California Court of Appeals, Fourth District, Third Division
Appeal from an order of the Superior Court of Orange County, No. 30-2012-00573060 David T. McEachen, Judge.
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Anderson Law Firm and Martin W. Anderson for Plaintiff and Appellant.
Sanders Roberts & Jewett, Reginald Roberts, Jr.; Snell & Wilmer, Mary-Christine Sungaila and Jenny Hua for Defendants and Respondents.
James McKenzie appeals from the trial court’s order awarding him only $28, 350 of the nearly $48, 000 in attorney fees he sought in this case, following the parties’ settlement of McKenzie’s claim under the automobile “lemon law” provisions of the Song-Beverly Consumer Warranty Act (Civ. Code, § 1790 et seq.). He contends the court abused its discretion by awarding him none of the attorney fees he incurred following Ford Motor Company's initial offer to compromise in April 2013, even though the case did not settle until months later.
The trial court refused to award McKenzie any of the attorney fees incurred in the wake of Ford’s initial offer because it viewed the compromise offer ultimately accepted by McKenzie as essentially identical to the offer he
had initially rejected – distinguished only by his “demand that [he] be allowed to file [a fee] motion.” The court concluded the entire 42 hours billed by McKenzie’s counsel in the wake of Ford’s initial offer amounted to “plaintiff’s counsel exaggerating the amount of their fees to increase their prized fees.” In short, the court concluded McKenzie unreasonably delayed settlement for the sole purpose of ginning up his fee award. As further support for that determination, the court also found that after receipt of Ford’s initial offer, McKenzie’s two attorneys billed for “many” hours of duplicative work, which the court deemed unreasonable.
We reverse. The trial court’s comparative assessment of Ford’s two settlement offers was erroneous as a matter of law. Even Ford concedes its initial settlement offer incorporated numerous extraneous provisions – including broad releases of both Ford and nonparties, an illegal confidentiality clause characterized as “material” to the settlement, and what amounted to an opt-out provision in Ford’s favor – all of which were excised from the offer McKenzie later accepted. These differences are significant, and thus McKenzie’s rejection of the initial offer was reasonable, requiring his counsel to continue working on the case. Moreover, contrary to the court’s belief, both of Ford’s compromise offers had the same attorney fee provision, allowing McKenzie the option of either accepting $15, 000 in full payment of his reasonable fees and costs, or filing a motion to obtain an award of fees in a higher amount. Given that McKenzie had already incurred over $28, 000 in fees and costs by the time of Ford’s initial offer – almost twice what Ford was offering to pay without a motion – it was not unreasonable for him to opt for pursuing that fee motion. And the fees reasonably incurred in pursuing the fee motion were properly includable in McKenzie’s attorney fees award.
The trial court’s erroneous comparison of Ford’s initial compromise offer with the offer McKenzie later accepted fatally undermines its conclusion that the entire amount of hours billed by McKenzie’s counsel in the wake of that initial offer was unjustified. The court’s additional finding, that McKenzie’s two attorneys also engaged in instances of duplicative billing after Ford’s initial offer, does not support a complete denial of fees for that period. Consequently, we remand the matter to the trial court with directions to reconsider the fee award.
McKenzie filed his complaint in May 2012, alleging causes of action arising out of his purchase of a defective Ford Fiesta automobile in July 2011. McKenzie’s complaint prayed for damages and restitution of approximately $23, 000, civil penalties equal to two times his damages for each violation of his warranty, an order enjoining Ford from engaging in any act or
practice constituting a violation of Business and Professions Code section 17531, and an award of attorney fees and costs. McKenzie was represented in the lawsuit by two separate attorneys, Martin W. Anderson of the Anderson Law Firm, and Jeffrey Kane of the Law Office of Jeffrey Kane.
Ford filed its answer in July 2012, and it subsequently responded to McKenzie’s written discovery, which was completed in August 2012. In November 2012, a jury trial was scheduled for June 2013.
In January 2013, Ford substituted new counsel into the case, and on April 24, 2013, Ford moved ex parte for an order continuing the trial so that it would have additional time to conduct its own discovery. McKenzie opposed the motion on the basis Ford had the opportunity to conduct discovery, but failed to do so in a timely manner. McKenzie claimed that having completed his own discovery, he was ready to proceed to trial as scheduled. The trial date was continued for two months, to September 2013.
The day after trial was continued, Ford served an offer to compromise on McKenzie’s claim, pursuant to Code of Civil Procedure section 998 (section 998). The financial provisions of the offer were that Ford would repurchase McKenzie’s automobile for the sum of $25, 000 and would either pay McKenzie $15, 000 in attorney fees, or agree that McKenzie could move the court for an award of reasonable attorney fees in some other amount. However, Ford’s offer was explicitly based on the following factual premises: that “[e]very concern presented by [McKenzie to Ford] was repaired within a reasonable number of repair attempts. The vehicle did not meet the statutory presumption for reasonable number of repair attempts. The vehicle did not meet the statutory presumption for reasonable number of repair attempts when [McKenzie] called Ford requesting a repurchase. Much of [McKenzie’s] attorneys’ fees were incurred unreasonably and unnecessarily [and] Ford contends that [McKenzie] has no viable claims against it in this action.”
Moreover, the offer expressly required McKenzie to “execute a release of all claims and causes of action arising out of any breach of implied warranty or breach of express warranty for the subject vehicle.” However, because no specific release was appended to the offer, McKenzie’s counsel asked Ford’s counsel for a copy of Ford’s proposed release to review before deciding whether to ...