Norman Pine, Certified Appellate Specialist, State Board of Legal Specialization
Why our Supreme Court has mandated that the award of a lodestar multiplier in contingency fee cases is virtually required, not merely permitted, in all but the rarest of cases.
A number of judges refuse to grant multipliers, almost as a matter of course. Superficially, this position is supported by the seemingly discretionary language of various fee-shifting statutes. In reality, however, that “discretion” is extremely narrow and subject to the severe shackles imposed by California Supreme Court case law.
Ketchum v Moses (2001) 24 Cal. 4th 1122 is the seminal Supreme Court case interpreting and applying the contingent-risk factor previously adopted by the Court in Serrano v. Priest (1977) 20 Cal.3d 25 (“Serrano III.) In Serrano III the Court had held that fee awards must be based on the lodestar adjustment method—the “‘only way . . . that can claim [the vitally important] objectivity.’” (Id. at p. 48, fn. 23, citation omitted.) The starting lodestar figure is calculated by multiplying the hours reasonably incurred by the reasonable hourly rate of the attorney who performed the work. (Ibid.) Once the lodestar amount was determined, it could be adjusted up or down based on specified criteria first announced in Serrano III and subsequently amplified upon in Ketchum.
In Ketchum the Court identified four disjunctive factors that might justify a positive multiplier. (24 Cal.4th at 1132.) Perhaps the most important of those stand-alone factors was contingent risk.
Indeed, when fairly read, Ketchum stands for the proposition that in cases that are taken on a purely contingent basis, it is virtually impossible to bring a plaintiff’s counsel’s compensation “into line with incentives they have to undertake claims for which they are paid on a fee-for-services basis” unless a premium (i.e., a multiplier) is provided. (24 Cal.4th at 1132.)
Ketchum’s analysis began by highlighting the Court’s holding in Serrano v. Unruh (1982) 32 Cal.3d 621, 635, “(Serrano IV)”) which stressed that competent private practitioners are unlikely to accept public interest litigation, “however meritorious, without some assurance of compensation that fairly covers the legal services required.” Without such assurance, citizens of ordinary means would not be able to bring such cases, and society at large would thereby suffer. (Ibid.)
Ketchum then made clear that such “fair” compensation means that the award should be “fully compensatory,” i.e., based on the “reasonable market value” of lawyers being paid hourly for their services. (24 Cal.4th at 1133.) It did so by unanimously underscoring the critical importance—almost the necessity—of granting a positive multiplier whenever plaintiff’s counsel in a fee-shifting case was working on a purely contingent basis. (Id. at 1132-1133.) This point was so key that the Court expressly rejected contrary U. S. Supreme Court authority and held that California law on this point was independent of federal case law. (Id. at 1137.)
In fashioning this framework to govern contingency fee cases, the Court’s analysis spelled out why, unless a multiplier is used, a contingency attorney simply cannot be fairly compensated (compared to his or her hourly-fee counterpart) given the great risk of no payment and the certainty of largely-deferred payment.
A contingent fee must be higher than a fee for the same legal services paid as they are performed. … “A lawyer who both bears the risk of not being paid and provides legal services is not receiving the fair market value of his work if he is paid only for the second of these functions.” (24 Cal.4th at 1132-1133, citation omitted, emphasis added.)
Yet, as Ketchum also noted, the very purpose of the lodestar adjustment method is “to fix a fee at the fair market value.” (Id. at 1132.) Thus, by the logic of the decision, a positive multiplier must be the norm. “The experience of the marketplace indicates” that unless a “premium” above the adjusted lodestar is awarded, “lawyers generally will not provide legal representation on a contingent basis.” (Id. at 1136, internal citation and marks omitted.)
Ketchum made one final but critically important point. It noted that “the unadorned lodestar reflects the general local hourly rate for a fee-bearing case; it does not include any compensation for contingent risk, extraordinary skill, or any other factors a trial court may consider under Serrano III.” (24 Cal.4th at 1138, Court’s emphasis.) Therefore, applying a multiplier to the adjusted lodestar:
[C]onstitutes earned compensation; unlike a windfall, it is neither unexpected nor fortuitous. Rather, it is intended to approximate market level compensation for such services, which typically includes a premium for the risk of nonpayment or delay in payment of attorney fees.(Ibid., emphasis added.)
Since Ketchum was decided, its commands have been implemented by vigilant Courts of Appeal. In Horsford v. The Board of Trustees (2005) 132 Cal.App.4th 359, for instance, the court held that after the lodestar is calculated:
[T]he court must adjust the resulting fee to fulfill the statutory purpose of bringing “the financial incentives for attorneys enforcing important constitutional [or statutory] rights … into line with incentives they have to undertake claims for which they are paid on a fee-for-service basis.”
(Horsford, 132 Cal. App 4th at 395, quoting Ketchum, 24 Cal. 4th at 1132, emphasis added.)
Similarly, in affirming a 1.65 multiplier, the court in Amaral v. Cintas Corp. No 2 (2008) 163 Cal.App.4th 1157, 1217, noted that “[o]ur courts have recognized that an enhanced fee award is necessary to compensate attorneys for taking such risks….” (Ibid., emphasis added.)
Trial judges are the agents of public policy. One aspect of that responsibility is to protect and preserve public interest litigation by providing the assurance Serrano, Ketchum, and their progeny have made to prospective counsel: if you take on the significant costs and risks associated with public interest cases, you may fully expect and rely upon the judiciary’s commitment that, if the action is ultimately successful, a multiplier will be used to ensure that you receive “fair” compensation, i.e., the “reasonable market value” of your services compared to hourly-paid attorneys.
Norman Pine’s practice focuses exclusively on appellate law, with a sub-specialty in employment law. He has handled (as counsel or co-counsel) many of the cutting edge employment cases decided by the California Supreme Court, including Williams v. Chino Valley Indep. Fire Dist; Harris v City of Santa Monica; Salas v. Sierra Chemical Co.; Roby v. McKesson Corp.; and Green v State of California. He has been repeatedly selected by the L.A. Daily Journal as one of its 75 “Top Labor & Employment Lawyers” in California (2009, 2011-2016.) He was awarded CELA’s top honor, “the Joe Posner award” and has been on Super Lawyers’ “Top 100” list (Southern California) continuously since 2009 and Best Lawyers in America since 2013. He may be contacted at npine@pineappeals.com.