Shakouri v. Tesla Motors CA2/4

Filed 6/30/22 Shakouri v. Tesla Motors CA2/4
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION FOUR
ARASH SHAKOURI, B307273
Plaintiff and Appellant, (Los Angeles County
Super. Ct. No. BC614940)
v.
TESLA MOTORS, INC.,
Defendant and Respondent.
APPEAL from an order of the Superior Court of
Los Angeles County, Richard J. Burdge, Judge. Affirmed.
Rosner, Barry & Babbitt, Hallen D. Rosner, Arlyn L.
Escalante; Strategic Legal Practices, Payam Shahian; California
Consumer Attorneys, Michael H. Rosenstein for Plaintiff and
Appellant.
Bowman and Brooke, Brian Takahashi, Jennifer T. Persky
and Colin P. Cronin for Defendant and Respondent.
INTRODUCTION
Code of Civil Procedure section 998 (section 998) is
intended to encourage parties to accept reasonable settlement
offers before trial. (Linthicum v. Butterfield (2009) 175
Cal.App.4th 259, 270.) To that end, section 998 “establishes a
procedure for shifting the costs upon a party’s refusal to settle. If
the party who prevailed at trial obtained a judgment less
favorable than a pretrial settlement offer submitted by the other
party, then the prevailing party may not recover its own postoffer
costs and, moreover, must pay its opponent’s postoffer costs.”
(Barella v. Exchange Bank (2000) 84 Cal.App.4th 793, 798, citing
§ 998, subd. (c)(1).)
Here, appellant Arash Shakouri sued respondent Tesla
Motors, Inc. under the Song-Beverly Consumer Warranty Act
(the Song-Beverly Act, Civ. Code, § 1790 et seq.) relating to
alleged defects in a Tesla Model S Shakouri purchased in 2014.
Tesla extended two informal settlement offers early in the case;
Shakouri declined. About six months into the case and after
initial discovery, Tesla served a section 998 offer proposing
$115,000 to repurchase the vehicle,1 plus attorney fees. Again,
Shakouri declined. After nearly three years of litigation, a jury
found for Shakouri and awarded him $96,145. Following trial,
Tesla moved to recover its costs under section 998. The court
granted the motion and awarded Tesla $143,624.59 in costs.
1 Civil Code section 1793.2, subdivision (d)(2) “sets forth the
manufacturer’s affirmative obligation to ‘promptly’ repurchase or
replace a defective vehicle [if the] manufacturer is ‘unable to
service or repair a new motor vehicle . . . to conform to the
applicable express warranties after a reasonable number of
attempts . . . .’” (Kirzhner v. Mercedes-Benz USA, LLC (2020) 9
Cal.5th 966, 971 (Kirzhner).)
2
On appeal, Shakouri argues that Tesla’s section 998 offer
was invalid because it was ambiguous, conditional, and made in
bad faith. In particular, he asserts the section 998 offer was
ambiguous because it required the vehicle’s “factory equipment”
to be intact upon repurchase. We find the offer was sufficiently
specific to allow Shakouri to evaluate the worth of the offer and
make a reasoned decision whether to accept it. We therefore find
no error and affirm.
FACTUAL AND PROCEDURAL BACKGROUND
A. Background facts
Shakouri purchased a Tesla Model S on February 27, 2014.
The car had a base price of $69,900. With added options including
an upgraded 85-kilowatt battery ($10,000), silver cyclone wheels
($2,500), and a “tech package” ($3,750), the total purchase price
came to $90,570. The car came with a Tesla Uniform Mobile
Connector (UMC) to charge the car.
Within weeks, Shakouri was unhappy with how the car was
charging. After several calls to customer service and remote
inspections of the car, Shakouri brought the car in for service in
August 2014. Tesla found a fault with the UMC and replaced it.
Shakouri reported that the charging problems continued, even at
Tesla-owned charging stations, and the car had problems with its
radio and Bluetooth systems. Another repair was completed in
June 2015, and more repairs were completed in October 2015,
following an incident in which the car shut down, would not
restart, and had to be towed.
On March 24, 2016, Shakouri filed a complaint alleging
causes of action under the Song-Beverly Act. In April 2016,
counsel for Tesla told Shakouri’s counsel that Tesla was willing
to repurchase the vehicle, and asked for “the vehicle’s service
3
history, financing information, and other documentation that will
assist us in determining the repurchase amount.” Shakouri’s
counsel responded that it was “premature at this point to engage
in any settlement discussions given we have not yet received
Tesla’s Answer to our Complaint.”
In May 2016, after answering the complaint, Tesla sent a
letter to Shakouri’s counsel offering “to repurchase the subject
vehicle using Civil Code Section 1793.2(d)(2) to calculate the
restitution amount.”2 Tesla included a spreadsheet listing
$72,528.62 as a “template,” and asked that Shakouri provide
additional information because he “financed the vehicle [and]
only he can fill us in on the numbers” relating to financing. Tesla
further offered to pay an additional $4,500 for “fees, costs and
expenses,” but stated that if Shakouri or his counsel felt that a
higher amount was appropriate, Tesla would be willing to review
itemized time charges “for further consideration.” The letter also
stated that Tesla assumed the vehicle had “no significant
unrepaired collision, vandalism or other damage” that would
impact “the quid pro quo for which restitution is being paid.”
Shakouri did not respond to the letter.
2 Civil Code section 1793.2, subdivision (d)(2)(B) states that
a 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.”
4
In July 2016, Shakouri stated in interrogatory responses
that he was still driving the car. He also stated that the car had
not been in any accidents, nor had it been altered or modified. In
updated interrogatory responses served in September 2016,
Shakouri did not update or change this information. In August
2016, an inspection of the vehicle while at a Tesla facility for
maintenance showed that the car had no collision damage and
included all factory equipment.
In October 2016, Tesla served a section 998 offer to
Shakouri.3 The offer included two options. The first option was a
repurchase offer “in the amount to which Plaintiff is legally
entitled under Civil Code § 1793.2(d)(2)(B), less a statutory
mileage offset” of 6,789 miles (the number of miles Shakouri
drove the car before first bringing it in for service), plus any
“incidental and consequential damages.” For the second option,
Tesla offered “to pay the total amount of $115,000.00 to plaintiff
and his lender, if any, to repurchase the Subject Vehicle and
obtain clear title. This offer is intended to mirror the offer made
in defense counsel’s May 25, 2016 correspondence to plaintiff’s
counsel.” The offer further stated, “The Subject Vehicle will be
returned with all factory equipment on the Subject Vehicle at the
time of Plaintiff’s purchase.” Tesla also offered to pay Shakouri’s
attorney fees of $5,000, or in an amount to be determined by the
court. In addition, the section 998 offer stated, “There is no
admission of liability by this offer. However, [Tesla] will
3 The offer was signed on September 30, 2016, and was
served by mail and fax on October 3, 2016. If a section 998 offer
is not accepted within 30 days, it is deemed withdrawn. (§ 998,
subd. (b)(2).) The time period for acceptance of a section 998 offer
is extended by five days if the offer is mailed. (Code Civ. Proc.,
§ 1013; Hofer v. Young (1995) 38 Cal.App.4th 52, 57.)
5
stipulate that Plaintiff is the prevailing party should a motion for
attorney’s fees be filed.”
On November 7, 2016, Shakouri’s counsel responded to the
section 998 offer with a letter stating that the offer was invalid.
The letter stated, “At the outset, it is unclear whether the offer is
being provided pursuant to Defendant’s obligations under Civil
Code §§1793.2 & 1794. Is Defendant admitting to liability in this
matter? Is Defendant agreeing to a full statutory repurchase of
Shakouri’s car? Is Defendant agreeing that the car is a ‘lemon’?
Does Defendant agree that Shakouri has ‘prevailed’ for purposes
of the lawsuit? Such questions still remain unanswered by virtue
of Defendant’s unclear 998 Offer.” Regarding the first offer for
statutory repurchase, Shakouri stated that the offer “seeks to
divest Shakouri of his inviolate right to a traditional jury trial,”
and the mileage offset of 6,789 miles “impermissibly penalizes
Shakouri for mileage which is not ‘directly attributable to use by
the buyer.’” The letter also stated that the section 998 offer “fails
to specify what . . . incidental and consequential damages are
being offered.”4
Turning to the second option, Shakouri’s letter stated,
“Defendant’s offer of a lump sum $115,000 fares no better. No
accounting of the sum is provided. Is Defendant paying for civil
penalties but not agreeing to repurchase the vehicle pursuant to
1793.2 so that it does not have to brand title?” The letter further
stated, “The Offer creates yet another impossibility in its
unequivocal requirement that the ‘Subject Vehicle will be
returned with all factory equipment on the Subject Vehicle at the
4In May 2016, Tesla propounded discovery requesting
information about Shakouri’s incidental and consequential
damages. In July 2016, Shakouri responded with only objections.
6
time of Plaintiff’s purchase.’ To attempt to comply with this
provision would require Plaintiff to track down every single part
that was removed by Defendant’s dealer at any time since
Plaintiff first took possession of the vehicle. Compliance is
impossible as Plaintiff (as well as Defendant’s dealers) has no
way of locating exactly what part used to be installed on the
Subject Vehicle.” Shakouri did not accept the offer.
The case went to trial three years later, in November 2019.
The jury found in favor of Shakouri and awarded him damages of
$78,855.00, plus a civil penalty of $17,290.00, for a total of
$96,145.00. The trial court entered judgment in favor of
Shakouri in that amount.
B. Post-trial motions
Shakouri filed a memorandum of costs and a motion for
attorney fees seeking a total of $907,548.24. Tesla apparently
also filed a memorandum of costs, but it is not included in the
appellant’s appendix. Shakouri moved to tax Tesla’s costs, Tesla
moved to tax Shakouri’s costs, and Tesla opposed Shakouri’s
motion for attorney fees. The parties’ positions, as relevant to
this appeal, were as follows.
Shakouri asserted that he was the prevailing party in the
litigation, and therefore was entitled to attorney fees and costs
under the Song-Beverly Act.5 He argued that Tesla “refuse[d] to
provide relief under the [Song-Beverly Act] for the lemon it sold”
to Shakouri. He asserted that Tesla’s section 998 offer was
“invalid, illegal, and incapable of acceptance—i.e., a legal nullity,”
5 Generally, the prevailing party in a civil lawsuit is
entitled to recover its costs (Code Civ. Proc., § 1032), and under
the Song-Beverly Act, the prevailing party is entitled to attorney
fees and costs. (Civ. Code, § 1794, subd. (d).)
7
due to the condition that the vehicle be returned “with all factory
equipment on the Subject Vehicle” at the time of purchase.
Shakouri argued that this provision “would force Plaintiff to
track down every part of the Vehicle that does not constitute
‘factory equipment.’” He also asserted that the section 998 offer
was made in bad faith because it included this “impossible
condition.”
Shakouri further contended that his recovery at trial of
$96,145.00 exceeded Tesla’s section 998 offer of $72,528.62. He
argued that the more specific offer of $72,528.62 “controls over
the more general offer of $115,000.” He also noted that the
$115,000 offer stated that it was intended to “mirror” the May
2016 offer, which was for $72,528.62.
Shakouri also stated that “Tesla’s denial of liability forced
Plaintiff to proceed with his lawsuit, which Tesla needlessly
prolonged through its obstruction.” Shakouri argued that the
time billed by his 19 lawyers (1,316.5 hours) and their hourly
rates (ranging from $275 to $675 per hour) were reasonable.
Shakouri further asserted that a lodestar multiplier of 1.35 was
warranted based on the “excellent outcome” and “the risk of non-
recovery shouldered in taking on the case.” He argued the
litigation involved risk because “Tesla engaged in scorched-earth
litigation and defended the case without regard to cost—
frequently crossing the boundary demarcating zealous from over-
zealous advocacy. Notwithstanding Tesla’s frustrating tactics,
Plaintiff prevailed at trial—but only after litigating this case for
almost four years without any compensation.”
Tesla contended that its section 998 offer exceeded
Shakouri’s recovery at trial. It asserted that Shakouri’s
“argument that Tesla’s May 25, 2016 letter and October 3, 2016
8
CCP 998 offered only $72,528.62 to plaintiff is ludicrous.” Tesla
argued that it had offered to pay full statutory damages—
including whatever incidental and consequential damages
Shakouri claimed—which Tesla calculated would have amounted
to at least $97,519.31. Tesla alternatively offered a lump sum of
$115,000, which “liberally added approximately $20,000 above
the rough estimate restitution number to include unknown loan
interest,[ ] unknown incidental and consequential damages, and
potential prejudgment interest.” Tesla argued that Shakouri’s
recovery of $96,145.00 was inferior to both offers.
Tesla further asserted that the section 998 offer was valid.
It stated that in the section 998 offer, “When Tesla asked for the
return of the vehicle with all factory equipment, nowhere did it
ask for . . . all ‘original’ factory equipment that came with the
vehicle. The purpose of requiring the ‘factory equipment at time
of purchase’ is to assure that plaintiff not strip it of its factory-
installed equipment and return a vandalized vehicle.” Tesla
further stated, “Simply matching up plaintiff’s car objectively
with his window sticker and confirming all factory equipment
was still in the car at time of surrender would have sufficed.”
Tesla therefore moved to tax all of Shakouri’s costs and
attorney fees incurred after the section 998 offer. Tesla noted
that Shakouri’s costs totaled $2,356.03 and attorney fees
amounted to $12,245.50 before the expiration of the section 998
offer, and the remainder of the costs and fees were incurred after
the section 998 offer expired.6
6Tesla also argued that some of Shakouri’s costs should be
taxed because they were unreasonable or unnecessary. Those
contentions are not relevant to the appeal.
9
At the hearing on the motions, Shakouri’s counsel argued
that the section 998 offer was “a conditional, invalid offer, with
an invalid term” regarding parts that had been replaced. The
court stated that if repairs had been done with manufacturer’s
parts, “I just think that’s an ordinary and acceptable
interpretation of the agreement. If, on the other hand, he tore
out the sound system and installed a different sound system, or
he put in a different rear-view mirror, he wouldn’t have the car
with the same [sic] as it was delivered to him. . . .” Shakouri’s
counsel argued that because repairs had been made and parts
had been replaced, “the condition, as written, could not be
complied with . . . rendering the offer incapable of acceptance.”
He also argued that Tesla “tendered an offer that [Shakouri]
could not accept. It was vague and ambiguous. And, in fact, it’s a
bad faith offer.” The court stated, “I don’t buy the bad faith
argument. I think that’s not – can’t believe you’re making it.”
Counsel for Tesla argued that the section 998 offer was not
ambiguous, and “the only reasonable interpretation is that if you
modify the car, you put an after-market stereo in, you’ve got to
put it back to stock, or you can’t take this 998.” Tesla’s counsel
asserted that Shakouri’s interpretation of the section 998 offer as
requiring a car that had never been repaired was “absurd.” The
court agreed, saying to Shakouri’s counsel that Tesla’s “intent
was they were buying back the car they sold, [and] they didn’t
want to get something delivered with no tires on it.” The court
continued, “And early on in the case, it seemed like every attempt
to try to engage in any sort of settlement discussion was met with
all the reasons why we can’t have settlement discussions because
we’ve got to try to keep litigating this case. And so I think you
looked at the 998 and tried to figure out a way that you could
10
claim that you couldn’t comply with it, rather than to evaluate it.
I think it’s pretty easy to evaluate it on its face.”
The trial court ruled on the parties’ motions in a 19-page
written order. Addressing Shakouri’s motion for attorney fees
first, the court considered whether the section 998 offer was
valid, noting that an “offer must be sufficiently specific to permit
the recipient meaningfully to evaluate it and make a reasoned
decision whether to accept it, or reject it and bear the risk he may
have to shoulder his opponent’s litigation costs and expenses.”
(Berg v. Darden (2004) 120 Cal.App.4th 721, 727.). The court
rejected Shakouri’s contention that the section 998 offer was
invalid: “The court finds that Defendant’s 998 Offer was valid
because it offered $115,000, a sum certain, as an option for
Plaintiff to accept. Although Plaintiff correctly contends that the
998 Offer must be construed from the perspective of the offeree
and must be sufficiently specific to permit the offeree to
meaningfully evaluate it and ‘make a reasoned decision whether
to accept it, or reject it,’ here the court finds that the $115,000
cash offer was sufficiently certain for this purpose.” The court
also stated, “Furthermore, the Plaintiff knew if he replaced or
removed parts from the vehicle. If he [had] he could not accept,
but if he had not he simply had to return the vehicle he
purchased.”
The court further held that the section 998 offer exceeded
Shakouri’s recovery. The court stated, “It is undisputed that
Plaintiff recovered damages in the amount of $78,855.00 plus
civil penalties in the amount of $17,290.00, for a total amount of
$96,145.00. Plaintiff incurred a total of $2,356.03 in costs prior to
the expiration of the 998 Offer. [Record citation.] Further,
Plaintiff had incurred $12,245.50 in fees at the time of the offer.
11
[Record citation.] Accordingly, Plaintiff’s total recovery for
purposes of determining whether the 998 cost shifting provisions
apply was $110,746.53. [¶] Because Defendant’s 998 Offer was
for $115,000, the court finds that Plaintiff did not obtain a more
favorable judgment for purposes of Code of Civil Procedure
section 998.”
The court therefore granted Shakouri’s motion for attorney
fees in part, awarding fees “incurred prior to the expiration of the
998 Offer, in the total amount of $12,245.50.” The court denied
Shakouri’s request for a lodestar multiplier.
Turning to Shakouri’s motion to tax Tesla’s costs, the court
rejected Shakouri’s argument that the costs should be taxed in
their entirety based on the section 998 offer, reiterating that the
offer exceeded the judgment. The court taxed some discrete
charges, and awarded Tesla $143,624.59 in costs.
The court granted Tesla’s motion to tax Shakouri’s costs.
The court stated, “As discussed above, the court finds that
Defendant’s 998 Offer was valid and that Plaintiff failed to
obtain a more favorable judgment for purposes of Code of Civil
Procedure section 998. As such, the court agrees that Plaintiff
should only be entitled to costs in the total amount of $2,356.03,”
the costs incurred before the section 998 offer.
Shakouri timely appealed.
DISCUSSION
Shakouri contends the court erred in finding the section
998 offer valid. He challenges two phrases in the section 998
offer: (1) “[t]he Subject Vehicle will be returned with all factory
equipment on the Subject Vehicle at the time of Plaintiff’s
purchase,” and (2) that the offer was “intended to mirror the offer
made” in the May 2016 letter. He characterizes the issue as a
12
determination of the validity of the section 998 offer, and urges
us to review the matter de novo. Generally, on appeal “we
independently review whether a section 998 settlement offer was
valid.” (Ignacio v. Caracciolo (2016) 2 Cal.App.5th 81, 86; see
also Khosravan v. Chevron Corp. (2021) 66 Cal.App.5th 288, 294-
295 (Khosravan).)
However, Shakouri’s arguments focus almost exclusively on
what Shakouri asserts was Tesla’s bad faith and
“gamesmanship.” He asserts that the provision that the vehicle
be returned with “all factory equipment” was “an impossible
condition Tesla knew Shakouri could not meet.” He argues Tesla
“knew the vehicle had undergone many repairs [and] that many
of its factory parts (present at the time of purchase) had been
replaced.” He asserts that Tesla’s “gamesmanship proves the
offer was invalid and incapable of acceptance, and further that it
was likely issued in bad faith.” He urges this court to “find that
Tesla acted in bad faith.”
“Whether a section 998 offer was reasonable and made in
good faith is a matter left to the sound discretion of the trial
court, and will not be reversed on appeal except for a clear abuse
of discretion.” (Barba v. Perez (2008) 166 Cal.App.4th 444, 450.)
Such a ruling will not be overturned “absent a showing that
discretion was exercised in an arbitrary, capricious or patently
absurd manner that resulted in a manifest miscarriage of
justice.” (Najera v. Huerta (2011) 191 Cal.App.4th 872, 877.) We
address Shakouri’s contentions of bad faith first.
A. The section 998 offer was not made in bad faith
When Shakouri’s counsel suggested to the trial court at the
hearing that Tesla made the section 998 offer in bad faith, the
court was skeptical: “I don’t buy the bad faith argument. I think
13
that’s not – can’t believe you’re making it.” The court’s written
order did not mention bad faith, but it can be inferred that the
court rejected this argument.
“A 998 offer is made in good faith only if the offer is
‘“realistically reasonable under the circumstances of the
particular case”’ [citation]—that is, if the offer ‘“carr[ies] with it
some reasonable prospect of acceptance.’”” (Licudine v. Cedars-
Sinai Medical Center (2019) 30 Cal.App.5th 918, 924.) “Whether
a section 998 offer has a reasonable prospect of acceptance is a
function of two considerations, both to be evaluated in light of the
circumstances ‘“at the time of the offer”’ and ‘“not by virtue of
hindsight.”’ [Citations.] First, was the 998 offer within the
‘range of reasonably possible results’ at trial, considering all of
the information the offeror knew or reasonably should have
known? [Citation.] Second, did the offeror know that the offeree
had sufficient information, based on what the offeree knew or
reasonably should have known, to assess whether the ‘offer [was]
a reasonable one,’ such that the offeree had a ‘fair opportunity to
intelligently evaluate the offer’ ?” (Id. at pp. 924-925.)
Both elements have been met here. First, Tesla’s offer was
within the range of reasonably possible results at trial. Shakouri
purchased the vehicle for $90,570, Tesla offered $115,000 to
repurchase the vehicle, and the jury’s verdict was for $96,145.
Although we do not evaluate a section 998 offer by virtue of
hindsight alone, when “the offeror obtains a judgment more
favorable than its offer, the judgment constitutes prima facie
evidence showing the offer was reasonable and the offeror is
eligible for costs as specified in section 998.’” (Adams v. Ford
Motor Co. (2011) 199 Cal.App.4th 1475, 1484.) Here, the offer
was well within the reasonable range.
14
Second, Tesla knew Shakouri had sufficient information to
assess the offer. Before Tesla served the section 998 offer,
Shakouri stated in discovery responses that he was still driving
the car, it had not been in any accidents, and it had not been
altered or modified. Thus, when Tesla made the section 998 offer
in October 2016, it had reason to know that Shakouri had
sufficient information to assess whether it was reasonable to offer
to repurchase the car with “all factory equipment” intact.
We therefore find no abuse of discretion in the trial court’s
implicit ruling that the section 998 offer was made in good faith.
Accordingly, we reject Shakouri’s appellate arguments to the
extent that they rely on accusations of gamesmanship or bad
faith based on Shakouri’s interpretation of Tesla’s intent, rather
than the validity of the offer itself. We turn to Shakouri’s
additional contentions that the offer was not valid.
B. The section 998 offer was valid
A section 998 offer “must be sufficiently specific to allow
the recipient to evaluate the worth of the offer and make a
reasoned decision whether to accept the offer.” (Fassberg
Construction Co. v. Housing Authority of City of Los Angeles
(2007) 152 Cal.App.4th 720, 764.) Thus, if a section 998 offer
includes “terms or conditions, apart from the termination of the
pending action in exchange for monetary consideration, that
make it exceedingly difficult or impossible to determine the value
of the offer to the plaintiff,” the court “should not undertake
extraordinary efforts to attempt to determine whether the
judgment is more favorable to the plaintiff. Instead, the court
should conclude that the offer is not sufficiently specific or certain
to determine its value and deny cost shifting under Code of Civil
Procedure section 998.” (Id. at p. 766.)
15
As with a bad faith determination, “we do not evaluate the
validity of a statutory offer to compromise after trial concludes.
Rather, we must evaluate the offer at the time the offeree
receives it and determine whether he or she is able to clearly
evaluate the worth of the offer.” (Duff v. Jaguar Land Rover
North America, LLC (2022) 74 Cal.App.5th 491, 500 (Duff); see
also Valentino v. Elliott Sav-On Gas, Inc. (1988) 201 Cal.App.3d
692, 698 [“the value” of a section 998 offer “must be measured as
of the time [the party] made its statutory offer and without the
benefit of hindsight”].) “We apply general contract principles in
interpreting a section 998 offer when doing so does not conflict
with the statute’s purpose of encouraging the pretrial settlement
of lawsuits.” (Auburn Woods I Homeowners Association v. State
Farm General Insurance Company (2020) 56 Cal.App.5th 717,
725.) In addition, we “interpret any ambiguity in the offer against
its proponent.” (Ignacio v. Caracciolo, supra, 2 Cal.App.5th at p.
86.)
Shakouri argues that the requirement that the vehicle be
“returned with all factory equipment on the Subject Vehicle at
the time of Plaintiff’s purchase” rendered the section 998 offer
invalid. He asserts this was an “impossible condition” “given that
Tesla knew the vehicle had undergone many repairs, that many
of its factory parts (present at the time of purchase) had been
replaced and thus it was impossible” to comply with the offer.
Shakouri further asserts that Tesla’s reference in the section 998
offer to the May 2016 letter was improper because the May 2016
letter “provided for an offset for any accident damage. This offset
is not authorized by Song-Beverly.” Tesla argues that the
common-sense interpretation of the section 998 offer is that
16
Shakouri could not return the car “in a stripped state” or “with
valuable parts missing.”
Determining the validity of a section 998 offer focuses on
whether the offeree can evaluate the offer at the time the offer
was made. (See, e.g., MacQuiddy v. Mercedes-Benz USA, LLC
(2015) 233 Cal.App.4th 1036, 1050 (MacQuiddy) [“‘the offeree
must be able to clearly evaluate the worth of the extended offer’”];
Duff, supra, 74 Cal.App.5th at p. 499 [“The offer must be
sufficiently specific to allow the recipient to meaningfully
evaluate it and make a reasoned decision whether to accept it”].)
Shakouri, as the owner and primary driver of the vehicle, knew
whether the car had been modified to remove any valuable
factory equipment. Shakouri stated in his interrogatory
responses served in July 2016 that the car had not been in any
accidents and it had not been modified, and an inspection by
Tesla showed that as of August 2016 the car had not been
modified. Shakouri had sufficient information when Tesla served
the section 998 offer in October 2016 to meaningfully evaluate it.
Shakouri contends the “factory equipment” provision did
not allow him to return the car with any parts on the vehicle that
had been replaced after the date of purchase. We agree with
Tesla that this interpretation is unreasonable, particularly in the
context of the Song-Beverly Act. Tesla offered to repurchase the
vehicle pursuant to Civil Code section 1793.2, subdivision (d),
which states, “If the manufacturer . . . 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 in accordance with subparagraph (A) or promptly make
restitution to the buyer in accordance with subparagraph (B).”
17
(Emphasis added.) Thus, “[t]he statute requires the
manufacturer to afford the specified remedies of restitution or
replacement if that manufacturer is unable to repair the vehicle
‘after a reasonable number of attempts.’ ‘Attempts’ is plural,”
and a “single attempt does not meet the statutory threshold.”
(Silvio v. Ford Motor Co. (2003) 109 Cal.App.4th 1205, 1208,
1209.)
Any repurchase of a vehicle under section 1793.2,
subdivision (d), therefore, necessarily involves the repurchase of a
vehicle that has been subjected to multiple repair efforts.
Presumably, such repairs include the replacement of some parts
that were on the car when it was originally sold, as well as any
parts replaced in the course of routine maintenance. Here, for
example, Tesla replaced an outside mirror on Shakouri’s car in
August 2014, and replaced the windshield wiper blades in
December 2014. It is unreasonable to interpret Tesla’s October
2016 offer to mean that Shakouri could only accept the section
998 offer if he somehow tracked down the mirror and the wiper
blades that had been removed years earlier. “[L]anguage in a
contract must be interpreted as a whole, and in the
circumstances of the case, and cannot be found to be ambiguous
in the abstract. [Citation.] Courts will not strain to create an
ambiguity where none exists.” (Waller v. Truck Ins. Exchange,
Inc. (1995) 11 Cal.4th 1, 18-19.)
This case is distinguishable from two cases Shakouri cites,
MacQuiddy, supra, 233 Cal.App.4th 1036 and Valdez v. Seidner-
Miller, Inc. (2019) 33 Cal.App.5th 600 (Valdez). In MacQuiddy,
the court held that a section 998 offer was invalid. There, the
plaintiff purchased a vehicle that developed mechanical
problems. The plaintiff took the car to the dealer multiple times
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for repairs, and eventually sued under the Song-Beverly Act and
other laws. “In the answer, the company admitted that it or its
authorized repair facility was unable to conform MacQuiddy’s car
to the applicable express and implied warranties.” (Id. at p.
1040.) The manufacturer then extended a section 998 offer to
repurchase the car on the condition that the car was “in an
undamaged condition, save normal wear and tear.” (Id. at p.
1041.) The plaintiff rejected the offer and the case went to trial.
The Court of Appeal held that the “undamaged condition”
provision rendered the section 998 offer invalid. (MacQuiddy,
supra, 233 Cal.App.4th at p. 1049.) The court stated, “Whether
the car was in an ‘undamaged condition’ was not defined, nor was
it clear what would happen if MacQuiddy accepted the offer, but
Mercedes-Benz subsequently concluded the car was ‘damaged’
beyond normal wear and tear.” (Id. at p. 1050.) The court
concluded, “Because of the undefined and subjective nature of the
term that Mercedes-Benz would repurchase the ‘undamaged’ car,
we conclude the section 998 offer was at least ambiguous, and
was therefore not valid.” (Ibid.)
Shakouri asserts that Valdez, supra, 33 Cal.App.5th 600involved a “conditional and ambiguous provision [in a settlement
offer] similar to the one here.” In Valdez, a car dealership
allegedly provided false information to the plaintiff, Valdez, when
he leased a car. Valdez sued under multiple laws including the
Consumer Legal Remedies Act (CLRA, Civ. Code, § 1750 et seq.),
which states that an action cannot be maintained if “an
appropriate correction, repair, replacement, or other remedy is
given, or agreed to be given within a reasonable time, to the
consumer.” (Civ. Code, § 1782, subd. (b).) Before the action was
filed, the defendant, Seidner, extended a CLRA “correction offer”
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to Valdez, which “required Valdez to return the vehicle ‘without
damage or vandalism, save normal wear and tear,’ and allowed
Seidner to void the settlement agreement if it determined the
vehicle was ‘in unacceptable condition.’” (Valdez, supra, 33
Cal.App.5th at p. 604.) In settlement negotiations, Seidner
stated that the settlement was contingent on an inspection of the
car, but Valdez refused to allow the agreement to be based on
Seidner’s “subjective review of the car’s condition.” (Ibid.)
Valdez declined the offer and filed the lawsuit. The trial court
granted the defendant’s motion for summary judgment, holding
that the correction offer barred the action.
The Court of Appeal reversed, holding that the settlement
offer was not an appropriate correction offer under the CLRA.
(Valdez, supra, 33 Cal.App.5th at p. 611.) The court primarily
focused on the fact that the offer improperly required Valdez to
forfeit all of his non-CLRA claims. (Ibid.) The court also stated,
however, that “Seidner’s correction offer improperly allowed
Seidner unilaterally to void the proposed settlement agreement if
it determined after an inspection that the vehicle was in an
unacceptable condition. [ ] Valdez does not dispute that if he
returned the vehicle with damage beyond normal wear and tear,
Seidner would be entitled to an offset for the damage. But
conditioning CLRA remedies on Seidner’s subjective
determination whether the vehicle was in an acceptable condition
rendered Seidner’s offer illusory. Thus, for this reason as well,
Seidner’s offer was not an appropriate correction offer under
section 1782, subdivision (b).” (Id. at pp. 615-616.)
Tesla’s section 998 offer requiring factory equipment to
remain in the vehicle is not comparable to the provisions in
MacQuiddy and Valdez allowing the defendants to be the sole
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arbiters of what constituted “normal wear and tear” of a vehicle.
The validity of a section 998 offer focuses on whether an offeree
can evaluate an offer, but the provisions in MacQuiddy and
Valdez prevented the plaintiffs from doing so by leaving the final
determination of “damage” versus “wear and tear” up to the
defendants. Here, by contrast, Shakouri knew whether factory
equipment had been removed from the vehicle; he stated in
discovery responses that he continued to drive the car, and it had
not been damaged or modified. Thus, Shakouri had sufficient
information to evaluate this provision of the section 998 offer.
This is also not a situation akin to that in Duff, supra, in
which the section 998 offer from the manufacturer, Jaguar,
“provided that Jaguar would repurchase the vehicle for
$28,430.80 or greater than that amount if Duff ‘provide[d]
documentation to show the amount is more than $28,430.80.’”
(Duff, supra, 74 Cal.App.5th at p. 496.) The Court of Appeal held
that the offer was not sufficiently specific because it “presents
somewhat of a moving target,” and it did not allow for a clear
determination of what would constitute a greater recovery at
trial. (Id. at p. 500.) Here, by contrast, Tesla’s $115,000 offer
was sufficiently specific.
Shakouri argues that the offer’s ambiguity is also
demonstrated by the fact that throughout the litigation, including
at trial and in post-trial motions, Tesla provided “a host of
alternative definitions for this express term in its offer.” He asks
us to look at “parol evidence” consisting of documents from
unrelated superior court cases against different car
manufacturers addressing similar section 998 offer language.
Such evidence is irrelevant to whether Shakouri could
meaningfully evaluate Tesla’s section 998 offer. “To further the
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purposes of promoting reasonable settlement under section 998,
we must consider the validity of section 998 offers as of the date
the offers are served.” (Burch v. Children’s Hospital of Orange
County Thrift Stores, Inc. (2003) 109 Cal.App.4th 537, 547-548;
accord, Khosravan, supra, 66 Cal.App.5th at p. 295.) Tesla’s
defenses at trial in 2019 and documents from different cases that
post-date Tesla’s offer are irrelevant to whether the section 998
offer here was sufficiently specific.
Shakouri also argues that “the offer did not say what would
happen should Tesla determine that any of the factory equipment
was missing or was damaged beyond repair by a ‘vindictive
consumer’ and how that issue may be resolved.” However, failure
to account for attempted future breaches by a vindictive offeree
does not render an offer invalid. Moreover, a section 998 offer
need not address every detail or contingency in order to be valid.
(See, e.g., Kirzhner, supra, 9 Cal.5th 966, 985 [“By offering to pay
incidental damages, the section 998 offer presumes liability with
the precise amount of damages to be later agreed upon by the
parties or ruled upon by a court”]; Covert v. FCA USA, LLC
(2022) 73 Cal.App.5th 821, 838-842 [section 998 offer’s failure to
include provisions addressing attorney fees, interest, and other
details did not render offer invalid]; but see Saba v. Crater (1998)
62 Cal.App.4th 150, 153 [“Section 998 does not grant the court
the authority to adjudicate” disputes about the parties’ intent in
settling a case when the purported section 998 offer was oral
rather than written]; Bias v. Wright (2002) 103 Cal.App.4th 811,
819-822 [court could not adjudicate disagreements relating to the
oral acceptance of a section 998 offer].)
Shakouri further asserts that Tesla’s reference to the May
2016 letter in the section 998 offer rendered the offer ambiguous.
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He argues that because the May 2016 letter included a
spreadsheet which mentioned an offset for any accident damage,
which is “not authorized by Song-Beverly,” the offer “became even
more ambiguous and conditional on Tesla’s subjective acceptance
of the vehicle’s condition.” However, by the time Tesla extended
the section 998 offer in October 2016, Shakouri had stated in his
interrogatory responses that the car had not been in any
accidents, and a vehicle inspection showed that there was no
accident damage. The lack of information available to Tesla in
May 2016 does not render the October 2016 offer invalid.
In short, Tesla’s section 998 offer was sufficiently specific to
allow Shakouri to evaluate the worth of the offer and make a
reasoned decision whether to accept it. We therefore find no
error in the trial court’s holding that the section 998 offer was
valid.
DISPOSITION
The trial court’s order is affirmed. Respondent is entitled
to its costs on appeal.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
COLLINS, J.
We concur:
MANELLA, P. J.
WILLHITE, J.
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