Graham v. Daimlerchrysler Corporation

(this opn. should precede companion case filed same date, S112943) In this case defendant offered to repurchase a truck that had been marketed with false statements about its towing capacity. This offer came after a lawsuit plaintiffs filed against defendant seeking this repurchase remedy, but before any kind of court judgment was rendered. Plaintiffs were awarded substantial attorney fees under Code of Civil Procedure section 1021.5. 2 Defendant raises several issues regarding those fees. The first is whether we should reconsider the catalyst theory, recognized by this court in Westside Community for Independent Living, Inc. v. Obledo (1983) 33 Cal.3d 348 (Westside Community). Under the catalyst theory, attorney fees may be awarded even when litigation does not result in a judicial resolution if the defendant changes its behavior substantially because of, and in the manner sought by, the litigation. We conclude the catalyst theory should not be abolished but clarified. In order to be eligible for attorney fees under section 1021.5, a plaintiff must not only be a catalyst to defendant's changed behavior, but the lawsuit must have some merit, as discussed below, and the plaintiff must have engaged in a reasonable attempt to settle its dispute with the defendant prior to litigation. Because these limitations on the catalyst theory are to some degree new and were not addressed by the parties or the trial court, we remand for reconsideration of the trial court's award of attorney fees in this case. Defendant also contends the trial court erred in concluding that the present lawsuit substantially benefited a large group of people or the general public, as required by section 1021.5. We conclude the trial court did not abuse its discretion in making that conclusion. Finally, defendant, while conceding that a plaintiff could be awarded attorney fees for attorney fee litigation, contends that these fees should not be enhanced beyond the ""lodestar"" amount. We do not endorse such a categorical rule, but we explain below that fees for fee litigation usually should be enhanced at a significantly lower rate than fees for the underlying litigation, if they are enhanced at all. We therefore will remand the cause to the trial court to recalculate the amount of the fee in light of the principles discussed below, assuming it finds on remand that plaintiffs are eligible for some attorney fees.