Chuong Van Pham v. Seattle City Light

¶31 (dissenting) — The majority’s treatment of the lodestar fee and contingency multiplier is devastating for civil rights plaintiffs. The legislature’s goal when enacting the fee shifting statute was “to enable vigorous enforcement of modern civil rights litigation and to make it financially feasible for individuals to litigate civil rights violations.” Hume v. Am. Disposal Co., 124 Wn.2d 656, 675, 880 P.2d 988 (1994). However the majority’s holding *545soundly defeats this goal. When adequate compensation for attorney fees is not provided, victims of civil rights violations suffer. The majority’s decision will ultimately preclude plaintiffs from bringing the very type of discrimination case we see before us today because a lawyer who fears she cannot collect her fee will simply not take a risky case.

Sanders, J.

*545I. The Lodestar Figure

¶32 Washington’s Law Against Discrimination (WLAD), chapter 49.60 RCW, entitles prevailing plaintiffs to “reasonable attorneys’ fees.” RCW 49.60.030(2). To encourage private enforcement of WLAD, the reasonable attorney fee remedy must be construed liberally. Martinez v. City of Tacoma, 81 Wn. App. 228, 235, 914 P.2d 86 (1996). To calculate the fee award, the trial court must apply the approach developed by the Third Circuit Court of Appeals in Lindy Bros. Builders, Inc. v. American Radiator & Standard Sanitary Corp., 487 F.2d 161 (3d Cir. 1973). Under this approach the court first determines a “lodestar” fee by multiplying a reasonable hourly rate by the number of hours reasonably expended. Bowers v. Transamerica Title Ins. Co., 100 Wn.2d 581, 593-94, 675 P.2d 193 (1983) (quoting Miles v. Sampson, 675 F.2d 5, 8 (1st Cir. 1982)). However the court may “limit the lodestar to hours reasonably expended, and should therefore discount hours spent on unsuccessful claims, duplicated effort, or otherwise unproductive time.” Id. at 597. The important contours of this limitation are at issue here.

¶33 Supposedly applying this approach, the trial court refused to compensate Chuong Van Pham and Heliodoro Lara approximately $50,000 of their requested lodestar attorney fees.2 Specifically, the court disallowed (1) $10,000 *546for 40 hours spent on the injunctive relief claim;3 (2) $14,375 for 57.5 hours spent on a cross-motion for summary judgment in United States District Court, motion on the merits, motion to file a second amended complaint (never filed), and media contacts;4 (3) $4,139 for preparation of appeal;5 (4) $3,750 spent on researching the effects of plaintiffs’ death on the judgment and injunctive relief;6 (5) $8,750 for the unsuccessful multiplier claim; and (6) $1,075 for settlement discussions.7

¶34 “Where the decision or order of the trial court is a matter of discretion, it will not be disturbed on review except on a clear showing of abuse of discretion, that is, discretion manifestly unreasonable, or exercised on untenable grounds, or for untenable reasons.” State ex rel. Carroll v. Junker, 79 Wn.2d 12, 26, 482 P.2d 775 (1971). Here the trial court’s reduction of hours spent on injunctive relief, settlement issues, and the multiplier claim was based on the theory these efforts were ultimately unsuccessful, not because the attorney hours were spent on “unsuccessful claims, duplicated effort, or otherwise unproductive time.” Bowers, 100 Wn.2d at 597. As such, these reductions are based on “untenable reasons” and constitute an abuse of discretion.

¶35 The trial court’s reduction of the hours spent by plaintiffs’ counsel on a cross-motion for summary judgment *547in United States District Court, a motion on the merits, and a motion to file a second amended complaint rests on similarly flawed reasoning. The trial court concluded these efforts “[were] not reasonably related to, nor did [they] cumulatively result in plaintiffs’ favorable resolution.” Clerk’s Papers (CP) at 651. This is incorrect. Pham and Lara’s cross-motion for summary judgment sought judgment as a matter of law on their race and national origin discrimination claim, the very claim on which they ultimately prevailed at trial. The simple fact that a particular motion did not cumulatively result in favorable resolution does not justify the disallowance of associated fees. Chuong Van Pham v. Seattle City Light, 124 Wn. App. 716, 726, 103 P.3d 827 (2004) (citing Martinez, 81 Wn. App. at 243).

¶36 The motion on the merits and the motion to file a second amended complaint also concerned the race and national origin claim, and thus must be included in the lodestar figure because, as correctly observed by the Court of Appeals, these efforts were “related to the discrimination claims on which [Pham and Lara] ultimately achieved substantial relief.” Id. The Court of Appeals found the trial court “improperly focused on the short term failure of certain components of the litigation, when the focus should have been on the long term success of the litigation as a whole.” Id. The Court of Appeals correctly reasoned: “[w]here the plaintiffs’ claims involve a common core of facts and related legal theories, a plaintiff who has won ‘substantial relief’ should not have the fee reduced simply because the trial court did not adopt each contention raised.” Id. at 726 (citing Martinez, 81 Wn. App. at 243).

f 37 Picking through the record to determine the success of each individual motion misses the point of a “lodestar” fee, which is to award reasonable attorney fees to plaintiffs who prevail in litigation as a whole. Courts have rejected the theory that plaintiffs should be denied compensation for time spent pursuing certain issues that “ultimately did not become litigated ... or upon which plaintiffs ultimately did not prevail.” Davis v. County of Los Angeles, 8 Empl. Prac. *548Dec. (CCH) ¶ 9444, at 5049 (C.D. Cal. 1974), quoted in Hensley v. Eckerhart, 461 U.S. 424, 431, 103 S. Ct. 1933, 76 L. Ed. 2d 40 (1983). Instead, under the “lodestar” method, “plaintiffs’ counsel are entitled to an award of fees for all time reasonably expended in pursuit of the ultimate result achieved in the same manner that an attorney traditionally compensated by a fee-paying client for all time reasonably expended on a matter.” Id. (emphasis added). See also Swann v. Charlotte-Mecklenburg Bd. of Educ., 66 F.R.D. 483, 484 (W.D.N.C. 1975) (prevailing plaintiffs awarded fees after court determined the obtained results “were excellent and constituted the total accomplishment of the aims of the suit” notwithstanding plaintiffs’ losses on “certain minor contentions”).

¶38 As Taylor v. Sterrett, 640 F.2d 663, 669 (5th Cir. 1981) explains, “[T]he proper focus is whether the plaintiff has been successful on the central issue as exhibited by the fact that he has acquired the primary relief sought.” And the United States Supreme Court in Hensley properly notes that in many cases “[m]uch of counsel’s time will be devoted generally to the litigation as a whole, making it difficult to divide the hours expended on a claim-by-claim basis.” Hensley, 461 U.S. at 435. In Hensley the Supreme Court agreed with the Missouri District Court’s finding that

“[Petitioners’] suggested method of calculating fees is based strictly on a mathematical approach comparing the total number of issues in the case with those actually prevailed upon. Under this method no consideration is given for the relative importance of various issues, the interrelation of the issues, the difficulty in identifying issues, or the extent to which a party may prevail on various issues.”

Id. at 428 (alteration in original) (quoting Record 220).8

*549f39 Justice William J. Brennan’s dissent in Hensley refers to the calculation of attorney fees under 42 U.S.C. § 1988 as a “task” Congress has “entrusted” to the courts, a task Justice Brennan views as “crucial to the vindication of individuals’ rights in a society where access to justice so often requires the services of a lawyer.” Hensley, 461 U.S. at 442 (Brennan, J., concurring in part, dissenting in part). In response to the Hensley Court’s emphasis on the necessity of “prevent [ing] ‘windfalls’ ” (id. at 444), Justice Brennan cautions: “lower courts must not forget the need to ensure that civil rights plaintiffs with bona fide claims are able to find lawyers to represent them.” Id. He continues: “the legislative history of § 1988 reveals Congress’ basic goal that attorneys . . . view civil rights cases as essentially equivalent to other types of work they could do, even though the monetary recoveries in civil rights cases . . . would seldom be equivalent to recoveries in most private-law litigation.” Id. at 447 (Brennan, J., concurring in part, dissenting in part). And “no fee is reasonable unless it would be adequate to induce other attorneys to represent similarly situated clients seeking relief comparable to that obtained in the case at hand.” Id. at 449.

¶40 Because I agree with the Court of Appeals’ contention that the trial court failed to focus on the long term success of the litigation as a whole when calculating the lodestar, I would hold the trial court’s reduction of plaintiffs’ fees constitutes an obvious abuse of discretion.

II. The Fee Multiplier

¶41 Pham and Lara sought a contingency multiplier of 2.0. Their request was based on plaintiffs’ counsel having accepted the case on a contingent fee basis,9 Pham and Lara’s difficulty in providing details of discrimination, and the necessity of adopting a high-risk litigation strategy of relying heavily on evidence gathered from adverse wit*550nesses and cross-examination. However these factors are the very ones which mandate a multiplier; they certainly do not foreclose it.

¶42 Fee enhancements are based on the notion that “attorney[s] who take[ ] such . . . [ ] case[s] on a contingent fee basis assume [ ] a substantial risk that a fee will never materialize.” Pham, 124 Wn. App. at 723. And marketplace experience “ ‘indicates that lawyers generally will not provide legal representation on a contingent basis unless they receive a premium for taking that risk.’ ” Bowers, 100 Wn.2d at 598 (quoting Samuel R. Berger, Court Awarded Attorneys’ Fees: What is “Reasonable”?, 126 U. Pa. L. Rev. 281, 325 (1977)).

¶43 The trial court determined Pham and Lara’s case was “high risk”10 but denied the multiplier request because “the difficulty of the case, and its associated risk, which was a consequence of the plaintiffs’ challenges in articulating their claims and the paucity of compelling relevant evidence of discrimination, are not grounds for a multiplier.” CP at 653-54 (Finding of Fact 34). This conclusion makes little sense. The plain language of Bowers directs a trial court to assess the risk associated with a claim in deciding whether a multiplier is appropriate. See Bowers, 100 Wn.2d at 598. The Bowers approach does not contemplate denying a multiplier on the basis of the source of that risk. Thus, the majority correctly holds “the trial court should not have used [Pham and Lara’s] inability to articulate their claims as justification for denying the multiplier.” Majority at 543.

¶44 But the majority should have gone further. Plaintiffs’ inability to articulate their claims and the difficulties of proof arising from this type of disparate treatment claim are the precise reasons the trial court should apply a multiplier. Thus the trial court said “no” to a multiplier for the very reason it should have said “yes,” and faulty analysis denying civil rights attorneys their fees is simply unacceptable. A contingency adjustment is not an unearned *551gain or a windfall for plaintiffs’ attorney. It is the inherent risk of this type of case that justifies the fee. And denying civil rights attorneys adequate fees will simply discourage lawyers from taking difficult cases, not to mention those especially difficult cases with “less-than-articulate” clients.

|45 As noted by Hensley, Congress has taken steps to ensure § 1988 did not become “a ‘relief fund for lawyers’ ” (Hensley, 461 U.S. at 446 (Brennan, J., concurring in part, dissenting in part) (quoting 122 Cong. Rec. 33314 (1976) (remarks of Sen. Kennedy))) by limiting fee awards to “prevailing” plaintiffs only and leaving district courts with the discretion to deny fees entirely when a fee award would be “unjust.” Id. With regard to contingency cases, the Court reasoned:

Attorneys who take cases on contingency, thus deferring payment of their fees until the case has ended and taking upon themselves the risk that they will receive no payment at all, generally receive far more in winning cases than they would if they charged an hourly rate. The difference, however, reflects the time-value of money and the risk of nonrecovery usually borne by clients in cases where lawyers are paid an hourly rate. Courts applying § 1988 must also take account of the time-value of money and the fact that attorneys can never be 100% certain they will win even the best case.

Hensley, 461 U.S. at 448-49 (Brennan, J., concurring in part, dissenting in part).

¶46 Risk of loss must be taken into consideration or this type of case will never be brought. Pham and Lara were fortunate — their claim prevailed. But for Pham and Lara’s attorney, this case might represent one win for every five losses, and, moreover, no reasonable lawyer can afford to give away $50,000 of his time for free. A contingency multiplier is not “double payment” or a “windfall” for plaintiffs’ lawyer; it is simply adequate compensation for prevailing in complex and risky litigation. The majority’s decision will preclude plaintiffs suffering discrimination from bringing these actions — the very result WLAD seeks to prevent. See id. at 456 (Brennan, J., concurring in part, *552dissenting in part) (“[T]he prospect of protracted appellate litigation regarding attorney’s fee awards to prevailing parties is likely to discourage litigation by victims of other civil rights violations .... The more obstacles that are placed in the path of parties who have won significant relief and then seek reasonable attorney’s fees, the less likely lawyers will be to undertake the risk of representing civil rights plaintiffs seeking equivalent relief in other cases. It may well become difficult for civil rights plaintiffs with less-than-certain prospects for success to obtain attorneys.”). I believe a fee multiplier is warranted and therefore would remand for calculation, not possible denial, of a multiplier pursuant to established precedent.

III. Income Tax Consequences of Noneconomic Discrimination Awards

f 47 Finally, I would hold WLAD’s “any other appropriate remedy” clause (RCW 49.60.030(2)) entitles prevailing plaintiffs to compensation for the increase in tax liability resulting from noneconomic damages. The majority upholds the trial court’s denial of a tax offset for Pham and Lara’s noneconomic damages despite the fact we have previously affirmed supplemental damage awards for tax consequences of the noneconomic portion of a judgment. In Blaney v. International Ass’n of Machinists & Aerospace Workers, 151 Wn.2d 203, 87 P.3d 757 (2004) (Blaney II), Blaney prevailed on her sex discrimination claim and obtained a judgment for $638,764, which included awards for front and back pay, pain and suffering, and, like here, emotional distress. Id. at 208. She was also awarded a supplemental judgment of $235,625.38 for prejudgment interest, attorney fees, and costs. Id.

¶48 To support her request for a supplemental judgment to offset the federal tax consequences, Blaney offered expert testimony that the total of both amounts would be considered gross income under federal tax law and would result in $244,753 in tax obligations she would not have incurred but for the lump sum judgments. Blaney v. Int’l Ass’n of *553Machinists & Aerospace Workers, 114 Wn. App. 80, 93 n.31, 55 P.3d 1208 (2002) (Blaney I). Blaney argued the supplemental judgment was necessary to make her whole under WLAD. Id. at 92.

¶49 WLAD provides:

Any person deeming himself or herself injured by any act in violation of this chapter shall have a civil action in a court of competent jurisdiction to enjoin further violations, or to recover the actual damages sustained by the person, or both, together with the cost of suit including reasonable attorneys’ fees or any other appropriate remedy authorized by this chapter or the United States Civil Rights Act of 1964 as amended, or the Federal Fair Housing Amendments Act of 1988 (42 U.S.C. § 3601 et seq.).

RCW 49.60.030(2) (emphasis added).

¶50 I agree with Blaney II and would hold the “any other appropriate remedy” clause entitles the prevailing plaintiff to a supplemental award for the additional federal income tax consequences of damage awards because WLAD incorporates the remedies available under the federal civil rights act. Blaney II, 151 Wn.2d at 216. We explained that Blaney “is not seeking a judgment to offset all the taxes she will incur from the $638,764 damage award. She is seeking a judgment only for the $244,753 in additional taxes she must pay above and beyond those she would have had to pay if the [defendant] had properly hired her.” Id. at 209 (citation omitted). As discussed above, both of these figures included awards for pain and suffering as well as emotional distress, and our holding did not limit itself to wage and benefit awards only. The Court of Appeals correctly concluded Blaney II’s reasoning “does not provide a basis to confine the award to the tax consequences on lost wages.” Pham, 124 Wn. App. at 729.

¶51 WLAD’s purpose is to “deter and to eradicate discrimination in Washington.” Marquis v. City of Spokane, 130 Wn.2d 97, 109, 922 P.2d 43 (1996). It “ ‘embodies a public policy of the “highest priority.” ’ ” Martini v. Boeing Co., 137 Wn.2d 357, 364-65, 971 P.2d 45 (1999) (quoting *554Phanna K. Xieng v. Peoples Nat’l Bank, 120 Wn.2d 512, 521, 844 P.2d 389 (1993)). WLAD mandates liberal construction to accomplish its purposes. RCW 49.60.020; Martini, 137 Wn.2d at 364. The holding of the Court of Appeals is consistent with this approach. The jury found Pham and Lara had suffered discrimination and determined $120,000 would compensate them for the accompanying emotional distress. This award will be diminished by federal taxes. Despite the majority’s faulty assertion that “[s]hifting the tax burden on these awards entirely to the defendant simply goes too far,” requiring Seattle City Light to reimburse Pham and Lara for the tax consequences of their award simply makes the plaintiffs whole. Majority at 537.

¶52 The majority cites O’Neill v. Sears, Roebuck & Co., 108 F. Supp. 2d 443 (E.D. Pa. 2000) as an example of a court “explicitly limiting an award covering increased tax liability to front and back pay only.” Majority at 537. In O’Neill the court held allowing a plaintiff to recover the tax consequences of compensatory and liquidated damages would constitute a “windfall,” because such damages were “only a product of this lawsuit” and “[plaintiff] would not have received these sums but for the defendant’s discriminatory action.” O’Neill, 108 F. Supp. 2d at 448 (emphasis omitted). However, as noted by the Court of Appeals, noneconomic damages are not a gain for the plaintiff, but instead simply “substitute[ ] for the sense of well-being that the plaintiff lost as a result of being discriminated against.” Pham, 124 Wn. App. at 731. “Emotional distress damages, just as much as front and back pay, are awarded to make the victim whole.” Id. Further, because “[t]he legislative command to award damages is . . . stronger in Washington’s statute than in Title VII,” Martini, 137 Wn.2d at 375, and considering WLAD’s purpose and its mandate of liberal construction, we are not bound by the federal courts on this question.

¶53 Accordingly, I would hold WLAD allows compensation for the additional federal income tax consequences of noneconomic damage awards. Furthermore, the trial court *555abused its discretion when it reduced the lodestar amount and failed to apply a multiplier. The majority’s failure to correct these mistakes leaves victims of civil rights abuses guessing whether their recovery will be radically reduced by uncompensated reasonable attorney fees and leaves their diligent and vigorous lawyers without an adequate fee even when they prevail on a very risky case.

¶54 I dissent because I believe the majority’s decision is antithetical to WLAD’s purpose of eradicating discrimination; indeed, discrimination cannot be eradicated if plaintiffs’ claims are never brought.

Chambers and Owens, JJ., concur with Sanders, J.

The trial court opted to use historic fee rates for the work performed by plaintiffs’ attorneys in 1997 and 1998, rather than current ones, “as an equalizing factor to time spent on abandoned, dismissed or withdrawn claims.” Clerk’s Papers (CP) at 640. This approach reduced the lodestar amount by $7,966.50. The Court of Appeals found no abuse of discretion, Chuong Van Pham v. Seattle City Light, 124 Wn. App. 716, 728, 103 P.3d 827 (2004), and Pham and Lara do not here challenge the use of historic fee rates. Although this issue need not be determined *546here, I observe that an award based on current rates makes more sense since historical rates contemplate prompt payment, not a payment deferred for years.

Disallowed because Pham and Lara were not the prevailing parties on the claim for injunctive relief and the “time for the post-trial request for injunctive relief is readily segregable from counsel’s other work product.” CP at 650 (Finding of Fact 28).

Disallowed because the trial court “conclude [d] the ... time was not reasonably related to nor did it cumulatively result in plaintiffs’ favorable resolution.” CP at 651 (Finding of Fact 29).

Disallowed because “attorney fees awardable for appeal are to be determined by the Court of Appeals.” CP at 649 (Finding of Fact 25).

Disallowed because the court found the attorney time spent on these issues duplicative and “not reasonably related to the issues in this case and.. . not necessarily expended.” CP at 651 (Finding of Fact 30).

Disallowed without further explanation. CP at 648 (Finding of Fact 24).

The Court in Hensley specifically held: “Where the plaintiff has failed to prevail on a claim that is distinct in all respects from his successful claims, the hours spent on the unsuccessful claim should be excluded in considering the amount of a reasonable fee. Where a lawsuit consists of related claims, a plaintiff who has won substantial relief should not have his attorney’s fee reduced simply because the district court did not adopt each contention raised.” Hensley, 461 U.S. at 440 (emphasis added).

I do not believe, however, that the nature of the fee agreement between plaintiffs and their attorney is necessarily relevant to the calculation of a reasonable fee award against the defendant.

CP at 653.