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The California Employers’ Eroding Leverage in Employment Litigation

Posted on: July 6th, 2015

By: Lisa Gorman

On May 4, 2015, the California Supreme Court chipped away, yet again, at the small amount of leverage employers had when facing meritless employment lawsuits.  Prior to the California Supreme Court’s ruling in Winn Williams v. Chino Valley Independent Fire District, prevailing employers were guaranteed recovery of their court costs.  Code of Civil Procedure section 1032(b) guarantees prevailing parties in civil litigation awards of the costs expended in the litigation, stating, “Except as otherwise expressly provided by statute, a prevailing party is entitled as a matter of right to recover costs in any action or proceeding.”  In Winn Williams, the California Supreme Court held Government Code section 12965(b) – which allows trial courts discretion in awards of both attorneys’ fees and costs to prevailing parties in Fair Employment and Housing Act (“FEHA”) cases – is an express exception to section 1032(b) and, thus, governs costs awards in FEHA cases.  “By making a cost award discretionary rather than mandatory, Government Code section 12965(b) expressly excepts FEHA actions from Code of Civil Procedure section 1032(b)’s mandate for a cost award to the prevailing party.”

In 1978, the U.S. Supreme Court held prevailing Title VII plaintiffs should ordinarily be awarded their attorneys’ fees, but a Title VII plaintiff “should not be assessed his opponent’s attorney’s fees unless a court finds that his claim was frivolous, unreasonable, or groundless, or that the plaintiff continued to litigate after it clearly became so.”  (Christianburg Garment Co. v. EEOC (1978) 434 U.S. 412, 422.)  Christianburg involved attorneys’ fees, not court costs, and the U.S. Supreme Court has not decided whether the asymmetrical standard it advances applies to an award of costs to a prevailing Title VII defendant.  In Winn Williams, the California Supreme Court extended Christianburg’s asymmetrical standard to cost awards under the FEHA.  “To reiterate, under that standard a prevailing plaintiff should ordinarily receive his or her costs and attorneys fees unless special circumstances would render such an award unjust.  A prevailing defendant, however, should not be awarded fees and costs unless the court finds the action was objectively without foundation when brought, or the plaintiff continued to litigate after it clearly became so.”  In justifying this unjust holding, the Winn Williams Court explained, “in FEHA cases, even ordinary litigation costs can be substantial, and the possibility of their assessment could significantly chill the vindication of employees’ civil rights.” 

Prior to the Winn Williams case, employers already had little leverage in settling FEHA claims.  Given that prevailing plaintiffs recover their attorneys’ fees, small businesses can’t afford the risk of going to trial, even if there is little chance the plaintiff would prevail or the damages exposure is minimal.  However, when plaintiffs brought claims with no genuine issue of material fact, employers could at least move for summary judgment, confident a victory would entitle them to recovery of their court costs.  The risk of having to pay defendant’s court costs may have precluded some plaintiffs from pursuing meritless claims.  The Winn Williams holding has eroded that small amount of leverage, as the employer must now pay its costs and fees even when opposing claims are so devoid of merit they are summarily dismissed. 

In light of Winn Williams, employers are advised to consider making a statutory offer of compromise, pursuant to California Code of Civil Procedure section 998, at the outset of an employment case.  If a plaintiff alleging FEHA claims does not accept defendant’s statutory offer of compromise, and fails to obtain a more favorable judgment or award, he or she loses the right to recover attorneys’ fees and court costs incurred after the offer was made, and, in addition, must pay defendant’s post-offer costs.  Thus, in making a sufficiently high statutory offer of compromise, employers regain some of the leverage usurped by the California Supreme Court’s recent Winn Williams ruling.

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