Tentative Ruling

Judge James F. Rigali
Department 2 SM-Cook
312-C East Cook Street P.O. Box 5369 Santa Maria, CA 93456-5369

CIVIL LAW & MOTION
Everling v. Ford Motor Company
Case No: 17CV01696
Hearing Date: Tue Jan 28, 2020 8:30

Nature of Proceedings: Motion for Determination of Attorney Fees and Costs

On April 18, 2017, plaintiff Kathryn Everling (“plaintiff”) filed her complaint for violations of the Song-Beverly Act and fraud against defendants Ford Motor Company (“defendant”) related to defects in her 2013 Ford Focus. On September 17, 2017, plaintiff filed a Notice of Settlement of Entire Case, which provided for payment of $99,000.00 to plaintiff and the following:

“Ford will additionally pay Plaintiff’s attorneys’ fees, expenses and costs in the amount of $5,000.00 or, should the $5,000.00 be refused, Ford is willing to allow the Court to determine, based on a noticed motion filed pursuant to Civil Code section 1794(d), the amount of attorneys’ fees, expenses and costs reasonably incurred by Plaintiff s counsel in the commencement and prosecution of this action, as provided by Civil Code section 1794(d). In ruling on Plaintiff’s fee motion, and except as otherwise provided in this paragraph, the fees, expenses and costs amount shall be calculated as if Plaintiff was found to have prevailed in an action under section 1794 (d) as of the date of this statutory offer except that Plaintiff may recover for fees and costs reasonably and actually incurred in bringing such a fee/cost motion. Ford will pay the attorney’s fees and cost amounts determined by the Court within 30 days’ notice of the Court’s ruling on same.”

(Defendant Ford Motor Company’s Statutory Offer to Compromise, Mikhov Decl., Exh. D.)

On December 27, 2019, plaintiff filed a Motion for Attorney’s Fees, Costs, and Expenses in the sum of $21,729.65 as follows:

Fees: $13,847.50

Enhancement: $ 6,923.75

Costs: $ 958.40

Opposition was filed on January 14, 2020 and reply was filed on January 21, 2020.

1. Legal Background

The right to recover costs exists solely by virtue of statute. (Murillo v. Fleetwood Enterprises, Inc. (1998) 17 Cal.4th 985, at p. 989.) Code of Civil Procedure “[s]ection 1032 is the fundamental authority for awarding costs in civil actions. It establishes the general rule that ‘[e]xcept as otherwise expressly provided by statute, a prevailing party is entitled as a matter of right to recover costs in any action or proceeding.’ ” (Scott Co. v. Blount, Inc. (1999) 20 Cal.4th 1103, 1108.) Code of Civil Procedure section 1033.5 “specifies the ‘items … allowable as costs under Section 1032.’ ” (Scott Co. v. Blount, Inc, supra, at p. 1108.) Costs include “Attorney fees, when authorized by any of the following: [¶] (A) Contract. [¶] (B) Statute. [¶] (C) Law.” (Code Civ. Proc., § 1033.5, subd. (a)(10).)

Here, the applicable attorney fee statute that triggers application of sections 1032 and 1033.5 is Civil Code section 1794, subdivision (d), which states: “If the buyer prevails in an action under this section [Song–Beverly Act], the buyer shall be allowed by the court to recover as part of the judgment a sum equal to the aggregate amount of costs and expenses, including attorney’s fees based on actual time expended, determined by the court to have been reasonably incurred by the buyer in connection with the commencement and prosecution of such action.”

2.Objections to Evidence

The court sustains plaintiff’s Objection No. 8, to the declaration of Matthew Proudfood, ¶ 11: “If such terms are applicable here, KLG may already have recovered their share of the settlement — Ford paid roughly $27,842.87 to refund Plaintiff for the price paid for the vehicle, plus an additional $71,157.13, of which 45% would constitute $32.020.70 for KLG. For KLG to have been paid $32,020.70 and potentially more, by way of this motion, would mean double recovery.”

This is speculative and irrelevant to this action as there is no evidence that the Fee Agreement on which the calculation is based is applicable in this matter. (See below.)

The remaining objections are overruled.

3. Timeliness of Motion

A notice of motion to claim attorney’s fees for services up to and including the rendition of judgment in the trial court must be served and filed within the time for filing a notice of appeal, e.g., within 60 days after service of “Notice of Entry” of judgment or 180 days after entry of judgment. (Cal. Rule of Court, rule 3.1702.)

Upon settlement, it is plaintiff’s duty to serve and file a request for entry of dismissal. (See Cal. Rule of Court, rule 3.1385.) A voluntary dismissal is a “judgment” within the meaning of the above rule. Thus, where an action is voluntarily dismissed prior to trial, the time limit for an attorney fees motion is 60 days after notice of entry of the dismissal. (Sanabria v. Embrey (2001) 92 Cal.App.4th 422; but see Exxess Electronixx v. Heger Realty Corp. (1998) 64 Cal.App.4th 698, 706—dictum suggesting CRC 3.1702(b) not applicable to voluntary dismissals, hence no time limit on motion for fees.)

Here, Plaintiff represented that a request for dismissal would be filed no later than November 30, 2017. (See September 1, 2017 Notice of Settlement, ¶ 1b.) But no dismissal was ever filed. This dereliction of duty inures to plaintiff’s benefit in that the time limit for filing this motion for attorney’s fees was arguably never triggered.[1] Moreover, defendant has suggested no prejudice from the resulting delay.

4. Impact of Contingency Fees

Defendant argues that the court should refuse to award any statutory attorney fees because the plaintiff’s attorneys were compensated out of the settlement proceeds pursuant to a contingency fee agreement. (See Motion, p. 1:23-23—“Plaintiff hired the Knight Law Group . . . on a contingency basis to assist in vindicating her rights.”) Moreover, defendant argues that plaintiff’s counsel may be violating ethical rules with their Fee Agreement. In support of this argument, it attaches an “exemplar Fee Agreement” obtained from Samantha Rusk v. Ford Motor Company filed in San Francisco Superior Court Case no. CGC-17-559594. The terms of the Fee Agreement allow plaintiff’s attorney to retain 45% of “additional damages” as well as all “Manufacturer-Paid Fees and Costs.” (Proudfoot Decl. filed 1/14/20, Exh. H.) According to defendant, this amounts to a double recovery from plaintiff’s counsel, receiving fees under a contingency agreement and statutory fees.

Defendant argues that plaintiff’s attorney is not permitted to recover both a contractual contingency fee and a statutory fee based on the following case:

“The trial court appears to be saying that the availability of contingency fees from the plaintiff displaced the considerations of contingency and delay that are required to be factored into a fee award to make it “reasonable “ under the standards reviewed in Ketchum v. Moses . . . Yet, as respondent acknowledges, plaintiffs’ counsel are not permitted to take contractual fees in addition to statutory fees: If the contingency fee is larger than the statutory fee award, counsel is permitted to accept that fee, with a setoff for statutory fees received. If the contingency fee is smaller than the statutory fee, counsel must reimburse the plaintiff from the statutory award for any amounts already paid by the client pursuant to the contingency contract. (See Blanchard v. Bergeron, supra, 489 U.S. at p. 93, 109 S.Ct. 939; Flannery v. Prentice, supra, 26 Cal.4th at p. 577, 110 Cal.Rptr.2d 809, 28 P.3d 860.)”

(Horsford v. Board of Trustees of California State University (2005) 132 Cal.App.4th 359, 401 [emphasis in original].)

The appellate court held that “to dispose the contingency and delay considerations factors from the fee calculus [in determining if the lodestar must be adjusted], and replace those considerations with hypothetical fees that counsel are prohibited from obtaining, is an abuse of the court’s discretion to determine reasonable attorney’s fees under Government Code section 12965, subdivision (b).)” (Id.)

It’s important to recognize that this holding analyzes the trial court’s treatment of a factor in the lodestar calculation. If there is any prohibition on collection (or offset) of statutory fees in the event of a contractual contingency fee agreement, it would be found in the cases cited by the Horsford court. Flannery v. Prentice (2001) 26 Cal.4th 572, 577, holds “any proceeds of a section 12965 fee award exceeding fees the client already has paid belong, absent a contractual agreement validly disposing of them, to the attorneys for whose work they are awarded.” Blanchard v. Bergeron (1989) 489 US 87, 94-95, has since been refined by the US Supreme Court in Venegas v. Mitchell (1990) 495 U.S. 82:

“But neither Blanchard nor any other of our cases has indicated that § 1988, by its own force, protects plaintiffs from having to pay what they have contracted to pay, even though their contractual liability is greater than the statutory award that they may collect from losing opponents. Indeed, depriving plaintiffs of the option of promising to pay more than the statutory fee if that is necessary to secure counsel of their choice would not further § 1988’s general purpose of enabling such plaintiffs in civil rights cases to secure competent counsel.

In sum, § 1988 controls what the losing defendant must pay, not what the prevailing plaintiff must pay his lawyer. What a plaintiff may be bound to pay and what an attorney is free to collect under a fee agreement are not necessarily measured by the “reasonable attorney’s fee” that a defendant must pay pursuant to a court order. Section 1988 itself does not interfere with the enforceability of a contingent-fee contract.”

(Venegas v. Mitchell (1990) 495 U.S. 82, 89–90; see also Pickett v. Sheridan Health Care Center (7th Cir. 2011) 664 F.3d 632—abuse of discretion for trial court to consider a contingency agreement when applying the lodestar for statutory fees.)

In any event, the court need not resolve this issue. There is no evidence that Exhibit H contains the same terms as the contractual arrangement that was signed in this action and the court will not infer that it does. Nor will the court infer that plaintiff’s counsel is in breach of any ethical obligations in the manner in which it handles its fees.

Finally, in the instant settlement agreement, defendant expressly agreed to pay statutory fees. The court will not entertain any argument now that plaintiff’s attorney has already been compensated by a contingency fee.

5. Lodestar Calculation

The calculation of reasonable attorney’s fees under the Song-Beverly Act is based on the lodestar method, which entails multiplying the number of hours reasonably expended by a reasonable hourly rate. (Robertson v. Fleetwood Travel Trailers of California, Inc. (2006) 144 Cal.App.4th 785, 817; Graciano v. Robinson Ford Sales (2006) 144 Cal.App.4th 140, 154.)

a. Hourly Rates

The hourly rates charged by the Knight Law Group range from $350/hour – $550/hour as follows:

Steve Mikhov $550/hour

Amy Morse $350/hour (admitted 2013)

Kristina Stephenson-Cheang $375/hour (admitted 2008)

Chris Swanson $375/hour (admitted 2011)

Hadi Gerami $350/hour (admitted 2002)

Of the 37 hours billed, 27 hours were billed for services performed by associates billing at $350/hour. Based on this record, the court finds the hourly rates to be reasonable.

Plaintiff’s counsel, Steve Mikhov, states: “All time billing entries were completed contemporaneously with each dated entry or near in time to the work performed.” (Mikhov Decl., ¶ 45.) Defendant nevertheless suggests that given the delay in filing this motion, plaintiff’s attorney has retroactively increased their hourly rates to present day rates rather than bill at the rates in effect in 2016-2017 when services were rendered. Defendant has produced a declaration signed by Mr. Mikhov on June 27, 2018 in support of his fee request in a case titled Marin v. Ford Motor Company (BC617691, Los Angeles County). (Proudfoot Decl., ¶12, Exh. I.) In that declaration, Mr. Mikhov states that he billed at a rate of $500/hour and that Kristina Stephenson-Cheang billed at an hourly rate of $350. (Proudfoot Decl., Exh. I, ¶¶ 40-41.)[2] This evidence doesn’t necessitate the conclusion that Mr. Mikhov is lying, mistaken, or incorrect about the reported billing rates because the evidence is equally consistent with a finding that Mr. Mikhov negotiated a different hourly rate with different clients.

b. Number of Hours Reasonably Expended—Allocation

Defendant argues that fees must be allocated citing Akins v. Enterprise Rent-A-Car Co. of San Francisco (2000) 79 Cal.App.4th 1127, 1133. That case states: “When a cause of action for which attorney fees are provided by statute is joined with other causes of action for which attorney fees are not permitted, the prevailing party may recover only on the statutory cause of action.”

The Akins case also states: “However, the joinder of causes of action should not dilute the right to attorney fees. Such fees need not be apportioned when incurred for representation of an issue common to both a cause of action for which fees are permitted and one for which they are not. All expenses incurred on the common issues qualify for an award. When the liability issues are so interrelated that it would have been impossible to separate them into claims for which attorney fees are properly awarded and claims for which they are not, then allocation is not required.” (Id. [citations omitted].)

Here, the complaint included two statutory causes of action based on breach of the warranty related to a transmission defect and three causes of action based on fraud for misrepresenting and concealing the transmission defect. Defendant demurred, challenging only the three fraud causes of action, on the basis that plaintiff failed state facts sufficient to constitute a cause of action. Defendant thus proposes that the court strike $1,435 in attorney’s fees for services rendered in opposition to the demurrer to the complaint since these services were not on the statutory cause of action.

Plaintiff argues that the fees need not be apportioned because they were incurred in representation for an issue common to both causes of action. Here, plaintiff suggests that civil penalties under Song-Beverly requires “bad intent,” just as punitive damages requires and that consequently the fees are justified since the causes of action “share a common thread.” The court finds this argument unconvincing. Opposition to the demurrer was based on the sufficiency of pleading the elements of the fraud claims, not the intent necessary for either the civil penalties or punitive damages. Allocation is appropriate. The court will not award the fees for services rendered in opposition to the demurrer to the complaint and will thus reduce any award by $1,435.00.

6. Whether Multiplier Warranted

Plaintiff argues that the lodestar should be adjusted in this case. The lodestar may be adjusted based on the following factors: (1) the novelty and difficulty of the questions involved, (2) the skill displayed in presenting them, (3) the extent to which the nature of the litigation precluded other employment by the attorneys, (4) the contingent nature of the fee award. (Graham v. DaimlerChrysler Corp. (2004) 34 Cal.4th 553, 579.) She asks for a multiplier of 0.5.

“The purpose of such adjustment is to fix a fee at the fair market value for the particular action.” (Ketchum v. Moses (2001) 24 Cal.4th 1122, 1132; see Weeks v. Baker & McKenzie (1998) 63 Cal.App.4th 1128, 1171–1172.) Adjustment may be made upward or downward depending on the court’s assessment of the fair market value for the particular action at issue.” (PLCM Group v. Drexler (2000) 22 Cal.4th 1084, 1095–1096.) On the other hand, if the trial court finds that the lodestar is less than a reasonable amount, enhancement is justified. (Ketchum, at p. 1132.)

Defendant argues that the case involved no novelty and no special skill while plaintiff focuses on the risk and delay in payment associated with a contingent fee scenario.

Attorney Mikhov’s declaration suggests that he is very experienced and skilled in this field. But that does not mean this case presented any particular matter requiring demonstration of any particular skill and nothing in this record suggests that it did. Nor do plaintiffs identify any novel or difficult question that required resolution in this case. Plaintiff’s attorneys filed and defended a complaint, drafted and reviewed discovery, and attended case management conferences. None of this suggests that any of the events were novel or legally difficult. There is no significant showing of the contingent nature of the fee award or the extent to which the nature of the litigation precluded other employment by the attorneys. In any event, plaintiff’s attorney had the ability to bring this motion much sooner, but waited two years. Any delay falls squarely on plaintiff’s attorney’s shoulders.

Based on the present record, the court denies the request to apply a multiplier.

The court similarly denies defendants’ request to apply a negative multiplier. Defendants assert “this court should apply a downward lodestar adjustment to reach a fee award that reflects the actual number of fees that were reasonably incurred in obtaining the settlement that was reached.” (Opposition, p. 10.) No evidence how to effectuate that was presented. The court declines to pick up the laboring oar on this point.

7. Conclusion

The motion for attorney fees is granted in the amount of $ 12,412.50 ($13,847.50 – $1,435).

Costs were unchallenged and the court accordingly grants the request to fix costs in the amount of $958.40.

Pursuant to California Rules of Court, 3.1308 (a)(1) and Santa Barbara County Superior Court Local Rule 1301(b), the court does not require a hearing; oral argument will be permitted only if a party notifies all other parties and the court by 4:00 p.m. (Department 2) the day before the hearing of the party’s intention to appear. This tentative ruling will become the ruling of the court if notice of intent to appear has not been given. If no hearing is held, plaintiff is directed to provide a proposed order and judgment for signature commensurate with this tentative, with appropriate notice to defendant pursuant to California Rules of Court rule 3.1312, which will then be entered by the court.

[1] Plaintiff’s counsel represents that he historically settled the matter of attorney’s fees, costs, and expenses without court involvement. However, Ford allegedly changed its practices in mid-2016 and the parties could no longer reach resolution without court order. In August 2017, Ford reportedly expressly stated it was no longer interested in talking about attorney fees and costs.

[2] This results in an overall difference of $175 in the services billed by Mr. Mikhov (3.5 hours x $50) and $150 in the services billed by Ms. Stephenson-Cheang (6 hours x $25).