Labor Law Attorney Feees

Plaintiff Loring Winn Williams sued defendant Chino Valley Independent Fire District for disability discrimination. The trial court granted summary judgment for the defendant and awarded it $5,368.88 in costs. The Court of Appeal affirmed, but the Supreme Court reversed, holding as follows:

CCP section 1032(b) mandates that prevailing parties recover their costs as a matter of right, “except as otherwise expressly provided by statute.” Government Code section 12965(b) allows courts, in their discretion, to award attorney fees and costs to prevailing parties in FEHA actions. Section 12965(b) thus constitutes an express exception to section 1032(b) and as a result, trial courts have discretion to award ordinary costs to prevailing defendants, but need not do so.

In exercising this discretion, courts must follow the rule set forth in Christiansburg Garment Co. v. EEOC (1978) 434 U.S. 412. In Christiansburg, the U.S. Supreme Court held that a prevailing plaintiff in a Title VII action ordinarily should be awarded his or her fees but should not be assessed his or her opponent’s fees unless a court finds that the claim was “frivolous, unreasonable, or groundless, or that the plaintiff continued to litigate after it clearly became so.”

Christiansburg applies equally to awards of attorney fees and costs in FEHA actions: a prevailing plaintiff ordinarily should recover his or her fees and costs unless special circumstances would render such an award unjust, but a prevailing defendant should not recover its fees or costs unless the court finds the action was “objectively without foundation when brought, or the plaintiff continued to litigate after it clearly became so.”

The opinion is available here.

A class member from outside of California objected that the settlement fund, after deduction of costs and attorney fees, was not sufficient. He also objected that requiring objectors appear at the final approval hearing violated their due process rights. The trial court overruled Chapa’s objections.

Plaintiff’s counsel’s declaration stating that he watched his paralegal reconstruct her working hours using the same information he used constituted inadmissible hearsay, and the portion of the fee award attributable to the paralegal’s work should be reconsidered on remand. Slip op. at 13-15.

The district court court did not abuse its discretion in only deducting 10 percent from the lodestar amount for plaintiff’s unsuccessful claims, since California law allows for such percentage adjustments, and neither party was able to segregate hours spent exclusively on the unsuccessful claims. Slip op. at 15-18.

California law did not require the district court to reduce the disparity between damages and attorney fees. Slip op. at 18-19.

The district court did not abuse its discretion in declining to reduce the fee request further because the initial fee request of almost $2 million (calculated using a $1.2 million lodestar and 1.5 multiplier) was inflated. Slip op. at 19-22.

Two firms filed a consumer class action against Toshiba. The case settled in mediation, giving class members warranty extensions and repair vouchers. One firm, Sklar Law Office (SLO), objected to the form of the agreement and class notice, but after further negotiation, filed a motion for settlement approval stating its intent to seek fees of almost $25 million (25 percent of a settlement value placed at almost $99 million), to be apportioned between class counsel. Toshiba objected and sought discovery regarding the fee request.

The trial court approved the settlement, awarding over $1 million in fees to SLO’s co-counsel. SLO continued to request the remainder of the $25 million, and a battle ensued. Toshiba sought Sklar’s electronic billing records, and Sklar objected. The Court ordered Sklar to sit for deposition and to produce the billing records in native format. At deposition, Sklar testified that she had converted her files to .pdf format and deleted the original electronic files with a program called “Wipe and Delete.” The trial court ordered SLO to allow a forensic inspection of its computers, and it refused.

The Court rejected the plaintiff’s argument that the standard for an award of defense attorney fees in a FEHA action also should apply to an award of ordinary costs. The Court also rejected the argument that federal precedent in Title VII and ADA cases should control.

The opinion is available here.

A few facts: The plaintiffs in the case sued their former attorneys for breach of fiduciary duty, conversion, and declaratory relief. The attorneys petitioned to compel arbitration, and the court granted the petition. The attorneys then moved to recover fees and costs incurred in bringing the petition to compel arbitration. The trial court granted the motion, the plaintiffs appealed, and the Court of Appeal reversed, explaining:

We conclude that because only one side—plaintiffs or their former attorneys—can prevail in enforcing the contingency fee agreement, the determination of the prevailing parties must await the resolution of the underlying claims by an arbitrator. Attorney fees can be awarded only to the parties that prevail in the “action.” (See Civ. Code, § 1717, subds. (a), (b)(1).) It follows that the trial court erred in awarding interim attorney fees to the former attorneys for filing a successful petition to compel arbitration.

Slip op. at 2.

The opinion is available here.

In class actions, an attorney’s agreement to share legal fees is governed by Rules of Professional Conduct, rule 2-200 (rule 2-200) and California Rules of Court, rule 3.769 (rule 3.769). Rule 2-200 permits an attorney to share legal fees with another lawyer only with the client’s informed, written consent. Rule 3.769 requires an applicant seeking court approval of a class action settlement to inform the court of any fee-sharing agreement.

In this case, we hold that an attorney may be equitably estopped from claiming that a fee-sharing contract is unenforceable due to noncompliance with rule 2-200 or rule 3.769, where that attorney is responsible for such noncompliance and has unfairly prevented another lawyer from complying with the rules’ mandates.

Slip op. at 2.

First, an employer does not have to pay its employees “reporting time pay” for attending meetings at work when the meetings are scheduled, and the employees work at least half the scheduled time, even if the scheduled time is less than four hours.

Second, an employer does not owe its employees “split shift” compensation if, when they work split shifts, they earned more than the minimum wages required by the wage order.

Third, the employer could not recover its attorney fees because the claims arose under Labor Code section 1194, the one-way fee-shifting statute for minimum wage and overtime claims, rather than section 218.5, which allows either party to recover its fees when it succeeds in an action for the nonpayment of wages.

In March, 2012, the California Supreme Court granted review in Aleman pending its decision in Kirby v. Immoos Fire Protection, Inc. The Court issued its Kirby  decision in April (discussed here) and transferred Aleman back to the Court of Appeal for reconsideration.

The Court of Appeal issued its new decision last week. Aleman v. AirTouch Cellular (9/20/12) — Cal.App.4th —. The Court again held that the plaintiffs could not recover reporting time pay (slip op. at 9-16) or split shift compensation (slip op. at 16-19).

The Court reversed its earlier decision on attorney fees in part. It began by reviewing Kirby, which held that Labor Code section 226.7 claims for missed meal and rest periods are not subject to Labor Code section 1194 because they are not minimum wage claim, nor are they subject to section 218.5 because they are claims for failure to provide meal and rest periods, not claims for nonpayment of wages.

Applying this logic, the Aleman Court held: (1) a split shift claim is a claim for minimum wages and is subject to section 1194 (slip op. at 25-26); but (2) a reporting time pay claim is not a minimum wage claim, and is subject to section 218.5, rather than section 1194 (slip op. at 26-27). The Court remanded to the trial court to award the defendant only such fees as were attributable to the reporting time claims.

The opinion is available here.

In SASCO v. Rosendin Electric, Inc. (7/11/12) — Cal.App.4th —, SASCO filed suit against Rosendin and three former employees who left SASCO to work for Rosendin.  SASCO alleged misappropriation of trade secrets and related causes of action.  After more than a year of litigation, with defense motions for summary judgment pending, SASCO dismissed the action.  The trial court granted the defendant’s motion for attorney fees, finding that SASCO prosecuted the action with no evidence of trade secret misappropriation. SASCO appealed, and the Court of Appeal affirmed.

The Ninth Circuit held that the incentive agreements created an unacceptable conflict of interest between the class representatives and class counsel who signed them, on the one hand, and the members of the class, on the other. Nevertheless, because there were other class representatives who had no incentive agreements and whose separate counsel were not conflicted, the Court affirmed the district court order approving the settlement, but remanded for reconsideration of the order awarding $7 million in fees to the conflicted attorneys and awarding zero to the objectors.

In Rodriguez v. Disner, —F.3d — (9th Cir. 8/10/12) the Ninth Circuit revisits this same case, considering whether the trial erred in reducing class counsel’s fee award to $500,000 or in denying fees to the objectors who had appealed.

The Court held that the district court had “broad discretion” to deny fees to an attorney who has committed an ethical violation, particularly in a common fund case such as this. Slip op. at 9079-9084. The Court then held that class counsel had committed an ethical violation in representing parties with conflicting interests. Slip op. at 9084-9086. As a result, the district court did not err in reducing counsel fee to $500,000. Slip op. at 9086-9088.

With regard to the objectors, the Court recognized that objectors may be entitled to recover attorney fees if their work increases the benefits to the class. Slip op. at 9088-9089. The majority of the objectors produced no benefit to the class, and the court did not err in denying them attorney fees. Slip op. at 9089-9090. However, the objectors who brought the incentive agreements to the court’s attention and who briefed the conflict of interest issue in the district court and in the Court of Appeal did create a benefit for the class, and the court erred in denying them fees. Slip op. at 9090-9092.

The opinion is available here.

Kellogg agreed to establish a $2.75 million fund for distribution to class members on a claims made basis. Class members submitting claims would receive $5 per box of cereal purchased, up to a maximum of $15.

Any funds remaining would not revert to Kellogg but would instead be donated to “charities chosen by the parties and approved by the Court pursuant to the cy pres doctrine.”

Kellogg agreed to distribute, also pursuant to the cy pres doctrine, $5.5 million “worth” of specific Kellogg food items to charities that feed the indigent. The settlement does not specify the recipient charities, nor does it indicate how this $5.5 million in food will be valued — at cost, wholesale, retail, or by some other measure.

Kellogg agreed that for three years, it would “refrain from using in its advertising and on its labeling for the Product any assertion to the effect that ‘eating a bowl of Kellogg’s® Frosted Mini-Wheats cereal for breakfast is clinically shown to improve attentiveness by nearly 20%.’ ” Kellogg would still be allowed to claim that “[c]linical studies have shown that kids who eat a filling breakfast like Frosted Mini-Wheats have an 11% better attentiveness in school than kids who skip breakfast.”

Kellogg agreed to pay class counsel’s attorneys’ fees and costs “not to exceed a total of $2 million.” Class counsel eventually requested the full $2 million in fees and costs.

The plaintiffs agreed to release all claims arising out of the challenged advertising.

Nicholas Labs employed Chen as its IT director. It filed suit against him, alleging breach of contract and other theories. Chen cross-complained, seeking indemnification for expenses incurred in the defense of the company’s action. The company dismissed its action on the eve of trial, and the case went to trial on the cross-action only. The trial court (Orange County Superior, Judge Sheila Fell) entered judgment for the company, finding that it had no obligation to indemnify Chen.

The Court of Appeal affirmed.

[Labor Code] Section 2802 … requires an employer to indemnify an employee who is sued by third persons for conduct in the course and scope of his or her employment, including paying any judgment entered and attorney’s fees and costs incurred in defending the action. [Citations.] As long as the employee is acting within the scope of his or her employment, the right to indemnity is not dependent upon a finding that the underlying action was unfounded.” Cassady v. Morgan, Lewis & Bockius LLP (2006) 145 Cal.App.4th 220, 230.

The Court held that the text of 2802 is unclear as to whether an employer must indemnify an employee for costs incurred in the employer’s action against the employee. However, taking into account the larger legal context, including California’s default provision that parties pay their own way in litigation, the Court held: “Consideration of this more expansive fabric of the law suggests that any interpretation of section 2802 which would allow the statute to become a unilateral attorney fee statute in litigation between employees and employers would be incompatible with that larger body of law.” 199 Cal.App.4th at 1251.

The Court considered several other points that I will not address, but for anyone who is interested, the opinion is available here.

Pac. Bell appealed, arguing that Sciborski’s claims were preempted by section 301 of the Labor Management Relations Act (“LMRA”) because she was a union member governed by a collective bargaining agreement and her claims required the court to interpret the CBA.  The Court rejected this argument and held that Sciborski’s claims were not preempted because they arose from independent state law and did not require the interpretation of the CBA.

Plaintiff Anthony Kirby worked for a contractor, IFP. He filed suit, alleging that IFP violated a number of wage and hour laws. He also named a number of doe defendants, alleging that they were liable under Labor Code section 2810 because they entered into contracts with IFP while knowing that the contracts did not provide sufficient funds to allow IFP to comply with all applicable labor and wage laws. Kirby settled with the doe defendants and dismissed his action against IFP. The trial court awarded IFP its attorney fees under Labor Code section 218.5, and the Court of Appeal affirmed. The Supreme Court reversed.

First, the Court held that a section 226.7 claim is not a claim for which attorney’s fees can be awarded to a prevailing employee under Labor Code section 1194.  Section 1194 allows successful plaintiffs to recover attorney’s fees in actions for the “legal minimum wage or the legal overtime compensation.” The Court rejected Kirby’s argument that the required payment for missed meal or rest periods is tantamount to a statutorily prescribed minimum wage. Slip op. at 7-8.

Next, the Court held that Labor Code section 218.5 does not authorize a prevailing party — either the employer or the employee — to recover its attorney’s fees in an action under section 226.7. The Court based this on its conclusion that an action under section 226.7 does not constitute an “action brought for the nonpayment of wages” within the meaning of section 218.5. Slip op. at 11.

Section 226.7 is not aimed at protecting or providing employees’ wages. Instead, the statute is primarily concerned with ensuring the health and welfare of employees by requiring that employers provide meal and rest periods as mandated by the IWC. When an employee sues for a violation of section 226.7, he or she is suing because an employer has allegedly “require[d] [the] employee to work during [a] meal or rest period mandated by an applicable order of the Industrial Welfare Commission.” In other words, a section 226.7 action is brought for the nonprovision of meal and rest periods, not for the “nonpayment of wages.”

Slip op. at 11-12 (citations omitted).

The Court then explained its holding in light of Murphy v. Kenneth Cole Productions (2007) 40 Cal.4th 1094, in which it held that the remedy for a violation of section 226.7 is one additional hour of pay, and that such pay constitutes a wage, rather than a penalty. “Nonpayment of wages,” the Court said, “is not the gravamen of a section 226.7 violation.” Slip op. at 13.

The “additional hour of pay” provided for in subdivision (b) is the legal remedy for a violation of subdivision (a), but whether or not it has been paid is irrelevant to whether section 226.7 was violated. In other words, section 226.7 does not give employers a lawful choice between providing either meal and rest breaks or an additional hour of pay. An employer’s failure to provide an additional hour of pay does not form part of a section 226.7 violation, and an employer‟s provision of an additional hour of pay does not excuse a section 226.7 violation. The failure to provide required meal and rest breaks is what triggers a violation of section 226.7. Accordingly, a section 226.7 claim is not an action brought for nonpayment of wages; it is an action brought for non-provision of meal or rest breaks.

Slip op. at 13-14.

The Court found support for its holding in the legislative histories of sections 218.5 and 226.7. “In sum, the legislative history shows that the Legislature (a) considered including a one-way fee-shifting provision in favor of employees in section 226.7, (b) ultimately deleted the provision from the final version of section 226.7, and then (c) gave no indication that section 218.5’s two-way fee-shifting rule should apply to section 226.7 claims, even as (d) it adopted amendments to section 218.5 as part of the very same legislation that created section 226.7.” Slip op. at 17.

Finally, the Court rejected IFP’s argument that the public policies of discouraging unmeritorious lawsuits and encouraging employees to file administrative complaints instead of civil suits support the applicability of section 218.5’s two-way fee-shifting rule to section 226.7 claims. Slip op. at 17.

The Court’s holding does not address the plaintiff’s argument that that, when a suit includes claims covered by section 1194, that section shields an unsuccessful employee against a section 218.5 award of attorney fees in favor of a successful employer. That argument will have to wait for another day.

1. Does Labor Code section 1194 apply to a cause of action alleging meal and rest period violations (Lab. Code 226.7) or may attorney’s fees be awarded under Labor Code section 218.5?
2. Is our analysis affected by whether the claims for meal and rest periods are brought alone or are accompanied by claims for minimum wage and overtime?

The decision is early. The 90-day deadline was not set to expire until June 4.  This is interesting, considering that the Court had to give itself an extension of time to publish the Brinker decision.

Aleman held (1) an employee could not recover “reporting time pay” for attending scheduled meetings at work when he worked at least half the scheduled time, even if the scheduled time was less than four hours; and (2) the employee could not recover split shift compensation when, on each occasion that he worked a split shift, he earned more than the minimum amount required by the wage order for the shift. It also held that the successful employer in that action could not recover its attorney fees.

The issues in Kirby are: