ROBERT GRAHAM et al., Plaintiffs and Respondents, v. DAIMLERCHRYSLER CORPORATION, Defendant and Appellant.
No. S112862
Supreme Court of California
Dec. 2, 2004
34 Cal.4th 553 | 21 Cal. Rptr. 3d 331 | 101 P.3d 140
Gibson, Dunn & Crutcher, Theodore J. Boutrous, Jr., DoHoang T. Duong, Gregory D. Brown, Dominic Lanza; Bryan Cave, Sheldon Eisenberg, Charles A. Newman, John W. Rogers; Robert E. Norton II and Mary E. Waldrup for Defendant and Appellant.
Somach, Simmons & Dunn, Timothy M. Taylor, Nicholas A. Jacobs, Christian C. Scheuring for Western Placer Waste Management Authority as Amicus Curiae on behalf of Defendant and Appellant.
Ruth Sorensen and Jennifer B. Henning for California State Association of Counties as Amicus Curiae on behalf of Defendant and Appellant.
Fred J. Hiestand for Civil Justice Association of California as Amicus Curiae on behalf of Defendant and Appellant.
Daniel J. Popeo, Paul D. Kamenar; Latham & Watkins, Jennifer F. Ziegaus and Daniel P. Brunton for Washington Legal Foundation as Amicus Curiae on behalf of Defendant and Appellant.
Law Offices of Richard M. Pearl, Richard M. Pearl; Kemnitzer, Anderson, Barron & Ogilvie, Andrew J. Ogilvie, Mark F. Anderson and Bryan A. Kemnitzer for Plaintiffs and Respondents.
Bill Lockyer, Attorney General, Manuel M. Medeiros, State Solicitor General, Richard M. Frank, Chief Assistant Attorney General, Theodora Berger, Assistant Attorney General, and Edward G. Weil, Deputy Attorney General, as Amici Curiae on behalf of Plaintiffs and Respondents.
F. Paul Bland, Kerry-Ann T. Powell, Victoria W. Ni and Arthur H. Bryant for Trial Lawyers for Public Justice, AARP, ACLU of Northern California, ACLU of San Diego and Imperial Counties, ACLU of Southern California, Asian Law Caucus, Asian Pacific American Legal Center of Southern California, Bet Tzedek-The House of Justice, California League for Environmental Enforcement Now, California Women‘s Law Center, Disability Rights Advocates, Disability Rights Education and Defense Fund, Inc., the First Amendment Project, The Impact Fund, Law Offices of Joaquin G. Avila, Lawyers’ Committee for Civil Rights of the San Francisco Bay Area, Legal Aid Foundation of Los Angeles, Mexican American Legal Defense and Educational Fund, National Association of Consumer Advocates, National Center for Youth Law, Prison Law Office, Protection and Advocacy, Inc., Public Advocates, Inc., Public Citizen, Public Counsel, Public Interest Law Project, Rosen, Bien & Asaro, Western Center on Law and Poverty,
Esner & Chang, Stuart B. Esner; Rohde & Victoroff and Stephen F. Rohde for Los Angeles County Bar Association and Beverly Hills Bar Association as Amici Curiae on behalf of Plaintiffs and Respondents.
Chavez & Gertler, Mark A. Chavez and Kim E. Card for the Bar Association of San Francisco as Amicus Curiae on behalf of Plaintiffs and Respondents.
The Sturdevant Law Firm, James C. Sturdevant; Ian Herzog; Michael Adler; Sharon J. Arkin; Stuart B. Enser; Brian S. Kabateck, David A. Rosen; Daniel U. Smith; Christine D. Spagnoli; Lea-Annn Tratten; Steven B. Stevens; and Scott H. Z. Sumner for Consumer Attorneys of California as Amicus Curiae on behalf of Plaintiffs and Respondents.
Mark Savage for Consumers Union of U.S., Inc., as Amicus Curiae on behalf of Plaintiffs and Respondents.
Fazio & Micheletti, Jeffrey L. Fazio and Dina E. Micheletti for Friends of the Earth, Inc., as Amicus Curiae on behalf of Plaintiffs and Respondents.
Claudia Center, Elizabeth Kristen; and Linda Kilb for the Legal Aid Society-Employment Law Center and Disability Rights Education and Defense Fund as Amici Curiae on behalf of Plaintiffs and Respondents.
OPINION
MORENO, J.-In this case defendant offered to repurchase a truck that had been marketed with false statements about its towing capacity. This offer came after a lawsuit plaintiffs filed against defendant seeking this repurchase remedy, but before any kind of court judgment was rendered. Plaintiffs were awarded substantial attorney fees under
Defendant also contends the trial court erred in concluding that the present lawsuit substantially benefited a large group of people or the general public, as required by
I. STATEMENT OF FACTS
The facts, taken largely from the Court of Appeal‘s opinion, are as follows:
DaimlerChrysler incorrectly marketed its 1998 and 1999 Dakota R/T trucks as having a 6,400-pound towing capacity when they could actually tow only 2,000 pounds. The error occurred because the Dakota R/T was a sporty version of an existing truck model, which could tow 6,400 pounds. However, to obtain a sporty design, DaimlerChrysler lowered the suspension on the Dakota R/T, thus reducing its towing capacity.
The reduced towing capacity was a potential risk factor. The lowered suspension meant that towing more than 2,000 pounds would cause the suspension to bottom out, stressing the frame and increasing fatigue and wear. The DaimlerChrysler response team considered this a potential safety issue.
Buyers who wanted to tow more than 2,000 pounds were told they could do so only if their Dakota R/T was modified with a trailer hitch costing $300. The factory installed some of these hitches, while other buyers who wanted to tow had dealer-installed or after-market hitches attached.
Nationwide, DaimlerChrysler sold or leased fewer than 7,000 of the Dakota R/T‘s in the two relevant years. Fewer than 1,000 affected R/T‘s were sold in California during the two years.
Many Dakota R/T buyers never intended to tow more than 2,000 pounds. When informed by DaimlerChrysler of the error, most of those customers were satisfied with DaimlerChrysler‘s offers of cash and merchandise.
Initially, DaimlerChrysler offered $300 refunds to buyers who had purchased hitches of that amount. By the summer, DaimlerChrysler authorized dealers to repurchase or replace Dakota R/T‘s on a case-by-case basis, but only for customers who demanded such a remedy.
On July 29, 1999, the Santa Cruz County District Attorney contacted DaimlerChrysler about the problem, threatened legal action, and requested DaimlerChrysler‘s input before acting. On August 10, 1999, the California Attorney General notified DaimlerChrysler it had joined the Santa Cruz County District Attorney. The public agencies requested a response by the end of August 1999.
Plaintiffs filed their case on August 23, 1999, in Los Angeles County Superior Court. Plaintiffs alleged they all bought 1999 Dakota R/T‘s from various DaimlerChrysler dealers. Only Graham lived and bought his truck in California. Plaintiffs alleged DaimlerChrysler marketed, sold, and warranted their 1998 and 1999 Dakota R/T‘s as capable of towing 6,400 pounds when the trucks actually could tow only 2,000 pounds. Plaintiffs alleged DaimlerChrysler acknowledged the error by letter to all purchasers dated June 16, 1999. Plaintiffs alleged they notified DaimlerChrysler of their (1) trucks’ failure to comply with the warranted towing capacity, and (2) revocation of their acceptance of their trucks on July 19, 1999. Plaintiffs sought (but never obtained) class certification for all those who bought Dakota R/T‘s nationwide. Plaintiffs alleged a single breach of express warranty cause of action. Plaintiffs sought return of their purchase or lease payments, compensatory damages, and attorney fees. Also on August 23, 1999, the Detroit News contacted DaimlerChrysler‘s legal counsel about plaintiffs’ case. DaimlerChrysler‘s counsel claimed DaimlerChrysler had responded appropriately to the marketing error, including offering buybacks to customers who
DaimlerChrysler‘s response team met throughout August 1999. The team knew about both public agency inquiries and the response deadline. Indeed, DaimlerChrysler wrote the public agencies that its internal approval process prohibited a response by August 31, but promised a response by September 8, 1999. On September 10, 1999, DaimlerChrysler issued its offer to all previous Dakota R/T buyers of repurchase or replacement. In response to later inquiries, response team members conceded they were aware of the class action lawsuit filed in California before DaimlerChrysler‘s September 10, 1999, letter offering repurchase or replacement to all Dakota R/T buyers.
DaimlerChrysler demurred to the complaint. Plaintiffs filed an amended complaint, acknowledging DaimlerChrysler‘s offer of, among other remedies, repurchase or replacement of the trucks for all previous buyers. The trial court sustained the demurrer without leave to amend and dismissed the case, finding it was moot because DaimlerChrysler already had offered all purchasers the relief plaintiffs sought. Meanwhile, the public agencies continued to pursue legal action against DaimlerChrysler, pointing to the fact that the erroneous marketing of the Dakota R/T continued as late as September 1999. In late 2000, DaimlerChrysler settled the public agency investigations by paying a $75,000 fine and agreeing to ensure that the marketing error did not reoccur. Nationwide, 2,549 Dakota R/T buyers opted for repurchase or replacement. Another 3,101 buyers opted for service contracts and parts coupons. The total value of these offers exceeded $15 million. Fewer than 1,000 of the R/T buyers were Californians.
Although plaintiffs’ case was dismissed, the parties continued to litigate plaintiffs’ entitlement to attorney fees. DaimlerChrysler insisted throughout that plaintiffs were not entitled to attorney fees, contending plaintiffs had no effect on DaimlerChrysler‘s recognition of the problem and decision to offer all buyers repurchase or replacement. For over a year, there were hotly contested discovery and other motions to clarify the facts described above. The court held a lengthy evidentiary hearing on October 18, 2000. DaimlerChrysler contended that the Dakota R/T response team was not even aware of the litigation until after September 10, 1999, when its repurchase offer was made, a position that the trial court found to lack credibility.
The trial court filed its final order awarding attorney fees on July 6, 2001. The court concluded after its review of the declarations and documentary evidence presented that DaimlerChrysler‘s “position that the lawsuit was not a catalyst was largely a transparent fabrication . . . .” It rejected
In addition to finding that plaintiffs were the successful party, the trial court found the other requirements of
The court also concluded that “DaimlerChrysler should pay plaintiffs attorneys fees in the interest of justice. Plaintiffs’ attorney fees will otherwise go unpaid. Fees cannot be paid out of the benefits conferred upon the consumers because DaimlerChrysler . . . distributed the benefits of [its] offer to the consumers without any discussion with plaintiffs or their attorneys. Justice is served by encouraging lawyers to bring meritorious consumer cases, of which this action is an example.”
The trial court found the lodestar fee amount was $329,620 through the October 18, 2000, hearing, with a multiplier of 2.25 for the fees incurred until the October 18, 2000, hearing, including fees for litigating attorney fees, and applied no multiplier for time thereafter. The court awarded no fees for work after April 23, 2001. The total award was $762,830.
The Court of Appeal affirmed. It observed that the United States Supreme Court had recently rejected the catalyst theory as a basis for attorney fee awards under various federal statutes in Buckhannon Board & Care Home, Inc. v. West Virginia Dept. of Health and Human Resources (2001) 532 U.S. 598 [149 L.Ed.2d 855, 121 S.Ct. 1835] (Buckhannon). But the court declined to follow the United States Supreme Court‘s lead, noting that the catalyst theory has been long recognized in California. The court also rejected arguments that the litigation was not in the public interest and that it did not benefit a substantial number of people. Further, the court concluded that the trial court did not abuse its discretion in awarding fees for seeking fees, and in permitting those fees to be enhanced over the basic lodestar amount. We granted review.
A. Whether the Catalyst Theory Should Be Abolished
An important exception to the American rule that litigants are to bear their own attorney fees is found in
In order to effectuate that policy, we have taken a broad, pragmatic view of what constitutes a “successful party.” “Our prior cases uniformly explain that an attorney fee award may be justified even when plaintiff‘s legal action does not result in a favorable final judgment. (Westside Community, [supra,] 33 Cal.3d 348, 352 [188 Cal.Rptr. 873, 657 P.2d 365];
The catalyst theory is an application of the above stated principle that courts look to the practical impact of the public interest litigation in order to determine whether the party was successful, and therefore potentially eligible for attorney fees. We specifically endorsed that theory in Westside Community, supra, 33 Cal.3d 348. The plaintiffs in that case sued to compel the Secretary of the Health and Welfare Agency to issue regulations implementing
We further observed that “[n]umerous federal decisions have reached the same conclusion, holding that attorney fees may be proper whenever an
Robinson v. Kimbrough, supra, 652 F.2d 458 (Robinson), cited with approval in Westside Community, provides a useful example of the catalyst theory‘s application. The plaintiffs filed suit in federal district court alleging that Harris County, Georgia, jury commissioners had compiled jury lists, from which grand and petit juries were summoned, with disproportionately low percentages of Blacks and women, resulting in their underrepresentation on the county‘s juries. One month after the complaint was filed, the jury commissioners, in a nonadversarial proceeding that did not involve the plaintiffs, requested a county judge to order them to recompile jury lists to obtain a more representative cross-section. The court order was required because the jury commissioners were not authorized to revise jury lists other than biennially, and the regular revision had been recently completed. The court granted the order and the jury lists were revised. The district court then dismissed the plaintiffs’ suit as failing to raise a substantial constitutional question. The plaintiffs appealed and the court of appeals held that, in light of the revised jury lists and certain statutory changes during the pendency of the appeal, the plaintiffs’ challenge was moot. The plaintiffs therefore never received judicial relief. (652 F.2d at pp. 460-462.)
Nonetheless, the court of appeals in subsequent proceedings affirmed that plaintiffs may be entitled to an award of attorney fees pursuant to the
The Westside Community court, although endorsing the catalyst theory found in Robinson and other federal cases, nonetheless went on to conclude that no attorney fees were owed in that case because there was no demonstrable causal connection between the lawsuit and the government‘s action. (Westside Community, supra, 33 Cal.3d at pp. 353-354.)
We continue to conclude that the catalyst theory, in concept, is sound. The principle upon which the theory is based-that we look to the “impact of the action, not its manner of resolution” (Folsom, supra, 32 Cal.3d at p. 685)-is fully consistent with the purpose of
DaimlerChrysler argues that we should reevaluate that endorsement in light of the rejection of the catalyst theory by the United States Supreme Court in Buckhannon, supra, 532 U.S. 598. At the outset we state what hardly needs stating: that United States Supreme Court interpretation of federal statutes does not bind us to similarly interpret similar state statutes. Indeed, in the realm of attorney fees for private attorneys general, this court
In Buckhannon, the plaintiffs sued alleging that certain state law requirements imposed on their assisted living facility violated the
A good deal of the Buckhannon court‘s reason for rejecting the catalyst theory turns on the definition of “prevailing party.” The Buckhannon majority found the term “prevailing party” to be “a legal term of art,” defined according to Black‘s Law Dictionary (7th ed. 1999) at page 1145 as ” ‘[a] party in whose favor a judgment is rendered, regardless of the amount of damages awarded <in certain cases, the court will award attorney‘s fees to the prevailing party>. - Also termed successful party.’ ” (Buckhannon, supra, 532 U.S. at p. 603.) This definition, together with prior court decisions, led the Buckhannon majority to conclude that a “prevailing party” must be a party that has brought about a ” ‘material alteration of the legal relationship of the parties’ ” (id. at p. 604), which could include both a “judgment[] on the merits,” and a settlement agreement “enforced through a consent decree.” (Ibid.)
We agree with DaimlerChrysler that the terms “prevailing party” and “successful party,” as used in
This practical definition of prevailing or successful party is consistent with our construction of the meaning of “prevailing party” within the context of
DaimlerChrysler also contends that the catalyst theory must be rejected because
Nor are we persuaded that cases decided under a catalyst theory will inevitably give rise to complex and time-consuming litigation over the issue of causality. Case law, as well as our own judicial experience, suggests that catalyst theory cases may be resolved by relatively economical, straightforward inquiries by trial court judges close to and familiar with the litigation. (See, e.g., Southwest Center for Biological Diversity, et al. v. Carroll, supra, 182 F.Supp.2d at pp. 951-952 (opn. of Moreno, J.).) Moreover, the defendant in such cases knows better than anyone why it made the decision that granted the plaintiff the relief sought, and the defendant is in the best position to either concede that the plaintiff was a catalyst or to document why the plaintiff was not. We are unpersuaded that DaimlerChrysler‘s inability or unwillingness to do either in the present case, thereby prolonging the litigation, is necessarily attributable to the inherent difficulty of catalyst theory cases.
DaimlerChrysler further argues that overall, the benefits that the catalyst rule is supposed to possess are dwarfed by the harms the rule will engender. It contends the evil to which the catalyst rule is addressed—that meritorious plaintiffs and plaintiffs’ attorneys will be deprived of attorney fees by a favorable settlement—will be a relatively rare occurrence. It quotes the Buckhannon majority that ” ‘[I]t is well settled that a defendant‘s voluntary cessation of a challenged practice does not deprive a federal court of its power to determine the legality of the practice’ unless it is ‘absolutely clear
(1975-1976 Reg. Sess.) as introduced Mar. 31, 1975, § 1, and as amended Sept. 11, 1975, § 2.) Plaintiffs argue that this change shows that no judgment is required for a plaintiff to be considered a prevailing party. The argument does not especially advance plaintiffs’ position. “Unpassed bills, as evidences of legislative intent, have little value.” (Dyna-Med, Inc. v. Fair Employment & Housing Com. (1987) 43 Cal.3d 1379, 1396 [241 Cal.Rptr. 67, 743 P.2d 1323].) This is particularly true when, as here, the bill was rewritten so extensively. Nor do we find other legislative materials cited by the parties, none of which focus on the question at issue, particularly helpful.
We, of course, have no way of quantifying the magnitude of the potential and actual abuses by plaintiffs under a catalyst rule or by defendants under its absence. DaimlerChrysler and the Buckhannon majority‘s prediction—that defendants’ change of behavior depriving worthy plaintiffs of attorney fees will be relatively rare—is one we cannot verify. But as plaintiffs argue, what is objectionable about elimination of the catalyst theory is not only that in a given case an attorney will be unjustly deprived of fees, but that attorneys will be deterred from accepting public interest litigation if there is the prospect they will be deprived of such fees after successful litigation. (See Chemerinsky, Closing the Courthouse Doors to Civil Rights Litigants (2003) 5 U.Pa. J.Const.L. 537, 547.) As matters stand now, public interest attorneys often take a considerable risk that they will not be paid at all because they will not prevail in the litigation or because they will be deemed ineligible for fees under
Nor do we believe that avoiding this increased risk of public interest litigation must inevitably come at the expense of rewarding a significant number of extortionate lawsuits. We can adopt sensible limitations on the catalyst theory that discourage the latter without putting a damper on lawsuits that genuinely provide a public benefit. Our starting point in this endeavor is the observation that the Legislature has assigned responsibility for awarding fees under
This court has not explicitly adopted the above two-pronged test. (See Wallace v. Consumers Cooperative of Berkeley, Inc. (1985) 170 Cal.App.3d 836, 843-844 [216 Cal.Rptr. 649] [noting that some federal circuits focus only on the causal prong and that this court had not considered the Nadeau test].) We now do so. The trial court must determine that the lawsuit is not “frivolous, unreasonable or groundless” (Stivers v. Pierce, supra, 71 F.3d at p. 752, fn. 9), in other words that its result was achieved “by threat of victory, not by dint of nuisance and threat of expense.” (Marbley v. Bane, supra, 57 F.3d at pp. 234-235.) The determination the trial court must make is not unlike the determination it makes when asked to issue a preliminary injunction, i.e., not a final decision on the merits but a determination at a minimum
Although the catalyst rule is sometimes formulated to permit an award of attorney fees as long as a lawsuit can survive a motion to dismiss or for judgment on the pleadings (see Buckhannon, supra, 532 U.S. at p. 605), we see no reason to limit a trial court‘s inquiry regarding the merits of the case to an examination of whether the pleadings state a cause of action. When a lawsuit has been mooted by a defendant‘s change in conduct, some development of the factual record is required in order to prevail on a catalyst theory. At the very least, a plaintiff must establish ” ‘the precise factual/legal condition that [it] sought to change or affect’ ” as a prerequisite for establishing the catalytic effect of its lawsuit. (Folsom, supra, 32 Cal.3d at p. 685.) Sometimes this factual background will have been developed in the course of litigation. (See, e.g., DeGidio v. Pung, supra, 920 F.2d 525; Pembroke v. Wood County, Texas, supra, 981 F.2d 225.) When the suit is mooted early in its prosecution (as occurred in the present case), it may generally be established during the attorney fee proceeding by declarations, or, at the discretion of the trial court, by an abbreviated evidentiary hearing. (See Sablan, supra, 856 F.2d at pp. 1322-1323; Pearl, Cal. Attorney Fee Awards (Cont.Ed.Bar 2d ed. 1998 & 2003 supp.) § 14.39, pp. 444-445.) The trial court may review this factual background not only to determine the lawsuit‘s catalytic effect but also its merits. Attorney fees should not be awarded for a lawsuit that lacks merit, even if its pleadings would survive a demurrer. We believe that trial courts will be able to conduct an abbreviated but meaningful review of the merits of the litigation designed to screen out nuisance suits without significantly increasing attorney fee litigation costs.7 On the other
In addition to some scrutiny of the merits, we conclude that another limitation on the catalyst rule proposed by the Attorney General, appearing as amicus curiae, should be adopted by this court. The Attorney General proposes that a plaintiff seeking attorney fees under a catalyst theory must first reasonably attempt to settle the matter short of litigation. (See Grimsley v. Board of Supervisors (1985) 169 Cal.App.3d 960, 966-967 [213 Cal.Rptr. 108].) We believe this requirement is fully consistent with the basic objectives behind
Applying the catalyst rule, as discussed above, to the present case, the trial court applied the first prong of the rule to conclude that the lawsuit was in fact a substantial causal factor in DaimlerChrysler‘s change in policy with respect to its willingness to repurchase or replace the Dakota R/T or to offer consumers substantial discounts. DaimlerChrysler does not contend that the trial court‘s ruling on that point is unsupported by substantial evidence. But it is unclear whether the trial court considered the merits of the suit, and the trial court did not consider whether plaintiffs attempted to reasonably settle the matter short of litigation. We therefore remand the matter for a determination of whether plaintiffs are eligible for attorney fees under the catalyst rule as articulated above.8
B. Trial Court Did Not Abuse Its Discretion in Finding the Substantial Benefit and Public Interest Prongs of Section 1021.5 Were Met
DaimlerChrysler also contends that the attorney fee award must be overturned in its entirety because it failed to confer “a significant benefit . . . on the general public or large class of persons” as required by
In the present case, the trial court found that the problem addressed by the lawsuit implicated an issue of public safety, and that the lawsuit benefited thousands of consumers and potentially thousands more by acting as a deterrent to discourage lax responses to known safety hazards. In light of the facts reviewed in the first part of this opinion, we conclude the trial court did not abuse its discretion in finding that the lawsuit met the substantial benefit and public interest requirements of
C. Whether There Should Be a Multiplier for Attorney Fees for Litigating Attorney Fees
In the present case, a large percentage of the attorney fees were awarded for litigation to obtain fees under
We first review some general principles regarding the calculation of attorney fees in public interest litigation. As we recently explained, under our decision in Serrano III, “a court assessing attorney fees begins with a touchstone or lodestar figure, based on the ‘careful compilation of the time spent and reasonable hourly compensation of each attorney . . . involved in the presentation of the case.’ [Citation.] We expressly approved the use of prevailing hourly rates as a basis for the lodestar, noting that anchoring the calculation of attorney fees to the lodestar adjustment method ” ‘is the only way of approaching the problem that can claim objectivity, a claim which is obviously vital to the prestige of the bar and the courts.” ’ [Citation.] In referring to ‘reasonable’ compensation, we indicated that trial courts must carefully review attorney documentation of hours expended; ‘padding’ in the form of inefficient or duplicative efforts is not subject to compensation. [Citation.]”
“Under Serrano III, the lodestar is the basic fee for comparable legal services in the community; it may be adjusted by the court based on factors including . . . (1) the novelty and difficulty of the questions involved, (2) the skill displayed in presenting them, (3) the extent to which the nature of the litigation precluded other employment by the attorneys, (4) the contingent nature of the fee award. [Citation.] The purpose of such adjustment is to fix a fee at the fair market value for the particular action. In effect, the court determines, retrospectively, whether the litigation involved a contingent risk or required extraordinary legal skill justifying augmentation of the unadorned lodestar in order to approximate the fair market rate for such services. The ” ‘experienced trial judge is the best judge of the value of professional services rendered in his court, and while his judgment is of course subject to review, it will not be disturbed unless the appellate court is convinced that it is clearly wrong.” ’ ” (Ketchum, supra, 24 Cal.4th at pp. 1131-1132.)
One of the most common fee enhancers, and one used by the trial court in the present case, is for contingency risk. We reaffirmed the propriety
Turning to the question of compensation for fee-related litigation, we first note it is well established that plaintiffs and their attorneys may recover attorney fees for fee-related matters. (Serrano IV, supra, 32 Cal.3d at pp. 632-633, 639.) As we stated: “the [private attorney general] doctrine will often be frustrated, sometimes nullified, if awards are diluted or dissipated by lengthy, uncompensated proceedings to fix or defend a rightful fee claim.” (Serrano IV, supra, 32 Cal.3d at p. 632; see also Ketchum, supra, 24 Cal.4th at p. 1141.)
While DaimlerChrysler does not dispute that fees for fee-related litigation may be awarded, it asks this court to hold that there should be no multiplier for fees on fees. It cites to several out-of-state cases that have disallowed such multipliers, principally because fee litigation is tangential to the primary litigation and of less social value. (See City of Birmingham v. Horn (Ala. 2001) 810 So.2d 667, 684 [“While the law clearly allows for a fee award with respect to [fee litigation], we do not consider this time to be vital to the true purpose of the litigation“]; Baksinski v. Northwestern University (1992) 231 Ill.App.3d 7 [595 N.E.2d 1106, 1114, 172 Ill.Dec. 436] [“the fee litigation in this case is not part of the class action litigation, and . . . confers no benefit on the class” and is therefore “not the type of litigation warranting the application of a multiplier“]; see also Indiana Hospital Licensing Council v. Women‘s Pavilion of South Bend (Ind.Ct.App. 1985) 486 N.E.2d 1070, 1080.) DaimlerChrysler argues that as a policy matter, enhancements of fees will serve only to encourage a “satellite” litigation of dubious social utility. (See Hensley v. Eckerhart (1983) 461 U.S. 424, 437 [76 L.Ed.2d 40, 103 S.Ct. 1933]; see also id. at p. 442 (conc. opn. of Brennan, J.) [referring to attorney fee litigation as “one of the least socially productive types of litigation imaginable“].)
As plaintiffs point out, our Court of Appeal adopted a contrary position in Downey Cares v. Downey Community Development Com. (1987) 196 Cal.App.3d 983 [242 Cal.Rptr. 272] (Downey Cares). In that case, the plaintiffs overturned an amendment to the city‘s general plan that had been brought about by a conflict of interest on the part of one of the city council members. The trial court awarded attorney fees under
We noted the holding in Downey Cares in Ketchum, supra, 24 Cal.4th at page 1141, footnote 6. But in Ketchum, we declined to apply the contingency fee enhancement to fees for fee litigation. We reasoned that under the statute authorizing attorney fees at issue in that case,
In light of the above discussion, we reject DaimlerChrysler‘s argument that fees for fee litigation can never be enhanced. Such a rule does not appear in harmony with the principle that the awarding of attorney fees and the calculation of attorney fee enhancements are highly fact-specific matters best left to the discretion of the trial court. (See Ketchum, supra, 24 Cal.4th at pp. 1131-1132.) Although we agree with DaimlerChrysler that the reduction of attorney fee litigation is a desirable objective, it is not clear that a categorical rule barring enhancements for fee litigation will accomplish that objective. It is not clear that the unnecessary prolongation of fee litigation is a significant problem, given that trial courts have the capacity to distinguish between reasonable and unreasonable attorney fee charges and the discretion
Furthermore, “[w]hen the Legislature has determined that the lodestar adjustment approach is not appropriate, it has expressly so stated. Thus, in 1993, it amended
Nonetheless, building on the discussion quoted above in Ketchum and Downey Cares, we recognize that the enhancement justified for fees in the underlying litigation may differ from the enhancement warranted in the fee litigation, and that a lower enhancement, or no enhancement, may be appropriate in the latter litigation. In fact, a closer examination of the enhancement factors set forth in Serrano III leads to the conclusion that in most cases, the enhancement for the fee litigation should be lower than the enhancement for the underlying litigation, if one is applied at all.
This is especially true of the “results obtained” factor that the trial court relied on in part to justify its multiplier. “The ‘results obtained’ factor can properly be used to enhance a lodestar calculation where an exceptional effort produced an exceptional benefit.” (Thayer v. Wells Fargo Bank (2001) 92 Cal.App.4th 819, 838 [112 Cal.Rptr.2d 284].) While the trial court may have legitimately concluded that the underlying litigation had produced an exceptional benefit for consumers in the present case, the same cannot be said of the fee litigation itself, which simply produced fees to compensate plaintiffs’ attorneys for their efforts. We conclude fees for fee litigation should not be enhanced on that basis.
Moreover, while this factor often takes into account the exceptional skill exhibited by the attorney (Lealao v. Beneficial Cal. Inc. (2000) 82 Cal.App.4th 19, 50 [97 Cal.Rptr.2d 797]; Edgerton v. State Personnel Bd. (2000) 83 Cal.App.4th 1350, 1363 [100 Cal.Rptr.2d 491]; City of Oakland v. Oakland Raiders (1988) 203 Cal.App.3d 78, 85 [249 Cal.Rptr. 606]), an enhancement on that basis is rarely justified for fee-related litigation. This litigation, as discussed above, is for the most part simpler than litigation on the merits. On the other hand, while attorney fees may not be used to punish defendants (Ketchum, supra, 24 Cal.4th at p. 1141), fees for fee litigation
Courts awarding attorney fees under
One enhancement factor that would be as applicable for fees on fees as for fees on the merits is a significant delay in the payment of the fees. (See Serrano III, supra, 20 Cal.3d at p. 49.) “Court-awarded fees normally are received long after the legal services are rendered. That delay can present
In the present case, the trial court made its initial decision regarding the fee multiplier before our decision in Ketchum and then, after further briefing, reduced the multiplier from 3.0 to 2.25, not differentiating between the fees in the underlying litigation and the fees on fees. It appears the court over-enhanced the fees on fees by inappropriately using the “results obtained” factor to arrive at the multiplier. On remand the court should also reexamine its use of the risk factor. While it was not required to explain how it calculated that factor, and we will generally presume the attorney fee award was correct ” ’ “on matters as to which the record is silent” ’ ” (Ketchum, supra, 24 Cal.4th at p. 1140), it would be appropriate for the trial court to reassess its calculation of a risk enhancement for fees on fees in light of this opinion‘s conclusion that the risk multiplier for those fees generally should be lower than for fees in the underlying litigation. The trial court is therefore directed on remand to recalculate the proper multiplier if it concludes that plaintiffs are eligible for some attorney fees.
III. DISPOSITION
The judgment of the Court of Appeal affirming the award of attorney fees in the present case is reversed, and the cause is remanded for proceedings consistent with the views expressed in this opinion.
George, C. J., Kennard, J., and Werdegar, J., concurred.
CHIN, J.—I dissent.
Plaintiffs filed a simple seven-page complaint alleging a single cause of action for breach of warranty after the defendant had already acknowledged its marketing mistake and was taking steps to correct it, and while the Santa Cruz County District Attorney and the California Attorney General were investigating the matter and preparing to take appropriate action. The complaint constituted plaintiffs’ entire legal effort regarding the underlying lawsuit. They obtained no judicial ruling of any kind in their favor. Nevertheless,
This court has never awarded attorney fees to a party with no judicial ruling in its favor. We should not start now. Relying solely on federal cases that have been overruled and California cases that either denied attorney fees or involved a plaintiff with a judicial ruling in its favor, the majority permits an award of attorney fees to the plaintiffs as the “prevailing” or “successful” party. To do so, it adopts the so-called catalyst theory, a theory that was once prevalent in federal courts, but that the United States Supreme Court has now repudiated. We should not resurrect it.
Moreover, plaintiffs do not qualify for attorney fees even under the majority‘s catalyst theory. Their lawsuit was unnecessary when filed, it was moot within days of its filing, and it conferred no substantial public benefit. Plaintiffs have also failed to show their suit had any merit in light of the corrective steps defendant had already taken. The majority implicitly recognizes that plaintiffs failed to justify their award of attorney fees, but it inexplicably remands the matter for yet more litigation, which will undoubtedly increase plaintiffs’ attorney fee demand to a truly astronomic amount. I disagree here also. No reason appears to give plaintiffs a second chance to try to prove what they failed to prove the first time. Courts should seek to resolve litigation, not perpetuate it.
Finally, the majority permits qualifying plaintiffs to receive not only (1) attorney fees for litigating the underlying lawsuit, but also (2) a multiplier on those fees, and also (3) attorney fees for litigating their entitlement to attorney fees, and also (4) a multiplier on the fees for litigating entitlement to fees. I disagree on the final point. Surely, awarding fees for the underlying litigation, with a potential multiplier, plus fees for litigating entitlement to fees, is sufficient. A multiplier for litigating fees on fees is excessive and can only lead to outrageously inflated awards like the one here, where a simple complaint is transformed into an award of over three-quarters of a million dollars.
The majority today goes further than this court has ever gone before—indeed, so far as I can tell, further than any other court has ever gone—in permitting plaintiffs to win large attorney fee awards. I cannot agree. Lest California truly become a mecca for plaintiffs and plaintiffs’ attorneys throughout the country, we need to be at least somewhat in step with the rest of the country.
DaimlerChrysler Corporation (DaimlerChrysler) incorrectly marketed its 1998 and 1999 Dakota R/T trucks as having a 6,400-pound towing capacity when they actually could tow only 2,000 pounds. The error occurred because the Dakota R/T was a sporty version of an existing truck model, which could tow 6,400 pounds. However, to obtain a sporty design, DaimlerChrysler lowered the suspension on the Dakota R/T, thus reducing its towing capacity. During these two years, DaimlerChrysler sold or leased fewer than 7,000 of the Dakota R/T‘s nationwide, including fewer than 1,000 in California.
DaimlerChrysler became aware of the mistake by early 1999. By February 1999, it had set up a response team to address the problem. By June 1999, DaimlerChrysler had replaced the incorrect marketing materials, owners manuals, and engine and door labels for not-yet-sold Dakota R/T‘s. DaimlerChrysler had also notified existing buyers of the error, told them not to attempt to tow more than 2,000 pounds, and provided them with the same modified materials. It told buyers who wanted to tow more than 2,000 pounds they could do so only if their Dakota R/T was modified with a trailer hitch costing $300. DaimlerChrysler also began to address remedial measures for customers who had bought or leased their Dakota R/T‘s under the incorrect marketing program. Many R/T buyers never intended to tow more than 2,000 pounds. When informed by DaimlerChrysler of the error, most of those customers were satisfied with DaimlerChrysler‘s offers of cash and merchandise. Initially, DaimlerChrysler offered buyers who had bought the hitches refunds of the $300 cost. By the summer 1999, DaimlerChrysler authorized dealers to repurchase or replace Dakota R/T‘s on a case-by-case basis for customers who demanded such a remedy.
On July 29, 1999, the Santa Cruz County District Attorney contacted DaimlerChrysler about the problem, threatened legal action, and requested DaimlerChrysler‘s input before acting. On August 10, 1999, the California Attorney General notified DaimlerChrysler that it had joined the Santa Cruz County District Attorney. The public agencies requested a response by the end of August 1999.
On August 23, 1999, plaintiffs filed the seven-page complaint underlying this appeal. They alleged that they had bought 1999 Dakota R/T‘s from various DaimlerChrysler dealers. One of the plaintiffs lived and bought his truck in California. Plaintiffs alleged a single cause of action for breach of express warranty based on the mistake regarding the trucks’ towing capacity. They alleged that DaimlerChrysler acknowledged the error by letter to all purchasers dated June 16, 1999. They alleged that they had previously notified DaimlerChrysler of their trucks’ failure to comply with the warranted
The day the lawsuit was filed, the Detroit News contacted DaimlerChrysler‘s legal counsel about the lawsuit. DaimlerChrysler‘s counsel claimed DaimlerChrysler had responded appropriately to the marketing error, including offering buybacks to customers who requested them. Plaintiffs faxed their complaint to DaimlerChrysler the same day. The next day, August 24, 1999, DaimlerChrysler‘s employee newsletter ran an article on the plaintiffs’ case. DaimlerChrysler‘s response team met throughout August 1999. The team knew about both public agency inquiries and the response deadline. DaimlerChrysler wrote to the public agencies that its internal approval process prohibited a response by August 31, but promised a response by September 8, 1999. On September 10, 1999, DaimlerChrysler informed all buyers of Dakota R/T‘s that, among other options, DaimlerChrysler would repurchase or assist in replacing their 1998 or 1999 Dakota R/T‘s. Evidence showed that the response team was aware of plaintiffs’ lawsuit before September 10, 1999.
DaimlerChrysler demurred to the complaint. Plaintiffs filed an amended complaint, acknowledging DaimlerChrysler‘s offer of, among other remedies, repurchase or replacement of the trucks for all previous buyers. The trial court sustained the demurrer without leave to amend and dismissed the case as moot because DaimlerChrysler had already offered all purchasers the relief plaintiffs sought.
The public agency investigation continued. That investigation revealed that some brochures containing the error were distributed as late as August 1999. In late 2000, DaimlerChrysler settled the public agency investigation by paying a $75,000 fine and agreeing to continue to assure that the marketing error did not reoccur.
Although the court dismissed plaintiffs’ case, the parties continued to litigate plaintiffs’ entitlement to attorney fees. As the Court of Appeal described it, “Over a year of hotly-contested discovery and other motions occurred to clarify the facts described above.” The trial court held three contested hearings on the fee request. On October 18, 2000, the court held a lengthy evidentiary hearing and made factual findings rejecting DaimlerChrysler‘s claim that it had at least decided to offer all buyers repurchase or buybacks before plaintiffs filed their case. The court found
The court found the “lodestar” fee amount (i.e., the number of hours of work multiplied by a reasonable hourly compensation; see Ketchum v. Moses (2001) 24 Cal.4th 1122, 1131-1132 [104 Cal.Rptr.2d 377, 17 P.3d 735]) was $329,620 through the October 18, 2000, hearing. It awarded a 2.25 multiplier for the fees until the October 18, 2000, hearing to account for risk and success. Ultimately, it awarded a total of $762,830 in attorney fees. It did not distinguish how much of this total was due to the underlying litigation and how much of it to litigating entitlement to attorney fees. However, DaimlerChrysler states and, at oral argument, plaintiffs agreed that roughly 90 percent of this award was for fees plaintiffs generated while seeking fees.
DaimlerChrysler appealed limited to the question of attorney fees. The Court of Appeal affirmed the judgment, and we granted DaimlerChrysler‘s petition for review.
II. DISCUSSION
A. California should not adopt the catalyst theory.
“California follows what is commonly referred to as the American rule, which provides that each party to a lawsuit must ordinarily pay his own attorney fees. [Citations.] The Legislature codified the American rule in 1872 when it enacted
The issue here is what it takes to be a “successful” or “prevailing” party within the meaning of these statutes. (I agree with the majority that these terms are synonymous for these purposes.) (Maj. opn., ante, at p. 570.) Although plaintiffs did not obtain any judicial ruling in their favor, they claim entitlement to attorney fees as the successful party because their lawsuit was a “catalyst” that caused DaimlerChrysler to offer the relief they sought. We have never awarded attorney fees predicated on the catalyst theory, but we have discussed it. As we explained in Westside Community for Independent Living, Inc. v. Obledo (1983) 33 Cal.3d 348 [188 Cal.Rptr. 873, 657 P.2d 365] (Westside Community) (a case that reversed an award of attorney fees), “Numerous federal decisions have . . . [held] that attorney fees may be proper whenever an action results in relief for the plaintiff, whether the relief is obtained through a ‘voluntary’ change in the defendant‘s conduct, through a settlement, or otherwise. [Citations.] [[] Thus, an award of attorney fees may be appropriate where ‘plaintiffs’ lawsuit was a catalyst motivating defendants to provide the primary relief sought . . . .’ [Citation.] A plaintiff will be considered a ‘successful party’ where an important right is vindicated ‘by activating defendants to modify their behavior.’ [Citation.]” (Id. at pp. 352-353.)
Although, as we explained in Westside Community, supra, 33 Cal.3d 348, lower federal courts had generally recognized the validity of the catalyst theory, the United States Supreme Court recently rejected it as a basis for
The high court began its analysis by noting that in the United States parties ordinarily must bear their own attorney fees, but Congress has authorized the award of such fees to the “prevailing party” in numerous statutes. (Buckhannon, supra, 532 U.S. at pp. 602-603.) “In designating those parties eligible for an award of litigation costs, Congress employed the term ‘prevailing party,’ a legal term of art. Black‘s Law Dictionary 1145 (7th ed. 1999) defines ‘prevailing party’ as ‘[a] party in whose favor a judgment is rendered, regardless of the amount of damages awarded <in certain cases, the court will award attorney‘s fees to the prevailing party>. Also termed successful party.’ This view that a ‘prevailing party’ is one who has been awarded some relief by the court can be distilled from our prior cases.” (Id. at p. 603.) “In addition to judgments on the merits, we have held that settlement agreements enforced through a consent decree may serve as the basis for an award of attorney‘s fees. [Citation.] Although a consent decree does not always include an admission of liability by the defendant [citation], it nonetheless is a court-ordered ‘chang[e] [in] the legal relationship between [the plaintiff] and the defendant.’ [Citations.] These decisions, taken together,
The court recognized that some of its cases contain dicta supporting the catalyst theory but noted that its holdings have never applied it; its cases awarding attorney fees involved a judgment on the merits or at least a consent decree. (Buckhannon, supra, 532 U.S. at pp. 603-604 & fns. 5, 7.) It concluded that “the ‘catalyst theory’ falls on the other side of the line from these examples. It allows an award where there is no judicially sanctioned change in the legal relationship of the parties. . . . A defendant‘s voluntary change in conduct, although perhaps accomplishing what the plaintiff sought to achieve by the lawsuit, lacks the necessary judicial imprimatur on the change. Our precedents thus counsel against holding that the term ‘prevailing party’ authorizes an award of attorney‘s fees without a corresponding alteration in the legal relationship of the parties.” (Id. at p. 605.) In response to the dissent‘s suggestion that it suffices if the plaintiff shows that the lawsuit stated a “colorable” and not “groundless” claim (id. at p. 627 (dis. opn. of Ginsburg, J.)), the court disagreed “that the term ‘prevailing party’ authorizes federal courts to award attorney‘s fees to a plaintiff who, by simply filing a nonfrivolous but nonetheless potentially meritless lawsuit (it will never be determined), has reached the ‘sought-after destination’ without obtaining any judicial relief.” (Id. at p. 606.)
In response to the policy arguments that the catalyst theory was necessary to prevent defendants generally from unilaterally mooting actions before judgment to avoid paying attorney fees and to not deter those plaintiffs with meritorious but expensive cases from bringing suit, the court cited contrary policy arguments. It noted “the disincentive that the ‘catalyst theory’ may have upon a defendant‘s decision to voluntarily change its conduct, conduct that may not be illegal.” (Buckhannon, supra, 532 U.S. at p. 608.) It also noted “that ‘[a] request for attorney‘s fees should not result in a second major litigation,’ [citation], and [the court has] accordingly avoided an interpretation of the fee-shifting statutes that would have ‘spawn[ed] a second litigation of significant dimension,’ [citation]. Among other things, a ‘catalyst theory’ hearing would require analysis of the defendant‘s subjective motivations in changing its conduct, an analysis that ‘will likely depend on a highly factbound inquiry and may turn on reasonable inferences from the nature and timing of the defendant‘s change in conduct.’ [Citation.] Although we do not doubt the ability of district courts to perform the nuanced ‘three thresholds’ test required by the ‘catalyst theory‘—whether the claim was colorable rather than groundless; whether the lawsuit was a substantial rather than an insubstantial cause of the defendant‘s change in conduct; whether the defendant‘s change in conduct was motivated by the plaintiff‘s threat of victory rather
I agree with the majority that we are not required to follow the high court‘s interpretation of these federal statutes in interpreting California‘s statutes. (Maj. opn., ante, at p. 568.) But federal decisions have persuasive value. “Since both this court and the Legislature have relied on federal cases in framing the private attorney general theory, we regard the federal precedent in this area as persuasive.” (Maria P. v. Riles (1987) 43 Cal.3d 1281, 1290 [240 Cal.Rptr. 872, 743 P.2d 932].) Because this court has never awarded attorney fees on a catalyst theory, but only recognized the existence of the federal rule, I see no reason suddenly to go an independent route for the first time after the federal courts have abandoned that theory.
In the companion case of Tipton-Whittingham v. City of Los Angeles (2004) 34 Cal.4th 604 [21 Cal.Rptr.3d 371] (Tipton-Whittingham), the United States Court of Appeals for the Ninth Circuit certified to this court questions similar to the one presented in this case. (See Tipton-Whittingham v. City of Los Angeles (9th Cir. 2003) 316 F.3d 1058.) In its certification order, it summarized our cases in this regard: “California cases preceding Buckhannon, while containing dicta that endorses the catalyst theory for the award of prevailing-party attorneys’ fees, have involved circumstances where there has been a judicially enforceable change in the legal relationship between the parties. See Maria P. v. Riles[, supra,] 43 Cal.3d 1281, 1290-91 [240 Cal.Rptr. 872, 743 P.2d 932] (1987) (determining plaintiffs qualified as prevailing parties under [
The majority says we “endorsed” the catalyst theory in Westside Community, supra, 33 Cal.3d 348. (Maj. opn., ante, at p. 566.) But, as the Ninth Circuit recognized, any such endorsement was dictum, because we denied attorney fees in that case. (Westside Community, supra, at p. 355.)
In Buckhannon, supra, 532 U.S. 598, the high court relied on the plain meaning of the word “prevailing” to reject the catalyst theory. Here, the language of
But voluntary action is not compelled action. Without some judicially enforceable order, there is no way to know whether the action was voluntary or compelled. Persons and entities act voluntarily in response to a lawsuit for many reasons, some unrelated to the lawsuit‘s merits: to avoid the expense of litigation or bad publicity, to foster good public relations, to make an improvement or take other useful action not required by law, perhaps simply to put the litigation behind and move on. The pressure to yield voluntarily to a lawsuit‘s demands, even if not legally required, is exacerbated by the circumstance that historically attorney fee awards have not gone in both directions. Although the statutes do not prohibit awards to prevailing defendants, the private attorney general doctrine has generally resulted only in attorney fee awards to the prevailing plaintiffs and not also to the prevailing defendants. Thus, unlike the plaintiffs who can hope to be reimbursed for their attorney fees, the defendants generally cannot expect to receive compensation from the plaintiffs for their attorney fees. Those defendants who choose to fight a lawsuit lose even when they win; they must pay their attorneys themselves, which can be very expensive even for the victor. This circumstance places the defendants under great pressure to settle a lawsuit, even if unmeritorious, as soon as possible.
The majority, as well as plaintiffs and supporting amici curiae, argue that not adopting the catalyst theory might discourage lawsuits like this one, and lawsuits like this one are so beneficial to society that courts must not do anything that might discourage them. They claim the catalyst theory is necessary to provide plaintiffs a full incentive to undertake the cost of public interest litigation. (E.g., maj. opn., ante, at p. 574.) I agree that the private attorney general doctrine serves a valuable purpose. (Woodland Hills Residents Assn., Inc. v. City Council (1979) 23 Cal.3d 917, 933 [154 Cal.Rptr. 503, 593 P.2d 200].) But it can also impose a substantial cost in a litigious world, especially as extended by the catalyst theory. The majority confidently asserts that the catalyst theory requires only “relatively economical, straightforward inquiries.” (Maj. opn., ante, at p. 573.) It bases this assertion partly on “our own judicial experience,” although it does not identify what that judicial experience might be. (Ibid.) Our only judicial experience with the catalyst theory consists of this case and Westside Community, supra, 33 Cal.3d 348. Our experience in this case is far from comforting and does not support the majority‘s confident assertion. Here, plaintiff filed a seven-page complaint stating a single cause of action. Then, after a year of “hotly-contested discovery,” various contested hearings, and a lengthy evidentiary hearing, the trial court awarded plaintiffs $762,830 in attorney fees, about 90 percent of which was for litigating the catalyst theory. And we are not done yet, as the majority remands the case for yet more litigation. Our experience in Westside Community, supra, 33 Cal.3d 348, is also not very comforting. There we reversed a grant of attorney fees predicated on the catalyst theory in our own hotly contested four-to-three decision, which also hardly suggests the doctrine is as easy to apply as the majority asserts.
In Tipton-Whittingham, supra, 34 Cal.4th at p. 608, the majority summarizes its catalyst theory requirements: “In order to obtain attorney fees without such a judicially recognized change in the legal relationship between the parties, a plaintiff must establish that (1) the lawsuit was a catalyst motivating the defendants to provide the primary relief sought; (2) that the lawsuit had merit and achieved its catalytic effect by threat of victory, not by dint of nuisance and threat of expense . . . ; and (3) that the plaintiffs reasonably attempted to settle the litigation prior to filing the lawsuit.” These requirements can be complex, not straightforward.
The second of these requirements forces a court that has entered no judicial ruling in the plaintiff‘s favor (otherwise the catalyst theory would not come into play) to make some sort of ruling regarding the merits of the underlying lawsuit. It is not clear to me exactly what the majority means in this regard, or how the trial court is supposed to go about making this determination, but here, after more than a year of litigating the catalyst theory, no court has yet made the ruling the majority demands. Future courts will have to struggle mightily to decide how to determine whether a moot lawsuit had merit when filed. Finally, the majority requires the plaintiffs to establish that they attempted to settle the litigation without a lawsuit (a requirement that, as I explain below, has long existed). This, too, is a factual question of some complexity, as today‘s remand for yet more litigation demonstrates.
Thus, permitting attorney fees on a catalyst theory, with no objective manifestation, in the form of judicial action, that the lawsuit vindicated a legal right, may, as here, “‘result in a second major litigation.‘” (Buckhannon, supra, 532 U.S. at p. 609.) “[T]he catalyst theory of fee recovery engenders confusion and unnecessary litigation. . . . Too frequently,
I can perceive of few things less useful to society than generating great amounts of attorney fees litigating the catalyst theory. In another attorney fee case, we stated that “scarce judicial resources should not be used to try the merits of voluntarily dismissed actions merely to determine which party would or should have prevailed had the action not been dismissed.” (Santisas v. Goodin (1998) 17 Cal.4th 599, 621 [71 Cal.Rptr.2d 830, 951 P.2d 399].) In this case, scarce judicial resources should not be used to litigate the various requirements of the catalyst theory.3
The majority argues the catalyst theory is needed to eliminate risk in public interest litigation. (Maj. opn., ante, at p. 574.) But there will always be risk. Indeed, one of the requirements for any plaintiff seeking attorney fees is that the plaintiff must have attempted to settle the dispute without litigation. (Grimsley v. Board of Supervisors (1985) 169 Cal.App.3d 960, 966 [213 Cal.Rptr. 108]; see maj. opn., ante, at pp. 576-577.) Carried to its logical conclusion, however, the majority‘s catalyst rationale should extend to attorney fees expended in seeking relief short of litigation. If the threat of litigation causes the prospective defendant to provide the relief sought, why should attorney fees be denied merely because no lawsuit was needed? Denying attorney fees when the desired result is obtained without a lawsuit can deter those plaintiffs who will have to expend attorney fees that they
The private attorney general doctrine inherently contains both a risk and a cost. A line must be drawn somewhere to balance this risk and this cost. I would hold that the statute here draws the necessary line by requiring some kind of a judicial imprimatur before a plaintiff can be considered to be a successful or prevailing party that enforced an important public right.
The potential for awards of this kind can also greatly increase the possibility of undue pressure to settle meritless claims. If DaimlerChrysler had simply paid the requested fees at the outset rather than litigate the question, it could have spared itself most of the award (as well as its own attorney fees, which are no doubt substantial). But surely plaintiffs’ entitlement to attorney fees was, and is, not so clear that DaimlerChrysler could not, and cannot, reasonably litigate it. The threat of a huge award of attorney fees generated while litigating the catalyst theory permits the plaintiffs to extort attorney fees from businesses no matter how weak their entitlement to them may be. With this case as a warning, future defendants may surrender to attorney fee demands, no matter how unmeritorious, rather than risk a substantial award of attorney fees down the road.
Indeed, the private attorney general doctrine, even without the catalyst theory and multipliers on fees on fees (see pt. II.C, post), gives the plaintiffs a great advantage in settlement negotiations. The defendants generally have to pay their own attorney fees. Thus, those defendants who litigate rather than sell out as cheaply as possible as soon as possible face not the risk, but the near certainty, that they will incur attorney fees they will not recover. They also risk incurring a potentially substantial award for the opponents’ attorney fees. The plaintiffs, by contrast, merely face the possibility they will not be compensated for their own attorney fees; they run little risk of having to pay their opponents’ attorney fees. And to compensate for even this possibility, the private attorney general doctrine permits courts to add a multiplier to the plaintiffs’ attorney fees, which can be very rewarding, as this case illustrates. The plaintiffs thus have relatively little incentive to settle, defendants a very strong need to settle. I see no need for the catalyst theory to provide yet more incentive to plaintiffs.
For all of these reasons, I would not adopt the catalyst theory as a basis for awarding attorney fees. I would conclude that before a party can be considered to be a successful or prevailing party under
B. Plaintiffs have not established entitlement to attorney fees even under the majority‘s catalyst theory.
Even accepting the majority‘s catalyst theory, plaintiffs have failed to establish entitlement to attorney fees for several reasons.
For any plaintiff (including those who actually win their lawsuit) to receive attorney fees, the action must have “resulted in the enforcement of an important right affecting the public interest . . . .” (
In reaching the opposite conclusion, the trial court and the majority of this court claim that the lawsuit “implicated an issue of public safety, and that the lawsuit benefited thousands of consumers and potentially thousands more by acting as a deterrent to discourage lax responses to known safety hazards.” (Maj. opn., ante, at p. 578.) Neither the trial court nor the majority gets more specific, but they must be referring to the incorrect advertising, not any failure to fully compensate the consumers for their damages; whether the consumers were made whole does not implicate public safety. I agree there is some evidence that DaimlerChrysler‘s mistake regarding the towing capacity implicated public safety at one time. (See id. at p. 561 [“The reduced towing capacity was a potential risk factor“].) I also agree that the public agency investigation revealed that brochures containing the mistake were distributed as late as August 1999. (Ibid.) But entirely missing is any relationship between public safety concerns and this lawsuit. The plaintiffs expressly alleged that in June 1999, DaimlerChrysler admitted its error in a letter sent to owners of the affected trucks. They alleged nothing regarding any continuing misrepresentations or any other public safety concerns, whether in the past or present. The only remedies the lawsuit sought were individual damages and attorney fees. No evidence whatever supports the conclusion that this lawsuit affected any public safety concerns. All that this lawsuit implicated was the truck owners’ parochial financial interests. Maximizing plaintiffs’ pecuniary gain does nothing to enhance public safety.
In trying to distinguish this lawsuit from the public agency investigation, and thus respond to DaimlerChrysler‘s argument that this was an unnecessary “tagalong” lawsuit, the trial court said that the public agencies “were only
The trial court also said that the Santa Cruz County District Attorney and the Attorney General “had only made an inquiry and had not commenced any proceeding when plaintiffs filed this action.” But the private attorney general doctrine should not reward someone merely for winning the race to the courthouse, especially given the long-standing requirement that the plaintiff must have attempted to settle the matter before filing the lawsuit, which the public agencies were doing.
The trial court and majority also suggest the attorney fee award was appropriate because this action served as a deterrent to others who might otherwise have a lax response to safety concerns. This suggestion fails for two reasons, one legal, one factual. First, “Carried to its logical conclusion, the reasoning adopted by the trial court and espoused by plaintiff would make the private attorney general doctrine applicable in every case in which a plaintiff successfully sued a public agency [or, as here, a large business] for some wrongful conduct, because every such lawsuit would communicate a message to the losing party. Such an expansive reading of the statutory requirement is untenable.” (Flannery v. California Highway Patrol (1998) 61 Cal.App.4th 629, 636 [71 Cal.Rptr.2d 632].) Second, even if the deterrence
In addition to erroneously seeking and obtaining credit for what the public agencies did, plaintiffs have failed to satisfy two other requirements: (1) they have failed to show that the lawsuit had any merit; and (2) they have failed to show that they reasonably attempted to settle the matter short of litigation.5 The majority implicitly recognizes this failure. (Maj. opn., ante, at pp. 575-576.) But, determined to reward these plaintiffs no matter how unwarranted the reward may be, it remands the matter for yet more litigation. It does so by a clever bit of judicial sleight of hand. It says that “these limitations on the catalyst theory are to some degree new.” (Maj. opn., ante, at p. 561, italics added.) Implicit is the argument that it would be unfair to deny the plaintiffs the opportunity to prove newly minted requirements.
I agree that, because the majority adopts the catalyst theory for the first time today, it has just invented some of the rules—in particular, the rule that a court that has never ruled on the merits should do so as part of the attorney fee litigation. Accordingly, to some degree, the limitations are new. But one critical requirement—that plaintiffs show the lawsuit was actually necessary—is not new. The majority tries to obfuscate this circumstance by saying the “Attorney General proposes” this rule. (Maj. opn., ante, at p. 577.) It hopes, no doubt, that the reader will infer that the Attorney General is proposing something new. But the Attorney General is not proposing something new. Rather, he is merely citing a requirement that has long existed. “[A]ttorney fees under
Even in the course of the proceedings in this court, plaintiffs have not attempted to show their action had any merit. They have not shown that DaimlerChrysler was legally required to offer a full refund in addition to the steps it had already taken regarding plaintiffs, which included full disclosure, prospective correction, and offers to pay for a hitch that, so far as this lawsuit demonstrates, would have cured all harm. The majority suggests that the “precise remedy chosen” need not be legally required and hypothesizes the existence of some other remedy that plaintiffs sought and that DaimlerChrysler was legally required to provide, and for which the actual remedy of a full refund was a “compromise.” (Maj. opn., ante, at p. 576, fn. 7.) I cannot imagine what that remedy might be, and neither plaintiffs nor the majority suggests any, but I suppose plaintiffs can attempt to prove one on remand if they choose. But for the lawsuit to have any merit there must be some “primary relief sought” (Tipton-Whittingham, supra, 34 Cal.4th at p. 608) that DaimlerChrysler was required to provide. Plaintiffs will have to make this showing on remand, and the trial court will have to make this determination.
The court will also have to determine whether plaintiffs can show that they attempted to settle the matter short of litigation. Because at least waiting until DaimlerChrysler had responded to the public agencies’ inquiry before filing a complaint would have been eminently reasonable, plaintiffs will not be able to make this showing, which is no doubt why they have not yet tried to do so despite the long-standing existence of Grimsley v. Board of Supervisors, supra, 169 Cal.App.3d 960. I also hope that on remand, the court will reconsider its contradiction in (1) finding this lawsuit different from the public agency investigation and (2) predicating the actual award of attorney fees on what the public agencies had accomplished. The court should look instead to what this lawsuit accomplished, which had nothing to do with public safety.
I can only hope that future courts apply the catalyst theory with more care than the majority does its own creation.
C. Plaintiffs should not receive a multiplier for litigating fees on fees.
The majority also holds that a plaintiff may recover, as attorney fees, not only its fees incurred prosecuting the underlying litigation, with a multiplier, and its fees incurred litigating its entitlement to attorney fees (i.e., fees on fees), but also a multiplier on fees on fees. I appreciate the majority‘s attempt to limit the size of such multipliers. The majority‘s efforts might help reduce the instances of the tail wagging the dog like here, where the fee for litigating fees on fees is nine times greater than the fee for litigating the underlying lawsuit. But I would hold that a multiplier is never appropriate for litigating fees on fees. The majority disagrees with courts from other states that have considered this question and, tellingly, cites no out-of-state cases
Permitting this second multiplier further stacks settlement leverage in the plaintiffs’ favor. Not only must a defendant be concerned about paying its own attorney fees, and about having to pay for the plaintiffs’ attorney fees incurred in the underlying litigation, with a potential multiplier, and about having to pay attorney fees the plaintiff incurred in seeking fees, it must also worry about paying a multiplier on that amount. All this greatly increases the pressure on the defendants to buy their way out of lawsuits as cheaply as possible no matter how meritless they may be.
I must also comment on the irony, no doubt unintended, of the majority‘s statements that a multiplier often takes into account the attorney‘s “exceptional skill,” and that litigating fees on fees “is for the most part simpler than litigation on the merits.” (Maj. opn., ante, at p. 582.) Plaintiffs exhibited no exceptional skill in litigating the underlying lawsuit. Because DaimlerChrysler had long since voluntarily informed plaintiffs of its mistake, plaintiffs had to undertake little or no investigation. Plaintiffs’ attorneys merely filed a simple seven-page complaint alleging a single cause of action and containing largely boilerplate language. Ironically, these attorneys’ best lawyering came when litigating their entitlement to attorney fees, including their ability to convince the trial court both to find that their action was distinct from the public agency investigation and to credit them with what the public agencies had accomplished. Although I hesitate to suggest this lest the court on remand take me seriously, in a perverse way, under the majority‘s analysis, plaintiffs’ effort while litigating their entitlement to fees might be entitled to a larger multiplier than their effort regarding the underlying lawsuit.
Thus is the topsy-turvy world of catalyst theory and fees plus multipliers plus fees on fees plus more multipliers for fees on fees.
III. CONCLUSION
At a time when Californians are increasingly concerned about extortionate lawsuits against businesses, large and small, and worried that the legal climate in California is so unfriendly to businesses that many are leaving the
Because the majority does not do so, I dissent. I would reverse the judgment of the Court of Appeal.
Baxter, J., and Brown, J., concurred.
On January 12, 2005, the opinion was modified to read as printed above.
Notes
The majority also accuses me of “reweighing and recharacteriz[ing]” the evidence. (Maj. opn., ante, at p. 578, fn. 9.) However, no evidence exists that this lawsuit implicated public safety that can be reweighed or recharacterized. The majority has not even attempted to identify any such evidence. It merely refers the reader to unspecified “facts reviewed in the first part of this opinion.” (Id. at p. 578.) But the majority‘s factual recitation shows that the public agencies, not plaintiffs, addressed public safety concerns. (See id. at p. 562 [the “public agency investigation revealed that brochures misrepresenting the trucks’ towing capacity were still being distributed as of August 1999“].)