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California DOC and Joint-Venture Contractor Owe Over $1.8 Million in Attorney Fees for Protracted Suit Granting Prison Workers Prevailing Wage

by John E. Dannenberg

The California Court of Appeal, 4th District, has upheld the San Diego Superior Court’s award of $1,257,258.60 in attorney fees incurred during drawn-out litigation against the California Department of Corrections and Rehabilitation (CDCR) and CMT Blues (CMT), the CDCR’s joint venture contractor employing prison labor. The lawsuit was brought by a private citizen who alleged taxpayer waste in CMT’s underpayment of prisoner wages, which resulted in a decrease in statutory deductions from those wages that benefited the taxpaying public.

The same Superior Court subsequently awarded another $242,000 in appellate fees when the CDCR and CMT balked at accepting the court’s order to pay back wages to prisoner workers, and finally awarded an additional $307,000 in 2007 after the CDCR and CMT continued to file meritless appeals. Cristina Vasquez, a private citizen, had sued under a “private attorney general” theory, for which attorney fee recovery is permitted by California Code of Civil Procedure § 1021.5.

Seventy prisoners were employed at the R.J. Donovan state prison near San Diego, sewing T-shirts for several U.S. companies. The jobs, under California’s Proposition 139 Joint Venture Prison Labor Initiative, paid minimum wage – far above the pennies per hour paid in normal slave labor prison jobs. However, in 2002 a class-action prisoner lawsuit (commenced against CMT by prisoner workers in 1996) complained that they were not paid for a required 30-day training period, were not paid overtime rates and were not paid the prevailing wage in the area, all in violation of California labor laws.

The prisoners were joined in 1999 by Cristina Vasquez and the Union of Needletrades, Industrial & Textile Employees, AFL-CIO, (UNITE) which challenged CMT’s wage-avoidance practices under California’s Code of Civil Procedure § 526a, a statute that permits taxpayer suits to remedy the perceived waste of taxpayer money. Vasquez’s legal theory was that because much of the prisoners’ wages were, by virtue of Proposition 139, diverted to offset their incarceration costs, support victim restitution funds and pay taxes, the taxpayers were being shortchanged by the underpayment of wages.

The prisoners prevailed in the suit, resulting in an award of $841,138 in back pay to 167 workers plus $435,000 in attorney fees and $65,000 in costs. Superior Court Judge William Pate found that “[CMT’s] failure to pay prevailing wages supports this court’s finding that [CMT] engaged in unlawful and unfair business practices. Proposition 139 clearly provided that in order to prevent employers, such as [CMT], from obtaining a competitive advantage, such employers would be subject to the same wage and hour requirements as a private business employing noninmate labor.”

However, Judge Pate balked at permitting Vasquez’s complaint to proceed. The California Court of Appeal disagreed, found the CDCR responsible for enforcing CMT’s compliance with state labor laws, and reinstated Vasquez’s complaint. See: Vasquez v. State of California, 105 Cal.App.4th 849, 129 Cal.Rptr.2d 701 (Cal.App. 4 Dist. 2003) [See: PLN, Oct. 2003, p.26].

Thereafter, Judge Pate issued an injunction requiring the CDCR to report on the status of wage-compliance for two years. Eight months into the injunction, in August 2004, the court accused the CDCR of retaliation for firing six prisoner workers who were employed by another Joint Venture contractor at R.J. Donovan Prison, Western Manufacturing. Western had only paid the state minimum hourly wages of $6.75 – if it paid at all – despite local prevailing wages ranging from $8.37 to $13.55. [See: PLN, Dec. 2004, p.16].

In June 2005, the court threatened to hold the CDCR in contempt for failure to follow its previous orders, or to explain “why they can’t get off the dime and get it done.” After losing their attempt to stave off Judge Pate’s angst by filing for appellate court relief, the CDCR sheepishly relented in August 2005. The court heard that one private contractor was estimated to have underpaid its imprisoned workers by $2 million. CDCR officials pled that they were too busy with bigger problems in the prison system, such as a federally ordered healthcare receivership and overseeing 50,000 CDCR employees, to monitor the Joint Venture contractors.

In a related claim brought against Western Manufacturing for wage underpayment at Calipatria State Prison, Judge Pate ruled in February 2006 that while the CDCR could sue for underpayment as to monies owed to the state by Western, the department did not have authority to file a lawsuit on behalf of monies owed to affected prisoners. Curiously, the CDCR could recover all unpaid wages owed by another contractor, Pub Brewing (which manufactured beer vats), because the company was in bankruptcy court where federal law is more amenable.

All of this litigation by Vasquez ran up considerable attorney fees, for which she, as a successful plaintiff, sought reimbursement. The CDCR fought her tooth and nail, but Judge Pate found that Vasquez was entitled to full recovery under § 1021.5. After studying the bills and deleting any questionable hours, Judge Pate awarded a “lodestar” amount of $967,122, with a “multiple” of 1.3 for the complexity and novelty of the case, reaching the $1,257,258.60 figure. The court also awarded $33,195.41 in costs.

In the next round, the Court of Appeal found that Judge Pate’s fee award was consistent with the record and not an abuse of discretion. Most importantly, it upheld the concept of “private attorney general” litigation in a § 526a taxpayer waste lawsuit, because Vasquez had demonstrated that there was (1) public interest, (2) substantial public benefit, and (3) necessity of private enforcement. The appeals court also awarded appellate fees and costs, but remanded that issue to the lower court for computation. See: Vasquez v. State of California, 41 Cal.Rptr.3d 556 (Cal.App. 4 Dist. 2006), review granted.

Judge Pate’s patience had by then worn thin. He rebuffed the defendants’ attempts to have him recused, and stated frankly in a ruling that set the appellate fee award at $307,338.36 that, “The court’s patience is gone. We’ve waited 18 months. Early on, plaintiff’s counsel kept trying to get me to kick the state where it sat down and get them to start moving on this case. But I gave them, as I think one should a separate governmental agency, the time to do it themselves and to do it right. But now 18 months has gone by and we have long since exhausted that time.” He observed that the state had spent “hundreds and hundreds and hundreds of thousands of dollars” resisting his orders.

Nonetheless, with the deep pockets of California’s taxpayers on their side, the unhappy state defendants again appealed the fee award. The Court of Appeal noted that the CDCR’s witnesses in the Superior Court proceedings had repeatedly denied having either responsibility for solving the wage underpayment problem or awareness of the court’s earlier orders, even though the CDCR was under an injunction (recently extended to February 2008) to resolve the underpayment issue. The court extended the reach of the injunction to Joint Venture contractors Labcon and Allwire, too.

At the heart of the appeal were the same issues the appellate court had rejected in the defendants’ earlier objections to Vasquez’s attorney fee award. The CDCR complained that Vasquez was no longer the “successful party” and had not conferred “a significant benefit to the public.” But Vasquez had won millions of dollars in reparations for prisoners and the state, which as yet had not been paid. The Court of Appeal held that ensuring compliance with a successful court action was compensable. It further held that whether Vasquez had not won every aspect of her claims would not dilute the award, upholding Judge Pate’s exercise of discretion. And when the CDCR balked at rewriting its administrative regulations per the court’s order, Vasquez was justified in spending attorney fees to do the enforcement work.

In the end, the CDCR – which had to pay its own lawyers untold sums fighting the lawsuit – owed Vasquez over $1.8 million in attorney fees, while CMT (and other Joint Venture contractors) owed the prisoners and the state of California millions of dollars in underpayment of wages for the years they failed to comply with applicable wage laws. Pointedly, the appellate court added an award of costs to Vasquez on the most recent appeal. The California Supreme Court granted review of the case on Nov. 28, 2007, which of course will result in even more attorney fees for both parties.

The prisoners and Vasquez were patiently and ably represented by Los Angeles attorneys Robert Berke, Joseph A. Pertel and Janet Herold throughout this lengthy and ongoing litigation. See: Vasquez v. State of California, 65 Cal. Rptr.3d 73 (Cal. App. 4 Dist. 2007), review granted.

Other source: The Recorder

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