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Attorney Fee Award Not Conditioned on Attempts at Pre-litigation Resolution

by Michael Brodheim

In a case resulting in the enforcement of provisions that California prisoners, under certain circumstances, be paid for work at no less than minimum wage, the California Supreme Court held that pre-litigation resolution attempts are not a categorical prerequisite to an award of attorney fees when a party prevails in a lawsuit that benefits the public.

Voter-approved passage of Proposition 139, the Prison Inmate Labor Initiative of 1990, led to the creation of “joint venture programs” between private employers and the California Department of Corrections and Rehabilitation (CDCR). Under the terms of Proposition 139, in exchange for use of state property, employers were obligated to pay wages to participating prisoner workers comparable to those of non-prisoner employees performing the same work (and not less than minimum wage). In turn, the state collected taxes and made permissible deductions from the prisoners’ gross wages for room and board, victim restitution and family support – an all-around win-win situation.

California taxpayer Cristina Vasquez, vice-president of a textile employees union, joined prisoners Charles Ervin and Shearwood Fleming in a complaint filed against the State of California, a CDCR official in charge of administering joint venture programs, clothing manufacturer CMT Blues, and several companies that resold CMT Blues garments under their own labels. The complaint alleged unfair business practices on the part of CMT Blues for failing to pay prisoner-employees the comparable (or minimum) wages required by Prop 139, for directing prisoners to replace foreign-manufacture labels with “Made in the USA” labels, and for selling those products to California consumers.

The lawsuit also alleged that the state enabled those practices by permitting joint venture employers to violate the terms of Prop 139 by, among other things, requiring prisoners to forego wages entirely during a 30-to-60-day training period. The net result, the complaint claimed, was both a waste of state property and a loss of tax revenue.

Vasquez’s taxpayer claim was severed from the prisoners’ claims when the state at first succeeded (by way of demurrer) in having the former dismissed. Before that decision was reversed by the Court of Appeal, the prisoners’ claims were certified as a class action. The class members prevailed and, following a non-jury trial, CMT Blues was ordered to pay $841,188.44 in back wages, damages, penalties and interest to the prisoner workers. Additionally, the court awarded $500,000 in attorney fees and costs. [See: PLN, March 2008, p.18].

Vasquez’s remaining taxpayer claim was settled when the parties agreed to a stipulated injunction which imposed substantial continuing obligations on the State of California – obligations designed to ensure that prisoners receive compensation from joint venture employers in accordance with the terms of Prop 139, and that the state consequently receives the full amount of taxes, housing costs and victim restitution payments required under the joint venture program.

Vasquez moved for attorney fees under Code of Civil Procedure (CCP) section 1021.5, the so-called private attorney general statute, which permits a court to award fees to a prevailing private party in any action that results in enforcement of an important right affecting the public interest. In October 2004, the court entered judgment and awarded attorney fees to Vasquez in excess of $1.25 million.

Two months later, the California Supreme Court held, in an otherwise-unrelated case, that a court may award attorney fees when a lawsuit settles without any judicially-recognized change in the legal relationship between the parties, so long as the lawsuit acted as a “catalyst” that compelled the defendant to change its behavior. In so doing, however, the Court felt it necessary to adopt “sensible limitations” to balance the competing risks and benefits of awarding attorney fees in such cases.

On one hand, the Court did not want to deter attorneys from taking on potentially meritorious public-interest litigation by permitting defendants, after a lawsuit’s initiation, to provide last-minute “voluntary” relief and thereby avoid having to pay attorney fees.
On the other hand, the Court did not want to reward “opportunistic” lawyers in cases where litigation was not actually necessary – because, for example, a mere pre-litigation request would have prompted the defendant to voluntarily make the sought-after changes. Thus, the Court conditioned the award of attorney fees in catalyst cases on a plaintiff’s reasonable efforts at pre-litigation settlement of the dispute.

After the trial court’s award of attorney fees to Vasquez was affirmed on appeal, the defendants sought review by the California Supreme Court on the sole question of whether CCP section 1021.5 permitted an award of attorney fees when the plaintiff made no pre-litigation attempt to resolve its dispute with the defendants. [See: PLN, March 2010, p.1].

In answering that question, the Court noted that its prior decision had been made in the context of a catalyst case. Because Vasquez had successfully obtained a stipulated injunction which brought about a judicially-recognized change in the legal relationship between the parties, hers was not a catalyst case. On the merits, the Court held that neither the language of CCP section 1021.5 nor its legislative history, nor any policy considerations such as those present in catalyst cases, supported the state’s argument that pre-litigation settlement efforts were a prerequisite to the award of attorney fees in non-catalyst cases. See: Vasquez v. State of California 45 Cal.4th 243, 195 P.3d 1049 (Cal. 2008).

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Related legal case

Vasquez v. State of California