Recent Article in California Lawyer Explores Potential Limitations on Fee Recovery for Suing Plaintiffs under CLRA.
Greg Nylen, an opponent in a class action that Mike Hensley is prosecuting, has written a nifty article in the June 2008 California Lawyer, entitled “Handling Claims under the CLRA” (found at pages 43-46 of the magazine). In this article, Mr. Nylen has an interesting discussion about potential limitations to fee recovery by plaintiffs seeking to resolve consumer disputes through use of the Consumers Legal Remedies Act (CLRA), Civil Code, §§ 1750-1784. We explore that subject and related topics below.
Civil Code section 1780(d) provides that the court “shall award court costs and attorneys’ fees to a prevailing plaintiff in litigation filed pursuant to this section.” The CLRA has no definition of “prevailing plaintiff” or “prevailing party.” However, the jurisprudence construing this provision has decided that a pragmatic test governs, usually focusing on whether the plaintiff obtained a “net monetary recovery” under the CLRA claim. (See, e.g., Reveles v. Toyota by the Bay, 57 Cal.App.4th 1139, 1154 (1977), disapproved on another ground in Snukal v. Flightways Mfg., Inc., 23 Cal.4th 754, 775 n. 6 (2000); Graciano v. Robinson Ford Sales, Inc., 144 Cal.App.4th 140, 150 (2006).) Mr. Nylen specifically discusses Graciano in his article.
Then, he makes this interesting observation, which we believe may have substance because of the “in litigation filed” language found in section 1780(d):
“Under the CLRA, a prevailing party is one who achieves objectives
in a lawsuit, as opposed to someone who achieves various aims
before a lawsuit is filed.” (See Article, at p. 45.)
Mr. Nylen’s observation also makes sense in light of the prefiling notice requirement of the CLRA, which promotes remediation and tries to facilitate precomplaint settlement.
Although not mentioned in his article, case law exists to indicate that a prevailing plaintiff still has entitlement to fees under a settlement reached after a complaint has been commenced.
In Kim v. Euromotors West/The Auto Gallery, 149 Cal.App.4th 170, 178-180 (2007), the Second District reversed the denial of a plaintiff’s fee motion where a postfiling settlement agreement was reached by which plaintiff was paid $10,000 and the prevailing party issue was reserved for later trial court determination. The trial judge determined that the settlement made it impossible to determine whether or not plaintiff prevailed. In disagreeing, the Second District remanded so that the trial judge had to make a decision on whether plaintiff prevailed, noting that it could be based on the fact plaintiff obtained a net monetary recovery or the fact he achieved most or all of what he wanted by filing the action.
An unpublished Second District decision, Arvetis v. Euro Classic Body Shop, 2003 WL 22120939 at *2-*3 (2d Dist., Div. 6 Sept. 13, 2003) (unpublished), even considered the postfiling settling party situation in an even more unusual context. There, a plaintiff filed suit before giving the defendant a repair opportunity after sending the prefiling notice letter. However, rather than seeking a dismissal of the suit, defendant settled by paying plaintiff approximately $15,000 as the matter got close to trial. The trial court denied awarding section 1780(d) fees to plaintiff. The Second District reversed, finding the net monetary recovery by plaintiff sufficed to make him a prevailing party. It found the prior noncompliance with the prefiling notice requirements was inconsequential: “We do not disagree that the trial court was empowered to make the prevailing party determination, but whether [plaintiff] complied with the procedural requirements for bringing his action was not relevant to that determination …. Because [plaintiff] obtained a net recovery in the action, he is the prevailing party and is thus entitled to attorneys fees under section 1780, subdivision (d). Any dispute regarding [plaintiff’s] compliance with the filing requirements of the CLRA was removed from the court’s consideration when the parties settled the matter.” (Id.at *3.) The appellate court also awarded plaintiff attorney’s fees on appeal. (PRACTICE POINTER—If you are on the defense side of a CRLA case, move to dismiss or bring a “no merit” motion early on based on prefiling notice noncompliance, or risk losing the leverage from this potent prefiling requirement.)
In contrast, a prevailing defendant on a CLRA claim can only obtain an attorney’s fees award if the defendant proves that the plaintiff’s prosecution was not in good faith, with case law requiring a finding of subjective bad faith. (See Civ. Code, § 1780(d); Corbett v. Hayward Dodge, Inc., 119 Cal.App.4th 915, 924 (2004).) An interesting application of these dictates is found in Sequeira v. Clippinger Chevrolet, 2005 WL 1953343 at *4-*5 (2d Dist., Div. 8 Aug. 16, 2005) (unpublished). There, a trial judge directed a verdict on plaintiffs’ CRLA count even though the jury returned a $8,000 award under an implied warranty claim. The trial judge determined defendant was not entitled to attorney’s fees under CRLA, and it appealed. The Second District affirmed by reasoning that the $8,000 judgment—although obtained on another claim—demonstrated plaintiffs had no bad faith in prosecuting the overall action inclusive of the unsuccessful CLRA claim.