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FCA on Hook for More Attorneys’ Fees in Settled Lemon Law Case

May 25, 2021, 9:48 PM

A couple who received a modest amount more in settlement during their lemon law trial against FCA US LLC than the automaker offered three months earlier must be allowed to recover attorneys’ fees for the period in between the offers, a California appeals court ruled.

The claimed hours of work shot up steeply after Kathy and Thomas Reck rejected FCA’s initial offer, amounting to about $100,000 of the total hours-based request of $125,000, according to the court.

It’s “an error of law for the trial court to reduce an attorney fee award on the basis of a plaintiff’s failure to settle when the ultimate recovery exceeds” the pretrial settlement offer in cases under public interest or civil rights statutes with fee-shifting provisions, the California Court of Appeal, First District, said Monday.

The case here involved the Song-Beverly Consumer Warranty Act, which requires a trial court to allow a prevailing plaintiff to recover reasonable attorneys’ fees.

The trial court must determine “a reasonable attorney fee award for actual hours expended” and will have the discretion “to address any duplicative or excessive billing or unnecessary motion practice,” the appeals court said.

The Recks alleged they bought a new 2011 Dodge Challenger for about $52,000. Frequent, persistent problems plagued the car, and FCA rejected their repurchase request, they said.

FCA offered to settle the case for $81,000 in April 2018, according to the court. The Recks rejected the offer and proceeded to trial. On the second day of trial, at the beginning of August 2018, the case settled for $89,500 plus reasonable attorneys’ fees and costs.

The trial court cut off fees incurred after the April offer, citing the small difference in recovery compared with the $100,000 difference in fees.

But courts addressing analogous provisions of federal law have made clear that policy considerations require that fees not be cut off after the first offer, Justice Gabriel P. Sanchez said for the appeals court.

“To endorse a different rule would create inordinate pressure on plaintiffs” to take low offers, and would “undermine the prosecution of meritorious civil rights or public interest litigation,” he said.

Justices Jim Humes and Kathleen M. Banke also served on the panel.

Rosner, Barry & Babbit, the Knight Law Group, and the Century Law Group represented the plaintiffs. Nixon Peabody LLP and the Law Office of David Tennant represented FCA.

The case is Reck v. FCA US LLC, 2021 BL 191670, Cal. Ct. App., 1st Dist., No. A157966, 5/24/21.

To contact the reporter on this story: Martina Barash in Washington at mbarash@bloomberglaw.com

To contact the editors responsible for this story: Rob Tricchinelli at rtricchinelli@bloomberglaw.com; Peggy Aulino at maulino@bloomberglaw.com