U. C. Regents Have Constitutional Immunity from Plaintiff's Attorney Fee Motion

In Goldbaum v. The Regents of the University of California, 2011 DJDAR 339 (2011), the Fourth District California Court of Appeal decided a novel issue arising under the California Constitution and Labor Code § 218.5. Labor Code § 218.5 provides that a prevailing plaintiff is eligible to recover reasonable and necessary attorney fees on unpaid wage claims.

Michael Goldbaum (Goldbaum) was a professor at the University of California, San Diego (UCSD). He was granted tenure by the University in 1979. In 2008, Goldbaum filed a complaint against the Regents of the University of California (Regents) for breach of contract. The complaint alleged that UCSD failed to report to the U. C. Retirement Plan (UCRP) that he had been an employee between 1977 and 1992. Goldbaum sought a determination that he was eligible for pension benefits for the complete period of his employment.

In response, U.C. Regents disputed Goldbaum’s eligibility and filed a Motion for Summary Judgment. While that motion was pending, the litigation was settled. Goldbaum then moved for his reasonable attorney fees under Labor Code § 218.5 characterizing the claim as one for unpaid wages and other benefits. The trial court denied the motion on the ground that the Regents had constitutional immunity to a claim for attorney fees.

The court of appeal affirmed the decision. The court noted that the California Constitution establishes the Regents as a public trust. As a public trust, they have powers of organization and government and are immune from legislative regulation subject to exceptions. The immunity includes areas involving general police power regulations governing private persons and corporations.

In response, Goldbaum argued that Labor Code § 218.5 was applicable to the Regents as a general police power regulation. The court of appeal rejected this argument. The court held that issues relating to wages and benefits were internal university affairs not subject to any exceptions relating to the Regents’s constitutional immunity.

Dividing Attorneys' Fees Pro Rata by Number of Claims May Not be Sufficient

In Harris v. Maricopa Count Superior Court, the Ninth Circuit remanded an attorneys' fee award back to the District Court when defendants and the lower court allocated fees to the prevailing defendant by determining which claims carried the right to fees to the prevailing defendant, and then using a pro rata approach to divide some of the fees by the number of claims.  The majority opinion held that this was improper. 

Judge Bybee's dissent strikes to the heart of the matter.  Does the "new rule" from the majority render a defendant's ability to recovery attorneys' fees almost impossible?

Vernon Harris brought a civil rights action against the Superior Court of Maricopa County alleging gender and race discrimination as well as state law claims of breach of contract and defamation.  Harris' claims were ultimately dismissed when defendant's pre-trial summary adjudication motions were granted. 

The court held it improper to allocate the general fees across the ten claims and then determining one-tenth of the fees were incurred for each claim.  This strikes at the heart of the civil rights policy. which is to encourage victims of discrimination to seek judicial relief and avoid self-help actions.  First, if defendant is seeking fees in a civil rights case, exceptional circumstances must be demonstrated.  Then, only the amount of attorneys' fees attributable exclusively to a plaintiffs' frivolous claims will be awarded.  When, as here, both non-frivolous and frivolous claims were brought, the burden rests with the fee claimant -- the defendant -- to show certain work performed which would not have been necessary but for the inclusion of the frivolous claims.  The Ninth Circuit then acknowledged that when, again as here, the complaint lists various legal theories all based on essentially the same facts, the burden on the defendant to establish which specific fees were attributable solely to the frivolous claims is, from a practical viewpoint, extremely difficult to prove.  At any rate, the Ninth Circuit held the burden is not carried by allocating fees in the pro rata fashion which was employed here.

I do not believe the burden is impossible, as Judge Bybee has intimated in his dissent.  But the amount of specificity is certainly important to a prevailing party, fee claimant defendant.

Does Negotiating a Fee Award along with Substantive Relief Create a Conflict of Interest?

An interesting article was published in California Lawyer, January 2011 issue, regarding attorneys' fees, and in particular, negotiating the amount of those fees during settlement discussions.  Negotiating Attorneys Fees, Id. at 12, "Expert Advice," by Adam W. Hofmann, from the San Francisco office of Hanson Bridgett.  The author recognizes that attorneys representing plaintiffs in civil rights and public interest cases usually bifurcate the settlement negotiations, with an attempt to reach agreement on the substantive issues first.  The right to attorneys' fees, and the amounts thereof, are typically delayed until after the substantive issues have been resolved.  Plaintiffs lawyers usually claim that bifurcation is necessary to avoid an ethical conflict between the client's claim and the lawyer's interest in getting paid.

The author argues, however, that such strategy may, in some cases, be a tactical mistake.  The tactic of negotiating the fees simultaneously with the substantive claims may arguably avoid the inherent conflict that usually arises. 

The answer is, of course, that it all depends on your case.  Negotiating the issues simultaneously, and demanding an excessive amount of fees (at least in the eyes of the defendant) could cause a stumbling block in the negotiations over the substantive claims.  Creating such an obstacle to the settlement talks at that point would mean plaintiff gets nothing, so the conflict could be real at that point.  Because many actions are driven by the fee claim -- the recovery of fees being the primary motivation for bringing suit in the first place -- the conflict of interest should always be considered.  The avoidance of that conflict is no doubt heavily dependent upon the case and the particular circumstances in each negoatiation.   

An intersting article, and worth your time to read; especially if you find yourself confronting this conflict question.