Opinion ID: 1245386
Heading Depth: 1
Heading Rank: 3

Heading: The Substantial Benefit Theory

Text: (3a) As we indicated in our opinion in D'Amico v. Board of Medical Examiners, supra, 11 Cal.3d 1, 25, the courts have fashioned another nonstatutory exception to the general rule on the award of attorneys fees. This exception, 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 circumstance, 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. Although of fairly recent development in California, this exception to the general rule is now well established in our law. Although the seminal California case on this subject, Fletcher v. A.J. Industries, supra, 266 Cal. App.2d 313, arose in the context of corporate litigation, [8] more recent decisions have applied the substantial benefit theory in a wide variety of circumstances, including those involving governmental defendants. Thus in Knoff v. City etc. of San Francisco, supra, 1 Cal. App.3d 184, a class action, the plaintiffs had secured the issuance of a writ of mandate requiring the board of supervisors to order a full investigation into the loss of property taxes during certain previous years, including the identification of taxable property which had escaped taxation for any reason, and to take appropriate action to recover the taxes due. The Court of Appeal affirmed a judgment awarding the plaintiffs their attorneys fees out of tax revenues to be collected in consequence of ... compliance with the writ of mandate ( id. at p. 203), citing Fletcher for the proposition that the award was proper even in the absence of an existing fund. In the more recent case of Mandel v. Hodges (1976) 54 Cal. App.3d 596 [127 Cal. Rptr. 244], the plaintiff, a state employee, had successfully challenged the state's practice of giving its employees time off with pay on Good Friday as a violation of constitutional prohibitions against the establishment of religion. The Court of Appeal, affirming an award of attorneys fees against the state, held that a substantial benefit had accrued to the state in the form of the future saving of funds formerly expended for work not performed, and that the trial court, exercising its equitable powers in a suit brought in a representative capacity, had properly shifted the cost burden of producing that benefit to the party enjoying it. Finally, in Card v. Community Redevelopment Agency (1976) 61 Cal. App.3d 570 [131 Cal. Rptr. 153], the plaintiff taxpayers had secured a judgment declaring invalid a city ordinance purporting to amend an existing redevelopment plan by including areas not covered by the original plan. As a result, certain property tax increment revenues otherwise payable to the redevelopment agency under the amending ordinance became available to various city and county taxing agencies. The Court of Appeal approved a portion of the judgment awarding attorneys fees to be paid by the various taxing agencies in proportion to their respective shares in the tax increment funds, holding that [t]his result substantially benefits the affected taxing agencies, named in the judgment (and through them their taxpayers), since it reduces both the occasion for the [redevelopment agency's] expenditure of such funds and the [agency's] source of such funds as well. (61 Cal. App.3d at p. 583.) (4a), (3b) (See fn. 10.) Relying on these and other [9] cases, plaintiffs and their attorneys urge that the award in this case was justified on the substantial benefit rationale and that the trial court erred in concluding otherwise. [10] (4b) In urging that such a benefit was conferred upon the state as a result of this litigation, they make reference to various factual findings of the trial court on the general subject, the most significant of which are set forth in the margin. [11] To the extent; however, that the subject findings are susceptible of the reading that substantial benefits in the form of increased educational opportunities have been bestowed upon the school children of this state as a necessary result of the Serrano decision  or that benefits in the form of tax savings have been bestowed upon the taxpayers  they are without support. 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. Only in the event that implementing legislation, in establishing the equality of educational opportunity required by Serrano, does so at a level higher than that presently enjoyed by the least favored student under the present system will concrete benefits accrue to any school child; only in the event that that level rises above the level of opportunity available to the most favored student under the present system will the required benefits accrue to all of the school children. By the same token, relative benefits to taxpayers will depend wholly upon the tax structure that the Legislature chooses to establish in order to finance its new system. In short, concrete 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. [12] It is also urged, however, that while Serrano may not have had the direct effect of producing increased educational opportunity or tax savings, it did produce benefits of a conceptual or doctrinal character which are shared by the state as a whole. Certain findings of the trial court  notably those numbered 5, 167, and 176 (set forth in fn. 11, ante )  support this contention. Common sense as well speaks in favor of the proposition 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. (3c) We have concluded, however, that to award fees on the substantial benefit theory on the basis of considerations of this nature  separate and apart from any consideration of actual and concrete benefits bestowed  would be to extend that theory beyond its rational underpinnings. [13] (4c) If the effectuation of constitutional or statutory policy, without more, is to serve as a sufficient basis for the award of attorneys fees in this state, the rationale for such awards must be found in a theory more directly concerned with considerations of this nature. It is to such a theory that we now turn.
In D'Amico v. Board of Medical Examiners, supra, 11 Cal.3d 1, plaintiffs had sought an award of fees not only on the common fund and substantial benefit theories but also on two additional theories, both of which were grounded largely on federal case law. The first of these, involving awards against an opponent who has maintained an unfounded action or defense `in bad faith, vexatiously, wantonly or for oppressive reasons' (11 Cal.3d at p. 26), is not involved in the instant case and we do not address ourselves to it. However, the second, the so-called private attorney general concept, was adopted by the trial court as the basis for its award, and we are now called upon to determine its applicability in this jurisdiction. In addressing ourselves to the private attorney general theory in D'Amico, we said This concept, as we understand it, seeks to encourage suits effectuating a strong congressional or national policy by awarding substantial attorney's fees, regardless of defendants' conduct, to those who successfully bring such suits and thereby bring about benefits to a broad class of citizens. (11 Cal.3d at p. 27.) Noting, however, that such doctrine was then under examination by the United States Supreme Court, we thought it prudent to await an announcement by the high court concerning its limits and contours on the federal level ( id. ) before determining its possible applicability in this jurisdiction. The announcement has now been made. In Alyeska Pipeline Co. v. Wilderness Society, supra, 421 U.S. 240, [14] a five to two opinion authored by Justice White, the Supreme Court held that the awarding of attorneys fees on a private attorney general theory, in the absence of express statutory authorization, did not lie within the equitable jurisdiction of the federal courts. Such awards, the court held, would make major inroads on a policy matter that Congress has reserved for itself. (421 U.S. at p. 269 [44 L.Ed.2d at p. 159].) The high court rested its conclusion on two bases. The first, involving the interpretation of an 1853 court costs act, need not long concern us here, for the act in question (presently 28 U.S.C. §§ 1920, 1923) bears little resemblance to the governing statute in this state, section 1021 of the Code of Civil Procedure. (5) In any event the fashioning of equitable exceptions to the statutory rule to be applied in California is a matter within the sole competence of this court. [15] The second basis on which the Supreme Court grounded its decision, however, dealing with the manageability and fairness of such awards in the absence of legislative guidance, goes directly to the heart of the determination here before us. The making of such awards in the absence of statutory authorization, the high court indicated, would leave the courts free to fashion drastic new rules with respect to the allowance of attorneys' fees to the prevailing party ... or to pick and choose among plaintiffs and the statutes under which they sue and to award fees in some cases but not in others, depending upon the courts' assessment of the importance of the public policies involved in particular cases. (421 U.S. at p. 269 [44 L.Ed.2d at pp. 159-160].) This, the court suggested, would represent an unacceptable and unwise intrusion of the judicial branch of government into the domain of the Legislature. It is with this consideration foremost in mind that we must assess the arguments advanced by plaintiffs and amici curiae in support of our adoption of the private attorney general concept in our state. Those arguments may be briefly summarized as follows: In the complex society in which we live it frequently occurs that citizens in great numbers and across a broad spectrum have interests in common. These, while of enormous significance to the society as a whole, do not involve the fortunes of a single individual to the extent necessary to encourage their private vindication in the courts. Although there are within the executive branch of the government offices and institutions (exemplified by the Attorney General) whose function it is to represent the general public in such matters and to ensure proper enforcement, for various reasons the burden of enforcement is not always adequately carried by those offices and institutions, rendering some sort of private action imperative. Because the issues involved in such litigation are often extremely complex and their presentation time-consuming and costly, the availability of representation of such public interests by private attorneys acting pro bono publico is limited. Only through the appearance of public interest law firms funded by public and foundation monies, argue plaintiffs and amici, has it been possible to secure representation on any large scale. The firms in question, however, are not funded to the extent necessary for the representation of all such deserving interests, and as a result many worthy causes of this nature are without adequate representation under present circumstances. One solution, so the argument goes, within the equitable powers of the judiciary to provide, is the award of substantial attorneys fees to those public-interest litigants and their attorneys (whether private attorneys acting pro bono publico or members of public interest law firms) who are successful in such cases, to the end that support may be provided for the representation of interests of similar character in future litigation. In the several cases in which the courts, persuaded by these and similar arguments, have granted fees on the private attorney general theory, various formulations of the rule have appeared. In spite of variations in emphasis, all of these formulations seem to suggest that there are three basic factors to be considered in awarding fees on this theory. These are in general: (1) the strength or societal importance of the public policy vindicated by the litigation, (2) the necessity for private enforcement and the magnitude of the resultant burden on the plaintiff, (3) the number of people standing to benefit from the decision. (See generally, Comment, Equal Access, supra, 122 U.Pa.L.Rev. 636, 666-674.) [16] Thus it seems to be contemplated that if a trial court, in ruling that a motion for fees upon this theory, determines that the litigation has resulted in the vindication of a strong or societally important public policy, that the necessary costs of securing this result transcend the individual plaintiff's pecuniary interest to an extent requiring subsidization, and that a substantial number of persons stand to benefit from the decision, the court may exercise its equitable powers to award attorney fees on this theory. It is at once apparent that a consideration of the first factor may in instances present difficulties since it is couched in generic terms, contains no specific objective standards and nevertheless calls for a subjective evaluation by the judge hearing the motion as to whether the litigation before the court has vindicated a public policy sufficiently strong or important to warrant an award of fees. We are aware of the apprehension voiced in some critiques that trial courts, whose function it is to apply existing law, will be thrust into the role of making assessments of the relative strength or weakness of public policies furthered by their decisions and of determining at the same time which public policy should be encouraged by an award of fees, and which not  a role closely approaching that of the legislative function. (See generally, Comment, Equal Access, supra, 122 U.Pa.L.Rev. 636, 670-671; Comment, The Supreme Court, 1974 Term (1975) 89 Harv.L.Rev. 1, 178-180.) [17] Since generally speaking the enactment of a statute entails in a sense the declaration of a public policy, it is arguable that, where it contains no provision for the awarding of attorney fees, the Legislature was of the view that the public policy involved did not warrant such encouragement. A judicial evaluation, then, of the strength or importance of such statutorily based policy presents difficult and sensitive problems whose resolution by the courts may be of questionable propriety. Such difficulties, however, are not present in the instant case. (6a) The trial court, in awarding fees to plaintiffs, found that the public policy advanced by this litigation was not one grounded in statute but one grounded in the state Constitution. (7a) Thus, the trial court concluded as a matter of law: If as a result of the efforts of plaintiffs' attorneys rights created or protected by the State Constitution are protected to the benefit of a large number of people, plaintiffs' attorneys are entitled to reasonable attorney's fees from the defendants under the private attorney general equitable doctrine. (Italics added.) (6b), (7b) (See fn. 18.) Its factual findings, which are not here challenged, establish that the interests here furthered were constitutional in stature. [18] (6c) Those findings also make clear that the benefits flowing from this adjudication are to be widely enjoyed among the citizens of this state [19] and that the nature of the litigation was such that subsidization of the plaintiffs is justified in the event of their victory. [20] In these circumstances we conclude that an award of attorneys fees to plaintiffs and their attorneys was proper under the theory posited by the trial court. So holding, we need not, and do not, address the question as to whether courts may award attorney fees under the private attorney general theory, where the litigation at hand has vindicated a public policy having a statutory, as opposed to, a constitutional basis. The resolution of this question must be left for an appropriate case. In sum, we hold that in the light of the circumstance of the instant case, the trial court acted within the proper limits of its inherent equitable powers when it concluded that reasonable attorneys fees should be awarded to plaintiffs' attorneys [21] on the private attorney general theory.
It should be clear from what we have said above that the eligibility of plaintiffs' attorneys for the award of fees granted in this case is not affected under the private attorney general theory by the fact that plaintiffs are under no obligation to pay fees to their attorneys, or the further fact that plaintiffs' attorneys receive funding from charitable or public sources. (7c) Because the basic rationale underlying the private attorney general theory which we here adopt seeks to encourage the presentation of meritorious constitutional claims affecting large numbers of people, and because in many cases the only attorneys equipped to present such claims are those in funded public interest law firms, a denial of the benefits of the rule to such attorneys would be essentially inconsistent with the rule itself. (See generally Comment, Awards of Attorney's Fees to Legal Aid Offices, supra, 87 Harv.L.Rev. 411.) The propriety of such awards under statutory provisions is already well-established in this state (see Horn v. Swoap, supra, 41 Cal. App.3d 375, 383-384; Trout v. Carleson (1974) 37 Cal. App.3d 337, 342-343 [112 Cal. Rptr. 282]), and similar considerations are applicable when the award is made under the court's equitable powers.
(8a) We reject the contention of Public Advocates, Inc. [22] that the fee awarded it was inadequate in light of all the circumstances. It is urged that the trial court, in limiting its award to Public Advocates to the admittedly substantial amount of $400,000, failed to take adequate account of the novelty and extreme difficulty of this litigation, its extremely contingent character, the significance of the issues determined, and the standard which the award in this case will set for similar awards in future cases. However, the record clearly indicates that the court considered all of these factors, among many others, in making its determination. Fundamental to its determination  and properly so [23]  was a careful compilation of the time spent and reasonable hourly compensation of each attorney and certified law student involved in the presentation of the case. That compilation yielded a total dollar figure of $571,172.50, of which $225,662.50 was applicable to Public Advocates, Inc., $320,710 to Western Center on Law and Poverty, and $24,800 to time spent by certified law students. Using these figures as a touchstone, the court then took into consideration various relevant factors, of which some militated in favor of augmentation and some in favor of diminution. Among these factors were: (1) the novelty and difficulty of the questions involved, and the skill displayed in presenting them; (2) the extent to which the nature of the litigation precluded other employment by the attorneys; (3) the contingent nature of the fee award, both from the point of view of eventual victory on the merits and the point of view of establishing eligibility for an award; (4) the fact that an award against the state would ultimately fall upon the taxpayers; (5) the fact that the attorneys in question received public and charitable funding for the purpose of bringing law suits of the character here involved; [24] (6) the fact that the monies awarded would inure not to the individual benefit of the attorneys involved but the organizations by which they are employed; and (7) the fact that in the court's view the two law firms involved had approximately an equal share in the success of the litigation. Taking all of these factors into consideration, the court proceeded to make a total award in the amount of $800,000, to be shared equally by each of the two law firms representing plaintiffs. (9) 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. ( Harrison v. Bloomfield Building Industries, Inc. (6th Cir.1970) 435 F.2d 1192, 1196; see Mandel v. Hodges, supra, 54 Cal. App.3d 596, 624.) (8b) We find no abuse of discretion here.
As indicated at the outset of this opinion, in Serrano II we specifically reserved jurisdiction for the purpose of determining plaintiffs' motion filed in this court on January 28, 1977, for attorneys' fees for services rendered in connection with the Serrano II appeal-which appeal was prosecuted only by certain officers of the County of Los Angeles and certain intervening school districts. (See 18 Cal.3d at p. 777.) On July 7, 1977, plaintiffs filed a letter request, which we treat as a supplementary motion, seeking additional fees for services rendered in opposing an unsuccessful petition for writ of certiorari filed by the aforesaid appellants in the United States Supreme Court. Finally, on October 31, 1977, plaintiffs filed a motion in this court for attorneys' fees for services rendered in connection with the instant appeal-which appeal was prosecuted only by certain state officers. All of these motions are now before us for decision. We have determined, however, in the interest of avoiding further delay in the finality of the instant decision while permitting all parties to be fully heard in these matters, that all of the aforesaid motions should be remanded to the trial court with directions to hear and determine them in light of the principles set forth in this opinion. (See Bozung v. Local Agency Formation Com. (1975) 13 Cal.3d 483, 485; No Oil, Inc. v. City of Los Angeles (1975) 13 Cal.3d 486, 487.) In each instance, the award of attorneys' fees, if any, shall be made and assessed only against said defendants and appellants appealing in the respective appeal, or such of them as the trial court in the exercise of its equitable discretion shall determine. The order concerning attorneys' fees filed August 1, 1975 is affirmed. The cause is remanded to the trial court with directions to hear and determine plaintiffs' motions for attorneys' fees filed in this court on January 28, 1977, July 7, 1977, and October 31, 1977, in conformity with the views herein expressed and to make and enter all necessary and appropriate orders.