36 Cal.App.5th 493
Cal. Ct. App.2019Background
- Mary Hanna purchased a new Mercedes-Benz in 2007; numerous warranty repair attempts followed and she sued in 2014 under the Song-Beverly Consumer Warranty Act seeking restitution, civil penalties, fees and costs.
- Mercedes-Benz served multiple Code of Civil Procedure § 998 offers (Jan 2016 and amended Jan 2017); the parties accepted Mercedes‑Benz’s Jan 27, 2017 offer providing $60,000 plus recovery of costs and attorney fees ‘‘based on actual time reasonably incurred . . . pursuant to Civil Code § 1794(d), to be determined by court motion if the parties cannot agree.’’
- Hanna moved for fees and costs seeking a lodestar of $172,712.50 with a 1.5 multiplier (totaling $259,068.75) plus costs of $15,547.07; Mercedes‑Benz opposed, raising objections to rates, overbilling, and reliance on a retainer that included a 40% fee on any recovery above actual damages.
- The trial court awarded $60,869 in attorney fees (awarding $45,869 for work through Jan 21, 2016 and $15,000 for post-Jan 21, 2016 work based on a contract-based 40% of excess recovery) and disallowed $2,137.86 in costs paid to Hanna’s first expert.
- On appeal Hanna argued the court erred by (1) not using the lodestar method to calculate post‑Jan 21, 2016 fees and (2) wrongly disallowing the first‑expert inspection cost. The Court of Appeal reversed and remanded for recalculation of fees using the lodestar method and affirmed the disallowance of the expert cost.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Hanna is entitled to recover reasonable attorney fees for work after Mercedes‑Benz’s Jan 2016 § 998 offer | Hanna: Yes; post‑offer work was reasonably incurred and produced a materially better settlement (Jan 2017) | Mercedes‑Benz: No; Hanna unreasonably refused the Jan 2016 offer and needlessly continued litigation | Held: Court of Appeal—Hanna entitled to recover reasonable post‑Jan‑2016 fees; rejecting Jan 2016 offer was not unreasonable given unfavorable terms removed in 2017 offer |
| Proper method to calculate Song‑Beverly fee award (lodestar vs. percentage of recovery) | Hanna: Fees must start with lodestar (time × reasonable rates) per §1794(d) and case law | Mercedes‑Benz: Trial court may apply discretion and consider retainer; reliance on percentage provision justified | Held: Court of Appeal—trial court erred by applying a percentage/retainer‑based cap for post‑Jan‑2016 fees; fee awards under §1794(d) must begin with lodestar (adjusted as appropriate) |
| Whether the trial court properly interpreted the retainer’s 40% provision to displace hourly lodestar for post‑Jan‑2016 fees | Hanna: Retainer provides hourly fee basis plus a separate 40% bonus on ‘‘additional damages’’; does not replace hourly compensation | Mercedes‑Benz: 40% clause governs recovery of ‘‘excess’’ and justifies limiting recoverable fees | Held: Court of Appeal—trial court misread retainer; even if retainer supported percentage, Song‑Beverly awards may not be tied to plaintiff’s recovery amount and must use lodestar as the starting point |
| Whether disallowance of $2,137.86 payment to Hanna’s first expert (Lepper) as costs was an abuse of discretion | Hanna: Inspection was contemporaneous and reasonably incurred before car became total loss | Mercedes‑Benz: Lepper was replaced; his work was not used and thus not reasonably incurred | Held: Court of Appeal—trial court’s implied finding that the Lepper expense was not reasonably incurred is supported by substantial evidence; disallowance affirmed |
Key Cases Cited
- Chavez v. City of Los Angeles, 47 Cal.4th 970 (lodestar assembly of hours and reasonable hourly compensation)
- Ketchum v. Moses, 24 Cal.4th 1122 (lodestar is appropriate starting point; trial court may adjust)
- Goodstein v. Bank of San Pedro, 27 Cal.App.4th 899 (what satisfies §998 offer formalities for appealability)
- Etcheson v. FCA US LLC, 30 Cal.App.5th 831 (Song‑Beverly fee awards: actual time expended must be shown and reasonably incurred)
- Goglin v. BMW of North America, LLC, 4 Cal.App.5th 462 (rejecting unreasonable settlement offer with unfavorable terms does not bar fees)
- McKenzie v. Ford Motor Co., 238 Cal.App.4th 695 (Song‑Beverly fees; review for abuse of discretion and lodestar principles)
- Nightingale v. Hyundai Motor America, 31 Cal.App.4th 99 (contingency agreements do not displace lodestar entitlement under §1794(d))
- Levy v. Toyota Motor Sales, U.S.A., Inc., 4 Cal.App.4th 807 (trial court may not base fee awards solely on a percentage of recovery)
- Robertson v. Fleetwood Travel Trailers of California, Inc., 144 Cal.App.4th 785 (even when client not personally liable, Song‑Beverly awards must be lodestar‑based)