In Published Opinion, Severson & Werson Wins Appeal Over Right to Attorney Fees

(Last updated July 2, 2008)

Severson & Werson attorneys Ryan C. Donlon and Katherine A. Wadley argued successfully to have an order denying attorney fees upheld by the Fourth District Court of Appeal, Division One, in an opinion filed on June 18, 2008, Ford Motor Credit Company v. Hunsberger (Case No. D050473).

In dispute was the defendant’s claim to nearly $100,000 in attorney fees. Severson represented the plaintiff on appeal, a prominent automobile finance company, which had sued the defendant in his capacity as guarantor of a truck lease on which the lessee had defaulted. The defendant made the plaintiff an offer to compromise for no money under Code of Civil Procedure section 998, which the plaintiff did not accept. But upon learning the defendant was essentially judgment-proof, the plaintiff voluntarily dismissed the action before trial. The defendant guarantor then sought his attorney fees under section 998 on the basis that the plaintiff had not achieved a better result than it would have if it had accepted his offer. But because Civil Code section 1717(b)(2) bars the recovery of attorney fees when a contract action is voluntarily dismissed, the trial court denied his claim.

The issue on appeal was whether section 998 overrides section 1717(b)(2) and independently entitles the defendant to attorney fees where there is no contractual attorney fee clause in his favor. The Court of Appeal observed that there was no prior law establishing which statute prevailed. Severson persuaded the court that Code of Civil Procedure section 998 was not an independent fee-shifting statute and that section 1717(b)(2) was a bar to recovery of any contractually authorized fees. Due to the novelty of these legal issues, the court ordered the opinion published, establishing it as binding legal precedent.

Thanks also go to Mark J. Kenney and Scott J. Hyman for their able assistance.

A copy of the court’s opinion can be viewed here.