Opinion ID: 706026
Heading Depth: 2
Heading Rank: 5

Heading: Contingent Fee Multiplier Under State Law.

Text: 53 The next issue concerns whether state or federal law controls the method of calculating an attorneys' fee awarded under state law. The issue arises because in City of Burlington v. Dague, 505 U.S. 557, 112 S.Ct. 2638, 120 L.Ed.2d 449 (1992), the Supreme Court held that contingency-fee multipliers are unavailable under federal fee-shifting statutes. California law permits such enhancements under state fee-shifting statutes. See, e.g., Serrano v. Priest, 20 Cal.3d 25, 141 Cal.Rptr. 315, 569 P.2d 1303 (1977); City of Oakland v. Oakland Raiders, 203 Cal.App.3d 78, 249 Cal.Rptr. 606 (1988). Given that Plaintiffs succeeded on both federal and state statutory grounds (which both provide for fee awards to prevailing parties), the trial court awarded fees based on the state law, Cal.Code Civ.P. Sec. 1021.5 and Cal.Gov't Code Sec. 12965(b). Applying state law, the court enhanced by a multiplier of 2.0, and awarded fees of $637,440. 7 See Crommie v. California PUC, 840 F.Supp. 719 (N.D.Cal.1994). 54 The PUC asserts that, although the right to a fee is a matter of state substantive law, the method of calculating that fee is procedural. Under an Erie analysis, the PUC contends that the court erred by applying the multiplier. 55 We review de novo the legal question whether state or federal law applies in a diversity action. In construing a state law, we follow the decisions of the state's highest court. Harvey's Wagon Wheel, Inc. v. Van Blitter, 959 F.2d 153, 154 (9th Cir.1992) (citation omitted). The Erie principles apply equally in the context of pendent jurisdiction. United Mine Workers v. Gibbs, 383 U.S. 715, 86 S.Ct. 1130, 16 L.Ed.2d 218 (1966); Maternally Yours, Inc. v. Your Maternity Shop, Inc., 234 F.2d 538, 540 n. 1 (2d Cir.1956). 56 The PUC's argument fails. Existing Ninth Circuit precedent has applied state law in determining not only the right to fees, but also in the method of calculating the fees. See, e.g., Kern Oil and Refining Co. v. Tenneco Oil Co., 792 F.2d 1380 (9th Cir.1986), cert. denied, 480 U.S. 906, 107 S.Ct. 1349, 94 L.Ed.2d 520 (1987). Shakey's Inc. v. Covalt, 704 F.2d 426 (9th Cir.1983), cited by the PUC, is not to the contrary. In Shakey's, the court held that state substantive law governs the award of fees in diversity actions, but the decision whether to hold an evidentiary hearing in deciding the fee question is procedural. 704 F.2d at 435. Whether to hold a hearing is a matter of court administration, whereas calculation of the amount of the fee is bound up in the substantive state right. 57 Further, we follow other circuits that apply state law in calculating the fee. E.g., Northern Heel Corp. v. Compo Industries, 851 F.2d 456, 475 (1st Cir.1988); Riordan v. Nationwide Mut. Fire Ins. Co., 977 F.2d 47, 53 (2d Cir.1992). One circuit has done so in the same context as here where a multiplier was used under state law because Dague precluded it under federal law. Davis v. Mutual Life Ins. Co. of New York, 6 F.3d 367, 382-83 (6th Cir.1993), cert. denied, --- U.S. ----, 114 S.Ct. 1298, 127 L.Ed.2d 650 (1994). 58 The PUC maintains that no case of this circuit has analyzed and considered the Erie issue regarding calculating the fee. The PUC also argues that in Dague the Supreme Court established a rule of federal practice regarding fee-shifting jurisprudence. As a federal rule, the PUC asserts that the practice falls within the holding of Hanna v. Plumer, 380 U.S. 460, 85 S.Ct. 1136, 14 L.Ed.2d 8 (1965). The PUC's position is that, as a federal rule, Dague must be applied unless it abridges, enlarges, or modifies a state substantive right. Hanna, 380 U.S. at 471-73, 85 S.Ct. at 1144-45. These arguments fail. Dague is decisional law (not a federal rule) interpreting procedures under federal statutes. Dague's applicability to a federal court's application of state fee-shifting statutes should be analyzed, if at all, under the twin aims of the Erie rule: discouragement of forum-shopping and avoidance of inequitable administration of the law. Hanna, 380 U.S. at 468, 85 S.Ct. at 1142. 59 Applying Hanna, the availability of a multiplier for fees in state court, but not in federal court, would likely lead to forum-shopping. As this case illustrates, if a multiplier is procedural, a significant difference in fees would be available in state court but not in federal court--an inequitable administration of the law. The method of calculating a fee is an inherent part of the substantive right to the fee itself, and a state right to an attorneys' fee reflects a substantial policy of the state. Cf. Chambers v. NASCO, 501 U.S. 32, 51-55, 111 S.Ct. 2123, 2136-38, 115 L.Ed.2d 27 (1991). The trial court did not err in applying state law to calculate the fees available under state law. 60 The PUC also argues that we should predict California law and find that, in light of Dague, the California Supreme Court will no longer allow contingent-fee enhancements. The California Supreme Court approved of such enhancements in Serrano v. Priest, 141 Cal.Rptr. at 329, 569 P.2d at 1317, and has continued to allow enhancements since then. See, e.g., Maria P. v. Riles, 43 Cal.3d 1281, 240 Cal.Rptr. 872, 743 P.2d 932 (1987). 61 Generally, California courts follow federal precedent in interpreting FEHA. Nesbit v. Pepsico, 994 F.2d at 704. However, although Dague arguably calls into question California's continued reliance on Serrano, we cannot decide that the California Supreme Court will necessarily adopt Dague as California law for its fee-shifting statutes. Only if there is no precedent or convincing evidence that the highest court of the state would decide differently, Andrade v. City of Phoenix, 692 F.2d 557, 559 (9th Cir.1982) (citation omitted), would we need to predict state law. The ... duty of the federal court is to ascertain and apply the existing California law, not to predict that California may change its law.... Klingebiel v. Lockheed Aircraft Corp., 494 F.2d 345, 346 (9th Cir.1974) (footnote omitted). We apply existing California precedent and affirm the use of a multiplier. 62