Lawyers for advocacy groups and others who file cases that achieve a public benefit should be rewarded by requiring defendants to pay their legal fees, a sharply divided California Supreme Court ruled Thursday.
Justice Carlos R. Moreno, who wrote the 4-3 decisions in two related cases, said lawyers need incentives to bring lawsuits that generate beneficial changes but often produce little or no money in damages. The fees should be paid even in cases that never go to court or result in formal settlements, the court ruled.
In one of the two cases, consumers sued DaimlerChrysler over trucks that could not pull loads nearly as heavy as advertised. In the other case, civil rights groups sued the Los Angeles Police Department over racial and sex discrimination. Neither suit went to trial, but both led the defendants to make substantial changes in their policies.
Most public-interest legal groups -- organizations that bring suits on environmental, civil liberties and consumer issues -- are on the liberal side of the political spectrum, and the ruling brought a strongly worded dissent from three conservative justices who said it would spur needless lawsuits.
Dissenting Justice Ming W. Chin warned that the ruling puts California out of step with the rest of the country and that the state may become a mecca for trial lawyers. The rulings come at a time when many courts elsewhere, including the U.S. Supreme Court, have sharply cut legal-fee awards.
Thursday’s decision moves the law in the wrong direction “at a time when Californians are increasingly concerned about extortionate lawsuits against businesses, large and small, and worried that the legal climate in California is so unfriendly to businesses that many are leaving the state,” wrote Chin, who was joined by Justices Marvin Baxter and Janice Rogers Brown.
In the Los Angeles case, Chin wrote, the lawyers who sued the police won $1.7 million in legal fees. “A city can finance a lot of municipal services for $1.7 million,” he wrote.
But Carol A. Sobel, a former ACLU lawyer who worked on the Los Angeles case, called the rulings “monumental.”
A U.S. Supreme Court ruling three years ago that rejected attorney fees in such cases has been “a disaster” for lawyers who represent prisoners and other indigents in U.S. courts, she said.
Lawyers have lost hundreds of thousands of dollars, and many are reluctant to take cases that may lead to important policy changes but leave them unpaid, she said.
The ruling also ensures that lawyers who bring environmental, disability rights and employment lawsuits will be paid even if the results benefit only one person, she said.
The DaimlerChrysler case involved 1998 and 1999 Dakota R/T trucks that were marketed as having a 6,400-pound towing capacity. The company later realized that it had made a mistake in its brochure and that the trucks could tow only 2,000 pounds. The heavier loads could cause safety problems.
DaimlerChrysler alerted owners that the trucks should be modified for heavier loads. The company also authorized dealers to repurchase or replace the trucks on a case-by-case basis, but only for customers who insisted on such a remedy.
Although most customers were satisfied with the firm’s offer of cash or merchandise to fix the problem, three truck owners sued in California courts.
A month after the lawsuit was filed, the automaker capitulated, announcing that it would repurchase or replace the trucks.
Because the company did what the suit had asked, the case became moot and was dismissed. But in dismissing the suit, a trial judge awarded the lawyers $762,830 in legal fees.
The suit had served as a “catalyst” that caused the firm to change its behavior, the judge ruled in awarding the money. DaimlerChrysler appealed.
The California Supreme Court ruling in Graham vs. DaimlerChrysler upheld the “catalyst” theory with new limitations. For attorneys to win fees, the lawsuit must have merit, the plaintiffs must have tried to reach agreement with the defendant before the lawsuit was filed, and the attorneys should not be paid at the same rate, if at all, for their time spent trying to recover their fees, the court said.
In the second case decided Thursday, Tipton-Whittingham vs. Los Angeles, the justices said the award of attorney fees in the suit against the LAPD was proper under California law. The fees went to the American Civil Liberties Union of Southern California, the NAACP Legal Defense Fund and a private law firm that had represented female police officers who sued the department.
The suit accused the department of sex and race discrimination and led to a voluntary decision by the department to meet most of the demands.
Los Angeles paid the lawyers $1.7 million in legal fees. But after the U.S. Supreme Court abolished the catalyst rule in federal court, the city went to court to try to get its money back.
Lawyers for the city argued that public agencies would be deterred from making voluntary policy changes after a lawsuit if the city could be forced to pay lawyers’ fees.
In the DaimlerChrysler case, a lower court will need to decide whether the fees meet the restrictions the justices laid out. Theodore J. Boutrous, who represented DaimlerChrysler, said he believes the award will be substantially reduced. But he said he was disappointed that the court did not abolish the catalyst rule, which he said “turns plaintiff lawyers into bounty hunters seeking nothing but a fee.”
“This is an issue that is ripe for being fixed by the Legislature or by the people of California through a ballot initiative,” he said.
Richard M. Pearl, who represented the lawyers who sued DaimlerChrysler, said he expected that the fees would be reduced only “a little.”
“Symbolically, this is a very significant victory for public-interest lawyers and, we think, the public,” Pearl said. “It makes it much more promising or possible for lawyers to take these cases without the fear ... they will end up getting nothing.”
But Fred J. Hiestand, general counsel for the Civil Justice Assn. of California, a business-financed legal group that sided with DaimlerChrysler, took heart from the close vote.
The court’s 4-3 division shows “how much danger the catalyst theory is in of being completely repudiated,” he said. In addition, he said, the court’s clarifications of the rule “trimmed its sails” and sent a warning to lawyers who abuse it that they might lose it altogether.
“There are three votes out of seven totally rejecting” attorney fees when there has been no court resolution, Hiestand said. “The next step is obvious. The next step is bye-bye.”