Opinion ID: 1134428
Heading Depth: 1
Heading Rank: 8

Heading: 13a 4. Under the circumstances of this case, plaintiffs' entitlement to attorney fees should be determined under the provisions of section 1021.5, rather than the substantial benefit doctrine.

Text: Plaintiffs contend that in addition to remanding this case for reconsideration under the new private attorney general statute, our court should also direct the trial court to award attorney fees to plaintiffs under the so-called substantial benefit theory, one of the nonstatutory equitable doctrines that California courts have utilized in the past as a basis for attorney fee awards. Although we agree with plaintiffs' contention that the trial court's denial of fees under this theory may have been based in part upon a misconception of one aspect of the doctrine, as we shall explain we have nonetheless concluded that under the circumstances of this case the court did not err in declining to award fees under the substantial benefit doctrine. In light of the nature of the benefits bestowed on the public by this litigation, we believe plaintiffs' entitlement to attorney fees should properly stand or fall on the basis of the private attorney general concept, rather than on the substantial benefit theory. In Serrano III, we explained that the substantial benefit theory which may be viewed as an outgrowth of the `common fund' doctrine, permits the award of fees when the litigant, proceeding in a representative capacity, obtains a decision resulting in the conferral of a `substantial benefit' of a pecuniary or nonpecuniary nature. In such circumstances, the court, in the exercise of its equitable discretion, thereupon may decree that under dictates of justice those receiving the benefit should contribute to the costs of its production. (20 Cal.3d at p. 38.) (14) Unlike the private attorney general concept, which, as we have seen, is intended to promote the vindication of important rights affecting the public interest, the substantial benefit doctrine  like the common fund doctrine from which it emerged  rests on the principle that those who have been unjustly enriched at another's expense should under some circumstances bear their fair share of the costs entailed in producing the benefits they have obtained. (15) Because of the disparity in the purposes underlying the private attorney general and substantial benefit doctrines, the doctrines differ in a number of subtle but important respects. In the first place, whereas the private attorney general doctrine as embodied in section 1021.5 (and most comparable statutory provisions) provides for the shifting of attorney fees from plaintiffs to one or more opposing parties, the substantial benefit doctrine does not contemplate that the losing party or parties should ultimately bear attorney fees but rather mandates that those receiving the benefits should contribute to the costs of its production. (Italics added.) ( Serrano III, supra, 20 Cal.3d at p. 38.) In some circumstances, however, this difference may be more theoretical than real, for frequently one or more of the opposing or losing parties will either represent or act on behalf of the benefited class, so that an attorney fee award entered against such a party will, as a practical matter, operate to spread the costs proportionately among [the benefited class]. ( Mills v. Electric Auto-Lite (1970) 396 U.S. 375, 393-394 [24 L.Ed.2d 593, 607, 90 S.Ct. 616].) (13b) Plaintiffs contend that this proposition applies to the instant case in that the City of Los Angeles, the party that will ultimately bear an attorney fee award entered against defendants, clearly is an appropriate party to spread the costs among the general city populace, the class which plaintiffs assert is the principal beneficiary of this litigation. Plaintiffs maintain that the trial court failed to appreciate the fee-spreading capability of the city and argue that the court's findings reveal that that court proceeded upon the erroneous assumption that the substantial benefit doctrine could be employed to shift fees to a defendant only where the litigation has conferred a benefit upon such defendant. We recognize that the trial court's finding is somewhat ambiguous in this regard. [14] To the extent that the trial court proceeded upon the assumption that an award under the substantial benefit theory is appropriate only when the defendant against whom the fees are awarded has itself directly benefited from the litigation, we agree with plaintiffs that such reasoning is erroneous. (16) Although some language in our earlier D'Amico decision may possibly have misled the trial court (see 11 Cal.3d at p. 25), we made it clear in Serrano III that an award of fees under the substantial benefit doctrine does not depend upon substantial benefits to the defendant. ... [T]he proper rule ... `permit[s] reimbursement [of attorneys fees] in cases where the litigation has conferred a substantial benefit on the members of an ascertainable class, and where the court's jurisdiction over the subject matter of the suit makes possible an award that will operate to spread the costs proportionately among them.' [Citations.] (20 Cal.3d at p. 40, fn. 10.) (13c) Nonetheless, although the fact that defendant agencies themselves may not have directly benefited from the litigation is not a sufficient reason for denying attorney fees under the substantial benefit theory, we believe the trial court's decision to deny fees on this basis was proper on another ground. In Serrano III, we recognized that plaintiffs and their attorneys, as a result of the Serrano litigation, have rendered an enormous service to the state and all of its citizens by insuring that the state educational financing system shall be brought into conformity with the equal protection provisions of our state Constitution so that the degree of educational opportunity available to the school children of this state will no longer be dependent upon the taxable wealth of the district in which each student lives. ( Id. ) We nonetheless concluded, however, that benefits of this nature  deriving from the effectuation of constitutional or statutory policy, without more ( id. )  would not provide a proper basis for an attorney fee award under the substantial benefit theory, but rather constituted the type of benefit to which the private attorney general doctrine was directed. The justification for distinguishing between the types of benefits encompassed by the substantial benefit and private attorney general concepts lies in the distinct purposes of the two doctrines. (17) As we have seen, the substantial benefit doctrine rests on the principle of preventing unjust enrichment. That principle has its clearest application in instances in which one individual's action has created or preserved a substantial common fund or has obtained a decision providing substantial pecuniary benefits to other persons; in such a case, courts can reasonably conclude that although an award of attorney fees payable out of the fund will render the benefited parties involuntary clients of the attorneys, equitable considerations justify charging those who have obtained an economic windfall with the costs of obtaining such benefits. So long as the costs bear a reasonable relation to the benefits, the involuntary client who retains a substantial gain from the litigation will generally have no just cause to complain. (See generally Dawson, Lawyers and Involuntary Clients: Attorney Fees from Funds (1974) 87 Harv.L.Rev. 1597.) When the benefits bestowed on others become less tangible and more ephemeral in nature, however, the equity in charging involuntary beneficiaries with the costs of obtaining such benefits on an unjust enrichment theory becomes more problematical. Although the named plaintiffs and others in the benefited class may place a high value on such intangible benefits, and thus may be more than willing to pay their share of the costs of procuring such benefits, other members of the benefited class may value such benefits differently, and may legitimately complain that they should not be involuntarily saddled with costs which are out-of-proportion to their perceived benefit. In such circumstances, insofar as an award of attorney fees is sought to be justified on notions of unjust enrichment, the justification fails. This is not to say, however, that the substantial benefit theory is only applicable in instances in which pecuniary benefits have been conferred by the litigation. Although most of the California cases which have invoked this theory have in fact involved such pecuniary benefits (see, e.g., Knoff v. City etc. of San Francisco (1969) 1 Cal. App.3d 184 [81 Cal. Rptr. 683]; Mandel v. Hodges (1976) 54 Cal. App.3d 596 [127 Cal. Rptr. 244]; Card v. Community Redevelopment Agency (1976) 61 Cal. App.3d 570 [131 Cal. Rptr. 153]), there have been instances in which litigation has produced nonpecuniary benefits of such a concrete and clearly substantial value that equitable considerations have suggested the injustice in permitting others to obtain such benefits without contributing to their cost. (See, e.g., Fletcher v. A.J. Industries (1968) 266 Cal. App.2d 313, 324-325 [72 Cal. Rptr. 146].) In the instant case, plaintiffs suggest that the present action has conferred upon the general public, and in particular upon the residents of Los Angeles, a number of such benefits, benefits which, while nonpecuniary in nature, are nevertheless sufficiently concrete and actual to justify an attorney fee award under the substantial benefit doctrine as elaborated in Serrano III. Initially, plaintiffs contend that all of the residents of Los Angeles have received the benefit of the important principle of law resolved in Woodland Hills I, namely, that before approving a subdivision map local authorities must make specific findings that a subdivision is consistent with the applicable general plan. Plaintiffs emphasize that this principle of law will be applied not only to the instant proposed subdivision but to all future subdivisions and thus that residents of all parts of the city will receive the benefits of plaintiffs' counsel's labor. Plaintiffs urge that, under such circumstances, all of the city's populace may appropriately be required to pay the attorneys fees incurred in securing the Woodland Hills I ruling. (18) Although it is a built-in consequence of [the Anglo-American principle of] stare decisis that `a legal doctrine established in a case involving a single litigant characteristically benefits all others similarly situated' (Dawson, Public Interest Litigation, supra, 88 Harv.L.Rev. 848, 918 (quoting Hoffman v. Lehnhausen (1971) 48 Ill.2d 323, 329-330 [269 N.E.2d 465, 469, 45 A.L.R.3d 1138]), the doctrine of stare decisis has never been viewed as sufficient justification for permitting an attorney to obtain fees from all those who may, in future cases, utilize a precedent he has helped to secure. (See, e.g., Schleit v. British Overseas Airways Corp. (D.C. Cir.1969) 410 F.2d 261, 262; Whittier v. Emmet (D.C. Cir.1960) 281 F.2d 24, 32.) As the Second Circuit Court of Appeals stated in rejecting a plea for attorney fees based on a comparable theory: It is a novel assertion that attorneys who are victorious in one case may, like the holder of a copyright, claim fees from all subsequent litigants who might rely on or use it in one way or another. ( Cranston v. Hardin (2d Cir.1974) 504 F.2d 566, 580.) Indeed, if plaintiffs' theory of stare decisis benefits were accepted, it is not at all clear that plaintiffs' counsel should reap the resultant financial rewards, for although the Woodland Hills I decision was the first to hold that specific findings are required as to subdivision map approvals, the Woodland Hills I court viewed its decision as controlled directly by this court's opinion in Topanga Assn. For A Scenic Community v. County of Los Angeles, supra, 11 Cal.3d 506. Accordingly, under plaintiffs' proposed theory, the attorney who represented the plaintiff in Topanga would apparently have at least an equal claim to such fees. These circumstances demonstrate both the impracticality and impropriety of attempting to shift attorney fees to a class of persons who may, under the doctrine of stare decisis, derive future benefits from a general principle of law enunciated in a judicial decision. (13d) Plaintiffs alternatively maintain that the Woodland Hills I litigation itself, without regard to stare decisis, provided significant benefits to the general Los Angeles populace by assuring that the particular development at issue in the case was not approved without a specific determination that the subdivision in fact conformed to the applicable general plan. (19) As explained above, however, our decision in Serrano III makes it clear that benefits of this nature  which derive primarily from the effectuation of statutory policy  are in themselves insufficient to sustain an attorney fee award under the substantial benefit theory. (20 Cal.3d at p. 42.) This conclusion in no way denigrates the importance or significance of such benefits, but rather simply recognizes that the private attorney general doctrine rather than the substantial benefit theory is the appropriate basis for evaluating attorney fee requests arising from the effectuation of such statutory policies. We recognize that, in the past, a number of decisions both in California and in other jurisdictions have sustained attorney fee awards pursuant to the substantial benefit theory under circumstances in which the benefits conferred by the litigation were arguably no more concrete or actual than the benefits assertedly bestowed in the instant case. (See, e.g., Mills v. Electric Auto-Lite, supra, 396 U.S. 375, 389-397 [24 L.Ed.2d 593, 604-609]; Hall v. Cole (1973) 412 U.S. 1, 4-9 [36 L.Ed.2d 702, 707-710, 93 S.Ct. 1943]; Coalition for L.A. County etc. Interest v. Board of Supervisors (1977) 76 Cal. App.3d 241 [142 Cal. Rptr. 766].) As subsequent decisions and academic commentaries have pointed out, however, although these decisions formally grounded an attorney fee award upon the substantial benefit rubric, the reasoning of the decisions fits more comfortably into the private attorney general concept than the substantial benefit theory. (See, e.g., Lee v. Southern Home Sites Corp. (5th Cir.1971) 444 F.2d 143, 144-145; La Raza Unida v. Volpe, supra, 57 F.R.D. 94, 98; Dawson, Public Interest Litigation, supra, 88 Harv.L.Rev. 849, 866-869; Comment, Equal Access, supra, 122 U.Pa.L.Rev. 636, 662-664; Note, Awarding Attorneys Fees to the Private Attorney General: Judicial Green Light to Private Litigation in the Public Interest, supra, 24 Hastings L.J. 733, 741.) In the absence of an established, private attorney general rationale, such an expansion of the substantial benefit theory to effectuate important public policies is understandable. Now that the California Legislature has explicitly endorsed the private attorney general theory as a basis for an attorney fee award, however, we believe that in this state cases of this nature should appropriately be governed by the private attorney general doctrine. Accordingly, on remand, we believe that the trial court should evaluate plaintiffs' request for attorney fees on the basis of the private attorney general concept established by section 1021.5 of the Code of Civil Procedure. Under the facts of this case, an award of attorney fees pursuant to the substantial benefit doctrine would not be appropriate.