Opinion ID: 1165326
Heading Depth: 2
Heading Rank: 1

Heading: Fee for services regarding the fee?

Text: (1a) The central issue is whether, under the private-attorney-general theory codified in section 1021.5, counsel's efforts to secure their fee for the underlying litigation may be compensated. Defendants' position is that there should be no award for fee-related services. They argue that plaintiffs' attorneys, in enforcing the award, vindicated no more than their personal interest, one inimical to that of their clients in that every fee awarded reduces pro tanto the fund available to defendants to use for public education. Defendants cite cases where fees were awarded under the common-fund or the substantial-benefit theory, viz., City of Detroit v. Grinnell Corp. (2d Cir.1977) 560 F.2d 1093 ( Grinnell II ), Lindy Bros. Builders, Inc. v. Am. Radiator, etc. (3d Cir.1976) 540 F.2d 102 ( Lindy II ), Gabrielson v. City of Long Beach (1961) 56 Cal.2d 224 [14 Cal. Rptr. 651, 363 P.2d 883], and Mandel v. Lackner (1979) 92 Cal. App.3d 747 [155 Cal. Rptr. 269] ( Mandel II ). The trial court correctly rejected those precedents as inapposite.
Since 1796 the rule in this country has been that counsel fees are not recoverable absent statute or enforceable agreement. (See Arcamel v. Wiseman (1796) 3 U.S. (3 Dall.) 306 [1 L.Ed. 613]; see also, e.g. Code Civ. Proc., § 1021; Alyeska Pipeline Co. v. Wilderness Society (1975) 421 U.S. 240, 247-257 [44 L.Ed.2d 141, 147-153, 95 S.Ct. 1612].) Courts have, however, carved out exceptions to the rule, principally the common-fund, substantial-benefit (or common-benefit), and private-attorney-general theories. [8] The common-fund exception was articulated in Trustees v. Greenough (1882) 105 U.S. 527 [26 L.Ed. 1157]. Greenough held that an act of Congress which limited costs recoverable by prevailing parties did not restrict courts' equitable powers to permit the trustee of a fund, or a party recovering or preserving a fund for the benefit of himself and others, to recover his costs (including attorney fees) from either the fund or the benefited parties directly. The fee-bill is intended to regulate only those fees and costs which are strictly chargeable as between party and party, and not to regulate the fees of counsel and other expenses and charges as between solicitor and client.... (105 U.S. at p. 535 [26 L.Ed. at p. 1161].) The central theory underlying the trustee's right was the prevention of unjust enrichment, i.e., prevention of an unfair advantage to the others who are entitled to share in the fund and who should bear their share of the burden of its recovery.... ( Estate of Stauffer (1959) 53 Cal.2d 124, 132 [346 P.2d 748].) Justifying the denial of recovery to the attorney was the fact that he could recover his fee from his client, the trustee. Yet Central Railroad & Banking Co. v. Pettus (1885) 113 U.S. 116 [28 L.Ed.915, 5 S.Ct. 387], held that the attorney had an independent right against the fund. [9] The theory was that he, like the client, had conferred a benefit on class members and thus, to avoid unjust enrichment, should be compensated. As the court explained in Lindy II, supra, 540 F.2d 102, on which defendants rely: `[t]he award of fees under the equitable fund doctrine is analogous to an action in quantum meruit: the individual seeking compensation has, by his actions, benefited another and seeks payment for the value of the service performed.' [ Lindy I ] 487 F.2d at 165. Accordingly, `a benefit to the fund is supposedly required.... The standard formula [of benefit] ... mix[es] together three distinct ideas: that a fund can be benefited by being created, increased or protected (or preserved).' ( Lindy II, supra, 540 F.2d 102, 110, citing Dawson, op. cit. supra, 87 Harv. L. Rev. 1597, 1626.) Therefore, just as the trustee was not permitted to surcharge the fund with personal expenses ( Greenough, supra, 105 U.S. 527, 538 [26 L.Ed. 1157, 1162]), the attorney's fee-related services were not compensable. Services performed in connection with the fee application are necessary to the attorney's recovery. They benefit him, for without them, the attorney cannot ... recover. But such services do not benefit the fund  they do not create, increase, protect or perserve it.... There being no benefit to the fund ... there should be no attorneys' fee award from the fund for those services. ( Lindy II, supra, 540 F.2d 102, 111; accord, Grinnell II, supra, 560 F.2d 1093, 1102, italics in original.) A second basis for the rule that attorneys could not recover from the fund for fee-related services was the potential for conflict of interest. Since Pettus, supra, 113 U.S. 116, it has been accepted that the attorney's claim is independent of and in addition to his client's claim for costs, including attorney fees. (See Dawson, op. cit. supra, 87 Harv.L.Rev. 1597, 1640.) To the extent counsel was permitted to surcharge for fees significantly beyond those to which he was entitled from his client, his motives to protect the client's interest might have been diluted. To the extent he succeeded in asserting the claim, both his client and other fund beneficiaries would lose. The prevailing rule is that one cannot be assessed the cost of effecting one's own loss. Thus the prohibition of an award for fee-related services in common-fund cases is an expression of the proscription against awarding any fees if competing interests are involved ( Lindy II, supra, 540 F.2d 102, 110)  a rule which, in turn, embodies the governing principle of the American rule. The conflict-of-interest basis for the rule in the attorney's instance is illustrated by this court's holding in Gabrielson, supra, 56 Cal.2d 224. The client's aim had been to aggregate monies against which she might ultimately assert rights. She succeeded in creating a $200 million fund from which her lawyer was denied fees. Affirming that result this court said, An attorney retained to recover or protect a common fund so that it would be available when and if his client could establish an adverse right thereto might be induced to forsake his client's interest in the hope of securing more substantial fees from the common fund. ( Gabrielson v. City of Long Beach, supra, 56 Cal.2d 224, 229-230.) Those two considerations were deemed fully applicable in cases arising under the substantial-benefit doctrine (see, e.g., Mandel II, supra, 92 Cal. App.3d 747, 760; County of Inyo v. City of Los Angeles, supra, 78 Cal. App.3d 82, 91), which developed as a variant of the common-fund theory in cases where no money fund had been created but a nonetheless concrete and significant benefit, impecuniary in nature, had been conferred on an ascertainable class. Courts reasoned, again under the principle of preventing unjust enrichment, that those benefited should share the burden of producing the fruits of litigation. Aside from the nature of the benefit, the rule differed little from the common-fund exception except in one respect: the beneficiaries could be the defendants or a class represented by them. The extension of the rule flowed from the fact that substantial-benefit developed from corporate litigation, wherein shareholder derivative actions were deemed to have conferred a benefit on the corporations against which they were directed. (See, e.g., Mills v. Electric Auto-Lite (1970) 396 U.S. 375, 390 [24 L.Ed.2d 593, 605, 90 S.Ct. 616]; Fletcher v. A.J. Industries (1968) 266 Cal. App.2d 313, 318-325 [72 Cal. Rptr. 146].) Even as a remedy against corporate defendants, however, substantial-benefit was sometimes deemed an instrument of public policy. [10] And, absent a theory designed solely to implement that policy, it was invoked increasingly in cases against government entities. (See e.g., Mandel v. Hodges (1976) 54 Cal. App.3d 596, 622-623 [127 Cal. Rptr. 244, 90 A.L.R.3d 728] [ Mandel I ]; Knoff v. City etc. of San Francisco (1969) 1 Cal. App.3d 184, 203-204 [81 Cal. Rptr. 683].) During this period the doctrinal lines became blurred between substantial-benefit theory and what ultimately developed as the private-attorney-general rationale. [11] The Mandel litigation is illustrative. There a state employee successfully challenged  as an establishment of religion  the practice of allowing government employees paid time off on Good Friday. The action saved the state $2 million in 1973 alone; and the trial court awarded plaintiff $25,000 in counsel fees, finding her a member of an ascertainable class of state employees. The court further found that her attorneys had acted `not only on her behalf, but in the general public interest and on behalf of members of [her] class....' (See Mandel I, supra, 54 Cal. App.3d 596, 622.) The Court of Appeal affirmed the judgment and also remanded for attorney fees on appeal, reasoning that plaintiff had rendered a substantial benefit to the citizens and taxpayers of the state. ( Id., at p. 624.) On remand the court awarded an additional $75,000. The state again appealed, and the Court of Appeal reversed as to the amount and held that counsel who had brought the suit could get fees for services on the prior, but not the current, appeal. ( Mandel II, supra, 92 Cal. App.3d 747, 760.) Relying on common-fund cases cited by defendants herein, the court reasoned that counsel on the second appeal had vindicated solely their own interest and that no benefit flowed to the public. Respondent's attorneys are... representing essentially their own interest at this time, as distinguished from those of the public to whom the benefits of the antecedent litigation stand secured. In consequence, the `substantial benefit' theory may not now be applied in their favor. ( Ibid. ) [12] So holding, the Court of Appeal merely applied the rule articulated by this court in Gabrielson, the Third Circuit in Lindy II, and the Second Circuit in Grinnell II, that considerations peculiar to common-fund and common-benefit cases require that counsel not be compensated for fee-related services. Both federal circuits have held squarely, however, that those considerations are absent when the fee is awarded under a statute embodying a private-attorney-general concept. In statutory fee award cases, the considerations of Lindy II and the equitable fund cases do not apply. Statutorily authorized fees are not paid out of the plaintiffs' recovery, and the attorney in seeking his fee is not acting in any sense adversely to the plaintiffs' interest. Hence the time expended by attorneys in obtaining a reasonable fee is justifiably included in the attorneys' fee application, and in the court's fee award. ( Prandini v. National Tea Co. (3d Cir.1978) 585 F.2d 47, 53; accord, Gagne v. Maher (2d Cir.1979) 594 F.2d 336, 344, affd. sub nom. Maher v. Gagne (1980) 448 U.S. 122 [65 L.Ed.2d 653, 100 S.Ct. 2570].) Defendants urge that all three theories should be deemed similar because, under each, lawyers seek fees from an involuntary client where payment would reduce funds otherwise available to plaintiff or to defendant for use in plaintiffs' behalf. We have rejected that view. Serrano III, for example, noted that the enormous service plaintiffs rendered to the state would nonetheless not support a fee award under the substantial-benefit theory because no concrete benefits were conferred by this court's holding. The fundamental holding of Serrano  i.e., that the existing school finance system, insofar as it operates to deny equality of educational opportunity to the school children of this state, is thereby violative of state equal-protection guarantees  does nothing in and of itself to assure that concrete `benefits' will accrue to anyone.... [C]oncrete `benefits' can accrue to the state or its citizens in the wake of Serrano only insofar as the Legislature, in its implementation of the command of equality which that case represents, chooses to bestow them. ( Serrano III, supra, 20 Cal.3d at p. 41, fn. omitted.) Defendants view the private-attorney-general theory as another version of common-fund. Justice Marshall, dissenting in Alyeska, similarly suggested that, under private-attorney-general approach, one consideration should be the extent to which shifting [the litigation] cost to the defendant would effectively place it on a class that benefits from the litigation. (421 U.S. at p. 285 [44 L.Ed.2d at p. 169].) The majority observed that Congress had imposed no such common-fund conditions upon the award under fee-shifting statutes embodying the private-attorney-general theory, and concluded that the condition disserve[d] that basis for fee shifting by imposing a limiting condition characteristic of other justifications. [¶] That condition ill suits litigation in which the purported benefits accrue to the general public. (421 U.S. 240, 264-265, fn. 39 [44 L.Ed.2d 141, 157].) As we said in Serrano III : The `private attorney general' theory must be accepted or rejected on its own merits  i.e., as a theory rewarding the effectuation of significant policy  rather than as a policy-oriented extension of the `substantial benefit' theory burdened with the limitations of that rationale. (20 Cal.3d at p. 45, fn. 16.)
Common-fund and substantial-benefit rest squarely on the principle of avoiding unjust enrichment. The private-attorney-general theory rests on the policy of encouraging private actions to vindicate important rights affecting the public interest, without regard to material gain. ( Serrano III, supra, 20 Cal.3d at p. 44; Woodland Hills II, supra, 23 Cal.3d at p. 933.) A central function is to call public officials to account and to insist that they enforce the law.... ( Alyeska, supra, 421 U.S. at p. 267 [44 L.Ed.2d at p. 159].) [13] Implicit is the recognition that without some mechanism authorizing the award of attorney fees, private actions to enforce ... important public policies will as a practical matter frequently be infeasible. ( Woodland Hills II, supra, 23 Cal.3d at p. 933.) Thus the 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. The rule in federal courts of appeals when they construe statutes like section 1021.5, embodying the private-attorney-general doctrine, [14] is that, absent facts rendering the award unjust, parties who qualify for a fee should recover for all hours reasonably spent, including those on fee-related matters. [15] The rule that Federal fee statutes ordinarily require a full fee award unless special circumstances would render such an award unjust first was stated in Newman v. Piggie Park Enterprises, supra, 390 U.S. 400, which construed the fee provision under title II of the 1964 Civil Rights Act. (P. 402 [19 L.Ed.2d, p. 1266].) [16] The Newman formula was invoked again for substantially identical provisions under title VII of that act ( Albemarle Paper Co. v. Moody (1975) 422 U.S. 405, 415 [45 L.Ed.2d 280, 295, 95 S.Ct. 2362]; cf., Christianburg Garment Co. v. EEOC (1978) 434 U.S. 412, 419 [54 L.Ed.2d 648, 655, 98 S.Ct. 694] [standard applies to prevailing plaintiffs but not prevailing defendants]) and under the Emergency School Aid Act of 1972 ( Northcross v. Memphis Board of Education (1973) 412 U.S. 427, 428 [37 L.Ed.2d 48, 50-51, 93 S.Ct. 2201]). It is the Newman standard  sometimes referred to as the Newman-Northcross rule  that Congress apparently intended to control the interpretation of its 1976 Fees Act. [17] Framing the private-attorney-general theory in California, both this court and the Legislature relied on federal precedent. (See Woodland Hills II, supra, 23 Cal.3d at p. 934.) Yet even were that not the case the unanimity of the federal rule  reflecting as it does time-tested workability  would merit our deference. Federal courts have reasoned that [i]f an attorney is required to expend time litigating his fee claim, yet may not be compensated for that time, the attorney's effective rate for all the hours expended on the case will be correspondingly decreased. Recognizing this fact, attorneys may become wary about taking Title VII cases, civil right cases, or other cases for which attorneys' fees are statutorily authorized. Such a result would not comport with the purpose behind most statutory fee authorizations, viz., the encouragement of attorneys to represent indigent clients and to act as private attorneys general in vindicating congressional policies. ( Prandini, supra, 585 F.2d 47, 53.) The contrary rule that defendants urge would permit a deep pocket losing party to dissipate the incentive provided by an award through recalcitrance and automatic appeals. ( Souza, supra, 564 F.2d 609, 614; accord, Bond, supra, 630 F.2d 1231, 1235-1236; Stanford Daily v. Zurcher (N.D.Cal. 1974) 64 F.R.D. 680, 683-684, affd. (9th Cir.1977) 550 F.2d 464, revd. on other grounds (1978) 436 U.S. 547 [56 L.Ed.2d 525, 98 S.Ct. 1970].) [18] It could permit fees to be determined by the litigiousness of losing parties. We should not distort our rule by restricting it to (1) persons with means sufficient to finance lawsuits without the assistance of court-awarded fees, and (2) indigents who qualify for legal aid. The showing required under section 1021.5 is substantial. (See fn. 1, ante. ) In cases where entitlement is vigorously contested, as here, [19] the hours demanded could dwarf those spent to establish the claim on the merits. Citizens of ordinary means are unlikely to file, and competent private practioners are unlikely to accept, public interest litigation, however meritorious, without some assurance of compensation that fairly covers the legal services required. [20] Nonetheless the federal rule does not license prevailing parties to force their opponents to a Hobson's choice of acceding to exorbitant fee demands or incurring further expense by voicing legitimate objections. Prevailing parties are compensated for hours reasonably spent on fee-related issues. A fee request that appears unreasonably inflated is a special circumstance permitting the trial court to reduce the award or deny one altogether. [21] If ... the Court were required to award a reasonable fee when an outrageously unreasonable one has been asked for, claimants would be encouraged to make unreasonable demands, knowing that the only unfavorable consequence of such misconduct would be reduction of their fee to what they should have asked in the first place. To discourage such greed, a severer reaction is needful.... ( Brown v. Stackler (7th Cir.1980) 612 F.2d 1057, 1059.) We conclude that defendant's first argument is without merit. Principles governing an award under the common-fund or substantial-benefit theory do not control when it is made under the private-attorney-general doctrine.
Defendants urge that Serrano III vindicated solely the right of plaintiffs' attorneys to a fee and, therefore, did not meet the three requirements of section 1021.5. They cite cases holding that benefits conferred did not transcend claimant's personal interest ( Marini v. Municipal Court (1979) 99 Cal. App.3d 829, 836-838 [160 Cal. Rptr. 465]; see also Friends of B Street v. City of Hayward (1980) 106 Cal. App.3d 988, 994-995 [165 Cal. Rptr. 514]) or were insignificant when measured against legislative goals ( Bruno v. Bell (1979) 91 Cal. App.3d 776, 778 [154 Cal. Rptr. 435]). In essence defendants argue that Serrano III, wherein plaintiffs' lawyers enforced their right to the fee for winning on the merits in Serrano II, is a separate action under section 1021.5 that must independently satisfy the law's requirements. [22] (2) An action, however, is merely a form of judicial remedy sought to protect a right or redress a wrong. (Code Civ. Proc., §§ 20-25; [23] see generally 2 Witkin, Cal. Procedure (2d ed. 1970) Actions, § 2, pp. 880-881.) (1b) Serrano II and III arose, as did Serrano I, from filing a single complaint; they bear the same superior court docket number. Civil code section 3523 states that [f]or every wrong there is a remedy. `This maxim of jurisprudence bestows upon the person who may be wronged the right to seek redress in an action, and the basis thereof is denominated the cause of action. ' (2 Witkin, op. cit. supra, at pp. 880-881, citing Painter v. Berglund (1939) 31 Cal. App.2d 63, 70 [87 P.2d 360], italics added.) A statutory fee motion does not create a new cause of action ... ( Kievlan v. Dahlberg Electronics, Inc. (1978) 78 Cal. App.3d 951, 959 [144 Cal. Rptr. 585] [construing § 1021.5]), much less a new action. It is a collateral matter, ancillary to the main cause. ( Ibid. ); cf. Associated Convalescent Enterprises v. Carl Marks & Co., Inc. (1973) 33 Cal. App.3d 116, 120 [108 Cal. Rptr. 782] [attorney fees under Civ. Code, § 1717].) It `seeks what is due because of the judgment....' ( Knighton v. Watkins (5th Cir.1980) 616 F.2d 795, 797, cited with approval in White v. New Hampshire Dept. of Empl. Sec. (1982) 455 U.S. 445, 452 [71 L.Ed.2d 325, 331, 102 S.Ct. 1162, 1166-1167].) Defendants urge that Serrano ended when, under section 1021.5, the lawsuit resulted in the enforcement of an important right and a significant benefit [had] been conferred; i.e., when the Serrano II judgment was final. Yet it is inherent in section 1021.5, as under other fee statutes, that fee applications, whenever filed, may not be heard until the benefits are secure. (See Marini, supra, 99 Cal. App.3d 829, 835 [§ 1021.5 implies jurisdiction to hear motion after judgment final].) As the court in White, supra, observed regarding a Fees Act motion (see fn. 14, ante ), [r]egardless of when attorney's fees are requested, the court's decision of entitlement to fees will ... require an inquiry separate from the decision on the merits  an inquiry that cannot even commence until one party has `prevailed.' (455 U.S. at p. 451 [71 L.Ed.2d at p. 331, 102 S.Ct. at p. 1166].) It is defendants' position that no fees are recoverable for defending the fee award on appeal because the appeal did not independently meet the requirements of section 1021.5. (3) Yet it is established that fees, if recoverable at all  pursuant either to statute or parties' agreement  are available for services at trial and on appeal. (See Wilson v. Wilson (1960) 54 Cal.2d 264, 272 [5 Cal. Rptr. 317, 352 P.2d 725], citing Dankert v. Lamb Finance Co. (1956) 146 Cal. App.2d 499, 503-504 [304 P.2d 199] [A contract for a reasonable attorney's fee in enforcing its provisions embraces an allowance for legal services rendered upon appeal as well during the trial].) This rule governs whether or not the sole issue on appeal has been fee entitlement. (See, e.g., Painter v. Estate of Painter (1889) 78 Cal. 625 [21 P. 433]; Clejan v. Reisman (1970) 5 Cal. App.3d 224, 241 [84 Cal. Rptr. 897].) [24] Courts routinely have awarded fees on appeals vindicating only the right to an award for trial services. At least one such award was made under section 1021.5. ( Wilkerson v. City of Placentia (1981) 118 Cal. App.3d 435, 444-445 [173 Cal. Rptr. 294]; see also Gunn v. Employment Development Dept. (1979) 94 Cal. App.3d 658, 665-666 [156 Cal. Rptr. 584]; Rich v. City of Benicia (1979) 98 Cal. App.3d 428, 434 [159 Cal. Rptr. 473].) (1c) Similar awards have been made under Welfare and Institutions Code section 10962 ( County of Humboldt v. Swoap (1975) 51 Cal. App.3d 442, 445 [124 Cal. Rptr. 510]; Horn v. Swoap (1974) 37 Cal. App.3d 375 383-384 [116 Cal. Rptr. 113]; Trout v. Carleson (1974) 37 Cal. App.3d 337, 344 [112 Cal. Rptr. 282]; Roberts v. Brian (1973) 30 Cal. App.3d 427, 431 [106 Cal. Rptr. 360]), Education Code section 44944 ( Russell v. Thermalito Union School Dist. (1981) 115 Cal. App.3d 880, 884 [176 Cal. Rptr. 1), and Civil Code section 1717 ( T.E.D. Bearing Co. v. Walter E. Heller & Co. (1974) 38 Cal. App.3d 59, 64-65 [112 Cal. Rptr. 910]). [25] In Hutto v. Finney, supra, 437 U.S. 678, the Supreme Court affirmed an award under 42 United States Code section 1988 for an appeal wherein the principal issue was the propriety of the fee award against state officials for prolonging, in bad faith, their defense in a lawsuit challenging prison conditions. The contrary rule, discussed above, would permit the fee to vary with the nature of the opposition. While attributing no bad faith to the Attorney General's office for its conduct of this litigation, we join those judges who have observed that government cannot litigate tenaciously and then be heard to complain about the time necessarily spent by the plaintiff in response. ( Copeland, supra, 641 F.2d 880, 904.) [26] The trial court lamented here that fee litigation should not be never-ending; [27] yet as to section 1021.5 its length truly lies in defendants' hands. Fees may be awarded solely to a successful party, and awards are discretionary. [28] In sum, defendants give us no reason in law or logic why we should not follow the rule of the overwhelming majority of courts that have considered the question. We hold therefore that, absent circumstances rendering the award unjust, fees recoverable under section 1021.5 ordinarily include compensation for all hours reasonably spent, including those necessary to establish and defend the fee claim. [29] Thus we affirm the award for services performed in Serrano III and remand the portion of the order that denies compensation for services related to the fee motions. [30]