In Goglin v. BMW of North America LLC (No. D068442, filed October 21, 2016), a California appeals court held that a consumer was properly entitled to attorneys fees and costs under the Song-Beverly Consumer Warranty Act (“Song-Beverly Act” commonly referred to as California’s “Lemon Law”) in connection with the purchase of a used BMW vehicle. BMW argued the consumer was not entitled to her attorneys fees and costs because it had offered to settle the matter before she filed her complaint, and thus any time spent in litigation-related activities was unnecessary and unreasonable. The court held, however, that BMW’s prelitigation settlement offer, which included a broad release of claims and a confidentiality clause, was not only unreasonable, but it was unlawful as to the consumer’s Song-Beverly act claims.
In Goglin, the plaintiff bought a used BMW from BMW San Diego. After the purchase, plaintiff sent BMW North America and BMW San Diego (collectively, “BMW”) a letter claiming it had violated the Consumer Legal Remedies Act (“CLRA”) by selling her a used vehicle with undisclosed prior collision damage and other issues. Plaintiff demanded that BMW cancel the transaction, refund her payments and provide her other remedies.
BMW agreed to repurchase the vehicle, reimburse plaintiff for all costs incurred and pay her reasonable attorneys fees. The offer was contingent on plaintiff agreeing to a general release which included dismissing BMW with prejudice from any lawsuit she may have filed, a waiver of all known and unknown claims and a confidentiality clause. Plaintiff refused to sign the settlement agreement commenting that the consumer protection laws “[did] not require consumers to waive their rights in order to have a dealer comply with statutory obligations.”
The parties did not engage in any further prelitigation settlement discussions. Plaintiff filed a complaint against BMW for violating the Song-Beverly Act, the CLRA and other consumer protection laws. The parties ultimately settled, with BMW agreeing to pay plaintiff $75,000 and to pay her reasonable attorneys fees and costs pursuant to the outcome of plaintiff’s motion to recover such fees and costs. Plaintiff was not required to sign any settlement agreement or release of any kind.
Pursuant to BMW’s agreement to pay her attorneys fees and costs, plaintiff filed a motion for an award of $200,249.19 in attorneys fees and costs. BMW opposed the motion arguing it was not liable for any litigation-related expenses because BMW had agreed to settle the matter before plaintiff filed the complaint, and that the amount sought was unreasonable. The trial court granted plaintiff’s motion and awarded her almost the entirety of the requested amount, for an award of $185,214.19.
The Court of Appeal affirmed the trial court’s ruling. The Goglin court first acknowledged the propriety of seeking attorneys fees under the Song-Beverly Act. In determining the reasonableness of the claimed fee, the court assessed the complexity of the case, the skill showcased and the results garnered. The prevailing buyer has the burden of proving that the fees were reasonably necessary for the litigation.
The Goglin court was not swayed by BMW’s arguments that plaintiff’s fees were unreasonable due to the prelitigation settlement offer that had been made. This argument ignored the objectionable aspects of the offer, including the broad release of claims and the confidentiality clause. The court held that “[r]ejecting the prelitigation settlement because of these unfavorable extraneous terms was not unreasonable.” Moreover, including such terms in settlement of a Song-Beverly Act claim was prohibited by the statute, further evidencing the reasonableness of plaintiff’s initial refusal to settle the claim. Therefore, the Goglin court affirmed the $185,214.19 award to plaintiff.
Goglin should serve as a refresher for attorneys negotiating the settlement of a lemon law claim under the Song-Beverly Act. Attorneys should be mindful of including broad releases, including Civil Code section 1542 waivers and confidentiality clauses, in the settlement agreement, especially where plaintiffs’ counsel are permitted to recover their attorneys fees in the case of a prevailing consumer.
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