We might have known it was coming since I reported about being subpoenaed to testify that attorneys fees were unwarranted in a Federal employment case because the employer would have settled for the same amount as the ultimate verdict in a mediation that took place six months before trial...but now the California Supreme Court has decided that an employee may not be entitled to recover attorneys fees in a meritorious employment case where the amount in controversy (or the ultimate verdict) is too small to have warranted the fees incurred. The decision -- Chavez v. City of Los Angeles -- tilts the balance between employee and employer interests in employment cases a little towards the employer by allowing trial courts to deny attorney fee recoveries to plaintiffs who only recover a small amount.
In Chavez, the Plaintiff was awarded $11,500 for FEHA violations, but the Attorneys submitted a fee bill of $840,000. Prior to this decision, the Court didn't have the discretion to deny attorneys fees, although they could be taxed pursuant to motion. Now, if the Court thinks they're out of balance with the value of the case, it can deny the fees. Game changer!
I have often seen the threat of huge legal fees tip the evaluation towards settling a case that otherwise has relatively low damages in employment actions. Although the cases are not frivolous, they may have limited value without the additional threat of legal fees.
Plaintiff's attorneys will likely be scrutinizing the intake on these cases more thoroughly where the damages are low. Employees who have been wrongly terminated may have less access to quality attorneys to take their cases where damages are small. Indeed, I'm going to assume that more of these cases will be settled earlier and through mediation than assuming the risk and expense of trial in light of this decision.
Interesting development in light of the economic recession in our generally pro-employee liberal State.
