru served a section 998 offer on Smalley, through his attorneys. The section 998 offer reads in full as follows:

"To Plaintiff and Plaintiff's attorneys of record:

"Pursuant to California Code of Civil Procedure section 998, in full settlement of the claims made by plaintiff Michael Smalley ('Plaintiff') against defendant

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Subaru of America, Inc. ('SOA'), SOA offers to pay Plaintiff the sum of Thirty Five Thousand and One Dollars ($35,001.00) plus either one of the following at Plaintiff's election: (1) Ten Thousand Dollars ($10,000.00) for Plaintiff's costs, including attorney's fees, or (2) Plaintiff's costs, including reasonably incurred attorney's fees, to be determined by the Court. In exchange, Plaintiff shall do each of the following: (1) file a Request for Dismissal of Plaintiff's action against SOA with prejudice; and (2) return the subject 2014 Subaru Forester to SOA, by delivering possession and transferring free and clear title to SOA after receiving payment from SOA of the sum of Thirty Five Thousand and One Dollars ($35,001.00) described above.

"If Plaintiff accepts this offer, the attorney of record for Plaintiff shall, "1. Sign here: _______;

"2. Elect one of the following by checking a box:

" [ ] Ten Thousand Dollars ($10,000.00) for Plaintiff's costs, including attorney's fees, or

" [ ] Plaintiff's costs, including reasonably incurred attorney's fees, to date to be determined by the Court; and

"3. Return the executed offer to attorneys of record for SOA.

"If this offer is not accepted within the time prescribed by section 998 of the California Code of Civil Procedure, it shall be deemed withdrawn and cannot be brought in as evidence by Plaintiff at trial." (Some capitalization omitted.)

Smalley objected to the section 998 offer in writing as "not reasonable."

The case continued to trial, and a jury awarded Smalley damages of $20,555.74 and a civil penalty of $7,000, for a total recovery of $27,555.74. Judgment was entered in July 2020.

Smalley and Subaru each filed a memorandum of costs, and each filed a motion to strike or tax the other's costs. The trial court found the section 998 offer was valid and exceeded the amount awarded to Smalley by the jury. The court awarded

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Smalley $1,351.17 in preoffer costs, and awarded Subaru $16,684.92 in postoffer costs. Smalley filed a notice of appeal from that postjudgment order (appeal No. G059904).

Smalley also filed a motion for attorney fees. The trial court stayed ruling on the attorney fees motion because that motion would depend on the validity of the section 998 offer, which was the same issue already on appeal. Smalley filed a notice of appeal from the trial court's postjudgment order staying the motion for attorney fees (appeal No. G060441). This court granted Smalley's unopposed motion to consolidate the two appeals.

DISCUSSION

Our review of the section 998 offer is subject to two different standards of review: Whether the section 998 offer was valid is a question of statutory interpretation we review de novo, and whether the offer was reasonable and made in good faith is reviewed for abuse of discretion. (Covert v. FCA USA, LLC (2022) 73 Cal.App.5th 821, 832, 834 (Covert).)

I

The Section 998 Offer Was Valid

As the offering party, Subaru had the burden of demonstrating the settlement offer was valid under section 998. (Covert, supra, 73 Cal.App.5th at p. 832.) The validity of a section 998 offer is determined as of the date it is served. (Covert, supra, at p. 833.)

The section 998 offer met the basic requirements of section 998, subdivision (b): It was in writing, contained the terms and conditions of the settlement, and included a provision allowing Smalley to indicate his acceptance of the offer.

"To be valid, an offer under section 998 may include nonmonetary terms and conditions, but it must be unconditional. [Citation.]...