Ayers v. FCA U.S.

318 Cal.Rptr.3d 691

Jacob AYERS, Plaintiff and Respondent,

v.FCA US, LLC, Defendant and Appellant.

B315884

Court of Appeal, Second District, Division 8.

Filed February 27, 2024

APPEAL from a judgment of the Superior Court of Los Angeles County. Teresa A. Beaudet, Judge. Reversed and remanded with directions. Los Angeles County Super. Ct. No. BC623368

Horvitz & Levy, Lisa Perrochet, John A. Taylor, Jr., Curt Cutting, Burbank; Hawkins Parnell & Young, Barry R. Schirm, Los Angeles, and Mari Kiridjian for Defendant and Appellant.

Knight Law Group, Steve Mikhov, Los Angeles, Roger Kirnos; Wirtz Law, Richard M. Wirtz, San Diego; Greines, Martin, Stein & Richard, Joseph V. Bui and Cynthia E. Tobisman, Los Angeles, for Plaintiff and Respondent.

GRIMES, Acting P. J.

This is an appeal of a costs judgment in favor of plaintiff Jacob Ayers entered after he and defendant FCA US, LLC (FCA) settled "lemon law" causes of action he asserted under the Song-Beverly Consumer Warranty Act (Song-Beverly), Civil Code section 1790 et seq.

We conclude Code of Civil Procedure¹ section 998 operates in this case to cut off plaintiff’s right to attorney fees incurred after February 16, 2018, the date FCA made a valid and good faith offer to compromise the action.

Accordingly, we reverse and remand for entry of a modified judgment in accordance with this opinion.

BACKGROUND

FCA manufactures and sells motor vehicles, including Jeeps. Plaintiff purchased a new Jeep Grand Cherokee in March 2013. The total sale price of the vehicle was $57,300.

Plaintiff experienced numerous problems with the Jeep during his first three years of ownership. Frustrated, he asked FCA to repurchase it in November 2015. FCA refused. Plaintiff retained counsel.

In March 2016, after plaintiff opted out of a class action settlement pertaining to vehicles like his, FCA made a written offer to repurchase plaintiff’s Jeep. His counsel contacted FCA to discuss settlement but no settlement was reached. Plaintiff then sued.

Plaintiff’s complaint included causes of action against FCA for violations of Song-Beverly and fraudulent inducement. Remedies under Song-Beverly include restitution equal to the price paid for the vehicle as well as discretionary civil penalties in an amount up to double a buyer’s actual damages (i.e., potentially three times the price paid). (Civ. Code, § 1794, subds. (b), (c), § 1793.2, subd. (d).)

In July 2016, about a month after plaintiff filed his complaint, FCA served plaintiff with an offer to compromise pursuant to section 998. As discussed in greater detail below, a plaintiff who rejects a rea- sonable offer of settlement made pursuant to section 998 and then fails to obtain a more favorable judgment is subject to certain burdens under the statute. Among these is that the plaintiff cannot recover from the defendant postoffer costs to which the plaintiff might otherwise have been entitled, and the plaintiff may become liable for certain postoffer costs of the defendant. (See § 998, subd. (c)(1).) FCA’s July 2016 offer was to buy back plaintiff’s Jeep for $61,000 and pay his reasonable costs and attorney fees pursuant to Civil Code section 1794, subdivision (d) (Song-Beverly’s fee-shifting provision) in exchange for dismissal of the lawsuit with prejudice. Plaintiff did not accept the offer and continued to litigate.

About a year later, in August 2017, FCA served a second section 998 offer with the same terms as the first, except FCA proposed to pay plaintiff $122,000. Again, plaintiff did not accept the offer and continued to litigate.

In February 2018, FCA served a third section 998 offer with the same terms as the first two, except FCA again increased the amount it would pay plaintiff—this time to $143,498. Again, plaintiff did not accept the offer and continued to litigate.

In August 2019, plaintiff made a section 998 offer of his own, seeking payment of $163,409 in exchange for the Jeep. After FCA rejected this offer. Plaintiff renewed it less than eight weeks later and FCA rejected it again.

In January 2020, after driving the Jeep for seven years, plaintiff traded it in for a new vehicle. Plaintiff received a credit of $13,000 for the Jeep in the trade.

Several months later, plaintiff’s trade-in took on new significance. In October 2020, Division One of this court held, as a matter of first impression, that Song-Beverly’s restitution remedy "does not include amounts a plaintiff has already recovered by trading in the vehicle at issue" and excluded such amounts from the calculation of Song-Beverly penalties. (Niedermeier v. FCA US LLC (2020) 56 Cal. App.5th 1052, 1061, 271 Cal.Rptr.3d 43, review granted Feb. 10, 2021, S266034.) Thus, in the wake of Niedermeier, a Song-Beverly plaintiff’s maximum possible recovery was reduced by three times the amount of a trade-in.² Plaintiff’s maximum potential recovery here was thus reduced by $39,000.

In January 2021, a few months after Niedermeier issued, plaintiff served FCA with another section 998 offer, this one for $125,000 plus costs, expenses and attorney fees pursuant to Civil Code section 1794, subdivision (d) as agreed by the parties or determined by the trial court in lieu of agreement. Like FCA’s section 998 offers, it provided for dismissal of the lawsuit with prejudice. Unlike FCA’s section 998 offers, it specified the timing of payment and gave plaintiff certain rights in the event of default. FCA accepted the offer.

The parties failed to agree on the amount of Civil Code section 1794, subdivision (d) costs, expenses and attorney fees payable to plaintiff. Accordingly, plaintiff filed a motion to determine these amounts, requesting $220,852.50 in attorney fees and $40,512.75 in costs, for a total of $261,365.25. FCA opposed the motion on numerous grounds. As relevant here, FCA argued its February 2018 section 998 offer precluded plaintiff from recovering $74,527.50 in fees incurred after the date of that offer. Relatedly, and again in reliance on section 998, FCA separately moved to tax plaintiff’s costs incurred after FCA served its February 2018 offer.

By a written order dated July 26, 2021, the trial court rejected FCA’s section 998 arguments on two independent grounds, despite finding that "[p]laintiff could have received a larger settlement award if he had accepted the earlier settlement instead of waiting to propose a later, smaller award after a Court of Appeals’ decision affected the calculus." First, it held that section 998’s limitations on expense and cost recovery do not apply when the case is resolved by a pretrial settlement. Second, it held an intervening change in law that reduced the maximum amount plaintiff could recover at trial exempted him from the usual consequences of section 998. The trial court cited no authority for these holdings.

On January 31, 2022, the trial court entered a judgment in favor of plaintiff for attorney fees and costs totaling $187,747.75 ($73,617.50 less than plaintiff requested). The reduction had nothing to do with FCA’s section 998 arguments.

FCA timely appealed the trial court’s July 26, 2021 order granting plaintiff’s motion for attorney fees and costs and denying in part FCA’s motion to tax. We treat FCA’s notice of appeal, filed September 24, 2021, as a timely appeal of the January 31, 2022 costs judgment entered on the order appealed. (See Cal. Rules of Court, rule 8.104(d).)

DISCUSSION

1. Section 998 and Standard of Review

Section 998 provides, in relevant part, that "the costs allowed under Sections 1031 and 1032 shall be withheld or augmented" as follows: "If an offer made by a defendant is not accepted and the plaintiff fails to obtain a more favorable judgment or award, the plaintiff shall not recover his or her postoffer costs and shall pay the defendant’s costs from the time of the offer. In addition, … the court or arbitrator, in its discretion, may require the plaintiff to pay a reasonable sum to cover postoffer costs of the services of expert witnesses, who are not regular employees of any party, actually incurred and reasonably necessary in either, or both, preparation for trial or arbitration, or during trial or arbitration, of the case by the defendant." (§ 998, subds. (a), (c)(1).)

[1, 2] To trigger the operation of section 998, an offer must be valid and made in good faith. An offer is valid if it (i) complies with the statutory requirements that it be in writing, contain the terms of the offer, include a mechanism for acceptance, and provide for entry of judgment or a legal equivalent if accepted (Perez v. Torres (2012) 206 Cal.App.4th 418, 425, 141 Cal.Rptr.3d 758 (Perez); see also § 998, subd. (a)); and (ii) is "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, 60 Cal.Rptr.3d 375 (Fassberg)). An offer is made in good faith if it "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, 242 Cal.Rptr.3d 76 (Licudine).)

[3, 4] We review questions of statutory interpretation de novo. (Curtis Engineering Corp. v. Superior Court (2017) 16 Cal. App.5th 542, 546, 225 Cal.Rptr.3d 702.)

When interpreting a statute, we must " ‘ " ‘ "determine the Legislature’s intent so as to effectuate the law’s purpose." ’ " ’ " (Los Angeles Unified School Dist. v. Superior Court (2023) 14 Cal.5th 758, 768, 308 Cal.Rptr.3d 822, 529 P.3d 1096.) To accomplish this, we must " " " "first examine the statutory language, giving it a plain and commonsense meaning. We do not examine that language in isolation, but in the context of the statutory framework as a whole in order to determine its scope and purpose and to harmonize the various parts of the enactment. If the...