Employers can only recover costs from frivolous FEHA claims

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The California Supreme Court previously established a dual standard for awarding attorneys’ fees to the prevailing party in FEHA cases

The California Fair Employment and Housing Act (FEHA) incentivizes employees (and their attorneys) to pursue the important interests promoted by that law. Government Code 12965(b) allows the court, in its discretion, to award the prevailing party “reasonable attorneys’ fees and costs, including expert witness fees.” However, this provision is not applied equally to employees and employers. Specifically, a number of courts, and ultimately the U.S. Supreme Court in Christiansburg Garment Co. v. EEOC (1978) 434 U.S 412, held that a prevailing employee is generally entitled to attorneys’ fees and as a matter of course. However, a prevailing employer is entitled to attorneys’ fees only if the case was “frivolous, unreasonable or groundless, or that the [employee] continued to litigate after it clearly became so.” The rationale for this asymmetric discretionary standard is that employees with even colorable claims may be discouraged from asserting them if they would be responsible for the employer’s attorneys’ fees if the claims are unsuccessful and the legislative intent was to remove any such disincentives in the assertion of discrimination, harassment or retaliation claims.

But the issue of what standard to apply for awarding litigation costs was still in question…until now

In Williams v. Chino Valley Independent Fire District (S213100, May 4, 2015), Williams, a firefighter, brought a disability discrimination action under the FEHA. The trial court granted the defendant’s motion for summary judgment and awarded prevailing party costs of $5,368.88 to the defendant. The appellate court affirmed the award, applying Code of Civil Procedure § 1032(b), which provides that prevailing parties are entitled to litigation costs as a matter of right, except as otherwise expressly provided by statute. (Emphasis added) Following other appellate courts, the Williams court declined to apply the discretionary Christiansburg standard to costs, distinguishing costs from attorneys’ fees on the grounds that attorneys’ fees can be much more expensive and less predictable than ordinary litigation costs.

The California Supreme Court disagreed, finding that Government Code § 12965(b) is an express exception to Code of Civil Procedure § 1032(b), and therefore the discretionary Government Code provision governs costs awards in FEHA cases. The Supreme Court further ruled that the dual standard established in Christiansburg for attorneys’ fees awards also applied to awards of costs, so that a prevailing defendant in an FEHA case may only recover ordinary litigation costs where the “court finds the action was objectively without foundation when brought, or the plaintiff continued to litigate after it clearly became so.” The court noted that even though ordinary litigation costs are generally likely to be smaller than attorney fees, a broader application of Christiansburg is nonetheless consistent with the legislative policy. “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.”

Under federal law, cost awards have been treated differently in discrimination cases. The Ninth Circuit Court of Appeal did not apply the Christiansburg standard to a cost award in a Title VII discrimination claim, holding that under Federal Rule of Civil Procedure 54(d)(1), costs are recoverable as a matter of right for a prevailing defendant. National Organization for Women v. Bank of California, 680 F.2d 1291 (9th Cir.1982). However, awards of costs and attorneys’ fees are expressly discretionary under the Americans with Disabilities Act, prompting courts to apply the Christiansburg standard in ADA cases. Brown v. Lucky Stores, Inc., 246 F.3d 1182 (9th Cir. 2001). It is yet to be seen whether the U.S. Supreme Court would extend the Christiansburg standard to costs.

Consequences of the Williams Decision

Although attorneys’ fees are generally regarded as the “big ticket” expense item that can substantially affect the settlement value of FEHA cases, the threat of cost recovery from a plaintiff was at least one negotiation point that employers had. In a fully litigated case, litigation costs can rise into the tens of thousands of dollars, which could create a substantial burden for many FEHA plaintiffs. Now, such recovery is only possible in the most frivolous cases, and defendants will have a difficult time meeting such a standard. Potential recovery of attorney’s fees and costs are a persistent undercurrent in the dynamics of any FEHA claim. The Williams case now limits the availability of that bargaining chip for employers.