Opinion
I. Introduction
This case is a companion to
Beasley
v.
Wells Fargo Bank,
A048490,
ante,
page 1383 [
We hold as follows: (1) the award was not precluded by the fact the litigation resulted in a common fund recovery from which attorney fees could have been paid; (2) this consumer protection action was in the public interest for purposes of a private attorney general award; (3) the trial judge did not abuse his discretion in applying a lodestar multiplier to the fee award; and (4) expert witness fees and other nonrecoverable expenses may be awarded under the private attorney general statute.
II. Background
After judgment on the merits, the plaintiffs moved for an award of $1,133,570 in “lodestar” attorney fees with a 2.0 multiplier, $11,157 in recoverable costs (Code Civ. Proc., § 1033.5), $198,679 in expenses (primarily expert witness fees) that were nonrecoverable as ordinary costs (id., § 1033.5, subd. (b)), and $51,433 in additional attorney fees for preparing the fee request. The judge granted the motion, citing as alternative grounds for recovery the private attorney general statute (id., § 1021.5) and the reciprocal contractual attorney fees statute (Civ. Code, § 1717). The judge’s order on the motion deviated from the plaintiffs’ request in three respects: it applied a multiplier of 1.5 rather than 2.0 to the lodestar attorney fees (for an increased attorney fee award of $1,700,355) due to the plaintiffs’ partial lack of success on the merits, it awarded $196,997 rather than $198,679 in nonrecoverable expenses, and it awarded $50,000 rather than $51,433 for *1413 preparation of the fee request. The court rendered a judgment incorporating the order, and Wells Fargo filed a timely notice of appeal.
III. Discussion
A. Code of Civil Procedure Section 1021.5
Wells Fargo first challenges the award of attorney fees to the extent it was based on Code of Civil Procedure section 1021.5.
1
The private attorney general statute permits a fee award when the following criteria are met: (1) the action “has resulted in the enforcement of an important right affecting the public interest,” (2) “a significant benefit” has been “conferred on the general public or a large class of persons,” (3) “the necessity and financial burden of private enforcement are such as to make the award appropriate,” and (4) the fees “should not in the interest of justice be paid out of the recovery, if any.” (§ 1021.5; see
Los Angeles Police Protective League
v.
City of Los Angeles
(1986)
1. The financial burden and interest of justice criteria.
Wells Fargo argues that in class action litigation that yields a common fund recovery, attorney fees should not be awarded under section 1021.5 because they may be paid from the common fund, 2 so that there is no financial burden from private enforcement beyond the usual American practice of requiring litigants to bear their own attorney fees, and hence the interests of justice do not preclude payment from the frind.
This is essentially an issue of first impression. There is only one published opinion on point,
Bank of America
v.
Cory
(1985)
It is generally said that the financial burden criterion of section 1021.5 is satisfied when the cost of litigation is disproportionate to the plaintiff’s “individual” stake in the matter. (E.g.,
Baggett
v.
Gates
(1982)
The problem with this argument is that although it is persuasive to the extent we should not limit our inquiry to each plaintiff’s individual stake, it is based on a fundamental misconception that the focal point is the common fund that is actually recovered. As amici curiae point out, in comparing the cost of litigation to the plaintiffs’ stake in the matter, we do not look at the plaintiffs’
actual
recovery after trial, but instead we consider “the
estimated value
of the case at the time the vital litigation decisions were being made . . . .”
(Los Angeles Police Protective League
v.
City of Los Angeles, supra,
188 Cal.App.3d at pp. 9-10, italics added.) In other words, the inquiry looks forward from the outset of counsel’s vital litigation decisions, rather than backward after judgment. This is because the purpose of section 1021.5 is to encourage public interest litigation by offering the “bounty” of a court-ordered fee (
The opinion in
Los Angeles Police Protective League
prescribes a two-step process for determining the “estimated value” of the case. First, the court must determine the monetary value of the “gains actually attained” by the successful litigants. Second, the court “must discount these total benefits by some estimate of the probability of success at the time the vital litigation decisions were made . . . .” (
*1415
Once estimated value is determined, it is compared to actual litigation costs. In general, a fee award will be appropriate unless estimated value “exceeds by a substantial margin the actual litigation costs.” (
Also, the financial burden criterion is interrelated with the other pertinent criteria under section 1021.5. If public benefits are very significant, it is more important to encourage litigation, and thus it may be appropriate to award fees under section 1021.5 “even in situations where the litigant’s own expected benefits exceed its actual costs by a substantial margin.” (
Thus, the following rule may be extrapolated from the Los Angeles Police Protective League opinion: If the estimated value of a class action common fund recovery, determined as of the time the vital litigation decisions were being made, does not exceed actual litigation costs by a substantial margin, the financial burden of private enforcement is such as to make it appropriate to award attorney fees under section 1021.5. In contrast, if estimated value is substantially more than actual litigation costs, there should be no award under section 1021.5 unless public benefits are very significant.
The record in the present case does not indicate whether the trial judge followed the procedures set forth in
Los Angeles Police Protective League
for assessing the financial burden criterion. That omission, however, is inconsequential. When public interest litigation has resulted in a decision by an appellate court, and there is a subsequent appeal from a fee award, the appellate court is in just as good a position as the trial judge to determine the issue of estimated value, and may do so independently. (
We must first determine the estimated value of this case, i.e., actual recovery discounted by probability of success at the time of the vital litigation decisions. We view the amount of the actual recovery as being the full $5,227,617 in the common fund—not merely each plaintiff’s individual stake—since the entire fund is available to pay attorney fees under the common fund doctrine.
*1416
Wells Fargo claims that any calculation of estimated value should be made by reference to the full amount sought by the plaintiffs at the outset of the litigation (purportedly more than $23 million) rather than the actual recovery. The opinion in
Los Angeles Police Protective League
leaves some room for this sort of argument. Although the court said “gains actually attained” must be discounted by probability of success, the court also said “the litigants must discount any monetary benefits
they hope to achieve
by the probability of success.” (
Quantifying the probability of success is more difficult. However, in view of the complexity of the case (which in large measure turned on arcane accounting disputes), and the limited litigation resources available to the plaintiffs as compared with the virtually unlimited resources available to Wells Fargo, it is safe to say that the plaintiffs’ likelihood of success was no greater than 50 percent, and probably much less.
Thus, the estimated value of the case was no greater, and probably much less, than half the amount of the recovery, or $2,613,808. It remains for us to compare this sum with actual litigation costs. We view those costs as being the full amount awarded, less the 1.5 lodestar multiplier, or $1,391,724. We do not include the multiplier for purposes of the financial burden criterion because the risk in pursuing the case, for which a multiplier is utilized, has been considered as a factor in quantifying the probability of success.
Comparing estimated value of $2,613,808 or less with actual litigation costs of $1,391,724, we find it a close issue whether estimated value “exceeds by a
substantial margin
the actual litigation costs.”
(Los Angeles Police Protective League
v.
City of Los Angeles, supra,
We therefore conclude that even if the estimated value of this case is viewed as exceeding actual litigation costs by a substantial margin, the public benefits from the litigation are so significant that an award of fees under section 1021.5 is appropriate. (
2. The public interest criterion.
Wells Fargo also contends this litigation did not result “in the enforcement of an important right affecting the public interest” (§ 1021.5) because it vindicated only the private rights of Wells Fargo cardholders, rather than benefitting the public as a whole, and thus there was no public interest at stake.
This argument confuses the question whether there was an important public interest at stake with the question whether a “significant benefit” has been “conferred on the general public or a large class of persons . . . .” (§ 1021.5, subd. (a).) The significant benefit criterion calls for an examination whether the litigation has had a beneficial impact on the public as a whole or on a group of private parties which is sufficiently large to justify a fee award. This criterion thereby implements the general requirement that the benefit provided by the litigation inures primarily to the public.
(Marini
v.
Municipal Court
(1979)
For example, in
Angelheart
v.
City of Burbank
(1991)
The present action to recover excessive fee assessments on behalf of hundreds of thousands of Wells Fargo customers, on the ground the fees were not valid as liquidated damages (Civ. Code, § 1671, subd. (d)), is appropriately characterized as a consumer protection action. (See Cal. Law Revision Com. com., 9 West’s Ann. Civ. Code, § 1671 (1985) p. 497 [Deering’s Ann. Civ. Code, § 1671 (1991 pocket supp.) p. 30].) Such actions have long been judicially recognized to be vital to the public interest. (E.g.,
Vasquez
v.
Superior Court
(1971)
We conclude the financial burden, interest of justice and public interest criteria were satisfied in this case, and thus the plaintiffs were properly awarded their attorney fees under section 1021.5. 4
B. The Lodestar Multiplier
Next, Wells Fargo challenges the court’s decision to apply the 1.5 lodestar multiplier to the award of attorney fees. The standard of review is abuse of discretion: the trial judge was in the best position to determine the value of the professional services rendered by plaintiffs’ counsel, and we may not disturb the judge’s decision on this point unless we are convinced it was clearly wrong.
(Serrano
v.
Priest, supra,
Wells Fargo contends the multiplier was inappropriate because the plaintiffs’ success was “limited” and “not exceptional,” in that four of their causes of action were unsuccessful and they achieved only a partial recovery on the liquidated damages theory. (See
Sokolow
v.
County of San Mateo
(1989)
Wells Fargo also challenges the trial judge’s reliance on the “contingency risk factor” as a basis for the multiplier. The judge said this factor, as evidenced in part by the expert witness declarations, demonstrated “that this kind of consumer class action litigation would not be pursued by counsel but for the expectation of receiving enhanced fee awards in successful cases.” The bank argues that plaintiffs’ counsel did not establish they had failed to recover full compensation in other consumer class actions, and thus failed to show justification for an enhancement in this case as compensation for such losses. This argument betrays an unduly narrow construction of the contingency risk factor. A multiplier might benefit counsel by making up for specific past losses, but that is not the primary purpose of the enhancement. The purpose is to compensate for the
risk
of loss generally in contingency cases
as a class. (Fadhl
v.
City and County of San Francisco
(9th Cir. 1988)
C. Expert Witness Fees and Other Nonrecoverable Expenses
Finally, Wells Fargo challenges the award of counsel’s expenses in the sum of $196,997 that were nonrecoverable as ordinary costs. (§ 1033.5, subd. (b).) Most of these expenses ($178,589) were expert witness fees; the remainder were for photocopying, postage, travel and the like.
Wells Fargo contends such expenses should not be awarded in a private attorney general action because they are not expressly authorized by section 1021.5 and are not “attorney fees” within the meaning of the statute. (See § 1033.5, subd. (b) [such expenses are not recoverable as costs “except when
*1420
expressly authorized by law”].) The bank relies on
West Va. Univ. Hospitals
v.
Casey
(1991)
There is a crucial difference, however, with regard to section 1021.5. California’s private attorney general statute was an explicit reaction to
Alyeska Pipeline Co.
v.
Wilderness Society
(1975)
Because our Legislature relied heavily on the pre-Alyeska federal decisions in enacting section 1021.5, we must assume the Legislature intended to adopt the pre-Alyeska federal practice of awarding expert witness fees and similar expenses when attorney fees were recoverable in private attorney general cases, consistent with the guiding purpose of encouraging public interest litigation. This indicator of legislative intent outweighs any inference we might otherwise draw from statutory comparisons of the sort conducted in Casey.
42 United States Code section 1988 was similarly enacted in response to
Alyeska,
but the majority and dissenting opinions in
Casey
disagreed regarding the extent to which that statute had been intended to return the federal courts to the
pre-Alyeska
law. The majority concluded that because the statute is both broader and narrower than the
ptt-Alyeska
“regime,” it had not been intended to return the federal courts “precisely” to the former law, and thus there was no reason to depart from the “normal import” of the statute’s text.
(West V.A. Univ. Hospitals
v.
Casey, supra,
499 U.S. at p._ [
We conclude that, consistent with the
pre-Alyeska
federal practice underlying the enactment of section 1021.5, expert witness fees and other
*1422
nonrecoverable expenses incurred by counsel may be awarded under section 1021.5 if, as is undisputed here, they represent expenses ordinarily billed to a client and are not included in the overhead component of counsel’s hourly rate. (See
Bussey
v.
Affleck
(1990)
D. Attorney Fees on Appeal
The plaintiffs request an award of their attorney fees for successfully defending both appeals. We conclude that, as at the trial level, they are entitled to such an award under section 1021.5.
(Laurel Heights Improvement Assn.
v.
Regents of University of California
(1988)
IV. Disposition
The judgment is affirmed.
Perley, Acting P. J., and Stein, J., * concurred.
Appellant’s petition for review by the Supreme Court was denied March 12, 1992. Baxter, J., did not participate therein. Lucas, C. J., and Panelli, J., were of the opinion that the petition should be granted.
Notes
All further statutory references are to the Code of Civil Procedure unless otherwise indicated.
Under the common fund theory, “when a number of persons are entitled in common to a specific fund, and an action brought by a plaintiff or plaintiffs for the benefit of all results in the creation or preservation of that fund, such plaintiff or plaintiffs may be awarded attorney’s fees out of the fund.”
(Serrano
v.
Priest
(1977)
Wells Fargo also advances a policy argument that section 1021.5 should never be applied in common fund cases because deduction of fees from the fund would provide an incentive for the plaintiffs to litigate more “efficiently.” Whatever merit there might be in this argument is eclipsed by section 1021,5’s purpose of encouraging public interest litigation.
We therefore need not address Wells Fargo’s arguments challenging the propriety of the award under Civil Code section 1717, which the trial court asserted as an alternative ground.
E.g., Business and Professions Code section 8768.5 (actions to compel county surveyor to file record of survey); Civil Code sections 987, subdivision (e)(4) and 989, subdivision (f)(1) (actions to protect artwork from alteration or destruction); Civil Code section 1745, subdivision (d) (actions against art dealer for lack of full disclosure); Civil Code section 7011 (paternity actions); Code of Civil Procedure section 1036 (inverse condemnation actions); Code of Civil Procedure section 1038, subdivision (b) (pretrial dispositions in bad faith actions for indemnity/contribution or under the Tort Claims Act); Code of Civil Procedure section 1235.140 (eminent domain actions); Corporations Code section 1305, subdivision (e) (actions to determine fair market value of dissenting shares); Government Code section 8670.56.5, subdivision (e), and Harbors and Navigation Code section 294, subdivision (e) (actions for damages from oil spill).
The district court decisions in Pyramid Lake and Bradley were reversed by the circuit courts on the ground, later embraced in Alyeska, that attorney fees should not be recoverable in federal private attorney general actions without specific statutory authorization. (Pyramid Lake Paiute Tribe of Indians v. Morton, supra, 499 F.2d at pp. 1096-1097; Bradley v. School Board of City of Richmond, Virginia, supra, 472 F.2d at pp. 327-331.) The appellate decisions did not dispute the proposition that if attorney fees were recoverable, so were expert witness fees and similar expenses.
We therefore need not address Wells Fargo’s additional argument that expert witness fees and the like may not be awarded under Civil Code section 1717, which the trial court asserted as an
alternative
ground for the award. (See also
ante,
fn. 4.) In any event, we rejected this argument in
Bussey
v.
Affleck, supra,
Associate Justice of the Court of Appeal, First District, Division One, sitting under assignment by the Chairperson of the Judicial Council.
