Friday, April 6, 2018
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Court of Appeal:
Litigant Not Prevailing Party Based on Securing Undeserved Benefit
Plaintiff Who Sued Under ‘Lemon Law’ Cannot Recover Attorney Fees Based on Settlement Under Which Manufacturer Paid Damages Not Statutorily Authorized
By a MetNews Staff Writer
The Court of Appeal for this district held yesterday that a litigant cannot be deemed a prevailing party based on obtaining a benefit to which there is no entitlement.
Although the ruling came in a case brought under the Song-Beverly Consumer Warranty Act—state “Lemon Law,”—the reasoning would appear to have applicability to offers of compromise pursuant to Code of Civil Procedure §998.
Justice Brian Hoffstadt of Div. Two wrote the opinion. It affirms the decision of Los Angeles Superior Court Judge Mel Red Recana denying attorney fees to plaintiff Efigenia Garcia, but modifying the judgment to award $750 in costs.
Offers to Purchase
The defendant was Mercedes-Benz USA, LLC. Prior to the lawsuit being filed, it agreed to purchase from Garcia, for $43,503.97, an automobile it manufactured and which she purchased.
A month after the purchase, the engine died.
However, the car-maker declined to pay Garcia the $3,090 she paid for dealer add-ons, and she sued. A confidential settlement was reached, leaving it to the court to determine attorney fees and costs, if any.
The statute provides for attorney fees for a prevailing plaintiff, and Garcia sought an award of $8,430 under that provision. Recana declined to make an award on the ground that the confidentiality of the settlement precluded a determination as to whether Garcia was any better off by virtue of having sued.
‘Prevailing’ Not Defined
Hoffstadt noted that the act does not define “prevailing.” He said a “handful of courts” have applied Code of Civil Procedure §1032, which provides for costs to a party with “a net monetary recovery,” in determining if attorney fees are to be awarded.
In light of that statute, he said, Garcia is entitled to ordinary costs, but under the prevailing view—which he said is more “pragmatic” and preferable—the question in determining the attorney-fee question is the extent to which the litigation goals were achieved.
“Because Mercedes-Benz is not legally responsible to pay Garcia for the dealer add-ons,” Hoffstadt wrote, “Garcia’s success in getting Mercedes-Benz to pay more than the statute requires does not count as a cognizable litigation benefit.”
Dealer Owes Refund
He explained:
“The trial court did not abuse its discretion in declining to find Garcia to be a prevailing party just because she pursued litigation to obtain the dealer add-ons from Mercedes-Benz. That is because she is not legally entitled, under the Act, to obtain a refund of those dealer add-ons from the manufacturer….Garcia purchased the add-ons from the dealer, not Mercedes-Benz. Except as to foodstuffs, a plaintiff seeking to recover for breach of an implied warranty of merchantability must prove privity with the breaching party….As to the dealer add-ons, Garcia’s privity is with the dealer—not Mercedes-Benz.”
The jurist pointed out that the act expressly provides that manufacturers are not obliged to make refunds for “nonmanufacturer items installed by a dealer” when the purchaser sues under an express warranty. He said that provision would be “nullified” if a plaintiff could skirt it by suing, as Garcia did, for breach of the implied warranty of merchantability.
He declared:
“[A] buyer is not a prevailing party under the Act just because she incurs attorney’s fees to obtain relief beyond that to which she is entitled. In such a case, the manufacturer or retail seller is paying more than it is legally required to pay just to end the litigation. Were the buyer who extracts such a ‘nuisance value’ as part of a settlement to be rewarded with attorney’s fees (by being declared a prevailing party), we would be acting in derogation of the true purpose of the Act’s attorney’s fees provision (which…is to remove the disincentive buyers might face when deciding whether to hire a lawyer to enforce their rights under the Act…as well as creating a perverse incentive for buyers to continue litigating in the hopes of obtaining a nuisance value that would entitle them to attorney’s fees as well.”
Hoffstadt commented:
“We are cognizant that our conclusion that a buyer is not a prevailing party under the Act’s attorney’s fees provision just because she convinces the manufacturer to pay for products and services supplied by the retail seller means that a buyer will not have a right to obtain a full refund for all outlay associated with her new defective car from a single party. And we recognize that a ‘one-stop’ remedy for buyers may make good sense, especially when the buyer in most cases purchased the car as part of a ‘one-stop’ shopping experience with the dealer. However, we are not free to disregard the Act’s plain language to implement what might be otherwise good public policy; that task lies solely with our Legislature.”
The case is Garcia v. Mercedes-Benz USA, LLC, 18 S.O.S. 1625.
Attorneys on appeal were René Korper and Thomas E. Solmer for Garcia and Jon D. Universal and James P. Mayo of Universal & Shannon for Mercedes-Benz.
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