BILL ANALYSIS
AB 2773
Page 1
Date of Hearing: May 4, 2010
ASSEMBLY COMMITTEE ON JUDICIARY
Mike Feuer, Chair
AB 2773 (Swanson) - As Amended: April 8, 2010
SUBJECT : EMPLOYMENT DISCRIMINATION: ATTORNEY'S FEES FOR
LOWER-WAGE WORKERS
KEY ISSUE : WHEN LOWER-WAGE WORKERS PROVE THAT THEY WERE THE
VICTIMS OF UNLAWFUL EMPLOYMENT DISCRIMINATION, SHOULD THEY BE
ENTITLED TO RECOVER THEIR ATTORNEY'S FEES UNDER THE SAME RULES
AS MORE HIGHLY-PAID VICTIMS OF DISCRIMINATION, DESPITE
RECOVERING LOWER MONETARY DAMAGES THAN THE UNLIMITED CASE
THRESHOLD?
FISCAL EFFECT : As currently in print this bill is keyed
non-fiscal.
SYNOPSIS
A recent California Supreme Court ruling upheld the denial of
attorney's fees to a victim of employment discrimination who
prevailed in the case but recovered less than the $25,000
jurisdictional limit for unlimited cases in state court.
Normally plaintiffs are presumptively entitled to attorney's
fees in such cases to ensure that employees are not deterred
from enforcing these important civil rights. However, a
separate law rule allows judges to deny costs and attorney's
fees entirely when a plaintiff files the case under the
unlimited civil rules but fails to recover the jurisdictional
minimum. When these two laws intersect, the Court held, the
rule allowing judges to deny fees for mis-denominated cases
trumps the rule that would otherwise make fees automatic.
Advocates for lower-wage workers believe the court's decision
will make it more difficult for the working poor to enforce
their rights when they are the victims of illegal
discrimination. They argue that unlimited civil case procedures
are the only effective mechanism for prosecuting employment
discrimination disputes, and that lawyers should not be
penalized for not accurately predicting that the ultimate
outcome of the case would be above the $25,000 limit,
particularly because some aspects of damages recovery are
difficult to quantify. The bill is opposed by the Civil Justice
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Association of California, which argues that an award of
attorney's fees to successful discrimination plaintiffs should
not be a routine event, and that it is appropriate for judges to
refuse to award attorney's fees in cases of nominal value.
SUMMARY : Revises attorney's fees awards in small employment
discrimination cases. Specifically, this bill exempts cases
brought under the Fair Employment and Housing Act (FEHA) from
the rule giving discretion to judges to deny fees in a case
other, than a limited civil case, if the prevailing party
recovers a judgment that could have been rendered in a limited
civil case.
EXISTING LAW provides that a prevailing party is entitled as a
matter of right to recover costs in any action or proceeding,
and specifies those items allowable as costs, but provides that
costs, or any portion of claimed costs, shall be as determined
by the court, in its discretion, in a case, other than a limited
civil case, if the prevailing party recovers a judgment that
could have been rendered in a limited civil case. (Code of
Civil Procedure section 1033.)
COMMENTS : The author states that this bill will help ensure
that California workers have fair and equitable access to the
civil justice system for claims brought under the Fair
Employment and Housing Act (FEHA) by removing a significant
barrier to securing private counsel for lower wage workers.
The sponsor, California Employment Lawyers Association, argues
that this bill will ensure that plaintiffs are not punished for
being unable to predict damage awards, and are allowed more
extensive discovery procedures to address the complex nature of
claims brought under the FEHA. Supporters note that this
proposal would still leave the trial court with broad authority
under Government Code Section 12965 to determine the amount of
reasonable attorney's fees, and the court may, if appropriate,
reduce a fee award if a plaintiff obtains only limited success,
so long as the claims on which the plaintiff prevails are
distinct from and unrelated to the unsuccessful claims. (Harman
v. City and County of San Francisco (2006) 136 Cal. App.4th
1279, 1307, 39 Cal.Rptr.3d 589; Greene v. Dillingham
Construction N.A., Inc., supra, 101 Cal.App.4th at p. 423, 124
Cal.Rptr.2d 250.)
Prevailing Plaintiffs In Employment Discrimination Cases Are
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Normally Entitled To Recover Attorney's Fees. In any action
brought under the California Fair Employment and Housing Act
(FEHA) (Gov. Code, 12900 et seq.), Government Code section
12965(b) grants the trial court discretion to award attorney's
fees to a prevailing party. This statute has been interpreted
to mean that in a FEHA action a trial court should ordinarily
award attorney's fees to a prevailing plaintiff unless special
circumstances would render a fee award unjust. (Young v. Exxon
Mobil Corp. (2008) 168 Cal.App.4th 1467, 1474; Steele v. Jensen
Instrument Co. (1997) 59 Cal.App.4th 326, 331.)
Recovery of Attorney's Fees For Lower-Wage Workers Is At Risk
Under A Recent Court Ruling. Under existing law, a prevailing
party is generally entitled as a matter of right to recover
costs in any action or proceeding. (Code Civ. Proc., 1032,
subd. (b).) The litigation costs that the prevailing party may
recover include attorney's fees when recovery of such fees is
authorized by statute. (Id., 1033.5, subd. (a)(10)(B).) But
when "the prevailing party recovers a judgment that could have
been rendered in a limited civil case," and the action was not
brought as a limited civil case, Code of Civil Procedure section
1033(a) states that "costs or any portion of claimed costs shall
be as determined by the court in its discretion . . . ." A
limited civil case is one in which the plaintiff believes the
amount in controversy does not exceed twenty-five thousand
dollars ($25,000) or one defined by statute as a limited civil
case (Code of Civil Procedure 86.)
On January 14, 2010, the California Supreme Court held in Chavez
v. City of Los Angeles (2010) 47 Cal.4th 970, that a trial court
has discretion in a FEHA case to deny a successful plaintiff his
attorney's fees when the plaintiff chooses to proceed in an
unlimited civil jurisdiction, but recovers less than the $25,000
jurisdictional minimum.
This decision reversed the Court of Appeal's ruling, which
reasoned that the rationale for denying attorney's fees under
section 1033(a) of the California Code of Civil Procedure, which
was designed to encourage pursuit of minor grievances in courts
of limited jurisdiction, is inapposite to statutory
discrimination or civil rights actions because "even a modest
financial recovery can serve to vindicate a substantial legal
right." The Court of Appeal also opined that denying attorney's
fees under section 1033(a) would discourage attorneys from
taking meritorious cases.
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The decision unfairly penalizes lower-wage workers and deters
enforcement actions, supporters state, because damages amounts
in FEHA claims, which often involve non-pecuniary damages, are
difficult to quantify and hard to predict. They contend that
the legislature must step in to help ensure that plaintiffs'
attorneys are not discouraged from taking FEHA cases because
these cases are integral to protect and vindicate important
civil rights.
Is The Interest In Protecting Lower-Wage Workers From Illegal
Discrimination Sufficiently Important To Prevent Courts From
Denying Attorney's Fees When Illegal Discrimination Has Been
Proved? As the California Supreme Court noted in its decision,
attorney's fee awards in FEHA actions make it easier for
plaintiffs of limited means to pursue meritorious claims
(Cummings v. Benco Building Services (1992) 11 Cal.App.4th 1383,
1387), are intended to provide fair compensation to the
attorneys involved in the litigation at hand, and encourage
litigation of claims that are of public interest (Flannery v.
Prentice (2001) 26 Cal.4th 572, 584).
Supporters of this measure contend that that limited
jurisdiction case procedure makes it generally inappropriate for
employment discrimination cases. Most importantly, supporters
argue, limited jurisdiction cases are permitted very limited
discovery; in particular, only one deposition is allowed per
party. Employment lawyers on both sides will acknowledge that
virtually no employment discrimination case can be proved with
these restrictions. Discrimination generally requires proof of
intent - that is, state of mind - which typically depends on
showing a larger pattern of treatment. Amassing that evidence
requires significant discovery by the plaintiff. Unlike a
normal breach of contract or tort action, such as an auto
accident, for example, all of the relevant evidence regarding
motive is in the exclusive possession of the employer.
Therefore, plaintiffs must engage in substantial discovery to
prove their cases.
If Lower-Wage Workers Are Deterred From Bringing Private
Enforcement Actions, They May Be Effectively Precluded From
Seeking Relief Because The Department Of Fair Employment And
Housing Reportedly Does Not Well Serve Those Who Cannot Obtain A
Lawyer. The need for plaintiffs of limited means to access
private counsel to pursue their FEHA claims was highlighted in a
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recent UCLA-RAND study on the FEHA and its enforcement
procedures, supporters note. As this Committee heard in its
recent oversight hearing regarding the Department of Fair
Employment and Housing (DFEH), this study found that lower-wage
workers are much less able to secure private counsel because the
amount of damages they are allowed to recover under the FEHA
compared to the amount of legal work needed to prosecute the
case and the risks involved makes it economically difficult for
attorneys, most of whom are small business owners operating as
sole practitioners, to take on this representation.
This is unfortunate, because the UCLA-RAND study found,
employees who are represented by lawyers prevail far more
frequently and obtain much better relief than those who must
rely on the DFEH. According to this study, employees who take
their case to trial win about half the time with jury awards
averaging $205,000. Those who stay in the state's
administrative system recover anything at all in 1 case out of
7, and even then receive an average of only $3,000.
The study found:
At present, we have two anti discrimination systems -
separate and unequal. Those with lawyers operating on
contingency fees have access to a civil justice system.
Others depend on the alternative provided by the DFEH and
the FEHC. Access to those two systems appears to vary
systematically by race, by occupation, and by sex. The
barrier to private counsel has been raised even higher very
recently. The California Supreme Court held in Chavez v.
City of Los Angeles (2010 WL 114941, January 14, 2010) that
in FEHA cases that might have been brought in a limited
jurisdiction Superior Court but were litigated to a verdict
of less than the $25,000 in a general jurisdiction Superior
Court, the court may deny attorneys' fees to the prevailing
plaintiff. Thus any attorney who considers accepting a
case that may result in a verdict under the jurisdictional
amount risks being paid nothing at all, even if he or she
prevails at trial, based on his or her inability to predict
a jury verdict. Although most plainti ff s' lawyers were
already reluctant to accept smaller cases, their
disincentive to do so is now increased.
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(G. Blasi & J. Doherty, California Employment and Discrimination
Law and Its Enforcement: The Fair Employment and Housing Act at
50, p. 65 (2010).)
This Bill Would Appear To Address Concerns By Non-Profit Public
Interest Law Organizations.
The Asian Pacific American Legal Center, Bet Tzedek Legal
Services, The Impact Fund, Public Counsel, and The Western
Center On Law And Poverty filed an amicus brief on the side of
the plaintiff in the Chavez case, arguing that the case
presented an issue of critical importance to California's
working poor. According to their brief, these organizations
represent low-wage workers "who, when they are the victims of
illegal discrimination or retaliation in the workplace, often
cannot show calculable economic damages in amounts that would
automatically meet the requirement for filing suit in a court of
unlimited jurisdiction. This is, in part, because these workers
earn extremely low wages. Also, in order to survive, these
workers must immediately mitigate any damages they suffer from
termination or other adverse employment actions by seeking new
employment, as the loss of wages for even one day or one week
can itself render a
low-wage employee unable to feed, clothe, and house herself and
her family. Finally, low-wage workers do not have the luxury of
seeking professional treatment for the emotional distress that
often accompanies discriminatory and retaliatory employment
practices."
These organizations noted that FEHA advances the constitutional
and legislative mandate to eradicate discrimination in the
workplace. "Given limited governmental resources available to
combat discrimination, FEHA's effectiveness depends on the
initiation of private lawsuits to combat discrimination. A
private lawsuit remedy, however, is illusory if a victim of
discrimination is unable to afford an attorney to prosecute his
or her case. FEHA solves that problem by providing attorney
fees to the prevailing party." [Giving] a court discretion to
deny "costs" to a prevailing party if the damage award is an
amount that could have been obtained in a court of limited
jurisdiction, overrides FEHA's attorney fee standard and permits
a trial court discretion to deny fees simply because the damage
award is low." According to these amici, denying attorney's
fees in these cases would "disproportionately affect those the
FEHA's attorney fees provision was designed to protect: the
indigent victims of discrimination and retaliation, who are
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wholly dependent on attorney fees to entice competent counsel to
take their cases. Without the same prospect for obtaining fees
as any other attorney prevailing in a FEHA matter, an attorney
presented with a clear case of discrimination against a
low-income employee would face an untenable choice: file the
claim in a court of limited jurisdiction, thereby guaranteeing
attorney fees but limiting the client's potential recovery of
noneconomic and punitive damages; or file the claim in superior
court and risk obtaining no fees if the client's award is
limited to low economic damages. An attorney faced with such a
dilemma may simply decline to take the case."
ARGUMENTS IN OPPOSITION: The Civil Justice Association of
California opposes the bill, arguing that it "will undo a
judicial deterrent to filing frivolous lawsuits."
CJAC "believes it is appropriate for judges to use their
discretion to refuse to award attorney's fees in case of nominal
value and therefore opposes the bill. Allowing the award of
attorney's fees to successful plaintiffs should not be a routine
event. While our Legislature and our courts have allowed the
award of attorney's fees, the rationale behind such awards is to
compensate the attorneys for involvement in litigation that
somehow benefits the public. Such awards are discretionary and
should remain so."
CJAC concludes, "If we allowed all cases involving $5,000 in
controversy to be filed and litigated as unlimited civil cases,
our courts would be even more clogged and backlogged than they
are."
REGISTERED SUPPORT / OPPOSITION :
Support
California Employment Lawyers Association (sponsor)
California Labor Federation
California Rural Legal Assistance Foundation
Consumer Attorneys of California
Employment Law Center, Legal Aid Society of San Francisco
Equal Rights Advocates
Western Center on Law and Poverty
Opposition
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Civil Justice Association of California
Analysis Prepared by : Kevin G. Baker / JUD. / (916) 319-2334