A tale of two appeals: Court clarifies FEHA fee awards and interest

It is not often that the same case results in two appellate opinions that clarify the law in completely different ways. Enter Vines v. O'Reilly Auto Enterprises, LLC (Los Angeles Superior Court, Case No. PC058045). In successive published opinions, the Second District Court of Appeal clarified, first, how to calculate attorneys' fees under the Fair Employment and Housing Act (FEHA) (Gov. Code, § 12900 et seq) and second, how interest should be calculated on remand.


FEHA WINNERS DON'T AUTOMATICALLY GET COSTS OR FEES


In a typical civil case, the "prevailing party" is entitled to costs (potentially including attorneys' fees) as a matter of right, just by virtue of prevailing. (Code Civ. Proc., § 1032.) However, under FEHA--the California law that prohibits discrimination and retaliation in the workplace--the law is remarkably different. Under FEHA, the decision whether to award costs and fees to a prevailing party is left solely to the discretion of the trial court. (Williams v. Chino Valley Independent Fire Dist. (2015) 61 Cal.4th 97, 105.) Thus, "in unusual circumstances" the trial court may award no costs or fees, even where there is a clear prevailing party. (Bustos v. Global P.E.T., Inc. (2017) 19 Cal.App.5th 558, 564.)


The issue becomes even muddier when a party has prevailed on some, but not all, of its FEHA-based claims. In that circumstance, courts apply the two-step analysis from Hensley v. Eckerhart (1983) 461 U.S. 424, 434 (Hensley). At the first step, the court determines whether the unsuccessful claims are sufficiently "related" to the successful claims to allow attorney's fees for the unsuccessful claims. (Id. at p. 434.) Then, at the second step, the court looks at the "nature of relief" to determine the proper amount of fees. (Ibid.)


The application of Hensley became central to both appeals in Vines. There, Vines brought causes of action under FEHA for both discrimination and retaliation but prevailed only on the retaliation claims. Vines requested all of the fees he incurred in the case, but the trial court reduced the award by 75 percent, finding: (1) Vines's unsuccessful discrimination claims were not sufficiently related to the successful retaliation claims because the facts giving rise to the retaliation arose after any purported discrimination, and (2) Vines's attorneys spent 75 percent of their time on the unsuccessful claims.


VINES I CLARIFIES APPLICATION OF HENSLEY TO FEHA CASES


In Vines I (Vines v. O'Reilly Auto Enterprises, LLC (2022) 74 Cal.App.5th 174) the Court of Appeal reversed the reduction of the fee award. The Court explained that whether two claims are "related" does not turn on when the supposed claims or the underlying facts arose. (Id. at p. 185.) Rather, the inquiry looks at whether the evidence and facts to support the unsuccessful claims were "probative" of issues relating to the successful claims. (Id. at p. 186.) In essence, if evidence overlaps between the two claims, they are sufficiently "related" for the purposes of FEHA. (Ibid.) 


In Vines's case, his retaliation claims were based on his reporting of the purported discrimination. Therefore, the Court of Appeal explained, the evidence of discrimination (even though not believed by the jury), was still likely probative of Vines's reasonableness in making the reports. That would be true regardless of when the facts arose. Accordingly, the trial court's "temporal" basis for finding the claims were unrelated was legal error, and the case was remanded back to the trial court to "recalculate" the fee award consistent with Hensley and Vines I.


The lesson to be had with Vines I is that losing parties have an uphill battle when opposing FEHA fee requests. Given the nature of FEHA claims--where the allegations and evidence of various forms of discrimination and retaliation are frequently overlapping--Vines I gives prevailing parties ground to stand on in requesting fees for the entire litigation, even where the victory is minimal compared to the scope of the litigation.


VINES II CLARIFIES WHEN INTEREST BEGINS TO RUN ON A FEHA FEE AWARD


In Vines II (Vines v. O'Reilly Auto Enterprises, LLC (2024) 101 Cal.App.5th 693) the case returned to the Court of Appeal to determine whether interest on the attorneys' fee award should run from the date of the original order awarding fees or from the date of the post-remand order "recalculating" the fees. In determining the issue, the Court of Appeal first recited the well-established rule in California: 


"When a judgment is modified upon appeal, whether upward or downward, the new sum draws interest from the date of entry of the original order, not from the date of the new judgment. On the other hand, when a judgment is reversed on appeal the new award subsequently entered by the trial court can bear interest only from the date of entry of such new judgment." (Id. at p. 701, quoting Stockton Theatres, Inc. v. Palermo (1961) 55 Cal.2d 439. emphasis added.) 


The Court further explained that a "modification" occurs when the appellate decision remands the case with instructions simply to award a different, sum-certain amount (e.g., change the award from $10,000 to $25,000), whereas a "reversal" occurs when the decision remands the case for further discretionary proceedings. (Id. at pp. 701-702.)


Applying that framework to the case, the Court of Appeal determined that Vines I "remanded the matter for further hearing and factfinding necessary to determine an appropriate fee award." That is, the trial court on remand was still required to apply Hensley to determine the amount, if any, of the ultimate fee award. Accordingly, Vines I was a "reversal," and interest necessarily ran from the post-remand award and not from the original fee order.


The upshot of Vines II is that most reversals of a FEHA cost or fee award will likely result in interest running from the post-remand award. Cost awards under FEHA are so discretionary at the trial court level that it is unlikely an appellate court will remand with instructions to enter a different, sum-certain amount (i.e., issue a "modification"). Rather, like what happened in Vines I, the Court of Appeal, in most cases, will likely reverse an erroneous fee award with instructions to "conduct further proceedings" in accordance with the correct legal principles.