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McCullough v. FCA U.S. LLC

Nov 9, 2018
D073330 (Cal. Ct. App. Nov. 9, 2018)




WILLIAM McCULLOUGH, Plaintiff and Appellant, v. FCA US LLC, Defendant and Respondent.

Rosner, Barry & Babbitt and Hallen D. Rosner, Arlyn L. Escalante, Shaghayegh Dinata-Hanson for Plaintiff and Appellant. Nixon Peabody and David Henry Tennant, Scott Steven Shepardson, Jennifer A. Kuenster, Lisa Caryn Schwartz-Tudzin for Defendant and Respondent.


California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super. Ct. No. 37-2015-00013501-CU-BC-CTL) APPEAL from a postjudgment order of the Superior Court of San Diego County, Timothy B. Taylor, Judge. Reversed and remanded with directions. Rosner, Barry & Babbitt and Hallen D. Rosner, Arlyn L. Escalante, Shaghayegh Dinata-Hanson for Plaintiff and Appellant. Nixon Peabody and David Henry Tennant, Scott Steven Shepardson, Jennifer A. Kuenster, Lisa Caryn Schwartz-Tudzin for Defendant and Respondent.

Plaintiff and appellant William McCullough brought an action under the Song-Beverly Consumer Warranty Act (Song-Beverly Act; Civ. Code, § 1790 et seq., commonly known as the "lemon law," hereafter the Act) against defendant and respondent FCA US LLC (Chrysler). Following a bench trial, McCullough obtained a $17,163.83 damages verdict and was declared the prevailing party. He thereafter sought $125,055 in attorney fees ($83,370 in lodestar fees plus a 1.5 percent multiplier) but the trial court awarded $18,685 in attorney fees. McCullough appeals from the postjudgment attorney fee order, contending the court improperly focused on the proportionality of the fees to the damages recovered, producing a biased result; ignored applicable authority; and abused its discretion in reducing the award by 78 percent from his $83,370 request. McCullough further contends the court committed legal error by cutting off his attorney fee recovery from the date of Chrysler's December 22, 2016 Code of Civil Procedure section 998 (section 998) offer to compromise, because his total judgment, which includes $10,100.30 in prejudgment interest accrued before the section 998 offer, amounts to more than Chrysler's offer.

The parties refer to defendant FCA US LLC as Chrysler, one of the multiple brands sold by defendant. We do so as well.

Because McCullough's ultimate judgment was more favorable than Chrysler's section 998 offer to compromise, he was not precluded from recovering his postoffer costs, including attorney fees, under the Act. We reverse the postjudgment order and remand the matter for the court to give McCullough the opportunity to refile his motion for attorney fees and costs.


In February 2011, McCullough purchased a new 2011 Jeep Cherokee for $51,754.03 including taxes, fees and certain options. Within four months and having driven the vehicle about 2,000 miles, it began to exhibit transmission problems. After multiple transmission repair visits, in April 2013 McCullough traded the vehicle in and received $28,000 toward a replacement vehicle, a 2013 Jeep. In January 2015, he asked Chrysler to repurchase the replacement vehicle. Chrysler rejected the offer.

In April 2015, McCullough sued Chrysler for damages, civil penalties and attorney fees under the Act. Chrysler responded by offering McCullough the "actual price paid or payable, including any incidental and consequential expenses incurred" for the vehicle, less an offset for use, plus McCullough's reasonable costs, expenses and attorney fees. McCullough did not accept the offer. Chrysler answered the complaint in May 2015, and concurrently served an offer to compromise under section 998 to pay restitution less an offset for McCullough's use, plus reasonable costs, expenses and attorney fees. McCullough rejected the offer, but offered to mediate the dispute. Chrysler declined mediation.

The Act provides in part: "[T]he manufacturer shall make restitution in an amount equal to the actual price paid or payable by the buyer, including any charges for transportation and manufacturer-installed options, but excluding nonmanufacturer items installed by a dealer or the buyer, and including any collateral charges such as sales or use tax, license fees, registration fees, and other official fees, plus any incidental damages to which the buyer is entitled under Section 1794, including, but not limited to, reasonable repair, towing, and rental car costs actually incurred by the buyer." (Civ. Code, § 1793.2, subd. (d)(2)(B).) The manufacturer may reduce the restitution amount "by that amount directly attributable to use by the buyer prior to the time the buyer first delivered the vehicle to the manufacturer or distributor, or its authorized service and repair facility for correction of the problem that gave rise to the nonconformity" to be determined by a formula specified in the subdivision. (Civ. Code, § 1793.2, subd. (d)(2)(C).)
Chrysler's May 2015 998 offer was "to make restitution pursuant to Civil Code 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 manufacturerinstalled 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 Plaintiff's use of the vehicle between the date he 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 Civil Code 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 [s]ection 998 Offer to Compromise, pursuant to Civil Code section 1794[, subdivision] (d)."

The court set the matter for trial in July 2016 but continued it to January 2017 at McCullough's request. On December 22, 2016, Chrysler served McCullough with an amended section 998 offer to pay $24,000, plus McCullough's reasonable costs, expenses and attorney fees based on actual time expended under Civil Code section 1794, subdivision (d), or as determined by the court. McCullough objected to the offer and rejected it.

McCullough waived a jury and the matter proceeded to a bench trial. Following a two-day trial, the trial court found McCullough had established a claim under the Act. The court found he did not prove substantial impairment of safety or value, but did prove substantial impairment of use. It awarded McCullough $17,163.83 in actual damages for the restitution value of the 2011 vehicle, as well as prejudgment interest as of May 7, 2015, but denied him civil penalties or treble damages. The court ruled McCullough was the prevailing party entitled to file a cost memorandum and motion for reasonable attorney fees. As to fees, the court's order noted: "[D]uring the trial [McCullough] had three or four lawyers at counsel table plus one or two more in the gallery. Only one lawyer (Mr. Wirtz) examined witnesses and argued the case. The court will take this into account in analyzing attorneys' fees. . . . Also to be considered at the time of the attorneys' fee motion is counsel's apparent failure to transmit to [McCullough] FCA's settlement offer . . . ."

McCullough moved for $125,055 in attorney fees, constituting a lodestar of $83,370 based on counsels' hourly rates and time spent on the matter, plus a 1.5 multiplier of $41,685. His motion recounted the litigation efforts by his counsel, Knight Law Group, and also Richard Wirtz of Wirtz Law APC, who in March 2016 had associated into the case as trial counsel. He argued Chrysler's section 998 offer was invalid and unenforceable because (1) it was vague, ambiguous and uncertain (2) it was silent as to specific incidental and consequential damages; (3) the offer limited his right to fees by denying recovery of fees actually and reasonably incurred after the date of the offer, contradicting Civil Code section 1794, subdivision (d); (4) the offer was silent as to pre-and post-judgment interest; and (5) it required execution of an undisclosed and unattached general release. McCullough submitted declarations from attorneys Wirtz and Steve Mikhov, who set out the time and hourly rates of various attorneys and staff from their law firms in the matter, including for time spent on the attorney fees motion. Both summarized some of the discovery matters and described trial preparation for both the June 2016 and January 2017 trial calls. Attorney Mikhov further described the attorney fees awarded in other lemon law matters. According to Mikhov, lemon law cases were not simple but required a specialized understanding of the full scope of "highly nuanced" consumer protection laws, as well as knowledge of the "intricacies of automobiles and a lexicon associated with them," how to investigate the matters, and auto manufacturers' and dealers' protocols for repairing vehicles.

Wirtz averred that he spent 5.6 hours at $500 per hour on the matter before Chrysler served its amended section 998 offer. He stated that the following persons worked on the matter: Associate attorney Amy R. Smith, 110.80 hours at $325 per hour; associate attorney Joshua Bradus, 9.5 hours at $250 per hour; associate attorney Lauren B. Sabb, 7.10 hours at $250 per hour (discounted from $250.50); director of legal services Eric Jung, 11.30 hours at $175 per hour; and paralegal Rebecca Evans, 4.9 hours at $175 per hour. Mikhov's declaration reflected that he worked 12.6 hours on the matter at his rate of $500 per hour, and that other attorneys who worked on the matter were associate attorney Amy Morse, 36 hours at $250 per hour; attorney Christopher Swanson, 23.7 hours at $325 per hour; associate attorney Daisy Ortiz, 2.5 hours at $225 per hour; contract attorney J. Kirk Donnelly, 11.3 hours at $375 per hour; attorney Kristina Stephenson-Cheang, 13 hours at $350 per hour; and partner Lauren Ungs, .9 hours at $350 per hour.

McCullough separately moved for an award of $10,791.20 in prejudgment interest under Civil Code section 3287, subdivision (a), calculated from February 3, 2011, the date of the vehicle purchase, to May 18, 2017, the date of the judgment. Alternatively, he sought an award of $3,557.90 in discretionary prejudgment interest under Civil Code section 3287, subdivision (b). McCullough pointed out he had asked for such interest at the legal rate in his prayer for relief. He disagreed with the court's calculation of prejudgment interest from May 7, 2015, the date of a letter from Chrysler to McCullough's counsel, arguing that damages were capable of being made certain on February 3, 2011.

McCullough calculated prejudgment interest at the legal rate of 10 percent based on the baseline restitution of $17,163.83 equaling $1,716.38 per annum or $4.70 per day ($17,163.83 x 10% - 365 days = $4.70).

Chrysler opposed both motions. Asserting McCullough made no "real attempt" to settle the case short of trial and criticizing him for retaining a second law firm to try his case, it argued the requested attorney fees were excessive, inherently duplicative and unreasonable. Chrysler argued McCullough's attorneys ignored its settlement offer so as to engage in two years of "needless" litigation using "recycled . . . work" on a case they characterized as very simple, without any particularly challenging or novel legal issues and factual hurdles. It argued McCullough's attorneys created any risk of nonpayment when they failed to accept its early settlement offer to pay full restitution plus reasonable attorney fees, costs and expenses. Chrysler asserted that counsel continued the lawsuit for the sole purpose of incurring substantial attorney fees and gambling on recovery of a civil penalty unsupported by the facts. Pointing to authority that a reduced award may be justified by overlitigation, Chrysler asked the court to apply a negative multiplier and make a downward adjustment to the lodestar figure. However, Chrysler did not provide evidence or legal authority demonstrating that McCullough's counsel's requested hourly rates were unreasonable, nor did it state how much time McCullough's attorneys should have spent on a case prepared for trial twice and tried to a favorable judgment for McCullough. Chrysler asked the court to deny McCullough's request for prejudgment interest on the ground that damages were uncertain and not capable of calculation.

On his request for attorney fees, McCullough argued in reply that Chrysler misstated both facts and law in various ways and did not present evidence rebutting the presumption that a verified fee bill is credible, and prima facie evidence of necessarily-incurred costs, expenses and services. On his motion for prejudgment interest, he pointed out via a sworn declaration from counsel that he had offered to mediate the case in May 2015 but Chrysler had declined.

The court granted McCullough's attorney fee motion, but in doing so it found "overwhelming" "evidence of inefficiency." In part, it reasoned: "Presently, plaintiff seeks attorneys' fees in the amount of $125,055.00. This is not a typographical error by the court. In a case which yielded a damages award of $17,163.83 plus a cost award of $10,875.50, plaintiff's counsel seeks attorneys' fees of $125,055.00. . . . [¶] . . . [¶] The court considers this fee application to contain equal measures of overreaching and frivolousness (bordering on bad faith). The court is sorely tempted to deny the request in its entirety as a result. To ask for $125,000.00 in a case in which there was an offer of $24,000.00 and which was worth $17,163.83 confirms the view held by many trial court judges: that the fee shifting provisions of the 'lemon law' statutes have been twisted from the purpose contemplated by the Legislature into something the well- intentioned drafters of the statutory framework would scarcely recognize. The court urges the parties to seek appellate review of this ruling, urges the Court of Appeal to publish an opinion reiterating this widely held view, and urges the Legislature to re- visit the statutory fee- shifting construct.

"The first level of review starts with the statutory language. [Civil Code s]ection 1794[, subdivision] (d) explicitly limits fees to those 'determined by the court to have been reasonably incurred.' So the initial question for the court is this: would a reasonable person spend $125,000.00 in order to receive an award of $17,163.83? To ask the question is to furnish the obvious answer.

"The second level of review considers the request for a multiplier. This is not a close question. Try as he might to 'soft pedal' the request as 'modest,' . . . , this is clearly not a proper case for a multiplier (except maybe a negative one). Plaintiff knew from day one there was a fee shifting apparatus available to him, and he conferred no conceivable benefit on anyone but himself. . . . The overreaching request for a multiplier is denied.

"This leaves the claimed lodestar of $83,370.00, which itself is nearly five times the damages awarded in this case. . . . [¶] . . . [¶] The most obvious conclusion from [a table of the attorney time and hourly rates] is that this was an exceedingly poorly managed case. Responsibility for this falls on Mr. Mikhov and, to a lesser extent, Mr. Wirtz. The evidence of inefficiency is overwhelming. The court makes these observations having practiced law in San Diego for 20 years prior to 2005, having run cases and sent out bills, having supervised associates and legal assistants, and having ruled on hundreds of fee applications in a variety of settings since 2005. The court has a hard time imagining that the Legislature intended to reward the excessive assignment of 14 lawyers to this modest, straightforward, commodity case (one which the defendant tried to settle at the outset). Proper staffing of this case would have been (at most) one partner, one senior associate, one junior lawyer and one legal assistant. Instead, the attorneys with the experience to know better allowed the existence of a series of transitory billers, which no doubt gave rise to inefficiency, unnecessary work, and an obvious lack of focus."

The court awarded McCullough a total of $18,685 (consisting of Wirtz's fees of $2800; Barnes's fees of $4907.50; Morse's fees of $9000; and Jung's fees of $1977.50), which the court observed parenthetically was "still more than the damages awarded in this case." About a week after its attorney fee ruling, the court awarded McCullough $10,791.20 in prejudgment interest.

McCullough timely appealed from the court's postjudgment attorney fee order.


I. Legal Principles Regarding Attorney Fee Awards Under the Act

The Act is a "strongly pro-consumer" law, whose remedies are in addition to those available to consumers under other laws, particularly the Unfair Competition Law. (Murillo v. Fleetwood Enterprises, Inc. (1998) 17 Cal.4th 985, 990; Civ. Code, § 1790.4.) It " 'is manifestly a remedial measure, intended for the protection of the consumer; it should be given a construction calculated to bring its benefits into action.' " (Murillo, at p. 990.) In keeping with the remedial purposes of the law, the Act mandates that prevailing buyers recover their expenses, costs and attorney 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." (Civ. Code, § 1794, subd. (d).) As the California Supreme Court has explained, an award of attorney fees, expenses and costs is the "primary financial benefit" the Act offers to consumers (Murillo v. Fleetwood Enterprises, Inc., at p. 994); that benefit is "their ability, if successful, to recover their 'attorney's fees based on actual time expended.' Such fees generally comprise the lion's share of the litigation costs, and the prospect of having to pay attorney fees even if one wins a lawsuit can serve as a powerful disincentive to the unfortunate purchaser of a malfunctioning automobile. By permitting prevailing buyers to recover their attorney fees in addition to costs and expenses, our Legislature has provided injured consumers strong encouragement to seek legal redress in a situation in which a lawsuit might not otherwise have been economically feasible." (Murillo v. Fleetwood Enterprises, Inc., at p. 994; see also Wohlgemuth v. Caterpillar Inc. (2012) 207 Cal.App.4th 1252, 1262; Robertson v. Fleetwood Travel Trailers of California, Inc. (2006) 144 Cal.App.4th 785, 817.)

"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." (Civ. Code, § 1794, subd. (d).)

II. McCullough's Judgment Was More Favorable than Chrysler's Section 998 Offer

We begin with McCullough's contention that the trial court's attorney fee order must be reversed because it was premised in part on the fact his $17,163.83 damages award was less than Chrysler's December 22, 2016 section 998 offer to pay him $24,000, triggering the sanction that precluded him from recovering his postoffer costs. McCullough states that the prejudgment interest accruing before Chrysler's December 22, 2016 section 998 offer is $10,100.30, meaning his total judgment amounts to $27,264.13 (the sum of $17,163.83 and $10,100.30), which exceeded, and was more favorable than, Chrysler's $24,000 offer to compromise.

Chrysler does not meaningfully challenge this point. Where, as here, an appellant contends the trial court misapplied the law and the underlying facts are undisputed, we review the matter de novo. (See Martinez v. Brownco Construction Co. (2013) 56 Cal.4th 1014, 1018 [court reviews de novo the issue of expert fee recovery under section 998 involving application of the law to undisputed facts]; Sanford v. Rasnick (2016) 246 Cal.App.4th 1121, 1130.) Doing so, we conclude McCullough's contention has merit.

In its respondent's brief, Chrysler refers to the court's award of prejudgment interest twice. First, Chrysler mentions the award in passing in a footnote to make the point that McCullough "cannot [] justify the over-lawyered staffing at trial" but instead argues he was prevented from seeking recovery of those fees. According to Chrysler, by making the argument McCullough "reinforces the commitment of Plaintiff's counsel (and Plaintiff) to run up legal fees and shift every dollar to Defendant, and they would have included that time in their fee request if not blocked by the court's erroneous ruling." Chrysler references the prejudgment interest award again in another footnote stating: "Plaintiff argues that when the award of costs is added to the $17,163.83 in damages, the total exceeds the $24,000 offer on December 22, 2016[,] by $3,264.13. . . . Even if Plaintiff is correct on that point, it has no bearing on the propriety of the trial court considering evidence that Plaintiff (or his lawyers) rejected early settlement offers that were higher than the amount of damages awarded at trial. Of course, prejudgment interest would have stopped running in 2015, and been much lower in the aggregate, if the case had settled at the outset like it should have." None of these arguments challenges McCullough's argument that the failure to account for prejudgment interest in the judgment prevented him from recovering his reasonable attorney fees incurred after December 22, 2016, requiring reversal of the attorney fee order.

"Under section 998, 'if the plaintiffs reject a defendant's offer to compromise and then fail to win a more favorable judgment, the plaintiffs cannot recover their postoffer costs and must pay the costs the defendant incurred after the offer.' " (MacQuiddy v. Mercedes-Benz USA, LLC (2015) 233 Cal.App.4th 1036, 1049; see Murillo v. Fleetwood Enterprises, Inc., supra, 17 Cal.4th at p. 1000; Civ. Code, § 998, subd. (c).) Such costs include attorney fees where authorized by statute, as here. (See Mangano v. Verity, Inc. (2008) 167 Cal.App.4th 944, 948.) To trigger the cost shifting under section 998, the offer's terms and conditions must be sufficiently certain so as to be capable of valuation, which enables the court to determine whether plaintiff's recovery at trial is more favorable. (Chen v. Interinsurance Exch. of the Automobile Club (2008) 164 Cal.App.4th 117, 121; see, e.g., MacQuiddy, at p. 1050.) Prejudgment interest is an element of compensatory damages, and thus to promote the legislative purpose behind section 998, "any preoffer prejudgment interest the plaintiff is entitled to recover under Civil Code section 3287 in a nontort action is to be included in determining whether the plaintiff has obtained a 'more favorable judgment' within the meaning of subdivision (c) of section 998." (Bodell Const. Co. v. Trustees of California State University (1998) 62 Cal.App.4th 1508, 1526.)

Here, the trial court declared McCullough the prevailing party, a determination also unchallenged by Chrysler. Under the Act he was entitled to recover his costs, expenses and reasonable attorney fees based on "actual time expended," in connection with commencement and prosecution of the action. (Civ. Code, § 1794, subd. (d).) McCullough's attorney fee motion, and the court's initial ruling, was based on the court's initial miscalculation of prejudgment interest. Because his judgment was more favorable than Chrysler's section 998 offer, McCullough should not have been subject to section 998's sanction precluding recovery of postoffer costs, including attorney fees, under the Act.

We observe that McCullough did not move to reopen or seek reconsideration of the trial court's attorney fee determination after its prejudgment interest ruling, so as to give the court the opportunity to correct the award. But Chrysler does not argue McCullough forfeited his challenge by failing to do so, and the question of McCullough's entitlement to post section 998 offer attorney fees and costs is one of law, which may be raised for the first time on appeal. (See Carman v. Alvord (1982) 31 Cal.3d 318, 324; Ward v. Taggart (1959) 51 Cal.2d 736, 742 ["a change in theory is permitted on appeal when 'a question of law only is presented on the facts appearing in the record' "]; Walker v. Apple, Inc. (2016) 4 Cal.App.5th 1098, 1113; Donorovich-Odonnell v. Harris (2015) 241 Cal.App.4th 1118, 1130.)

Our independent review of this question based on undisputed facts compels us to conclude the error warrants reversal. The remedial purposes of the Act are furthered by permitting McCullough an opportunity to seek the full award of costs and reasonable fees to which he is entitled. (Murillo v. Fleetwood Enterprises, Inc., supra, 17 Cal.4th at p. 990; accord, Wohlgemuth v. Caterpillar Inc., supra, 207 Cal.App.4th at pp. 1261-1262 [provision for recovery of costs and attorney fees in the Act is an "important aspect of . . . consumer protection"; it removes the disincentive buyers might face when deciding whether to hire a lawyer, giving " 'injured consumers strong encouragement to seek legal redress in a situation in which a lawsuit might not otherwise have been economically feasible' "].)

III. The Court Must Redetermine McCullough's Attorney Fee Award

Because we direct the trial court on remand to give McCullough an opportunity to seek attorney fees and costs unlimited by section 998's cost-shifting, we set out for the court's benefit the methodology it must use to calculate the award under the Act. We do so because it is not clear that the court's ruling was "consistent with the applicable legal principles" (Graciano v. Robinson Ford Sale, Inc. (2006) 144 Cal.App.4th 140, 149), and under the circumstances, the court on remand can give " 'further consideration and amplification of its reasoning.' " (Ibid.)

As a general matter, attorney fee awards should be "fully compensatory" (Ketchum v. Moses (2001) 24 Cal.4th 1122, 1133; Roth v. Plikaytis (2017) 15 Cal.App.5th 283, 290); absent special circumstances rendering the award unjust, parties who qualify for a fee should recover compensation for "all the hours reasonably spent" in successfully litigating the action and obtaining their fee. (Ketchum, at p. 1133; Roth, at p. 290; Hensley v. Eckerhart (1983) 461 U.S. 424, 430 [counsel for prevailing parties should be paid for all time reasonably expended on a matter]; see also Horsford v. Board of Trustees of California State University (2005) 132 Cal.App.4th 359, 394; Meister v. Regents of University of California (1998) 67 Cal.App.4th 437, 447.)

This court summarized the methodology specifically relating to the Act in Goglin v. BMW of North America, LLC (2016) 4 Cal.App.5th 462. The Act " 'requires the trial court to make an initial determination of the actual time expended; and then to ascertain whether under all the circumstances of the case the amount of actual time expended and the monetary charge being made for the time expended are reasonable. These circumstances may include, but are not limited to, factors such as the complexity of the case and procedural demands, the skill exhibited and the results achieved. If the time expended or the monetary charge being made for the time expended are not reasonable under all the circumstances, then the court must take this into account and award attorney fees in a lesser amount. A prevailing buyer has the burden of "showing that the fees incurred were 'allowable,' were 'reasonably necessary to the conduct of the litigation,' and were 'reasonable in amount.' " ' " (Goglin, at p. 470, italics added.) The use of a multiplier is authorized in awarding attorney fees under the Act in cases involving a contingent fee arrangement. (Robertson v. Fleetwood Travel Trailers of California, Inc, supra, 144 Cal.App.4th at p. 822.)

Though the court exercises discretion in awarding attorney fees, including under fee-shifting statutes such as the Act (see Goglin v. BMW of North America, LLC, supra, 4 Cal.App.5th at p. 470; Mountain Air Enterprises, LLC v. Sundowner Towers, LLC (2017) 3 Cal.5th 744, 751 [general review standard for amount of attorney fee award]), its exercise must be based on proper factors. " ' The discretion of a trial judge is not a whimsical, uncontrolled power, but a legal discretion, which is subject to the limitations of legal principles governing the subject of its action, and to reversal on appeal where no reasonable basis for the action is shown.' " (Sargon Enterprises, Inc. v. University of Southern California (2012) 55 Cal.4th 747, 773; see People v. Giordano (2007) 42 Cal.4th 644, 663; Roth v. Plikaytis, supra, 15 Cal.App.5th at p. 290.) " ' " '[T]he scope of discretion always resides in the particular law being applied, i.e., in the "legal principles governing the subject of [the] action . . . ." Action that transgresses the confines of the applicable principles of law is outside the scope of discretion and we call such action an "abuse" of discretion.' " ' " (Graciano v. Robinson Ford Sales, Inc., supra, 144 Cal.App.4th at pp. 148-149.) "To determine if a court abused its discretion, we must thus consider 'the legal principles and policies that should have guided the court's actions.' " (Sargon, at p. 773.)

In its ruling, the trial court here correctly summarized the lodestar method, which is applicable to calculating attorney fees under the Act. (Doppes v. Bentley Motors, Inc. (2009) 174 Cal.App.4th 967; Robertson v. Fleetwood Travel Trailers of California, Inc, supra, 144 Cal.App.4th at p. 821.) In reaching the so-called lodestar, a court begins by deciding "the reasonable hours spent" on the case and multiplying that number by "the hourly prevailing rate for private attorneys in the community conducting noncontingent litigation of the same type." (Ketchum v. Moses, supra, 24 Cal.4th at p. 1133.) "[T]he unadorned lodestar reflects the general local hourly rate for a fee-bearing case; it does not include any compensation for contingent risk, extraordinary skill, or any other factors a trial court may consider under Serrano [v. Priest (1977) 20 Cal.3d 25 (Serrano III)]." (Ketchum, at p. 1138.) The trial court here did not take issue with the hourly rates charged by McCullough's counsel. "Using the lodestar as the basis for the attorney fee award 'anchors the trial court's analysis to an objective determination of the value of an attorney's services, ensuring that the amount awarded is not arbitrary.' " (Bernardi v. County of Monterey (2008) 167 Cal.App.4th 1379, 1394, quoting PLCM Group, Inc. v. Drexler (2000) 22 Cal.4th 1084, 1095.)

The trial court also acknowledged it had discretion to adjust the lodestar figure in light of a number of relevant factors that weigh in favor of augmentation or diminution. (Ketchum v. Moses, supra, 24 Cal.4th at p. 1132; Serrano III, supra, 20 Cal.3d at p. 49; Graciano v. Robinson Ford Sales, Inc., supra, 144 Cal.App.4th at p. 154.) "[T]he lodestar . . . may be adjusted by the court based on factors, including . . . (1) the novelty and difficulty of the questions involved, (2) the skill displayed in presenting them, (3) the extent to which the nature of the litigation precluded other employment by the attorneys, [and] (4) the contingent nature of the fee award. [Citation.] The purpose of such adjustment is to fix a fee at the fair market value for the particular action. In effect, the court determines, retrospectively, whether the litigation involved a contingent risk or required extraordinary legal skill justifying augmentation of the unadorned lodestar in order to approximate the fair market rate for such services." (Ketchum v Moses, at p. 1132.)

Despite the court's recitation of these settled legal principles, we question whether it applied them objectively and dispassionately in reaching the award, which substantially reduced the requested fees by some 78 percent. The court's attorney fee ruling was grounded in its criticism of the fee-shifting construct as an abstract matter, going so far as inviting appellate review of whether the statutory fee-shifting framework is in keeping with the Legislature's purpose. But it is not this court's function to address the wisdom of a statute's policy; such arguments are best left to the Legislature. (See Berkeley Hillside Preservation of City v. Berkeley (2015) 60 Cal.4th 1086, 1108 [court does not sit in review of the Legislature's wisdom in balancing policies against the goals of a statute]; People v. Indiana Lumbermens Mutual Ins. Co. (2010) 49 Cal.4th 301, 308; accord, Soto v. Motel 6 Operating, L.P. (2016) 4 Cal.App.5th 385, 395.) The court also compared the total fees requested by McCullough (the lodestar plus the 1.5 multiplier) with McCullough's $17,163.83 in damages. This led the court at the outset of its analysis to rely on the notion that a "reasonable person" would not spend $125,000 to receive an award of $17,163.83. The court did not state what number of hours it believed would have been reasonable to litigate the case. Even when the court correctly characterized the lodestar, pointing out the lodestar constituted McCullough's requested fees of $83,370, the court continued to engage in a strict comparison, pointing out that sum was "nearly five times the damages awarded in this case." But the fact the amount involved in the litigation was low in comparison to the fee request does not relieve the court from relying on a lodestar analysis. (See Ketchum v. Moses, supra, 24 Cal.4th at p. 1134 ["the determination of the lodestar figures is . . . fundamental to arriving at an objectively reasonable amount"].) Further, "while the degree of the plaintiff's success in obtaining the objectives of the litigation is a factor that the trial court may consider in determining an award of reasonable attorney fees under a fee statute [citation] . . . there is no requirement that the trial court make an award of attorney fees in an amount that is commensurate with or in proportion to the degree of success in the . . . litigation." (Bernardi v. County of Monterey, supra, 167 Cal.App.4th at p. 1398.) The court's characterization of damages, of course, did not include the prejudgment interest that it ultimately awarded McCullough and so its observation that the fee award of $18,685 was "still more than the damages awarded in this case" is inaccurate. (North Oakland Medical Clinic v. Rogers (1998) 65 Cal.App.4th 824, 830 ["It is well established that prejudgment interest is not a cost, but an element of damages"]; see American Federation of Labor v. Unemployment Inc. Appeals Bd. (1996) 13 Cal.4th 1017, 1029.)

Further, in reducing the fee, the court referred to a chart identifying each attorney, their years of practice, hourly rate and hours spent ["The most obvious conclusion from the foregoing table (italics added) . . . ."] While the court is permitted to adjust for duplication and inefficiency (Graciano v. Robinson Ford Sales, Inc., supra, 144 Cal.App.4th at p. 161; 569 East County Boulevard LLC v. Backcountry Against the Dump, Inc. (2016) 6 Cal.App.5th 426, 441 (569 East) [court may reduce hours for "duplicative or excessive" work]), such duplicate effort should be apparent in the statements accompanying McCullough's motion reflecting the tasks performed by counsel, not simply the product of the court's opinion that too many lawyers worked on the case. The trial court did not provide any examples of actual inefficiency and duplicated effort (apart from pointing out numerous attorneys worked on the matter), and we cannot infer it had carefully reviewed the statements and was familiar with them so as to identify particular issues supporting its reduction. (Compare, 569 East County Boulevard LLC, supra, 6 Cal.App.5th at p. 441 & fn. 18 [trial court "expressly stated it had 'culled through the billing statement' "]; Christian Research Institute v. Alnor (2008) 165 Cal.App.4th 1315, 1324 ["record amply demonstrates the trial court's familiarity with Alnor's billing submissions"].) And though the court stated its ruling took into account the fact that McCullough had "three or four lawyers at counsel table plus one or two more in the gallery" at trial, McCullough's fee motion did not (at least at that time) ask for fees for trial work, so the court's observation was immaterial to the actual attorney fee determination.

This is particularly so where counsel explains that each attorney works on a separate aspect of the case so as to promote efficiency in the numerous lemon law cases they handle. --------

The court is not required to explain its reasoning, but the lack of an explanation may hinder appellate review, and make it more difficult for an appellate court to uphold it as reasonable. (Rancho Mirage County Club Homeowners Association. v. Hazelbaker (2016) 2 Cal.App.5th 252, 264; see also Gorman v. Tassajara Development Corp. (2009) 178 Cal.App.4th 44, 101 [trial court abused its discretion in reducing fee award because appellate court was "unable to ascertain a reasonable basis for the trial court's reduction of the lodestar amount"].) Even when a justification is provided, reversal may be warranted when it is unreasonable, arbitrary, or based on improper factors. (See Mountjoy v. Bank of America, N.A. (2016) 245 Cal.App.4th 266, 272, 280-282 [reversing trial court's 70 percent across-the-board reduction in hours based on purportedly flawed time entries as arbitrary: "[T]here appears to be no reasonable basis for the conclusion that the total hours included in the 70 percent plus time entries that were flawed in one or more ways was even reasonably close to 70 percent of the total time claimed"; the reduction method without any correlation shown to the number of hours claimed on the flawed entries was arbitrary and "not a legitimate basis for determining a reasonable attorney fee award"]; Rogel v. Lynwood Redevelopment Agency (2011) 194 Cal.App.4th 1319, 1321, 1333 [reversing order reducing lodestar of approximately $2.7 million to $540,000 in litigation against a government agency on trial court's reasoning that " 'the money should be spent in Lynwood and not on the lawyers' "; defendant's status as a government agency and preservation of its finances were not proper factors to consider when applying a multiplier to the lodestar].) The reviewing court should be able to determine how the court ultimately arrived at the amount of fees it awarded, particularly where it orders a substantial reduction in the actual time expended.

To be clear, trial courts need not " ' 'become enmeshed in a meticulous analysis of every detailed facet of the professional representation." ' " (PLCM Group, Inc. v. Drexler, supra, 22 Cal.4th at p. 1098.) And, as we have explained, the court retains discretion to undertake an analysis of the reasonableness of the attorney fee request. But it is the trial court's role to use the proper methodology, including by examining the evidence and billing records (Christian Research Institute v. Alnor, supra, 165 Cal.App.4th at p. 1324) so as to determine a reasonable attorney fee award based on the lodestar and proper factors under the foregoing authorities.


The judgment is reversed and the matter remanded to the trial court with directions that it permit McCullough to refile his motion for attorney fees and costs under the Act and redetermine the attorney fee award. McCullough shall recover his costs on appeal.


Summaries of

McCullough v. FCA U.S. LLC

Nov 9, 2018
D073330 (Cal. Ct. App. Nov. 9, 2018)
Case details for

McCullough v. FCA U.S. LLC

Case Details

Full title:WILLIAM McCULLOUGH, Plaintiff and Appellant, v. FCA US LLC, Defendant and…


Date published: Nov 9, 2018


D073330 (Cal. Ct. App. Nov. 9, 2018)