Hyundai Must Pay Attorney’s Lemon Fees Even If Double Recovery

Lawyers who represented a consumer on claims that Hyundai Motor America sold him a breakdown-prone car must be paid “reasonably incurred” fees calculated on an hourly basis under California’s lemon law, regardless of any contingency-fee agreement with the client, an appeals court in the state said.

The risk of a windfall for the attorneys is a matter between them and their client, governed by precedent barring statutory plus contractual fees in a case and ethics rules prohibiting unreasonable fees, the California Court of Appeal, First District, ruled Jan. 29.

The trial court was wrong to award just $11,425 to the Knight Law Group LLP and the Altman Law Group for their work in the case, which settled for about $120,000, the appeals court said. They sought just under $50,000 for their hours, “enhanced” by half, for a total of almost $75,000, according to the court.

Car owner Richard E. Chapman Jr. alleged that he purchased his 2011 Hyundai Sonata for about $37,500. After a year, the vehicle allegedly developed electrical and engine-related problems, ultimately requiring a new engine. Hyundai allegedly made an invalid offer in response to Chapman’s request that it repurchase the car.

He sued Hyundai, which made a series of settlement offers. The second of these, for $34,000, went to mediation but didn’t settle because Chapman wasn’t present. Chapman accepted the fourth offer, for $120,372.

The trial court said that it wasn’t reasonable to continue past the $34,000 settlement offer, and that reasonable fees couldn’t be calculated without knowing the contractual fee agreement.

But the allegations supported civil penalties under the Song-Beverly Warranty Act, the appeals court said, so it was reasonable to push for a higher settlement.

And the trial court didn’t need to know the contingency fee arrangement, it said. “To the extent counsel ends up with a potential double recovery (or unconscionable fees) from the combination of the statutory fee award and amounts to be paid from the settlement proceeds under a contingency fee agreement, it is a matter between the attorney and client,” Justice Henry E. Needham Jr. wrote for the court.

Justice Gordon B. Burns and Judge Brad Seligman of Alameda County Superior Court also served on the panel.

The Auto Fraud Legal Center represented Chapman on appeal. SJL Law PC represented Hyundai.

The case is Chapman v. Hyundai Motor Am., 2021 BL 29678, Cal. Ct. App., 1st Dist., No. A158279, 1/28/21.