Flannery v. Prentice, S080150.

• Court: United States State Supreme Court (California)
• Writing for the Court: WERDEGAR, J.
• Citation: 110 Cal.Rptr.2d 809,26 Cal.4th 572,28 P.3d 860
• Parties: Leslie FLANNERY, Plaintiff, Cross-defendant and Appellant, v. John F. PRENTICE et al., Defendants, Cross-complainants and Respondents.
• Docket Number: No. S080150.,S080150.
• Decision Date: 13 August 2001

110 Cal.Rptr.2d 809
26 Cal.4th 572
28 P.3d 860

Leslie FLANNERY, Plaintiff, Cross-defendant and Appellant,
v.
John F. PRENTICE et al., Defendants, Cross-complainants and Respondents

No. S080150.

Supreme Court of California.

August 13, 2001.

110 Cal.Rptr.2d 811

Nagley & Meredith, Nagley, Meredith & Miller and Lawrence N. Hensley, Sacramento, for Plaintiff, Cross-defendant and Appellant

Joe Ross McCray, San Francisco; Lewis, D'Amato, Brisbois & Bisgaard, Frederick Bruce Legernes; Law Offices of Richard M. Pearl and Richard M. Pearl, Berkeley, for Defendants, Cross-complainants and Respondents.

110 Cal.Rptr.2d 810

WERDEGAR, J

The question presented is to whom, as between attorney and client, attorney fees awarded under Government Code section 12965 (hereafter section 12965),¹ part of the California Fair Employment and Housing Act (FEHA) (Gov.Code, § 12900 et seq.), belong when no contractual agreement provides for their disposition. We conclude that, absent proof on remand of an enforceable agreement to the contrary, the attorney fees awarded in this case belong to the attorneys who labored to earn them.

Background

The Court of Appeal adequately stated the relevant facts. Plaintiff Leslie Flannery sued her former employer, the California Highway Patrol (CHP), alleging violations of FEHA. The jury awarded plaintiff $250,000 in damages. The trial court awarded $1,088,231 in attorney fees, expressly basing the award both on Government Code section 12965, subdivision (b) and on Code of Civil Procedure section 1021.5. (Flannery v. California Highway Patrol (1998) 61 Cal.App.4th 629, 632-633, 71 Cal.Rptr.2d 632 (Flannery I).)

On appeal by the CHP, the Court of Appeal concluded that the fee award was improper insofar as it was based on Code of Civil Procedure section 1021.5 and that, insofar as it was based on FEHA, the trial court had not applied the correct standards

110 Cal.Rptr.2d 812

in determining the amount. The Court of Appeal remanded for reconsideration of the amount of the fee award. (Flannery I, supra, 61 Cal.App.4th at p. 648, 71 Cal.Rptr.2d 632.) On remand, the trial court applied a reduced multiplier and awarded $891,042 in fees and expenses for the underlying case and $80,642 in fees and expenses for fee work. The CHP also appealed that award, and the Court of Appeal unanimously affirmed it.²

Meanwhile, Flannery brought this action against her former counsel, John F. Prentice, John H. Scott, and the law firms of Prentice & Scott, and Bley & Bley, John Prentice's former firm (collectively, defendants). Her amended complaint included causes of action for declaratory relief, breach of fiduciary duties, legal malpractice, and constructive fraud. She sought damages and a judicial declaration that she was entitled to the entire statutory fee awarded in the earlier action. Flannery alleged that she and defendants had orally entered into a contingent fee agreement entitling defendants only to "40% of the net settlement or net award of the jury." She also contended that defendants' failure to advise her of the terms and conditions of their representation and to obtain her full and informed consent to a fee agreement constituted a breach of their fiduciary duties, legal malpractice, and constructive fraud. The amended complaint also included causes of action for breach of fiduciary duty and legal malpractice based on allegations that defendants had in the FEHA litigation failed to present competent evidence of future wage loss.

Prentice & Scott cross-complained against Flannery, seeking a declaration that they were entitled to the statutory fee award and, in the alternative, recovery in quantum meruit or damages for breach of contract. Prentice & Scott contended they had a contingency agreement with Flannery providing they would receive either "forty percent of the amount recovered from a jury verdict or the entirety of statutory fees that might be awarded. . . ." Additionally, Bley & Bley cross-complained against Prentice & Scott for equitable indemnity and contractual damages.

Defendants moved for summary judgment on Flannery's complaint. Prentice & Scott also moved for summary adjudication on their declaratory relief cause of action. The trial court granted summary judgment for defendants, concluding as matters of law that Flannery was not entitled to the attorney fee award in the FEHA litigation and that there had been no malpractice. The trial court also granted Prentice & Scott's motion for summary adjudication, declaring that, as a matter of law, they were entitled to the proceeds of the attorney fee award in the FEHA litigation. The remaining claims in the cross-complaints were dismissed voluntarily.

The Court of Appeal reversed, reasoning, in the published portion of its opinion, that attorney fees awarded under section 12965, subdivision (b) belong to the litigant formally awarded them (who may or may not agree to give these fees to counsel as compensation), and that whether any compensation agreement exists in this case presents a triable question of fact.

Discussion

A. Who owns funds awarded pursuant to section 12965 when no contract provides for their disposition?

As noted, in private actions brought under section 12965, "the court, in

110 Cal.Rptr.2d 813

its discretion, may award to the prevailing party reasonable attorney's fees and costs, including expert witness fees . . . ." (§ 12965, subd. (b).) The propriety of the court's having awarded fees in this case is not at issue; our question pertains to the ownership of the statutory award. In such circumstances, our fundamental task is to "ascertain the Legislature's intent in order to effectuate the law's purpose." (White v. Ultramar, Inc. (1999) 21 Cal.4th 563, 572, 88 Cal.Rptr.2d 19, 981 P.2d 944.) As will appear, while the legislative purposes underlying FEHA and its attorney fee provision are relatively clear, which formulation (among various combinations of rules and exceptions proffered by the parties) will most reliably effectuate these purposes is a closer question. We conclude that any proceeds of a section 12965 fee award exceeding fees the client already has paid belong, absent a contractual agreement validly disposing of them, to the attorneys for whose work they are awarded

1. Statutory language

We begin our inquiry by examining section 12965's words, giving them a plain and commonsense meaning. (Garcia v. McCutchen (1997) 16 Cal.4th 469, 476, 66 Cal.Rptr.2d 319, 940 P.2d 906.) In doing so, however, we do not consider the statutory language in isolation. (Lungren v. Deukmejian (1988) 45 Cal.3d 727, 735, 248 Cal.Rptr. 115, 755 P.2d 299.) Rather, we look to "the entire substance of the statute . . . in order to determine the scope and purpose of the provision. . . ." (West Pico Furniture Co. v. Pacific Finance Loans (1970) 2 Cal.3d 594, 608, 86 Cal. Rptr. 793, 469 P.2d 665.) We avoid any construction that would produce absurd consequences. (People v. Mendoza (2000) 23 Cal.4th 896, 908, 98 Cal.Rptr.2d 431, 4 P.3d 265.)

While it is true that section 12965 authorizes fee awards "to the prevailing party" (§ 12965, subd. (b), italics added), that language does not unambiguously favor plaintiff. "The word `part[y]' is reasonably susceptible to more than one interpretation." (Levy v. Superior Court (1995) 10 Cal.4th 578, 582, 41 Cal.Rptr.2d 878, 896 P.2d 171.) "In the countless procedural statutes in which the term `party' is used, it is commonly understood to refer to either the actual litigant or the litigant's attorney of record. [Citations.] Since that is the ordinary import of the term, that is the meaning we must ascribe to it when used in [a statute], unless the Legislature has clearly indicated a contrary intent...." (McDowell v. Watson (1997) 59 Cal.App.4th 1155, 1164, 69 Cal.Rptr.2d 692, citing Levy v. Superior Court, supra, at p. 583, 41 Cal.Rptr.2d 878, 896 P.2d 171; see also Trope v. Katz (1995) 11 Cal.4th 274, 282, 45 Cal.Rptr.2d 241, 902 P.2d 259.)³

Even if we were to construe "party" in section 12965 formally to designate a litigant only, that would not preclude our also declaring that beneficial ownership of section 12965 fees remains, absent contract, with the attorneys they are designed to compensate. (Cf. U.S. ex rel. Virani v. Jerry M. Lewis Truck Parts & Equipment (9th Cir.1996) 89 F.3d 574, 577, cert. den.

110 Cal.Rptr.2d 814

(1997) 519 U.S. 1109, 117 S.Ct. 945, 136 L.Ed.2d 834 (Virani) [concluding, in an action under the federal False Claims Act, that a client's "right" to reasonable attorney fees "is really a power to obtain fees for his attorney; the attorneys' right does not come into being until the client exercises that power; the defendant's liability will only arise if that power is exercised"].)

Section 12965 expressly authorizes the award only of attorney fees. An award that does not compensate the litigant for payments made to, owed to, or forgiven⁴ by an attorney or attorneys is, in one sense, not an "attorney's fee" at all. Read plainly in accordance with this language, therefore, section 12965 does not authorize awards that the litigant is not (absent agreement, at any rate) obligated to pay as attorney compensation. Indeed, as we previously have recognized, "the usual and ordinary meaning of the words `reasonable attorney's fees' is the consideration that a litigant pays or becomes liable to pay in exchange for legal representation." (Trope v. Katz, supra, 11 Cal.4th at p. 282, 45 Cal.Rptr.2d 241, 902 P.2d 259.)⁵

Despite the foregoing, section 12965 is nevertheless, in our view, "sufficiently ambiguous to warrant our consideration of evidence of the Legislature's intent beyond the words of the statute." (Snukal v. Flightways Manufacturing, Inc. (2000) 23 Cal.4th 754, 779, 98 Cal. Rptr.2d 1, 3 P.3d 286.) Accordingly, in order to ascertain the most reasonable interpretation of section 12965, we may examine extrinsic information, including the statute's legislative history and...