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California’s Lemon Law Continues to Produce Bitter Results for Manufacturers as Only the Legislature, not the Courts, Can Address the Law’s “Twisted” Fee-Shifting Provision

Jan 29, 2019 | Topic: Warranty

A recent ruling by San Diego Superior Court Judge Timothy Taylor and the corresponding California Court of Appeal opinion have confirmed that the California legislature should be tasked with reviewing and amending California’s Song-Beverly Consumer Warranty Act (“Song-Beverly”) fee-shifting provision.

In McCullough v. FCA US LLC, No. D073330, 2018 WL 5856500 (Cal. Ct. App. Nov. 9, 2018), the Plaintiff sued FCA US LLC (“Chrysler”) for allegedly violating Song-Beverly.  Immediately after service of the Complaint, Chrysler offered Plaintiff “the actual price paid or payable, including any incidental and consequential expenses incurred” for the vehicle, less an offset for use.  Chrysler also offered to pay Plaintiff’s reasonable costs, expenses, and attorney fees.  Plaintiff, however, rejected the offer.

After Chrysler answered the Complaint, it served an Offer to Compromise for restitution, less an offset for use, and reasonable costs, expenses, and attorney fees (the “998 Offer”).  Plaintiff again declined Chrysler’s offer.  Approximately one month before trial, Chrysler served a second 998 Offer, this time for $24,000, plus Plaintiff’s reasonable costs, expenses, and attorney fees.  For the third time, Plaintiff rejected Chrysler’s offer.

The matter ultimately went to a bench trial, and the trial court found Plaintiff had established a claim under Song-Beverly.  But the trial court only awarded Plaintiff $17,163.83 in actual damages for the restitution of the subject vehicle, as well as prejudgment interest.  Plaintiff did not recover any civil penalties under Song-Beverly.  The Court also held that Plaintiff was the prevailing party and therefore entitled to file a cost memorandum and motion for reasonable attorney fees.  In making this ruling, however, the Court noted that during the trial, Plaintiff “had three or four lawyers at counsel table plus one or two more in the gallery,” but only one of Plaintiff’s lawyers examined witnesses and argued the case.  The Court cautioned Plaintiff that this fact would be taken into account in analyzing Plaintiff’s request for reasonable attorney fees. 

Plaintiff filed a fee motion requesting $125,055 in attorney fees, constituting a lodestar of $83,370 and a 1.5 multiplier of $41,685.  In addition to recounting the hours and rates of the attorneys that worked on the matter, the declarations in support of Plaintiff’s motion claimed Lemon Law cases are not simple and instead require specialized understanding of consumer protection laws, automobiles, and dealers’ protocols for repairing vehicles.  Chrysler opposed the motion on the basis that the attorney fees were excessive, duplicative, and unreasonable.  Chrysler also noted that Plaintiff’s counsel had failed to properly convey its first settlement offer to Plaintiff, and accused Plaintiff’s counsel of doing so in order to engage in needless litigation to recover excessive fees. 

Judge Taylor ultimately granted Plaintiff’s attorney fee motion, but he decreased the fee award to $18,685.  Judge Taylor noted that there was “overwhelming” evidence of inefficiency on the part of Plaintiff’s counsel and Plaintiff’s attorney fee motion contained “equal measures of overreaching and frivolousness (bordering on bad faith).”  Judge Taylor further stated: “To ask for $125,000 [in attorney fees] in a case in which there was an offer of $24,000.00 and which was worth $17,163.83 confirms the view held by many trial court judges: that the fee shifting provisions of the ‘lemon law’ statutes have been twisted from the purpose contemplated by the Legislature into something the well-intentioned drafters of the statutory framework would scarcely recognize.”  Judge Taylor went further and urged the parties to seek appellate review of his ruling in order to allow the Court of Appeal to publish an opinion “reiterating this widely held view” regarding excessive fees under Song-Beverly, and also urged the California Legislature to “re-visit the statutory fee shifting construct.”

Plaintiff then appealed to the California Court of Appeal.  The Court of Appeal ultimately found in favor of the Plaintiff and remanded the matter back to the Superior Court for a re-calculation of the attorney fee award.  While the Court of Appeal’s opinion did not reiterate Judge Taylor’s criticisms of Song-Beverly’s fee-shifting provision, it confirmed that it is the California Legislature’s obligation to question the “wisdom of a statute’s policy.”  In other words, the Court of Appeal has confirmed it is the California Legislature’s obligation to review Song-Beverly’s much-abused fee-shifting provision.