Warren v. Kia Motors America, Inc.

Another cautionary tale for California auto dealers

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In this December 12, 2018, ruling the Court of Appeal again reminded those involved in the sale of automobiles to consumers of the expense of litigation.

In January 2011, Shirlean Warren (Warren) purchased a 2010 Kia Forte for a total sale price including the cost of financing for $25,737.45. At 26,600 miles and less than 12 months since her purchase, Warren began experiencing “problems” with the vehicle. Warren took the vehicle to a Kia-authorized repair facility a total of 14 times, and when her concerns couldn’t be fixed, she traded it in and purchased a 2013 Kia Forte. Shortly after the trade, she retained counsel and requested a buyback of the 2010 Forte pursuant to California’s Song-Beverly Consumer Warranty Act. Before filing suit in October 2014, Warren’s attorneys offered to settle the case, but Kia rejected the offer. Accordingly, Warren filed her complaint alleging Kia violated the Song-Beverly Act­ by failing to adequately service and repair defects and nonconformities, including suspension, electrical, interior, and brakes defects and further alleging Kia failed to conform the vehicle to its express warranties despite a reasonable number of repair attempts.

Ultimately, the parties were unable to resolve the dispute and an 8-day jury trial was conducted in the summer of 2016. The jury found that the subject vehicle had defects which substantially impaired its use, value, or safety and which Kia failed to repair after a reasonable number of attempts or opportunities. On August 4, 2016, the jury returned a special verdict and awarded Warren total damages of $17,455.57. Although the jury found that Kia had willfully failed to repurchase or replace the subject vehicle, the jury did not award a civil penalty. The judgment was entered on September 9, 2016, and indicated that the amount of Warren’s attorney fees, costs, and expenses would be awarded pursuant to noticed motions.

Warren timely filed a motion for attorney fees, seeking $351,055.26 in lodestar fees (the number of attorney hours worked times the attorneys’ hourly rates), plus a lodestar multiplier of 1.5, for a total of $526,582.89 for fees and costs. In her motion, Warren argued that the nature and complexity of her case, the skills of her attorneys, and her contingency fee arrangements with her attorneys warranted all of the requested fees. She also argued that Kia had engaged in ‘aggressive’ and ‘scorched earth’ litigation tactics, necessitating many of the requested lodestar fees. In its opposition, Kia claimed the hours and rates charged by three law firms retained to represent her were excessive, “given that this was a ‘simple lemon law case.” According to Kia, this was a “classic case of excessive billing due to staffing a case with too many attorneys resulting in duplicative, inefficient work.” Kia requested that the court limit the attorney fee award to a total sum of $180,000.

Following a hearing on Warren’s attorney fees and costs, the trial court awarded Warren $115,848.24 in attorney fees and $24,436.65 in costs, noting there was a disconnect between the verdict amount and the requested attorney fees. The court stated it believed its award of attorney fees was “generous.” Warren appealed the trial court’s ruling with respect to her attorney fees and costs.

On appeal, Warren argued that the trial court abused its discretion by tying the attorney fee award to a proportion of the prevailing buyer’s damages. The Court of Appeal agreed, finding that the trial court erred when it selected a negative multiplier to make the fee award roughly proportionate to Warren’s modest damages award, and remanded the case back to the Superior Court to reassess Warren’s claim for attorney fees.

The Warren case is yet another cautionary tale for auto dealers in California. The majority of lawsuits brought against auto dealers by consumers assert causes of action based on California statutes that include mandatory fee-shifting provisions, like Warren’s Song-Beverly Act claim. This case clearly demonstrates how expensive disputes involving relatively low priced vehicles can become, and lead to attorneys fee awards that are many times the amount of recoverable damages.

On a related note, this may be a good time to review your insurance coverage with your broker to ensure that your dealership is properly protected in consumer claims.

Warren v. Kia Motors America, Inc. (2018) – Cal.Rptr.3d – , 2018 WL 6520889.