Court of Appeals Sides With Defense in Consumers Legal Remedies Act Case

June 24, 2010

Michael B. Lawler and James S. Williams successfully argued against a motion for attorney fees through California's Consumers Legal Remedies Act (“CLRA”) in the Appellate Court.  The CLRA is a consumer-protection law that prohibits deceptive sales practices such as false advertising, misrepresentations regarding the nature of goods sold, and inclusion of unconscionable terms in sales contracts. The Act provides for “prevailing plaintiff” attorney fees in litigation. To ensure that consumers do not bargain away protections of the CLRA, the Act expressly provides – without exception: “Any waiver by a consumer of the provisions of this title is contrary to public policy and shall be unenforceable and void.”

Plaintiff, the purchaser of a car, sued the car dealer and the finance company under the CLRA, claiming that misrepresentations had been made with respect to the terms of the transaction and that there were errors in the sales contract. Defendants made a settlement offer under Code of Civil Procedure section 998 pursuant to which the plaintiff was to waive “any claim to attorneys’ fees or costs.” Plaintiff accepted the 998 offer and then, despite the attorney-fee waiver provision, made a motion for $270,000 in attorney fees, claiming to be the “prevailing plaintiff” because he obtained a net recovery in the settlement. Plaintiff asserted that the above-quoted provision of the CLRA rendered the attorney-fee waiver void. The court denied plaintiff’s attorney-fee motion, and plaintiff appealed.

On appeal, the plaintiff again claimed to be the “prevailing plaintiff”and again argued that the attorney-fee waiver was void under the CLRA. Defendants argued that plaintiff’s receipt of positive relief in settlement did not render him the “prevailing plaintiff” and contended that the anti-waiver provision of the CLRA, despite the absence of any stated exceptions, was never intended to apply to agreements to resolve litigation. Ultimately the Court of Appeal sided with defendants, holding that the 998 settlement offer was “precisely drafted” with respect to the attorney-fee waiver and that plaintiff’s acceptance of that offer bound him to the waiver. The appellate justices agreed that the anti-waiver provision was not intended to apply to settlement agreements.