Flannery v. Prentice
Statutory attorney fees awarded under the FEHA (beyond fees the client already paid) belong to the attorneys who earned them, absent an enforceable agreement to the contrary — not to the client.
Flannery v. Prentice (2001) 26 Cal.4th 572
Attorney Fees
FEHA
Fee-Shifting
Remedies
Affirmed
In brief. The Court resolved who owns a statutory fee award when client and counsel both claim it. It held that “[a]ttorney fees awarded pursuant to [Government Code] section 12965 (exceeding fees already paid) belong, absent an enforceable agreement to the contrary, to the attorneys who labored to earn them.” (Flannery v. Prentice (2001) 26 Cal.4th 572, 590.) Whether such an agreement exists, and what it provides, are “questions of fact.” (Ibid.)
Facts
Leslie Flannery prevailed in an action under the California Fair Employment and Housing Act (FEHA), and the trial court awarded statutory attorney fees under Government Code section 12965, subdivision (b). (26 Cal.4th at pp. 575–577.) A dispute then arose between Flannery and the attorneys who had represented her, John Prentice and others, over who was entitled to the fee award — particularly the portion exceeding any fees Flannery had already paid. (Ibid.) The attorneys claimed the statutory award compensated their labor and belonged to them; Flannery claimed it as the prevailing party. (Ibid.)
Procedural history
The trial court entered summary judgment for the attorneys, finding they, not Flannery, were entitled to the earlier fee award. (26 Cal.4th at pp. 576–577.) The Court of Appeal’s judgment was reviewed, and the Supreme Court granted review to decide the ownership of FEHA fee awards as between attorney and client. (Id. at pp. 577–578.) The Supreme Court held the fees belong to the attorneys absent an enforceable contrary agreement, and remanded for resolution of the factual question whether such an agreement existed. (Id. at pp. 590–591.)
Issue
When a court awards statutory attorney fees to a prevailing FEHA plaintiff under Government Code section 12965, subdivision (b), and the award exceeds fees the client already paid, do those fees belong to the client or to the attorneys who earned them? (26 Cal.4th at pp. 575–576.)
Holding
The fees belong to the attorneys. “Attorney fees awarded pursuant to section 12965 (exceeding fees already paid) belong, absent an enforceable agreement to the contrary, to the attorneys who labored to earn them.” (26 Cal.4th at p. 590.) The analysis “may not be dispositive — indeed, will not even come into play — where the parties have made an enforceable agreement disposing of an award’s proceeds,” and “[w]hether an enforceable agreement exists, or what its terms may be in any given case, are . . . questions of fact.” (Ibid.) Affirmed in part and remanded. (Id. at pp. 590–591.)
Reasoning
1. The statutory fee compensates the attorney’s work. The Court reasoned that a FEHA fee award under section 12965, subdivision (b), is calculated to compensate the reasonable value of the legal services rendered — the lodestar of hours reasonably expended at a reasonable rate. (26 Cal.4th at pp. 578–584.) Because the award measures and reimburses counsel’s labor, it logically belongs to counsel, who performed that labor, rather than to the client, who did not. (Ibid.)
2. The fee-shifting statute’s purpose. Section 12965’s fee-shifting provision exists to encourage competent attorneys to undertake meritorious civil-rights cases that vindicate important public policies, by assuring them reasonable compensation when their clients prevail. (26 Cal.4th at pp. 583–586.) Awarding the statutory fees to attorneys — not as a windfall to clients — serves that purpose, ensuring the incentive structure the Legislature created actually reaches the lawyers it was designed to attract. (Ibid.)
3. The role of fee agreements. The Court emphasized that the default rule yields to contract: where “the parties have made an enforceable agreement disposing of an award’s proceeds,” that agreement governs. (26 Cal.4th at pp. 587–590.) The Court canvassed the circumstances in which written fee agreements are and are not required under Business and Professions Code section 6148 — noting, for example, that written agreements are not always required for corporate clients, contingency-fee matters governed by separate rules, emergencies, or where “a writing is otherwise impractical.” (Id. at pp. 588–590 & fn.) Whether an enforceable agreement allocates the statutory fees is a factual question for remand. (Id. at p. 590.)
4. The dissent. Justice Kennard dissented. (26 Cal.4th at pp. 591 et seq. (dis. opn. of Kennard, J.).) She would have treated the statutory fee award as belonging to the prevailing client — the named party to whom the award runs — leaving the attorney’s entitlement to be governed entirely by the fee contract between attorney and client, rather than by a judicially fashioned default rule favoring counsel. (Ibid.)
Significance
Flannery is the controlling California authority on ownership of statutory attorney-fee awards in FEHA (and analogous fee-shifting) cases. Its default rule — fees belong to the attorneys who earned them, absent an enforceable agreement to the contrary — shapes fee agreements, liens, and disputes between counsel and clients (and between successive counsel) over statutory awards. Practically, it tells lawyers handling fee-shifting employment cases to address the allocation of any statutory award expressly in the retainer, because silence defaults the award to counsel. The decision reinforces the public-policy purpose of FEHA’s fee provision (encouraging the private bar to litigate civil-rights claims) recognized in the broader fee-shifting jurisprudence, and it remains a staple citation whenever entitlement to a section 12965 award is contested. See the Review’s coverage of the remedies and FEHA lines.
Key quotes
“Attorney fees awarded pursuant to section 12965 (exceeding fees already paid) belong, absent an enforceable agreement to the contrary, to the attorneys who labored to earn them.” (Flannery, supra, 26 Cal.4th at p. 590.)
“Whether an enforceable agreement exists, or what its terms may be in any given case, are . . . questions of fact.” (Ibid.)
Read the full opinion (California Supreme Court — full text) →
Practice pointer
Address statutory fees in the retainer. Because Flannery defaults a FEHA fee award to counsel absent an enforceable agreement, lawyers and clients should spell out in the engagement letter how any statutory or court-awarded fees are allocated and how they interact with a contingency fee (to avoid double recovery and to comply with fee-agreement rules under Bus. & Prof. Code § 6148 and the Rules of Professional Conduct). Successor counsel and lien claimants should likewise document entitlement. When a fee dispute arises, frame the question Flannery poses: is there an enforceable agreement disposing of the award? If not, the fees follow the labor.
Open questions
How Flannery’s default rule interacts with contingency-fee contracts, mid-case substitutions of counsel, and attorney fee liens continues to generate disputes, as does what constitutes an “enforceable agreement” sufficient to displace the default. The decision’s reach beyond FEHA to other fee-shifting statutes, and its application where the client has paid some but not all fees, remain recurring questions of fact and contract interpretation.