Hanna v. Mercedes-Benz USA

Filed 6/18/19
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION SEVEN
MARY HANNA, B283776
Plaintiff and Appellant, (Los Angeles County
Super. Ct. No. BC552038)
v.
MERCEDES-BENZ USA, LLC,
Defendant and
Respondent.
APPEAL from an order of the Superior Court for the
County of Los Angeles, Barbara A. Meiers, Judge. Reversed and
remanded with directions.
Rosner, Barry & Babbitt, Hallen D. Rosner and Arlyn L.
Escalante for Plaintiff and Appellant.
Universal & Shannon, Jon D. Universal and James P.
Mayo for Defendant and Respondent.
_____________________________________
To settle Mary Hanna’s lawsuit under the Song-Beverly
Consumer Warranty Act (Civ. Code, § 1790 et seq.), Mercedes-
Benz USA, LLC agreed on January 27, 2017 to pay Hanna
$60,000 plus a sum equal to her costs and expenses in pursuing
the action, “including attorney’s fees based on actual time
reasonably incurred . . . pursuant to Civil Code Section 1794(d),
to be determined by court motion if the parties cannot agree.”
After failing to reach agreement with Mercedes-Benz, Hanna
moved for an award of $259,068.75 in attorney fees using the
lodestar method1—a $172,712.50 base amount with a
1.5 multiplier—and costs of $15,547.07. The trial court awarded
only $60,869 in fees, limiting Hanna’s recovery for fees incurred
after January 21, 2016 to $15,000 based on the court’s
interpretation of a percentage-based contingency fee provision in
the retainer agreement between Hanna and her counsel. The
court awarded all costs sought by Hanna except for $2,137.86
paid to her initial expert.
On appeal Hanna contends the court abused its discretion
in failing to apply the lodestar method to determine attorney fees
for the period after January 21, 2016 and by disallowing the fee
paid to her first expert as a recoverable cost. We agree the court
used, in part, an improper method to determine reasonable
1 Using the lodestar method to calculate attorney fees, “the
trial court first determines a touchstone or lodestar figure based
on a careful compilation of the time spent by, and the reasonable
hourly compensation for each attorney, and the resulting dollar
amount is then adjusted upward or downward by taking various
relevant factors into account.” (Chavez v. City of Los Angeles
(2010) 47 Cal. 4th 970, 985; see Serrano v. Priest (1977) 20 Cal. 3d
25, 48-49.)
2
attorney fees and remand for it to recalculate Hanna’s fee award.
We affirm the court’s cost award.
FACTUAL AND PROCEDURAL BACKGROUND
1. Circumstances Leading to the Filing of Hanna’s
Complaint
On August 12, 2007 Hanna purchased a new vehicle from
Mercedes-Benz for $52,948.54, including sales tax, license fees
and other charges. The car immediately exhibited a problem
with its rear seatbelt, which failed to retract, requiring Mercedes-
Benz to install new seatbelt components. Additional concerns
surfaced within the first 18 months, and during the next several
years Mercedes-Benz made warranty repair attempts on at least
20 occasions for a variety of problems.
On May 9, 2014 Hanna requested Mercedes-Benz
repurchase the vehicle. Mercedes-Benz denied the request. On
July 17, 2014 Hanna sued Mercedes-Benz for violation of the
refund-or-replace provisions of the Song-Beverly Act.2 Her
complaint sought an award of actual damages, a civil penalty of
two times actual damages3 and attorney fees and costs.
2 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 to the purchase price less an amount directly
attributable to use by the purchaser prior to the discovery of the
nonconformity. (Civ. Code, § 1793.2, subd. (d); see Gavaldon v.
DaimlerChrysler Corp. (2004) 32 Cal. 4th 1246, 1250.)
3 The Song-Beverly Act authorizes a civil penalty of up to two
times the amount of actual damages if the purchaser establishes
3
2. Mercedes-Benz’s Offers To Compromise
After Hanna filed her lawsuit, Mercedes-Benz served a
series of offers to compromise pursuant to Code of Civil Procedure
section 998 (section 998). The first section 998 offer on October 8,
2014 provided for a judgment against Mercedes-Benz in the
amount of $5,000, plus reasonably incurred attorney fees and
costs to be determined by the court if the parties could not agree.
Hanna did not accept the offer.
In May 2015 Hanna’s vehicle was involved in an accident
and deemed a total loss by her insurer. Hanna did not notify
Mercedes-Benz that she no longer owned the car.
Mercedes-Benz’s second section 998 offer to compromise,
dated January 20, 2016,4 required Hanna to surrender the
vehicle and dismiss her action with prejudice; in return
Mercedes-Benz would “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 and other official fees, plus any incidental
and consequential damages to which the buyer is entitled under
Civil Code Sections 1794, including, but not limited to,
reasonable repair, towing, and rental car costs actually incurred
the manufacturer’s failure to comply with the Act’s provisions
was willful. (Civ. Code, § 1794, subd. (c).)
4 Although dated January 20, 2016, this offer was identified
as the January 21, 2016 offer by the court, apparently because it
was not served on—or, perhaps, not received by—Hanna’s
counsel until January 21, 2016.
4
by the buyer, less a reasonable mileage offset in accordance with
Civil Code Section 1793.2(d)(2)(C), all to be determined by court
motion if the parties cannot agree.” The offer provided Mercedes-
Benz would pay Hanna’s reasonable attorney fees and costs and
required her to execute a general release.
In February 2016 Hanna served written objections to the
second offer, asserting it was vague, ambiguous and uncertain as
to the damages or recovery being offered. She also objected to the
requirement she return the vehicle on the ground of
impossibility, explaining the car had been declared a total loss
following an accident and was no longer in her possession. She
further objected to the requirement she enter into a general
release because the terms of the proposed release were not made
known to her.
On January 17, 2017 Mercedes-Benz served its third
section 998 offer to compromise, which it titled “Amended Offer to
Compromise.” This offer included similar language regarding
restitution as the second offer, but omitted the requirement that
Hanna return the vehicle. Instead, the offer permitted Mercedes-
Benz to deduct from the sum to be paid to Hanna the amount she
had received from her insurer when her car had been declared a
total loss. This offer no longer required execution of a release.
On January 23, 2017 Mercedes-Benz served a fourth
section 998 offer, titled “Second Amended Offer to Compromise,”
and on January 27, 2017 its fifth section 998 offer, titled “Third
Amended Offer to Compromise.” The January 23, 2017 offer
deleted the language regarding restitution (including the
reference to deductions for a reasonable mileage offset and
amounts received from the May 2015 accident) and instead
provided for payment of $55,000 to Hanna. The January 27, 2017
5
offer, otherwise identical to the January 23, 2017 offer, proposed
a payment to Hanna of $60,000.
Paragraph 2 of the January 27, 2017 offer stated, “In
connection with the above offer to compromise, [Mercedes-Benz]
will pay [Hanna] a sum equal to the aggregate amount of costs
and expenses, including attorney’s fees based on actual time
reasonably incurred in connection with the commencement and
prosecution of this action pursuant to Civil Code Section 1794(d),
to be determined by court motion if the parties cannot agree.”
Hanna accepted the January 27, 2017 offer the same day.
3. Hanna’s Motion for Attorney Fees and Costs
On March 30, 2017 Hanna moved for attorney fees and
costs pursuant to Civil Code section 1794, subdivision (d).
Hanna’s motion was supported by the declarations of the
attorneys and paralegals who had worked on the matter and
included invoices billed to Hanna among its exhibits.
Hanna sought a total of $274,615.82 in fees and costs,
which included a request her lodestar attorney fees of
$172,712.50 be multiplied by 1.5. She argued the multiplier was
justified, in part, by the fact the law firm of O’Connor & Mikhov
LLP had taken the matter on a contingent basis.
The fees and costs request included $2,137.86 for a vehicle
inspection performed on February 12, 2015. Mark O’Connor,
Hanna’s lead counsel, attached to his March 30, 2017 declaration
an O’Connor & Mikhov cost invoice that included an entry dated
February 24, 2015 stating the vehicle inspection charge was per
“Thomas Lepper’s Invoice (11.5 hrs).” Hanna provided no
explanation of Lepper’s identity or role in the litigation or any
other information to support the claimed cost.
6
4. Mercedes-Benz’s Opposition
Mercedes-Benz filed its opposition to Hanna’s attorney fee
motion on April 12, 2017. Mercedes-Benz contended the Song-
Beverly Act, which provides for recovery of reasonably incurred
attorney fees, did not mandate use of the lodestar method and
argued the trial court had discretion to determine what
constituted reasonably incurred fees, including no fee at all. It
argued the issue before the court was whether Hanna’s attorney
fees generated after its January 20, 2016 section 998 offer were
reasonably incurred. Mercedes-Benz asserted the January 2016
offer would have provided Hanna the relief to which she was
entitled under the Song-Beverly Act and that Hanna had an
implied duty to negotiate with Mercedes-Benz following the offer
in a good faith effort to settle the case. According to Mercedes-
Benz, the trial court had discretion to deny fees after the January
2016 offer because of Hanna’s failure to engage in good faith
negotiations.
Mercedes-Benz also asserted Hanna had failed to meet her
burden of establishing the reasonableness of the fees and costs
requested because she had not submitted a copy of the retainer
agreement with her counsel for the court’s review. Mercedes-
Benz stated it understood the fee agreement was not on a
contingency basis and specified lower hourly billing rates than
reflected on the invoices sent to Hanna and used to calculate her
lodestar figure.5 It urged the court to award fees, if at all, on the
basis of the fee agreement’s lower rates.
5 For example, although the motion and billing records
reflected an hourly rate of $650 for partner Mark O’Conner,
Mercedes-Benz told the court the fee agreement stated the hourly
billing rate for all partners in the firm was $350.
7
In addition, Mercedes-Benz explained, although Hanna’s
fee agreement generally provided for payment of fees calculated
on an hourly, not a percentage, basis (owed by “the
manufacturer,” not Hanna), it also required payment of
additional attorney fees in the event Hanna’s attorneys recovered
a damage award exceeding her actual damages. Specifically, the
fee agreement provided 40 percent of any amount recovered in
excess of actual damages would be due from Hanna as additional
attorney fees.
Mercedes-Benz contended Hanna’s actual damages were
$22,428.32: $52,590.54 (the price of the vehicle) less $14,998.02
(the amount Hanna had received from her insurer after the
vehicle was declared a total loss) and $15,163.60 (the mileage
offset). It asserted, therefore, that $37,571.68 of its $60,000
settlement payment was the excess amount subject to the
40 percent provision in the retainer agreement and that the
$15,028.67 Hanna owed her attorneys (40 percent of $37,571.68)
should be offset against the fees claimed by Hanna in her motion.
Finally, Mercedes-Benz argued Hanna was not entitled to a
lodestar multiplier; a significant number of attorney billing
entries were improperly in block billing format; the case was
overstaffed; and certain categories of fees and costs were not
reasonably incurred for a variety of reasons, including $2,137.86
in costs for Lepper’s vehicle inspection. Mercedes-Benz explained
Lepper was Hanna’s “first expert” but had not “actually [been]
used as an expert” in the case. He had subsequently been
replaced by Darrell Blasjo, who was designated a retained expert
by Hanna and deposed by Mercedes-Benz. At his deposition
Blasjo testified Lepper had never shared his work product with
Blasjo.
8
Mercedes-Benz supported its opposition with the
declaration of its attorney Mark Julius, dated April 12, 2017. In
a one-sentence statement Julius declared all of the factual
representations in the opposition memorandum were true and
accurate to the best of his knowledge.
5. Hanna’s Reply
Hanna filed her reply on April 18, 2017. Among other
arguments Hanna disputed Mercedes-Benz’s assertion her
attorneys had not taken her case on a contingency basis. She
also filed objections to Julius’s April 12, 2017 declaration, but did
not object on the ground that any material in Mercedes-Benz’s
papers was protected from disclosure by Hanna’s attorney-client
privilege.
6. The Hearing on Hanna’s Fee Motion
At the outset of the April 25, 2017 hearing on Hanna’s
motion for attorney fees and costs, the court stated its “very
tentative” inclination was to cut short attorney fees after the
January 2016 settlement efforts. It also stated it might
substantially reduce the fees requested in other respects. The
court asked Hanna’s attorney to provide a copy of Hanna’s fee
agreement because “according to the defense argument, in your
contract the attorney fee hourly rate was stated to be 300 and
some-odd dollars per hour for your lead attorney, and in your
paperwork you claimed that his rate is 600 and some-odd dollars
per hour.”
Turning to Mercedes-Benz, the court expressed concern
that the company had failed to specify in its opposition papers
which attorney billing entries reflected services it claimed were
duplicative or otherwise objectionable and had failed to indicate
9
what Mercedes-Benz contended would constitute a reasonable
fee. The court ordered Mercedes-Benz to provide that
information within 10 days. It also ordered Hanna to provide her
attorney fee agreement within the same time.
7. Post-hearing Developments
On April 28, 2017 Hanna filed a response to the court’s
order that she submit her fee agreement, arguing the agreement
was protected by the attorney-client privilege. Because she did
not wish to waive the privilege, disobey the court or be held in
contempt, she requested the court modify its April 25, 2017 order
to allow her to submit a redacted copy of the fee agreement. She
also explained the agreement reflected the matter had been
taken on a contingency basis and disclosed the hourly rates
applicable to the case.
On May 2, 2017 the trial court issued a modified ruling
withdrawing that portion of its April 25, 2017 order requiring
Hanna to submit the retainer agreement. Instead, the court
ordered Mercedes-Benz to provide the documents on which it had
relied to assert its understanding of the contents of Hanna’s fee
agreement.
Later that day Mercedes-Benz filed another Julius
declaration, which attached a copy of a fee agreement, dated
June 11, 2014, between Hanna and her husband Reda Hanna, on
the one hand, and the O’Connor & Mikhov law firm, on the other
hand, confirming the firm’s representation of the Hannas “in
connection with your lemon law/breach of warranty claim against
Mercedes-Benz USA, LLC.” Julius explained the fee agreement
had been voluntarily produced by Reda Hanna at his deposition
on May 5, 2015.
10
The June 11, 2014 fee agreement stated, in part, “YOU
NEVER PAY ATTORNEY FEES. THE ATTORNEYS’ FEES
ARE PAID BY THE MANUFACTURER. [¶] Attorney’s fees are
contingent upon an acceptable settlement being achieved or a
successful verdict at trial. THIS MEANS THAT THERE ARE
NO ATTORNEY FEES PAID IF THERE IS NO SETTLEMENT
OR IF WE DO NOT WIN AT TRIAL. . . . [¶] . . . [¶] In the
event that your case goes to trial and we prevail, Law Firm will
file a motion with the Court for an award of attorney fees. Any
attorneys’ fees awarded will belong to Law Firm. IF NO FEES
ARE AWARDED, YOU DO NOT HAVE TO PAY THE LAW
FIRM ATTORNEY FEES.”
The agreement provided for fees based on the time
expended at $350 to $650 per hour for partners and $200 to $300
per hour for associates, and explained the “above contingent fee is
not based on a percentage basis.” According to the agreement,
“[i]f a lawsuit is required, Attorney shall receive from
Defendant(s), a fee of his actual time expended on the case
calculated at his customary hourly rate (or other fee as may be
agreed upon between Attorney and Defendant(s)).”
The agreement also provided, “In some instances we are
able to recover additional damages above and beyond Client’s
actual damages. In only those instances where we are able to
recover additional damages, 40% of those additional damages
shall be due the Law Firm as additional attorney’s fees.
Examples of additional damages include civil penalties, punitive
damages, waiver of mileage/use offset, waiver of negative equity
on a traded-in vehicle and include any instance where the firm is
11
able to obtain damages beyond Client’s statutory lemon
law/breach of warranty recovery.”6
On May 5, 2017 Mercedes-Benz filed the declaration of its
attorney Jon Universal. Universal stated any attorney-client
privilege protecting the Hanna fee agreement from disclosure had
been waived. According to Universal, the agreement had been
voluntarily produced at Reda Hanna’s deposition while
Mr. Hanna was represented by O’Connor & Mikhov LLP.
Universal also explained O’Connor & Mikhov LLP lodged no
objection to production of the fee agreement by Mr. Hanna, never
demanded the agreement be immediately returned and never
filed a motion with the court or made any other effort to seek
return of the agreement.
On May 15, 2017 Mercedes-Benz filed another Julius
declaration describing its proposed adjustments to Hanna’s
requested fees and costs in compliance with the court’s order at
the April 25, 2017 hearing. Among the reductions proposed was
disallowing the cost of Lepper’s vehicle inspection. With respect
to Hanna’s attorney fees, Julius proposed cutting off fees as of
January 20, 2016, the date of the prior section 998 offer. Julius
also proposed recalculating all services performed by associates
at the lower hourly rate of $200 and all services performed by
partners at the lower hourly rate of $350. Of the $172,712.50 in
6 The agreement also provided, “In the unlikely event Client
consents to a settlement, dismissal, or otherwise terminates the
case (1) without a provision for actual Attorney’s fees incurred or
(2) without a provision that allows Law Firm to file a motion for
the court to determine the amount of Attorney’s fees, without
Attorney’s consent, Client shall be responsible for Attorney’s fees
and costs that have been billed in litigating your case (as detailed
above) or $2,500.00, whichever is greater.”
12
total attorney fees reflected in the invoices from O’Connor &
Mikhov LLP to Hanna, Mercedes-Benz contended only
$13,852.50 constituted reasonable fees.
8. The Court’s Ruling Awarding Fees and Costs
On May 16, 2017 the trial court issued its ruling and order,
granting Hanna $60,869 in attorney fees and all costs as
requested except $2,137.86 for the payment to Lepper. According
to the court, the sum awarded for fees included $45,869, the
amount “claimed as set forth in the plaintiff’s moving papers” to
have been incurred by Hanna for the period through January 21,
2016, the “date by which plaintiffs had successfully negotiated for
a payment by the defendant of all sums generally to be
encompassed and provided in a successful ‘lemon law’ action.”
The court explained, “Thereafter, plaintiff continued with
the action and in January 2017 obtained a settlement offer
considerably in excess of that which had been proffered in
January 2016”; “[h]owever, the settlement offer finally made
included amounts above and beyond that which is commonly
regarded as that which is statutorily required.” The court
interpreted Hanna’s fee agreement as requiring “the additional
sums earned in the January 2016 through 2017 period” “to be
essentially ‘split’ between defense [sic] counsel and the client,
resulting in a payment due from the client to her attorney (and
per the contract not from the manufacturer) of approximately
$15,000 to compensate for the additional time spent (in lieu of
any hourly rate as the court reads the contract) in obtaining this
additional benefit for the client.”
The court found “these fees for an above-and-beyond
settlement amount were a part of reasonably incurred attorney
fees, and as would be the case with any reasonably incurred fees,
13
whether they are calculated based upon hourly rates, contingency
or some mixture thereof, such fees can be and should be assessed
against the defendant where the plaintiff prevails . . . .” Finding
the additional $15,000 amount should be paid by Mercedes-Benz,
rather than Hanna, the court added it to the $45,869 awarded for
the period through January 21, 2016, for “a total of $60,869 to be
paid by defendant as the reasonable attorney fee incurred in this
action.”7 The court explained it regarded “the additional sums
earned post January 21, 2016 (to wit a portion of the additional
settlement amount) as being additional reasonable attorney fees
since it is viewing them as an amount designed to [ensure] that
the defense [sic] counsel would be compensated for any additional
time and effort in obtaining a better than usual result in lieu of
using a straight hourly rate.”
The court provided no explanation for its award of costs.
DISCUSSION
1. This Court Has Jurisdiction To Consider Hanna’s
Appeal of the Order Awarding Attorney Fees and Costs
The section 998 offer accepted by Hanna provided, “This
offer is made pursuant to Goodstein v. Bank of San Pedro (1994)
27 Cal. App. 4th 899, 323 Cal. Rptr. 2d 740, in that a judgment will
not be entered. Rather, the Complaint will be dismissed with
prejudice.”8 On January 30, 2017 Hanna filed a notice of the
7 The court cautioned, “However, defense [sic] counsel is
ordered not to make any deduction from the plaintiff’s recovery to
doubly compensate itself for this $15,000 amount as ‘additional
fees’ above and beyond the $60,869 now being ordered.”
8 This court in Goodstein v. Bank of San Pedro, supra,
27 Cal.App.4th at page 906, held, although section 998,
subdivision (b), states a qualifying settlement offer must “allow
14
parties’ settlement on Judicial Council mandatory form CM-200,
checking the box that indicated the settlement was conditional
and stating, “The settlement agreement conditions dismissal of
this matter on the satisfactory completion of specified terms that
are not to be performed within 45 days of the date of the
settlement. A request for dismissal will be filed no later than . . .
June 15, 2017.”
Although the notice of settlement did not request dismissal
of the action (and, to the contrary, expressly stated a request for
dismissal would be filed in the future), on January 30, 2017 the
court ordered the entire action dismissed. Its minute order of
that date states, “In response, to the parties settlement, pursuant
to CCP 664.6 and CCP 998, the entire action . . . is order[ed]
dismissed with the court retaining jurisdiction to enforce the
settlement.” The order of dismissal is recorded in the superior
court’s registry of actions, which states, “Dismissed/Disposed” in
Department 12 at 10:00 a.m. on January 30, 2017.9
judgment to be taken,” an offer that requires a voluntary
dismissal with prejudice meets the requirements of that
provision. “The word ‘judgment’ in Code of Civil Procedure
section 998 indicates that the statute contemplates that an offer
to compromise which is accepted will result in the final
disposition of the underlying lawsuit; the statute does not
indicate any intent to limit the terms of the compromise
settlement or the type of final disposition.”
9 Although the registry of action reflecting the order of
dismissal and the notice of the parties’ settlement is included in
Hanna’s Appendix, the January 30, 2017 minute order and notice
of settlement are not. On our own motion, pursuant to California
Rules of Court, rule 8.155(a)(1)(A), we augment the record to
include the January 30, 2017 minute order and settlement notice.
15
Without acknowledging the January 30, 2017 order of
dismissal, Mercedes-Benz contends the May 16, 2017 order
awarding Hanna attorney fees and costs is not appealable and
Hanna’s appeal must be dismissed because it was not included in
a judgment or made following entry of an order of dismissal.
(See Code Civ. Proc., § 904.1, subd. (a)(1) [authorizing appeal
from a final judgment] & (2) [authorizing appeal from an order
made after a judgment made appealable by subdivision (a)(1)];
see generally Walker v. Los Angeles County Metropolitan
Transportation Authority (2005) 35 Cal. 4th 15, 21 [“a reviewing
court lacks jurisdiction on direct appeal in the absence of an
appealable order or judgment”].)
Although the order of dismissal as originally filed was not
signed by the court (see Code Civ. Proc., § 581d [“[a]ll dismissals
ordered by the court shall be in the form of a written order signed
by the court”]), on April 24, 2019 the superior court reentered a
signed version of its order, “nunc pro tunc to 1/30/17.”10
Accordingly, the court’s May 16, 2017 order awarding Hanna
attorney fees and costs is properly before us as an order made
after an appealable order or judgment pursuant to Code of Civil
Procedure section 904.1, subdivision (a)(2).
Moreover, even if the order awarding fees and costs were
not appealable under Code of Civil Procedure section 904.1,
subdivision (a)(2), it would be within our jurisdiction to review
under the collateral order doctrine: “When a court renders an
interlocutory order collateral to the main issue, dispositive of the
rights of the parties in relation to the collateral matter, and
directing payment of money or performance of an act, direct
10 We augment the record to include the signed version of the
order of dismissal on our own motion.
16
appeal may be taken. [Citations.] This constitutes a necessary
exception to the one final judgment rule. Such a determination is
substantially the same as a final judgment in an independent
proceeding.” (In re Marriage of Skelley (1976) 18 Cal. 3d 365, 368;
see Sjoberg v. Hastorf (1948) 33 Cal. 2d 116, 119 [an otherwise
interlocutory order is directly appealable “if the order is a final
judgment against a party in a collateral proceeding growing out
of the action”].)
“To qualify as appealable under the collateral order
doctrine, the interlocutory order must (1) be a final determination
(2) of a collateral matter (3) and direct the payment of money or
performance of an act.” (Apex LLC v. Korusfood.com (2013)
222 Cal. App. 4th 1010, 1015-1016.) The order awarding Hanna
legal fees and costs satisfies all three of these criteria and is
appealable. (See Rich v. City of Benicia (1979) 98 Cal. App. 3d
428, 432 [order awarding attorney fees after resolution of the
merits of the suit by stipulation of the parties was appealable as
a final determination on a collateral matter requiring payment of
money].)
2. Recovery of Attorney Fees Under the Song-Beverly Act
A prevailing buyer in an action under the Song-Beverly
Act “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); see
Warren v. Kia Motors America, Inc. (2018) 30 Cal.App.5th 24, 35
[“[t]he ‘plain wording’ of section 1794, subdivision (d) requires the
trial court to ‘base’ the prevailing buyer’s attorney fee award
17
‘upon actual time expended on the case, as long as such fees are
reasonably incurred—both from the standpoint of time spent and
the amount charged’”; italics omitted].) As discussed, Hanna and
Mercedes-Benz repeated this language and expressly
incorporated section 1794, subdivision (d), into their settlement
agreement.
“‘The statute “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.”’”’” (Etcheson v. FCA US LLC
(2018) 30 Cal.App.5th 831, 840 (Etcheson); accord, Goglin v.
BMW of North America, LLC (2016) 4 Cal.App.5th 462, 470
(Goglin).)
We review a trial court’s order awarding attorney fees and
costs under the Song-Beverly Act for abuse of discretion.
(Etcheson, supra, 30 Cal.App.5th at p. 840; McKenzie v. Ford
Motor Co. (2015) 238 Cal. App. 4th 695, 703.) “‘“We presume the
trial court’s attorney fees award is correct, and ‘[w]hen the trial
court substantially reduces a fee or cost request, we infer the
court has determined the request was inflated.’”’” (Etcheson, at
18
p. 840.) However, “when the record affirmatively shows the trial
court’s discretionary determination of fees pivoted on a factual
finding entirely lacking in evidentiary support, the matter must
be reversed with instructions to redetermine the award.” (Id. at
p. 841; see 569 East County Boulevard LLC v. Backcountry
Against the Dump, Inc. (2016) 6 Cal.App.5th 426, 435, fn. 10.)
“[W]here an issue of entitlement to attorney fees and costs
depends on the interpretation of a statute, our review is de novo.”
(Wohlgemuth v. Caterpillar Inc. (2012) 207 Cal. App. 4th 1252,
1258.) Similarly, the interpretation of a written instrument,
including an attorney retainer agreement, is reviewed de novo in
the absence of any conflict in extrinsic evidence presented to
clarify an ambiguity. (Powers v. Dickson, Carlson & Campillo
(1997) 54 Cal. App. 4th 1102, 1111.)
3. Hanna Is Entitled To Recover Reasonable Attorney Fees
for Legal Services Performed After the January 2016
Section 998 Offer To Compromise
In the trial court Mercedes-Benz argued Hanna was not
entitled to recover attorney fees for legal services provided after
its January 2016 section 998 offer because she unreasonably
refused to accept that offer and failed to engage in good faith
negotiations after it was made. Mercedes-Benz essentially
repeats that argument on appeal to defend the trial court’s ruling
limiting Hanna’s post-January 21, 2016 fees to $15,000.
Mercedes-Benz’s argument ignores the unfavorable aspects
of its January 2016 offer, which, among other terms, required
Hanna to return an automobile she no longer possessed and to
sign a general release with undisclosed terms. Both of those
provisions were removed from the January 2017 section 998 offer
to compromise that was the basis for the parties’ settlement.
19
Rejecting a settlement offer because of unfavorable terms is
neither unreasonable nor a permissible ground for denying an
award of attorney fees under the Song-Beverly Act. (Etcheson,
supra, 30 Cal.App.5th at pp. 845-846 [“where a defendant’s
settlement offer contains unfavorable provisions or is otherwise
invalid, as [defendant’s] offers were here, it is not unreasonable
for a plaintiff to reject that offer”]; Goglin, supra, 4 Cal.App.5th
at p. 471 [not unreasonable to reject prelitigation settlement offer
with a broad general release and a confidentiality provision];
McKenzie v. Ford Motor Co., supra, 238 Cal.App.4th at pp. 705-
708 [same].)
Where a party continues to litigate after receiving a
settlement offer, absent a finding that failure to resolve the case
through negotiation was unreasonable or solely attributable to
counsel’s desire to generate more fees, additional fees incurred to
establish liability or damages, including evidence of willfulness
necessary to recover civil penalties, are properly included in an
award of fees under Civil Code section 1794, subdivision (d). (See
Etcheson, supra, 30 Cal.App.5th at pp. 846, 850; Goglin, supra,
4 Cal.App.5th at p. 472.) Here, the trial court expressly found
that Hanna “in January 2017 obtained a settlement offer
considerably in excess of that which had been offered in
January 2016.” Far from finding Hanna’s attorneys continued to
litigate simply to generate more fees, the court recognized the
efforts of Hanna’s counsel after January 2016 were responsible
for a substantial increase in her recovery and thus “a part of
reasonably incurred fees.” The court’s findings are supported by
substantial evidence: Not only did Hanna’s attorneys eliminate
the requirements that she return the automobile and enter into a
general release but also her counsel successfully negotiated for
20
the payment of a substantial sum in addition to Hanna’s actual
damages, which had been the basis for Mercedes-Benz’s
January 2016 offer.
4. The Trial Court Erred by Failing To Use the Lodestar
Method for the Award of Fees Incurred After the January
2016 Section 998 Offer To Compromise
a. The trial court misread Hanna’s retainer agreement
Finding that between January 21, 2016 and January 27,
2017 Hanna’s counsel was able to increase Mercedes-Benz’s
settlement offer to include payment of a sum in excess of her
actual damages, the trial court correctly concluded Hanna was
entitled under the parties’ settlement agreement and Civil Code
section 1794, subdivision (d), to recover her reasonable attorney
fees incurred after January 21, 2016. However, rather than use
the lodestar method to calculate post-January 21, 2016 fees, as it
had for its determination of reasonable fees up to that date, the
court looked to Hanna’s retainer agreement and applied its
provision for Hanna’s attorneys to receive 40 percent of any
recovery in excess of actual damages to cap additional fees at
$15,000 (rather than the requested additional base amount of
$126,843.50).11
The trial court was entitled to consider Hanna’s retainer
agreement in awarding her fees. (See Glaviano v. Sacramento
City Unified School Dist. (2018) 22 Cal.App.5th 744, 748, 757
[“the attorney’s fee agreement is relevant and may be considered”
11 The trial court apparently accepted Mercedes-Benz’s
calculation that Hanna’s actual damages were approximately
$22,500 and, therefore, that she had received approximately
$37,500 in additional damages from the $60,000 settlement
payment. Forty percent of $37,500 is $15,000.
21
even though the statutory fees provision at issue in the case,
which provided for payment of “reasonable attorney’s fees
incurred,” “does not compel any particular award”].)12 But the
court fundamentally misinterpreted the agreement and then
misapplied its own mistaken interpretation to the determination
of the reasonable fees incurred by Hanna after January 21, 2016.
As discussed, the retainer agreement between Hanna and
the O’Connor & Mikhov law firm expressly provided that
“[a]ttorney’s fees are based on the time expended” at a range of
hourly rates specified for partners, associates and legal
assistants. Although those fees are “contingent upon an
acceptable settlement being achieved or a successful verdict at
trial,” the agreement explained, “[t]he above contingent fee is not
based on a percentage basis.” The time-expended basis for
12 Hanna has forfeited her argument that the retainer
agreement is privileged and should not have been considered by
the trial court. As discussed, although Hanna objected to the
trial court’s April 25, 2017 order requiring her to produce the fee
agreement, the court withdrew that aspect of its order and
instead required Mercedes-Benz to produce the documents on
which it had relied to state its understanding of Hanna’s fee
arrangement with her attorneys. The record on appeal fails to
show Hanna objected to the court’s May 2, 2017 modified ruling
or responded to Mercedes-Benz’s contention any attorney-client
privilege had been waived by her husband’s production of a copy
of the agreement, as set forth in Julius’s May 2, 2017 declaration
and Universal’s May 5, 2017 declaration filed in response to the
trial court’s May 2, 2017 ruling. (See Doers v. Golden Gate
Bridge Etc. Dist. (1979) 23 Cal. 3d 180, 184, fn. 1 [an appellate
court will generally not consider procedural defects or erroneous
rulings where an objection could have been but was not made to
the lower court].)
22
determining attorney fees was reiterated in the next sentence of
the agreement, which stated, if a lawsuit is required, trial
counsel would receive “a fee of his actual time expended on the
case calculated at his customary hourly rate” or other fee as
might be agreed upon by the client. Following this description of
the method for calculating attorney fees, the retainer agreement
stated, if the law firm was able “to recover additional damages
above and beyond Client’s actual damages”—for example, civil
penalties or waiver of a mileage/use offset—then “40% of those
additional damages shall be due the Law Firm as additional
attorney’s fees.” Contrary to the trial court’s reading, this
language clearly specified that O’Connor & Mikhov would receive
its hourly rate for all time expended on the litigation, whether
directed to the recovery of actual or additional damages, but it
would also be entitled to a bonus equal to 40 percent of all
additional damages recovered. By misreading this language as
providing for a percentage recovery of additional damages “in lieu
of an hourly rate” for those legal services, and then using its
faulty interpretation of the retainer agreement as the sole basis
for awarding only $15,000 of the fees incurred after January 21,
2016, the trial court committed plain error.
b. A fee award under the Song-Beverly Act may not be
based on a percentage of the plaintiff’s recovery
Even if the trial court’s interpretation of the retainer
agreement were correct, however, it would still have been error to
award fees for legal work performed by O’Connor & Mikhov after
January 21, 2016 based entirely on the law firm’s percentage
share of civil penalties or other “excess” monetary recovery,
rather than using the lodestar figure—time spent multiplied by
reasonable hourly compensation for each attorney (see Ketchum
23
v. Moses (2001) 24 Cal. 4th 1122, 1131-1132)—as specified in the
parties’ settlement agreement and mandated by Civil Code
section 1794, subdivision (d), as the starting point for its analysis.
While the trial court has broad discretion to increase or
reduce the proposed lodestar amount based on the various factors
identified in case law, including the complexity of the case and
the results achieved, the court’s analysis must begin with the
“actual time expended, determined by the court to have been
reasonably incurred.” (Civ. Code, § 1794, subd. (d).) “[I]t is
inappropriate and an abuse of a trial court’s discretion to tie an
attorney fee award to the amount of the prevailing
buyer/plaintiff’s damages or recovery in a Song-Beverly Act
action.” (Warren v. Kia Motors America, Inc., supra,
30 Cal.App.5th at p. 37; see Nightingale v. Hyundai Motor
America (1994) 31 Cal. App. 4th 99, 105, fn. 6 [in a case in which
there is a contingency fee agreement, “for purposes of
section 1794, subdivision (d), a prevailing buyer represented by
counsel is entitled to an award of reasonable attorney fees for
time reasonably expended by his or her attorney”]; see also
Robertson v. Fleetwood Travel Trailers of California, Inc. (2006)
144 Cal. App. 4th 785, 818 [even though the clients did not have a
personal obligation to pay for legal services out of their own
assets under the terms of a contingency fee agreement, attorney
fee award under the Song-Beverly Act must be based on the
lodestar adjustment method].)
Citing Levy v. Toyota Motor Sales, U.S.A., Inc. (1992)
4 Cal. App. 4th 807, 815-816, Mercedes-Benz argues Hanna’s claim
for an award of attorney fees based on the lodestar method is
“incongruous” with a contingency fee agreement. Nothing in Levy
supports that assertion. Indeed, after discussing Aetna Life &
24
Casualty Co. v. City of Los Angeles (1985) 170 Cal. App. 3d 865,
which reversed a trial court’s fee award because it had been
based on a percentage of the plaintiffs’ recovery, consistent with a
contingent fee agreement, rather than consideration of the
number of hours spent on the case and reasonable hourly
compensation for the attorney, the Levy court expressly noted,
“Our case did not involve a contingent fee arrangement.” (Levy,
at p. 815.)
c. Mercedes-Benz’s speculative efforts to justify the trial
court’s decision are misplaced
In an effort to justify the trial court’s reduction of post-
January 21, 2016 attorney fees from the $126,843.50 additional
base amount requested to $15,000, Mercedes-Benz argues the
court may have been influenced by what it characterizes as
Hanna’s misrepresentations about the nature of her retainer
agreement with O’Connor & Mikhov, including with respect to
the 40 percent bonus feature, suggesting the court may have
found Hanna and her attorneys not to be credible and applied its
skepticism about their honesty to the substance of the billing
statements submitted with the fee motion. Mercedes-Benz also
contends the court may have reduced Hanna’s fee request
because it found the total sought was unreasonable, her
attorneys overly litigated the case, or they had submitted padded
or duplicative bills.
It may be permissible for us to presume the trial court
considered the relevant lodestar adjustment factors to reach its
fee award when confronted with a silent record. (See, e.g., Levy v.
Toyota Motor Sales, U.S.A., Inc., supra, 4 Cal.App.4th at p. 816
[“Although the trial court found the items submitted in support of
the fee claim were grossly exaggerated, there is nothing in the
25
record indicating how the court arrived at the amount of the
award ultimately made. In the circumstances, we must presume
the court, using its sound discretion, found the sum awarded
reasonably incurred and reasonable in amount”].) However,
where, as here, the court expressly states a legally erroneous
ground for its ruling, we cannot infer its exercise of discretion
rested on a wholly different basis. (Etcheson, supra,
30 Cal.App.5th at pp. 845-846 [where court based its drastic
reduction of plaintiffs’ fee request on its view that continuing to
litigate the case following a settlement offer was unnecessary,
“we cannot indulge an inference that the trial court’s order . . .
was based on a legitimate lodestar assessment of the overall
reasonableness of counsel’s fees based on rates, duplication of
effort, or complexity”]; McKenzie v. Ford Motor Co., supra,
238 Cal.App.4th at p. 705 [“[w]hen the court states its reasons
explicitly [for reducing the fees requested], we cannot infer its
exercise of discretion rested on a wholly different basis”].)
In sum, we reverse the trial court’s attorney fee award and
remand for redetermination, using the lodestar method, of the
reasonable attorney fees incurred by Hanna in connection with
the entire prosecution of her lawsuit.
5. The Trial Court Did Not Abuse Its Discretion in
Disallowing Costs for Hanna’s First Expert
The trial court disallowed as recoverable costs, without
explanation, the $2,137 paid to Hanna’s first expert, Thomas
Lepper, to inspect Hanna’s vehicle. On appeal Mercedes-Benz
defends that ruling, arguing that expense was unnecessarily
incurred because Hanna replaced Lepper as her expert. Noting
that Mercedes-Benz provided no citation to the record showing
Lepper had been withdrawn, Hanna contends, because Lepper
26
conducted the inspection in February 2015, shortly before the
vehicle was declared a total loss, the cost for the inspection was
reasonably and necessarily incurred.
Absent findings or any explanation from the trial court, we
presume the court found the cost for Lepper to inspect Hanna’s
car was not reasonably incurred, as required by section 1794,
subdivision (d), for the recovery of costs; and we review the record
to determine whether that implied finding is supported by
substantial evidence. (See Christian Research Institute v. Alnor
(2008) 165 Cal. App. 4th 1315, 1322 [where abuse of discretion is
the applicable standard of review, “‘[t]he judgment of the trial
court is presumed correct; all intendments and presumptions are
indulged to support the judgment; conflicts in the declarations
must be resolved in favor of the prevailing party, and the trial
court’s resolution of any factual disputes arising from the
evidence is conclusive’”]; Frei v. Davey (2004) 124 Cal. App. 4th
1506, 1512 [under abuse of discretion standard, “‘[i]f the trial
court has made no findings, the reviewing court will infer all
findings necessary to support the judgment and then examine the
record to see if the findings are based on substantial evidence’”].)
Substantial evidence supports the finding the cost for
Lepper to inspect Hanna’s vehicle was not reasonably incurred.
As discussed, Julius’s April 12, 2017 declaration, read in
conjunction with Mercedes-Benz’s opposition memorandum,
established Lepper was replaced by Darrell Blasjo as Hanna’s
expert and Lepper’s work product was not provided to Blasjo for
his use. Although Lepper’s pre-accident inspection may have
been necessary if the vehicle’s value before being declared a total
loss was somehow relevant to Hanna’s damage claim or was a
factor in Mercedes-Benz’s settlement offers, Hanna did not
27
attempt to justify the expense on that basis in the trial court.
“‘As a general rule, theories not raised in the trial court cannot be
asserted for the first time on appeal; appealing parties must
adhere to the theory (or theories) on which their cases were
tried.’” (Nellie Gail Ranch Owners Assn. v. McMullin (2016)
4 Cal.App.5th 982, 997; accord, In re Marriage of Nassimi (2016)
3 Cal.App.5th 667, 695.)
DISPOSITION
The May 16, 2017 order awarding fees and costs is
reversed, and the matter remanded for a redetermination of
attorney fees in a manner consistent with this opinion. Hanna is
to recover her costs on appeal.
PERLUSS, P. J.
We concur:
SEGAL, J. FEUER, J.
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