Plaintiffs moved for an award of $89,445 in lodestar attorney fees with a 1.5 enhancement of $44,722.50 for a total of $134,167.50 in fees, plus $5,059.05 in costs. Finding the hourly rates and amount of counsels' time spent on services on plaintiffs' behalf to be reasonable, the trial court tentatively ruled plaintiffs were entitled to recover $81,745 in attorney fees and $5,059.05 in costs. However, in its final order the court substantially reduced its award, concluding plaintiffs should not have continued to litigate the matter at all after FCA's March 2015 section 998 offer. It found their sought-after attorney fees after the March 2015 offer were not "reasonably incurred," and cut off fees from that point, awarding plaintiffs a total of $2,636.90 in attorney fees and costs.
Plaintiffs appeal from the postjudgment order. Pointing out their ultimate recovery was double the estimated value of FCA's invalid March 2015 section 998 offer, which they had no duty to counter or accept, they contend the trial court abused its discretion by cutting off all attorney fees and costs incurred after that offer. We agree. We reverse
FACTUAL AND PROCEDURAL BACKGROUND
In November 2010, plaintiffs purchased a new 2010 Chrysler Town & Country for $40,040.69, including sales tax and fees. After one year and about 15,000 miles of usage, the car began to exhibit abnormal engine noises and irregular shifting problems. These problems persisted for the next several years, leading plaintiffs in August 2014 to request that FCA repurchase the vehicle. FCA advised plaintiffs they could not do anything for them because plaintiffs had put more than 40,000 miles on the vehicle.
In early February 2015, plaintiffs sued FCA and the vehicle's seller, Peck Jeep Eagle, Inc., for damages, civil penalties and attorney fees under the Act, attaching their retail installment sale contract as an exhibit to the complaint. About two weeks
FCA answered the complaint in early March 2015 and acknowledged the vehicle "now qualifies for repurchase under the [Act]." FCA otherwise denied each allegation of the original complaint, including those that would entitle plaintiffs to a civil penalty.
Following the March 2015 section 998 offer, the matter proceeded with a demurrer to FCA's cross-complaint, discovery and other litigation over the next fifteen months in anticipation of the July 29, 2016 trial date.
On June 27, 2016, FCA served an amended section 998 offer proposing to pay plaintiffs $65,000 in exchange for dismissal of the action and the vehicle's return. FCA offered to pay reasonable costs, expenses and attorney fees under section 1794, subdivision (d) based on actual attorney time expended up to the date of the offer either stipulated by the parties or by motion. By mid-July 2016, the parties had negotiated a settlement in which
Unable to reach an agreement with FCA for the amount of attorney fees, costs, and expenses, plaintiffs moved for $139,227 in costs and fees, comprised of lodestar fees of $89,445, a 1.5 multiplier on the fees of $44,723, and costs of $5,059.05. In the motion, they summarized the litigation and efforts of their counsel, O'Connor & Mikhov, LLP, who took the matter on a contingent fee basis. They also submitted declarations from attorneys and staff, including partners Mark O'Connor
FCA opposed the motion. Asserting plaintiffs' attorneys incurred the "maximum amount of attorneys' fees possible before resolving the matter," it argued the requested fees were excessive and unreasonable. FCA argued plaintiffs' attorneys ignored or objected to its settlement offers
In reply, plaintiffs argued FCA had misstated facts and law. They pointed out FCA did not dispute the lodestar method was the proper means for determining attorney fees or their prevailing party status. They argued it was FCA that mishandled the case by willfully failing to abide by its affirmative obligation under the Act to promptly offer restitution or replacement of a vehicle at the time it qualified for such a remedy. They argued FCA had a duty to inquire into the facts and circumstances but did not, and rejected their August 2014 demand for repurchase or replacement. Plaintiffs also argued FCA did not accurately recount the parties' settlement efforts; they pointed out it qualified its first March 2015 section 998 offer with a refusal to admit liability, and that offer was deemed withdrawn after 30 days so that plaintiffs had nothing to accept after that point. They pointed out that once FCA made a reasonable settlement offer in June 2017, the case settled. Plaintiffs argued they were not in sole possession of information that would permit FCA to comply with its obligations under the Act, as the sales contract was attached to the complaint, and FCA could have determined the paid and payable amount as the amount financed was at 0 percent interest. They argued the "only explanation for the delay is that it took the skill and persistence of Plaintiffs' counsel for FCA to appreciate its own exposure to civil penalties under the [Act]." Plaintiffs reiterated that FCA had not rebutted the fact their case was taken on contingency basis, and asserted that FCA's attacks on their counsel as motivated to run up fees were entirely unsupported in the record.
In February 2017, the court issued a tentative ruling awarding plaintiffs $81,745 in lodestar attorney fees and $5,059.05 in costs, stating it was "of the opinion that the lodestar represents reasonable hourly rates for the Plaintiffs' counsel and that the time was reasonably incurred."
About a month later, the court issued its final order. In it, the court drastically reduced plaintiffs' sought-after fees, indicating
The court continued: "From essentially the moment the complaint was filed, the Defendant sought to resolve this case on the terms specified under the ... Act. Notwithstanding Defendant's willingness to settle and communications of such intent, it does not appear Plaintiffs ever attempted to facilitate a prompt resolution. For example, later in 2015 when Defendant sought to ascertain by way of interrogatories the necessary amounts to which Plaintiffs would be entitled, the responses failed to provide Defendant that information."
"The Court would agree that if the issue before it was the enforceability of a [ section] 998 offer, that (1) the February 2015 letter was not a valid [ section 998 offer]; and (2) the March 2015 offer was vague. [¶] However, the enforceability of a [ section] 998 offer is not the issue before the Court. Rather the issue is whether the fees sought by the Plaintiffs were 'reasonably incurred by [the Plaintiffs] in connection with the commencement and prosecution of [this] action.' "
"The Court concludes that it cannot make a finding that the fees Plaintiffs seek were reasonably incurred in the prosecution of this action when it appears abundantly clear that Defendant from the beginning was trying to extricate itself from the case-simply asking the Plaintiffs to tell it what the appropriate dollar amount was-with no cooperation from the Plaintiffs. Neither Plaintiffs' arguments at the hearing nor in their papers provided a satisfactory explanation for the continued litigation of this case after Defendants' initial settlement offers."
"Having reviewed the billing records of counsel, the Court finds that Plaintiffs are entitled to recover their attorneys' fees up to March 13, 2015, in the total amount of $2,095. Plaintiffs have failed to explain why any fees over and above this amount were 'reasonably incurred.' In this regard, the Court again notes its initial review of the billing records revealed services performed that appeared reasonable in amount in terms of the amount of time spent on a given service and the dollar amount therefor. However, the real issue here is whether the performance of those services in the first instance was even necessary. The Court concludes that but for the services up to
Plaintiffs timely appealed from the postjudgment attorney fees order.
DISCUSSION
I. Legal Principles for Attorney Fee Recovery Under the Act and Standard of Review
We summarized the legal principles applicable to an attorney fee award under the Act in Goglin , supra ,
" 'We review an award of attorney fees under [the Song-Beverly Act] for abuse of discretion. [Citations.] We presume the trial court's attorney fees award is correct, and "[w]hen the trial court substantially reduces a fee or cost request, we infer the court has determined the request was inflated." [Citation.] "The ' "experienced trial judge is the best judge of the value of professional services rendered in his [or her] court, and while his [or her] judgment is of course subject to review, it will not be disturbed unless the appellate court is convinced that it is clearly wrong." ' " ' " ( Goglin , supra , 4 Cal.App.5th at pp. 470-471,
Though the trial judge has broad discretion in awarding reasonable attorney fees, it is nevertheless "a legal discretion subject to the limitations of legal principles governing the subject of its action ...." ( 569 East County , supra ,
II. Contentions
Plaintiffs contend the trial court abused its discretion and essentially punished
We conclude plaintiffs' points have merit.
III. The Court Erred by Deciding Plaintiffs' Entitlement to Prevailing Party Attorney Fees Based on Their Failure to Accept Unreasonable or Invalid Settlement Offers
As we have stated above, when a trial court severely curtails the number of compensable hours in a fee award, as the court did here, a reviewing court may engage in a presumption that the court determined the fee request was inflated and thus unreasonable on that basis. (See 569 East County , supra ,
Concededly, the trial court had broad discretion in determining the reasonableness of plaintiffs' fee request, and in its tentative ruling appeared to adopt the requested lodestar amount with some reductions for unsupported time and an excessive hourly rate (see footnote 6, ante ). But the court ultimately discarded the lodestar inquiry in its final order; it used what the court itself found was a vague and invalid section 998 compromise offer to cut off plaintiffs' attorney fees, under the apparent theory that it was unreasonable for plaintiffs' counsel to reject that offer or counsel should have been more cooperative in facilitating a settlement for an award of restitution rather than continue litigating the issue of FCA's willfulness for a civil penalty under the Act or seek any additional recovery. In substance and effect the court incorporated the penalty provisions of section 998 (applicable to instances-unlike this case-where the plaintiff's result obtained is less than the defendant's settlement offer) into its reasonableness analysis, and failed to acknowledge that plaintiffs for their counsel's litigation efforts recovered an amount more than double the value of FCA's initial restitution offers. In this way, the court abused its discretion. Its decision to cut off fees from the point of FCA's March 2015 offer, particularly in the face of plaintiffs settlement for almost double the amount, was error.
We do not write on a blank slate in reaching our conclusions. Goglin involved a plaintiff who in November 2014 settled her action under the Act against the defendants for $75,000, less her loan balance. ( Goglin , supra , 4 Cal.App.5th at pp. 468-469,
The plaintiff in Goglin moved for an award of about $200,000 in attorney fees and costs; the defendants in opposition argued her counsel should not be compensated for any litigation activities given the pre-trial settlement offer, and thus any time spent on litigation-related activities were unnecessary and unreasonable; the claimed fees were grossly inflated and not reasonably expended because the plaintiff "ignored repeated offers of restitution, filed an unnecessary lawsuit, and engaged in unnecessary litigation activity"; the case did not warrant such an award because it was not complex; the plaintiff settled for only a portion of the total recovery she initially sought; and none of the costs were reasonably necessary given the prelitigation offer to reimburse the plaintiff for everything she was owed. ( Goglin , supra ,
On appeal, we addressed the defendants' argument that the plaintiff was not entitled to any fees or costs because she unreasonably refused to accept one of the defendant's prelitigation settlement offers. ( Goglin , supra ,
In reaching this conclusion, we relied in part on McKenzie , supra ,
Our Division Three colleagues reversed. ( McKenzie , supra ,
The Court of Appeal concluded the trial court's actual reasoning was an abuse of discretion, as the court had erroneously viewed the two settlement offers as essentially identical, and thus believed the plaintiff acted unreasonably in rejecting the first offer for the purpose of exaggerating his fees. ( McKenzie , supra ,
The import of both Goglin and McKenzie is that where a defendant's settlement offer contains unfavorable provisions or is otherwise invalid, as
In this case, as in McKenzie , we cannot indulge an inference that the trial court's order drastically reducing plaintiffs' fee request from $89,445 to $2,636 was based on a legitimate lodestar assessment of the overall reasonableness of counsel's fees based on rates, duplication of effort, or complexity. The court here found counsel's hourly rates and the time spent on tasks to be reasonable. Rather, it expressly based its ruling on the necessity of plaintiffs' continued efforts in litigating the case to the eventual settlement. But as in Goglin and McKenzie , FCAs settlement offers were unacceptable; the first informal offer required them to sign a release without stating any release terms, and the second was insufficiently specific, as the trial court found. (See MacQuiddy v. Mercedes-Benz USA, Inc. (2015)
Nor can we conclude that the trial court's order was correct regardless of its underlying reasoning. ( 569 East County , supra ,
Citing Harman v. City and County of San Francisco (2006)
FCA's points concerning the reasonableness of their settlement offers and their characterizations of plaintiff's counsel's efforts are contradicted by the trial court's own findings and the nature of the settlement offers. And "[g]eneral arguments that fees claimed are excessive, duplicative, or unrelated do not suffice." ( Premier Medical Management. Systems, Inc. v. California Insurance Guarantee Association (2008)
Harman 's plaintiff was only partially successful on his claims under the federal Civil Rights Act; the Court of Appeal observed that case law was not consistent as to whether a party's refusal of a settlement offer should be part of a court's analysis of a reasonable attorney fee. ( Harman v. City and County of San Francisco , supra ,
Nor does Thayer , supra ,
Unlike the defendant in Thayer , supra ,
Meister v. Regents of University of California , supra ,
FCA argues plaintiffs' request for a 1.5 multiplier shows the unreasonableness of their fee request. They cite no authority for the proposition, and we are not persuaded. While it is permissible to account for the pursuit of unsuccessful claims in determining a reasonable attorney fee, the fact that counsel seeks a multiplier as a component of its fee request-denied by the court in this case-is not itself a proper factor in determining the reasonableness of sought-after fees. In fact, it is not unusual for counsel to ask for a multiplier in contingent fee cases as this one. (See Bernardi v. County of Monterey (2008)
IV. The Trial Court Erred as a Matter of Law by Applying the Section 998 Penalty in Awarding Reasonable Attorney Fees
As we have stated, in reducing plaintiffs' fee award the trial court in substance and effect applied the penalty of section 998 for plaintiffs' failure to accept FCA's March 2015 settlement offer. Section 998 is intended to encourage settlement by punishing the party who fails to accept a reasonable offer. (
None of the factors triggering section 998's penalty warranted its application here. Under the circumstances, the court's use of the March 13, 2015 date to cut off plaintiffs' attorney fees was arbitrary and unsupportable. We therefore reverse the order.
The postjudgment order is reversed and the matter remanded with directions that the trial court award plaintiffs reasonable attorney fees for their counsels' services, including those performed after FCA's March 2015 offer, as well as reasonable fees for services in pursuing their motion for fees and costs. Plaintiffs shall recover their costs on appeal.
WE CONCUR:
McCONNELL, P. J.
IRION, J.
Notes
Undesignated statutory references are to the Civil Code.
The record does not contain plaintiffs' response, but attorney invoices and other evidence indicates that several days later they sent a letter rejecting the informal offer as impermissibly vague and incapable of being accepted for failing to state a specific dollar amount.
" 'If the buyer establishes that the failure to comply [with an obligation under the Song-Beverly Act] was willful, the judgment may include, in addition to [actual damages], a civil penalty which shall not exceed two times the amount of actual damages.' " (Goglin v. BMW of North America, LLC (2016)
More fully, FCA's March 2015 section 998 offer was "to make restitution pursuant to ... section 1793.2[, subdivision] (d)(2)(B) in an amount equal to the actual price paid for the vehicle, including any charges for the transportation and manufacturer-installed options, but excluding nonmanufacturer items installed by a dealer or the buyer, and including any collateral charges such as sales tax, license fees, and registration fees less an amount directly attributable to plaintiffs' use of the vehicle between the date they purchased the vehicle and the date on which the vehicle was first presented to an authorized Chrysler repair facility for repairs that gave rise to the nonconformity alleged in the complaint as calculated pursuant to ... section 1793.2[, subdivision] (d)(2)(C) ... [and] to pay reasonable costs, expenses and attorneys' fees based on actual time expended up to the date of this [section 998 offer], pursuant to ... section 1794[, subdivision] (d)." (Some capitalization omitted.)
Attorney Mark O'Connor provided the hourly rates of all attorneys and staff from his firm in the matter. He stated the following individuals, including himself, worked on the case: Partner Mark O'Connor at $650 per hour, partner Steve Mikhov at $500 per hour, associate Russel Higgins at $400 per hour, associate Lauren Ungs at $350 per hour, associate Stephanie Marshall at $200 per hour, associate Alastair Hamblin at $325 per hour, associate Chris Swanson at $325 per hour, associate Shawna Melton at $325 per hour, associate Amy Morse at $250 per hour, contract attorney Constance Morrison at $350 per hour, associate Kevin Van Hout at $300 per hour, associate Daisy Ortiz at $225 per hour, associate Kristina Stephenson-Cheang at $350 per hour, contract attorney Kirk Donnelly at $375 per hour, and paralegal Amy Fox at $175 per hour. O'Connor did not summarize the total hours by individual, but instead referenced an attached exhibit of all invoices. The invoices detailed the expenses and the work performed by attorneys and staff, by date, from July 15, 2014, through January 31, 2017.
Plaintiffs' $89,445 lodestar request included twenty hours at $450 per hour in anticipation of the reply and appearance at the hearing. Their reply did not include support for this rate, therefore the court concluded a reasonable rate would be $325 and adjusted the lodestar accordingly.
In 569 East County this court interpreted McKenzie as standing for the proposition that a court will abuse its discretion if its order contravenes uncontradicted evidence. (569 East County , supra ,
Notably, on remand and having been directed to reconsider the reasonableness of the attorney fee award using the lodestar method, the trial court in Harman again awarded over $1.1 million in attorney fees in the case, in which the plaintiff had obtained a recovery of $30,300. (Harman v. City and County of San Francisco (2007)
Thayer involved nine law firms for plaintiffs in five coordinated class action law suits arising from Wells Fargo's anticipatory breach of a promise to provide checking accounts free of any service charge during the account's lifetime. (Thayer , supra , 92 Cal.App.4th at pp. 824-825,