Cal.S.Ct.: No settlement effort required for atty. fees

The California Supreme Court held that failure to pursue settlement before filing suit does not always bar an award of attorneys fees under state law.

The court unanimously  held that a categorical prelitigation requirement for settlement negotiations applies only to so-called “catalyst” cases, where the plaintiff obtains a positive result without judicial action. In non-catalyst cases, prelitigation settlement efforts should be considered as one factor in assessing the necessity of the suit to advance the public interest. The court further held that a stipulated injunction (essentially the same as a consent decree) constitutes judicial resolution and thus does not fall within restrictions on “catalyst” cases. Vasquez v. State of California, --- Cal.Rptr.3d ---, 2008 WL 4936884 (Cal. Nov. 20, 2008) (No. S143710).

 

         

          Vasquez is the vice-president of the UNITE union. She sued under the state’s taxpayer standing doctrine, claiming that the state wasted public resources by failing to collect and disburse payments due from joint-venture employers as part of the state’s Prison Inmate Labor Initiative. In the same action, claims of unfair business practices asserted by UNITE itself and California inmates against the prison employers resulted in judgment for plaintiffs. Vasquez’s taxpayer claim led to a stipulated settlement. The state challenged the fee award on the ground that Vasquez failed to pursue settlement before filing suit.

 

            In contrast to the federal courts, California accepts the “catalyst” doctrine, under which plaintiffs may recover attorneys’ fees for public-interest cases that achieve positive results through voluntary action of the defendants rather than judicial action. Compare Graham v. DaimlerChrysler Corp., 34 Cal.4^th 553 (2004), with Buckhannon Bd. & Care Home, Inc. v. W.V. Dept. of Health and Hum. Resources, 532 U.S. 598 (2001). Under Graham, a plaintiff must show that the lawsuit (1) was a catalyst motivating defendants to provide the relief sought, (2) had merit, and (3) was filed only after reasonable attempts to settle. The court now holds that this third requirement applies, as a categorical requirement, only to catalyst cases.

 

          The court held that “[n]either the language of the [fees] statute nor the cases interpreting it impose such a categorical [prelitigation] requirement.” Rather, the statute requires the court to determine whether “the necessity … of private enforcement… [is] such as to make the award appropriate.” Cal. Code Civ. Proc. § 1021.5. This language, said the court, does not explicitly or implicitly require attempts to settle in all cases. In some circumstances, the court said, “attempts to settle may have been futile, exigent circumstances may have required immediate resort to judicial process, or prior efforts to call the problem to the defendant's attention – perhaps by other parties or in other proceedings – may have been rebuffed.” By contrast, in other cases facts will suggest that litigation was unnecessary, such as where relatively minor violations of law are immediately remedied once the plaintiff files suit. The fee statute is sufficiently flexible to take all this into account.

 

          The court said that it had made clear when it set out the prelitigation settlement negotiation requirement in Graham that it was “a limitation on the catalyst theory,” developed by the court in light of particular concerns about catalyst cases, and not required by statute. The court also noted that several California statutes do impose specific prelitigation settlement negotiation requirements for, e.g., libel, medical negligence, shareholder, and certain consumer suits. The legislature could have imposed such requirements on all requests for attorneys fees, but it did not.

 

          The court further stated that a case that results in a stipulated injunction is not a catalyst case, even though relief comes about from voluntary action by the defendant. The key, said the court, is where there is “a judicially recognized change in the legal relationship between the parties.” A stipulated injunction is a court order – in effect, a consent decree. Even federal courts recognize a consent decree as a basis for awarding fees. Buckhannon, 532 U.S. 598, 604. Since the state’s only argument on appeal was based on applying the prelitigation settlement negotiation requirement as a categorical rule, fees were appropriate in this case.