SERRANO v. UNRUH (1981)

The case at bar addresses the propriety of an attorneys' fee award for services rendered on an appeal which established the attorneys' right to fees for earlier litigation in the same basic case. The instant proceeding evolves from a constitutional challenge to the financing system for California public schools, and a subsequent appeal seeking attorneys' fees for the “school financing” lawsuit. A procedural review of this progression of appeals focuses on the lower court's “fees for fees” order at issue here.

In Serrano v. Priest (1971) 5 Cal.3d 584, 96 Cal.Rptr. 601, 487 P.2d 1241 (“Serrano I ”), the Supreme Court reversed the trial court's judgment of dismissal, entered after sustaining defendants' demurrers to plaintiffs' complaint. The Supreme Court remanded the cause to the trial court, with directions to overrule the demurrers and allow the constitutional challenge to proceed to trial.

In Serrano v. Priest (1976) 18 Cal.3d 728, 135 Cal.Rptr. 345, 557 P.2d 929 (“Serrano II ”), the Supreme Court affirmed a Los Angeles County Superior Court judgment, entered on September 3, 1974, which held that the California public school financing system violated state constitutional provisions guaranteeing equal protection of the laws. The high court also affirmed the order to bring the invalid financing system into constitutional compliance within six years from the date judgment was entered.

Public Advocates, Inc. (“Public Advocates”) and the Western Center on Law and Poverty (“Western Center”) represented plaintiffs in this landmark litigation involving state constitutional guarantees. Within a month after the trial court judgment was entered, and before defendants filed their appeals, plaintiffs' attorneys made separate motions for an award of reasonable attorneys' fees against defendants Priest (then the state Treasurer), Riles (then and presently the state Superintendent of Public Instruction), and Flournoy (then the state Controller) in their official capacities as officers of the State of California. The motions of the public interest law firms were not based upon statute, but were addressed to the equitable powers of the court.

On August 1, 1975, the trial court filed an order awarding $400,000 each to Public Advocates and Western Center as reasonable attorneys' fees for their representation of plaintiffs through April 14, 1975. Since this award was against only the state defendants, Unruh (presently the state Treasurer), Riles, and Cory (presently the state Controller) appealed from the order. Plaintiffs also appealed the amount of the fee award. On October 1, 1975, the appeal was transferred to the Supreme Court and consolidated with the then-pending appeal of the basic issue in Serrano II. The high court elected to decide the substantive constitutional (basic) issues first, deferring consideration of the fee award until the judgment in Serrano II was final, which occurred on February 1, 1977.

The appeal regarding fees engendered Serrano v. Priest (1977) 20 Cal.3d 25, 141 Cal.Rptr. 315, 569 P.2d 1303 (“Serrano III ”). There the Supreme Court affirmed the $800,000 award of attorneys' fees to Public Advocates and Western Center. The court concluded that the “inherent equitable powers” of the trial court allowed for the fee award under the “private attorney general” theory. (Id. at p. 47, 141 Cal.Rptr. 315, 569 P.2d 1303.) The Supreme Court decided that neither the “common fund” theory¹ nor the “substantial benefit” theory² applied to the equal protection issues litigated in Serrano II. In Serrano III, however, the court held that the private attorney general doctrine was an applicable equitable exception to the statutory restriction on attorneys' fees appearing in Code of Civil Procedure, section 1021.³ (20 Cal.3d at p. 43, 141 Cal.Rptr. 315, 569 P.2d 1303.)

Public Advocates and Western Center presented motions to the Supreme Court for further fees in connection with the Serrano II appeal and the Serrano III appeal. While the state defendants appealed the trial court order for attorneys' fees underlying the Serrano III decision, only the county defendants appealed the substantive judgment in Serrano II. In remanding the motions for appellate fees to the trial court, the Supreme Court declared in Serrano III : “In each instance, the award of attorneys' fees, if any, shall be made and assessed only against said defendants and appellants appealing in the respective appeal, or such of them as the trial court in the exercise of its equitable discretion shall determine.” (20 Cal.3d at p. 50, 141 Cal.Rptr. 315, 569 P.2d 1303.)

On August 13, 1979, the Los Angeles County Superior Court entered an order for supplemental attorneys' fees. Responding to the separate motions of Public Advocates and Western Center, the trial court denied fees for any time expended on the motions below by either public interest law firm. However, the trial court awarded Public Advocates and Western Center $74,254.70 in attorneys' fees for the Serrano II appeal against the county defendants who had contested the substantive judgment. The lower court further ordered the state defendants to pay $39,560⁴ in attorneys' fees to the public interest law firms for their defense of the August 1, 1975, trial court order for attorneys' fees on appeal in Serrano III.

Public Advocates and Western Center settled the amount of the appellate fee award in Serrano II with the county defendants. The appeals regarding that portion of the August 13, 1979, order were abandoned. The award of attorneys' fees for the Serrano II appeal and the parties' subsequent settlement on the amount thereof are not at issue here. Both the state defendants (“appellants” herein) and the public interest law firms (“respondents” herein) appealed the remaining parts of the trial court order, raising two issues requiring resolution by this court.⁵ Appellants contest the validity of the $39,560 award of attorneys' fees for the Serrano III appeal. Public Advocates and Western Center challenge the trial court's denial of additional amounts for the time expended on their fee motions.

In Serrano III, supra, 20 Cal.3d 25, 49, 141 Cal.Rptr. 315, 569 P.2d 1303, the Supreme Court declared: “The ‘experienced trial judge is the best judge of the value of professional services rendered in his court, and while his judgment is of course subject to review, it will not be disturbed unless the appellate court is convinced that it is clearly wrong.’ (Harrison v. Bloomfield Building Industries, Inc. (6th Cir. 1970) 435 F.2d 1192, 1196; (citation).)” The trial court properly exercised its discretion in denying Public Advocates and Western Center additional amounts for their fee motions below. While that portion of the order is affirmed, the controlling statute and judicial authorities indicate that the award of $39,560 in attorneys' fees for the Serrano III appeal was “clearly wrong.”

The critical distinction must be clearly recognized on this appeal (Serrano IV ?) between the litigation in Serrano II and Serrano III. The legal confrontation in Serrano II established that the California public school financing system violated equal protection guarantees in the state Constitution. The constitutional struggle in Serrano II determined important rights affecting the public interest. The attorneys' fee award affirmed by the Supreme Court in Serrano III, and the subsequent settlement with the county defendants for appellate fees in Serrano II, reimbursed respondents for their financial burden in vindicating a strong constitutional principle in school financing.

Unlike their representation of the public interest in Serrano II, however, respondents pursued their own interests in Serrano III. An analysis of “the true scope and significance” of respondents' quest for attorneys' fees in Serrano III “compels the conclusion that there was no reasonable basis for a private attorney general award in this action.” (Marini v. Municipal Court (1979) 99 Cal.App.3d 829, 837, 160 Cal.Rptr. 465.)

The trial court abused its discretion in awarding attorneys' fees for the Serrano III appeal. The $39,560 award against appellants portends an injury which is “ sufficiently grave to amount to a manifest miscarriage of justice,' ” and reversal is appropriate “where no reasonable basis for the action is shown.” (6 Witkin, Cal. Procedure (2d ed. 1971) Appeal, ss 242-244, pp. 4234-4235.) Since there is neither a statutory nor a judicial basis for awarding attorneys' fees in the Serrano III appeal, that portion of the trial court order is reversed. The reversal removes the need to discuss the related arguments made by the parties on this appeal.

Code of Civil Procedure section 1021.5⁶ is dispositive to the appellate fee award for Serrano III.⁷ The statute sets forth the requirements for a “private attorney general” attorney fee award, and codifies the trial court's traditional equitable discretion. (Woodland Hills Residents Assn., Inc. v. City Council (1979) 23 Cal.3d 917, 938, 154 Cal.Rptr. 503, 593 P.2d 200; Save El Toro Assn. v. Days (1979) 98 Cal.App.3d 544, 554, 159 Cal.Rptr. 577.) The legislative prerequisites clearly demonstrate the trial court's abuse of discretion in making the award involved herein. Litigating the amount of a fee award on appeal in Serrano III cannot be construed as “the enforcement of an important right” which conferred “a significant benefit” on “the general public or a large class of persons.” (Code Civ.Proc., s 1021.5.)

It is apparent that the Legislature intended “some selectivity, on a qualitative basis,” in awarding attorneys' fees under section 1021.5. (Woodland Hills Residents Assn., supra, 23 Cal.3d 917, 935, 154 Cal.Rptr. 503, 593 P.2d 200.) The Supreme Court has instructed that “the trial court, utilizing its traditional equitable discretion (now codified in section 1021.5), must realistically assess the litigation and determine, from a practical perspective, whether or nor the action served to vindicate an important right so as to justify an attorney fee award under a private attorney general theory.” (Id. at p. 938, 154 Cal.Rptr. 503, 593 P.2d 200.)

Respondents' efforts in obtaining a sizable fee award (Serrano III ) do not rise to the level of vindicating “an important right affecting the public interest.” In Save El Toro Assn. v. Days, supra, 98 Cal.App.3d 544, 555, 159 Cal.Rptr. 577, the court declared: “Whether the litigation was actually necessary in order to vindicate the rights of the public has a strong bearing on the question whether, in the words of section 1021.5, a ‘significant benefit’ has resulted.” The only right secured on appeal in Serrano III was respondents' entitlement to a fee award, and the only benefit conferred by that litigation was personal to Public Advocates and Western Center. A realistic assessment of the “importance” of an attorneys' fee award, together with the limited class of beneficiaries, clearly indicates that the supplemental appellate fees ordered for Serrano III do not comport with the “fundamental legislative goals” underlying section 1021.5. (Woodland Hills Residents Assn., supra, at pp. 936, 939-940, 154 Cal.Rptr. 503, 593 P.2d 200.)

The absence of the “private attorney general” doctrine in Serrano III is explained by the Court of Appeal's analysis in Mandel v. Lackner (1979) 92 Cal.App.3d 747, 155 Cal.Rptr. 269. Although the Mandel decision addressed the “substantial benefit” theory, the court's reasoning has a determinative effect on the attorneys' fee award for Serrano III.

The Mandel court decided that respondent's attorneys were not entitled to fees for their services on an appeal which only related to their right to fees as the result of a prior appeal. (Id. at p. 760, 155 Cal.Rptr. 269.) In evaluating the appeal for attorneys' fees, the court declared: “The stake on this one is not the constitutional principle now perpetually established in the public interest, but the amount of the attorneys' fees earned in the process of establishing it. Respondent's attorneys are therefore representing essentially their own interests at this time, as distinguished from those of the public to whom the benefits of the antecedent litigation stand secured.” (Ibid.; cited with approval in Marini v. Municipal Court, supra, 99 Cal.App.3d 829, 838, 160 Cal.Rptr. 465 (a “private attorney general” decision).)

If for no other reason, the trial court's attorney-fee order regarding Serrano III must be reversed “for want of the pivotal element of predominant public interest.” (Marini, supra, at p. 838, 160 Cal.Rptr. 465.) From a “practical perspective,” it is difficult for this court to perceive any significant benefit derived by the public from the $39,560 award. (See, e.g., Bruno v. Bell (1979) 91 Cal.App.3d 776, 787, 154 Cal.Rptr. 435.)

Respondents argue that defense of the fee award in Serrano III caused them to forego the representation of other “public interest” claims. Public Advocates and Western Center urge this “fees for fees” scenario to purportedly permit the litigation of public interest cases on their merits. Respondents also contend that ordering attorneys' fees for securing fees will terminate protracted litigation over awards with recalcitrant defendants possessing greater legal resources. Superficially attractive, these arguments fail to satisfy statutory requirements for a “private attorney general” award.

The use of $39,560 to help finance additional public interest litigation is not at issue before this court. While we recognize respondents' strong legal efforts, we do not here adjudicate the value thereof. (Marini v. Municipal Court, supra, 99 Cal.App.3d 829, 837-838, 160 Cal.Rptr. 465.) The public benefits allegedly forfeited through respondents' involvement in the Serrano III appeal are obviously too speculative to satisfy “the standard of significance” dictated by section 1021.5 and the relevant judicial authorities. (Id. at p. 837, 160 Cal.Rptr. 465.) Any public value derived from the Serrano III appeal is “wholly coincidental to the attainment of (respondents') personal goals.” (Ibid.)

Respondents seek to highlight their limited ability to bear the expense of extended litigation, and the relative legal resources of the state appellants. “Disparity of economic resources has played a role in some counsel fee decisions, but only where the basic requisites of the award were otherwise satisfied. (Citation.)” (County of Inyo v. City of Los Angeles (1978) 78 Cal.App.3d 82, 90, 144 Cal.Rptr. 71.) The economic arguments cannot substitute for failure to qualify for a “private attorney general” award in the Serrano III appeal.

Public Advocates and Western Center contend that the attorneys' fee award for the constitutional litigation in Serrano II should not be diminished by a denial of appellate fees in the Serrano III effort to secure that award. Respondents argue that to exclude fees for Serrano III would substantially reduce their “effective recovery of fees for all Serrano appellate work,” and violate “the spirit of the private attorney general doctrine.” The “diminution” argument fails to recognize the critical distinction between the Serrano II and the Serrano III litigation, and contravenes an express statutory requirement for a “private attorney general” award. Respondents' limited financial resources do not satisfy the statutory directives, because Public Advocates and Western Center did not incur a “disproportionate” financial burden in securing their personal interests. (Friends of “B” Street v. City of Hayward (1980) 106 Cal.App.3d 988, 994, 165 Cal.Rptr. 514; Marini v. Municipal Court, supra, 99 Cal.App.3d 829, 836, 160 Cal.Rptr. 465.)

The trial court award of attorneys' fees for the Serrano III appeal contravenes the section 1021.5 requirement relating to “the necessity and financial burden of private enforcement.” “An award on the ‘private attorney general’ theory is appropriate when the cost of the claimant's legal victory transcends his personal interest, that is, when the necessity for pursuing the lawsuit placed a burden on the plaintiff ‘out of proportion to his individual stake in the matter.’ (Citation.)” (County of Inyo v. City of Los Angeles, supra, 78 Cal.App.3d 82, 89, 144 Cal.Rptr. 71; Woodland Hills Residents Assn., Inc. v. City Council, supra, 23 Cal.3d 917, 941, 154 Cal.Rptr. 503, 593 P.2d 200.) The award at issue here does not meet this basic condition.

The sizable attorneys' fee award affirmed in Serrano III and the settlement with the county defendants reimbursed respondents for their “private enforcement” effort in Serrano II. But the only benefits conferred in Serrano III were personal to Public Advocates and Western Center, and respondents' individual interests in attorneys' fees transcended the cost of their legal victory.

In summation, the Supreme Court in Serrano III listed three basic factors to be considered in awarding fees on the “private attorney general” theory. (20 Cal.3d 25, 45, 141 Cal.Rptr. 315, 569 P.2d 1303.) If a trial court “determines that the litigation has resulted in the vindication of a strong or societally important public policy, that the necessary costs of securing this result transcend the individual plaintiff's pecuniary interest to an extent requiring subsidization, and that a substantial number of persons stand to benefit from the decision, the court may exercise its equitable powers to award attorney fees on this theory.” (Ibid.)

The three-pronged test was applied by the Supreme Court in Serrano III to affirm the “private attorney general” fee award for the constitutional litigation climaxed in Serrano II. (Id. at pp. 46-47, 141 Cal.Rptr. 315, 569 P.2d 1303.) However, all three factors in the equitable doctrine weigh against the propriety of attorneys' fees for the Serrano III appeal. First, the relevant public policy grounded in the state Constitution was vindicated in Serrano II. This court cannot accept the “fees for fees” award at issue here as “the vindication of a strong or societally important public policy.” Second, respondents' pursuit of substantial attorneys' fees should not be subsidized through an additional “private attorney general” award. (See, e.g., Bruno v. Bell, supra, 91 Cal.App.3d 776, 786, 154 Cal.Rptr. 435.) Finally, the Serrano III fee litigation will have no widespread public benefit, as only respondents stood to receive an attorneys' fee award. The circumstances of the case at bar also fall short of meeting the Supreme Court indices for a “private attorney general” award.

That portion of the trial court's order denying additional amounts for the fee motions below is affirmed; the award of attorneys' fees for the Serrano III appeal is reversed. Each party shall bear its own costs on the present appeal.

FOOTNOTES

1.  20 Cal.3d at pp. 37-38, 141 Cal.Rptr. 315, 569 P.2d 1303.

2.  Id. at p. 41, 141 Cal.Rptr. 315, 569 P.2d 1303.

3.  Code of Civil Procedure section 1021 provides: “Except as attorney's fees are specifically provided for by statute, the measure and mode of compensation of attorneys and counselors at law is left to the agreement, express or implied, of the parties; but parties to actions or proceedings are entitled to costs and disbursements, as hereinafter provided.”

4.  As to the attorneys' fees for their appellate work in Serrano III, the trial court awarded $31,280 to Public Advocates and $8,280 to Western Center.

5.  John Serrano, Jr., is the named plaintiff in the underlying action. But the thrust of the instant appeal concerns the right of Public Advocates and Western Center to secure the fee award for the appeal in Serrano III. Plaintiffs' counsel are also cross-appellants with regard to the denial of fees for their motions below. Since we resolve the issue of denial at the outset of our opinion, and plaintiffs' counsel are the actual litigants in this appeal, Public Advocates and Western Center will be denominated as “respondents” herein.Although the state defendants are also cross-respondents with regard to the trial court's denial of an award for the fee motions, Unruh, Riles, and Cory will be identified as “appellants” herein.

6.  Code of Civil Procedure section 1021.5 provides: “Upon motion, a court may award attorneys' fees to a successful party against one or more opposing parties in any action which has resulted in the enforcement of an important right affecting the public interest if: (a) a significant benefit, whether pecuniary or nonpecuniary, has been conferred on the general public or a large class of persons, (b) the necessity and financial burden of private enforcement are such as to make the award appropriate, and (c) such fees should not in the interest of justice be paid out of the recovery, if any. With respect to actions involving public entities, this section applies to allowances against, but not in favor of, public entities, and no claim shall be required to be filed therefor.”

7.  The trial court ordered the state defendants to pay attorneys' fees for the Serrano III appeal on August 13, 1979. Section 1021.5 was signed into law by the Governor on September 30, 1977. Pursuant to article IV, section 8 of the California Constitution, section 1021.5 became effective January 1, 1978.

STEPHENS, Acting Presiding Justice.

ASHBY and HASTINGS, JJ., concur.