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A Victory for Employers - Attorneys' Fees Awards in Cases Where Damages are Found to Be Less than $25,000
by: Michael Pott and Derek Haynes
In a victory for employers, the California Supreme Court recently issued an opinion in Chavez v. City of Los Angeles (2010) 47 Cal.4th 970, holding that trial courts may refuse to award attorney fees in cases brought under the California Fair Employment Act (FEHA) when the plaintiff-employee’s recovery does not exceed $25,000.
Chavez involved a police officer who filed suit against the City of Los Angeles for what he perceived was harassment, discrimination and retaliation in violation of the FEHA. A number of his claims were dismissed throughout the case and, after a five-day trial, Chavez prevailed on just a single claim of retaliation, for which the jury awarded $11,500 in damages. Chavez then filed a motion for fees and costs valued at $870,935.50.
In denying the motion, the trial court relied on Code of Civil Procedure section 1033, which grants the court discretion to deny, in whole or in part, an award of fees and costs in cases where the plaintiff does not obtain a money judgment in excess of $25,000. The rationale behind this statute is that the court should have the discretion to deny fees and costs in a case where the plaintiff could have brought the action as a limited civil case (amount in controversy of $25,000 or less), but did not do so and thus did not take advantage of the cost and time-savings advantages of limited civil cases. Chavez appealed and the Court of Appeals reversed, holding that Section 1033 does not apply in FEHA cases. The City of Los Angeles appealed to the California Supreme Court.
On appeal, the Supreme Court found no indication that the Legislature intended to prohibit the use of Section 1033 in FEHA cases. If it had, the Court explained, FEHA would essentially allow plaintiffs to recover fees and costs that could have been avoided had they not unreasonably failed to take advantage of the time and cost saving features of limited civil cases. The Court held that if the trial court is “firmly persuaded” that (1) the plaintiff’s attorney “had no reasonable basis” to anticipate recovering damages in excess of $25,000 based on the information available at filing; and (2) the case could have been litigated fairly and effectively as a limited civil matter, then the trial court may deny an award of attorney’s fees in whole or in part. When denying fees in part, the Court explained that the trial court should only award an amount “that is reasonable in relation to the results obtained.” If the plaintiff only prevails on some of his or her claims, then fees should not be awarded “for time spent litigating claims unrelated to the successful claims.”
Practical Effect
Prior to the Court’s ruling in Chavez, one of the major concerns of employers has been the risk of substantial fee awards in cases involving only nominal damages. While the Supreme Court’s ruling does not eliminate that risk in its entirety, it is a move in the right direction. In cases where there is little in the way of special and emotional distress damages, employers may be able to use Chavez to open the door to early settlement opportunities now that plaintiff attorneys run the risk of coming up empty-handed if they miscalculate the extent of their client’s damages.
For additional information on these and other employment law updates, employers are encouraged to seek legal counsel.
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