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Unique Strategy Used To “Win” a Song-Beverly Consumer Warranty Case

March 17, 2015 | Topic: Warranty

Mercedes-Benz recently implemented a unique strategy to essentially win a Song-Beverly Consumer Warranty case.  MacQuiddy v. Mercedes-Benz, 233 Cal. App. 4th 1036 (2015).  In the answer to the complaint, Mercedes admitted that the vehicle did not conform to the warranty.  Id. at 1039.  It also admitted that it would offer plaintiff a repurchase or replacement.  Id.  Shortly after filing its answer, Mercedes served plaintiff with a repurchase Section 998 Offer to Compromise.  Id. at 1041.  Plaintiff rejected the offer.  Id.  Since Mercedes, “admitted liability for failure to repurchase or replace the car under the Act, and the parties stipulated to a restitution amount [—the repurchase price—], trial proceeded only on [plaintiff’s] claim for a civil penalty.”  Id. at 1039.  The jury found that plaintiff was not entitled to civil penalties because Mercedes-Benz did not willfully fail to repurchase or replace plaintiff’s vehicle.  Id. at 1043. 

Plaintiff subsequently filed a motion for attorney’s fees as the prevailing party.  Plaintiff argued that while he lost the civil penalty issue, he secured a net money recovery (i.e. the repurchase price), and was therefore the prevailing party.  However, the trial court disagreed and denied the motion for attorney’s fees.  Plaintiff appealed the motion and the judgment, but the court of appeals essentially affirmed the trial court’s decision.  Id. at 1039.  The relevant portion of plaintiff’s appeal related to the trial court’s denial of the attorney’s fee motion, and the validity of the Section 998 Offer to Compromise. 

As for the attorney’s fee motion, plaintiff argued that he was entitled to attorney’s fees as the prevailing party under Code of Civil Procedure Section 1032.  But, as the court explained, Section 1032 is a general costs statute.  A prevailing party under this statute is not necessarily a prevailing party under a separate attorney fee statute.  Under the Song-Beverly attorney’s fee statute, a buyer who prevails is entitled to attorney’s fees, but the term “prevail” is not defined.  Id. at 1046.  Since the statute does not define the prevailing party, the trial court should “determine which party succeeded on a practical level, by considering the extent to which each party realized its litigation objectives.”  Id. at 1047.  In applying this approach, the court concluded that the trial court did not abuse its discretion, because plaintiff did not “achieve his main litigation objective--obtaining a civil penalty.”  Id. at 1048-1049.  Obtaining the repurchase was basically immaterial, because Mercedes-Benz had offered plaintiff a repurchase before trial. 

As for the validity of the Section 998 Offer to Compromise, MacQuiddy holds that an undefined and subjective term in an Offer to Compromise can invalidate the offer.  Id. at 1050.  In MacQuiddy, the provision at issue in the offer was that the vehicle had to be returned “in an undamaged condition, save normal wear and tear.”  Id.  The court held that the term “undamaged condition” inserted uncertainty into the offer, and therefore made the Section 998 Offer to Compromise invalid.  Even so, plaintiff was only allowed to recover his post-offer costs, not his attorney’s fees.  Id. at 1051-1051. 

If it becomes evident early in the litigation that a repurchase or replacement is necessary, it may be beneficial for defendants to implement a strategy similar to the one used in MacQuiddy in order to mitigate their losses.