Good guys win one: Kim v. Euromotors West

by Stephen Gardner

Of late, many courts seem to bend over backwards to find ways to deny reasonable attorneys’ fees to a successful plaintiff. The most notorious example of this is the United States Supreme Court’s decision in Buckhannon Board and Care Home, Inc. v. W. Va. Dep't of Health and Human Resources, 532 U.S. 598 (2001), where the Court held that the term "prevailing party" is a legal term of art that, according to the leading legal dictionary, means a “party in whose favor a judgment is rendered.”

Since many cases are resolved before final judgment, the effect of the Supreme Court’s ruling is to force parties to a judgment rather than disposing of a dispute simply by settling and then dismissing the underlying lawsuit. Of course, the number of former plaintiff lawyers on the Supreme Court, indeed on most benches, is pretty small, so most judges don’t actually understand anything other than monthly billing (where the law firm is the prevailing party!).

This issue is particularly acute when the object of a lawsuit is an injunction changing the defendant’s wrongful practice. Under the Court’s logic, all a defendant need do is change its practice, and then move to dismiss, getting a free bite at the apple. This encourages wrongful acts, since there is no sanction if caught. It’s like a bank robber nabbed leaving the bank, who only has to promise to stop robbing banks in the future to beat the rap — he doesn’t even have to give the money back!

Not long after Buckhannon, the California Supreme Court expressly rejected this reasoning. In Graham vs. DaimlerChrysler, 101 P.3d 140 (Cal. 2004) and Tipton-Whittingham vs. Los Angeles, 101 P.3d 174 (Cal. 2004), the California Supreme Court employed the common sense approach — you are the prevailing party if you get what you want, and your lawyer should get paid for it.

Now, in early April, a California court of appeals affirmed the right of a plaintiff to settle before trial and still get paid attorneys’ fees. In Kim v. Euromotors West, 2007 WL 959807 (Cal.App. 2 Dist., April 2, 2007), the California court of appeal reversed a trial court ruling that had refused to determine whether or not a plaintiff was a prevailing party, simply because the plaintiff had settled all of his claims other than fees.

In the settlement agreement, the defendant agreed to cancel the car lease that was the underlying dispute and to pay plaintiff a total of nearly $80,000, and plaintiff gave the car (a lemon) back to defendant. The agreement anticipated that the issue of prevailing party status and entitlement to attorneys’ fees would be submitted to the trial court for determination: “Kim [the plaintiff] hereby reserves his right to make an application to the Court in an attempt to recover his reasonable attorneys’ fees and costs with respect to TAG [a defendant] in connection with his CRLA [Consumer Legal Remedies Act] claim. TAG reserves the right to oppose the motion on grounds it deems appropriate.”

This would seem to be clear: The parties did not agree whether plaintiff was a prevailing party, but did agree to submit the issue to the court.

The court disagreed. At hearing, the trial court said, “My question is, you settled. How is the court supposed to determine who the prevailing party is? How do I do that?”

The court of appeals’ answer was, in essence, “By doing your job.” The appellate court said that merely settling the underlying dispute did not mean that a plaintiff did not prevail. The court’s discussion of what it means to be a prevailing party is excellent, touching on the many ways in which a dispute can be resolved, and finding that the test is indeed a common sense one: the plaintiff is the prevailing party “when he gets most or all of what he wanted.”

This is in stark contrast to some other state courts, whose very goal seems to be insuring that any defendant “gets most or all of what he wanted,” and will twist the law to get there.

Comments

[Andrew Engel]

Isn't a simple solution to include a provision in the settlement agreement that provides that the plaintiff is the prevailing party for purposes of the statute. Would the Court not be bound by that agreement and merely hear the issue of the amount of fees to be paid.

Of, you could do what I always did, simply settle on fees at the same time you settle the rest of the case.