The landscape for litigating employment cases brought under the California Fair Employment and Housing Act (FEHA) was recently altered by the California Supreme Court in Williams v. Chino Valley Independent Fire District (2015) 61 Cal.4th 97.
Prior to the Williams decision, employer-defendants relied upon Code of Civil Procedure section 1032, to recover litigation costs from unsuccessful plaintiffs. Section 1032 entitles any prevailing party to recover costs unless there is an express exception to that right. In Williams, the Court held that the FEHA is an express exception to section 1032 because it grants the court discretion to decide whether or not to award attorneys’ fees and costs rather than mandate that costs be awarded.
The Williams Court went on to find that an employer-defendant can only recover litigation costs in FEHA cases if it can prove the case was “objectively groundless.” This means that after being cleared of wrongdoing in a case, if an employer-defendant wants to recover its litigation costs, it will have to litigate the issue of whether it should be awarded its costs; thus, incurring more attorneys’ fees in the process. This is a radical departure from past practice and will likely have a significant impact on the ability of defendants to resolve FEHA cases.
For example, in the past, a prevailing employer-defendant would oftentimes be able to avoid incurring the costs of an appeal by agreeing to waive collection of the cost award the employer-defendant obtained against the plaintiff. Since it will be difficult for an employer-defendant to obtain a cost award based on the “objectively groundless” standard, the losing plaintiff will rarely have an incentive to waive his or her right to appeal in exchange for a waiver of costs. This will likely lead such plaintiffs to file more appeals. Plaintiff attorneys may then attempt to leverage the threat of an appeal in an effort to extract some monetary payment from the defendant-employer, even though the defendant-employer prevailed.
While the above paints a potentially bleak picture for defendant-employers, there still may be ways for defendant-employers to obtain a cost award in FEHA cases without addressing the “objectively groundless” standard. For example, if a FEHA defendant makes an offer to compromise under California Code of Civil Procedure section 998 that is not accepted and the defendant prevails in the case, the defendant may, in the court’s discretion, be awarded post-offer costs. The Williams case does not address whether the “objectively groundless” analysis would take precedence over the statutory language of section 998. Furthermore, Williams does not address the situation where a defendant prevails on both FEHA and non-FEHA causes of action. Hopefully, as these issues are litigated in the future, courts will recognize that prevailing employer-defendants are still entitled to recover their litigation costs in such situations.
As a result of the Williams case, EIA members should be prepared for pushback from the plaintiffs’ bar when trying to resolve FEHA cases. It is likely that mediators, settlement conference judges, and counsel for plaintiffs will put little stock in the defense argument that it will be able to recover costs against the plaintiff at the end of the case. We recommend that members speak with their litigation counsel about the effect of Williams and strategize regarding how to best address the effects of the Williams case, whether it be by using section 998 offers to compromise or by utilizing some other tactic.
Please feel free to contact the EIA for questions regarding this decision.