Filed 1/29/21

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION FIVE

TANIA PULLIAM,

Plaintiff and Respondent,

v.

HNL AUTOMOTIVE INC. et al.,

Defendants and Appellants.

B293435

(Los Angeles County

Super. Ct. No. BC633169)

APPEAL from an order of the Superior Court of Los 

Angeles County, Barbara M. Scheper, Judge. Affirmed.

McCreary, PC and Duncan J. McCreary; McGuirewoods, 

Leslie M. Werlin, Jamie D. Wells and Anthony Q. Le for 

Defendants and Appellants.

Rosner, Barry & Babbit, Hallen D. Rosner, Arlyn L. 

Escalante and Serena D. Aisenman for Plaintiff and Respondent.

__________________________
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INTRODUCTION

Defendants HNL Automotive Inc. and TD Auto Finance, 

LLC (TD) appeal the trial court’s award of attorney’s fees to 

plaintiff following a jury trial on plaintiff’s lemon law claims. 

Defendants argue: (1) plaintiff’s counsel failed to provide 

evidence of their hourly rates, (2) the trial court erred in refusing 

to apportion attorney’s fees, (3) the trial court erred in applying a 

lodestar multiplier, and (4) TD was not liable for attorney’s fees

under title 16, section 433.2 of the Code of Federal Regulations 

(2020) (the Holder Rule). We affirm the amount of attorney’s fees 

awarded, finding no abuse of discretion. We affirm the court’s 

ruling that TD is liable for attorney’s fees, and conclude that the 

Holder Rule does not limit the attorney’s fees that a plaintiff may 

recover from a creditor-assignee. 

FACTS AND PROCEDURAL BACKGROUND

1. Plaintiff’s Vehicle Purchase

In July 2016, plaintiff purchased a “Certified Pre-Owned”

2015 Nissan Altima from HNL Automotive Inc. (the dealership)

pursuant to a retail installment sales contract. The contract 

included the following language from title 16, section 433.2 of the 

Code of Federal Regulations:

“NOTICE: ANY HOLDER OF THIS CONSUMER 

CREDIT CONTRACT IS SUBJECT TO ALL 

CLAIMS AND DEFENSES WHICH THE DEBTOR 

COULD ASSERT AGAINST THE SELLER OF 

GOODS OR SERVICES OBTAINED PURSUANT 

HERETO OR WITH THE PROCEEDS HEREOF. 

RECOVERY HEREUNDER BY THE DEBTOR 

SHALL NOT EXCEED AMOUNTS PAID BY THE 

DEBTOR HEREUNDER.” 

This language is commonly referred to as the Holder Rule. 

(Lafferty v. Wells Fargo Bank, N.A. (2018) 25 Cal.App.5th 398, 
3

404 (Lafferty).) We discuss in depth the Holder Rule and who is a 

holder in the final portion of our Discussion section below.

Following plaintiff’s purchase, TD accepted assignment of the 

retail installment sales contract and became the “Holder” of 

plaintiff’s retail installment sales contract.

Advertisements for the particular vehicle plaintiff 

purchased showed that it had cruise control, 6-way poweradjustable seats, and other specific features. Plaintiff is disabled, 

and because of her disabilities, cruise control and poweradjustable seats were necessary features. After the purchase, 

plaintiff learned that the vehicle did not have cruise control or 6-

way power-adjustable seats, and did not meet the requirements 

of the Nissan Certified Pre-Owned program as advertised.

2. Plaintiff’s Complaint and Trial 

In September 2016, less than two months after purchasing 

the vehicle, plaintiff filed this lawsuit against the dealership and 

TD in the trial court. Her complaint had six causes of action, 

alleging misrepresentation in violation of the Consumer Legal 

Remedies Act related to the vehicle’s certification, breach of 

implied warranty under the Song-Beverly Consumer Warranty 

Act (Song-Beverly) codified in Civil Code section 1790 et seq., 

fraud and deceit, negligent misrepresentation, violation of 

Business and Professions Code section 17200, and violation of 

Vehicle Code section 11711 (vehicle fraud).

1 Plaintiff alleged that 

due to the inclusion of the Holder Rule language in the retail 

installment sales contract, TD was liable for all of the 

dealership’s misconduct in the sale of the vehicle.

Trial occurred in April 2018. The cause was submitted to 

the jury with directions to return a verdict on four causes of 

1 All subsequent statutory references are to the Civil Code 

unless indicated otherwise.
4

action. The jury found for plaintiff on one cause of action—

violation of the implied warranty of merchantability under SongBeverly. The jury’s findings established plaintiff purchased a 

motor vehicle from the dealership, the dealership was in the 

business of selling motor vehicles to retail buyers, the dealership

failed to adequately package and label the 2015 Nissan, and the 

vehicle failed to conform to the promises or affirmations of fact 

made on the container or label. The jury found that the purchase 

contract for the vehicle was assigned from the dealership to TD.

The jury found that plaintiff’s total damages were 

$21,957.25. On May 29, 2018, the court entered judgment in 

favor of plaintiff and against the dealership and TD, jointly and 

severally, in the amount of $21,957.25. The judgment left blank 

the amount of costs, attorney’s fees, and prejudgment interest to 

be awarded.2

3. Posttrial Motion for Attorney’s Fees

On July 26, 2018, plaintiff filed a posttrial motion seeking 

the award of attorney’s fees. Plaintiff sought $169,602, which 

consisted of a lodestar figure of $141,335 and a 0.2 multiplier.

Plaintiff supported the motion with declarations from Hallen D.

Rosner and Michael A. Klitzke, respectively the partner and 

associate from Rosner, Barry & Babbit LLP, who had been 

working on her case. Rosner’s declaration authenticated the 

firm’s attached billing records, provided citation to similar cases 

where the firm’s hourly rates had previously been approved,

described each attorney’s experience and qualifications, noted 

2 The record does not include motions or orders related to 

costs or prejudgment interest, but the case summary indicates at 

least the issue of costs was litigated by the parties. We do not 

discuss costs or prejudgment interest as they are not raised on 

appeal.
5

that the firm’s rates were not increased in contingency matters, 

and explained the risks the firm weathered in taking this usedvehicle case on a contingency basis. Klitzke’s declaration 

authenticated documents related to the litigation, as well as 

various communications between himself and opposing counsel.

He also described his legal experience and explained his hourly 

rate.

In the motion, plaintiff asserted that TD was liable for 

attorney’s fees in addition to the amounts plaintiff paid under the 

retail installment sales contract. Plaintiff argued the Holder 

Rule did not bar plaintiff’s recovery of attorney’s fees from TD.

In its opposition, defendants objected to the declarations of 

plaintiff’s counsel in support of the motion, and argued plaintiff 

failed to provide evidence of Rosner’s hourly rate. Defendants 

asserted that the fee award should be reduced by 83 percent

because plaintiff succeeded on only one of the six causes of action

that had been alleged. Defendants also argued the lodestar 

multiplier was not appropriate because the lawsuit was not 

exceptionally difficult and plaintiff’s counsel was not 

exceptionally skilled. Lastly, citing Lafferty v. Wells Fargo Bank 

(2013) 213 Cal.App.4th 545, 563, defendants argued pursuant to 

title 16, section 433.2 of the Code of Federal Regulations, that TD 

was not liable for the attorney fees because as the holder of the 

retail installment sales contract, its liability could not exceed the 

amount plaintiff paid to TD.

On August 29, 2018, the trial court heard argument from 

counsel. In response to defendants’ argument that plaintiff’s fees 

should be apportioned, the court found that defendants’ 

“mathematical” proposal of giving plaintiff one-sixth of the fees 

was not appropriate. The court stated: “I’ve decided they 

[plaintiff’s counsel] have satisfied the burden establishing that 

there is no need for any sort of allocation, and it in fact would be 
6

impossible, and your failure to make any suggestion to the 

contrary other than your mathematical equation I think 

demonstrates that. It’s just the facts and the legal theories were 

completely intertwined, and I don’t think that there is any way 

that the court can or should be required to go through on a lineby-line basis and try to figure out what work went – somehow 

went to a fraud cause of action that did not also relate to the 

successful cause of action.”

In response to defendants’ argument that a multiplier

should not be applied to the lodestar figure because it was a 

simple case, the court stated: “You didn’t make it simple, Mr. 

McCreary [defense counsel], nor did your client. I was here for 

this, so this is not just counsel amongst themselves discussing 

how, you know, difficult discovery . . . which is out of the presence 

of the jury. I saw plenty in my handing of this case, and whether 

it was because of your client or for some other reason, what would 

have been or could have been a fairly simple case was made much 

more complicated by your client’s posture in this matter from the 

beginning to the end, as far as the court’s concerned.”

In an eleven-page minute order explaining its decision, the 

court awarded plaintiff $169,602 in attorney’s fees.3 The court 

reiterated that apportionment was not necessary or possible 

based on intertwined facts of the case and that $141,335 in fees 

was reasonably incurred by plaintiff in prosecuting the action. 

The court indicated it was capable of assessing whether the 

3 Plaintiff points out that defendants failed to include the 

judgment in the record. We observe that the judgment on the 

jury verdict can be found in the first volume of the clerk’s 

transcript at page 121. The minute order granting attorney’s fees 

directed the clerk to affix the attorney fees order to this 

judgment.
7

lodestar was reasonable. The court also stated Rosner’s hourly 

rate was obvious from the billing records, and pointed out that 

defendants did not claim his rate to be unreasonable. The court 

largely overruled defendants’ evidentiary objections to plaintiff’s 

counsel’s declarations.4

DISCUSSION

Defendants contend on appeal that (1) plaintiff’s attorneys

failed to provide evidence of their hourly rates and failed to 

establish that their hourly rates are the prevailing rates in the 

community; (2) attorney’s fees should be reduced because plaintiff 

did not succeed on all claims; (3) the court abused its discretion 

by applying a lodestar multiplier to the fees, and (4) TD is not 

liable for attorneys’ fees in this matter. We address each issue in 

turn.

1. Legal Overview for Awarding Attorney’s Fees in 

Lemon Law Cases

The jury found defendants liable for breach of the implied 

warranty of merchantability under Song-Beverly, commonly 

known as the automobile “lemon law.” (Duale v. Mercedes–Benz 

USA, LLC (2007) 148 Cal.App.4th 718, 721.) In its more typical 

application, Song-Beverly requires automobile manufacturers to 

repair a new motor vehicle within a reasonable number of 

attempts. If the manufacturer cannot repair the vehicle, the 

manufacturer must replace it or pay restitution to the buyer, at 

the buyer’s election. (§ 1793.2, subd. (d)(2).) The present case is 

not about unsuccessful efforts to repair a vehicle but is for breach 

4 The court sustained a single hearsay objection to an exhibit 

titled “United States Consumer Law Attorney Fee Survey Report 

2015-1016,” which was attached to attorney Klitzke’s declaration 

in support of plaintiff’s motion for attorney’s fees. 
8

of the implied warranty of merchantability in the sale of a vehicle

to plaintiff.5 Section 1794, subdivision (a) permits the buyer to 

bring an action for recovery of damages and other relief.

If the buyer prevails in the action against the seller, “the 

buyer shall be allowed by the court to recover as part of the 

judgment a sum equal to the aggregate amount of costs and 

expenses, including attorney’s fees based on actual time 

expended, determined by the court to have been reasonably 

incurred by the buyer in connection with the commencement and 

prosecution of such action.” (§ 1794, subd. (d).) “[A] prevailing 

buyer has the burden of showing that the fees incurred were 

allowable, were reasonably necessary to the conduct of the 

litigation, and were reasonable in amount.” (Doppes v. Bentley 

Motors, Inc. (2009) 174 Cal.App.4th 967, 998 (Doppes).) “The 

reasonable hourly rate is that prevailing in the community for 

similar work.” (PLCM Group, Inc. v. Drexler (2000) 22 Cal.4th 

1084, 1095.) 

Courts apply the lodestar method in calculating attorney’s 

fees. (Robertson v. Fleetwood Travel Trailers of California, Inc.

(2006) 144 Cal.App.4th 785, 818-819 (Robertson); Ketchum v. 

Moses (2001) 24 Cal.4th 1122, 1135 (Ketchum).) “That method 

requires the trial court to first determine a touchstone or lodestar 

figure based on a careful compilation of the actual time spent and 

reasonable hourly compensation for each attorney. [Citation.] 

The touchstone figure may then be augmented or diminished by 

5 Section 1792 provides: “Unless disclaimed in the manner 

prescribed by this chapter, every sale of consumer goods that are 

sold at retail in this state shall be accompanied by the 

manufacturer’s and the retail seller’s implied warranty that the 

goods are merchantable. The retail seller shall have a right of 

indemnity against the manufacturer in the amount of any 

liability under this section.”
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taking various relevant factors into account, including (1) the 

novelty and difficulty of the questions involved and the skill 

displayed in presenting them; (2) the extent to which the nature 

of the litigation precluded other employment by the attorneys; 

and (3) the contingent nature of the fee award, based on the 

uncertainty of prevailing on the merits and of establishing 

eligibility for the award. [Citation.] As the Supreme Court 

subsequently explained, the initial lodestar amount is based on 

the reasonable rate for noncontingent litigation of the same type, 

which amount may then be enhanced (e.g., through use of a socalled multiplier) to account for factors such as the contingent 

nature of the case: ‘The purpose of such adjustment is to fix a fee 

at the fair market value for the particular action. In effect, the 

court determines, retrospectively, whether the litigation involved 

a contingent risk or required extraordinary legal skill justifying 

augmentation of the unadorned lodestar in order to approximate 

the fair market rate for such services.’ ” (Robertson, supra,

144 Cal.App.4th at p. 819.) “In making its calculation, the court 

may rely on its own knowledge and familiarity with the legal 

market, as well as the experience, skill, and reputation of the 

attorney requesting fees.” (569 East County Boulevard LLC v. 

Backcountry Against the Dump, Inc. (2016) 6 Cal.App.5th 426, 

437 (569 East County).)

“We review an award of attorney fees under [Song–Beverly] 

for abuse of discretion. [Citations.] We presume the trial court’s 

attorney fees award is correct. . . . ‘The “ ‘experienced trial judge 

is the best judge of the value of professional services rendered in 

his [or her] court, and while his [or her] judgment is of course 

subject to review, it will not be disturbed unless the appellate 

court is convinced that it is clearly wrong.’ ” ’ ” (Doppes, supra, 

174 Cal.App.4th at p. 998.)
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2. Substantial Evidence Supported the Lodestar Amount

Defendants assert plaintiff “did not establish or mention 

Mr. Rosner’s hourly billing rate whatsoever. Mr. Rosner did not 

provide any evidence of his hourly rate, and Appellants were 

unable to determine from the submissions Mr. Rosner’s hourly 

rate.” (Emphasis omitted.) Defendants mischaracterize the 

record.

Plaintiff’s fee motion was accompanied by a declaration 

from Rosner. Attached to that declaration was a copy of the 

firm’s invoice for all work completed on the case. The invoice 

included a description of the work performed, identification of the 

attorney that performed the work, and that attorney’s hourly 

rate. Multiple attorneys from the firm worked on the case, and 

each attorney’s hourly rate was reflected on the invoice, including 

(as noted by the trial court) Rosner’s own rate. Substantial 

evidence supported that part of the lodestar based on counsel’s 

hourly rate and hours worked. 

Defendants also argue that plaintiff’s counsel failed to 

establish that their hourly rates are the prevailing rates in the 

community. Rosner’s declaration dedicated three paragraphs and 

multiple exhibits to establishing that the firm’s rates are 

competitive in the local market, and he attached a national 

survey of prevailing rates among consumer protection attorneys, 

including rates for California attorneys. The declarations of 

Rosner and Klitzke included a section on the experience and 

qualifications of each attorney and paralegal who billed on the 

case. Defendants offer no authority to suggest that further 

evidence is needed to establish market rates in the community. 

The evidence was sufficient for the trial court which also 

observed that it was capable of assessing market rates in the 

community sua sponte. (See 569 East County, supra,

6 Cal.App.5th at p. 437 [“In making its calculation, the court may 
11

rely on its own knowledge and familiarity with the legal market, 

as well as the experience, skill, and reputation of the attorney 

requesting fees.”].) Substantial evidence supported the lodestar 

amount.

In three conclusory sentences in their opening brief and 

without citation to authority, defendants generally argue that the 

trial court improperly overruled their foundation and hearsay 

objections to Rosner’s and Klitzke’s declarations. Defendants fail 

to make specific arguments about each objection on appeal or 

provide legal support for their position. We consider those points 

no further as “issues not addressed as error in a party’s opening 

brief with legal analysis and citation to authority are forfeited.” 

(Golden Door Properties, LLC v. Superior Court (2020) 

52 Cal.App.5th 837, 890.)

3. No Abuse of Discretion in Refusing to Apportion the 

Fee Award

We also find no abuse of discretion in the trial court’s 

refusal to apportion attorney’s fees based on plaintiff’s success on 

one cause of action.

When a plaintiff is successful, “the fact that he or she has 

prevailed on some claims but not on others is a factor to be 

considered in determining the amount of the fee awarded.” 

(Lyons v. Chinese Hosp. Assn (2006) 136 Cal.App.4th 1331, 1345.) 

Nonetheless, it is well-established that “ ‘[a]ttorneys fees need 

not be apportioned between distinct causes of action where 

plaintiff’s various claims involve a common core of facts or are 

based on related legal theories.’ ” (Graciano v. Robinson Ford 

Sales, Inc. (2006) 144 Cal.App.4th 140, 159; Downey Cares v. 

Downey Community Development Com. (1987) 196 Cal.App.3d 

983, 997; see Harman v. City and County of San Francisco (2007) 

158 Cal.App.4th 407, 421 [“There is ‘no mathematical rule 

requiring proportionality between compensatory damages and 
12

attorney’s fees awards, [citation], and courts have awarded 

attorney’s fees where plaintiffs recovered only nominal or 

minimal damages.”].)

Here, the court found that apportionment was not possible 

because the claims involved a common core of facts and 

intertwined legal theories. The record supports the court’s view.

Plaintiff’s claims are based on a single set of facts: the dealership 

falsely representing that the vehicle had cruise control, 6-way 

power-adjustable seats, and other specific features. Each of 

plaintiff’s causes of action revolve around these

misrepresentations. Defendants do not explain how the causes of 

action were distinct from one another or based on different sets of 

facts. 

We find no abuse of discretion. 

4. No Abuse of Discretion in Applying a Lodestar 

Multiplier

Defendants argue the court abused its discretion in 

applying a lodestar multiplier to attorney’s fees because the 

“lawsuit was [a] simple factual and legal case involving a car 

transaction where the jury determined that the labeling on the 

car was incorrect under the Song Beverly Act.” 

Our Supreme Court has instructed that while the lodestar 

amount “is the basic fee for comparable legal services in the 

community; it may be adjusted by the court based on factors

including . . . (1) the novelty and difficulty of the questions 

involved, (2) the skill displayed in presenting them, (3) the extent 

to which the nature of the litigation precluded other employment 

by the attorneys, [and] (4) the contingent nature of the fee 

award.” (Ketchum, supra, 24 Cal.4th at p. 1132.) 

Here, plaintiff solely requested a multiplier based on her 

counsel’s contingent risk. “The purpose of a fee enhancement, or 

so-called multiplier, for contingent risk is to bring the financial 
13

incentives for attorneys enforcing important constitutional rights

. . . into line with incentives they have to undertake claims for 

which they are paid on a fee-for-services basis.” (Ketchum, supra,

24 Cal.4th at p. 1132.) The lodestar enhancement “is intended to 

approximate market-level compensation for such services, which 

typically includes a premium for the risk of nonpayment or delay 

in payment of attorney fees.” (Id. at p. 1138.)

Defendants focus on the novelty of the case in arguing the

multiplier was an abuse of discretion. Defendants do not address 

the contingency risk, or any other factor that courts may consider 

when awarding a multiplier enhancement. 

We conclude the trial court did not abuse its discretion in 

awarding a 0.2 multiplier to account for the inherent risks 

associated with taking the case on contingency and fronting all 

costs of litigation. Rosner’s declaration explained that the firm 

bills at the same rate for contingent and non-contingent cases. 

Rosner also attested to the risks associated with contingent 

cases. The requested multiplier was modest and it accounted for 

the risk plaintiff’s counsel took in litigating the case against 

defendants whom the court found made the case challenging and 

protracted. The trial court specifically found defense counsel’s 

litigation tactics complicated the case and made what could have 

been a “simple” case into a difficult one.6 On this record, there 

was no abuse of discretion. 

6 It appears that during litigation, defendants made it 

difficult to secure witnesses, refused to appear and complete 

depositions, and withheld documents.
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5. The Holder Rule Does Not Limit TD Auto Finance’s

Liability for Attorney’s Fees

Defendant TD alone argues that it is not liable for 

attorney’s fees based on the Holder Rule (16 C.F.R. § 433.2). We 

disagree.

a. The Holder Rule

The Federal Trade Commission (FTC) “promulgated the 

Holder Rule in 1975 as a consumer protection measure to 

abrogate the holder in due course rule for consumer installment 

sale contracts that are funded by a commercial lender. 

[Citations.] ‘Under the holder in due course principle, the 

creditor could “assert his right to be paid by the consumer despite 

misrepresentation, breach of warranty or contract, or even fraud 

on the part of the seller, and despite the fact that the consumer's 

debt was generated by the sale.” ’ [Citation.] ‘Before the FTC 

rule, if a seller sold goods on credit and transferred the credit 

contract to a lender, the lender could enforce the buyer’s promise 

to pay even if the seller failed to perform its obligations under the 

sales contract. Similarly, despite a seller’s breach, the buyer was 

obligated to pay the lender under a consumer loan contract that 

directly financed the purchase of goods or services from the 

seller.’ ” (Lafferty, supra, 25 Cal.App.5th at pp. 410–411.) “ ‘In 

abrogating the holder in due course rule in consumer credit 

transactions, the FTC preserved the consumer’s claims and 

defenses against the creditor-assignee. The FTC rule was 

therefore designed to reallocate the cost of seller misconduct to 

the creditor. The commission felt the creditor was in a better 

position to absorb the loss or recover the cost from the guilty 

party—the seller.’ ” (Id. at p. 411.) 

The FTC’s regulation requires the following notice to be 

given in every consumer installment sales contract that is funded 
15

by a commercial lender (Lafferty, supra, 25 Cal.App.5th at 

p. 404): 

“NOTICE: ANY HOLDER OF THIS CONSUMER 

CREDIT CONTRACT IS SUBJECT TO ALL 

CLAIMS AND DEFENSES WHICH THE DEBTOR 

COULD ASSERT AGAINST THE SELLER OF 

GOODS OR SERVICES OBTAINED PURSUANT 

HERETO OR WITH THE PROCEEDS HEREOF. 

RECOVERY HEREUNDER BY THE DEBTOR 

SHALL NOT EXCEED AMOUNTS PAID BY THE 

DEBTOR HEREUNDER.” (16 C.F.R. § 433.2.)

The FTC regulation requiring use of this notice is known as 

the Holder Rule.7 Somewhat more informally, the liability 

imposed by the notice – in contrast to the otherwise applicable 

holder in due course principle – is also known as the Holder Rule.

b. The Parties’ Contentions and Overview 

The parties wrestle with the final sentence of the Holder 

Rule, which states that recovery by the debtor shall not exceed 

the amounts paid by the debtor under the installment sales 

contract. TD asserts that this limits plaintiff’s recovery of both 

damages and attorney’s fees to the amount she paid under the 

retail sale installment contract. Plaintiff argues the limit applies

only to compensatory damages. 

A number of voices, including state and federal courts, the 

California Legislature, and the FTC, have all expressed opinions 

7 The Regulation provides that it is a deceptive trade practice 

to omit the Holder Rule Notice in a consumer credit contract. 

(16 C.F.R. § 433.2.) A consumer credit contract is, in turn, 

defined as “[a]ny instrument which evidences or embodies a debt 

arising from a ‘Purchase Money Loan’ transaction or a ‘financed 

sale’ ” as those terms are themselves defined by regulation. 

(16 C.F.R. § 433.1(i).)
16

on the issue – many of them contradictory. A broad overview of 

the situation, which we will discuss in greater detail below, is 

this: In California, the Third Appellate District in Lafferty, 

supra, 25 Cal.App.5th 398, held that the Holder Rule’s cap on 

recovery applies to attorney’s fees as well as damages. In 

response to Lafferty, the California Legislature enacted a statute, 

Civil Code section 1459.5, intended to abrogate Lafferty and allow 

recovery of attorney’s fees in excess of the Holder Rule’s cap.8

In the meantime, other jurisdictions were also struggling 

with the issue. Some courts found the Holder Rule’s cap applied 

to attorney’s fees. (E.g., Simpson v. Anthony Auto Sales, Inc.

(W.D. La. 1998) 32 F.Supp.2d 405, 410; State ex rel. Stenberg v. 

Consumer’s Choice Foods, Inc. (Neb. 2008) 755 N.W.2d 583, 595; 

Scott v. Mayflower Home Imp. Corp. (2001) 363 N.J.Super. 145, 

165-166, overruled on other grounds by Psensky v. American

Honda Finance Corp. (2005) 378 N.J.Super. 221, 231.) Others 

found it did not. (E.g., Oxford Finance Cos. v. Velez (Tx.Ct.App. 

1991) 807 S.W.2d 460, 464-465.) Still others imposed attorney’s 

fees on holders in excess of the cap without even addressing the 

issue. (E.g., Diaz v. Paragon Motors of Woodside, Inc. (E.D.N.Y. 

2008) 2008 WL 2004001; In re Stewart (E.D.Pa. 1988) 93 B.R. 

878, 879.)

At the same time, as part of its review of its regulations, 

the FTC sought comments on the costs, benefits, and impact of 

8 Section 1459.5 provides: “A plaintiff who prevails on a 

cause of action against a defendant named pursuant to Part 433, 

Title 16 of the Code of Federal Regulations or any successor 

thereto, or pursuant to the contractual language required by that 

part or any successor thereto, may claim attorney’s fees, costs, 

and expenses from that defendant to the fullest extent 

permissible if the plaintiff had prevailed on that cause of action 

against the seller.”
17

the Holder Rule. (80 FR 75018.) It received a number of 

responses, a handful of which mentioned attorney’s fees and an 

even smaller number of which identified the split in the law 

regarding the application of the cap to attorney’s fees. 

(<https://www.ftc.gov/policy/public-comments/2015/12/initiative631> [as of January 26, 2021] as archived <https://perma.cc/ 

N3SN-NPSC>.) The FTC issued a Rule Confirmation in which it

confirmed the Holder Rule with no modifications, but volunteered 

its opinion that the Holder Rule’s cap applied to attorney’s fees.

(84 FR 18711.)

Thereafter, the issue presented itself again in California, 

this time, before the First Appellate District, Division Five, in 

Spikener v. Ally Financial, Inc. (2020) 50 Cal.App.5th 151 

(Spikener). The Spikener court concluded that the FTC’s 

construction of the rule was “dispositive on the Holder Rule’s 

application to attorney fees.” (Id. at p. 158.) The court also 

determined that Civil Code section 1459.5 was preempted by the 

Holder Rule as so interpreted. (Id. at p. 160.)9

Not surprisingly, TD would have us follow Lafferty and 

Spikener.10 In our ensuing discussion, we first disagree with 

Lafferty’s interpretation of the Holder Rule, and conclude that the 

Holder Rule’s cap itself does not apply to attorney’s fees. Then, 

we disagree with Spikener’s conclusion regarding the binding 

9 Unlike Spikener, Lafferty was not a preemption case. 

Lafferty interpreted the Holder Rule’s cap as applying to

attorneys’ fees. (Lafferty, supra, 25 Cal.App.5th at p. 414.) 

10 When the parties briefed this issue, Spikener had not yet 

been decided. Upon this court’s request, the parties addressed 

Spikener at oral argument.
18

nature of the FTC’s contrary interpretation in its Rule 

Confirmation.

c. The Holder Rule Cap Does Not Apply to Attorney Fees

Preliminarily, we set forth the rules of interpretation which 

apply to regulations. Next, we discuss the rationale of the 

Lafferty court which led it to conclude the Holder Rule’s cap 

applies to attorney’s fees. Lastly, we explain our disagreement 

with Lafferty and proffer our own, contrary, interpretation.

(i) Rules of Regulatory Interpretation and 

Standard of Review

Generally, we apply the same rules governing statutory 

interpretation to the interpretation of administrative regulations. 

(Regents of the University of California v. Public Employment 

Relations Bd. (2020) 51 Cal.App.5th 159, 187.)

“In interpreting a statute, our primary goal is to determine 

and give effect to the underlying purpose of the law. [Citation.] 

‘Our first step is to scrutinize the actual words of the statute, 

giving them a plain and commonsense meaning.’ [Citation.] ‘ “If 

the words of the statute are clear, the court should not add to or 

alter them to accomplish a purpose that does not appear on the 

face of the statute or from its legislative history.’ ” [Citation.] In 

other words, we are not free to ‘give words an effect different from 

the plain and direct import of the terms used.’ [Citations.] 

However, ‘ “the ‘plain meaning’ rule does not prohibit a court 

from determining whether the literal meaning of a statute 

comports with its purpose or whether such a construction of one 

provision is consistent with other provisions of the statute.” ’ 

[Citations.] To determine the most reasonable interpretation of a 

statute, we look to its legislative history and background.” 

(Goodman v. Lozano (2010) 47 Cal.4th 1327, 1332.)
19

We review statutory interpretation and preemption

questions de novo. (Spielholz v. Superior Court (2001) 

86 Cal.App.4th 1366, 1371.)

(ii) Lafferty’s Rationale

In Lafferty, the plaintiffs purchased a vehicle under an 

installment contract, which was later assigned to a holder, i.e. a 

credit company. (Lafferty, supra, 25 Cal.App.5th at p. 405.) Like 

the case at bar, the plaintiffs sued the holder pursuant to the 

Holder Rule. (Id. at pp. 406–407.) After the plaintiffs and the 

holder entered into a settlement agreement where the holder 

paid the plaintiffs the amount paid under the installment 

contract, the plaintiffs moved for attorney fees. The trial court 

denied fees as barred by the Holder Rule’s limitation on recovery 

in excess of the amount paid by the plaintiffs under the 

installment sales contract. (Id. at pp. 407-408.)

Relying on two California and two out-of-state cases, the 

Lafferty court stated the “term ‘recovery’ is broad and regularly 

used to include compensatory damages, punitive damages, 

attorney fees, and costs.” (Lafferty, supra, 25 Cal.App.5th at 

p. 412.) The Lafferty court held: “a consumer cannot recover 

more under the Holder Rule cause of action than what has been 

paid on the debt regardless of what kind of a component of the 

recovery it might be—whether compensatory damages, punitive 

damages, or attorney fees.” (Id. at p. 414.)

(iii) Our Interpretation of the Language of the 

Holder Rule

The statutory interpretation question for us is: Does the 

word “recovery,” as used in the Holder Rule, include attorney’s 

fees. If “recovery” includes attorney’s fees, then the Holder Rule’s 

limitation that recovery “by the debtor shall not exceed amounts 

paid by the debtor hereunder,” means that the court would add 

the attorney’s fees to the compensatory award and limit the total 
20

recovery to the amount the debtor paid under the purchase 

agreement. That is Lafferty’s holding. (Lafferty, supra, 

25 Cal.App.5th at p. 412.)

Black’s Law Dictionary defines “recovery” as “1. The 

regaining or restoration of something lost or taken away. . . . [¶] 

2. The obtainment of a right to something (esp. damages) by a 

judgment or decree. . . . 4. An amount awarded in or collected 

from a judgment or decree.” (Recovery Definition, Black’s Law 

Dict. (11th ed. 2019) available at Westlaw; see Wasatch Property 

Management v. Degrate (2005) 35 Cal.4th 1111, 1121–1122, 

[“When attempting to ascertain the ordinary, usual meaning of a 

word, courts appropriately refer to the dictionary definition of 

that word”].) The dictionary definition of recovery focuses on 

damages, i.e. restoring money that was taken away from the 

plaintiff, and does not expressly address attorney’s fees. 

To the extent that Lafferty cites several cases that discuss 

recovery to include attorney’s fees in contexts outside the Holder 

Rule, we do not find these to be persuasive in defining recovery 

for the purpose of the Holder Rule. The Rule’s legislative history 

makes clear that the objective of the Holder Rule was to compel 

“creditors to either absorb seller misconduct costs or return them 

to sellers, by denying sellers access to cut-off devices,” thereby 

discouraging “predatory practices and schemes.” (Preservation of 

Consumers’ Claims and Defenses, 40 FR 53506 (Nov. 18, 1975) 

p. 53523.) In its “Statement of Basis and Purpose” published in 

the Federal Register in conjunction with the Holder Rule’s 

enactment, the FTC stated: “It is unfair to subject an innocent 

party to costs and harm occasioned by a guilty party. Consumers 

are clearly injured by a system which forces them to bear the full 

risk and burden of sales related abuses. There can be little 

commercial justification for such a system. The desired 

reallocation of cost and risk will both reduce the costs of seller 
21

misconduct in the marketplace and return the residuum to the 

guilty parties. Consumers and honest merchants will benefit as 

prices come to reflect actual transactions costs and honest 

merchants no longer need compete with those who rely on 

abusive sales practices.” (Ibid.) 

The FTC also found that pre-existing law placed consumers 

in a precarious position of being financially incapable of enforcing 

their rights in court: “The Commission further finds that 

aggrieved consumers are often not in a position to take advantage 

of the legal system. Where seller misconduct in a credit sale 

transaction has given rise to consumer injury, the consumer is 

theoretically in a position to seek damages or other relief from

the seller in court. . . . However, in such cases the consumer 

must pay the creditor holding his note or contract whether or not 

he ultimately receives a judgment against the seller. . . . [S]uch 

damages are rarely enough to attract competent representation. 

The sheer costs of recourse to the legal system to vindicate a 

small claim, together with the days of work that must be missed 

in order to prosecute such a claim to judgment, render recourse to 

the legal system uneconomic. In addition, the worst sellers . . .

prove difficult to locate and serve, and the marginal liquidity 

which characterizes their operations makes collection of a 

judgment difficult or impossible even if they are successfully 

served. Bankruptcy or insolvency becomes a final barrier to 

recovery.” (40 Fed. Reg. 53512.) The Holder Rule was the FTC’s 

answer to such consumer impediments. 

In August 1976, at a congressional hearing on the recently 

enacted Holder Rule, acting director of the FTC’s Bureau of 

Consumer Protection, Margery Waxman Smith, made the 

following statements, which echoed the FTC’s comments above:

“In times past, when sellers were fewer and 

consumer credit was less pervasive, it may have been 
22

reasonable to conclude that consumers could assess 

the risks of seller nonperformance more efficiently 

than a note purchaser. Under these conditions, a 

rule of law favoring holders-in-due course may have 

promoted economic efficiencies. But in today’s 

complex credit-oriented economy of mass production 

and distribution, where buyers and sellers transact 

impersonally for standardized products, it may no 

longer be most efficient to place all the risks of seller 

nonperformance on the buyer. This is particularly 

true where the creditor has frequent dealings with 

the seller though common ownership, affiliation or a 

regular course of dealing. The Commission’s rule, in 

short, carefully shifts some of these risks from 

consumers to those who have a better and more 

efficient means of assessing them, pricing them, and 

shifting them back to the seller.

“The purpose of the rule is to recognize these 

realities. Consumers who are victimized by seller 

misconduct and compelled to pay a third-party 

creditor are not in a position to obtain redress for 

their injuries, thus shifting the costs back to the 

seller. The reasons for this situation are many. They 

revolve around the costs of taking time off from work, 

finding legal representation in a context which the 

law would generally classify as a small claim, 

undertaking the costs of litigation, and meeting a 

rigid payments schedule whatever the ultimate result 

of such efforts may be. 

“Creditors, in those situations to which the rule 

applies, are in a position to shift the risk back where 

it belongs, either directly or through the price 
23

mechanism. They deal in volume while consumers 

deal once. Creditors enjoy ready access to 

commercial information which consumers cannot 

obtain. They have the leverage to return risks to the 

sellers they finance. They can spread information 

costs over many transactions. All together their 

comparative advantage here is incalculable.

[¶]

“The required provision does contain one 

express cautionary limitation on a creditor’s 

exposure. The consumer may never recover 

consequential damages under the provision which 

exceed the amount of the credit contract.” 

(Consumer Claims and Defenses: Hearings Before the Subcomm. 

on Consumer Protection and Finance of the Comm. on Interstate 

and Foreign Commerce House of Rep., 94th Cong., 2nd Sess.

(1976), Serial No. 94-145, pp. 22-23.)

Acting Director Smith’s comments indicate that at the time

the FTC’s position on the limitation on recovery was that the rule 

limited consequential damages, not attorney’s fees. To include 

attorney’s fees in the Holder Rule’s limitation on recovery would 

be out of sync with its objective of reallocating the costs of the 

seller’s misconduct from the consumer back to the seller and 

creditor. Attorney’s fees “is a form of compensation that, along 

with an award of actual damages, permits the consumer to be 

made whole. . . . [O]ne of the objectives of the Holder Rule is to 

internalize the costs of a seller’s misconduct. Those costs include 

the expense of obtaining compensation for injury caused by the 

seller’s misconduct.” (Greenfield & Ross, Limits on a Consumer's 

Ability to Assert Claims and Defenses under the FTC's Holder in 

Due Course Rule (1991) 46 Business Lawyer 1135, 1148.) 
24

One commentator suggested that if the creditor is not 

responsible for attorney fees and costs, there would be an 

incentive to intentionally prolong litigation and cause a consumer 

to spend more prosecuting the case than the recovery available 

under the sales contract. “Exposure to liability for fees and costs 

. . . has a tendency to cut down on litigation and encourage 

settlement because commercial parties have less incentive to stall 

the litigation until the case goes away. This ability to stall is 

especially implicated when the commercial parties have the 

resources to continue the litigation while wearing down the 

resources of the consumer.” (Rosmarin, Consumers-R-Us: A 

Reality in the U.C.C. Article 2 Revision Process (1994) 35 Wm. & 

Mary L.Rev. 1593, 1615.) “The statutory availability of attorney’s 

fees and costs to a prevailing consumer is another way to level 

the playing field between the consumer and commercial parties to 

the transaction.” (Id. at p. 1616.) Both consumer rights and the 

rule’s purpose would be frustrated if attorney fees were not 

recoverable from both the seller and the creditor-assignee.11

d. The FTC’s Rule Confirmation Does Not Change This 

Result

Were we writing on a clean slate – or one which involved 

only Lafferty – our analysis would be complete. But TD argues 

that, as Division Five of the First District held in Spikener, the 

language in the FTC’s Rule Confirmation is entitled to such 

deference as to preclude our interpretation to the contrary and, 

therefore, to preemptively nullify Civil Code section 1459.5. Our 

rejection of this argument begins with an explanation of how the 

relevant language in the FTC’s Rule Confirmation came to be.

11 Of course, the California Legislature has taken a similar 

view in its enactment of Civil Code section 1459.5.
25

(i) History of the FTC’s Rule Confirmation

In December 2015, the FTC requested public comment on 

“the overall costs and benefits, and regular and economic impact” 

of the Holder Rule “as part of the agency’s regular review of all 

its regulations and guides.” (80 FR 75018.) The request for 

comment identified 15 questions on which the FTC sought 

comment, including whether the Holder Rule should be modified 

in any way, but asked no questions specifically about attorney’s 

fees. (80 FR 75019.) If the responding party believed any 

modifications to the Rule should be made, the party was also 

required to answer sub-questions on what evidence supported the 

proposed modifications, and how the modifications would affect 

the costs and benefits of the rule for consumers and businesses. 

(80 FR 75019.)

Nineteen comments were received, ranging from multipage analyses of the Holder Rule submitted by consumer 

advocacy groups and trade associations for consumer credit 

agencies to single paragraphs submitted by individuals. 

(<https://www.ftc.gov/policy/public-comments/2015/12/initiative631> [as of January 26, 2021], archived at <https://perma.cc/

D4MP-68VS>.)

Of the nineteen comments received, only six of them 

addressed the issue of attorney’s fees under the Holder Rule –

their positions differed both on whether the Holder Rule cap did

apply to attorney’s fees and whether it should. Two consumer 

organizations believed that the Holder Rule’s cap did not 

presently apply to attorney fees, but requested the FTC to clarify 

that it did not. Specifically, the National Association of 

Consumer Advocates asked that the FTC “clarify that the Holder 

Rule’s cap on recovery does not apply to attorney fees that the 

holder incurs.” (<https://www.ftc.gov/system/files/documents/

public_comments/2016/02/00029-100584.pdf>, p. 3 [as of January 
26

26, 2021], archived at <https://perma.cc/W2EH-L7UP>.) The 

National Consumer Law Center agreed, stating that the FTC 

should “[c]larify that the Rule’s cap on recovery does not apply to 

attorney fees for which the holder is liable because of the holder’s 

own litigation conduct.” (<https://www.ftc.gov/system/files/

documents/public_comments/2016/02/00015-100535.pdf>, p.8 [as 

January 26, 2021], archived at <https://perma.cc/CP4Y-DY49>.) 

The National Consumer Law Center argued that “[c]larification 

of this point is necessary because while many courts allow fees

above the cap, others do not.” (Ibid., fns. omitted.) Footnotes 

collected cases on both sides of the issue. (Ibid., fns. 29 & 30.) Its

comment offered policy reasons for why fees should not be 

encompassed by the Holder Rule’s cap. (Id. at pp. 8-9.)

Two others wanted the Holder Rule’s cap eliminated 

entirely, in language which appears to have assumed the cap 

presently applied to attorney fees. MFY Legal Services, Inc. 

sought elimination of the cap to ensure that “consumers are made 

whole, as many of their damages for fraud and breach of contract 

exceed payments made (e.g., cash deposits, cash payments for 

add-on products, out-of-pocket losses for repairs, attorney’s fees, 

and lost wages) and could have been avoided had the lender 

heeded their complaints.” (<https://www.ftc.gov/system/files

/documents/public_comments/2016/02/00011-100533.pdf>, p. 6 [as 

of January 26, 2021], archived at <https://perma.cc/LV29-

PYTS>.) Another individual similarly requested the Holder Rule 

be modified “to expressly provide that the holder is liable to the 

consumer for all actual damages proximately caused by the prior 

holders and original seller, including consequential and 

incidental damages, as well as attorney fees incurred by the 

consumer, so long as those remedies would be available to the 

consumer against prior holders and/or the original seller.” 

(<https://www.ftc.gov/policy/public-comments/2016/02/02/
27

comment-3> [as of January 27, 2021], archived at 

<https://perma.cc/K6VK-67W5>.)

On the other side of the issue, the American Financial 

Services Association asked that the FTC “confirm that under the 

Holder Rule’s plain language, any court-awarded sum, under the 

Rule, must be ‘limited to amounts paid by the debtor hereunder.’ 

This limitation includes interest, costs and attorney fees.”

(<https://www.ftc.gov/system/files/documents/public_comments/2

016/02/00025-100572.pdf>, p. 3 [as of January 27, 2021], archived 

at https://perma.cc/YLF2-ETHW>.) The association offered case 

law, including Lafferty. (Id. at p. 7, fn. 30, p. 8, fn. 33.)

Taking a position in the middle was CU Direct Corporation, 

the “nation’s largest point-of-sale auto financing and indirect 

lending network for credit unions . . . .” (<https://www.ftc.gov/

system/files/documents/public_comments/2016/02/00027-

100578.pdf>, p. 1 [as of January 27, 2021], archived at 

<https://perma.cc/5MAX-CXRZ>.) Although CU Direct cited no 

cases, it appeared to be writing from experience that attorney 

fees were not subject to the cap. CU Direct also offered a 

solution. It expressed a concern about excessive attorney’s fees 

“routinely claimed by plaintiff’s counsel as part of the damages 

that the holder is ultimately responsible to pay under the law.” 

(Id. at p. 2.) It stated, “While it may be reasonable for a lender, 

as holder of the contract, to be liable for some of the consumer’s 

attorneys’ fees, it is far less reasonable to hold a lender liable for 

excessive or abusive levels of attorneys’ fees, especially in cases 

where they are essentially unable to fight or contest the claim.” 

(Id. at p. 3.) To resolve the problem it perceived, CU Direct 

sought “a fair and reasonable schedule” of attorney’s fees. (Ibid.)

(ii) The FTC’s Rule Confirmation

After reviewing the comments, the FTC “determined to 

retain” the Holder Rule “in its present form.” (84 FR 18711.) The 
28

FTC issued a Confirmation of Rule that rejected all proposed 

modifications to the rule, specifically noting that “none of the 

comments that proposed changing the Rule provided the 

Commission with specific evidence of the potential costs and 

benefits of such modifications.” (84 FR 18712.)

When it came to the issue of attorney’s fees, the FTC 

explained that “Six comments addressed whether the Rule’s 

limitation on recovery to ‘amounts paid by the debtor’ allows or 

should allow consumers to recover attorneys’ fees above the cap 

. . . .”12 (84 FR 18713.) After itemizing the six comments, the 

FTC stated, “We conclude that if a federal or state law separately 

provides for recovery of attorneys’ fees independent of claims or 

defenses arising from the seller’s misconduct, nothing in the Rule 

limits such recovery. Conversely, if the holder’s liability for fees 

is based on claims against the seller that are preserved by the 

Holder Rule Notice, the payment that the consumer may recover 

from the holder—including any recovery based on attorneys’ 

fees—cannot exceed the amount the consumer paid under the 

contract. Claims against the seller for attorneys’ fees or other 

recovery may also provide a basis for set off against the holder 

that reduces or eliminates the consumer’s obligation. The 

Commission does not believe that the record supports modifying 

the Rule to authorize recovery of attorneys’ fees from the holder, 

based on the seller’s conduct, if that recovery exceeds the amount 

paid by the consumer.” (84 FR 18713.)

12 The FTC’s use of “allows or should allow” suggests that the 

agency itself was unclear whether the Holder Rule actually 

addressed the issue of attorney’s fees at all.
29

(iii) The Rule Confirmation Is Not Entitled to 

Dispositive Deference

In Kisor v. Wilkie (2019) 139 S.Ct. 2400, 2408 (Kisor), the 

Supreme Court reaffirmed the doctrine of deference to an 

agency’s reading of its own, genuinely ambiguous regulations. 

However, the court also reaffirmed the limitations of that 

doctrine. Particularly, in considering deference, “a court must 

make an independent inquiry into whether the character and 

context of the agency interpretation entitles it to controlling 

weight. [Citations.]” (Id. at p. 2416.) “The inquiry on this 

dimension does not reduce to any exhaustive test.” (Ibid.) 

However, the court has identified certain markers for identifying 

when regulatory deference is and is not appropriate. (Ibid.)

The four markers the court identified were: First, the 

“regulatory interpretation must be one actually made by the 

agency. In other words, it must be the agency’s ‘authoritative’ or 

‘official position,’ rather than any more ad hoc statement not 

reflecting the agency’s views. [Citation.]” (Kisor, supra, 

139 S.Ct. at p. 2416.) “Next, the agency’s interpretation must in 

some way implicate its substantive expertise.” (Id. at p. 2417.) 

“Finally, an agency’s reading of a rule must reflect ‘fair and 

considered judgment’ to receive . . . deference. [Citation.]” (Ibid.) 

A court should decline to defer to a convenient litigation position 

or post hoc rationalization. (Ibid.) Moreover, a court may not 

“defer to a new interpretation, whether or not introduced in 

litigation, that creates ‘unfair surprise’ to regulated parties. 

[Citation.] That disruption of expectations may occur when an 

agency substitutes one view of a rule for another.” (Id. at 

pp. 2417-2418.) Such an upending of reliance may occur without 

an explicit interpretive change; we will not defer to an 

interpretation that would impose retroactive liability on parties 
30

for longstanding conduct the agency never before addressed. (Id. 

at p. 2418.)

We consider each of the four factors the Supreme Court 

identified in Kisor and conclude the FTC’s Rule Confirmation is 

not entitled to conclusive deference under the Court’s flexible 

standard. 

First, we assume that the FTC’s “regulatory interpretation 

[is] one actually made by the agency,” although even that 

assumption is somewhat challenged by our consideration of the 

third factor below. 

Second, we do not believe resolution of the issue is easily 

within the FTC’s substantive expertise. This is so for two 

reasons. (1) Resolution of the issue may turn on the particular 

state statute providing for attorney’s fee recovery at issue, and 

whether that statute is intended to be punitive against the payor 

or simply to make the payee whole. (2) As illustrated by the 

FTC’s request for comments which led to the Rule Confirmation, 

the FTC sought to exercise its judgment based on data regarding 

the effect of the rule (or any proposed rule change) on consumers 

and businesses. No commenter provided the FTC with data on 

the costs and benefits to consumers or businesses in different

jurisdictions based on the availability of attorney’s fees or any 

limitations placed on them. Thus, the FTC’s statement regarding 

attorney’s fees in its Rule Confirmation was not an exercise of its 

substantive expertise, but simply a position taken after limited 

arguments were made on each side.13 

13 The FTC had not sought comments on this specific issue; 

its received input was therefore limited to those six comments 

which had volunteered the information even though not asked 

expressly. Presumably, if the FTC formally and affirmatively 

sought comments on whether the Holder Rule’s cap should apply
31

Third, given the informal nature of the FTC’s consideration 

of the issue– one that followed a request for comments that did 

not mention attorneys’ fees – we are not convinced that the 

confirmation truly represented the “ ‘fair and considered 

judgment’ [necessary] to receive . . . deference.” (Kisor, supra, 

139 S.Ct. at p. 2416.) Fourth, although we cannot say the 

position taken in the Rule Confirmation was a change in 

interpretation – as the FTC had not previously interpreted the 

rule at all – it did, in fact, address an issue never previously 

addressed, and undermined the existing practice in those 

jurisdictions in which attorney fees in excess of the cap had been, 

and were being, imposed as a matter of course.

(iv) We Disagree With Spikener

The Spikener court reached the opposite conclusion. 

Purporting to apply the Kisor test, the Spikener court concluded 

the FTC’s Rule Confirmation was entitled to dispositive 

deference. The court’s analysis on this point, in its entirety, is: 

“The Rule Confirmation was issued by the FTC and published in 

the Federal Register, and was indisputably the FTC’s official 

position. Interpretation of the Holder Rule, which provides that 

taking a consumer credit contract without the prescribed 

language is an unfair or deceptive act or practice, falls within the 

expertise of the FTC. [Citation.] The Rule Confirmation issued 

after the FTC solicited and reviewed public comments and 

reflects the agency’s considered judgment. The FTC’s 

interpretation is entitled to deference. [Citation.]” (Spikener, 

supra, 50 Cal.App.5th at p. 159.)

We are not persuaded. In Kisor, the U.S. Supreme Court 

retained the doctrine of deference to agency interpretations, but 

to attorney’s fees, it would have received a great deal more 

relevant input on which to make its determination. 
32

“reinforce[d] its limits.” (Kisor, supra, 139 S.Ct. at p. 2408.) The 

high court emphasized that an agency interpretation is not 

entitled to deference when it “does not reflect an agency’s 

authoritative, expertise-based, ‘fair[, or] considered judgment.’ 

[Citations.]” (Id. at p. 2414.) As we have discussed, this requires 

courts considering the preclusive effect of agency determinations 

to make “independent inquiry into whether the character and 

context of the agency interpretation entitles it to controlling 

weight. [Citations.]” (Id. at p. 2416.) We do not believe the 

Spikener court’s brief discussion of the issue satisfies this 

requirement. 

Our inquiry into the context of the agency’s interpretation, 

convinces us that Spikener’s analysis is incorrect. In particular, 

we find significant that the agency initially had not previously 

spoken on the issue, and chose to express its opinion without 

seeking formal input on it. Instead, the FTC had requested 

comments on the Holder Rule in general terms, seeking 

arguments on modifying the rule only if supported by data 

setting forth the impact of any proposed modifications on 

consumers and businesses. It did not receive that data. Had the 

FTC issued a modification based on an analysis of submitted 

data, or after consideration of arguments submitted in response 

to an express notice, it would have made a stronger case for 

deference. Instead, the agency, based on no data and limited 

argument, spoke on an issue on which it had previously remained 

silent for decades, and had not given notice of an intent to speak. 

This falls short of the type of considered analysis entitled to 

dispositive deference. “[W]hether a court should give such 

deference depends in significant part upon the interpretive 

method used and the nature of the question at issue.” (Barnhart 

v. Walton (2002) 535 U.S. 212, 221-222.) This is particularly so 

when the issue involved is not exclusively one of federal law, but 
33

rather an issue of the intersection of federal law and state law of 

remedies. (Cf. Kisor, supra, 139 S.Ct. at p. 2417 [“Some 

interpretive issues may fall more naturally into a judge’s 

bailiwick. Take one requiring the elucidation of a simple 

common-law property term, see Jicarilla Apache Tribe v. Federal 

Energy Regulatory Com. (10th Cir.) 578 F.2d 289, 292–293, or one 

concerning the award of an attorney’s fee, see W. Va. Highlands 

Conservancy, Inc. v. Norton (4th Cir. 2003) 343 F.3d 239”].) 

Because we conclude the Holder Rule cap does not include 

attorney’s fees within its limit on recovery and that the FTC’s 

interpretation to the contrary is not entitled to deference, the 

Holder Rule is consistent with section 1459.5, and we need not 

address whether section 1459.5 independently applies.

DISPOSITION

We affirm the attorney’s fees awarded by the trial court. 

Plaintiff Tania Pulliam is awarded her costs on appeal. 

RUBIN, P.J.

WE CONCUR:

BAKER, J.

KIM, J.