Unanimous Court in Vasquez v. State of California Adopts A More Flexible Rule and Equitable Consideration of This Factor in the Noncatalyst 1021.5 Context.
In our category "Cases Under Review," we noted that the California Supreme Court had accepted review of Vasquez v. State of California, which presented the issue of whether plaintiff, in order to recover attorney’s fees under Code of Civil Procedure section 1021.5 (the private attorney general statute) first had to attempt to settle the matter short of litigation in a noncatalyst case. On November 20, 2008, the Court came down with its decision in Case No. S143710, squarely answering the question "no."
Earlier, in Graham v. DaimlerChrysler Corp., 34 Cal.4th 553, 560 (2004), the California Supreme Court had held that this reasonable settlement effort was a prerequisite for a section 1021.5 fee award in a "catalyst case". In Graham, the Supreme Court held the “catalyst theory” permits a court to award attorney fees under section 1021.5 “even when litigation does not result in a judicial resolution if the defendant changes its behavior substantially because of, and and in the manner sought by, the litigation.” However, in Vasquez, the Supreme Court found nothing in either the legislative history of or policies underlying section 1021.5 to mandate an extension of the reasonable settlement effort requirement in the context of noncatalyst cases. (In Vasquez, plaintiff obtained a stipulated injunction–which is not treated as a catalyst situation.)
The Court rejected application of a categorical rule in noncatalyst cases. Instead, the lower courts have equitable discretion to weight the reasonable settlement effort factor when determining that "the necessity and financial burden of private enforcement are such as to make the award appropriate" under one of the section 1021.5 prongs. Justice Werdegar, writing on behalf of a 7-0 court, stated: "The language of section 1021.5 is sufficiently flexible to permit courts to consider these and all other relevant circumstances in determining whether private enforcement was sufficiently necessary to justify awarding fees." (Slip Opn, at p. 8.)
Vasquez also mentioned other situations, noting that reasonable settlement efforts must be demonstrated as a fee prerequisite in FEHA catalyst cases, while no such requirement need be met in ADA cases. It similarly has a nice discussion of the distinctions between "catalyst" and "noncatalyst" cases.