California Justices Rule 7-0 Attorneys’ Fees May Be Denied in Low-Recovery FEHA Cases

The California Supreme Court ruled unanimously Jan. 14 that a state civil procedure rule, which authorizes the denial of attorneys’ fees and costs to a prevailing party who recovered less than $25,000 and could have brought a “limited civil case” with rules intended to control costs, applies to employment discrimination cases brought under the state’s Fair Employment and Housing Act (Chavez v. Los Angeles).

Reversing an appeals court’s decision that the civil procedure rule (Cal. Civ. Proc. Code § 1033(a) ) does not apply to FEHA suits, the supreme court found that the plain language of Section 1033(a) “gives a trial court discretion to deny attorney fees to a plaintiff who prevails on a FEHA claim but recovers an amount that could have been recovered in a limited civil case.”

However, in exercising that discretion, “the trial court must give due consideration to the policies and objectives of the FEHA in general and of its attorney fee provision in particular,” Justice Joyce L. Kennard wrote for the supreme court.

In light of Los Angeles police officer Robert Chavez’s “minimal success and grossly inflated attorney fee request” of nearly $871,000, the trial court did not abuse its discretion in denying him an award of any attorneys’ fees, Kennard said. Chavez lost most of his claims but won an $11,500 jury verdict for one act of retaliation.

Chief Justices Ronald M. George and Justices Marvin R. Baxter, Kathryn Mickle Werdegar, Ming W. Chin, Carlos R. Moreno, and Carol A. Corrigan joined in the opinion.

Will Effect of Ruling Be Limited to Extreme Cases?

Lisa R. Jaskol with the Public Counsel in Los Angeles worked on an amicus brief filed in support of Chavez by the Los Angeles County Bar Association and the California Women Lawyers and agreed to do the oral argument on his behalf. She said she is glad that the supreme court recognized the importance of the FEHA attorneys’ fees provision and instructed courts to take the policies and purposes of the provision into account. However, Jaskol said she is disappointed by the denial of any fees to Chavez’s attorneys.

Jaskol expressed concern that the ruling might deter plaintiffs’ attorneys from taking FEHA cases out of fear that they will have to do a limited civil case or take the chance of ending up with a recovery under $25,000 and being denied any fees. That “would be very unfortunate and would be contrary to the legislative intent to encourage attorneys to take meritorious cases,” Jaskol said. She expressed hope that the ruling will be limited to extreme cases and will not have broad application.

San Francisco management attorney Paul W. Cane asserted that the principles the court announced are very consistent with their argument that there should be proportionality between attorneys’ fees and results and that fees should be cut or denied when they are grossly disproportionate to the degree of results achieved. Cane, who is with Paul, Hastings, Janofsky & Walker, worked on an amicus brief filed in support of Los Angeles by the Employers Group and the California Employment Law Council. He said the potential for recovery of attorneys’ fees for all hours expended creates an incentive for plaintiffs’ attorneys not to settle.

Jeremy B. Rosen of Horvitz & Levy in Encino, Calif., worked on an amicus brief filed by a coalition of groups supporting Chavez. He said the supreme court ruling has the effect of minimizing the claims of low-wage workers whose economic damages necessarily are limited and will make it very difficult for them to find legal representation. But Rosen said he hopes that effect will be counteracted by the court’s emphasis on considering FEHA’s policy to encourage attorneys to take meritorious cases.

Deputy City Attorney Beth D. Orellana said she is very pleased with the outcome of denying fees to Chavez and said the supreme court did “an excellent job” analyzing the statutory provisions. Unfortunately, plaintiffs sometimes bring claims that are exaggerated and their attorneys are unwilling to settle for reasonable amounts, forcing employers into trial, Orellana said. The possibility of a full attorneys’ fees award hurts settlement negotiations, she said.

Chavez Filed Many Complaints, Suits.

Los Angeles hired Chavez as a police officer in 1989. He was accused in 1996 of stealing payroll checks but eventually was cleared. After being transferred to a different division in February 1997, Chavez said he was under investigation by the internal affairs group. His captain suspected Chavez was paranoid and ordered him to be evaluated by the behavioral science services unit. He attended 10 counseling sessions and was transferred to another division in September 1997.

In his first suit filed in state court in April 1998, Chavez brought various tort and civil rights claims based on the stolen checks accusation. He later made numerous internal complaints of harassment, including police helicopters hovering over his house, in retaliation for the suit. In response to a citizen’s complaint in April 1999, the department investigated Chavez’s conduct at a laundromat that had been robbed. A month later, he took leave for stress, was treated by a psychologist, and complained to the department several times about helicopters over his house.

The superior court dismissed the first suit in December 1999. The following month, Chavez submitted to the city a claim for damages allegedly resulting from police department helicopters hovering over his house. After the police department’s air support division investigated and found the allegations were unfounded, the city denied the claim for damages.

Chavez returned to work in March 2000 and was served with notice of a five-day suspension for neglect of duty during the laundromat incident. The department assigned him to administrative duty until he could be evaluated by a staff psychologist. He filed an administrative complaint with a state agency in late March alleging discrimination on a number of bases, harassment, and retaliation, and two days later he requested a transfer. The department approved the request in late April.

Chavez filed his second suit in state court in May 2000 alleging discrimination, harassment, and retaliation in violation of the FEHA and various tort claims. Two weeks later, the department rescinded the order granting Chavez’s transfer request, prompting another administrative complaint alleging retaliation. He filed a third suit, this time in federal court, in August 2000 alleging violation of his constitutional rights. He was transferred in October 2000 and resumed patrol duties.

The federal district court granted Chavez’s request to exercise jurisdiction over his FEHA and tort claims, and the state court later dismissed that suit. Chavez again left work due to stress in April 2001. The federal court ruled in favor of the city in May 2002. The U.S. Court of Appeals for the Ninth Circuit in September 2004 issued an unpublished decision rejecting most of Chavez’s claims but remanding the issues of whether the temporary rescission of the transfer approval constituted retaliation and whether his assignment to administrative duty constituted discrimination. On remand, the federal district court dismissed the remaining FEHA claims without prejudice to refiling them in state court.

Final Suit Limited to FEHA Claims.

Chavez filed his final suit in state court in November 2004, alleging discrimination and harassment based on perceived mental disability and retaliation for filing administrative complaints and the prior suits. The Los Angeles County Superior Court conducted a trial and the jury ruled against Chavez with the exception of his retaliation claim based on rescinding the transfer. The jury awarded $1,500 in economic damages and $10,000 for emotional distress.

Chavez’s attorneys requested nearly $871,000 in attorneys’ fees for services provided in all the suits and a doubling of the lodestar amount—the number of hours worked multiplied by each attorney’s hourly rate. The superior court conducted a hearing and denied the request entirely, citing Section 1033(a) and Steele v. Jensen Instrument Co., 69 Cal. Rptr. 2d 135 (Cal. Ct. App. 1997), which denied an attorneys’ fees award to a FEHA plaintiff who won a jury verdict for only $21,078.

The California Court of Appeal reversed, holding that Section 1033(a) does not apply in FEHA cases because “[e]ven a modest financial recovery can serve to vindicate a substantial legal right” in statutory discrimination and civil rights suits and applying Section 1033(a) to such claims “would discourage attorneys from taking meritorious cases.” The appeals court also found that Chavez’s case could not have been brought as a limited civil case because of the restrictions on discovery (72 Cal. Rptr. 3d 783 (Cal. Ct. App. 2008); 43 DLR A-6, 3/5/08).

Section 1033(a) Applies When Recovery Below $25,000.

Under Section 1033(a), when “the prevailing party recovers a judgment that could have been rendered in a limited civil case,” the court has discretion in awarding attorneys’ fees. “In other words,” Kennard said, “section 1033(a) applies when a plaintiff has obtained a judgment for money damages in an amount (now $25,000 or less) that could have been recovered in a limited civil case, but the plaintiff did not bring the action as a limited civil case and thus did not take advantage of the cost- and time-saving advantages of limited civil case procedures.”

Appeals court decisions have found that in exercising discretion under Section 1033(a), the trial court should consider the amount of damages the plaintiff reasonably could have expected to recover and the total costs incurred in the suit, Kennard said.

FEHA authorizes courts to use discretion in awarding reasonable attorneys’ fees and costs to the prevailing party (Cal. Gov’t Code § 12965(b) ). California courts have found that attorneys’ fees awards in FEHA suits “make it easier for plaintiffs of limited means to pursue meritorious claims” and are intended to provide fair compensation to plaintiffs’ attorneys and encourage litigation of meritorious claims, Kennard said.

FEHA’s attorneys’ fees provision is similar to that in Title VII of the 1964 Civil Rights Act, Kennard said. California courts have followed the U.S. Supreme Court in adopting a rule that “a prevailing plaintiff should ordinarily recover attorney fees unless special circumstances would render the award unjust, whereas a prevailing defendant may recover attorney fees only when the plaintiff’s action was frivolous, unreasonable, without foundation, or brought in bad faith,” Kennard said.

If a court finds that attorneys’ fees should be awarded, the court should use the “lodestar adjustment method,” Kennard said. She explained that “the trial court first determines a touchstone or lodestar figure based on a careful computation of the time spent by, and the reasonable hourly compensation for, each attorney, and the resulting dollar amount is then adjusted upward or downward by taking various relevant factors into account.” Kennard found that the ultimate goal is to determine reasonable attorneys’ fees, not to encourage unnecessary litigation of claims that have no broad public impact or are factually or legally weak.

‘No Irreconcilable Conflict’ Between Provisions.

“In the situation presented here, we perceive no irreconcilable conflict between section 1033(a)” and FEHA’s attorneys’ fees provision, Kennard said.

“In exercising its discretion under section 1033(a) to grant or deny litigation costs, including attorney fees, to a plaintiff who has recovered FEHA damages in an amount that could have been recovered in a limited civil case, the trial court must give due consideration to the policies and objectives of the FEHA and determine whether denying attorney fees, in whole or in part, is consistent with those policies and objectives,” Kennard said. She found that a “plaintiff’s failure to take advantage of the time- and cost-saving features of the limited civil case procedures may be considered a special circumstance that would render a fee award unjust.”

In considering whether a FEHA case should have been brought as a limited civil case, “the trial court should consider FEHA’s underlying policy of encouraging the assertion of meritorious FEHA claims, and it should evaluate the entire case in light of the information that was known, or should have been known, by the plaintiff’s attorney when the action was initially filed and as it developed thereafter,” Kennard said.

She found that an attorneys’ fees award should not be denied if “the plaintiff’s attorney might reasonably have expected to be able to present substantial evidence supporting a FEHA damages award in an amount exceeding the damages limit (now $25,000) for a limited civil case, or if the plaintiff’s attorney might reasonably have concluded that the action could not be fairly and effectively litigated as a limited civil case.”

“Section 1033(a)'s purpose is to encourage plaintiffs to bring their actions as limited civil actions whenever it is reasonably practicable to do so,” Kennard said. She found “there is no indication” in the statutory provisions that the state legislature “has ever intended to prohibit the use of limited civil case procedures for the prosecution of FEHA claims.”

“Although extensive discovery may be conducted in many or even most FEHA actions, this does not mean that elaborate discovery proceedings are invariably necessary to effectively litigate a FEHA claim,” Kennard said. She pointed out that although limited civil case procedures restrict the amount of discovery parties may conduct without court approval, trial courts are authorized to grant additional discovery if needed and the parties may agree to additional discovery.

Extent of Success ‘a Crucial Factor.’

The U.S. Supreme Court has found that the extent of a plaintiff’s success, such as prevailing on some claims but not others, “is a crucial factor” in determining the attorneys’ fees award and that although fees do not have to be strictly proportionate to the recovery, a plaintiff who recovers only nominal damages should receive no fee, Kennard said. She found that California court rulings are consistent on this point.

Chavez’s success “was modest at best,” Kennard said. She found that he raised a wide variety of claims in his various suits but only succeeded in recovering damages for one claim. Chavez made no attempt to argue that his success on that claim “had any broad public impact or resulted in significant benefit to anyone other than himself,” Kennard said. She found that because the one winning claim “apparently was not closely related to or factually intertwined with” the unsuccessful claims, the trial court reasonably concluded that Chavez “was not entitled to attorney fees for time spent litigating those unsuccessful claims.”

The trial court also reasonably concluded that the request for nearly $871,000 for 1,851 attorney hours “was grossly inflated when considered in light of the single claim on which plaintiff succeeded, the amount of damages awarded on that claim, and the amount of time an attorney might reasonably expect to spend in litigating such a claim,” Kennard said. She found that factor alone was sufficient to justify denying any attorneys’ fees award in this case.

Kennard also agreed with the trial court that Chavez should have brought a limited civil case because his evidence in support of the one winning FEHA retaliation claim was “seriously deficient” as to damages and “too slight to support a damage recovery in excess of $25,000.”

Rochelle Evans Jackson in Orange, Calif., and Melinda G. Wilson in Gardena, Calif., represented Chavez. City Attorney Rockard J. Delgadillo, Paul L. Winnemore, and Beth D. Orellana in Los Angeles represented the city.