Wednesday, November 16, 2016

FYI: Cal App Ct Holds Consumer Properly Rejected Pre-Suit Offer With General Release and Confidentiality Clauses

The California Court of Appeal, Fourth Appellate District, recently held that a successful consumer plaintiff was entitled to $185,000 in attorney fees and costs, even though she rejected a settlement offer containing an appropriate remedy before she filed suit.


In so ruling, the Court held that rejecting the pre-litigation settlement offer was not unreasonable, as the offer required the consumer to agree to a broad release of claims and a confidentiality clause, and especially as the confidentiality provision in particular was unlawful as to the consumer's Song-Beverly Consumer Warranty Act, Cal. Civ. Code § 1790, et seq. ("Song-Beverly Act") claims.


A copy of the opinion is available at:  Link to Opinion


A car buyer filed a complaint against a car dealer and manufacturer for violations of the Song-Beverly Act and other statutes, alleging the used vehicle she purchased had numerous defects that the dealer and manufacturer were unable to repair. After the parties settled the lawsuit as to all issues except attorney fees, the trial court awarded the buyer over $185,000 in attorney fees and costs.


The dealer and manufacturer appealed, contending that the buyer was not entitled to attorney fees or costs because she could have avoided litigation by settling the matter earlier. The dealer had made a prelitigation offer in response to a notice required by the Consumers Legal Remedies Act, Cal. Civ. Code, § 1750 et seq., for the buyer's claim under that statute. The dealer and manufacturer argued that they had offered the buyer an appropriate remedy before she filed her complaint, but that she unreasonably refused to agree to a general release and a confidentiality clause.


As you may recall, the Song-Beverly Act generally provides that a prevailing buyer may recover reasonable attorney fees.  See Cal. Civ. Code § 1794.


Relying on McKenzie v. Ford Motor Co. (2015) 238 Cal. App. 4th 695, the Court of Appeal noted that under the Song-Beverly Act, the dealer's requirement of a confidentiality provision was unlawful, and the dealer's and manufacturer's appeals were premised on their mistaken belief the buyer should have accepted the settlement offer with the conditions notwithstanding statutory and case law.


The Court therefore held that the buyer's rejection of the dealer's pre-litigation settlement offer was reasonable and the failure to resolve the case earlier was not attributable solely to her obstinacy or a desire to generate fees.


The dealer and manufacturer additionally contended that the fee award should have been reduced because there was insufficient evidence to show that her attorney's hours and hourly rate were reasonable given the litigation's lack of risk and complexity, and because the buyer ignored repeated offers of restitution, filed an unnecessary lawsuit, and engaged in unnecessary litigation activity. They further argued that the buyer's counsel should not be compensated at a higher rate than the $300 per hour that the dealer paid its counsel.


The Court of Appeal disagreed, noting that until the case actually settled, the buyer had to conduct discovery and prepare to prove liability on her varied claims with their varied elements. She also had to be prepared to counter the affirmative defenses asserted by the dealer and manufacturer.


Because the trial court, which considered the evidence and observed the buyer's counsel's lawyering skills firsthand, determined that he charged an appropriate hourly rate, the Court of Appeal concluded that the trial court did not abuse its discretion in basing its fee award on a rate of $575 per hour.


Accordingly, the Court of Appeal affirmed the trial court's award of the buyer's attorney fees and awarded her costs on appeal.





Ralph T. Wutscher
Maurice Wutscher LLP
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