Justice May Be Blind, But She Knows Who’s Holding the Checkbook

Your former administrative assistant has sued you in a California Superior Court for gender-based discrimination under the California Fair Employment and Housing Act (FEHA). You have tried to settle the case for a reasonable amount, but your ex-employee isn’t in the mood to be reasonable. The jury trial is scheduled to last two weeks. At the close of the plaintiff’s case, after six days of trial, the judge grants your attorney’s motion for nonsuit.

It’s all over. All that worry, all that money, all those endless meetings with your attorney have paid off. Your lawyer did a great job. She must have, because defense costs in the case are over six figures. You won the case hands down. Are you allowed to get that money back from the person who sued you?

As with most things legal, the answer is, “it depends.” It depends on the case, the court you’re in, the claims made against you, and the judge.

By their very nature, attorney fee awards are squirrelly critters. In law school, attorneys learn about the “English rule” and the “American rule” for awarding attorneys’ fees. Under the English system, the loser in a civil lawsuit generally has to pay his opponent’s attorneys’ fees in addition to his or her own. The assumption this system makes is that litigants and their counsel will be more reluctant to file a frivolous lawsuit if they know that they will be responsible for the other guy’s legal fees if the case turns out to be a loser.

Like many other practices of the British, the “English rule” just wasn’t democratic enough for our forbears in the New World, so along with the Bill of Rights and the Boston Tea Party, America is home to the “American rule” for attorney fee awards. Under the American system, each party to a civil lawsuit must generally bear his or her own legal costs and fees, regardless of who wins and who loses.

There are numerous exceptions to this general rule. For example, parties to a contract have the absolute right to decide between them who will pay the legal fees and costs in the event there is litigation involving the subject matter of the contract. If the court finds that the contract is enforceable, then the attorneys’ fees provision of the contract will be enforced consistent with the parties’ intentions as expressed in the contract.

Statutory law provides another vast universe of exceptions to our general rule that each party bears its own fees and costs. Our legislators have determined that society as a whole will benefit if attorneys are encouraged to undertake the representation of individuals in certain kinds of lawsuits, i.e. those that advance, at least in theory, the public good. As incentive for lawyers to take on the representation of clients in these cases, there are now a number of statutory schemes under which the losing party must pay attorneys’ fees in favor of the party who wins.

In California, Government Code section 12965(b) provides in part that “the court, in its discretion, may award to the prevailing party reasonable attorneys’ fees and costs” in cases brought under the FEHA. However, almost without exception, the courts’ discretion has been exercised to award attorneys’ fees to the prevailing party only if the prevailing party happened to be the plaintiff. A prevailing defendant was generally still left out in the cold.

This “you only get your attorneys’ fees back if you’re the plaintiff” mentality comes to us from a series of US Supreme Court and California Appellate Court cases. These cases have consistently held that a victorious plaintiff in an employment discrimination case should recover his or her attorneys’ fees unless special circumstances would render such an award unjust. In lawyer speak, that means the employee, if successful, almost always gets attorneys’ fees from the defendant employer.

The appellate courts have held that the purpose of the statutory attorney fee provisions was to ensure that plaintiffs with limited financial resources could maintain employment discrimination actions, and that society as a whole would benefit from the largesse of this policy.

On the other hand, this same line of cases has generally held that a prevailing defendant should recover attorneys’ fees only if the action was found to be “unreasonable, frivolous, meritless or vexatious.” Again, in real life, the prevailing employer is almost never able to meet the burden of proof to establish frivolous litigation to the satisfaction of the trial judge, who has the discretion to award attorneys’ fees (or not) to the prevailing party. And even if the employer should somehow manage to beat the odds, the chances of the it actually being able to collect on an attorneys’ fees judgment are slim to none.

How does all of this play out in reality? Well how it plays out is that it makes lawsuits brought under the FEHA difficult and expensive to settle, because the plaintiff’s attorneys have a built-in incentive to keep generating attorneys’ fees. So even though the value of the plaintiff’s case (in terms of actual damages/lost wages and so forth) may be nominal, the threat of an enormous statutory attorneys’ fees award against the employer is always present. All too often, this becomes the giant tail that wags what is otherwise a rather petite dog.

A few years ago, there appeared to be a glimmer of hope that California trial and appellate court judges were growing inpatient with the status quo. In January of 2010, the California Supreme Court issued its decision in the matter of Chavez v. City of Los Angeles. In Chavez, the plaintiff worked as a police officer for the LAPD. The case alleged a series of particularly bizarre and dramatic employment events. These included allegations that Chavez stole payroll checks, an allegation by Chavez that his house was under surveillance by LAPD helicopters who were “spying” on him and his wife, etc. Chavez ultimately filed a complaint against the City under the FEHA alleging unlawful employment discrimination on the basis of race, color, marital status, medical condition, national origin/ancestry and disability.

After five years of litigation, Chavez went to trial and won his case. Well, actually, he prevailed on only one of the myriad claims he brought against the City. But in any event, he was awarded damages in the whopping amount of $11,500 by a jury of his peers.

After trial, Chavez’ attorneys submitted a bill for recovery of statutory attorneys’ fees in the amount of $870,935.50. Yes, you read that number right. They spent nearly a million bucks to get an award that could have been obtained in small claims court.

The trial court denied the motion for attorneys fees. Chavez appealed from the order denying attorneys fees, and, shockingly, the appellate court found that the trial court had abused its discretion in denying the motion. The City of Los Angeles appealed to the California Supreme Court who granted review. The Supreme Court ultimately determined that a claim for statutory attorneys’ fees may be denied or reduced where the attorneys’ fees were unreasonably inflated in light of the plaintiff’s “modest” success at trial.

Five years on, it seems unlikely that the Chavez decision has heralded a new era of legislative reform. For the time being, it is prudent to assume that if you are the prevailing defendant in a California FEHA case, you will not recover your attorneys’ fees from the person or persons who sued you. It is also reasonable to assume that unless the plaintiff’s success is truly nominal and is combined with an outrageously inflated attorneys’ fees bill, you are still going to be stuck paying for the other guy’s attorneys fees.

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