Labor & Employment Law

California Supreme Court Trims Back Attorney Fees For Plaintiffs Attorneys -- Chavez v. City of Los Angeles

Most employment law claims, including most claims for discrimination and unpaid wages, require the award of attorney fees to a "prevailing plaintiff."  Indeed, it is very common for a Plaintiff to recover tens of thousands in damages at trial and yet be awarded hundreds of thousands of dollar to compensate his attorney for the time spent on the case.  This creates a strong incentive for employers to reach early settlement in small dollar cases before the accumulated attorney fees become the driving economic factor in the case.  Many an employer has settled a case based on the threat that "if plaintiff recovers one dollar, you will have to pay all of his attorney fees."

The recent California Supreme Court decision in  Chavez  v. City of Los Angeles threatens to change that dynamic by giving trial courts the discretion to severely limit the recovery of attorney fees where a plaintiff achieves only limited success.  In Chavez the plaintiff sued and won at trial in an action for discrimination in violation of the California Fair Employment and Housing Act the ("FEHA").  At trial, however, she recovered a mere $11,500 in damages.  Yet her attorneys claimed a whopping $870,935.50 in fees for prevailing in the case.  

The Supreme Court decided that "in light of plaintiff's minimal success and grossly inflated attorney fee request, the trial court did not abuse its discretion in denying [all] attorney fees."   In reaching this result, the Court articulated the following guidelines for trial courts to consider in deciding whether to reduce, or even deny outright, any fee request.

• Where a plaintiff brings an "unlimited civil action" and yet recovers less than $25,000 (which is the maximum jurisdictional threshold for a streamlined "limited" civil action), the trial court has greater discretion to deny the request  for fees.
• Plaintiffs are not entitled to recover for attorney time expended on any factually distinct claim on which they did not prevail.
• 'A fee request that appears unreasonably inflated is a special circumstance permitting the trial court to reduce the award or deny one altogether."

The bottom line is that Plaintiffs attorneys can no longer assume that they will be permitted to recover all of their fees even if they prevail.  If a request is grossly disproportionate to the plaintiff's actual recovery they will face the prospect of taking a substantial "haircut" on their fees.  Indeed, if the trial judge believes they are being greedy or padding their fee request they may get nothing at all.   

Full post as published by California Labor & Employment Defense Blog on February 27, 2010 (boomark / email).