Serrano v. Unruh

Decision Date28 October 1982
CourtCalifornia Supreme Court
Parties, 652 P.2d 985 John SERRANO, Jr., et al., Plaintiffs and Appellants, v. Jesse M. UNRUH, as State Treasurer, etc., et al., Defendants and Appellants. L.A. 31496.

Sidney M. Wolinsky, John E. McDermott, Richard A. Rothschild, Fred H. Altshuler, Stephen P. Berzon, Michael Rubin and Altshuler & Berzon, San Francisco, for plaintiffs and appellants.

David B. Roe, Berkeley, Terry Smerling, Fred Okrand and Mark D. Rosenbaum, Los Angeles, as amici curiae on behalf of plaintiffs and appellants.

George Deukmejian, Atty. Gen., and John J. Klee, Jr., Deputy Atty. Gen., for defendants and appellants.

John H. Larson, County Counsel, Los Angeles, and Frederick R. Bennett, Principal Deputy County Counsel, Los Angeles, as amici curiae on behalf of defendants and appellants.

NEWMAN, Justice.

The principal question in this appeal and cross-appeal is whether a fee award under a private-attorney-general theory (Code § 1021.5) properly compensates counsel for fee-related services. 1 We conclude that, absent circumstances rendering an award unjust, the fee should ordinarily include compensation for all hours reasonably spent, including those relating solely to the fee. We thus affirm the principal award here and remand for reconsideration that portion of the trial court's order which denied compensation for services on the fee motions.

This is another episode in the landmark Serrano litigation that began with an action filed in 1968 as an equal protection challenge to the financing of public schools. 2 It was initiated by a class of children and parents against (1) the State Treasurer, the Superintendent of Public Instruction, and the State Controller in their capacities as state officials (state defendants), 3 and (2) several school districts and officials thereof (county defendants).

The superior court sustained demurrers to the complaint and dismissed. We reversed and remanded for trial. (Serrano I, supra, 5 Cal.3d at p. 619, 96 Cal.Rptr. 601, 487 P.2d 121.) In September 1974, following an extended trial, the court (Bernard Jefferson, J.) entered judgment for plaintiffs, ruling that the financing system violated equal protection and ordering that the system be brought into compliance within six years of judgment.

Within a month of judgment and before county defendants appealed, plaintiffs' attorneys filed separate motions for fee awards against state defendants. 4 In August 1975 $400,000 each was awarded to Public Advocates and Western Center, as reasonable fees for their representation of plaintiffs through April 1975. The awards were made on a private-attorney-general theory and were computed on findings of the reasonable market value of the services. As the basis, or "touchstone," for that computation, Judge Jefferson used the reasonable hourly rates of each of the public-interest attorneys who worked on the case. He derived the rates from those prevailing for private attorneys of comparable skill, experience, and stature conducting noncontingent class litigation in the Los Angeles area.

State defendants filed an appeal that we transferred to this court and consolidated with the then-pending appeal by county defendants on the merits. After the fee issue was briefed, however, we chose to defer it until judgment on the merits (Serrano II ) was final.

Before our remittitur issued, plaintiffs' attorneys filed motions seeking fees for services (1) in Serrano II, (2) in opposing county defendants' unsuccessful petition for certiorari before the United States Supreme Court, and (3) in what became Serrano III. Serrano III, filed in October 1977, affirmed the award for trial services and remanded the motions with directions that "the award of attorneys' fees, if any, shall be made and assessed only against said defendants and appellants appealing in the respective appeal, or such of them as the trial court in the exercise of its equitable discretion shall determine." (Serrano III, supra, 20 Cal.3d 25, 50, 141 Cal.Rptr. 315, 569 P.2d 1303.)

In 1979 the superior court (Deutz, J.) awarded plaintiffs' attorneys (1) fees against county defendants of $74,254.70 ($44,966.50 to Public Advocates, $29,288.20 to Western Center) 5 for services in defending the judgment on the merits (Serrano II ), (2) partial costs against county defendants of $503.74 for printing the brief in opposition to the petition for certiorari, and (3) fees against state defendants of $39,560 ($31,280 to Public Advocates, $8,280 to Western Center) for defending the fee award (Serrano III ). In so ruling the court reduced the hours claimed for Serrano II by 20 percent and enhanced the touchstone figure 6 by 15 percent. The deniedenhancement of the figure for Serrano III. All the awards were computed on the basis of the hourly rates set by Judge Jefferson in 1975 with some upward adjustments to reflect increased experience and skill in the interim. The court also denied plaintiffs' motions for services seeking compliance with the dictates of Serrano II and preparing the fee motions.

All defendants appealed; plaintiffs' attorneys cross-appealed. County defendants thereafter settled and abandoned their appeal, and plaintiffs' attorneys abandoned that portion of the cross-appeal relating to county defendants. Thus before us now are state defendants' appeal of the $39,560 award to plaintiffs' attorneys for their successful enforcement on appeal of the award granted for prevailing at trial, and plaintiffs' cross-appeal of that portion of the order denying fees for services in preparing the fee motions. 7

I. Fee for services regarding the fee?

The central issue is whether, under the private-attorney-general theory codified in section 1021.5, counsel's efforts to secure their fee for the underlying litigation may be compensated. Defendants' position is that there should be no award for fee-related services. They argue that plaintiffs' attorneys, in enforcing the award, vindicated no more than their personal interest, one inimical to that of their clients in that every fee awarded reduces pro tanto the fund available to defendants to use for public education. Defendants cite cases where fees were awarded under the common-fund or the substantial-benefit theory, viz., City of Detroit v. Grinnell Corp. (2d Cir.1977) 560 F.2d 1093 (Grinnell II ), Lindy Bros. Builders, Inc. v. Am. Radiator, etc. (3d Cir.1976) 540 F.2d 102 (Lindy II ), Gabrielson v. City of Long Beach (1961) 56 Cal.2d 224, 14 Cal.Rptr. 651, 363 P.2d 883, and Mandel v. Lackner (1979) 92 Cal.App.3d 747, 155 Cal.Rptr. 269 (Mandel II ). The trial court correctly rejected those precedents as inapposite.

A. FEE AWARDS IN COMMON-FUND AND SUBSTANTIAL-BENEFIT CASES

Since 1796 the rule in this country has been that counsel fees are not recoverable absent statute or enforceable agreement. (See Arcamel v. Wiseman (1796) 3 Dall. 306, 1 L.Ed. 613; see also, e.g., Code Civ.Proc., § 1021; Alyeska Pipeline Co. v. Wilderness Society (1975) 421 U.S. 240, 247-257, 95 S.Ct. 1612, 1616-1621, 44 L.Ed.2d 141.) Courts have, however, carved out exceptions to the rule, principally the common-fund, substantial-benefit (or common-benefit), and private-attorney-general theories. 8

The common-fund exception was articulated in Trustees v. Greenough (1882) 105 U.S. 527, 26 L.Ed. 1157. Greenough held that an act of Congress which limited costs recoverable by prevailing parties did not restrict courts' equitable powers to permit the trustee of a fund, or a party recovering or preserving a fund for the benefit of himself and others, to recover his costs (including attorney fees) from either the fund or the benefited parties directly. "The fee-bill is intended to regulate only those fees and costs which are strictly chargeable as between party and party, and and not to regulate the fees of counsel and other expenses and charges as between solicitor and client ...." (105 U.S. at p. 535).

The central theory underlying the trustee's right was the prevention of unjust enrichment, i.e., "prevention of an unfair advantage to the others who are entitled to share in the fund and who should bear their share of the burden of its recovery...." (Estate of Stauffer (1959) 53 Cal.2d 124, 132,1982146756;0072;1960120103;RP;;661;

Yet Central Railroad & Banking Co. v. Pettus (1885) 113 U.S. 116, 5 S.Ct. 387, 28 L.Ed. 915, held that the attorney had an independent right against the fund. 9 The theory was that he, like the client, had conferred a benefit on class members and thus, to avoid unjust enrichment, should be compensated. As the court explained in Lindy II, supra, on which defendants rely: " '[t]he award of fees under the equitable fund doctrine is analogous to an action in quantum meruit: the individual seeking compensation has, by his actions, benefited another and seeks payment for the value of the service performed.' [Lindy I ] 487 F.2d at 165. Accordingly, 'a benefit to the fund is supposedly required .... The standard formula [of benefit] ... mix[es] together three distinct ideas: that a fund can be benefited by being "created, increased or protected" (or "preserved").' " (Lindy II, supra, 540 F.2d 102, 110, citing Dawson, op. cit. supra, 87 Harv.L.Rev. 1597, 1626.)

Therefore, just as the trustee was not permitted to surcharge the fund with personal expenses (Greenough, supra, 105 U.S. 527, 538, 26 L.Ed. 1157), the attorney's fee-related services were not compensable. "Services performed in connection with the fee application are necessary to the attorney's recovery. They benefit him, for without them, the attorney cannot ... recover. But such services do not benefit the fund --they do not create, increase, protect or preserve it.... There being no benefit to the fund ... there should be no attorneys' fee award from the fund for those services." (Lindy II, supra, 540 F.2d 102, 111; accord, Grinnell II, supra, 560 F.2d 1093, 1102, ...

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