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January 2010

California Supreme Court Limits Plaintiffs' Ability to Recover Inflated Attorneys' Fees in FEHA Cases

Chavez v. City of Los Angeles, No. S162313 (Cal. Jan. 14, 2010)

The California Supreme Court's recent opinion in Chavez v. City of Los Angeles is a significant decision that limits plaintiffs' ability to recover grossly inflated attorneys' fees when a lawsuit yields only a modest recovery.

In California, a "limited" case is one valued at $25,000, or less, and "unlimited" actions are those over this jurisdictional amount. Ordinarily, when a plaintiff brings an unlimited action but ultimately recovers less than $25,000, the trial court has discretion to deny that plaintiff his statutory costs even though he would have been entitled to those costs as a matter of right had he recovered more than $25,000.  In actions brought under California's Fair Employment Housing Act (FEHA), these costs can be very substantial because "costs" include attorneys' fees.

The facts in Chavez demonstrate why the Supreme Court's opinion is significant. Over the span of nearly six years, Chavez filed several lawsuits, including claims for discrimination and harassment under FEHA. After extensive litigation, Chavez prevailed on only one of his ten causes of action and recovered a total of $11,500. Chavez proceeded to file a motion for $13,144.26 in costs and $870,935.50 in attorney fees. Because Chavez had brought his action as an unlimited case but recovered less than $25,000, the trial court exercised its discretion pursuant to the rule explained above and denied Chavez's motion. However, the Court of Appeal held that this rule did not apply to cases brought under FEHA, which meant that trial courts had no discretion to deny attorneys' fees in FEHA cases even if a plaintiff recovered less than $25,000. The Supreme Court disagreed and reinstated the trial court's decision.

The Supreme Court first held that the above statutory rule applied to FEHA cases because the rule did not conflict with FEHA's purpose and spirit. As the Court explained, trial courts have the ability, among other things, to expand discovery in limited cases. Thus, plaintiffs could still fully vindicate their rights in limited actions. The Court next held that the trial court did not abuse its discretion when it denied Chavez's fees. The factors against Chavez included the protracted nature of his various lawsuits, his modest recovery, and his prevailing on only one of his ten causes of action. In light of his limited success, his $870,935.50 in claimed attorneys' fees was grossly inflated. The Court also held that the trial court did not err in finding that Chavez should have brought his case as a limited action, especially since there was very little evidence that Chavez suffered damages over $25,000—a fact that should have been known to him at the outset of his case.

Chavez is decidedly a beneficial decision both for defendants in FEHA actions and for the court system for the following reasons. First, had the Supreme Court agreed with the Court of Appeal, trial courts would no longer have discretion to deny costs and attorneys' fees that often are, as Chavez demonstrates, quite substantial. Second, because plaintiffs would have little incentive to bring low-value cases as limited cases, the already overburdened California court system would see its resources and dockets taxed further. Finally, plaintiffs with weak claims would be encouraged to press forward to trial to recover any modest amount against defendants with hopes of recovering substantial attorneys' fees. In the end, not only did the Supreme Court correctly interpret the law, the Court also avoided these undesirable consequences.

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Employment Law

Employment Law