The Court of Appeals of California, Second District, recently upheld a trial court’s ruling reducing the amount of a plaintiff’s attorney’s fee award in a consumer litigation action to less than 40% of the amount sought by the plaintiff’s counsel.

A copy of the opinion in Morris v. Hyundai Motor America is available at: Link to Opinion. The opinion was later revised slightly and certified for publication: Link to Opinion.

A car buyer sued the manufacturer of a used car she purchased under California’s Song-Beverly Consumer Warranty Act, Civ. Code, § 1790 et seq., for alleged defects that the manufacturer refused to repurchase. The parties settled the litigation, with the manufacturer agreeing to pay the purchaser plaintiff $85,000 plus reasonable attorney fees and expenses.

The plaintiff purchaser moved for a fee award using the lodestar method that consisted of a $127,792.50 base amount with a 1.5 multiplier, for a total of $191,688.75. However, the trial court awarded only $73,864 in fees.

This appeal followed.

Just as with many consumer statutes that allow the successful consumer to recover attorney’s fees, in an action under California’s Song-Beverly Consumer Warranty Act, the prevailing buyer has the burden of “showing that the fees incurred were ‘allowable,’ were ‘reasonably necessary to the conduct of the litigation,’ and were ‘reasonable in amount’.”

The Appellate Court noted the extensive case law establishing that:

  • The “trial judge is the best judge of the value of professional services rendered in his [or her] court, and while his [or her] judgment is of course subject to review, it will not be disturbed unless the appellate court is convinced that it is clearly wrong.”
  • In addition, “the lodestar method vests the trial court with the discretion to decide which of the hours expended by the attorneys were ‘reasonably spent’ on the litigation, and to determine the hourly rates that should be used in the lodestar calculus.”
  • While the trial court has broad discretion to increase or reduce the proposed lodestar amount based on the various factors identified in case law, including the complexity of the case and the results achieved, the court’s analysis must begin with the ‘actual time expended, determined by the court to have been reasonably incurred.’”
  • “A trial court may not rubber stamp a request for attorney fees, but must determine the number of hours reasonably expended.”
  • In evaluating whether the attorney fee request is reasonable, the trial court should consider “‘whether the case was overstaffed, how much time the attorneys spent on particular claims, and whether the hours were reasonably expended.'”
  • “Reasonable compensation does not include compensation for ‘padding’ in the form of inefficient or duplicative efforts.”
  • “A reduced award might be fully justified by a general observation that an attorney overlitigated a case or submitted a padded bill or that the opposing party has stated valid objections.'”
  • “In making its calculation [of a reasonable hourly rate], the court may rely on its own knowledge and familiarity with the legal market, as well as the experience, skill, and reputation of the attorney requesting fees, the difficulty or complexity of the litigation to which that skill was applied, and affidavits from other attorneys regarding prevailing fees in the community and rate determinations in other cases.”

The Appellate Court also noted that “it is inappropriate and an abuse of a trial court’s discretion to tie an attorney fee award to the amount of the prevailing buyer/plaintiff’s damages or recovery in a Song-Beverly Act action.'” A “‘rule of proportionality’ would make it difficult for individuals with meritorious consumer rights claims to obtain redress from the courts when they cannot expect a large damages award.”

Pointing to various statements by the trial judge at the hearing on attorney’s fees, the plaintiff argued that the trial court engaged in a prohibited proportionality analysis in setting the attorney fee award.

However, the Appellate Court noted that “the trial court’s final written order in the instant case did not suggest in any respect that the court reduced the attorney fee award based on the size of the settlement award.”

Instead, the Appellate Court noted that the trial court’s order indicated a fee reduction was warranted because it was unreasonable to have six different lawyers from two different law firms for the plaintiff, “staffing a case that did not present complex or unique issues, did not involve discovery motions, and did not go to trial.” In addition, the trial court found the attorneys’ hourly rates of $500 per hour to over $600 per hour to be unreasonably high.

The plaintiff also argued that “the trial court arbitrarily cut 83.5 hours of reasonably incurred fees billed by six attorneys who worked on the case, citing concerns about inefficiencies and duplication,” but without referencing “any specific examples of inefficiencies or redundancies as a result of the number of attorneys staffing the case.”

The Appellate Court noted that “[a]n across-the-board reduction in hours claimed based on the percentage of total time entries that were flawed, without respect to the number of hours that were actually included in the flawed entries, is not a legitimate basis for determining a reasonable attorney fee award.”

Nevertheless, the Appellate Court noted that the trial court “made clear that its approach was designed to reduce the total award to the reasonable amount that would have been billed had there been an appropriate number of attorneys on the case. The court could properly have made an across-the-board reduction of 30 percent to accomplish the same purpose.”

Therefore, the Appellate Court rejected the plaintiff’s argument here as well, holding that “[p]lainly, it is appropriate for a trial court to reduce a fee award based on its reasonable determination that a routine, non-complex case was overstaffed to a degree that significant inefficiencies and inflated fees resulted.”

The plaintiff also argued the trial court improperly reduced the hourly rates of $500 to $650 per hour for her attorneys to $300 per hour, even though she “submitted ample evidence, which Defendant failed to rebut, that her counsel’s rates were reasonable and commensurate with other consumer attorneys’ rates.”

However, the Appellate Court again disagreed, noting that “even if Plaintiff established that her attorneys’ rates were generally commensurate with other consumer law attorneys with the same level of experience and skill, Plaintiff ignores that there are a number of factors that the trial court may have taken into consideration in determining that reductions in the attorneys’ hourly rates were warranted. The court reasonably could have reduced the rates based on its finding that the matter was not complex; that it did not go to trial; that the name partners were doing work that could have been done by lower-billing attorneys; and that all the attorneys were doing work that could have been done by paralegals.”

In sum, the Appellate Court held that the plaintiff failed to meet “her burden to show an abuse of discretion in the trial court’s reduction of the attorneys’ hourly rates.”

Therefore, the Appellate Court affirmed the trial court’s order awarding fees and costs, and also allowed the defendant manufacturer to recover its costs on appeal.