McKenzie v. Ford Motor Co.
238 Cal. App. 4th 695
| Cal. Ct. App. | 2015Background
- McKenzie sued Ford under the Song‑Beverly Consumer Warranty Act (lemon law) after buying a defective 2011 Ford Fiesta; he sought damages, civil penalties, and attorney fees. Two attorneys represented McKenzie.
- After discovery and a trial continuance, Ford served a CCP § 998 offer to repurchase the vehicle for $25,000 plus either $15,000 in fees or the option to move for a larger fee award; the offer included a separate multi‑page release with broad third‑party releases and an expressly “material” confidentiality clause (statutorily prohibited).
- McKenzie rejected Ford’s April 2013 offer and served his own § 998 offer for essentially the same financial terms but without the problematic release; Ford let that lapse and later served a stripped‑down § 998 offer (no broad release or confidentiality) which McKenzie accepted. Judgment followed.
- McKenzie moved for $47,491.25 in attorney fees (including fees incurred after Ford’s first § 998 offer). The trial court awarded only $28,350.08 — the amount McKenzie billed before Ford’s initial offer — concluding post‑offer fees (about 42 hours) were unreasonable and largely duplicative.
- On appeal the Court of Appeal reversed, holding the trial court abused its discretion by denying all post‑offer fees: Ford’s initial offer contained significant nonfinancial terms that made rejection reasonable, the fee provisions in both offers were substantively the same, and reasonable fees incurred pursuing a fee motion are recoverable.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether fees incurred after Ford’s initial § 998 offer are recoverable | McKenzie: initial offer contained unacceptable/illegal nonfinancial conditions (broad releases, illegal confidentiality); rejecting it was reasonable, so subsequent fees are compensable | Ford: initial offer was essentially adequate; continued litigation after it was unreasonable and fees should be cut off at that date | Court: Reversed — initial offer materially differed; rejection was reasonable; post‑offer fees (including fee‑motion fees) must be reconsidered and may be awarded |
| Whether Ford’s two § 998 offers were substantively identical | McKenzie: they were not — the first included extraneous, potentially enforceable, and illegal provisions; the second removed them | Ford: differences were legally meaningless/unenforceable, so plaintiff unreasonably delayed to inflate fees | Court: Differences were significant (including designated “material” confidentiality and broad releases); plaintiff’s refusal was justified |
| Whether pursuing a fee motion after a § 998 offer is recoverable | McKenzie: fee‑motion work is compensable as part of actual time expended | Ford: plaintiff could have accepted $15,000 lump sum; pursuing motion was self‑serving | Court: Fee‑motion work is ordinarily includable; here plaintiff already had incurred more than $15,000, so pursuing a motion was reasonable |
| Whether duplicative billing justified denying all post‑offer fees | McKenzie: limited duplication; staffing by two attorneys justified by different expertise | Ford: two lead attorneys billed overlapping tasks; post‑offer duplication shows deliberate overbilling | Court: Minimal identified duplication (about two hours) did not justify denying the entire post‑offer fee period; remand to recalculate reductions if any |
Key Cases Cited
- Robertson v. Fleetwood Travel Trailers of California, 144 Cal.App.4th 785 (explains fee award based on actual time reasonably incurred)
- Ketchum v. Moses, 24 Cal.4th 1122 (fee awards ordinarily include hours spent on the fee motion)
- City of Colton v. Singletary, 206 Cal.App.4th 751 (abuse‑of‑discretion standard for attorney fee awards)
- Ellis v. Toshiba America Information Systems, 218 Cal.App.4th 853 (deference to trial court’s fee determinations)
- Serrano v. Priest, 20 Cal.3d 25 (appellate review: fee awards not disturbed absent clear error)
- Christian Research Institute v. Alnor, 165 Cal.App.4th 1315 (court may infer requested fees were inflated when substantially reduced)
- Meister v. Regents of the University of California, 67 Cal.App.4th 437 (trial court may consider continued litigation after a reasonable settlement offer when awarding fees)
- Keene v. Harling, 61 Cal.2d 318 (contract severability and effect of illegal provisions)
- Valentino v. Elliott Sav‑On Gas, 201 Cal.App.3d 692 (§ 998 offer that conditions settlement on releases of nonparties/other claims may be invalid for shifting costs)