Espejo v. The Copley Press, No. D065397 (D4d1 Jul. 7, 2017)
This is a post-trial appeal after a bench trial in an employment class action brought by newspaper delivery persons. The big substantive issue is whether the class were employees of the Newspaper or independent contractors. Having found they were employees, the court awarded about $3 million in restitution under the UCL, plus $1.7 million in prejudgment interest and $6 million in attorneys’ fees ($1.25 of which was to be paid out of the award, the remainder by defendants). There are a lot of issues, a good number of them with some procedural bearing.
First up is class cert. The Newspaper says that Plaintiffs aren’t adequate. But there isn’t much to the argument other than a complaint that the class reps didn’t know a whole lot about the management of the case and that some of them didn’t testify at trial. Other than issues about conflicts—not present here—there are no hard and fast rules about what makes a rep adequate so far as knowledge and participation go. Because the trial court had substantial evidence to find that the reps, were in fact, adequate, it didn’t abuse its discretion in certifying and then declining to decertify the case.
The Newspaper also argues that the trial proceeded on certain claims for reimbursement that had not been certified for class treatment. But the court disagrees with that interpretation of the order.
Issue three is that certain kinds of reimbursable expenses not pleaded in the complaint were proven at trial. The Newspaper knew in well advance that these expenses would be raised at trial and had a chance to contest them. And because the additional categories of expenses were just differences in degree, not kind, amendment to conform to proof wouldn’t fundamentally change the theory of the case. Under the circumstances, the trial court didn’t abuse its discretion by permitting a conforming amendment.
Issue four deals with the right to jury trial. Plaintiffs had a raft of different claims, but moved to bifurcate and try their UCL claims first. And of course, UCL claims are equitable: no right to jury trial. Which had the result of the court, not a jury, as the trier of fact on the key employer vs. independent contractor issue. Unfortunately for the paper, the record reflects that its counsel acquiesced to the bifurcation and it attendant consequences, so it waived the right to appeal the issue. (It likely would matter anyway, given California’s preference for trying equity first, and its failure to adopt the federal rule in Beacon Theatres v. Westover, which holds that the Seventh Amendment right to jury trial precludes court determinations of factual issues in equity if those issues overlap with factual issues underlying legal claims.)
Next up are a bunch of substantive issues about the calculation of restitution under the UCL. The Newspaper wins a few of these, with the court finding that the restitution needed to be reduced for various individualized item that were already credited or paid to the Plaintiffs. Plaintiffs otherwise prevail, however, in that the award was based on substantial evidence.
Prejudgment interest: The general prejudgment interest statute—Civil Code § 3287—is addressed to interest on damages. Because the UCL permits only restitution, § 2387 doesn’t apply. And because § 3287 is inapplicable, § 3287(a)’s rule precluding the accrual of pre-filing interest on unliquidated claims doesn’t apply. Nonetheless, courts do have the discretion as a matter of equity to include prejudgment interest in a restitution award when doing so is necessary to compensate the plaintiffs for the lost time-value of money.The court didn’ t abuse its discretion by doing so here.
Finally, there are a bunch of disputes about attorneys’ fees. As noted, the court ordered that $1.25 million of fees should be paid out of the award fund (about 25 percent) but it also awarded the $4.75 million balance of the fees to be paid by the Newspaper under Code of Civil Procedure § 1021.5. The Newspapers’ principal issue is with the court’s making an award § 1021.5, which codifies the private attorney general doctrine. Section 1021.5 permits an award of fees against a defendant when three criteria are met: (1) A significant benefit to the public or a large class; (2) private enforcement is necessary and burdensome; (3) it is in the interest of justice that the fees shouldn’t be paid out of the recovery. The big issue here is (2).
A test for the necessary and burdensome element has developed in the case law. There’s two sub-elements: (a) private enforcement is necessary; and (b) the burden of private enforcement warrants subsidizing the prevailing party’s attorneys. In that test, sub-element (b), in turn, is based upon a test that compares the burden of achieving a legal victory to the anticipated financial outcome for the plaintiff. If the burden outweighs the anticipated benefit, fee shifting is proper. And then to measure the value of benefit, the court looks to the value of a potentially successful claim, discounted by the chance of success, measured at the time vital litigation decisions were made. The burden, however, is measured by the actual fees incurred at the end of the case.
That’s quite a test.
The trial court determined, and the court of appeal agrees, that the relevant time in which to measure the potential benefit was when the court granted class cert. Although cert was granted, the court significantly pared back the claims at that time. The anticipated class recovery at that time, discounted for the chance of failure, was significantly exceeded by the actual costs incurred, which were almost $6 million. So a shift in fees was appropriate.
The Newspaper argues that since the “key time” in the fee analysis was class cert, Plaintiff shouldn’t recover for work done before that. But the case cited isn’t on point, and there’s no other authority. Moreover, the pre-cert costs seem to fall within the $1.25 million portion of the award that the court ordered that the attorneys could take out of the fund.
The court does, however, order that the fee calculation should be redone on remand, based on the various rulings that will ultimately affect the total restitution awardable to the class. Moreover, Plaintiff will also recover fees for the appeal.
The Newspaper also complains about the trial court’s failure to apportion fees attributable to unsuccessful claims. That has its own two-part test. Step one asks of the claims are legally and factually related. If they are not, the fees for unsuccessful claims should be apportioned out. If they are, the court looks to the significance of the relief obtained compared to the hours expended by the attorneys. If the results are excellent, full lodestar is appropriate. But if there’s only a partial or limited success, some reduction can be appropriate to avoid overcompensation. The trial court didn’t do this analysis here, so is ordered to add it to its to-do list on remand.
The Newspaper also claims that the lodestar was done wrong. The court calculated both the time spent and an appropriate rate within the realm of reason. It gets a huge lump of discretion in doing so, and it didn’t abuse it here, although a recalculation of the hours expended might be merited on remand, given the other rulings in the appeal.
Finally, Plaintiff cross appealed on the trial court’s failure to award an enhancement on the lodestar. Fees under a lodestar can be enhanced due to exceptional skill or difficulty, the attorneys being precluded from taking other work, or contingent risks. But it’s also important not to double count. For instance, a difficult case might command the attention of an attorney with a high hourly rate who spends a lot of time on the issue. Those factors then would be subsumed into the lodestar and an enhancement multiple inappropriate. Here, after looking at the factors, the trial court declined to award an enhancement because the requisite skill and time were addressed in the attorneys’ rates and hours. Based on that, the trial court didn’t abuse its discretion.
Partially reversed and remanded on various issues.
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