Cal Biz Lit

When Can Attorneys' Fees Be Awarded in a FEHA Case?

I am two thirds of the way through a three part post on attorneys’ fees, and have gotten a little bogged down (the pesky details of my law practice have gotten in the way of long posts).  At any rate, the first post, on the contractual right to fees, is here.  The second, dealing with fees in civil rights, employment and public interest litigation, is here.  The final installment will cover fees in consumer litigation, and (I hope) it will be up in the next ten days or so.

But a recent decision, Villanueva v. City of Colton (2008) ___Cal.App.4th___ (4th Dist., E042188) reminds me that I should have mentioned the rare circumstance under which a successful defendant can be awarded attorneys’ fees against an unsuccessful plaintiff under California’s Fair Employment and Housing Act.  Fundamentally, the situation is this:

Government Code section 12965(b) authorizes an award of reasonable attorneys’ fees and costs “to the prevailing party” in a FEHA action.  But, tracking the comparable provisions in Federal Title VII actions and the U.S. Supreme Court’s decision in Christiansburg Garment Co. v. EEOC (1978) 434 U.S. 412,421, California courts have held that a prevailing defendant can be awarded attorneys’ fees only if the suit is objectively “frivolous, unreasonable or without foundation.”  Rosenmann v. Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro (2001) 91 Cal.App.4th 859;  Cummings v. Benco Building Services (1992) 11 Cal.App.4th 1383.

In order to ensure that plaintiffs are not unduly punished for asserting their civil rights, Rosenman requires that, before awarding fees to a defendant, the trial court must make findings that the plaintiff is capable of paying.  The same holding appears in Jersey v. John Muir Medical Center (2002) 97 Cal.App.4th 814, where the court of appeal also reversed a trial court of fees against the plaintiff based on a finding of “no merit” – not the proper standard.

In the recent Villanueva decision, the plaintiff failed to offer evidence of his inability to pay attorneys’ fees other than showing that he earned $25 per hour.  The court of appeal held that without such evidence, the trial court’s award of fees could not be an abuse of discretion, effectively placing the burden of proof  on this issue, or at least the burden of going forward, on the plaintiff.

Attorneys’ Fees and Fee Awards In California – Part II

    Last week, I posted about contractual attorney fee provisions, and situations where a prevailing party could be awarded attorneys’ fees because of a provision in a contract.  This week, the subject is the award of fees in civil rights, employment and public interest litigation.  This is a long post, so I'm putting the rest of it after the jump.  When all three posts are up, I'll probably try to incorporate them all into a white paper.

So as we often say, lots more after the jump.

Wrongful Termination Case Based on Labor Code Section 232.5 is Preempted by NLRA

California has two statutes, Labor Code sections 232 and 232.5, that protect the rights of employees to disclose information about their compensation or working conditions.  The first, Labor Code section 232, was enacted in 1984, provides:

No employer may do any of the following:

(a) Require, as a condition of employment, that an employee refrain from disclosing the amount of his or her wages.

(b) Require an employee to sign a waiver or other document that purports to deny the employee the right to disclose the amount of his or her wages.

(c) Discharge, formally discipline, or otherwise discriminate against an employee who discloses the amount of his or her wages.

This statute was broadly interpreted by the Court of Appeal in Grant-Burton v. Covenant Care, Inc. (2002) 99 Cal.App.4th 136.  There, the court upheld a claim for wrongful termination against public policy after an employee was allegedly terminated for telling co-employees (during an exchange of information between co-employees) that she did not receive a bonus.  The court held that (a) section 232 set forth the public policy of the state protecting employees from adverse employment action for disclosing information about “wages,” and (b) that the statute was intended to protect employees who wanted to discuss “some aspect of their compensation, for example, a possible increase in pay, perceived disparities in pay, or the awarding of bonuses.”

Only months after the court’s Grant Burton decision, the legislature enacted Labor Code section 232.5:

No employer may do any of the following:

(a) Require, as a condition of employment, that an employee refrain from disclosing information about the employer's working conditions.

(b) Require an employee to sign a waiver or other document that purports to deny the employee the right to disclose information about the employer's working conditions.

(c) Discharge, formally discipline, or otherwise discriminate against an employee who discloses information about the employer's working conditions.

(d) This section is not intended to permit an employee to disclose proprietary information, trade secret information, or information that is otherwise subject to a legal privilege without the consent of his or her employer.

In the following six years, no California court has issued a published decision involving section 232.5. . . . . until now.

More after the jump.

How Not to Give References

Most employer's attorneys advise their clients that when an inquiry is made about a former employee, the employer should limit the response to confirming the former employee's dates of employment and job title.  There are two reasons for this:  avoiding liability to the prospective employer for misleading information about a problem employee, and avoiding liability to the former employer for defamation.  This is certainly conservative legal advice and probably a good way to avoid litigation risk.

There are also a significant number of employers who consider this advice to be overkill, and who continue to give out information about past employees. Their logic is that the hiring process is a difficult one, and employers should help one another.  CalBizLit is not unsympathetic with this view, although as an employer, it tends to err on the side of risk avoidance.

But here's something everybody can agree is a bad idea.  Verdict Search
(Subscription Requ'd) reports on the case of William Dozier v. Lithia Ford of Fresno and Mike Leal, Fresno Superior Court No. 05CECG02456.  The news report from the Fresno Bee also appears at the web site for Oren & Paboojian, who represented Dozier.

This was an arbitrator's decision, not a jury verdict.  Plaintiff was a salesman for Lithia Ford.  He left to take another job.  His former  manager faxed posters to his new employer, depicting him as "wanted" for being a traitor and backstabber.  Dozier sued for defamation.

Here's the twist:  Dozier was a Vietnam veteran sniper.  When he was in Vietnam, the Viet Cong circulated wanted posters with his photo on it.  He claimed that the posters caused flashbacks to his service time, caused him to start drinking again, and resulted in VA hospitalization.  His alcohol use caused him to lose his job and the family home.

The arbitrator found that the posters were defamatory and all the damages were caused by the defamation.  He awarded $775,000.

How Not to Write An Employee Handbook

The Peters Law Group in Southern California is a small firm representing employees in discrimination, harassment and other litigation.  They also publish the often excellent California Employee Rights Blog.

Over the weekend, they published an amazing post on Tribune Co.'s (owner of the L.A. Times, which also covered the story here) new employee manual, designed to get rid of "mind-numbing lawyer gobbeldygook" and replace it with "common sense."  But the manual, apparently written by a PR executive,  is full of mistakes, and ripe for an enterprising employee-side lawyer to use against Tribune in a future discrimination and harassment case. 

The many gaffes should remind every company doing business in this state that it needs meaningful, written employment policies, and those policies should be vetted by an employment lawyer who knows what she / he is doing, not by the company flack. 

My favorite is the description in the manual of sexual harassment:

    4.2 Working at Tribune means accepting that sometimes you might hear a word that you…might not use…experience an attitude you don’t share…[or] hear a joke that you might not consider funny.

    4.3 This should be understood, should not be a surprise and is not considered harassment.

    4.4 Harassment means being told that a raise, promotion or other benefit is dependent on you going on a date with your boss or some other similar activity.

Well, no, not actually.  While harassment is sometimes "quid pro quo" harassment (the type described in section 4.4 above), the much more common type is "hostile environment" harassment, which apparently isn't described anywhere in the manual.  While I agree that use of "a word that you…might not use…[or] an attitude you don’t share…[or]  joke that you might not consider funny" is not usually sexual harassment, when a sexually charged atmosphere is created by conduct which is severe or pervasive -- including the use of words, jokes or expressed attitudes in some instances -- an employer might well face liability for harassment.  And a lawyer representing an employee making claims of this type against Tribune would love to cross-examine Tribune's executives about language like this in an employee handbook or manual.

Mandatory Arbitration in Employment Contracts

Today's guest blawger is Michael Sachs, who practices employment law with our firm.

Today's Wall Street Journal discusses the increasing use of arbitration provisions in employment agreements.   The WSJ estimates as many as 20% of all businesses require employees to agree to submit employment disputes to binding arbitration and agree in advance to waive jury trial rights as a condition of employment. 

The article also discusses a Missouri case where the court applied an arbitration provision even where the employee failed to sign the agreement.  The court reasoned that by continuing to work, the employee had agreed to be governed by the arbitration provision.

Interestingly, a recent California Court of Appeals indicates the law here is exactly the opposite.  In Mitri v. Arnel Management Co. (2007) ___ C.A. 4th ___ , the employer brought a motion to compel arbitration based on an arbitration provision contained in its employee handbook.  The handbook stated that any dispute would be settled by arbitration and that as a condition of employment the employees were required to sign an arbitration provision.  The employer argued that such language, in conjunction with an acknowledgment of receipt and review of the handbook, created an arbitration provision.  The employees argued that there was no signed arbitration provision because this passage only alerted them that an arbitration agreement would be forthcoming and they would be required to sign that agreement, but that no such agreement was ever provided to or signed by them.  The California Court of Appeals held that the employees never agreed to arbitrate their claims and thus, the motion to compel arbitration was denied.

More discussion of the WSJ artice and a number of perspectives on arbitration appear here at Legal Blog Watch. 

                                                                                                                               --Michael Sachs

Staples Wage and Hour Settlement

The focus of this blog is not employment law, and there are other blogs (Storm on the employer side, Wage Law on the employee side) whose authors do an excellent job in this field. But anybody  who conducts any kind of business at all in California needs to be aware of the dangers of misclassifying as  "managers" employees who stock shelves, mop up spills and counters, apply price stickers, run the cash register and have other non-management duties.   The exposure for non-payment of overtime is enormous, as Staples recently found out, according to this report in Wage Law:  $38 million, or more than $22,000 per "assistant manager."

Son of Gentry v. Circuit City

I blogged recently on Gentry v. Superior Court (2007) 42 Cal.4th 443, suggesting that it was likely to get lots easier to attack any number of kinds of contracts (and perhaps I should have said , at least consumer and form employment contracts) on unconscionability grounds.   Hot on the heels of Gentry comes Murphy v. Check ‘n Go (October 17, 2007) ___ Cal.App.4th ___, A114442, a wage and hour case where the First District found substantively and procedurally unconscionable (a)  the mandatory arbitration provision in an employment contract;  (b)  the waiver of class action provision;  and (c) the requirement that the arbitrator decide matters of unconscionability. 

All this is in a situation where the court agreed the language was clear, where (as in Gentry) the employee was advised to seek independent counsel, and there was apparently no evidence that the employee was required to sign the agreement , or even believed she was so required (although the court drew an inference that she must have thought the agreement was mandatory). 

Indeed, it looks as if the only real factual showing used to attack the contract was sworn declarations by Murphy’s attorney and two other attorneys that binding arbitration agreements and class action waivers in employment contracts were really bad things that let employers get away with murder.

I really do believe that these kinds of provisions are dead meat in form employment contracts, and that the same logic has potential in any number of other attacks on contracts.

Attorneys' Fee Awards: Big City Lawyers In Small Towns

A good deal of the litigation our firm defends involves the risk – or even the certainty – that one side or the other is going to be awarded attorneys' fees at the end of the proverbial day. 

• Much of our firm’s contract litigation involves contracts providing that fees go to the prevailing party.  Under Civil Code section 1717, even if the contractual provision only goes in one direction (e.g., the contract provides for fees to the company if it successfully defends suit), California law makes the provision reciprocal, allowing fees to the prevailing party on either side.
• Much of our firm’s consumer litigation is brought under the Consumer Legal Remedies Act or Song Beverly Consumer Warranty Act, both of which specifically provide for attorneys’ fees for a successful plaintiff.
• In our dealership work, the Automobile Sales Finance Act provides for fees for the successful plaintiff, while the Automobile Leasing Act provides for fees for the prevailing party, plaintiff or defendant.
• And then there is California’s private attorney general act, Code of Civil Procedure section 1021.5, which provides for attorneys’ fees for a successful party in a case which “has resulted in the enforcement of an important right affecting the public interest” under certain circumstances.  This statute is just about always in play in Proposition 65 matters and Unfair Competition Law cases.

All of this means that, in many cases, the attorney fee award is like the bomb that gets dropped at the end of the case:  the plaintiff or plaintiff class is awarded (or settles for) a modest amount of money.  Then comes the attorneys’ fee petition, seeking for the attorneys many multiples of what the plaintiff (or the plaintiff class) received.  And, on top of everything else, the plaintiff attorneys are likely entitled to their fees incurred in obtaining fees.

Under California’s leading case of Ketchum v. Moses (2001) 24 Cal. 4th 1122, an attorneys’ fee award is to be based, in part, on the hours reasonably spent times the prevailing hourly rates for attorneys in the same community conducting noncontingent work of the same type.  The resulting figure (the “lodestar”) may then be adjusted upward or, occasionally, downward, based on a variety of factors which have been developed by the courts.  Serrano v. Priest (1977) 20 Cal.3d 25;  Weeks v. Baker & McKenzie (1998) 63 Cal.App.4th 1128.

What happens, though, when a firm charging big city rates comes to the small town?  Under Horsford v. Board of Trustees of California State University (2005) 132 Cal.App.4th 359, the out of town firm may receive the out of town rate if it demonstrates that the plaintiff could not have received adequate representation using local counsel.

Now a new case fleshes out the limit of this rule.  In Nichols v. City of Taft (October 2, 2007), ___ Cal.App.4th ___, F051477, Morrison & Foerster (a San Francisco based AmLaw 100 firm universally known as “MoFo”) brought a case in Kern County under California’s Fair Employment and Housing Act, which provides for attorneys’ fees for successful plaintiffs.  On the eve of trial, the parties settled the case for $175,000, reserving to MoFo the right to move for attorneys’ fees. 

And move MoFo did, claiming some $507,000 at hourly rates as high as $550 (again demonstrating that CalBizLit and his partners are woefully underpaid).  The City challenged the rates, demonstrating that the highest hourly rate charged in the community was $250.

The trial court agreed, reducing the hourly rates accordingly.  But what the trial court took away with one hand, it gave with the other.  It concluded that it was required to use a “multiplier,” (i.e., an upward enhancement) to compensate MoFo for the fee reduction. It then applied a multiplier of 33 1/3%, bouncing the fee award back up to more than $470,000.

No dice, said the court of appeal.  The trial court was right in using local rates.  But it was wrong in using the multiplier (which MoFo had not even requested) to repair the damage.  Not only was the trial court not required to use a multiplier to compensate for a rate reduction, it was prohibited from using the multiplier for this purpose.  So the case was remanded to see if there was any other basis for applying a multiplier, or if MoFo would have to just struggle along with an award based on local rates – a mere $302,000.

As a side note, the defendant also argued that the $302,000 was too high because it was out of proportion to the result obtained.  But that argument fell flat.  The court added to the legion of other opinions holding that the defendant can’t drive the plaintiff’s hours off the chart with an aggressive defense and then argue that the lawyers spent too much time on the case.  A similar holding is in a case issued just yesterday, Cruz v. Ayromloo (October 3, 2007) ___ Cal.App.4th ___ (B190159), in which the court also stated clearly (albeit in dictum) that the lodestar should not be reduced just because the attorneys took the case “pro bono.”

How To Get Out Of A Contract: More Musings on Gentry

Last week I blogged about the first half of the Cal Supremes’ decision in Gentry v. Circuit City (2007) ___Cal.4th___, S141502.  And the first half –- casting considerable doubt on “class action waivers” in binding arbitration agreements, at least as to overtime claims – was noteworthy and got the most notice in the blawgosphere.  But I think the second half is potentially much more far-reaching.  It may open up the potential for unconscionability arguments in all kinds of contracts, and strike a big blow against all kinds of “contracts of adhesion.”

More after the jump.