Saturday, January 16, 2010

New Employment Case Limits Right to Recover Attorneys Fees

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.

1 comment:

Joe Markowitz said...

It's an interesting decision, but I'm not sure it is a game changer. My understanding was the the courts always had some discretion at least to limit the amount of attorneys' fees based on the reasonableness of the time spent in light of the recovery achieved. This case turned on whether FEHA cases were exempt from the provisions of CCP 1032 which hold that costs can be denied entirely in a case brought as an unlimited case which ultimately turns out to have a value of less than $25,000. I'm not sure that was a settled question before this case, so I'm not sure it would be right to say that this case changed the law. But the case does now make clear that courts have the discretion to deny attorney fees entirely, at least when the plaintiff's success is so minimal and the attorneys' fee request is so inflated as they were found to be in this case.