California provides strong legal safeguards for victims of financial elder abuse, including the ability to recover the legal fees incurred in protecting them. But what happens when the claims of financial elder abuse are unfounded?

That was the issue at the core of a recent case decided by the California Court of Appeal (Gamo v Merrell).

Tirso Gamo was 81 years old when he purchased a Maserati automobile from J Star Auto Group, an Orange County automobile dealership led by Jared Merrell.

In a lawsuit filed in Orange County Superior Court, Gamo claimed that the dealership had told him they would credit him $6,500 for his trade-in, but when his wife reviewed the sales contract a few days after he got the car, she saw that he had been credited only $2,000 for his old vehicle.

Gamo told the court he would not have purchased the Maserati if he had known he would receive only $2,000, not $6,500, for his trade-in.

He asserted claims against the seller for financial elder abuse, violation of the Consumer Legal Remedies Act (CLRA), fraud, undue influence, and a number of other violations of law.

During pre-trial discovery, attorneys for J Star presented Gamo with documents related to the sale. They then asked him to admit that he had been given ample time to read the contract; that he had initialed each page of the contract; that the contract showed his trade-in was valued at $2,000; that Gamo did not have any condition that would have prevented him from reading and understanding the contract; and that J Star had not altered the terms of the contract. Gamo declined to do so.

Surprisingly, the parties proceeded to trial over this $4,500 alleged overpayment. The jury found in favor of J Star on all claims and determined that the dealership had not represented any facts to Gamo. The court entered a judgment in the seller’s favor.

J Star then asked the court to order Gamo to reimburse it a whopping $490,000 in attorney’s fees, CRLA fees, and “cost-of-proof” fees it had incurred in having to prove at trial the contract terms that Gamo had refused to admit during discovery. (A cost-of-proof claim is for expenses resulting from a litigant’s unjustifiable denial of a discovery request.)

Gamo opposed the fee motion, arguing that financial elder abuse statutes barred the claim.

His attorneys pointed out that these statutes contain a unilateral fee provision which awards fees only to prevailing plaintiffs in financial abuse cases. Defendants, such as J Star in this case, who win a financial elder abuse case are not entitled to seek attorney fees, Gamo’s attorney argued.

The trial court agreed, adding that this provision also bars successful defendants from recovering attorney fees for claims that were not specifically founded on allegations of financial elder abuse but that “overlap” with them. Since all of Gamo’s claims were based on the same transaction and were “inextricably intertwined” with his claim of financial elder abuse, the court denied J Star’s fee request in its entirety.

The sellers appealed, arguing that the trial court erred when it ruled the unilateral fee provision of the financial elder abuse statutes also barred them from recovering cost-of-proof and CLRA fees.

The appellate justices gave the dealership a partial victory.

It was clear, they said, that California law allows only plaintiffs to recover reasonable fees and costs in financial elder abuse cases. Presumably, legislators had decided that “some important public policy,” such as ensuring that litigants are not discouraged from pursuing a claim, required barring prevailing defendants from recovering attorney and CRLA fees.

But awarding cost-of-proof fees to a successful defendant does not conflict with the unilateral fee provision of financial elder abuse statutes, they said. A cost-of-proof claim is intended to reimburse an opposing party’s costs caused by having to prove an issue when a litigant did not have a reasonable, good-faith belief in the discovery stage that it would prevail on that issue at trial. They saw no public policy reason to deny cost-of-proof claims in a financial elder abuse case.

The justices reversed the trial court’s order denying recovery of cost-of-proof fees but affirmed the remainder of its ruling. It awarded the auto dealership its costs on appeal.

By Lynda I. Chung