In Benson v. Southern California Auto Sales, Inc., 2015 WL 5047611 (Cal.App. 4 Dist., 2015), the California Court of Appeal found that a car dealer who lost at trial nevertheless was not responsible for $171k in attorneys’ fees incurred by Plaintiff because the dealer had offered full relief in response to the 30-day CLRA letter at the inception of the Action.  The facts were as follows:

Benson purchased a used Infiniti from SCAS on October 1, 2011. He alleged that he subsequently learned the car had a damaged frame. He also alleged the car’s price on the contract he signed was $1,496 higher than the advertised price ($24,995) and the contract falsely stated he did not make a deferred down payment, when he actually did.  Benson’s counsel sent SCAS two letters, both dated December 10, 2012. One letter, entitled “Notice of Violation of California Law, Including but not Limited to the Consumer Legal Remedies Act,” was written “to comply with California Civil Code [section] 1782(a).”2 Benson demanded rescission of the purchase contract, return of his car payments, a $5,000 penalty, and incidental damages in an unspecified amount. He offered to return the car to SCAS. The other letter, entitled “Companion Letter to CLRA Letter Notice of Rejection, Revocation and Rescission, Offer of Settlement of Entire Matter,” proposed a settlement on the following terms: SCAS pay the “damages” portion of the other letter (including investigative fees and attorney fees), pay all court costs, pay $38,500, and pay $2,850 to finalize the settlement and return the car. Benson for his part would return the vehicle and dismiss the entire case as to all parties. The CLRA, section 1782, subdivision (b), gives a merchant 30 days to respond to a demand for correction, but Benson did not wait for that response. He filed his complaint on January 2, 2013, less than 30 days after the date of the two demand letters, alleging 17 causes of action.3 He confined his CLRA cause of action to requests for injunctive relief.  On January 9, 2013, SCAS responded to the notice letter. While denying any wrongdoing, SCAS offered to settle the matter as follows: rescission of the contract, return of the vehicle to SCAS, refund of all car payments, satisfaction of the debt to the finance company, $2,500 for incidental and attorney fees, waiver of any claim for mileage, execution of a mutual settlement and release agreement. As SCAS noted, Benson had driven the car for well over a year before he complained, and he would be basically “walk[ing] away” from it, having had free use of it for that time.  Benson replied to SCAS’s offer by demanding a total of almost $30,000 to settle the case, in addition to rescinding the contract. Included in the total amount was a demand for $8,500 to settle “all remaining causes of action” in addition to the CLRA claim. The record contains no written response to this demand.  Benson filed his first amended complaint pursuant to stipulation on November 22, 2013, listing 10 causes of action. In addition to a CLRA violation, the complaint alleged violation of the Automobile Sales Finance Act (ASFA), unfair competition and false advertising claims, Vehicle Code violations, negligent and intentional misrepresentation, and violation of the Song–Beverly Consumer Warranty Act. This complaint sought damages for CLRA violations.  Trial was set for May 12, 2014, then continued to June 16. Benson, the finance company, SCAS, and SCAS’s owner, who had been sued as an individual, settled in early May. SCAS stipulated to a judgment in the amount of $34,500 against it “on the complaint.” The balance of the loan was waived, and Benson agreed to turn over the car. The settlement included Benson’s release of all three defendants.  The settlement/judgment allowed Benson to make a motion for attorney fees and costs—which he filed on May 21 against these three defendants—and allowed the settling defendants to contest the fee motion “on any grounds available to them.” In particular, the settlement agreement allowed the defendants to contend that they were the prevailing parties “in light of the pre-litigation offer per the CLRA.” Citing the CLRA and the ASFA as their basis, Benson’s counsel asked for $171,915 in fees and $10,358 in costs, for a total of $182,273.  The trial court denied the motion, explaining that Benson could not maintain a cause of action for damages under the CLRA because SCAS offered him “an appropriate correction, repair, replacement or other remedy” (§ 1782, subd. (b)) (collectively “appropriate correction”) back in January 2013. He was therefore not entitled to his fees or his costs. Benson protested that what SCAS had offered was not appropriate because it included a settlement and release of all his claims, not just his CLRA claim. The court responded that all of Benson’s claims were “inextricably intertwined with the CLRA claim and based on the same conduct.” The order denying the motion was entered on June 18, 2014.

The Court of Appeal found that the trial court properly denied Plaintiff’s counsel any attorneys’ fees.

Substantial evidence supports the court’s exercise of discretion in this case. The initial complaint was filed before the 30–day notice period had expired. Although the original complaint alleged several grounds for injunctive relief and the first amended complaint alleged several additional grounds, the judgment pursuant to settlement makes no mention whatsoever of any alteration in SCAS’s practices. It is concerned solely with who will pay how much to whom and with the motion for attorney fees. The judgment also provided for a waiver and release of all claims between Benson and the defendants.. . . We conclude that the trial court in this case did not abuse its discretion in deeming SCAS’s January 2013 offer of correction appropriate, thereby negating Benson’s ability to maintain a cause of action for damages under section 1782, subdivision (b). SCAS in effect offered to undo the entire transaction and to pay Benson (really his lawyers) a reasonable sum for assembling a couple of largely boilerplate letters. Filing a complaint before the response period expired was Benson’s (really his lawyers’) decision. Instituting the lawsuit could easily have waited until after SCAS made its correction offer. The fact that the lawsuit was filed before Benson heard back from SCAS strongly suggests that the correction offer, unless it was truly extravagant, would have had no effect on Benson’s (really his lawyers’) plan to sue. . . . Whether the settlement awarded Benson damages is, in light of our conclusion regarding the attorney fees as discussed in the next section, a moot point. We note here, however, that what Benson got was a judgment pursuant to a settlement.10 Nowhere is there any confession of liability by the settling defendants. Nowhere does the judgment provide that Benson was awarded damages under the CLRA or under any of the other causes of action. From all that appears in the record, the settlement figure could just as easily have reflected the defendants’ lower end estimate of what it would cost them in legal fees to try the case. “Damages under the CLRA are a legal remedy, intended to compensate those who suffer actual damage.” (Leatherman, supra, 135 Cal.App.4th at p. 695.) Nothing in the judgment indicated that Benson was being compensated for any actual damage, which compensation usually flows only one way. The settlement, however, required both Benson and the defendants to perform; he had to return the car and release his claims. (Cf. Reveles v. Toyota by the Bay (1997) 57 Cal.App.4th 1139, 1154, disapproved on other grounds in Gavaldon v. DaimlerChrysler Corp. (2004) 32 Cal.4th 1246, 1261 [plaintiff awarded attorney fees under CLRA and other statutes after evidentiary hearing in which trial court found him entitled to judgment on the merits].)   The written notice requirement is intended to forestall litigation, by requiring consumer and merchant to attempt to fix the problem before resorting to the courts. Precluding a merchant from obtaining an end to litigation that, in essence, consists of nine different versions of the same cause of action frustrates this intention. As Benson himself acknowledged, all his “causes of action arise from the same underlying ‘common core of facts.’ ” It would be sensible, then, to settle all causes of action as a unit. At least, it is not an abuse of discretion for the trial court to regard the correction offer in that light. The court did not abuse its discretion in deciding that the correction SCAS offered was appropriate.

The Court of Appeal found that the Plaintiff’s counsel had not demonstrated a right to attorneys’ fees under any other theory under the CLRA, either, public policy or not.

Section 1780, subdivision (a), sets out the remedies available to a consumer who has suffered damage as a result of an act declared unlawful in section 1770. These are (1) actual damages, (2) injunctive relief, (3) restitution of property, (4) punitive damages, and (5) any other relief the court deems proper. Section 1780, subdivision (e), requires an award of court costs and attorney fees to a “prevailing plaintiff in litigation filed pursuant to this section.” (Italics added.) We review the legal basis for an award of attorney fees de novo. (Kim v. Euromotors West/The Auto Gallery (2007) 149 Cal.App.4th 170, 176; Corbett, supra, 119 Cal.App.4th at p. 921.) We conclude that if a suit for damages cannot be maintained under the CLRA because a merchant offered an appropriate correction in response to a consumer’s notice, then a plaintiff cannot collect attorney fees for such a suit.11 We interpret section 1782 to create a requirement analogous to exhaustion of administrative remedies (see, e.g., Gov.Code, §§ 12960, subd. (b), 12965, subd. (b)), or to a demand on the board of directors before filing a shareholder’s derivative suit (see Corp.Code, § 800, subd. (b)), or notification of a local public entity of a plaintiff’s intent to sue for money or damages. (See Gov.Code, § 905; see also Vasquez v. State of California (2008) 45 Cal.4th 243, 252 [similar statutes].) In all of these instances, a lawsuit cannot go forward until the potential plaintiff has received a response to a notice or the time for responding has expired. If the deficiency is caught early enough, it can result in a dismissal on demurrer. (See Myers v. Mobil Oil Corp. (1985) 172 Cal.App.3d 1059, 1063 [administrative remedies]; Charter Township of Clinton Police & Fire Retirement System v. Martin (2013) 219 Cal.App.4th 924, 928–929 [demand or demand futility]; Lewis v. City and County of San Francisco (1971) 21 Cal.App.3d 339, 340 [notification of tort claim against public entity]; see also Kagan v. Gibralter Sav. & Loan Assn. (1984) 35 Cal.3d 582, 590, overruled on other grounds in Meyer v. Sprint Spectrum L.P. (2009) 45 Cal.4th 634 [CLRA action for damages will not lie if prospective defendant corrects wrongs].) If the plaintiff sues without fulfilling this requirement, the lawsuits are fatally defective from the beginning. It follows, then, that the plaintiff should not be able to make the defendants pay his or her attorneys for filing and maintaining such a suit. Attorney fees are not recoverable in actions for damages under the CLRA unless the response to the notice letter is not an appropriate one or no response is forthcoming within the statutory time period.  Benson asserts that the CLRA is meant to protect consumers and awarding attorney fees in cases such as his promotes this purpose. But the legislation actually has two purposes. Protecting consumers is one; providing efficient and economical procedures to secure such protection is the other. It is neither efficient nor economical to engage in protracted litigation and to run up attorney fees when an appropriate correction has been offered at the very outset. As the trial court stated, “I don’t think it’s the purpose of the [CLRA] to have lawyers receive a windfall when they make such claims and the defendant—or potential defendant has an opportunity within 30 days to cure to avoid the result of being beset with large attorney fee costs.”  To the extent that Benson’s suit was one for damages, it should not have been filed after SCAS offered an appropriate correction, and he cannot require the defendants to pay attorney fees for a suit to obtain damages. In the absence of any briefing or argument on the issue, we do not here address the requirements for an attorney fee award based on a request for injunctive relief. (See §§ 1780, subd. (a), 1782, subd. (d).)