ALERT: California Supreme Court Rules that Attorneys’ Fees May Be Denied in Low-Recovery FEHA Cases

On January 14, 2010, the California Supreme Court unanimously ruled that attorneys’ fees may be denied in low-recovery cases brought under California’s Fair Employment and Housing Act ("FEHA"). In Chavez v. City of Los Angeles, the Court held that Section 1033(a) of the California Code of Civil Procedure applies to actions brought under the FEHA.

Under Section 1033(a), the trial court, at its discretion, may deny, in whole or in part, the plaintiff’s recovery of litigation costs. Section 1033(a) applies when a plaintiff obtains a judgment for money damages in an amount ($25,000 or less) that could have been recovered in a limited civil case, but the plaintiff did not bring the action as a limited civil case and, thus, did not take advantage of the cost- and time-saving advantages of limited civil case procedures. The FEHA authorizes courts to, at their discretion, award reasonable attorneys’ fees and costs to the prevailing party in a FEHA action.

The Plaintiff, Robert Chavez, worked as a police officer for the Los Angeles Police Department (the "LAPD"). During the course of his employment with the LAPD, plaintiff filed four lawsuits against the City of Los Angeles and lodged several complaints with California’s Department of Fair Employment and Housing ("DFEH").

This case pertains to plaintiff’s fourth lawsuit, in which he alleged claims under the FEHA including discrimination and harassment and retaliation for filing administrative complaints and the prior lawsuits. The Los Angeles County Superior Court conducted a five-day jury trial on plaintiff’s claims and the jury ruled against plaintiff with respect to all claims except retaliation. On that claim, the jury awarded plaintiff $1,500 in economic damages and $10,000 for emotional distress.

Plaintiff filed a motion for costs and a separate motion for attorneys’ fees, in which he requested fees for work done in all four of the lawsuits and requested that the lodestar sum be doubled, so that the requested fees increased to almost $871,000. The superior court denied the request entirely, citing Section 1033(a) of the California Code of Civil Procedure.

The California Court of Appeal reversed, holding that Section 1033(a) does not apply in FEHA cases because "[e]ven a modest financial recovery can serve to vindicate a substantial legal right" in statutory discrimination lawsuits and applying Section 1033(a) to such claims "would discourage attorneys from taking meritorious cases." The Court of Appeal also found that plaintiff’s case could not have been brought as a limited civil case because of the restrictions on discovery in limited civil cases.

The California Supreme Court reversed, holding that Section 1033(a) does apply to FEHA claims.

The Court held that, "[i]n the situation presented here, we perceive no irreconcilable conflict between section 1033(a) and the FEHA’s attorney fee provision." It noted that, in exercising its discretion under Section 1033(a) to grant or deny litigation costs in a FEHA action, the trial court "must give due consideration to the policies and objectives of the FEHA and determine whether denying attorney fees, in whole or in part, is consistent with those policies and objectives. If so, the plaintiff’s failure to take advantage of the time- and cost-saving features of the limited civil case procedures may be considered a special circumstance that would render a fee award unjust."

In considering whether a FEHA action should have been brought as a limited civil case, "the trial court should consider FEHA’s underlying policy of encouraging the assertion of meritorious FEHA claims and it should evaluate the entire case in light of the information that was known, or should have been known, by the plaintiff’s attorney when the action was initially filed and as it developed thereafter."

The Court continued on to note that a reduced fee award is appropriate when a claimant achieves only limited success and that plaintiff’s success "was modest at best." It held that the trial court reasonably concluded that plaintiff’s attorneys’ fees request was "grossly inflated considered in light of the single claim on which plaintiff succeeded" and also held that the trial court reasonably concluded that plaintiff’s action should have been brought as a limited civil case, primarily because plaintiff’s evidence in support of his retaliation claim was "seriously deficient on one essential element"—damages.

The Chavez decision may serve to discourage plaintiffs’ attorneys from bringing especially weak FEHA actions or encourage them to file such actions as limited civil cases, since their fee recovery may be reduced if they fail to do so. In addition, Chavez may affect the strategies employers utilize to defend FEHA actions. Specifically, because Chavez may increase employers’ settlement leverage, especially in weaker cases or in cases in which only minimal damages can be proven, employers can begin to use the risk of a minimal attorneys’ fees award as an incentive to plaintiffs’ counsel to settle those FEHA actions for reasonable amounts rather than taking them to trial.

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This alert is intended to provide a brief synopsis of recent developments in the law and should not be construed as legal advice.