From Casetext: Smarter Legal Research

Nielsen v. FCA U.S. LLC

COURT OF APPEAL OF THE STATE OF CALIFORNIA FIRST APPELLATE DISTRICT DIVISION FIVE
Aug 23, 2018
A151659 (Cal. Ct. App. Aug. 23, 2018)

Opinion

A151659

08-23-2018

BLAKE EDWARD NIELSEN, Plaintiff and Appellant, v. FCA US LLC, Defendant and Respondent.


NOT TO BE PUBLISHED IN OFFICIAL REPORTS

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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (San Mateo County Super. Ct. No. CIV532403)

Blake Edward Nielsen appeals from a judgment and post-judgment order denying him recovery for his attorney fees and costs in a "lemon law" action commenced under the Song-Beverly Consumer Warranty Act (Civ. Code, § 1790 et seq.) (the Act). He contends the court erred in finding that he was not the prevailing party under the Act; respondent's settlement offer pursuant to Code of Civil Procedure section 998 was invalid due to ambiguity and uncertainty; and the court erred in finding that his recovery at trial was less than the amount of the settlement offer. We will affirm.

I. FACTS AND PROCEDURAL HISTORY

In December 2013, Nielsen purchased a new 2014 Jeep Grand Cherokee from Putnam Automotive, Inc., for $49,815.36. Believing that the vehicle suffered from electrical and engine defects, in September 2014 he asked the manufacturer, respondent FCA US LLC (FCA), to repurchase the vehicle under the terms of the Act. (Civ. Code, § 1793.2, subd. (d)(1).)

FCA informed Nielsen that it was unable to conclude from its records that it was obligated to repurchase the vehicle, but offered Nielsen $2,000 in exchange for a general release of claims. Nielsen rejected the offer.

A. Nielsen's Complaint

In February 2015, Nielsen filed a complaint against FCA for breach of express and implied warranties under the Act. Alleging "defects and nonconformities to warranty including, but not limited to, electrical and engine defects," Nielsen claimed entitlement to "reimbursement of the price paid for the vehicle" (less the amount directly attributable to Nielsen's use before discovering the defects), "incidental, consequential and general damages," and attorney fees and costs. He also requested a "civil penalty of up to two times the amount of actual damages" on the ground that FCA had willfully violated the Act.

That same month, FCA offered to "make restitution of the actual price paid or payable, including any incidental and consequential expenses incurred, pursuant to Civil Code section 1793.2(d)(2)(B) [violation of express warranty], less an offset for use pursuant to Civil Code Section 1793.2(d)(2)(B) & (C)," and to "pay the reasonable attorneys' fees, expenses and costs pursuant to Civil Code Section 1794(d)." In exchange, Nielsen would return the vehicle to FCA and execute a release. FCA invited Nielsen to provide specified documentation that would allow FCA's counsel to "properly calculate the restitution amount." Nielsen did not respond.

B. FCA's 998 Offer

In March 2015, FCA served Nielsen with an offer to settle under Code of Civil Procedure section 998 (998 Offer). Essentially, FCA proposed to make restitution and reimburse Nielsen for his reasonable attorney fees and costs, without stating a specific dollar amount.

The 998 Offer was worded as follows: "[FCA offers] to make restitution pursuant to Civil Code section 1793.2(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 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(d)(2)(C) . . . [and] to pay reasonable costs, expenses and attorneys' fees based on actual time expended up to the date of this CCP Section 998 Offer to Compromise, pursuant to Civil Code section 1794(d)." (Italics added.)

Nielsen responded to FCA's 998 Offer with written objections in May 2015. He asserted that the offer was "vague and uncertain in its terms," particularly because it did not specify a dollar amount, the amount of the offset for his use of the vehicle, or whether FCA was going to pay off the loan or just reimburse him for payments he already made. In greater detail, Nielsen objected that the offer (1) proposed restitution in an amount equal to the actual price paid for the vehicle, while Civil Code section 1793.2, subdivision (d)(2)(B) indicated restitution must be in an amount equal to the actual price paid or payable by the buyer, and the absence of the word "payable" from the offer rendered it unclear whether FCA would pay the lienholder the balance due on the loan; (2) did not "specifically detail the dollar amount" of the offer; (3) did not indicate the mileage that would be used to calculate the mileage offset for Nielsen's use of the vehicle or specify the dollar amount of the offset; (4) did not address payment of Nielsen's incidental damages; (5) did not specify whether or when Nielsen would have to return the vehicle; (6) did not say whether Nielsen would have to sign a release; (7) did not specify when Nielsen would receive payment; (8) did not address prejudgment interest; and (9) provided for a reimbursement of attorney fees and costs only through the date of the offer.

The record does not include any response by FCA to Nielsen's objections. The case proceeded to a jury trial.

C. Jury Trial Verdict

During deliberations, the jury sent the court a question asking how to calculate damages under an implied warranty theory. The parties stipulated to the amount of $48,267.41 in restitution.

The jury returned a verdict in Nielsen's favor on his implied warranty claim in the stipulated amount of $48,267.41. The jury found that FCA was not obligated to repurchase the vehicle and was not liable for other damages, a civil penalty, or further relief.

D. Nielsen's Motion for Attorney Fees and Costs

Under Civil Code section 1794, subdivision (d), Nielsen filed a motion to recover $280,275 as attorney fees ($224,220 incurred fees with a multiplier of 1.25) plus $21,180.96 in costs as the prevailing party under the Act.

FCA opposed Nielsen's motion, arguing principally that Nielsen was not entitled to fees and costs because he was not the prevailing party (since he recovered only for restitution, which had already been offered, and he did not obtain a civil penalty), and the purported fees were inflated and not reasonably incurred.

At the January 2017 hearing on Nielsen's motion, the trial court asked FCA to provide "what the calculation would have been at the time had the offer been accepted," because "it's difficult to compare [the 998 Offer as it is] with what the trial result is." FCA's attorney agreed to do so, insisting that he could not have calculated a dollar amount for the 998 Offer at the outset without knowing Nielsen's payment, registration, and other information. Nielsen's attorney countered that, with the purchase contract and down payment information, FCA could have figured out the payments and estimated the registration amount.

In February 2017, FCA filed its "Restitution Calculation Pursuant to Court Request." Using figures for the payments Nielsen had made, an offset for mileage Nielsen had driven, Nielsen's costs for vehicle registration, and the payoff to the lienholder, FCA stated its 998 Offer had a value of $49,782.52. This amount exceeded the amount of the jury's verdict.

Nielsen filed a response, arguing that "FCA has manipulated simple math to now retrospectively come up with a number that is greater than that $48,267.41 jury verdict." Nielsen asserted, among other things, that FCA's calculation (1) was based on the full term pay-off of the loan, inclusive of all interest that would have accrued, rather than the payoff as of the time of the 998 Offer; and (2) calculated the offset for use at the lowest possible miles, even though at trial FCA had contended the offset would be at a higher number of miles. Nielsen also contended that the information FCA used in calculating the amount of the 998 Offer could have been ascertained by FCA at the time of the offer. Nielsen calculated the value of the 998 Offer at $43,963.09, which is less than what the jury awarded.

In April 2017, the court issued its order denying Nielsen's motion for attorney fees and costs. First, the trial court rejected Nielsen's argument that the 998 Offer was not sufficiently specific, finding that it had a dollar value of $49,782.52 (as asserted by FCA) in restitution plus then-accrued reasonable attorney fees, costs and expenses (which the court estimated at $25,295). "And, the Court is of the opinion, and I so find, that Plaintiff's Counsel - who have long-time and well-known expertise in representing consumers in these kinds of 'Lemon Law' cases, and had pertinent repurchase information in Plaintiff's sole possession - clearly had the capability of understanding the 998 Offer." The court concluded the offer was sufficiently definite, a valid offer, and reflected an amount greater than the recovery Nielsen obtained at trial.

Second, the court found that Nielsen's response to the 998 Offer "was in bad faith" and his written objection was "a constructive rejection" of the 998 Offer. Further, the court stated: "And Plaintiff's Counsel should not be allowed to engage in the fiction that the 998 Offer was invalid and, therefore, be heard to claim that they never actually rejected the 998 Offer and cannot be held to the CCP 998 sanctions flowing from such a wrongful rejection. To put it another way, Plaintiff's use of such evasive Objection is a manifest abuse of process by an improper and unwarranted attempt to side-step and undermine the whole purpose and integrity of the 998 Offer process."

Third, the court found that Nielsen was not the prevailing party, noting that FCA "is the party who has better-met its litigation objectives in this case." "This Court believes that Defense Counsel has aptly and accurately summed-up the situation here . . . '[W]ith a full restitution offer in hand, Plaintiff elected to try the case, gambling on recovering a civil penalty. Plaintiff lost that bet. Not only did the jury not award a civil penalty, they concluded that the Jeep did not qualify for repurchase under the express warranty provision of Song-Beverly. They awarded him only restitution under the implied warranty of merchantability for an amount that Plaintiff's attorney stipulated to. The jury denied every attempt by Plaintiff to recover any additional amount, Rejecting his counsel's argument for "cover" damages.' "

Nielsen filed a notice of appeal from the judgment and the post-judgment order regarding his motion for attorney fees, costs, and expenses.

II. DISCUSSION

Nielsen's motion for attorney fees, costs, and expenses was brought exclusively under Civil Code section 1794, subdivision (d). The first question, therefore, is whether Nielsen was entitled to recover under that section as a prevailing party within the meaning of the statute. If he was the prevailing party, the next question would be whether his failure to accept the 998 Offer limited his recovery, which would depend on whether the 998 Offer was valid and whether Nielsen's recovery at trial exceeded the amount of the 998 Offer. As it turns out, we need only address the first question to resolve the appeal.

A. Was Nielsen the Prevailing Party Under the Act?

1. The Act's Provisions

The Act requires manufacturers and retail sellers of new cars to extend an implied warranty of merchantability to the buyer that the car is fit for the ordinary purposes for which cars are used. (Civ. Code, §§ 1791.1, subd. (a)(2), 1792.) It also regulates how any express warranties are created and enforced. (Civ. Code, §§ 1793.1, 1793.2, 1793.3, 1795.)

Under the Act, "[i]f the manufacturer or its representative in this state is unable to service or repair a new motor vehicle . . . to conform to the applicable express warranties after a reasonable number of attempts, the manufacturer shall either promptly replace the new motor vehicle. . . or promptly make restitution to the buyer in accordance with subparagraph (B)." (Civ. Code, § 1793.2, subd. (d)(2).) The buyer has the right to choose restitution instead of replacement. (Ibid.) Subparagraph (B) provides that restitution "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 Act gives new car buyers the right to sue when a manufacturer or retail seller "fail[s] to comply" with any "implied or express warranty." (Civ. Code, § 1794, subd. (a).) The measure of the buyer's damages includes the replacement or reimbursement set forth in Civil Code section 1793.2, subdivision (d), as described ante. (Civ. Code, § 1794, subd. (b).) In addition, the buyer may recover a civil penalty if the manufacturer's or retail seller's failure to comply with the Act was willful. (Civ. Code, § 1794, subd. (c).) And a buyer who "prevails" in the action may recover "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 the lawsuit. (Civ. Code, § 1794, subd. (d).)

2. Prevailing Party Determination

Although the Act authorizes an award of attorney fees and costs if the buyer "prevails" in the action, it does not define a prevailing party. (Civ. Code § 1794, subd. (d).) Courts have adopted a "pragmatic approach" that considers "the extent to which each party realized its litigation objectives," such that obtaining a net monetary recovery does not automatically make the plaintiff the prevailing party. (MacQuiddy v. Mercedes- Benz USA, LLC (2015) 233 Cal.App.4th 1036, 1047 (MacQuiddy).) The parties have followed this approach in briefing the issue.

The trial court applied the pragmatic approach, determining that Nielsen did not prevail in the action because FCA was "the party who has better-met its litigation objectives in this case," since the jury awarded only restitution for the amount stipulated by the parties and refused to impose a civil penalty or require a repurchase under an express warranty. We review the court's determination for an abuse of discretion. (MacQuiddy, supra, 233 Cal.App.4th at p. 1047.)

The analysis in MacQuiddy is instructive. There, the plaintiff sued the defendant manufacturer for rescission, restitution and a civil penalty. The defendant's answer admitted that restitution was due and served a 998 Offer proposing to repurchase the car for the amount of the down payment, monthly payments, and outstanding loan obligation, less a mileage offset. (233 Cal.App.4th at p. 1041.) MacQuiddy proceeded to trial, and the jury awarded him restitution in a stipulated amount, but rejected his claim for a civil penalty. The trial court ruled that MacQuiddy was not the prevailing party for purposes of the Act: while the jury awarded MacQuiddy a repurchase of the car for the stipulated amount, the defendant's liability for the repurchase was not contested, and the only matter litigated was the issue of a civil penalty. The appellate court concluded that the trial court had not abused its discretion. "Using a pragmatic approach, and being guided by equitable considerations, the trial court could conclude within the confines of the applicable principles of law that MacQuiddy was not a prevailing party because he did not achieve his main litigation objective - obtaining a civil penalty." (Id. at p. 1048.)

Here, FCA offered Nielsen restitution and recovery of attorney fees in the same month that he filed his lawsuit - and again in the 998 Offer - but Nielsen rejected these offers and proceeded to trial. Nielsen's ostensible reason for rejecting a restitution settlement was that he wanted to obtain relief other than restitution: a repurchase of the car for breach of express warranty, a civil penalty, or other relief as alleged in his complaint. He recovered none of this relief. Therefore, it was not an abuse of discretion to conclude that Nielsen failed to accomplish his litigation objectives and was therefore not the prevailing party in the litigation.

Nielsen insists his primary litigation objective was to return the car and essentially get his money back, and he obtained this recovery. He points out that, although the jury did not award the civil penalty he sought, a litigant need not obtain all of the desired recovery to be a prevailing party. (Citing Gezalyan v. BMW of North America, LLC (C.D.Cal. 2010) 697 F.Supp.2d 1168, 1170 (Gezalyan) [plaintiff was the prevailing party under the Act because she accomplished her main litigation objective of getting the defendant to repurchase her vehicle, even though she did not prevail on claims for civil penalty, conversion, or punitive damages].) Gezalyan is a federal district court case that we have no obligation to follow. Moreover, it is distinguishable. In Gezalyan, the court found that the repurchase remedy was the plaintiff's main litigation objective even though the defendant had offered to repurchase the vehicle, because the defendant's offer to repurchase "had numerous conditions not authorized by the Act." (Ibid. Italics added.) FCA's restitution offer, by contrast, was unconditional. In any event, the fact that a federal district court judge in Gezalyan reached a certain conclusion on the facts in that case does not mean that the court in this case abused its discretion based on the facts before it.

Because the trial court was within its discretion to conclude that Nielsen was not a prevailing party under the Act, Nielsen has no right under Civil Code section 1794, subdivision (d) to recover "costs and expenses, including attorney's fees." And since Nielsen did not seek costs or attorney fees under any other provision, we need not and do not consider whether the 998 Offer was valid or whether Nielsen's recovery exceeded the amount of the 998 Offer.

II. DISPOSITION

The judgment and post-judgment order are affirmed.

/s/_________

NEEDHAM, J. We concur. /s/_________
JONES, P.J. /s/_________
BRUINIERS, J.


Summaries of

Nielsen v. FCA U.S. LLC

COURT OF APPEAL OF THE STATE OF CALIFORNIA FIRST APPELLATE DISTRICT DIVISION FIVE
Aug 23, 2018
A151659 (Cal. Ct. App. Aug. 23, 2018)
Case details for

Nielsen v. FCA U.S. LLC

Case Details

Full title:BLAKE EDWARD NIELSEN, Plaintiff and Appellant, v. FCA US LLC, Defendant…

Court:COURT OF APPEAL OF THE STATE OF CALIFORNIA FIRST APPELLATE DISTRICT DIVISION FIVE

Date published: Aug 23, 2018

Citations

A151659 (Cal. Ct. App. Aug. 23, 2018)