Thursday, June 20, 2019
Court of Appeal:
By a MetNews Staff Writer
An attorney-fee award in a case brought under the state’s “lemon law” has been reversed by the Court of Appeal for this district because the trial court judge misread the plaintiff’s retainer agreement with her lawyers and failed to utilize the lodestar method of calculation.
The opinion, filed Tuesday, was authored by Dennis Perluss of Div. Seven. It reverses an order by Los Angeles Superior Court Judge Barbara A. Meiers.
The plaintiff, Mary Hanna, sued Mercedes-Benz USA, LLC under the Song-Beverly Consumer Warranty Act—Civil Code §1790 et seq.—popularly referred to as the “lemon law.” Represented by specialists in that area of law, O’Connor & Mikhov, she obtained a settlement on Jan. 27, 2017, for $60,000 plus costs—including attorney fees—and expenses.
She had paid the all-inclusive amount of $52,948.54 in 2007 for a new Mercedes-Benz, and had received $14,998.02 from her insurance company after the vehicle was damaged beyond repair in a May 2015 accident. The settlement amount was, therefore, in excess of actual damages.
Although the law firm took the case on a contingency-fee basis, the retainer agreement spelled out hourly rates. It also provided:
“In some instances we are able to recover additional damages above and beyond Client’s actual damages. In only those instances where we are able to recover additional damages, 40% of those additional damages shall be due the Law Firm as additional attorney’s fees.”
Hanna and Mercedes were unable to agree on the amount of attorney fees—she wanted to use the lodestar amount of $172,712.50 and a multiplier of 1.5, with the product being $259,068.75—and, pursuant to the settlement agreement, the setting of fees was left to the court.
Using the lodestar method, Meiers awarded $45,869 for the period up to Jan. 21, 2016, the date of upon which Hanna apparently received a Jan. 20 settlement offer from Mercedes, with terms less favorable than those she ultimately accepted a year later. For the period after Jan. 21, 2016, up to Jan. 27, 2017 when the settlement was reached, the judge awarded $15,000 which she reckoned to be 40 percent of the pay-out in excess of actual damages.
The total attorney-fee award was $60,869.
Perluss quoted the language in the retainer agreement relating to “additional fees” and said:
“Contrary to the trial court’s reading, this language clearly specified that O’Connor & Mikhov would receive its hourly rate for all time expended on the litigation, whether directed to the recovery of actual or additional damages, but it would also be entitled to a bonus equal to 40 percent of all additional damages recovered. By misreading this language as providing for a percentage recovery of additional damages ‘in lieu of an hourly rate’ for those legal services, and then using its faulty interpretation of the retainer agreement as the sole basis for awarding only $15,000 of the fees incurred after January 21, 2016, the trial court committed plain error.”
“Even if the trial court’s interpretation of the retainer agreement were correct, however, it would still have been error to award fees for legal work performed by O’Connor & Mikhov after January 21, 2016 based entirely on the law firm’s percentage share of civil penalties or other ‘excess’ monetary recovery, rather than using the lodestar figure—time spent multiplied by reasonable hourly compensation for each attorney…—as specified in the parties’ settlement agreement and mandated by Civil Code section 1794, subdivision (d), as the starting point for its analysis.”
Wording of Statute
That paragraph, part of the Song-Beverly Act, reads:
“If the buyer prevails in an action under this section, the buyer shall be allowed by the court to recover as part of the judgment a sum equal to the aggregate amount of costs and expenses, including attorney’s fees based on actual time expended, determined by the court to have been reasonably incurred by the buyer in connection with the commencement and prosecution of such action.”
Perluss said the “trial court has broad discretion to increase or reduce the proposed lodestar amount based on the various factors identified in case law,” but that the initial inquiry must always be what number of hours were reasonably expended by counsel.
The case is Hanna v. Mercedes-Benz USA, 19 S.O.S. 2847.
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