California Court Of Appeal Holds Plaintiff’s Rejection Of Settlement Requiring Waiver Of Claims Is Reasonable In Goglin v. BMW of North America, LLC (2016) 4 Cal.App.5th 462

By: Gregory K. Sabo and Chelsea L. Zwart
May 25, 2017

In Goglin v. BMW of North America, LLC (2016) 4 Cal.App.5th 462, the Fourth District California Court of Appeal held that a plaintiff’s rejection of a pre-litigation offer including extraneous non-financial terms is reasonable and therefore does not preclude the plaintiff from recovering attorneys’ fees under California’s Song-Beverly Consumer Warranty Act (California Civil Code §§1790 et seq.) upon prevailing in the action.

Prior to initiating litigation in Goglin, the plaintiff notified BMW of her claims, asserting the dealer violated the Consumer’s Legal Remedies Act (“CLRA”) by selling her a used vehicle with undisclosed prior collision damage and an extensive history of mechanical failure. To resolve the issue, BMW offered to repurchase the vehicle, pay off her loan, and reimburse her for the down payment and loan payments made less an offset for depreciation and reimburse her for reasonable attorneys’ fees. The offer was contingent upon the plaintiff signing a settlement and release agreement including terms for a general release, waiver of California Civil Code §1542, dismissal with prejudice of any lawsuit she may have filed against BMW, and a confidentiality and nondisparagement clause.

The plaintiff indicated she would accept BMW’s agreement as to the buyback and payoffs, but she would not sign the proposed settlement and release agreement, stating the applicable consumer protection laws “do not require that consumers waive their rights in order to have a dealer comply with statutory obligations.”

The plaintiff eventually filed a complaint against BMW for various violations of California’s consumer protection acts.  Throughout the litigation, BMW repeatedly offered to settle the matter.  However, the plaintiff refused each offer, consistently stating that she was not required to waive her rights and that while she would dismiss some of her claims, she intended to move forward with others, including those for civil penalties against BMW.

Ultimately, the parties settled the matter.  The terms of the settlement provided for a buyback of the vehicle, payoff and reimbursement for the plaintiff’s loan related thereto, and attorneys’ fees to be separately negotiated or resolved by a noticed motion.  In return, the plaintiff agreed to dismiss the entire action with prejudice.  However, the settlement expressly did not require her to sign a settlement agreement or release of any kind.

Approximately six months later, the plaintiff filed a motion for an award of $200,000 in attorneys’ fees and costs, which was supported by billing statements from her counsel.  BMW opposed the motion, arguing that any time spent on litigation-related activities was unnecessary and unreasonable because it had offered to settle the matter, including reimbursing the plaintiff for everything she was owed, prior to her initiating litigation and repeatedly thereafter.

The California Court of Appeal upheld the trial court’s order granting the plaintiff $185,000 in attorneys’ fees and costs, holding that the plaintiff’s repeated and consistent objection to the broad release of claims and confidentiality clause in BMW’s proposed settlement agreement and release was not unreasonable, especially given that the final settlement expressly did not include these unfavorable terms.  Moreover, the Court reasoned that since none of BMW’s settlement offers admitted liability, the plaintiff’s counsel was required to litigate the case until it was settled, irrespective of the fact that the terms of the settlement ultimately resulted in the buyback, reimbursement, and payoff included in BMW’s initial settlement offer.

Goglin stresses the importance of settling matters involving violations of consumer protection laws early.  Dealerships should carefully evaluate whether they can live without certain settlement terms for the sake of resolving the dispute to avoid the risk of seemingly inflated or unnecessary attorneys’ fees later being awarded to the plaintiff.

Chelsea L. Zwart
Ms. Zwart is an Associate at Chapman Glucksman Dean Roeb & Barger.

About the author

Gregory K. Sabo

Mr. Sabo is a Partner at Chapman Glucksman Dean Roeb & Barger.

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