Chen v. BMW of North America

Filed 12/29/22; certified for publication 1/23/23 (order attached)
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SIXTH APPELLATE DISTRICT
DANIEL ZHIHUI CHEN, H048257, H048444
(Santa Clara County
Plaintiff and Appellant, Super. Ct. No. CV295858)
v.
BMW OF NORTH AMERICA, LLC,
Defendant and Respondent.
Plaintiff Daniel Chen appeals the trial court’s order awarding him $53,509.51 in
attorney fees and costs in his lawsuit against BMW of North America. He contends the
trial court should have awarded additional attorney fees accrued after BMW’s statutory
offer to compromise under Code of Civil Procedure section 998. We conclude BMW’s
offer complied with the statutory requirements and that Chen did not achieve a result
more favorable than its terms. The statute therefore disallowed recovery of attorney fees
and costs accrued after the offer was made. We will affirm the trial court’s fee award.
I. BACKGROUND
Chen sued BMW of North America for breach of warranty and for violating the
Song-Beverly Consumer Warranty Act (Civ. Code, § 1790, et seq.) and the Consumers
Legal Remedies Act (Civ. Code, § 1750, et seq.). He alleged a new BMW he bought in
2011 had various engine defects and the problems were not repaired after a reasonable
number of attempts. He sought compensatory damages, restitution, statutory penalties,
and injunctive relief.
Chen commenced his lawsuit in June 2016. BMW answered the complaint and
generally denied all allegations. After the suit had been pending for about a year, BMW
extended an offer to compromise under Code of Civil Procedure section 998.
(Undesignated statutory references are to this code.) The offer, in its entirety, was:
“Defendants BMW of North America, LLC and BMW of Mountain View (collectively
“BMW defendants”) hereby offer, pursuant to Code of Civil Procedure Section 998, to
have judgment entered against them, jointly and severally, and in favor of plaintiff Daniel
Zhihui Chen in the total sum of one hundred sixty-thousand dollars ($160,000), which
amount is exclusive of recoverable costs and attorney’s fees accrued as of the date this
offer is made. [¶] BMW of North America, LLC shall also pay the amount of Plaintiff’s
reasonable attorney’s fees and costs in this litigation, in an amount determined by the
Court following a properly noticed motion by Plaintiff. [¶] Plaintiff shall return the
Subject Vehicle to BMW of North America, LLC, along with clear title. [¶] If such an
offer is not accepted prior to trial or within 30 days after it is made, whichever occurs
first, it shall be deemed withdrawn. If BMW Defendants’ offer is not accepted before
withdrawal, and Plaintiff fails to obtain a more favorable judgment, BMW Defendants
will seek costs and reasonable expert fees to the full extent permitted by law.”
(Capitalization omitted.)
Chen did not accept the offer. Instead, his counsel responded with a letter
asserting the offer was not valid because it was “fatally vague and uncertain.”
(Capitalization omitted.) The litigation continued for another two years. The parties
settled on the day of trial. The terms of the settlement were essentially identical to the
section 998 offer: BMW would pay Chen $160,000; Chen would return the car; and
Chen’s attorney’s fees, costs, and expenses would be determined by the court through a
noticed motion.
Chen moved as a prevailing party for attorney fees and costs in the amount of
$436,071.82. The trial court granted the motion but awarded only $53,509.51. The court
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arrived at that amount by including only fees and costs accrued through July 2017,
45 days after the section 998 offer was made.
II. DISCUSSION
Resolving this appeal turns on whether BMW’s section 998 offer from June 2017
is valid. If it is, Chen’s failure to achieve a better litigation result than what BMW
offered means he is not entitled to post-offer attorney fees, and the trial court’s award is
correct. We review the validity of a section 998 offer de novo. (Sanford v. Rasnick
(2016) 246 Cal.App.4th 1121, 1131–1132.) Under that standard of review, we exercise
our independent judgment; we do not defer to the trial court’s decision and we are not
bound by its reasoning. (Sangster v. Paetkau (1998) 68 Cal.App.4th 151, 163.)
The purpose of Code of Civil Procedure section 998 is to promote early resolution
of litigation by encouraging parties to make—and accept—reasonable settlement offers.
(Scott Co. v. Blount, Inc. (1999) 20 Cal.4th 1103, 1114.) The statute encourages
acceptance of reasonable offers by penalizing a party who does not accept a settlement
offer and then fails to achieve a better result through continued litigation. (Code of Civ.
Proc. § 998, subd. (c)(1).) In such a case, the nonaccepting party cannot recover
litigation costs, including attorney fees, accrued after the date the offer was made. (Scott
Co. v. Blount, Inc., at p. 1112.)
To invoke the statutory mechanism, the offer must be in writing, and must “allow
judgment to be taken or an award to be entered in accordance with the terms and
conditions stated at that time.” (Code of Civ. Proc., § 998, subd. (b).) It must “include a
statement of the offer, containing the terms and conditions of the judgment or award, and
a provision that allows the accepting party to indicate acceptance of the offer by signing a
statement that the offer is accepted.” (Ibid.) BMW’s offer complied with those
requirements.
Chen contends BMW’s offer is nonetheless invalid because its terms are too
vague. A section 998 offer must be specific and certain enough to allow a plaintiff to
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determine its value at the time it is made. (Khosravan v. Chevron Corp. (2021)
66 Cal.App.5th 288, 295.) An offer is insufficiently specific if it contains terms making
it “ ‘exceedingly difficult or impossible to determine the value of the offer to the
plaintiff.’ ” (Ibid.) We do not see anything unclear about the terms of the section 998
offer in this case. The offer was to pay Chen $160,000; he would be required to return
the car with clean title; and he would be allowed to seek an award of attorney fees and
costs by noticed motion, the amount to be determined by the court. Those terms are
easily understandable and do not make it difficult to assess the offer’s value. A
reasonable person would understand what they stood to gain by accepting. Chen argues
the offer is ambiguous because it did not expressly deem him the prevailing party and did
not state whether BMW would brand the defective vehicle as a “ ‘Lemon Law’ buyback.”
But merely pointing out things the offer did not include does not render it ambiguous.
Not specifying the prevailing party or articulating how the vehicle would be classified
after its return are technical details that would not prevent a reasonable person from
evaluating the offer against the prospects of proceeding to trial. (See Covert v. FCA USA,
LLC (2022) 73 Cal.App.5th 821, 838.)
Chen also asserts the offer is vague because it said he would be allowed to move
for an award of attorney fees and costs, without specifying whether he could also recover
expenses. In Chen’s view, expenses are distinct from costs because his lawsuit included
a claim under the Song-Beverly Act, which defines recoverable expenses to include
additional items not typically included as litigation costs. (See Civ. Code, § 1794,
subd. (d).) But when a section 998 offer is silent about postjudgment recovery of cost
items, those items can be recovered by motion. (Timed Out LLC v. 13359 Corp. (2018)
21 Cal.App.5th 933, 944.) An otherwise recoverable expense is not waived merely
because it is not mentioned in the offer. (Ibid.) Silence on that point did not create
ambiguity: to the extent expenses are something different than costs, nothing in BMW’s
section 998 offer prevented Chen from recovering them.
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For the same reason we find no merit in Chen’s assertion that the settlement he
ultimately agreed to was more favorable than the offer merely because the settlement
expressly mentioned recovery of expenses. Nor do we find merit in Chen’s argument
that the settlement was more favorable because the section 998 offer might have allowed
him to recover only attorney fees accrued until the date the offer was made, and not the
(relatively minimal) additional fees necessary to facilitate entry of judgment and move
for an attorney fee award. Neither the section 998 offer nor the settlement guaranteed
any amount of fees or said anything about the time period the fee award would cover.
The offer and settlement contained identical terms regarding recovery attorney fees—
they would be determined by the court after a noticed motion. Accepting the offer would
have meant deferring to the court’s discretion as to the appropriate amount of fees, which
is what Chen did by entering into the settlement agreement.
Chen also asserts the offer was not made in good faith, suggesting it was not
within the range of reasonable possible results at trial or did not allow him a fair
opportunity to intelligently evaluate it. (See Licudine v. Cedars-Sinai Medical Center
(2019) 30 Cal.App.5th 918, 924.) But under the statutory scheme, it was Chen’s burden
to convince the trial court the offer was not made in good faith. (Id. at p. 926.) We
review the trial court’s determination in that regard under the highly deferential abuse of
discretion standard. (Covert v. FCA USA, LLC, supra, 73 Cal.App.5th 821, 834.) The
offer here was significant: $160,000 plus the opportunity to recover attorney fees and
costs. We have already determined there was nothing about the offer that would prevent
Chen from intelligently evaluating it. We see no abuse of discretion in finding Chen did
not meet his burden to show the offer was made in bad faith.
Chen takes issue with the reasoning expressed in the trial court’s written order,
specifically the court admonishing the parties that they should have met and conferred
regarding any ambiguity in the offer and that Chen’s failure to do so itself warranted
denial of post-offer fees. We review the trial court’s ruling, not its reasoning. A ruling
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that is correct must be upheld on appeal regardless of the reasoning articulated by the trial
court. (D’Amico v. Board of Medical Examiners (1974) 11 Cal.3d 1, 18–19.) The only
potential error in the result here actually benefitted Chen: the trial court awarded attorney
fees accrued for 45 days after the section 998 offer was made, although the statute
precludes an award of fees incurred after a valid offer. But as BMW has not cross-
appealed, we will not disturb the ruling.
The section 998 offer was clear and specific enough for Chen to understand what
was being offered and to weigh that against his prospects at trial. He did not accept the
offer and later agreed to a settlement that provided no greater benefit. There was no error
in enforcing the statutory prohibition against awarding post-offer attorney fees and costs.
III. DISPOSITION
The order is affirmed. Costs are awarded to respondent by operation of California
Rules of Court, rule 8.278, subdivision (a)(1).
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______________________________________
Grover, J.
WE CONCUR:
____________________________________
Greenwood, P.J.
____________________________________
Lie, J.
H048257, H048444
Chen v BMW of North America
Filed 1/23/23
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SIXTH APPELLATE DISTRICT
DANIEL ZHIHUI CHEN, H048257, H048444
(Santa Clara County
Plaintiff and Appellant, Super. Ct. No. CV295858)
v. ORDER GRANTING REQUEST
FOR PUBLICATION
BMW OF NORTH AMERICA, LLC,
Defendant and Respondent.
BY THE COURT:
Pursuant to California Rules of Court, rule 8.1105(b), the request for publication is
hereby granted. It is ordered that the opinion in this matter, filed on December 29, 2022,
shall be certified for publication.
Dated: _____________________________
Grover, J.
_____________________________
Greenwood, P. J.
_____________________________
Lie, J.
H048257, H048444
Chen v BMW of North America
Trial Court Santa Clara County Superior Court
Superior Court Case No. CV295858
Trial Judge Hon. Peter H. Kirwan
Counsel for Plaintiff and Appellant Christopher Patrick Barry
Daniel Zhihul Chen Gregory Thomas Babbitt
Auto Fraud Legal Center LLP
Payam Shahian
Strategic Legal Practices, APC
Michael Harris Rosenstein
Law Offices of Michael H. Rosenstein, LC
Counsel for Defendant/Respondent Roger Scott Raphael
BMW of North America, LLC Shahram Nassi
Lewis Brisbois Bisgaard & Smith LLP
Thomas M. Peterson
Mark William Allen
Morgan, Lewis & Bockius, LLP
H048257, H048444
Chen v BMW of North America