Vasquez v. State

• Decision Date: 20 November 2008
• Docket Number: No. S143710.,S143710.
• Citation: 45 Cal. 4th 243,195 P.3d 1049,85 Cal.Rptr.3d 466
• Court: California Supreme Court
• Parties: Cristina VASQUEZ, Plaintiff and Respondent, v. STATE of California, Defendant and Appellant.

195 P.3d 1049

85 Cal.Rptr.3d 466

45 Cal. 4th 243

Cristina VASQUEZ, Plaintiff and Respondent, v. STATE of California, Defendant and Appellant.

No. S143710.

Supreme Court of California.

November 20, 2008.

Archer Norris, Thomas S. Clifton, Colin C. Munro, Sonny T. Lee, Walnut Creek; Niddrie, Fish & Buchanan and Martin N. Buchanan, San Diego, for Defendant and Appellant.

Jarvis, Fay, Doporto & Gibson, Jarvis, Fay & Doporto, Oakland, and Andrea J. Saltzman, for League of California Cities and California State Association of Counties as Amici Curiae on behalf of Defendant and Appellant.

Edmund G. Brown, Jr., Attorney General, Manuel M. Medeiros, State Solicitor General, Tom Greene, Chief Assistant Attorney General, Theodora Berger, Assistant Attorney General, and Edward G. Weil, Deputy Attorney

General, as Amici Curiae on behalf of Defendant and Appellant.

Altshuler, Berzon, Nussbaum, Rubin & Demain, Altshuler Berzon, Michael Rubin, San Francisco, Katherine M. Pollock; Law Offices of Robert Berke, Robert Berke, Santa Monica, Joseph A. Pertel; Law Offices of Robert S. Gerstein, Robert S. Gerstein; Law Offices of Janet Herold and Janet Herold, La Crescenta, for Plaintiff and Respondent.

Deborah J. La Fetra, for Pacific Legal Foundation as Amicus Curiae on behalf of Plaintiff and Respondent.

The Impact Fund, Brad Seligman, Berkeley, Julia Campins, Oakland; Litt, Estuar, Harrison & Kitson, Barret S. Litt and Paul J. Estuar, Los Angeles, as Amici Curiae on behalf of Plaintiff and Respondent.

Richard Rothschild, Los Angeles; Law Offices of Richard M. Pearl and Richard M. Pearl for Los Angeles County Bar Association, Berkeley, as Amicus Curiae on behalf of Plaintiff and Respondent.

WERDEGAR, J.

Under the so-called private attorney general statute (Code Civ. Proc., § 1021.5, sometimes hereafter section 1021.5), a court may award attorney fees to the successful party in an action that has resulted in the enforcement of an important right affecting the public interest. In Graham v. DaimlerChrysler Corp. (2004) 34 Cal.4th 553, 560, 21 Cal. Rptr.3d 331, 101 P.3d 140 (Graham), we held the "catalyst theory" permits a court to award attorney fees under section 1021.5 "even when litigation does not result in a judicial resolution if the defendant changes its behavior substantially because of, and in the manner sought by, the litigation." In so holding, we also adopted "sensible limitations on the catalyst theory" (Graham, at p. 575, 21 Cal.Rptr.3d 331, 101 P.3d 140) to discourage meritless suits motivated by the hope of fees, "without putting a damper on lawsuits that genuinely provide a public benefit" (ibid.).

Today we revisit one of the "limitations on the catalyst theory" adopted in Graham, supra, 34 Cal.4th 553, 575, 21 Cal.Rptr.3d 331, 101 P.3d 140—specifically, the rule that the plaintiff in a "catalyst case," to recover attorney fees under section 1021.5, "must have engaged in a reasonable attempt to settle its dispute with the defendant prior to litigation" (Graham, at p. 561, 21 Cal.Rptr.3d 331, 101 P.3d 140). While this is not a catalyst case (see post, 85 Cal.Rptr.3d at p. 478, 195 P.3d at p. 1059), defendant argues the rule just mentioned should apply whenever fees are sought under section 1021.5. We hold that no such categorical rule applies in noncatalyst cases. In all cases, however, section 1021.5 requires the court to determine that "the necessity and financial burden of private enforcement ... are such as to make the award appropriate...." (Ibid., italics added.) In making this determination, one that implicates the court's equitable discretion concerning attorney fees, the court properly considers all circumstances bearing on the question whether private enforcement was necessary, including whether the party seeking fees attempted to resolve the matter before resorting to litigation.

I. INTRODUCTION

Defendant and appellant the State of California petitions for review of a decision affirming an order awarding attorneys' fees under section 1021.5 to plaintiff and respondent Cristina Vasquez.

Proposition 139, known as the Prison Inmate Labor Initiative of 1990 (approved by voters, Gen. Elec. (Nov. 6, 1990), and codified as Pen.Code, § 2717.1 et seq.), instructs the Secretary of the Department of Correction and Rehabilitation to establish joint venture programs with private employers within state prison facilities to employ inmates (id., § 2717.2; see id., § 5050). The law provides, among other things, that inmates be paid wages "comparable to wages paid by the joint venture employer to non-inmate employees performing similar work for that employer" or wages "comparable to wages paid for work of a similar nature in the locality in which the work is to be performed." (Pen. Code, § 2717.8.) The law also requires the Secretary to deduct up to 80 percent of each inmate employee's gross wages for taxes, room and board, restitution to the victims of crime, and support for the inmate's family. (Ibid.)

In August 1999, inmates Charles Ervin and Shearwood Fleming, together with the Union of Needletrades, Industrial & Textile Employees, AFL-CIO (UNITE), filed a complaint stating various causes of arising out a joint venture between the State of California and CMT Blues to manufacture clothing at the Richard J. Donovan Correctional Facility in San Diego. As subsequently amended, the complaint named as defendants CMT Blues, its manager Pierre Sleiman, and several corporations that resold CMT Blues' products under their own names. Plaintiffs alleged defendants had committed unfair business practices by failing to pay comparable wages (Pen.Code, § 2717.8) or minimum wages (Lab.Code, §§ 1197, 3351, subd. (e)), by directing inmates to remove and replace "Made in Honduras" labels with others reading "Made in the USA," and by selling these garments to consumers throughout California.

In July 2000, a second amended complaint added Vasquez, the international vice-president of UNITE, as a plaintiff, and added as defendants the State of California and Noreen Blonien, assistant director of the Department of Corrections and Rehabilitation for joint venture programs (collectively hereafter the State). Vasquez, who asserted standing as a taxpayer to prevent the waste of state property (Code Civ. Proc, § 526a), alleged the State had failed to collect and disburse payments due from joint venture employers, including CMT Blues. This failure had occurred, Vasquez alleged, because the State had permitted employers, in violation of Proposition 139, to require inmates to complete unpaid training periods of 30 to 60 days and to pay less than comparable wages.

The State successfully demurred to Vasquez's taxpayer cause of action. Vasquez appealed, and the Court of Appeal reversed. (Vasquez v. State of California (2003) 105 Cal.App.4th 849, 129 Cal.Rptr.2d 701.) The court rejected the State's argument that a taxpayer claim for waste lies only to prevent the unlawful expenditure of funds, and held that such a claim may also challenge the State's failure to collect funds. (Id., at pp. 854-856, 129 Cal.Rptr.2d 701.)

While Vasquez's appeal was pending, the inmates' claims against CMT Blues were certified as a class action and tried without a jury. In August 2002, the court entered judgment for the plaintiff class, ordering CMT Blues to pay $841,188.44 in wages, liquidated damages, waiting time, penalties and interest. The court also awarded, based on the parties' stipulation, attorney fees of $435,000 and costs of $65,000.

The trial of Vasquez's taxpayer claim commenced in January 2004. The trial ended, however, when the parties agreed to a stipulated injunction, which the court approved on February 17, 2004, and later entered as a judgment. The injunction requires the State to submit written progress reports to the court every 90 days, to obtain wage plans and duty statements from each joint venture employer, to comply with all applicable record-keeping requirements, to provide payroll data to plaintiff's counsel, to identify comparable wages as required by Proposition 139, to require joint venture employers to notify inmates of their rights under Proposition 139 and the Labor Code, to establish wage-related grievance procedures for inmates, to require joint venture employers to post bonds to secure the payment of wages, to notify the court and plaintiff's counsel of defaults in wage payments, and to take reasonable steps to collect overdue wages. The court retained jurisdiction to enforce, modify and/or dissolve the injunction for a period of two years, subject to extension or termination for good cause, and also retained jurisdiction to award attorneys' fees.

Vasquez subsequently moved for attorney fees under section 1021.5. On August 11, 2004, the court awarded $1,257,258.60, based on a lodestar amount of $967,122 and a multiplier of 1.3. On October 28, 2004, the court entered judgment on the stipulated injunction and the award of attorney fees.

On December 2, 2004, we filed our decision in Graham, supra, 34 Cal.4th 553, 21 Cal. Rptr.3d 331, 101 P.3d 140, holding that the plaintiff in a catalyst case, to recover attorney fees under section 1021.5, "must have engaged in a reasonable attempt to settle its dispute with the defendant prior to litigation" (Graham, at p. 561, 21 Cal.Rptr.3d 331, 101 P.3d 140).

On December 17, 2004, the State in this case appealed the award of attorney fees. In its opening brief on appeal, the State argued Vasquez was not entitled to recover fees under section 1021.5 because, among other reasons, she had not engaged in a reasonable attempt to settle before resorting to litigation. The Court of Appeal affirmed the fee award. Concerning the State's argument that Vasquez was required to have attempted to settle her claim, the court observed that Graham applied only to catalyst cases, that the instant case was not a catalyst case because Vasquez had obtained a stipulated injunction that was reduced to...