Madrigal v. Hyundai Motor America

Oscar and Audrey Madrigal (plaintiffs) purchased a car from Hyundai Motor America (Hyundai) (defendant) for approximately $24,173. When the car proved a lemon, the Madrigals asked Hyundai to buy it back under California’s Song-Beverly Consumer Warranty Act. When Hyundai refused, the Madrigals sued Hyundai for violating the act. Within two months, Hyundai made a settlement offer, offering to pay either the car’s purchase price plus expenses or $37,396. When the Madrigals did not accept the offer within 30 days, it was statutorily deemed withdrawn. Six months later, Hyundai made a second settlement offer, offering to pay either the car’s purchase price plus expenses or $55,556. Again, the Madrigals failed to respond, and the offer was deemed withdrawn. Eighteen months later, on the day trial was scheduled to begin, the parties reached a settlement agreement under which Hyundai agreed to pay the Madrigals $39,000. It allowed the Madrigals to seek costs and attorney’s fees by motion. The Madrigals moved to recover approximately $207,439 in attorney’s fees and $20,866 in costs. Hyundai moved to strike the claimed fees and costs, arguing that, under California Code of Civil Procedure § 998, the Madrigals were not entitled to recover fees and costs incurred after the second settlement offer because they ultimately settled for a less favorable amount. The court rejected Hyundai’s argument, concluding that § 998 applied only if a nonsettling party obtained a less favorable judgment at trial. The court awarded the Madrigals approximately $84,743 in attorney’s fees and $17,681 in costs. The court of appeals reversed, finding § 998 did apply. The Madrigals appealed.