Patel v. Mercedes-Benz USA

Filed 12/17/19; Certified for Publication 12/31/19 (order attached)
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION FOUR
NILAY B. PATEL et al., B293813
Plaintiffs and Appellants, (Los Angeles County
Super. Ct. No. BC580425)
v.
MERCEDES-BENZ USA, LLC,
Defendant and Respondent.
APPEAL from an order of the Superior Court of
Los Angeles County, Teresa A. Beaudet, Judge. Reversed and
remanded with directions.
Rosner, Barry & Babbitt, Hallen D. Rosner and Arlyn L.
Escalante for Plaintiffs and Appellants.
Lehrman Law Group, Kate S. Lehrman and Robert A.
Philipson for Defendant and Respondent.
INTRODUCTION
Plaintiff Nilay B. Patel contracted with defendant
Mercedes-Benz USA, LLC (MBUSA) to lease a vehicle. During
the lease period, the vehicle’s navigation system experienced
recurring problems, which MBUSA was unable to repair. Patel
sued MBUSA under the Song-Beverly Consumer Warranty Act
(the Act, Civ. Code, §§ 1790-1795.8).1 At trial, the jury found the
vehicle had a substantial impairment, and MBUSA failed to
repair or replace the vehicle. Accordingly, the jury awarded
damages.
This otherwise straightforward case has a twist, however:
Patel did not lease the vehicle for his own use. Instead, he leased
it for a friend, Arjang Fayaz, who was the primary driver. Patel
paid the lease payments to MBUSA, and Fayaz reimbursed Patel.
Because Patel was the lessee and the party to the express
warranty, Patel alone sued MBUSA. MBUSA deposed Fayaz as a
witness. After several days of trial, MBUSA moved for nonsuit
on the basis that Patel did not suffer any damages, because
Fayaz reimbursed him for the lease payments. The trial court
denied MBUSA’s motion for nonsuit, but ordered that Fayaz be
added to the case as a plaintiff. When the jury awarded
damages, it awarded them solely to Fayaz.
Patel and Fayaz then moved for attorney fees as prevailing
parties under the Act. The trial court granted the motion as to
Fayaz only, and limited the attorney fee award to fees incurred
while Fayaz was a party to the case—from the penultimate day of
trial onward. Plaintiffs appealed, asserting that the trial court
erred by finding that Patel was not a prevailing party entitled to
1All further statutory references are to the Civil Code
unless otherwise indicated.
2
attorney fees, and by limiting the award to only fees incurred
after Fayaz was added as a plaintiff.
We agree with plaintiffs and reverse. The Act provides that
successful plaintiffs are entitled to collect 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.” (§ 1794, subd.
(d).) Plaintiffs successfully proved to a jury that the vehicle was
defective in breach of MBUSA’s express warranty, MBUSA failed
to repair or replace it, and damages resulted from MBUSA’s
breach. That the jury awarded fees to Fayaz rather than Patel
did not support the trial court’s holding that Patel was not a
prevailing party entitled to attorney fees. Therefore, the order on
the attorney fee motion is reversed, and the case is remanded for
a hearing to determine a reasonable fee award under section
1794, subdivision (d).
FACTUAL AND PROCEDURAL BACKGROUND
A. Allegations
In May 2015, Patel filed a complaint asserting causes of
action under the Act and the Magnuson-Moss Consumer
Warranty Act (15 U.S.C. § 2301 et. seq.). Patel alleged that on
December 24, 2013, he leased a new 2014 Mercedes C250W from
MBUSA, and the vehicle came with an express warranty. The
vehicle was delivered with “serious defects and nonconformities
to warranty” including “electrical and HVAC defects.”
In the cause of action for violation of the Act, Patel alleged
that the vehicle’s “nonconformities substantially impair the use,
value, and/or safety of the vehicle,” and MBUSA was unable to
repair the vehicle. Patel alleged that MBUSA refused to replace
the vehicle or make restitution. In the cause of action for
3
violation of the Magnuson-Moss Warranty Act, Patel alleged that
MBUSA breached express and implied warranties. Patel sought
damages, rescission of the contract, a civil penalty, and attorney
fees.
Prior to trial, initially set for July 2016, the parties
stipulated to the following facts. Patel leased the vehicle on
December 24, 2013, with a 39-month lease term. The vehicle had
a “4-year/50,000 mile ‘bumper-to-bumper’ warranty,” and “an
implied warranty of merchantability arose upon the sale of the
consumer good as a matter of law.” During the first year of the
lease, the vehicle was presented for repairs four times, primarily
due to “repeated problems with the vehicle’s navigation system.”
“Plaintiff attempted to secure a statutory repurchase under the
Song-Beverly Consumer Warranty Act, but Defendant refused to
repurchase or replace the defective vehicle.” In addition, Patel’s
“friend, Arjang Fayaz, was the primary driver of the subject
vehicle.” The stipulation noted that “All other issues, including
liability, causation, and damages, are controverted.”
MBUSA deposed both Patel and Fayaz on October 6, 2015,
according to a declaration filed by plaintiffs’ counsel after trial.
Plaintiffs’ counsel stated that he “represented Fayaz at his
deposition as if he was a plaintiff, not a third-party.” The vehicle
was returned and the lease was terminated on August 27, 2016.
In its trial brief, MBUSA stated that Fayaz testified in his
deposition that he “reimburses Mr. Patel for all the payments
related to the vehicle.” MBUSA asserted that the “complaints
lodged by the primary driver, Mr. Fayaz, were minimal and
largely went unverified, if they were present at all.” MBUSA also
asserted that “[t]here was no breach of the implied warranty of
merchantability, because the vehicle was fit for the ordinary
4
purposes for which vehicles are used.” In its trial brief, MBUSA
did not argue that Patel was not entitled to damages due to
Fayaz’s payments to Patel.
B. Trial and verdict
Trial began on January 31, 2018. No trial transcript is
included in the record, and the facts generally are not
controverted on appeal. Plaintiffs state in their opening brief on
appeal that Fayaz “was prepared and represented as though he
were the plaintiff.” On February 6 MBUSA filed a motion for
nonsuit,2 asserting that Patel was not present at trial, and he had
failed to establish that he was damaged: “[T]he evidence was
clear that Arjang Fayaz made all payments related to the vehicle
and incurred all costs related to the vehicle—Mr. Fayaz testified
to it repeatedly. Plaintiff [Patel] has put on no evidence that the
vehicle was worth anything less to him because he paid
absolutely nothing for the vehicle. As such the ‘value’ of the
vehicle to Nilay Patel has not been impaired at all, let alone
substantially impaired.” MBUSA stated that “Fayaz is not a
party to this action and is free to file his own lawsuit tomorrow.
There is simply no purpose to continue on with this case which
seeks damages for plaintiff Patel.”
Patel opposed the motion, asserting that Patel leased the
vehicle, and payments were made to MBUSA through Patel’s
bank account. Patel acknowledged that the “evidence reflects
that Mr. Fayaz was the primary driver of the vehicle and paid all
costs associated with leasing and driving the vehicle.” Patel
asserted that the source of the funds he used to pay for the leased
vehicle was irrelevant to his claims. Patel asked that the motion
2The motion in the record on appeal is not file-stamped;
the date on the signature page is February 6, 2018.
5
be denied, and in the alternative, requested leave to amend the
complaint to conform to proof by adding Fayaz as a party.
A minute order dated February 8 states the court’s ruling:
“Defendant’s Motion for Nonsuit is DENIED. [¶] Plaintiff’s
Motion to Amend is GRANTED.” Plaintiffs state in their opening
brief on appeal that “the trial court added Fayaz as an
indispensable party.” According to another minute order, on
February 9 MBUSA moved for a directed verdict against Fayaz
for lack of standing, and for a directed verdict against Patel for
lack of damages. The court denied both motions.
The jury returned a verdict on February 9. The portion of
the jury verdict form addressing express warranty asked, “Did
Nilay Patel or Arjang Fayaz lease a vehicle distributed by
Mercedes-Benz?” The jury answered yes. The verdict form
asked, “Did Mercedes Benz give Nilay Patel or Arjang Fayaz a
written warranty?” The jury answered yes. The jury also found
that the vehicle had a defect covered by the warranty that
substantially impaired the vehicle’s use, value, or safety, and
that MBUSA failed to repair the defect or replace the vehicle.3
A separate section of the verdict form asked the jury to
determine damages. One line of this section was for “[a]ctual
payments paid or payable by Nilay Patel to lease the vehicle.”
The jury put a zero on this line. A separate line was for “[a]ctual
payments paid or payable by Arjang Fayaz to lease the vehicle.”
3The actual verdict form is not included in the record on
appeal; this information is taken from a minute order in the
respondent’s appendix and the judgment that was later signed by
the court. The jury also found in favor of MBUSA on an implied
warranty theory relating to the one-year period after the vehicle
was leased. The jury declined to impose a civil penalty on
MBUSA.
6
Here, the jury inserted a figure of $21,434.37. The jury wrote
zeroes on additional lines for sales taxes and other fees, and
“[c]onsequential damages.”
The court entered a judgment stating, “Plaintiffs Nilay
Patel or Arang Fayaz shall recover from Defendant, Mercedes-
Benz USA, LLC, the amount of $19,767.85 with interest thereon
at the rate of ten percent per annum from the date of entry of this
judgment until paid.”4 The judgment also stated that “Plaintiffs”
shall recover costs, attorney fees, and prejudgment interest; the
amounts were left blank.
C. Motion for attorney fees
Plaintiffs moved for attorney fees under section 1794,
subdivision (d),5 which states that where a “buyer prevails in an
action” under the Act, the buyer is entitled to “attorney’s fees
based on actual time expended . . . in connection with the
commencement and prosecution of such action.” (§ 1794, subd.
(d).) Plaintiffs sought $190,090.00 in attorney fees for work by
two different law firms, plus a lodestar multiplier of 1.5, for a
total award of $285,135.00.
Plaintiffs asserted that the fees were warranted because
the case had been pending for nearly four years and the parties
had taken more than a dozen depositions. Plaintiffs said they
expected MBUSA to argue that Fayaz was not entitled to recover
attorney fees because he was not joined as a party until trial.
4 MBUSA states in its respondent’s brief that the lower
amount was “based on the jury’s finding of a mileage offset of
9,330 miles.” The jury found that the vehicle had been driven
9,330 miles before being delivered to MBUSA for repairs.
5 Plaintiffs also moved for prejudgment interest, and
MBUSA moved to strike certain costs. Only the motion for
attorney fees is at issue in this appeal.
7
Plaintiffs asserted that the case would not have been litigated
any differently if Fayaz had been joined earlier since Fayaz was
deposed as a witness, and MBUSA’s consistent defense
throughout the case was that the vehicle was not defective.
Plaintiffs argued that the lodestar multiplier was warranted “to
account for the delay in payment and contingent risk posed by
this case.”
MBUSA opposed the motion. It argued that Patel had
recovered nothing, and only Fayaz was entitled to damages.
MBUSA asserted that Patel was therefore not the prevailing
party and he was not entitled to any attorney fees. MBUSA
contended that Fayaz was not entitled to recover attorney fees for
the work done while Patel was the sole plaintiff. It continued,
“At most, Mr. Fayaz is entitled to $5,412.00 he ostensibly
incurred when the action was being prosecuted on his behalf.”
MBUSA reached this figure by adding together the fees incurred
in the “five day period plaintiffs’ attorneys were actively
prosecuting the action on behalf of plaintiff Fayaz,” and dividing
the sum in half to subtract fees for work done on behalf of Patel.
MBUSA also asserted that the fees requested were
excessive for a simple lemon law case. It further contended that
particular fee entries were excessive, and that the rates charged
were inflated.
After a hearing, the court granted the motion for attorney
fees, but held that only Fayaz was entitled to an award of fees.
The court stated, “Fayaz is the only party that can properly be
considered a prevailing party under the Song-Beverly Act. Patel’s
litigation objective in this case was to recover damages from
Mercedes-Benz, but the jury awarded him none.” The court
therefore assessed “the reasonableness of the attorney’s fees
8
incurred after Fayaz was joined as an indispensable party on
February 8, 2018.” The court found the time and rates charged
by plaintiffs’ counsel from February 8 onward were reasonable,
and declined to impose a lodestar enhancement. The court
rejected MBUSA’s assertion that the fees after February 8 should
be split in half because there were two plaintiffs. The court
therefore awarded Fayaz $22,772.50 in attorney fees, which
included fees relating to the motion.
Plaintiffs timely appealed from the court’s order on the
motion for attorney fees.
DISCUSSION
Plaintiffs contend the trial court erred in limiting the
attorney fee award to fees incurred only after Fayaz was added to
the case as a plaintiff, and by finding that Patel was not a
prevailing party. MBUSA asserts that the trial court’s ruling
was correct. We review a trial court’s order awarding attorney
fees and costs under the Act for abuse of discretion. (Hanna v.
Mercedes-Benz USA, LLC (2019) 36 Cal.App.5th 493, 507.)
However, “‘the determination of the legal basis for an attorney fee
award is subject to independent review. [Citation.] In such a
case, the issue involves the application of the law to undisputed
facts.’” (Wohlgemuth v. Caterpillar Inc. (2012) 207 Cal.App.4th
1252, 1258.)
The appropriateness of an attorney fee award must be
considered in light of the relevant statutory scheme. “The Song-
Beverly Act requires a manufacturer that gives an express
warranty on a new motor vehicle to service or repair that vehicle
to conform to the warranty. If the manufacturer is unable to do
so after a reasonable number of attempts, the purchaser may
seek replacement of the vehicle or restitution in an amount equal
9
to the purchase price less an amount directly attributable to use
by the purchaser prior to the discovery of the nonconformity.”
(Hanna v. Mercedes-Benz USA, LLC, supra, 36 Cal.App.5th at p.
497, fn. 2; see also § 1793.2, subd. (d)(2).) Under the Act, “a buyer
of a new motor vehicle shall also include a lessee of a new motor
vehicle.” (§ 1793.2, subd. (d)(2)(D).)
A “buyer of consumer goods who is damaged by” the breach
of an express warranty “may bring an action for the recovery of
damages and other legal and equitable relief.” (§ 1794, subd. (a).)
“If the buyer prevails in an action under this section, the buyer”
is entitled to recover “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.” (Id., subd. (d).) “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.
(1998) 17 Cal.4th 985, 994.)
Plaintiffs assert that Patel was a “buyer” with standing to
sue under the Act, and because the jury determined that MBUSA
breached the express warranty for the vehicle he leased, Patel
was the prevailing party under the Act. MBUSA asserts that
Patel cannot be deemed a prevailing party, because the jury did
not award him any damages, and the “idea that Patel’s litigation
objective was to have the jury award him nothing is
preposterous.”
There is no question that plaintiffs, rather than MBUSA,
prevailed on the express warranty claim. The jury found that
10
MBUSA leased the vehicle to “Nilay Patel or Arjang Fayaz”;
MBUSA provided a written warranty; the vehicle had a defect
that substantially impaired the vehicle’s use, value, or safety;
and MBUSA failed to repair or replace the vehicle. The jury
awarded damages caused by the breach. Thus, there is no
question that based on the findings of the jury, plaintiffs
prevailed on their express warranty claim under the Act.
The question is therefore whether attorney fees should be
limited because Patel—the lessee and party to the express
warranty—initiated the case, but the jury ultimately awarded
damages to Fayaz rather than Patel.6 In essence, MBUSA asserts
that neither Patel, nor Fayaz, nor plaintiffs collectively are
entitled to collect attorney fees for the initiation and preparation
of the case, despite the successful prosecution of the breach of
express warranty claim. This position contradicts both the
language and intent of the attorney fee provision in the Act.7
Section 1794, subdivision (d) makes clear that a prevailing
party is entitled to attorney fees “based on actual time expended .
. . in connection with the commencement and prosecution of such
6 Plaintiffs contend that the trial court erred by adding
Fayaz as a party, since the jury could have awarded damages to
Patel, and it was “that erroneous decision, based on a technicality
raised by MBUSA, which brings us here.” However, both parties
represented to the trial court that Fayaz should be added as a
party—MBUSA by arguing that Fayaz was the party who was
damaged, and plaintiffs, in opposing the nonsuit motion, by
asking in the alternative that Fayaz be joined.
7 MBUSA’s argument also contradicts the judgment signed
by the trial court, which states that Patel “or” Fayaz shall recover
damages from MBUSA, and that “plaintiffs” are entitled to
attorney fees. The parties do not address the differences between
the verdict and the judgment.
11
action.” Here, the trial court denied all fees associated with “the
commencement and prosecution of the action,” and instead
awarded fees only from the penultimate day of trial onward.
There can be no question that at least some of plaintiffs’
attorneys’ work in initiating the case, conducting discovery,
preparing the case for trial, and the first days of trial were
essential to plaintiffs’ success. The trial court’s limitation of fees,
without regard to the “actual time expended” by plaintiffs’
counsel in successfully initiating and prosecuting the case under
the Act, was an abuse of discretion.
The court also erred in finding that Patel was not a
prevailing party based solely on the lack of a damage award to
Patel. The Act does not define “prevailing party.” MBUSA
asserts that Patel was not a prevailing party under Code of Civil
Procedure section 1032, subdivision (a)(4), which defines a
prevailing party to include a party “with a net monetary
recovery.” However, where a fee-shifting statute such as section
1794 is concerned, “attorney fees recovery is governed by the fee-
shifting statute itself, rather than a rigid adherence to Code of
Civil Procedure section 1032.” (Wohlgemuth v. Caterpillar Inc.,
supra, 207 Cal.App.4th at p. 1264.) To that end, to determine the
“prevailing party” under the Act, “the trial court should simply
take a pragmatic approach to determine which party has
prevailed. That is, the trial court would determine which party
succeeded on a practical level, by considering the extent to which
each party realized its litigation objectives.” (Ibid.)
Thus, the prevailing party under section 1794, subdivision
(d) is not necessarily determined by whether there is a net
monetary recovery. (MacQuiddy v. Mercedes-Benz USA, LLC
(2015) 233 Cal.App.4th 1036, 1047.) Instead, “‘a party who is
12
denied direct relief on a claim may nonetheless be found to be a
prevailing party if it is clear that the party has otherwise
achieved its main litigation objective.’” (Id. at p. 1048.)
MBUSA contends that Patel did not meet his litigation
objective, because “there is nothing in the record to support
[Patel’s] claim that he really intended all along to have the jury
award him nothing.” This glib characterization of Patel’s
litigation objectives is inaccurate. Plaintiffs note that restitution
damages are defined by the Act8 and relate to the vehicle; Patel
did not seek individualized damages. Plaintiffs assert that
Patel’s objective was to have MBUSA return the car payments,
and that goal was achieved. Indeed, the express warranty claim
involved a single, allegedly defective vehicle, the objective in
initiating the action was to recover damages associated with the
breach of the warranty on that vehicle, and the jury awarded
those damages. That plaintiffs had a separate agreement by
which Fayaz reimbursed Patel for the lease payments did not
undermine the single, overarching litigation objective for the
case.
8 Section 1793.2, subdivision (d)(2)(B) states that when
restitution is warranted for breach of an express warranty under
the Act, “the 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.”
13
In addition, MBUSA cites no authority supporting its claim
that a single cause of action involving breach of a warranty on a
vehicle can be deemed unsuccessful, despite a jury verdict to the
contrary, because the cause of action was asserted by two
different plaintiffs. We have found no authority that suggests
that under circumstances such as the ones in this case involving
a single vehicle, the parties’ litigation objectives may be
separately parsed.
Moreover, the court’s limitation of the fee award was at
odds with the purposes behind fee awards in consumer protection
legislation such as the Act. Attorney fee provisions in consumer
protection statutes “allow[ ] consumers to pursue remedies in
cases as here, where the compensatory damages are relatively
modest. To limit the fee award to an amount less than that
reasonably incurred in prosecuting such a case, would impede the
legislative purpose underlying” such statutes. (Graciano v.
Robinson Ford Sales, Inc. (2006) 144 Cal.App.4th 140, 150
[addressing attorney fee provisions in the Automobile Sales
Finance Act, § 2981 et seq., and the Consumers Legal Remedies
Act, § 1750 et seq.]; see also Warren v. Kia Motors America, Inc.
(2018) 30 Cal.App.5th 24, 39 [“Graciano’s reasoning applies with
equal force here, a case involving a prevailing buyer seeking
attorney fees under the Song-Beverly Act.”].) By limiting the
attorney fee award to only the last days of trial onward, the trial
court’s ruling contradicted the purposes of the fee-shifting
provision of the Act, intended to award fees reasonably incurred
in prosecuting a case.
MBUSA argues that Patel should be judicially estopped
from “claiming that he was suing on behalf of Fayaz.” Judicial
estoppel “‘prevents a party from “asserting a position in a legal
14
proceeding that is contrary to a position previously taken in the
same or some earlier proceeding. The doctrine serves a clear
purpose: to protect the integrity of the judicial process.”’” (Daar
& Newman v. VRL International (2005) 129 Cal.App.4th 482,
490-491.) Here, nothing in the record suggests there was any
confusion about Fayaz’s role in the case. Plaintiffs’ counsel
stated that both Patel and Fayaz were deposed in October 2015.
A list of stipulated facts signed by counsel for both parties in
June 2016 stated that Fayaz “was the primary driver of the
subject vehicle.” Trial began a year and a half later, in January
2018, and Fayaz testified. Nothing in the record suggests the
parties were unclear about Fayaz’s role before trial began.
Arguably, Fayaz could have been included as a plaintiff earlier in
the litigation, as he was the party affected by the breach and the
efforts to have the vehicle repaired. However, there is no support
for MBUSA’s characterization that Patel was not forthcoming
about Fayaz’s involvement “right up until the time that he
realized that he had not proven any damages.” As Patel has not
taken inconsistent positions, judicial estoppel does not apply.
The trial court erred by finding that Patel was not a
prevailing party, and by limiting the attorney fee award to fees
incurred only after Fayaz was added as a party. The order is
therefore reversed. Because the trial court did not address the
parties’ contentions regarding the fees requested for work
completed before Fayaz was joined, the matter is remanded to
allow the trial court to determine the amount of fees “reasonably
incurred by the buyer in connection with the commencement and
prosecution of such action.” (§ 1794, subd. (d).)
15
DISPOSITION
The order on plaintiffs’ motion for attorney fees is reversed.
The matter is remanded for additional proceedings consistent
with this opinion, including a determination of the appropriate
attorney fee award to plaintiffs under section 1794, subdivision
(d). Plaintiffs are entitled to recover their costs on appeal.
COLLINS, J.
We concur:
MANELLA, P. J.
WILLHITE, J.
16
Filed 12/31/19
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION FOUR
NILAY B. PATEL et al., B293813
Plaintiffs and Appellants, (Los Angeles County
Super. Ct. No. BC580425)
v.
ORDER CERTIFYING OPINION FOR
MERCEDES-BENZ USA, LLC, PUBLICATION
Defendant and Respondent.
THE COURT
The opinion in the above-entitled matter filed on December
17, 2019 was not certified for publication in the Official Reports.
Upon application of appellant and for good cause appearing, it is
ordered that the opinion shall be published in the Official
Reports.
Pursuant to California Rules of Court, rule 8.1105(b), this
opinion is certified for publication.
____________________________________________________________
MANELLA, P.J. WILLHITE, J. COLLINS, J.