Opinion ID: 2508131
Heading Depth: 2
Heading Rank: 3

Heading: Whether There Should Be A Multiplier for Attorney Fees for Litigating Attorney Fees

Text: In the present case, a large percentage of the attorney fees were awarded for litigation to obtain fees under section 1021.5. As noted, the lodestar amount calculated by the trial court was $329,620, and that amount was multiplied by an enhancement of 2.25, for a total $762, 830. The trial court based the enhancement on the contingency nature [of the litigation], the delay in payment and the quality of the result. DaimlerChrysler argues that there should be no enhancement for fees for fee-related litigation, or fees on fees. Assuming the trial court concludes on remand that plaintiffs are entitled to some attorney fees, we address for its benefit whether it appropriately awarded enhancements for fees on fees. We conclude that, while fees for attorney fee litigation under section 1021.5 may be enhanced under some circumstances, that enhancement should generally be lower than fees awarded in the underlying litigation. We first review some general principles regarding the calculation of attorney fees in public interest litigation. As we recently explained, under our decision in Serrano III, a court assessing attorney fees begins with a touchstone or lodestar figure, based on the `careful compilation of the time spent and reasonable hourly compensation of each attorney... involved in the presentation of the case.' [Citation.] We expressly approved the use of prevailing hourly rates as a basis for the lodestar, noting that anchoring the calculation of attorney fees to the lodestar adjustment method `is the only way of approaching the problem that can claim objectivity, a claim which is obviously vital to the prestige of the bar and the courts.' [Citation.] In referring to `reasonable' compensation, we indicated that trial courts must carefully review attorney documentation of hours expended; `padding' in the form of inefficient or duplicative efforts is not subject to compensation. [Citation.] Under Serrano III, the lodestar is the basic fee for comparable legal services in the community; it may be adjusted by the court based on factors including ... (1) the novelty and difficulty of the questions involved, (2) the skill displayed in presenting them, (3) the extent to which the nature of the litigation precluded other employment by the attorneys, (4) the contingent nature of the fee award. [Citation.] The purpose of such adjustment is to fix a fee at the fair market value for the particular action. In effect, the court determines, retrospectively, whether the litigation involved a contingent risk or required extraordinary legal skill justifying augmentation of the unadorned lodestar in order to approximate the fair market rate for such services. The `experienced trial judge is the best judge of the value of professional services rendered in his court, and while his judgment is of course subject to review, it will not be disturbed unless the appellate court is convinced that it is clearly wrong.' ( Ketchum, supra, 24 Cal.4th at pp. 1131-1132, 104 Cal.Rptr.2d 377, 17 P.3d 735.) One of the most common fee enhancers, and one used by the trial court in the present case, is for contingency risk. We reaffirmed the propriety of a contingency risk enhancement in Ketchum: The economic rationale for fee enhancement in contingency cases has been explained as follows: `A contingent fee must be higher than a fee for the same legal services paid as they are performed. The contingent fee compensates the lawyer not only for the legal services he renders but for the loan of those services. The implicit interest rate on such a loan is higher because the risk of default (the loss of the case, which cancels the debt of the client to the lawyer) is much higher than that of conventional loans.' (Posner, Economic Analysis of Law (4th ed.1992) pp. 534, 567.) `A lawyer who both bears the risk of not being paid and provides legal services is not receiving the fair market value of his work if he is paid only for the second of these functions. If he is paid no more, competent counsel will be reluctant to accept fee award cases.' ( Ketchum, supra, 24 Cal.4th at pp. 1132-1133, 104 Cal. Rptr.2d 377, 17 P.3d 735.) Turning to the question of compensation for fee-related litigation, we first note it is well established that plaintiffs and their attorneys may recover attorney fees for fee-related matters. ( Serrano IV, supra, 32 Cal.3d at pp. 632-633, 639, 186 Cal.Rptr. 754, 652 P.2d 985.) As we stated: the [private attorney general] doctrine will often be frustrated, sometimes nullified, if awards are diluted or dissipated by lengthy, uncompensated proceedings to fix or defend a rightful fee claim. ( Serrano IV, supra, 32 Cal.3d at p. 632, 186 Cal.Rptr. 754, 652 P.2d 985; see also Ketchum, supra, 24 Cal.4th at p. 1141, 104 Cal.Rptr.2d 377, 17 P.3d 735.) While DaimlerChrysler does not dispute that fees for fee-related litigation may be awarded, it asks this court to hold that there should be no multiplier for fees on fees. It cites to several out-of-state cases that have disallowed such multipliers, principally because fee litigation is tangential to the primary litigation and of less social value. (See City of Birmingham v. Horn (Ala.2001) 810 So.2d 667, 684 [While the law clearly allows for a fee award with respect to [fee litigation], we do not consider this time to be vital to the true purpose of the litigation]; Baksinski v. Northwestern University (1992) 231 Ill.App.3d 7, 172 Ill.Dec. 436, 595 N.E.2d 1106, 1114 [the fee litigation in this case is not part of the class action litigation, and ... confers no benefit on the class and is therefore not the type of litigation warranting the application of a multiplier]; see also Indiana Hospital Licensing Council v. Women's Pavilion of South Bend (Ind.Ct.App.1985) 486 N.E.2d 1070, 1080.) DaimlerChrysler argues that as a policy matter, enhancements of fees will serve only to encourage a satellite litigation of dubious social utility. (See Hensley v. Eckerhart (1983) 461 U.S. 424, 437, 103 S.Ct. 1933, 76 L.Ed.2d 40; see also id. at p. 442, 103 S.Ct. 1933 (conc. opn. of Brennan, J.) [referring to attorney fee litigation as one of the least socially productive types of litigation imaginable].) As plaintiffs point out, our Court of Appeal adopted a contrary position in Downey Cares v. Downey Community Development Com. (1987) 196 Cal.App.3d 983, 242 Cal.Rptr. 272 ( Downey Cares ). In that case, the plaintiffs overturned an amendment to the city's general plan that had been brought about by a conflict of interest on the part of one of the city council members. The trial court awarded attorney fees under Government Code section 91003 and applied a 1.5 multiplier to the entire lodestar amount, including fees for fee litigation. The Court of Appeal upheld the judgment. After reviewing the justification stated above for awarding fees for fee litigation, it stated: Considering the numerous factors a trial court might legitimately weigh in determining the multiplier [citation], it is certainly conceivable that some of these factors might apply to the main litigation but not to the fee litigation. For instance, the underlying suit might involve complex issues, lengthy proceedings, and unusual skill, while at the same time the fee related motions might be routine and short. Under such circumstances, a trial court would not abuse its discretion if it chose to distinguish the two categories and apply a different multiplier to each. [Citation.] On the other hand, a trial court would not necessarily abuse its discretion if it chose not to distinguish the two categories but to apply the multiplier to the whole lodestar. For instance, if the contingency of receiving any fee and the long delay in receiving the fee ... were important to the trial judge's calculation, they seem equally applicable to the award for fee-related services. ( Downey Cares, supra, 196 Cal.App.3d at pp. 997-998, 242 Cal.Rptr. 272.) Echoing Downey Cares, plaintiffs argue that there is no principled basis for categorically precluding appropriate enhancements for fees for fee litigation. We noted the holding in Downey Cares in Ketchum, supra, 24 Cal.4th at page 1141, footnote 6, 104 Cal.Rptr.2d 377, 17 P.3d 735. But in Ketchum, we declined to apply the contingency fee enhancement to fees for fee litigation. We reasoned that under the statute authorizing attorney fees at issue in that case, section 425.16, subdivision (c), the fees were mandatory once a party prevailed on the underlying anti-SLAPP motion, and there was at that point no contingent risk to the pursuit of attorney fees that would justify an enhancement for the fees on fees. ( Ketchum, supra, 24 Cal.4th at pp. 1141-1142, 104 Cal.Rptr.2d 377, 17 P.3d 735.) We had no occasion to decide whether fees for fee litigation should be enhanced under section 1021.5. In light of the above discussion, we reject DaimlerChrysler's argument that fees for fee litigation can never be enhanced. Such a rule does not appear harmony with the principle that the awarding of attorney fees and the calculation of attorney fee enhancements are highly fact specific matters best left to the discretion of the trial court. (See Ketchum, supra, 24 Cal.4th at pp. 1131-1132, 104 Cal. Rptr.2d 377, 17 P.3d 735.) Although we agree with DaimlerChrysler that the reduction of attorney fee litigation is a desirable objective, it is not clear that a categorical rule barring enhancements for fee litigation will accomplish that objective. It is not clear that the unnecessary prolongation of fee litigation is a significant problem, given that trial courts have the capacity to distinguish between reasonable and unreasonable attorney fee charges and the discretion to disallow the latter. Nor is it clear that, if there is such a problem, it is caused mainly by avaricious plaintiffs rather than recalcitrant defendants. Furthermore, [w]hen the Legislature has determined that the lodestar adjustment approach is not appropriate, it has expressly so stated. Thus, in 1993, it amended Code of Civil Procedure section 1021.5 to provide that attorney fees awarded to a public entity under the section `shall not be increased or decreased by a multiplier based upon extrinsic circumstances, as discussed in [ Serrano III, supra, ] 20 Cal.3d 25, 49 [141 Cal.Rptr. 315, 569 P.2d 1303].' (Stats.1993, ch. 645, § 2, p. 3747.) Its express restriction on the use of fee enhancements therein `can be read as an implicit endorsement of their use in other contexts.' ( Ketchum, supra, 24 Cal.4th at p. 1135, 104 Cal.Rptr.2d 377, 17 P.3d 735.) One of those other contexts is for fees for fee litigation, as recognized six years prior to the 1993 amendments in Downey Cares. Nonetheless, building on the discussion quoted above in Ketchum and Downey Cares, we recognize that the enhancement justified for fees in the underlying litigation may differ from the enhancement warranted in the fee litigation, and that a lower enhancement, or no enhancement, may be appropriate in the latter litigation. In fact, a closer examination of the enhancement factors set forth in Serrano III leads to the conclusion that in most cases, the enhancement for the fee litigation should be lower than the enhancement for the underlying litigation, if one is applied at all. This is especially true of the results obtained factor that the trial court relied on in part to justify its multiplier. The `results obtained' factor can properly be used to enhance a lodestar calculation where an exceptional effort produced an exceptional benefit. ( Thayer v. Wells Fargo Bank (2001) 92 Cal.App.4th 819, 838, 112 Cal.Rptr.2d 284.) While the trial court may have legitimately concluded that the underlying litigation had produced an exceptional benefit for consumers in the present case, the same cannot be said of the fee litigation itself, which simply produced fees to compensate plaintiffs' attorneys for their efforts. We conclude fees for fee litigation should not be enhanced on that basis. Moreover, while this factor often takes into account the exceptional skill exhibited by the attorney ( Lealao v. Beneficial Cal. Inc. (2000) 82 Cal.App.4th 19, 50, 97 Cal.Rptr.2d 797; Edgerton v. State Personnel Bd. (2000) 83 Cal.App.4th 1350, 1363, 100 Cal.Rptr.2d 491; City of Oakland v. Oakland Raiders (1988) 203 Cal. App.3d 78, 85, 249 Cal.Rptr. 606), an enhancement on that basis is rarely justified for fee related litigation. This litigation, as discussed above, is for the most part simpler than litigation on the merits. On the other hand, while attorney fees may not be used to punish defendants ( Ketchum, supra, 24 Cal.4th at p. 1141, 104 Cal.Rptr.2d 377, 17 P.3d 735), fees for fee litigation may be enhanced when a defendant's opposition to the fee motion creates extraordinary difficulties. (See e.g. Edgerton v. State Personnel Bd., supra, 83 Cal.App.4th at p. 1363, 100 Cal.Rptr.2d 491; Crommie v. P.U.C. (N.D.Cal.1994) 840 F.Supp. 719, affd. sub nom. Mangold v. P.U.C. (9th Cir.1995) 67 F.3d 1470 [lodestar enhanced in part by increased difficulty due to defendant's excessively vexatious and often unreasonable opposition].) [10] Courts awarding attorney fees under section 1021.5 also may generally differentiate between the contingency risk undertaken during the litigation on the merits and the risk undertaken for litigation on fees. The risk that an attorney takes in the underlying public interest litigation has two components: the risk of not being a successful party, i.e., of not prevailing on the merits, and the risk of not establishing eligibility for an attorney fee award. ( Serrano III, supra, 20 Cal.3d at p. 49, 141 Cal.Rptr. 315, 569 P.2d 1303.) As discussed, in Ketchum we declined to award a contingency enhancement for fee litigation because under section 425.16, award of the fee was mandatory once a party had prevailed on the underlying motion, and therefore neither of the two risk components were implicated. Generally speaking, by the time of the commencement of fee litigation in section 1021.5 cases, the first and perhaps most substantial component of risk, that of not being a successful party, has been eliminated. What remains is the second component, that plaintiffs may not be able to establish eligibility for fees, i.e., to establish that the litigation confers a `significant benefit' ... `on the general public or a large class of persons' ( Beasley v. Wells Fargo Bank, supra, 235 Cal.App.3d at pp. 1417-1418, 1 Cal.Rptr.2d 459) or that there was the `necessity and financial burden of private enforcement,' making the award appropriate ( Hammond v. Agran (2002) 99 Cal. App.4th 115, 121, 120 Cal.Rptr.2d 646). Although in the present case, as in other catalyst theory cases, plaintiffs had not established themselves as the successful party at the beginning of the fee litigation, and some enhancement for that risk may be justified, the achievement of their litigation objective before fee litigation would reduce somewhat the uncertainty over their successful party status. The fact that the risk of fee litigation is generally less than the risk of litigation on the merits of the suit justifies a lower attorney fee multiplier for the former, if one is given at all. We do not believe a lower multiplier on fees for less risky fee litigation will deter attorneys from accepting worthwhile public interest cases. (See Ketchum, supra, 24 Cal.4th at pp. 1132-1133, 1141-1142, 104 Cal.Rptr.2d 377, 17 P.3d 735.) One enhancement factor that would be as applicable for fees on fees as for fees on the merits is a significant delay in the payment of the fees. (See Serrano III, supra, 20 Cal.3d at p. 49, 141 Cal.Rptr. 315, 569 P.2d 1303.) Court-awarded fees normally are received long after the legal services are rendered. That delay can present cash-flow problems for the attorneys. In any event, payment today for services rendered long in the past deprives the eventual recipient of the value of the use of the money in the meantime, which use, particularly in an inflationary era, is valuable. A percentage adjustment to reflect the delay in receipt of payment therefore may be appropriate. ( Copeland v. Marshall (D.C.Cir.1980) 641 F.2d 880, 893.) But this enhancement, which is tantamount to an interest rate, is by itself quite small and may be reduced or eliminated if the lodestar rate is based on the present hourly rate rather than the lesser rate applicable when the services were rendered. ( Id. at p. 893, fn. 23, see also Pearl, Cal. Attorney Fee Awards, supra, § 13.10, p. 390.) In the present case, the trial court made its initial decision regarding the fee multiplier before our decision in Ketchum and then, after further briefing, reduced the multiplier from 3.0 to 2.25, not differentiating between the fees in the underlying litigation and the fees on fees. It appears the court over-enhanced the fees on fees by inappropriately using the results obtained factor to arrive at the multiplier. On remand the court should also reexamine its use of the risk factor. While it was not required to explain how it calculated that factor, and we will generally presume the attorney fee award was correct `on matters as to which the record is silent' ( Ketchum, supra, 24 Cal.4th at p. 1140, 104 Cal.Rptr.2d 377, 17 P.3d 735), it would be appropriate for the trial court to reassess its calculation of a risk enhancement for fees on fees in light of this opinion's conclusion that the risk multiplier for those fees generally should be lower than for fees in the underlying litigation. The trial court is therefore directed on remand to recalculate the proper multiplier if it concludes that plaintiffs are eligible for some attorney fees.