Second District, Division 3 Also Finds 998 Fee Waiver In Not Illegal under California’s Lemon Law.
The next case, involving the interplay between Code of Civil Procedure section 998 pretrial offers and California consumer/civil fee shifting statutes, basically holds plaintiff to the bargain reached when he accepted the 998 offer made by defendants.
In Anderson v. Sullivan Motor Cars, LLC, Case No. B212091 (2d Dist., Div. 3 May 27, 2010) (unpublished), plaintiff sued under various consumer statutes and a car purchase agreement. Certain defendants made a 998 offer to rescind the contract, take back the vehicle, and pay plaintiff $27,000 conditioned upon a release of all defendants and plaintiff’s express waiver of “any claim for attorney’s fees or costs.” Plaintiff accepted the settlement, but then moved to recover attorney’s fees under various fee shifting statutes (the Rees-Levering Motor Vehicle Sales and Finance Act, the Consumer Legal Remedies Act [CLRA], and Civil Code section 1717). The trial court denied the motion on several grounds: (1) because the plaintiff filed a dismissal with prejudice, it lacked jurisdiction to rule on the motion; (2) the dismissal acted as a retraxit; (3) plaintiff was not a prevailing party under Code of Civil Procedure section 1032(a)(4); (4) plaintiff was not the prevailing party pursuant to Civil Code section 1717(b); (5) even if plaintiff were deemed the prevailing party, his acceptance of the 998 offer and execution of a general release waived his claim for fees; and (6) nothing in another consumer scheme prevented waiver of fees as part of a settlement with defendants.
Plaintiff appealed, but lost his attempts to recoup attorney’s fees.
First, the appellate court determined that the trial court did retain jurisdiction to award statutory attorney’s fees (Gorgri v. Jack in the Box Inc., 166 Cal.App.4th 255, 261 (2008)), but did not have jurisdiction to award fees under Civil Code section 1717 based on the voluntary dismissal with prejudice (Gorgri, supra, at p. 274.)
Most critically, plaintiff’s acceptance of the 998 offer with a fee waiver was binding in nature. A judgment entered pursuant to a 998 offer acceptance is regarded as a contract between the parties. The settlement offer was precisely drafted, so that the waiver was clear and enforceable.
Plaintiff argued that the anti-waiver section codified in the CLRA (Civil Code section 1751) rendered the 998 waiver unenforceable. Not so, said the Court of Appeal. This was not a pre-contract or contract formation waiver, but a waiver made as part of a settlement. The appellate court believed that a consumer is not prevented from waiving fees as a settlement component; otherwise, “no settlement would be possible[, something] that would contradict the well-established public policy in California that favors and encourages settlement of litigation.” (Slip Opn., p. 9.)
Finally, the appellate panel rejected plaintiff’s argument that he was the prevailing party under CLRA. The 998 waiver was binding, meaning that the prevailing party rules did not apply under circumstances where a plaintiff has waived the right to such fee recovery.