Friday, December 3, 2004
S.C. Upholds Attorney Fee Awards Based on ‘Catalyst’ Theory
By KENNETH OFGANG, Staff Writer/Appellate Courts
The “catalyst” theory, under which a plaintiff who does not prevail in the traditional litigation sense may recover legal fees as a private attorney general if the lawsuit resulted in a change in the defendant’s behavior that benefited the public, remains viable in California, a divided Supreme Court ruled yesterday.
“The catalyst theory is an application of the...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.,” Justice Carlos Moreno wrote for the court.
While the U.S. Supreme Court has ruled that the theory may no longer be applied in federal cases, Moreno went on to say, “[w]e continue to conclude that the catalyst theory, in concept, is sound.”
The justice noted that California’s highest court “has markedly diverged from United States Supreme Court precedent” in the past where private attorney general fees are concerned, permitting them even before the Legislature expressly authorized them by enacting Code of Civil Procedure Sec. 1021.5.
Moreno was joined by Chief Justice Ronald M. George and Justices Kathryn M. Werdegar and Joyce L. Kennard.
Justice Ming Chin dissented, noting that the state high court had never previously expressly endorsed the catalyst theory and arguing that its doing so now will encourage meritless lawsuits designed to generate fees.
Chin, joined by Justices Marvin Baxter and Janice Rogers Brown, endorsed the U.S. Supreme Court’s view, expressed in Buckhannon Board & Care Home, Inc. v. West Virginia Dept. of Health and Human Resources (2001) 532 U.S. 598, that the theory is inconsistent with statutes requiring that fees be awarded only to the “prevailing party.”
The court qualified its endorsement of the theory by setting down limitations on its application.
“In order to be eligible for attorney fees under section 1021.5,” Moreno wrote, “a plaintiff must not only be a catalyst to defendant’s changed behavior, but the lawsuit must have some merit...and the plaintiff must have engaged in a reasonable attempt to settle its dispute with the defendant prior to litigation.”
Yesterday’s ruling concerned a $760,000 fee award in favor of several purchasers of 1998 and 1999 Dakota R/T trucks, only one of them a Californian. The plaintiffs claimed that DaimlerChrysler Corporation violated consumer protection laws by falsely advertising that the trucks could tow more than three tons.
In fact, the trucks could only tow a ton. The company explained that the R/T is a sporty version of the earlier Dakota, and that design improvements required that the suspension be lowered, thus reducing towing capacity.
When buyers began complaining, the company formed a response team. Sometime after the suit was filed, the company offered to replace or repurchase the vehicles—about 7,000 of which had been sold or leased, fewer than 1,000 of those in California—or to provide purchasers with service contracts and parts coupons; in addition to its earlier offer of cash refunds for those who had spent $300 each to purchase trailer hitches in order to increase the towing capacity of their vehicles.
More than 2,500 buyers accepted the repurchase-or-replace option, and more than 3,000 took the coupons, costing the company more than $15 million. The company also agreed to pay a $75,000 penalty to avoid threatened actions by the state attorney general and the district attorney of Santa Cruz County.
Los Angeles Superior Court Commissioner Bruce Mitchell dismissed the suit, saying it was moot once the company did everything the plaintiffs asked the court to order it to do. But the jurist allowed the plaintiffs to continue to litigate their attorney fee request, which they did for more than a year before the commissioner held an evidentiary hearing.
Mitchell eventually ruled that the suit had resulted in the company’s offer to resolve the matter directly with the customers, and that a private attorney general award was appropriate because thousands had benefited as a result of the litigation. The commissioner branded as “largely a transparent fabrication” the company’s claim that it acted solely in response to direct complaints from consumers and the government investigations, and not because of the lawsuit.
Mitchell concluded that the services of the plaintiffs’ attorneys, through the date of the evidentiary hearing, were worth $330,000 based on hourly billing rates. He applied a multiplier of 2.25 and added about $20,000—with no multiplier—for services rendered after the hearing in order to arrive at the total award.
The high court ordered that the trial court reconsider the award under the new limitations. It also concluded that litigation over fees should not generally be the subject of large multipliers.
In a companion case, the court held, by the same 4-3 majority and in response to a certified question from the Ninth U.S. Circuit Court of Appeals, that the catalyst theory may be applied to a case brought under the Fair Employment and Housing Act. The Ninth Circuit sought the justices’ advice with respect to an appeal by the City of Los Angeles from a $1.7 million fee award in a suit alleging sex and gender discrimination within the police department.
U.S. District Judge Terry Hatter originally awarded the fees under Title VII, as well as FEHA and Sec. 1021.5. After Buckhannon was decided, the case was sent back to Hatter to determine whether fees should be awarded solely under state law.
The judge ruled that they should, and in the same amount as originally.
The cases are Graham v. DaimlerChrysler Corporation, 04 S.O.S. 6189, and Tipton-Whittingham v. City of Los Angeles, 04 S.O.S. 6207.
Copyright 2004, Metropolitan News Company