Opinion
Hearing Granted Aug. 26, 1982.
Opinion on pages 1-11 omitted.
HEARING GRANTED [*]
See also 29 Cal.3d 531, 174 Cal.Rptr. 841, 629 P.2d 935.
[183 Cal.Rptr. 703]George Deukmejian, Atty. Gen., Thomas E. Warriner, Asst. Atty. Gen., Charlton G. Holland, Deputy Atty. Gen., San Francisco, for defendants and appellants.
Richard M. Kaplan, Ephraim Margolin, San Francisco, for plaintiff and respondent.
ROUSE, Acting Presiding Justice.
Defendants (hereafter collectively referred to as "the State") appeal from an order awarding plaintiff's attorneys Richard Kaplan and Ephraim Margolin fees in the amount of $51,600 for legal services rendered by them on a prior appeal in this case.
Defendants include the State Department of Health Services, its director, the Governor, the Controller, and the State Personnel Board and its members.
Since this is the fourth appeal taken by the State in the same action, a brief summary of the procedural history of the case appears appropriate. This action was originally commenced in 1972 by plaintiff Shelley Mandel, a state employee who claimed that the State was engaging in the unconstitutional establishment of religion by its practice of closing its offices and paying its employees for time off on Good Friday. The initial judgment in this action was entered on April 6, 1973. Among other things, the judgment (1) enjoined the Governor from continuing the practice of ordering the closure of state offices on the religious holiday of Good Friday, between noon and 3 p. m., upon the ground that the practice violated constitutional proscriptions involving the treatment of religion by government (U.S.Const., 1st Amend., cl. 1, id. 14th Amend.; Cal.Const., art. I, § 4); (2) on the same ground, enjoined the Controller from paying state employees for time taken off from work during the three-hour period mentioned; and (3) awarded plaintiff $25,000 as compensation for the services rendered by her attorneys prior to the entry of the judgment. (Mandel v. Hodges (1976) 54 Cal.App.3d 596, 610-624, 127 Cal.Rptr. 244 (Mandel I ).)
In addition to finding the practice unconstitutional, and enjoining it, the trial court [183 Cal.Rptr. 704] found that plaintiff's attorneys had rendered a "substantial benefit" to the citizens and taxpayers of California by saving funds which had previously been expended in paying state employees for work not performed (Mandel I, supra, at pp. 619-623, 127 Cal.Rptr. 244) and that they had thereby acted as private attorneys general.
The State challenged both the injunctive provisions and the award of attorneys' fees on its first appeal. (Mandel I, at pp. 601-602, 127 Cal.Rptr. 244.) The appellate court affirmed both the injunctive provisions and the fee award. The appellate court also authorized the trial court, upon remand, to award fees to plaintiff's attorneys for the services thus far rendered on appeal. (P. 624, 127 Cal.Rptr. 244.)
The trial court made such an award in 1976, ordering fees of $75,000, and the State once again appealed. (Mandel v. Lackner (1979) 92 Cal.App.3d 747, 155 Cal.Rptr. 269 (Mandel II ).) In Serrano v. Priest (1977) 20 Cal.3d 25, 141 Cal.Rptr. 315, 569 P.2d 1303 (Serrano III ), the California Supreme Court articulated a formula for determining the amount of fees which are to be awarded on the "private attorney general" concept. However, that case was not decided until after the trial court had made its $75,000 award in Mandel II.
In Mandel II, the appellate court affirmed the trial court's judgment to the extent that it awarded attorneys' fees, but reversed as to the amount awarded and remanded the case to the trial court with directions to recalculate the award in accordance with the new procedures prescribed by Serrano III. In Mandel II, among other things, the appellate court interpreted Serrano III as requiring the establishment of a base figure, a "touchstone," which is comprised of time spent and value per unit for each attorney. After determining the base, the trial court was further directed to augment or diminish this base by applying the factors approved in Serrano III or any other factors which the court, in its discretion, deemed applicable. (Mandel II, supra, at p. 761, 155 Cal.Rptr. 269.)
After this remand, plaintiff's attorneys filed a motion in the trial court for the purpose of obtaining guidance as to the proper procedure to be followed in determining the award of attorneys' fees. Guidelines were established by the trial court, and the procedure which then ensued was that each party submitted declarations and memoranda and the matter was then orally argued.
In its "Memorandum of Decision," the trial court first identified the touchstone base as required by Mandel II. The court found that Mr. Kaplan had expended 104 hours at the hourly rate of $75 per hour related to the Mandel I appeal, for a total of $7,800; as for Mr. Margolin, the court calculated that he had logged 51 hours at the hourly rate of $100 per hour, for a total of $5,100. The total of the two was a touchstone base of $12,900. Having determined the touchstone, the court held that this figure should be enhanced by a factor of four, or a 400 percent increase, to yield a fee award of $51,600.
The trial court based its enhancement figure on the following factors:
1) the novelty and difficulty of the legal issues in this case (constitutional and attorney's fee issues);
2) the contingent nature of the case because there was a great risk of an adverse judgment since "the constitutional and attorney's fee issues had never before been raised";
3) the skill and experience of the attorneys, who were characterized as "pioneering" and of the "highest caliber";
4) the amount of savings to the state;
5) vindication of a fundamental right of the people of California to be free from state-imposed religion.
The present appeal by the State arises from the above analysis made by the trial court. The State argues that the trial judge abused his discretion by enhancing a touchstone base by 400 percent for services rendered in an appeal which involved no novel issues of law, no unique skill exercised by counsel, slight contingency and ambiguous [183 Cal.Rptr. 705] savings to the public. The State does not challenge the trial court's touchstone figure.
The burden which the State must bear in seeking to overturn a trial court's determination of reasonable attorney's fees is substantial. " ' "What is a reasonable fee for such services is first committed to the sound discretion of the trial judge...." ' [Citations.] ... '... The only basis for reversal would be that the amount was so large (or so small) as to "shock the conscience" and suggest that passion and prejudice influenced the determination....' " (Shannon v. Northern Counties Title Ins. Co. (1969) 270 Cal.App.2d 686, 688, 76 Cal.Rptr. 7.) Hence, our task is to determine whether the amount awarded by the trial court can be deemed an abuse of that court's discretion.
Any fee-setting formula for a "private attorney general" case must provide an award sufficient to fulfill the primary purpose of awarding fees, namely, to encourage attorneys from the private bar to take these difficult, politically sensitive cases. In order to achieve this goal, the courts have enhanced the touchstone or lodestar bases by making "bonus" or "incentive" awards, when appropriate, to compensate for the risk of loss undertaken, reasoning that the pursuit of unpopular issues will be encouraged only if attorneys who do so are properly compensated for their risks in undertaking such cases. In addition, fee-setting formulas are designed to compensate for the possibility at the outset that the litigation will be unsuccessful and that no fee will be obtained. Finally, a court setting a fee on a private attorney general theory must satisfy itself of the overall fairness and reasonableness of the total fee awarded under all the circumstances.
In Serrano III, the California Supreme Court recognized the purpose behind awarding private attorney general fees when the court set forth the formula for computing such an award of fees. A fundamental part of the formula is the calculation of a touchstone figure representing the reasonable hourly compensation and number of hours of each attorney involved in the presentation of the case. In this context, the Supreme Court quoted City of Detroit v. Grinnell Corp. (2d Cir. 1974) 495 F.2d 448, 470: " 'The starting point of every fee award ... must be a calculation of the attorney's services in terms of the time he has expended on the case. Anchoring the analysis to this concept is the only way of approaching the problem that can claim objectivity, a claim which is obviously vital to the prestige of the bar and the courts.' " (Serrano III, supra, 20 Cal.3d at p. 48, fn. 23, 141 Cal.Rptr. 315, 569 P.2d 1303.)
After calculating the touchstone figure, the court then took into consideration various relevant factors, of which some militated in favor of augmentation and some in favor of diminution. Among these factors were: "(1) the novelty and difficulty of the questions involved, and the skill displayed in presenting them; (2) the extent to which the nature of the litigation precluded other employment by the attorneys; (3) the contingent nature of the fee award, both from the point of view of eventual victory on the merits and the point of view of establishing eligibility for an award; (4) the fact that an award against the state would ultimately fall upon the taxpayers; (5) the fact that the attorneys in question received public and charitable funding for the purpose of bringing law suits of the character here involved; (6) the fact that the monies awarded would inure not to the individual benefit of the attorneys involved but the organizations by which they are employed; and (7) the fact that in the court's view the two law firms involved had approximately an equal share in the success of the litigation." (Serrano III, supra, at p. 49, 141 Cal.Rptr. 315, 569 P.2d 1303.)
In Mandel II, the appellate court held that the formula delineated in Serrano III should be applied by the trial court, on remand, to determine the reasonable attorneys' fees that should be awarded to counsel for their services rendered on the appeal in Mandel I. Specifically, the appellate court stated that "some of the seven factors approved in Serrano III may be applied in [183 Cal.Rptr. 706] the court's discretion but do not limit it." (Mandel II, supra, at p. 761, 155 Cal.Rptr. 269.)
In order to properly evaluate the award of attorneys' fees here in issue, it appears appropriate at the outset to compare this case to Serrano III. That case involved a successful and novel challenge to California's public school financing system. There was a lengthy trial and complex legal issues. The court there found a touchstone figure of $571,172.50 and enhanced that figure, applying the various factors listed, by some 43 percent to reach a total of $800,000.
"Other California cases awarding attorney's fees on the substantial benefit theory have not had the statewide impact that was present in [Serrano III ], and it is not likely there will be any such case in the foreseeable future. The benefits in each of the cases have nevertheless been real and substantial to the entity involved ...." (Common Cause v. Stirling (1981) 119 Cal.App.3d 658, 666-667, 174 Cal.Rptr. 200, dissenting opinion of Cologne, Acting P. J.)
In Coalition for L.A. County Planning etc. Interest v. Board of Supervisors (1977) 76 Cal.App.3d 241, 142 Cal.Rptr. 766, a collection of public interest firms and individuals prevailed in an action against the County of Los Angeles for not complying with the general plan and related statutory requirements. The trial court there applied the substantial benefit theory and, based upon a touchstone of $83,160, enhanced the touchstone by approximately a factor of two or $170,000 (p. 251, 142 Cal.Rptr. 766).
The award in both of these cases was for legal services rendered in complex trial litigation. In contrast, the award here is for services rendered on appeal, where there was no pretrial or trial preparation, no discovery and no motions, but only briefing and one oral argument. Since plaintiff had prevailed in the trial court, counsel's services on appeal consisted of arguing in support of the trial court's judgment and answering the State's arguments. For these services, the trial court awarded counsel an enhancement of 400 percent.
It seems apparent that the enhancement figure used by the trial court here does not conform to the objectives established in Serrano III.
In effect, the trial court in this case distorted out of any recognizable dimension the objective touchstone figure that it had previously calculated. There appears to be no logical or reasonable connection between the objective figure established by that touchstone award and the fee arrived at after multiplying it by 400 percent. It is a figure pulled out of the air, bearing no rational basis to the fee mechanism established by Serrano and reiterated by this court in Mandel II. It introduces gross subjectivity into a system designed expressly for the purpose of maintaining objectivity.
Based upon what was awarded and upheld in Serrano III and Coalition for L.A. County Planning etc. Interest v. Board of Supervisors, supra, 76 Cal.App.3d 241, 142 Cal.Rptr. 766, the enhancement figure reached by the trial court is grossly disproportionate and must be considered on its face a palpable abuse of discretion.
We are left with the problem of deciding whether we should remand this case to the trial court or decide it ourselves. Normally, we would remand this case to the trial court to make a more objective finding as to the enhancement figure. However, in this instance we do not believe that such a procedure would be productive.
Ten years have now elapsed since Shelley Mandel alleged the unconstitutional practice by the State that resulted in this lawsuit. This very opinion, regrettably, must be identified as Mandel IV. Nonetheless, the end of this protracted litigation finally is in sight, and we do not wish unnecessarily to prolong it when the only remaining issue before us is that of the attorneys' fees. Under these circumstances, it would appear inappropriate to again remand this case to the trial court.
Since the legal services here in issue were rendered on appeal rather than in the trial court, it seems entirely appropriate that the fee for such services be fixed by an appellate court. In Boller v. Signal Oil & Gas [183 Cal.Rptr. 707] Co. (1964) 230 Cal.App.2d 648, 41 Cal.Rptr. 206, the trial court awarded attorney's fees to counsel in an amount which the court on appeal found to be inadequate. Rather than remand the action for a new trial, the Court of Appeal modified the conclusions and findings of the trial court. (Pp. 656-657, 41 Cal.Rptr. 206.) The Court of Appeal was confronted with the argument that the trial court's discretion in fixing fees cannot be overturned unless there is a "plain and palpable abuse of its discretion ...." (P. 653, 41 Cal.Rptr. 206.) However, the appellate court in Boller concluded that it possessed "the same basic expertise with regard to counsel fees as does a trial court" (p. 656, 41 Cal.Rptr. 206) and that the mistakes made by the trial court in assessing the evidence and in following the law were indeed palpable. (P. 653, 41 Cal.Rptr. 206.)
After careful analysis of the Mandel cases, and in particular Mandel I, we must agree with the trial court that the work performed by plaintiff's attorneys was pioneering because they presented novel and complex issues of law that ultimately led to the first reported California case interpreting the nondiscrimination or preference clause of the state Constitution and the first reported California case to award "private attorney general" fees against the state, resulting in substantial savings to the people of California. (See Mandel I, 54 Cal.App.3d p. 622, fn. 16, 127 Cal.Rptr. 244.) In addition, we believe that the conduct of plaintiff's attorneys in agreeing to take such a public interest case was extremely risky because of the strong possibility of never receiving payment for fees that are judicially awarded. However, since plaintiff had already prevailed in the trial court, the contingency factor of the appeal becomes greatly diminished, as does the significance of most of the factors used by the trial court to determine the enhancement figure.
We conclude that plaintiff's attorneys should receive a total award of $25,800 for their services rendered on the appeal in Mandel I, a 100 percent increase over the touchstone figure. This is approximately the same amount that the attorneys were awarded for their trial court services.
The record reflects that plaintiff's attorneys expended "some 300 hours" of time for the original trial.
We must deny counsel's request that fees be awarded to them for this appeal. Their request is identical to the one previously made to this court and disposed of in Mandel II. There, having considered the public interest established in the litigation in Mandel I, this court concluded that the litigation relating to the fees was essentially a pursuit of private interest, and thus ruled that no fee award was appropriate. (Mandel II, supra, 92 Cal.App.3d at p. 760, 155 Cal.Rptr. 269.)
This issue is now pending before the California Supreme Court (Serrano v. Unruh, L.A. 31496, app. pending, argued May 5, 1982).
The order is modified so as to reduce the amount of attorney's fees awarded to plaintiff's attorneys to the total sum of $25,800. As so modified, the order is affirmed.
We hasten to point out that, by our determination in this matter, we do not intend, in any manner, to disparage the tireless efforts of two very able and dedicated counsel in this seemingly endless litigation. Certainly, as the Attorney General conceded at oral argument, the sum of $51,600 would not bankrupt the State of California. However, when the trial court's enhanced touchstone figure is examined in light of the two basic components of the Serrano III formula (i.e., reasonable hourly compensation times the number of hours involved), it computes out to a rate of $400 per hour for Mr. Margolin and $300 for Mr. Kaplan. Even in these times of an inflated economy, it is difficult to justify an award based on such hourly rates, especially when we consider, as we must, the fact that the award will ultimately fall upon the taxpayers.
MILLER, J., concurs.
[183 Cal.Rptr. 708]NEWSOM, Associate Justice.
Assigned by the Chairperson of the Judicial Council.
I respectfully dissent.
While I agree with the conclusion of the majority that quadrupling the "touchstone" figure was arbitrary and entitled to no precedential effect, the result thereby achieved seems to me manifestly a reasonable one in light of all pertinent factors, particularly the complexity of the issues, the special skills displayed by the attorneys, and the public benefit conferred by the successful termination of the action.
I would confirm the amount of the award without reference to the trial court's denomination of a method which produced a factually justifiable result.
[*] On February 10, 1983, the cause was retransferred to the Court of Appeal, First Appellate District, Division Two, with directions. Subsequent opinion was not certified for publication.
Counsel for plaintiff has suggested that we defer determination of the issue until the Supreme Court decision is announced. Since we have no idea when that event might occur, we deem it advisable to respond, as we have, on the basis of existing case law.