Second District, in Kim II, Reverses Denial of Fee to Settling Plaintiff Who Obtained Rescission and Restitution in a “Lemon Porsche” Case.
The nice thing about our blog is that many cases come back to illustrate fee recovery principles or give us a chance to elaborate on past posts. The next decision fits into both of these categories.
California’s Consumer Legal Remedies Act (CLRA) has a mandatory fee-shifting provision requiring that fees be awarded to a “prevailing plaintiff” under CLRA (Civil Code) section 1780(d). “Prevailing plaintiff” is not defined in the statutory scheme, but we surveyed cases in our June 3, 2008 post that held it meant a litigant obtaining a “net monetary recovery” on a CLRA claim. One of the decisions so holding was Kim v. Euromotors West/The Auto Gallery, 149 Cal.App.4th 170 (2007) (Kim I). The Second District, Division Eight, in Kim I, reversed the lower court for its belief that a settlement of plaintiff’s claims—especially with a settlement agreement by which rescission was accomplished and money was paid back for a repair-weary Porsche, with an express reservation of an ability to seek fees under the CLRA—precluded a fee award. In remanding, the appellate panel designated three alternate ways that the plaintiff might be able to establish he was a prevailing plaintiff: (1) he obtained a “net monetary recovery” (by analogy to Code of Civil Procedure section 1032); (2) he achieved “most or all” of his litigation objectives; or (3) he achieved a combination of monetary recovery and litigation objectives. (Kim I, supra, 149 Cal.App.4th at 181 [phrasing its language in the disjunctive].)
On remand, the lower court yet again denied fee recovery to plaintiff. This time around, the rationale was different: plaintiff had dismissed nine of ten claims in the settlement agreement (each side bearing their respective fees and costs) and had only obtained rescission/restitution under the CLRA claim (reserving a fee recovery determination for judicial action later on). The trial court observed, “neither party achieved complete recovery on all claims and on balance neither party prevailed sufficiently to justify an award of attorney’s fees.” Kim appealed this adverse ruling.
That brings us to Kim v. Porsche Cars North America, Inc., Case No. B199777 (2d Dist., Div. 8 July 21, 2008) (unpublished) (Kim II). Although our title has given the result away, Kim obtained a reversal, with the appellate court directing the lower court to determine the amount of fees that Kim shall recover.
At the outset, Justice Rubin, writing for a 3-0 panel, acknowledged that fee awards are usually governed by the deferential abuse of discretion review standard. However, he noted an important nuance to this rule—“[f]ailure to follow applicable legal principles is properly considered an abuse of discretion,” citing Kim I, supra, 149 Cal.App.4th at 176-177.
The Court of Appeal found that the trial court failed to follow the disjunctive test that was enunciated in Kim I for determining whether plaintiff prevailed. Because the lower court found Kim had obtained a net monetary recovery (a fact beyond dispute), he prevailed under CLRA section 1780(d). The panel stated that “complete recovery on all claims” is not the correct test—“[a]t most, even a plaintiff who has not obtained a net monetary recovery need show only that he achieved most of his litigation objectives to establish prevailing plaintiff status ….”, citing Graciano v. Robinson Ford Sales, Inc., 144 Cal.App.4th 140, 150 (2006).
Further, Justice Rubin found that dismissal of the bulk of claims did not preclude Kim from establishing prevailing party status. Focusing on California’s “primary right” doctrine, the appellate court decided that a litigant can prevail where he obtains recovery on one claim, especially where the dismissed claims involve either duplicative relief or less important forms of relief. The panel found that Kim did accomplish his primary litigation objective—rescission and restitution—such that he was not divested of prevailing party status by dismissing duplicative relief (monetary damages) or less important relief (Song-Beverly Act civil penalties or an injunction). (Slip Opn., pp.8-9.)
Judge Egerton (sitting by assignment) concurred, but wrote to clarify what he believed to be the result reached in the particular circumstances of Kim II. He noted that trial courts have very broad discretion in determining prevailing party status in fee contests, with it often being the case that a plaintiff prevailing on only one claim out of ten will not be deemed the prevailing party. Judge Egerton then explained his concurrence: “On the specific facts of this case, however, I agree with the majority that Kim was entitled to attorney’s fees under the CLRA. Before suing, Kim asked [the Porsche dealer] to take the car back and to refund his money. [Dealer] refused. In the settlement, Kim succeeded in returning the car to [Dealer] and getting his money back.”
Kim II is valuable in clarifying that the CLRA fee recovery test is a disjunctive tripartite test, and can allow a successful plaintiff to be deemed “prevailing” if one factor or a combination of them can be satisfied.